“When the capital development of a country becomes a by-product
of the activities of a casino, the job is likely to be ill-done.”
John Maynard Keynes
"Life is a school of probabilities."
Walter Bagehot
Neoliberal economics (aka casino
capitalism) function from one crash to another. Risk is
pervasively underpriced under neoliberal system, resulting in bubbles small and large which hit the
economy periodically. The problem are not strictly economical or political. it is ideological as in "greed is good" slogan. Like
a country which adopted a certain religion follows a certain path, the USA behaviour after adoption
of neoliberalism somewhat correlate with the behaviour of alcoholic who decided to booze himself to
death. The difference is that debt is used instead of booze.
Hypertrophied role of financial sector under neoliberalism introduces strong positive feedback look
into the economic system making the whole system unstable. Any attempts to put some sand into the wheels
in the form of increasing transaction costs or jailing some overzealous bankers or hedge fund managers
are blocked by political power of financial oligarchy, which is the actual ruling class under neoliberalism
for ordinary investor (who are dragged into stock market
by his/her 401K) this in for a very bumpy ride. I managed to observe just two two financial crashed
under liberalism (in 2000 and 2008) out of probably four (Savings
and loan crisis was probably the first neoliberal crisis). The next crash is given, taking into
account that hypertrophied role of financial sector did not changes neither after dot-com crisis of
200-2002 not after 2008 crisis (it is unclear when and if it ended; in any case it was long getting
the name of "Great Recession").
Timing of the next crisis is anybody's guess but it might well be closer then we assume. As Mark
Twain aptly observed: "A thing long expected takes the form of the unexpected when at last it comes"
;-):
This morning that meant a stream of thoughts triggered by Paul Krugman’s most
recent op-ed, particularly this:
Most of all, the vast riches being earned — or maybe that should be “earned” —
in our bloated financial industry undermined our sense of reality
and degraded our judgment.
Think of the way almost everyone important missed the warning signs of an impending crisis.
How was that possible? How, for example, could Alan Greenspan have declared, just a few years
ago, that “the financial system as a whole has become more resilient” — thanks to derivatives,
no less? The answer, I believe, is that there’s an innate tendency
on the part of even the elite to idolize men who are making a lot of money, and assume that they
know what they’re doing.
As most 401K investors are brainwashing into being "over bullish", this page is strongly bearish
in "perma-bear" fashion in order to serve as an antidote to "Barrons" style cheerleading. Funny, but
this page is accessed mostly during periods of economic uncertainty. At least this was the case during
the last two financial crisis(2000 and 2008). No so much during good times: the number of visits drops
to below 1K a month.
When will the next crash occur ?
There is no doubt that it will occur. But the question is whether the market in 2021 is ripe to the crash? If the answer
is yes, you better trip your stock holdings. Especially if you are over 60 and has sizable 401K savings.
Can the stock market go another 20-50% up. No double it can. But a more interesting question is: "Can it go down 50%?"
from the current level. The situation
when some financial assets are grossly overvalued is called a bubble. Few understand that bubbles are not accident or the result of
actions of "evil does" but a logical development of investing in financial capitalism, which
logically creates so called "Minsky moment".
See also a book “Boom and Bust- A Global History
of Financial Bubbles,” by William Quinn and John Turner of Queen’s University Belfast in Northern Ireland.
Rather than regarding overvalued assets as a bubble, the authors view them as a fire. “Boom and Bust” looks closely at 300
years’ worth of market manias using the metaphor of “the fire triangle.” (oxygen, fuel and heat). Remove one factor, and you can
prevent or put out a fire.
The oxygen of investing is marketability, or the ease of buying and selling an asset. Centuries ago, that meant carving up
difficult-to-transfer corporate ownership into tradable shares. Nowadays it’s carrying a stockbroker in your pocket. With a
smartphone-trading app, you can buy or sell so-called fractional shares in increments anyone can afford.
The fuel, is manifested in financial markets by money and credit. Low interest rates make investing with borrowed money
cheaper, while paltry yields on safe savings compel people to take more risk then necessary or prudent. With stocks at record
highs, bonds yielding next to nothing and memories of market crashes faded, many investor jumped into risky investments
with both feet. Fixed-income investors turn to corporate loans, equity-linked debt and even stocks. So investors ire chasing the
chimera of higher yield at lower risk, along with the reflected glow of investing alongside a billionaire by investing in extoic
funds operating with derivatives like Infinity Q. Kind of shadow on 2006-2008 over us. Last year, pension funds lost
billions on strategies that had long earned steady returns by betting against steep market declines. Some of the world’s largest
pensions and endowments were caught in a cash crunch in 2008 and 2009 when the smooth ride they’d been getting from their
alternative investments turned rough. The other alternative is to say, "Our goals for returns are unrealistic" and cut them
drastically switch from the foal of positive return to the goal of minimal loss. But that’s harder as bull market can persist
another year or two or three...
Heat in stock market fire triangle is supplied by speculation. When prices go up, more people and more machines buy,
inflaming prices even more and attracting another rush of speculators. That lures in naive buyers who think making money is easy.
But hedge funds and other institutions also chase those hot returns, fanning the flames even higher.
The third side of our bubble triangle, analogous to heat, is specula-
tion. Speculation is the purchase (or sale) of an asset with a view to selling
(or repurchasing) the asset at a later dale with the sole motivation of
generating a capital gain.21 Speculation is always present to an extent;
there are always some investors who buy assets in the expectation of
future price increases. However, during bubbles, large numbers of
novices become speculators, many of whom trade purely on momentum,
buying when prices are rising and selling when prices are falling. Just as
a fire produces its own heal once it starts, speculative investment is self-
perpetuating: early speculators make large profits, attracting more spec-
ulative money, which in turn results in further price increases and higher
returns to speculators. The amount of speculation required to start the
process is only a small fraction of that which occurs at its peak.
Once a bubble is underway, professional speculators may purchase an
asset they know to be overpriced, planning to re-sell the asset to ‘a greater
fool’ to make a capital gain.22 This practice is commonly referred to as
‘riding the bubble’.
However, it is often difficult to distinguish investors
who rode the bubble from those who were lucky enough to sell at the
right time. Speculation is also much more widespread when many inves-
tors have limited exposure to downside risk. This may be the case when defaulting on debts incurs few costs, when institutional
investors are faced with poorly designed incentive structures or when bank owners have limited liability. In these circumstances,
the prospect of buying a risky asset in the hope of short-term gains is much more appealing. Of course, investors can also
speculate ‘for the fall’: selling assets in the hope of buying them back later for a lower price. If the speculator does not own
the asset, they can speculate for the fall by short selling: borrowing the asset, selling it, buying it back later for a lower
price, then returning it to the lender. The short seller is hoping that the asset’s price will fall in the intervening period so
that they can make a profit from the trade. In practice, however, short selling is often much more difficult and risky than simply
buying an asset.
NOTE: The “Boom and Bust” notes that the fire triangle has in recent years been expanded with a fourth component, an
“exothermic chain reaction.” Marketability, credit and speculation are necessary, but not sufficient, to start and maintain a
market fire. A fourth component, what the authors call a “spark,” is also needed. That can come from new technology, government
intervention or both. The stock-buying binge of the late 1990s was sparked by euphoria over the potential of the internet. “Boom
and Bust” shows that most bubbles tend to be confined to a few stocks or industries.
What is the spark that sets the bubble fire ablaze? Economic
models of bubbles struggle to explain when and why bubbles start -
according to Vernon Smith, a Nobel laureate, the sparks that initiate
bubbles are a mystery.26 In this book, we argue dial the spark can
come from two sources: technological innovation, or government
policy.
Technological innovation can spark a bubble by generating abnormal
profits at firms that use the new technology, leading to large capital gains
in their shares. These capital gains then attract the attention of momentum traders, who begin to buy shares in the firms because their price has
risen. At this stage, many new companies that use (or purport to use) the
new technology often go public to take advantage of the high valuations.
While valuations may appear unreasonably high to experienced observers, they often persist for two reasons. First, the technology is
new, and its economic impact is highly uncertain. This means that there is limited information with which to value the shares
accurately. Second, excitement surrounding technology) leads to high levels of media attention,
drawing in further investors. This is often accompanied by the emergence of a ‘new era’ narrative, in which the world-changing magic of the
new technology renders old valuation metrics obsolete, justifying very
high prices.27
Alternatively, the spark can be provided by government policies that
cause asset prices to rise. Usually, but not always, die rise in asset prices
is engineered deliberately in the pursuit of a particular goal. This goal
could be the enrichment of a politically important group, or of politicians themselves. It might be part of an attempt to reshape society in
[neoliberal fashion]...
The key lesson of previous bubbles is that financial markets, however, can easily heat up fivefold or even 10-fold and then
collapse at least 50% in a flash, burning millions of speculators and sometimes charring entire economies. Here is one review from
Amazon:
Reviewed in the United States on December 26, 2020. Verified Purchase
Quinn and Turner prefer to use the analogy of a "fire" to describe speculative bubbles. A fire is "destructive, self-perpetuating
and difficult to control once it begins." And just as a fire needs oxygen, fuel, and heat, a speculative bubble needs assets that
are easy to trade (i.e., oxygen), plenty of money and credit (fuel), and speculation (heat). It also needs a spark, which usually
comes from government action or new technology.
The authors describe how these key elements played out in 11 speculative booms since the 1700s: • French Mississippi Bubble (1719 to 1720) • British South Sea Bubble (1719 to 1720) • British Emerging Market Mines Bubble (1824 to 1826) • U.K. Railway Mania (1844 to1846) • Australian Land Boom (1886 to 1893) • The U.K. Bicycle Mania (1895 to 1898) • U.S. Roaring Twenties (1920 to 1931) • Japanese stock and real estate bubble (1985 to 1992) • U.S. Dot-Com Bubble (1995 to 2001) • U.S. and European Subprime Bubble (2003 to 2010) • the 2007 and 2015 Chinese stock bubbles.
Some of the many interesting facts they uncover include:
• The word "bubble" originated from Shakespeare in the 'All the world's a stage' speech from his comedy "As You Like It." He uses
'bubble' to mean "fragile, empty or worthless, just like a soap bubble." Beginning in 1719, with the South Sea Bubble, writers like
Daniel Defoe and Jonathan Swift used "bubble" to describe new companies that were worthless.
• Charles Mackay's 1841 book "Extraordinary Popular Delusions and the Madness of Crowds", which gives a vivid account of the foolish
speculation during the South Sea Bubble, is mostly fiction: almost none of the anecdotes can be substantiated.
• In 2008 The Economist described the British Railway Mania as "arguably the greatest bubble in history."
• During the British Railway Mania of 1848, railway shares rose from constituting 23 percent of total stock market value to 71
percent. So many new speculators began buying railway stocks that 15 new stock exchanges opened in England during the mania to meet
the demand. (Half of them shut down when the mania ended.)
• Fueling the railway bubble was the Bank of England's low discount rate. At 2.5 percent in 1844, it was the lowest it had ever been
in the 150 years of the bank's history. Investors bought railway stocks to earn a higher yield.
• The Japanese government deliberately sparked the land and stock bubbles during the late 1980s to create a boom. Japan lowered
interest rates, gave tax breaks to real estate developers, and allowed banks to accept land as collateral, which increased the
amount of lending they could do, which was usually plowed back into more land and stocks.
• The authors believe that the Dot-com bubble during the late 1990s had many good economic benefits, despite the 8-month recession
that followed it. The bubble directed a lot of money into innovative companies and motivated smart entrepreneurs to create new
companies. It also supplied the capital needed to build internet communications, which have been so critical for our lives today.
• Between 2000 and 2008 in both Ireland and Spain, more than one new home was built for every new inhabitant in the country.
• In the U.K., the bank Northern Rock marketed "Together mortgages," which allowed individuals to borrow up to 125 percent of their
home value, targeting borrowers who could not afford to buy a home or even furnish it.
• The Chinese stock market bubbles resembled the South Sea and Mississippi bubbles of 1720, where the bubbles were created
deliberately to offload government debt onto stockholders.
The main lesson from the book is that while bubbles can be blurry during the heat and smoke of a speculative fire, we should look
for three key elements: asset marketability, speculation, and leverage.
In proportion to market size—which weights giant tech stocks heavily—the companies in the S&P 500 recently traded at 21 times
expected earnings over the next 12 months, according to Matarin Capital Management, an investment firm in New York. That’s about 24%
higher than their average over the past quarter-century. This can go higher (probably to mid 30th) or crash to Earth.
Market will definitely collapse sooner or later. But nobody knows when. Especially taking into account FED Plunge protection team activities. If is stupid and irresponsible to talk about June crash...
20210424 : Why Grantham Says the Next Crash Will Rival 1929, 2000 by further inflating money not by deflating it. So people who warn regular fold about risks are rare and they harm their own business, if they have any. Profit of doom and gloom are not popular and it is precarious occupation
He suggest that SPACs,Tesla, and bitcoin can serve are canary in the mine as for timing of bubble deflation.
This video is over two months old of course and the the market has continued to set new records. Ray Daleo also issued a warning as did Harry Dent. And market still is going up.
Because of the corona epidemic, investments in real production have dried up and the money has instead flooded the stockmarkets. I guess that if the crisis continues the stockmarket bubble can be kept inflated because the money has nowhere else to go!
electrification, especially in cars is a very long shot and here it is unlear if it make sense to invent int he currest companies involvedas they are in a bubble. Just look at Tesla. electrification, especially in cars is a very long shot and here it is unlear if it make sense to invent int he currest companies involvedas they are in a bubble. Just look at Tesla. ( Jan 22, 2021 , www.youtube.com )
20210413 : U.S. Treasury yields slip despite surge in inflation to 2˝-year high by very small number of companies. Treasury yields slipped Tuesday after bond investors shrugged off an increase in U.S. consumer prices in March that sent yearly inflation measures to the highest level in two and a half years. Treasury yields slipped Tuesday after bond investors shrugged off an increase in U.S. consumer prices in March that sent yearly inflation measures to the highest level in two and a half years. ( economistsview.typepad.com )
Sometimes it is prudent to stop investing for a while.. And what the author calls savers and investors should properly be called speculators. Petty speculators that serve as the feed for Wall Street sharks.
The situation with office and retail space after COVID-19 is simply bad. There will be no return to previous state. And this situation generall reflact that general situation in the US economy/ In this sense stock market is completely detached from reality, fueled by speculation and 401K inflows. The latter makes passivly managed funds like based on S&P500 index yet another Ponzi scheme.
20210408 : Financial crises get triggered about every 10 years -- Archegos might be right on time by Paul Brandus Paul Brandus Financial crises are never quite the same. During the late 1980s, nearly a third of the nation's savings and loan associations failed, ending with a taxpayer bailout -- in 2021 terms -- of about $265 billion. In 1997-1998, financial crises in Asia and Russia led to the near meltdown of the largest hedge fund in the U.S. -- Financial crises are never quite the same. During the late 1980s, nearly a third of the nation's savings and loan associations failed, ending with a taxpayer bailout -- in 2021 terms -- of about $265 billion. In 1997-1998, financial crises in Asia and Russia led to the near meltdown of the largest hedge fund in the U.S. -- In 1997-1998, financial crises in Asia and Russia led to the near meltdown of the largest hedge fund in the U.S. -- In 1997-1998, financial crises in Asia and Russia led to the near meltdown of the largest hedge fund in the U.S. -- Long-Term Capital Management (LTCM). Its reach and operating practices were such that Federal Reserve Chairman Alan Greenspan said that when LTCM failed, "he had never seen anything in his lifetime that compared to the terror" he felt. LTCM was deemed "too big to fail," and he engineered a bailout by 14 major U.S. financial institutions. Exactly a decade later, too much leverage by some of those very institutions, and the bursting of a U.S. real estate bubble, led to the near collapse of the U.S. financial system. Once again, big banks were deemed too big to fail and taxpayers came to the rescue. The trend? Every 10 years or so, and they all look different. Are we in the early stages of a new crisis now, with the blowup at the family office Archegos Capital Management LP? A family office, for the uninitiated, is a private wealth management vehicle for the ultra-wealthy. Here's what I mean by ultra-wealthy: Consulting firm EY estimates there are some 10,000 family offices globally, but manage, says a separate estimate by market research firm Campden Research, nearly $6 trillion. That $6 trillion is likely far higher now given that it's based on 2019 data. Exactly a decade later, too much leverage by some of those very institutions, and the bursting of a U.S. real estate bubble, led to the near collapse of the U.S. financial system. Once again, big banks were deemed too big to fail and taxpayers came to the rescue. The trend? Every 10 years or so, and they all look different. Are we in the early stages of a new crisis now, with the blowup at the family office Archegos Capital Management LP? A family office, for the uninitiated, is a private wealth management vehicle for the ultra-wealthy. Here's what I mean by ultra-wealthy: Consulting firm EY estimates there are some 10,000 family offices globally, but manage, says a separate estimate by market research firm Campden Research, nearly $6 trillion. That $6 trillion is likely far higher now given that it's based on 2019 data. The trend? Every 10 years or so, and they all look different. Are we in the early stages of a new crisis now, with the blowup at the family office Archegos Capital Management LP? A family office, for the uninitiated, is a private wealth management vehicle for the ultra-wealthy. Here's what I mean by ultra-wealthy: Consulting firm EY estimates there are some 10,000 family offices globally, but manage, says a separate estimate by market research firm Campden Research, nearly $6 trillion. That $6 trillion is likely far higher now given that it's based on 2019 data. A family office, for the uninitiated, is a private wealth management vehicle for the ultra-wealthy. Here's what I mean by ultra-wealthy: Consulting firm EY estimates there are some 10,000 family offices globally, but manage, says a separate estimate by market research firm Campden Research, nearly $6 trillion. That $6 trillion is likely far higher now given that it's based on 2019 data. A family office, for the uninitiated, is a private wealth management vehicle for the ultra-wealthy. Here's what I mean by ultra-wealthy: Consulting firm EY estimates there are some 10,000 family offices globally, but manage, says a separate estimate by market research firm Campden Research, nearly $6 trillion. That $6 trillion is likely far higher now given that it's based on 2019 data. ( www.advisorperspectives.com )
20210405 : Financial crises get triggered about every 10 years -- Archegos might be right on time by 14 major U.S. financial institutions. Exactly a decade later, too much leverage by some of those very institutions, and the bursting of a U.S. real estate bubble, led to the near collapse of the U.S. financial system. Once again, big banks were deemed too big to fail and taxpayers came to the rescue. The trend? Every 10 years or so, and they all look different. Are we in the early stages of a new crisis now, with the blowup at the family office Archegos Capital Management LP? A family office, for the uninitiated, is a private wealth management vehicle for the ultra-wealthy. Here's what I mean by ultra-wealthy: Consulting firm EY estimates there are some 10,000 family offices globally, but manage, says a separate estimate by market research firm Campden Research, nearly $6 trillion. That $6 trillion is likely far higher now given that it's based on 2019 data. Exactly a decade later, too much leverage by some of those very institutions, and the bursting of a U.S. real estate bubble, led to the near collapse of the U.S. financial system. Once again, big banks were deemed too big to fail and taxpayers came to the rescue. The trend? Every 10 years or so, and they all look different. Are we in the early stages of a new crisis now, with the blowup at the family office Archegos Capital Management LP? A family office, for the uninitiated, is a private wealth management vehicle for the ultra-wealthy. Here's what I mean by ultra-wealthy: Consulting firm EY estimates there are some 10,000 family offices globally, but manage, says a separate estimate by market research firm Campden Research, nearly $6 trillion. That $6 trillion is likely far higher now given that it's based on 2019 data. The trend? Every 10 years or so, and they all look different. Are we in the early stages of a new crisis now, with the blowup at the family office Archegos Capital Management LP? A family office, for the uninitiated, is a private wealth management vehicle for the ultra-wealthy. Here's what I mean by ultra-wealthy: Consulting firm EY estimates there are some 10,000 family offices globally, but manage, says a separate estimate by market research firm Campden Research, nearly $6 trillion. That $6 trillion is likely far higher now given that it's based on 2019 data. A family office, for the uninitiated, is a private wealth management vehicle for the ultra-wealthy. Here's what I mean by ultra-wealthy: Consulting firm EY estimates there are some 10,000 family offices globally, but manage, says a separate estimate by market research firm Campden Research, nearly $6 trillion. That $6 trillion is likely far higher now given that it's based on 2019 data. A family office, for the uninitiated, is a private wealth management vehicle for the ultra-wealthy. Here's what I mean by ultra-wealthy: Consulting firm EY estimates there are some 10,000 family offices globally, but manage, says a separate estimate by market research firm Campden Research, nearly $6 trillion. That $6 trillion is likely far higher now given that it's based on 2019 data. ( www.wsj.com )
Listen to this article 6 minutes 00:00 / 06:06 1x Earnings, valuation and rampant speculation have all played a role in the extraordinary bull market that began a year ago this week. The latest combination of the three has a troubling reliance on the speculative element. A broad framework for thinking about stocks can be derived from the late economist Hyman Minsky's three stages of debt. In the first stage, borrowers take on only what they can afford to repay in full from their earnings by the time the debt matures; a standard mortgage works like this. Earnings, valuation and rampant speculation have all played a role in the extraordinary bull market that began a year ago this week. The latest combination of the three has a troubling reliance on the speculative element. A broad framework for thinking about stocks can be derived from the late economist Hyman Minsky's three stages of debt. In the first stage, borrowers take on only what they can afford to repay in full from their earnings by the time the debt matures; a standard mortgage works like this. A broad framework for thinking about stocks can be derived from the late economist Hyman Minsky's three stages of debt. In the first stage, borrowers take on only what they can afford to repay in full from their earnings by the time the debt matures; a standard mortgage works like this. A broad framework for thinking about stocks can be derived from the late economist Hyman Minsky's three stages of debt. In the first stage, borrowers take on only what they can afford to repay in full from their earnings by the time the debt matures; a standard mortgage works like this. U.S. 10-year Treasury yield Source: Tullett Prebon As of March 24 % Pre-pandemic peak of S&P 500 2020 '21 0.25 0.50 0.75 1.00 1.25 1.50 1.75 2.00 S&P 500 forward price/earnings ratio Source: Refinitiv Note: Weekly data S&P 500 peak 2020 '21 12 14 16 18 20 22 24 The parallel in the stock market is stocks going up when earnings -- or rather the expectation of earnings, since the market looks ahead -- go up. There is a risk of course, just as there is with debt: The earnings might not appear, and the stock goes back down. But earnings offer the least risky form of gains, and one that we should welcome as obviously justified. From the low in the summer, 2020 earnings forecasts jumped more than 10%, and expectations for this year rose more than 8%. Stocks responded. In Minsky's second stage, borrowers plan only to repay the interest, and refinance when the main debt is due to be repaid; much company debt works like this. It is taken out with a plan to roll it over indefinitely. Interest rates matter a lot: If they go down when the company needs to refinance, it will pay less. The equity parallel is to gains in valuation due to lower long-term rates. As with corporate debt, this is entirely justified and sustainable so long as rates stay low, because future earnings are now more appealing. The danger is that rates rise, in which case the stock might be hit no matter how earnings pan out. A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the The parallel in the stock market is stocks going up when earnings -- or rather the expectation of earnings, since the market looks ahead -- go up. There is a risk of course, just as there is with debt: The earnings might not appear, and the stock goes back down. But earnings offer the least risky form of gains, and one that we should welcome as obviously justified. From the low in the summer, 2020 earnings forecasts jumped more than 10%, and expectations for this year rose more than 8%. Stocks responded. In Minsky's second stage, borrowers plan only to repay the interest, and refinance when the main debt is due to be repaid; much company debt works like this. It is taken out with a plan to roll it over indefinitely. Interest rates matter a lot: If they go down when the company needs to refinance, it will pay less. The equity parallel is to gains in valuation due to lower long-term rates. As with corporate debt, this is entirely justified and sustainable so long as rates stay low, because future earnings are now more appealing. The danger is that rates rise, in which case the stock might be hit no matter how earnings pan out. A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the In Minsky's second stage, borrowers plan only to repay the interest, and refinance when the main debt is due to be repaid; much company debt works like this. It is taken out with a plan to roll it over indefinitely. Interest rates matter a lot: If they go down when the company needs to refinance, it will pay less. The equity parallel is to gains in valuation due to lower long-term rates. As with corporate debt, this is entirely justified and sustainable so long as rates stay low, because future earnings are now more appealing. The danger is that rates rise, in which case the stock might be hit no matter how earnings pan out. A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the In Minsky's second stage, borrowers plan only to repay the interest, and refinance when the main debt is due to be repaid; much company debt works like this. It is taken out with a plan to roll it over indefinitely. Interest rates matter a lot: If they go down when the company needs to refinance, it will pay less. The equity parallel is to gains in valuation due to lower long-term rates. As with corporate debt, this is entirely justified and sustainable so long as rates stay low, because future earnings are now more appealing. The danger is that rates rise, in which case the stock might be hit no matter how earnings pan out. A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the The equity parallel is to gains in valuation due to lower long-term rates. As with corporate debt, this is entirely justified and sustainable so long as rates stay low, because future earnings are now more appealing. The danger is that rates rise, in which case the stock might be hit no matter how earnings pan out. A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the The equity parallel is to gains in valuation due to lower long-term rates. As with corporate debt, this is entirely justified and sustainable so long as rates stay low, because future earnings are now more appealing. The danger is that rates rise, in which case the stock might be hit no matter how earnings pan out. A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the The parallel in the stock market is the The parallel in the stock market is the hunt for the greater fool . Sure, GameStop < shares bear no relation to the reality < of the company, but I can make money from buying an overpriced stock if I can find someone willing to pay even more because they "like the stock." Wild bets became obvious this year, as newcomers armed with stimulus, or "stimmy," checks Wild bets became obvious this year, as newcomers armed with stimulus, or "stimmy," checks Wild bets became obvious this year, as newcomers armed with stimulus, or "stimmy," checks drove up the price of many tiny stocks, penny shares and those popular on Reddit discussion boards. Speculative bets such as the solar and ARK ETFs rallied up until mid-February, long after growth stocks peaked in August Price performance Source: FactSet *Russell 1000 indexes As of March 25, 7:02 p.m. ET % Invesco Solar Value* ARK Innovation Growth* Sept. 2020 '21 -25 0 25 50 75 100 125 The concern for investors: How much of the market's gain is thanks to this pure speculation, and how much to the justifiable gains of the improving economy and low rates? If too much comes from speculation, the danger is that we run out of greater fools and prices quickly drop back. The concern for investors: How much of the market's gain is thanks to this pure speculation, and how much to the justifiable gains of the improving economy and low rates? If too much comes from speculation, the danger is that we run out of greater fools and prices quickly drop back. me title= A look at how stocks moved through the pandemic suggests earnings and bond yields are still much more important than the gambling element for the market as a whole, but is still troubling. From the S&P peak in mid-February to the end of June, the story was of cratering earnings partly offset by higher valuations. The S&P was down 8%. Earnings forecasts for 12 months ahead fell 20%, while with 10-year yields down almost a full percentage point, valuations were up from a precrisis high of 19 times forecast earnings (itself the highest since the aftermath of the dot-com bubble) to 21 times. Growth stocks -- based on the Russell 1000 index of larger companies -- were slightly up, because they benefit most from falling bond yields, having more of their earnings far in the future. Cheap value stocks, which benefit less, were down 18%. A look at how stocks moved through the pandemic suggests earnings and bond yields are still much more important than the gambling element for the market as a whole, but is still troubling. From the S&P peak in mid-February to the end of June, the story was of cratering earnings partly offset by higher valuations. The S&P was down 8%. Earnings forecasts for 12 months ahead fell 20%, while with 10-year yields down almost a full percentage point, valuations were up from a precrisis high of 19 times forecast earnings (itself the highest since the aftermath of the dot-com bubble) to 21 times. Growth stocks -- based on the Russell 1000 index of larger companies -- were slightly up, because they benefit most from falling bond yields, having more of their earnings far in the future. Cheap value stocks, which benefit less, were down 18%. A look at how stocks moved through the pandemic suggests earnings and bond yields are still much more important than the gambling element for the market as a whole, but is still troubling. From the S&P peak in mid-February to the end of June, the story was of cratering earnings partly offset by higher valuations. The S&P was down 8%. Earnings forecasts for 12 months ahead fell 20%, while with 10-year yields down almost a full percentage point, valuations were up from a precrisis high of 19 times forecast earnings (itself the highest since the aftermath of the dot-com bubble) to 21 times. Growth stocks -- based on the Russell 1000 index of larger companies -- were slightly up, because they benefit most from falling bond yields, having more of their earnings far in the future. Cheap value stocks, which benefit less, were down 18%. From the S&P peak in mid-February to the end of June, the story was of cratering earnings partly offset by higher valuations. The S&P was down 8%. Earnings forecasts for 12 months ahead fell 20%, while with 10-year yields down almost a full percentage point, valuations were up from a precrisis high of 19 times forecast earnings (itself the highest since the aftermath of the dot-com bubble) to 21 times. Growth stocks -- based on the Russell 1000 index of larger companies -- were slightly up, because they benefit most from falling bond yields, having more of their earnings far in the future. Cheap value stocks, which benefit less, were down 18%. From the S&P peak in mid-February to the end of June, the story was of cratering earnings partly offset by higher valuations. The S&P was down 8%. Earnings forecasts for 12 months ahead fell 20%, while with 10-year yields down almost a full percentage point, valuations were up from a precrisis high of 19 times forecast earnings (itself the highest since the aftermath of the dot-com bubble) to 21 times. Growth stocks -- based on the Russell 1000 index of larger companies -- were slightly up, because they benefit most from falling bond yields, having more of their earnings far in the future. Cheap value stocks, which benefit less, were down 18%. Growth stocks -- based on the Russell 1000 index of larger companies -- were slightly up, because they benefit most from falling bond yields, having more of their earnings far in the future. Cheap value stocks, which benefit less, were down 18%. Growth stocks -- based on the Russell 1000 index of larger companies -- were slightly up, because they benefit most from falling bond yields, having more of their earnings far in the future. Cheap value stocks, which benefit less, were down 18%. NEWSLETTER SIGN-UP ( Mar 26, 2021 , www.wsj.com )
Inflation also might be coming via the devaluation of the dollar.
Notable quotes:
"... These articles are great at d ..."
"... There are no safe options. TIPS are indexed to the CPI. The CPI is "adjusted" by weighting, substitution, and hedonics to preserve the mirage of low inflation. We are being forced to either speculate in the market or watch our savings get swallowed by inflation. ..."
These articles are great at describing the problem, but not so great at suggesting what investors ought to do to
protect themselves.
TIPS are sometimes suggested, but if the govt is manipulating the reporting of inflation then TIPS
aren't going to be much help. Gold and blue chip stocks... "diversify"? how about some articles that will explore strategies.
There are no safe options. TIPS are indexed to the CPI. The CPI is "adjusted" by weighting, substitution, and hedonics to
preserve the mirage of low inflation. We are being forced to either speculate in the market or watch our savings get swallowed
by inflation.
Strong economic rebound and lingering pandemic disruptions fuel inflation forecasts
above 2% through 2023, survey finds. The U.S. inflation rate reached a 13-year high recently,
triggering a debate about whether the country is entering an inflationary period similar to the
1970s. WSJ's Jon Hilsenrath looks at what consumers can expect next.
Americans should brace themselves for several years of higher inflation than they've seen in
decades, according to economists who expect the robust post-pandemic economic recovery to fuel
brisk price increases for a while.
Economists surveyed this month by The Wall Street Journal raised their forecasts of how high
inflation would go and for how long, compared with their previous expectations in April.
The respondents on average now expect a widely followed measure of inflation, which excludes
volatile food and energy components, to be up 3.2% in the fourth quarter of 2021 from a year
before. They forecast the annual rise to recede to slightly less than 2.3% a year in 2022 and
2023.
That would mean an average annual increase of 2.58% from 2021 through 2023, putting
inflation at levels last seen in 1993.
"We're in a transitional phase right now," said Joel Naroff, chief economist at Naroff
Economics LLC. "We are transitioning to a higher period of inflation and interest rates than
we've had over the last 20 years."
Inflation likely rose sharply again in May. Economists polled by Dow Jones and The Wall
Street Journal predict the consumer price index rose 0.5% last month. The report comes out on
Thursday. If so, that would push the yearly rate close to 5% from 4.2% in April.
Consumer prices have only risen that fast twice in the past 30 years, most recently in 2008
when the cost of a barrel of oil topped $150.
... ... ...
The central bank has stuck to its prediction that inflation will drop back toward 2% by next
year. But many are beginning to wonder.
"The writing is on the wall: The Fed's temporary-inflation mantra is sounding more dated by
the week," said senior economist Sal Guatieri of BMO Capital Markets.
Neoliberal oligarchy fight against income redistribution by pushing perverted social justice
smoke screen and in effect can turn the USA in South Africa. Money quote from comments: "If I
read NASDAQ's proposal for Board representation in the Onion, I would have thought that even
these jokesters have exceeded the creativity threshold of ridiculousness I thought was possible."
and "What about the Mentally Ill? Do they get a seat? How about the Homeless?"
Three words about famele CEO and board room members: Elizabeth Holmes, Theranos. BTW what is
unclear in NASDAQ bold critical race theory support is: Can we exchange one black member for two
female members? Or not.
Also why stop at the boardrooms. Why not require the same in professional sport teams?
Nasdaq has, in its own words, embraced "the social justice movement." The
actual job of a stock exchange, however, is to ensure that trading is orderly and its listed
companies follow standard governance rules. But doing that doesn't earn the applause of the
political left. Progressive approval apparently means a lot to Nasdaq, which has officially
proposed to its regulator -- the Securities and Exchange Commission, newly chaired by Gary
Gensler -- to increase boardroom diversity through a "regulatory approach."
This proposal would require that Nasdaq-listed companies not only disclose the diversity
characteristics of their existing boards, but also retain "at least one director who
self-identifies as female," and "at least one director who self-identifies as Black or African
American, Hispanic or Latinx, Asian, Native American or Alaska Native, two or more races or
ethnicities, or as LGBTQ+."
Noncompliant firms must publicly "explain" -- in writing -- why they don't meet Nasdaq's
quotas. Nasdaq has, in its own words, embraced "the social justice movement."
The actual job of a stock exchange, however, is to ensure that trading is orderly and its
listed companies follow standard governance rules. But doing that doesn't earn the applause of
the political left. Progressive approval apparently means a lot to Nasdaq, which has officially
proposed to its regulator -- the Securities and Exchange Commission, newly chaired by Gary
Gensler -- to increase boardroom diversity through a "regulatory approach."
The Fed, in sync with the fiction writers at the Bureau of Labor Statistics (BLS), reports
consumer inflation as honestly as Al Capone reported taxable income.
Vardaman 3 hours ago
"A basket of things no one actually buys, with prices we just pull out of our
asses..."
Glock 1 hour ago
Yep, the BLS uses the CPI-W to literally avoid raising SS payments. The real rate of
inflation for seniors is close to 10% as the things they spend most of their money on like
medical care, medicine, food and utilities have gone through the roof
While the government claims they are entitled to 1.5% or less COLA's out of which comes a
bigger deduction every year for Medicare. Scam artists.
NEW YORK (Reuters) - In this manic era of meme stocks, cryptocurrencies and real-estate
bidding wars, studying the history of financial markets might seem a little dry and
old-fashioned.
Except to Jeremy Grantham.
The chairman of the board of famed asset managers GMO is a certified bubble-ologist,
fascinated by how and why bubbles emerge. Grantham studies classic ones like 1929, but - now in
his eighties - he has also lived through (and called) numerous modern booms and busts,
including the dot-com wreckage in 2000, the bull market peak in 2008 and the bear market low in
2009.
In case you did not know where this is headed: He says we are in a bubble right now.
In January Grantham wrote an investor letter, "Waiting For the Last Dance," about an
inflating bubble that "could well be the most important event of your investing lives."
Six months later, the stock market is starting to show some cracks. Grantham spoke with
Reuters about this moment of market history.
Q: When your letter of warning came out, what was the response like?
A: I got a lot of pushback. Waves of Bitcoin freaks attacked me in every way possible. They
said my ears were too big, and that I needed to be locked up in an old-folks home.
Q: So if we were already in a bubble then, where do things stand right now?
A: Bubbles are unbelievably easy to see; it's knowing when the bust will come that is
trickier. You see it when the markets are on the front pages instead of the financial
pages, when the news is full of stories of people getting cheated, when new coins are being
created every month. The scale of these things is so much bigger than in 1929 or in 2000.
Q: What is your take on equity valuations now?
A: Looking at most measures, the market is more expensive than in 2000, which was more
expensive than anything that preceded it.
My favorite metric is price-to-sales: What you find is that even the cheapest parts of the
market are way more expensive than in 2000.
Q: What might bring an end to this bubble?
A: Markets peak when you are as happy as you can get, and a near-perfect economy is
extrapolated into the indefinite future. But around the corner are lurking serious issues like
interest rates, inflation, labor and commodity prices. All of those are beginning to look less
optimistic than they did just a week or two ago.
Q: How long until a bust?
A: A bust might take a few more months, and, in fact, I hope it does, because it will give
us the opportunity to warn more people. The probabilities are that this will go into the fall:
The stimulus, the economic recovery, and vaccinations have all allowed this thing to go on a
few months longer than I would have initially guessed.
What pricks the bubble could be a virus problem, it could be an inflation problem, or it
could be the most important category of all, which is everything else that is unexpected. One
of 20 different things that you haven't even thought of will come out of the woodwork, and you
had no idea it was even there.
Q: What might a bust look like?
A: There will be an enormous negative wealth effect, broader than it has ever been, compared
to any other previous bubble breaking. It's the first time we have bubbled in so many different
areas "" interest rates, stocks, housing, non-energy commodities. On the way up, it gave us all
a positive wealth effect, and on the way down it will retract, painfully.
Q: Are there any asset classes which are relatively attractive?
A: You could always own cash, or you could do what the institutions do, which is buy heavily
into the asset classes that are least bad. The least overpriced are value stocks and emerging
markets. Those are the two arbitrages. With value and emerging, you should make some positive
return over the next 10 years.
Q: It is difficult to be bearish right now?
A: Not for me, because I don't have career risk anymore. But every big company has lots of
risk: They facilitate a bubble until it bursts, and then they change their tune as fast as they
can, and make money on the downside.
But this bubble is the real thing, and everyone can see it. It's as obvious as the nose on
your face.
NEW YORK (Reuters) - In this manic era of meme stocks, cryptocurrencies and real-estate
bidding wars, studying the history of financial markets might seem a little dry and
old-fashioned.
Except to Jeremy Grantham.
The chairman of the board of famed asset managers GMO is a certified bubble-ologist,
fascinated by how and why bubbles emerge. Grantham studies classic ones like 1929, but - now in
his eighties - he has also lived through (and called) numerous modern booms and busts,
including the dot-com wreckage in 2000, the bull market peak in 2008 and the bear market low in
2009.
In case you did not know where this is headed: He says we are in a bubble right now.
In January Grantham wrote an investor letter, "Waiting For the Last Dance," about an
inflating bubble that "could well be the most important event of your investing lives."
Six months later, the stock market is starting to show some cracks. Grantham spoke with
Reuters about this moment of market history.
Q: When your letter of warning came out, what was the response like?
A: I got a lot of pushback. Waves of Bitcoin freaks attacked me in every way possible. They
said my ears were too big, and that I needed to be locked up in an old-folks home.
Q: So if we were already in a bubble then, where do things stand right now?
A: Bubbles are unbelievably easy to see; it's knowing when the bust will come that is
trickier. You see it when the markets are on the front pages instead of the financial
pages, when the news is full of stories of people getting cheated, when new coins are being
created every month. The scale of these things is so much bigger than in 1929 or in 2000.
Q: What is your take on equity valuations now?
A: Looking at most measures, the market is more expensive than in 2000, which was more
expensive than anything that preceded it.
My favorite metric is price-to-sales: What you find is that even the cheapest parts of the
market are way more expensive than in 2000.
Q: What might bring an end to this bubble?
A: Markets peak when you are as happy as you can get, and a near-perfect economy is
extrapolated into the indefinite future. But around the corner are lurking serious issues like
interest rates, inflation, labor and commodity prices. All of those are beginning to look less
optimistic than they did just a week or two ago.
Q: How long until a bust?
A: A bust might take a few more months, and, in fact, I hope it does, because it will give
us the opportunity to warn more people. The probabilities are that this will go into the fall:
The stimulus, the economic recovery, and vaccinations have all allowed this thing to go on a
few months longer than I would have initially guessed.
What pricks the bubble could be a virus problem, it could be an inflation problem, or it
could be the most important category of all, which is everything else that is unexpected. One
of 20 different things that you haven't even thought of will come out of the woodwork, and you
had no idea it was even there.
Q: What might a bust look like?
A: There will be an enormous negative wealth effect, broader than it has ever been, compared
to any other previous bubble breaking. It's the first time we have bubbled in so many different
areas "" interest rates, stocks, housing, non-energy commodities. On the way up, it gave us all
a positive wealth effect, and on the way down it will retract, painfully.
Q: Are there any asset classes which are relatively attractive?
A: You could always own cash, or you could do what the institutions do, which is buy heavily
into the asset classes that are least bad. The least overpriced are value stocks and emerging
markets. Those are the two arbitrages. With value and emerging, you should make some positive
return over the next 10 years.
Q: It is difficult to be bearish right now?
A: Not for me, because I don't have career risk anymore. But every big company has lots of
risk: They facilitate a bubble until it bursts, and then they change their tune as fast as they
can, and make money on the downside.
But this bubble is the real thing, and everyone can see it. It's as obvious as the nose on
your face.
Strong economic rebound and lingering pandemic disruptions fuel inflation forecasts
above 2% through 2023, survey finds. The U.S. inflation rate reached a 13-year high recently,
triggering a debate about whether the country is entering an inflationary period similar to the
1970s. WSJ's Jon Hilsenrath looks at what consumers can expect next.
Americans should brace themselves for several years of higher inflation than they've seen in
decades, according to economists who expect the robust post-pandemic economic recovery to fuel
brisk price increases for a while.
Economists surveyed this month by The Wall Street Journal raised their forecasts of how high
inflation would go and for how long, compared with their previous expectations in April.
The respondents on average now expect a widely followed measure of inflation, which excludes
volatile food and energy components, to be up 3.2% in the fourth quarter of 2021 from a year
before. They forecast the annual rise to recede to slightly less than 2.3% a year in 2022 and
2023.
That would mean an average annual increase of 2.58% from 2021 through 2023, putting
inflation at levels last seen in 1993.
"We're in a transitional phase right now," said Joel Naroff, chief economist at Naroff
Economics LLC. "We are transitioning to a higher period of inflation and interest rates than
we've had over the last 20 years."
Unfortunately,
seniors often miss tax-saving opportunities that are available to them. Don't let that happen
to you!
For new retirees, it's more important than ever to take full advantage of every tax break
available. That's especially true if you're on a fixed income. After all, you have to stretch
out your retirement savings to cover the rest of your life. But holding on to your money during
retirement is easier said than done. That's why retirees really need to pay close attention to
their tax situation.
Unfortunately, though, seniors often miss valuable tax-saving opportunities . In many cases,
it's simply because they just don't know about them. Don't let that happen to you -- check out
these often-overlooked tax breaks for retirees . You could save a bundle!
When you turn 65, the IRS offers you a gift in the form of a larger standard
deduction . For example, a single 64-year-old taxpayer can claim a standard deduction of
$12,550 on his or her 2021 tax return (it was $12,400 for 2020 returns). But a single
65-year-old taxpayer will get a $14,250 standard deduction in 2021 ($14,050 in 2020).
The extra $1,700 will make it more likely that you'll take the standard deduction rather
than itemize. And, if you do claim the standard deduction, the additional amount will save you
over $400 if you're in the 24%
income tax bracket .
Couples in which one or both spouses are age 65 or older also get bigger standard deductions
than younger taxpayers. If only one spouse is 65 or older, the extra amount for 2021 is $1,350
– $2,700 if both spouses are 65 or older. Be sure to take advantage of your age!
For new retirees, it's more important than ever to take full advantage of every tax break
available. That's especially true if you're on a fixed income. After all, you have to stretch
out your retirement savings to cover the rest of your life. But holding on to your money during
retirement is easier said than done. That's why retirees really need to pay close attention to
their tax situation.
Unfortunately, though, seniors often miss valuable tax-saving opportunities . In many cases,
it's simply because they just don't know about them. Don't let that happen to you -- check out
these often-overlooked tax breaks for retirees . You could save a bundle!
When you turn 65, the IRS offers you a gift in the form of a larger standard
deduction . For example, a single 64-year-old taxpayer can claim a standard deduction of
$12,550 on his or her 2021 tax return (it was $12,400 for 2020 returns). But a single
65-year-old taxpayer will get a $14,250 standard deduction in 2021 ($14,050 in 2020).
The extra $1,700 will make it more likely that you'll take the standard deduction rather
than itemize. And, if you do claim the standard deduction, the additional amount will save you
over $400 if you're in the 24%
income tax bracket .
Couples in which one or both spouses are age 65 or older also get bigger standard deductions
than younger taxpayers. If only one spouse is 65 or older, the extra amount for 2021 is $1,350
– $2,700 if both spouses are 65 or older. Be sure to take advantage of your age!
The rules are clear: To qualify for tax-free profit from the sale of a home, the home must
be your principal residence and you must have owned and lived in it for at least two of the
five years leading up to the sale. But there is a way to capture tax-free profit from the sale
of a former vacation home.
Let's say you sell the family homestead and cash in on the break that makes up to $250,000
in profit tax-free ($500,000 if you're married and file jointly). You then move into a vacation
home you've owned for 25 years. As long as you make that house your principal residence for at
least two years, part of the profit on the sale will be tax-free.
Basically, the $250,000/$500,00 exclusion doesn't apply to any profit that is allocable to
the time after 2008 that a home is not used as your principal residence. For example, assume
you bought a vacation home in 2001, convert it to your principal residence in 2015 and sell it
in 2021. The post-2008 vacation-home use is seven of the 20 years you owned the property. So,
35% (7 ÷ 20) of the profit would be taxable at capital gains rates; the other 65% would
qualify for the $250,000/$500,000 exclusion.
"... Here are the other ominous signs of froth in the IPO market. ..."
"... Tech leads the way: It dominates the IPO market again, just as in 1999. ..."
"... Frothy first-day gains: The average first-day pop for IPOs in the second quarter was 42% ..."
"... Historically high valuations ..."
"... Retail investors in the mix ..."
"... "I think it says more about general liquidity than it does about where the stock market is going next,"ť says Kevin Landis of the Firsthand Technology Opportunities TEFQX, -3.24% , referring to the IPO frenzy. "There is so much money sloshing around. The capital markets look like the rich guy from out of town who just got off the cruise ship, and we are all coming out of the woodwork to sell him stuff,"ť he says. ..."
"... "Things are going up simply because of liquidity, which means eventually there will be a top,"ť says Landis. "But not necessarily an impending top right around the corner."ť Landis is worth listening to because his fund outperforms his technology category by 9.6 percentage points annualized over the five years, according to Morningstar. ..."
"... Market calls are always a matter of what intelligence spies call "the mosaic."ť Each bit of information is a piece of an overall mosaic. While the IPO market froth is disturbing, you should consider this cautionary signal as just one among many. ..."
A frothy market for initial public offerings suggests stocks are overvalued
Oatly, which produces oat milk products, went public in May. (Photo Illustration by Scott Olson/Getty Images)
I hear more money managers say it's starting to feel like 1999" the bubble year followed by an epic market crash.
They may be on to something.
The initial public offering (IPO) market now shows the froth that foreshadows big stock market corrections.
Consider these troubling signals from the IPO market.
1. Ominous volume:
Second-quarter IPO proceeds were the biggest since" get this" the fourth quarter of 1999. The huge
tech selloff that scarred a generation of investors started in March 2000 and then spread to the entire market.
Some details: A total of 115 IPOs raised $40.7 billion in the second quarter. That follows a busy first quarter when 100 IPOs
raised $39.1 billion. Both quarters saw the largest amount of capital raised since the fourth quarter of 1999, when IPOs raised
$46.5 billion. These numbers come from the IPO experts at Renaissance Capital, which manages the IPO exchange traded fund, Renaissance
IPO ETF
IPO,
-3.43%
.
Of course, adjusted for inflation, the 2021 numbers shrink relative to the fourth quarter of 1999. But this doesn't get us off
the hook. The 2021 IPO figures, above, exclude the $12.2 billion and $87 billion raised by special purpose acquisition companies
(SPACs) in the second and first quarters.
This spike in IPO volume is troubling for a simple reason. Investment bankers and companies know the most opportune time to sell
stock is around market highs. They bring companies public at their convenience, not ours. This tells us they may be selling a
top now.
Here are the other ominous signs of froth in the IPO market.
2.
Tech leads the way:
It dominates the IPO market again, just as in 1999.
The tech sector raised the majority
of second-quarter proceeds and posted its busiest quarter in at least two decades with 42 IPOs, says Renaissance Capital. This
included the quarter's largest IPO, DiDi Global
DIDI,
+1.61%
,
the Chinese ride-hailing app. The large U.S.-based tech names were Applovin
APP,
-5.54%
in app software, the robotics company UiPath
PATH,
-3.68%
,
and the payments platform Marqeta
MQ,
-4.93%
.
3. We can expect more of the same:
A robust IPO pipeline sets the stage for a booming third quarter, says Renaissance
Capital. The IPO pipeline has over a hundred companies. Tech dominates.
4.
Frothy first-day gains:
The average first-day pop for IPOs in the second quarter was 42%
. That's well above
the range of 31%-37% for the prior four quarters.
5.
Historically high valuations
:
Typically, tech companies have come public with enterprise-value-(EV)-to-sales
ratios of around 10. Now many are coming public with EV/sales ratios in the 20-30 range or more, points out Avery Spears, an IPO
analyst at Renaissance Capital. For example, the cybersecurity company SentinelOne
S,
-6.14%
came public with an EV/sales ratio of 81, says Spears.
6.
Retail investors in the mix
:
They're big participants in IPO trading" often driving IPOs up by crazy amounts
in first-day trading. "In the second quarter there were a lot of small deals with low floats and absolutely insane trading, popping
well over 100% and in one case over 1,000%,"ť says Spears. Pop Culture Group
CPOP,
-12.38%
rose over 400% on its first day of trading, and E-Home Household Service
EJH,
-3.67%
advanced 1,100%. "This demonstrates presence of retail investors in the market,"ť she says. Both
names have since fallen.
Keep in mind that the 2000 selloff was not the only one foreshadowed by IPO froth. The selloffs during mid-2015 to early 2016
and the second half 2018 were both preceded by high-water marks for IPO deal volume.
IPO-froth pushback
"It's different this time"ť are maybe the most dangerous words in investing. But market experts say several factors suggest the
robust IPO market isn't such a negative signal.
First, decent quality companies are coming public. "Because companies stay private longer, you are seeing far more mature companies
coming public,"ť says Todd Skacan, equity capital markets manager at T. Rowe Price. These aren't like the speculative Internet
companies of 1999. "It would be more of a signal of froth if more borderline companies were coming public like in the fourth quarter
of 1999,"ť he says.
We saw some of this with the SPACs, says Skacan, but the SPAC craze has cooled off. Second-quarter SPAC issuance fell 79% compared
to the first quarter, muted by "investor fatigue and regulatory scrutiny,"ť says a Renaissance Capital report on the IPO market.
In the second quarter, 63 SPACs raised $12.2 billion, compared to the 298 SPACs that raised $87 billion in the first quarter.
Next, the type of company coming public might also calm fears. Alongside all the tech names, there are many industrial and consumer-facing
companies" not the kinds of businesses that indicate froth. The latter category includes public national brands like Mister Car
Wash
MCW,
-1.82%
and Krispy Kreme
DNUT,
-2.16%
,
and the high-growth oat milk brand Oatly
OTLY,
-2.79%
.
Third, IPOs are only floating 10%-15% of their overall value, and many post-IPO valuations are not that much higher than valuations
implied by pre-IPO capital raises. That's different, compared to 1999. "It is not like they are selling a high number of shares
at inflated prices,"ť says Skacan. This makes sense, because companies that are more mature when they do an IPO don't need as much
money.
Liquidity flood
"I think it says more about general liquidity than it does about where the stock market is going next,"ť says Kevin Landis
of the Firsthand Technology Opportunities
TEFQX,
-3.24%
,
referring to the IPO frenzy. "There is so much money sloshing around. The capital markets look like the rich guy from out of town
who just got off the cruise ship, and we are all coming out of the woodwork to sell him stuff,"ť he says.
"Things are going up simply because of liquidity, which means eventually there will be a top,"ť says Landis. "But not necessarily
an impending top right around the corner."ť Landis is worth listening to because his fund outperforms his technology category by
9.6 percentage points annualized over the five years, according to Morningstar.
The bottom line
Market calls are always a matter of what intelligence spies call "the mosaic."ť Each bit of information is a piece of an overall
mosaic. While the IPO market froth is disturbing, you should consider this cautionary signal as just one among many.
Michael Brush is a columnist for MarketWatch. At the time of publication, he owned APP. Brush has suggested APP in his stock
newsletter,
Brush Up on Stocks
. Follow him on Twitter @mbrushstocks,
There's nothing more beautiful to a professional investor than a negative correlation between stocks and bonds. When stocks have
a bad month, bonds have a good month, and vice versa. Since their zigs and zags offset each other, the value of the combined portfolio
is less volatile. The customers are pleased. And that's how it's been for most of the last two decades.
But for almost a year now, Bloomberg market reporters have been detecting anxiety from the pros that the era of negative correlation
may be over or ending, replaced by an era of positive correlation in which stock and bond prices move together, amplifying volatility
instead of dampening it. "Bonds Have Never Been So Useless as a Hedge to Stocks Since 1999," read the headline on one article this
May.
Yet hope springs eternal. The headline on a July 7 article was, "Bonds Are Hinting They'll Hedge Stocks Again as Growth Bets Ease."
In the big picture and over long periods, it's obvious and necessary that stock and bond returns are positively correlated. After
all, they're competing investments. Each generates a stream of income: dividends for (most) stocks, coupon payments for bonds. If
stocks get very expensive, investors will shift money into bonds as a cheaper alternative until that rebalancing makes bonds more
or less equally expensive. Likewise, when one of the two asset classes gets cheap it will tend to drag down the other.
When the pros talk about negative correlation they're referring to shorter periods""say, a month or two--over which stocks and
bonds can indeed move in different directions. Lately two giant money managers have produced explanations for why stocks and bonds
move apart or together. They're worth understanding even if your assets under management are in the thousands rather than billions
or trillions.
Bridgewater Associates, the world's biggest hedge fund, based in Westport, Conn., says that how stocks and bonds play with
each other has to do with economic conditions and policy. "There will naturally be times when they're negatively correlated and naturally
be times when they're positively correlated, and those come from the underlying environment itself," senior portfolio strategist,
Jeff Gardner says in an edited transcript of a recent in-house interview.
According to Gardner, inflation was the most important factor in the markets for decades""both when it rose in the 1960s and 1970s
and when it fell in the 1980s and 1990s. Inflation affects stocks and bonds similarly, although it's worse for bonds with their fixed
payments than for stocks. That's why correlation was positive during that long period.
For the past 20 years or so, inflation has been so low and steady that it's been a non-factor in the markets. So investors have
paid more attention to economic growth prospects. Strong growth is great for stocks but doesn't do anything for bonds. That, says
Gardner, is the main reason that stocks and bonds have moved in different directions.
PGIM Inc., the main asset management business of insurer Prudential Financial Inc., has $1.5 trillion under management. In a report
issued in May, it puts numbers on the disappointment the pros feel when stocks and bonds start to move in sync. Let's say a portfolio
is 60% stocks and 40% bonds and has a stock-bond correlation of -0.3, which is about average for the last 20 years. Volatility is
around 7%. Now let's say the correlation goes to zero" not positive yet, but not negative anymore, either. To keep volatility from
rising, the portfolio manager would have to reduce the allocation to stocks to around 52%, which would lower the portfolio's returns.
If the stock-bond correlation reached a positive 0.3, then keeping volatility from rising would require reducing the stock allocation
to only 40%, hitting returns even harder.
PGIM's list of factors that affect correlations is longer than Bridgewater's but consistent with it. The report by vice president
Junying Shen and managing director Noah Weisberger says correlations between stocks and bonds tend to be negative when there's sustainable
fiscal policy, independent and rules-based monetary policy, and shifts up or down in the demand side of the economy (consumption).
The correlation is likely to be positive, they say, when there's unsustainable fiscal policy, discretionary monetary policy, monetary-fiscal
policy coordination, and shifts in the supply side of the economy (output).
One last thought: It's a good idea to spread your money between stocks and bonds even if they don't hedge each other. The capital
asset pricing model developed by William Sharpe in the 1960s says everyone should have the same portfolio, consisting of every asset
available, and adjust their risk by how much they borrow. True, not everyone agrees. John Rekenthaler, a vice president for research
at Morningstar Inc., wrote a fun article in 2017 about the different strategies of Sharpe and fellow Nobel laureate Harry Markowitz.
Images removed. See the original for the full version...
Notable quotes:
"... To shed light on this question, let's look at where both asset classes stand relative to their long-term trendlines. It's important to take a long-term perspective because commentators seem overly eager to detect bubbles everywhere they look these days. They (and we) need to be reminded that not every bull market is a bubble, and not every bear market represents the bursting of a bubble. ..."
Which U.S. asset class is more likely in a bubble right now" stocks or housing? More than 80% of traders polled in a
Charles Schwab survey say both.
To shed light on this question, let's look at where both asset classes stand relative to their long-term trendlines. It's important
to take a long-term perspective because commentators seem overly eager to detect bubbles everywhere they look these days. They (and
we) need to be reminded that not every bull market is a bubble, and not every bear market represents the bursting of a bubble.
Why are we so eager to detect bubbles? Will Goetzmann, a finance professor at Yale University, told me that he suspects it traces
to the moral overtone that investors have when they declare something to be forming a bubble. When they do, he said, they're implying
that those who lose big in that bear market will be getting what they deserve.
This column leaves moral judgments out of the equation. I instead am focusing on the most comprehensive data set of U.S. equity
and housing returns that I know. This database, which extends back to the late 1800s, was compiled by Ã'scar Jordà of the Federal
Reserve Bank of San Francisco, Katharina Knoll of Deutsche Bundesbank in Frankfurt, Dmitry Kuvshinov and Moritz Schularick, both
of the University of Bonn, and Alan M. Taylor of the University of California Davis.
This database is unique in several ways. One big advantage
is that it includes data for both stocks and housing; other databases extend further back in the case of the stock market but don't
include housing. The database also takes rent into account when calculating housing's return. Some prior historical analyses of housing's
return have focused only on price appreciation, which significantly underreports housing's performance.
The chart below plots the returns since 1890 of U.S. stocks and housing. Notice that equities and housing have each produced
largely similar returns over the past 130 years . As recently as the late 1940s, housing was ahead of equities for cumulative
performance since 1890. As recently as the late 1970s the two data series were nearly neck-and-neck. Notice further that housing's
performance has been less volatile than the stock market's, especially since World War II.
For each asset class I calculated an exponential trendline that most closely fit the 130 years' worth of data. The bad news is
that both stocks and housing currently are above their respective trendlines, so if you insist that both assets are in bubbles now
you in fact could find some statistical support.
Of the two, the stock market is further ahead of its long-term trendline than is housing. So if you'd have to pick which of the
two is more likely to decline significantly, you should choose stocks.
Bonds are vulnerable
I've not said anything about bonds, but they are even further ahead of their trendline than either stocks or housing. So from
this long-term perspective they are even more vulnerable than stocks to a big decline.
when the tax rates increase even more, it just encourages automation or DIY (bring your own sheets to avoid paying the cleaning
fee), which just grinds down growth rather than accelerates it.
Notable quotes:
"... Applebee's is now using tablets to allow customers to pay at their tables without summoning a waiter. ..."
Companies see automation and other labor-saving steps as a way to emerge from the health crisis with a permanently smaller
workforce
PHOTO:
JIM THOMPSON/ZUMA PRESS
... ... ...
Economic data show that companies have learned to do more with less over the last 16 months or so. Output nearly
recovered to pre-pandemic levels in the first quarter of 2021 -- down just 0.5% from the end of 2019 -- even though U.S.
workers put in 4.3% fewer hours than they did before the health crisis.
... ... ...
Raytheon Technologies
Corp.
RTX
0.08%
,
the biggest U.S. aerospace supplier by sales, laid off 21,000 employees and contractors in 2020 amid a drastic
decline in air travel. Raytheon said in January that efforts to modernize its factories and back-office operations
would boost profit margins and reduce the need to bring back all those jobs. The company said that most if not all
of the 4,500 contract workers who were let go in 2020 wouldn't be called back.
... ... ..
Hilton Worldwide Holdings Inc. HLT -0.78% said last week that most of its U.S. properties are adopting "a
flexible housekeeping policy," with daily service available upon request. "Full deep cleanings will be conducted
prior to check-in and on every fifth day for extended stays," it said.
Daily housekeeping will still be free for those who request it...
Unite Here, a union that represents hotel workers, published a report in June estimating that the end of daily
room cleaning could result in an industrywide loss of up to 180,000 jobs...
... ... ...
Restaurants have become rapid adopters of technology during the pandemic as two forces -- labor shortages that are
pushing wages higher and a desire to reduce close contact between customers and employees -- raise the return on such
investments.
...
Applebee's is now using tablets to allow customers to pay at their tables without summoning a
waiter.
The hand-held screens provide a hedge against labor inflation, said John Peyton, CEO of Applebee's
parent
Dine
Brands Global
Inc.
... ... ...
The U.S. tax code encourages investments in automation, particularly after the Trump administration's tax cuts,
said Daron Acemoglu, an economist at the Massachusetts Institute of Technology who studies the impact of
automation on workers. Firms pay around 25 cents in taxes for every dollar they pay workers, compared with 5 cents
for every dollar spent on machines because companies can write off capital investments, he said.
A lot of employers were given Covid-aid to keep employees employed and paid in 2020. I
assume somebody has addressed that obligation since it wasn't mentioned.
But, what happens to the unskilled workers whose jobs have been eliminated? Do Raytheon
and Hilton just say "have a nice life on the streets"?
No, they will become our collective burdens.
I am all for technology and progress and better QA/QC and general performance. But the
employers that benefit from this should use part of their gains in stock valuation to keep
"our collective burdens" off our collective backs, rather than pay dividends and bonuses
first.
Maybe reinvest in updated training for those laid off.
No great outcome comes free. BUT, as the article implies, the luxury of having already
laid off the unskilled, likely leaves the employer holding all the cards.
And the wheel keeps turning...
Jeffery Allen
Question! Isn't this antithetical (reduction of employees) to the spirit and purpose of
both monetary and fiscal programs, e.g., PPP loans (fiscal), capital markets funding
facilities (monetary) established last year and current year? Employers are to retain
employees. Gee, what a farce. Does anyone really care?
Philip Hilmes
Some of this makes sense and some would happen anyway without the pandemic. I don't need my room
cleaned every day, but sometimes I want it. The wait staff in restaurants is another matter. Losing
wait staff makes for a pretty bad experience. I hate having to order on my phone. I feel like I might
as well be home ordering food through Grubhub or something. It's impersonal, more painful than telling
someone, doesn't allow for you to be checked on if you need anything, doesn't provide information you
don't get from a menu, etc. It really diminishes the value of going out to eat without wait staff.
al snow
OK I been reading all the comments I only have a WSJ access as the rate was a great deal.
Hotel/Motel started making the bed but not changing the sheets every day for many years I am fine as
long as they offer trash take out and towel/paper every day
and do not forget to tip .
clive boulton
Recruiters re-post hard to fill job listings onto multiple job boards. I don't believe the reported
job openings resemble are real. Divide by 3 at least.
Stocks are near all-time highs, and though U.S. markets opened slightly lower on Thursday, it's much easier to find bulls than
bears these days.
But a technical indicator showing itself in five high-profile stocks and two funds suggests that a market correction is
coming, according to strategist
Michael
Kramer of Mott Capital Management
, in our
call
of the day
.
The relative strength index, or RSI, measures the speed and change of recent price movements and is one of the most
renowned technical signals. It allows investors to evaluate whether a security is overbought or oversold -- i.e. overvalued or
undervalued. A reading of 70 or above is considered overbought, while 30 and below is oversold.
A look back at 2018 is enough to tell investors why they should watch this indicator, according to Kramer, who noted on
January 29, 2018 that high RSIs for some of the biggest names signalled that the stock market was ready to fall. "Things
got really ugly after that through February 8," he said.
In those 10 days early in 2018, Dow industrials
DJIA,
+0.15%
tumbled
near 9%, the S&P 500
SPX,
-0.33%
plunged
more than 10%, and the Nasdaq Composite
COMP,
-0.70%
fell
near 10%.
Now, "the same thing is emerging," Kramer said, "with the biggest stocks all reaching very overbought reading."
By the end of Wednesday, Apple had an RSI of more than 80, with Amazon at 70, Microsoft at 76, and Google-owner Alphabet at
73 and showing a rising pattern, Kramer said. He noted that Nvidia's RSI was in the process of breaking a near-two month
rise up to 83.
Ark Innovation ETF's RSI was sitting at 76, while the QQQ was above 75. "When the QQQ RSI gets this high, the outcomes are
not good most of the time, including January 2018," Kramer said.
Cryptos are a collectors item just like fine art. While money has value based on the military jack boot of empire which insures
its value only with its domination of most countries and the violent destruction of any attempt to set up a transparent real money
system exchangable for gold (Libya). A painting by a hot painter is worth 900k because there are a handful of people who will
pay that for it, they're interest in it keeps the value at a certain level. Same with Bitcoin, but that interest is spread out
to millions of people. If they all decide its worthless than it is, but why would they? I think a lot of these evidence free claims
of hacking and ransom wear are made to devalue the currency that the ransom is paid in, it could have easily been paid in dollars
via the internet, as cryptos is basiclly just that: a stand in for the dollar being moved to an account that is a number. Cryptos
in this way provide a window to real capitalism. This to me is natural human evolution toward anarchism and a system of exchange
that is transparent and based on people working together instead of militaristic violence. You can exchange cryptos for gold,
rubles and yaun, so saying that it exist only based on the dollars supremacy is wrong.
What I know about computers and Bitcoin would get lost in a thimble. However, what I've learnt about the US Govt over the years
tells me that this problem wouldn't be happening if the USG hadn't dedicated itself to micro-managing, and dominating the www
- for Top Secret (i.e. bullshit) reasons.
I was appalled when I learnt that the USG had made strong encryption ILLEGAL, and dumbfounded when I first heard about the
PRISM 'co-operative' USG-mandated www surveillance program. Edward Snowden's NSA revellations confirmed that the USG has KILLED
computer security for crappy, feeble-minded reasons.
It's more or less par for the course that the USG blames other entities for its own prying and mischief-making. Were it not
for the USG placing LOW limits on computer security, we would all have access to Pretty Good Privacy and pro-active, timely means
of detecting and defending and/or evading malware.
"They mostly never see the piece, it's kept in climate controlled storage."
This is standard practice. Using "Ports Franches" as in several Swiss towns including Geneva. Perfectly legal as they are not
IN the country (for Tax purposes).
However, this is not really for "drug" cartels but just a way of transferring assets from one rich person to another.
Many ownership deals are made inside the Port Franche itself, without the need to transport the work outside. There is a limitation
on the time a work can be left inside the building, but I believe all that they have to do is drive more or less "round the block"
and re-enter it. I'm a bit hazy about that detail, as I do not have a spare Rembrandt to verify this personally.
****
jsanprox | Jul 12 2021 1:59 utc | 103
A painting by a hot painter is worth 900k because there are a handful of people who will pay that for it, they're interest
in it keeps the value at a certain level.
The primary dealers agree on a common price level for a stated painter. These paintings can even be used as collateral when
borrowing money.
Other painters do not have a "guaranteed" price level but one based on auction values (ie. What the customer is willing to pay.)
The Primary dealers are a very small group who control all the big art fairs and which other dealers are allowed to sell or deal
there -.
There are "rules" about "participation" (not sure about the terminology here), that various dealers will have made between themseves.
ie. There is a split-up of profits following certain agreed parts. Woe unto a dealer that doesn't pay his part. (OK; personal
note here, I once accidently fell foul of the "cartel" because a gallery owner with my works, had not paid "out" on a large sum
that he had made on another artist he was representing. They decided to "get" him.)
****
Ransomware ; Why are people getting all hot and bothered about Corporations paying money in Bitcoin? Happens all the
time.
Another Personal anecdote ; About five years ago I started recieving emails from unknown "people", Real first names,
with an attachement. As normal, these go into trash without being opened (or into a folder I have, called "dodgy spam?) About
20 + of them. Next I recieved one email saying (in French) " I know your little secret, and if you don't want everyone else to
know, pay (about €30) a "Small" sum into the following bitcoin account xxxxx."
In France you can " porter plainte" , ie, denounce and start a legal process against an "unknown person, or persons".
This is to protect yourself, and is run by the Government/police. In my case, never having opened any of the "attachments", I
don't know what they were, probably porn of some sort. IF they had been opened there would have been a suspicion that I was a
"willling" victim. (The first question asked by the Gov. Site was "Have you paid them/it, and by how much". in my case - none)
******
Haven't heard anything since. BUT, Bitcoin was already being used for criminal purposes.
Nobody had to find a super-secret backdoor into my computer. Just buy a data base with working emails - Corporations
use them all the time to send publicity. By looking at the address, and other more or less freely available information, they
can target people, by location, age, etc.
But you only know a Picasso is worth a lot because you can calculate it in USD terms (ultimately: you can also calculate in
any other fiat currency, but, since we live in the USD Standard, we only know a certain amount of fiat currency is worth if we
can convert it to USDs). The USD is still the unit of accountancy and the means of payment even in the art market.
You can never pay your taxes or fill the tank of your car with a Picasso - you would have to sell it for USDs, and use these
USDs to pay for everything you need. Sure, two megarich persons could exchange art between them as some kind of permute, but that
doesn't constitute a societal unity (because billionares don't exist in a vacuum). It is a particularity of society, not society
itself.
The same is true with crypto. And with gold. And with platinum. And with whatever else you want. It is a myth crypto is "fake"
just because it is purely digital: the material specification of the thing doesn't matter for its status of money. Being digital
is the lesser of crypto's problems. Crypto's main problem is the very economic foundations of its existence, which ensure it will
never be money.
And no: subdividing crypto wouldn't solve it - they tried it with gold when capitalism lived through the Gold Standard (when
it was on its death throes) and there's a limit to this. Even if the digital era allowed it, you would then simply have fiat money
system with extra steps and double the brutality, because then the power to issue money would rest with few private individual
hoarders of the crypto with no legal accountability and responsibility; it would be a dystopian "Pirates of the Caribbean" meets
"Mad Max" scenario.
Keith Speights: Some findings were recently published in Nature magazine that
indicate that the Pfizer-BioNTech and the Moderna vaccines may provide protection for
years.
Many investors are and were hoping for annual recurring revenue from these companies'
vaccines. Brian, how troublesome is this latest data for the prospects for Pfizer, BioNTech,
and Moderna?
Brian Orelli: There's a bit of an extrapolation going on here. The researchers looked at
memory B cells, which tend to provide more long-term protection than, let's say, antibodies.
They looked at those in the lymph nodes and found the cells were there as long as 15 weeks.
Typically, they'd mostly be gone by four to six weeks. So that's the basis of this claim
that it could offer protection for years. If true, that will be a big blow obviously to vaccine
makers, at least for Moderna and BioNTech.
Pfizer would be fine because it's so diversified. It's really hard to make an argument for
the valuations of Moderna and BioNTech right now if these vaccines are one and done over a
couple of years. They really need to have ongoing sales until they can get growth from other
drugs in their pipelines.
Speights: Brian, when I first saw the story, I went to check out to see how the stocks were
performing, and Moderna is up, BioNTech was barely changed, Pfizer barely changed. It seems to
me that investors really aren't making much of this news. Do you think that's the right take at
this point?
Orelli: I think it's still too early to be able to conclude that it's definitely going to
work for years. The other issue is that we're looking at, will those B cells actually protect
against the variants?
If they don't protect against the variants, then it doesn't really matter if you have B
cells in your lymph nodes. If they're not going to protect against the variants then we're
going to have to get a booster shot anyway.
Speights: Right. Obviously, if these vaccines provide immunity for multiple years, these
companies aren't going to make nearly as much money as they expect and a lot of investors
expect. So this is a big story to watch, but like you said, really, really early right now and
too soon to maybe go drawing any conclusions at this point.
The continued decline in Treasury yields has prompted many short-sighted arm-chair analysts
to declare that the Fed was right about inflationary pressures being "transitory". Of course,
as Treasury
Secretary Janet Yellen herself admitted, a little inflation is necessary for the economy to
function long term - because without "controlled inflation," how else will policymakers inflate
away the enormous debts of the US and other governments.
As policymakers prepare to explain to the investing public why inflation is a "good thing",
a report published this week by left-leaning NPR highlighted a phenomenon that is manifesting
in grocery stores and other retailers across the US: economists including Pippa Malmgren call
it "shrinkflation". It happens when companies reduce the size or quantity of their products
while charging the same price, or even more money.
As
NPR points out, the preponderance of "shrinkflation" creates a problem for academics and
purveyors of classical economic theory. "If consumers were the rational creatures depicted in
classic economic theory, they would notice shrinkflation. They would keep their eyes on the
price per Cocoa Puff and not fall for gimmicks in how companies package those Cocoa Puffs."
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However, research by behavioral economists has found that consumers are "much more gullible
than classic theory predicts. They are more sensitive to changes in price than to changes in
quantity." It's one of many well-documented ways that human reasoning differs from strict
rationality (for a more comprehensive review of the limitations of human reasoning in the
loosely defined world of behavioral economics, read Daniel Kahneman's "Thinking Fast and
Slow").
Just a few months ago, we described shrinkflation as "the
oldest trick in the retailer's book" with an explanation of how Costco was masking a 14%
price hike by instead reducing the sheet count in its rolls of paper towels and toilet
paper.
NPR's report started with the story of Edgar Dworsky, who monitors grocery store shelves for
signs of "shrinkflation".
A couple of weeks ago, Edgar Dworsky walked into a Stop & Shop grocery store in
Somerville, Mass., like a detective entering a murder scene.
He stepped into the cereal aisle, where he hoped to find the smoking gun. He scanned the
shelves. Oh no, he thought. He was too late. The store had already replaced old General Mills
cereal boxes -- such as Cheerios and Cocoa Puffs -- with newer ones. It was as though the
suspect's fingerprints had been wiped clean.
Then Dworsky headed toward the back of the store. Sure enough, old boxes of Cocoa Puffs
and Apple Cinnamon Cheerios were stacked at the end of one of the aisles. He grabbed an old
box of Cocoa Puffs and put it side by side with the new one. Aha! The tip he had received was
right on the money. General Mills had downsized the contents of its "family size" boxes from
19.3 ounces to 18.1 ounces.
Dworsky went to the checkout aisle, and both boxes -- gasp! -- were the same price. It was
an open-and-shut case: General Mills is yet another perpetrator of "shrinkflation."
It's also being used for paper products, candy bars and other packaged goods.
Back in the day, Dworsky says, he remembers buying bigger candy bars and bigger rolls of
toilet paper. The original Charmin roll of toilet paper, he says, had 650 sheets. Now you
have to pay extra for "Mega Rolls" and "Super Mega Rolls" -- and even those have many fewer
sheets than the original. To add insult to injury, Charmin recently shrank the size of their
toilet sheets. Talk about a crappy deal.
Shrinkflation, or downsizing, is probably as old as mass consumerism. Over the years,
Dworsky has documented the downsizing of everything from Doritos to baby shampoo to ranch
dressing. "The downsizing tends to happen when manufacturers face some type of pricing
pressure," he says. For example, if the price of gasoline or grain goes up.
The whole thing brings to mind a scene from the 2000s comedy classic "Zoolander".
Note to Goldman: you're a bank. Stick to banky-stuff. Leave the fear **** and lies to
the professionals in the .gov and MSM.
p3scobar 7 hours ago
Goldman is the government... sooo.....
espirit 9 hours ago
If Goldman can give medical advice, so can I.
A Lunatic 9 hours ago remove link
Turning off the TV will neutralize the Delta Variant.
rag_house 9 hours ago
Just like 'Climate Change' you know it's contrived when the bankers start doing
'science.'
liberty2day 9 hours ago
when did they not?
rag_house 8 hours ago
Bankers aren't scientists. They simply dream up fake things they want to convince people
of and bribe people to try to make it seem real.
Enraged 9 hours ago remove link
Goldman Sachs Charged in Foreign Bribery Case and Agrees to Pay Over $2.9 Billion
The Goldman Sachs Group Inc. and Goldman Sachs (Malaysia) have admitted to conspiring to
violate the Foreign Corrupt Practices Act (FCPA) in connection with a scheme to pay over $1
billion in bribes to Malaysian and Abu Dhabi officials to obtain lucrative business for
Goldman Sachs, including its role in underwriting approximately $6.5 billion in three bond
deals for 1Malaysia Development Bhd. (1MDB), for which the bank earned hundreds of millions
in fees.
bond prices have nothing to do with recovery [sic]
stock prices have nothing to do with growth, except growth of the money supply
Kreditanstalt 3 hours ago
"...the price of a beer or a McDonalds in 10-years time will be exactly the same as it
is today. (Which it won't.)"
But the type who buy US government bonds don't care about the price of burgers. They
only plan to flip the thing back to the next Greater Fool...or THE FED
Henry Simons and Irving Fisher supported the Chicago Plan to take away the bankers
ability to create money.
"Simons envisioned banks that would have a choice of two types of holdings: long-term
bonds and cash. Simultaneously, they would hold increased reserves, up to 100%. Simons saw
this as beneficial in that its ultimate consequences would be the prevention of
"bank-financed inflation of securities and real estate" through the leveraged creation of
secondary forms of money."
Bankers do need to ensure the money they lend out gets paid back to balance their
books.
Banking requires prudent lending.
If someone can't repay a loan, they need to repossess that asset and sell it to recoup
that money.
If they use bank loans to inflate asset prices they get into a world of trouble when
those asset prices collapse.
As the real estate and stock market collapsed the banks became insolvent as their assets
didn't cover their liabilities.
They could no longer repossess and sell those assets to cover the outstanding loans and
they do need to get the money they lend out back again to balance their books.
The banks become insolvent and collapsed, along with the US economy.
When banks have been lending to inflate asset prices the financial system is in a
precarious state and can easily collapse.
Cont ......
Sound of the Suburbs 2 hours ago
That was the 1920s.
What was the ponzi scheme of inflated asset prices that collapsed in Japan in 1991?
Japanese real estate.
They avoided a Great Depression by saving the banks.
They killed growth for the next 30 years by leaving the debt in place.
Japan could study the Great Depression to avoid this fate.
What was the ponzi scheme of inflated asset prices that collapsed in 2008?
"It's nearly $14 trillion pyramid of super leveraged toxic assets was built on the back
of $1.4 trillion of US sub-prime loans, and dispersed throughout the world" All the
Presidents Bankers, Nomi Prins.
We avoided a Great Depression by saving the banks.
We left Western economies struggling by leaving the debt in place, just like Japan.
It's not as bad as Japan as we didn't let asset prices crash in the West, but it is this
problem has made our economies so sluggish since 2008.
We, in turn, seem to have learnt something from Japan, as they did let asset prices
crash.
The banking system and the markets are still closely coupled.
Any significant fall in asset prices will feed back into the banking system.
We are trapped, and the only way to keep things from collapsing is to keep pumping in
more and more liquidity.
It's a choice
Let the assets bubbles collapse, and watch this feed back into the financial
system.
Keep the whole thing afloat, but make things worse in the long run as the bubbles
just get bigger and bigger.
We've gone for option two.
That's why the FED get so jittery when the markets start to fall.
During the coronavirus lockdowns there was no way the markets could be allowed to
reflect what was going on in the real economy.
The banking system would go down.
Sound of the Suburbs 1 hour ago remove link
They learnt from the mistakes of the 1920s and put regulations in place to ensure this
didn't happen again.
Financial stability arrived in the Keynesian era and was locked into the regulations of
the time.
"This Time is Different" by Reinhart and Rogoff has a graph showing the same thing
(Figure 13.1 - The proportion of countries with banking crises, 1900-2008).
Neoclassical economics came back and so did the financial crises.
The neoliberals removed the regulations that created financial stability in the
Keynesian era and put independent central banks in charge of financial stability.
Why does it go so wrong?
Richard Vague had noticed real estate lending balloon from 5 trillion to 10 trillion
from 2001 – 2007 and knew there was going to be a financial crisis.
Richard Vague has looked at the data for financial crises going back 200 years and found
the cause was nearly always runaway bank lending.
We put central bankers in charge of financial stability, but they use an economics that
ignores the main cause of financial crises, private debt.
Most of the problems are coming from private debt.
The technocrats use an economics that ignores private debt.
The poor old technocrats never really stood a chance.
Many people seem to have forgotten after their nearly four-decade run that bonds have a
very ugly side that can yield great pain. Today's lower yields may be part of a greater
conundrum created by the reality of too much freshly printed money floating around and
people needing someplace to stash it. The article below delves into why interest rates may
unexpectedly rise. https://Bonds
As An Investment Have A Very Ugly Side.html
besnook10 4 hours ago
the equity market is reflecting the rush to dollar assets as a function of economic
uncertainty especially dedollarization while the low rates also reflect the lower demand
for dollars because of dedollarization.
George Bayou 5 hours ago
Treasury rates are set by the fed and have absolutely nothing to do with reality
anymore. The rates are set so that the government can sustain a higher debt ceiling,
nothing more. Corporate bonds can be made artificially low because they don't have to
compete against treasuries.
buzzsaw99 4 hours ago
i would argue that the s&p 500 is set by the fed and has absolutely nothing to do
with reality anymore. i would further add that if the fed didn't meddle treasury rates
would be even lower and the corporate spread would be huge.
bshirley1968 PREMIUM 4 hours ago
I would argue you are both right. The meddle when they have to. As long as the sheep run
with their narrative, the "markets" usually go the way they want them to. But they will
step in when there is a divergence.
George Bayou 4 hours ago remove link
I agree that the s&p is inflated due to fed injection and currency devaluation. I
disagree about treasury rates, if the fed stopped buying treasuries then the market would
not take up the slack unless the rates went higher.
The fed can't do this not only because the government couldn't afford paying higher
rates, but the housing industry that they've inflated would get crushed as well.
"How many impossible things can you believe before breakfast?"
US 10-year bonds and US equity are in full rally mode. They show contradictory expectations
for a stalled recovery and future strong growth! How can that be? Because the market is about
what participants collectively think – and how markets think has been utterly changed by
12 years of monetary experimentation, repression, and distortion. We've got to change the way
we think about markets.
That the reflation trade is fading fast? Falling bond yields = rising bond prices, and are a
sign the market anticipates a slowdown and declining inflationary threat.
Yet, we still expect to see further equity upside? Falling dividend yields = rising equity
prices, and are a sign the market anticipates strong growth and rising corporate profits.
In bonds there is truth. Bonds are about credit risk – getting repaid principal and
interest. But not the US treasury market – which is why it is called the risk-free rate.
The risk of holding a Treasury bond actually boils down to inflation risk. Whatever mad-eyed
Libertarian preppers hiding in mountain lairs say, the US Government defaulting on debt is a 50
Sigma possibility – it aint going to happen.
But inflation will eat away the value of the bond today in terms of its purchasing power
relative to its future purchasing power at maturity. The greater inflation, the less the bond
is worth, and its price today should reflect that. Inflation could occur through rising prices,
and declining confidence in currency which creates inflation as its FX value tumbles.
If you assume zero inflation – as the market clearly does when the 10-year risk free
rate is 1.34% – then there is no downside risk holding Treasuries. You will happily
collect $1.34 for each $100 invested semi-annually and the price of a beer or a McDonalds in
10-years time will be exactly the same as it is today. (Which it won't.)
Bonds have rallied strongly in recent weeks – clearly telling us the expectations of a
strong global recovery have stalled. There is little upside to holding bonds. Just certainty.
If the global economy does staggering well you won't get $2 back on your $100 investment. The
only way you get more at maturity is if we see deflation – when the price of a beer is
less in 10 years time than it is today.
Yet, we all know the world is a very uncertain place – its been illustrated by supply
chain shifts and breaks, and rising trade hassle and protectionism. Inflation is not only
likely – but nailed on. And that means any pension fund buying bonds today to pay your
pension tomorrow – is going to fail unless they find other ways to generate returns.
It's the same problem if they buy equity. Long term, bonds outperform, but today we believe
stocks are the only place to generate Alpha. If you want upside, then buy stocks. If the global
economy rallies and grows, then profits rise and companies become more valuable yada, yada The
downside? If the global economy stalls, companies make less money, the price falls or they
collapse completely and you get nothing back.
How can the two markets be telling us such a contradictory story?
Distortion is a terrible thing. It affects minds and they way we think about markets.
And this is what I suddenly realised yesterday talking to my chums yesterday. We all noted
the same thing – those of us of a certain age are watching younger, more nimble financial
minds take over our business. That's normal. They have different perspectives and different
reads on what's happening and No One Working In Global Finance Today Under the Age of 32 has
ever known markets that were undistorted by QE!
Think about it a second – central bank policies holding interest rates artificially
low and them standing ever-ready to support global markets from the consequences of induced
bubble conditions – have been the dominant theme of market for 12 years now. A whole
generation of very clever bankers and investment managers are maturing into senior positions
across the global financial industry having known nothing else.
It amazes me in our own internal discussions how the divide between we few surviving old
fogey's who remember free market currency crashes, bond market collapses and equity tumbles,
and the younger financiers who can just accept the distortions caused by central banks to avoid
these events, as a factor to include in their market expectations..
That's probably why anyone over 40 is such a bear and convinced the market is unsustainable,
while the younger generation is far more accepting of distortion as a permanent market
reality..
Remember when it comes to generating investment returns, it's not what you think, but what
the market thinks that matters. It is just a voting machine
(And, by the way, the only way funds are going to make proper returns in these markets is
probably to shift out of distorted financial assets (bonds and equity) and start buying real
world assets linked to reality that's a story for tomorrow!)
In the past year the combined QE of the EU plus the Fed went from $8.3 Tr to $17.4 Tr.
That is massive economic stimulus and rate suppression. It is estimated by the Fed that
for each $ 1Tr of QE in the US, there is a 50 BP reduction from what would have been
market interest rates. So, $4 trillion of QE by the Fed equals 200 BP of rate reduction.
If inflation is running at 3%, and then there is 2% QE reduction, then real Fed Funds
rates are around 500 BP negative. QE is completely distorting the bond market. That is
driving a lot of the stock market growth
NoDebt 5 hours ago
Well, for sure, one thing UST rates are NOT is a proxy for inflation. Haven't been in a
long time.
They are a proxy for where the Fed wants the rates to be. Nothing more. And that is
mostly driven by the need to finance profligate federal government deficits. What the
market won't buy at a given rate, the Fed will buy. But make no mistake, the rate will be
what they want it to be. Simple as that.
buzzsaw99 5 hours ago
That the reflation trade is fading fast? Falling bond yields = rising bond prices, and
are a sign the market anticipates a slowdown and declining inflationary threat...
ah, ********. there is no market.
Herdee 3 hours ago (Edited)
The numbers are 3.5% for the U.S. and 2.5% for Japan. Hit those numbers on interest
rates and it's game over. Neither one of them at that point according to their tax revenues
could even make a payment on the interest, let alone make a principle payment.
Adino 2 hours ago
Yeah, I'd love for someone to explain to me how $30 trillion + debt and over $130
trillion in unfunded liabilities gets paid off without hyperinflation.
Especially when the frn itself is the primary source of the debt.
bshirley1968 PREMIUM 4 hours ago
Sure, whatever Blain.
It's just time to throw bond traders a bone. Two weeks from now stawks will be once
again pushing new records and we'll be talking about "rising interest" rates.
The narrative changes.......consistently.
How long ago were we hearing about the significance of 1.75% on the ten year......as
stawks rallied to all time highs day after day? Now we are supposed to be scared because
rates are falling......and telling us there is "risk" out there.
The ******** is thick.......and it's all ********.
Hal n back 4 hours ago
meanwhile, this week a 10.7 ounce bag of M&M's went up 11%.
90% hamburger meat is $4 a pound on sale.
eggs, which do fluctuate, are 1.49 a dozen for large (they were 88 cents not too long
ago)
cereals are up in price or down in content.
A bagel is now a buck without the smear.
Too bad there is not an official true inflation rate. even when the govt does it by
region, its not correct.
Actually too bad government is not held accountable. On a fair and even basis.
ChromeRobot 5 hours ago
Yeah there is no possible way that the "Japanofication" of US bonds and economy can
occur. Our CB is much smarter than theirs. Lol, lol, lol.... The 10yr has appreciated 10%
in a month! Who cares about the yield. Negative yields on German bunds. This guy kills
me!
Heroic Couplet 5 hours ago
The libertarian magazine Reason yesterday had an interesting article about the 10 year
Treasury and how student loan interest rates are tied to it. Now, if the 10 year goes down,
are we going to see the 3% student loan interest rate and the 6% student loan interest rate
go down? OF COURSE NOT.
gcjohns1971 1 hour ago
The US Defaulted in 1790 "Continentals" 1824 "He killed the Bank", the Civil War
"Greenbacks", arguably the Panic of 1907, 1933 "Gold Confiscation", 1971 "Temporary
suspension of Convertibility...Like the Pound Sterling in 1914!..
Kreditanstalt 3 hours ago
"...the price of a beer or a McDonalds in 10-years time will be exactly the same as it
is today. (Which it won't.)"
But the type who buy US government bonds don't care about the price of burgers. They
only plan to flip the thing back to the next Greater Fool...or THE FED
As
Peter Hitchens noted recently "the most bitterly funny story of the week is that a defector
from North Korea thinks that even her homeland is 'not as nuts' as the indoctrination now
forced on Western students."
One of Yeonmi Park's initial shocks upon starting classes at Colombia University was to be
met with a frown after revealing to a staff member that she enjoyed reading Jane Austen. "Did
you know," Ms. Park was sternly admonished, "that those writers had a colonial mind-set? They
were racists and bigots and are subconsciously brainwashing you."
But after encountering the new requirement for the use of gender-neutral pronouns, Yeonmi
concluded: "Even North Korea is not this nuts North Korea was pretty crazy, but not this
crazy." Devastatingly honest, but not exactly a compliment to what once might have been the
land of her dreams.
Sadly, Hitchens reports that her previous experience served Yeonmi well to adapt to her new
situation: "She came to fear that making a fuss would affect her grades and her degree.
Eventually, she learned to keep quiet, as people do when they try to live under intolerant
regimes, and let the drivel wash over her."
Eastern European readers will unfailingly understand what it is that Hitchens meant to
say.
"... For now, loose monetary and fiscal policies will continue to fuel asset and credit bubbles, propelling a slow-motion train wreck. The warning signs are already apparent in today's high price-to-earnings ratios SPX , low equity risk premiums, inflated housing and tech assets COMP , and the irrational exuberance surrounding special purpose acquisition companies (SPACs), the crypto sector BTCUSD, , high-yield corporate debt , collateralized loan obligations, private equity, meme stocks AMC, and runaway retail day trading. ..."
"... But meanwhile, the same loose policies that are feeding asset bubbles will continue to drive consumer price inflation, creating the conditions for stagflation whenever the next negative supply shocks arrive. Such shocks could follow from renewed protectionism; demographic aging in advanced and emerging economies; immigration restrictions in advanced economies; the reshoring of manufacturing to high-cost regions; or the balkanization of global supply chains. ..."
"... More broadly, the Sino-American decoupling threatens to fragment the global economy at a time when climate change and the COVID-19 pandemic are pushing national governments toward deeper self-reliance. ..."
"... Making matters worse, central banks have effectively lost their independence, because they have been given little choice but to monetize massive fiscal deficits to forestall a debt crisis. With both public and private debts having soared, they are in a debt trap. Central banks will be damned if they do and damned if they don't, and many governments will be semi-insolvent and thus unable to bail out banks, corporations, and households. The doom loop of sovereigns and banks in the eurozone after the global financial crisis will be repeated world-wide ..."
"... When former Fed Chair Paul Volcker hiked rates to tackle inflation in 1980-82, the result was a severe double-dip recession in the United States and a debt crisis and lost decade for Latin America. But now that global debt ratios are almost three times higher than in the early 1970s, any anti-inflationary policy would lead to a depression, rather than a severe recession. The question is not if but when. ..."
Roubini warns: After 'the Minsky Moment' crashes overheated speculative markets, 'the
Volcker Moment' will will arrive to crash the debt-burdened global economy
( Project Syndicate ) -- In
April, I
warned that today's extremely loose monetary and fiscal policies, when combined with a
number of negative supply shocks, could result in 1970s-style stagflation (high inflation
alongside a recession). In fact, the risk today is even bigger than it was then.
After all, debt ratios in advanced economies and most emerging markets were much lower in
the 1970s, which is why stagflation has not been associated with debt crises historically. If
anything, unexpected inflation in the 1970s wiped out the real value of nominal debts at fixed
rates, thus reducing many advanced economies' public-debt burdens.
The warning signs are already apparent in today's high price-to-earnings ratios, low
equity risk premiums, inflated housing and tech assets, and the irrational exuberance
surrounding special purpose acquisition companies (SPACs), the crypto sector, high-yield
corporate debt, collateralized loan obligations, private equity, meme stocks, and runaway
retail day trading.
Conversely, during the 2007-08 financial crisis, high debt ratios (private and public)
caused a severe debt crisis -- as housing bubbles burst -- but the ensuing recession led to low
inflation, if not outright deflation. Owing to the credit crunch, there was a macro shock to
aggregate demand, whereas the risks today are on the supply side.
Worst of both
worlds
We are thus left with the worst of both the stagflationary 1970s and the 2007-10 period.
Debt ratios are much higher than in the 1970s, and a mix of loose economic policies and
negative supply shocks threatens to fuel inflation rather than deflation, setting the stage for
the mother of stagflationary debt crises over the next few years.
For now, loose monetary and fiscal policies will continue to fuel asset and credit
bubbles, propelling a slow-motion train wreck. The warning signs are already apparent in
today's high price-to-earnings ratios SPX , low equity risk
premiums, inflated housing and tech assets COMP , and the
irrational exuberance surrounding special purpose acquisition companies (SPACs), the crypto
sector BTCUSD, ,
high-yield corporate debt , collateralized loan obligations, private equity, meme stocks
AMC, and runaway
retail day trading.
But meanwhile, the same loose policies that are feeding asset bubbles will continue to
drive consumer price inflation, creating the conditions for stagflation whenever the next
negative supply shocks arrive. Such shocks could follow from renewed protectionism; demographic
aging in advanced and emerging economies; immigration restrictions in advanced economies; the
reshoring of manufacturing to high-cost regions; or the balkanization of global supply
chains.
Recipe for macroeconomic disruption
More broadly, the Sino-American decoupling threatens to fragment the global economy at a
time when climate change and the COVID-19 pandemic are pushing national governments toward
deeper self-reliance. Add to this the impact on production of increasingly frequent
cyberattacks on critical infrastructure and the social and political backlash against
inequality, and the recipe for macroeconomic disruption is complete.
Making matters worse, central banks have effectively lost their independence, because
they have been given little choice but to monetize massive fiscal deficits to forestall a debt
crisis. With both public and private debts having soared, they are in a debt trap. Central
banks will be damned if they do and damned if they don't, and many governments will be
semi-insolvent and thus unable to bail out banks, corporations, and households. The doom loop
of sovereigns and banks in the eurozone after the global financial crisis will be repeated
world-wide
As inflation rises over the next few years, central banks will face a dilemma. If they start
phasing out unconventional policies and raising policy rates to fight inflation, they will risk
triggering a massive debt crisis and severe recession; but if they maintain a loose monetary
policy, they will risk double-digit inflation -- and deep stagflation when the next negative
supply shocks emerge.
But even in the second scenario, policy makers would not be able to prevent a debt crisis.
While nominal government fixed-rate debt in advanced economies can be partly wiped out by
unexpected inflation (as happened in the 1970s), emerging-market debts denominated in foreign
currency would not be. Many of these governments would need to default and restructure their
debts.
At the same time, private debts in advanced economies would become unsustainable (as they
did after the global financial crisis), and their spreads relative to safer government bonds
would spike, triggering a chain reaction of defaults. Highly leveraged corporations and their
reckless shadow-bank creditors would be the first to fall, soon followed by indebted households
and the banks that financed them.
The Volcker Moment
To be sure, real long-term borrowing costs may initially fall if inflation rises
unexpectedly and central banks are still behind the curve. But, over time, these costs will be
pushed up by three factors. First, higher public and private debts will widen sovereign and
private interest-rate spreads. Second, rising inflation and deepening uncertainty will drive up
inflation risk premiums. And, third, a rising misery index -- the sum of the inflation and
unemployment rate -- eventually will demand a "Volcker Moment."
When former Fed Chair Paul Volcker hiked rates to
tackle inflation in 1980-82, the result was a severe double-dip recession in the United States
and a debt crisis and lost decade for Latin America. But now that global debt ratios are almost
three times higher than in the early 1970s, any anti-inflationary policy would lead to a
depression, rather than a severe recession. The question is not if but when.
Under these conditions, central banks will be damned if they do and damned if they don't,
and many governments will be semi-insolvent and thus unable to bail out banks, corporations,
and households. The doom loop of sovereigns and banks in the eurozone after the global
financial crisis will be repeated world-wide, sucking in households, corporations, and shadow
banks as well.
As matters stand, this slow-motion train wreck looks unavoidable. The Fed's recent pivot
from an ultra-dovish to a mostly dovish stance changes nothing. The Fed has been in a debt trap
at least since December 2018, when a stock- and credit-market crash forced it to reverse its
policy tightening a full year before COVID-19 struck. With inflation rising and stagflationary
shocks looming, it is now even more ensnared.
So, too, are the European Central Bank, the Bank of Japan, and the Bank of England. The
stagflation of the 1970s will soon meet the debt crises of the post-2008 period. The question
is not if but when.
Nouriel Roubini is CEO of Roubini Macro Associates and chief economist at Atlas Capital
Team.
The U.S. has won international backing for a
global minimum rate of tax as part of a wider overhaul of the rules for
taxing international companies , a major step toward securing a final agreement on a key
element of the Biden administration's domestic plans for revenue raising and spending.
Officials from 130 countries that met virtually agreed Thursday to the broad outlines of
what would be the most sweeping change in international taxation in a century. Among them were
all of the Group of 20 major economies, including China and India, which previously had
reservations about the proposed overhaul.
Those governments now will seek to pass laws ensuring that companies headquartered in their
countries pay
a minimum tax rate of at least 15% in each of the nations in which they operate, reducing
opportunities for
tax avoidance .
"... The US seems to be especially vulnerable to issues caused by lack of precarity as it has such a poor welfare system, previously relying on infinite growth to smooth things over or a, now failing, religious faith to keep things in order; prolonged economic and political success that has led to a sense of entitlement and self-belief in the American way, a history of putting personal liberty above all else, which embraces competition rather than co-operation; and a world beating phobia of death well beyond when reproductive age has passed. ..."
"... The gig economy, middle class collapse, MAGA, BLM (and the police actions that prompted its rise), cancel culture, (un)reality TV's attraction, FOMO, the increase in low level strife, self-harming, on-line pornography addiction, the Oxycodone/Fentanyl epidemic etc. are all manifestations and/or causes of that precarity. Civil wars and major revolts (and almost any that succeed in their aims) tend to happen only when there is intra elite infighting rather than uprisings from below. The most likely catalyst for that at the moment is Trump, which may be a good sign given his ineffectualness, ineptitude and general repulsive lack of charisma; anyone even a bit more like a real human being could cause serious ructions. ..."
I have been reading "˜A More Contested World: Global Trends 2040' by The National
Intelligence Council; slowly as there's a lot in it but also a lot missing. No mention of
specific resource limits, no discussion of GM just general "˜technology' concerns
concentrating on AI and of course, god forbid any mention of overpopulation. It is very
US-centric "" in the good scenarios the world gets to a better place only through US leadership
"" and humanist focused with no consideration of the rights of the earth in general, only the
perpetuation of our civilisation and to that end all future scenarios are some variant of
technology led, growth obsessed, centralised BAU (maybe not with full globalism but still based
around hegemonic power structures at some level). It's a view from mainstream economists and
politicians carrying all the normal drawbacks that those words imply: i.e. bad things happen
when the world doesn't do as it's told to do by us, and if you don't agree with us about what
constitutes "˜bad' then you're wrong about that too.
The rising wealth gap and other inequality issues are a common theme in these global risk
studies. However, theories in some recent studies have proposed that it is not inequality
itself that is the problem so much as a prolonged sense of precarity (a new word to me and,
apparently, to MS spellchecker, but it is essentially identical to precariousness) of the
non-elites that accompanies it.
This makes sense from an evolutionary standpoint, as parents desire a stable and resource
abundant household in which their children can be expected to reach a reproductive age. This
might be expected to come more from the female side, as they are tied to their offspring more
than males, who are free to spread their sperm and move on. I have read reorts, possibly
anecdotal only, that it will invariably be the woman that will be the party insisting on buying
the largest house that can be attained, whether affordable or not. I'm all for gender equality
and women's rights but some things are innate and equal-rights do not mean equal hormones,
ambitions, impulses and behaviors.
From this viewpoint therefore, solving the wealth inequality issue is actually anathema to
population reduction. For example the already low birth rate in Italy had a further step down
caused by the increased precarity due to the economic impact of Covid-19, the government has
responded by offering direct incentives for having children. The apparent short term aims are
in direct opposition to the what is best long term, this is called a dilemma rather than a
problem.
The US seems to be especially vulnerable to issues caused by lack of precarity as it has
such a poor welfare system, previously relying on infinite growth to smooth things over or a,
now failing, religious faith to keep things in order; prolonged economic and political success
that has led to a sense of entitlement and self-belief in the American way, a history of
putting personal liberty above all else, which embraces competition rather than co-operation;
and a world beating phobia of death well beyond when reproductive age has passed.
The neologism for the growing proportion of people affected by precarity is the precariat.
The always readable Tim Watkins has a new post that touches on some of theses issues, with a
particular eye on the possibility (or not) of significant inflationary issues ( The
Everything Death Spiral ).
The gig economy, middle class collapse, MAGA, BLM (and the police actions that prompted
its rise), cancel culture, (un)reality TV's attraction, FOMO, the increase in low level strife,
self-harming, on-line pornography addiction, the Oxycodone/Fentanyl epidemic etc. are all
manifestations and/or causes of that precarity. Civil wars and major revolts (and almost any
that succeed in their aims) tend to happen only when there is intra elite infighting rather
than uprisings from below. The most likely catalyst for that at the moment is Trump, which may
be a good sign given his ineffectualness, ineptitude and general repulsive lack of charisma;
anyone even a bit more like a real human being could cause serious ructions.
Great post George thank you. It is quite evident for the astute observer that western
democracy has over the years turned more and more into an amalgam of kleptocracy, oligarchy and
plutocracy.
How many countries have colonial Europe and U.S foreign policy destroyed in the name of
"democracy" and "freedom" ?
I've lost count.
Plato famously is said to have said:
"If you do not take an interest in the affairs of your government, then you are doomed to live
under the rule of fools."
In Platos book the republic, Socrates despises democracy as one of the worst forms of
government. His criticism those many years ago still resonates till this day (in my
opinion).
WIthout invoking logic, I feel the world is in uncharted waters and heading towards a
precipice which no one will see coming.
You have a typo, I believe you mean oxycontin (oxycodone) epidemic. HICKORY IGNORED HOLE
IN HEAD IGNORED 06/27/2021
at 1:12 pm
Hicks , not being based in USA ,my view maybe incorrect . The US is undergoing an
identity crisis . Where in the world did we have this gender crisis , male "" female heck can't
people see between their thighs ? Red-Blue . White Supremacy vs BLM . North vs South . Growing
up in the 70's US entrepreneurship was my inspiration . My hero's were Ford, Sloan , Edison etc
and what do we have today, Musk ? What changed that a society where work was an ethic has
transformed into a system where everyone is looking for an opportunity to suck at the teat of
the government . Amazing transformation for someone who has a reference point . Now I am going
into the stupid zone . What changed was the net surplus energy available per capita to the US
citizen . Once that flipped it was downhill all the way . I reserve the right to be incorrect
in my assessment .
Regarding the off-topic finish, I don't think most people realize how fragile is the glue
holding the US together.
Fragmentation along tribal lines is the biggest theme in American culture.
If a minority collection of tribes succeeds in the attempts to reverse election results, even
more than the Electoral College already does, the country will undergo a major restructuring
(polite description) with no guarantees on a recognizable outcome.
"... This is not the first time Summers has predicted that the firehose of fiscal and monetary stimulus will unleash soaring inflation. While career economists at the White House and Fed - who have peasants doing their purchases for them - urge Americans to ignore the current hyperinflation episode, saying that the recent inflation surge will soon pass, Summers has been unique among his fellow Democrats in predicting that massive monetary and fiscal stimulus alongside the reopening of the economy would spark considerable price pressures. ..."
"... Asked how financial markets may behave in the rest of 2021, Summers said "there will probably be more turbulence" as traders react to faster inflation by pushing up bond yields. "We've got a lot of processing ahead of us in markets," he said. ..."
It may not be quite hyperinflation - loosely defined as pricing rising at a double-digit
clip or higher - but if former Treasury Secretary and erstwhile democrat Larry Summers is
right, it will be halfway there in about six months.
One day after Bank of America warned that the coming "hyperinflation" will last at least 2
and as much as 4 years - whether or not one defines that as transitory depends on whether one
has a Federal Reserve charge card to fund all purchases in the next 4 years - Larry Summers,
who is this close from being excommunicated from the Democrat party, predicted inflation will
be running "pretty close" to 5% at the end of this year and that bond yields will rise as a
result over the rest of 2021.
Considering that consumer prices already jumped 5% in May from the previous year, his
forecast is not much of a shock.
Speaking on Bloomberg TV, Summers said that "my guess is that at the end of the year
inflation will, for this year, come out pretty close to 5%," adding that "it would surprise me
if we had 5% inflation with no effect on inflation expectations." If he is right, the recent
reversal in one-year inflation expectations which dipped from 4.6% to 4.2% according to the
latest UMich consumer sentiment survey, is about to surge to new secular highs.
This is not the first time Summers has predicted that the firehose of fiscal and monetary
stimulus will unleash soaring inflation. While career economists at the White House and Fed -
who have peasants doing their purchases for them - urge Americans to ignore the current
hyperinflation episode, saying that the recent inflation surge will soon pass, Summers has been
unique among his fellow Democrats in predicting that massive monetary and fiscal stimulus
alongside the reopening of the economy would spark considerable price pressures.
Asked how financial markets may behave in the rest of 2021, Summers said "there will
probably be more turbulence" as traders react to faster inflation by pushing up bond yields.
"We've got a lot of processing ahead of us in markets," he said.
Ironically, Summers - who now teaches at Harvard University whose president he was not too
long ago when he hung out with his buddy Jeffrey Epstein...
Plus Size Model 5 hours ago (Edited)
Exactly!! Not only that, it's not just the FED that is contributing to inflation. We can
also blame the SEC and the DOJ. I've never seen a Zero Hedge article blaming stock price
appreciation or buybacks for causing inflation or increasing the money supply. The DOJ
never enforces antitrust laws. The FBI never investigates money laundering from overseas
that creates artificial real estate appreciation that inflates the money supply when people
take out HELOC. There are other oversight bodies that, in a sane world, would not allow
foreign investment in real estate. Bitcoin and others are a new tool that is being used to
manipulate the money supply. It's comical how coins always go down when the little guys are
holding the bag and go up when Coinbase executives want to cash out.
Another thing, this artificial chip shortage, punitive tariffs, and new tax laws are
also adding to price increases.
Totally_Disillusioned 1 hour ago
Speculative investments have NEVER been included in the forumulation of CPI that
determines inflation rate.
Revolution_starts_now 6 hours ago
Larry Summers is a tool.
gregga777 5 hours ago (Edited) remove link
Banksters in 2010's: We've got to revise how we calculate inflation again to conceal it
from the Rubes.
Banksters in 2020: Ho Lee Fuk! Gun the QE engine! Pedal to the metal! Monetize all of
the Federal government's debt! Keep those stonks zooming upwards!
Banksters in 2021: Ho Lee Fuk! The Rubes have caught onto our game! Gun the QE engine!
Keep that pedal to the metal! Maybe the Rubes won't notice housing prices going up 20% per
year?
Summer 2021: Ho Lee Fuk! They are noticing Inflation! We'd better revise how we
calculate inflation again to conceal it from the Rubes.
When and how another housing bubble will burst? This is the question.
The author forget that the current movement out of the cities into the suburb can lead to the
collapse of prices in overpriced areas of big cities like NYC. Also the retain space collapse is
evident even to untrained observers. So people moving out of big cities like NYC and cities
devastated by riots need to sell their current condos and apartments. To whom?
There are
many reports of homebuyers getting into bidding wars and many cities where home prices have
appreciated
by well more than 10% over the past year. This naturally leads to a concern about market
volatility: Must what goes up come down ? Are we
repeating the excesses of the early 2000s, when housing prices surged before the market
crashed?
Some analysts
argue that this time, it's even less likely that prices will fall. Inventories
of new homes for sale are very low, and lending standards are much tighter than in 2005. This
is true. In fact, the ground is even firmer than it seems.
New home inventories were very high before the Great Recession. Today, they are closer to
the level that has been common for decades. The portion of inventory built and ready for move-in is
especially low because of supply chain interruptions combined with a sudden boost of demand
during the coronavirus pandemic. We shouldn't worry much about a crash when buyers are eagerly
snapping up the available homes.
... ... ...
At the June 2006 Federal
Reserve meeting, Ben Bernanke said, "It is a good thing that housing is cooling. If we could
wave a magic wand and reinstate 2005, we wouldn't want to do that." It's notable that Jerome
Powell, who today holds Bernanke's former position as Fed chair, isn't openly pining for a
"cooler" housing market.
There is a common belief that before the Great Recession, homebuyers were taken in by the
myth that home prices never go down, and they became complacent. Those buyers turned out to
be wrong. Yet, even when a concerted effort to kill housing markets succeeded, we had to beat
them into submission for three full years before prices relented. Home prices can go down, but
we have to work very hard, together, for a long time, to make them fall.
If you are a buyer in a hot market where home prices are 30% higher than they were a year
ago, you're getting a 30% worse deal than you could have had back then. Nothing can be done
about that. That said, the main things to be concerned with are the factors federal
policymakers are in control of. There is little reason to expect housing demand to collapse. If
it does, it will require communal intention""federal monetary and credit policies meant to
create or accept a sharp drop in demand. And even if federal officials intend for housing
construction to collapse, history suggests that a market contraction would push new sales
down deeply for an extended period of time before prices relent.
Guest commentaries like this one are written by authors outside the Barron's and
MarketWatch newsroom. They reflect the perspective and opinions of the authors. Submit
commentary proposals and other feedback to [email protected] .
Kevin
Erdmannis a visiting research fellow with the Mercatus Center at George Mason
University and author of Shut Out: How A Housing Shortage Caused the Great Recession and
Crippled Our Economy.
The problem is that many people face long term unemployment without substantial emergency funds, which further complicates
already difficult situation.
Notable quotes:
"... More than 2K adults to were interviewed to try and ascertain how long they could survive without income. It turns out that approximately 72.4MM employed Americans - 28.4% of the population - believe they wouldn't be able to last for more than a month without a payday. ..."
Imagine you lost your job tomorrow. How long would you be able to sustain your current
lifestyle? A week? A month? A year?
As we await Friday's labor market update, Finder has just published the results of a recent
survey attempting to gauge the financial stability of the average American in the post-pandemic
era.
More than 2K adults to were interviewed to try and ascertain how long they could survive
without income. It turns out that approximately 72.4MM employed Americans - 28.4% of the
population - believe they wouldn't be able to last for more than a month without a payday.
Another 24% said they expected to be able to live comfortably between two months and six
months. That means an estimated 133.6MM working Americans (52.3% of the population) can live
off their savings for six months or less before going broke.
On the other end of the spectrum, roughly 8.7MM employed Americans (or 3.4% of the
population) say they don't need to rely on a rainy day fund since they have employment
insurance which will compensate them should they lose their job.
Amusingly, men appear to be less effective savers than women. Some 32.4MM women (26.7% of
American women) say their savings would stretch at most a month, compared to 40MM men (29.9% of
American men) who admit to the same. Of those people, 9.7MM women (8% of American women) say
their savings wouldn't even stretch a week, compared to 15.5MM men (11.6% of American men) who
admit to the same.
A majority of employed Americans over the age of 18 say their savings would last six months
at most. About 70.7MM men (52.8% of American men) and 62.8MM women (51.8% of American women)
fear they'd be in dire straits within six months of losing their livelihood.
Unsurprisingly, younger people tend to have less of a savings buffer - but the gap between
the generations isn't as wide as it probably should be.
While increasing one's income is perhaps the best route to building a more robust nest egg,
Finder offered some suggestions for people looking to maximize their savings.
1. Create a budget and stick to it
Look at your monthly income against all of your monthly expenses. Add to them expenses you
pay once or twice a year to avoid a surprise when they creep up. After you know where your
money is going, you can allot specific amounts to different categories and effectively track
your spending.
"... Indeed, economists and analysts have gotten used to presenting facts from the perspective of private employers and their lobbyists. The American public is expected to sympathize more with the plight of wealthy business owners who can't find workers to fill their low-paid positions, instead of with unemployed workers who might be struggling to make ends meet. ..."
"... West Virginia's Republican Governor Jim Justice justified ending federal jobless benefits early in his state by lecturing his residents on how, "America is all about work. That's what has made this great country." Interestingly, Justice owns a resort that couldn't find enough low-wage workers to fill jobs. Notwithstanding a clear conflict of interest in cutting jobless benefits, the Republican politician is now enjoying the fruits of his own political actions as his resort reports greater ease in filling positions with desperate workers whose lifeline he cut off. ..."
For the past few months, Republicans have been waging a ferocious political battle to end
federal unemployment benefits, based upon stated desires of saving the U.S. economy from a
serious labor shortage. The logic, in the words
of Republican politicians like Iowa Senator Joni Ernst, goes like this: "the government pays
folks more to stay home than to go to work," and therefore, "[p]aying people not to work is not
helpful." The conservative Wall Street Journal has been beating the drum for the same argument,
saying recently that it was a " terrible
blunder " to pay jobless benefits to unemployed workers.
If the hyperbolic claims are to be believed, one might imagine American workers are
luxuriating in the largesse of taxpayer-funded payments, thumbing their noses at the earnest
"job creators" who are taking far more seriously the importance of a post-pandemic economic
growth spurt.
It is true that there are currently millions of jobs going unfilled. The U.S. Bureau of Labor Statistics just
released statistics showing that there were 9.3 million job openings in April and that the
percentage of layoffs decreased while resignations increased. Taking these statistics at face
value, one could conclude this means there is a labor shortage.
But, as economist Heidi Shierholz explained in a New York
Times op-ed , there is only a labor shortage if employers raise wages to match worker
demands and subsequently still face a shortage of workers. Shierholz wrote, "When those
measures [of raising wages] don't result in a substantial increase in workers, that's a labor
shortage. Absent that dynamic, you can rest easy."
Remember the subprime mortgage housing crisis of 2008 when
economists and pundits blamed low-income homeowners for wanting to purchase homes they
could not afford? Perhaps this is the labor market's way of saying, if you can't afford higher
salaries, you shouldn't expect to fill jobs.
Or, to use the logic of another accepted capitalist argument, employers could liken the job
market to the surge pricing practices of ride-share companies like Uber and Lyft. After
consumers complained about hiked-up prices for rides during rush hour,
Uber explained , "With surge pricing, Uber rates increase to get more cars on the road and
ensure reliability during the busiest times. When enough cars are on the road, prices go back
down to normal levels." Applying this logic to the labor market, workers might be saying to
employers: "When enough dollars are being offered in wages, the number of job openings will go
back down to normal levels." In other words, workers are surge-pricing the cost of their
labor.
But corporate elites are loudly complaining that the sky is falling -- not because of a real
labor shortage, but because workers are less likely now to accept low-wage jobs. The U.S.
Chamber of Commerce
insists that "[t]he worker shortage is real," and that it has risen to the level of a
"national economic emergency" that "poses an imminent threat to our fragile recovery and
America's great resurgence." In the Chamber's worldview, workers, not corporate employers who
refuse to pay better, are the main obstacle to the U.S.'s economic recovery.
Longtime labor organizer and senior scholar with the Institute for Policy Studies Bill Fletcher Jr. explained to me in an email
interview that claims of a labor shortage are an exaggeration and that, actually, "we suffered
a minor depression and not another great recession," as a result of the coronavirus pandemic.
In Fletcher's view, "The so-called labor shortage needs to be understood as the result of
tremendous employment reorganization, including the collapse of industries and companies."
Furthermore, according to Fletcher, the purveyors of the "labor shortage" myth are not
accounting for "the collapse of daycare and the impact on women and families, and a continued
fear associated with the pandemic."
He's right. As one analyst
put it, "The rotten seed of America's disinvestment in child care has finally sprouted." Such
factors have received little attention by the purveyors of the labor shortage myth -- perhaps
because acknowledging real obstacles like care work requires thinking of workers as real human
beings rather than cogs in a capitalist machine.
Indeed, economists and analysts have gotten used to presenting facts from the perspective of
private employers and their lobbyists. The American public is expected to sympathize more with
the plight of wealthy business owners who can't find workers to fill their low-paid positions,
instead of with unemployed workers who might be struggling to make ends meet.
Already, jobless benefits were slashed to appallingly low levels after Republicans reduced a
$600-a-week payment authorized by the CARES Act to a mere
$300 a week , which works out to $7.50 an hour for full-time work. If companies cannot
compete with this exceedingly paltry sum, their position is akin to a customer demanding to a
car salesperson that they have the right to buy a vehicle for a below-market-value sticker
price (again, capitalist logic is a worthwhile exercise to showcase the ludicrousness of how
lawmakers and their corporate beneficiaries are responding to the state of the labor
market).
Remarkably, although federal jobless benefits are funded through September 2021,
more than two dozen Republican-run states are choosing to end them earlier. Not only will
this impact the bottom line for
millions of people struggling to make ends meet, but it will also undermine the stimulus
impact that this federal aid has on the economies of states when jobless workers spend their
federal dollars on necessities. Conservatives are essentially engaged in an ideological battle
over government benefits, which, in their view, are always wrong unless they are going to the
already privileged (remember the GOP's 2017
tax cuts for corporations and the wealthy?).
The GOP has thumbed its nose at federal benefits for residents before. In order to
underscore their ideological opposition to the Affordable Care Act, recall how Republican
governors
eschewed billions of federal dollars to fund Medicaid expansion. These conservative
ideologues chose to let their own
voters suffer the consequences of turning down federal aid in service of their political
opposition to Obamacare. And they're doing the same thing now.
At the same time as headlines are screaming about a catastrophic worker shortage that could
undermine the economy, stories abound of how American billionaires paid
peanuts in income taxes according to newly released documents, even as their wealth
multiplied to extraordinary levels. The obscenely wealthy are spending their mountains of cash on luxury
goods and fulfilling
childish fantasies of space travel . The juxtaposition of such a phenomenon alongside the
conservative claim that jobless benefits are too generous is evidence that we are indeed in a
"national economic emergency" -- just not of the sort that the U.S. Chamber of Commerce wants
us to believe.
West
Virginia's Republican Governor Jim Justice justified ending federal jobless benefits early
in his state by lecturing his residents on how, "America is all about work. That's what has
made this great country." Interestingly, Justice owns a resort that couldn't find enough
low-wage workers to fill jobs. Notwithstanding a clear conflict of interest in cutting jobless
benefits, the Republican politician is now enjoying the fruits of his own political actions as
his resort reports greater ease in filling positions with desperate workers whose lifeline he
cut off.
When lawmakers earlier this year
debated the Raise the Wage Act , which would have increased the federal minimum wage,
Republicans wagged their fingers in warning, saying higher wages would put companies out of
business. Opponents of that failed bill claimed that if forced to pay $15 an hour, employers
would hire fewer people, close branches, or perhaps shut down altogether, which we were told
would ultimately hurt workers.
Now, we are being told another story: that companies actually do need workers and won't
simply reduce jobs, close branches, or shut down and that the government therefore needs to
stop competing with their ultra-low wages to save the economy. The claim that businesses would
no longer be profitable if they are forced to increase wages is undermined by one
multibillion-dollar fact: corporations are raking in record-high profits and doling them out to
shareholders and executives. They can indeed afford to offer greater pay, and when
they do, it turns out there is no labor shortage .
American workers are at a critically important juncture at this moment. Corporate employers
seem to be approaching a limit of how far they can push workers to accept poverty-level jobs.
According to Fletcher, "This moment provides opportunities to raise wage demands, but it must
be a moment where workers organize in order to sustain and pursue demands for improvements in
their living and working conditions."
Sonali Kolhatkar is the founder, host and executive producer of "Rising Up With Sonali,"
a television and radio show that airs on Free Speech TV and Pacifica stations. She is a writing
fellow for the Economy for All project at the Independent Media Institute. This article was
produced by Economy for All , a project of the
Independent Media Institute.
Paul Tudor Jones said economic orthodoxy has been turned upside down with the Federal
Reserve focused on unemployment even as inflation and financial stability are growing
concerns.
Inflation risk isn't transitory, the hedge fund manager said in an interview on CNBC.
If the Fed says the U.S. economy is on the right path, "then I would go all in on the
inflation trade, buy commodities, crypto and gold," he said. "If they course correct, you will
get a taper tantrum and a sell off in fixed income and a correction in stocks.
By Joe Carroll and Kevin Crowley
June 21, 2021, 3:30 PM EDT Updated on June 21, 2021, 4:00 PM EDT
Performance-improvement program will involve 5%-10% annually
Reviews are separate from sweeping job cuts disclosed in 2020
Exxon Mobil Corp. is preparing to reduce headcount at its U.S. offices by between 5% and 10%
annually for the next three to five years by using its performance-evaluation system to suss
out low performers, according to people familiar with the matter.
The cuts will target the lowest-rated employees relative to peers, and for that reason will
not be characterized as layoffs, the people said, asking not to be identified because the
information isn't public. While such workers are typically put on a so-called performance
improvement plan, many are expected to eventually leave on their own. This year's evaluation is
happening now but affected employees have not yet been notified, the people said.
"Our annual performance assessment process has been occurring over the last several months,"
Exxon spokesman Casey Norton said in an email. "Where employees are not contributing to their
highest ability, they may need to participate in an improvement plan. This is an annual process
which has been in place for many years, and it is meant to improve performance. This process is
unrelated to workforce reduction plans."
The plan is separate from Exxon's announcement last year that it will cut 14,000 jobs
worldwide by 2022, and it would extend reductions well beyond that original time frame. It's a
tumultuous time for Exxon, which is still grappling with the fallout from last month's annual
meeting, when shareholders rebuffed top management and replaced a quarter of the company's
board over climate and financial concerns.
Exxon had 72,000 employees globally at the end of last year, of which 40% worked in the
U.S., according to a company filing.
White-Collar Jobs
Several high-profile traders have also left in the last few weeks. While the
performance-review process mostly applies to white-collar jobs in areas such as engineering,
finance and project management, there's no suggestion the trading departures were related to
the review program.
Exxon's other cost-cutting initiatives have included suspending bonuses and halting
employee-contribution matches to 401k savings plans as the pandemic crushed demand for crude,
saddling the company with a record annual loss.
International crude prices have surged 44% this year to almost $75 a barrel, improving
Exxon's financial position markedly. Still, the supermajor has some way to go to pay down debts
accumulated during 2020's market collapse. A smaller and more efficient workforce is key to
further improvements.
Exxon achieved $3 billion of annual "structural cost reductions" in 2020 and will continue
to make savings through 2023, Chief Executive Officer Darren Woods said at the annual meeting
in May.
"We've got additional work to continue to take advantage of the new organization and find
opportunities to reduce our costs," Woods said.
Exxon's shares rose 3.6% to $62.59 at the close in New York trading amid a broad rally in
energy stocks on stronger oil prices.
BofA expects U.S. inflation to remain elevated for two to four years, against a rising
perception of it being transitory, and said that only a financial market crash would prevent
central banks from tightening policy in the next six months.
It was "fascinating so many deem inflation as transitory when stimulus, economic growth,
asset/commodity/housing inflations (are) deemed permanent", the investment bank's top
strategist Michael Hartnett said in a note on Friday.
Thyagaraju Adinarayan
Fri, June 25, 2021, 5:24 AM
By Thyagaraju Adinarayan
LONDON (Reuters) - BofA expects U.S. inflation to remain elevated for two to four years,
against a rising perception of it being transitory, and said that only a financial market crash
would prevent central banks from tightening policy in the next six months.
It was "fascinating so many deem inflation as transitory when stimulus, economic growth,
asset/commodity/housing inflations (are) deemed permanent", the investment bank's top
strategist Michael Hartnett said in a note on Friday.
Hartnett thinks inflation will remain in the 2%-4% range over the next 2-4 years. U.S.
inflation has averaged 3% in the past 100 years, 2% in the 2010s, and 1% in 2020, but it has
been annualising at 8% so far in 2021, Bofa said in the note.
Global stocks were holding near record highs hours ahead of the reading of May core personal
consumption expenditures index, an inflation gauge tracked closely by the Fed. The gauge is
estimated to rise 3.4% year-on-year.
... In the week to Wednesday, investors pumped $7 billion into equities and $9.9 billion
into bond funds, while pulling $53.5 billion from cash funds, BofA calculated, using EPFR
data.
Meme-based investing 'is a totally nihilistic parody of actual investing,' says Jeremy Grantham, who called 3 stock-market
bubbles
Last Updated: June 24, 2021 at 7:18 p.m. ET
First
Published: June 24, 2021 at 3:16 p.m. ET
By
Mark DeCambre
18
'This is it guys, the biggest U.S. fantasy trip of all time,' says Grantham
Jeremy Grantham, founder of GMO, speaks in 2012 in Oxford, England
GETTY
IMAGES
"'Meme' investing -- the idea that something is worth investing in, or rather gambling on, simply because it is funny --
has become commonplace. It's a totally nihilistic parody of actual investing. This is it guys, the biggest U.S. fantasy
trip of all time."
That's Jeremy Grantham, co-founder and chief investment strategist at Boston-based money manager Grantham, Mayo, Van Otterloo
& Co., in a recent interview with
Bloomberg
News
, lamenting the state of an investment world that has prominently featured the emergence of meme-linked trading in
stocks like GameStop Corp.
GME,
-1.32%
,
AMC
Entertainment Holdings
AMC,
-4.66%
and
BlackBerry Ltd.
BB,
-4.42%
,
among
others.
Grantham noted that the meme cryptocurrency dogecoin
DOGEUSD,
-1.74%
is
"worth billions in the market and not even pretending to be [a] serious [investment]."
"Dogecoin was created as a joke to make fun of cryptocurrencies being worthless, and, not only has it taken off, but it's
such a success that second-level joke cryptocurrencies making fun of dogecoin have gone to multibillion-dollar valuations,"
he said.
Indeed, AMC Entertainment is up over 2,500% in 2021 thus far; GameStop has gained over 1,000% in the year to date; dogecoin
is up by about 5,000%, despite a precipitous drop; and BlackBerry shares are up over 90% so far this year.
By comparison, traditional assets have seen more mundane returns. The Dow Jones Industrial Average
DJIA,
+0.69%
is
up a more than respectable 12% so far in 2021, while the S&P 500
SPX,
+0.33%
has
returned over 13% in the year to date and the Nasdaq Composite
COMP,
-0.06%
has
made a powerful comeback in June to achieve a gain of nearly 12% in the first six months of the year.
Grantham views the social-media-driven meme-stock moves as concerning and indicative of bubbles percolating in financial
markets that will ultimately need to be contended with.
Grantham is worth paying attention to due to his prescient calls over the years. He said that stocks were overvalued in
2000 and again in 2007, anticipating subsequent market downturns,
the
Wall Street Journal reports
. Grantham also signaled that elements of the financial market had become unmoored from
reality leading up to the 2008–09 financial crisis.
However, his bearishness thus far hasn't helped his core investment strategies, amid a relentless run-up in stocks, be they
traditional or meme. The Nasdaq Composite has already put in back-to-back record closes this week and was aiming for a 17th
record finish on Thursday, while the S&P 500 index was eyeing a record of its own.
A significant global bond market correction is likely in the next three months as central
bankers eye the exit door from pandemic emergency policy, according to a Reuters poll of
strategists who also forecast modestly higher yields in a year.
Financial markets were caught off guard by the Federal Reserve's surprisingly hawkish tone
at its meeting last week, sparking a sell-off in equities and a safe-haven rush into
Treasuries.
While Fed Chair Jerome Powell played down rising price pressures on Tuesday, just a day
later two Fed officials said the recent bout of higher inflation could last longer than
anticipated.
The MOVE index - a bond market volatility gauge - hit a two-month high on Monday,
underscoring those mixed signals and uncertainty about the near-term.
In the June 17-24 poll, over 60% of fixed-income strategists, or 25 of 41, who answered an
additional question said a significant sell-off in global bond markets was likely over the next
three months.
... The U.S. 10-year Treasury yield was forecast to rise about 50 basis points to 2.0% by
June 2022, from around 1.5% on Thursday.
... When asked how high would U.S. 10-year Treasury yields rise to over the next three
months, the median of 30 analysts was 1.75%, with forecasts ranging between 1.5% and 2.0%.
... "Inflation is not all transitory. It is going to be a mix of sustainable and
transitory," said Guneet Dhingra, head of U.S. interest rates strategy at Morgan Stanley.
Traders are addicted to trading, much like murderers fixate on murdering. The traders
noticed a slight change in the Fed's tone and sold anything tied to inflation. They whacked
gold good. Then they went after the other commodities. When they were done there, they went
after value stocks, before finishing the week by blasting a bunch of cyclical names.
25 play_arrow
ted41776 5 hours ago
the only kind of ism that has exist is sociopathism
they always end up at the top of any power pyramid and make the rules that apply to all
others but not them
same as it always was and same as it always will be
NoDebt 4 hours ago
Traders are addicted to trading, much like murderers fixate on murdering
A line I wish I had come up with.
lambda PREMIUM 4 hours ago
This was already modeled and formalized: The Gambler Fallacy.
(cointelegraph.com)
45BeauHD on Monday June 21,
2021 @05:20PM from the not-dog-friendly dept. The president of the Federal Reserve Bank of
Minneapolis, Neel Kashkari, took a jab at Dogecoin (DOGE) last week by referring
to the memecoin as a Ponzi scheme , upping his rhetoric against cryptocurrencies.
Cointelegraph reports: Kashkari's comments were in response to a LinkedIn poll by Paul
Grewal, the chief legal officer and corporate secretary of Coinbase, who
asked his connections about the proper way to pronounce "Doge." "The right pronunciation is
pon-zi," Kashkari quipped.
This isn't the first time Kashkari has taken aim at cryptocurrencies. In February 2020,
he said digital assets like Bitcoin (BTC) lack the basic tenants of a stable currency and
praised the Securities and Exchange Commission for "cracking down" on initial coin offerings.
Kashkari is not a member of this year's Federal Open Market Committee, the group responsible
for setting United States monetary policy. The Minneapolis branch of the Fed will serve as an
alternate FOMC member in 2022 before rotating back onto the committee as a voting member in
2023.
In the face of prolonged low interest rates, all investors face three basic choices, says
Mr. Skjervem, the consultant who formerly managed roughly $100 billion as chief investment
officer of the Oregon State Treasury.
You can raise your existing holdings of traditional risky assets like stocks, even though no
one thinks they're cheap.
You can add a bunch of new and exotic bets and hope they don't blow up on you.
Or you can grit your teeth and stay the course, through a period of what may be lackluster
returns, until interest rates finally normalize.
"People are looking for the silver bullet, the magic wand, the get-out-of-jail-free card,"
says Mr. Skjervem. "There isn't one."
Jason Zweig always offers a breath of fresh air in the world of investment advice.
I like the cautionary tale he offers in re Fund "Trustees". Likely that many serve as
decoys on the pond. Ignore that blind, look how comfortable the plastic ducks appear.
Stuart Young
There will be no solution to the yield problem until Powell and the Federal Reserve Bank stop
having a fire sale on money and return interest rates to their normal levels. It certain that
there is much resistance to do this from the administration due to the trillions of dollars
they are borrowing and yes, these borrowed dollars are coming from the same Federal Reserve
Bank that controls the interest rates for the nation.
John Zarwan
Two quick comments. 1, a pension system is different than an individual, as the pension
system has a legal obligation to meet the payouts of its members. If my retirement nest egg
doesn't provide, too bad for me, but my heirs aren't required to make up the shortfall. 2, it
would have been nice if the article focused more on the purported subject rather than the
shortcomings of a possibly corrupt pension plan.
BRIAN HILL
For those who say just have an S&P 500 index fund, the index had no return from 2000 to
2012 and other long periods like 1966 to 1982. And if you were withdrawing income during this
period the sequence of return risk would be a disaster. You need multiple asset classes - not
just large cap US stocks.
Richard Fishman
How easy it is for these pension trustees to make themselves popular with participants by
raising earning assumptions and payouts when they have their big daddy the U.S. Pension
Benefit Guarantee Corp. ready to raid the taxpayers pockets again and again. As usual,
intelligent, conservative, fiscal management is a joke. What else is new?
Khyshang Lew
I do agree. It is time to lower expected rate of return.
Frank Walker
I wouldn't want to pour any water on all the great returns of the past 10 years but they came
after a major crash in 2008. A Federal Reserve that dropped the interest rate to 1.5% on a 10
year bond. They have created a Stock, Bond, and Real Estate market bubble. How would your
averages work out with a 50% correction?
Ralph Tibiletti
"People are looking for the silver bullet, the magic wand, the get-out-of-jail-free card,"
says Mr. Skjervem. "There isn't one."
All of these problems are caused by a dysfunctional federal government controlled by
politicians from both parties whose only concern is getting elected and reelected. They
accomplish their goal by redistributing wealth in the form of many different entitlement
programs and by catering to the legislative needs of special interest groups.
Voting is not the solution because we only replace the existing set with a different set
that will perform in the same way. We need a Solomon like individual who can solve the
problem.
Y.C. Sung
Private equity is great for money managers; there's no transparency in the value of the
investment. Unlike public market managers who have a scorecard on them every day, private
equity managers have wide latitude in valuing their investments. They can avoid being fired
for a long time.
Rachel Glyn
Not sure why it's different than a SPAC.
Ralph Tibiletti
"The challenge we all face as investors is that the collapse in interest rates makes
achieving historical rates of return very difficult,"
As we all know this problem has been caused by the Fed's zero interest rate and
money printing polices in support of the profligate spending and borrowing by both parties in
the federal government.
Why is the Fed so interested in the interest rate that savers may receive but has no
interest in the interest rate that lenders may charge like credit card companies? It does
seem a bit unfair when lenders can borrow at near zero percent interest rates and then loan
the money out at 16 percent plus. This smacks of inequality with which both the Fed and the
federal government seem so terribly concerned.
James Winkle
The only magic bullet for a lot of people is to spend less.
While Alphabet Class A and Facebook shares are up 37% and 21%, respectively, other members
of the group have weighed on the market. Amazon shares are up 7.1% in 2021, lagging behind the
11% rise in the benchmark S&P 500. Apple and Netflix have fared even worse, down 1.7% and
7.4% for the year.
... ... ...
For much of 2020, a badly constricted economy pushed investors toward stocks -- like the
FAANG names -- whose businesses were less affected and whose future growth became even more
alluring with the drop in interest rates. The Russell 1000 Growth Index advanced 37% for the
year, while the Russell 1000 Value Index eked out a 0.1% gain -- the largest annual performance
gap between the two style benchmarks in FactSet data going back to 1979.
Big tech stocks were among the leaders of that rally. Apple shares climbed 81% in 2020 --
last August becoming the first U.S. public company to
surpass $2 trillion in market value -- while Amazon rose 76% and Netflix gained 67%.
Facebook added 33% for the year, and Alphabet 31%.
These companies are too big and too powerful. I hope for anti-trust legislation that cuts
them down to size. The tech oligarchs have too much influence on what Americans think and do.
They are a direct threat to our democracy. I hope more Americans will decide to support
smaller companies (especially local stores), putting conviction ahead of convenience.
J Pate
Google and Amazon has no near peer competitors. Netflix and Apple do. My family got rid of
Netflix last year and now have Hulu. There is a ton of free steaming sites also. We never
missed Netflix.
Jay Urbain
"While Alphabet Class A and Facebook shares are up 37% and 21%, respectively, other members
of the group have weighed on the market. Amazon shares are up 7.1% in 2021, lagging behind
the 11% rise in the benchmark S&P 500. Apple and Netflix have fared even worse, down 1.7%
and 7.4% for the year."
Time to take another look at AMZN and AAPL.
Jon Tannen
Gasp! So after breathtaking rises for Apple and Netflix stocks, they're merely flat these
days? Not up 30% this month? Uh-oh! Sound the alarms! Someone please tell the writer that
stocks are not a straight diagonal to the sky. [She's actually wrong about Apple's valuation
being down this year, according to WSJ's very charts! The price is 130 now vs. 129 on Jan 4.
But hey, she's obliged to come up with an article this week.]
This all reminds me of analyst Dan Niles coming on CNBC for years and proclaiming he's
shorting Apple. Every few months: "I'm shorting Apple." "I'm shorting Apple." Again and again
and again. The guy must be broke. [Of course, no one calls him out about it.]
Marshall Dillon
Amazon? Not for me. I have switched most of my online buying to Walmart and local stores.
Amazon needs to get out of politics and stop suppressing free speech, much like the WSJ
moderators.
SACHIN SHARMA
This entire article is misleading. Choosing 2020 as a base year to compare this group of
stocks leaves out the important context of what happened the prior ten years, when FB and
GOOGL underperformed vs APPL, NFLX, AMZN. A mean reversion within this group because money
managers need to justify their existence could be the simple explanation. Also, how much of
the Russel growth fund performance came from AMC and GME, those bell weather companies?
In IT corporate honchos shamelessly put more then a dozen of very specific skills into the
position rescription and want a cog that hit that exactly. they are not interested in IQ, ability
to learn and such things. that want already train person for the position to fill, so that have
zero need to train this persn and they expect that he will work productively from the day
one.
But corporate elites are loudly complaining that the sky is falling -- not because of a
real labor shortage, but because workers are less likely now to accept low-wage jobs.
Duh. This is so blindingly obvious, but NC is the only place that seems to mention this
fact.
Here in the UK, the outmigration of marginally paid workers from Eastern Europe and the
resultant "labour shortage" triggered by Brexit has made it abundantly clear that Blair's
change to open borders was not from any idealistic considerations but as a way of importing
easily exploited labor.
Business leaders quoted in the the tsunami of hand-wringing MSM articles about the current
catastrophe are offering such helpful solutions as allowing housekeepers to use pools and
gyms in off hours, free meals to waiters, etc. Anything but a living wage.
" I don't actually see any untruths to the GOP talking points. "
"" Workers are less likely to accept a job while receiving Gov't benefits" and "workers are
less likely to accept low wage crappy jobs ".
Well,if u can survive on a $300/week program that ends after several weeks pass,bless u.
No one else in America can. That's a $7.50 hr full time "summer job" with no pension or
medical benefits that teenagers with no dependents,few bills n maintenance issues might be
interested in; adults with adult responsibilities,no way. That so called RepubliCons, the
"economics experts", can make such a fraudulent claim n anyone out of elementary school
believes it has a quantum particle of reality or value is . well I'll just say a sad n
unbelievable situation.
They get 300 dollars plus regular UI. They can also get Medicaid and CHIP, or if they are
still making too much they are eligible for Obamacare exchange. Plus they're eligible for
SNAP and housing vouchers
There is one significant fallacy in this article: The author conflates Republican
opposition to enhanced benefits with opposition to unemployment benefits overall.
I very much stand with labour over business on most (probably all) points, but the
Republican argument is to end the enhanced benefits in most cases – Not to abolish
unemployment assistance. They believe the role of government is to step in to help pay basic
bills in the event of unemployment, but oppose the current higher level of benefit due to the
market distortions it causes (Hence the appearance of the term 'labour shortage'.)
I agree that it basically forces mcdonalds et al to up their wages if they want to do
business, which should be a positive for society, but I find it unlikely that the author
could have unintentionally mistunderstood the argument on such a fundamental level, and all
it does is try to drive a wedge further between each side of the argument.
Anyone that believes that workers supported their jobs being sent overseas is either
demented or delusional or suffers from a mental hernia. The same goes for the common working
stiffs supporting massive immigration to help drive down their ability to demand a livable
wage.
American labor has been sold down the river by the International Labor Leaders,
politicians and the oligarchy of US corporate CEO's.
======
Got a new hip recently. Do your P.T., take it easy, follow the warnings of what not to do
until you heal and you should discover that decades feel like they are lifted off your
shoulders.
Sierra,
You've made a very interesting point that actually never occurred to me and one in which I
never seen fully examined.
Exploiting labour and outsourcing it are two sides of the same coin with the same goal in
mind, diverting revenue streams into the C-suite and rentier class.
Obviously you cannot outsource most of the workers in the hospitality industry or the
non-virtual aspects of world's oldest profession, but a lot of the tech industry and the
virtual aspects of the latter are very amenable to being shipped overseas.
Immigrants are extremely visible and an easy target, while outsourcing is essentially an
impossible to contain concept that creates real world hardship.
Dear NC readers, do you know of any studies comparing and contrasting the economic impact of
immigration and/or limiting it and outsourcing?
Indeed, economists and analysts have gotten used to presenting facts from the
perspective of private employers and their lobbyists.
You are acting if economists and lobbyists are separate groups, as opposed to largely a
subset thereof. Funny how a field entirely based on the study of incentives claims incentives
don't distort their policy prescriptions, isn't it?
As for low-paid jobs, they are traditionally the last resort of immigrants and other
marginalized populations, but the anti-immigration push that began under Obama, and
enthusiastically continued by Trump and Biden, has perfectly predictable consequences.
One factor not mentioned is many free-riding businesses refuse to pay for training, then
wonder why there are no trained workers to hire.
Now, there are definitely fields where there is a genuine and deliberate labor shortage.
Usually white-collar credentialed professions like medical doctors and the AMA cartel.
Economics is not based on incentives. That's behavioral economics. I hate to quote Larry
Summers, but this is Summers on financial economics:
Ketchup economists reject out of hand much of this research on the ketchup market. They
believe that the data used is based on almost meaningless accounting information and are
quick to point out that concepts such as costs of production vary across firms and are not
accurately measurable in any event. they believe that ketchup transactions prices are the
only hard data worth studying. Nonetheless ketchup economists have an impressive research
program, focusing on the scope for excess opportunities in the ketchup market. They have
shown that two quart bottles of ketchup invariably sell for twice as much as one quart
bottles of ketchup except for deviations traceable to transaction costs, and that one
cannot get a bargain on ketchup by buying and combining ingredients once one takes account
of transaction costs. Nor are there gains to be had from storing ketchup, or mixing
together different quality ketchups and selling the resulting product. Indeed, most ketchup
economists regard the efficiency of the ketchup market as the best established fact in
empirical economics.
Happy to see you back at a keyboard, and hoping your recovery is progressing well. I had
the misfortune of spending two days in the hospitals while they got my blood chemistry
strightened out. Here's the kicker; the hospitalist, who I saw 3 times, submitted a bill for
a whopping $17,000. Just yesterday, the practice she works for submitted a bill that was
one-tenth her charges for the work she did, yet her bill is still sitting waiting to be
processed.
OMG, how horrible. HSS is a small hospital for a big city like NYC, only 205 beds and 25
operating rooms. No emergency room. They are not owned by PE and so I don't think play
outsourcing/markup games (they are very big on controlling quality, which you can't do if you
have to go through middlemen for staffing). Some of the MDs do that their own practices
within HSS but they are solo practitioners or small teams, which is not a model that you see
much of anywhere outside NYC
The last time I was hospitalized, all the hospitalists were in the employ of the hospital,
now they are in the employ of a nationwide hospitalist practice, which has all the smell of
private equity around it. I'm really beginning to think that a third party focusted on
healthcare might have a real shot at upsetting the political order – maybe it's time to
drag out your skunk party for 2024.
As for low-paid jobs, they are traditionally the last resort of immigrants and other
marginalized populations, but the anti-immigration push that began under Obama, and
enthusiastically continued by Trump and Biden, has perfectly predictable
consequences.
Well I'm sorry you can't find easily exploitable labor, except I'm not immigrants face the
same ridiculous costs, and weren't hispanic workers more heavily impacted by covid due
to those marginal jobs (I'll switch your dynamic to low wage workers , and
marginal jobs, thanks), so by your logic more should have been let in to die from
these marginal jobs? but yeah we need more PMC except we don't Now, there are definitely fields where there is a genuine and deliberate labor shortage.
Usually white-collar credentialed professions like medical doctors and the AMA
cartel."
Last I checked it was private equity, wall st and pharmaceutical companies and their
lobbyists that drive up costs so labor needs to charge more.
Wake up and smell the coffee.
How much of this is over specification on the part of employers in the ad for the job? We
want the perfect candidate who can do the job better than we can with no training .
OMG this is such a long-standing pet peeve! We've commented on this nonsense regularly.
Companies took the position that they don't have to train and now they are eating their
cooking.
The mismatch between job openings and job applicants is not just about wages.
In fact, if companies were willing to take a chance on people who didn't exactly match the
job requirements, the likely effect would be to raise the wages some of those that did not
qualify under the over exacting job requirements. [And likely paying these new employees less
than they had contemplated paying the perfect candidate.]
But that seems like someone making the hiring decision might, just possibly, be seen as
taking a risk.
At my empolyer we know we can't find any colleges that teach mainframe skills, so we bring
in graduates who are willing to learn those skills – we submit them to a 3-month
bootcamp and then there's a long period of mentorship under a senior person to their group
that has an opening. Since everybody and their dog are now moving headfirst into DevOps,
where all the tooling is in somewhat less ancient software, they get exposed using those
Eclipse/VScode-based tools and are able to come up to speed somewhat quicker. Still, no one
in corporate America dares to bite the bullet and re-platform their core systems with few
exceptions (SABRE) for fear of losing all the institutional knowledge that's in software,
rather than wetware (humans).
Just think what is happening right now with everyone holding an Indian outsourcing
contract. You don't have individual's cellphone numbers over in India, which would cost you
an arm and a leg to call, never mind what's going on in their facilities.
On the other hand, there's something to be said for employers not training their staffs.
In the SF Bay Area computer industry, employees and independent contractors alike continually
race to train themselves in the new technologies that seem to crop up like mushrooms after a
rain. Many companies train their customers–and charge them for it–before they'll
train their staffs. This is a principal reason there's a market for contractors. Training
oneself in new technologies lays a base for opportunities that don't appear if you spend a
decade in the same job (unless, like mainframe programming, your job is so old it's new). I
suppose this is a beneficial side of capitalism?
I get that you want experience for mid to senior level jobs but the experience
requirements for what are ostsensibly entry-level jobs have gotten absurd. The education
requirements have also gotten out of hand in some cases.
That being said, a lot of the shortages are in low-wage, part-time jobs so the issue isn't
necessarily ridiculous requirements, like you sometimes see for entry level white collar
jobs, but wages that are too low and awful working conditions.
How many people want to be treated like dirt–be it by customers, management, or
both–for not much more than minimum wage if they have other options?
A wage increase will help fill these jobs but there also needs to be a paradigm shift in
how employees are treated–the customer is not always right and allowing them to treat
employees in ways that would not be tolerated in other businesses, and certainly not in many
white-collar workplaces is a huge part of the problem and why these jobs have long had
high-turnover.
It never ends – when it was about immigrant labor under George B junior – I
think – the call was
-- - They do jobs that Americans won't -- or something to that effect.
It always bothered me that the sentence was never, in my mind, completed. It should have been
said
-- They do jobs that Americans won't do at that pay level. --
The tax system, economic system and higher education departments have been perverted by the
continuous bribery and endowments by the rentier class to our elected law makers and dept
heads for decades –
The creditor, debtor relationships distorted for eons.
The toll takers have never, in history, been in any higher level of mastery than they are
now.
It is not to throw out the constitution but, to throw out those who have perverted it.
The construction industry knows how to exploit immigrant labor, documented as well as
undocumented. I'm sure most peole born here refuse to work for the same wages.
The exploitation occurs on many levels. For small residential jobs, a lot of wage theft
occurs. For larger jobs, a lot of safety regs get ignored. When you have a population that
won't use the legal avenues available to other citizens to push back against abuse you can
get a lot done :/
When I go looking for a job if a degree isn't required I am very unlikely to pursue it
further. Same if the list of 'required' is overly detailed. I'm making assumptions in both of
these cases (that might not be correct) about pay, benefits, work environment, etc. and what
is actually going on with a job listing. Why? Chiefly my likelihood of actually getting a
reasonable offer. I expect either being seen as overqualified in the first case or the job
only being listed because of some requirement in the second.
I have to wonder if many places know how to hire. This is made much more difficult by
years of poorly written (maybe deceptive) job postings. You probably know many of the
phrases; flexible schedule, family ___, reliable transportation required, and so on. Its no
surprise if puffery doesn't bring back the drones.
If we're playing with statistics. How many of these posted job openings, how many
interviews did the companies offer v. how many offers were made until the position was
filled? If position remains open, has the company increased the base pay offer? guaranteed an
increased min. number of weekly hours? offered bonuses or increased benefits? How many times
has this same job opening using the original posting criteria been re-posted? Is this a real
single job opening that the company plans to fill in real time or just a posting that they
keep opening because they have high turnover? etc., etc., etc.
The real problem with this workers are lazy meme is that it is repeated and repeated all
year long on the local news from the viewpoint of business. It has filtered down to local
people. I hear them repeating what the local news said without giving it any critical
thought. Even those who say that we need unions and believe themselves to be on the side of
workers.
Ear wigs are good for businesses. Insidious for workers.
In the UK, in the days of Labor Strive, before Neo-liberalism , there was always newspaper
reports about "Labor Strife" and "bolshy workers." Never once did the press examine
Management had behaved and caused the workers to become "bolshy" – a direct reaction to
Management's attitudes and behavior, probably based on the worst attributes of the UK's class
system.
Definition: A bolshy person often argues and makes difficulties.
Management get the workers (Their Attitudes) it deserves.
I recommend reading "The Toyota Way" to explore a very successful management style.
This song is getting a probably getting more hits these days
Take this job and Shove It https://www.youtube.com/watch?v=eIjEauGiRLo
But I hear lots of businesses will close to to no labor, so when they close they can go work
for 7.25 an hour for one of their competitors who also needs laborors Solidarinosc!
If businesses are suffering, it's restaurants and small scale enterprise. The Covid
response was tailored to the needs of economy of scale mega biz. They likely knew multitides
of mom-n-pops would go away- and they have. But that's fine.
So if state governments can turn down federal unemployment supplements because they want
labor to go back to work for unlivable wages this means the federal government can do nothing
about it. When push comes to shove the question that must be settled is, Is it a human right
to receive employment assistance until a job is found that pays a livable wage? (Not even a
republican will actually say No). So then that puts all the stingy states on notice that
there is a human rights issue here. States will have the choice to either let businesses shut
down for lack of workers, or states can subsidize minimum wages and benefits. If states
choose, in desperation, to subsidize minimum wages, then the states can apply to the feds to
be compensated. The thing that is needed in the interim, between when the real standoff
starts and ends, is a safety net for workers who are being blocked by the state from
receiving unemployment benefits. I say call in the national guard. This is a human rights
issue.
The real exploitation happened when we allowed companies to delocalize, manufacture
product in China and sell it here with no strings attached.
James Goldsmith seems like a prophet now, he was so absolutely right.
Wow. The Clinton flack was insufferable. AND WRONG about pretty much everything. Goldsmith
was brilliant. I wasn't paying enough attention at he time, but how many high profile people
were making the arguments he was making?
I'm surprised that nobody has taken the opportunity to comment on how this discussion
shows how hypocritical Biden and the democrats were not to press for raising the minimum
wage.
The pretense (which they must have coached the "Senate scholar" on) was that raising the
minimum wage was not related to revenue (i.e., a revenue bill). But of course it is! Right
now, paying below-poverty wages enabled Walmart and other employers to make the government
pay part of their wage bill. Higher minimum wages would raise these government aid recipients
out of the poverty range, saving public revenue.
That is so obvious that the failure of the Democrats to make the point shows that they really
didn't want to raise wages after all.
I didn't expect much from Biden but he's even worse than I thought. Along with those
bought senators hiding behind Joe Manchin. Depressing to think how much worse everything will
become for working people here.
When I think about how they're complaining about Manchin now when there was a serious
primary challenge against him last year, and how the Democrat organization rallied around
Manchin and not his challenger, it is disgusting to see Slate/The Guardian/NYT/other "Blue no
matter who" mouth breathers write articles asking what can be done to salvage a progressive
agenda from the curse of bipartisanship.
I had given up on national politics long before the 2020 election circus but this latest
has confirmed my resolve. The destruction of the Democrat party can't come soon enough.
If I call them Hypocritics, when I never believed them in the first place, will they feel
any shame at all? Or must I be part of their class for them to feel even the tiniest of
niggles?
Perhaps they'll feel ashamed once they cut the check for the $600 they shorted us this
winter. Or maybe that they are reneging on the extended unemployment benefits early or
One side makes you sleep on a bed of nails and swear allegiance.The other side generously
offers to help you out, no strings attached, but you might bleed out from the thousands of
tiny means-testing cuts. Each side want the lower tiers to face the gauntlet and prove one's
worthiness, hoping to convince us that a black box algorithm is the same thing as a jury of
peers.
Exactly right! And keep in mind deluge of op-eds telling us that Biden is a
transformational president! The same authors presented a deluge of op-eds telling us how
Senator Sanders was to radical for the American people after he did well in early primaries.
That the reforms he supported like Medicare for all, raising the minimum wage, lowering drug
costs, help with daycare, doing something about climate change etc. were reforms that the
people would never accept because the people value their freedom and don't want to live in a
socialistic country.
It looks like none of the promises Biden made during the campaign will be implemented by
President Biden. That why he is in the White House.
Would a lot of these positions be filled if the US had single payer healthcare or similar?
Would workers accept low paying positions if they didn't have to lose so much of their pay to
crappy health insurance?
At our local Petsmart they cut staff during the pandemic. They laid off all full time
workers
And are only hiring back part time. I knew several of the laid off people and they are not
coming back. Two of the people that worked full time have found other jobs one with slightly
better pay the other with slightly better benefits. We are in California where rent is very
high so another person we know decided to use this as a chance to relocate to another state
where housing is less expensive. Our older neighbor retired, although vaccinated now, he
decided it just wasn't safe and after the CDC told everyone to take off their mask off. He is
glad he just decided to live on a little less money. I suspect there are a lot of reasons as
Yves stated above for a lack of workers, but this "they are lazy" trope is capitalistic
nonsense.
Some highlights:
>> everyone but an idiot knows that the lower classes must be kept poor, or they will
never be industrious.
-- Arthur Young; 1771
>>Even David Hume, that great humanist, hailed poverty and hunger as positive
experiences for the lower classes, and even blamed the "poverty" of France on its good
weather and fertile soil:
'Tis always observed, in years of scarcity, if it be not extreme, that the poor labour more,
and really live better.
>>Poverty is therefore a most necessary and indispensable ingredient in society It
is the source of wealth, since without poverty, there could be no labour; there could be no
riches, no refinement, no comfort, and no benefit to those who may be possessed of
wealth.
I'll just point out, per the Old Testament, that wage, debt and rent slavery were the
exception, not the norm (as they are in the US) for citizens (Hebrews) in ancient
Israel/Judah.
That's because the assets in ancient Israel/Judah were roughly equally owned by all
citizens with provisions in the OT Law (eg. Leviticus 25, eg. Deuteronomy 15, eg. Deuteronomy
23:19-20) to keep it that way in the long run (but less than 50 years).
Contrast that to US where we have privileges for a private credit cartel, aka "the banks",
and no limits to the concentration of land ownership and the roots of our problems are
evident.
So begging for better jobs for citizens is, in the Biblical context, pathetically weak tea
indeed.
On a personal note I had a great job interview Thursday at the local food co-op. This is
my first in person interview since I was terminated without cause by IBM (after almost 24
years there in a server development job) almost a year ago. Despite applying for over 100
positions. I'm over 60 and haven't worked in a year so I admit I'm grateful to even get the
chance.
I have another interview with them next week and hoping to start soon as a produce clerk
making $13.50 an hour. If I can get on full time they offer a decent insurance plan including
dental. The HR person acknowledged that I was "wildly overqualified" but encouraging. The
possibility of getting health care is key; my IBM Cobra benefits will start costing me almost
$1400/monthly for myself and my husband in September after the ARA subsidy expires.
I've adjusted my expectations to reinvent myself as a manual laborer after decades in
fairly cushy corporate life. I've managed to keep my health and physical capacity so somewhat
optimistic I can meet the job requirements that include lifting 50 lb boxes of produce. But
we'll see.
You mean you haven't had a job in a year since it's highly doubtful that you have not done
any work in a year; eg. cooking, cleaning, shopping, car maintenance, gardening,
chauffeuring, mowing the lawn, home maintenance and caring for others count as work.
We need to stop conflating work (good) with wage slavery as if the former necessarily
requires the latter.
Okay sure. I haven't earned in a year. But it's still a problem I'm trying to sort
out best as I can.
Since I still live in the US where earning is highly correlated with insurance
coverage, and I still have about 5 years until we're both qualified for Medicare this may
turn out to be a great thing that has happened.
And since I don't see a path out of wage slavery today I'll be happy to accept almost any
offer from the food co-op. It's a union job with decent pay and benefits and may offer other
opportunities in the future. They mostly buy and sell products that are locally made so that
makes it easier too. The money we are all enslaving each other over is staying around here as
much as possible. Okay.
Good luck! Fyi i strongly suggest u look into taking your IBM pension asap as 1. It will
minimally impact your taxes as u r now earning less n 2. How many more years do u think it
will be there? ( I usually recommend most people take their social security at 62 for similar
reasons but in your case I'd do your research b4 making any move like that. ) Take a blank
state n Fed tax form n pencil in the new income n see what the results are.
Btw truly wonderful people are involved in food co-ops,enjoy!
No one really questions the idea of maximising profit.
How do you maximise profit?
You minimise costs, including labour costs, i.e. wages.
Where did the idea of maximising profit comes from?
It certainly wasn't from Adam Smith.
"But the rate of profit does not, like rent and wages, rise with the prosperity and
fall with the declension of the society. On the contrary, it is naturally low in rich and
high in poor countries, and it is always highest in the countries which are going fastest to
ruin." Adam Smith
Exactly the opposite of today's thinking, what does he mean?
When rates of profit are high, capitalism is cannibalising itself by:
1) Not engaging in long term investment for the future
2) Paying insufficient wages to maintain demand for its products and services
Today's problems with growth and demand.
Amazon didn't suck its profits out as dividends and look how big it's grown (not so good on
the wages).
The benefits of the system can be passed upwards in dividends or downwards in wages.
Both actually detract from the money available for re-investment as Jeff Bezos knows only too
well.
He didn't pay dividends, and paid really low wages, to maximise the amount that he could
re-invest in Amazon and look how big it's grown.
The shareholders gains are made through the value of the shares.
Jeff Bezos hopes other people are paying high enough wages to buy lots of stuff from Amazon;
his own workers don't have much purchasing power.
Where do the benefits of the system go?
Today, we pass as much as possible upwards in dividends.
In the Keynesian era they passed a lot more down in wages.
> Jeff Bezos hopes other people are paying high enough wages to buy lots of stuff from
Amazon; his own workers don't have much purchasing power.
You are missing the tree in the forest. Jeff hopes other people will pay a high enough
price for Amazon stawk. We already know Jeff doesn't give a shit about the stuff he sells, or
the inhumane working conditions that go along with the low pay and short "career". I mean,
not even the nastiest farmer would treat his mules like that, even if mules were easy and
cheap to come by.
We don't think people should get money when they are not working.
Are you sure?
What's the point in working?
Why bother?
It's just not worth all the effort when you can make money doing nothing.
In 1984, for the first time in American history, "unearned" income exceeded "earned"
income.
They love easy money.
With a BTL portfolio, I can get the capital gains on a number of properties and extract
the hard earned income of generation rent at the same time.
That sounds good.
What is there not to like?
We love easy money.
You've just got to sniff out the easy money.
All that hard work involved in setting up a company yourself, and building it up.
Why bother?
Asset strip firms other people have built up, that's easy money.
"West Virginia's Republican Governor Jim Justice justified ending federal jobless
benefits early in his state by lecturing his residents on how, "America is all about work.
That's what has made this great country."
Have you had a look around recently?
In 1984, for the first time in American history, "unearned" income exceeded "earned"
income.
America is not about work at all.
The US is largely about exploiting or being exploited with most of US doing both.
We should resent an economic system that requires we exploit others or be a pure victim
ourselves.
That said and to face some truths we'd rather not, the Bible offers some comfort, eg:
Ecclesiastes 7:16 Do not be excessively righteous, and do not be overly wise. Why should you ruin
yourself?
Ecclesiastes 5:8-9 If you see oppression of the poor and denial of justice and righteousness in the province,
do not be shocked at the sight; for one official watches over another official, and there are
higher officials over them. After all, a king who cultivates the field is beneficial to the
land.
Nonetheless, we should support economic justice and recognize that most of us are net
losers to an unjust economic system even though it offers some corrupt compensation* to
divide and confuse us.
*eg positive yields and interest on the inherently risk-free debt of a monetary
sovereign.
Jim Justice made his money the old fashioned way, he inherited it:
From Wiki: James Conley Justice II (born April 27, 1951) is an American businessman and
politician who has been serving as the 36th governor of West Virginia since 2017. With a net
worth of around $1.2 billion, he is the wealthiest person in West Virginia. He inherited a
coal mining business from his father and built a business empire with over 94 companies,
including the Greenbrier, a luxury resort.
I wonder how much of this is also related to a change in the churn we assume existed
pre-pandemic? For example, the most recent JOLTS survey results from April
2021 show the total number of separations hasn't really changed but the number of quits
has increased.
So, one possible interpretation of that would be employers are less likely to fire people
and those who think they have skills in demand are more interested in leaving for better
opportunities now. That makes intuitive sense given what we've been through. If you had a
good gig and it was stable through 2020 you had very little reason to leave it even if an
offer was better with another company. That goes double if you were a caregiver or had
children. Which of course is why many women who were affected by the challenges of balancing
daycare and a career gave up.
This is also my experience lately. While it's only anecdotal evidence, we're having a hard
time hiring mid career engineers. Doesn't seem like pay is the issue. We offer a ton of
vacation, a separate pool of sick time, decent benefits, and wages in the six figures with a
good bonus program. We're looking to hire 3 engineers. We can't even get people to apply. In
2019 we could be sure to see a steady supply of experienced candidates looking for new
opportunities. Now? If you have an engineering position and your company is letting you work
from home it seems you don't have a good reason to jump.
Look no further than Cedar Point Amusement Park in Sandusky, Ohio. They had only half the
staff they normally need at $10 an hour. So they double the wage to $20 an hour and filled
every job in less than a week. The Conservaturds will never admit they are lying.
As a small business owner providing professional services I am grateful for the comment
section here.
I have called professional peers to get a behind the corporate PR perspective of their
businesses. Although anecdotal, the overall trend in our industry is to accept the labor
shortage and downsize. Most firms have a reliable backlog of work and will benefit from an
infrastructure bill. Our firm has chosen to downsize and close vacant positions.
Remote work, although feasible, has employees thinking they are LeBron James, regardless
of their skill set. Desperate employers are feeding their belief. Two years from now it will
be interesting to see if these employees they fail forward. Company culture minimized
employee turnover pre-covid. This culture has little meaning to an employee working in his
daughter's playroom.
For context, in California, I believe the median income for licensees is approximately
$110,000 with lower level technicians easily at $75k in the urban areas.
Lastly, the "paltry" $300 per week is in additional to the state unemployment checks and
is not subject to taxes. As stated previously, $300 is equal to $7.50 per hour. Federal
minimum wage is $7.25 and is adopted by many states minimum, for what it's worth.
With respect, I do not see any there there in the comment. Adjusted for inflation the
minimum wage at its height in 1968 at 1.60, would be just under $13 per hour today. However,
even at $15 in California, it is inadequate.
Anyone making anything like the minimum wage would not be working from home, but would be
working in some kind of customer service job, and would find paying for adequate food,
clothing, and shelter very difficult. Not in getting any extras, but only in getting enough
to survive. People, and their families, do need to eat.
If the response of not paying enough, and therefore not getting new hires, is to downsize,
perhaps that is good. After all no business deserves to remain in business, especially if the
business model depends on its workers being unable to survive.
I am also fed up with the "lazy worker" meme. Or rather, propaganda. People are literally
exhausted working 2 or 3 lousy jobs and no real healthcare. Equally irritating to me is a
misguided notion that we have some magically accessible generous safety net in the US. As
though there aren't thousands and thousands on waiting lists for government subsidized
housing. Section 8 vouchers? Good luck.
We've ended "welfare as we [knew] it" (AFDC) thanks to Bill Clinton and then the screw was
turned tightly by Junior Bush (no child care, but go to work.) The upshot was bad news for
kids.
Seems to me one of the few things left is the food stamp program, and I can't imagine how
that's been reconfigured. Whomever gave that fantastic list of goodies people can get in the
US with a mere snap of the fingers isn't in the real world, imho.
Ok! Yves, lovely to see you again, my friend! (Cue the Moody Blues ) Get well!
Here is my story.
I am 56 years old, on dialysis and I was collecting SSI of 529 a month.
I was living with and taking care of my mother in her home because she had dementia.
She died in December and I had to start paying the bills. In March I inherited her IRA which
I reported to SS. I was able to roll it over into my own IRA because I am disabled, due to
the Trump tax law changes.
I reported the changes in a timely manner and because I couldn't afford to live here without
a job, I took a part time job for 9 an hour.
So now, because I inherited my mother's IRA and have too much resources I no longer qualify
for SSI and have been overpaid to the tune of almost 2 grand, which I am assuming I will have
to pay back. I have no idea how that works either. Do they just grab money out of your
account? Anyone who knows please tell me.
I would run, run, run to the nearest public assistance counselor or lawyer. In the San
Francisco Bay Area, it is should not be too hard to find one. They saved me. There are also
in California several state websites. There was a useful to me benefits planning site (It only covers nine states though).
The rules for SSI (Supplemental Security Income), SSDI (Social Security Disability
Insurance), Social Security, Medi-Cal or Medicaid, and Medicare are each different. Each
state has its own modifications as well, so that is fifty additional sets of modified rules
especially for the medical benefits. If they are determined to claw back the money, how it is
done might depend on the individual state. It is truly a maze of flycatchers and trapdoors
out for you and your money.
The overworked benefits clerks often do not have the knowledge to deal with anything even
slightly unusual and are not encourage or at least discouraged from finding out due to
the never shrinking pile, not from anyone's malice. This means you could lose benefits
because they did not know what they were doing or just by mistake. So, it is up to you to
find those nonprofit counselors or the for profit lawyer to help you through the laws, rules,
and whatever local regulations there are. Hopefully, you will not have to read through some
of the official printed regulations like I did. If wasn't an experience paper pusher.. The
average person would have been lost. Intelligence and competence has nothing to do with.
Hell, neither does logic, I think.
In my case, when I inherited a retirement account, SSDI was not affected, because of how
the original account was set up. However, SSDI is different from SSI although both have
interesting and Byzantine requirements. I guess to make sure we are all "deserving" of any
help.
So don't ask anonymous bozos like me on the internet and find those local counselors. If
it is nonprofit, they will probably do it completely free. If needed, many lawyers, including
tax lawyers, and CPAs will offer discounted help or will know where you can go.
What is the floor on wages?
Disposable income = wages – (taxes + the cost of living)
Set disposable income to zero.
Minimum wages = taxes + the cost of living
So, as we increase housing costs, we drive up wages.
The neoliberal solution.
Try and paper over the cracks with Payday loans.
This what we call a short term solution.
Someone has been tinkering with the economics and that's why we can't see the problem.
The early neoclassical economists hid the problems of rentier activity in the economy by
removing the difference between "earned" and "unearned" income and they conflated "land" with
"capital".
They took the focus off the cost of living that had been so important to the Classical
Economists as this is where rentier activity in the economy shows up.
It's so well hidden no one even knows it's there and everyone trips up over the cost of
living, even the Chinese.
Angus Deaton rediscovers the wheel that was lost by the early neoclassical economists. "Income inequality is not killing capitalism in the United States, but rent-seekers like
the banking and the health-care sectors just might" Angus Deaton, Nobel prize winner.
Employees get their money from wages and the employers pay the cost of living through wages,
reducing profit.
This raises the costs of doing anything in the US, and drives off-shoring.
The Chinese learn the hard way.
Davos 2019 – The Chinese have now realised high housing costs eat into consumer
spending and they wanted to increase internal consumption. https://www.youtube.com/watch?v=MNBcIFu-_V0
They let real estate rip and have now realised why that wasn't a good idea.
The equation makes it so easy.
Disposable income = wages – (taxes + the cost of living)
The cost of living term goes up with increased housing costs.
The disposable income term goes down.
They didn't have the equation, they used neoclassical economics.
The Chinese had to learn the hard way and it took years, but they got there in the end.
They have let the cost of living rise and they want to increase internal consumption.
Disposable income = wages – (taxes + the cost of living)
It's a double whammy on wages.
China isn't as competitive as it used to be.
China has become more expensive and developed Eastern economies are off-shoring to places
like Vietnam, Bangladesh and the Philippines.
Inflation for common people level means devaluation of the dollar. It can happen for reasons
completely detached from money supply issues. For example shortage of commodities (especially
oil) or diminishing of the world reserve currency status of the dollar (refusal of some countries
to hold their currency reserves in dollars and switch to other currencies in mutual trade).
Increase of military expenses (Pentagon budget is over trillion dollars now) also does not help
(guns instead of butter policy)
The reason that rates are discounting the current "economic growth" story is that artificial
stimulus does not create sustainable organic economic activity.
"This is because bubble activities cannot stand on their own feet; they require support
from increases in money supply that divert to them real savings from wealth generators. Also,
note again that a major cause behind the possible decline in the pool of real savings is
unprecedented increases in money supply and massive government spending. While the pool of
real savings is still growing, the massive money supply increase is likely to be followed by
an upward trend in the growth rate of the prices of goods and services. This could start
early next year. Once the pool of real savings starts to decline, however -- because of
massive monetary pumping and reckless fiscal policies -- various bubble activities are will
plunge. This, in turn, is likely to result in a large decline in economic activity and in the
money supply." – Mises Institute
As stimulus fades from the system, that decline in money supply is only one of several
reasons that "deflation" will resurface.
Monetary & Fiscal Policy Is Deflationary
The Federal Reserve and the Government have failed to grasp that monetary and fiscal policy
is "deflationary" when "debt" is required to fund it.
How do we know this? Monetary velocity tells the story.
What is "monetary velocity?"
"The velocity of money is important for measuring the rate at which money in circulation
is used for purchasing goods and services. Velocity is useful in gauging the health and
vitality of the economy. High money velocity is usually associated with a healthy, expanding
economy. Low money velocity is usually associated with recessions and contractions. " –
Investopedia
With each monetary policy intervention, the velocity of money has slowed along with the
breadth and strength of economic activity.
While in theory, "printing money" should lead to increased economic activity and inflation,
such has not been the case.
A better way to look at this is through the " veil of money" theory.
If money is a commodity, more of it should lead to less purchasing power, resulting in
inflation. However, this theory began to fail as Governments attempted to adjust interest rates
rather than maintain a gold standard.
Crossing The Rubicon
As shown, beginning in 2000, the "money supply" as a percentage of GDP has exploded higher.
The "surge" in economic activity is due to "reopening" from an artificial "shutdown."
Therefore, the growth is only returning to the long-term downtrend. As shown by the attendant
trendlines, increasing the money supply has not led to either more sustainable economic growth
rates or inflation. It has been quite the opposite.
However, it isn't just the expansion of the Fed's balance sheet that undermines the strength
of the economy. For instance, it is also the ongoing suppression of interest rates to try and
stimulate economic activity. In 2000, the Fed "crossed the Rubicon," whereby lowering interest
rates did not stimulate economic activity. Therefore, the continued increase in the "debt
burden" detracted from it.
Similarly, we can illustrate the last point by comparing monetary velocity to the
deficit.
As a result, monetary velocity increases when the deficit reverses to a surplus. Such allows
revenues to move into productive investments rather than debt service.
The problem for the Fed is the misunderstanding of the derivation of organic economic
inflation
6-More Reasons Deflation Is A Bigger Threat
Previously,
Mish Shedlock discussed Dr. Lacy Hunt's views on inflation, or rather why deflation remains
a more significant threat.
Inflation is a lagging indicator. Low inflation occurred after each of the past four
recessions. The average lag was almost fifteen quarters from the end of each. (See Table
Below)
Productivity rebounds in recoveries and vigorously so in the aftermath of deep
recessions . The pattern in productivity is quite apparent after the deep recessions ending
in 1949, 1958, and 1982 (Table 2 Below). Productivity rebounded by an average of 4.8% in
the year after each of these recessions. Unit labor costs remained unchanged as the rise in
productivity held them down.
Restoration of supply chains will be disinflationary . Low-cost producers in Asia and
elsewhere could not deliver as much product into the United States and other relatively
higher-cost countries. Such allowed U.S. producers to gain market share. As immunizations
increase, supply chains will gradually get restored, removing that benefit.
Accelerated technological advancement will lower costs . Another restraint on inflation
is that the pandemic significantly accelerated the implementation of technology. The sharp
shift will serve as a restraint on inflation. Much of the technology substitutes machines
for people.
Eye-popping economic growth numbers vastly overstate the presumed significance of their
result . Many businesses failed in the recession of 2020, much more so than usual.
Furthermore, survivors and new firms will take over that market share, which gets reflected
in GDP. However, the costs of the failures won't be.
The two main structural impediments to traditional U.S. and global economic growth are
massive debt overhang and deteriorating demographics, both having worsened as a consequence
of 2020.
To summarize, the long-term risk to current outlooks remains the "3-Ds:"
Deflationary Trends
Demographics; and,
Debt
Conclusion
With this in mind, the debt problem remains a massive risk. If rates rise, the negative
impact on an indebted economy quickly depresses activity. More importantly, the decline in
monetary velocity shows deflation is a persistent threat.
"It is hard to overstate the degree to which psychology drives an economy's shift to
deflation. When the prevailing economic mood in a nation changes from optimism to pessimism,
participants change. Creditors, debtors, investors, producers, and consumers all change their
primary orientation from expansion to conservation.
Creditors become more conservative, and slow their lending.
Potential debtors become more conservative, and borrow less or not at all.
Investors become more conservative, they commit less money to debt investments.
Producers become more conservative and reduce expansion plans.
Consumers become more conservative, and save more and spend less.
These behaviors reduce the velocity of money, which puts downward pressure on prices.
Money velocity has already been slowing for years, a classic warning sign that deflation is
impending. Now, thanks to the virus-related lockdowns, money velocity has begun to collapse.
As widespread pessimism takes hold, expect it to fall even further."
There are no real options for the Federal Reserve unless they are willing to allow the
system to reset painfully.
Unfortunately, we now have a decade of experience of watching monetary experiments only
succeed in creating a massive "wealth gap."
Most telling is the current economists' inability to realize the problem is trying to "cure
a debt problem with more debt."
In conclusion, the Keynesian view that "more money in people's pockets" will drive up
consumer spending, with a boost to GDP being the result, has been wrong. It hasn't happened in
40 years.
Unfortunately, deflation remains the most significant threat as permanent growth doesn't
come from an artificial stimulus.
bikepath999 2 hours ago
Title is 100% wrong! It's artificial growth (money printing) that is the inflation!
Organic growth thru increased production can actually lead to deflation!
OldNewB 2 hours ago
Exactly. Inflation can be the reduction in the rate of deflation due to productivity
increases.
bikepath999 2 hours ago
Transitory is just the new little catch phrase to have you chasing after your own tail
rather than skinning alive a central banker or politician
dead hobo 2 hours ago (Edited)
Transitory was Janet Yellen's favorite word for years. It was her catch phrase like
Bernanke's was 'The benefits outweigh the costs'. Total blather in both cases.
In both cases, it was muppet-speak for 'p*ss off'. But it sounded oh so intelligent and
the media lapped it up.
About the above article ... Economics, as commonly applied by sales folk, teachers,
experts, and pundits is theology, not science. One credibility trick is to quote an expert
who quoted another expert. Like above. How can you argue against this depth?
Misesmissesme 2 hours ago (Edited)
They are somewhat correct on the technical definition of inflation. However,
hyper-inflation does not care about any of that. It only needs a government willing to
print and a populace that has lost faith in the currency. We know the gov and the Fed are
game. It's just a matter of time until the masses lose faith in the dollar.
OldNewB 2 hours ago (Edited) remove link
Devaluing the fiat by printing to infinity has nothing to do with growth.
Printing IS inflation. Where it shows up is another matter.
Whether it results in higher prices is a function of behavior between buyers and sellers
of assets, products and services.
-- ALIEN -- 2 hours ago (Edited) remove link
International Energy Agency said GLOBAL PEAK OIL PRODUCTION for all liquids happened in
2018.
NO economic growth is possible without growing the energy supply, so 2% predicted growth
is BS,
unless other countries contract by 2+%.
Quia Possum 2 hours ago
We're beyond the point of pulling the rip cord.
Some ZH writer had an excellent analogy to a hot air balloon on fire. Up to a height X,
you can jump off safely. Up to a height Y you can jump off and survive with some broken
bones, but you're going to have to muster some courage to do that. But once you pass that
height you're dead whether you jump or stay in the balloon all the way.
The price of energy is growing. and that means inflation is accelerating, but it will
probably take the form of stagflation...
Stagflation is characterized by slow
economic growth and relatively high unemployment -- or economic stagnation -- which is at the same time
accompanied by rising prices (i.e. inflation). Stagflation can also be alternatively defined as a
period of inflation combined with a decline in gross domestic product (GDP). See also Stagflation - Wikipedia
Stagflation led to the emergence of the Misery index . This index, which is
the simple sum of the inflation rate and unemployment rate, served as a tool to show just how
badly people were feeling when stagflation hit the economy.
Under neoclassic economic doctrine stagflation was long believed to be impossible. This
pseudoscience demonstrated in the Phillips Curve portrayed
macroeconomic policy as a trade-off between unemployment and inflation.
Excellent analysis. I would add one point as a result of your conclusion. Older
populations with declining birth rates and slower population, depress household, business and
public investment. The contracting effect on investment is highly deflationary and overwhelms
the impact of inflation due to the smaller labor force. This condition is plainly evident in
Japan and Europe. Moreover, this pattern will be increasingly apparent in the US .
The Transitory Boat
The transitory boat is a small one. Powell and Yellen have to say that no matter what they
believe.
Rosenberg, Hunt, and I are in the small boat.
And if you want another reason to be in that boat with us, then think about what happens
when asset bubbles burst. It won't be inflationary, that's for sure.
Meanwhile, "I just say buy the gold," Rosenberg said. "Gold has 1/5 of the volatility that
bitcoin has."
Let us preface our inflation note with one of our favorite quotes:
"World War II was transitory"
– GMM
Inflation has eroded my purchasing power in my transitory life. Bring back the $.35 Big Mac,
which was only about 20% of the minimum wage. Now? About 40-50%... Enough to spark a
revolution?
By Rebecca Elliott and Collin Eaton Updated Aug. 26, 2020 4:11 pm ET
Refineries, petrochemical facilities and ports along the Gulf Coast were closing as
Hurricane Laura barreled toward the Texas-Louisiana border.
The hurricane strengthened to a Category 4 storm Wednesday, with sustained winds of 140
miles an hour, according to an afternoon update from the National Hurricane Center. It is
projected to unleash a storm surge as high as 20 feet along portions of the Louisiana coast
with as much as 15 inches of rainfall.
Inflation doesn't really matters, what only matters is the one big question: "How much bonds
does the one market member with unlimited funds buy?".
And the time the FED was able to rise more than .25% is in the rear mirror – when they
hike now, inflation or not, all these zombie companies and zombie banks will fail and no lawyer
in the world will be able to clean up the chaos after all these insolvency filings.
They have to talk the way out of this inflation. They have to talk until it stops, or
longer. They can't hike. They can perhaps hike again when most of the debt is inflated away
– a period with 10+% inflation and 1% bond interrest.
And yes, they can buy litterally any bond dumped onto the market – shown this in March
last year when they stopped the corona crash in an action of one week.
I think most non-investment-banks are zombies at the moment, and more than 20% of all
companies. They all will fail in less than 1 year when we would have realistic interrest rates.
On the dirty end, this would mean 10%+ for all this junk out there – even mighty EXXON
will be downgraded to B fast.
In old times the FED rates would be more than 5% now with these inflation numbers. Nobody
can pay this these days.
And now in the USA – look for how much social justice and social security laws you'll
get. The FED has to provide cover for all of them.
We in Europe will do this, too. New green deal, new CO2 taxes, better social security
– the ECB already has said they will swallow everything dumped on the market.
So, oil 100$ the next years – but some kind of strange dollars buying less then they
used to.
Eulen , your 2cents = 1 Dollar . Everything you say is correct . Weird is the only word for
what is happening in the financial world . I was in my first year of college when Paul Volcker
hiked interest rates into double digits so I have a benchmark to measure against . This is not
going to end well . Take care .
REPLY
There are also Bagdad Bobs from IEA " "World oil supply is expected to grow at a faster rate
in 2022, with the US driving gains of 1.6 million bpd from producers outside the OPEC alliance.
"
All factors that Stokman sites does not exclude bond rate remaining withing this yea max-min
band for the rest of the year. You never know how long Fed will continue to buy bonds to suppress
the yield.
The last "dead chicken bounce" of 10 year bond caught many people unprepared and
surprised.
The Fed's destructive money-pumping has many victims, but chief among these is the Wall
Street financial narrative itself.
It emits not a whiff about the patent absurdity of the Fed's monthly purchase of $120
billion of treasury and GSE debt under current circumstances; and treats with complete respect
and seriousness the juvenile word game known as "thinking about thinking about tapering" by
which the clowns in the Eccles Building fearfully attempt to placate the liquidity-intoxicated
speculators on Wall Street.
So it's not surprising that today's 5.0% CPI reading was made inoperative within minutes
after the BLS release by a chorus of financial pundits gumming about "base effects" and
ridiculing outliers like soaring used car prices (up 29.7% YoY), which, of course, Bloomberg
reporters never see the inside of anyway.
Then again, that's why we look at the two-year stacked CAGRs, which smooth the ups and downs
of the worst lockdown months last spring; and also why we use the 16% trimmed mean CPI, which
eliminates the highest 8% and lowest 8% of items in the overall CPI each month (both sets of
deleted outliers are different each month).
In the present instance, therefore, off-setting the used car prices in the highest 8% of
items during May is the -5.0% YoY drop in health insurance costs (if you believe that BLS
whopper) and the -5.3% drop in sporting event prices, which, of course, have been largely zero
since last April.
In any event, the 16% trimmed mean CPI for May was up by 4.7% annualized versus the April
number and was higher by 2.62% on YoY basis.
Still, the more salient point is that on a two-year stacked basis the plain old CPI -- used
car prices and all -- leaves not a scintilla of doubt: Consumer inflation is accelerating and
rapidly.
During the last eight months the growth rate for the two year stack has risen from 1.48% to
2.55% per annum. And we don't recall a word in May 2019 about that year's reading being
particularly deflationary. It was actually up 1.83% from May 2018.
Per Annum CPI Increase, Two-Year Stack:
October 2020: 1.48%;
November 2020: 1.59%;
December 2020: 1.78%;
January 2021: 1.92%;
February 2021: 1.99%;
March 2021: 2.07%;
April 2021: 2.23%;
May 2021: 2.55%.
Still, according to the Fed apologists there's nothing troubling about the above because the
Fed is now only trying to hit its 2.00% inflation target "averaged over time".
Let's see. Here are the CPI growth rates going back to May 2014. It turns out you have to
average back seven years before you have a shortfall from the 2.00% target!
CPI Increase per Annum To May 2021 From:
May 2018, 3-Yr, average: 2.31%;
May 2017, 4-Yr. average: 2.42%;
May 2016, 5-Yr. average: 2.31%;
May 2015, 6-Yr. Average:2.10%;
May 2014, 7-Yr. Average: 1.81%
You get the scam. These mendacious fools will just keep averaging back in time until the get
a number that's a tad under 2.00%, smack their lips loudly and then pronounce the current
inflation to be "transitory".
And they will also toss out any inflation index that undercuts their MOAAR inflation mantra
-- like all of the data reported above!
So we will say it again : The CPI is a highly imperfect general price measure owing to its
one-sided treatment of quality (hedonic) improvements, wherein some reported prices are
adjusted downward for improved product features like airbags and more powerful PCs, put few
prices are adjusted upward for the junkie toys, towels, kitchenware, appliances and furniture
that comes out of China.
But with the 8% highest and 8% lowest prices dropped out monthly to filter out the short-run
noise, the 16% trimmed mean version of the CPI at least purports to be a fixed basket price
index, not a variable weight deflator like the Fed's beloved PCE deflator.
In short, the 16% trimmed mean CPI puts paid to the "transitory" scam. Come hell or high
water, this serviceable inflation measure has been rising at 2.00% per annum since the year
2000, and even more than that during the 1990s.
Thus, during the 112 months since the Fed formally adopted inflation targeting in January
2012, it has risen by 2.03% per annum and by 2.15% per annum since January 2000.
Equally significantly, there have been only a handful of times during the 256 monthly
readings since January 2000 when the year-over-year measure dropped materially below 2.00%.
YoY Change, 16% Trimmed Mean CPI, 2000-2021
For want of doubt, here is the Fed's preferred short-ruler -- -the core PCE (personal
consumption expenditure deflator less food and energy). And the Fed's case for its insane
money-pumping essentially boils down to the dueling information covered by the red bars above
and the purple bars below.
As it happens, the one-year change in the core PCE deflator is 3.1% and the stacked two-year
gain is 1.99% per annum. That latter is apparently not close enough to 2.00% for government
work, meaning that the Fed needs to get more years into its average.
Even then, you have to be trained in the medieval theology of counting angels on the head of
a pin to ascertain the purported earth-shaking "shortfall" from target. Compared to April 2021,
here are the multi-year CAGRs on an April-to-April basis:
2019-2021: 1.99%;
2018-2021: 1.89%;
2017-2021: 1.92%;
2016-2012: 1.86%:
2015-2021:1.82%
That's right. For the five year-pairs shown above, the average CAGR for the core PCE
deflator was 1.90%. It seems that "lowflation" amounts to that which you need a magnifying
glass to ascertain -- 10 basis points of shortfall.
Of course, our monetary bean counters are not done "averaging", either. If you go back to
January 2012 when the Fed officially adopted inflation targeting, the core PCE deflator is up
by 1.69% per annum, and since January 2000 it has risen by 1.75% per annum.
So there you have it. For want of 25-31 basis points of annual inflation -- -averaging back
to the beginning of the current century -- you have a camarilla of central bankers giving deer
in the headlights an altogether new meaning. That is to say, they are apparently not even
thinking about thinking about tapering their massive bond-buying fraud owing to the barely
detectable differences between purple and red bars of these dueling charts.
As we said a few days back, would that they had applied the 25th Amendment to the Federal
Reserve Board.
These sick puppies are in urgent need of palliative care.
YoY Change In Core PCE Deflator, 2000-2021
They are also in need of a dose of realism, and on that score there are three figures in the
May CPI report which tell you all you need to know. To wit, compared to May 2020, durable goods
prices were up by 10.3%, nondurables were higher by 7.4% and services less energy gained
2.9%.
In fact, in the recent history of these three figures lays a stinging refutation of the
entire "lowflation" scam promulgated by the Fed money printers and their acolytes and shills on
Wall Street and in Washington, too.
On this matter, the Donald was right, even if by accident or for the wrong reasons. What we
are referring to, of course, is the "Shina" factor.
Beijing's form of state-controlled printing press capitalism has systematically drivendown
the cost of manufactured goods and especially durables by, in effect, draining the rice paddies
of China's great interior and herding its latent industrial work force into spanking new
factories which paid wages less than meager. And CapEx costs were rock bottom, too, owing to
$50 trillion of central bank-fueled domestic debt and the greatest cheap capital-driven
malinvestment spree in human history.
The result was an intense, multi-decade long deflation of manufactured goods as the high
labor costs embodied in US and European manufacturers were steadily squeezed out of global
prices levels as production shifted to China and its East Asian supply chain.
That impact is patently obvious in the composition of the CPI among the three components
which were flashing warning lights in today's inflation report.
Composition of CPI By Major Components, 2000-2021
In the first place, the core of domestic inflation lies in the 58.8% weight of the CPI
consisting of mainly domestically supplied services. The 2.9% YoY gain reported for May for CPI
services less energy was essentially par for the course.
That is, during the last 21 years (since January 2000) this component (black line) has risen
by 2.71% per annum, and since January 2012 it has gained a similar 2.63% per annum.
Needless to say, if there is any part of the inflation rate that the Fed can most powerfully
impact, it is domestically supplied services like health care, education, housing,
entertainment, travel and foods services. So where's the "lowflation" in that part of the CPI
basket?
Alas, we don't have lowflation in services at all, but a stubborn 2.6%-3.0% upward price
drift in domestic service components which account for nearly three-fifths of the household
budget.
By contrast, the durable goods component (brown line) accounts for 11.1% of the CPI, and
it's been an anchor to the windward for more than two decades. As of May 2021, prices were
still 8% below their January 2000 level.
The truth is, the alleged lowflation on the top line CPI has been heavily attributable to
the deflationary durable goods sector, but, alas, that era is apparently over. The Chinese rice
paddies have been drained on a one-time basis and its labor force is now actually shrinking,
while the Donald's ill-timed tariff barriers have forced production to move to higher cost
venues, albeit not necessary the USA of A.
Either way, the anchor to the windward is largely gone , meaning that rising durable goods
prices going forward will no-longer weigh as heavily on the CPI.
It should be further noted that during the past two-decades nondurable prices have also
held-down the CPI top line -- again in large part owing to the "Shina" factor and downward
pressures from cheap apparel, footwear, home furnishings and the like.
During the past 21 years, the nondurables component (yellow line) of the CPI rose by 1.99%
per annum, which is as close as you please to the target, but was also on anchor on the overall
CPI top-line ( purple line) which increased by 2.19% per annum.
Alas, during the period since January 2012, nondurables rose by just 0.63% per annum owing
to flat-lining energy and commodity prices, thereby pulling the overall CPI down to 1.80% per
annum, where it too fell awry of the Fed's sacred 2.00% target.
But here's the thing. A smattering of surging nondurable goods prices in the May 2021 report
are a stark reminder that the times they are a changin'.
On a YoY basis, these components suggest that "lowflation" in durables may have passed its
sell-by date and that the 7.4% YoY gain in nondurables overall may be lifting, not suppressing,
the CPI top-line going forward.
YoY Change In Major Nondurables Components:
Energy commodities: +54.5%;
Apparel: +5.6%;
Home furnishings and supplies: +3.7%;
Footwear: +7.1%;
Food away from home: +4.0%
Household furnishings and operations: +4.6%.
In sum, the chart above captures the one-time history of the Fed's phony "lowflation"
narrative -- an aberrant condition that is now fading fast. Sooner or latter they will run out
of excuses and back inflation reports to average down. And that, in turn, means tapering of the
Fed's great bond-buying fraud -- the lynch pin of the greatest bond and stock bubble in
recorded history.
Do we think that will trigger the greatest financial asset value collapse in modern
times?
Why, yes, we do! play_arrow
wareco 4 hours ago remove link
Seriously? David Stockman? This guy has been perpetually wrong for the last 4 years, at
least. In June, 2017, he was calling for the S&P to fall to 1600. Never happened. In
October 2019, he loudly proclaimed that everyone should get out of the "casino". S&P up
40% since then. He has as much credibility as that self-promoter, Harry Dent, who has been
calling for gold to drop to $700 since 2012.
Sound of the Suburbs 8 hours ago (Edited) remove link
Stage one – The markets are rising.
Look at all that wealth we are creating.
Stage two – It's a bubble.
That wealth is going to disappear.
Stage three – Oh cor blimey! I remember now, this is what happened last time
At the end of the 1920s, the US was a ponzi scheme of inflated asset prices.
The use of neoclassical economics, and the belief in free markets, made them think that
inflated asset prices represented real wealth.
1929 – Wakey, wakey time
The use of neoclassical economics, and the belief in free markets, made them think that
inflated asset prices represented real wealth, but it didn't.
It didn't then, and it doesn't now.
Putting a new wrapper around old economics did fool global elites.
You'd have to get up pretty early in the morning to catch me out.
E5 9 hours ago
Not going to happen.
No one is buying.
No one is raising salaries.
Inflation is a stalled plane.
Everyone is waiting.
Self fulfilling prophecy. Mainstreet is waiting on their inheritance from dead Boomers.
The only thing that will save America. Money being spent and Cuban Missile Crisis not
happening under Boomers.
"... The dynamics show how much the municipal-bond market has been swept up in the global push into higher yield assets as central banks worldwide hold interest rates low to stoke the economic recovery. ..."
"... That's fueled a surge in debt sales by corporations and governments battered by virus lockdowns. And for the state and local government debt market, it has revived the years-long rally in junk bonds that was only temporarily derailed by the coronavirus lockdowns. ..."
"... So far this year, government agencies across the U.S. have sold more than $6.5 billion of bonds that can only be marketed to institutional investors able to bear the risk, driving such issuance toward the biggest year on record, according to data compiled by Bloomberg. ..."
With the economy rebounding swiftly from the pandemic, interest rates on high-yield state
and local government securities have tumbled to the lowest in over two decades. Cash is pouring
into mutual funds focused on the junk-rated debt so quickly that money managers are fighting to
get in on new deals. And prices have rallied, driving high-yield bonds to their biggest run of
outperformance since 2014.
The demand is so strong that a California agency sold 35-year bonds for the development of a
senior-living community at a yield of 4.43%, about two-and-a-half percentage points less than
bankers initially anticipated. The price went on to surge 8% in secondary trading.
"We couldn't think of a better time to come to market," said Sarkis Garabedian, an
investment banker at Ziegler, the underwriter on the bonds. He said the firm hadn't seen such
interest in a transaction for a new senior living campus since they started tracking the
metrics in the 1980s. "We really hit the sweet spot here."
Recent bond sales have raised money for an ethanol production facility in North Dakota, a
bevy of charter schools, and a youth-sports complex in Arizona. American Samoa, a junk-rated
territory, is tapping the market for the first time since 2018. And the owner of a plant that
recycles rice waste into fiberboard may sell more debt even though it has already been driven
to default.
The dynamics show how much the municipal-bond market has been swept up in the global push
into higher yield assets as central banks worldwide hold interest rates low to stoke the
economic recovery.
That's fueled a surge in debt sales by corporations and governments battered by virus
lockdowns. And for the state and local government debt market, it has revived the years-long
rally in junk bonds that was only temporarily derailed by the coronavirus lockdowns.
So far this year, government agencies across the U.S. have sold more than $6.5 billion of
bonds that can only be marketed to institutional investors able to bear the risk, driving such
issuance toward the biggest year on record, according to data compiled by Bloomberg.
May CPI is expected at 8:30 a.m. ET Thursday. It is unclear to me why the 10-year Treasury yield fell below the key 1.5% Wednesday.
Was it short-covering? if so what triggered it? If predictions are true it might jump up on Jun 10, 2021 because you can't have Headline
CPI 4.7% and the 10-year Treasury yield 1.5%. That's the theatre of absurd.
Rent, owners' equivalent rent and medical care services collectively are 50% of the core CPI basket.
Notable quotes:
"... Headline CPI is expected to jump 4.7% year-over-year, the highest rate since sky high energy prices spiked inflation readings in the fall of 2008. ..."
"... "I am worried about rent and owners' equivalent rent because it should go up. It had decelerated," she said. Shelter is more than 30% of CPI , and rent costs have bottomed in some cities, Swonk added. "The issue is it could have longer legs and keep overall inflation measures buoyed more than people expect." ..."
...The consensus forecast for the core consumer price index, which excludes food and energy, is 3.5% on a year-over-year basis,
according to Dow Jones. That's the fastest annual pace in 28 years.
Economists expect both core and headline CPI rose by 0.5% in May. Headline CPI is expected to jump 4.7% year-over-year, the highest
rate since sky high energy prices spiked inflation readings in the fall of 2008.
... ... ...
"I am worried about rent and owners' equivalent rent because it should go up. It had decelerated," she said. Shelter is more
than 30% of CPI , and rent costs have bottomed in some cities, Swonk added. "The issue is it could have longer legs and keep
overall inflation measures buoyed more than people expect."
"... As bubbles peak, they combine objective signs of excess" prices rising much faster than earnings can justify" with subjective signs of mania, such as frenzied trading and borrowing. ..."
"... My research on the 10 biggest bubbles of the past century, from the US stock market in 1929 to Chinese shares in 2015, shows that prices typically rise 100 per cent in the year before the peak, with much of the gain packed into the climactic last months. That finding is closely in line with bubble studies from academics at Harvard and others. ..."
"... By those standards, there are at least five current bubblets. They include the cryptocurrency market for bitcoin and ethereum; clean energy stocks, including some of the biggest names in electric vehicles; small cap stocks, including many of the hottest pandemic stories; a basket of tech stocks that lack earnings, which is also chock-a-block with famous brands; and special purpose acquisition companies (Spacs) , which allow investors a new way to buy into private firms before they go public. ..."
"... The historical bubbles in my study did suffer midcourse setbacks on the way up, but typically those corrections were around 25 per cent and never more than 35 per cent. Beyond that point" a 35 per cent drop" the bubbles in my sample became monophasic, or stuck on a one-way downhill path. ..."
"... It is important to remember that a bubble is often a good idea gone too far. In the early 2000s, the conventional wisdom was that the dotcom bubble had fuelled mainly junk companies with business plans barely worth the napkins they were written on. Later, researchers found that, compared with other bubbles, those in the tech sector produce many start-ups that fail but also help launch major innovations. For every few dozen dotcom flame-outs, there was a giant survivor such as Google or Amazon that would go on to make the economy more productive. ..."
As bubbles peak,
they combine objective signs of excess" prices rising much faster than earnings can justify"
with subjective signs of mania, such as frenzied trading and borrowing.
To some the entire US
stock market looks bubbly given its dizzying run-up, but earnings growth has also been
extraordinarily strong through the pandemic. Beneath the surface, however, sectors of the
market from green tech to cryptocurrency show tell-tale bubble signs.
My research on the 10 biggest bubbles of the past century, from the US stock market in 1929
to Chinese shares in 2015, shows that prices typically rise 100 per cent in the year before the
peak, with much of the gain packed into the climactic last months. That finding is closely in
line with bubble studies from academics at Harvard and others.
By those standards, there are at least five current bubblets. They include the
cryptocurrency market for bitcoin and ethereum; clean energy stocks, including some of the
biggest names in electric vehicles; small cap stocks, including many of the hottest pandemic
stories; a basket of tech stocks that lack earnings, which is also chock-a-block with famous
brands; and special purpose acquisition
companies (Spacs) , which allow investors a new way to buy into private firms before they
go public.
Each of these bubblets is captured in an index that rose in the last year by around 100 per
cent, often much more, to a peak value between $500bn and $2.5tn. Day traders and other newbies
rushed in, a common symptom of late stage market manias. Now these bubbles are faltering, as
they so often do, in response to increases in long-term interest rates. What's next?
The historical bubbles in my study did suffer midcourse setbacks on the way up, but
typically those corrections were around 25 per cent and never more than 35 per cent. Beyond
that point" a 35 per cent drop" the bubbles in my sample became monophasic, or stuck on a
one-way downhill path.
For the median case, the bottom was found 70 per cent below the peak, and came just over two
years after the peak. Except for the index of small-cap pandemic stocks, the other four bubble
candidates have all experienced drops of at least 35 per cent, but also of no more than 50 per
cent (in the case of ethereum). In other words, they are not likely to resume inflating any
time soon, and they are still far from the typical bottom.
There is one new factor that could upset this historical pattern. Despite the rise in
long-term interest rates, there is plenty of liquidity sloshing around the markets, with
central banks committed to easy money as never before. The risks though are skewed to the
downside.
It is important to remember that a bubble is often a good idea gone too far. In the early
2000s, the conventional wisdom was that the dotcom bubble had fuelled mainly junk companies
with business plans barely worth the napkins they were written on. Later, researchers found
that, compared with other bubbles, those in the tech sector produce many start-ups that fail
but also help launch major innovations. For every few dozen dotcom flame-outs, there was a
giant survivor such as Google or Amazon that would go on to make the economy more
productive.
"... Just in time for Pride Month, a new exchange traded fund aims to connect with LGBTQ investors. ..."
"... LGBTQ Loyalty Holdings partners with Harris Poll to annually survey 150,000 self-identifying LGBTQ constituents across the U.S. for their views about a company's brand awareness, brand image, brand loyalty and how the firm supports the community. As noted in its prospectus , 25% of the index's weighting is derived from that survey data. ..."
Just in time for Pride Month, a new exchange traded fund aims to connect with LGBTQ investors. Two previous efforts failed to
attract enough assets.
The fund, LGBTQ + ESG100 ETF LGBT,
, launched in late May, is a passively managed, large-cap index fund that holds the top 100 U.S. companies that most align with
the LGBTQ community.
In 2019, two LGBTQ-focused ETFs were delisted: ALPS Workplace Equality Portfolio ETF and InsightShares LGBT Employment Equality
ETFs. Like this new fund, both were mostly U.S. large-cap, passive index ETFs comprising companies that received high or perfect
marks for workplace equality in the Human Rights Campaign Corporate Equality
Index , a benchmark for corporate LGBTQ policies.
The first ETF stuck around for five years, but the second barely made it two years, even though it was launched with much fanfare
by UBS. Neither gained many assets.
Bobby Blair, CEO and founder of LGBTQ Loyalty Holdings, which launched the fund with issuer ProcureAM, says community input on
holdings makes this fund different.
LGBTQ Loyalty Holdings partners with Harris Poll to annually survey 150,000 self-identifying LGBTQ constituents across the U.S.
for their views about a company's brand awareness, brand image, brand loyalty and how the firm supports the community. As noted in
its prospectus
, 25% of the index's weighting is derived from that survey data.
... the LGBTQ + ESG100 has an annual expense ratio of 0.75%.
David Milliken and Kate Holton Sat, June 5, 2021, 4:01 AM
...Hundreds of billions of dollars could flow into the coffers of governments left
cash-strapped by the COVID-19 pandemic after the Group of Seven (G7) advanced economies agreed
to back a minimum global corporate tax rate of at least 15%.
Facebook said it expected it would have to pay more tax, in more countries, as a result of
the deal, which comes after eight years of talks that gained fresh impetus in recent months
after proposals from U.S. President Joe Biden's new administration.
"G7 finance ministers have reached a historic agreement to reform the global tax system to
make it fit for the global digital age," British finance minister Rishi Sunak said after
chairing a two-day meeting in London.
The meeting, hosted at an ornate 19th-century mansion near Buckingham Palace in central
London, was the first time finance ministers have met face-to-face since the start of the
pandemic.
U.S. Treasury Secretary Janet Yellen said the "significant, unprecedented commitment" would
end what she called a race to the bottom on global taxation. German finance minister Olaf Scholz said the deal was "bad news for tax havens around the
world". Yellen also saw the G7 meeting as marking a return to multilateralism under Biden and a
contrast to the approach of U.S. President Donald Trump, who alienated many U.S. allies. "What I've seen during my time at this G7 is deep collaboration and a desire to coordinate
and address a much broader range of global problems," she said.
Ministers also agreed to move towards making companies declare their environmental impact in
a more standard way so investors can decided more easily whether to fund them, a key goal for
Britain.
... ... ...
Key details remain to be negotiated over the coming months. Saturday's agreement says only
"the largest and most profitable multinational enterprises" would be affected.
... ... ...
The G7 includes the United States, Japan, Germany, Britain, France, Italy and
Canada.
... Average hourly earnings for workers in leisure and hospitality rose to $18.09 in May,
the highest ever and up 5% from January alone, according to Labor Department data released on
Friday. Pay rose even faster for workers in non-manager roles, who saw earnings rise by 7.2%
from January, far outpacing any other sector.
That higher pay could be a sign that companies are lifting wages as they seek to draw people
back to work after more than a year at home. Some businesses are struggling to keep up with
higher demand as more consumers, now fully vaccinated, get back to flying, staying in hotels
and dining indoors. Job gains in leisure and hospitality this year have so far outpaced gains
in other sectors.
But it is too soon to know whether the boost will be enough to help speed up hiring at a
time when many workers are still facing other obstacles, including health concerns and having
to care for children and other relatives.
"The fact of the matter is, the pandemic is still going on," said Daniel Zhao, a senior
economist for Glassdoor. "The economy is running ahead of where we are from a public health
situation."
Some 2.5 million people said they were prevented from looking for work in May because of the
pandemic, according to the Labor Department.
... ... ...
Employment in leisure and hospitality is still in a deep hole when compared with pre-pandemic
levels. The industry added 292,000 jobs in May, with about two-thirds of that hiring happening
in restaurants and bars. But overall employment is still down 2.5 million jobs, or 15% from
pre-pandemic levels, more than any other industry.
... ... ...
Some people who previously worked at hotels or restaurants moved on to other types of jobs
during the pandemic, such as packaging goods at a warehouse, and it's too soon to know whether
they will switch back as more of the economy reopens, said Zhao.
...About half of states are putting an early end to a $300 federal supplement to weekly
unemployment benefits, winding them down as soon as June 12. The supplement expires nationwide
on Sept. 6.
(Reporting by Jonnelle Marte and Ann Saphir; Editing by Chizu Nomiyama and Jonathan
Oatis)
"Over the past five years, the S&P 500 stock index has more than doubled. For the past
10 years, it has nearly quadrupled," says Orman. "If you have left your portfolios on
autopilot, that could likely mean that you now own more stock than you intend to, or
should."
Left to their own devices, your increasingly valuable stocks may have started to account for
an even larger portion of your account
... ... ...
Orman cites a recent analysis from Fidelity Investments on the retirement plans the company
handles. Fidelity estimates about 20% of savers own more stock than they'd recommend for
someone of their age.
Whereas climate change issues are the presumptive reasons behind the latest wave of investor revolts at the oil and gas giants,
lurking beneath the surface is a growing sense of apprehension about Big Oil's strategy and failure to generate adequate returns for
shareholders in recent decades.
The naked truth is that Exxon and its cohorts have severely underperformed the broader market over the last two decades in terms of
total returns to shareholders, implying the sector's woes are long-term and strategic rather than short-term and cyclical.
Chronic underperformance
XOM
Source: CNN Money
Big Oil's underperformance relative to the market is clearly evident whether you are looking at 2-year, 5-year, 10-year, or even
20-year timespans.
For instance, since 2015, Exxon shares have returned a -2.5% compound annual loss based on share prices and dividends, a far cry
from the average annual gain of +14.4% by the
S&P 500
over the timeframe.
Over the past two decades, Exxon's compound annual return has clocked in at +4.2%, still considerably lower than the broad market
benchmark's return of +7.1%.
... ... ...
Exxon is hardly alone, with none of its peers, including Chevron,
Royal Dutch Shell
(NYSE:RDS.A),
BP
Inc.
(NYSE:BP), and
Total
(NYSE:TOT) coming close to matching the returns by
the broader share market over the past decade.
In fact, on an inflation-adjusted U.S. dollar basis, returns by Exxon, Shell, and BP have been negative over the past five years, a
period which coincided with the biggest bull market in the history of the stock market.
The renewable energy conundrum
You cannot blame the oil majors for continuing to engage in a lot of hand-wringing at a time when investors are demanding they pump
less oil and transition to cleaner energy.
For the oil majors, successfully transitioning to green energy companies is not going to be a walk in the park because these
companies have to ride two horses.
That's the case because the majority are already battling dwindling cash flows which means they cannot afford to gamble with
whatever little is left. Oil prices have been on a downtrend since 2014, a situation that has only worsened during the pandemic.
Oil and gas firms are still grappling with the best way to presently use dwindling cash flows; in effect, they are still weighing
whether it's worthwhile to at least partially reinvent themselves as renewables businesses while also determining which low-carbon
energy markets offer the most attractive future returns.
Most renewable ventures, like solar and wind projects, tend to churn out cash flows akin to annuities for several decades after
initial up-front capital expenditure with generally low price risk as opposed to their current models with faster payback but high
oil price risk. With the need to generate quick shareholder returns, some fossil fuel companies have actually been scaling back
their clean energy investments.
Energy companies are also faced with another conundrum: Diminishing returns from their clean energy investments.
A
paper
published in Science Direct
last August says that dramatic reductions in the cost of wind and solar have been leading to an even
bigger reduction in revenue inflows leading to falling profits. This is particularly true for wind energy as later deployments of
wind usually have lower market value than earlier ones due to wind energy revenue declining more rapidly than cost reductions. Solar
is more resilient, with technological progress approximately balancing out the revenue degradation, which perhaps explains why
solar
stocks have gone ballistic.
Adding wind and solar to our grid tends to reduce electricity prices during peak generation times: Indeed, electricity prices in
California can come down to zero during long sunny durations. This was not a problem for early deployments but is becoming a major
concern as renewables increasingly play a bigger part in our electricity generation mix.
But, ultimately, Big Oil will have to take the plunge and engage in drastic internal restructuring and product cycle transitions
even as activists like Engine No.1 promise to continue turning the screw. As Charlie Penner of Engine No.1 has told
FT
, the
energy transition is happening faster than expected and has undermined Big Oil's assumptions about long-term demand for its oil.
"The bots' mission: To deliver restaurant meals cheaply and efficiently, another leap in
the way food comes to our doors and our tables." The semiautonomous vehicles were
engineered by Kiwibot, a company started in 2017 to game-change the food delivery
landscape...
In May, Kiwibot sent a 10-robot fleet to Miami as part of a nationwide pilot program
funded by the Knight Foundation. The program is driven to understand how residents and
consumers will interact with this type of technology, especially as the trend of robot
servers grows around the country.
And though Broward County is of interest to Kiwibot, Miami-Dade County officials jumped
on board, agreeing to launch robots around neighborhoods such as Brickell, downtown Miami and
several others, in the next couple of weeks...
"Our program is completely focused on the residents of Miami-Dade County and the way
they interact with this new technology. Whether it's interacting directly or just sharing
the space with the delivery bots,"
said Carlos Cruz-Casas, with the county's Department of Transportation...
Remote supervisors use real-time GPS tracking to monitor the robots. Four cameras are
placed on the front, back and sides of the vehicle, which the supervisors can view on a
computer screen. [A spokesperson says later in the article "there is always a remote and
in-field team looking for the robot."] If crossing the street is necessary, the robot
will need a person nearby to ensure there is no harm to cars or pedestrians. The plan is to
allow deliveries up to a mile and a half away so robots can make it to their destinations in
30 minutes or less.
Earlier Kiwi tested its sidewalk-travelling robots around the University of California at
Berkeley, where
at least one of its robots burst into flames . But the Sun-Sentinel reports that "In
about six months, at least 16 restaurants came on board making nearly 70,000
deliveries...
"Kiwibot now offers their robotic delivery services in other markets such as Los Angeles
and Santa Monica by working with the Shopify app to connect businesses that want to employ
their robots." But while delivery fees are normally $3, this new Knight Foundation grant "is
making it possible for Miami-Dade County restaurants to sign on for free."
A video
shows the reactions the sidewalk robots are getting from pedestrians on a sidewalk, a dog
on a leash, and at least one potential restaurant customer looking forward to no longer
having to tip human food-delivery workers.
...Analysts at Goldman Sachs""in October""ran the numbers on the stock market impact of
previous capital-gains tax hikes. While there is only a modest impact on the stock market as a
whole, momentum stocks usually get socked before they are levied, they found. That makes
sense""investors logically are more motivated to sell the stocks where they would save the most
by avoiding higher capital-gains taxes.
The last time capital-gains taxes were hiked, in 2013, the wealthiest households sold 1% of
their equity assets, the Goldman analysts found. According to the
Federal Reserve's distributional financial account data , the top 1% held $17.79 trillion
of equities and mutual funds in the fourth quarter of 2020""so a 1% selling of stocks this time
would be $178 billion. (The most recent Internal Revenue Service breakdown, from 2018, found
that millionaires accounted for just over 500,000 filers or about 0.4% of the total.)
"... As I argued three weeks ago, this sentiment pattern suggests that the market may remain in a fairly narrow range for the next several months. ..."
"... be on the lookout for when the market timers remain bullish in the face of declines, or bearish in the wake of rallies. That will indicate that a bigger decline or rally is in store. ..."
"... In the meantime, the market timers' behavior suggests both market rallies and declines will be subdued. That's good news to the extent you were worried that a major new bear market is about to begin, but bad news if you were hoping for a more sustained rally. ..."
This quick jumping onto and off of the bullish and bearish bandwagons has become the new
normal, as you can see from the table below.
... ... ...
As I argued three weeks ago, this sentiment pattern suggests that the market may remain
in a fairly narrow range for the next several months. The contrarian bet is that the
market will finally break out of that trading range whenever the market timers stubbornly hold
onto their sentiment beliefs in the face of the market moving in the opposite direction.
That is, be on the lookout for when the market timers remain bullish in the face of
declines, or bearish in the wake of rallies. That will indicate that a bigger decline or rally
is in store.
In the meantime, the market timers' behavior suggests both market rallies and declines
will be subdued. That's good news to the extent you were worried that a major new bear market
is about to begin, but bad news if you were hoping for a more sustained rally.
... ... ...
Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks
investment newsletters that pay a flat fee to be audited. He can be reached at [email protected] .
Job gains in May were led by leisure and hospitality, with the sector adding 292,000 jobs.
Payrolls grew by
559,000 last month, the Labor Department reported Friday, up from a revised 278,000 in
April, which marked a sharp drop from March's figure.
The labor recovery has slowed from earlier in the year -- in March, the economy added
785,000 jobs
... The labor-force participation rate, the share of adults working or looking for work,
edged slightly lower in May to 61.6%, down from 63.3% in February 2020.
Republicans, always eager to snatch the bread from the mouths of the poor, are blaming
unemployment benefits for the reluctance of workers to return to jobs. In some red states,
they already are snatching it.
But more men are returning to work than are women. Doesn't that prove that unemployment
benefits are not holding back former workers?
I'll bet more women will return to work in September, after schools start up in-person
classes.
William Lamb
Republican turn a blind on helping people, except themselves. They would rather have one
being a slave and get pay less then nothing with little perks in making less then high
quality item that will still have defects, even if we pride our workmanship that is suppose
to equal to none. It would like being in 1950s, when there was not much world competition,
when world economy was still recovering from WW2.
I guessed Republican want American to continue working by low paying wages so they can
enrich themselves, and show that America can still produce things with slave wages.
johm moore
Most of the jobs are insufficient to support a reasonable quality of life. A job today is
about like a half a job pre-NAFTA and the job export process in terms of the quality of life
that it supports.
Bryson Marsh
If UI was holding back employment, then why are we adding so many low wage jobs? The missing
jobs are in *middle income* sectors.
David Chait
I wouldn't call people returning to work "new" jobs, that just seems disingenuous.
rich ullsmith
Asset prices rise when the jobs report is lukewarm. Thank you, Federal Reserve. May I have
another.
Sam Trotter
It should be made mandatory to publish the offered wage/rate. I see so many fake jobs posted
on LinkedIn with no description of bill rate for contract positions or Base+Bonus for
Full-Time roles. Too many mass scam messages.
Analysts said other factors are driving lower yields, including a weaker dollar, which has
lifted demand for Treasurys from foreign investors. Foreign investors tend to hold more
Treasurys when the dollar declines and reduces the costs of protecting against swings in
currencies.
That is a counterintuitive response , because rising inflation erodes the value of
Treasuries' payouts. And the data did indicate stronger inflation: Excluding volatile food and
energy costs, prices rose 0.7% in May. That was the second-highest monthly increase in consumer
prices since the early 1980s, behind April's 0.8% rise. Compared with last year, when the
global economy was mired in a pandemic-driven slowdown, headline consumer prices rose at
a 5% pace . (Excluding food and energy, they rose 3.8%.)
The market's moves could be muted because investors are betting that central bankers are
going to stick with their view that most of the strength in consumer prices will pass after a
potentially bumpy reopening period and keep policy easy.
That doesn't mean Treasuries have much room to rally more from here.
The Fed's meeting next week may be the first test. If central-bank officials talk about
starting to remove accommodation earlier than expected, that could send yields higher. In fact,
strategists from TD Securities decided to take a bearish view on the 10-year note on Thursday,
after yields fell below 1.5% earlier this week. They argued that continued economic momentum
and stronger inflation could lead central-bank officials to take a more upbeat tone on the
economy than investors expect at their meeting on June 15 and 16.
The percentage of people quitting their jobs, meanwhile, also rose to a record 2.8% among
private-sector workers. That's a full percentage point higher than a year ago, when the
so-called quits rate fell to a seven-year low.
...A recent study by Bank of America, for example, found that job switchers earned an extra
13% in wages from their new positions. That's a big chunk of money.
...Normally people who quit their jobs are ineligible for unemployment benefits, but they
can get an exemption in many states for health, safety or child-care reasons.
About half of the states, all led by Republican governors, plan to stop giving out the
federal benefit by early July to push people back into the labor force. Economists will be
watching closely to see how many people go back to work.
Wood, who became the face of the outsized rally in technology stocks such as Zoom Video
Communications Inc and electric vehicle maker Tesla Inc during the coronavirus pandemic last
year, said that falling lumber and copper prices signal that the market is "beginning to see
signs that the risks are overblown" from inflation.
...Wood, whose ARK Innovation ETF was the top-performing actively managed U.S. equity fund
tracked by Morningstar last year, has seen her performance stagnate along with the slowdown in
growth stocks. Her flagship fund is down nearly 28% from its early February high.
A short-term period of slightly higher inflation wouldn't be memorable, but an extended run
of inflation above 3% can be problematic. Social Security Is Your Best Inflation Hedge; you need
to maximize it.
Social Security checks represent about a third of income for all retirees.
Among elderly recipients, those checks represent half of their retirement income for married
couples and 70% for singles.
A primary residence, if you own a house and it is fully paid off, also gave some minimal
inflation protection.
Another factor is that once people actually get into retirement, ,
their spending generally decreases so much that they're spending less overall, even accounting
for inflation.
While seniors can't directly affect the inflation rate,
there are ways to minimize the shadow it casts over their retirement.
Reducing housing costs, for instance, is a step in the right direction. Trading in a larger
home for a smaller one, even if the mortgage is paid off, reduces the monthly outflow for
property taxes, utilities, homeowners insurance, and maintenance.
Another smart move is adding investments to your portfolio that are likely to increase in
value as inflation rises.
The media is buzzing with claims of an "Economic Boom" in 2021. While the economy will most
certainly grow in 2021, the question is how much is already "baked in?"
"The economy has entered a period of supercharged growth. Instead of fizzling, it could
potentially remain stronger than it was during the pre-pandemic era into 2023.
Economists now expect the second quarter to grow at a pace of 10%, and they expect growth
for 2021 to be north of 6.5%. In the past decade, only a few quarters gross domestic product
growing at even 3%."
The premise is that strong "pent up" demand will sustain the economic recovery over the next
few years.
However, since market lows in 2020, the market surge has not only recouped all of those
losses but has rocketed to all-time highs on expectations of surging earnings growth.
"Vaccines and herd immunity continue to bring COVID cases down, and the economic reopening
continues to kick into a higher gear. Such is what the data is starting to show. Across
economic metrics, from the gross domestic product ( GDP ) to retail sales and job growth, boom
conditions are evident ."
She is correct in her statement. However, there is a difference between an "economic boom"
and a "recovery." As shown in the chart of GDP growth below, the U.S. has already experienced a
very sharp "economic recovery" from the recessionary lows. (I have included estimates for the
rest of 2020, which shows a return to trend growth.)
The following chart shows the economic recovery against the massive dumps of liquidity
pumped into the economy. (Estimates run through the end of 2021 using economist's
assumptions.)
Can't Recoup Losses
Certain areas of the economy, like airlines, hotels, and cruise ships, have yet to recover
to pre-pandemic levels. However, those industries only make up a relatively small amount of
overall economic activity. Furthermore, these industries will continue to struggle for some
time as individuals will not take "two vacations" this year since they missed last year. That
activity is now forever lost.
Yes, the economy will recover most likely to pre-pandemic levels this year due to stimulus
injections, but as
discussed previously , what then?
"The biggest problem with more stimulus is the increase in the debt required to fund it.
There is no historical precedent, anywhere globally, that shows increased debt levels lead to
more robust economic growth rates or prosperity. Since 1980, the overall increase in debt has
surged to levels that currently usurp the entirety of economic growth. With economic growth
rates now at the lowest levels on record, the change in debt continues to divert more tax
dollars away from productive investments into the service of debt and social welfare."
Just as it is with investing, getting "back to even" is not the same thing as "organic
growth."
"In calculus, the second derivative , or the second-order derivative , of a function f is
the derivative of the derivative of f." – Wikipedia.
In English, the "second derivative" measures how the rate of change of a quantity is itself
changing. Since we measure GDP growth on an annual rate of change basis, the larger the economy
grows, the lower the rate of change will be. Here is a simplistic example go GDP growth:
In year 1, GDP = $1. In the second year, GDP grows to $2. The annual rate of change is
100%. However, in year 3, even though the economy grows to $3, the annual rate of change
falls to just 50%.
Given the long-term historical correlation between economic growth, corporate earnings, and
annualized returns, the reversion to trend growth has implications for investors. As Liz
notes:
"Using three broad ranges for GDP growth historically, the lowest range (when the economy
is barely growing or in recession) is accompanied by the highest annualized stock market
performance. GDP is only slightly back into positive territory on an annualized basis.
However, the strong growth expected in the second quarter will push GDP into the highest
zone. At that level, stocks have historically posted a negative annualized return."
The reason is that once economic growth reaches higher levels, stocks have climbed to levels
incorporating those expectations. In other words, when things are as "good as they can get,"
stocks begin to reprice for slower future growth rates.
That is the phase we are at currently.
How Much Pent Up Demand Is There Anyway
The main driver of the expected recovery from a "recessionary" low stems from the question
of how much "pent up" demand currently exists?
If we look at durable goods as an example, such would suggest that much of the demand for
long-lasting products got pulled forward by consumers over the last 12-months.
Of course, if we broaden that measure to retails sales which make up ~40% of the personal
consumption expenditures (PCE) index , we see much the same.
Given PCE, which comprises nearly 70% of GDP, has already recovered much of pandemic-related
decline, how much "pent up" demand remains.
However, wage growth outside of personal transfer payments (i.e., stimulus) hasn't
recovered. It is impossible to sustain higher rates of economic growth without wage growth.
Importantly, as we saw in January and February following the $900 billion stimulus bill
passage, there was a short-lived surge of activity. However, once individuals spent the money,
activity quickly faded. We saw the same with retail sales in April following the American
Rescue Plan, which sent out $1400 checks.
After the $1400 checks get spent, what will be the driver for continued consumption at
previous rates? Further, given the impact of a larger economy (as it recovers), the rate of
change will decline markedly in the months to come.
Earnings Growth Inflection
"Earnings growth has a high correlation to stock market performance, but with time lags
that are less well-understood. We are about halfway through the first quarter S&P 500
earnings season and so far, the results are exceptionally strong." – Liz Ann
Sonders
That is correct, and given the high correlation between earnings and market returns, we come
back to the same question. Has the advance in the market accounted for the rebound in earnings?
More importantly, what happens when that growth reverses?
"Relative to last year's second-quarter plunge of nearly -31% year-over-year, expectations
are that S&P 500 earnings will be up more than 46% in this year's first quarter. The
second quarter will boast a whopping 60% increase. Such should be the inflection point in
terms of the year-over-year growth rate." – Liz Ann Sonders
The problem is the S&P rose to levels that earnings growth will have difficulty
supporting, particularly as the stimulus fades from the system. As with economic growth, the
2nd derivative of earnings growth is now a headwind for the markets.
Notably, the outsized growth of the market reflects repetitive interventions into the
financial markets by the Fed. Those interventions detached financial asset growth from their
long-term correlation to GDP growth, where corporate revenue comes from. Historically, when the
S&P
500 becomes separated from economic growth, a reversion occurred.
Currently, analysts are expecting earnings to surge well above economic growth rates.
However, the flaw in the analysis is the assumption earnings growth will continue its current
trend.
While there will be an economic recovery to pre-pandemic levels, a recovery is very
different from an expansion.
As Liz concludes:
"Optimism is extremely elevated. Such is certainly justified by stock market behavior over
the past year and recent economic releases. But some curbing of enthusiasm may be warranted
given the history of the stock market as an uncanny 'sniffer-outer' of economic inflection
points."
As she goes on to point out, this is not a time for FOMO-driven investment decision-making.
The reality is that the supports that drove the economic recovery will not support an ongoing
economic expansion. One is self-sustaining organic growth from productive activity, and the
other is not.
The risk of disappointment is high. And so are the costs of being "wilfully blind" to the
dangers.
Yes, inflation is rising, and retirees must now consider repositioning not just their
short-term safe-haven investments (we'll talk more about that in part two) but their entire
portfolio as well (which we'll focus on here). Well that, conveniently enough, is the subject
(and title) of a paper soon to be published in the Journal of Portfolio Management that was
co-authored by Campbell Harvey, a professor at Duke University, and several of his colleagues
affiliated with Man Group. What more, Harvey and his co-authors found that no individual equity
sector, including the energy sector, offers significant protection against high and rising
inflation.
... here's what Harvey and his co-authors discovered after researching eight periods of
inflation dating back to 1925: Neither equities nor bonds performed well in real terms during
the inflationary periods studied. Real being the nominal rate of return minus the rate of
inflation.
... ... ...
TIPS
"Treasury Inflation-Protected Securities (TIPS) are robust when inflation rises, giving them
the benefit of generating similar real returns in inflationary and noninflationary regimes,
both of which are positive," the authors wrote.
In fact, TIPS had a 2% annualized real return during the most recent five periods of
inflation.
But what looks promising in a research paper might not work in reality given the current
yield on TIPS (0.872% as of June 2, 2021). The low yield means that TIPS are a "really super
expensive" inflation hedge going forward, said Harvey.
"It means that you're going to get a negative return in noninflationary periods," he said.
"So yes, they provide the protection, but they're an expensive way to get that protection."
Commodities
"Traded commodities" have historically performed best during high and rising inflation. In
fact, traded commodities have a "perfect track record" of generating positive real returns
during the eight U.S. periods studied, averaging an annualized 14% real return.
Now investors might not be able to trade commodities in the same manner as institutional
investors using futures, but they can invest in ETFs that invest in a broad basket of
commodities, said Harvey.
Other assets
Residential real estate on average holds its value during inflationary times, though not
nearly as well as commodities. Collectibles such as art (7%), wine (5%) and stamps (9%) have
strong real returns during inflationary periods, as well.
And while some suggest adding bitcoin to a diversified portfolio as an inflation protection
asset, caution is warranted given that bitcoin is untested with only eight years of quality
data -- over a period that lacks a single inflationary period, the authors wrote. "It's not
just untested," said Harvey. "It's too volatile."
Gold is also too volatile as a reliable hedge against inflation. Harvey noted, for instance,
that the performance of gold since 1975 is largely driven by a single year, 1979, when gold
dramatically appreciated in value. "And that makes the average look really good," he said.
Harvey also said his number one dynamic strategy for inflationary times is changing the
sector exposures in your portfolio. With this strategy, you would allocate a greater portion of
your assets to sectors that have historically performed well during inflationary periods, such
as medical equipment, and less if anything at all to sectors that have performed poorly during
inflationary periods, such as consumer durables and retail. "You can naturally rebalance your
portfolio to be a little more defensive," he said. "And that can be done by any investor."
Harvey and his co-authors also found active equity factors generally hold their own during
inflation surges with "quality stocks" having a small positive real return and "value stocks"
having a small negative return.
Dynamic strategies are "active" strategies that involve monthly rebalancing of portfolios,
according to Harvey. In contrast, passive strategies require minimal or no rebalancing; for
example, holding an S&P 500 index fund.
Active equity factor investing uses frequent rebalancing to take bets that deviate from the
investment weights implied by a passive market portfolio. These bets seek to produce returns
over and above the passive market portfolio, said Harvey.
In Harvey's study, quality is defined as a combination of profitability, growth and safety
and value is defined with traditional metrics such as the book-to-price ratio.
Is now the time to reposition your portfolio?
According to Harvey, inflation surging from 2% to more than 5% is bad for stocks and bonds.
We're not there yet; the current rate of inflation is 4.2%. But we are getting close to the
"red zone" and now would be a good time to "rethink the posturing of your portfolio," Harvey
said. "So even if it doesn't occur, it doesn't matter. If the risk is high enough, you take
some actions, you're basically buying some insurance."
And being proactive is the key. "So, at least right now, it's better to have the discussion
now than when it's too late; when we're already in the surge and the asset prices have already
dropped," said Harvey.
Remember too that what you hedge is "unexpected" inflation, Harvey said. "What you really
are concerned with is unexpected inflation or a surprise in inflation. We call it an economic
shock."
But not a transitory shock. That won't have any effect on asset prices. "You need to
consider long-term inflation," he said.
And that place to look for that is in the break-even inflation (BEI) rate reflected in
TIPS and nominal Treasurys. The BEI is the weighted average of inflation expectations over the
life of the bond. And changes in the BEI have the advantage of reflecting changes in long-term
or permanent inflation expectations. Presently the BEI is 2.44%. "Anything that is a long-term
measure of inflation is going to have the maximum reflection in the asset prices," he said.
As for the current inflationary environment, Harvey said it's a mix of transitory and not-so
transitory elements. Lumber prices are up but likely not permanently. The rising prices of
other goods and services, however, may not be transitory. "It's obviously difficult to dissect
this," he said. "But it's really important for people that are running a portfolio draw that
distinction."
US government bonds rallied on Friday following a weaker-than-expected reading on American
job growth for the month of May. But a key report on consumer price inflation will provide a
fresh test for investors. Consumer prices rose at its fastest pace in more a decade in the 12
months to April, but analysts project that it has picked up even more since then, raising fears
that the economy is overheating. Economists surveyed by Bloomberg expect the year on year
inflation rate to have jumped to 4.7 per cent in May in figures to be released by the
Department of Labor on Thursday, compared with 4.2 per cent in April.
It looks like this surge is suitable, especially in energy... That spells troubles for
the US economy which is based on cheap energy.
Higher prices for commodities are flowing through to more companies and consumers, making it
harder for central bankers to ignore them
...The world hasn't seen such across-the-board commodity-price increases since the beginning
of the global financial crisis, and before that, the 1970s. Lumber, iron ore and
copper have hit records . Corn, soybeans and wheat have jumped to their
highest levels in eight years . Oil recently reached
a two-year high .
At current metal prices, Rio Tinto PLC, BHP Group Ltd. , Anglo American PLC and Glencore PLC could this year generate a
combined $140 billion in earnings before interest, taxes, depreciation and amortization,
according to Royal Bank of Canada. That compares with $44 billion in 2015, when metals prices
were at or near lows.
However, in Russia, a commodity exporter, surging commodity prices also are driving up
inflation. While Russia's international reserves hit $600.9 billion in May, the highest ever,
its central bank increased its benchmark interest rate by 0.5 percentage point to 5% in April.
It said it would consider further increases, citing "pro-inflationary risks generated by price
movements in global commodity markets."
"We think that the inflation pressure in Russia is not transitory, not temporary,"
Russia's central-bank governor Elvira Nabiullina told CNBC in a recent interview.
...Nicolas Peter, chief financial officer of BMW AG , said in May that it expects
an impact of 500 million euros, equivalent to about $608 million, from prices for raw
materials. Increased steel prices have added about $515 to the cost of an average U.S. light
vehicle, according to Calum MacRae, an auto analyst at GlobalData.
Like most central banks, the US Federal Reserve has been forced to ask why more than a
decade of ultra-loose monetary policy has had such lacklustre economic results.
The Fed's data are misleading because they assume the US is the middle-class nation it has
ceased to be.
Until it uses data that reflect the nation as it is, the Fed will no more get America back
to shared prosperity than someone using a map of New Amsterdam will find the pond in Central
Park.
"If we ended up with a slightly higher interest-rate environment it would actually be a plus
for society's point of view and the Fed's point of view," she told Bloomberg.
"We've been fighting inflation that's too low and interest rates that are too low now for a
decade," she said. "We want them to go back to" a normal environment, "and if this helps a
little bit to alleviate things then that's not a bad thing -- that's a good thing."
Biden Admin proposing elimination of IDC expensing and percentage depletion, among other tax
preferences.
Elimination of IDC expensing will affect US shale.
Percentage depletion only affects small producers. We can make it without percentage
depletion. Will just result in us paying more income tax. But lower 48 onshore conventional
production in US is below 2 million barrels per day and slowly falling. Hopefully we will be
permitted to continue to produce oil for the many uses of it besides light transport.
As long as Biden doesn't try to sell these as "Big Oil Tax breaks" I'm not going to
complain.
I think elimination of these tax preference items will lower US production, which will
increase oil prices. US is historically the only major producer that has desired low oil
prices. That is because we are still a net importer of crude oil.
Now that Trump is gone, it appears US also is not too concerned about oil prices.
What a turnaround from this time, last year. We had just reactivated our wells at the end of
May, 2020, after oil had went negative on April 20.
Yesterday WTI closed around $69.50.
President Biden could turn out to be very good for small conventional lower 48 onshore
producers. He just needs to recognize that our oil is still needed, and will still be needed
for decades.
I will keep beating my drum. Stripper well oil is small footprint. Existing source. Very low
methane emissions from upstream operations. Employs the highest number of persons per BO.
Employs largely rural populace. Owned by small business. Family owned. Pays a lot in local
taxes. Is very low decline. Predictable. Uses the smallest amount of materials, such as
plastics and steel. I can go on, but won't.
Stripper well doesn't need "tax breaks" either, if it is afforded a strong, stable oil
price. In my view, $60-70 WTI won't kill the consumer.
But, I heard on Bloomberg radio yesterday that the Reddit investors are beginning to pour
into oil and grains. So, worried about volatility.
Only about 1/5-1/6 of voters in the very rural counties (25K or less in population) votes
for Biden. Yet his policies appear to be a boon for those populations.
Here's to $5+ corn, $14+ soybeans, $6+ wheat, $6+ milo and $65+ WTI! Keeping prices there
would really solidify a part of the US that is really struggling.
I suspect I might be the only person still posting here that lives in an oil and grain
producing region. There just aren't many of us left.
Labor will be our huge problem. Maybe strong and stable commodity prices could bring some
people back, or keep some of our young people here?
Thank goodness for the people from Mexico and Central America. Without them, rural USA would
be in really big trouble. SHALLOW SAND IGNORED
06/05/2021 at 10:48 am
Dennis.
I will add, if rural is in big trouble, I believe the entire USA is in big trouble.
I have never seen the labor shortages that I am seeing today in my community.
I know there are many efforts to radically change how our country's food supply is produced.
But, like energy transition, those will take decades.
It is not attractive to most to live in rural locations. Very, very difficult psychological
and emotional transition for those that try to move from urban/suburban to rural. I have seen
it first hand. We cannot keep doctors for that reason, for example. There are almost no
attorneys here under the age of 60. Management of our factories has mostly been moved, because
it can be due to technology, and because management doesn't want to live here.
Most in the factories here are being hired in at $16-19 per hour, and will be over $20 soon
after. Most work at least 10 hours of overtime a week.
But we have a very high percentage of young adults in the rural areas struggling with hard
drug dependency. Meth is the big one, and it is easier for a 20 year old to get meth than to
get a beer in most rural areas.
Our country needs to do so much better across the board on hard drug dependency. One of the
many reasons being to fill all of these job openings. Of course, there are more important ones
than that.
I bet if hard drug dependency was completely eliminated, over 90% of child abuse and neglect
court cases would also be wiped out. That is the most important reason we need to do
better.
Just in time for Pride Month, a new exchange traded fund aims to connect with LGBTQ investors. Two previous efforts failed to
attract enough assets.
The fund, LGBTQ + ESG100 ETF LGBT,
+0.91%
, launched in late May, is a passively managed, large-cap index fund that holds the top 100 U.S. companies that most align with
the LGBTQ community.
In 2019, two LGBTQ-focused ETFs were delisted: ALPS Workplace Equality Portfolio ETF and InsightShares LGBT Employment Equality
ETFs. Like this new fund, both were mostly U.S. large-cap, passive index ETFs comprising companies that received high or perfect
marks for workplace equality in the Human Rights Campaign Corporate Equality
Index , a benchmark for corporate LGBTQ policies.
The first ETF stuck around for five years, but the second barely made it two years, even though it was launched with much fanfare
by UBS. Neither gained many assets.
Bobby Blair, CEO and founder of LGBTQ Loyalty Holdings, which launched the fund with issuer ProcureAM, says community input on
holdings makes this fund different.
LGBTQ Loyalty Holdings partners with Harris Poll to annually survey 150,000 self-identifying LGBTQ constituents across the U.S.
for their views about a company's brand awareness, brand image, brand loyalty and how the firm supports the community. As noted in
its prospectus
, 25% of the index's weighting is derived from that survey data.
... the LGBTQ + ESG100 has an annual expense ratio of 0.75%.
As bubbles peak,
they combine objective signs of excess" prices rising much faster than earnings can justify"
with subjective signs of mania, such as frenzied trading and borrowing. To some the entire US
stock market looks bubbly given its dizzying run-up, but earnings growth has also been
extraordinarily strong through the pandemic. Beneath the surface, however, sectors of the
market from green tech to cryptocurrency show tell-tale bubble signs.
My research on the 10 biggest bubbles of the past century, from the US stock market in 1929
to Chinese shares in 2015, shows that prices typically rise 100 per cent in the year before the
peak, with much of the gain packed into the climactic last months. That finding is closely in
line with bubble studies from academics at Harvard and others.
By those standards, there are at least five current bubblets. They include the
cryptocurrency market for bitcoin and ethereum; clean energy stocks, including some of the
biggest names in electric vehicles; small cap stocks, including many of the hottest pandemic
stories; a basket of tech stocks that lack earnings, which is also chock-a-block with famous
brands; and special purpose acquisition
companies (Spacs) , which allow investors a new way to buy into private firms before they
go public.
Each of these bubblets is captured in an index that rose in the last year by around 100 per
cent, often much more, to a peak value between $500bn and $2.5tn. Day traders and other newbies
rushed in, a common symptom of late stage market manias. Now these bubbles are faltering, as
they so often do, in response to increases in long-term interest rates. What's next?
The historical bubbles in my study did suffer midcourse setbacks on the way up, but
typically those corrections were around 25 per cent and never more than 35 per cent. Beyond
that point" a 35 per cent drop" the bubbles in my sample became monophasic, or stuck on a
one-way downhill path.
For the median case, the bottom was found 70 per cent below the peak, and came just over two
years after the peak. Except for the index of small-cap pandemic stocks, the other four bubble
candidates have all experienced drops of at least 35 per cent, but also of no more than 50 per
cent (in the case of ethereum). In other words, they are not likely to resume inflating any
time soon, and they are still far from the typical bottom.
There is one new factor that could upset this historical pattern. Despite the rise in
long-term interest rates, there is plenty of liquidity sloshing around the markets, with
central banks committed to easy money as never before. The risks though are skewed to the
downside.
It is important to remember that a bubble is often a good idea gone too far. In the early
2000s, the conventional wisdom was that the dotcom bubble had fuelled mainly junk companies
with business plans barely worth the napkins they were written on. Later, researchers found
that, compared with other bubbles, those in the tech sector produce many start-ups that fail
but also help launch major innovations. For every few dozen dotcom flame-outs, there was a
giant survivor such as Google or Amazon that would go on to make the economy more
productive.
... Average hourly earnings for workers in leisure and hospitality rose to $18.09 in May,
the highest ever and up 5% from January alone, according to Labor Department data released on
Friday. Pay rose even faster for workers in non-manager roles, who saw earnings rise by 7.2%
from January, far outpacing any other sector.
That higher pay could be a sign that companies are lifting wages as they seek to draw people
back to work after more than a year at home. Some businesses are struggling to keep up with
higher demand as more consumers, now fully vaccinated, get back to flying, staying in hotels
and dining indoors. Job gains in leisure and hospitality this year have so far outpaced gains
in other sectors.
But it is too soon to know whether the boost will be enough to help speed up hiring at a
time when many workers are still facing other obstacles, including health concerns and having
to care for children and other relatives.
"The fact of the matter is, the pandemic is still going on," said Daniel Zhao, a senior
economist for Glassdoor. "The economy is running ahead of where we are from a public health
situation."
Some 2.5 million people said they were prevented from looking for work in May because of the
pandemic, according to the Labor Department.
... ... ...
Employment in leisure and hospitality is still in a deep hole when compared with pre-pandemic
levels. The industry added 292,000 jobs in May, with about two-thirds of that hiring happening
in restaurants and bars. But overall employment is still down 2.5 million jobs, or 15% from
pre-pandemic levels, more than any other industry.
... ... ...
Some people who previously worked at hotels or restaurants moved on to other types of jobs
during the pandemic, such as packaging goods at a warehouse, and it's too soon to know whether
they will switch back as more of the economy reopens, said Zhao.
...About half of states are putting an early end to a $300 federal supplement to weekly
unemployment benefits, winding them down as soon as June 12. The supplement expires nationwide
on Sept. 6.
(Reporting by Jonnelle Marte and Ann Saphir; Editing by Chizu Nomiyama and Jonathan
Oatis)
"The bots' mission: To deliver restaurant meals cheaply and efficiently, another leap in
the way food comes to our doors and our tables." The semiautonomous vehicles were
engineered by Kiwibot, a company started in 2017 to game-change the food delivery
landscape...
In May, Kiwibot sent a 10-robot fleet to Miami as part of a nationwide pilot program
funded by the Knight Foundation. The program is driven to understand how residents and
consumers will interact with this type of technology, especially as the trend of robot
servers grows around the country.
And though Broward County is of interest to Kiwibot, Miami-Dade County officials jumped
on board, agreeing to launch robots around neighborhoods such as Brickell, downtown Miami and
several others, in the next couple of weeks...
"Our program is completely focused on the residents of Miami-Dade County and the way
they interact with this new technology. Whether it's interacting directly or just sharing
the space with the delivery bots,"
said Carlos Cruz-Casas, with the county's Department of Transportation...
Remote supervisors use real-time GPS tracking to monitor the robots. Four cameras are
placed on the front, back and sides of the vehicle, which the supervisors can view on a
computer screen. [A spokesperson says later in the article "there is always a remote and
in-field team looking for the robot."] If crossing the street is necessary, the robot
will need a person nearby to ensure there is no harm to cars or pedestrians. The plan is to
allow deliveries up to a mile and a half away so robots can make it to their destinations in
30 minutes or less.
Earlier Kiwi tested its sidewalk-travelling robots around the University of California at
Berkeley, where
at least one of its robots burst into flames . But the Sun-Sentinel reports that "In
about six months, at least 16 restaurants came on board making nearly 70,000
deliveries...
"Kiwibot now offers their robotic delivery services in other markets such as Los Angeles
and Santa Monica by working with the Shopify app to connect businesses that want to employ
their robots." But while delivery fees are normally $3, this new Knight Foundation grant "is
making it possible for Miami-Dade County restaurants to sign on for free."
A video
shows the reactions the sidewalk robots are getting from pedestrians on a sidewalk, a dog
on a leash, and at least one potential restaurant customer looking forward to no longer
having to tip human food-delivery workers.
Whereas climate change issues are the presumptive reasons behind the latest wave of investor revolts at the oil and gas giants,
lurking beneath the surface is a growing sense of apprehension about Big Oil's strategy and failure to generate adequate returns for
shareholders in recent decades.
The naked truth is that Exxon and its cohorts have severely underperformed the broader market over the last two decades in terms of
total returns to shareholders, implying the sector's woes are long-term and strategic rather than short-term and cyclical.
Chronic underperformance
XOM
Source: CNN Money
Big Oil's underperformance relative to the market is clearly evident whether you are looking at 2-year, 5-year, 10-year, or even
20-year timespans.
For instance, since 2015, Exxon shares have returned a -2.5% compound annual loss based on share prices and dividends, a far cry
from the average annual gain of +14.4% by the
S&P 500
over the timeframe.
Over the past two decades, Exxon's compound annual return has clocked in at +4.2%, still considerably lower than the broad market
benchmark's return of +7.1%.
... ... ...
Exxon is hardly alone, with none of its peers, including Chevron,
Royal Dutch Shell
(NYSE:RDS.A),
BP
Inc.
(NYSE:BP), and
Total
(NYSE:TOT) coming close to matching the returns by
the broader share market over the past decade.
In fact, on an inflation-adjusted U.S. dollar basis, returns by Exxon, Shell, and BP have been negative over the past five years, a
period which coincided with the biggest bull market in the history of the stock market.
The renewable energy conundrum
You cannot blame the oil majors for continuing to engage in a lot of hand-wringing at a time when investors are demanding they pump
less oil and transition to cleaner energy.
For the oil majors, successfully transitioning to green energy companies is not going to be a walk in the park because these
companies have to ride two horses.
That's the case because the majority are already battling dwindling cash flows which means they cannot afford to gamble with
whatever little is left. Oil prices have been on a downtrend since 2014, a situation that has only worsened during the pandemic.
Oil and gas firms are still grappling with the best way to presently use dwindling cash flows; in effect, they are still weighing
whether it's worthwhile to at least partially reinvent themselves as renewables businesses while also determining which low-carbon
energy markets offer the most attractive future returns.
Most renewable ventures, like solar and wind projects, tend to churn out cash flows akin to annuities for several decades after
initial up-front capital expenditure with generally low price risk as opposed to their current models with faster payback but high
oil price risk. With the need to generate quick shareholder returns, some fossil fuel companies have actually been scaling back
their clean energy investments.
Energy companies are also faced with another conundrum: Diminishing returns from their clean energy investments.
A
paper
published in Science Direct
last August says that dramatic reductions in the cost of wind and solar have been leading to an even
bigger reduction in revenue inflows leading to falling profits. This is particularly true for wind energy as later deployments of
wind usually have lower market value than earlier ones due to wind energy revenue declining more rapidly than cost reductions. Solar
is more resilient, with technological progress approximately balancing out the revenue degradation, which perhaps explains why
solar
stocks have gone ballistic.
Adding wind and solar to our grid tends to reduce electricity prices during peak generation times: Indeed, electricity prices in
California can come down to zero during long sunny durations. This was not a problem for early deployments but is becoming a major
concern as renewables increasingly play a bigger part in our electricity generation mix.
But, ultimately, Big Oil will have to take the plunge and engage in drastic internal restructuring and product cycle transitions
even as activists like Engine No.1 promise to continue turning the screw. As Charlie Penner of Engine No.1 has told
FT
, the
energy transition is happening faster than expected and has undermined Big Oil's assumptions about long-term demand for its oil.
...Analysts at Goldman Sachs""in October""ran the numbers on the stock market impact of
previous capital-gains tax hikes. While there is only a modest impact on the stock market as a
whole, momentum stocks usually get socked before they are levied, they found. That makes
sense""investors logically are more motivated to sell the stocks where they would save the most
by avoiding higher capital-gains taxes.
The last time capital-gains taxes were hiked, in 2013, the wealthiest households sold 1% of
their equity assets, the Goldman analysts found. According to the
Federal Reserve's distributional financial account data , the top 1% held $17.79 trillion
of equities and mutual funds in the fourth quarter of 2020""so a 1% selling of stocks this time
would be $178 billion. (The most recent Internal Revenue Service breakdown, from 2018, found
that millionaires accounted for just over 500,000 filers or about 0.4% of the total.)
This quick jumping onto and off of the bullish and bearish bandwagons has become the new
normal, as you can see from the table below.
... ... ...
As I argued three weeks ago, this sentiment pattern suggests that the market may remain
in a fairly narrow range for the next several months. The contrarian bet is that the market
will finally break out of that trading range whenever the market timers stubbornly hold onto
their sentiment beliefs in the face of the market moving in the opposite direction. That is, be
on the lookout for when the market timers remain bullish in the face of declines, or bearish in
the wake of rallies. That will indicate that a bigger decline or rally is in store.
In the meantime, the market timers' behavior suggests both market rallies and declines
will be subdued. That's good news to the extent you were worried that a major new bear market
is about to begin, but bad news if you were hoping for a more sustained rally.
... ... ...
Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks
investment newsletters that pay a flat fee to be audited. He can be reached at [email protected] .Continue
Reading
Canadian economist Mario Seccareccia, recipient of this year's John Kenneth Galbraith
Prize in Economics, says it's time to reconsider the idea of full employment. He spoke to Lynn
Parramore of the Institute for New
Economic Thinking about why 2021 offers a rare opportunity to rebalance the economy in
favor of Main Street.
Once upon a time – not so long ago, really – unemployment was not a thing.
In agricultural societies, even capitalistic ones, most people worked on the land. A smaller
number worked in villages and towns – shoemakers and carpenters and so on. Some might go
back and forth from the countryside to the town, depending on the availability of work. If your
work in town building houses dried up, you might come back to the country for the harvest.
Economist Mario Seccareccia, who loves history, notes that before the Industrial Revolution,
it was unthinkable that someone ready and able to work had no job to do.
Questions: If unemployment was once unknown, why do we accept it now?
Where did unemployment come from?
In those pre-Industrial Revolution times, there were paupers, mostly people who could not
work for some reason such as a disability. These were deemed deserving of charity. A small
number of paupers were considered deviants and treated harshly, perhaps made to labor in public
work-houses under vile conditions.
Seccareccia notes that early classical economists like Adam Smith and David Ricardo
recognized that able-bodied people could experience temporary joblessness, but not the
long-term variety. The word "unemployment" only became widely used in the nineteenth century.
As cities grew and manufacturing took off, people living in cities and towns grew apart.
Movement between the two places grew less fluid. The agricultural sector of the economy was
shrinking.
At first, if you lost your factory job, you could still probably pick up something in the
countryside to tide you over. But if you had grown up in the city, as more and more people did,
you might not know how to do rural work. By the late nineteenth century, most city dwellers
could no longer count on falling back on agricultural work during hard times.
Karl Marx noted that England's enclosure movement, which gained momentum as early as the
seventeenth century, had made things hard for agricultural workers as wealthy landowners
grabbed up the rights to common lands that workers had traditionally been allowed to use and
were a vital part of their sustenance. Uprooting peasants from the land and traditional ways of
life, Marx observed, created an "industrial reserve army" – basically a whole bunch of
people wanting to work but unable to find a job during times when industrialists held back
investment or when machines took over certain jobs.
Marx saw that this new kind of unemployment was a feature of capitalism, not a bug. Still, a
lot of mainstream bourgeois economists thought that the market would somehow sort things out
and eventually provide enough job openings to prevent mass unemployment.
It didn't turn out that way. Exhibit A: The Great Depression.
Especially after World War I, many later economists, most notably John Maynard Keynes,
warned that high rates of unemployment were getting to be the norm in the twentieth century.
Keynes predicted that a lot of people would go on being jobless unless the government did
something. This was very bad for society.
Keynes emphasized that full employment was never going to just happen on its own. Mainstream
economists thought that if wages fell enough, full employment would eventually prevail. Keynes
disputed that. As wages fell, demand contracted even further, leading to even less business
investment and so forth in a never-ending cycle. No, capitalism, with its business cycles led
to involuntary unemployment, according to Keynes.
Seccareccia observes that economist Michał Kalecki agreed that the government could
make policies to help more people stay employed at a decent wage, but there was just one
problem: wealthy capitalists weren't going to have it. They would oppose state-supported
systems to hold demand up so that fear of unemployment checked workers' demands for better pay
and improved work conditions.
For a while, after World War II, the capitalists were on the defense. The Great Depression
and the Communist threat got western countries spooked enough to go along with Keynes's
argument that governments should try to encourage employment by doing things like creating big
projects for people to work on. Safety nets were created to keep folks from falling into
poverty. The goal of full employment gained popularity and many more workers joined unions.
Capitalists v. Full Employment
Economists have bandied about various definitions of what full employment ought to look
like, explains Seccareccia: "A well-known definition came from William Beveridge, who said that
what you wanted was as many jobs open as people looking for them – or even more jobs
because every person can't take every type of job."
In the mid-twentieth century, with the economy doing well, neoclassical economists like
Milton Friedman started to push back against the idea of full employment. He discouraged the
use of fiscal and monetary policy to support employment, arguing that attempts to push down
unemployment beyond what he insisted was its "natural" rate in the economy would simply lead to
inflation.
In the 1960s, some of what Friedman warned about did actually happen. Employment was low and
prices started to go up mildly, particularly during the Vietnam War era. However, the biggest
boost to the credibility of Milton Friedman came with the OPEC cartel oil-price hikes of the
1970s that pushed the inflation rate to double-digit levels while simultaneously pushing up
unemployment. So, in the '70s, western countries started backing off from encouraging full
employment and maintaining strong safety nets. Proponents of the new neoliberal framework were
in favor of cutting safety nets, shedding government jobs, and leaving it to the market to
decide how much unemployment there would be. They said that it had to be this way to keep
inflation from rising, even though the cause of that high inflation of the '70s had nothing to
do with high public spending and excessive money creation that Friedman and his friends talked
about.
Seccareccia points to proof that the neoclassical logic didn't hold up. In the two decades
before the Global Financial Crisis of 2007-8, the rate of unemployment went down, but inflation
didn't go up. That proved that the neoclassical economists were wrong. But unfortunately,
policymakers didn't really digest this before the Great Recession hit. So, they bungled the
response badly by putting the brake on public spending too quickly because of fears of
excessive budget deficits and potentially higher future inflation that never materialized. They
kept insisting that the employment level would return to that "natural" state Friedman had
talked about if they just left things to the market.
"But it didn't work out that way," says Seccareccia. "Unemployment skyrocketed and it took a
decade to return to pre-crisis levels.
Which brings us to the COVID-19 crisis.
A Crisis Is a Terrible Thing to Waste
Seccareccia says that we have to understand the difference between the current situation and
the Global Financial Crisis. This time, it really is different.
"The earlier crisis started in the financial sector and spread to the real economy," he
explains. "But in 2020, when the Coronavirus emerged, the financial and industrial sectors got
hammered at the same time." This meant that people in both sectors stopped spending. Households
couldn't spend even if they wanted to because traveling, dining out, and other activities were
off-limits. Businesses cut investment as uncertainty loomed and exports declined due to
restrictions at borders. Unless you were Home Depot or an e-commerce company, you couldn't sell
anything.
The COVID-19 crisis also saw workers pulled out of activities thought to be too high risk
for spreading the virus. Across the country, non-essential workers were sent home and told to
stay there. Most, especially in sectors like leisure and hospitality,
can't do their work from home . A lot of these people lost their wages, and because most of
them were low-wage to begin with, they could least afford the hit. Many were only able to
maintain their incomes through government unemployment insurance. Businesses, meanwhile, were
kept afloat with subsidies.
Seccareccia notes that unemployment had an interesting twist in the pandemic because it was
both the problem and the initial cure for the health crisis. Unemployment kept the virus from
circulating. It saved lives.
Fast-forward to late spring, 2021. As America and other western countries seek to put the
pandemic behind them, the economy is opening back up. Employers are wanting to hire, and they
are even competing with each other for workers. But many job seekers are waiting to go back to
work. There are a lot of reasons why: caregiving for kids is still a huge burden, and people
are still worried about getting sick. Transit routes have been disrupted making it harder for
people to get to work. It's also possible that some workers may be resisting jobs on offer
which come with low pay and inadequate benefits.
Employers have started complaining they can't find workers and blame the social safety net
as the problem. Some employers, like those in the hospitality industry, are offering higher pay
to lure workers back.
Just as Kalecki predicted, the wealthy capitalists are getting uneasy. The Chamber of
Commerce, for example, has pushed the U.S. to stop expanded unemployment insurance benefits so
that people will be forced to return to low-wage jobs. Some Republican-dominated states have
jumped on board with this idea. Economist Larry Summers, for his part, is warning about
inflation and telling the Federal Reserve to raise interest rates so that wages don't go up. He
complains that when he walks outside,
all he sees are people eager to fill job vacancies . It's unclear where he was living when
he said that, or which people he is talking about.
Others argue that expanded unemployment insurance isn't the problem, but the crappy jobs on
offer. Seccareccia believes that it's a good thing if employers raise their wages, even if that
means a little bit of inflation.
Rising inequality, he emphasizes, is unsustainable in a healthy society, and it's about time
ordinary people had a little power to improve their lot. "When employers are worried about
people quitting," he says, "that's when you know you're getting close to full employment. And
in a capitalist society, it's an extremely rare situation when the number of quits begins to
exceed the number of new hires as an economy nears the peak of a business cycle."
In Seccareccia's view, "there's a balancing act between workers 'fearing the sack' and
employers 'fearing the quit.'" He observes that capitalists are very good at making sure that
the former situation is more common, and they've been spectacularly successful in the last 40
years. "This is why you have flat wages and runaway inequality," says Seccareccia.
"Productivity goes up but the workers don't share in it." Profits pile up at the top.
Right now, inflation has been creeping up in some areas. In a couple of sectors, like used
cars, it's rising a lot. The question is, beyond a couple of unique cases, what will happen to
inflation overall? And will be temporary? A lot of economists think that inflation will be
short-lived and will not get very high, so it's nothing to get excited about. Some economists,
like Antonella Palumbo, think the
worry about inflation is overdone . She notes that with unemployment still high and vast
numbers of people who formerly worked but are still out of the labor force, the ranks of the
famous reserve army of unemployed are still huge. As the economy restarts, all kinds of
short-run bottlenecks are cropping up, but that reserve army is not going anywhere fast and
will continue to limit wage increases.
Seccareccia points out that wealthy capitalists trying to stop workers from getting paid
better and conservatives complaining about laziness fail to mention that meanwhile, the stock
market is soaring, making the rich richer. Plus, the housing market is booming because the more
affluent people lucky enough to have kept their jobs over the pandemic now have extra money
saved to spend on big-ticket items. "Is it really fair," he asks, "to complain about a few
hundred dollars a week received by those at the bottom of the economic ladder? Especially how
much the economy is already titled in favor of the haves?"
So, what exactly should the government do about unemployment? Should it do anything at all?
For Seccareccia's part, he thinks this is a perfect time to reconsider the idea of full
employment, which has been so long abandoned by policymakers in favor of some "natural"
unemployment rate. "Policymakers need to understand why COVID may offer a chance not seen since
the end of WWII," he says. "We could actually make the economy fairer for ordinary people."
> So, what exactly should the government do about unemployment?
My favoured solution, and that of other readers of this blog, I suspect, is the Job
Guarantee as promoted by MMT.
Because a well designed job guarantee would provide a floor on wages and benefits, the
private sector would be forced to match it at the very least. But as has been pointed out on
this blog many times before, Kalecki's point that full employment would remove employers
ability to effectively threaten workers with the sack, means that it will be very difficult
politically to see it implemented.
Next week I start my 2nd year of pandemic triggered unemployment after I was terminated
without cause. On June 26th my extended UI benefits will be halted by TX Governor Greg Abbot.
Okay.
In a year of applying for new positions I have managed to get exactly 1 phone interview
after a 40 year career in technology development, ending up with almost 24 years at IBM. In
my last year with them I received both a performance bonus and a salary hike. But I'm now
over 60 and have been unemployed longer than 3 months so that's probably fairly typical
experience. Okay.
The path to full employment is probably going to require the creation of new opportunities
in a still contracting economic system. It's not impossible if you're focused on the goal.
Here's my shortlist of policy initiatives that could dramatically and quickly grow the number
of available jobs, particularly for the under employed younger people who are paying off
student loans.
Dramatically increase social security and medicare eligibility/benefits to convince older
workers to leave the workforce.
Expand paid family leave and vacation policies to align with other industrialized nations in
order to require businesses to hire to cover needed absences.
Drop the number of hours that define full time work to allow more workers to get full
benefits.
Yeah, I'd like to be considered for another good paying job in a still viable industry. I
spent decades developing skills that are still relevant and valuable. But I'm old and I'm
expensive because I have expectations based on my own employment history that 40 years of
neoliberal policies have rendered obsolete. Okay.
I'm close enough to retirement and lucky enough in my ability to save and plan that this
won't wreck us. I try to imagine my pandemic inspired involuntary retirement as an
opportunity to become a labor rights activist. It helps.
My situation is virtually the same, although in academia as research scientist at major US
university, with last 6 years as invited scientist at German research institute. Returned to
US to the nightmare of Trump at 63, but fully (and naively) intending to continue working.
I've lost count of how many job applications I've tendered, with only one interview in two
years, then COVID. Now resigned to the fact that work for me from here on out will be
different. I continue to write papers with colleagues at university to maintain a reputation
in my field. Now recognize that people take one look at my CV, and think: "Old! Expensive!"
-- but the truth is I would be willing to work for little just to stay active in a field
applying expertise I've spent decades acquiring. I've since met many, many seniors in the
same boat: trained professionals with lots of experience who still want to work (and, in my
case, need at least some income).
But at least I had a career. I can't imagine the hopelessness of people 35-40 years my
junior, with huge debt from college, grad school, and unable to find a decent job.
Something must change. The situation as it exists is unsustainable. One bright light seems
to be increasing recognition of the way the economy actually functions, the role of public
spending, and the real limits to growth, prosperity.
Appreciate your commiseration Rolf. I expect there is an army of people like us who are in
this situation or about to be.
Fwiw (maybe not much), I'm actively trying to get hired full time at the food coop near my
house. The workers there are represented by a union and get full insurance benefits including
dental with a 40 hour work week. The Vt minimum wage of $11.75/hr doesn't matter as much as
those insurance benefits do; we're still in that 5 year gap between age 60 and age 65 where
you are on your own if you need healthcare.
And I've pretty much decided to laugh off Beaux Jivin's campaign promise to drop the
medicare eligibility age to 60 etc. It's abandoned along with many other campaign promises.
Okay.
Thanks, A/S, for your kind words. Yes, benefits are key. I really am increasingly worried
that Biden, and the Democratic Party in general, don't seem the grasp the fact that the GOP
is absolutely committed to recovering control of Congress and the White House by *any* means
necessary. Biden in particular seems to entertain the notion that he can bring the right wing
to his way of thinking by conciliation, negotiation, compromise, and good performance. But
the GOP is not interested in Dem's performance or compromise -- McConnell has made this quite
clear. So Dems have an opportunity to make significant history, a true course correction, but
only this once. To pursue "bipartisanship" with a party that has no interest in compromise is
hugely naïve -- I can't imagine Biden is that foolish, except that he did begin his
campaign with the promise that "nothing would fundamentally change".
The food coop gig sounds like a good, sound shot -- all the best to you.
Fellow army member, age 61. Lucky to have health care via spouse but definitely not enough
wealth to retire. Two interviews in last two years, both in retrospect clearly designed to
fill out an interview field when preferred (much younger) hire had already been identified.
The canard about atrophied skills might apply in the occasional instance but IMO is just more
bullsh1t in defense of existing social order.
Dem obliviousness to the reality all around us is truly horrifying. I used to argue that
the big sort would result in fenced "progressive" enclaves in which all parties – those
inside and those outside – would be thrilled to not have to interact with each other.
But it's clear to me now that progressives don't need physical separation to avoid seeing
what they don't want to; they are completely able to not see the world right in front of
them.
I guess I should include this post script regarding my IBM termination:
After I'd been unemployed for about 90 days I was contacted by a recruiter working on
behalf of IBM and my former managers. They were looking for people with exactly my skills and
experience to come back to work at IBM as temporary contractors. I agreed to a short phone
interview to learn more about the opportunity.
Once the recruiter verified my experience and contacts at IBM, I managed to confirm that
they expected to bring me back on at about 80% of my former salary. With no benefits and zero
job security. I laughed out loud at this acknowledgment of their duplicity but agreed to let
myself be considered and provided a resume. Never heard back which is probably okay.
Amateur Socialist, Rolf and Left in Wisconsin -- I take my hat off to all of you. Work
left both my partner and me a number of years ago, and we quickly learned that we had aged
out of the market and were useless to society as we thought of it. Fortunately, we relatively
quickly became eligible for Medicare, which even in its steadily diminishing state was (and
is) a significant help.
Good luck to all of you, and A/S, please let us know the outcome of your pursuit of the
job with benefits at your local Food Co-op.
I think your experience demonstrates the problem with defining full Employment as, "anyone
who wants a job has one". Using this definition, the simple way to get the economy to FE then
is to just make all the jobs so terrible and low paying that no one wants them. You dont need
a job, and you dont want just any old crappy job. You want one similiar to your old one, If
that doesnt exist anymore, one would reasonably say you dont want a job, since what you want
doesn't exist, hence we're at full employment
All of this is to say, we shouldnt necessarily just encourage the government to get us to
FE. Capitalists by themselves are quite capable of getting us there, as I'd argue they did in
the 19th century. Its government interventions like minimum wage and basic safety protocols
that keep us from reaching FE since that's what makes people actually want a job
it was unthinkable that someone ready and able to work had no job to do.
I think there is a conflation of the language terms bandied
about–work-v-jobs-v-employment are all couched in the concept of a Consumption Based
Economy. I am tired of this.
weeding the garden is work–unless I'm paying you then it becomes a job. In both
instances, however, you are employed in the endeavor. This is grooming behavior using
language, imo, and needs to stop.
I think this muddle is a componant of the current 'Jobs Discussion".
Covid has rattled generations coming out of Displacements following the very unequal GFC,
and an undefined(maybe) examination of Meaning and Place within the current state of the
world and the Economy that has been chosen to fulfill the needs of that Economy (Societal and
Personal). More Intuitive than cognitive to many.
Selling Plastic bric-a-brac for the Man, to make the rent in an endless cycle, may have
lost its cache' subconsciously, to the 'common man' in this time of apparent Climate Crises
et al.
There is still plenty to do, and little time for Idleness( itself a "reward' promoted as a
'something' by the Consumptive Economy).
"Proponents of the new neoliberal framework were in favor of cutting safety nets, shedding
government jobs, and leaving it to the market to decide how much unemployment there would be.
They said that it had to be this way to keep inflation from rising,"
"The market" – that's the first con people have to get over. There is.no "the
market" like there it is something like nature.
It's system of intentional, changeable human decisions backed by beliefs and emotions of all
kinds now matter how many theories or quantifications occur. And a corporate beuracracy is
still a beuracracy.
And actually this neoliberal thinking of letting some imaginary entity "the market"
"decide" (we should be lughing at this silliness!) to keep people unemployed to avoid
"inflation" only makes sense if it actually meant to signify "avoid inflation of the
population."
The modern police force is a consequence of idle and unemployed city dwellers. Idled
workers don't just sit down and die from malnutrition. Instead, they roam around looking for
food, or opportunities that would lead to procuring food. Hungry, impoverished mobs are never
a good idea: Ask Czar Nicholas, Kaiser Wilhelm, or the French aristocrats of the 1780's
(rather, interrogate their ghosts) how idle, hungry crowds furthered their reigns. For all
that, look to the unrest of the 1930's in the US.
Given this reality–that unemployed and starving people refuse to sit down and die
peacefully–what will happen as automation starts to rob routine jobs? Already we are
seeing robots prowling the Walmart aisles, driverless vehicles delivering pizzas, and
self-checkout lines in big box stores. We who work are losing the war on unemployment, which
leads to a question: Who is the winner?
Almost as an afterthought, one wonders how much in contributions to Social Security and
Medicare have been lost because of automation. Robots don't pay taxes.
After the achievement of the 40-hour workweek, paid vacations, and other labor
concessions, many influential figures believed that egalitarian access to leisure would
only increase in the 20th century. Among them was economist John Maynard Keynes, who
forecast in 1930 that labor-saving technologies might lead to a 15-hour workweek when his
grandchildren came of age. Indeed, he titles his essay, "Economic Possibility for our
Grandchildren."
The benefits of labour-saving technologies have mostly been taken as money instead of time
and by doing so the capitalist class kept power thereby leading to them getting the
lions-share of the benefits of the labour-saving techologies.
The political class could, and still can, side with people and decide that labour-saving
technologies is to be taken out as reduced amount of hours spent working for someone else. As
is the politcal class have bought the 'lump of labour'-fallacy-fallcy hook, line and sinker
so what we see is increased pension-age etc
I tried out retirement for a few months. I'm 62 and got SS and a very small pension. It's
not enough so I went back – temping. The jobs I can get as a paralegal/admin person
don't pay a lot but there seem to be quite a few of them based on companies that are merging
or have merged and have a huge mess to clean up. So they hire you for a few months to slog
through chaos and fix it. Then on to the next one. I'll keep doing this until I can move to a
cheaper part of the U.S. Remote helps in that if I don't have a Zoom interview they can't
tell how old I am. I feel for everyone who can't even get tedious work. If my SS was higher I
would stop working. If my salary had matched that of the male co-workers that had the exact
same job as me, my pension would be higher. Retiring in America for many people is part
nomadic as you have to move out of your area to survive after you leave your regular job, or
it gets rid of you and the other part is being extremely frugal. Woohoo what a life after
over 40 years of helping companies make money.
Yes a totally true statement. For it to be higher I would have had to wait until almost 67
to take it. It will go up a tad from my additional employment – maybe. Anyway it's a
mostly a set amount. I make as a temp in 2 weeks (take home) what I get in SS once per month.
If I make over about $19k annually while taking the SS, the US gov will begin to reduce the
SS payment.
Social Security takes the highest 40 quarters (10 years) of your earnings to calculate
your benefit. If your current work results in higher numbers than are being used currently,
the higher numbers will be used and your benefit will increase.
I tried to reply to your question – yes it is a true statement. What I wrote
additionally may have been moderated out for some reason so I won't repeat it. It only
mentioned dollar amounts and the US gov so maybe that was bad – not sure!
Victoria H
and I thank you for that.
But I think you, and I will 'work' until we die–
What does work mean?
noun. exertion or effort directed to produce or accomplish something; labor; toil. productive
or operative activity. employment, as in some form of industry, especially as a means of
earning one's livelihood: to look for work. the result of exertion, labor, or activity; a
deed or performance.
Work | Definition of Work at Dictionary.comhttps://www.dictionary.com › browse
› work
I am personally familiar with what you are going through and My wife is there right
now.
I waited till full retirement at 66 to collect–not being able to leave 2k on the
table(diff btwn 62 and 66 for me). I cannot describe the amount of effort and gyration I
needed to extend to achieve that– which may explain why I am the only one in my
'Friend Circle' to actually accomplish it.
Trigger Warning
I thought the coup de grace was when I had to sign up for–and Pay For, with cash,
Quarterly–Medicare without a SS check to have it automatically deducted from. Because
of my birthday I needed to pony up about 5 months worth of premiums(but i had 3 months to
save up for the next Q pymt). I doubt you've ever been curbed at the end of a physical
altercation, but that is what it felt like to me. Best think about all that.
Good news–do your own taxes for your enlightenment and you will see that the SS Income
Worksheet provides a path to structuring your Income to counter-balance additional
Income.
Discalimer–I am in no way an Acc'tant or Tax Man or even giving Advice. I am a
Carpenter–but Written Instructions are Written Instructions and Numbers are Numbers and
I made a paid living following both–so it's understandable enough to give you some
options to ponder.
And to Rolf/AmSoc and all the others -- IMNSHO(the first ever time I have used this
phrase) the most dispiriting element about 'Retirement' in America is the Stranding of So
Many Valuable Assets embodied in the Retired when the world desperatly needs "All Hands On
Deck" to resist the Man Made Extinction looming.
the most dispiriting element about 'Retirement' in America is the Stranding of So Many
Valuable Assets embodied in the Retired when the world desperately needs "All Hands On
Deck" to resist the Man Made Extinction looming.
These are true words, Rod. I think catastrophic changes (no hyperbole) lie ahead, for
which there is little precedent. Many make absurdly blithe assumptions, thinking they
won't be affected, or that wealth will insulate them. This is arrogant folly, and we will
need everyone to row in the same direction.
The man who owns the Heating and Air Conditioning company I have been using for the last
decade lives in the neighborhood and is 88 years old. After his brother had health problems,
and the young nephew he employed left for greener pastures,he now does pretty much all the
work himself, and let me tell you, he knows his stuff. I know I should have a back-up in
mind, just in case, but so far, haven't found anyone else I can trust.
Well said. I took retirement at 62 for several reasons,number 1 being i didn't believe it
would be around long enough to pay me back.
"All hands on deck" is imo exactly what is needed,but the mostly planned divisiveness
(fake right vs fake left aka RepubliCons vs Dumbocrats) will help ensure that never occurs,to
someone's benefit.
Just think how many people would quit working, or enter self-employment, if they weren't
dependent on employer providedmedical insurance. I don't know the answer/estimate; it would
have to be a large number, enough to significantly raise wages across the board.
Retiring in America for many people is part nomadic
This observation made me remember a critical scene from the excellent oscar winner last
year, Nomadland . Frances McDormand's character meets a friend who explains why she
took to the road: "Five hundred forty dollars a month from Social Security. After working non
stop for over 40 years. How am I supposed to live on that".
I'm paraphrasing possibly badly from memory; it's a very short scene that isn't really
pursued farther in the script. But I do remember thinking "Aha! This is the root cause of all
this misery and despair "
We moved to southern Vermont from Texas just prior to the pandemic believing we had
relocated to a cheaper part of the US as you also mentioned. But Vermont's strong public
health track record during the pandemic has unleashed a huge real estate boom here so who
knows We may end up priced out of Vermont eventually too.
Real estate is still relatively cheap in Texas (at least around Houston), with the caveat
that Republicans don't always keep the power on or the water pressure up in the middle of
winter.
Unfortunately our place was in the Austin exurb of Bastrop. Which is now part of the
Austin insane real estate boom. And yes Houston can be cheap but only if you don't mind
living near a refinery. Or in the path of many future hurricanes. Hard pass.
I keep seeing references to "flat wages." While it's technically true, I suspect it's
enormously deceptive.
Yes, we have flat wages. But the cost of necessities that add little or no value to
people's lives but which they're FORCED to pay for have shot up far, far beyond the pace of
inflation. Think medical care, housing and education, to name just three, all of which are
somehow ignored or slighted in official inflation stats.
Right now the best transition is for the government to regulate capitalism in the
direction the future (sustainability) dictates. The problem with regulating capitalism is
that most capitalists think it is already too regulated; taxes are too high, etc. They are on
the edge of revolution themselves. And regulated capitalism is almost an oxymoron to most
Americans. It's just business as usual to a European because they have better social spending
and blablablah. The statistic I remember is that the EU spends about 45% of its revenue on
social stuff; the US spends a little less than 35%. The problem, as I see it, is this: If we
in the US do not achieve adequate social spending we create the perfect breeding ground for
exploitation of the environment. People will be desperate for a job – any job. Which
will not only cause worse CO2 problems, it will poison off, or starve off, many many species
now living on the edge. We will further pollute the oceans and waterways. And we will not
only stick with our sick and poisonous agricultural practices, we will exponentiate them
– precluding all efforts to fix these unsustainable things. Capitalism as we have known
it must change. So, even the great idea of capitalism must adapt to reality. Somebody please
tell Larry. At this point "inflation" is an absolutely meaningless word. It would be a very
good thing if we followed Eisenhower's advice to LBJ and began to create social structures
that are fair to all of society – to the capitalists whose current mandate of voracious
profiteering is clearly unsustainable, as well as to "labor" – as we see it evolving
– and now, most importantly, we must include the rights of the planet itself and all of
our fellow travelers. We won't last very long if we kill them all off and trash the Earth.
The race to the bottom that all privateering capitalism eventually creates is the most absurd
thing in the history of civilization.
A good start would be breaking up all of the ubiquitous monopolies/monopsonies/cartels,
that have taken over every sector of the economy, from food processing to entertainment to
banking to manufacturing to politics to (ad infinitum/nauseum).
I went to Firehouse Subs yesterday there was a whiteboard inside on a table, facing into
the restaurant, that said they were hiring and offered starting pay of $9.00 for crew members
and $12.00 for shift managers.
Just inside the door, facing out, was a whiteboard offering starting pay of $11.00 for
crew members and $14.00 for shift managers. Seems like they're getting the message.
As an aside, I'd like to give props to Firehouse Subs for using pressed paper clam boxes
and paper bags.
For the past several months, Morgan Stanley's fundamental analysts have been turning
increasingly bearish on stocks, with the pessimistic sentiment plateauing
earlier this week when chief equity strategist Michael Wilson said that there is far too
much optimism in the market, and that while earnings are slowly rising, forward PE multiples
are far too high and are set to slide, with "the de-rating about 75% to go or an approximate
15% decline in P/Es from here." As a result, in Wilson's view - which is rapidly emerging as
the most bearish on Wall Street - " earnings revisions will not be able to offset that
de-rating, leaving the overall market vulnerable to a 10-15 % correction over the next 6
months."
It now appears that Morgan Stanley's fundamental bearishness has spilled over into the
bank's technical analyst team and as the bank's chief Euro equity Strategist Matthew Garman
writes, for only the fifth time in over 30 years, each of Morgan Stanley's five market timing
indicators are giving a sell signal at the same time.
Not only that, but the bank's Combined Market Timing Indicator - which has been in sell
territory since March - just hit a new all time high of 1.19, surpassing the previous record
high seen in June-2007, right around the time of the first great quant crash and before the
market collapsed.
According to Garman, the only time equities have risen after a "Full House" Sell Signal was
in Feb 17, shortly after the Shanghai Accord kicked in to prevent a global recession. The other
previous occasions where there was a "Full House" Sell Signal were Mar-90, May-92, Jun-07.
According to MS, "in the 6M post the initial Full House Sell Signal, MSCI Europe has fallen on
average 6% ."
So with every in house risk indicator screaming sell, does that mean that Morgan Stanley
will have the balls to tell its clients to sell? Why of course not, because in this market
where stuff like the AMC, GameStop and Bed Bath squeezes force analysts to admit they no longer
have any idea what's going on...
... Morgan Stanley is keeping the hope and assuming that the current period will be similar
to 2017 - the only other time when a massive sell signal did not result in a market plunge.
Back in 2017, we remained constructive despite the signal given i) strong EPS growth, ii)
an early cycle environment, iii) EU inflows, iv) low sentiment and v) a rise in M&A.
Sentiment metrics may look more elevated than in 2017, but many of those factors remain in
place today. While we see a trickier risk-reward for equities globally, we maintain our view
that there is a compelling case for Europe to outperform global peers.
Yet even Morgan Stanley is forced to admit that while Defensives may just scrape by after a
record sell signal, cyclicals are about to be hammered. The next chart shows the relative
performance of Cyclicals versus Defensives after a Full House Sell Signal on. As MS notes,
"perhaps unsurprisingly, given the poor performance at the market level, Cyclicals have
struggled. In the 6M post the four initial Full House Sell Signals, Cyclicals have
underperformed Defensives on average 12%, and this drops to -15% looking at any day
when the MTIs have all said sell at the same time."
This was true even in 2017 when equity markets rose: "we previously cited similarities with
the 2017 Full House Sell Signal as reasons to not get overly cautious on equity markets in
aggregate at this moment in time. After the February-2017 Full House Sell Signal, MSCI Europe
continued to rise pretty consistently through the rest of the year. However, despite strong
performance from the market in aggregate, the performance of Cyclicals versus Defensives was
much poorer. Between February and June 2017 Cyclicals underperformed Defensives by 6%."
It's not just the bank's sell signal that is prompting concerns about the future returns of
cyclicals: Borrowing a page from our own warnings (see "
China's Credit Impulse Just Turned Negative, Unleashing Global Deflationary Shockwave "),
Morgan Stanley looks at "a number of China data points which are giving warning signs" first
and foremost the collapse in China's credit impulse, to wit:
While credit tightening has been front-loaded in 1H21, as outlined here, our economists
remain constructive on China's growth recovery. Having said that, a number of Chinese data
points do suggest the Cyclical bounce looks overextended. China's credit impulse has just
turned negative, and historically this has provided a lead indicator for the year-on-year
performance of European Cyclicals (Exhibit 5). Similarly, the relative performance of Cyclicals
versus Defensives has closely tracked moves in Chinese 10Y bond yields, which are now at their
lowest levels since September 2020, standing in sharp contrast to the performance of
Cyclicals.
Putting it all together, readers have to ask themselves if what is coming will be an analog
of the one and only episode on history when the market did not plunge after all Morgan Stanley
market timing indicators hit a sell (and were at an all time high), or will this case be
similar to Mar-90, May-92, Jun-07 when the outcome was anything but a happy ending.
The annual rate of inflation in the eurozone rose in May to hit the European Central Bank's
target for the first time since late 2018, as energy prices surged in response to a
strengthening recovery in the global economy.
"... LTO drilling locations are diminishing faster and faster. Look for massive consolidation as E&P companies can only grow through M&A. ..."
"... The energy transition will be painful and longer than anticipated. Criminalization of an industry that embodies national security and that gives the "haves" a competitive advantage in favor of hopes and prayers is folly and irresponsible. ..."
"... A few years ago I heard Chinese venture capitalist speak at the Aspen Institute. He claimed that democracy is not a form of government but instead a religion. He gave the example that in Nigeria, the US is concerned about human rights while the Chinese could care less who dies in Nigeria as long as they can get the oil. He also stated that the Chinese only care about how they can feed, shelter, move, and run their economy and human rights are not remotely introduced into their paradigm. Something to think about. ..."
Ovi, great work as usual .My POV is that it is GOM that is the major factor in the comeback
, not "shale plays " that are supposedly going to be the saviors of Industrial civilisation .
Confirms my argument ( and of many others )that shale is all juiced out . Better to lower
expectations from LTO for the future .
REPLYOVI IGNORED HOLE IN HEAD IGNORED
05/30/2021 at 1:40 pm
Ovi, great work as usual .My POV is that it is GOM that is the major factor in the
comeback , not "shale plays " that are supposedly going to be the saviors of Industrial
civilisation . Confirms my argument ( and of many others )that shale is all juiced out . Better
to lower expectations from LTO for the future .
REPLY OVI IGNORED
05/30/2021 at 5:00 pm
Thanks HH
I know the general opinion seems to be that the shale plays are finished. Looking at the
data that is in the post doesn't confirm, at this time, that shale is overblown. Let's look at
the two states at the top of the post, Texas and NM and the onshore L48 first chart.
Looking at the Texas increase from January to March one gets 4,745 – 4,661 = 84
kb/d or 42 kb/d/mth. Looking at NM from November to March, one gets 1,155 – 1,112 = 43 or 11 kb/d/mth. The total being 53 kb/d/mth.
Looking at the total onshore L48 increase from January to March, one gets 8,861 –
8,814 = 47 or a net of 23.5 kb/d/mth. So within the onshore lower 48 there is 30 kb/d/mth of
decline.
I would not bet much on my two month or four month analysis, but I think we will need to
monitor what is happening in Texas and NM for another six months to get a better idea of what
is happening in the Permian. The price of oil will be the determining/critical factor.
I know the general opinion seems to be that the shale plays are finished. Looking at the
data that is in the post doesn't confirm, at this time, that shale is overblown. Let's look at
the two states at the top of the post, Texas and NM and the onshore L48 first chart.
Looking at the Texas increase from January to March one gets 4,745 – 4,661 = 84 kb/d
or 42 kb/d/mth.
Looking at NM from November to March, one gets 1,155 – 1,112 = 43 or 11 kb/d/mth.
The total being 53 kb/d/mth.
Looking at the total onshore L48 increase from January to March, one gets 8,861 –
8,814 = 47 or a net of 23.5 kb/d/mth. So within the onshore lower 48 there is 30 kb/d/mth of
decline.
I would not bet much on my two month or four month analysis, but I think we will need to
monitor what is happening in Texas and NM for another six months to get a better idea of what
is happening in the Permian. The price of oil will be the determining/critical factor.
LTO drilling locations are diminishing faster and faster. Look for massive consolidation as
E&P companies can only grow through M&A. Many companies have drilling inventories of
less than four years. The LTO revolution is over as we knew it and the number of E&P
companies will shrink dramatically. There will be minimal growth and much less than 75kbd per
month.
The energy transition will be painful and longer than anticipated. Criminalization of an
industry that embodies national security and that gives the "haves" a competitive advantage in
favor of hopes and prayers is folly and irresponsible.
China will bury us as they try to capture as much of the hydrocarbon as they can knowing
that energy equals power.
A few years ago I heard Chinese venture capitalist speak at the Aspen
Institute. He claimed that democracy is not a form of government but instead a religion. He
gave the example that in Nigeria, the US is concerned about human rights while the Chinese could
care less who dies in Nigeria as long as they can get the oil. He also stated that the Chinese
only care about how they can feed, shelter, move, and run their economy and human rights are
not remotely introduced into their paradigm. Something to think about.
Investments in real estate, commodities and gold can help offset higher inflation, wealth
manager say.
Real estate, for instance, can gain value amid inflation, while property owners can increase
rent on tenants. Real estate investment trusts have also offered attractive returns in prior
periods of rising inflation.
Commodities historically do well when the U.S. dollar is weak, and higher inflation tends to
push the greenback lower.
"Inflation is inevitable, especially with the amount of money the government is spending,"
says Patrick Healey, founder and president of Caliber Financial Partners, a financial planning
firm. "From a financial standpoint, you do need to have some hedges in your portfolio."
...Materials and energy companies stand to benefit from higher commodities prices, while
higher interest rates tend to help financial stocks with higher profit margins.
the OMB expects slower growth in the long run. It projects gross domestic product growth
running slightly over 2% on average annually between fiscal 2022 and 2031, while the
nonpartisan Congressional Budget Office pegs growth at less than 2% on average over the same
window. Either growth rate is anemic, making more "broadly shared prosperity" unlikely as
well.
...
It may be that raising federal spending turns out to be a winning formula for Democrats in
2022. Then again, it may not. Especially since Mr. Biden would hike taxes high enough to eat up
more GDP than in any 10-year period in American history, according
to the American Action Forum's Gordon Gray. The spending binge would also increase the nation's
public debt to 117% of GDP""greater than the previous record GDP percentage that Washington
clocked in the year after World War II.
Recent polling suggests the Democrats' approach may not help them in the midterms.
... Democrats may be counting on Republicans to emphasize "culture war" issues rather than
deliver a focused, principled attack on the president's orgy of spending and tax increases.
This isn't to suggest issues like defunding the police, critical race theory and border
security are unimportant. But in 2022, as in most years, the economy will likely be the real
congressional battleground. The sooner Republicans recognize that, the better.
Mr. Rove helped organize the political-action committee American Crossroads and is author of
"The Triumph of William McKinley" (Simon & Schuster, 2015).
I don't believe policies matter any more. In 2020, democrats secured a permanent upper hand
for themselves which is mail-in ballots.
Kenneth Johnson
WSJ headline---"Yes, It's Still The Economy, Stew ped"
If....by the summer of 2022....inflation is 4%+....we're in a recession....and
unemployment is 6%+....the Democrats will lose the midterms....I hope.
If none of those things is true....they may 'dodge a bullet'.
Any other opinions?
Ron Hoelscher
They have lost the culture war and do not seem to realize it.
As far as spending, when an economy evolves to have very few people controlling the 90% of
the economy then the governing party must resort to handouts to the 90% to stay in power.
I think the Romans called it "bread and circuses." Trump was the circus, now people want
some bread.
Ovi, refer Iranian oilfields . I have always said that Iran is producing and selling all the
oil it wants to sell or can sell . The regime has outlived 10 US administrations and 6 US
presidents inspite of sanctions . They are having to sell at a discount but at the end of the
day the oil flows . Just some road bumps and a zig zag route . I doubt they have a lot of spare
capacity .If and when the sanctions are lifted all what is " unofficial " will become "
official " . As to OPEC or OPEC+ that they are close to capacity viewpoint is more prevailing
by the day .
Current around of stimulus has run it's coarse. I look for jobs numbers and inflation
numbers to soften over next few months. Which means more QE and lower interest rates for
longer. Higher stock prices.
But for the real economy. We pulled 5 years worth of GDP forward. Unless governments are
prepared to spend even more on a monthly and yearly basis going forward than they did since
March 2020 until now. And put more money into the hands of average people. We roll over first
then fall off a cliff economically. Private banks just aren't going to create the money via
loan creation in volume needed to offset or match what the government has done over past year.
So without further massive stimulus we get massive credit contraction.
With the debt burden not just public debt but private debt hanging over the economy we
likely never return to pre-pandemic levels of Global GDP
Price action for oil is still bullish but that can change in a hurry when jobs and inflation
data turn soft. HOLE IN HEAD IGNORED
05/31/2021 at 2:00 pm
HHH, " With the debt burden not just public debt but private debt hanging over the economy
we likely never return to pre-pandemic levels of Global GDP " . Been parroting this from a long
time but few want to admit that
the BAU is over . Life is(was) a party and all parties must end .
LONDON (Reuters) - Cryptocurrencies such as bitcoin are a "farce" and a symptom of bubbles forming in financial markets, Amundi
chief investment officer Pascal Blanque said on Thursday.
Bitcoin, trading at around $39,364, fell 35% last month after China doubled down on efforts to prevent speculative and financial
risks by cracking down on mining and trading of the largest cryptocurrency.
Speaking at a news conference, Blanque described the crypto currency as a "farce," adding that it was a symptom of the bubbles
forming in markets.
If you buy food or gas like everyone else, you already have a profound understanding of how
inflation can consume your budget.
The latest official inflation tally showed a jaw-dropping 3.4 per cent increase in the cost
of living in April compared with a year earlier.
That's not to say runaway inflation is inevitable. The Bank of Canada has vowed to use its
monetary bag of tricks to keep it under control. Also, if you draw income from a defined
benefit pension (DB), Canada Pension Plan (CPP) or Old Age Security (OAS), benefits are
automatically tied to inflation.
Canadians who invest through a defined contribution pension (DC), or through a self-directed
registered retirement savings plan (RRSP) or tax-free savings account aren't so lucky. But
there are steps you can take in your investment portfolio to hedge against a rapid increase in
the cost of living. The objective of a hedge is to add protection without sacrificing return
potential. Here are four ways to put that protection in your portfolio.
1. Commodity equities
Equity markets generally advance with inflation (to a point), so it's good to stay invested
and diversified across sector and geographic lines. But some equities actually contribute more
to - and benefit more from - inflation. Commodities like crude oil, lumber, grain and metals
have taken the lead. That means bigger profits for commodity producers.
You can invest in specific commodities on the futures market through exchange-traded funds
(ETFs), or purchase shares in commodity-producing companies directly or through ETFs and mutual
funds.
2. Real estate
Real estate is another equity asset class already contributing to - and benefitting from -
inflation. Home owners are reaping rewards from soaring residential real estate prices but
there are many ways to diversify real estate holdings into other real estate subsectors through
real estate investment trusts. REITs are companies that own and operate residential, commercial
and industrial real estate that generate income from rents and capital gains through price
appreciation.
3. Short-term fixed income
Proper portfolio diversification includes safe fixed income, such as government bonds.
Dedicating a significant portion to fixed income in a portfolio will cushion it from volatility
on the equity side. How much of your portfolio should be dedicated to fixed income depends on
your tolerance for risk and how soon you need the cash.
It's hard to make that argument right now when yields are near rock-bottom lows, so it's
best to bite the bullet for now and keep your fixed income in short-term maturities to take
advantage of higher yields if inflation pushes interest rates up. A typical one-year guaranteed
investment certificate (GIC), for example, pays about one per cent (well below the current
inflation rate).
You can also hedge fixed income with inflation-adjusted products such as annuities or real
return bonds, but the added cost of that protection could eat into overall returns if inflation
does not become a problem.
4. Fixed-rate mortgage
Variable-rate mortgages are now available at about one per cent. While it might be tempting
for homeowners to borrow money for (close to) nothing, a rapid rise in mortgage rates could
translate into hundreds of dollars added to a monthly household budget or tens of thousands of
dollars over the course of the mortgage.
Five-year fixed rates are available at two per cent. That means you will pay two per cent no
matter what inflation does to mortgage rates in the next five years.
If you aren't already locked in, think about locking in now.
Scorpion 16 April, 2021 I am not surprised either that ARK bought COIN. She is a gambler not an
investor. Most of her investment is in overvalued, overhyped stocks they can't just keep going
up.
Lou 18 May, 2021 Until recently she was loaded up with Tesla - as much as 10% of the ARKK
portfolio - which accounted for a good part of its stellar performance (note that she had TSLA
in some of the other ARK funds. Not sure any of these other choices are going to give her ETFs
the ride TSLA gave them. Reply 2 Rene 7 May, 2021 Any one that invest in Bitcoin ,dogecoin,
Coin etc, must have his brain fall of pot or must have so much money like the Tesla Ceo, that
they can gamble for ever in a Casino, with that kind of money, i too will invest in Tin air,
and artificial money because Y cannot invest money sufficient to go broke in 10 life times.
that is very easy I don't need to expect any return in my investment.
Theo the Cat 19 May, 2021 I would never buy ARKK's stocks, but I am definitely watching and
eating popcorn. Alex 27 April, 2021 ARK is losing steam. People start to realize ARK can't
survive in a bear market
Theo the Cat 19 April, 2021 Ark is gonna turn into Titanic.
Rock 25 May, 2021 no one cares what ARK invests in... unless you want to lose money Reply 2
Cybercraig 25 April, 2021 I may end up selling ARK.G for a loss to balance next year's taxes.
Yech! Reply 5 4 Mighty Lion 19 May, 2021 Why is the reporting about ARK so sexist? Every single
article I've ever seen starts "Cathie Wood's ARK ETFs ... (such and such) ..." If it was
managed by a man, they would just say "ARK ETFs ... (etc). Reply 2 FlorinS 4 hours ago How can
we trust Cathie Wood ? Only few days ago she predicted that Bitcoin may reach $500,000.
Money quote from comments: "When news of this proposed standard came out, I read the actual
standard because I wanted to see if it really was that bad. Things were reported like, "Saying
an answer is 'wrong' is racist. There is no right and wrong in math, just shades of truth."
These kinds of things are worrisome. So I read a good chunk of the proposal, and I couldn't
find anything like that. Instead, I found their point was that anyone has the capability of
learning math, and so we should be teaching it to everyone. If people aren't learning it, then
that's a problem with our teaching methods.
Not sure Google and Apple will be happy. Clearly programming languages are racists as almost
all of them were created by white guys and they disproportionally punish poor coders...
A plan to reimagine math instruction for 6 million California students has become
ensnared in equity and fairness issues -- with critics saying proposed guidelines will hold
back gifted students and supporters saying it will, over time, give all kindergartners through
12th-graders a better chance to excel. From a report: The proposed new guidelines aim to
accelerate achievement while making mathematical understanding more accessible and valuable to
as many students as possible, including those shut out from high-level math in the past because
they had been "tracked" in lower level classes. The guidelines call on educators generally to
keep all students in the same courses until their junior year in high school, when they can
choose advanced subjects, including calculus, statistics and other forms of data
science.
Although still a draft, the Mathematics Framework achieved a milestone Wednesday, earning
approval from the state's Instructional Quality Commission. The members of that body moved the
framework along, approving numerous recommendations that a writing team is expected to
incorporate. The commission told writers to remove a document that had become a point of
contention for critics. It described its goals as calling out systemic racism in mathematics,
while helping educators create more inclusive, successful classrooms. Critics said it
needlessly injected race into the study of math. The state Board of Education is scheduled to
have the final say in November.
When news of this proposed standard came out, I read the actual standard because I wanted to
see if it really was that bad. Things were reported like, "Saying an answer is 'wrong' is
racist. There is no right and wrong in math, just shades of truth." These kinds of things are
worrisome.
So I read a good chunk of the proposal, and I couldn't find anything like that. Instead, I
found their point was that anyone has the capability of learning math, and so we should be
teaching it to everyone. If people aren't learning it, then that's a problem with our teaching
methods.
I also found that instead of getting rid of calculus, they are suggesting that you learn
calculus as a Junior or Senior in high school. This seems fine to me.
Does the curriculum for grades 1-10 have the appropriate foundational education for kids in
grades 11-12 to actually succeed in a calculus class? Because if not, then the notion that any
significant portion of juniors and seniors will be able take a calculus class is just a
fantasy. Re:
That is the goal, but I am not enough of an expert to know whether they reached their goal
or not. Re:
Reading (mostly skimming) through chapter 8 (about grades 9-12), a couple things stick
out:
First off, they define three different possible "pathways" for grades 9-10, which seems
completely in opposition to goal of a "common ninth- and tenth- grade experience." It sounds
like they envision that some high schools will only provide a single pathway while others will
provide multiple ones -- but it seems incredibly obvious that that's going to put students on
different tracks.
in 40 years since I did it. (I have been helping my kids.)
Which is a problem, because the world has changed with the advent of computers.
So they work on quite difficult symbolic integrations. But absolutely nothing on numerical
methods (and getting the rounding errors correct) which is far more useful in the modern
world.
For non-specialist students, there is almost nothing on how to really build a spreadsheet
model. That again is a far more useful skill than any calculus or more advanced algebra.
And then Re: I can't believe this
white supremacy I doubt they could get AP Calculus to work. It's going to have to be an
easier version of pre Calculus. Because of how they schedule the classes today, some kids take
summer courses so that they can get the prerequisites in time. Keeping everyone at the same
slow pace is painful for the stronger students. I'm wondering if they are having trouble
finding teachers who are qualified to teach math. Kumon The ones
whose parents can send them to Kumon or Russian Math after school, will have the capacity.
Those who cant even if they were smart enough for the accelerated program under current system
wont. With any law follow the money- see who will make money from this. Re:I can't believe
this white supremacy (
Score: 4 , Insightful) by CrappySnackPlane ( 7852536 ) on Monday May 31,
2021 @04:14PM ( #61440460 )
Which planet did you go to school on?
Here on Earth, here's how "everyone learns calculus in 11th grade" works:
The entire class has to stop and wait for the kids who are genuinely overwhelmed - be it
because they're smart-but-poor-and-hungry or, you know, because they're just fucking
dumb , both types exist, it doesn't matter - to catch up, because the teacher's job
rests on whether 79% or 80% of their students score a passing grade on the statewide
achiev^H^H^H^H^H^H (whoops, can't have achievements, that's ableist) "performance" tests. The
teacher, being a rational creature who understands how to make sure their family's bread
remains buttered, spends the bulk of their time helping along little Jethro and Barbie.
The bright kids are left bored out of their minds, and the "solution" presented by these
absolute shitstains is to suggest the bright kids do after-school activities if they want to
actually learn. Like, that's great for the 1% who genuinely love math the way some kids
love music or acting or sports, but what about the 25% or so who are really gifted at math and
would like to do more with it, but aren't so passionate about it that they want to give up more
of their precious dwindling free time to pursue it? What about the 50% who aren't necessarily
great at math but could certainly learn a lot more if the class wasn't being stopped every two
minutes to re-re-remind little Goobclot that "x" was actually a number, not just a letter?
Look, I absolutely agree that it's bad to write kids off as dumb. But Harrison
Bergeron is not included in the "Utopian Literature of the 20th Century" curriculum for a
reason. There's a flipside, and none of these "one size fits all" proposals does anything to
convince me that the proponents have actually seriously considered the other side of the coin.
Reply to This Parent Share FlagRe:I can't believe this
white supremacy (
Score: 2 ) by systemd-anonymousd ( 6652324 ) on Monday May 31,
2021 @06:26PM ( #61440894 )
My local school district is removing all AP math courses because they believe a disparity in
race in the students represents racism, and/or they just don't want to have to look at the
situation. I know the precursors to this sort of racist policy when I see it, and documents
that espouse a trifecta of equity, inclusivity, and diversity are fully intended to pull crabs
back down into the boiling bucket. Re:final countdown (
Score: 2 ) by gweihir ( 88907
) on Monday May 31, 2021 @05:31PM ( #61440734 )
Next step is mandatory lobotomies for smarter kids or something like it. Because they
obviously violate the dumber ones by setting an example the dumber ones can never hope to
reach. See also "Harrison Bergeron" by Kurt Vonnegut.
Reply to This Parent Share
"The consumer-price index rose at a remarkable 4.2%," says your editorial, "Powell
Gets His Inflation Wish" (May 13). Remarkable, yes, but our current inflation problem is
far worse than that 4.2%, which is bad enough. The real issue is what is happening in 2021. We
need to realize that for the first four months of this year, the seasonally-adjusted
consumer-price index is rising at an annual rate of 6.2%. Without the seasonal adjustments, it
is rising at 7.8%. Meanwhile, house prices are inflating at 12%.
We are paying the inevitable price for the Federal Reserve's monetization of government debt
and mortgages. As for whether this is "transitory," we may paraphrase J.M. Keynes: In the long
run, everything is transitory. But now it is high time for the Fed to begin reducing its debt
purchases, and to stop buying mortgages.
Skill shortages, wage pressures and "hawseholes flash with cash" is is a pretty questionable
consideration (mostly neoliberal mythology). It is typical for WSJ not to touch controversial topics
connected with the deterioration of global neoliberal empire centered in Washington and rampant money printing by Fed, which
increases the level of debt to Japanese's level. They also are buying bonds to keep rate under check which is kind of
counterfeiting money.
So we should expect US stock market to emulate Japanese's stock market. Under
neoliberalism there can be no wage pressures as war of labor was won by financial oligarchy which
institutes neo-feudal regime of wage slavery. One of the key methods is import of foreign workers
to undermine wages in the USA. And neoliberalism is a trap, creating "Welcome to the hotel California" situation.
Automation and robotization puts further pressure on workers in the USA, especially low skill jobs (in some restaurants
waiters are replaced by robots). In many large grocery shots, Wall Mart, etc automatic cashiers machines now are common.
That increase theft but saving on casheer job partially compensate for that. In back office cash and check counting is also
automated using machines.
The key issue here might be the status of dollar as world reserve currency... That allows the USA to
export inflation. If dollar dominance will be shaken inflation chickens will come to roost.
Inflation is here already, and in the long run there is a lot of upward
pressure on prices. But between now and then lies a big question for investors and the
economy: Is the Federal Reserve right to think that the price rises we're seeing now are
temporary and will abate by next year?
Some at the Fed are already having vague doubts, starting to talk about when to
discuss removing some of their extraordinary stimulus even as they continue to push the idea
that inflation is likely to fall back of its own accord.
... ... ..
Inflation expectations can become self-fulfilling, and are watched closely by the Fed.
One-year consumer inflation expectations reached 4.6% in May, according to the University of
Michigan survey, the highest since the China commodity boom of 2011.
Jeffrey P
It is important to not underestimate market sentiment and expectations in such matters
because sometimes in economics, the expectation can be strong enough to become a
self-fulfilling prediction even when other indicators recede or normally wouldn't be a
driver.
Jeffrey Whyatt
I wonder how COLAs in wages, pensions, social security, etc. will impact inflation when these
kick in. Think most occur automatically on a given contractual date. Might add fuel to the
fire.
BRANDON JAMES
Just look at the prices for all the things they exclude from the CPI and other indices of
inflation.
stephen rollins
How do you tell when the Treasury Sec. and Fed Chair are lying about inflation? When you open
your eyes in the morning and the Sun rises in the East.
RICHARD TANKSLEY
It seems wise not to overlook the upcoming problems that we might have with China which which
have the potential to create even more inflation. Lots of tensions are still around and
frankly we should seriously dent US imports from there over the Wuhan virus.
BRUCE MONTGOMERY
Economists are good at dissecting the past, but terrible at forecasting the future.
ROBERT BAILEY
They predicted 12 out of the last 3 recessions
stephen rollins
Yes, and non economists do even worse. Look at the Japanese stock market. About 37K in
1990, cratered, and still only at 28 today. Thats over 30 years, folks.
RODNEY EVERSON
Definition of a "Positive Carry Trade": Borrowing money at an interest rate and investing it
at a higher rate to earn the difference.
Banks do this with deposits, for example, borrowing money from savers and investing it in
higher-yielding loans.
Bond traders typically do it by purchasing longer maturities at, say, three percent and
financing them in the repo market at a rate now close to zero.
The main risk to such a trade is that the higher-yielding investment loses value while
holding it. The bank loan goes bad, or the long bond falls in value while holding it.
Today the Federal Reserve is running the largest positive carry trade in history,
borrowing trillions of dollars from the banking system and paying them 1/10 of one percent on
the loans while using the money to buy trillions of bonds and mortgages for its
portfolio.
If they raise short rates today, the banks will want more than 1/10 of a percent while,
simultaneously, bond prices will crater. Anyone see a conflict here?
RODNEY EVERSON
There seems to be universal agreement that inflation is underway today. The disagreement is
three-part: 1) It will be transitory and we will return to low levels; 2) It will not be
transitory and we are facing steadily rising prices for the foreseeable future; 3) Not only
will it not be transitory, but it will begin to escalate rapidly with the Fed proving unable
or even unwilling to control it, resulting in a hyperinflation.
The bond market is clearly betting on scenario #1, as is the Fed.
And yet the government is spending like the proverbial drunken sailor and the Fed has now
abandoned the banking system's fractional reserve mechanism that Volcker employed to bring
the 1970's inflation back under control. The result, to my mind, is that the U.S.
Government's finances now closely approximate those of Venezuela and Zimbabwe in the recent
past while the Fed has relinquished the tools that would ordinarily be used to yield a
different result than those countries experienced.
C Cook
Economics and politics.
The story describes reality well. Economics is just fuzzy theory now, neither I nor 99% of
America can sort it out. MMT... Print money forever and it doesn't matter?
Politics is clear. History has shown that new administrations lose the House at the first
mid-term. If that happens next year, the entire woke/green/leftist agenda goes down in
flames. Pelosi is back to being a pedestrian member of the House.
To avoid history, DNC will attempt to spend our grandchildren's future to buy every vote
available. Free everything, all the time. No need to work, study, or even get out of bed
before noon. Infrastructure is code for pay off Unions to get workers to vote, shake down
companies who want construction contracts to donate to DNC.
Equity market is watching. Bond market is watching. Likely, they realize that the only
reality is the massive damage to the US which will result from the DNC wanting to keep Nancy
happy.
James Cornelio
Unexplored in this article is the issue of what CAN the Fed do if there is unacceptable
inflationary pressures. To think that it could reduce its $100+ billion monthly purchases in
debt let alone raise interest rates by any serious amount is to forget that we are a nation
awash in debt and that any move by the Fed to do either would result in a 'taper tantrum' the
likes of which will cause all previous tantrums to look like nothing more than naughty
child's play.
William Mackey
The poster child for inflation has to be in the retail housing market. Fixer Uppers that went
begging for a buyer two years ago are the subject of bidding wars today. Biden is pouring
trillions into an emergency that is not there.
DANIEL PETROSINI
The Fed is now just another political entity. They are justifying the ridiculous
increase in money supply with the 'temporary' argument. It is critical to note, they have
always been late. This will not end well.
jennifer raineri
So right. And everyone is just whistling through the graveyard.
Ivaylo Ivanov
One possibility is that households spend some of their savings but continue to save more
than before in case of future trouble, while higher prices make people think twice about
splashing out.
When people see prices rising across the board they spend and hoard, they don't
save, especially when savings accounts interest rates are 0%.
CHING CHANG TSAI
In my opinion, anyone with common sense knows that inflation is here. Everything is more
expensive than before with a significant difference that draws buyer's attention. Even my
home value appreciates about 20% more than the value in 2020, estimated by the local
government. Thanks to my senior age that helped me to limit the raise to 10%. I protested in
vain due to local taxing authority had hard data on hand to dispute my protest.
I accept the reality except that FED said this inflation is "transitory." I can hardly
wait till next year to see my home value will depreciate back to my 2020 property value. I
hope FED will not "lie" on this subject.
David Weisz
I accept the reality except that FED said this inflation is "transitory."
The Fed description is accurate... it's just whether the transition is to
lower inflation or to runaway inflation.
Shares of Flywire, a company that helps organizations accept foreign-currency payments,
debuted on the Nasdaq on Wednesday at $34 apiece, up from their $24 IPO price. They rose about
4% on their first day of trading, giving the Boston-based fintech a roughly $3.5 billion
valuation by day's end. As a private company, Flywire was last valued at $1 billion after a
round of funding in early 2020, according to a PitchBook estimate.
Founded in 2009 under the name peerTransfer by Spanish serial entrepreneur Iker Marcaide,
Flywire originally aimed to make it easier for international students to pay U.S. tuition
without incurring foreign currency fees that could range from 3% to 5%. Flywire has since
expanded its services, enabling some 2,250 clients including universities, hospitals, travel
providers and businesses to accept payments in more than 130 currencies. It acquired Palo Alto
healthcare payments startup Simplee in February 2020. Despite the turmoil of last year, Flywire
processed $7.5 billion in payment volume and signed up 400 new customers while retaining 97% of
existing customers.
Mr. Dale, that's not entirely accurate. Obviously, the value of the cash deteriorates as
inflation progresses, but once inflation is underway interest rates, particularly short-term
rates, typically escalate. Often in the past, the short rate has gone well above the
inflation rate and people holding money market funds do quite well, ending up earning more
than the inflation rate and able to take advantage of depressed prices in bonds and even
stocks later on.
But if we get a hyperinflation, (and to be fair you did specify "runaway inflation") which
isn't out of the question given the Fed's actions, short term rates won't likely reach the
level required to make cash a good alternative. At that point, real assets, possibly some
stocks, or holding cash denominated in another currency become the only reasonable protection
from your savings losing significant value. Cryptocurrencies could also pan out, although
there's a huge risk that they do not, and that's despite what inflation does.
C Cook
You cannot eat gold and crypto is a house of cards. Short term, only cash holds up, and even
then inflation eats it away slowly.
Longer term, I believe only place to hide is the mega-cap global franchise stocks. They
can dodge government policies and can move assets to where they live better.
jennifer raineri
How can inflation progress if everything crashes? I believe the horrible mess we've gotten
into is going to produce horrific results. The financial crisis was the result of
deregulation. What's next will be global and will be due to the sheer stupidity of the
reaction to Covid. Throw politics in there too.
I accept the reality except that FED said this inflation is "transitory."
The Fed description is accurate... it's just whether the transition is to
lower inflation or to runaway inflation.
Jim McCreary
The biggest single factor that will drive long-term inflation is the absence of downward
price pressure from new Chinese market entrants. Cutthroat pricing from China is the ONLY
reason the West has been able to get away with Money-Printing Gone Wild for the past 20 years
without triggering runaway inflation.
There are no new Chinese entrants because the Chinese are now all in in the world economy.
The existing Chinese competitors are seeing their costs go UP, not down, because they have
fully employed the Chinese population, and have to pay up in order to get and keep
workers.
So, without any more downward price pressure from China, this latest round of
Money-Printing Gone Wild is showing up as price inflation, and will continue to do so.
Batten down the hatches! Stagflation and then runaway inflation are coming!
The "Everything Bubble" has jumped from hyperbole to literal truth in just a couple of
years, as more and more assets enter "crazy expensive/extremely reckless" territory. The latest
addition to the list is collateralized loan obligations (CLOs), which are created when a bank
lends money to a less-than-creditworthy company and then bundles that loan with a bunch of
similar loans into bonds for sale to yield-starved pension funds and bond funds.
There's a legitimate place in the market for this kind of security, as long as everyone
understands the risks. But in financial bubbles, banks' insatiable hunger for fees combines
with bond buyers' desperate need for income to cloud everyone's judgment. Lending standards
slip, bond quality declines, credit rating agencies look the other way to keep the deals
flowing, and buyers keep buying because they have no choice.
Record year
So far this year, issuance of new CLOs is on pace to easily exceed 2018's record.
Part of this surge is, like so much else, catch-up from last year's nationwide lockdown. But
most is just your typical out-of-control financing fueled by way too much new currency being
dumped into the banking system.
So how can bonds made up of below-investment-grade paper be investment grade? Through the
magic of securitization. As the Wall
Street Journal recently quoted CitiGroup:
Because CLOs' loan holdings are diversified, the bonds can achieve higher credit ratings
than the underlying loans, making them popular among institutions restricted to
investment-grade debt, such as banks and insurers.
Meanwhile, the combination of a recovering economy and lots of lenders willing to finance
pretty much anything is improving the prospects of financially challenged companies. Fewer of
them are defaulting, which increases the confidence of the people buying CLO bonds. Moody's
Investors Service now expects the trailing 12-month default rate on CLOs to fall to 3.9% by the
year-end, from 7.5% in March. And a growing number of firms are now being reviewed by rating
agencies to have their CLOs upgraded.
Meanwhile, spreads relative to risk-free paper are shrinking:
Sounds promising, right? And, alas, also familiar. Here's how CDOs, the previous bubble's
version of CLOs, worked just before the bottom fell out in 2008:
https://www.youtube.com/embed/3hG4X5iTK8M
Perpetual motion machine
Once they really get going, asset-backed securities like CDOs and CLOs take on a kind of
perpetual-motion-machine vibe in which easy money begets even easier money. To the extremely
credulous, such a system looks capable of spinning right along forever. Unfortunately, this
perception tends to become widespread just as some crucial cog in the machine is about to
break.
Which cog will it be? Candidates abound. Interest rates might rise, stocks might tank, the
government might realize its policies are stoking instability and try to "taper." Some crazy
geopolitical thing might happen (DO NOT look closely at Palestine, Ukraine, or Taiwan). It
doesn't matter which breaks first, as long as one eventually does.
Then the perpetual motion machine shifts into reverse, with rising defaults causing lower
CLO bond ratings causing mass sales by panicked institutions. And so on, until whoever had the
guts to short this market cashes out with epic gains. 11,429 31 NEVER
Detective Miller 2 hours ago
When there's nothing left there's always war.
Misesmissesme 2 hours ago
The institutions buying these instruments have no risk. They know they'll be bailed out
because they're too big to fail. Risk is all on the little guy who'll have to pay for the
bailouts.
NotApplicable PREMIUM 36 minutes ago
Powell and his magic checkbook.
Justus D. Barnes 2 hours ago (Edited)
Which war? Biblical or one of the escalating hot spots?
What if the Fed fought inflation my lowering the cost of electricity? Instead of
subsidies just increase the supply? They are printing billions why not see to it that we
double our energy production with nuclear power plants? If the cost of electricity was
halved that would instantly boost everyone's disposable income while making our
manufacturing more competitive.
Angelo Misterioso 56 minutes ago remove link
This is about the 5's derivation of this concept - going all the way back through, CDO
Squared, CRE CDO's, CDO's and CBO's before that... the hi grade CDO's were 200 to 1
levered...
just pure greed by the street and the regulators were the C students in math
class...
radical-extremist 1 hour ago
When homeowners in Stockton California began to discover the magical mystery of
Adjustable Rate Mortgages and couldn't afford to pay another $600 a month for their "dream
home" - the bottom began to fall out.
When unprofitable ghost companies, of which there are thousands, start defaulting on
their cheap loans - that's the sign. Which companies, where? No one's sure.
el_buffer 2 hours ago
I need to get my money out of this country before they rape me for yet another friggin
bailout.
Tanner798 1 hour ago
Keep in mind: most of the leveraged loans these CLOs are made up of are all floating
rate. If the Fed increases interest rates to combat inflation, the companies borrowing from
leveraged loans will no longer be able to afford their interest payments. The only reason
why the default rate is so low is due to the originators rolling these companies into
larger leveraged loans so they don't default. Rating agencies look the other way and
deteriorate the covanents to allow this to happen.
Ajax_USB_Port_Repair_Service_ 1 hour ago
Which state pension funds fare buying CLO's? My guess is the blue states.
Interesting Times In The UK 52 minutes ago
The Big Short is an excellent film, just as pertinent today ... as it was 13 years
ago.
Can't wait to watch the sequel ..
Portal 2 hours ago
Rampant speculation always precedes a collapse.
ThanksIwillHaveAnother 41 minutes ago (Edited)
I love how Wall Street constantly invents new words. In this case these are Junk
Bonds.
Calm has descended across one of the most influential markets for all investors: government
bonds. Investors fearing a rolling interest rate shock unfolding in 2021 with the potential for
puncturing high-flying equities, housing and highly indebted economies have been breathing
easier of late.
Courtesy of central banks' sustained presence in bond markets, this year's rise in market
borrowing costs has not triggered a bigger shock, At least for now.
Looks like this guys somewhat understands the problems with neoliberalism, but still is captured by neoliberal ideology.
Notable quotes:
"... That all seems awfully quaint today. Pensions disappeared for private-sector employees years ago. Most community banks were gobbled up by one of the mega-banks in the 1990s -- today five banks control 50 percent of the commercial banking industry, which itself mushroomed to the point where finance enjoys about 25 percent of all corporate profits. Union membership fell by 50 percent. ..."
"... Ninety-four percent of the jobs created between 2005 and 2015 were temp or contractor jobs without benefits; people working multiple gigs to make ends meet is increasingly the norm. Real wages have been flat or even declining. The chances that an American born in 1990 will earn more than their parents are down to 50 percent; for Americans born in 1940 the same figure was 92 percent. ..."
"... Thanks to Milton Friedman, Jack Welch, and other corporate titans, the goals of large companies began to change in the 1970s and early 1980s. The notion they espoused -- that a company exists only to maximize its share price -- became gospel in business schools and boardrooms around the country. Companies were pushed to adopt shareholder value as their sole measuring stick. ..."
"... Simultaneously, the major banks grew and evolved as Depression-era regulations separating consumer lending and investment banking were abolished. Financial deregulation started under Ronald Reagan in 1980 and culminated in the Financial Services Modernization Act of 1999 under Bill Clinton that really set the banks loose. The securities industry grew 500 percent as a share of GDP between 1980 and the 2000s while ordinary bank deposits shrank from 70 percent to 50 percent. Financial products multiplied as even Main Street companies were driven to pursue financial engineering to manage their affairs. GE, my dad's old company and once a beacon of manufacturing, became the fifth biggest financial institution in the country by 2007. ..."
The logic of the meritocracy is leading us to ruin, because we arc collectively primed to ignore the voices of the millions getting
pushed into economic distress by the grinding wheels of automation and innovation. We figure they're complaining or suffering because
they're losers.
We need to break free of this logic of the marketplace before it's too late.
[Neoliberalism] had decimated the economies and cultures of these regions and were set to do the same to many others.
In response, American lives and families are falling apart. Ram- pant financial stress is the new normal. We are in the third
or fourth inning of the greatest economic shift in the history of mankind, and no one seems to be talking about it or doing anything
in response.
The Great Displacement didn't arrive overnight. It has been building for decades as the economy and labor market changed in response
to improving technology, financialization, changing corporate norms, and globalization. In the 1970s, when my parents worked at GE
and Blue Cross Blue Shield in upstate New York, their companies provided generous pensions and expected them to stay for decades.
Community banks were boring businesses that lent money to local companies for a modest return. Over 20 percent of workers were unionized.
Some economic problems existed -- growth was uneven and infla- tion periodically high. But income inequality was low, jobs provided
benefits, and Main Street businesses were the drivers of the economy. There were only three television networks, and in my house
we watched them on a TV with an antenna that we fiddled with to make the picture clearer.
That all seems awfully quaint today. Pensions disappeared for private-sector employees years ago. Most community banks were
gobbled up by one of the mega-banks in the 1990s -- today five banks control 50 percent of the commercial banking industry, which
itself mushroomed to the point where finance enjoys about 25 percent of all corporate profits. Union membership fell by 50 percent.
Ninety-four percent of the jobs created between 2005 and 2015 were temp or contractor jobs without benefits; people working
multiple gigs to make ends meet is increasingly the norm. Real wages have been flat or even declining. The chances that an American
born in 1990 will earn more than their parents are down to 50 percent; for Americans born in 1940 the same figure was 92 percent.
Thanks to Milton Friedman, Jack Welch, and other corporate titans, the goals of large companies began to change in the 1970s
and early 1980s. The notion they espoused -- that a company exists only to maximize its share price -- became gospel in business
schools and boardrooms around the country. Companies were pushed to adopt shareholder value as their sole measuring stick.
Hostile takeovers, shareholder lawsuits, and later activist hedge funds served as prompts to ensure that managers were committed
to profitability at all costs. On the flip side, CF.Os were granted stock options for the first time that wedded their individual
gain to the company's share price. The ratio of CF.O to worker pay rose from 20 to 1 in 1965 to 271 to 1 in 2016. Benefits were streamlined
and reduced and the relationship between company and employee weakened to become more transactional.
Simultaneously, the major banks grew and evolved as Depression-era regulations separating consumer lending and investment
banking were abolished. Financial deregulation started under Ronald Reagan in 1980 and culminated in the Financial Services Modernization
Act of 1999 under Bill Clinton that really set the banks loose. The securities industry grew 500 percent as a share of GDP between
1980 and the 2000s while ordinary bank deposits shrank from 70 percent to 50 percent. Financial products multiplied as even Main
Street companies were driven to pursue financial engineering to manage their affairs. GE, my dad's old company and once a beacon
of manufacturing, became the fifth biggest financial institution in the country by 2007.
It's hard to be in the year 2018 and not hear about the endless studies alarming the general public about coming labor automation.
But what Yang provides in this book is two key things: automation has already been ravaging the country which has led to the great
political polarization of today, and second, an actual vision into what happens when people lose jobs, and it definitely is a
lightning strike of "oh crap"
I found this book relatively impressive and frightening. Yang, a former lawyer, entrepreneur, and non-profit leader, writes
showing with inarguable data that when companies automate work and use new software, communities die, drug use increases, suicide
increases, and crime skyrockets. The new jobs created go to big cities, the surviving talent leaves, and the remaining people
lose hope and descend into madness. (as a student of psychology, this is not surprising)
He starts by painting the picture of the average American and how fragile they are economically. He deconstructs the labor
predictions and how technology is going to ravage it. He discusses the future of work. He explains what has happened in technology
and why it's suddenly a huge threat. He shows what this means: economic inequality rises, the people have less power, the voice
of democracy is diminished, no one owns stocks, people get poorer etc. He shows that talent is leaving small towns, money is concentrating
to big cities faster. He shows what happens when those other cities die (bad things), and then how the people react when they
have no income (really bad things). He shows how retraining doesn't work and college is failing us. We don't invest in vocational
skills, and our youth is underemployed pushed into freelance work making minimal pay. He shows how no one trusts the institutions
anymore.
Then he discusses solutions with a focus on Universal Basic Income. I was a skeptic of the idea until I read this book. You
literally walk away with this burning desire to prevent a Mad Max esque civil war, and its hard to argue with him. We don't have
much time and our bloated micromanaged welfare programs cannot sustain.
This is a very short book, almost an essay -- 136 pages. It was published in October 2004, four years before financial crisis of
2008, which put the first nail in the coffin of neoliberalism. It addresses the cultural politics of neo-liberalism ("the
Great Deception")
Notable quotes:
"... By now, we've all heard about the shocking redistribution of wealth that's occurred during the last thirty years, and particularly during the last decade. But economic changes like this don't occur in a vacuum; they're always linked to politics. ..."
"... Ultimately, The Twilight of Equality? not only reveals how the highly successful rhetorical maneuvers of neoliberalism have functioned ..."
"... The titles of her four chapters--Downsizing Democracy, The Incredible Shrinking Public, Equality, Inc., Love AND Money--summarize her argument. ..."
"... Her target is neoliberalism, which she sees as a broadly controlling corporate agenda which seeks world domination, privatization of governmental decision-making, and marginalization of unions, low-income people, racial and sexual minorities while presenting to the public a benign and inclusive facade. ..."
"... Neo-liberalism seeks to upwardly distribute money, power, and status, she writes, while progressive movements seek to downwardly distribute money, power, and status. The unity of the downwardly distribution advocates should match the unity of the upwardly distribution advocates in order to be effective, she writes. ..."
"... "There is nothing stable or inevitable in the alliances supporting neoliberal agendas in the U.S. and globally," she writes. "The alliances linking neoliberal global economics, and conservative and right-wing domestic politics, and the culture wars are provisional--and fading...." ..."
"... For example, she discusses neoliberal attempts to be "multicultural," but points out that economic resources are constantly redistributed upward. Neoliberal politics, she argues, has only reinforced and increased the divide between economic and social political issues. ..."
"... Because neoliberal politicians wish to save neoliberalism by reforming it, she argues that proposing alternate visions and ideas have been blocked. ..."
By now, we've all heard about the shocking redistribution of wealth that's occurred during the last thirty years, and
particularly during the last decade. But economic changes like this don't occur in a vacuum; they're always linked to politics.
The Twilight of Equality? searches out these links through an analysis of the politics of the 1990s, the decade when
neoliberalism-free market economics-became gospel.
After a brilliant historical examination of how racial and gender inequities were woven into the very theoretical underpinnings
of the neoliberal model of the state, Duggan shows how these inequities play out today. In a series of political case studies,
Duggan reveals how neoliberal goals have been pursued, demonstrating that progressive arguments that separate identity politics and
economic policy, cultural politics and affairs of state, can only fail.
Ultimately, The Twilight of Equality? not only reveals how the highly successful rhetorical maneuvers of neoliberalism have
functioned but, more importantly, it shows a way to revitalize and unify progressive politics in the U.S. today.
Mona Cohen 5.0 out of 5 stars A Critique of Neoliberalism and the Divided Resistance to It July 3, 2006
Lisa Duggan is intensely interested in American politics, and has found political life in the United States to have been "such
a wild ride, offering moments of of dizzying hope along with long stretches of political depression." She is grateful for "many
ideas about political depression, and how to survive it," and she has written a excellent short book that helps make sense of
many widely divergent political trends.
Her book is well-summarized by its concluding paragraph, which I am breaking up into additional paragraphs for greater
clarity:
"Now at this moment of danger and opportunity, the progressive left is mobilizing against neoliberalism and possible new or
continuing wars.
"These mobilizations might become sites for factional struggles over the disciplining of troops, in the name of unity at a
time of crisis and necessity. But such efforts will fail; the troops will not be disciplined, and the disciplinarians will be
left to their bitterness.
"Or, we might find ways of think, speaking, writing and acting that are engaged and curious about "other people's" struggles
for social justice, that are respectfully affiliative and dialogic rather than pedagogical, that that look for the hopeful spots
to expand upon, and that revel in the pleasure of political life.
"For it is pleasure AND collective caretaking, love AND the egalitarian circulation of money--allied to clear and hard-headed
political analysis offered generously--that will create the space for a progressive politics that might both imagine and
create...something worth living for."
The titles of her four chapters--Downsizing Democracy, The Incredible Shrinking Public, Equality, Inc., Love AND
Money--summarize her argument.
She expected upon her high school graduation in 1972, she writes, that "active and expanding social movements seemed capable
of ameliorating conditions of injustice and inequality, poverty, war and imperialism....I had no idea I was not perched at a
great beginning, but rather at a denouement, as the possibilities for progressive social change encountered daunting historical
setbacks beginning in 1972...."
Her target is neoliberalism, which she sees as a broadly controlling corporate agenda which seeks world domination,
privatization of governmental decision-making, and marginalization of unions, low-income people, racial and sexual minorities
while presenting to the public a benign and inclusive facade.
Neo-liberalism seeks to upwardly distribute money, power, and status, she writes, while progressive movements seek to
downwardly distribute money, power, and status. The unity of the downwardly distribution advocates should match the unity of the
upwardly distribution advocates in order to be effective, she writes.
Her belief is that all groups threatened by the neoliberal paradigm should unite against it, but such unity is threatened by
endless differences of perspectives. By minutely analyzing many of the differences, and expanding understanding of diverse
perspectives, she tries to remove them as obstacles towards people and organizations working together to achieve both unique and
common aims.
This is good book for those interested in the history and current significance of numerous progressive ideological arguments.
It is a good book for organizers of umbrella organizations and elected officials who work with diverse social movements. By
articulating points of difference, the author depersonalizes them and aids in overcoming them.
Those who are interested in electoral strategies, however, will be disappointed. The interrelationship between neoliberalism
as a governing ideology and neoliberalism as a political strategy is not discussed here. It is my view that greater and more
focused and inclusive political organizing has the potential to win over a good number of the those who see support of
neoliberalism's policy initiatives as a base-broadening tactic more than as a sacred cause.
"There is nothing stable or inevitable in the alliances supporting neoliberal agendas in the U.S. and globally," she
writes. "The alliances linking neoliberal global economics, and conservative and right-wing domestic politics, and the culture
wars are provisional--and fading...."
Reading this book adds to one's understanding of labels, and political and intellectual distinctions. It has too much jargon
for my taste, but not so much as to be impenetrable. It is an excellent summarization and synthesis of the goals, ideologies, and
histories of numerous social movements, both famous and obscure.
Duggan
articulately connects social and economic issues to each other, arguing that neoliberal
politics have divided the two when in actuality, they cannot be separated from one another.
In the introduction, Duggan argues that politics have become neoliberal - while politics
operate under the guise of promoting social change or social stability, in reality, she argues,
politicians have failed to make the connection between economic and social/cultural issues. She
uses historical background to prove the claim that economic and social issues can be separated
from each other is false.
For example, she discusses neoliberal attempts to be "multicultural," but points out that
economic resources are constantly redistributed upward. Neoliberal politics, she argues, has
only reinforced and increased the divide between economic and social political issues.
After the introduction, Duggan focuses on a specific topic in each chapter: downsizing
democracy, the incredible shrinking public, equality, and love and money. In the first chapter
(downsizing democracy), she argues that through violent imperial assertion in the Middle East,
budget cuts in social services, and disillusionments in political divides, "capitalists could
actually bring down capitalism" (p. 2).
Because neoliberal politicians wish to save neoliberalism by reforming it, she argues that
proposing alternate visions and ideas have been blocked. Duggan provides historical background
that help the reader connect early nineteenth century U.S. legislation (regarding voting rights
and slavery) to perpetuated institutional prejudices.
CLOs have become a $760 billion market, accounting for 70% of new leveraged loan purchases
last year, according to Citi.
... Just six nonfinancial, junk-rated companies defaulted during the first quarter of this
year, according to Moody's Investors Service -- the lowest level since 2018. The ratings agency
expects the trailing 12-month default rate to fall to 3.9% by the end of December, from 7.5% in
March.
... The combination has analysts and investors expecting a banner year for CLO issuance.
Bank of America
projects sales to total around $360 billion this year, including refinancings, while Citibank
expects around $290 billion. Both figures would surpass 2018's all-time high.
... Critics say CLOs allow companies to borrow more than they can support, exposing
investors to losses in a downturn. A wave of leveraged loan downgrades
hit CLO managers last year , causing some portfolios to surpass limits on low-rated
holdings or breach collateral tests.
... Some CLO tranches haven't traded consistently, wrote KKR analysts in a recent note, a
sign that there could be some fragility lurking underneath the market's surface.
"Despite the high volume of activity, we do not believe that liquidity across the [CLO]
market has been uniform and as robust as it may seem," they wrote.
The read question is when this will happen. So far this year the yield of 10 year bond fluctuate in a rather narrow band. It
does not steadily increases...
Some tried to downplay concern by pointing out that the gains resulted from the "base effect" of comparing current prices with
the artificially depressed "Covid lockdown" prices of March and April of last year. But that ignores the more alarming trend of near-term
price acceleration.
According to the Bureau of Labor Statistics, in every month this year, the month-over-month change in prices has been greater
than the change in the previous month.
In April prices jumped .8% from March, versus an expected gain of just .2%. Clearly, if this trend continues, or even fails to
dramatically reverse, we could be looking at inflation well north of 5 or 6 percent for the calendar year. That would create a big
problem.
Despite Federal Reserve officials' recent assurances that the inflation problem is "transitory," many investors are concluding
that the central bank will have to deal with this problem by tightening monetary policy far sooner than had been expected. This would
make sense if the Fed cared about restraining inflation or, more importantly, had the power to do anything to stop it. In truth,
we are sailing into these waters with little ability to alter speed or course, and we will be wholly at the mercy of the waves we
have spent a generation creating.
The Commerce Department on Friday reported that
consumer spending rose 0.5% in April from a month earlier, which, coming after March's government stimulus-check-fueled surge,
was impressive. The gain was driven by a 1.1% increase in spending on services""an indication of how, with
Covid-19 cases dropping
and
vaccination rates rising , consumers are shifting their behavior. Spending on goods actually declined, with the weakness concentrated
in spending on nondurable goods such as groceries and cleaning products.
But a closer look at April's overall gain indicates it was mainly driven by price increases. By the Commerce Department's measure,
which is the Federal Reserve's preferred gauge of inflation, consumer prices rose 0.6% in April from March, putting them 3.6% above
their year-earlier level. As a result, real, or inflation-adjusted spending declined. Core prices, which exclude the often volatile
food and energy categories to better capture inflation's underlying trend, were up 0.7% from March, and 3.1% on the year. The Fed's
inflation goal is 2%, though it has said it
will tolerate higher readings than that for some time.
Some tried to downplay concern by pointing out that the gains resulted from the "base
effect" of comparing current prices with the artificially depressed "Covid lockdown" prices of
March and April of last year. But that ignores the more alarming trend of near-term price
acceleration.
According to the Bureau of Labor Statistics, in every month this year, the month-over-month
change in prices has been greater than the change in the previous month.
In April prices jumped .8% from March, versus an expected gain of just .2%. Clearly, if this
trend continues, or even fails to dramatically reverse, we could be looking at inflation well
north of 5 or 6 percent for the calendar year. That would create a big problem.
Despite Federal Reserve officials' recent assurances that the inflation problem is
"transitory," many investors are concluding that the central bank will have to deal with this
problem by tightening monetary policy far sooner than had been expected. This would make sense
if the Fed cared about restraining inflation or, more importantly, had the power to do anything
to stop it. In truth, we are sailing into these waters with little ability to alter speed or
course, and we will be wholly at the mercy of the waves we have spent a generation
creating.
According to BofA's latest Flows Show, this week's EPFR data revealed a broad defensive retrenchment, culminating with the largest
inflow to cash since Apr'20 & largest inflow to gold in 16 weeks ($2.6bn); and while broad inflows to equities continue ($512bn YTD)
& largest inflow to Europe since Feb'18 ($2.8bn); we just experienced the largest 3-week outflow from tech since Mar'19 ($1.5bn)
as well as the largest outflow from banks since Jun'20 ($0.6bn).
Refinitiv confirms this,
reporting this morning that "global money market funds saw huge inflows" amounting to no less than $53.2 billion, the highest
in four weeks, in the week ended May 26 amid caution that quickening inflation could alter the direction of U.S. monetary policy
and shake up asset markets.
Despite the massive flows into the safety of money market, Refinitiv also finds that global equity funds attracted solid inflows
of $8.84 billion, a 46% increase over the previous week, as stocks rallied somewhat after U.S. Federal Reserve officials reaffirmed
a dovish monetary policy stance: U.S. equity funds received $2.87 billion, while European equity funds and Asian equity funds obtained
$2.47 billion and $1 billion, respectively.
Where the EPFR and Refinitiv data diverge is when it comes to tech. Contrary to the EPFR observation, Refinitiv reports that tech
funds attracted inflows worth $546 million after three straight weeks of outflows, while financial sector funds faced their first
outflow in 16 weeks, hit by a decline in bond yields.
y_arrow
Pausebreak 6 hours ago
"Refinitiv's analysis of 23,865 emerging-market funds showed equity funds had net outflows worth $463 million, while bond
funds had inflows worth $420 million after outflows in the previous week."
Mary Beth
11 months ago Vanguard eliminated the 30% limitation on investments in non-investment grade
bonds today . Any indication of how far they will go to increase returns?
Prices for the building blocks of the economy have surged over the past year. Oil, copper, corn and gasoline futures all cost
about twice what they did a year ago, when much of the world was locked down to fight the spread of the deadly coronavirus. Lumber
has more than tripled.
Not sure its adding anything which hasn't been said already but to look at the same thing in a different way:
2, or if you look at it 'sideways' 3, main interwoven factors drive inflation:
Access to money to spend - That can be wage/earnings increases or access to cheap debt. That ups demand & prices follow.
Devaluation of the currency - Pushes up raw material imports & prices follow.
What curbs inflation?:
High taxation
High interest rates
High unemployment
And if anyone can point to any Western Democracy currently willing to implement any one, never mind all three, of those
controls a lot of folk will probably be pretty surprised.
Michael Matus
Commodities prices are not the problem. They are high now because of a short-term surge in demand and supply chain issues. All
should be worked out by this time next year.
The long-term structural problem could be wages. If inflation shows up in wages through wage increases through a multitude
of industries then there will be a problem,....... a major one.
Having all these people on the Dole from the government didn't help things Joe!
But like all Presidents that came after HW Bush all you care about is getting re-elected. Doling out is a great way even if
its at the cost of the country.
The FED as been intervening in the markets for so long that they have no tools left for the next crisis.
The FED painted themselves into a corner and the Stimulus that was not needed left them no Escape.
Michael Brown
"Having all these people on the Dole from the government didn't help things Joe!"
What about raising the minimum wage, and Joe commanding that all workers for federal contractors be paid $15 per hour or more?
You think that could be inflationary?
Michael Matus
I would have to agree with yoiu Michael. I should have mentioned that, thank you for reminding me. However, the main problem with
all the sources trhat I have out on the street and their are mnay. Is WAGE growth. As far as a national mimum wage there is none.
Altough there probably will be now. Most states pay as high or higher than what the Federal Government was proposing.
90% of government contractors make at least $15.00 an hour anyway. The VAST majority of the problem is enhanced unemployment
insurance. The 3 month averge of wage groth ending in March was 3.4%. If it hits > 4.0% that will be bad.
Michael Brown
Excellent points, Michael. The list of government actions instigating inflation would be long indeed.
Michael Matus
Unfortunately, Michael, I would have to Wholeheartedly agree with you, Have a Good Weekend!
JOSEPH MICHAEL
Serious, severe inflationary problems are here, they are just starting, and they are going to get much worse.
Brian Kearns
eh.
best to give corporations a large tax cut
so the can buy back stock
Bill Hestir
I will interested to see if new car prices, lumber prices, new home prices, gasoline prices, and food prices will ever go back
down to pre-pandemic levels.
If not, with all the new anti-business taxes and reluctance of out-of-work laborers to go back to work, how will businesses
not be forced to raise their wages and increase the price of their products even higher than they are today?
At what point, therefore, will the Fed end their "inflation is transitory" farce and raise interest rates?
Deirdre Hood
Food prices, regardless of when inflation ends, will not go down/return to 'normal'.
Supply lines are squeezed (NO ONE can hire reliable transport drivers), low supply of workers, plus factor in a bad
year for wheat, and it turns into the perfect storm for commercial bakers.
Judy Neuwirth
Inflation is just getting started. Cho Bi-Den's hyper-regulated economy is only three months old and already it's 1976 all over
again!
Jim Chapman
Now Judy, it's just "transitory" inflation as per Yellen, Powell and Buyden. You really must stick with the narrative, and remember,
Adam Smith's scurrilous "Invisible Hand" is a ultra-right wing conservative myth. So we are not supposed to believe our lying
eyes.
The U.S. is woefully unprepared to handle "the electrification of everything," as Amy Myers
Jaffe, a research professor at Tufts University's Fletcher School, describes the drive to
electrify transportation and buildings and parts of industry in The Wall Street
Journal .
Increased electrification in all sectors will need huge investments in the electric grid, in
battery storage to back up renewable power generation, in charging points for EVs, and in
technologies such as green hydrogen to help those technologies to reach maturity and cost
efficiency enough to start replacing fossil fuels.
When considering a fund's volatility, an investor may find it difficult to decide which fund
will provide the optimal risk-reward combination. Many websites provide various volatility
measures for mutual funds free of charge; however, it can be hard to know not only what the
figures mean but also how to analyze them.
Furthermore, the relationship between these figures is not always obvious. Read on to learn
about the four most common volatility measures and how they are
applied in the type of risk analysis based on modern portfolio theory.
The relationship between portfolio returns and risk can be represented by the efficient
frontier, a curve that is a part of modern portfolio theory.
Another way to measure risk is standard deviation, which reports a fund's volatility,
indicating the tendency of the returns to rise or fall drastically in a short period of
time.
Beta, another useful statistical measure, compares the volatility (or risk) of a fund to
its index or benchmark.
The R-squared of a fund shows investors if the beta of a mutual fund is measured against
an appropriate benchmark.
Alpha measures how much, if any, extra risk helped the fund outperform its corresponding
benchmark.
Optimal Portfolio Theory and Mutual Funds
One examination of the relationship between portfolio returns and risk is the efficient
frontier , a curve that is a part of the modern portfolio theory. The curve forms from a
graph plotting return and risk indicated by volatility, which is represented by the standard
deviation . According to the modern portfolio theory, funds lying on the curve are yielding
the maximum return possible, given the amount of volatility.
As standard deviation increases, so does the return. Once expected returns of a portfolio
reach a certain level, an investor must take on a large amount of volatility for a small
increase in return. Obviously, portfolios with a risk/return relationship plotted
far below the curve are not optimal since the investor is taking on a large amount of
instability for a small return. To determine if the proposed fund has an optimal return for the
amount of volatility acquired, an investor needs to do an analysis of the fund's standard
deviation.
Modern portfolio theory and volatility are not the only means investors use to analyze the
risk caused by many different factors in the market. And things like risk tolerance and investment
strategy affect how an investor views his or her exposure to risk. Here are four other
measures.
https://637ee757112ba46fe0c09f00b0574098.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html
1. Standard Deviation
As with many statistical measures, the calculation for standard deviation can be
intimidating, but because the number is extremely useful for those who know how to use it,
there are many free mutual fund screening services that
provide the standard deviations of funds.
The standard deviation essentially reports a fund's volatility, which indicates the tendency
of the returns to rise or fall drastically in a short period of time. A volatile security is
also considered a higher risk because its performance may change quickly in either direction at
any moment. The standard deviation of a fund measures this risk by measuring the degree to
which the fund fluctuates in relation to its mean return .
A fund with a consistent four-year return of 3%, for example, would have a mean, or average,
of 3%. The standard deviation for this fund would then be zero because the fund's return in any
given year does not differ from its four-year mean of 3%. On the other hand, a fund that in
each of the last four years returned -5%, 17%, 2%, and 30% would have a mean return of 11%.
This fund would also exhibit a high standard deviation because each year, the return of the
fund differs from the mean return. This fund is, therefore, riskier because it fluctuates
widely between negative and positive returns within a short period.
Remember, because volatility is only one indicator of the risk affecting a security, a
stable past performance of a fund is not necessarily a guarantee of future stability. Since
unforeseen market factors can influence the volatility, a fund with a standard deviation close
or equal to zero this year may behave differently the following year.
To determine how well a fund is maximizing the return received for its volatility, you can
compare the fund to another with a similar investment strategy and similar returns. The fund
with the lower standard deviation would be more optimal because it is maximizing the return
received for the amount of risk acquired. Consider the following graph:
With the S&P
500 Fund B, the investor would be acquiring a larger amount of volatility risk than
necessary to achieve the same returns as Fund A. Fund A would provide the investor with the
optimal risk/return relationship.
2. Beta
While standard deviation determines the volatility of a fund according to the disparity of
its returns over a period of time, beta , another useful statistical measure,
compares the volatility (or risk) of a fund to its index or benchmark . A fund with a beta very
close to one means the fund's performance closely matches the index or benchmark. A beta
greater than one indicates greater volatility than the overall market, and a beta less than one
indicates less volatility than the benchmark.
If, for example, a fund has a beta of 1.05 in relation to the S&P 500, the fund has been
moving 5% more than the index. Therefore, if the S&P 500 increased by 15%, the fund would
be expected to increase by 15.75%. On the other hand, a fund with a beta of 2.4 would be
expected to move 2.4 times more than its corresponding index. So if the S&P 500 moved 10%,
the fund would be expected to rise 24%, and if the S&P 500 declined 10%, the fund would be
expected to lose 24%.
Investors expecting the market to be bullish may choose funds exhibiting
high betas, which increase investors' chances of beating the market. If an investor expects the
market to be bearish in the near future, the funds
with betas less than one are a good choice because they would be expected to decline less in
value than the index. For example, if a fund had a beta of 0.5, and the S&P 500 declined by
6%, the fund would be expected to decline only 3%.
Beta by itself is limited and can be skewed due to factors other than the market risk affecting the fund's
volatility.
3. R-Squared
The R-squared of a fund shows investors if
the beta of a mutual fund is measured against an appropriate benchmark. Measuring the
correlation of a fund's movements to that of an index , R-squared describes the level of
association between the fund's volatility and market risk, or, more specifically, the degree to
which a fund's volatility is a result of the day-to-day fluctuations experienced by the overall
market.
R-squared values range between 0 and 100, where 0 represents the least correlation, and 100
represents full correlation. If a fund's beta has an R-squared value close to 100, the beta of
the fund should be trusted. On the other hand, an R-squared value close to 0 indicates the beta
is not particularly useful because the fund is being compared against an inappropriate
benchmark.
If, for example, a bond fund was judged against the
S&P 500, the R-squared value would be very low. A bond index such as the Bloomberg Barclays
US Aggregate Bond Index would be a much more appropriate benchmark for a bond fund so that the
resulting R-squared value would be higher. Obviously, the risks apparent in the stock market
are different than those associated with the bond market . Therefore, if the beta
for a bond were calculated using a stock index, the beta would not be trustworthy.
An inappropriate benchmark will skew more than just beta. Alpha is calculated using beta, so if the
R-squared value of a fund is low, it is also wise not to trust the figure given for alpha.
We'll go through an example in the next section.
4. Alpha
Up to this point, we have learned how to examine figures measuring risk posed by volatility,
but how do we measure the extra return rewarded to you for taking on the risk posed by factors
other than market volatility? Enter alpha, which measures how much if any of this extra risk
helped the fund outperform its corresponding
benchmark. Using beta, alpha's computation compares the fund's performance to that of the
benchmark's risk-adjusted returns and
establishes if the fund outperformed the market, given the same amount of risk.
For example, if a fund has an alpha of one, it means that the fund outperformed the
benchmark by 1%. Negative alphas are bad in that they indicate the fund underperformed for the
amount of extra, fund-specific risk the fund's investors undertook.
The Bottom Line
This explanation of these four statistical measures provides you with the basic knowledge
for using them to apply the premise of the optimal portfolio theory, which uses volatility to
establish risk and offers a guideline for determining how much of a fund's volatility carries a
higher potential for return. These figures can be difficult to understand, so if you use them,
it is important to know what they mean.
These calculations only work within one type of risk analysis . If you are
deciding on buying mutual funds, it is important to be aware of factors other than volatility
that affect and indicate the risk posed by mutual funds.
The price of the benchmark 10-year Treasury inflation-protected security logged its biggest
one-day decline in a month. Shares of real-estate investment trusts slid the most since
January. Commodities were generally flat but dropped the following day.
The three asset classes have vacillated since, but their initial moves showed the unexpected
ways that markets can behave when inflation is rising, especially when many are already
expensive by historical measures.
This week, investors will gain greater insight into the inflation picture when the Commerce
Department updates the Federal Reserve's preferred inflation gauge, the
personal-consumption-expenditures price index. They will also track earnings from the likes of
Dollar General Corp. ,
Costco Wholesale
Corp. and Salesforce.com Inc.
The stakes are high for investors. Inflation dents the value of traditional government and
corporate bonds because it reduces the purchasing power of their fixed interest payments. But
it can also hurt stocks, analysts say, by pushing up interest rates and increasing input costs
for companies.
From early 1973 through last December, stocks have delivered positive inflation-adjusted
returns in 90% of rolling 12-month periods that occurred when inflation""as measured by the
consumer-price index""was below 3% and rising, according to research by Sean Markowicz, a
strategist at Schroders, the U.K. asset-management firm. But that fell to only 48% of the
periods when inflation was above 3% and rising.
A recent report from the Labor Department showed that the
consumer-price index jumped 4.2% in April from a year earlier, up from 2.6% in March. Even
excluding volatile food and energy prices, it was up 3% from a year earlier, blowing past
analysts' expectations for a 2.3% gain.
Analysts say that there are plenty of reasons why inflation won't be able to maintain that
pace for long. The latest year-over-year numbers were inflated by comparisons to deeply
depressed prices from the early days of the pandemic. They were also supported by supply
bottlenecks that many view as fixable and robust consumer demand that could dissipate once
households have spent government stimulus checks.
... ... ...
By comparison, the S&P GSCI Commodity Total Return Index delivered positive
inflation-adjusted returns in 83% of the high and rising inflation periods. "Commodities are a
source of input costs for companies and they're also a key component of the inflation index,
which by definition you're trying to hedge," said Mr. Markowicz.
At the same time, commodities are among the most volatile of all asset classes and can be
influenced by an array of idiosyncratic factors.
Charles Goodhart, the economist from the Bank of England, has just written an important book
arguing that worldwide demographic changes are going to result in a couple of decades of high
inflation. See Charles Goodhart, The Great Democratic Reversal: Ageing Societies, Waning
Inequality, and an Inflation Revival. Maybe the Journal could find someone to review it.
Maybe Ms. Yellen should read it.
(Douglas Levene)
Bruce Fegley
This article is naive, if not ridiculous, for several reasons. I name a few.
1st - the stock market is the best hedge against inflation over a long time period -
years, not daily, weekly, or quarterly. Especially with dividend reinvesting and with an
automatic buying plan like the DRIP plans offered by many companies at no or very low
cost.
2nd - Individuals can buy US government I-series savings bonds at NO COST directly from
the US Treasury, and while they do not completely hedge against inflation, they offer good
interest rates that beat bank interest and are completely insured.
3rd - Toyota and perhaps other car companies offer notes with higher interest than banks
but not FDIC insured. About 1.5% now.
One does not have to blow money away on bitcoin or hold gold, which is taxed as a
collectible and has assay fees on the front and back ends of any buy/sell transaction unless
one is buying coins which have a markup to begin with.
Theo Walker
Started buying I-bonds this month. The rates are great! Easily the best safe investment right
now.
Bryson Marsh
... why would you buy TIPS? The spread is a farce after all.
PHILIP NICHOLAS
Inflation is always sticky . In other words all the prices do not go down . Wages that are
increased , usually stay . Companies sense a new level they can pass on to consumers . And
the Government damage to energy prices will influence prices .
Bryson Marsh
Memory costs, data plans, and televisions are all examples that clearly demonstrate secular
price declines despite periodic increases.
Charles D
"Inflation Forces Investors to Scramble for Solutions"
Hundreds of millions of Americans are going to suffer as the Federal Government
inflates the national debt away over the next 10 to 15 years. Investors will figure it out,
but the little guy will get crushed once again. Oh well, we get the government we deserve.
They are all substantially down, one year from now; except Copper and financials which are
flat.
What does that say about the economy & inflation in one year?
Paul Smith
I am under the impression that the Social Security COLA is based on a September to September
comparison of the CPI-U. That is to say, for example, September 2020 CPI-U vs. September 2021
CPI-U. Is this not correct?
We have had inflation over over the past decade or so. As measured by the CPI-U, it has
hovered around 2 percent. Not a big deal to the Fed's economists. Cumulatively, however, it
adds up.
I have been retired for 16 years. Inflation has eroded the purchasing power of my fixed
pension by 25.5. Mercifully, I have other resources to make up the loss, but for people on a
fixed pension, so-called mild inflation can wreck it over time.
James Webb
Paul, one of the lower estimates for 2022:
"The Kiplinger Letter is forecasting that the annual cost-of-living adjustment for Social
Security benefits for 2022 will be 4.5%, the biggest jump since 2008, when benefits rose
5.8%. That would also be higher than the 3% adjustment The Kiplinger Letter predicted earlier
this year."
From SocialSecurity dot gov:
"To determine the COLA, the average CPI-W for the third calendar quarter of the most
recent year a COLA was determined is compared to the average CPI-W for the third calendar
quarter of the current year. The resulting percentage increase, if any, represents the
percentage that will be used to increase Social Security benefits beginning for December of
the current year. "
So the predicted 4.5-4.7% increase for 2022 will take effect December 31 this year.
Of course the calculation is not completed yet....
James Robertson
The Fed's inflation calculations have become increasingly "fuzzy" since the Boskin Commission
in 1995. The CPI ignores housing, food, and energy. Healthcare gets weighted at 3 percent,
though it accounts for 18 percent of expenditures. "Hedonic quality adjustment" is another
knob the Fed turns to "control" inflation. Inflation calculated by comparing the price of a
basket of goods this year to a basket of goods last year runs quite a bit higher than the
CPI; even higher if you include food, shelter, and energy in that basket.
James Webb
What's in the CPI?
-Food and Beverages (breakfast cereal, milk, coffee, chicken, wine, full service meals,
snacks)
-Housing (rent of primary residence, owners' equivalent rent, fuel oil, bedroom
furniture)
-Clothes (men's shirts and sweaters, women's dresses, jewelry)
-Transportation (new vehicles, airline fares, gasoline, motor vehicle insurance)
-Medical Care (prescription drugs and medical supplies, physicians' services, eyeglasses and
eye care, hospital services)
-Recreation (televisions, toys, pets and pet products, sports equipment, admissions)
-Education and Communication (college tuition, postage, telephone services, computer software
and accessories)
-Other Goods and Services (tobacco and smoking products, haircuts and other personal
services, funeral expenses)
Tim Adams
The core CPI which the Fed uses excludes food and energy. The Consumer price index which is
used for things like social security adjustments does not. These very similar but different
uses of the same acronym just adds to the confusion.
Industrial production rose 0.7% in April over the previous month, less than expected,
partly because manufacturing output growth slowed as auto companies struggled to get
parts for new cars.
While industrial production was up 16.5 percent from its level in April 2020 (the trough of
the pandemic), it was still 2.7 percent below its pre-pandemic (February 2020) level.
Capacity utilization for the industrial sector rose to 74.9 percent, but some 4.7
percentage points below its long-run (1972–2020) average.
Retail sales also stalled in April and, excluding food and fuel, sales fell 1.5%.
Taiwan is now becoming an obstacle to the American Empire's own imperial agenda.
For now, the solution being found is to force Samsung (South
Korea) to build a chip factory in the USA. But South Korea can only pay for others' sins
up to a point. There will come a time the USA will have to choose which one to lose: the
entire Korean Peninsula or Taiwan. My bet is they'll throw Taiwan under the bus long before
South Korea even starts to crack.
"... there's a growing sense that the forces behind the recovery will eventually feed through to higher prices if left unchecked. One harbinger could be the rally in commodities, with a key index of raw materials this month jumping to a five-year high. ..."
"... "If the stimulus continues, at some point it will become inflationary," said Sanjiv Bhatia, the chief investment officer at Pembroke Emerging Markets in London. "At some point, we believe it will become a problem." ..."
The prospect of tighter monetary conditions in emerging markets still hasn't changed the
overall calculus for many investors, with behemoths including Pacific Investment Management Co.
and BlackRock Inc. focusing on the growth story instead. Developing-nation inflation remains
near a record low, with the economic rebound making assets look "increasingly interesting,"
according to Dan Ivascyn, Pimco's group chief investment officer in Newport Beach,
California.
Yet there's a growing sense that the forces behind the recovery will eventually feed
through to higher prices if left unchecked. One harbinger could be the rally in commodities,
with a key index of raw materials this month jumping to a five-year high.
"If the stimulus continues, at some point it will become inflationary," said Sanjiv
Bhatia, the chief investment officer at Pembroke Emerging Markets in London. "At some point, we
believe it will become a problem."
For now, assurances from the Federal Reserve that inflation in the U.S. is unlikely to get
out of control have supported the bulls. The Fed appears in no rush to raise interest rates, a
move that would siphon capital out of emerging economies currently enjoying the windfall from
U.S. stimulus.
That major central banks currently view inflation as transitory should boost
developing-nation currencies as a whole, according to Henrik Gullberg, a London-based macro
strategist at Coex Partners Ltd.
MSCI Inc.'s emerging-market currency index has climbed to a record high, while the benchmark
equity gauge just posted its biggest two-day rally in almost two weeks amid a rally in energy
and technology shares. On Friday, risk assets got further support when U.S. job growth data
significantly undershot forecasts.
"On the one hand, the valuations of growth stocks look meaningfully less demanding after
recent underperformance coupled with earnings upgrades," said Kate Moore, the head of thematic
strategy at BlackRock in New York. "On the other, rising inflationary pressures from the broad
economic restart and low inventories should be supportive of cyclicals and commodity
producers."
The French version of Michael Lewis' book The Big Short is intitled Le casse du
siècle , which literally means the "heist of the century." This idea is
interesting, as going short can be regarded as finding the weak points of the financial system
and hacking into it.
However, that game is not easy.
Firstly, because "there is a difference between knowing the path and walking the path," as
Morpheus said to Neo. Indeed, even if many people seem to understand problems and to see the
answers, most of them will never dare to act. It is true for investors aware of heavy
speculation on capital markets, but also for so-called political leaders noting that the
trajectory of public debt is unsustainable. Many know what is going wrong, but how many of them
will try to do something about it?
The second difficulty is that the greatest trick Wall Street ever pulled was convincing the
world that an asset would never go down. Which means that even if one is willing to take a
stand against the financial system, there is still a high probability that he or she will ake
the wrong bet because of that misperception of risk.
There are a lot of things that can be learnt from past crises, and especially from the
events of 2007-2008. Today, most people in finance (apart from TikTok investors?) know that
investors like Dr Michael Burry or Steve Eisman made huge profits thanks to credit default
swaps on mortgage-backed securities or on collateralized debt obligations. But does it mean
that such a trade could easily be replicated?
The answer is "no" as going short on housing securitized debt before 2007 required to agree
to keep paying a premium while waiting for an event that never happened before. In fact,
everyone laughed at CDS buyers, as betting against the US residential market was seen as the
stupidest thing ever. In other words, it is not something that the average Joe would do, and
people should bear in mind that Burry even had to prevent Scion Capital's investors from taking
their money back as his scenario was regarded as pure madness.
The second problem was that investors willing to short the housing bubble had to properly
identify the source of hidden risks in the system. This problem could be summarized by what I
call "the Hubler paradox" (see The Great
Wall and the Big Short ).
Howie Hubler was a trader at Morgan Stanley, famous for making the second largest trading
loss in history. And it was all the more ironical as his analysis on RMBS securities was 90%
right. As he realized that many households would default on their mortgage everywhere in the
country, he decided to short risky BB tranches of CDOs while buying AAA tranches which were
supposed to be "risk-free."
The problem is that financial crises occur because risk was underestimated. Said
differently, they occur because of excessive concentration on assets bearing hidden risks. That
is what happened with AAA securities of RMBS or CDOs. The fact that many people suddenly
realized that those tranches were riskier than previously thought put the whole system in a
corner, with too many persons willing the leave the room at the same time using a small exit
door. The outcome was a massive spike of credit default swaps.
Meanwhile, part of the risk of BB tranches was already priced in. That does not mean that
their valuation did not drop after 2007, but the overall impact was less severe than for
so-called AAA securities.
Note that the mortgage delinquency rate peak was around 10% in 2009, meaning that most loans
were not affected by payment issues. Somehow the crisis may have never happened if upper
tranches had been rated AA instead of AAA.
How can we explain such a collective failure? We do know the answer thanks to decades of
academic research: herding behavior and positive feedback loops leading to severe imbalances on
capital markets, such as over concentration and increasing short volatility positions.
To summarize, opportunistic players had better focus on hidden sources of risks rather than
obvious sources of risks. Betting against obvious sources of risks can be profitable, but
assets embedding hidden sources of risks offer the best risk-to-return profile (i.e. the most
convex behavior).
Red Queens Narratives
A simple look at social media shows you that today almost everyone is able to identify
sources of risk in the system. And some people are even willing to bet against things like
Tesla, Peloton, ARK, bitcoin, dogecoin or whatsoever. Those are probably smart moves. But they
are also obvious sources of risk. They are at best the BB tranches of current capital markets.
So, what is the equivalent of AAA tranches?
I already answered that question in a previous post (see To
Be Passive Is to Let Others Decide for You ). Today, I believe that the biggest risk is the
excessive concentration on US equities, and especially on exchange-traded funds tracking large
cap indices.
For the past years, most fund managers have increased their exposure to the S&P 500 or
to the Nasdaq, mainly by being overweight on mega caps like Apple, Microsoft, Amazon, Alphabet
or Facebook. Worse, many participants have gone passive, buying tons of shares of large cap
ETFs such as SPY or QQQ.
In 2021, Apple or Amazon are regarded as risk-free names. Indeed, everyone knows that those
companies are unlikely to go bankrupt anytime soon. And since everyone loves them, then what
could possibly go wrong? Well, that is precisely what the story of securitized debt obligations
taught us. Once again, "the greatest trick the devil ever pulled was convincing the world he
didn't exist."
During the mid-2000's, most households did not default on their mortgage. However, some
defaults occur and one of the biggest crises ever occurred because most investors thought that
AAA tranches were risk-free.
Even if FAANGs are unlikely to fail, misperception of risk is tricky and dangerous.
Valuations are so stretched that there is no margin safety in case of serious bad news.
Besides, what will happen if everyone suddenly realizes that the time has come to reduce the
exposure to US mega caps? Will the market be able to absorb selling flows from ETFs and active
fund whatever their size?
Of course, people will answer that such a scenario is highly unlikely. That there will
always be a bid if people start to sell. To address that objection, I have already mentioned
that interesting Twitter thread on the absence of liquidity in the market when people start to
panic (see @FadingRallies ).
However, anyone willing to short SPY or QQQ must be ready to pay premium and/or to face
margin calls as long as it takes before something ugly occurs. And yes, it may seem crazy. But
somehow, such trade could be worth it.
Betting on a 25% drop of Apple's shares before July 16th would cost you a premium of 0.25%
of the share price. Meanwhile, the same bet on Tesla would cost 1.58% of the share price.
Despite that difference, most people would prefer to go short on Tesla rather than on Apple.
Probably, because there are obviously more fundamental reasons to bet against Tesla. And
perhaps also because investment professionals are fed up with Elon Musk while being indifferent
to Tim Cook. But we must never forget that "it's not personal, it's strictly business." What is
more, obvious risks lead to more expensive protections, and thus less convexity (i.e.
suboptimal strategies).
This entire post is not an investment recommendation. But it is interesting to bear in mind
that most people naturally underestimate the occurrence of extreme events. From a statistical
perspective, participants believe in Gaussian distributions, while asset prices are distributed
following power-tailed functions. The subprime crisis was an event that was supposed to happen
once in the universe lifetime according to securitization specialists, while it only took a few
years before the whole thing blew up.
Therefore, everyone is free to believe that US large caps will never crash. After all, this
is what it takes for a new "heist of the century," or at least of the past fifteen years. Once
you realize that, it will probably be too late to act.
Remember what Verbal Kint added about the devil at the end of The Usual Suspects ?
"... Mark Carbana, U.S. rates strategist at Bank of America, still expects U.S. rates to rise further especially if there is a strong reading for the Fed's preferred measure of inflation, personal consumption expenditures, due out next Friday. ..."
"... He expects Treasury yields to rise in the second half of the year ..."
In the U.S., inflation readings have been strong and the minutes of the last Fed meeting
released Wednesday showed there had been
some discussion about slowing bond purchases -- also known as taper talk.
... Mark Carbana, U.S. rates strategist at Bank of America, still expects U.S. rates to
rise further especially if there is a strong reading for the Fed's preferred measure of
inflation, personal consumption expenditures, due out next Friday. "Uncertainty around
inflation is the highest it has been in decades," he said, particularly around whether recent
high readings are temporary or due to changes in the underlying economy. He expects
Treasury yields to rise in the second half of the year , pushed higher by rises in yields
on inflation-protected Treasurys as the Fed starts to talk more seriously about tapering its
bond purchases.
For April 2021 the official Current Unadjusted U-6 unemployment rate was 9.9% down from 10.9%
in March, and 11.6% in February, January was 12.0%. It was also 11.6% October "" December 2020.
But It was 18.3% in June, 20.7% in May, and 22.4% in April. It is still well above the 8.9% of
March 2020 when unemployment rates started jumping drastically due to massive shutdowns due to
the Coronavirus.
Initial Jobless Claims tumbled (positively) to their lowest since the pandemic lockdowns
began, adding just 406k Americans last week (well below the 425k expected). This is still
double the pre-pandemic norms
y_arrow 1
Truthtellers 11 hours ago (Edited) remove link
Companies laid off an additional 400K people last week and they actually think we are
dumb enough to believe there is a labor shortage? That line of crap is obviously just a
ploy to get employee's to accept lower salaries.
I'll believe there is a labor shortage after 16 million jobs have been added and the
weekly initial claims number is zero.
Until then, I guess if you have a "labor shortage" you better get that pay up.
AJAX-2 13 hours ago (Edited)
Another 400K+ applying for 1st time unemployment benefits and yet they piss on my leg,
tell me it's raining, while proclaiming there is a labor shortage. Bu!!****.
PerilouseTimes 9 hours ago
Close to a million people a week were signing up for unemployment for a year and
unemployment has been extended. Wouldn't that mean at least 40 million Americans are on
unemployment not to mention all the people on welfare and disability? I think the number is
closer to 100 million Americans on the government dole and that doesn't count all the
worthless government jobs out there.
Normal 12 hours ago remove link
I'm on unemployment except California seems to have quit paying people on unemployment.
I tried every-which-way to contact them but there is no way in hell to get through to a
live person. I went and typed in how to speak with a real person at the EDD, and hundreds
of people have posted that they haven't been paid in 12 weeks. I spoke with their Cal-Jobs
representative and she said that many people haven't been paid since March of last year. I
think they are forcing the so-called unemployed to their Cal-Jobs site by not paying
them.
ay_arrow
NEOSERF 13 hours ago
Worst month during the GFC appears to be about 650K...we are only 50% below that....with
21 states preparing to end the extension, things will be fantastic in these numbers shortly
if not the real world...waiting for all the cold/flu season coughing and cold weather in
November...
As the credit strategist continues, "while it is easy to blame transitory factors, these
were surely all known about before the last several data prints and could have been factored
into forecasts. That they weren't suggests that the transitory forces are more powerful than
economists imagined or that there is more widespread inflation than they previously believed.
"
To be sure, all such "˜surprise' indices always mean revert so the inflation one will
as well. However as Reid concludes, "the fact that we're seeing an overwhelming positive beat
on US inflation surprises in recent times must surely reduce the confidence to some degree of
those expecting it to be transitory. "
Archegos' prime brokers initially attempted to try and avoid a market panic by coordinating
their sales of the massive blocks of shares their had accumulated on behalf of Archegos via a
complicated series of swap arrangements. But when Goldman Sachs and Morgan Stanley broke ranks
and opted to be the first out the door, Credit Suisse, which had the biggest exposure to
Archegos, was ultimately left with more than half of the $10 billion+ in losses that banks were
stuck with (while Hwang reportedly lost his entire 11-figure fortune).
Right now, it's not exactly clear what laws prosecutors suspect Archegos and the prime
brokers of breaking.
While authorities haven't accused Archegos or its banks of breaking any laws in their
dealings, the episode has drawn public criticism from regulators, as well as some inquiries
behind the scenes from watchdogs around the world. The implosion shows Wall Street has grown
too complacent about potential threats building up in the economy, Michael Hsu, the new
acting chief of the Office of the Comptroller of the Currency, said last week.
But the DoJ isn't the only agency poking around: Investigations are ongoing across the
globe.
The Securities and Exchange Commission launched a preliminary investigation into Hwang in
March, a person familiar with the matter said at the time. The agency has since explored how
to increase transparency for the types of derivative bets that sank the firm.
And in the U.K., the Prudential Regulation Authority has been asking firms including
Credit Suisse, Nomura and UBS Group AG to hand over information related to their lending to
Archegos, people familiar with the matter have said.
While investigators will undoubtedly focus on what happened, some believe that the real
concerns lie in current vulnerabilities in the world of equity finance. The team at Risky
Finance recently calculated that some $3 trillion in hidden Archegos-style exposure is out
there in the market, just waiting to explode if stocks sell off.
...
It should serve as a warning. 14 years ago, obscure corners of banking businesses became
hotbeds of regulatory arbitrage, speculation and leverage. The contagion of US subprime brought
the financial system to its knees. Now, after years of low or negative interest rates, equity
finance may have become a similar hotbed.
Inflation fears already roiled the market this week with the Nasdaq falling nearly 2%, but
one hedge fund founder is sounding the alarm over a potential 20% collapse that could be
sparked by the Federal Reserve signaling an end to accommodative pandemic-era monetary policy
later this year.
Satori Fund founder Dan Niles recently told Yahoo Finance that this week's
hotter-than-anticipated inflation data coupled with other central banks around the world
already coming off their easy money policies will likely corner the Fed into tapering its
accommodative policies sooner than expected.
"If you've got food prices, energy prices, shelter prices moving up as rapidly as they are,
the Fed's not going to have any choice," he said, predicting that the Fed could signal the
beginning of a move to wind down its monthly $120 billion a month pace of asset purchases by
this summer. "They can say what they want, but this reminds me to some degree of them saying
back in 2007 that the subprime crisis was well contained. Obviously it wasn't."
I can understand the frustrations and rage of certain folks.
If you're a worker on an oil rig, a truck driver, a policeman, or some such jobs, there's
bound to be moments when you're angry as hell. So, even though such people say crazy things
once a while, I can understand where they're coming from. They need to blow off steam.
But the professor class? These lowlife parasites sit on their asses and talk shi*. They
produce nothing and make a living by spreading nonsense. And yet, they act like they are
soooooooooo angry with the way of the world. If they really care about the world, why hide in
their academic enclaves?
Academia needs a cultural revolution, a real kind, not the bogus 'woke' kind made up of
teachers' pets.
Can it be wage driven inflation, when there is mass unemployment of the scale that we
observer. That's a stupid idea. Commodites driven inflation is possible as oil if probably past
its peak, but for now production continued at plato level and cars are getting slightly more
economical, espcially passenger car, where hybrids reached 40 miles er gallon.
Notable quotes:
"... The prospect of a rebound to 2% yields on the world's benchmark bond is alive and well. ..."
The prospect of a rebound to 2% yields on the world's benchmark bond is alive and
well.
Treasury-market bears found a deeper message within Friday's weak employment report that's
emboldened a view that inflationary pressures are on the rise, and could boost rates to levels
not seen since 2019. For Mark Holman at TwentyFour Asset Management, the sub-par April labor
reading indicated companies will need to lift wages to entice people back into the labor force;
he's expecting a break of 2% on the 10-year this year.
That level has come to symbolize a return to pre-pandemic normalcy in both markets and the
economy. The wild ride in markets on Friday suggests Holman likely has company in his views.
Ten-year yields initially plunged to a more than two-month low of 1.46%, then reversed to end
the day at 1.58%. Meanwhile, a key market proxy of inflation expectations surged to a level
last seen in 2013.
(Bloomberg) -- Senator Elizabeth Warren ripped the Federal Reserve for its oversight of
Credit Suisse Group AG in the run-up to Archegos Capital Management's implosion, arguing the
regulator badly blundered when it freed the bank from heightened monitoring.
Warren pointed out at a Tuesday Senate hearing that the Fed knew Credit Suisse had problems
estimating its potential trading losses because the agency had flagged the Swiss bank over that
issue in its 2019 stress tests. She questioned why Credit Suisse, under the watch of Fed Vice
Chairman for Supervision Randal Quarles, was among foreign banks released last year from
oversight by the Large Institution Supervision Coordinating Committee, which keeps tabs on
lenders that pose the greatest risk to the U.S. financial system.
"So you now agree that you made the wrong decision to weaken supervision?" the Massachusetts
Democrat asked Quarles, who was testifying before the Senate Banking Committee.
"We did not weaken supervision," he responded, saying the shrinking U.S. footprint of Credit
Suisse and other foreign banks prompted the Fed's decision. Quarles further argued that the
billions of dollars in losses that Credit Suisse suffered in relation to Archegos -- trader
Bill Hwang's family office -- weren't a result of faulty Fed oversight.
"The losses you are referring to didn't occur in the United States," he said.
Warren scoffed at the idea that missteps involving overseas lenders don't lead to U.S.
consequences. She reminded Quarles his term as vice chairman ends in five months, and said,
"our financial system will be safer when you are gone."
The University of Michigan consumer confidence index fell to 82.8 in May, from 88.3 in
April. More importantly, the current conditions index slumped to 90.8, from 97.2 and the
expectations index declined to 77.6, from 82.7.
Hard data also questions the strength of the recovery. April retail sales were flat, with
clothing down 5.1%, general merchandise store sales fell 4.9%, leisure & sporting goods
down 3.6% with food & drink services up just by 3%.
United States industrial production was also almost flat in April, rising just 0.4%
month-on-month in April pushed by a 4% slump in motor vehicle production. You may think this is
not that bad until you see that industrial capacity utilization came at 74.7% in April,
significantly below the pre-pandemic levels.
Employment also questions the "strong recovery" thesis. Non-farm employment is still down
8.2 million, or 5.4 percent, from pre-pandemic level yet gross domestic product is likely to
how a full recovery in the second quarter.
These figures are important because they come after trillions of dollars of so-called
stimulus and the entire thesis of the V-shaped recovery comes from a view that consumption is
going to soar. Reality shows otherwise. In fact, reality shows that retail sales showed an
artificial bump due to the wrongly called stimulus checks only to return to stagnation.
The rise in inflation further questions the idea of a consumption boom, certainly for the
middle class. Why? If we look at the 4.2% rise in consumer price index in April includes a 25%
increase in energy, a 12% increase in utility prices, a 5.6% increase in transportation
services, a 2.2% in medical services etc. As consumers perceive a higher rise in prices,
especially in those essential goods and services that we purchase every day, consumption
decisions become more prudent and propensity to save rises. This is something that we have seen
in numerous countries. In Japan, years of "official" messages about the risk of deflation
clashed with citizens' perception of cost of living, and tendency to save increased, rightly
so. Citizens are not stupid, and you can tell them that there is no inflation or that it is
transitory, but they feel the rise in cost of living and react accordingly.
Two things should concern us. First, the weakness of the recovery in the middle of the
largest fiscal and monetary stimulus seen in decades, and second, the short and diminishing
effect of these programs. A two trillion stimulus package creates a very short-term impact that
lasts less than five months.
1 play_arrow
Onthebeach6 1 hour ago
Stolen election, Marxist takeover, BLM burning, looting and murdering, defund the
police, cancel culture, corrupt MSM and big tech, Critical race theory tearing down western
civilisation and the constitution torn up.
What a time to be alive!
Stimulus is mainly theft by the elites but it has a secondary purpose to keep the
consumer passive until the regime has consolidated its position.
Consumers should be a lot more than just unhappy.
Lordflin 1 hour ago remove link
So called stimulus is just a payoff to cronies and special interest... with a token toss
of a few coins out the window to the people as the curtained carriage barrels past and on
down the road...
lambda PREMIUM 34 minutes ago
I have seen this happening before my eyes in Africa about 20 years ago. Some rich
"elect" with heavily armed guards was throwing coins from a truck and the villagers were
busy collecting them off the mud while chanting "long live" for the guy.
HorseBuggy 1 hour ago
Before the pandemic a lot of people slaved away for pay that barely covered their basic
needs.
All of a sudden they are not going to the slave work, they are getting better money than
when they were slaving and being abused and now you are telling them go back to slave away
or else!
It could be very depressing for a lot of people and to make matters a lot worse, a lot
of people became very political in everything and workplaces are full of tension.
Helg Saracen 10 minutes ago
The situation is similar not only in the United States. Now in developed countries it is
almost everywhere something like this. It's just that Americans are still surprised by this
(unlike the rest, not "special"). An old friend of mine had a small restaurant chain. Due
to the hysteria around the covids, he is now virtually bankrupt (not yet bankrupt, but
close to it). And he is not alone in such a situation. He had to fire most of the workers,
waiters. No profit, no jobs. There are no new and old jobs - people simply have no money
for a normal existence. Everything is very simple.
May beyes, but may there is will the Last Hurrah move up...
Even if the S&P 500 stays flat for the rest of 2021, this year would mark its third
consecutive year of double-digit gains. The index has only one such three-year period since
the dot-com bubble burst in 2000.
This week, LPL Research analyst Jeff Buchbinder said investors should expect stock market
gains to
slow significantly in the second half of 2021 as inflationary pressures and rising interest
rates weigh on investor sentiment.
Over the last decade or so, Sci-Hub, often referred to as "The Pirate Bay of Science,"
has been giving free access to a huge database of scientific papers that would otherwise be
locked behind a paywall.
Unsurprisingly, the website has been the target of multiple lawsuits, as well as an
investigation from the United States Department of Justice. The site's Twitter account was
also
recently suspended under Twitter's counterfeit policy, and its founder, Alexandra
Elbakyan, reported that the FBI
gained access to her Apple accounts .
Now, Redditors from a subreddit called DataHoarder, which is aimed at archiving
knowledge in the digital space, have come together to try to save the numerous papers
available on the website. In a
post on May 13 , the moderators of r/DataHoarder, stated that "it's time we sent Elsevier
and the USDOJ a clearer message about the fate of Sci-Hub and open science.
We are the library, we do not get silenced, we do not shut down our computers, and we
are many." This will be no easy task. Sci-Hub is home to over 85 million papers, totaling a
staggering 77TB of data . The group of Redditors is currently recruiting for its archiving
efforts and its stated goal is to have approximately 8,500 individuals torrenting the papers
in order to download the entire library. Once that task is complete, the Redditors aim to
release all of the downloaded data via a new "uncensorable" open-source website.
"... "Consider hiring me to do your assignment,"ť reads a bid from one auction site. "I work fast, pay close attention to the instructions, and deliver a plagiarism-free paper."ť ..."
"... ... For the final exam, Mr. Johnson, a course coordinator, said he used a computer program that generated a unique set of questions for each student. Those questions quickly showed up on a for-profit homework website that helped him to identify who posted them. ..."
"... About 200 students were caught cheating -- one-fourth of the class. Overall, cases of academic dishonesty more than doubled in the 2019-20 academic year at NC State, with the biggest uptick as students made the transition to online learning, according to the school. ..."
"... Surprised that the use of apps like Photomath and mathway weren't mentioned. Students can just take a photo of a math problem, specify the directions and copy the steps. ..."
"... I've taugh at the high school and college level. I recently taught engineering at a NC high school. Within a couple months of Zoom teaching, I realized that cheating was rampant. I had numerous blatant examples of straight copy-and-paste cheating. ..."
"... The colleges have been cheating students for decades selling worthless programs and false information to students at exorbitant rates. So who is surprised that the students learned to cheat themselves. ..."
"... What the article needs to cover is the enormous amount of cheating done on SATs, GREs, LSATs, etc. to get into prestigious universities -- especially by prospective students who'll be here on an F1 visa. ..."
"... Such cheating is legendary among some cultures but the PC crowd won't want to hear about that, will they. We need their electronics and their widgets and such best not to rock that boat. P ..."
A year of
remote learning has spurred an eruption of cheating among students, from grade school to college. With many students isolated
at home over the past year""and with a mass of online services at their disposal""academic dishonesty has never been so easy.
Websites that allow students to submit questions for expert answers have gained millions of new users over the past year. A newer
breed of site allows students to put up their own classwork for auction.
"Consider hiring me to do your assignment,"ť reads a bid from one auction site. "I work fast, pay close attention to the instructions,
and deliver a plagiarism-free paper."ť
... For the final exam, Mr. Johnson, a course coordinator, said he used a computer program that generated a unique set of questions
for each student. Those questions quickly showed up on a for-profit homework website that helped him to identify who posted them.
About 200 students were caught cheating""one-fourth of the class. Overall, cases of academic dishonesty more than doubled in the
2019-20 academic year at NC State, with the biggest uptick as students made the transition to online learning, according to the school.
Texas A&M University had a 50% increase in cheating allegations in the fall from a year earlier, with one incident involving 193
students self-reporting academic misconduct to receive lighter punishment after faculty members caught on, a university official
said. The University of Pennsylvania saw cheating case investigations grow 71% in the 2019-20 academic year, school data shows.
Dozens of cadets at the
U.S. Military Academy at West Point were caught cheating on an online calculus exam last year, sharing answers with each other
from home. The school said in April it was ending a policy that protected cadets who admitted honor code violations from being kicked
out.
... ... ...
In February, auction website homeworkforyou.com featured one student post looking for someone willing to do weekly school assignments,
exams and a project for a business class at York College in Queens, N.Y., over a two-month span. The winning bidder would also need
to pose as the student and respond to classmates in a group assignment. The student specified that an "A"ť was the desired outcome,
and that the "willing to pay"ť fee was $465.
By the next day, 29 bids had come in. The average was $479.41.
... Other popular websites that students use to get help""by submitting a question for an expert to quickly answer, or by searching
a database of previous answers""include Chegg and Brainly,
which said they have seen a big increase in users during the pandemic.
Mr. Piwnik said world-wide users grew to 350 million monthly in 2020, from about 200 million in 2019. The basic service is free,
while a $24 annual subscription is ad-free and gives access to premium features.
Chegg, a publicly held company based in Santa Clara, Calif., prides itself on a willingness to help institutions determine the
identities of those who cheat. It allows educators to report copyright information found on the site. The company saw total net revenue
of $644.3 million in 2020, a 57% increase year over year. Subscribers hit a record 6.6 million, up 67%.
A year of
remote learning has spurred an eruption of cheating among students, from grade school to college. With many students isolated
at home over the past year and with a mass of online services at their disposal academic dishonesty has never been so easy.
Websites that allow students to submit questions for expert answers have gained millions of new users over the past year. A newer
breed of site allows students to put up their own classwork for auction.
"Consider hiring me to do your assignment,"ť reads a bid from one auction site. "I work fast, pay close attention to the instructions,
and deliver a plagiarism-free paper."ť
... For the final exam, Mr. Johnson, a course coordinator, said he used a computer program that generated a unique set of questions
for each student. Those questions quickly showed up on a for-profit homework website that helped him to identify who posted them.
About 200 students were caught cheating -- one-fourth of the class. Overall, cases of academic dishonesty more than doubled in the
2019-20 academic year at NC State, with the biggest uptick as students made the transition to online learning, according to the school.
Texas A&M University had a 50% increase in cheating allegations in the fall from a year earlier, with one incident involving 193
students self-reporting academic misconduct to receive lighter punishment after faculty members caught on, a university official
said. The University of Pennsylvania saw cheating case investigations grow 71% in the 2019-20 academic year, school data shows.
Dozens of cadets at the
U.S. Military Academy at West Point were caught cheating on an online calculus exam last year, sharing answers with each other
from home. The school said in April it was ending a policy that protected cadets who admitted honor code violations from being kicked
out.
... ... ...
In February, auction website homeworkforyou.com featured one student post looking for someone willing to do weekly school assignments,
exams and a project for a business class at York College in Queens, N.Y., over a two-month span. The winning bidder would also need
to pose as the student and respond to classmates in a group assignment. The student specified that an "A"ť was the desired outcome,
and that the "willing to pay"ť fee was $465.
By the next day, 29 bids had come in. The average was $479.41.
... Other popular websites that students use to get help "by submitting a question for an expert to quickly answer, or by searching
a database of previous answers" include Chegg and Brainly,
which said they have seen a big increase in users during the pandemic.
Mr. Piwnik said world-wide users grew to 350 million monthly in 2020, from about 200 million in 2019. The basic service is free,
while a $24 annual subscription is ad-free and gives access to premium features.
Chegg, a publicly held company based in Santa Clara, Calif., prides itself on a willingness to help institutions determine the
identities of those who cheat. It allows educators to report copyright information found on the site. The company saw total net revenue
of $644.3 million in 2020, a 57% increase year over year. Subscribers hit a record 6.6 million, up 67%.
Colleges administrators and professors ban speakers with opinions that differ from their narratives, pull books they don't like
and can claim to be 'racist', and hire based solely on ethnic background.
But. the are SHOCKED when student cheat the system.
S 18 minutes ago
Surprised that the use of apps like Photomath and mathway weren't mentioned. Students can just take a photo of a math
problem, specify the directions and copy the steps.
Unfortunately for the students, the apps will solve problems in peculiar ways that stand out to the teacher. I've never had
so many students cheat of quizzes or tests. With most of them fully virtual even still, or home often because of hybrid, it's
almost impossible to get fairly produced student work. E
SUBSCRIBER 40 minutes ago
Lazy, lazy test makers. Write new questions (and please check them through a simple search first to make sure the answer
isn't readily available), timed testing, and assume the test takers all have full access to the internet. Stop assuming the
test taking conditions haven't changed. They have.
SUBSCRIBER 44 minutes ago
Back in the 1980's when I went to College there was a big uproar over Cliff Notes. Students copying word for word... But it
was known you could buy test questions, hire note takers for class, buy essays. The Frat boys had a well developed system! J
SUBSCRIBER 1 hour ago (Edited)
The cheating isn't limited to students.
Look at how our Congressional representatives behave in office!
Look at how career bureaucrats behave!
is it any wonder that cheating is so rampant? honesty and integrity are for suckers.
why worry about your conscience? there is no Deity, there is no higher moral law. All ethics are relative. As long as I get
ahead, what's the big deal?
There's no afterlife anyway, so what do I have to worry about? G
SUBSCRIBER 1 hour ago
Maybe they're studying to be our future national-level political leaders. G
SUBSCRIBER 1 hour ago
Call me old-fashioned, naive or worse but I always saw homework or studying for an exam as the mental counterpart to
physical exercise.
Sure, you can cheat.
But you cheat yourself in the long term when you don't develop the intellectual "muscles" that you need to compete and
succeed in adult life.
And you or your parents paid good money to get that degree and you bypassed four or more years of earning potential by
attending school.
Sounds like a pretty poor tradeoff to me. B
SUBSCRIBER 1 hour ago (Edited)
I've taugh at the high school and college level. I recently taught engineering at a NC high school. Within a couple
months of Zoom teaching, I realized that cheating was rampant. I had numerous blatant examples of straight copy-and-paste
cheating.
I confronted each student and most of them either played dumb, or denied it. I separately showed them each the website and
documents they stole from and told them this was their one and only freebie. A few parents confronted me but after showing
them the evidence they either dropped it or confronted their own child. A few parents thanked me for holding their kid
accountable, but most just complained or dropped it altogether.
After a couple more months of it continuing, and not getting enough support from the administrators, I quit, without yet
having secured a new job. I'll say this, it's worse than you think, and your child likely does it too, or knows of those who
do. It's become acceptable to them bc of pressure to get into college. M
SUBSCRIBER 1 hour ago
It is not new. Twenty-five years ago, my wife, a ranked academic, was given a paper supposedly written by one of her
students. She recognized it because she typed it after I wrote it ten years before.
When she confronted the student he admitted to buying it from a paper mill. Apparently the prof I wrote it for sold
his "collection" on retirement. Sadly, even then, the student got little more than a slap on the wrist once outed.
SUBSCRIBER 1 hour ago
The colleges have been cheating students for decades selling worthless programs and false information to students at
exorbitant rates. So who is surprised that the students learned to cheat themselves. M
SUBSCRIBER 1 hour ago
This is just a manifestation of the bankruptcy of our education system. Let's face it, for most students from
kindergarteners to PhD post grads, it is not about gaining knowledge, learning how to think or even mastering skills. It is
about checking blocks to build a resume. What does a diploma really mean? A checked block.
The system has known and participated in this for decades. What does it really matter how that block got checked?
SUBSCRIBER 1 hour ago
What the article needs to cover is the enormous amount of cheating done on SATs, GREs, LSATs, etc. to get into
prestigious universities -- especially by prospective students who'll be here on an F1 visa.
Such cheating is legendary among some cultures but the PC crowd won't want to hear about that, will they. We need
their electronics and their widgets and such best not to rock that boat. P
SUBSCRIBER 1 hour ago
I'm a lecturer at a Canadian university and am quite troubled by the use of textbook publisher's test banks in exam prep.
Students easily find the keys on line. Some students have stopped attending class. They know what will be on the exam. Of
course they learn nothing. Admin, faculty and students love the easy inflated grades. Academic wheels turn but there is no
learning. It's not a student problem, it's a bone lazy faculty problem. I write my own exams but many refuse. E
SUBSCRIBER 1 hour ago
Wonderful. Just what I want. Doctors, lawyers, accountants, engineers, urban planners, nurses, mechanics, dentists, and
other professionals who need to cheat to graduate.
SUBSCRIBER 1 hour ago
Hey you forgot another sizable group that will provide US with 'professionals' of questionable quality the AA crowd
that gets placed into universities based upon what?
How can one ignore all the noise in the media to focus on the crux of the situation,
implications, and the future outcomes?
One can only understand the impact of events better and envision the future by exploring
plausible scenarios and identifying signals which over time will enable one to size up the
probabilities of outcomes.
INTERNATIONAL -- MONETARY IMPERIALISM
Geopolitical relationships are frosty & flammable. All the narratives can be summed up
into a few SCENARIOS:
DECOUPLING. Two spheres of influence & supply chains. China & Russia led and
the Five Eyes led. Germany/EU?
WAR. The dollar empire launching a war against China &/or Russia. Iran?
The probabilities of these scenarios will be defined by the following SIGNALS:
NS2. Is Nord Stream 2 completed by September? If yes, a major geopolitical
victory for Russia. If the U$A can thwart this project then it still has the power and will
to shape Europe. If, on the other hand, Germany & Russia resists U$A's pressure and
complete the pipeline to operate, that would be an act of defiance unprecedented in postwar
history. This is the biggest clash between Russia and the United States since the end of
World War II. Let's see if European countries are less subservient to Washington.
De-DOLLARIZATION. China, Russia and other nations moving away from the US$ and trading
in their respective national currencies.
SANCTIONS. More sanctions from the dollar empire against China, Russia, Iran,
Germany... Counter sanctions, retaliations... impact on the global economy...
Any new scenarios & signals? What probabilities would one assign to various scenarios?
What will be the construct of scenarios and signals at the national level?
The Dollar Empire likes to initiate a conflict during Olympics when they are held in its
adversaries:
"... With its narrow focus on inflation expectations, the Fed seems to be fighting the last battle. Just because the Fed hasn't faced big trade-offs in recent decades doesn't mean trade-offs aren't coming or that they no longer exist. ..."
"... The long-term risks from asset bubbles and fiscal dominance dwarf the short-term risk of putting the brakes on a booming economy in 2022. ..."
Clinging to an emergency policy after the emergency has passed, Chairman Powell courts
asset bubbles.
...With its narrow focus on inflation expectations, the Fed seems to be fighting the
last battle. Just because the Fed hasn't faced big trade-offs in recent decades doesn't mean
trade-offs aren't coming or that they no longer exist.
Chairman Jerome Powell needs to recognize the likelihood of future political pressures on
the Fed and stop enabling fiscal and market excesses.
The long-term risks from asset bubbles and fiscal dominance dwarf the short-term risk of
putting the brakes on a booming economy in 2022.
Mr. Broda is a partner at Duquesne Family Office LLC, where Mr. Druckenmiller is
chairman and CEO.
Stefan Hofrichter, head of global economics and strategy at German fund management giant Allianz Global Investors, put
together a 10-point checklist for bubbles that he says was inspired by Charles Kindleberger, the author of the 1978 classic,
"Manias, Panics, and Crashes." In the table below, you can see what that list is, as well as the color-coded rating he
assigned to them.
At the end of April, the S&P 500
SPX,
0.20%
traded
at a cyclically adjusted price-earnings ratio of 37, a level not seen since the dot-com bubble of 1998, and the Nasdaq
Composite
COMP,
0.59%
was
at an even more-staggering 55. (European, Japanese and Asian equities, by contrast, are trading at or below their long-term
valuation multiples.) And he doesn't agree that the valuations are justified by low bond yields. "Low real yields have
historically typically implied rather low multiples, since low yields point to a slow-growth environment and a higher risk
of recession," says Hofrichter. "Monetary policy over the decades has lifted investors' risk appetite to extremes, powering
the run-up in equities," he says.
Also on the bubble list is that multiple asset classes are overvalued, noting that the term premium for longer-dated
sovereign bonds remains around 100 basis points below the long-term average. Another sign of bubbles is that they tend to
occur alongside the perception of a new era, which clearly is the case now with artificial intelligence. Ultra-easy
monetary policy, the advent of new financial instruments like special-purpose acquisition companies and cryptocurrencies,
and what he calls "overtrading" -- exponential price movements and signs of above-average risk taking -- also are
illustrative of bubbles.
So with all these bubble signs, isn't it a time to sell? "History has shown that bubbles only burst once central banks
start to hike rates or take other steps to rein in their 'easy money' policies." Until the Fed starts tapering its bond
purchases, "we think there is a reasonable chance that U.S. equities will continue bubbling up further. As a result, we
stay nervously 'risk on' for now, gravitating towards risk assets. And we have a bias for value stocks, which are trading
at a multidecade discount to growth stocks," he says.
Tim Duy, chief U.S. economist at SGH Macro Advisors, analyzed the wave of comments from Federal Reserve officials,
including Vice Chair Richard Clarida. "Notice how slowly the Fed is moving in the tapering direction, mixing in talking
about tapering with policy still being in a good place and not seeing substantial progress 'just yet.' This is by design.
It's enough that if you are watching for it and you know what to look for, you see the subtle shift but not enough to be
any kind of game-changer," he said. Duy expects the formal pivot toward tapering to be announced at the Jackson Hole, Wyo.
conference in August, with the actual reductions starting in the first quarter of 2022, or possibly the final quarter of
2021.
Fed Vice Chair for Supervision Randal Quarles has two speeches, the first on insurance regulation and the second on the
economic outlook.
The chief executives of Wall Street banks -- including Bank of America
BAC,
0.37%
,
Goldman
Sachs
GS,
1.01%
and
JPMorgan Chase
JPM,
0.35%
--
will testify in front of the Senate Banking Committee on the topic of oversight.
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Amazon
AMZN,
0.48%
struck
a deal to buy studio MGM for $8.45 billion, with Amazon saying the purchase rationale was the "treasure trove of IP in the
deep catalog that we plan to reimagine."
Dick's Sporting Goods
DKS,
14.98%
jumped
8% after hiking its earnings outlook. Zscaler
ZS,
12.18%
rose
11%, after the cybersecurity company's quarterly results and higher full-year outlook breezed past Wall Street
expectations. Retailer Nordstrom
JWN,
-5.54%
fell
5%, after reporting a wider loss than forecast.
After the close, graphics chip maker Nvidia
NVDA,
0.24%
,
database
software maker Snowflake
SNOW,
2.21%
and
identity management company Okta
OKTA,
1.07%
release
their latest numbers.
Need to Know starts early and is updated until the opening bell, but
sign
up here
to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.
Federal Reserve officials seem to be having some success in calming investor fears over inflation --- a chart from
Deutsche Bank illustrates why that was a tall task.
More On MarketWatch
Steven Goldstein is based in London and responsible for MarketWatch's coverage of financial markets in Europe, with a
particular focus on global macro and commodities. Previously, he was Washington bureau chief, directing MarketWatch's
economic, political and regulatory coverage. Follow Steve on Twitter: @MKTWgoldstein.
Grantham thinks we are in a big, multi-asset market bubble and there is going to be a monstrous crash. Grantham lays out his
overvaluation argument in a video I made with him in February. There are two issues I wish I had pushed him harder on then: the
difficulty of getting out of the market without missing years of gains, and why, if he has mastered the art of identifying and
dodging bubbles, the equity funds at GMO (the asset manager he founded more than 40 years ago, where he still serves as a
strategist) have not beaten their benchmarks convincingly.
expand_more
remove
Zola.22
A popover with more user information
34 MINUTES AGO
if you try to time the market, you must be skillful or lucky at least two times -- when you exit,
and when you re-enter. The risk of missing out on the early bull runs is also very great, so that
you might miss out on the best part of the gains.
As for me, I am sticking with my game plan, which has two guiding principles: (1) "it is better to
buy a wonderful company at fair prices, than a fair company at wonderful prices" (Buffet); and (2)
invest in stocks only what will not cost you sleep at nights during times of market turbulence, but
keep that much invested at all times (the Economist).
A popover with more user information
42 MINUTES AGO
Wasn't the whole point of QE to (1) increase bank reserves, thereby encouraging banks to make loans; and (2) reduce
interest rates, thereby encouraging borrowers to take loans to fund profitable investments and private consumption?
Before the pandemic, isn't it true that banks that received QE reserves largely did not use them to support increased
lending? If so, pre-pandemic QE would have meant the following outcomes: banks' balance sheets remained almost the same
(they swapped securities for reserves); central banks had larger balance sheets (they have acquired more assets and
issued more bank reserves); and no one else became any the richer or poorer. What effects did this scenario have?
In this round of QE, however, I understand that US banks have made additional loans because of their QE reserves, and
also the Fed has purchased securities from non-bank sellers. That must mean that the Fed has a larger balance sheet
(more securities, more bank reserves issued, and less funds because of purchases from non-bank sellers); banks have
larger balance sheets (more reserves, more loans owed to them, and more deposits owed to depositors); their borrowers
have loans that they can use to invest or consume and corresponding obligations; and non-bank sellers have bank deposits
that they can use to invest. This round of QE has thus increased M2 (more deposits owed or used by non-bank sellers and
borrowers) and bank debt owed by borrowers.
A popover with more user information
2 HOURS AGO
(Edited)
Grantham's claim that you could have pulled out of the market in 1928 is very misleading. To make money you would have had
to remain in cash for a DECADE. Many folks lost their shirt by 'correctly' anticipating the initial crash, but then jumped
back into a bear market that went even further south.
(From JK Galbraith's history of the 1929 crash, which is an astonishingly entertaining read and perhaps highly timely)
A popover with more user information
4 HOURS AGO
(Edited)
QE is a market-distorting mechanism, used by Central Banks to "manage" interest rates (straightforward) and Money Supply
(harder).
Managing Money Supply is difficult because of the number of variables that impact how much new money is created when the
Central Bank buys govt. debt securities and issues reserves in exchange.
If the govt. debt securities are purchased from a lending bank, creating more reserves that can be used to make loans, the
crucial question is whether the bank will actually increase its credit portfolio, or whether it is more concerned about
maintaining its reserve ratio? If it does increase lending, then which sectors of the economy will it lend to - consumer,
manufacturing, technology, real estate or financial (i.e. hedge funds)? Is there demand for new loans? The limitations on
QE through lending banks were laid bare in the 2010 - 2016 timeframe, when European banks were more focused on repairing
their balance sheets and reserve ratios, than extending new credit.
By contrast, when a Central Bank purchases govt. debt securities from a non-bank holder, there is a dual-impact that causes
the substitution of govt. securities in favor of other asset classes. First, the reduction in yields makes other asset
classes more attractive and second, the shrinking pool of govt. debt securities forces re-allocation of capital into other
asset classes. Which of these two variables has a greater impact is hard to say, as it depends on the asset re-allocation
decisions of tens of thousands of portfolio managers, working within the framework of investment parameters for hundreds of
thousands of investment funds.
Ultimately, the asset re-alloction away from govt. debt securities will inflate the value of asset classes all the way down
the risk spectrum, creating a bubble of value inflation in each successive risk-asset class until a new equilibrium is
established. This triggers the so-called "wealth effect", where investors borrow against, or liquidate, unexpected
investment gains, creating an increase in aggregate demand.
QE's impact on Money Supply is (relatively) easy to understand, but devilishly hard to quantify.
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Risk adjusted returns. How many individuals are invested in bonds? Not very many because there is essentially no return.
This means there is a very high concentration in the riskiest assets.
Also Mr. Armstrong individual investors have finite lives. If I am 70 and we experience a market that has no return for 12
years (1999-2011) and there is a 20-40% drawdown within that and I do not have any surplus income to reinvest in the market
as it goes down should I just always stay 100% invested. Money managers have to take all of this into consideration and
determine their allocations accordingly. Arm chair quarterbacking is quite easy.
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(Edited)
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You are wrong on bonds. Bonds have been great risk adjusted payers.
If you bought 30yr treasuries in 2000, you made almost 8% per annum for 2 decades with zero
risk.
Not bad. The S&P would only be slightly better.
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The riskless return on 30 years bought in 2000 is 6,5 %, not 8 %.
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The nature of the goal you are pursuing is critical to how you assess Grantham's arguments. If your goal is to beat the
performance of a benchmark index over a give period of time, then you very likely reject them.
However, if you seek to achieve long-term accumulation or (even more so), decumulation goals, then you are likely to agree
with Grantham's fundamental point that avoiding losses is more important than taking a lot of risk in overvalued markets to
eek out the last few points of return.
The math is clear: You start with 100. The market loses 25%, and you are at 75. To return to 100 you need a return of 33%.
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I like the article and it makes sense. Problem is that you could find someone with Jeremy's view (but
not commanding the same respect, I agree) each year for the past 10 years. I know people who have yet
to enter the market since 2009 and have yet to buy a house, waiting for the dip. And they kind of
missed the dip last year with equities and it didn't quite amount to a dip with house prices.
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Someone correct me if I'm wrong but
QE = money printing. Shouldn't take fancy empirical studies or mathematical models to figure out that
money printing depresses the value of cash and inflates the value of assets relative to cash.
I'm also very skeptical of the claim that QE puts too much money in "public" hands. What is meant by
the public? Sure, there were government handouts and unemployment benefits, that I would consider
public. But there were also equally if not larger massive government bailouts to large multinational
corporations and legislative pork to bureaucratic government entities. I don't really consider those
"public".
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So in other words, QE does cause inflation, but because the money only lands in the hands of the rich,
it is just assets the rich hold that have seen inflation?
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Student of ideas
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On QE it matters whether the bonds are purchased from banks or from non banks. If they were on the
balance sheet of JPM and are not replaced then there is no effect on broad money measures like M2. JPM
has simply exchanged a long maturity asset (bonds) for a short maturity asset (reserves at the Fed).
Both are government liabilities. If Pimco sells bonds to the Fed it gets a new deposit at JPM which
JPM balances by making a new reserve at the Fed. M2 is the sum of cash and bank deposits so it has
risen. Monetarist theory suggests that Pimco may use that deposit to buy something else, driving up
asset prices. In the first case JPM may not do anything else.
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Anders K
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QE certainly leads to a "hot potato" effect, but you can't just talk about "the public". QE cash ends
up with asset managers, but not households. So the inflation it leads to is with financial asset
prices, not goods and services. The BoE has written papers in the past about the linkage of the former
to the latter (a "wealth effect") but I think they've retreated from that now.
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The majority of money at Asset Managers belongs eventually to households though. Either the
PM at the AM will have to rebalance the portfolio - by buying more other bonds (bidding up th
prices) or the client can withdraw some cash and spend it on goods.
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(Edited)
Over the past 15 months thought I was a financial genius, until I realized that everything has gone
up. I guess its better to be lucky rather than smart.
On the other hand I am worried. Common sense tells me that the higher the market goes, the bigger the
eventual crash that will be. But there appears to be a disconnect between Fed (and other Central
Banks) outlook and the high levels of both the real estate and stock markets.
In that respect I agree with Larry Summers. There is too much money sloshing around in the system and
the Fed and other Central Banks should tap the breaks. You only need to look at the ridiculous prices
that Real Estate and Stocks have achieved to realize that the market is telegraphing two possible
scenarios: either the economy is going to grow at an an astounding rate going forward, or there's a
good possibility that inflation will be a big problem in the not to distant future.
I don't know which will happen (I suspect the latter) but sooner or later the market is going to turn
from euphoria to hysteria.
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You forgot one other possibility; that the market is pricing in low inflation, secular
stagnation, and persistently low discount rates. The reason why the CAPE index is high
relative to "historic averages" does not need to be to do with euphoria, hysteria or bubbles
and could instead be everything to do with fundamentals. These fundamentals may turn out to
be wrong, but I think it would be wrong to call this a bubble even in retrospect.
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Maybe "the market" doesn't folollow an economic logic but individual investors just
rely on gut feeling?
Retail investors just join the party,thinking stocks can only go up. Most asset
managers I talk to just tell me that debt is so high that CBs cannot raise policy
rates ever again. Should long-term rates (=market rates) rise regardless, then CBs
would control the yield curve. With interest rates on bonds thus capped at negative
real rates,equities markets might never fall again.
Sure consumer inflation might rise at some point, possibly even to compensate for
the vagaries of the printing press. But the not so independent central bankers may
still prefer letting inflation rip over bringing about a colossal recession.
Maybe that's why asset prices will keep rising.
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Moneybags
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The market is in a funny place as long as dividends are exceeding bond yields (before buybacks) That
said, owning real assets in a time of excessive money printing and rising inflation is a better place
than following a purist's inclination to sell up and own cash.
The whole talk about bubbles should be addressed to the Fed in the first instance.
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On QE, isn't it the case that Pimco's clients only have cash to the extent that the Treasuries were
purchased from Pimco and not from the Fed? And wouldn't that not be the case as much if there had
been significant new issuance from the Fed? And has there not in fact been such significant new
issuance?
I thought the whole point of QE is that it is "sterilised" in this way so as not to spike CPI. Which
would certainly appear to have worked. Which then leads on to: if the above is the correct
explanation of QE, why has CPI been flat on its back until v recently?
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The difficulty in identify bubbles is because economists today make no distinction between values &
prices.
The classical economists like Ricardo had a labour theory of value to explain prices.
Individual commodities were assumed to have a natural price based upon their actual labour time,
direct & indirect, that went into their production. Market prices driven by supply & demand oscillated
around these natural prices.
But Ricardo accepted Say's Law & rejected the general glut theory supported by the likes of Malthus,
who greatly influenced Keynes.
For Ricardo there could only be over & under production at commodity/industry level.
The general glut theorists understood that the circulation of capital could be disrupted; that supply
did not automatically create its own demand.
Ricardo understood there were problems with his labour theory of value though.
It meant that there couldn't be an exchange of equivalents for profits to be made; workers must be
paid less than the value they created (hence the Ricardian socialist school).
It also couldn't explain why the price of fine wine aged in oak would sell at a higher price than wine
that hadn't been matured.
The LTV had to be corrected or rejected.
The neo-classicals embraced marginalism & prices are supposedly explained by prices.
Problem is there's no way to identify bubbles.
Rather awkwardly for the capitalists Marx solved the problem with the classical LTV.
He explained that as well as commodities having labour values based upon their concrete labour time,
the tendency for the rate of profit to equalise gives commodities 'prices of production'.
That only in aggregate do market prices equal aggregate prices of production which equal their labour
value equivalents, & that this is only across the business cycle.
It will only be by chance that a commodity sells for its labour value equivalent, supply & demand
market prices will oscillate around their 'prices of production'.
They go to market to see how much of society's finite labour time they can claim.
None of this explains asset price bubbles though, but it provides the foundation.
By accepting the role of the market in forming 'natural prices' that are not tied to an individual
commodity's labour time, we can see that a credit system, by separating the act of purchase from
paying, permits leverage, & so aggregate market prices inflating above their value equivalent.
A credit/debt fuelled asset price bubble.
Historically the credit system could only leverage so far as the value of the national currency was
tied to a fixed weight of gold (which takes a set amount of labour time to produce).
Too much token or credit money resulted in gold flight.
Central banks had to intervene to maintain the value of their money, & so pop the bubbles.
Since 1971 they haven't had to do this.
Rather they have been complicit in their creation & now do all they can to stop them deflating.
In otherwords, they continue to push market prices above their values.
The big question is how long they can deny the law of value?
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It's plagiarism if you don't cite your source:
The Value of Everything: Making and Taking in the Global Economy
Book by Mariana Mazzucato
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Trutheludes
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(Edited)
On Jeremy Grantham
Often successful genius is a flash in the pan.
Intelligence is a function of times; times pass, and it joins mediocrity. Jeremy Grantham has had his
day and should call it a day.
Success is random but passes on as planned intelligence. Spectacular failures too happen in spite of
intelligent planning – funds run by Nobel Laureates failed, for example.
In fact, most great men in history were geniuses and failed eventually.
Truth is, myriad forces at work are just too formidable for human intelligence to comprehend and
control.
Remain humble and aim small. You will be successful. Buy index ETFs, don't quit; markets might fall
but will rise again. And when you will look back years later, you will see a rising trajectory, albeit
broken at several places.
.
On QE
"In Pimco's clients' balance sheet, a deposit of $100 is substituted for the Treasuries -- with which
they can buy riskier assets."
But was not that $100 already there, with which they bought Treasuries in the first place? They bought
Treasuries and then sold them; they paid $100 and got them back. Where is the new money – except for
small buying/selling profit?
So, I am sorry QE does not add to money with the public. Fed has only bought Treasuries in a
circuitous way and monetized the government deficits by proxy.
Fed buying Treasuries lowers the rates, which might not happen because investors would demand higher
yields. Fed's acceptance of paltry yields pushes the interest rates down.
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PS. By the way Robert, I read reviews of Mandelbrot's The (Mis)Behaviour of Markets: A Fractal
View of Risk, Ruin and Reward. It is a very formidable and humbling book. It is on my buy list.
Thanks for recommending it.
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James Peach
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A bank making a profit does not lead to new money, except where it distributes retained
earnings to shareholders in the form of new deposits.
On your point about QE, I think you're right, the new deposits were already created when the
bank bought the treasuries, which predates the FED's QE operation. But the second question
is: would the bank have purchased these USTs if it did not anticipate a QE operation. If the
answer to that question is no, then you can make a reasonable argument that the QE operation
did lead to an increase in broad money/M2.
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Enter the Winter
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Without clear specification of counterfactuals, none of this talk about whether a
particular operation "does" or "does not" "create money" means anything to me at
all.
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high rate tax payer
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selling out and then repurchasing also has transactional costs which are not insignificant once you
count in capital gains tax on the gains.
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Danmalin
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What is the purpose of QE?
According to the ECB website it is 'to put downward pressure on the term structure of interest rates'.
The BoE website states that 'the aim of QE is simple: by creating this 'new' money, we aim to boost
spending and investment in the economy'.
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FKN
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8 HOURS AGO
There is almost no industry with as much transparency on performance and comparability than asset
management. There is also no industry with as much evidence of LACK of skill in delivering performance
that exceeds benchmarks:
Yet the industry thrives and practitioners make vast fortunes in the process of destroying value.
GMO is a case in point. The performance on the US equity factsheet that you highlight shows that the
portfolio has underperformed 9 out of the last 10 years.
The benchmark free allocation fund that you highlight has returned 4.2% (!) per year over the last
years and is basically a macro hedge fund with 17% in equity long/short strategies, 43% in
"alternative" strategies and its largest position is 20% EM; i.e. it is not representative of an asset
allocation fund at all. Their Global Asset Allocation Strategy has underperformed 9 out of the last
years with the only annual period of outperformance being in 2011.
Yet year in, year out Jeremy Grantham and many like him, get to expound their views as if they are
gurus to be listened to and emulated and cash their multi-million dollar paychecks.
Every investor should thank their lucky stars for John Bogle and Vanguard for changing the whole
nature of the business by not only educating and offering investors the passive alternative but in the
process lowering active fees across the industry.
I think journalists who give active managers, selling unrealisable dreams, the forum, do their readers
a huge disservice.
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Maybe the real treasure was the fees they collected on the way.
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8 HOURS AGO
Dr Lacy Hunt is ex deputy chair of the Texas Fed and an expert on Federal Reserve policy. He has
written extensively on the difference between QE and "true MMT" ( which is effectively helicopter
money) which in turn requires making Fed reserves legal tender and that in turn requires a change to
the Fed Reserve Act.
His argument, explained in detail midway through the Q1 2020 quarterly report, appears to conflict
with the "QE puts money in the public's pockets " argument the FT appears to be making?
I would welcome your comment on Hunt's line of reasoning? Clearly M2 has indeed increased dramatically
but has been offset by falling velocity.
https://hoisington.com/pdf/HIM2021Q1NP.pdf
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(Edited)
It isn't, however, difficult to identify a badly overpriced market. It is extremely easy in
retrospect and it is easy in real time. If you graph them, they look like Himalayan peaks coming
out of the plateau.
if I look at the first chart I see an unmistakable himalayan peak emerging in 2014. Yet selling out in
2014 and sitting at the sidelines for now 7 years and counting wasn't the best move. Case in point:
it's not that easy to time the market.
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RE QE: shocking, in a way, that it is unclear how a policy avidly pursued by the major Central Banks
actually works, or indeed is supposed to work. It is not sold as a policy designed to bid up existing
assets but Central Banks can't determine what assets the private sector chooses to buy. or force them
to invest in the creation of new assets.
On the Money supply it is more useful to look at the asset side of the Balance sheet. In the EA we
can see that most of the growth in bank assets is via the purchase of Government bonds,while the
growth in spending to the private sector has been modest and is slowing. So QE is not monetary
financing but pretty close to it as its main function is to help reduce the cost of servicing Govt
debt.
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(Edited)
Reflecting on the prior two cycles for what's to come is a losing strategy (especially mean
reversion). Study the 1950s and the Bretton Woods Accord - shifting monetary policy frameworks will
break down a lot of correlations from the prior cycles.
As for QE:
the treasury is
auctioning debt almost daily..bid to cover ratios on 42-week bills consistently exceed 3. The Fed is
literally buying treasury securities at their theoretical peak. This isn't QE anymore - this is debt
monetization. Treasury is using these funds to pump the "lower end" of the income distribution in the
form of direct deposits, enhanced unemployment and tax breaks.
Is this inflationary? Not yet. Household savings are incredibly high. The supply side is the problem.
But what did anyone expect to happen when decoupling from China?
What happens to the DXY when the FED stops its asset purchases? Historically - higher yields equals
higher dollar. Will this hold given the extraordinary debasement?
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QE was intended to work bottom down from Central Banks, Banks, Corporations and finally end up in
consumer's hands.
If central banks bought bonds from commercial banks, funds available for lending increased for the
latter.
Now, commercial banks lent to corporations with the intention to increase capital spending in an easy
financial conditions environment.
Subsequently corporations drove the funds to buybacks and dividends therefore inflating stock prices.
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JM2845
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If you're going to use this logic to promote sloshiness, you need to consider what happens when the
treasury issues bills or bonds. A second after JPM sells treasuries to the Fed, 2 seconds after it
bought them from Pimco, it buys $100 worth of treasury bills issued by the US treasury. If you apply
this framework, you should look at all operations that change banking sector liquidity, not just the
parts that suit your argument.
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ArioMike
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9 HOURS AGO
Delighted you keep talking to Jeremy, Robert.
I don't like whiskey (or whisky), and my bed is one I cannot hide under. But over December and January
in my largest retirement fund, where I have SAA discretion (I view it as strategic
risk
allocation,
rather than asset) I sold lots of equity and am now over 50% cash and linkers. It can be done.
I have never done/supported TAA over my investment career, and view my decision as an asset owner one,
not an investment manager one.
Which leads me to offer an answer to the two issues you wish you had pressed him on. It has
historically been good practice for asset owner clients to mandate close to zero cash in a mandate.
Most managers are rubbish at market timing (see my TAA comment above), and it is foolish to give them
rope to hang the client's portfolio with. And it is hard for asset owners to have the skills (and
organisational flexibility) to tilt towards (say) value when they think "value risk" vs "growth risk"
is underpriced.
Very few investment managers are incented to make the big calls we are talking about. The asset owners
with the necessary time horizon are the only ones who can do it. (Or they need to identify the skill
of the few JGs that exist and appoint them for long enough to harvest the fruits of those skills). And
in fact these guys are not investment managers (who manage portfolios), rather they are strategic risk
managers.
Happy to elaborate offline, Robert. Quite a few of your FT colleagues know who I am...
PS The world is in a BNPL Ponzi scheme, debt is the politician's friend, and there are few guardrails
there. Central banks are probably fighting the last war (inflation), and not rearming to prevent the
next one (correlated, big, risk crystallizations). Think Archegos and friends...The best global Risk
Mitigation effort is the Paris Agreement, and implementation there is not exactly in high gear.
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Marc
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I tend to agree with Jeremy as well but my move has been more along the lines of 15% cash and
"safe" stocks. So, for example, I would be curious to know why you wouldn't think that a name
say like Nestle, which gives you a 2.5% dividend yield in a country with negative rates
wouldn't"t be more appealing than holding cash? Even during the GFC, when it had a run of 50%
in the previous 2 years to its peak, it only went down c20% and was back near its previous
peak within 2 years. It also feels like this time around, with no visibility on yields
anywhere already being programmed into the medium term, a turn to these kind of value stocks
with sustainable dividends will be more immediate and that these types of stocks may suffer
even less than after the GFC.
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I have a similar strategy, in that I have created a cash pool which is sufficiently
large to cover my outgoings over the next 5 years, though I am reluctant to invest
in a single dividend yielding stock. Warren Buffet provides a strong rationale for
why an index is preferable to single stocks (
https://www.cnbc.com/2020/05/22/warren-buffett-most-people-shouldnt-pick-single-stocks.html
).
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Why does Buffet himself holds individual stocks rather than indexes ?
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You are prudent and of course also technically correct. Also, agree it is a giant ponzi
scheme.
However, curious to know your thoughts as to why you believe the Fed would allow the S&P to
fall by a large margin (say >20%), triggering contagions?
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ArioMike
I have found much comfort in your comment as I thought that I am so dumb for holding 70% in
cash, no literally, cash. And the point about getting "shot", well, I made an email and told
them I will underperform but their capital is safe.
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I agree that Fed might lose the control: much depends on the continuation of the status of
the dollar as the main reserve currency. If this position continue to weaken all beta are
off.
What would happen to the financial system if the Fed stopped printing massive amounts of
money for stimulus and debt service? Williams explains,
" You could see financial implosion by preventing liquidity being put into the system. The
system needs liquidity (freshly created dollars) to function. Without that liquidity, you
would see more of an economic implosion than you have already seen. In fact, I will contend
that the headline pandemic numbers have actually been a lot worse than they have been
reporting. It also means we are not recovering quite as quickly. The Fed needs to keep the
banking system afloat. They want to keep the economy afloat. All that requires a tremendous
influx of liquidity in these difficult times."
So, is the choice inflation or implosion? Williams says, "That's the choice, and I think we
are going to have a combination of both of them. .."
" I think we are eventually headed into a hyperinflationary economic collapse. It's not
that we haven't been in an economic collapse already, we are coming back some now. . . . The
Fed has been creating money at a pace that has never been seen before. You are basically up
75% (in money creation) year over year. This is unprecedented. Normally, it might be up 1% or
2% year over year. The exploding money supply will lead to inflation. I am not saying we are
going to get to 75% inflation -- yet, but you are getting up to the 4% or 5% range, and you
are soon going to be seeing 10% range year over year. . . . The Fed has lost control of
inflation. "
And remember, when the Fed has to admit the official inflation rate is 10%, John Williams
says, "When they have to admit the inflation rate is 10%, my number is going to be up to around
15% or higher. My number rides on top of their number."
Right now, the Shadowstat.com inflation rate is above 11%. That's if it were calculated the
way it was before 1980 when the government started using accounting gimmicks to make inflation
look less than it really is. The Shadowstats.com number cuts out all the accounting gimmicks
and is the true inflation rate that most Americans are seeing right now, not the "official"
4.25% recently reported.
Williams says the best way to fight the inflation that is already here is to buy tangible
assets. Williams says,
"Canned food is a tangible asset, and you can use it for barter if you have to. . . .
Physical gold and silver is the best way to protect your buying power over time."
Gold may be a bit expensive for most, but silver is still relatively cheap. Williams says,
"Everything is going to go up in price."
When will the worst inflation be hitting America? Williams predicts,
"I am looking down the road, and in early 2022, I am looking for something close to a
hyperinflationary circumstance and effectively a collapsed economy."
Join Greg Hunter of USAWatchdog.com as he goes One-on-One with John Williams, founder of
ShadowStats.com.
2 play_arrow 1
Nikki Alexis 7 minutes ago
John Williams warning about hyperinflation is like Peter Schitt telling me stocks are
going to crash. It's coming, it's coming! Boy crying wolf.
Cautiously Pessimistic 59 minutes ago
Accounting Gimmicks. Election Gimmicks. Gender Gimmicks. Science Gimmicks. Rule of Law
Gimmicks.
America has become one big fun house of gimmicks.
Time for a RESET.
NoDebt 54 minutes ago remove link
Yeah, the Reset Gimmick. Where they fundamentally transform themselves into a permanent
position of power. Never mind that they'll kill millions to achieve it.
Samual Vimes 47 minutes ago (Edited)
What about gutting primary dealers by buying T bills directly ?
Doyle Lonnegan to Johnny "Hooker" Kelly in the movie The Sting: "Your boss is quite the
card player Mr. Kelly. How does he do it?"
Kelly to Lonnegan: "He cheats."
philipat 2 days ago
It's appropriate that the entirely useless ex-PM Cameron got taken by this guy and tried
to use his influence to access free money for him from The Treasury as an "advisor"..He
didn't get any.
The Fed never had control, just s bunch of shysters running a long term hybrid ponzi
scheme.
Lordflin 54 minutes ago (Edited)
The Fed is losing control...
I suppose that is true... as the function has been to drain the people's wealth into the
coffers of the few...
The Real Satoshi 29 minutes ago remove link
Sad that Greg Hunter got kicked off youtube.
gregga777 12 minutes ago (Edited)
He is in great company, though. Anyone who offends the Marxist narratives (Politically
Correct, Multicultural, Affirmative Action, Diversity, Feminist, LGBTQQ, etc.) gets kicked
off YouTube.
pmc 36 minutes ago (Edited) remove link
...As Kissinger said "The illegal we do immediately; the unconstitutional takes a little
longer."
A growing economy has helped lift oil prices 31% this year.
Jesse Felder was cited in MarketWatch's
Call
of the Day
for his opinion that energy is the neglected sector of the stock market even though it has been outperforming other
sectors since last fall. (You can read Felder's entire posting
here
.)
He pointed out that energy stocks make up a smaller percentage of the S&P 500
SPX,
1.31%
than
they did 20 years ago. Looking at numbers provided by FactSet, it appears Felder expressed this phenomenon mildly. As of the
close on May 19, the S&P 500 energy sector made up 2.85% of the index's market capitalization, down from 6.95% 20 years earlier.
The collapse in crude oil prices from the summer of 2014 through February 2016 was enough to push some energy companies out of the
S&P 500 -- their market values had declined too much to remain in the benchmark large-cap index. And the worst point of the COVID-19
crisis for financial markets even led to forward-month oil futures contracts falling below zero in April 2020. (The price of West
Texas crude oil per continuous forward contract
CL00,
-1.93%
was
up 31% for 2021 to $63.35 on May 19, according to FactSet.)
The S&P 500 now includes only 23 energy stocks. Our look at the sector will be broadened to the 63 energy companies in the S&P
Composite 1500 Index
SP1500,
1.19%
,
which
is made up of the S&P 500, the S&P 400 Mid Cap Index
MID,
0.52%
and
the S&P Small Cap 600 Index
SML,
0.25%
.
Here's how the 11 sectors of the S&P 1500 have performed this year through May 19 and also since the end of 2019 and since the end
of 2015:
Trump represented a FACTION
of the establishment. Which one? He did their bidding and in the process alienated other
factions. The other factions worked together to get him replaced. There are factions within
neocons, neoliberals and establishment. It is a nuanced and complex structure, not
monolithic. It is misleading to state, "he publicly broke away from the American oligarchy's
class interests".
Trump's biggest MISTAKE was that he didn't build a good sounding board of advisors. He
surrounded himself with his family members and believed his orders will be implemented like a
corporate president. Jared Kushner is a Bilderberg. So Trump was connected to the global
syndicate and part of the swamp.
The unipolar order ended in 2014/15 and the multipolar order is establishing. The U$A or
NATO can't launch a foreign war like they did in Libya. Russia and China have warned the
Financial Empire and defined the redlines. This is the reason behind Trump not launching a
new major foreign war. Will Biden launch a new war? However, Trump did launch hybrid wars in
Venezuela, Bolivia, Belarus,... Trump didn't break from FOREIGN adventures.
During Trump's term:
– How many bombs were dropped?
– How much new DEBT was created?
– How much did the money supply increase by?
– What happened to the trade deficit?
The account of the 3 months of the Biden team is this: bad employment numbers, retail
spending flattening, inflation galloping in many sectors, a border crisis, rockets and
explosions in the Middle East, and, above all else, a week of shocking gas shortages all over
the Eastern seaboard. So really, this poor performance can only be better. But could it have
been worse? hardly. They bungled everything they touched, and did not touch that needs to be
addressed. Namely, lockdowns, masks, distancing: scores of published scientific studies
informs that these are completely futile. They should be lifted. And the Fauci-CDC-SAGE (UK)
- official pro-pseudoscience cabal should be fired everywhere. Real science and undistorted
statistics should inform people, so they understands that they were duped for a year by the
media controlled by Democrats-liberals. Even the WSJ infects people with numerous,
ill-written articles on Covid, which is a shame from this medium.
The market is getting wobbly. The high flyers (Tesla, Bitcoin, Lumber) are down Bigly, the
VIX is increasing, Tech is weak, commoditires are showing signs of weakness while PMs are
showing strength. Every day that exit door looks a little smaller.
Silenus 2 hours ago (Edited)
The stock markets have kept reaching all time highs even though economic activity is well
below where it was in 2019. There is large-scale unemployment, supply chain problems, worker
unrest etc. In other words, there is no reason that stock markets should be at all time
highs.
The only reason for these valuations is hopium combined with easy money policy, i.e.
speculation.
A crash is definitely possible, and if not a crash, then long-term, grinding
stagnation.
Weihan 2 hours ago remove link
Optimism, pessimism, schmepticism. WHO CARES?! None of this matters because there are NO
markets! There is only central bank manipulation and corruption. Whatever outcome they want,
they will get.
Rentier88 2 hours ago (Edited)
"Peak Wall Street Optimism Is Now Behind Us: It's All Downhill From Here"
Never underestimate all the stupid people who speculate (since it isn't investing) these
days, robinhood fools come to mind.
CthulhuNoLivesMatter 4 hours ago (Edited) remove link
You are supposed to invest in things you understand and have confidence in.
Where should I invest my money according to the ZH posters?
drjd 4 hours ago
Yourself.
CthulhuNoLivesMatter 3 hours ago
I'm working on myself right now. Doing intermittent fasting. Also been doing some self
work involving applying stoic philosophy to my life.
If anything, the relative performance of the U.S. stock market's various style and sectors
suggests the bull market will stay alive and well for at least a few more months. This cheery
forecast is at odds with the widespread opinion that value stocks' relative strength is an
early warning signal of market weakness.
Who Bought the $4.7 Trillion of Treasury Securities Added Since March 2020 to the
Incredibly Spiking US National Debt?by Wolf Richter • May 17, 2021 •
119 CommentsThe Fed did. Nearly everyone did. Even China nibbled again. Here's who
holds that monstrous $28.1 trillion US National Debt.By Wolf Richter for WOLF STREET .
The US national debt has been decades in the making, was then further fired up when the tax
cuts took effect in 2018 during the Good Times. But starting in March 2020, it became the
Incredibly Spiking US National Debt. Since that moment 15 months ago, it spiked by $4.7
trillion, to $28.14 trillion, amounting to 128% of GDP in current dollars:
But who bought this $4.7 trillion in new
debt?
We can piece this together through the first quarter in terms of the categories of holders:
Foreign buyers as per the Treasury International Capital data,
released this afternoon by the Treasury Department; the purchases by the Fed as per its weekly
balance sheet; the purchases by the US banks as per the Federal Reserve Board of Governors bank
balance-sheet data; and the purchases by US government entities, such as US government pension
funds, as per the Treasury Department's data on Treasury securities.
Foreign creditors of
the US.
Japan , the largest foreign creditor of the US, dumped $18 billion of US Treasuries in
March, reducing its stash to $1.24 trillion. Since March 2020, its holdings dropped by $32
billion.
China had been gradually reducing its holdings over the past few years, but then late last
year started adding to them again. In March, its holdings ticked down for the first time in
months, by $4 billion, bringing its holdings to $1.1 trillion. Since March 2020, it added $9
billion:
But Japan's and China's importance as creditors to the US has been diminishing because the
US debt has ballooned. In March, their combined share (green line) fell to 8.3%, the lowest in
many years:
All foreign holders combined dumped $70 billion in Treasury securities in March, bringing
their holdings to $7.028 trillion (blue line, left scale). But this was still up by $79 billion
from March 2020.
These foreign holders include foreign central banks, foreign government entities, and
foreign private-sector entities such as companies, banks, bond funds, and individuals. Despite
the increase of their holdings since March 2020, their share of the Incredibly Spiking US
National Debt fell to 25.0%, the lowest since 2007 (red line, right scale):
After Japan & China, the 10 biggest foreign holders include tax havens where US
corporations have mailbox entities where some of their Treasury holdings are registered. But
Germany and Mexico, with which the US has massive trade deficits, are in 17th and 24th place.
The percentages indicate the change from March 2020. Note the percentage increase of India's
holdings:
US government funds hit record, but share of total debt drops further.
US government pension funds for federal civilian employees, pension funds for the US
military, the US
Social Security Trust Fund , and other federal government funds bought on net $5 billion of
Treasury securities in Q1 and $98 billion since March 2020, bringing their holdings to a record
of $6.11 trillion (blue line, left scale).
But that increase was outrun by the Incredibly Spiking US National Debt, and their share of
total US debt dropped to 21.8%, the lowest since dirt was young, and down from a share of 45%
in 2008 (red line, right scale):
Federal Reserve goes hog-wild: monetization of
the US debt.
The Fed bought on net $243 billion of Treasury securities in Q1 and $2.44 trillion since it
began the bailouts of the financial markets in March 2020. Over this period through March 31,
it has more than doubled its holdings of Treasuries to $4.94 trillion (blue line, left scale).
It now holds a record of 17.6% of the Incredibly Spiking US National Debt (red line, right
scale):
US Banks pile them up.
US commercial banks bought on net $28 billion in Treasury securities in Q1 and $267 billion
since March 2020, bringing the total to a record $1.24 trillion, according to Federal Reserve
data on bank balance sheets. They now hold 4.4% of the Incredibly Spiking US National
Debt:
Other US entities & individuals
So far, we covered the net purchases by all foreign-registered holders, by the Fed, by US
government funds, and by US banks. What's unaccounted for: US individuals and institutions
other than the Fed, the banks, and the government. These include bond funds, private-sector,
state, and municipal pension funds, insurers, US corporations, hedge funds (they use Treasuries
in complex leveraged trades), private equity firms that need to park billions in "dry powder,"
etc.
These US entities hold the remainder of Incredibly Spiking US National Debt. Their holdings
surged by $149 billion in Q4 and by $2.35 trillion since March 2020, to a record $8.76 trillion
(blue line, left scale). This raised their share of the total debt to 31.2% (red line, right
scale), making these US individuals and institutions combined the largest holder of that
monstrous mountain of debt:
The Incredibly Spiking US National Debt and who
holds it, all in one monstrous pile:
Enjoy reading WOLF STREET and want to support it? Using ad blockers – I totally get
why – but want to support the site? You can donate. I appreciate it immensely. Click on
the beer and iced-tea mug to find out how:
'Everybody wants to have asset prices forever going up and the cost of financing to be next to nothing,' Kerry Killinger says.
Like many other banks, Washington Mutual rode the wave of low-interest rates to grow its mortgage business during the housing boom
of the early 2000s. During Kerry Killinger's time as CEO, WaMu grew to have more than $300 billion in assets.
But when the subprime bubble burst, the bank's fortunes quickly turned. In September 2008, at the height of the financial crisis,
Killinger was forced out by the company's board, and ultimately the bank was seized by federal regulators. It still stands as the
largest bank failure in U.S. history.
In their new book, "Nothing Is Too Big to Fail: How the Last Financial Crisis Informs Today," Kerry Killinger and his wife Linda,
who previously served as the vice chair of the Federal Home Loan Bank of Des Moines, explore WaMu's failure, the government's
response to the last crisis and where there is growing risk in today's econom
...
In
the book, the Killingers raise concerns about asset bubbles they believe are forming in a wide range of asset classes, including
stocks, art and luxury items -- and housing. MarketWatch spoke with Kerry and Linda Killinger about the book, the Federal Reserve and
how to avoid another global financial crisis like the 2008 meltdown.
...
Linda Killinger:
I wanted to write a book about this because it was such an unusual, crazy experience. Back in the '80s I
was a partner in an international accounting firm, and the regulators would call me in to do plans for banks that were failing in
that time. I noticed that the regulators would do everything they could to help a bank get liquidity, or to help save a bank that
had not been consumed in crime or problems. But in this crisis of 2008, it just seemed like nobody wanted to help community banks.
In fact, they just did the opposite. They really went after them. I thought it was important to write about the difference and how
important it is to help community banks in a crisis like this.
Kerry Killinger:
My focus was more on public policy -- about being sure we learned all the lessons we possibly can. I've
become very concerned that some of the policies currently being adopted by the Federal Reserve and the regulators in government may
be leading us to a new financial crisis.
'Some of the policies currently being adopted by the Federal Reserve and the regulators in government may be leading us to a
new financial crisis.'
-- Kerry Killinger
MW
: In your book, you explain that you see another bubble forming in residential real-estate -- just one of the many asset
bubbles you warn about. What do you believe caused the last housing bubble that led to the Great Recession and how does it compare
to what's going on now?
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Kerry Killinger:
We've lived through a lot of housing cycles in our careers, and including the big bubble that that was
created in the early 2000s. The housing bubble was primarily caused in the early 2000s by the Fed keeping the fed funds rate below
the rate of inflation for several years. They did that in 2000 through 2003, and that lowered mortgage payments so low and led to
housing prices increasing because housing affordability was good with very low mortgage payments. That caused housing prices to rise
much more quickly than the rate of inflation.
From 2000 to 2006 nationally housing prices rose about 83%. Over that same period, the rate of inflation was up about 20%. So a huge
increase faster than the rate of inflation, and over the long run, housing prices ought to rise at about the rate of inflation,
which was about 2% a year or so. Clearly it was a speculative period where prices were rising too quickly, and speculators and
investors increasingly jumped on board.
To help fuel it, underwriting standards were reduced by Fannie and Freddie, the FHA, VA, Wall Street, bank portfolio lenders, and
all that. Then on top of that we had this growth of subprime lending. Keeping rates so low for so long was the most important
driving force in my opinion.
[Today] the similarities are that the Fed has pursued this policy of ultra-low interest rates with the fed funds rates.
Increasingly, the Fed is keeping mortgage rates at an artificially low level for 30-year fixed rates by purchasing assets in their
own portfolio, including mortgage-backed securities and an increasing array of guarantees that the Fed has done as part of its
policies to fight an economic downturn.
Those actions have led to what I'm calling ultra-low mortgage payments, and that naturally led to a surge in housing prices. Since
2015 housing prices nationally were up about 36% -- more than three times the rate of inflation over that period.
Another similarity is we're seeing speculators and investors jumping in. This go-around it's large entities wanting to buy tracts of
homes to use as rental housing. So the non-owner-occupied part of the market, which is the investor side, has gone up from 31.9% to
34.4% in the past year. We're getting a repeat of speculation coming in at this stage with investors coming in in a major way.
Now, subprime lending is not the same factor it was the last go-around fortunately, but we do know that there's an increasing amount
of subprime lending going on by the FHA, VA and some of the government enterprises. On the good news side, I think underwriting
standards have remained better, much better, than they were in the last go-around. But my caution is underwriting standards are all
based on housing prices that are, I believe, inflated because of these ultra-low-interest mortgage rates.
MW:
You wrote about how, in your view, the Fed's response last time around exacerbated the financial crisis. And just now,
you spoke about how the Fed is contributing to the rise in home prices. So what role do you think the Fed should play in addressing
the bubble that you argue is forming now?
Kerry Killinger:
This go around I think the Fed has learned that it needs to provide plenty of liquidity to keep from
having a crisis. My concern is I think the Fed has gotten hooked on these expansive policies of ultra-low interest rates, asset
guarantees, asset purchases and flooding the system with liquidity for a long period of time. And those policies are very
appropriate for helping get an economy out of a recession in order to get things stabilized, but their use over extended periods of
time always leads to an escalation in inflation and the creation of asset bubbles.
'The Fed has gotten hooked on these expansive policies of ultra-low interest rates, asset guarantees, asset purchases and
flooding the system with liquidity for a long period of time.'
-- Kerry Killinger
They are caught in a conundrum now. The policies that were appropriate to help get us beyond COVID-19 -- the longer they keep using
those same policies, I think they just keep inflating these bubbles. And it will be very difficult to manage them down in an orderly
manner. All assets go through these kinds of ups and downs -- the key is how do we manage them in a way that doesn't cause immediate
implosion, like they did in 2008? The longer they allow these bubbles to keep growing, the bigger challenge they're going to have
at some point in the future.
MW:
You're both strong proponents of community banks and have argued that they should play an important role in the
mortgage industry. But following the Great Recession, many banks have reduced or eliminated their mortgage businesses, citing the
steep cost of regulation, and non-bank mortgage companies have risen up to fill that void. Should the federal government make it
easier for community banks to lend mortgages, and how should it go about doing so?
Linda Killinger:
Well, it depends. I think, if it looks like a bank, it smells like a bank and does mortgages like a bank,
it should be regulated like a bank. Unless there's some incredible service that they provide that banks don't provide -- otherwise,
they're doing the same thing as community banks but they're not being regulated.
The problem with that is things are going pretty well right now because they're selling mostly to Fannie and Freddie. Fannie and
Freddie's guidelines are pretty good right now, but at any point in time [non-banks] could couple up with unregulated hedge funds or
other entities from Wall Street and start securitizing loans themselves, lowering standards and trying to attract more people.
Especially if the Congress and the new president want to have more affordable housing, it depends on what they do when they want to
push for more. There needs to be more affordable housing, but it shouldn't be handled in the way that it was last time. Last time
they had Fannie Mae in the 90s saying well 33% of your loan should be [low- and middle-income (LMI)] loans, and by 2008 it was 60%
should be LMI. So there's a tremendous pressure on Fannie and Freddie from Congress and the other regulators to really crank out
more LMI lending. We really have to be careful about how we do that in the future. Community banks should be involved because they
know how to do it right.
MW:
When the COVID-19 pandemic began, federal lawmakers and regulators were quick to roll out forbearance options to
homeowners who suddenly lost income as a result of the economic shock. A year later, many homeowners are still not making their
monthly mortgage payments and are in forbearance. With the foreclosure moratorium still in place, homeowners aren't yet at risk of
losing their homes, but that possibility lingers. What should we be doing right now to stave off another foreclosure crisis?
Linda Killinger:
During the crisis in 2007, when it started to collapse, Kerry put together a $3 billion fund [at WaMu] to
help subprime borrowers stay in their homes. He lowered the payments, and he lowered the amount that was owed, so it was manageable
and they could stay in their home. I think that's a responsibility of banks to do that. It's going to be hard when the forbearance
goes away -- unless banks and organizations are willing to really write down the principal or lower the payments just to help people
a little bit more.
Kerry Killinger:
Over the long run you are far better off to do everything you can to keep somebody in a home, if they can
possibly afford it. And the last route you want to have to go through is foreclosure, because the costs are painful for everybody
involved. We always used to try to do anything possible to keep people into the homes as long as we possibly can, and I think that
is a very positive thing what the government and everyone did when COVID hit. Some of those solutions are very appropriate for the
short term when you've got a crisis going on, but I think over time they need to be brought back to a more normal environment in
which you will always have a small percentage of homes that will have to go through foreclosure. They were just the wrong home for
the wrong people at the wrong time.
People don't even think about that anymore, but home prices will fall again in some markets for some reason. Given the rapid
escalation we have seen in the last five years, especially in the last 12 months, these are unsustainable price increases that will
be subject to some kind of correction when interest rates start to return to more normal levels. Probably one of the more
controversial things I'll say here is if you assume that we're going to have about a 2% inflation rate and a GDP growing over the
long term at about 2% to 2.5%, then mortgage interest rates on 30-year fixed-rate mortgages should be more in the 4.5% to 5% range.
MW:
Do you think consumers are willing to stomach mortgage rates at that level, after so many years in which mortgage rates
have remained so low?
Kerry Killinger:
Look, all of us want to have the good times roll. Everybody wants to have asset prices forever going up
and the cost of financing to be next to nothing. That's something that a lot of people wish for. We're just putting the warnings out
that seldom do things go up forever. Right now you have borrowing costs substantially below the rate of inflation and way below
historic norms, and that's unlikely to last forever.
I don't know if it's a matter of whether the consumers like it or not, but equilibrium would be closer to 4.5% to 5% on long-term
mortgages. I just put out there that if that happens, for whatever reason, the affordability of housing will become much more
stressed and mortgage payments will grow. That will have a tendency to put downward pressure on home prices. I don't think we're
likely to repeat the problems that hit in 2008 because I think the Fed is smart enough now not to pull liquidity to a point that
causes a downward spiral. But you could certainly see a period over several years of some downward pressure on prices as
affordability becomes more difficult because of rising monthly mortgage payments.
'Right now you have borrowing costs substantially below the rate of inflation and way below historic norms, and that's
unlikely to last forever.'
-- Kerry Killinger
MW:
What else about the market and the economy right now is a source of concern to you?
Kerry Killinger:
I do think that the economy is both stabilized and now back into a strong growth mode, and I think we're
going to see very strong economic activity for the balance of this year and into next year. Inflation is picking up and will be
higher than what many think at this point. Businesses are telling me that they are having more price increases today than they have
had in the last decade. So I think the concern about inflation is real.
And these growing asset bubbles just continue to escalate to the point to where the assets are selling well above reasonable
estimates of intrinsic value. That always presents a certain amount of risk. And finally, we're seeing more and more speculative
products and speculators in the market -- not necessarily just in housing.
Look at certain parts of the stock market
DJIA,
-0.36%
SPX,
-0.40%
.
Look
at bitcoin
BTCUSD,
-4.31%
.
Look
at SPACs. Look at NFTs. I can just go through a litany of assets that have risen in price very, very dramatically. Whenever you have
a combination of rapidly rising price and increasing speculative activity, you have to raise the red flags. Are bubbles being
created here?
Linda Killinger:
Yes, and are pension plans buying some of those bubble products?
Kerry Killinger:
A fair bit of that build-up of buyers for those single-family homes are pension plans doing it directly to
have that asset category. Because with the Fed keeping interest rates artificially low, they can't afford to put into riskless
assets like Treasury securities. They have to keep searching out yields. One of them is increasingly into residential real estate.
Inflation fears already roiled the market this week with the Nasdaq falling nearly 2%, but
one hedge fund founder is sounding the alarm over a potential 20% collapse that could be
sparked by the Federal Reserve signaling an end to accommodative pandemic-era monetary policy
later this year.
Satori Fund founder Dan Niles recently told Yahoo Finance that this week's
hotter-than-anticipated inflation data coupled with other central banks around the world
already coming off their easy money policies will likely corner the Fed into tapering its
accommodative policies sooner than expected.
"If you've got food prices, energy prices, shelter prices moving up as rapidly as they are,
the Fed's not going to have any choice," he said, predicting that the Fed could signal the
beginning of a move to wind down its monthly $120 billion a month pace of asset purchases by
this summer. "They can say what they want, but this reminds me to some degree of them saying
back in 2007 that the subprime crisis was well contained. Obviously it wasn't."
For their part,
Fed officials have remained adamant that a rise in inflation is to be expected as a
transitory reality of the economy reopening from the pandemic lockdown. The latest print
from the Bureau of Labor Statistics out this week , however, may have spooked investors
when it showed consumer prices for the month of April rose at their fastest annual pace since
2008. That inflation metric, which is different than the Fed's
preferred Personal Consumption Expenditures (PCE) index , jumped to a 4.2% rise over the
last 12 months. The Fed has already signaled it would be comfortable staying accommodative even
if inflation in the recovery shoots past 2% as measured by its preferred metric.
In the US, this translates to a growth environment where GDP will be 3pp above its
pre-COVID-19 path by end-2022 and underlying core PCE inflation (adjusted for base effects)
rises above 2%Y from March 2022. The Fed, which is now aiming for inflation averaging 2%Y and
maximum employment, should remain accommodative. Our chief US economist Ellen Zentner expects
the Fed to signal its intention to taper asset purchases at the September FOMC meeting, to
announce it in March 2022 and to start tapering from April 2022 . On our forecasts, rate hikes
begin in 3Q23, after inflation remains at or above 2%Y for some time and the labour market
reaches maximum employment.
What are the risks to this story? Most obvious is the emergence of new COVID-19 variants
that resist vaccines. However, I have argued that the biggest threat to this cycle is an
overshoot in US core PCE inflation beyond the Fed's implicit 2.5%Y threshold – a serious
concern, in my view, which could emerge from mid-2022 onwards .
Portal 4 hours ago
LMFAO!!!
You sent manufacturing and industry to China.
There is no "red hot recovery.". Just a long descent into fascism and communist
poverty.
Newpuritan 4 hours ago
The "red hot recovery." they are hoping for is replacing all efficient energy production
with inefficient "green" energy. The costs will be astronomical but are hoped to offset the
Boomer generation retirement period.
Iskiab 2 hours ago (Edited)
Yea, all these forecasting models are garbage. They're all based on a faulty assumption
that trends continue so the growth we see now will continue, plus things will revert back to
the trend line. Junk in, junk out.
A more realistic assessment would be there was a bump from reopening, but costs have
increased. It will be impossible to get back to the old growth trend line, and expect the low
growth of the last 20 years to continue from hereon out. The stimulus will help a bit but not
much, most of the stimulus was misallocated.
JH2020 3 hours ago (Edited)
It's the sycophants of the Wall Street/government confidence game, dropping words that,
hopefully, lead to buying securities, not selling, though, perversely, any negative truths
result in the assumption there will be a new flood of free money, from the Fed, driving
margin debt even more vertical, such that one needs a second page for the chart, or a more
drastic log scale. (In this economy so red hot interests rates need to be kept near zero, for
the remainder of the century, and near daily reassurance the Fed will accommodate anything
and everything, whatsoever, anytime a sector gets some heartburn, or a red candlestick gets
too large.)
Red hot = FOMO bait.
The "red not" verbiage is comical, reminds me of Hollywood sycophants, that write reviews
of some pretend person, some degenerate nobody, "In an unparalleled display of performing
brilliance, in this worthy sequel to A Couple Hours of Brains Splattered All Over the Wall,
and which only proves his sheer genius, the way he flared his nostrils, while driving in the
chase scene, that went two times around the entire city perimeter, in the ongoing
lanes...".
ebworthen 4 hours ago
"Red hot global recovery"? ROFLMAO!
That isn't recovery, it is money printing, inflation, and rabid speculation.
hugin-o-munin 4 hours ago (Edited)
Who do these people think they can fool?
This was about the dumbest article by a bank in a long while. Pushing a contrarian lie too
hard reveals it quicker than keeping quiet. Someone should remind Morgan Stanley of this age
old truth. Real inflation is destroying the USD right now. Ignoring it and pretending
otherwise will only accelerate the fall into hyper inflation.
J J Pettigrew 3 hours ago
A little inflation is good for you.
What's a little? 2.5%? For ten years....a flat chart of 2.5% each year... .looks like
nothing happened....just 28% off the value of the dollar...thats all.
Sound of the Suburbs 2 hours ago
How does anything really work?
I don't know, I use neoclassical economics.
Everyone tries to kill growth by making the same mistakes as Japan.
Japan led the way and everyone followed.
At 25.30 mins you can see the super imposed private debt-to-GDP ratios.
Why did they think private debt wouldn't be a problem after 2008?
Probably the same reason they didn't notice it building up before 2008.
The economics of globalisation has always had an Achilles' heel.
The 1920s roared with debt based consumption and speculation until it all tipped over into
the debt deflation of the Great Depression. No one realised the problems that were building
up in the economy as they used an economics that doesn't look at debt, neoclassical
economics.
Not considering private debt is the Achilles' heel of neoclassical economics.
That explains it.
"We cannot solve our problems with the same thinking we used when we created them." Albert
Einstein.
Who do you think you are?
This is what we are going to do, whether you like it or not.
He must be one of those populists.
Einstein was right of course, but you know what neoliberals are like.
Anyone that doesn't go along with their ideas must be a populist.
Sound of the Suburbs 2 hours ago (Edited) remove link
Not considering private debt is the Achilles' heel of neoclassical economics.
Weak analysis. The fundamental factor is the price for energy, not some trivia like used cars
and trucks. Teh second dot com bubble will deflate but it is unclear when and whether this is a
crash or gradual deplation of worthless junk stocks which enjoyed "profitless" IPOs.
With rising energy prices it is more difficult to keep interpreting high CPI numbers as
temporary. But like in the past the USA will fight the rise in energy prices tools and nail. With
the full power of their global neoliberal empire.
... prices for used cars and trucks jumped 10 per cent in April alone, accounting for a
large slice of the gains in the overall index.
"It looks like Wall Street is climbing the wall of worry," said Gregory Perdon, co-chief
investment officer at private bank Arbuthnot Latham. "The bears are constantly looking for
signs that the world is going to end. They come up with all the potential excuses. The reality
is that the only question that matters is whether the reopening is going OK or not.
... Notably, while 10-year US yields did rise on Wednesday after the inflation data release,
they did not hit new highs.
Inflation is back. The U.S. consumer-price index
surged to a 13-year high of 4.2% in April, official data showed Wednesday. The eurozone's
figure is a weaker 1.6%, but still a two-year high. The global bond market isn't panicking yet.
The pandemic led many distressed companies to slash prices in 2020. Investors always knew that,
as the economy reopened, some year-over-year increases would be huge.
The prices of most products
haven't changed much . CPI gyrations are mostly down to a few items particularly affected
by lockdowns and travel restrictions, such as airfares and restaurant prices, as well as
commodities. Excluding food and energy, U.S. inflation in April was just 3%.
... Over the past few decades, for example, CPI figures
have mostly been the results of a concatenation of "temporary" trends in different sectors
-- the costs of education and healthcare rose nonstop, while the prices of many goods
continuously fell. It was different in the 1970s, when an idiosyncratic squeeze in the supply
of oil fueled an inflationary spiral that pushed all costs up.
Investors Double Down on Stocks, Pushing Margin Debt to Record : Chasing bigger gains, some
have exposed themselves to potentially devastating losses through riskier plays, such as
concentrated positions
and trading options.
In my youth I worked as a very junior financial reporter and I have a continuing interest.
While markets are crashing around the world there is a commodities boom, particularly in
copper and critical minerals needed for green energy like cobalt, manganese, tin and rare
earths.
China was an exporter but is now the worlds biggest importer. These resources are actually
finite.
The markets are agog at the price of iron ore. While the US wastes trillions of borrowed
money and blood in the desert sands of the Middle East on behalf of the bandit state, China
builds and produces goods for export.
The US has lost the trade war, but no one ever wins a trade war. It's the last man
standing. Uncle Shmuel is looking punch drunk. While the tribal cabal running the US is drunk
with power.
Because the US has gone bankrupt and owes China the national debt the elite cabal seem
hell bent on war with China as an exit to the financial quagmire they have created.
Once upon a time last year, there was the EV startup hype-boom that found its way to the
SPAC hype-boom, and the two combined and generated miraculously swift and spectacular results;
and their collapse has been equally swift and spectacular.
And they're joined by the IPO hype-boom stocks, including the spectacularly hyped highflyers
that got shot down, such as Zoom (-49% from peak), Coinbase (-29%), or Airbnb (-35%), and
they're in turn joined by the ARK Innovation ETF (-34%). This whole thing has come unglued.
The EV SPAC boom-and-bust is reflected in the WOLF STREET EV SPAC Index, which has collapsed
by 57% since its peak on February 17. The index tracks seven EV-related companies that have
gone public via a merger with a SPAC: Nikola, QuantumScape (batteries for EVs), Canoo,
Lordstown Motors, Romeo Power (batteries for EVs), XL Fleet (EV drive systems for fleets), and
Lucid Motors. Since February 17, these seven stocks combined have shed $35 billion in value,
which they should have never had in the first place. Easy come, easy go, except when it's your
money (data via YCharts ):
...Ms. Wood's "disruptive innovation" jargon may be somewhat novel. What her investors are
experiencing isn't. Fund managers like Gerald Tsai in the 1960s who rode Polaroid and Xerox to
stardom or various dot-com visionaries in the late 1990s wound up doing poorly for clients who
discovered them after they became hotshots. The culprit is unrealistic expectations and
reversion to the mean for the bubbly sectors that got them there. Analyst Meb Faber points out
that not one of the five Morningstar "fund managers of the decade" through 2010 even managed to
beat the market in the next 10 years. The best of the bunch, Bruce Berkowitz's Fairholme Fund,
became the worst.
...As Peter Schiff put it, CPI is a lie . Grant used the
evolution of the toothbrush into its electric form as an example. How do you measure the clear
quality improvements in the toothbrush? The government uses hedonics to measure these changes,
but as Grant pointed out, this is "inexact and not really a science."
Grant believes that the economy can only tolerate 2.5% real rates. If that is breached, he
thinks the Fed will have to resort to yield-curve control. If it does actually try to shrink
its balance sheet and sell bonds, it will drive bond yields even higher. Fed bond-buying is the
only thing propping up the bond market right now.
In fact, the Fed is propping up the entire economy. There is a sense that the Fed will
always step in and save the markets. As a result, we have bubbles everywhere, from the stock
market, to real estate, to cryptocurrency.
"These are strange and oppressive markers of financial markets that have lost moorings of
valuation," Grant said.
I think the astounding complacency toward, or indifference of, the evident excesses in our
monetary and fiscal affairs I think the lack of concern about those things is perhaps the
most striking inflationary augur I know of."
Meanwhile, the Fed continues to create money. M1 annual growth is 350%; M2 is growing at
approximately 28%.
"Never before have we had monetary peacetime growth this fast," Grant said.
"Tell me who cares."
Grant said central bankers like Powell are guilty of hubris. They suffer from the delusion
that they can actually control everything. Grant called the Fed "un-self-aware."
Despite Jay Powell's credentials, he knows nothing about the past and believes he knows
everything about the future."
Grant talked about gold ,
saying it is an investment in "monetary disorder."
To me, gold isn't a hedge against monetary disorder. It's an investment in monetary
disorder, which is what we have. We have floating-rate currencies. We have manipulated
exchange rates. We have manipulated interest rates. When the cycle turns, people will want
gold and silver, and they will want something tangible ."
"If everyone sees it, is it still a bubble?" That was a great question I got over the
weekend. As a "contrarian" investor, it is usually when "everyone" is talking about an event;
it doesn't happen.
"To appreciate how widespread current concern about a bubble is, consider the accompanying
chart of data from Google Trends. It plots the relative frequency of Google searches based on
the term 'stock market bubble.' Notice that this frequency has recently jumped to a
far-higher level than at any other point over the last five years."
What Is A Bubble?
"My confidence is rising quite rapidly that this is, in fact, becoming the fourth 'real
McCoy' bubble of my investment career. The great bubbles can go on a long time and inflict a
lot of pain, but at least I think we know now that we're in one." – Jeremy Grantham
What is the definition of a bubble? According to Investopedia:
"A bubble is a market cycle that is characterized by the rapid escalation of market value,
particularly in the price of assets. Typically, what creates a bubble is a surge in asset
prices driven by exuberant market behavior. During a bubble, assets typically trade at a
price that greatly exceeds the asset's intrinsic value. Rather, the price does not align with
the fundamentals of the asset. "
This definition is suitable for our discussion; there are three components of a "bubble."
The first two,
price and valuation, are readily dismissed during the inflation phase. Jeremy Grantham once
produced the following chart of 40-years of price bubbles in the markets. During the inflation
phase, each was readily dismissed under the guise "this time is different."
We are interested in the "third" component of "bubbles," which is investor
psychology.
"It's the swings of psychology that get people into the biggest trouble. Especially since
investors' emotions invariably swing in the wrong direction at the wrong time. When things
are going well people become greedy and enthusiastic. When times are troubled, people become
fearful and reticent. That's just the wrong thing to do. It's important to control fear and
greed."
Currently, it's difficult for investors to become any more enthusiastic about market
returns. ( The RIAPro Fear/Greed Index
compiles measures of equity allocation and market sentiment. The index level is not a component
of the measure that runs from 0 to 100. The current reading is 99.9, which is a historical
record.)
Such is an interesting juxtaposition. On the one hand, there is a rising recognition of a
"bubble," but investors are unwilling to reduce "equity risk" for "fear of missing out or
F.O.M.O." Such was a point noted explicitly by Mark:
"Rather than responding by taking some chips off the table, however, many began freely
admitting a bubble formed. They no longer tried to justify higher prices on fundamentals.
Rather, they justified it instead in terms of the market's momentum. Prices should keep going
up as FOMO seduces more investors to jump on the bandwagon."
I know. The discussion of "valuations" is an old-fashioned idea relegated to investors of an
older era. Such was evident in the pushback on Charlie Munger's comments about Bitcoin
recently:
" While Munger has never been a bitcoin advocate, his dislike crystalized into something
close to hatred. Looking back over the past 52 weeks, the reason for Munger's anger becomes
apparent with Berkshire rising only 50.5% against bitcoin's more than 500% gain." –
Coindesk
In 1999, when Buffett spoke out against "Dot.com" stocks, he got dismissed with a similar
ire of "investing with Warren Buffett is like driving 'Dad's old Pontiac.'"
Today, young investors are not interested in the "pearls of wisdom" from experienced
investors. Today, they are "out of touch," with the market's "new reality."
"The big benefit of TikTok is it allows users to dole out and obtain information in short,
easily digestible video bites, also called TikToks. And that can make unfamiliar, complex
topics, such as personal finance and investing, more palatable to a younger audience.
That advice runs the gamut, from general information about home buying or retirement
savings to specific stock picks and investment ideas. Rob Shields, a 22-year-old, self-taught
options trader who has more than 163,000 followers on TikTok, posts TikToks under the
username stock_genius on topics such as popular stocks to watch, how to find good stocks, and
basic trading strategies." – WSJ:
Of course, the problem with information doled out by 22-year olds is they were 10-year olds
during the last "bear market." Given the lack of experience of investing during such a market,
as opposed to Warren Buffett who has survived several, is the eventual destruction of
capital.
Plenty Of Analogies
"There is no shortage of current analogies, of course. Take Dogecoin, created as a joke
with no fundamental value. As a
recent Wall Street Journal article outlined , the Dogecoin 'serves no purpose and, unlike
Bitcoin, faces no limit on the number of coins that exist.'
Yet investors flock to it, for no other apparent reason than its sharp rise. Billy Markus,
the co-creator of dogecoin, said to the Wall Street Journal, 'This is absurd. I haven't seen
anything like it. It's one of those things that once it starts going up, it might keep going
up.'" – Mark Hulbert
That exuberance shows up with professionals as well. As of the end of April, the National
Association Of Investment Managers asset allocation was 103%.
As Dana Lyons noted previously:
" Regardless of the investment acumen of any group (we think it is very high among NAAIM
members), once the collective investment opinion or posture becomes too one-sided, it can be
an indication that some market action may be necessary to correct such consensus. "
Give Me More
Of course, margin debt, which is the epitome of " speculative appetite," soared in recent
months.
As stated, "bubbles are about psychology," which the annual rate of change of leverage
shows.
Another form of leverage that doesn't show up in margin debt is ETF's structured to multiply
market returns. These funds have seen record inflows in recent months.
With margin debt reaching levels not seen since the peak of the last cyclical bull market
cycle, it should raise some concerns about sustainability. It is NOT the level of leverage that
is the problem as leverage increases buying power as markets are rising. The unwinding of this
leverage is critically dangerous in the market as the acceleration of "margin calls" leads to a
vicious downward spiral.
Importantly, this chart does not mean that a massive market correction is imminent. I t does
suggest that leverage, and speculative risk-taking, are likely much further advanced than
currently recognized.
Pushing Extremes
Prices are ultimately affected by physics. Moving averages, trend lines, etc., all exert a
gravitational pull on prices in both the short and long term. Like a rubber band, when prices
get stretched too far in one direction, they have always eventually "reverted to the mean" in
the most brutal of manners.
The chart below shows the long-term chart of the S&P 500 broken down by several
measures: 2 and 3-standard deviations, valuations, relative strength, and deviations from the
3-year moving average. It is worth noting that both standard deviations and distance from the
3-year moving average are at a record.
During the last 120-years, overvaluation and extreme deviations NEVER got resolved by
markets going sideways.
The only missing ingredient for such a correction currently is simply a catalyst to put
"fear" into an overly complacent marketplace. Anything from economic disruption, a
credit-related crisis, or an unexpected exogenous shock could start the "panic for the
exits."
Conclusion
There is more than adequate evidence a "bubble" exists in markets once again. However, as
Mark noted in his commentary:
'I have no idea whether the stock market is actually forming a bubble that's about to
break. But I do know that many bulls are fooling themselves when they think a bubble can't
happen when there is such widespread concern. In fact, one of the distinguishing
characteristics of a bubble is just that."
However, he concludes with the most important statement:
"It's important for all of us to be aware of this bubble psychology, but especially if
you're a retiree or a near-retiree. That's because, in that case, your investment horizon is
far shorter than for those who are younger. Therefore, you are less able to recover from the
deflation of a market bubble."
Read that statement again.
Millennials are quick to dismiss the "Boomers" in the financial markets today for "not
getting it."
No, we get it. We have just been around long enough to know how these things eventually
end.
Consumers are picking up on the rise of inflation, and the Fed, which has been trying to
heat up inflation, is pleased. The Fed watches "inflation expectations" carefully. The minutes
from the March FOMC meeting mention "inflation expectations" 12 times.
The New York Fed's Survey of Consumer
Expectations for April, released today, showed that median inflation expectations for one
year from now rose to 3.4%, matching the prior highs in 2013 (the surveys began in June
2013).
But wait the median earnings growth expectations 12 months from now was only 2.1%, and
remains near the low end of the spectrum, a sign that consumers are grappling with consumer
price inflation outrunning earnings growth. The whoppers were in the major specific
categories.
History repeats and the repetition is coming with some minor variations.
Notable quotes:
"... "Corporate bond rates have been rising steadily since May. Yellen is not doing what Greenspan did in 2004." ..."
"... There isn't much of a difference between signaling tighter money to a market that is skeptical of Fed forecasts and actually tightening. ..."
"... While at 5.0 percent, the unemployment rate is not extraordinarily high, most other measures of the labor market are near recession levels. The percentage of the workforce that is involuntarily working part-time is near the highs reached following the 2001 recession. The average and median duration of unemployment spells are also near recession highs. And the percentage of workers who feel confident enough to quit their jobs without another job lined up remains near the low points reached in 2002. ..."
"... While wage growth has edged up somewhat in recent months by some measures, it is still well below a rate that is consistent with the Fed's inflation target. Hourly wages have risen at a 2.7 percent rate over the last year. If there is just 1.5 percent productivity growth, this would be consistent with a rate of inflation of 1.2 percent. ..."
"... One positive point in today's action is the Fed's commitment in its statement to allow future rate hikes to be guided by the data, rather than locking in a path towards "normalization" as was effectively done in 2004. ..."
Washington, D.C.- Dean Baker, economist and a co-director of the Center for Economic and Policy Research (CEPR) issued the
following statement in response to the Federal Reserve's decision regarding interest rates:
"The Fed's decision to raise interest rates today is an unfortunate move in the wrong direction. In setting interest rate policy
the Fed must decide whether the economy is at risk of having too few or too many jobs, with the latter being determined by the
extent to which its current rate of job creation may lead to inflation. It is difficult to see how the evidence would lead the
Fed to conclude that the greater risk at the moment is too many jobs.
"While at 5.0 percent, the unemployment rate is not extraordinarily high, most other measures of the labor market are near
recession levels. The percentage of the workforce that is involuntarily working part-time is near the highs reached following
the 2001 recession. The average and median duration of unemployment spells are also near recession highs. And the percentage of
workers who feel confident enough to quit their jobs without another job lined up remains near the low points reached in 2002.
"If we look at employment rates rather than unemployment, the percentage of prime-age workers (ages 25-54) with jobs is still
down by almost three full percentage points from the pre-recession peak and by more than four full percentage points from the
peak hit in 2000. This does not look like a strong labor market.
"On the other side, there is virtually no basis for concerns about the risk of inflation in the current data. The most recent
data show that the core personal consumption expenditure deflator targeted by the Fed increased at just a 1.2 percent annual rate
over the last three months, down slightly from the 1.3 percent rate over the last year. This means that the Fed should be concerned
about being below its inflation target, not above it.
"While wage growth has edged up somewhat in recent months by some measures, it is still well below a rate that is consistent
with the Fed's inflation target. Hourly wages have risen at a 2.7 percent rate over the last year. If there is just 1.5 percent
productivity growth, this would be consistent with a rate of inflation of 1.2 percent.
"Furthermore, it is important to recognize that workers took a large hit to their wages in the downturn, with a shift of more
than four percentage points of national income from wages to profits. In principle, workers can restore their share of national
income (the equivalent of an 8 percent wage gain), but the Fed would have to be prepared to allow wage growth to substantially
outpace prices for a period of time. If the Fed acts to prevent workers from getting this bargaining power, it will effectively
lock in place this upward redistribution. Needless to say, workers at the middle and bottom of the wage distribution can expect
to see the biggest hit in this scenario.
"One positive point in today's action is the Fed's commitment in its statement to allow future rate hikes to be guided
by the data, rather than locking in a path towards "normalization" as was effectively done in 2004. If it is the case that
the economy is not strong enough to justify rate hikes, then the hike today may be the last one for some period of time. It will
be important for the Fed to carefully assess the data as it makes its decision on interest rates at future meetings.
"Recent economic data suggest that today's move was a mistake. Hopefully the Fed will not compound this mistake with more unwarranted
rate hikes in the future."
RC AKA Darryl, Ron said in reply to Peter K....
I like Dean Baker. Unlike the Fed, Dean Baker is a class warrior on the side of the wage class. He makes the point about the
path to normalization being critical that I have been discussing for quite a while. Let's hope this Fed knows better than Greenspan/Bernanke
in 2004-2006. THANKS!
likbez said in reply to RC AKA Darryl, Ron...
Very true !
pgl said in reply to RC AKA Darryl, Ron...
"Longer-term bond rates barely moved, showing that there was very little news." This interest rate rose from 4.45% to 5.46%
already. So the damage was already done:
"... This interest rate rose from 4.45% to 5.46% already..."
Exactly! Corporate bond rates have been rising steadily since May. Yellen is not doing what Greenspan did in 2004. Yellen's
Fed waited until the bond rate lifted off on its own (and maybe with some help from policy communications) before they raised
the FFR.
So far, there is no sign of their making a fatal error. They are not fighting class warfare for wage class either, but they
seem intent on not screwing the pooch in the way that Greenspan and Bernanke did. No double dip thank you and hold the nuts.
"... "It's just unbelievable that central banks are actively encouraging this." ..."
"... Good point. Many times we look at charts and say WTF but once you normalize to inflation, maybe this is not as bad as originally it appeared ..."
"... reminds me of an abusive husband telling his beaten wife, "See what you made me do!" ..."
"... Hussman says the right way to do that is to look at margin debt to GDP ration, which is a record. GDP is doubling rate is about every 20 years now at nominal 3.5% ..."
"... That description applies to most Wall Streeters and banksters, whose titanic egos are amazing given the fact that most are parasites that contribute less than a woodlouse to society. Still, I dread the coming US debt collapse discussed in this website, which I would term a debt explosion as all of the bubbles start to pop and so many debtors and former creditors (like lessors, banks, etc.) become publicly known to be legally insolvent. ..."
"... I have invested carefully but we will all lose much or most of our savings. ..."
"... It is very irritating to think of the trillions that the banksters' deceptively named, "Federal" Reserve has been transferring to its ultra-rich owners for decades. They will probably even avoid most taxation again. ..."
Exactly. It is way more scary than even Wolf's charts suggest because there are so many
layers of leverage stacked on top of each other.
People taking out margin debt on stock portfolios that they bought by re-mortgaging their
bubbled houses to buy stocks with record corporate debt, collaterised (if at all) with bubble
assets, at record valuations driven itself by leverage etc etc
It's just unbelievable that central banks are actively encouraging this.
The amount of margin debt is not a WTF amount if you use the prices-double each 11 year
rule of thumb.
This 11 year period is strikingly accurate if you take the price of the New York Times
since 1900 (I have a booklet with frontpages of each year and discovered this when looking at
the selling prices). Having said that, the current 800B is the same as the previous inflation corrected peaks
of 2009 and around 1999.
So yes, Wolf is 100% correct with the prediction on what is coming. It is just not a WTF
amount but a history-repeats-itself moment
"normalize to inflationary, maybe not as bad as originally it appeared"
I know what you mean, but then the (major) problem is that the inflation itself shouldn't be viewed as "normal". Kinda reminds me of a gvt program defending doubled budget over 8 yrs because of
"inflation" when in point of fact it is likely that G printing/policy has *created* the
inflation in the first place (to help fund the program now pointing at inflation).
Also, reminds me of an abusive husband telling his beaten wife, "See what you made me
do!"
Hussman says the right way to do that is to look at margin debt to GDP ration, which is a record. GDP is doubling rate is about
every 20 years now at nominal 3.5%
That description applies to most Wall Streeters and banksters, whose titanic egos are
amazing given the fact that most are parasites that contribute less than a woodlouse to
society. Still, I dread the coming US debt collapse discussed in this website, which I would
term a debt explosion as all of the bubbles start to pop and so many debtors and former
creditors (like lessors, banks, etc.) become publicly known to be legally insolvent.
It is unfortunate that it may happen at the worst possible time, when we face an adversary
worse and more powerful than the Soviet Union or Nazi Germany ever was. I have invested
carefully but we will all lose much or most of our savings.
It is very irritating to think of
the trillions that the banksters' deceptively named, "Federal" Reserve has been transferring
to its ultra-rich owners for decades. They will probably even avoid most taxation again.
I do not like to even think how many Americans will wind up. Remember the saying "There
but for the grace of god, go I." Many of us will be saying that a lot in the coming years if
we are very fortunate.
"Generalized Anxiety Disorder (GAD) is characterized by persistent and excessive worry
about a number of different things. People with GAD may anticipate disaster and may be overly
concerned [...]. Individuals with GAD find it difficult to control their worry. They may
worry more than seems warranted about actual events or may expect the worst even when there
is no apparent reason for concern."
Seems like the perfect profile for an [CIA] operative. ;)
"... The CPI is calculated by analyzing the price of a "basket of goods." The makeup of that basket has a big impact on the final CPI number. According to WolfStreet , 10.9% of the CPI is based on durable goods (computers, automobiles, appliances, etc.). Nondurable goods (primarily food and energy) make up 26.6% of CPI. Services account for the remaining 62.5% of the basket. This includes rent, healthcare, cellphone service etc.) ..."
"... The things the government includes and excludes from the basket can make a profound difference in that final CPI number. Back in 1998, the government significantly revised the CPI metrics. Even the Bureau of Labor Statistics (BLS) admitted the changes were "sweeping." ..."
"... In 1998, the BLS followed the recommendations of the Boskin Commission. It was appointed by the Senate in 1995. Initially called the "Advisory Commission to Study the Consumer Price Index," its job was to study possible bias in the computation of the CPI. Unsurprisingly, it determined that the index overstated inflation " by about 1.1% per year in 1996 and about 1.3% prior to 1996. The 1998 changes to CPI were meant to address this "issue." ..."
"... As Peter pointed out, there is a lot of geometric weighting, substitution and hedonics built into the calculation. The government can basically create an index that outputs whatever it wants. ..."
"... Peter said there is a bit of irony in government officials and central bankers constantly complaining about "not enough inflation." ..."
"... They're the ones that are cooking the books to pretend that inflation is lower than it really is. Because what they're really trying to do is get the go-ahead to produce more inflation, which is printing money." ..."
"... And there are other things that hide inflation. For instance, shrinking packaging so there is less product sold at the same price, or substituting lower quality ingredients, or requiring consumers to assemble items themselves. ..."
"... They find different ways to lower the quality and not increase the price, and I'm sure that the government is not picking up on any of that. If the quality improves, yeah, yeah, they calculate that. But they probably ignore all the circumstances where the quality is diminished." ..."
"... The bottom line is we can't trust CPI to tell us the truth about inflation. ..."
And we're seeing rising prices all over the place, from the grocery store to the gas station. Even
the government numbers flash
warning signs . But as Peter Schiff explains in this clip from an interview with Jay Martin, it's probably even worse than we
realize because the government cooks the numbers when it calculates CPI.
The monthly rises in CPI
through the first quarter show an upward trend. The CPI in January was up 0.3%. It was up 0.4% in February. And now it's up 0.6%
in March. That totals a 1.013% increase in Q1 alone. The question is does this really reflect the truth about inflation? Peter doesn't
think it does.
The government always makes changes to their methods of measuring things, whether it's GDP, or inflation, or unemployment.
And they always tweak the numbers to produce a better result as a report card. "
Imagine if students in a school had the ability to change the metrics by which they were graded or the methodology the teacher
used to calculate their grades.
Would it surprise anybody that all of a sudden they started getting more As and Bs and fewer Cs and Ds? The government always
wants to make the good stuff better, like economic growth, and the bad stuff better, like unemployment or inflation. So, they
want to find ways to make those numbers little and the good numbers big."
The CPI is calculated by analyzing
the price of a "basket of goods." The makeup of that basket has a big impact on the final CPI number. According to WolfStreet , 10.9%
of the CPI is based on durable goods (computers, automobiles, appliances, etc.). Nondurable goods (primarily food and energy) make
up 26.6% of CPI. Services account for the remaining 62.5% of the basket. This includes rent, healthcare, cellphone service etc.)
The things the government includes and excludes from the basket can make a profound difference in that final CPI number. Back in 1998, the government significantly revised the CPI metrics. Even
the Bureau of Labor Statistics
(BLS) admitted the changes were "sweeping."
According to the BLS, periodic changes to the CPI calculation are necessary because "consumers change their preferences or new
products and services emerge. During these occasions, the Bureau reexamines the CPI item structure, which is the classification scheme
of the CPI market basket. The item structure is a central feature of the CPI program and many CPI processes depend on it."
In 1998, the BLS followed the recommendations of the Boskin Commission. It was appointed by the Senate in 1995. Initially called
the "Advisory Commission to Study the Consumer Price Index," its job was to study possible bias in the computation of the CPI. Unsurprisingly,
it determined that the index overstated inflation " by about 1.1% per year in 1996 and about 1.3% prior to 1996. The 1998 changes
to CPI were meant to address this "issue."
As Peter pointed out, there is a lot of geometric weighting, substitution and hedonics built into the calculation. The government
can basically create an index that outputs whatever it wants.
I think this period of "Oh wow! We have low inflation!' It's not a coincidence that it followed this major revision into how
we calculate it."
Peter said there is a bit of irony in government officials and central bankers constantly complaining about "not enough inflation."
They're the ones that are cooking the books to pretend that inflation is lower than it really is. Because what they're really
trying to do is get the go-ahead to produce more inflation, which is printing money."
Peter said the CPI will never reveal the true extent of rising prices.
And there are other things that hide inflation. For instance, shrinking packaging so there is less product sold at the same price,
or substituting lower quality ingredients, or requiring consumers to assemble items themselves.
They find different ways to lower the quality and not increase the price, and I'm sure that the government is not picking up
on any of that. If the quality improves, yeah, yeah, they calculate that. But they probably ignore all the circumstances where
the quality is diminished."
The bottom line is we can't trust CPI to tell us the truth about inflation.
"... "In a highly inflationary environment, we like the auto parts space with its unique ability to pass-through higher costs to customers given the non-discretionary nature of the category," says Goldman Sachs analyst Kate McShane. "For instance, in 2019, telegraphed prices increases to offset cost pressures arising from tariffs provided an incremental benefit to same-store sales growth and most auto parts retailers cited between 150-300 basis points of tariff-related inflation." ..."
The investment thesis is pretty straightforward. With mobility across the country picking up (see chart below) as people get vaccinated,
cars will likely need more maintenance. That leaves auto parts retailers such as O'Reilly (
ORLY ), Genuine Parts Company (
GPC ), AutoZone (
AZO ) and Advance Auto Parts (
AAP ) in the enviable position of being able
to pass inflation in everything from tires to car wax on to consumers and then post strong profits.
"In a highly inflationary environment, we like the auto parts space with its unique ability to pass-through higher costs to
customers given the non-discretionary nature of the category," says Goldman Sachs analyst Kate McShane. "For instance, in 2019, telegraphed
prices increases to offset cost pressures arising from tariffs provided an incremental benefit to same-store sales growth and most
auto parts retailers cited between 150-300 basis points of tariff-related inflation."
McShane rounds out her bullish thesis on auto parts retailers by noting the main sector plays sport price-to-earnings multiples
below historical averages. Of the four aforementioned auto parts retailers, AutoZone has the lowest forward price-to-earnings multiple
of 18.7 times, according to Yahoo Finance
Plus data .
Mobility is back on the move higher as people get vaccinated for COVID-19.
As for which name McShane is most bullish on, that award goes to Advance Auto Parts in the wake of a recent analyst day. McShane
made the rare Wall Street move of upgrading her rating on Advance Auto Parts to Buy from Sell.
"Our double tier upgrade " from Sell to Buy " is predicated upon
(1) Advance Auto Parts improving profit and loss dynamics with 2-4% same-store sales per annum and 230-450 basis points of margin
expansion by 2023;
(2) cyclical recovery in do-it-for-me, where Advance Auto Parts has greater exposure vs peers;
(3) a finally improving do-it-yourself story as its new private label and loyalty program appears to be resonating with customers;
(4) improved capital allocation to shareholders;
(5) the ability of the auto parts space to pass-through inflation; and
(6) valuation that looks appealing vs history, especially in light of improving macro and company specific dynamics,"
Signs of inflation are picking up, with a mounting number of consumer-facing companies
warning in recent days that supply shortages and logistical logjams may force them to raise
prices.
Tight inventories of materials as varied as semiconductors, steel, lumber and cotton are
showing up in survey data, with manufacturers in Europe and the U.S. this week flagging record
backlogs and higher input prices as they scramble to replenish stockpiles and keep up with
accelerating consumer demand.
As commodities become increasingly expensive, whether faster inflation proves transitory --
or not -- is the biggest question for policy makers and markets. Rising prices and the
potential for a response from central banks topped the list of concerns for money managers
surveyed by Bank of America Corp.
Many economists and central bankers, from the Federal Reserve on down, maintain that price
gains are temporary and will be curbed by forces such as virus worries and unemployment.
Investors remain skeptical, with businesses including Nestle SA and Colgate-Palmolive Co.
already announcing they’ll need to raise prices.
U.S. Treasury Secretary Janet Yellen, a former Fed chair, entered the debate on Tuesday when
she ruffled markets with the observation that rates will likely rise as government spending
ramps up. She later clarified she was neither predicting nor recommending an increase.
The Bloomberg Commodity Spot Index, which tracks 23 raw materials, has risen to its highest
level in almost a decade. That has pushed a gauge of global manufacturing output prices to its
highest point since 2009, and U.S. producer prices to levels not seen since 2008, according to
data from JPMorgan Chase & Co. and IHS Markit. JPMorgan analysts also estimate non-food and
energy import prices in the biggest economies rose almost 4% in the first quarter, the most in
three years.
“Risk clearly leans to the upside in the current
environment,†said John Mothersole, pricing and purchasing research director at IHS
Markit. “The surge in commodity prices over the past year now guarantees
higher goods-price inflation this summer.â€
The epicenters of work-from-home show the biggest drops in office occupancy rates, according
to Kastle’s “Back to Work Barometer†at the
end of April: in San Francisco, the occupancy rate was at 14.8% of the pre-Pandemic level, in
New York City at 16.2%, and in San Jose at 18.0%.
... ... ...
A survey by Accenture of 400 North American financial-services companies found that 80% of
the executives would like for workers to spend four or five days in the office post-Pandemic.
Many of them think that working at home makes training younger employees more difficult and is
hurting company culture.
But employees are looking for flexibility, now that they have proven that they can be
productive at home.
“You’ve seen the senior executives sitting in their
office and there’s nobody behind them,†Laurie McGraw, head of
Accenture’s capital markets industry team in North America, told
Bloomberg . “And then you see the entry-level folks starved for
in-person interaction because they need to be coached on a more regular basis. And then
there’s the vast middle that’s content to be
home.â€
The work-from-home year 2020 generated record profits for banks, proving that work-from-home
can be managed, and many employees question the need to commute every day. According to Rob
Dicks, Accenture’s talent and organization head for capital markets,
employees are likely to push back against a full-time return.
Despite whatever executives would like, the reality of the cost-cutting aspects of working
from home has already set in. According to Accenture’s survey, of the same
executives:
Nearly two-thirds expect to cut their office footprint by 11% to 40% over the next nine
months.
Over half are planning to relocate employees to new lower-cost locations.
9% said they’ll close their headquarters in a major market.
Financial firms have been all over the place with their plans.
Goldman Sachs, in an internal memo seen by
Bloomberg , told its US employees that they should be prepared to report to the office by
June 14, according to an internal memo seen by Bloomberg.
Vanguard Group, which employs about 17,300 people, is planning a hybrid model for most of
its staff, with many employees able to work from home on Mondays and Fridays.
Bridgewater Associates is going for the hybrid model as well and will allow their employees
to work from home at least part of the time.
Deutsche Bank, which employs about 8,000 people in the US, is planning to let its staff work
from home for up to three days a week. Separately, the bank had said that it wanted to reduce
its office foot print to cut costs.
Deutsche Bank is offering “flexibility†as an inducement for
hiring and retention. A survey had found that 90% of its employees wanted the opportunity to
work from home at least part of the time after the Pandemic. Office space will be reconfigured
to accommodate the hybrid model.
JPMorgan Chase told its employees in a
memo to report back to the office by early July on a “consistent
rotational schedule†that would allow staff some flexibility.
Money managers who’ve spent the bulk of their careers profiting from
deflationary trends need to quickly switch gears or risk an “inflation
shock†to their portfolios, warns JPMorgan Chase & Co. chief global markets
strategist Marko Kolanovic.
“Many of today’s investment managers have never
experienced a rise in yields, commodities, value stocks, or inflation in any meaningful
way,†Kolanovic wrote in a report Wednesday. “A significant
shift of allocations towards growth, ESG and low volatility styles over the past decade, all of
which have negative correlation to inflation, left most portfolios vulnerable.â€
After staging a powerful rally since November amid vaccine rollouts and government stimulus,
bets tied to inflation -- rising Treasury yields, cyclical stocks and small-caps, to name a few
-- have taken pause in recent weeks. While that has sparked debate over how long the trend will
persist, Kolanovic urged clients to adjust to the new regime amid the reopening of the global
economy.
“Given the still high unemployment, and a decade of inflation undershoot,
central banks will likely tolerate higher inflation and see it as temporary,†he
wrote. “The question that matters the most is if asset managers will make a
significant change in allocations to express an increased probability of a more persistent
inflation.â€
The way Kolanovic sees it, as data continue to point to higher prices of goods and services,
investors will be forced to shift from low-volatility plays to value stocks, while increasing
allocations to direct inflation hedges such as commodities. That trend is likely to persist in
the second half of the year, he wrote.
Based on JPMorgan’s data, professional investors have yet to fully
embrace the reflation trade. Take equities, for instance. Both computer-driven traders and
hedge funds now hold stocks at levels below historical averages.
“Portfolio managers likely will not take chances and will reposition
portfolios,†Kolanovic wrote. “The interplay of low market
liquidity, systematic and macro/fundamental flows, the sheer size of financial assets that need
to be rotated or hedges for inflation put on, may cause outsized impact on inflationary and
reflationary themes over the next year.â€
And if it doesn't last after the stimmies are gone, dealers will sit on massively
overpriced collateral, which could get messy. By Wolf Richter for WOLF STREET .
This has been going on for months: Used-vehicle prices spiking from jaw-dropper to
jaw-dropper, and just when I thought prices couldn't possibly spike further, they do.
Prices of used vehicles that were sold at auctions around the US in April spiked by 8.3%
from March, by 20% year-to-date, by 54% from April 2020, and by 40% from April 2019, according
to the Used Vehicle Value Index released today by Manheim, the largest auto auction operator in
the US and a unit of Cox Automotive. All heck has broken loose in the used vehicle market:
The price spike has now completely blown by the prior record spike over the 13-month period
through September 2009, which included the cash-for-clunkers program that removed a whole
generation of serviceable older vehicles from the market.
Curiously, the St. Louis Fed says used car prices have been pretty much flat for the last
25 years. While the last year of data shows a notable jump in prices, it's apparently been
bludgeoned a little with some old fashioned hedonic quality adjustments.
I'll help you out since I've been covering this for years. So here is the correct link
that explains it all, new vehicle CPI and used vehicle CPI (which is what you cited), plus
"hedonic quality adjustments."
I can see how the supply for these auctions will be tight for some time given that
business travel and the resulting car rental usage is way down. In addition, I would expect a
lot of corporate car purchasing is down considerably as many sales reps have worked remotely
which stalled corporate car purchasing schedules.
Messrs. Levy and Bordo allude to the sharp drop in the velocity of M2 after the 2007-09
crisis. The actual decline is startling. In the first quarter of 2007 M2 velocity was 1.99, by
the first quarter of 2020 it had fallen almost continually to 1.38. In other words, the money
stock went from turning over twice a year to under 1.4 times a year. This is the primary reason
for the very low inflation over the period.
Because of the Covid lockdowns, M2 fell even further to 1.13 by the fourth quarter of 2020.
As the authors point out, conditions are much different today than in 2007-20 because of
boosted bank reserves, households with substantial savings ready to spend and commercial banks
in good shape and eager to lend. Unless an economy-wide lockdown occurs, these are very good
reasons to believe the velocity of money will increase significantly, just as the 27% surge in
M2 since the outbreak of the pandemic works its way through the economy.
This is a prescription for major inflation, perhaps 4%-5% in the next two years. When people
say "no way," I remind them that in the early 1980s hardly anyone believed that interest rates
would ever return to 1950s levels. While many individuals prefer to trend forecast, never
underestimate how inflation (and interest rates) can swing back and forth in ways that
amaze.
Em. Prof. Stephen Happel
Arizona State University
Tempe, Ariz.
Messrs. Levy and Bordo might have made an equally compelling case about the Fed being in
total denial about the more troubling risk: that its policies have been contributing to a
global asset-price and credit-market bubble.
By maintaining ultralow interest rates and by continuing to expand its balance by $120
billion a month, even when the economy could soon be overheating and U.S. equity valuations are
close to their all-time highs, the Fed risks further inflating the asset-price bubble. By so
doing, it is heightening the chances of a hard economic landing when the Fed is eventually
forced to slam on the monetary-policy brakes to meet its inflation objective.
Desmond Lachman
American Enterprise Institute
Washington
Why did the money supply hardly budge in 2008, whereas now it's steadily increasing? The
answer is that during the financial crisis the Fed conducted a radical experiment: It paid
banks not to lend. By design, quantitative easing shored up banks' balance sheets while
interest on excess reserves prevented the newly created money from circulating.
In March 2020, the Fed slashed interest on excess reserves from 1.60% to 0.10%. The benefits
of sitting on funds is much smaller, which is why lending has increased.
Messrs. Levy and Bordo emphasize structural factors in the U.S. economy, such as housing and
trade. These matter, but not nearly so much as policy. Inflationary pressures will continue if
the Fed's asset purchases increase the broader money supply. But this depends on whether the
Fed raises interest on excess reserves to prepandemic levels.
For better or worse, interest on excess reserves is now a crucial policy tool. We can't
understand inflation without it.
SUBSCRIBER 3 hours ago Yellen and the Fed are currently repeating one of the most disturbing
episodes of U.S. economic history. It happened during the 1940s following the conclusion of
WWII.
The Fed is riding a tiger by the tail and will likely have great difficulty extricating
itself from a torrid monetary experiment that is reaching its limits. The U.S. M4 money supply
rose an alarming 24% in March alone from a year earlier whereas M1 rose 37%. Notwithstanding
these shocking numbers the Fed continues to buy $120bn of bonds each month and the total amount
of money in circulation is exploding at an unprecedented 40% rate.
Professor William Barnett of the Center for Financial Stability in New York explained that
today's financial collusion between the Fed and the Treasury is much like the 1940s when the
Fed served as a fiscal agent for Democratic administrations. The chaotic aftermath? By mid-1947
the rate of inflation exceeded 17% per year - destroying low income households.
(Cont.)
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Yellen and the Fed are currently repeating one of the most disturbing episodes of U.S.
economic history. It happened during the 1940s following the conclusion of WWII.
The Fed is riding a tiger by the tail and will likely have great difficulty extricating
itself from a torrid monetary experiment that is reaching its limits. The U.S. M4 money
supply rose an alarming 24% in March alone from a year earlier whereas M1 rose 37%.
Notwithstanding these shocking numbers the Fed continues to buy $120bn of bonds each month
and the total amount of money in circulation is exploding at an unprecedented 40% rate.
Professor William Barnett of the Center for Financial Stability in New York explained that
today's financial collusion between the Fed and the Treasury is much like the 1940s when the
Fed served as a fiscal agent for Democratic administrations. The chaotic aftermath? By
mid-1947 the rate of inflation exceeded 17% per year - destroying low income households.
Yellen and the Fed are currently repeating one of the most disturbing episodes of U.S.
economic history. It happened during the 1940s following the conclusion of WWII.
The Fed is riding a tiger by the tail and will likely have great difficulty extricating
itself from a torrid monetary experiment that is reaching its limits. The U.S. M4 money
supply rose an alarming 24% in March alone from a year earlier whereas M1 rose 37%.
Notwithstanding these shocking numbers the Fed continues to buy $120bn of bonds each month
and the total amount of money in circulation is exploding at an unprecedented 40% rate.
Professor William Barnett of the Center for Financial Stability in New York explained
that today's financial collusion between the Fed and the Treasury is much like the 1940s
when the Fed served as a fiscal agent for Democratic administrations. The chaotic
aftermath? By mid-1947 the rate of inflation exceeded 17% per year - destroying low income
households.
Yellen and the Fed are currently repeating one of the most disturbing episodes of U.S.
economic history. It happened during the 1940s following the conclusion of WWII.
The Fed is riding a tiger by the tail and will likely have great difficulty
extricating itself from a torrid monetary experiment that is reaching its limits. The
U.S. M4 money supply rose an alarming 24% in March alone from a year earlier whereas M1
rose 37%. Notwithstanding these shocking numbers the Fed continues to buy $120bn of
bonds each month and the total amount of money in circulation is exploding at an
unprecedented 40% rate.
Professor William Barnett of the Center for Financial Stability in New York
explained that today's financial collusion between the Fed and the Treasury is much
like the 1940s when the Fed served as a fiscal agent for Democratic administrations.
The chaotic aftermath? By mid-1947 the rate of inflation exceeded 17% per year -
destroying low income households.
Yellen and the Fed are currently repeating one of the most disturbing episodes of
U.S. economic history. It happened during the 1940s following the conclusion of
WWII.
The Fed is riding a tiger by the tail and will likely have great difficulty
extricating itself from a torrid monetary experiment that is reaching its limits.
The U.S. M4 money supply rose an alarming 24% in March alone from a year earlier
whereas M1 rose 37%. Notwithstanding these shocking numbers the Fed continues to
buy $120bn of bonds each month and the total amount of money in circulation is
exploding at an unprecedented 40% rate.
Professor William Barnett of the Center for Financial Stability in New York
explained that today's financial collusion between the Fed and the Treasury is
much like the 1940s when the Fed served as a fiscal agent for Democratic
administrations. The chaotic aftermath? By mid-1947 the rate of inflation
exceeded 17% per year - destroying low income households.
President Biden and Secretary Yellen said this week there is no significant
inflation.
On May 7 of last year, the metric standard of lumber, 1,000 board feet was $360 .
Today it's $1,702 a record high. It broke $1,000 first time ever a month ago on
April 7.
That's a 70% increase in lumber in just the last 30 days.
Copper was $2.33 on May 7 of last year. Today, $4.76 a record high.
Steel Rebar was $3,768 on May 7 of last year. Today: $5,483 , record high. President Biden and Secretary Yellen said this week there is no significant inflation
.
Tell that to a builder, his subcontractors, and the buyer of a newly built home this
summer.
Food prices for Corn, Wheat, Soybeans, Rice, Milk, Coffee, Cocoa are up double digits in just
the last two months.
Vice President Harris ignored a question about inflation with her regular everyday cackle
laughing as she walked away.
We are in month four of this administration that prioritizes its war on the wind and the
weather.
Figures are from Yahoo Finance
President Biden and Secretary Yellen said this week there is no significant
inflation.
On May 7 of last year, the metric standard of lumber, 1,000 board feet was $360 .
Today it's $1,702 a record high. It broke $1,000 first time ever a month ago
on April 7.
That's a 70% increase in lumber in just the last 30 days.
Copper was $2.33 on May 7 of last year. Today, $4.76 a record high.
Steel Rebar was $3,768 on May 7 of last year. Today: $5,483 , record
high. President Biden and Secretary Yellen said this week there is no significant
inflation .
Tell that to a builder, his subcontractors, and the buyer of a newly built home this
summer.
Food prices for Corn, Wheat, Soybeans, Rice, Milk, Coffee, Cocoa are up double digits in
just the last two months.
Vice President Harris ignored a question about inflation with her regular everyday cackle
laughing as she walked away.
We are in month four of this administration that prioritizes its war on the wind and the
weather.
Figures are from Yahoo Finance
Not only is this not true, the evidence shows that bubbles are called in advance. In 1999,
the Wall Street Journal had 286 articles on bubbles. Here are a few of the titles,
"When the Bubble Bursts..."
"The Bubble Won't Burst"
"Bursting Mr. Geenspan's Bubble"
"Fed `Bubble' Policy: Watch, Don't Pop'"
"Fed Governor Meyer Counters Suggestions Of a Market Bubble"
Dogecoin is now valued at more than Ford.
Economics?
Lunacy is more like it.
This is just more proof that the dollars are becoming more worthless.
Whistling past the graveyard.
⏤But Yellen said yesterday: "I don't think there is going to be an inflationary problem.
Biden has proposed further substantial spending packages we would love to be enacted into
law."
There is no alternative to the thrust-lifting energy jet fuel provides.
Daily demand is about 6 million barrels a day, a third in the USA.
Price rise is nearing a third in just the last three months.
There is no stopping an airline's largest revenue, the cargo jet planes carry; passengers
above are incidental.
SUBSCRIBER 3 hours ago Some of this, especially the cryptocurrency talk, reminds me of the
1990s: We don't have profits, probably never will, but we have clicks. And that's what matters.
Like thumb_up 3 Reply reply Share link Report
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D
Some of this, especially the cryptocurrency talk, reminds me of the 1990s: We don't have
profits, probably never will, but we have clicks. And that's what matters.
Some of this, especially the cryptocurrency talk, reminds me of the 1990s: We don't have
profits, probably never will, but we have clicks. And that's what matters.
Some of this, especially the cryptocurrency talk, reminds me of the 1990s: We don't
have profits, probably never will, but we have clicks. And that's what matters.
Some of this, especially the cryptocurrency talk, reminds me of the 1990s: We
don't have profits, probably never will, but we have clicks. And that's what
matters.
Some of this, especially the cryptocurrency talk, reminds me of the
1990s: We don't have profits, probably never will, but we have clicks.
And that's what matters.
Some of this, especially the cryptocurrency talk, reminds me of
the 1990s: We don't have profits, probably never will, but we
have clicks. And that's what matters.
Some of this, especially the cryptocurrency talk,
reminds me of the 1990s: We don't have profits,
probably never will, but we have clicks. And that's
what matters.
Some of this, especially the
cryptocurrency talk, reminds me of
the 1990s: We don't have profits,
probably never will, but we have
clicks. And that's what matters.
Some of this,
especially the
cryptocurrency talk,
reminds me of the
1990s: We don't have
profits, probably
never will, but we
have clicks. And
that's what matters.
Some
of
this,
especially
the
cryptocurrency
talk,
reminds
me of
the
1990s:
We
don't
have
profits,
probably
never
will,
but
we
have
clicks.
And
that's
what
matters.
Some
of
this,
especially
the
cryptocurrency
talk,
reminds
me
of
the
1990s:
We
don't
have
profits,
probably
never
will,
but
we
have
clicks.
And
that's
what
matters.
Some
of
this,
especially
the
cryptocurrency
talk,
reminds
me
of
the
1990s:
We
don't
have
profits,
probably
never
will,
but
we
have
clicks.
And
that's
what
matters.
Some
of
this,
especially
the
cryptocurrency
talk,
reminds
me
of
the
1990s:
We
don't
have
profits,
probably
never
will,
but
we
have
clicks.
And
that's
what
matters.
"It's not the return on my money I'm concerned with, it's the return of my money that I'm
concerned with." Will Rogers, circa 1930. How easily we all forget.
V
"It's not the return on my money I'm concerned with, it's the return of my money that I'm
concerned with." Will Rogers, circa 1930. How easily we all forget.
V
"It's not the return on my money I'm concerned with, it's the return of my money that
I'm concerned with." Will Rogers, circa 1930. How easily we all forget.
V
"It's not the return on my money I'm concerned with, it's the return of my money
that I'm concerned with." Will Rogers, circa 1930. How easily we all forget.
V
"It's not the return on my money I'm concerned with, it's the return of
my money that I'm concerned with." Will Rogers, circa 1930. How easily we
all forget.
V
Everybody is afiad to say that this is another dot-com bubble which will eventually birst.
Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies as
the poster child of this mania. "The S&P 500 stock index now trades at about 22 times the
coming year's profits, according to FactSet, a level only exceeded at the peak of the dot-com
boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
An unprecedented fiscal and monetary stimulus led by the Federal Reserve
is fueling a new investor euphoria. Is this a new bubble? And when could it burst?
To veterans of financial bubbles, there is plenty familiar about the present. Stock
valuations are their richest since the dot-com bubble in 2000. Home prices are back to their
pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual
investors are pouring money into green energy and cryptocurrency.
This boom has some legitimate explanations, from the advances in digital commerce to
fiscally greased growth that will likely be the strongest since 1983. . ..
the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the
10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative
-- for only the second time in 40 years.
....Harvard University economist Jeremy Stein... "while I don't think we're headed for
sustained high inflation it's completely possible we'll have several quarters of hot readings
on inflation."
Since stocks' valuations are only justified if interest rates stay extremely low, how do
they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise
one to 1.5 percentage points, he asked. " You could get a serious correction in asset
prices."
C
Everybody is afiad to say that this is another dot-com bubble which will eventually birst.
Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies
as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times
the coming year's profits, according to FactSet, a level only exceeded at the peak of the
dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the Federal Reserve
is fueling a new investor euphoria. Is this a new bubble? And when could it burst?
To veterans of financial bubbles, there is plenty familiar about the present. Stock
valuations are their richest since the dot-com bubble in 2000. Home prices are back to their
pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual
investors are pouring money into green energy and cryptocurrency.
This boom has some legitimate explanations, from the advances in digital commerce to
fiscally greased growth that will likely be the strongest since 1983. . ..
the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the
10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative
-- for only the second time in 40 years.
....Harvard University economist Jeremy Stein... "while I don't think we're headed for
sustained high inflation it's completely possible we'll have several quarters of hot readings
on inflation."
Since stocks' valuations are only justified if interest rates stay extremely low, how do
they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise
one to 1.5 percentage points, he asked. " You could get a serious correction in asset
prices."
C Cam Dipalo
I was reading a book from the late 1800 early 1900s, "Unforeseen Tendencies of Democracy".
Describing the election / selection process of political leadership in America (more than one
hundred years ago), I was struck by "the certitude of the salary [provided by office] to the
great multitude who in every country either fail in life, or shrink from the conflicts which
the competitive system makes necessary, is very attractive; it soon converted the civil
service into what has been called "spoils"; that is, booty won by victories at the polls".
Roll forward one hundred years and we can only be in a worse spot: bigger, more complex
problems are being addressed by even less qualified individuals. The result is that when I go
to the grocery store now, I am paying 1.5x what I used to pay 2 years ago. And that is the
only inflation measure I trust.
Everybody is afiad to say that this is another dot-com bubble which will eventually birst.
Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies
as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times
the coming year's profits, according to FactSet, a level only exceeded at the peak of the
dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the Federal Reserve
is fueling a new investor euphoria. Is this a new bubble? And when could it burst?
To veterans of financial bubbles, there is plenty familiar about the present. Stock
valuations are their richest since the dot-com bubble in 2000. Home prices are back to their
pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual
investors are pouring money into green energy and cryptocurrency.
This boom has some legitimate explanations, from the advances in digital commerce to
fiscally greased growth that will likely be the strongest since 1983. . ..
the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the
10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative
-- for only the second time in 40 years.
....Harvard University economist Jeremy Stein... "while I don't think we're headed for
sustained high inflation it's completely possible we'll have several quarters of hot readings
on inflation."
Since stocks' valuations are only justified if interest rates stay extremely low, how do
they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise
one to 1.5 percentage points, he asked. " You could get a serious correction in asset
prices."
C Cam Dipalo
I was reading a book from the late 1800 early 1900s, "Unforeseen Tendencies of Democracy".
Describing the election / selection process of political leadership in America (more than
one hundred years ago), I was struck by "the certitude of the salary [provided by office]
to the great multitude who in every country either fail in life, or shrink from the
conflicts which the competitive system makes necessary, is very attractive; it soon
converted the civil service into what has been called "spoils"; that is, booty won by
victories at the polls". Roll forward one hundred years and we can only be in a worse spot:
bigger, more complex problems are being addressed by even less qualified individuals. The
result is that when I go to the grocery store now, I am paying 1.5x what I used to pay 2
years ago. And that is the only inflation measure I trust.
Everybody is afiad to say that this is another dot-com bubble which will eventually
birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies
as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times
the coming year's profits, according to FactSet, a level only exceeded at the peak of the
dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the Federal
Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it
burst?
To veterans of financial bubbles, there is plenty familiar about the present. Stock
valuations are their richest since the dot-com bubble in 2000. Home prices are back to their
pre-financial crisis peak. Risky companies can borrow at the lowest rates on record.
Individual investors are pouring money into green energy and cryptocurrency.
This boom has some legitimate explanations, from the advances in digital commerce to
fiscally greased growth that will likely be the strongest since 1983. . ..
the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result,
the 10-year Treasury bond yield is well below inflation -- that is, real yields are deeply
negative -- for only the second time in 40 years.
....Harvard University economist Jeremy Stein... "while I don't think we're headed for
sustained high inflation it's completely possible we'll have several quarters of hot readings
on inflation."
Since stocks' valuations are only justified if interest rates stay extremely low, how do
they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields
rise one to 1.5 percentage points, he asked. " You could get a serious correction in asset
prices."
C Cam Dipalo
I was reading a book from the late 1800 early 1900s, "Unforeseen Tendencies of
Democracy". Describing the election / selection process of political leadership in
America (more than one hundred years ago), I was struck by "the certitude of the salary
[provided by office] to the great multitude who in every country either fail in life,
or shrink from the conflicts which the competitive system makes necessary, is very
attractive; it soon converted the civil service into what has been called "spoils";
that is, booty won by victories at the polls". Roll forward one hundred years and we
can only be in a worse spot: bigger, more complex problems are being addressed by even
less qualified individuals. The result is that when I go to the grocery store now, I am
paying 1.5x what I used to pay 2 years ago. And that is the only inflation measure I
trust.
Everybody is afiad to say that this is another dot-com bubble which will eventually
birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with
cryptocurrencies as the poster child of this mania. "The S&P 500 stock index now
trades at about 22 times the coming year's profits, according to FactSet, a level only
exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the Federal
Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it
burst?
To veterans of financial bubbles, there is plenty familiar about the present. Stock
valuations are their richest since the dot-com bubble in 2000. Home prices are back to
their pre-financial crisis peak. Risky companies can borrow at the lowest rates on
record. Individual investors are pouring money into green energy and cryptocurrency.
This boom has some legitimate explanations, from the advances in digital commerce to
fiscally greased growth that will likely be the strongest since 1983. . ..
the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a
result, the 10-year Treasury bond yield is well below inflation -- that is, real yields
are deeply negative -- for only the second time in 40 years.
....Harvard University economist Jeremy Stein... "while I don't think we're headed for
sustained high inflation it's completely possible we'll have several quarters of hot
readings on inflation."
Since stocks' valuations are only justified if interest rates stay extremely low, how
do they reprice if the Fed has to tighten monetary policy to combat inflation and bond
yields rise one to 1.5 percentage points, he asked. " You could get a serious
correction in asset prices."
C Cam Dipalo
I was reading a book from the late 1800 early 1900s, "Unforeseen Tendencies of
Democracy". Describing the election / selection process of political leadership
in America (more than one hundred years ago), I was struck by "the certitude of
the salary [provided by office] to the great multitude who in every country
either fail in life, or shrink from the conflicts which the competitive system
makes necessary, is very attractive; it soon converted the civil service into
what has been called "spoils"; that is, booty won by victories at the polls".
Roll forward one hundred years and we can only be in a worse spot: bigger, more
complex problems are being addressed by even less qualified individuals. The
result is that when I go to the grocery store now, I am paying 1.5x what I used
to pay 2 years ago. And that is the only inflation measure I trust.
Everybody is afiad to say that this is another dot-com bubble which will
eventually birst. Because after it burst there will be a lot of blood on the
floor.
But the current situation can be defined as a crazy financial mania with
cryptocurrencies as the poster child of this mania. "The S&P 500 stock index
now trades at about 22 times the coming year's profits, according to FactSet, a
level only exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the
Federal Reserve is fueling a new investor euphoria. Is this a new bubble? And when
could it burst?
To veterans of financial bubbles, there is plenty familiar about the present.
Stock valuations are their richest since the dot-com bubble in 2000. Home prices
are back to their pre-financial crisis peak. Risky companies can borrow at the
lowest rates on record. Individual investors are pouring money into green energy
and cryptocurrency.
This boom has some legitimate explanations, from the advances in digital
commerce to fiscally greased growth that will likely be the strongest since 1983. .
..
the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a
result, the 10-year Treasury bond yield is well below inflation -- that is, real
yields are deeply negative -- for only the second time in 40 years.
....Harvard University economist Jeremy Stein... "while I don't think we're
headed for sustained high inflation it's completely possible we'll have several
quarters of hot readings on inflation."
Since stocks' valuations are only justified if interest rates stay extremely
low, how do they reprice if the Fed has to tighten monetary policy to combat
inflation and bond yields rise one to 1.5 percentage points, he asked. " You
could get a serious correction in asset prices."
C Cam Dipalo
I was reading a book from the late 1800 early 1900s, "Unforeseen
Tendencies of Democracy". Describing the election / selection process of
political leadership in America (more than one hundred years ago), I was
struck by "the certitude of the salary [provided by office] to the great
multitude who in every country either fail in life, or shrink from the
conflicts which the competitive system makes necessary, is very
attractive; it soon converted the civil service into what has been called
"spoils"; that is, booty won by victories at the polls". Roll forward one
hundred years and we can only be in a worse spot: bigger, more complex
problems are being addressed by even less qualified individuals. The
result is that when I go to the grocery store now, I am paying 1.5x what
I used to pay 2 years ago. And that is the only inflation measure I
trust.
Everybody is afiad to say that this is another dot-com bubble which
will eventually birst. Because after it burst there will be a lot of blood
on the floor.
But the current situation can be defined as a crazy financial mania
with cryptocurrencies as the poster child of this mania. "The S&P 500
stock index now trades at about 22 times the coming year's profits,
according to FactSet, a level only exceeded at the peak of the dot-com boom
in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall
Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by
the Federal Reserve is fueling a new investor euphoria. Is this a new
bubble? And when could it burst?
To veterans of financial bubbles, there is plenty familiar about the
present. Stock valuations are their richest since the dot-com bubble in
2000. Home prices are back to their pre-financial crisis peak. Risky
companies can borrow at the lowest rates on record. Individual investors
are pouring money into green energy and cryptocurrency.
This boom has some legitimate explanations, from the advances in digital
commerce to fiscally greased growth that will likely be the strongest since
1983. . ..
the Federal Reserve.... is buying hundreds of billions of dollars of
bonds. As a result, the 10-year Treasury bond yield is well below inflation
-- that is, real yields are deeply negative -- for only the second time in
40 years.
....Harvard University economist Jeremy Stein... "while I don't think
we're headed for sustained high inflation it's completely possible we'll
have several quarters of hot readings on inflation."
Since stocks' valuations are only justified if interest rates stay
extremely low, how do they reprice if the Fed has to tighten monetary
policy to combat inflation and bond yields rise one to 1.5 percentage
points, he asked. " You could get a serious correction in asset
prices."
C Cam Dipalo
I was reading a book from the late 1800 early 1900s,
"Unforeseen Tendencies of Democracy". Describing the election /
selection process of political leadership in America (more than
one hundred years ago), I was struck by "the certitude of the
salary [provided by office] to the great multitude who in every
country either fail in life, or shrink from the conflicts which
the competitive system makes necessary, is very attractive; it
soon converted the civil service into what has been called
"spoils"; that is, booty won by victories at the polls". Roll
forward one hundred years and we can only be in a worse spot:
bigger, more complex problems are being addressed by even less
qualified individuals. The result is that when I go to the
grocery store now, I am paying 1.5x what I used to pay 2 years
ago. And that is the only inflation measure I trust.
Everybody is afiad to say that this is another dot-com bubble
which will eventually birst. Because after it burst there will be
a lot of blood on the floor.
But the current situation can be defined as a crazy financial
mania with cryptocurrencies as the poster child of this mania.
"The S&P 500 stock index now trades at about 22 times the
coming year's profits, according to FactSet, a level only
exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over
Wall Street.
May 8, 2021
An unprecedented fiscal and monetary
stimulus led by the Federal Reserve is fueling a new investor
euphoria. Is this a new bubble? And when could it burst?
To veterans of financial bubbles, there is plenty familiar
about the present. Stock valuations are their richest since the
dot-com bubble in 2000. Home prices are back to their
pre-financial crisis peak. Risky companies can borrow at the
lowest rates on record. Individual investors are pouring money
into green energy and cryptocurrency.
This boom has some legitimate explanations, from the advances
in digital commerce to fiscally greased growth that will likely
be the strongest since 1983. . ..
the Federal Reserve.... is buying hundreds of billions of
dollars of bonds. As a result, the 10-year Treasury bond yield is
well below inflation -- that is, real yields are deeply negative
-- for only the second time in 40 years.
....Harvard University economist Jeremy Stein... "while I
don't think we're headed for sustained high inflation it's
completely possible we'll have several quarters of hot readings
on inflation."
Since stocks' valuations are only justified if interest rates
stay extremely low, how do they reprice if the Fed has to tighten
monetary policy to combat inflation and bond yields rise one to
1.5 percentage points, he asked. " You could get a serious
correction in asset prices."
C Cam Dipalo
I was reading a book from the late 1800 early
1900s, "Unforeseen Tendencies of Democracy".
Describing the election / selection process of
political leadership in America (more than one
hundred years ago), I was struck by "the certitude
of the salary [provided by office] to the great
multitude who in every country either fail in life,
or shrink from the conflicts which the competitive
system makes necessary, is very attractive; it soon
converted the civil service into what has been
called "spoils"; that is, booty won by victories at
the polls". Roll forward one hundred years and we
can only be in a worse spot: bigger, more complex
problems are being addressed by even less qualified
individuals. The result is that when I go to the
grocery store now, I am paying 1.5x what I used to
pay 2 years ago. And that is the only inflation
measure I trust.
Everybody is afiad to say that this is another
dot-com bubble which will eventually birst. Because
after it burst there will be a lot of blood on the
floor.
But the current situation can be defined as a
crazy financial mania with cryptocurrencies as the
poster child of this mania. "The S&P 500 stock
index now trades at about 22 times the coming year's
profits, according to FactSet, a level only exceeded
at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management"
is all over Wall Street.
May 8, 2021
An unprecedented fiscal and
monetary stimulus led by the Federal Reserve is
fueling a new investor euphoria. Is this a new
bubble? And when could it burst?
To veterans of financial bubbles, there is plenty
familiar about the present. Stock valuations are
their richest since the dot-com bubble in 2000. Home
prices are back to their pre-financial crisis peak.
Risky companies can borrow at the lowest rates on
record. Individual investors are pouring money into
green energy and cryptocurrency.
This boom has some legitimate explanations, from
the advances in digital commerce to fiscally greased
growth that will likely be the strongest since 1983.
. ..
the Federal Reserve.... is buying hundreds of
billions of dollars of bonds. As a result, the
10-year Treasury bond yield is well below inflation
-- that is, real yields are deeply negative -- for
only the second time in 40 years.
....Harvard University economist Jeremy Stein...
"while I don't think we're headed for sustained high
inflation it's completely possible we'll have several
quarters of hot readings on inflation."
Since stocks' valuations are only justified if
interest rates stay extremely low, how do they
reprice if the Fed has to tighten monetary policy to
combat inflation and bond yields rise one to 1.5
percentage points, he asked. " You could get a
serious correction in asset prices."
C Cam Dipalo
I was reading a book from the late
1800 early 1900s, "Unforeseen
Tendencies of Democracy". Describing
the election / selection process of
political leadership in America (more
than one hundred years ago), I was
struck by "the certitude of the
salary [provided by office] to the
great multitude who in every country
either fail in life, or shrink from
the conflicts which the competitive
system makes necessary, is very
attractive; it soon converted the
civil service into what has been
called "spoils"; that is, booty won
by victories at the polls". Roll
forward one hundred years and we can
only be in a worse spot: bigger, more
complex problems are being addressed
by even less qualified individuals.
The result is that when I go to the
grocery store now, I am paying 1.5x
what I used to pay 2 years ago. And
that is the only inflation measure I
trust.
Everybody is afiad to say that this
is another dot-com bubble which will
eventually birst. Because after it
burst there will be a lot of blood on
the floor.
But the current situation can be
defined as a crazy financial mania with
cryptocurrencies as the poster child of
this mania. "The S&P 500 stock
index now trades at about 22 times the
coming year's profits, according to
FactSet, a level only exceeded at the
peak of the dot-com boom in 2000."
And the shadlow of "Long-Term
Capital Management" is all over Wall
Street.
May 8, 2021
An unprecedented
fiscal and monetary stimulus led by the
Federal Reserve is fueling a new
investor euphoria. Is this a new
bubble? And when could it burst?
To veterans of financial bubbles,
there is plenty familiar about the
present. Stock valuations are their
richest since the dot-com bubble in
2000. Home prices are back to their
pre-financial crisis peak. Risky
companies can borrow at the lowest
rates on record. Individual investors
are pouring money into green energy and
cryptocurrency.
This boom has some legitimate
explanations, from the advances in
digital commerce to fiscally greased
growth that will likely be the
strongest since 1983. . ..
the Federal Reserve.... is buying
hundreds of billions of dollars of
bonds. As a result, the 10-year
Treasury bond yield is well below
inflation -- that is, real yields are
deeply negative -- for only the second
time in 40 years.
....Harvard University economist
Jeremy Stein... "while I don't think
we're headed for sustained high
inflation it's completely possible
we'll have several quarters of hot
readings on inflation."
Since stocks' valuations are only
justified if interest rates stay
extremely low, how do they reprice if
the Fed has to tighten monetary policy
to combat inflation and bond yields
rise one to 1.5 percentage points, he
asked. " You could get a serious
correction in asset prices."
C Cam Dipalo
I was reading a book
from the late 1800
early 1900s,
"Unforeseen
Tendencies of
Democracy".
Describing the
election / selection
process of political
leadership in America
(more than one
hundred years ago), I
was struck by "the
certitude of the
salary [provided by
office] to the great
multitude who in
every country either
fail in life, or
shrink from the
conflicts which the
competitive system
makes necessary, is
very attractive; it
soon converted the
civil service into
what has been called
"spoils"; that is,
booty won by
victories at the
polls". Roll forward
one hundred years and
we can only be in a
worse spot: bigger,
more complex problems
are being addressed
by even less
qualified
individuals. The
result is that when I
go to the grocery
store now, I am
paying 1.5x what I
used to pay 2 years
ago. And that is the
only inflation
measure I trust.
Everybody is afiad
to say that this is
another dot-com bubble
which will eventually
birst. Because after it
burst there will be a
lot of blood on the
floor.
But the current
situation can be
defined as a crazy
financial mania with
cryptocurrencies as the
poster child of this
mania. "The S&P 500
stock index now trades
at about 22 times the
coming year's profits,
according to FactSet, a
level only exceeded at
the peak of the dot-com
boom in 2000."
And the shadlow of
"Long-Term Capital
Management" is all over
Wall Street.
May 8,
2021
An
unprecedented fiscal
and monetary stimulus
led by the Federal
Reserve is fueling a
new investor euphoria.
Is this a new bubble?
And when could it
burst?
To veterans of
financial bubbles,
there is plenty
familiar about the
present. Stock
valuations are their
richest since the
dot-com bubble in 2000.
Home prices are back to
their pre-financial
crisis peak. Risky
companies can borrow at
the lowest rates on
record. Individual
investors are pouring
money into green energy
and cryptocurrency.
This boom has some
legitimate
explanations, from the
advances in digital
commerce to fiscally
greased growth that
will likely be the
strongest since 1983. .
..
the Federal
Reserve.... is buying
hundreds of billions of
dollars of bonds. As a
result, the 10-year
Treasury bond yield is
well below inflation --
that is, real yields
are deeply negative --
for only the second
time in 40 years.
....Harvard
University economist
Jeremy Stein... "while
I don't think we're
headed for sustained
high inflation it's
completely possible
we'll have several
quarters of hot
readings on
inflation."
Since stocks'
valuations are only
justified if interest
rates stay extremely
low, how do they
reprice if the Fed has
to tighten monetary
policy to combat
inflation and bond
yields rise one to 1.5
percentage points, he
asked. " You could
get a serious
correction in asset
prices."
C Cam Dipalo
I was
reading
a
book
from
the
late
1800
early
1900s,
"Unforeseen
Tendencies
of
Democracy".
Describing
the
election
/
selection
process
of
political
leadership
in
America
(more
than
one
hundred
years
ago),
I was
struck
by
"the
certitude
of
the
salary
[provided
by
office]
to
the
great
multitude
who
in
every
country
either
fail
in
life,
or
shrink
from
the
conflicts
which
the
competitive
system
makes
necessary,
is
very
attractive;
it
soon
converted
the
civil
service
into
what
has
been
called
"spoils";
that
is,
booty
won
by
victories
at
the
polls".
Roll
forward
one
hundred
years
and
we
can
only
be in
a
worse
spot:
bigger,
more
complex
problems
are
being
addressed
by
even
less
qualified
individuals.
The
result
is
that
when
I go
to
the
grocery
store
now,
I am
paying
1.5x
what
I
used
to
pay 2
years
ago.
And
that
is
the
only
inflation
measure
I
trust.
Everybody
is
afiad
to
say
that
this
is
another
dot-com
bubble
which
will
eventually
birst.
Because
after
it
burst
there
will
be a
lot
of
blood
on
the
floor.
But
the
current
situation
can
be
defined
as a
crazy
financial
mania
with
cryptocurrencies
as
the
poster
child
of
this
mania.
"The
S&P
500
stock
index
now
trades
at
about
22
times
the
coming
year's
profits,
according
to
FactSet,
a
level
only
exceeded
at
the
peak
of
the
dot-com
boom
in
2000."
And
the
shadlow
of
"Long-Term
Capital
Management"
is
all
over
Wall
Street.
May
8,
2021
An
unprecedented
fiscal
and
monetary
stimulus
led
by
the
Federal
Reserve
is
fueling
a new
investor
euphoria.
Is
this
a new
bubble?
And
when
could
it
burst?
To
veterans
of
financial
bubbles,
there
is
plenty
familiar
about
the
present.
Stock
valuations
are
their
richest
since
the
dot-com
bubble
in
2000.
Home
prices
are
back
to
their
pre-financial
crisis
peak.
Risky
companies
can
borrow
at
the
lowest
rates
on
record.
Individual
investors
are
pouring
money
into
green
energy
and
cryptocurrency.
This
boom
has
some
legitimate
explanations,
from
the
advances
in
digital
commerce
to
fiscally
greased
growth
that
will
likely
be
the
strongest
since
1983.
.
..
the
Federal
Reserve....
is
buying
hundreds
of
billions
of
dollars
of
bonds.
As a
result,
the
10-year
Treasury
bond
yield
is
well
below
inflation
--
that
is,
real
yields
are
deeply
negative
--
for
only
the
second
time
in 40
years.
....Harvard
University
economist
Jeremy
Stein...
"while
I
don't
think
we're
headed
for
sustained
high
inflation
it's
completely
possible
we'll
have
several
quarters
of
hot
readings
on
inflation."
Since
stocks'
valuations
are
only
justified
if
interest
rates
stay
extremely
low,
how
do
they
reprice
if
the
Fed
has
to
tighten
monetary
policy
to
combat
inflation
and
bond
yields
rise
one
to
1.5
percentage
points,
he
asked.
"
You
could
get a
serious
correction
in
asset
prices."
C
Cam
Dipalo
I
was
reading
a
book
from
the
late
1800
early
1900s,
"Unforeseen
Tendencies
of
Democracy".
Describing
the
election
/
selection
process
of
political
leadership
in
America
(more
than
one
hundred
years
ago),
I
was
struck
by
"the
certitude
of
the
salary
[provided
by
office]
to
the
great
multitude
who
in
every
country
either
fail
in
life,
or
shrink
from
the
conflicts
which
the
competitive
system
makes
necessary,
is
very
attractive;
it
soon
converted
the
civil
service
into
what
has
been
called
"spoils";
that
is,
booty
won
by
victories
at
the
polls".
Roll
forward
one
hundred
years
and
we
can
only
be
in
a
worse
spot:
bigger,
more
complex
problems
are
being
addressed
by
even
less
qualified
individuals.
The
result
is
that
when
I
go
to
the
grocery
store
now,
I
am
paying
1.5x
what
I
used
to
pay
2
years
ago.
And
that
is
the
only
inflation
measure
I
trust.
Everybody
is
afiad
to
say
that
this
is
another
dot-com
bubble
which
will
eventually
birst.
Because
after
it
burst
there
will
be
a
lot
of
blood
on
the
floor.
But
the
current
situation
can
be
defined
as
a
crazy
financial
mania
with
cryptocurrencies
as
the
poster
child
of
this
mania.
"The
S&P
500
stock
index
now
trades
at
about
22
times
the
coming
year's
profits,
according
to
FactSet,
a
level
only
exceeded
at
the
peak
of
the
dot-com
boom
in
2000."
And
the
shadlow
of
"Long-Term
Capital
Management"
is
all
over
Wall
Street.
May
8,
2021
An
unprecedented
fiscal
and
monetary
stimulus
led
by
the
Federal
Reserve
is
fueling
a
new
investor
euphoria.
Is
this
a
new
bubble?
And
when
could
it
burst?
To
veterans
of
financial
bubbles,
there
is
plenty
familiar
about
the
present.
Stock
valuations
are
their
richest
since
the
dot-com
bubble
in
2000.
Home
prices
are
back
to
their
pre-financial
crisis
peak.
Risky
companies
can
borrow
at
the
lowest
rates
on
record.
Individual
investors
are
pouring
money
into
green
energy
and
cryptocurrency.
This
boom
has
some
legitimate
explanations,
from
the
advances
in
digital
commerce
to
fiscally
greased
growth
that
will
likely
be
the
strongest
since
1983.
.
..
the
Federal
Reserve....
is
buying
hundreds
of
billions
of
dollars
of
bonds.
As
a
result,
the
10-year
Treasury
bond
yield
is
well
below
inflation
--
that
is,
real
yields
are
deeply
negative
--
for
only
the
second
time
in
40
years.
....Harvard
University
economist
Jeremy
Stein...
"while
I
don't
think
we're
headed
for
sustained
high
inflation
it's
completely
possible
we'll
have
several
quarters
of
hot
readings
on
inflation."
Since
stocks'
valuations
are
only
justified
if
interest
rates
stay
extremely
low,
how
do
they
reprice
if
the
Fed
has
to
tighten
monetary
policy
to
combat
inflation
and
bond
yields
rise
one
to
1.5
percentage
points,
he
asked.
"
You
could
get
a
serious
correction
in
asset
prices."
C
Cam
Dipalo
I
was
reading
a
book
from
the
late
1800
early
1900s,
"Unforeseen
Tendencies
of
Democracy".
Describing
the
election
/
selection
process
of
political
leadership
in
America
(more
than
one
hundred
years
ago),
I
was
struck
by
"the
certitude
of
the
salary
[provided
by
office]
to
the
great
multitude
who
in
every
country
either
fail
in
life,
or
shrink
from
the
conflicts
which
the
competitive
system
makes
necessary,
is
very
attractive;
it
soon
converted
the
civil
service
into
what
has
been
called
"spoils";
that
is,
booty
won
by
victories
at
the
polls".
Roll
forward
one
hundred
years
and
we
can
only
be
in
a
worse
spot:
bigger,
more
complex
problems
are
being
addressed
by
even
less
qualified
individuals.
The
result
is
that
when
I
go
to
the
grocery
store
now,
I
am
paying
1.5x
what
I
used
to
pay
2
years
ago.
And
that
is
the
only
inflation
measure
I
trust.
Everybody
is
afiad
to
say
that
this
is
another
dot-com
bubble
which
will
eventually
birst.
Because
after
it
burst
there
will
be
a
lot
of
blood
on
the
floor.
But
the
current
situation
can
be
defined
as
a
crazy
financial
mania
with
cryptocurrencies
as
the
poster
child
of
this
mania.
"The
S&P
500
stock
index
now
trades
at
about
22
times
the
coming
year's
profits,
according
to
FactSet,
a
level
only
exceeded
at
the
peak
of
the
dot-com
boom
in
2000."
And
the
shadlow
of
"Long-Term
Capital
Management"
is
all
over
Wall
Street.
May
8,
2021
An
unprecedented
fiscal
and
monetary
stimulus
led
by
the
Federal
Reserve
is
fueling
a
new
investor
euphoria.
Is
this
a
new
bubble?
And
when
could
it
burst?
To
veterans
of
financial
bubbles,
there
is
plenty
familiar
about
the
present.
Stock
valuations
are
their
richest
since
the
dot-com
bubble
in
2000.
Home
prices
are
back
to
their
pre-financial
crisis
peak.
Risky
companies
can
borrow
at
the
lowest
rates
on
record.
Individual
investors
are
pouring
money
into
green
energy
and
cryptocurrency.
This
boom
has
some
legitimate
explanations,
from
the
advances
in
digital
commerce
to
fiscally
greased
growth
that
will
likely
be
the
strongest
since
1983.
.
..
the
Federal
Reserve....
is
buying
hundreds
of
billions
of
dollars
of
bonds.
As
a
result,
the
10-year
Treasury
bond
yield
is
well
below
inflation
--
that
is,
real
yields
are
deeply
negative
--
for
only
the
second
time
in
40
years.
....Harvard
University
economist
Jeremy
Stein...
"while
I
don't
think
we're
headed
for
sustained
high
inflation
it's
completely
possible
we'll
have
several
quarters
of
hot
readings
on
inflation."
Since
stocks'
valuations
are
only
justified
if
interest
rates
stay
extremely
low,
how
do
they
reprice
if
the
Fed
has
to
tighten
monetary
policy
to
combat
inflation
and
bond
yields
rise
one
to
1.5
percentage
points,
he
asked.
"
You
could
get
a
serious
correction
in
asset
prices."
C
Cam
Dipalo
I
was
reading
a
book
from
the
late
1800
early
1900s,
"Unforeseen
Tendencies
of
Democracy".
Describing
the
election
/
selection
process
of
political
leadership
in
America
(more
than
one
hundred
years
ago),
I
was
struck
by
"the
certitude
of
the
salary
[provided
by
office]
to
the
great
multitude
who
in
every
country
either
fail
in
life,
or
shrink
from
the
conflicts
which
the
competitive
system
makes
necessary,
is
very
attractive;
it
soon
converted
the
civil
service
into
what
has
been
called
"spoils";
that
is,
booty
won
by
victories
at
the
polls".
Roll
forward
one
hundred
years
and
we
can
only
be
in
a
worse
spot:
bigger,
more
complex
problems
are
being
addressed
by
even
less
qualified
individuals.
The
result
is
that
when
I
go
to
the
grocery
store
now,
I
am
paying
1.5x
what
I
used
to
pay
2
years
ago.
And
that
is
the
only
inflation
measure
I
trust.
Everybody
is
afiad
to
say
that
this
is
another
dot-com
bubble
which
will
eventually
birst.
Because
after
it
burst
there
will
be
a
lot
of
blood
on
the
floor.
But
the
current
situation
can
be
defined
as
a
crazy
financial
mania
with
cryptocurrencies
as
the
poster
child
of
this
mania.
"The
S&P
500
stock
index
now
trades
at
about
22
times
the
coming
year's
profits,
according
to
FactSet,
a
level
only
exceeded
at
the
peak
of
the
dot-com
boom
in
2000."
And
the
shadlow
of
"Long-Term
Capital
Management"
is
all
over
Wall
Street.
May
8,
2021
An
unprecedented
fiscal
and
monetary
stimulus
led
by
the
Federal
Reserve
is
fueling
a
new
investor
euphoria.
Is
this
a
new
bubble?
And
when
could
it
burst?
To
veterans
of
financial
bubbles,
there
is
plenty
familiar
about
the
present.
Stock
valuations
are
their
richest
since
the
dot-com
bubble
in
2000.
Home
prices
are
back
to
their
pre-financial
crisis
peak.
Risky
companies
can
borrow
at
the
lowest
rates
on
record.
Individual
investors
are
pouring
money
into
green
energy
and
cryptocurrency.
This
boom
has
some
legitimate
explanations,
from
the
advances
in
digital
commerce
to
fiscally
greased
growth
that
will
likely
be
the
strongest
since
1983.
.
..
the
Federal
Reserve....
is
buying
hundreds
of
billions
of
dollars
of
bonds.
As
a
result,
the
10-year
Treasury
bond
yield
is
well
below
inflation
--
that
is,
real
yields
are
deeply
negative
--
for
only
the
second
time
in
40
years.
....Harvard
University
economist
Jeremy
Stein...
"while
I
don't
think
we're
headed
for
sustained
high
inflation
it's
completely
possible
we'll
have
several
quarters
of
hot
readings
on
inflation."
Since
stocks'
valuations
are
only
justified
if
interest
rates
stay
extremely
low,
how
do
they
reprice
if
the
Fed
has
to
tighten
monetary
policy
to
combat
inflation
and
bond
yields
rise
one
to
1.5
percentage
points,
he
asked.
"
You
could
get
a
serious
correction
in
asset
prices."
C
Cam
Dipalo
I
was
reading
a
book
from
the
late
1800
early
1900s,
"Unforeseen
Tendencies
of
Democracy".
Describing
the
election
/
selection
process
of
political
leadership
in
America
(more
than
one
hundred
years
ago),
I
was
struck
by
"the
certitude
of
the
salary
[provided
by
office]
to
the
great
multitude
who
in
every
country
either
fail
in
life,
or
shrink
from
the
conflicts
which
the
competitive
system
makes
necessary,
is
very
attractive;
it
soon
converted
the
civil
service
into
what
has
been
called
"spoils";
that
is,
booty
won
by
victories
at
the
polls".
Roll
forward
one
hundred
years
and
we
can
only
be
in
a
worse
spot:
bigger,
more
complex
problems
are
being
addressed
by
even
less
qualified
individuals.
The
result
is
that
when
I
go
to
the
grocery
store
now,
I
am
paying
1.5x
what
I
used
to
pay
2
years
ago.
And
that
is
the
only
inflation
measure
I
trust.
The 10-year US Treasury yield fell to only 0.48% in March 2020, when deflationary fears were
mounting. The S&P 500 index had fallen by 32% in just five weeks as China's covid crisis
was followed by the prospect of other jurisdictions going into pandemic lockdowns. Commodity
prices were collapsing. The Fed then did what it always does in these conditions. It cut
interest rates to the minimum possible (zero this time) and it flooded markets with money
($120bn in QE every month) along with some other market fixes to cap corporate bond yields from
rising to reflect lending risks.
Fuelling it all is the expansion of base money by central banks. The St Louis Fed's FRED
chart below showing the Fed's monetary base illustrates the point and is a proxy for the global
picture, because the dollar is the reserve currency and the pricing medium for all
commodities.
From the beginning of March 2020, which was the month the Fed announced virtually unlimited
monetary expansion, base money has grown by 69%. It is this rapid growth in central bank money
which is undoubtedly behind rising commodity prices, or put more accurately, is why the
purchasing power of the dollar in international markets is falling.
When the outlook for the purchasing power of a fiat currency falls, all holders expect
compensation in the form of higher interest rates. Partly, it is due to time preference -- the
fact that an owner of the currency has parted with the use of it for a period of time. And
partly it is due to the expectation that when returned, the currency will buy less than it does
today. Official forecasts of the CPI state that the dollar's purchasing power will probably
sink to 97.5 cents on the dollar, then the yield on the ten-year UST should be at least 2.56%
(2.5%/0.97), otherwise new buyers face immediate losses. The official expectation that the rise
in the rate of price inflation will be temporary is immaterial to an investment decision today,
because the yield can be expected to evolve over time in the light of events.
This is before adding something to the yield for time preference (admittedly minimal in a
freely traded bond), plus something for currency risk relative to an investor's base currency
and plus something for creditor risk. Stripped of these other considerations, on the basis of
expected inflation alone a current yield of 1.61 appears to be far too low, and a yield target
of at minimum of 2.5% appears more appropriate.
ay_arrow
FinsterF 14 hours ago
Will increase??? Inflation is already much higher than 2% or whatever the latest
government figures imply. Price inflation first shows up in real time data like stock and
commodity prices. It only later shows up in broad consumer prices. Not to mention that year
over year data already average six months late.
And this on top of tricks like homeowners equivalent rent and hedonic adjustments. So
official inflation stats both systematically understate and lag actual inflation.
HorseBuggy 19 hours ago
As long as you print money you could keep this market going higher and higher regardless
of any reality.
philipat 14 hours ago
As much as I enjoy reading Alasdair's work, he's wrong about Bond Yields because there IS
NO RECOVERY. The latest BLS jobs report started to indicate that despite all the "stimulus"
the underlying economy is very weak, and that isn't due to the excuse of Covid. From the
data, the global economy started turning down in 4Q2108. This became more obvious in 3Q2019
with the REPO crisis. All before Covid.
The Bond markets almost always get it right and, as of now, Bond yields are falling as
also are Eurodollar Futures, suggesting that for once Powell is right, any inflation is
indeed transitory.
The good news for Alasdair is that for the last 3 years, Gold has been a precise mirror
image of Bond REAL yields so as Real Yields now fall further negative again, Gold should
respond to the upside - as already being seen.
Sound of the Suburbs 13 hours ago
Why is neoclassical economics so dangerous to the financial system?
We never did learn as much as we should have done from 1929.
Neoclassical economics produces ponzi schemes of inflated prices.
When they collapse it feeds back into the financial system.
Neoclassical economics still has its 1920's problems.
What's wrong with neoclassical economics?
It makes you think you are creating wealth by inflating asset prices
Bank credit flows into inflating asset prices, debt rises faster than GDP and you
eventually get a financial crisis.
No one notices the private debt building up in the economy as neoclassical economics
doesn't consider debt.
What is the fundamental flaw in the free market theory of neoclassical economics?
The University of Chicago worked that out in the 1930s after last time.
Banks can inflate asset prices with the money they create from bank loans.
Henry Simons and Irving Fisher supported the Chicago Plan to take away the bankers ability
to create money.
"Simons envisioned banks that would have a choice of two types of holdings: long-term
bonds and cash. Simultaneously, they would hold increased reserves, up to 100%. Simons saw
this as beneficial in that its ultimate consequences would be the prevention of
"bank-financed inflation of securities and real estate" through the leveraged creation of
secondary forms of money."
Existing financial assets, e.g. real estate, stocks and other financial assets, are traded
and bank credit is used to fund the transfers. This inflates the price.
You end up with a ponzi scheme of inflated asset prices that will collapse and feed back
into the financial system.
At the end of the 1920s, the US was a ponzi scheme of inflated asset prices.
The use of neoclassical economics and the belief in free markets, made them think that
inflated asset prices represented real wealth.
1929 – Wakey, wakey time
Why did it cause the US financial system to collapse in 1929?
Bankers get to create money out of nothing, through bank loans, and get to charge interest
on it.
Bankers do need to ensure the vast majority of that money gets paid back, and this is
where they get into serious trouble.
Banking requires prudent lending.
If someone can't repay a loan, they need to repossess that asset and sell it to recoup
that money. If they use bank loans to inflate asset prices they get into a world of trouble
when those asset prices collapse.
As the real estate and stock market collapsed the banks became insolvent as their assets
didn't cover their liabilities.
They could no longer repossess and sell those assets to cover the outstanding loans and
they do need to get most of the money they lend out back again to balance their books.
The banks become insolvent and collapsed, along with the US economy.
When banks have been lending to inflate asset prices the financial system is in a
precarious state and can easily collapse.
What was the ponzi scheme of inflated asset prices that collapsed in Japan in 1991?
Japanese real estate.
They avoided a Great Depression by saving the banks.
They killed growth for the next 30 years by leaving the debt in place.
What was the ponzi scheme of inflated asset prices that collapsed in 2008?
"It's nearly $14 trillion pyramid of super leveraged toxic assets was built on the back of
$1.4 trillion of US sub-prime loans, and dispersed throughout the world" All the Presidents
Bankers, Nomi Prins.
They avoided a Great Depression by saving the banks.
They left Western economies struggling by leaving the debt in place, just like Japan.
It's not as bad as Japan as we didn't let asset prices crash in the West, but it is this
problem has made our economies so sluggish since 2008.
The last lamb to the slaughter, India
They had created a ponzi scheme of inflated asset prices in real estate, but it
collapsed.
"This Time is Different" by Reinhart and Rogoff has a graph showing the same thing (Figure
13.1 - The proportion of countries with banking crises, 1900-2008).
Neoclassical economics came back and so did the financial crises.
The neoliberals removed the regulations that created financial stability in the Keynesian
era and put independent central banks in charge of financial stability.
Why does it go so wrong?
Richard Vague had noticed real estate lending balloon from 5 trillion to 10 trillion from
2001 – 2007 and knew there was going to be a financial crisis.
Richard Vague has looked at the data for financial crises going back 200 years and found
the cause was nearly always runaway bank lending.
We put central bankers in charge of financial stability, but they use an economics that
ignores the main cause of financial crises, private debt.
Most of the problems are coming from private debt.
The technocrats use an economics that ignores private debt.
The poor old technocrats don't really stand a chance.
In 2008 the Queen visited the revered economists of the LSE and said "If these things were
so large, how come everyone missed it?"
It's that neoclassical economics they use Ma'am, it doesn't consider private debt.
One of the biggest risks to U.S. recovery is the difficulty aroun...
U.S. job growth significantly undershot forecasts in April, suggesting that difficulty
attracting workers is slowing momentum in the labor market and challenging the economic
recovery.
Payrolls rose 266,000 from a month earlier, according to a Labor Department report Friday
that represented one of the largest downside misses on record. Economists in a Bloomberg survey
projected a 1 million hiring surge in April.
The unemployment rate edged up to 6.1 per cent, though the labor-force participation rate
also increased.
... The disappointing payrolls print leaves overall employment more than 8 million short of
its pre-pandemic level and is consistent with recent comments from company officials
highlighting challenges in filling open positions.
... While job gains accelerated in leisure and hospitality, employment at temporary-help
agencies and transportation and warehousing declined sharply.
...
Labor force participation, a measure of the percentage of Americans either working or
looking for work, rose to 61.7 per cent in April from 61.5 per cent, likely supported by
increased vaccinations that helped fuel the reopenings of many retail establishments,
restaurants and leisure-facing businesses.
Average weekly hours increased to match the highest in records dating back to 2006. The gain
in the workweek, increased pay and the improvement in hiring helped boost aggregate weekly
payrolls 1.2 per cent in April after a 1.3 per cent gain a month earlier.
Workforce participation for men age 25 to 54 increased last month, while edging lower for
women.
Goldman Sachs Group Inc. and bond titan Pacific Investment Management Co. have a simple
message for Treasuries traders fretting over inflation: Relax.
The firms estimate that bond traders who are pricing in annual inflation approaching 3% over
the next handful of years are overstating the pressures bubbling up as the U.S. economy
rebounds from the pandemic.
...the overshoot could be as large as 0.2-to-0.3 percentage point. That gap makes a
difference with key market proxies of inflation expectations for the coming few years surging
this week to the highest in more than a decade. The 10-year measure, perhaps the most closely
followed, eclipsed 2.5% Friday for the first time since 2013, even after unexpectedly weak U.S.
jobs data.
There's at least one market metric that backs up the view that the pressures, which have
been building for months, aren't about to get out of hand and may even prove temporary. A swaps
instrument that reflects the annual inflation rate for the second half of the next decade has
been relatively stable in recent months.
...The Federal Reserve has been hammering home that it sees any spike in price pressures as
likely short-lived, and that it's willing to let inflation run above target for a period as the
economy revives.
... ... ...
... Inflation worries have been mounting against a backdrop of soaring commodities prices --
copper, for example, set a record high Friday. It's all happening as lawmakers in Washington
debate another massive fiscal-stimulus package.
...
Korapaty calls the outlook for inflation "benign." His view is that the market is overly
optimistic with its inflation assumptions, with the greatest mismatch to be found on the three-
and five-year horizon. At roughly 2.75% and 2.7%, respectively, those rates are around 20 to 30
basis points higher than they should be, in his estimate.
... ... ...
...Treasury Secretary Janet Yellen stirred markets by saying interest rates will likely rise
as government spending swells and the economy achieves faster growth. She walked back the
remarks hours later.
... "Because we think front-end rates are pricing in a more aggressive Fed path than we
believe, we do like shorter-dated nominal bonds, and think there's value there," she said.
...retail investors have been net buyers of stocks for 10 straight weeks, hedge funds have
been sellers, client data from BofA Global Research showed, with the four-week average of net
sales of equities by hedge funds hitting their highest levels since the firm began tracking the
data in 2008.
Just yesterday,
we showed that only a few quarters after banks effectively shut down, refusing to give out
C&I, credit card or auto loans and mortgages to virtually anyone as a result of record
Draconian credit standards, credit standards saw a complete U-turn and as of April, lending
standards for credit cards and autos were the loosest on record.
This was not lost on US consumers who after suffering through a miserable 12 months in which
they dutifully repaid their credit card debt like total idiots who acted responsibly (instead
of doing what US corporations are doing and loading up on even more debt to ensure they all get
bailed out during the next crisis), in March aggregate consumer credit surged by $25.8BN,
smashing expectations for the 2nd month in a row (
as a reminder February was the biggest beat on record ) and barely slowing down from last
month's massive $26.1BN increase.
... non-revolving credit - i.e., student and auto loans - continued its relentless ramp
higher, increasing by $19.4BN in March, the most since June of 2020...
Just a Little Froth in the Market 10 minutes ago
"Americans are once again highly confident about the future, and are spending far beyond
their means, as they always tend to do."
Ah no, they are using credit cards because they have no real money. Asinine article.
Archimedes bathwater PREMIUM 7 minutes ago
If Americans use their credit cards for the same stuff as last year, but everything costs
20% more, is that also called an explosion in consumer credit? MOAR WINNING??!
nsurf9 8 minutes ago (Edited) remove link
Well, the average revolving credit card rate is only 16%.
brian91145 12 minutes ago
lol so no one is working and everyone is using credit cards? Sounds like a great
economy!
Charles Kindleberger, the late MIT professor who wrote the popular book, "Manias, Panics and
Crashes," called such speculation and crisis a hardy perennial.
"Periods of great innovation are interesting from an investor's perspective because you can
justify a wide range of valuations," says Robin Greenwood, a Harvard Business School professor
who has studied bubbles. He says another classic example was a 1920s boom in closed-end funds,
investment portfolios that trade on an exchange. Before the 1929 stock crash, issuance of
closed-end funds soared and the prices on the funds raced ahead of the underlying values of
their investment holdings.
Swindlers are oftentimes attached to the financial boom, too. That included Robert Knight,
who helped cook the books of the South Sea Company, fled England and landed in an Antwerp
prison for a time. Then there was Bernie Madoff, who cooked up his own investment Ponzi scheme
that crashed in December 2008. He died in jail last month.
.... The problem might be when investment in the vehicle is fueled by a surge in borrowing.
"Leverage is the killer," Mr. Buiter said.
That was certainly the case for the 2000s, when collateralized debt obligations helped fuel
mortgage borrowing. Between 2000 and 2008, debt in the financial sector more than doubled from
$8.7 trillion to $18 trillion; among households it doubled from $7.2 trillion to $14.1
trillion, according to Federal Reserve data.
This time the pattern is different. Though government debt is rising fast, debt in the
financial sector remains below its 2008 peak and household debt has been rising more slowly
than in the 2000s. Between 2012 and 2020, household debt rose to $16.6 trillion, from $13.6
trillion. That is something that gives Mr. Buiter some peace of mind.
"There are signs, indicators of excess, but they haven't led us down the path of an
unsustainable credit boom yet," Mr. Buiter said.
C
Dogecoin is completely worthless in the grand scheme. Unlimited dogecoins can exist (first
red flag of many). It was created as a joke. Yet people are buying for one reason and one
reason only: They think someone will come behind them and pay even more. Until that stops
happening the sky is the limit. If this is not a sign of the bubble I do not knw what
is...
... ... ...
Charles Kindleberger, the late MIT professor who wrote the popular book, "Manias, Panics and
Crashes," called such speculation and crisis a hardy perennial.
"Periods of great innovation are interesting from an investor's perspective because you can
justify a wide range of valuations," says Robin Greenwood, a Harvard Business School professor
who has studied bubbles. He says another classic example was a 1920s boom in closed-end funds,
investment portfolios that trade on an exchange. Before the 1929 stock crash, issuance of
closed-end funds soared and the prices on the funds raced ahead of the underlying values of
their investment holdings.
Swindlers are oftentimes attached to the financial boom, too. That included Robert Knight,
who helped cook the books of the South Sea Company, fled England and landed in an Antwerp
prison for a time. Then there was Bernie Madoff, who cooked up his own investment Ponzi scheme
that crashed in December 2008. He died in jail last month.
.... The problem might be when investment in the vehicle is fueled by a surge in borrowing.
"Leverage is the killer," Mr. Buiter said.
That was certainly the case for the 2000s, when collateralized debt obligations helped fuel
mortgage borrowing. Between 2000 and 2008, debt in the financial sector more than doubled from
$8.7 trillion to $18 trillion; among households it doubled from $7.2 trillion to $14.1
trillion, according to Federal Reserve data.
This time the pattern is different. Though government debt is rising fast, debt in the
financial sector remains below its 2008 peak and household debt has been rising more slowly
than in the 2000s. Between 2012 and 2020, household debt rose to $16.6 trillion, from $13.6
trillion. That is something that gives Mr. Buiter some peace of mind.
"There are signs, indicators of excess, but they haven't led us down the path of an
unsustainable credit boom yet," Mr. Buiter said.
C curt meinecke
Whenever I got that panicked feeling that I was missing out on crazy returns (dot-com stocks
in the 90s, housing in the 2000s), it always ended with a crash. I got that feeling with
crypto currency. I know to resist the urge. I did.
Dogecoin is completely worthless in the grand scheme. Unlimited dogecoins can exist (first
red flag of many). It was created as a joke. Yet people are buying for one reason and one
reason only: They think someone will come behind them and pay even more. Until that stops
happening the sky is the limit. If this is not a sign of the bubble I do not knw what
is...
... ... ...
Charles Kindleberger, the late MIT professor who wrote the popular book, "Manias, Panics and
Crashes," called such speculation and crisis a hardy perennial.
"Periods of great innovation are interesting from an investor's perspective because you can
justify a wide range of valuations," says Robin Greenwood, a Harvard Business School professor
who has studied bubbles. He says another classic example was a 1920s boom in closed-end funds,
investment portfolios that trade on an exchange. Before the 1929 stock crash, issuance of
closed-end funds soared and the prices on the funds raced ahead of the underlying values of
their investment holdings.
Swindlers are oftentimes attached to the financial boom, too. That included Robert Knight,
who helped cook the books of the South Sea Company, fled England and landed in an Antwerp
prison for a time. Then there was Bernie Madoff, who cooked up his own investment Ponzi scheme
that crashed in December 2008. He died in jail last month.
.... The problem might be when investment in the vehicle is fueled by a surge in borrowing.
"Leverage is the killer," Mr. Buiter said.
That was certainly the case for the 2000s, when collateralized debt obligations helped fuel
mortgage borrowing. Between 2000 and 2008, debt in the financial sector more than doubled from
$8.7 trillion to $18 trillion; among households it doubled from $7.2 trillion to $14.1
trillion, according to Federal Reserve data.
This time the pattern is different. Though government debt is rising fast, debt in the
financial sector remains below its 2008 peak and household debt has been rising more slowly
than in the 2000s. Between 2012 and 2020, household debt rose to $16.6 trillion, from $13.6
trillion. That is something that gives Mr. Buiter some peace of mind.
"There are signs, indicators of excess, but they haven't led us down the path of an
unsustainable credit boom yet," Mr. Buiter said.
C curt meinecke
Whenever I got that panicked feeling that I was missing out on crazy returns (dot-com
stocks in the 90s, housing in the 2000s), it always ended with a crash. I got that feeling
with crypto currency. I know to resist the urge. I did.
Dogecoin is completely worthless in the grand scheme. Unlimited dogecoins can exist
(first red flag of many). It was created as a joke. Yet people are buying for one reason and
one reason only: They think someone will come behind them and pay even more. Until that stops
happening the sky is the limit. If this is not a sign of the bubble I do not knw what
is...
... ... ...
Charles Kindleberger, the late MIT professor who wrote the popular book, "Manias, Panics
and Crashes," called such speculation and crisis a hardy perennial.
"Periods of great innovation are interesting from an investor's perspective because you
can justify a wide range of valuations," says Robin Greenwood, a Harvard Business School
professor who has studied bubbles. He says another classic example was a 1920s boom in
closed-end funds, investment portfolios that trade on an exchange. Before the 1929 stock
crash, issuance of closed-end funds soared and the prices on the funds raced ahead of the
underlying values of their investment holdings.
Swindlers are oftentimes attached to the financial boom, too. That included Robert Knight,
who helped cook the books of the South Sea Company, fled England and landed in an Antwerp
prison for a time. Then there was Bernie Madoff, who cooked up his own investment Ponzi
scheme that crashed in December 2008. He died in jail last month.
.... The problem might be when investment in the vehicle is fueled by a surge in
borrowing. "Leverage is the killer," Mr. Buiter said.
That was certainly the case for the 2000s, when collateralized debt obligations helped
fuel mortgage borrowing. Between 2000 and 2008, debt in the financial sector more than
doubled from $8.7 trillion to $18 trillion; among households it doubled from $7.2 trillion to
$14.1 trillion, according to Federal Reserve data.
This time the pattern is different. Though government debt is rising fast, debt in the
financial sector remains below its 2008 peak and household debt has been rising more slowly
than in the 2000s. Between 2012 and 2020, household debt rose to $16.6 trillion, from $13.6
trillion. That is something that gives Mr. Buiter some peace of mind.
"There are signs, indicators of excess, but they haven't led us down the path of an
unsustainable credit boom yet," Mr. Buiter said.
C curt meinecke
Whenever I got that panicked feeling that I was missing out on crazy returns (dot-com
stocks in the 90s, housing in the 2000s), it always ended with a crash. I got that
feeling with crypto currency. I know to resist the urge. I did.
Dogecoin is completely worthless in the grand scheme. Unlimited dogecoins can exist
(first red flag of many). It was created as a joke. Yet people are buying for one reason
and one reason only: They think someone will come behind them and pay even more. Until
that stops happening the sky is the limit. If this is not a sign of the bubble I do not
knw what is...
... ... ...
Charles Kindleberger, the late MIT professor who wrote the popular book, "Manias,
Panics and Crashes," called such speculation and crisis a hardy perennial.
"Periods of great innovation are interesting from an investor's perspective because
you can justify a wide range of valuations," says Robin Greenwood, a Harvard Business
School professor who has studied bubbles. He says another classic example was a 1920s
boom in closed-end funds, investment portfolios that trade on an exchange. Before the
1929 stock crash, issuance of closed-end funds soared and the prices on the funds raced
ahead of the underlying values of their investment holdings.
Swindlers are oftentimes attached to the financial boom, too. That included Robert
Knight, who helped cook the books of the South Sea Company, fled England and landed in an
Antwerp prison for a time. Then there was Bernie Madoff, who cooked up his own investment
Ponzi scheme that crashed in December 2008. He died in jail last month.
.... The problem might be when investment in the vehicle is fueled by a surge in
borrowing. "Leverage is the killer," Mr. Buiter said.
That was certainly the case for the 2000s, when collateralized debt obligations helped
fuel mortgage borrowing. Between 2000 and 2008, debt in the financial sector more than
doubled from $8.7 trillion to $18 trillion; among households it doubled from $7.2
trillion to $14.1 trillion, according to Federal Reserve data.
This time the pattern is different. Though government debt is rising fast, debt in the
financial sector remains below its 2008 peak and household debt has been rising more
slowly than in the 2000s. Between 2012 and 2020, household debt rose to $16.6 trillion,
from $13.6 trillion. That is something that gives Mr. Buiter some peace of mind.
"There are signs, indicators of excess, but they haven't led us down the path of an
unsustainable credit boom yet," Mr. Buiter said.
C curt meinecke
Whenever I got that panicked feeling that I was missing out on crazy returns
(dot-com stocks in the 90s, housing in the 2000s), it always ended with a crash.
I got that feeling with crypto currency. I know to resist the urge. I did.
Dogecoin is completely worthless in the grand scheme. Unlimited dogecoins can
exist (first red flag of many). It was created as a joke. Yet people are buying for
one reason and one reason only: They think someone will come behind them and pay
even more. Until that stops happening the sky is the limit. If this is not a sign
of the bubble I do not knw what is...
... ... ...
Charles Kindleberger, the late MIT professor who wrote the popular book,
"Manias, Panics and Crashes," called such speculation and crisis a hardy
perennial.
"Periods of great innovation are interesting from an investor's perspective
because you can justify a wide range of valuations," says Robin Greenwood, a
Harvard Business School professor who has studied bubbles. He says another classic
example was a 1920s boom in closed-end funds, investment portfolios that trade on
an exchange. Before the 1929 stock crash, issuance of closed-end funds soared and
the prices on the funds raced ahead of the underlying values of their investment
holdings.
Swindlers are oftentimes attached to the financial boom, too. That included
Robert Knight, who helped cook the books of the South Sea Company, fled England and
landed in an Antwerp prison for a time. Then there was Bernie Madoff, who cooked up
his own investment Ponzi scheme that crashed in December 2008. He died in jail last
month.
.... The problem might be when investment in the vehicle is fueled by a surge in
borrowing. "Leverage is the killer," Mr. Buiter said.
That was certainly the case for the 2000s, when collateralized debt obligations
helped fuel mortgage borrowing. Between 2000 and 2008, debt in the financial sector
more than doubled from $8.7 trillion to $18 trillion; among households it doubled
from $7.2 trillion to $14.1 trillion, according to Federal Reserve data.
This time the pattern is different. Though government debt is rising fast, debt
in the financial sector remains below its 2008 peak and household debt has been
rising more slowly than in the 2000s. Between 2012 and 2020, household debt rose to
$16.6 trillion, from $13.6 trillion. That is something that gives Mr. Buiter some
peace of mind.
"There are signs, indicators of excess, but they haven't led us down the path of
an unsustainable credit boom yet," Mr. Buiter said.
C curt meinecke
Whenever I got that panicked feeling that I was missing out on crazy
returns (dot-com stocks in the 90s, housing in the 2000s), it always
ended with a crash. I got that feeling with crypto currency. I know to
resist the urge. I did.
Yves here. Mark Blyth is such a treat. How can you not be a fan of the man who coined "The
Hamptons are not a defensible position"? Even though he's not always right, he's so incisive
and has such a strong point of view that his occasional questionable notions serve as fodder
for thought. And I suspect he'll be proven correct on his topic today, the inflation bugaboo.
Yves here. Mark Blyth is such a treat. How can you not be a fan of the man who coined "The
Hamptons are not a defensible position"? Even though he's not always right, he's so incisive
and has such a strong point of view that his occasional questionable notions serve as fodder
for thought. And I suspect he'll be proven correct on his topic today, the inflation bugaboo.
Even though he's not always right, he's so incisive and has such a strong point of view that
his occasional questionable notions serve as fodder for thought. And I suspect he'll be proven
correct on his topic today, the inflation bugaboo. Even though he's not always right, he's so
incisive and has such a strong point of view that his occasional questionable notions serve as
fodder for thought. And I suspect he'll be proven correct on his topic today, the inflation
bugaboo. By Paul Jay.
... ... ...
Paul Jay
And is the idea that inflation is about to come roaring back one of the stupid
ideas that you're talking about? And is the idea that inflation is about to come roaring back
one of the stupid ideas that you're talking about?
Mark Blyth
I hope that it is, but I'm going to go with Larry on this one. He says it's
about one third chance that it's going to do this. I'd probably give it about one in ten, so
it's not impossible.
So, let's unpack why we're going to see this. Can you generate inflation? Yeah. I mean, dead
easy. Imagine your Turkey. Why not be a kind of Turkish pseudo dictator?
Why not fire the head of your central bank in an economy that's basically dependent on other
people valuing your assets and giving you money through capital flows? And then why don't you
fire the central bank head and put in charge your brother-in-law? I think it was his
brother-in-law. And then insist that low interest rates cure inflation. And then watch as the
value of your currency, the lira collapses, which means all the stuff you import is massively
expensive, which means that people will pay more, and the general level of all prices will go
up, which is an inflation. So, can you generate an inflation in the modern world? Sure, yeah.
Easy. Just be an idiot, right? Now, does this apply to the United States? No. That's where it
gets entirely different. So, a couple of things to think about (first). So, you mentioned that
huge number of 20 trillion dollars. Well, that's more or less about two thirds of what we threw
into the global economy after the global financial crisis, and inflation singularly failed to
show up. All those people in 2010 screaming about inflation and China dumping bonds and all
that. Totally wrong. Completely wrong. No central bank that's got a brass nameplate worth a
damn has managed to hit its inflation target of two percent in over a decade. All that would
imply that there is a huge amount of what we call "˜slack' in the economy. (Also) think
about the fact that we've had, since the 1990s, across the OECD, by any measure, full
employment. That is to say, most people who want a job can actually find one, and at the same
time, despite that, there has been almost no price pressure coming from wages, pushing on into
prices, to push up inflation. So rather than the so-called vertical Phillips curve, which most
of modern macro is based upon, whereby there's a kind of speed bump for the economy, and if the
government spends money, it can't push this curve out, all it can do is push it up in terms of
prices. What we seem to actually have is one whereby you can have a constant level of
inflation, which is very low, and any amount of unemployment you want from 2 percent to 12
percent, depending on where you look and in which time-period.
All of which suggests that at least for big developed, open, globalized economies, where
you've destroyed trade unions, busted up national product cartels, globally integrated your
markets, and added 600 million people to the global labor supply, you just can't generate
inflation very easily. Now, we're running, depending on how much actually passes, a two to five
trillion-dollar experiment on which theory of inflation is right. This one, or is it this one?
That's basically what we're doing just now. Larry's given it one in three that it's his one.
I'd give it one in ten his one's right. Now, if I may just go on just for a seconds longer.
This is where the politics of this gets interesting. Most people don't understand what
inflation is. You get all this stuff talked by economists and central bankers about inflation
and expectations and all that, but you go out and survey people and they have no idea what the
damn thing is. Think about the fact that most people talk about house price inflation.
There is no such thing as house price inflation. Inflation is a general rise in the level of
all prices. A sustained rise in the level of prices. The fact that house prices in Toronto have
gone up is because Canada stopped building public housing in the 1980s and turned it into an
asset class and let the 10 percent top earners buy it all and swap it with each other. That is
singularly not an inflation. So, what's going to happen coming out of Covid is there will be a
big pickup in spending, a pickup in employment. I think it's (going to be) less than people
expect because the people with the money are not going to go out and spend it because they have
all they want already. There are only so many Sub-Zero fridges you can buy. Meanwhile, the
bottom 60 percent of the income distribution are too busy paying back debt from the past year
to go on a spending spree, but there definitely will be a pickup. Now, does that mean that
there's going to be what we used to call bottlenecks? Yeah, because basically firms run down
inventory because they're in the middle of a bloody recession. Does it mean that there are
going to be supply chain problems? Yes, we see this with computer chips. So, what's going to
happen is that computer chips are going to go up in price.
So, lots of individual things are going to go up in price, and what's going to happen is
people are going to go "there's the inflation, there's that terrible inflation," and it's not.
It's just basically short-term factors that will dissipate after 18 months. That is my bet. For
Larry to be right what would have to be true?
That we would have to have the institutions, agreements, labor markets and product markets
of the 1970s. We don't.
... ... ...
So, I just don't actually see what the generator of inflation would be. We are not Turkey
dependent on capital imports for our survival with a currency that's falling off a cliff. That
is entirely different. That import mechanism, which is the way that most countries these days
get a bit of inflation. That simply doesn't apply in the U.S. So, with my money on it, if I had
to bet, it's one in 10 Larry's right, rather one in 3.
Paul Jay
The other point he raises, and we talked a little bit about this in a previous
interview, but let's revisit it, is that the size of the American debt, even if it isn't
inflationary at some point, creates some kind of crisis of confidence in the dollar being the
reserve currency of the world, and so this big infrastructure spending is a problem because of
that. That's part of, I believe, one of his arguments. The other point he raises, and we talked
a little bit about this in a previous interview, but let's revisit it, is that the size of the
American debt, even if it isn't inflationary at some point, creates some kind of crisis of
confidence in the dollar being the reserve currency of the world, and so this big
infrastructure spending is a problem because of that. That's part of, I believe, one of his
arguments.
Mark Blyth
The way political economists look at the financial plumbing, I think, is
different to the way that macro economists do. We see it rather differently. The first thing
is, what's your alternative to the dollar unless you're basically going to go all-in on gold or
bitcoin? And good luck with those. If we go into a crushing recession and our bond market
collapses, don't think that Europe's going to be a safe haven given that they've got half the
US growth rate. And we could talk about what Europe's got going on post-pandemic because it's
not that good. So what's your alternative (to the Dollar)? Buy yen? No, not really. You're
going to buy Chinese assets? Well, good luck, and given the way that their country is being run
at the moment, if you ever want to take your capital out. I'm not sure that's going to work for
you, even if you could. So you're kind of stuck with it. Mechanically there's another problem.
All of the countries that make surpluses in the world make surpluses because we run deficits.
One has to balance the other. So, when you're a Chinese firm selling to the United States,
which is probably an American firm in China with Chinese subcontractors selling to the United
States, what happens is they get paid in dollars. When they receive those dollars in China,
they don't let them into the domestic banking system. They sterilize them and they turn them
into the local currency, which is why China has all these (dollar) reserves. That's their
national savings. Would you like to burn your reserves in a giant pile? Well, one way to do
that would be to dump American debt, which would be equivalent to burning your national
savings. If you're a firm, what do you do? Well, you basically have to use dollars for your
invoicing. You have to use dollars for your purchasing, and you keep accumulating dollars,
which you hand back to your central bank, which then hands you the domestic currency. The
central bank then has a problem because it's got a liability " (foreign) cash rather than an
asset. So, what's the easiest asset to buy? Buy another 10-year Treasury bill, rinse and
repeat, rinse and repeat. So, if we were to actually have that type of crisis of confidence,
the people who would actually suffer would be the Germans and the Chinese, because their
export-driven models only makes sense in terms of the deficits that we run. Think of it as kind
of monetarily assured destruction because the plumbing works this way. I just don't see how you
can have that crisis of confidence because you've got nowhere else to take your confidence.
Paul Jay
If I understand it correctly, the majority of American government debt is held
by Americans, so it's actually really the wealth is still inside the United States. I saw a
number, this was done three or four years ago, maybe, but I think it was Brookings Institute,
that assets after liabilities in private hands in the United States is something like 98
trillion dollars. So I don't get where this crisis of confidence is going to come any time
soon. If I understand it correctly, the majority of American government debt is held by
Americans, so it's actually really the wealth is still inside the United States. I saw a
number, this was done three or four years ago, maybe, but I think it was Brookings Institute,
that assets after liabilities in private hands in the United States is something like 98
trillion dollars. So I don't get where this crisis of confidence is going to come any time
soon.
Mark Blyth
Basically, if your economy grows faster (than the rest of the world because
you are) the technological leader, your stock markets grows faster than the others. If you're
an international investor, you want access to that. (That ends) only if there were actual real
deep economic problems (for the US), like, for example, China invents fusion energy and gives
it free to the world. That would definitely screw up Texas. But short of that, it's hard to see
exactly what would be these game-changers that would result in this. And of course, this is
where the Bitcoin people come in. It's all about crypto, and nobody has any faith in the
dollar, and all this sort of stuff. Well, I don't see why we have faith in something (like that
instead . I think it was just last week. There wasn't much reporting on this, I don't know if
you caught this, but there were some twenty-nine-year-old dude ran a crypto exchange. I can't
remember where it was. Maybe somewhere like Turkey. But basically he had two billion in crypto
and he just walked off with the cash. You don't walk off with the Fed, but you could walk off
with a crypto exchange. So until those problems are basically sorted out, the notion that we
can all jump into a digital currency, which at the end of the day, to buy anything, you need to
turn back into a physical currency because you don't buy your coffee with crypto, we're back to
that (old) problem. How do you get out of the dollar? That structural feature is incredibly
important.
Paul Jay
So there's some critique of the Biden infrastructure plan and some of the
other stimulus, coming from the left, because, one, the left more or less agrees with what you
said about inflation, and the critique is that it's actually not big enough, and let me add to
that. I'm kind of a little bit surprised, maybe not anymore, but Wall Street on the whole, not
Larry Summers and a few others, but most of them actually seem quite in support of the Biden
plan. You don't hear a lot of screaming about inflation from Wall Street. Maybe from the
Republicans, but not from listening to Bloomberg Radio. So there's some critique of the Biden
infrastructure plan and some of the other stimulus, coming from the left, because, one, the
left more or less agrees with what you said about inflation, and the critique is that it's
actually not big enough, and let me add to that. I'm kind of a little bit surprised, maybe not
anymore, but Wall Street on the whole, not Larry Summers and a few others, but most of them
actually seem quite in support of the Biden plan. You don't hear a lot of screaming about
inflation from Wall Street. Maybe from the Republicans, but not from listening to Bloomberg
Radio.
Mark Blyth
You don't even hear a lot of screaming about corporate taxes, which is
fascinating, right? You'd think they'd be up in arms about this? I actually spoke to a business
audience recently about this, and I kind of did an informal survey and I said, "why are you
guys not up in arms about this?" And someone that was on the call said, "well, you know, the
Warren Buffet line about you find out who's swimming naked when the tide goes out? What if a
lot of firms that we think are great firms are just really good at tax optimization? What if
those profits are really just contingent on that? That would be really nice to know this
because then we could stop investing in them and invest in better stuff that actually does
things." You don't even hear a lot of screaming about corporate taxes, which is fascinating,
right? You'd think they'd be up in arms about this? I actually spoke to a business audience
recently about this, and I kind of did an informal survey and I said, "why are you guys not up
in arms about this?" And someone that was on the call said, "well, you know, the Warren Buffet
line about you find out who's swimming naked when the tide goes out? What if a lot of firms
that we think are great firms are just really good at tax optimization? What if those profits
are really just contingent on that? That would be really nice to know this because then we
could stop investing in them and invest in better stuff that actually does things."
Paul Jay
And pick up the pieces of what's left of them for a penny if they have to go
down. And pick up the pieces of what's left of them for a penny if they have to go down.
Mark Blyth
Absolutely. Just one thought that we'll circle back, to the left does not
think it's big enough, etc. Well, yes, of course they wouldn't, and this is one of those things
whereby you kind of have to check yourself. I give the inflation problem a one in ten. But what
I'm really dispassionately trying to do is to look at this as just a problem. My political
preferences lie on the side of "˜the state should do more.' They lie on the side of
"˜I think we should have higher real wages.' They lay on the side that says that
"˜populism is something that can be fixed if the bottom 60 percent actually had some kind
of growth.' So, therefore, I like programs that do that. Psychologically, I am predisposed
therefore to discount inflation. I'm totally discounting that because that's my priors and I'm
really deeply trying to check this. In this debate, it's always worth bearing in mind, no one's
doing that. The Republicans and the right are absolutely going to be hell bent on inflation,
not because they necessarily really believe in (inevitable) inflation, (but) because it's a
useful way to stop things happening. And then for the left to turn around and say, well, it
isn't big enough, (is because you might as well play double or quits because, you know, you've
got Biden and that's the best that's going to get. So there's a way in which when we really are
trying to figure out these things, we kind of have to check our partisan preferences because
they basically multiply the errors in our thinking, I think.
Paul Jay
Now, earlier you said that one of the main factors why inflation is
structurally low now, I don't know if you said exactly those words. Now, earlier you said that
one of the main factors why inflation is structurally low now, I don't know if you said exactly
those words.
Mark Blyth
I would say that yes. I would say that yes.
Paul Jay
Is the weakness of the unions, the weakness of workers in virtually all
countries, but particularly in the U.S., because it matters so much. That organizing of workers
is just, they're so unable to raise their wages over decades of essentially wages that barely
keep up with inflation and don't grow in any way, certainly not in any relationship to the way
productivity has grown. So we as progressives, well, we want workers to get better organized.
We want stronger unions. We want higher wages, but we want it without inflation. Is the
weakness of the unions, the weakness of workers in virtually all countries, but particularly in
the U.S., because it matters so much. That organizing of workers is just, they're so unable to
raise their wages over decades of essentially wages that barely keep up with inflation and
don't grow in any way, certainly not in any relationship to the way productivity has grown. So
we as progressives, well, we want workers to get better organized. We want stronger unions. We
want higher wages, but we want it without inflation.
Mark Blyth
And it's a question of how much room you have to do that. I mean,
essentially, if you quintuple the money supply, eventually prices will have to rise"¦but
that depends upon the velocity of money which has actually been collapsing. So maybe you'd have
to do it 10 times. There's interesting research out of London, which I saw a couple of weeks
ago, that basically says you really can't correlate inflation with increases in the money
supply. It's just not true. It's not the money that's doing it. It's the expectations. That
then begs the question, well, who's actually paying attention if we all don't really understand
what inflation is? So I tend to think of this as basically a kind of a physical process. It's
very easy to understand if your currency goes down by 50 percent and you're heavily dependent
on imports. You're import (prices) go up. All the prices in the shops are going to go up.
That's a mechanism that I can clearly identify that will generate rising prices. If you have
big unions, if you have kind of cartel-like vertically integrated firms that control the
national market, if you have COLA contracts. If you have labor able to do what we used to call
leapfrogging wage claims against other unions, if this is all institutionally and legally
protected, I can see how that generates inflation, that is a mechanism I can point to. That
doesn't exist just now. Let's unpack this for a minute. The sort of fundamental theoretical
assumption on this is based is some kind of "˜marginal productivity theory of wages.' In
a perfectly free market with free exchange, in which we don't live, what would happen is you
would hire me up to the point that my marginal product is basically paying off for you, and
once it produces zero profits, that's kind of where my wages end. I'm paid up to the point that
my marginal product is useful to the firm. This is not really a useful way of thinking about it
because if you're the employer and I'm the worker, and I walk up to you and say, hey, my
marginal productivity is seven, so how about you pay me seven bucks? You just say, shut up or
I'll fire you and get someone else. Now, the way that we used to deal with this was a kind of
"˜higher than your outside option,' on wages. The way we used to think about this was
"why would you pay somebody ten bucks at McDonald's?" Because then you might actually get them
to and flip the burgers because they're outside option is probably seven bucks, and if you pay
them seven bucks, they just won't show up. So we used to have to pay workers a bit more. So
that was, in a sense, (workers) claiming (a bit of the surplus) from productivity. But now what
we've done, Suresh Naidu the economist was talking about this the other day, is we have all
these technologies for surveilling workers (instead of paying them more). So now what we can do
is take that difference between seven and ten and just pocket it because we can actually pay
workers at your outside option, because I monitor everything you do, and if you don't do
exactly what I say I'll fire you, and get somebody else for seven bucks. So all the mechanisms
for the sharing of sharing productivity, unions, technology, now lies in the hands of
employers. It's all going against labor. So (as a result) we have this fiction that somehow
when the economy grows, our productivity goes up, and workers share in that. Again, what's the
mechanism? Once you take out unions and once you weaponize the ability of employers to extract
surplus through mechanisms like technology, franchising, all the rest of it, then it just tilts
the playing field so much that we just don't see any increase in wages. (Now) let's bring this
back to inflation. Unless you see systematic (and sustained) increases in the real wage that
increases costs for firms to the point that they need to push on prices, I just don't see the
mechanism for generating inflation. It just isn't there. And we've underpaid the bottom 60
percent of the U.S. labor market so long it would take a hell of a lot of wage inflation to get
there, with or without unions.
Paul Jay
Yeah, what's that number, that if the minimum wage was adjusted for inflation
and it was what the minimum wage was, what, 30 years ago, the minimum wage would be somewhere
between 25 and 30 bucks, and that wasn't causing raging inflation. Yeah, what's that number,
that if the minimum wage was adjusted for inflation and it was what the minimum wage was, what,
30 years ago, the minimum wage would be somewhere between 25 and 30 bucks, and that wasn't
causing raging inflation.
Mark Blyth
And there is that RAND study from November 2020 that was adeninely entitled, "˜Trends
in Income 1979 to 2020,' and they calculated, and I think this is the number, but even if I'm
off, the order of magnitude is there, that transfers, because of tax and regulatory changes,
from the 90th percentile of the distribution to the 10 percentile, totalled something in the
order of $34 trillion. That's how much was vacuumed up and practically nothing trickled down.
So when you consider that as a mechanism of extraction, why are worrying about inflation
(from wages)? The best story on inflation is actually Charles Goodhart's book that came out
last year. We got a long period of low inflation because of global supply chains, and because
of demographic trends. It's a combination of global supply chains, Chinese labor, and
demographics all coming together to basically push down labor costs, and that's why you get
this long period of deflation, which leads to rising profits and zero inflation. A perfectly
reasonable way of explaining it. And his point is that, well, that's coming to an end. The
demographics are shifting, or shrinking. We're going back to more closed economies. You're
going to create this inflation problem again. OK, what's the timeline on that? About 20
years? A few years ago, we were told we had 12 years to fix the climate problem or we're in
deep shit. If we have to face the climate problem versus single to double-digit inflation,
I'm left wondering what is the real problem here? And there is that RAND study from November
2020 that was adeninely entitled, "˜Trends in Income 1979 to 2020,' and they
calculated, and I think this is the number, but even if I'm off, the order of magnitude is
there, that transfers, because of tax and regulatory changes, from the 90th percentile of the
distribution to the 10 percentile, totalled something in the order of $34 trillion. That's
how much was vacuumed up and practically nothing trickled down. So when you consider that as
a mechanism of extraction, why are worrying about inflation (from wages)? The best story on
inflation is actually Charles Goodhart's book that came out last year. We got a long period
of low inflation because of global supply chains, and because of demographic trends. It's a
combination of global supply chains, Chinese labor, and demographics all coming together to
basically push down labor costs, and that's why you get this long period of deflation, which
leads to rising profits and zero inflation. A perfectly reasonable way of explaining it. And
his point is that, well, that's coming to an end. The demographics are shifting, or
shrinking. We're going back to more closed economies. You're going to create this inflation
problem again. OK, what's the timeline on that? About 20 years? A few years ago, we were told
we had 12 years to fix the climate problem or we're in deep shit. If we have to face the
climate problem versus single to double-digit inflation, I'm left wondering what is the real
problem here? The best story on inflation is actually Charles Goodhart's book that came out
last year. We got a long period of low inflation because of global supply chains, and because
of demographic trends. It's a combination of global supply chains, Chinese labor, and
demographics all coming together to basically push down labor costs, and that's why you get
this long period of deflation, which leads to rising profits and zero inflation. A perfectly
reasonable way of explaining it. And his point is that, well, that's coming to an end. The
demographics are shifting, or shrinking. We're going back to more closed economies. You're
going to create this inflation problem again. OK, what's the timeline on that? About 20
years? A few years ago, we were told we had 12 years to fix the climate problem or we're in
deep shit. If we have to face the climate problem versus single to double-digit inflation,
I'm left wondering what is the real problem here? The best story on inflation is actually
Charles Goodhart's book that came out last year. We got a long period of low inflation
because of global supply chains, and because of demographic trends. It's a combination of
global supply chains, Chinese labor, and demographics all coming together to basically push
down labor costs, and that's why you get this long period of deflation, which leads to rising
profits and zero inflation. A perfectly reasonable way of explaining it. And his point is
that, well, that's coming to an end. The demographics are shifting, or shrinking. We're going
back to more closed economies. You're going to create this inflation problem again. OK,
what's the timeline on that? About 20 years? A few years ago, we were told we had 12 years to
fix the climate problem or we're in deep shit. If we have to face the climate problem versus
single to double-digit inflation, I'm left wondering what is the real problem here? OK,
what's the timeline on that? About 20 years? A few years ago, we were told we had 12 years to
fix the climate problem or we're in deep shit. If we have to face the climate problem versus
single to double-digit inflation, I'm left wondering what is the real problem here? OK,
what's the timeline on that? About 20 years? A few years ago, we were told we had 12 years to
fix the climate problem or we're in deep shit. If we have to face the climate problem versus
single to double-digit inflation, I'm left wondering what is the real problem here? A few
years ago, we were told we had 12 years to fix the climate problem or we're in deep shit. If
we have to face the climate problem versus single to double-digit inflation, I'm left
wondering what is the real problem here? A few years ago, we were told we had 12 years to fix
the climate problem or we're in deep shit. If we have to face the climate problem versus
single to double-digit inflation, I'm left wondering what is the real problem here?
Great piece. He put to words something I've thought about but couldn't articulate: if
wages are stagnant, how could you possibly get broad based inflation?
There is no upward pressure on labor costs anywhere in the economy. The pressures are
all downward.
You would need government spending in the order of magnitudes to drive up wages. Or
release from a lot of debt, like student loan forgiveness or what have you.
I'm not sure you need wage growth to get inflation. As Blyth notes, most of the time
inflation is a currency or a monetary issue. In the 70s, it was initially an oil thing " and
oil flows through a lot of products " and then really went crazy only when Volker started
raising interest rates. I don't think there is an episode of "wage-push" inflation in
history. (The union cost-of-living clauses don't "cause" inflation, they only adjust for past
inflation. If unions can cause wage-push inflation, someone needs to explain how they did
this in the late 70s, when they were much less powerful and unemployment was substantially
higher, than in the 1950s.) One could argue that expansive fiscal policy might drive
inflation but, even then, the mechanism is through price increases, not wage increases. You
do need consumption but that can always come from the wealthy and further debt immiseration
of the rest of us.
Blythe is one of those guys who is *almost* correct. For example he declares that
expectations drive inflation. What about genuine shortages? The most recent U.S. big inflation
stemmed from OPEC withholding oil"a shortage we answered by increasing the price ($1.75/bbl in
1971 -> $42/bbl in 1982). In Germany, the hyperinflation was driven by the French invading
the Ruhr, something roughly like shutting down Ohio in the U.S. A shortage of goods resulted.
Inflation! In Zimbabwe, the Rhodesian (white) farmers left, and the natives who took over their
farms were not producing enough food. A shortage of food, requiring imports, resulted.
Inflation!
I guess you could say people in Zimbabwe "expected" food"¦but that's not standard
English.
JFYI, Blythe is not a fan of MMT. He calls it "annoying." Yep, that's his well-reasoned
argument about how to think about it.
As a *political* economist, he may have a point in saying MMT is a difficult political sell,
but otherwise, I'd say the guy is clueless about it.
Inflation isn't caused by the amount of money in the economy but by the amount of
*spending*.
Like the other commenter, I've wondered this too"if wages have been stagnant for a
generation, then how are we going to get inflation? By what mechanism? It seems like almost all
of the new money just adds a few zeros to the end of the bank account balances of the already
rich (or else disappears offshore).
Still, you just cannot people to understand this because of houses, health care and
education. One might even argue that inflated house and education prices are helping keep
inflation down. If more and more of our meager income is going to pay for these fixed
expenditures, then there's no money left over to pay increased prices for goods and services.
So there's no room to increase the prices of those things. As Michael Hudson would point out,
it's all sucked away for debt service, meaning a lot of the "money printing" is just
subsidizing Wall Street.
But if you pay attention to the internet, for years there have been conspiracy theories all
across the political spectrum that we were really in hyperinflation and the government just
secretly "cooked the books" and manipulated the statistics to convince us all it wasn't
happening. Of course, these conspiracy theories all pointed to the cost of housing, medicine
and education as "proof" of this theory (three things which, ironically, didn't go up
spectacularly during the Great Inflation of the 1970's). Or else they'd point to gas prices,
but that strategy lost it's potency after 2012. Or else they'd complain that their peanut
butter was secretly getting smaller, hiding the inflation (shrinkflation is real, or course,
but it's not a vast conspiracy to hide price increases from the public).
I'm convinced that this was the ground zero for the kind of anti-government conspiratorial
thinking that's taken over our politics today. These ideas was heavy promoted by libertarians
like Ron Paul starting in the nineties, helped by tracts like "The Creature from Jekyll
Island," which argued that the Fed itself was one big conspiracy. I've seen plenty of people
across the political spectrum"including on the far Left"take all of this stuff as gospel.
So if the government is secretly hiding inflation and the Fed itself is a grand conspiracy
to convince us that paper is money (rather than "real" money, aka gold), then is it that hard
to believe they're manipulating Covid statistics and plotting to control us all by forcing us
all to wear masks and get vaccinated? In my view, it all started with inflation paranoia.
Blyth explains why housing inflation isn't really a sign of hyperinflation. But the average
"man on the street" just doesn't get it. To Joe Sixpack, not counting some of the things he has
to pay for is cheating. So are "substitutions" like ground beef when steak gets too pricey, or
a Honda Civic for a Toyota Camry, for example. The complexity of counting inflation is totally
lost on them, making them vulnerable to conspiratorial thinking. Since Biden was elected, the
ZOMG HyPeRiNfLaTiOn!!&%! articles are ubiquitous.
Does anyone have a good way of explaining this to ordinary (i.e. non-economically literate)
people? I'd love to hear it! Thanks.
"There is no such thing as house price inflation. Inflation is a general rise in the level
of all prices. A sustained rise in the level of prices. The fact that house prices in Toronto
have gone up is because Canada stopped building public housing in the 1980s and turned it into
an asset class and let the 10 percent top earners buy it all and swap it with each other. That
is singularly not an inflation."
Maybe I am totally off but, I would say"¦. By your definition, inflation does not exist
in the economic terminology as inflation only exists if generally all prices go up and a
singularity of soaring house prices and education and healthcare do not constitute an inflation
because the number of things inflating do not meet some unknown number of items needed for a
general rise in all prices to create an inflation.
What I read you to say is that if Labor prices go up " that could lead to inflation " but if
house prices go up (as they have) that is not inflation.
Hypothetically " if labor prices do not go up and the "˜nessesities of living' prices go
up (Housing and Med) " would you not have an inflation in the cost of living? " I am convinced
that economists and market experts try to claim that the economy and markets are seperate and
distinct from humans as a science " and that Political science has nothing to do with what they
present. Yet, humans are the only species to have formed the markets and money we all
participate and, the only species, therefore, to have an exclusive asset ownership, indifferent
to any other species " IE " if you can't pay you can't play and have no say.
I submit that one or a few asset price increases that are combined with labor price stasis(the
actual money outlayed for those asset price increased products not moving up) " especially one
that is a basic to living (shelter) and not mobile (like money) is inflation " Land prices
going up will generally increase the prices of all products created thereon.
I think there's two things going on here. There's different inflation indicators, and asset
prices are by definition never a part of inflation
The main indicator of CPI has so many different things in it that the inflation of any one
item is going to have little effect on it. But you can look up BEA's detailed GDP deflator to
see inflation for more specific things like housing expenses (rent) or transportation.
So back to real estate/land: real estate and land are like the stock market. They aren't
subject to inflation. They are subject to appreciation. There is somewhat of a feedback effect
for sure though: Increased real estate prices can drive up inflation. Rent for sure gets driven
up, but also any other good that's built domestically if the owners of capital need to pay more
to rent their factories/farms etc.
As noted in the article though, capitalists can simply move their production overseas so
there's a limit to how much US land appreciation can filter into inflation. Its definitely
happening with rent as housing can't be outsourced. But rent is only one part of overall
inflation
The point he was making is that the price change in housing is the result of a policy
restructuring of the market: no new public housing and financial deregulation.
The price of food is similarly a response to policy changes: industry consolidation and
resulting price setting to juice financial profits.
The point is distinguishing between political forces and market forces. The former is
socially/politically determined while the latter has to do with material realities within a
more or less static market structure.
This is a distinction essential to making good policy but useless from a cost of living
perspective.
One could prevent crossover for awhile, but eventually certain policies are going to affect
certain markets. The policy of giving the rich money drives up asset prices, real estate is a
kind of asset, eventually rising real estate costs affect the market the proles enter when they
have to buy or rent real estate.
If state institutions tell them there is no inflation, the proles learn that the state
institutions lie because they know better from direct experience. Once that gap develops, it's
as with personal relationships: when trust is broken, it is very hard to replace. Once belief
in state institutions is lost, significant political effects ensue. Often they are rather
unpleasant.
Blyth pointed to the lack of systemic drivers of price increases, and how the traditional
ones have disappeared. I think one that he missed, that results in a disconnect with the
evidence of price increases across multiple sectors, is the neoliberal infestation.
Rent-sucking intermediaries have imposed themselves into growing swaths of the mechanisms of
survival, hollowed out productive capacity, and crapified artifacts to the extent that their
value is irredeemably reduced. This is a systemic cause for reduced buying power, i.e.
inflation, but it is not a result of monetary or fiscal policy, but political and ideological
power.
> . . . The fact that house prices in Toronto have gone up is because Canada
stopped building public housing in the 1980s and turned it into an asset class and let the 10
percent top earners buy it all and swap it with each other.
That is a total load of baloney. The eighties were a time when the Conservative government
came up with the foreign investor program and it was people from Hong Kong getting out before
the British hand over to China in 1997.
I was there, trying to save for a house and for every buck saved the houses went up twenty.
I finally pulled the plug in 89 when someone subdivided a one car garage from their house and
sold it for a small fortune. The stories of Hong Kongers coming up to people raking their yard
and offering cash well above supposed market rates and the homeowner dropping their rakes and
handing over the keys were legendary.
It's still that way except now they come from mainland China, CCP members laundering their
loot.
Any government that makes domestic labor compete with foreign richies for housing is
mendacious.
When a Canadian drug dealer "saves up" a million to buy a house and the RCMP get wind of it,
they lose the house. When a foreigner show up at the border with a million, it's all clean.
Many people who talk about avoiding inflation are speaking euphemistically about preventing
wage growth, and only that; dog whistles, clearly heard by the intended audience. Yet they are
rarely confronted directly on this point. Instead we hear that they don't understand what the
word inflation means, and Mark seems to be saying these euphamists (eupahmites?) needn't be so
concerned because wages will not go up anyway. If so, what we are talking about here is merely
helping workers stay afloat without making any fundamental changes. Well, both sides can agree
to that as usual. Guess I'm just worn out by this kind of thing.
The thing that I like about Mark Blyth is how he cuts to the chase and does not waffle. Must
be his upbringing in Scotland I would say. The revelation that the US minimum wage should be
about $25-30 is just mind-boggling in itself. But in that talk he unintentionally put a value
on how much is at stake in making a fairer economic system and it works out to be about $34
trillion. That is how much has been stolen by the upper percentile and why workers have gone
from having a job, car, family & annual vacation to crushing student debt, a job at an
Amazon fulfillment center and a second job being an Uber driver while living out of car.
That $25-30 wage was keeping up with inflation , if it were keeping up with
productivity it would be, IIRC, nearly twice that. It is interesting to see a dollar
figure put on the amount you can reap after a generation or two of growing a middle class, by
impoverishing it.
But now what we've done, Suresh Naidu the economist was talking about this the other day,
is we have all these technologies for surveilling workers (instead of paying them
more) . So now what we can do is take that difference between seven and ten and just
pocket it because we can actually pay workers at your outside option, because I monitor
everything you do, and if you don't do exactly what I say I'll fire you, and get somebody
else for seven bucks.
Praise be the STEM workers. Without them where would the criminal corporate class be?
Every time I listen to the news (without barfing) the story is, we need moar STEM workers,
and I ask myself, what do they do for a living?
If that kind of tidbit excites you:
Before going into economics, Alan Greenspan was a sax and clarinet player who played with the
likes of Stan Getz and Quincy Jones.
And Michael Hudson studied piano and conducting .
Do failed musicians gravitate to economics? Perhaps for the same reason as my bank manager, a
failed bass player (honors graduate from Classy Cdn U in double bass), they see the handwriting
on the wall. He told me his epiphany came when he and his band-mates were trying to make
cup-o-noodles with tap water in a room over the pub in Thunder Bay where they were playing.
The mental gymnastics to get to "everything needed to survive costs more but wages have not
gone up in decades so therefore its all transitory and inflation does not exist" must be
painful. How high does the price for cat food have to get before we stop eating?
Yes! "The Hamptons are not a defensible position" ranks right up there with "It is easier to
imagine the end of the world than the end of (neoliberal) capitalism" by Mark Fisher (and F.
Jameson?).
Very good, Mark. This leads to the next Q. How do we maintain aggregate demand? The rich
guys increasingly Hoover everything up and pay no taxes. So, there is no T. Is the only way to
get cash and avoid deflation deficit spending by the G? There is no I worth a damn. (X-M) is a
total drain on everything since it's all M in the US and no X. The deficits will have to go out
of sight in the future.
You say that there is no velocity of money. Is this because the more money pored into the
economy by the G, the more money the rich guys steal? So, there is a general collapse in C.
Maybe the work around for the rich guy theft is a $2,000 (sorry, $1,400) check every now and
then to the great unwashed. The poors can circulate it a couple of times before the rich guys
steal it. Seems like the macro-economists have a lot of "˜splainin' to do. Oh, right,
they are busy right now measuring the output gap.
I'd like to see Mark go into a discussion on the velocity of money. I remember the old timey
Keynesians lecturing about it, and that's all I remember. I'm guessing that it's related to the
marginal propensity to consume.
I may be getting a bit out over my skis, but the St. Louis Fed calculates the velocity of
money ( https://fred.stlouisfed.org/series/M2V ). It is
defined as
The velocity of money is the frequency at which one unit of currency is used to purchase
domestically- produced goods and services within a given time period. In other words, it is the
number of times one dollar is spent to buy goods and services per unit of time. If the velocity
of money is increasing, then more transactions are occurring between individuals in an
economy.
So as velocity slows, fewer transactions happen. Based on the linked chart, the peak
velocity was 2.2 in mid-1997. In Q1 2021, it was 1.12. By my understanding, although the money
supply continues to increase, the money isn't flowing through the economy in the way it was
over the last 30 years (or even 10 years ago).
It's beyond my level of understanding to say with any certainty as to why the slowdown in
velocity has occurred, but I speculate it's directly related to the ever-growing inequality in
the US economy and the ongoing rentier-ism that Dr. Hudson discusses. [simplistically, if Jeff
Bezos has $1.3 billion more on Monday than on Friday, that money will flow virtually nowhere.
If each of Amazon's employees equally shared that $1.3 billion (about $1,000 each), the
preponderance of the money would flow into the economy in short order].
I've always speculated that money velocity is one of the key indicators of the stagnant
economy since 2008. It certainly has coincided with the dramatic increase in wealth in the top
fraction (not the 1% but the 0.001%) of the US population.
What Blythe has laid out is not a tale about inflation or money, but a tale about power.
If money goes to the non-elite, you get inflation. If it goes to the elite, you don't get
inflation.
If you are a country with little control of your resources (not lack of resources, but control)
and/or loans (think IMF)/debt (think war reparations) that give people with little interest in
whether you live or die control over your countries' finances, you can be prone to inflation or
even hyperinflation.
Yeah, I figured out a long time ago that none of this is any "natural economic law" because
there is no such thing as "nature" in economics. Inflation is all about political decisions and
perceptions.
And I saw this on YouTube a couple of days ago"¦and I still can't think of anything
around me that hasn't gone up on price.
This is a good response to Summers. But I have a quibble and a concern.
My quibble is that he offers no theory of inflation except implicitly aggregate supply
exceeding aggregate demand and there is nothing but hand-waving regarding what he is referring
to that he feels has a one chance in ten of happening versus Summers one in three. A second
part of this quibble is: what does it mean for inflation to "come roaring back." I assume it
means more than just a short-term adjustment to a shot of government spending and gifting. I
believe if he thought this through he would have to conclude that without changes in the
current structure of the global economy there is no way for this to happen. That really is the
case he has made. With labor beaten down not only in the US but worldwide inflation will not
come roaring back, period. That is unless there is a chance either that a labor renewal is a
near-term possibility. I doubt he believes this. Or does he believe there is another way for
inflation to roar back? If so, what is that way, what is the theory behind it?
A more fundamental concern is the part where he relies on marginal productivity theory when
discussing employment and exploitation. Conceptually that far from Marx's fundamental
distinction between labor and labor power.
Hyperinflation doesn't seem to be possible in this age of digital money no matter how much
you conjure up because nobody notices the extreme amount of monies around all of the sudden as
the average joe isn't in the know.
Used houses are always appreciating in value, but none dare call it inflationary, more of a
desired outcome in income advancement if you own a domicile.
There were no shortages of anything in the aftermath of the GFC, and now for want of a
semiconductor, a car sale was lost. Everything got way too complex, and we'll be paying the
price for that.
I think the inflation to come won't be caused by a lack of faith in a given country's money,
but the products and services it enabled us to purchase.
""¦and now for want of a semiconductor, a car sale was lost"¦."
Sometimes car sales are lost because the price of cars has gone up (new and used)"¦just
don't call it inflation"¦
I'm going to let some more time pass, but stimulus or not, we went from all economic
problems being laid at the feet of Covid to now moving on to "shortages"
everywhere"¦
Just enought to make you go"¦hmmmm"¦.unti more time passes.
Used houses always appreciate " or is it that they appreciate due to a combination of
inflation in income over time and the dramatic decrease in interest rates over the last 20
years?
A very quick back of the envelope calc (literally " and all number are approximate):
In June 2000, median US income was $40,500; 30 yr mortgage rate was 8.25%. 28% of monthly
income = $945. That supports a mortgage (30 yr fixed, P&I only " no tax, insurance, etc) of
roughly $125,000.
In June 2005, median US income was $44,000; 30 yr mortgage rate was 5.5%. 28% of monthly
income = $1026. That supports a mortgage (30 yr fixed, P&I only " no tax, insurance, etc)
of roughly $180,000.
In June 2010, median US income was $49,500; 30 yr mortgage rate was 4.69%. 28% of monthly
income = $1155. That supports a mortgage (30 yr fixed, P&I only " no tax, insurance, etc)
of roughly $225,000.
In June 2015, median US income was $53,600; 30 yr mortgage rate was 4.00%. 28% of monthly
income = $1250. That supports a mortgage (30 yr fixed, P&I only " no tax, insurance, etc)
of roughly $260,000.
Finally, In June 2020, median US income was $63,000; 30 yr mortgage rate was 3.25%. 28% of
monthly income = $1470. That supports a mortgage (30 yr fixed, P&I only " no tax,
insurance, etc) of roughly $340,000.
And for fun, if you went to 40% of income in 2020 (payment only), a $2100 monthly payment
will cover nearly a $500,000 mortgage in 2020.
For the vast majority of home buyers, the price isn't the main consideration " it's how much
will it cost per month. So a small increase in median income (roughly 2% per year) combined
with dramatically lower interest rates can drive a HUGE increase in a mortgage " and ultimately
the price that can be paid for a house.
Can't say I really understand this sort of thing but saying rocketing house-prices is
"˜a singularity' rather than "˜house-price inflation' has to me echoes of the
Bourbon's "Bread too expensive? Let them eat cake." And Versailles wasn't a defensive position
either.
In my version of economics-for-the-under-tens you get inflation in two situations. First is
where enough folk have enough cash in their pockets for producers/manufacturers/retailers to
hike their prices without hitting their sales too much and secondly where there's a shortage of
stuff people want and/or need which leads to a bidding war. However I'd agree with Blyth that
neither condition exists now or seems likely to arise for a while, making a "˜spike' in
inflation unlikely.
I am a non-economist, and so my thoughts below may be wrong. However, here goes.
I would say we have had inflation. Roaring inflation. For the past 20 years of so.
Inflation in wages and ordinary costs of living? No, wages have been stagnant. Health care
has led the charge in cost of living increases, but most other living expense increases have
been low.
Inflation in asset prices? We have had massive inflation in the costs of residential housing
where I live.
20 years ago I could buy a 5 br, 3 bath home on a decent block in a good area close to
everything for $270,000 dollars. Sure it needed some renovation, but still"¦. Now to buy
that home it would cost me around $1,250,000. So that home has gone up in value by 500%. Man,
that is inflation.
As I understand it, asset inflation is not counted by governments in the GDP or CPI. It
appears that those who have most of the assets don't want this to be counted, by the very fact
that they control the politicians who control what is counted, and asset inflation isn't
counted in the economic data that the politicians rely upon to prove how prudent they are.
So if you want a day to day example of where all this free money is going, look at housing.
And also have a quick look at the insane increases in the worth of billionaires. They love all
this government spending which magically? seems to end up, via asset purchase and asset price
inflation, in their pockets.
Price is what one pays, value is what one gets. That house is roughly the same, so the value
has not changed, but the price has gone up by a factor of 5
Same with stawks. One share of Amazon stawk is $3,467.42 as of yesterday.
What is its value? If Bezos can work his tools ever harder, monitor them down to the
nanosecond and wring ever moar productivity out of them before throwing them in the tool
dumpster behind every Amazon warehouse, the value proposition is that someone else will believe
the stawk price should be even higher, at which point one can sell it at greater price for a
profit.
What is inflation? Good question. I'd say inflation is fear of monetary devaluation. Not
devaluation, just the fear of it. We'll never overcome this unease if we always deal in
numbers. Dollars, digits, whatever. We need to deal in commodities " let's call just about
everything we live with and use a "commodity". Including unpaid family help/care; and the more
obvious things like transportation. If we simply took a summary of all the necessary things we
need to live decent lives " but not translated into dollars because dollars have no sense " and
then provided these necessities via some government agency so that they were not "inflated" in
the process and thereby provided a stable society, then government could MMT this very easily.
Our current approach is so audaciously stupid it will never make sense let alone balance any
balance sheets. That's a feature, not a bug because it's the best way to steal a profit. The
best way to stop demand inflation or some fake scarcity or whatever is to provide the necessary
availability. That's where uncle Joe is gonna run headlong into a brick wall. He has spent his
entire life doing the exact opposite.
The figure for the upward transfer of wealth from the Rand Study was $50 trillion between
1975-2018. It was adjusted up by the authors from $47 trillion to bring it up to 2020
trends.
Now the interesting thing to me is this " look at the date of the publication in Time
magazine: Sept. 14, 2020, so right in the heart of campaign fever, and it never came up in the
debates, in the press"¦I didn't hear about it until Blyth made one of his appearances on
Jay's show with Rana Foroohar. Long after the election.
As long as 80% of Americans are head over heels in debt and 52% of 18-to-29-year-olds are
currently living with their parents, there never will be the wage inflation of the 1970s. A
majority of the people arrested for the Capitol riot had a history of financial trouble. The
elite blue zones in Washington State and Oregon that prospered from globalism are seeing a
spike in coronavirus cases. North American neoliberal governments have failed dismally. It is
intentional in order to exploit more wealth for the rich from the natural resources and
workers. If the mRNA vaccines do not control coronavirus variants, and a workable national
public health system is not implemented; succession and chaos will bring on Zimbabwe type
inflation.
There is a reason why Portland Oregon has been a center of unrest for the past year. The
Elite just do not want to see it. How can Janet Yellen deal with this? She can't. She is an
Insider. She was paid 7.2 million dollars in speaker and seminar fees in the last two years not
to.
"... Despite the fact that most moving-average-crossover signals provide some form of maximum loss reduction in comparison to a buy-and-hold strategy, their ability to outperform the underlying market is limited. Furthermore, the recent underperformance of such crossover signals since 2009 is a typical phenomenon rather than a temporarily one. This is because a negative crossover signal does not necessarily predict significant and longer-lasting downturns, or bear markets. Nevertheless, if investors are more focused on maximum draw-down reduction, such crossover signals are worth looking at, though they should definitely not be the sole source of information. ..."
Advisor Perspectives welcomes guest contributions. The views presented here do not
necessarily represent those of Advisor Perspectives.
Moving-average-crossover strategies have worked out very well in recent years. They
prevented their followers from being invested in equities during the tech bubble and the
financial crisis. Nevertheless, most of those strategies have underperformed the broad
equity market since 2009. In this article, I will analyze all possible
moving-average-crossover signals for the S&P 500 since 1928, to see if these strategies
provide any value for investors.
Introduction
Mebane Faber's 2007 paper " A Quantitative Approach to
Tactical Asset Allocation " has become quite popular among the investment community. In
this paper, he demonstrated that a very simple 10-month moving average could be used as an
effective investment strategy. To be more precise, Faber used a 10-month moving average to
determine if an investor should enter or exit a position within a specific asset class.
When the closing price of any given underlying closes above its 10-month moving average (10
months is approximately 200 trading days), the investor should buy, and when the price
closes below the 10-month moving average, the investor should sell. As this strategy has
worked out very well in the past and is very easy to follow, many investors have adopted
similar moving-average-crossover strategies for their personal portfolios. A lot of
articles have been published about how to apply or improve on Faber's ideas.
Another famous moving-average-crossover pattern is called the "golden cross." It occurs
when the 50-day moving average of a specific underlying security crosses above its 200-day
moving average. The claim is that this signifies an improvement in the underlying trend
structure of any given security. Investors should move into cash if the golden cross turns
into a "death cross," in which the 50-day moving average crosses below the 200-day moving
average. Within the last decade, most of those moving-average-crossover strategies have
worked out very well, as shown in the chart below. This was mainly because those moving
average strategies prevented their followers from being invested in equities during the
tech bubble and the financial crisis.
Nevertheless, most of those crossover strategies have underperformed the broad equity
market since 2009, as shown in the chart below, where the payoff from the golden cross
since 2009 is depicted. This was mainly because we have not seen any longer-lasting
downturn since then.
The recent underperformance of such strategies is not a big surprise at all, as all
trend-following strategies are facing the typical "late in, late out" effect. Therefore,
such an approach can only outperform a simple buy-and-hold strategy during longer lasting
bear markets. However, many investors try to avoid the typical late-in-late-out effect by
choosing shorter moving-average combinations, which has, of course, the negative effect of
increased trading activities.
Despite the fact that those moving-average-crossover signals are quite popular, I have
not found any research paper that evaluates all possible moving-average-crossover
combinations to determine whether such strategies provide any additional value for
investors.
Methodology
Let's analyze all possible moving-average-crossover signals for the S&P 500 from
Dec. 31, 1928, until June 11, 2014, to get an unbiased view of the pros and cons of such
crossover signals. In addition, I would like to determine if the recent underperformance of
those crossover signals compared to a simple buy-and-hold strategy is typical or just a
temporary phenomenon. Moreover, I would like to find out if the outcome of a specific
crossover strategy tends to be stable or more random in its nature. For simplicity, I have
assumed a zero nominal rate of return if a specific strategy was invested in cash.
Moreover, in our example there is no allowance for transaction costs or brokerage
fees.
Results
In the following charts I analyze different kind of key metrics (z-axis), and the time
frame for each single moving average is plotted on the x and y axis, respectively. For
example, the key metric for the golden cross strategy (50:200) can be found if you search
the crossing point of the 50 day moving average (x-axis=50) and the 200 day moving average
(y-axis=200). I tested all combinations of lengths (in days) of moving averages crossing
over one another.
All moving crossover strategies provide some form of maximum loss reduction. If we
consider the fact that the biggest decline from the S&P 500 was 86% during the 1930s,
the main advantage of such strategies become quite obvious.
In total, there were only three combinations of days (70/75, 65/80 and 70/80) that faced
a maximum loss exceeding the maximum loss from the S&P 500. All other combinations
faced losses less than a typical buy-and-hold strategy. Especially in the range from 50/240
days to 220/240 days, the maximum loss ranged between -40% and 060%, which is quite an
encouraging ratio if we consider the 86.1% from the S&P 500. Moreover, as we can see
that in that region, this drawdown reduction was or tends to be quite stable over time --
this area can be described as a plateau. If this effect was a random variable within that
specific time range, there would have been many more spikes in that area. Therefore, small
adjustments within the time frames of any moving average are likely to have not a big
impact at all, regarding to this ratio. The case is quite different if we analyze the area
around 1/100 days to 1/200 days. In that area, small adjustments within the time frame of
each moving average could lead to quite different results and are therefore highly likely
to be random.
Another typical relationship is that as the number of trades increases, both moving
averages become shorter. This, of course, is due to transaction costs. For that reason,
most followers of such a strategy prefer a combination of short-term-oriented and
long-term-oriented moving averages to reduce the total number of trades.
If we focus on the annualized performance of those moving-average-crossover signals
since 1929, we can see that all combinations delivered a positive return since then. This
outcome is not a big surprise at all, as the S&P 500 has risen by nearly 8,000% since
then. Therefore, any continuous participation within the market should have led to a
positive performance.
Another interesting point is the historical ability of those crossover signals to
outperform a simple buy-and-hold strategy. In the second graph, we only highlighted those
moving-average-crossover combinations that have been able to outperform a buy-and
hold-strategy. We can see that the best combination (5/186) was able to generate a yearly
outperformance of 1.4% on average, with no transaction costs included. Nevertheless, we can
see a lot of spikes in that graph. Most outcomes are highly likely to be random by their
nature. For example, the 5/175 combination delivered a yearly outperformance of 1.3% on
average, while the 10/175 crossover outperformance was only 0.3% and the 20/175
underperformed the market by almost 0.5% on average.
Therefore, the outperformance of most crossover signals depends on pure luck. The case
is slightly different if we focus on the area between 1:100/ 200:240, as all combinations
in that range managed to outperform the S&P 500. The outperformance was quite stable
over time, as small adjustments within the timeframe of each moving average did not lead to
big differences in terms of outperformance. Nevertheless, the yearly outperformance in that
region was only 0.58% on average. Please bear in mind that I have not included any
transaction costs in our example.
Generating
absolute returns
Outperformance is just one side of the story. Investors might be also interested in
generating absolute rather than relative positive returns. I looked at the ability of any
moving-average-crossover combination to generate absolute positive returns. I analyzed how
many signals of each moving-average-crossover combination were profitable in the past,
expressed in percentage terms. A lot of combinations delivered long signals, which have
been profitable more than 50% of the time. The area around 50/120 days to 200/240 days
tends to be pretty stable, as the percentage of absolute positive signals is slowly
increasing to the top. It looks like some moving-average combinations have the ability to
forecast rising markets.
Unfortunately, this does not hold in most cases, as the percentage of absolute positive
signals strongly depends on the number of days each moving-average combination was invested
in the S&P 500. This becomes quite obvious if we consider that the S&P 500 has
risen slightly less than 8,000% since 1929. Any exposure to the market in that time period
is highly likely to produce a positive return! This effect can be seen on the second graph
below, which shows the average long-signal length of each moving crossover combination,
measured in days. If we compare both graphs, we can see a strong relationship between the
average signal length and the percentage of positive performing signals. Nevertheless, some
combinations tend to be better suitable for catching a positive trend than
others.
As any moving-average combination could only outperform the market during a
longer-lasting downturn, it is also interesting to examine how often a cash signal
(negative crossover signal) was able to outperform the market. In such a case, the S&P
500 must have performed negative during that specific time period. The ratio can be also
seen as the probability that a bearish crossover signal indicates a longer-lasting
downturn. As you can see in the graph below, the S&P 500 performed negative in less
than 50% of all cases after any moving-average-crossover combination flashed a bearish
crossover signal. In addition, the graph is extremely spiked, indicating that this poor
outcome tends to be completely random.
The bottom
line
Despite the fact that most moving-average-crossover signals provide some form of
maximum loss reduction in comparison to a buy-and-hold strategy, their ability to
outperform the underlying market is limited. Furthermore, the recent underperformance of
such crossover signals since 2009 is a typical phenomenon rather than a temporarily one.
This is because a negative crossover signal does not necessarily predict significant and
longer-lasting downturns, or bear markets. Nevertheless, if investors are more focused on
maximum draw-down reduction, such crossover signals are worth looking at, though they
should definitely not be the sole source of information.
Paul Allen is the head of quantitative/technical market analysis ofWallStreetCourier.com, an
independent research- and investment advisor for selected stock market information.
Last Wednesday, Federal Reserve Chair Jerome Powell showed how simple questions do not
always get simple answers. When speaking to the media after the latest Federal Open Market
Committee ( FOMC ) meeting,
some difficult questions were asked. So much so, Powell had to repeat one question to himself,
asking:
When will the economy be able to stand on its own feet?
He immediately followed with:
I'm not sure what the exact nature of that question is.
FOX News correspondent Edward Lawrence elaborated, asking when the Fed would lower the
number of treasuries it buys, and when the economy would function "without having that support
from the monetary side."
Powell found ways to avoid answering the idea of a nation which stands without central bank
supports, but he did refer to various "tests" the Fed will do in order to make decisions like
shrinking the balance sheet, explaining:
we've articulated our test for that, as you know, and that is just we'll continue asset
purchases at this pace until we see substantial further progress.
He went on to say that prior to making any decisions, such as buying fewer treasuries, they
will give the public a lot of notice beforehand.
There was also a question related to the Fed's influence in the housing market:
the housing market is strong, prices are up. And yet, the Fed is buying $40 billion per
month in mortgage related assets. Why is that, and are those purchases playing a role at all
in pushing up prices?
Despite amassing nearly $2.2 trillion of mortgage-backed securities
(MBS), Powell defended the central bank on the grounds that:
I mean, we started buying MBS because the mortgage-backed security market was really
experiencing severe dysfunction, and we've sort of articulated, you know, what our exit path
is from that. It's not meant to provide direct assistance to the housing market.
To be clear, the "severe dysfunction" occurred over a decade ago, when the Fed entered the
MBS market. As for the public knowing the exit path or not providing assistance to the housing
market, both ideas are highly debatable, to say the least.
But even more puzzling is when Powell says that during the current COVID crisis:
We bought MBS, too. Again, not intention to send help to the housing market, which was
really not a problem this time at all.
Strange, the Fed would commit to buying $40 billion a month of MBS when, according to the
Chair, there were no problems in the market. He concludes that purchases will go to zero over
time, but the "time is not yet."
The final question asked was in regards to market intervention:
if you get out of the markets, there aren't enough buyers for all of the Treasury debt?
And so, rates would have to go way up. Bottom line question is what do we get for $120
billion a month that we couldn't get for less?
Powell never explained what exactly "we get for $120 billion" a month, but assured us the
Fed was looking to reach its goals, and this was part of its plan. However, he did comment on
purchases, saying:
But if we bought less, you know, no. I mean, I think the effect is proportional to the
amount we buy And we articulated the, you know, the test for withdrawing that accommodation.
And we think, you know. So, we're waiting to see those tests to be fulfilled, both for asset
purchases and for lift off of rates. And, you know, when the tests are fulfilled, we'll go
ahead as, you know, we've done this before.
Between various tests to determine policy, vague responses, and a general avoidance of
answering questions directly, not much was offered other than providing perpetual liquidity
injections under accommodative monetary conditions. It was refreshing to see the mainstream
media ask more questions about the plan ahead; we can only hope the mainstream economic
community will do the same.
Janet Yellen caused market ructions when she noted in public that: "It may be that interest
rates will have to rise somewhat to make sure that our economy doesn't overheat, even though
the additional spending is relatively small relative to the size of the economy."
Firstly, because rates aren't the Treasury Secretary's job to comment on - EVER. Yes, there
is the same need for endless hockey-stick-projection optimism on growth, the same silken spiel,
and the same one-size-fits-all Panglossian policy prescriptions (of various vintages: Slash
taxes! Raise taxes!) in both roles: but there is a separation of powers between the two.
Secondly, because that very same Panglossian policy from the Fed has got global markets to
the point where the mere idea of small increase in US rates is going to bring a whole lot of
precariously-levered objects tumbling down. It's a good job that interest rates never, ever,
ever have to go up again then, isn't?
Naturally, Yellen immediately had to walk back these comments when qualifying that rate
increases " are not something that I am predicting or recommending ." So just what was the
correct verb then? Speculating? Hypothesizing? Imagining? Dreaming? Deluding?
For now, markets can happily seize on all of the usual Fed-driven speculative hypotheticals
to imagine, dream, and delude themselves to greater wealth as usual . US couples everywhere can
keep fantasizing that they too can one day get a billionaire divorce. Yet it's not as if Yellen
doesn't have just *a little* bit of experience in this rate field thing. It's not as if she
might not end up thinking a certain way on autopilot in the new job, and saying the quiet part
out loud – is it?
Of course, the question of who is driving applies to the Fed itself . Yellen added: "If
anyone appreciates the independence of the Federal Reserve I think that person is me." Yet
unlike the BOE, for example, the Fed allows US banks a major role (if not "ownership") in its
12 regional Reserve Banks, alongside balancing presidential appointees. So it a fusion body,
and even if it is independent of the Treasury, that is hardly true of all influence: the reason
for having 12 regional Reserve Banks was originally to water down that of Wall Street. Yet how
is that working out, and where are the union/labour representatives, for example? That's a
structural issue the US press doesn't talk about much even as much of it obsesses about power
structures everywhere else; but, sadly, anti-Semitic conspiracy theorists more than compensate,
because that's their defined role.
Meanwhile, we all know the Powell Fed is still firmly in pedal-to-the-metal mode . Yellen
just agreed to stay in the back seat in that regard, even if her proposed fiscal policy is the
equivalent of winding down the window and sticking her head out of it, like a dog having a good
time, which should see any caring central bank driver reduce speed accordingly.
The question remains, however, as to exactly what is driving the massive surge in commodity
prices we are still seeing all round us? Headlines yesterday were that corn hit USD7 a bushel,
the highest since 2013. Today Bloomberg reports "Raw materials surging across tighter markets
and recovery; Consumer prices rising as manufacturers pass on higher costs." Once upon a time,
central banks used to do something when headlines like this were seen. So why no need to brake?
Because this is all transitory, as Powell and Yellen, at the second attempt, just
underlined.
But how so? Is it Covid-19 related? We already hear that semiconductor supply will be
pinched for years. Or perhaps it is all just happening "because markets", as seems to be the
general consensus? Or, just maybe, the Fed, and other major central banks, are also playing a
role via their pedal-to-the-metal liquidity? Another key driver is Wall Street realising
commodities are an inflation hedge too – even as that creates the inflation they are
trying to avoid. (Don't worry: they still get to eat. Others might not though.) Another is
China's voracious commodity appetite. (Don't worry: they still get to eat. Others might not
though.) One thing we can be sure of. Prices seem to be moving significantly higher, and not
just due to the expected base effects.
Ironically, the only way in which Powell --and Yellen-- can be sanguine about this is in the
knowledge that even if prices go up, US wages almost certainly won't. Yes, at the moment we are
anecdotally seeing US labour shortages as millions of previously low-paid workers prefer to
live off of their last stimulus cheque rather than report for the daily drudgery. But have you
heard any anecdotes of wages going up as a result – or rather of businesses closing down,
or automating? As has been repeated here many times, are the structures *really* being put in
place to support sustained higher wages? If not, it's just higher prices - and so lower real
wages.
I am not sure that the 12 regional Reserve Banks and those in DC are aware of what that will
feel like to Joe Public. More so if their logical response is to keep monetary stimulus high,
and so pushing real wages even lower. If mishandled, this could easily drive us off a cliff. As
such, who is really in the driver's seat?
3 play_arrow
Cloud9.5 3 hours ago (Edited)
Who is running the show? The front is the CIA. Who is behind it? A collection of
oligarchs.
Brill 3 hours ago
No mention of Rothschild?
No mention of Rockefeller?
Joe Bribem 2 hours ago
The biggest cockroaches are never mentioned.
Lordflin 3 hours ago remove link
Geopolitics are in the driver's seat...
The economy is along for the ride...
radical-extremist 2 hours ago
If Antifa had any brains (which they don't), they'd be marching and rioting against the
CIA and the Fed - not the Proud Boys, ICE and local police stations. They're fighting to tear
down the SYSTEM, and they don't even know what or where the SYSTEM really is.
PAsucks 2 hours ago
"I am not sure that the 12 regional Reserve Banks and those in DC are aware of what that
will feel like to Joe Public." It's called a lack of empathy, an important trait of
sociopaths. Federal Reserve is an arm of .gov - a criminal organization.
Apollo Capricornus Maximus 2 hours ago
The unelected Council of Foreign Relations kleptocratic oligarchy is in charge of the
kinetic and psychological manipulation of Western finances and zeitgeist. The Federal
Reserve, CIA, National Security state, MSM, Congress all report and obey this criminal cabal
of whom every member should be hung by the American people.
Last Wednesday, Federal Reserve Chair Jerome Powell showed how simple questions do not
always get simple answers. When speaking to the media after the latest Federal Open Market
Committee ( FOMC ) meeting,
some difficult questions were asked. So much so, Powell had to repeat one question to himself,
asking:
When will the economy be able to stand on its own feet?
He immediately followed with:
I'm not sure what the exact nature of that question is.
FOX News correspondent Edward Lawrence elaborated, asking when the Fed would lower the
number of treasuries it buys, and when the economy would function "without having that support
from the monetary side."
Powell found ways to avoid answering the idea of a nation which stands without central bank
supports, but he did refer to various "tests" the Fed will do in order to make decisions like
shrinking the balance sheet, explaining:
we've articulated our test for that, as you know, and that is just we'll continue asset
purchases at this pace until we see substantial further progress.
He went on to say that prior to making any decisions, such as buying fewer treasuries, they
will give the public a lot of notice beforehand.
There was also a question related to the Fed's influence in the housing market:
the housing market is strong, prices are up. And yet, the Fed is buying $40 billion per
month in mortgage related assets. Why is that, and are those purchases playing a role at all
in pushing up prices?
Despite amassing nearly $2.2 trillion of mortgage-backed securities
(MBS), Powell defended the central bank on the grounds that:
I mean, we started buying MBS because the mortgage-backed security market was really
experiencing severe dysfunction, and we've sort of articulated, you know, what our exit path
is from that. It's not meant to provide direct assistance to the housing market.
To be clear, the "severe dysfunction" occurred over a decade ago, when the Fed entered the
MBS market. As for the public knowing the exit path or not providing assistance to the housing
market, both ideas are highly debatable, to say the least.
But even more puzzling is when Powell says that during the current COVID crisis:
We bought MBS, too. Again, not intention to send help to the housing market, which was
really not a problem this time at all.
Strange, the Fed would commit to buying $40 billion a month of MBS when, according to the
Chair, there were no problems in the market. He concludes that purchases will go to zero over
time, but the "time is not yet."
The final question asked was in regards to market intervention:
if you get out of the markets, there aren't enough buyers for all of the Treasury debt?
And so, rates would have to go way up. Bottom line question is what do we get for $120
billion a month that we couldn't get for less?
Powell never explained what exactly "we get for $120 billion" a month, but assured us the
Fed was looking to reach its goals, and this was part of its plan. However, he did comment on
purchases, saying:
But if we bought less, you know, no. I mean, I think the effect is proportional to the
amount we buy And we articulated the, you know, the test for withdrawing that accommodation.
And we think, you know. So, we're waiting to see those tests to be fulfilled, both for asset
purchases and for lift off of rates. And, you know, when the tests are fulfilled, we'll go
ahead as, you know, we've done this before.
Between various tests to determine policy, vague responses, and a general avoidance of
answering questions directly, not much was offered other than providing perpetual liquidity
injections under accommodative monetary conditions. It was refreshing to see the mainstream
media ask more questions about the plan ahead; we can only hope the mainstream economic
community will do the same.
ReadyForHillary 1 hour ago
When will the economy be able to stand on its own feet?
He immediately followed with:
I'm not sure what the exact nature of that question is.
HA HA HA HA!
HA HA HA HA HA HA HA HA!
CovidBannedTard 1 hour ago
C'mon man!!!
Lordflin 1 hour ago
The entire point to the Fed is to fail to answer tough questions...
no cents at all 1 hour ago
Or doublespeak. The fed probably has a talented linguistics department at their employ
Paul Bunyan 1 hour ago (Edited)
What they have always said is moronic. Yet the world is full of morons, so the people
can't see through the lies.
Miniminer1 1 hour ago
Not a confidence builder
SDShack 1 hour ago (Edited)
Good god, how many 'you know' responses did Powell have? Sounds like some brain dead
zoomer...'it's like, you know, complicated, and like, you know, we are working on it.' A
complete 'Emperor has no clothes' moment. And these are supposed to be the smartest people on
the planet. Clueless or just evil liars. Or both.
mtl4 53 minutes ago
I'll take both for $1000 Alex
Ajax_USB_Port_Repair_Service_ 1 hour ago
The Fed intervenes everyday, all day, because they have to. There is no market without the
Fed.
CovidBannedTard 1 hour ago
You know!!!....The Thing!!!
C'mon Man!!
Paul Bunyan 1 hour ago (Edited)
The game is almost over. The dollar has 1-2 years left before a complete monetary reset.
Make sure you get out soon. You won't want to make last minute decisions.
JOHNLGALT. 1 hour ago
My last minute decision is:
1). Do I buy Ounces?
2). Do I buy Kilograms?
🦍🦍🚀🚀🚀😂🤣😎.
Emmet Fitz-Hume 1 hour ago
Powell, Greenspan, et al are just word-salad machines
Why should seniors and retirees be sacrificed with ZIRP in order to advance the interests
of the US Treasury and Corporate borrowers?
I would call it elder abuse. He should be required to address this question. Let's have
the Press do their job
Ben A Drill 41 minutes ago
Why should anyone gamble with their hard earned money to keep up with inflation?
AhabQuixote 50 minutes ago
This is a ponzi scheme in plain sight. It is as if Bernie Madoff told his clients that his
firm is a scam but a scam is the only way the system can function. It will all be fixed at
some point in the future when pigs fly.
nuerocaster 29 minutes ago
You may think that the Mises Institute and Rabo Bank are idiots. But think how hard it is
to present all this as managerial error and make stupendous wealth transference and money
laundering sound like oopsie.
archipusz 1 hour ago
Why even ask.
They are going to print. Congress wants them to print. All the elite benefit from the
printing.
It is not going to stop.
JOHNLGALT. 1 hour ago
WE will stop them!!
We are a community that loves Silver, Period. 72.4k. Silverbacks. 2.2k. Online now Created
29 Jan 2021.
Go SILVERBACKS 🦍🦍🦍🦍.
This is a movement to bring the
🐍🐍🐍BANK$TER$🐍🐍🐍DOWN.
Biden the moron dictator doesn't like to answer questions either
ChromeRobot 47 minutes ago
Basically, if you haven't figured it after 108 years, these clowns don't have the
slightest clue what they're doing or worse....do.
Revolution_starts_now 1 hour ago
Do you prefer GITMO or SuperMax?
Ajax_USB_Port_Repair_Service_ 17 minutes ago
I'll take GITMO. Nonsmoking, non-vaccinated, section please.
CrabbyR 1 hour ago (Edited)
Politicians and banker's first language is bafflegab
Misesmissesme 1 hour ago (Edited)
Answers? We ain't got no answers! We don't need no answers! I don't have to give you any
steenking answers!
Backhandslicer 23 minutes ago
Life support? They have created a monster and the monster is ravaging the country side
Backhandslicer 25 minutes ago
Powell is thinking I'm a currency printing machine and all the chicks dig me I shouldn't
have to answer any questions
Backhandslicer 35 minutes ago
Powell sounds like the absent minded janitor
Backhandslicer 36 minutes ago (Edited)
Eliminate the central bank and use only metals as money with paper currency withdrawable
for any of the metals at any bank or credit union
CosmoJoe 35 minutes ago
Seriously? I haven't carried cash in years. I don't want to. I don't want to carry a bunch
of gold and silver around in a little money sack. It isn't the f&cking middle ages.
zorrosgato 31 minutes ago
A paper currency backed by gold would work fine enough.
MASTER OF UNIVERSE 18 minutes ago
Would cement bricks painted gold work well enough if we never allowed anybody to test gold
samples to verify authenticity?
That's what Fort Knox is, right?
MOU
Backhandslicer 26 minutes ago
Does a 100 dollar bill in your pocket give you a rash?
CosmoJoe 19 minutes ago
I wouldn't know, I don't carry $100 in my pocket.
permanent victim 55 minutes ago
The fed will be all powerful till the world abandons the dollar. Until then they will
print shamelessly
Ben A Drill 48 minutes ago
Understand the free masons and you will see how much evil is in the world.
Realism 1 hour ago
The list of paid liars keeps growing
VWAndy 1 hour ago
Why shouldnt they be hung from lamp posts is a valid question too.
Rainman 1 hour ago
By now we all know the bankster-owned Fed and the US Treasury are one and the same
entity.
Old Hickory twitches in his grave...
dlfield 1 hour ago
A: Why never, because then I would be out of a job.
sarret PREMIUM 1 hour ago
Here's a difficult question Powell. Do you identify more with a disabled penguin or a gay
orangutan? Get it wrong and you will be cancelled ya numpty.
JohnnyCrypto 19 seconds ago
Yeah, MadeofTheta was right!
It's over!
ClamJammer 2 minutes ago
Learned everything he knew about not answering questions from Pompeo........we lie, we
steal, we cheat.........
permanent victim 10 minutes ago
As long as the markets are up I am doing what I am getting paid to do
cowdiddly 14 minutes ago
Ummm....errrr... Questions? We don't need no stinking questions.
IDESofMARCH 16 minutes ago remove link
FED policy picks and chooses which busines fails and which makes all the money.
FED kills Ma and Pa Bus DEAD, Wall Mart, HD, Chain Restaurants and Dollar Stores all
having a good time raising prices.
Treasury Secretary walks backs comments she made earlier suggesting that
rates might rise
Treasury Secretary Janet Yellen said Tuesday she is neither predicting nor recommending that
the Federal Reserve raise interest rates as a result of President Biden's spending plans,
walking back her comments earlier in the day that rates might need to rise to keep the economy
from overheating.
"I don't think there's going to be an inflationary problem, but if there is, the Fed can be
counted on to address it," Ms. Yellen, a former Fed chairwoman, said Tuesday at The Wall Street
Journal's CEO Council Summit.
Ms. Yellen suggested earlier Tuesday that the central bank might have to raise rates to keep
the economy from overheating, if the Biden administration's roughly $4 trillion spending plans
are enacted.
Banks including Goldman
Sachs Group Inc., Morgan Stanley and UBS are focused on hedge funds with very concentrated
positions, including those that attempt to increase their returns by borrowing a significant
amount of money, fund managers said. Some are running stress tests to see where they could have
shortfalls if some of a fund's positions precipitously drop. Newly empowered credit-risk
departments are reviewing clients with portfolios that are far more diversified than
Archegos's.
Several banks are starting to rework agreements with a number of clients to change the terms
of equities total-return swaps, said prime-brokerage executives and advisers to funds.
Total-return swaps are derivative contracts that helped Archegos anonymously amass huge
positions across multiple lenders, without the knowledge of those lenders and with little money
upfront. Archegos's collapse has sparked calls for tougher regulation of such swaps.
Swaps give their holders exposure to the profits and losses of the securities underlying the
agreements but not ownership. In the case of Archegos, for example, the family office had swap
agreements with multiple banks giving it exposure to ViacomCBS Inc. But the banks actually held
the shares.
As things stand now, some margin requirements are fixed. Going forward, some clients will be
regularly required to post additional collateral based on the changing market value of their
portfolios or factors such as increases in volatility or concentration. Many swaps agreements
already have such a margin requirement, though some larger clients with more negotiating power
don't.
Elizabeth Schubert, a partner at Sidley Austin LLP who advises hedge-fund clients on
negotiating their trading relationships with dealers, said she has seen several banks recently
move to look at a client's cash and swaps positions together when determining the collateral
required.
For dealers, "it gives them more control from a risk-management perspective -- but clients
lose a lot of control and transparency about the margin they have to post," Ms. Schubert said.
She added that fund managers who lived through the failure of Lehman Brothers, which tied up
some funds' assets for years, remain wary about posting more than a minimal amount of
margin.
Several banks, including Morgan Stanley, have spoken with clients about fully or partly
terminating swaps, said people briefed on the conversations. Such moves could help lower the
lenders' exposure to swaps and in instances reduce the leverage a fund is using.
Banks including Goldman
Sachs Group Inc., Morgan Stanley and UBS are focused on hedge funds with very concentrated
positions, including those that attempt to increase their returns by borrowing a significant
amount of money, fund managers said. Some are running stress tests to see where they could have
shortfalls if some of a fund's positions precipitously drop. Newly empowered credit-risk
departments are reviewing clients with portfolios that are far more diversified than
Archegos's.
Several banks are starting to rework agreements with a number of clients to change the terms
of equities total-return swaps, said prime-brokerage executives and advisers to funds.
Total-return swaps are derivative contracts that helped Archegos anonymously amass huge
positions across multiple lenders, without the knowledge of those lenders and with little money
upfront. Archegos's collapse has sparked calls for tougher regulation of such swaps.
Swaps give their holders exposure to the profits and losses of the securities underlying the
agreements but not ownership. In the case of Archegos, for example, the family office had swap
agreements with multiple banks giving it exposure to ViacomCBS Inc. But the banks actually held
the shares.
As things stand now, some margin requirements are fixed. Going forward, some clients will be
regularly required to post additional collateral based on the changing market value of their
portfolios or factors such as increases in volatility or concentration. Many swaps agreements
already have such a margin requirement, though some larger clients with more negotiating power
don't.
Elizabeth Schubert, a partner at Sidley Austin LLP who advises hedge-fund clients on
negotiating their trading relationships with dealers, said she has seen several banks recently
move to look at a client's cash and swaps positions together when determining the collateral
required.
For dealers, "it gives them more control from a risk-management perspective -- but clients
lose a lot of control and transparency about the margin they have to post," Ms. Schubert said.
She added that fund managers who lived through the failure of Lehman Brothers, which tied up
some funds' assets for years, remain wary about posting more than a minimal amount of
margin.
Several banks, including Morgan Stanley, have spoken with clients about fully or partly
terminating swaps, said people briefed on the conversations. Such moves could help lower the
lenders' exposure to swaps and in instances reduce the leverage a fund is using.
Are we suppose to believe that Credit Suisse, Morgan Stanley, Goldman Sachs, et al, were
really blindly investing billions with a family office? Is it really true that the head of
the office had had his brokerage license taken away by the SEC and only recently restored by
the Trump administration?
Goldman Sachs apparently knew enough to pull their money out in time.
The real issue is whether investment bankers were taking advantage of the less stringent
regulation of a family office in order to manipulate the markets. Manipulation like the
creation of short squeezes on target stocks. Is that even legal?
Banks including Goldman
Sachs Group Inc., Morgan Stanley and UBS are focused on hedge funds with very concentrated
positions, including those that attempt to increase their returns by borrowing a significant
amount of money, fund managers said. Some are running stress tests to see where they could have
shortfalls if some of a fund's positions precipitously drop. Newly empowered credit-risk
departments are reviewing clients with portfolios that are far more diversified than
Archegos's.
Several banks are starting to rework agreements with a number of clients to change the terms
of equities total-return swaps, said prime-brokerage executives and advisers to funds.
Total-return swaps are derivative contracts that helped Archegos anonymously amass huge
positions across multiple lenders, without the knowledge of those lenders and with little money
upfront. Archegos's collapse has sparked calls for tougher regulation of such swaps.
Swaps give their holders exposure to the profits and losses of the securities underlying the
agreements but not ownership. In the case of Archegos, for example, the family office had swap
agreements with multiple banks giving it exposure to ViacomCBS Inc. But the banks actually held
the shares.
As things stand now, some margin requirements are fixed. Going forward, some clients will be
regularly required to post additional collateral based on the changing market value of their
portfolios or factors such as increases in volatility or concentration. Many swaps agreements
already have such a margin requirement, though some larger clients with more negotiating power
don't.
Elizabeth Schubert, a partner at Sidley Austin LLP who advises hedge-fund clients on
negotiating their trading relationships with dealers, said she has seen several banks recently
move to look at a client's cash and swaps positions together when determining the collateral
required.
For dealers, "it gives them more control from a risk-management perspective -- but clients
lose a lot of control and transparency about the margin they have to post," Ms. Schubert said.
She added that fund managers who lived through the failure of Lehman Brothers, which tied up
some funds' assets for years, remain wary about posting more than a minimal amount of
margin.
Several banks, including Morgan Stanley, have spoken with clients about fully or partly
terminating swaps, said people briefed on the conversations. Such moves could help lower the
lenders' exposure to swaps and in instances reduce the leverage a fund is using.
Are we suppose to believe that Credit Suisse, Morgan Stanley, Goldman Sachs, et al, were
really blindly investing billions with a family office? Is it really true that the head of
the office had had his brokerage license taken away by the SEC and only recently restored
by the Trump administration?
Goldman Sachs apparently knew enough to pull their money out in time.
The real issue is whether investment bankers were taking advantage of the less stringent
regulation of a family office in order to manipulate the markets. Manipulation like the
creation of short squeezes on target stocks. Is that even legal?
big institutions are currently selling into strength.
2) May and June (especially the second half of June) tend to be challenging months for the
market. After the first week of May, approximately 80% of S&P 500 companies will have
reported their earnings. The news cycle will then shift away from fundamentals to politics,
interest rates, and any geopolitical concerns. Speaking of interest rates, as the economy
slowly gets back to normal, it wouldn't surprise me to see the 10-year yield return to its
levels from January 2020 (around 1.8%-2.0%). If this happens, it will lead to further
compression in the multiples of growth stocks.
3) The IRS deadline for filing tax returns was extended this year to May 17. We will likely
see tax selling prior to this because 2020 was a strong year for the markets, and many people
will have capital gains taxes to pay by this date. On a related note, the new administration
seems determined to raise taxes, specifically capital gains taxes. I don't believe they will
get any of these new proposals approved, but the continuous headlines could keep some pressure
on the market over the near-term.
4) The S&P 500 ( ^GSPC ) historically averages a 10% return per
year. So far this year, it is up over 11%. It wouldn't be unreasonable to see a normal
correction or some technical digestion before heading higher later in the year. Also, since
1980, the average intra-year correction is -14.3%.
5) A few sentiment measures are showing high levels of bullishness. For example, the latest
NAAIM Exposure
Index , which measures exposure by active investment managers, is at its highest level in
over two months. Any minor pullback would shake out some of this excess bullishness, as
investors are still quick to rush out the door when the market starts to drop.
Art 14 hours ago The major fundamental issue now is the soon-to-be-obvious inflation triggered
by the six trillion dollar man and the always wrong federal reserve policies. Ultimately,
fundamentals decide stock market valuations. Reply 13 2 Allen 1 day ago If Apple's earnings
couldn't lift the market then nothing will. Look the market is near or at all time highs and
valuations are stretched to say the least. The easy money has already been made the current
risk reward is to the downside. The market is way overdue for at least a 10-20% correction
which would be healthy. "As they say... stairs up elevator down." Reply 7 1 EmEs 1334 14 hours
ago Several things wrong with the article. First, some Biden taxes will pass, because budget
reconciliation process works for taxing and spending. Not clear whether they will be
retroactive or when they will take effect, but I'd say next year. People with gains might be
induced to sell this year to take advantage of disappearing low cap gains rates - and selling
puts downward pressure on the market. Very little about that, here. Very little here about
fundamentals, like stretched P/E or CAPE ratios. Very little here about the tremendous amount
of money in the system from the Fed and from the fiscal stimulus bills that are pushing the
market higher, both because of more money chasing assets and because of expectations that the
economy will launch into hyper-drive because of the stimulus. Instead, this guy just thinks
that prices return to a mean of 10% per year - many years it is more and many it is less, so
that is no measure at all. Infantile analysis. But he could be right about the run-up running
out of steam. It certainly would be nice if the froth was skimmed off because I'd like a buying
opportunity and buying any stocks at these prices is pretty crazy. I'd by TAIL. Reply 4
DoublinDown 1 day ago Think you nailed it. Quality growth stocks selling off after great ER's
points to weakness underneath. This doesn't bode well for the overall market in the near term.
Bullying is an epidemic. It is rampant, widespread, pervasive and the effects can be
catastrophic. It occurs in our communities, in our schools – and sadly – even in
our homes. Bullying statistics are staggering, scary and merit serious consideration and
immediate action. Consider the following:
Facts and Statistics
90% of students in grades 4-8 report having been harassed or bullied.
28% of students in grades 6-12 experience bullying. 2
20% of students in grades 9-12 experience bullying. (stopbullying.gov)
In grades 6-12, 9% of students have experienced cyberbulling. 2
Over 160,000 kids refuse to go to school each day for fear of being bullied. (Nation
Education Association)
70.6% of students report having witnessed bullying in their school–and over 71% say
bullying is a problem.
Over 10% of students who dropout of school do so due to being bullied repeatedly.
Each month 282,000 students are physically assaulted in some way in secondary schools
throughout the United States–and the number is growing.
Statistics suggest that revenge [due to bullying] is the number one motivator for school
shootings in the U.S.
86% of students surveyed said, "other kids picking on them, making fun of them or
bullying them" is the number one reason that teenagers turn to lethal violence at
school.
Nearly 75% of school shootings have been linked to harassment and bullying.
87% of students surveyed report that bullying is the primary motivator of school
shootings.
64% of students who are bullied do not report it. (Petrosina, Guckenburg, Devoe and
Hanson 2010)
2 National Center for Education Statistics and Bureau of Justice
Statistics
Types of Bullying
When most people think about bullying they envision some kind of physical intimidation.
However, bullying can take on many forms which are just as emotionally and psychologically
damaging as physical intimidation and harassment. There are four general forms of bullying.
These include:
Physical – Physical bullying involves aggressive physical intimidation and is
often characterized by repeated tripping, pushing, hitting, kicking, blocking, or touching
in some other inappropriate way. Even though it's the most obvious form of bullying, it
isn't the most prominent.
Physical bullying is damaging and can be emotionally and psychologically devastating.
When a child fears for their safety, they're not able to focus on life and function
normally. Notwithstanding the trauma that physical bullying causes, most children don't
report it to a teacher or to their parents. Signs of physical bullying may include
unexplained scratches, bruises, and cuts, or unexplainable headaches or stomach aches.
However, the psychological effects of physical bullying may be even more pronounced than
the physical scars. Children who are withdrawn, struggle to focus, or become anti-social
may also be the recipients of physical bullying–even if there aren't any other
outward signs.
If you think your child or student is being bullied physically, talk to them in a casual
manner about what's going on before school, during class, during lunch or recess, and on
the way home from school. Ask them if anyone has been, or is being, mean to them. Keep your
emotions in check, and stay calm and caring in your tone, or your child may shut off and
not tell you what's happening. If you find that physical bullying is occurring, contact the
appropriate school officials, or law enforcement officers – there are anti-bullying
laws at the local, state and federal levels. Do not confront the bully, or the bully's
parents, on your own.
Verbal – Verbal bullying involves putting down others and bullying them using
cruel, demeaning words. Verbal bullying includes name calling, making racist, sexist or
homophobic remarks or jokes, insulting, slurs, sexually suggestive comments, or abusive
language of any kinds. Verbal bullying is one of the most common forms of bullying.
So how do you know when a child is being verbally bullied? They may become moody,
withdrawn, and/or have a change in their appetite. They may be straight forward and tell
you that somebody said something that hurt their feelings, or ask you if something someone
said about them is true.
Verbal bullying can be difficult to address. The best way to deal with verbal bullying
is to build childrens' self confidence. Confident kids are less susceptible to verbal
bullying than those who already struggle with poor self esteem and self image. Students
should be taught in the classroom to treat everyone with respect and that there is never an
excuse for saying something mean or disrespectful to someone else.
Social – Social bullying is a common form of bullying among children and
students. It involves exclusion from groups, spreading malicious rumors and stories about
others, and generally alienating people from social acceptance and interaction. Next to
verbal bullying, social bullying is one of the most common forms of bullying.
Social bullying can be one of the hardest forms of bullying to identify and address
– but it's just as damaging as other forms of bullying, and the effects can last a
long time. Children being bullied socially may experience mood changes, become withdrawn,
and start spending more time alone. Social bullying is more common among girls than
boys.
The best way to identify social bullying is to stay close to your kids and maintain an
open line of communication. Talk to them nightly about how their day went and how things
are going in school. Focus on building their self esteem and get them involved in
extracurricular activities outside of school such as team sports, music, art and other
activities where they develop friendships and interact with others.
Cyberbullying – Cyberbullying is the least common type of bullying, but it can
be just as damaging as other forms of bullying. It includes any type of bullying that
occurs via the Internet or through electronic mediums. The most common types of
cyberbullying include:
Text message bullying
Picture/video clip bullying via mobile phone cameras
Email message bullying
Bullying through instant messaging
Chat-room bullying
Bullying via websites
Children who are being cyberbullied typically spend more time online or texting. They
often frequent social media sites such as facebook, twitter, etc. If a child or student
seems upset, sad or anxious after being online, especially if they're visiting social media
websites, it may be a sign they're being cyberbullied. Kids and students who are
cyberbullied exhibit many of the same characteristics as kids being bullied physically,
verbally or socially. They may become withdrawn, anxious, distant, or want to stay home
from school.
Cyberbullying can occur 24/7, so the best way to combat cyberbullying is to monitor
Internet usage and limit time spent on social media websites. Children need to know that if
they encounter cyberbullying they shouldn't respond, engage, or forward it. Instead, they
need to inform their parents or a teacher so the communication can be printed out and taken
to the proper authorities. When cyberbullying includes threats of violence or sexually
explicit content, law enforcement should be involved.
Where Does Bullying Occur?
The majority of bullying occurs at school, outside on school grounds during recess or after
school, and on the school bus – or anywhere else students interact unsupervised. Bullying
may also occur at home between siblings or in the community where kids congregate.
Cyberbullying takes place online and via digital communication devices.
* Bradshaw, C.P. (2007). Bullying and peer victimization at school: Perceptual differences
between students and school staff. 36(3), 361-382.
Anti-bullying Laws and Policies
Currently, there aren't any Federal anti-bullying laws. However, state and local lawmakers
have taken steps to prevent bullying and protect the physical, emotional and psychological well
being of children. To date, 49 states have passed anti-bullying legislation. When bullying
moves into the category of harassment, it then becomes a violation of Federal law. Criminal
code as it relates to bullying by minors varies from state to state. The map below shows the
states that have established anti-bullying laws, anti-bullying policies, and both anti-bullying
laws and policies.
The current market melt-up is taken as nearly risk-free because the Fed has our back , i.e. the Federal Reserve will intervene
long before any market decline does any damage.
It's assumed the Fed or its proxies, i.e. the Plunge Protection Team, will be the buyer in any freefall sell-off: no matter how
many punters are selling, the PPT will keep buying with its presumably unlimited billions.
"They (financial firms) failed to recognize that market liquidity is largely a function of the degree of investors' risk aversion,
the most dominant animal spirit that drives financial markets. But when fear-induced market retrenchment set in, that liquidity
disappeared overnight, as buyers pulled back. In fact, in many markets, at the height of the crisis of 2008, bids virtually disappeared."
For the uninitiated, bids are the price offered to buyers of stocks and ETFs and the ask is the price offered to sellers. When
bids virtually disappear , this means buyers have vanished: everyone willing to buy on the way down (known as catching the falling
knife ) has already bought and been crushed with losses, and so there's nobody left (and no trading bots, either) to buy.
When buyers vanish, the market goes bidless , meaning when you enter your "sell" order at a specific price (limit order), there's
nobody willing to buy your shares at the current price. The shares remains yours all the way down.
If you decide to just get out at any price and place a market order (sell at whatever the bid is offered), your $100 per share
stock might sell for $5 a share. This is known as a flash crash , and astute punters have observed that these are becoming more common.
When markets go bidless, the predictable order flow of low-volume days goes out the window. On a typical low volume day (and all
days are low volume recently), the spread between bid and ask is modest in heavily traded issues and sellers can be confident their
sell order will execute in a few seconds. In a freefall sell-off, sell orders pile up and the bid plummets to levels that were considered
"impossible" in low-volume days.
What Greenspan didn't discuss is the trading bots that do most of the trading have been programmed to be risk averse . In a real
sell-off, why catch the falling knife by hitting the bid on the way down? That's a guaranteed way to either lose money or ending
up a bagholder .
Humans have a default setting for risk aversion: it's called panic. Once the euphoric comnfidence that the Fed will never allow
the market to fall by more than a few percentage points is broken, it's not replaced by rational risk assessment; it's replaced by
full-blown just-get-me-out panic.
The Plunge Protection Team works just fine on low-volume days, but it fails when a tsunami of selling washes away the bid. Though
few seemed to notice, massive selling volume begets more selling as the bots' risk aversion kicks in.
Ironically, the mass migration of retail punters into the market has introduced a heightened potential for panic selling. The
wild swings in Gamestock (GME) earlier in the year were a sneak preview of what can happen as panicked newbies enter market sell
orders.
Euphoric punters forget that many of the players are leveraged, meaning that they're using borrowed money (margin debt) to buy
more stocks. Should the market drop instead of rebounding, their account will fall below minimum requirements and they will have
to add cash or sell stocks. When buy the dip fails, those with margin calls add to the selling.
Other limits can manifest in cryptocurrency trading. When most trades are buys, few notice the fine print on exchange sell orders
in crypto wallets and exchanges. Prices may be guaranteed for a limited time (for example, 10 minutes), and there may not be an option
for limit orders. If the order doesn't execute before the time limit expires, then the order to sell executes at whatever bid is
offered.
There's also no guarantee that your sell order will execute in a timely manner. A reader recently sent me a screenshot of an exchange
of a top 100 (by market cap) cryptocurrency for Bitcoin that took almost 2 hours to execute. (The reader passed on using the Lightning
Network after reading the disclosures.)
Exchanges may limit the number of coins per exchange. In other words, the implicit assumption that punters can unload their entire
position at the current bid may prove unfounded in heavy sell volume days.
The point here is bottlenecks can emerge in heavy sell volume days that traders did not anticipate. The possibility that markets,
brokerage platforms and exchanges could break and simply cease to function isn't on anyone's radar, despite various bits of evidence
that a breakdown isn't as farfetched as punters currently assume.
Ten minutes is more than enough time for supreme, euphoric confidence to crumble into panic , and trading bots can pull their
buy orders in 10 milliseconds.
This is why the big players distribute their shares to overly confident retail punters over many weeks. Big players know there
is no way they can dump their entire position without crushing the bid, so they sell in bits and pieces all the way up the euphoric
melt-up.
The issue isn't just the price you get when you sell--it's being able to get out of your position at all. A strange phenomenon
occurs in freefall sell-offs: the exit door (i.e. the liquidity that allows you to liquidate your entire position at the current
bid) suddenly shrinks from a barndoor to a mouse-sized hole in the baseboard.
Nobody thinks a euphoric rally could ever go bidless, but as Greenspan belatedly admitted, liquidity is not guaranteed . In a
real tsunami of trading-bot selling, the Plunge Protection Team's card table is no match for the sea of selling.
Risk aversion can go from zero to 200 faster than overconfident punters believe possible.
The prices of raw materials used to make almost everything are skyrocketing, and the upward trajectory looks set to continue as
the world economy roars back to life.
From steel and copper to corn and lumber, commodities started 2021 with a bang, surging to levels not seen for years. The rally
threatens to raise the cost of goods from the lunchtime sandwich to gleaming skyscrapers. It’s also lit the fuse on the massive
reflation trade that’s gripped markets this year and pushed up inflation expectations. With the U.S. economy pumped up on fiscal
stimulus, and Europe’s economy starting to reopen as its vaccination rollout gets into gear, there’s little reason to expect
a change in direction.
JPMorgan Chase & Co. said this week it sees a continued rally in commodities and that the “reflation and reopening trade will
continue.†On top of that, the Federal Reserve and other central banks seem calm about inflation, meaning economies could be left
to run hot, which will rev up demand even more.
“The most important drivers supporting commodity prices are the global economic recovery and acceleration in the reopening phase,â€
said Giovanni Staunovo, commodity analyst at UBS Group AG. The bank expects commodities as a whole to rise about 10% in the next
year.
The Treasury market's inflation bulls seem to have gotten a green light from Federal Reserve
Chair Jerome Powell to double down on wagers that price pressures will only intensify in the
months ahead.
The renewed mojo for the reflation trade follows Powell's reaffirmation this week of the
central bank's intention to let the world's biggest economy run hot for some time as it
recovers from the pandemic. The Fed's unwavering commitment to ultra-loose policy in the face
of robust economic data is what caught traders' attention. It took on added significance as it
coincided with signs infections are ebbing again in the U.S., and as President Joe Biden
unveiled plans for trillions more in fiscal spending.
Investors eying all this aren't ready to give the Fed the benefit of the doubt in its
assessment that inflationary pressures will prove temporary. A key bond-market proxy of
inflation expectations for the next decade just hit the highest since 2013, and cash has been
pouring into the largest exchange-traded fund for Treasury Inflation-Protected Securities.
Globally, there's been a net inflow into mutual and exchange-traded inflation-linked debt funds
for 23 straight weeks, EPFR Global data show.
The Fed is stressing that inflation's upswing "is transitory, but we likely won't have
better clarity on this assertion until this initial economic wave from reopening has subsided,"
said Jake Remley, a senior portfolio manager at Income Research + Management, which oversees
$89.5 billion. "Inflation is a very difficult macro-economic phenomenon to predict in normal
times. The uncertainty of a global pandemic and a dramatic economic rebound" has made it even
harder.
Ten-year TIPS provide a reasonably priced insurance policy against inflation risk over the
coming decade, Remley said. The securities show traders are wagering annual consumer price
inflation will average about 2.4% through April 2031. The measure has roared back from the
depths of last year, when it dipped below 0.5% at one point in March.
Brian Sozzi ·
Editor-at-Large Sat, May 1, 2021, 6:05 PM
Billionaire Warren Buffett is joining the long list of executives saying serious levels of
inflation are starting to take hold as the U.S. economy roars back from the COVID-19
downturn.
Buffett called out much higher steel costs impacting Berkshire's housing and furniture
businesses.
"People have money in their pocket, and they pay higher prices... it's almost a buying
frenzy," Buffett said, noting that the economy is "red hot."
The Oracle of Omaha isn't alone in battling inflation at the moment from everything to
higher steel prices to runaway copper prices.
The number of mentions of "inflation" during first quarter earnings calls this month have
tripled year-over-year, the biggest jump dating back to 2004, according to fresh research from
Bank of America strategist Savita
Subramanian . Raw materials, transportation, and labor were cited as the
main drivers of inflation .
Subramanian's research found that the number of inflation mentions has historically led the
consumer price index by a quarter, with 52% correlation. In other words, Subramanian thinks
investors could see a "robust" rebound in inflation in coming months in the wake of the latest
round of C-suite commentary.
"Inflation is arguably the biggest topic during this earnings season, with a broad array of
sectors (Consumer/Industrials/Materials, etc.) citing inflation pressures," Subramanian
notes.
The world's biggest companies are taking action, just like Buffett at Berkshire.
Kleenex maker Kimberly-Clark said it will increase prices in the U.S. and Canada on the
majority of its consumer products due to "significant" commodity cost inflation. The percentage
increases will range from mid- to high-single digits and go into effect in June.
Archegos is a Greek word denoting leadership. The place where the eponymous family office
led UBS, and a growing roll call of investment banks, was into a morass.
"... That is, the premium for commodities that can be delivered now versus later into the future is the highest it has been since at least 2007, signaling just how strong the world's demand is for raw materials and how tight supplies are. ..."
For an idea of exactly how strong the fundamentals are for commodities such as metals, agriculture and oil today, consider this:
These markets are now showing the steepest backwardation in more than 14 years.
That is, the premium for commodities that can be delivered now versus later into the future is the highest it has been since
at least 2007, signaling just how strong the world's demand is for raw materials and how tight supplies are.
In commodities markets, futures are frequently pricier at longer maturities because they reflect the cost of carrying inventories
over time as well as future demand expectations. But urgent demand has flipped about half of major commodity markets tracked by the
Bloomberg Commodity Index including oil, natural gas, copper, soybeans into backwardation.
When the Federal Open Market Committee begins its two-day meeting on Tuesday, it ought to
consider whether its policies aimed to bolster housing may be having negative side effects.
With the market for new and existing homes red hot, the rationale for subsidizing the mortgage
market has largely passed. Indeed, the Fed’s policies may be hurting home
affordability as much as they’re helping.
"... Deluard points out that the level of stock gains we are seeing now is unprecedented, with one exception: the Great Depression. After passing 4,000 points for the first time this month, the S&P 500 is on track to soon double its COVID-19 pandemic low of 2,237 points 14 months ago. ..."
"... individual investors have been throwing money at the market while insiders are getting out. An unprecedented $105 billion flowed into U.S. equity exchange-traded funds in the last eight weeks, Deluard says. Meanwhile, the strategist says equity offerings raised a record $262 billion in the first quarter and Nasdaq insiders sold $41.5 billion in the past three quarters. ..."
"... The strategist also points to inflation as a worrying sign. He believes the argument that COVID-19 is distorting inflation is flawed, and that the current level of inflation, such as in commodity prices, represents more than normalization from the pandemic shock ..."
Our
call
of the day
, from strategist Vincent Deluard at broker StoneX, takes a close look at the big question hovering above these
recent market gains. Are we seeing a new roaring economic cycle that started in March 2020, or “the spectacular apotheosis of a
decade plus-long expansion and overvalued bull market”?
The strategist uses “the duck test” â€" which follows from the saying, “if it looks like a duck, swims like a duck, and quacks like a
duck, then it probably is a duck.” His conclusion isn’t good news for stocks.
Deluard points out that the level of stock gains we are seeing now is unprecedented, with one exception: the Great Depression. After
passing 4,000 points for the first time this month, the S&P 500 is on track to soon double its COVID-19 pandemic low of 2,237 points
14 months ago.
There have been 12 major bear markets in the last century, according to Deluard, and stock prices never doubled in the ensuing rally
after five of them. In the seven cases where stock prices in the post-bear market doubled, it took an average of four years.
“There is only one precedent in history for such a rapid doubling, when U.S. stocks doubled between June and September 1932,”
Deluard says. “A 40% correction quickly followed, and then another 100% + rally in a confusing sequence of brutal bear markets and
dazzling rebounds which lasted until the battle of Stalingrad turned the fate of World War II.”
Another troubling sign is that the recent, spectacular rebound in corporate earnings amid the wider economic recovery from the
pandemic hasn’t led to a rise in share buybacks, which are still 30% below pre-pandemic levels, according to Deluard. “As a result,
the total shareholder yield (buybacks & dividend divided by market cap) of U.S. large-caps is at its lowest level in a generation,”
Deluard says.
Further to that,
individual investors have been throwing money at the market while insiders are getting out. An unprecedented $105
billion flowed into U.S. equity exchange-traded funds in the last eight weeks, Deluard says. Meanwhile, the strategist says equity
offerings raised a record $262 billion in the first quarter and Nasdaq insiders sold $41.5 billion in the past three quarters.
Chart via StoneX.
The strategist also points to inflation as a worrying sign. He believes the argument that COVID-19 is distorting inflation is
flawed, and that the current level of inflation, such as in commodity prices, represents more than normalization from the pandemic
shock
The last point Deluard makes is that banks’ loan-to-deposit ratio has collapsed to 50%, which is half of its pre-2007 levels. This
is a red flag for “trapped kinetic energy” that will be unleashed by steeper yield curves, stronger demand for loans, and other
factors, according to the strategist. Deluard notes that the big four banks would need to issue an additional $2.1 trillion in loans
to return to the pre-pandemic loan-to-deposit ratio average.
“Inflation is the 800-pound gorilla that will kill this aging bull,” Deluard says.
Would you pay more than 100 million dollars for a single deli in rural New Jersey that had
less than $36,000 in sales during the last two years combined? I know that sounds like a
completely ridiculous question, but the stock market apparently thinks that deli is worth that
much. On Thursday, the Dow Jones Industrial Average closed above 34,000 for the first time in
history, and investors all over the country cheered. But this financial bubble is not real. It
is a giant mirage that is built on a foundation of fraud.
Einhorn Sees
Broken Markets in N.J. Deli’s $105 Million Valuation
Investors have lost all touch with reality, and in this sort of euphoric environment a small
deli in rural New Jersey can literally be valued
at more than 100 million dollars …
The Paulsboro, New Jersey-based Your Hometown Deli is the sole location for Hometown
International, which has an eye-popping market value despite totaling $35,748 in sales in the
last two years combined, according to securities filings.
“Someone pointed us to Hometown International (HWIN), which owns a
single deli in rural New Jersey … HWIN reached a market cap of $113
million on February 8. The largest shareholder is also the CEO/CFO/Treasurer and a Director,
who also happens to be the wrestling coach of the high school next door to the deli. The
pastrami must be amazing,†Einhorn said in a letter to clients published
Thursday.
For young people getting ready to graduate from high school and go to college,
don’t waste your time.
Just open up a small deli and go public.
Soon you will be a multi-millionaire.
Alternatively, you could start a fake cryptocurrency as a joke and watch it become worth
billions of dollars.
The digital currency Dogecoin surged by more than 85 percent so far this week in thrilling
scenes for fans of the bizarre coin. Launched in 2013 and created by Jackson Palmer and Billy
Markus as a joke, the cryptocurrency has never seen the highs of rival coins like bitcoin,
which is currently worth $63,531.49. But a growing fanbase has helped kickstart the meme
coins value, and today has seen the prices skyrocket.
Looking at it objectively, I don’t know why any rational investor would
ever put one red cent into Dogecoin.
But in 2021, rational investors are being left in the dust, and those that foolishly rush in
are getting filthy rich.
Coinbase was briefly valued at as much as $100 billion in its Nasdaq debut Wednesday, a
landmark event for the cryptocurrency industry. The stock closed at $328.28 per share,
valuing Coinbase at $85.8 billion on a fully diluted basis.
Don’t you wish that you would have been the one to launch Coinbase?
Of course all of these absurd valuations are just temporary.
This bubble will inevitably pop, and those that did not sell at the top of the market will
be kicking themselves.
In the financial markets, enormous fortunes are being won and lost all the time, but none of
this is real.
What is real are the riots that are happening in our streets on a nightly basis. Last night,
rioters “waved
a pig’s head†at police officers in
Minnesota…
DAUNTE Wright protesters waved a pig’s head at cops as chaos again
erupted in Brooklyn Center, with hundreds storming the police station.
Demonstrators came out for the fourth night in a row since Wright, 20, was fatally shot by
police officer Kim Potter during a traffic stop on Sunday.
A prominent activist who supports the Black Lives Matter movement has appeared to support
violent protests, arguing that rioting and looting are ‘a legitimate,
politically-informed response to state violence’.
Bree Newsome, 35, made the passionate remarks in a series of tweets this week, arguing
that police are not limited to non-violence, and that a violent response to injustice can be
appropriate and justified.
Homeless men lie on the sidewalk while others wearing blankets and rags loiter on a street
strewn with garbage, feces, and drug paraphernalia along the notorious Kensington Avenue drag
in Philadelphia.
Video posted online on March 10 shows people living out of suitcases on the sidewalks in
the area adjacent to the entrance to the Somerset train station along the Market-Frankford
train line while others openly brandish needles.
Cardboard boxes with trash bags stacked on top of them lie feet away from the entrances to
various pawn shops, check-cashing stores, delis, and bodegas.
The financial bubble that we are experiencing right now will go away, but the problems on
our streets are not going away.
But if you don’t want to believe this, go ahead and pour your life
savings into Hometown International or Dogecoin and see what happens.
You only make money in the markets if you get out in time, and time is quickly running out
for those that have put their faith in this financial bubble.
* * *
Michael’s new book entitled “Lost Prophecies Of The
Future Of America†is now available in paperback and for the
Kindle on Amazon.
Educated_Redneck 12 hours ago (Edited)
This article is late by 13 years (i.e. 2008 financial crisis) or dare I say 49 years (i.e.
1972 leaving the gold standard) or maybe 108 years (i.e. 1913 FED creation). Pick your
favorite year.
Lordflin 12 hours ago
Our civilization is now run on fraud...
People expect fraud... depend on it... entire industries are built around it...
What hasn't fraud touched...?
chunga 12 hours ago
A few years ago I was semi-obsessed with looking for it. If you look you will see it is
literally everywhere. It is what it is.
Lordflin 12 hours ago
Sadly...
In too many situations over the past thirty years it has come looking for me...
From my experience in education to my experience at the hands of the justice system here
in Idaho...
And I have been trying to mind my own business... imagine what I could accomplish if I
were actually looking for trouble...
Kreditanstalt 12 hours ago (Edited)
They're not "filthy rich" until they successfully sell their Dogecoins to some other
fool...which might one day become difficult.
It's a Ponzi scheme and only the early entries get rich
truthseeker47 12 hours ago
I would not call it a bubble; looks more like a Ponzi Scheme to me.
"... In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. ..."
"... The parallel in the stock market is the hunt for the greater fool . Sure, GameStop shares bear no relation to the reality of the company, but I can make money from buying an overpriced stock if I can find someone willing to pay even more because they 'like the stock.' ..."
"... The concern for investors: How much of the market's gain is thanks to this pure speculation, and how much to the justifiable gains of the improving economy and low rates? If too much comes from speculation, the danger is that we run out of greater fools and prices quickly drop back. ..."
In Minsky's second stage, borrowers plan only to repay the interest, and
refinance when the main debt is due to be repaid; much company debt works like this. It is
taken out with a plan to roll it over indefinitely. Interest rates matter a lot: If they go
down when the company needs to refinance, it will pay less.
The equity parallel is to gains in valuation due to lower long-term rates. As with corporate
debt, this is entirely justified and sustainable so long as rates stay low, because future
earnings are now more appealing. The danger is that rates rise, in which case the stock might
be hit no matter how earnings pan out.
A big chunk of the gains in stocks in the past year came from the sharply lower rates in the
first response to the pandemic when the Federal Reserve flooded the system with money.
Price-to-forward-earnings multiples soared. From the S&P 500's low on
March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings
12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the
10-year Treasury, already down sharply from mid-February's high, fell
further as stocks rebounded.
In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the
hope of capital gains big enough to make up the gap. Land speculators are a prime
example.
The parallel in the stock market is the
hunt for the greater fool . Sure, GameStop shares
bear no relation to the reality of the company, but I can make money from buying an overpriced stock if I can find someone
willing to pay even more because they 'like the stock.'
Wild bets became obvious this year, as newcomers armed with stimulus, or 'stimmy,' checks
drove up the price of many tiny stocks, penny shares and those popular on Reddit discussion
boards.
The concern for investors: How much of the market's gain is thanks to
this pure speculation, and how much to the justifiable gains of the improving economy and low
rates? If too much comes from speculation, the danger is that we run out of greater fools
and prices quickly drop back.
Builders are struggling to construct new homes given an ongoing lumber shortage. Without more homeowners listing, buyers are scrambling
to compete for the limited number of homes on the market, which continues to drive prices up to new heights.
The threat of higher inflation: For the past three decades, U.S. inflation has been low,
leading some investors to discount it as a threat. Yet veteran investors will remember that in
the late 1970s inflation reached double-digit levels. For the 1973â€"1982 period,
the annual inflation rate averaged 8.7%. At that rate, a car that cost $20,000 would be priced
at $21,740 one year later. Five years later, the price of the same car would be $30,351. Of
course, it’s not just big-ticket items that are affected by inflation.
Virtually everything you buy costs more â€" from a gallon of milk to a pair of
running shoes.
It’s safe to assume that inflation will be a factor to one degree or
another during your investing lifetime. For this reason, it’s vital to
consider inflation when you calculate how your investments will grow with time.
Inflation is also an important consideration in portfolio construction. The real returns
(i.e., adjusted for inflation) of cash investments have not kept pace with inflation. Bonds are
particularly vulnerable, too, because a considerable portion of their return consists of
interest payments, which are worth a little less each year in an inflationary period. (At one
point in the 1970s, bonds were facetiously known as “certificates of
confiscation.â€) As such, most long-term investors need to hold a significant stake
in stocks, which provide more stable dividends and the potential to increase substantially in
value
Pius
Twelvetrees 5 hours ago Excellent advice from someone who's seen a lot of ups and downs. Many
of today's investors/traders have never experienced a truly bear market. There will be some
hard lessons learned over the next few months/years. I predict inflation will come roaring
back.
...“The economy went off a cliff in March [2020],†Buffett said. “It was resurrected in an extraordinarily effective way
by Federal Reserve actions and, later, on the fiscal front, by Congress.â€
Buffett added that the Fed’s actions helped companies brace for impact, as the initial spread of COVID sent companies scrambling
to raise funds. Berkshire Hathaway was among the many companies that turned to debt issuance as the stock market tanked in late February
and early March last year, issuing a $500
million 10-year bond on March 4, 2020.
The appetite for corporate debt dried up shortly after that, prompting the Fed weeks later to create
several liquidity facilities
that would take on commercial paper and medium-term investment grade debt.
By entering the debt market as its own counterparty (through separate vehicles with equity investment from the U.S. Treasury),
the central bank hoped to not only backstop markets but give private players the confidence to provide their own liquidity.
“[The Fed] took a market where Berkshire couldn't sell bonds on the day before and turned it into one where Carnival Cruise
Lines, a day or two later, had record issuance of corporate debt,†Buffett said. “Companies losing money, companies were closed.
It was the most dramatic move that you could imagine.â€
Those purchases included over $40 million
in debt issued by Berkshire Hathaway, covering its insurance, finance, and energy businesses.
Buffett applauded Powell for his “speed and decisiveness†in backstopping the corporate debt market, adding that his persistence
on getting more fiscal support was also helpful to the federal government’s relief efforts.
Buffett
similarly said at Berkshire Hathaway’s meeting last year that “every one of those people that issued bonds in late March
and April [2020] ought to send a thank you letter to the Fed.â€
The Oracle of Omaha added that the Fed and the government have helped the economic rebound, estimating that 85% of the U.S. economy
now appears to be “running a super high gear.â€
My uncle did admissions at Cambridge and he actively discriminated against Public School
boys, despite being one himself. He was actually involved in hiring that black woman to be the
Master at Christ's College. Similarly at Citi it was very obvious any remotely competent black
was promoted way beyond there competency, although that was largely limited to back and middle
office roles.
Still the ONS dataset is A09, Labour Market status by ethnic group, is testament to
white folks ingenuity to overcome such discrimination and the free market at work.
By Joseph
Carson , former chief economist of Alliance Bernstein
Federal Reserve Chairman Jerome Powell has played down the current runup in inflation,
arguing it is associated with the reopening of the economy. And as the low inflation readings
of one year ago drop out, the twelve-month calculation (i.e., the so-called base effect) of
reported inflation is likely to move up in the coming months.
Yet, Mr. Powell's "base effect" inflation argument is nonsense. For the "base effect"
argument to be correct, the twelve-month reading of reported inflation should be markedly lower
when the economy was closed than what occurred before the pandemic. But that's not the
case.
Last week, the Bureau of Economic Analysis reported that the twelve-month change ending in
March 2021 in the core personal consumption index (the Fed's preferred price index) was 1.83%.
That compares to the 1.87% reading for the year ending in February 2020 and 1.7% for the year
before that.
The 1.83% reading for twelve months ending March 2021 essentially matches the average
inflation rate of the two prior years. And that 12 month period includes the three months
(April to June) when the economy was closed, and GDP plunged a record 31% annualized. How could
there be a "base effect" on reported inflation when the base year has the same inflation rate
as it did before the pandemic?
Mr. Powell's "base effect" inflation argument has not been questioned or challenged by
analysts or reporters. Regardless of that, investors need to ignore the Fed's rhetoric and
treat upcoming price increases as "new" inflation.
As nonsensical as the explanation for the uptick in inflation, so too is the remedy. Demand
has always been the primary force behind broad inflation cycles. Yet, Mr. Powell argues that
product price inflation will ease once manufacturers increase output and eliminate "supply
bottlenecks," and home inflation will slow once builders build more homes.
It's hard to see how more supply (or growth) will slow inflation anytime soon. Federal Home
Loan Mortgage Company (Freddie Mac) estimates that the US needs almost 4 million new homes to
meet demand. That could take two to three years. Also, it's hard to see how increasing product
output will solve the inflation problem. The supply-side argument solution; fight inflation
with more demand and more commodity inflation.
The Fed's mantra has always been "inflation is everywhere and always a monetary phenomenon."
But nowhere in Mr. Powell's statements or comments do you find any monetary policy role for
increased inflation or any responsibility for containment. Investors forewarned.
Trying to guess when the bubble burst is fools game. But the fact support the idea that this
is a huge bubble.
Notable quotes:
"... 'Fake earnings, fake GDP, fake interest rates and super-high valuations' make for an increasingly untenable situation, he warns. The expanding market bubble has been building since 2008. But the Federal Reserve keeps averting the next huge crisis by continuously 'printing money,' declares the Harvard Business School MBA. ..."
"... It's the riskiest market since 1929. The difference is that '29 wasn't as global. This is an everything bubble. And with the $1.9 trillion fiscal stimulus bill, we're wiling to stimulate 40-something percent of GDP just to prevent a slowdown in the economy. That's going to go down in history as the most insane thing ever. They'll say, 'What were they smoking?' ..."
"... The next crash will be worse than the last one because it will come from higher levels and [plummet] to lower levels. ..."
"... If you're willing to take more risk, you'll have one bucket in long-term U.S. Treasury bonds and maybe in a few other good governments, like Sweden or Australia. Triple-A corporate could go in there too. Then you'll have another bucket '" of short stocks, not leveraged. ..."
"... Jeremy Grantham [GMO co-founder] said [on Jan. 5] this level of euphoria means you're within months '" not years '" of a major bubble peak. You're at the end. ..."
"... The only reason people are spending is because the government handed businesses and consumers tons of money. But it will get to a point where it's not going to matter how much money is printed '" and then you'll have an avalanche. A huge collapse is coming. ..."
"... Loans will fail by the boatload. Then money disappears. That causes bank and business failures. We have to get all the financial leverage, financial assets and debt out of our economy. Twenty percent of public companies are zombies. They can't even pay their debt service in a growth economy. ..."
That's what 'The Contrarian's Contrarian, as Dent has been dubbed, tells ThinkAdvisor in an interview.
The strategist correctly called Japan's 1989 bubble bust and recession,
the dot-com crash and the populist swell that made Donald Trump president.
What could be 'the biggest crash ever,' he argues, will hit by the end of June, if not sooner. It will be 'the initiation of the next
big economic downturn,' Dent predicts.
'Fake earnings, fake GDP, fake interest rates and super-high
valuations' make for an increasingly untenable situation, he warns. The expanding market bubble has been building since 2008.
But the Federal Reserve keeps averting the next huge crisis by continuously 'printing money,' declares the
Harvard Business School MBA.
His HSD Publishing, an independent research firm, generates monthly newsletters that he and
Rodney Johnson, HSD president, each write.
In the interview, Dent delivers his prescription for investing amid the weakened economy and
impending disaster, as he sees it: Zero in on long-term Treasurys.
'What's better than sleeping with 30-year Treasury
bonds,' he exults. They'll 'magnify your money.'
He then describes a portfolio allocation for the investor that's 'willing to take more risk.' As for
the notion of high inflation, 'no way in hell,' he says.
Dent, whose latest book is ' What to Do When the
Bubble Pops: Personal and Business Strategies for the Coming Economic Winter '
(G&D Media-April 2020), also tells ThinkAdvisor his considered opinions on cryptocurrency
('a big trend long term'), the GameStop frenzy
('stupid but admirable') and Sen. Elizabeth
Warren's wealth tax bill ('First of all, those assets are
going to crash.')
ThinkAdvisor interviewed Dent on March 5. He was speaking by phone from his base in San
Juan, Puerto Rico, where he has resided for the last several years. When the conversation
pivoted to folks who attack him for his frequently inaccurate predictions, he offered some
choice words and an explanation, then described key indicators he employs that show 'very clear cycles.'
Here are highlights of our interview:
THINKADVISOR: How much risk is there in the stock market right now?
HARRY DENT JR.: It's the riskiest market since 1929. The
difference is that '29 wasn't as global. This is an
everything bubble. And with the $1.9 trillion fiscal stimulus bill, we're
wiling to stimulate 40-something percent of GDP just to prevent a slowdown in the economy.
That's going to go down in history as the most insane thing ever.
They'll say, 'What were they smoking?'
Please elaborate on the extent of the risk you see.
This may be the biggest bubble crash ever: stocks, commodities, real estate.
The next crash is the initiation of the next big [economic] downturn, which will be much worse
than the one in 2008-2009.
When do you think the next crash will occur?
It will likely come by the end of June, probably sooner. The S&P falls to 2,100
'" lower than the March 2020 low '" and that would be a 47% to 48% drop
from recent highs, though it may go to 4,000 first. The next crash will be worse than the last
one because it will come from higher levels and [plummet] to lower levels.
Why will the downturn that you see be so harsh?
The only reason the 2008 downturn didn't turn into a depression was that
they turned on the monetary spigots so hard and blew us out of it, which kept the bubble going.
They kept printing money and put it off. Now we've got a bigger bubble. This
downturn is going to be the Great Depression that the deep recession of 2008 was [falling
into].
How long do you think the depression will last?
If the economy finally falls apart after this much stimulus, economists will flip from being
endlessly bullish to endlessly bearish. They'll say, 'Now
we're in a decade-long-plus depression, like the 1930s.' But
I'll say, 'Nope, this thing will be hell:
It's going to do its work very fast. By 2024, it will be over.'
By 2023 or 2024, we're going to be coming out of it into what I call the
next Spring Boom.
Right now, you favor investing in Treasury bonds. What's your
strategy?
Man, what's better than sleeping with 30-year Treasury bonds
'" the safest investment in the reserve currency of a country
that's in big trouble '" but not as much as Europe and Japan are
in and nowhere near as much as China is in. We're in the best house in a bad
neighborhood.
What will happen to the 30-year Treasury bond during the massive crash you
foresee?
It's going to fall to half a percent and maybe zero. It will expand your
money 30%, 40%, 50%, while stocks are crashing 70%, 80%, 90%. Real estate will go down 30%,
40%, 50%. Commodities are already down 50% and are going down another 30% or 40%. Everything is
going to default. Cash will preserve your money. The 30-year Treasury will magnify your
money.
So, do you think 50% of an investment portfolio should be in Treasurys?
If you're willing to take more risk, you'll have one
bucket in long-term U.S. Treasury bonds and maybe in a few other good governments, like Sweden
or Australia. Triple-A corporate could go in there too. Then you'll have
another bucket '" of short stocks, not leveraged.
Stocks are very volatile on the way down. You can also be in REITs that are in very solid
areas, like multi-family housing in affordable cities and medical facilities because those will
hold up the best.
There's a discernable euphoria now among investors. But John
Templeton, the renowned investor and fund manager, famously said that 'bull
markets die on euphoria.' Do you agree with that?
Yes. And Jeremy Grantham [GMO co-founder] said [on Jan. 5] this level of euphoria means
you're within months '" not years '" of a major
bubble peak. You're at the end.
Wil cryptocurrency be part of that huge crash?
Yes. I think Bitcoin is the big thing long term and that crypto and blockchain is a big
trend. It's like the internet of finance '" money and assets
'" instead of information. So it's a big deal '" but
in its early stages.
Bitcoin is going to go to 58 [thousand], 60, 80 '" and then end up back at 3,000
to 4,000. I would buy it long term, a couple of years from now. I wouldn't
touch it between now and then.
What are your expectations for the economy once the pandemic substantially fades?
Some industries are never going to come back. We're not back to where we
were before COVID '" by GDP or any other major indicator. Everybody is acting like 'When we get over COVID, we'll be back better than
ever.' The stock market is already anticipating that. But it's
wrong.
The only reason people are spending is because the government handed businesses and
consumers tons of money. But it will get to a point where it's not going to
matter how much money is printed '" and then you'll have an
avalanche. A huge collapse is coming.
What specifically will cause it?
There's is no way you can [keep] having fake earnings, fake GDP, fake
interest rates and super-high valuations. Financial assets have to come down to reality.
What are the implications?
Loans will fail by the boatload. Then money disappears. That causes bank and business
failures. We have to get all the financial leverage, financial assets and debt out of our
economy. Twenty percent of public companies are zombies. They can't even pay their
debt service in a growth economy. They're already dead.
We've just keeping them alive with embalming.
Jensen joined
Bloomberg's "What Goes Up" podcast to discuss this week's Federal Reserve meeting and how
ample liquidity from the central bank, combined with a booming economic rebound, make
conditions ripe for markets to get more bubbly.
Q. Bubbles are a very strange phenomenon because the risk-reward relationship is so
interesting. It almost seems that as an investor, you have to participate in bubbles. Because
if you think it's a bubble too early, you really miss the best returns from them. How do you
know when it's time to get out of an overvalued market?
A: All along through Bridgewater's history we've been systematic. So we've taken the kind
of discussion we're having now -- a very qualitative view of the world -- but translated into
ways to measure it. So you take something like a bubble, right? A classic qualitative thing.
What do you mean by bubble? How do you measure that it's a bubble? Is it enough to say prices
are high relative to history, or what's the actual measure? And then how reliable is it?
And we have six gauges of a bubble that we use all over the world. Then you could apply it
to cryptocurrency. You can apply it to anything you wanted in the world to stocks, to bonds
to anything. Our basic scoreboard is: Are prices high relative to traditional measures? Are
prices discounting unsustainable conditions?
So, as an example today, there's something like 10% of stocks that are pricing in more
than 20% revenue growth and margin expansion. If you look at history, 2% of stocks actually
achieved that. That's an extremely hard thing to do.
Q: That's not counting the base effects from last year, right?
A: No. I'm talking about ongoing growth rates without the base effect. It doesn't happen.
That's very, very unlikely to happen. Potentially with inflation or something you might, but
in a normal kind of forward-looking picture, you don't get that. So that's an example of
discounting unsustainable conditions. They can't, as a group, actually achieve that
condition.
The third thing is new buyers entering the market. How many new buyers are there? How big
a part of the market are they? There's the broad sentiment measures. There's purchases being
financed by leverage and buyers and businesses sort of making extended forward purchases .
That's all part of our checklist for a bubble. And you see today a fair amount of the equity
market in the U.S. in a bubble, but not the aggregate.
There are definitely pockets that meet those standards and that's dangerous. And then,
like you said, what do you want to do, buy or sell them? Well, that's a whole other dangerous
thing.
And that's where, when we had a drawdown in 2000-2001 associated with the bubble -- both
the dollar and the equity market and how that was playing out at the time -- that really
forced us to get into flows, which is basically how we measure bubbles today. Where's the
money coming from? Who are the buyers and sellers? What are their balance sheets? How much
more money can they put into this bubble versus how much income they're getting and when does
that start to flip? And so for us, that process of being able to look at the balance sheets
of the buyers and sellers and think about when they've been stretched to an extreme -- where
they won't have the money, where there's more supply coming than possible demand."
So you look at the IPO pipeline, you look at the creation of new instruments, how fast
those balance sheets are growing. And that's how we try to measure that criss-cross. And it's
still a very, very dangerous game, like you're saying.
So the third part is be careful and be conservative in your thinking around the ability to
time those things, because that's kind of the easiest place to die in asset prices is trying
to be short a bubble too early.
"... Mr. Courtney's calculation was one of several supporting the disclosure in a Journal article last fall that taxpayers could ultimately be on the hook for roughly a third of the $1.6 trillion federal student loan portfolio. This could amount to more than $500 billion, exceeding what taxpayers lost on the saving-and-loan crisis 30 years ago. ..."
The federal budget assumes the government will recover 96 cents of every dollar borrowers
default on. That sounded high to Mr. Courtney because in the private sector 20 cents would be
more appropriate for defaulted consumer loans that aren't backed by an asset.
He asked Education Department budget officials how they calculated that number. They told
him that when borrowers default, the government often puts them into new loans. These pay off
the old loans, and this is considered a recovery, even though in many cases the borrowers
haven't repaid anything and default on the new loans as well.
In reality, the government is likely to recover just 51% to 63% of defaulted amounts,
according to Mr. Courtney's forecast in a 144-page report of his findings, which was reviewed
by The Wall Street Journal.
"If you accounted this way in the private sector, you wouldn't be in business anymore," Mrs.
DeVos said in a December interview. "You'd probably be behind bars."
Mr. Courtney's calculation was one of several supporting the disclosure in
a Journal article last fall that taxpayers could ultimately be on the hook for roughly a
third of the $1.6 trillion federal student loan portfolio. This could amount to more than $500
billion, exceeding what taxpayers lost on the saving-and-loan crisis 30 years ago.
If Mr. Courtney is right, there are big implications for taxpayers and families alike. While
defaulted student loans can't cause the federal government to go bankrupt the way bad mortgage
lending upended banks during the financial crisis, they expose a similar problem: Billions of
dollars lent based on flawed assumptions about whether the money can be repaid.
There are periods when you should sit on your money, despite inflation. This is probably one of those. When no one believes in the future, that's an opportunity. When everyone does, sell
Notable quotes:
"... Take Quantumscape, which went public via a SPAC and produces solid-state lithium metal batteries. Bill Gates and Volkswagen are investors. In 2020 it had no revenue and lost more than $1 billion. Quantumscape had a peak valuation of $50 billion last December. ..."
When I read that technology can construct an image of your face from your DNA, my initial reaction was: That's the stupidest
thing I've ever heard.
Fortunately, I've had a lifetime
of stupidest-things-I've-heard things (
like Bleep ) became
reality. Like the Kübler-Ross stages of grief -- denial, anger, bargaining, depression, acceptance -- technology goes through similar
phases.
My phases of techno-hype: Incredulous. Will never happen. Dread. I'll try it. Booster. Overhype. Failed expectations.
On to the next paradigm. Understand these before plunking money into passing fancies. We know the famous will-never-happen
predictions.
Understand these before plunking money into passing fancies.
We know the famous will-never-happen predictions.
IBM 's Thomas
Watson : "I think there is a world market for maybe five computers." Digital's Ken Olsen : "There is no reason anyone would want a computer
in their home." Funny now, but not unreasonable at the time.
I've learned to harness those knee-jerk denials when I know that technology performance will increase and costs decrease.
Classic scale. I'm actually suspicious of things that aren't controversial from the start. I live in those denial phases -- ask
my wife. Why? Because almost every time, no one believes in the future. That's the time to invest. Until everyone believes it and
then some. Then it's probably time to sell.
I live in those denial phases -- ask my wife. Why? Because almost every time, no one believes in
the future. That's the time to invest. Until everyone believes it and then some. Then it's probably time to sell.
Think of the 2007 iPhone introduction. Typing on glass, are you kidding me? So many white-collar warriors hurdling through airports
were thumb-writing on BlackBerry s -- aka Crackberrys. Take
away my keyboard, even though it's tiny and painful to use? Over my dead body. Well, we know how that turned out. BlackBerry is now
worth $5 billion. Apple a bit more.
Same for electric cars. It's my God-given right to guzzle gas and shift gears with abandon. I don't want a car that works like a
high school electronics lab with a battery and a fan. No way. Yet batteries got cheaper, and range went up.
It wasn't that long ago that everyone was dubious of autonomous cars. The 2005 Darpa Grand Challenge saw Stanley, a Stanford robot,
win $2 million in a 132-mile self-driving race. But on real streets with bicyclists and old ladies? No way. Well, we're not there yet,
but it's certainly accepted that it will happen.
The stock market allocates capital to those ideas it believes are winners. Remember investing guru Benjamin Graham's stock market
as a short-run voting machine, long-run weighing machine? So where are we now -- especially amid a Fed-fueled feeding frenzy? When markets
overpay, they're voting that all that good stuff is practically guaranteed to happen. Huge expectations are built into many stock prices.
Entrepreneurs, naturally, love the overhype stage -- almost free money thrown at them at billion-dollar valuations. But it's the
most dangerous time for investors. HBO has a show named "Euphoria." It's about teen drug use, but no matter; the show's best line is
by the main character, Rue: "Every time I feel good, I think it will last forever . . . but it doesn't."
Expectations eventually get dashed. Reality bites. Stocks come down. Even if the market or product ends up successful, I've noticed
that overhyped stocks can return to their peak values, but five to 10 years later. That's a long time to wait for hype to become real.
Take Quantumscape, which went public via a SPAC and produces solid-state lithium metal batteries. Bill Gates and
Volkswagen are investors. In 2020 it had no revenue
and lost more than $1 billion. Quantumscape had a peak valuation of $50 billion last December. Now it's $13.5 billion. It could work.
I hope it does work. But unless something radical changes, I think it will take a long time for the company to be worth $50 billion
again.
There are plenty of overhyped things to choose from, many with zero revenue. Some may be successful, others certainly won't: Air
taxis (Archer and Joby). Hydroponic vertical farms (AeroFarms). Space travel (Momentus).
Gamestop 's turnaround.
My advice is always to invest in the fog. When everyone else is incredulous, look for scale. Usually, no one else can see it. Squint
hard, but don't make stuff up. If you can see something that everyone dismisses, and that will get cheaper over a long period of time,
maybe decades, buy in cheap and go along for the long ride. Others will eventually overpay.
On the flip side, when the fog clears and we've moved from the acceptance to hype, it's time to unload your shares to those late
to the party. One hint is that stocks are now worth twice gross domestic product. You might sell early. So what? No one ever lost money
taking a profit. But please, know which phase we're in -- don't be the last one in the pool. Instead, start hunting for the next wave
no one believes in.
But constructing a face from DNA? That'll never happen. Well, maybe . . .
In fall 2011 the National Student Clearinghouse Research Center found that higher education
enrollment was slightly more than 20.5 million students. By fall 2019 that figure had dropped
to about 18.2 million, a decline of slightly over 11%. During those eight years the number of
18- to 24-year-olds remained roughly constant.
We have long had a social consensus that it's worth four years of our children's lives and
very large sums of their parents' money to see their knowledge, mental capacity, and career
prospects greatly expanded by going to college. Attitudes and habits formed by this consensus
were bound to lag behind the reality of academia as it now is. Yet the NSCRC numbers show that
already about 1 in 9 have mustered the courage and independence of thought to face reality and
stop wasting time and money.
This illicit conversion of a vital social institution to an alien use deprives all Americans
of the benefits of a properly functioning system of higher education. It also means that a
destructive and long since discredited political ideology is now using colleges and
universities to gain a degree of influence over society that it could never have achieved at
the ballot box. That's election interference on a scale not remotely matched by anything that
was alleged in the 2020 election.
When academia's astonishing message to society is, "We'll take your money, but we'll do with
it what we want, not what you want," the response ought to be simple: "No you won't." The
question is, can the millions of people who make up that wonderful abstraction called "society"
act in a way that is sufficiently concerted and organized to deliver the message effectively?
Many have already made a good start. But the rest need to join if we are ever again to have
college campuses that aren't as academically incompetent as they are politically
malevolent.
Mr. Ellis is a professor emeritus of German literature at the University of California,
Santa Cruz and author of "The Breakdown of Higher Education: How It happened, the Damage It
Does, and What Can Be Done."
Joe Biden took the riskiest step of his presidency with a call for higher taxes on the
wealthy to fund a massive investment in the nation's social safety net, betting he could sell
the American public on sweeping change following a pandemic that exacerbated economic and
social divides.
Biden devoted his first address to a joint session of Congress to a call for a "a
once-in-a-generation investment in our families," prescribing trillions of dollars in new
spending for infrastructure, child care, paid leave, community college tuition, and a bevy of
subsidies for working class families.
And in a full-throated confrontation of Wall Street, Biden said the nation's wealthiest
taxpayers and companies should foot the bill. He declared investors "didn't build this country"
and said the wealthy had lined their pockets during the pandemic without paying their fair
share.
"I stand here tonight before you in a new and vital hour of life and democracy of our
nation," Biden said.
The speech was delivered to a House chamber where heightened security and social distancing
measures underscored the disease and division still confronting the nation. It amounted to an
audacious gamble that Biden can harness public support not only for trillions of dollars in new
federal programs for lower- and middle-income Americans, but the biggest tax hikes in
decades.
But his ambitions rest on a narrow Democratic majority in the Senate, where the defections
of only a single moderate or two would mean failure.
Biden painted the deadly course of the virus as embodying and exaggerating the inequalities
that have broadened in recent decades, with working class Americans shouldering economic and
health insecurity while the wealthiest flourished. At risk is not only his vision for
rebuilding the economy, but the razor-thin advantage his party holds in Congress ahead of the
2022 midterm elections, when Republicans are well positioned to retake the majority at least in
the House.
"Doing nothing is not an option," the president implored.
Unattainable Wealth
Biden's effort was in many ways a break from the cautious center-left triangulation that has
defined Democratic presidential politics since the Reagan Revolution. His calculation is that
voters battered by the virus just a decade after a painful recession are no longer as concerned
about deficit spending or retaining low tax rates for a tier of wealth that seems increasingly
unattainable.
And Biden used one of the biggest bully pulpits he's provided to offer a presidential
validation of the growing influence of the progressive left, pitching at least US$3.8 trillion
in new spending, sweeping new changes to the health care system, and substantial gun control
measures.
Biden's own tendencies are more conciliatory, and he's likely to ultimately jettison some of
the more ambitious proposals as he seeks to navigate legislation through Capitol Hill --
particularly with moderate Democrats already expressing skepticism about new taxes and
spending. He took pains to caveat his broadsides against the nation's wealthiest, saying he was
"not out to punish anyone" and, in a line improvised from the prepared text, acknowledged the
"good guys and women on Wall Street."
But he left little room for critics within his party to argue he lacked ambition, and his
presidential legacy will now be defined by his ability to deliver a once-in-a-generation suite
of new government investments, services, and programs.
The forum for Biden's call for structural economic change itself seemed designed to
underscore the unprecedented moment. Because of coronavirus precautions, only about 200
lawmakers were invited to attend the speech in person, and some of the Senate's most powerful
moderates -- including West Virginia Democrat Joe Manchin and Utah Republican Mitt Romney --
were relegated to seats in the upper balcony.
The president's tone and tenor suggested that even if ordinary Americans weren't in the
room, he felt emboldened by polls that suggest his proposals are popular – and that he
himself has been buoyed by a largely successful vaccine campaign that's administered more than
315 million shots and a stimulus program that provided more than 160 million checks to
taxpayers.
The president's approval rating is at 57 per cent, according to a Gallup poll released
Friday, matching his post-inauguration high. And seven in 10 Americans favored Biden's initial
US$1.9 trillion stimulus bill, with only around a third of those surveyed by the Pew Research
Center earlier this month saying it spent too much.
His new US$1.8 trillion families plan and the US$2.25 trillion infrastructure proposal
– which he christened a "blue-collar blueprint to build America" -- directly targeted two
key constituencies: suburban moms and the White working class of the Rust Belt.
The Bloomberg Dollar Spot Index erased its losses as of 12:00 p.m. in Hong Kong, as traders
who were betting on a bigger spending plan from Biden cut back on currency risk positions.
Treasury futures were little changed and U.S. equity futures maintained their gains.B
Pandemic Disparities
There's reason for Biden to direct his appeal to those he said "feel left behind and
forgotten."
The pandemic ushered in not only disproportionate health outcomes -- a recent study by Ball
State University showed a higher death rate among counties with higher poverty levels -- but
deepened disparate economic trends.
While the richest 1 per cent in the U.S. saw their wealth increase by US$4 trillion, the
bottom half of Americans shared just a US$471 billion increase. Female participation in the
labor force has slipped to 57 per cent -- the lowest level since 1988 – and a half
million more women exited the workforce than men during a crisis that saw 10 million jobs
disappear.
White House advisers have made no secret about the opening they see.
Chief of Staff Ron Klain has spent recent weeks promoting stories that bluntly describe
Biden's plans to hike taxes on the wealthy in a flurry of social media posts.
Economic adviser Brian Deese declined to publicly address any element of Biden's families
plan ahead of its rollout Wednesday – except a provision to hike capital gains taxes on
Americans making over US$1 million a year. And political adviser Anita Dunn on Tuesday penned a
memo to "interested parties" pointing to recent Fox News polling that showed 56 per cent of
respondents backed paying for infrastructure through increased taxes on corporations and 63 per
cent supported raising income taxes on the wealthiest Americans.
"We need to make the case, but the American people seem very supportive of the idea that
when it comes to longstanding challenges in this country, we need to come together and make the
investments we need in order to address them," said White House economic adviser David
Kamin.
Congressional Difficulties
Still, the success of Biden's effort will hinge on parlaying that popular support into votes
in a narrowly divided Congress, where Republicans remain loathe to offer any assistance and
without them, moderate Senate Democrats like Arizona's Kyrsten Sinema and Manchin can scuttle
any piece of legislation single-handedly.
Both have already voiced skepticism about Biden's proposed tax increases, leaving open the
question of how the White House's proposals can proceed. And Republicans looked to fan that
uncertainty, painting the president's vision as excessive and ineffective.
"Our best future won't come from Washington schemes or socialist dreams," Senator Tim Scott,
a South Carolina Republican, said in the GOP rebuttal to Biden's address. "It will come from
you -- the American people."
Biden, for his part, said that big investments in jobs and infrastructure "have often had
bipartisan support" and looked to win skeptics by adopting rhetoric more familiar to
Republicans and painting his plans as essential to winning a global battle for the future.
"We have to prove democracy still works," the president said. "That our government still
works -- and can deliver for the people."
--With assistance from Jennifer Epstein and Tan Hwee Ann.
Wealthiest Americans get US$195 billion richer in Biden's first 100 days
Simon Hunt and Ben Steverman , Bloomberg News
https://imasdk.googleapis.com/js/core/bridge3.453.0_en.html#goog_1563483815 Getting
Biden's capital gains tax through congress is slim to none: Federated Hermes' Orlando
Biden tax plans have roadblocks but will trigger a big sell-off i...
Joe Biden's election has done little to slow the inexorable surge of wealth among U.S.
billionaires.
In the president's first 100 days in office, against a drumbeat of calls for the rich to pay
more in taxes, the 100 wealthiest Americans added a combined US$195 billion to their fortunes,
according to a Bloomberg analysis.
The most recent gains have been fueled by the continued rise of the stock market since Biden
was sworn in Jan. 20, along with the vaccination program's fast rollout and a US$1.9 trillion
government stimulus package. The S&P 500 and Dow Jones indexes have both climbed more than
10 per cent during that time.
Attempts such as Biden's to refloat the economy can boost incomes and wealth at the very
top, said Mike Savage, a sociology professor at the London School of Economics.
"We've seen that paradox since the 2008 financial crash with quantitative easing, which has
mostly benefited people with assets, inflating their value significantly,'' Savage said.
The richest 100 made a further US$267 billion between the 2020 election and Biden's
inauguration, amounting to a total gain of US$461 billion since Nov. 4. From Donald Trump's
2017 inauguration to last fall's election, those billionaires got about US$860 billion
richer.
The combined fortunes of the richest 100 Americans have reached US$2.9 trillion, greater
than the combined US$2.5 trillion wealth of the bottom 50 per cent of the U.S. population,
according to data from the Federal Reserve.
The rise has been driven by an explosion of wealth among a handful of ultra-billionaires.
The 10 wealthiest Americans have added US$255 billion since election day, bringing their
combined net worth to US$1.2 trillion.
The biggest driver of this wealth surge has been tech companies like Amazon.com Inc.,
Facebook Inc. and Alphabet Inc.'s Google, bolstered by increased online and stay-at-home
activity during the coronavirus pandemic. The FANG stocks index has climbed 94 per cent in the
past 12 months compared with the 45 per cent advance of the S&P 500.
Amazon founder Jeff Bezos, the world's richest man, has gotten US$11.7 billion richer this
year, according to the Bloomberg Billionaires Index, adding to about US$120 billion of wealth
gains during the Trump presidency. Mark Zuckerberg's net worth rose US$8.1 billion yesterday
alone on the strength of Facebook's first-quarter results.
Google's Larry Page has added US$26.6 billion this year after the California-based company
posted record profit last year, while the wealth of Tesla Inc.'s Elon Musk has grown US$5.1
billion since January.
Finance billionaires such as Warren Buffett and Blackstone Group Inc.'s Stephen Schwarzman
have also been major beneficiaries of stock market rises.
In his first 100 days, Biden has moved quickly to propose sharp tax hikes for the rich and
programs to funnel trillions of dollars to middle- and lower-class Americans in the form of new
infrastructure, social spending and stimulus checks. He laid out those policies in his first
address to Congress on Wednesday.
"Sometimes I have arguments with my friends in the Democratic Party," Biden said. "I think
you should be able to become a billionaire or a millionaire. But pay your fair share."
Under his "American Families Plan" announced Wednesday, the top rate of personal income tax
would increase to 39.6 per cent for the highest 1 per cent of earners from the current 37 per
cent, while the capital gains rate would be raised to the same level for those earning above
US$1 million, wiping out the discrepancy between income and capital gains tax rates that has
benefitted many of the ultra-rich.
The wealthiest 1 per cent currently pay 40 per cent of all federal income taxes, according
to Internal Revenue Service data, an amount that doesn't include payroll taxes.
"When you ask the American people what they want, they want corporations and millionaires
and billionaires to pay higher taxes," said Erica Payne, founder of the Patriotic Millionaires,
a group of progressive high-net-worth individuals. "It is politically a winner, it is
economically the right thing to do and it is morally a no-brainer."
Corporate tax hike
The White House has also proposed a plan to hike corporate taxes to fund infrastructure
spending. In a surprise this month, Bezos issued a statement saying he supports the general
idea. "We look forward to Congress and the administration coming together to find the right,
balanced solution that maintains or enhances U.S. competitiveness," he said.
Conservatives say boosting spending by adding a greater burden on the wealthy can
backfire.
"Government investments are often sold to the public with the promise that they will improve
lives and improve the economy," Scott Hodge, president of the Tax Foundation, argued in
testimony before Congress this week. "In every case, the economic harm caused by the taxes
would swamp any of the benefits from the new spending, leaving taxpayers and the economy worse
off."
Despite the pandemic, Fed data show all groups gained wealth last year. The top 1 per cent
did best, however, adding US$4 trillion in 2020 and bringing their total net worth to almost
US$39 billion, more than the bottom 90 per cent of Americans combined. Personal incomes in the
U.S. jumped a record 21 per cent in March, surging after households received a third round of
relief checks.
In his speech to Congress, Biden emphasized his efforts to create good-paying jobs,
especially those that don't require a college degree. The increasing dominance of tech giants,
however, won't necessarily help middle-class Americans. As a proportion of their market
capitalization, most technology companies employ relatively few Americans compared with their
older listed peers, concentrating wealth in the hands of a select few.
"The whole retail distribution system is changing," said Robert Miller, professor of
economics and statistics at Carnegie Mellon University. "Recent technology has been hollowing
out some parts of middle management, so you can see parts of the middle class slipping
away."
Tax loopholes
Democrats in Congress are pushing other plans to close loopholes and tax wealth. To claw
back gains made by America's richest during the pandemic, Senator Elizabeth Warren, a
Massachusetts Democrat, proposed an Ultra Millionaire tax, a new version of the wealth tax she
floated as a presidential candidate. Under her proposal, those with fortunes exceeding US$50
million would face a 2 per cent tax on their wealth, increasing to 3 per cent for those worth
more than US$1 billion. The plan is unlikely to become law, given opposition from Biden and
other Democrats.
Higher taxes aren't "going to have very much effect in the long term on redistributing
wealth," Carnegie Mellon's Miller said. "This focus on how we're going to get the money is a
bit misplaced – we should be thinking more about how we want to help the people that need
help."
SUBSCRIBER 2 hours ago Borrowing money to gamble on the stock market is not
a very smart thing to do in my opinion. Like thumb_up 7 Reply reply Share link Report flag
R
Individual investors are holding more stocks than ever before as major indexes climb to
fresh highs. They are also upping the ante by borrowing to magnify their bets or increasingly
buying on small dips in the market.
Stockholdings among U.S. households increased to 41% of their total financial assets in
April, the highest level on record. That is according to JPMorgan Chase & Co. and Federal Reserve
data going back to 1952 that includes 401(k) retirement accounts.
... A survey by the American Association of Individual Investors showed that investors'
allocations to the stock market hit around a three-year high of 70% in March. And margin
debt -- or money that investors borrow to buy securities --
stood at a record as of March , Financial Industry Regulatory Authority figures
show.
... "Retail investors have made a lot of money on many things including equities over the
past year. At some point, given how high their equity allocation is, the risk is they decide to
get out and take profits," said Mr. Panigirtzoglou, a managing director at JPMorgan. "That is
effectively what happened before in 2000."
Individual investors are holding more stocks than ever before as major indexes climb to
fresh highs. They are also upping the ante by borrowing to magnify their bets or increasingly
buying on small dips in the market.
Stockholdings among U.S. households increased to 41% of their total financial assets in
April, the highest level on record. That is according to JPMorgan Chase & Co. and Federal Reserve
data going back to 1952 that includes 401(k) retirement accounts.
... A survey by the American Association of Individual Investors showed that investors'
allocations to the stock market hit around a three-year high of 70% in March. And margin
debt -- or money that investors borrow to buy securities --
stood at a record as of March , Financial Industry Regulatory Authority figures
show.
... "Retail investors have made a lot of money on many things including equities over the
past year. At some point, given how high their equity allocation is, the risk is they decide to
get out and take profits," said Mr. Panigirtzoglou, a managing director at JPMorgan. "That is
effectively what happened before in 2000."
I believe there is 60% chance we put in a top before May 17 th . I'm not sure th@t all the
day traders from 2020 have actually put aside enough money to pay their taxes . Those gains
were all short term ordinary income .
We won't crash , we will have just put a high in that may not be breached for many years . Of
course all bets are off if Biden pays every one's taxes for them and gives them an extra "
stimmy" .
Individual investors are holding more stocks than ever before as major indexes climb to
fresh highs. They are also upping the ante by borrowing to magnify their bets or increasingly
buying on small dips in the market.
Stockholdings among U.S. households increased to 41% of their total financial assets in
April, the highest level on record. That is according to JPMorgan Chase & Co. and Federal Reserve
data going back to 1952 that includes 401(k) retirement accounts.
... A survey by the American Association of Individual Investors showed that investors'
allocations to the stock market hit around a three-year high of 70% in March. And margin
debt -- or money that investors borrow to buy securities --
stood at a record as of March , Financial Industry Regulatory Authority figures
show.
... "Retail investors have made a lot of money on many things including equities over the
past year. At some point, given how high their equity allocation is, the risk is they decide to
get out and take profits," said Mr. Panigirtzoglou, a managing director at JPMorgan. "That is
effectively what happened before in 2000."
I believe there is 60% chance we put in a top before May 17 th . I'm not sure th@t all the
day traders from 2020 have actually put aside enough money to pay their taxes . Those gains
were all short term ordinary income .
We won't crash , we will have just put a high in that may not be breached for many years .
Of course all bets are off if Biden pays every one's taxes for them and gives them an extra
" stimmy" .
Individual investors are holding more stocks than ever before as major indexes climb to
fresh highs. They are also upping the ante by borrowing to magnify their bets or increasingly
buying on small dips in the market.
Stockholdings among U.S. households increased to 41% of their total financial assets in
April, the highest level on record. That is according to JPMorgan Chase & Co. and Federal Reserve
data going back to 1952 that includes 401(k) retirement accounts.
... A survey by the American Association of Individual Investors showed that investors'
allocations to the stock market hit around a three-year high of 70% in March. And margin
debt -- or money that investors borrow to buy securities --
stood at a record as of March , Financial Industry Regulatory Authority figures
show.
... "Retail investors have made a lot of money on many things including equities over the
past year. At some point, given how high their equity allocation is, the risk is they decide
to get out and take profits," said Mr. Panigirtzoglou, a managing director at JPMorgan. "That
is effectively what happened before in 2000."
I believe there is 60% chance we put in a top before May 17 th . I'm not sure th@t all
the day traders from 2020 have actually put aside enough money to pay their taxes .
Those gains were all short term ordinary income .
We won't crash , we will have just put a high in that may not be breached for many
years . Of course all bets are off if Biden pays every one's taxes for them and gives
them an extra " stimmy" .
Individual investors are holding more stocks than ever before as major indexes climb
to fresh highs. They are also upping the ante by borrowing to magnify their bets or
increasingly buying on small dips in the market.
Stockholdings among U.S. households increased to 41% of their total financial assets
in April, the highest level on record. That is according to JPMorgan Chase & Co. and Federal
Reserve data going back to 1952 that includes 401(k) retirement accounts.
... A survey by the American Association of Individual Investors showed that
investors' allocations to the stock market hit around a three-year high of 70% in March.
And margin debt -- or money that investors borrow to buy securities --
stood at a record as of March , Financial Industry Regulatory Authority figures
show.
... "Retail investors have made a lot of money on many things including equities over
the past year. At some point, given how high their equity allocation is, the risk is they
decide to get out and take profits," said Mr. Panigirtzoglou, a managing director at
JPMorgan. "That is effectively what happened before in 2000."
I believe there is 60% chance we put in a top before May 17 th . I'm not sure
th@t all the day traders from 2020 have actually put aside enough money to pay
their taxes . Those gains were all short term ordinary income .
We won't crash , we will have just put a high in that may not be breached for
many years . Of course all bets are off if Biden pays every one's taxes for them
and gives them an extra " stimmy" .
Individual investors are holding more stocks than ever before as major indexes
climb to fresh highs. They are also upping the ante by borrowing to magnify their
bets or increasingly buying on small dips in the market.
Stockholdings among U.S. households increased to 41% of their total financial
assets in April, the highest level on record. That is according to JPMorgan Chase &
Co. and Federal Reserve data going back to 1952 that includes 401(k) retirement
accounts.
... A survey by the American Association of Individual Investors showed that
investors' allocations to the stock market hit around a three-year high of 70% in
March. And margin debt -- or money that investors borrow to buy securities --
stood at a record as of March , Financial Industry Regulatory Authority figures
show.
... "Retail investors have made a lot of money on many things including equities
over the past year. At some point, given how high their equity allocation is, the
risk is they decide to get out and take profits," said Mr. Panigirtzoglou, a
managing director at JPMorgan. "That is effectively what happened before in
2000."
I believe there is 60% chance we put in a top before May 17 th . I'm not
sure th@t all the day traders from 2020 have actually put aside enough
money to pay their taxes . Those gains were all short term ordinary
income .
We won't crash , we will have just put a high in that may not be breached
for many years . Of course all bets are off if Biden pays every one's
taxes for them and gives them an extra " stimmy" .
Individual investors are holding more stocks than ever before as major
indexes climb to fresh highs. They are also upping the ante by borrowing to
magnify their bets or increasingly buying on small dips in the market.
Stockholdings among U.S. households increased to 41% of their total
financial assets in April, the highest level on record. That is according
to JPMorgan Chase & Co.
and Federal Reserve data going back to 1952 that includes 401(k) retirement
accounts.
... A survey by the American Association of Individual Investors showed
that investors' allocations to the stock market hit around a three-year
high of 70% in March. And margin debt -- or money that investors borrow
to buy securities --
stood at a record as of March , Financial Industry Regulatory Authority
figures show.
... "Retail investors have made a lot of money on many things including
equities over the past year. At some point, given how high their equity
allocation is, the risk is they decide to get out and take profits," said
Mr. Panigirtzoglou, a managing director at JPMorgan. "That is effectively
what happened before in 2000."
I believe there is 60% chance we put in a top before May 17 th
. I'm not sure th@t all the day traders from 2020 have actually
put aside enough money to pay their taxes . Those gains were
all short term ordinary income .
We won't crash , we will have just put a high in that may not
be breached for many years . Of course all bets are off if
Biden pays every one's taxes for them and gives them an extra "
stimmy" .
Individual investors are holding more stocks than ever before
as major indexes climb to fresh highs. They are also upping the
ante by borrowing to magnify their bets or increasingly buying on
small dips in the market.
Stockholdings among U.S. households increased to 41% of their
total financial assets in April, the highest level on record.
That is according to JPMorgan Chase
& Co. and Federal Reserve data going back to 1952 that
includes 401(k) retirement accounts.
... A survey by the American Association of Individual
Investors showed that investors' allocations to the stock market
hit around a three-year high of 70% in March. And margin debt
-- or money that investors borrow to buy securities --
stood at a record as of March , Financial Industry Regulatory
Authority figures show.
... "Retail investors have made a lot of money on many things
including equities over the past year. At some point, given how
high their equity allocation is, the risk is they decide to get
out and take profits," said Mr. Panigirtzoglou, a managing
director at JPMorgan. "That is effectively what happened before
in 2000."
I believe there is 60% chance we put in a top
before May 17 th . I'm not sure th@t all the day
traders from 2020 have actually put aside enough
money to pay their taxes . Those gains were all
short term ordinary income .
We won't crash , we will have just put a high in
that may not be breached for many years . Of course
all bets are off if Biden pays every one's taxes
for them and gives them an extra " stimmy" .
Individual investors are holding more stocks than
ever before as major indexes climb to fresh highs.
They are also upping the ante by borrowing to magnify
their bets or increasingly buying on small dips in
the market.
Stockholdings among U.S. households increased to
41% of their total financial assets in April, the
highest level on record. That is according to
JPMorgan
Chase & Co. and Federal Reserve data going
back to 1952 that includes 401(k) retirement
accounts.
... A survey by the American Association of
Individual Investors showed that investors'
allocations to the stock market hit around a
three-year high of 70% in March. And margin debt
-- or money that investors borrow to buy securities
--
stood at a record as of March , Financial
Industry Regulatory Authority figures show.
... "Retail investors have made a lot of money on
many things including equities over the past year. At
some point, given how high their equity allocation
is, the risk is they decide to get out and take
profits," said Mr. Panigirtzoglou, a managing
director at JPMorgan. "That is effectively what
happened before in 2000."
I believe there is 60% chance we put
in a top before May 17 th . I'm not
sure th@t all the day traders from
2020 have actually put aside enough
money to pay their taxes . Those
gains were all short term ordinary
income .
We won't crash , we will have just
put a high in that may not be
breached for many years . Of course
all bets are off if Biden pays every
one's taxes for them and gives them
an extra " stimmy" .
Individual investors are holding
more stocks than ever before as major
indexes climb to fresh highs. They are
also upping the ante by borrowing to
magnify their bets or increasingly
buying on small dips in the market.
Stockholdings among U.S. households
increased to 41% of their total
financial assets in April, the highest
level on record. That is according to
JPMorgan Chase & Co. and
Federal Reserve data going back to 1952
that includes 401(k) retirement
accounts.
... A survey by the American
Association of Individual Investors
showed that investors' allocations to
the stock market hit around a
three-year high of 70% in March. And
margin debt -- or money that investors
borrow to buy securities --
stood at a record as of March ,
Financial Industry Regulatory Authority
figures show.
... "Retail investors have made a
lot of money on many things including
equities over the past year. At some
point, given how high their equity
allocation is, the risk is they decide
to get out and take profits," said Mr.
Panigirtzoglou, a managing director at
JPMorgan. "That is effectively what
happened before in 2000."
I believe there is
60% chance we put in
a top before May 17
th . I'm not sure
th@t all the day
traders from 2020
have actually put
aside enough money to
pay their taxes .
Those gains were all
short term ordinary
income .
We won't crash , we
will have just put a
high in that may not
be breached for many
years . Of course all
bets are off if Biden
pays every one's
taxes for them and
gives them an extra "
stimmy" .
Individual investors
are holding more stocks
than ever before as
major indexes climb to
fresh highs. They are
also upping the ante by
borrowing to magnify
their bets or
increasingly buying on
small dips in the
market.
Stockholdings among
U.S. households
increased to 41% of
their total financial
assets in April, the
highest level on
record. That is
according to
JPMorgan Chase
& Co. and Federal
Reserve data going back
to 1952 that includes
401(k) retirement
accounts.
... A survey by the
American Association of
Individual Investors
showed that investors'
allocations to the
stock market hit around
a three-year high of
70% in March. And
margin debt -- or money
that investors borrow
to buy securities --
stood at a record as of
March , Financial
Industry Regulatory
Authority figures
show.
... "Retail
investors have made a
lot of money on many
things including
equities over the past
year. At some point,
given how high their
equity allocation is,
the risk is they decide
to get out and take
profits," said Mr.
Panigirtzoglou, a
managing director at
JPMorgan. "That is
effectively what
happened before in
2000."
I
believe
there
is
60%
chance
we
put
in a
top
before
May
17 th
. I'm
not
sure
th@t
all
the
day
traders
from
2020
have
actually
put
aside
enough
money
to
pay
their
taxes
.
Those
gains
were
all
short
term
ordinary
income
.
We
won't
crash
,
we
will
have
just
put
a
high
in
that
may
not
be
breached
for
many
years
.
Of
course
all
bets
are
off
if
Biden
pays
every
one's
taxes
for
them
and
gives
them
an
extra
"
stimmy"
.
Individual
investors
are
holding
more
stocks
than
ever
before
as
major
indexes
climb
to
fresh
highs.
They
are
also
upping
the
ante
by
borrowing
to
magnify
their
bets
or
increasingly
buying
on
small
dips
in
the
market.
Stockholdings
among
U.S.
households
increased
to
41%
of
their
total
financial
assets
in
April,
the
highest
level
on
record.
That
is
according
to
JPMorgan
Chase
&
Co.
and
Federal
Reserve
data
going
back
to
1952
that
includes
401(k)
retirement
accounts.
... A
survey
by
the
American
Association
of
Individual
Investors
showed
that
investors'
allocations
to
the
stock
market
hit
around
a
three-year
high
of
70%
in
March.
And
margin
debt
-- or
money
that
investors
borrow
to
buy
securities
--
stood
at a
record
as of
March
,
Financial
Industry
Regulatory
Authority
figures
show.
...
"Retail
investors
have
made
a lot
of
money
on
many
things
including
equities
over
the
past
year.
At
some
point,
given
how
high
their
equity
allocation
is,
the
risk
is
they
decide
to
get
out
and
take
profits,"
said
Mr.
Panigirtzoglou,
a
managing
director
at
JPMorgan.
"That
is
effectively
what
happened
before
in
2000."
I
believe
there
is
60%
chance
we
put
in
a
top
before
May
17
th
.
I'm
not
sure
th@t
all
the
day
traders
from
2020
have
actually
put
aside
enough
money
to
pay
their
taxes
.
Those
gains
were
all
short
term
ordinary
income
.
We
won't
crash
,
we
will
have
just
put
a
high
in
that
may
not
be
breached
for
many
years
.
Of
course
all
bets
are
off
if
Biden
pays
every
one's
taxes
for
them
and
gives
them
an
extra
"
stimmy"
.
Individual
investors
are
holding
more
stocks
than
ever
before
as
major
indexes
climb
to
fresh
highs.
They
are
also
upping
the
ante
by
borrowing
to
magnify
their
bets
or
increasingly
buying
on
small
dips
in
the
market.
Stockholdings
among
U.S.
households
increased
to
41%
of
their
total
financial
assets
in
April,
the
highest
level
on
record.
That
is
according
to
JPMorgan
Chase
&
Co.
and
Federal
Reserve
data
going
back
to
1952
that
includes
401(k)
retirement
accounts.
...
A
survey
by
the
American
Association
of
Individual
Investors
showed
that
investors'
allocations
to
the
stock
market
hit
around
a
three-year
high
of
70%
in
March.
And
margin
debt
--
or
money
that
investors
borrow
to
buy
securities
--
stood
at
a
record
as
of
March
,
Financial
Industry
Regulatory
Authority
figures
show.
...
"Retail
investors
have
made
a
lot
of
money
on
many
things
including
equities
over
the
past
year.
At
some
point,
given
how
high
their
equity
allocation
is,
the
risk
is
they
decide
to
get
out
and
take
profits,"
said
Mr.
Panigirtzoglou,
a
managing
director
at
JPMorgan.
"That
is
effectively
what
happened
before
in
2000."
I
believe
there
is
60%
chance
we
put
in
a
top
before
May
17
th
.
I'm
not
sure
th@t
all
the
day
traders
from
2020
have
actually
put
aside
enough
money
to
pay
their
taxes
.
Those
gains
were
all
short
term
ordinary
income
.
We
won't
crash
,
we
will
have
just
put
a
high
in
that
may
not
be
breached
for
many
years
.
Of
course
all
bets
are
off
if
Biden
pays
every
one's
taxes
for
them
and
gives
them
an
extra
"
stimmy"
.
Individual
investors
are
holding
more
stocks
than
ever
before
as
major
indexes
climb
to
fresh
highs.
They
are
also
upping
the
ante
by
borrowing
to
magnify
their
bets
or
increasingly
buying
on
small
dips
in
the
market.
Stockholdings
among
U.S.
households
increased
to
41%
of
their
total
financial
assets
in
April,
the
highest
level
on
record.
That
is
according
to
JPMorgan
Chase
&
Co.
and
Federal
Reserve
data
going
back
to
1952
that
includes
401(k)
retirement
accounts.
...
A
survey
by
the
American
Association
of
Individual
Investors
showed
that
investors'
allocations
to
the
stock
market
hit
around
a
three-year
high
of
70%
in
March.
And
margin
debt
--
or
money
that
investors
borrow
to
buy
securities
--
stood
at
a
record
as
of
March
,
Financial
Industry
Regulatory
Authority
figures
show.
...
"Retail
investors
have
made
a
lot
of
money
on
many
things
including
equities
over
the
past
year.
At
some
point,
given
how
high
their
equity
allocation
is,
the
risk
is
they
decide
to
get
out
and
take
profits,"
said
Mr.
Panigirtzoglou,
a
managing
director
at
JPMorgan.
"That
is
effectively
what
happened
before
in
2000."
I
believe
there
is
60%
chance
we
put
in
a
top
before
May
17
th
.
I'm
not
sure
th@t
all
the
day
traders
from
2020
have
actually
put
aside
enough
money
to
pay
their
taxes
.
Those
gains
were
all
short
term
ordinary
income
.
We
won't
crash
,
we
will
have
just
put
a
high
in
that
may
not
be
breached
for
many
years
.
Of
course
all
bets
are
off
if
Biden
pays
every
one's
taxes
for
them
and
gives
them
an
extra
"
stimmy"
.
Individual
investors
are
holding
more
stocks
than
ever
before
as
major
indexes
climb
to
fresh
highs.
They
are
also
upping
the
ante
by
borrowing
to
magnify
their
bets
or
increasingly
buying
on
small
dips
in
the
market.
Stockholdings
among
U.S.
households
increased
to
41%
of
their
total
financial
assets
in
April,
the
highest
level
on
record.
That
is
according
to
JPMorgan
Chase
&
Co.
and
Federal
Reserve
data
going
back
to
1952
that
includes
401(k)
retirement
accounts.
...
A
survey
by
the
American
Association
of
Individual
Investors
showed
that
investors'
allocations
to
the
stock
market
hit
around
a
three-year
high
of
70%
in
March.
And
margin
debt
--
or
money
that
investors
borrow
to
buy
securities
--
stood
at
a
record
as
of
March
,
Financial
Industry
Regulatory
Authority
figures
show.
...
"Retail
investors
have
made
a
lot
of
money
on
many
things
including
equities
over
the
past
year.
At
some
point,
given
how
high
their
equity
allocation
is,
the
risk
is
they
decide
to
get
out
and
take
profits,"
said
Mr.
Panigirtzoglou,
a
managing
director
at
JPMorgan.
"That
is
effectively
what
happened
before
in
2000."
I
believe
there
is
60%
chance
we
put
in
a
top
before
May
17
th
.
I'm
not
sure
th@t
all
the
day
traders
from
2020
have
actually
put
aside
enough
money
to
pay
their
taxes
.
Those
gains
were
all
short
term
ordinary
income
.
We
won't
crash
,
we
will
have
just
put
a
high
in
that
may
not
be
breached
for
many
years
.
Of
course
all
bets
are
off
if
Biden
pays
every
one's
taxes
for
them
and
gives
them
an
extra
"
stimmy"
.
Individual
investors
are
holding
more
stocks
than
ever
before
as
major
indexes
climb
to
fresh
highs.
They
are
also
upping
the
ante
by
borrowing
to
magnify
their
bets
or
increasingly
buying
on
small
dips
in
the
market.
Stockholdings
among
U.S.
households
increased
to
41%
of
their
total
financial
assets
in
April,
the
highest
level
on
record.
That
is
according
to
JPMorgan
Chase
&
Co.
and
Federal
Reserve
data
going
back
to
1952
that
includes
401(k)
retirement
accounts.
...
A
survey
by
the
American
Association
of
Individual
Investors
showed
that
investors'
allocations
to
the
stock
market
hit
around
a
three-year
high
of
70%
in
March.
And
margin
debt
--
or
money
that
investors
borrow
to
buy
securities
--
stood
at
a
record
as
of
March
,
Financial
Industry
Regulatory
Authority
figures
show.
...
"Retail
investors
have
made
a
lot
of
money
on
many
things
including
equities
over
the
past
year.
At
some
point,
given
how
high
their
equity
allocation
is,
the
risk
is
they
decide
to
get
out
and
take
profits,"
said
Mr.
Panigirtzoglou,
a
managing
director
at
JPMorgan.
"That
is
effectively
what
happened
before
in
2000."
I
believe
there
is
60%
chance
we
put
in
a
top
before
May
17
th
.
I'm
not
sure
th@t
all
the
day
traders
from
2020
have
actually
put
aside
enough
money
to
pay
their
taxes
.
Those
gains
were
all
short
term
ordinary
income
.
We
won't
crash
,
we
will
have
just
put
a
high
in
that
may
not
be
breached
for
many
years
.
Of
course
all
bets
are
off
if
Biden
pays
every
one's
taxes
for
them
and
gives
them
an
extra
"
stimmy"
.
Individual
investors
are
holding
more
stocks
than
ever
before
as
major
indexes
climb
to
fresh
highs.
They
are
also
upping
the
ante
by
borrowing
to
magnify
their
bets
or
increasingly
buying
on
small
dips
in
the
market.
Stockholdings
among
U.S.
households
increased
to
41%
of
their
total
financial
assets
in
April,
the
highest
level
on
record.
That
is
according
to
JPMorgan
Chase
&
Co.
and
Federal
Reserve
data
going
back
to
1952
that
includes
401(k)
retirement
accounts.
...
A
survey
by
the
American
Association
of
Individual
Investors
showed
that
investors'
allocations
to
the
stock
market
hit
around
a
three-year
high
of
70%
in
March.
And
margin
debt
--
or
money
that
investors
borrow
to
buy
securities
--
stood
at
a
record
as
of
March
,
Financial
Industry
Regulatory
Authority
figures
show.
...
"Retail
investors
have
made
a
lot
of
money
on
many
things
including
equities
over
the
past
year.
At
some
point,
given
how
high
their
equity
allocation
is,
the
risk
is
they
decide
to
get
out
and
take
profits,"
said
Mr.
Panigirtzoglou,
a
managing
director
at
JPMorgan.
"That
is
effectively
what
happened
before
in
2000."
I
believe
there
is
60%
chance
we
put
in
a
top
before
May
17
th
.
I'm
not
sure
th@t
all
the
day
traders
from
2020
have
actually
put
aside
enough
money
to
pay
their
taxes
.
Those
gains
were
all
short
term
ordinary
income
.
We
won't
crash
,
we
will
have
just
put
a
high
in
that
may
not
be
breached
for
many
years
.
Of
course
all
bets
are
off
if
Biden
pays
every
one's
taxes
for
them
and
gives
them
an
extra
"
stimmy"
.
Individual
investors
are
holding
more
stocks
than
ever
before
as
major
indexes
climb
to
fresh
highs.
They
are
also
upping
the
ante
by
borrowing
to
magnify
their
bets
or
increasingly
buying
on
small
dips
in
the
market.
Stockholdings
among
U.S.
households
increased
to
41%
of
their
total
financial
assets
in
April,
the
highest
level
on
record.
That
is
according
to
JPMorgan
Chase
&
Co.
and
Federal
Reserve
data
going
back
to
1952
that
includes
401(k)
retirement
accounts.
...
A
survey
by
the
American
Association
of
Individual
Investors
showed
that
investors'
allocations
to
the
stock
market
hit
around
a
three-year
high
of
70%
in
March.
And
margin
debt
--
or
money
that
investors
borrow
to
buy
securities
--
stood
at
a
record
as
of
March
,
Financial
Industry
Regulatory
Authority
figures
show.
...
"Retail
investors
have
made
a
lot
of
money
on
many
things
including
equities
over
the
past
year.
At
some
point,
given
how
high
their
equity
allocation
is,
the
risk
is
they
decide
to
get
out
and
take
profits,"
said
Mr.
Panigirtzoglou,
a
managing
director
at
JPMorgan.
"That
is
effectively
what
happened
before
in
2000."
I
believe
there
is
60%
chance
we
put
in
a
top
before
May
17
th
.
I'm
not
sure
th@t
all
the
day
traders
from
2020
have
actually
put
aside
enough
money
to
pay
their
taxes
.
Those
gains
were
all
short
term
ordinary
income
.
We
won't
crash
,
we
will
have
just
put
a
high
in
that
may
not
be
breached
for
many
years
.
Of
course
all
bets
are
off
if
Biden
pays
every
one's
taxes
for
them
and
gives
them
an
extra
"
stimmy"
.
Individual
investors
are
holding
more
stocks
than
ever
before
as
major
indexes
climb
to
fresh
highs.
They
are
also
upping
the
ante
by
borrowing
to
magnify
their
bets
or
increasingly
buying
on
small
dips
in
the
market.
Stockholdings
among
U.S.
households
increased
to
41%
of
their
total
financial
assets
in
April,
the
highest
level
on
record.
That
is
according
to
JPMorgan
Chase
&
Co.
and
Federal
Reserve
data
going
back
to
1952
that
includes
401(k)
retirement
accounts.
...
A
survey
by
the
American
Association
of
Individual
Investors
showed
that
investors'
allocations
to
the
stock
market
hit
around
a
three-year
high
of
70%
in
March.
And
margin
debt
--
or
money
that
investors
borrow
to
buy
securities
--
stood
at
a
record
as
of
March
,
Financial
Industry
Regulatory
Authority
figures
show.
...
"Retail
investors
have
made
a
lot
of
money
on
many
things
including
equities
over
the
past
year.
At
some
point,
given
how
high
their
equity
allocation
is,
the
risk
is
they
decide
to
get
out
and
take
profits,"
said
Mr.
Panigirtzoglou,
a
managing
director
at
JPMorgan.
"That
is
effectively
what
happened
before
in
2000."
I
believe
there
is
60%
chance
we
put
in
a
top
before
May
17
th
.
I'm
not
sure
th@t
all
the
day
traders
from
2020
have
actually
put
aside
enough
money
to
pay
their
taxes
.
Those
gains
were
all
short
term
ordinary
income
.
We
won't
crash
,
we
will
have
just
put
a
high
in
that
may
not
be
breached
for
many
years
.
Of
course
all
bets
are
off
if
Biden
pays
every
one's
taxes
for
them
and
gives
them
an
extra
"
stimmy"
.
Individual
investors
are
holding
more
stocks
than
ever
before
as
major
indexes
climb
to
fresh
highs.
They
are
also
upping
the
ante
by
borrowing
to
magnify
their
bets
or
increasingly
buying
on
small
dips
in
the
market.
Stockholdings
among
U.S.
households
increased
to
41%
of
their
total
financial
assets
in
April,
the
highest
level
on
record.
That
is
according
to
JPMorgan
Chase
&
Co.
and
Federal
Reserve
data
going
back
to
1952
that
includes
401(k)
retirement
accounts.
...
A
survey
by
the
American
Association
of
Individual
Investors
showed
that
investors'
allocations
to
the
stock
market
hit
around
a
three-year
high
of
70%
in
March.
And
margin
debt
--
or
money
that
investors
borrow
to
buy
securities
--
stood
at
a
record
as
of
March
,
Financial
Industry
Regulatory
Authority
figures
show.
...
"Retail
investors
have
made
a
lot
of
money
on
many
things
including
equities
over
the
past
year.
At
some
point,
given
how
high
their
equity
allocation
is,
the
risk
is
they
decide
to
get
out
and
take
profits,"
said
Mr.
Panigirtzoglou,
a
managing
director
at
JPMorgan.
"That
is
effectively
what
happened
before
in
2000."
I
believe
there
is
60%
chance
we
put
in
a
top
before
May
17
th
.
I'm
not
sure
th@t
all
the
day
traders
from
2020
have
actually
put
aside
enough
money
to
pay
their
taxes
.
Those
gains
were
all
short
term
ordinary
income
.
We
won't
crash
,
we
will
have
just
put
a
high
in
that
may
not
be
breached
for
many
years
.
Of
course
all
bets
are
off
if
Biden
pays
every
one's
taxes
for
them
and
gives
them
an
extra
"
stimmy"
.
From commnets: "Barrons reports that as of Friday the total value of stocks v GDP has
surpassed the Dot com peak in early 2000 .Case Schiller PE is at all time record
margin loans at all time record . 200 day moving average at high for 95% of stocks"
...That's what some investors seem to believe -- and who can blame them? The stock market
used to take years, sometimes decades, to recover its prior peak after the start of a
bear-market decline. After last year's 34% meltdown, however, stocks regained record highs in
only 126 trading days.
With the exception of a 100-day rebound after an interim drop in early 2009, that's the
fastest-ever recovery to a prior peak. The S&P 500 has fallen at least 20% -- the
conventional definition of a bear market -- 26 times in the past nine decades, according to Dow
Jones Market Data. Recoveries to previous highs have typically taken almost three years,
often much longer .
... ... ...
That complacency takes a toll -- even among Vanguard investors, who tend to be cautious.
These people often follow the philosophy of the firm's late founder,
Jack Bogle , who preached patience and repeatedly warned that stocks are risky. If anyone
should come through the sharpest market decline in decades unperturbed, it's the people in this
survey -- typically about 60 years old, with about $225,000 in Vanguard investments, roughly
70% in stocks.
Yet they didn't all sit tight. One group in the survey stood out: those who went into early
2020 with the highest expectations for stock returns in the upcoming year. They ended up
reducing their exposure to stocks much more sharply during the crash of February and March 2020
than those who had been expecting lower returns.
They also tended to turn around and buy back much of the stock they had just sold -- but not
until prices had already shot above the March lows.
Investors elsewhere seem to have concluded from the swiftness of the recovery that stocks
aren't risky at all. After last spring's rebound,
Dave Portnoy , a social-media celebrity, declared " Stocks only go up
" so often that it began to seem like a magic incantation. And, for the past year,
just about every stock has gone up .
That's largely because the Federal Reserve has backstopped markets by squashing interest
rates toward zero and by buying more than $2.5 trillion in
Treasury securities since February 2020, along with other massive
interventions . Meanwhile, emergency government programs pumped trillions of dollars of
stimulus into the economy.
SHARE YOUR THOUGHTS
Have you lost your fear of a bear market? Why or why not? Join the conversation below
.
Fund managers fruitlessly complained about how these policies were distorting markets, but
individual investors simply followed the old Wall Street adage: Don't fight the Fed. So long as
the central bank is drenching the markets with liquidity, why not buy stocks -- and why fear
another crash?
What's more, target-date
funds , which continually seek to keep a predetermined exposure to stocks, command in
excess of $2.8 trillion, according to Morningstar Inc. Investors added $52 billion
to target-date funds in 2020.
The popularity of these portfolios has -- so far, anyway -- helped make market crashes
self-correcting . The more stocks fall, the more the target-date funds have to buy them;
otherwise, the portfolios would fall below their mandated ratios of stocks to other
assets.
From commnets: "Barrons reports that as of Friday the total value of stocks v GDP has
surpassed the Dot com peak in early 2000 .Case Schiller PE is at all time record
margin loans at all time record . 200 day moving average at high for 95% of stocks"
...That's what some investors seem to believe -- and who can blame them? The stock market
used to take years, sometimes decades, to recover its prior peak after the start of a
bear-market decline. After last year's 34% meltdown, however, stocks regained record highs in
only 126 trading days.
With the exception of a 100-day rebound after an interim drop in early 2009, that's the
fastest-ever recovery to a prior peak. The S&P 500 has fallen at least 20% -- the
conventional definition of a bear market -- 26 times in the past nine decades, according to Dow
Jones Market Data. Recoveries to previous highs have typically taken almost three years,
often much longer .
... ... ...
That complacency takes a toll -- even among Vanguard investors, who tend to be cautious.
These people often follow the philosophy of the firm's late founder,
Jack Bogle , who preached patience and repeatedly warned that stocks are risky. If anyone
should come through the sharpest market decline in decades unperturbed, it's the people in this
survey -- typically about 60 years old, with about $225,000 in Vanguard investments, roughly
70% in stocks.
Yet they didn't all sit tight. One group in the survey stood out: those who went into early
2020 with the highest expectations for stock returns in the upcoming year. They ended up
reducing their exposure to stocks much more sharply during the crash of February and March 2020
than those who had been expecting lower returns.
They also tended to turn around and buy back much of the stock they had just sold -- but not
until prices had already shot above the March lows.
Investors elsewhere seem to have concluded from the swiftness of the recovery that stocks
aren't risky at all. After last spring's rebound,
Dave Portnoy , a social-media celebrity, declared " Stocks only go up
" so often that it began to seem like a magic incantation. And, for the past year,
just about every stock has gone up .
That's largely because the Federal Reserve has backstopped markets by squashing interest
rates toward zero and by buying more than $2.5 trillion in
Treasury securities since February 2020, along with other massive
interventions . Meanwhile, emergency government programs pumped trillions of dollars of
stimulus into the economy.
SHARE YOUR THOUGHTS
Have you lost your fear of a bear market? Why or why not? Join the conversation below
.
Fund managers fruitlessly complained about how these policies were distorting markets, but
individual investors simply followed the old Wall Street adage: Don't fight the Fed. So long as
the central bank is drenching the markets with liquidity, why not buy stocks -- and why fear
another crash?
What's more, target-date
funds , which continually seek to keep a predetermined exposure to stocks, command in
excess of $2.8 trillion, according to Morningstar Inc. Investors added $52 billion
to target-date funds in 2020.
The popularity of these portfolios has -- so far, anyway -- helped make market crashes
self-correcting . The more stocks fall, the more the target-date funds have to buy them;
otherwise, the portfolios would fall below their mandated ratios of stocks to other
assets.
Mr. Sinclair is correct . While I lost 100% in WAMU in 2008 , from2009 to present msft is up
1000% dwarfing my loss in WAMU .
Barrons reports that as of Friday the total value of stocks v GDP has surpassed the Dot com
peak in early 2000 .
Case Schiller PE is at all time record
margin loans at all time record .
200 day moving average at high for 95% of stocks ( translation : there is nothing left to buy
) .
The course of action is clear ..Don't sell but whatever you do ..Do NOT buy . Cash is a
wonderful hedge .
When asked how he got so rich Bernard Baruch replied " by selling too early"
From commnets: "Barrons reports that as of Friday the total value of stocks v GDP has
surpassed the Dot com peak in early 2000 .Case Schiller PE is at all time record
margin loans at all time record . 200 day moving average at high for 95% of stocks"
...That's what some investors seem to believe -- and who can blame them? The stock market
used to take years, sometimes decades, to recover its prior peak after the start of a
bear-market decline. After last year's 34% meltdown, however, stocks regained record highs in
only 126 trading days.
With the exception of a 100-day rebound after an interim drop in early 2009, that's the
fastest-ever recovery to a prior peak. The S&P 500 has fallen at least 20% -- the
conventional definition of a bear market -- 26 times in the past nine decades, according to Dow
Jones Market Data. Recoveries to previous highs have typically taken almost three years,
often much longer .
... ... ...
That complacency takes a toll -- even among Vanguard investors, who tend to be cautious.
These people often follow the philosophy of the firm's late founder,
Jack Bogle , who preached patience and repeatedly warned that stocks are risky. If anyone
should come through the sharpest market decline in decades unperturbed, it's the people in this
survey -- typically about 60 years old, with about $225,000 in Vanguard investments, roughly
70% in stocks.
Yet they didn't all sit tight. One group in the survey stood out: those who went into early
2020 with the highest expectations for stock returns in the upcoming year. They ended up
reducing their exposure to stocks much more sharply during the crash of February and March 2020
than those who had been expecting lower returns.
They also tended to turn around and buy back much of the stock they had just sold -- but not
until prices had already shot above the March lows.
Investors elsewhere seem to have concluded from the swiftness of the recovery that stocks
aren't risky at all. After last spring's rebound,
Dave Portnoy , a social-media celebrity, declared " Stocks only go up
" so often that it began to seem like a magic incantation. And, for the past year,
just about every stock has gone up .
That's largely because the Federal Reserve has backstopped markets by squashing interest
rates toward zero and by buying more than $2.5 trillion in
Treasury securities since February 2020, along with other massive
interventions . Meanwhile, emergency government programs pumped trillions of dollars of
stimulus into the economy.
SHARE YOUR THOUGHTS
Have you lost your fear of a bear market? Why or why not? Join the conversation below
.
Fund managers fruitlessly complained about how these policies were distorting markets, but
individual investors simply followed the old Wall Street adage: Don't fight the Fed. So long as
the central bank is drenching the markets with liquidity, why not buy stocks -- and why fear
another crash?
What's more, target-date
funds , which continually seek to keep a predetermined exposure to stocks, command in
excess of $2.8 trillion, according to Morningstar Inc. Investors added $52 billion
to target-date funds in 2020.
The popularity of these portfolios has -- so far, anyway -- helped make market crashes
self-correcting . The more stocks fall, the more the target-date funds have to buy them;
otherwise, the portfolios would fall below their mandated ratios of stocks to other
assets.
Mr. Sinclair is correct . While I lost 100% in WAMU in 2008 , from2009 to present msft is
up 1000% dwarfing my loss in WAMU .
Barrons reports that as of Friday the total value of stocks v GDP has surpassed the Dot com
peak in early 2000 .
Case Schiller PE is at all time record
margin loans at all time record .
200 day moving average at high for 95% of stocks ( translation : there is nothing left to
buy ) .
The course of action is clear ..Don't sell but whatever you do ..Do NOT buy . Cash is a
wonderful hedge .
When asked how he got so rich Bernard Baruch replied " by selling too early"
From commnets: "Barrons reports that as of Friday the total value of stocks v GDP has
surpassed the Dot com peak in early 2000 .Case Schiller PE is at all time record
margin loans at all time record . 200 day moving average at high for 95% of stocks"
...That's what some investors seem to believe -- and who can blame them? The stock market
used to take years, sometimes decades, to recover its prior peak after the start of a
bear-market decline. After last year's 34% meltdown, however, stocks regained record highs in
only 126 trading days.
With the exception of a 100-day rebound after an interim drop in early 2009, that's the
fastest-ever recovery to a prior peak. The S&P 500 has fallen at least 20% -- the
conventional definition of a bear market -- 26 times in the past nine decades, according to
Dow Jones Market Data. Recoveries to previous highs have typically taken almost three years,
often much longer .
... ... ...
That complacency takes a toll -- even among Vanguard investors, who tend to be cautious.
These people often follow the philosophy of the firm's late founder,
Jack Bogle , who preached patience and repeatedly warned that stocks are risky. If anyone
should come through the sharpest market decline in decades unperturbed, it's the people in
this survey -- typically about 60 years old, with about $225,000 in Vanguard investments,
roughly 70% in stocks.
Yet they didn't all sit tight. One group in the survey stood out: those who went into
early 2020 with the highest expectations for stock returns in the upcoming year. They ended
up reducing their exposure to stocks much more sharply during the crash of February and March
2020 than those who had been expecting lower returns.
They also tended to turn around and buy back much of the stock they had just sold -- but
not until prices had already shot above the March lows.
Investors elsewhere seem to have concluded from the swiftness of the recovery that stocks
aren't risky at all. After last spring's rebound,
Dave Portnoy , a social-media celebrity, declared " Stocks only go
up " so often that it began to seem like a magic incantation. And, for the past year,
just about every stock has gone up .
That's largely because the Federal Reserve has backstopped markets by squashing interest
rates toward zero and by buying more than $2.5 trillion in
Treasury securities since February 2020, along with other
massive interventions . Meanwhile, emergency government programs pumped trillions of
dollars of stimulus into the economy.
SHARE YOUR THOUGHTS
Have you lost your fear of a bear market? Why or why not? Join the conversation
below .
Fund managers fruitlessly complained about how these policies were distorting markets, but
individual investors simply followed the old Wall Street adage: Don't fight the Fed. So long
as the central bank is drenching the markets with liquidity, why not buy stocks -- and why
fear another crash?
What's more, target-date
funds , which continually seek to keep a predetermined exposure to stocks, command in
excess of $2.8 trillion, according to Morningstar Inc. Investors added $52
billion to target-date funds in 2020.
The popularity of these portfolios has -- so far, anyway -- helped make market crashes
self-correcting . The more stocks fall, the more the target-date funds have to buy them;
otherwise, the portfolios would fall below their mandated ratios of stocks to other
assets.
Mr. Sinclair is correct . While I lost 100% in WAMU in 2008 , from2009 to present msft
is up 1000% dwarfing my loss in WAMU .
Barrons reports that as of Friday the total value of stocks v GDP has surpassed the Dot
com peak in early 2000 .
Case Schiller PE is at all time record
margin loans at all time record .
200 day moving average at high for 95% of stocks ( translation : there is nothing left
to buy ) .
The course of action is clear ..Don't sell but whatever you do ..Do NOT buy . Cash is a
wonderful hedge .
When asked how he got so rich Bernard Baruch replied " by selling too early"
From commnets: "Barrons reports that as of Friday the total value of stocks v GDP has
surpassed the Dot com peak in early 2000 .Case Schiller PE is at all time record
margin loans at all time record . 200 day moving average at high for 95% of stocks"
...That's what some investors seem to believe -- and who can blame them? The stock
market used to take years, sometimes decades, to recover its prior peak after the start
of a bear-market decline. After last year's 34% meltdown, however, stocks regained record
highs in only 126 trading days.
With the exception of a 100-day rebound after an interim drop in early 2009, that's
the fastest-ever recovery to a prior peak. The S&P 500 has fallen at least 20% -- the
conventional definition of a bear market -- 26 times in the past nine decades, according
to Dow Jones Market Data. Recoveries to previous highs have typically taken almost three
years,
often much longer .
... ... ...
That complacency takes a toll -- even among Vanguard investors, who tend to be
cautious. These people often follow the philosophy of the firm's late founder,
Jack Bogle , who preached patience and repeatedly warned that stocks are risky. If
anyone should come through the sharpest market decline in decades unperturbed, it's the
people in this survey -- typically about 60 years old, with about $225,000 in Vanguard
investments, roughly 70% in stocks.
Yet they didn't all sit tight. One group in the survey stood out: those who went into
early 2020 with the highest expectations for stock returns in the upcoming year. They
ended up reducing their exposure to stocks much more sharply during the crash of February
and March 2020 than those who had been expecting lower returns.
They also tended to turn around and buy back much of the stock they had just sold --
but not until prices had already shot above the March lows.
Investors elsewhere seem to have concluded from the swiftness of the recovery that
stocks aren't risky at all. After last spring's rebound,
Dave Portnoy , a social-media celebrity, declared " Stocks only go
up " so often that it began to seem like a magic incantation. And, for the past year,
just about every stock has gone up .
That's largely because the Federal Reserve has backstopped markets by squashing
interest rates toward zero and by buying more than $2.5 trillion
in Treasury securities since February 2020, along with other
massive interventions . Meanwhile, emergency government programs pumped trillions of
dollars of stimulus into the economy.
SHARE YOUR THOUGHTS
Have you lost your fear of a bear market? Why or why not? Join the conversation
below .
Fund managers fruitlessly complained about how these policies were distorting markets,
but individual investors simply followed the old Wall Street adage: Don't fight the Fed.
So long as the central bank is drenching the markets with liquidity, why not buy stocks
-- and why fear another crash?
What's more, target-date
funds , which continually seek to keep a predetermined exposure to stocks, command in
excess of $2.8 trillion, according to Morningstar Inc. Investors added $52
billion to target-date funds in 2020.
The popularity of these portfolios has -- so far, anyway -- helped make market
crashes
self-correcting . The more stocks fall, the more the target-date funds have to buy
them; otherwise, the portfolios would fall below their mandated ratios of stocks to other
assets.
Mr. Sinclair is correct . While I lost 100% in WAMU in 2008 , from2009 to present
msft is up 1000% dwarfing my loss in WAMU .
Barrons reports that as of Friday the total value of stocks v GDP has surpassed
the Dot com peak in early 2000 .
Case Schiller PE is at all time record
margin loans at all time record .
200 day moving average at high for 95% of stocks ( translation : there is nothing
left to buy ) .
The course of action is clear ..Don't sell but whatever you do ..Do NOT buy .
Cash is a wonderful hedge .
When asked how he got so rich Bernard Baruch replied " by selling too early"
From commnets: "Barrons reports that as of Friday the total value of stocks v
GDP has surpassed the Dot com peak in early 2000 .Case Schiller PE is at all time
record
margin loans at all time record . 200 day moving average at high for 95% of
stocks"
...That's what some investors seem to believe -- and who can blame them? The
stock market used to take years, sometimes decades, to recover its prior peak after
the start of a bear-market decline. After last year's 34% meltdown, however, stocks
regained record highs in only 126 trading days.
With the exception of a 100-day rebound after an interim drop in early 2009,
that's the fastest-ever recovery to a prior peak. The S&P 500 has fallen at
least 20% -- the conventional definition of a bear market -- 26 times in the past
nine decades, according to Dow Jones Market Data. Recoveries to previous highs have
typically taken almost three years,
often much longer .
... ... ...
That complacency takes a toll -- even among Vanguard investors, who tend to be
cautious. These people often follow the philosophy of the firm's late founder,
Jack Bogle , who preached patience and repeatedly warned that stocks are risky.
If anyone should come through the sharpest market decline in decades unperturbed,
it's the people in this survey -- typically about 60 years old, with about $225,000
in Vanguard investments, roughly 70% in stocks.
Yet they didn't all sit tight. One group in the survey stood out: those who went
into early 2020 with the highest expectations for stock returns in the upcoming
year. They ended up reducing their exposure to stocks much more sharply during the
crash of February and March 2020 than those who had been expecting lower
returns.
They also tended to turn around and buy back much of the stock they had just
sold -- but not until prices had already shot above the March lows.
Investors elsewhere seem to have concluded from the swiftness of the recovery
that stocks aren't risky at all. After last spring's rebound,
Dave Portnoy , a social-media celebrity, declared " Stocks
only go up " so often that it began to seem like a magic incantation. And, for
the past year,
just about every stock has gone up .
That's largely because the Federal Reserve has backstopped markets by squashing
interest rates toward zero and by buying more than $2.5
trillion in Treasury securities since February 2020, along with other
massive interventions . Meanwhile, emergency government programs pumped
trillions of dollars of stimulus into the economy.
SHARE YOUR THOUGHTS
Have you lost your fear of a bear market? Why or why not? Join the
conversation below .
Fund managers fruitlessly complained about how these policies were distorting
markets, but individual investors simply followed the old Wall Street adage: Don't
fight the Fed. So long as the central bank is drenching the markets with liquidity,
why not buy stocks -- and why fear another crash?
What's more, target-date
funds , which continually seek to keep a predetermined exposure to stocks,
command in excess of $2.8 trillion, according to Morningstar Inc. Investors added
$52 billion to target-date funds in 2020.
The popularity of these portfolios has -- so far, anyway -- helped make
market crashes
self-correcting . The more stocks fall, the more the target-date funds have to
buy them; otherwise, the portfolios would fall below their mandated ratios of
stocks to other assets.
Mr. Sinclair is correct . While I lost 100% in WAMU in 2008 , from2009 to
present msft is up 1000% dwarfing my loss in WAMU .
Barrons reports that as of Friday the total value of stocks v GDP has
surpassed the Dot com peak in early 2000 .
Case Schiller PE is at all time record
margin loans at all time record .
200 day moving average at high for 95% of stocks ( translation : there is
nothing left to buy ) .
The course of action is clear ..Don't sell but whatever you do ..Do NOT
buy . Cash is a wonderful hedge .
When asked how he got so rich Bernard Baruch replied " by selling too
early"
From commnets: "Barrons reports that as of Friday the total value of
stocks v GDP has surpassed the Dot com peak in early 2000 .Case Schiller PE
is at all time record
margin loans at all time record . 200 day moving average at high for 95% of
stocks"
...That's what some investors seem to believe -- and who can blame them?
The stock market used to take years, sometimes decades, to recover its
prior peak after the start of a bear-market decline. After last year's 34%
meltdown, however, stocks regained record highs in only 126 trading
days.
With the exception of a 100-day rebound after an interim drop in early
2009, that's the fastest-ever recovery to a prior peak. The S&P 500 has
fallen at least 20% -- the conventional definition of a bear market -- 26
times in the past nine decades, according to Dow Jones Market Data.
Recoveries to previous highs have typically taken almost three years,
often much longer .
... ... ...
That complacency takes a toll -- even among Vanguard investors, who tend
to be cautious. These people often follow the philosophy of the firm's late
founder,
Jack Bogle , who preached patience and repeatedly warned that stocks
are risky. If anyone should come through the sharpest market decline in
decades unperturbed, it's the people in this survey -- typically about 60
years old, with about $225,000 in Vanguard investments, roughly 70% in
stocks.
Yet they didn't all sit tight. One group in the survey stood out: those
who went into early 2020 with the highest expectations for stock returns in
the upcoming year. They ended up reducing their exposure to stocks much
more sharply during the crash of February and March 2020 than those who had
been expecting lower returns.
They also tended to turn around and buy back much of the stock they had
just sold -- but not until prices had already shot above the March
lows.
Investors elsewhere seem to have concluded from the swiftness of the
recovery that stocks aren't risky at all. After last spring's rebound,
Dave Portnoy , a social-media celebrity, declared " Stocks
only go up " so often that it began to seem like a magic incantation.
And, for the past year,
just about every stock has gone up .
That's largely because the Federal Reserve has backstopped markets by
squashing interest rates toward zero and by buying more than
$2.5 trillion in Treasury securities since February 2020, along with
other massive interventions . Meanwhile, emergency government programs
pumped trillions of dollars of stimulus into the economy.
SHARE YOUR
THOUGHTS
Have you lost your fear of a bear market? Why or why not? Join the
conversation below .
Fund managers fruitlessly complained about how these policies were
distorting markets, but individual investors simply followed the old Wall
Street adage: Don't fight the Fed. So long as the central bank is drenching
the markets with liquidity, why not buy stocks -- and why fear another
crash?
What's more,
target-date funds , which continually seek to keep a predetermined
exposure to stocks, command in excess of $2.8 trillion, according to
Morningstar Inc.
Investors added $52 billion to target-date funds in 2020.
The popularity of these portfolios has -- so far, anyway -- helped
make market crashes
self-correcting . The more stocks fall, the more the target-date funds
have to buy them; otherwise, the portfolios would fall below their mandated
ratios of stocks to other assets.
Mr. Sinclair is correct . While I lost 100% in WAMU in 2008 ,
from2009 to present msft is up 1000% dwarfing my loss in WAMU
.
Barrons reports that as of Friday the total value of stocks v
GDP has surpassed the Dot com peak in early 2000 .
Case Schiller PE is at all time record
margin loans at all time record .
200 day moving average at high for 95% of stocks ( translation
: there is nothing left to buy ) .
The course of action is clear ..Don't sell but whatever you do
..Do NOT buy . Cash is a wonderful hedge .
When asked how he got so rich Bernard Baruch replied " by
selling too early"
From commnets: "Barrons reports that as of Friday the total
value of stocks v GDP has surpassed the Dot com peak in early
2000 .Case Schiller PE is at all time record
margin loans at all time record . 200 day moving average at high
for 95% of stocks"
...That's what some investors seem to believe -- and who can
blame them? The stock market used to take years, sometimes
decades, to recover its prior peak after the start of a
bear-market decline. After last year's 34% meltdown, however,
stocks regained record highs in only 126 trading days.
With the exception of a 100-day rebound after an interim drop
in early 2009, that's the fastest-ever recovery to a prior peak.
The S&P 500 has fallen at least 20% -- the conventional
definition of a bear market -- 26 times in the past nine decades,
according to Dow Jones Market Data. Recoveries to previous highs
have typically taken almost three years,
often much longer .
... ... ...
That complacency takes a toll -- even among Vanguard
investors, who tend to be cautious. These people often follow the
philosophy of the firm's late founder,
Jack Bogle , who preached patience and repeatedly warned that
stocks are risky. If anyone should come through the sharpest
market decline in decades unperturbed, it's the people in this
survey -- typically about 60 years old, with about $225,000 in
Vanguard investments, roughly 70% in stocks.
Yet they didn't all sit tight. One group in the survey stood
out: those who went into early 2020 with the highest expectations
for stock returns in the upcoming year. They ended up reducing
their exposure to stocks much more sharply during the crash of
February and March 2020 than those who had been expecting lower
returns.
They also tended to turn around and buy back much of the stock
they had just sold -- but not until prices had already shot above
the March lows.
Investors elsewhere seem to have concluded from the swiftness
of the recovery that stocks aren't risky at all. After last
spring's rebound,
Dave Portnoy , a social-media celebrity, declared "
Stocks only go up " so often that it began to seem like a
magic incantation. And, for the past year,
just about every stock has gone up .
That's largely because the Federal Reserve has backstopped
markets by squashing interest rates toward zero and by buying
more than $2.5 trillion in Treasury securities since February
2020, along with
other massive interventions . Meanwhile, emergency government
programs pumped trillions of dollars of stimulus into the
economy.
SHARE YOUR THOUGHTS
Have you lost your fear of a bear market? Why or why not?
Join the conversation below .
Fund managers fruitlessly complained about how these policies
were distorting markets, but individual investors simply followed
the old Wall Street adage: Don't fight the Fed. So long as the
central bank is drenching the markets with liquidity, why not buy
stocks -- and why fear another crash?
What's more,
target-date funds , which continually seek to keep a
predetermined exposure to stocks, command in excess of $2.8
trillion, according to Morningstar
Inc. Investors added $52 billion to target-date funds in
2020.
The popularity of these portfolios has -- so far, anyway --
helped make market crashes
self-correcting . The more stocks fall, the more the
target-date funds have to buy them; otherwise, the portfolios
would fall below their mandated ratios of stocks to other
assets.
Mr. Sinclair is correct . While I lost 100% in WAMU
in 2008 , from2009 to present msft is up 1000%
dwarfing my loss in WAMU .
Barrons reports that as of Friday the total value
of stocks v GDP has surpassed the Dot com peak in
early 2000 .
Case Schiller PE is at all time record
margin loans at all time record .
200 day moving average at high for 95% of stocks (
translation : there is nothing left to buy ) .
The course of action is clear ..Don't sell but
whatever you do ..Do NOT buy . Cash is a wonderful
hedge .
When asked how he got so rich Bernard Baruch
replied " by selling too early"
From commnets: "Barrons reports that as of Friday
the total value of stocks v GDP has surpassed the Dot
com peak in early 2000 .Case Schiller PE is at all
time record
margin loans at all time record . 200 day moving
average at high for 95% of stocks"
...That's what some investors seem to believe --
and who can blame them? The stock market used to take
years, sometimes decades, to recover its prior peak
after the start of a bear-market decline. After last
year's 34% meltdown, however, stocks regained record
highs in only 126 trading days.
With the exception of a 100-day rebound after an
interim drop in early 2009, that's the fastest-ever
recovery to a prior peak. The S&P 500 has fallen
at least 20% -- the conventional definition of a bear
market -- 26 times in the past nine decades,
according to Dow Jones Market Data. Recoveries to
previous highs have typically taken almost three
years,
often much longer .
... ... ...
That complacency takes a toll -- even among
Vanguard investors, who tend to be cautious. These
people often follow the philosophy of the firm's late
founder,
Jack Bogle , who preached patience and repeatedly
warned that stocks are risky. If anyone should come
through the sharpest market decline in decades
unperturbed, it's the people in this survey --
typically about 60 years old, with about $225,000 in
Vanguard investments, roughly 70% in stocks.
Yet they didn't all sit tight. One group in the
survey stood out: those who went into early 2020 with
the highest expectations for stock returns in the
upcoming year. They ended up reducing their exposure
to stocks much more sharply during the crash of
February and March 2020 than those who had been
expecting lower returns.
They also tended to turn around and buy back much
of the stock they had just sold -- but not until
prices had already shot above the March lows.
Investors elsewhere seem to have concluded from
the swiftness of the recovery that stocks aren't
risky at all. After last spring's rebound,
Dave Portnoy , a social-media celebrity, declared
"
Stocks only go up " so often that it began to
seem like a magic incantation. And, for the past
year,
just about every stock has gone up .
That's largely because the Federal Reserve has
backstopped markets by squashing interest rates
toward zero and by buying
more than $2.5 trillion in Treasury securities
since February 2020, along with
other massive interventions . Meanwhile,
emergency government programs pumped trillions of
dollars of stimulus into the economy.
SHARE
YOUR THOUGHTS
Have you lost your fear of a bear market? Why
or why not? Join the conversation below .
Fund managers fruitlessly complained about how
these policies were distorting markets, but
individual investors simply followed the old Wall
Street adage: Don't fight the Fed. So long as the
central bank is drenching the markets with liquidity,
why not buy stocks -- and why fear another crash?
What's more,
target-date funds , which continually seek to
keep a predetermined exposure to stocks, command in
excess of $2.8 trillion, according to Morningstar
Inc. Investors added $52 billion to target-date funds
in 2020.
The popularity of these portfolios has -- so
far, anyway -- helped make market crashes
self-correcting . The more stocks fall, the more
the target-date funds have to buy them; otherwise,
the portfolios would fall below their mandated ratios
of stocks to other assets.
Mr. Sinclair is correct . While I
lost 100% in WAMU in 2008 , from2009
to present msft is up 1000% dwarfing
my loss in WAMU .
Barrons reports that as of Friday the
total value of stocks v GDP has
surpassed the Dot com peak in early
2000 .
Case Schiller PE is at all time
record
margin loans at all time record .
200 day moving average at high for
95% of stocks ( translation : there
is nothing left to buy ) .
The course of action is clear ..Don't
sell but whatever you do ..Do NOT buy
. Cash is a wonderful hedge .
When asked how he got so rich Bernard
Baruch replied " by selling too
early"
From commnets: "Barrons reports that
as of Friday the total value of stocks
v GDP has surpassed the Dot com peak in
early 2000 .Case Schiller PE is at all
time record
margin loans at all time record . 200
day moving average at high for 95% of
stocks"
...That's what some investors seem
to believe -- and who can blame them?
The stock market used to take years,
sometimes decades, to recover its prior
peak after the start of a bear-market
decline. After last year's 34%
meltdown, however, stocks regained
record highs in only 126 trading
days.
With the exception of a 100-day
rebound after an interim drop in early
2009, that's the fastest-ever recovery
to a prior peak. The S&P 500 has
fallen at least 20% -- the conventional
definition of a bear market -- 26 times
in the past nine decades, according to
Dow Jones Market Data. Recoveries to
previous highs have typically taken
almost three years,
often much longer .
... ... ...
That complacency takes a toll --
even among Vanguard investors, who tend
to be cautious. These people often
follow the philosophy of the firm's
late founder,
Jack Bogle , who preached patience
and repeatedly warned that stocks are
risky. If anyone should come through
the sharpest market decline in decades
unperturbed, it's the people in this
survey -- typically about 60 years old,
with about $225,000 in Vanguard
investments, roughly 70% in stocks.
Yet they didn't all sit tight. One
group in the survey stood out: those
who went into early 2020 with the
highest expectations for stock returns
in the upcoming year. They ended up
reducing their exposure to stocks much
more sharply during the crash of
February and March 2020 than those who
had been expecting lower returns.
They also tended to turn around and
buy back much of the stock they had
just sold -- but not until prices had
already shot above the March lows.
Investors elsewhere seem to have
concluded from the swiftness of the
recovery that stocks aren't risky at
all. After last spring's rebound,
Dave Portnoy , a social-media
celebrity, declared "
Stocks only go up " so often that
it began to seem like a magic
incantation. And, for the past year,
just about every stock has gone up
.
That's largely because the Federal
Reserve has backstopped markets by
squashing interest rates toward zero
and by buying
more than $2.5 trillion in Treasury
securities since February 2020,
along with
other massive interventions .
Meanwhile, emergency government
programs pumped trillions of dollars of
stimulus into the economy.
SHARE
YOUR THOUGHTS
Have you lost your fear of a bear
market? Why or why not? Join the
conversation below .
Fund managers fruitlessly complained
about how these policies were
distorting markets, but individual
investors simply followed the old Wall
Street adage: Don't fight the Fed. So
long as the central bank is drenching
the markets with liquidity, why not buy
stocks -- and why fear another
crash?
What's more,
target-date funds , which
continually seek to keep a
predetermined exposure to stocks,
command in excess of $2.8 trillion,
according to
Morningstar Inc. Investors added
$52 billion to target-date funds in
2020.
The popularity of these
portfolios has -- so far, anyway --
helped make market crashes
self-correcting . The more stocks
fall, the more the target-date funds
have to buy them; otherwise, the
portfolios would fall below their
mandated ratios of stocks to other
assets.
Mr. Sinclair is
correct . While I
lost 100% in WAMU in
2008 , from2009 to
present msft is up
1000% dwarfing my
loss in WAMU .
Barrons reports that
as of Friday the
total value of stocks
v GDP has surpassed
the Dot com peak in
early 2000 .
Case Schiller PE is
at all time
record
margin loans at all
time record .
200 day moving
average at high for
95% of stocks (
translation : there
is nothing left to
buy ) .
The course of action
is clear ..Don't sell
but whatever you do
..Do NOT buy . Cash
is a wonderful hedge
.
When asked how he got
so rich Bernard
Baruch replied " by
selling too early"
From commnets:
"Barrons reports that
as of Friday the total
value of stocks v GDP
has surpassed the Dot
com peak in early 2000
.Case Schiller PE is at
all time record
margin loans at all
time record . 200 day
moving average at high
for 95% of stocks"
...That's what some
investors seem to
believe -- and who can
blame them? The stock
market used to take
years, sometimes
decades, to recover its
prior peak after the
start of a bear-market
decline. After last
year's 34% meltdown,
however, stocks
regained record highs
in only 126 trading
days.
With the exception
of a 100-day rebound
after an interim drop
in early 2009, that's
the fastest-ever
recovery to a prior
peak. The S&P 500
has fallen at least 20%
-- the conventional
definition of a bear
market -- 26 times in
the past nine decades,
according to Dow Jones
Market Data. Recoveries
to previous highs have
typically taken almost
three years,
often much longer
.
... ... ...
That complacency
takes a toll -- even
among Vanguard
investors, who tend to
be cautious. These
people often follow the
philosophy of the
firm's late founder,
Jack Bogle , who
preached patience and
repeatedly warned that
stocks are risky. If
anyone should come
through the sharpest
market decline in
decades unperturbed,
it's the people in this
survey -- typically
about 60 years old,
with about $225,000 in
Vanguard investments,
roughly 70% in
stocks.
Yet they didn't all
sit tight. One group in
the survey stood out:
those who went into
early 2020 with the
highest expectations
for stock returns in
the upcoming year. They
ended up reducing their
exposure to stocks much
more sharply during the
crash of February and
March 2020 than those
who had been expecting
lower returns.
They also tended to
turn around and buy
back much of the stock
they had just sold --
but not until prices
had already shot above
the March lows.
Investors elsewhere
seem to have concluded
from the swiftness of
the recovery that
stocks aren't risky at
all. After last
spring's rebound,
Dave Portnoy , a
social-media celebrity,
declared "
Stocks only go up "
so often that it began
to seem like a magic
incantation. And, for
the past year,
just about every stock
has gone up .
That's largely
because the Federal
Reserve has backstopped
markets by squashing
interest rates toward
zero and by buying
more than $2.5 trillion
in Treasury
securities since
February 2020, along
with
other massive
interventions .
Meanwhile, emergency
government programs
pumped trillions of
dollars of stimulus
into the
economy.
SHARE
YOUR THOUGHTS
Have you lost
your fear of a bear
market? Why or why not?
Join the conversation
below .
Fund managers
fruitlessly complained
about how these
policies were
distorting markets, but
individual investors
simply followed the old
Wall Street adage:
Don't fight the Fed. So
long as the central
bank is drenching the
markets with liquidity,
why not buy stocks --
and why fear another
crash?
What's more,
target-date funds ,
which continually seek
to keep a predetermined
exposure to stocks,
command in excess of
$2.8 trillion,
according to
Morningstar Inc.
Investors added $52
billion to target-date
funds in 2020.
The popularity of
these portfolios has --
so far, anyway --
helped make market
crashes
self-correcting .
The more stocks fall,
the more the
target-date funds have
to buy them; otherwise,
the portfolios would
fall below their
mandated ratios of
stocks to other
assets.
Mr.
Sinclair
is
correct
.
While
I
lost
100%
in
WAMU
in
2008
,
from2009
to
present
msft
is up
1000%
dwarfing
my
loss
in
WAMU
.
Barrons
reports
that
as
of
Friday
the
total
value
of
stocks
v
GDP
has
surpassed
the
Dot
com
peak
in
early
2000
.
Case
Schiller
PE
is
at
all
time
record
margin
loans
at
all
time
record
.
200
day
moving
average
at
high
for
95%
of
stocks
(
translation
:
there
is
nothing
left
to
buy
)
.
The
course
of
action
is
clear
..Don't
sell
but
whatever
you
do
..Do
NOT
buy
.
Cash
is
a
wonderful
hedge
.
When
asked
how
he
got
so
rich
Bernard
Baruch
replied
"
by
selling
too
early"
From
commnets:
"Barrons
reports
that
as of
Friday
the
total
value
of
stocks
v GDP
has
surpassed
the
Dot
com
peak
in
early
2000
.Case
Schiller
PE is
at
all
time
record
margin
loans
at
all
time
record
. 200
day
moving
average
at
high
for
95%
of
stocks"
...That's
what
some
investors
seem
to
believe
--
and
who
can
blame
them?
The
stock
market
used
to
take
years,
sometimes
decades,
to
recover
its
prior
peak
after
the
start
of a
bear-market
decline.
After
last
year's
34%
meltdown,
however,
stocks
regained
record
highs
in
only
126
trading
days.
With
the
exception
of a
100-day
rebound
after
an
interim
drop
in
early
2009,
that's
the
fastest-ever
recovery
to a
prior
peak.
The
S&P
500
has
fallen
at
least
20%
--
the
conventional
definition
of a
bear
market
-- 26
times
in
the
past
nine
decades,
according
to
Dow
Jones
Market
Data.
Recoveries
to
previous
highs
have
typically
taken
almost
three
years,
often
much
longer
.
...
...
...
That
complacency
takes
a
toll
--
even
among
Vanguard
investors,
who
tend
to be
cautious.
These
people
often
follow
the
philosophy
of
the
firm's
late
founder,
Jack
Bogle
, who
preached
patience
and
repeatedly
warned
that
stocks
are
risky.
If
anyone
should
come
through
the
sharpest
market
decline
in
decades
unperturbed,
it's
the
people
in
this
survey
--
typically
about
60
years
old,
with
about
$225,000
in
Vanguard
investments,
roughly
70%
in
stocks.
Yet
they
didn't
all
sit
tight.
One
group
in
the
survey
stood
out:
those
who
went
into
early
2020
with
the
highest
expectations
for
stock
returns
in
the
upcoming
year.
They
ended
up
reducing
their
exposure
to
stocks
much
more
sharply
during
the
crash
of
February
and
March
2020
than
those
who
had
been
expecting
lower
returns.
They
also
tended
to
turn
around
and
buy
back
much
of
the
stock
they
had
just
sold
--
but
not
until
prices
had
already
shot
above
the
March
lows.
Investors
elsewhere
seem
to
have
concluded
from
the
swiftness
of
the
recovery
that
stocks
aren't
risky
at
all.
After
last
spring's
rebound,
Dave
Portnoy
, a
social-media
celebrity,
declared
"
Stocks
only
go
up
" so
often
that
it
began
to
seem
like
a
magic
incantation.
And,
for
the
past
year,
just
about
every
stock
has
gone
up
.
That's
largely
because
the
Federal
Reserve
has
backstopped
markets
by
squashing
interest
rates
toward
zero
and
by
buying
more
than
$2.5
trillion
in
Treasury
securities
since
February
2020,
along
with
other
massive
interventions
.
Meanwhile,
emergency
government
programs
pumped
trillions
of
dollars
of
stimulus
into
the
economy.
SHARE
YOUR
THOUGHTS
Have
you
lost
your
fear
of a
bear
market?
Why
or
why
not?
Join
the
conversation
below
.
Fund
managers
fruitlessly
complained
about
how
these
policies
were
distorting
markets,
but
individual
investors
simply
followed
the
old
Wall
Street
adage:
Don't
fight
the
Fed.
So
long
as
the
central
bank
is
drenching
the
markets
with
liquidity,
why
not
buy
stocks
--
and
why
fear
another
crash?
What's
more,
target-date
funds
,
which
continually
seek
to
keep
a
predetermined
exposure
to
stocks,
command
in
excess
of
$2.8
trillion,
according
to
Morningstar
Inc.
Investors
added
$52
billion
to
target-date
funds
in
2020.
The
popularity
of
these
portfolios
has
-- so
far,
anyway
--
helped
make
market
crashes
self-correcting
. The
more
stocks
fall,
the
more
the
target-date
funds
have
to
buy
them;
otherwise,
the
portfolios
would
fall
below
their
mandated
ratios
of
stocks
to
other
assets.
Mr.
Sinclair
is
correct
.
While
I
lost
100%
in
WAMU
in
2008
,
from2009
to
present
msft
is
up
1000%
dwarfing
my
loss
in
WAMU
.
Barrons
reports
that
as
of
Friday
the
total
value
of
stocks
v
GDP
has
surpassed
the
Dot
com
peak
in
early
2000
.
Case
Schiller
PE
is
at
all
time
record
margin
loans
at
all
time
record
.
200
day
moving
average
at
high
for
95%
of
stocks
(
translation
:
there
is
nothing
left
to
buy
)
.
The
course
of
action
is
clear
..Don't
sell
but
whatever
you
do
..Do
NOT
buy
.
Cash
is
a
wonderful
hedge
.
When
asked
how
he
got
so
rich
Bernard
Baruch
replied
"
by
selling
too
early"
I don't really. I estimate total fuel consumption for light and heavy vehicles (road only)
worldwide in 2018, then I simply assume the non-land transport demand for C+C (for farm
equipment, water transport, air transport, and everything else that isn't for road vehicles
(heavy trucks, buses, motorcycles, and light vehicles). I simply assume that quantity remains
fixed (greater need for miles travelled by air and water matched by less fuel use due to
efficiency improvements so the two factors exactly offset).
Essentially it is just a simplifying assumption. NICK G IGNORED04/26/2021 at
7:55 pm
Dennis,
So you're assuming that global land transport oil consumption (excluding farm, rail, buses,
heavy off-road trucks, motorcycles, chainsaws, etc) is 55 Mb/d, or 64% of all C&C? That
seems a little high. How did you estimate that? DENNIS COYNE IGNORED04/27/2021 at
6:52 am
Nick,
I used US data for average fuel economy for heavy trucks and light vehicles, then I used a
1300 million global fleet size, assumed average miles driven was about 10k per year, did
something similar for commercial (heavy truck) fleet globally. It is a rough estimate, BP has
gasoline and diesel consumption for World at 52 Mb/d in 2019, I assume most of that is for
light vehicles and heavy trucks, not sure how much is used in ships (I assumed they mostly use
fuel oil/bunker/residual fuel).
Also see figure 2 on page 6 of EIA document below, 55 Mboe/d in 2020 looks about right, and
they estimate about 57 Mboe/d in 2025, my estimate is about 56 Mboe/d, with decreases starting
in 2028.
The model is no doubt imperfect and does not account for the drop in demand in 2020 due to
pandemic (the model was done in 2019 before the pandemic).
It's interesting how quickly this 2017 study has become out of date:
" The combined share of electric and plug-in hybrid electric vehicles in OECD countries
increases from less than 1% in 2015 to 10% in 2040. In non-OECD countries, diesel, natural gas,
and electric and plug-in hybrid electric vehicles experience a three-to-five percentage point
increase in the total share of LDVs sold in non-OECD countries. In 2040, diesel and natural gas
vehicles each represent approximately 11.5% of the total LDV new sales market in non-OECD
countries, and electric and plug-in hybrid electric vehicles combined represent 4.5%."
They thought EVs would be about 10% in 2040, while diesel and NG vehicles would each be
about 11.5%. Based on how quickly car makers are abandoning diesel and NG and adopting EVs, I'd
say EVs will take pretty much all of the 23% projected for diesel and NG and, of course, much
more. LIKBEZ04/30/2021 at 1:12
pm
Dennis,
I know that you are EV enthusiast, and even own Tesla, but still we need to be
realistic.
For heavy trucks transporting goods over long distances the switch to EV is very problematic
and might never happen. The switch to natural gas is a possibility but this is an expensive
solution. For local trucks the problem is the cost of the battery and it might happen but very
slowly, as gradual displacement due to high gas prices. Even in this case natural gas will eat
lithium.
Three large users of fuel that you did not account are military, airplanes and agricultural
machinery. In the USA we also need to add trains as the level of electrification of railroads
leaves much to be desired.
Those three categories of consumers of fuel are not switching to EV in foreseeable future.
If you account for the growth of population the demand actually might increase until the price
of fuel will come into play.
Globally Africa, China, India (and Asia in general), xUSSR space very rapidly add personal
cars so those areas will experience growth of fuel demand. And cars in those regions often run
for 15-20 years not 12 like in the USA. .
And that will affect African producers and, especially Russia. So when talking about Russia
it is important to understand that the internal consumption will grow (Russia adds around 1.5
million cars a year) and that will cut exports https://knoema.com/atlas/Russian-Federation/Primary-energy-consumption
although many Russian cars are running of natural gas as it is cheaper.
The initial fascination with EV as passenger cars will soon pass as outside places like
California with no winter they are very problematic during winter periods. I would say they are
dangerous.
Currently they are kind of status symbol in certain circles and IMHO represent "conspicuous
consumption." Conspicuous consumption is a term coined by American economist and sociologist
Thorstein Veblen.
I wonder whether Tesla stock will be able to sustain the current crazy valuation in
three-five years period. (139 minutes and 25 seconds) DENNIS COYNE IGNORED04/27/2021 at 5:17
pm
Hickory,
Here is a transition scenario that assumes the 37% growth rate in plug in sales continues,
personally I think this is too optimistic, sales for light vehicles is 100% plugin by 2031 and
the ICE light vehicle fleet is replaced 100% by 2044 with plugin vehicles. Interesting that you
believe this is pessimistic. Also interesting that Ovi believes my original EV scenario is too
optimistic, I seem to be somewhere between your optimism and the pessimism of Ovi. It will be
interesting to watch (and I hope you are right).
We shall see. It seems to me that at a certain point, there is going to be a very rapid
realization that we are in new territory. Most of the manufacturers now get it, and are
scrambling to react.
It will be very interesting to see if there is a component supply crunch ( I think likely) in
the late decade.
A big piece of the unknown on this this is the general state of the world economy.
If there is stability and resumed growth after pandemic, the transition to plugin vehicles will
be quicker.
If there is economic stagnation/contraction- it will be much slower as people hold on to what
they've got.
And of course, the price oil will play a leading role in the incentive/disincentive
equation.
I also think it is important to acknowledge that we are talking about percent of new sales,
but not the absolute magnitude of sales. That may be more important. Vehicles last so much
longer now, and if petrol is available at reasonable price, the best bet for most people
financially will be to milk their current vehicle for as long as possible. But after that, the
next one will probably have a plug. STEPHEN HREN IGNORED04/28/2021 at 3:32
pm
At some point people will stop buying ICE vehicles even if no EV option is available.
Operating a gas station, especially in an urban environment, is a low margin, high regulation
enterprise. As gas stations in urban areas either go out of business or give up on selling gas,
gas cars will lose most of their appeal for urban and suburban residents because of "range
anxiety" – i.e. not enough places to fill up. I would guess that at about 20-30% EV
saturation, selling gas will no longer become profitable in any given area. This will add to
the spiral of concerns about resale value for ICE cars as the inevitability of the EV
transition becomes ever more apparent. HICKORY IGNORED04/28/2021 at
10:31 pm
This kind of action is hard to predict from past performance, but get used to these kind of
news items-
Germany March 2021
"The number of new passenger plug-in car registrations increased to 65,681 (up 232%
year-over-year), which is 22.5% of the total [new car]market. That's more than one in five new
cars!" OVI IGNORED04/26/2021 at 5:17
pm
Dennis
To me the EV market is bifurcated. From what I can see there are four concentrated EV
markets in the world.
– California due to its history with car pollution.
– Norway using its massive oil revenues to heavily subsidize EVs along wth other
perks.
– China with their heavy EV sales mandate and getting away from its achilles heal,
oil.
– Japan also wants to reduce dependence on oil.
Looking at what is happening in two US states provides some insight on how fast the EV take
up will occur in the US. California with a population of 39.5 M sold 133,000 EVs in 2020 or put
another way 3,360 EVs per million population. New York with a population of 19.45 M sold 21,000
EVs in 2020 or 1,080 EVs per million population. That is a ratio of three to one. it would be a
lot higher in other states.
Total US 2020 sales were 296,000. California accounts for 45% of US sales.
My point is that these 4 concentrated regions are not representative of the rest of the
world. The only region that will continue to grow at a significant pace will be China with its
sales mandate and I think with an eye to becoming a world leader in EV design. EVs are coming,
no doubt, but at a pace that is slower than most prognosticators are forecasting, primarily
because of cost.
"... nobody, myself included, knows when this is going to end. We just watch the things that would normally indicate an end. ..."
"... "I think we should recognize we're pulling demand forward and that the longer-term outlook is not particularly favorable, in my view," he said. Cooperman said he expects Federal Reserve Chairman Jerome Powell, who has described a recent pickup in price pressures as "transitory," will ultimately be surprised by inflation, forcing the central bank to signal action before the end of 2022. ..."
Billionaire investor Leon Cooperman says he's a "fully invested bear" with "an eye on the exit.
'I suspect the market will be lower a year from today. But I
don't have to make that guess now. This is not going to end well.'
-- Leon Cooperman, Omega Family Office
That's self-described "fully invested bear" Leon Cooperman,
who told CNBC
on Friday that given a coming rise in taxes, inflation and a "reasonably richly appraised market," he has "an eye
on the exit."
Cooperman, the chair of the Omega Family Office, added that "
nobody, myself included, knows when this is going to end. We
just watch the things that would normally indicate an end.
"
Stocks were
weaker Friday
, on track for a mixed weekly performance despite a hectic week of corporate results that featured blowout
results for some of the world's largest tech-related companies. The Dow Jones Industrial Average
DJIA,
-0.54%
was down more than 200 points, dragging the blue-chip gauge lower for the week. The S&P 500
SPX,
-0.72%
was down 0.7% for the session, while the Nasdaq Composite
COMP,
-0.85%
was down 0.5%.
Cooperman warned that the pace of market gains since bottoming out in March 2020 following
the pandemic-induced bear market plunge can't continue indefinitely.
"I think we should recognize we're pulling demand forward and that the longer-term outlook is not particularly favorable,
in my view," he said. Cooperman said he expects Federal Reserve Chairman Jerome Powell, who has described a recent pickup in
price pressures as "transitory," will ultimately be surprised by inflation, forcing the central bank to signal action before the
end of 2022.
dougc
1 hour ago
If he is a fully invested BEAR he should be invested FOR the pullback and not eyeing an exit. If
he's fully invested now in a bull market strategy, he's lying about his expectations.
Reply
1
1 reply
Jolly
2 hours ago
The fed and biden are committed to endless cash until we go bankrupt or bonds pricing go way up and
this thing is forced to crash. you stay in the market and make the fed raise rates.
1Economist
4 hours ago
Popcorn: Do intelligent people erase Glass/Steagall, and uptick rule? At the same time powers in charge are unable to
grasp the significant loss of market makers, the progress of Ai & dark pools. Throw in new monetary policy that debt
doesn't matter and you get huge liquidity and a big BANG!
John
31 minutes ago
Saw the exact same thing in the 1990's. Everyone knew it was a bubble, but they all thought they could get out before
everyone else if they had to.
aaa
1 hour ago
I would never trust the epitome of greed, when it comes to investments that they can go long or
short...into a decree of direction. You have to ask yourself how and why entities like this have
accumulated billions on the market....
Reply
1
Scott
3 hours ago
Leon Cooperman says he has an "eye on the exit?" So? Anyone who doesn't at all times have an eye on
the exit is a fool. Tell me something I don't know, Leon.
C
49 minutes ago
Another shorter trying to manipulate the market
"Retail clients were the only buyers last week, while institutional and hedge fund clients sold," said Bank of America strategists
led by Jill Carey Hall. "Retail clients have been buyers for the eighth straight week, while hedge fund clients sold for the third
straight week."
The team at Bank of America notes that cumulative equity flows last week totaled a net $5.2 billion worth of outflows, the largest
one-week move out of stocks since November and the fifth-largest on record. In the past, these kinds of exoduses from the market
have portended shaky periods for investors.
"In the prior times weekly flows were this (or more) negative, the subsequent week's returns were -1% on avg/median with negative
returns 75% of the time," the firm notes. "Four-week average flows have been trending lower in recent weeks and have now turned negative
for the first time since mid-Feb, suggesting a pause to increasingly euphoric sentiment."
...But data from strategists on the Street does show that retail's participation in this market is not what it once was. The strategy
team over at Deutsche Bank led by Binky Chadha published a report late last week showed that single-stock call options â€"
a core part of the YOLO trade
powered by retail â€" has been declining in recent weeks.
The recent calm in the Treasury market contrasts with early-year selling that pushed yields to their highest levels since the
pandemic started.
... Foreign investors purchased around $135 billion worth of long-term Treasuries on a net basis in January and February, according
to data recently compiled by Citiâ€"the best two-month start to a year since 2012.
...But buying from foreign investors and even pension funds may not be enough to quell a rise in yields, said Mr. Goldberg. His firm
is forecasting the 10-year yield to rise to 2% by the end of the year, supported by improving economic data and passage of a fiscal
package later this year.
After thirteen months, the BLS still cannot count the Unemployed. Headline U.3
Unemployment also remained deep in non-recovery territory. The BLS acknowledged continuing
misclassification of some "unemployed" persons as "employed," in the Household Survey. Where
the count of the understated unemployed had an "upside limit" of 636,000 persons in March 2021,
the February 2021 upside estimate of understated unemployed was 756,000. The difference would
be a potential headline U.3 of 6.44% instead of today's headline 6.05%, which was down from a
headline 6.22% in February. Fully adjusted for COVID-19 disruptions, based on BLS side-surveys
of Pandemic impact, and with more than six million people missing from the headline U.S. labor
force, actual headline U.3 unemployment still should be well above 10%, the highest
unemployment rate since before World War II, outside of the Pandemic and possibly at the trough
of the 1982-1983 recession. Broader March 2021 headline U.6 unemployment [including some
decline in short-term discouraged workers and those employed part-time for economic reasons]
eased to 10.71% from 11.07% in February. Including long-term discouraged/ displaced workers,
the March 2021 ShadowStats Alternate Measure –- moving on top of the decline in U.6
–- notched minimally lower to 25.7%, from 25.8% in February 2021, reflecting some modeled
transition of "short-term" to "long-term" discouraged workers, with the Pandemic having passed
its 12-month anniversary. The latest Unemployment Rates are posted on the ALTERNATE DATA
tab (above).
I don't share David P. Goldman's ideology and convictions. They are almost the polar
opposite of mine's.
But he has something I don't have, something that only a bourgeois specialist can give:
insider information.
I once hypothesized here that, if the USA were to collapse suddenly (which I don't think
it ever will, but if it do happen), then it would surely involve an uncontrolled growing
spiral of inflation/hyperinflation. That's the logical conclusion of an hypothetical collapse
of the USD standard.
So far, I can only see a mild rise in inflation. I don't think the USA will ever
experience hyperinflation (four-digit) or even true high inflation (two-digit). Goldman is a
rabid neoliberal, and anything above 2% is hyperinflation for him, so we should take these
kind of analyses with a grain of salt.
DAILY UPDATE (April 29th to May 3rd): • First-Quarter 2021 GDP Annualized Inflation
Jumped to a 31-Year High of 4.1%, With Quarterly Real GDP Growth Hitting a Consensus 6.4%,
Still Shy of Pre-Pandemic Recovery • Monthly March Series Showed Broad Inflation Soaring
on Top of Still-Faltering Jobs and Economic Activity [See the headlined paragraphs in the
LATEST NUMBERS section]
• Fed Chairman Powell - "We've Got a Long Ways to Go" • March 2021 Money Supply
and Monetary Base Growth Continued to Explode • U.S. Government's Financial Condition
Deteriorated Sharply in 2020 [See the headlined paragraphs in the SYSTEMIC RISK section]
• G E N E R A L .. H E A D L I N E S .. -- Pandemic-Driven U.S. Economic Collapse
Continues to Harden in a Protracted "L"-Shaped Non-Recovery
-- Severe Systemic Structural Damage from the Shutdown Is Forestalling Meaningful
Economic Rebound into 2022 or Beyond, Irrespective of the Advances in Coronavirus Vaccines and
Treatments
-- Panicked, Unlimited Federal Reserve Money Creation and Federal Government Deficit
Spending Continue and Will Expand, Triggering Major Domestic Inflation
-- With Fundamental Dollar Debasement Intensifying, Holding Physical Gold and Silver
Protects the Purchasing Power of One's Assets, Irrespective of Any Near-Term Central Bank or
Other Machinations to the Contrary.
Scroll down for the latest ShadowStats outlook, headline economic news and background
information on the U.S. Economy, Financial System (FOMC), Financial Markets and Alternate Data,
also for Publicly Available Special Reports and Contact Information.
• L A T E S T .. N U M B E R S .. Still shy by an annualized quarterly 3.53% gain of
recovering the Pre-Pandemic Peak Gross Domestic Product Activity in Fourth-Quarter 2019,
annualized First-Quarter 2021 Real GDP Growth surged 6.39%, effectively matching market
expectations, picking up from the 4.33% growth pace of Fourth-Quarter 2020 (April 29th,
Bureau of Economic Analysis - BEA). Those 1q2021 and 4q2020 GDP gains followed an annualized
3q2020 rebound of 33.44%, against respective annualized 2q2020 and 1q2020 Pandemic-driven
collapses of 31.38% (-31.38%) and 4.96% (-4.96%). Where activity in 3q2020 and 4q2020 GDP was
boosted heavily by Inventory Building, 1q2021 GDP growth of 6.39% was softened by heavy
Inventory Liquidation. Reflecting same, "Final Sales," which is the GDP net of Inventory
changes, surged to 9.03% in 1q2021, versus 2.96% in 4q2020 and against 26.87% in 2q2020.
Continued Depression in Payroll Activity Belies Some of the Headline Boom in the Heavily
Gimmicked, Overstated Real GDP Numbers. Seasonally adjusted First-Quarter 2021 Payroll
Employment declined year-to-year by 5.6% (-5.6%), following an annual decline of 6.0% (-6.0%)
in Fourth-Quarter 2020. Outside of the current Pandemic-collapsed economy, that 1q2021 annual
Payroll decline was the deepest since the 1946 realignment of the post-World War II U.S.
economy to a peacetime footing. In contrast to collapsed annual Payrolls, 1q2021 Real GDP
gained a headline 0.4% year-to-year. Year-to-year change in Employment is a broad, direct
measure of underlying economic reality, suggestive at present of a much weaker headline GDP
circumstance than is being proffered to the U.S. Public and to the Equity and Currency Markets.
Discussed frequently here, much of the GDP gimmicking is tied to artificially depressed GDP
Inflation, which results in overstated, headline Real (Inflation-Adjusted) numbers. Expanded
detail of the current circumstance will be fully reviewed, along with related graphs in pending
No. 1460 .
First-Quarter 2021 GDP Implicit Price Deflator inflation surged to 31-year high,
annualized quarterly 4.07% (4.1%) Inflation, and 2-year high 1.85% (1.9%) year-to-year
Inflation. Today's (April 29th) then pending GDP release prompted Federal Reserve Chairman
Powell's warning at yesterday's FOMC Press Conference of a "temporary" jump in the FOMC's
targeted "Core" PCE inflation rate. That is the inflation rate for the GDP's dominant [68.2% of
nominal] Personal Consumption Expenditure (PCE) category (less Food and Energy). A subcomponent
of the aggregate GDP Deflator, the FOMC's targeted PCE Inflation Index (Excluding Food and
Energy) jumped to an annualized 2.3% in 1q2021 [above or at the FOMC Target of 2.0%-plus], up
from 1.3% in 4q2020, but down from a one-time spiked 3.4% in 3q2020. The FOMC targeted deflator
hit a one-year high 1.5% year-to-year reading, still well below target. Expanded discussion
follows in Nos. 1460 and 1461 , also see the FOMC discussion in the SYSTEMIC
RISK section.
(April 26) Real March 2021 New Orders for Durable Goods declined 0.2% (-0.2%) in the
month, having declined by 1.0% (-1.0%) in February (Census Bureau). Against
Pandemic-collapsed March 2020 activity, March 2021 Real New Orders surged 20.1%, where February
2021 annual change had been 0.0% against the February 2020 pre-Pandemic peak. Against that
peak, those same March 2021 orders were down by 0.2% (-0.2%), and also were down by 4.9%
(-4.9%) measured with a two-year stacked change (against March 2019), as commonly used with the
Cass Freight Index® (see the discussion in No. 1459 and pending 1460 on
Pandemic disrupted annual growth). Net of a sharp reduction in still-strong Commercial Aircraft
Orders, March 2021 Real New Orders gained 1.6% in the month, having declined by 3.0% (-3.0%) in
February, March activity gained 1.4% from its February 2020 pre-Pandemic peak.
(April 26) 2021 Annual Retail Sales Benchmark Revisions cumulatively reduced headline
annual nominal growth rates by a 10 to 20 basis points per year from 2016 to date (Census).
At the most extreme, the nominal level of March 2021 Retail Sales revised lower by 0.75%
(-0.75%), while the level of the Pandemic collapsed March 2020 number revised lower by 0.85%
(-0.85%). The average downside revision to the headline monthly sales level, in basis points,
was 66 in 2021, 57 in 2020, 48 in 2019, 27 in 2018, 20 in 2017, 8 in 2016, which had the effect
of spreading the easier growth rates over the full period of revision. See the April 15 Retail
Sales paragraph; extended detail and graphs follow in pending 1460 .
(April 16) Seasonally adjusted, the March 2021 Cass Freight Index® gained 3.4% in the
month, recovering its "Polar Vortex," weather driven 3.2% (-3.2%) plunge in February
(CassInfo.com - See detail at
https://www.cassinfo.com/freight-audit-payment/cass-transportation-indexes/march-2021 and
scroll down). The March 2021 unadjusted series gained 10.03% year-to-year, versus a
weather-deflated 4.16% in February and 8.61% in January. That weather driven, downside February
aberration, broke a rising string of annual gains back to 2.43% in October 2020. Such followed
a 1.84% (-1.84%) annual decline in September 2020, which then was the 22nd consecutive
year-to-year monthly decline. The recent monthly annual increases in Freight Activity were the
first since the Federal Reserve's tightening of November 2018 began strangling U.S. Economic
Activity. As much of the economy declined into an unofficial "recession," Freight Activity and
the Cass Freight Index® did, too. As of March 2021, the "Two-Year Stacked Change" in the
Index (March 2021 against March 2019) held negative for the 18th-straight month, albeit
narrowed to a negligible 0.08% (-0.08%) from 3.67% (-3.67%) in February 2021. Given the March
2021 rebound from February weather, ShadowStats estimates that re-stabilizing April 2021
activity could take that two-year stacked change back to an annual decline around 1.5% (-1.5%).
In like manner, March's "Two-Year Stacked Change" in U.S. Industrial Production held negative
for the 15th straight month, down by 3.74% (-3.74%) [see second paragraph following]. Although
Freight Activity and some parts of the U.S. economy [not yet Industrial Production] have
recovered 2020 pre-Pandemic levels, those pre-Pandemic levels already were below actual peak
Freight and Economic Activity at the end of 2018, when the Fed moved to slow the economy.
Freight and related areas such as Production and Manufacturing still have not recovered their
true (albeit unofficial) pre-recession peaks. -- ShadowStats regularly follows and analyzes the
Cass Freight Index® as a highest-quality coincident and leading indicator of underlying
economic reality. We thank Cass for their permission to graph and to use their numbers in our
Commentaries. Full economic analysis of the latest monthly and quarterly economic series
follows in No. 1460
(April 16) March 2021 Housing Starts and Building Permits both showed meaningful monthly
gains, with Starts rebounding sharply from a weather-driven February plunge. As with Real
Retail Sales, April's Starts activity likely will see some pullback from March's catch-up
surge (Census Bureau). March 2021 Building Permits gained a statistically significant 2.7%
in the month (90% confidence interval), having declined by a revised 8.8% (-8.8%) [previously
10.8% (-10.8%)] in February and having gained 10.7% in January. March Housing Starts jumped by
a statistically meaningful 19.4% in the month, rebounding from a weather-driven collapse of
11.3% (-11.3%) [previously 10.3% (-10.3%)] in February, and a revised January decline of 1.7%
(-1.7%) [previously 5.1% (-5.1%). As headlined, March 2021 Building Permits and Housing Starts
respectively gained 30.2% and 37.0% year-to-year against Pandemic-savaged March 2020 activity,
up respectively against their February 2020 pre-Pandemic peaks by 22.8% and 11.0%. That said,
both headline March 2021 Permits and Starts still held shy of ever recovering their pre-Great
Recession peak levels of activity, respectively by 22.0% (-22.0%) and 23.5% (-23.5%).
(April 15) Constrained by Motor Vehicle production issues for a second month, March
Industrial Production came in well below expectations, suggestive of slowing First-Quarter 2021
GDP (Federal Reserve Board). Nonetheless, disrupted by the Pandemic, year-to-year change in
March 2021 Industrial Production turned positive for the first time in 18 months (since
September 2019), gaining 1.02% year-to-year, having declined by 4.77% (-4.77%) in February
2021. Yet, that annual gain was against Pandemic-collapsed activity in March 2020. Against its
pre-Pandemic peak activity of February 2020, headline March 2021 production still declined by
3.40% (-3.40%), more in line with the February 2021 annual decline. A two-year stacked decline
(against March 2019) showed March 2021 activity down by 3.74% (-3.74%), versus 5.00% (-5.00%)
in February 2021. The issues here and the ShadowStats approaches to related reporting and
graphics are detailed in Benchmark Commentary No. 1459 , with extended detail in
Economic Commentary No. 1460 . Otherwise, March 2021 Industrial Production gained 1.44%
in the month (up by 0.89% net of revisions), having declined by 2.62% (-2.62%) in February.
Parallel numbers for March 2021 Manufacturing showed a monthly gain of 2.73% [2.11%
net of revisions], against a monthly drop of 3.73% (-3.73%) in February. Annual growth turned
positive by 3.14% in March 2021, versus 20 straight months of annual decline, from July 2019
through a 4.66% (-4.66%) drop in February 2021. March 2021 activity, however, was down by 2.06%
(-2.06%) against its February 2020 pre-Pandemic peak, and was down in a two-year stacked
decline of 2.34% (-2.34%) in March 2021, versus 4.99% (-4.99%) in February 2021. Mining
showed a monthly gain of 5.66% [5.83% net of revisions], against a monthly drop of 5.62%
(-5.62%) in February. Annual growth held negative at 8.82% (-8.82%) for the 12th month (since
April 2020), down by 10.39% (-10.39%) against its pre-Pandemic and pre-Oil Price War high,
versus a February 2021 annual decline of 15.20% (-15.20%). Utilities showed a record
monthly drop (since 1972) of 11.39% (-11.39%)[down 12.18% (-12.18%) net of revisions], against
a monthly gain of 9.18% in February. A March 2021 annual decline of 0.22% (-0.22%) was seen
there versus a 3.27% (-3.27%) drop against its pre-Pandemic high, and versus a February annual
gain of 9.15%.
(April 15) Extreme monthly Retail Sales volatility is likely to continue for another
month (Census -- see April 26 Benchmark Revision paragraph). ShadowStats standardly removes
growth due to inflation from the headline Retail Sales series, reporting it in Real or
Inflation-Adjusted Terms, deflated by the seasonally-adjusted CPI-U as otherwise calculated by
the St. Louis Fed. On that basis, the headline nominal March 2021 monthly Retail Sales gain of
9.8% was 9.1% in real terms, net of inflation.
Beyond large monthly swings in activity reflecting massive weather disruptions, and despite
intensifying Production issues, surging Motor Vehicle sales reportedly drove that greater than
expected 9.1% surge in Real Retail Sales, rebounding from a 3.1% (-3.1%) weather-driven plunge
in February; watch for a likely stabilizing 2.9% (-2.9%) pullback in April 2021 sales, which
appears likely to bring Real Retail Sales back into balance, with monthly growth stabilizing,
averaging around 0.9%. That said, Real Sales gained year-to-year by 24.4% in March 2021,
against Pandemic collapsed activity in March 2020. Against its pre-Pandemic peak of February
2020, March 2021 activity gained 15.9% (see the related discussion in No. 1459 and
pending 1460 . That annual gain, or change from pre-Pandemic peak activity, followed an
annual gain of 4.9% (previously 4.5%) in February 2021, and a revised 8.1% [previously 8.0%,
initially 6.0%] in January 2021.
(April 13) March 2021 unadjusted year-to-year March 2021 Consumer Price Inflation (CPI-U)
jumped 2.62% -- a one-year high -- as gasoline prices soared, not only fully recovering pre-Oil
Price War levels of a year ago, but also hitting the highest unadjusted levels since May of
2019 (Bureau of Labor Statistics - BLS). Headline March 2021 CPI-U gained 0.62% in the
month, 2.62% year-to-year, against monthly and annual gains of 0.35% and 1.68% in February.
That inflation pickup reflected more than a full recovery in gasoline prices, which had been
severely depressed by the Oil Price War of one year ago. Such had had the effect of depressing
headline U.S. inflation up through February 2021, including suppressing the 2021 Cost of Living
Adjustment (COLA) for Social Security by about one-percentage point to the headline 1.3%. By
major sector, March Food prices gained 0.11% in the month, 3.47% year-to-year (vs. 0.17% and
3.62% in February); "Core" (ex-Food and Energy) prices gained 0.34% in March, 1.65%
year-to-year (vs. 0.35% and 1.28% in February); Energy prices gained 5.00% in March, 13.17%
year-to-year (vs. 3.85% and 2.36% in February), with underlying Gasoline prices gaining 9.10%
in the month, 22.48% year-to-year (vs. 6.41% and 1.52% in February).
The March 2021 ShadowStats Alternate CPI (1980 Base) rose to 10.4% year-to-year, up from
9.4% in February 2021 and against 9.1% in January 2021. The ShadowStats Alternate CPI-U
estimate restates current headline inflation so as to reverse the government's
inflation-reducing gimmicks of the last four decades, which were designed specifically to
reduce/ understate COLAs. Related graphs and methodology are available to all on the updated
ALTERNATE DATA tab above. Subscriber-only data downloads and an Inflation Calculator are
available there, with extended details in pending No. 1460 .
(April 9) March 2021 Producer Prices exploded across the board, with record levels of
annualized First-Quarter 2021 Inflation of 8.99% for Total PPI-FD, 16.04% for PPI-FD Goods
Sector and 5.62% for PPI-FD Services Sector (BLS). Those record levels were in context of
the current PPI historical series that began in November 2009. On the more-meaningful Goods
side, Energy and "Core" inflation hit respective historic annualized quarterly peaks of 78.80%
and 7.11%, while annualized quarterly Food inflation slowed to 5.44% having its earlier
historic peak of 13.68% in Fourth-Quarter 2020. On a monthly basis, March 2021 PPI-FD Goods
gained a stronger than expected 1.67%, versus 1.44% in February, with March 2021 year-to-year
growth jumping to 6.97%, from 3.39% in February. Food, Energy and "Core" (net of Food and
Energy) Sectors respectively gained 0.48%, 0.91% and 5.88% in the month, and 5.05%, 24.26% and
3.47% year-to-year.
(April 7) Continuing sharp deterioration with the headline February 2021 Real Merchandise
Trade Deficit indicated a likely record First-Quarter 2021 trade shortfall, with a
corresponding hit to First-Quarter GDP. (Census / BEA). Still in sharp deterioration
against December 2020 and 4q2020 activity, the January 2021 Real Merchandise Trade Deficit
narrowed minimally in revision, accompanied by initial headline reporting of an accelerated
deepening in the February 2021 Deficit. Those numbers are on track for an historic, record Real
Merchandise Trade Deficit in 1q2021. In turn, that suggests a deepening quarterly hit to the
April 29th release of the "Advance" First-Quarter 2021 GDP. Expanded detail and graphs follow
in No. 1460 .
(April 2) Despite some monthly improvement, March 2021 Labor Details still indicate no
GDP recovery at hand (Bureau of Labor Statistics - BLS). Seasonally-adjusted March 2021
Payroll Employment declined year-to-year by 4.5% (-4.5%) versus a revised 6.1% (-6.1%)
[previously 6.2% (-6.2%)] in February 2021. That narrowed annual decline was helped by initial
year-ago Pandemic impact on labor conditions. February 2020 activity was the pre-Pandemic
series peak, and March 2020 data were net of minimal initial Pandemic hit, in advance of the
massive collapse seen in the April 2020 numbers. Against the Pre-Pandemic peak, March 2021 was
down by 5.5% (-5.5%), versus the headline virus-narrowed 4.5% (-4.5%). Discussed and graphed in
pending No. 1459 , and consistent with recent annual growth comparisons to pre-Pandemic
levels, a 5.5% (-5.5%) drop has not been seen since the 1946 post-World War II war-production
shutdown of the U.S. economy. That circumstances still indicates no imminent recovery in the
U.S. GDP, irrespective of usual reporting games played with the headline GDP series.
After thirteen months, the BLS still cannot count the Unemployed. Headline U.3
Unemployment also remained deep in non-recovery territory. The BLS acknowledged continuing
misclassification of some "unemployed" persons as "employed," in the Household Survey. Where
the count of the understated unemployed had an "upside limit" of 636,000 persons in March 2021,
the February 2021 upside estimate of understated unemployed was 756,000. The difference would
be a potential headline U.3 of 6.44% instead of today's headline 6.05%, which was down from a
headline 6.22% in February. Fully adjusted for COVID-19 disruptions, based on BLS side-surveys
of Pandemic impact, and with more than six million people missing from the headline U.S. labor
force, actual headline U.3 unemployment still should be well above 10%, the highest
unemployment rate since before World War II, outside of the Pandemic and possibly at the trough
of the 1982-1983 recession. Broader March 2021 headline U.6 unemployment [including some
decline in short-term discouraged workers and those employed part-time for economic reasons]
eased to 10.71% from 11.07% in February. Including long-term discouraged/ displaced workers,
the March 2021 ShadowStats Alternate Measure –- moving on top of the decline in U.6
–- notched minimally lower to 25.7%, from 25.8% in February 2021, reflecting some modeled
transition of "short-term" to "long-term" discouraged workers, with the Pandemic having passed
its 12-month anniversary. The latest Unemployment Rates are posted on the ALTERNATE DATA
tab (above).
• S Y S T E M I C .. R I S K -- The April 2021 FOMC Meeting produced no change in
Policy or Outlook (April 28th, Federal Reserve Board's Federal Open Market Committee [FOMC]
Statement and Federal Reserve Chairman Jerome S. Powell's Press Conference). With no shift in
the FOMC economic or inflation outlook, existing stimulus and federal funds rate policies are
expected to continue through year-end 2023, as projected previously at the March 2021 FOMC
Meeting. That said, Chairman Powell forewarned of a possible "temporary" boost to the FOMC's
targeted Inflation Series, as discussed earlier in the second paragraph of the LATEST
NUMBERS section, and opening paragraphs on the GDP.
Today's Federal Reserve Press Release reconfirmed, once again: "The Committee [FOMC] seeks
to achieve maximum employment and inflation at the rate of 2 percent over the longer run. With
inflation running persistently below this longer-run goal, the Committee will aim to achieve
inflation moderately above 2 percent for some time so that inflation averages 2 percent over
time and longer-term inflation expectations remain well anchored at 2 percent. The Committee
expects to maintain an accommodative stance of monetary policy until these outcomes are
achieved."
(April 27) March 2021 Money Supply and Monetary Base Continued to Explode (Federal
Reserve Board - FRB). Where the Pandemic began hitting the system hard in March 2020, the
Federal Reserve responded with a massive influx of Money Supply -- liquidity. Accordingly,
comparative year-to-year change in the various March 2021 Money Supply measures tends to be
depressed, against what otherwise was the February 2020 Pre-Pandemic trough in the various
Money Supply measures, before the March 2020 surge. Here is how the various measures shape up.
ShadowStats "Basic M1" (Currency plus Demand Deposits) gained by a depressed 62.1% year-to-year
in March 2021, versus 69.6% in February 2021, yet March 2021 was up by a record 73.6% against
that February 2020 Pre-Pandemic trough, contrasted versus the February 2021 62.1% change
year-to-year, and against that same February 2020 Pre-Pandemic trough. The Money Supply numbers
have been updated to the ALTERNATE DATA tab. See the detailed discussion and graphs in
No. 1459 and pending No. 1460 .
In like manner, March 2021 versus the February 2020 Pre-Pandemic trough, and February 2021
against the February 2020 Pre-Pandemic trough (and year-to-year) shape up as follows. Newly
redefined headline M1 was up a record 363.9% versus 356.9% (or 34.0% versus 32.1% on what would
be a more-consistent basis going forward). M2 was up 28.6% versus 27.0%, and M3 was up 23.4%
versus 22.5%.
On a parallel basis, although not hitting the record levels of the 2007-2008 Banking System
Collapse, the March 2021 Monetary Base change versus the Pre-Pandemic trough and February 2021
year-to-year change hit 69.0% versus 57.7%, with Currency at a record 17.8% versus 16.9%, and
with Bank Reserves surging 124.6% versus 101.9%, as though it were the 2007-2008 collapse.
The Money Supply Table and Graphs on the ALTERNATE DATA tab, and the data here,
again, reflect March 2021 Money Supply and Monetary Base growth against the February 2020
Pre-Pandemic trough level, which otherwise is muted by the crisis passing beyond its first
anniversary and against surging Money Supply growth in March 2020, as the FOMC entered its
initial panic.
(April 6th) U.S. Government 2020 Financial Statements. -- The deepening
deficit net worth of the U.S. Government's financial condition hit a record shortfall –
negative net worth – of $113.8 trillion in fiscal year 2020 (year-ended September 30),
widening from a $103.4 trillion negative net worth in 2019. That 2020 shortfall reflected
an operating deficit "Net Position" or operating negative net worth of $26.8 trillion in 2020,
widening from a Net Position deficit of $23.0 trillion in 2019, plus deepening unfunded Social
Security and Medicare net liabilities (Closed Group) of $87.0 trillion in 2020, versus $80.4
trillion in 2019. As did her predecessors, Treasury Secretary Janet L. Yellen described the
current "Fiscal Path" as "Unsustainable," with the government's current Debt-to-GDP ratio at
100% in 2020, predicted to go to 623% before the end of the Century. Those indications are
overly optimistic in the extreme. Allowing for the "Unfunded" Liabilities, the Debt-to GDP
ratio was 531% in fiscal 2020. The 2020 Financial Report is available here:
https://www.fiscal.treasury.gov/reports-statements/financial-report/ -- ShadowsStats will
provide extended analysis in pending No. 1461 .
Systemic Turmoil is just beginning, with both the Fed and U.S. Government driving
uncontrolled U.S. dollar creation, between unconstrained Money Supply growth and uncontained
Deficit Spending. Again, continued extraordinary Monetary and Fiscal Stimulus will be
needed at least into 2022, irrespective of the nature of the COVID-19 vaccines. Indeed, likely
leading into accelerating inflation, Hyperinflation, both extreme Monetary and Fiscal stimuli
are underway. Discussions on the inflation threat and re-accelerating money growth are found in
Special Hyperinflation Commentary, Issue No. 1438 , subsequent missives including
particularly No. 1451 and No. 1454 , with a fully updated and expanded review
pending in Benchmark Economic Commentary, Issue No. 1461 .
Economic, FOMC, financial-market, political and social circumstances all continue to evolve
along with the Pandemic and unfolding political circumstances. COVID-19 vaccines and improved
treatment hold out some prospect of limited economic improvement in 2021 or 2022. Still, many
segments and regions of the U.S. economy, and individual, personal circumstances have suffered
severe structural damage from the shutdown, areas that likely will take years to recover fully.
Accordingly, ongoing massive Fiscal and Monetary Stimuli will be needed and likely will expand
well into 2023, per both the current FOMC outlook and the ongoing ShadowStats assessment.
SHADOWSTATS ALERT: In context of the still-evolving Coronavirus Pandemic and related or
economic crises, near-term financial-market risks from negative economic, liquidity and
political issues, are intensified by potential Hyperinflation, long viewed by ShadowStats as
the ultimate fate of the U.S. Dollar. That said, irrespective of recent relative weakness
in gold prices and related Central Bank or other market machinations, the ShadowStats broad
outlook in the weeks and months ahead remains for: (1) A continuing and renewed deepening
(potentially hyperinflationary) U.S. economic collapse, reflected in (2) Continued flight to
safety in precious metals, with accelerating upside pressures on gold and silver prices, (3)
Mounting selling pressure on the U.S. dollar, against the Swiss Franc and other stronger
currencies, and (4) Despite recent extreme Stock Market volatility, continuing high risk of
major instabilities and heavy stock-market selling, complicated by ongoing direct, supportive
market interventions arranged by the U.S. Treasury Secretary, as head of the President's
Working Group on Financial Markets (a.k.a. the "Plunge Protection Team"), or as otherwise gamed
by the FOMC.
• P O S T I N G .. S C H E D U L E .. (Updated April 29th) -- Commentary postings on
www.ShadowStats.com are advised to Subscribers by a coincident e-mail, along with appropriate
links. [Subject to Change] Economic Commentary No. 1460 will post over this weekend,
reviewing recent economic, financial-market and monetary numbers and FOMC developments.
Benchmark Commentary No. 1461 likely will follow over the May 8th Weekend, updating the
ShadowStats Long-Term Economic and Inflation Outlook.
PENDING EVENTS AND DATA: The Census Bureau will publish March 2021 Construction Spending
and annual revisions on May 3rd at 10:00 a.m. ET, ShadowStats coverage should follow by
4:00 p.m. ET.
• ARCHIVES - VIEWING EARLIER COMMENTARIES. ShadowStats postings of December 2020
and before - back to 2004 - are open to all, accessible by clicking on "Archives," at the
bottom of the left-hand column of this ShadowStats homepage.
• ALTERNATE DATA TAB provides the latest headline data, exclusive ShadowStats
Alternate Estimates and related Graphs of Inflation, GDP, Unemployment, Money Supply [just
updated] and the ShadowStats Financial-Weighted U.S. Dollar. Data downloads and the Inflation
Calculator are subscriber only.
Indices such as the Dow Jones Industrial Average (DJIA) and S&P 500 ( ( SPY ) ) are generally viewed
as convenient ways to measure the health of the entire stock market. Indeed, they are the
indicators that most folks in the business media use to determine if there are uptrends,
downtrends, bull markets, or bear markets.
The major indices generally do a good job of measuring overall market health, but there are
times when they can be very misleading. The problem is that there a small number of big-cap
stocks that can move the indices in one direction while hundreds or even thousands of smaller
stocks are moving in the other way.
Over the last 10 weeks, there has been a significant disconnect between the stocks that led
early in the year and the indices. Growth stocks, speculative small-caps, hot theme names, and
other groups have been very weak for a while, but the S&P 500 was hitting a new high
Thursday morning.
For a clearer picture of what is going on out there, a much better indicator is the ARK
Innovation ETF ( ARKK ) . ARKK was in a very strong
uptrend off the March 2020 low and gained nearly 400%. The fund held the stocks that market
participants favored for a very long time. It topped at $160 on Feb. 16 and a week later had
fallen 20% to $128, which is the definition of a bear market.
Since falling into a bear market, ARKK has been in a trading range and continued to
languish. It is down more than 3% Thursday as growth stocks and small-caps are taking it on the
chin again.
This is what is really going on in the market for most individual traders that focus on
stock-picking. The S&P 500 and DJIA are totally disconnected from this action. For most
traders it has been a bear market for over two months now, but we never hear about it in the
media.
This presents the most crucial question right now: What will happen to ARKK and the stocks
that it reflects if there is a major correction in the senior indices? Will they continue to
fall, or will there be some rotational action as money comes out of the names that are
currently at highs?
There is no easy answer, but that is the dilemma we face if we start to see deeper
corrective action in the S&P 500 and DJIA.
Mary 5 days ago As an alternative to PTTRX, which is waning in the current interest rate
environment...
A special deal is available and it's one of the few times you can lock in a great return
with no risk. On May 1, the inflation component on US Treasury I-Bonds will adjust to an
annualized rate of 3.54%. This is a tremendous jump due to inflation ramping up. I-Bonds,
similar to TIPS combine the inflation rate with an interest rate component (currently 0% for
I-Bonds) to get the overall yield. There is a $10k/person/year cap on the amount of I-Bonds
that can be purchased through Treasury Direct. Between the folks living under your roof, that
could amount to a good chunk.
In any case, you can easily set up an account on Treasury Direct and any money going in
on/after May 1 will get the new 3.54% rate. You can't withdraw the funds for 5 years to avoid
penalty. However, with a 3.54% yield, if you do need to withdraw early, the 6 months penalty
still leaves you significantly better off than CDs or other alternatives.
The inflation component adjusts every 6 months, so the yield you get will vary. However,
it's pretty well known that Powell/Treasury are looking to let the economy run hot for a while,
basically committing not to raise interest rates until 2023.
Anyhow, have a look. There's a couple of good articles out there about this situation. I
personally like the one on tipswatch. Mary 2 days ago @DOOGIE1 My pleasure. It's a tough
environment for fixed income investors these days...I take what I can get. I think the I-Bonds
are one of the best inflation hedges out there. TIPS should be good, but again, as a result of
the crazy interest rate environment, the interest rate component on short-term TIPS is
negative! I-Bonds never have negative interest component.
Lastly, re-reviewing terms, if you withdraw earlier than 5 years, penalty is last 3 months
of interest, not 6 - so even better.
After being stuck in their homes for so long, people are itching to get out again. It's a
boon to newly reopening economies, with consumers ready to start spending more at gas stations,
convenience stores, restaurants, hotels and attractions. Daimler AG, BMW AG and Toyota Motor
Corp. all started the year with sales at records, and things are so hot that used car prices in
the U.S. are soaring to all-time highs.
The jump in vehicle sales is a strong sign that this is more than just a passing fad.
Gasoline is the big winner.
Profits from making the fuel are near seasonal five-year highs and are expected to stay
strong as the Northern Hemisphere heads into summer driving season. U.S. refiner Valero Energy
Corp. says gasoline sales are nearly at pre-pandemic levels, and the biggest bulls are
predicting demand could hit a record. The U.S. Energy Information Administration expects summer
fuel prices to be the highest since 2018 this year.
The trouble with this line of reasoning is that it is hard to square with last year's market
logic. A year ago, we were a month into a rebound as the valuations of big technology stocks
soared, something explained at the time by
far lower Treasury yields . That made sense: Lower bond yields make earnings that are
expected to grow far into the future look more attractive, and Big Tech is full of those.
Growth stocks were a great place to be as the longest-dated Treasury yields plumbed new lows.
Valuations should rise when bond yields fall a long way.
Here we come to the problem: Just as lower yields justified a higher valuation for stocks
last year, higher yields should mean a lower price-to-earnings multiple -- albeit a lower
multiple of much higher earnings. Instead, valuations have gone broadly sideways as bond yields
first rose and then this month pulled back a bit. The result is that the stock market's
relationship with the bond market has gone haywire.
The strangeness shows up in the correlation between stocks and bond yields. Since the late
1990s higher yields have typically been good for stocks, so they tended to rise and fall
together daily -- even as over the long run, yields fell and stocks rose.
Last year, this relationship broke down. Investors got into a cycle where bad news on the
economy was good news for stocks, because it resulted in such
extreme support from the Federal Reserve and the government. The effect canceled out the
usual relationship almost entirely, breaking the link between stocks and bonds by late
summer.
The odd relationship of yields up, stocks up...Yields dropped a little and growth stocks
made more new highs. The tendency for both to move in the same direction, measured by the
50-day correlation of growth stocks to bond yields, has reversed and is at its most negative
since the boom times of 1999. Bizarrely, the link between value stocks and bonds has also
turned reversed, although not in such an extreme way, as value stocks also made new highs.
The bearish investor can take this as a sign of over-exuberance.
The trouble with this line of reasoning is that it is hard to square with last year's market
logic. A year ago, we were a month into a rebound as the valuations of big technology stocks
soared, something explained at the time by
far lower Treasury yields . That made sense: Lower bond yields make earnings that are
expected to grow far into the future look more attractive, and Big Tech is full of those.
Growth stocks were a great place to be as the longest-dated Treasury yields plumbed new lows.
Valuations should rise when bond yields fall a long way.
Here we come to the problem: Just as lower yields justified a higher valuation for stocks
last year, higher yields should mean a lower price-to-earnings multiple -- albeit a lower
multiple of much higher earnings. Instead, valuations have gone broadly sideways as bond yields
first rose and then this month pulled back a bit. The result is that the stock market's
relationship with the bond market has gone haywire.
The strangeness shows up in the correlation between stocks and bond yields. Since the late
1990s higher yields have typically been good for stocks, so they tended to rise and fall
together daily -- even as over the long run, yields fell and stocks rose.
Last year, this relationship broke down. Investors got into a cycle where bad news on the
economy was good news for stocks, because it resulted in such
extreme support from the Federal Reserve and the government. The effect canceled out the
usual relationship almost entirely, breaking the link between stocks and bonds by late
summer.
The odd relationship of yields up, stocks up...Yields dropped a little and growth stocks
made more new highs. The tendency for both to move in the same direction, measured by the
50-day correlation of growth stocks to bond yields, has reversed and is at its most negative
since the boom times of 1999. Bizarrely, the link between value stocks and bonds has also
turned reversed, although not in such an extreme way, as value stocks also made new highs.
The bearish investor can take this as a sign of over-exuberance.
Thanks for the insightful article. Yet for the time being the facts don't matter. The Fed has
turned investors--those who put money into the markets for the long term--into
speculators--those who put money into the markets with the hope of selling to a greater fool
in the short to near term. And just as most believe themselves above average, most of these
speculators believe they'll be amongst those who will get out at the top. Never mind that as
the saying goes, "There will be a whole bunch of fat people all trying to get out one skinny
door."
The rise in commodity prices has pushed inflation and that raise questions about the Fed's
assurances that any bump in inflation will be short-lived. Gundlach Says Fed Is Guessing That
Inflation Will Be Transitory
The stock market's recovery from the pandemic may be a mere continuation of the bull market
that preceded this crisis. If so, stocks may be at the end of their run, rather than beginning
an upswing.
It could actually be seen as the end of a longer bull market that began after the 2008-2009
financial crisis. That would mean the 2020 bear market and recession -- a health-induced crisis
rather than one caused by financial excess -- interrupted a bull market that had gone on for
more than a decade.
dopie 3 hours ago Apple....2.2 trillion market cap trading at 35 times EARNINGS? Reply 1 1
Patrick dopie 2 hours ago You think THAT'S a bubble? So that means you don't own any AMZN (P/E
of 82), NFLX (61), or TSLA (695!!) either, right?
"... The temptation to book profits and bail is getting hard to resist after the S&P 500's best 12-month rally since the 1930s. Increasing the anxiety are a mountain of charts signaling a market that's stretched to its limits. ..."
"... Earlier this month, the index soared 16% above its 200-day average, a feat that before December had occurred only a handful times over the past three decades. Moreover, the benchmark's relative strength index has surpassed 70 on both a weekly and monthly basis, a sign that the market has risen too far, too fast. ..."
"... A strategy following RSI signals has dropped 10% this year. The damage occurred as stocks entered the year with unbridled momentum that touched off an order to sell. The trade has since been in place as the S&P 500 never pulled back fast and long enough to flash buy. ..."
"... The moving average convergence/divergence indicator -- better known as MACD -- has suffered a loss of 9.8%. Five of the nine trading signals that the model has produced have been buys, and four of them have lost money. In addition, all four short recommendations have been losers. ..."
(Bloomberg) -- If you bailed because of Bollinger Bands, ran away from relative strength or took direction from the directional
market indicator in 2021, you paid for it.
It's testament to the straight-up trajectory of stocks that virtually all signals that told investors to do anything but buy
have done them a disservice this year. In fact, when applied to the S&P 500, 15 of 22 chart-based indicators tracked by Bloomberg
have actually lost money, back-testing data show. And all are doing worse than a simple buy-and-hold strategy, which is up 11%.
Of course, few investors employ technical studies in isolation, and even when they do, they rarely rely on a single charting technique
to inform decisions. But if anything, the exercise is a reminder of the futility of calling a market top in a year when the journey
has basically been a one-way trip.
"What we've seen this year is a very strong up market that didn't get many pullbacks," said Larry Williams, 78, creator
of the Williams %R indicator that's designed to capture a shift in a security's momentum. A long-short strategy based on the
technique is down 7.8% since the end of December.
"All the overbought and oversold indicators, mine as well as anybody else's, didn't get many buy signals, but a lot of sells,"
he said.
The temptation to book profits and bail is getting hard to resist after the S&P 500's best 12-month rally since the 1930s. Increasing
the anxiety are a mountain of charts signaling a market that's stretched to its limits.
Earlier this month, the index soared 16% above its 200-day average, a feat that before December had occurred only a handful times
over the past three decades. Moreover, the benchmark's relative strength index has surpassed 70 on both a weekly and monthly basis,
a sign that the market has risen too far, too fast.
Add in pundits warning of bubble-like valuations and resurgent coronavirus concerns, and it's a recipe for sell orders. Hedge
funds, for instance, have hit the exits this month, stampeding out of tech stocks just days before Apple Inc. and Amazon.com Inc.
report financial results.
Yet avoiding the stock market for any period of time has proven to be the riskiest wager of all. The S&P 500 has yet to retrench
more than 5% this year. At the same time, missing out on the big up days is more penalizing than ever. Absent the top five sessions,
the index's 11% gain dwindles to 2%.
"To try to guess that this is the right time to be out of the market, you may as well go to Las Vegas," said Mark Stoeckle,
chief executive officer at Adams Funds. "There's just as much risk doing that."
Bloomberg's back-testing model purchases the S&P 500 when an indicator signals a "buy" and holds it until a "sell" is
generated. At that time, the index is sold and a short position is established and kept until a buy is triggered.
A strategy following RSI signals has dropped 10% this year. The damage occurred as stocks entered the year with unbridled momentum
that touched off an order to sell. The trade has since been in place as the S&P 500 never pulled back fast and long enough to flash
buy.
The moving average convergence/divergence indicator -- better known as MACD -- has suffered a loss of 9.8%. Five of the nine trading
signals that the model has produced have been buys, and four of them have lost money. In addition, all four short recommendations
have been losers.
Such is the cost of betting against momentum in a market where the S&P 500 has already eclipsed the average Wall Street strategist's
year-end target.
"Today, and for much of 2020, the overbought conditions have been absorbed by the market with more strength, or at best a pause,"
said Renaissance Macro Research co-founder Jeff deGraaf, who ranked as the top technical analyst in Institutional Investor's
annual survey for 11 straight years through 2015. "Overbought/oversold conditions are useless without first defining the
underlying trend of the market."
Williams, who has been trading since 1962, agrees. Technical analysis tools aren't broken, he says, but in a bull market that's
as resilient as this one, investors need to use them in the right context.
"You have to have a different tool, if you will, for a job you're doing," he said. "I have a hammer that can build a house,
but if I use the hammer to dig a hole in the ground, that's going to be really hard."
For more articles like this, please visit us at bloomberg.com
Subscribe now to stay
ahead with the most trusted business news source.
"... Since 2000, the US debt has increased about $20 trillion, roughly $1 trillion a year in deficit spending. In that same time, inflation adjusted GDP has risen one whole quarter. ..."
"... Throw the super rich into the mix and there is not much left for the little people. ..."
"... This "recovery" is based on liquidity, money printing and debt. May as well just make up the GDP numbers like the inflation numbers. ..."
There is an overly optimistic consensus view about the speed and strength of the United States' recovery that is contradicted
by facts. It is true that the United States recovery is stronger than the European or Japanese one, but the macro data shows that
the euphoric messages about aggregate GDP growth are wildly exaggerated.
Of course, Gross Domestic Product is going to rise fast, with estimates of 6% for 2021. It would be alarming if it did not after
a massive chain of stimuli of more than 12% of GDP in fiscal spending and $7 trillion in Federal Reserve balance sheet expansion.
This is a combined stimulus that is almost three times larger than the 2008 crisis one, according to McKinsey.
The question is, what is the quality of this recovery? The answer is: extremely poor.
The United States real growth excluding the increase in debt will continue to be exceedingly small. No one can talk about a strong
recovery when industry capacity utilization is at 74%, massively below the level of 80% at which it was before the pandemic. Furthermore,
labor force participation rate stands at 61.5%, significantly below the pre-covid level and stalling after bouncing to 62% in September.
Unemployment may be at 6%, but it is still almost twice as large as it was before the pandemic. Continuing jobless claims remain
above 3.7 million in April.
Weekly jobless claims remain above 500,000 and the total number of people claiming benefits in all programs -- state and federal
combined -- for the week ending March 27 decreased by 1.2 million to 16.9 million.
These figures must be put in the context of the unprecedented spending spree and the monetary stimulus. Yes, the recovery is better
than the Eurozone's thanks to a fast and efficient vaccination rollout and the dynamism of the United States business fabric, but
the figures show that a relevant amount of the subsequent stimulus plans have simply perpetuated overcapacity, kept zombie firms
that had financial issues before covid-19 alive and bloated the government structural deficit and mandatory spending.
Would the United States economy had recovered as fast as it has without the deficit-spending stimulus plans? Maybe. I believe
so because the entire recovery, both in markets and the economy, has been driven by the vaccine news and the process of inoculation.
Most of the programs that have been implemented have had a small impact compared to the re-opening of the hospitality sector and
the vaccinations. The entire economic crisis came from the lockdowns and the virus and the entire recovery is the re-opening and
the vaccinations.
My main concern is that this monster deficit and debt program has been set as the minimum for the next crisis. No one has analysed
if the spending plans have been effective. In fact, in the eurozone no one seems to be concerned about the fact that countries that
have spent between 20 to 30% of GDP in stimulus plans are now in stagnation. The mainstream message seems to be that if the spending
plans have not worked it is because they were not large enough. Very few seem to be discussing the waste in public funding when the
number one drivers of the recovery are the vaccine roll-out and the re-opening of the services sector.
It seems that governments want to convince us that they have saved the world when the reality is that the misguided lockdowns
were the cause of the economic debacle and lifting them is the main cause of the recovery. In the process, trillions have been squandered.
It is dangerous to accept that government spending no matter how much and what for is the only solution and even more dangerous to
believe that the shape of the recovery is only a function of the size of the stimulus package. The problem was the virus and the
government-imposed lockdowns, the solution is the vaccine and the re-opening. The problem was caused by government's lack of prevention
and excess of interventionism and the solution is not more intervention.
Bay Area Guy 38 minutes ago
Since 2000, the US debt has increased about $20 trillion, roughly $1 trillion a year in deficit spending. In that same
time, inflation adjusted GDP has risen one whole quarter. The other 19-3/4 years, real GDP declined.
This, despite the aforementioned $20 trillion in deficit spending. The "recovery" is not strong because we never got out of
the recession/depression that was caused by the dot.com bubble bursting as well
as the 2008 financial crisis.
When real GDP declines despite such massive infusions of debt, you're in big trouble. The fact that this also happened at a
time when population (both legal and illegal) was rising means that more people are trying to get a share of an ever-shrinking
pie. It's a recipe for disaster.
jim942 35 minutes ago
Throw the super rich into the mix and there is not much left for the little people.
GlassHouse101 53 minutes ago
"If you could print Prosperity, you would have thought they would have figured it out sometime over the past few hundred years."
- Buffett
khakuda 32 minutes ago (Edited)
This "recovery" is based on liquidity, money printing and debt. May as well just make up the GDP numbers like the inflation
numbers.
GeezerGeek 20 minutes ago
It's never made sense to me why consumer spending should be part of the gross domestic product. If .GOV passed out $20 trillion
and gave people one year to spend it, would the GDP really be increased? If we had to produce those products here in the USSA
it might come close to reality, but if all we spent the money on was stuff from Asia and nothing was produced here, the GDP would
crash in 2022 without another $25 trillion to keep things going.
We should be using a different yardstick for measuring the economy, using things like real production (cars, corn) and non-government
employment.
There are dozens of charts that illustrate how closely today’s financial
bubble resembles its predecessors. But simple is better when expressing a hard truth, so
let’s go with that old standby, margin debt. This is debt created when
over-stimulated investors borrow against their stocks to buy more stocks. At its high extremes,
the result is always the same: A price decline that forces overleveraged investors to liquidate
at any price, turning correction into bloodbath. Note that the steeper the rise in margin debt,
the more severe the resulting plunge in share prices.
The next chart illustrates more clearly the “steep†thing.
The current spike is one for the record books.
Now, during past spikes in margin debt the “investors†who
were swept up in the euphoria of easy money frequently responded to criticism with a variation
on “corporate earnings are about to soar, which will make everything okay.
Plus we know you’re only complaining because you missed the gravy train and
you’re jealous.â€
But corporate earnings almost never completely offset extreme valuations and soaring margin
debt. A useful measure for visualizing this fact is “earnings
yield,†which is the S&P 500 index’s aggregate earnings
expressed as a percentage of its aggregate market cap. This is how much a buyer of the average
stock receives in earnings per dollar invested. Common sense says the more the buyer receives
the better the deal. And history says the less the buyer receives the higher the likelihood of
stock prices falling in the ensuing few years. Today’s yield of 2.36% is the
second-lowest ever. That’s really bad.
Market will definitely collapse sooner or later. But nobody knows when. Especially taking into account FED Plunge protection team activities. If is stupid and irresponsible to talk about June crash...
Dent’s forecast
seems to have struck some kind of chord. For about a week or longer, the article was the most popular article at ThinkAdvisor.com. But although he may be unique in setting a deadline, he’s not the only guru predicting disaster.
Just this week I got a note from Jonathan Ruffer, an eminent money manager in London, with this dire warning: “I take it pretty much
for granted that the 40 year bull market is ending, and that it will be replaced by hard investment times.” And Jeremy Grantham
(also born in England, but long based in the U.S.)
recently
concluded
that stocks, bonds and real estate are all in a bubble and may well collapse together in the next year or two.
Longstanding gloomster John Hussman
estimates
the
S&P 500
SPX,
+1.09%
could
end up losing us all money over the next 20 years even before you deduct inflation, and suspects a quick 25-30% market slump may be
ahead.
I have a guilty secret. I’m a sucker for these warnings (OK, maybe not for Dent’s). They often make for compelling reading. The most
bearish stock market forecasters are generally more intelligent, more freethinking, and more interesting than the average Wall
Street salesman. They usually write much better, too. Hussman’s math and logic are almost unarguable. Why, asked John Wesley, does
the devil have the best tunes? (I am not comparing these people to a religious devil, of course, only to the Wall Street equivalent:
Sinners who may interfere with the business.)
And their arguments make plenty of sense. Maybe not those predicting a market collapse in time for Wimbledon, but those warning us
of grim years ahead. The U.S. stock market is
almost
90% above the level
where the “Warren Buffett Rule” is supposed to trigger red flashing lights and deafening warning sounds. The
so-called
“Shiller”
or
cyclically adjusted price to earnings ratio ], the
Tobin’s
Q
â€" all sorts of measures are telling us some version of Alien’s “Danger! The emergency destruct system is now activated! The
ship will detonate in 30 minutes... 10 minutes ...” Run, don’t walk, to the escape pod. Don’t forget the cat.
And most of the most bullish forecasts we hear from Wall Street involve the simple fallacy of double-counting: The more stocks rise
the better their “historic returns,” which a salesman then cheerfully extrapolates into the future.
... ... ...
It’s not that the bull market salesmen are clearly right. Actually, math and cold hard logic should give anyone cause for concern,
especially about the most euphoric U.S. stocks.
But even if these skeptics turn out to be right, when is it going to happen? Will the market go up another 10% or 20% or 50% before
it turns? Will it happen in June this year â€" or June in 2025?
I always figure that the day I finally decide to tune these guys out altogether will be the moment the Titanic hits the iceberg.
But there are options instead of trying to guess on Boom and Doom. We can just let the market decide for us instead. Money manager
Meb Faber
worked
out
years ago that pretty much every stock market crash or bear market in history has been signaled in advance. If you just
cashed out when the market index first fell below its 200-day moving average, you avoided nearly all the carnage. (OK, in the sudden
1987 one-day crash you got all of a single day’s notice.)
Even if you didn’t end up making more money in the long-term than a buy-and-hold investor, he found, you made pretty much the same
amount … and with far less “volatility“ (and sleepless nights).
Last year this trigger got you out of the S&P 500 on March 2, just before the main implosion. The market rose above the 200-day
moving average again, triggering it was time to get back in, on June 1.
Most people will use the S&P 500 index as their trigger, but Faber found it worked for other assets such as REITs as well. Global
investors may prefer the MSCI All-Country World Index.
Is this system guaranteed to work? Of course not. But nor is anything else. That includes all those bullish predictions that stocks
will earn you inflation plus 6% a year. And those bearish predictions that once the market reaches a certain valuation triggers it’s
heading for disaster. All rules are rely on some assumption that the future will resemble the past.
And using this rule means you can safely and happily ignore all the people predicting the end of the world.
Brett Arends is an award-winning financial writer with many years experience writing about markets, economics and personal
finance. He has received an individual award from the Society of American Business Editors and Writers for his financial
writing, and was part of the Boston Herald team that won two others. He has worked as an analyst at McKinsey & Co., and is a
Chartered Financial Consultant. His latest book, "Storm Proof Your Money", was published by John Wiley & Co.
Amos Library
8 hours ago
It took 19 years and 2 crashes to get to even (inflation adjusted) from the 2000 peak.
James Goodwin
7 hours ago
I've been among the gloomsters for the last decade and evidently wrong. That pessimism (and
lost opportunity) rests on debt and demography which are connected into the future. Our vast
debts are unstainable at these low interest rates unless savings are substantial and
economic growth is high. For now the substantial baby boomer generation (now in their mid
70s and in their mid 50s to 60s) have no alternative but to invest in the stock market. This
is self fulfilling lowering the cost of capital and pushing up returns as central banks can
afford to come to the rescue. That seems to have hit the limits with record low interest
rates and QE now being tested by rising bond yields. But as more retire there will be a
double hit from the higher costs of their health and pensions, and a shrinking workforce
which presents wage bargaining power (technology and globalisation included). That is a
situation which has been slowly developing this last decade (beginning in Japan in the 1990s
and more recently China) and will now accelerate across the developed world (notably in
Italy and Germany). This pivots on Covid caused inflation which seems likely to be more than
a blip. As part of this I am reminded that Japan's Nikkei Index is still 25% below its 1989
high of 38,000. I will retain my wait and see approach while others enjoy themselves talking
and acting like its the roaring 20s.
Reply
6
1
lee Hoffman
James Goodwin
1 hour ago
Well James you will be waiting another 10 years. Your prognostications have been
wrong in the past, and will continue in the future. Bond yields in the US?
What's the bond yields in Germany and Japan? Negative. Yes, the US monetary
policy is suspect. But, compared to what? The Euro? The yen? The Chinese
currency value is tied to ours, not an independent currency at all. Bond yields
here have decelerated mostly because of the ability to arbitrage currency abroad
and buy a 10 year US bond guaranteed by the US at 1.5 as opposed to a German
Bund at negative .30! Yes, there is a wrinkle in the supply chain caused by
Covid, and perhaps exasperated by reluctant workers to return to work, and
frankly an incentive domestically not to go back to work. But the deflationary
levers at work have not abated. The internet, international competition, more
efficient supply chains, and the ability to tap into inexpensive labor worldwide
are still there. You've missed in the last 10 years, by being out of the market
a return of over 500%. Do you really feel qualified to provide investing advice?
Reply
2
David Binkowski
8 hours ago
The ones who treat ever rustle in the grass as a lion, also never become millionaires
because they run every time the grass rustles. Sometimes surviving inhibits thriving.
Reply
6
2
William Howell
David Binkowski
7 hours ago
Wait a minute! Your death also means thriving - for the lion! It's much better
to die as a contributor to vibrant being than to get run over by an inanimate
car. (Message paid for by the Lion's Pride)
Reply
2
Darryl Egbert
David Binkowski
7 hours ago
I became a millionaire through hard work and frugal living and not touching the
stock market (except for some shorts in 2000 and 2008).
Todd Johnson
5 hours ago
In April of this last year 2020 there were many "experts" predicting
an even larger crash after the March 20th bottom from Covid, mainly
due to the economic slowdown and huge jump in unemployment. I felt
that as the pandemic waned the thirst for consumption would
re-emerge so I bought, bought, bought. While Warren Buffet was
selling all his airline stock I was buying them. I made over 50%
return on these investments since then. Not bad!
Reply
2
Mike Mayo
5 hours ago
A homeowner since 1995, I live in St Petersburg, Florida - where
real estate values have exploded over the past few years (since
'17), and there is very little inventory. Without question, this is
NOT a healthy market, and I'm hopeful that prices will in fact
decrease modestly while inventory increases. I have over $400K in
equity in the house, and can't even buy a loaf of bread with it. In
fact, I continue to put money into the house, with repairs,
renovations, etc. Making matters worse, I can't even downsize into
something smaller and less expensive - and bank or invest the
difference - since prices are sky-high and inventory so low. This is
not a healthy or sustainable market. As for the financial markets,
it remains the greatest wealth creator in the history of human-kind.
Markets will always fluctuate, sometimes wildly, but if you keep
cash on the ready, consistently buy the dips and don't sell in a
panic into weakness, you will always make money - and lots of it.
Throughout the bull-market that started in '09, we've had some very
significant down-turns and corrections. December '18 is an excellent
example. The market dropped like a rock, nearly 20% in a month. The
following month, the market came roaring back. I'm confident that at
some point this year, the market will have a 10%+ correction. I will
stay the course, buy that dip aggressively, only to have the market
come roaring back and my net-worth grow.
Reply
2
Paul Johnston
Mike Mayo
5 hours ago
Just curious: If you want to cash out the gains on the
house, why not downsize and buy elsewhere? There are
lots of pleasant places to live besides St Pete, and not
all have low inventory and sky-high prices. Just sayin'....
Reply
don stern
2 hours ago
Since 1793, there has never been a stock market crash
that hasn't resulted, ultimately, in another all time
stock market high.
Reply
2
Thor B
don stern
2 hours ago
The key word is "ultimately"...
Reply
Amos Library
1 hour ago
from a major investment research company V and L weekly
summary 4/30 There are potential flies in the ointment,
however. First, there is a recent jump in inflation,
with the U.S. homebuilding sector and several regional
manufacturing surveys The Value Line View In This Issue
suggesting greater cost pressures. Then, there’s the
troubling uptick in COVID-19 cases, which could slow
progress on the recovery front. Meanwhile, earnings
season is proving to be a solid one so far, with strong
performances from a number of banking giants, as well as
several consumer and tech entities. In all, we think
Corporate America will do well in the coming weeks.
Here, too, there should be further improvement in the
next few quarters. The bull market is rambling on, with
the Dow Jones Industrial Average recently ascending
34,000 for the first time ever while the NASDAQ, off
notably to close the first quarter, is back near 14,000.
What’s more, the recent trends could well continue,
although the high price-earnings ratios and low dividend
yields now in place make the stock market, now priced
for near perfection, vulnerable to unwelcome news. So,
some caution is warranted. Conclusion: We think
investors should proceed with some care, with a wary eye
on price-earnings ratios and dividend yields.
Reply
1
Michael Wilson
2 hours ago
Using both the 50 and 200 DMA as signals works good
also. Sell 1/2 if the 50 is crossed and the other half
if the 200 is crossed. Reverse the method to buy. Worked
great over the last two years.
Jakob Bear
7 hours ago
Well written article thanks.. Growth stocks already crashed though so I'm guessing he is referring to tech and the dow?
Could be, always a good idea to have money on the sidelines to pick up any drastic or non-sensical dips. Dividend stocks
still give dividends also so the economy really would have to crash. Consider we are just coming out of covid and there
is robust growth ahead, it is unlikely the economy is going to crash anytime soon, maybe not grow as fast as
anticipated. But once again bond rates will go down and growth stocks will go up if that happens. Who knows I'll stick
with a few select spec stocks for now they don't follow the market anyways except in short term movements. Good luck
all!
CARLOS T BAEZ
7 hours ago
Discipline always works in the long term. If one treats every
historical proven trigger consistantly, one would do better than
average. The reason that it is called discipline is because it most
be acted upon consistanly. Wealth always runs to where it has been
treated the best historically: Real Estate, US Treasuries,
Commodities (between a cookie brand and a company that provides the
flour, butter, salt and suggar I would always choose the latter),
significant companies' dividend stocks, defensive stocks, major
financial stocks, and major consumer staples stocks. No matter how
the economy/stocks do one has to eat, drink, shelter, utilities,
transportation, communication, health care and die (funeral homes).
If one can not make money (consistantly) with the S&P 500, one can
not make money in any other index consistantly. Never bet against
the USA. We are the Financial/Wealth Heaven in the unniverse.
Reply
2
2
Darryl Egbert
7 hours ago
I really do believe we are now at the point that the Fed cannot
allow assets prices to fall without the real economy taking a huge
nosedive. They have essentially sucked (forced) everyone into the
equities to avoid losing the purchasing power of their savings. If
asset price were to drop by 50%, people would look into their
savings accounts and realize they have to stop consuming and start
saving their a significant income to make up for the losses (the
"wealth effect" that the Fed built the recovery on would go into
reverse). They have said as much in congressional testimony - if a
fall asset prices flows through to the real economy, there is a Fed
"put". One my favorite advisors made a comment this weekend that 20%
fall in equities would be met by the Fed jumping in with $50
billion/month of more QE. He also postulated that they would go find
some good lawyers who could find a loophole around the Federal
Reserve Act, allowing the Fed to directly purchase equities - like
they have been doing in Japan. As Hussman says, even if they could
prevent asset prices from falling materially, the forward returns
will dismal if not negative for decades to come. Fed can postpone -
or maybe even prevent price discovery, but they cannot change the
underlying value of assets. And long as the price of assets exceed
the underlying value, you are swimming against the currents.
Reply
1
William Howell
7 hours ago
Fun article by Brett Arends. This seems to be a basic need of every
human : to carry around at least five "end-of-the-world scenarios"
at all times. Why 5? Because these scenarios have a habit of
[washing out, breaking in two, being mis-placed or forgotten]. But
historically they also become true, even in recent times, and
perhaps to far greater depths than the imaginations of Hollywood?
But one can't stop living for fear of death (or a bad-return year).
At least one of your doomsayers has also been a super-bull on and
off, not a perma-bear.
Reply
1
T Cr
5 hours ago
In the modern data-tracking of stocks, there has never been a
worldwide pandemic coming a few years after a global equities and
banking meltdown. This time right now is unheralded. So, all of the
old "rules" for predicting a turn toward the bears simply can't and
don't count. This is one data point, and you never base a
statistical conclusion on one data point; you need at least 10 for
significance and preferably 20. So, ignore anyone who is using these
old metrics to try to win any argument about upcoming market
conditions. They simply don't even enough data points to base the
future on the past. Instead, look to current forces at play and use
your ability to rank order investment choices for both individual
and institutional investors: inflation and bond yields are
ultra-low, central banks are still involved in some degree of
quantitative easy, federal governments are still stimulating
economic activity, unemployed resources still exist in any number of
sectors (entertainment, food service, vacationing, labor), major
corporations still pay dividends well in excess of inflation (I see
you Verizon and AT&T), and profits in any and all health care
related industries are booming as is residential real estate and IT
(remote learning and work from home). As long as these factors hold,
well chosen stocks or indexes will flourish. Investors don't want
either bonds or CDs, and a tin can in the back yard rarely feels
like a savvy choice.
Reply
michael pyles
3 hours ago
Falling interest rates, decreasing taxes, higher government
spending, rising productivity via automation, and loss of labor
bargaining power via globalization and the destruction of unions,
have all kept the market rising since 1982. Keep your eye of these.
If they begin to change, the outlook for earnings will change. Don't
be a victim to recency bias.
Reply
Amos Library
1 hour ago
Lance Roberts Real investment advice dot com For Jeremy Siegel, making wild
predictions about markets has no consequence. If he is wrong, he makes
another prediction to cover for the first. However, for you, following such
a prediction can have a devastating impact on your short- and long-term
financial goals. The reality is that markets are pushing “rarified air.” It
is unlikely that corporate earnings will achieve the lofty goals set out by
analysts currently. It is also very probable that economic growth may be
weaker than expected. Of course, these are just “concerns” of an overvalued,
extended, and overly bullish market. Sure, the current cyclical bull market
could rise another 30%. Momentum-driven markets are hard to kill in the
latter stages, particularly as exuberance builds. However, they do
eventually end. Will the market likely be higher in another decade from now?
Maybe. However, if interest rates or inflation rise sharply, the economy
moves through a normal recessionary cycle, or if Jack Bogle is
correct, things could be much more disappointing. As Seth Klarman from
Baupost Capital once stated: “Can we say when it will end? No. Can we say
that it will end? Yes. And when it ends and the trend reverses, here is what
we can say for sure. Few will be ready. Few will be prepared.”
Amos Library
1 hour ago
Lance Roberts Real investment advice dot com For Jeremy Siegel,
making wild predictions about markets has no consequence. If he is
wrong, he makes another prediction to cover for the first. However,
for you, following such a prediction can have a devastating impact
on your short- and long-term financial goals. The reality is that
markets are pushing “rarified air.” It is unlikely that corporate
earnings will achieve the lofty goals set out by analysts currently.
It is also very probable that economic growth may be weaker than
expected. Of course, these are just “concerns” of an overvalued,
extended, and overly bullish market. Sure, the current cyclical bull
market could rise another 30%.
Jay Arant
5 hours ago
Dent's thinking sounds dented. We've had quite a few pullbacks since the
beginning of this year and I believe a correction is coming whenever but no one
know exactly WHEN.....Do not put any "stock" into some fringe thinking doomsday
prophesyer which we've all heard before.
Reply
1
1
Gerry Cruzman
Jay Arant
3 hours ago
The US is approaching $30 trillion dollars of National Debt, and we
have a mentally incompetent President and Dems in control of
Congress who have no interest or clue in controlling Federal
spending - and it’s but a matter of time until that massive debt and
uncontrolled spending reeks havoc with our economy...
Reply
1
3
Show 2 more replies
Mike Staples
8 hours ago
When hype runs into reality, there’s a crash. As long as reality is being hid by
money from above, there’s no need to worry.
Reply
Alberto Perez
6 hours ago
With central bankers' feet on the accelerator, it's hard for me to envision a
"crash" anytime soon.
Reply
Maitreya riske
Alberto Perez
5 hours ago
Almost every crash has been caused by the Central Bank trying to
goose the economy. The next one will be also.
Reply
Maitreya riske
6 hours ago
The BIG issue with the market as currently configured is that we are relying on
the FED to save us if something goes wrong even though these are the exactly the
same people who have destroyed all market pricing signals/ pushed us all to the
same side of the boat at the same time/ continually tried to goose the economy
over and over until interest rates have been lowered to zero. Well guess what?
Now they are trapped because how do you engineer a new bull market when you
can't lower rates the next time something bad happens. That's the problem, we're
told everything is fine but its not. If we actually had a real economy based on
savings and investing instead of a giant pozzi game based on IOU's and Debt then
maybe people wouldn't be so worried. You should be worried because trusting
these people is a fool's errand. But don't worry Goldman Sachs will be there
with plenty of cash to buy all your assets for dirt cheap when the time comes.
Reply
T Cr
Maitreya riske
5 hours ago
You see only the FED as a key actor in macro policy. Keynes holds
most of the cards, though, not the FED. Stimulus by the Treasury for
brick and mortar projects is ultimately much more powerful than the
FED, and requires no changes in either taxation or the
buying/selling of Treasuries. Any spending that is needed is simply
done by creating new money via the Treasury, which is its
Constitutional authority. As long as inflation is well under 3%, say
most economists, creating new money nudges innovation, upgrading of
infrastructure, enhanced education for a smarter future work force
and enhanced productivity. Priming the economic pump is not a Ponzi
scheme, since no one has to be "paid back", ever, as in a Ponzi
scheme. There is no "debt" when the Treasury creates new money.
Reply
1
Hey Now
4 hours ago
I just figured loose monetary policy from the Fed would keep this bull market
going.
Reply
Mike Elek
5 hours ago
Somewhere between market doomsday and the never-ending party is the truth. For
those who have warned, "Cash out now!" for the past five years, well, they
missed out on an incredible bull run. Then there are those who post rocket
emojis and expect this bull run to continue forever. I'm OK with a market
downturn, because it's healthy. Fundamentals should win out, because someone
always wins on Wall Street. All of those who short stocks help the market,
because their bearish predictions help to keep stock prices in check (my
theory). Another of my theories is that Trump kept the market in check. Every
time the market seemed ready for a big run-up, he would say something
ridiculous, and the market would slide. I think that this prevented a massive
bubble and crash. His big mouth caused mini-corrections, which in the long run
helped the market. ...
See
more
Reply
Dave N Japan
1 hour ago
I see the market not doing much in he next 4 years, but not a collapse, It all
depends on China and Taiwan I think
Reply
average american
3 hours ago
Please read this info from Indian medical experts regarding COVID triple
mutation. If this is true a market crash is around the corner. Western world
doesn’t want you to know. The Times of India spoke to Vinod Scaria, a researcher
at the CSIR-Institute of Genomics and Integrative Biology in India, who said the
triple-mutant was also an "immune escape variant" â€" a strain that helps the
virus attach to human cells and hide from the immune system. In other words, you
may not be safe from this variant even if you were previously infected by
another strain, or even if you have been vaccinated," Chinnaswamy said.
Reply
"... The Fed has been buying $80 billion in Treasurys each month since June and slashed rates to near zero in March to stabilize financial markets. ..."
"... The Fed has been buying $80 billion in Treasurys each month since June and slashed rates to near zero in March to stabilize financial markets. ..."
"... The Fed has been buying $80 billion in Treasurys each month since June and slashed rates to near zero in March to stabilize financial markets. ..."
"... The Fed has been buying $80 billion in Treasurys each month since June and slashed rates to near zero in March to stabilize financial markets. ..."
"... The Fed has been buying $80 billion in Treasurys each month since June and slashed rates to near zero in March to stabilize financial markets. ..."
"... The Fed has been buying $80 billion in Treasurys each month since June and slashed rates to near zero in March to stabilize financial markets. ..."
"... The Fed has been buying $80 billion in Treasurys each month since June and slashed rates to near zero in March to stabilize financial markets. ..."
"... The Fed has been buying $80 billion in Treasurys each month since June and slashed rates to near zero in March to stabilize financial markets. ..."
"... The Fed has been buying $80 billion in Treasurys each month since June and slashed rates to near zero in March to stabilize financial markets. ..."
"... The Fed has been buying $80 billion in Treasurys each month since June and slashed rates to near zero in March to stabilize financial markets. ..."
"... The Fed has been buying $80 billion in Treasurys each month since June and slashed rates to near zero in March to stabilize financial markets. ..."
The spread between the two-year Treasury yield and a key interest rate set by the Federal Reserve is the narrowest since the depths
of the coronavirus market selloff, a potential sign of financial-system stress.
The two-year Treasury yield, which closed Tuesday at 0.115%, is 0.015 percentage point above the interest rate on excess reserves,
or IOER. It traded as low as 0.105% earlier in February. The Fed pays banks on the reserves held above and beyond those required by
central-bank regulatory policy as part of its effort to maintain liquidity in the financial system.
When the coronavirus
sent
markets and the economy into a tailspin
in March, the Fed cut IOER by 1 percentage point to 0.10% --
alongside
other interventions
-- to shore up short-term lending markets and support economic activity. The spread between IOER and the
two-year yield has typically been above 0.05 percentage point since the Fed cut the rate to its lowest level ever in March.
Yield on U.S. 10-year Treasury note
Source:
Tullett Prebon
%
March
2020
'21
0.4
0.6
0.8
1.0
1.2
1.4
1.6
Traders said the shrinking of this spread reflects appetite for short-term debt as investors gobble up safe assets and park
their cash. It also highlights a key tension point in financial markets: to what extent is Fed support for markets taking asset
prices to unsustainable levels, and how vulnerable does that leave bond markets and other areas exposed to sudden reversals
...bond traders are concerned that inflation could rise in coming months and years as the government prints money to support the
economy and cover future borrowing costs.
Traders contend that short-term yields would be higher if the central bank wasn't anchoring rates.
The Fed has been
buying $80 billion in Treasurys each month since June and slashed rates to near zero in March to stabilize financial markets.
The idea is that low interest rates and bond buying boost spending by providing cheap credit to businesses and households.
Some bond investors fear too much cheap credit will mean inflation.
...
Another
corner of U.S. markets is sending warning signals: the 10-year break-even rate, which tracks annual inflation expectations over
the next decade, traded as high as 2.24% last week.
....The difference between the break-even rate and the Treasury yield recently widened to more than 1 percentage point. For some
this is a sign that inflation isn't far off, and in the meantime that financial markets remain vulnerable to bubbles.
"I would characterize the phase we are in now as an era of hyperstimulation between fiscal and monetary policy," said Thomas
Pluta, global head of linear rates trading at JPMorgan Chase & Co. "The byproduct is all this cash sloshing around the system
chasing assets like crypto, commodities and meme stocks." (Traders on Reddit's WallStreetBets forum use memes such as a rocket
emoji to accompany favorite stock picks like GameStop Corp.)
SUBSCRIBER
1 month ago
So every time the stock market wobbles the Fed is going to step up and say "don't worry, hang onto your stocks
and bonds, we'll keep printing more money?"
The spread between the two-year Treasury yield and a key interest rate set by the Federal Reserve is the narrowest since the depths
of the coronavirus market selloff, a potential sign of financial-system stress.
The two-year Treasury yield, which closed Tuesday at 0.115%, is 0.015 percentage point above the interest rate on excess reserves,
or IOER. It traded as low as 0.105% earlier in February. The Fed pays banks on the reserves held above and beyond those required by
central-bank regulatory policy as part of its effort to maintain liquidity in the financial system.
When the coronavirus
sent
markets and the economy into a tailspin
in March, the Fed cut IOER by 1 percentage point to 0.10% --
alongside
other interventions
-- to shore up short-term lending markets and support economic activity. The spread between IOER and the
two-year yield has typically been above 0.05 percentage point since the Fed cut the rate to its lowest level ever in March.
Yield on U.S. 10-year Treasury note
Source:
Tullett Prebon
%
March
2020
'21
0.4
0.6
0.8
1.0
1.2
1.4
1.6
Traders said the shrinking of this spread reflects appetite for short-term debt as investors gobble up safe assets and park
their cash. It also highlights a key tension point in financial markets: to what extent is Fed support for markets taking asset
prices to unsustainable levels, and how vulnerable does that leave bond markets and other areas exposed to sudden reversals
...bond traders are concerned that inflation could rise in coming months and years as the government prints money to support the
economy and cover future borrowing costs.
Traders contend that short-term yields would be higher if the central bank wasn't anchoring rates.
The Fed has been
buying $80 billion in Treasurys each month since June and slashed rates to near zero in March to stabilize financial markets.
The idea is that low interest rates and bond buying boost spending by providing cheap credit to businesses and households.
Some bond investors fear too much cheap credit will mean inflation.
...
Another
corner of U.S. markets is sending warning signals: the 10-year break-even rate, which tracks annual inflation expectations over
the next decade, traded as high as 2.24% last week.
....The difference between the break-even rate and the Treasury yield recently widened to more than 1 percentage point. For some
this is a sign that inflation isn't far off, and in the meantime that financial markets remain vulnerable to bubbles.
"I would characterize the phase we are in now as an era of hyperstimulation between fiscal and monetary policy," said Thomas
Pluta, global head of linear rates trading at JPMorgan Chase & Co. "The byproduct is all this cash sloshing around the system
chasing assets like crypto, commodities and meme stocks." (Traders on Reddit's WallStreetBets forum use memes such as a rocket
emoji to accompany favorite stock picks like GameStop Corp.)
SUBSCRIBER
1 month ago
So every time the stock market wobbles the Fed is going to step up and say "don't worry, hang onto your stocks
and bonds, we'll keep printing more money?"
The spread between the two-year Treasury yield and a key interest rate set by the Federal Reserve is the narrowest since the depths
of the coronavirus market selloff, a potential sign of financial-system stress.
The two-year Treasury yield, which closed Tuesday at 0.115%, is 0.015 percentage point above the interest rate on excess reserves,
or IOER. It traded as low as 0.105% earlier in February. The Fed pays banks on the reserves held above and beyond those required by
central-bank regulatory policy as part of its effort to maintain liquidity in the financial system.
When the coronavirus
sent
markets and the economy into a tailspin
in March, the Fed cut IOER by 1 percentage point to 0.10% --
alongside
other interventions
-- to shore up short-term lending markets and support economic activity. The spread between IOER and the
two-year yield has typically been above 0.05 percentage point since the Fed cut the rate to its lowest level ever in March.
Yield on U.S. 10-year Treasury note
Source:
Tullett Prebon
%
March
2020
'21
0.4
0.6
0.8
1.0
1.2
1.4
1.6
Traders said the shrinking of this spread reflects appetite for short-term debt as investors gobble up safe assets and park
their cash. It also highlights a key tension point in financial markets: to what extent is Fed support for markets taking asset
prices to unsustainable levels, and how vulnerable does that leave bond markets and other areas exposed to sudden reversals
...bond traders are concerned that inflation could rise in coming months and years as the government prints money to support the
economy and cover future borrowing costs.
Traders contend that short-term yields would be higher if the central bank wasn't anchoring rates.
The Fed has been
buying $80 billion in Treasurys each month since June and slashed rates to near zero in March to stabilize financial markets.
The idea is that low interest rates and bond buying boost spending by providing cheap credit to businesses and households.
Some bond investors fear too much cheap credit will mean inflation.
...
Another
corner of U.S. markets is sending warning signals: the 10-year break-even rate, which tracks annual inflation expectations over
the next decade, traded as high as 2.24% last week.
....The difference between the break-even rate and the Treasury yield recently widened to more than 1 percentage point. For some
this is a sign that inflation isn't far off, and in the meantime that financial markets remain vulnerable to bubbles.
"I would characterize the phase we are in now as an era of hyperstimulation between fiscal and monetary policy," said Thomas
Pluta, global head of linear rates trading at JPMorgan Chase & Co. "The byproduct is all this cash sloshing around the system
chasing assets like crypto, commodities and meme stocks." (Traders on Reddit's WallStreetBets forum use memes such as a rocket
emoji to accompany favorite stock picks like GameStop Corp.)
SUBSCRIBER
1 month ago
So every time the stock market wobbles the Fed is going to step up and say "don't worry, hang onto your stocks
and bonds, we'll keep printing more money?"
The spread between the two-year Treasury yield and a key interest rate set by the Federal Reserve is the narrowest since the depths
of the coronavirus market selloff, a potential sign of financial-system stress.
The two-year Treasury yield, which closed Tuesday at 0.115%, is 0.015 percentage point above the interest rate on excess reserves,
or IOER. It traded as low as 0.105% earlier in February. The Fed pays banks on the reserves held above and beyond those required by
central-bank regulatory policy as part of its effort to maintain liquidity in the financial system.
When the coronavirus
sent
markets and the economy into a tailspin
in March, the Fed cut IOER by 1 percentage point to 0.10% --
alongside
other interventions
-- to shore up short-term lending markets and support economic activity. The spread between IOER and the
two-year yield has typically been above 0.05 percentage point since the Fed cut the rate to its lowest level ever in March.
Yield on U.S. 10-year Treasury note
Source:
Tullett Prebon
%
March
2020
'21
0.4
0.6
0.8
1.0
1.2
1.4
1.6
Traders said the shrinking of this spread reflects appetite for short-term debt as investors gobble up safe assets and park
their cash. It also highlights a key tension point in financial markets: to what extent is Fed support for markets taking asset
prices to unsustainable levels, and how vulnerable does that leave bond markets and other areas exposed to sudden reversals
...bond traders are concerned that inflation could rise in coming months and years as the government prints money to support the
economy and cover future borrowing costs.
Traders contend that short-term yields would be higher if the central bank wasn't anchoring rates.
The Fed has been
buying $80 billion in Treasurys each month since June and slashed rates to near zero in March to stabilize financial markets.
The idea is that low interest rates and bond buying boost spending by providing cheap credit to businesses and households.
Some bond investors fear too much cheap credit will mean inflation.
...
Another
corner of U.S. markets is sending warning signals: the 10-year break-even rate, which tracks annual inflation expectations over
the next decade, traded as high as 2.24% last week.
....The difference between the break-even rate and the Treasury yield recently widened to more than 1 percentage point. For some
this is a sign that inflation isn't far off, and in the meantime that financial markets remain vulnerable to bubbles.
"I would characterize the phase we are in now as an era of hyperstimulation between fiscal and monetary policy," said Thomas
Pluta, global head of linear rates trading at JPMorgan Chase & Co. "The byproduct is all this cash sloshing around the system
chasing assets like crypto, commodities and meme stocks." (Traders on Reddit's WallStreetBets forum use memes such as a rocket
emoji to accompany favorite stock picks like GameStop Corp.)
SUBSCRIBER
1 month ago
So every time the stock market wobbles the Fed is going to step up and say "don't worry, hang onto your stocks
and bonds, we'll keep printing more money?"
The spread between the two-year Treasury yield and a key interest rate set by the Federal Reserve is the narrowest since the depths
of the coronavirus market selloff, a potential sign of financial-system stress.
The two-year Treasury yield, which closed Tuesday at 0.115%, is 0.015 percentage point above the interest rate on excess reserves,
or IOER. It traded as low as 0.105% earlier in February. The Fed pays banks on the reserves held above and beyond those required by
central-bank regulatory policy as part of its effort to maintain liquidity in the financial system.
When the coronavirus
sent
markets and the economy into a tailspin
in March, the Fed cut IOER by 1 percentage point to 0.10% --
alongside
other interventions
-- to shore up short-term lending markets and support economic activity. The spread between IOER and the
two-year yield has typically been above 0.05 percentage point since the Fed cut the rate to its lowest level ever in March.
Yield on U.S. 10-year Treasury note
Source:
Tullett Prebon
%
March
2020
'21
0.4
0.6
0.8
1.0
1.2
1.4
1.6
Traders said the shrinking of this spread reflects appetite for short-term debt as investors gobble up safe assets and park
their cash. It also highlights a key tension point in financial markets: to what extent is Fed support for markets taking asset
prices to unsustainable levels, and how vulnerable does that leave bond markets and other areas exposed to sudden reversals
...bond traders are concerned that inflation could rise in coming months and years as the government prints money to support the
economy and cover future borrowing costs.
Traders contend that short-term yields would be higher if the central bank wasn't anchoring rates.
The Fed has been
buying $80 billion in Treasurys each month since June and slashed rates to near zero in March to stabilize financial markets.
The idea is that low interest rates and bond buying boost spending by providing cheap credit to businesses and households.
Some bond investors fear too much cheap credit will mean inflation.
...
Another
corner of U.S. markets is sending warning signals: the 10-year break-even rate, which tracks annual inflation expectations over
the next decade, traded as high as 2.24% last week.
....The difference between the break-even rate and the Treasury yield recently widened to more than 1 percentage point. For some
this is a sign that inflation isn't far off, and in the meantime that financial markets remain vulnerable to bubbles.
"I would characterize the phase we are in now as an era of hyperstimulation between fiscal and monetary policy," said Thomas
Pluta, global head of linear rates trading at JPMorgan Chase & Co. "The byproduct is all this cash sloshing around the system
chasing assets like crypto, commodities and meme stocks." (Traders on Reddit's WallStreetBets forum use memes such as a rocket
emoji to accompany favorite stock picks like GameStop Corp.)
SUBSCRIBER
1 month ago
So every time the stock market wobbles the Fed is going to step up and say "don't worry, hang onto your stocks
and bonds, we'll keep printing more money?"
The spread between the two-year Treasury yield and a key interest rate set by the Federal Reserve is the narrowest since the depths
of the coronavirus market selloff, a potential sign of financial-system stress.
The two-year Treasury yield, which closed Tuesday at 0.115%, is 0.015 percentage point above the interest rate on excess reserves,
or IOER. It traded as low as 0.105% earlier in February. The Fed pays banks on the reserves held above and beyond those required by
central-bank regulatory policy as part of its effort to maintain liquidity in the financial system.
When the coronavirus
sent
markets and the economy into a tailspin
in March, the Fed cut IOER by 1 percentage point to 0.10% --
alongside
other interventions
-- to shore up short-term lending markets and support economic activity. The spread between IOER and the
two-year yield has typically been above 0.05 percentage point since the Fed cut the rate to its lowest level ever in March.
Yield on U.S. 10-year Treasury note
Source:
Tullett Prebon
%
March
2020
'21
0.4
0.6
0.8
1.0
1.2
1.4
1.6
Traders said the shrinking of this spread reflects appetite for short-term debt as investors gobble up safe assets and park
their cash. It also highlights a key tension point in financial markets: to what extent is Fed support for markets taking asset
prices to unsustainable levels, and how vulnerable does that leave bond markets and other areas exposed to sudden reversals
...bond traders are concerned that inflation could rise in coming months and years as the government prints money to support the
economy and cover future borrowing costs.
Traders contend that short-term yields would be higher if the central bank wasn't anchoring rates.
The Fed has been
buying $80 billion in Treasurys each month since June and slashed rates to near zero in March to stabilize financial markets.
The idea is that low interest rates and bond buying boost spending by providing cheap credit to businesses and households.
Some bond investors fear too much cheap credit will mean inflation.
...
Another
corner of U.S. markets is sending warning signals: the 10-year break-even rate, which tracks annual inflation expectations over
the next decade, traded as high as 2.24% last week.
....The difference between the break-even rate and the Treasury yield recently widened to more than 1 percentage point. For some
this is a sign that inflation isn't far off, and in the meantime that financial markets remain vulnerable to bubbles.
"I would characterize the phase we are in now as an era of hyperstimulation between fiscal and monetary policy," said Thomas
Pluta, global head of linear rates trading at JPMorgan Chase & Co. "The byproduct is all this cash sloshing around the system
chasing assets like crypto, commodities and meme stocks." (Traders on Reddit's WallStreetBets forum use memes such as a rocket
emoji to accompany favorite stock picks like GameStop Corp.)
SUBSCRIBER
1 month ago
So every time the stock market wobbles the Fed is going to step up and say "don't worry, hang onto your stocks
and bonds, we'll keep printing more money?"
The spread between the two-year Treasury yield and a key interest rate set by the Federal Reserve is the narrowest since the depths
of the coronavirus market selloff, a potential sign of financial-system stress.
The two-year Treasury yield, which closed Tuesday at 0.115%, is 0.015 percentage point above the interest rate on excess reserves,
or IOER. It traded as low as 0.105% earlier in February. The Fed pays banks on the reserves held above and beyond those required by
central-bank regulatory policy as part of its effort to maintain liquidity in the financial system.
When the coronavirus
sent
markets and the economy into a tailspin
in March, the Fed cut IOER by 1 percentage point to 0.10% --
alongside
other interventions
-- to shore up short-term lending markets and support economic activity. The spread between IOER and the
two-year yield has typically been above 0.05 percentage point since the Fed cut the rate to its lowest level ever in March.
Yield on U.S. 10-year Treasury note
Source:
Tullett Prebon
%
March
2020
'21
0.4
0.6
0.8
1.0
1.2
1.4
1.6
Traders said the shrinking of this spread reflects appetite for short-term debt as investors gobble up safe assets and park
their cash. It also highlights a key tension point in financial markets: to what extent is Fed support for markets taking asset
prices to unsustainable levels, and how vulnerable does that leave bond markets and other areas exposed to sudden reversals
...bond traders are concerned that inflation could rise in coming months and years as the government prints money to support the
economy and cover future borrowing costs.
Traders contend that short-term yields would be higher if the central bank wasn't anchoring rates.
The Fed has been
buying $80 billion in Treasurys each month since June and slashed rates to near zero in March to stabilize financial markets.
The idea is that low interest rates and bond buying boost spending by providing cheap credit to businesses and households.
Some bond investors fear too much cheap credit will mean inflation.
...
Another
corner of U.S. markets is sending warning signals: the 10-year break-even rate, which tracks annual inflation expectations over
the next decade, traded as high as 2.24% last week.
....The difference between the break-even rate and the Treasury yield recently widened to more than 1 percentage point. For some
this is a sign that inflation isn't far off, and in the meantime that financial markets remain vulnerable to bubbles.
"I would characterize the phase we are in now as an era of hyperstimulation between fiscal and monetary policy," said Thomas
Pluta, global head of linear rates trading at JPMorgan Chase & Co. "The byproduct is all this cash sloshing around the system
chasing assets like crypto, commodities and meme stocks." (Traders on Reddit's WallStreetBets forum use memes such as a rocket
emoji to accompany favorite stock picks like GameStop Corp.)
SUBSCRIBER
1 month ago
So every time the stock market wobbles the Fed is going to step up and say "don't worry, hang onto your stocks
and bonds, we'll keep printing more money?"
The spread between the two-year Treasury yield and a key interest rate set by the Federal Reserve is the narrowest since the depths
of the coronavirus market selloff, a potential sign of financial-system stress.
The two-year Treasury yield, which closed Tuesday at 0.115%, is 0.015 percentage point above the interest rate on excess reserves,
or IOER. It traded as low as 0.105% earlier in February. The Fed pays banks on the reserves held above and beyond those required by
central-bank regulatory policy as part of its effort to maintain liquidity in the financial system.
When the coronavirus
sent
markets and the economy into a tailspin
in March, the Fed cut IOER by 1 percentage point to 0.10% --
alongside
other interventions
-- to shore up short-term lending markets and support economic activity. The spread between IOER and the
two-year yield has typically been above 0.05 percentage point since the Fed cut the rate to its lowest level ever in March.
Yield on U.S. 10-year Treasury note
Source:
Tullett Prebon
%
March
2020
'21
0.4
0.6
0.8
1.0
1.2
1.4
1.6
Traders said the shrinking of this spread reflects appetite for short-term debt as investors gobble up safe assets and park
their cash. It also highlights a key tension point in financial markets: to what extent is Fed support for markets taking asset
prices to unsustainable levels, and how vulnerable does that leave bond markets and other areas exposed to sudden reversals
...bond traders are concerned that inflation could rise in coming months and years as the government prints money to support the
economy and cover future borrowing costs.
Traders contend that short-term yields would be higher if the central bank wasn't anchoring rates.
The Fed has been
buying $80 billion in Treasurys each month since June and slashed rates to near zero in March to stabilize financial markets.
The idea is that low interest rates and bond buying boost spending by providing cheap credit to businesses and households.
Some bond investors fear too much cheap credit will mean inflation.
...
Another
corner of U.S. markets is sending warning signals: the 10-year break-even rate, which tracks annual inflation expectations over
the next decade, traded as high as 2.24% last week.
....The difference between the break-even rate and the Treasury yield recently widened to more than 1 percentage point. For some
this is a sign that inflation isn't far off, and in the meantime that financial markets remain vulnerable to bubbles.
"I would characterize the phase we are in now as an era of hyperstimulation between fiscal and monetary policy," said Thomas
Pluta, global head of linear rates trading at JPMorgan Chase & Co. "The byproduct is all this cash sloshing around the system
chasing assets like crypto, commodities and meme stocks." (Traders on Reddit's WallStreetBets forum use memes such as a rocket
emoji to accompany favorite stock picks like GameStop Corp.)
SUBSCRIBER
1 month ago
So every time the stock market wobbles the Fed is going to step up and say "don't worry, hang onto your stocks
and bonds, we'll keep printing more money?"
The spread between the two-year Treasury yield and a key interest rate set by the Federal Reserve is the narrowest since the depths
of the coronavirus market selloff, a potential sign of financial-system stress.
The two-year Treasury yield, which closed Tuesday at 0.115%, is 0.015 percentage point above the interest rate on excess reserves,
or IOER. It traded as low as 0.105% earlier in February. The Fed pays banks on the reserves held above and beyond those required by
central-bank regulatory policy as part of its effort to maintain liquidity in the financial system.
When the coronavirus
sent
markets and the economy into a tailspin
in March, the Fed cut IOER by 1 percentage point to 0.10% --
alongside
other interventions
-- to shore up short-term lending markets and support economic activity. The spread between IOER and the
two-year yield has typically been above 0.05 percentage point since the Fed cut the rate to its lowest level ever in March.
Yield on U.S. 10-year Treasury note
Source:
Tullett Prebon
%
March
2020
'21
0.4
0.6
0.8
1.0
1.2
1.4
1.6
Traders said the shrinking of this spread reflects appetite for short-term debt as investors gobble up safe assets and park
their cash. It also highlights a key tension point in financial markets: to what extent is Fed support for markets taking asset
prices to unsustainable levels, and how vulnerable does that leave bond markets and other areas exposed to sudden reversals
...bond traders are concerned that inflation could rise in coming months and years as the government prints money to support the
economy and cover future borrowing costs.
Traders contend that short-term yields would be higher if the central bank wasn't anchoring rates.
The Fed has been
buying $80 billion in Treasurys each month since June and slashed rates to near zero in March to stabilize financial markets.
The idea is that low interest rates and bond buying boost spending by providing cheap credit to businesses and households.
Some bond investors fear too much cheap credit will mean inflation.
...
Another
corner of U.S. markets is sending warning signals: the 10-year break-even rate, which tracks annual inflation expectations over
the next decade, traded as high as 2.24% last week.
....The difference between the break-even rate and the Treasury yield recently widened to more than 1 percentage point. For some
this is a sign that inflation isn't far off, and in the meantime that financial markets remain vulnerable to bubbles.
"I would characterize the phase we are in now as an era of hyperstimulation between fiscal and monetary policy," said Thomas
Pluta, global head of linear rates trading at JPMorgan Chase & Co. "The byproduct is all this cash sloshing around the system
chasing assets like crypto, commodities and meme stocks." (Traders on Reddit's WallStreetBets forum use memes such as a rocket
emoji to accompany favorite stock picks like GameStop Corp.)
SUBSCRIBER
1 month ago
So every time the stock market wobbles the Fed is going to step up and say "don't worry, hang onto your stocks
and bonds, we'll keep printing more money?"
The spread between the two-year Treasury yield and a key interest rate set by the Federal Reserve is the narrowest since the depths
of the coronavirus market selloff, a potential sign of financial-system stress.
The two-year Treasury yield, which closed Tuesday at 0.115%, is 0.015 percentage point above the interest rate on excess reserves,
or IOER. It traded as low as 0.105% earlier in February. The Fed pays banks on the reserves held above and beyond those required by
central-bank regulatory policy as part of its effort to maintain liquidity in the financial system.
When the coronavirus
sent
markets and the economy into a tailspin
in March, the Fed cut IOER by 1 percentage point to 0.10% --
alongside
other interventions
-- to shore up short-term lending markets and support economic activity. The spread between IOER and the
two-year yield has typically been above 0.05 percentage point since the Fed cut the rate to its lowest level ever in March.
Yield on U.S. 10-year Treasury note
Source:
Tullett Prebon
%
March
2020
'21
0.4
0.6
0.8
1.0
1.2
1.4
1.6
Traders said the shrinking of this spread reflects appetite for short-term debt as investors gobble up safe assets and park
their cash. It also highlights a key tension point in financial markets: to what extent is Fed support for markets taking asset
prices to unsustainable levels, and how vulnerable does that leave bond markets and other areas exposed to sudden reversals
...bond traders are concerned that inflation could rise in coming months and years as the government prints money to support the
economy and cover future borrowing costs.
Traders contend that short-term yields would be higher if the central bank wasn't anchoring rates.
The Fed has been
buying $80 billion in Treasurys each month since June and slashed rates to near zero in March to stabilize financial markets.
The idea is that low interest rates and bond buying boost spending by providing cheap credit to businesses and households.
Some bond investors fear too much cheap credit will mean inflation.
...
Another
corner of U.S. markets is sending warning signals: the 10-year break-even rate, which tracks annual inflation expectations over
the next decade, traded as high as 2.24% last week.
....The difference between the break-even rate and the Treasury yield recently widened to more than 1 percentage point. For some
this is a sign that inflation isn't far off, and in the meantime that financial markets remain vulnerable to bubbles.
"I would characterize the phase we are in now as an era of hyperstimulation between fiscal and monetary policy," said Thomas
Pluta, global head of linear rates trading at JPMorgan Chase & Co. "The byproduct is all this cash sloshing around the system
chasing assets like crypto, commodities and meme stocks." (Traders on Reddit's WallStreetBets forum use memes such as a rocket
emoji to accompany favorite stock picks like GameStop Corp.)
SUBSCRIBER
1 month ago
So every time the stock market wobbles the Fed is going to step up and say "don't worry, hang onto your stocks
and bonds, we'll keep printing more money?"
The spread between the two-year Treasury yield and a key interest rate set by the Federal Reserve is the narrowest since the depths
of the coronavirus market selloff, a potential sign of financial-system stress.
The two-year Treasury yield, which closed Tuesday at 0.115%, is 0.015 percentage point above the interest rate on excess reserves,
or IOER. It traded as low as 0.105% earlier in February. The Fed pays banks on the reserves held above and beyond those required by
central-bank regulatory policy as part of its effort to maintain liquidity in the financial system.
When the coronavirus
sent
markets and the economy into a tailspin
in March, the Fed cut IOER by 1 percentage point to 0.10% --
alongside
other interventions
-- to shore up short-term lending markets and support economic activity. The spread between IOER and the
two-year yield has typically been above 0.05 percentage point since the Fed cut the rate to its lowest level ever in March.
Yield on U.S. 10-year Treasury note
Source:
Tullett Prebon
%
March
2020
'21
0.4
0.6
0.8
1.0
1.2
1.4
1.6
Traders said the shrinking of this spread reflects appetite for short-term debt as investors gobble up safe assets and park
their cash. It also highlights a key tension point in financial markets: to what extent is Fed support for markets taking asset
prices to unsustainable levels, and how vulnerable does that leave bond markets and other areas exposed to sudden reversals
...bond traders are concerned that inflation could rise in coming months and years as the government prints money to support the
economy and cover future borrowing costs.
Traders contend that short-term yields would be higher if the central bank wasn't anchoring rates.
The Fed has been
buying $80 billion in Treasurys each month since June and slashed rates to near zero in March to stabilize financial markets.
The idea is that low interest rates and bond buying boost spending by providing cheap credit to businesses and households.
Some bond investors fear too much cheap credit will mean inflation.
...
Another
corner of U.S. markets is sending warning signals: the 10-year break-even rate, which tracks annual inflation expectations over
the next decade, traded as high as 2.24% last week.
....The difference between the break-even rate and the Treasury yield recently widened to more than 1 percentage point. For some
this is a sign that inflation isn't far off, and in the meantime that financial markets remain vulnerable to bubbles.
"I would characterize the phase we are in now as an era of hyperstimulation between fiscal and monetary policy," said Thomas
Pluta, global head of linear rates trading at JPMorgan Chase & Co. "The byproduct is all this cash sloshing around the system
chasing assets like crypto, commodities and meme stocks." (Traders on Reddit's WallStreetBets forum use memes such as a rocket
emoji to accompany favorite stock picks like GameStop Corp.)
SUBSCRIBER
1 month ago
So every time the stock market wobbles the Fed is going to step up and say "don't worry, hang onto your stocks
and bonds, we'll keep printing more money?"
"... Still, credit risk has been rising in the $1.2 trillion market of below-investment-grade loans, like those Cyxtera took on for its 2017 acquisition by private-equity firms. Issuers of such "leveraged loans" are also being acquired by SPACs. That will likely lead to higher levels of distress among such companies in the next economic downturn, according to Mr. Daigle. ..."
... Conditions are significantly different now than in 1999, when speculative telecommunications companies raised capital by issuing
stock and high-yield bonds, Mr. Daigle said. That bubble enabled companies like Global Crossing Ltd., Iridium LLC and WorldCom Inc.,
to raise billions of dollars
before they went bankrupt .
"The biggest lesson for the leveraged finance market from the late 1990s is that no amount of equity can salvage a bad business
model," Mr. Daigle said.
In contrast, the average credit quality of high-yield bond issuers today is relatively strong. More than half of high-yield bonds
are rated double-B, the highest below-investment-grade rating, compared with a historical average of 35%, Citigroup's Mr. Anderson
said.
Still, credit risk has been rising in the $1.2 trillion market of below-investment-grade loans, like those Cyxtera took on
for its 2017 acquisition by private-equity firms. Issuers of such "leveraged loans" are also being acquired by SPACs. That will
likely lead to higher levels of distress among such companies in the next economic downturn, according to Mr. Daigle.
"It's the opposite of what we saw in the 1990s when the speculative lending was happening in the high-yield bond market,"
he said.
Contra market is a description of an asset or investment that moves against the trend of the broad market. Contra market securities
and sectors tend to have a negative correlation
, or weak correlation, with the broader market index and the general economy. When the economy is weak or stock market indexes
underperform , contra segments
outperform , and vice versa.
Understanding a Contra Market
A contra market stock or sector is one that performs well in bear markets and underperforms in bull markets. For example,
defensive stocks â€"so called because of their
relative immunity to economic cycles â€"such
as large pharmaceuticals and utilities, may outperform (but not necessarily rise in value) during bear markets because of their stable
revenues and cash flows. However, they may not fare as well during bull markets when investors favor riskier stocks and sectors such
as technology and basic materials.
"Safe haven" securities such as U.S. Treasuries
and gold, which have the greatest appeal during economic turmoil, are also classic examples of contra market plays.
KEY TAKEAWAYS
A contra market is one that moves against the trend of the broader market and tends to have a negative correlation with it,
or at least a relatively weak correlation.
Investors utilize contra markets to hedge, make contrarian investment plays, or to diversify holdings.
The advantage of contra markets is that they tend to be out favor when the broader market is doing well, which may provide
some opportunities for value investors to
snatch up some deals.
The disadvantage of contra markets is that investing in them during a broad market rally could mean missing out on big returns
from the broader market.
Contra Market Strategies
Contra market strategies are employed for a variety of reasons. Possibly an investor believes the broader market will decline,
and so they wish to gain some protection, or possibly profit, by moving some or all of their funds into contra markets. Or possibly
the investor is a contrarian , meaning they prefer
to buy or sell assets that go against the flow of the broader market or economy. The investor may also simply want to
diversify and not hold only assets that tend
to move in the same direction.
Hedging: Investors can use simple contra market strategies to
hedge their portfolios. For example, if an investor’s
portfolio has significant exposure to equities, they could purchase an asset class that is typically viewed as a
safe haven , such as gold, to protect against
a severe stock market downturn. Investors can purchase physical gold from government mints, precious metal dealers and jewelers,
or through futures contracts on a commodities exchange. Buying a gold
exchange-traded fund (ETF) like the SPDR Gold Trust
Shares (GLD) is another way that investors can gain exposure to the commodity.
Contrarian Investing: Using contra market strategies can help contrarian investors profit against the crowd. Some fund managers
believe that taking a long position in an aging bull
market is the "crowded trade," meaning there is little room for new money to push the market higher. Instead of taking the obvious
trade, the contrarian investor may look for investment opportunities that outperform if the broader stock market starts to fall,
for instance, purchasing an ETF that returns the inverse performance of the Standard & Poor’s 500 (S&P 500) index. There
are many inverse ETFs that rise in price when the
underlying asset falls in value.
Diversification: Using contra markets can help an investor diversify. Holding only stocks that move in the same direction
may work well when the stock market is rising, but when it falls so will all the holdings in the portfolio. Adding some stocks
or other assets that have a low correlation, or negative correlation, to the stock market may help level out some of the ups and
down in the portfolio's returns.
Advantages of Investing in Contra Market Sectors
During bull markets, cyclical sectors such as technology and financials perform well and get more expensive in terms of price,
while contra market sectors such as consumer staples and utilities underperform. This provides investors with an opportunity to
accumulate contra market stocks at lower prices
and more attractive valuations. For example, as the U.S. economy performed well in the first half of 2018, technology
FANG stocks outperformed the broader market.
1 As a result, utility stocks were out of favor and subsequently cheaper. This may have attracted some contra investors to start
accumulating positions in these underperformers in the hopes that they will perform better in the future.
Disadvantages of Investing in Contra Markets
While contra markets provide a potentially safer or more profitable place to be when the broader market or economy changes direction,
holding contra assets during a major bull market could mean missing out on big returns from the broader market. Over a 5 year period
between May 2014 and 2019, the SPDR S&P 500 (SPY) returned over 50% while the SPDR Gold Trust Shares (GLD) returned -3%. Taking part
in the major bull market in stocks was a more prudent play than hoping gold would find its footing.
Example of a Contra Market: Gold
Gold has a weak correlation with the S&P 500 stock index. At times the correlation is negative, other times it is positive, and
tends to oscillate back and forth. Many investors like to hold gold as it is viewed as an outperformer during tough times for the
stock market. Yet that isn't always the case.
When the S&P 500 rose in 1995 to 2000, gold declined and had a negative correlation. The S&P 500 then fell from 2001 into late
2002. Gold started rising while stocks were falling, trading relatively flat and then picking up steam to the upside in mid-2001.
So in this case, switching to gold would have paid off.
The chart below shows the SPDR S&P 500 ETF versus gold futures (blue line), with the bottom
indicator showing the correlation between the two
assets.
From early 2003 to mid-2007 stocks and gold both rose. Stocks flattened out for most of 2007 while gold rose. For this period,
gold was favorable as stocks where topping . Stocks and
gold both sank in 2008, but gold turned higher earlier than stocks and ran to upside into the 2011 high.
The S&P bottomed in early 2009 and continued to rise into 2019, with several
corrections . Gold peaked between 2011 and 2012,
and then went into a downtrend in 2013. Between 2014 and 2018 gold moved sideways, and did not provide a safe haven during the 2015
stock market correction as gold also fell during that time. In 2018, while stocks experienced a correction, gold also fell, although
it experienced a small rally prior to the stock market bottom.
Printing money has its limits after which the Central Bank loses the control of inflation. The only question is when this limit will be reached.
Notable quotes:
"... The Fed is underestimating the massive amount of money printing it will have to do to finance the largest peacetime spending the U.S. has ever engaged in. Banks, foreign governments and U.S. agenciesâ€"chiefly Social Security, which is no longer running large surplusesâ€"are not going to be the big buyers of bonds, as has previously been the case. That leaves the Fed doing the heavy lifting, and the scale of money creation it will need to do will fire up a sizable inflation. ..."
The stock market
is assuming that the damage the Biden
administration and the Federal Reserve are beginning to inflict on the recovering economy will be limited. This episode of
What’s
Ahead
examines why that happy assumption will explode.
The Fed is
underestimating the massive amount of money printing it will have to do to finance the largest peacetime spending the U.S. has
ever engaged in. Banks, foreign governments and U.S. agenciesâ€"chiefly Social Security, which is no longer running large
surplusesâ€"are not going to be the big buyers of bonds, as has previously been the case. That leaves the Fed doing the heavy
lifting, and the scale of money creation it will need to do will fire up a sizable inflation.
Then there are
the enormous tax increases that Democrats are determined to enact on capital gains, businesses, higher incomes, gasoline, car
mileage, energy, inheritances and more, which will whack the nascent recovery later this year and in 2022.
The economy has
real strengths coming out of the pandemic, but it won’t be able to withstand the magnitude of these abuses.
"... This widespread concern is entirely consistent with a bubble’s formation, according to a definition proposed several decades ago by Robert Shiller, the Yale finance professor and Nobel laureate. According to him, a bubble is “a market situation in which news of price increases spurs investor enthusiasm which spreads by psychological contagion from person to person, bringing in a larger and larger class of investors, who, despite doubts about fundamental value ..."
"... Rather than responding by taking some chips off the table, however, many began freely admitting that a bubble was forming. They no longer tried to justify higher prices on fundamentals, but began justifying it instead in terms of the market’s momentum. Prices should keep going up as FOMO seduces more and more investors to jump on the bandwagon. ..."
"... As a recent Wall Street Journal article outlined , the dogecoin “serves no purpose and, unlike Bitcoin, faces no limit on the number of coins that exist.†Yet investors are flocking to it, for no other apparent reason than it has already gone up so much. Billy Markus, the co-creator of dogecoin, was quoted in that Wall Street Journal article saying “This is absurd. I haven’t seen anything like it. It’s one of those things that once it starts going up, it might keep going up.†..."
"... Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at [email protected] ..."
I have no idea whether the stock market is actually forming a bubble
that’s about to break.
But I do know that many bulls are fooling themselves when they think a bubble
can’t happen when so many of us are concerned about one. In fact, one of the
distinguishing characteristics of a bubble is that such concern is widespread.
This seems counterintuitive. You would think that a bubble is most vulnerable to forming and
then popping when investors are oblivious to that possibility. But you would be wrong.
It’s important for all of us to be aware of this bubble psychology, but
especially if you’re a retiree or a near-retiree. That’s
because, in that case, your investment horizon will be shorter than for those who are younger,
and you therefore are less able to recover from the deflation of a market bubble.
To appreciate how widespread current concern about a bubble is, consider the accompanying
chart of data from Google Trends. It plots the relative frequency of Google searches based on
the term “stock market bubble.†Notice that this frequency has
recently jumped to a far-higher level than at any other point over the last five years.
This widespread concern is entirely consistent with a bubble’s
formation, according to a definition proposed several decades ago by Robert Shiller, the Yale
finance professor and Nobel laureate. According to him, a bubble is “a
market situation in which news of price increases spurs investor enthusiasm which spreads by
psychological contagion from person to person, bringing in a larger and larger class of
investors, who, despite doubts about fundamental value , are drawn to the investment
partly through envy of others’ successes and partly through a
gambler’s excitement.†(I italicized the above phrase, not
Shiller.)
Notice that recognition of overvaluation is an integral part of the definition.
This recognition was certainly present during the weeks and months prior to the popping of
the Internet bubble in March 2000. During the early and middle years of the 1990s, you may
recall, it was possible to justify higher prices while keeping a straight face. But that became
less and less possible as prices continued going higher in the late 1990s, and especially as
some dot-com companies went public with huge valuations despite having no assets, revenue or
business plan.
Rather than responding by taking some chips off the table, however, many began freely
admitting that a bubble was forming. They no longer tried to justify higher prices on
fundamentals, but began justifying it instead in terms of the market’s
momentum. Prices should keep going up as FOMO seduces more and more investors to jump on the
bandwagon.
There is no shortage of current analogies, of course. Take dogecoin, which was created as a
joke and has no fundamental value. As a
recent Wall Street Journal article outlined , the dogecoin “serves no
purpose and, unlike Bitcoin, faces no limit on the number of coins that exist.†Yet
investors are flocking to it, for no other apparent reason than it has already gone up so much.
Billy Markus, the co-creator of dogecoin, was quoted in that Wall Street Journal article saying
“This is absurd. I haven’t seen anything like it.
It’s one of those things that once it starts going up, it might keep going
up.â€
Needless to say, things don’t go up forever. Those who nevertheless
continue to invest in such an environment do so with the implicit assumption that they will be
able to recognize it, in advance, when the bubble is about to popâ€"and therefore
able to leave the party before everyone else. This is a dangerous delusion, however; not
everyone can be the first to leave the party.
The bottom line? Far from being a reason why a bubble isn’t forming, the
widespread current concern about a possible bubble is actually a reason to worry that it could
be. Take heed.
Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat
fee to be audited. He can be reached at [email protected]
Money from stock offerings is flowing into below-investment-grade companies
at a pace not seen since the dot.com boom of the 1990s
The wave of cash raised by
special-purpose acquisition companies is rolling into the junk debt market, aiding
distressed companies and rewarding investors who own their bonds and loans.
SPACs, also known as blank-check companies, have issued roughly $100 billion of stock this
year, a record, to buy private companies and take them public. Some SPACs are targeting
companies with below-investment-grade credit ratings, hoping to use their cash piles to pay
down debt and grow the businesses.
Not since the dot.com-boom two decades ago has stock-market enthusiasm been hot enough
to fuel such activity in debt markets , bond investors and analysts say.
Mutual funds managers that owned WeWork bonds booked paper gains of 25% after the ailing
shared-office provider
started merger talks in January with a SPAC, according to MarketAxess. Companies with junk
credit ratings are typically required to buy back their debt, often at a premium, when a change
of control occurs via a merger. Loans of Cyxtera Technologies Inc.â€"which
credit-rating companies recently warned was in danger of defaultâ€"jumped 16% in
February when the data-center operator
agreed to merge with one of the blank-check companies , according to AdvantageData Inc.
“There’s a lot of deja-vu of the late 1990s happening
in the high-yield market right now,†said Michael Anderson, a managing director for
credit research at Citigroup Inc.
We've been outlining how the Fed and other central banks have unleashed an inflationary
bubble in all assets truly an Everything Bubble.
We've already assessed the impact this is having on commodities, bonds and other asset
classes. Today I want to assess the impact this will have on stocks.
To do that, we need to look at emerging markets.
Inflation is a common occurrence for emerging markets, primarily because more often than not
they devalue their currencies, whether by choice or because the markets lose faith in their
ability to pay off their debts.
Because of this, emerging markets can provide a glimpse into how inflation affects stocks.
So, let's dig in.
Here is a chart of South Africa's stock market since 2003. As you can see, the stock market
rallied significantly until 2010, but has effectively gone nowhere ever since then.
The reason this chart looks so lackluster is because it is priced in U.S. dollars. The $USD
has been strengthening against the South African currency (the Rand) since 2010.
Watch what happens we price the South Africa stock market in its domestic currency (blue
line). Suddenly, this stock market has been ROARING, rising some 750% since 2003. That means
average annual gains of 41%!!!
Let's use another example.
Below is a chart of the Mexican stock market priced in $USD. Once again, we see a stock
market that has done nothing of note for years.
Now let's price it in pesos (actually the exchange rate of pesos to $USD, but close
enough).
You get the general idea. So if hot inflation is in the U.S. financial system, it would make
perfect sense for stocks (denominated in the $USD which is losing value due to inflation) to
ERUPT higher.
Something like I don't know what's happened since mid-2020?
Look, we all know what's going on here. The stock market is erupting higher as inflation
rips into the financial system based on Fed NUCLEAR money printing. And we all know what comes
when this bubble bursts.
On that note, we just published a Special Investment Report concerning FIVE secret
investments you can use to make inflation pay you as it rips through the financial system in
the months ahead.
The report is titled Survive the Inflationary Storm. And it explains in very simply terms
how to make inflation PAY YOU.
We are making just 100 copies available to the public.
Don't believe your lying eyes, will be the message tomorrow from The Fed's Jay Powell as he
hypnotizes investors to believe that "inflation is transitory" and they have "the tools" to
manage it.
'Bond King' Jeff Gundlach is not buying that line and told BNN Bloomberg in an interview
this morning.
"...more importantly, I'm not sure why they think they know it's transitory... how do they
know that?"
"...there's plenty of money-printing that's been going on, and we've seen commodity prices
going up massively... home prices in the US are inflating very substantially... so there's a
lot of inflation that's already baked in to input prices ."
Gundlach does admit that Powell has a point in the very near term as the prints were about
to see "which could be as high as 4% [for CPI]" are off of year-ago, very depressed levels.
"...what he means by transitory is that the base effect will lead to problems in the next few
months but then the base effect will become less problematic."
But, Gundlach adds, "it's not clear to me that inflation is going to go back down to around
2 to 2.5%... we don't know, nobody knows... but we're most concerned with the fact that The Fed
thinks they know."
This is worrisome because The Fed's track record is anything but inspiring...
"when I go back to the global financial crisis, when we almost had a complete meltdown of
the financial system, Ben Bernanke completely missed all of the problems that led to the
crisis."
Bernanke's infamous "contained to subprime... and subprime is only a sliver of the market"
comments could be about to be trumped by Powell's "inflation is transitory" comments as
Gundlach warns "there's plenty of indicators that suggest inflation is going to go higher and
not just on a transitory basis."
The Fed is "trying to paint the picture" of control, but Gundlach tries to make clear:
"they're guessing."
So, what does that mean for markets?
While some fear "we ain't seen nothing yet" in terms of yields rising (and multiple
contraction), Gundlach notes that "it really depends on just how much manipulation the
authorities are willing to do."
The billionaire fund manager notes that yields are "still very low... well below the current
inflation rate... so we have negative yields everywhere on the yield curve."
It's also "hard to figure out who's going to buy the bonds," he notes, "as we are about to
see issuance like we have never seen before." Foreigners have been selling bonds for years and
domestically there is little demand, so Gundlach notes the only one left to soak up all this
extra supply is The Federal Reserve, which has already expanded its balance sheet massively in
the last 12 months.
"Who's going to buy all these many trillions of dollars of bonds? Foreigners have been
selling for years and they've accelerated their selling in the last several quarters,
domestic buyers are not exactly selling, but they're not adding to their holdings. So what's
left to absorb all of the spawn supply is the Federal Reserve ."
"Left to true, free markets, bond yields at the long-end would obviously be higher than
they are now."
And so who will buy all these bonds with negative real yields - The Fed... "and they have
been transparent about their willingness and ability to buy bonds and expand their balance
sheet with no ceiling."
Gundlach is talking about Yield Curve Control, reminding viewers that "The Fed can set the
long-end wherever they want it... there's a precedent for this from back in the 1940s into the
50s," in order to ease the pain of the debt from World War II.
Of course, Gundlach warns ominously, "once they stopped the yield curve control, we went
into a 27 year massive bear market in bonds, because of 'guns-n'butter' policies... which look
like our policies today."
Simply put, he sees "an echo [in current markets and policies] of what happened in the late
1970s into the early 1980s."
His forecast is that "The Fed will allow the market forces to take yields to higher levels
[10Y 2.25%] before stepping in."
The Bond King also note that the US stock market is very overvalued by virtually every
important metric , and especially so versus foreign markets such as Asia and even Europe.
"I bought European equities a couple of weeks ago, literally for the first time in many
years. I can't remember the last time I did it. And that's largely because I think the U.S.
dollar is almost certain to decline over the intermediate to long term."
There's a lot more in the interview on the impact of Biden's stimmies and potential tax
hikes...
https://webapps.9c9media.com/vidi-player/1.9.19/share/iframe.html?currentId=2189621&config=bnn/share.json&kruxId=&rsid=bellmediabnnbprod,bellmediaglobalprod&siteName=bnnb&cid=%5B%7B%22contentId%22%3A2189621%2C%22ad%22%3A%7B%22adsite%22%3A%22ctv.bnn%22%2C%22adzone%22%3A%22ctv.bnn%22%7D%7D%5D
10,571 48 NEVER
Sound of the Suburbs 26 minutes ago
We are going to train you in this Mickey Mouse economics that doesn't consider private
debt and put you in charge of financial stability at the FED.
They don't stand a chance.
Financial stability arrived in the Keynesian era and was locked into the regulations of
the time.
"This Time is Different" by Reinhart and Rogoff has a graph showing the same thing (Figure
13.1 - The proportion of countries with banking crises, 1900-2008).
Neoclassical economics came back and so did the financial crises.
The neoliberals removed the regulations that created financial stability in the Keynesian
era and put independent central banks in charge of financial stability.
Why does it go so wrong?
Richard Vague had noticed real estate lending balloon from 5 trillion to 10 trillion from
2001 – 2007 and knew there was going to be a financial crisis.
Richard Vague has looked at the data for financial crises going back 200 years and found
the cause was nearly always runaway bank lending.
We put central bankers in charge of financial stability, but they use an economics that
ignores the main cause of financial crises, private debt.
Most of the problems are coming from private debt.
The technocrats use an economics that ignores private debt.
The poor old technocrats don't stand a chance.
WITCH PELOSI 39 minutes ago
42" entry level lawnmower @ Home Depot, spring 2014, $999. Spring 2021 $1549. That's what
I call inflation! And maybe a little greed to boot!
atomp 34 minutes ago
$30 is the new $10.
Sound of the Suburbs 25 minutes ago remove link
In 2008 the Queen visited the revered economists of the LSE and said "If these things were
so large, how come everyone missed it?"
It's that neoclassical economics they use Ma'am, it doesn't consider private debt.
...the overall cash buildup still effectively means that companies have looked at the
investment options available and found them wanting. When a company determines that sitting on
near zero-yielding assets is the best use of their funds, it paints a very dim picture of their
collective view of the economy's future.
... ... ...
The U.S. cash buildup isn't yet in Japan's league, but the situation appears to be heading
that way in Europe. Investors should keep a close eye on where overall levels settle: if they
stay up here where the air is thin, that will be a dispiriting signal about the future.
Whether or not the broader stock market is in a bubble, ultra-growth stocks seem to be,
according to an analyst at JPMorgan.
While some Wall Street analysts are concerned about a broader stock market bubble,
JPMorgan's Eduardo Lecubarri, global head of small- and mid-cap equity strategy, wrote in a
note that ultra-growth equities are the area of most concern. "We have argued since the start
of the year that investors needed to run away from stocks trading on high multiples over rich
growth expectations," said Lecubarri in...
The US dollar could collapse by the end of 2021 and the economy can expect a more than
50% chance of a double-dip recession, the economist Stephen Roach told CNBC on
Wednesday.
The US has seen economic output rise briefly and then fall in eight of the past 11
business-cycle recoveries, Roach said.
Grim second-quarter data cannot be dismissed, he said, pointing out that "the
current-account deficit in the United States, which is the broadest measure of our
international imbalance with the rest of the world, suffered a record deterioration."
Roach last predicted a crash in the dollar index in June, when it was trading at about
96. He said at the time that it would collapse 35% against other major currencies within the
next year or two.
The "seemingly crazed idea" that the
US dollar will collapse against other major currencies in the post-pandemic global economy
is not so crazy anymore, the economist Stephen Roach
told CNBC's "Trading Nation" on Wednesday.
Roach, a former chairman of Morgan Stanley Asia, also said he sees a more than 50%
probability of a double-dip recession in the United States.
He based that prediction on historical evidence, saying that in eight of the past 11
business-cycle recoveries economic output has risen briefly and then fallen.
"It's certainly something that happens more often than not," he said.
Roach
last predicted a dollar crash in June , saying it would collapse 35% against other major
currencies within the next couple of years. At the time, the dollar index traded at about 96.
On Thursday, the index traded at about 94.41.
He said on Wednesday that he expected the collapse to happen by the end of 2021, but he did
not say by how much.
"The current-account deficit in the United States, which is the broadest measure of our
international imbalance with the rest of the world, suffered a record deterioration in the
second quarter," he said.
"The so-called net national savings rate, which is the sum of savings of individuals,
businesses, and the government sector, also recorded a record decline in the second quarter,
going back into negative territory for the first time since the global financial crisis."
Lingering vulnerability and the aftermath of the initial decline are two factors driving the
dollar's ominous future, he said.
"Lacking in saving and wanting to grow, we run these current-account deficits to borrow
surplus saving, and that always pushes the currencies lower," Roach said. "And the dollar is
not immune to that time-honored adjustment."
Additionally, Roach said, new COVID-19 infections and higher mortality rates must be part of
assessing the risk of an aftershock, Roach said.
"As we head into flu season with the new infection rates moving back up again, with
mortality unacceptably high, the risk of an aftershock is not something you can dismiss," he
said. "So that's a tough combination. And I think the record of history suggests that this is
not a time, unlike what the frothy markets are doing, to bet that this is different."
"The current-account deficit in the United States, which is the broadest measure of our
international imbalance with the rest of the world, suffered a record deterioration in the
second quarter," he said.
"The so-called net national savings rate, which is the sum of savings of individuals,
businesses, and the government sector, also recorded a record decline in the second quarter,
going back into negative territory for the first time since the global financial crisis."
Lingering vulnerability and the aftermath of the initial decline are two factors driving the
dollar's ominous future, he said.
"Lacking in saving and wanting to grow, we run these current-account deficits to borrow
surplus saving, and that always pushes the currencies lower," Roach said. "And the dollar is
not immune to that time-honored adjustment."
Additionally, Roach said, new COVID-19 infections and higher mortality rates must be part of
assessing the risk of an aftershock, Roach said.
"As we head into flu season with the new infection rates moving back up again, with
mortality unacceptably high, the risk of an aftershock is not something you can dismiss," he
said. "So that's a tough combination. And I think the record of history suggests that this is
not a time, unlike what the frothy markets are doing, to bet that this is different."
In his 2008 letter to shareholders, Warren Buffett shared an important lesson.
"Long ago, Ben Graham taught me that 'Price is what you pay; value is what you get,'"
Buffett wrote. "Whether we're talking about socks or stocks, I like buying quality merchandise
when it is marked down."
This is one of the most fundamental concepts in investing. No matter how good a company is,
or how fast it's growing, it's always possible to overpay.
This is why analysts talk so much about valuation . The market price gyrates on a
daily basis, especially during a market crash. But over the long term, price and value
ultimately converge.
So where are stocks valued today? Despite the difficult environment, many markets are
trading at historically high multiples.
"The current P/E on the U.S. market is in the top 10% of its history," said GMO Asset
Management co-founder Jeremy Grantham. The Canadian stock market isn't too far behind,
especially when you strip out the ailing fossil fuel industry.
Prices suggest that conditions are in the top 10% of history, but is that actually true?
"The U.S. economy in contrast is in its worst 10%, perhaps even the worst 1%," concluded
Grantham. "In addition, everything is uncertain, perhaps to a unique degree."
Prepare for
a market crash
The numbers are clear. Stock prices are sky-high. The value that you're getting in return,
meanwhile, could be quite low.
At minimum, there's an unprecedented range of outcomes over the next 12 to 24 months. A
complete return to normal could occur. Alternatively, we could slide into a deep and dark
recession.
Just take a look at what some major CEOs are saying about the market crash.
Air Canada CEO Calin Rovinescu said, "It's the darkest period ever in the history of
commercial aviation." He doesn't expect conditions to normalize for three years. Linamar Corp
Linda Hasenfratz warned that the industry must brace for a resurgence of COVID-19. Canadian
Federation of Independent Business CEO Dan Kelly said that just 17% of Canadian restaurants are
reporting an average volume of sales.
Things just don't line up. Whenever the gap between price and value rises, the odds of a
market crash also rise. Grantham thinks we could be experiencing one of the biggest gaps
ever .
"The market's P/E level typically reflects current conditions. Markets have historically
loved fat margins, low inflation, stability and, by inference, low levels of uncertainty," he
explains. Yet prices are high and conditions are terrible.
"This is apparently one of the most impressive mismatches in history," Grantham
concluded.
Most stocks are too expensive, but some still trade at bargain prices.
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The S&P 500's price-to-sales ratio is worryingly high
A second reason to be concerned can be found in the S&P 500's price-to-sales
(P/S) ratio . This ratio describes the value of the S&P 500 index relative to the
aggregate revenue its 500 components are bringing in. As a general rule, the lower the
price-to-sales ratio, the more fundamentally attractive an investment.
As of April 21, the S&P 500's price-to-sales ratio was estimated at 3.06. This is an
unquestioned high point dating back at least 21 years. In fact, the S&P 500's P/S ratio
hadn't ended the year higher than 2 at any point this century prior to 2017. Since the end of
2018, the P/S ratio for the widely followed index has expanded 64%.
On one hand, an increased reliance on technology should allow companies to be more
efficient, thus expanding their operating margins. On the other hand, nothing historically
shows that P/S ratios this high can be sustained.
IMAGE SOURCE: GETTY IMAGES. 3. The S&P 500's price-to-book value spells
trouble
A third metric that could cause warning bells to go off is the S&P 500's price-to-book (P/B)
ratio . This is a measure of the S&P 500's market capitalization divided by the book
value of the equities that make up the index. Like the P/S ratio, a lower value is generally
indicative of an equity or index being undervalued.
As of this past week, the price-to-book-value of the S&P 500 topped 4.5. That's closing
in on the highest level reached this century, 5.06, set back in March 2000. If March 2000 rings
a bell, it's because that's when the dot-com bubble hit its peak. For some context, the average
P/B value over the past 21 years is 2.87.
Although the P/B ratio has lost much of its importance as technology and innovation have
taken over, it's still concerning that the index subsequently lost about half of its value the
last time the ratio was this high.
The fourth worrisome metric is the S&P 500's earnings
yield . Whereas the price-to-earnings ratio is a measure of share price divided by earnings
per share, the earnings yield is earnings per share divided by share price, and multiplied by
100 to yield a percentage.
Since 1870, the average earnings yield for the S&P 500 is 7.31%. That's a lot higher
than what investors can typically generate from bonds, which is why equities are often such a
smart and desirable investment. But as of April 21, the earnings yield of the S&P 500 was a
measly 2.35%. It's been more than halved since the beginning of 2019, when it was 5.1%.
The issue here is that 30-year Treasury bonds sport a nearly identical yield (2.26%).
Although earnings can grow over time and improve the S&P 500's earnings yield, it's worth
hypothesizing that, with historically low lending rates and ongoing fiscal stimulus, earnings
growth won't get any better than it is now. Future earnings growth could slow as dovish
monetary policy is tightened, thereby exposing an unattractive risk-versus-reward ratio with
bonds.
IMAGE SOURCE: GETTY IMAGES. 5. The frequency of double-digit-percentage corrections is a
red flag
Lastly, don't overlook how common double-digit declines are for the benchmark index.
Since the beginning of 1950 (a year I've arbitrarily chosen for the sake of simplicity),
there have been 38 declines of at least 10%. This works out to an
average double-digit decline every 1.87 years . We're already about 1.1 years removed from
the bear market bottom.
Understand, though, that averages are exactly that: averages. Sometimes the market can go an
exceptionally long time without a single 10% correction (1991 through 1996), while other times
they become an annual occurrence (1997-2003, with the dot-com bubble encompassing 2000 through
2002). The point is this: Corrections and/or crashes happen often.
IMAGE SOURCE: GETTY IMAGES. Crashes are blessings in disguise
All five of these metrics would seem to point to one inevitable conclusion: The likelihood
of a stock market crash or double-digit correction is quite high. This might be unnerving to
some, but it's actually great news for investors with a long-term mindset.
Every single crash and correction throughout history has
been a blessing in disguise . That's because investors are trading short-term pain for
long-term gain.
Eventually, every double-digit decline in the S&P 500 has been completely erased by a
bull-market rally. If you buy great companies when emotion-based crashes rear their heads and
you hang on to them for long periods, there's a very good chance you'll build wealth over time.
While it's not normal to see total returns of 88% in 13 months following a crash, an annualized
double-digit total return over the long run is quite possible.
History serves as a warning for the S&P 500's Shiller P/E ratio
Arguably the biggest red flag from a fundamental standpoint is the S&P 500's Shiller
price-to-earnings (P/E) ratio, which is also commonly referred to as the cyclically adjusted
P/E, or CAPE. The Shiller P/E is based on average inflation-adjusted earnings from the previous
10 years.
As of April 21, the Shiller P/E ratio for the S&P 500 was 37.49. That's well over double
its average annual reading of 16.81 since 1870.
What's particularly
concerning is what's happened previously when the Shiller P/E ratio has surpassed and
stayed above 30. In the previous four instances (the Great Depression, the dot-com boom, Q4
2018, and the coronavirus crash), the S&P 500 has lost anywhere from 20% to 89% of its
value. While an 89% loss is very unlikely with the Federal Reserve and federal government
willing to provide seemingly unlimited support to financial markets, a sizable double-digit
correction has become the expectation when valuations extend well past historic norms.
W hat I'm about to say is going to unnerve some of you, but it's the absolute truth: A stock
market crash
might be imminent .
Since hitting a bear-market bottom on March 23, 2020, the three major U.S. indexes have been
virtually unstoppable. Through April 6, 2021, the tech-dependent Nasdaq Composite (NASDAQINDEX:
^IXIC) has doubled, while the benchmark S&P 500 (SNPINDEX: ^GSPC) and iconic Dow Jones
Industrial Average (DJINDICES: ^DJI) were up a respective 82% and 80%. There's not an optimist
on Wall Street who would be dissatisfied with gains like these in just over one year's
time.
The question is whether or not these gains will prove fleeting.
Image source: Getty Images.
Signs point to a potential crash
Right now, there is no shortage of catalysts that could knock this market off its
perch.
In recent months, Wall Street has been
worried about rapidly rising Treasury yields . Keep in mind that when I say "rapidly
rising," some context is needed. Although 10-year Treasury yields have doubled over the last
five months, a 1.7% yield is still historically very low.
Nevertheless, investors are concerned about the potential for higher lending rates, which
could slow the borrowing capacity and growth prospects for the dozens of fast-paced and
innovative companies that have led the stock market higher. It could also signal an uptick in
inflation and force the Federal Reserve to consider raising interest rates earlier than
expected.
Another
chief concern is equity valuations . Dating back 150 years, there have only been five
instances where the S&P 500's Shiller price-to-earnings (P/E) ratio has surpassed and
sustained 30. The Shiller P/E ratio measures average inflation-adjusted earnings from the
previous 10 years and is also known as the cyclically adjusted P/E ratio, or CAPE. On April 6,
the Shiller P/E ratio for the S&P 500 was nearly 36.7, which is well over double its
historic average of 16.8.
Furthermore, in the previous four instances where the S&P 500's Shiller P/E hit 30, the
index lost anywhere from 20% to as much as 89% of its value. Although we're unlikely to see
Great Depression-like losses of 89% ever again,
at least a 20% decline has been the recipe when valuations get extended.
The coronavirus pandemic also remains a concern. Though the light at the end of the tunnel
is now visible, variants of the disease threaten to minimize vaccine efficacy or push herd
immunity (i.e., a return to normal) further down the line.
Image source: Getty Images.
Three things to do right now
So, what's an investor to do?
1. Realize that downside catalysts always exist and
don't overreact
The first thing is to relax and realize that there's always a catalyst waiting in the wings
that could send the market screaming lower. Whether we're mired in a recession or the economy
is firing on all cylinders, I can't recall a time in my more than two decades of investing
where the warning siren hasn't been sounding about one thing or another.
Investors should understand that
stock market crashes and corrections are a normal part of the investing cycle and the
so-called price of admission to the greatest wealth creator on the planet. With the S&P 500
experiencing a double-digit decline every 1.87 years, on average, since the beginning of 1950,
it's important not to overreact to sharp or sudden moves lower in the market. It also helps
knowing that these moves lower
usually don't last very long .
2. Reassess what you own
Secondly, and to build on the previous point, it's always a good time to
reassess your portfolio and reaffirm your investment thesis . In other words, take a closer
look at the companies you own stakes in and revisit the reason(s) why you purchased them in the
first place. There's a very good chance that a stock market crash is going to have little or no
long-term effect on the underlying performance of the companies you've invested in and is
therefore going to have no impact on your investment thesis.
Keep in mind that you don't need to wait for a stock market crash, or even the threat of a
crash, to do this a couple of times a year. Ensuring that your investment thesis still holds
water will minimize the emotional aspects of stock market corrections and crashes and make it a
lot easier to hold on to great stocks.
Image source: Getty Images.
3. Have cash at the ready for when opportunity comes
knocking
The third thing to do is build up a healthy cash position so you can take advantage of the
market's inevitable downturns. You see, despite the S&P 500, Dow Jones Industrial Average,
and Nasdaq Composite undergoing dozens of double-digit corrections and crashes throughout their
history, each and every one of these moves lower has
eventually been erased by a bull market rally .
In fact, data from Crestmont Research shows that
at no point between 1919 and 2020 have rolling 20-year total returns (including dividends)
ever been negative. If you bought an S&P 500 tracking index at any point over the past 102
years and held on to your investment for a minimum of 20 years, you made money.
When the next correction or crash does rear its head, be thankful, because you're being
given an opportunity to buy great companies at a discount.
The current financial world has been reduced to a one-legged bar-stool in a bar where
drinks are on the house. There is no scenario where this does not end well no matter how
euphoric we are in the moment.
[Apr 24, 2021] Why Grantham Says the Next Crash Will Rival 1929, 2000 by further inflating money not by deflating it. So people who warn regular fold about risks are rare and they harm their own business, if they have any. Profit of doom and gloom are not popular and it is precarious occupation
He suggest that SPACs,Tesla, and bitcoin can serve are canary in the mine as for timing of bubble deflation.
This video is over two months old of course and the the market has continued to set new records. Ray Daleo also issued a warning as did Harry Dent. And market still is going up.
Because of the corona epidemic, investments in real production have dried up and the money has instead flooded the stockmarkets. I guess that if the crisis continues the stockmarket bubble can be kept inflated because the money has nowhere else to go!
electrification, especially in cars is a very long shot and here it is unlear if it make sense to invent int he currest companies involvedas they are in a bubble. Just look at Tesla. electrification, especially in cars is a very long shot and here it is unlear if it make sense to invent int he currest companies involvedas they are in a bubble. Just look at Tesla.
Notable quotes:
"... Around 37:30 , Milton Friedman ism at the corporate level, that is sociopath by any definition... : ) ..."
"... People and corporations qho like Frieman professes are driven exclusively by profit motive are "sociopaths" ..."
"... What a refreshing honest interview. The interviewer and Mr. Grantham are professional, easy to follow and are respectful. The topic they are discussing can be disheartening, but it is nice to know someone is looking out for the retail investors instead of fleecing them of their hard earned labor by misleading the retail investor to go all in and go for broke. ..."
"... Many of the big companies are just sucking up cheap money and making it look like profits with clever accounting. The fact that the markets seem unaffected by covid shows how thick the fraud is. ..."
"... SPACs " an excuse for people with reputation and marginal ethics to take 20% and dash around the country for six months" EPIC ..."
"... COVID-19 revealed that there are two kinds of jobs: essential jobs and bullshit jobs. We just eliminated all the bullshit jobs and put them onto UBI/welfare and it removed a drag on the economy. ..."
"... 1929 and 2000? Also 2008. So we have 3 very big bubbles in the space of 20 years. This is a boom / bust economy with each action of the Federal Reserve to mitigate the pain of the bursting of the previous bubble only sews the seeds for the next bubble. ..."
His comment about how workers are treated nowadays is so true and so important. I once saw
a video of a guy who explained that his small company (service online) had made an extra
million the previous year. He went on to explain that he wasn't going to buy another house
or car or TV etc and would probably only need to employ one extra worker. He said that the
"rich" don't create jobs, the lower and upper middle class create jobs. When they have a
secure job and suitable income for the work they do, they will buy more things which will
create more manufacturing, transport, shipping, retail jobs over time which increase the
numbers in stable jobs et al
"The future value of dividends"......I'll try to remember that. He reminds me of Buffett. All I
know is, there are a lot fewer companies paying even 4% than there used to be. You're lucky now
just to get 3% and it will more likely be 2%, if anything.
I never attempt to make money on the stock market. I buy on the assumption that they could close the
market the next day and not reopen it for ten years. –Warren Buffett
I love his refutation of Milton Friedman's idea that corporate management's only job is to maximize
profit and a company has no responsibility to society in general. "If you say, as an individual,' My only
interest is to maximize my advantages,' which is what they say at the corporate level, you're a
sociopath." - Jeremy Grantham
37:20
If you say, as an individual, 'My only interest is to maximize my advantages,' which is what they say at
the corporate level, you're a sociopath.
WOW!
Stop & think about this. I don't think I have
Ever
thought about corporate America this way, but it is 100% true.
The interviewer either was playing Devil's advocate or doesn't believe Grantham. Grantham is old enough to have
seen some bear markets. It's now a game of musical chairs and when the music stops it will be a rush to the
exits. Quote 12 days before the 1929 crash: "Stock prices have reached what looks like a permanently high
plateau. I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as (bears)
have predicted. I expect to see the stock market a good deal higher within a few months." – Irving Fisher,
Ph.D. in economics, Oct. 17, 1929
I disagree that nobody saw the 2008 real estate burst coming. I saw it when I sold my house in 2004. I mean it was
unprecedented that the value of my house doubled in 8 years. And the buyers of my house were given a loan of 105% of the
purchase price. Then I read that people had taken out balloon mortgages. Then, I was offered a "no doc" loan to purchase a
condo. I mean the red flags were HUGE
This is a stunning interview beautifully articulated, glad there are others who see through the fog too. We're living in massive,
massively fraudulent times, value is utterly misplaced, and loss has been hidden on a scale never before seen. Extraordinary
times ahead.
Wow a great interview with challenging questions and a calm exchange of ideas! Its been years since I've witnessed something like
this.... Thank you gentlemen!
What he says at the end is the most important of all. A system, a corporate mindset that they have no responsibility to their
workers, to their customers, to their communities or country or the planet, that their only responsibility is to maximize
profits... that's beyond sociopathy and it's incredibly corrosive to society and humanity.
10:10
"When you have reached this level of super-enthusiasm, the bubble has
always,
without exception, broken in the next few months - not a few years." This video was recorded on Jan 22 Today is March 27. My
daughter has been on the point of buying a house for the last 6 months, and I have been telling her to wait, so she bought a van,
and has spent the Winter in it, but with the market getting ever higher, she is starting to think "Dad, you're obviously wrong. I
should buy now. How long can I wait?"
Most newbies usually undermine and neglect the importance of technical analysis with regards to trading. Technical analysis
overly predicts the movement of assets prices regardless of what is happening in the wider or broader market. Essentially, the
procedure involves studying the paths of a particular asset movement in the past so as to establish a sustainable pattern that
can be used to predict future movement of an asset. Doing technical analysis can be quite different which is why most newbies/traders
neglect day trading their coins and stick to holding which is very dangerous as when the market goes bearish, advise any
newbies/traders to buy the dip for traders who are still wondering to enter the market or old time traders who are holders to
seek help from not just any trader but an established trading expert with at least 96% trade accuracy . I underwent series of
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Pinnacle of this year for me, under his careful guide and his signal service I've been able to recover my losses and even grow
my trading portfolio massively from 1.6 BTC to 7 BTC in just 5 weeks. I will advice traders esp newbies to have orientation of
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w,h,a,t,s,a,p,p,(+1 7 8 6 4 3 2 8 3 1 6)
Great
point
34:00
Investing in Infrastructure, more jobs, creating less energy waste....now I waste my stimmy check in the market. Italy is
supporting greening of homes,....ya have too as they begin to look more and more like the colosseum.
People and corporations qho like Frieman professes are driven exclusively by profit motive are "sociopaths"
🤡 Hey no one is
stopping interviewee or interviewing company from giving away all or most of their wealth, yet strangely none of these
do-as-I-say types never do...
Great
Interview. Respect to Mr Grantham for his views on green issues and for investing in these. He sees that unless we begin to
invest heavily into something which actually MATTERS in order for us Humans to inhabit this Planet long term, then we are doomed
as a race. I thought the part referring to "Stuffed Chinese dogs" Sums this up perfectly.
This video aged well. The bubble popping in many EVs, cloud, SPACs, hyper growth techs. Now, money rotated to the junior and big
cap stocks. Nasdaq hitting new highs. Soon they would start dumping the big cap stocks, then the SP500 stocks... its playing out
just like in 2000
The market has appeared to me unreal for a long time. Soaring to ever new heights for no particular reason. Reality will have its
way eventually, perhaps soon.
I guess what this good gentleman is saying the whole system is going to collapse this year and I guess Covid was the safety net
to ease us into it. Fasten your seatbelts folks. God bless Vince in London. Brilliant interview
I just don't get the markets, and investors, we are now at a point where the U.S. has to print money in order to survive, and
printing money will never stop. Yet as far as wallstreet is concerned this is on of the best times America has ever had.
Whenever talking with a financial investor, ALWAYS remember they will encourage what benefits them personally and discourage what
benefits them personally as well.
Long terms bonds are very expensive! I am not agree with the electric cars they are not that green as they say, the good thing
about electric car is, that they aren't noisy!
"long-term discounted value of a future stream of dividends" using what interest rate? The benchmarks are either close to zero or
even negative these days, a simple geometric progression will diverge to infinity.
@
24:00
in... its will never pay a dividend.... your right its CALLED FORKING and everyone whos was in along time ago is quite rich off
the forks alone.
Great interview although I would have asked a couple of questions about the value stocks in emerging markets. I would have asked
for concrete examples. Problem with many emerging markets is that they are riddled with political instability, and they tend to
depend too much on developed economies for their exporting success. I would not bet a dime on Brazil or Russia, for example.
China is a giant scam when it comes to its stock markets. India might be a different story but not sure about the BJP either.
What a refreshing honest interview. The interviewer and Mr. Grantham are professional, easy to follow and are respectful. The
topic they are discussing can be disheartening, but it is nice to know someone is looking out for the retail investors instead of
fleecing them of their hard earned labor by misleading the retail investor to go all in and go for broke.
This is the biggest asset bubble in modern history. Very different than 99' and 08' but the same , an extremely quick increase in
asset values due to available essentially free money. People can get lending as long as they have a job. Jobs go away as soon as
there is an issue. I witnessed this in both 99 and 08. And BTW we did see it coming in 08. Then how do they pay for a mortgage? I
can't say when it will happen, but it will with certainty.
There's
some really useful long term perspective, mixed with nostalgia for dividends which stocks had to have to compete with interest to
match risk free return of government bonds along with magical thinking about total electrification. All this is wound together
with a hypnotic calm like he's imparting facts and received wisdom not opinion. Stay skeptical and take the good and leave the
rest.
"Rival"? I think "dwarf" is the word you are looking for. WW3 is a real possibility. There's a dutch ex-soldier who predicts
there is going to be be a huge war in the years between 2020 and 2022. His name is Ingo Piepers. And he did his research very
thoroughly and had it even verified in multiple peer reviews. If we look back on all the big wars, they were almost always about
money. Now there is a money problem brewing
WORLDWIDE.
Also his research was completely independent from any kind of economic information as far as I am aware, so there's a good chance
he doesn't even know about the economic side of things. But they seem to overlay frighteningly well. I hope it's all going to be
okay without any real war. Here's the video (it's in dutch tho):
https://www.youtube.com/watch?v=9wTX3CGeOJ8
Every administration since Bush knows that if you keep interest rates low, and print money, you creat inflation. Inflation
creates a strong market. TheFed has made the market the only game to invest in.
I feel what is happening at the COMEX is criminal. I feel major banks are hording the silver and trying to drive the price of
silver down for acquisition of the physical. In my mind and my gut tells me they are preparing a large horde of silver for the
automotive markets to produce electrical vehicles(EV's). Look at the price of Palladium and Platinum. P&P sored when it was/is
used for automotive catilittic converters. What is going to be used next for automotives (whispers batteries in huge demand). The
price of silver will sky rocket for automotive use just like Palladium and Platinum. Then you will see Palladium and Platinum
prices tank.
The
"usual" basics of real economy and real life are right. They have been working well for centuries despite bubbles, as well as
rational investment decision did. Mr Grantham is a successful investor that has been making money investing in the pre "New Era
economy". Probably, I think things work different there. So, I think that probably, the way to invest and gain money in markets
would change too in near the future, as it is happening in all markets and industries. Maybe, it would grow the alternative ways
to make lots of money in short periods of time (SPACS, tech startup, complex derivatives, etc..) as it already happened. There
would be investments based on extremely higher business results expectations not correlated with biz fundamentals. There would be
more bubbles. Anyway, I agreed with Mr Grantham on how real life works...
The thing I always ask about pundits and prognosticators is: what has been their record. I believe that Grantham has been bearish
and wrong for many years. I looked at GMO's Global Asset Allocation Fund (GMWAX). Since it started in June 2019, it's up 6%. The
broad market (VTI) is up 43%. Correct me if I'm wrong.
For those complaining about his big payday on QuantumScape while being against SPACs, remember he invested $12 million in
QuantumScape seven years prior to the SPAC deal, he did not have a controlling interest in the company to stop the merger.
The next step is more bond buying to control yields as inflation expectations rise. The final step before the implosion is a
"Credit Choke" where the government orders banks to stop lending to prevent hyperinflation, in tandem with big interest rate
rises that will cause mass bankruptcies in order to purge the excess currency out of the system and stabilise prices
The
correction or crash will come, statistically speaking, it has to at some time eventually. In 2021 though? I'm skeptical of that
given the enormous liquidity being unleashed, the pent up demand, the signs for employee new hire rates and unemployment rates.
All that $ has to go somewhere so business growth will continue, equity growth, EPS and ROIC will continue to lead to further
higher stock prices until they don't and then, maybe this time in 2023 things change but heck 2 years is a long time in business.
Even a broken clock is right twice a day. That being said major US corporations are over leveraged in the bond market and are
barely making interest payments while being down graded to "junk bonds". We need a hero that can trim the fat and save our
country.... excuse me while I put on my super man costume. :)
Hopefully, unlike the no-fault bank, trading, and brokerage house bailouts of the 2008 crisis, the next big market flop
will see people jailed, jumping from high windows a la 1929, and a general deep cull of the ruling and "investing" classes.
Equities traders and corporate bonds issuers have an out-of-control need for Fed support. Cold turkey is coming, not
because regulators won't rightly try to ease their massive subsidies, but because traders will just ride their
over-leveraged positions right in the ground.
It is not crash, it is correction, stock market always goes in cycle of up and down. It is called "fleecing the sheep", sheep
being their clients and the 401k owners, rainse and repeat every 8 to 12 yeas or so.
"We have lost considerable strength in the economy; we have fewer people working, and we have a reduced stream of goods and
services, and yet the [market] price is much higher." "Is it really justified that we have delivered a serious blow to the world
economy and yet the global stock market has gone way up? It doesn't feel right."
"I
don't believe in a law to prevent a man from getting rich; it would do more harm than good. So while we do not propose any war
upon capital, we do wish to allow the humblest man an equal chance to get rich with everybody else." Abraham Lincoln
"I see
in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country... corporations
have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavor to
prolong its reign by working upon the prejudices of the people until all wealth is aggregated in a few hands and the Republic is
destroyed." Abraham Lincoln
I have listened to this Bloomberg YouTube interview in its entirety with Jeremy Grantham, at least six times now, he shares a
lifetime of accumulated knowledge and wisdom in a time when we need sound logic and direction desperately. THANK YOU!!!!!!!!! Mr.
Grantham.
Many of the big companies are just sucking up cheap money and making it look like profits with clever accounting. The fact
that the markets seem unaffected by covid shows how thick the fraud is.
...Our markets are in whole driven by the central bank printing. Zombie companies and vulture investment firms distort what is
left, value investing is deeply buried in the grave.
13:30
COVID-19 revealed that there are two kinds of jobs: essential jobs and bullshit jobs. We just eliminated all the bullshit
jobs and put them onto UBI/welfare and it removed a drag on the economy.
"You cant predict a market to the week, or even the month" proceeds to say the bubble always pops within months and then
says people are putting in their final in for these last few weeks. This guy doesn't see the whole picture, although i
agree that eventually we will deleverage but this guy has tunnel vision on his view
37:00
If the system demands that the only way a business can make a profit is by providing Goods and Services that make
peoples lives better then what difference does the motivation make? State Power has no such obligation, in fact, the
immoral can pitch groups against each other for advantage and wealth, they can borrow to cover up inefficiencies, they
can empire build pointless departments for personal advancement. Similarly corporations can leverage state power for
advantageous regulations, a truly free market is the only moral system.
Big inflation will hit at the same time. Remember, 40% money supply increase in the last year, and a lot of that money went
into either equities or savings accounts during the uncertainty of covid. People who cash out of equities with a profit will
then spend it and put it into goods as consumer confidence will still be high when this first happens and people will no
longer be looking to hold onto investments during the uncertainty of covid. This is where the newly printed money makes its
way back into the economy and drives prices of commodities up. Simultaneously, you will have the bagholders who got caught up
in the market bubble who made little to no money or even bought in high and suffered massive losses as always happens in a
bubble. This is going to get ugly. It will then turn into hyperinflation if the government's solution is once again to print
their way through a crisis
"Bitcoin is 100% faith. Come the next market phase where faith is at a minimum, what do we think will happen to a stock
whose entire reason for existence is faith and nothing but faith?" - But doesn't that a hundred percent describe the US
dollar too??!
For your average American having a Savings account is .20 of a Percent Interest Investment and Corporations Force people
into 401ks because the Pensions are gone, That must make a big difference in how much money is in the stock market. Normal
people have no choice, The Wealthy Do.
After the disaster in Texas, I'm not so sure renewable energy is great for investment. The picture of the frozen windmills
has become an iconic image in the American mind, however much the windmills may or may not have contributed to the break
down.
1929 and 2000? Also 2008. So we have 3 very big bubbles in the space of 20 years. This is a boom / bust economy with
each action of the Federal Reserve to mitigate the pain of the bursting of the previous bubble only sews the seeds for the
next bubble.
I wonder if there is even another cycle left in this zero %, money printing economy!
I
can see how alluring a video like is... It's hard to disagree with anything that is described in the video, so on the whole
everyone will feel it's truthful, There is a strong feeling that extended rises in any market are illogical, instinctively
investors will always look for a perceived difference between current price and current real value which should be much
higher and expect that eventually prices will rise to eliminate the gap. The problem as always is defining the "imminent"
collapse... Is that supposed to happen today? Next week? Month(s) from now? Years from now? And like most prognosticators
this video doesn't identify a date or even a range of time. Eventually all bubbles burst, and are identified in hindsight.
It's an axiom that hardly anyone can properly identify the day before a bubble bursts, if that were possible than everyone
would have gotten out that day before. A reasonable strategy seems to be outlined in this video which is to always
transition your investments into risk-averse parts of the marketplace, and he identifies green industries that are likely
to become ever more important into the next years, possibly decades. People should realize that discussing an imminent
bubble burst is important, yet ironically the mere discussion by enough people will likely result in behaviors that delay
that very event, perhaps indefinitely.
Next four years, I see extemely slow growth. Maybe slight stock pullbacks (~10%) on tax increases or other event. Raising
interest rates will cause pullback greater than 20% and historically been a sure sign.
Mr. Grantham's hope in the Biden administration doing something good for the country is both sad and misplaced. How can an
intelligent person have any confidence in a corrupt liar who is barely able to read a teleprompter?
Listening to Jeremy Grantham it occurs to me that I have never in my entire life not been able to listen to someone that
says the stock market is going to crash in the near future nor at the very same time not been able to listen to someone
advocating that stocks are the best investment you can make. My conclusion is that the people that say the stock market is
going up are right most of the time but when the people that say the stock market is going down are more right when they
are right.
You all are addicted for money, thats the reason of MMT, it is needed due to your addiction, in the end it will crete
poverty and satisfaction for the bubbles classes...try to free yourself from addiction
If you think a president who has held ZERO press conferences and taken no calls with foreign leaders can fix the stock
market, I'd be better off taking stock advice from Mickey mouse.
He said in this video that a sign of a bubble about to burst is to look for stocks like Tesla and SPACs, and Bitcoin coming
down day after day. One month later this exact thing happened. The writing is on the wall.
The bond yield graph does not take into account the inflation rate. I recall purchasing S&L CDs for 12% back in 1981 but
the inflation rate was 10.5%. If you could find a fixed rate 30 year mortgage the rate was about 18.5%. So the real bond
return was not much different compared to present day.
"I have no confidence and have not had any for over 20 years in price-to-book and PE and price-to-cash flow,
price-to-sales, even, as a measure of true value. a measure of true value is the long-term discounted value of a future
stream of dividends" -Jeremy Gratham
This is great... I'm starting to learn about the current situation.... I lived through 4 booms and busts.. I didn't see the
first one coming because I was young and inexperienced... I was in the land business... I got out at the right time for the
last three busts.. Never waited for the top.... When it starts down its too late... Get out now as he says... Brilliant
guy... Thanx
Greenspan talked of Irrational Exhubberence in Sept 1997 but the market continued to rise till NASDAQ peak in March 2000
and S&P Peak in July 2000. so a few months is way to fast
it really looks like an October crash is coming - looks like it, feels like it, smells like it. People are nearly all
in on the stock and crypto markets, some are taking loans to do it. We are in a frenzy. Even I am all in. I hope I
listen to myself and derisk a bit into cash before the end of the year.
This is pretty revealing interview that systematize know facts about the current bubble. That
does not mean that you can predict when the bubble will deflate and from what level. It might run
for another couple of year or even more. After all stock market is a casino.
The "greatest economy in history" was the USA from the 1950s to about 1975 when its
standard of living was the highest in world history. That was a time when the average man
could afford to buy a nice house and raise a large family on his income alone, and mom stayed
home to manage the family and the home.
One thing I never see addressed by any of the guests here on overvaluation of stock
markets this: aren't markets just pricing in the likelihood of future superinflation? They're
not looking today's earning multiples, they're looking at future earning multiples when
currency is worthless. I feel like most guests are talking out of both sides.
There's both inflation coming and also a crash because of fundamentals. They can't both be
happening at the same time. Either the dollar crashes or the stock market crashes - if both
crash at the same time, then they cancel each other out since share are traded on
dollars.
Another podcast of doom and gloom.. It's informative, truthful, and revealing.. It's also
the same message DS has been delivering for sometime.. Hardly news worthy..
I have respect for Mr Stockman. But he's been very wrong for quite a while. He's been
saying for a long time that the poop is going to hit the fan. Well it will hit the fan. But
nobody knows when.
On today's Wall Street Journal home page, two articles appear side-by-side. One is about how
a heretofore obscure, nearly-valueless cryptocurrency called dogecoin, originally created as a
joke, has soared to the point of being consequential for large sections of the investing
public. And it's not unique:
Last year, stocks with less in the way of fundamentals, and more reliance on telling a
hard-to-disprove story about the future, had a fabulous time.
Profit provides a grounding for a stock, while story stocks can soar on the wings of the
imagination for a long time before being pulled back to earth -- or occasionally confirmed as
true fliers -- by hard business facts.
Dogecoin's combination of get-rich-quick speculators and you-only-live-once Reddit meme
traders is similar to GameStop, which was initially pushed up by a story about a new business
model and then a short squeeze, before nihilistic Redditors took over.
The story stock of the last decade was electric-car maker Tesl a, with the tale being that
there was a gigantic untapped market for self-driving electric cars and clean power that would
eventually both work and be highly profitable.
The danger is that the excess so obvious in dogecoin has spread beyond the story stocks into
mainstream investments, and that when eventually the froth is blown away, the rest of the
market cools suddenly. That would be a bad joke.
The second article notes that something similar is happening in the bond market:
A key measure of the perceived risk in low-rated corporate bonds is hovering around its
lowest level in more than a decade, highlighting investors' mounting confidence in the
economic outlook.
The average extra yield, or spread, investors demand to hold speculative-grade corporate
bonds over U.S. Treasurys dropped below 3 percentage points this month to as low as 2.90
percentage points for the first time since 2007, when it set a record of 2.33 percentage
points, according to Bloomberg Barclays data.
Yields on low-rated corporate bonds already hit a record low of 3.89% in February. That
data point is especially important for businesses, because it signals how cheaply they can
borrow when they issue new bonds. Companies including Charter Communications and United
Airlines Holdings have issued a total of $184.5 billion of speculative-grade bonds this year
through Tuesday, the highest over that period on record, according to LCD, a unit of S&P
Global Market Intelligence.
The spread relative to Treasurys, however, is arguably an even better measure of
investors' outlook for the economy, since it shows how much investors feel they need to be
compensated for the risk that companies may default on their debt.
The narrow speculative-grade bond spreads indicate debt investors think that the economic
environment for businesses over the next several years could be better than at any time since
the 2008-2009 financial crisis -- a striking development after many feared a severe,
long-lasting economic downturn just last year.
So at one end of the financial asset spectrum, a crypto originally created as a joke is
generating the most enthusiasm and biggest capital gains, while way over on the corporate debt
part of the spectrum, junk bonds have never been more richly valued (i.e., they've never
yielded less). Each of these asset categories – cryptos and junk – are "story
stocks" of a sort, securities that are perceived to be attractive because the environment is
going to be nothing short of perfect for years to come. Therefore no need to worry about risk
and every incentive to roll the dice for big returns.
Note the all-important sentence from the junk bond article (bold added):
"The average extra yield, or spread, investors demand to hold speculative-grade corporate
bonds over U.S. Treasurys dropped below 3 percentage points this month to as low as 2.90
percentage points for the first time since 2007 "
Here's what happened to junk bond yields (and, inversely, junk bond prices) after 2007:
One last data point: I got a long-overdue haircut yesterday, and instead of the normal
chitchat about our families and upcoming vacations, the stylist and I talked dogecoin, bitcoin,
Robinhood, and GameStop. She (a 20-something Latina) and her husband are having a ball
speculating on things they hadn't heard of six months ago on exchanges that didn't exist in
2019. So far they – like the "investors" in the above Wall Street Journal articles
– are thoroughly enjoying their newfound wealth.
Lordflin 1 day ago (Edited)
There will come a day... should such a day still have prospect amid the coming chaos...
and historians of that day exist such that they are still recording...
That humans will be forced to ask...
What the holy **** were they thinking...!?
Paul Bunyan 1 day ago (Edited)
It happens frequently to humanity. Real estate a decade ago. Dot com bubble. Merger and
Acquisitions in '87. The inflation crash of the early '80s. So when the system buckles and we
get another crash it's just another bubble of hubris that humans know and truly love. For if
we didn't love creating manic bubbles, we wouldn't do it.
Entertaining1 1 day ago
These are NOT sell signals.
They just look like them. We've had 12 years of head fakes.
You will go broke trading on ZH sell signal articles.
HopefulCynical 23 hours ago
You're sort of correct. They ARE sell signals.
But then the Fed sees them too, and buys stonks, propping up the market until the wave of
selling has passed and the bears are all murdered again.
The Fed then dribbles their stonks back out into the next bull leg up.
Rinse, repeat, wipe hands on pants.
XanII 2 hours ago
If one would just know when the music stops. It's been like this for so so long only old
ones recall how it was to trade stocks. Not stonks that always go up.
Kreditanstalt 1 day ago (Edited)
WHEN the bubble does pop they will find it exceedingly difficult to all fit through that
tiny exit door simultaneously.
The somewhat smarter segment among Bitcoin "investors" have already started selling
archipusz 23 hours ago
I don't think it will pop.
I think it will go parabolic until the currency goes kaput and then you sure as heck will
be glad you are not in the currency.
radical-extremist 1 day ago (Edited)
Everything is the South Sea Bubble. Get out before gravity takes hold.
When the cute Latina chick at the hair cutting place is talking crypto...that's God's way
of telling you it's time.
chunga 1 day ago
The stock market is the bellwether of US health.
Entertaining1 1 day ago
The funny thing is that this all happened a century ago.
In the 1920s, the Dow was the only measure of the economy commonly used.
We came up with GNP, later replaced with GDP, because in 1929 we realized the market is
not America.
Don't worry. We'll get there again. See you in a Hooverville.
chunga 1 day ago
Dmitry Orlov has had the best one sentence quote for two years running.
The Unites States can best be described as a singular, highly integrated, systemically
corrupt scheme.
Chen Zhao, Founding Partner and Chief Strategist of Montreal-based Alpine Macro, has been
analyzing global financial markets for more than thirty years. Numerous investors worldwide
know him as the long-serving Chief Strategist of BCA Research.
Today, Zhao is confident about equity markets. He sees the ingredients for a strong recovery
in the global economy, and he believes fears of higher inflation are overblown. He sees the
potential for the Federal Reserve's monetary policy to inflate a new speculative bubble. "This
bubble is going to be a whole lot bigger than the tech bubble of the late nineties, and it will
probably run a whole lot longer than we think", says Zhao in an in-depth conversation with The
Market NZZ.
Mr. Zhao, in February and March, we have witnessed a sharp upward move in long term US bond
yields, temporarily causing a sell-off in the Nasdaq. What do you make of this?
Whenever bond yields rise, you should conceptually decompose this movement into two
stages. One is reflective, meaning the bond market is trying to tell you something about the
underlying economy. Rising bond yields are reflective of stronger economic growth. However, a
market selloff could also move into a phase where bond yields become too high, constraining
economic activity. In my judgement, what we are witnessing right now is purely reflective.
The ISM manufacturing index is at its highest level since 1983, the world economy is in a
strong recovery mode. Higher yields are consistent with the economy getting stronger. Under
these circumstances, I would be more concerned if bond yields did not rise.
Aren't rising inflation expectations also playing a part?
I don't see a clear breakout in inflation expectations. People forget that during the
decade after the global financial crisis, inflation expectations have fallen apart. Markets
became much more concerned about deflation. Inflation breakeven rates currently are between 2
and 2.2%, whereas the average range during the decade before 2009 was more like 2.5 to 3%. So
inflation expectations are simply in the process of being normalized.
Do you see room for a further rise in yields?
Our model says ten year Treasury yields are pretty much at fair value today, at around
1.5%. But we know that if we have a cyclical move in financial markets, nothing stops at fair
value. Markets always undershoot or overshoot. So I could see yields rise towards 2% or even
a bit more. If they approach 2%, we would be active buyers of long term Treasuries.
Don't you see structural inflation building up?
No, not at all. There is a widespread misunderstanding of this issue. Many people look at
the fiscal position of the United States and see a budget deficit of almost 20% of GDP. The
Fed balance sheet has expanded by $7 trillion since the beginning of the pandemic, M2 has
exploded upward. How can this not be inflationary? Well, in my experience, something that is
too obvious is usually wrong.
How so?
What happened is this: For all of 2020, the US government unleashed $3.5 trillion in
various rescue packages, as a result of which the federal government debt rose by $3.6
trillion. At the same time, the household sector's disposable income increased by $3.5
trillion, and household savings shot up by $5.5 trillion. In other words, American households
not only saved up all the transfer payments they received from the government, but they even
saved $2 trillion more from their own income. These rescue programs did absolutely nothing to
generate aggregate final demand or GDP growth. What we have seen was not a fiscal stimulus to
boost aggregate demand, but a transfer payment. This was no different than a one-time tax
cut. We know that people's spending behaviour is determined by their outlook for sustainable
income. If you give them a one-time tax cut, they will save it. This is what the Permanent
Income Hypothesis says and this is what has happened.
... ... ...
Does that also mean you don't see a structural bear market for bonds, where yields would
drift higher over the coming years?
Correct, I don't see the drivers for structurally higher yields. That's why I think that
ten-year Treasury yields above 2% would represent a good buying opportunity.
play_arrow
Leonine 2 minutes ago
M2 has exploded upward. How can this not be inflationary? Well, in my experience,
something that is too obvious is usually wrong.
Even those with half a brain can twig that JP Morgan are a bunch of crooks. Simply Google
"JP Morgan fines".
Those who are market savvy should Google "JP Morgan fines".
Surely in literally everly market segment the CEO, Jamie Dimond, would be banged up in
prison?!!!!!!!!!!!!!!!!!!
nsurf9 21 hours ago (Edited)
You think this guy understands that, even with more than 50% of the, country in plandemic
lock-down, shutter/closed and/or bankrupt for a solid year, the "markets" have literally
doubled.
This just means that JPM like the other whores have taken their short positions and will
now do everything in their power to ensure that they cash out.
Corporations, especially those headquartered in Georgia, have come out against the
legislation signed by Governor Kemp. Republicans describe the bill as one that addresses
election integrity while Democrats call it a voter suppression law – "Jim Crow 2.0".
Coca-Cola and Delta were among
the first to make a point to virtue-signal after the governor signed the bill, only to be
exposed as taking part in the process and giving input into the legislation. Both were fine
with the law until the governor signed it and grievance activists did their thing. Coke soon
discovered that not all of its consumers think that companies should be making policy –
that 's the job of lawmakers- and now it is trying to clean up the mess it made for itself.
Churches have increasingly played a part in American politics and this is an escalation of
that trend. Evangelical churches have shown support for conservative and Republican candidates
while black churches get out the vote for Democrats. This threat of bringing a large-scale
boycott over state legislation is a hostile action against the corporation. It's political
theatre. Groups like Black Voters Matter, the New Georgia Project Action Fund (Stacey Abrams),
and the Georgia NAACP are pressuring companies to publicly voice their opposition and the
religious leaders are doing the bidding of these politically active groups.
When SB 241 and HB 531 were working through the legislative process, the groups put pressure
on Republican lawmakers and the governor to abandon the voting reform legislation. They also
demanded that donations to any lawmakers supporting the legislation be stopped. The Georgia
Chamber of Commerce tried to remain bipartisan while still voicing support for voting rights
but then caved and expressed "concern and opposition" to some provisions . At the time,
several large Georgia companies were targeted by activists, including Aflac, Coca-Cola,
Delta Airlines, Home Depot, Southern Company and UPS.
The Georgia Chamber of Commerce previously reiterated the importance of voting rights
without voicing opposition against any specific legislation. In a new statement to CNBC, the
Georgia Chamber said it has "expressed concern and opposition to provisions found in both HB
531 and SB 241 that restrict or diminish voter access" and "continues to engage in a
bipartisan manner with leaders of the General Assembly on bills that would impact voting
rights in our state."
Office Depot came out at the time and supported the Chamber's statement. The Election
Integrity Act of 2021, originally known as Georgia Senate Bill 202, is a Georgia law
overhauling elections in the state that was signed into effect by the governor and we know what
happened. Office Depot has not delivered for the activists as they demand so now the company
faces boycott drama. The
religious leaders are taking up where the activist groups left off.
African Methodist Episcopal Bishop Reginald Jackson said the company has remained "silent
and indifferent" to his efforts to rally opposition to the new state law pushed by
Republicans, as well as to similar efforts elsewhere.
" We just don't think we ought to let their indifference stand ," Jackson said.
The leader of all his denomination's churches in Georgia, Jackson had a meeting last week
with other Georgia-based executives to urge them to oppose the voting law, but said he's had
no contact with Home Depot, despite repeated efforts to reach the company.
Faith leaders at first were hesitant to jump into the boycott game. Now the political
atmosphere has changed and they are being vocal. Jackson focused on pressuring Coca-Cola first.
After that company went along to get along, before it realized its error, Jackson moved his
focus onto other companies.
"We believe that corporations have a corporate responsibility to their customers, who are
Black, white and brown, on the issue of voting ," Jackson said. "It doesn't make any sense at
all to keep giving dollars and buying products from people that do not support you."
He said faith leaders may call for boycotts of other companies in the future.
So, here we are with Home Depot in the spotlight. There are
four specific demands leveled at Home Depot in order to avoid further action from the
activists.
Rev. Lee May, the lead pastor of Transforming Faith Church, said the coalition is "fluid
in this boycott" but has four specifics requests of Home Depot: To speak out publicly and
specifically against SB 202; to speak out against any other restrictive voting provisions
under consideration in other states; to support federal legislation that expands voter access
and "also restricts the ability to suppress the vote;" and to support any efforts, including
investing in litigation, to stop SB 202 and other bills like it.
" Home Depot, we're calling on you. I'm speaking to you right now. We're ready to have a
conversation with you. You haven't been ready up to now, but our arms are wide open. We are
people of faith. People of grace, and we're ready to have this conversation, but we're very
clear those four things that we want to see accomplished ," May said.
The Rev. Timothy McDonald III, senior pastor of the First Iconium Baptist Church, warned
this was just the beginning.
"It's up to you whether or not, Home Depot, this boycott escalates to phase two, phase
three, phase four," McDonald said. "We're not on your property -- today. We're not blocking
your driveways -- today. We're not inside your store protesting -- today. This is just phase
one."
That sounds a lot like incitement, doesn't it? Governor Kemp is speaking out, he has had
enough. He held
a press conference to deliver his comments.
"First, the left came for baseball, and now they are coming for Georgia jobs," Kemp said,
referring to MLB's decision to move this year's All-Star Game from Atlanta over the new laws.
"This boycott of Home Depot – one of Georgia's largest employers – puts partisan
politics ahead of people's paychecks."
"The Georgians hardest hit by this destructive decision are the hourly workers just trying
to make ends meet during a global pandemic. I stand with Home Depot, and I stand with nearly
30,000 Georgians who work at the 90 Home Depot stores and 15 distribution centers across the
Peach State. I will not apologize for supporting both Georgia jobs and election integrity,"
he added.
"This insanity needs to stop. The people that are pushing this, that are profiting off of
it, like Stacey Abrams and others, are now trying to have it both ways," Kemp said. "There is
a political agenda here, and it all leads back to Washington, D.C."
The governor is right. The activists are in it to federalize elections, not to look out for
Georgians, who will lose jobs over these partisan actions. The law signed by Kemp increases
voting rights, it doesn't limit them .
New weekly jobless claims likely
edged higher last week after plunging to the lowest level since the start of the pandemic.
The Department of Labor will
release its weekly report on new jobless claims on Thursday at 8:30 a.m. ET. Here were the main metrics expected from the report,
compared to consensus data compiled by Bloomberg:
Initial jobless claims, week ended April
17:
610,000
expected vs. 576,000 during the prior week
Continuing claims, week ended April 3:
3.640 million expected vs. 3.731 million
during the prior week
Last week's new claims came as a
welcome surprise after more than a year of elevated initial filings. At 576,000, new claims broke below the Great Recession-era
high of 665,000 filed in March 2009 for the first time in more than a year. And claims have dropped precipitously from their
all-time high of 6.1 million from last spring.
But the labor market recovery has
still been choppy, and the general downtrend in new jobless claims over the past several months has come with some bumps higher.
Other reports have also underscored the stop-and-start nature of the rebound, with the
Federal
Reserve's latest Beige Book last week
noting that many regions continued to experience labor shortages as well as hiring
challenges over the past several weeks.
^DJI
+0.74%
Jobless claims preview: Another 610,000 Americans likely filed new unemployment claims
Emily McCormick
·
Reporter
Wed, April 21, 2021, 2:00 PM
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NQ=F
+0.54%
^IXIC
+0.74%
SPY
+0.69%
YM=F
+0.78%
+2
New weekly jobless claims
likely edged higher last week after plunging to the lowest level since the start of the pandemic.
The Department of Labor
will release its weekly report on new jobless claims on Thursday at 8:30 a.m. ET. Here were the main metrics expected from
the report, compared to consensus data compiled by Bloomberg:
Initial jobless claims, week ended April
17:
610,000
expected vs. 576,000 during the prior week
Continuing claims, week ended April 3:
3.640 million expected vs. 3.731
million during the prior week
Last week's new claims came
as a welcome surprise after more than a year of elevated initial filings. At 576,000, new claims broke below the Great
Recession-era high of 665,000 filed in March 2009 for the first time in more than a year. And claims have dropped
precipitously from their all-time high of 6.1 million from last spring.
But the labor market
recovery has still been choppy, and the general downtrend in new jobless claims over the past several months has come with
some bumps higher. Other reports have also underscored the stop-and-start nature of the rebound, with the
Federal
Reserve's latest Beige Book last week
noting that many regions continued to experience labor shortages as well as
hiring challenges over the past several weeks.
And even within the jobless
claims report, some metrics have remained stubbornly elevated and pointed to persistently high levels of unemployment.
Nearly 17 million Americans were still receiving unemployment benefits across all programs as of late March, including more
than 12 million Americans on the federal Pandemic Unemployment Assistance and Pandemic Emergency Unemployment Compensation
program, which each expire in September. And some individual states, including Nevada and Alaska, continue to post insured
unemployment rates that are well above the national average.
In a recent note from SocGen's Andrew Lapthorne, the cross-asset strategist summarizes the
ongoing market insanity delightfully, saying that "there is an increasingly large number of
weird and wonderful signs of market excess, from surging crypto currencies started as a joke to
a single New Jersey Deli trading at $100m market cap."
To be sure, it's not just the record liquidity that has pushed the Goldman index of
financial conditions to record easy levels...
... there is also a lot of good news, with the economic narrative improving and vaccination
programs accelerating worldwide, with most now hoping that the worst of the pandemic is behind
us. At the same time, global profit expectations are being revised upwards and earnings growth
is forecast to jump by a third in 2021.
Given this almost euphoric market backdrop, Lapthorne correctly notes that "anything bearish
is met with groans."
But to complete the record, the SocGen strategist adds that even after this profit rebound,
global equities will be trading at over 21x earnings, which is extremely expensive on most
historical measures, and at a stock level, " the distribution of valuations is as extreme as
during the 1999 tech-bubble."
Finally, the amount of global market capitalization that has reported a negative profit
number in the last year and in each of the last three years is higher than at any point during
the past 22 years, and has even surpassed the dot com bubble.
Lapthorne's rhetorical question: " We wonder how the history books will describe 2021."
mailll 6 hours ago (Edited)
Corporate stocks are the new bitcoin. People putting trillions into worthless corporate
assets. Brought to us by free money from the Federal Reserve.
I know one company that had a market cap of about $200 million about 5 years ago. It now
has a market cap of about $2 billion. And as their stocks have been increasing year after
year, their net incomes were becoming more and more in the negative. And in order to finance
their mismanaged company, they have been issuing more stocks. And instead of decreasing the
value of their stocks, their stocks actually doubled. Once again, brought to us by free money
from the Federal Reserve.
But keep in mind, the Fed giveth, and the Fed taketh away. And each time they taketh away
after issuing all of this easy money, they have gained more and more power over our financial
system, and over our government. In fact, the Federal Reserve is now Uncle Sam's new daddy.
And Uncle Sam is loving it. And investors are loving it, many of who don't even realize why
this is happening.
I expect the Fed to taketh it all away sometime in 2022.
istt 3 hours ago
P/E ratio for the NASDAQ are not anywhere close to 1999. But the Buffett Indicator is near
record highs.
(Bloomberg) -- Wall Street banks have long relied on a familiar system to limit the dangers
of trading with big clients: assign sales staff to win deals, and risk controllers to keep them
in check -- even if it sacrifices some profit.At Credit Suisse Group AG, executives had given
the point salesman to Archegos Capital Management on its swaps desk the new responsibility of
instead overseeing risk-taking in the broader prime-brokerage unit, according to people with
knowledge of the matter. This year, Archegos's swap bets spectacularly collapsed, saddling the
bank with a $4.7 billion writedown, and setting it up as the biggest loser to emerge from the
debacle at Bill Hwang's family office.
Parshu Shah -- the salesman who became head of prime-services risk -- hasn't been accused of
any impropriety in previous trades with Archegos. But the bank has faced questions in the wake
of the debacle over whether managers prioritized boosting revenue over managing against
downside. Shah is among a roster of Credit Suisse executives who've been forced to step down
following the blowup, according to an internal memo early this month.
The usually behind-the-scenes functions of risk controls have been thrust into the limelight
after Credit Suisse was left holding the bag on two financial catastrophes in just a few months
-- Hwang's firm and the collapse of Greensill Capital. The Swiss lender's losses have left
investors puzzling over whether it has sufficient checks in place.
In recent years, Credit Suisse Chief Executive Officer Thomas Gottstein and his predecessor
Tidjane Thiam gave the task of resetting risk management and the bank's risk appetite to Lara
Warner, head of risk, who is stepping down as well. She challenged risk managers to stop
thinking only about defending the bank's capital and also look at strategic business
priorities, Bloomberg reported earlier.
While it's not typical for revenue-generating finance employees to switch to risk-oversight
roles, some banks make such shifts.Credit Suisse, the worst-performing major bank stock this
year, is set to disclose first-quarter earnings results on Thursday that are likely to involve
a more-detailed discussion around the Archegos mess. Anna Christensen, a spokeswoman for Credit
Suisse declined to comment for the firm and Shah, or say how long he'd been in the
risk-oversight position.
Shah, who has been with the bank for more than 20 years, was one of the people at the firm
who helped nurture the relationship with Archegos as the fund began growing in size.When Shah
left the swaps desk, his sales role ended and he took over the new oversight position within
the prime-brokerage group. That job included overseeing the risk of several clients, including
Archegos. An existing member of Shah's team was assigned to Hwang's firm for monitoring its
activity on a daily basis, according to a Credit Suisse executive who asked not to be
identified discussing internal matters.
The prime-brokerage risk group was one among several lines of defense set up to shield a
firm of Credit Suisse's size from confronting hefty losses in dealings with any one client. But
the enormity of the bank's exposure coupled with the rapid implosion of Hwang's firm ripped
through the safety net Credit Suisse had set up, leaving management befuddled, the lender's
workforce frustrated and investors furious.
In 2016, under then-CEO Thiam, Credit Suisse underwent a significant restructuring of its
risk functions that led to many people leaving. The risk-control center was shifted to Zurich,
Credit Suisse's headquarters, from New York, where the majority of the bank's
investment-banking and trading activities sit.
Since the restructuring, efforts to cut costs have damped the bank's ability to add talent
and replenish the defense lines, a person familiar with the matter said.
It would be stupid to buy US stocks at those valuations. But it is strange that 401K
investors do not participate, they usually have fixed allocation heavily biased to stocks
providing Wall Street sharks with ample food chain...
Household equity holdings now account for 47% of total assets, according to Citi. That is
the highest level since 1970. Returns were subpar for the next decade.
Brian Sozzi
·
Editor-at-Large
Thu, April 22, 2021, 4:32 PM
If you believe the market is a
forward
looking mechanism
-- and most investors would agree that it is -- then you may want to prepare your portfolios for a sharp
slowdown in economic growth later this year and into 2022 as fiscal stimulus wanes.
U.S. economic growth for this year is "peaking," Goldman Sachs strategists led by Ben Snider warned in a new note on Thursday.
Snider said Goldman's economists predict 10.5% GDP growth for the second quarter, the strongest quarterly growth rate since 1978.
The projection is also near the high-end of most economists on Wall Street.
From there, well, it's all downhill for GDP growth.
Goldman estimates growth in the third and fourth quarters of this year will clock in at 7.5% and 6.5%, respectively. Growth is
then seen slowing in each quarter of 2022 -- by the fourth quarter Goldman is modeling a mere 1.5% GDP increase.
Economic growth is peaking, warns Goldman Sachs.
"Although our economists expect U.S. GDP growth will remain both above trend and above consensus forecasts through the next few
quarters, they believe the pace of growth will peak within the next 1-2 months as the tailwinds from fiscal stimulus and economic
reopening reach their maximum impact and then begin to fade," Snider said.
The economic growth peak could have major implications for investor returns, Snider thinks.
Goldman's research shows decelerating economic growth usually leads to weaker -- though still positive -- equity returns and
greater volatility. Since 1980, the S&P 500 has averaged a monthly return of 0.6% when economic growth was positive but
decelerating. That is half the 1.2% average gain when economic growth was positive and accelerating, points out Snider.
"Decelerating economic growth is also typically accompanied by sector rotations within the equity market,' Snider added.
"Cyclical industries tend to lead the market in environments of positive and accelerating economic growth, but as growth peaks
and decelerates more defensive industries typically outperform."
Bond investors are bewildered after last week's stellar US economic data sparked a rally in
haven US Treasuries -- a market reaction that breaks the typical dynamic for fund managers. The
price of highly rated government bonds tends to jump in response to bad news, pushing down
yields. Mike Riddell, a portfolio manager at Allianz Global Investors, described the market
move as "bonkers".
With politics leaning ever more left on university campuses, I hope Dr Ladapo doesn't lose
his job at UCLA for writing a cogent and concise opinion piece.
RICHARD SANDOR SUBSCRIBER 3 hours ago
Brian : Yes, an expensive university in my largely Democrat-controlled state state has a
student group which wants to ' censor ' the university president for not being focused enough
on ' diversity, inclusiveness and equity . ' Hope the parents realize the high price they are
paying for this left wing indoctrination. mrs
The idea of seasonality is not bad per se, but needs to be applied intelligently. In this
sense, May is not fixed month and can occur during any month of the year when signs of impeding
collapse are prominent. Selling when you (still) have some gains is kind of insurance against the
crash.
"Sell in May and go away," advises the trading maxim. But with stocks at record highs, one
trader at the New York Stock Exchange is recommending the strategy with a twist.
... The full axiom was originally, "Sell in May and go away, and come on back on St. Leger's
Day." It has its roots in the City of
London . Financial professionals would go on holiday in May for approximately four months
to escape the summer heat and return for the St. Leger derby in mid-September. Traders and
bankers in the U.S. appropriated the aphorism over the years and condensed it to its current
form.
Many traders still leave their desks for the summer. Volume dries up, liquidity tends to
wane, and the bearish summer tendencies become a self-fulfilling prophesy -- to an extent. The
likelihood of markets to follow predictable patterns based on the calendar is called
seasonality -- accounting for up to one-third of a market's price movement.
While a powerful indicator at times, there can easily be overriding factors. Entire books
and websites are dedicated to the study, such as The Stock Trader's Almanac , which has been
published since
1967. The author, Jeff Hirsch, has combined seasonality with other technical indicators to
produce a
robust trading strategy over time.
Woods takes account of the current year-to-date gains for the indices and sees the potential
for some cooling off.
"We could see a pause in this market. It seems too obvious, but right now seeing where we've
gone and how strong this rally has been -- a pause would be fine. And you throw in the
seasonality factor where April is the second strongest month over the last 20 years. Now we're
coming into that slowdown. We didn't see it last summer, which was great. But this summer,
rationale would dictate that we're gonna go away," said Jay.
... ... ...
Jared Blikre is an anchor and reporter focused on the markets on Yahoo Finance Live.
Follow him@SPYJared
Kevin 17 hours ago I don't think anyone
can give you good advice about this market. I am 50/50 and unsure...and I think everybody else
is in all honesty. We all know that valuations are high, the market may be over-heated, and the
market is due for a pullback. We all know that. But, in my lifetime, we have never had an
economic reopening after a forced government shutdown during a pandemic. You can make arguments
for a pullback or a continued rally very easily. Both sides make perfect sense. With that being
said, I think you just have to be playing both sides. Stay in the game and keep some dry powder
as well. Yes, I know that is very simplistic and basic, but this thing really could go either
way during the coming months. Frank 22 hours ago Slashing interest rates and backstopping
corporate debt, for example, helped direct money into the financial system. Some of the biggest
beneficiaries were wealthier Americanswho hold investments. As a stark sign of how the rich got
richer in the past 12 months, the number of billionaires on Forbes's 35th-annual ranking grew
by nearly a third, swelling by 660.
BananaBob 22 hours ago It makes sense to sell in Q2 when the markets are at record highs. Q3 is
usually the worst quarter of the year. Lots of companies take their losses in Q3 (at least on
paper) to make their Q4 numbers look better. Then, then they can say 'a gain of x% since last
quarter' to boost their year end numbers and show a hockey stick shaped chart on their annual
reports.
MickinMD 6 hours ago Yahoo should point out here that a "trader" is more of a gambler than an
investor.
While May-Sept. may be bad, history says that people that sell generally miss the optimum
reentry point and buy back at a higher price.
Still, the P/E of the S&P 500 was 18 in 2014 and is 43 now - something not seen since
2000 when Fed Chair Alan Greenspan wisely warned against "irrational exuberance."
The problem with selling stocks today is: where are you going to put the money for the short
term until you reinvest? In 0.1% credit union savings or 0.05% 1-year M&T bank CD (0.025%
is the national avg.)?
A big reason for the big-bubbled market is that the people who tend to invest in the market
also tended not to lose their jobs during the pandemic, they have money to invest, and CD's and
Bonds don't pay anything.
I've taken money out of stocks but only to spend a ton to repair and remodel my house: my
"emergency" CD's pay 2.1% to 2.85% interest and mature in 2024: I'm not going to redeem them
and later replace them with 0.5% CD's.
The clincher for me to sell stocks is because the market is SO overpriced. My personal,
conservative, retiree's stock portfolio's P/E went from 20 in 2014 to 26 now - value stocks are
mostly not in a huge bubble.
So I partially-sold stocks that made big gains last year but tend not to be moving up this
year and have higher than usual P/E's. For ex., Costco (COST) returned 33% last year but is
down 2% this year and it's P/E is 39 - it was 27 to 29 from 2015-18.
Uald NRA 19 hours ago You might want to look at a chart of national debt. Republicans make a
big deal about the debt whenever Democrats are in power, but the moment they are in control
that worry goes away completely. The national debt increased by 186% under Reagan, 101% under
Bush, Obama was 74%. Reality doesn't fit perception when it comes to who actually increases our
debt faster.
a 16 hours ago Don't sell out rather reblance your portfolio to restore your asset allocation
to a what makes sense for you from a risk tolerance standpoint. Also study the previous market
crashes. 1987, 1992, 2000, 2008 and 2020, They all happened for completely different reasons.
History never repeats itself. The next crash will be for something completely different yet
again. Work on possible senarios that might tigger a market crash, for example a run on the
dollar, or crypto goes bust and the leverage take the banks with it, massive inflation, covid
comes back, etc. When you have a few scenarios then look for asset classes that can survive
that crash. That's where you get insight from studying previous crashes. mike s 1 day ago
"Thoughts On the Market" podcast had a bit on this. While it is old, there seems still some
truth in it - but with newer influences and some specific to NOW. Taxes, financial experts
taking vacations, etc. I am more concerned with supply chains slowly coming back as demand is
there, inflation, rising costs in things like corn, lumber (other commodities), etc. Also, I
think many "day-traders" will continue to chase gains with cryptos - not sure what that will
do. I'm only in a little bit with GBTC and RIOT. I've got a decent bit of cash on the side to
buy in if (when - many think) there is another major dip. There are a few areas that have been
slowing down (tech, small caps, SPACs, ARK-type stuff) that I am still buying little bits here
and there - BUT not over-buying (I hope)... Where to buy? Services? Airlines? Shipping? not
sure.. (is anyone? nope)
Hose 22 hours ago Fed banksters and wall st. Analyst Criminals should go to Jail.
David2 1 day ago Sell in May and then pay the capital gains tax in April. Tax harvesting after
a decline seems like a much smarter move
sixpacktwo 5 hours ago I'm older and last year went to dividend paying funds and utilities.
After 50 years I'm letting other people keep me safe. DENNIS S 1 day ago With the S & P at
37.9 times earnings, the highest in history it may be time for some profit taking .
Evolution 6 hours ago The calm before the storm is here. Ultra smart market. Totally
undetectable.
Microsoft buys speech recognition company Nuance in $16B deal, second biggest since
LinkedIn
Nuance has a strong reputation for its voice recognition technology, and it has been
considered an acquisition target for companies like Apple, Microsoft and more for several
years.
The past year or so has been one of the oddest periods ever for the stock market and
economy, with a rare pandemic shutting down businesses and throwing millions of people out of
work.
At the same time, the federal government stepped up with unprecedented amounts of stimulus
payments, free loans to businesses, eviction moratoriums and other aid -- even a delayed
deadline for filing income-tax returns.
Things are off-the-charts unusual. Yet for novice investors who stuck a toe in the stock
market for the first time over the past year or so, it's all they know.
And it's not just a few people, either. Armed with stimulus checks and motivated by boredom
perhaps, millions of people took the stock market plunge last year -- a whopping 15% of all
current stock investors got their start in 2020, according to a new Schwab survey.
Most must be thinking, "This is easy." Here are some reasons why they should think
twice.
The stock market has climbed steadily for the past 13 months, over which time it has nearly
doubled in value. That's rare in itself. But the really unusual part was the extremely short
duration of the preceding bear market or downward spiral, which lasted just five weeks.
No wonder these first-year investors are more optimistic about near- and long-term results
compared to more seasoned market participants, according to the Schwab survey. The newbies also
tend to be younger -- 35 years old, on average, compared to 48 for people who started investing
prior to 2020. They thus can afford to be more optimistic, as they have more time to make up
losses.
It's true that rising or bull markets always spring from the ashes of bear markets, but
usually those preceding downdrafts are much more prolonged. That's the real challenge of
investing -- dealing with month after month, if not year after year, of falling prices, when
disappointment leads to despair and then desperation. If you blinked, you missed the bearish
phase of 2020. The next downward cycle won't be so kind.
... ... ...
Investing, like gambling, isn't so difficult when you're playing with house money. That was
somewhat the case for millions of Americans who received stimulus payments from Uncle Sam or
possibly souped-up unemployment benefits.
Sure, plenty of people used this cash as financial lifelines, to stay afloat. But others
saved their stimulus checks or put them to use in the stock market.
In other words, some new investors probably don't fully appreciate that investing involves
sacrifice: You forego consumption today in hopes that your money will grow enough over time
that higher spending will be possible years down the road.
Stimulus checks don't arrive every year, though there is one form of free money that you can
tap into on an ongoing basis. These are the matching funds available through workplace
401(k)-style funds that employers ante up to encourage workers to invest.
Even the federal government offers limited retired matching funds to lower-income
workers, through the widely underappreciated Retirement Savers tax credit (details at irs.gov).
It's not a huge sum -- a maximum credit of $1,000 annually to the lowest-income workers -- but
it beats the stimulus money you can count on most years.
Don't assume your buddies are right
There's a lot of psychology to investing, and one tendency is that people seek out
confirming views from friends, family members and colleagues. There's something heartening
about having your investing ideas validated by others. The danger is that these other parties
might have even less knowledge than you.
More than in most years, collaborative investing appears to be on the rise. For example, a
survey by MagnifyMoney, a subsidiary of Lending Tree, found that nearly six in 10 investors age
40 or younger are members of online forums such as Reddit. These can be good ways to learn
about finances, but they also might lead you astray.
"It's great that these communities are introducing a lot of people to investing, which is
one of the best ways to build wealth over a lifetime," said Tendayi Kapfidze, LendingTree's
chief economist, in a statement. "A concern is that some are leading to relatively short-term
trading concentrated in a few stocks with hopes of getting rich quick."
Usually, investors are better off thinking for themselves and tuning out the "noise" or
outside distractions. In part, this is because other people often have different goals,
tolerance for risk or other motivations compared to you. Or, they're just wrong.
... .... ...
And rather than concentrate your money in a handful of stocks, Sandoval recommends spreading
it out through low-cost, diversified mutual funds or exchange-traded funds. The market's strong
performance last year, she noted, was driven by a smattering of large, technology-focused
companies including Facebook, Amazon, Apple, Netflix and Google.
But already, there are signs that the market's leadership is shifting. Besides, pinpointing
future hot stocks isn't easy to do, except in hindsight...
The recent run-up in government bond yields is a gift to any fund manager fretting over
market risks ranging from geopolitics to leverage. It is true that the first quarter of this
year was no fun for holders of government bonds, which dropped in price on the largest scale in
four decades. The pullback means that, just as Russia and the US once again lock horns, and as
the Archegos implosion stirs concerns over potentially systemic risks stemming from plentiful
global leverage, government bonds again offer something of a safety net.
At least $120 billion a month of Treasury debt and mortgage-backed securities bought by FED
since last June is around trillion dollars now. This is just putting money from one pocket to
another not a real buy or sell. Essentially the naked emission of dollars -- attempt to export
inflation.
So FED seeks to increase inflation to somewhere between 2 and 3 percent a year. Which means
payment to the forign owners of the US national debt will increase accordingly. And payments to
foreign owners is a real thing as central banks are now reluctant to recirculate supruss dollars
into treasuries and China cuts it purchases of dollar denominated debt.
The Fed has been buying at least $120 billion a month of Treasury debt and mortgage-backed
securities since last June to hold down long-term borrowing costs. Since December, the central
bank has said the economy must make "substantial further progress" toward its goals of maximum
employment and 2% inflation before it scales back those purchases.
"We will taper asset purchases when we've made substantial further progress toward our
goals, from last December when we announced that guidance," Mr. Powell said in a virtual event
held by the Economic Club of Washington, D.C. "That would in all likelihood be before -- well
before -- the time we consider raising interest rates."
The Fed has said it will hold rates near zero until it sees the labor market return to full
employment and inflation rise to 2% and is forecast to moderately exceed that level for some
time. Mr. Powell reiterated that he thinks it is highly unlikely that the Fed would raise
interest rates this year and noted that most central-bank officials see rates remaining near
zero through 2023.
Tuesday's report fueled concerns that inflation, dormant through the record-long economic
expansion from 2009 to 2020, could soon become a challenge for policy makers. Mr. Powell
acknowledged those worries while reiterating that the Fed seeks inflation "that is moderately
above 2% for some time" to make up for the past decade's shortfalls.
Both the Biden administration and the Fed acknowledge the possibility of prices rising
faster than usual in coming months as the economic recovery strengthens and demand for goods
and services temporarily outruns supply. But both expect the acceleration in inflation to prove
temporary.
What has driven bonds lower from 10 year interest around 1.7% to around 1.5%? Which means
around 2% difference in the price of the bonds. This is the question.
Is this about the concerns about the status of dollar as global reserve currency, that were
eased? Or that Biden administration is paralyzed and will not be able to extend the USA debt as
it planed to do.
Treasury yields still remain much higher than where they started the year.
The 10-year finished last year at 0.913%. The yield on the 30-year bond settled Thursday at
2.210%, down from 2.325% Wednesday but up from 1.642% at the end of last year.
"British private schools create a class culture of a kind unknown in the rest of Europe.
The extreme case is the boarding prep schools, which separate children from their parents at
the age of eight in order to shape them into members of a detached elite. In his book The
Making of Them the psychotherapist Nick Duffell shows how these artificial orphans survive
the loss of their families by dissociating themselves from their feelings of love(14).
Survival involves "an extreme hardening of normal human softness, a severe cutting off from
emotions and sensitivity."(15) Unable to attach themselves to people (intimate relationships
with other children are discouraged by a morbid fear of homosexuality), they are encouraged
instead to invest their natural loyalties in the institution.
This made them extremely effective colonial servants: if their commander ordered it, they
could organise a massacre without a moment's hesitation (witness the detachment of the
officers who oversaw the suppression of the Mau Mau, quoted in Caroline Elkins's book,
Britain's Gulag(16)). It also meant that the lower orders at home could be put down without
the least concern for the results. For many years, Britain has been governed by damaged
people.
I went through this system myself, and I know I will spend the rest of my life fighting
its effects. But one of the useful skills it has given me is an ability to recognise it in
others. I can spot another early boarder at 200 metres: you can see and smell the damage
dripping from them like sweat. The Conservative cabinets were stuffed with them: even in John
Major's "classless" government, 16 of the 20 male members of the 1993 cabinet had been to
public school; 12 of them had boarded(17). Privately-educated people dominate politics, the
civil service, the judiciary, the armed forces, the City, the media, the arts, academia, the
most prestigious professions, even, as we have seen, the Charity Commission. They recognise
each other, fear the unshaped people of the state system, and, often without being aware that
they are doing it, pass on their privileges to people like themselves.
The system is protected by silence. Because private schools have been so effective in
moulding a child's character, an attack on the school becomes an attack on all those who have
passed through it. Its most abject victims become its fiercest defenders. How many times have
I heard emotionally-stunted people proclaim "it never did me any harm"? In the Telegraph last
year, Michael Henderson boasted of the delightful eccentricity of his boarding school. "Bad
work got you an 'order mark'. One foolish fellow, Brown by name, was given a double order
mark for taking too much custard at lunch. How can you not warm to a teacher who awards such
punishment? Petty snobbery abounded," he continued, "but only wets are put off by a bit of
snobbery. So long as you pulled your socks up, and didn't let the side down, you wouldn't be
for the high jump. Which is as it should be."(18) A ruling class in a persistent state of
repression is a very dangerous thing."
... the financial markets sometimes feel like a house of cards.
...the more existential questions: what's the right level for a stock market that plunged
33% in about two weeks just a year ago? How much of that gain comes down to policy stimulus
and how much is real? How much of the expected economic rebound is already priced in? What
happens if the vaccine promise falls short? What if this is as good as it gets?
Taken together, it leaves people who manage money, their clients, and the companies that
advise them, just as befuddled as Andersen, with almost as many perceived red flags as there
are theories as to what's causing it all.
"The most common observation we get from clients is that markets don't "feel right", and we
absolutely get that," wrote Nicholas Colas, co-founder of DataTrek Research, in a recent note.
"For us, a big piece of this unease comes from the novelty of seeing capital markets go from
distress to euphoria in such a short period of time."
...there's been a rush for young companies to go public, sometimes before they have the full
business model ironed out and sometimes when profits are still far on the horizon. That means
the stock market resembles a casino some days, with people piling in who are unafraid of, or
just not used to, losing money.
...the current moment, full of Redditors
and memes and
SPACs and
electric cars and Zoom meetings to 1999, when the internet was the wild, wild west and
trading had just moved on line.
...still worth considering. It's simultaneously true that for the past 20 years, any time
any tech stock anywhere gets a little pricy, it prompts a lot of pearl-clutching about the
dot-com bust -- and that there are uncanny similarities that do warrant more attention.
Why do periods of disruption so frequently lead to speculation? Why do we let
snake-oil-sounding financiers sell us whatever they're selling us? ...
... the traditional ways of managing risk -- government bonds, for example --
aren't really up to the job the way they might have been a few decades ago, as yields
remain low and the decades-long bull market comes to an end.
Instead, the muni market "yawned" when the bill was passed, said Eric Kazatsky, Bloomberg Intelligence head municipal strategist, a
signal that the aid money had already been priced in. But muni ETFs are still worth a look, he thinks.
Kazatsky is a fan of the "gorillas" in the marketplace for all the usual reasons -- what he calls "solid" management, low fees,
liquidity and robust inflows. He mentions the $21 billion iShares National Muni Bond ETF
MUB,
-0.06%
,
which
tracks investment-grade bonds. For investors willing to take on a little more risk, there's the VanEck Vectors High Yield Muni ETF
HYD,
-0.02%
,
which
has $3.3 billion under management. For taxable munis, the Invesco Taxable Municipal Bond ETF
BAB,
-0.21%
is
one of the bigger funds.
For investors unfamiliar with the municipal space, "high-yield" is a different animal than in the corporate sector: much safer, with
very infrequent defaults. The space "could actually offer a much bigger reward because there are a lot of bargains to be had from
the market dislocation last year, if you don't think they've run their course," Kazatsky told MarketWatch.
With slightly less risk comes a bit less reward: HYD has a 30-day SEC yield of 2.82% as of March 5 while the largest corporate
junk-bond ETF, the iShares iBoxx $ High Yield Corporate Bond ETF
HYG,
-0.21%
,
has
yielded 3.42%.
The stock market has been breaking records over the last year while the real economy has struggled in the face of the pandemic.
And that discrepancy is starting to make experts a little nervous.
One expert, Suze Orman, would go so far as to say she's now preparing for an inevitable crash.
... ... ...
"I don't like what I see happening in the market right now," Orman said in a video for CNBC. "The economy has been horrible, but
the stock market has been going [up]."
While investing is as easy now as
using
a smartphone app
, Orman is concerned about where we can go from these record highs.
And even with stimulus checks, which are still going out, and the real estate market breaking its own records last year, Orman
worries about what will come with the coronavirus -- especially as new variants continue to pop up.
And given how long the market has been surging, she feels it's just been too long since the last crash to stay this high much
longer. "This reminds me of 2000 all over again," Orman says.
The Buffett Indicator
...
the Buffett Indicator, which is a measurement of the ratio of the
stock market's total value against U.S. economic output, continues to climb to previously unseen levels.
And those in the know are wondering if it's a sign that we're about to see a hard fall.
Even Tesla boss Elon Musk is starting to feel anxious. Musk recently asked investing bigwig Cathie Wood, CEO of Ark Invest, if we
should be expecting a crash.
While Wood initially brushed off any concerns, she did tell Musk she would have her team take a closer look.
HHw to prepare for a rainy day
Freedomz / Shutterstock
Orman has three recommendations for setting up a simple investment strategy to help you successfully navigate any sharp turns in the
market.
1. Buy low
Part of what upsets Orman so much about the furor over meme stocks like GameStop is it goes completely against the average
investor's interests.
"All of you have your heads screwed on backwards," she says. "All you want is for these markets to go up and up and up. What good is
that going to do you?"
She points out that, the only extra money most people have goes toward
investing
for retirement
in their 401(k) or IRA.
Because you probably don't plan to touch that money for decades, the best long-term strategy is to buy low. That way, your dollar
will go much further now, leaving plenty of room for growth over the next 20, 30 or 40 years.
... ... ...
First, prepare for the worst and hope for the best. Since the onset of the pandemic, Orman now recommends everyone have an emergency
fund that can cover their expenses for a full year.
NOTE: At their peak in April 2020,
more than 6 million Americans made first-time claims for unemployment assistance in a single
week. And for 20 weeks in a row, more than a million people filed initial jobless claims.
As of March,
total employment in the U.S. was still more than 8 million below February 2020 levels. In
short, the labor market recovery still has a very long way to go.
"... How much of my retirement portfolio do I really want to gamble on a high-risk, low-profit company that is already valued at over 1,000 times its most recent earnings, plus seven times the peak earnings of its entire industry, and which is controlled and run by a volatile, drug-taking eccentric? ..."
"... You've got nearly five times as much of your retirement portfolio invested in Tesla than you do in the entire U.S. home-building industry. ..."
How much of my retirement portfolio do I really want to gamble on a high-risk,
low-profit company that is already valued at over 1,000 times its most recent earnings, plus
seven times the peak earnings of its entire industry, and which is controlled and run by a
volatile, drug-taking eccentric?
Right now if you hold an S&P 500 or similar stock market index fund you've got more
money invested in Tesla than you do in, say, Ralph Lauren (RL) Molson Coors (TAP) Gap (GPS)
Hasbro (HAS) American Airlines (AAL) United Airlines (UAL) Delta Air Lines (DAL) Campbell Soup
(CPB) Domino's Pizza (DPZ) Hershey (HSY) Wynn Resorts (WYNN) Kellogg (K) General Mills (GIS)
Darden Restaurants (DRI) Clorox (CLX) and many others.
You've got nearly five times as much of your retirement portfolio invested in Tesla than
you do in the entire U.S. home-building industry.
The professional poker player finally points out some of the insane moves observed in
pennystocks in Q1, focusing on a tiny deli owner in rural NJ:
Strange things happen to all kinds of stocks. Last year, on one day in June, the stocks of
about a dozen bankrupt companies roughly doubled on enormous volume. Recently, the Wall
Street Journal reported a boom in penny stocks.
Someone pointed us to Hometown International (HWIN), which owns a single deli in rural New
Jersey. The deli had $21,772 in sales in 2019 and only $13,976 in 2020, as it was closed due
to COVID from March to September. HWIN reached a market cap of $113 million on February 8.
The largest shareholder is also the CEO/CFO/Treasurer and a Director, who also happens to be
the wrestling coach of the high school next door to the deli. The pastrami must be amazing.
Small investors who get sucked into these situations are likely to be harmed eventually, yet
the regulators – who are supposed to be protecting investors – appear to be
neither present nor curious.
We don't find it at all surprising that Einhorn's conclusion from his capital markets
observations over the past quarter is identical to ours, when we discussed the insane stock
moves that dominated much of January and February:
"From a traditional perspective, the market is fractured and possibly in the process of
breaking completely."
"Having a large amount of leverage is like driving a
car with a dagger on the steering wheel
pointed at your heart. If you do that, you will be a better driver. There will be fewer
accidents but when they happen, they will be fatal ." Warren Buffett
The Financial Instability Hypothesis (FIH) has both empirical and theoretical aspects that
challenge the classic precepts of Smith and Walras, who implied that the economy can be best
understood by assuming that it is constantly an equilibrium-seeking and sustaining system. The
theoretical argument of the FIH emerges from the characterization of the economy as a
capitalist economy with extensive capital assets and a sophisticated financial system.
In spite of the complexity of financial relations, the key determinant of system behavior
remains the level of profits: the FIH incorporates a view in which aggregate demand determines
profits. Hence, aggregate profits equal aggregate investment plus the government deficit. The
FIH, therefore, considers the impact of debt on system behavior and also includes the manner in
which debt is validated.
Minsky identifies hedge, speculative, and Ponzi finance as distinct income-debt relations
for economic units. He asserts that if hedge financing dominates, then the economy may well be
an equilibrium-seeking and containing system: conversely, the greater the weight of speculative
and Ponzi finance, the greater the likelihood that the economy is a "deviation-amplifying"
system. Thus, the FIH suggests that over periods of prolonged prosperity, capitalist economies
tend to move from a financial structure dominated by hedge finance (stable) to a structure that
increasingly emphasizes speculative and Ponzi finance (unstable). The FIH is a model of a
capitalist economy that does not rely on exogenous shocks to generate business cycles of
varying severity: business cycles of history are compounded out of (i) the internal dynamics of
capitalist economies, and (ii) the system of interventions and regulations that are designed to
keep the economy operating within reasonable bounds.
"... much like the dot-com period, there is a broad subset of stocks (mostly in technology) that have become completely untethered, particularly since the summer of 2020, from business fundamentals like earnings and even sales -- driven higher only by euphoric market participants extrapolating from a past extraordinary trajectory of prices. ..."
"... A lot of today's US stock market has become what I call a "pure price-chasing bubble." Examination of the history of comparable pure price-chasing bubbles shows there has been a set of key causal factors that contributed to these rare (I have found nine in total) market events; the presence of most of these factors has usually been necessary for markets to reach the requisite escape velocity. ..."
"... To fuel the bubble further, there was a rapid expansion of bank money beginning three years before the market peak -- but the expansion of credit was even greater, owing to an explosion of margin credit (with implied annuaized interest rates sometimes reaching 100 percent) through an informal system utilizing postdated checks ..."
"... The US market certainly exhibits an exceptional record of price appreciation, with the S&P 500 having risen by almost 500 percent over more than a decade. In contrast to most other bubbles, however, it is notable that US economic growth over this period has been relatively anemic. ..."
"... Due to a sustained high rate of corporate equity purchases financed with debt, this overarching expansion of credit has also made its way into the last decade's bull market and steepened its price trajectory. ..."
"... The role of message boards and chat rooms -- with their millions of participants, all in instant real-time contact -- has created crowd dynamics in speculative stock market favorites at a pace without parallel in other pure price-chasing bubbles. ..."
"... a peak will be reached, a decline will follow, and the psychological dynamics in play on the way up will go into reverse and will accelerate the fall. ..."
"... Moreover, in the context of a grossly underestimated mass of corporate debt, history tells us the consequences of the bursting of the US stock market bubble should be another financial crisis and another recession ..."
According to Frank Veneroso, a broad subset of today's US stock market has become what he
calls a "pure price-chasing bubble." Examination of the history of comparable pure
price-chasing bubbles shows there has been a set of key causal factors that contributed to
these rare market events.
The most extreme such case was an over-the-counter market in Kuwait called the "Souk
al-Manakh." This exemplar of a pure price-chasing phenomenon may shed light -- albeit
unflattering -- on the current US equity market, Veneroso contends.
Our trade deficit rose 4.8% February, as both our exports and imports decreased, but the
value of our exports fell by almost three times as much as the value of our imports did .the
Commerce Department
report on our international trade in goods and services for February indicated that our
seasonally adjusted goods and services trade deficit rose by $3.3 billion to $71.1 billion in
February, from a January deficit that was revised down to $67.8 billion from the $68.2 billion
deficit reported a month ago in rounded figures, the value of our February exports fell by $5.0
billion to $187.3 billion on $4.8 billion decrease to $131.1 billion in our exports of goods
and a $0.2 billion decrease to $56.1 billion in our exports of services, while our imports fell
$1.7 billion to $258.3 billion as a $2.0 billion decrease to $219.1 billion in our imports of
goods was partially offset by a $0.3 billion increase to $39.2 billion in our imports of
services . export
prices averaged 1.6% higher in February , which means our real exports fell more month over
month than the nominal decrease by that percentage, while import prices rose 1.3%, meaning that
the contraction in real imports was greater than the nominal decrease reported here by that
percentage
For a third consecutive month, everyday prices moved sharply higher with gains led by
motor fuels prices.
On the core services side, significant increases came from motor vehicle insurance (up
3.3 percent for the month), transportation services (+1.8 percent), and motor vehicle
maintenance services (+1.0 percent).
Energy prices continue to drive the Everyday Price Index higher in the early part of
2021.
For a given time-horizon, it has been conventional for those estimating such a "rational"
market forecast of expected inflation to take the appropriate Treasury security nominal yield
of that time horizon (say 5 years) and simply subtract from it the yield on the same time
horizon TIPS, which covers security holders for inflation. So it has long looked like this
difference is a pretty good estimate of this market expectation of inflation, given that TIPS
covers for it while the same time horizon Treasury security does not.
Well, it turns out that there are some other things involved here that need to be taken
account, one for each of these securities. On the Treasury side, it turns out that the proper
measure of the expected real yield must take into account the expected time path of shorter
term yields up to that time horizon. This time path has associated with it a risk regarding the
path of interest rates throughout the time period. This is called the Treasury risk premium, or
trp. It can be either positive or negative, with it apparently having been quite high during
the inflationary 1979s.
The element that needs to be taken into account with respect to the TIPS is that these
securities are apparently not as liquid in general as regular Treasury securities, and the
measure of this gap is the Liquidity premium, or lp. This was apparently quite high when these
were first issues and also saw a surge during the 2008-09 financial crisis. In principle this
can also be of either sign, although has apparently been positive.
Anyway, the difference between the nominal T security yield and the appropriate TIPS yield
is called the "inflation breakeven," the number that used to be focused on as the measure of
market inflation expectations. But the new view is that this must be adjusted by adding (tpr
– lp).
In a post just put up on Econbrowser by Menzie the current inflation breakeven for five
years out is 2.52%. But according to Menzie the current (tpr – lp) adjustment factor is
-0.64%. So adding these two together gives as the market expected inflation rate five years
from now of 1.88%, although Menzie rounded it out to 1.9%.
If indeed this is what we should be looking at it says the market is not expecting all that
much of an increase in the rate of inflation from its current 1.7% five years from now. The Fed
and others are looking at a short term spike in prices this year, but the market seems to agree
with their apparent nonchalance (shared by Janet Yellen) that this will wain later on, with
that expected 5 year rate of inflation still below the Fed's target of 2%.
Certainly this contrasts with the scary talk coming from Larry Summers and Olivier
Blanchard, not to mention most GOP commentators, regarding what the impact of current fiscal
policies passed and proposed by Biden will do to the future rate of inflation. Not a whole lot,
although, of course, rational expectations is not something that always forecasts all that
well, so the pessimists might still prove to be right.
Barkley Rosser
Likbez , April 14, 2021 6:27 pm
Larry Summers is a puppet of financial oligarchy. Everything that he writes should be
viewed via this prism. He also is highly overrated.
IMHO rates are no longer are determined by only domestic factors.
I think that the size of foreign holdings of the USA debt and their dynamics is another
important factor. FED will do everything to keep inflation less then 2% but this is possible
only as long as they can export inflation.
BTW realistically inflation in the USA is probably 30%-60% higher than the official
figure. Look at http://www.shadowstats.com/ :
March 2021 annual Consumer Price Index inflation hit an unadjusted three-year high of
2.62%, as gasoline prices soared to multi-year highs, not seen since well before the 2020
Oil Price War. -- March Producer Price Index exploded, with respective record annualized
First-Quarter PPI inflation levels of 9.0% in Aggregate, 16.0% in Goods and 5.6% in
Services.
• L A T E S T .. N U M B E R S .. March 2021 unadjusted year-to-year March 2021
CPI-U Inflation jumped 2.62% -- a one-year high -- as gasoline prices soared, not only
fully recovering pre-Oil Price War levels of a year ago, but also hitting the highest
unadjusted levels since May of 2019 (April 13th, Bureau of Labor Statistics –
BLS). Headline March 2021 CPI-U gained 0.62% in the month, 2.62% year-to-year, against
monthly and annual gains of 0.35% and 1.68% in February.
That inflation pickup reflected more than a full recovery in gasoline prices, which
had been severely depressed by the Oil Price War of one year ago. Such had had the
effect of depressing headline U.S. inflation up through February 2021, including
suppressing the 2021 Cost of Living Adjustment (COLA) for Social Security by about
one-percentage point to the headline 1.3%. By major sector, March Food prices gained
0.11% in the month, 3.47% year-to-year (vs. 0.17% and 3.62% in February); "Core" (ex-Food
and Energy) prices gained 0.34% in March, 1.65% year-to-year (vs. 0.35% and 1.28% in
February); Energy prices gained 5.00% in March, 13.17% year-to-year (vs. 3.85% and 2.36% in
February), with underlying Gasoline prices gaining 9.10% in the month, 22.48% year-to-year
(vs. 6.41% and 1.52% in February).
The March 2021 ShadowStats Alternate CPI (1980 Base) rose to 10.4% year-to-year, up
from 9.4% in February 2021 and against 9.1% in January 2021. The ShadowStats Alternate
CPI-U estimate restates current headline inflation so as to reverse the government's
inflation-reducing gimmicks of the last four decades, which were designed specifically to
reduce/ understate COLAs.
Related graphs and methodology are available to all on the updated ALTERNATE DATA
tab above. Subscriber-only data downloads and an Inflation Calculator are available there,
with extended details in pending No. 1460 .
In this sense China and Japanese policies will influence the USA rates. If they cut buying
the US debt the writing for higher rates is on the wall. In a way, recent events might signal
that FED can lose the control over rate if and when foreign actors cut holding of the USA
debt.
Behavior of foreign actors is probably the key factor that will determine the rates in the
future.
Hedge fund managed reinvent old tricks on a regular basis. Regulators simply can't catch up and are not willing to catch up as
they are captured by big bonds.
NMR
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Cathy Chan and Steven Arons
Tue, April 13, 2021, 11:36 AM
More content below
NMR
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(Bloomberg) -- The collapse of Archegos Capital Management LP, an investment firm that few even on Wall Street had heard of
until it imploded last month, is changing a lucrative, decades-old part of global banking.
Nomura Holdings Inc. and Credit Suisse Group AG, the two lenders hit hardest, have started to curb financing in the
business with hedge funds and family offices. European regulators are looking at risks banks are taking when lending to
such clients, while in the U.S., authorities started a preliminary probe into the debacle.
Together, steps taken from Washington to Zurich and Tokyo could portend some of the biggest changes since the financial
crisis to a cornerstone of global banking known as prime brokerage. Typically housed in the equities units of large
investment banks, these businesses lend cash and securities to the funds and execute their trades, and the relationships
can be vital for investment banks.
But the collapse of Archegos, the family office of former hedge fund trader Bill Hwang, has underscored the risks banks are
taking with these clients, even when their loans are secured by collateral. Credit Suisse has been the worst-hit so far,
taking a $4.7 billion writedown in the first quarter.
The lender, one of the biggest prime brokers among European banks, is now weighing significant cuts to its prime brokerage
arm in coming months, people familiar with the plan have said.
It has already been calling clients to change margin requirements in swap agreements -- the derivatives Hwang used for his
bets -- so they match the more restrictive terms of other prime-brokerage contracts, people with direct knowledge of the
matter said. Specifically, the bank is shifting from static margining to dynamic margining, which may force clients to post
more collateral and could reduce the profitability of some trades.
Nomura, which is facing an estimated $2 billion from the Archegos fiasco, followed suit, with restrictions including
tightening leverage for some clients who were previously granted exceptions to margin financing limits, Bloomberg reported
on Tuesday. A representative for the Tokyo-based firm declined to comment.
Hwang's family office built positions in at least nine stocks that were big enough to rank him among the largest holders,
fueled by bank leverage that would have been unusual even for a hedge fund. Archegos was able to place outsize wagers using
derivatives and, as a private firm, avoid the disclosures required of most investors. Almost invisibly, he accumulated a
portfolio that some people familiar with his accounts estimate at as much as $100 billion.
While Hwang's financiers had clues about what Archegos was doing and the trades they had financed, they couldn't see that
he was taking parallel positions at multiple firms, piling more leverage onto the same few stocks, according to people
familiar with the matter.
In the U.S., regulators are already privately dropping hints of new rules to come. Securities and Exchange Commission
officials have signaled to banks that they intend to make trading disclosures from hedge funds a higher priority, while
also finding ways to address risk and leverage.
"Hopefully this will cause the prime brokerages of regulated banking organizations (and their supervisors) to re-assess
their relationships with highly leveraged hedge funds," Sheila Bair, a former chairman of the Federal Deposit Insurance
Corp., wrote on Twitter.
In Europe, the top banking regulator has asked some of the bloc's largest banks for additional information on their
exposure to hedge funds, people familiar with the matter said. While the checks by the European Central Bank on lenders
such as Deutsche Bank AG and BNP Paribas SA are standard practice after such a disruptive event, they underscore
regulators' concern, even as most euro-region banks skirted big losses.
"There is a need to scrutinize the reasons why the banks enabled the fund to leverage up to such an extent," ECB executive
board member Isabel Schnabel said in an interview with Der Spiegel last week. "It is a warning signal that there are
considerable systemic risks that need to be better regulated."
The big news continues to be a bifurcation between the currently unfolding Boom, fueled by
the fire hose of monetary and fiscal stimulus, and the fallout in the long leading forecast
based on the increase in interest rates as a result.
Likbez , April 13, 2021 1:50 pm
Basing your investment decisions on indicators derived from the past is like driving
the car using only rear-view mirror :-). I forgot to whom this quote belongs (buffet?)
but there is some truth to that.
Add to this that government stats are distorted (we can debate how much), especially
unemployment stats (U3 vs. U6 vs. reality). That same is true about inflation. Both are
highly politically charged metrics and as such is subject to political pressures both in
methodology and actual stats collection.
When 10 years treasures yield goes down from 1.7%, when stock market goes up and
inflation is up too, that suggests rising level of fear.
Lemming (aka 401K speculators) are pushed from bonds into riskier assets. We saw
this development before.
It is quite probable that stock market will be lifted further while economy as a whole
deteriorates. Then what?
Nothing will revive business that were closed during pandemic. Situation with the
commercial real estate now is very interesting indeed.
The problem in the US economy are systemic and they can't be patched with stimulus.
Financial oligarchy needs to be tamed. Regulations needs to be restored. And some most
obnoxious players jailed or eliminated by other means. Or, at least, the revolving door
needs to be closed for GS and company. As Jesse put it
"THE BANKS MUST BE RESTRAINED, AND THE FINANCIAL SYSTEM REFORMED, WITH BALANCE
RESTORED TO THE ECONOMY, BEFORE THERE CAN BE ANY SUSTAINABLE RECOVERY."
I think leverage in cryptocurrencies is higher then in other sectors, as this is the most
reckless speculators market by definition, so the collapse is quite possible
Our call of the day from Bank of America narrows down where investors see the most risk
these days. Fingers are pointing at the world's most popular cryptocurrency.
[Apr 13, 2021] U.S. Treasury yields slip despite surge in inflation to 2˝-year high by very small number of companies. Treasury yields slipped Tuesday after bond investors shrugged off an increase in U.S. consumer prices in March that sent yearly inflation measures to the highest level in two and a half years. Treasury yields slipped Tuesday after bond investors shrugged off an increase in U.S. consumer prices in March that sent yearly inflation measures to the highest level in two and a half years.
The 10-year Treasury note yield
TMUBMUSD10Y,
1.653%
fell
to 1.659%, down from 1.675% at the end of Monday, while the 2-year note
TMUBMUSD02Y,
0.168%
was
steady at 0.169%. The 30-year bond yield
TMUBMUSD30Y,
2.339%
slid
0.9 basis point to 2.336%.
What's driving Treasurys?
The U.S. consumer price index rose
0.6% in March, while the core gauge that strips out for energy and food prices came in
at an 0.3% increase.
The annual rate of inflation climbed to 2.6% from 1.7% in the prior month, marking the highest level since the fall of 2018.
'The ratio has certain limitations in telling you what you need to
know'
Who wouldn't love to replicate the investing success achieved by billionaire Warren Buffett?
This is why investors are drawn to stories about the "Buffett Indicator."
For those catching up, the Buffett Indicator is the value of a country's publicly traded
stocks divided by its gross national product (and
different people have different ways of
accounting for those
inputs ). This ratio first became associated with Buffett in a 2001
interview with Fortune's Carol Loomis where the investor characterized the ratio as
"probably the best single measure of where valuations stand at any given moment."
At the time he noted, the ratio was very high in the late 1990's, portending the dot-com
bubble which eventually burst.
At the 2017 Berkshire Hathaway ( BRK-A , BRK-B ) annual shareholders meeting,
Buffett fielded a question about the Buffett indicator as well as
Robert Shiller's legendary CAPE ratio . He had this to say: "Every number has some degree
of meaning. It means more sometimes than others...And both of the things that you mentioned get
bandied around a lot. It's not that they're unimportant They can be very important. Sometimes
they can be almost totally unimportant. It's just not quite as simple as having one or two
formulas and then saying the market is undervalued or overvalued ." (Emphasis ours.)
Sometimes it is prudent to stop investing for a while.. And what the author calls savers and investors should properly be called speculators. Petty speculators that serve as the feed for Wall Street sharks.
,,,valuations have never been so stretched at the beginning of an economic cycle. Savers need to plan for lower future returns.
S&P Composite 1500, cyclically adjusted price/earnings ratio
Source:
Prof. Robert Shiller
Note:
Economic troughs are defined by the National Bureau of Economic Research:
.
times
MONTHS
SINCE TROUGH
GDP
trough
1990-2001
2001-07
2007-20
2020-Now
-30
0
30
60
90
120
0
5
10
15
20
25
30
35
40
45
10:05 am ET
The S&P Composite 1500 is trading at a CAPE of 37. That is more than twice the historical average, though still less than the
dot-com bubble peak of 44. It reached 33 before the 1929 crash.
Historical data show that negative returns can happen at almost any level of valuation, but that overall there is still an inverse
correlation between CAPE and future 10-year equity returns. Usually, stocks progressively cheapen after economic growth reaches a
peak. Once they hit a bottom, they slowly become expensive again. In the 2009-2020 cycle, for example, CAPE started at 16 and ended
at 31.
Economic data have been phenomenal lately, lifting the U.S. stock market to new highs as
investors celebrate an end in sight to the global nightmare of the past year.
And so it's an awkward time to be a killjoy, even if just hypothetically.
The fiercest debate among market participants this year has revolved around inflation --
will it or won't...
None of this is to say risk markets are set to crash or that it's time to short
everything.
Parets says, "As long as US Financials are above those 2007 highs, it's tough to make a
structurally bearish case. The weight-of-the-evidence suggests this is just a messy environment
within a larger more macro advance for stocks."
He also highlights the bullish breadth thrusts in stocks over the last year, where large
numbers of stocks all advance simultaneously. "This first wave off the lows last year was
tremendous. All those breadth thrusts we've seen since June, and even through January this year
are characteristic of early cycle behavior. These thrusts historically show up near the
beginning of bull markets, not near the end of them. But one common denominator among all of
these longer-term bullish environments, is that there were corrections along the way."
Markets can correct through both price and time -- eventually working off excesses and
settling into equilibrium, waiting for the next catalyst.
Parets doesn't know how long it will take for markets to set up for the next big move.
However, he is looking at the energy sector for clues. "One tell will likely be how long it
takes for Energy stocks to digest this overhead supply from those former lows in early 2016,"
he says, referencing a chart of the Energy Select Sector SPDR Fund ( XLE ). "We're also looking for Small-caps, Mid-caps
and Micros to get back above those February highs. But again, how long will that take?"
In the meantime, investors may reduce position size...
"There are times to make money in the market, and then there are times to keep your money.
In sports, you play offense and you play defense," says Parets. "Offense sells tickets, but
defense wins championships."
The Bureau of Economic Analysis (BEA) recently published state personal income and GDP data
for the fourth quarter and 2020 calendar year. Most states suffered a massive decline in GDP in
2020's second quarter as governors followed the advice of public-health officials to shut down
businesses to "flatten the curve."
But the new data show that states that allowed businesses to reopen sooner, and maintained
fewer restrictions for the rest of the year, recovered by year-end. Real GDP for private
industries fell 1.3% nationally at an annual compounded rate between the first and fourth
quarters, according to BEA.
Yet there was large variation among the states. Hawaii's economy declined the most (-9.9%)
-- no surprise given its dependence on tourism. Wyoming (-6.6%) and other energy-producing
states were also slow to bounce back. New York's (-5%) recovery was third worst, and even New
Jersey (-2.3%) and Connecticut (-0.3%) fared better. Utah performed the best, growing 4.3%. It
also has the sixth lowest per capita Covid death rate.
More content below More content below More content below More content below More content below
More content below Jared
Blikre Sat, April 10, 2021, 8:22 AM
Warren Buffett's Berkshire Hathaway should scale back its passive investment in the S&P
500 ( ^GSPC ) and plow it
right back into Berkshire stock ( BRK-A , BRK-B) . That's because the environment for stock
picking is ripe for a shift away from passive investing, which could suffer a decade of low or
nonexistent returns.
"This is the single worst time to be a passive investor in since they started passive
investments... The [S&P 500] index is highly likely to not make money over the next 10
years," said Bill Smead, chief investment officer of Smead Capital Management, during the most
recent Yahoo Finance Plus
webinar on Wednesday. "Whether you look at historical price earnings ratios, whether you look
at the normalization of interest rates, whether you look at ridiculously high levels of
participation by individual investors -- compared to household network going back for decades,
it all points to the same thing. The markets are not designed to make the majority
succeed."
'You have to be a deviant to outperform'
In investing parlance, alpha is the return above and beyond a benchmark, such as the S&P
500 -- in other words, a trader's edge. By definition, an investor in an ETF that tracks the
index, such as the SPDR S&P 500 ETF ( SPY ), will see no alpha. But an active trader needs
to find alpha by thinking differently.
"Alpha comes from deviation. You have to be a deviant to outperform -- not a non-deviant,"
said Smead.
Not all stock pickers are alike.
Cathie Wood 's ARK Innovation ETF quickly became the world's largest actively managed ETF,
with $28 billion in assets under management at its February peak. Over the last year, the fund
loaded up on high growth names like Tesla ( TSLA ), Square ( SQ ) and the Grayscale Bitcoin Trust ( GBTC ).
Smead prefers a more value-focused approach that also incorporates growth strategies. He
uses a few recent examples to warn how quickly momentum trades can reverse. "[W]hen money comes
out of popular growth stocks, it's like a fire hose. And the companies that it's going into are
a teacup. You're pouring water from a fire hose into a teacup. And that's also part of what
happened with Reddit and Archegos," he said.
...Part of the runup in stock prices over the past year is due to the rebound in earnings we will see over the next few quarters.
However, now that interest rates, oil prices and the dollar index have each been rising for some time, earnings growth will almost
certainly peak and rollover next year, falling back into negative territory.
As the stock
market discounts fundamentals roughly 18 months into the future, according to Stan Druckenmiller, this bearish reversal in
fundamentals could begin to affect stock prices relatively soon.
Longer-term there is a very real risk to record-high corporate profit margins.
Over
the past decade, corporations have benefitted at the expense of labor to an unprecedented degree. This is already leading to
serious, "political problems," of the sort
predicted
by Warren Buffett
20 years ago. The current administration appears to view rectifying this situation as its primary mandate and
will, apparently, go about fulfilling it by, among other things,
raising corporate income
taxes and boosting a jobs market already showing signs of overheating.
Finally, as
Mehul
Daya
has demonstrated, history shows that rising interest rates regularly act as a bearish catalyst for both markets and the
economy. To the extent that low interest rates and easy money have encouraged and incentivized the unprecedented amount of leverage
supporting risk assets today,
the reversal in rates, which is already more
dramatic than anything we have seen in decades, threatens to reveal just how fragile markets and the economy have now become.
For the rest of the chart book and a more detailed discussion of these issues, check out the
interview, scheduled to be released tomorrow, at
MacroVoices.com
.
That seems to be the mood music at the White House; and the IMF; and the World Bank; and the
Fed, and in fact most central banks. All of them are busy building back better-ly. Ambitious
global tax plans are on the table to wipe tax havens off them; US spending plans are being
pushed; and Treasury Secretary Yellen is talking about "labor vs. capital": perhaps she will
soon add "M > C > MP > C+ > M+" to underline how the economy actually works, which
none of the neoclassical models at the Treasury or the Fed do?
Regardless, US yields are heading lower, the US dollar is heading down, and US stocks are
heading up, in a continuation of their own long-running impossible dream . Let me tell you a
tall tale: perhaps just one man is ultimately responsible for that right now - US Democrat
Senator Joe Manchin. He appears on what some might see as an anti -quixotic quest that may stop
the White House from tilting at any windmills (or solar panels or broader
"infrastructure").
Senator Manchin yesterday reaffirmed via a Washington Post op-ed that he will not back
proposed changes to the Senate filibuster rule (" I have said it before and will say it again
to remove any shred of doubt: There is no circumstance in which I will vote to eliminate or
weaken the filibuste r") or support " shortcutting the legislative process through budget
reconciliation ." Both of those statements, if not negotiating positions, will prove to be
giants obstructing the path of President Biden's domestic agenda. It doesn't mean nothing will
get done – but it means nothing like what some people were recently thinking was going to
get done now will.
If so, as stocks and bonds ebulliently suggest, there is still a white knight to save us,
however : those plodding Sancho Panzas turned would-be dashing Dons, our central banks . It is
they who will continue to chase their own impossible dream of saving the world via yield curve
manipulation and junk asset purchases without lancing price-discovery and capitalism at the
same time. On a related note, Fed Chair Powell spoke yesterday against a backdrop of
supply-chain stresses that mean
Americans can't get ketchup to go with their fries , and explained he isn't worried about
inflation, but infections. As I keep repeating, this stance is only logically consistent if one
really *is* thinking about labour vs. capital: but Fed policy cannot deal with that populist
'red' issue any more than it can with a popular red condiment. It's all fiscal and
political-economy, which seems a dream too far at the moment.
Some might think it remarkable that the fate of the US economy, and hence the world economy,
can really turn on the actions of just one man. Welcome to the absurdity of real life. As
Cervantes noted: "When life itself seems lunatic, who knows where madness lies? Perhaps to be
too practical is madness. To surrender dreams -- this may be madness. Too much sanity may be
madness -- and maddest of all: to see life as it is, and not as it should be!" At least Manchin
was elected. By contrast, who elected central banks? (On which, what happens if the US, or
anywhere, elects an administration which wants to move away from a green economy when their
"independent" central bank has pledged to support the transition towards one? Has anyone
thought about that, or are we all too busy singing from the same hymn sheet to suppose it could
ever happen?)
Interesting combination: Rise of fear in bond market along with rising recklessness in
stoack markets
10-year U.S. Treasury note fall as low as 1.628% for a second straight day as it continues
to back away from a 14-month high of 1.776% hit in late March.
...
The recent pullback in yields has helped high growth names such as those in the technology
sector, the best performing sector on the day, while megacap stocks such as Apple , Microsoft
and Amazon were the biggest boosts to the S&P 500.
The gains have also sent the tech-heavy Nasdaq to a seven-week high and within 2% of its
February 12 record closing high.
The Russell 1000 growth index, which consists of tech-related stocks, gained 1.05%, while
its value counterpart , comprising mostly financials and energy names, slipped 0.11%.
For low-income Americans, it has been a double-whammy of job losses
(the total
number of Americans receiving jobless benefits from the government has basically stagnated for the last four months)...
Source: Bloomberg
...and significant increases in the costs of living.
As
Bloomberg
reports
, while the headline consumer inflation rate in the U.S. remains subdued, at 1.7% - but it
masks
large differences in what people actually buy
.
If you like to eat,
food-price inflation is running at more than double the headline rate
,
and staples like household cleaning products have also climbed.
Source: Bloomberg
if you drive a car,
gas prices have soared
in recent months...
Source: Bloomberg
All of which might explain why confidence among the lowest income Americans is lagging significantly (because
groceries
or gas take up a bigger share of their monthly shopping basket than is the case for wealthier households, and they're items that
can't easily be deferred or substituted
)...
Source: Bloomberg
An analysis by Bloomberg Economics
, which reweighted consumer-price baskets based on the spending habits of different income
groups, found that
the richest Americans are experiencing the lowest level of inflation
.
"On average, higher-income households spend a smaller fraction of their budgets on food,
medical care, and rent, all categories that have seen faster inflation than the headline in recent years, and 2020 in
particular."
The question of who exactly gets hurt most by higher prices could become more urgently concerning as most economists - and even The
Fed itself - expect inflation to accelerate in the next 12 months.
So, in summary, The Fed is telling Americans - ignore "transitory" spikes in non-core inflation (such as food and energy), it's just
temporary and base-effect-driven (oh and we have the "tools" to manage it). However,
despite
all The Fed's pandering and virtue-signaling about "equity" and "fairness", it is precisely this segment of the costs of living that
is crushing most of the long-suffering low-income population ($1400 checks or not)
.
And now all eyes will be on this morning's PPI print which is expected to surge to +3.8% YoY.
Bond markets are firmly in the driving seat. For too long, inflation has disappeared from
investors' radar. The key ones include a hostile environment for trade and globalisation,
business and labour support public programmes and the extraordinary debt burden fuelled by the
pandemic. These are set to create a turning point in the current market regime before long.
My simple solution is to turn the vacant malls into giant marijuana growing operations,and
huge meth labs,and use the revenue from the meth and weed sales to balance the Federal
budget..As an additional plus,you put the Mexican drug cartels out of business,which can't be
a bad thing,either
FurnitureFireSale 26 minutes ago
The smile on the side of the Prime trucks looks like a big wang (Bezos's?) saying "F-U,
take THIS!" to all the small businesses. Once you see it, you cannot unsee it.
Puppyteethofdeath 14 minutes ago
Turn them into homeless shelters.
744,000 Americans filed for 1st time unemployment last week.
Every week the numbers are the same.
no cents at all 5 minutes ago
Yet mall property owners and their ilk have equity prices in the stratosphere. Same with
cruise lines. A mystery. (Although doesn't take scooby doo to understand why)
The situation with office and retail space after COVID-19 is simply bad. There will be no return to previous state. And this situation generall reflact that general situation in the US economy/ In this sense stock market is completely detached from reality, fueled by speculation and 401K inflows. The latter makes passivly managed funds like based on S&P500 index yet another Ponzi scheme.
Office and retail vacancies are up, driving rents down, but the first quarter vacancy
rate at regional and super-regional malls stands out. The
record
11.4% rate
is a 90-basis-point jump from the previous quarter, according to Moody's Analytics REIS.
The vacancy rate at those malls is up 0.4% year over year, with asking rents down 1%
and effective rents (which adds in other variables that affect occupancy cost) down 1.5%.
Given the ongoing structural changes in the U.S. mall sector, that's not likely the
bottom, according to a report from Moody's Analytics Senior Economist Thomas LaSalvia.
... "
Both office and retail are going through a structural change that will continue to
cause many firms to look closely at their respective footprints,"
LaSalvia said
.
"As their leases expire, it is likely some will move or downsize, putting further downward pressure on rents and vacancy rates
through this year and into 2022."
The fate of malls is the most dire. Retailers were already shrinking their footprints,
especially at malls, well before the pandemic. The flight of anchors has also picked up, as department stores like Nordstrom
and Macy's increasingly
shy
away from the mall.
Since the start of the pandemic, with retail businesses scrutinizing their store productivity more
closely than ever, much power has
shifted
away from landlords
, which are making more concessions to lease terms.
..."[R]
etail is slogging through the evolutionary process that started well before the
pandemic,"
LaSalvia said
. "Malls are of more concern than neighborhood centers,
but even then, it is unlikely that we will close down every single mall in the US."
9.1ontherichterscale
34 minutes ago
(Edited)
Who wants
to go to a mall to be immersed in all sorts of diversity?
Malls
were nice in the 1980s.
SMC
13 minutes ago
Strength through diversity expects that each human will on average, provide their best and not be silenced
or restrained by expectations of physical and/or intellectual equality.
Our
ancestors fought and bled so all citizens are free men and women. The virtual chains some citizens wear
today are of their own making. If they are not tossed aside, tomorrow they may real for all.
FurnitureFireSale
30 minutes ago
I
don't feel like dealing with hood rats. Most of America feels the same way, I suspect.
PGR88
26 minutes ago
(Edited)
Our
local mega-mall, when it was functioning "normally" a decade ago, needed an actual army of hired security
on Thursday/Friday/Saturdays to manage the local hood rats who crossed the highway from the ghetto, to
prevent them from tearing the place apart.
CheapBastard
25 minutes ago
Mall
vacancies and business closures all time high under Biden.
Fact
Checked : True ✔️
yerfej
11 minutes ago
Sometimes reality bites.
homeskillet
17 minutes ago
The Malls will also be listed as a Covid fatality, but they had many other underlying causes...
like a
motorcycle accident being listed as a Covid fatality.
itstippy
23 minutes ago
The
big mall in Madison, WI (East Towne Mall) has been dying for a couple decades now, but all kinds of Big Box
stores and chain restaraunts around it have been thriving. As mall traffic diminished every year, Gander
Mountain, Cabellas, Target, and many others built giant retail outlets in the same area stealing the mall's
business. Dozens of chain restaraunts moved in too. Traffic was busy, busy.
Now
the entire area, mall and surrounding retail, is dying. It started before the Covid-19 retail catastrophe
and I doubt it will reverse. People sit at home, buy stuff from Amazon, buy food from Go Grub, and get
social interaction on Twitter & Facebook.
The
mall has nothing left but a Sunglasses Hut and a store that sells cinnamon sticky buns.
arby63
29 minutes ago
Too much has changed for traditional malls to survive. I cannot imagine a solid path forward.
adr
25 minutes ago
(Edited)
You
can go to what was one of the busy high end malls outside Boston, and see half of it empty.
The
stores that are open only allow five to eight customers in at a time, and have a ten minute time limit for
you to spend inside. Stores worth going to have lines of people outside. You are also pretty much forced to
buy something, otherwise the people waiting in line scream at you for wasting their time.
The
food courts are open, but only for takeout. You can't sit in the mall and eat.
It is
just about the worst experience you can have. Then you can't even go to a bar, because all bars in
Massachusetts are still closed. You can only get alcohol if you are eating food.
American savers could once count on bonds to provide meaningful returns with modest risk. Not anymore.
More than a decade of easy money has kept the U.S. economy afloat in times of crisis and fueled an
unprecedented boom in financial markets.
But it's also created a whole new series of risks, especially for savers.
Where there was once a vast pool of safe debt in which they could park their cash and count on annual
payouts of 5% or more -- comfortably above inflation -- today there's little more than a puddle, and a shrinking one at that. In fact,
never has the amount of new government and corporate debt paying even modest yields been so minuscule.
Institutional investors and savers looking for a 5% annual interest rate had plenty of new bond and loan offerings rated BB
and above to choose from prior to the 2008 financial crisis. These included debt from government-sponsored mortgage-loan
companies like Fannie Mae and Freddie Mac.
$932.6B
580 parent issuers
Rating:
BB
BBB
A
AA
AAA
$84.0B
Federal National Mortgage
Association
(Fannie Mae)
$179.4B
Federal Home Loan Banks
$85.2B
Federal Home Loan Mortgage Corp
(Freddie Mac)
By 2019, after a decade in which the Federal Reserve kept benchmark rates near zero, the pool had shrunk dramatically, despite
the fact that issuance of new debt was near record levels. Debt rated A or above paying 5% virtually disappeared, leaving the
vast majority of such offerings rated in the lowest tier of investment-grade, or worse.
$333.0B
301 parent issuers
$7.5B
Altice USA Inc
▼
$11.7B
◀
The Walt Disney Company
Now, after the Fed's unprecedented intervention in bond markets drove rates down even further in the pandemic, finding anything
paying more than 5% has become difficult, except for investors willing to dip into the riskiest parts of the junk-bond market.
While cheap borrowing costs have been a boon for corporate America, the same can't be said for money managers that need to
generate returns that match their long-term obligations.
$131.7B
138 parent issuers
$23.9B
Petroleos Mexicanos
The repercussions -- for pension managers, endowments, insurance companies and 70 million baby boomers starting
their retirements -- are vast. Sure, yields aren't negative like in much of Europe, but many are nonetheless being forced to, as
legendary investor Warren Buffett recently
put it
, "juice the pathetic
returns now available by shifting their purchases to obligations backed by shaky borrowers."
Others may choose to heed the advice of Ray Dalio, the founder of hedge fund giant Bridgewater Associates, who
now recommends
avoiding the U.S. bond market
entirely and focusing on higher-returning, non-debt investments.
Junk's Rock-Bottom Rates
The average yield on bonds rated BB and lower recently fell to a record low.
Average yield
12%
Covid-19
Recession
▶
10
8
6
3.89%
4
2011
2013
2015
2017
2019
2021
While the potential payout is greater, such moves also carry significant risk, especially for groups
previously accustomed to holding only the safest assets.
It's possible that as savers push deeper into lower-rated debt, equities and more esoteric markets, the
reckoning never comes.
But most know that's ultimately unlikely.
"It's a struggle that all of the public pension plans have been facing for a number of years -- there are some
solutions, and there are some hope and pray trades," said Steve Willer, who helps manage $21 billion as deputy chief investment
officer at the Kentucky Public Pensions Authority, which has lowered certain return targets amid the changing investment
environment. "People are having to be more creative in looking at different segments of the debt market. That comes with
different risks."
Source: Bloomberg compilation of government and corporate dollar-denominated bond and loan offerings with a yield of 5% or more
at issue and at least one BB- or higher rating from S&P Global Ratings, Moody's Investors Service or Fitch Ratings. Issuance is for
the six months ended March 31. Debt amounts are aggregated by issuer and ratings tier. Data includes debt issued in exchange for
older bonds and notes linked to currencies that may yield more than traditional securities.
Editors: Boris Korby, Natalie Harrison and Alex Tribou
Judge James C. Ho is absolutely correct to imply it is profoundly offensive to be offered
opportunity based on race rather than merit ("
Notable & Quotable: Judges ," March 27).
When I was approaching graduation and beginning my job search, a friend of the family, who
was Jewish himself, approached me with an opportunity. His accounting firm, one of the "Big
Eight" firms, had inquired if he knew any young Jewish accountants it could hire because it
didn't have any Jews working in the firm. The family friend told me this was a wonderful
opportunity and that I would be made partner and become prosperous. He was shocked when I
responded no, and asked why. I told him if I accepted this offer, I would never know if I was
successful because I was Jewish or because I was talented and skilled.
The Remarkable Accuracy of CAPE as a Predictor of Returns
by
Michael
Finke
,
7/20/20
On
July 21, 2020, this article was corrected to attribute the term "animal spirits" to John Maynard Keynes instead of Adam
Smith.
What return can I expect from my stock investments over the next 10 years?
The most common answer is to use the historical average. The geometric average historical return on the S&P 500 is about
10%.
Is it reasonable, then, to project 10% stock returns?
Another method is to consider the valuation of stocks. If stocks are at a higher price than their historical average as a
multiple of recent earnings, can we then expect a lower return than we have in the past?
Can valuations predict future earnings?
There have been a number of recent criticisms of Robert Shiller's measure of stock valuation – the cyclically-adjusted
price to earnings ratio (CAPE) – as a predictor of future stock returns. A 2017
Advisor
Perspectives
article
pointed
out that the ratio wasn't a realistic measure of future stock returns because 10-year earnings included the global
financial crisis. Others have
argued
that
changes in accounting rules mean that you can't compare today's CAPE to historical CAPE. An
analysis
by
Vanguard found that the R-squared, or predictive ability, of the Shiller CAPE and 10-year returns between 1926 and 2011 was
0.43. Although 0.43 is high for an asset whose returns are assumed to be random, it gives CAPE critics a reason to dismiss
its value.
Care to guess how well the monthly CAPE predicted future 10-year returns between January 1995 and May 2020?
In a period where accounting rules changed and the 2008 global financial crisis decimated profits, CAPE explained 90% of
the variation in 10-year returns. Here's what it looks like when I model 10-year nominal, annualized, geometric returns
starting every month from January 1995 through June 2010 (185 blue dots) as a function of their CAPE value during this
period:
The standard deviation of the error (how far off the prediction was from the actual value) is 1.37%. This is the difference
between the predicted annual return (the yellow dot) and the actual return (the blue dot) at each initial Shiller PE ratio.
In other words, 67% of the time the return was plus or minus 1.37% from the CAPE model prediction; and 95% of the time the
actual return was within 2.74% of the future 10-year predicted returns. CAPE's ability to predict 10-year future returns
during the last 25 years has been remarkable.
As I write this, the S&P CAPE is 29.28. The 10-year return we can expect using the 1995-2020 model is 5.89%, with a 67%
probability that it will be between 4.52% and 7.26%. This is about 1% per year lower than Blackrock's 10-year capital
market
expectations
for
large-cap U.S. stocks, but still in the ballpark.
Over the next 10 years, a hypothetical equity return of 10% is exactly three standard deviations above what the CAPE model
would predict (5.89%). If returns are normally distributed, a 10% S&P return has about a 0.3% chance of occurring (or a
99.7% chance of not happening).
Was the 1995-2020 period different than historical periods? As the Vanguard study notes, CAPE predicted only 43% of the
variation in 10-year S&P returns between 1926 and 2011. You might expect that the recent predictability of CAPE is an
anomaly.
Since 1975, the Shiller CAPE has explained 85% of variation in future stock returns. In fact, CAPE's ability to predict
10-year returns was remarkably strong until just before the Great Depression. The R-squared starting at 1940 is 0.7. It's
hard to dismiss the value of an indicator that can predict 70% of the variation in future stock returns.
The figure below shows CAPE's ability to predict 10-year returns beginning in 1920. I started with the Jan 1995-May 2020
time period and went back in time to estimate how the R-squared changed within various periods. The predictability of the
CAPE model has remained consistent in the post-WW2 era, but the lower predictive power prior to 1975 may mean that the
expected future 10-year return of stocks starting from a CAPE of 20 using the 1940 model may differ from the predicted
return on stocks using the 1975 or 1995 models. Again, it's not much different.
The marginal effect of investing in a higher CAPE stock market today is remarkably similar to investing in high-CAPE
periods through the latter half of the 20th century. For each point increase in CAPE, investors should expect a 10-year
stock return that is just over half a percent lower. Higher stock returns after 1975 pushed the predicted value up slightly
compared to the 1940 model, but not by a huge amount. For example, the predicted S&P return from investing when CAPE values
are 20 is 11.1% in both the 1975-2020 and 1995-2020 periods, and 9.8% in the 1940-2020 period.
An investor can grab the current
CAPE
ratio
online and refer to the table below to estimate (with a surprising degree of confidence) the expected return on
an equity portfolio over the next 10 years. For a one standard deviation range, add plus or minus 2% to the predicted
values for the earlier time periods.
How can stock returns be this predictable? In 1981, economist Robert Shiller rocked the efficient market world when he
asked a simple question: If stock prices are rational, why are they so much more volatile than dividends? Historical
dividends don't bounce around all that much, while stock prices exhibit wild swings in value that don't reflect future
volatility in cash flows. Something must be amiss.
Shiller's article heralded a new stream of literature on the impact of market sentiment, or what John Maynard Keynes
referred to as "animal spirits," on stock prices. Sometimes people are more excited about the idea of investing in stocks,
and other times they lose their nerve. This results in valuation swings that are higher during periods of economic
expansion and positive sentiment, and fall during recessions when investors are pessimistic.
In my own
research
,
I have found that measured risk tolerance of retirement plan participants rises and falls with periods of high and low
market sentiment. During the global financial crisis, risk tolerance, measured using a popular financial planning
instrument, had a
0.9
correlation
with the S&P 500 and a high correlation with other measures of consumer sentiment. Investors' appetite for
investment risk is not constant.
What is a stock return? According to the capital asset pricing model, a stock returns consist of a risk-free return and a
risk premium. The risk premium is the amount of extra expected return that is needed to incent risk-averse investors into
buying a stock instead of a bond. The Sharpe Ratio of the market portfolio is positive because investors are generally risk
averse, but sentiment can drive the reward for risk up or down. What if the price of risk is driven predictably by market
sentiment?
A risk premium that rises and falls with changes in investor risk tolerance has enormous implications for portfolio
construction. When investors are risk averse, the market Sharpe Ratio rises and investors receive a greater reward for
taking investment risk. When investors are risk tolerant, the Sharpe Ratio falls and investors don't get as much juice from
buying stocks instead of bonds.
The predictability of CAPE presents a problem for those who use historical mean returns to project future returns. Although
often considered heresy, return predictability also challenges the investment policy approach of maintaining a constant
asset allocation.
Why? Let's assume two investors – one is a Vulcan and the other a behavioral human whose risk preferences depend on market
sentiment. The Vulcan will simply look at current valuations and adjust asset allocations based on the expected return
being offered by the market. If the CAPE is 34, the expected stock return is between 2% and 4% over the next 10 years. This
paltry compensation for taking investment risk means that the Vulcan will select an optimal portfolio with a lower
percentage of stocks. Conversely, the Vulcan will go all-in on stocks when CAPE ratios revert to the teens.
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The behavioral investor is willing to accept low-return stocks during an economic expansion because they are highly risk
tolerant. During a bear market, they suddenly become risk averse and avoid investing in stocks. A constant equity
allocation can help the behavioral investor rebalance toward risk when markets fall and away from risk when markets rise in
value. Maintaining a constant allocation is better than the alternative, and automatic rebalancing is one of the reasons
target-date fund participants outperform other fund investors.
Constant equity allocations are still not optimal.
Rebalancing toward a desired equity allocation is not optimal because the Vulcan can do better by responding to what
markets are willing to pay for risk. Building valuation-based portfolios is hard because portfolio managers and individual
investors aren't Vulcans. They don't want to take more risk after markets fall. They don't want to reduce risk when markets
rise.
But investors would be wise to think of CAPE as the price of risk. An investor is a price-taker walking through the aisle
of the investment store. When risk is on sale, investors should buy more risk. When risk is expensive, they should buy
less. And they shouldn't expect to eat as well when, like today, nothing in the investment store is on sale.
Michael Finke, PhD, is a professor of wealth management and the Frank M. Engle
Distinguished Chair in Economic Security at The American College of Financial Services.
Looking Back at Jeremy Siegel on the Business Cycle and the Markets
by
Erik
Conley
,
7/10/18
Advisor Perspectives
welcomes guest contributions. The views presented here do not
necessarily represent those of
Advisor Perspectives
Dr. Jeremy Siegel, professor of finance at The Wharton School of the University of Pennsylvania, has done a remarkable
study of the returns of different types of assets over the past 200 years. He published his findings in the book
Stocks
for the Long Run
in 1994. He has updated the book several times, most recently in 2014. It is surely one of the best
books on investing of all time.
This article focuses on chapter 15 in Siegel's book, "Stocks and the Business Cycle." This chapter was a revelation to me
when I first read it in 1994. It makes so much sense, and yet it's rarely discussed in the financial literature. It's as if
Siegel discovered a gold mine and nobody else was interested. I'll give you the short version of this landmark chapter.
Cliff notes for chapter 15 of
Stocks
for the Long Run
Invariably the stock market turns down before a recession hits and rises before it is over. Of the 47 U.S. recessions since
1802, 43 (9 out of 10) have been preceded by stock market declines of 8% or more. The table below is from the book.
Stock Prices and Business Cycle
Peaks, 1948-2017
If an investor went to cash or Treasury bonds four months before each recession, the gains would be significant. The
problem, of course, is knowing when to get back into stocks.
Here's where the real money is
made
I have a voracious appetite for anything related to the stock market, the economy and behavioral science. When I come
across information like what is shown in these tables, I pay attention. Is it just coincidence, or is there something else
going on? Do stock market investors "sense" when a recession is coming, precipitating a market decline? To answer this
question, we also must talk about false signals.
Recession False Alarms by Stock
Market, 1945-2017
The stock market telegraphs the onset of a recession, but it also gives false signals. What are we to make of this?
Market declines that are not followed by a recession (false signals) are notably shorter in duration and less severe than
declines that presage recessions. This is an easy hurdle to clear. When the market is in decline, but the economic
indicators are healthy, investors should stay invested and take the short-term pain that the market is dishing out.
If, on the other hand, the economic indicators are in decline, an aggressive and proactive defensive strategy is warranted.
That might involve cutting back on equity exposure, buying a put on the market or switching from stocks to bonds. Each
investor must decide for him/herself how to play defense.
Why go to all the trouble?
According to Siegel, an investor who correctly plays defense stands to gain as much as 5% per year in returns, versus an
investor who simply stays put throughout recessionary periods. This is more than enough reward for going to all the
trouble. Here is what Siegel had to say in his book:
My studies show that if investors could predict in advance when recessions will begin and end, they could enjoy superior
returns to the returns earned by a buy and hold investor. Specifically, if an investor switched from stocks to cash or
short-term Treasuries 4 months before the start of a recession and back to stocks 4 months before the end of the recession,
he or she would gain almost 5 percentage points over the buy and hold investor.
Gains through timing the business cycle – Part 2
We now move from the theoretical aspects of Siegel's research to the practical realm. We do this by looking at actual
returns, using real clients with real money invested, by applying various investment strategies over the past 20 years.
The numbers in the table below come from actual client accounts, beginning in 2002. Prior to 2002, the numbers come from
back testing, using the identical strategy parameters.
I would like to draw your attention to the 6th strategy in the table – "Recession Defense." This is the strategy I designed
to capture the 4-5% bonus returns from timing the business cycle, as described in Siegel's book.
The returns for the Recession Defense strategy are the same as they are for a traditional buy-and-hold strategy for the
time period that began after the last recession. This is because the strategy is only invoked at the early stages of a new
recession forecast. Most of the time this strategy will remain operating quietly in the background until it's needed.
Once the model raises the alarm for a new recession, the returns for buy-and-hold and Recession Defense start to diverge.
At the end of the full 20-year period, the Recession Defense strategy has outperformed the buy-and-hold strategy by 13% per
year. If that seems hard to believe, consider this. The last 20 years included two severe recessions and two severe bear
markets. All an investor had to do was get out of the way when the warning signs were there and get back into stocks when
the model sounded the all-clear. Yes, it can be and has been done.
As I said earlier, my model isn't perfect (87% accuracy score), and it's not the only one. But it has worked well enough to
add substantial value to my clients' portfolios over time.
If you decide to stand pat during recessions, eventually you will get back to even. This is why the buy-and-hold doctrine
is so appealing, and Siegel is a big advocate of this doctrine. But here's the thing. A bear market may not cost you money
in the long run, but it will certainly cost you time, and lots of it.
For example, those unfortunate souls who bought into the stock market mania in 1929 not only lost their collective shirts
in the downturn, but it took them more than 20 years to get back to even. Do you have 20 years to wait to get back to even?
Recession forecasting
Returning once again to Siegel,
If one could predict in advance when recessions will occur, the gains would be substantial. That is perhaps why billions of
dollars have been spent trying to forecast the business cycle. But the record of those efforts is extremely poor.
My own research agrees with that statement. Forecasting recessions is extremely difficult. But it's not impossible. I know
of at least three recession forecasting services (
here
,
here
and
here
)
that have been around for at least a decade and have accuracy scores of 80% or higher. (I did my own analysis on their
published forecasts to arrive at this accuracy score.) I also have my own recession forecasting model that has an 87%
accuracy score, using the same analysis methods I used for the other three forecasting services.
The benefits of having a contingency plan
Unless you're financially independent, stock market investing is going to play an important part in your retirement
planning. The whole point of financial planning is to find a way to make sure your cash doesn't run out before you do.
But investing in stocks means you're going to go through some harsh market declines. Investors who expect to earn generous
returns while watching their net worth rise smoothly are fooling themselves.
The best way to protect your nest egg from the next bear market is to plan ahead. Having a contingency plan, even a simple
one, will save you from the worst parts of a bear market. You will never be able to sell at the top and buy back in at the
bottom, but if you can avoid the worst months of a bear market, your returns will be significantly higher than a
buy-and-hold investor.
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Perspectives
A contingency plan is an add-on to your strategic plan. Brokers, advisors and planners often don't cover this critical
aspect of investment planning. The advice industry does a good job of designing plans that serve investors well while the
economy and the market are healthy and growing. That's how it is about two-thirds of the time. But what about the other
one-third of the time? Their standard answer is "Don't worry about it, just stay invested and ride the waves."
That's not bad advice for many investors, especially those who don't have the time to fiddle with their investment
accounts. Many others just aren't interested in investing, so not worrying about bear markets or recessions makes perfect
sense for them. For those who do care about bear markets, there is a better alternative: your "plan B."
An example of a contingency plan
A contingency plan doesn't have to be complicated to be effective. What's required is to take some time, perhaps an hour,
and think about what you should do when things start to fall apart. The method I teach my clients is setting up a simple
rules-based tactical plan that tells them exactly what to do, and when to do it. For example
This is a very simplistic example. But with such a plan in place, you don't have to stress about what to do. You just look
at the recession indicator and follow your own instructions.
Final thoughts
Recessions and bear markets are two of the topics about which I'm the most passionate. I've devoted most of my career to
studying the link between the two, and the models I designed are the result of hundreds of hours of effort. I would be
happy to answer any questions you have about this topic, and I encourage you to sign up for the free stuff on my website,
like the weekly newsletter, the mini-courses in investment theory, and the quizzes.
Erik Conley was a trader and portfolio manager from 1975-2001 and former head of equity
trading at Northern Trust Co. in Chicago. He is now a private investor, founder of a nonprofit investor advocacy firm and
private investing coach.
B Bill Hestir SUBSCRIBER 1 day ago Stocks Soar As Bank Aid Ends Fear of Money
Panic
By W. A. Lyon in the New York Herald Tribune on March 28, 1929
The stock market strode out from under the shadow of a panic in call money that so lately
threatened, but was revived in all its old strength yesterday.
Assured that the New York banks were ready with their boundless resources to prevent a
money crisis, the public and the professional trader set out to repair the damage done to
prices on Monday and the major part of Tuesday.
Stocks in the aggregate, though bucking a 15 per cent rate for loans, enjoyed the
greatest advance they have known in a single day in the last two years. Not even the surging
bull markets of the memorable year 1928 saw such a day of heavy buying. Like
thumb_up 8 Reply reply Share link Report
flag
P Peter Hayes SUBSCRIBER 1 day ago This totally looks like 1929 all over again. Maybe we'll
even see "Bidenvilles" popping up at some future date.
[Apr 08, 2021] Financial crises get triggered about every 10 years -- Archegos might be right on time by Paul Brandus Paul Brandus Financial crises are never quite the same. During the late 1980s, nearly a third of the nation's savings and loan associations failed, ending with a taxpayer bailout -- in 2021 terms -- of about $265 billion. In 1997-1998, financial crises in Asia and Russia led to the near meltdown of the largest hedge fund in the U.S. -- Financial crises are never quite the same. During the late 1980s, nearly a third of the nation's savings and loan associations failed, ending with a taxpayer bailout -- in 2021 terms -- of about $265 billion. In 1997-1998, financial crises in Asia and Russia led to the near meltdown of the largest hedge fund in the U.S. -- In 1997-1998, financial crises in Asia and Russia led to the near meltdown of the largest hedge fund in the U.S. -- In 1997-1998, financial crises in Asia and Russia led to the near meltdown of the largest hedge fund in the U.S. -- Long-Term Capital Management (LTCM). Its reach and operating practices were such that Federal Reserve Chairman Alan Greenspan said that when LTCM failed, "he had never seen anything in his lifetime that compared to the terror" he felt. LTCM was deemed "too big to fail," and he engineered a bailout by 14 major U.S. financial institutions. Exactly a decade later, too much leverage by some of those very institutions, and the bursting of a U.S. real estate bubble, led to the near collapse of the U.S. financial system. Once again, big banks were deemed too big to fail and taxpayers came to the rescue. The trend? Every 10 years or so, and they all look different. Are we in the early stages of a new crisis now, with the blowup at the family office Archegos Capital Management LP? A family office, for the uninitiated, is a private wealth management vehicle for the ultra-wealthy. Here's what I mean by ultra-wealthy: Consulting firm EY estimates there are some 10,000 family offices globally, but manage, says a separate estimate by market research firm Campden Research, nearly $6 trillion. That $6 trillion is likely far higher now given that it's based on 2019 data. Exactly a decade later, too much leverage by some of those very institutions, and the bursting of a U.S. real estate bubble, led to the near collapse of the U.S. financial system. Once again, big banks were deemed too big to fail and taxpayers came to the rescue. The trend? Every 10 years or so, and they all look different. Are we in the early stages of a new crisis now, with the blowup at the family office Archegos Capital Management LP? A family office, for the uninitiated, is a private wealth management vehicle for the ultra-wealthy. Here's what I mean by ultra-wealthy: Consulting firm EY estimates there are some 10,000 family offices globally, but manage, says a separate estimate by market research firm Campden Research, nearly $6 trillion. That $6 trillion is likely far higher now given that it's based on 2019 data. The trend? Every 10 years or so, and they all look different. Are we in the early stages of a new crisis now, with the blowup at the family office Archegos Capital Management LP? A family office, for the uninitiated, is a private wealth management vehicle for the ultra-wealthy. Here's what I mean by ultra-wealthy: Consulting firm EY estimates there are some 10,000 family offices globally, but manage, says a separate estimate by market research firm Campden Research, nearly $6 trillion. That $6 trillion is likely far higher now given that it's based on 2019 data. A family office, for the uninitiated, is a private wealth management vehicle for the ultra-wealthy. Here's what I mean by ultra-wealthy: Consulting firm EY estimates there are some 10,000 family offices globally, but manage, says a separate estimate by market research firm Campden Research, nearly $6 trillion. That $6 trillion is likely far higher now given that it's based on 2019 data. A family office, for the uninitiated, is a private wealth management vehicle for the ultra-wealthy. Here's what I mean by ultra-wealthy: Consulting firm EY estimates there are some 10,000 family offices globally, but manage, says a separate estimate by market research firm Campden Research, nearly $6 trillion. That $6 trillion is likely far higher now given that it's based on 2019 data.
Here's the potential danger. Family offices generally aren't regulated. The 1940 Investment Advisers Act says firms with
15 clients or fewer don't have to register with the Securities and Exchange Commission. What this means is that trillions
of dollars are in play and no one can really say who's running the money, what it's invested in, how much leverage is being
used, and what kind of counterparty risk may exist. (Counterparty risk is the probability that one party involved in a
financial transaction could default on a contractual obligation to someone else.)
The problem is that only about a third of that, or $10 billion, was its own money. We now know that Archegos worked with
some of the biggest names on Wall Street, including Credit Suisse Group AG
CS,
+0.74%
,
UBS Group AG
UBS,
-0.18%
,
Goldman Sachs Group Inc.
GS,
+1.41%
,
Morgan Stanley
MS,
+1.47%
,
Deutsche Bank AG
DB,
-0.88%
and Nomura Holdings Inc.
NMR,
-1.30%
.
But since family offices are largely allowed to operate unregulated, who's to say how much money is really involved here
and what the extent of market risk is? My colleague Mark DeCambre reported last week that Archegos' true exposures to bad
trades could actually
be closer to $100 billion
.
Danger of counterparty risk
This is where counterparty risk comes in. As Archegos' bets went south, the above banks -- looking at losses of their own
-- hit the firm with margin calls. Deutsche quickly dumped about $4 billion in holdings, while Goldman and Morgan Stanley
are also said to have unwound their positions, perhaps limiting their downside.
So is this a financial crisis? It doesn't appear to be. Even so, the Securities and Exchange Commission has opened a
preliminary investigation into Archegos and its founder, Bill Hwang.
One peer, Tom Lee, the research chief of Fundstrat Global Advisors, calls Hwang one of the "top 10 of the best
investment minds" he knows.
But federal regulators may have a lesser opinion. In 2012, Hwang's former hedge fund, Tiger Asia Management, pleaded
guilty and paid more than $60 million in penalties after it was accused of trading on illegal tips about Chinese banks. The
SEC banned Hwang from managing money on behalf of clients -- essentially booting him from the hedge fund industry. So Hwang
opened Archegos, and again, family offices aren't generally aren't regulated.
Yellen on the case
This issue is on Treasury Secretary Janet Yellen's radar. She said last week that greater oversight of these private
corners of the financial industry is needed. The Financial Stability Oversight Council (FSOC), which she oversees, has
revived a task force to help agencies better "share data, identify risks and work to strengthen our financial system."
Most financial crises end up with American taxpayers getting stuck with the tab. Gains belong to the risk-takers. But
losses -- they belong to us.
To paraphrase Abe Lincoln, family offices -- a multi-trillion dollar industry largely
allowed to operate in the shadows in a global financial system that is more intertwined than ever -- are of the
super-wealthy, by the super-wealthy and for the super-wealthy. And no one else.
The Archegos collapse may or may not be the beginning of yet another financial crisis. But who's to say what thousands
of other family offices are doing with their trillions, and whether similar problems could blow up?
In 2007, I was at a conference
where Paul McCulley, who was with PIMCO at the time, was discussing the idea of a "Minsky Moment." At that time, this idea
fell on "deaf ears" as the markets, and economy, were in full swing.
However, it wasn't too long
before the 2008 "Financial Crisis" brought the "Minsky Moment" thesis to the forefront. What was revealed, of course, was
the dangers of profligacy which resulted in the triggering of a wave of margin calls, a massive selloff in assets to cover
debts, and higher default rates.
Economist Hyman Minsky argued
that the economic cycle is driven more by surges in the banking system, and in the supply of credit than by the
relationship which is traditionally thought more important, between companies and workers in the labor market.
In other words, during periods
of bullish speculation, if they last long enough, the excesses generated by reckless, speculative, activity will eventually
lead to a crisis. Of course, the longer the speculation occurs, the more severe the crisis will be.
Hyman Minsky argued there is
an inherent instability in financial markets. He postulated that an abnormally long bullish economic growth cycle would
spur an asymmetric rise in market speculation which would eventually result in market instability and collapse. A "Minsky
Moment" crisis follows a prolonged period of bullish speculation which is also associated with high amounts of debt taken
on by both retail and institutional investors.
One way to look at "leverage,"
as it relates to the financial markets, is through "margin debt," and in particular, the level of "free cash" investors
have to deploy. In periods of "high speculation," investors are likely to be levered (borrow money) to invest, which leaves
them with "negative" cash balances.
While margin balances did
decline in 2018, as the markets fell due to the Federal Reserve hiking rates and reducing their balance sheet, it is
notable that current levels of "leverage" are still excessively higher than they were either in 1999, or 2007.
This is also seen by looking
at the S&P 500 versus the growth rate of margin debt.
The mainstream analysis
dismisses margin debt under the assumption that it is the reflection of "bullish attitudes" in the market. Leverage fuels
the market rise. In the early stages of an advance, this is correct. However, in the later stages of an advance, when
bullish optimism and speculative behaviors are at the peaks, leverage has a "dark side" to it. As
I
discussed previously:
"At some point, a reversion
process will take hold. It is when
investor
'psychology
'
collides with 'leverage and the problems associated with market liquidity. It will be the equivalent of striking a
match, lighting a stick of dynamite, and throwing it into a tanker full of gasoline."
That moment is the "Minsky
Moment."
As noted, these reversion of
"bullish excess" are not a new thing. In the book, "
The
Cost of Capitalism,
" Robert Barbera's discussed previous periods in history:
The last five major global
cyclical events were the early 1990s recession -- largely occasioned by the U.S. Savings & Loan crisis, the collapse of
Japan Inc. after the stock market crash of 1990, the Asian crisis of the mid-1990s, the fabulous technology boom/bust
cycle at the turn of the millennium and the unprecedented rise and then collapse for U.S. residential real estate in
2007-2008.
All five episodes delivered
recessions, either global or regional. In no case was there as significant prior acceleration of wages and general
prices. In each case, an investment boom and an associated asset market ran to improbably heights and then collapsed.
From 1945 to 1985 there was no recession caused by the instability of investment prompted by financial speculation -- and
since 1985 there has been no recession that has not been caused by these factors.
Read that last sentence again.
Interestingly, it was
post-1970 the Federal Reserve became active in trying to control interest rates and inflation through monetary policy.
"In the U.S., the Federal Reserve has
been the catalyst behind every preceding financial event since they became 'active,' monetarily policy-wise, in the late
70's. As shown in the chart below, when the Fed has lifted the short-term lending rates to a level higher than the
2-year rate, bad 'stuff' has historically followed."
As noted above, "Minsky
Moment" crises occur because investors, engaging in excessively aggressive speculation, take on additional credit risk
during prosperous times, or bull markets. The longer a bull market lasts, the more investors borrow to try and capitalize
on market moves.
However, it hasn't just been
investors tapping into debt to capitalize on the bull market advance, but corporations have gorged on debt for unproductive
spending, dividend issuance, and share buybacks. As I
noted
in last week's MacroView
:
"Since the economy is driven by
consumption, and theoretically, companies should be taking on debt for productive purposes to meet rising demand,
analyzing corporate debt relative to underlying economic growth gives us a view on leverage levels."
"The problem with debt, of course, is
it is leverage that has to be serviced by underlying cash flows of the business. While asset prices have surged to
historic highs, corporate profits for the entirety of U.S. business have remained flat since 2014. Such doesn't suggest
the addition of leverage is being done to 'grow' profits, but rather to 'sustain' them."
Over the last decade, the
Federal Reserve's ongoing liquidity interventions, zero interest-rates, and maintaining extremely "accommodative" policies,
has led to substantial increases in speculative investment. Such was driven by the belief that if "something breaks," the
Fed will be there to fix to it.
Despite a decade long economic
expansion, record stock market prices, and record low unemployment, the Fed continues to support financial speculation
through ongoing interventions.
John Authers recently penned
an excellent piece on this issue
for
Bloomberg:
"Why does liquidity look quite so
bullish? As ever, we can thank central banks and particularly the Federal Reserve. Twelve months ago, the U.S. central
bank intended to restrict liquidity steadily by shrinking the assets on its balance sheet on "auto-pilot." That changed,
though. It reversed course and then cut rates three times. And most importantly, it started to build its balance sheet
again in an attempt to shore up the repo market -- which banks use to access short-term finance -- when it suddenly froze
up in September. In terms of the increase in U.S. liquidity over 12 months, by CrossBorder's measures, this was the
biggest liquidity boost ever:"
While John believes we are
early in the global liquidity cycle, I personally am not so sure given the magnitude of the increase Central Bank balance
sheets over the last decade.
Currently, global Central Bank
balance sheets have grown from roughly $5 Trillion in 2007, to $21 Trillion currently. In other words, Central Bank balance
sheets are equivalent to the size of the entire U.S. economy.
In 2007, the global stock
market capitalization was $65 Trillion. In 2019, the global stock market capitalization hit $85 Trillion, which was an
increase of $20 Trillion, or roughly equivalent to the expansion of the Central Bank balance sheets.
In the U.S., there has been a
clear correlation between the Fed's balance sheet expansions, and speculative risk-taking in the financial markets.
Is Another Minsky Moment Looming?
The International Monetary
Fund (IMF) has been issuing global warnings of high debt levels and slowing global economic growth, which has the potential
to result in Minsky Moment crises around the globe.
While this has not come to
fruition yet, the warning signs are there. Globally, there is roughly $15 Trillion in negative-yielding debt with asset
prices fundamentally detached for corporate profitability, and excessive valuations on multiple levels.
"How else can one explain that the
risky U.S. leveraged loan market has increased to more than $1.3 trillion and that the size of today's global leveraged
loan market is some two and a half times the size of the U.S. subprime market in 2008? Or how else can one explain that
in 2017 Argentina was able to place a 100-year bond? Or that European high yield borrowers can place their debt at
negative interest rates? Or that as dysfunctional and heavily indebted government as that of Italy can borrow at a lower
interest rate than that of the United States? Or that the government of Greece can borrow at negative interest rates?
These are all clear
indications that speculative excess is present in the markets currently.
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However, there is one other
prime ingredient needed to complete the environment for a "Minsky Moment" to occur.
That ingredient is
complacency.
Yet despite the clearest signs that
global credit has been grossly misallocated and that global credit risk has been seriously mispriced, both markets and
policymakers seem to be remarkably sanguine. It would seem that the furthest thing from their minds is that once again
we could experience a Minsky moment involving a violent repricing of risky assets that could cause real strains in the
financial markets."
Desmond is correct. Currently,
despite record asset prices, leverage, debt, combined with slowing economic growth, the level of complacency is
extraordinarily high. Given that no one currently believes another "credit-related crisis" can occur is what is needed to
allow one to happen.
Professor Minsky taught that
markets have short memories, and that they repeatedly delude themselves into believing that this time will be different.
Sadly, judging by today's market exuberance in the face of mounting economic and political risks, once again, Minsky is
likely to be proved correct.
At this point in the cycle,
the next "Minsky Moment" is inevitable.
All that is missing is the
catalyst to start the ball rolling.
Talk about Minsky moment started in 2017 and as of 2021 the bubble did not burst. Warning
from Keynes to short sellers: Market can stay irrational longer then you can stay solvent.
The mere mention of a "Minsky moment" -- a sudden crash of markets
and economies that are hooked on debt -- is enough to send shudders through policy makers. The
theory stems from the work of Hyman Minsky, a U.S. economist who specialized in how excessive
borrowing fuels financial instability. Record debt levels around the world, coupled with
sky-high financial market valuations, have kept Minsky's theory prominent, drawing warnings
from the International
Monetary Fund and others. Before taking over the U.S. Federal Reserve, Janet Yellen
described his work as "
required reading ." 1. What makes a Minsky moment?
The term refers to the end stage of a prolonged period of economic prosperity that has
encouraged investors to take on excessive risk, to the point where lending exceeds what
borrowers can pay off. At that point, Minsky wrote, there's an increase in "speculative and
Ponzi finance." When a destabilizing event as simple as an increase in interest rates occurs,
investors are forced to sell assets to raise money to repay loans. That in turn sends markets
into a spiral amid a demand for cash. There have been attempts to distinguish between a Minsky
moment and a Minsky process that leads up to it. To continue reading
C
C Cook SUBSCRIBER 1 day ago The unanswered question is not if there are a lot of other
Archegos, no doubt there are. But what are the big banks going to do? When one bank gets burned
and execs fired, other bank execs and investors get nervous. Maybe unwind similar investor
deals. Maybe quickly.
There is never just one rat in the basement...
K Kevin H SUBSCRIBER 1 day ago The argument we hear as every bubble inflates is that "this
time is different". Perhaps the reason each bubble deflates is different, but irrational
investor psychology seems to be the driving force behind each lap on the rollercoaster.
Admittedly, the search for yield of any kind has forced many investors to stay more heavily
in the market than they might otherwise consider doing. While risk free (or close to risk free)
returns are usually at least somewhat uninspiring, they're virtually non-existent right
now.
So, the search for any type of yield could be fueling the market's fire for at least a while
longer. Even with that said, the wildly speculative behavior I'm seeing lately does make me a
bit nervous.
It reminds me of the dot com era, and the housing bubble... both were times when people
repeatedly reassured each other with the thought that "it's different, this time".
J James Webb SUBSCRIBER 1 day ago John, an old market saying I'm sure you're familiar with,
"the market can stay irrational longer than you can stay solvent."
Plus identifying market tops are far more difficult than identifying market bottoms. March
2020 was EASY!
A crash will come. This year? Next year? 5 years from now? 20 years from now?
I've gone through four crashes in my life. 1987, 2001, 2008, 2020. 1974 was also during my
life but way before I even knew what the stock market was.
The 1987 and 2020 were very short lived, deep and scary, but were over very quickly. 2001
and 2008 were scary and felt never ending.
Pick an allocation, rebalance and live life. When a crash comes, BUY!
B BA Byron SUBSCRIBER 1 day ago @ LANCE
Because most people see an insane increases in the market as a wonderful thing, rather than
a worrisome trend. They congratulate themselves for buying high in a bull market and they never
learn from their mistakes - because they refuse to admit they made any. It is always those
greedy "others" who did this to them.
It goes like this:
Bull market = " Buy! I'm a genius! "
Bear market = " Sell! Bad luck! "
Rinse wash repeat.
"Investors should remember that excitement and expenses are their enemies. And if they
insist on trying to time their participation in equities, they should try to be fearful when
others are greedy and greedy when others are fearful. " - Warren Buffett
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C Charles Bromley SUBSCRIBER 16 hours ago The old joke: There are two steps that can be
taken to be absolutely sure of making $1M on Wall Street. First Step......start with $2M......
R Richard Hightower SUBSCRIBER 23 hours ago At some point the revelation will be clear, in
all probability after the fact, that the trade Archegos had on, in one variant or the other, is
the same trade that is on in every corner of the markets, and on a global basis. The "trade" is
simple and works like magic to its practitioners, some of whom are quite unwitting.
The underlying is an asset class steadily rising in price devoid of valuation consideration
, levered by leverage upon leverage, and contingent upon low and lower rates - financing rates,
carrying costs, discount rate assumptions, and market derived interest rates. If rates are low
and lower, bravo. If rates rise, the trade unwinds.
The unwind has already started, slowly at first and then spectacularly.
It will truly be a Minsky Moment, with a Dornbusch footnote. Look it up.
Like
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A Anin Nathan SUBSCRIBER 1 day ago The derivatives, options, swaps, margin investing are
effective instruments to skim the cream and leave the traditional investors to sit on the foam.
You may hate to hear that, but that is how the system works. Like thumb_up 8 Reply
reply Share link Report flag
J John Goldin SUBSCRIBER 1 day ago Interesting how everyone frets about "unsophisticated"
individual investors distorting the market, while so called "sophisticated" investors are the
ones with much higher leverage. Individuals levering up is a risky personal choice.
Multi-billion dollar hedge funds levering up 10x (or more) is a systemic risk.
"... That was up 49% from one year earlier, the fastest annual increase since 2007, during the frothy period before the 2008 financial crisis. Before that, the last time investor borrowings had grown so rapidly was during the dot-com bubble in 1999. ..."
"... Significant increases in value without corresponding increases in earnings is the sign of a bubble. The entire S&P 500 has been significantly overvalued for several years now. The cyclically adjusted PE ratio is several times it's historical mean. Historically markets have ALWAYS reverted back to the mean. ..."
As of late February, investors had borrowed a record $814 billion against their portfolios,
according to data from the Financial Industry Regulatory Authority, Wall Street's
self-regulatory arm. That was up 49% from one year earlier, the fastest annual increase
since 2007, during the frothy period before the 2008 financial crisis. Before that, the last
time investor borrowings had grown so rapidly was during the dot-com bubble in 1999.
... some analysts say
run-ups in margin debt contribute to bubbles, and they fear that today's levels of
borrowing will hurt investors if the market has a downturn.
... Leverage combined with internet hype can be dangerous, the Commodity Futures Trading
Commission said in a notice to investors Tuesday.
...It is unclear how many other investment firms have obtained Archegos-style levels of
leverage. Little disclosure is required in the market for total return swaps, which Wall Street
banks privately tailor for clients.
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P Peter Hayes SUBSCRIBER 8 hours ago (Edited) In the year prior to CoVid the S&P grew
21%, from 2,775 to 3,380, meaning it already factored in robust future growth. It plummeted to
2,305 in March 2020, and has since rebounded to 4,080. Are we saying the economy is 20% better
than it was right before CoVid? Are we kidding ourselves? While things in general are much
better than they were last summer, there are still huge segments of the economy which have been
utterly devastated by the shutdowns, i.e. commercial real estate, tourism, hospitality and
restaurant industries, and countless mom-and-pop businesses. The hot housing market masks the
huge number of mortgages which have been forbeared since April 2020, and will continue so to
the end of this year. There's going to be a day of reckoning for all this, probably sooner than
later. The S&P should probably be in the range of 3,000 right now, not 4,000, meaning it's
at least 33% overvalued. Like thumb_up 1 Reply reply Share
link Report flag
K Kim Jady SUBSCRIBER 9 hours ago Remember the Duke brothers in Trading Places? "Margin
call gentlemen." ike thumb_up 3 Reply reply Share link
Report flag
B Bill Payne SUBSCRIBER 10 hours ago Only one thing gives a stock any value; the underlying
company's ability to generate an income stream into the future. If the price/earnings ratio
increases significantly it means that the stock is increasing in value for some reason other
than earnings. There is no valid reason for the stock price to increase other than through
increased earnings. Significant increases in value without corresponding increases in
earnings is the sign of a bubble. The entire S&P 500 has been significantly overvalued for
several years now. The cyclically adjusted PE ratio is several times it's historical mean.
Historically markets have ALWAYS reverted back to the mean. Even though the Fed has kept
the market artificially propped up there will be a massive correction coming at some time
probably followed by a recession. Historically it has always worked this way. We had better
watch out. It's not only limited to one sector of the market like it was in 1999 or 2008. It's
the entire market.
A ANDREW BLENCOWE SUBSCRIBER 12 hours ago 1927 returns
Benjamin Strong cut the Fed's discount rate 0.5% in 1927
So -- it would appear -- the world is currently two years away from its 1929
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K Kamalesh Banerjee SUBSCRIBER 17 hours ago (Edited) The total market capitalization of the
US stock market now is about $41 trillion (that is trillion with a t). Total margin debt of $
814 billion is not a large percentage of the total market cap (under 2%). Thus it is misleading
to say that margin debt is fueling the bull market. Yes, some investors (individuals and hedge
funds) may be over leveraged but the market as a whole is not. Some pockets of the market are
frothy but the market as a whole is not. This is not the roaring 1920s. - yet! Like
thumb_up 2 Reply reply Share link Report
flag
P Paul Smith SUBSCRIBER 9 hours ago (Edited) Interesting! Curious what it was prior to
great depression and great recession, and if similar why was margin blamed, to a great extent,
for great depression? EDIT a quick read indicates in 1928 margin of 2 to 1 was allowed, and
many margin calls wiped people out resulting in a spiralling downward of share prices. So seems
that margin issue perhaps causes an outsize amount of market risk despite it's low overall
percent. Like thumb_up Reply reply Share link Report
flag MARK JURECKI SUBSCRIBER 8 hours ago That's an astute observation. The
potential damage of widespread margin calls is the destruction of the 'buy side' of stock
transactions.
The Great Depression was sometimes described as a failure of the Demand Side. Deflation
causing potential investors to hold onto cash and wait for a better deal. Quashing the market.
R Richard Hightower SUBSCRIBER 23 hours ago At some point the revelation will be clear, in
all probability after the fact, that the trade Archegos had on, in one variant or the other, is
the same trade that is on in every corner of the markets, and on a global basis. The "trade" is
simple and works like magic to its practitioners, some of whom are quite unwitting. The
underlying is an asset class steadily rising in price devoid of valuation consideration ,
levered by leverage upon leverage, and contingent upon low and lower rates - financing rates,
carrying costs, discount rate assumptions, and market derived interest rates. If rates are low
and lower, bravo. If rates rise, the trade unwinds.
The unwind has already started, slowly at first and then spectacularly.
It will truly be a Minsky Moment, with a Dornbusch footnote. Look it up. Like
thumb_up Reply reply Share link Report flag
P PJ L SUBSCRIBER 1 day ago Stocks are up and everyone is buying on margin to get in on the
unprecedented bull market, more millionaires are being created than ever in the entirety of
history.
in the fanatical exuberance disconnected to reality, Every company begins overproducing
goods to fill a demand because look how high the market is! We're in an economic boom, everyone
is going to buy OUR stuff. Make more!
Credit is so cheap, you're missing out if you don't lever up and get in on all this sweet
action...
Sound familiar? Oh wait that's what led to the crash of 1929 and the great depression
thereafter...
As Meme Stock Mania Fizzles, Wall Street Sees 'Big Reckoning'
by
Bailey
Lipschultz
,
4/6/21
The day-trading Reddit crowd turned the first quarter of 2021 into one of the wildest periods of stock market mania in
modern history. Books -- plural -- will undoubtedly be dedicated to the topic in years to come.
But after these small-time speculators banded together to drive up dozens of obscure stocks by hundreds or even thousands
of
percent
--
and in the process burned a few hedge-fund barons betting on declines -- the movement appears to be petering out. An index
that tracks 37 of the most popular meme stocks -- 37 of the 50 that Robinhood Markets banned clients from trading during
the height of the frenzy -- is essentially unchanged over the past two months after soaring nearly 150% in January.
Talk to Wall Street veterans and they'll tell you that this flat-lining is the beginning of what will be an inexorable move
downward in these stocks.
It's not so much about the poor fundamentals of the companies. At least not in the short term. The day-trading zealots have
shown a surprising ability to ignore those facts. It's more that as the pandemic slowly winds down and the economy starts
to open up, many of them will leave their homes and start going back into offices and out to restaurants and embarking on
trips near and far. And as they do, they may stop obsessing about their Robinhood accounts.
Their collective sway on the meme-stock universe, in other words, will wane.
"People are going to be doing other things," said Matt Maley, chief market strategist at Miller Tabak + Co. There will be a
"big reckoning" at some point, he said. "There's no question in my mind."
Of course, the Wall Street set has, broadly speaking, misread the Reddit crowd for weeks earlier this quarter, and it's
possible their analysis is wrong again now. Preliminary data, though, suggests they're right.
Recent reports suggest vaccinated Americans are planning long-awaited vacations with searches for "
Google
flights
" reaching a peak popularity score of 100 this week, according to a Google Trends tracker. The opposite is being
seen for terms like "
stock
trading
" and "
investing
"
which have plunged, Google Trends shows.
"The stimulus check impact on retail trading is waning," said Edward Moya, senior market analyst at Oanda. "Many Americans
are looking to go big on attending sporting events, traveling across the country, vacationing, visiting family and friends,
and revamping wardrobes before going out to restaurants, pubs and returning to the office."
Gamestop Juggernaut
Video-game retailer GameStop Corp. became the poster child for retail traders looking to rage against the hedge fund elite.
However, the stock's
2,460%
roller coaster
alongside other favorites touted on Reddit's WallStreetBets thread caused as much pain as it did joy.
The stock's more than 900% surge this year has drawn a wary eye from the Wall Street analysts that follow it. The average
12-month price target implies the stock will lose more than three-quarters of its value from current levels. Only Jefferies
holds a price target near Thursday's $191.45 close and that call came with the warning that shares are "subject to
volatility beyond fundamentals."
But any sense of GameStop trading on fundamentals has been ignored since it first captivated Wall Street and Reddit users
in the back half of January. Bulls are more than happy to tout their bets on forums as a move to stick it to short sellers
as they buy into a company rebirth delivered by activist investor Ryan Cohen.
Given AMC Entertainment Holdings Inc.'s position as a movie theater many Americans went to at some point, it's not a
complete surprise as to why Reddit users rushed to the company's aide. #SaveAMC trended on Twitter and amateur investors
appeared more than happy to fight against Wall Street's skeptics despite most movie theaters being closed due to the
ongoing pandemic.
The chain's latest rally came amid plans to continue reopening cinemas, however, Wall Street is skeptical. None of the nine
analysts tracking the company rate it a buy and the average price target implies the stock will lose 63% of its value in
the coming year.
Retail euphoria leaked over to a broader range of securities from cult-favorites like Bitcoin, Tesla Inc., and the ARK
Innovation ETF to smaller companies like the clothing retailer Express Inc. Chinese tech company The9 Limited is among the
group's best performers this year with an 860% surge.
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Perspectives
The company's rally has been fueled by recent moves to ride the Bitcoin wave alongside peers like Future FinTech Group Inc.
and Ault Global Holdings Inc.
Zomedica Corp., a small-cap animal health company, has become a cult favorite among retail investors chasing stocks with
low share prices. The Ann Arbor, Michigan-based company started the year worth less than a quarter, but had soared as high
as $2.91.
Trading volume of the company has accelerated this year with an average of 174 million shares changing hands per session,
more than four times the average over the course of 2020. A mention from Tiger King's Carole Baskin helped it go viral in
mid-January.
Bloomberg News provided this article. For more articles like this please visit
bloomberg.com
.
The good news is that you can obtain the historical perspective missing from Billion
Dollar Loser with a reading list that is every bit as much fun . Start with
The Smartest Guys in the Room by Bethany McLean and Peter Elkind, the story of the
Enron con. Then travel back into the Roaring Twenties with Frederick Lewis Allen's description
of Samuel Insull's electrical utility empire in The Lords of Creation , then finish up with Edward Chancellor's nonpareil Devil Take the Hindmost , which describes Neumann's most remote business ancestors,
John Blunt of the South Sea Company and the nineteenth century English railway titan, George
Hudson. Finally, for sheer moral turpitude, nothing beats John Carreyrou's exposition of the
Elizabeth Holmes/Theranos disaster, Bad Blood.
Not only will you be entertained, but the WeWork, Enron, Insull, Hudson, Blunt, and Holmes
narratives will alert you to the signs of impending catastrophe: lofty rhetoric, millennial
predictions, and public adulation that almost inevitably give rise to overweening hubris. With
luck you'll be able to immunize your portfolios against the siren song of the never-ending
parade of entrepreneurial heroes served up by your colleagues, your clients, and a breathless
financial press.
Elon Musk and TSLA, anyone?
William J. Bernstein is a neurologist, co-founder of Efficient Frontier Advisors, an
investment management firm, and has written several titles on finance and economic history. He
has contributed to the peer-reviewed finance literature and has written for several national
publications, including Money Magazine and The Wall Street Journal. He has produced several
finance titles, and four volumes of history, The Birth of Plenty, A Splendid Exchange, Masters
of the Word, and The Delusions of Crowds about, respectively, the economic growth inflection of
the early 19th century, the history of world trade, the effects of access to technology on
human relations and politics, and financial and religious mass manias. He was also the 2017
winner of the James R. Vertin Award from CFA Institute.
We all know
that the economy moves in cycles; boom is followed by bust is followed by boom seemingly forever. A question we'd all like the
answer to is: "Where are we now in the cycle?" Economist Hyman Minsky's "financial instability hypothesis" helps answer this
question.
Classical Economics Assumes the Market is Fundamentally Stable
An assumption
underlying classical economic theory is that the economy is fundamentally stable and seeks equilibrium. The theory holds that
as excesses occur, rational market actors see the excesses and act to make money or avoid losing it, and thereby move the
economy back toward equilibrium.
According to
this theory, bubbles and crashes are caused by external shocks to the economy such as disease, wars, and technological
discoveries. While external shocks, such as the OPEC oil embargo of the 1970s or the current pandemic, certainly have
significant economic effects, they don't adequately explain the sequence of booms and busts that we have seen. The dotcom bust
of 2000 and the financial crisis of 2008 weren't caused by external shocks; they illustrate that the economy is not
fundamentally stable.
Minsky Proposed that the Market is Fundamentally Unstable
Hyman Minsky
was an economist at Washington University in St. Louis from 1965 to 1990. He proposed a theory he labeled the financial
instability hypothesis, which holds that the economy creates its own bubbles and crashes. The gist of his theory is that
stable economies sow the seeds of their own destruction because stability, seeming safe, encourages people to take risks. That
risk-taking creates financial instability that eventually results in panic and crisis.
Unfortunately,
during his lifetime, neither Minsky nor his hypothesis was taken seriously. He died in 1996, before the dotcom bubble and the
Great Recession, both of which gave credence to his ideas. His theory is now accepted as a primary explanation for the
boom-and-bust cycles in the economy.
The financial
instability hypothesis is rooted in swings between excessive risk-taking and the panic that follows when the risk-taking
overheats and the economy collapses. Increased risk in the economy can be seen in the terms on which debt is incurred. Minsky
hypothesized three stages of lending he dubbed hedge, speculative, and Ponzi.
During the
hedge stage, lenders and borrowers are cautious because of the losses they incurred in the prior recession. Borrowers are wary
of leverage, and lenders make loans in modest amounts with stringent credit requirements. During this stage, the amount of
debt in the system is reasonable.
In the
following speculative stage, market participants become more confident of a recovery. Borrowers take on greater amounts of
debt, and the economy begins to boom. Lenders grant credit based on ever-lower standards, assuming that asset prices will
continue to rise. During this stage, borrowers can cover the interest on the loans, but become less able to repay the
principal.
By the final
Ponzi stage, lenders and borrowers have forgotten the lessons of the prior crisis. Everyone is sure that asset prices will
continue to rise, and debt is granted with repayments based on that assumption. The economy becomes over-leveraged; debt and
risk-taking have created a financial house of cards.
Finally, a
"Minsky Moment" -- as the Paul McCulley of PIMCO dubbed it -- occurs. Market insiders take profits, everyone panics, and a crash
ensues before the cycle starts over.
The key insight
of Minsky's model is that stability itself is destabilizing (see figure below) because during times of economic stability,
healthy investments lead to speculative euphoria, increasing financial leverage, and over-extending debt, eventually resulting
in a Minsky Moment, which leads to a recession or even a financial crisis.
Minsky's Cycle of the Economy
IMAGE
SOURCE: THE ST. LOUIS TRUST COMPANY
Paradoxically, Minsky's hypothesis teaches us that the time of greatest investment risk is when everything seems good, and
investing is actually least risky when, as Baron Rothschild once put it, there is "blood in the streets."
How Minsky Can Help Us Be Better Investors
Minsky's
financial instability hypothesis is an essential mental model for us to have in our toolkit. Each cycle has its own
characteristics and length. Euphoria and panic can both last longer than we might expect. And outside shocks such as a
pandemic or geopolitical events can have big effects as well. So, we can't predict with precision when the economy will
transition from one part of the cycle to the next.
But knowing
roughly where we are in the cycle can inform good strategies for investors and business owners. As the economy and markets
move from boom to euphoria, it's essential to have a healthy margin of safety in the form of cash and high-quality bonds.
Smart businesses will increase their cash to shore up liquidity and resist the temptation to take on more debt. Then when the
profit-taking and panic occur, they can redeploy their safety margin into bargain-priced risk assets.
The most
important lesson to take from Minsky's hypothesis is not to get caught up in the fear that comes with the panicky part of the
cycle, or the greed that accompanies the euphoria. While it's not possible to accurately time the tops and bottoms of the
market, knowing roughly where we are in the cycle may help you stick with your investment strategy and avoid following the
herd at full speed into a bust.
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Twitter
or
LinkedIn
.
Check
out
my
website
.
John Jennings
I am the chief strategist and president at
The
St. Louis Trust Company
, a multi-family office and boutique trust company that serves wealthy families across the
U.S.
Roubini said that a climb above 2% for the benchmark 10-year Treasury note
TMUBMUSD10Y,
1.628%
,
which
is used to set rates from everything from mortgages to auto loans, could foster further investor blowups.
Rising yields have propelled investors to sell more speculative wagers because higher yields imply that borrowing costs are also
climbing for investors, making such speculative wagers less economically attractive.
Known as "Dr. Doom" in some circles for his bearish predictions, Roubini has been persistently downbeat on his outlook for markets
and the economy since the pandemic took hold in earnest in the U.S. last year. Last year, he said that the V-shaped bounce "is
becoming a U, and the U could become a W if we don't find a vaccine and don't have enough stimulus."
Like thumb_up 10 Reply reply Share link Report
flag
S Sandeep Jain SUBSCRIBER 1 day ago This article is missing the whale in the stock markets.
Individuals borrowing Billions on margins is insignificant compared to corporations borrowing
in the Trillions. US corporate debt now exceeds $22 Trillion. A significant portion of this
debt is used to buy back stock.
C C Cook SUBSCRIBER 17 hours ago ....inside players can use cheap money from the Fed to
lever up 10, 20 times as Archegos did. Where is the SEC? Where are the banking regulators? Are
those investors/speculators that much smarter than all the Ivy lawyers working in the
government?
The Hedges have paid off the DNC to keep the government at bay and the tax preferences safe.
Look who funded Hillary and Biden campaigns.
One week ago, in our initial take on the biggest hedge fund collapse since LTCM, we explained that - in our view - the
catalyst for the failure of the Archegos hedge fund, which had as much as 10x leverage allowing it to hold some $100BN in
positions, was Morgan Stanley and Goldman breaking ranks with their fellow prime brokers, and sparking the biggest margin call
since Lehman and AIG.
Turns out we were right.
In the most detailed account yet of what happened in the fateful 24 hours between March 25 and 26, when many -
but
not all
- of Archegos' big prime brokers starting dumping blocks of Bill Hwang's margined stock,
CNBC's
Hugh Son
writes that "the night before the Archegos Capital story burst into public view late last month, the fund's
biggest prime broker quietly unloaded some of its risky positions to hedge funds, people with knowledge of the trades told
CNBC."
That prime broker was Morgan Stanley and to avoid what could have been up to $10 billion in losses, the bank sold about $5
billion in shares from Archegos' holdings in media and Chinese tech names to a small group of hedge funds late Thursday, March
25, roughly around the time a last ditch negotiation between prime brokers including Credit Suisse failed to reach a
compromise to avoid a firesale.
Morgan Stanley's scramble to "be first" is a previously unreported detail that shows the extraordinary steps some banks took
to protect themselves from incurring losses from a client's meltdown. The moves, Son reports, benefited Morgan Stanley, while
banks that were slow to react such as Credit Suisse and Nomura have seen billions in losses and widespread C-Suite layoffs.
Credit Suisse said Tuesday that it took a $4.7 billion hit after unwinding losing Archegos positions; the firm also cut its
dividend and halted share buybacks.
It was also not previously known that
Morgan Stanley had the blessing of Archegos
itself to shop around its stock late Thursday.
The bank offered the shares at a discount, telling the hedge funds
that they were part of a margin call that could prevent the collapse of an unnamed client.
Alas, all those hedge funds that bought Archegos holdings late on Thursday are now deep underwater on their positions. That's
because Morgan Stanley had information it didn't share with the stock buyers: as CNBC details, the basket of shares it was
selling, comprised of eight or so names including Baidu and Tencent Music,
was merely
the opening salvo of an unprecedented wave of tens of billions of dollars in sales by Morgan Stanley and other investment
banks starting the very next day.
And now, it is Morgan Stanley's other clients - those who bought the Archegos positions when approched by the mega broker -
that are furious at the bank for having been betrayed and not receiving that crucial context, according to one of the people
familiar with the trades. The hedge funds learned later in press reports that Hwang and his prime brokers convened Thursday
night to attempt an orderly unwind of his positions, a task which we reported last week proved to be impossible especially
once word of the conclave got out.
That means that at least some bankers at Morgan Stanley knew the extent of the selling that was likely and that Hwang's firm
was unlikely to be saved, CNBC's sources claim. And, as we explained one week ago in "
Goldman
And Morgan Stanley Broke Ranks
", it was that knowledge that helped Morgan Stanley and rival Goldman Sachs avoid losses
because the firms quickly disposed of shares tied to Archegos.
Morgan Stanley had another reason why it had to be
first,
smartest or cheat:
it was the biggest holder of the top ten stocks traded by Archegos at the end of 2020 with
about $18 billion in positions overall, its prime broker going crazy in how much leverage it allowed Hwang to put on via Total
Return Swaps. Credit Suisse was the second most exposed with about $10 billion, these sources noted. According to CNBC,
that
means that Morgan Stanley could've faced roughly $10 billion in losses had it not acted quickly.
"I think it was an '
oh shit
' moment where
Morgan was looking at potentially $10 billion in losses on their book alone, and they had to move risk fast,"
the
person with knowledge said. Meanwhile, for those who missed it, this is
how
Credit Suisse lost $4.7 billion
.
And while Goldman's sale of $10.5 billion in Archegos-related stock on Friday, March 26 was widely reported after the bank
blasted emails to a broad list of clients, Morgan Stanley's move the night before went unreported until now because the bank
dealt with fewer than a half-dozen hedge funds, allowing the transactions to remain hidden.
Needless to say, all those hegde funds would like nothing more than inflicting major pain on James Godman's bank, although in
retrospect, their losses are their own fault: the clients which comprise a subgenre of hedge funds dubbed "equity capital
markets strategies," don't have views on the merits of individual stocks.
Instead,
they'll purchase blocks of stock from big prime brokers like Morgan Stanley and others when the discount is deep enough,
usually to unwind the trades over time.
Alas, that deep discount would prove to get much more deep in coming days.
After Morgan Stanley and Goldman sold the first blocks of shares with the consent of Archegos, the floodgates opened. Prime
brokers including Morgan Stanley and Credit Suisse then exercised their rights under default, seizing the firm's collateral
and launching a full blown firesale on Friday as CNBC details:
In a wild session for stocks on that Friday in late March came another twist: Some of the hedge fund investors who had
participated in the Thursday sales also bought more stock from Goldman, which came later to market at prices that were 5%
to 20% below the Morgan Stanley sales.
While these positions were deeply underwater
that day, several names including Baidu and Tencent rebounded, allowing hedge funds to unload positions for a profit.
"It was a gigantic clusterf--- of five different banks trying to unwind billions of
dollars at risk at the same time, not talking to each other, trading at wherever prices were advantageous to themselves,"
one
industry source said.
While Morgan Stanley exited most Archegos positions by Friday, March 26 it had one last holding: 45 million shares of
ViacomCBS, which it shopped to clients on Sunday. The bank's delayed disposal of Viacom shares has sparked questions and
speculation that it held onto the stock because it wanted a secondary offering run by Morgan Stanley the week before to close.
A clusterfuck indeed.
Yet in a repeat Wall Street irony, while many funds are furious at Morgan Stanley they will get over it quick: as CNBC
concludes, despite leaving some of its hedge fund clients feeling less-than-thrilled, Morgan Stanley isn't likely to lose them
over the Archegos episode because the funds want access to shares of hot IPOs that Morgan Stanley, as the top banker to the
U.S. tech industry, can dole out.
In other words, half Boiler Room, half Margin Call.... which is a good excuse as any for us to end with one of the best Wall
Street movie clips in the past decade, one which in 2011 predicted with uncanny accuracy everything that would happen to
Archegos and its prime brokers...
delta0ne
16 hours ago
(Edited)
if
this isn't the most obvious case for Insider Trading to avoid big losses than I don't know what Insider
trading is.
The
difference is some boys are allowed to do it, while the rest aren't.
sabaj49
15 hours ago
all those hedge funds that bought Archegos
holdings late on Thursday are now deep underwater on their positions.
isn't that called insider trading and ripe for lawsuits against the MORGAN STANLEY
should be as they WITHHELD VITAL INFORMATION
hey it's not that big risk - we just need to raise more CASH FOR COLLATERAL
of course we didn't mention other 10 banksters needing to unload same
Paul Bunyan
10 hours ago
Sold
$10B of bad investments hours before the margin call. If that's not an inside track I don't know what is.
Not sure what you do for a living yuri, but it ain't trading.
overbet
13 hours ago
Inside
information has nothing to do with order flow knowledge.
Paul Bunyan
10 hours ago
(Edited)
remove
link
Bro
you think MS figured out what hours before a margin call? Order flow knowledge? Do you think the
traders are rain man? They aren't. They are coked out frat boys trying to get any advantage they can,
and Wall Street leaks like a sieve.
Simple1
13 hours ago
The
bankers are the law, they run the government, the markets and print your money.
2+2 ≠ 5
10 hours ago
Morgan
Stanley did a classic pump n' dump with the hedge fund monies!
JR Wirth
14 hours ago
Morgan
Stanley was smart. The fine will be about 500m, the settlements will be about $ 2 Billion. They saved 7.5
billion that night.
BorisTheBlade
7 hours ago
remove
link
I
wouldn't be surprised if they came up with a similar back-of-the-envelope guesstimate hours prior at the
board meeting.
The Ordinal Numbers
PREMIUM
15 hours ago
And
people wonder why we clap when we hear of bankers jumping from buildings.....
Chipper609
15 hours ago
Much
like a bank run....if there is a line....you're too late.
Stackers
16 hours ago
remove
link
"
They
dont lose money. They dont care if everyone else does, but they dont lose money
"
~Will
Emmerson
jamesblazen62
15 hours ago
A
gigantic cluster**** that sent the market to all-time highs.
Overpowered By Funk
15 hours ago
Serious Alice in Wonderland **** going on these days.
pashley1411
14 hours ago
(Edited)
When
facing 11 digit losses; lawyers are cheap, politicians cheaper.
gunner1867
15 hours ago
(Edited)
Why
would those clients continue to do business with Morgan Stanley. MS had to know it was the beginning of the
selling and not a "clean up" situation. They decided that reputation was less important than money.
beaker
15 hours ago
Hence
the truth in the term, "No honor amongst thieves."
GRDguy
9 hours ago
Sociopathic financiers will gang up when it benefits them, but rip each others' face off when need be. Easy
to do when there's no empath nor conscience. Just be first. The movie Margin Call is classic.
mjl975
12 hours ago
Dear
lord..how can you risk $10 billion on any one customer..let alone one with the history of Hwang/Archegos
spanish inquisition
15 hours ago
remove
link
This was a controlled demolition
.
I am guessing they figured out the scam and that it was going to collapse. All that is left is to create an
official narrative.
It
was also not previously known that
Morgan
Stanley had the blessing of Archegos itself to shop around its stock late Thursday.
anti-bolshevik
15 hours ago
It
was also not previously known that
Morgan
Stanley had the blessing of Archegos itself to shop around its stock late Thursday.
Wait a
minute, and this is the salient point here:
Was
Archegos the Stock Owner or were these Security-based Swaps (SBS) / Total Return Swaps (TRS) with Morgan
Stanley as the Counterparty? Morgan also granted leverage to Archegos??
x_Maurizio
15 hours ago
And
therefore the SP500 soared 130 pts...
tobagocat
4 hours ago
Cracks
are beginning to appear in this fraud we call a financial system. Counterfeiting and rigging are losing
their effect. Illusion soon to turn into reality...look out below
Long
story short, Banks and risk managers learned nothing from the financial crisis ....
Meanwhile the SEC is monitoring reddit and Congress was calling diamond hands to testify cuz wrong folks
made money. House of cards.
Just_Sayin_To_Save_Ya
13 hours ago
(Edited)
SEC is
happily and conviniently turning blind eyes to whole Archegos saga. Archegos was actually created and
sponsored by MS & other criminal banks, is quite obvious. The Archegos entiry is to trade off books and off
market in a black box. Now if you think, FED is doing the same thro these banks and playing in this
markets.
The
problem is, no body can invoke margin call on FED. Not main street, not wall street not precious metals or
commodities or bonds or $. They all are in together to squeeze out little guys and make them work for that
retirement dream :) LOL.
Sound of the Suburbs
5 hours ago
Why is it so easy for bankers to
make lots of money?
Henry
Simons and Irving Fisher supported the Chicago Plan to take away the bankers ability to create money.
"Simons envisioned banks that would have a choice
of two types of holdings: long-term bonds and cash. Simultaneously, they would hold increased reserves, up
to 100%. Simons saw this as beneficial in that its ultimate consequences would be the prevention of
"bank-financed inflation of securities and real estate" through the leveraged creation of secondary forms of
money."
Existing financial assets, e.g.
real estate, stocks and other financial assets, are traded and bank credit is used to fund the transfers.
This inflates the price.
You
end up with a ponzi scheme of inflated asset prices that will collapse and feed back into the financial
system.
At the end of the 1920s, the US
was a ponzi scheme of inflated asset prices.
The
use of neoclassical economics and the belief in free markets, made them think that inflated asset prices
represented real wealth accumulation.
1929 –
Wakey, wakey time
Why did it cause the US
financial system to collapse in 1929?
Bankers get to create money out of nothing, through bank loans, and get to charge interest on it.
Bankers do need to ensure the vast majority of that money gets paid back, and this is where they get into
serious trouble.
Banking requires prudent lending.
If
someone can't repay a loan, they need to repossess that asset and sell it to recoup that money. If they use
bank loans to inflate asset prices they get into a world of trouble when those asset prices collapse.
As the
real estate and stock market collapsed the banks became insolvent as their assets didn't cover their
liabilities.
They
could no longer repossess and sell those assets to cover the outstanding loans and they do need to get most
of the money they lend out back again to balance their books.
The
banks become insolvent and collapsed, along with the US economy.
When banks have been lending to
inflate asset prices the financial system is in a precarious state and can easily collapse.
What was the ponzi scheme of
inflated asset prices that collapsed in Japan in 1991?
Japanese real estate.
They
avoided a Great Depression by saving the banks.
They
killed growth for the next 30 years by leaving the debt in place.
What was the ponzi scheme of
inflated asset prices that collapsed in 2008?
"It's nearly $14 trillion pyramid of super
leveraged toxic assets was built on the back of $1.4 trillion of US sub-prime loans, and dispersed
throughout the world"
All the Presidents Bankers, Nomi Prins.
They
avoided a Great Depression by saving the banks.
They
left Western economies struggling by leaving the debt in place, just like Japan.
It's
not as bad as Japan as we didn't let asset prices crash in the West, but it is this problem has made our
economies so sluggish since 2008.
The last lamb to the slaughter,
India
They
had created a ponzi scheme of inflated asset prices in real estate, but it collapsed.
The
movie Margin Call is first and foremost the story of what happened in 2008 when investment banks unloaded on
their unsuspecting clients Mortgage Backed Securities they knew had become worthless.
ToSoft4Truth
13 hours ago
The
Big Short (2015) - Brownfield Fund and Scion Capital unload short positions [HD 1080p]
And the CEO who once called for the US to raise taxes on the rich and adopt more explicitly socialist policies to expand access to
higher education, housing and child care, praised the federal government's response to the economic crisis caused by the COVID
pandemic. Consumers who are now flush with savings will help drive an economic boom,
Dimon
wrote in his 34K-word missive.
"I have little doubt that with excess savings, new stimulus savings, huge deficit spending, more QE, a new potential
infrastructure bill, a successful vaccine and euphoria around the end of the pandemic, the US economy will likely boom," Dimon
said.
"This boom could easily run into 2023 because all the spending could extend well into
2023."
"Ascertaining the quality of the government's spending will take years, Dimon said, but he has little doubt that "spent wisely,
it will create more economic opportunity for everyone," he said.
Although equity valuations are already "quite high", Dimon aid a multi-year boom may help to
justify current levels, because markets are pricing in economic growth and excess savings that may soon be poured into the market.
Dimon, who built the biggest and most profitable bank in the US, warned shareholders in his industry that disruption by big tech had
finally arrived, as shadow lenders have gained ground, having the benefit of being unconstrained by strict capital requirements that
have forced big banks to hold more capital in reserve.
"Banks have enormous competitive threats - from virtually every angle,"
Dimon
said.
"Fintech and Big Tech are here big time!"
Echoing Jerome Powell and other senior Fed officials, Dimon offered an oblique reference to "froth and speculation" in the market,
but didn't point to any specific areas he saw as threats. He also offered some thoughts on yields and the inflation outlook that,
unlike comments from Jerome Powell, raised the possibility that the rise in inflation might be more than "transitory."
"Conversely, in this boom scenario it's hard to justify the price of US debt (most people
consider the 10-year bond as the key reference point for US debt),"
Dimon said.
"This is because of two factors: first, the huge supply of debt that needs to be absorbed, and second, the not-unreasonable
possibility that an increase in inflation will not be just temporary."
"We need to properly invest, on an ongoing basis, in modernizing infrastructure,"
Dimon
wrote.
"Virtually everyone agrees that we have done a woefully inadequate job investing in our infrastructure – from highways, ports and
water systems to airport modernization and other projects. One study examined the effect of poor infrastructure on efficiency
(for example, poorly constructed highways, congested airports with antiquated air traffic control systems, aging electrical grids
and old water pipes) and concluded this could all be costing us hundreds of billions of dollars per year."
However, while Dimon said he's bullish about the future of the US, some challenges remain, including our increasingly polarized
society. In closing, he wrote: "While I have a deep and abiding faith in the United States of America and its extraordinary
resiliency and capabilities, we do not have a divine right to success. Our challenges are significant, and we should not assume they
will take care of themselves. Let us all do what we can to strengthen our exceptional union."
jamesblazen62
10 hours ago
remove
link
Dimon knows
massive deficit spending can't and won't continue forever. The short-term earnings benefit is more than offset by
the long-term damage to the nation's balance sheet.
He doesn't
care. Cheerlead the cocaine high and leave the consequences to somebody else.
same2u
10 hours ago
Stock market is the food stamps program and UBI for the rich....
And they had it better than ever before over the past 40 years...
Working is for fools...
Brazillionaire
28 minutes ago
Our leaders should be selected from an acceptable pool of globalist elite, that's all. Hard to understand
why the proles would see the need to question that. Seems easy enough to understand. <s>
GreatUncle
32 minutes ago
He does say it eloquently ...
Although
equity valuations are already "quite high"
Just means more 0's added to the number keep 'em coming now where is my stimmy check because I want to see
the more 0's added to that too.
Then he says populism on the left or right should not be allowed to drive policy ... in other words left and
right ...
"you ain't getting what you want so screw you."
Lordflin
10 hours ago
How
these demonic creatures can talk about an economic boom on one hand, and continuing lock downs of the
economy with the other is a marvel...
They
really believe they control the narrative with their media and their celebrity...
Sadly,
in some parts of the country they still do...
In
others the anger is building to an explosive level...
gatorengineer
10 hours ago
I
don't see any anger just sorrow and misery here in pa
Rise Of The Machines
9 hours ago
Take
the FED away and show me the boom!
yogibear
9 hours ago
Dimon
is a bankster/crook, why believe anything he says?
artless
1 hour ago
Well as much as I despise Dimon as a criminal he is the smartest bankster out there and he does tend to
get some things correct like the idea that there will be a boom and it will last until 2023 or so. That
is very likely. Of course the comedown from that high will probably be extraordinarily horrible but...as
the say hedge accordingly.
No
way they will let the thing crash just too soon. Gotta cement the new regime and make the sheeple think
all is going well and that THIS time the folks in charge REALLY care about them and are working in there
interests. There is still a ton of wealth to be extracted from the country-trillions of dollars yet and
these parasites are not going to end their program just yet and miss out on that. I mean, what's M1 these
days again? We are in full fledged LaLa land.
You
have to read all of it and parse out the stuff that indicates his and the rest of the bankster crowd's
intentions then work off that.
But
otherwise, yes, Jamie Dimon should be strung up from the street posts.
FiscalBatman
1 hour ago
Of course the economy will "expand" through 2023. They did everlasting damage with the lockdowns. It
has nowhere to go but up, for now. Until it implodes.
Peak Finance
2 hours ago
remove
link
Didn't
even read his non-sense
remember this guy would literally be a dour-faced walmart greeter if not for the bailouts
this
"master of the universe" has no clothes and clay feet
OldNewB
1 hour ago
Give a
man a gun and he can rob a bank.
Give a
man a bank and he can rob the world.
MommickedDingbatter
1 hour ago
Fed
member bank( JPM for one) gets money for next to nil at a key stroke, loans out said money to XYZ small
bank. As an asset, now loans out said money to hedge fund FUD. As another asset, lends again to 3rd world
country in a derivative contract. Meanwhile, flipping it over in an overnight swap. How this hasn't exploded
is beyond comprehension.
LJC
9 hours ago
"And
then finally, when there's nothing left, when you
can't
borrow
another buck from the bank or buy another case of booze, you bust the joint out. You
light
a
match"
Goodfellas
Bdubs
9 hours ago
I'm
with you... at least in feudal societies, the landed aristocracy has skin in the game, will saddle up and
lead their regiment into the fray.
Dimon
and ilk have an air of vulture.
efrustrated
2 hours ago
Dear
Mr. Dimon,
You
are the living embodiment of everything that has gone wrong with the American economy.
Yours,
The
rest of the world.
Drink Feck Arse Girls @ edifice
1 hour ago
"
China's
leaders believe America is in decline..."
China's leaders might be correct.
2banana
10 hours ago
remove
link
So the
$1 Trillion in obama "shovel ready jobs" was a sham? Who knew?
"We
need to properly invest, on an ongoing basis, in modernizing infrastructure," Dimon wrote. "Virtually
everyone agrees that we have done a woefully inadequate job investing in our infrastructure – from
highways, ports and water systems to airport modernization and other projects.
Be of Good Cheer
10 hours ago
Who is
the "everyone"? Who decided that our infrastructure needed more money? This sounds like COVID rationalizing
all over again. I think our roads and bridges are fine enough, at least the ones I travel. Stop spending.
Buzz-Kill
9 hours ago
Infrastructure Con Job: Only 10% of Bidens stimulus will go into this category.
The
other 90% goes into Green New Deal & Reparations Projects.
But, don't tell anyone the truth about the new scam.
Globalistsaretrash
53 minutes ago
remove
link
America is in decline due to people like Dimon
.
PGR88
1 hour ago
Dimon
says that America's oligarchs and politicians are to blame for intense polarization - with no sense of irony
whatsoever.
MontCar
PREMIUM
1 hour ago
While
the music's playing ya gotta get up n dance. When it stops, turn out the lights.
yerfej
2 hours ago
A
society cannot succeed when it doesn't enforce the rules on half the people because of some level of wealth
or cult affiliation. People who visit the US are astonished at the number of brain dead idioyts wandering
around, they should be in zoo's. Although its as bad in France. When society hands out unlimited free
shyyyit with nothing asked in return it gets the quality of fhreaks the US now produces.
Zeus123
9 hours ago
Is
this Jamie Dude HIGH?
ChromeRobot
9 hours ago
High on himself. He'll do whatever is necessary to make money for his sleazeball bank.
toady
1 hour ago
"We need to properly invest, on
an ongoing basis, in modernizing infrastructure,"
Dimon wrote.
The
first thing that needs to happen is the definition of "infrastructure"... Dimon goes on and on about planes,
trains, and automobiles, while Bribe'm's "infrastructure" bill plows trillions into his cronies pockets,
then throws 10 or 20 billion at "racist highways".
se48s2t8sn
1 hour ago
Jamie
Dimon doesn't understand how hated he is.
t0mmyBerg
1 hour ago
Dimon
supports the same policies that have killed America. Trading with China ==> the hollowing out of the
economy, massive financialization of the economy ==> unproductive debt, skewing of law favoring big
business over small
ThomasJefferson69
2 hours ago
States
"excess savings" and then "
30%
of Americans don't have enough savings
to deal with unexpected expenses that total as little as $400"
This dumbass can't remember the lies he starts with.
onemorething
2 hours ago
(Edited)
JPMorgan's Dimon Admits "
Something
Has Gone Terribly Wrong
" In America...
some people stole something
John
Pierpont Morgan has been dead for 108 years but he still keeps ******* us over.
Jamie
Dimon saying
Something Has Gone Terribly Wrong,
is
like Captain Renault decrying gambling in Casablanca.
(((here are your winnings, sir)))
Francis Uwood
2 hours ago
How
about a wealth tax on people like Dimon and Bezos. They are all for increasing taxes but their wealth is
not based on their salaries. How about a wealth tax on their assets.
JoePesci
2 hours ago
(Edited)
****
yeah, I'm thinking 95% on everything above $1Billion dollars. Nobody is worth more than that. You get a
billion dollars you can use your time to do things other than accumulate wealth, which at that point you
will only continue to do so at the destruction of everyone else.
ChromeRobot
9 hours ago
remove
link
Jamie
D comes on tv and smiles I reach back to make sure I still have my wallet. It's a reflex.
Machido
32 minutes ago
(Edited)
35 K
words. Another 'Das Kapital'
These
guys manipulated markets to get where they are, Now they are all invoking socialism/communism so they can
take charge of looting whats left.
shepnkc
PREMIUM
1 hour ago
remove
link
Always trying to pump the markets....probably hasn't gotten all his shorts in place yet....
Evil-Edward-Hyde
2 hours ago
Dimon
says somethings wrong in the USA
I
don't think the Mega Banks like Chase Bank had anything to do with that 😂
Look
in the Mirror Mr Dimon .
radical-extremist
2 hours ago
Jamie
Dimon has as much authority to weigh in on the Socio-political issues of our time as does the CEO of Coke or
Delta Airlines or MLB. Stay in your lane banker boy.
Verrick
2 hours ago
Although equity valuations
are already "quite high", Dimon aid a multi-year boom may help to justify current levels, because markets
are pricing in economic growth and excess savings that may soon be poured into the market.
"Quite
high" phhh. You sir, are quite high
mickeydouglas
2 hours ago
Jamie
Dimon was the butt boy of Sandy Weill, the man who destroyed the US economy so he could acquire Citigroup.
Herdee
5 hours ago
(Edited)
remove
link
This
guy is nothing but a f * c king crook and a gangster. They just paid a fine of a BILLION dollars for
manipulating the Gold Market. And they even give time for this shyster to even speak?
jamesblazen62
10 hours ago
remove
link
Dimon
is in greed's grasp and he can't escape. He's had 2 brushes with death (cancer and emergency heart
surgery). You'd think a billionaire with more money than he can ever need or want has something better to
do in his life than conniving for more money and playing big corporate games of manipulation and deceit.
Evil-Edward-Hyde
50 minutes ago
J P
Morgan is a crime Syndicate.
They
constantly Break the Laws.
No
Problem for Them,
They
Just Pay The Fines.
Their
secret is they make much much more money on the scam did they have to pay in fines.
FiscalBatman
1 hour ago
remove
link
It's
amazing how out of touch these guys are. They just don't get it. Dimon will be swaying back and forth with
the rest of them at this rate
newworldorder
1 hour ago
(Edited)
The US
Political class is not investing Govt funds, to bolster America and Americans, - the are however investing
in WOKEISM, EQUITY AND DIVERSITY, based on skill color, gender and sexual orientation.
Truce
1 hour ago
remove
link
Rich
man tells nation: if you all work together really well you can make me richer.
Tomdelay
1 hour ago
'And, I've been a big supporter of all the radical Lefties in the Dem party. My tribe contributes 50% of
the annual budget of the DNC & me & my banking Zionists at the Fed have been steadily undermining the USA
for over 100 years. So if you believe a word of the BS I just laid on you, then you haven't been paying
attention and deserve the servitude or death that awaits you.'
Rubicon727
2 hours ago
The
monster problem in the US is: people like Dimon, and all the other ultra-rich-multi-billionaires who have
absolute power. THEY ARE THE PROBLEM and have been since the early 1990s.
Leroy Whitby
2 hours ago
(Edited)
Biden's infrastructure plan is a tax hike plus
USD
180bln for research and development (ONE HUNDRED EIGHTY BILLION fluffy accounting Bull$#!+)
USD
85bln for public transit (probably Bull$#!+)
USD
80bln for Amtrak and freight rail (Bull$#!+ and Berkshire Hathaway)
USD
174bln to encourage EVs via tax credits and other incentives to companies that make EV batteries in the
US instead of China (ONE HUNDRED SEVENTY FOUR BILLION pretend to compete with China while taking their
bribes Bull$#!+)
USD
100bln for broadband (tech sector Bull$#!+)
USD
300bln to promote advanced manufacturing (THREE HUNDRED BILLION Elon Musk type with a dash of hypocrisy
Bull$#!+)
USD
400bln spending on in-home care (FOUR HUNDRED BILLION socialist wet fantasy level Bull$#!+)
USD
46bln in fed procurement programs for government agencies to buy fleets of EVs (environmental crazy type
Bull$#!+)
USD
35bln in R&D programs for cutting-edge, new technologies (Elon Musk squared level Bull$#!+)
USD
50bln in dedicated investments to improve infrastructure resilience (probably Bull$#!+)
USD
16bln program intended to help fossil fuel workers transition to new work (Bull$#!+ from the government
teat)
USD
10bln for a new "Civilian Climate Corps." (stinking piles of utter Bull$#!+)
Anything left for roads and bridges and airports after the ONE TRILLION spent on home care, EV's, and
research?
Bay of Pigs
9 hours ago
Legs
Dimon has always been a serial liar.
He's
incapable of being honest.
One Moment Please
9 hours ago
My
neighbors and I are not experiencing any of this 'economic boom' he speaks of.
Maybe
we abide in some mysterious economic dead zone?
Mr..Lucky
10 hours ago
"Stock
prices have reached what looks like a permanently high plateau," Yale economist Irving Fisher.
"... Lasser said that equates to approximately 59 square feet of shopping center space per U.S. household, less than 62 square feet in 2010. That number is expected to plunge by 2026 as online shopping dominates. ..."
"... UBS estimates 9% of all retail stores will shutter operations by 2026, or about 80,000 retail stores. ..."
"... The bankster crash took tons of auto dealerships with it too. Very little is rising to replace any of it, unless it can be tied to an overpriced underdelivering data-mined subscription. ..."
The retail apocalypse has been well documented for readers (see:
here &
here &
here ) over the years as tens of thousands of brick and mortar stores nationwide have shuttered their doors. The problem today
- is that millions of jobs lost during the pandemic are never coming back - in a consumer-based economy - this sets up for even more
store closures.
UBS analyst Michael Lasser told clients this week that a whopping 80,000 retail stores are estimated to close in the next five
years as the virus pandemic has deeply scarred the economy and resulted in a permanent shift in how consumers shop, that is, online
.
"An enduring legacy of the pandemic is that online penetration rose sharply ," wrote Lasser.
"We expect that it will continue to increase, which will drive further rationalization of retail stores , especially as some
of the unique support measures from the government subside," he said.
UBS found at the end of 2020, there were 115,000 shopping malls, compared with 112,000 in 2010 and 90,000 in 2000.
Lasser said that equates to approximately 59 square feet of shopping center space per U.S. household, less than 62 square feet
in 2010. That number is expected to plunge by 2026 as online shopping dominates.
UBS estimates 9% of all retail stores will shutter operations by 2026, or about 80,000 retail stores.
Lasser assumes during this period that e-commerce sales will jump to 27% of total retail sales by then, up from 18% today.
UBS said many retail stores have been on life support following cheap government loans and a supercharged consumer via
stimulus checks . The short-term artificial boost will be short-lived, which will lead to even more store closures.
Many of the closures will be retailers who sell clothing and accessories. UBS believes 21,000 closures from this industry will
be by 2026. Office supplies and sporting goods businesses are other retailers that will be hit hard.
The good news is that auto parts, home improvement, and grocery retailing will be less susceptible to the retail apocalypse.
However, there is more bad news. The labor market recovery is not robust. The economy is still short 8 million jobs and 19 million
people are collecting some form of unemployment insurance . This is a large swath of the population who have fallen into financial
hardships and are increasingly unlikely to return to their jobs (and thus, absent UBI, in a vicious cycle can no longer spend like
pre-COVID times). play_arrow
RKDS 38 minutes ago (Edited)
Not surprising. The feeling I've been getting more and more is that civilization is receding. My town had a KMart for most,
if not all, of my life. After the Jamesway next town over closed, decades ago, it was the only general merchandise store for 20
miles in either direction. Now it's gone. Schools, grocery stores, power plants, gas stations, you name it, it's closing.
So many stores I used to shop in are gone, general and specialty. The toy stores are all gone. Best Buy is the last (lousy)
electronics retailer standing.
Books, forget about it, may as well go to the library. Art/craft stores are mostly gone except
I guess Michaels which was always the weakest selection.
Want to rent a movie? Too bad. Almost as hard to go watch a movie with
so many theatres having gone under even before the plandemic. Put together a computer or buy software? You're joking, right?
When
that WSB bubble bursts, GameStop will be a dead man walking.
Sears and JCP locations sit idle everywhere. Not even sure where
I'd buy shoes/sneakers if I had to go to a store. The bankster crash took tons of auto dealerships with it too. Very little is
rising to replace any of it, unless it can be tied to an overpriced underdelivering data-mined subscription.
I used to have to order specialty items online. Now it's like everything is online or bust. Even Target and Walmart don't bother
to stock their shelves most of the time. Then we've got that clown of a postmaster general going "herp derp I's gon' raise da'
prices cuz I's don't gots no udder ideas!1" Everything in this country is engineered to maximize problems for working people.
Nothing has been able to shake the new bull market in recent weeks -- not a still elevated 10-year Treasury yield or
threats of higher taxes on the wealthy and corporations by the Biden administration.
But the one thing that has powered the S&P 500 beyond a record 4,000 -- data that indicates a strong post COVID-19
economic
recovery is rapidly building -- may turn out to ruin the rally. And it could play out within three months, warns widely followed
Deutsche Bank Chief Strategist Binky Chadha.
"Very near term, we expect equities to continue to be well supported by the acceleration in macro growth, and see buying
by systematic strategies and buybacks driving a grind higher. But we expect a significant consolidation (-6% to -10%) as growth
peaks over the next three months," Chadha wrote in a new research note on Tuesday.
Chadha calls out peaking ISM data -- which has been coming in hot of late -- as the potential trigger point for a steep market
pullback.
"Our house economics forecast implies a flattening out of the ISMs at elevated levels beginning in Q2 (64) and continuing into
Q3 (63). There are a number of considerations though that suggest the monthly ISMs peak more sharply over the next three months and
slow in keeping with the historical inverted-V shaped pattern. We look for discretionary investor equity positioning to be pared
with a peak in the ISMs and do not expect retail to buy the dip. We then see equities rallying back as our baseline remains for strong
growth but only a gradual and modest rise in inflation," explains Chadha.
Thus far, investors are hardly positioned for any sizable spring/early summer swoon in stocks -- with good reason as the economic
data has been impressive.
The
U.S. economy created 916,000 jobs in March , the Bureau of Labor Statistics reported last week. That crushed Wall Street estimates
for a 660,000 increase. The gain has some economic forecasters telling
Yahoo Finance Live the economy could be on the verge of creating a million jobs a month very soon.
Nothing has been able to shake the new bull market in recent weeks -- not a still elevated 10-year Treasury yield or
threats of higher taxes on the wealthy and corporations by the Biden administration.
But the one thing that has powered the S&P 500 beyond a record 4,000 -- data that indicates a strong post COVID-19
economic
recovery is rapidly building -- may turn out to ruin the rally. And it could play out within three months, warns widely followed
Deutsche Bank Chief Strategist Binky Chadha.
"Very near term, we expect equities to continue to be well supported by the acceleration in macro growth, and see buying by systematic
strategies and buybacks driving a grind higher. But we expect a significant consolidation (-6% to -10%) as growth peaks over the
next three months," Chadha wrote in a new research note on Tuesday.
Chadha calls out peaking ISM data -- which has been coming in hot of late -- as the potential trigger point for a steep market
pullback.
"Our house economics forecast implies a flattening out of the ISMs at elevated levels beginning in Q2 (64) and continuing into
Q3 (63). There are a number of considerations though that suggest the monthly ISMs peak more sharply over the next three months and
slow in keeping with the historical inverted-V shaped pattern. We look for discretionary investor equity positioning to be pared
with a peak in the ISMs and do not expect retail to buy the dip. We then see equities rallying back as our baseline remains for strong
growth but only a gradual and modest rise in inflation," explains Chadha.
Thus far, investors are hardly positioned for any sizable spring/early summer swoon in stocks -- with good reason as the economic
data has been impressive.
The
U.S. economy created 916,000 jobs in March , the Bureau of Labor Statistics reported last week. That crushed Wall Street estimates
for a 660,000 increase. The gain has some economic forecasters telling
Yahoo Finance Live the economy could be on the verge of creating a million jobs a month very soon.
Meanwhile, data from
IHS Markit
and the
Institute for Supply Management on activity in the services sector on Monday blew the doors off analyst estimates as the ISM's
activity index surged to a record high, as Yahoo Finance's Myles Udland wrote in the
Morning Brief
newsletter. IHS Markit's reading was the best in seven years, noted Udland.
And last but not least,
corporate profit estimates for the first quarter have continued to trend noticeably higher amid the acceleration in economic
data.
But if economic data moderates as Chadha expects, the stock market could lose a key catalyst. That's not lost by Chadha's peers
on Wall Street.
"Our view coming into 2021 was that earnings will drive markets higher and valuations will take a backseat, and actually be flat
to down for the year. But the good news is actually starting to get priced in here, and we think it's going to become more challenging
for investors and trickier," said Saira Malik, global equities chief investment officer and global portfolio manager at Nuveen...
That makes Jamie brilliant. play_arrow 5 play_arrow 1
zorrosgato 10 hours ago
"flush with savings"
HA!
Yen Cross 10 hours ago
Jack, ****, Dimon? Which one was it Z/H Google moderator?
I donate at Christmas.
Basil 20 minutes ago
whats gone wrong is the cancer of progressiveism. wokeism, social justice nonsense.
Gadbous 29 minutes ago
Don't you want to just slap these people?
MuleRider 18 minutes ago
You misspelled decapitate.
GrandTheftOtto 2 hours ago
"It was a year in which each of usfaced difficult personal challenges"
boundless hypocrisy...
Mr. Rude Dog 2 hours ago remove link
" Americans know that something has gone terribly wrong, and they blame this country's
leadership: the elite, the powerful, the decision makers - in government, in business and in
civic society," he wrote.
"This is completely appropriate, for who else should take the blame?"
Lets see if he projects the problem back on the citizens...Let's see what happens.
"But populism is not policy, and we cannot let it drive another round of poor planning
and bad leadership that will simply make our country's situation worse."
I knew the so called elites could not take the blame... You know populism always makes bad
decisions with the economy, our monetary system, our infrastructure and just managing our tax
money in general...Yes I knew Jamie could not take the blame..LOL.!!!!
QE4MeASAP 2 hours ago
So Dimon is giving the state of the union instead of Biden?
Budnacho 2 hours ago
Jamie Dimon....Friend of the Little Guy....
Tomsawyer2112 PREMIUM 11 hours ago
He doesn't believe a word of what he just said. But he knows that if he wants his bank to
continue to be an extension of the government and curry favor then he needs to tow the line.
I am sure he also has his eye on a future role as Fed Lead or US Treasurer but might be tough
since he's not a diversity candidate.
oknow 2 hours ago
Someone turn off his mike, dont need your sorry *** confession
Just confiscate his wealth and make him do 9 to 5 jobs for the rest of his life.
ChromeRobot 9 hours ago remove link
This guy is a rarity in the banking industry. He's a billionaire. Running a bank I was
often told in my early years in finance was foolproof. Everybody needs money and they have
it. Hard to fk up. Somehow this "titan" has gamed it to do really well doing something
incredibly easy. Positioning yourself to be a SIFI helps too! Too big to fail has it's
perks.
a drink before the war 10 hours ago
What Jamie is really saying without saying it is " I get paid in stock options however
since the pandemic JPM and other banks haven't been allowed to do stock buy back but come
June we get back to the NORMAL and with the FED printing money and giving it to us we going
to talk this stock WAY up no matter what because I got almost two years of stock options I
gotta get paid for!"
lay_arrow 2
archipusz 10 hours ago
If you want to get to the top, you must speak the party line narrative.
The truth is something different altogether.
Eddie Haskell 10 hours ago
If you want to be a state-approved oligarch you've gotta suck the right dickie. Good
job.
Detective Miller 38 minutes ago
"Jaimie Tells Bagholders To 'Buy Buy Buy!!!'"
Onthebeach6 38 minutes ago
The US is addicted to helicoptor money.
The world looks fine to an addict until the supply is cut off.
sbin 41 minutes ago
Off shore industry
Steal pension funds
Laundering drug money
Regulatory capture.
Jimmy going to lock himself in jail and forfeit his assets?
34k of jerkoff.
Nuk Soo Kow 2 hours ago
How magnanimous of Jamie to blame elitists and civic "leaders" for the structural problems
in America. It was the banksters that pushed NAFTA and helped China engineer it's currency
against the dollar, which led to massive outflows of productive capital. It was the banksters
via the use of financial legerdemain who engineered the collapse in 2008 (not to mention
every other banking panic and collapse prior to). It's high time to throw out this den of
vipers once and for all.
Nature_Boy_Wooooo 2 hours ago
He lost me at.....
We need more cheap immigrant labor...... housing is unaffordable for many.
No **** moron!......you suppressed our wages and increased demand for housing.
PT 10 hours ago remove link
I always consult the fox when I want to know about the state of the hen house.
QuiteShocking 10 hours ago
Economic boom?? Is really just trying to get back to where we were previously before the
pandemic hit with things opening back up etc... More people have been working from home so
different spending patterns are developing.. but could change... Supply chain chaos makes it
seem like shortages and inflation etc... It may only last through 2023?? but with Dems in
charge this is not a given with their anti business slant??
same2u 11 hours ago
UBI for the rich= stock market...
Hope Copy 3 hours ago (Edited)
Jamie knows that the core of Crypto is at the CIA and that the pseudo Republic has far to
much Fascist politics at the core .. There has been a competitive failure at most all levels
of the government in recent times with a 'winner take all' at the cost of keeping competitive
practices alive (not to mention kickbacks).. Of course China is laughing even though they
have a history of cutting corners (and outright fraud) in every economic sector.
Mario Landavoz 20 minutes ago
Banker. That's all ya need to know.
Just a Little Froth in the Market 40 minutes ago
But the CEO was very candid about China...
"China's leaders believe America is in decline... The Chinese see an America that is
losing ground in technology, infrastructure and education – a nation torn and
crippled . . . and a country unable to coordinate government policies (fiscal, monetary,
industrial, regulatory) in any coherent way to accomplish national goals
This is correct.
Joe A 55 minutes ago
He is just mocking and taking a piss at everybody. That America is such a mess is because
of people like him with his scorched earth robber baron rogue capitalism. But there is a way
to redeem yourselves. Just make all your assets available to the American people. And oh,
blow your own brain out.
Abi Normal 3 hours ago remove link
What else is he supposed to say? As long as things don't go bad for Jamie it's cool.
OrazioGentile 3 hours ago
The Banksters, after years of mismanagement, borderline fraud, and endless bailouts now
see that investments in unicorn startups, selling mindless BS to each other, and the quick
buck lead to a burned out husk called America?!? Now?!? Let all of them live in the great
paradise called the Cayman Islands that they helped build and see how far they get selling
"capital instruments" to each other. The last 20 years have taught most Americans that hard
work is meaningless to get ahead IMHO.
Nothing has been able to shake the new bull market in recent weeks -- not a still elevated 10-year Treasury yield or
threats of higher taxes on the wealthy and corporations by the Biden administration.
But the one thing that has powered the S&P 500 beyond a record 4,000 -- data that indicates a strong post COVID-19
economic
recovery is rapidly building -- may turn out to ruin the rally. And it could play out within three months, warns widely followed
Deutsche Bank Chief Strategist Binky Chadha.
"Very near term, we expect equities to continue to be well supported by the acceleration in macro growth, and see buying
by systematic strategies and buybacks driving a grind higher. But we expect a significant consolidation (-6% to -10%) as growth
peaks over the next three months," Chadha wrote in a new research note on Tuesday.
Chadha calls out peaking ISM data -- which has been coming in hot of late -- as the potential trigger point for a steep market
pullback.
"Our house economics forecast implies a flattening out of the ISMs at elevated levels beginning in Q2 (64) and continuing into
Q3 (63). There are a number of considerations though that suggest the monthly ISMs peak more sharply over the next three months and
slow in keeping with the historical inverted-V shaped pattern. We look for discretionary investor equity positioning to be pared
with a peak in the ISMs and do not expect retail to buy the dip. We then see equities rallying back as our baseline remains for strong
growth but only a gradual and modest rise in inflation," explains Chadha.
Thus far, investors are hardly positioned for any sizable spring/early summer swoon in stocks -- with good reason as the economic
data has been impressive.
The
U.S. economy created 916,000 jobs in March , the Bureau of Labor Statistics reported last week. That crushed Wall Street estimates
for a 660,000 increase. The gain has some economic forecasters telling
Yahoo Finance Live the economy could be on the verge of creating a million jobs a month very soon.
Nothing has been able to shake the new bull market in recent weeks -- not a still elevated 10-year Treasury yield or
threats of higher taxes on the wealthy and corporations by the Biden administration.
But the one thing that has powered the S&P 500 beyond a record 4,000 -- data that indicates a strong post COVID-19
economic
recovery is rapidly building -- may turn out to ruin the rally. And it could play out within three months, warns widely followed
Deutsche Bank Chief Strategist Binky Chadha.
"Very near term, we expect equities to continue to be well supported by the acceleration in macro growth, and see buying by systematic
strategies and buybacks driving a grind higher. But we expect a significant consolidation (-6% to -10%) as growth peaks over the
next three months," Chadha wrote in a new research note on Tuesday.
Chadha calls out peaking ISM data -- which has been coming in hot of late -- as the potential trigger point for a steep market
pullback.
"Our house economics forecast implies a flattening out of the ISMs at elevated levels beginning in Q2 (64) and continuing into
Q3 (63). There are a number of considerations though that suggest the monthly ISMs peak more sharply over the next three months and
slow in keeping with the historical inverted-V shaped pattern. We look for discretionary investor equity positioning to be pared
with a peak in the ISMs and do not expect retail to buy the dip. We then see equities rallying back as our baseline remains for strong
growth but only a gradual and modest rise in inflation," explains Chadha.
Thus far, investors are hardly positioned for any sizable spring/early summer swoon in stocks -- with good reason as the economic
data has been impressive.
The
U.S. economy created 916,000 jobs in March , the Bureau of Labor Statistics reported last week. That crushed Wall Street estimates
for a 660,000 increase. The gain has some economic forecasters telling
Yahoo Finance Live the economy could be on the verge of creating a million jobs a month very soon.
Meanwhile, data from
IHS Markit
and the
Institute for Supply Management on activity in the services sector on Monday blew the doors off analyst estimates as the ISM's
activity index surged to a record high, as Yahoo Finance's Myles Udland wrote in the
Morning Brief
newsletter. IHS Markit's reading was the best in seven years, noted Udland.
And last but not least,
corporate profit estimates for the first quarter have continued to trend noticeably higher amid the acceleration in economic
data.
But if economic data moderates as Chadha expects, the stock market could lose a key catalyst. That's not lost by Chadha's peers
on Wall Street.
"Our view coming into 2021 was that earnings will drive markets higher and valuations will take a backseat, and actually be flat
to down for the year. But the good news is actually starting to get priced in here, and we think it's going to become more challenging
for investors and trickier," said Saira Malik, global equities chief investment officer and global portfolio manager at Nuveen...
House prices are seriously insane. Even my kind of crappy little place went up $85k on
zillow in the last two months!
The only people I see buying are people from out of state (mostly Calif, NY and
Oregon---unfortunately) and local government employees who never missed a paycheck during this
entire ****show.
The people selling are private sector economic losers who are down sizing. Even the Family
Doc down the street is selling his business is so slow because people are afraid to sit in an
office+insurance reimbursements are down.
The entire USA economy is now more topsy turvey then ever in my life time.
The International Monetary Fund upgraded its global economic growth forecast for the second
time in three months, while warning about widening inequality and a divergence between advanced
and lesser-developed economies.
The global economy will expand 6% this year, up from the 5.5% pace estimated in January, the
IMF said in its World Economic Outlook published on Tuesday. That would be the most in four
decades of data, coming after a 3.3% contraction last year that was the worst peacetime decline
since the Great Depression.
Market surges on 80,000 retail outlet closings optimism.
[Apr 05, 2021] Financial crises get triggered about every 10 years -- Archegos might be right on time by 14 major U.S. financial institutions. Exactly a decade later, too much leverage by some of those very institutions, and the bursting of a U.S. real estate bubble, led to the near collapse of the U.S. financial system. Once again, big banks were deemed too big to fail and taxpayers came to the rescue. The trend? Every 10 years or so, and they all look different. Are we in the early stages of a new crisis now, with the blowup at the family office Archegos Capital Management LP? A family office, for the uninitiated, is a private wealth management vehicle for the ultra-wealthy. Here's what I mean by ultra-wealthy: Consulting firm EY estimates there are some 10,000 family offices globally, but manage, says a separate estimate by market research firm Campden Research, nearly $6 trillion. That $6 trillion is likely far higher now given that it's based on 2019 data. Exactly a decade later, too much leverage by some of those very institutions, and the bursting of a U.S. real estate bubble, led to the near collapse of the U.S. financial system. Once again, big banks were deemed too big to fail and taxpayers came to the rescue. The trend? Every 10 years or so, and they all look different. Are we in the early stages of a new crisis now, with the blowup at the family office Archegos Capital Management LP? A family office, for the uninitiated, is a private wealth management vehicle for the ultra-wealthy. Here's what I mean by ultra-wealthy: Consulting firm EY estimates there are some 10,000 family offices globally, but manage, says a separate estimate by market research firm Campden Research, nearly $6 trillion. That $6 trillion is likely far higher now given that it's based on 2019 data. The trend? Every 10 years or so, and they all look different. Are we in the early stages of a new crisis now, with the blowup at the family office Archegos Capital Management LP? A family office, for the uninitiated, is a private wealth management vehicle for the ultra-wealthy. Here's what I mean by ultra-wealthy: Consulting firm EY estimates there are some 10,000 family offices globally, but manage, says a separate estimate by market research firm Campden Research, nearly $6 trillion. That $6 trillion is likely far higher now given that it's based on 2019 data. A family office, for the uninitiated, is a private wealth management vehicle for the ultra-wealthy. Here's what I mean by ultra-wealthy: Consulting firm EY estimates there are some 10,000 family offices globally, but manage, says a separate estimate by market research firm Campden Research, nearly $6 trillion. That $6 trillion is likely far higher now given that it's based on 2019 data. A family office, for the uninitiated, is a private wealth management vehicle for the ultra-wealthy. Here's what I mean by ultra-wealthy: Consulting firm EY estimates there are some 10,000 family offices globally, but manage, says a separate estimate by market research firm Campden Research, nearly $6 trillion. That $6 trillion is likely far higher now given that it's based on 2019 data.
Here's the potential danger. Family offices generally aren't regulated. The 1940 Investment Advisers Act says firms with 15
clients or fewer don't have to register with the Securities and Exchange Commission. What this means is that trillions of dollars
are in play and no one can really say who's running the money, what it's invested in, how much leverage is being used, and what
kind of counterparty risk may exist. (Counterparty risk is the probability that one party involved in a financial transaction
could default on a contractual obligation to someone else.)
The problem is that only about a third of that, or $10 billion, was its own money. We now know that Archegos worked with some
of the biggest names on Wall Street, including Credit Suisse Group AG
CS,
+1.59%
,
UBS Group AG
UBS,
+1.01%
,
Goldman Sachs Group Inc.
GS,
-1.25%
,
Morgan Stanley
MS,
-0.28%
,
Deutsche Bank AG
DB,
+0.74%
and Nomura Holdings Inc.
NMR,
+1.87%
.
But since family offices are largely allowed to operate unregulated, who's to say how much money is really involved here and
what the extent of market risk is? My colleague Mark DeCambre reported last week that Archegos' true exposures to bad trades
could actually
be closer to $100 billion
.
Danger of counterparty risk
This is where counterparty risk comes in. As Archegos' bets went south, the above banks -- looking at losses of their own -- hit
the firm with margin calls. Deutsche quickly dumped about $4 billion in holdings, while Goldman and Morgan Stanley are also said
to have unwound their positions, perhaps limiting their downside.
So is this a financial crisis? It doesn't appear to be. Even so, the Securities and Exchange Commission has opened a
preliminary investigation into Archegos and its founder, Bill Hwang.
One peer, Tom Lee, the research chief of Fundstrat Global Advisors, calls Hwang one of the "top 10 of the best investment
minds" he knows.
But federal regulators may have a lesser opinion. In 2012, Hwang's former hedge fund, Tiger Asia Management, pleaded guilty
and paid more than $60 million in penalties after it was accused of trading on illegal tips about Chinese banks. The SEC banned
Hwang from managing money on behalf of clients -- essentially booting him from the hedge fund industry. So Hwang opened Archegos,
and again, family offices aren't generally aren't regulated.
Yellen on the case
This issue is on Treasury Secretary Janet Yellen's radar. She said last week that greater oversight of these private corners
of the financial industry is needed. The Financial Stability Oversight Council (FSOC), which she oversees, has revived a task
force to help agencies better "share data, identify risks and work to strengthen our financial system."
Most financial crises end up with American taxpayers getting stuck with the tab. Gains belong to the risk-takers. But losses --
they belong to us. To paraphrase Abe Lincoln, family offices -- a multi-trillion dollar industry largely allowed to operate in the
shadows in a global financial system that is more intertwined than ever -- are of the super-wealthy, by the super-wealthy and for
the super-wealthy. And no one else.
The Archegos collapse may or may not be the beginning of yet another financial crisis. But who's to say what thousands of
other family offices are doing with their trillions, and whether similar problems could blow up?
M Michael OFarrell SUBSCRIBER 3 hours ago Biden, or whoever is actually in charge, is
giving this country away. It will the younger generation that will pay the price. Like
thumb_up 6 Reply reply Share link Report
flag
M Mark A. Rosasco SUBSCRIBER 3 hours ago "A whole generation with a new explanation" ,
history definitely rhymes.
According to John Kenneth Galbraith, financial memory is usually about 20 years, then
lessons need to be re-leaned the hard way, either with financial euphoria or I would say with
tax polices that promote economic growth.
J John Augsbury SUBSCRIBER 4 hours ago It is regrettable that Biden has done less than
nothing to bring the country together. Biden has allowed Nancy Pelosi and Chuck Schumer to set
their own agendas and leadership seems to come from back rooms. Main Stream Media provide
nothing but a cheer leading section or cover for the illegal immigration crisis. Like
thumb_up Reply reply Share link Report flag
S Sharif Ahmed SUBSCRIBER 4 hours ago "he doesn't have a mandate .... no, he doesn't have a
mandate... no mandate....no..," the conservative muttered as he stared blankly at the asylum
walls.
Another 'no mandate' article from the people who continue to disregard a 7 million vote
thrashing. We'll be forced to read these for years to come I guess.
Like thumb_up 3 Reply reply Share link Report
flag Andrew Colin SUBSCRIBER 4 hours ago When they decided to count those *7
million at 4am is when things get sticky Sharif.
Sadly these fringe ideas this joke of a president is pushing will never be mainstream, no
matter how many times the media tells us that they are.
D Daniel Altorfer SUBSCRIBER 3 hours ago Biden has been a life long salaried public tax
absorber for 50 years with nothing to show for it. Maybe your vote is the real comedy here.
Like thumb_up 12 Reply reply Share link Report
flag John Briscoe SUBSCRIBER 4 hours ago This whole piece is an admission
that Republicans have lost any credibility with US Citizens aged less than 60 years. Like
thumb_up 7 Reply reply Share link Report
flag
D Daniel Whitworth SUBSCRIBER 4 hours ago I am under 60 years old and am now a Republican;
formerly a Democrat. I challenge your assessment.
Like thumb_up 19 Reply reply Share link Report
flag Andrew Colin SUBSCRIBER 4 hours ago Former Dem, under 40, now a Repub,
will never vote Dem again after the handling of COVID-19 and the woke mob.
In fairness I don't typically side with Facebook and corporate America on fringe ideas, but
rather actual progressive ideas.
You couldnt be more wrong in your assessment. The Dem party is a collection of underemployed
social media addicts that are typically obese and unhappy... if we want to be accurate. Like
thumb_up Reply reply Share link Report flag
C C F ETTER SUBSCRIBER 4 hours ago
The Bolsheviks, a tiny but ferociously focused minority, proceeded in this way in 1917.
Those who don't know their history are doomed to repeat it. Like thumb_up
14 Reply reply Share link Report flag
J JOHN OWEN SUBSCRIBER 4 hours ago The Bolsheviks led to the rise of Stalin. Like
thumb_up 13 Reply reply Share link Report
flag
M Mary Rhee SUBSCRIBER 5 hours ago I just finished reading "I chose Freedom," by Victor
Kravchenko, published in 1946. He writes about his eventual repudiation of the Communist system
and his escape to the west. Like so many young idealists, he was an ardent believer in the
teachings of Lenin, Marx, and Stalin--until he saw the evils of collectivization and the
subsequent starvation of the peasants, the lying of the press, and the State's justification of
brutality and often murder for "the higher good." In our country today, some of these same
tactics are being implemented. True, they are being implemented on a lesser scale than Victor
Kravchenko experienced, but the seeds of totalitarianism are being groomed, fostered, and even
praised by today's extreme Left. We need to stop this brainwashing. Granted, the extreme Right
has its flaws, too, but they don't control the press, universities, or Silicon Valley. Both
parties need to dump their extremists so that we can get our country back. Like thumb_up
3 Reply reply Share link Report flag
C C F ETTER SUBSCRIBER 4 hours ago It wasn't stolen. It was manipulated. Manipulated by the
press, by social media, the FDA, the FBI and our intelligence 'professionals' of the past and
present and Covid was the blessing bequeathed upon the Democratic Party by the Chinese
communists.
S Susan Lynch-Smith SUBSCRIBER 4 hours ago Also, news media with their selective coverings,
especially with Hunter Biden and Biden himself, of whom is an idiot. But wait, we the people
are the idiots as it is a runaway train now with you do not speak out unless it is for the
administration and the left-wing ideologies.
Over the months there have been letters to the editor regarding academia,
"Academic Freedom Long Ago Withered Away" (Letters, March 5) being a case in point. I find
it interesting that for the most part they are written by professors emeriti or retired
academics, not active ones with a job to lose. This is very telling in and of itself.
David Zeiler's
post
("How
We Know Stock Market Crash Is Coming") was one of several crash predictions in the first quarter of 2021. And yet, the first day of
the second quarter ended with the S&P 500 breaking through 4,000 to close at an all-time high of 4,019.87. Rounding up, that's four
thousand twenty reasons to ignore
permabears
.
It's one thing to hedge against downside risk - we've been big advocates of that (more on that below) - but betting on a collapse
because you're negative about politics or the government is a recipe for losing money.
There were certainly reasons to be cautious at the end of last year - there always are. But if you bet against the market and the
dollar and bet on gold then, you've taken L's on all three since.
The Markets Versus The Real World
Markets impact the real world and vice-versa. George Soros spends lots of words explaining this under his theory of "
reflexivity
",
but it's easier to explain with a couple of examples. The real world impacting the market is an easy one: Russia invaded Finland in
1939, and Finish bonds tanked. But markets impact the real world too. A recent example was the WallStreetBets crowd bidding up the
price of AMC shares. That enabled AMC to float a secondary offering, raising money to keep the theater chain in business. Thanks to
a bunch of Robinhood traders, movie theaters stayed open in the real world.
Although markets and the real world impact each other to some extent, markets are not the real world. A lot of negative things that
happen in the real world have no impact on the market, and vice-versa. For example, we've written recently about the
anarcho-tyranny
in
America's cities, and how depraved teens
murdered
an
immigrant working a sub-minimum wage in our capital. Terrible stuff, but it has no impact on the stock market, and another new high
in the S&P 500 won't impact it either.
Japan As Another Example
Japan offers another example of the distinction between markets and the real world. In February, the Nikkei 225, Japan's main stock
index, crossed above the 30,000 level for
the
first time
since 1990. For thirty years, Japanese stocks went nowhere, but that doesn't mean Japan went nowhere. They kept
improving their enviable country. Compare, for instance, their bullet train network in 1990...
To their network in 2020.
Lost in translation
10 hours ago
Stop
investing; instead, cash out, go Galt.
Stop
supporting a system that hates you and wants you dead.
Orlov
warned us ...
philipat
5 hours ago
I
really like Orlov, he makes some very smart observations. One of his most brilliant I thought was to point
out that "
A large part of the US economy depends on selling over-priced services to ourselves, which
ultimately doesn't amount to much
". How very true..
philipat
13 hours ago
2020 GAAP Earnings have a forward P/E of 40X. That's unprecedented and absurd, especially since there is no
recovery and the economy will collapse after the "stimulus" ends.
Agreed
about Silver, especially now FINALLY more people have understoof what a scam the paper PM derivatives
"markets" are and are buying physical. It's collapsing at the edges, with the Perth Mint leading the way in
exposed fraud!!
Automatic Choke
PREMIUM
8 hours ago
(Edited)
ok.
an interesting read, though, is "This Time Its Different". a very thorough evaluation of all financial
crises since the stone age. they ask the question, "is it possible to borrow your way out of a debt
crisis?" spoiler: "no".
your
argument says that the fed must keep spiking the punchbowl harder and harder to keep the party going. i
don't disagree. i only claim that there is a limit, and all of history agrees.
(edit)
by the way...how old are you? i was around when people were buying home mortgages at 18%, and it wasn't
pretty.
philipat
5 hours ago
(Edited)
I
think the Fed has nothing left. All it can do is jawbone and QE (Or QE in the slightly different form of YCC).
And it will until it collpases or there is the reset - whichever comes first. The economy started turnong
down in 4Q2018 and became noticeable in Sept 2019 with the Repo events. Well before Covid, which is just the
excuse and cover for many things. So if Covid goes away, as soon as the "stimulus" ends, the economy will
turn down again.
I'm
old enough to remember that too. But luckily never had a mortgage. Moved around the world with MNCs and had
accommodation paid for until I designed and built my own place in the tropics and by then was able
to pay cash.
Abuse of "Family office" was the only invention of Bill Hwang. and he was not the first to
exploit this loophole to accumulate unsustainable level of leverage.
One of them walks for hours through New York's Central Park listening to recordings of the
Bible and embraces a new, 21st-century vision of an age-old ideal: that of a modern Christian
capitalist, a financial speculator for Christ, who seeks to make money in God's name and then
use it to further the faith. A generous benefactor to a range of unglamorous, mostly
conservative Christian causes, this Hwang eschews the trappings of extravagant wealth, rides
the bus, flies commercial and lives in what is, by billionaire standards, humble surroundings
in suburban New Jersey.
That same Bill Hwang, it turns out, is also a backer of one of Wall Street's hottest hands
of late, Cathie Wood of Ark Investments. Like Hwang, Wood is known to hold Bible study meetings
and figures into what some refer to as the "faith in finance" movement.
And here, at last, is where the Bill Hwangs collide. The fortune he amassed under the noses
of major banks and financial regulators was far bigger and riskier than almost anyone might
have thought possible -- and these riches were pulled together with head-snapping speed. In
fact, it was perhaps one of the greatest accumulations of private wealth in the history of
modern finance.
And Hwang lost it all even faster.
... ... ...
But before the next success, Tiger Asia ran into more trouble -- this time, trouble big
enough to bring Hwang's days as a hedge fund manager to an end.
When Tiger Asia pleaded guilty to wire fraud in 2012, the SEC said the firm used inside
information to trade in shares of two Chinese banks. Hwang and his firm ended up paying $60
million to settle the criminal and civil charges. The SEC banned him from managing outside
money and Hong Kong authorities prohibited him from trading there for four years (the ban ended
in 2018).
Shut out of hedge funds, Hwang opened Archegos, a family office. The firm, which recently
employed some 50 people, initially occupied space in the Renzo Piano-designed headquarters of
the New York Times. Today it's based further uptown, by Columbus Circle, sharing its address
with the Grace & Mercy Foundation.
"My journey really began when I was having a lot of problems in our business about five or
six years ago," Hwang said in a 2017 video. "And I knew one thing, that this was a situation
where money and connections couldn't really help. But somehow I was reminded I had to go to the
words of the God."
That belief helped Hwang rebuild his financial empire at dizzying speed as banks loaned him
billions of dollars to ratchet up his bets that unraveled spectacularly as the financial firms
panicked. What ensued was one of the greatest margin calls of all time, pushing his giant
portfolio into liquidation. Some of the banks may end up with combined losses of as much as $10
billion, according to analysts at JPMorgan Chase & Co.
... ... ...
Doug Birdsall, honorary co-chairman of the Lausanne Movement, a global group that seeks to
mobilize evangelical leaders, said Hwang always likes to think big. When he met with him to
discuss a new 30-story building in New York for the American Bible Society, Hwang said, "Why
build 30 stories? Build it 66 stories high. There are 66 books in the bible."
Before so much went so wrong so fast, Archegos appeared to be ramping up. A year ago, Hwang
petitioned the SEC to let him work or run a broker-dealer; the SEC agreed.
It's impossible to say where Bill Hwang, the hard-charging financial speculator, ends, and
Bill Hwang, the Christian evangelist and philanthropist, begins. People who know him say the
one is inseparable from the other. Despite brushes with regulators, staggering trading losses
and the question swirling around his market dealings, they say Hwang often speaks of bridging
God and mammon, of bringing Christian teaching to the money-centric world of Wall Street.
By 2024 world output will still be 3% lower than was projected before the pandemic, with
countries reliant on tourism and services suffering the most, according to the IMF.
... "The Biden stimulus is a two edged sword," said former IMF chief economist Maury
Obstfeld, who is a now senior fellow at the Peterson Institute for International Economics in
Washington. Rising U.S. long-term interest rates "tighten global financial conditions.
Whether "working from home" is a temporary fad or a permanent "new normal" remains to be seen; what becomes more evident is
the mounting supply glut of corporate space in Manhattan, according to
Bloomberg
,
citing a new report from real estate firm Savills.
Savills said the amount of office space available in Manhattan is at a three-decade high. The report, released on Thursday,
said the availability rate soared to 17.2% in the first quarter. The rise in the rate was primarily due to a massive surge
in sublease space, which now stands at 22 million square feet, or 62% higher than 2019 levels.
"Abundant short- and long-term options are driving price reductions," Savills noted. "Many owners are proposing
historically aggressive rates, concessions, and flexibility to secure tenants amid so much competition."
Savills said rents fell for the fifth consecutive quarter to around $76.27 a square foot, down 9% from a year earlier.
These cheaper rents are creating a massive opportunity for companies who want to enter the city.
Desperate landlords were offering generous concessions for long-term leases at newly constructed buildings: "Average tenant
improvement allowances jumped 16% and free rent surged 17% to an average of 13.5 months. The tenant-friendly market is
expected to last for at least the next 12 to 18 months," Savills said.
The Manhattan office market continues to struggle more than one year after the pandemic hit, which has emptied Manhattan's
skyscrapers. And since most employees are still working from home, just around 24.21% of workers in the New York
metropolitan area were back at their desks as of this week.
Even with the vaccine rollout now reaching 100 million Americans, companies are still opting for "hybrid" work as remote
working
dominates
.
In a past report, Jim Wenk, a vice chairman at Savills North America, said commercial real estate in the borough will have
a "very choppy period for the foreseeable future."
A
recent
survey
from the Partnership for New York City found 66% of Manhattan's most prominent employers would allow employees
to work under hybrid work arrangements, meaning they would Manhattan's most prominent employers.
As more proof the work environment is rapidly changing, major magazine publisher Conde Nast (who owns brands such as ARS
Technica, GQ, Teen Vogue, The New Yorker, Vanity Fair, Vogue, Wired, among other popular magazines) is a major anchor
tenant in the new World Trade Center, recently
skipped
out
on rent as it asked for rent discounts and a reduction in square footage.
Last month, JP Morgan was
reportedly
looking
to sublet hundreds of thousands of square feet at 4 New York Plaza in the financial district and 5 Manhattan West in the
Hudson Yards area.
To make matters worse, Hudson Yards, a massive complex on Manhattan's Far West Side with condos, office space, and
retailers built over an enormous railroad yard had investors panic because the company
refuse
d to
open its books. The combination of work-at-home and folks moving to suburbs has left Hudson Yards and other places across
the borough a 'ghost town.'
This all suggests that the virus pandemic has brought years of technological change to the work model that has possibly
made companies more productive and cut costs as employees work from home or adopt a hybrid work model. Without office
workers returning to the borough, there can't be a robust recovery in the near term.
...Economists do expect inflation to rise to above 2% as more states reopen and then stay
there. And the St. Louis Fed is forecasting a 2.35% rate for the next 10 years.
...China's economy has dynamics that could raise the U.S. inflation rate over time. Key to
the argument are China's aging population and the value of the country's currency, the Yuan.
First, age. Today, the average age in China is 38, the same as in the U.S. By 2040, though, the
number skyrockets to 47 in China and dips to 37 here.
The shift means fewer Chinese workers and upward pressure on pay. Higher wages probably
would cause Chinese manufacturers to raise prices of exports, which could be passed onto
American consumers.
Now, the Yuan. The currency bottomed at 7.12 per dollar in late 2019 after a more than
five-year down-trend. China wants a weaker currency so its exports are more competitive --
cheaper -- for global buyers. Since the end of 2019, the Yuan has risen to 6.50 per dollar. If
the trend continues, U.S. importers might raise prices because the cost of their imports are
higher.
"Over the next decade, Asia's growth will slow dramatically, its wages will rise, its
factories will close, its surpluses will melt and its currencies will rise sharply," wrote
Vincent Deluard, global macro strategist at StoneX in a note. "For the rest of the world, this
will be a massive and unexpected inflationary shock."
Bill Gross expect that it will end the year at 2.5% Gross said he bet against the 10-year Treasury through
the futures market and remains short, anticipating a combination of rising commodity prices, a weaker dollar and stimulus-driven demand
will spark inflation. "Inflation, currently below 2%, is not going to be below 2% in the next few months," Gross said. "I see a 3% to
4% number ahead of us."
Bloomberg
"It is a dimension as vast as space and as timeless as infinity. It is the middle ground
between light and shadow, between science (reality) and superstition (bubbles), and it lies between the pit of man's fears
and the summit of his knowledge (fundamentals). This is the dimension of (economic) imagination. It is an area which we
call The Twilight Zone."
-
Rod Serling, introduction to the TV series, 1959 [our comments in ( )]
Our economy has entered the twilight zone. Today, economic leaders base policies on a hoped-for
utopia
with
bubbles called 'growing markets' and greed termed 'good valuations'. The
twilight zone
economy
is a place where fundamentals have disappeared. It is a utopian world of no moral hazard for business, financial
or economic mistakes. In the last year, the Federal Reserve has injected over $4.1T into the banking, hedge fund, Wall Street
complex of the financial elite. Vast injections of dollars have sent stock valuations to record highs. Yet, the
pandemic-driven economy is real for 19M Americans out of work, others who lost 540,000 loved ones, and millions carrying
housing debt due to missed rent and house payments.
Policymakers Disconnected From the Real Economy
Yet, policymakers continue to become further disconnected from the real economy where people work and spend. These leaders
imagine an economy of full employment forever, risk assets continually rising in price (not value) with virtually no market
corrections. It is an economic wonderland for corporations to use low-cost debt to finance infinite profits and stock
buybacks. Wall Street is only too pleased to hype this corporate financial engineering. Goldman Sachs forecasts a GDP surge
to 8% in the 4th quarter of this year due to the $1.9T American Rescue Bill. Bond king Bill Gross predicts interest rates
surge to 3 – 4 % by year end.
Does all this monetary and fiscal stimulus result in a
healthy solid economy or the most catastrophic inflationary bubble in modern times
? Our post identifies the dimensions of
the Twilight Zone Economy.
Astronomical Public Debt Drags Growth
The country is drowning in low-interest debt. But, this liquidity 'soma' drug is putting investors to sleep, thinking
everything will be ok. Now, public debt is at levels not seen since WWII and projected to go to 200% of GDP by 2051.
Source: CBO, The Daily Shot – 3/15/21
During WWII, debt supported production capacity for building weapons, planes, and infrastructure to support the war effort.
When the war was over, the US was the only major economy intact, leading to a high growth productive economy. The investment
in productive industries increased the standard of living for most Americans.
Sources: Blackrock, IMF, OECD, The Daily Shot – 3/15/21
Are the present monetary debt and fiscal stimulus programs of relief payments resulting in productive investment? This chart,
by Lance Roberts, shows how increasing public debt has resulted in a continuing decline in real economic growth.
Source: RIA, Lance Roberts, 3/17/21
Public debt not used for solid investments in infrastructure, basic research for innovation, or productivity has resulted in
an ever-growing debt level to achieve a continuing decline in economic growth. This cycle of low-cost ballooning debt to
finance debt service and transfer payments will likely result in economic stagnation or worse.
Negative Yielding Debt Triggers Speculation
Sovereign negative-yielding debt reached a record high of $17.8T last month. Thus, a massive level of worldwide debt is not
repaying the entire principal to debt holders. Correlated to soaring negative-yielding debt is the meteoric rise of trader
speculation in Bitcoin and other cryptocurrencies.
Sources: Daily Feather, Bloomberg – 3/22/21
Such parabolic moves in debt and speculative digital currencies like Bitcoin are candidates for a significant reversion in
value at some date in the near future.
Equity Markets Are In An Alternate Reality
Why is a firm like Tesla valued at the same level as the next six largest car companies or the oil industry's total market
capitalization? Isn't Tesla's valuation in the economic twilight zone? Analysts value Tesla at $1M per vehicle produced versus
GM at $5000 per vehicle. While VW is building six battery factories in the EU, and vows by 2025 to produce over 1.2M EVs in
2022, matching Tesla's total output. VW has now taken over the dominant market share in Europe and is opening EV plants in
Asia and North America.
There are 15 major car manufacturers, including GM, Ford, Toyota, Honda, Nissan, BMW, Mercedes, investing billions into EV
production plants and battery facilities. Tesla may have a first-mover advantage in the EV market, but it may wind up like
Yahoo, losing out to Google in the internet search sector. The following chart shows S&P valuations at Dotcom Crash levels in
2000.
The following chart shows the record valuation of stocks as a percentage of GDP back to 1952!
Sources: Charles Schwab, Bloomberg – 12/31/20
Traders are using ever-increasing levels of margin to buy stocks. Corporate executives with record levels of cash are
resuming stock buybacks as the Dow and S&P continue to set new record highs. Yet, corporate sales and economic fundamentals
don't support this extreme valuation case.
This chart from Real Investment Advisors notes the divergence of stock valuations growing to 164% versus corporate sales
growth of 42% and GDP growth at 22% since 2007.
Source: Real Investment Advisors – 3/20/21
Investors, executives, and the Federal Reserve are addicted to low-interest rates. And just like physical addiction, the time
will come when the zero-interest economic drug won't work anymore, and withdrawal sets in spiraling into a market crash.
Bubbles Bubbles Everywhere
Another sign of an alternative reality is bubbles in non-financial markets. For example, Christie's just sold a digital work
of art by an artist known as Beepie for $69.3M with a non-fungible (exchangeable) token (NFT) when the bidding started at just
$100. NFT collectible prices have sky rocked, providing the buyer with ownership rights indicating their purchase is
authentic. Beepi knows he's riding a soaring market, observing, 'Absolutely it's a bubble, to be honest."
An NFT buyer purchased 351 Top NBA Shot videos for $5,000 last January in the video clip market. Based on social media
chatter, Momentranks.com values the videos at $67,000 today. Sneaker reselling has soared as the collectible marketplace,
StockX, announced that Nike Dunks sold for $33,400 two months ago. StockX disclosed that a Tom Brady rookie trading card sold
for a record $1.3M in January. Even innocuous things like Twitter CEO Jack Dorsey's first tweet sold for $2.9M. Venture
capitalists Marc Andreessen and Ben Horowitz note what motivates mania buyers at a collectible forum:
Andreessen:
"A big part of the entire
point of life is aesthetics. The way that we live and the design of things around us and artistic creativity."
Horowitz:
"It's a feeling. You're buying
a feeling. And what's that worth?"
Writer Ben Carlson notes in his analysis of bubble markets that:
"We're
emotional. We lead with our feelings. We're superstitious."
Superstition is a characteristic of the Twilight Zone Economy.
Core City Life Is Changed Forever
Many think life will go back to the way things were in February 2020. We disagree. Life has changed forever in America. The
lack of commuters changes core city life where they are the heartbeat of neighborhoods surrounded by office towers. Millions
of small businesses and restaurants dependent on commuter patronage are scrambling to survive. When they had the opportunity,
millions of workers worked from home and found they could perform successfully remotely. Hundreds of thousands of workers
left cities to move to another less costly city or region. Some analysts think 99% of commuters will come back to city
offices.
Yet, surveys show that from 20 – 25 % of professionals in dense city centers like New York and San Francisco want to work from
home at least 3 – 4 days a week or work from home full time. Based on remote worker management experience companies are
restructuring their reporting hierarchy. Global corporations to startups are moving to a distributed worker organization,
further flattening the reporting structure for improved performance and business agility.
The lack of office workers leaves 20% of offices in core cities vacant, putting banks and commercial office space landlords at
risk for billions of dollars in lease income. Plus, small businesses in these core cities have lost 50- 60% of their sales.
Business owners hold billions of dollars in lease debt which must be paid off even after 80% of commuters return. Innovative
new small businesses and restaurants will emerge to support these commuters. Plus, new attractions and business models will
bring back visitors crucial for the leisure and hospitality sectors.
Millions of Workers Are Long Term Unemployed
About 19M workers collect continuing unemployment, of which 39.5% have been unemployed over 27 weeks. These permanently
unemployed workers will have a difficult time finding their next job. While Indeed reports that job openings are up 3.7 %
from January 2020, millions of workers are still unemployed. Many of these workers do not have the job skills to be hired for
many new manufacturing and services jobs. Bank of America completed an analysis of unemployment pre – COVID to the trajectory
of employment post COVID showing a lingering decline in the labor force.
Sources: Bank of America, CBO, Zerohedge, Real Investment Advisors – 2/12/21
The BofA analysis shows a permanent loss of employment in labor force size in Phase 3 of the recovery. The reality of the
economy that workers and consumers will likely live in is an economy of debt dragging economic growth with poor job prospects.
Job prospects for millions of workers will be limited by their lack of marketable skills. A major workforce segment faces a
long financial recovery time from either the loss of their business or job. Lack of consumer spending by the permanently
unemployed will slow the recovery.
Corporate Executives Join In the Party
In the 1950s, CEO pay to average worker pay was 50 times. Today, CEO pay is 350 times average worker pay, with Wall Street
applauding stock buybacks totaling 1.4T in 2019. While buybacks fell to $450B in 2020, Bloomberg forecasts stock buybacks to
resume $150B per quarter in 2021. Stock buybacks create overvalued markets. Ned Davis Research estimates the SPX as overvalued
by at least 20% due to stock buybacks distorting prices in 2019. A company gooses prices by using cash to purchase shares in
the open market, thereby reducing the stock pool for public investors. If demand stays the same, prices go up.
Yet, the company has not increased in substantive value. Many executives used low-cost debt to make stock purchases that
saddle the company with major debt obligations. Executives must refinance these debt obligation or pay them off in the near
future. In January 2020, corporate debt hit a 30-year record 49% of GDP, while interest rates were low. Fitch forecasts a
jump in corporate loan defaults in 2021 to 8 – 9% from a 2020 default range of 5 – 6%.
Sources: Fitch Ratings, Vuk Vukovic – 9/22/20
A significant default storm looms in the coming years as interest rates rise.
Another cash flow squeeze is developing in profit margins. Prices paid for goods and services are increasing at a rate far
faster than corporations can raise end customer prices in the following chart.
Sources: Mizuho Securities, The Federal Reserve Bank of Philadelphia, The Daily Shot –
3/19/21
Note the gap between prices paid and prices received in 2009 just before the 2009 fall. A similar cash flow squeeze seems to
be strengthening.
Policy Makers Are Missing Solid Economic Landmarks
To pilot a ship along a coast and into a safe harbor, a captain needs recognizable landmarks and beacons.
Our
policy – captains are in a twilight zone fog.
Many key economic indicators do not actually measure what policymakers tell
us they do. Stock earnings per share reports are financially manipulated by stock buybacks misleading investors as to the
actual earnings per share compared to pre-buybacks. The Fed holds interest rates artificially low with the resulting
liquidity injections distorting debt markets. Unemployment rates are not accurate when the Bureau of Labor Statistics shows a
rate of 6.7%. But, according to state unemployment reports, 19M workers are on continuing unemployment. Thus, the unemployment
rate is more like 12.6%.
The Fed's inflation consumer price index figures exclude 'volatile energy and food prices, which are expenses consumers
experience every day. Since the federal government in 1999 changed to a 'consumer lifestyle buying pattern' approach rather
than a standard price comparison, inflation has consistently been under-reported. In 1998 the Bureau of Labor Statistics
shifted to an 'owner equivalent rental cost' for homeownership. Using the Case-Shiller Home Price Index since 2019 shows the
BLS OER-based approach understates CPI dramatically at 1.0% vs. the Case-Shiller model at 2.5%.
Industry Research On The Real Economy Is More Accurate
Chapwood Investments publishes a biannual index including 50 cities comparing consumer goods and services prices on 500
consumer items. Their analysis showed the top ten cities in the US with an average inflation rate of 10% in the second half of
2020. A marketing industry research firm compared price changes for 220 often purchased consumer products at Target and
Walmart comparing 2018 to 2019 prices on average, the increase was 5 – 6% for both stores. Corporate marketing executives
must have accurate information to make reasonable sales forecasts and plans for investment. Our policy leaders can learn from
their example.
The Way Out of the Twilight Zone
To leave the Twilight Zone grip requires policymakers to recognize financial and real
economy fundamentals. They need to drop the no economic pain utopia model.
Policymakers need to get real with their
statistics and tracking systems to base their policy initiatives on the real economy. Analysts need to use fundamentals for
stock market and financial valuations. The Fed should stop rescuing failing hedge funds, zombie companies and end the
addiction to low-cost debt. Washington can start paying for new spending programs with increased focused taxes, ending
government waste and lower spending. The focus needs to be on a monetary and fiscal set of policies sustaining
entrepreneurship, hard work, and allowing the economic consequences of business failure to run their course.
To avoid the inevitable market crash, these programs need to be phased in over several
years to allow for investors, executives, and consumers to make adjustments to their portfolios.
It
is as if economic leaders have sent investors up an infinite 'wall of price' like a free solo climber, with no safety rope
leaving them to the inevitable fate of fundamental economic gravity
.
takeaction
3 hours ago
(Edited)
I stopped right
here...
" who lost 540,000 loved ones "
People die
every day...and it is NOT from the scamdemic...
In regards to
this economy...with Biden being propped up, the printing will not stop...
So watch asset
prices continue to explode. Don't short anything right now.
There will be a
time to short...but IMO not now..you will get crushed.
mrktwtch2
PREMIUM
3 hours ago
remove
link
I live
in a small suburb north of Chicago in the county of mchery il we r 12 miles south of the Wisconsin
border..my wife paid 139k for her town home in 2002 it went down to 78k during the crash but now its worth
195..since the joggers burned the cities down everyone is trying to move out of the city..strange times
indeed
USAllDay
3 hours ago
The
stupidity is just getting started. Yield curve control, price fixing, never ending eviction and foreclosure
moratorium extensions, constant stimulus for fat alcoholic/meth addicted "single mothers". The collapse will
be beautiful. Nothing this dirty should exist.
SMC
27 minutes ago
The
thing we can do is enjoy every day to the fullest and not help them peddle their idiocy and fear.
If we
are right, they are destroying themselves.
Mathematics, Physics and Chemistry may be "*-ist" but they combined with staying in shape, focus and
dedication are key to our survival.
There's a saying that bull markets climb a wall of worry.
Investors are always looking for something to go wrong when things are going right. With
stocks at or near all-time highs, investors have begun to fret over higher interest rates and
their potentially negative impact on economic growth, coming inflation and what higher rates
portend for stock-market valuations.
Higher rates, however, probably won't kill the bull market. Corporate management teams might
do that all on their own. New stock sales by companies already flush with cash is sending a
coded message to investors that things might be as good as they get.
Interest rates are always a concern for the market and the overall economy. Higher interest
rates make everything more expensive including home mortgages and car payments. It also makes
it harder to start and grow businesses.
For the market, higher interest rates tend to depress price-to-earnings multiples. The
reason is, essentially, math. If investors can make more interest on their bonds, they demand
more return from stocks. Higher returns tomorrow means paying less for stocks today.
Here's the thing. Inflation isn't running wild. The yield on the 10-year Treasury bond is
about 1.7%, up from recent lows, but lower than where yields finished 2019. That isn't a high
enough rate to choke off economic growth. At 3% and higher, the oxygen intake could start to
get cut off.
Inflation expectations aren't out of line with history either. Inflation expectations can be
measured by the difference in traditional government bonds yields and the yield on government
inflation protected securities. Essentially, the face value of an inflation protected bond goes
up by the consumer price index. The difference in yield between the traditional bond and the
inflation protected bond is the level of inflation required to make an investor the same return
on both.
Today, the 10-year yield is at roughly 1.7%. The 10-year inflation protected yield is
negative 0.7%. So inflation has to average about 2.4% for both bond holders to get the same
return.
Investors should watch out for inflation, but they should be more concerned with recent
stock sales by companies flush with cash.
While a robust domestic recovery is great news for corporate profits, it might not be for
stock prices if bond yields keep climbing -- especially technology stocks, which have proven to
be especially sensitive to yields recently. Back in December when vaccine and stimulus plans
were known, economists thought that the 10 year note's yield would be 1.08% in June. It
jumped to 1.72% on Friday in response to the jobs report. Some forecasters see it topping
2% this year for the first time since the summer of 2019.
If we are to believe authorities the USA. added 916K jobs in March, and the official
unemployment rate is at 6% (note the word official; the current official U6 unemployment rate as
of March 2021 is 10.70%; so the real number is probably much higher than 10%)
Fudging data became as prominent as it was in the USSR. The neoliberal empire can't afford objective stats.
Notable quotes:
"... monthly data is collected over a brief timeframe - just a few days - and that the calculations are seasonally adjusted. ..."
"... Yes, at least half the sheep population think they are real. It's insane how dumb people are today. ..."
I spent the last 2 weeks digging into the numbers - especially timing of the surveys and
data collection. I get the fact that weekly claims don't reflect new hires. I also realize
that monthly data is collected over a brief timeframe - just a few days - and that the
calculations are seasonally adjusted.
But let's be reasonable - how is it possible to have 700K - 800K initial jobless claims
every week and create nearly a million new jobs? Does anyone really believe any of these numbers?
Globalistsaretrash
Yes, at least half the sheep population think they are real. It's insane how dumb people
are today.
Not only was the March payrolls report a blockbuster, golidlocks number, much higher than expected but not
too
high
to spark immediate reflation/hike fears thanks to subdued wage inflation, job growth in March was also widespread unlike
February, where 75% of all new jobs
were
waiters and bartenders
. By contrast, in March the largest gains occurring across most industries with the bulk taking
place in leisure and hospitality, public and private education, and construction.
Here is a full breakdown:
Employment in leisure and hospitality increased by 280,000 in March,
as
pandemic-related restrictions eased in many parts of the country. Nearly two-thirds of the increase was in food services
and drinking places (+176,000). Job gains also occurred in arts, entertainment, and recreation (+64,000) and in
accommodation (+40,000). Employment in leisure and hospitality is down by 3.1 million, or 18.5 percent, since February
2020.
In March, employment increased in both public and private education,
reflecting
the continued resumption of in-person learning and other school-related activities in many parts of the country. Employment
rose by 76,000 in local government education, by 50,000 in state government education, and by 64,000 in private education.
Employment is down from February 2020 in local government education (-594,000), state government education (-270,000), and
private education (-310,000).
Construction added 110,000 jobs in March,
following job losses in the
previous month (-56,000) that were likely weather-related. Employment growth in the industry was widespread in March, with
gains of 65,000 in specialty trade contractors, 27,000 in heavy and civil engineering construction, and 18,000 in
construction of buildings. Employment in construction is 182,000 below its February 2020 level.
Employment in professional and business services rose by 66,000 over the month.
In
March, employment in administrative and support services continued to trend up (+37,000), although employment in its
temporary help services component was essentially unchanged. Employment also continued on an upward trend in management and
technical consulting services (+8,000) and in computer systems design and related services (+6,000).
Manufacturing employment rose by 53,000 in March,
with job gains occurring
in both durable goods (+30,000) and nondurable goods (+23,000). Employment in manufacturing is down by 515,000 since
February 2020.
Transportation and warehousing added 48,000 jobs in March.
Employment
increased in couriers and messengers (+17,000), transit and ground passenger transportation (+13,000), support activities
for transportation (+6,000), and air transportation (+6,000). Since February 2020, employment in couriers and messengers is
up by 206,000 (or 23.3 percent), while employment is down by 112,000 (or 22.8 percent) in transit and ground passenger
transportation and by 104,000 (or 20.1 percent) in air transportation.
Employment in the other services industry increased by 42,000 over the month,
reflecting
job gains in personal and laundry services (+19,000) and in repair and maintenance (+18,000). Employment in other services
is down by 396,000 since February 2020.
Social assistance added 25,000 jobs in March,
mostly in individual and
family services (+20,000). Employment in social assistance is 306,000 lower than in February 2020.
Employment in wholesale trade increased by 24,000 in March,
with job gains
in both durable goods (+14,000) and nondurable goods (+10,000). Employment in wholesale trade is 234,000 lower than in
February 2020.
Retail trade added 23,000 jobs in March.
Job growth in clothing and
clothing accessories stores (+16,000), motor vehicle and parts dealers (+13,000), and furniture and home furnishing stores
(+6,000) was partially offset by losses in building material and garden supply stores (-9,000) and general merchandise
stores (-7,000). Employment in retail trade is 381,000 below its February 2020 level.
Employment in mining rose by 21,000 in March,
in support activities for
mining (+19,000). Mining employment is down by 130,000 since a peak in January 2019.
Financial activities added 16,000 jobs in March.
Job gains in insurance
carriers and related activities (+11,000) and real estate (+10,000) more than offset losses in credit intermediation and
related activities (-7,000). Financial activities has 87,000 fewer jobs than in February 2020.
It's hardly a surprise that with the US reopening, the one industry seeing the biggest hiring remains leisure and hospitality
where jobs rose by 280,000, as pandemic-related restrictions eased in many parts of the country, with nearly two-thirds of the
increase in "food services and drinking places", i.e., waiters and bartenders, which added +176,000 jobs in March.
And another notable change was in the total number of government workers, which surged by 136K in March, reversing the 90K
drop in February, as a result of 49.6K state education workers and 76K local government education workers added thanks to the
reopening of schools around the country.
Here is a visual breakdown of all the March job changes:
Finally,
courtesy
of Bloomberg
, below are the industries with the highest and lowest rates of employment growth for the most recent month.
7
play_arrow
Jack Offelday
1 hour ago
The "V" recovery. Where Food Service jobs are the new "Golden Age".
Creamaster
47 minutes ago
(Edited)
My wife is a nurse in an outpatient office under a large hospital umbrella here. Normally these outpatient
spots go within days to a week.
Currently they have 2 openings they have been trying to fill for a few months now. Combine that with the
fact my wife got 3 years worth of raises in a single shot, recently and out of the blue for no reason, tells
me the hospitla is really screwed trying to fill nursing spots.
After this pandemic crap, it has likely scared alot of people away from entering healthcare, and if a nurse
was on the fence about retirement , likely decided to call it quits after all this BS.
newworldorder
45 minutes ago
There are an estimated, 30 million illegals currently in the USA waiting legalization.
WHEN legalization happens, they will bring into the USA (by historical averages,) another 60 to 90 million
of their family members in 10 years.
And all of them US Minority workers, by current US Diversity Laws, - same as all Black Americans.
"It is a dimension as vast as space and as timeless as infinity. It is the middle ground
between light and shadow, between science (reality) and superstition (bubbles), and it lies between the pit of man's fears
and the summit of his knowledge (fundamentals). This is the dimension of (economic) imagination. It is an area which we
call The Twilight Zone."
-
Rod Serling, introduction to the TV series, 1959 [our comments in ( )]
Our economy has entered the twilight zone. Today, economic leaders base policies on a hoped-for
utopia
with
bubbles called 'growing markets' and greed termed 'good valuations'. The
twilight zone
economy
is a place where fundamentals have disappeared. It is a utopian world of no moral hazard for business, financial
or economic mistakes. In the last year, the Federal Reserve has injected over $4.1T into the banking, hedge fund, Wall Street
complex of the financial elite. Vast injections of dollars have sent stock valuations to record highs. Yet, the
pandemic-driven economy is real for 19M Americans out of work, others who lost 540,000 loved ones, and millions carrying
housing debt due to missed rent and house payments.
Policymakers Disconnected From the Real Economy
Yet, policymakers continue to become further disconnected from the real economy where people work and spend. These leaders
imagine an economy of full employment forever, risk assets continually rising in price (not value) with virtually no market
corrections. It is an economic wonderland for corporations to use low-cost debt to finance infinite profits and stock
buybacks. Wall Street is only too pleased to hype this corporate financial engineering. Goldman Sachs forecasts a GDP surge
to 8% in the 4th quarter of this year due to the $1.9T American Rescue Bill. Bond king Bill Gross predicts interest rates
surge to 3 – 4 % by year end.
Does all this monetary and fiscal stimulus result in a
healthy solid economy or the most catastrophic inflationary bubble in modern times
? Our post identifies the dimensions of
the Twilight Zone Economy.
Astronomical Public Debt Drags Growth
The country is drowning in low-interest debt. But, this liquidity 'soma' drug is putting investors to sleep, thinking
everything will be ok. Now, public debt is at levels not seen since WWII and projected to go to 200% of GDP by 2051.
Source: CBO, The Daily Shot – 3/15/21
During WWII, debt supported production capacity for building weapons, planes, and infrastructure to support the war effort.
When the war was over, the US was the only major economy intact, leading to a high growth productive economy. The investment
in productive industries increased the standard of living for most Americans.
Sources: Blackrock, IMF, OECD, The Daily Shot – 3/15/21
Are the present monetary debt and fiscal stimulus programs of relief payments resulting in productive investment? This chart,
by Lance Roberts, shows how increasing public debt has resulted in a continuing decline in real economic growth.
Source: RIA, Lance Roberts, 3/17/21
Public debt not used for solid investments in infrastructure, basic research for innovation, or productivity has resulted in
an ever-growing debt level to achieve a continuing decline in economic growth. This cycle of low-cost ballooning debt to
finance debt service and transfer payments will likely result in economic stagnation or worse.
Negative Yielding Debt Triggers Speculation
Sovereign negative-yielding debt reached a record high of $17.8T last month. Thus, a massive level of worldwide debt is not
repaying the entire principal to debt holders. Correlated to soaring negative-yielding debt is the meteoric rise of trader
speculation in Bitcoin and other cryptocurrencies.
Sources: Daily Feather, Bloomberg – 3/22/21
Such parabolic moves in debt and speculative digital currencies like Bitcoin are candidates for a significant reversion in
value at some date in the near future.
Equity Markets Are In An Alternate Reality
Why is a firm like Tesla valued at the same level as the next six largest car companies or the oil industry's total market
capitalization? Isn't Tesla's valuation in the economic twilight zone? Analysts value Tesla at $1M per vehicle produced versus
GM at $5000 per vehicle. While VW is building six battery factories in the EU, and vows by 2025 to produce over 1.2M EVs in
2022, matching Tesla's total output. VW has now taken over the dominant market share in Europe and is opening EV plants in
Asia and North America.
There are 15 major car manufacturers, including GM, Ford, Toyota, Honda, Nissan, BMW, Mercedes, investing billions into EV
production plants and battery facilities. Tesla may have a first-mover advantage in the EV market, but it may wind up like
Yahoo, losing out to Google in the internet search sector. The following chart shows S&P valuations at Dotcom Crash levels in
2000.
The following chart shows the record valuation of stocks as a percentage of GDP back to 1952!
Sources: Charles Schwab, Bloomberg – 12/31/20
Traders are using ever-increasing levels of margin to buy stocks. Corporate executives with record levels of cash are
resuming stock buybacks as the Dow and S&P continue to set new record highs. Yet, corporate sales and economic fundamentals
don't support this extreme valuation case.
This chart from Real Investment Advisors notes the divergence of stock valuations growing to 164% versus corporate sales
growth of 42% and GDP growth at 22% since 2007.
Source: Real Investment Advisors – 3/20/21
Investors, executives, and the Federal Reserve are addicted to low-interest rates. And just like physical addiction, the time
will come when the zero-interest economic drug won't work anymore, and withdrawal sets in spiraling into a market crash.
Bubbles Bubbles Everywhere
Another sign of an alternative reality is bubbles in non-financial markets. For example, Christie's just sold a digital work
of art by an artist known as Beepie for $69.3M with a non-fungible (exchangeable) token (NFT) when the bidding started at just
$100. NFT collectible prices have sky rocked, providing the buyer with ownership rights indicating their purchase is
authentic. Beepi knows he's riding a soaring market, observing, 'Absolutely it's a bubble, to be honest."
An NFT buyer purchased 351 Top NBA Shot videos for $5,000 last January in the video clip market. Based on social media
chatter, Momentranks.com values the videos at $67,000 today. Sneaker reselling has soared as the collectible marketplace,
StockX, announced that Nike Dunks sold for $33,400 two months ago. StockX disclosed that a Tom Brady rookie trading card sold
for a record $1.3M in January. Even innocuous things like Twitter CEO Jack Dorsey's first tweet sold for $2.9M. Venture
capitalists Marc Andreessen and Ben Horowitz note what motivates mania buyers at a collectible forum:
Andreessen:
"A big part of the entire
point of life is aesthetics. The way that we live and the design of things around us and artistic creativity."
Horowitz:
"It's a feeling. You're buying
a feeling. And what's that worth?"
Writer Ben Carlson notes in his analysis of bubble markets that:
"We're
emotional. We lead with our feelings. We're superstitious."
Superstition is a characteristic of the Twilight Zone Economy.
Core City Life Is Changed Forever
Many think life will go back to the way things were in February 2020. We disagree. Life has changed forever in America. The
lack of commuters changes core city life where they are the heartbeat of neighborhoods surrounded by office towers. Millions
of small businesses and restaurants dependent on commuter patronage are scrambling to survive. When they had the opportunity,
millions of workers worked from home and found they could perform successfully remotely. Hundreds of thousands of workers
left cities to move to another less costly city or region. Some analysts think 99% of commuters will come back to city
offices.
Yet, surveys show that from 20 – 25 % of professionals in dense city centers like New York and San Francisco want to work from
home at least 3 – 4 days a week or work from home full time. Based on remote worker management experience companies are
restructuring their reporting hierarchy. Global corporations to startups are moving to a distributed worker organization,
further flattening the reporting structure for improved performance and business agility.
The lack of office workers leaves 20% of offices in core cities vacant, putting banks and commercial office space landlords at
risk for billions of dollars in lease income. Plus, small businesses in these core cities have lost 50- 60% of their sales.
Business owners hold billions of dollars in lease debt which must be paid off even after 80% of commuters return. Innovative
new small businesses and restaurants will emerge to support these commuters. Plus, new attractions and business models will
bring back visitors crucial for the leisure and hospitality sectors.
Millions of Workers Are Long Term Unemployed
About 19M workers collect continuing unemployment, of which 39.5% have been unemployed over 27 weeks. These permanently
unemployed workers will have a difficult time finding their next job. While Indeed reports that job openings are up 3.7 %
from January 2020, millions of workers are still unemployed. Many of these workers do not have the job skills to be hired for
many new manufacturing and services jobs. Bank of America completed an analysis of unemployment pre – COVID to the trajectory
of employment post COVID showing a lingering decline in the labor force.
Sources: Bank of America, CBO, Zerohedge, Real Investment Advisors – 2/12/21
The BofA analysis shows a permanent loss of employment in labor force size in Phase 3 of the recovery. The reality of the
economy that workers and consumers will likely live in is an economy of debt dragging economic growth with poor job prospects.
Job prospects for millions of workers will be limited by their lack of marketable skills. A major workforce segment faces a
long financial recovery time from either the loss of their business or job. Lack of consumer spending by the permanently
unemployed will slow the recovery.
Corporate Executives Join In the Party
In the 1950s, CEO pay to average worker pay was 50 times. Today, CEO pay is 350 times average worker pay, with Wall Street
applauding stock buybacks totaling 1.4T in 2019. While buybacks fell to $450B in 2020, Bloomberg forecasts stock buybacks to
resume $150B per quarter in 2021. Stock buybacks create overvalued markets. Ned Davis Research estimates the SPX as overvalued
by at least 20% due to stock buybacks distorting prices in 2019. A company gooses prices by using cash to purchase shares in
the open market, thereby reducing the stock pool for public investors. If demand stays the same, prices go up.
Yet, the company has not increased in substantive value. Many executives used low-cost debt to make stock purchases that
saddle the company with major debt obligations. Executives must refinance these debt obligation or pay them off in the near
future. In January 2020, corporate debt hit a 30-year record 49% of GDP, while interest rates were low. Fitch forecasts a
jump in corporate loan defaults in 2021 to 8 – 9% from a 2020 default range of 5 – 6%.
Sources: Fitch Ratings, Vuk Vukovic – 9/22/20
A significant default storm looms in the coming years as interest rates rise.
Another cash flow squeeze is developing in profit margins. Prices paid for goods and services are increasing at a rate far
faster than corporations can raise end customer prices in the following chart.
Sources: Mizuho Securities, The Federal Reserve Bank of Philadelphia, The Daily Shot –
3/19/21
Note the gap between prices paid and prices received in 2009 just before the 2009 fall. A similar cash flow squeeze seems to
be strengthening.
Policy Makers Are Missing Solid Economic Landmarks
To pilot a ship along a coast and into a safe harbor, a captain needs recognizable landmarks and beacons.
Our
policy – captains are in a twilight zone fog.
Many key economic indicators do not actually measure what policymakers tell
us they do. Stock earnings per share reports are financially manipulated by stock buybacks misleading investors as to the
actual earnings per share compared to pre-buybacks. The Fed holds interest rates artificially low with the resulting
liquidity injections distorting debt markets. Unemployment rates are not accurate when the Bureau of Labor Statistics shows a
rate of 6.7%. But, according to state unemployment reports, 19M workers are on continuing unemployment. Thus, the unemployment
rate is more like 12.6%.
The Fed's inflation consumer price index figures exclude 'volatile energy and food prices, which are expenses consumers
experience every day. Since the federal government in 1999 changed to a 'consumer lifestyle buying pattern' approach rather
than a standard price comparison, inflation has consistently been under-reported. In 1998 the Bureau of Labor Statistics
shifted to an 'owner equivalent rental cost' for homeownership. Using the Case-Shiller Home Price Index since 2019 shows the
BLS OER-based approach understates CPI dramatically at 1.0% vs. the Case-Shiller model at 2.5%.
Industry Research On The Real Economy Is More Accurate
Chapwood Investments publishes a biannual index including 50 cities comparing consumer goods and services prices on 500
consumer items. Their analysis showed the top ten cities in the US with an average inflation rate of 10% in the second half of
2020. A marketing industry research firm compared price changes for 220 often purchased consumer products at Target and
Walmart comparing 2018 to 2019 prices on average, the increase was 5 – 6% for both stores. Corporate marketing executives
must have accurate information to make reasonable sales forecasts and plans for investment. Our policy leaders can learn from
their example.
The Way Out of the Twilight Zone
To leave the Twilight Zone grip requires policymakers to recognize financial and real
economy fundamentals. They need to drop the no economic pain utopia model.
Policymakers need to get real with their
statistics and tracking systems to base their policy initiatives on the real economy. Analysts need to use fundamentals for
stock market and financial valuations. The Fed should stop rescuing failing hedge funds, zombie companies and end the
addiction to low-cost debt. Washington can start paying for new spending programs with increased focused taxes, ending
government waste and lower spending. The focus needs to be on a monetary and fiscal set of policies sustaining
entrepreneurship, hard work, and allowing the economic consequences of business failure to run their course.
To avoid the inevitable market crash, these programs need to be phased in over several
years to allow for investors, executives, and consumers to make adjustments to their portfolios.
It
is as if economic leaders have sent investors up an infinite 'wall of price' like a free solo climber, with no safety rope
leaving them to the inevitable fate of fundamental economic gravity
.
takeaction
3 hours ago
(Edited)
I stopped right
here...
" who lost 540,000 loved ones "
People die
every day...and it is NOT from the scamdemic...
In regards to
this economy...with Biden being propped up, the printing will not stop...
So watch asset
prices continue to explode. Don't short anything right now.
There will be a
time to short...but IMO not now..you will get crushed.
mrktwtch2
PREMIUM
3 hours ago
remove
link
I live
in a small suburb north of Chicago in the county of mchery il we r 12 miles south of the Wisconsin
border..my wife paid 139k for her town home in 2002 it went down to 78k during the crash but now its worth
195..since the joggers burned the cities down everyone is trying to move out of the city..strange times
indeed
USAllDay
3 hours ago
The
stupidity is just getting started. Yield curve control, price fixing, never ending eviction and foreclosure
moratorium extensions, constant stimulus for fat alcoholic/meth addicted "single mothers". The collapse will
be beautiful. Nothing this dirty should exist.
SMC
27 minutes ago
The
thing we can do is enjoy every day to the fullest and not help them peddle their idiocy and fear.
If we
are right, they are destroying themselves.
Mathematics, Physics and Chemistry may be "*-ist" but they combined with staying in shape, focus and
dedication are key to our survival.
'The world will never be the same:' Coursera CEO on learning post pandemic
Reggie Wade
·
Writer
Fri, April 2, 2021, 12:43 PM
More content below
More content below
^IXIC
+1.76%
COUR
+1.73%
The online learning platform
Coursera
(
COUR
)
saw a big pop following its Nasdaq (
^IXIC
)
debut this week. Coursera revenue was up 60% last year, and CEO Jeff Maggioncalda predicts online learning is here to stay even
after the pandemic eventually winds down.
"The world needs more access to high-quality learning. ... There will be a new normal that emerges. We don't know what that will
look like either in terms of how we work remotely versus in an office and how we will learn online and also on campus. But it's
pretty clear that the world will never be the same again and that online learning will be a big part of it," he told Yahoo
Finance Live.
"So we really think about the long term, all the structural reasons why people will need to learn continuously through their
lives to learn new skills as the world goes more digital," he said.
Dec 27, 2019 Mountain View / CA / USA - Coursera headquarters in Silicon Valley; Coursera is an American online learning
platform that offers massive open online courses, specializations, and degrees
One area that Coursera is looking to expand is its degree and certification programs. Maggioncalda tells Yahoo Finance that the
company can use technology to shake up traditional degree offerings.
"What we've seen for centuries is that college degrees are the most meaningful, recognized learning credential that there is, and
the credential type hasn't really innovated that much over the last period of history. We think with technology, the ability to
create not only degrees but other types of credentials," he said.
"It will be a portfolio of credentials. We believe that will serve lifelong learning needs in a world where people need to keep
learning, even as they're working," he added.
Bloomberg News recently published an article,
Amazon
Fights Union Drive With Fact-Free Bombast
, discussing Amazon's alleged use of misinformation to prevent employees from
unionizing. In the same manner Kailash recused itself from having a "bull" or "bear" thesis on Bitcoin, we will recuse ourselves
from any discussion of unions. What we would like to draw our readers' attention to however is the method by which Amazon pays
many senior executives.
In the Bloomberg article it noted that the former head of Amazon's
logistics business was awarded stock compensation worth $160 million dollars.
In the wake of the scandals that occurred during the financially profligate dot.com bubble, rule FAS123 was passed requiring stock
compensation be expensed in a company's income statement. In papers written both in the professional and academic worlds, Kailash
has used Amazon as an example of how cash flow accounting contradicts the intent of FAS123. The Kailash note found
here
showed
how Amazon's well explained and GAAP compliant use of lease and stock comp accounting could potentially cause confusion among
analysts. Kailash's academic expert on stock compensation put his work,
Stock
Compensation Expense, Cash Flows and Inflated Valuations
through peer review. His work made it painfully clear that this GAAP
compliant accounting method diminished the information value of traditional calculations of free cash flows.
Authored by Vassilis Karamanis, FX and rates strategist who writes for Bloomberg
Albert Einstein is widely credited as saying that
insanity is doing the same thing over and
over again and expecting a different result.
The phrase keeps coming to my mind as I read story after story on the Archegos
Capital Management saga and look at a series of charts on the euro. At first, the two might seem unrelated, but they both hold
relevant lessons about market complacency.
The story reads as expected -- or feared: The firm, little known outside finance circles, had amassed tens of billions of dollars in
stocks bets, much of it using opaque derivatives and borrowed funds, including some giant bets on a small group of equities. And
then it all went awry.
The acronym LTCM doesn't mean much, it seems, to some market participants. Common sense either. Maybe Margin Call, J.C. Chandor's
2011 movie, should be trending in streaming services, serving as a healthy reminder.
Those of us who still remember the spectacular collapse of the U.S. hedge fund Long-Term
Capital Management in the late 1990s though are probably asking ourselves how this happened again.
Was it a regulatory issue, a market inherently at fault or just human nature? Will the story simply be forgotten again, especially
given the few signs of lasting damage on markets? Or maybe we are all grown ups now and can move on quietly and in peace instead of
obsessing over every set back. At least until the next tail risk comes knocking on our door, that is.
So what does the euro have to do with any of this?
It's not that there is a secret correlation with stocks that unveiled itself amid the Archegos turmoil. But I'd argue that there's a
link.
And it's that some investors or managers are losing sight of reality and sustainable
value-at-risk levels.
The common currency hit its lowest level in nearly five months today. Fair enough, right? The yield on 10-year U.S. notes reached
its highest level since January 2020 Tuesday, and is now just a whisker away from halving its decline since 2018, so it makes sense
for the dollar to keep applying pressure on euro bulls.
Darth Vader
5 hours ago
I think it's
unfair to mix Albert Einstein up with these grubby little thieves.
The game is
rigged and they're picking winners and losers. Best not to play their game.
Misesmissesme
5 hours ago
I
think these fit better:
Only two things are infinite,
the universe and human stupidity, and I'm not sure about the former. A Einstein
The difference between genius
and stupidity is that genius has its limits. A Einstein
OrazioGentile
5 hours ago
Still
waiting for a movie on the collapse of Bear Stearns or Lehmann- fact I'm sure will be loads more
entertaining than fiction!
Former regulators and financial-reform advocates say one rule change, in particular,
could have prevented the debacle : requiring greater disclosures of the bets that investors
such as Archegos place on companies using swaps.
Bloomberg News recently published an article,
Amazon
Fights Union Drive With Fact-Free Bombast
, discussing Amazon's alleged use of misinformation to prevent employees from
unionizing. In the same manner Kailash recused itself from having a "bull" or "bear" thesis on Bitcoin, we will recuse ourselves
from any discussion of unions. What we would like to draw our readers' attention to however is the method by which Amazon pays
many senior executives.
In the Bloomberg article it noted that the former head of Amazon's
logistics business was awarded stock compensation worth $160 million dollars.
In the wake of the scandals that occurred during the financially profligate dot.com bubble, rule FAS123 was passed requiring stock
compensation be expensed in a company's income statement. In papers written both in the professional and academic worlds, Kailash
has used Amazon as an example of how cash flow accounting contradicts the intent of FAS123. The Kailash note found
here
showed
how Amazon's well explained and GAAP compliant use of lease and stock comp accounting could potentially cause confusion among
analysts. Kailash's academic expert on stock compensation put his work,
Stock
Compensation Expense, Cash Flows and Inflated Valuations
through peer review. His work made it painfully clear that this GAAP
compliant accounting method diminished the information value of traditional calculations of free cash flows.
After mixed messages in last week's claims data (low initial claims, record high pandemic
continuing claims), analysts expected a further fall in first time jobless benefit seekers but
were disappointed as claims rose from 684k the previous week to 719k last week.
... Total return swaps are brokered by Wall Street banks. They provide investors with
exposure to the profits or losses of stocks or other assets, without the investor actually
holding the underlying shares. Archegos's strategy backfired in recent weeks after ViacomCBS
and other stocks sold off. Mr. Hwang's firm was unable to meet its obligations to its banking
partners, which in turn liquidated large chunks of stock they had amassed to underpin the
trades. Among the banks
now facing steep losses are Credit Suisse Group AG and Nomura Holdings Inc.
...history shows that one messy unwind can easily spread. The U.S. Office of Financial
Research finds that the ten largest hedge funds were leveraged
far more heavily than the next 40 largest funds, as of June. And many family offices may
not be counted in these statistics at all, which mostly rely on disclosure forms they are able
to avoid.
There are some obvious responses for regulators, such as mandating disclosure of the
total return swaps that allowed Archegos to build big positions out of the public eye. But
there are no easy answers to the wider challenge of overseeing leverage within the broadest
financial complex when debt is almost free.
The system has held up under the latest strain, but this isn't a victory. Archegos means one
who leads the way. Regulators must do what they can to ensure as few as possible follow.
Swiss rival Credit Suisse expects a hit in the billions of dollars from Archegos, people
with knowledge of the matter have said, while Nomura Holdings Inc. has signaled it may lose as
much as $2 billion. Analysts at JPMorgan Chase & Co. estimate the Archegos blowup may cause
as much as $10 billion of combined losses for banks.
David Herro, chief investment officer of Harris Associates -- one of Credit Suisse's biggest
shareholders -- said on Bloomberg Television on Wednesday that the Archegos incident was a
"wake-up call" for Credit Suisse and should lead to sweeping changes to its culture and
oversight practices.
Shares of Credit Suisse tumbled 21% this week on concern over the size of its potential
Archegos hit. Deutsche Bank is down 2.9%.
...High-yield bonds rated in the CCC tier, usually the lowest-graded bonds that trade,
gained 3.58% year-to-date, according to Bloomberg Barclays index total return data. They
performed better than leveraged loans, which saw returns of 1.78%, and high-grade bonds, which
posted a 4.65% loss. They outperformed mortgage bonds and Treasuries too.
The higher coupons that the securities pay can offer insulation against the sting of rising
yields. CCC notes average coupons of 7.7%, compared with 5.9% for high yield debt overall and
3.7% for investment-grade corporate notes, according to Bloomberg Barclays index data.
"The lower quality trade still has some legs," said Scott Kimball, co-head of U.S. fixed
income at BMO Global Asset Management. "Investors typically look to high-yield securities,
particularly CCCs, when yields are on the rise. Now, we see record positive revisions for U.S.
growth by economists being further boosted by record fiscal stimulus expectations."
Casino capitalism is the fertile ground for the most sleazy types of speculators. The stock
market has become a giant slot machine financed by 401K lemmings. The marks here are 401K
investors.
Excessive leverage is a immanent feature of the pre-collapse stage of Minsky cycle. So those
who argue that we are close to another crash get some additional confirmation due to this event.
The Masters of the Universe rediscovered the hidden areas of huge risk, and like in 2008 are
afraid but can't and do not want to anything.
TBTF such as Goldman and Morgan aid the most sleazy types as they bring outsized profits for
them. So this a catch 22 as Goldman and other TBFT controls SEC not the other way around.
It would be prudent to view banksters as a special type of mafia and treat accordingly and
prohibit for them serving in government. But this is impossible under neoliberal as financial
oligarchy has all political power.
The question is: Is there another fund that's larger, that's more leveraged with the same
characteristics that could prove to be a more systemic event? That's the major concern right
now." Wall Street's hottest trades such as pure-tech plays and high-flying tech/media like the
ones bet on by Hwang -- could be unwound. The Hwang blowup wakes up investors to the realization
that many parts of the market are overvalued and it's time to sell -- and quickly as yields are
going up. For the the FAANGS, the Tesla's out there -- the fundamentals don't support the stock.
So it would be logical to a large correction.
Notable quotes:
"... The idea that one firm can quietly amass outsized positions through the use of derivatives could set off another wave of criticism directed against loosely regulated firms that have the power to destabilize markets. ..."
Much of the leverage used by Hwang's Archegos Capital Management was provided by banks
including Nomura Holdings Inc. and Credit Suisse Group AG through swaps and so-called
contracts-for-difference, according to people with direct knowledge of the deals. It means
Archegos may never actually have owned most of the underlying securities -- if any at all.
While investors who own a stake of more than 5% in a U.S.-listed company usually have to
disclose their holdings and subsequent transactions, that's not the case with positions built
through the type of derivatives apparently used by Archegos. The products, which are transacted
off exchanges, allow managers like Hwang to amass exposure to publicly-traded companies without
having to declare it.
The swift unwinding of Archegos has reverberated across the globe, after banks such as
Goldman Sachs Group Inc. and Morgan Stanley forced Hwang's firm to sell billions of dollars in
investments accumulated through highly leveraged bets. The selloff roiled stocks from Baidu
Inc. to ViacomCBS Inc., and prompted Nomura and Credit Suisse to disclose that they face
potentially significant losses on their exposure.
One reason for the widening fallout is the borrowed funds that investors use to magnify
their bets: a margin call occurs when the market goes against a large, leveraged position,
forcing the hedge fund to deposit more cash or securities with its broker to cover any losses.
Archegos was probably required to deposit only a small percentage of the total value of
trades.
The chain of events set off by this massive unwinding is yet another reminder of the role
that hedge funds play in the global capital markets. A hedge fund short squeeze during a
Reddit-fueled frenzy for Gamestop Corp. and other shares earlier this year spurred a $6 billion
loss for Gabe Plotkin's Melvin Capital and sparked scrutiny from U.S. regulators and
politicians.
The idea that one firm can quietly amass outsized positions through the use of
derivatives could set off another wave of criticism directed against loosely regulated firms
that have the power to destabilize markets.
Bob 2 days ago This is another major reminder that the stock market is not as rational as we
want to believe. A small group of very large, leveraged funds can have far more impact on the
market than dozens or hundreds of well thought out and researched programs. Sigh. Take your
lumps and move on. Hasso 2 days ago 2008 - Hwang's Tiger Asia suffered losses from the
Volkswagen short, 2012 - Hwang's Tiger Asia paid $44M to settle insider trading charges, banned
2014- Hong Kong fined him $5.3M & banned him for four years. 2021 - And here we are
again.
Tyrone 2 days ago Gee, Credit Suisse involved in sleezy investments. Again. I'm shocked, just
shocked!
Manohar 2 days ago Banks haven't learnt anything yet...you know why? Because its other people's
money and the no one gets prosecuted when they are caught with hand in the cookie jar.
killer klown 2 days ago it's a sign that the market and it's regulators have learned
nothing.........to even pretend that a penny difference in assumed earnings versus actual
earnings using the GAAP accounting (which itself says it's not exact but generally accepted
accounting principles)moves a stock is in itself a joke, this situation of a BIG BLACK BOX
calls for the complete dismantle of the derivatives market which was created to lay off risk.
Bill Hawng should be FLAT Broke his possesions seized, The board of Credit Suisse and Nomura et
all should be unemployed as of 8:31 this morning. But they won't and it's only going to happen
again and again.
Amvet 2 days ago Market manipulators have a free rein in the USA. Are politicians also
involved? Reply 16 3 George 2 days ago Just amazing how some of the world's most sleazy
characters have access to cosmic sums of money and remain under the radar and legal(???). Then
nothing seems to happen except that loads of other folk get burned while they move on to the
next bright idea. Reply 13 1 Rick 2 days ago So clearly limiting those who can purchase these
to exclude amateur players has not been successful. Recklessness is not limited to amateurs.
Mr. H. 2 days ago In 2008 high finance was playing very high risk games with clients money at
the undefined edge between legal and illegal. A bunch of firms went away along with many
billions of dollars because a bunch of players were playing CYA. They came up with the term
"too big to fail" when they were picking winners and losers. "too big to fail" is is fetid
bovine excrement. The SEC, that is the administrative government, was not doing its job! There
were many questions about government employee competence to do those jobs. The government
should have let the market place pick the winners and losers, then the government should have
prosecuted everyone who failed to perform their fiduciary duty and set a major precedent about
high risk play with other people's money; keep it legal or go to jail and lose your shirt. That
is what should happen this time too! Noone 2 days ago Almost like something that is so
dangerous and risky to both the market AND the "investor" that retail traders ARE BANNED from
doing it should.. idk.. BE ILLEGAL FOR EVERYONE? Useless SEC. Do your job right.
Philip 2 days ago Ironic that Hedge Funds are the most unhedged game going.... Dan 1 day ago
The managers of these HFs lack morality, they steal from other companies because they believe
in their twisted little minds if they set up a system whereby they can trade in dark pools with
illegal naked shorting, counterfeit shares and stock manipulation under the radar -- it makes
the crime okay. All of this criminality is been done with the aid of supplementary leverage
ratio (SLR) If they can manage to bankrupt the company they short with Government SLR they end
up paying no tax and pocket the money GME/AMC and more for example.. Bingo the most audacious
robbery attempt in the history of the state. Oh boys did they fail, wow what a spectacular
failure. Now they have to deleverage destabilizing the entire market. Do these HF managers rank
their values differently to the moral code we all live by? Obviously they do! There's no doubt
they'll get lots of time to think about their behaviour when they're in the slammer. Each case
will have to be evaluated on its own merit at some stage of course. On the face of it, all
indications points to a tradeoff that benefits themselves at the disadvantaging of other. Sad
for them! I rest my case!
Jodes 1 day ago The spikes in shares like ROKU, BIDU, SHOP and many more have huge parabolic
spikes at the top accounting for the disfunctional market as we were seeing it at the top. They
had huge buy orders to artificially spike the prices keep them up and then experts come in
after and raise price targets and put a BUY rating on the stock. Then get retail to buy in and
then drop them like a rock. Greedy and dispicibale. All probably done for a huge bonus. While
retail suffers for their greed.
Vince 2 days ago More than 100 Trillion (with a T) are moving around the world in Derivatives
each and every day., some say closer to 200 Trillion! You figure it our when THAT bubble
bursts! Reply 2 1 SniffMopWho 2 days ago Interesting how these guys make millions and billions,
just by pressing keys on a keyboard.
... 2 days ago More sleaze trying to bring down the market by making risky bets with swaps and
derivatives, yet the regulators are caught asleep again. Just more proof of incompetence by
Biden and his hired idiots at the SEC.
TL;DR- Citadel and friends have shorted the treasury bond market to oblivion using the
repo market. Citadel owns a company called Palafox Trading and uses them to EXCLUSIVELY short
& trade treasury securities. Palafox manages one fund for Citadel - the Citadel Global
Fixed Income Master Fund LTD. Total assets over $123 BILLION and 80% are owned by offshore
investors in the Cayman Islands. Their reverse repo agreements are ENTIRELY rehypothecated
and they CANNOT pay off their own repo agreements until someone pays them, first. The ENTIRE
global financial economy is modeled after a fractional reserve system that is beginning to
experience THE MOTHER OF ALL MARGIN CALLS.
THIS is why the DTC and FICC are requiring an increase in SLR deposits. The madness has
officially come full circle.
tnorth 4 hours ago
another month of completely rigged 'markets'
mtl4 4 hours ago remove link
Music is still playing, make sure you have a chair when it stops
this_circus_is_no_fun 1 hour ago remove link
Consider these two points:
Treasuries are claimed to be backed by the "full faith and credit of the United
States".
In Q1, Treasuries suffer their biggest loss in 40 years.
y_arrow
Kreditanstalt 1 hour ago (Edited)
I've always wondered why seemingly contradictory and uncorrelated assets and asset classes
alternately "soar" and "plunge" on different days, usually in random conjunction with
others...
It seems so counterintuitively...MECHANICAL...or theory-driven, rather than rational
"investing".
This is first of all about the corruption of SEC. all this hacking of financil system in not new. So the failure to
prevent it is the failure of regulation.
One of World's Greatest Hidden Fortunes Is Wiped Out in Days
More content below
More content below
VIACA
+4.87%
GSX
+4.75%
Katherine Burton and Tom Maloney
Tue, March 30, 2021, 8:29 AM
More content below
More content below
VIACA
+4.87%
GSX
+4.75%
(Bloomberg) --
From his perch high above Midtown Manhattan, just across from Carnegie Hall, Bill Hwang was quietly building
one of the world's greatest fortunes.
Even on Wall Street, few ever noticed him -- until suddenly, everyone did.
Hwang and his private investment firm, Archegos Capital Management, are now at the center of one of the
biggest margin calls of all time -- a multibillion-dollar fiasco involving secretive market bets that were
dangerously leveraged and unwound in a blink.
Hwang's most recent ascent can be pieced together from stocks dumped by banks in recent days -- ViacomCBS
Inc., Discovery Inc. GSX Techedu Inc., Baidu Inc. -- all of which had soared this year, sometimes
confounding traders who couldn't fathom why.
One part of Hwang's portfolio, which has been traded in blocks since Friday by Goldman Sachs Group Inc.,
Morgan Stanley and Wells Fargo & Co., was worth almost $40 billion last week. Bankers reckon that Archegos's
net capital -- essentially Hwang's wealth -- had reached north of $10 billion. And as disposals keep
emerging, estimates of his firm's total positions keep climbing: tens of billions, $50 billion, even more
than $100 billion.
It evaporated in mere days.
"I've never seen anything like this -- how quiet it was, how concentrated, and how fast it disappeared,"
said Mike Novogratz, a career macro investor and former partner at Goldman Sachs who's been trading since
1994. "This has to be one of the single greatest losses of personal wealth in history."
Late Monday in New York, Archegos broke days of silence on the episode.
"This is a challenging time for the family office of Archegos Capital Management, our partners and
employees," Karen Kessler, a spokesperson for the firm, said in an emailed statement. "All plans are being
discussed as Mr. Hwang and the team determine the best path forward."
The cascade of trading losses has reverberated from New York to Zurich to Tokyo and beyond, and leaves
myriad unanswered questions, including the big one: How could someone take such big risks, facilitated by so
many banks, under the noses of regulators the world over?
part of the answer is that Hwang set up as a family office with limited oversight and then employed financial derivatives to
amass big stakes in companies without ever having to disclose them. Another part is that global banks embraced him as a lucrative
customer, despite a record of insider trading and attempted market manipulation that drove him out of the hedge fund business a
decade ago.
A disciple of hedge-fund legend Julian Robertson, Sung Kook "Bill" Hwang shuttered Tiger Asia Management and Tiger Asia Partners
after settling an SEC civil lawsuit in 2012 accusing them of insider trading and manipulating Chinese banks stocks. Hwang and the
firms paid $44 million, and he agreed to be barred from the investment advisory industry.
He soon opened Archegos -- Greek for "one who leads the way" -- and structured it as a family office.
Family offices that exclusively manage one fortune are generally exempt from registering as investment advisers with the U.S.
Securities and Exchange Commission. So they don't have to disclose their owners, executives or how much they manage -- rules
designed to protect outsiders who invest in a fund. That approach makes sense for small family offices, but if they swell to the
size of a hedge fund whale they can still pose risks, this time to outsiders in the broader market.
"This does raise questions about the regulation of family offices once again," said Tyler Gellasch, a former SEC aide who now
runs the Healthy Markets trade group. "The question is if it's just friends and family why do we care? The answer is that they
can have significant market impacts, and the SEC's regulatory regime even after Dodd-Frank doesn't clearly reflect that."
Valuable Customer
Archegos established trading partnerships with firms including Nomura Holdings Inc., Morgan Stanley, Deutsche Bank AG and Credit
Suisse Group AG. For a time after the SEC case, Goldman refused to do business with him on compliance grounds, but relented as
rivals profited by meeting his needs.
The full picture of his holdings is still emerging, and it's not clear what positions derailed, or what hedges he had set up.
One reason is that Hwang never filed a 13F report of his holdings, which every investment manager holding more than $100 million
in U.S. equities must fill out at the end of each quarter. That's because he appears to have structured his trades using total
return swaps, essentially putting the positions on the banks' balance sheets. Swaps also enable investors to add a lot of
leverage to a portfolio.
Morgan Stanley and Goldman Sachs, for instance, are listed as the largest holders of GSX Techedu, a Chinese online tutoring
company that's been repeatedly targeted by short sellers. Banks may own shares for a variety of reasons that include hedging swap
exposures from trades with their customers.
'Unhappy Investors'
Goldman increased its position 54% in January, according to regulatory filings. Overall, banks reported holding at least 68% of
GSX's outstanding shares, according to a Bloomberg analysis of filings. Banks held at least 40% of IQIYI Inc, a Chinese video
entertainment company, and 29% of ViacomCBS -- all of which Archegos had bet on big.
"I'm sure there are a number of really unhappy investors who have bought those names over the last couple of weeks," and now
regret it, Doug Cifu, chief executive officer of electronic-trading firm Virtu Financial Inc., said Monday in an interview on
Bloomberg TV.
He predicted regulators will examine whether "there should be more transparency and disclosure by a family
office."
Without the need to market his fund to external investors, Hwang's strategies and performance remained secret from the outside
world. Even as his fortune swelled, the 50-something kept a low profile. Despite once working for Robertson's Tiger Management,
he wasn't well-known on Wall Street or in New York social circles.
Hwang is a trustee of the Fuller Theology Seminary, and co-founder of the Grace and Mercy Foundation, whose mission is to serve
the poor and oppressed. The foundation had assets approaching $500 million at the end of 2018, according to its latest filing.
"It's not all about the money, you know," he said in a rare interview with a Fuller Institute executive in 2018, in which he
spoke about his calling as an investor and his Christian faith. "It's about the long term, and God certainly has a long-term
view."
... ... ...
"You have to wonder who else is out there with one of these invisible fortunes," said Novogratz. "The psychology of all that
leverage with no risk management, it's almost nihilism."
Unlike the devastating London Whale debacle in 2012, which was
all
JPMorgan
eventually drawn and quartered quite theatrically before Congress (and was a clear explanation of how banks used Fed reserves
to manipulate markets, something most market participants had no idea was possible), this time JPMorgan was nowhere to be
found in the aftermath of the historic margin call that destroyed hedge fund Archegos. Which is may explain why JPMorgan bank
analyst Kian Abouhossein admits he is quite "
puzzled"
by
the recent fallout from the Archegos implosion (or maybe JPM simply was not a Prime Broker of the notorious Tiger cub), which
however does not prevent him from trying to calculate the capital at risk from the Archegos collapse.
In a note published this morning, Kian writes after Nomura yesterday confirmed (at least) a $2Nn potential claim and fellow
Japanese bank Mitsubishi UFJ Securities Holdings announcing today of another potential $300MM loss - which as the JPM
strategist admits "
for a likely non-material PB player is surprising to us"
–
JPMorgan now
expects losses well beyond normal
unwinding scenario for the industry
: and explains that it now sees "the losses as very material in relation to
lending exposure for a business that is mark-to-market and holds liquid collateral" and makes Nomura's indication of
potentially losing $2bn and press speculation of CSG $3-4bn losses "as not an unlikely outcome" according to the JPM
strategist.
So why is JPM surprised?
Because as Abouhossein writes,
"
in normal
circumstances... we would have suspected industry losses of $2.5-5bn. We now suspect losses in the range of $5-10bn
."
In
other words,
JPM has doubled its max loss estimate to as much as $10BN, a number which
could yet rise.
To get there, JPM estimates that
Archegos was highly leveraged at 5-8x (i.e. $50-80bn
of exposure for $10bn of equity
) - using Total Return Swaps and
Certificates
for Difference
to lever up so massively as we discussed yesterday - and it was this use of equity-swaps tha "tincreased
the inability of PBs to see the concentration risk in holdings within the hedge fund in question."
Even so, Kian admits that he remains "
puzzled why Credit Suisse (CSG) and Nomura have
been unable to unwind all their positions at this point – as we would expect to get an announcement as soon as this is the
case, on the scale of potential losses (especially in the case of CSG which hasn't provided numerical impact)"
although
we have gotten some headlines suggesting the total loss could be as big as $7 billion.
That said the JPM analyst expects full disclosure by the end of the week at the latest from CSG and would keep an eye on
credit agencies statements as well. And in the harshest slam of JPM's competitors, Kian says he suspects
"potentially
poor risk mgmt being an issue here considering i) late unwinding, and ii) possibly significant more leverage than for GS/MS
similar exposures."
Alternatively, one could argue that it was Goldman and Morgan Stanley who rushed to break ranks with the syndicate of Prime
Brokers and started dumping blocks of Archegos shares for one reason or another on Friday morning as we detailed yesterday,
which meant that while they suffered the least losses, those banks - like CS, Nomura and Wells - which were slow to start
selling, would end up with the largest losses (for more see "
How
Goldman And Morgan Stanley Broke Ranks And Triggered The Biggest Margin Call Since Lehman
").
In terms of actual loss estimates with an empahsis on Credit Suisse which so far appears to
be the hardest hit, here is a breakdown from JPMorgan of what is known:
In terms of capital at risk, based on press articles,
Credit Suisse seems to have
bigger issues than Nomura assuming press speculation of $3-4bn are correct and Grensill could potentially lead to additional
litigation cost of $1-3bn.
In the case of Nomura, JPM has reduced the share buyback for FY2020 from Ą75 billion to
Ą10 billion; if the press speculation losses are correct,
it would expect CS at a
minimum will have to cancel its share buyback for 2021, preserving the dividend and we assume no buyback for the next 2 years
assuming Basel 4 implementation as of Jan 2023.
Assuming no RWA growth vs. YE2020 levels, JPM calculates that
CS
can absorb a max. one-time pre-tax hit of c$4.5b
n
(CHF 4.2bn) for Archegos which post-tax is 116bps of CET1
capital offset by 32bps of Retained earnings (1Q Net Income less 1Q dividend accrual of CHF 0.2bn and share buyback of CHF
0.3bn completed YTD) and still reach 12% by end of 1Q 21 which is seen as an acceptable level for S/Hs under Basel 3 – with
further hits to come (see below). The minimum CET1 requirement is 10% and every additional $1bn pre-tax hit is 26bps of CET1
capital based on YE2020 RWAs and
hence "any hits beyond $5bn pre-tax from Archegos will
call into question the capital position in our view", JPM warns.
Separately, Bloomberg adds that March's blowups may - in addition to wiping out more than a year of profits for the bank and
threaten its stock buyback plans - also add add to the reputational hit from the other missteps by bank CEO Thomas Gottstein.
With the shares posting the only decline among Europe's major banks in 2021 and a new chairman starting next month, Chief
Executive Officer Thomas Gottstein is facing questions over whether he and risk chief Lara Warner have a handle on the bank's
exposures.
"Risk control at every level in this bank must be examined and changes made where there are deficiencies," David Herro, chief
investment officer at Harris Associates, one of the biggest investors in the bank, said in an email. "But I state the
obvious?"
As Bloomberg further notes, the hits from Archegos and Greensill have spoiled a plan by Gottstein to start the year with a
clean slate.
The CEO late last year wrote down the value of the bank's stake in hedge fund York Capital and took a hit related to a
long-standing legal case into residential mortgage-backed securities, dealing the bank its first quarterly loss in three
years. The crises have more than overshadowed its best start to the year in a decade.
"While all four events appear idiosyncratic in nature, it inevitably has led investors to
question the strategic decision making at CS and the risk culture of the firm,"
Andrew Coombs, a Citi bank analyst wrote
Tuesday.
While Credit Suisse has not quantified the full damage yet, and has merely said that it faces "highly significant" losses tied
to Archegos, Berenberg analysts pegged the hit at 3 billion Swiss francs, on top of 500 million francs from the Greensill
issues.
* * *
Finally, JPM tries to answer a key question for many investors,
namely what has
happened with holdings (as speculated in the press ) of Archegos Capital?
As Kian writes, the share price of Arhcegos Capital linked stocks fell by -39% on avg. since the beginning of last week.
According to press reports (Bloomberg), Archegos Capital was forced to sell large shareholdings in eight online and
entertainment companies (
GSX Techedu, ViacomCBS, Discovery, iQIYI, Tencent Music,
Vipshop, Baidu, Farfetch)
to cover potential losses after some positions moved against the fund. Once Archegos
Captial failed to meet its margin commitments, the sell-off intensified further as banks started offloading via sizeable block
trades the holdings posted by the fund as collateral, prompting more declines.
Based on the latest publicly available disclosure the banks with the largest exposure to the mentioned companies were Morgan
Stanley, Credit Suisse, Goldman Sachs, Nomura and to a lesser extent UBS and DB (more details below). On Friday alone, both
ViacomCBS and Discovery saw their largest ever daily decline, with each falling by more than -27%. Traded volumes for the
eight companies peaked on Friday with daily volumes being on avg. more than 13x the 90 days moving average. The sell-off
continued on Monday 29th with the aforementioned stocks falling further -6% on average.
Based on latest available public filings, JPM calculates that the banks which had the largest holdings in the eight Archegos
Capital-linked stocks mentioned by the press were
Morgan Stanley, Credit Suisse,
Goldman Sachs and Nomura.
Morgan Stanley exposure was relatively broad based with 5%+ holdings in all but one
companies and with 10%+ stake in both GSX Techedu and iQIYI. Credit Suisse exposure was also broad based with holdings in all
but one companies and with the largest exposure being its 9% stake in Discovery. Goldman Sachs exposure was mainly
concentrated in GSX Techedu (22% stake), while Nomura had exposure in all but one companies and a relatively large holding of
7% in GSX Techedu. Other banks such as Bank of America, Citi, UBS, Deutsche and Barclays also had holdings above 2% in some
the mentioned companies (mainly GSX Techedu and Discovery).
Finally, courtesy of JPM, here is a summary of all the latest publicly available information disclosing what exposure each
bank may have had - and still has - to Archegos:
play_arrow
Calculus99
4 hours ago
(Edited)
If you
listen to the corporate ******** from ALL of these firms, they'll all say the same crap -
"We employ the some of the smartest guys in finance
as well as run cutting edge risk management systems so as to protect our shareholders and (cliche) stake
holders."
Then
something like this happens, ie you let a degen gambler margin up xfold in a highly charged and volatile
market betting on some of the riskiest go-go stocks.
Any
old non-smartest guy with a $10 Casio calculator could have predicted the massive risks they were taking and
the probable fallout.
Smartest guys?
Cutting edge risk management?
Their
words aren't even worth a penny...
bonsai_king
3 hours ago
Thats
just what they post online.
In the
real world, its all backroom deals, tit for tat, exchange of favors kind of BS.
Do you
actually think anyone involved lost their personal fortunes?
101 years and counting
3 hours ago
if
you're running JPM or GS, etc....why wouldnt you leverage everything to the top? if you go boom, Jerome
will save you. afterall, if you dont save us, the "World will end".
john milton
3 hours ago
This
is it in banking, sometimes you win big time and got your big bonuses, sometimes you lose big time and
taxpayers pay your bonuses.
ssgredux
4 hours ago
Wait
till JPM hears about JPM's exposure to derivatives...
I love
the OCC Quarterly. You have to go all the way to the back, to see the good stuff. GS is leveraged, waaay
beyond everybody else!
Kefeer
3 hours ago
remove
link
Banking crisis, artificial chip
shortages, artificial price manipulation of oil
, artificial wuhan-flu war, with artificial experimental
injections, artificial everything - even the clouds above.
What is the plan with all these
working together and add the artificial dementia installed President and you have the recipe for something
huge???
....
So
glad these casinos have Gubmnt subsidized, FDIC insurance.
Great Iota
59 minutes ago
(Edited)
Save
this post ...
The
"Damage" from the Archegos collapse will be a nano piss drop in a rain compared to the damage from the
upcoming cryptocurrency collapse.
Bitcoin alone could cause quadrillion USD damage when you count the worthless underlining asset plus the
100X derivatives. I'm surprised that governments and its citizens have embraced this worthless asset. 1000
Years from know we will be teaching about the "Bitcoin Blowup".
What
can cause Bitcoin to go worthless? Lots!
1 - No
real need (only purpose is its a Ponzi Scheme designed to increase in value).
2 - Unrecoverable (lost your account, password, or remote drive? your SOL)
3 - Uninsurable (no one can return your Bitcoin to you)
4 - Open to program hacks
5 - Not backed by anything
6 - Needs electricity and internet.
7 - Can never be a useful currency
You
people have all gone mad!
stop_the_fraud
43 minutes ago
Saved
and archived.
Great Iota
30 minutes ago
I'm
hoping that the only reason the global leaders are allowing Bitcoin is so it can mop up the trillions of
paper being added to the system to save the system without creating inflation. At the end of the day, it
gives avenue for abusive money printing without inflating a real asset that people need.
Can
you imagine if all the money flowing into crypto was going into housing or food? Look at the stock market
bubble caused by all the low interest money flowing into it.
This madness will end when the fed tightens or the global economy collapse (one will happen for sure).
Cheap Chinese Crap
5 minutes ago
remove
link
You're
crazy. There's nothing wrong with treating an IOU from some anonymous guy on the Internet as a cash
substitute.
Lef-ty
PREMIUM
2 hours ago
Just
another reason to make the banks smaller. How about no derivatives trading other than a hedge book.
Synthetic positions should be part of 5% disclosure rule. The fact that no one knew what was happening is
just another warning signal.
lay_arrow
highwaytoserfdom
3 hours ago
(Edited)
Bring in Kenny Griffin and Bernake from Citadel to front run the whole market...
ROFLMAO While at it bring in Peter Griffin, and Lois; Meg, Chris, and
Stewie and Brian. heck bring in all Quahog, Rhode Island.. Wait a second
Gina M. Raimondo Secretary of Commerce jeez did not think it could get much
worse that Wilber but one of the granny culling governors (oh yea those machines
flipped votes) ..medical murder scam plan demonic reset....
LMAO--------> Look MAO CIA globalony..
Bill of Rights
3 hours ago
The same JPM thats dumping Commercial and Residential Real Estate at a massive clip,
that JPM?
Ozarkian
3 hours ago
10x Leverage caused the 1929 crash. History repeats.
RevIdahoSpud3
1 hour ago
I have just lived through the 2nd Major Coup in my lifetime as a U S Born citizezn.
The first for me was JFK's assassination by government insiders. The Second was the
2020 election with the lunatic Biden
installed
(not
elected) as president of the U S Corporation. Before that may have been the
establishing of the Fed Reserve in 1913 but I wasn't alive yet. Others may have been
WWI, WWII, Viet Nam...and how many others such as 911 and the Patriot Act.
I mention because we are supposed to read news of the banking industry, trade
agreements, border breaches and hundreds of other topics that are supposed to be
events of the day? Spontaneous and not preplanned as if these events have any
relevance to a freeman's life.
Since the Trump coup, there is nothing really noteworthy that the deep state cycles
as news. It's all smoke and mirrors. Perhaps it is to the 'players', the top 1% who
battle each other for world domain in a global chess game who actually care as they
seem to be the ones with something at stake. Their vast fortunes and their need for
more.
At the bottom of the totem it's all irrelevant. This level is just survival of the
fittest. News, fake news, and irrelevant news has no impact on reality.
And yet, how many people dwell/devote their lives and time to being abreast of
Meghan and Harry, Congress, Goldman Sachs, Tesla, Climate cooling/heating, racism,
discrimination, womyns rights... . Such as waste!
denker
2 hours ago
RWA growth ► Risk Weighted Average Growth
CET1 ► Common Equity Tier 1
CSG ► Credit Suisse Group
$300MM ► $300 million
$2Nn ► fark knows?
PB player ► Primary Broker player?
GS/MS
► Goldman
Sachs and Morgan Stanley
S/Hs under Basel 3 ► Share Holders under Basel 3
Cheap Chinese Crap
4 minutes ago
That's 2 nanu-nanus. Mork's account got hacked.
ponchoramic
2 hours ago
Daily Reminder; The financialization of everything sucked the life out of real
capitalism and everything you see right now is a product of that life sucking
parisitical scheme.
King of Ruperts Land
2 hours ago
(Edited)
Don't worry, be happy.
Secret Weapon
3 hours ago
Greedy parasites getting their balls kicked in. Very fun to watch.
scoop2020
3 hours ago
I would imagine all the big losers are putting their numbers out there so they can
take them to the bankruptcy courts and claim GS and MS had privilege(by selling
before the news came out) and try and claw back there benefits. Never brag about
dodging a bullet. It only pisses off the people who didn't dodge the bullet.
NuYawkFrankie
4 hours ago
(Edited)
It's this kind of reckless gambling suggests that we leaned nothing from the
Long Term Capital
Management fiasco
zob2020
4 hours ago
Time to ban asset management and speculation for the same company?
archipusz
4 hours ago
The gov't will take care of it.
They wouldn't take care of robinhood's traders buying gme, but they'll take care of
this to make sure hedge funds can keep trading. Y'see, hedge funds are important.
ted41776
4 hours ago
once they were deemed institutions too big to fail and too big to jail they
became the government
there is nothing they won't get away with now
naro
1 hour ago
There has never been so much margin debt in the history of America, because interest
rates are so low that it seems like almost free money, and that is exactly what led
to the Market collapse on 1929
Nuxx
PREMIUM
3 hours ago
If this had everything to make a LTCM or Lehmann 2.0, how convenient that a ship got
stuck in the mud last week and had everybody and their mother looking towards Egypt
whilst Goldman Sachs and Morgan Stanley unloaded their cargo in the meantime.
tunetopper
3 hours ago
What is the limitation of Friends and Family on Family Offices?
Why did Soros, Cohen, Tudor Jones, Druckenmuller, and Hwang all get an exemption out
of Dodd-frank in 2019.
Omphalos of Delphi
3 hours ago
Don't worry. The Federal Reserve is bailing out the pedophiles while you schmucks
get stuck with the bag-o-crap. Here are some stocks rallying hard on the face of
700.000 a week unemployment claims
Olaf Myfrenzargay
4 hours ago
Total return swaps should be banned outright.
jack-of-all-trades
29 minutes ago
remove
link
Just to add to JPM analyst's comments. It's all pure speculation but...
Other Archegos' equity swaps were most likely linked to the Viacom swaps via
standard legal arrangements (cross default-like). E.g. if Archegos' were to fail on
its obligations to the counterparty on one swap, the counterparty gets the right to
terminate other outstanding swaps with Archegos and sell its underlying hedges in
the open market. This is done firstly to eliminate/reduce counterparty's risk
exposure to Archegos and, secondly, offset any losses the counterparty would
incur on Viacom with [hopefully] gains on other swaps outstanding or, if no gains,
reduce its hedge unwind losses.
Any PB service provider to Archegos knew with 100% certainty early last week that
Archegos would not have a penny left to settle any arising swap liquidation
losses/claims to it the moment Archegos failed to meet its ViacomCBS margin call(s).
MS and GS PB desks knew that, as the US houses, their ECM desks were best positioned
to find buyers for ViacomCBS compared to CS/UBS, not to mention DB and Japanese
houses that have no real ability in most of those names. Coincidentally, it's wrong
to refer to the group of these banks as a "syndicate".
It's likely that many of these PB desks knew other and coordinated things on regular
basis but there certainly wasn't any legal arrangement/obligation among these banks
to coordinate liquidation of any of their Archegos swap hedges. Their
decision-making was straight-forward -- GS/MS, with the best chance to get out
unscathed (lower Archegos exposure, better ECM teams) -- didn't dither and headed
for the exit ASAP. For CS (and perhaps UBS/DB), it was more complicated -- not as
well-placed to find buyers for ViacomCBS stock yet with [much] larger exposures,
they probably tried to coordinate the fire sale but quickly realised that they would
not be the first out the door and ultimately got stuck in the doorframe. For the
Japanese houses, the situation was worse -- without their own ECM teams, they
depended on other banks to place large CBSViacom blocks -- a mission impossible
under the circumstances.
With regards to the huge size of these losses... everyone must be stunned:
The market has been
bullish up until now, despite the recent rollover of top speculative names like
TSLA and other techs and yield rises in longer dated Treasuries -- the mood is
nothing like 2007-08;
Granted, the stock
trading volumes since the GFC time in 2008 have been massively diluted with the
high-speed/algorithmic trading, short-gamma [index] ETFs hedging, etc, etc --
these trading flows are not "real", so to speak. But everyone's market risk
people must have known (or reasonably guessed) how to tweak their risk models for
the above.... Guess they were wrong!!!
It's safe to assume that the terms of every single one of the PB (and not PB) equity
swaps/CFDs/"whatevers" out there will be scrutinised, re-assessed, and renegotiated
when and if possible.
The silver lining to this cloud is that it happened while the sun is still shining,
relatively speaking.
...
Elevated valuations is probably the biggest source of consternation for investors.
... Barclays sees limited upside in the near term. The firm has a 4,000 year-end target for
the S&P, which suggests less than a 1% gain from Friday's close.
A little known hedge fund that blew up last week has sent shockwaves through the world of investment banking.
Shares in Credit Suisse (
CSGN.SW
)
and Nomura (
8604.T
)
sunk over 10% on Monday after both warned they faced potentially billions in losses linked to hedge fund Archegos Capital.
Banks that worked with Archegos and lent it money to buy shares were scrambling to offload Archegos' investments after a handful
of risky bets made by the hedge fund went bad. The rush to exit these positions hit public shares prices, leaving banks with huge
losses.
Hedge funds typically borrow money from banks to invest, a process known as margin trading. This allows funds to leverage up the
cash they hold and increase their positions -- potentially earning far greater returns if their bets come good. However, it also
means hedge funds can theoretically lose more money than they hold in client funds.
If trades made on margin turn sour, banks will ask a client to put up more money as collateral to limit potential losses. This
process is known as a margin call.
Archegos faced margin calls on its positions last week but failed to provide extra cash. As a result, banks began selling off
stocks held on the hedge fund's behalf -- a fire sale known in the City as liquidating positions. The business press reported on
Friday that Goldman Sachs (
GS
)
and Morgan Stanley (
MS
)
were selling huge chunks of shares in businesses including ViacomCBS (
VIAC
),
Discovery (
DISCA
)
and Chinese stocks Baidu (
BIDU
)
and Tencent Music (
TME
).
The block sales are estimated to be worth around $20bn (Ł14.5bn),
according
to the Financial Times
.
Shares in Credit Suisse sunk after it warned of 'significant losses' linked to the blow up at Archegos Capital. Photo:
Fabrice Coffrini/AFP via Getty Images
A little known hedge fund that blew up last week has sent shockwaves through the world of investment banking.
Shares in Credit Suisse (
CSGN.SW
)
and Nomura (
8604.T
)
sunk over 10% on Monday after both warned they faced potentially billions in losses linked to hedge fund Archegos Capital.
Banks that worked with Archegos and lent it money to buy shares were scrambling to offload Archegos' investments after a
handful of risky bets made by the hedge fund went bad. The rush to exit these positions hit public shares prices, leaving
banks with huge losses.
Hedge funds typically borrow money from banks to invest, a process known as margin trading. This allows funds to leverage up
the cash they hold and increase their positions -- potentially earning far greater returns if their bets come good. However, it
also means hedge funds can theoretically lose more money than they hold in client funds.
If trades made on margin turn sour, banks will ask a client to put up more money as collateral to limit potential losses. This
process is known as a margin call.
Archegos faced margin calls on its positions last week but failed to provide extra cash. As a result, banks began selling off
stocks held on the hedge fund's behalf -- a fire sale known in the City as liquidating positions. The business press reported
on Friday that Goldman Sachs (
GS
)
and Morgan Stanley (
MS
)
were selling huge chunks of shares in businesses including ViacomCBS (
VIAC
),
Discovery (
DISCA
)
and Chinese stocks Baidu (
BIDU
)
and Tencent Music (
TME
).
The block sales are estimated to be worth around $20bn (Ł14.5bn),
according
to the Financial Times
.
"Things started going wrong for Archegos when shares of companies such as Viacom started to slide mid-last week," said Michael
Brown, a senior market analyst at Caxton Business. "It was at that point that margins were called, and couldn't be provided,
hence the block sales seen Friday."
A fire sale can have a negative impact on stock prices and shares in both ViacomCBS and Discovery sunk 27% on Friday. Banks
therefore risked making less back from the sales than they lent to clients to fund the investments.
Credit Suisse on Monday warned it was facing "highly significant" losses linked to Archegos that could be "material to our
first quarter results".
The Swiss lender didn't name Archegos but said: "A significant US-based hedge fund defaulted on margin calls made last week by
Credit Suisse and certain other banks."
Credit Suisse said it was "in the process" of selling shares held by Archegos. The bank said it was "premature" to estimate
how much it would likely lose from the crisis.
"We intend to provide an update on this matter in due course," Credit Suisse said.
Shares sunk 13.4% in Zurich.
"One would assume that, judging by the size of positions sold, the 'game is up' for Archegos," Brown said.
He said it was "unlikely" that Archegos would pose a systemic risk to the financial system. Neil Wilson, chief market analyst at
Markets.com, said the hedge fund "appears to have been too concentrated in a number of risky stocks."
A hedge fund blow up is relatively unusual and Archegos' undoing has raised concerns that other funds could find themselves in
similar positions.
"Block equity-trades stemming from margin-calls on Archegos will have sent the market's spidey senses a tingle," said Bill Blain,
a senior strategist at Shard Capital. "Who is next?"
Alex Harvey, a portfolio manager at Momentum, said: "We tend to find out after the event that other funds get caught up as
sometimes hedge funds may be crowded into similar trades."
"When we look at this and think about the GameStop saga and the decline in Tesla as two examples -- what we're seeing are more and
more pockets of very unusual trading activity in some stocks," he said. "You worry that this sort of frothy trading activity in
turn creates pockets of distress among investors and banks that leads to larger unwinds and losses for financials."
Medicaid
expansion enrollment grew nearly 30% year-over-year in 19-state sample, Andrew Sprung,
XPOSTFACTOID, March 17, 2021
An update on Medicaid expansion enrollment growth since the pandemic struck. Below is a
sampling of 19 expansion states through January of this year, and 14 states through
February.
Maintaining the assumption, explained here ,
"relatively slow growth in California would push the national total down by about 2.5
percentage points." These tallies still point to year-over-year enrollment growth of
approximately 30% from February 2020 to February 2021.
If that's right, then Medicaid enrollment among those rendered eligible by ACA expansion
criteria (adults with income up to 138% FPL) may exceed 19 million nationally and may be
pushing 20 million. Assuming the sampling of a bit more than a third of total expansion
enrollment represents all expansion states more or less and again accounting for slower growth
in California.
"... Last week was the 53rd straight week total initial claims were greater than the second-worst week of the Great Recession. (If that comparison is restricted to regular state claims -- because we didn't have PUA in the Great Recession -- initial claims are still greater than the 14th worst week of the Great Recession.) ..."
One year ago this week, when the first sky-high unemployment insurance (UI) claims data of the pandemic were released, I said
"
I
have been a labor economist for a very long time and have never seen anything like this
." But in the weeks that followed,
things got worse before they got better -- and we are not out of the woods yet.
Last
week -- the week ending March 20, 2021 -- another 926,000 people applied for UI. This included 684,000 people who applied for
regular state UI and 242,000 who applied for Pandemic Unemployment Assistance (PUA), the federal program for workers who are
not eligible for regular unemployment insurance, like gig workers.
Last week was the 53rd straight week total initial claims were greater than the second-worst week of the Great Recession. (If
that comparison is restricted to regular state claims -- because we didn't have PUA in the Great Recession -- initial
claims are still greater than the 14th worst week of the Great Recession.)
Figure A
shows continuing claims in all programs over time (the latest data for this are for March 6). Continuing claims
are currently nearly 17 million above where they were a year ago, just before the virus hit.
FIGURE A
Continuing unemployment claims in all programs, March 23, 2019–March 6, 2021
*Use
caution interpreting trends over time because of reporting issues (see below)*
Date
Regular state UI
PEUC
PUA
Other programs (mostly EB and STC)
2019-03-23
1,905,627
31,510
2019-03-30
1,858,954
31,446
2019-04-06
1,727,261
30,454
2019-04-13
1,700,689
30,404
2019-04-20
1,645,387
28,281
2019-04-27
1,630,382
29,795
2019-05-04
1,536,652
27,937
2019-05-11
1,540,486
28,727
2019-05-18
1,506,501
27,949
2019-05-25
1,519,345
26,263
2019-06-01
1,535,572
26,905
2019-06-08
1,520,520
25,694
2019-06-15
1,556,252
26,057
2019-06-22
1,586,714
25,409
2019-06-29
1,608,769
23,926
2019-07-06
1,700,329
25,630
2019-07-13
1,694,876
27,169
2019-07-20
1,676,883
30,390
2019-07-27
1,662,427
28,319
2019-08-03
1,676,979
27,403
2019-08-10
1,616,985
27,330
2019-08-17
1,613,394
26,234
2019-08-24
1,564,203
27,253
2019-08-31
1,473,997
25,003
2019-09-07
1,462,776
25,909
2019-09-14
1,397,267
26,699
2019-09-21
1,380,668
26,641
2019-09-28
1,390,061
25,460
2019-10-05
1,366,978
26,977
2019-10-12
1,384,208
27,501
2019-10-19
1,416,816
28,088
2019-10-26
1,420,918
28,576
2019-11-02
1,447,411
29,080
2019-11-09
1,457,789
30,024
2019-11-16
1,541,860
31,593
2019-11-23
1,505,742
29,499
2019-11-30
1,752,141
30,315
2019-12-07
1,725,237
32,895
2019-12-14
1,796,247
31,893
2019-12-21
1,773,949
29,888
2019-12-28
2,143,802
32,517
2020-01-04
2,245,684
32,520
2020-01-11
2,137,910
33,882
2020-01-18
2,075,857
32,625
2020-01-25
2,148,764
35,828
2020-02-01
2,084,204
33,884
2020-02-08
2,095,001
35,605
2020-02-15
2,057,774
34,683
2020-02-22
2,101,301
35,440
2020-02-29
2,054,129
33,053
2020-03-07
1,973,560
32,803
2020-03-14
2,071,070
34,149
2020-03-21
3,410,969
36,758
2020-03-28
8,158,043
0
52,494
48,963
2020-04-04
12,444,309
3,802
69,537
64,201
2020-04-11
16,249,334
31,426
216,481
89,915
2020-04-18
17,756,054
63,720
1,172,238
116,162
2020-04-25
21,723,230
91,724
3,629,986
158,031
2020-05-02
20,823,294
173,760
6,361,532
175,289
2020-05-09
22,725,217
252,257
8,120,137
216,576
2020-05-16
18,791,926
252,952
11,281,930
226,164
2020-05-23
19,022,578
546,065
10,010,509
247,595
2020-05-30
18,548,442
1,121,306
9,597,884
259,499
2020-06-06
18,330,293
885,802
11,359,389
325,282
2020-06-13
17,552,371
783,999
13,093,382
336,537
2020-06-20
17,316,689
867,675
14,203,555
392,042
2020-06-27
16,410,059
956,849
12,308,450
373,841
2020-07-04
17,188,908
964,744
13,549,797
495,296
2020-07-11
16,221,070
1,016,882
13,326,206
513,141
2020-07-18
16,691,210
1,122,677
13,259,954
518,584
2020-07-25
15,700,971
1,193,198
10,984,864
609,328
2020-08-01
15,112,240
1,262,021
11,504,089
433,416
2020-08-08
14,098,536
1,376,738
11,221,790
549,603
2020-08-15
13,792,016
1,381,317
13,841,939
469,028
2020-08-22
13,067,660
1,434,638
15,164,498
523,430
2020-08-29
13,283,721
1,547,611
14,786,785
490,514
2020-09-05
12,373,201
1,630,711
11,808,368
529,220
2020-09-12
12,363,489
1,832,754
12,153,925
510,610
2020-09-19
11,561,158
1,989,499
10,686,922
589,652
2020-09-26
10,172,332
2,824,685
10,978,217
579,582
2020-10-03
8,952,580
3,334,878
10,450,384
668,691
2020-10-10
8,038,175
3,711,089
10,622,725
615,066
2020-10-17
7,436,321
3,983,613
9,332,610
778,746
2020-10-24
6,837,941
4,143,389
9,433,127
746,403
2020-10-31
6,452,002
4,376,847
8,681,647
806,430
2020-11-07
6,037,690
4,509,284
9,147,753
757,496
2020-11-14
5,890,220
4,569,016
8,869,502
834,740
2020-11-21
5,213,781
4,532,876
8,555,763
741,078
2020-11-28
5,766,130
4,801,408
9,244,556
834,685
2020-12-05
5,457,941
4,793,230
9,271,112
841,463
2020-12-12
5,393,839
4,810,334
8,453,940
937,972
2020-12-19
5,205,841
4,491,413
8,383,387
1,070,810
2020-12-26
5,347,440
4,166,261
7,442,888
1,450,438
2021-01-02
5,727,359
3,026,952
5,707,397
1,526,887
2021-01-09
5,446,993
3,863,008
7,334,682
1,638,247
2021-01-16
5,188,211
3,604,894
7,218,801
1,826,573
2021-01-23
5,156,985
4,779,341
7,943,448
1,785,954
2021-01-30
5,003,178
4,062,189
7,685,857
1,590,360
2021-02-06
4,934,269
5,067,523
7,520,114
1,523,394
2021-02-13
4,794,195
4,468,389
7,329,172
1,437,170
2021-02-20
4,808,623
5,456,080
8,387,696
1,465,769
2021-02-27
4,457,888
4,816,523
7,616,593
1,237,929
2021-03-06
4,458,888
5,551,215
7,735,491
1,207,201
Other programs (mostly EB and STC)
PUA
PEUC
Regular
state UI
Jul
2019
Jan
2020
Jul
2020
Jan
2021
0
10,000,000
20,000,000
30,000,000
40,000,000
Chart
Data
Caution:
Trends over time in PUA claims may be distorted because when an individual is owed retroactive
payments, some states report all retroactive PUA claims during the week the individual received their
payment.
The good news in all of this
is
Congress's passage of the sweeping $1.9 trillion relief and recovery package. It is both providing crucial support to millions
of working families and setting the stage for a robust recovery. One big concern, however, is that the bill's
UI
provisions
are
set to expire the first week in September, when, even in the best–case scenario, they will still be needed. By then, Congress
needs to have put in place long-run UI reforms that include automatic triggers based on economic conditions.
Krugman is is barking on the wrong tree. The question right now is not wage inflation but the
inflation due to weakening dollar as purchases of Treasuries by foreign buyers weakened. That
what probably caused the spike on 10 year Treasuries yield.
Without foreign buyers of the US debt the deficit spending does not work. So it is quite
possible that this time inflationary pressures will come from the weakening of the status of the
dollar as the world reserve currency. As along the this status is unchallenged the USA will be
OK. If dollar is challenged the USA will experience the Seneca cliff.
Paul Krugman argues once's again this morning that any increase in inflation this year as
part of a post-pandemic boom will be transitory:
I agree. I want to elaborate on one point he hasn't emphasized; namely, you can't have a
wage-price inflationary spiral if wages don't participate!
To make my point, let me show you three graphs below, covering wages and prices in three
different periods: (l) the inflationary 1960s and '70's, (2) the disinflationary
Reagan-era 1980s and early '90's, and (3) the low inflation period of the late 1990s to the
present.
In addition to the YoY% change in CPI, I also show CPI less energy (gold), better to show oil
shocks, and also that it takes about a year for inflation in energy prices to filter through to
inflation in other items.
Also, hourly wages were greatly affected (depressed) by the entry of 10,000,000's of women
into the workforce between the 1960s and mid-1990s. This increased median household income, which
would be the better metric, but since that statistic is only released once a year, I've
approximated its impact by adding 1% to the YoY% change in average hourly wages (light blue).
"It took really more than a decade of screwing things up -- year after year -- to get to
that pass, and I don't think we're going to do that again," Krugman said of the inflation
scourge of the 1970s to early 1980s. He spoke in an interview with David Westin for Bloomberg
Television's "Wall Street Week" to be broadcast Friday.
...The worst-case scenario out of the fiscal stimulus package would be a transitory spike in
consumer prices as was seen early in the Korean War, Krugman said. The relief bill is
"definitely significant stimulus but not wildly inflationary stimulus," he said.
...Economists predict that the core inflation measure tied to consumer spending that the Fed
uses in its forecasts will remain under 2% this year and next, a Bloomberg survey shows. A
different gauge, the consumer price index is seen at 2.4% in 2021 and 2.2% next year. The
CPI peaked at over 13% in 1980.
The risk is that policy makers are "fighting the last war" -- countering the undershooting
of the 2% inflation target and limited fiscal measures taken after the 2007-09 financial
crisis, the economists said.
Even so, he argued that "redistributionist" aspects of the pandemic-relief package will
reduce the need for the Fed to keep monetary stimulus too strong for too long in order to
address pockets of high unemployment. Fed Chair Jerome Powell has repeatedly said the central
bank wants to see very broad strengthening in the labor market, not just a drop in the national
jobless rate.
"It's not silly to think that there might be some inflationary pressure" from the fiscal
package, Krugman said. But it was designed less as stimulus than as a relief plan, he
said.
The financial fallout of covid-19 has pushed child hunger to record levels. The need has
been dire since the pandemic began and highlights the gaps in the nation's safety net.
While every U.S. county has seen hunger rates rise, the steepest jumps have been in some of
the wealthiest counties, where overall affluence obscures the tenuous finances of low-wage
workers. Such sudden and unprecedented surges in hunger have overwhelmed many rich communities,
which weren't nearly as ready to cope as places that have long dealt with poverty and were
already equipped with robust, organized charitable food networks.
Data from the anti-hunger advocacy group
Feeding America and the U.S. Census Bureau shows that counties seeing the largest estimated
increases in child food insecurity in 2020 compared with 2018 generally have much higher median
household incomes than counties with the smallest increases. In Bergen, where the median
household income is $101,144, child hunger is estimated to have risen by 136%, compared with
47% nationally.
That doesn't mean affluent counties have the greatest portion of hungry kids. An estimated
17% of children in Bergen face hunger, compared with a national average of around 25%.
But help is often harder to find in wealthier places. Missouri's affluent St. Charles
County, north of St. Louis, population 402,000, has seen child hunger rise by 69% and has 20
sites distributing food from the St. Louis Area Foodbank. The city of St. Louis, pop. 311,000,
has seen child hunger rise by 36% and has 100 sites.
"There's a huge variation in how different places are prepared or not prepared to deal with
this and how they've struggled to address it," said Erica Kenney , assistant professor of public
health nutrition at Harvard University. "The charitable food system has been very strained by
this."
Eleni Towns, associate director of the No Kid Hungry campaign , said the pandemic "undid a decade's
worth of progress" on reducing food insecurity, which last year threatened at least 15 million
kids.
And while President Joe Biden's covid relief plan, which he signed into law March 11,
promises to help with anti-poverty measures such as monthly payments to families of up to $300
per child this year, it's unclear how far the recently passed legislation will go toward
addressing hunger.
"It's definitely a step in the right direction," said Marlene Schwartz , director of the Rudd
Center for Food Policy and Obesity at the University of Connecticut. "But it's hard to know
what the impact is going to be."
Let's just keep spending all that money on our misadventures around the world though. I
believe in a strong defense but just that, defense. I would like to hear the warmongers
justify the ridiculous amounts of money spent on that, yet we can take care of our own to a
basic minimum. What the hell happened to this country over the years
"What the hell happened to this country over the years "
4 to 5 decades of neoliberalism will do that. Its like the nation-state equivalent of
being addicted to a drug. Makes you feel better in the short term: Reagan America worked
great! In the 80s. Long term everything gets screwed over, health wise.
Typical banana republic, spending on war and ridiculous, dysfunctional but grandiose
weapons, usually shown off in parades – lorded over by a rich oligarchy – while
people starve and live in hovels. However, a healthy well-fed population is the source of a
nation's strength, so we are well on the way to fading into a has-been.
"Sierra had to leave her Amazon warehouse job when the kids' school went remote, and
Morales stopped driving for Uber when trips became scarce and he feared getting covid on top
of his asthma".
In other words, our skimpy unemployment insurance systems in man states, plus gaps in the
pandemic special relief, plus the insufferable arrogance of closing the schools with no
financial relief for parents, and here we are.
Sorry guys but this is Failed Nation stuff. I am one of those that happen to believe that
it is the most fundamental duty of a State to protect children and pregnant women. Anything
after that is a bonus if not an embellishment. America is not only the wealthiest country in
the world but is also the wealthiest in history. And yet child hunger is tolerated. And just
to add the bread slices to this s*** sandwich, there are about 800 billionaires in the US at
the moment. How many of them could wake up one day and say to themselves: 'You know what?
I am going to abolish child hunger in America with my money and be remembered forever and
even have statues raised to myself!' But it never happens.
America's incredible success is going to require americans to have a vastly reduced
standard of living to the point that they are equally as poverty stricken as the poors the
world over. Globalisation really makes any other out come unfair, and we must globalize.
Everyone being a poverty stricken gig worker is the plan. Here in this case an amazon worker
and an uber driver, on the dole. In reality, I think the biden admin has just dusted off the
plans that were to be unleashed under hillary, that's one of the reasons it all seems so ham
handed. The TPP was going to keep the world in our orbit and create supra national barriers
to autonomy in order to stop what is in fact happening now where they are free to choose
between china/russia and the US. From this perspective trump really screwed the plans of the
despicables.
1. It in the past
2. It was built on predation against the British Empire
Who needs a German Enemy with friends who help with lend-lease, Cancel the German War
debt, and not their "allies." Combined with subverting the British Empires rule with a
twisted version of self-rule – Governance dependent on not having US Sanctions, aka
imperialism absent responsibility.
This after dispossession the local US natives of the ancestral lands by force, and tricky
legalities.
It's not a failed nation, it's how the US was always designed to work. It might have had
some good years of P.R. and marketing after WWII but it was always a lie. The Constitution
was written by a bunch of wealthy slavers that hated commoners and feared economic democracy
and popular governance. The US became the wealthiest country by starving kids and killing
people the world over; it was forced into a bit of wealth distribution for a few decades by
multi-state steel strikes, the Bonus Army, armed miners unions, tenants unions, the Farmers
Holiday movement, and the contrast of a Soviet Union that was advancing by leaps and bounds
economically while the US festered in a depression. But whether it was the indigenous, the
slaves, the Filipinos, the Haitians, the Chinese, the Nicaraguans, the Mexicans, the
Hondurans, the Iranians, the Guatemalans, the Chileans, the Koreans, the Vietnamese, the
Laotians, the Cambodians, the Russians, the Iraqis, the Libyans, the Syrians, or it's own
citizens, the US has always killed for money. If it runs out of places to take over and
expand it'll just starve the kids at home to make a buck. It'll charge the poor overdraft
fees for having no money then chalk that up as a financial service. It'll have its state
security forces kill you for a traffic stop and then beat every citizen en masse that dares
to object. It'll cannibalize the very infrastructure and fabric of society and hand it over
to oligarchs and private equity. It'll give all the wealth to people who charge usury and own
embroidered pieces of paper but who don't actually do anything useful or necessary. And the
marks that watch US movies and television and news will believe that the US is somehow
benevolent and that they can somehow bend the will of the rapacious through the very
electoralism that the wealthy designed to keep the poor from having a say.
Starving children. Children in concentration camps. Children forced into schools during a
plague. These aren't 'oopsies.' This is how the country is set up to run. Look at how much
money the wealthy gained by letting a pandemic run wild. Look at how the entire investment
class should have gone bankrupt in 2008 but instead workers were fired from jobs and cast out
of their homes by the millions. Now the kids of those sacrificed are starving right next to
the wealthy that should have gone bust. The affluent are literally taking food out of kids
mouths because they won't let their precious stocks or real estate go down in price one iota.
The only good thing about kids starving in wealthy districts is that a Robin Hood won't have
to go to far to find money to give to those kids.
The 800 billionaires consider child hunger in America to be one of their greatest
achievements.
The child hunger in America problem won't be solved until the 800 billionaires and all
their ideological supporters and economic servants have been " rounded up and exterminated",
so to speak.
Thank you, Palaver. All "food" is not equal. Nutrition should be the emphasis.
In my jurisdiction, the Food Bank Industry encourages donations of packaged, processed,
industrialized "food". For example, fifty pounds of oats gives much more nutrition bang for
the buck than the equivalent $$$ amount of Conglomerate Cereals.
At my Conglomerate Stupormarket, they have a bin for unthinking donors to drop in "food"
that was bought in the Stupor. I've seen poptarts, jars of frosting, jello, etc. all sorts of
"food". And why do I think the Stupormarket just recycles a lot of this stuff back onto their
shelves, making a huge profit?
Next time you donate, check out what your Food Bank is actually peddling and who runs it.
Food Banks have become a huge Industry and we know what happens to huge Industries.
My mother gives rides to some of her friends (without expectation of any compensation cuz
friendship). In return, some of the friends give random items from their weekly food bank
allotment.
the food is shelf-stable processed items with produce and baked goods nearing expiration
from the local gourmet independent chain and the local Whole Foods.
Manslow's hierarchy of needs applies obviously and the food banks do truly heroic deeds
daily, but long-term people can't live healthy lives eating boxed Mac 'n Cheese, PBJ
sandwiches and organic cookies every single day.
I say expand WIC spending and eligibility, but as I'm not too familiar with that program,
dunno if that'll do any good.
In the USA, the top one percent of household net worth starts at $11,099,166.
It is seems improbable that the commenter achieved that goal. May be he is thinking of 1%
of Indonesia or Philippines. The reference to tenant farmers also appears to indicate a
country like that. Retiring to live in the Indonesian countryside is not my idea of a good
old age. Correct me please if I am wrong.
The one good thing about bringing back neoclassical economics.
We know what led to Wall Street Crash in 1929. The same mistakes have been repeated
globally.
At 25.30 mins you can see the super imposed private debt-to-GDP ratios.
The financial crisis appears to come out of a clear blue sky when you use an economics
that doesn't consider debt, like neoclassical economics, as it did in 1929.
1929 – US
1991 – Japan
2008 – US, UK and Euro-zone
The PBoC saw the Chinese Minsky Moment coming and you can too by looking at the chart
above. The Chinese were lucky; it was very late in the day. Everyone has made the same
mistake; only the Chinese worked out what the problem was.
The Chinese don't seem too worried about the competition.
Putin and Xi are jealous of Wall Street.
No matter how hard they try, they have never been able to inflict the same level of damage to
the West, Wall Street managed in 2008.
The Chinese know what to look out for to spot a financial crisis coming. They look for the
problems brewing in private debt and inflated asset prices.
This nice Chinese chap tried to warn the Americans the US stock markets was at 1929 levels at
Davos 2018. https://www.youtube.com/watch?v=1WOs6S0VrlA
We know what a correction from 1929 levels looks like.
We have seen it before.
"They've done it again, I can't believe my luck. US stock markets are at 1929 levels,
this isn't going to end well" president Xi
Xi has probably rung Putin up to tell him the good news.
I bet they had a right old laugh.
Luckily for the Chinese, the Americans have no idea what they are doing.
The Chinese have been making all the classic mistakes of neoclassical economics, but have
been learning from them to ensure they don't make the same mistakes again.
We haven't been doing this in the West.
At the end of the 1920s, the US was a ponzi scheme of inflated asset prices.
The use of neoclassical economics, and the belief in free markets, made them think that
inflated asset prices represented real wealth.
1929 – Wakey, wakey time
The use of neoclassical economics, and the belief in free markets, made them think that
inflated asset prices represented real wealth, but it didn't.
It didn't then, and it doesn't now.
What was the ponzi scheme of inflated asset prices that collapsed in 2008? "It's nearly $14 trillion pyramid of super leveraged toxic assets was built on the back of
$1.4 trillion of US sub-prime loans, and dispersed throughout the world" All the
Presidents Bankers, Nomi Prins.
It wasn't real wealth, just a ponzi scheme of inflated asset prices.
Real estate – the wealth is there and then it's gone.
1990s – UK, US (S&L), Canada (Toronto), Scandinavia, Japan, Philippines,
Thailand
2000s – Iceland, Dubai, US (2008), Vietnam
2010s – Ireland, Spain, Greece, India
It wasn't real wealth, just a ponzi scheme of inflated asset prices.
It's been the same since Tulip Mania.
You can inflate asset prices, keeping them inflated is the hard bit.
Oh yeah, we had a system like that where all the wealth stayed at the top. We called it
Feudalism. The Americans are progressing in the reverse direction.
Perhaps certain counter-Feudalist towns, cities, communities, etc. should study up on how
certain Free Towns and Free Republics survived in Europe during the Feudalist Period. And try
to set themselves up as the Free Towns, Free Cities, Free Republics in the midst of a future
Feudalist America.
Thank you, RMO, you summarized US-Russian relations from 1991 to the start of the Putin
era much better than me. We really missed an opportunity to integrate the Russians into the
US-EU alliance (such as it was), especially with regard to NATO.
Bush Jr. compounded this failure by mistaking Putin for an ally in the war against terror,
thinking that our concerns in the middle east paralleled Putin's affairs in Chechen. They
could have, but didn't. Putin was a more strategic thinker.
My sense is that Putin played a waiting game for much of the first two decades of this
century...
"report on January personal income and spending shows just how important the stimulus
packages enacted by the federal government both last spring and last month have been to
sustaining the economy."
The truth of that was confirmed on the back end in this morning's report for February, in
which January's 10% increase in income was followed by a -7.1% decrease (red). January's
increase of 3.4% in spending was also partially reversed by a -1.0% decrease in February
(blue):
... ... ...
Employment is down over 5% since last February, while production is down 4%. Meanwhile,
income is down only 2.5%, and real sales have actually increased by nearly 5%! Most recently,
in the combined two-month period since December, two of the series – payrolls and real
sales – have increased, while the other two – industrial production and income less
government payments – have declined.
Since the Big Texas Freeze impacted probably substantially impacted all of these, the
underlying situation is presumably better.
"... How convinced should anyone be when dismissing the message of metrics like these? To be sure, both the market and economy are in uncharted waters. It's possible -- perhaps likely -- that old standards don't apply when something as random as a virus is behind the stress. At the same time, many a portfolio has been squandered through complacency. Market veterans always warn of fortunes lost by investors who became seduced by talk of new rules and paradigms. ..."
"... At 35, the CAPE is at its highest since the early 2000s. ..."
"... Another indicator raising eyebrows is called Tobin's Q. The ratio -- which was developed in 1969 by Nobel Prize-winning economist James Tobin -- compares market value to the adjusted net worth of companies. It's showing a reading just shy of a peak reached in 2000. T ..."
"... the signal sent by the "Buffett Indicator," a ratio of the total market capitalization of U.S. stocks divided by gross domestic product. ..."
"... Still, it's hard to ignore the risks to underlying assumptions. While rock-bottom rates underpin many of the arguments, this year has shown that the Fed still is willing to let longer-term interest rates run higher. And betting on huge upside earnings surprises is risky too -- it's rare to see a 16% beat historically. Before last year, earnings had exceeded estimates by an average 3% a quarter since 2015. ..."
"... "This happens in every bubble," said Bill Callahan, an investment strategist at Schroders. "It's: 'Don't think about the traditional value metrics, we have a new one.' It's: 'Imagine if everyone did XYZ, how big this company could be.'" ..."
"... To Scott Knapp, chief market strategist of CUNA Mutual Group, abandoning standard valuation measures because the environment has changed places investors in "pretty sketchy territory." Talk of watershed moments rendering traditional metric irrelevant as a signal, he says. "That's usually an indication we're trying to justify something," he said. ..."
Shiller P/E. Tobin's Q. Buffett Indicator. Ignore them all?
It's 'usually an indication we're trying to justify something'
Everywhere you look, there's a valuation lens that makes stocks look frothy. Also everywhere you look is someone
saying don't worry about it.
The so-called
Buffett
Indicator
. Tobin's Q. The S&P 500's forward P/E. These and others show the market at stretched levels, sometimes
extremely so. Yet many market-watchers argue they can be ignored, because this time really is different. The
rationale? Everything from Federal Reserve largesse to vaccines promising a quick recovery.
How convinced should anyone be when dismissing the message of metrics like these? To be sure, both the market and
economy are in uncharted waters. It's possible -- perhaps likely -- that old standards don't apply when something as
random as a virus is behind the stress. At the same time, many a portfolio has been squandered through complacency.
Market veterans always warn of fortunes lost by investors who became seduced by talk of new rules and paradigms.
"Every time markets hit new highs, every time markets get frothy, there are always some talking heads that argue:
'It's different,'" said Don Calcagni, chief investment officer of Mercer
Advisors
.
"We just know from centuries of market history that that can't happen in perpetuity. It's just the delusion of
crowds, people get excited. We want to believe."
Source: Robert Shiller's website
Robert Shiller is no apologist. The Yale University professor is famous in investing circles for unpopular valuation
warnings that came true during the dot-com and housing bubbles. One tool on which he based the calls is his
cyclically adjusted price-earnings ratio that includes the last 10 years of earnings.
While it's flashing warnings again, not even Shiller is sure he buys it. At 35, the CAPE is at its highest since the
early 2000s. If that period of exuberance is excluded, it clocks in at its highest-ever reading. Yet in a recent
post
,
Shiller wrote that "with interest rates low and likely to stay there, equities will continue to look attractive,
particularly when compared to bonds."
Another indicator raising eyebrows is called Tobin's Q. The ratio -- which was
developed
in
1969 by Nobel Prize-winning economist James Tobin -- compares market value to the adjusted net worth of companies.
It's showing a reading just shy of a peak reached in 2000. To Ned Davis, it's a valuation chart worth being wary
about. Still, while the indicator is roughly 40% above its long-term trend, "there may be an upward bias on the ratio
from technological change in the economy," wrote the Wall Street veteran who founded his namesake firm.
Persuasive arguments also exist for discounting the signal sent by the "Buffett Indicator," a ratio of the total
market capitalization of U.S. stocks divided by gross domestic product. While it recently reached its highest-ever
reading above its long-term trend, the methodology fails to take into consideration that companies are more
profitable than they've ever been, according to Jeff Schulze, investment strategist at ClearBridge Investments.
"It's looked extended really for the past decade, yet you've had one of the best bull markets in U.S. history," he
said. "That's going to continue to be a metric that does not adequately capture the market's potential."
At Goldman Sachs Group Inc., strategists argue that however high P/Es are, the absence of significant leverage
outside the private sector or a late-cycle economic boom points to low risk of an imminent bubble burst. While people
are shoveling money into stocks at rates that have signaled exuberance in the past, risk appetite is rebounding after
a prolonged period of aversion, according to the strategists, who also cite low interest rates.
"Today is a very different situation -- I don't think we've got a broad bubble," Peter Oppenheimer, chief global
equity strategist at the firm, said in a recent interview on Bloomberg Television. "Given the level of real rates,
where they are, it's still likely to be broadly supportive for equities versus bonds."
Another rationale employed to dismiss certain valuation metrics is the earnings cycle. Corporate America is just
emerging from a recession, with profits forecast to stage a strong comeback. The strong outlook for profits is why
many investors are giving similarly stretched valuations the benefit of the doubt. Trading at 32 times reported
earnings, the S&P 500 looks quite expensive, but with income forecast to jump 24% to $173 a share this year, the
multiple drops to about 23.
The valuation case becomes more favorable should business leaders continue to blow past expectations. For instance,
if this year's earnings come in at 16% above analyst estimates, as they did for the previous quarter, that'd imply a
price-earnings ratio of less than 20. While that exceeds the five-year average of 18, Ed Yardeni is not troubled by
what he calls "the New Abnormal."
"Valuation multiples are likely to remain elevated around current elevated levels because fiscal and monetary
policies continue to flood the financial markets with so much free money," said the founder of Yardeni Research Inc.
He predicts the S&P 500 will finish the year at 4,300, about an 8% gain from current levels.
Still, it's hard to ignore the risks to underlying assumptions. While rock-bottom rates underpin many of the arguments, this year
has shown that the Fed still is willing to let longer-term interest rates run higher. And betting on huge upside earnings
surprises is risky too -- it's rare to see a 16% beat historically. Before last year, earnings had exceeded estimates by an
average 3% a quarter since 2015.
"This happens in every bubble," said Bill Callahan, an investment strategist at Schroders. "It's: 'Don't think about the
traditional value metrics, we have a new one.' It's: 'Imagine if everyone did XYZ, how big this company could be.'"
Returns of 2%
Valuations are never useful market-timing tools because expensive stocks can get more expensive, as was the case during the
Internet bubble. Yet viewed through a long-term lens, valuations do matter. That is, the more over-valued the market is, the
lower the future returns. According to a study by Bank of America strategists led by Savita Subramanian, things like
price-earnings ratios could explain 80% of the S&P 500's returns during the subsequent 10 years. The current valuation framework
implies an increase of just 2% a year over the next decade, their model shows.
To Scott Knapp, chief market strategist of CUNA Mutual Group, abandoning standard valuation measures because the environment has
changed places investors in "pretty sketchy territory." Talk of watershed moments rendering traditional metric irrelevant as a
signal, he says.
"That's usually an indication we're trying to justify something," he said.
"In a community where the primary concern is making money, one of the necessary rules is to
live and let live. To speak out against madness may be to ruin those who have succumbed to it.
So the wise in Wall Street are nearly always silent. The foolish thus have the field to
themselves."
John Kenneth Galbraith, The Great Crash of 1929
"Foolishness is a more dangerous enemy of the good than malice. One may protest against
evil; it can be exposed and, if need be, prevented by use of force. Evil always carries within
itself the germ of its own subversion in that it leaves behind in human beings at least a sense
of unease.
In conversation with them, one virtually feels that one is dealing not at all with a person,
but with slogans, catchwords and the like that have taken possession of them. They are under a
spell, blinded, misused, and abused in their very being."
Dietrich Bonhoeffer, Prisoner for God: Letters and Papers from Prison
"The ideal subject of totalitarian rule is not the convinced Nazi or the dedicated
communist, but people for whom the distinction between fact and fiction, true and false, no
longer exists."
Hannah Arendt, The Origins of Totalitarianism
"When we trade the effort of doubt and debate for the ease of blind faith, we become
gullible and exposed, passive and irresponsible observers of our own lives. Worse still, we
leave ourselves wide open to those who profit by influencing our behavior, our thinking, and
our choices. At that moment, our agency in our own lives is in jeopardy."
Margaret Heffernan
Today was a general wash and rinse in the markets.
Wax on, wax off.
If you look at the charts you will see the deep plunges in the early trading hours in stocks
and the metals, especially silver.
Simply put, it is called running the stops.
This is not 'the government' doing this.
These are the monstrous financial entities that we have allowed lax regulation and years of
propagandizing to create, in the biggest Banks and hedge funds.
Most will run back to the familiar sources of their ideological addiction, the so-called
'news sites' that thrive on the internet and alternative radio funded by the oligarchs.
If you are one of those who cannot wait to run back to your familiar ideological watering
hole to relieve the tension of thought, you might just be one of the willfully blind and
lost.
Truth is more palatable to the sick at heart when it has been twisted out of shape.
The good news perhaps is that a cleaning out like this often proceeds a resumption of a move
higher.
First they kick off the riff raff. Oh, certainly that does not include you, but those
others, right?
Or not. It is not easy to think like a criminal when you are not privy to the same jealously
guarded information and perverse perspective on life.
On the lighter side I have experienced no side effects from the first dose of the
Coronavirus vaccine which I had the other day.
Let's see if the second shot has the same results.
The whole experience reminded me of 'Sabin Oral Sunday' back in 1960. I don't recall any
anti-vaxxer or ideologically driven whack-a-doodlism back then, but I was too young to
care. And polio shots were no fun. But it beat doing time in an iron lung.
How many people are really out of work? The answer is surprisingly difficult to ascertain.
For reasons that are likely ideological at least in part, official unemployment figures greatly
under-report the true number of people lacking necessary full-time work.
That the "reserve army of labor" is quite large goes a long way toward explaining the
persistence of stagnant wages in an era of increasing productivity.
How large? Across North America, Europe and Australia, the real unemployment rate is
approximately double the "official" unemployment rate.
The "official" unemployment rate in the United States, for example, was 5.5 percent for
February 2015. That is the figure that is widely reported. But the U.S. Bureau of Labor
Statistics keeps track of various other unemployment rates, the most pertinent being its "U-6"
figure. The U-6 unemployment rate includes all who are counted as unemployed in the "official"
rate, plus discouraged workers, the total of those employed part time but not able to secure
full-time work and all persons marginally attached to the labor force (those who wish to work
but have given up). The actual U.S. unemployment rate for February 2015, therefore, is 11 percent .
Canada makes it much more difficult to know its
real unemployment rate. The official Canadian
unemployment rate for February was 6.8 percent, a slight increase from January that
Statistics Canada attributes to "more people search[ing] for work." The official measurement in
Canada, as in the U.S., European Union and Australia, mirrors the official standard for
measuring employment defined by the International Labour Organization -- those not working at
all and who are "actively looking for work." (The ILO is an agency of the United Nations.)
Statistics Canada's closest measure toward counting full unemployment is its R8 statistic,
but the R8 counts people in part-time work, including those wanting full-time work, as
"full-time equivalents," thus underestimating the number of under-employed by hundreds of
thousands,
according to an analysis by The Globe and Mail . There are further hundreds of
thousands not counted because they do not meet the criteria for "looking for work." Thus
The Globe and Mail analysis estimates Canada's real unemployment rate for 2012 was
14.2 percent rather than the official 7.2 percent. Thus Canada's true current unemployment rate
today is likely about 14 percent.
Everywhere you look, more are out of work
The gap is nearly as large in Europe as in North America. The official European Union
unemployment rate was 9.8
percent in January 2015 . The European Union's Eurostat service requires some digging to
find out the actual unemployment rate, requiring adding up different parameters. Under-employed
workers and discouraged workers comprise four percent of the E.U. workforce each, and if we add
the one percent of those seeking work but not immediately available, that pushes the
actual unemployment rate to about 19 percent.
The same pattern holds for Australia. The Australia Bureau of Statistics revealed that its
measure of "extended labour force under-utilisation" -- this includes "discouraged" jobseekers,
the "underemployed" and those who want to start work within a month, but cannot begin
immediately -- was
13.1 percent in August 2012 (the latest for which I can find), in contrast to the
"official," and far more widely reported, unemployment rate of five percent at the time.
Concomitant with these sobering statistics is the length of time people are out of work. In
the European Union, for example, the long-term unemployment rate -- defined as the number of
people out of work for at least 12 months --
doubled from 2008 to 2013 . The number of U.S. workers unemployed for six months or longer
more than tripled from
2007 to 2013.
Thanks to the specter of chronic high unemployment, and capitalists' ability to transfer
jobs overseas as "free trade" rules become more draconian, it comes as little surprise that the
share of gross domestic income going to wages has declined steadily. In the U.S., the share has
declined from 51.5 percent in 1970 to about 42 percent. But even that decline likely
understates the amount of compensation going to working people because almost all gains in
recent decades has gone to the top one percent.
The increased ability of capital to move at will around the world has done much to
exacerbate these trends. The desire of capitalists to depress wages to buoy profitability is a
driving force behind their push for governments to adopt "free trade" deals that accelerate the
movement of production to low-wage, regulation-free countries. On a global basis, those with
steady employment are actually a minority of the world's workers.
Using International Labour Organization figures as a starting point, professors John Bellamy
Foster and Robert McChesney calculate that the "global reserve army of labor" -- workers who
are underemployed, unemployed or "vulnerably employed" (including informal workers) -- totals
2.4 billion. In contrast, the world's wage workers total 1.4 billion -- far less! Writing in
their book The Endless
Crisis: How Monopoly-Finance Capital Produces Stagnation and Upheaval from the USA to
China , they write:
"It is the existence of a reserve army that in its maximum extent is more than 70 percent
larger than the active labor army that serves to restrain wages globally, and particularly in
poorer countries. Indeed, most of this reserve army is located in the underdeveloped
countries of the world, though its growth can be seen today in the rich countries as well."
[page 145]
The earliest countries that adopted capitalism could "export" their "excess" population
though mass emigration. From 1820 to 1915, Professors Foster and McChesney write, more than 50
million people left Europe for the "new world." But there are no longer such places for
developing countries to send the people for whom capitalism at home can not supply employment.
Not even a seven percent growth rate for 50 years across the entire global South could absorb
more than a third of the peasantry leaving the countryside for cities, they write. Such a
sustained growth rate is extremely unlikely.
As with the growing environmental crisis, these mounting economic problems are functions of
the need for ceaseless growth. Once again, infinite growth is not possible on a finite planet,
especially one that is approaching its limits. Worse, to keep the system functioning at all,
the planned
obsolescence of consumer products necessary to continually stimulate household spending
accelerates the exploitation of natural resources at unsustainable rates and all this
unnecessary consumption produces pollution increasingly stressing the environment.
Humanity is currently consuming the equivalent of one and a
half earths , according to the non-profit group Global Footprint Network. A separate report
by WWF–World Wide Fund For Nature in collaboration with the Zoological Society of London
and Global Footprint Network, calculates that the Middle East/Central Asia, Asia-Pacific, North
America and European Union regions are each consuming about double their
regional biocapacity.
We have only one Earth. And that one Earth is in the grips of a system that takes at a pace
that, unless reversed, will leave it a wrecked hulk while throwing ever more people into
poverty and immiseration. That this can go on indefinitely is the biggest fantasy.
"Underfunded" is a euphemism for "have students with low test scores." E.g., "Washington
D.C.'s underfunded schools."
D.C. spent around $30,115 per pupil in 2016-17, while in 2017-18, nearby Arlington County
was expected to spend $19,340, the City of Falls Church to spend $18,219; the City of
Alexandria, $17,099; Montgomery County, $16,030; Fairfax County, $14,767; Prince George's
County, $13,816; Loudoun County, $13,688; City of Manassas, $12,846; City of Manassas Park,
$11,242; and Prince William County, $11,222.
"Underfunded" is a euphemism for "have students with low test scores." E.g., "Washington
D.C.'s underfunded schools." Presumably, it means "underfunded relative to some theoretical
amount of money, such as a gajillion dollars, that would be sufficient to raise these
students' test scores to average."
My dad was a school administrator in one of the top county public school systems in the
country. A politically deep-blue part of the country. He retired in the early '80's. I
remember him telling me once after he retired that his school(s) would get constant demands
from the school board to raise black (not many Hispanics then) test scores. He said the
school(s) focused all kinds of resources on black students which yielded no appreciable
results. He then said, "You know how we raised black test scores to the level demanded? We
fudged the numbers."
The EUP is cutting its own throat trying to bully China. I see the move was made as soon
as Blinken arrived and began spreading lies about both Russia and China. I know China and
Russia would like these rogue nations to uphold their honor by obeying the UN Charter, but it
seems too many have caught the Outlaw US Empire's disease and now want to return to their
Colonial ways. If the EUP ends up trashing the Comprehensive Agreement on Investment (CAI)
with China, many individual European nations are going to be very angry. China won't mind if
that's what the EUP does as is explained here :
"After China announced sanctions on 10 individuals and four entities from the EU as a
countermove to EU's unilateral sanctions against China, some people from the EU reacted
strongly, claiming China's countermeasures were "unacceptable." The European Parliament
canceled a meeting on Tuesday to discuss the Comprehensive Agreement on Investment (CAI) with
China. Some members of the European Parliament warned that the lifting of Chinese sanctions
should be a condition to promote talks on CAI. Voices that support to block the agreement in
an attempt to punish China have been hyped by some anti-China forces.
"Yet those forces should be told that the CAI between China and the EU is mutually
beneficial, rather than a gift from the EU to China. If the European Parliament wants to
obstruct the deal, taking it as a bargaining chip in interactions with China, it should first
reach a consensus among European countries. If they all agree, let's just take it as
negotiations between China and the EU never took place last year. But don't blackmail China
with the case. China despises such ugly deeds."
China's saying essentially that it will forego the benefits of trade if it isn't properly
respected and doesn't care if the EU's dire economic condition worsens because it can't stand
up for itself in the face of the world's #1 Bully, which is exactly the same line Russia has
taken.
It is not just Jens Quisling, half (or more) of the European political elite are USA
proxies.
Take for example the European green parties.
I am pretty sure that the Dutch green party is at its core a NATO/military intelligence
operation. It was created as a merger of three parties, all of whom had a distinct pacifist
and socialist signature. The new party, GroenLinks ("GreenLeft") has forgotten all of that
and has limited itself to churning out Big Climate slogans. The party leader is an obviously
hollow puppet in the image of Justin Trudeau. His opinions are handed to him by advisors in
the shade.
A few years ago, an MP for GroenLinks, Mariko Peters was enthousiastically
promoting more military missions in Afghanistan. She was also a board member of the
"Atlantische Commissie", the local Dutch chapter of the Atlantic Treaty Organisation
(the USA chapter is the more well-known Atlantic Council). If you study her antics and
associations more closely, it is pretty obvious that there is nothing green or left about
this lady and that she is an obvious atlanticist diplomat/spy type.
Currently, there are no political parties in the Netherlands that are critical of NATO.
This used to be very
different not even a very long time ago.
What the article does not mention is the association, reputedly for a six-figure salary)
of former Grüne luminary Joschka Fisher to the Nabucco pipeline project (competing with
ns2). Fischer is also a member of the council on foreign relations and a founding member even
of the European chapter ECFR.
"... freedom is material: a human being must be free from material privation, here and now, in life (and not in the mythical afterlife of reincarnation) in order to be really free. In other words, freedom from need is true freedom. ..."
Marx's concept of freedom is completely different from the liberal or pre-liberal concepts
of freedom. For Marx, freedom is material: a human being must be free from material
privation, here and now, in life (and not in the mythical afterlife of reincarnation) in
order to be really free. In other words, freedom from need is true freedom.
Human beings can only be materially free. Don't fall for the moral victories of
liberalism, the snake oil salesmen's promise of a spot in Paradise from the Abrahamics or the
nihilist bullshittery from the Buddhists et al.
Excellent point by vk here. Despite sometimes pretending to myself that I am a Buddhist (I
am really good at meditating!), real freedom is being free from need. Abstract and
metaphysical "freedoms" are luxuries of the wealthy that few under the thumb of the
empire can afford.
I have been surprised by the explosion in the numbers of people locally living in cars and
vans lately. I guess from my Buddhist perspective they have been freed from the attachment to
a residence. Who could have guessed that capitalism would be such a good teacher of the path
to enlightenment?
It's freedom from Want. The Four Freedoms as articulated by FDR in 1941 were:
1.Freedom of speech
2.Freedom of worship
3.Freedom from want
4.Freedom from fear
Earlier this year on the 80th anniversary of FDR's speech, I wrote a series of comments on
the topic. They remain the four main tasks needing to be accomplished for the Common Man to
be genuinely free. At the time, they were to be the main goals of WW2; goals that were
further articulated by Henry Wallace in 1942 & '43 in his speeches and writings.
Currently, several nations have accomplished those four goals; none of them is a
NATO/Neoliberal nation however.
Retirees who have the most money pay the most in taxes, according to a
recent
working paper
, but they're not necessarily rich.
"Most of the tax burden is carried by the top quintile of households,"
Anqi
Chen
, co-author and assistant director of savings research at the Center for Retirement Research at Boston College, told
Yahoo Money. But "it's important to keep in mind that when we think about the top quintile of households -- the top 20% -- they're
not the super wealthy."
Those in the highest quintile are mostly married couples with average combined Social Security benefits of $50,900, 401(k)/IRA
balances of $325,400, and financial wealth of $441,400. When annuitized, those assets and retirement accounts earn account
holders roughly $3,000 per month -- or $36,000 per year -- ostensibly making them middle-income earners, Chen said.
"That's some money but not a ton of money," Chen said, "and these households will have to pay about 11% [in taxes]."
(Photo: Getty)
The highest quintile pays 11.3% on their retirement income, while the top 5% is taxed at 16.4%, and the top 1% is taxed at 22.7%,
according to the analysis. Overall, retired households pay 6% in federal and state taxes on their income.
Researchers used income data from 3,419 individuals and 1,907 households included in the Health and Retirement Study, a
nationally representative longitudinal survey of older Americans. The analysis assumes the retirees follow the required minimum
distributions for their retirement accounts and consume only interest and dividends from their assets.
The heavy tax burden carried by well-off retirees demonstrates that even those who enter their golden years with the most money
are still short on savings, an ongoing problem for many Americans. Roughly 40% of the top quintile of savers are at risk of
maintaining their standard of living, meaning "taxes will make the goal even more difficult to attain," the study said.
For the majority of retired households, "taxes are negligible," Chen said, paying 0% to 1.9%. But they are far from lucky.
Those in the "bottom two-thirds of the income distribution don't have a lot in financial assets" that yield material income in
retirement, she added.
Yahoo Money sister site Cashay has a weekly newsletter.
Stephanie is a reporter for Yahoo Money and
Cashay
,
a new personal finance website. Follow her on Twitter
@SJAsymkos
.
The USA remains is secular stagnation mode caused by neoliberalization of the economy and
2008 financial crisis. Nothing can change that.
When Microsoft and Facebook are called high growth stock the question arise about the sanity
of the author. How they can achieve high growth? Facebook user base probably might even shrink,
not expand due to negative publicity as being a surveillance company and more and more obnoxious
censorship.
Microsoft achieved dominance in desktop long ago and with PC sales basically stagnant how it
can grow in its key market? Connections to PRISM also do not help.
Wall Street speculated on the identity of the mysterious seller behind the massive $10.5
billion in block trades executed on Friday by Goldman Sachs Group Inc. The question is why did
these block trades occur? Does one firm know something others don't or were they somehow forced
to cut risk? Read More: 'Unprecedented'-
Wall Street Ponders Goldman's Block-Trade Spree
Much of the stock market's recent turbulence has been an after-effect of movements in the
bond market, where Treasury yields have been largely climbing since last autumn. Higher yields
can make investors less willing to pay high prices for stocks, with companies seen as the most
expensive taking the most pain. Companies that ask their investors to wait many years for the
payoff of big profit growth have also been hit hard.
The yield on the 10-year Treasury rose to 1.67% from 1.61% late Thursday. But that's still
below where it was last week, when it rose above 1.70% and touched its highest level since
before the pandemic began.
The higher yields helped lift stocks of banks, in part because higher interest rates allow
them to make bigger profits from making loans. Financial stocks also got a boost after the
Federal Reserve said it will soon allow
banks to resume buying back their own stock and to send bigger dividend payments to
shareholders. The Fed restricted such moves last summer to force banks to hold onto cash
cushions amid the coronavirus-caused recession.
Some of Friday's biggest gains came from energy stocks, which benefited from a $2.41 rise in
the price of U.S. oil, settling at $60.97 per barrel.
... ... ...
President Joe Biden is pushing for
big spending on the nation's infrastructure , as many past presidents have done to little
effect. "Whether or not it happens or doesn't happen, the market feels like there's more of a
possibility that it will happen," Plumb said.
... high-growth stocks were turning in a mixed performance on Friday. Apple rose 0.5%, but
only after swinging between gains and losses numerous times through the day. Microsoft rallied
1.8%, and Facebook climbed 1.5%, but Tesla dropped 3.4%.
In the background is a continuing stark
economic situation in the US : After shedding
140,000 jobs in December, the economy added back just 50,000 jobs in January. The country
is still short 10 million jobs from where it was pre-pandemic, and some 4 million workers have
dropped out of the workforce. In that context, it's hard to gauge just how much to worry about
overshooting it on the response.
The Asia times article did it connect the dots for me. china especially is not buying US
bonds anymore. Hence low demand for it , causing the yields to ride to attract buyers.
The 30-year Treasury yield has climbed all the way back to its 2019 level, mainly because
inflation expectations built into the yield have risen to the highest level since 2014. A US
government deficit equal to 20% of GDP, a falling dollar and rising commodity prices mean more
inflation in the future.
The Federal Reserve bought most of the Treasury debt issued in the past year, and will have
to buy most of the Treasury debt issued during the coming year, as Bridgewater's Ray Dalio told
the China Economic Forum on Sunday.
Unlike the period after the 2009 crash, when foreigners financed roughly half of the US
government deficit, foreigners haven't increased their holdings of US debt during the past
twelve months.
Dalio, one of the world's most successful investors, warns that they might start to sell the
debt they already own. "The situation is bearish for the dollar," Dalio concluded.
As the late Herbert
Stein said, anything that can't go on forever won't.
Budan University Professor Bai Gang told China's Observer website last week: "For the
past year, the US has continued to issue more currency to ease its internal situation. The
pressure will eventually seriously damage the status of the US dollar as the core currency in
the international payment system."
"... "Neither the Securities and Exchange Commission [SEC] nor any state securities commission has approved or disapproved of the securities offered in this prospectus, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense " (emphasis mine); and ..."
"... "The trust is not an investment company registered under the Investment Company Act of 1940. The trust is not a commodity pool for purposes of the Commodity Exchange Act, and its sponsor is not subject to regulation by the Commodity Futures Trading Commission as a commodity pool operator, or a commodity trading advisor. ..."
Is it also not a conflict of interest that HSBC bank, a bank that allegedly holds some of
the largest short positions against gold on the COMEX, is the custodian for the SPDR Gold
Trust? If these banks profit when gold and silver drop, and they manage the largest ETFs in the
US regarding these respective metals, is it unreasonable to state that these two banks should
be barred from acting as custodians of the GLD and SLV?
In fact, how is this situation any different than Goldman Sachs's actions in the past when
they originated CDOs and then made a fortune by shorting them, actions that back then, were
apparently unknown even to the firm's own traders? On the surface, it certainly appears to be
another classic case of the fox guarding the hen house.
... ... ...
Some may say that the word delusional is a harsh term, but a mere glance at the GLD and SLV
prospectuses explains my use of this term. Both the GLD and the SLV prospectus contain the
following two statements:
"Neither the Securities and Exchange Commission [SEC] nor any state securities commission
has approved or disapproved of the securities offered in this prospectus, or determined if
this prospectus is truthful or complete. Any representation to the contrary is a criminal
offense " (emphasis mine); and
"The trust is not an investment company registered under the Investment Company Act of 1940.
The trust is not a commodity pool for purposes of the Commodity Exchange Act, and its sponsor
is not subject to regulation by the Commodity Futures Trading Commission as a commodity pool
operator, or a commodity trading advisor.
Furthermore, the SLV prospectus additionally states, "As an owner of iShares, you will
not have the protections normally associated with ownership of shares in an investment
company (emphasis mine) registered under the Investment Company Act of 1940, or the
protections afforded by the Commodity Exchange Act of 1936."
Does anyone else besides me not find it ludicrous that both the SEC and the CFTC have not
examined either the GLD or SLV prospectus to determine if it is truthful or complete, and that
in fact, any claims that the prospectus is truthful and complete is a "criminal offense"? So
with nothing in the marketing materials of how these trusts operate or what exactly they buy on
behalf of shareholders vetted by an independent third party, how is it that both of these
respective trusts are still allowed to cumulatively sell tens of billions of dollars worth of
shares to shareholders based upon a prospectus that could possibly be a complete
fabrication?
And media stocks were monkeyhammered (this was the biggest weekly drop in media stocks since
March 2020) ...
This all had the smell of a major media/tech fund liquidation. ViacomCBS was a total
shitshow...
Momentum stocks melted down...
Source: Bloomberg
SPACs dumped...
Source: Bloomberg
On the week, Staples outperformed as Discretionary dumped and Energy stocks changed their
mind faster than Fauci...
Treasury yields were lower across the curve this week led by the long-end... Is the pullback
in Small Caps relative to Big-Tech implying that rates have peaked for now? 1.60% remains a key
level for 10Y yields...
NightWriter 5 hours ago
We're starting to see bad news causing price drops as opposed to 2020 where the worst
thing imaginable caused more bull runs. If there's some really bad news this weekend, the
market could open up to a new low.
Peak Finance 4 hours ago (Edited)
I expect a flip back to bad news = good market news
word is they going to rig the UE this coming month to some crazy + millions of jobs to
make biden look good just like they did for O, same tricks messing with the "no logner in
workforce" numbers to up the employment rate
which is NOT going to have the effect on the market they think it will
SuperareDolo 2 hours ago
I concluded after Bernanke's printing that the market is able to see alpha (which security
is more valuable than another), but blind to beta (the valuation of the whole market). It can
judge one against another, but is incapable of reacting to overall valuations. Those are a
factor only of how much money is in the financial system. And there's too much.
Iskiab 1 hour ago (Edited)
Well bad news is good news sorta isn't it. Bad economic news means more QE in a situation
where it won't help that much keeping the gravy train going.
I would be careful around momentum stocks. Any deviation from the trendline will be a big
buy signal for algos, they're trained to look for opportunities and ride upward momentum,
then get out faster if things go bad. If it diverges much from the old trend line they might
buy en mass and see if it can create any momentum.
CheapBastard 5 hours ago (Edited) remove link
Dow soars 450 points!
Greatest recover eva!
ok, now get back in the food line for your bowl of soup.
Keltner Channel Surf 4 hours ago remove link
More than half a dozen indices/sectors I follow had very odd charts for the bulk of the
day, VERY tightly wound with suppressed vertical action well into the post-lunch period. If
you think of a tug-of-war game at company picnics that sits at a stalemate until one side
gains the edge, it always snaps hard in one direction.
The amplitude of most Daily candles wasn't terribly out of line with stronger days the
past few weeks -- but the irregular concentration of orders in time certainly was.
If I had to guess, the news of large liquidations may have torqued the spring to a near
black hole density, as machines were spooked (or, more likely, thwarted) by unusual order
patterns, then when the liquidations ended with prices well below VWAP, we break with speed
as most machines end Friday's flat, and the bias starting yesterday afternoon was a weekly
reversion back up.
As I've said before, when less active larger players suddenly become active, more active
daily algos, which control things 80% of the time, see their impact muted or overrun. But
these little devils don't EVER stop so, like a Roomba robot vacuum that hits an obstacle,
once the path is clear, it mindlessly goes where it planned. Again, this is your market on
drugs (or computers).
The UBS economics team holds the out-of-consensus view that annual core PCE inflation won't
exceed the Fed's 2% target until 2024. And what will happen with S&P500 if inflation brakes
3% barrier in late 2021 or 2022. Pumping money into stock market is a Ponzi scheme by definition
so at one point mistki moment might arrive.
Biden hailed the new law's focus on
growing the economy "from the bottom up and the middle out," after decades of supply-side,
or "trickle down" tax policies. It "changes the paradigm" for the first time since President
Johnson's Great Society programs, he said.
But the last time free-spending, inflation-permissive "regime shifts for fiscal and monetary
policymakers" coincided, wrote Deutsche Bank economists David Folkerts-Landau and Peter Hooper,
"such shifts touched off a sustained surge in inflation in the U.S.," beginning in 1966.
Growth in core prices, which exclude food and energy, jumped from well under 2% in 1965 to
nearly 3.5% in 1966 and approached 5% by late 1968, Deutsche Bank noted. Inflation remained
elevated into the early 1970s, even before an oil shock hit in 1973. The pickup was
broad-based, but health care inflation played a key role, going from less than 3% to nearly 7%
by early 1967.
The S&P 500 suffered through a bear market in 1966. Another 19-month bear market began
in late 1968. The Dow Jones made a major top in January 1966. It would take the Dow Jones until
1982 to finally break through that ceiling for good.
Almost everyone expects a notable pickup in inflation this year -- including the Fed.
Monetary policymakers expect the personal consumption expenditures (PCE) price index to rise
2.4% this year. That's vs. 1.5% in the 12 months through January.
Fed Chair Jerome Powell said March 17 that the Fed will discount this year's jump in prices
as a transitory bounce from pandemic-induced weakness. What happens in 2022 will be key. Fed
projections show inflation easing back to 2%. But if pressures don't ease, the Fed will have to
reassess its 2024 timetable for the cycle's first rate hike.
It's easy to see how Fed projections might understate next year's inflation. Policymakers
likely are not factoring in any impact from the Democrats' next massive spending package.
Subdued health care prices might help keep inflation in check, depending on what Congress
does. A 2% hike in Medicare reimbursements is scheduled to lapse in April, but lawmakers appear
set to extend it. A 3.75% increase in Medicare fees for physicians could end in January,
Deutsche Bank said.
Democrats also are eyeing spending curbs to help pay for their infrastructure package.
Letting Medicare negotiate prescription drug prices is high on the list of options.
Longer term, the inflation outlook may depend on whether a
post-pandemic productivity boom offsets upward price pressure as globalization
backslides.
10-Year Treasury Yield Surges On U.S. Economy Growth Outlook
This week, the 10-year Treasury yield has eased to 1.66%, after hitting 1.75% last week, the
highest of the Covid era. Still, the 10-year yield is up 66 basis points since Jan. 5.
Financial market pricing now indicates an expectation that inflation will average 2.35% over
the coming decade. That's the difference between the 10-year Treasury yield and the -0.69%
yield on 10-year Treasury Inflation-Protected Securities, or TIPS.
"Negative real yields seem highly incongruous with the robust economic growth in train,"
Moody's Analytics chief economist Mark Zandi wrote. As real yields rebound, Zandi sees the
10-year Treasury yield reaching 2% by year end, 2.5% in 2022 and 3% by late 2023.
What Do
Taxes, Interest Rates Mean For S&P 500?
As the new fiscal and monetary policy regime takes hold, investors will have a lot to
process. If the era of too-little inflation and ultralow interest rates is drawing to an end,
but earnings growth surges as the economy catches fire, what will that mean for the S&P
500? And how might tax hikes affect stock prices?
... ... ...
The UBS economics team holds the out-of-consensus view that annual core PCE inflation won't
exceed the Fed's 2% target until 2024. Chief U.S. economist Seth Carpenter expects the new
stimulus checks to be largely saved. The next fiscal package might likewise have a "muted" bang
for the buck, while adding just $600 billion to the federal deficit.
... ... ...
Interest Rates: Parker finds that a 50-basis-point rise in the 10-year Treasury yield
compresses price-earnings multiples by six-tenths of a point. Based on the S&P 500's
current forward earnings multiple of about 21.5, that would equate to about a 3% decline in the
S&P 500.
Capital Gains Taxes: Biden has proposed hiking the capital gains tax rate from 20% to 39.6%
for high earners. Parker figures that could slice 1.5 points off the S&P 500 P/E multiple,
potentially a 7% hit. However, UBS expects that not quite half the tax plan will become
law.
Parker arrives at a 19.5 forward earnings multiple for the S&P 500. That also factors in
some compression because the fiscal boost to earnings is bound to slacken...
Absurd NFT PRices Expose a Global Financial House of Cards
BY SKWEALTHACADEMY
FRIDAY, MAR 26, 2021 - 5:59
The
insanity of absurd NFT prices reveals the fraud of the global currency system. The pricing for assets worldwide has gone
insane at a time when the vast majority of the world's population became poorer, not wealthier, over the past 12 months due
to the global economic lockdowns. As an example, there was an article in the Philadelphia Inquirer the other day of
a
cassette tape of hip hop icon Nas's Illmatic album selling for $13,999
. Not a CD, but a cassette tape. A rectangular
piece of cardboard, known as an NBA trading card, for star
Luka
Doncic's rookie trading card, recently auctioned for $4.6M.
Luka Doncic is not a star that played in 1925, and for this
reason, his rookie card is worth so much. Luka Doncic entered the NBA in the 2018-19 season, less than three years ago.
Nostalgic or collector items are simply selling for insane price because, in my opinion, wealthy people have captured so
much of the world's wealth through a global currency system designed and engineered to produce this end result, that they
have no better use for their money than to pay $14,000 for a music item that the vast majority of people do not even have
the necessary hardware to actually play and to pay more than $4.5M for a piece of cardboard. Anyone that truly understands
the difference between a sound and an unsound monetary system realizes that the likelihood, under a sound monetary system,
of people paying exorbitant prices for the types of assets and NFTs described above would be a fraction of the probability
at which they are occurring today.
Banksy, a
UK-based street artist infamous for mocking the very wealthy people that pay millions for his artwork, even titling a piece
"Morons" which depicted an art auction with a framed picture of the words "I can't believe you morons actually buy this
shit". Instead of being offended by the artist's mockery, someone paid nearly 44,000 pounds for it and it recently sold
for nearly 10 times the original purchase price when the piece was destroyed and the act of destruction was turned into an
NFT. By the way Banksy also sold a very simple drawing of a girl with a red balloon that was mounted inside a frame in
which he had hidden a shredder. After it sold for $1.4M, Banksy remotely activated the hidden shredder and shredded his
artwork into thin strips as perhaps "revenge" against the idiocy of narcissistic, wealthy art collectors that can't find
any better use of their money than purchasing stencil created art for which no rational person would ever pay $1.4M. To
demonstrate the idiocy of the art world, Sotheby's immediately coined the shredding of the art piece as "the first work in
history ever created during a live auction", which art collectors worldwide seemed to accept, and thereby increased the
value of the destroyed piece of art to perhaps as high as double the original auction price at the current time and
avoiding a more rational valuation for the art piece to near zero.
I once read
a book called the $12M Stuffed Shark, in which the author revealed that US hedge fund manager Steve Cohen paid $12M to an
artist to kill a shark and put it in a vat of plexiglass sealed formaldehyde that he could display in the foyer of his
house and basically concluded, after a careful introspection into the art world, that pieces of art like pyramids built
from tiny Godiva chocolates and stainless-steel colored balloon animals
($58M
or more)
would be priced at whatever price dealers could convince the dumbest rich person it was worth. Certainly this
conclusion seemed to be supported when someone purchased an
"art
installation" of a banana taped to the wall with duct tape at a Miami Beach art gallery for $120,000 at the end of 2019
.
When people conclude that the best use for $5M or $58M is to buy a piece of cardboard or a steel balloon animal during a
period in which Rome is burning (i.e. exploding homelessness numbers in Los Angeles nearing 70,000 as evidenced
here
and
here
),
either this is a sign of the fraud of the monetary system, the decline of civilization, or both. If you have ever lived in
Los Angeles, as I have, and watch the video referenced in the second link, you will find it astonishing that massive
homeless encampments have sprung up throughout Los Angeles in areas that prior to recent years, had no homelessness.
(depending on the social media platform you may be watching this on, the soaring prices for which art that I consider to be
the lowest form of art that many do not even consider as art is selling for such absurd prices, including NFTs that I will
soon discuss, is certainly reflective of the rapid decline of civilization.
This rapid
decline of civilization is also reflected in the fact that giant titans of the tech world and social media platforms
continue to promote and push the most morally reprehensible content to the top positions of success on their platforms.
When popular YouTube Logan Paul visited the "suicide forest" in Japan and found a dead body hanging from the tree, he
filmed it and mocked the dead person and YouTube quickly promoted his video as one of their top trending videos on their
entire platform for 24 hours, until Logan Paul, not YouTube executives, deleted the video due to the outrage it provoked.
Another popular YouTuber, David Dobrik, has had many of his reprehensible videos monetize bullying and belittling of
others, often promoted on YouTube among the top trending videos. Recently Dobrik came under fire for allegedly monetizing a
video of an actual rape on his channel, and he was roundly mocked when his initial apology consisted of trying to blame the
rape victim, who was allegedly underage and too drunk to consent to sex. In his "apology", Dobrik stated he always gains
consent for his videos, but sometimes people he victimizes consent at first but then change their minds later, and that is
why it appears in many of his videos that he is monetizing morally reprehensible behavior. In any event, YouTube executives
allegedly allowed such morally and cowardly behavior to be monetized to massive sums of income for such YouTubers and seem
to be more focused on demonetizing anyone that challenges a narrative, true or false, forwarded by the oligarchs.
And as
ludicrous as are the prices paid for some of the assets I've mentioned above, the level of insanity paid for NFTs, in my
opinion, are at an even exponentially higher level. For those of you that may not know what are NFTs, Non-Fungible Tokens
are unique blockchain-based digital assets that represent an increasing number of commodities, from art and real estate to
collectibles like sports trading cards. One platform, Original Protocol, recently auctioned off the world's first NFT music
album by American DJ 3LAU. Collectively, the artist's fanbase
paid
out more than $11 million
for 33 NFTs contained on 3LAU's album Ultraviolet. In this case, since musicians are
routinely ripped off by giant record labels and often have such suffocating, unfair contracts that make it near impossible
to earn any significant income from album releases, the digitization of music in the form of NFTs that allow musicians to
control their income is a wonderful aspect of the new digital economy of NFTs.
The
Non-Fungibility of NFTs and Most Cryptocurrencies Disqualify Them for Use in Financial Derivative Currency Swaps
NFTs sell
digital representations of items, including some that used to be represented in the physical world, like trading cards and
pieces of art. As is the case in the fine art world, an NFT's price is the highest price you can convince someone to pay
for it, a pool of clients that often overlaps with the over indulgent, narcissistic people that comprise the bidders for
modern art pieces that sell for millions of dollars. Perhaps the most amazing quality of NFTs is that they actually have a
more meaningful value than any cryptocurrency not backed by any type of hard asset. For example, bitcoin is a digital
asset, but one would be hard pressed to describe its intrinsic value. One cannot say its fungibility is its price because
its price is denominated in fiat currencies with intrinsic values of near zero. Furthermore, for those that constantly and
very wrongly argue that non hard-asset backed cryptocurrencies are sound money, if bankers truly believed that bitcoin even
remotely qualified as sound money, they would have zero problem offering currency swap derivative contracts between any
fiat currency and bitcoin.
Yet, there
is not a single corporation in the entire world that has a currency swap that hedges their corporate cash treasury holdings
with bitcoin. You can never have any type of financial contract without unlimited risk if it is denominated in bitcoin in
which both parties realistically have no idea of the price range of that currency for the maturity of that contract. No
rational party will lock themselves into a contract in which a currency presents unlimited risk to them. The simple
understanding of why there are no derivative currency swaps or hedging contracts denominated in bitcoin should easily
explain to any rational person the very reason why BTC is not considered as sound money by a single banker in the entire
world. On the contrary, even as volatile in price as gold and silver may be, gold and silver mining companies routinely
hedge their inventory risk and their revenue risk of yet-to-be-mined gold and silver ounces by establishing open positions
of gold and silver futures contracts years into the future.
You can't
argue that BTC's intrinsic value is the block of the blockchain that records the transaction, because whether that block is
used to record an NFT, BTC, or ownership of real estate, a photo or song, the price represented by that block could
possibly vary from just a few dollars to several million dollars. So the blockchain has no intrinsic value either. However,
with NFTs, its value, is more uniquely determinable than the block upon which a bitcoin transaction is stored that records
the price of bitcoin, because that value is simply the highest price willing to be paid by all available bidders at any
given time. If there are no available bidders willing to bid on a particular NFT for weeks or perhaps months on end, then
one can assume the price of that NFT, even if the last paid price was $100,000, is likely zero. But even if there is one
available bidder for that NFT at a price of $1,000,000 then the market price of that NFT is $1M. Though one may state that
the bidding mechanism is much more controlled in BTC markets and that BTC could never be priced at zero or $1M per BTC in
such a cavalier manner that mimics the pricing of NFTs, the similarities between the pricing mechanisms based upon lack of
fungibility should not be ignored when considering the inherent risk imbedded in the price of BTC in its near $60,000 per
coin current price. You will either understand this risk and behave accordingly, or ignore this risk and likely expose
yourself to strong downside risk in the future at some point that should be expected but will remain unexpected to those
that cannot, or will not, accept this existing risk.
The five
biggest whales that own BTC in order from top to bottom,
are
believed to be as follows:
(1) The collective of institutions/people called Satoshi Nakamoto; (2) The FBI; (3) The
Winklevoss Twins; (4) Micree Zhan; and (5) Jihan Wu. Other notable owners among the top 10 BTC whales are Huobi, Tim Draper
and the North Korean State. In 2017, Bloomberg reported that only 1,000 people owned 40% of all BTC in the entire world.
Given that in the past two years, it has been reported that the top whales had been cornering the BTC market and increasing
their market share, it would not be surprising if they had increased their market share to 50% or perhaps even higher by
2021. In any event, this translates into 0.00012658% of the world's population likely controlling majority ownership of
BTC. I don't know of any world in which such a statistic does not translate into enormous risk.
Unanswered
Questions
But
fungibility is what reveals why cryptocurrencies like BTC and NFTs cannot ever qualify as sound money. For those that don't
understand why sound money needs to be a fungible asset, take gold for example. Fungibility essentially means that money
should never vary in its qualitative properties but only its quantitative properties. All gold has electroconductivity
properties no matter its form. Electroconductivity is an intrinsic quality of gold. Because all purified four nine gold has
the same density, the same volume will always be measured by the exact same weight in grams, again another fungible quality
of gold. However, depending on how paper gold futures markets are being manipulated and the date, that same gram of gold
will vary wildly in fiat currency price. Fiat currency price, thus can never be the quantitative property used to value
gold. Weight is the constant that should be used for gold's value when it is to be used as sound money, because this
quantitative property is always unwavering, always constant no matter if one is using gold as money in Moscow, Capetown,
Montevideo, Santiago, Montreal, Phoenix, Miami, Mogadishu, Kiev, Paris, Heidelberg, Reykjavik, Chiangmai, or Seoul.
What
quantitative property of bitcoin that is consistent and always the same across all uses? This is a question without an
answer. For this same reason, NFTs could never serve as sound money either. No matter the latest fiat currency price paid
for a Banksy "Morons" drawing set on fire, how can one determine the exchange rate for this NFT and an NFT representing a
Mark Cuban tweet. Should the Banksy NFT be priced 10 million times higher than a Mark Cuban tweet NFT? Is an NBA TopShot
NFT worth 1/1000 the price of a Banksy burning piece of art NFT? And even though NFTs have more uniqueness than say, a
satoshi of BTC, because price assigned to that uniqueness is entirely subjective, the uniqueness leaves it no more fit to
use as sound money than a cryptocurrency that has no backing of a hard asset. Miami-based art collector Pablo Rodriguez-Fraile
proved the absurd pricing mechanism for NFT when he recently sold an NFT that he acquired for $66,666 in October,
a
10-second computer-generated video clip of a slogan-covered giant Donald Trump created by digital artist Beeple
, for
mor than 100 times his original cost at $6.6M.
The last
point of irony in the BTC is the solution to the unsound global fiat currency system narrative is that many HODLers of BTC
are well aware of the oligarch's use of their power consolidation strategy of (1) Create a crisis; (2) Present the solution
to the artificially created crisis; and (3) Implement the solution to consolidate power, yet will never give any type of
consideration to the possibility of how perfectly the creation of BTC, in response to the 2008 global financial crisis,
fits this exact historical narrative that oligarchs have repeatedly implemented, instead choosing to believe that BTC is
the special unique exception to this oft-deployed strategy.
This
despite, three US employees of the Central Bank, Galina Hale, Marianna Kudlyak, and Patrick Shultz, and one US university
professor, Arvind Krishnamurthy, admitting that the premise I presented to my social media followers in December of 2017,
when BTC hit $20,000, that the introduction of the US bitcoin futures market was going to be used to slash the BTC price
drastically, essentially writing the premise for the referenced US Central Banker paper five months before it was written.
In that paper, titled "How Futures Changed Bitcoin Prices", the four authors basically echoed my premise, and stated,
"We suggest
that the rapid rise of the price of bitcoin and its decline following issuance of futures on the CME is consistent with
pricing dynamics suggested elsewhere in financial theory and with previously observed trading behavior. Namely, optimists
bid up the price before financial instruments are available to short the market (Fostel and Geanakoplos 2012). Once
derivatives markets become sufficiently deep, short-selling pressure from pessimists leads to a sharp decline in value.
While we understand some of the factors that play a role in determining the long-run price of bitcoin, our understanding of
the transactional benefits of bitcoin is too imprecise to quantify this long-run price. But as speculative dynamics
disappear from the bitcoin market, the transactional benefits are likely to be the factor that will drive valuation."
While they
did not name the players in the BTC futures markets that drove BTC prices downward from $20,000 to $3,000 in 2018, the
implication is that Central Bankers were involved in this downward spiral. And if Central Bankers were involved in this
downward spiral, the downward price spiral would of course, been far easier to execute, if Central Bankers were also among
the members of the collective that constitutes the largest BTC whale, Satoshi Nakamoto. Even though these dots, though
purely speculative, are clearly possible, most every BTC HODLer that is confident in the achievement of end-year $300,000
BTC prices or higher, will never consider this possibility, even for a nanosecond, despite heavy suggestions of three US
Central Bank employees that Central Bankers were involved in the 2018 BTC price crash. But if one did, as is the rational
and logical thing to do, then one would have far greater difficulties distinguishing the mechanisms that set the price for
NFTs and BTC. And as the introduction of the first BTC ETFs seem to be on the near horizon now, one would be smart to heed
the lessons learned after trading of BTC futures was introduced at the end of 2017. Subscribe to my
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... On December 7, 2009, I sent out a warning from our Managing Director, J. Kim, to
thousands of people via email about the deterioration of the global economy...
...J. Kim: "Despite the weapons of mass financial destruction that bankers have created
and governments worldwide have coddled and shielded from proper regulation, the majority of
people still incredibly do not understand the crime syndicate-like relationships among
governments, corporations and banks. The public sees that the US markets are up a little over
10% this year and many are duped into believing that that the stock market performance means
that the economy is recovering. And this belief is reinforced by idiot talking heads on TV like
Jim Cramer that do nothing but misinform people. Sure, US markets have now risen by more than
36.79% since they crashed in 2008, a figure that sounds impressive on the surface level. Then
combine this impressive sounding figure with US Fed Reserve Chairman Ben Bernanke's national
appearance on 60 Minutes, when he lies to the nation about inflation rates and about continuing
to create more money out of thin air, and you have millions more that are converted into
sheeple. How do I know? Because I talk almost every month to people in the US that tell me they
believe the economy is recovering. So when people believe that inflation is still less than 2%
because the Fed tells them to believe this, they look at a near 37% gain in the US markets in
the last two years and believe that they have made substantial recovery in their pensions and
IRAs and consequently believe the economy must be recovering as well! (by comparison, J. Kim's
Crisis Investment Opportunities newsletter(that he published back then) has returned more than
105.25% over the same time period, clobbering the S&P 500's 36.79% return, and yielding
very substantial REAL gains, even after the inflationary monetary effects of the US Federal
Reserve's schemes)."
James C : "So besides the government and bankers deliberately keeping people in the dark,
why else do you think some, or even many, people believe the economy is recovering?"
J. Kim: "First of all, the Federal Reserve's insane POMO (Permanent Open Market
Operation) schemes this year (2010) are largely responsible for propping up the US market this
year. In 2009, when I stated that the US would experience significant economic shocks in 2010
and 2011, I did not yet know the duration of the Fed's POMO operations and how insane they were
going to be. Although daily POMOs had already reached upwards of $6 billion and $7 billion per
day as of mid-2009 (just for US Treasuries, but up to multiples of these figures when including
US Treasuries and other debt-related financial products), many had speculated that the POMOs
would soon end. Obviously, with projected cumulative POMOs of nearly $1,000,000,000,000 just
between November 2010 and June 2011 (again just for US Treasuries), the Fed Reserve POMO scheme
not only did not end, but it received an injection of steroids in 2010. So POMOs that were used
to buy future contracts of US market indexes is a major factor that has kept the US market
afloat at this juncture and may continue to keep it afloat for several more months. Rising
stock markets have no correlation to a strong economy anymore due to scams run by Central Banks
and due to gains that largely occur due to the devaluing currencies that these markets are
denominated in . The best performing stock market of the past decade has been the Zimbabwe
stock market. Still, it's irrelevant if you made a quadrillion Zimbabwe dollar profit investing
in the Zimbabwe stock market, as by 2008, a loaf of bread would have cost you 1.6 trillion
Zimbabwe dollars."
James C: "If the economy is really not recovering, then can you explain what is really
going on?"
J. Kim: "Let me explain what is really going on with the economy with the following
disaster analogy. In June of 1995, the Sampoong department store, a five-story building with
four basement levels, suddenly collapsed in Seoul, South Korea, tragically killing 501 people
and injuring 937 others. When the Sampoong department store was constructed, the owners, due to
a desire to cut costs, made several fatal decisions. First, they decided to cut away a number
of support columns in the original blueprint in order to install escalators. Secondly, in order
to cut costs, the owners shrunk the original width of the support columns from the required
80cms to only 60 cms, an inadequate width to support the load of the building. In addition, the
original blueprint called for only a four-story building but the owners built an additional
fifth story that housed a restaurant with a very heavy heated concrete base that quadrupled the
load of the original building design.
Two months before the building collapsed, worrisome cracks appeared in the ceiling of the
south wing's floor. On the day of the collapse, cracks as wide as 10 centimeters appeared in
the top floors of the building five hours before the building collapsed, but the owners hid
this information from its patrons and refused to shut down and/or evacuate the building as they
did not want to lose its daily revenue. When it became clear that the building was going to
collapse, senior executives of the department store fled without warning any of the patrons
still inside the building. An alarm to evacuate the building was only sounded when the building
started to make loud cracking sounds, just 7 minutes before its collapse at 5:57 PM despite
signs of an imminent collapse being clearly visible more than five hours prior. City officials
Lee Chung-Woo and Hwang Chol-Min, in charge of overseeing the construction of the building,
were responsible with concealing the illegal changes to the original blueprint designs and were
later charged with and convicted of bribery."
"Amazingly, the above story serves as nearly a perfect analogy for the US economy. The
government and bankers laud a rising stock market as proof that the economy is recovering. They
go on record stating that inflation is less than 2% when in reality it is more than four times
higher. They state unemployment is less than 10% when it is nearly 23% [Editor's Note: These
statistics all apply to the year in which this original interview was conducted, 2010]. Thus,
to many people, the economy appears as the Sampoong department store's exterior appeared to the
public right before its collapse, structurally sound and with a solid exterior. This is the
reason why 40,000 people a day visited the department store despite its fatal structural
integrity problems. The government and bankers are just like the Sampoong department store
owners, actively concealing all warning signs from the public and selling them an illusion that
all is okay when instead, the economy is heading for collapse. Just as the Sampoong department
store owners constructed a crappy building destined to collapse due to excessive greed, bankers
with the help of government officials, constructed dozens of financial derivative products
destined to collapse due to their excessive greed as well."
"The US regulators that also see the impending cracks in the economy, are just like Lee
Chung-Woo and Hwang Chol-Min. They receive inordinate pressure and bribes from the bankers to
look the other way and keep the public in the dark about the impending doom that is coming. In
the case of the Sampoong disaster, when the contractors refused to continue work on the
building when the owners changed structural regulations that endangered the integrity of the
building, the owners fired the contractors and hired ones that would cut corners. US regulators
that are honest and that try to protect the American public, like Brooksley Born, received the
same fate as the original Sampoong contractors and are also fired or forced to resign. When the
entire system is corrupt, even the rare good person can't save disasters from happening. Thus,
the public is none-the-better-off despite the presence of regulators that are supposed to
protect the public's interests and safety, but in reality, protect the greed and profits of
companies that exploit the public's interests."
"And finally, the economy itself is like Sampoong's interior. It is replete with cracks
and fractures that warn us of the disaster ahead. But even so, a large percentage of the masses
still remains ignorant because the banker/corporate/government three-headed monster keeps the
people's vision in a tunnel by pummeling the public with a constant stream of propaganda on
MSNBC, newspapers, and financial talk shows. In Seoul, Sampoong's owners distracted the
public's attention away from the developing disaster with stores fully of luxury goods. So when
the US economy finally experiences shocks in the future more disastrous than those in 2008, as
was the case with the Sampoong department store collapse, many will believe that now warning
signs had existed despite the evidence that exists to the contrary today. And I'm quite certain
the media, just as they did in 2008, will stupidly ask the same questions they did back then,
such as "How did this happen?" when in fact, all the answers stare them in the face right now.
With the Fed's POMO schemes, regulators that aid and abet fraud, and governments and bankers
that conceal truth from the public, the combined effect of these actions is just to delay
disaster for another year or two. So that is why I say now that disaster will visit the US
sometime between 2011-2013."
... As I already stated above, anyone that has a rudimentary understanding of real finance
(meaning finance as it operates in the real world, not finance as taught in MBA programs)
already understood that Central Bankers' massive provisions of liquidity in the overnight repo
market pointed to US banks being undercapitalized in cash
... in my referenced April 2020 article above, I only explained why it was necessary for
Central Bankers to keep interest rates extremely low, and I had not yet realized, as we were
only a few weeks into a global economic lockdown that was promised to last only a few weeks,
that the global economic destruction caused by lockdowns would be the mechanism used to achieve
this goal of keeping interest rates extremely low. In other words, only in hindsight, a few
months into the lockdown, did I connect the dots myself and understand why it was necessary to
keep the economic lockdowns going forever, which is also why I stated at the end of 2020 that
only the extremely naïve and foolish believe that the bankers and politicians would end
the lockdowns in the New Year, as the problem I explained in April 2020 that needs to be
managed to avoid meltdown of the global financial system still very much exists in March of
2021.
I often look at rising US corporate junk bond yields after long periods of decline as the
proverbial "canary in the coal mine" to predict major trouble ahead in global stock
markets.
As you can see, US corporate junk bond yields have just started to rise after nearly a full
year of plunging yields. Is the rise enough to spark concern? In my opinion, the rise in yields
is not significant enough to yet spark major concern, but if they break 5.0% then at this
point, I will dive deeper into the muck to see what I can find.
So stay tuned, and if you have not yet subscribed to my free newsletter, please do so at the
link at the top of this page.
Higher inflation in any country is typically currency negative. Fears of rampant inflation in
the US have gone unfulfilled for years. the current level of deficit spending raises the question
whether some sort of existential crisis for the dollar is in the books. In 2020 the US budget
deficit hit 14.9% of GDP , the highest level since 1945. FEd now owns around 22% of the US beft
-- in essence, one branch of the government buys debt from the another part of government. This
might be a bad news for stocks, bonds and the dollar. The demand for Treasuries from private
investors, including foreign buyers, appears to have weakened recently.
Trust in government statistics, especially such measures as inflation and unemployment hit
new low (see comnets below) and that also spell troble in the long run.
Under neoliberalism financial oligarchy dominates and labor reduced to the role of "debt
slaves" and lacks any wage bargaining power. So the main danger is deficits and eroding trust in
the US economy which supports the role of dollar as world reserve currency. US foreign policy and
sanctions encourages "flight from dollar" for Russia and China.
Notable quotes:
"... the difference between longer-term and shorter-term yields remains far greater in real yields than in nominal yields. This difference over time, known as the yield curve, illustrates how much investors expect interest rates to rise in the future: A steep curve equals more rate rises. ..."
"... For normal Treasury yields, that five-year to 10-year gap was 0.798 percentage points, up from 0.550 percentage points at the end of 2020 ..."
"... Seems like a very effective way to "tax" 401k money indirectly. ..."
The Fed reiterated last week that its rate-setting committee doesn't expect to increase
interest rates until after 2023. However, investors predict that it will, according to
Sebastien Galy, senior macro strategist at Nordea Asset Management.
... the difference between longer-term and shorter-term yields remains far greater in
real yields than in nominal yields. This difference over time, known as the yield curve,
illustrates how much investors expect interest rates to rise in the future: A steep curve
equals more rate rises.
... For normal Treasury yields, that five-year to 10-year gap was 0.798 percentage
points, up from 0.550 percentage points at the end of 2020 .
... ... ...
Some investors also fear that a sharper rise in interest rates later will be more
destabilizing for other assets such as stocks or riskier corporate debt...
... ... ...
Harold Begzos SUBSCRIBER 1 week ago The value of fiat currency is only
as good as the government that prints the paper. We are managing the dollar like a Caudillo
running a banana republic. The U.S. is experiencing a sugar high. When the sugar runs out the
crash will cause harm for the next decade.
A Andy Kives SUBSCRIBER 1 week ago One of my many price increases this year was this
morning from my metal and plastic container wholesaler, who I buy a few hundred thousand pieces
from annually. Prices are only going up 10-26% in April.
What inflation? Like thumb_up 3 Share link Report flag
S Susan Croxton SUBSCRIBER 1 week ago (Edited) The dollar tanked under Trump, like he
wanted Like thumb_up Share link Report flag
G Gerald Garibaldi SUBSCRIBER 1 week ago (Edited) My grandmother was a deft investor, and
her credo when investing was always "Don't ignore what's around you." I'm not her equal, but
what's around me doesn't seem to be middle/working class families and people gearing up to
shoot their stimulus wad on new TV sets and sunglasses. I think growth will after a short
spirt, disappoint. And inflation will hit like a tsunami. EU is not following our example, by
the way. Most inflation will be imported. 1 Share link Report flag
J John Harris SUBSCRIBER 1 week ago (Edited) An included modest understatement of the
year:
"The flip side of this exceptionalism is a growing fear of higher inflation that could
eventually reverse the dollar's fortunes, according to some investors."
J John Harris SUBSCRIBER 1 week ago (Edited) Duh --
Did anybody look at M2 ?? Austin Lowrie SUBSCRIBER 1 week ago The currency debasement will
continue, until morale improves.... Like thumb_up 5 Share link Report
flag
I Ivaylo Ivanov SUBSCRIBER 1 week ago The article misses an important component of the
equation. Various estimates suggest about half of all US cash in circulation, about $700-800
billion, circulates outside US borders. The trigger of a run on the dollar (a collapse, really)
might be these holders, not foreign governments. The moment they realize they are holding
increasingly worthless money they will try to dump it. Often ordinary people figure out the
worthlessness of a currency much faster than governments.
M1 (hot money) has increased by 70% in 12 months. The question is how fast people realize
what that means.
Like thumb_up Share link Report flag Frank Mostek SUBSCRIBER 1 week ago If you drive car, own a home,
require healthcare, have kids and eat - you have noticed plenty of inflation...
L Lester Brown SUBSCRIBER 1 week ago Makes you realize how slanted the CPI measurement is.
1.4% in 2020 - my a $$!!
B Brett M SUBSCRIBER 1 week ago go through the exercise of reconstructing the CPI with
research online. I did. It won't take you long to see that there is no component less than 2%.
you will find edu costs +5% annully for years, medical costs +4% annually for years. 2 Share
link Report flag
B bruce strong SUBSCRIBER 1 week ago So the Federal debt as a percentage of GDP was about
30% in 2001 and it's now around 100%. Seems we are living way beyond our means and this can
only lead to trouble in the coming years. The only question is will Congress do anything to
stop the spending? Forget about worrying about inflation as it;s the least of our concerns.
p 5 Share link Report flag Frank Mostek SUBSCRIBER 1 week ago I think it around 130% now...
T Ted Terry SUBSCRIBER 1 week ago Apparently the Business Kids are surprised at the
strength of the dollar but knowledgeable readers are not that surprised. The Dollar competes
against the Euro and look at where the EU is. They are squabbling at each other over their
ineffective response to the virus and their economies are struggling to break back to normal.
I'm not sure where the Dollar is with respect to the Pound but the Brits too are still more
virus bound than we are.
B bruce strong SUBSCRIBER 1 week ago Japan's been running with a debt load of over 200% and
the Yen has held up quite well. 2 Share link Report flag
S Stephen S S Hyde SUBSCRIBER 1 week ago "The U.S. has a big advantage because the dollar
is the world's most commonly used currency."
This both understates and buries the lede on this seemingly granitic foundation of a
fiscal/monetary system that has allowed us to get away with simultaneously lowering taxes,
explosively expanding borrowings, creating the money to cover it, and then lending it to
ourselves. (Eat your heart out, Argentina.)
Unfortunately, having the world's reserve currency is not a skyhook, as our British cousins
learned with their once indomitable Sterling. Like thumb_up 23 Share link Report
flag
I Ivaylo Ivanov SUBSCRIBER 1 week ago If you do everything in your power to debase your
currency foreigners eventually notice. It will take one big player noticing to bring down the
house (of cards). In the 60-s and the gold backed dollar it was de Gaulle. It will be
interesting to see who will jump the gun this time around. 3 Share link Report
flag
S Stephen S S Hyde SUBSCRIBER 1 week ago You obviously have an informed sense of history.
The dollar's gold backing had been increasingly precarious but relatively stable until de
Gaulle pulled the fatal trigger. David Van Wie SUBSCRIBER 1 week ago
Fears of rampant inflation have gone unfulfilled for years. The U.S. has had low and stable
inflation for nearly three decades.
Indeed. That point can't be emphasized enough. Said differently: for all of our
research, economic theories and modeling, we still don't understand what causes inflation in
our economy.
Is it caused by massive amounts of deficit spending? Nope. We've had lots of that and no
serious inflation. Higher taxes? Lower taxes? No and no. What about high or low trade deficits?
Sorry, try again. No correlations here.
I could go on, but you get my point. All of the things forecasters such as myself rely on to
model inflation all sound like they should be predictive, but they aren't. Intuition creates
cognitive bias, which in turn leads to bad trades that don't work.
We won't figure out what's going on until about 6-12 months after inflation restarts,
unfortunately. Then, everyone will have known it all along! Just don't ask to see their old
forecasts. Like thumb_up 15 Share link Report flag
S Stephen S S Hyde SUBSCRIBER 1 week ago Great comment, Mr. Van Wie. On top of your point
(or underneath it) is the tendency for complex systems to fail not gradually, but suddenly and
catastrophically. Think the Great Depression, the Soviet Union, the Great Credit Crunch, and
Long Term Capital Management (talk about a moniker to challenge the gods!). I don't know when,
how, or why, but I think our lifetimes will witness the opportunity to dig through the ruins of
a once magnificent edifice built on sand. Like thumb_up 10 Share link Report
flag
B Brett M SUBSCRIBER 1 week ago Yes but your whole basis is on the government orgs giving
your inflation information [% year over year ] are telling the truth. They are not. Like
thumb_up Share link Report flag J Domingo SUBSCRIBER 1 week ago Everyone is worried about inflation except
the Fed.
Which is why everyone is worried about inflation except the Fed. Like thumb_up 21
Share link Report flag
I Ivaylo Ivanov SUBSCRIBER 1 week ago
Everyone is worried about inflation except the Fed.
Which is why everyone should be very worried about inflation. The
seeming carelessness of the Fed is the best indication inflation will get out of hand. Like
thumb_up 3 Share link Report flag Stuart Young SUBSCRIBER 1 week ago With the government pumping
trillions of dollars into the economy, anyone who chooses to ignore serious inflation problems
is just fooling themselves. Like thumb_up 11 Share link Report flag
A Anne T SUBSCRIBER 1 week ago Not an investment expert here at all.
But anyone with a mind knows where the Biden-Harris Administration is going and it's worse
than route Obama-Biden took us on.
Seems Democrats still refuse to stop themselves from getting in the way of a budding
recovery.
And learned nothing between 2009-2020. Like thumb_up 6 Share link Report
flag
P Paul Kaufmann SUBSCRIBER 1 week ago Did you happen to notice the debt/gdp graph in the
article? The slope in the past 4 years is so great that it is almost uncalculable...infinite.
Like thumb_up Share link Report flag
A Anne T SUBSCRIBER 1 week ago Yes I did.
From 2008-1016 it soared from 40% to 76% where it pretty much stayed until the Covid stimulus
of 2020. Like thumb_up Share link Report flag
H H S Howell SUBSCRIBER 1 week ago We are already in an inflationary spiral. Don't rely on
gov figures, just take a trip to the local hardware or grocery store. In the past the danger of
big socialist government was Tax and Spend, today it is Print and Spend resulting in an
enormous escalation of Debt (the largest in the world).
China officially holds $1.1 trillion of our debt, but actually much more when counting Hong
Kong, other regions of China. Should China sell (debt dump) their US bonds, it would have the
destabilizing effect of lower bond prices and higher yields, devaluation of the dollar, higher
cost of servicing our debt and a stock market crash.
J Jeffrey Cunningham SUBSCRIBER 1 week ago Seems like a very effective way to "tax"
401k money indirectly.thumb_up Share link Report flag
P Peter Sherman SUBSCRIBER 1 week ago Bond investors are selling.
The Unholy Marriage of the Federal Reserve and Treasury allowing for the implementation of MMT
( Magic Money Tree ) probably create high inflation .
Given the rotten value in bonds now ( negative real yield) and rising odds of higher
inflation, expect to see more selling.
B Brett M SUBSCRIBER 1 week ago (Edited) I read a quote in an article one time
"until the bond market rebels"
It means people become like me - refusing to own US treasuries nor USA bonds. The only
exception is a 529 account I have which limits choices.
If people became like me relatively fast, investors sell bonds off, interest rates shoot
through the roof as the USA gov loses control of their puppet show. Then the government
defaults - and rather quickly, say within a year after.
I personally believe that USA government debt is worthless. I am a big fan of gold right
now.
If China ever moved toward being a reformed country that didn't have George Orwell cameras in
every alley, field and wooded grove, then the dollar would plummet. If there was another
country that was not pathetic financially I would move my money there.
Listen to this article 6 minutes 00:00 / 06:06 1x Earnings, valuation and rampant speculation have all played a role in the extraordinary bull market that began a year ago this week. The latest combination of the three has a troubling reliance on the speculative element. A broad framework for thinking about stocks can be derived from the late economist Hyman Minsky's three stages of debt. In the first stage, borrowers take on only what they can afford to repay in full from their earnings by the time the debt matures; a standard mortgage works like this. Earnings, valuation and rampant speculation have all played a role in the extraordinary bull market that began a year ago this week. The latest combination of the three has a troubling reliance on the speculative element. A broad framework for thinking about stocks can be derived from the late economist Hyman Minsky's three stages of debt. In the first stage, borrowers take on only what they can afford to repay in full from their earnings by the time the debt matures; a standard mortgage works like this. A broad framework for thinking about stocks can be derived from the late economist Hyman Minsky's three stages of debt. In the first stage, borrowers take on only what they can afford to repay in full from their earnings by the time the debt matures; a standard mortgage works like this. A broad framework for thinking about stocks can be derived from the late economist Hyman Minsky's three stages of debt. In the first stage, borrowers take on only what they can afford to repay in full from their earnings by the time the debt matures; a standard mortgage works like this. U.S. 10-year Treasury yield Source: Tullett Prebon As of March 24 % Pre-pandemic peak of S&P 500 2020 '21 0.25 0.50 0.75 1.00 1.25 1.50 1.75 2.00 S&P 500 forward price/earnings ratio Source: Refinitiv Note: Weekly data S&P 500 peak 2020 '21 12 14 16 18 20 22 24 The parallel in the stock market is stocks going up when earnings -- or rather the expectation of earnings, since the market looks ahead -- go up. There is a risk of course, just as there is with debt: The earnings might not appear, and the stock goes back down. But earnings offer the least risky form of gains, and one that we should welcome as obviously justified. From the low in the summer, 2020 earnings forecasts jumped more than 10%, and expectations for this year rose more than 8%. Stocks responded. In Minsky's second stage, borrowers plan only to repay the interest, and refinance when the main debt is due to be repaid; much company debt works like this. It is taken out with a plan to roll it over indefinitely. Interest rates matter a lot: If they go down when the company needs to refinance, it will pay less. The equity parallel is to gains in valuation due to lower long-term rates. As with corporate debt, this is entirely justified and sustainable so long as rates stay low, because future earnings are now more appealing. The danger is that rates rise, in which case the stock might be hit no matter how earnings pan out. A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the The parallel in the stock market is stocks going up when earnings -- or rather the expectation of earnings, since the market looks ahead -- go up. There is a risk of course, just as there is with debt: The earnings might not appear, and the stock goes back down. But earnings offer the least risky form of gains, and one that we should welcome as obviously justified. From the low in the summer, 2020 earnings forecasts jumped more than 10%, and expectations for this year rose more than 8%. Stocks responded. In Minsky's second stage, borrowers plan only to repay the interest, and refinance when the main debt is due to be repaid; much company debt works like this. It is taken out with a plan to roll it over indefinitely. Interest rates matter a lot: If they go down when the company needs to refinance, it will pay less. The equity parallel is to gains in valuation due to lower long-term rates. As with corporate debt, this is entirely justified and sustainable so long as rates stay low, because future earnings are now more appealing. The danger is that rates rise, in which case the stock might be hit no matter how earnings pan out. A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the In Minsky's second stage, borrowers plan only to repay the interest, and refinance when the main debt is due to be repaid; much company debt works like this. It is taken out with a plan to roll it over indefinitely. Interest rates matter a lot: If they go down when the company needs to refinance, it will pay less. The equity parallel is to gains in valuation due to lower long-term rates. As with corporate debt, this is entirely justified and sustainable so long as rates stay low, because future earnings are now more appealing. The danger is that rates rise, in which case the stock might be hit no matter how earnings pan out. A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the In Minsky's second stage, borrowers plan only to repay the interest, and refinance when the main debt is due to be repaid; much company debt works like this. It is taken out with a plan to roll it over indefinitely. Interest rates matter a lot: If they go down when the company needs to refinance, it will pay less. The equity parallel is to gains in valuation due to lower long-term rates. As with corporate debt, this is entirely justified and sustainable so long as rates stay low, because future earnings are now more appealing. The danger is that rates rise, in which case the stock might be hit no matter how earnings pan out. A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the The equity parallel is to gains in valuation due to lower long-term rates. As with corporate debt, this is entirely justified and sustainable so long as rates stay low, because future earnings are now more appealing. The danger is that rates rise, in which case the stock might be hit no matter how earnings pan out. A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the The equity parallel is to gains in valuation due to lower long-term rates. As with corporate debt, this is entirely justified and sustainable so long as rates stay low, because future earnings are now more appealing. The danger is that rates rise, in which case the stock might be hit no matter how earnings pan out. A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the The parallel in the stock market is the The parallel in the stock market is the hunt for the greater fool . Sure, GameStop < shares bear no relation to the reality < of the company, but I can make money from buying an overpriced stock if I can find someone willing to pay even more because they "like the stock." Wild bets became obvious this year, as newcomers armed with stimulus, or "stimmy," checks Wild bets became obvious this year, as newcomers armed with stimulus, or "stimmy," checks Wild bets became obvious this year, as newcomers armed with stimulus, or "stimmy," checks drove up the price of many tiny stocks, penny shares and those popular on Reddit discussion boards. Speculative bets such as the solar and ARK ETFs rallied up until mid-February, long after growth stocks peaked in August Price performance Source: FactSet *Russell 1000 indexes As of March 25, 7:02 p.m. ET % Invesco Solar Value* ARK Innovation Growth* Sept. 2020 '21 -25 0 25 50 75 100 125 The concern for investors: How much of the market's gain is thanks to this pure speculation, and how much to the justifiable gains of the improving economy and low rates? If too much comes from speculation, the danger is that we run out of greater fools and prices quickly drop back. The concern for investors: How much of the market's gain is thanks to this pure speculation, and how much to the justifiable gains of the improving economy and low rates? If too much comes from speculation, the danger is that we run out of greater fools and prices quickly drop back. me title= A look at how stocks moved through the pandemic suggests earnings and bond yields are still much more important than the gambling element for the market as a whole, but is still troubling. From the S&P peak in mid-February to the end of June, the story was of cratering earnings partly offset by higher valuations. The S&P was down 8%. Earnings forecasts for 12 months ahead fell 20%, while with 10-year yields down almost a full percentage point, valuations were up from a precrisis high of 19 times forecast earnings (itself the highest since the aftermath of the dot-com bubble) to 21 times. Growth stocks -- based on the Russell 1000 index of larger companies -- were slightly up, because they benefit most from falling bond yields, having more of their earnings far in the future. Cheap value stocks, which benefit less, were down 18%. A look at how stocks moved through the pandemic suggests earnings and bond yields are still much more important than the gambling element for the market as a whole, but is still troubling. From the S&P peak in mid-February to the end of June, the story was of cratering earnings partly offset by higher valuations. The S&P was down 8%. Earnings forecasts for 12 months ahead fell 20%, while with 10-year yields down almost a full percentage point, valuations were up from a precrisis high of 19 times forecast earnings (itself the highest since the aftermath of the dot-com bubble) to 21 times. Growth stocks -- based on the Russell 1000 index of larger companies -- were slightly up, because they benefit most from falling bond yields, having more of their earnings far in the future. Cheap value stocks, which benefit less, were down 18%. A look at how stocks moved through the pandemic suggests earnings and bond yields are still much more important than the gambling element for the market as a whole, but is still troubling. From the S&P peak in mid-February to the end of June, the story was of cratering earnings partly offset by higher valuations. The S&P was down 8%. Earnings forecasts for 12 months ahead fell 20%, while with 10-year yields down almost a full percentage point, valuations were up from a precrisis high of 19 times forecast earnings (itself the highest since the aftermath of the dot-com bubble) to 21 times. Growth stocks -- based on the Russell 1000 index of larger companies -- were slightly up, because they benefit most from falling bond yields, having more of their earnings far in the future. Cheap value stocks, which benefit less, were down 18%. From the S&P peak in mid-February to the end of June, the story was of cratering earnings partly offset by higher valuations. The S&P was down 8%. Earnings forecasts for 12 months ahead fell 20%, while with 10-year yields down almost a full percentage point, valuations were up from a precrisis high of 19 times forecast earnings (itself the highest since the aftermath of the dot-com bubble) to 21 times. Growth stocks -- based on the Russell 1000 index of larger companies -- were slightly up, because they benefit most from falling bond yields, having more of their earnings far in the future. Cheap value stocks, which benefit less, were down 18%. From the S&P peak in mid-February to the end of June, the story was of cratering earnings partly offset by higher valuations. The S&P was down 8%. Earnings forecasts for 12 months ahead fell 20%, while with 10-year yields down almost a full percentage point, valuations were up from a precrisis high of 19 times forecast earnings (itself the highest since the aftermath of the dot-com bubble) to 21 times. Growth stocks -- based on the Russell 1000 index of larger companies -- were slightly up, because they benefit most from falling bond yields, having more of their earnings far in the future. Cheap value stocks, which benefit less, were down 18%. Growth stocks -- based on the Russell 1000 index of larger companies -- were slightly up, because they benefit most from falling bond yields, having more of their earnings far in the future. Cheap value stocks, which benefit less, were down 18%. Growth stocks -- based on the Russell 1000 index of larger companies -- were slightly up, because they benefit most from falling bond yields, having more of their earnings far in the future. Cheap value stocks, which benefit less, were down 18%. NEWSLETTER SIGN-UP
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Since June the story has reversed. Earnings forecasts have soared, and this year's earnings predictions are now
back up to match where 2020 earnings were expected to be before the recession. The bond yield has leapt almost
a full percentage point, and is higher than it was last February.
Yet, since June, the market's overall valuation is slightly up, and growth stocks are up 23%. Sure, cheap value
stocks responded as expected, rising almost a third and beating growth stocks. But if a lower bond yield
justified the rise in valuations, a higher bond yield ought to mean lower valuations, and probably outright
lower prices for growth stocks.
This is concerning but, directionally at least, is explained by the oddity of August, when bond yields rose
alongside valuation multiples and
the
biggest technology stocks leapt in price
. Measure it from the end of August, instead of the end of June,
and valuations have dropped a bit as bond yields have risen.
But the fall isn't enough to provide much comfort, and worse is that the highly speculative stocks popular with
many individual traders bucked the trend. Notable themes including electric cars, hydrogen, SPACs and wind and
solar power went into ludicrous mode until the middle of February this year, when the rise in bond yields
accelerated and the speculative stocks fell back some.
Share prices propelled more by earnings expectations than bond yields is healthy, while speculation is -- by its
nature -- fickle, and so a poor basis for holding on to a stock for long. My hope is that the contribution of pure
gambling to the overall level of the market is relatively small. But it is hard to explain why stocks should be
so much higher than before the pandemic panic when the earnings outlook is worse and bond yields are back to
where they were.
The investment seeks to track the performance of the Bloomberg Barclays U.S. Treasury
Inflation-Protected Securities (TIPS) 0-5 Year Index. The index is a
market-capitalization-weighted index that includes all inflation-protected public obligations
issued by the U.S. Treasury with remaining maturities of less than 5 years. The manager
attempts to replicate the target index by investing all, or substantially all, of its assets in
the securities that make up the index, holding each security in approximately the same
proportion as its weighting in the index.
Vanguard Short-Term Inflation-Protected
Securities Index Fund ETF Shares (VTIP) NasdaqGS - NasdaqGS Real Time Price. Currency in
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WASHINGTON (Reuters) - Inflation will hit 2.5% this year and not fall much in 2022, which
the Federal Reserve should welcome as a way to reaffirm the central bank's inflation target,
St. Louis Federal Reserve Bank President James Bullard said on Tuesday.
" I am not seeing the inflation rate come down very much in 2022 ... maybe just
slightly, " Bullard said in comments that placed him among the more aggressive Fed
officials in terms of willingness to see inflation move higher this year and remain there
without raising interest rates.
"Part of the goal is to take the increase in inflation that we have this year penciled in
and allow some of that to move through to inflation expectations," and keep them cemented at
the Fed's 2% inflation target.
The real inflation for the past 20 years was probably around 5%: that buypoer of$100
dinimisnes by 50% in 20 years. In some areas like education and healthcare much faster that that.
In some areas slower then that. Official inflation was around half of that (and this discrepancy
is systemic -- due to the desire of any regime based of fiat currency to underestimate inflation
and thus diminish additional payment to Social Security and other linked to inflation budget
items) . Thanks to a massive federal deficit inflation might pick up.
Higher inflation in 2021-2023 is now the consensus,
"The Fed has signaled that its dovish monetary policy is here indefinitely," Mr. Toomey
said, noting a recent uptick in commodity prices and a brightening outlook for economic growth.
"I worry that the Fed will be behind the curve when inflation picks up."
Mr. Powell, however, reiterated that he doesn't expect supply-chain bottlenecks or an
expected surge in consumer demand later this year as the economy reopens to change in long-term
price trends. The Fed generally doesn't alter its policies in response to temporary price
pressures.
"In the near term, we do expect, as many forecasters do, that there will be some upward
pressure on prices," Mr. Powell said. "Long term we think that the inflation dynamics that
we've seen around the world for a quarter of a century are essentially intact. We've got a
world that's short of demand with very low inflation and we think that those dynamics haven't
gone away overnight and won't."
Sen. Richard Shelby (R., Ala.) pressed Ms. Yellen on her changing views on the risks of high
and rising federal debt. Government red ink has swelled over the past year as economic activity
stalled and Congress ramped up spending to combat the pandemic.
Lloyd B. Thomas, Ph.D. University of Missouri Columbia, Mo.
The Federal Reserve is capable of nipping any surge of inflation, but it has made clear it
will be behind the curve as inflation rises. It has announced that it will not boost interest
rates until it is confident we have reached full employment and until inflation substantially
exceeds 2% annually for a considerable period.
Ed Kah, l Woodside, Calif,
The Fed's "foresight" in the 1970s sleepwalked us over 10 years into 14.5% inflation,
18.5% mortgage rates, 7.5% unemployment and a severe recession in 1980. The Fed's repression
of interest rates has already inflated asset prices. It is now favoring spending that will
move the national debt held by the public toward 150% of GDP if the Democrats keep passing
multitrillion-dollar stimulus spending bills in a fast recovering economy.
The big risk comes when interest rates regress to higher historic averages that increase
the cost of government debt. Even a very small rise in short-term rates shook the markets
recently. The Fed should at the very least hedge this risk by lengthening the maturity of
most government debt. They should also caution Congress about the sorry history of countries
whose debt exceeds GDP.
Jacob R. Borden , P.E. Trine University, Angola, Ind.
Prof. Blinder uses macroeconomic anecdotes to argue that upward of 4% inflation is no big
deal. But it is a big deal when you recognize that inflation is a tax on the accumulation of
wealth. Sen. Elizabeth Warren must be smiling.
Even worse, inflation is a regressive tax on wealth. The professional class is already
shifting assets to protect against inflationary headwinds. Mary B. Flyover, on the other
hand, has few such assets and instead spends relatively more of her money on fuel and
groceries, the very elements missing from Mr. Blinder's preferred measure of
inflation.
Every year, inflation saps the spending power of a dollar earned, putting future savings
further out of reach for people already being left behind. What little savings is available
is largely in checking and savings accounts that don't even keep up with current inflation,
let alone just a little more. Then add the compounding impact of inflated incomes on inflated
tax bills. Once 4% inflation is baked in, Ms. Flyover's tax bill will be forever higher,
while her purchasing power will trend ever lower.
Thomas Porth, Hockessin, Del.
The facts that Prof. Blinder doesn't cite are what worry me. When I studied economics at
Princeton in 1981 (using Prof. Blinder's textbook), the yield on the 10-year Treasury stood at
14% as of the end of December, while the CPI-U inflation rate stood at 8.9%. The real risk-free
rate of return was therefore a positive 5.1% or so. In contrast, today the CPI-U stands at 1.7%
(March 10), while the yield on the 10-year Treasury stands at 1.71% (March 18), for a real
risk-free rate of return of what is effectively zero.
Even relying on current measures of inflation, the real rate of return has dropped from
positive 5.1% in 1981 to zero or, let's be serious, less than zero today (when I am retired).
Sorry, Prof. Blinder, but I'm starting to panic.
The Federal Reserve's $3.4 trillion in asset purchases and the roughly $4.5 trillion in Covid
recovery funds Congress approved in 2020 largely succeeded in [reventing the 2020 recession
hitting the stock market. Unemployment increased to the recession level and will stay at this
level.
S&P 500 Thrived During Federal Reserve's Low-Rate Regime. This regime by-and-large
ended.
Almost everyone expects a notable pickup in inflation this year -- including the Fed.
Monetary policymakers expect the personal consumption expenditures (PCE) price index to rise 2.4%
this year. That's vs. 1.5% in the 12 months through January. The 10-year yield is up 66 basis
points since Jan. 5.
Now, as President Joe Biden gets ready to tee up another massive spending package focused on
infrastructure, Wall Street is weighing what unleashed fiscal policy might mean for interest
rates, tax rates and stock prices.
The implications are magnified by the
Federal Reserve's recent about-face on inflation , from standing on guard against it to
trying to stoke it. The combination of easy fiscal and monetary policy may lift the Dow Jones
and S&P 500 in the near term. Yet some on Wall Street think it could mean lower returns in
the future.
The seismic shifts in fiscal and monetary policy are drawing comparisons to another
old-economy moment: the latter half of the 1960s. That era was marked by strong economic
growth. But it also brought rising inflation -- and a long-term stock market top.
S&P
500 Hits Highs While Techs Slip
The Dow Jones and S&P 500 index rallied to new highs this month, though they have pulled
back modestly in recent days. The Nasdaq remains 9% off its Feb. 16 peak, selling off this week
What ails big techs that dominate the Nasdaq, like Apple stock, Amazon.com ( AMZN ) and highly valued
growth names such as Tesla ( TSLA )?
Tech giants are no longer are the only game in town given the bullish outlook for cyclical
and value stocks. Meanwhile, the surge in Treasury yields has led stock market strategists to
rethink growth stock valuations -- and much more.
...If not for Jan. 5, the latest round of fiscal stimulus might have been $1.25 trillion
smaller -- like the $600 billion package pitched by moderate GOP senators.
The Democrats' bill went well beyond $1,400 stimulus checks, emergency jobless aid and funds
for Covid vaccines and testing. Washington also will send $580 billion to state and local
governments. That "is significantly higher than the estimated $85 billion net budget shortfall
facing state and local governments," wrote Moody's Analytics economist Bernard Yaros.
...
Biden also promised "historic investments in infrastructure, manufacturing, innovation,
research and development, and clean energy." These more tangible investments, however, would
involve a one-time appropriation that could be financed with deficits.
The Biden campaign's plan to spend $2 trillion on green-tinted infrastructure over four
years will likely serve as a starting point. The whole package could add up to $4 trillion,
Goldman Sachs estimates.
Money started flowing out of technology stocks that led the market higher for much of the
last year. The sharp increase in bond yields in recent weeks has taken the steam out of
technology stocks
Despite FED cheerleading of stock market money managers are betting that inflation will climb
sharply, and could spur the central bank to raise interest rates or pare back bond
purchases.
This rotation has benefitted the value and cyclical sectors, like industrials ( XLI ), energy ( XLE ) and financial ( XLF ) stocks -- which have all outperformed this year.
Meanwhile, defensive sectors, like consumer staples ( XLP ), health care ( XLV ) and utilities ( XLU ) have been the worst performers.
Tech ( XLK ) is the fourth
biggest sector laggard this year, as attention (and money) has shifted from the high-growth
names like Peloton ( PTON )
and Zoom ( ZM ) to the less
sexy names that are more likely to benefit from a recovery, like Caterpillar ( CAT ), American Airlines ( AAL ) and Goldman Sachs ( GS ).
A record 52% of those surveyed by BofA now think we'll see more of the same over the next
year -- that value will outperform growth.
...if bond yields simply climb higher, problems emerge for the entire market when the moves
in the bonds are too rapid or disorderly. The pace of the rise or fall in yields
matters.
P Paul Avila SUBSCRIBER 8 hours ago U.S. stocks edged higher Wednesday as investors
awaited more testimony from Federal Reserve Chairman Jerome Powell.
Good grief. Is there any way his subordinates could prevent that? Perhaps lock him in a
supply closet until the market closes? Every time he opens his pie hole, I lose money.
W Will Bee SUBSCRIBER 8 hours ago Actually I suspect we are waiting for all the FED and
Treasury "people" to stop jawboning us so Markets can assimilate their irrelevance
Sellers got more than they listed for in 36% of deals in February, according to
Redfin
... the median home price of U.S. residences rose 14.4% last month, to $336,200, compared to
the same time the previous year, the data showed. That marks the biggest jump since July
2013.
Mar.24 -- Senator Elizabeth Warren (D-MA) asks Treasury Secretary Janet Yellen if she would
direct the Financial Stability Oversight Council (FSOC) to consider designating BlackRock as a
firm whose failure could threaten the financial system.
(Reuters) - Treasury Secretary Janet Yellen said on Wednesday it is important to "look
carefully" at systemic risks posed by asset managers, including BlackRock Inc, but said
designating them as systematically important financial institutions may not be the right
approach.
Yellen's remarks came in response to questions from Senator Elizabeth Warren, a longtime
Wall Street critic, who demanded to know why BlackRock and other large asset managers had not
been added to the list of designated institutions.
"I believe it is important to look very carefully at the risks posed by the asset management
industry, including BlackRock and other firms," Yellen, who as Treasury secretary, chairs the
Financial Stability Oversight Council (FSOC), which is charged with making such
designations.
"FSOC began to do that, I believe, in 2016 and 2017, but the risks it focused on were ones
having to do with open-end mutual funds that can experience massive withdrawals and be forced
to sell off assets that could create fire sales. That is actually a risk we saw materialize
last spring in March," she said.
In 2014, BlackRock and other asset managers won a battle in their fight against tighter
regulation when a panel of top financial regulators agreed to revamp their review of
asset-management firms to focus on potentially risky products and activities rather than
individual firms.
"I think that with respect to asset management, rather than focus on designation of
companies, I think it is important to focus on an activity like that and consider what the
appropriate restrictions are," Yellen said.
"The past two administrations in the US, and numerous global regulators, have studied our
industry for a decade and concluded that asset managers should be regulated differently from
banks, with the primary focus being on the industry's products and services," BlackRock said in
a statement.
The collapse of Greensill involved a predicable cast of unwise enablers, but it should
serve as a warning to the growing number of Alternative Asset buyers on the dangers of complex deals which promise much but
deliver less. Due diligence is critical in the highly illiquid alternatives sector.
You really can't make it up when it comes to the collapse of supply chain charlatan Greensill. I suspect it will make a great
film It should also send a judder down our spines, reminding us things are seldom what they seem in complex structured finance:
I'm wondering how many fund managers are quietly nervous about what's really in their alternative asset/direct lending
investment buckets this morning?
If I was a holder of complex European securitisation/receivables deals that promise much, but actually provide very little
information on the performance of underlying assets, then I might suddenly find an anxious desire to check just how they are
REALLY doing.
At least former UK premier David Cameron will be happy. A majority comprising Tory MPs on the UK's Treasury Select Committee
blocked
an inquiry
into Greensill yesterday on the basis it may be politically influenced. The fact
Call-Me-Dave
was
texting chancellor Rishi Sunak pleading for GFC to be a special case for Covid Bailout loans says it all about the dangers of
lobbying. The SNP will be equally delighted at the lack of scrutiny of dodgy dealings up in the Highlands.
The Greensill collapse is unlikely to be the last time financial chicanery is exposed as
sham. And that is why holders of European Alternatives and Asset backed transactions should be nervous. The lessons of the
Greensill deals are multiple:
Don't assume the deals you are sold are what you are told they are,
There is no substitute for deep due diligence.
Companies that look impossible to finance do not suddenly become AAA credits after a sprinkling of magic secured funding dust.
Anything promising of low-risk/high-returns from complex structuring and technical innovation is suspect.
Let's review the unfolding Greensill mess:
There over 1000 holders of the $10 bln plus of defaulted Greensill investment structures packaged and issued by Credit Suisse –
which marketed them as ultra-safe secured investments. Under the law, what the holders recover on these deals will rather depend
on how much the administrator and the courts can jemmy out of Sanjay Gupta's
dead-firm walking
;
steel and commodities business GFC Alliance. (I have no hesitation in saying GFC will go to the wall – there can't be a single
sane financial firm on the planet willing to finance them as the story of its' Greensill relationship emerges and its connected
in-house banking arrangements become clearer – although, apparently, a state rescue is under consideration to save jobs.)
Investors will be lucky to see much more than the 30% recovery already in the pot from non-Gupta related investments in the
Greensill funds – but Credit Suisse may decide to make its investors good. The reputational damage of seeing their private and
investment banking clients clobbered for their stupidity, which would negate their private banking brand, may mean it's worth
taking the hit. No wonder CS staff are very grumpy about their bonuses.
Successful financial scams require willing participants. All the usual fools are there in
the mix.
Yet again the German regulator missed what was going on in Greensill's German bank and its exposures to Gupta. The team at Credit
Suisse who agreed to warehouse Greensill originated "future receivables" and sell them as pristine secured assets have a limited
shelf life. The insurance broker who managed to convince an insurance fund the underlyings were AAA quality looks vulnerable. Or
what about the sales teams in Morgan Stanley who actually marketed the deals. Yet again Softbank is in the frame after it
invested in excess of $1.5 bln at a $4-7 bln valuation, hailing Greensill as a leading Finech, when the actual truth is that its
high-tech driven lending algos were nothing more than basic Excel spread sheets.
Greensill's financial magic was little more than sheer chutzpah – being able to persuade investors that the dull old low margin
conservative business of factoring – short-term secured lending against invoices and accounts receivable, was something
incredibly clever, undervalued and able to generate huge returns based on unique proprietary tech.
Greensill deals went further. Rather than just factoring Gupta's bills to suppliers and its invoices, the firm conjured up
"future receivables" – pledging the company's expected future earnings for lending now. That's not necessarily a bad thing – its
basic credit – but it only works if these earnings were completely predictable like obligated mortgage payments. What Greensill
was doing was lending on future earnings on very volatile commodities. Remember – oil prices went negative in 2020.
In return for funding challenging names we know Greensill took divots out these clients. It made over Ł36 mm financing Gupta's
deals in Scotland, and an amazing $108mm in fees from the $850mm Bluestone coal deals in the US – for which it is now being taken
to court. All these fees gave Lex Greensill the wherewithal for his private Air Greensill fleet – but didn't make the financings
any safer.
Any smart investors would probably have asked questions – but what's not to like about a deal that's secured on receivables,
offers a high coupon, is wrapped with an insurance package from reputable insurer and involves major investment firms like Credit
Suisse banking them, and Morgan Stanley marketing them?
One question is how did Greensill get away with it so long?
It was clear as early as 2017 there were major issues with some of the supply chain financing deals Greensill was putting
together. The following year a major Swiss investment group, GAM, blew up when deals a leading fund manager had bet the shop on
were questioned internally. A review by external investigators discovered a lack of information and documentation on a whole
series of Greensill deals. They questioned how due diligence was done on the deals. The fund manager was suspended and later
dismissed – triggering a redemption run on the fund. The whistle-blower was also shown the door on the back of massive client
exits.
GAM invested in the funds because it's very hard to turn down the promise of a low risk / high return deal that promised so much
more than the tiny yields available in conventional credit markets.
Despite the events at GAM, Credit Suisse went on to package $10 bln plus of Greensill deals. It was all done with an insurance
wrap from a single name put them in its safe bucket. I know other insurance firms refused the deals. The trigger for the collapse
of the Greensill scam was the withdrawl of that critical insurance – causing Credit Suisse to stop. Greensill has known for a
year Tokyo Marine (which sacked the underwriter involved) would not renew and had been unable to find alternative cover.
Perhaps Credit Suisse bought the story and Softbank link that Greensill was a remarkable new Fintech with the Midas touch of
changing dull, conservative factoring into a money machine? All that glitters is not gold.
One of the major developing themes in markets has been a shift from financial assets – which are seriously mispriced due to
monetary distortion and financial asset inflation – into real assets, the so-called alternatives market. Alternative because they
are not stocks or bonds, but cash flows and real assets. The collapse of Greensill will heighten awareness of due diligence risks
in these non-standard, off-market, asset backed alternatives. Alternative asset holders will be looking at holdings for what else
might be wobbly.
For instance, I might urge them not to be hypnotised by the assumptions underlying a well-known fund investing in music
royalties, the basis of which is also being questioned by analysts. (I certainly won't mention the fund by name as the manager is
a well-known litigant.) I have no reason to believe or disbelieve what analysts, the FT and a US investment bank have said about
it overpaying for assets or questioning the valuation hikes it puts on future revenues when it acquires catalogues. Personally I
like music assets, know their value, and, given certain circumstances the fund in question might come good. Equally.. it might
not.
To understand how these deals works its critical to understand exactly what's occurring within the structures – how real are the
assets, how the cash flows, how its accounted, and where it goes. That's why having top notch accountants and lawyers is such an
important requirement for any deal. However, if they are working in the interests of the issuers and bankers – then investors are
the likely patsies. There is a real difference between the way US and European Asset Backed deals are structured – basically US
deals are transparent. European deals tend to be opaque.
Alternative deals based on real assets and tangible cash flows are often, but not always, decorrelated from distorted financial
assets, allowing low risk deals to yield better long- term returns. They tick can the box in terms of risk vs return and provide
significant diversification away from conventional markets. The major negative is there is little pretence they will be liquid
assets. If you want to sell – even in good markets it will not be easy.
The only way you should participate in Alternative type deals is by knowing exactly what's going on. And – yes, my day job is
Head of Alternative Assets. Happy to discuss in depth any time.
Most tax havens are either American possessions or British possessions. Then there are the
tax havens that are firmly under American geopolitical control (Switzerland, Monaco,
Luxembourg, Ireland). Then there is the State of Delaware (of which the present POTUS is from).
There are no tax havens under the control of an enemy of the West.
The USA should stop with that charade. If it wanted to curb on tax evasion, it would've
already done so decades ago.
Capitalism is value that self-valorises. The rich must get richer and the poor must get
poorer over the long term. That's how a healthy capitalist system operates. To try to claim USD
1.4 trillion from their bourgeoisie is not how the American Empire should work. This is a
desperate attempt of the American Federal State to survive.
When the most respected bank in the US feels compelled to publish A 42-page "guide to
bubbles and why we are not in one" in response to what is a clear outpouring of client concerns
that we are, in fact, in one we repsectfully leave it up to readers to read between the lines
and reach the obvious conclusion.
We say that because reading Goldman's actual lines is quite painful: in his (futile) attempt
to convince the bank's clients that US stocks are not, in fact, in a bubble, Goldman strategist
Peter Oppenheimer writes that "in recent weeks there have been growing concerns about a bubble
building up in the equity market and across financial markets in general" before eventually
concluding that "while there are pockets of excessive valuations in equities, and parts of the
market are justifiably de-rating as interest rates adjust, in our assessment only a few of
these common characteristics are currently present or being partially met. Importantly, the
absence of significant leverage (outside of the government sector) and the early stage of the
cycle suggest that the risks of an imminent bubble with systemic risks to the financial system
and economies is relatively low."
... ... ...
But wait, it gets even dumber, because in the very next attempt to refute the existence of a
bubble, Goldman says that there are only "a few" consistent hallmarks of financial bubbles,
with the majority "characterized by many, if not most, of the following":
Excessive price appreciation & extreme valuations
New valuation approaches justified
Increased market concentration
Frantic speculation and investor flows
Easy credit, low rates & rising leverage
Booming corporate activity
New Era narrative and technology innovations
Late Cycle economic boom
The emergence of accounting scandals and irregularities
Hilariously, despite admitting that there are bubble signs of 7 out of 9 categories, Goldman
claims there has been no emergence of accounting scandals and irregularities..
... ... ...
If we had to summarize Goldman's thesis it would be that while pockets of exuberance and
excessive price rises increase, they do not necessarily mean that a broader and systemically
dangerous bubble is forming more broadly.
In the S&P 500 -- the best- performing of the major equity markets -- the rise of
the past few years has been impressive, particularly in technology, but it's not nearly as
extreme as the explosive rise that accrued during the late 1990s
Fundamental EPS for the leading technology companies and for the more widely owned
retail stocks have significantly outstripped those of the rest of the market, so
outperformance has been supported by superior growth and fundamentals
The rally has been based on achieved reality, not purely on hope and possibility
(Goldman must be referring to the 21x forward PE multiple here which is based on some form
of "achieved" future reality).
While high valuations imply lower longer- term returns, they don't point to a
broad-based valuation bubble in equity markets
In any case, it was around point that we gave up on reading more of this drivel, and sent
our condolences to the junior analysts who had to work a soul-crushing 100 hours a week (even
though there are millions of 25-year-olds who would kill to work 200 hour weeks for half the
pay of a Goldman analyst) to put this together.
ay_arrow
JohnGaltsChild 6 hours ago remove link
There is no bubble.
Biden won fair and square.
There is no crisis at the border.
The government never surveils private citizens.
Critical race theory is not racist.
I'm a mindless robot.
Im4truth4all 6 hours ago
Add:
Epstein committed suicide.
The FBI is committed to truth and integrity.
The Supreme Court is committed to truth and integrity.
The democrat/marxists tell no lies.
And the list goes on ad infinitum.
stop_the_fraud 6 hours ago
Bitcoin is the new world currency.
Gold is a worthless pet rock.
EV's are the future.
JohnGaltsChild 6 hours ago
"Who are you going to believe, me or your own eyes?"
Groucho Marx
Art_Vandelay 7 hours ago (Edited)
When the most respected bank in the US.
Respected by whom, again?
Buzz-Kill 6 hours ago (Edited)
Operated by FED thieves, with politicians close behind.
khakuda 6 hours ago (Edited) remove link
Go back to 1999 and you will see all of the street brokers saying the same thing. It's
different this time is basically what they are saying, which is what one always hears during
bubbles.
And the accounting irregularities usually appear after the decline when they can no longer
be hidden...think Madoff or Lehman.
Victory_Rossi 6 hours ago
I don't know why anyone would do business with Goldman at all. Even if you're greedy as
fvkc and think you'll be the special one that GS doesn't screw over, why take a chance? It's
like the parable of the scorpion or snake - you know what they are so why'd you pick it up.
Good luck Muppets!! You're going to need it.
Im4truth4all 6 hours ago remove link
"If you repeat a lie often enough, people will believe it, and you will even come to
believe it yourself." - Joseph Goebbels
Art_Vandelay 6 hours ago
Is Goldman getting into the comedy business now? I was sort of laughing at their analysis
the whole way through.
Watching in Baltimore 6 hours ago
"I have no fears for the future of our country. It is bright with hope."
Herbert Hoover, March 4, 1929
Death2Fiat 6 hours ago
Take a look at the Fed's M* monetary base charts.
It's straight up. 90 degree angle all the way up.
Great Iota 5 hours ago (Edited)
No Bubble? I couldn't find a single stock that was worth investing (value). Think this was
the first time in 25 years that it has happened. All equity is either losing money per share
or for every $100 you invest, you make between .001 cent to $3.50.
I remember the days when you expected companies to earn $10 to $20 per $100 depending on
industry.
Now, you got virtual intangible assets like Bitcoin, which is a total scam, its not a
currency, has no real use, and is an exact definition of a Ponzi scheme. Brilliant idiots who
collect billions from the government for having a green company and at the same time invests
billions in a Ponzi scheme that consumes ridiculous amount of energy.
in 3 months, Bitcoin will undo all the green initiatives the democrats has pushed for in
the last 20 years. Grats morons!
No one knows how to calculate energy use?
cooll 7 hours ago
Goldman = contrarian indicator.
YesWeKahn 6 hours ago
Sure, based on goldman's logics, not only there is no bubble, this is actually a multi
generational bottom, they should sell all their other assets and buy stocks.
Last week the US Federal Reserve raised its growth forecasts for the US economy for this
year and next. Fed officials now reckon the US economy with expand in real terms by 6.5%, the
fastest pace since 1984, a few years after the slump of 1980-2. This is a significant rise from
the Fed's previous forecast. Also, the unemployment rate is expected to drop to just 4.5% by
year-end, while the inflation rate ticks up to 2.2%, above the official target rate set by the
Fed.
Driving this new optimism on growth is the fast roll-out of vaccines to protect Americans
from COVID-19 plus the huge fiscal stimulus package put through Congress that most mainstream
forecasters expect to add at least 1% point to economic growth and bring down unemployment.
But Fed chair Jay Powell made it clear that the Fed had no intention of raising its target
interest rate until 2023 at the earliest even if inflation accelerates. He wants to see the
unemployment rate drop to 3.5% and inflation averaging 2% or so. He would tolerate the economy
"running hot" until that happens because he reckons that any rise in inflation would be
transitory.
The implication of Powell's view was that the US economy was going to have a 'sugar rush'
from the fiscal stimulus and from the 'pent-up' demand of consumers with cash savings ready to
spend on restaurants, leisure, travel etc once the pandemic restrictions were relaxed. But as
every parent knows, giving a child too much sugar leads to a rush of energy. And then comes the
letdown and sleep. That is what Powell worries about, namely that after this burst of energy on
the 'sugar high' of government paychecks and restaurants meals, the US economy will slip back
into the low growth trajectory that applied before the pandemic slump.
Powell is also concerned about a potential relapse in the fight against the virus and
expects fiscal support from the stimulus starting to fade next year and worries that the labour
market will continue to struggle. So he expects 'core inflation' (excluding food and energy
prices) will fall back to 2 per cent next year and 2.1 per cent in 2023. So no inflationary
spiral.
It is significant that the long-term growth forecast by the Fed is just 1.8% a year, which
is hardly any higher than average real GDP growth of 1.7% since the end of the Great Recession
and before the pandemic.
This implies that the Fed reckons the US economy is going to drop back to the rate of growth
experienced in the Long Depression since 2009, and the 'sugar rush' is just that.
What this also implies is that contrary to the views of the Keynesians, the
multiplier effect of the fiscal stimulus will soon dissipate and then the US economy will
depend, not on consumers' pent-up demand but on the willingness and ability of the capitalist
sector to invest. It's investment not consumer demand that will matter in sustaining any
significant recovery; not sugar treats but on new energy in the form of new surplus value (to
use Marx's term for profits).
Financial investors are less convinced that Powell is right. After all, getting the US
economy to achieve a 3.5% unemployment rate and 2% inflation has been achieved only twice since
1960! So 'inflation expectations' among investors have been rising, suggesting an inflation
rate of 2.6% on a five-year view. As a result, US government bond yields have also risen
significantly, as bond yields suffer in real terms if inflation rises.
The view that the US economy may 'overheat' has been argued by Larry Summers, the
arch-Keynesian of several administrations. He fears that the fiscal and monetary stimulus will
lead to 'excess demand' and so drive up prices across the board, eventually forcing the Fed to
raise interest rates. Summers argues this, because this time last year, he was telling the
world that the COVID pandemic would have little long-lasting impact and the economy would
bounce back once it was over, just like seaside towns go to sleep in the winter and then wake
up when the tourist season starts. He seems to think that the US economy will revive of its own
accord and fiscal stimulus is unnecessary. But the experience of the last year has been much
longer and more damaging than a 'winter break'.
At the other end of the argument, Summers has been scathingly attacked by post-Keynesians
and leftists who reckon there is no danger of 'overheating' and rising inflation, because there
is plenty of 'slack' in the economy ie workers needing jobs and businesses needing to start up.
But what this view ignores is the 'hysteresis' effect on the economy from the pandemic slump;
namely that many workers have been forced to leave the workforce for good over the last year
and many small to medium businesses will never return. The Long Depression has seen a steady
reduction in estimates of US productive capacity.
That means the room for economic recovery is reduced unless investment in new means of
production and employment rises significantly. So there could be 'overheating' and higher
inflation, not because of pent-up consumer demand but because of weak productive capacity
– not 'too much demand' but 'not enough supply'.
What the last ten years has shown is that business investment growth has slowed as the
profitability of productive capital has fallen in the US. Cash-rich companies and investors,
borrowing at record-low interest rates, have preferred to speculate in financial assets. The
huge tally of bailouts by central banks and cuts in corporate taxation have been spent on
driving the stock and bond markets to all-time highs while the 'real economy' has stagnated.
The bottom 80% of American households, who drive the bulk of personal consumption expenditures
(PCE), continue to struggle to make ends meet.
And down the road, rising debt cannot be ignored. And it is not so much public sector debt,
which in the US is now well above 100% of GDP; more important is corporate debt. If interest
rates for firms do start to rise because of increased inflation, then debt servicing costs for
a whole swathe of so-called 'zombie' companies will become an excessive burden and bankruptcies
will ensue.
According to Bloomberg, In the US, almost 200 big corporations have joined the ranks of
so-called zombie firms since the onset of the pandemic and now account for 20% of top 3000
largest publicly-traded companies. With debts of $1.36 trillion. That's 527 of the 3000
companies didn't earn enough to meet their interest payments!
As before, the Fed is caught. If it does not end the monetary largesse at some point, then
inflation could rise which will eat into real incomes and drive up corporate debt costs. But if
it acts to curb inflation, it could provoke a stock market crash and corporate bankruptcies.
That is what happens when an economy is in 'stagflation': namely rising inflation and low
growth.
For example, the very sharp fall in stock prices in 1987 did not lead to economic recession
and prices recovered quickly. The reason then was that the profitability of capital in the
major economies had been rising for over five years and was at a relatively high level in 1987
and profitability continued to rise for another decade. But that is not the situation now. The
profitability of capital is near all-time lows and even a recovery in 2021 and 2022 will not
put levels back to that before 1997 or 2006. And corporate debt has never been higher
historically.
These underlying forces suggest that the 'sugar rush' will be just that – a short
burst followed by slumber at best.
"If it does not end the monetary largesse at some point "
There's the rub. Moral hazard is in full effect. Too big to fail has essentially been
codified by the politicians the capitalists have purchased. So, theoretically, how long can
it all go on, assuming the power elite all agree to keep the game up? I'm surprised they've
been able to do it this long
Reply
Doesn't the role of government debt in maintaining the nominal values of fictitious
capital, either directly or by preserving nominal value of the currency, mean that many of
the winners in the depression (those that have capital reserves always win distressed
properties in a depression, no?) will find an excessive debt an unbearable burden long
before they find the gigantic flow into the banks, the stock market and corporate bonds a
threat. Given the perception that the rest of the world will always bear the brunt of US
government contraction, isn't there likely to be a major political demand for
austerity?
If the US weren't the financial nerve center, I would expect a monetary crisis in
exports, but there is no reserve currency to compete. Making a basket of currencies work or
switching to Special Drawing Rights to replace the Fed have the problem of opposing the US
government while coordinating in a kind of monetary union with other states, which is not
what good bourgeois democracies do. Gold and oil, the commodities most likely to be sought
to preserve value are either too scarce or their markets too manipulated by a handful of
players. Although an inflationary crisis/dollar collapse seems unlikely (and fears of
hyperinflation wildly inflated, barring a military defeat of the US,) It's clear to me that
a stagflation scenario is probable.
Reply
I think it is Powell who is having the sugar high. If we examine Retail Sales for the
combined months January and February a strange combination is seen. In terms of adjusted
data, the two months were up by 5.1% on the previous year, but if we examine unadjusted
figures sales were flat. Thus it appears it is all in the adjustment, with the fall in
February effectively wiping out the rise in January. https://www.census.gov/retail/index.html
Thus a $900 billion injection was effective for only one month. Yes there will be a
short term boost from the $1,900 billion ARP Bill, but that has to be set against so many
negative potential events. First and foremost, the issue of interest rates. The 10 year
rate is above, what I called the red line at 1.6%, and markets, while not sneezing have
certainly got itchy noses. I would caution against using 1987 to substantiate the view that
market crashes do not cause recessions. Conditions now are very different and the economy,
because of inequality, is much more dependent on capital gains. Thus a market crash will
wipe out any gains from these relief packages. I have been trying to look up losses in the
global bond market, which amounted to $3 trillion when the rate hit 1.4%. It is likely now
to be in the vicinity of $5 trillion.
Anyway we will know more this Thursday when corporate profits are released. Once again I
will prepare a post which looks at the rate of profit both with and without subsidies.
Reply
Hi Michael, love the blog- I just had a quick question about the US stimulus package I
was hoping you could help with.
It's about the stimulus cheques- if I remember right they're about $1,400 each. This
helicopter money sounds good, but am I not right in thinking that a lot of this will just
go into the pockets of private landlords or other rentiers and will thus have a limited
effect in terms of boosting consumer spending?
But if FED lost control think can became really break soon. Theoretically TIP bought directly
from Treasury might be an escape for misery but currently they are not as their yield right now
is just 0.125% while inflation is somewhere probably between 2 and 6 percent per year. CPI Inflation Calculator
shown that $1K in 200 is equivalent to $1558 now so the official annual inflation is around
2.5%
...The economics of trading from stocks and real estate to interest rates would be turned
upside down if projections of runaway prices are to be believed.
Yet there are clear divisions. Goldman Sachs Group Inc. says commodities have proven their
mettle over a century while JPMorgan Asset Management is skeptical -- preferring to hide in
alternative assets like infrastructure.
Pimco, meanwhile, warns the market's inflation obsession is misplaced with central banks
potentially still set to undershoot targets over the next 18 months.
... There will be rotation into real-economy assets such as small caps, financials and
energy stocks instead of rates and credit, and that will generate a lot of volatility.
... TIPS (only if bought directly from the treasury) offer reasonable insurance for an
inflation overshoot. Commodities and assets linked to real estate should also benefit in an
environment of rising inflation.
Bind vigilanties is a myth... Concerned speculators are real. They would "sell first and ask
questions later", pushing up interest rates and battering bonds and stocks...
The bond vigilantes appear to have returned, punishing not only the Treasury market but also
exacting a toll on the Nasdaq Composite's highfliers. What's different this time is that the
bond vigilantes are fighting the Fed, to mix two market aphorisms. The Federal Reserve just
reiterated its intention to maintain its ultra-accommodative policy until it sees what it deems
as maximum employment and inflation steadily above 2%.
Your editorial "The
Semiconductor Shortage" (March 13) is right that government action is not needed to correct
the short-term supply-demand imbalance causing the global chip shortage, but wrong that the
U.S. can "prod" its way to stronger domestic semiconductor production and more secure chip
supply chains in the long term. Global competitors haven't passed the U.S. as a location for
chip manufacturing by prodding. They've done it by funding ambitious government incentives to
lure semiconductor production to their shores.
As a result, only 12% of global manufacturing is now done in the U.S., down from 37% in
1990.
The IRS uses the information it has on hand to determine your eligibility for a stimulus. If
your income in 2020 was higher than in 2019, you might want to wait to file if the two numbers
straddle the cutoffs for stimulus eligibility, which
are $75,000 for single people and $150,000 for married couples .
This is the first tine the benchmark 10-year note trades up above 1.7% since Covid-19
pandemic began. Though much higher than last year, when it spent months between 0.6% and 0.9%,
the 10-year yield also remains low on a historical basis, It have been above 3% as recently as
2018.
The key problem is that the S&P500 level is in the bubble territory using Shiller metric
and that means that a large correction is a possibility.
As 10-year TSY yields briefly touched 1.75% this morning in the wake of Wednesday's FOMC, an
overnight note from Zoltan Pozsar
predicting the end of SLR relief , and a report by the Nikkei noting that the BOJ would
allow long-term interest rates to move in a slightly larger range of about 0.25%, versus 0.2%
now...
Bank of America warned that ... 10-year yields above that level could become a headwind for
the equity complex. As BofA strategist Savita
Subramanian wrote "history suggests that 1.75% on the 10-yr (the house forecast and ~25bp above
current levels) is the tipping point at which asset allocators begin to shift back to bonds"
and thus sell stocks in the next wave of aggressive liquidations.
Why 1.75%? Because that yield on the 10Y is decisively above the S&P's dividend yield,
and where according to BofA "there is an alternative to stocks", or TIAA.
Separately, in its fund manager survey, Bank of America found that while few believed that
rates at 1.5% would cause an equity correction (which they did as
Nomura originally predicted one month ago ), the move from 1.5% to 2% is critical as 43% of
investors now think 2% is the level of reckoning in the 10-year Treasury that will cause a 10%
correction in stocks .
Ajax_USB_Port_Repair_Service_ 7 hours ago
2.0 is the new 1.75
paid_attention 4 hours ago (Edited)
I've noticed that there hasn't been any down days over 2% in months...
Globalistsaretrash 7 hours ago remove link
Just last week an article said 1.54% would trigger Armageddon.
Boxed Merlot 7 hours ago
...last week...1.54% would trigger Armageddon...
I know this is getting old, but being cursed with a "boomer memory", I still remember when
interest only real estate purchases at 1% of purchase price per month to service one's "note"
was considered a steal. Home loans at 16-18% were common and t-bills were paying a mere
10-12% a year.
What's more, me and mine are still here after all those years, albeit a bit longer in the
tooth, but that's life.
I know, I know, this time is different.
Seasmoke 7 hours ago
So no Ponzi Collapse at 1.65 ?? Because I read that somewhere last week.
Globalistsaretrash 7 hours ago
Me too.
radical-extremist 7 hours ago (Edited) remove link
OMG! I can't decide whether I want a 1.75% yield in treasuries or SPY dividends....just so
I can keep pace with 2.2% inflation of the DXY...of my $1400 stimmie.
nope-1004 7 hours ago remove link
1.75.... lmao. The rigged casino is THAT weak?
mtl4 7 hours ago (Edited) remove link
Everyone was a genius back in the Dot Com era too.......works until it doesn't.
drjd 6 hours ago
Because life is all about the pursuit of profits?
I woke up 7 hours ago
How much more fake money needs to be printed to cover the debt when yields go to 1.75
gcjohns1971 6 hours ago
When everyone is a finacialized zombie, a rotation from stocks bankrupts everyone. If
corporates are deprived of their financial casino takes, then you have until quarterlies to
see that as a GDP bloodbath.
Then the only place to go will be commodities. The inflation the Fed has been searching
for lives there. PPI will go wild, up double and some times triple digits in a matter of
days, spooking everyone.
itstippy 7 hours ago
Does the Fed have some sort of tool in their toolbox they could use to suppress market
yields on the 10 year if needed?
JZimmerman901 7 hours ago
They only have one "tool" and that's to print money. And sure, if they print money to buy
10 years, that would suppress yields.
Chutney ferret Harris 7 hours ago
Correction to the article - "Then again, Goldman has been wrong about virtually everything
it has said publicly in recent years so take the bank's optimism with a metric ton of
salt."
We know privately Goldman knows what is going on and happily collecting its vig from the
taxpayers.
ReadyForHillary 6 hours ago
Why would anyone assume that what GS states publicly is their true opinion?
silverredux 7 hours ago
Goldman has been correct because they've invested in the other side of the argument every
time
Goldman up 152% in 12 months.
Rising rates keep metals in check too. Just a bonus
MrNoItAll 7 hours ago
Goldman Sach bank's optimism is fabricated hope-filled messaging to the "investors" their
mega-bonuses are dependent on.
QE4MeASAP 7 hours ago
Maybe we'll get to see if "Not in my Lifetime" Bernanke was correct.
Everybody All American 7 hours ago remove link
We are now over the 100% debt to GDP ratio barrier and if rates rise from here to any even
small degree it is game, set, match. Since the market top of the 10yr in price there has been
a 7% loss for those who bought as it stands right now. We are talking some big losses.
Remember, no one is buying this stuff for the yield.
incalescent 7 hours ago
While I like to disagree with Goldman on principle. I think there is a better argument
than the dividend yield of S&P500 stocks to account for the upcoming shift. The 2% and 3%
inflections points have more weight with the general trends. This 1.5% number feels like an
exercise in finding a reason to pick the number, not a sharp pin to prick the bubble.
Bubble though, it is, and we live in cactus times.
Calvinharrison 1 hour ago
I put all my pension into government bond funds.. it will drop the least compared to
stocks. And I could enter stocks again later. 30% up on the year is ridiculous and there are
some funds that went up close to 50%.
AUD 3 hours ago
I think it's the volatility of the move which concerns the Fed. If interest rate spreads
stay tight as rates move higher, the casino can stay afloat. If rates move to fast, things
get out of control.
Ozarkian 7 hours ago
Does this mean you can't have your cake and eat it too?
The value of a 30-year Treasury fell 15.6% in just three months. That is the equivalent of
almost a decade of the income it offered three months ago, and it is the flip side of the
sudden rise in yields. Shorter-maturity Treasurys have fallen less, but even for the 10-year
note it will take six years of income to recover the loss of the past three months.
...But the probability of inflation averaging over 3% for the next five years has reached
30%, the highest since the taper tantrum, showing the rising uncertainty about the impact of
stimulus combined with easy money.
Morgan Stanely's chief US equity strategist Mike Wilson told investors Monday in a new
podcast titled "A Tougher Road Ahead for
Small Caps?" that "extraordinary outperformance" of cyclicals and small caps is coming to
an end . He downgraded small caps on Monday to reduce risk.
"From our perspective, the equity market is doing exactly what it should be at this stage
of the recovery. The recent non-linear move in long-term interest rates means equity
investors can no longer ignore this risk. The rates market is mispriced , and now that the
seal has been broken, there's good chance equity markets start to price in the next 50bps
move, even if it's months away. What this really means is that equity valuations are likely
to fall this yea r - a key part of our call for 2021 ," Wilson said.
The downgrade comes as Wilson told investors last week
three reasons why the "stock correction has further to go before it's over." His latest
podcast indicated the "extraordinary outperformance and earnings revisions and valuation
expansion" of small caps is likely "coming to an end."
Wilson warned:
"Falling equity valuations is what always happens at this stage of the recovery , and we
see little reason to think it will be different this time. Having said that, the recent
fiscal stimulus may provide one last final push higher as this money leaks into the market.
We would use that strength to reduce positions in the more expensive parts of the
market."
He said his team upgraded small caps near the pandemic low last April as his core "thesis
was that we would experience a V-shape recovery in the economy, and the government subsidy of
the unemployment cycle would accrue to the bottom line of corporations, especially small caps."
Since then, Russell 2000 has outperformed S&P 500 and Nasdaq 100 by 50% and 40%,
respectively.
With the Russell 2000 down more than 1% and the Nasdaq 100 up more than 1% on Tuesday
morning, one of the most significant shifts from value to growth is underway since late
October.
Lt. Frank Drebin 4 hours ago
Does today appear more and more like the beginnings of the Dot Com bust?
Not that I don't like charts or comparisons (good job Tyler's), but the dot com bust didnt
have trillions of dollars pumped into it to keep it propped up. Little apples to oranges if
you ask me.
yerfej 4 hours ago
There might be some new highs in the next week or two as the cash flows into the market
but it pretty much over. Get out now as the implosion is going to be fast and furious.
You_Cant_Quit_Me 3 hours ago
You have to be crazy to open a small business when the federal or local govt can shut you
down based on no scientific data. Similar story for being a landlord when the govt can ban
evictions for nonpayment of rent. Why risk your capital when those with no skin in the game
can indirectly destroy your life savings.
Mrgior31513 1 hour ago
Because not doing so is leaving money on the table. People open small businesses because
being an employee is not generally the most lucrative option, and higher paying jobs are not
always available. Opening a small business is always extremely risky, now we just have more
added risks to the mix. Federal, state and local governments could always shut you down based
on no scientific data and ridiculous regulations, this is nothing new ~simply wider spread
than it normally is.
radical-extremist 3 hours ago
This analyst has yet to realize we're no longer living in 2005. We're living in world with
previously unfathomable liquidity brought about through Central Banks and perpetually low
interest rates. And our government has just pumped another $1.9 Trillion into everything. You
can't look at one segment and predict it should go lower, without considering the volatility
of the Whole Enchilada.
A worry for retirees: Inflation forecasts hit 8-year high
A worry for retirees: Inflation forecasts hit 8-year high
Brett Arends
Mon, March 15, 2021, 10:01 AM
Nobody suffers more from high inflation than retirees. Back in the 1970s, it was those in retirement living
on fixed income that got hit the hardest as prices rose year after year. The investment returns from their
bonds and cash fell way behind.
Now, let's consider the stark contrast between Biden's presentation and a speech delivered
by Governor Kristi Noem of South Dakota at the CPAC conference. For those who don't know, Noem
is the one bright star in a year of Orwellian darkness and gloom. She's a strait-laced,
plain-talking, clear-thinking conservative who sticks to her principles like glue. She is a
stalwart, red-blooded American girl who believes in God, the Constitution and the United States
of America. Here's an excerpt from her CPAC speech:
"Now everybody knows that almost overnight we went from a roaring economy to a tragic
nationwide shutdown. By the beginning of 2020, President Trump had created 7 million new
American jobs. We had the lowest unemployment rate in over half a century, and unemployment
rates for black, Hispanic, and Asian Americans reached the lowest levels in history. More
than 10 million people had been lifted out of poverty and out of welfare. And all of that
changed in March .
Now, most governors shut down their states . What followed was record unemployment,
businesses closed, most schools were shuttered and communities suffered, and the U.S. Economy
came to an immediate halt. Now let me be clear, COVID didn't crush the economy, government
crushed the economy . And then just as quickly, government turned around and held itself
out as the savior, and frankly, the Treasury Department can't print money fast enough to keep
up with Congress's wishlist. But not everyone has followed this path. For those of you who
don't know, South Dakota is the only state in America that never ordered a single business
or church to close. We never instituted a shelter in place order. We never mandated that
people wear masks. We never even defined what an essential business is, because I don't
believe that governors have the authority to tell you that your business isn't essential.
" (" Kristi Noem
CPAC 2021 Speech Transcript", rev.com)
She's right, isn't she? No elected official has the right to close a business or a church
EVER. Period. We do not bestow those powers on our governors nor are they granted under the
Constitution. Neither war nor pandemic nor any other national emergency or crisis should
ever be used to strip Americans of the liberties that are guaranteed under the Constitution of
the United States . Biden was wrong to say that the "most important function of government
is to protect the American people." That's just wrong. The most important function of
government is to preserve and protect the liberties that are outlined in the Bill of Rights.
That's job#1: Defend Freedom at all cost . Everything else is a footnote. Here's more from
Noem:
"South Dakota schools are no different than schools everywhere else in America, but we
approached the pandemic differently. From the earliest days of the pandemic our priority
was the students, their wellbeing and their education. When it was time to go back to school
in the fall, we put our kids in the classroom. Teachers, administrators, parents and the
students themselves were of one mind to make things work for our children, and the best way
to do that was in the classroom. Now in South Dakota, I provided all of the information
that we had to our people, and then I trusted them to make the best decisions for
themselves, for their families, and in turn, their communities. We never focused on the
case numbers. Instead, we kept our eye on hospital capacity. Now, Dr. Fauci, he told me
that on my worst day I'd have 10,000 patients in the hospital. On our worst day, we had a
little over 600 . Now, I don't know if you agree with me, but Dr. Fauci is wrong a
lot."
Naturally, Noem got a standing ovation when she blasted the duplicitous Lord Fauci, the man,
who more than any other, bears responsibility for almost single-handedly plunging the country
into an unprecedented crisis. Here's more:
"Even in a pandemic, public health policy needs to take into account people's economic and
social wellbeing. Daily needs still need to be met. People need to keep a roof over their
heads . They need to feed their families. And they still need purpose. They need their
dignity . Now my administration resisted the call for virus control at the expense of
everything else. We looked at the science, the data and the facts, and then we took a
balanced approach . Truthfully, I never thought that the decisions that I was making were
going to be unique. I thought that there would be more who would follow basic conservative
principles, but I guess I was wrong."
Yes, she was wrong, but who could have foreseen that every reprobate Democrat governor in
the country would simultaneously take advantage of a public health crisis to impose de facto
martial law? We never saw that coming, although, we have to assume that there must have been
some tacit agreement and coordination among the governors and their paymasters that they would
fall-in-line when the time was right . Ahh, but that's conspiracy talk!
Damn right, it is! Here's more:
"Many in the media, criticized South Dakota's approach. They labeled me as ill-informed,
that I was reckless, and even a denier. The media did all of this while simultaneously
praising governors who issued lockdowns, who mandated masks and shut down businesses,
applauding them as having taken the right steps to mitigate the spread of the virus. At one
point, I appeared on George Stephanopoulos' Sunday Show. He had just wrapped up a segment
with New York Governor, Andrew Cuomo, where he asked Cuomo to give me some advice on how to
deal with COVID." (Loud Laughter)
In South Dakota, we did things differently. We applied common sense and conservative
governing principles. We never exceeded our hospital capacity and our economy is booming.
We have the lowest unemployment rate in the nation. We are number one in the nation for
keeping jobs, keeping businesses open and keeping money in the pockets of our people. The
people of South Dakota kept their hours and their wages at a higher rate than workers
anywhere else in the nation. And our schools are open . Our founding fathers established
our National Constitution, and the people of individual states crafted their own
constitutions that place specific limits on the role of government. Those limits are
essential to preventing government officials from trampling on people's rights."
The people themselves are the ones entrusted with expansive freedoms, the free will to
exercise their rights to work, worship and to earn a living. No governor should ever dictate
to their people which activities are officially approved or not approved. And no governor
should ever arrest, ticket or fine people for exercising their freedoms. Governors, and
members of Congress and the president have a duty to respect the rights of the people who
elected them, but it seems these days that conservatives are the only ones who know what that
means. Personal responsibility is considered a God-given gift in South Dakota. Personal
responsibility is not a term that conservatives have abandoned..
We should illustrate to the world that people thrive when government is limited, and
people's ingenuity and their creativity is unleashed. We should also remind the world what
happens when tyranny and oppression are allowed to thrive. God bless each and every one
of you and may God bless the United States of America."
By now, we should all realize that the greatest threat to personal freedom is always and
everywhere the State; that is the main lesson of this unfortunate Covid fiasco. The Democrat
governors usurped powers and issued edicts for which they had no authority and for which they
should be held to account. They should be impeached and prosecuted. They were undoubtedly
acting on behalf of criminal elites who fill their campaign coffers in return for assistance in
advancing their own self-centered interests.
If you haven't figured it out yet, we are in the fight of our lives with "do goodie"
billionaire climate alarmists who have inserted themselves into the political process and who
have the power to shut down the economy with the flip of the switch. These same buttinskis
have gone to great lengths to create the global health infrastructure along with significant
control of the mainstream media, that allows them to grossly inflate an aggressive but
thoroughly-manageable viral infection and transform it into the Black Plague. This, in turn,
creates the pretext for preventing people from running their businesses or attending school or
gathering with friends or family or traveling at will or doing any of the things that people in
a free country are at liberty to do. There is no way to reason with people who think that
the only way they can achieve their own malicious objectives, is by enslaving, incarcerating or
liquidating the millions of people who stand in the way of their grand design. We must
defend ourselves from these hostile elites by recommitting ourselves to the fundamental
principles upon which this country was founded. These are the same principles that Kristi Noem
has not only articulated so well in her speech, but also put into practice in her home state of
South Dakota.
We should never accept the oppressively dark and dystopian vision of Joe Biden.
That's not for us. We should aspire to Noem's "shining city on a hill", a place where people
can work when and where they please, travel when and where they please, and meet with friends
and family when and where they please. It's not selfish for us to want these things for
ourselves and our families. Freedom is a basic human necessity like eating, drinking or
breathing. We need freedom, just like we need leaders who believe as we do and who are
unshakable in their convictions. We need leaders like Kristi Noem who was as steadfast as
Gibraltar when everyone else went weak-in-the-knees. The woman is a real American hero and
a patriot.
Real inflation in the USA is probably close to 3-4% a year judging from the dynamic of rental
payments and prices on on food. Annual Food inflation was between 3.93%, to 3.78% in December to
February timeframe.
The February 2021 ShadowStats Alternate CPI (1980 Base) increased 9.4% year-to-year, up from
9.1% in January 2021, 9.0% in December 2020 and against 8.8% in November. The ShadowStats
Alternate CPI-U estimate restates current headline inflation so as to reverse the government's
inflation-reducing gimmicks of the last four decades, which were designed specifically to reduce/
understate COLAs.
Inflation may be on many investors' minds, but it has yet to show up in the numbers.
Moreover, a close reading of the data suggests that inflation won't be a problem for some time,
if ever.
The latest reading of the consumer price index shows that Americans' cost of living was only
1.7% higher in February 2021 than a year earlier. That's the fastest inflation reading since
the pandemic began, but still substantially slower than the pre-pandemic average. Exclude
volatile food and energy prices, and inflation is running at 1.3%...
The understatement of housing inflation in the consumer price index has reached a new
milestone.
As reported, the gap between the actual change in house prices and owners' rent, published by the Bureau
of Labor Statistics (BLS), exceeds the "bubble" levels.
In February, BLS reported owner's rent increased 2% over the last 12 months. House price inflation, as reported by the Federal
Housing Finance Agency (FHFA), increased 11.4%. That gap over 900 basis points exceeds the 800 basis point gap recorded during
the housing bubble peak.
The consumer price index was created and designed to measure prices paid for purchases of specific goods and services by
consumers. The CPI was often referred to as a buyers' index since it only measured prices "paid" by consumers.
The CPI has lost that designation.
It
is no longer measures actual prices.
For the past two decades, BLS imputes the owners' rent series, using data from
the rental market, no longer using price data from the larger single-family market.
Imputing prices for the cost of housing services make the CPI a hybrid index or a cross between a price index and a cost of
living index. A hybrid index is not appropriate as a gauge to ascertain price stability, especially when the hypothetical
measure of owner's rent accounts for 30% of the core CPI.
The CPI missed the price "bubble" of the mid-2000s, and the economic and financial fallout was historic.
History
sometimes repeats itself in economics and finance. Policymakers forewarned.
The FED has been inflating a cheap money bubble for 40 years. The response to every
recession is to cut rates. But the Fed never returns rates to pre-recession levels so the
economy ultimately enters one recession after the next at lower and lower rates. Now at near
zero, the gig is up. Dropping rates by nearly 50 basis points per year for four decades has
created the mother of all bubbles.
Greed is King 1 hour ago remove link
USA, the new Roman Empire and just like the old Roman Empire was, the scourge of the
planet.
A Sovereign debt ridden nation, that only survives due to its enormous military that
enables the USA to pillage the resources of other countries via a foreign policy of threat,
intimidation, invasion and occupation; exactly the same tactics used by the original Roman
Empire.
Unfortunately for the USA, the MIC and American armed forces, are the biggest consumer of
all of the income and resources obtained from pillaging and debt, they are a greedy
insatiable monster that continues to grow and demands more and more to be fed.
We`re now in the ludicrous, unsustainable and unacceptable situation of, all of the
countries who are having their resources stolen by the USA, and all of the American tax
payers who are underwriting the debt incurred by the USA are in fact paying for the MIC and
armed forces to repress them.
Here`s a radical idea; why not stop borrowing to feed the MIC monster, and try treating
the rest of planet Earth with respect and cooperation.
Commenter R.J.S. Discuses CPI Rising led by Food, Energy, and Medical
The consumer price index rose 0.4% in February , as higher prices for fuel, groceries,
utilities, and medical services were only partly offset by lower prices for clothing, used
vehicles, and airline fares the Consumer Price Index Summary from the Bureau
of Labor Statistics indicated that seasonally adjusted prices averaged 0.4% higher in February,
after rising by 0.3% in January, 0.2% in December, 0.2% in November, 0.1% in October, 0.2% in
September, 0.4% in August, by 0.5% in July and by 0.5% in June, after falling by 0.1% in May,
falling by 0.7% in April and by 0.3% in March, but after rising by 0.1% in February of last
year .the unadjusted CPI-U index, which was set with prices of the 1982 to 1984 period equal to
100, rose from 261.582 in
January to 263.014 in February , which left it statistically 1.6762% higher than the
258.678 reading of February of last year, which is reported as a 1.7% year over year increase,
up from the 1.4% year over year increase reported a month ago .with higher prices for energy
and foods both factors in the overall index increase, seasonally adjusted core prices, which
exclude food and energy, were up just 0.1% for the month, as the unadjusted core price index
rose from 269.755 to 270.696, which left the core index 1.2826% ahead of its year ago reading
of 267.268, which is reported as a 1.3% year over year increase, down from the 1.4% year over
year core price increase that was reported for January and the 1.6% the year over year core
price increase that was reported for December
The volatile seasonally adjusted energy price index rose 3.9%
in February , after rising by 3.5% in January, 2.6% in December, 0.7% in November, 0.6% in
October, 1.4% in September, 0.9% in August, 2.1% in July, and by 4.4% in June, but after
falling by 2.3% in May, by 9.5% in April, 5.8% in March, and by 2.5% last February, and hence
is only 2.4% higher than in February a year ago the price index for energy commodities was 6.6%
higher in February, while the index for energy services was 0.9% higher, after falling 0.3% in
January .the energy commodity index was up 6.6% on a 6.4% increase in the price of gasoline and
a 9.9% increase in the index for fuel oil, while prices for other energy commodities, including
propane, kerosene, and firewood, were on average 7.3% higher within energy services, the price
index for utility gas service rose 1.6% after falling 0.4% in January and is now 6.7% higher
than it was a year ago, while the electricity price index rose 0.7% after falling 0.2% in
January .energy commodities are now averaging 1.6% higher than their year ago levels, with
gasoline price averaging 1.5% higher than they were a year ago, while the energy services price
index is now up 3.2% from last February, as electricity prices are also 2.3% higher than a year
ago
The seasonally
adjusted food price index rose 0.2% in February, after rising by 0.1% in January and 0.3%
in December, after being unchanged in November, rising 0.2% in October, rising 0.1% in August
and in September, after falling 0.3% in July, rising 0.5% in June, 0.7% in May, 1.4% in April,
0.3% in March, and by 0.3% last February, as the price index for food purchased for use at home
was 0.3% higher in January, after falling 0.1% in January, while the index for food bought to
eat away from home was 0.1% higher, as average prices at fast food outlets rose 0.4% and prices
at full service restaurants rose 0.3%, while food prices at employee sites and schools averaged
12.2% lower notably, the price index for food at elementary and secondary schools was down
13.7% and is now down 32.5% from a year ago
Well, technically, Goldman clients are asking if they should be buying anything at all,
period, in a time of resurgent volatility driven by rising rates and bond market vol, which
sparked a high beta/growth panic in equities two weeks ago but have since seen the influence
fade.
Yet anyone hoping for a quick and painless reprieve from surging rates will be disappointed.
In his latest Weekly Kickstart, Goldman's David Kostin writes that the bank's economists expect
that rates will continue to rise in coming months and forecast 11% real US GDP growth in 2Q
with core PCE inflation rising to 2.3% "suggesting that investors will have to continually
grapple with the anxiety about economic overheating and Fed tightening that has gripped markets
in recent weeks." Goldman also expects the 10-year yield will rise to 1.8% by mid-year and 1.9%
by year-end. At the rate it is going, it may get there next week.
This is a big problem for Goldman because while we already know that equities are extremely
overpriced according to most valuation metrics, with the S&P 500 trading above the 90th
percentile in absolute valuation...
... ... ...
So what else do Goldman's clients think? Well, based on Kostin's client conversations, most
investors share the bank's view that interest rates will continue rise, but many believe that
the equity market rotations that have recently accompanied rising rates have gone too far.
Translation: Goldman clients are desperately trying to convince nobody but themselves that the
turmoil is over (spoiler alert: it is only just starting).
... ... ...
But what may be even more challenging is that value no longer is cheap as it was just a few
weeks ago. Specifically, Kostin notes that this week Goldman's equity analysts' proprietary
Reopening Scale climbed to a 5 on a scale of 1 to 10...... even as the bank's Reopening basket
has already recovered 75% of its decline, suggesting markets have vastly outrun the recovery.
Consider that Goldman's Cyclicals vs. Defensives basket pair has climbed to its highest level
since the post-tax reform surge of early 2018... ... and the relative P/E valuation of the
baskets stands at its highest historical level outside of the post-GFC recovery.
So with many cyclicals and "reopening" stocks no longer trading at depressed levels, and
with growth stocks susceptible to further market turmoil on the back of rising rates, Goldman's
clients ask: " Where is there still value in the US stock market ?"
Well, since Goldman makes its money by making markets, and has a sworn duty to encourage
clients to buy cheap stocks even when there aren't, Kostin answers with a decisive yes .
... In fact, the Goldman strategist admits that valuations today are even more elevated than
they were in 2000. 20 years ago, the aggregate S&P 500 P/E was a similar 24x, but the
median stock traded at 14x. Today, the median firm trades at 21x .
...
Energy - which we have been pounding the table on since last summer (see the Exxon posts) -
has returned 40% YTD and continues to trade with a very close relationship to long-term oil
prices. Goldman's commodity strategists expect Brent crude will rise 8% to $75/bbl next year.
Energy is also the only S&P 500 sector with short interest above its historical average.
This will be key once Quants (which recently covered their energy shorts) go massively long the
energy sector as
we previewed on Friday . Similarly, Financials, the second best sector YTD (16%), trades
closely with Treasury yields. Although it has recently rallied more than its typical
relationship with rates would have implied, relative valuations remain low compared to history
and Goldman expects value to keep outperforming if the economy continues to accelerate and
rates continue to rise. play_arrow
The Count 3 minutes ago (Edited) remove link
Listen to a guy who experienced all crashed since 1987. Whenever you have housewives trade
stocks, futures or real estate over the kitchen table the end is very near. Whenever pundits
say the market cant go down the end is very very near. Whenever people want to buy whatever
hasn't gone up yet the end is just around the corner.
Disposable people are indispensable. Who else would fight the wars? Who would preach? Who
would short derivatives? Who would go to court and argue both sides? Who would legislate? Who
would sell red hots at the old ball game?
For too long disposable people have been misrepresented as destitute, homeless, unemployed,
or at best precariously employed. True, the destitute, the homeless, the unemployed and the
precarious are indeed treated as disposable but most disposable people pursue respectable
professions, wear fashionable clothes, reside in nice houses, and keep up with the Jones.
Disposable people are defined by what they do not produce. They do not grow food. They do
not build shelters. They do not make clothes. They also do not make the tractors used to grow
food, the tools to build shelters or the equipment to make clothes.
Although disposable people do not produce necessities what they do is not unnecessary. It is
simply that the services they provide are not spontaneously demanded as soon as one acquires a
bit of additional income. One is unlikely, however, to engage the services or purchase the
goods produced by disposable people unless one is in possession of disposable income.
Disposable income is the basis of disposable people. Conversely, disposable people are the
foundation of disposable income.
Pandemic-Driven U.S. Economic Collapse Continues in a Hardening, Protracted "L"-Shaped
Non-Recovery
- Severe Systemic Structural Damage from the Shutdown Will Forestall Meaningful Economic
Rebound into 2022 or Beyond, Irrespective of Advances in Coronavirus Vaccines and
Treatments
- Panicked, Unlimited Federal Reserve Money Creation and Federal Government Deficit
Spending Continue and Will Expand, Triggering Major Domestic Inflation
- With Fundamental Dollar Debasement Intensifying, Holding Physical Gold and Silver
Protects the Purchasing Power of One's Assets
Scroll down for the latest ShadowStats outlook, headline economic news and background
information on the U.S. Economy, Financial System (FOMC), Financial Markets and Alternate Data,
also for Publicly Available Special Reports and Contact Information.
Yet anyone hoping for a quick and painless reprieve from surging rates will be disappointed.
In his latest Weekly Kickstart, Goldman's David Kostin writes that the bank's economists expect
that rates will continue to rise in coming months and forecast 11% real US GDP growth in 2Q
with core PCE inflation rising to 2.3% "suggesting that investors will have to continually
grapple with the anxiety about economic overheating and Fed tightening that has gripped markets
in recent weeks." Goldman also expects the 10-year yield will rise to 1.8% by mid-year and 1.9%
by year-end. At the rate it is going, it may get there next week.
HARLEY BASSMAN: Well, that's a good question. I would say that this notion that rates are
exploding higher and bad things are happening, it's not quite the case. I would say that when
10-years were at 0.75, that was the wrong price. All we're doing now is going to the right
price as opposed to where we were before , which is the wrong price. I would push back at you.
We've seen a significant curve steepening. I'm quite certain we're going to talk about that
today quite a bit.
... ... ...
The banking system, maybe there's bad guys in there and certainly there were villains 10
years ago who should have gone to jail, and didn't, but the banking system is the plumbing of
our financial economy, and we need to maintain it. Therefore steeper curve helps that plumbing
system, so the government can do it. The Fed and fiscal policy can be more efficient.
... ... ...
HARLEY BASSMAN: Circling back to our first two sentences here, it's never different this
time. That's my mantra. It's never different this time. I can't explain why or how but I just
do not think that we've reinvented human tragedy. Hubris, greed, ego. We wrote about it, the
Greeks wrote about it, Shakespeare wrote about it. It just hasn't changed, and it's this idea
that we've invented a new paradigm I just don't believe it. It's a different song, but it's
still music and I think that we'll find some way to go and cause trouble, which is why I
believe in inflation ultimately.
Is it next year? No. Is it in 20 years? I don't know. What I do think, it's going to happen
in two to four years when the demographic bubble rolls over. We could do that later on. I think
we're going to get it because I don't think you could print the coin of the realm at a faster
pace than the overall growth of the economy without inflation at some point. Now, could it take
20 years? Why not? It took 400 years for the Roman Empire collapsed, so in the grand scheme of
things, maybe not.
This policy of money printing is not going to end well. That doesn't mean it was a bad
public policy, by the way, because having the economy totally collapse either in 2009 or last
year is certainly a bad idea, so maybe deferring the pain or spreading the pain out. I think
that inflation is the ultimate solution. Because inflation is a beautiful tax. It taxes,
everybody. It taxes them silently, and the politicians dumped a vote on it. As a tax, everyone
-- well, I wasn't happy, but it's the easiest one to live with in a democracy.
ebworthen 1 hour ago remove link
" They purchase a Rembrandt for a sandwich and our souls for a glass of whisky. Krupp and
Stinnes get rid of their debts, we of our savings. The profiteers dance in the palace
hotels." -- Klaus Mann, 1923; Weimar, Germany.
The more things change, the more they stay the same.
YuriTheClown 1 hour ago
And the Weimar Republic was run by who? Very similar make up to that of the
Bolsheviks.
85% non members of the Royal Church of Scotland.
Creamaster 1 hour ago
Covid timing was sure convenient for a lot of things to occur
You decide, was it naturally occurring, or released intentionally?
Son of Loki 1 hour ago (Edited)
The 10-years will hit 2% soon, and 3% by end of year.
Given the sad state of the economy and leadership (Yellen, Bribem, etc), no way of
stopping it.
Son of Loki 1 hour ago (Edited)
The 10-years will hit 2% soon, and 3% by end of year.
Given the sad state of the economy and leadership (Yellen, Bribem, etc), no way of
stopping it.
Jalmar Shockt 14 minutes ago
It doesn't work that way and it's not about inflation the way one usually thinks of
it.
Hyperinflation is not the same as the ultimate inflation of the money supply. It is the
ultimate depreciation of the currency unit. The two concepts are far from being the same.
When the populace eventually figures out what's going on the bonds, notes, bills, and other
obligations of the United States government that are all irredeemable will be repudiated.
aeslong 48 minutes ago (Edited) remove link
"I would say that when 10-years were at 0.75, that was the wrong priceI would say that
when 10-years were at 0.75, that was the wrong price. All we're doing now is going to the
right price as opposed to where we were before , ....."
yea, only bond was mispriced, right? other assets, including public debts don't have to be
priced to where they were before.
Ted Baker 1 hour ago
more market manipulation...
Bank_sters 1 hour ago (Edited)
Central banksters print money and give most to the wealthy and connected, foreign govts,
the war machine and then send a few crumbs to the serfs. Meanwhile destroy their currency,
savings and future.
Yields? what a joke. CPI- pure fiction.
Finance so easy a psychopathic child can do it.
overbet 1 hour ago
Wall Street adage:
The most dangerous words on Wall Street are, this time its different.
YuriTheClown 1 hour ago (Edited)
Bassman's outlook for rates and markets. Unsurprisingly, he sees more volatility, and
higher convexity, ahead.
I've tried searching for the definition of "convexity" in this context and had no luck.
Anyone care to enlighten?
Oops. I guess the internet had some additions since then.
Convexity
Ron_Paul_Was_Right 46 minutes ago remove link
"A steeper curve helps the baking system."
Did you mean like, a more steeply curved cookie sheet? To help the baking of brownies? I
don't follow.
vote_libertarian_party 1 hour ago remove link
Something will trigger the stock and bond bubble to pop...
Why is it so expensive to get anything done in the US?
Neoclassical economics and the missing equation.
Disposable income = wages – (taxes + the cost of living)
The US's high cost of living pushes up wages making it expensive to get anything done in
the US.
See where neoclassical economists go wrong?
Employees get their money from wages, and the employers pay the cost of living through wages,
reducing profit.
It is the US's employers who pay the high cost of living, via wages, reducing profit.
Do you really want to pay the US's high cost of living in wages?
No way.
You will have to off-shore to maximise profit.
The early neoclassical economists hid the problems of rentier activity in the economy by
removing the difference between "earned" and "unearned" income and they conflated "land" with
"capital".
They took the focus off the cost of living that had been so important to the Classical
Economists as this is where rentier activity in the economy shows up.
It's so well hidden no one even knows it's there.
The neoliberals picked up this pseudo economics and thought it was the real deal.
Things were never going to go well.
Imagine the Chamber of Commerce actively lobbying for state-supported child care, massive
increases in funding for public transportation, public education, public health, and
housing.
Perhaps we should take a look at China to learn how we too can become better capitalists,
and so help USA businesses focus on the business of business.
Western companies couldn't wait to off-shore to low cost China, where they could make
higher profits.
China had coal fired power stations to provide cheap energy.
China had lax regulations reducing environmental and health and safety costs.
China had a low cost of living so employers could pay low wages.
China had low taxes and a minimal welfare state.
China had all the advantages in an open globalised world.
What was Keynes really doing?
Creating a low cost, internationally competitive economy.
Keynes's ideas were a solution to the problems of the Great Depression, but we forgot why
he did, what he did.
They tried running an economy on debt in the 1920s.
The 1920s roared with debt based consumption and speculation until it all tipped over into
the debt deflation of the Great Depression. No one realised the problems that were building
up in the economy as they used an economics that doesn't look at private debt, neoclassical
economics.
Keynes looked at the problems of the debt based economy and came up with redistribution
through taxation to keep the system running in a sustainable way and he dealt with the
inherent inequality capitalism produced.
The cost of living = housing costs + healthcare costs + student loan costs + food + other
costs of living
Disposable income = wages – (taxes + the cost of living)
Strong progressive taxation funded a low cost economy with subsidised housing, healthcare,
education and other services to give more disposable income on lower wages.
Employers and employees both win with a low cost of living.
Keynesian ideas went wrong in the 1970s and everyone had forgotten the problems of
neoclassical economics that he originally solved.
"Keynesian ideas went wrong in the 1970s" and from the 80s on because the (primarily)
Republicans had forgotten that Keynes originally stipulated that the government debt incurred
during "bad times" be liquidated during "good times". Since Reagan, Republicans have
increased debt to stimulate the economy, but failed to pay it down once that part of Keynes's
took effect. Republicans are the biggest half-Keynesians of all time.
Behind all this is the neo-liberal renunciation of any 'national' policies. Define a
'nation' as you will, it still is a valid category. It has definite 'needs' and requirements
to function well and continue as a viable entity. The 'national' government has functioned in
the past as the representative and facilitator for the 'nation.' "Drown that in a bathtub"
and you eventually eliminate the 'nation's' ability to function. The end stage of that
process is the collapse and extinction of the 'nation.'
The above process should be familiar to anyone who has studied the past few decades of
American history. What the proponents of the neo-liberal dispensation have not advertised, if
indeed they even know, is what replaces the 'nation?' An International Syndicate of
Oligarchs? If so, such an endeavour is doomed to failure. History has shown, time and again,
that the concept and practice of commercial business is not an adequate organizing principle
for large scale human society. It simply does not make allowances for human variability.
The best example of the point above that I can think of is the present dominance of short
term thinking and planning in the business sphere. Restricting the inputs of the decision
making process to short term issues, such as quarterly earnings and stock prices in the
bourse, leads to the dysfunctions bemoaned in the piece above. Offshoring a factory makes
sense from a short term business point of view, but ignores the long term 'national'
implications. Here is a direct conflict between the two methods of social organization. At
present the short term methodology is ascendant. Alas, it looks as if America is going to
have to learn this lesson of setting proper 'national' priorities the hard way; such as by
losing a war decisively.
I look on the bright side here. A small thermonuclear exchange between America and some peer
adversary will not only 'thin out' the population, but also bring on a nuclear winter and
retard the progression of global warming for a while. It might be the breathing space the
Terran human race needs to survive beyond the upcoming evolutionary bottleneck.
The consumer-price index rose 0.4% in February from the prior month, as the pace of the
economic recovery increased following a winter lull, buoyed by higher gasoline and energy
costs.
Value stocks are beating growth stocks by the widest margin in two decades, the latest sign
that investors expect the next year to bring a powerful economic rebound.
As
the rollout of Covid-19 vaccines quickens and the economy bounces back from last year's
shutdowns, portfolio managers are snapping up cyclical stocks -- banks, energy companies and
others whose fortunes are closely linked to economic growth. Those shares often fit the
description of value stocks, which trade at low multiples of their book value, or net
worth.
The shift in bets marks a reversal of a trend that has held essentially since the financial
crisis, in which growth stocks outpaced value stocks. That reflected in part the rise of big
tech companies such as Apple Inc. and Amazon.com Inc. AMZN -0.77% and in part the
softness of the U.S. economy. This year, the Russell 1000 Value Index is up 11% and the Russell
1000 Growth Index has edged up 0.2%.
Tech Wrecks As Yields Breakout
BY TYLER DURDEN
FRIDAY, MAR 12, 2021 - 11:05
10Y Yields topped the March 5th highs...
And 30Y has broken out...
And that triggered selling long-duration growth-tastic stocks, sending Nasdaq notably lower...
And more rotation into value as the Dow and Small Caps jump...
And the
correlation
between bonds and stocks remains extremely high and
extremely unusual...
That won't help the asset-allocators?
OldNewB
39 minutes ago
It
will all reverse as soon as Europe closes.
bonsai_king
17 minutes ago
remove
link
Already reversing heavily.
Tech not routed is what this article should read.
A
1% dip in MSFT, QCOM, NVDA, APPL is not exactly a rout....
OldNewB
15 minutes ago
Yep. PPT is real.
zeroshrubbery
35 minutes ago
(Edited)
remove
link
The
senate blew their load by using their budget reconcilliation for the year to pass stimulus, so nothing
else will pass this year. Biden pretty much said point blank there will be no more stimulus period. So
right now we're in a buy the rumor, sell the news dip. The 100 billion or so flowing into the market
should create one final massive blow off top before everyone and their brother's snake's feed mouse
starts taking profits.
I'm
tracking the trading shows some completely dense permabulls, who think they are god's gift to humanity
sharing expert trading advise with their portfolio of HODLing meme stocks. I can't wait to bathe in the
schadenfreude as the losses start hitting 40-50%, they probably will mark their channels private at 80%
losses so I'm not expecting it to last long but one can only hope.
OldNewB
28 minutes ago
Don't be so sure. If the Fed doesn't buy absolutely everything (just like BOJ), the final crash
happens and America goes under. They're not going to let it happen. Inflation and hyperinflation is
the plan, even though they will continue to lie about it being low. Liars and thieves all.
The jobs picture overall has been improving with
379,000 workers added in February , although the U.S. economy still has almost 10 million
fewer jobs than it did before the coronavirus pandemic took hold. Economists have been revising
their employment and GDP forecasts are higher.
Goldman Sachs Chief Economist Jan Hatzius, for example, wrote in a report this week that
the jobless
rate would fall to 4.1% by the end of 2021, from 6.2% last month.
Hyams has been seeing similar encouraging signs on Indeed, with postings on the site already
lapping where they were pre-pandemic. "On Indeed, when we look at new job postings and our
benchmark pre-pandemic of February 1, 2020, at the end of this February we were up 5%
year-over-year. That's still with entire sectors completely shut down," he said.
As for where the hottest demand lies for new jobs, Hyams pointed to e-commerce-related
occupations including logistics, warehousing and delivery, as well as jobs in health care and
pharmacy.
While some of those openings may require showing up regularly in-person, many will not,
which again feeds into Hyams' thesis that interviews will remain virtual.
"If you're going to be a remote worker, interviewing over video actually makes a whole lot
more sense. It's more convenient. It will cut down on travel," he said.
That means many interviewees can continue to pull their blazers and ties out of the closet
-- along with their sweatpants.
Remember job interviews pre-pandemic? The jitters, the choosing of just the right suit, the
race to get there early, maybe even the drive across town or flight across the country for a
shot at a new opportunity?
Like most everything else, the pandemic changed that dynamic. The jitters may remain, but
in-person meetings are largely off the table, interviews among them. The CEO of one of the
most-trafficked jobs websites says it's likely to stay that way even after people get back to
the office.
"People being able to conduct an interview from the safety and convenience of their own
home is going to change hiring forever," said Chris Hyams, Indeed CEO, in an interview with
Yahoo Finance Live. "We believe this is the beginning of a massive secular shift."
"In April, we saw the number of requests for interviews to happen over video shoot up by
1,000%. Even as things have started to stabilize and the economy has opened up over the last 11
months, we've seen that continue to grow," Hyams said.
The jobs picture overall has been improving with
379,000 workers added in February , although the U.S. economy still has almost 10 million
fewer jobs than it did before the coronavirus pandemic took hold. Economists have been
revising their employment and GDP forecasts are higher. Goldman Sachs Chief Economist Jan
Hatzius, for example, wrote in a report this week that the
jobless rate would fall to 4.1% by the end of 2021, from 6.2% last month.
Hyams has been seeing similar encouraging signs on Indeed, with postings on the site
already lapping where they were pre-pandemic. "On Indeed, when we look at new job postings
and our benchmark pre-pandemic of February 1, 2020, at the end of this February we were up 5%
year-over-year. That's still with entire sectors completely shut down," he said.
As for where the hottest demand lies for new jobs, Hyams pointed to e-commerce-related
occupations including logistics, warehousing and delivery, as well as jobs in health care and
pharmacy.
While some of those openings may require showing up regularly in-person, many will not,
which again feeds into Hyams' thesis that interviews will remain virtual.
"If you're going to be a remote worker, interviewing over video actually makes a whole lot
more sense. It's more convenient. It will cut down on travel," he said.
That means many interviewees can continue to pull their blazers and ties out of the closet
-- along with their sweatpants.
Millions of renters
have been unable to pay some or even all of their rent since March 2020, when the
pandemic struck . An analysis by the Urban Institute, a Washington think tank, found that
the amount of unpaid rent could
exceed $52 billion . It estimated that the average household that has fallen behind on rent
owed $5,586.
A bond market selloff is calling the tune across financial markets. Equilibrium is unlikely
to return until the yield on the benchmark 10-year U.S. Treasury note hits 2%, a well-known
macro strategist argued Friday.
"There will be no peace until U.S. 10s reach 2%," said Kit Juckes, global macro strategist
at Société Générale, in a note.
... ... ...
"The pattern seems clear enough: The equity market is seeing a sector rotation but not a
correction; the bond market is seeking a new equilibrium in the light of a vastly improved
economic outlook in both the U.S. and elsewhere; some policy makers are pushing back against
the bond moves, with little success," Juckes wrote.
As yields rise, the dollar rallies, but when yields settle at a new level, the dollar drops
back. The pattern probably goes on until bonds find an equilibrium, unlikely before 10-year
note yields have a 2-handle, judging by taper tantrums and past cycles," he said.
the majority of stocks are weakening and not making new highs, it's not a good sign
when only 30 stocks are leading the way.
Institutional investors pile into stocks
We have different (hopefully better) ways of measuring divergence these days --
specifically, cumulative breadth indicators, new highs vs. new lows, etc., so we don't
have to "stretch" to draw a conclusion about the Dow today.
For a pump and dump to work, you need a certain type of investor—specifically, the type P.T. Barnum said is born every minute
(on platforms like Reddit and Robinhood, more like every nanosecond). To be nice, let’s call them dupes. “Greater fools” works
too. The Federal Reserve owns a share of the blame. You can’t pump without hot air, which the Fed has been supplying for way too
long. Sometimes these schemes last a while, even years. Pay attention to the stories told by presstitutes hyping many of today’s
overvalued stocks. The question arise: "Is today’s market a giant pump and dump?" The market is priced at 32 times earnings; the
historic norm is 16. Expect the inevitable Reddit group: r/StockBagHoldersClub.
Notable quotes:
"... Bull markets need fuel. When the marginal buyer is done, there are no more greater fools to buy in, no matter how well companies actually perform. The dream is priced in, and firms can only meet, not beat, expectations. ..."
"... For those lulled by today's bull market, remember that you own a piece of paper. Low-yielding U.S. Treasury bills and bonds are safe because they are backed by the U.S. government, by cash flow of tax dollars and by the country's assets (think land, not Fort Knox). Stocks are backed by expectations of future earnings, but if you overpay during periods of high expectations (like today), then your downside is huge. Crypto is backed simply by the faith of those who proclaim it is a store of value. Even art and exotic cars and silly NFT tokens are backed only by faith the wealthy will overpay for uniqueness. Faith becomes scarce when the selling starts. ..."
Remember that banker talking about losing 90%? He was talking about the late-'70s death
march down, characterized by stocks going up in the morning and then down in the afternoon --
optimists quickly stepped on by pessimists. Sure enough, after 2000, high-flying tech names
were down 90%. Many went to zero.
How do these bull bashes end? When the last skeptical buyer finally sees the light and buys
into the dream that every car will be electric, that crypto replaces gold and banks, that we
overindulge on vertically farmed "plant-based steaks" while streaming "Bridgerton" Season 5
before we hop on an air taxi for our flight to Mars. Those last skeptics (maybe already)
convince themselves there's no longer any downside. And then boom, it's over.
Bull markets need fuel. When the marginal buyer is done, there are no more greater fools to
buy in, no matter how well companies actually perform. The dream is priced in, and firms can
only meet, not beat, expectations.
For those lulled by today's bull market, remember that you own a piece of paper.
Low-yielding U.S. Treasury bills and bonds are safe because they are backed by the U.S.
government, by cash flow of tax dollars and by the country's assets (think land, not Fort
Knox). Stocks are backed by expectations of future earnings, but if you overpay during periods
of high expectations (like today), then your downside is huge. Crypto is backed simply by the
faith of those who proclaim it is a store of value. Even art and exotic cars and silly NFT
tokens are backed only by faith the wealthy will overpay for uniqueness. Faith becomes scarce
when the selling starts.
The US, UK and Euro-zone went on a joint economic suicide mission before 2008. What was the ponzi scheme of inflated asset prices that collapsed in 2008? "It's nearly $14 trillion pyramid of super leveraged toxic assets was built on the back of
$1.4 trillion of US sub-prime loans, and dispersed throughout the world" All the Presidents
Bankers, Nomi Prins.
Our bankers had distributed this load of old doggie-doo across the financial systems of the
US, UK and Euro-zone. When these asset prices collapsed, so did our financial systems. Bankers just need to create as many products as they can from something in the real world,
e.g. subprime mortgages.
They all go up together and down together. They call it leverage. I think they are doing the same with ETFs now, since no one worked out what they were up to
last time.
"2020 marked the secular low point for inflation and interest rates," warned Michael Hartnett, chief investment strategist for
Bofa Global Research, in a Thursday note. "The 40-year bull market in bonds is over."
His cautionary words come as investors contend with the sudden surge in long-term Treasury yields this year which has surprised
even the bond bears.
The 10-year note yield
TMUBMUSD10Y,
1.540%
was
at 1.532% on Thursday, over 60 basis points from where it traded at the beginning of the year.
That rise has, in turn, heightened concerns around stretched valuations in equities, briefly sending the Nasdaq Composite
COMP,
+2.52%
into
correction territory this week, defined as a 10% fall from its intraday peak. Stocks have recently found their footing again,
with the S&P 500
SPX,
+1.04%
up
nearly 3% this week.
Investors throughout the multidecade long bull market in bonds have sometimes bet against a continued slide in long-term Treasury
yields, but as inflation has struggled to break above the Federal Reserve's 2% target for any sustained stretch, forecasts for
higher yields have often proved a losing proposition.
Still, Hartnett suggested any complacency is dangerous as undercurrents in the economy and policymaking pointed towards a tidal
wave of inflationary pressures that could overwhelm buyers of Treasurys.
The Nasdaq Composite has fallen 7.25% from its Feb. 12 record high through Tuesday as a
sharp rise in the 10-year year yield caused investors to flee stocks in the growth-heavy index.
At the same time, the Dow Jones Industrial Average has held within 0.4% of its record peak.
"The lesson here is that near or at market peaks, it is common for the Nasdaq to first
succumb to the overhyped inflation fears and the rise in bond yields, and after the mega caps
slip, the Dow follows with a lag," Rosenberg said. "And the blue-chips decline, albeit at a
slower rate."
The 10-year Treasury yield has climbed 64 basis points this year to 1.56%, a 13-month high,
amid concerns the unprecedented amount of fiscal and monetary stimulus used to combat the
economic slowdown caused by COVID-19 will bring back inflation that has been lacking since the
2008 financial crisis.
... ... ...
The last two major bond-market selloffs, in 2016 and 2012, resulted in the 10-year yield
rising by 132 basis points and 162 bps, respectively. Measuring from the August 2020 low of
0.515% suggests the top in yield could occur in the 1.82% to 2.13% area and begin forming in
May, according to Bank of America's analysis. In both examples, the top took about three months
to form.
Over the past five years the Nasdaq Composite has increased in value by 127%. Which is less
then the 456% growth in the Nasdaq during the heyday of the dot-com era but still significant.
With the recent listing of Snowflake ($SNOW) in what was the largest software IPO ever, some have
argued that this is reminiscent of the dot-com bubble where the share price for technology
companies routinely doubled or more on their first day of trading. Snowflake's astronomical
valuation aside, the frenetic market behavior surrounding this summer's IPO craze is a cause for
concern. Also look at the hype around Nikola project. The current P/E ratio od S&P500 of 28.8
is below the high of 44 in December 1999 but still very high.
Arguably the single greatest concern for the stock market is valuation, which is something
I've
been harping on for months .
As of Feb. 22, the Shiller S&P 500 price-to-earnings
(P/E) ratio -- a P/E ratio based on average inflation-adjusted earnings from the previous 10
years -- stood at 35.30. That's more than double its average reading of 16.78 over the past 150
years, and it's the highest the Shiller P/E ratio has been for the S&P 500 since the
dot-com crash two decades ago.
There have only been five instances in the 150-year history of the Shiller S&P 500 P/E
ratio where a bull market rally has sustainably taken it above 30: The Great Depression, the
dot-com bubble, Q4 2018, the COVID-19 crash of Q1 2020, and currently. In each of the previous
four instances, the S&P 500 lost between 20% and 89% of its value. Admittedly, the Great
Depression was a unique scenario that would be unlikely to play out today. Nevertheless,
bad
things have historically been in the cards for the S&P 500 when the Shiller P/E ratio
gets north of 30.
Rising Treasury yields portend trouble for spoiled homeowners and
prospective buyers
A third market crash-causing concern is that the multiyear housing boom could dry up at the
drop of a pin.
Without getting too far into the weeds, current homeowners and prospective buyers have been
driven by historically low lending rates. Though the Fed doesn't directly control mortgage
rates, there's been a fairly tight correlation between mortgage rates and 10-year Treasury
yields for a long time. Last year, 10-year Treasury yields hit roughly 0.5%, paving the way for
historically low mortgage and refinance rates, as well as tempting homeowners to take equity
out of their homes.
Buffett's disciples are looking at their idol's indicator, which seems to suggest the stock
market is significantly overvalued. The Berkshire Hathaway chief said in 2001, "The ratio
(stock market capitalization to annual GDP) has certain limitations in telling you what you
need to know. Still, it is probably the best single measure of where valuations stand at any
given moment."
While the Federal Reserve continues to pump liquidity and fuel new record highs, the
COVID-19 pandemic depresses economic output. The Buffett indicator stands at 194%, which is
well above the 159.2% just before the dot.com bubble. Hence, the Oracle of Omaha sees a very
strong warning signal.
Is the stock market heading for a crash in 2021? Pundits seem sure
a severe correction is coming because of the irrational exuberance that's happening at
present. Some analysts liken it to the events in the late 1990s when the dot.com bubble burst. We
witnessed the longest bull market
While the narrative of the Dot Com crash is commonly understood as a market-wide crash, the
chart above shows that over the five years after the peak of the bubble, the S&P 500 Equal
Weight Index generated a positive 36% return while the Nasdaq declined by 58%. If you look at
the white line representing the S&P 500 Equal Weight Index, you'll see that by the end of
2001, when the NASDAQ had fallen by almost 60%, the average stock was actually up about 9%
despite the Dot Com crash and the horrific events of 9/11.
With IT being one of few sectors that have continued to deliver stable results amid the
Covid-19 recession, analysts and investment advisors alike have urged for caution as some have
feared a repeat of the 1995-2000 tech bubble that ultimately burst in 2002 when 80% was wiped
off the stock market. However, as some more level-minded commentators have pointed out, the
differences between 2002 and today outnumber the similarities as private and institutional
investors alike have a better understanding of how digital services work now than 18 years ago
– and P/E ratios have been more reasonable lately than they were during the dot-com
bubble.
As difficult as it is to imagine a world without the internet, the medium as we know it
today only took off in earnest with the event of Windows 95 and the Netscape browser. The tech
bubble began with Netscape, the company behind the browser, which was loss-making at the time
of its IPO but still saw its share price increase from $28 to $75 within the first few hours of
trading. Netscape would be joined by other tech and software companies which had underlying
structural problems but still saw their share prices skyrocket – investors jumped at the
opportunity to buy stocks in any company with the prefix "e-" or suffix "-com". The tech
companies spent millions on advertising campaigns but failed to make a profit and in 2000,
valuations began to fall. Between 2000 and 2002 Nasdaq fell by 80% – and the dot-com
bubble burst.
In its infancy, the internet seemed to offer unlimited possibilities and so it us
understandable that investors felt optimistic. Cut-throat competition and limitations in what
consumers and corporate users were actually willing and able to do with the new medium limited
the potential of many tech companies, and start-ups with poor finances were generally not in a
position to compete with giants such as Microsoft, IBM and Apple who already had been
established for decades.
The proliferation of smartphones and 3G as well as fast broadband around 2010 enabled a new
wave of innovation and saw a rise in social media users and online streaming services. Some
pre-existing firms, such as Facebook and Netflix have been able to tap into this new market
while newcomers such as Uber and Lyft offer services that would have been unviable without
smartphones. While tech start-ups have proliferated in recent years, many stay away from the
stock market precisely because they are not yet profitable – food delivery service
Deliveroo being one example. Cab-hailing app Uber's IPO and subsequent plummeting stock price
served as a lesson to many others.
While it could be argued that the fall in value of stocks from Uber, FitBit and other tech
start-ups is tech bubble 2.0 starting to burst, a broader view calls for another assessment. As
noted, start-ups have not seen their stock prices surge when going public, but rather plummet
immediately. Unlike in 2000, investors are more aware of the differences between tech firms and
the services they offer – simply having an "e-" or "-com" in the company name does not
make investors queue up to buy stock – and investors also know that corporate IT is a
larger market than products directed as consumers. As an illustration, Amazon earns two-thirds
of its revenue from its cloud computing platform and not from physical sales or video
streaming.
Among the IT stocks on the S&P500 index that have seen the highest increase in the last
decade, we find Apple, Alphabet (the owner of Google), Amazon, Facebook, Mastercard, Microsoft
and Visa. These continue to deliver robust returns.
Taken together, the buzz word "the winner takes it all" seems to ring true as tech giants,
with their relatively high P/E multiples are in a position to dominate the market and acquire
promising start-ups. How their domination will impact the stock exchanges remains to be seen,
but for the time being it seems unlikely that their stocks would collapse.
10-year treasury rates average at around 5% during this entire growth period. This is a stark
contrast to the 1.5% we are seeing now (which already seem to rattle markets).
The Cyclically Adjusted Price Earnings Ratio, or CAPE, a measure developed by Robert
Schiller, is also flashing red with the second highest reading in history going back to the
late 1900s (see exhibit 4).
Price to sales ratios also hit a record high (see Exhibit 5).
There are other indicators that suggest that equity prices have detached from underlying
fundamentals. The put / call ratio on the CBOE has now reached the levels of the dot.com bubble
(see Exhibit 6).
Bill Gates is now the largest owner of
farmland in the U.S. having made substantial investments in at least 19 states throughout the
country. He has apparently followed the advice of another wealthy investor, Warren Buffett, who
in a February 24, 2014 letter to investors described farmland as an investment that has "no
downside and potentially substantial upside."
The World Wide Web, which is what people really tend to mean when they say 'the Internet,'
was officially invented by Tim Berners-Lee in 1989. When people interact with the Internet
today, they are using the World Wide Web, which is technically not the same as the 'Internet.'
However, the Web did not become fully commercialized right away.
When the Mosaic Web browser was released in 1993, the commercial growth of the Internet
started to become much more prominent. Really, the commercialization of the Internet and the
dawn of mass Internet commerce began around this point. However, the Dot Com Boom itself did
not really get into full force until 1997. The Dot Com Bubble was characterized by the
unprecedented growth of companies that came to be known as Dot-com companies.
There are still a companies today that are referred to as 'dot-com companies.' However, in
many cases, the people who say that are going to date themselves. The dot-com companies of the
late 1990's were more or less formed in order to take advantage of the remaining venture
capital in the markets that they entered. They often had little more than a great domain name
and a basic idea. They hoped people would invest in what they had in order for them to rise
through the ranks, but many of them would have no real idea of how to produce anything even if
their companies could have had any substance.
"... The psychologies of speculation and gambling are almost indistinguishable: both are dangerously gambler places a bet on a horse he is creating a risk, while the speculator who buys a share is simply involved in the transfer of an existing risk. ..."
"... To repeat Keynes's warning from the 1930s: "when the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done." Momentum trading, trend-following currency speculators, overleveraged hedge funds, and corporate managements obsessed with daily fluctuations in share quotations are unlikely to produce the optimal distribution of scarce resources in the global economy. We have reached Keynes's "third degree." ..."
"... ...options, developed by Scholes and Merton, which lies at the heart of the modem derivatives world, is dependent on the similar assump- tion diat past volatility is a reliable guide to future volatility. This assumption may be likened to driving a motorcar by looking in the rearview mirror -- line as long as the road continues straight but disastrous when you reach the first comer. ..."
For Smith, the speculator is defined by his readiness to pursue short-term opportunities for profit: his investments are fluid whereas those
of the conventional businessman are more or less fixed. This distinction was retained by John Maynard Keynes, who described "enter-
prise" as "the activity of forecasting the prospective yield of assets
over their whole life,1' in contrast to speculation, which he called "die
activity of forecasting the psychology of the market.'1
Specidation is conventionally defined as an attempt to profit from
changes in market price. Thus, forgoing current income for a
prospective capital gain is deemed speculative. Speculation is active
while investment is generally passive. According to the Austrian
economist J. A. Schumpeter, "the difference between a speculator
and an investor can be defined by the presence or absence of the
intention to 'trade,1 i.e. realize profits from fluctuations in security
prices.112 The line separating speculation from investment is so thin
that it has been said both that speculation is the name given to a
failed investment and that investment is the name given to a suc-
cessful speculation. Fred Schwed. a Wall Street wit, declared that
clarifying the difference between investment and speculation was
"like explaining to the troubled adolescent that Love and Passion
are two different things. He perceives that they are different, but
they don't seem quite different enough to clear up his problem."
Schwed concluded the two could be separated on the grounds that
the first aim of investment was the preservation of capital while the
primary aim of speculation was the enhancement of fortune.
As he put it: "Speculation is an effort, probably unsuccessful, to turn a little money into a lot. Investment is an effort, which should be successful, to prevent a lot of money becoming a little."'
Similar problems of definition are encountered in distinguishing
speculation from gambling. While a bad investment may be a spec-
ulation, a poorly executed speculation is often described as a gamble. The American financier Bernard Baruch was once dismissed
from the presence of Pierpont Morgan for uttering the word "gamble" in relation to a business proposition.4 Later, Baruch recalled
that "there is no investment which doesn't involve some risk and
is not something of a gamble."
The psychologies of speculation and gambling are almost indistinguishable: both are dangerously gambler places a bet on a
horse he is creating a risk, while the speculator who buys a share is simply involved in the transfer of an
existing risk.
Speculation is generally considered riskier them
investment. The securities analyst Benjamin Graham declared that
investment requires a "margin of safety" so that the value of the
principal is maintained even in unforeseen adverse conditions.
An
uninformed or spontaneous investment is more speculative than
one in which the investor has taken the time to investigate and
assess its potential returns. Graham added that buying shares with
borrowed money was always speculative. The capitalist is confronted with a broad spectrum of risk with prudent investment at
one end and reckless gambling at the other. Speculation lies somewhere between the two.
... ... ...
It is often said that speculation never changes because human
nature remains the same. "Avarice, or desire of gain, is a universal
passion which operates at all times, in all places, and upon all per-
sons," wrote David Hume in the eighteenth century. To this we
might add that the fear of loss, emulation of one's neighbour, the
credulity of the crowd, and the psychology of gambling are equally
universal. The early stock markets were moved by hopes and fears
as much as their later counterparts. These emotions are unleashed
during moments of speculative euphoria. They follow die path of
least resistance, moulding each mania, regardless of its historical
context, into a common form. This explains why all great specula-
tive events seem to repeat themselves and why the experience of the
1690s seems so familiar.
The theory of the "rational bubble" appears to be nothing more
than an elaborate restatement of the "greater fool" investment
strategy, whereby the speculator knowingly buys shares above their
intrinsic value hoping that a "greater fool" will pay more for them
later. The exponents of the "rational bubble" appear to overlook
the fact that the success of this strategy is dependent on liquidity
(i.e., the constant presence of both buyers and sellers in the mar-
ket) and that in a panic buyers vanish at the very moment when
"rational bubble" speculators are seeking to unload their shares.
The "greater fool" method of investment has enjoyed great popu-
larity' in the 1990s American bull market where it has been
renamed "momentum investing." Speculators look to buy shares
that are rising faster than the market and sell quickly when the rise
begins to peter out.* The fate of the London banker John Martin in
1720 illustrates the dangers of this frivolous approach to invest-
ment. Early in the summer, he had gleefully argued that "when the
rest of the world is mad, we must imitate them in some measure,"
but he failed to sell out before the crash, lost a fortune, and ended
up complaining pathetically of being "blinded by other people's
advice."19
... ... ...
During the upturn of the cycle, Bagehot argued, people become
convinced the prosperity will last forever and mercantile houses
engage in excessive speculations. At the same time, an increasing
number of frauds are perpetrated on investors, which only come to
light after a crisis: "All people are most credulous when they are
most happy."
... ... ...
...According to John Stuart Mill, the seeds of each boom
are sown during the preceding crisis, when the liquidation of credit
causes asset prices to decline so severely that they become genuine
bargains. Their subsequent sharp rise from a low level leads to a
revival of speculation.55 After each crisis, the financial markets
invariably shrug off past follies and losses to confront the future
with bright optimism and fresh credulity. Capital becomes "blind,"
to use Bagehots term. Unable to remember the past, investors are
condemned to repeat it.
... ... ...
The most striking similarity between the 1920s and 1990s bull
markets is the notion that traditional measures of stock valuation
had become obsolete. Once again it was argued that an investment
in the stock market helped retain purchasing power during infla-
tionary periods and that management wras becoming more respon-
sive to shareholders' interests. Abby Joseph Cohen of Coldman
Sachs claimed that a longer business cycle and lower inflation justi-
fied an upward valuation in stock prices. In their Securities Analy-
sis, Benjamin Craham and David Dodds wrote that "instead of
judging the market price by established standards of value, the new'
era [of the 1920s] based its standards of value upon the market
price." In similar fashion, consultants in the 1990s invented a con-
cept named "market value added," which simply measured the difference between the market value of the firm and the amount of
capital tied up in it. The higher the "market value added," the
greater the firm is deemed to be worth.
The net asset value of a company -- the value of its factories,
machinery, and suchlike -- became the most despised of traditional
valuation tools. Dividend yields, which slipped to a historic low of
less than 1 Vi percent, were also dismissed as irrelevant. At times
even the price-eamings ratio, a measure favourable to speculative
values, has looked too conservative. Discounting future cash flow's
was used to justify any price for fast-growing technology companies. In late October 1996, a headline in the Investors Business
Daily, a stock market daily which published relative strength fig-
ures, asked and answered a question that vexed many minds:
"Overvalued? Not If the Stock Keeps on Rising."90
The new paradigm, or new' economics, of the 1990s provided the
intellectual underpinning for the greatest bull market in American
history. When stock prices fell sharply in October 1997, Abby
Joseph Cohen of Goldman Sachs saved the day by advising her
clients to increase their holding of shares. James Grant has sug-
gested that the reappearance of the new era ideology was a sign
that "markets make opinions not the other way round."
... ... ...
Keynes defined speculation as the attempt to forecast changes in
the psychology of the market. He compared it to various parlour
games -- snap, old maid, and musical chairs. Switching his
metaphor, Keynes likened speculation to a newspaper competition
in which the competitors have to pick out the six prettiest faces
from hundreds of photographs,
so that each competitor has to pick, not those faces which he
Itimself finds prettiest, but those which he thinks likeliest to
catch the fancy of the other competitors, all of whom are looking
at the problem from the same point of view ... We have reached
the third degree w here we devote our intelligences to anticipating what average opinion expects the average opinion to be.'8
Speculation which is a beneficial, indeed vital, component of the
capitalist process has come to dominate the system to an unhealthy
degree.
To repeat Keynes's warning from the 1930s: "when the
capital development of a country becomes a by-product of the
activities of a casino, the job is likely to be ill-done." Momentum
trading, trend-following currency speculators, overleveraged hedge
funds, and corporate managements obsessed with daily fluctuations in share quotations are unlikely to produce the optimal distribution of scarce resources in the global economy. We have reached
Keynes's "third degree."
... ... ...
...options, developed by Scholes and Merton, which lies at the heart of
the modem derivatives world, is dependent on the similar assump-
tion diat past volatility is a reliable guide to future volatility. This
assumption may be likened to driving a motorcar by looking in the
rearview mirror -- line as long as the road continues straight but
disastrous when you reach the first comer.
In common with all the
practical ideas generated by the Efficient Market Hypothesis, it is
based on the belief that when financial theories are turned into practice there is no change to the underlying reality. This was the error of
portfolio insurance in the 1980s and remained die error of the
derivatives markets a decade later. If markets are not efficient but
are subject to chaotic feedback loops, then the entire financial
superstructure created around derivatives in the 1990s, with its $50
trillion worth of exposure, is based on shaky premises.
Even outside the field of options pricing, the teaching of the Efficient Market Hypothesis has insinuated itself into the practices of
modem finance: the fads for "shareholder value" and corporate
stock-option schemes, the Capital Asset Pricing Model (which "scientifically" calculates companies' cost of capital), and popular
investment in stock index funds are all predicated, to a greater or
lesser extent, on the assumption that shares are efficiently priced by
the market. But if the hypothesis is false -- e.g., because speculative...
>
5.0 out of 5 stars
The
No. 1 history of financial speculation
Reviewed in the United States on July 3, 2018
Verified Purchase
Absolutely the single best history of financial speculation. Chancellor seems to
have assimilated just about everything one could on all the major speculative episodes, from ancient origins through the
1990s.
There's not much else to say. If you're an investor, this is a must-read history of how things can go horribly wrong in
financial markets.
In fact, with U.S. equities bumping against all-time high valuations (in mid-2018), this is the perfect moment to take
your time and read through this book. It'll show you all the ways you might be getting swept up in speculative excess,
of which you might not be aware, even if you're invested in the greatest businesses that have ever existed.
>
Shashank V. Nerurkar
4.0 out of 5 stars
Historical
Perspective of Financial Speculation
Reviewed in India on September 9, 2019
Verified Purchase
Devil Take The Hindmost is very informative book which covers the history of
financial speculation from the third century. The author has narrated relevant details from various sources which
reflects the scholarly research undertaken by him. The major speculative bubbles such as tulip mania, south sea bubble,
railway network in Britain and US, automobile revolution in US, the crash of 1929, junk bonds mania, the Japanese bubble
of 1980 and havoc created by derivatives and hedge funds after 1990 are covered in great details. One realizes that not
much has changed as far as factors that lead to financial speculation over the history. The reader will be better
equipped to compare the conditions in financial markets with historical perspective. The author could have avoided bias
against the Republicans in US and Conservatives in Britain as their opposition has not done any better in managing the
financial speculation. The book is a bit dated and as such do not cover the dot-com bubble and 2008 financial crisis.
The book is great read for all participants in financial markets.
One of the biggest permanent changes coming out of the Pandemic is that businesses have
invested in technologies that have long been available, but that hadn't been deployed because
there was no visible need to deploy them, and because businesses were stuck in a rut, and
change is hard and costly – and the rules of inertia had taken over.
But now the Pandemic has forced businesses to change. There is no going back to the old
normal. And these technologies impact employment in both directions.
We encountered precisely that when we went cross-country skiing last week at Royal Gorge in
the Sierra Nevada, which we do every year. What is said to be the largest cross-country ski
resort in the US with 120 miles of groomed trails (if they're groomed) had fallen on hard times
years ago, filed for bankruptcy, and was acquired out of bankruptcy in 2011/2012. It is now
operated by Sugar Bowl Resort, the downhill ski area nearby. There have been some improvements
since then, such as new warming huts. But the resort remained largely low tech, or no tech. And
even there, things changed massively and permanently with the Pandemic.
The way it used to work: You stood in line every morning to buy old-fashioned trail passes
that you then stuck on your poles and that you then tried to scrape off at night. If you rented
equipment, you spent more time standing in line. There was a website, but you couldn't buy
anything on it. There were quite a few employees involved in dealing with the skiers that
wanted to buy trail passes and rent equipment. The place could get crowded, and customers
wasted time standing in line and dealing with logistics.
Now, the requirements of social distancing and contactless commerce forced the resort to
invest in an ecommerce website. You have to use the website to buy trail passes and pay
for and make reservations for the rental equipment (actually fitting the rental equipment is
still done in person at the lodge).
Trail passes are now rechargeable cards, similar to prepaid debit cards with a radio chip.
You get them at an ATM-type machine outside the lodge by holding the QR code -- that
black-and-white square-shaped maze -- of your reservation (paper or smartphone) under the
scanner. And it spits out the card. You can recharge the trail pass online and reuse next year
.
This should have been done 10 or 15 years ago. It's superfast and convenient, and you don't
have to stand in line anywhere. You can park, scan, and ski.
And the resort has gone entirely cashless. You can buy some corn bread, but you have to use
your card. Credit card transactions are automated. No one needs to balance the cash drawer or
count cash.
And some of the staff that used to deal with the trail passes and other stuff are now either
doing other things at the resort or are no longer needed at all.
But there are people who manufacture, install, and maintain the equipment, build and
maintain the ecommerce site, and deal with the other issues that tech produces. They're
different jobs and only have a small local component.
This is a permanent change. And it's an improvement for users of the resort. It may have
also reduced employment at the resort, while supporting employment at companies that provide
and service the technology.
I chatted with one of the employees at the resort. Trail pass sales were doing pretty good,
he said, but equipment rentals were down by about half compared to last year. He figured that a
lot of people have bought their own equipment.
It would make sense: quite a few people have apparently left San Francisco and other
high-cost Bay Area cities, and some of them have moved into the Sierra Nevada, including the
Lake Tahoe area and the whole strip along I-80, including Truckee, now that they're "working
from home" and can take a daily ski break between Zoom calls.
The healthcare industry has done a similar thing: Using technology to avoid contact, thereby
making a lot of basic stuff simpler and cheaper. At our healthcare provider, we could always
make a phone-appointment with a doctor. This was free and quick, and often all that's needed
for minor things, and avoided the time and cost of "going to the doctor." This was an
option.
Now telemedicine – or "virtual care" – has turned into a thing. Making video
appointments is now encouraged. Prescriptions are filled online and delivered. When that's all
that is needed, it saves time for the patient and the healthcare provider.
Obviously, telemedicine still doesn't work for many medical issues, but the routine issues
that doctors spend much of their time on can be handled that way.
Only some of these technologies are visible to patients. For the healthcare providers, it
meant investing in video tools and other technologies and in the infrastructure needed to
support this on a large scale.
The Pandemic has also pushed even reluctant consumers and businesses into ecommerce. In Q4
last year, when brick-and-mortar stores were open nearly everywhere,
ecommerce sales soared by 32% from a year earlier .
Package deliveries by UPS nearly doubled to 34 million packages a day, UPS chief information
and engineering officer Juan Perez said at a
Wall Street Journal event. And the company had to adapt and scale its digital technologies
to deal with it. The Pandemic drove some of the most significant changes in the company's
history, he said.
The entire ecommerce sector, likely the biggest beneficiary of the Pandemic, has invested
vast sums in technologies and infrastructure to deal with the surge in demand.
This now includes ski resorts and grocery stores and other previously unlikely suspects for
ecommerce. They will not go back to the old normal, nor will their customers.
While lots of office employees who now work at home will eventually return to the office,
the old times of nine-to-five every day at a desk farm are gone for many employees. Companies
have invested in technologies to succeed with their hybrid work-from-home models, and they are
cutting costs where possible by reducing the real estate footprint and related costs.
People who like working in an office can gravitate to employers that encourage or require
it. People who like working at home can gravitate to employers with hybrid models. Companies
will make one or the other a selling point when recruiting talent. That's how that will wash
out.
It will take years to sort through the issues that these sudden and often massive shifts
leave behind. But from what I have seen, many of the shifts are positives and should have
happened a long time ago – and only inertia prevented them from happening.
The blunt answer is that the Fed, in sync with the fiction writers at the Bureau of Labor Statistics (BLS), reports consumer
inflation as honestly as Al Capone reported taxable income.
In short: The Fed has been lying about (i.e. downplaying) inflation for years.
As we've shown in many prior reports, the Consumer Price Index (CPI) scale used by the BLS to measure U.S. consumer price
inflation is an open charade, allowing the BLS, and hence the Fed, to basically "report" inflation however they see fit -- at least
for now.
If, for example, the weighting methodologies hitherto used by the Fed to measure CPI inflation in the 1980's were used today,
then US, CPI-measured inflation would be closer to 10% not the reported 2%.
Concerned about by rising consumer costs, the Fed simply tweaked its CPI scale for measuring the same, effectively downplaying
rising costs like a fat-camp scale which downplayed the significance of say beer, chocolate or pizza.
In short, the Fed didn't like the old CPI scale for measuring inflation, and so they simply replaced it with one in which 2+2 =2.
But why all the mathematical gymnastics and creative writing at the current BLS and Fed?
What explains the ongoing double-speak wherein the Fed wishes to target higher inflation yet simultaneously and deliberately mis-reports
it at far lower levels?
Necessity: The Mother of Invention
.
The Fed, in deep
need
of keeping its IOU-driven (i.e debt-driven) façade of "recovery" in
motion, has no choice but to
invent
a respectably controlled (i.e. LOW) CPI inflation
rate in order to make US Treasury bonds look even moderately attractive to others.
After all, the US lives on those IOU's. They need to look pretty.
If, however, the more honest and much higher 10% inflation rate were honestly reported on an honest CPI scale, the
inflation-adjusted
yield
on the US 10-Year Treasury would be
negative
8%–which hardly makes it a pretty bond for
the world to either admire or buy.
That's a problem for Uncle Sam.
And so the Fed invents a CPI inflation number that is less embarrassing than reality. It's just that simple.
By the way, if real yields on the US 10-Year were honestly reported at -8%, gold would be ripping to the moon right now (it
skyrocketed in the 1970's when real yields were -4%).
We all know, however, that the Fed (and the bullion banks it serves) are terrified of rising gold prices, as a rising gold price
confirms the absolute failure of their monetary policies and the open, and ongoing, debasement of the US Dollar.
This further explains why the world's central and bullion banks
openly
manipulate
the paper gold price in the COMEX markets on a daily basis.
Furthermore, given that the only thing that seems to be "healthy" in the US today is the biggest stock and bond market bubble in
its history, the Fed wants to keep that bubble growing rather than naturally popping.
And toward this end, the Fed may be desperate, dishonest and delusional, but they aren't completely stupid.
They know, for example, that for the last 140 years, ALL (and I mean ALL) of the stock market's gains came during
disinflationary
periods,
not
inflationary
periods -- which is all the more reason for the Fed to lie about inflation
and keep the bubble rising.
So, please don't fall for Powell's double-speak that he's more concerned about focusing on
employment than inflation.
The unspoken truth is that Powell (as well as Yellen, Bernanke et al) have been absolutely obsessed with inflation for years.
They simply mis-report it (i.e. lie), as the dollar's
purchasing power
continues its slow
fall toward the floor of history.
Having Your Cake and Eating it Too.
What the Fed has been doing ever since Greenspan (the veritable "Patient Zero" of the current global $280T debt disaster) is very
clever yet extremely toxic, as well as openly duplicitous.
Specifically, the Fed now prints over $120B per month (to buy $80B in unwanted Treasury bonds and another $40B in unwanted, toxic
MBS paper) with no apparent inflationary effect (despite the fact that inflation is defined by money supply) beyond its 2%
"allowance."
Such extreme money creation openly dilutes the USD to inflate away US debt with increasingly diluted dollars, now a desperate as
well as deliberate Fed policy.
But by simultaneously and dishonestly mis-reporting CPI inflation as they dilute the dollar, the Fed can inflate away US debt
without having to make the inflation-adjusted yields on Treasury bonds appear too embarrassingly ugly (i.e. grotesquely
negative
)
for circulation and consumption.
Such open fraud, of course, allows the Fed to have its cake (debased currencies to inflate away debt) and eat it too (by
under-reporting the otherwise disastrous CPI inflationary consequences of such a desperate policy.)
In short, by putting lipstick on the pig of what would otherwise by
highly negative
real
yields on an openly bogus Treasury bonds if the CPI inflation rate were
accurately
reported,
the Fed can continue to live on more debt, more IOU's and more dishonesty.
Such veiled inflationary dishonesty allows the U.S. to effectively extend and pretend as the US credit market marches forward
like a veritable Frankenstein -- that is dead, yet still marching, arms outstretched and moaning like a beast.
QuiteShocking
4 hours ago
Gas was
around $2 a gallon on Election Day (Nov 3rd 2020)... and now over $2.70 a gallon for a 35% increase and we're just
getting started... So much for the 2% fantasy...
PodissNM
PREMIUM
3 hours ago
The
price of practically everything has doubled in the past 20 years. Other than a few outliers like TVs,
which have seemingly never been cheaper.
Now
they're reducing package quantities in consumer staples to obfuscate further price increases.
philipat
3 hours ago
(Edited)
It's all a confidence game. The Fed CANNOT let rates rise (USG can't afford to pay higher rates on
interest on the ever increasing debt, let alone paying down principal - that can never happen) but on the
other hand it needs inflation to inflate away some of the debt. And it cannot allow Equity markets to
crash (they have become the surrogate US economy) so as the debt grows the equity markets must continue
to grow. Just a smallish sustained drop would cripple GDP.
Which means the USD should collapse.
BUT
it's like keeping all the plates spinning together. All three are manipulated. EVERYTHING is manipulated,
there are NO free markets. The ESF and Central Banks (Why does the Fed need trading floors?) intervene
daily in everything. And so far they are getting away with it.
Which brings us back to confidence......
buzzsaw99
4 hours ago
(Edited)
remove
link
The principal value of TIPS rises as inflation rises.
Inflation is the pace at which prices increase throughout the U.S. economy, as measured by the Consumer Price
Index (CPI)...
real yields
all negative baybee, except the 30y is a whopping +0.010%
The
purpose of the consumer price index (CPI) is to reflect just how much inflation is eating into both our
incomes and our savings.
Currently,
the government understates inflation by using a formula
based
on the concept of a "constant level of satisfaction" that evolved during the first half of the 20th
century in academia.
More on this subject in the article below.
There are many reasons the stock market HAS to keep rising. One of the main ones is that all of the
city and state pension funds are heavily invested in the stock market. If the stock market wasn't rising,
tax-payers would have to pick up a greater share of pensions. Simply put, this can't happen.
MrBoompi
1 hour ago
remove
link
Come on. The only jobs Fed employees care about are their own jobs. They supervised the dismantling of
our manufacturing jobs, without lifting a finger, since 1971. They are not screaming to end the
lockdowns either.
Just like minimum wage, Seniors have been denied the true COL increases, which are the law, for Social
Security. These payments should at least be double what they are today.
They are globalists and as such could care less about common folk. A must-have skill if you want to be
Fed Chair is the ability to lie. This skill will be needed much more than your business, law, and
accounting degrees.
Give Me Some Truth
1 hour ago
remove
link
Thanks to
the author for pointing out the elephant in the room that "officials" and the mainstream media are not allowed to
discuss. Namely (from this article):
"We all
know, however, t
hat the Fed (and the
bullion banks it serves) are terrified of rising gold prices, as a rising gold price confirms the absolute failure
of their monetary policies and the open, and ongoing, debasement of the US Dollar.
This further explains why the world's
central and bullion banks
openly
manipulate
the paper gold price in the COMEX markets on a daily basis."
In short, EVERYTHING the "Powers that
Be" do is designed to keep gold and silver prices contained, which thus protects the all-important fiat printing
press.
Inflation
numbers are rigged to help achieve this result and so too are precious metal markets rigged.
I'd also add that the
"unemployment" numbers are equally bogus.
So too are many of the COVID numbers and metrics.
If numbers
can be rigged - if definitions can be changed - to support a specious narrative, they will be ... All for the same
purpose.
"There is no one party in the electrical power generation chain on which to lay the blame,
and we should quit trying"
Power lines are shown Tuesday, Feb. 16, 2021, in Houston. More than 4 million people in
Texas still had no power a full day after historic snowfall and single-digit temperatures
created a surge of demand for electricity to warm up homes unaccustomed to such extreme lows,
buckling the state's power grid and causing widespread blackouts.
In 1882, Thomas Edison formed the Edison Electric Illuminating Co., which brought electric
light to Manhattan but most Americans still lit their homes with gas light and candles for
another 50 years. Only in 1925 did half of all homes in the U.S. have electric power. It has
been many years since the US has been fully electrified, but in 2015, 1 billion people (three
times the US population) in the world had no access to electricity. Access to electricity is a
key metric to determining a nation's affluence; as late as 2001, the entire county of
Afghanistan was virtually without electricity. Afghani GDP was $500 per person in 2019 while
the United States GDP was $65,000 per person.
We have come to expect that we should have electric power 100 percent of the time, and when
that doesn't happen, then it must be someone else's fault (Oncor, ERCOT, power generators,
retail electric providers like Griddy, employees and/or board members of any and all of the
above, etc.). There are very few who know how electric power is generated and even fewer who
understand the vast number of both mechanical and human factors that must operate seamlessly
(and do operate seamlessly 99.9 percent of the time) to provide this modern miracle. We should
really consider ourselves quite fortunate to have electricity at all, but of course we, as
Americans, are smarter, better looking and more talented than everyone else and expect to have
our every wish granted immediately; "Vanity of vanities, and all is vanity" spoke Ecclesiastes.
Not a few have observed that this event occurred at the beginning of Lent, forcing involuntary
penance on a people who refuse even the slightest voluntary inconveniences.
Within ERCOT, natural gas burned in gas turbines provides about 50 percent of the generating
capacity in Texas, with wind/solar at about 30 percent, coal about 15 percent and nuclear about
5 percent. Since natural gas provides such a large percentage of electric power, and in an
effort to find the appropriate scapegoat to Texas' woes, we first need to understand what a
typical oil and gas production facility contains. A three-phase stream (oil, salt water and
natural gas) is produced from the wellhead and flows to a separator, where the gas leaves the
top of the separator in the vapor phase and the oil-salt water mixture leaves the bottom of the
separator in the liquid phase and goes to a (gas-fired) heater-treater, which applies heat to
break the oil-water emulsion and separate the oil from the saltwater. Oil then goes to storage
tanks or pipelines, while water is either sent to a disposal well (via electric pump) or
trucked off the lease.
Let's examine what really happened during the 221 consecutive hours with temperatures below
the freezing point of water (32 degrees Fahrenheit). The natural gas in the vapor phase leaving
the separator is saturated with water vapor, and since all the functions listed above occur
above ground in steel pipes and vessels, the gas quickly drops in temperature, and the water
vapor can freeze in the pipeline creating an ice block (a hydrate). If the gas cannot leave the
lease then, unless the gas is flared, the well must be shut in. Even if the gas does not freeze
in the line, if the paved roads and dirt lease roads are too hazardous for 18-wheeled truck
transports to pick up the oil and water from the lease, then as soon as the on-lease storage is
filled, the well must be shut in. Most leases have some level of electric power for pumps,
lighting, heat tracing or similar uses, and when the electric provider ceases to provide that
power, then any efforts to restore production and unfreeze equipment are hampered. The
combination of freezing within on-lease flowlines, hazardous conditions preventing company
employees from getting to the lease, lack of crude and water truck hauling, and the loss of
electricity results in a complete wellhead shut in.
The graph below illustrates actual field production data from a Reagan County producer who
battled all the issues above:
Virtually 100 percent of the gas produced in the Permian Basin must be processed in a gas
processing plant for the removal of water, hydrogen sulfide, carbon dioxide and valuable
natural gas liquids (NGLs, which are ethane, propane, butanes and heavier), with the remaining
molecules consisting almost entirely of methane (called residue gas) delivered into
large-diameter pipelines at the plant outlet. As producers struggled to keep wells on, gas
processors also struggled as volumes to their plants steadily decreased (making it more
difficult to operate), and they faced similar issues of employee safety, in-plant freezes and
loss of electricity to key pieces of equipment like NGL pumps (if the NGLs cannot be pipelined
from the plant on a continuous basis, the plant is forced to shut down). All plants have a
minimum volume of gas required to run the plant, and many plants hit this wall; Navitas'
processing complex east of Midland dropped from 750,000 Mcf per day to zero Mcf per day) while
Cogent in Reagan County dropped from 460,000 Mcf per day to 40,000 Mcf per day.
Assuming a total loss of wind/solar and a 50 percent loss in coal, natural gas' share of the
remaining generating capacity rose to about 80 percent; when wellhead freezes dramatically
reduced gas flow to the processing plants, and when plants were having their own freeze issues,
electric providers then cut power to these plants, eliminating what little gas supply was left
available, effectively creating a "death spiral."
So, irrespective if (a) power generators were properly winterized, or (b) we had more
gas-fired powered generation, or (c) Texas was not deregulated, the fuel supply simply was not
available, "not even for ready money" (in Oscar Wilde's "The Importance of Being Earnest,"
Algernon expresses his dismay to the butler regarding why there were no cucumber sandwiches, to
which the butler replies "There were no cucumbers in the market this morning, sir, not even for
ready money"; after you read this comedy you should read his equally compelling but more somber
tale, "The Picture of Dorian Gray").
As gas supply dwindled, and power demand increased, the price of gas "for ready money"
jumped from its normal price of $3/MMBtu to $100-$200/MMBtu, and as the price of gas surged,
and the demand for power increased while its availability decreased, the price of power also
surged from $.03 per kilowatt-hour to $9 per kilowatt-hour. The typical consumer reaction was
that there was "price gouging" simply because the price increased; what we witnessed was the
classic supply-demand-price dynamic of the free market, which that same consumer enjoys on a
regular basis when shopping for virtually any product.
Griddy customers enjoyed the rewards of supply-demand-price when power was plentiful and
cheap, but they knew full well that they were susceptible to price spikes; Griddy updated
open-market prices every five minutes and sent alerts when the price was increasing or
decreasing, so those customers had the tools available on their "smart" phones and could elect
to cease or continue to use power at a known cost.
Force majeure is a French term that literally means "greater force" and is related to an act
of God, an event for which no party can be held accountable, such as a hurricane or a tornado
(or 221 consecutive hours below 32 degrees). Try as we might, there is no one party in the
electrical power generation chain on which to lay the blame, and we should quit trying. Will
all the entities in the chain expend the money to protect against an event that happens once in
a hundred years? Will you expend the money to buy and maintain a gas- or diesel-powered
generator and beef up the insulation in your house to protect against an event that happens
once in a hundred years? Do you expect the answers to both questions to be the same?
It is very unfortunate that lives were lost as an indirect consequence to the temporary loss
of electricity. In another segment of our lives where man and machine interact, let's look at
deaths on Texas roadways, which run about 3,500 per year. For the last 20 consecutive years, at
least one person has died every single day in a vehicle accident; are we filing lawsuits or
calling for the resignation of employees of TxDOT, DPS or vehicle manufacturers? If we were
serious about reducing deaths to zero (TxDOT's 2050 goal) would we drop the speed limit to 30
miles per hour on all roadways and post officers every 10 miles to issue mandatory citations?
Or would we appeal to taking personal responsibility for safe driving habits every time we
turned the key in the ignition?
Switching gears, what should oil and gas producers be prepared for in late March when they
are paid for gas delivered in February? Just because natural gas traded for $100-$200/MMBtu for
a few days does not mean you will receive that price; it depends on what your gas contract
stipulates and whether the plant to which you are connected sold any gas during that period. In
an effort to be equitable, gas processors who did sell some high-priced gas could possibly
allocate that value to only those producers who actually delivered gas to them during that
period, rather than compute an average monthly price and applying that price to all deliveries
during February. If your gas processor passes through your share of its electricity bill, you
could be in for a shock on high pass-through power costs. You may get inquiries from royalty
owners wondering why they are not seeing the effects of $100/MMBtu gas and whether you
exercised a fiduciary responsibility to obtain that price.
This is only a partial list; the storm outside is over, but the financial and legal storm
could only be beginning.
"... ... on Friday we reported that according to the latest EPFR fund flow data , $22.2Bn in new money flowed into equities last week, following the previous week's massive $46.2Bn inflow which was the 3rd biggest on record, bringing the total 16 week inflow to $436BN, a stunning burst of inflows as shown in the chart below. ..."
"... So bizarre has been this divergence - historically, investors have always pulled money during times of stress and heightened volatility, instead they are plowing record amounts of cash into stocks now ..."
"... "they're opting for parts of the market that have suffered the most, doubling down in arguably risky ways with triple-leveraged tech funds and options galore." ..."
"... "Historically it's been a bad signal that retail investors are piling into the market and a signal of a top," said Art Hogan, chief market strategist at National Securities Corp. And yet, as he admits in the very next sentence, " every time we tried to call a top in 2020 because of retail participation, it was wrong." ..."
"... Because in a centrally-planned "market" where the Fed guarantees no losses ever, why not buy any and every dip? Sure enough, that's what they did and boy did they buy the dip : ..."
"... lots and lots and lots of stimmy checks are about be deposited to daytraders' checking accounts ..."
"... As long as you feed $$ into the military industrial complex, the stock market goes up. The military is the key industry of the US and that will not change. ..."
"... Neoclassical economics is a pseudo economics that hides the inconvenient truths discovered by the classical economists. The classical economists identified the constructive "earned" income and the parasitic "unearned" income. Most of the people at the top lived off the parasitic "unearned" income and they now had a big problem. ..."
"... In 1984, for the first time in American history, "unearned" income exceeded "earned" income. ..."
"... It looks like a parasitic rentier capitalism because that is what it is. ..."
Something bizarre is happening in the stock market: for the past three weeks stocks - and especially tech - has gotten hammered,
with the Nasdaq briefly sliding into a 10% correction while the S&P has also been hard hit (although one can't say the same for reflation
stocks such as energy which have soared in recent weeks). Some other notable casualties: Apple has tumbled 15% since late January.
Tesla has lost more than a quarter-trillion dollars in market value in three weeks, and more than $1.5 trillion has been wiped off
the Nasdaq in less than a month.
And yet, despite this hit to risk assets on the back of the recent in surge in interest rates, accompanied by a parallel
spike in both the VIX, and its bond market equivalent, the MOVE index...
... on Friday we reported that
according to the latest EPFR fund flow data , $22.2Bn in new money flowed into equities last week, following the previous week's
massive $46.2Bn inflow which was the 3rd biggest on record, bringing the total 16 week inflow to $436BN, a stunning burst of inflows
as shown in the chart below.
So bizarre has been this divergence - historically, investors have always pulled money during times of stress and heightened
volatility, instead they are plowing record amounts of cash into stocks now - that Goldman's David Kostin dedicated his Weekly
Kickstart report to the topic. In a note titled "Rising rate anxiety roils share prices but also supports outlook for strong equity
inflows" , the Goldman chief equity strategist writes that as "rates rose, and equities fell, long-duration growth stocks plummeted,
but equity funds continued to see large net inflows."
Equity mutual fund and ETF inflows have totaled $163 billion since the start of February, the largest five-week inflow on record
in absolute dollar terms and third largest in a decade relative to assets. Even though the recent backup in rates has weighed
on equity prices broadly, the pace of inflows into equity funds during the last few weeks has accelerated compared with the start
of the year.
In contrast, weekly flows into bond funds averaged roughly $10 billion in February, 50% less than weekly inflows in January.
In addition, money market funds have seen net outflows of $34 billion during the past month.
... ... ...
According to Bloomberg, even though the market peaked almost a month ago, retail traders have plowed cash into U.S. stocks at
a rate 40% higher than they did in 2020, which was a record year. Yet one way retail capital allocation differs from the charts above,
is that "they're opting for parts of the market that have suffered the most, doubling down in arguably risky ways with triple-leveraged
tech funds and options galore."
Could it be that nothing but sheer stupidity and/or certainty in yet another Fed bailout is behind the record inflows? And is
Powell to blame?
Retail traders, many of them newbie investors, have consistently held strong, buying virtually every dip during what's been
the best start to a bull market in nine decades. But now the world is wondering how much it'll take for them to call it quits,
especially after a year in which retail traders were right way more often than wrong.
"Historically it's been a bad signal that retail investors are piling into the market and a signal of a top," said Art Hogan,
chief market strategist at National Securities Corp. And yet, as he admits in the very next sentence, " every time we tried to call
a top in 2020 because of retail participation, it was wrong."
Just how aggressive has retail buying been? According to data from VandaTrack, which monitors retail flows in the U.S. market,
retail investors snapped up an average of $6.6 billion in U.S. equities each week, up from an average $4.7 billion in net weekly
purchases in 2020 even as stocks swooned over the last three weeks.
They've doubled down on areas of the market that have been hit the hardest. Apple, which has plunged 15% since late January,
was the most-popular retail buy this past week. NIO Inc., the electric-vehicle maker down almost 40% since Feb. 9, was the second-most
popular. Next up were exchange-traded funds tied to the Nasdaq 100, the Invesco QQQ Trust Series 1 (ticker QQQ) and a triple leveraged
version (ticker TQQQ).
Because in a centrally-planned "market" where the Fed guarantees no losses ever, why not buy any and every dip? Sure enough,
that's what they did and boy did they buy the dip :
On Thursday, when the Nasdaq 100 fell as much as 2.9%, almost 32 million bullish call options traded across U.S. exchanges,
the fifth-most on record. The other four have all occurred within the last four months.
There is one fundamental reason why retail investors are buying: the just passed $1.9TN Biden stimulus ensures lots and lots
and lots of stimmy checks are about be deposited to daytraders' checking accounts:
"There's a lot of excess liquidity and we just had this $600 check going to many families in January," said Jimmy Chang, chief
investment officer of Rockefeller Global Family Office. "We're going to get an additional liquidity injection in the $1,400 check
and part of that money is going into risk assets."
Incidentally, the question of how much of Biden's $1.9TN stimulus will end up in the market is one we discussed last week in the
context of a recent
Deutsche Bank survey :
"Given stimulus checks are currently penciled in at c.$405bn in Biden's plan, that gives us a maximum of around $150bn that
could go into US equities based on our survey.
as we
reported
earlier today , Morgan Stanley's Michael Wilson believes that the selloff has more room to go before it's over. Bloomberg agrees
and notes that "if past is precedent, that could mean the sell-off has more room to run. Retail investors tend to buy the initial
dips, and it's not until they capitulate and sell that markets ultimately bottom, according to Eric Liu, co-founder and head of research
at Vanda Research. The firm's data show that was the case in both selloffs in 2018, as well as roughly a year ago during the Covid
crash."
To Victoria Fernandez, chief market strategist for Crossmark Global Investments, their continued presence in the markets likely
means elevated volatility will persist. Still, that doesn't mean retail investors' efforts are misguided.
"Is there some dumb money in retail trades? Yes. But not all of it," she said. "Some of these people are doing their homework,
looking for opportunities and trying to take advantage of it. Some win, some lose -- it's really not that different than what
professionals do on an institutional basis."
Maybe there is dumb money in retail, but that's hardly what matters. What does matter - in our view - is what
we
reported earlier today, namely that last week we saw the biggest shorting among hedge funds since last May. And with the squeeze
having started on Friday and clearly continuing on Sunday, the upcoming "mega squeeze" (
which
we predicted earlier today ) is all that matters.
As such while Wall Street ruminates about the cause (and reflexive effect) of the current record capital inflows into equity stocks
amid growing market turmoil, the only thing that matters for this broken, illiquid market is positioning and right now the "max pain"
is higher. A lot higher, especially since the Fed will have no choice but to step in if stocks continue to fall as all the careful
centrally-planned work of the past 12 years would implode with a massive bang if it does not.
play_arrow 4
Hobbit of Hyperinflation 6 hours ago
Two words: THE FED.
SQRT 69 1 hour ago remove link
Three letters: PPT
DontFollowMyAdviceImaDummy PREMIUM 10 hours ago
probably going to sell off for another 8 to 10 business days and then the magic money pump machine will get activated along
with every stonk price target seeing huge price target increases because of fantasies about flying cars and infinite forever profits
by 2040...
Whats-A-Theta PRO 10 hours ago
As no one stops and asks what stocks are actually worth we shouldn't have too much trouble.
Chiefisme 4 hours ago remove link
There is a simple explanation. The market is rigged. The Fed is wildly "printing" money and supporting all of the markets including
equity to keep the faced going.
VioLaTor 5 hours ago remove link
Oil past 70 also this morning. I saw CW had a new podcast over the weekend, and on BB today to rally the troops. See what happens.
I think the new investors might well be learning that stocks also go down, and diversification is good. 10 year auction on Wednesday
will be interesting.
uhland62 7 hours ago remove link
As long as you feed $$ into the military industrial complex, the stock market goes up. The military is the key industry
of the US and that will not change.
You_Cant_Quit_Me 27 minutes ago
When you get nothing on your savings people move the cash elsewhere for higher yield. The FED is inflating bubbles in equities
and real estate
Sound of the Suburbs 4 hours ago
The wealth is there and then it's gone. At the end of the 1920s, the US was a ponzi scheme of inflated asset prices.
The use of neoclassical economics, and the belief in free markets, made them think that inflated asset prices represented real
wealth. 1929 – Wakey, wakey time
The use of neoclassical economics, and the belief in free markets, made them think that inflated asset prices represented real
wealth, but it didn't.
It didn't then, and it doesn't now.
Real estate - the wealth is there and then it's gone.
Get ready to put Australia, Canada, Norway, Sweden and Hong Kong on the list.
It's not real wealth. What is real wealth? Weimar Germany and Zimbabwe were never short of money. Weimar Germany and Zimbabwe
had created far too much money compared to the goods and services available within the economy causing hyper-inflation. States
can just create money, and the last thing you want is too much of the damn stuff in your economy. They had made so much money
it lost nearly all its value, and they needed wheelbarrows of the stuff to buy anything.
Money has no intrinsic value; it comes from what it can buy. Central bankers actually look at the money supply, and expect
it to rise in line with the new goods and services in the economy, as it grows. More goods and services in the economy require
more money in the economy. Paul Ryan was a typically confused neoliberal and Alan Greenspan had to put him straight. Paul Ryan
was worried about how the Government would pay for pensions. Alan Greenspan told Paul Ryan the Government can create all the money
it wants, there is no need to save for pensions.
What matters is whether the goods and services are there for them to buy with that money. That's where the real wealth in the
economy lies. They worked it out last time. The real wealth creation in the economy is measured by GDP. The transfer of existing
assets, like stocks and real estate, doesn't create real wealth and therefore does not add to GDP. Real wealth creation involves
real work, producing new goods and services in the economy. It took them a long time to disentangle the hopelessly confused thinking
of neoclassical economics in the 1930s.
This is the second time around and it has already been done.
Sound of the Suburbs 4 hours ago remove link
Neoclassical economics is a pseudo economics that hides the inconvenient truths discovered by the classical economists.
The classical economists identified the constructive "earned" income and the parasitic "unearned" income. Most of the people at
the top lived off the parasitic "unearned" income and they now had a big problem.
This problem was solved with neoclassical economics, which hides this distinction. It confuses making money and creating wealth
so all rich people look good. If you know what real wealth creation is, you will realise many at the top don't create any wealth.
Look what has happened to the US since they got confused between making money and creating wealth. In 1984, for the first
time in American history, "unearned" income exceeded "earned" income.
The American have lost sight of what real wealth creation is, and are just focussed on making money. You might as well do that
in the easiest way possible. It looks like a parasitic rentier capitalism because that is what it is. You've just got
to sniff out the easy money. All that hard work involved in setting up a company yourself, and building it up. Why bother?
Asset strip firms other people have built up, that's easy money. The private equity firms have found an easy way to make money
that doesn't actually create any wealth. Bankers make the most money when they are driving your economy into a financial crisis.
They will load your economy up with their debt products until you get a financial crisis.
On a BBC documentary, comparing 1929 to 2008, it said the last time US bankers made as much money as they did before 2008 was
in the 1920s.
The bankers loaded the US economy up with their debt products until they got financial crises in 1929 and 2008. As you head
towards the financial crisis, the economy booms due to the money creation of bank loans.
The financial crisis appears to come out of a clear blue sky when you use an economics that doesn't consider debt, like neoclassical
economics.
CB Newkirk III 5 hours ago (Edited) remove link
All the Business Knowledge is in the algorithms (programs), and no one knows what they do, or how to maintain and upgrade them
for a changing environment. The just keep patching them and hope that it works. But hey, those graphs are nifty looking.
Tesla down 31%? Not a problem I will use the dividends to offset my losses. Oh wait!
BigJJ 13 minutes ago
I've never understood how Tesla could possibly make money given all the infrastructure
they had to install just to sell shoddily thrown together rusty cars that are useless when
the grid crashes.
Sound of the Suburbs 41 minutes ago (Edited)
...What was the ponzi scheme of inflated asset prices that collapsed in 2008?
El Hosel 1 hour ago (Edited)
Clearly "It's different this time", now that everybody knows "stocks only go up"...
In our
call
of the day,
Miller
Tabak & Co's chief market strategist Matt Maley said investors need to be "very careful" about buying the dip when it comes to
the tech-laden index and should instead be selling the bounces.
...
the
FAANG Index -- which includes Facebook
FB,
+2.58%
,
Amazon
AMZN,
+0.77%
,
Apple
AAPL,
+1.07%
,
Netflix
NFLX,
+1.00%
and
Google parent Alphabet
GOOGL,
+3.10%
--
is only 6% off February highs and still sits above its 100 day moving average. "A break below that moving average would send up a
big warning flag on the group," he said.
...
The
price of Brent crude
BRNK21,
-0.56%
briefly
topped
$70 a barrel
for
the first time in a year after Saudi Arabia and Yemen rebels traded airstrikes.
Over the last month, Tesla has fallen from about $868 to $598, a plunge of about 31%. But it
isn't just Tesla investors that are feeling the pain: with the stock having risen in popularity
over the last 18 months, Tesla is now tied to numerous ETFs that it winds up pulling lower when
it underperforms. In fact,
Bloomberg notes that "at one point on Friday, every one of the 54 U.S.-based ETFs that have
assets under management exceeding $1 billion and more than 1% invested in Tesla had
fallen."
Mando Ramos 1 hour ago
A year ago today it was trading at $72 dollars a share, and it was criminally,
outrageously overvalued then. But as we've all learned in the last 10 years, crime actually
does pay
buzzsaw99 50 minutes ago (Edited)
the idea was to add tsla to the s&p is about fleecing all the index buyers. Read 401K
lemmings.
Xi the Pooh 51 minutes ago remove link
Tesla and Bitcoin are two bubbles that need popping. Useless overvalued garbage.
Son of Loki 17 minutes ago
What's the definition of malinvestment?
The NYSE and NASDAQ.
hedge4Gain 51 minutes ago
"Betting On A Dream": Could Tesla Be The Canary In The ETF Liquidity Coal Mine? Betting on
Tesla has always been like betting on a yellow school bus winning the 500 mile race or a
windmill in snowstorm.
Lordflin 35 minutes ago
The PPT and the CBs have your backs folks... you will be fine...
Academic research suggests stock-market trading and more traditional gambling have quite a
bit in common. One paper published in January says there's 3.5 times more gambling in stock
markets than in more traditional venues like casinos and lotteries.
The paper -- from Alok Kumar of the University of Miami, Houng Nguyen of the University of
Danang, and Talis Putnins at the University of Technology Sydney and Stockholm School of
Economics -- says the U.S. and Hong Kong have the highest per capita levels of what they call
stock-market gambling in the world. They identify so-called lottery stocks by looking at volume
divided by market cap, and looking for unusually large ratios.
That's not to say all stock market investing is gambling. The researchers say about 15% of
stock market volume in the U.S. is associated with gambling, a percentage that runs as high as
30% in the stock markets of China and Thailand.
Offshore oil has already started to show
signs of emerging from last year's crisis, as costs have been slashed since the previous
downturn of 2015-2016. Deepwater oil breakevens have dropped to below those of U.S. shale
supply, making deepwater one of the cheapest new sources of oil supply globally, Rystad Energy
said last year.
In its new report this week, the energy research firm expects 592 offshore project
commitments between 2021 and 2025, up from 355 projects in the 2016-2020 period and up from the
478 project commitments in the period 2011 to 2015.
Over the next five years, deepwater is set to show the most impressive growth in the number
of commitments, with the number of projects rising to 181 from 106 in 2016-2020 and 115 in the
five years before that, Rystad Energy has estimated.
"The search for large new fields in deep and remote waters became much more economically
viable after dayrates for drilling rigs and offshore supply vessels fell in the wake of the oil
price crash in 2014 and 2015. This offers significant support for companies interested in
deepwater," said Rajiv Chandrasekhar, energy service analyst at Rystad Energy.
"... Many of these new companies made outrageous, and often fraudulent, claims about their business ventures for the purpose of raising capital and boosting share prices. ..."
"... However, in the midst of the "mania," things like valuation, revenue, or even viable business models didn't matter. It was the "Fear Of Missing Out," which sucked investors into the fray without regard for the underlying risk. ..."
"... Sir Issac Newton, the brilliant mathematician, was an early investor in South Sea Corporation. Newton quickly made a lot of money and recognized the early stages of a speculative mania. Knowing that it would eventually end badly, he liquidated his stake at a large profit. ..."
"... However, after he exited, South Sea stock experienced one of the most legendary rises in history. As the bubble kept inflating, Newton allowed his emotions to overtake his previous logic and he jumped back into the shares. Unfortunately, it was near the peak. ..."
"... The story of Newton's losses in the South Sea Bubble has become one of the most famous in popular finance literature. While surveying his losses, Newton allegedly said that he could "calculate the motions of the heavenly bodies, but not the madness of people." ..."
"... Yes, this time is different. "Like all bubbles, it ends when the money runs out." – Andy Kessler ..."
I have previously discussed the importance of understanding how "physics" plays a crucial role in the stock market. As Sir Issac
Newton once discovered, "what goes up, must come down."
Andy Kessler, via the Wall Street
Journa l, recently discussed a similar point with respect to the momentum in stock prices. To wit:
"Does this sound familiar: Smart guy owns stock in March at $200, sells it in June at around $600, but then buys it back in
July and August for between $900 and $1,000. By September it's back at $200. Ouch. Tesla this year? Yahoo in 2000? Nope. That
was Sir Isaac Newton getting pulled into the great momentum trade of the South Sea Co., which cratered 300 years ago this month.
He lost the equivalent of more than $3 million today. Newton, whose second law of motion is about the momentum of a body equaling
the force acting on it, didn't know that works for stocks too."
To understand what happened to the South Sea Corporation, you need a bit of history.
The South Sea History
In 1720, in return for a loan of Ł7 million to finance the war against France, the House of Lords passed the South Sea Bill, which
allowed the South Sea Company a monopoly in trade with South America.
England was already a financial disaster and was struggling to finance its war with France. As debts mounted, England needed a
solution to stay afloat. The scheme was that in exchange for exclusive trading rights, the South Sea Company would underwrite the
English National Debt. At that time, the debt stood at Ł30 million and carried a 5% interest coupon from the Government. The South
Sea company converted the Government debt into its own shares.
They would collect the interest from the Government and then pass it on to their shareholders.
Interesting Absurdities
At the time, England was in the midst of rampant market speculation. As soon as the South Sea Company concluded its deal with
Parliament, the shares surged to more than 10 times their value. As South Sea Company shares bubbled up to incredible new heights,
numerous other joint-stock companies IPO'd to take advantage of the booming investor demand for speculative investments.
Many of these new companies made outrageous, and often fraudulent, claims about their business ventures for the purpose of
raising capital and boosting share prices. Here are some examples of these companies' business proposals (History House, 1997):
Supplying the town of Deal with fresh water.
Trading in hair.
Assuring of seamen's wages.
Importing pitch and tar, and other naval stores, from North Britain and America.
Insuring of horses.
Improving the art of making soap.
Improving gardens.
The insuring and increasing children's fortunes.
A wheel for perpetual motion.
Importing walnut-trees from Virginia.
The making of rape-oil.
Paying pensions to widows and others, at a small discount.
Making iron with pit coal.
Transmutation of quicksilver into a malleable fine metal.
For carrying on an undertaking of great advantage; but nobody to know what it is.
A Speculative Mania
However, in the midst of the "mania," things like valuation, revenue, or even viable business models didn't matter. It was
the "Fear Of Missing Out," which sucked investors into the fray without regard for the underlying risk.
Though South Sea Company shares were skyrocketing, the company's profitability was mediocre at best, despite abundant promises
of future growth by company directors.
The eventual selloff in Company shares was exacerbated by a previous plan of lending investors money to buy its shares. This "margin
loan," meant that many shareholders had to sell their shares to cover the plan's first installment of payments.
As South Sea Company and other "bubble " company share prices imploded, speculators who had purchased shares on credit went bankrupt.
The popping of the South Sea Bubble then resulted in a contagion that spread across Europe.
Newton's Folly
Sir Issac Newton, the brilliant mathematician, was an early investor in South Sea Corporation. Newton quickly made a lot of
money and recognized the early stages of a speculative mania. Knowing that it would eventually end badly, he liquidated his stake
at a large profit.
However, after he exited, South Sea stock experienced one of the most legendary rises in history. As the bubble kept inflating,
Newton allowed his emotions to overtake his previous logic and he jumped back into the shares. Unfortunately, it was near the peak.
It is noteworthy that once Newton decided to go back into South Sea stock, he moved essentially all his financial assets into
it. In general, Newton was intimately familiar with commodities and finance. As Master of the Mint, his post required him to make
many decisions that depended on market prices and conditions. The story of Newton's losses in the South Sea Bubble has become
one of the most famous in popular finance literature. While surveying his losses, Newton allegedly said that he could "calculate
the motions of the heavenly bodies, but not the madness of people."
Throughout financial history, markets have evolved from one speculative "bubble," to bust, to the next with each one being believed
"it was different this time." The slides below are from a presentation I made to a large mutual fund company. What we some common
denominators between all previous bubbles and now.
The table below shows a listing of assets classes that have experienced bubbles throughout history, with the ones related to the
current environment highlighted in yellow. It is not hard to see the similarities between today and the previous market bubbles in
history. Investors are currently chasing "new technology" stocks from Zoom to Tesla, piling into speculative call options, and piling
into leverage. What could possibly go wrong?
Oh, by the way, the slides above are from a 2008 presentation just one month before the Lehman crisis. The point here is that
speculative cycles are always the same.
The Speculative Cycle
Charles Kindleberger suggested that speculative manias typically commence with a "displacement" which excites speculative interest.
The displacement may come from either an entirely new object of investment (IPO) or from increased profitability of established investments.
The speculation is then reinforced by a "positive feedback" loop from rising prices. which ultimately induces "inexperienced investors"
to enter the market. As the positive feedback loop continues, and the "euphoria" increases, retail investors then begin to "leverage"
their risk in the market as "rationality" weakens.
The full cycle is shown below.
During the course of the mania, speculation becomes more diffused and spreads to different asset classes. New companies are floated
to take advantage of the euphoria, and investors leverage their gains using derivatives, stock loans, and leveraged instruments.
As the mania leads to complacency, fraud and manipulation enter the market place. Eventually, the market crashes and speculators
are wiped out. The Government and Regulators react by passing new laws and legislations to ensure the previous events never happen
again.
The Latest Mania
Let's go back to Andy for a moment:
"When bull markets get going, investors come out of the woodwork to pile in. These momentum investors -- I call them momos
-- figure if a stock is going up, it will keep going up. But usually, there is some source of hot air inflating stocks: either
a structural anomaly that fools investors into thinking ever-rising stock prices are real or a source of capital that buys, buys,
buys -- proverbial 'dumb money.' Think of it as a giant fireplace bellows, an accordion-like contraption that pumps in fresh oxygen
to keep flames growing." – Andy Kessler
We have seen these manias repeated throughout history.
In 1929 you could buy stocks with as little as a 5% down payment
The 1960s and '70s had the Nifty Fifty bubble.
In 1987 it was a rising dollar, portfolio insurance, and major investments by the Japanese into U.S. real estate.
In 2000, it was the new paradigm of the internet and the influx of new online trading firms like E*Trade creating liquidity
issues in Nasdaq stocks. Additionally, record numbers of companies were being brought public by Wall Street to fill investor demand.
In 2008, subprime mortgages, low interest rates, and lax lending policies, combined with a litany of derivative products inflated
massive bubbles in debt instruments.
In 2020?
What about today? Look back at the chart of the South Sea Company above. Now, the one below. See any similarities. Yes, that's
Tesla. However, you can't solely blame the Federal Reserve as noted by Andy:
"Most simply blame the Federal Reserve -- especially today, with its zero-interest-rate policy -- for pumping the hot air that
gets the momos going. Fair enough, but that's only part of the story. Long market runs have always allured investors who figure
they're smart to jump in, even if it's late.
Everyone forgets the adage, 'Don't mistake brains for a bull market.'"
As stated, while no two financial manias are ever alike, the end results are always the same. Are there any similarities in today's
market? You decide.
"From SPACs, or special purpose acquisition companies, which are modern-day blind pools that often don't end well. Today's
momos also chase stock splits, which mean nothing for a company's actual value. Same for a new listing in indexes like the S&P
500. Isaac Newton could explain the math." – Andy Kessler
You get the idea. But one of the tell-tale indications is the speculative chase of "zombie" companies which are only still alive
primarily due to the Federal Reserve's interventions.
Fixing The Cause Of The Crash
Historically, all market crashes have been the result of things unrelated to valuation levels. Issues such as liquidity, government
actions, monetary policy mistakes, recessions, or inflationary spikes are the culprits that trigger the "reversion in sentiment."
Importantly, the "bubbles" and "busts" are never the same. I previously quoted Bob Bronson on this point:
"It can be most reasonably assumed that markets are efficient enough that every bubble is significantly different than the
previous one. A new bubble will always be different from the previous one(s). Such is since investors will only bid prices to
extreme overvaluation levels if they are sure it is not repeating what led to the previous bubbles. Comparing the current extreme
overvaluation to the dotcom is intellectually silly.
I would argue that when comparisons to previous bubbles become most popular, it's a reliable timing marker of the top in a
current bubble. As an analogy, no matter how thoroughly a fatal car crash is studied, there will still be other fatal car crashes.
Such is true even if we avoid all previous accident-causing mistakes."
Comparing the current market to any previous period in the market is rather pointless. The current market is not like 1995, 1999,
or 2007? Valuations, economics, drivers, etc. are all different from cycle to the next.
Most importantly, however, the financial markets always adapt to the cause of the previous "fatal crash." Unfortunately, that
adaptation won't prevent the next one.
Yes, this time is different. "Like all bubbles, it ends when the money runs out." – Andy Kessler
Top 10 Holdings AS OF 12/31/2020; 47.15% of Total Portfolio
10 Year Treasury Note Future Mar 211 2.37%
Federal National Mortgage Association 2.5% 03/11/2051 6.76%
Federal National Mortgage Association 2.5% 02/11/2051 5.93%
Federal National Mortgage Association 2% 03/11/2051 5.41%
Pimco Fds 5.38%
Federal National Mortgage Association 3% 2.97%
FTSE Bursa Malaysia KLCI Future Mar 21 2.60%
Federal National Mortgage Association 2% 02/11/2051 2.18%
CSMC TRUST 3.32183% 1.86%
Fin Fut Us Ultra 30yr Cbt 03/22/21 1.69%
7706 holdings as of 12/31/2020
In one of his latest Flows and Liquidity reports, JPM quant Nick Panigirtzoglou writes that as we approach quarter-end, the
equity rebalancing flow question is resurfacing in client conversations. As we notes, "the equity rally and the bond sell-off
during the current quarter is naturally creating a pending rebalancing flow for multi-asset investors away from equities into
bonds for pension funds and balanced mutual funds. How much of equity/bond rebalancing flow should we expect into current
quarter-end?"
To answer this question, the Greek strategist applies a familiar framework and looks at the four key multi-asset investors that
have either fixed allocation targets or tend to exhibit strong mean reversion in their asset allocation.
These
are balanced mutual funds, such as 60:40 funds, US defined benefit pension plans, Norges Bank, i.e. the Norwegian oil fund, and
the Japanese government pension plan, GPIF.
For those curious about the details, below is a more detailed summary of the considerations behind the four key investor classes
ahead of month and quarter-end.
1. Balanced mutual funds including 60:40 funds
,
a
close to $7.5tr AUM universe globally, tend to rebalance over 1-2 months or so. The lesson from last Nov/Dec is that balanced
mutual funds exhibit flexibility and they do not necessarily rebalance every single month.
During
the previous quarter, they appear to have postponed rebalancing for Nov-end or Dec-end and to have waited until January to
de-risk/rebalance.
JPM believes that funds de-risked in January, as a result of the tumble in balanced MFs equity
beta...
.. and since it would have been too soon to rebalance again in February, the quant believes that they have likely postponed any
pending rebalancing to March. Assuming they were fully rebalanced at the end of January, which is a reasonable hypothesis given
the reduction in their betas in January and by taking into account the performance of global equities and bonds since then,
JPMorgan
estimates
around $107bn of equity selling by balanced mutual funds globally
into the end of
March in order to revert to their 60:40 target allocation.
lay_arrow
HankMFRearden
PREMIUM
18 hours ago
Reconcile this with previous post about off the hook equity inflows. Would not passive mostly be
rebalancing by targeted direction of new flows vs. selling of existing positions, particulalry in tech
which has declined?
Americans aren't spending but saving, by paying down debt at an enormous rate, the nightmare
of Keynesians the world over.
They are unleashing trillions in new spending but cutting back, in the stimulus bill,
support for actual Americans whose lives they've ruined with lockdowns and public health
terrorism.
They have held interest rates at or below zero for so long that when the market makes the
slightest move to go somewhere else, it precipitates massive market dislocation in fundamental
markets.
We're no longer talking about the sub-prime mortgage market or Turkish corporate
debt loads . We're talking about massive short bets against the U.S. 10 year Treasury
Note.
Eventually reality always reasserts itself. The central banks are running out of maneuvering
space before he entire system collapses. Maybe that's what they want.
Maybe they think they can maintain their narrative of competence long enough to shift the
blame to incompetent governments who have incurred the wrath of their people through inhuman
COVID-19 lockdowns and endless psychological torture.
I don't know at this point. But I can tell you that debt first extends and then destroys all
illusions about who is and who isn't truly solvent.
And over the past few weeks it's clear there are an increasing number of people who command
real amounts of money who don't buy the narratives the central banks are selling.
* * *
play_arrow
Hickory Dickory Dock 21 hours ago
Inflation expectations are rising because of fiscal and monetary stimulus and the
"re-opening" of the economy.
Those rising inflation expectations cause nominal interest rates to rise.
If nominal interest rates rise more than inflation rises, real interest rates rise.
Rising real interest rates cause stocks, bonds and gold/silver to fall.
Falling 'markets' cause the Fed to step in and save the day by capping nominal interest
rates.
Capped nominal interest rates cause real rates of interest to fall (assuming no change in
inflation rates).
Falling real rates of interest mean higher gold and silver prices.
conraddobler 21 hours ago (Edited)
Interest rates were near 15% in 1979, what did gold and silver do back then?
Hickory Dickory Dock 21 hours ago
Incorrect. Real interest rates were below zero in 1979-1980.
Real rates are interest rates (just not nominal interest rates).
hisnamewas 7 hours ago
I assume by "real" you mean an imaginary number called the "inflation" which they can set
arbitrarily low by choosing what is included in the calculation.
Hickory Dickory Dock 17 hours ago
Since real interest rates are calculated as being equal to nominal interest rates minus
the rate of inflation, understating inflation (whether intentionally or simply through
mis-measurement) will have the effect of overstating real interest rates, not understating
them. E.g., if the nominal interest rate is 10% and the inflation rate is 7%, the real
interest rate is 3%. However, if the inflation rate is understated in this example as being
4% instead of 7%, the real interest rate (10% nominal interest rate minus 4% inflation rate)
will appear as 6% rather than 3% (thus overstating the real inflation rate).
I do believe that the inflation data on Shadowstats is more accurate than the CPI or other
government-supplied figures, which are heavily gamed.
I believe it's only a matter of time before yield curve control will be implemented. Keep
in mind it may not be called that, but the net effect will be to suppress longer term
interest rates. Assuming the policy is effective at doing that, you can expect gold and
silver to resume their bull runs, virtually overnight.
George Bayou 21 hours ago remove link
It is obvious what the Fed is doing, they want to devalue the dollar so the gov't can
continue to service the debt. YCC will keep the debt serviceable and devalues the dollar at
the same time. The Fed is on board with any spending the democrats can dream up now because
they know the dollar will be devalued in the future. That is the only way they can get out of
this mess.
The problem with devauling the dollar is it will transfer real wealth to the wealthy
elites in the process. That is something that the democrats fail to tell their base.
itstippy 22 hours ago remove link
Today's Central Bankers never stop jawboning. They think it's their job to somehow
"justify" the way they support banks and the financial sector at the expense of the working
and middle classes. They're no longer economists, but just more politicians.
Central Banker: "Please stop yawning when I'm talking."
Real Economist: "I'm not yawning, I'm trying to say something."
dead hobo 22 hours ago
Long yields have about 3/4% to rise to reach recent historical levels. The world didn't
end a couple of years ago at these rates. It won't end now. No YCC for you.
zorrosgato 19 hours ago
Since September 21,1981 the yield on the US 10yr treasury has been falling. A 40 year
descent to where we are at today, at times easing off from the fall but seemingly never to
take back over 3%. If the powerful bond market and/or the Fed decided that inflation, yields
or interest rates were either too high or too low they most likely wouldn't have waited until
today to fix the problem. A day when insurmountable debt has pretty much taken that option
out of the equation. Lets not forget, as always, no market goes straight down or straight
up.
WASHINGTON (Reuters) - U.S. Treasury Secretary Janet Yellen on Friday said higher long-term
Treasury debt yields were a sign market participants were anticipating a stronger recovery, not
of increased inflation concerns.
"I don't see that the markets are expecting inflation to rise above the 2% inflation
objective that the Fed has as an average inflation rate over the longer run," Yellen said in a
PBS Newshour interview.
She added the United States needs faster job growth than seen during February, but can reach
full employment by next year with President Joe Biden's $1.9 trillion stimulus plan in
place.
Bing nips at Google's heels again. Here's why it doesn't matter.
Tim Beyers
(TMFMileHigh)
Updated: Apr 6, 2017 at 11:29AM
Published: Sep 21, 2010 at 12:00AM
Author Bio
According to the
latest data from comScore,
Google
's
(Nasdaq:
GOOG)
share of the search market fell four-tenths of a percentage point in August just as Bing partners
Microsoft
(Nasdaq:
MSFT)
and
Yahoo!
(Nasdaq:
YHOO)
gained share. Thus, the headline: Google is shrinking.
Except that it isn't
true. Let's take a closer look at Google's average search market share for the first and second quarters of 2010, and then
compare the findings with the average revenue growth of the top three search contenders:
Interactive chart showing the daily 10 year treasury yield back to 1962. The 10 year
treasury is the benchmark used to decide mortgage rates across the U.S. and is the most liquid
and widely traded bond in the world. The current 10 year treasury yield as of March 04, 2021 is
1.54% .
Both major parties work according the the scheme of a pyramidal control. To control a
company A, you need to get majority of voting shares. Which belong to company B that owns,
say, 60%. In turn, 60% or shares of B belongs to C which controls A while having 60% x 60% =
36% of capital. After adding D, E etc., you can get away with the following: you start with
actual majority of shares, and the company prospers. Time to realize gains. But that would
deprive you of control. Thus you organize company B and sell 40% of its shares. Control
preserved. Wash and repeat.
In a similar spirit, a narrow circle can control a major party. Of course, the rules are
different and more hidden. On the bottom level, the equivalent of B controlling A, it was
observed that rational arguments are boring, and the wide masses have hard time following
them and following what (itself controlled) B advocates. So you invent easy to remember
[expletive deleted] like "Obama birth's certificate", "Russian collusion" etc. An energetic
group with group solidarity needs its tribal spirit and shibboleths.
The Democratic Party civil war between the 'progressive anti-war socialist' and 'neocon
Wall Street beltway' wings. It will go on for at least two years
TBT or not TBT 1 hour ago
Oh hogwash. The minute Obama took over from Bush Cindy Sheehan and the rest disappeared
from the news. There was no real push back within the Dem electorate against the foreign wars
because they all support the Democrat War on America above all. They only pretend to give a
rip about some backward misogynist theocratic craphole people when Republicans are in
office.
King of Kalifornia 1 hour ago
It's been going on for years. The socialists keep falling for it, and the neoliberals (in
the mold of their heroes, Reagan and Thatcher) have forced their compliance.
I worry that people cannot survive this. Real, warm blooded, caring, loving people can be
broken by this. And that's what makes me angry. Because this is unnecessary. The money to
deliver a decent society exists.
All that we need to make the lives of the vast majority of people in this country is a real
understanding of economics, of money, of how it interacts with tax, and how we can use that for
the common good.
But no political party seems to get that as yet. And until they do, this unnecessary
suffering will continue. And that makes me very angry. Pointless pain is what we're enduring.
And all for the sake of accepting that money is not a constraint on our potential, and never
will be.
Let me have a go.
If prosperity and wealth can be created by printing more money, why there is still poverty
in the world?
After all, isn't every country equipped with a central bank that can print as much money as
they want?
Real wealth is not denominated in dollars, only in what those dollars can buy. Devaluing
the dollar doesn't hurt the wealthy, most of their wealth is in the form of equity and real
assets, not dollars.
The average person's wealth is measured mostly in his future labor, how much he is going to
earn. He will earn less because the Fed devalues his labor through its manipulation of the
dollar. He will see this in the rising cost of living without an increase in his pay. Sure
perhaps the value of labor will at some point catch up to the devalued dollar, but in the
interim he will earn less and will never catch up to what he would have earned otherwise.
It doesn't hurt the wealthy, it hurts the middle class, and will for years to come.
Your macroeconomic ignorance is duly noted, featuring as it does the usual "commodity
money" and mercantilist shibboleths.
MMT describes fiat monetary operations which have been in effect since the Nixon
shock and the abandonment of Bretton Woods almost 50 years ago . Do catch up.
honest question, wouldn't MMT (in a hypothetical universe run by committed MMTers) in
the UK likely will produce vastly different results than MMT in relatively autarkic
economics like the USA or Russia?
The UK relies on imports to one degree or another for virtually every physical good
necessary for a first-world living standard (food -- even basic foodstuffs like wheat,
medicine, spare parts, petrol, apparel, even steel, etc).
While the UK's economy tilts to exporting services education, finance, media,
medicinal/technological intellectual property, tourism, etc.
Would a weaker UK pound encourage more service exports? Or merely increase inflation,
particularly for the bottom 50%?
Because MMT analysts tend to be mostly US or Australian, the applicability of it to
smaller, more open economies has not, I think, had the attention thats needed (although to
be fair, Richard Murphy has done quite a lot of writing on this). While the UK is a large
economy, its also very open (although increasingly less so, thanks to Brexit). So it
clearly has much less room to manoeuvre in terms of monetary or fiscal policy than a more
autarkical nation. Its not just with MMT and inflation – things like Keynesian
multipliers tend to be lower in more open economies as the benefits of fiscal expansion get
exported out. The Labour party under Corbyn did put together some very interesting and well
thought through MMT-influenced policies, but of course that all got thrown out with
Corbyn.
As Yves has pointed out before, the UK has a particular problem in that it has little
spare physical capacity in its economy to take advantage of a weaker currency. In the past,
it has been unable to increase output when the pound has been weaker. So a weakening pound
is likely to be more inflationary than in many other economies.
I think that in a general sense, MMT makes sense in all economies in a Covid scenario of
a massive drop in output thanks to a black swan event. As Murphy points out, you just need
to shove the cash into the economy through monetary means and forget about having to repay
it. Inflation just isn't a problem in those circumstances, and it has the benefit of
maintaining productive capacity within the economy. But in more 'normal' times, MMT needs
to be applied with far more care in an economy like the UK than in a US or China or Russia
or EU.
Kind of wondering here what would happen if all the poor and unemployed/welfare
recipients and even the precarious middle class also decided to offshore their money. Why
not? Say in every country; say it became a global movement. The neoliberal nightmare should
inform us all. Just because a small country doesn't have spare capacity or idle resources
is not really a contraindication for MMT. It is more a factor of having an intrinsic
imbalance due to decades if not centuries of grift and graft by those in a position to help
themselves. And it creates confused politics. As you mentioned above – the Tories in
the UK seem to have also usurped the opposition. Well, to my thinking, that is exactly what
Trump did. And it is almost a crazy hope of "If you can't beat them, join them." And just
exactly where does that leave a functional economy? My first image is a junkyard.
First, apropos the applicability of Modern Money Theory to relatively open economies
like that of the U.K., see the discussion of the prerequisites for monetary sovereignty as
outlined by Robert Hockett and Aaron James in their 2020 book, Money for Nothing .
In addition to the well-known requirements (nation must issue its own currency; currency
not pegged to metal or any other currency; no borrowing in foreign currencies), Hockett and
James add others, including "limited trade dependence in essential goods such as food or
energy sources, in order to mitigate foreign exchange and inflation risk ." (274)
Second, apropos the applicability of MMT to smaller economies, I am pleased to note that
Fanny Pigeaud and Ndongo Samba Sylla's 2018 book, L'Arme Invisible de la
Françafrique: Une Histoire du Franc CFA , has at last been published in English
as Africa's Last Colonial Currency: The CFA Franc Story . (Your search engine will
take you either to the
publisher or to an internet behemoth where you can order it.)
Pigeaud and Sylla's book is a history and analysis of the political economy of the CFA
zone: the countries of central and west Africa which were French colonies and which
continue to use a common currency imposed on them by the French imperialists in 1945.
This book is, in my estimation, the best book we have so far in applying the insights of
Modern Money Theory to non-monetarily sovereign economies. You have to love any book that
starts out by translating Hyman Minsky's most famous aphorism into French: Tout un
chacun peut creér de la monnaie: le problème est de la faire
accepter.
"limited trade dependence in essential goods such as food or energy sources, in order
to mitigate foreign exchange and inflation risk ."
Again, we/they have choices based on resource constraints. But, as usual, they are
political. Most of these choices seem impossible now, but remember Victory Gardens ?
Alas, such things are not looked upon favourably by Big Ag and the supermarket chains, but
my depression-era grandparents grew most of their own food for their very large (by our
standards) families. Maternal side, farmers -- my mother, born 1923, said that she never
even knew there was a depression until she read about it later in high school. Grandpa paid
his property taxes by driving snowplow for the county in the winter. Father's side -- my
father, born 1922, grew up in a village (5-bedroom two story house built by his father, a
shoemaker, and friends/relatives/contractors) on a biggish, maybe 1-2 acre? lot, which was
part of a grant to the family for Civil War service. Grandma still had apple, peach, cherry
and walnut trees, raspberry and currant bushes when I knew her, and had grown beans,
tomatoes, potatoes and all that stuff before the 7 kids got married. Obviously, the kids
did a lot of the work, too. Sewing room -- made most of the clothes for family, Dad says
the kids' diapers were made of sugar sacks.
IOW, this is not rocket science. We did this sort of thing for millions of years,
omitting the last 200 or so, and can very likely do it again. People explored the whole
round world, and conquered a lot of it, without electricity or the internal combustion
engine. We're not all gonna die!
Unless we as a species continue to act on maximizing shareholder value rather than
surviving.
I think that you might be onto something here. I suspect that the lives of our
grandchildren as they grow older will resemble the lives of our grandparents from your
description. Of course that may mean a lot off decentralization from out of big cities but
it can be done – especially if there is no other choice. And it's not like in the US
that there is not the land to do this with.
It is an excellent article, with one small exception, the words, "I accept that creating
money this way is inflationary."
Contrary to popular wisdom, inflation is not caused by money creation . All
inflations are caused by shortages , most often shortages of food or energy.
That includes hyperinflations. Consider, for one, the Zimbabwe hyperinflation. The
government took farmland from farmers and gave it to non-farmers. The inevitable food
shortages caused inflation. The government's "money-printing" was merely the wrongheaded
response to the inflation, not the cause.
In fact, the hyperinflation could have been cured by more money creation, had that money
been used to cure the food shortage, by purchasing food from abroad and distributing it, or
by teaching the non-farmers how to farm.
In the past year, the U.S. has spent an astounding $4 trillion, and soon it will spend
another $2 trillion, Yet, there will be no inflation so long as there are no shortages of
food, oil, or labor.
Bottom line: Scarcity, not money creation, causes inflation.
In the US, as in the UK, planned inequality and (managed) unequal access to the benefits
of the money system are two of the most salient activities of our (US) three government
branches.
So are ye telling me the reason conservatives don't (for example) want to raise the
minimum wage is not because of some economic or monetary reason or law but instead just to
keep people in their place, i.e. preserve the status quo? Amazing! And I guess them
conservatives that "havenot" go along because of that "relative advantage" thing –
they are so fixated on keeping those below in their place that they are blind to the upside
of a more democratic and social monetary policy. Well I'll be. Now I git it!
Then the MMT School are conservatives since they'd use taxation to curb inflation (by
some undisclosed means that does not curb consumption).
But why should price inflation be a problem so long as:
1) It does not exceed income gains for ALL citizens;
2) the means that produce it do not violate equal protection under the law;
and
3) it is not extreme?
The only reason I can think of, and it's a contemptible one, is that large fiat
hoarders* would see their hoards diminish in value in real terms.
*not to disparage those saving for a home, initial capital formation, legitimate
liquidity needs, etc.
One point of inflation is to restrain creditors (rhymes with "predators").
Meanwhile, "printing" money does not initiate inflation. Most inflation–even
hyperinflation–is "cost push," i.e. related to shortages of goods. In Zimbabwe, the
Rhodesian farmers left, and the people to whom Mugabe gave their land were not as
productive. Result: a shortage of food requiring imports (balance of payments problem).
In Weimar Germany, the French army invaded the Ruhr, shutting down Germany's industrial
heartland, making a shortage of goods. They already had a balance of payments problems with
WWI reparations.
it was always thus.
the real Burkean Conservatives behind it all, who yes want to keep everyone in their
place.
as i've lamented many times, it's hard to get a read on who the real Bosses are, since they
don't go on TV and brag, generally(various rightwing billionaires in the last 15 years,
notwithstanding)
C.Wright Mills and Domhoff are the only taxonomists of that cohort that i'm aware of
Diannah Johnstone, perhaps.
Maybe Pepe Escobar when they hide the rum.
otherwise, every attempt i've seen in the last 30 years has had elements of tinfoil and
illuminatii/NWO scattered throughout.
I reckon this is by design, at some level.
whatever there exists a demographic cohort of humanity that is exceedingly wealthy, thinks
it's in charge and mostly really is and that is truly cosmopolitiain citizens of the
world.
their most defining feature is that they pretend real hard not to exist and most of us
little people give them no mind, and pretend right along.
This cohort is not monolithic, nor all powerful they each are as prone to tunnel vision and
stupidity as any of us but they have better connected steering wheels, and cleaner
windshields, and mirrors that work.
One hopes that, like in FDR Times, they will feel threatened enough by the results of their
long term policy preferences to allow a few larger crumbs to fall from the table, so as to
mollify the ravening hordes .ere those hordes notice who the real Hostis Humani Generis
are.
But it looks like they're more likely to double down on the diversionary division of the
Bewildered Herd hence, Cancel Seuss! and Sinema's little antoinette dance .and an hundred
other mostly unimportant things that happened just yesterday to keep us'n's riled up about
the wrong things.
Michael Mackenzie and James Fontanella-Khan in New York Fri, March 5, 2021, 7:00 PM
The veteran value investor John Rogers predicted the US is headed for a repeat of the
"roaring twenties" a century ago that will finally encourage investors to dump tech stocks in
favour of companies more sensitive to the economy. The founder of Ariel Investments told the
Financial Times in an interview that value investing "dinosaurs" like him stood to win as
higher economic growth and rising interest rates took the air out of some of the hottest stocks
of recent years. The US central bank is "overly optimistic that they can keep inflation under
control", he said, and higher bond market interest rates would reduce the value of future
earnings for highly popular growth stocks such as tech companies and for the kinds of
speculative companies coming to market in initial public offerings or via deals with Spacs.
Production jumped in late 2019 but has struggled to maintain a plateau since then as FPSO
start-ups have become sparser while the Campos basin decline continued apace.
Drilling rig numbers offshore increased in 2020 in support of the new FPSOs but land
drilling virtually disappeared.
Rate of decline in the Campos basin, onshore and for small offshore basins have accelerated
decline rates through 2019 and 2020, and all growth is coming from the Santos basin, which
seems to be entering middle age with a rising water cut and the first developments reaching
exhaustion.
Future Projections
Fitting a Verhulst curves to Santos basin production is virtually impossible as it is in
such an early stage of development. An attempted fit resulted in remaining reserves of 22Gb
compared to the APB figure of 11 to 12Gb. The estimate is bound to increase as a number of very
large FPSOs come on line before 2025. Therefore the projection is based on a bottom up on
recent, developing and possible projects that have started up or been announced, using any data
for throughput, reserves etc., that is available and otherwise using usual design practice
(e.g. typical field size for a given design throughput, FPSO availability, ramp-up times,
decline rates, plateau periods).
The Verhulst best fit including annual production through 2019 results in a much thinner
tail than from 2017 because recent figures have been much lower than the fit then. 2020
production was not used in the fit but the value prorated from monthly data through September
shows the declining trend is continuing. The remaining reserves calculated from the fit is only
2Gb compared to 6 to 7 Gb from APB data. Fitting the curve but constraining the reserves to
this numbe produces an unrealistically thick tail. The 2017 gave a better match but more likely
there is another round of developments due that would need a separate curve to match. The first
three of this are currently under development and their expected additional flow over the next
few years matches the prediction from Petrobras – it only shows Petrobras' share of total
equivalent production so the line shown has been prorated to total oil.
I recommend everybody to read it all, but here's the crucial paragraph for the topic being
discussed here:
Foreigners, who took up a great deal of Treasury debt during and after the Global Financial
Crisis of 2008-2009, have stopped buying Treasuries. China, the largest official holder of
US government bonds, isn't motivated to bail America out at the moment.
This Treasury debt buying spree during 2008-2009 is what the American people still call
"the Obama Recovery". In fact, Obama had nothing to do with it: it was China that saved the
USA from collapse in 2008 as it bailed it out.
But now it's different. On the USA is buying USA. The problem here is that we aren't
talking about manufacturing and commodities, but fictitious capital: you know something's
wrong when you have to buy your own debt in order to create a raison d'être for your
own debt's existence.
Bankers rule the world. Corporations are international fiefdoms serving the banks. The
deep state is just the goon squad to steal resources from locals, and to kill any uppity serf
who might have any aspiration for freedom. Trump was for show, so as to turn the guns on
pesky, uppity, and white Americans. I am both dreading and please they hate my side. Biden is
the senile old coot who just signs proclamations. The real advantage to Biden is he doesn't
tweet to stir up the masses. Apparently that was a no, no.
"In this episode of Keiser Report, Max and Stacy look at the 'growing concern that
market-based inflation expectations have become unreliable as indicators,' i.e. the central
banks have destroyed the price signal foundational to free and fair markets. In this
environment, we see Goodhart's Law at work: When a measure becomes a target, it ceases to
be a good measure. Billionaire hedge fund investor Paul Singer says of the 'market
craziness' that there is a 'scarcity of honest profits.'"
From Shadowstats most recent Flash Commentary on 24 Feb:
"Despite Happy Headline Gains in January 2021 Real Retail Sales, Production and
Construction, the Underlying Payroll Employment Numbers Tell the Opposite Story •
First-Quarter 2021 GDP Remains at Risk of Relapsing into Quarterly Contraction •
January 2021 Producer Price Index Monthly Inflation Hit a Record, 10-Year High • U.S.
Dollar Collapse Accelerates."
Shadowstats next Benchmark Commentary will cover "major definitional and accuracy issues
with current Federal Reserve and Federal Government Monetary and Economic data, along with
corrective approaches." Of course, that's one way of saying Here's how the government
lies about the economy and how you can see through them and come close to the truth
.
Would Putin or the Chinese allow their governments to operate in such a manner? IMO,
once the USA began to lie about the basic economic stats it became a failed state and has
been in decline ever since despite all outward appearances. Earlier this week, Strategic-Culture
published an Infographic to answer this question:
"Is the American Dream Still Alive?"
Do note the point of separation between productivity and wages that's been pointed at
now for several decades and how closely it follows Nixon's exit from the Gold Standard.
Passer by @21 and @26, had a thought related to your mention that "the US dollar still
remains 62% of world currency reserves" , or "nearly two thirds of world currency
reserves" . That seems to correspond to the IMF figure of 61.5% from December 2019. The
IMF figure from December 2020, however, is now down to 60.4% .
A few months ago I read that Goldman Sachs had suggested the USD could drop 6% in 2021,
while Citigroup suggested
that it could drop as much as 20%.
Assuming no other changes to reserves, a 6% drop in the USD seems to imply the 60.4%
percentage would become less than 58%. And a 20% drop in the USD seems to imply that US
dollar holdings could fall to around 50% of world currency reserves.
And if it gets to around 50%, does a tipping point, as William Gruff @28 mentioned, kick
in?
On the other hand, other Wall Street strategists think the USD will strengthen in 2021, so
who knows ...
"America's economy has almost doubled in size over the last four decades, but broad
measures of the nation's economic health conceal the unequal distribution of gains. A small
portion of the population has pocketed most of the new wealth, and the coronavirus pandemic
is laying bare the consequences of the unequal distribution of prosperity."
Of course, a significant contributor to the "wealth gap" was the rise in the stock market
fostered by trillions of liquidity injected by the Federal Reserve. As NYT noted:
"The affluent, of course, do tend to own stock, and the median net worth of the richest 10
percent of households rose 13 percent from 2007 to 2016 (the last year for which the Fed has
released data).
Another way to view this issue is by looking at household net worth growth between the top
10% and everyone else.
"Wealth disparities have widened over time. In 1989, the bottom 90 percent of the U.S.
population held 33 percent of all wealth. By 2016, the bottom 90 percent of the population
held only 23 percent of the wealth. The wealth share of the top 1 percent increased from
about 30 percent to about 40 percent over the same period." –
Equitable Growth
Such is more visible when you see that since 2007, the ONLY group has seen an increase in
net worth in the top 10% of the population. Such is also the group that owns 90% of the stock
market as discussed in "How The
Fed Made The Top 10% Richer."
" That is not economic prosperity. It is a distortion of economics."
An Elite Club
Central Bank's globally sought to stoke economic growth by inflating asset prices.
Unfortunately, the consumption of the benefit was only those with savings and discretionary
income to invest.
In other words, the stock market became an "exclusive" club for the elite.
While monetary policy increases the wealth of those that have wealth, the Fed mistakenly
believed the "trickle-down" effect would be enough to stimulate the entire economy.
It hasn't.
The sad reality is that these policies only acted as a transfer of wealth from the middle
class to the wealthy. Such created one of the largest "wealth gaps" in human history.
Via Forbes :
"'The top 10% of the wealth distribution hold a large and growing share of U.S. aggregate
wealth, While the bottom half hold a barely visible share.' Fed economists wrote in a
paper outlining the new data set on inequality. The charts show that 'while the total net
worth of U.S. households has more than quadrupled in nominal terms since 1989, that increase
accrued more to the top than the bottom.'"
A recent report from BCA Research confirms the same showing the increase in wealth of the
top 10% as compared to everyone else.
Lack Of Capital
The current economic expansion is already the longest post-WWII expansion on record. Of
course, that expansion came from artificial interventions rather than stable organic economic
growth. As noted, while the financial markets have soared higher in recent years, it bypassed a
large portion of Americans. Such was NOT because they were afraid to invest, but because they
had NO CAPITAL with which to invest.
The ability to "maintain a certain standard of living" remains problematic for many forcing
them further into debt.
"The debt surge is partly by design. A byproduct of low borrowing costs the Federal
Reserve engineered after the financial crisis to get the economy moving. It has reshaped both
borrowers and lenders. Consumers increasingly need it. Companies increasingly can't sell
their goods without it. And the economy, which counts on consumer spending for more than
two-thirds of GDP, would struggle without a plentiful supply of credit." – WSJ
I often show the "gap" between the "standard of living" and real disposable incomes. In
1990, incomes alone were no longer able to meet the standard of living. Therefore, consumers
turned to debt to fill the "gap."
However, following the "financial crisis," even the combined income and debt levels no
longer filled the gap. Currently, there is almost a $2150 annual deficit facing the average
American. (Note: this deficit accrues every year, which is why consumer credit keeps hitting
new records.)
The Rest Have Debt
The debt-to-income problem keeps individuals from building wealth, and government statistics
obscure the fundamental reality. We discussed this point in detail in the "
Illusion Of Soaring Savings."
" The median net worth of households in the middle 20% of income rose 4% in
inflation-adjusted terms to $81,900 between 1989 and 2016. That is the latest available data.
For households in the top 20%, median net worth more than doubled to $811,860. And for the
top 1%, the increase was 178% to $11,206,000.
The value of assets for all U.S. households increased from 1989 through 2016 by an
inflation-adjusted $58 trillion. A full 33% of that gain -- $19 trillion -- went to the
wealthiest 1%, according to a Journal analysis of Fed data." – WSJ
Of course, if the Fed's actions to inflate asset prices worked, then wealth distribution
would be more even. Importantly, we wouldn't see more than 50% of Americans unable to meet a
$500 emergency.
The single truth of a decade of monetary and fiscal interventions is this:
"The top 10% of the economy has assets, the bottom 90% has the debt."
The Fed Does Have A Choice
The Fed does have a choice that could alter the current wealth inequality dynamic:
Allow capitalism to take root by allowing corporations to fail and restructure. A needed
process after spending a decade leveraging themselves to the hilt, buying back shares, and
massively increasing executive wealth while compressing workers' wages. Or,
Continue to bailout "bad actors" and further forestall the "clearing process" that would
rebalance the economy and allow for increased future organic economic growth.
As the Fed's balance sheet rises past $7-Trillion, they chose to impede the "clearing
process" once again. By not allowing for debt to fail, corporate restructuring, and
"socializing the losses," they removed the risk of speculative practices.
Such has ensured the continuation of "bad behaviors."
Unfortunately, given we have a decade of experience watching the "wealth gap" grow, the next
decade will only see the "gap" worsen.
The obvious question we should be asking is:
"If we are in a booming economy, as supposedly represented by surging asset prices, then
why are Central Banks globally acting to increase financial stimulus for the market?"
The trap the Fed has fallen into is that markets are predicated on ever-cheaper cash being
freely available. Even the faintest threat that the cash might become more expensive or less
available causes shock waves.
Such was seen in late 2018 when the Fed signaled it might increase the pace of normalizing
monetary policy. The markets imploded, and the Fed halted its plan of shrinking its balance
sheet. Then, during the pandemic, the Fed flooded the system with liquidity to halt a market
crash.
Equality In Misery
The reality is the Fed has left unconventional policies in place for so long after the
"Financial Crisis," the markets can no longer function without them. Risk-taking, and the
build-up of financial leverage, have removed any ability to "normalize" monetary policy. At
least not without triggering violent market convulsions.
Given there is too much debt, too much activity predicated on ultra-low interest rates, and
confidence hinging on inflated asset values, the Fed has no choice but to keep pushing
liquidity until something eventually "pops."
Of course, it will be the bottom 90% that absorbs the losses. As noted by Sven Henrich
previously:
"In a world of measured low inflation and weak wage growth easy central bank money creates
vast price inflation in the assets owned by the few making the rich richer, but also enables
the taking on ever higher debt burdens leaving everyone else to foot the ultimate bill."
" That is the measured outcome of the central bank easy money dynamic. After decades, it
has now taken on new obscene forms in the past 10-years with absolutely no end in sight."
For the world's elite, their view of the world is far different than the reality the rest
face.
Of course, this also explains much of the recent election outcomes.
When "capitalism" isn't allowed to work for the "equality" of the whole, the populous will
"vote" themselves "equality in misery."
Lordflin 11 hours ago remove link
The so called market has become nothing more than an open vein... draining the life's
blood of civilization down the maws of lifeless parasites...
They are killing the host...
2banana 11 hours ago
In the era of insanely cheap and easy money, those closest to the money spigot get
insanely wealthy for doing nothing.
Those in the back of the line get $75,000 communications degrees, and 27% credit
cards.
Nothing explodes "wealth inequality" like cheap and easy money.
TreeTopSlick 11 hours ago remove link
The Cantillon Effect in action. Never been so obvious in America than today.
2banana 10 hours ago
Great analogy.
Cantillon's original thesis outlines how rising prices affect different sectors at
different times and suggests that time difference effectively acts as a taxing mechanism. In
other words, the first sectors to receive the newly created money enjoy higher profits as
their pay increases, but general costs are still low. On the other hand, the last sectors in
which prices rise (where there is more economic friction) face higher costs while still
producing at lower prices.
Alice-the-dog 11 hours ago
The "monetary policy that created a feedback loop between the Fed and the elite" isn't a
by product, it's a design feature.
Crow-Magnon 11 hours ago
"If the American people ever allow private banks to control the issue of their money,
first by inflation and then by deflation, the banks and corporations that will grow up around
them (around the banks), will deprive the people of their property until their children will
wake up homeless on the continent their fathers conquered."
Here are the political affiliations of America's 50 richest families
You've both been bamboozled. The richest people in the country may pretend to have
political affiliations, but it's just a distraction. The Capitol Hill Whores are bought off
very cheaply, which is why the wealthy spend their money on both D-whores and R-whores.
It is in the interest of the very wealthy to keep the D/R, left/right, red/blue charade
going because it keeps peoples' anger focused on the paid actors instead of looking for who
is really screwing the country. They've got nothing to worry about as long as they can keep
the unwashed rabble fighting against each other.
Mary Jane 10 hours ago remove link
99% of Americans can't hold that thought in their heads. They can only hold the
left/right, red/blue understanding in their heads. One is their team, just as in Sports, and
their team must win. It doesn't matter that they just shelled out money to the owner of the
stadium, and the franchises, who could care less who won as long as the money keeps coming
in. Very similar, to the bread and circus routines of the Roman Empire's Coliseum, no one
ever looked at the wealth of the Emperor.
Apocalypse2020 8 hours ago
"The super-rich will have to keep up the pretense that national politics might someday
make a difference. Since economic decisions are their prerogative, they will encourage
politicians of both the Left and the Right, to specialize in cultural issues. The aim will be
to keep the minds of the proles elsewhere – to keep the bottom 75 percent of Americans
and the bottom 95 percent of the world's population busy with ethnic and religious
hostilities, and with debates about sexual mores. If the proles can be distracted from their
own despair by media-created pseudo-events the super-rich will have little to fear."
Richard Rorty, 1998
Sound of the Suburbs 7 hours ago remove link
What has happened to inequality?
Pretty much what you would expect really.
Mariner Eccles, FED chair 1934 – 48, observed what the capital accumulation of
neoclassical economics did to the US economy in the 1920s.
"a giant suction pump had by 1929 to 1930 drawn into a few hands an increasing proportion
of currently produced wealth. This served then as capital accumulations. But by taking
purchasing power out of the hands of mass consumers, the savers denied themselves the kind of
effective demand for their products which would justify reinvestment of the capital
accumulation in new plants. In consequence as in a poker game where the chips were
concentrated in fewer and fewer hands, the other fellows could stay in the game only by
borrowing. When the credit ran out, the game stopped"
With the capital accumulation of neoclassical economics wealth concentrates at the
top.
A few people have all the money and everyone else gets by on debt.
Keynes added some redistribution to stop all the wealth concentrating at the top, and
developed nations formed a strong healthy middle class.
The neoliberals removed the redistribution.
With the capital accumulation of neoclassical economics wealth concentrates at the
top.
A few people have all the money and everyone else gets by on debt.
It wasn't even hard.
Let it Go 10 hours ago
Things are really messed up. This gives credence to the idea we might soon be witness to
the first global inflationary depression. As investors shift into assets that do well during
times of inflation, it is possible they may set in motion a self-feeding loop or cycle. More
about this in the following article.
Commodities have seen four supercycles over the past 100 years. The last one peaked in 2008,
after 12 years of expansion.
Last month, two of the biggest banks on Wall Street - JPMorgan Chase
and
Goldman Sachs - joined others predicting a new commodities supercycle as economies reopen
and the risks of the pandemic subside.
The expectation is for a long-term boom spanning oil, metals, and agricultural material
prices. JPMorgan's head of oil and gas, Christyan Malek, recently offered one of the most
bullish forecasts for oil, suggesting international crude prices could rebound to US$100 per
barrel.
Perhaps we need an honest national dialog about declining expectations, rising
inequality, social depression and the failure of the status quo.
Even as the chirpy happy-talk of a
return to normal
floods the airwaves, what
nobody dares acknowledge is that
"normal" for a rising number of Americans is the
social
depression
of
downward mobility and social defeat
.
Downward mobility
is not a new trend--it's
simply accelerating.
As this RAND Corporation report documents, (
Trends
in Income From 1975 to 2018
) $50 trillion in earnings has been transferred to the Financial Aristocracy from the bottom
90% of American households over the past 45 years.
"The $50 trillion transfer of wealth the RAND report documents has occurred entirely
within the American economy, not between it and its trading partners. No, this upward redistribution of income, wealth,
and power wasn't inevitable; it was a choice--a direct result of the trickle-down policies we chose to implement since
1975.
We chose to cut taxes on billionaires and to deregulate the financial industry. We
chose to allow CEOs to manipulate share prices through stock buybacks, and to lavishly reward themselves with the
proceeds. We chose to permit giant corporations, through mergers and acquisitions, to accumulate the vast monopoly power
necessary to dictate both prices charged and wages paid. We chose to erode the minimum wage and the overtime threshold
and the bargaining power of labor. For four decades, we chose to elect political leaders who put the material interests
of the rich and powerful above those of the American people."
The reality is that the
middle class
has been reduced to the sliver just below the
top 5%--if we use the standards of the prosperous 1960s as a baseline.
Downward mobility excels in creating and distributing what I term
social
defeat
:
In my lexicon,
social defeat
is the spectrum of anxiety,
insecurity, chronic stress, fear and powerlessness that accompanies declining financial security and social status.
Downward mobility and social defeat lead to
social
depression
.
Here are the conditions that characterize social depression:
1. High expectations of endlessly rising prosperity instilled as a birthright no longer align with economy reality.
2. Part-time and unemployed people are marginalized, not just financially but socially.
3. Widening income/wealth disparity as those in the top 10% pull away from the bottom 90%.
4. A systemic decline in social/economic mobility as it becomes increasingly difficult to move from dependence on the
state or one's parents to financial independence.
5. A widening disconnect between higher education and employment: a college/university degree no longer guarantees a
stable, good-paying job.
6. A failure in the Status Quo institutions and mainstream media to recognize social depression as a reality.
7. A systemic failure of imagination within state and private-sector institutions on how to address social depression
issues.
8. The abandonment of middle class aspirations: young people no longer aspire to (or cannot afford) consumerist status
symbols such as luxury autos or conventional homeownership.
9. A generational abandonment of marriage, families and independent households as these are no longer affordable to
those with part-time or unstable employment.
10. A loss of hope in the young generations as a result of the above conditions.
The rising tide of collective anger arising from social depression is visible in
many places:
road rage, violent street clashes between groups seething for a fight, the destruction of friendships
for holding "incorrect" ideological views, and so on.
A coarsening of the entire social order is increasingly visible:
The
Age of Rudeness
.
Depressive thoughts (and the emotions they generate) tend to be self-reinforcing, and this is why it's so difficult to
break out of depression once in its grip.
One part of the healing process is to expose the sources of anger that we are
repressing.
As psychiatrist Karen Horney explained in her 1950 masterwork,
Neurosis
and Human Growth: The Struggle Towards Self-Realization
, anger at ourselves sometimes arises from our failure to live
up to the many "shoulds" we've internalized, and the idealized track we've laid out for ourselves and our lives.
The article
The
American Dream Is Killing Us
does a good job of explaining
how our failure to
obtain the expected rewards of "doing all the right things"
(getting a college degree, working hard, etc.) breeds
resentment and despair.
Since we did the "right things," the system "should" deliver the financial rewards
and security we expected.
This systemic failure to deliver the promised rewards is eroding the social contract and
social cohesion. Fewer and fewer people have a stake in the system.
We are increasingly angry at the system, but we reserve some anger for ourselves,
because
the mass-media trumpets how well the economy is doing and how some people are doing extremely well. Naturally, we wonder,
why them and not us? The failure is thus internalized.
One response to this sense that the system no longer works as advertised is to
seek
the relative comfort of echo chambers
--places we can go to hear confirmation that this systemic stagnation is the
opposing ideological camp's fault.
Part of the American Exceptionalism we hear so much about is a can-do optimism:
set
your mind to it and everything is possible.
The failure to prosper as anticipated is generating a range of negative emotions
that are "un-American":
complaining that you didn't get a high-paying secure job despite having a college degree
(or advanced degree) sounds like sour-grapes: the message is you didn't work hard enough, you didn't get the right diploma,
etc.
It can't be the system that's failed, right?
I discuss this in my book
Why
Our Status Quo Failed and Is Beyond Reform
: the top 10% who are benefiting mightily dominate politics and the media,
and their assumption is:
the system is working great for me, so it must be working great
for everyone
. This implicit narrative carries an implicit accusation that any failure is the fault of the individual,
not the system.
The inability to express our despair and anger generates depression. Some people will redouble their efforts, others will
seek to lay the blame on "the other" (some external group) and others will give up.
What
few people will do is look at the sources of systemic injustice and inequality.
Perhaps we need an honest national dialog about declining expectations, rising
inequality and the failure of the status quo
that avoids polarization and the internalization trap (i.e. it's your
own fault you're not well-off).
We need to value honesty above fake happy-talk. Once we can speak honestly, there
will be a foundation for optimism.
Rising yields will likely inject more volatility into financial markets as investors debate
when the Fed will be forced to tighten monetary policy, though that doesn't appear to be
anytime soon.
Fed chair Jerome Powell downplayed concerns this week about potentially higher inflation and
signaled that the central bank sees no need to alter its ultralow rate policies for the
foreseeable future. The Fed projects that inflation will remain at or below the central bank's
2% target through 2023.
Despite conventional thinking that rising long-term rates are bad for stocks, historical
data show that the broad S&P 500 has actually posted strong returns.
The S&P 500 has averaged an annualized total return of 13% and increased 81% of the time
during rising rate periods (13 out of 16), according to data from Truist Advisory Services.
Buffet repurchased its own stock. Which means he does not see attractive investments. But his
advice as for searching for yield and moving to junk bonds is a valid one.
Insurance represents the largest of Berkshire Hathaway's four "family jewel" businesses.
Though unlike other insurance companies, Berkshire takes a more equity-heavy approach when
investing its insurance float.
According to Buffett, Berkshire's insurance fleet has more capital deployed than any of its
competitors thanks to the financial strength of the operation and the "huge cash flow"
generated by the non-insurance businesses.
This combination allows Berkshire's insurance operation to "safely follow an equity-heavy
investment strategy," something that's "not feasible for the overwhelming majority of
insurers," Buffett wrote. For regulatory and credit-rating reasons, a lot of insurers have to
focus on bonds.
He noted that some insurers and bond investors "may try to juice the pathetic returns now
available by shifting their purchases to obligations backed by shaky borrowers." In other
words, they may allocate more of the portfolios to financial instruments like leveraged loans
and high-yield bonds, aka junk bonds.
"Risky loans, however, are not the answer to inadequate interest rates," he added. "Three
decades ago, the once-mighty savings and loan industry destroyed itself, partly by ignoring
that maxim."
Poofing money into existence has serous consequences: Eventual Economic Depression:
Here is my prediction (it is actually very positive ultimately).
1. Stock market is way, way, way too high for the underlying profitability of companies
and underlying demand (capacity to spend/budget/money in the pocket) from consumers.
2. FAATMAN companies' valuations are way to high. FAATMAN = Facebook, Amazon, Alphabet
(google), Tesla, Microsoft, Apple and Netflix. But this can be fixed. Keep reading!
3. I am expecting a Titanic level Market slide within 0-3 years. Down 70%. Great
Depression level. But much faster due to electronic age we live in.
4. I will go in with both feet with ALL my cash into the stock market at that time. My
jump-in level is 70% down from peak.
5. Interest rates tell you 90% of the story. This low of rates means DEMAND is very, very
weak compared to capacity (I refinanced my 15 year fixed rate mortgage at 2.2% APR). Which
means that average Joe does not have sufficient income to borrow and spend. Yes capacity to
produce in our beautiful god given economy is huge and ever expanding. That part is
correct!
6. Capacity of the economy is stupendously high due to extreme automation. Again, this is
the good part. Of course. Thanks to the IT guys like me.
7. Federal Reserve cannot do much at this point. Federal Reserve would be pushing on a
string and they know it.
8. One way to balance capacity and demand in our economy is through UBI (Universal Basic
Income). Otherwise known as John Maynard Keynes' helicopter cash or Clifford H. Douglas'
social credit.
9. If we don't do UBI we will at least need to do continuous stimuluses by the federal
government. Every six months.
10. UBI is better, simpler, more comprehensive, fairer way to stimulate the economy
continuously. I would called it: AUTOMATION DIVDEND. That is what it really is.
11. How long will it take for Americans to realize how economy really works (i.e.,
Keynesian economics). Don't know. But there is hope. Bernie Sanders and the Democrats in
general are not too far from seeing past the scarcity paradigm which conservatives
(Republicans) live in. It took me probably 2000 hours of intensely scouring the web to figure
out what is going on. Reading books and reading all kinds of blogs and comments in blogs to
figure out the truth about our modern credit based economy. By the way in my heart I am a
conservative (Republican). But I cannot vote for them because they (Republicans) are clueless
about how the economy really works.
12. It took elderly dying in the streets in the 30's for FDR to realize we need a social
security program.
13. A future UBI program should be simple in implementation. All who have SSN should get
non-taxable UBI (no exceptions). Babies and Billionaires included. I would start with $500
per month per SSN. This can be implemented very easily through a partnership between the
Social security administration + the Bankers. Very similar to how my mom's social security
benefits are deposited in her Wells Fargo bank account every month seamlessly.
14. Why pay billionaires UBI. Because it is only fair. Money printed is not the same as
money spent. If the billionaire does not spend it. The extra money does not "cost" any
resources from within our economy. Cool. Isn't it.
15. If inflation ensues I would implement a consumption tax (a national sales tax) to tone
down consumption and balance capacity and demand. By the way I would completely eliminate all
federal income taxes including social security taxes. If inflation ensues again raise the
national sales tax to balance capacity and demand. State and local taxes have to stay since
state and local governments can't print money.
16. If something like the above is not done. Capitalism will be destroyed completely. How
ironic, by conservatives themselves because they don't understand (Keynesian) economics.
17. Capitalism was rescued after the great depression by world war II spending, GI bill
spending, Marshall Plan spending, the space program spending, the welfare and food stamp
programs spending, the korean war spending, the vietnam war spending, the Reagan's star wars
defense programs spending and defense budget and other budget items spending in general. If
these "spendings" were not there than capitalism would have collapse by now due to
deflation.
18. Capitalism is too much focused savings and dies of deflation eventually when consumers
cannot borrow anymore!
19. This (Keynesian) economics only works because of automation and availability of
relatively cheap abundant energy supplies which power our machines and our computers.
20. If we ever cannot get cheap energy supplies Well back to few hundred million people on
earth total and scarcity!
In Western society, especially in American society, money equals status. The more money
you have the the more esteemed you are; I don't particularly care to have money except for
some of the nice things I can get like books, but then my ego or sense of self worth is not
tied to money, whereas for too many of the higher classes it is tied to a sense of personal
value; it also means political as well as social power. The wealthiest Americans are treated
like gods in our nation merely because they have wealth.
Having seen middle class customers lording themselves our my fellow employees was an
interesting experience. It convinced me that the money they had made them feel good; it will
take force of some kind to get a more equal and just society that does not depend on raw
wealth for a good life.
Yves here. An ugly trade treaty that included corporate-profit guaranteeing "investor-state
dispute settlement" mechanisms is again getting the bad press it deserves. We mentioned the
1994 Energy Charter Treaty in our 2013-2015 opposition to the TransPacific Partnership and its
Atlantic sister, the TransAtlantic Trade and Investment Partnership because it had become
notorious in Europe for undermining clean energy initiatives.
From a November 2013 post, quoting Public Citizen :
Vattenfal, a Swedish company, is a serial trade pact litigant against Germany. In 2011,
Der Spiegel reported on how it was suing for expected €1 billion plus losses due to
Germany's program to phase out nuclear power:
According to Handelsblatt, Vattenfall has an advantage in seeking compensation because
the company has its headquarters abroad. As a Swedish company, Vattenfall can invoke
investment rules under the Energy Charter Treaty (ECT), which protect foreign investors in
signatory nations from interference in property rights. That includes, according to the
treaty's text, a "fair and equitable treatment" of investors.
The Swedish company has already filed suit once against the German government at the
ICSID. In 2009, Vattenfall sued the federal government over stricter environmental
regulations on its coal-fired power plant in Hamburg-Moorburg, seeking €1.4 billion
plus interest in damages. The parties settled out of court in August 2010.
These treaty terms are designed to erode national sovereignity and establish supra-national
mechanisms to make corporate profits senior to national laws. I'm not making that up. Again
from that 2013 post:
Word has apparently gotten out even to Congressmen who can normally be lulled to sleep
with the invocation of the magic phrase "free trade" that the pending Trans Pacific
Partnership is toxic. This proposed deal among 13 Pacific Rim countries (essentially, an
"everybody but China" pact), is only peripherally about trade, since trade is already
substantially liberalized. Its main aim is to strengthen the rights of intellectual property
holders and investors, undermining US sovereignity, allowing drug companies to raise drug
prices, interfering with basic operation of the Internet, and gutting labor, banking, and
environmental regulations.
It's not really about "trade", but a system of enforceable global governance that is not
designed for modification by those who will live the results.
The only good news about the Energy Charter Treaty, compared to its later versions of
investor-state dispute settlement provisions, is that signatories can withdraw. And that might
actually happen with the Energy Charter Treaty.
By Fabian Flues, an adviser on trade and investment policy at Berlin-based PowerShift,
Cecilia Olivet, project coordinator with the Economic Justice Programme at the Transnational
Institute, and Pia Eberhardt, a researcher and campaigner with the Brussels-based campaign
group Corporate Europe Observatory. Originally published at
openDemocracy
On 4 February the German energy giant RWE announced it was
suing the government of the Netherlands . The crime? Proposing to phase out coal from the
country's electricity mix. The company, which is Europe's biggest emitter of carbon, is
demanding €1.4bn in 'compensation' from the country for loss of potential earnings,
because the Dutch government has banned the burning
of coal for electricity from 2030.
If this sounds unreasonable, then you might be surprised to learn that this kind of legal
action is perfectly normal – and likely to become far more commonplace in the coming
years.
RWE is suing under the Energy Charter Treaty (ECT), a little-known international agreement
signed without much public debate in 1994. The treaty binds more than 50 countries, and allows
foreign investors in the energy sector to sue governments for decisions that might negatively
impact their profits – including climate policies. Governments can be forced to pay huge
sums in compensation if they lose an ECT case.
On Tuesday, Investigate Europe revealed that the EU,
the UK and Switzerland could be forced to pay more than €345bn in ECT lawsuits over
climate action in the coming years. This amount, which is more than twice the EU's annual
budget, represents the total value of the fossil fuel infrastructure that is protected by the
ECT, and was calculated using data gathered by Global Energy Monitor and Change of Oil
International.
With ECT-covered assets worth €141bn (or more than €2,000 per citizen), the UK
– which in 2019 became the first major economy to pass a net zero emissions law –
is the country most vulnerable to future claims.
In 2019 the European Commission called the ECT "outdated" and
"no longer sustainable", and more than 450 climate leaders and scientists and 300
lawmakers from across Europe have called on governments to withdraw from the treaty.
But in response, powerful interests have mobilised to not just defend the treaty, but to
expand it to new signatory states. These interests include the fossil fuels lobby keen to keep
its outsized legal
privileges ; lawyers who make millions arguing ECT cases; and the Brussels-based ECT
Secretariat, which has close ties to both industries and whose survival depends on the treaty's
continuation.
A Bodyguard for Polluters
Supporters of the ECT make a number of controversial claims to prevent countries from
leaving the treaty and persuade new countries to join. But their myths and misinformation are
easily
debunked .
For example, ECT supporters say the treaty attracts foreign investment, including into clean
energy. However, there is no clear evidence that ECT-style agreements do this: a recent
meta-analysis of 74 studies found
that investment agreements' effect on increasing foreign investment "is so small as to be
considered zero".
And while ECT supporters claim the treaty protects renewable investments, in reality it
predominantly protects and prolongs the fossil-fuel dominated status quo. In recent years only
20% of investments protected by the ECT covered clean energy, compared to 56% for coal, oil and
gas.
By protecting the status quo, the ECT acts as a
bodyguard for polluters . As the RWE example shows, when a government decides to phase out
coal or cease oil and gas operations, fossil fuel companies can demand steep compensation via
the ECT. So with no public benefits and clear risks for climate action, why are countries
hesitant to leave the treaty? Two more myths are preventing them from taking action.
Firstly, ECT proponents claim that an ongoing process to 'modernise' the treaty will fix its
flaws. But modernisation has proceeded at a snail's pace since 2017, and is unlikely to succeed
given resistance from powerful ECT members like
Japan , whose companies have used the ECT to take legal action against other governments.
Leaked
reports show that the talks are stalled due to the requirement to take decisions
unanimously.
No signatory state has proposed removing its dangerous corporate courts, which take the form
of arbitration tribunals run by three private lawyers. No state has proposed a clear exemption
for climate action. No ECT member wants to exclude protection of fossil fuels from the
modernised treaty any time soon.
In short: the negotiations around ECT 'modernisation' will not bring the treaty in line with
global climate commitments.
Secondly, ECT supporters claim that leaving the treaty offers no protection against costly
lawsuits. The ECT's sunset clause – which allows investors to sue a country for 20 years
after its withdrawal from the treaty – makes a unilateral ECT exit useless, it is
claimed.
In practice, however, withdrawing from the ECT significantly reduces countries' risk of
being sued and avoids carbon lock-in from new fossil fuel projects. The ECT's sunset clause
only applies to investments made before withdrawal, while those made after are no
longer protected.
At a time when the majority of new energy investment is still in fossil fuels, not
renewables, this is important. The sooner countries leave, the fewer new dirty investments will
fall under the ECT and be 'locked-in' by its legal status.
Italy took the necessary step of withdrawing from the ECT in 2016. Going forward, if
multiple countries decide to
withdraw together – say, the EU bloc, supported by allies such as the UK or
Switzerland – they can further weaken the sunset clause. Countries that withdraw could
adopt an agreement that excludes claims within their group, before jointly leaving the ECT at
the same time. That would make it difficult for investors from those countries to sue others
from the group.
This week a European-wide petition has been launched so that citizens can
call on their governments to end the ECT madness.
Leaving the outdated, climate-killing ECT is a no-brainer. It is not just good governance,
but the logical step for all who take global warming seriously.
Those "investor-state dispute settlement" mechanisms are nuts and I can see a rush for the
door if one or two countries pull out of the Energy Charter Treaty. There has to be a point
where they realize that the Energy Charter Treaty is not in fact a suicide pact. Good thing
that there is not an equivalent in the medical industry or else healthcare companies would be
suing nations for giving their citizens vaccines on the grounds that it is robbing those
companies of future income from treating them during the present pandemic.
"not an equivalent in the medical industry or else healthcare companies would be suing
nations for giving their citizens vaccines on the grounds that it is robbing those companies
of future income from treating them during the present pandemic"
Are you sure?
They have been given a non-liability clause for side-effects. The EU has ordered more
vaccine in spite of not knowing if the vaccines will stop the transfer of the disease. If
that doesn't sound like an equivalent, what does?
No. that's quite different. The governments under an ISDS type of regime would be required
to buy or to compensate for non-purchases.
Here, they are competing with each other to try to get supplies. The liability waivers are
in a completely different economic category and result from governments being so eager to get
the vaccines that they were released without going through the normal approval process (and
the drug companies as a result having an upper hand in bargaining).
It was the governments themselves who enjoined the pharma companies to rush vaccine
development and who then also rushed the approval process. Thus in this case (and only in
this case) I think that a waiver of liability (maybe with some residual liability for gross
negligence) is entirely appropriate.
The ECT mechanism is a reasonable response to a question: "If a company in good faith
follows a nation's laws and invests money in a long-term, legal project, who should pay for
the stranded costs if the nation decides to change the law to make the project illegal?" This
is about who should pay for stranded assets.
Legislators naturally are looking for someone else to pick up the bill and the "someone
else" is often a foreign company because domestic companies have to much political power to
be messed with and the company shareholders are often local people.
The Canadian gas pipeline to the US gulf coast is an example. More than two billion
dollars were invested, the proper permits were gotten and the pipeline was built- all except
a five mile stretch now held up in the usual creative American litigation machine. So who
should pay for the two billion invested- half of which came from the Alberta provincial
government? Alberta has already filed the arbitration claim and I support their position; if
a country encourages a legal investment and then changes the rules the country can do it- but
the country should pay for the loss.
When American assets are confiscated overseas using the same sort of creative legal
reasoning the US investors are rightly up in arms. I'm specifically not including the
all-to-common cases of fraud and political payoffs by foreign investors. In the cases Yves
cites there are no allegations that the contracts were tainted by fraud.
A well known modern historian has pointed out that if the American abolitionists wanted to
end slavery they should have campaigned to do what the British did- buy all the slaves, set
them free and compensate the owners for the "taking" of the property. In the 1830s the
British spent the money and freed the slaves. In the U.S., on the other hand we had a civil
war, more than half a million young men killed- and the cost of the war was five times what
it would have cost to purchase and free all the slaves. I use this example because there were
clearly both moral and economic issues involved in slavery, just as there are in the fight to
limit air pollution and stop climate change.
Not only is there no free lunch, but there is always a fight about who should pay for the
lunch.
This sets the stage to rethink contracts of all kinds. If the Energy Charter Treaty
(basically contracts to protect vested interests for profits and against liabilities) is
breached by a country simply leaving the organization it makes all those contracts worthless.
And it explains why the TPP and the TAP don't have a get-out clause. I think the question of
stranded assets is being mishandled too. Especially because we will need fossil fuel for many
decades to come. At this point it is a question of what do we sacrifice to protect the
atmosphere? It looks like gasoline-cars and maybe home heating fuel. But not electricity. RWE
AG is a huge generator and provider of electricity. Asia Pacific as well as the EU. So taking
Texas as a good example, what happens to RWE if they are faced with any number of problems
and need to generate electricity fast? Their best backup is oil and natural gas. And it's
gotta be a no-brainer that they are seriously involved with Nordstream-2, and something
similar in eastern Siberia (?), to supply fuel and back-up fuel for their operations. ECT is
an old agreement. TPP is a newer one. Neither one of them are looking at the downside to the
environment. So they should both be rethought and re-construed. Because, for more accurate
consideration, fossil fuels are not so much a stranded asset as an asset that must be
carefully conserved to last us through a long transition period.
Given that industries spend as much effort lobbying for the environmental disasters our
leaders (they paid to get elected) approve I don't think they deserve to earn back the
expense of their investments, let alone the theoretical profit that that stupid, immoral
investment could have generated
I think this sort of situation shows how important it is for governments to be the
investors/owners of critical infrastructure instead of capitalists (paid for by asset taxes,
transaction taxes and MMT).
At this point I can think of no wealthy person who's fortune is not built on the misery of
our grandchildren (Oh no! It's us, now, not our grandkids at the edge of the abyss) and we
need a massive asset tax on top of huge lifestyle changes. An asset free, radically different
life is coming soon for us all whether we choose it or not and putting the decision off is
only making the looming reality worse..
One factor is a change in one of the three large producer's policies. This large producer is
also the only producer that consumes more than it produces and therefore the only one of the
three that favors lower prices. I'm referring to USA, of course.
USA shale (and to a much lesser extent GOM) growth kept a lid on prices. Where would prices
have been 2010-19 without USA adding 7 million BOPD?
USA growth doesn't appear to be headed toward adding 1 million BOPD or more per year in the
future. USA companies are all being pressured to pay dividends. To cover dividends, USA
companies need much higher prices. USA companies aren't forecasting growth like past years.
For the first time ever, the USA government is not making oil production growth, either
domestic or foreign, a priority. I am not making a "political" statement here trying to rile up
the left on the board. Just look at oil prices since the USA election on 11/3. Not a
coincidence. Not likely USA will be intervening anytime soon in the ME to protect oil supplies.
At least not in a big way.
I have no idea how high oil prices will go. I wonder what happens politically in USA with $3
gasoline? $4 ? Are high gasoline prices no longer a political liability? They weren't for Obama
in 2012. But USA was drilling like crazy in 2012. Not sure what happens this time if that
occurs, given clear desire of Biden Administration to discourage USA oil production growth.
Another factor is the Western European producers have told the market recently in a very
straightforward manner that their oil production is past peak. The CEO's of both BP and RDS
have stated this. Total is also transitioning away from oil. Equinor also, it changed its name
to remove the word oil.
Next, even though total worldwide demand will still be below a record, demand growth from
2020 to 2021 worldwide will be big, much bigger than from 2009 to 2010 after GFC. What did
prices do from the depths of GFC to 2011? Compare GFC stimulus to COVID stimulus.
Last, how many paper barrels are traded per physical barrel? With the increase in paper
barrels (I would call them more accurately day trader barrels) volatility in the oil market has
grown. The price went negative big time one day last April. It was purely a day trader
phenomenon.
Everyday you can find headlines that point to a huge transition underway in the world energy
scene.
For example today-
-Exclusive: Equinor considers more US asset sales in global strategy revamp, and
-Ford bets $29B on leading the 'electric vehicle revolution'
There is a huge scramble underway to adapt to the conditions these big companies now see
coming to be over this decade.
In the meantime, I think that oil demand growth will be very strong over the next 18-24
months.
And as the price of gas in the USA goes up in this rebound phase, the great difference in
travel cost/mile between plug-in vehicles (like a Ford mustang) and ICE vehicles will become a
widely known fact. Ford (and the other manufacturers) all know that now, even if they were slow
on the uptake.
This world is going to change rapidly this decade in so many ways. REPLYALIMBIQUATED IGNORED02/15/2021 at 11:34
am
I think a general feeling of optimism that there is light at the end of the Covid 19 tunnel
is helping as well. REPLYSURVIVALIST IGNORED02/15/2021 at 12:23
pm
" For the first time ever, the USA government is not making oil production growth, either
domestic or foreign, a priority."
Great observation. I recall when GWB2 went to KSA to 'kiss the ring' and ask for more oil
production. I wonder how it will play out next time. REPLYHICKORY IGNORED02/15/2021 at 12:33
pm
"" For the first time ever, the USA government is not making oil production growth, either
domestic or foreign, a priority."
Of much greater impact- For the first time ever, the major oil companies are not making oil
production growth, either domestic or foreign, a priority. REPLYSHALLOW SAND IGNORED02/15/2021 at 1:11
pm
The Biden administration is under pressure to see oil prices rise. The green agenda of wind,
solar and EV's is only cost competitive with fossil fuels in two ways: 1) green subsidies; or
2) higher oil prices. Until high oil prices threaten the economy, the Biden administration will
enact policies that gladly see oil prices rise. And with the oil price experience of 2009 to
2014 still relatively fresh in people's minds, the Biden administration is not afraid of $60,
$70, or even $90 oil. They are hoping for it. REPLYHICKORY IGNORED02/15/2021 at 2:13
pm
"$60, $70, or even $90 oil. They are hoping for it."
As are the people working in the oil industry. REPLYSTEPHEN HREN IGNORED02/15/2021 at 4:59
pm
As far as anyone on this board is considered, the higher the price of oil the better. Let's
phase out oil production in the US over the next three decades and keep the price high the
entire time so the producers make money and people are incentivized to switch to less polluting
EVs. It'll be like the TRC for the whole country but heading towards a bottleneck. Auction
drilling rights so only the best wells get drilled. Keep restricting drilling in a phased
manner, enact a gradually lower cap on the number of wells that can be drilled until it goes to
zero in twenty years and then maintain these stripper wells until they are empty. REPLYPAULO IGNORED02/15/2021 at 6:33
pm
Can you imagine any US party that would actually dare to promote a higher cost for gasoline?
Personally, I think there should be a big carbon tax and fuel tax surcharge imposed to fix
infrastructure, but whatever.
Confession: I am not anti oil. My son works in the Cdn industry. I just think people drive
more than they should and that energy should be priced higher. Win win. LLOYD IGNORED02/16/2021 at 3:55
pm
So $90 oil is good for:
-Saudi
-Democrats
-Shallow
-Tesla
-Renewables
PAOIL-
I disagree that high oil prices are needed to make green energy competitive, because oil is
already very expensive energy, which is why it is rarely used to generate electricity. Wind and
solar compete against coal, nuclear and gas, not oil.
Oil shines as a way to store energy in a moving vehicle and power internal combustion
engines. As such, it really competes with batteries, not with the rest of the energy market at
all. And batteries still have a tiny impact on oil markets.
So higher oil prices might be useful for the EVs, but not particularly useful for wind and
solar. But in reality, the EV market is suffering from chronic battery shortages as
manufacturers struggle to build factories fast enough to meet 20% or more annual demand growth.
The oil price really isn't an issue, and raising oil prices wouldn't help.
If Biden's goal was to make EVs more competitive, the government has an easy way to raise
oil prices, which is to raise taxes at the pump. This would be more or less neutral to the oil
price from the producer point of view. It would just encourage exports and discourage imports,
improving America's balance of payments. But it hasn't worked in Europe, where taxes are over
60% of the price at the pump. The most effective way to promote EVs is subsidizing the purchase
price of the vehicle. That has been very effective.
Hoping that the American consumer will keep oil demand up internationally no longer makes
sense, as America's relative economic importance has been falling since 1945. I'm not sure what
the previous administration was trying to accomplish by talking down the price. REPLYJEFF IGNORED02/16/2021 at 5:13
am
"But it hasn't worked in Europe, where taxes are over 60% of the price at the pump. "
I have driven a Toyota Corolla on an 4 week US trip.
With an engine for the US market – you can't buy this modell in Europe. It was very
steady going – and thirsty. At least for european thinking, we used 7-8 litres / 100 km
by mostly driving country roads in cruise control at the given speed (didn't wanted to deal
with US police). Slow for my feeling, I'm driving faster in Germany.
And use only round about 6 litres with a car of similar size, which is a bit faster than
this Corolla – with this lazy slow driving I would use below 5 litres with my car (and
get a lot of flashing).
Jeff –
That was a little unclear on my part. I meant high gasoline prices haven't gotten people to
buy, EVs, but direct subsidies seem to work.
It's also worth mentioning that $120 oil didn't really dent consumption much, and certainly
didn't inspire many to buy EVs.
In my opinion liquid fuel is cheap. I mean I think that consumers aren't willing to make
significant changes in behavior even if prices increase significantly. S IGNORED02/17/2021 at 3:05
am
Alimbiquated, as an European in a well-to-do country, the matter of car buying is somewhat
more complicated than just gasoline price. E.g. fully electric car availibily, their price,
distances that need to be travelled (range anxiety in other words) are still important. Hybrid
cars are also rather expensive. Here it seems that these two car groups are selling better and
better, public charging points are increasing etc so we will see what happens. As I have a full
electric car I got relatively cheaply (still a bit of ouch ) I think I will not get a petroleum
or diesel car ever J HOUSMAN IGNORED02/18/2021 at 4:08
pm
"The green agenda of wind, solar and EV's is only cost competitive with fossil fuels in two
way" Three ways, actually. The third is when we finally start to realize the actual cost of
destroying the environment by burning fossil fuels REPLYMATT MUSHALIK IGNORED02/15/2021 at 10:01
pm
Global crude oil may have peaked 2018-19 before Covid
A dozen workers that are members of the Safe union are threatening to down tools at the
Mongstad terminal from midnight on Monday if talks with the industry body aimed at breaking an
impasse over a 2020 wage settlement with Equinor fail.
Other fields that could be impacted include Kvitebjorn, Visund, Byrding, Fram and
Valemon, with gas output exports from the Troll area also in danger of being hit.REPLYMATT MUSHALIK IGNORED02/15/2021 at 8:05
am
An interesting scenario showing what happens when demand outstrips supply due to lack of
investment is playing out right now in Oklahoma and Texas. There has been a lack of investment
in the region last year due to the drop in prices, and in Oklahoma, the slowing of investment
has been happening for a few years. The massive cold snap that descended on the region made
spot prices (not the futures price you can look up on Bloomberg etc) rise from $2 an MMBTU, to
$5, to $9, to $300, to $600, all in the course of a week. It is currently higher. The cold
weather has caused shut ins of wells, and processing plants. You have a situation where demand
is increasing but supply cannot keep up. I know this is a micro problem that will resolve
itself as temperatures increase, in the coming weeks, but this could be an example of what oil
prices might see in the near future. There has been a lack of investment for years in large
projects, if demand rebounds quickly as vaccine roll out continues, we will not be able to turn
back on new production fast enough to keep prices from running higher, resulting in some
temporary ridiculous price spikes. REPLYSHALLOW SAND IGNORED02/15/2021 at 10:31
am
I saw this resulted in a lot of wells that have been shut in for 5-10 years being
reactivated. REPLYGREENBUB IGNORED02/15/2021 at 8:25
pm
Shallow, are you affected by the cold snap or power outages? REPLYSHALLOW SAND IGNORED02/16/2021 at 12:41
am
Yes. We have about 10% frozen off. Our pumpers decided what to drain and shut in, and what
to keep on. They are real pros. You can't find better.
Our people are the key. We owe them bigtime. They have been out there in this stuff keeping
the rest from freezing.
We will be good soon, temps will come up.
Keep in mind, with one exception, our pumpers are 50+ years old.
Are there millennials that are going to keep the strippers going 24/7/365?
No. I work in construction biz. 90% of twenty somethings can't work five minutes without
looking at their phones. They are useless. All my buddies have the same complaint. REPLYOVI IGNORED02/15/2021 at 9:49
pm
An interesting clip from this article:
"This isn't a consensus view yet but it's quickly coming. Two heavyweights in the past week
have stepped up and called out the problem.
The first was Goldman Sach's Jeff Currie, who called the bull market in the early 2000s.
"I want to be long oil and hang on for the ride," Currie said in an interview with S&P
Global Platts on Feb. 5, warning "there is a lot of upside here."
"Is it back to $150/b? I don't know as it is a macro repricing we are talking about and
everything needs to reprice."
The other is JPMorgan and Marko Kolanovic, who said Friday that oil and commodities appear
to be entering a supercycle.
"We believe that the new commodity upswing, and in particular oil up cycle, has started,"
the JPMorgan analysts said in their note. "The tide on yields and inflation is turning."
"We believe that the last supercycle peaked in 2008 (after 12 years of expansion), bottomed
in 2020 (after a 12-year contraction) and that we likely entered an upswing phase of a new
commodity supercycle."
Shale driller bases rig lease costs on well performance
Rigs are typically rented out at a daily rate for a period of a few months, which has meant
less money for oilfield service providers as drilling becomes quicker and more efficient. So
Helmerich & Payne Inc. is touting a new pricing model based on overall well performance,
and almost a third of its U.S. rigs are now being leased on that basis, CEO John Lindsay said
Wednesday on an earnings call.
In the Permian Basin of West Texas and New Mexico, home to the busiest shale patch in North
America, operators are now drilling the same number of wells with 180 rigs as they were with
300 rigs a year ago, according to industry data provider Lium.
Yeah okay. That's all great. But what I was looking at was oil production. It's going down,
not up. With these prices oil production should be increasing, not decling. Why is that? After
all, that's really all that matters.
The standard analysis of the interplay between technology and education, developed by
economists like Lawrence Katz and Claudia Goldin..., and David Autor..., suggests that
improvements in technology -- coupled with a college graduation rate that slowed sharply in
the 1980s -- have been principal drivers of the nation's widening income gap, leaving workers
with less education behind.
But critics like Mr. Mishel point out that this theory has important blind spots. For
instance, why have wages for college graduates stagnated over the last decade, even as
innovation continues at a breathtaking pace? ...
Most notably, the skills-and-tech story leaves aside one of the most perplexing and important
dynamics of the last 30 years: the rise of the 1 percent, a tiny sliver of the population
that last year took in almost a dollar out of every $4 generated by the American economy. ...
Mr. Mishel's preferred explanation of inequality's rise is institutional: a shrinking minimum
wage cut into the earnings of the nation's least-skilled workers while falling trade
barriers, deregulation and the decline of labor unions eroded the income of the middle class.
The rise of the top 1 percent, he believes, is mostly about executive pay and the growing
footprint of finance. ...
My view is that both the technology and institutional forces are at work, and the question
is not which of the two explains growing inequality -- they are not mutually exclusive -- but
rather how much each contributed to the growing disparity.
Actually, That started with the passage of the Great Society program of 1965, under
President Johnson. With Great Society, welfare became official, hip, and institutionalize,
with the worst affects being the break-up of black and inner city families, and a doubling to
tripling of the out-of-wedlock birthrate. The lower 95 percenters would be better off under
the policies of Roosevelt, Truman, Eisenhower and Kennedy.
Read the book "The Truly Disadvantaged" about how the break up of inner city families was
not to do with welfare but with the lack of jobs for working class men.
That doesn't mean by the way that I am against better micro-economic design of the social
security system. A citizen's income (c.f. Friedman's negative income tax) is my preferred
welfare system design.
Thomas Sowell has stated that the black family made more progress during the 20 years
before Great Society, as opposed to the 20 years after Great Society. Great Society was the
first opportunity for mommas to afford to have children, without the benefit of a husband and
father to the children, on the taxpayers' dime. Where a birth of a human baby should be a
blessed event, it's be cheapened to included the Dept. of Social Services. In my state, in
the bigger cities, the out-of-wedlock birthrate pre Great Society was 25%, then by 1975 to
current times, the out-of-wedlock birthrate hovers around 75- 80 percent. Black on black
crime went up, number of black victims went up, and drug use increased. I don't disagree with
the point you are trying to make, but it got much worse at the time of the introduction of
Great Society.
When we say yields equalize across assets prices, this is natural over the whole economy,
including government, given sufficient time to equalize. If rates are low, and price to
earnings high, then you can bet your booty that government yields are low also.
And this will be true of any complete, bounded economic model, it is really basic to the
concept of a model. So ask youself who or what has driven yields lower over the 40 year
period and you can win a banana.
Second Best has it completely backwards! The post-New Deal period saw the strongest
economy and most prosperous middle class in American history!
The New Deal came about because the real takers (the wealthy) were taking too much of the
pie. Same thing is happening today! But unfortunately we don't have an FDR around to stick up
for working men and women. We have the pro-corporate party (Dems) and the ultra-pro-corporate
party (GOP).
Second Best is just pretending to be a reactionary for amusement. Unfortunately some
bloggers roll in here occasionally that make roughly the same comments, but are serious. I
keep telling him to use emoticons :<)
I wouldn't put any of the blame for rising inequality on technology. We've been replacing
workers with machinery for over 200 years!
I think the two principle reasons are low tax rates and low union membership.
Contrary to popular belief, there is very little correlation between tax rates and growth.
But there is a very high correlation between low tax rates and increased income
inequality.
Anecdotal but, when you look at typical office-type work, it's hard to not conclude that
technology (computers/software) has killed a ton of middle-income office jobs.
e.g. The typical law firm 10+ years ago might have had 3-4 support staff (secretaries,
paralegals, filing clerks) for every attorney. Today, it's more typical to have 2-3 attorneys
for every support staff employee. Technology allows this.
I easily believe this for the secretaries and clerical staff, but what happened to the
paralegals? Similar trends can/could be observed in other professional fields, but there too,
while the clerical and admin staff was trimmed (and to an extent management hierarchies but
lately it looks like they have come back), subject matter (of the variety that cannot be
automated) work has not been cut a lot. OTOH IT/internet allowed a lot of "commodity" tasks
to be outsourced and offshored.
Is it possible that the (newer generation?) attorneys had to take on paralegal tasks as
part of their job? That would be in line with other fields where in reality a lot of the "low
level" and clerical work that has been ostensibly automated was pushed onto the professional
staff. For example, in many places you are supposed to arrange your own business travel
(hotel, flights), order office materials, do print/copy work etc. that used to be done by now
"automated" clerical staff up to 10-15 years ago. Also when it comes to subject matter work,
a lot of work formerly done by techs and other support staff (who were often hourly) has been
transferred to the professionals (who are generally salaried and "exempt" from overtime pay),
while it is generally swept under the rug in performance evaluations which are about subject
matter achievements (research pubs, delivered product features etc.). On the flip side there
is now probably more nominally professional staff, some of whom (esp. juniors) are loaded
with more tech/support content - but then a lot of them are hired offshore too.
"Both sides agree that the overall weakness of the job market since the turn of the
millennium is a prime culprit. As Professor Katz noted: "The only moments we've had of
broadly shared prosperity have been in tight labor markets.""
This is a problem of demand management policy. Demand can be managed via fiscal, monetary
and/or trade/currency policies.
It's also a problem of politics as Krugman says in that the powerful center-right has
ignored the recent economic evidence, as have the center-right's academic/media message
machine. The center-right has cried wolf over inflation and government deficits all in the
name of preventing policies that would help the economy and tighten labor markets.
Yes labor policy is very important as well. I would support pro-union policies - which
help politically also - and work-sharing programs during downturns which Germany has and
which Dean Baker recommends.
It's also a problem of a long term decline in federal government consumption and gross
investment, and the willingness of macroeconomists to re-define "full employment" as a
situation in which lots and lots of people are in fact unemployed. I don't think private
enterprise alone will ever be capable of generating full employment and tight labor markets,
demand stimulus or no demand stimulus.
When there is insufficient demand yields drop as capacity is idled. Under conditions of
weak demand there is also a drop in investment as new entrepreneurs and established
businesses know the deck is stacked against them.
The low yields are a natural symptom of the deficient demand. If you're looking for who to
blame, there are several likely suspects.
One is a government indifferent to unemployment that caters almost exclusively to the
super rich and the multi national, stateless corporations. The second is a government
indifferent to unemployment that caters almost exclusively to the super rich and the multi
national, stateless corporations. The third is see one and two.
This is the beginnings of fascism, of course. All we need now is a strong authority figure
and a good war.
Fighting to Stop an Entitlement Before It Takes Hold, and Expands by John Harwood
November 12, 2013
"WASHINGTON -- Underlying fierce Republican efforts to stop President Obama's health care
law and the White House drive to save it is a simple historical reality: Once major
entitlement programs get underway, they quickly become embedded in American life. And then
they grow.
That makes the battle over the Affordable Care Act more consequential than most Washington
political fights. "If it's in place for six months, it will be impossible to repeal it or
change it in ways that significantly reduce the benefits," said Robert D. Reischauer, a
Democrat who used to lead the Congressional Budget Office.
Douglas Holtz-Eakin, another former C.B.O. director, reflects the concern of fellow
Republicans in framing the stakes more dramatically. Either the law's health insurance
exchanges "can't cut it," he explained, or "it's Katie, bar the door -- we have an
explosively growing new program."
Ever since President Franklin D. Roosevelt's New Deal during the Great Depression, the
dominant pattern for major entitlements -- the term for government assistance programs open
to all who qualify and not subject to annual budget constraints -- has been durability and
expansion. That is the record Senator Ted Cruz of Texas refers to in warning Republicans not
to allow Americans to become "hooked on the subsidies" -- an argument Mr. Obama sarcastically
recast as, "We've got to stop it before people like it too much."
Congress enacted Social Security in 1935 to provide benefits to retired workers. In 1939,
benefits were extended to their dependents and survivors. Later the program grew to provide
disability coverage, cover self-employed farmers and raise benefit levels.
President Lyndon B. Johnson's Great Society created Medicare and Medicaid in the 1960s to
provide health coverage for the elderly and the poor. They followed the same pattern.
In 1972, Congress extended Medicare eligibility to those under 65 on disability and with
end-stage renal disease. In 2003, Congress passed President George W. Bush's plan to offer
coverage under Medicare for prescription drugs.
Lawmakers initially linked Medicaid coverage to those receiving welfare benefits, but over
time expanded eligibility to other "poverty-related groups" such as pregnant women. In 1997,
President Bill Clinton signed into law the Children's Health Insurance Program, which now
covers eight million children whose families' incomes are too high to qualify for
Medicaid."
...
The old canard, right out of Doonesbury cartoon sociology.
The real issue is discretionary spending. It is gone mainly because of entitlement
crowding. The thirty small hoover states find higher multipliers in discretionary spending.
It is really a critical political issue, and the thirty hoovers will take the ship down
unless they get their discretionaries.
New York, Florida, California and Texas are united against discretionary spending. Both
parties are having internal battles on the issue.
Listen to yellens statement on discretionary spending, she likes it. But listen to the
House, they sequester it. Whyndid you and i just agree, via our representatives, to cut
discretionary spending? Any clue? What did every red blooded american say about the
entitlements? No, no.!!. What did we do? Cut discretionary spending to save entitlements. If
anyone is capable of any news searching on the topic, i suspect you will find much talk about
discretionary vs entitlement spending. We name that, give it an actual semantic.
Crowding.
Right. There wasno sarcasm, i must suddenly be in nutsville. A very good chunk of
articles, right here, required reading was about cuts to discretionary spending and saving
entitlements. Someone is not doing their homework.
What the complaint was about, in the two posts above, was that the discretionary vs
entitlement comment was not framed in some kind of simple minded 'evil tea party'. As if no
actual thought may occur on the blog unless it passes some orwellian, straight jacket,
nonesense. Seriously, crowding out occurs in the budget all the friggin time and mostly has
little to with some bogus script of plastic political analysis.
Entitlement spending does not fund humbug factories. Or PAC's to make sure the pentagon
has a 'strategic objective' to keep the defense corporations (aka troughers) healthy.
Entitlements have had little 'crowding' effect on discretionary spending.
Roughly, discretionary to entitlements used to be about 35:65 in 1999, today it is not
that different, while the war half of discretionary (19% of outlays in 2012) is nearly 60%
too large.
When you take away war and corporate welfare entitlements should be 6 times discretionary
spending.
What matters is discretionary spending enriches a few a lot, while entitlements take care
of many a little.
Well you have an opinion about entitlements and discretionary spending. You like the
former, not the later. We have a name for people like you, Crowders, you crowd out one form
of spending vs another form.
So quit bitching and play the game. We are conducting a mass experiment, lead by
researcher janet yellen. She is going to test your theory by attempting more discretionary
spending. If she screws it up, you win a banana.
Ok, lets review the roosevelt thing.
In 1928, investors believed we were head for a new productivity frontier based on the
efficiency of the mass market. They predicted 4% non-inflationary growth for the horizon.
What we got in 1948 was exactly that, high growth, low inflation, rising productivity.
Between 1928 and 1948, we got social security, progressives taxes, off the gold standard, two
major down turns, twenty million dead from WW2, and the cold war.
Thats a twenty year wait, mostly the result of bad and good government depending on how
one sorts the events. Ok, you all sort it all out, I am moving on.
The rapid transformation of business processes via the capital formation advantages of
robust, diverse, and highly liquid financial markets made it all possible.
Translation: If tax incentives are set to prefer trading equities (relatively low capital
gains tax rate) over holding equities (relatively low dividends tax rate) then capital will
flow to investments with the fast rather than longest duration returns. Fastest returns for
capital will come from mergers and downsizing (i.e, layoffs), outsourcing (narrow
specialization), offshoring of production (labor wage arbitrage), and technology asset
capital expenditure (automation) will be the preferred uses of capital. With the short term
emphasis then training, retention, maintaining internal competency succession, and
operational process improvements will undesirable expenses. The preferences quickly become
self reinforcing as workforce quality devolves and capital rewards itself more and
more.
Economic is a quantitative science and economists should understand the statistics and
test for interactions. Sometimes, the interactive effects can be greater than major
effects.
"
wages for college graduates stagnated over the last decade, even as innovation continues
at
"
Tell me something! Does all of innovation come from humans? From Hunans? From automation?
From computer hardware? Software? Software with a child process? A child process coded by the
parent process? Do you see what is happening?
We are now approaching the moment of singularity. A moment in history, or an epoch of
history? Tell me something else!
Do all boomer-s leave the work force simultaneously? Or during a poorly defined epoch? The
singularity has already begun but will evolve slowly as the present SE, singularity epoch
unfolds. Computer jockey-s first used the word processing feature of computer to code their
human imagination. Later assemblers re-coded human source code, checked source for semantics
and many other features. Supercomputers now work at unbelievable gigaflops. But if human
brain is merely a biological gigaflopper, eventually all its functions will be replaced by
semiconductor brains. But so what?
RM, Reverse Migration! As mechanized innovation replaces Americans, Yankee-s will need to
migrate to developing countries where the singularity process will be slower and with a phase
shift, behind the American Curve.
"The standard analysis of the interplay between technology and education, developed by
economists like Lawrence Katz and Claudia Goldin..., and David Autor..., suggests that
improvements in technology -- coupled with a college graduation rate that slowed sharply in
the 1980s -- have been principal drivers of the nation's widening income gap, leaving workers
with less education behind...."
-- Eduardo Porter
I do not understand this assertion, since what is remarkable about the United States is
that the portion of men and women 25 to 34 and 55 to 64 with college degrees is just about
the same.
July, 2013
College or university degree attainment by age group, 2011
"The standard analysis of the interplay between technology and education, developed by
economists like Lawrence Katz and Claudia Goldin..., and David Autor..., suggests that
improvements in technology -- coupled with a college graduation rate that slowed sharply in
the 1980s -- have been principal drivers of the nation's widening income gap, leaving workers
with less education behind...."
-- Eduardo Porter
I do not understand this assertion, since what is remarkable about the United States is
that the portion of men and women 25 to 34 and 55 to 64 with college degrees is just about
the same.
What is importance to notice about increasing income concentration is how much of an
increase there has been above the top 1% of families. we find the share of income for the top
.1% of families going from 3.41% to 11.33% between 1980 and 2012 for an astonishing gain.
Corruption of government at all levels produced a class of plutocratic rent holders in
finance and other industries able to buy rents. Citi and Solyndra being outstanding examples
on the D side and ADM and the oil companies on the R side.
Abysmal social and economic conditions in African American urban ghettos. These conditions
contribute much to the poor conditions in the schools that serve that population. The kids
who attend school in these neighborhoods are really up against it. Social arrangements that
sort the educated upper middle class into "their"towns by residential pricing and development
patterns tend to limit highly advantageous educational opportunities to their children. In
the big cities the upper middle class either uses influence to obtain places for their
children in desirable public schools or use private schools.
Pressure on wages and employment opportunities for people with low educational attainment
due to the development of more efficient production technologies and low wage competition in
the global trading system.
Forgive my skepticism that a few billion more federal dollars of stimulus will correct
these problems.
Gov. Jerry Brown, whose pronouncements of California's economic recovery have been
criticized by Republicans who point out the state's high poverty rate, said in a radio
interview Wednesday that poverty and the large number of people looking for work are "really
the flip side of California's incredible attractiveness and prosperity."
The Democratic governor's remarks aired the same day the U.S. Census Bureau reported that
23.8 percent of Californians live in poverty under an alternative calculation that includes
the cost of living.
Asked on National Public Radio's "All Things Considered" about two negative indicators --
the state's nation-high poverty rate and the large number of Californians who are unemployed
or marginally employed and looking for work -- Brown said, "Well, that's true, because
California is a magnet.
"People come here from all over in the world, close by from Mexico and Central America and
farther out from Asia and the Middle East. So, California beckons, and people come. And then,
of course, a lot of people who arrive are not that skilled, and they take lower paying jobs.
And that reflects itself in the economic distribution."
----------------
Hmmm. So my claim that the bankruptcy of America is caused by a negative growth black hole in
Sacramento was just admitted as true by the Guv of California. Where is my banana?
Enemies of the
Poor, by Paul Krugman, Commentary, NY Times : Suddenly it's O.K., even mandatory, for
politicians with national ambitions to talk about helping the poor. This is easy for
Democrats, who can go back to being the party of F.D.R. and L.B.J. It's much more difficult
for Republicans, who are having a hard time shaking their reputation for reverse
Robin-Hoodism, for being the party that takes from the poor and gives to the rich.
And the reason that reputation is so hard to shake is that it's justified. It's not much of
an exaggeration to say that right now Republicans are doing all they can to hurt the poor,
and they would have inflicted vast additional harm if they had won the 2012 election.
Moreover, G.O.P. harshness toward the less fortunate isn't just a matter of spite...; it's
deeply rooted in the party's ideology...
Let's start with the recent Republican track record.
The most important current policy development in America is the rollout of the Affordable
Care Act, a k a Obamacare. Most Republican-controlled states are, however, refusing to
implement a key part of the act, the expansion of Medicaid, thereby
denying health coverage to almost five million low-income Americans. And the amazing
thing is that ... the aid through would cost almost nothing; nearly all the costs ... would
be paid by Washington.
Meanwhile, those Republican-controlled states are slashing unemployment benefits,
education financing and more. As I said, it's not much of an exaggeration to say that the
G.O.P. is hurting the poor as much as it can.
What would Republicans have done if they had won the White House in 2012? Much more of the
same. Bear in mind that every
budget the G.O.P. has offered since it took over the House in 2010 involves savage cuts
in Medicaid, food stamps and other antipoverty programs. ...
The point is that a party committed to small government and low taxes on the rich is, more or
less necessarily, a party committed to hurting, not helping, the poor. ...
Republicans weren't always like this. In fact, all of our major antipoverty programs --
Medicaid, food stamps, the earned-income tax credit -- used to have bipartisan support. And
maybe someday moderation will return to the G.O.P.
For now, however, Republicans are in a deep sense enemies of America's poor. And that will
remain true no matter how hard the likes of Paul Ryan and Marco Rubio try to convince us
otherwise.
"We're Broke" is the mantra of the GOP. Yes, the nation with the highest GDP in absolute
terms and a very high per capita level of income is "broke". You see this nonsense from
Republican leaders at the beginning of a film called "We're Not Broke" which is devoted to
the GOP push to have even less taxes on their base - the ultrarich.
US can afford to spend 4 times the part of GDP that Japan and German spend on warmaking.
And a similar amount on crony capital.
US can afford new ships that will not be equipped, star wars missiles that can hit
nothing, and a $1500B fighter program which is failing its tests many of which cannot be
performed because the thing is unreliable.
Republicans are out of touch. The MinWage is so far below Living Wage that the taxpayers
have to subsidize MinWage workers so they can have enough to eat. This is wrong. The system
and the employers are exploiting their labor.
Medicaid and Obamacare are a subsidy to the poor workers who can't afford the costs of
health care and don't have it provided by employers. A workforce that is not healthy is bad
for business: more missed workdays, lower productivity, higher turnover, etc. The single
minded focus on cutting social spending is completely wrong.
The question that is not asked: "What services do people need to be functional in our
modern economy? What mix of employer benefits, government benefits and wage contribution are
required to deliver the services?" For many people, wages are too low to pay for the minimum
basic goods and services. How do we make up the difference? Or do we have people do without
and erode the health and potential economic output? Republicans have a short sighted focus on
cutting spending and investment in the short run and are not considering the long run.
I don't have the source, but I believe our net worth, nationally, is just north of $74
trillion. And we added more than $1.3 trillion to that amount the past 12 months. This is the
figure that deals in assets we know about. Given the loopholes in our tax code that allow the
super rich to essentially hide much of their income, here and overseas, that net worth figure
is certainly below the real number.
So the statement 'we're broke' borders on the ridiculous. Our cash flow statement is less
impressive, but certainly far above adequate. Even here, this is a choice. We could easily
return to balance (although that's historically been a very bad idea) just by fixing our tax
code so it become more progressive. Today's tax code over taxes the middle class in order to
fund tax breaks for the super rich.
Yep. The progressiveness of the tax code stops in its track at about the Top 2%. Right
about the spot where hiding income becomes easy and makes economic sense.
Someday we will figure out how much income never hits tax returns.
My wife and I had over $30,000 of such income last year. Guaranteed the vast majority of the
Top 10% had similar amounts.
However, I really was not talking about W2 income, but rather things like Romney's $20
million IRA. Or hedge fund managers keeping earnings offshore to avoid any taxes (even the
reduced scam they receive) and living by borrowing against their offshore holdings at
ludicrously low interest rates.
Maybe it was collateral damage since they live in the same neighborhoods? Probably though
it was being fought as a limited war and then there was mission creep.
An all out war on poverty would have transformed the economic battlefield in ways that
very few actually wanted.
The other day someone -- I don't remember who or where -- asked an interesting question:
when did it become so common to disparage anyone who hasn't made it big, hasn't gotten rich,
as a "loser"? Well, that's actually a question we can answer, using Google Ngrams, which
track the frequency with which words or phrases are used in books:
[Graph]
Sure enough, the term "losers" has become much more common since the 1960s. And I think
this word usage reflects something real -- a growing contempt for the little people.
This contempt surely isn't limited to Republican politicians. Still, it's striking how
unable they are to show any empathy for people who are just doing their best to make a modest
living. The most famous example, of course, is Mitt Romney, who didn't just disparage 47
percent of the nation; he urged everyone to borrow money from their parents and start a
business. I still think the most revealing example to date was Eric Cantor, who marked Labor
Day by tweeting:
"Today, we celebrate those who have taken a risk, worked hard, built a business and earned
their own success."
But Marco Rubio's latest speech deserves at least honorable mention, for the airy way he
dismissed the idea of raising the minimum wage: "Raising the minimum wage may poll well, but
having a job that pays $10 an hour is not the American dream."
In a sense, he's right: if the American dream means getting rich, then $10 an hour isn't
living that dream. But most people aren't and won't get rich. Raising the minimum wage would
mean higher incomes for around 27 million people; in many cases the gains would amount to
thousands of dollars a year, which is really a lot in low-income families. So what are all
these people, chopped liver? Well, yes, at least in the eyes of the GOP -- or maybe make that
chopped losers.
OK, I know what the answer will be: conservative policies will lead to economic growth,
and that will raise all boats, the way it did in the days of Saint Ronald. Except, you know,
it didn't. Here's the real wage of nonsupervisory workers:
[Real wage of production and nonsupervisory workers * ]
Even if you give Reagan credit for the 1982-9 business cycle expansion, which you
shouldn't, there's no way to claim that his policies led to higher wages for ordinary
workers.
So what is the GOP agenda to help people who aren't going to build businesses and get
rich? There isn't one -- partly because they really can't reconcile any real agenda with
their overall ideology, but also because, deep in their hearts, they consider ordinary people
trying hard to get by a bunch of losers.
Entitlement expansion. See Detroit and Scranton. Coming soon to Chicago.
[ The term "entitlement" is used when a writer wishes to hide the fact the what is being
talked about is Social Security or Medicare or a pension program that a worker has
contributed to for years and years.
As for the supporting of pension funds, all that has to be understood is how terrific
stock and bond markets returns have been these last 30 and more years. Any pension fund
manager who simply bought a mix of stock and bond market indexes would have done splendidly
for workers and there would be no possible problem now. ]
The problem has not typically been fund returns. It has been underfunding of the programs
by employers, on the assumption that magic market alpha will make up the difference (well,
that's the happy spin on it, the truth is most of the funders didn't much care if the
difference was made up or not so long as they got theirs.)
The focus on pension fund investing strategies is an important one, but kept distinct from
funding levels and political battles it's almost meaningless.
This needs to be explained, keeping here to employer contributions by government
employers.
As to the mention of auto companies and pension contributions, there you have a problem in
which employers can estimate a pension fund investment return and contribute according to the
estimate so that a higher estimate will mean lower levels of contributions from employers for
a time. Nonetheless, ordinary investment returns over long periods of time should have left
no pension problem for workers.
Once executives realized the raises they could gain by taking deferred comp. in stock, or
even in guaranteed return special accounts (Jack Welch at GE-14% annual), corporations
couldn't afford much of anything else. Today CEOs make 290 times the average pay of their
employees compensation, so in order to cover those outsized gains and still report good
profits, companies need to trim budgets anywhere and everywhere. Stable, defined benefit
plans, paid for in addition to wages, got tossed and replaced by contribution plans funded by
employees themselves.
For more than 35 years in America it's been a time to strip corporate assets and pick the
pockets of employees and shareholders in order to pay executives their gargantuan
compensation packages.
Thanks to our rigged tax code, ripping off the middle class has become a full time project
of the super rich and their paid help in Congress and academia.
Same thing happened in the public as in the private sector funds. Look at Illinois or New
Jersey or Detroit. Economic miracles or budget crises lead to underfunding, rolling the dice
on investments, and appetites for silver bullet alternative investments that help explain the
massive shift to PE and HF despite their fee structures (and can lead to alternatives
managers the profits they took off the funds to help subvert the DB system). The push to
alpha helps create instability and predation in the markets, goes the theory. But in any
case, underfunding by the public sector leads to blame-shifting onto "those workers making
bad investments" and leads to pernicious politics around retirement security.
Unfortunately the employers (including and perhaps worst public employers) used the
upturns in the market as opportunities to reduce what they paid into the funds (as a way to
fund tax cuts and get re-elected). Then after severe downturns in the market rather than
increase the funding for pensions they argue to take away earned pensions from the workers
(or leave the mess to be fixed by federal government).
Nice set of explanations, which leads me to think in the case of public workers in unions
there should be a yearly accounting by the union of employer pension contributions along with
an allowing for quick contract redress should employer contributions fall short for a given
length of time.
DeDude is not entirely correct. In the following example, the problem was powerful
predators, fraud, and corruption, as there was plenty of money, and plenty of foresight.
Where was Union oversight in this fiasco? Or better yet, fiscal accountability on the part
of the Regents for wrongful termination, theft, breach of fiduciary duty? I don't see much
hope, because social memory is short, human nature is flawed, and dynastic wealth in the
hands of sociopaths seeks to defend its economic position until the population rises up in
revolt. Wash, rinse, repeat.
In Illinois, public employee union leaders were probably paid off to keep silent about
pension underfunding. A couple of union leaders benefited from special legislation that
awarded them a nice pension for one day of substitute teaching. The special pension was in a
well funded plan, not the state teachers' plan. The legislation doesn't spell out the quid
pro quo, but experienced observers connect dots like these. The legislature takes care of
public union officials who take care of them.
Tax cuts for the wealthy, see the entire country. The problem is not excessive spending,
but inadequate revenues. The latter as a consequence of unnecessary and destructive tax cuts
for the rich. We already had the lowest effective tax rate on the wealthy in the developed
world before that.
"...The most important current policy development in America is the rollout of the
Affordable Care Act, a k a Obamacare. Most Republican-controlled states are, however,
refusing to implement a key part of the act, the expansion of Medicaid, thereby denying
health coverage to almost five million low-income Americans..."
[That is sad on two levels. First it is sad that "The most important current policy
development in America is the rollout of the Affordable Care Act" instead of robust policies
for creating job and wage growth. Second then of course it is sad "Most Republican-controlled
states are.. refusing to implement ... the expansion of Medicaid... denying health coverage
to almost five million low-income Americans."
And by sad I mean a sad sorry state of affairs that should have a big effect on the
mid-term elections if we get off our duffs and take this to the voting booths.]
One day someone will point out that the value of a municipal bond or a treasury bond is an
"entitlement", just like the value of a pension, SS or Medicare is an "entitlement".
The coupon clipping class needs constant feeding. And the super rich coupon clippers need
a deep pool of poor people to maintain their comfort. So simple, really.
That has been pointed out many times in the book, This Time is Different where we see
defaults on both entitlements. In fact, one of the biggest topics of the post crash era has
been when the usa would default in its bond entitlements.
Not too accurate. Bonds and pensions are contracts and sort of can be thought of as
entitlements since your benefits can be enforced in court. You are entitled to whatever your
counterparty agreed to (so long as you did your part and your counterparty is solvent). SS
and Medicare are not contracts. Treasury could have twice the funds needed to pay for SS
forever and Congress could decide tomorrow to cut benefits 80%. Same with Medicare. The two
programs on your list that people are probably most likely to think of as entitlements are
probably the least like entitlements. Your counterparty can change the rules on you
tomorrow.
"...The answer, I'm sorry to say, is almost surely no.
First of all, they're deeply committed to the view that efforts to aid the poor are
actually perpetuating poverty, by reducing incentives to work..."
"...But our patchwork, uncoordinated system of antipoverty programs does have the effect of
penalizing efforts by lower-income households to improve their position: the more they earn,
the fewer benefits they can collect. In effect, these households face very high marginal tax
rates. A large fraction, in some cases 80 cents or more, of each additional dollar they earn
is clawed back by the government..."
"...we could reduce the rate at which benefits phase out..."
[Then Krugman slips away from reality to embrace center aisle politics.}
"...Will this ever change? Well, Republicans weren't always like this. In fact, all of our
major antipoverty programs -- Medicaid, food stamps, the earned-income tax credit -- used to
have bipartisan support. And maybe someday moderation will return to the G.O.P..."
{Yeah those were the good old days leading up to financialization for M&A
anticompetitive consolidation of labor market arbitrage, globalization of wages backed by the
abitrage of the exorbitant privilege of US dollar foreign reserves against rising trade
deficits, stagnant wages from both consolidation and globalization, and a rising share of
capital devouted to speculation on equities and derivatives (e.g, commodity futures bets ARE
derivative contracts). Three cheers for center aisle politics. ]
"40 million refugees with no place on this earth to call their home
One for every aimless graduate with nothing else to show for it but loans
And those of us who make a mark using someone else's blood
Our western stain won't wash away, won't vanish in the flood
It sets deeper with each hurricane and tidal wave and war:
We want everything we see and once it's gone we just want more."
Young men without jobs living in the nation with the world's most powerful millitary
establishment will not make the world a better place to live for anyone. Might not even make
it a place to live.
"Republicans weren't always like this. In fact, all of our major antipoverty programs --
Medicaid, food stamps, the earned-income tax credit -- used to have bipartisan support."
I agree and disagree to a point. While the Republican party used to be more moderate, as a
whole, in the past, there was always a conservative wing in the GOP that opposed these
programs.
For example, in 1961, Reagan gave his famous speech on Medicare - declaring that it would
be the end of America as we know it. One day we would be telling stories to our grandchildren
how America used to be the home to free men.
There has always been in element in the GOP to attack safety nets to the point of
hysterical and absurd arguments. Over the years, the conservative wing has grew and become
more vocal.
One of the main differences between liberals and conservatives, is that liberals see our
weak labor markets, poverty, eroding mobility, and increased economic inequality as a market
failure. Conservatives view it as a moral failure.
It seems to me that the somewhat controversial programs of Obamacare and the Federal
Reserve's policies of forward guidance and QE have helped the poor. If Republicans had
successfully blocked them, things would be worse. It's difficult to defend these programs
against critics on the left and right because of the inherent difficulty in defending public
policies given the evidence. It isn't as clear cut as one would like.
Likewise there are the Republicans' austerity policies like the sequester which Obama went
along with.
Maybe I wasn't clear. I think Obamacare and the Fed have helped. I believe fiscal
austerity has hurt. A number of smart people agree with these assessments.
Meaning that reduced income taxation means lower overall government revenues, which means
reduced means to aid the poor by, for instance, adequate HealthCare or the subsidized housing
or paying for postsecondary education that will give them the means to obtain well-paying
jobs.
This sad fact is even more difficult to swallow given that DoD-expenditures have doubled
in the 40 year period ending in 2012. See info-graphic here: http://www.washingtonpost.com/blogs/wonkblog/files/2013/01/defensechart.jpg
. Do we really need all that spending to provide a defense of the nation now that the Cold
War (extant in the 1960s) is over?
The plutocrats erected a statue to Ronnie for having reversed the good that FDR had
wrought by increasing taxation upon them to levels of around 65%, that crept up inevitably to
around 90%.
And, of course, the rich are still benefiting from the beneficial taxation (that peaks out
at 30% in their level of income).
Besides, if the generally recognized Gini Coefficient depicts Income Disparity across all
levels of income, then the US is shown to be the developed country with the worst Income
Fairness of any on earth. (See info-graphic here: http://en.wikipedia.org/wiki/File:Gini_since_WWII.svg
)
MY POINT?
Which means, according to the World Top Incomes Database developed by the Paris School of
Economics? the following: 10% of American households garner about 52% of ALL HOUSEHOLD INCOME
whilst the rest of us 90Percenters scramble after the remaining 48%.
No, the history says that reducing taxes on the rich allows you to borrow and spend,
laying the cost on the middle class. Note, Clinton's tax hike came with budget cuts. Our 2013
tax hike, though meager, results in sequestering.
The problem here is dumbass economists too stupid to come up with any theory of government
that explains supply and demand for government services. So dumbass economists resort to name
calling, blaming their own failure of analysis on the other side. Political scientists are
much worse, all they do is name calling.
{No, the history says that reducing taxes on the rich allows you to borrow and spend,
laying the cost on the middle class.}
Can't imagine where you've concocted this notion from my reply. I posited the premise of
increasing taxes upon our upper-class financial nobility who have reduced 15% of our people
to poverty and serfdom.
{Note, Clinton's tax hike came with budget cuts. Our 2013 tax hike, though meager, results
in sequestering.}
Historical fact of no consequence whatsoever.
The point about raising taxes on the rich is not just about reducing their far to
easily-gained Net Worth. It is to teach that class a lesson about return-on-investment. For
the moment, a level of taxation at only 30% allows them to accumulate vast Net Worth, which
is simply reinvested in interest-bearing accounts for the most part.
Increasing taxation on interest-bearing accounts would induce them to place their savings
in more economy-friendly investments that create jobs. The revenues would also help reduce
deficits and improve government financing of society-friendly policies like a Universal
Public HealthCare Option and Tertiary Education for those who cannot afford it.
These are both common policy rudiments of any modern society in this day and age. Except
the US, of course ...
Moreover, the key point about taxation is this: Whilst an economy should reward
risk-taking, there is no need whatsoever for the pot of Gold at the end of the rainbow to be
unlimited and growing by leaps and bounds because it is too lowly taxed.
Especially not when 15% of fellow Americans are incarcerated below the Poverty Threshold.
That economic fact is unacceptable. And it did not occur because "people are either too
stupid or too lazy".
It occurred because of an inept policy as regards both educational level and our inability
to prevent unskilled work from dislocation abroad.
The Republicans never did care about the poor and are not about to start. The question
that bothers me is when the Democrats will resume working on behalf of the poor.
{The question that bothers me is when the Democrats will resume working on behalf of the
poor.}
Musing about whether that will or will not happen in a blog will certainly not assist in
bringing it about.
Only hard work militating for such an outcome will obtain the necessary results. Which can
only happen if more progressives are voted into the HofR. And it will take a good ten years
of well-considered legislation to right all the wrong that has occurred since the last War on
Poverty in the 1960s.
TORONTO (Reuters) - Hedge funds are turning bullish on oil once again, betting the pandemic
and investors' environmental focus has severely damaged companies' ability to ramp up
production.
Such limitations on supply would push prices to multi-year highs and keep them there for two
years or more, several hedge funds said.
The view is a reversal for hedge funds, which shorted the oil sector in the lead-up to
global shutdowns, landing energy focused hedge funds gains of 26.8% in 2020, according to data
from eVestment. By virtue of their fast-moving strategies, hedge funds are quick to spot new
trends.
... Tawil predicted prices of $70 to $80 a barrel for Brent by the end of 2021 and is
investing long independent oil and gas producers.
... ... ...
Global crude and condensate production was down 8% in December from February 2020, prior to
the pandemic's spread accelerating, according to Rystad Energy.
North America's output was down 9.5% and Europe's production declined just 1% over the same
time period.
U.S. sanctions against Venezuela and declining oilfields in Mexico have kept oil output from
Latin America sluggish.
Jamjen831
wrote:
peachpuff wrote: Barcode scanners and flashlight apps... who installs these? Phones come
with these features already baked in.
I assume some of it is just old stuff people just re-download without thinking. Android
hasn't always had a built in flashlight app (and am I crazy in that the early ones required
root?). And I'm pretty sure that's the same with QR readers. I hadn't realized that Google Lens
was a QR scanner until fairly recently.
Count me in that boat. I just checked my phone and sure enough, Barcode Scanner was there.
I'm guessing it's from 3-4 phones ago and just came along for the ride as Play autoloaded my
apps on the new phones because I haven't used it in ages and ages. daggar Ars
Tribunus Militum
REPLY FEB 8, 2021 2:57 PM
POPULAR
Jamjen831
wrote:
peachpuff wrote: Barcode scanners and flashlight apps... who installs these? Phones come
with these features already baked in.
I assume some of it is just old stuff people just re-download without thinking. Android
hasn't always had a built in flashlight app (and am I crazy in that the early ones required
root?). And I'm pretty sure that's the same with QR readers. I hadn't realized that Google Lens
was a QR scanner until fairly recently.
It's more likely that it's stuff that gets re-downloaded without user interaction. When you
set up a new Android, the phone will often re-download all the apps from the old phone. Unless
you're going through to curate those apps, your 2021 new phone might be getting something
that's gone through a succession of auto-downloads since the mid 2010's. everythingallatonce
Smack-Fu Master, in training
REPLY FEB 8, 2021 2:57 PM
POPULAR
peachpuff
wrote: Barcode scanners and flashlight apps... who installs these? Phones come with these
features already baked in.
I can't really speak for the barcode scanner, but given that a lot of Android phones are
incapable of being updated there is a decent chance a lot of people with much older phones
actually have to install a flashlight app.
Google really needs to do something regarding the malware problem. I'm not going to pretend
to know the answer, but for a company that made $15.23 billion in earnings last quarter and
owns Project Zero you'd think they'd be able to protect a platform they have complete control
over. Jamjen831 Ars
Scholae Palatinae et Subscriptor REPLY FEB 8, 2021 3:02
PM
Dr.Bananas wrote:
peachpuff wrote: Barcode scanners and flashlight apps... who installs these? Phones come
with these features already baked in.
Not all phones. I haven't had an Android phone with a stock barcode scanner ever. Samsung
Galaxy Ace, Galaxy Nexus, Moto G, Nexus 5X, Nokia 3 and my current Sony XZ2 Compact all came
without one. It should be part of the default camera app, but sadly that's not always the
case.
As mentioned above, Google Lens is the defacto QR Scanner (it's part of the camera app). Do
those phones have Lens? I've been on Nexus\Pixel for a long time so not too sure how Google has
pushed that. Xavin Ars
Legatus Legionis et Subscriptor REPLY FEB 8, 2021 3:03
PM
POPULAR
marsilies
wrote: So I use an app called "Barcode Scanner" that's not the malware app. However, the recent
reviews blast it for adware, which I haven't noticed. I think having the exact same name has
caused some people to post negative reviews on the wrong app: https://play.google.com/store/apps/deta
... nt.android
That's correct, it's clean, people are just confused by the same names. The one with the
malware was always a sad copy of the ZXing Team one you linked.
As mentioned above, Google Lens is the defacto QR Scanner (it's part of the camera app). Do
those phones have Lens? I've been on Nexus\Pixel for a long time so not too sure how Google has
pushed that.
You need an internet connection for Lens to scan barcodes. Batmanuel Ars
Tribunus Militum
REPLY FEB 8, 2021 3:12 PM Ancan wrote: I've got a Galaxy S8+ and if there's a built in
barcode scanner I must admit I haven't found out in the years I've had it.
And how many users know they can use an app called "Lens" to scan barcodes?
Does Lens give you technical info about the type of a barcode (aka the Symbology)? Granted,
most people don't have a need to know or care, but I have a job doing work with retail POS
equipment, including hand and flatbed scanners. For my job, it's SUPER helpful sometimes to
have a barcode scanner app that can tell me what type of barcode is being scanned - because
sometimes scanners will scan all the barcodes, *except* this one type of barcode, and then I
gotta find out what kind of barcode it is, so that I can enable that symbology for the scanner
in question (or provide instructions to my customers on how they enable it for their POS).
Or, I can scan the barcode to get the underlying text in the barcode, to compare with our
app's logs, to make sure it's scanning correctly (e.g. not getting truncated or anything like
that).
That's why I have ZXing Team barcode scanner on my phone and recommend it to co-workers.
I assume some of it is just old stuff people just re-download without thinking. Android
hasn't always had a built in flashlight app (and am I crazy in that the early ones required
root?). And I'm pretty sure that's the same with QR readers. I hadn't realized that Google
Lens was a QR scanner until fairly recently.
It isn't just old people, as you admitted yourself practically everyone doesn't
understand all the things their apps can do, especially when that changes over time. A big
part of that problem is the appalling fact that most apps, even the most widely used and
professionally developed, have basically no documentation, and no way of finding out what
their features actually are.
Developers have this fantasy in their heads that they don't document the programs
because it's really hard to keep the documentation in-sync with a changing app, but the
real reason is just a pervasive problem in development culture caused by the race to get
things onto the market, and the convenient lie that developers tell themselves that their
apps are "self documenting", as if everyone has the time or desire to play "app scientist"
and experiment with the app endlessly to find out all its hidden, unobvious features.
@dmccarty: Yeah, the "update or not" decision is tricky for apps. What I do, is turn off
update only for apps that I have no desire for updates too and which shouldn't be doing any
internet activity or only activity to a defined, trusted spot. Any other kind of app,
especially ones that might be subjected to varying network input from undefined sources,
gets updates. Up +21 ( +22 / -1 ) Down 3906 posts | registered 9/15/2009
MikeSafari
Wise, Aged Ars Veteran
REPLY FEB 8, 2021 3:17 PM peachpuff wrote: Barcode scanners and flashlight apps... who
installs these? Phones come with these features already baked in.
I unfortunately didn't have a choice. I bought a Nokia 6.1 a couple of years ago and
installed the official Google Camera app, which has a built-in barcode/QR code reader, but
when Nokia pushed the Android 10 update, it broke the camera app completely. And Nokia's
default camera app does *not* read barcodes or QR codes for some reason. So to read them, I
had to install a third-party app.
Not super thrilled anyway, but thankfully it was not this one.
As mentioned above, Google Lens is the defacto QR Scanner (it's part of the camera app). Do
those phones have Lens? I've been on Nexus\Pixel for a long time so not too sure how Google has
pushed that.
Lens looks like it was initially exclusive to the Pixel 2, and slowly expanded until it became
its own Android app in June 2018: https://en.wikipedia.org/wiki/Google_Lens
So all the phones listed peachpuff came without it, and you'd probably have to have an
Android phone released in the last 2 1/2 years to even have it pre-installed.
Then, as others have noted, one would have to know that Lens can scan barcodes, and if you
have had Android phones for a while, the initial setup and migration may install their old
barcode scanner app anyway.
"... If you're married and your spouse is covered by a workplace-based retirement plan but you're not, you can deduct your full IRA contribution as long as your joint AGI doesn't top $196,000 for 2020. You can take a partial tax deduction if your combined income is between $196,000 and $206,000. ..."
"... Spouses with little or no earned income for 2020 can also make an IRA contribution of up to $6,000 ($7,000 if 50 or older) as long as their spouse has sufficient earned income to cover both contributions. The contribution is tax-deductible as long as your household income doesn't exceed the limits for married couples filing jointly. ..."
There's still time to make a 2020 IRA contribution and lower your tax bill.
by:
Sandra
Block
January 13, 2021
As you get ready to tackle your 2020 tax return, make sure you haven't overlooked one of the best ways to cut your tax bill
and secure your future -- funding a traditional IRA. (There is no upfront tax break for funding a Roth IRA.)
You can actually make an IRA contribution for the 2020 tax year up until the time you file your tax return, which is due April
15, 2021. But why wait? If you have some extra income – say, from a
stimulus
check
– go ahead and deposit it into an IRA account now before you forget. You'll also give the money a little more time
to grow, which you'll appreciate when you retire.
And what about those tax savings? Well, depending on your income, you may be able to deduct your IRA contribution on your 2020
return. To contribute to a traditional IRA, you or your spouse must have earned income from a job. But, otherwise,
you
may be able to deduct contributions
to an IRA even if you or your spouse are covered by another retirement plan at
work. Plus, starting last year, seniors age 70˝ and older with earned income can contribute to a traditional IRA, too.
Here's some more good news: The IRA deduction is an "above the line" adjustment to income, meaning you don't have to itemize
your deductions to claim it. It will reduce your adjusted gross income (AGI) dollar-for-dollar, lowering your tax bill. And
your lower AGI could make you eligible for other tax breaks, which are tied to income limits.
Who Qualifies
If you're single and don't participate in a retirement plan at work, you can make a tax-deductible IRA contribution for 2020
of up to $6,000 ($7,000 if you're 50 or older) regardless of your income. If you're married and your spouse is covered by a
workplace-based retirement plan but you're not, you can deduct your full IRA contribution as long as your joint AGI doesn't
top $196,000 for 2020. You can take a partial tax deduction if your combined income is between $196,000 and $206,000.
But even if you do participate in a retirement plan at work, you can still deduct up to the maximum $6,000 IRA contribution
($7,000 if you're 50 or older) if you're single and your income is $65,000 or less ($104,000 if married filing jointly). And
you can deduct some of your IRA contribution if you're single and your income is between $65,000 and $75,000, or if you're
married and your income is between $104,000 and $124,000.
Spouses with little or no earned income for 2020 can also make an IRA contribution of up to $6,000 ($7,000 if 50 or older) as
long as their spouse has sufficient earned income to cover both contributions. The contribution is tax-deductible as long as
your household income doesn't exceed the limits for married couples filing jointly.
Double Tax Break
Some low- and moderate-income taxpayers get an extra break for contributing to an IRA or other retirement account.
In addition to the usual IRA deduction, you may qualify for a Retirement Savers tax credit of up to $1,000 for contributions
to an IRA or other retirement tax plan. (A tax credit, which reduces your tax bill dollar-for-dollar, is more valuable than a
deduction, which merely reduces the amount of income that is taxed.)
The actual amount of the credit depends on your income. It ranges from 10% to 50% of the first $2,000 contributed to an IRA or
other retirement account. To be eligible, your 2020 income can't exceed $32,500 if you're single; $48,750 if you're the head
of a household with dependents; or $65,000 if you're married filing jointly. The lower your income, the higher the credit. But
you can't claim the Retirement Savers credit if you're under 18, a student, or can be claimed as a dependent on someone else's
tax return.
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Last week, a large number of small-time investors drove up the price of GameStop's (GME)
stock a
historic 1,784 percent . But this was no mere spike in some obscure stock. The stock's
price spiked in part as a result of efforts by "an army of smaller investors who have been
rallying on Reddit and elsewhere online to support GameStop's stock and beat back the
professionals." These professionals were hedge fund managers who had shorted GameStop's stock.
In other words, hedge funders were betting billions that GameStop's stock would go down. But
the price went up instead, meaning hedge funds like Melvin Capital (and Citron Research) took
"a significant loss," possibly totaling
$70 billion.
There surely were plenty of insiders on both sides of this deal. Given the complexity of
various schemes employed by seasoned investors, it seems it is very unlikely that this is just
a simple matter of little Davids taking on Wall Street Goliaths.
But it also looks like that's not all that was going on. Had this only been just another
scheme by some Wall Street insiders against some other Wall Street insiders the story would
probably have ended there.
But that's not what happened. Rather, it appears that, for many of the smaller investors who
were involved, much of this "short squeeze" was conducted for the purposes of throwing a monkey
wrench in the plans of Wall Street hedge funds which exist within the rarified world of
billionaires and their friends.
Pro–Wall Street Fearmongering
The reactions to the event from media pundits and other commentators were telling in that
there was clearly fear and outrage over the fact that business as usual on Wall Street wasn't
being enforced. Predictably, much of the reaction to the Reddit rebellion was to label it a
"fiasco," " insanity
," and something sure to leave a "
trail of destruction ." The important thing was to use words designed to make it all look
like the threat to hedge funds represents some sort of grave threat to the overall economy. Jim
Lebenthal at CNBC, for example,
declared the "short-squeeze fiasco is a threat to the proper functioning of financial
markets."
The fearmongering went beyond even the usual places we hear about financial news. On The
View , for example, Meghan McCain delivered the sort of status quo
–defending bromides we've come to expect from her. She insisted the GameStop affair could
spiral into an economy-killing disaster because
If the stock ends up plunging because of this, because of GameStop and Wall Street loses
billions, at a certain point, it will impact stocks like Apple and Disney and stocks that a
lot of average Americans do invest in, and if that happens, average Americans will end up
losing even more money.
Her comment doesn't rally make any sense, and she doesn't seem to have even a rudimentary
understanding of what happened. But her comment delivered the important point: namely, that
anything that causes volatility in the market could be a disaster for every American household.
Translation: and we should all be very, very afraid if something isn't done to keep these
Reddit people --
whom she compared to the Capitol "insurrectionists" -- under control.
Of course, in a functioning and relatively unhampered market, unusual, unexpected things
happen all the time. Entrepreneurial actors do things the incumbent firms and "experts" hadn't
counted on. This leads to "instability" and big swings in prices. This is actual capitalism,
and it doesn't mean the marketplace isn't functioning properly. In fact, it probably means the
marketplace is dynamic and responsive to consumers and other market participants.
But that's not something Wall Street insiders or their pals in Washington like in the modern
era. Although Wall Streeters love to portray themselves as capitalist captains of industry, the
fact is they have very little interest in real, competitive capitalism.
Rather, we live in the era of "too big to fail" (TBTF), when market freedom means nothing
and preserving the portfolios of powerful Wall Street institutions is what really
matters.
Decades of "Too Big to Fail"
It's based on the idea that Wall Street is just too important to the whole economy, and
Washington must intervene to make sure rich guys on Wall Street stay rich. David Stockman
explains this philosophy:
[It is] the notion that the "threat of systemic risk" and a cascading contagion of losses
form the failure of any big Wall Street institution would be so calamitous that it warranted
an exemption from free market discipline.
This goes back at least to the 1994 Mexican bailout -- which was really a bailout of
investors, not of Mexico -- which solidified the process of normalizing huge transfers of
wealth from taxpayers and dollar holders to the Wall Street elite. By then, the "Greenspan put"
was already in place, with the central bank forever poised to embrace more easy money in
pursuit of propping up stock prices. Then came the bailouts of 2008 and the covd-19 avalanche
of easy money -- all of which lopsidedly benefited Wall Street over the rest of the
economy.
This "exemption from free market discipline" is what Wall Street is all about these days.
The financial sector has become accustomed to enjoying bailouts, easy money, and the resulting
financialization which puts ever greater amounts of the US economy into the hands of Wall
Street money managers. The sector is now built on corporate welfare, not "free markets." No
matter what happens, Wall Street expects the deck to be stacked in its favor.
This is why "volatility" has become a bad word, and "stability" is now the name of the game.
It's why Lebenthal thinks anything out of the ordinary is a threat to the "proper functioning
of financial markets." If some free market innovation and inventiveness actually takes place in
some small corner of the marketplace, well, then we're all expected to get very upset.
That's the way Wall Street likes it. ay_arrow 1
Kayman 8 hours ago
The marketing slogan "Too Big Too Fail" conveniently presumed Wall Street was more
important than the Real Economy. A fatal presumption.
Wall Street is a Parasite, backstopped by the Fed, who, in turn, are backstopped by the
Nation. A crumbling nation, where the Fed strangles lending/savings intermediation, and saves
the blood suckers by bleeding the dying core of America.
wmbz 8 hours ago
"The sector is now built on corporate welfare, not "free markets."
This is NOT a new thing. Corporate welfare has been in play for a long, long time. I am
amazed how long it has taken otherwise "smart" people to grasp this fact.
The only difference is, it is out in the glaring sunlight for all to see. TPTB are damn
proud of it!
junction 7 hours ago (Edited)
Except for the involvement of WallStreetBets in temporarily blocking the hedge fund bear
raid on GameStop using "naked" shorts, it is still business as usual on Wall Street. No one
at the SEC does anything but collect a salary, issue press releases and go to lunch as the
Mafia crime families. . . oops, hedge funds run "bust out" operations on businesses. The
lapdog financial press cheered on the hedge funds as they demolished American businesses. The
same gutter journalists who are not yet linking micro-manager Bezos giving up total control
of Amazon right after his cloud service illegally de-platformed Parler for violation of
bogus. made-up community standards. But then, bigger things are afoot. Bolshevik president
Biden just approved deploying B-1 bomber to Norway for the first time. Nuclear bomb carrying
B-1 bombers. Anything to distract people from how rotten things are.
Cognitive rationalist 7 hours ago
Banking financial sector: private profits for me, public losses for thee
gladitsover 8 hours ago remove link
"..the table is tilted folks. The game is rigged.."
George Carlin
Lokiban 8 hours ago
I think it was all about showing to those unawares how corrupt and rigged Wall street
truly is and they have gotten the message out bigtime.
The only question to be asked is who became the proverbial bagholder when average people saw
their 'Bitcoin-Tulipmania' chance to get out with amazing profits and with that breaking the
promise to continue pumping gme till it hits $1500.
One has always to be carefull if these kind of actions are true populism going against the
controllers or is it controllers playing their hideous games again for a reason, like the
great reset.
Greed has never been a good advisor in these times, easy sheoplemoney. It works all the
time..
COMMENT: Message: Re Reddit "WallStreetBets"
Hi Marty,
Thanks for this blog post but I think they are not trying to make money out of short
squeezing GME really, they are trying to make a point. If you follow some of the posts you
see many stories about how badly people and their families were hurt in 2008 when not a
single banker went to prison. Stories of Fathers losing jobs and houses and descending into
alcoholism in front of their children who now are part of WallStreetBets, others who had to
live off of beans and rice or what Mama could grow in the garden and went hungry etc.
So they are not buying GME to see it rise, though that is fine, they are spending money
"they can afford to lose" to punish the hedge funds that have along with bankers hurt the
little guy repeatedly. These same people IMO have bought off our politicians, removed
regulations like Glass Steagal etc all to reap profits to the top while crushing everyone
else.
Listen in June 2008 I got laid off from Palm, in July I broke my arm ( badly ), in August
some tenants left so I tried to put that property up for sale but in September Lehman fell
and the real estate agent told me the market was OFF that I could not sell and needed to rent
it with no one renting for 5 more months. At the same time in September I had a 100K home
equity line I took out just for emergencies and since I was having one I wanted to use it
– but then Wells Fargo pulled the whole thing.
So there I was Marty, sitting on the couch with a cast from fingers to shoulder watching
the world meltdown on a tiny TV set while on lots of pain killers
I was forced to use my small 401K, and ended up using the whole thing through 9 months of
disability, two surgeries and a job search that did not yield a job until the fall of
2011.
So IMO these arrogant SOB cheating hedge fund guys should pound sand on GME for once because
the casino is rigged, heads they win, tails they win, and the taxpayers lose their jobs,
homes, and pay for their bailouts.
I say give it to 'em.
Off my soapbox
REPLY: I fully understand that. I have fought against these people my whole life. I was
more interested in learning HOW the economy functioned where they were only interested in
guaranteed trades. I guess I was the Leonardo da Vinci of finance. Instead of digging up
bodies to figure out how the anatomy functioned, I searched history and developed a computer
model to try to ascertain what made the world economy tick.
A professor from Princeton where Einstein taught said to me that I reminded him of
Einstein. I was surprised, for I did not see myself as comparable to Einstein in any way. He
then explained that what he meant was my curiosity which moved me to try to figure out what
made it all function. I came to understand what he meant. If you are not CURIOUS and seek out
knowledge, then you will NEVER discover anything new! I was not dealing with the physics of
the world, but the finance. People are attracted by this blog and Socrates for that same
reason. They have that spark of curiosity and seek to also understand what makes it all tick!
We need to teach students to be curious. That is the key to all progress we desperately need
to survive this never-ending battle of authoritarianism v independence and freedom.
I have stated many times that I had discovered the 8.6-year frequency in my research I
conducted at Princeton, University in the Firestone Library. Those were fond memories for it
was an amazing resource back then as was the Royal British Newspaper Library, which I
gathered my FOREX database by sifting through the largest newspaper collection in the
world.
This was the difference between me and the "club" where I tried to understand the movement
of the ages that caused the rise and fall of civilization and therein the economy/markets,
and the "club" which seeks to manipulate everything by sheer force armed with bribes. They
own the Southern District of New York courts, the Second Circuit, and the Department of
Justice along with the SEC and CFTC. Goldman Sachs has even stacked the SEC and CFTC with
their former people. Nobody was prosecuted despite the fact that they were involved in the
looting of capital in Malaysia and Greece. And people have the audacity to claim there was
absolutely no election fraud? There is nothing we can trust that goes on in government
anymore and it will only get far worse as we head into 2032.
I am well aware of the sentiment behind this Reddit trend. My concern is simple. Don't put
it past the "club" to be in there making this seem like a sure bet and then set everyone up
for the big crash. Be careful here going into Feb/March 2021.
Last week, a large number of small-time investors drove up the price of GameStop's (GME)
stock a
historic 1,784 percent . But this was no mere spike in some obscure stock. The stock's
price spiked in part as a result of efforts by "an army of smaller investors who have been
rallying on Reddit and elsewhere online to support GameStop's stock and beat back the
professionals." These professionals were hedge fund managers who had shorted GameStop's stock.
In other words, hedge funders were betting billions that GameStop's stock would go down. But
the price went up instead, meaning hedge funds like Melvin Capital (and Citron Research) took
"a significant loss," possibly totaling
$70 billion.
There surely were plenty of insiders on both sides of this deal. Given the complexity of
various schemes employed by seasoned investors, it seems it is very unlikely that this is just
a simple matter of little Davids taking on Wall Street Goliaths.
But it also looks like that's not all that was going on. Had this only been just another
scheme by some Wall Street insiders against some other Wall Street insiders the story would
probably have ended there.
But that's not what happened. Rather, it appears that, for many of the smaller investors who
were involved, much of this "short squeeze" was conducted for the purposes of throwing a monkey
wrench in the plans of Wall Street hedge funds which exist within the rarified world of
billionaires and their friends.
Pro–Wall Street Fearmongering
The reactions to the event from media pundits and other commentators were telling in that
there was clearly fear and outrage over the fact that business as usual on Wall Street wasn't
being enforced. Predictably, much of the reaction to the Reddit rebellion was to label it a
"fiasco," " insanity
," and something sure to leave a "
trail of destruction ." The important thing was to use words designed to make it all look
like the threat to hedge funds represents some sort of grave threat to the overall economy. Jim
Lebenthal at CNBC, for example,
declared the "short-squeeze fiasco is a threat to the proper functioning of financial
markets."
The fearmongering went beyond even the usual places we hear about financial news. On The
View , for example, Meghan McCain delivered the sort of status quo
–defending bromides we've come to expect from her. She insisted the GameStop affair could
spiral into an economy-killing disaster because
If the stock ends up plunging because of this, because of GameStop and Wall Street loses
billions, at a certain point, it will impact stocks like Apple and Disney and stocks that a
lot of average Americans do invest in, and if that happens, average Americans will end up
losing even more money.
Her comment doesn't rally make any sense, and she doesn't seem to have even a rudimentary
understanding of what happened. But her comment delivered the important point: namely, that
anything that causes volatility in the market could be a disaster for every American household.
Translation: and we should all be very, very afraid if something isn't done to keep these
Reddit people --
whom she compared to the Capitol "insurrectionists" -- under control.
Of course, in a functioning and relatively unhampered market, unusual, unexpected things
happen all the time. Entrepreneurial actors do things the incumbent firms and "experts" hadn't
counted on. This leads to "instability" and big swings in prices. This is actual capitalism,
and it doesn't mean the marketplace isn't functioning properly. In fact, it probably means the
marketplace is dynamic and responsive to consumers and other market participants.
But that's not something Wall Street insiders or their pals in Washington like in the modern
era. Although Wall Streeters love to portray themselves as capitalist captains of industry, the
fact is they have very little interest in real, competitive capitalism.
Rather, we live in the era of "too big to fail" (TBTF), when market freedom means nothing
and preserving the portfolios of powerful Wall Street institutions is what really
matters.
Decades of "Too Big to Fail"
It's based on the idea that Wall Street is just too important to the whole economy, and
Washington must intervene to make sure rich guys on Wall Street stay rich. David Stockman
explains this philosophy:
[It is] the notion that the "threat of systemic risk" and a cascading contagion of losses
form the failure of any big Wall Street institution would be so calamitous that it warranted
an exemption from free market discipline.
This goes back at least to the 1994 Mexican bailout -- which was really a bailout of
investors, not of Mexico -- which solidified the process of normalizing huge transfers of
wealth from taxpayers and dollar holders to the Wall Street elite. By then, the "Greenspan put"
was already in place, with the central bank forever poised to embrace more easy money in
pursuit of propping up stock prices. Then came the bailouts of 2008 and the covd-19 avalanche
of easy money -- all of which lopsidedly benefited Wall Street over the rest of the
economy.
This "exemption from free market discipline" is what Wall Street is all about these days.
The financial sector has become accustomed to enjoying bailouts, easy money, and the resulting
financialization which puts ever greater amounts of the US economy into the hands of Wall
Street money managers. The sector is now built on corporate welfare, not "free markets." No
matter what happens, Wall Street expects the deck to be stacked in its favor.
This is why "volatility" has become a bad word, and "stability" is now the name of the game.
It's why Lebenthal thinks anything out of the ordinary is a threat to the "proper functioning
of financial markets." If some free market innovation and inventiveness actually takes place in
some small corner of the marketplace, well, then we're all expected to get very upset.
That's the way Wall Street likes it. ay_arrow 1
Kayman 8 hours ago
The marketing slogan "Too Big Too Fail" conveniently presumed Wall Street was more
important than the Real Economy. A fatal presumption.
Wall Street is a Parasite, backstopped by the Fed, who, in turn, are backstopped by the
Nation. A crumbling nation, where the Fed strangles lending/savings intermediation, and saves
the blood suckers by bleeding the dying core of America.
wmbz 8 hours ago
"The sector is now built on corporate welfare, not "free markets."
This is NOT a new thing. Corporate welfare has been in play for a long, long time. I am
amazed how long it has taken otherwise "smart" people to grasp this fact.
The only difference is, it is out in the glaring sunlight for all to see. TPTB are damn
proud of it!
junction 7 hours ago (Edited)
Except for the involvement of WallStreetBets in temporarily blocking the hedge fund bear
raid on GameStop using "naked" shorts, it is still business as usual on Wall Street. No one
at the SEC does anything but collect a salary, issue press releases and go to lunch as the
Mafia crime families. . . oops, hedge funds run "bust out" operations on businesses. The
lapdog financial press cheered on the hedge funds as they demolished American businesses. The
same gutter journalists who are not yet linking micro-manager Bezos giving up total control
of Amazon right after his cloud service illegally de-platformed Parler for violation of
bogus. made-up community standards. But then, bigger things are afoot. Bolshevik president
Biden just approved deploying B-1 bomber to Norway for the first time. Nuclear bomb carrying
B-1 bombers. Anything to distract people from how rotten things are.
Cognitive rationalist 7 hours ago
Banking financial sector: private profits for me, public losses for thee
gladitsover 8 hours ago remove link
"..the table is tilted folks. The game is rigged.."
George Carlin
Lokiban 8 hours ago
I think it was all about showing to those unawares how corrupt and rigged Wall street
truly is and they have gotten the message out bigtime.
The only question to be asked is who became the proverbial bagholder when average people saw
their 'Bitcoin-Tulipmania' chance to get out with amazing profits and with that breaking the
promise to continue pumping gme till it hits $1500.
One has always to be carefull if these kind of actions are true populism going against the
controllers or is it controllers playing their hideous games again for a reason, like the
great reset.
Greed has never been a good advisor in these times, easy sheoplemoney. It works all the
time..
After the Trump Justice Department
sued Yale following the results of a 2-year Civil Rights investigation which found
"long-standing and ongoing" race-based discrimination, the Biden DOJ just dismissed the case
without explanation .
... ... ...
The Trump DOJ had argued that the Ivy League university had violated federal civil rights
law for "at least 50 years," by favoring Black and Hispanic students over Whites and Asians,
according to
The Hill .
The legal battle represented one of the Trump administration's moves to challenge
affirmative action programs aimed at increasing diversity on campus, which some conservatives
consider unfair and illegal.
Yale, which staunchly defended its admission practices, praised the DOJ's decision to drop
the case in a statement, saying it was "gratified" by the decision. -
The Hill
"Our admissions process has allowed Yale College to assemble an unparalleled student body,
which is distinguished by its academic excellence and diversity," argued the university. "Yale
has steadfastly maintained that its process complies fully with Supreme Court precedent, and we
are confident that the Justice Department will agree."
The Trump administration notably instituted several measures to prevent universities from
considering race as a factor during admissions, even joining a similar lawsuit against Harvard
University.
There is a massive threat to our capital markets, the free market in general, and fair
dealings overall. And no, it's not China. It's a homegrown threat that everyone has been afraid
to talk about.
Until now.
That fear has now turned into rage.
Hordes of new retail investors are banding together to take on Wall Street. They are not
willing to sit back and watch naked short sellers, funded by big banks, manipulate stocks, harm
companies, and fleece shareholders.
The battle that launched this week over GameStop between retail investors and Wall
Street-backed naked short sellers is the beginning of a war that could change everything.
It's a global problem, but it poses the greatest threat to Canadian capital markets, where
naked short selling -- the process of selling shares you don't own, thereby creating
counterfeit or 'phantom' shares -- survives and remains under the regulatory radar because
Broker-Dealers do not have to report failing trades until they exceed 10 days.
This is an egregious act against capital markets, and it's caused billions of dollars in
damage.
Make no mistake about the enormity of this threat: Both foreign and domestic schemers have
attacked Canada in an effort to bring down the stock prices of its publicly listed
companies.
In Canada alone, hundreds of billions of dollars have been vaporized from pension funds and
regular, everyday Canadians because of this, according to Texas-based lawyer James W.
Christian. Christian and his firm Christian Smith & Jewell LLP are heavy hitters in
litigation related to stock manipulation and have prosecuted over 20 cases involving naked
short selling and spoofing in the last 20 years.
"Hundreds of billions have been stolen from everyday Canadians and Americans and pension
funds alike, and this has jeopardized the integrity of Canada's capital markets and the
integral process of capital creation for entrepreneurs and job creation for the economy,"
Christian told Oilprice.com.
The Dangerous Naked Short-Selling MO
In order to [legally] sell a stock short, traders must first locate and secure a borrow
against the shares they intend to sell. A broker who enters such a trade must have assurance
that his client will make settlement.
While "long" sales mean the seller owns the stock, short sales can be either
"covered" or "naked" . A covered short means that the short seller has
already "borrowed" or has located or arranged to borrow the shares when the short sale is made.
Whereas, a naked short means the short seller is selling shares it doesn't own
and has made no arrangements to buy. The seller cannot cover or "settle" in this instance,
which means they are selling "ghost" or "phantom" shares that simply do not exist without their
action.
When you have the ability to sell an unlimited number of non-existent phantom shares in a
publicly-traded company, you then have the power to destroy and manipulate the share price at
your own will.
And big banks and financial institutions are turning a blind eye to some of the accounts
that routinely participate in these illegal transactions because of the large fees they collect
from them. These institutions are actively facilitating the destruction of shareholder value in
return for short term windfalls in the form of trading fees. They are a major part of the
problem and are complicit in aiding these accounts to create counterfeit shares.
The funds behind this are hyper sophisticated and know all the rules and tricks needed to
exploit the regulators to buy themselves time to cover their short positions. According to
multiple accounts from traders, lawyers, and businesses who have become victims of the worst of
the worst in this game, short-sellers sometimes manage to stay naked for months on end, in
clear violation of even the most relaxed securities laws.
The short-sellers and funds who participate in this manipulation almost always finance
undisclosed "short reports" which they research & prepare in advance, before paying
well-known short-selling groups to publish and market their reports (often without any form of
disclosure) to broad audiences in order to further push the stock down artificially. There's no
doubt that these reports are intended to create maximum fear amongst retail investors and to
push them to sell their shares as quickly as possible.
That is market manipulation. Plain and simple.
Their MO is to short weak, vulnerable companies by putting out negative reports that drive
down their share price as much as possible. This ensures that the shorted company in question
no longer has the ability to obtain financing, putting them at the mercy of the same funds that
were just shorting them. After cratering the shorted company's share price, the funds then
start offering these companies financing usually through convertibles with a warrant attachment
as a hedge (or potential future cover) against their short; and the companies take the offers
because they have no choice left. Rinse and Repeat.
In addition to the foregoing madness, brokers are often complicit in these sorts of crimes
through their booking of client shares as "long" when they are in fact "short". This is where
the practice moves from a regulatory gray area to conduct worthy of prison time.
Naked short selling was officially labeled illegal in the U.S. and Europe after the
2008/2009 financial crisis.
Making it illegal didn't stop it from happening, however, because some of the more creative
traders have discovered convenient gaps between paper and electronic trading systems, and they
have taken advantage of those gaps to short stocks.
Still, it gets even more sinister.
According to Christian, "global working groups" coordinate their attacks on specifically
targeted companies in a "Mafia-like" strategy.
Journalists are paid off, along with social media influencers and third-party research
houses that are funded by what amounts to a conspiracy. Together, they collaborate to spread
lies and negative narratives to destroy a stock.
At its most illegal, there is an insider-trading element that should enrage regulators. The
MO is to infiltrate a company through disgruntled insiders or lawyers close to the company.
These sources are used to obtain insider information that is then leaked to damage the
company.
Often, these illegal transactions involve paying off "informants", journalists, influencers,
and "researchers" are difficult to trace because they are made from offshore accounts that are
shut down once the deed is done.
Likewise, the "shorts" disguised as longs can be difficult to trace when the perpetrators
have direct market access to trading systems. These trades are usually undetected until the
trades fail or miss settlement. At that point, the account will move the position to another
broker-dealer and start the process all over again.
The collusion widens when brokers and financial institutions become complicit in
purposefully mislabeling "shorts" as "longs", sweeping the illegal transactions under the rug
and off of regulatory radar.
"Spoofing" and "layering" have also become pervasive techniques to avoid regulator
attention. Spoofing, as the name suggests, involves short sellers creating fake selling
pressure on their targeted stocks to drive prices lower. They accomplish this by submitting
fake offerings in "layers" at different prices to create a mirage.
Finally, these bad actors manage to skirt the settlement system, which is supposed to
"clear" on what is called a T+2 basis . That
means that any failed trades must be bought or dealt with within 3 days. In other words, if you
buy on Monday (your "T" or transaction day), it has to be settled by Wednesday.
Unfortunately, Canadian regulators have a hard time keeping up with this system, and failed
trades are often left outstanding for much longer periods than T+2. These failing trades are
constantly being traded to reset the settlement clock and move the failing trade to the back of
the line. The failures of a centralized system
According to Christian, it can be T+12 days before a failed trade is even brought to the
attention of the IIROC (the Investment Industry Regulatory Organization of Canada)
Prime Brokers and Banks are Complicit
This is one of Wall Street's biggest profit center and fines levied against them are merely
a minor cost of doing business.
Some banks are getting rich off of these naked short sellers. The profits off this kind of
lending are tantalizing, indeed. Brokers are lending stocks they don't own for massive profit
and sizable bonuses.
This layer of what many have now called a "criminal organization" is the toughest for
regulators to deal with, regardless of the illegal nature of these activities.
Prime brokers lend cash account shares that are absolutely not allowed to be lent. They lend
them to short-sellers in order to facilitate them in settling their naked shorts.
It's not that the regulators are in the dark on this. They are, in fact, handing out fines,
left and right -- both for illegal lending and for mismarking "shorts" and "longs" to evade
regulatory scrutiny. The problem is that these fines pale in comparison to the profits earned
through these activities.
And banks in Canada in particular are basically writing the rules themselves, recently
making it easier (and legal) to lend out cash account shares.
Nor do law firms have clean hands. They help short sellers bankrupt targeted companies
through court proceedings, a process that eventually leads to the disappearance of evidence of
naked shorts on the bank books.
"How much has been stolen through this fraudulent system globally is anyone's guess," says
Christian, "but the number begins with a 'T' (trillions)."
The list of fines for enabling and engaging in manipulative activity that destroys
companies' stock prices may seem to carry big numbers from the retail investor's perspective,
but they are not even close to being significant enough to deter such actions:
- The SEC charged Citigroup's principal U.S. broker-deal subsidiary in 2011 with misleading
investors about a $1 billion collateralized debt obligation (CDO) tied to the U.S. housing
market. Citigroup had bet against investors as the housing market showed signs of distress. The
CDO defaulted only months later, causing severe losses for investors and a profit of $160
million (just in fees and trading profits). Citigroup paid $285 million to settle these SEC
charges.
- In 2016, Goldman, Sachs & Co. agreed to pay $15 million to settle SEC charges that
its securities lending practices violated federal regulations. To wit: The SEC found that
Goldman Sachs was mismarking logs and allowed customers to engage in short selling without
determining whether the securities could reasonably be borrowed at settlement.
- In 2013, a Charles Schwab subsidiary was found liable by the SEC for a naked short-selling
scheme and fined
$8.2 million .
- The SEC charged two Merrill Lynch entities in 2015 with using "inaccurate data in the
course of executing short sale orders", fining them $11 million.
- And most recently, Canadian Cormark Securities Inc and two others came under the SEC's
radar. On December 21, SEC instituted cease-and-desist orders against
Cormark. It also settled charges against Cormark and two other Canada-based broker deals for
"providing incorrect order-making information that caused an executing broker's repeated
violations of Regulation SHO". According to the SEC, Cormark and ITG Canada caused more than
200 sale orders from a single hedge fund, to the tune of more than $660 million between August
2016 and October 2017, to be mismarked as "long" when they were, in fact, "short" -- a clear
violation of Regulation SHO. Cormark agreed to pay a penalty of $800,000 , while ITG Canada -- one of
the other broker-dealers charged -- agreed to pay a penalty of $200,000. Charging and fining
Cormark is only the tip of the iceberg. The real question is on whose behalf was Cormark making
the naked short sells?
- In August 2020, Bank of Nova Scotia (Scotiabank) was fined
$127 million over civil and criminal allegations in connection with its role in a massive
price-manipulation scheme.
According to one Toronto-based Canadian trader who spoke to Oilprice.com on condition of
anonymity, "traders are the gatekeeper for the capital markets and they're not doing a very
good job because it's lucrative to turn a blind eye." This game is set to end in the near
future, and it is only a matter of time.
"These traders are breaking a variety of regulations, and they are taking this risk on
because of the size of the account," he said. "They have a responsibility to turn these
trades down. Whoever is doing this is breaking regulations [for the short seller] and they know
he is not going to be able to make a settlement. As a gatekeeper, it is their regulatory
responsibility to turn these trades away. Instead, they are breaking the law willfully and with
full knowledge of what they are doing."
"If you control the settlement system, you can do whatever you want," the source
said. "The compliance officers have no teeth because the banks are making big money. They
over-lend the stocks; they lend from cash account shares to cover some of these fails for
instance, if there are 20 million shares they sold 'long', they can cover by borrowing from
cash account shares."
The Naked Truth
In what he calls our "ominous financial reality", Tom C.W. Lin, attorney at law, details how
"millions of dollars can vanish in seconds, rogue actors can halt trading of billion-dollar
companies, and trillion-dollar financial markets can be distorted with a simple click or a few
lines of code".
Every investor and every institution is at risk, writes Lin.
The naked truth is this: Investors stand no chance in the face of naked short sellers. It's
a game rigged in the favor of a sophisticated short cartel and Wall Street giants.
Now, with online trading making it easier to democratize trading, there are calls for
regulators to make moves against these bad actors to ensure that North America's capital
markets remain protected, and retail investors are treated fairly.
The recent GameStop saga is retail fighting back against the shorting powers, and it's a
wonderful thing to see - but is it a futile punch or the start of something bigger? The
positive take away from the events the past week is that the term "short selling" has been
introduced to the public and will surely gather more scrutiny.
Washington is gearing up to get involved. That means that we can expect the full power of
Washington, not just the regulators, to be thrown behind protecting the retail investors from
insidious short sellers and the bankers and prime brokers who are profiting beyond belief from
these manipulative schemes.
The pressure is mounting in Canada, too, where laxer rules have been a huge boon for
manipulators. The US short cartel has preyed upon the Canadian markets for decades as they know
the regulators rarely take action. It is truly the wild west.
Just over a year ago,
McMillan published a lengthy report on the issue from the Canadian perspective, concluding
that there are significant weaknesses in the regulatory regime.
While covered short-selling itself has undeniable benefits in providing liquidity and
facilitating price discovery, and while the Canadian regulators' hands-off approach has
attracted many people to its capital markets, there are significant weaknesses that threaten to
bring the whole house of cards down.
McMillan also noted that "the number of short campaigns in Canada is utterly
disproportionate to the size of our capital markets when compared to the United States, the
European Union, and Australia".
Taking Wall Street's side in this battle, Bloomberg notes that Wall Street
has survived "numerous other attacks" over the centuries, "but the GameStop uprising could mark
the end of an era for the public short", suggesting that these actors are "long-vilified folks
who try to root out corporate wrongdoing".
Bloomberg even attempts to victimize Andrew Left's Citron Research, which -- amid all the
chaos -- has just announced that it has exited the short-selling game after two decades.
Nothing could be further from the truth. Short sellers, particularly the naked variety, are
not helping police the markets and route out bad companies, as Bloomberg suggests. Naked short
sellers are not motivated by moral and ethical reasons, but by profit alone. They attack good,
but weak and vulnerable companies. They are not the saviors of capital markets, but the
destroyers. Andrew Left may be a "casualty", but he is not a victim. Nor likely are the hedge
funds with whom he has been working.
In a petition initiated by Change.org, the petitioners urge the SEC and FINRA to
investigate Left and Citron Research, noting: "While information Citron Research publishes are
carefully selected and distributed in ways that do not break the law at first sight, the SEC
and FINRA have overlooked the fact that Left and Citron gains are a result of distributing
catalysts in an anticipation of substantial price changes due to public response in either
panic, encouragement, or simply a catalyst action wave ride. Their job as a company is to
create the most amount of panic shortly after taking a trading position so they and their
clients can make the most amount of financial gains at the expense of regular investors."
On January 25 th , the
Capital Markets Modernization Taskforce published its final report for Ontario's Minister
of Finance, noting that while naked short selling has been illegal in the United States since
2008, it remains a legal loophole in Canada. The task force is recommending that the Ministry
ban this practice that allows for the short-selling of tradable assets without first borrowing
the security.
The National Coalition Against Naked Short Selling - Failing to Deliver Securities (NCANS),
which takes pains to emphasize that is not in any way against short-selling, notes: "Naked
short-selling transfers the risk exposure and the hedging expense of the derivatives market
makers onto the backs of equity investors, without any corresponding benefit to them. This is
fundamentally unfair, and must stop."
Across North America, the issue is about to reach a fever pitch over GameStop. For once,
regular retail investors have a voice to use against Wall Street. And for once, Washington
appears to be listening. The House and Senate both have hearings
scheduled over the GameStop saga.
Paradoxically, the same company that basically started the retail investor coup -- zero-fee
trading app Robinhood -- is now under fire for pulling the rug out from under the same
democratic movement.
After retail investors joined forces against Wall Street short-sellers to push GameStop
stock from $20 to a high of over $480 in less than a week, Robinhood made the very unpopular
move of instituting
a ban on buying for retail investors. Under the rules, Wall Street could still buy and
sell, but retail investors could only sell. This new band of investors -- which includes pretty
much all of Robinhood's clientele -- are up in arms, with customers now suing. They won't go
away, and they have Washington's ear and Twitter and Reddit's social media power. This is
shaping up to be an uprising.
What happens with GameStop next could end up dictating a new form of capital markets
democracy that levels the playing field and punishes the Mafia-like elements of Wall Street
that have been fleecing investors and destroying companies for years.
Retail investors want to clean up capital markets, and they just might be powerful enough to
do it now. That's a serious wake-up call for both naked short sellers and the investing
public.
"... "We told the people who were already enjoying a prosperous situation that things would be much better for their children and that we would be able to solve the outstanding problems. [But the new situation] presents a much more difficult task to fulfill. Because from the moment there is no longer a constant surplus to be distributed, the question of distribution is appreciably more difficult to resolve." ..."
Highly recommend the Przeworski piece at Phenomenal World.
Most of it is reflections on/by
3 European leftist leaders from the 1970s-80s (German Prime Chancellor Willy Brandt, Austrian
Chancellor Bruno Kreisky, and Swedish Prime Minister Olof Palme) about how the oil shocks and
associated economic changes of the era presented a challenge to social democrats –
including ending the belief/fantasy that reformism could be system-changing – that they
(we) were not then, and I would argue still are not, able to address.
Palme spells out the difficulty:
"We told the people who were already enjoying a prosperous situation that things would
be much better for their children and that we would be able to solve the outstanding
problems. [But the new situation] presents a much more difficult task to fulfill. Because
from the moment there is no longer a constant surplus to be distributed, the question of
distribution is appreciably more difficult to resolve."
Brand echoes these concerns, noting that it is essential to prevent inequality from
increasing as growth resumes. Eighteen months later, during another in person meeting on 25
May 1975, Kreisky makes the fiscal constraint even more explicit:
"It is precisely now that
reforms should be made. It is just a question which. If we strongly develop social
policies, we will not be able to finance them."
Also included an amazing graph of declining electoral support for left/SD parties in
Europe.
"... Today's cultural dominance in much of the South and chunks of the Midwest by boobtoob preachers, Dominationists and the highly heretical oxymoronical "Christian" Zioni$ts can be seen as the afterbirth of cultural Calvinism. Calvinism is Talmudic in its essence and squats at the nexus of what they like to call "Judeo-Christian Civilization". ..."
The author Jafee is confused on Bentham, because Bentham was confused himself, or was a Jewish agent of mammon.
The highlighted terms accord with Benthamian Utilitarianism -- the greatest human happiness of the greatest human number.[1]
Much (but surely not all) pertinent history suggests that Bentham's thinking influenced the construction of the Preamble
The English philosopher Jeremey Bentham (1748-1832) was a defender of usury, which is the opposite of happiness for the greatest
human number.
In 1787 Jeremey Bentham wrote "In Defence of Usury." Bentham was the son of a rich lawyer, and a lawyer himself, not an economist,
which is why he was confused. Bentham created the present mis-definition of usury which prevails to today, so he was very damaging.
"The taking of grater interest than the law allows, or the taking of greater interest than is usual."
Bentham ignored hundreds of years of the Catholic Scholastics work on usury, and also ignored Aristotle. Actually Bentham attacked
Aristotle in order to spread his B.S. Bentham's father was Jewish, and Bentham also ignored the fairly strong Old Testament admonitions
against usury.
Bentham spread the same erroneous B.S. that Calvin did, and both men did enormous damage, and whether by design or confusion
are NOT for the common good. Their connections to our (((friends))) is suspicious.
A Persian Daric is a gold coin. Bentham said this: Though all money in nature is barren, though a Daric would not beget another
Daric yet for a Daric which a man borrowed he might get a ram and couple of ewes and the ewes would probably not be barren (pages
98 to 101 of his screed)
Aristotle and the Catholic Schoolmen clearly showed that it was the Ewes that were fertile, not the coins.
Bentham or Calvin could not read with comprehension and twisted words into new meanings. This twisted language persists in
the brains of modern humans as confusion.
As if every Daric is going to buy an Ewe in order to reproduce.
By 1850 John Whipple wrote "The Importance of Usury Laws – An answer to Jeremey Bentham."
"The purpose of money is to facilitate exchange. It was never intended as an article of trade, as an article possessing an
inherent value in itself, and further than as representative or test of the value of all other articles."
It undoubtedly admits of private ownership, but of an ownership that is not absolute, like the product of individual industry,
but qualified and limited by the special use for which it was designed.
And
The power of money over every other article, arises out of the artificial character given to it by the STATE , AND NOT
OUT OF THE QUALITIES OF THE MATERIAL WHICH IT IS COMPOSED.
Bentham also argued that anti-usury laws were due to prejudice against Jews. Whipple was not frightened by the Jew trick of
anti-semitism claims. Whipple said this in reply, "The real truth is this feeling which he calls prejudice is the result of the
moral instinct of mankind."
Whipple wasn't afraid of calling out the Jew.
In other words, Bentham did not have the moral instinct of mankind, but instead was a usurer, hiding behind his utilitarianism
doctrine.
My view is that the preamble general welfare clause is direct lineage that comes through Benjamin Franklin and his experiences
in the Philadelphia Colony. Franklin was definitely NOT a usurer, and was not confused on money.
The Preamble of the constitution reflects a Liebnizian metaphysic reflected in the notion of the pursuit of happiness, were
are not talking utilitarianism, but a recognition that man is made in the image of the creator, Imago Dei where happiness
reflects an acknowledgement that we are actually creative beings where happiness is a reflection of such creativity, above mere
acquisition of 'property' as the Confederacy devolved the phrase to "Life, Liberty and Property"
@Mefobills eply distorted by Calvinistic Puritanism and its "Chosen People" mythos.
Much of the religious fervor which dominated the American frontier in the latter decades of the 18th Century and early 19th–they
called it "The Great Awakening" -- was infused with the patriarchal form of religiosity as ignited by Calvinistic tropes and memes.
Today's cultural dominance in much of the South and chunks of the Midwest by boobtoob preachers, Dominationists and the
highly heretical oxymoronical "Christian" Zioni$ts can be seen as the afterbirth of cultural Calvinism. Calvinism is Talmudic
in its essence and squats at the nexus of what they like to call "Judeo-Christian Civilization".
My preference is to employ the more objectively truthful description: the "JudieChristie MagickMindfuck.
@Leonard R. Jaffee Anti-semitism card. Bentham even attacked Aristotle for corrupting Christianity.
In Bentham's book, Bentham associates some of the positive attributes of thrift with money lending. Money lending becomes on
the same plane as thrift in his worldview. An here is the coup-de-gras: Compound interest was forbidden in Bentham's day, and
Bentham urged its legalization.
A compound curve for interest is outside of nature, as the claims on nature grow exponentially. Nature does not grow exponentially.
Nature and labor cannot pay the claims, and society polarizes. Jesus started his mission on the Jubilee year, as Jubilees are
coded in the Bible to prevent polarization.
If Bentham wasn't a Jew, he certainly had the Jewish spirit. Bentham was not for the common good.
Covid-19 exposed some warts of neoliberalism in higher education... They want to keep those lucrative international students
flooding in, after all.
Notable quotes:
"... We align our identities with our institutions and think in very a short-term, metric-based fashion, seeing "success" (for instance) in terms of student recruitment (tuition fees paid in). Moreover, we're encouraged above all to be global in outlook: we look forward to our perennially "busy" international conference seasons and we emphasize the global and the transnational over the merely local or national ..."
"... our identities as academics are unavoidably embedded in a form of neoliberal hyperglobalisation. We rely on unrestricted flows of (wealthy) bodies across borders. ..."
"... We see this form of globalisation, and the benefits that accrue to us and our institutions from it, as a form of moral necessity : something it isn't possible even to argue against in good faith. Hence our loud assent to principles like open borders and always-on mass migration. ..."
"... Our commitment to the global as a form of moral mission has left us completely unprepared for what's currently unfolding. We are utterly unused to considering the material constraints of the economy our livelihoods depend on; that globalisation might come back to bite us; that the very aircraft that carry us across the world to conference destinations and field work sites would one day turn off the spigot of endlessly mobile bodies our careers and identities depend on. ..."
"... In this respect, I think of this post over at Crooked Timber, where John Quiggin (an economist I have a great deal of respect for) simply cannot bring himself to confront the possibility that the open borders dream might be dead. ..."
"... But the fact that the "export education" model was a disastrous wrong turn will take much longer to be accepted, I think, because of the widespread commitment I've been talking about here to the principle of the global as a form of moral necessity. ..."
we've had a Minsky-like process operating on a society-wide basis: as daily risks have declined, most people have blinded
themselves to what risk amounts to and where it might surface in particularly nasty forms. And the more affluent and educated
classes, who disproportionately constitute our decision-makers, have generally been the most removed.
I see something very similar happening in academia. We align our identities with our institutions and think in very a short-term,
metric-based fashion, seeing "success" (for instance) in terms of student recruitment (tuition fees paid in). Moreover, we're
encouraged above all to be global in outlook: we look forward to our perennially "busy" international conference seasons and we
emphasize the global and the transnational over the merely local or national (denigrated as narrow, provincial, and ideologically
suspect).
We like to see ourselves as mobile subjects, bodies in constant motion, our minds Romantically untethered from the confines
of any one nation state.
So our identities as academics are unavoidably embedded in a form of neoliberal hyperglobalisation. We rely on unrestricted
flows of (wealthy) bodies across borders. Our institutions (or many of them) have become dependent on international students
and their superior fee-paying ability compared with merely "domestic students."
We might agree in principle with ideas of a GND,
say, or take an ecocritical approach to a novel or a play, but we're certainly not going to cut back on the number of international
conferences we attend. Indeed, many of us go further.
We see this form of globalisation, and the benefits that accrue to us and our institutions from it, as a form of moral
necessity : something it isn't possible even to argue against in good faith. Hence our loud assent to principles like open borders
and always-on mass migration. We have to keep those lucrative international students flooding in, after all. (Not that we'd
ever put it in terms as crassly material as that; after all, we don't work in university administration .)
Our commitment to the global as a form of moral mission has left us completely unprepared for what's currently unfolding.
We are utterly unused to considering the material constraints of the economy our livelihoods depend on; that globalisation might
come back to bite us; that the very aircraft that carry us across the world to conference destinations and field work sites would
one day turn off the spigot of endlessly mobile bodies our careers and identities depend on.
Hence the reason why a lot of my colleagues are so lost right now. They're so used to living on a purely symbolic (or moral-symbolic)
level that the materiality of this virus and its consequences seems like a crude insult. Many stubbornly hold on to their old
commitments, unwilling to admit that the world might have changed.
In this respect, I think of this post over at
Crooked Timber, where John Quiggin (an economist I have a great deal of respect for) simply cannot bring himself to confront the
possibility that the open borders dream might be dead.
Where we go from here, I have no idea. But the fact that international and Erasmus students might be gone for the foreseeable
future, and the major implications this will have for the financial viability or our universities, seems to be slowly sinking
in.
But the fact that the "export education" model was a disastrous wrong turn will take much longer to be accepted, I think,
because of the widespread commitment I've been talking about here to the principle of the global as a form of moral necessity.
"... "I am also reading the the next focus of the little people investors is the highly manipulated precious metals markets.....I love the smell of burning Wall Street in the morning." ..."
"... Back in the Oughts when the fraudulent mortgages were grossly inflating Real Estate Investment Trusts (REITs), there were many instances of naked short selling to keep honest REITs down, activities I learned firsthand. We formed a shareholders organization that lobbied the SEC to enforce its laws but to no avail--the regulators were well captured and did zip. ..."
"... There's short selling, and then there's naked short selling. Why do the markets require naked short selling? If those hedge funds already owned the stocks that they are selling short, they would not be in such trouble now. ..."
Early this week a few amateur stock trading nerds decided to promote a stock that was heavily shortened by certain hedge funds.
The idea was to raise the stock price of Game Stop Corp., a vendor for computer games, by having lots of small stock traders to
buy into it. The hedge fund that shortened the stock, and thereby bet on a dropping stock price, would then make huge losses while
the many small buyers would potentially profit.
Instead of greed, this latest bout of speculation, and especially the extraordinary excitement at GameStop, has a different
emotional driver: anger. The people investing today are driven by righteous anger, about generational injustice, about what
they see as the corruption and unfairness of the way banks were bailed out in 2008 without having to pay legal penalties later,
and about lacerating poverty and inequality. This makes it unlike any of the speculative rallies and crashes that have preceded
it.
The movement was successful. The stock price of Game Stop Corp. rose from some $10 to over $400 within just a few days. The
short seller
had
to take cover under a larger firm:
Hedge fund Melvin Capital closed out its short position in GameStop on Tuesday after taking huge losses as a target of the
army of retail investors. Citadel and Point72 have infused close to $3 billion into Gabe Plotkin's hedge fund to shore up its
finances.
I'm shocked! Absolutely shocked to see that the game of finance is rigged!!!!/snark
There have not been market fundamentals since the beginning of financialization in 1971 when money became fiat instead of gold
backed. I find it interesting that it has taken 50 years for the cancer of financialization to fully compromise the host. It will
be interesting to see where this goes from here.
I think the speed of decline of empire is speeding up as noted by the increase in international investment in China.
I am also reading the the next focus of the little people investors is the highly manipulated precious metals markets.....I
love the smell of burning Wall Street in the morning.
"I am also reading the the next focus of the little people investors is the highly manipulated precious metals markets.....I
love the smell of burning Wall Street in the morning."
Is Max Keiser going after the silver market again? I bet he was posting on r/Wallstreetbets to stir things up!
Back in the Oughts when the fraudulent mortgages were grossly inflating Real Estate Investment Trusts (REITs), there were many
instances of naked short selling to keep honest REITs down, activities I learned firsthand. We formed a shareholders organization
that lobbied the SEC to enforce its laws but to no avail--the regulators were well captured and did zip.
We even ran full pages ads in the NY Times and WaPost to add visibility to our justifiable outrage, which was well proven when
the bubble burst.
But Obama didn't do his job and enforce the law, and the entire mess is far worse now. This episode epitomizes the amazing
amounts of corruption masquerading as well regulated markets and an equitable financial system.
I support Hudson's debt forgiveness for the main reason it will bankrupt the debt holders--the Financial Parasites--who are
also the beneficiaries of the corrupt system; and with their destruction, will allow for the rise of the Public Financial Utility
that will restore law and order to that realm of the economy. Yes, this must be seen as yet another episode of the longstanding
Class War, one of the most brazen ever.
There's short selling, and then there's naked short selling. Why do the markets require naked short selling? If those hedge
funds already owned the stocks that they are selling short, they would not be in such trouble now.
Citadel and Point72 have infused close to $3 billion into Gabe Plotkin's hedge fund to shore up its finances.
-b
How Robinhood was rigged:
Robinhood sells its orderflow to Citadel for execution. Citadel then chiselled the retail investor for pennies per trade by frontrunning (think high freq trading) before execution
of retail order, inflating the price and cheating the customer.
Citadel bailed out Citron, essentially inheriting the short position. Citadel then threatened Robinhood with refusing payment for orderflow
The globalists found just the economics they were looking for.
The USP of neoclassical economics – It concentrates wealth.
Let's use it for globalisation.
Mariner Eccles, FED chair 1934 – 48, observed what the capital accumulation of
neoclassical economics did to the US economy in the 1920s. "a giant suction pump had by 1929 to 1930 drawn into a few hands an increasing proportion
of currently produced wealth. This served then as capital accumulations. But by taking
purchasing power out of the hands of mass consumers, the savers denied themselves the kind of
effective demand for their products which would justify reinvestment of the capital
accumulation in new plants. In consequence as in a poker game where the chips were
concentrated in fewer and fewer hands, the other fellows could stay in the game only by
borrowing. When the credit ran out, the game stopped"
This is what it's supposed to be like.
A few people have all the money and everyone else gets by on debt.
McFaul says that "Biden's team should come up with new ways to grow these ties [with
ordinary Russians] even over Putin's objections. In the long run, forging and sustaining
links with Russian society will undermine anti-American propaganda as well as American
stereotypes about Russia."
To this, McFaul adds that, "The new administration should make it easier for Russians to
study in and travel to the United States," and urges European states to do the same.
My take on this is very simple: the West cannot even absorb their own youth anymore. What
makes them think they can absorb Russia's?
Besides, it's not so simple an operation to attract young people to your country to study.
The logistics are very complicated, and it requires a lot of resources not even counting the
promise of jobs within your own country (in the case of STEM students). Even the brain drain
from countries with large populations such as China and India don't surpass much above the
low to mid six digits. And those programs take time to gain traction - decades in most cases.
And all of this already taking into account the fact that your country still has to be an
attractive place.
Discontent already exists in Americans with Indian STEM from H1B1 visa program. As the
excess population rises, so will resistance to new influx of immigrants - specially
high-skilled ones. This will snowball to a stage where Americans become second-class citizens
in their own country (as you would have to guarantee the jobs for the foreigners in order to
sweeten the deal).
How will the USA regain its advantage in this world?
I was looking back at some earlier reports to gain an insight into the means by which the
USA gave the game away and the means that might restore its place in the economic world. It
has allowed itself to be completely captive to global private finance AND ownership of the
keys to its salvation. If it dfoes not nationalise its key industries then it can rest
assured of its doom. IMO it is now almost impossible for it to nationalise a pizza parlour
let alone an education or engineering sector.
If the USA is to survive the oncoming collapse and break free of its apocalyptic war
agenda, then certain realities WILL have to occur. These realities include (but are not
limited to):
1) Regaining its lost industrial potential, with an emphasis on the machine tool sector
which the west once enjoyed as a world leader
2) Regaining the lost scientific and technological capacities which the USA once had
when it still valued productive thinking under the days of JFK and NASA
3) Regaining a grasp of education which values productive citizens over consumer
subjects
4) Regaining control over national credit under federal banking, dirigisme and other
long-term investment practices that rely on regulating Wall Street speculation and other
unproductive forms of banking.
How might these vital capacities be regained?....
The USA is incapable of nationalising its education sector and is incapable
systemically of having the patience to await the benefits. It will continue to sustain an
education sector that is designed to transfer $$$ in taxation directly to private corporation
pockets and to do so by reducing the the number of salary earners between the input $ and the
$ that end in private corporation pockets. The private corporations will continue to perfect
the swindle of returning the least possible effort in return for those $$$.
Ditto for defence spending and every other sector.
The USAi is hoist by its own petard and has a dull brained president surrounded by
ideological obsessives, cultural paranoiacs, a narcissistic Congress and Senate. It will not
be capable of restoring its real economy and will continue to imagine itself as a world
leader. It will berate and negate and cancel all unorthodox thought from those that favour
nation building.
The rest of the world's nations had better take note. Clearly many have.
I actually talked about this with Kuppy last week.
He considers HFT a problem but not crippling; he says they cost him $10K to $25K a day
but apparently this isn't enough to deter his hedge fund activities. He said that up to 70%
of trading volume activity in any stock is HFT (!).
As for scam: well - the value of the front running exists only so long as the herd is in
the market. Every single market crash - whether bitcoin or the stock market or whatever -
sees the vast majority of players exit (or bankrupt). At that point, the trading volumes
and numbers of people participating plummet dramatically.
How valuable do you think RH's model is then?
Sounds to me that HFT is a scam in itself. Am I to believe that algorithms trading against
each other repetitively at high speed is anything other than machine driven gambling on one
algorithm's interpretation of the behaviour of another algorithm, mostly outside of the human
buy and sell in the market place. Are the humans just strapped on for the ride through a
cabal of trading companies?
@ uncle t # 168 who wrote
"
I was looking back at some earlier reports to gain an insight into the means by which the USA
gave the game away and the means that might restore its place in the economic world. It has
allowed itself to be completely captive to global private finance AND ownership of the keys
to its salvation. If it does not nationalize its key industries then it can rest assured of
its doom.
"
I continue to posit that the key industry that needs to be "nationalized/made totally
sovereign" is finance. If humanity can follow China's lead, the motivations in the other
industries will revert to doing what is right, rather than what is profitable.
In regards to your HFT comment in # 172, you have calling HFT a scam correct. It is
programmed/manufactured theft under the guise of AI.
When guys like Michael Saylor put a half a billion into bitcoin they have done their
homework. Seems to me a scam is an operation containing a lot of lies. I don't see how
bitcoin falls into that category.
As far as a Ponzi scheme I also do not see the connection. It is nothing like a Ponzi.
There are no promises of big returns or large dividends.
When people follow 'guys like Michael Saylor [and see him] put a half a billion into bitcoin
they [think] have done their homework [and follow like fish chasing a lure] THEN they have
been sucked into a ponzi scheme where the lure is a fast buck if they follow the (smart?)
leader. Then the smart leader progressively sells out at a sweet peak and the chumps watch it
dip for a month or two. Unless of course there are lots of paid journalists and bloggers and
facebook praise singers pumping the lure of the endless profit of bitcoin.
Sounds like rumours of gold in them thar hills.
There are a large number of lies (or exaggeration?) in bitcoin and all spun within a
sheath of mystery and complexity and even 'mining' to smear some credible lipstick on the
scheme.
There is a sucker born every minute and they invest in BS and love a veneer of mystique
and bitcoin falls squarely into the category of lies and scams and fancy imaginings and the
lure that suckers are forever chasing. Yes, people buy and sell and some make a profit - same
as any ponzi scheme.
"... It's really quite simple actually. The same folks who did the 911 false flag attack crime are behind the virus hoax. Their ends have never changed; to acquire power and control (which they certainly already have) And to use any means no matter how ruthless and murderous to keep it. ..."
"... When you control all the money in the world, even if you don't have truth on your side, you have immense power. ..."
"... Forget the 99.99% Vs 00.01%. Imagine a few hundred who are running the Covid scam and vaccine poisoning programme and the couple of million opposing it. They are continuing. The opposition, in the meantime, is living on the internet posting 'truth's and pictures of Hitler. ..."
"... Just caught some more mainstream pish on how Fauci blamed his "country's ineffective pandemic response on an American "anti-science bias." He called this bias "inconceivable," because "science is truth." ..."
"... So Fauci stated "science is truth." – but that is what makes "Fauci" a charlaton in the eyes of real scientists; science is ever changing, evolving, ever questioned, enhanced and even proved incorrect. Today's theories (what he believes to be the truth), will be smiled upon in the future. ..."
Off-Guardian commenter, Maribel Tuff, expands their comment Above The
Line.
Bringing together the US emergency bank lending crisis and the now massive Covid response,
I've concluded that one of the main reasons it is happening, apart from the corporate looting,
is because of a historic event, the USA's economic collapse and the dollar's demise, which
started just weeks before this Covid operation kicked off, and has been put on hold by a world
wide manufactured economic 'freeze'.
THE END OF 'EXTEND AND PRETEND'
A few months before Covid appeared, the Fed were busy pouring literally trillions of dollars
into the US banks, to prevent inter-lending bank-runs which were starting to develop. These
were the same tectonic fissures that developed prior to the 2008 crisis, where the banks became
so distrustful of each other's solvency, that they massively increased interest rates to each
other to factor in the risk. If unsuppressed the lending rates would continue to rise, laying a
path to bank failures and a contagion which would eventually derail the economy and undermine
the dollar itself.
In September 2019 the Fed intervened in the repo. markets for four consecutive
days, pumping $75 billion per day into the banks, as the inter-banking interest rate –
the repo rate – peaked at a terrifying
10% [ 1 ]. If this
level were allowed to contaminate regular highstreet lending, it would cause widespread debt
defaults & insolvencies.
The dangers are far greater today because, unlike in 2008, Quantitive Easing (QE) has pushed
the Fed to the limits of its credibility, and are forcing them into causing some serious
currency debasement. If they continue with the forms of QE they are shackled to, then dollar
debasement becomes a certainty in a US economy that is far more fragile & indebted
generally and less able to cope.
The Fed must have known for a few years that QE was not returning the economy to economic
normality, and that they were still trapped in the solvency crisis of 2008. Knowing this, the
Fed were prepared for the latest crisis. They had made it possible to inject hundreds of
billions of dollars into the banking system discreetly, unlike in 2008, without any additional
Congressional fanfare, via the Financial Stability
Oversight Council , formed in 2010.
They had given themselves almost unlimited funds and the resources of the entire government
if necessary, to reassure the banks that collapse was impossible. This 'rescue operation' was
being played out, relatively unreported except in the financial press, only weeks prior to the
Covid flu appearing on the world stage. Issuing
..
cumulative repo loans totalling more than $9 trillion to the trading houses on Wall
Street that the Fed had been making from September 17 of 2019 – months before the onset
of COVID-19 anywhere in the world [ 2 ]
Unlike in 2008, this second use or continued use of mass Fed stimulus is not a new untested
idea and, by using it again or continuing to use it more intensely to stabilise the banks, it
would eventually lead the markets to conclude that we are locked in a never ending cycle of
stimulus, which will inevitably end in hyperinflation and dollar collapse.
That is an uncontroversial economic fact, and will be the conclusion of the Fed's current
policy. In that context, an external 'event' could be critical in taking the spotlight off US
finance and its woes.
The Fed
will not want to exit repo operations until they are absolutely certain the market can stand
on its own two feet. [ 3 ], [
4 ]
United States Overnight Repo Rate was at 0.11 on Friday January 15
But, as they well know given their experience over the past 10 years, the markets will never
be able to stand on their own feet in the current economic model. Now not only companies are
being kept afloat by low interests rates, the US itself is dependent and kept solvent by
low interest rates.
The fed has injected or made available over 9 trillion dollars to the banks in only 6 months
leading up to March 2020, that is over 40% of the USA's GDP, prior to Covid and represents
nearly a 40% increase in the USA's national debt!
So it is becoming very obvious that we are at the end of this particular monetary road, the
'extend and pretend' policy is finished and there is nothing in the economic tool box that can
stall the inevitable. Only an external 'divine' intervention could, even temporarily delay the
dollar's collapse. As an aside, I should add, although they may be affected later, this is not
happening in European or Asian banks, only in US banks.
THE DIVERSION
In my opinion, the US security agencies picked a scenario off the shelf, something they have
been justifiably rehearsing for years, the response to a deadly virus, which would produce the
required financial shutdown, suppress bank activity, and create a world crisis big enough to
eclipse the US economic crisis and produce a 'flight to safety' into the dollar, facilitating
an economic induced coma, allowing time, a breathing space and justifying massive emergency QE
injections into the US and world economy.
It could be sold as a period during which a restructuring of the world banking system could
take place and perhaps reschedule debt as well as redefine the mechanisms of a new reserve
currency.
This is what I think 'The Great Reset' really is about. It is being painted as something
intricate and nefarious on every level, but it's possibly more utilitarian than that, a
necessary dialog, where the subject of that dialog is sealed from the public, justified by
protecting our worried and panicky ears, and which concerns almost all western world
leaders.
I'm sure a major false flag terror attack would have been discussed as an alternative to
Covid, but the US is in no fit position economically to respond militarily, and without a
military response to a terror attack the US would fear looking weak. Although Wars have been
thought to resolve many an economic crisis, it is just as likely, in this instance, that a
proxy war with Russia or a direct war with Iran would precipitate a dollar collapse, rather
than create growth and a flight to 'safety'. China would no doubt gleefully humiliate the US
during such a conflict. So I speculate that major wars, as an economic solution, are off the
table, at least until this crisis is resolved.
Creating a virus out of thin air is a cruel and vicious deceit, but the Fed will no doubt
have claimed to its allies that it is far less painful than the total economic implosion we
will face in the brewing economic collapse, where financial contagion from the US would cause
most western financial institutions to become insolvent, debt would remain unpaid, trade would
cease, asset values would crumble, bank machines stop, riots start, martial law be declared,
and in many ill-prepared, import-dependent countries like the UK, rationing and eventually
hunger would begin.
This is the threat the fed would have made to their allies, as we know for a fact they did
in 2008, when asking for a united world central bank stimulus, making it appear vital to world
economic survival.
They would have claimed that this time around the economic dangers are of such a magnitude
that they even persuaded their foes, Russia and China, to partake in the hoax, because they are
also reliant on continued banking & economic stability, and would not be willing to risk
political instability at home caused by a second world economic depression.
By creating this suspension of an economic collapse, the US has cleverly turned the
dominance of the dollar into a matter of international survival, effectively holding the world
to ransom and blocking the baton of world reserve currency being dually transferred over to the
next economic ascendant, China, and where the US has effectively engineered themselves a seat
amongst the judges at their own bankruptcy hearing.
Believing this to be the case, I am less confused as to why most of the USA's allies were so
helpful and so consistent in making this Covid operation happen, and I have concluded it is
their belief in the integrated nature of the financial & currency markets and the threat of
economic collapse posited, as in 2008 by the Fed, that is causing their
complicity.
MUTUAL SECRECY
As each irrational, destructive lockdown measure is implemented I am quite sure that our
politicians, the very few that are in the know, say to each other: 'we are lucky because
"lockdowns" are as nothing, compared to the calamity that would overtake us in the event of a
dollar-induced economic collapse!' This, for me, explains their apparent insanity, lies and the
internationally co-ordinated nature of their response. They too are acting out of fear, not for
a virus, but for fear of anarchy and, by extension, the very real threat to their own lives
that would result.
The secrecy surrounding this operation is wholly consistent, because it is in nobody's
interests to break ranks. If anyone exposes what is really happening to the US economy then it
would precipitate the run on the banks, and then the dollar, that they are being told would
lead to a world economic catastrophe.
To explore this hypothesis, we can look at the varying responses of the world players, and
measure their reluctance or complicity in the scam, because at this turning point in history,
during these shifts of power, loyalty is not guaranteed.
Japan has been strangely reluctant to take part, indicating to me their brooding irritation
with US hegemony, which has been growing amongst their population for some years and expressed
through the Osprey protests . It looked at
one point like they were flirting with the idea of ignoring Covid altogether. Prompting the US
to 'invite' Japan to join 5-eyes, perhaps to exert more direct control over them, via their
security services?
Russia and China are reluctantly playing along for obvious economic reasons, but again we
see reluctance to go full hog, despite the attraction of introducing authoritarian measures at
home under the cover of Covid. Russia has even invented a non-existent vaccine for the
non-existent virus, giving themselves an instant opt-out when required. Whereas China is
preferring to just stop testing, and ignore the 'crisis' altogether, except for the odd
statement about how dangerous it all is.
Non-western Africa, is not taking part at all, in Nigeria there are very few cases, probably
because they are out of the loop on what is really happening, and see little evidence of a
virus in their population.
Germany although physically occupied by the US, like Japan, have a confidence and
independence that marks them apart from other vassal states. Having 'found' far fewer cases of
Covid, they have tried to preserve their precious economy from any serious harm for as long as
possible, demonstrating a cheekiness, consistent with their building of the Nord-stream
pipeline project to Russia, ignoring the US's repeated demands for them to stop.
In contrast, the USA's closest, most supine of allies, & the 5 eyes states, are
enthusiastically taking part, hyping the virus story to the n th degree of
absurdity. Notably the UK, France and Australia, each week pushing yet another absurdly fascist
response to a non-existent problem to scare their population stiff. In my view each allies'
response is calibrated to their financial dependency on the US and how 'captured' their leaders
are to US interests.
On the political and media front, alternative media, doubtless spurred on by seeded stories
and certain controlled opposition, unwittingly fans these flames by speculating on various
kingpins and ideologues central to the plot, like Bill & Malinda Gates, and playing up fear
stories of Marxist tyrannies, Communist takeovers, compulsory vaccines, tracking chips and
various accusations against the dangers of 5G – targeted for being predominately European
and Chinese technology.
The end result is a population left either paralysed by fear of the flu, or in terror of a
rising 'Marxist Fascist tyranny' run by 'jewish globalists' and oligarchs. Either way, everyone
is in too fearful a state to logically assess what is really going on around them.
I'm sure, in the dark bowels of Langley, Virginia, this scenario has been pre-rehearsed and
stress-tested for years, and pieced together from a huge portfolio of coups and psychological
terror operations from around the world.
Perhaps with lessons learned from Climate Change where, as with the weather, the common flu
can easily be weaponised. In the case of Covid via a swiftly implemented 'testing' regime,
simply testing for the common cold and producing millions of false positives, and a hysterical,
totally unquestioning mainstream media.
COVID OPPORTUNISM
International Covid panic created some short term, but worryingly for the USA, short-lived
'flight to safety'. 'International crisis' is the USA's traditional and most effective tool to
protect the dollar: normally US/UK media-manufactured. It was used to bolster a flagging dollar
via the media-created 'Euro crisis' or 'Greek debt crisis'. A series of hysterical panics made
'real' by US and UK financial press, quickly making the USA's economic woes old news, and
reducing the world reserve holdings of the Euro in only a matter of months.
Along with the 'flight to (dollar) safety', Covid has offered the opportunity to freeze the
USA's banking collapse with massive injections of cash. $9 trillions was available to US banks
up until March 2020, but in addition to this the Fed produced $5 trillion in economic stimulus
to the wider economy and a further 5 trillions recently.
Without this 'external threat' – a 'killer virus' – this amount of stimulus
would have immediately caused panic and threatened dollar credibility. However, with the virus
narrative and the world-unified stimulus response to the 'Covid pandemic', this modest flight
to (dollar) safety, along with the massive cash injections, looked justified and sensible.
It also looks to me like those in the 'dollar economic zone' – if there is such a
thing – have gone along with their own impoverishment and have wrecked their own
economies under the cover of Covid, to save themselves from a perceived greater economic
catastrophe, bank contagion, on the basis of what I believe is being secretly told them by the
USA, and based on what they have been witnessing in the US banking system prior to March.
It could easily be argued that we are being unwittingly drawn into a conspiracy to protect
the dollar and US hegemony, under the cover of Covid, that is not in our own best long-term
interests at all (currently being called the 'great reset').
Like Brexit and like the War on Carbon, I believe that if an operation or manufactured event
seems to offer multifaceted advantages to the USA and their Corporate & military elite,
then that operation has revealed its origins.
As it is the case with Covid, not only is there a freeze on the US economic collapse, but US
Corporations and Internet services are benefiting massively from the 'Covid illusion'.
Something that must be getting more obvious by the day, and must be giving honest foreign
leaders concerns as they see their retail sectors ravaged by Amazon and their cultural
institutions replaced by Netflix, Apple TV and Amazon TV.
And the proposed 'salvation' involves paying billions to US Pharma, for, at best, a very
doubtful vaccine. The least-honest politicians can no doubt engineer their 'shutdowns' to
preference US corporations, whilst acting as the viceroys of Empire.
This looting could just be a side-show to the main event of dollar 'transition' or collapse,
or it could be amongst the main aims of 'Operation Covid', it is difficult to tell, but it
looks like the rest of the world is being looted by US Corporations and their home grown
small-to-medium-size businesses bankrupted, with vast additional profits flowing to the USA's
richest, where we see the stella rise in the wealth of America's robber barons.
From renting taxis with Uber to replacing hotels with AirBNB flats, holding meetings on
zoom, spending 'cash free' via Visa, MasterCard et al and the Paypal cartel, ordering food
on-line with Uber eats and destroying local culture, all are being forced on a gullible world
public during the Covid selective collapse. It should be dawning on everyone by now that Covid
is a very, very Neoliberal Corporate virus, strangely working in the interests of a continued
US Corporate neoliberal rollout against our own national geopolitical interests.
It is not only the Corporates that benefit from US 'operations' like Covid, the security
state also demands their share of the spoils for assisting in and facilitating much of the
operation. US tracking apps, social media and communication platforms are being forced, as a
parasitical middle man, into every walk of our lives, taking a thin slice off everyday
activities, like an America tax.
The details of the implementation of the Covid operation aside, it is possible that many
inside the system regard the 'Great Reset' as not a conspiracy to oppress us, to exploit us and
destroy our lives in a Marxist tyranny as many believe, but rather regard it as a necessary
adjustment to an unbalanced economic system.
To see it like that we must believe that the current system is fundamentally flawed and that
good faith solutions are being sought. I think 'The Reset' is seen by many honest brokers
around the world as a genuine platform to resolve flaws in the current world economy, and to
manage a transition from the dollar, in a controlled fashion. We should not always think the
worst motives of everyone involved.
Having said that, I have no doubt that the US is busy trying to hijack the agenda to
preserve its own supremacy, even during its climactic demise. The US Military industrial
complex will be suspicious of any direction not determined by them, and I'm sure in Washington,
Brussels and Beijing there is a battle over the measures and direction we need to take.
Like it or not, there may be very good reasons for these discussions to be held in secret,
and we are left with only secondhand hints of the battles being fought over our current
economic future; like Universal income, a shared international reserve currency, digital
currencies or a cashless society, perhaps required through exchange controls or price fixing,
to fight coming hyper-inflation?
Many US shills will be telling the world, that this is a 'crisis of capitalism', a crisis of
western civilisation, and that we all need to preserve the US economy & dollar supremacy to
save the world.
I personally believe the US has set us up during this crisis, like they did in the last in
2008, where they dumped all their bad debt on European banks to 'share' the crisis out. Working
on the principle that: a problem shared is a problem halved, perhaps. Even if we are in this
crisis because of a US collapse, and the rest of us could survive relatively unscathed. A
'Reset' does appear to be one route that enables a slow deflating of the economic bomb sitting
under the US and which may affect the rest of us badly, if it goes off.
" SHE SWALLOWED
THE SPIDER TO CATCH THE FLY;
I DON'T KNOW WHY SHE SWALLOWED A FLY – PERHAPS SHE'LL DIE "
I reference the nursery rhyme as a cautionary tail, because this all started with the
relatively normal economic recession of 2007, which if the USA had allowed to burn through its
economy, would have been resolved in only a few years, and we would be living in normal times
now. But they didn't. The world's central banks were persuaded to take measures that caused
greater long-term harm, which in turn has led, in my view, to the 'Covid solution', a
provocation intended to temporarily justify even more of the poisonous QE and low interest
rates that didn't work before.
Whilst perhaps sold as a 'fire-break for a more long term solution to be found, I don't see
much evidence that the 'fire-break' is being used well. It seems more like a pause for the
always shortsighted American elites to loot as much as is possible from our states' coffers
before an economic tsunami hits.
A SELF-INFLICTED PROBLEM
I also believe the US never needed to be in this grave position it is today. Its problems
are very much self inflicted. Simply taxing its wealthy and cutting its outrageous military
spending would have averted a dollar crisis, leading instead to a slow drift from the dollar
over a few decades as China took up the strain. But that is another story related to America's
ideological, political and philosophical bankruptcy and scleroses, that has increasingly driven
them into an economic ditch over the past 45 years.
The Covid operation itself is a beautiful metaphor for the original banking crisis, which
triggered the Fed to use quantitive easing (QE) – a far, far more damaging response than
the original crisis itself, just as the lockdowns are far, far more damaging than this strain
of flu, naturally occurring or released deliberately as a marker.
If a consensus resolution is not found quickly for the transfer or sharing of the world
reserve currency, as the dollar is about to collapse, I have no doubt we will be required to
'swallow' a more drastic intervention than Covid to save the US economy and the dollar, each
solution proving more damaging than the last And of course, as the rhyme goes, we will
eventually swallow a 'horse' and be 'dead of course'.
If I am right guys, in one respect you can breathe a sigh of relief: world tyranny, forced
vaccinations with harmful DNA changes, sterilisations, and mass genocide are not the main aims
of this 'operation'. They may be the end result of it, if we are not careful, but I don't think
they are the main aims.
The US is trying to stall dollar relegation using the Covid operation, and make it a major
event, when previously the transition from old to new world reserve currency would have gone
almost unnoticed by most of us. The British ceded the Pound's world reserve currency status
relatively quietly after WWII, under US pressure to float the pound.
It is perhaps a measure of the utility that is now offered by the world's reserve currency,
to facilitate the uncontrolled looting of the rest of the world's economies, that it is now
such a prize and so hard to surrender. Without the dollar and its world reserve status,
enabling the US to print pieces of green paper in exchange for real goods, the US would
certainly be bankrupt.
But that is not our fault and it is not for us in the rest of the world to save them,
especially since it is their ideology that has inflicted so much harm on their own people and
the rest of world.
What we are witnessing is an attempt, through foul means, by another once great Empire to
postpone the inevitable. To fight off being consigned to obscurity.
So we exist in that mad time, that time of collapse and chaos before a new order asserts
itself, which could last a month or 100 years.
You can view Maribel Tuff's original comment
here .
The author wished to remain anonymous.
anti_republocrat , Jan 25, 2021 9:51 PM
I was initially not very aware of the liquidity problem that developed in September, 2019,
but I became aware of lots of weirdness quite early. Some examples are the FDA shutting down
the testing Dr. Hlelen Chu was conducting on stored sample in January. I concluded that the
federal government did not want her detecting SARS-CoV-2 in samples collected in 2019. Also,
in mid-March, Ben Swann released a video discussing the invalid comparison of Covid's CFR
with flu's IFR. If an apples to apples comparison had been made, people would have known that
flu is far more dangerous than Covid-19. A third weirdness was the CDC's changes to death
certificate criteria exposed by MN state senator Dr. Scott Jensen. He is now enduring
harassment from the state medical board and has had to defend his license to practice in MN.
About the same time, I became more aware of the liquidity issue and concluded that obscuring
that was a prime motivator for hoax, but there were several other motivations. Not all
participants in an event necessarily share the same motivation.
It became obvious to me early on that the Gates/Fauci/WHO/HHS crowd was lying about
Hydroxychloroquine in order to boost vaccine development. It was hard to link that interest
to multiple state governors deliberately committing genocide, but a FB friend yesterday clue
me into this article about the power and control of Anthony Fauci throughout the medical
establishment: https://kevinbarrett.heresycentral.is/2020/06/mccarthy/
Fear of such power may also be the reason that the FLCCC Alliance affiliated Eastern Virginia
Medical School has disfavored HCQ. They clearly believe, probably with good reason, that
Ivermectin is better, so they don't want to get smeared with HCQ while they're pushing an
even better alternative.
The third motivation is the desire to be rid of Trump. Trump was many bad things, but he
was also opposed to the US being controlled by an international globalist, technocratic Deep
State. He thus had opponents all over the West, not just in the US. Members of the Deep State
were in a perfect position to make sure the funders and controllers of the Democratic Party
apparatus were aware how they could use a pandemic and lock downs against Trump.
I'm sure individuals who participated in the hoax had varying levels of awareness, as Ken
McCarthy explained when interviewed by Kevin Barrett in the link above. Some actually
believed the Covid-19 narrative. Some were afraid to speak out, seeing the retribution faced
by others. But many were well aware of what they were doing, even to the point of deliberate
eldercide.
It's a good thing most of my life has passed, because death is the only cure for me. No
amount of de-programming or exposure to rats will make me unsee what I've seen.
The US with the largest military on the planet surrendering power to 'an international
globalist, technocratic Deep State."? I don't see that as a choice any US president would
make, or is making. Why would they, they hold all the cards and have created in their minds
the greatest empire in History.
If there are two alternative views of the future for America, one being pursued by Biden
and an alternative by Trump, both will involve American supremacy and control.
Norman E Anderson , Jan 25, 2021 8:34 PM
The Solution: A Global Rush to BitCoin.. pump BitCoin to the Maximum.. then dump it all
into their "LIBRA DIEM" just waiting to be offered at the right time.. all to Fund the
"balanced ERA 56 Per Diem Stipend" of the New Global Serf Class
Bitcoin will fail in the face of the e-yuan, following dollar collapse. China is way ahead
in making their digital currency official.
Lone Wolf , Jan 25, 2021 7:51 PM
This article could portray the absolute reality of the world situation but it will only be
read by 99.99999% of the world's population. Of that 0% will be capable of acting positively
in support of it.
This applies to every article that appears in OffGuardian. Words hold the ephemeral value
of 'chip paper', they are incapable of effecting a solution to a problem that cannot be
resolved by words alone.
Understanding this lies at the root of the REAL solution.
paranoid goy , Jan 25, 2021 1:20 PM
You know a thing as a simple truth by it being simple without being simplistic. But the
Bolsheviks never let a good crisis go to waste, so keep fighting Baal Gates' holy water!
Excellent post.
JdL , Jan 25, 2021 8:49 AM
"Off-Guardian commenter, Maribel Tuff, expands their comment Above The Line."
Who are "they" in this sentence? Please don't tell me this is some kind of genderless BS,
using the plural to mean singular just to avoid – GASP! – implying whether
someone is male or female.
I took it to be a deliberate use of a gender-neutral pronoun not out of political
correctness, but because it is an understood pen name and there's no reason to believe the
writer is one sex or the other. (Of course, it is still confusingly plural.)
Harry Rogers , Jan 24, 2021 11:29 PM
A couple of notes from history.
After the Vietnam War ended and a number of years later to buy anything in Vietnam you
needed lots of the currency called the Dong.
Gradually it wasn't called the Dong they were called "bricks". When you went to buy you would
ask "How many bricks?". Now a brick was about 100 Dong notes.
After the second world war in Germany some peole actually carried their Recih Marks in a
wheelbarrow when they went to buy something like bread etc.
Today the world debt is $57,917,909,049,231.
The simple thing about debt and money is that its all an illusion created for the benefit
of a robotic universe that needs to believe that the piece of cheap paper I hold in my hand
is of some value.
Also the US owes China owes Russia owes The EU owes Japan owes the UK owes ad infinitum.
See the silliness of it! Ooh lets panic what if China wants it money back ? Um not possible
and anyway its just numbers on a page.
What has real value?? Find out when life becomes live or die.
therevolutionwas , Jan 25, 2021 1:13 PM Reply to Harry
Rogers
Precious metals are not edible or useful unless you consider jewelery and semi-conductors
to be essential items.
Why do gold and silver have "real value"?
bypassing yr lame filter , Jan 25, 2021 2:22 PM Reply to therevolutionwas
Precious metals are not edible or useful unless you consider ornaments and semi-conductors
to be essential items.
Why do gold and silver have "real value"?
The spam fitler (spelling deliberate) here is obviously written by a member of the Borg as
you cannot even use words that contain the three letters j,e, and w in succession. Which is
why I had to write "ornaments" instead of the more exact name for shiny things worn as
ornaments.
That's why you should own it in the form of legal tender, such as sovereigns and
britannias.
Tony , Jan 24, 2021 9:08 PM
This is a crappy piece of writing which steals the correct economic analysis of people
like Jim Sinclair, Bill Holter and others, and warps it into the jack/jim (and their one
million aliases) trolling which has blighted OffG for months. This was obvious when it
appeared as a series of btl's recently. If anyone wants the full picture, they just have to
watch Bill and Jim's videos on youtube and elsewhere, where they make it abundantly clear
that this is a globalist problem, the people behind it don't fly flags, and they are only
interested in power through money and economic control.
Arby , Jan 24, 2021 1:26 PM
"This is what I think 'The Great Reset' really is about. It is being painted as something
intricate and nefarious on every level " The focus is narrow (but I appreciated the
interesting information) and, it seems to me, the author is here expressing an awareness of
that flaw. There's lots of speculation here as well and while I have no problem with that, a
humble approach would involve the admission of that fact. Why was Japan reluctant to jump on
the mankind-killing bandwagon? The author cites disaffection on the part of the Japanese
population. That tracks. But we also know that Japan wanted to have their Olympics and
thought that maybe they still could. Is Maribel certain that that wasn't the case? It wasn't
the Japanese people who turned on a dime. It was the government. The Japanese government
finally realized that the Olympics, which it wanted (for the prestige and the economic
repercussions of that I suppose), were not going to go ahead. On a dime, it suddenly viewed
corona as a super dangerous mankind-destroying bug and issued proclamation after proclamation
in its sudden supercharged flight down the road of fascism. Until then, while it acknowledged
the (non existent) Sars CoV 2 / covid 19 reality, it was not bothered by it.
Don't agree with everything you said, but nevertheless an informative article and firms up
much of what Catherine Austin Fitts has been saying: https://www.bitchute.com/video/RpRAvjoxVDCQ/
Tom , Jan 24, 2021 10:49 AM
"Whereas China is preferring to just stop testing, and ignore the 'crisis' altogether,
except for the odd statement about how dangerous it all is."
Maribel, can you list a reference showing China has stopped or reduced testing?
See comments below by others regarding PCR testing in China.
Sarah Jones , Jan 24, 2021 10:27 AM
They have prevented new relationships from beginning and erased those kids. It is genocide
from the ground up. Even couples are not likely to have kids under such uncertainty. The very
opposite of their claim of "saving lives". Those that do are being abused more than before
with masks during child birth and keeping the father out. Their relationship being sabotaged
with trauma from the beginning and then further trauma and destruction of the family with
parents involved in assaulting kids with "vaccines".
Sarah Jones , Jan 24, 2021 11:10 AM Reply to Sarah
Jones
Jeanice Barcelo explains how hospital birth is ritual trauma abuse to destroy the family
and how ultrasound is to destroy the eggs inside those babies so they are targetting a
generation ahead. It is satanists/ abortionists/ psychopaths behind covid not economists. It
is trauma to harm love and damage those kids and their future relationships to induce further
trauma. They said toilet paper was selling out as an inside joke about the young jerking off
to porn during "lockdown" and "social distancing".
Abortion is just fine if you want your ethnic group annihilated and erased from the face
of the earth.
Isaiah 3:12 (MCV) As for my people, children are their oppressors (infantile Cultural
Marxists), and women (Marxist feminists) rule over them. O my people, they which lead thee
cause thee to err, and destroy the way of thy paths.
theobalt , Jan 24, 2021 4:22 AM
China would "humiliate" the US in a war? That's just like a girl to worry about making a
dent on ego and overlooking a few dents on the planet How's it going in your basement darling
We're all suspended to your words and your little heart and your little brain all memory no
processor
" ..a proxy war with Russia or a direct war with Iran would precipitate a dollar collapse,
rather than create growth and a flight to 'safety'. China would no doubt gleefully humiliate
the US during such a conflict. "
The war would not be with China. During a conflict with Iran or proxy with Russia the US
is economically vulnerable to China's financial sabotage.
No time for a war with anybody . time to stop buying slavery products from China. China
and the cabal already humiliate everyone by corrupting our politicians. Not the US
The USA's Corporate elites, including Trump moved their manufacturing plant and expertise
to China to exploit their cheap labour, nobody forced them.
It was Corporate greed & vanity that caused the surrender of American manufacturing
power to China. American's thought they were superior to China but they have made themselves
her bitch.
Not even a war could save them now, unless they intended to have their military's spare
parts Fedexed over from China, during the conflict.
Also if China's economy were switch to a war footing, like a sleeping giant, it would dwarf
even the USA's military in a very short time, their capacity is the biggest in the world.
David Homer , Jan 25, 2021 4:12 PM Reply to Z=Anon
You are correct in everything except you have forgotten the fact that China imports most
of its iron ore, copper, aluminum, coal, oil, etc. They would be in trouble in a world war
situation.
messenger charles , Jan 25, 2021 4:38 PM Reply to David
Homer
They will invade Australia and New Zealand first in order to secure those minerals and
rely upon Russia for oil and gas.
theobalt , Jan 24, 2021 3:51 AM
What to do with our lives
Find food eat the food when you feel pressure download the
shit down
Anyone trying to prevent you to do any of those things, murder them
Tim Glover , Jan 24, 2021 3:35 AM
I haven't read the 487 comments so apologies, but the author seriously undermines their
argument by suggesting that the virus is a hoax. Exaggerated, yes, hoax, quite obviously not.
I have no doubt that there is truth in this article, but claiming that the virus does not
exist at all is untenable; the author should remove their blinkers and align their theory
with reality.
Tim, I used to think like you, but the original evidence has been extrapolated beyond all
reason by Con-19 artists. So now we must be pedantic and ask for evidence:
a. That the RNA fragments originally sequenced by Chinese scientists in Wuhan (not from a
virus but from patients bodily fluids) all belonged to a single strain of virus, putatively
named Covid-19 but never isolated for sequencing of a complete viral genome?
b. That the Covid-19 was exceptionally deadly; bearing in mind that the Chinese figures
for death among severely ill patients were comparable to normal U$ figures for death among
patients hospitalized with normal annual flu.
c. That the original Covid-19 strain is still extant? (assuming there actually was a
Covid-19 in Wuhan, which is not proven)
d. Assuming the orriginal Wuhan strain has died out (mutated), where is the evidence that
its mutant progeny are more deadly than the original Wuhan strain was ie, not much.
e. Last and most important, where is the evidence that the Westminster con artists
(Con-911, Con-WMD, Con-Viagra, Con-Sarin, Con-Novijoke) are not lying this time ? their lips
are moving.
I know from my personal experience that there is a new strain of virus, because I, and
many of my friends were seriously ill with it and 2 people died. many of the people affected
had no connection to each other. That this is not simply an unconnected anecdote is clear
from looking at the data which show that across the world there was a clear spike in
mortality in spring (The UK committed mass manslaughter in care homes but this is not the
case in other countries). It does not matter where it originated, or whether the genome has
been sequenced. I know the PCR test is useless. I know that there is hype, fear mongering and
exaggeration. I know masks don't work and lockdowns will kill more than they save by a wide
margin. Nonetheless, the virus is real.
Mike Ellwood (Oxon UK) , Jan 24, 2021 8:43 PM Reply to Tim
Glover
Whereabouts do you liveTim? I still don't know anybody who has been ill with supposed
Covid-19 ever since the "Pandemic" began, let alone, know anyone who died from it.
Were the other people who were ill, and especially the 2 who died, particularly old,
and/or did they have other serious health conditions?
And how do you know what you had was the "new strain"? The "new strain" is fairly new,
isn't it? Those poor souls must have died fairly quickly after contracting it.
And how many is "many"?
And how do you know that it wasn't "normal" flu? This is the flu season, after all,
assuming you live in the northern hemisphere. Flu can be quite dangerous too.
@Tim Glover: "I know from my personal experience that there is a new strain of virus,
because I, and many of my friends were seriously ill with it".
How do you know that the flu virus which made you and your friends "seriously ill" was
Covid-19?
I asked someone in England the same question at the start of the Con-19 hype last winter:
How did she know that her friend in the countryside and her relative in London, both of whom
told her they had it and it was their worst flu ever, had escaped death from a specific
headline-news "novel virus Covid-19", when there was so much boring ordinary flu about?
"Voila le Anglais avec son sang froid habituel (Here comes the Englishman with his usual
bloody cold)" -- Fractured French.
gary orlando , Jan 25, 2021 5:35 AM Reply to Tim
Glover
Tim, you have NO CLUE WHAT YOU'RE TALKING ABOUT. "i WAS SERIOUSLY ILL" is an extremely
ignorant piece of so called evidence. there is NO NEW VIRUS. and virus DO NOT CAUSE ILLNESS
AND contagion is a myth. it IS ALL A lie. you are brainwashed.
therevolutionwas , Jan 25, 2021 1:23 PM Reply to Tim
Glover
Virus's are real and will remain real. They kill susceptible people all the time. And with
the lock down there are more people not carrying on with their normal lives, not eat right,
not getting enough sun, etc ..
Something is happening but you don't know what it is – do you, Mr Jones?
– B Dylan
You have a currently accepted narrative that saves you from questioning your current
worldview.
I don't think it helps to argue 'it is real!
Or it isn't real!
People are dying every day – and by far the most are dying in the ways they generally
do. WHO benefits for the official narratives?
That health as as joy in being as well as resilience to toxic stress and exposures, has an
arena of personal and collective responsibility is of course true.
So far you haven't felt to look into those who are offering excellent witness to the lack
of established facts at the basis of an incomprehensibly disproportionate coordinated
reaction that represents a hijacking of living selves – not cells.
So you are confident that because Dr WHO and the whole pharmaceutical establishment back
you up, you can state 'the virus is real', as part of an extremely invested establishment of
social and corporate identity in its theory.
A positive result and diagnosis for terminal cancer can operate a nocebo death sentence on
its recipient even if the test is in error.
This is similar to what is being perpetrated on the public mind – regardless whether
for private reasons great or small.
When dealing with the dissociated, one cannot simply tell them their experience is unreal.
Thus no one can tell the so called sheep to 'wake up'. No can I tell such woke people to stop
projecting and restore their recognition of another's presence – just because.
Joel Walbert , Jan 24, 2021 5:54 AM Reply to Tim
Glover
Zero evidence anywhere in the world of sars-cov2 having been isolated. Claims of such are
not evidence of it. Numerous FOIA requests in various places provided no evidence of
isolation. A CDC document states there is no isolated virus and that is in fact a computer
generation. People being sick and dying does not even almost prove a virus
messenger charles , Jan 24, 2021 11:30 AM Reply to Joel
Walbert
What they have allegedly 'isolated' has not been purified, and THAT is the crucial element
to this issue. All their 'papers' are a fraud.
That is precisely my point. The document I was referring to states clearly there are no
isolates and that the testing is based off computer generated sequences. I generally would
believe nothing from the CDC but when one of their own official documents admits fraud on a
grand scale, I feel I must trust that one. Its all about discernment.
The CDC document is titled,
CDC 2019-Novel Coronavirus (2019-nCoV) Real-Time RT-PCR Diagnostic Panel.
It is dated July 13, 2020. On page 39, in a section titled,
"Performance Characteristics,"
"Since no quantified virus isolates of the 2019-nCoV are currently available, assays
[diagnostic tests] designed for detection of the 2019-nCoV RNA were tested with characterized
stocks of in vitro transcribed full length RNA "
Agreed. My friend is COO of big US pvt hospital group..he told me last April that their
hospitals(over 200) were near EMPTY and he was laying off staff left and right. Last Dec he
said their census was .." about normal for a flu season"..ie, no piles of bodies, no over
crowding.. ie, no real pandemic.
Fred762 , Jan 25, 2021 7:48 PM Reply to Joel
Walbert
USmonthly death totals from all causes have been FLAT for 5 years . therefore, NO
PANDEMIC
Joel Walbert , Jan 26, 2021 12:46 AM Reply to Fred762
Exactly. There are shockingly lower deaths from virtually all causes this past year
though. Fraudulent death certificates are the pandemic, not a computer generated viral
sequence.
Jacques , Jan 24, 2021 6:04 AM Reply to Tim
Glover
The virus IS a hoax. Some people say that viruses do not exist at all. Dunno. Even if they
do, the fairy tale of SARS-CoV-2 is complete bullshit.
Nobody has ever been able to present the alleged virus in an isolated form. The alleged
virus has never been proved to cause a disease. Period. If you or anyone claim that
SARS-CoV-2 exists, let me fucking see it. If you or anyone claim that the alleged SARS-CoV-2
causes the alleged diseases COVID-19, prove it. There are procedures for that. Such as Koch's
postulates.
None of that is done, therefore SARS-CoV-2 & COVID-19 must be considered a crock of
shit until proven otherwise. No data from the world over suggest that there is a pandemic.
End of story. That's your reality. Period.
messenger charles , Jan 24, 2021 11:19 AM Reply to Tim
Glover
The so-called virus has NOT been isolated nor has it, more importantly, been purified.
Sars Cov 2 otherwise known as Covid19 is 100% a lie and a criminal hoax. Research doctors Tom
Cowan, Stefan Lanka and Andrew Kaufman.
Mike Ellwood (Oxon UK) , Jan 24, 2021 8:44 PM Reply to messenger
charles
Also check out the website TheInfectiousMyth.com .
Yes, that man recently passed away but I leaned my foundational anti-COVID myth lessons
from his site as early as March.
Always knew pcr tests were BS.
Never knew a lot of the other COVID info till later.
From his web site or rather what was once his website:
"This was a database and web server owned by David Crowe. From the family of David Crowe,
we are sorry to share with everyone that David passed away on July 12th, 2020."
Paul Vonharnish , Jan 24, 2021 2:42 PM Reply to Tim
Glover
Hello Tim Glover: I see you've received many down votes for suggesting that a (covid)
virus does exist. Tsk, tsk, tsk I can only help you if you really want to be
helped Just repeat after me:
The Earth is flat.
Gravity is an illusion.
The Sun revolves around the Earth.
The moon is hollow and filled with cheese.
There's a white robed guy watching over everything .
The (above) white robed guy – loves everyone equally
You'll be better soon
messenger charles , Jan 25, 2021 4:26 PM Reply to Paul
Vonharnish
Actually the earth is a fixed globe at the centre of the universe (the pinnacle of God's
creation) with the sun and moon orbiting the earth.
Crikey – with friends like you – who needs enemies!
There are moments in life when a sense of lack can step forth in power and strut the stage
of the world like a giant!
(Yes sarcasm).
You get to set the measure of your receiving but not the timing and the manner of your
rewards. Life is meant to be a surprise!
Do you know what love is?
theobalt , Jan 24, 2021 1:52 AM
Answer to Judith comment below, and my usual type of comment right on the head of that
confusing and propagandist article
You should blow your nose without a tissue. They are full of formaldehyde causes
skin irritation and attacks the nervous system it's a carcinogen too and it comes mainly from
China (and I believe Israel Chemicals is also mainly involved) also avoid bed sheets from
Ikea and Amazon and any made in china (I tested them in TSP concoctions), any cheap furniture
from the likes (fiberboards and pieces of wood stuck together with F. based glue offgasing
like crazy, laundry detergents filled with them to replenish any garment, making sure the
American population remains dumbed down and sick and dying. The US dollar doesn't exist, no
more than the freakin' kopec.
American people exists. American land exists. And they are fine.
But they need to be taken down are they Don't worry people of Europe If it is crushed it
is not to save you. It will go in the same pockets of the people who have been crushing you
for quite a while.
Oh yeah, if you have a properly responsive immune system, your respiratory system will
inflame and clog in a very alarming way from exposure to formaldehyde offgasing rings a
bell?!?!
Raymondo Don Sayo , Jan 24, 2021 1:42 AM
The author was just short of calling opinions other than his own as conspiracy theories
which is a base of ignorance. Too long of a rambling severely narrow minded road is this
article. Lots of good thoughts within.
Maybe you are the controlled op?
The case of Australia, the "Building 7" of the Coronavirus scheme, is a case in point that
entirely supports the author's case, as before we had more than 1000 cases and a handful of
deaths, the government declared it would pump $180 billion into the banks to stabilise them,
including for the first time in history, QE. So it printed all the money and handed it around
just as the graphs of infection were exponential, in mid-March. After that and the lock down
another $130 Billion was laid out for "job keeper", which is only going to hit the fan in
March as 500,000 workers find their jobs have actually disappeared.
But now it's Vaccines that are the growth factory, and everyone is clamouring for them
because otherwise we will remain locked in this prison for years. We can't leave as we won't
be insured and there is no guarantee we'll be allowed to return.
But meanwhile, along with the US, our stock market made record gains this last year.
DYOC.
Sadly I have to entirely disagree with the author when she writes that the Russians
produced an imaginary vaccine against a non-existent virus. It's simply not true – have
a look at this paper about the GE manufacture of SARS hybrid viruses, going on at the WIV
since 2007, and of course in North Carolina under Ralph Baric: https://www.sciencedirect.com/science/article/abs/pii/S1931312820303024
" $130 Billion was laid out for "job keeper", which is only going to hit the fan in March
as 500,000 workers find their jobs have actually disappeared."
What is this end of March timeline even in Australia ? It's the same here in the UK when
the furlough period ends ? Am I missing something ?
Hi Grafter Here's what most of us missed..
Belarusian President Aleksandr Lukashenko said via Belarusian Telegraph Agency, BelTA., that
World Bank and IMF offered him a bribe of $940 million USD in the form of "COVID RELIEF AID."
In exchange for $940 million USD, the World Bank and IMF demanded that the President of
Belarus:
• imposed "extreme lockdown on his people"
• force them to wear face masks
• impose very strict curfews
• impose a police state
• crash the economy
Belarus President Aleksandr Lukashenko REFUSED the offer and stated that he could not accept
such an offer and would put his people above the needs of the IMF and World Bank. This is NOT
a conspiracy. You may research this yourself. He actually said this!
Now IMF and World Bank are bailing out failing airlines with billions of dollars, and in
exchange, they are FORCING airline CEOs to implement VERY STRICT POLICIES such as FORCED face
masks covers on EVERYONE, including SMALL CHILDREN, whose health will suffer as a result of
these policies.
And if it is true for Belarus, then it is true for the rest of the world! The IMF and World
Bank want to crash every major economy with the intent of buying over every nation's
infrastructure at cents on the dollar!!!
Which would tend to confirm what the Article stated??
Exactly what was running through my mind while reading this article
j. d. , Jan 23, 2021 10:41 PM
Your post is thorough and revealing – and counter-narrative, so it might get
shadow-banned
It is disappointing to realize that not only mainstream opinion, but also both sides of
the political aisle have pushed the idea that the economy faltered after covid was declared
an emergency. However, that's clearly not the case, as your article details.
Coventry League Capital Partners, a finance firm, also posted a blog way back in April
2020 that included a mishmash of tweets/posts from throughout 2019 about a pending financial
crisis given mass layoffs in some markets, an inverted yield curve, and bank liquidity
issues. If interested, below is the address to the article:
By September of 2019, the U.S. financial market was in full-blown crisis mode with massive
"repo" operations initiated by the Federal Reserve Bank (FED). Another blogger that provided
exhaustive detail in a series of real-time blog posts about the 2019 repo situation and
financial crisis is "Wall Street On Parade."
Are you two living in the same house with ten others?
Helen , Jan 23, 2021 10:41 PM
Interesting but fails to account for the original Wuhan theatre where China, against all
previously recognised pandemic planning, sold lockdown to the West. They did so restricting
it to one city and limiting overall damage to their economy. A kind of "how to"
demonstration. You also have their main western satellites, NZ and Australia the only ones to
have followed the Zero Covid policy of the CCP – a technique of pure tyranny.
China's CCP ended COVID charade in April by eliminating flawed PCR test as unreliable
diagnostic tool for COVID infections in individual clinical diagnosis of COVID disease which
definition was narrowed to initial interpretation as Unexplained (by long known before 2020
viral or bacterial presence), pneumonia for original interpretation as caused by long known
local environmental factors including man made factors like deadly therapies, medical
particle and wave diagnostic device malfunctions or inherent designer flaws as well as cases
of immunodeficiency or autoimmunity in pneumonia patients.
In other words COVID patient in China is not one who was PCR tested positive but one with
a documented form of pneumonia-like damage to lungs.The seasonal increase in in flu and
explained and unexplained pneumonia is behind recent new quarantine measures in China.
and still China plays this COVID game as it is too desirable to hold big stick of COVID in
their hands amid economic collapse programmed by reset.
PCR and serology is being used in China for general Epidemiological models not
specifically for COVID but for general epidemic situation assessment of all respiratory
diseases flu, common cold and pneumonia that are at local epidemic levels throughout the year
getting worse in winter season.
Last year mild season in China 75,000+ people died of flu, 5,000 officially died of COVID.
Do your math. It was much ado about nearly nothing, while real crisis of old people
needlessly dying of poverty, lack of medical access driven flu is ignored as nobody among
governments gives a damn as it cannot be sold as apocalypse to scare people into
submission.
Rumplestiltskin , Jan 24, 2021 3:09 AM Reply to Kalen
Great comment Kalen, interesting info re China not using the PCR to diagnose CV,
particularly since they sold an absolute shit ton of them to Australia via the mining magnate
what's his name. If we can break the governments reliance on the PCR test, this whole charade
collapses. Ive been saying this for months.
Superb comment- it is easier to point towards a bogeyman 'over there' or some exotic event
(bat cave) than to face the hard fact that the daemon is in your house and staring you right
in the face.
That wasn't followed in all of Australia really only Victoria and WA who got hyper excited
after the initial burst of enthusiasm qld has been more damaged by the planes not arriving
rather than any thing much needing locked up those important minerals we sell had to keep
moving I suspect plus we had a looming election which seemed to put the breaks on too much
enthusiasm so we just shut our border and went on with life until recently when we showed
signs of wanting to play that rush to the head seems to have stalled in Brisbane.,,
doesn't of course stop the believers carrying on around one .
and in my opinion the whole wuhan thing was so staged to make me question of any of it was
real,,,they either exported fear or thought they were actually under attack themselves given
those war games were held in wuhan
For 6 weeks since the alleged outbreak in Wuhan the residents of Wuhan were moving freely
around the rest of China but this virus never really showed up anywhere else in China apart
from Wuhan apart from the odd isolated outbreak that quickly vanished.
This doesn't tie in with a super spreading infectious virus.
Every so often the CCP will say there are small localised outbreaks and puff by magic they
quickly disappear.
It's just CCP propaganda and keeping their toe dipped in the water.
rraa , Jan 23, 2021 10:11 PM
I don't think the Chinese government is involved. People seem to think of China as one
giant homogenous BLOB that moves like a well oiled machine. In fact, regions have a LOT of
autonomy. I don't doubt that some individual Chinese scientists contributed to the Western
narrative. Remember that China overhauled it's entire medical system after Sars 2003. It has
a very modern and transparent pneumonia and respiratory illness surveillance system and all
the alphabet agencies of the West know what is going on it.
WHO published a notice on December 31 that was a very routine notice.
The whole thing took a life of it's own after four cases were reported in one day around Dec
26. If you read the very first paper with the virus sequence on Jan 11, it only mentioned a
novel coronavirus. But almost simultaneously a second paper was published with Edward Homes
as a co-author, the one with the batwoman scientist. This was the one that made the wild
claims about the virus being linked to bats and so on.
No I am not a CCP troll, I've been following the medical and scientific articles from the
beginning and trying to keep track of where the narratives emerged from.
China only locked down about 4% of its population. They did so because it was just before the
New Year and half a billion people were about to travel. Wuhan is a major rail hub. They
didn't want a repeat of Sars 2003. Even the Chinese in Wuhan were terrified by the Western
media. They don't live in some dark cave as the Western media would have you believe.
Nor does Beijing control every research institute and every research project in China as some
people seem to imagine it does. I don't think the virus "came from a lab" because if you read
the actual papers, you find the "new" virus is nothing more than a statistical result. It's
literally a software output, not something in a test tube.
I don't doubt thought that Fauci and Co were funding projects at the Wuhan lab so they could
scapegoat it for this theatre.
rraa – the actual papers that you write of that state a "new virus", are they the
papers that Drosten based his papers on? And the subsequent pcr fiasco?
The statistical result in the Chinese paper – was that based on the 4 cases?
I find what you wrote very interesting. It never occurred to me that the virus did not
come from the lab, but from just having been written about in a paper. I never believed it
was a virus from nature. (Not looking for an argument here about virus/no such thing –
just want some clarity from rraa)
I heard Dr Tom Cowan talk about this Chinese paper and its trip to Germany. But at that
point I thought it must have been the gain of function work in the US funded Wuhan lab.
Thanks.
Tomoola Sitchin , Jan 24, 2021 1:02 AM Reply to Judith
The Chinese provided a computer model of the virus, which Drosten has supposedly used to
configure his version of the PCR test, which is now used the world over.
No one has yet proved that the Sars-cov-2 coronavirus actually exists, other than on a
computer screen. For my money we are having a baddish flu, which has been conveniently
repackaged as Covi-19.
If you take out the mass death event during the 6 week period in March/April that was
brought upon the elders in care homes we are looking at one of the lower mortality rates of
the past two decades.
Those mass deaths were caused by pre-ordained policies, not a viral event, that were an
aberration from past years and in direct opposition of how the medical science states how the
viral season should be addressed for care homes, hospice etc.
I believe the current slight spike in mortality in the UK had been caused by the huge
uptake of flu shots.
The BMJ posted an article recently that flu shots can be successful in protecting against
one strain of influenza but they increase ones susceptibility to contracting other
viruses.
We are now in the middle of respiratory disease season.
Covid has conveniently completely eradicated all other viruses.
Yes it pays to go back and look at the original documents and who was involved there is a
panel the WHO calls together and who was on it and what they were supplied with and who
argued against .from all I ever read it was much to do about little but much convenience for
a range of agenda in which our mate faucci played a big role and has no doubt collected
billions..and never forget it played a big role in US elections and providing a divide
line
what I never quite get is what the UK is actually getting out of playing the game been awful
watching what you guys have done to yourselves.
Tomoola Sitchin , Jan 24, 2021 12:53 AM Reply to rraa
I would guess you are pretty near the mark and 77th Brigade probably think so as well
judging by the down votes.
A few weeks after Event 201, Gao published "A novel coronavirus outbreak of global health
concern" in the Lancet .[ https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(20)30185-9/fulltext
] This paper is filled with all of the "scary" buzz-phrases that were used to justify the
hysteria in the US and Europe. The same article featured "Clinical features of patients
infected with 2019 novel coronavirus in Wuhan, China" by all-Chinese authors, with all the
nonsense about bats.[ https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(20)30183-5/fulltext
] Incidentally, it also says, "A novel coronavirus, which was named 2019-nCoV, was isolated
then from lower respiratory tract specimen and a diagnostic test for this virus was developed
soon after that." I'm not saying whether that's true or not, but that's the claim. The claim
is based on the referred paper "A Novel Coronavirus Genome Identified in a Cluster of
Pneumonia Cases -- Wuhan, China 2019−2020," authored in part by, who else? George Gao .
[ http://weekly.chinacdc.cn/en/article/id/a3907201-f64f-4154-a19e-4253b453d10c
]
China also served up some cartoonish snuff films, supposedly depicting the severe effects
of "Covid" and the draconian "lockdown" measures supposedly in response. This was exactly the
role scripted for China in the 2010 Rockefeller Lock Step "Scenario" report.
C'mon, man. Chinese government not involved? Grow up.
Maxwell , Jan 24, 2021 3:55 AM Reply to Fact
Checker
You would be hard pressed to illustrate that George Gao has any allegiance to China or the
Chinese people any more than you could prove the same for Fauci, Farrar, Elias (respective
countries and people) or any number of high profile technocrats.
In all cases their allegiance is to their ideology and big business.
We know this as the PCR test was designed by Drosten in the absence of having any virus
and the full genomic sequencing was done by Drosten going through the genomic database of
previous coronaviruses picking out bits and pieces of RNA sequences through sheer guesswork
and then adding on the theoretical RNA sequences supplied by the Chinese.
Drosten doesn't even deny he created the test with no virus available.
A week or so later China supplied the full genomic sequencing from the virus 'isolated' in
a human and it was exactly the same as Drostens computerised virus.
Oh the Chinese government is not involved? The Chinese government doesn't exist it is an
extension of the cabal. The Chinese people exist and they are being killed and enslaved by
their "Government" and it is a system that Rockefeller liked soooo much that he wants to
replicate it all over the world Biden is not American, Biden is CCP of America.
Wayne Vanderploeg , Jan 23, 2021 10:01 PM
This was a favorite on the Ray Rayner show in the Chicago area in the 60s. Or was it, "A
Fly Went By". No, It was the old lady one
Ben , Jan 23, 2021 10:00 PM
UK Government quietly changes law to give councils lockdown powers until July 17th, 2021.
At the same time, revelers at a party in Kensington are confronted by police, but no fines
issued. And Conservative MPs in Wales resign after discovered drinking in a pub whilst under
Drakeford's pub ban order
Politicians are inflicting lockdown misery on their electorate but breaking the rules
themselves because they know 'Covid' is a scam
A new 'ap' (for which you pay) can be added to your smartphone. The app enables users to
create a representation of their body structure in the form of a 3D avatar, with
accurate circumference measurements and total body fat assessment.
Heathtech company MyFiziq Limited has developed a dimensioning technology that enables its
users to check, track and assess their dimensions using a smartphone, from the comfort of
their home. The app enables users to create a representation of their body structure in the
form of a 3D avatar, with accurate circumference measurements and total body fat
assessment.
And here is the bait – "Associated company Bearn is unique in that it awards one
penny for each active calorie burned, enabling users to earn hundreds of dollars a year just
for staying healthy and making healthy choices."
Biomorphik (ie buy more) is a behavioural change company with a key goal being to
improve the health and wellness of people at a whole-of-society level through better
creation, measurement, storage, analysis, and access to data.
In other words, it is data-mining, disguised as keeping your healthy – to be used
against you in the future social credit system they are designing. At present, you are
rewarded for losing excess fat, but in the future you will be punished if you do not keep up
with the 'health' regime they have set for you.
Since this ap went on the market, the public demand has outstripped the supply, it is so
popular. Beware, I think it is a trap.
Reggie , Jan 23, 2021 9:10 PM
But the author is assuming that US wants to keep the dollar hegemony. I'm not so
sure about that. I think it's obvious that US's leaders are globalists and they want to see
the dollar die, in favor of a virtual world currency that they can use to manipulate the
sheep to their heart's content.
I also think the forced vaccinations, etc., ARE a primary reason for this fraud. The
pharma folks are globalists and forced vaxxes are their wet dream. And I do think that the
Bill Gay agenda of vaxxes does have something to do with his dream of population reduction,
and that's a globalist consensus, it's not just Bill's idea.
Eric McCoo , Jan 23, 2021 8:35 PM
It's obvious from its extremely defensive stance now and at the start that China is
involved.
In my view this is ultimately about digital ID and a Chinese style social credit system.
Some people might remember the UK government pushing a universal ID a number of years ago.
Scrapped in 2011.
'Identity cards were scrapped in 2011 – they're no longer valid and you can't use
them as proof of identify.
Mike Ellwood (Oxon UK) , Jan 23, 2021 9:41 PM Reply to Eric
McCoo
That's weird; I never had one. How many people got one? I'm talking about what must have
been modern ones (presumably issued by the Blair government, although I thought their plans
for ID cards had never got off the ground).
Actually, I'm old enough to have got a paper/card identity card, issued by the post-war
Labour government. I think I still have it somewhere. The number on that card became your NHS
number (although NHS numbers were revamped many years later).
Mike Ellwood (Oxon UK) , Jan 24, 2021 9:09 PM Reply to Eric
McCoo
Thanks for that. I wasn't aware of the partial rollout. I clearly wasn't paying sufficient
attention at the time!
Jeffrey Strahl , Jan 23, 2021 8:08 PM
And i didn't even see this.
"The details of the implementation of the Covid operation aside, it is possible that many
inside the system regard the 'Great Reset' as not a conspiracy to oppress us, to exploit us
and destroy our lives in a Marxist tyranny as many believe, but rather regard it as a
necessary adjustment to an unbalanced economic system.
To see it like that we must believe that the current system is fundamentally flawed and that
good faith solutions are being sought. I think 'The Reset' is seen by many honest brokers
around the world as a genuine platform to resolve flaws in the current world economy, and to
manage a transition from the dollar, in a controlled fashion. We should not always think the
worst motives of everyone involved."
Right! 🙂 We need to be adjusted to total remote control, social impact investing, ..
I'm sorry i gave this one 3 stars. 0 is what it rates.
Doctortrinate , Jan 23, 2021 8:34 PM Reply to Jeffrey
Strahl
as sending young naive men into a 300 machine gun wall of hell – was an unfortunate
miscalculation again and again and again.
theobalt , Jan 24, 2021 2:08 AM Reply to Doctortrinate
reference on this?
Doctortrinate , Jan 24, 2021 4:13 AM Reply to theobalt
parallels are ruthlessly profuse. Look to the Somme offensive.
I don't know how old you are but your education seems sadly lacking if you constantly have
to ask for references? Did you miss the lesson where you were taught to research?
My Grandson age 10 had just completed a term on WW! prior to lockdown, and here is a piece he
researched.
If these people in the money markets had not gotten into derivatives, tax avoidance
foundations, hedge coys etc I suspect we wouldn't be in this mess .the very people now
wanting socially responsible investment, save the planet etc are the very ones who created
the financial meltdowns and someone wants to tell me I should pay for all this
May Hem , Jan 23, 2021 10:16 PM Reply to Sarah
Jones
Thank you Sarah, for this valuable information. "Gaslighting" is the technique now being
used by mainstream media and the virtual virus planners to confuse and control us. And so
clearly explained by this video.
We need to be aware of these techniques so we can defend and keep our sanity.
One of the signs of the sociopath is a refusal to take responsibility. This reminds me of
the vaccine makers, and their refusal to take any form of responsibility for any damage
caused by their products.
theobalt , Jan 24, 2021 2:15 AM Reply to Sarah
Jones
it is not only a psyop it is real businesses closed, real people starving and not getting
medical care, real grandma's hearts broken, real people deprived of essential human contact.
It is a mass murder operation. Solution? A deadly vaccine experiment that will control the
killing of more But it will advance medical science to make valuable med for the remaining
500 mill I'm not trying to scare you dear I'm trying to get you on board
awildgoose , Jan 23, 2021 10:05 PM Reply to Jeffrey
Strahl
Precisely.
The entire point of the Confucius Institutes was to study Western culture and what makes
it tick.
The Chinese have understood that the West is filled with hysterical, hypochondriac
people.
They have exploited this understanding masterfully.
It would appear that China had a lot of help from dr Bruce alyward, a Canadian who by even
a small glimpse of his work trail suggests plenty of involvement with any number of gates
follies a short listen to his enthusiasm for wuhan methodology and his being convinced it was
going to kill millions makes the bloody run cold he is also fond of graphs etc. so no doubt
Ferguson fits in here somewhere and by the way he cites that many younger people were dying
in China, not just old folk he quite specifically says it isn't just an oldies disease so I
wonder what happened when it arrived on other shores obviously it transformed only to take
out the relatively old at end of average life so he was obvious fooled, mislead or just
whatever on his visit to fact find in China .it would seem he was most responsible for all
this carryon
Jeffrey Strahl , Jan 24, 2021 8:08 PM Reply to Edith
China got a lot of help. From the WHO, from Big Pharma, from Big Tech, from the mass media
(which are heavily tied into Big Pharma and Big Tech). That letter and Ivor's video go into
that.
Resistance needs to be organised to have any effect. Unions would have been best, but
they've been compromised
May Hem , Jan 24, 2021 3:19 AM Reply to AngryAngry
Great video. Thanks AA. Will share this around. I would much rather focus on solutions
rather than arguing where the virtual virus started.
Sarah Jones , Jan 23, 2021 7:35 PM
An apple a day keeps the covid away.
AngryAngry , Jan 23, 2021 7:34 PM
So, after watching Katherine Austin Fitts interview you thought it might be a good idea to
throw a few half truths, sound credible, add a few charts and make us believe a communist
take over/ depopulation/ creating an operating system in humans with a back door had never
been an elite plan for us cattle. How did OG let you in?
Ernest Judd , Jan 23, 2021 8:02 PM Reply to AngryAngry
Is this diatribe being addressed to the author of the article?
Researcher , Jan 23, 2021 8:45 PM Reply to Ernest
Judd
Get a new name. This one isn't valid. And stop using words I use. It's tiresome. Your
vocabulary is lacking but that shouldn't stop you from occasionally consulting a
thesaurus.
theobalt , Jan 24, 2021 2:26 AM Reply to Researcher
Oh madame
theobalt , Jan 24, 2021 2:25 AM Reply to Ernest
Judd
I hope it is
Researcher , Jan 23, 2021 9:01 PM Reply to AngryAngry
Yes. They've been here everyday trolling the comments and they reformulated the 77th
script from "America did it" to this nonsensical screed.
Some of their initial attempts at diversionary tactics included attacking Dr. Reiner
Fuellmich, Bobby Kennedy Jnr, James Corbett and claiming US corporations and specifically,
tort laws were destroying upstanding European corporations like Bayer, VW, Deutsche Bank and
RBS. Fraudsters, polluters, money launderers and poisoners were now victims of the big bad US
of A. Who knew?
All of this to divert from the NGOs such as the WHO, UN, World Bank, BIS, IMF, WEF in
collusion with 197 governments and 1,000 corporations forcing Agenda 21 and Agenda 2030 onto
the global population under the guise of a pandemic, and rebranding those two agendas as the
Great Reset and the 4th Industrial Revolution. (4th Reich)
theobalt , Jan 24, 2021 2:27 AM Reply to Researcher
'at a girl
theobalt , Jan 24, 2021 2:23 AM Reply to AngryAngry
Yeah. The number of short stops and "it might be" or it's possible that" when ever the
narrative leads to actual truth that this direction is a tissue of anti-US bs is certainly an
indication
Sam - Admin2 , Jan 24, 2021 2:45 AM Reply to AngryAngry
It's a perspective. Perspectives can be useful.
theobalt , Jan 24, 2021 4:15 AM Reply to Sam -
Admin2
I can't honestly use this one for anything valuable from my perspective
-CO , Jan 23, 2021 7:31 PM
For those of you who dwell on the perpetrators of the planned scamdemic here's a few apt
biblical quotes to consider and meditate upon if you feel so inclined.
"For our struggle is not against flesh and blood, but against the rulers, against the
powers, against the world forces of this darkness, against the spiritual forces of wickedness
in the heavenly places." Ephesians 6:12.
Politicians + so-called "scientific advisors" and other gutless officials in positions of
power knowing of the fraud and deception and doing nothing to remedy it and using the just
following orders excuse:
"Ye are of the devil, as your father, and ye desire to do the lusts of your father. He was
a murderer from the beginning, and standeth not in the truth, because there is no truth in
him. When he speaketh a lie, he speaketh of his own: for he is a liar, and the father
thereof."
John 8:44
Lux et veritas
Moneycircus , Jan 23, 2021 7:24 PM
Eight marriages, 87 years but it was the Covid what got Larry King or at least it was with
him or came after him or something.
AngryAngry , Jan 23, 2021 7:35 PM Reply to Moneycircus
Took 91 year old Caprice Grandmother first – tragic💉💉💉
Researcher , Jan 23, 2021 10:27 PM Reply to AngryAngry
Oh Caprice. That ho' who was on that sho'.
Ernest Judd , Jan 23, 2021 8:03 PM Reply to Moneycircus
He died of old age.
Wayne Vanderploeg , Jan 23, 2021 10:08 PM Reply to Ernest
Judd
Exactly. However, a Covid body is worth extra cash. I am sure it must have tested
positive. How could it not. All that cash.
George Mc , Jan 24, 2021 8:43 AM Reply to Ernest
Judd
"Old age" was what they used to call it. We now know it was COVID. All the billions who
died in the past really died of COVID. All the documents of yore will have to be rewritten.
The Bible: Methuselah lived 969 years before he passed with the holy COVID.
Researcher , Jan 23, 2021 9:07 PM Reply to Moneycircus
His health started failing severely before covid and he stopped going to the RT studios in
2019.
It's interesting that they branded King as the first Covid19 famous death. They smeared
his name with a fake cause of death.
Just goes to show being an ass kissing, non journalist doesn't help you after you kick the
bucket.
killing of the king is done most month using numerology and astrology aka ritual via
sacrifice. it how they appease operate
larry KING signed a contract
what did he offer fuck all he took your time and kept the sheep entertained hypnotized.
Wayne Vanderploeg , Jan 23, 2021 10:05 PM Reply to Moneycircus
I was thinking the same thing when I saw it in the news. Fox, I believe. I held my sarcasm
back, though. It was the Down's Syndrome kids that got em Just kidding .
JuraCalling , Jan 23, 2021 10:07 PM Reply to Moneycircus
He invited it on his show as a guest. Brave but crazy.
theobalt , Jan 24, 2021 2:28 AM Reply to Moneycircus
I say the marriages in the times of fake woman's lib psyop is definately a comorbidity
that man is a hero
A bit off topic but just watched this very interesting dialogue between Ryan Christian and
Whitney Webb on Last American Vagabond. Lots of ground covered.
"SolarWinds Hack, Takeover of US,and the Final Stage of the War on You"
Tried to link but it would not copy successfully.
Fact Checker , Jan 23, 2021 9:18 PM Reply to Judith
Thanks for the tip!
Apropos of this article, Webb observes: "People really need to start, especially this
year, paying attention to the World Economic Forum people. If you're in independent media and
you're acting like this is not a trans-national push by the people you claim to be fighting
against, who have now all allied together in this transnational Blob to enslave
us all, c'mon people, get with the program. There's way bigger stuff going on that has way
graver implications than any previous year I've been alive."
Articles like this represent a desperate effort to maintain the illusion of the phony,
antiquated narratives of national rivalries, when the actual actors on the world stage are a
full generation past that.
She also calls out the Yuval Noah Harari's Davos 2020 speech that I've been highlighting,
which is excerpted in the "New Normal" mini documentary. She offers some great insight about
Mr. Harari's unconcealed disdain for the masses, concluding his speech by arguing that "the
elite" need to take hold of the potential of Total Information Awareness surveillance
technology, before "the rats" do!
Judith , Jan 23, 2021 9:55 PM Reply to Fact
Checker
Yes, I've watched Whitney on Last American Vagabond a few times. Mind like a steel
trap.
Today, as you pointed out – well, I've never seen her quite so emphatic. She was
really adamant, beyond just reporting. I found the dialogue very very interesting.
I followed up that interview with the latest James Corbett weekly "Solutions" episode with
Catherine Austin Fitts. Not as deep into the WEF, but certainly touching on the same
subject.
Moneycircus , Jan 24, 2021 5:37 AM Reply to Fact
Checker
If anyone's short of time listen from 20 minutes
Intelligence & organized crime syndicates
Russia as "look, squirrel" straw man for Israeli tech
(when Russia-Israeli tech tycoons are often one and the same)
Transnational corporate networks extend to U.S. tech & defense
Microsoft effectively offshored, embedded in Israel
Cyber attack will be "worse than Covid" -- promises Klaus Schwab
By targeting banks this ushers in new digital "store credit"
Big tech & defense-surveillance capitalists lock down the monetary system.
This year we will segue from Covid to a new hacking/digital scenario. Our saviours will
tell us lockdown has saved us while they ransacked and looted the economy. We will be told to
trust them. Digital ID-monetary system will be the physical aspect of that "trust".
Moneycircus , Jan 24, 2021 7:06 AM Reply to Moneycircus
Maggie , Jan 24, 2021 4:53 PM Reply to Moneycircus
Hi Moneycircus,
So have you any ideas HOW we stop them taking over our money?
Spent my whole life saving bits and bobs to enable us to enjoy a simple retirement and
investing in our Grandchildren's education. And now 'they' are going to steal our money via
the ID-monetary system? Because we will not have the right 'passport' because non of us, my
Husband and I or our children and grandchildren will be vaccinated?
Thank You All for the content and place to have real discussions on what is going on in
the world.
Kovid Krisis is the rich's cntl-alt-del of the world while they cook up a reboot of some
kind or another to save their capitalist empire from oblivion.
A MUST READ so we can all start following the money and talk about radical (root)
solutions.
Jubilee – Public Banking – Tax the Rich to 5x Base Pay – Establish 1x
Regional Base Living Income on 1040 hrs work/yr – Confiscate the World Financial
Digital Shadow Casino Money created in the last 30 years and redistribute equally into a
World Public Banks Trust Fund for each human born on Earth. And so on. Direct Democracy will
also get everyone to participate and create a true self-governing democracy.
Moneycircus , Jan 23, 2021 6:25 PM
Latest UK Column broadcast summarized
here , including this gem: Chatham House masterclass in manipulating public fear , part
of Jan 2019 influenza preparedness conference.
That echoes my thoughts on this completely. Thanks for putting into words what's inside my
head.
pantoufle , Jan 23, 2021 6:07 PM
This is the best explainer I've read so far of this entire disaster. Ties together almost
everything. And it originated in your Comments section. And you had the nous to publish it as
an article. Outstanding.
I used to love The Guardian. But that was many years ago. I never gave them any dough
(funny they never really asked for it in the old days–they didn't seem so desperate
until they became WokeNazis).
I just sent you guys 20 pounds.
theobalt , Jan 24, 2021 2:35 AM Reply to pantoufle
If you gave 20 lbs for this article, you're gonna have to give 1000 for each of the other
ones
tony_opmoc , Jan 23, 2021 5:58 PM
Excellent essay by Maribell Tuff, and whilst I missed it the first time around in the
comments (being serially banned here does have an effect on me), I think most of what he/she
wrote here is most probably true. I note that most of my comments here, no even longer go
into awaiting moderation. They just completely disappear, when I press send.
Where's Catte Black?
Tony
Edwige , Jan 23, 2021 5:26 PM
Venture capital in so-called edtech more than doubled in the last year:
Looks like some very wealthy people know "remote learning" isn't going away anytime
soon.
Roberto , Jan 23, 2021 6:31 PM Reply to Tim
Drayton
Now that's ironic. The principle of equality can only be sustained by force, but 'nature
is more forceful in the return', as observed by Francis Bacon, (albeit referring to the
suppression of habit, it holds true for everything).
There is no such thing as a classless society; in any historic example that's why there have
been Party bosses, nomenklatura, apparatchik, and the peasants, and of course the police
necessary to maintain the status quo with violence, or maybe just intimidation of the
especially meek.
How this succeeds in any example is evident by the result. The peasants always revolt; it
differs how long it takes, and the natural viability and civility of any society is in direct
inverse proportion to the number of police (visible or not) it requires to maintain
control.
With impeccable timing, just after I'd posted the above comments, a colleague sent me a
copy of the guidelines which our company now wants us to follow. Full PPE, endless washing of
hands, checking everyone's temperature every two hours, blah, blah, blah.
It appears that the money-grubbing, heartless wankers who own the company have, all of a
sudden, developed a deep concern for the well-being of the people who live in their
establishments and the staff who work with them. Remarkable, really, considering that they
hadn't previously seemed to give a solitary fuck about us. Praise be!
I shall now spend the rest of the evening feeling like a twat (as a kind of practice run
for tomorrow's shift, when I'll be kitted out in gloves, muzzle and apron).
Or I could just go for the nuclear option of phoning in
sick-of-this-fucking-ridiculous-shit.
You should blow your nose without a tissue. They are full of formaldehyde causes
skin irritation and attacks the nervous system it's a carcinogen too and it comes mainly from
China (and I believe Israel Chemicals is also mainly involved) also avoid bed sheets from
Ikea and Amazon and any made in china (I tested them in TSP concoctions), any cheap furniture
from the likes (fiberboards and pieces of wood stuck together with F. based glue offgasing
like crazy, laundry detergents filled with them to replenish any garment, making sure the
American population remains dumbed down and sick and dying. The US dollar doesn't exist, no
more than the freakin' kopec.
American people exists. American land exists. And they are fine.
But they need to be taken down are they Don't worry people of Europe If it is crushed it
is not to save you. It will go in the same pockets of the people who have been crushing you
for quite a while.
About 6 months ago my father in law ranted to me about how he hopes people never shake
hands again because it's so disgusting. All this talk makes me want to go the opposite
direction and shower less, share more gourds of mate with friends, kiss more people, etc.
That reminds me of the George Carlin bit in which he talks about swimming in a river (the
Hudson?) with his friends when he was a kid and ingesting all manner of nastiness (including
shit). He was of the opinion that this was what had given him an impregnable immune
system.
I can't help but compare that attitude to the nonsense we hear from the germaphobes among
us.
Pardon the vanity or self-indulgence, but this demands that I recycle a comment I posted
at this site last April:
Last month– a lifetime ago– the day after local (Pennsylvania, USA) officials
first announced the onset of the Megadeath Virus of Doom, I insouciantly wandered up to the
nearby supermarket– mostly to buy bagged salad, my one concession to eating produce. I
sailed through the door and stopped short at the sight of a shopping-cart "Trail of Tears";
forlorn customers in a line stretching from the (understaffed) checkout registers to the far
wall of the store, then winding around the corner and up the aisle.
As a retired employee of the state unemployment benefits agency who worked for years in
now-extinct Job Centers, I am familiar with crisis situations when "the lines are going out
the door", and people seem to arrive by the busload. So I turned around to leave. As I did, a
big, burly older man was entering the store; I'd seen him around the area, but we'd never
spoken.
He also stopped short, and said to me, "What's this all about?" I said, "Apparently a lot
of people think the world is coming to an end, and they want to make sure they have the
makings of their last meal." (Not to mention toilet paper for postprandial use.)
The man shook his head and said, "Christ! I played sandlot baseball for years, and the
ball used to get full of dirt, crud and even dog shit once in a while; we just picked it up
and kept on playing!"
I was gratified by this unsolicited validation. Of course, to the pro-pandemic Chicken
Littles, he may have played baseball but he's obviously no "team player".
Don't you remember a few months ago on Fox news across the pond in the land where you're
not free to say happy Xmas ? They carried a piece banning groups of any size singing 'Happy
Birthday'. Apparently the way we pronounce 'P' and ' B' is so forceful it could spray
everywhere with covid.
President Trum endoresd the idea even though it sounded like they were taking the iss.
Ersonally i think it's all ollocks. Still, it was a positive message to see all those poor
victims of a crippling virus stood 'in it together' having a sing along..
Willem , Jan 23, 2021 4:53 PM
One of my comments got deleted in the spam folder. In that comment I specifically
explained my work situation and the fanatics I am dealing with. Perhaps it was therefore
deleted because, even though the anecdote was true, I cannot prove that the anecdote was
true.
Or maybe the comment was just unlucky
Nevertheless, this experience was a good reminder for me that all anecdotes here should be
taken with a grain of salt since we are all anonymous commenters here (and therefore can both
tell true anecdotes or dream them up any way we please: no one can check the true factualness
of the anecdote)
But what I wanted to say can also be said without anecdotal 'evidence' which is this:
In science (any science, being it medical science, political science, economic science,
etc) there is theory and practice. And if the science is a true science, the theory should
always be confirmed by practice. And if practice doesn't follow the theory, the theory should
change.
Unfortunately we live in a topsy turvy world where practice should always follow theory.
And if practice doesn't follow theory it is discarded as an aberration, a chance finding,
unimportant, flawed, unscientific, finding and the theory remains standing unabated.
And this is the reason why we are in this mess. The economy isn't working, because the
theory is flawed, as is medical science on covid (and other diseases), and political science
(on for instance the definition what a democracy is). And all we scientists are supposed to
do is act as if the theory is sound and find confirmation that what should be true according
to theory, is essentially followed by practice.
And this can only be done by either censoring everything that doesn't fit the theory (and
there are many ways to censor) or finding more and more, sort of ontological arguments of why
God must exist.
And the problem with ontological arguments is that they have this fascinating feature of
finding the truth, against the odds, because the truth is so difficult to find (when the
theory is flawed) but still is found in an ontological argument.
This could be yet another reason why in epidemiology the Covid theory stands unabated. It
is difficult to understand, you have to go into great lengths to understand it and finding
the truth can be as difficult as an ontological argument, which can only be found by the
smartest of the smartest scientists. And so it is fun! Because trying to solve puzzles is
fun. Like alchemy
While in reality the truth is not so difficult to find. When I limit myself to covid, here
is a riddle: how can you say that there are excess deaths due to covid, if the average age of
death (81 years in NL) is the same as the average age of death in Covid (82 years)?
If you want to explain that and still hold that the theory stands unabated, you do need an
ontological argument, and this is what some epidemiologists are doing (others just ignore the
riddle, as if it doesn't exist).
And anyone (like me) who is crushing their thoughts and theories, is considered as
Archimedes considered the Roman soldier who was disturbing him on his thoughts on the
circles.
I am aware that this is also an ontological argument where I remain faithful to the idea
that epidemiologists can act rational as in that they do want to distill practice out of a
theory
What if all those epidemiologists are employed by the institutions that are controlled by
the same corporate structures who control the entire field of virology and genetics?
Yeah? try to say "fuck China" get ready for 20 downvotes
ted , Jan 23, 2021 4:31 PM
Very good analysis in my opinion. There has to be a reason for a relatively boring
respiratory season (outside of the few countries where hospitals bring elderly patients to a
somewhat earlier death than would have been the case absent medical intervention) turning
into endless economic suppression through endless lockdown.
Here in the US, the unimaginable levels of direct money transfers to households is fueling
nasty levels of inflation already. As an example, a haircut at my now rebel barber went from
US $18 last march to US $ 25 last week. A new housing bubble mania is taking hold, while
renters are permitted to not pay rent for the foreseeable future allowing more consumer
spending for a dwindling supply of goods and services, hopefully stimulating more hyper
inflation. Grandpa Joe promises 2 trillion more in direct money transfers soon. (remember how
outraged Americans were when Hank Paulson had the audacity to ask for 750 billion in 2008? .
ah the good times of yore).
Given the scale of direct cash transfers to individuals, I take issue with one part of the
argument. The goal here is not to save the dollar but to debase the dollar on a massive
scale. Hyper inflation of the dollar would shrink the value of debts held and promises made,
particularly in the colossal derivatives markets, as these are now obviously unwinding in an
uncontrolled fashion (thus the need for the incredible scale of money printing). The problem
is other currencies are so tied to the dollar that they have no choice but to follow the
American plan, debasing their currencies to try and keep an even footing with the US. This is
the only thing that would explain the EU's zeal for lockdowns that are well in excess of
anything in the US (I am writing from California). The EURO must trade on parity with the
dollar as the banking systems of both regions are deeply intertwined.
We are already seeing the outcome. The burden of planet covid/financial reset will fall
exclusively on the poor and working classes. those who do not have financial assets, while
the nominal wealth of the professional classes explodes (as it is presently doing). Something
like the upstairs/downstairs society of the 19th century is the result. Which is great for
political parties, because they only need to professional classes to win elections, while the
peons, who cannot even vote because they are increasingly not citizens or stripped of
citizenship through incarceration have no voice at all. Dickensian dystopia 21st century
style awaits.
RobG , Jan 23, 2021 4:07 PM
This article, as many others have pointed out, is certainly interesting, particularly how
it deals with the enemies du jour being in lockstep with it all, which is something the covid
believers always point to.
However, I do believe there's something very sinister behind the covid con. I say this
because you only have to look at how they are deliberately trying to destroy all human joy,
creativity and spirituality. Indeed, they are deliberately trying to destroy our human
society that's existed for tens of thousands of years.
Sarah Jones , Jan 23, 2021 6:32 PM Reply to livingsb
covid is a viral infectious disease. it infects people with narcissistic abuse techniques
like triangulation, smear campaigns, blame shifting, hoovering and gaslighting which the
infected individual then spreads further. a ponzi marketing scheme for the fake health system
which turns out to be the biggest destroyer of health made up of psychopaths with only the
very rare medical doctor speaking out tentatively about the narcassistic abuse and
destruction that is covid.
First, as to the article itself. I regard it as an intentional or possibly unintentional
limited hangout. The truthiness part of it is foremost the recognition that the Sept 2019
"repocalypse," with the massive intrusion of the Fed into the interbank lending, marked the
start of the collapse of the life support to the global financial system since early 2009.
The ensuing scamdemic was a diversion to the economic collapse and allowed our Owners to
decimate the fiat currencies through exponential printing, vastly increasing the "legal" debt
ultimately held against the 99.9%. I also give her credit for recognizing the fact that
covid-1984 is a non-existent artifact. I was considering doing a deconstruction of the
incorrect statements of this article, but decided that it was not really worth the hours
involved.
I would simply state that almost every step we are seeing has been planned since before
the official rollout of the Fed in the USA in 1913. One could reasonably build a case that it
dates back to John Dee and Kelly during the reign of the first Elizabeth. The ultimate aim is
to revert the planet to total control under a dystopian, neofeudal technocracy, drastically
cull the population, and to transform the remaining ones into genetically altered cyborgs
whose "minds" are part of the "cloud." The next step in the rollout will be a pseudo crypto
digital currency by all the world's central banks which will be in short order unified into
Earthcoin. This will be a de facto credit against a global company store such as many
sharecroppers and coal miners faced in the USA in past decades. One's means of existence can
be eliminated with the click of a mouse from a slight act of misbehavior, especially
thoughtcrime. In short a three tiered society where 95% will be serfs, 4.99% will be
technicians and enforcers, and the tiny remainder will be the owners. While not a great work
of fiction, The Hunger Games was a good projection of this society. I never bothered
to watch the film.
I wish to give the author thanks for giving me a good laugh with her statement that the
politicians of the world had to be convinced that the gigantic psyops would in the end prove
less disastrous to world's population than just letting the system collapse. As if they are
not also sociopaths who could not care less about the welfare of their constituents.
Hector , Jan 23, 2021 5:18 PM Reply to el
Gallinazo
I would give the films a go. I watched the first one several years ago at my other half's
insistence and was pleasantly surprised at the depth of its themes despite some duff acting.
The second film is also worthwhile but I wouldn't bother with the third and fourth.
Today my local news had a headline quoting our governor comparing our vaccine rollout to
the Hunger Games. I noticed several other states and cities doing the same about their own
vaccine rollout.
2fat2surf , Jan 23, 2021 3:57 PM
It's really quite simple actually. The same folks who did the 911 false flag attack crime
are behind the virus hoax. Their ends have never changed; to acquire power and control (which
they certainly already have) And to use any means no matter how ruthless and murderous to
keep it.
When you control all the money in the world, even if you don't have truth on your side, you
have immense power.
There is something sinister behind this.
JuraCalling , Jan 23, 2021 11:47 PM Reply to 2fat2surf
We know the truth. They know the truth. They have the power. We have nothing .It would
appear that it doesn't matter who has any truth on their side. It's power that shapes the
destiny of a race .
el Gallinazo , Jan 24, 2021 1:21 PM Reply to JuraCalling
"They have the power. We have nothing."
Disagree strongly. We outnumber the innermost cabal by about 7 billion to 1000. Wrap your
head around that. They maintain their power through the transmission depicted on the back of
the USA $1 Federal Reserve Note from the eye on the top down that pyramid. The way to combat
it is for us peons at the ground level of the pyramid to dismantle their transmission system
from the ground up , leaving our emperors eventually without any clothes. If one wishes to
find the savior who will save us, just look in the mirror. To do that successfully, we must
first dismantle their divide and control global psyops.
JuraCalling , Jan 24, 2021 3:17 PM Reply to el
Gallinazo
"Disagree strongly. We outnumber the innermost cabal by about 7 billion to 1000. Wrap
your head around that."
That would be great if it was a "how many people are in your gang" contest.
If 1,000 people are in a face off with 100 people, who has the advantage ?
Now. if that 100 people had machine guns, tanks and grenades, but the 1,000 were unarmed-
who has the advantage. Wrap your head around that.
"They maintain their power through the transmission depicted on the back of the USA $1
Federal Reserve Note from the eye on the top down that pyramid."
Who does. This is a global pandemic to cover a global takeover. Yes -- there's actually a
world outside of America. True story. In the greater scheme of things, America is 'the new
kid'. It's just the loudest and least clever. Does Schwab make his plans based on the US fed
res ?
It doesn't matter if our emperors have no clothes or if they have suits of armour. What
they do have is an arsenal of bio chemical weaponry and poisons along with the various
books of rules they can change on a daily basis that determine where we go, what we do, and
when. And, of course, the list of consequences for those who believe we don't have to.
There's a reason why the 'innermost cabal' are showing no fear against the vast
numbers that oppose it. And it's not bravery or stupidity.
Forget the 99.99% Vs 00.01%. Imagine a few hundred who are running the Covid scam
and vaccine poisoning programme and the couple of million opposing it. They are
continuing. The opposition, in the meantime, is living on the internet posting 'truth's and
pictures of Hitler.
Fact Checker , Jan 24, 2021 10:03 PM Reply to JuraCalling
" America is 'the new kid'. It's just the loudest and least clever."
Not the first time you've made me LOL, Jura, and I'm sure it won't be the last. To the
quick you cut.
George Mc , Jan 23, 2021 3:50 PM
Just caught some more mainstream pish on how Fauci blamed his "country's ineffective
pandemic response on an American "anti-science bias." He called this bias "inconceivable,"
because "science is truth."
Thus spake Zarafauci!
He also "compared those discounting the importance of masks and social distancing to
"anti-vaxxers" in their "amazing" refusal to listen to science."
Fauci IS Science!
Meanwhile Adrian Bardon, professor of philosophy, is amazed at Fauci's amazement at this
rejection of The Mighty Science, saying that "Denial is Everywhere"!
Ah well only one solution: a little brain operation to make everyone "see the Truth"!
Bob -Enough now , Jan 23, 2021 5:05 PM Reply to George
Mc
So Fauci stated "science is truth." – but that is what makes "Fauci" a charlaton
in the eyes of real scientists; science is ever changing, evolving, ever questioned, enhanced
and even proved incorrect. Today's theories (what he believes to be the truth), will be
smiled upon in the future.
Mike Ellwood (Oxon UK) , Jan 23, 2021 6:15 PM Reply to Bob
-Enough now
Yes one could keep wondering why anyone listens to that little man .how do these people
get to be the man of the moment he was there for the aids story and back for this game how
knows how many billion he has made from these games. Or why on earth anyone regards anything
he says as sane let alone science
JuraCalling , Jan 23, 2021 11:59 PM Reply to George
Mc
He's the leader of the pack for Scientism. Him and Gates the two-headed snake.
They believe if it can be quantified / measured. expressed in data- it's real. Anything
else is speculation and myth.
This is why the whole covid exercise has had two avenues from day one.
Avenue one: The alleged instructions passed to politicians by behavioural scientists(
meaning behavioural psychologists that teach them conditioning techniques that match those
imagined in the Lockstep paper)
Avenue two : The alleged data and results passed to them by other 'advisors' that call
themselves 'scientific advisers'. They talk about data, numbers, projections and use them as
a foundation to build the lockdown and oppression on. None of the numbers are available to
us.
note that no avenue is left open that leads to medical doctors and virologists that
want an open debate *
Note that neither the psychologists or number crunchers have faces and voices and nobody
is there to debate or discuss. Just to pass a script of instructions to the suited clowns who
don't know there arses from a hole in the ground.
The ritualistic physical instructions of social distancing and self isolating and the
grinding down of hope and personal willpower are to induce a semi-trance state.
Watch the deadness in every pair of eyes that have a mask underneath. Watch how they have
begun to avoid speaking and walk like they're in a minefield, zombie – like.
It's all priming. The de-humanizing is the prepping. It's winding us down like toys before
'resetting' us.
If the next step is the morphing of man and machine through their mad Nazi Science- and
every day suggests it is- then we are about to bring the curtain down on man as a species and
usher in their manmade man. What better way to cremate all previous belief systems
about God made man. They hijack natural selection and then bastardize that into unnatural
selection just after God is killed as an idea that was never quantifiable.
@James
Speaks rn. I'm not fine with assuming that the end product will automatically produce
merit beyond what meritocracy is today – brown-nosing. True merit is you have
demonstrated you can do it.
The last 40+ years have seen an endless stream of "bright boys" graduating university with
MBAs, getting involved in the management structure as "change agents", screwing up the
business for 5 years then "taking another opportunity" to screw up a different company.
Prof. Henry Mintzberg calls them the wrong people, at the wrong time, for the wrong
reason, because they don't have a clue how the real world works. But hey, they are high IQ
people, so they must have merit.
@Curmudgeon
r medicine and sophisticated writing. The issue is that these individual were poorly educated
– first and foremost in the "greed is good" school of the America. After sipping deeply
of this dead-end, destructive ethical framework, these individuals were then carefully
trained on how to extract value from an economy/a company rather than add value.
High IQ is still desperately needed for progress and to maintain civilisation. But put to
ill-use, high IQ individuals can wreak commensurately wreak greater havoc.
Analogies could be made to guns, armies, cars. All of them can be put to exceptionally
ill-use. Few would argue that a modern nation can live without automobiles or some kind of
armed defence force.
According to STR, Inc , a hotel industry
market data firm, 2020 was absolutely the worst year on record for hotels as industrywide
profits fell to zero , as the virus pandemic and resulting government-enforced social
distancing measures kept travelers at home.
STR's latest report said the US hotel occupancy rate was 44% for the year, down from 66% in
2019. This was the lowest occupancy rate on record. In an earlier
STR report, we noted weeks ago that the industry had one billion unsold room nights for the
first time, surpassing the record of 786 million in 2009.
Even though S&P Global Ratings warned a few months back that the hotel industry's
recovery may not occur until 2023, STR now believes a recovery in occupancy rates back to 2019
levels may not occur until 2024.
Best Western CEO David Kong recently told CNN that "If we don't get a vaccine soon and
business doesn't return, it's going to get much worse."
The economic consequences of these non-debated government policies have been catastrophic.
In the U.S. something like 60 million jobs have been lost, many never to return. A hundred and
fifty thousand restaurants have gone bankrupt. Only one in three museums will ever reopen. In
San Francisco they decided NOT to count the numbers of new homeless. No reason was given but
one can guess. The homeless situation in the U.S., in big cities in particular, was critical
even before the pandemic. Now the numbers are unprecedented. Not even during the 'Great
Depression' was there anything like the current level of those without basic shelter.
Food insecurity is at a crisis level. Feeding America , the largest hunger
relief organization in the US, estimates over 50 million people go hungry every night including
something close to twenty million children.
Since mid-March 2020, numerous surveys have documented unprecedented levels of food
insecurity that eclipse anything seen in recent decades in the United States, including
during the Great Recession. Over the past five years, US Department of Agriculture (USDA)
estimates of food insecurity in the United States have hovered around 11% to 12%.
As of March and April 2020, national estimates of food insecurity more than tripled to 38%
In a national survey we fielded in March 2020 among adults with incomes less than 250% of the
2020 federal poverty level (based on thresholds from the US Census), 44% of all households
were food insecure including 48% of Black households, 52% of Hispanic households, and 54% of
households with children. American Public Heath Association ( Dec 2020
)
And yet, congress just passed another defense budget increase. According to Defense
News
the final version of the 2020 defense appropriations bill, part of a broad $1.4 trillion
spending deal to finalize federal spending for 2020 and avert a government shutdown. The
defense bill would provide $738 billion.
Almost one in three households suffers hunger, regularly. Almost half of black and hispanic
households. Households with children are most vulnerable to the government policies. So half of
the kids in the U.S. have inadequate nutrition. Half will suffer long term developmental
problems, almost guaranteed.
So, given that there are countless medical professionals around the world who question the
effectiveness of Covid policy by government, who questions the World Health Organization and
CDC? One would think there would be a heated and exhaustive discussion about how to proceed.
Once it was clear that this was not a particularly fatal virus, there should have been wide and
far-reaching debate. But there was none.
And who are the authorities who dictate these policies? This also remains unclear. The head
of the WHO is
Dr.Tedros Adhanom Ghebreyesus . But the face of the pandemic is Anthony Fauci. Now
his role is also a bit unclear.
Fauci is director of the National Institute of Allergy and Infectious Diseases (NIAID). He
has held that position since 1984. It is unclear why he is the official advisor to
presidents.
But, the point is that Bill Gates controls forty percent of the WHO. So, take Norway, where
I live. Who advises the PM? Or advises her health minister? And it's worth noting that the
health minister is Bent Høie, from the ruling party, a conservative business-friendly
party.
Høie was born in Randaberg. He studied law at University of Bergen in 1991 and also
attended the Norwegian School of Hotel Management from 1991-93.
Well, I guess Hotel management is as good a background as any to make life and death
decisions about pandemics. One assumes the WHO and/or the CDC send advisors to talk to the
Minister of Health. But I am only guessing.
My point is that the decision-making process is utterly opaque. Nobody seems to have a clear
idea from where, exactly, the policy of lockdown (the quarantining of healthy people is, as far
as I can tell, utterly new) originated, or where the marketing and obvious fearmongering came
from.
For there has been a clear marketing apparatus in play, with all the mask adverts, the
social distancing, etc. And worth mentioning is that the eco outcry about plastic straws, a
genuine issue, really, suddenly receded and now, in the hysteria of mask wearing, the
environment has had to absorb 9 billion single-use cloth and plastic
masks .
The entire global economy is teetering on collapse. And this was intentional. This is
because of governmental actions, not because of a virus. Of course, western economies have been
teetering since 2008, if not before.
I'm not an economist, but this is the point where one must look at "The Great Reset"
.
Most of you have heard of it, its been on the cover of TIME magazine, and that photo of
Klaus Schwab and his Vulcan unitard suit has cropped up across all social media platforms. The
short version (for a long and exhaustive and insightful version see Cory Morningstar
here ) is that Schwab and his friends at the World Economic Forum have this idea, clothed
in perfect green attire, to "reset" the economies of the West (or of the world).
The word 'reset' is interesting. Who came up with that I wonder? It feels very computer-ish
and futuristic, and optimistic! And while much is made of certain aspects (natural capital,
social capital, a new deal for nature, social impact bonds, etc) the reality is that the
capitalist system, in the hands of the richest at any given moment (or we can say the ruling
class), drive corrections to the market. This helps consolidate wealth at the top, or transfer
more to the top.
And that is what this is, with the difference being that the plan is more about the
destruction of markets, the destruction of competition, and the hyper monopolization of nearly
everything. It entails a good deal of AI fantasy, but it also means a digitalization of
currency (so no grey economy, no borrowing from friends, no under the table work) and a massive
increase in surveillance and tracking. All of this is helped by the lockdown policies, the
so-called 'Reset' would likely be stillborn if not for the reaction to Covid.
Allow me to insert HERE a European
Commission statement regarding Covid19.
Now the new head of the European Commission is Ursula von der Leyen. Remember that much of
the Reset is driven by the ruling elite of Europe and North America. And these people share
common values and goals. Here is a brief biographical sketch on Ms von der
Leyen
"Von der Leyen's father's grandparents were the cotton merchant Carl Albrecht
(1875–1952) and Mary Ladson Robertson (1883–1960), an American who belonged to a
plantation owning family of the southern aristocracy from Charleston, South Carolina.
Her American ancestors played a significant role in the British colonization of the
Americas, and she descends from many of the first English settlers of Carolina, Virginia,
Pennsylvania and Barbados, and from numerous colonial-era governors.
Among her ancestors were Carolina governors John Yeamans, James Moore, Robert Gibbes, Thomas
Smith and Joseph Blake, Pennsylvania deputy governor Samuel Carpenter, and the American
revolutionary and lieutenant governor of South Carolina James Ladson.The Ladson family were
large plantation owners and her ancestor James H. Ladson owned over 200 slaves by the time
slavery in the United States was abolished; her relatives and ancestors were among the
wealthiest in British North America in the 18th century, and she descends from one of the
largest British slave traders of the era, Joseph Wragg."
I will return to why this has relevance. But I will only say here that all of the faces
fronting for the Green New Deal, and the Reset, are wealthy, from lineages of extreme wealth
and position. Today's theme is 'class'.
I can tell you only what I think Schwab and his colleagues want from this project. Let's
look at what is not going to return to normal after the lockdown.
Commercial airlines are going bust, and those that are still alive have drastically cut
routes and have limited their service. The days of cheap flights to warm beaches is gone, I
suspect, for good. Vacations will be limited and travel limited (well, unless you are very rich
like Gates and Schwab and Ms von der Leyen and Prince Charles and Jeff Bezos et al).
There are now sixty million people out of work in the U.S. The inevitability of the
Universal Basic Income is pretty clear. The question is how much does one mean by basic
?
Here I think one might do a quick history overview of apartheid South Africa, of the sugar
plantations of the 18th century in the Caribbean or, well, the Nazi work camp system. The new
capitalism that is imagined (and look, feel free to call it post-capitalism , or woke feudalism
or whateverthefuckever you want) has more in common with the aforementioned systems of
servitude and slavery than it does with anything else. It is class struggle, as Marx
emphasized. Jobs won't be coming back. There will be a gigantic surplus population.
And already one sees the gradual coalescing of a new caste system. People deemed 'important'
are allowed to go places and few questions are asked if they violate social distancing or mask
wearing. The new social apartheid, which began as a pseudoscientific method for disease
control, has now, in the brief span of a year, become a defacto class segregation. The rich are
exempt. Here is an article from the New York Post(Aug
15th) :
Meanwhile, billionaire David Geffen has been hanging on his yacht, Tom Hanks and Rita
Wilson are cruising Greece in another yacht after receiving "honorary" citizenship, Facebook
overlord Mark Zuckerberg has been trolling the waters off Hawaii in a $12,000 surfboard, Jeff
Bezos and his lady friend have been (multiple) house-hunting, buying up millions of dollars
in property in Los Angeles to build a compound while traveling via private jet to several
cities around the country, former Mayor Bloomberg splashed out $45 million on a Colorado
compound (joining a host of other billionaires buying in that state as well as Montana and
Wyoming); and others are spending millions to buy citizenship in "safe" countries like New
Zealand.
That 'compound' remark is worth noting. For this is the future for much of America. Gated
compounds for the aristos and the dirty, squalid, infected world for the proles. And look,
gated communities with private security have been in existence for forty years. Only now
the separation has deeper implications.
Of course, football can continue in both the US and UK, though basketball has been more
strictly limited (the perception is, of course, that basketball is an urban game and in a
league over 70% black).
It is amazing how these strictly-enforced behavioural rules are relaxed for the amusements
of the court. The rich can pretty much do whatever they want. Literally none of the rules apply
to them. There is a middle tier of affluent, those deemed necessary, for the moment anyway, who
get to move around more easily. For the millions now without income the restrictions will be
quite acute.
So, back to the Reset for a moment. I keep returning to the slave economies of times past
because this is increasingly what capitalism has been trending toward. The sugar plantations of
the Caribbean used slave labour. Imported from Africa. They sold that raw product in markets of
the metropole, to world markets. But on the plantation only master and slave relations existed.
And this is, in one sense, what is being normalized today. Slave relations. And like the gulf
Monarchies who use
'guest' workers (slaves, literally), Americans are close already to being guest workers in
their own country.
And like the Apartheid laws in South Africa, certain castes (replacing race in this case)
cannot go to the private beach of Mark Zukerberg. Or these days, often, any beach at all.
It's worth noting that the old 19th Century industrialist tycoons eventually became huge
philanthropists. Carnegie, Mellon, Peabody, Rockefeller even. They endowed education, built
libraries and hospitals. Today's tycoons create deceptive Green projects that are really just
more wealth-amassing schemes to displace indigenous people, steal land and property, and help
sell and normalize the police state.
Students throughout California are now stuck at home in hot, crowded rooms that
occasionally fill with wildfire smoke. 19% of these students are English language learners
and almost 13% of them have disabilities. Every day on Zoom they fall more and more behind
both academically and socially. In Los Angeles Unified, the state's largest district,
students are receiving 90-170 minutes of daily live instruction (depending on their age),
after which they are expected to do independent work. Compared to the traditional six or
seven-hour school day, online education is laughably inadequate. In real time, teachers and
families are watching important developmental windows close for vulnerable children.
Meanwhile the California Democratic Party and its affiliates tout virtual schooling as a
solution for mitigating COVID-19 transmission" Alex Gutentag ( The Bellows
)
Gutentag also notes that the California governor sends his kids to a private school with
in-person learning. Caste.
Not to mention that many children in the U.S. now live in highly-stressed homes. Over forty
million people are at risk of eviction because of unpaid back rent. None of these homes can
afford adequate food. They certainly cannot afford health care.
What happens when a child gets sick in today's America? I suspect for hundreds of thousands
they will, at best, get inconsistent attention from volunteer medical workers -- unless there
is a lockdown in effect. Then they get nothing.
As I say, this brutal reorganization of the economy bears no small similarity to a slave
economy -- but it is being sold to the public by pretending it is this new, technology-driven
Reset. (Own nothing and be happy).
What exactly does the government plan to do with those sixty million unemployed Americans?
What does the UK plan? or Germany or France? Or anywhere? The stimulus package went mostly to
big corporations. And media and state propaganda continue to provide endless distractions (see
assault on the
Capitol , and anything to do with Trump).
There is a clear belief in and emphasis on technology in all this. On AI and robotics and
transhumanism (sic) . This belief in AI to solve almost everything is reaching levels of
delusion that many people, even critics of the Reset, seem to ignore.
So how is it that people have so passively surrendered their rights? The answer is
complex.
First, the idea of cooperation and grass roots organizing have been relentlessly disparaged
in the media for decades. When unions were effectively destroyed under Reagan, along with them
went the last vestiges of collectivity. Hollywood has always made films about individual
triumph, almost never about revolutionary organizing. I think a large number of people today,
even those skeptical, suffer from a kind of inertia. And this too has been built into the
system. And it may well be an aspect of screen habituation.
But before that, people are afraid. The unseen enemy, the invisible virus, the plague, an
enemy that brings fevers and suffering, sickness and death. But that is only a part of the
problem. The Reset is presenting a future of total control for the ruling class.
Why would anyone support this madness? Well, first, because they are being sold on the idea
that it's green, and that THEY, themselves, will be in control. Sort of. And second, they have
limited options.
In a way the long shadow of the Reagan years are evident here. The destruction of unions,
coupled with the loss of real public education, has allowed for the rootless, lonely and
isolated 'individual' of contemporary America. And the utter absence of a real leftist
party.
But it's true for much of Europe, too. Here in Norway the wearing of masks is prevalent in
'high risk' red zones. And one still can't drive across the border to Sweden. I see enormous
stress indicators in children. Even in my children. And they are young. Nobody feels happy.
Isolation does not promote happiness.
Still, how likely is it that this Reset works? I think this question is ignored somewhat and
therefore we need to ask 'for whom does it work'? While there has been enormous amounts of
great stuff written about Schwab and the WEF I must digress a moment (although its not really a
digression, but only appears to be):
There is a basic problem with AI, deep learning, and natural language and, while it is about
language, it applies to other fields as well. This is the Frame problem . And the Frame
problem is intwined with the problem of time.
NOTE: The Frame problem "is the challenge of
representing the effects of action in logic without having to represent explicitly a large
number of intuitively obvious non-effects. But to many philosophers, the AI researchers' frame
problem is suggestive of wider epistemological issues." – Stanford Encyclopedia of Philosophy
– ed.
The Frame
problem is about relevance, and that the outlier issues, while statistically rare, are
actually what distinguish 'smart' people from 'not smart' people. Machine learning, AI, can do
a lot of things, but to over-applaud its achievements without admitting its profound
limitations is going to lead to some catastrophic mistakes and, no doubt, human tragedies.
So far the solution for the new AI cheerleaders is to make the real world like a lab. In one
sense, Singapore, with extensive use of AI via a very authoritarian state apparatus, has
already done this. China is a more complex discussion, and wanting to avoid any idea of an
'Oriental plot', I'm just going to take a Mulligan.
The ruling class anywhere is exempted in all such examples. The majority of humans will be
treated as rats in a lab test. Not even rats, but toys. In other words, highly, if not totally,
expendable.
But the problems with the Reset, and with all of the Green New Deal projects, are that they
operate in a computer model-based world that is rather significantly divorced from real life,
and certainly, intentionally, disregards class (and caste).
There are also new ideas like '
human capital bonds '. It sounds complex but this is just a more draconian loan arrangement
where, if you default, for example while going to medical school, even if you graduate you wont
be allowed to practice. Everything in this new economy gives people less power and less
autonomy.
The issues with all AI and with the advanced technology praised by the Reset are
philosophical more than scientific. Part of the problem is that the real world is enormously
complex. Like weather prediction, anything more than six or seven days out is all but
impossible. There are too many unknown factors and variables. This truth can be extrapolated to
just about any real world problem. But for all the growing skepticism about AI, the proponents
(who know these problems) continue to propagandize the benefits and the infinite possibilities
of an AI-dominated future.
The most absurd are the transhumanists. Given how little is actually known about
consciousness, and considering that all AI is just math, it seems almost infantile to think we
are going to learn better with implants, or work more efficiently. Alongside that is the issue
of prediction. Perhaps this was built into the Enlightenment, but what Adorno and Horkheimer
came to call 'instrumental thinking' is now embraced unquestioningly by the new peddlers of
AI.
Back to the philosophical issue. Wittgenstein famously said:
If a lion could speak, we would not understand it.
Language is part of a shared horizon of the world (as Steven Gambardella put it). Computers
can simulate thought, but only up to a point. (See Chinese Box experiment)
The whole modern conception of the world is founded on the illusion that the so-called
laws of nature are the explanations of natural phenomena. Thus people today stop at the laws
of nature, treating them as something inviolable, just as God and Fate were treated in past
ages. Ludwig Wittgenstein ( Tractatus )
AI is the Alchemy of the 21st century. The new Reset, driven by the high net worth figures
from Wall Street, Silicon Valley, or the Royal Houses of Europe, is a fantasy. But a fantasy
that is part of a long class struggle.
And at a certain point it doesn't matter, not totally, if AI works.
If
errors occur in computation, or in facial recognition, or in food allotments to the
projected new slave class, the billionaires on their yachts wont mind. If the implant in my
brain crashes during a scheduled update, that's just one less servant to feed.
And there is also a clear de-population agenda at work in all this. Certainly David
Attenborough and Baroness Goodall are big on getting rid of the indigenous people in Africa . Nearly all of the
pro-Reset leadership believe in depopulation. Prince Charles, another who prefers he keep his
privilege. It is not an accident that an Ursula von der Leyen is running point for the EU now.
A descendent of the biggest slave trader in Europe at one time. It speaks to exactly why a Hugo
Chavez, for example, so offended these people. Or an Evo Morales. Remember it was not so long
ago that the U.S. worked to control and neutralize African independence movements. While Cuba
and the U.S.S.R. helped to support those movements. Dick Cheney until the 90s called Mandela a
terrorist.
This intentional demolition of capitalism, as we have come to know it, is designed to
enclose populations via surveillance, digital tagging, health passports, and no doubt much
more. Again, if the digital tag doesn't work, so what? I happen to think much of this ruling
class dream is doomed to fail on the technical level. The problem is that it quite possibly
will work on a political and control level.
Depopulation is rebranded eugenics, and nothing else. The royals of Europe have always
longed for a return to what, for them, was colonial grandeur. The fantasy future is nostalgia
for the ruling class. The dream can be traced back to what the Empire has always done. They
destroy anything democratic and/or socialist. They support any dictator at any time because
they believe they deserve more and more of what is better. Let them eat cake.
They have crushed independence and autonomy for all of the 20th century and now into the
21st. The Mau Mau uprising in Kenya, the assassination of Lumumba, Vietnam, Indonesia and
Suharto, El Salvador ( U.S. support for Roberto D'Aubuisson, a fervent admirer of Hitler), or
Nicaragua, or Chile, the former Yugoslavia. One could go on and on and on. The U.S. support for
Papa Doc in Haiti, for Trujillo in the Dominican Republic. Nowhere, at any time, has the
Imperialist and colonial-loving ruling class EVER supported democracy or equality. Never,
nowhere, not once.
The problem is about perception . Take one of the biggest NGOs in the entire New Deal for
Nature; Conservation International . These people work with the WWF, with Club of Rome,
and We Mean Business. These are very wealthy business ventures. Now, Conservation International
also finances the Greta Thunberg films.
HERE is their board of directors, from their web page.
Perception. But Northrup Grummon and Riverstone Holdings. The first is a major player in the
defense industry, the industry that just got a trillion dollars, give or take, from the U.S.
Government. The second is a private equity firm focused on leveraged buyouts. Arnhold LLC is an
investment management company. Banco BTG Pactual S/A is an investment management company and
consultant to corporate trading. You get the idea. These are the people who have helped further
inequality, aided environmental destruction, and helped plunder the assets of countless
countries. The cynicism is jaw dropping, but many people just see Greta, see Green New Deal and
assume this NGO is an innocent well-intentioned and 'woke' eco-venture.
WHY would anyone think that suddenly these people are out to save the planet?
Well, they might think they ARE saving the planet, but not for you and me. For
themselves.
John Steppling is an original founding member of the Padua Hills Playwrights
Festival, a two-time NEA recipient, Rockefeller Fellow in theatre, and PEN-West winner for
playwrighting. He's had plays produced in LA, NYC, SF, Louisville, and at universities across
the US, as well in Warsaw, Lodz, Paris, London and Krakow. He has taught screenwriting and
curated the cinematheque for five years at the Polish National Film School in Lodz, Poland.
Plays include The Shaper, Dream Coast, Standard of the Breed, The Thrill, Wheel of Fortune,
Dogmouth, and Phantom Luck, which won the 2010 LA Award for best play. Film credits include 52
Pick-up (directed by John Frankenheimer, 1985) and Animal Factory (directed by Steve Buscemi,
1999). A collection of his plays was published in 1999 by Sun & Moon Press as Sea of Cortez
and Other Plays. He lives with wife Gunnhild Skrodal Steppling; they divide their time between
Norway and the high desert of southern California. He is artistic director of the theatre
collective Gunfighter Nation. Jan 19, 2021 1:40 PM
great piece. I am perplexed when we speak of the new era we are facing, as a new form of
feudalism. The feudal age it was not just a story between serfs and feudal lords, in Europe, we
also witnessed the birth of Medieval commune, the Municipalities, in which citizens gave
themselves the first laws and rights of free men. "During the 10th century in several parts of
Western Europe, peasants began to gravitate towards walled population centers, as advances in
agriculture (the three-field system) resulted in greater productivity and intense
competition
Such townspeople needed physical protection from lawless nobles and bandits, part of the
motivation for gathering behind communal walls, but also strove to establish their liberties,
the freedom to conduct and regulate their own affairs and security from arbitrary taxation and
harassment from the bishop, abbot, or count in whose jurisdiction these obscure and ignoble
social outsiders lay. This was a long process of struggling to obtain charters that guaranteed
such basics as the right to hold a market. The breakaway from their feudal overlords by these
communes occurred in the late 12th century and 13th century, during the Investiture Controversy
between the Pope and the Holy Roman Emperor. Milan led the Lombard cities against the Holy
Roman Emperors and defeated them, gaining independence (battles of Legnano, 1176, and Parma,
1248). Meanwhile, the Republic of Venice, Pisa and Genoa were able to conquer their naval
empires on the Mediterranean sea (in 1204 Venice conquered three-eights of the Byzantine Empire
in the Fourth Crusade). Cities such as Parma, Ferrara, Verona, Padua, Lucca, Siena, Mantua and
others were able to create stable states at the expenses of their neighbors, some of which
lasted until modern times." https://en.wikipedia.org/wiki/Medieval_commune
."
I've been following her work for several months now and think her premises much sounder
than Matthew Ehret's, who are actually on the same Canadian team. Generally, the three of us
are working on exposing the rise and spread of what's now known as Neoliberalism. And of
course, there's Dr. Hudson who's ahead of us all.
The line of investigation initiated by Upton Sinclair into the shared Board memberships at
key elite universities within the USA that erased the traditional teaching of
political-economy and replaced it with the mathematical economics which lie at the root of
Neoliberalism's Junk Economics
I see as very promising as they're also prominent bankers and Old Money with social
connections to England's Royalty and Nobility--the primary members of Europe's Rentier
Class . When I look over the comments, many have forgotten just what Class owns the
Duopoly and controls the federal government. Trump was never allowed into their circle but
was used by some of its members in the pursuit of interests that are still shrouded in fog.
My working hypothesis there is they were quite worried that too much industrial capacity had
been foreclosed and moved such that it caused a real threat to national security; thus the
need for MAGA.
With the rise of the Eurasian Bloc, the "threat" isn't military; it's economic. As I wrote
earlier today, an economy based on consumerism will collapse when the consumers can no longer
consume. Hudson's 100% correct that debt's that can't be repaid won't. The current degree of
economic polarization is miniscule compared to what might ensue if the Bidenites don't
forestall it--200 Million people bankrupt while 100 Million have good paying jobs and can
afford their debts--the remaining 40-50 Million are mostly impoverished children. This time
the part of the public that gets shafted as in 2009 under Obama isn't going to sit still, and
what happened in DC will be repeated elsewhere with meaning this time. A genuine MAGA Fascist
wanting control will need to disarm the Rentier Class and the Swamp thus ousting the
current "Friendly Fascist" regime--and that would require a paramilitary since that's
basically what composes the Swamp--Civil War between two Factions of Reaction that would also
split the military. Wonder what barflies think of all that?
Earlier in the week I linked to the latest Renegade Inc program which had Dr.
Hudson as one of the guests. That show's
transcript is now available. Here's an excerpt with Ross Ashcroft asking a question:
"Ross: What do you think are the megatrends that we should be looking at in 2021? What do
you think is the direction of travel, if you like, for so-called developed economies?
"Michael Hudson: Well, the big trend in any economy is the growth of debt, because the
debt grows exponentially. The economy has painted itself into a debt corner. We can see that
in real estate. We can see that for small business. There's also almost no way to recover.
The Federal Reserve has been printing quantitative easing to keep stock and bonds high. But
for the real economy, the trend is polarization and lower employment.
"The trend also is that state and local finances are broke, especially in the biggest
cities, New York City, San Francisco and Los Angeles. They're not getting income tax revenue
from the unemployed or closed businesses. They're not getting the real estate tax with so
many defaults and mortgage arrears. In New York City there's talk of cutting back the subways
by 70 percent. People will be afraid to take the subways when they're overcrowded with people
with the virus. So you're having a breakdown not only in state and local finances, but of
public services that are state run – public transportation services, health services,
education is being downsized. Everything that is funded out of state and local budgets is
going to suffer.
"And living standards are going to be very sharply downward as people realize how many
services they got are dependent on public infrastructure."
And this one I must also include:
"Ross: What is the one thing that has really surprised you in 2020? What have you laughed
at? What has given you a chuckle?
"Michael Hudson: The surprise – that I really shouldn't have been surprised at
– is how naive Bernie Sanders supporters were in thinking that they were going to get a
fair deal and that the elections were going to be fair. The illusion is that people were
actually going to have a fair election when the last thing the vested interests wanted was
Bernie Sanders or Elizabeth Warren or any kind of reformer. So what happened to Sanders is
what happened to Corbyn in Britain and the Labour Party's neoliberal leadership.
"So what's for laughs? I guess, Tulsi Gabbard's takedown of Kamala Harris was absolutely
wonderful. Everybody just broke out laughing, cheering for her. And of course, that's why she
was marginalized, and now we have Kamala Harris as the senior vice president."
Of course, none of the dire economic news is being reported with the focus instead on Wall
Street's markets, with much of the public just as brainwashed about it as Trump. The last
third focuses on politics, which is what most barflies want to read about. So, click the link
and read what Dr. Hudson sees in the tea leaves.
The economy develops momentum on its own because of pent-up demand, and depressed
hospitality and airline stocks become strong performers . Fiscal and monetary policy remain
historically accommodative. Nominal economic growth for the full year exceeds 6% and the
unemployment rate falls to 5%. We begin the longest economic cycle in history, surpassing
the cycle that lasted from 2010 to 2020.
The Federal Reserve and the Treasury openly embrace Modern Monetary Theory as their
accommodative policies continue. As long as growth exceeds the rate of inflation, deficits
don't seem to matter. Because inflation increases modestly, gold rallies and
cryptocurrencies gain more respect during the year.
Even as energy company executives cut estimates for long-term growth, near-term
opportunities are increasing. The return to "normal" increases both industrial activity and
mobility, and the price of West Texas Intermediate oil rises to $65/bbl. Rig counts
increase and energy high yield bonds rally soundly. Energy stocks are among the best
performers in 2021.
The equity market broadens out. Stocks beyond health care and technology participate in
the rise in prices. "Risk on" is not without risk and the market corrects almost 20% in the
first half, but the S&P 500 trades at 4,500 later in the year. Cyclicals lead
defensives, small caps beat large caps and the "K" shaped equity market recovery unwinds.
Big cap tech is the source of liquidity, and the stocks are laggards for the year.
The surge in economic growth causes the 10-year Treasury yield to rise to 2%. The yield
curve steepens, but a concomitant increase in inflation keeps real rates near zero. The Fed
wants the strength in housing and autos to continue. As a result, it extends the duration
of bond purchases in order to prevent higher rates at the long end of the curve from
choking off credit to consumers and businesses.
The slide in the dollar turns around. The post-vaccine strength of the U.S. economy and
financial markets attracts investors disenchanted with the rising debt and slower growth of
Europe and Japan. Treasurys maintain a positive yield and the carry trade continues.
The past year began with the assassination of the Iranian military genius General Qasem
Soleimani by the United States, and it ended with the murder of the prominent scholar Mohsen
Fakhrizadeh by the Israelis. In early January, Iran, expecting another aggressive action from
the West, accidently shot down a Ukrainian civil aircraft that had inexplicably altered its
course over Tehran without request nor authorization. Around the same time, Turkey confirmed
the deployment of its military in Libya, beginning a new phase of confrontation in the region,
and Egypt responding with airstrikes and additional shows of force. The situation in Yemen
developed rapidly: taking advantage of the Sunni coalition's moral weakness, Ansar Allah
achieved significant progress in forcing the Saudis out of the country in many regions. The
state of warfare in northwestern Syria has significantly changed, transforming into the formal
delineation of zones of influence of Turkey and the Russian-Iranian-Syrian coalition. This
happened amid, and largely due to the weakening of U.S. influence in the region. Ankara is
steadily increasing its military presence in the areas under its responsibility and along the
contact line. It has taken measures to deter groups linked to Al-Qaeda and other radicals. As a
result, the situation in the region is stabilizing, which has allowed Turkey to increasingly
exert control over most of Greater Idlib.
ISIS cells remain active in the eastern and southern Syrian regions. Particular processes
are taking place in Quneitra and Daraa provinces, where Russian peace initiatives were
inconclusive by virtue of the direct destructive influence of Israel in these areas of Syria.
In turn, the assassination of Qasem Soleimaniin resulted in a sharp increase in the targeting
of American personnel, military and civil infrastructure in Iraq. The U.S. Army was forced to
regroup its forces, effectively abandoning a number of its military installations and
concentrating available forces at key bases. At the same time, Washington flatly rejected
demands from Baghdad for a complete withdrawal of U.S. troops and promised to respond with
full-fledged sanctions if Iraq continued to raise this issue. Afghanistan remains stable in its
instability. Disturbing news comes from Latin America. Confrontation between China and India
flared this year, resulting in sporadic border clashes. This situation seems far from over, as
both countries have reinforced their military posture along the disputed border. The aggressive
actions of the Trump administration against China deepen global crises, which has become
obvious not only to specialists but also to the general public. The relationship between the
collective West and the Russian Federation was re-enshrined in "the Cold War state", which
seems to have been resurrected once again.
The turbulence of the first quarter of 2020 was overshadowed by a new socio-political
process – the corona-crisis, the framework of which integrates various phenomena from the
Sars-Cov2 epidemic itself and the subsequent exacerbation of the global economic crisis. The
disclosure of substantial social differences that have accumulated in modern capitalist
society, lead to a series of incessant protests across the globe. The year 2020 was accompanied
by fierce clashes between protesters professing various causes and law enforcement forces in
numerous countries. Although on the surface these societal clashes with the state appear
disassociated, many share related root causes. A growing, immense wealth inequality, corruption
of government at all levels, a lack of any meaningful input into political decision making, and
the unmasking of massive censorship via big tech corporations and the main stream media all
played a part in igniting societal unrest.
In late 2019 and early 2020 there was little reason for optimistic projections for the near
future. However, hardly anyone could anticipate the number of crisis events and developments
that had taken place during this year. These phenomena affected every region of the world to
some extent.
Nevertheless, Middle East has remained the main source of instability, due to being an arena
where global and regional power interests intertwine and clash. The most important line of
confrontation is between US and Israel-led forces on the one hand, and Iran and its so called
Axis of Resistance. The opposing sides have been locked in an endless spiral of mutual
accusations, sanctions, military incidents, and proxy wars, and recently even crossed the
threshold into a limited exchange of strikes due to the worsening state of regional
confrontation. Russia and Turkey, the latter of which has been distancing itself from
Washington due to growing disagreements with "NATO partners" and changes in global trends, also
play an important role in the region without directly entering into the confrontation between
pro-Israel forces and Iran.
As in the recent years, Syria and Iraq remain the greatest hot-spots. The destruction of
ISIS as a terrorist state and the apparent killing of its leader Abu Bakr al-Baghdadi did not
end its existence as a terror group. Many ISIS cells and supporting elements actively use
regional instability as a chance to preserve the Khalifate's legacy. They remain active mainly
along the Syria-Iraq border, and along the eastern bank of the Euphrates in Syria. Camps for
the temporary displaced and for the families and relatives of ISIS militants on the territory
controlled by the Syrian Democratic Forces (SDF) in north-eastern Syria are also breeding
grounds for terrorist ideology. Remarkably, these regions are also where there is direct
presence of US forces, or, as in the case of SDF camps, presence of forces supported by the
US.
The fertile soil for radicalism also consists of the inability to reach a comprehensive
diplomatic solution that would end the Syrian conflict in a way acceptable to all parties.
Washington is not interesting in stabilizing Syria because even should Assad leave, it would
strengthen the Damascus government that would naturally be allied to Russia and Iran. Opposing
Iran and supporting Israel became the cornerstone of US policy during the Trump administration.
Consequently, Washington is supporting separatist sentiments of the Kurdish SDF leadership and
even allowed it to participate in the plunder of Syrian oil wells in US coalition zone of
control in which US firms linked to the Pentagon and US intelligence services are
participating. US intelligence also aids Israel in its information and psychological warfare
operations, as well as military strikes aimed at undermining Syria and Iranian forces located
in the country. In spite of propaganda victories, in practice Israeli efforts had limited
success in 2020 as Iran continued to strengthen its positions and military capabilities on its
ally's territory. Iran's success in establishing and supporting a land corridor linking
Lebanon, Syria, Iraq, and Iraq, plays an important role. Constant expansion of Iran's military
presence and infrastructure near the town of al-Bukamal, on the border of Iraq and Syria,
demonstrates the importance of the project to Tehran. Tel-Aviv claims that Iran is using that
corridor to equip pro-Iranian forces in southern Syria and Lebanon with modern weapons.
The Palestinian question is also an important one for Israel's leadership and its lobby in
Washington. The highly touted "deal of the century" turned out to be no more than an offer for
the Palestinians to abandon their struggle for statehood. As expected, this initiative did not
lead to a breakthrough in Israeli-Palestinian relations. Rather the opposite, it gave an
additional stimulus to Palestinian resistance to the demands that were being imposed. At the
same time, Trump administration scored a diplomatic success by forcing the UAE and Bahrain to
normalize their relations with Israel, and Saudi Arabia to make its collaboration with Israel
public. That was a historic victory for US-Israel policy in the Middle East. Public
rapprochement of Arab monarchies and Israel strengthened the positions of Iran as the only
country which not only declares itself as Palestine's and Islamic world's defender, but
actually puts words into practice. Saudi Arabia's leadership will particularly suffer in terms
of loss of popularity among its own population, already damaged by the failed war in Yemen and
intensifying confrontation with UAE, both of which are already using their neighbor's weakness
to lay a claim to leadership on the Arabian Peninsula.
The list of actors strengthening their positions in the Red Sea includes Russia. In late
2020 it became known that Russia reached an agreement with Sudan on establishing a naval
support facility which has every possibility to become a full-blown naval base. This foothold
will enable the Russian Navy to increase its presence on key maritime energy supply routes on
the Red Sea itself and in the area between Aden and Oman straits. For Russia, which has not had
naval infrastructure in that region since USSR's break-up, it is a significant diplomatic
breakthrough. For its part. Sudan's leadership apparently views Russia's military presence as a
security factor allowing it to balance potential harmful measures by the West.
During all of 2020, Moscow and Beijing continued collaboration on projects in Africa,
gradually pushing out traditional post-colonial powers in several key areas. The presence of
Russian military specialists in the Central African Republic where they assist the central
government in strengthening its forces, escalation of local conflicts, and ensuring the
security of Russian economic sectors, is now a universally known fact. Russian diplomacy and
specialists are also active in Libya, where UAE and Egypt which support Field Marshal Khaftar,
and Turkey which supports the Tripoli government, are clashing. Under the cover of declarations
calling for peace and stability, foreign actors are busily carving up Libya's energy resources.
For Egypt there's also the crucial matter of fighting terrorism and the presence of groups
affiliated with Muslim Brotherhood which Cairo sees as a direct threat to national
security.
The Sahel and the vicinity of Lake Chad remain areas where terror groups with links to
al-Qaeda and ISIS remain highly active. France's limited military mission in the Sahara-Sahel
region has been failure and could not ensure sufficient support for regional forces in order to
stabilize the situation. ISIS and Boko-Haram continue to spread chaos in the border areas
between Niger, Nigeria, Cameroun, and Chad. In spite of all the efforts by the region's
governments, terrorists continue to control sizable territories and represent a significant
threat to regional security. The renewed conflict in Ethiopia is a separate problem, in which
the federal government was drawn into a civil war against the National Front for the Liberation
of Tigray controlling that province. The ethno-feudal conflict between federal and regional
elites threatens to destabilize the entire country if it continues.
The explosive situation in Africa shows that post-colonial European powers and the "Global
Policeman" which dominated that continent for decades were not interested in addressing the
continent's actual problem. Foreign actors were mainly focused on extracting resources and
ensuring the interests of a narrow group of politicians and entities affiliated with foreign
capitals. Now they are forced to compete with the informal China-Russia bloc which will use a
different approach that may be a described as follows: Strengthening of regional stability to
protect investments in economic projects. Thus it is no surprise that influential actors are
gradually losing to new but more constructive forces.
Tensions within European countries have been on the rise during the past several years, due
to both the crisis of the contemporary economic paradigm and to specific regional problems such
as the migration crises and the failure of multiculturalism policies, with subsequent
radicalization of society.
Unpleasant surprises included several countries' health care and social protection networks'
inability to cope with the large number of COVID-19 patients. Entire systems of governance in a
number of European countries proved incapable of coping with rapidly developing crises. This is
true particularly for countries of southern Europe, such as Italy, Spain, Portugal, and Greece.
Among eastern European countries, Hungary's and Romania's economies were particularly badly
affected. At the same time, Poland's state institutions and economy showed considerable
resilience in the face of crisis. While the Federal Republic of Germany suffered considerable
economic damage in the second quarter of 2020, Merkel's government used the situation to inject
huge sums of liquidity into the economy, enhanced Germany's position within Europe, and
moreover Germany's health care and social protection institutions proved capable and
sufficiently resilient.
Coronavirus and subsequent social developments led to the emergence of the so-called "Macron
Doctrine" which amounts to an argument that EU must obtain strategic sovereignty. This is
consistent with the aims of a significant portion of German national elites. Nevertheless,
Berlin officially criticized Macron's statements and has shown willingness to enter into a
strategic partnership with Biden Administration's United States as a junior partner. However,
even FRG's current leadership understands the dangers of lack of strategic sovereignty in an
era of America's decline as the world policeman. Against the backdrop of a global economic
crisis, US-EU relations are ineluctably drifting from a state of partnership to one of
competition or even rivalry. In general, the first half of 2020 demonstrated the vital
necessity of further development of European institutions.
The second half of 2020 was marked by fierce mass protests in Germany, France, Great
Britain, and other European countries. The level of violence employed by both the protesters
and law enforcement was unprecedented and is not comparable to the level of violence seen
during protests in Russia, Belarus, and even Kirgizstan. Mainstream media did their best to
depreciate and conceal the scale of what was happening. If the situation continues to develop
in the same vein, there is every chance that in the future, a reality that can be described as
a digital concentration camp may form in Europe.
World media, for its part, paid particular attention to the situation in Belarus, where
protests have entered their fourth month following the August 9, 2020 presidential elections.
Belarusian protests have been characterized by their direction from outside the country and
choreographed nature. The command center of protest activities is officially located in Poland.
This fact is in and of itself unprecedented in Europe's contemporary history. Even during
Ukraine's Euromaidan, external forces formally refused to act as puppetmasters.
Belarus' genuinely existing socio-economic problems have led to a rift within society that
is now divided into two irreconcilable camps: proponents of reforms vs. adherents of the
current government. Law enforcement forces which are recruited from among President
Lukashenko's supporters, have acted forcefully and occasionally harshly. Still, the number of
casualties is far lower than, for example, in protests in France or United States.
Ukraine itself, where Western-backed "democratic forces" have already won, remains the main
point of instability in Eastern Europe. The Zelenskiy administration came to power under
slogans about the need to end the conflict in eastern Ukraine and rebuild the country. In
practice, the new government continued to pursue the policy aimed at maintaining military
tension in the region in the interests of its external sponsors and personal enrichment.
For the United States, 2020 turned out to be a watershed year for both domestic and foreign
policy. Events of this year were a reflection of Trump Administration's protectionist foreign
policy and a national-oriented approach in domestic and economic policy, which ensured an
intense clash with the majority of Washington Establishment acting in the interests of global
capital.
In addition to the unresolved traditional problems, America's problems were made worse by
two crises, COVID-19 spread and BLM movement protests. They ensured America's problems reached
a state of critical mass.
One can and should have a critical attitude toward President Trump's actions, but one should
not doubt the sincerity of his efforts to turn the slogan Make America Great Again into
reality. One should likewise not doubt that his successor will adhere to other values. Whether
it's Black Lives Matter or Make Global Moneymen Even Stronger, or Russia Must Be Destroyed, or
something even more exotic, it will not change the fact America we've known in the last half
century died in 2020. A telling sign of its death throes is the use of "orange revolution"
technologies developed against inconvenient political regimes. This demonstrated that currently
the United States is ruled not by national elites but by global investors to whom the interests
of ordinary Americans are alien.
This puts the terrifying consequences of COVID-19 in a new light. The disease has struck the
most vulnerable layers of US society. According to official statistics, United States has had
about 20 million cases and over 330,000 deaths. The vast majority are low-income inhabitants of
mega-cities. At the same time, the wealthiest Americans have greatly increased their wealth by
exploiting the unfolding crisis for their own personal benefit. The level of polarization of US
society has assumed frightening proportions. Conservatives against liberals, blacks against
whites, LGBT against traditionalists, everything that used to be within the realm of public
debate and peaceful protest has devolved into direct, often violent, clashes. One can observe
unprecedented levels of aggression and violence from all sides.
In foreign policy, United States continued to undermine the international security system
based on international treaties. There are now signs that one of the last legal bastions of
international security, the New START treaty, is under attack. US international behavior has
prompted criticism from NATO allies. There are growing differences of opinion on political
matters with France and economic ones with Germany. The dialogue with Eastern Mediterranean's
most powerful military actor Turkey periodically showed a sharp clash of interests.
Against that backdrop, United States spent 2020 continuously increasing its military
presence in Eastern Europe and the Black Sea basin. Additional US forces and assets were
deployed in direct proximity to Russia's borders. The number of offensive military exercises
under US leadership or with US participation has considerably increased.
In the Arctic, the United States is acting as a spoiler, unhappy with the current state of
affairs. It aims to extend its control over natural resources in the region, establish
permanent presence in other countries' exclusive economic zones (EEZ) through the use of the
so-called "freedom of navigation operations" (FONOPs), and continue to encircle Russia with
ballistic missile defense (BMD) sites and platforms.
In view of the urgent and evident US preparations to be able to fight and prevail in a war
against a nuclear adversary, by defeating the adversary's nuclear arsenal through the
combination of precision non-nuclear strikes, Arctic becomes a key region in this military
planning. The 2020 sortie by a force of US Navy BMD-capable AEGIS destroyers into the Barents
Sea, the first such mission since the end of the Cold War over two decades ago, shows the
interest United States has in projecting BMD capabilities into regions north of Russia's
coastline, where they might be able to effect boost-phase interceptions of Russian ballistic
missiles that would be launched in retaliatory strikes against the United States. US
operational planning for the Arctic in all likelihood resembles that for South China Sea, with
only a few corrections for climate.
In Latin America, the year of 2020 was marked by the intensification Washington efforts
aimed at undermining the political regimes that it considered to be in the opposition to the
existing world order.
Venezuela remained one of the main points of the US foreign policy agenda. During the entire
year, the government of Nicolas Maduro was experiencing an increasing sanction, political and
clandestine pressure. In May, Venezuelan security forces even neutralized a group of US
mercenaries that sneaked into the country to stage the coup in the interests of the
Washington-controlled opposition and its public leader Juan Guaido. However, despite the
recognition of Guaido as the president of Venezuela by the US and its allies, regime-change
attempts, and the deep economic crisis, the Maduro government survived.
This case demonstrated that the decisive leadership together having the support of a notable
part of the population and working links with alternative global centers of power could allow
any country to resist to globalists' attacks. The US leadership itself claims that instead of
surrendering, Venezuela turned itself into a foothold of its geopolitical opponents: China,
Russia, Iran and even Hezbollah. While this evaluation of the current situation in Venezuela is
at least partly a propaganda exaggeration to demonize the 'anti-democratic regime' of Maduro,
it highlights parts of the really existing situation.
The turbulence in Bolivia ended in a similar manner, when the right wing government that
gained power as a result of the coup in 2019 demonstrated its inability to rule the country and
lost power in 2020. The expelled president, Evo Morales, returned to the country and the
Movement for Socialism secured their dominant position in Bolivia thanks to the wide-scale
support from the indigenous population. Nonetheless, it is unlikely that these developments in
Venezuela and Bolivia would allow to reverse the general trend towards the destabilization in
South America.
The regional economic and social turbulence is strengthened by the high level of organized
crime and the developing global crisis that sharpened the existing contradictions among key
global and regional players. This creates conditions for the intensification of existing
conflicts. For example, the peace process between the FARC and the federal government is on the
brink of the collapse in Colombia. Local sources and media accuse the government and affiliated
militias of detentions and killings of leaders of local communities and former FARC members in
violation of the existing peace agreement. This violence undermine the fragile peace process
and sets conditions for the resumption of the armed struggle by FARC and its supporters. Mexico
remains the hub for illegal migration, drug and weapon trafficking just on the border with the
United States. Large parts of the country are in the state of chaos and are in fact controlled
by violent drug cartels and their mercenaries. Brazil is in the permanent state of political
and economic crisis amid the rise of street crime.
These negative tendencies affect almost all states of the region. The deepening global
economic crisis and the coronavirus panic add oil to the flame of instability.
Countries of South America are not the only one suffering from the crisis. It also shapes
relations between global powers. Outcomes of the ongoing coronavirus outbreak and the global
economic crisis contributed to the hardening of the standoff between the United States and
China.
Washington and Beijing have insoluble contradictions. The main of them is that China has
been slowly but steadily winning the race for the economic and technological dominance
simultaneously boosting own military capabilities to defend the victory in the case of a
military escalation. The sanction, tariff and diplomatic pressure campaign launched by the
White House on China since the very start of the Trump Presidency is a result of the
understanding of these contradictions by the Trump administration and its efforts to guarantee
the leading US position in the face of the global economic recession. The US posture towards
the South China Sea issues, the political situation in Hong Kong, human rights issues in
Xinjiang, the unprecedented weapon sales to Taiwan, the support of the militarization of Japan
and many other questions is a part of the ongoing standoff. Summing up, Washington has been
seeking to isolate China through a network of local military alliances and contain its economic
expansion through sanction, propaganda and clandestine operations.
The contradictions between Beijing and Washington regarding North Korea and its nuclear and
ballistic missile programs are a part of the same chain of events. Despite the public rhetoric,
the United States is not interested in the full settlement of the Korea conflict. Such a
scenario that may include the reunion of the North and South will remove the formal
justification of the US military buildup. This is why the White House opted to not fulfill its
part of the deal with the North once again assuring the North Korean leadership that its
decision to develop its nuclear and missile programs and further.
Statements of Chinese diplomats and top official demonstrate that Beijing fully understands
the position of Washington. At the same time, China has proven that it is not going to abandon
its policies aimed at gaining the position of the main leading power in the post-unipolar
world. Therefore, the conflict between the sides will continue escalating in the coming years
regardless the administration in the White House and the composition of the Senate and
Congress. Joe Biden and forces behind his rigged victory in the presidential election will
likely turn back from Trump's national-oriented economic policy and 'normalize' relations with
China once again reconsidering Russia as Enemy #1. This will not help to remove the insoluble
contradictions with China and reverse the trend towards the confrontation. However, the Biden
administration with help from mainstream media will likely succeed in hiding this fact from the
public by fueling the time-honored anti-Russian hysteria.
As to Russia itself, it ended the year of 2020 in its ordinary manner for the recent years:
successful and relatively successful foreign policy actions amid the complicated economic,
social and political situation inside the country. The sanction pressure, coronavirus-related
restrictions and the global economic crisis slowed down the Russian economy and contributed to
the dissatisfaction of the population with internal economic and social policies of the
government. The crisis was also used by external actors that carried out a series of
provocations and propaganda campaigns aimed at undermining the stability in the country ahead
of the legislative election scheduled for September 2021. The trend on the increase of sanction
pressure, including tapering large infrastructure projects like the Nord Stream 2, and
expansion of public and clandestine destabilization efforts inside Russia was visible during
the entire year and will likely increase in 2021. In the event of success, these efforts will
not only reverse Russian foreign policy achievements of the previous years, but could also put
in danger the existence of the Russian statehood in the current format.
Among the important foreign policy developments of 2020 underreported by mainstream media is
the agreement on the creation of a Russian naval facility on the coast of the Red Sea in Sudan.
If this project is fully implemented, this will contribute to the rapid growth of Russian
influence in Africa. Russian naval forces will also be able to increase their presence in the
Red Sea and in the area between the Gulf of Aden and the Gulf of Oman. Both of these areas are
the core of the current maritime energy supply routes. The new base will also serve as a
foothold of Russia in the case of a standoff with naval forces of NATO member states that
actively use their military infrastructure in Djibouti to project power in the region. It is
expected that the United States (regardless of the administration in the White House) will try
to prevent the Russian expansion in the region at any cost. For an active foreign policy of
Russia, the creation of the naval facility in Sudan surpasses all public and clandestine
actions in Libya in recent years. From the point of view of protecting Russian national
interests in the Global Oceans, this step is even more important than the creation of the
permanent air and naval bases in Syria.
As well as its counterparts in Washington and Beijing, Moscow contributes notable efforts to
the modernization of its military capabilities, with special attention to the strategic nuclear
forces and hypersonic weapons. The Russians see their ability to inflict unacceptable damage on
a potential enemy among the key factors preventing a full-scale military aggression against
them from NATO. The United Sates, China and Russia are in fact now involved in the hypersonic
weapon race that also includes the development of means and measures to counter a potential
strike with hypersonic weapons.
The new war in Nagorno-Karabakh became an important factor shaping the balance of power in
the South Caucasus. The Turkish-Azerbaijani bloc achieved a sweeping victory over Armenian
forces and only the involvement of the Russian diplomacy the further deployment of the
peacekeepers allowed to put an end to the violence and rescue the vestiges of the
self-proclaimed Armenian Republic of Artsakh. Russia successfully played a role of mediator and
officially established a military presence on the sovereign territory of Azerbaijan for the
next 5 years. The new Karabakh war also gave an additional impulse in the Turkish-Azerbaijani
economic and military cooperation, while the pro-Western regime in Armenia that expectedly led
the Armenian nation to the tragedy is balancing on the brink of collapse.
The Central Asia traditionally remained one of the areas of instability around the world
with the permanent threat of militancy and humanitarian crisis. Nonetheless, despite forecasts
of some analysis, the year of 2020 did not become the year of the creation of ISIS' Caliphate
2.0 in the region. An important role in preventing this was played by the Taliban that
additionally to securing its military victories over the US-led coalition and the US-backed
Kabul government, was fiercely fighting ISIS cells appearing in Afghanistan. The Taliban, which
controls a large part of Afghanistan, was also legalized on the international scene by direct
talks with the United States. The role of the Taliban will grow and further with the reduction
of the US military presence.
While some media already branded the year of 2020 as one of the worst in the modern history,
there are no indications that the year of 2021 will be any brighter or the global crises and
regional instability will magically disappear by themselves. Instead, most likely 2020 was just
a prelude for the upcoming global shocks and the acute standoff for markets and resources in
the environment of censorship, legalized total surveillance, violations of human rights under
'democratic' and 'social' slogans' and proxy wars.
The instability in Europe will likely be fueled by the increasing cultural-civilizational
conflict and the new wave of newcomers that have acute ideological and cultural differences
with the European civilization. The influx of newcomers is expected due to demographic factors
and the complicated security, social situation in the Middle East and Africa. Europe will
likely try to deal with the influx of newcomers by introducing new movement and border
restrictions under the brand of fighting coronavirus. Nonetheless, the expected growth of the
migration pressure will likely contribute to the negative tendencies that could blow up Europe
from inside.
The collapse of the international security system, including key treaties limiting the
development and deployment of strategic weapons, indicates that the new detente on the global
scene will remain an improbable scenario. Instead, the world will likely move further towards
the escalation scenario as at least a part of the current global leadership considers a large
war a useful tool to overcome the economic crisis and capture new markets. Russia, with its
large territories, rich resources, a relatively low population, seems to be a worthwhile
target. At the same time, China will likely exploit the escalating conflict between Moscow and
the US-led bloc to even further increase its global positions. In these conditions, many will
depend on the new global order and main alliances within it that are appearing from the
collapsing unipolar system. The United States has already lost its unconditional dominant role
on the international scene, but the so-called multipolar world order has not appeared yet. The
format of this new multipolar world will likely have a critical impact on the further
developments around the globe and positions of key players involved in the never-ending Big
Game.
* * *
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Usually such prediction are not worth electrons to are needed to display them on the screen
but the idea that "[paper gold" offer no hadge might be sound. Whether natural gat wil rally as
he predicts is another story ("Buy natural gas because Williams expects it to rally.") If the
stock market followed his forecasts he probably would be billionaire, especially with his
tendency to trade futures.
It is not clear how long the market can levitate at current high but some kind of 2008
reckoning might be in the cards. When and what might be the trigger is not clear. But as one
commenter said "I don't believe that all of the damage caused by our pandemic has been adequately
summed up" The disconnect between the actual economy and the stock market can't last
forever.
I've watched Williams accurately call many market twists and turns in the 15 years I've known
him. I know of more than a few money managers who trust his judgement. Williams has won or
placed well in the I've watched Williams accurately call many market twists and turns in the 15
years I've known him. I know of more than a few money managers who trust his judgement.
Williams has won or placed well in the World Cup
Trading Championship several times since the 1980s To make market calls, Williams uses his
own time-tested mix of fundamentals, seasonal trends, technical signals and intelligence
gleaned from the Commitment of Traders report from the Commodity Futures Trading Commission
(CFTC). Here's how he thinks about the three types of positions the CFTC reports. Williams
considers positioning by commercial traders or hedgers and users and producers of commodities
to be the smart money. He thinks large traders, mainly big investment shops, and the public are
contrarian indicators. Williams mainly trades futures because he thinks that's where you can
make the big money. But we can apply his calls to stocks and exchange traded funds, too. Here's
how he's positioning for the next few weeks and through the end of the year, in some of the
major asset classes and stocks. To make market calls, Williams uses his own time-tested mix of
fundamentals, seasonal trends, technical signals and intelligence gleaned from the Commitment
of Traders report from the Commodity Futures Trading Commission (CFTC). Here's how he thinks
about the three types of positions the CFTC reports. Williams considers positioning by
commercial traders or hedgers and users and producers of commodities to be the smart money. He
thinks large traders, mainly big investment shops, and the public are contrarian indicators.
Williams mainly trades futures because he thinks that's where you can make the big money. But
we can apply his calls to stocks and exchange traded funds, too. Here's how he's positioning
for the next few weeks and through the end of the year, in some of the major asset classes and
stocks. To make market calls, Williams uses his own time-tested mix of fundamentals, seasonal
trends, technical signals and intelligence gleaned from the Commitment of Traders report from
the Commodity Futures Trading Commission (CFTC). Here's how he thinks about the three types of
positions the CFTC reports. Williams considers positioning by commercial traders or hedgers and
users and producers of commodities to be the smart money. He thinks large traders, mainly big
investment shops, and the public are contrarian indicators. Williams mainly trades futures
because he thinks that's where you can make the big money. But we can apply his calls to stocks
and exchange traded funds, too. Here's how he's positioning for the next few weeks and through
the end of the year, in some of the major asset classes and stocks. Williams mainly trades
futures because he thinks that's where you can make the big money. But we can apply his calls
to stocks and exchange traded funds, too. Here's how he's positioning for the next few weeks
and through the end of the year, in some of the major asset classes and stocks. Williams mainly
trades futures because he thinks that's where you can make the big money. But we can apply his
calls to stocks and exchange traded funds, too. Here's how he's positioning for the next few
weeks and through the end of the year, in some of the major asset classes and stocks.
Expect an extended stock market selloff
To make market calls in September, Williams turns to what he calls the Machu Picchu trade,
because he discovered this signal while traveling to the ancient Inca ruins with his wife in
2014. Williams, who is intensely focused on seasonal patterns that consistently play out over
time, noticed that it's usually a great idea to sell stocks -- using indexes, mostly -- on the
seventh trading day before the end of September. (This year, that's Sept. 22.) Selling on this
day has netted profits in short-term trades 100% of the time over the past 22 years.
... ... ...
One caveat: Watch the advance-decline line, one of Williams' favorite indicators. If fewer
stocks are declining relative to advancers on days the stock market is weak, or if there is a
broadening out of participation on up days, this is a sign the any selloff may be coming to a
close.
"If great breadth comes in to the market [on up days], then I will get bullish," he
says.
Gold offers no hedge
A lot of people think gold serves as a hedge during stock market declines, but this isn't
true, says Williams. Gold has slumped along with stocks in most of the major market selloffs.
He expects the same over the next three to four weeks. He's advising gold traders to sell any
rallies now, and then revisit when gold falls later this year to buy back lower.
To make this call, Williams looks at the typical seasonal pattern for gold that plays out
every year, and also the historical trends in election years. The conclusion: Gold typically
peaks around the middle of September then weakens for most of the rest of the year. This year,
gold has underperformed its typical seasonal pattern, which is bearish for the metal.
"Gold has not been able to stay in step with what happened in the past, therefore the
seasonal pattern should work this year," he says.
Another sign of potential weakness is the "crazy bullishness on gold" among the right-wing
pundits like Ron Paul who have a long-standing affinity for the medal.
"They're all on the bandwagon because of the rally in gold," he says.
As with gold, he expects a similar seasonal pattern in other precious metals and copper.
They will be weak from now through the end of the year, with a possible bounce in the middle of
October.
Michael Brush is a Manhattan-based financial writer who publishes the stock newsletter Brush
Up on Stocks. Brush has covered business for the New York Times and The Economist group. He
attended Columbia Business School in the Knight-Bagehot program. Günter
Wolfeschlegelsteinhausenbergerdorff 11 hours ago Only this September there is a the Fed, a
pandemic, Robinhood and Trump, and his corrupt administration. Factor in those variables and
it's impossible to predict what the market is going to do. Will remain in all cash till after
the election. Stuart Young 11 hours ago I don't believe that all of the damage caused by our
pandemic has been adequately summed up. Our U.S. Government may suffer huge consequences as a
result of trillions of dollars in new debt. The law of gravity can be defied on so long. LT
Murray 1 day ago Valualtions are now about where they were in the summer when there was all the
talk about a V-shaped recovery that is now known not to be the case.
The epidemic was almost certainly the knockout punch for many businesses that were already barely
surviving before the shock.
Notable quotes:
"... Needless to say, a rebound from the lockdowns was inevitable. All sorts of activities like dentist appointments on hold (and dentistry personnel accounted for 10% of the job gains), and so there's pent up demand for medical procedures and treatments, as well as more mundane services that many regard as critical, like haircuts. ..."
"... Multiple factors are working together to bias observers to underestimate the severity of Covid-19 economic damage. ..."
"... The first is that it has hit parts of the economy that are relatively removed from media coverage: low income service workers and small business owners. ..."
"... Second is that in the middle income to better off sections of the country, things still look reassuringly normal. ..."
"... Third is that due to optimism bias and/or having experienced the 1987 crash, the dotcom bust, and 9/11, many people are predisposed to believe that even if the pain of spring 2020 is acute, that the economy will rebound and nearly all of the damage will be erased by year end or say at worst, mid 2021. Underscoring that it a widespread tendency to see Mr. Market at the economy. ..."
"... Colleges will have a lot of trouble this fall. ..."
"... PPP loans are keeping workers on the books through late June-mid July, depending on when the loan came in. Many employers, ranging from museums to small manufacturers are saying they have to make deep headcount cuts then ..."
"... Cutting across all the categories of businesses suffering from Covid-19 damage .restaurants, shops in office districts, merchants in college towns, small manufacturers ..."
"... State and local governments are already hemorrhaging jobs and it will get worse ..."
"... But wages have been largely stagnant since at least 2000, and spending increases since 2010 were powered by rising personal and corporate debts. ..."
"... Both 4-year and 2-year community colleges produce RN's. Both have clinical (hospital) requirements. Of course, 4-year colleges produce RN's with greater academic depth. Doesn't mean they are better nurses. But they are the ones roaming the ICU's because they have the greater depth of knowledge. ..."
"... governments will seemingly fail to recognize that strong keynesian intervention is mandated and has to be maintained for long if they don't want depression to keep its course while the usual hawks are already asking for termination of state aid programs. We had first epidemic negationism and now we face economic negationism as if the value of stocks would by itself fix everything back to normal. Harder times ahead unfortunately. ..."
"... I think most of the long-term job losses will be low income jobs (less than $40k/year). This is the group that recent statistics showed is at spending levels similar to last year, but much of that is supported by federal stimulus money ($600/wk unemployment, $1,200 check, PPP). When that dries up, that spending will likely decline. Many of those low income jobs will not have come back for two years as they are in hospitality and entertainment types of sectors. The drive-thru fast-food and takeout restaurants are doing fine – everything else is suffering and many will go permanently out of business. It is going to be a bloodbath in downtown areas in major cities. ..."
"... Combined with a 3 trillion dollar spending bill, we have an unprecedented increase in aggregate demand from the average American. Now that the economy starts to open up a bit, there is actually something to spend the money on other than Amazon purchases. ..."
"... One of the biggest ironies of all is that the health care industry is suffering because the expense of treating coronavirus is not offset by enough income but it is still crowding out other services. I doubt any big hospitals will go under, but the small rural ones have been dropping like flies for a few years now. ..."
"... people are putting off going in for imaging procedures and lab work because they are afraid the clinics and hospital labs are dangerous places. ..."
"... My son's lender gave him 3 months "forbearance". At the end of the three months they billed him for a triple mortgage payment. ..."
"... One of the difficult things about the current situation is the remarkable shortage of PPE and the difficulty the manufacturing sector seems to have both meeting the existing demand and coming up with improved products at scale. Since PPE is safety-critical (failures will cause injury or death), and since almost all manufacturing seems to have been outsourced to China where quality is suspect at best, it's hard to be optimistic about the situation improving. In fact, as new protocols evolve around the world in which PPE is the new normal, shortages and counterfeit products seem likely to get worse. ..."
"... Sporting events (not that I follow any) have economic impact and there will not be any residual demand when they are permitted. ..."
"... While not directly connected to the pandemic, it is overlapping in timing of the economic damage. The collapse of oil prices has laid waste to the shale revolution. ..."
"... GDP growth . Forget it, it's over . De-growth is the new normal. This reality will become apparent as the parasites – hedge funds, private equity et al – begin to fall later this year. ..."
"... for retirees (who are of course at higher risk of COVID-19 fatality spectrum) there is no -- absolutely zero -- desire to hit the malls and the large stores. ..."
"... The mid-level pub and restaurant trade will be decimated. There was over-supply before and this is now chronically exposed. All we passed were shuttered -- some offering take-out, which might be a life line but they are typically too far from the town centres to compete with the cheap kebab, chicken and Indian walk-ups. Plus, people won't pay a gourmet premium to spoon something out of a foil tray themselves. However, at the lower end of the market, those fast-food places with drive-thrus will be fine -- queues round the block at McDonalds, KFC and Starbucks. ..."
"... Here in Oregon we have had a serious outbreak of Covid in a seafood packing plant in Newport. And we learn that the majority of the workforce come from Guatemala, Serbia, and Ukraine. How can this make economic sense? ..."
"... A large greenhouse (64 acres under glass) near here was the largest COVID cluster outside of NYC. Two hundred "guest" workers were housed 4 to a room, 2 in each bed at cheap motels. The Canadian owners pay local workers and "guests " $13/hour. But the labor contactor gets an amount on top, plus there is the housing, food and transportation for the "guests". ..."
"... Home sales here are really hot – a big exodus from Seattle is driving it. ..."
"... real wages for USA men at the 50% percentile level are down -5.1% over the 1979 to 2018 time frame. ..."
"... Given that the USA has had infrastructure declining (lowering quality of life), housing, medical and educational costs rising in excess of inflation, USA wage earners were hurting, at the median level, well before Covid-19 and well before 2000. ..."
"... Shops are already going under here in Silicon Valley. I've driven down Santa Cruz Ave. in Menlo Park a few times over the last week and there are a fair number of empty storefronts. It is the fancy shopping street in town. Since I don't actually shop there I couldn't tell what sorts of shops had closed. ..."
"... It's going to be deep and lasting because it only increases the systemic problem of growing income inequality. There were viruses before and there will be more after. In this case, the response was to grow the ghetto, faster. Fintech has to go in for the kill shot here ..."
"... DC control technology can only increase income inequality so long as it is the primary recipient of MMT. It's one and zeroes, a completely arbitrary binary outcome. ..."
Too many people who should know better are taking a big bounce in retail sales as a sign that an economic
recovery is well underway. It is, but only in the sense that going from the ICU to a hospital bed could also
be defined as a recovery. In keeping, the Atlanta Fed's GDPNow forecast for the second quarter has improved
from negative 52.8% to a sunny negative 45.5%.
Needless to say, a rebound from the lockdowns was
inevitable. All sorts of activities like dentist appointments on hold (and dentistry personnel accounted for
10% of the job gains), and so there's pent up demand for medical procedures and treatments, as well as more
mundane services that many regard as critical, like haircuts.
Nevertheless, stock indices rising to new highs looks remarkably out of touch in light of the baked-in
and certain-to-continue-for-long-enough-to-matter damage. The true believers are in "Central banks are on
the case and will save us" mode. Perhaps they need to heed the warning, "Past results are no guarantee of
future performance."
Multiple factors are working together to bias observers to underestimate the severity of Covid-19
economic damage.
The first is that it has hit parts of the economy that are relatively removed from media coverage: low
income service workers and small business owners. Tell me how often CNN goes to interview the owner of a dry
cleaner or auto lube shop, even though small businesses have long been the generator of new jobs. Similarly,
notice how reports of Covid-19 infections at food processing facilities isn't covered until the capacity
taken out rises to a level where it might impact consumers. In keeping, Bloomberg had a story today,
More Food Shortages Loom With Outbreaks at 60 U.S Plants
, of outbreaks at non-meat processing
facilities, like fruit and vegetable packers and bakeries.
Second is that in the middle income to better off sections of the country, things still look reassuringly
normal. The lockdowns froze activity including business closures. I now live in a twee suburb, and in the
local shopping districts, there are not yet any vacant storefronts, even though some businesses in not so
prominent locations (a liquor store, the restaurant with the best pizza in the area, and an Olive Garden
branch, for starters) have folded; a lot of better restaurants have not reopened even though the lockdown
ended a couple of weeks ago.
On top of that, houses in tony suburban and exurban areas are in keen demand. So on top of feeling good
about their stock portfolios, upper middle class homeowners in those areas are positively chuffed about
reports of brisk property sales at strong prices.
Third is that due to optimism bias and/or having experienced the 1987 crash, the dotcom bust, and 9/11,
many people are predisposed to believe that even if the pain of spring 2020 is acute, that the economy will
rebound and nearly all of the damage will be erased by year end or say at worst, mid 2021. Underscoring that
it a widespread tendency to see Mr. Market at the economy.
This is far from a comprehensive list, but below are eight reasons why the deep damage to the economy
won't be reversed any time soon.
1. Business travel is not coming back any time soon. People are getting accustomed to Zoom. And word may
also get out that domestic flying is much worse than it used to be, which will be a deterrent to those who
might be so bold as to want to get on a plane. That is a fundamental blow to airlines, airport vendors,
hotels, restaurants, and convention centers. Hotel occupancy in April was 24.5% which if anything seems high
based on my personal datapoints. The pricings I see say that hotel operators are not expecting much if any
improvement through the summer. And as we discussed, hotels are at risk of creating a vicious cycle: they've
cut service levels drastically as a way to reduce the bleeding of the low occupancy rates. But even at
knocked-down prices, the degraded experience is enough to make travelers think twice about getting on the
road.
2. White collar workers will not be going back to offices in the old numbers. Elevators and public
transport, particularly commuter trains, are perceived as big risks. And a lot of cities can't cope well
with people driving in. NYC is extreme here but it's now short of parking space even with midtown looking
freakily underpopulated. Moreover, many large corporations, having had to figure out how to make work from
home manageable, have decided they can cope with it or even like it, so they plan to cut their office space
when lease renewals come up. That development will thin out tons of businesses near office buildings
4. Colleges will have a lot of trouble this fall. First, they are losing nearly all their
full-freight-paying Chinese students, between concern over US Covid-19 risks, Administration hostility, and
travel restrictions. That alone is a big blow.
On top of that, some are planning to reopen but MIT's announcement yesterday,
that it will not allow all students to return to campus,
probably represents a new normal. Well-placed
MIT alumni read the university's decision as driven significantly by a desire to protect faculty and staff;
I hear from sources with contacts at other universities that administrators that they see no way to put kids
in dorms without running unacceptably high Covid risks. Remember, even though kids almost never die of
Covid-19, but there is a risk of serious damage. 1/2 the asymptomatic cases on the Diamond Princess now show
abnormal lungs. And remember those cruises have half the people on board as crew, and the crew skews young.
College is a lot less appealing if you don't stay in a dorm.
Just as diminished activity in central business districts has negative knock-on effects to nearby
business, so to do hollowed-out colleges and universities have for their communities,
as described in more depth in a recent Bloomberg story
.
5. PPP loans are keeping workers on the books through late June-mid July, depending on when the loan came
in. Many employers, ranging from museums to small manufacturers are saying they have to make deep headcount
cuts then. Continuing unemployment claims already show that new hires are still being pretty much equaled by
job losses.
6. Cutting across all the categories of businesses suffering from Covid-19 damage .restaurants, shops in office districts,
merchants in college towns, small manufacturers Small
business owners have to guarantee loans personally unless they are able to finance their operations by
borrowing against real estate. Even SBA loans require a personal guarantee. So when consumers cheerily say
that restaurant owners or other operators will just declare Chapter 7 or 11 and then start their venture
afresh, they miss that these capitalists will be wiped out. They won't have the money to start over again.
And they may not have the pain tolerance either.
7. State and local governments are already hemorrhaging jobs and it will get worse. And in some, perhaps
many communities, the budget cuts will be so deep that they will degrade service levels. Less frequent
garbage collection and street repair is not good for business either.
8. The EU is not going to do enough stimulus to offset its own Covid-19 damage and Brexit is coming, a
shock to the EU and UK when both are already on the ropes. Roughly 25% of S&P earnings come from Europe. The
odds Italian banks will blow is rising all the time and that could be a CreditAnstalt-level event.
I'm sure readers can come up with additional items, but this list alone ought to be enough to curb the
enthusiasm of the economy cheerleaders. As Marshall Auerback said by e-mail:
American household spending in the 1960s was powered by rising wages and growing home equity. But
wages have been largely stagnant since at least 2000, and spending increases since 2010 were powered by
rising personal and corporate debts. House values are now stagnant at best, and will likely fall in the
months ahead. Faced with radical uncertainty, US consumers will save more and spend less. Even if the
government replaces their lost incomes for a time, people know that stimulus is short term. What they do
not know is when the next job offer – or layoff – will come along.
Moreover, people do distinguish between needs and wants. Americans need to eat, but they mostly don't
need to eat out. They don't need to travel. Restaurant owners and airlines therefore have two problems:
they can't cover costs while their capacity is limited for public-health reasons, and demand would be
down even if the coronavirus disappeared. This explains why many businesses are not reopening even though
they legally can. Others are reopening, but fear they cannot hold out for long. And the many millions of
workers in America's vast services sector are realizing that their jobs are simply not essential.
Universities have been very adept at squeezing themselves into occupations to make them a required
third party. So nursing was once an occupation that a lot of people could do but in many countries
now, if you want to be a nurse you have to be university qualified.
In previous times an
apprenticeship was the main requirement with state given examinations at the end of it. I think that
this could be true of doctors as well. But no in ore and more occupations, unless you have the
university qualifications, you can't do the job.
Let me just say that having college trained, licensed RN's are important. They are the one's who
actually make a hospital function. The skills needed to be a qualified RN are well beyond
apprenticeship.
I've spent some critical time in a hospital and the ability of attending RN's (both ICU and
general unit) to understand the broader implications of a doctor's directive and the comprehension
of computational details involved with medicine application is beyond me. It's too much work for my
mind; and I'm one of those licensed professionals mandated by the state.
And this ignores the "soft skills" needed to provide care to patients. (If you've ever been
tended by a male nurse, you'll know what I'm saying.)
Erm, I have been tended by a male nurse and I don't know what you mean.
What I have observed (as a patient and friend-of-patient) is that community college trained
nurses, who, in my part of the world, start working on wards in the first week, are better
nurses than the university-trained ones who don't see a patient until year two. Many would have
washed out early on if they had actually contact with patients right away. You can generally
spot them, they clutch their clipboards as if they were shields and flee to positions in admin
ASAP.
Both 4-year and 2-year community colleges produce RN's. Both have clinical (hospital)
requirements. Of course, 4-year colleges produce RN's with greater academic depth. Doesn't
mean they are better nurses. But they are the ones roaming the ICU's because they have the
greater depth of knowledge.
My main point was a simple one: modern day nursing skills cannot be gained through
apprenticeship. It requires sustained study, instruction, and clinical experience.
The epidemic was almost certainly the knockout punch for many businesses that were already barely
surviving before the shock.
And governments will seemingly fail to recognize that strong keynesian
intervention is mandated and has to be maintained for long if they don't want depression to keep its course
while the usual hawks are already asking for termination of state aid programs. We had first epidemic
negationism and now we face economic negationism as if the value of stocks would by itself fix everything
back to normal. Harder times ahead unfortunately.
Well said, Ignacio. I would add that this may be a knockout punch for globalization as we know it.
John Ralston Saul suggested this already happened two decades ago (it takes awhile for ideologies to die
in the minds of the elite, right?). I don't know how we are going to functionally transition to "positive
nationalism" (ie. citizen based economics) but you presented a key ingredient, IMHO, when you wrote:
"strong keynesian intervention is mandated and has to be maintained for long if they don't want
depression to keep its course"
There is only one reason to remove or not implement Federal support for the population at large and
SMEs: The "hawks" want (for them or for their clients) to buy properties and stuff on the cheap.
Yves, the "forgiveness terms" on the PPP loans have been amended from the initial up to 75% of
$100,000 spent on salaries within
eight
weeks of PPP loan distribution to a
24
week period. I believe this change will allow smaller businesses to survive for a longer
period.
I think these changes will help employees of only a limited subset of businesses, those
businesses that hadn't previously applied but which will now apply because of the changed terms.
The new terms don't increase the amount of the loan, they just change how much of it will be
forgiven. My company received a PPP loan under the original terms, the changes make the amount
forgiven somewhat greater, but the cash won't last any longer. The real beneficiaries of the
changes will be owners (including myself), who now will have to repay less of the loan.
No, this is the reverse. It's not a matter of distribution, it's a matter of how long the
business can afford to keep the staff.
Even assuming the PPP paid enough for full salary recovery (for some businesses, it doesn't; a
friend with a manufacturing business got only $420K versus her $700K payroll because some of her
employees are high skill and make over $100K), extending the time helps only for businesses that
were entirely closed, like restaurants. It did NOT increase the amount distributed. That was set
based on 8 weeks of payroll as 75% of the total distributed.
So if after paying full payroll for eight weeks (now eight weeks from when you started
supporting salaries) and your business clearly can't support the payroll, you will cut staff.
Moreover, the amendment on the fly was of limited help. A lot of business like restaurants (per
a WSJ story yesterday( didn't apply because the 8 week requirement was in affect when the program
had funds to distribute.
A zigzag economy. Or even better, stairsteppin down to lower states of 'commerce', much of it
'informal', out of the prying noses of taxman everywhere .. that too, uh, works in my admittedly
cloudy seer's eye.
If ever there was a time that the establishment would fight a job guarantee program it is now.
When they say they need to be able to "compete" it's all about bringing wages down. Nothing does that
more than mass unemployment. Every industry is going to squeeze wages to make up for lost demand that you
nor your children should hold your breath about returning. Sports and entertainment – big squeeze. Keep a
close eye on the battles with the unions.
I see people desperately mincing about like there will be a return to "like it was in 2019."
Wandering around in their deluded dreamworld as if all of this was like a season of the tv series Dallas
back in the eighties – an entire season written off as another characters dream.
In my little town of Sebastopol at least half the restaurants will go out of business, the one used
bookstore is shuttered and quite a few of the tourist dependent shops will be going out of business.
Vacation rentals are being allowed again, it's too early to tell if they will be OK yet.
July 4th will be a good indicator.
Real Estate prices are looking wobbly.
I did get my first haircut since January and now sport bright blue mohawk.
I think most of the long-term job losses will be low income jobs (less than $40k/year). This is the group
that recent statistics showed is at spending levels similar to last year, but much of that is supported by
federal stimulus money ($600/wk unemployment, $1,200 check, PPP). When that dries up, that spending will
likely decline. Many of those low income jobs will not have come back for two years as they are in
hospitality and entertainment types of sectors. The drive-thru fast-food and takeout restaurants are doing
fine – everything else is suffering and many will go permanently out of business. It is going to be a
bloodbath in downtown areas in major cities.
The economy will lose a significant amount of consumer spending when the below median income have
significantly lower income because they spend that income. That will reduce corporate revenues and sales tax
collection.
White collar workers working from home will do fine. They will also continue saving money instead of
spending it since they won't be travelling for pleasure or business or going out for food or entertainment.
Recent statistics indicate that in early June, the top 25% income category reduced their credit card
spending by 17% compared to pre-coronavirus while the lower income people reduced their spending 4%. This is
the same reason that the Republican tax cuts don't work to boost the economy – they give the money to people
who don't spend it, so it doesn't create economic growth, although it does create asset bubbles.
Reduced state and local tax revenues means the layoffs are already starting in the public sector. There
are so many public sector layoff requirements that saving a dollar in salary is only saving $0.30 in the
first year after laying off the employee. So the layoffs are likely to be deep. A cost effective approach is
that state and local governments will simply not hire to fill positions of recent retirees because then they
get 100% savings, so younger folks hoping for government work are going to be disappointed for at least a
couple of years. State and local governments reduciton in spending was a significant damper on the fianncial
crisis recovery and will be one here as well.
I think we are staring at 10% unemployment for at least 2 years. Real unemployment may be significantly
higher as discouraged workers don't get counted. Also, with so many baby boomers entering Social Security
eligibility, they may be forced to retire early and take reduced social security payments for the rest of
their lives. That will be a drag on the economy for the next 30 years as social security benefits
recirculate in the same month they get paid.
I don't think you are appreciating the magnitude of months on end of low wage workers salaries being
doubled, combined with a huge drop in federal tax revenue. Also, congress is certainly not stupid enough
to allow the additional unemployment benefits to expire going into an election (afterwards, certainly).
Combined with a 3 trillion dollar spending bill, we have an unprecedented increase in aggregate demand
from the average American. Now that the economy starts to open up a bit, there is actually something to
spend the money on other than Amazon purchases.
Consumption is our economy, and if you don't think we are going to continue seeing huuuge retail sales
numbers > earnings > GDP then you are way off base IMO. We are effectively already instituting a generous
UBI. Yes, many small businesses have and will tragically fail and we are in a complete mess in many ways,
but sectoral balance always wins out. The private sector hasn't had a surplus like this since I don't
even know when? WWII maybe? This certainly blows away the response we had in 2008.
All this spells term #2 for the Donald in my outlook. The dems threw everything they possibly could at
him and it failed miserably. And it serves them right, run a real candidate with real policy positions
instead of incessantly whining about the guy who is in there now. Not sure how long it is going to take
for the left to wake up
9. Low income people, with the most propensity to spend,
can't if they don't have income for a long time.
Here's a horrifying
thread with video and pics
of an 8 hour wait
to apply for UI in Kentucky. And there are people who applied
in March and April who still haven't been serviced.
As an extra bonus, (nonperformative) mask usage in the line looks like it's about 50%,
so some of these poor souls will soon have other things to worry about.
Mitch's solution for his hard-pressed constituents:
More judges.
One of the biggest ironies of all is that the health care industry is suffering because the expense of
treating coronavirus is not offset by enough income but it is still crowding out other services. I doubt any
big hospitals will go under, but the small rural ones have been dropping like flies for a few years now.
I
had my yearly yesterday and my new doc is voicing her frustration with the way information is so mishandled,
not to mention that the tests for antibodies are virtually useless, and she thinks it will take at least a
year to get some kind of yearly shot for corona.
We might never see an actual vaccination. She mentioned
that people are putting off going in for imaging procedures and lab work because they are afraid the clinics
and hospital labs are dangerous places.
> What is forbearance? It is a lender's temporary willingness not to collect interest or principal
payments on a loan.
My son's lender gave him 3 months "forbearance". At the end of the three months they billed him for a
triple mortgage payment. Fortunately he was able to remain employed and had banked the 3 payments. I expect he is one of the only
people to do so.
Such "forbearance" sounds like a vicious scam.
It is not at all a well known concept. It just lets you pay late with no penalty. It does not relieve
you of your obligation.
Having said that (and I need to turn in so I am not about to find the link) I am told a NY Post
article said that tenants in NYC were pretty much paying as usual, so they seemed to appreciate that this
forbearance business was not much of a break.
Just wait till federal tax time become 'un'-deferred. How many, especially the precarious within
the middleclasses, not be able to pay what's owed? .. or .. incensed at the transparently unfair
government/fed reserve plays, just throw up their proverbial hands, and say 'Screw this!!! Wall Street
made Bank thankyouverymuch! .. why am I not held to the Same standard??'
A minor point: I've read that if absolutely everyone wore a mask we could resume many of our activities.
Maybe. But personally, I find them semi-suffocating, even the fairly loose-fitting cloth variety. I believe
in their worth but the nauseating experience of light oxygen deprivation causes me to avoid most outings or
activities that require them. I can't imagine how medical professionals wear these things so often. Maybe it
takes some getting used to.
Is anyone else similarly annoyed? Again, I believe in the value of mask wearing; I just find it nearly
unbearable.
I find the most objectionable thing to be glasses fogging, with suffocation a close second. I imagine
one can eventually get used to it, since, e.g., surgeons wear them for hours at a stretch every day of
their working lives.
One of the difficult things about the current situation is the remarkable shortage of PPE and the
difficulty the manufacturing sector seems to have both meeting the existing demand and coming up with
improved products at scale. Since PPE is safety-critical (failures will cause injury or death), and since
almost all manufacturing seems to have been outsourced to China where quality is suspect at best, it's
hard to be optimistic about the situation improving. In fact, as new protocols evolve around the world in
which PPE is the new normal, shortages and counterfeit products seem likely to get worse.
Obviously this is one area where a wartime level of federally driven domestic production efforts would
make total sense, but this would require acknowledging that coronavirus is real, and with Donald "nothing
to see here" Trump in the White House this seems unlikely to happen any time soon.
I don't even notice mine, to the point where I sometimes try to spoon food thru it
I dunno, maybe it's because I used to have a beard? In combination with the fact that I was an avid
bicyclist so just walking around, let alone sitting in front of a computer, just doesn't require much
air?
I don't care for them, but since I am working at home and don't go anywhere -- my lovely and talented
wife also does shopping -- I only needed a mask once for an unavoidable shopping trip. She had a birthday.
We got a very nice pear torte from the local chocolaterie!
I do work, play games with the kids, and eat well. I putter about in the wood shop. (Hand tools are
the secret for avoiding masks there.) I'm really quite a bit happier than before the outbreak. We seem to
be able to hide out from the virus on our homestead in the Santa Cruz Mountains redwoods. With that, the
clean air, decreased car noise and no commute, I'm wondering why we didn't do this before!
I'm sure it will all come crashing down when school starts again, but for the moment, life is grand.
While I agree with this, I wonder if it's missing the other side. For example, when more people work from
home, they still need to eat and don't necessarily have time to cook. Will suburban and neighborhood
restaurants and delivery services see an uptick? Obviously, this doesn't help the city center businesses,
but maybe it evens out a bit when spread across the entire economy. That is, a lot of current businesses are
in a bad way, but maybe the economy will restructure around the "new normal".
Takeout is way less profitable than sitdown. Restaurants here closed after briefly trying takeout
because they could not make it work (three in a less than ten minute driving distance). The only ones I
anticipate that will do OK are venues with tiny sit down spaces, where they were set up as mainly
takeout.
Sporting events (not that I follow any) have economic impact and there will not be any residual demand
when they are permitted. And surely some people will be reluctant to enter arenas with thousands of screaming
fans. Locally, Syracuse has SU football and basketball (drawing 20-40,000), a triple A baseball team and a
minor league hockey team. I don't know how many game nights there are locally, but I'd guess 100+. There is
a certain amount of out of town people attending same.
Same is true for live entertainment or the NY State Fair (close to 100,000 daily attendance for a 2 week
run). All these things are cancelled and there won't be make up dates or residual demand.
The impact of non-events (like forgone haircuts or meals out) will take some time to work through the
broader economy. Also, habits will change even if there is a vaccine or miracle cure.
I suspect that the really interesting and alarming consequences are going to come from the interaction of
a number of these factors, sometimes in unforeseeable ways. Consider, for example, what other industries or
sectors are impacted by business travel: travel companies, foreign exchange companies, airport duty free
shops, taxi companies, car hire companies, makers of business travel applications for smartphones,
translators and interpreters, portable computers and electronics of all kinds, adapter plugs, expensive
luggage of all kinds, upper-tier restaurants and hotels where foreign languages are spoken, sources of
business entertainment, certain personal services, um, sometimes sought by travelling businessmen, security
staff at hotels, insurance companies, risk-management consultancies, medical and vaccination services,
dry-cleaning services, spas and beauty services, legal advisers on doing business, even the little shop in
the lobby that sells business books, expensive souvenirs and overpriced essentials that you typically
forget.
None of these industries will necessarily disappear, but all will lose the most lucrative part of
their business.
In conjunction with fewer tourists though, (which must now be a given) some or all of them
may go down, or at least be drastically reduced. And it's likely that there'll be a general retrenchment of
staff deployed abroad and the presence of international organisations. So if you do eventually get that trip
to exotic destination you have been promising yourself for some years, you may find that there are no decent
hotels or restaurants and no proper taxi service to your run-down hotel where nobody speaks English.
The other thing is tertiary education, where the problems go well beyond a lack of Chinese students (who can
still register to study remotely of course). A number of universities in Europe have simply cancelled all
in-person classes next year, and there is a huge and rather ill-directed effort under way to establish
complete online learning systems. Nobody has any idea what the long-term consequences of this will be, for
jobs, research, careers and even the survival of many institutions, but they won't be pretty. A lot of
degrees simply can't be done on line. And of course the economies of many towns and cities are partially
dependent on students and staff spending money, and buying and renting houses.
So if you live in a small but pleasant university town with a flourishing tourist industry, a science
park and an international conference centre, you own a restaurant and your brother owns a taxi company, it
might be time to consider something else.
While not directly connected to the pandemic, it is overlapping in timing of the economic damage. The
collapse of oil prices has laid waste to the shale revolution. Prior to the oil price war oil production and
the money being poured into it was actually a substantial portion of GDP growth. That isn't likely coming
back soon if every.
GDP growth . Forget it, it's over . De-growth is the new normal. This reality will become apparent as
the parasites – hedge funds, private equity et al – begin to fall later this year.
Anecdotals from my visit the past two days with my mother-in-law. A lot of pent-up cash from well-heel'ed pensioners who had booked expensive vacations but have now
cancelled. Several are going to replace not old but not new either cars using the holiday fund. So some
uptick will come from that.
As for retail, the garden centres were doing a good trade at the checkouts but the upscale cafes which
are usually attached are still closed and this is what makes the difference in this sector of retail's
business model here between break-even (at best) and good profits. But they'll survive.
However, for retirees (who are of course at higher risk of COVID-19 fatality spectrum) there is no --
absolutely zero
-- desire to hit the malls and the large stores. Even if it wasn't for trying to
maintain social distances, the prospect if you're in your seventies or eighties to queue (usually for a time
in the open air) for an uncertain wait
just to get in
is a huge disincentive.
Add in the lack of
catering and this is going to be hit very hard if my sampling is anything to go by.
The mid-level pub and restaurant trade will be decimated. There was over-supply before and this is now
chronically exposed. All we passed were shuttered -- some offering take-out, which might be a life line but
they are typically too far from the town centres to compete with the cheap kebab, chicken and Indian
walk-ups. Plus, people won't pay a gourmet premium to spoon something out of a foil tray themselves.
However, at the lower end of the market, those fast-food places with drive-thrus will be fine -- queues round
the block at McDonalds, KFC and Starbucks.
Residential real estate is also mixed. Nice places in good lots in ready-to-move-into condition have sold
-- retirees moving from London and the Home Counties have lots of equity and are buying for the long term
(well, as long term as you get aged 65-75) so aren't interested in the losing sleep over the possibility of
a 10 or 20% correction if one happens -- they want to move usually to be nearer family, to get out of
over-developed London and the South East and to enjoy a retirement lifestyle.
However, properties which are not retiree-friendly (e.g. not bungalows or apartments in full-service
blocks with lifts) are a serious drag on the market. This
https://www.rightmove.co.uk/property-for-sale/property-70609848.html
had hung around for ages for the
vendor. I suspect it is an executor sale. Traditionally, disaster-areas like this property is would get
bought by developers (usually builders) to flip after gutting and refurbing but of course, this
business-model is
utterly
dependent on not overpaying in the first place in a falling market. Here,
the owner is just calling it quits and auctioning it off (very unusual in the UK property market but
probably the right thing to do as at least it'll be settled and they'll get their money without the hassle
and stress of something that might sit there unsold incurring maintenance costs and property taxes for a
year and even if it does sell, it'll be a low offer because of the condition it is in and would entail
possibly a collapse-prone chain that could all fall through at any minute). So residential real estate here
in the UK -- a crucial part of what props up the wider economy -- is showing early signs of stagnation and is
very quality- and price-dependent.
Here in Oregon we have had a serious outbreak of Covid in a seafood packing plant in Newport. And we
learn that the majority of the workforce come from Guatemala, Serbia, and Ukraine.
How can this make economic sense?
Clearly the wages are too low for native Oregonians. But Newport Seafood must pay gangmasters whose fees
include travel (bus from Guatemala, several planes from Serbia and Ukraine) plus accommodation for the
crews.
The set-up seems both crazy and an excellent way to spread the virus. Added to which many of the
Guatemaltecos speak a dialect called Mam which makes contract tracing more difficult.
Surely paying decent wages, in Oregon, Guatemala, Serbia and Ukraine, would be a tidier solution for all of
us.
A large greenhouse (64 acres under glass) near here was the largest COVID cluster outside of NYC. Two
hundred "guest" workers were housed 4 to a room, 2 in each bed at cheap motels.
The Canadian owners pay local workers and "guests " $13/hour. But the labor contactor gets an amount
on top, plus there is the housing, food and transportation for the "guests".
If one were cynical /s/ one might think the game is to have a reserve army of "guests", ready, willing
and able to displace any uppity locals.
Maybe if the Canadian owners paid $25/hour for locals, no guests would be required. BTW, they pay no
property tax on the $100M facility and get cut rate electricity.
Here in our small town (pop. around 14,000) the local food processing plant which cans peas, corn, and
other vegetables was the site of a 400% increase in CV cases. It is the biggest spike we have seen, going
went from 18 cases to almost 90 in the space of a couple of weeks, although our county is still doing
pretty well in general. The plant was shut down for a couple of week but now seems to be running again, I
assume with greater safety measures now implemented. At one time it was mostly local white guys who
worked in the plant but nowadays there is a much larger percentage of Hispanic workers.
Here in the suburbs of DFW houses are selling like hotcakes. Not exaggerating. Multiple offers and
prices over list. Selling in days after listing. I can't fathom this in Covid times. The uncertainty
alone makes that impossible to consider.
A family down the street just sold to move into a house a couple miles away that has a pool. Are they
not noticing that the economy is in shambles? Does it not occur to them that the knock-on effects might
eventually affect their household? Even if your job is safe now, it doesn't mean that it will be in the
future! Maybe now is not the right time to make a major upgrade like that! I just can't
In the meantime my taxes and insurance are going up.
Exodus from San Antone and Austin (and everywhere else) is what worries me bunch of rich folks
invading this place is the last thing i want.
Local PTB kept it in check for a long while yammering on about the radium in the water (you'd hafta
keep a sink-full overnight, in a closed up house, for 75 years for it to have a measurable effect)
Most of this clandestine effort was to keep the big cities from taking our groundwater but it had
the ancillary effect of limiting ingress to rich anti-science types(sigh).
The people who can afford to move right now I assume are not people i'd want as neighbors Todds and
Karens, bringing Civilisation to us hill people.
If you have plenty of cash, a downturn is the time to buy, assuming prices are cheaper. I'm not
sure they are, yet. Not enough forced sales yet, I'd imagine.
On the flip side, once you realize that your employer will probably let you telecommute from Vail,
CO, the condo in the big city may seem inconvenient to the slopes. I imagine there is some demand in
that dimension too. For the less adventurous, there are always the 'burbs.
I live on the North Olympic Peninsula. 'Tourism' is probably gonna suck going forward, especially if
lockdowns resume due to any future viral hotspot flareups. Our downtown has partially opened up, but for
how long ??
We also have 2 large building projects going on downtown – construction having begun last summer, came to
a standstill when the virus hit, then resumed. Both venues predicated to some extent on out of towners
spending their $$$ here. I think the virus just put the kibosh on those rosy plans.
Re: "American household spending in the 1960s was powered by rising wages and growing home equity. But
wages have been largely stagnant since at least 2000"
Starting the clock at 2000 glosses over the wage data from earlier years, which was none too good.
When women's earnings are added in the real wages at the 50% percentile level have risen a total of 6.1%
over the 40 year inclusive time frame.
Given that the USA has had infrastructure declining (lowering quality of life), housing, medical and
educational costs rising in excess of inflation, USA wage earners were hurting, at the median level, well
before Covid-19 and well before 2000.
One might argue that many wage earners have adjusted to this new normal BEFORE Covid-19 and this could
steel them somewhat for Covid-19 effects.
Shops are already going under here in Silicon Valley. I've driven down Santa Cruz Ave. in Menlo Park a
few times over the last week and there are a fair number of empty storefronts. It is the fancy shopping
street in town. Since I don't actually shop there I couldn't tell what sorts of shops had closed.
It is hardly the most important detail in the story, but I see 24 Hour Fitness is closing 100
locations. I would visit one when I was in Dallas. It was the best gym I've been to, lots of very well
selected equipment, the only place I ever saw with 2.5 dumbbell increments up to 52.5 lbs, many trainer
toys, pleasant space. This is a real shame, and I am sure other readers will see names of businesses they
patronized and liked.
It's going to be deep and lasting because it only increases the systemic problem of growing income
inequality. There were viruses before and there will be more after. In this case, the response was to grow
the ghetto, faster. Fintech has to go in for the kill shot here.
DC control technology can only increase income inequality so long as it is the primary recipient of MMT.
It's one and zeroes, a completely arbitrary binary outcome.
A: when the only difference is perception, electronic money.
Relative to the planet, let alone the universe, there is no such thing as an expert. Having tribes of
experts competing to see who gets to play God on any particular day can only result in a completely
artificial world.
The video game industry are making out like bandits, for now at least.
Wonder how this will impact the coming console generation though. How many people will have four or five
hundred spare smackers for a new system (or twice that for both new systems), plus new games at 60 bucks
each?
And will the assembly lines in Taiwan and China even be running? Nintendo was expecting to have its
production back up by this month, yet the Switch is still out of stock almost everywhere. And that's for an
existing, well established production line.
@ Grieved | Dec 19 2020 6:01 utc | 135 with the rant about the Dems and Medicare for
All
The US government has been financialized like the majority of the Fortune 500. Since the
1970's the trajectory in the US has been to reduce government spending on social safety net
programs and privatize the Social Security Insurance program. While SSI was raped by
Reagan/Greenspan/Congress and taken from the independence of actuaries and made a political
budget football including false claims of being and "entitlement" program the safety net
social programs fared worse. In the early 1970's, when I was familiar with the planning for
and provision of social services like for developmental disabilities, alcoholism, mental
health, job search help, infancy care (WIC) and drug abuse, the concept of continuum of care
helped the different agencies collaborate and really help folks. Then the Fed stared changing
the rules of the way money was to be spent that developed columns of services that don't
interact/coordinate with each other as well as reducing overall low income support.
I also want to add to what you wrote earlier that humanity use to make other than the
throw-away-to-churn-the-money-mill products that were both designed and built better/to last.
It fits with our throw away food system with all that packaging and none of it refillable,
seemingly by design.....
....
....
because as I continue to write here, its all about the God of Mammon instead of the support
of the masses social structure with the underpinning of the God of Mammon way of life is
controlled by the global private financed owned elite and the support of the masses way of
life is exampled biggly currently by China.
The poverty myth that there is little or no poverty is all too common. In fact, the United
States has one of the highest poverty rates in the developed world. One study ranked the
United States 29 of 31 OECD countries in 2012. When it comes to child poverty, things are
even worse. A UNICEF report found that the United States ranked 34 of 35 developed
countries – only Romania had a higher child poverty rate.
Do you think a nation like this has the means to build Medicare for All? I don't think
so.
The wonderful world you talk about was not experienced by the peoples of Guatemala, Iran,
Chile, Honduras, Nicaragua, Mexico, Argentinia, Haiti, Vietnam, Laos, Cambodia, Iran, Iraq,
Libya, Syria and many of the homeless and destitute in the US, UK, Japan etc. The wonderful
world you describe is an illusion.
There is a line from the 1960s Science Fiction series called the Invaders from another
galaxy who wish take over the world. At the beginning of each episode the narrator says " they
wish to take over the world and make it their world".
The Transnational Financiers have been working towards that goal for centuries!!!!
"... Trump and Giuliani are vulgar and buffoonish, but they play the same slimy game as their Democratic opponents. The Republicans scapegoat the deep state, communists and now, bizarrely, Venezuela; the Democrats scapegoat Russia. The widening disconnect from reality by the ruling elite is intended to mask their complicity in the seizure of power by predatory global corporations and billionaires. ..."
"... Silicon Valley billionaires, including Facebook cofounder Dustin Moskovitz and ex-Google CEO Eric Schmidt, donated more than $100 million to a Democratic super PAC that created a torrent of anti-Trump TV ads in the final weeks of the campaign to elect Biden. The heavy infusion of corporate money to support Biden wasn't done to protect democracy. It was done because these corporations and billionaires know a Biden administration will serve their interests. ..."
"... Democratic Senator Chris Murphy told CNN during this campaign that Russian disinformation efforts are "more problematic" than in 2016. He warned that "this time around, the Russians have decided to cultivate U.S. citizens as assets. They are attempting to try to spread their propaganda in the mainstream media." ..."
"... This will be the official mantra of the Democratic Party, a vicious redbaiting campaign without actual reds, especially as the country spirals out of control. The reason I have a show on Russia-funded RT America ..."
"... Voice of America ..."
"... World Socialist Web Site, ..."
"... We let these companies get this monopolistic share of the distribution system. Now they're exercising that power. ..."
"... In the Soviet Union the truth was passed, often hand to hand, in underground samizdat documents, clandestine copies of news and literature banned by the state. The truth will endure. It will be heard by those who seek it out. It will expose the mendacity of the powerful, however hard it will be to obtain. Despotisms fear the truth. They know it is a mortal threat. If we remain determined to live in truth, no matter the cost, we have a chance. ..."
40
Comments on Chris Hedges: The Ruling Elite's War on Truth American political leaders
display a widening disconnect from reality intended to mask their complicity in the seizure of
power by global corporations and billionaires. By Chris Hedges / Original to ScheerPost
Joe Biden's victory instantly obliterated the Democratic Party's longstanding charge that
Russia was hijacking and compromising US elections. The Biden victory, the Democratic Party
leaders and their courtiers in the media now insist, is evidence that the democratic process is
strong and untainted, that the system works. The elections ratified the will of the people.
But imagine if Donald Trump had been reelected. Would the Democrats and pundits at The New
York Time s , CNN and MSNBC pay homage to a fair electoral process? Or, having spent
four years trying to impugn the integrity of the 2016 presidential race, would they once again
haul out the blunt instrument of Russian interference to paint Trump as Vladimir Putin's
Manchurian candidate?
Trump and Giuliani are vulgar and buffoonish, but they play the same slimy game as their
Democratic opponents. The Republicans scapegoat the deep state, communists and now, bizarrely,
Venezuela; the Democrats scapegoat Russia. The widening disconnect from reality by the ruling
elite is intended to mask their complicity in the seizure of power by predatory global
corporations and billionaires.
... ... ...
The two warring factions within the ruling elite, which fight primarily over the spoils of
power while abjectly serving corporate interests, peddle alternative realities. If the deep
state and Venezuelan socialists or Russia intelligence operatives are pulling the strings no
one in power is accountable for the rage and alienation caused by the social inequality, the
unassailability of corporate power, the legalized bribery that defines our political process,
the endless wars, austerity and de-industrialization. The social breakdown is, instead, the
fault of shadowy phantom enemies manipulating groups such as Black Lives Matters or the Green
Party.
"The people who run this country have run out of workable myths with which to distract the
public, and in a moment of extreme crisis have chosen to stoke civil war and defame the rest of
us – black and white – rather than admit to a generation of corruption, betrayal,
and mismanagement," Matt Taibbi writes.
These fictional narratives are dangerous. They erode the credibility of democratic
institutions and electoral politics. They posit that news and facts are no longer true or
false. Information is accepted or discarded based on whether it hurts or promotes one faction
over another. While outlets such as Fox News have always existed as an arm of the Republican
Party, this partisanship has now infected nearly all news organizations, including publications
such as The New York Times and The Washington Post , along with the major tech
platforms that disseminate information and news. A fragmented public with no common narrative
believes whatever it wants to believe.
... ... ...
The flagrant partisanship and discrediting of truth across the political spectrum are
swiftly fueling the rise of an authoritarian state. The credibility of democratic institutions
and electoral politics, already deeply corrupted by PACs, the electoral college, lobbyists, the
disenfranchisement of third-party candidates, gerrymandering and voter suppression, is being
eviscerated.
Silicon Valley billionaires, including Facebook cofounder Dustin Moskovitz and ex-Google
CEO Eric Schmidt, donated more than $100 million to a Democratic super PAC that created a
torrent of anti-Trump TV ads in the final weeks of the campaign to elect Biden. The heavy
infusion of corporate money to support Biden wasn't done to protect democracy. It was done
because these corporations and billionaires know a Biden administration will serve their
interests.
The press, meanwhile, has largely given up on journalism. It has retreated into competing
echo chambers that only speak to true believers. This catering exclusively to one demographic,
which it sets against another demographic, is commercially profitable. But it also guarantees
the balkanization of the United States and edges us closer and closer to fratricide.
When Trump leaves the White House millions of his enraged supports, hermetically sealed
inside hyperventilating media platforms that feed back to them their rage and hate, will see
the vote as fraudulent, the political system as rigged, and the establishment press as
propaganda. They will target, I fear, through violence, the Democratic Party politicians,
mainstream media outlets and those they demonize as conspiratorial members of the deep state,
such as Dr. Anthony Fauci. The Democratic Party is as much to blame for this disintegration as
Trump and the Republican Party.
The election of Biden is also very bad news for journalists such as Matt Taibbi, Glen Ford,
Margaret Kimberley, Glenn Greenwald, Jeffrey St. Clair or Robert Scheer who refuse to be
courtiers to the ruling elites. Journalists that do not spew the approved narrative of the
right-wing, or, alternatively, the approved narrative of the Democratic Party, have a
credibility the ruling elite fears.
The worse things get – and they will get worse as the pandemic leaves hundreds of
thousands dead and thrusts millions of Americans into severe economic distress –the more
those who seek to hold the ruling elites, and in particular the Democratic Party, accountable
will be targeted and censored in ways familiar to WikiLeaks and Julian Assange, now in a London
prison and facing possible extradition to the United States and life imprisonment.
Barack Obama's assault on civil liberties, which included the repeated misuse of the
Espionage Act to prosecute whistleblowers, the passage of Section 1021 of the National Defense
Authorization Act (NDAA) to permit the military to act as a domestic police force and the
ordering of the assassination of U.S. citizens deemed to be terrorists in Yemen, was far worse
than those of George W. Bush. Biden's assault on civil liberties, I suspect, will surpass those
of the Obama administration.
The censorship was heavy handed during the campaign. Digital media platforms, including
Google, Twitter, YouTube and Facebook, along with the establishment press worked shamelessly as
propaganda arms for the Biden campaign. They were determined not to make the "mistake" they
made in 2016 when they reported on the damaging emails, released by WikiLeaks, from Hillary
Clinton's campaign chairman John Podesta. Although the emails were genuine, papers such as The
New York Times routinely refer to the Podesta emails as "disinformation." This, no doubt,
pleases its readership, 91 percent of whom identify as Democrats according to the Pew Research
Center. But it is another example of journalistic malfeasance.
Following the election of Trump, the media outlets that cater to a Democratic Party
readership made amends. The New York Times was one of the principal platforms that amplified
Russiagate conspiracies, most of which turned out to be false. At the same time, the paper
largely ignored the plight of the disposed working class that supported Trump. When the
Russiagate story collapsed, the paper pivoted to focus on race, embodied in the 1619 Project.
The root cause of social disintegration -- the neoliberal order, austerity and
deindustrialization -- was ignored since naming it would alienate the paper's corporate
advertisers and the elites on whom the paper depends for access.
Once the 2020 election started, The New York Times and other mainstream outlets censored and
discredited information that could hurt Biden, including a tape of Joe Biden speaking with
former Ukrainian President Petro Poroshenko, which appears to be authentic. They gave
credibility to any rumor, however spurious, which was unfavorable to Trump. Twitter and
Facebook blocked access to a New York Post story about the emails allegedly found on Hunter
Biden's discarded laptop.
Twitter locked the New York Post out of its own account for over a week. Glenn Greenwald,
whose article on Hunter Biden was censored by his editors at The Intercept, which he helped
found, resigned. He released the email exchanges with his editors over his article. Ignoring
the textual evidence of censorship, editors and writers at The Intercept engaged in a public
campaign of character assassination against Greenwald. This sordid behavior by self-identified
progressive journalists is a page out of the Trump playbook and a sad commentary on the
collapse of journalistic integrity.
The censorship and manipulation of information was honed and perfected against WikiLeaks.
When WikiLeaks tries to release information, it is hit with botnets or distributed denial of
service attacks. Malware attacks WikiLeaks' domain and website. The WikiLeaks site is
routinely shut down or unable to serve its content to its readers. Attempts by WikiLeaks to
hold press conferences see the audio distorted and the visual images corrupted. Links to
WikiLeaks events are delayed or cut. Algorithms block the dissemination of WikiLeaks content.
Hosting services, including Amazon, removed WikiLeaks from its servers. Julian Assange, after
releasing the Iraqi war logs, saw his bank accounts and credit cards frozen. WikiLeaks' PayPal
accounts were disabled to cut off donations. The Freedom of the Press Foundation in December
2017 closed down the anonymous funding channel to WikiLeaks which was set up to protect the
anonymity of donors. A well-orchestrated smear campaign against Assange was amplified and given
credibility by the mass media and filmmakers such as Alex Gibney. Assange and WikiLeaks were
first. We are next.
Democratic Senator Chris Murphy told CNN during this campaign that Russian
disinformation efforts are "more problematic" than in 2016. He warned that "this time around,
the Russians have decided to cultivate U.S. citizens as assets. They are attempting to try to
spread their propaganda in the mainstream media."
This will be the official mantra of the Democratic Party, a vicious redbaiting campaign
without actual reds, especially as the country spirals out of control. The reason I have a show
on Russia-funded RT America is the same reason Vaclav Havel could only be heard on the
US-funded Voice of America during the communist control of Czechoslovakia. I did not
choose to leave the mainstream media. I was pushed out. And once anyone is pushed out, the
ruling elite is relentless about discrediting the few platforms left willing to give them, and
the issues they raise, a hearing.
"If the problem is 'American citizens' being cultivated as 'assets' trying to put
'interference' in the mainstream media, the logical next step is to start asking Internet
platforms to shut down accounts belonging to any American journalist with the temerity to
report material leaked by foreigners (the wrong foreigners, of course – it will continue
to be okay to report things like the 'black ledger')," writes Taibbi , who has done some of the best reporting on
the emerging censorship. "From Fox or the Daily Caller on the right
, to left-leaning outlets like Consortium or the World Socialist Web
Site, to writers like me even – we're all now clearly in range of new speech
restrictions, even if we stick to long-ago-established factual standards."
Taibbi argues that the precedent for overt censorship took place when the major digital
platforms – Facebook, Twitter, Google, Spotify, YouTube – in a coordinated move
blacklisted the right-wing talk show host Alex Jones.
"Liberal America cheered," Taibbi told me when I interviewed him for my show, " On Contact ":
They said 'Well this is a noxious figure. This is a great thing. Finally, someone's taking
action.' What they didn't realize is that we were trading an old system of speech regulation
for a new one without any public discussion. You and I were raised in a system where you got
punished for speech if you committed libel or slander or if there was imminent incitement to
lawless action, right? That was the standard that the Supreme Court set, but that was done
through litigation. There was an open process where you had a chance to rebut charges. That
is all gone now.
Now, basically there's a handful of these tech distribution platforms that control how
people get their media.
They've been pressured by the Senate, which has called all of their CEOs in, and basically
ordered them, 'We need you to come up with a plan to prevent the sowing of discord and
spreading of misinformation.' This has finally come into fruition. You see a major reputable
news organization like the New York Post -- with a 200-year history -- locked out of its own
Twitter account.
The story [Hunter Biden's emails] has not been disproven. It's not disinformation or
misinformation. It's been suppressed as it would be suppressed in a Third World country. It's
a remarkable historic moment. The danger is that we end up with a one-party informational
system. There's going to be approved dialogue and unapproved dialogue that you can only get
through certain fringe avenues. That's the problem. We let these companies get this
monopolistic share of the distribution system. Now they're exercising that power.
In the Soviet Union the truth was passed, often hand to hand, in underground samizdat
documents, clandestine copies of news and literature banned by the state. The truth will
endure. It will be heard by those who seek it out. It will expose the mendacity of the
powerful, however hard it will be to obtain. Despotisms fear the truth. They know it is a
mortal threat. If we remain determined to live in truth, no matter the cost, we have a
chance.
Chris Hedges Chris Hedges is a Pulitzer Prize–winning journalist who
was a foreign correspondent for fifteen years forThe New York Times,where he
served as the Middle East Bureau Chief and Balkan Bureau Chief for the paper. He previously
worked overseas forThe Dallas Morning News,The Christian Science
Monitor, and NPR. He is the host of the Emmy Award-nominated RT America showOn Contact.paul eastonNOVEMBER
23, 2020 AT 10:28 AM
It seems like the masters are just as deluded as the slaves. But the situation is
unsustainable. When many millions of slaves become homeless and hungry that reality will become
unavoidable. Who will they blame? Will they attack one another or will they revolt against the
system? Soon we will see. Carolyn L ZarembaNOVEMBER
24, 2020 AT 10:30 AM
I share only alternative media since I don't trust "mainstream" media one iota. I post
articles from the World Socialist Web Site, Consortium News, the Grayzone, Caitlin Johnstone
and others all the time. I am a socialist. I was only banned from posting on FB once, for
criticizing Israel. No surprise there. But I suspect FB of shadow banning, i.e., making it look
like you've posted an article but making it invisible to others in their news feeds. I first
learned of this practice from Craig Murray, another whose articles I post regularly. paul
eastonNOVEMBER
25, 2020 AT 1:35 AM
That is a chilling thought. I was shadow banned by medium.com a few years ago. It appeared
to me that my posts and comments went in, but no one else could see them. At least with them I
could tell something was wrong because I had regular conversations with some people. With FB I
don't know if you could ever be sure. R ZwarichNOVEMBER
25, 2020 AT 5:37 AM
Mr. Easton is indeed correct. It is VERY chilling, especially if people would imagine what
THEY would do, if they had our Enemy's morally depraved motivations, and if they had the
control our Enemy has over ALL our communications switches.
There are three basic types of mass communications. One to many. Many to one. And many to
many.
The Enemy has complete access to 'one to many' communications, and complete control over
anyone's else's access to same. Many to one communications are ineffective for intrinsic
reasons. Many to many communications offer myriad methods of cunningly creative control.
If we send out group emails, for example, in simple old-fashioned list-serves, they who
control the switches could easily 'filter', to determine who among addressees gets any message,
and who doesn't.
I used to write comments in the Boston Globe, the wholly owned plaything of a VERY weird old
Billionaire and his proud and beautiful young trophy wife. (Less than half his age, of course).
At first I thought the Globe NEVER censored. I could write anything, and it would post. Ahh but
then I learned that the Globe is a HEAVY handed censor, but was clever enough to put a 'cookie'
in your browser folder to tell their server to let you see your own comments, so you would not
even know that no one else could see them. It was 'stealth censorship'.
We should try to remember that these people are morally depraved, in their constant
paroxysms of raw Greed and raw Lust. No force exists any longer in our nation to restrain them.
Anything we can 'see' that they CAN do, we can pretty much figure they already DO do, or else
sooner or later will. Carol ShapiroNOVEMBER
23, 2020 AT 1:44 PM
While I don't agree with you, Chris Hedges, all the time, I believe you are our one. true.
journalist. Thankful for your honesty. Insight. Huge intellect. Global experience. I am an
"unenrolled" voter -- an extremely disillusioned former Bernie Sanders supporter. Truly, I feel
like he would have been our closest attempt to achieving a real "citizen government". What a
laughable term that is these days. Bernie never would have had a chance running as a Democrat
– absurd. He should have walked out of that convention four years ago and taken his
supporters with him. Oh wait- you said that. NeverNOVEMBER
23, 2020 AT 2:59 PM
Don't forget that the selective coverage by the NY Times in this campaign didn't start when
Biden became the nominee. Up to that time, the Times ran one or two articles on Sanders it
seems. Whatever the number, it was miniscule. They almost completely ignored one of the most
significant campaigns in modern history, thus helping to ensure it died on the vine. And when
they did cover it one or two times, it was always negative.
US liberals more fascist than conservatives–long observed by historians/social
philosophers
"amerikans do not converse as Tocqueville wrote, amerikans entertain each other. amerikans do
not exchange ideas, they exchange images. the problem w amerikans is not Orwellian–it is
huxleyan: amerikans love their oppression: Neil Postman Stephen MorrellNOVEMBER
24, 2020 AT 1:18 AM
Glenn Greenwald's points need stressing: (i) some of the most vociferous proponents of
online censorship are mainstream and 'alternative' 'journalists' who on repeated occasions have
egged on the carriers to shut sites, pages, accounts or postings; (ii) these 'journalists'
aren't just serving the narrowest band of oligarchic media empires in history, but also are
ivy-league bourgeois brats with no interest at all in exposing the injustices or malfeasance of
bourgeois society, unlike many journalists of the past; and (iii) that it's not in the
immediate material interests of the carriers to conduct the censorship, especially in the
longterm, since it consumes resources and lowers traffic and profits. They'd much rather the
government do it and for them to be compensated at taxpayer expense.
To avoid future potential government antitrust measures or nationalisation (heaven forbid!),
Zuckerberg and his ilk have been censoring in heavyhanded and hamfisted ways that aren't so
'autonomous' but for the moment at least can be traced along the usual Democrat-controlled
thinktank and CIA/FBI lines, which of course also are beyond public scrutiny. Despite the
prospects for freedom of reach (and reach is what it's really about) apparently growing dimmer
with each senate committee appearance by the carrier oligarchs, ways and means will be found to
circumvent their draconian measures. While alternative non-censoring platforms have yet to gain
significant traction, it likely won't take much for one to catch on, perhaps sparked by an
outrageous event of suppression, that turns Facebook, Twitter, etc, into museum pieces. One
might imagine, for instance, Wikileaks-style YouTube, Facebook, Twitter equivalents that act as
true carriers, purely machine-based and devoid of human interference, that precludes them
becoming the 'moral guardians' that Twitter, Facebook etc, are quickly metamorphising into.
As increasing swathes of the population appear not to be aligning within the bourgeoisie's
preset ideological 'tribal' boundaries, there's a certain schadenfreude in seeing the rulers in
dread of the truth getting out and spreading uncontrollably. Their tailored counter-narratives
simply are too enfeebled and slight to square with the hard reality that's hitting everyone,
from the most educated and brainwashed to the least. That ivy-league stenographers are being
pressed into the service of censorship gives some indication of the desperation of the rulers.
We all know, as do they but can never admit it publicly, that censorship and repression are
frank admissions that they've lost all 'arguments' for their very existence.
To an extent, Trump has been responsible for letting the genie out of the bottle, as the
first president probably since before Andrew Jackson to have failed, repeatedly, to put
lipstick on the racist, capitalist imperial pig. The efforts by the ruling class at censorship
and naked suppression of freedom of reach and of access to sources of truthful information will
only increase in desperation as their myth-making narratives become ever more unable to
rationalise a crisis that's they're beginning to see as intractable and endangering their
rule.
Russian President Vladimir Putin has warned that the coronavirus pandemic could lead to a
global economic collapse that would have a significant impact on the lives of millions of
people across the world.
Speaking at the virtual G20 summit of international leaders on Saturday, Putin warned that,
"despite some positive signals, the main risk is still the so-called stagnant mass
unemployment with a subsequent increase in poverty and social disorder."
"The coronavirus epidemic, the global lockdown and the freezing of economic activity
launched a systemic economic crisis, which the modern world has not known since the Great
Depression," he added.
Putin also lavished praise on the "massive contribution" of the US, which, along with
other countries, has joined together to "create a stimulus package for the world economy to
the tune of $12 trillion." Mainly put forward by large economies, including Russia's, the
stimulus is thought to have played a role in buoying fragile world markets.
"... A staggering 9.2 million jobs could be lost in the U.S. Travel & Tourism sector in 2020 if barriers to global travel remain in place, the World Travel & Tourism Council (WTTC) revealed. ..."
A staggering 9.2 million jobs could be lost in the U.S. Travel & Tourism sector in
2020 if barriers to global travel remain in place, the World Travel & Tourism Council
(WTTC) revealed.
The new figure comes from WTTC's latest economic modelling, which looks at the punishing
impact of COVID-19 and travel restrictions on the Travel & Tourism sector.
According to the latest data, 7.2 million jobs in the U.S. have been impacted. If there is
no immediate alleviation of restrictions on international travel, as many as 9.2 million jobs
– more than half of all jobs supported by the sector in the U.S. in 2019 – would be
lost.
WTTC has identified the four top priorities which should be addressed, including the
adoption of a comprehensive and cost-effective testing regime at departure to avoid
transmission, the re-opening of key 'air corridors' such as between New York and London, and
international coordination.
The challenge of restoring safe travels in the new normal is one of the biggest issues
facing the U.S. as it grapples with a depressed economy devastated by the COVID-19 pandemic,
which has hit the Travel & Tourism sector particularly hard.
The WTTC Economic Impact Report for 2019 revealed that Travel & Tourism contributed
$1.84 trillion to the U.S. economy and was responsible for more than one in 10 (10.7%) American
jobs.
"... The grouping is thus; 1) Coastal Elites/Wall Street/City of London/Private Banking/Atlantacism/Libertarian Free Market Economics aka finance capitalism ..."
"... The middle of America is land power, and is opposed to Atlantacism, rim theory, blue water navy power projection, importation of third world people, and export of jobs and factories. ..."
Indeed, one can't help but wonder whether the historic American nation would fare better
under outright foreign occupation than a hostile elite which considers itself our rulers and
treats us with open contempt, if not hatred.
Russia or China would not flood the historic American nation with "third world people" in
order to chase after a dollar. A good argument could be made that China or Russia would be a
better government for Heartland America than the "international" coastal elites.
The coastal elites are wedded to finance capitalism. This group of people want a thin veneer
of Oligarchs (themselves) controlling a mixed race, or brown population in their factories.
Finance Capital wants to make illicit gains. Finance capital could care less about improving
labor ability of the native population.
The grouping is thus; 1) Coastal Elites/Wall Street/City of London/Private
Banking/Atlantacism/Libertarian Free Market Economics aka finance capitalism . (In short,
the coastal elites are for an "international world order" with them in charge, with them making
their finance nut with usury, rents, and unearned income. Lying and cheating is ok, because
only money matters. Their capital is fungible, meaning it can fly anywhere in the world to make
gains, and to them labor has legs and is also fungible, to then lower prices – to make
gains.)
Land Powers, such as China and Russia are not "international" in their thinking. Although
they do some power projection into blue water as a form of defense. They are interested in
improving their sovereign population.
The middle of America is land power, and is opposed to Atlantacism, rim theory, blue
water navy power projection, importation of third world people, and export of jobs and
factories.
The American system of economy of the founders was the first industrial capitalism, and the
"credit of the nation" went toward infrastructure, public health, and improving the
commons.
The Jew and English finance capitalism method, first combined together in 1694, and has
always been at war with heartland America. The parasite is dug in deep.
"... But while they now have the power, globalists do not have solutions to the country problems, and the crisis of neoliberalism (which started in 2008) will continue, the far-right nationalism will stay and may even gain strength. This suggests that in 2024 is somebody like Tucker Carlson will lead the ticket. And Tucker is a more dangerous opponent to neoliberal Dems than Trump ever been. "Trumpism without Trump" will live, so to speak. ..."
Interesting piece by Beinart about the obvious question that isn't being asked: Why did
Trump lose? After all he had the advantages of incumbency, until February the stock market was
booming, wages were rising, things were going great.
Answer: because he was not nearly radical enough. Because he was a weak leader who was
captured by the Republican elite (not the other way round). Also (rather ironic this) because
he was and is a terrible negotiater. He continually caved into the likes of Mitch McConnell,
and, well the rest is history.
Question: will 'super Trump' in 4 or 8 years time manage to follow the Eastern European
template and create a genuine populist party? (economically social democratic, particularly
concentrating on pensioners: extremely hostile to immigration, skeptical of environmental
issues, culturally conservative?). If so the future is the Republicans' but it's a big if.
...he was a weak leader who was captured by the Republican elite (not the other way
round). Also (rather ironic this) because he was and is a terrible negotiator. He
continually caved into the likes of Mitch McConnell, and, well the rest is history.
All true. But Biden victory in some ways looks like Catch 22 for neoliberal Dems (Will the
Democrats Ever Make Sense of This Week? – New Republic):
In sum, if the results we have hold, Joe Biden will win the election and preside over a
divided Congress. A chastened and anxious Democratic caucus will continue to hold the
House.
A triumphant Senate Republican caucus will obviously destroy his major legislative
agenda. Biden will assuredly turn to policy by executive action, just as Barack Obama did
late in his legislatively stymied administration.
When he does, Republicans will do all they can to send those actions to a 6–3
conservative Supreme Court Biden will be unable to pack or meaningfully reform.
In defeating Trump, Democrats will have avoided their worst-case scenario. Instead, they
will have won the worst possible Biden victory, a political situation that will be a
nightmare all its own.
Trump, with his "national neoliberalism," was an anomaly in its own right. And such things
do not last long. So this is a kind of "return to normal" -- return to power of the
"internationalist" faction of Oligarchy who is linked to globalization (and constitutes the
majority of the US oligarchy), which was unexpectedly defeated in 2016 and since then foght
tooth and nail for the return to power. And such "normalization" is the most logical outcome
of the 2020 elections and is to be expected.
But while they now have the power, globalists do not have solutions to the country problems,
and the crisis of neoliberalism (which started in 2008) will continue, the far-right
nationalism will stay and may even gain strength. This suggests that in 2024 is somebody like
Tucker Carlson will lead the ticket. And Tucker is a more dangerous opponent to neoliberal
Dems than Trump ever been. "Trumpism without Trump" will live, so to speak.
That may spell troubles for the well-being of the PMC (professional and management class)
to which we all belong.
I would add that the fact that Biden victory legitimized Russia-gate and abuse of their
power by intelligence agencies is also a problem. I suspect that Neo-McCarthyism, in the long
run, might backfire.
Wow! Today's
Global Times editorial about the election and its outcome is very perceptive in
its entirety making it very hard to determine an excerpt. I decided on the center 4
paragraphs as they're a coherent whole:
"Every society has internal divergences and contradictions. The design of the US system
indulges and even encourages the fermentation of contradictions. Mechanisms help maintain the
balance between interests and power. For a long time, this performed relatively well, but new
challenges are changing the conditions of US mechanisms, and changing relations between the
effectiveness of US mechanisms and the difficulties US society faces.
"The fundamental change is that the US has been consuming its accumulated advantages
against the backdrop of globalization. Its pattern of interests has been fixated, and the
overall competitiveness of the country has been sliding. The welfare it has made for the
people cannot match people's demands and expectations. The mechanism that distributes
interests solidifies and further erodes social ability of promoting unity.
"In the internet era, identity politics is rising. People can easily feel that their
rights are deprived because they are from a certain social class. Maintaining social unity
has become an increasingly arduous and sensitive task. Obviously, the US needs political
reforms more than many other countries to enhance its ability to promote unity.
"But in the past four years, the Trump administration, incited by the US election system,
has pushed the country into a risky path where it enhances division to boost the existing
pattern of political interests. There are so many social woes in US society, be it between
different races and classes, between new immigrants and old ones, and between different
regions, let alone partisan. But now the objective of society has been cast on Trump's
reelection. This objective has to a great extent squeezed the room of US society to pursue
maximum common interests."
But I really insist reading the entire editorial.
In an op/ed
by a professor at the Center for American Studies of Fudan University, we learn what some
close observers from outside see as the primary contradictions within the Outlaw US
Empire:
"There are two main contradictions in the US. First, contradictions between the whites and
ethnic minorities. The advantageous position of the whites continues to decrease and they
would lose their dominance over the country in the future. This makes their tolerance and
confidence in ethnic minorities decrease as well. The ratio of the population of ethnic
minorities is rising. This increases their demand for equality and rights.
"It is normal for ethnic minorities to demand for corresponding political, social,
economic and cultural positions, but this will pose a severe challenge to the cultural,
religious and racial nature of the US. As the US population continues to lose balance,
related conflicts will break out or even become a periodic and escalating crisis.
"Second, contradictions between elites and ordinary people. Supporters of the Democratic
Party are mainly demotic elites who benefit from globalization and liberalization of the
global economy, and those who support the Republican Party are middle- and lower-class
people, and religious conservatives. This is very clear in the county-based electoral maps.
Trump-supporting counties that are vast, under populated and economically backward, surround
cities and counties that support the Democratic Party, while Democrat-dominated counties and
cities use their economic and population advantages to lead the political pattern in some
states. The contradictions between elites and ordinary people will not end with the
election."
Not stated clearly IMO is that these contradictions are Centrifugal in their affects on
the overall society thus impeding attempts to reform the polity and gain control over the
forces exerting actual control that are beyond government.
The elites may control who gets nominated but no matter how flawed or repugnant their
candidate is or how obvious that the candidate was chosen for them the flocks that follow the
candidates act as if they did the choosing.
Trump was given 10 times the free advertising than all the other primary candidates
combined and yet his followers think they picked him.
And Biden will go down in history as the candidate who got more popular votes than any
other candidate ever has and yet he is about as popular as a hemorrhoid.
"... One camp within the elites recognizes the danger and seeks reforms , but the reforms are too little, too late, and in any event, the elites who cling most ardently to the past stability fight the reform movement to a standstill. ..."
"... So take your pick, America: what's the closest analogy? A sclerotic Politburo of elders living in the past, an elite fiddling while the nation disintegrates, or an elite so out of touch with reality that it claims inflation is zero while the populace can no longer afford bread? ..."
Rome, the USSR and Revolutionary France are all compelling analogies due to the hubristic
cluelessness of their fractured elites as the pretensions of stability collapsed around them.
Even though Nero didn't actually fiddle while Rome burned and Marie Antoinette didn't gush "Let
them eat brioche" when notified that the peasants had no bread (or more accurately, could no
longer afford it), these myths are handy encapsulations of the disconnect from reality that
infested the elites in the last years before the deluge of non-linear chaos overwhelmed the
regimes.
While historians gather evidence of tipping points such as pandemics, ecological damage,
invasions, droughts, inflation, etc., the core dynamic is ultimately the loss of social
cohesion within the ruling elites and in the social order at large.
As a generality, the permanence of the status quo is taken for granted by elites, who then
feel free to squabble amongst themselves over the spoils of wealth and power. Distracted by
their own infighting, the elites are blind to the erosion of the foundations of their
power.
As coherence in the elites unravels, the ties uniting the elites with the masses unravel as
well.
One camp within the elites recognizes the danger and seeks reforms , but the reforms are too
little, too late, and in any event, the elites who cling most ardently to the past stability
fight the reform movement to a standstill.
As social cohesion unravels, systems that once seemed immutable (i.e. linear ) suddenly
display non-linear dynamics in which modest changes that would have made little difference in
the past now unleash regime-shattering disorder.
So take your pick, America: what's the closest analogy? A sclerotic Politburo of elders
living in the past, an elite fiddling while the nation disintegrates, or an elite so out of
touch with reality that it claims inflation is zero while the populace can no longer afford
bread?
They all lead to the same destination.
richsob , 1 hour ago
I know a lot of history and I think we will go the route of Rome. We will have a slow
slide into total failure from a debased currency, an over extended military, tax revolts,
unmanageable immigration and an internal war among the elites.
HRH of Aquitaine 2.0 , 1 hour ago
My name is an indirect reference to France and the French Revolution.
When Pelosi was photo'd in front of two massive Sub Zero fridges with gourmet ice cream,
that was the equivalent of "let them eat brioche." She is fvucking clueless. A tool that is
barely coherent, much like Joe.
People see through it. The greed of the politicians, and their apparatchiks, the
bureaucrats, is obvious to anyone willing to look. FFS apparatchiks can retire with six
fixure salaries after being a government employee! People are sick to death of their
arrogance, their greed, their out-and-out abuse of the taxpayer!
The other analogy, which I think is valid, is to ancient Rome. I was a philosophy major /
Latin minor so took quite few courses involving the classes, reading the classics, or
translating them. I also spent a semester in Rome, tramping through the Forum and walking
underground and overground. In 1997 Rome was a beautiful city, mostly safe.
Anyhow, ancient Rome ended up debasing their currency, literally. Which the US (and other
central banks) are doing with excessive money printing.
Excessive taxation drove away the tax base of ancient Rome. The first jingle keys event
was there. Why? Taxes were too high. People will work hard if there is a profit incentive and
they are able to earn a good return from their labor. Once that incentive was gone, people
abandoned their farms and property and left. Where did they go? Away. Away from the tax
collectors, which were richly rewarded for any taxes they were able to collect. I suppose at
the end, the collection methods became quite brutal. At that point, when it is your money or
your life, you throw the tax collector your money and flee with your life. You walk away from
land that you love and start over.
Never an easy choice to abandon one's land and home. But that is exactly what
happened.
Central bankers and governments, along with the common citizen, would do well to heed
historical precedents.
MAOUS , 31 minutes ago
I see it more like The Godfather Part I & II. We were betrayed by the stupidest
simpletons of our own family (citizenry) that sold us out for trinkets, false promises of
grandeur and propaganda from Rival Mafia Families who wanted to rub our family out, kill our
leader and take over. "I didn't know until today, it was Barzini all along." Yeah, but Fredo
was the turn coat that made it all possible. Meet the simpletons of our Family known as your
fellow American voter. "A Republic, if you can keep it." We lost it, kiss it goodbye. Say
hello to the new Black Hand on the block.
Omega Point , 1 hour ago
One of the best articles on ZH in a while. The elites are so full of hubris, they behave
as if the state of affairs since the post-WWII era has always been the state of affairs
throughout history and are immutable. They believe that they are cause of America's
dominance, not the individuals who built this country on whose goodwill they are now quickly
draining.
I think we're like Rome. Currency debasement, no border security, massively corrupt
politicians, most of population on welfare, and games and circuses to distract from the
rot.
The elites will soon be surprised how quickly things will decline, just as shocked as the
Romans when the Visigoths came through the city walls and looted the Imperial City in 410
AD.
play_arrow
sbin , 1 hour ago
The USSR was very similar with decrepit old party hacks ruining everything.
Unfortunately American exceptional lunatics will try to destroy the world before excepting
reality.
Never been a group so corrupt and delusional with so much destructive weaponry.
Dr Strangelove is more appropriate.
RKKA , 1 hour ago
In the summer of 1941, the 4th Panzer Division of Heinz Guderian, one of the most talented
German tank generals, broke through to the Belarusian town of Krichev. Parts of the 13th
Soviet Army were retreating. Only one gunner, Nikolai Sirotinin, did not retreat - very
young, short, thin.
On that day, it was necessary to cover the withdrawal of troops. “There will be two
people with a cannon here,” said the battery commander. Nikolai volunteered. The second
was the commander himself.
On the morning of July 17, a column of German tanks appeared on the highway.
Nikolai took up a position on the hill right on the field. The cannon was sinking in the
high rye, but he could clearly see the highway and the bridge over the river. When the lead
tank reached the bridge, Nikolai knocked it out with the first shot. The second shell set
fire to the armored personnel carrier that closed the column.
We must stop here. Because it is still not entirely clear why Nikolai was left alone at
the cannon. But there are versions. He apparently had just the task - to create a "traffic
jam" on the bridge, knocking out the head car of the Nazis. The lieutenant at the bridge and
adjusted the fire, and then, disappeared. It is reliably known that the lieutenant was
wounded and then he left towards the withdrawing positions. There is an assumption that
Nikolai had to move away, having completed the task. But ... he had 60 rounds. And he
stayed!
Two tanks tried to move the lead tank off the bridge, but they were also hit. The armored
vehicle tried to cross the river not across the bridge. But she got stuck in a swampy shore,
where another shell found her. Nikolai shot and shot, knocking out tank after tank ...
Guderian's tanks rested on Nikolai Sirotinin, like the Chinese wall, like the Brest
fortress. Already 11 tanks and 6 armored personnel carriers were on fire! For almost two
hours of this strange battle, the Germans could not understand where the gun was firing from.
And when we reached the position of Nikolai, he had only three shells left. The Germans
offered him to surrender. Nikolai responded by firing at them with a carbine.
This last battle was short-lived ...
11 tanks and 7 armored vehicles, 57 soldiers and officers were lost by the Nazis after the
battle, where they were blocked by the Russian soldier Nikolai Sirotinin.
The inscription on the monument: "Here at dawn on July 17, 1941 entered into combat with a
column of fascist tanks and in a two-hour battle repulsed all enemy attacks, senior artillery
sergeant Nikolai Vladimirovich Sirotinin, who gave his life for the freedom and independence
of our Motherland."
"After all, he is a Russian soldier, is such admiration necessary?" These words were
written down in his diary by Chief Lieutenant of the 4th Panzer Division Henfeld: “July
17, 1941. Sokolnichi, near Krichev. An unknown Russian soldier was buried in the evening. He
alone stood at the cannon, shot a convoy of our tanks and infantry for a long time, and died.
Everyone was amazed at his courage ... Oberst (Colonel) before the grave said that if all the
soldiers of the Fuehrer fought like this Russian soldier, they would have conquered the whole
world! Three times they fired volleys from rifles. After all, he is a Russian soldier, is
such admiration necessary? "
Ordinary people were ready to defend and die for the USSR. And who is Gorbachev, who
destroyed the USSR. A traitor who betrayed everything and everyone. A stupid dilettante who
imagines himself a world-class politician. The main drawback of the USSR was that the power
was too concentrated in the hands of one person, who was trusted without question. But when
people realized where he was leading the country, it was too late.
Max21c , 2 hours ago
It's a mix between Nazi Germany and its criminality and thievery and persecution
machinery, and Bolshevist Russia and its criminality and thievery and persecution machinery
and many third world banana republics and their criminality and thievery and political
persecution machinery.
Face it Washingtonians are evil.
ZeroTruth , 1 hour ago
Americuck in and of its entirety is just a criminal organization. I know a restaraunteur
that started his business in the Bay Area selling drugs using a fleet of vehicles that had
hidden compartments everywhere. Each vehicle was capable of holding up to half a key of yay
and powdered molly already grammed up. Drivers were issued burner phones and given orders via
dispatcher.
Last I checked, he had 7 restaurants that did amazing business and those vehicles were
still on the road providing the other service. That's just one of the many I know of and it's
small time compared to what the US government is doing.
ZeroTruth , 1 hour ago
Americuck in and of its entirety is just a criminal organization. I know a restaraunteur
that started his business in the Bay Area selling drugs using a fleet of vehicles that had
hidden compartments everywhere. Each vehicle was capable of holding up to half a key of yay
and powdered molly already grammed up. Drivers were issued burner phones and given orders via
dispatcher.
Last I checked, he had 7 restaurants that did amazing business and those vehicles were
still on the road providing the other service. That's just one of the many I know of and it's
small time compared to what the US government is doing.
DeeDeeTwo , 2 hours ago
The elites, Big Tech, Media and Deep State threw the kitchen sink at this election and did
not move the needle. Regardless of who is next President, nothing changes. This is a tribute
to the stability of the American system. In fact, the pendulum is swinging against the
subversives who are becoming increasingly reckless and discredited.
TBT or not TBT , 2 hours ago
What did Huxley call the future country depicted in Brave New World?
@zanon: "Actually economy is doing better than expected. Even though Covid will contintue
to be a threat against economic growth.
"U.S. GDP booms at 33.1% rate in Q3, better than expected"
LMAO. I guess you also think the stock market is an economic indicator that reflects the
well-being of normal people.
And yeah, if you pump $4,000,000,000,000 into a bunch of corporations and the ludicrous
stock market casino, the "economy" of any country will "do better".
If Greece during it's financial crisis had $4 trillion to spare and gave it all to their
oligarchs and robber barons, would Greece's "economy" mean the country was doing great? Give
me a break.
No matter the outcome, the fact that this election is so close is a clear indicator that
Americans aren't connecting material conditions on the ground -- a depression, pandemic,
low wages, etc -- to the consequences of politics. Which is an abject, disgusting failure
of Democrats.
We can observe the American economy has declined since 1980 relatively - but not by much.
It was China that skyrocketed.
This is why the political polarization in the USA right now is being fought mainly on
moral/ideological grounds. The American people still thinks it has sufficient time and
resources to first fight among itself (put the proverbial traun back on its tracks) - only to
then subjugate the rest of world (like it did in 1946 and 1992).
The Americans are still rationalizing in moral-ethic-ideological terms because their
economy stagnated and is degrading - but not collapsing. This still gives them a material
base to fuel their pride.
But pay attention: those data are in USD terms. Its industry was what declined the most in
the linked fact sheet above. Before the War of Secession, the South was richer in USD terms
than the North - but war quickly revealed most of the South's "GDP" was financialization
(speculation over the slaves' prices).
Like the petrodollars, WTO better known as globalization, was formed in 1995 after the
fall of Eastern blocks ,to dominate and control the world trade in US fiat currency specially
when China with her cheap skilled labor was to become major world manufacturers of goods.
Basically like oil America agreed not to impose tariff on goods they consumed if you trade
and exported on their fiat currency which costed US nothing to produce. Obviously unlike oil
trade this globalization of trade in US dollar could not work, since unlike oil trade America
couldn't politically dominated and control the good manufacturing countries, like it could,
with small oil producing countries. The period of free trade in goods and energy is coming to
an end, therefore US needs to lower her standards of living, or to go to major wars with
other resources hungry powers to continue colonizing the third world resources and labor.
Either way the end result will be the sam as for, not so Great Britain, ottomans, Spanish,
Persian empires, the only obvious difference shorter empire.
Again Ferdinand Pecora harking back to the 1930's as discussed in the past weeks
commentaries:-
Wilmarth's writing is so insightful and profound in its analysis of the similarities
between the banks of the late 1920s and today that it feels like the ghost of Ferdinand
Pecora might have been whispering in Wilmarth's ear. Pecora was a former prosecutor from
New York who was chosen to preside over much of the early 1930s Senate Banking hearings and
investigations of the corrupt Wall Street structure that led to the 1929 crash and Great
Depression.
Three banking names that played significant roles in the crash of 1929 and the
ensuing Great Depression were National City Bank, JP Morgan, and Chase National Bank.
National City Bank was the precursor to today's Citigroup, the bank that would have
collapsed in 2008 except for the largest taxpayer and Federal Reserve bailout in global
banking history. JPMorgan and Chase combined in 2000 to create today's JPMorgan
Chase.
For weeks now, we've been been pointing to expectations that a Joe Biden victory,
accompanied by a Democratic sweep of the Senate, could accelerate
a "reflation" trade , as the world witnesses the shift toward fiscal policy in the form of
massive fiscal stimulus supplant QE as the preferred vehicle for the central bank carrying out
its monetary policy objectives.
This fusion between fiscal and monetary policy is an inevitable consequence of the Fed's
shouldering the burden of promoting economic "equality", or at least combating "inequality" - a
laughably ironic objective for the Fed, which has done more than any other single entity in
blowing the equity asset bubble that's driven economic inequality in the US back to levels last
seen during the Gilded Age.
Well,
after having MMT pioneer Stephanie Kelton, best known as the go-to economic policy advisor
for AOC and Bernie Sanders, on the show, MacroVoices this week followed up with an individual
who has examined the potential blowback caused by this historic policy shift.
This week, MV host Erik Townsend interviewed Tian Yang, the head of macro at Variant
Perception, an established research shop that frequently produces opinion columns in the
financial press. During this week's interview, Yang outlines the findings from a slide deck
that was provided free by MacroVoices to all members (membership is free)
After the historic drubbing endured by crude in the US earlier this year, Yang is among a
group of strategists who have been warning about the reflationary blowback that the Fed is
risking now that it has explicitly decided to allow inflation to run hot.
Yang outlines some of these concepts in the interview, which we have excerpted below:
* * *
Erik: And where do you see the inflation story coming into this?
Central Banks Must 'Play Their Part'
Tian : So I think we need to think about inflation both from a structural point of view and
a cyclical point of view. So the thing to say is cyclically, when unemployment rates are still
quite high, when there's still capacity in the economy, you don't expect to see kind of
immediate pickup in core inflation. Headline could tick up a little bit when commodity prices
industrial commodity, so forth, initiate pickup, so on the cyclical front, there's not
necessarily as much inflation pressure right now.
But structurally, we've seen some truly seismic shifts in the kind of policy landscape and
the structure of the economy actually just this year. When you see governments and developed
market governments around the world start to run giant fiscal deficits funded by central banks,
that's obviously a very dramatic shift away from independent central banking and the focus on
inflation.
This is very much going back to the old Keynesian kind of playbook of essentially, fiscal
led growth and at the same time, we've seen the US Federal Reserve do a number of quite
dramatic shifts this year. Firstly, moving to average inflation targeting is obviously quite a
big mission that they don't really know where the NAIRU (Non-accelerating inflation rate of
unemployment) is, they don't really care what the NAIRU is, they are just going to run the
economy and let it run hot.
And such a policy is also pretty timing consistent because it's not well defined, what's the
period over which we're targeting average inflation. The incentive will always be as inflation
picks up for policymakers to just run their heart because it's easier to kind of keep the party
going.
So, both fiscal and monetary policy are starting to become a lot more expansionary and
loose. And the historical precedents for this kind of price action would probably go back to
World War 2 with a fair-trade record, that essentially meant fiscal deficits would be very
large. But there was a moral imperative for the central banks to finance the government
deficits, and that ended up creating a lot of inflation.
And this time around, the moral imperative is that the central bank's got to play their part
with the pandemic. And going into the future, the central bank probably has to play their part
was addressing inequality, climate change, or any of these big issues that essentially
justifies why central banks should finance government deficits.
So that's quite dramatic policy shift, the other thing that's happened is that the Fed is
now proactively kind of destroying the quality of its balance sheet. So again, as extreme, we
could go back to when we were on the gold standard, if you look at central bank balance sheet,
most currencies backed by gold, right.
So $1 is an asset for us but for the central bank $1 is a liability so previously they
backed it on the asset side of their balance sheet with gold. Obviously, over time we abandoned
the gold standard, so forth, the quality of assets on the central bank's balance sheet is
getting worse and worse. And obviously, this year, the fact that they started buying corporate
bonds, the fact that, they're willing to take on fallen angels, hide your debt and take on more
credit risk is just another reflection of just the weakening central bank balance sheets.
It's not necessarily a immediate concern, but it lays the foundations for people to kind of
increase inflation expectations and to really worry about what the value of the dollar is. And
so when you have these kind of structural shifts in policy coming together in a couple ways to
make a kind of deterioration in central bank balance sheets and government balance sheets.
That's typically been the recipe for inflation expectations to become unhinged.
From A Lake To An Ocean
Erik: Tian, I love the picture on page five where you're talking about lake and ocean
regimes of inflation. Needless to say, you're not talking about a necessarily a really calm
easy day out on the ocean, but maybe a stormy day.
Now I want to go back to what you said because it seems to me that the game is very
different this time around in that you drew an analogy to, okay, after World War 2 we move to a
whole lot of deficit spending, which should be inflationary. The thing is, after World War 2 we
were still, as you said, on a gold standard. And the big inflation didn't really get unleashed
until we came after the gold standard with the breakdown of Bretton Woods in 1971.
Now, this time around, we're going to have I think the same if not a greater shift to a
public policy emphasis on major spending programs with a lot of deficit spending. But we're
already in a pure fiat environment, so nobody's pretending there's a constraint on how much
money you can print in order to finance government spending.
I would think that means that the inflation is certainly not delayed by 20 years the way it
was after World War 2, but is it immediate? Or is there still a lag of several years before
that inflation really hits the system in terms of consumer price inflation after those pre
generated factors like deficit spending kick in? How long does it take before we really see the
inflation start to get away?
Tian: Yeah, I mean, that's a great question. I guess it's a little bit like when they think
about how people go bankrupt, right, it happens very slowly and or all at once. I think this is
kind of the analogy we're kind of drawing here because we're talking about a shift in inflation
expectations, which is obviously predicated on just the general belief in the system.
These things are obviously inherently fairly hard to predict but what we can do is kind of
position for when it already makes sense. So when markets are already not pricing in much
inflation risk premiums and also as the economy cyclically picks up, those things are going to
help just drive a more normal reflation cycle.
So right now, if you position for that, then when the tail comes through and potentially
more inflation picks up later, you're kind of on the right side of it. In terms of the
mechanism it could, as you say, potentially happen quickly or you could take a few years. I
mean, if we're in this kind of 1960 style environment then what you need to do is go along for
the excess capacity in the economy to be used up first, and then have inflation pick up.
And then you will need that to feed into shifting hecs inflation expectations higher, and
then you should move into more of a wage price spiral. Then when people think inflation is
going higher, they're going to demand higher wages and that's what really kicks off the more
uncontrolled inflation right now.
Arguably right now for a lot of people, you know say live in the United States, the actual
cost of living inflation is actually already been a lot higher than what CPI would be saying if
you look at shadow stats, inflation and these kind of different projections. They would say
inflation has be running a 4-5% annually for the past 20 years, if you get rid of a lot of the
hedonic adjustments and so forth. And arguably, it's actually this mismatch between what
official CPI says and what people feel is their true cost of living. That gap is also fueling a
lot of the populism and the kind of general discontent that we have been seeing in society and,
by the way, this isn't a new, it's just quite rare that we see it in developed markets.
If you take emerging market economies like Argentina or these places that have been known to
have huge inflation's, this is typically what happens. The population doesn't believe in the
CPI, they think their real cost of living is going up a lot higher, so when it comes to wage
negotiations, they demand CPI plus 5-10%.
No more '60/40'?
Erik: Tian, let's talk about how this translates for portfolios, it sounds like we're very
much in agreement that inflation is coming, but it's kind of hard to know exactly when and how
it shows up. Probably when it does show up, it shows up in a big way, you don't want to be
caught by surprise, but you don't know that it's happening right away. So what do you do in
terms of your portfolio in order to be ready for that?
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Tian: Yeah, well that's kind of the million-dollar question at the moment isn't it? So the
first thing to know is, I think I mentioned briefly at the start, clearly more traditional
portfolio construction, the kind of 60/40 or the heavy allocation to fixed income, it's
naturally kind of getting to the end of the road. I think most people recognize that as yields
bump up against the zero bound, the ability for your fixed income portion to really offer a
diversified impact or a hedge to equity risk is going to diminish.
So, going forward, what's very interesting about commodities is that one of the unique
properties of commodities is typically when commodity volatility is high commodity prices
actually tend to go up a lot. And this is quite different to equities because normally for
equities only when equities are crashing that volatility picks up, whereas for commodities, the
volatility tends to be to the upside. Now, the thing to say about commodities is that one of
the big reasons why it tends to be very high volatility is that there tends to be quite
prolonged periods of demand and supply mismatches for the industry. Just because typically
supply responses can take a long time if you're going to build a new mine, or drill a new well,
or build a new plant, it could sometimes you could take up to three to five years. Obviously,
if it's like the super-efficient shell well, maybe it takes one year to get to get it
going.
But for a lot of commodity sites if you're going to build a refinery or build a chemical
plant or things like that, it's going to be three to five years. And because of that very delay
supply response it is where you end up with this prolonged period of demand supply mismatches.
And so that that's kind of what we're starting to see right now, where for a lot of commodity
sectors are more capital scarce.
This being a prolonged period of a lack of investment, a lack of capex, and so these are
sectors that we would expect to have quite explosive upside as the as the economy recovers and
as demand comes back. So I think in the slide deck there's a section on page 15 where I
mentioned the capital cycle. So, I think this is a very interesting framework to actually think
about when we're trying to decide where to invest in.
So for the capital cycle I think that the best thing that I've read that's really inspired
us on this was some pieces written by Marathon Asset Management. And it was basically collated
together in a book called "Capital Returns: Investing Through the Capital Cycle", and the book
was put together by Edward Chancellor. And so the basic idea is that, if there's a lot of money
flowing to a particular industry or sector, then that inflow of money will cause a lot more
competition within that industry which drives down returns and then as returns fall very low
then nobody in the industry can make a profit.
In reality only passenger feet and commercial aviation consumption are highly elastic. Other
pasts oil consumption, including consumption by military and commercial tracking are much less
elastic.
And Amazon consumption partially compesates for drop is passenger car traffic :-)
In general oil consumption is a proxy of economic activity. As economic activity is resorting
the same will happen with oil consumption.
Thirty-five percent: this is the size of the spending cuts oil and gas companies are likely
to have made this year in response to the effects that the coronavirus pandemic is having on
demand, according to the International Energy Agency. And this is just the spending slump in
upstream oil and gas. This is just part of a wider trend of investment cuts in the energy
industry, according to the IEA, which earlier this month published an update of its World
Energy Investment report, first released in late spring.
At the time, some thought we were seeing the worst of the pandemic. They were, apparently,
wrong.
Demand for oil has certainly improved in some parts of the world, notably in Asia, where
governments have been more successful in containing the spread of the coronavirus than their
counterparts in Europe and North and South America. But even in China – the world's oil
demand recovery driver –the rebound is slowing down. After all, even though its domestic
demand may be improving, if regional and global demand is stalling, this will have a negative
effect on China as well.
According to the IEA, the impact that the pandemic is having on investments in the oil
industry will continue to be felt for years to come. This is hardly surprising: the agency
noted a 45-percent cut in investments by US shale oil companies this year, combined with a
50-percent jump in financing costs .
The number of active drilling rigs in the US may be rising, suggesting the beginning of a
recovery, but the total was still down 564 rigs on the year as of last week, so that recovery
will take a while.
Meanwhile, fuel stock updates from the Energy Information Administration are offering mixed
signals: last week, for instance, saw a major drawdown in distillate fuel stocks, which should
be good news suggesting demand for distillates is improving. The problem is that it is likely
that this improvement is a temporary occurrence rather than a trend. Air travel is still
greatly constrained, and the chances of any change in the status quo are slim.
Uncertainty: this is the keyword for not just the oil industry but for all others affected
by the pandemic to such a grave extent as to force changes in business models. Europe's Big Oil
majors are doing just that with their push into renewables and plan to greatly reduce the
contribution of their core business to overall earnings. USmajors are sticking with oil, and
they may well have a good reason to do it.
There has been a lot of government and activist talk about a green recovery from the
pandemic crisis. But the pandemic is still raging, and not only is it not abating, but it is
gathering strength. This would mean more money needed for stimulus measures. This, in turn,
would mean less money to spend on renewables, because despite the celebrated cost declines in
solar and wind, financial and regulatory support from governments remains essential for their
increased deployment.
The future remains marred in uncertainty that extends to the possibility of a rebound in oil
investments. According to some, such as BP, we are already past peak oil demand, so that would
mean less investment in oil production growth globally. Others, such as OPEC producers, hope
things will sooner or later return to normal, and the world's appetite for more oil will
continue to grow for at least a few more years before plateauing. And yet even OPEC is
preparing for a worst-case scenario.
The extended cartel OPEC+ is considering a delay in the next relaxation of oil production
cuts, from January 2021 to April, in response to the latest trends in Covid-19 infections. One
thing seems relatively clear, however. The longer the surge in new infections continues, the
longer it would take the industry to return on the path of recovery and growth.
I keep on reading this narrative that there is no difference between Trump and Biden and
no matter who you vote for the blob wins. That the effort to unseat Trump and overturn the
2016 election results, to derail his 2020 campaign is all some elaborate game of 52D chess
that we are too stupid to understand.
Here is my problem with that narrative.
The political scene in the US is split between two factions 1) the US globalists
(Democrats/Establishment Republicans/Deep State/Big Tech/MSM/WallStreet) and on the other
side 2) US Nationalists (Trump/the deplorables).
When Trump was campaigning in 2016 he made it clear that he intended to bring back the
supply chain to the US. All those manufacturing jobs that were outsourced to third world
countries to maximise the profits of the large corporations we're going to be brought back
and the way he intended on doing that was to exit free trade agreements that harmed US
national interest and introduce protectionist policies (tariffs/ low corporate taxes etc)
which would entice/induce/force manufacturers to open factories in the US again.
This horrified the globalists as they have for the past decades been implementing a
controlled disintegration of the US
The great "liberalization" of world commerce began with a series of waves through the
1970s, and moved into high gear with the interest rate hikes of Federal Reserve Chairman
Paul Volcker in 1980-82, the effects of which both annihilated much of the small and medium
sized entrepreneurs, opened the speculative gates into the "Savings and Loan" debacle and
also helped cartelize mineral, food, and financial institutions into ever greater
behemoths. Volcker himself described this process as the "controlled disintegration of the
US economy" upon becoming Fed Chairman in 1978. The raising of interest rates to 20-21% not
only shut down the life blood of much of the US economic base, but also threw the third
world into greater debt slavery, as nations now had to pay usurious interest on US loans.
false solutions to a crisis of global proportions are being promoted in the form of a
"Great Global Reset" which aims at creating a new economic order under the fog of COVID.
This emerging "new order", as it is being promoted by Mark Carney, George Soros, Bill Gates
and other minions of the City of London is shaped by a devout commitment to depopulation,
world government and master-slave systems of social control.
By attempting to tie the new system of "value" to economic practices which are designed
to crush humanity's ability to sustain itself in the form of "reducing carbon footprints",
"sustainable green energy", cap and trade, carbon taxes and green infrastructure bonds,
humanity is being set up to accept a system of governance onto our children and
grandchildren which will subject them to a dystopic world of fascism the likes of which
even Hitler could not have dreamed.
Exiting NAFTA, implementing protectionist measures, lowering corporate taxes, starting a
trade war with China (that is where the majority of the outsourced jobs went) he is trying to
undo the controlled disintegration of the US. That is why the globalists hate him so
much.
Fall enrollment has
plunged , some colleges are shuttering operations, revenues across the entire higher
education industry are collapsing, and the shift from physical to virtual education due to the
virus pandemic could prick the next bubble: the student housing debt market.
Our warning about the coming implosion of the higher education industry (see here
from 2014) , as a whole, has become louder and louder over the last six-plus years as the
student debt bubble has recently swelled to more than $1.6 trillion. Years ago, no one at the
time, could've forecasted a virus pandemic would doom colleges and universities.
Credit rating agency Moody's recently downgraded the entire higher education sector to
negative from stable, and the American Council on Education estimates colleges and universities
will experience a $23 billion decline in revenues over the next academic year.
Bloomberg outlines the increase of virtual education in a virus pandemic has resulted in an
abundance of empty dorms at colleges and universities, creating a $14 billion headache for the
student housing debt market.
"West Virginia State University, already hit with a 10% enrollment drop, plans to give
money to a school foundation so it can meet its bond covenants for residence hall debt. A
community college in Ohio is using part of a $1.5 million donation for a financially-strapped
student housing project. And officials at New Jersey City University, which serves largely
first-generation and lower-income students and has recorded years of deficits, are prepared
to shore up a dorm there," Bloomberg said.
The squeeze on university finances comes as the National Student Clearinghouse Research
Center
warned about a 16% drop in first-year undergraduate students enrolled for the fall
semester. This means new revenue streams are quickly drying up for overleveraged colleges and
universities.
"The limiting factor is some of these schools themselves are facing uncertainty with many
of their revenue streams," S&P Global Ratings analyst Amber Schafer said in an interview.
"It's a matter of not only willingness, but if they're able to support the project."
"Typically, privatized student housing debt is paid off by the revenue generated by the
dorms -- meaning there's little recourse for bondholders if things go south," Bloomberg said.
With occupancy rates already declining as coronavirus cases are surging, well, this could be
bad news for colleges and universities heading into 2021.
"Borrowers have begun revealing how empty residence halls are as the pandemic spurs many
campuses to keep classes online. According to the school foundation that sold the debt, West
Virginia State University's dorm is 71% full, putting it about 20 percentage points from
where it needs to be to satisfy debt covenants. Other privatized student housing projects,
like two on Howard University's campus, are virtually empty due to online-only instruction
there," Bloomberg said.
Bloomberg warns: "Privatized dorms are struggling the most given that they weren't
structured to withstand 20% to 30% drops in occupancy -- or no students at all."
"West Virginia State University may have to step in to help student housing bonds at risk
of violating a debt service coverage ratio, Moody's warned this month. The historically-black
college faces "considerable" challenges in backstopping the bonds, Moody's said.
The nearly 290-bed residence hall with rents of $3,881 per semester was just 71% occupied
this fall, while it needed to be about 92% occupied, said Patricia Schumann, president of the
university foundation that sold the debt. Schumann said the university is projected to
provide a $75,000 payment in January. In the meantime, she said the school was working to
bolster its financial position and boost recruitment and donations.
"We're not standing still," she said.
Ohio's Terra State Community College, which has more than 2,100 students, was downgraded
deeper into junk over the risk posed by a dorm owned by a nonprofit, given that the school
"appears to provide an unconditional guarantee" to meet the debt obligations, Moody's said.
The project was financed through a bank note.
The dorm's occupancy fell to 62%, and the college is using a previously-received donation
to cover a shortfall in project revenue amounting between $500,000 to $600,000, the ratings
company said in a report this month.
At New Jersey City University, a student housing project financed though a separate entity
will likely miss a required debt service coverage ratio. The public school having to step in
to help the bonds would be a challenge, but a surmountable one, said Jodi Bailey, the
university's associate vice president for student affairs. The student housing bonds aren't a
debt of the university, so the school would be choosing to provide financial support,
according to bond documents .
The school is working to cut expenses related to the dorm. "Is it a harder year? Most
definitely," she said.
The student housing bonds, issued by West Campus Housing LLC in 2015, were
slashed deeper into junk in September by S&P, which said in a report that residence halls'
occupancy there had fallen to 56% so the school could accommodate social-distancing
guidelines," said Bloomberg.
To summarize, plunging enrollments, resulting in falling occupancy rates for dorms, is a
debt bomb waiting to go off for many overleveraged colleges and universities that are panicking
at the moment to divert enough funds to service debts, as the usual revenue streams, that being
rent checks from students, are nowhere to be found as virtual learning keeps young adults in
their parents' basements and out of dorms.
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If occupancy rates continue to slide through 2021, then we must revisit what we said months
before the virus pandemic began in the US:
A weaker U.S. dollar, rising inflation risks and demand driven by additional fiscal and
monetary stimulus from major central banks will spur a bull market for commodities in 2021,
Goldman's chief commodity strategist Jeffrey Currie said on Thursday, also predicting that "all
commodity markets are in, or moving toward, a deficit with inventories drawing in all but
cocoa, coffee and iron ore."
The bank, which notes that markets are increasingly concerned about the return of inflation,
forecast a return of 28% over a 12-month period on the S&P/Goldman Sachs Commodity Index
(GSCI), with a 17.9% return for precious metals, 42.6% for energy, 5.5% for industrial metals
and a negative return of 0.8% for agriculture.
A key catalyst for the bank's bullish call is that "nearly all commodity markets are in, or
moving toward, a deficit with inventories drawing in all but cocoa, coffee and iron ore."
As Currie adds, "such broad-based deficits are usually only seen late in the business cycle,
underscoring the unique environment markets are in. Given that inventories are drawing this
early in the cycle, we see a structural bull market for commodities emerging in 2021." In the
strategist's view, the bull market will be driven by three major themes:
structural under-investment in the old economy,
policy driven demand and
macro tailwinds from a weakening dollar and rising inflation risks. "These drivers remain
consistent with the bank's bullish views from the start of this year, and have now been
intensified by COVID-19 disruption and the subsequent global policy response."
Some more thoughts from Currie on the tightening in commodity markets:
Commodity markets have been mostly range bound since this summer, in our view caught
between a longer-term bullish outlook for 2021 and near-term concerns around the timing of a
vaccine amid rising COVID cases across Europe and the US Midwest (see Exhibit 4). However, it
is important to emphasize that nearly all commodity markets are in, or moving toward, a
global deficit with inventories drawing in all but cocoa, coffee and iron ore. Such
broad-based deficits are usually only seen late in the business cycle,underscoring the unique
environment markets are in.
As global demand remains tepid for consumer-related commodities like oil, the deficits
further underscore how significant the drop in supply has been and how the supply response
function has changed. For oil, the sharp drop in capex is now having an impact on non-OPEC
decline rates, with capital markets refusing to fund shale drilling, only debt rollovers. In
metals, we have seen a sharp drop in maintenance capex and supply disruptions dragging into
2021. This suggests that even if demand falters in coming weeks as winter exacerbates
COVID-19, markets will likely continue to rebalance, barring an outright collapse in demand.
In our view, base metals and agriculture have more near-term upside than oil, with smaller
inventories to move through before prices begin to rise.
Goldman then shows the following chart which reveals the growing deficit across key
commodities, as well as the key macro catalysts for higher commodity prices in coming
months:
Hedging that even if demand falters in coming weeks as winter exacerbates COVID-19, Goldman
still expect markets will continue to rebalance, "barring an outright collapse in demand."
Goldman takes a more contained view on energy saying that while inventories of oil remain high,
"upside in energy prices will likely come after winter." However, non-energy commodities face
immediate upside as balances have tightened ahead of expectations, driven by large Chinese
demand and adverse weather shocks, according to the Goldman strategist.
Focusing on Gold, Currie said that expansionary fiscal and monetary policies in developed
market economies continue to drive interest rates lower and create demand for hedging the tail
risks of inflation, lifting demand for precious metals. As a result, Goldman forecasts gold
prices at an average of $1,836 per ounce in 2020 and $2,300 per ounce in 2021, and expects
silver prices to be at around $22 per ounce in 2020 and $30 per ounce next year .
Non-energy commodities could see an "immediate upside" as the market balances tighten ahead
of expectations on strong demand from China and weather-driven risks, the Goldman Sachs
analysts said.
The bank maintained a "neutral" view on commodities in the near term and "overweight" in the
medium term.
The $100-plus million blitz includes at least $22 million from Facebook co-founder Dustin
Moskovitz, according to an exclusive report from Recode, a subdivision of Vox. Another
Democratic megadonor involved is former Google and Alphabet CEO Eric Schmidt, currently
advising the Pentagon on technology innovation.
Called Future Forward, the super PAC has filed federal paperwork on Tuesday disclosing that
it has raised $66 million between September 1 and October 15. It has contracted for $106
million of TV ads between September 29 and November 3, according to media tracking firm
Advertising Analytics. This makes it the largest Biden booster outside the Democrats' campaign
itself, already a fundraising juggernaut.
Recode also reported that Future Forward "has been recommended in private communications
by the team of Reid Hoffman." He is the LinkedIn co-founder and Democratic megadonor
previously caught funding a disinformation
campaign during the 2017 special Senate election in Alabama, in which a company called New
Knowledge created a Twitter army of 'Russian bots' pretending to back the Republican candidate.
It was unclear from the Recode story whether Hoffman had contributed any funding to Moskovitz's
super PAC.
"... Corporate Democrats' anxiety and fear that they could lose control over the party became quite evident during latest party convention, as they tried hard to "bury" their own progressives while gave plenty of time to neoliberal Republicans and war criminals to speak. ..."
globinfo
freexchange
As we explained
previously, what we see now in the United States with Trump, is a counter-attack by the part of
the American capital against the globalist faction. The faction that is primarily consisted by
the liberal plutocracy. Therefore, as the capitalist class splits, the capitalists around Trump
are now taking with them the most conservative part of the American society, as they need
electoral power. They have the money and their own media network. Their first big victory was
Trump in the US presidency and this explains why the liberal media attack him so hard and so
frequently.
The COVID-19 pandemic added more chaos in the ongoing civil war between capitalists and (as
always), the working class is paying the price for the additional mess.
The DNC
establishment fought hard, one more time, to get rid of Bernie Sanders in order to impose its
own - fully controllable and fully dedicated to the neoliberal status quo - Joe Biden/Kamala
Harris duo. Obviously, this was an attempt by the corporate Democrats to challenge and beat
Trump without harming neoliberal order through a Socialist like Sanders in the leadership of
the Democratic Party. Still, the DNC establishment couldn't take full control of the whole
situation as the most popular progressives, like Alexandria Ocasio-Cortez, renewed their
position in the party through big victories in the 2020 primaries. Furthermore, the progressive
army came out stronger through significant
additional victories like Cori Bush's.
Corporate Democrats' anxiety and fear that they could lose control over the party became quite
evident during latest party convention, as they tried
hard to "bury" their own progressives while gave plenty of time to neoliberal
Republicans and war criminals to speak.
And, actually, this is the main reason that the corporate Democrats want so desperately to beat
Trump in November's election.
With a potential Biden victory the corporate Dems will re-establish their position in the party
against progressives, as they will be able to play the Trump-scare card for four more years.
During that time, they will get all the help they want from the liberal media to bury forever
the most popular Socialist policies. Simply by claiming that the Trump nightmare could return
in 2024. Therefore, they will demand "unity" from all party members under their own terms, in
short, under full restoration of the neoliberal status quo. Under these circumstances,
corporate Democrats will have plenty of time to assist the liberal plutocrats to
take over directly the party in 2024.
On the contrary, with a potential Trump victory the Trump-scare card will be burned for good
and corporate Democrats won't be able to use it as Trump won't be able to have another term in
2024.
In that case, corporate Democrats will receive additional pressure from the progressive wing
and progressive voters, as these will demand radical changes inside the party towards popular
policies. The liberal capitalist faction will face the serious threat to be left without
political power, which by 2024, will be restricted to some moderate Republicans who are
dedicated to the neoliberal doctrine. The dream of the liberal plutocrats to take over
political power directly will die forever.
And this could be proved decisive for the outcome of
the endo-capitalist war between the liberal plutocrats and the Trump-affiliated
capitalists.
At this point American politics is a dispute among two Jewish factions, Trump is a pawn
of the Zionist faction and was targeted for destruction by the Cosmopolitan faction. Whoever
wins, we loose!
@Ghali
ary. The Israeli/Zionist elites care about their constituents opinions about as much as the
elites in any group. ZERO. There's a big club and we ain't in it.
The Israeli/Zionist elites wanted war with Iran or slapping them back economically to the
middle ages. Hillary was going to leave the Iran deal in place and Trump was going to tear it
up.
Trump paid for his re-election by murdering Solemani. Trump felt he couldn't start a war
in his first term so offered that up to get their support. He will be re-elected in big part
because he solidified his position with them as the anti-Iran candidate.
Former Republican presidential candidate Mitt Romney released an extraordinary statement on
Tuesday, decrying a political scene he said "has moved away from spirited debate to a vile,
vituperative, hate-filled morass, that is unbecoming of any free nation." "The world is
watching America with abject horror," he added.
Romney tweeted his statement under the title "My thoughts on the current state of our
politics." "I have stayed quiet," he said, "with the approach of the election." "But I'm
troubled by our politics," the sole Republican to vote to impeach Trump added in his
statement.
"The president calls the Democratic vice-presidential candidate 'a monster'. He repeatedly
labels the Speaker of the House 'crazy.' He calls for the justice department to put the prior
president in jail. He attacks the governor of Michigan on the very day a plot is discovered
to kidnap her. Democrats launch blistering attacks of their own, though their presidential
nominee refuses to stoop as low as others," Romney, a Utah senator who was the 2012
Republican nominee for president, complained in the statement.
Though superficially trying to appear "fair and balanced" in the didactic sermon
patronizingly delivered by the only adult in the room full of political upstarts, Romney's
perceptible bias in the polemical diatribe was hard not to be noticed.
It defies explanation if he didn't watch the presidential debate or consciously elided over
the sordid episode where the Democratic presidential nominee contemptuously sneered at his
political rival with derogatory epithets such as "a clown, a racist and Putin's puppy."
I'm not sure if Biden was high on meth during the debate, as Trump had repeatedly been
insinuating, or he lacks basic etiquette to act like a dignified statesman, but only
amphetamines could make a person take leave of his senses and insolently yell at the president
of the US, "Will you shut up, man," while ironically complaining, "This is so
unpresidential."
Though a longtime Republican senator, Mitt Romney's loyalty to the GOP was compromised due
to a personal spat with Trump. In the Republican primaries of the 2016 US presidential
elections, Romney severely castigated Trump, calling him "a phony and a fraud."
After Trump was elected president, he dangled the carrot of the secretary of state
appointment to Romney, invited him to a dinner in a swanky New York restaurant, made him eat
his words and fawn all over Trump like a servile toady. But later, he gave one of the most
coveted appointments in the US bureaucratic hierarchy to oil executive Rex Tillerson.
Romney felt humiliated to the extent that in Trump's vulnerable moment, after impeachment
proceedings were initiated against him in the Senate in February, Romney became the only US
senator in the American political history who voted against his own Republican Party
president.
Though lacking intellect and often ridiculed for frequent spelling errors on his Twitter
timeline, such as "unpresidented" and "covfefe," implying he gets his news feed from television
talk shows and rarely reads book and articles, Donald Trump is street smart and his
anti-globalization agenda and down-to-earth attitude appeal to the American working
classes.
Nevertheless, it's quite easy for the neuroscientists on the payroll of the national
security establishment to manipulate the minds of such impressionable politicians and lead them
by the nose to toe the line of the deep state, particularly on foreign policy matters. No
wonder national security shills disparagingly sneer at the president as the
"toddler-in-chief."
In 2017, a couple of caricatures went viral on social media. In one of those caricatures,
Donald Trump was depicted as a child sitting on a chair and Vladimir Putin was shown whispering
something into Trump's ears from behind. In the other, Trump was portrayed sitting in Steve
Bannon's lap and the latter was shown mumbling into Trump's ears, "Who is the big boy now?" And
Trump was shown replying, "I am the big boy."
The meaning conveyed by those cunningly crafted caricatures was to illustrate that Trump
lacks the intelligence to think for himself and that he was being manipulated and played around
by Putin and Bannon. Those caricatures must have affronted the vanity of Donald Trump to an
extent that after the publication of those caricatures, he became ill-disposed toward Putin and
sacked Bannon from his job as the White House Chief Strategist in August 2017, only seven
months into the first year of the Trump presidency.
Bannon was the principal ideologue of the American alt-right movement. Though the alt-right
agenda of the Trump presidency has been scuttled by the deep state, Trump's views regarding
global politics and economics are starkly different from the establishment Democrats and
Republicans pursuing neocolonial world order masqueraded as globalization and free trade.
Besides the Trump supporters in the United States, the far-right populist leaders in Europe
are also exploiting popular resentment against free trade and globalization. The Brexiteers in
the United Kingdom, the Yellow Vest protesters in France and the far-right movements in Germany
and across Europe are a manifestation of a paradigm shift in the global economic order in which
nationalist and protectionist slogans have replaced the free trade and globalization mantra of
the nineties.
Donald Trump withdrawing the United States from multilateral treaties, restructuring trade
agreements and initiating a trade war against China are meant to redress, at least
cosmetically, the legitimate grievances of the American working classes against the wealth
disparity created by laissez-faire capitalism and market fundamentalism.
Michael Crowley reported for the New
York Times last month that American allies and former US Officials fear Trump could seek
NATO exit in a second term. According to the report, "This summer, Mr. Trump's former national
security adviser John R. Bolton published a book that described the president as repeatedly
saying he wanted to quit the NATO alliance. Last month, Mr. Bolton speculated to a Spanish
newspaper that Mr. Trump might even spring an 'October surprise' shortly before the election by
declaring his intention to leave the alliance in a second term."
The report notes, "In a book published this week, Michael S. Schmidt, a New York Times
reporter, wrote that Mr. Trump's former chief of staff John F. Kelly, a retired four-star
Marine general, told others that 'one of the most difficult tasks he faced with Trump was
trying to stop him from pulling out of NATO.' One person who has heard Mr. Kelly speak in
private settings confirmed that he had made such remarks."
Crowley adds, "Donald Trump now relies on 'a team of inexperienced bureaucrats' and has
grown more confident and assertive, as he has already sacked seasoned national security
advisers, including John F. Kelly; Jim Mattis, another retired four-star Marine general and
Trump's first defense secretary; and H.R. McMaster, a retired three-star Army general and
Trump's former national security adviser."
In fact, the Trump administration announced plans in July to withdraw 12,000 American troops
from Germany and sought to cut funding for the Pentagon's European Deterrence Initiative. About
half of the troops withdrawn from Germany were re-deployed in Europe, mainly in Italy and
Poland, and the rest returned to the US.
Similarly, although full withdrawal of US troops from Afghanistan was originally scheduled
for April next year, according to terms of peace deal reached with the Taliban on February 29,
President Trump hastened the withdrawal process by making an electoral pledge this week that
all troops should be "home by Christmas." "We should have the small remaining number of our
BRAVE Men and Women serving in Afghanistan home by Christmas," he tweeted last week.
Even the arch-foes of the US in Afghanistan effusively praised President Trump's peace
overtures. Taliban spokesman Zabihullah Mujahid
told CBS News in a phone interview last week, "We hope he will win the election and wind up
US military presence in Afghanistan."
The militant group also expressed concern about President Trump's bout with the coronavirus.
"When we heard about Trump being COVID-19 positive, we got worried for his health, but it seems
he is getting better," another Taliban senior leader confided to reporter Sami Yousafzai.
Moreover, Iran-backed militias
recently announced "conditional" cease-fire against the US forces in Iraq on the condition
that Washington present a timetable for the withdrawal of its troops. The US-led coalition has
already departed from smaller bases across Iraq and promised to reduce its troop presence from
5,200 to 3,000 in the next couple of months, though Iraq's parliament passed a resolution
urging the full withdrawal of US troops in January.
There is no denying the fact that the four years of the Trump presidency have been unusually
tumultuous in the American political history, but if one takes a cursory look at the list of
all the Trump aides who resigned or were otherwise sacked, almost all of them were national
security officials.
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In fact, scores of former Republican national security officials recently made their
preference public that they would vote in the upcoming US presidential elections for Democrat
Joe Biden instead of Republican Donald Trump against party lines.
What does that imply? It is an incontrovertible proof that the latent conflict between the
deep state and the elected representatives of the American people has come to a head during the
Trump presidency.
Although far from being a vocal critic of the deep state himself, the working-class
constituency that Trump represents has had enough with the global domination agenda of the
national security establishment. The American electorate wants the US troops returned home, and
wants to focus on national economy and redress wealth disparity instead of acting as global
police waging "endless wars" thousands of miles away from the US territorial borders.
Addressing a convention of conservatives last year, Trump publicly castigated his own
generals, much to the dismay of neoliberal chauvinists upholding American exceptionalism and
militarism, by revealing: "I learn more sometimes from soldiers what's going on, than I do from
generals. I do. I hate to say it. I tell the generals all the time."
At another occasion, he ruffled more feathers by telling the reporters: "I'm not saying the
military's in love with me. The soldiers are. The top people in the Pentagon probably aren't
because they want to do nothing but fight wars so all of those wonderful companies that make
the bombs and make the planes and make everything else stay happy."
In a note which we are confident will go swimmingly with millions of Americans who lost
their jobs in the past six months, Goldman's economics team writes that "scarring effect" from
the pandemic recession has been "surprisingly limited" and the "damage has so far been much
less than initially feared" in what is likely the most upbeat take on the current economy and
one wonders if it involved any research outside of Tribeca.
After saying tthat the early weeks of the virus shock the Goldman economists "began to
closely track measures of long-term damage to businesses and the labor force" with many
businesses facing near-total collapses in revenue and 25 million jobs lost in little over a
month, "the threat of deep scarring effects loomed over the US economy." Instead, things have
been far better than expected.
Looking at the business sector first, Jan Hatzius and team write that the "scarring effects
on the business sector remain surprisingly limited" as commercial bankruptcy filings have run
below the pre-pandemic trend, most business closures during the worst months of the pandemic
have proved temporary, and new business formation has surged recently.
A similar cheerful conclusion emerges when Goldman looks at the labor force, with the
Goldman economists writing that "scarring effects on the labor force have also been less severe
than feared" , as unemployment has fallen sharply, "and most of the remaining job losers are
either still on temporary layoff or are in industries that should largely recover with a
vaccine." In addition, Goldman observes, "labor demand has rebounded much more quickly than
last cycle, reducing the risk of widespread long-term unemployment."
Ludicrous? Insane? Hilarious? Perhaps all three, yet here are some of the data Goldman used
to reach its arguably offensive to tens of millions of Americans conclusion:
The left side of Exhibit 1 shows that total commercial bankruptcy filings reported by the
American Bankruptcy Institute have actually run below the pre-pandemic trend. While a recent
San Francisco Fed report
noted with alarm that Chapter 11 bankruptcies are running at the fastest pace since 2013,
this largely reflects recent changes to the bankruptcy code and it has been more than offset
by declines in other commercial bankruptcy filings.
The right side of Exhibit 1 shows that Bloomberg's count of bankruptcies at large
companies did briefly spike to a level that approached the financial crisis peak. But as our
credit strategists have shown, the majority of these were firms already on a path to default
before the pandemic, not otherwise healthy businesses needlessly sunk by an unprecedented
shock.
In other words, Goldman contends that while there was a spike in defaults, it was largely
among those companies that were already levered to the hilt and would have filed anyway. The
covid crisis merely accelerated their demise, which come to thing of it, is what the covid
virus is also doing with most of the elderly people it affects and who die not so much from the
virus as due to other underlying, chronic or acute conditions, whose impact is merely
accentuated to the point of lethality by covid.
What about Goldman's optimistic take on the labor market?
Here the economists argue that the silver lining of the employment collapse was the very
high share of temporary layoffs shown in Exhibit 3, historically something which they say is "a
reliable signal of rapid recovery" even as those permanently laid off is an dangerously high
number, the highest since 2013, Goldman's spin notwithstanding.
To elucidate their point, Goldman next claims that just five months later, the number of
newly unemployed workers since the virus shock has indeed declined dramatically, and about half
still report that they are on temporary layoff. While not all of these workers will return to
their old positions, this nevertheless points to further outsized job gains in coming
months.
Here Bank of America disagrees, and lays out three cyclical forces today that spell out far
greater pain for the labor force than GOldman is willing to admit, to wit:
History repeats: skill mismatch yet again. Given the lack of demand for services-travel,
entertainment, etc.-there will likely end up being discouraged workers in this sector. The
skills are not easily transferrable to other sectors-particularly on the goods side of the
economy where demand has been resilient.
Disengagement from the labor force due to health or childcare: the threat of the virus
has left many people with extremely difficult decisions to make. Some may decide that the
risk of falling sick with COVID in their workplace is too significant and thus will
voluntarily leave the workforce, particularly for those who are close to retirement. Parents
also struggle with child-care issues-it may be hard for parents to fully return to work until
they are able to feel confident that their children can return to prior educational
arrangements or daycare. This could make it difficult to have two working parents-the burden
tends to be disproportionally on women. As long as the virus remains a threat, there will be
a portion of the workforce on the sidelines.
Reengagment in the labor force because of the "telepresence revolution": over the
medium-term, the shift toward greater virtual / remote working could be a positive for the
LFPR. According to the BLS's Time-Use Survey, about 8% of the workforce worked from home at
least one day a week prior to COVID. According to research from the Atlanta Fed in which the
authors compared the Time-Use Survey results to current survey analysis, they find that the
share of working days from home is set to triple after the pandemic. Similarly, the BofA
Global Research data analytics team surveyed the companies across the research coverage for
their latest expectations on the timing for return to the office - the results show that only
80% of employees will be expected to be fully back in the office by the end of 2021.
While Goldman acknowledges this, saying that "not all workers who lost jobs in
virus-sensitive industries will return to them when a vaccine becomes available, and many
layoffs are likely to prove permanent" but then adds that "workers who have to switch jobs or
even occupations already face much better prospects for re-employment than after previous
recessions."
So it's all good, see? Well, maybe not: even Goldman had to concede that long-term
unemployment rose in September and is likely to rise somewhat further in the October jobs
report as more workers who lost their jobs in the first month of the pandemic cross the
half-year mark. But even here Goldman finds a silver lining, and writes that "the rapid
recovery of labor demand and faster pace of labor reallocation is a striking contrast with past
recessions that should help most workers avoid the very long unemployment spells seen last
cycle."
In short, there is virtually nothing about the devastation endured by businesses and workers
that Goldman's well-trained economists can't spin into a positive outcome, and as they
summarize "scarring effects on businesses and the labor force have so far proven much less
severe than initially feared."
This, they conclude, "bodes well for the economy's medium-term recovery prospects and is one
more reason for Goldman's above-consensus 2021 growth forecast." What about the withdrawal of
fiscal support which has forced Americans to draw down drastically on
their savings which were boosted by the massive fiscal stimulus ...
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Surely at least that has to be positive? Well, as Hatzius agrees, it does raise some risks
over the next few months, but then the chief economist counters that "we expect a vaccine and
further fiscal support next year -- including another round of small business funding, even in
a divided government scenario -- to limit the long-term damage and keep the economy on track
for a much more rapid than usual recovery."
To this all one can say is wow : and while we certainly would urge the Goldman economists to
read something like " A
devastating experience:' Temporary layoffs just became permanent for millions of American
workers , and "
Ex-Bankruptcy Judge Says Worse Is Yet To Come ", we have two questions: just why did
Goldman publish such a puff piece - what does it stand to gain by gutting its reputation for at
least pretend-objective analysis - and question number two: has anyone on the Goldman economics
team actually stepped one foot outside their academic tri-state ivory tower in the past
year?
Before juxtaposing the U.S. and alternative responses to the corona virus's economic
effects, [1]
I would like to step back in time to show how the pandemic has revealed a deep underlying
problem. We are seeing the consequences of Western societies painting themselves into a debt
corner by their creditor-oriented philosophy of law. Neoliberal anti-government (or more
accurately, anti-democratic) ideology has centralized social planning and state power in "the
market," meaning specifically the financial market on Wall Street and in other financial
centers.
At issue is who will lose when employment and business activity are disrupted. Will it be
creditors and landlords at the top of the economic scale, or debtors and renters at the bottom?
This age-old confrontation over how to deal with the unpaid rents, mortgages and other debt
service is at the heart of today's virus pandemic as large and small businesses, farms,
restaurants and neighborhood stores have fallen into arrears, leaving businesses and households
– along with their employees who have no wage income to pay these carrying charges that
accrue each month.
This is an age-old problem. It was solved in the ancient Near East simply by annulling these
debt and rent charges. But the West, shaped as it still is by the legacy of the Roman Empire,
has left itself prone to the massive unemployment, business closedowns and resulting arrears
for these basic costs of living and doing business.
Western civilization distinguishes itself from its Near Eastern predecessors in the way it
has responded to "acts of God" that disrupt the means of support and leave debts in their wake.
The United States has taken the lead in rejecting the path by which China, and even social
democratic European nations have prevented the corona virus from causing widespread insolvency
and polarizing their economies. The U.S. corona virus lockdown is turning rent and debt arrears
into an opportunity to impoverish the indebted economy and transfer mortgaged property and its
income to creditors.
There is no inherent material need for this fate to occur. But it seems so natural and even
inevitable that, as Margaret Thatcher would say, There Is No Alternative.
But of course there is, and always has been. However, resilience in the face of economic
disruption always has required a central authority to override "market forces" to restore
economic balance from "above."
Individualistic economies cannot do that. To the extent that they have a strong state, they
are not democratic but oligarchic, controlled by the financial sector in its own interest, in
tandem with its symbiotic real estate sector and monopolized infrastructure. That is why every
successful society since the Bronze Age has been a mixed economy. The determining factor in
whether or not an economic disruption leaves a crippled economy in its wake turns out to be
whether its financial sector is a public utility or is privatized from the debt-strapped public
domain as a means to enrich bankers and money-lenders at the expense of debtors and overall
economic balance.
China is using an age-old policy common ever since Hammurabi and other Bronze Age rulers
promoted economic resilience in the face of "acts of God." Unless personal debts, rents and
taxes that cannot be paid are annulled, the result will be widespread bankruptcy,
impoverishment and homelessness. In contrast to America's financialized economy, China has
shown how natural it is for society simply to acknowledge that debts, rents, taxes and other
carrying charges of living and doing business cannot resume until economic normalcy is able to
resume.
Near Eastern protection of economic resilience in the face of Acts of God
Ancient societies had a different logic from those of modern capitalist economies. Their
logic – and the Jewish Mosaic Law of Leviticus 25, as well as classical Greek and Roman
advocates of democratic reform – was similar to modern socialism. The basic principle at
work was to subordinate market relations to the needs of society at large, not to enrich a
financial rentier class of creditors and absentee landowners. More specifically, the
basic principle was to cancel debts that could not normally be paid, and prevent creditors from
foreclosing on the land of debtors.
All economies operate on credit. In modern economies bills for basic expenses are paid
monthly or quarterly. Ancient economies operated on credit during the crop year, with payment
falling due when the harvest was in – typically on the threshing floor. This cycle
normally provided a flow of crops and corvée labor to the palace, and covered the
cultivator's spending during the crop year. Interest typically was owed only when payment was
late.
But bad harvests, military conflict or simply the normal hardships of life frequently
prevented this buildup of debt from being paid. Mesopotamian palaces had to decide who would
bear the loss when drought, flooding, infestation, disease or military attack prevented the
payment of debts, rents and taxes. Seeing that this was an unavoidable fact of life, rulers
proclaimed amnesties for taxes and these various obligations incurred during the crop year.
That saved smallholders from having to work off their debts in personal bondage to their
creditors and ultimately to lose their land.
For these palatial economies, resilience meant stabilization of fiscal revenue. Letting
private creditors (often officials in the palace's own bureaucracy) demand payment out of
future production threatened to deprive rulers of crop surpluses and other taxes, and
corvée labor or even service in the military. But for thousands of years, Near Eastern
rulers restored fiscal viability for their economies by writing down debts, not only in
emergencies but more or less regularly to relieve the normal creeping backlog of debts.
These Clean Slates extended from Sumer and Babylonia in the 3 rd millennium BC to
classical antiquity, including the neo-Assyrian, neo-Babylonian and Persian Empires. They
restored normal economic relations by rolling back the consequences of debts personal and
agrarian debts – bondage to creditors, and loss of land and its crop yield. From the
palace's point of view as tax collector and seller of many key goods and services, the
alternative would have been for debtors to owe their crops, labor and even liberty to their
creditors, not to the palace. So cancelling debts to restore normalcy was simply pragmatic, not
utopian idealism as was once thought.
The pedigree for "act-of-God" rules specifying what obligations need not be paid when
serious disruptions occur goes back to the laws of Hammurabi c. 1750 BC. Their aim was to
restore economic normalcy after major disruptions. §48 of Hammurabi's laws proclaim a debt
and tax amnesty for cultivators if Adad the Storm God has flooded their fields, or if their
crops fail as a result of pests or drought. Crops owed as rent or fiscal payments were freed
from having to be paid. So were consumer debts run up during the crop year, including tabs at
the local ale house and advances or loans from individual creditors. The ale woman likewise was
freed from having to pay for the ale she had received from palace or temples for sale during
the crop year.
Whoever leased an animal that died by an act of god was freed from liability to its owner
(§266). A typical such amnesty occurred if the lamb, ox or ass was eaten by a lion, or if
an epidemic broke out. Likewise, traveling merchants who were robbed while on commercial
business were cleared of liability if they swore an oath that they were not responsible for the
loss (§103).
It was realized that hardship was so inevitable that debts tended to accrue even under
normal conditions. Every ruler of Hammurabi's dynasty proclaimed a Clean Slate cancelling
personal agrarian debts (but left normal commercial business loans intact) upon taking the
throne, and when military or other disruptions occurred during their reign. Hammurabi did this
on four occasions. 2
Bronze Age rulers could not afford to let such bondage and concentration of property and
wealth to become chronic. Labor was the scarcest resource, so a precondition for survival was
to prevent creditors from using debt leverage to obtain the labor of debtors and appropriate
their land. Rulers therefore acted to prevent creditors from becoming a wealthy class seeking
gains by impoverishing debtors and taking crop yields and land for themselves.
By rejecting such alleviations of debts resulting from economic disruption, the U.S. economy
is subjecting itself to depression, homelessness and economic polarization. It is saving
stockholders and bondholders instead of the economy at large. That is because today's
rentier interests take the economic surplus in the form of debt service, holding labor
and also corporate industry in bondage. Mortgage debt is the price of obtaining a home of one's
own. Student debt is the price of getting an education to get a job. Automobile debt is needed
to buy a car to drive to the job, and credit-card debt must be run up to pay for living costs
beyond what one is able to earn. This deep indebtedness makes workers afraid to go on strike or
even to protect working conditions, because being fired is to lose the ability to pay debts and
rents. So the rising debt overhead serves the business and financial sector by lowering wage
levels while extracting more interest, financial fees, rent and insurance out of their
take-home pay.
Debt deflation and the transition from finance capitalism to an Austerity Economy
By injecting $10 trillion into the financial markets (when Federal Reserve credit is added
to U.S. Treasury allocation), the CARES act enabled the stock market to recover all of its 34
percent drop (as measured by the S&P 500 stocks) by June 9, even as the economy's GDP was
still plunging. The government's new money creation was not spent to revive the real economy of
production and consumption, but at least the financial One Percent was saved from loss. It was
as if prosperity and living standards would somehow return to normal in a V-shaped
recovery.
But what is "normal" these days? For 95 percent of the population, their share of GDP
already had been falling ever since the Obama Depression began with the bank bailout in 2009,
leaving an enormous bad-debt overhead in place. The economy's long upswing since World War II
was already grinding to an end as it struggled to carry its debt burden, rising housing costs,
health care and related monthly "nut." 3
This is not what was expected 75 years ago. World War II ended with families and businesses
rife with savings and with little debt, as there had been little to buy during the wartime
years. But ever since, each business cycle recovery has started with a higher ratio of debt to
income, diverting more revenue from business, households and governments to pay banks and
bondholders. This debt burden raises the economy's cost of living and doing business, while
leaving less wage income and profit to be spent on goods and services.
The virus pandemic has merely acted as a catalyst ending of the long postwar boom. Yet even
as the U.S. and other Western economies begin to buckle under their debt overhead, little
thought has been given to how to extricate them from the debts and defaults that have
accelerated as a result of the broad economic disruption.
The "business as usual" approach is to let creditors foreclose and draw all the income and
wealth over subsistence needs into their own hands. Economies have reached the point where
debts can be paid only by shrinking production and consumption, leaving them as strapped as
Greece has been since 2015. Rejecting debt writedowns to restore social balance was implanted
at the outset of modern Western civilization. Ever since Roman times it has become normal for
creditors to use social misfortune as an opportunity to gain property and income at the expense
of families falling into debt. Blocking the emergence of democratic civic regimes empowered to
protect debtors, creditor interests have promoted laws that force debtors to lose their land or
other means of livelihood to foreclosing creditors or sell it under distress conditions and
have to work off their debts.
In times of a general economic disruption, giving priority to creditor claims leads to
widespread bankruptcy. Yet it violates most peoples' ideas of fairness and distributive justice
to evict debtors from their homes and take whatever property they have if they cannot pay their
rent arrears and other charges that have accrued through no fault of their own. Bankruptcy
proceedings will force many businesses and farms to forfeit what they have invested to much
wealthier buyers. Many small businesses, especially in urban minority neighborhoods, will see
yeas of saving and investment wiped out. The lockdown also forces U.S. cities and states to
cope with plunging sales- and income-tax revenue by slashing social services and depleting
their pension funds savings to pay bondholders. Balancing their budgets by privatizing hitherto
public services will create monopoly rents and new corporate empires
These outcomes are not necessary. They also are inequitable, and instead of being a survival
of the fittest and most efficient economic solutions, they are a victory for the most
successfully predatory. Yet such results are the product of a long-pedigreed legal and
financial philosophy promoted by banks and bondholders, landlords and insurance companies
reject economy-wide debt relief. They depict writing down debts and rents owed to them as
unthinkable. Banks claim that forgiving personal and business rents would lead absentee
landlords to default on their mortgages, threatening bank solvency. Insurance companies claim
that to make their policy holders whole would bankrupt them. 4 So something has to give: either the population's broad economic interests, or
the vested interests insisting that labor, industry and the government must bear the cost of
arrears that have built up during the economic shutdown.
As in oligarchic Rome, financial interests in today's world have gained control of
governments and captured the political and regulatory agencies, leaving democratic reformers
powerless to suspend debt service, rent arrears, evictions and depression. The West is becoming
a highly centrally planned economy, but its planning center is Wall Street, not Washington or
state and local governments.
Rising real estate arrears prompt a mortgage bailout
Canada and many European governments are subsidizing businesses to pay up to 80 percent of
employee wages even though many must stay home. But for the 40 million Americans who haven't
been employed during the closedown, the prospect is for homelessness and desperation. Already
before the crisis about half of Americans reported that they were living paycheck to paycheck
and could not raise $400 in an emergency. When the paychecks stopped, rents could not be paid,
nor could other normal monthly living expenses.
America is seeing the end of the home ownership boom that endowed its middle class with
property steadily rising in price. For buyers, the price was rising mortgage debt, as bank
credit was the major factor in raising property prices. (A home is worth however much a bank
will lend against it.) For non-whites, to be sure, neighborhoods were redlined against racial
minorities. By the early 2000s, banks began to make loans to black and Hispanic buyers, but
usually at extortionately high interest rates and stiffer debt terms. America's white home
buyers now face a fate similar to that which they have long imposed on minorities:
Debt-inflated purchase prices for homes so high that they leave buyers strapped by mortgage and
compulsory insurance payments, with declining public services in their neighborhoods.
When mortgages can't be paid, foreclosures follow. That causes declines in the proportion of
Americans that own their own homes. That home ownership rate already had dropped from about 58
percent in 2008 to about 51 percent at the start of 2020. Since the 2008 mortgage-fraud crisis
and President Obama's mass foreclosure program that hit minorities and low-income buyers
especially hard, a more landlord-ridden economy has emerged as a result of foreclosed
properties and companies bought by speculators and vast absentee-owner companies like
Blackstone.
Many businesses that closed down did not pay the landlords. Realizing that if they are held
responsible for paying full rents that accrued during the shutdown, it would take them over a
year to make up the payment, leaving no net earnings for their efforts. That was especially the
case for restaurants with compulsory limited "distance" seating and other stores obliged to
restrict the density of their customers. Many restaurants and other neighborhood stores decided
to go out of business. For hotels standing largely empty, some 19 percent of mortgage loans had
fallen into arrears already by May, along with about 10 percent of retail stores. 5
The commercial real estate sector owes $2.4 trillion in mortgage debt. About 40 percent of
tenants did not pay their rents for March, April and May, from restaurants and storefronts to
large national retail markets. A moratorium on evictions put them off until August or September
2020. But in the interim, quarterly state and local property taxes were due in June, which also
was when the annual federal income-tax payment was owed for the year 2019, having been
postponed from April in the face of the shutdown.
The prospective break in the chain of payments of landlords to their banks may be bailed out
by the Federal Reserve, but nobody can come up with a scenario whereby the debts owed by
non-elites can be paid out of their own resources, any more than they were rescued from the
junk-mortgage frauds that left over-mortgaged homes (mainly for low-income victims) in the wake
of Obama's decision to support the banks and mortgage brokers instead of their victims. In
fact, it takes a radical scenario to see how state and local debt can be paid as public budgets
are thrown into limbo by the virus pandemic.
The fiscal squeeze forces governments to privatize public services and assets
Since 1945, the normal Keynesian response to an economic slowdown has been for governments
to run budget deficits to revive the economy and employment. But that can't happen in the wake
of the 2020 pandemic. For one thing, tax revenue is falling. Governments can create domestic
money, of course, but the U.S. government quickly ran up a $2 trillion deficit by June 2020
simply to support Wall Street's financial and corporate markets, leaving a fiscal squeeze when
it came to public spending into the real economy. Many U.S. states and cities have laws
obliging them to balance their budgets. So public spending into the real economy (instead of
just into the financial and corporate markets) had to be cut back.
Sales taxes from restaurants and hotels, income taxes, and property taxes from landlords not
receiving rents. U.S. states and localities are having a huge tax shortfall that is forcing
them to cut back basic social services and infrastructure. New York City mayor de Blasio has
warned that schools, the police and public transportation may have to be cut back unless the
city is given $7 billion. The CARES act passed by the Democratic Party in control of the House
of Representatives made no attempt to allocate a single dollar to make up the widening fiscal
gap. As for the Trump administration, it was unwilling to give money to states voting
Democratic in the presidential or governorship elections.
The irony is that just at the time when a pandemic calls for public health care, political
pressure for that abruptly stopped. Logically, it might have been expected the virus to have
become a major catalyst for single-payer public health care, not least to prevent a wave of
personal bankruptcy resulting from high medical bills. But hopes were dashed when the leading
torch bearer for socialized medicine, Senator Bernie Sanders, threw his support behind Joe
Biden and other opponents for the presidential nomination instead of focusing the primary
elections on what the future of the Democratic Party would be. It decided to focus the 2020
U.S. election merely on the personality of which candidate would impose neoliberal policy:
Republican Donald Trump, or his opponent running simply on a platform of "I am not Trump."
Both candidates – and indeed, both parties behind them –sought to downsize
government and privatize as much of the public sector as possible, leaving administration to
financial managers. Past government policy would have restored prosperity by public spending
programs to to rebuild the roads and bridges, trains and subways that have fallen apart. But
the fiscal squeeze caused by the economic shutdown has created pressure to Thatcherize
America's crumbling transportation and urban infrastructure – and also to sell off land
and public enterprises, basic urban health, schools – and at the national level, the post
office. Fiscal budgets are to be balanced by selling off this infrastructure, in lucrative
Public-Private Partnerships (PPPs) with financial firms.
The neoliberal rent-extractive plan is for private capital to buy monopoly rights to repair
the nation's bridges by turning them into toll bridges, to repair the nation's roads and
highways by making the toll roads, to repair sewer systems by privatizing them. Schools,
prisons, hospitals and other traditionally public functions. Even the police are to be
privately owned security-guard agencies and managed for profit – on terms that will
provide interest and capital gains for the financial sector. It is a New Enclosures movement
seeking monopoly rent much as landlords extract land rent.
Having given $10 trillion dollars to support financial and mortgage markets, neoliberals in
both the Republican and Democratic parties announced that the government had created so large a
budget deficit as a result of bailing out the banking and landlord class that it lacked any
more room for money creation for actual social spending programs. Republican Senate leader
Mitch McConnell advised states to solve their budget squeeze by raiding their pension funds to
pay their bondholders.
For many decades, public employees accepted low wage growth in exchange for pensions. Their
patient choice was to defer demands for wage increases in order to secure good pensions for
their retirement. But now that they have worked at stagnant wages for many years, the money
ostensibly saved for their pensions is to be given to bondholders. Likewise at the federal
level, pressure was renewed by both parties to cut back Social Security, Medicare and Medicaid,
with Obama's 2010 Simpson-Bowles Commission on Fiscal Responsibility and Reform to reduce the
deficit at the expense of retirees and the poor.
In sum, money is being created to fuel the financial sector and its stock and bond markets,
not to increase the economy's solvency, employment and living standards. The corona virus
pandemic did not create this shift, but it catalyzed and accelerated the power grab, not least
by pushing public-sector budgets into crisis.
It doesn't have to be this way
Every successful economy has been a mixed public/private economy with checks on the
financial sector's power to indebt society in ways that impoverish it. Always at issue,
however, is who will control the government. As American and European industry becomes more
debt ridden, will they be oligarchic or democratic?
A socialist government such as China's can keep its industry going simply by simply writing
down debts when they can't be paid without forcing a closedown and bankruptcy and loss of
assets and employment. The world thus has two options: a basically productive public financial
system in China, or a predatory financial system in the United States.
China can recover financially and fiscally from the virus disruption because most debts
ultimately are owned to the government-based banking system. Money can be created to finance
the material economy, labor and industry, construction and agriculture. When a company is
unable to pay its bills and rent, the government doesn't stand by and let it be closed down and
sold at a distressed price to a vulture investor.
China has an option that Western economies do not: It is in a position to do what Hammurabi
and other ancient Near Eastern palatial economies did for thousands of years: write down debts
so as to keep the economy resilient and functioning. It can suspend scheduled debt service,
taxes, rents and public fees from having to be paid by troubled areas of its economy, because
China's government is the ultimate creditor. It need not contend with politically powerful
bankers who insist that the economy at large must lose, not themselves. The government can
write down the debt to keep companies in business, and also their employees. That's what
socialist governments do.
The underlying problem is finance capitalism. Its roots lie at the heart of Western
civilization itself, rejecting the "circular time" permitting economic renewal by Clean Slates
in favor of "linear time" in which debts are permanent and irreversible, without public
oversight to manage finance and credit in the economy's overall long-term interest.
It often is easier to get rich in such times of disaster and need than in times of normal
prosperity. While the U.S. economy polarizes between creditors and debtors, the stock market
anticipates fortunes being made quickly from the insolvency of business with assets and
property to be grabbed. Coupled with the Federal Reserve's credit creation to support the
financial and real estate markets, asset prices are soaring (as of June 2020) for companies
that expect to get even richer from the widespread distress to come in autumn 2020 when
evictions and foreclosures ae scheduled to begin again.
In that respect, the corona virus's effect has been to help defeat the financial sector's
enemy, governments strong enough to regulate it. The fiscal squeeze resulting from widespread
unemployment, business closedowns, rent and tax arrears is being seized upon as a means of
dismantling and privatizing government at the federal, state and local levels, at the expense
of the citizenry at large.
Notes
[1]WHEN CHINA SNEEZES: From the Coronavirus Lockdown to the Global Politico-Economic
Implications, Edited by Cynthia McKinney, Chapter 9, Economic Impact.
[2]
I provide a detailed history of Clean Slate acts from the Bronze Age down through Biblical
times and the Byzantine Empire in " and forgive them their debts" (ISLET 2018).
[3]
I provide the details in Killing the Host: How Financial Parasites and Debt Destroy the
Global Economy ((SLET, 2015).
[4]
Lawsuits are exploding over the role of insurance companies supposed to protect business from
such interruptions. See Julia Jacobs, "Arts Groups Fight Their Insurers Over Coverage on Virus
Losses," The New York Times , May 6, 2020, reports that "insurance companies have issued
a torrent of denials, prompting lawsuits across the country and legislative efforts on the
state and federal levels to force insurers to make payments. The insurance industry has argued
that fulfilling all of these requests would bankrupt the industry."
[5]
Conor Dougherty and Peter Eavis, "In Commercial Real Estate, the Domino Effect Escalates,"
The New York Times , June 9, 2020.
Michael
Hudson's newest interview on the Macro N Cheese Podcast either as a transcript or via
audio is all about the coming debt deflation and what he calls the Neofeudal Empire.
If you haven't already known, Hudson reminds you that:
Who is the dumbest economic Nobel Prize winner? [Paul Krugman?] Paul Krugman. That's right.
He was given a Nobel Prize for not understanding what money was. If he would have
understood it, that would've excluded him from getting the Nobel Prize.
Posted by: snake | Oct 5 2020 4:02 utc | 93 430,000,000 virgin Americans
Thought the population as of this year was 331 million? Typo?
True, dissatisfaction with states appears to be on the rise world-wide. The problem is
that people still are still thoroughly brainwashed into believing the problem is *their*
state, not "state" in the abstract. And because of that, *any* change they make is likely to
be for the worse, a la National Socialism. The likelihood of some form of "Chinese Communism"
in this country is next to zero - not that I would welcome that, either, but some here would.
France might swing toward some form of "council socialism", given their previous history with
left revolutions, but I don't see that spreading anywhere else; maybe Spain given their
anarchism history. No, I don't see any evidence that the state itself is under any
significant threat anywhere. States may collapse, even in the US, but they will reform almost
immediately. Any positive changes will be unlikely and even if implemented will quickly be
eroded.
The *only* solution is extermination of the ruling class. "The world will only be free
when the last politician is strangled with the guts of the last priest." And even then,
without some kind of "re-education" of everyone else, it won't last. A new ruling class will
simply arise.
Just looked up that Ben Franklin quote:
First reported by James McHenry, a Maryland delegate to the Constitutional Convention.
This is what he wrote: "A lady asked Dr. Franklin Well Doctor what have we got a republic or
a monarchy. A republic replied the Doctor if you can keep it." Another of his famous quotes
from that era comes just after Washington had been elected the first president. "The first
man put at the helm will be a good one. Nobody knows what sort may come afterwards," he said.
But that isn't the full quote. He continued, "The executive will be always increasing here,
as elsewhere, till it ends in a monarchy."
Well, here we are. We didn't keep it. And here we are: a lunatic in office who thinks he's
King George.
"The middleman and the host society come in conflict because elements in each group have incompatible goals. To say this is
to deny the viewpoint common in the sociological literature that host hostility is self-generated (from psychological problems
or cultural traditions)."
Edna Bonacich, "A Theory of Middleman Minorities," 1973.
[1]
An interesting accompaniment to Nathan Cofnas's 2018 attempted debunking of Kevin MacDonald's work on Jews was the subtle resurfacing
of Steven Pinker's claim that a more plausible theory of the Jewish historical experience can be found in "Thomas Sowell's convincing
analysis of 'middleman minorities' such as the Jews, presented in his magisterial study of migration, race, conquest, and culture."
Pinker first involved himself in criticism of MacDonald's work in a
letter to Slate , in January 2000, where he made the
above comment. A mere teenager in January 2000, it was only in the wake of the Cofnas affair that I first discovered and read Pinker's
initial response to MacDonald's theory. It goes without saying that I disagreed with almost everything Pinker had to say, but I was
especially vexed by his invocation of the "middleman minority" theory, something I've been familiar with for over a decade and always
found strongly lacking. Pinker himself, of course, has relatively little expertise in the area, his only comment on the theme coming
from a quasi-memoir on Jewish intelligence written for
New Republic . Additionally, his gushing use
of persuasive language ("convincing," "magisterial") to describe Thomas Sowell's extremely derivative and now rather dated Migrations
and Cultures: A World View (1996) struck me as a wholly contrived inflation of what isn't really a rival theory at all,
and certainly not a Sowell innovation. In fact, the history of "middleman minority" theory, and especially its application to the
Jews, has a patchy, chequered, and ambiguous history that is worth exploring in its own right. The following essay is intended to
provide such a history, as well as to broadly assess the merits and inadequacies of exploring Jewish history through this lens, and
also the ways it complements, and falls short of, Kevin MacDonald's theory.
History of the Theory
The comparing of Jews with other sojourning or diaspora trading peoples is far from new, and has even been a staple of anti-Jewish
writing since at least the Enlightenment. Voltaire, for example, wrote in his Oeuvres Complètes (Geneva, 1756) and Dictionnaire
Philosophique (Basle, 1764) that "The Guebers [Parsis in the modern terminology], the Banyans [Indian merchants] and the Jews,
are the only nations which exist dispersed, having no alliance with any people, are perpetuated among foreign nations, and continue
apart from the rest of the world." [2]
In the course of his essay, however, Voltaire concluded that, some surface similarities aside, "It is certain that the Jewish nation
is the most singular that the world has ever seen." Bruno Bauer (1809 -- 1882), the German Protestant theologian, philosopher and
historian, also used the example of the Parsis and Overseas Indians, writing in The Jewish Problem (1843),
The base [of the tenacity of the Jewish national spirit] is lack of ability to develop with history, it is the reason of the
quite unhistorical character of that nation, and this again is due to its oriental nature. Such stationary nations exist in the
Orient, because there human liberty and the possibility of progress are still limited. In the Orient and in India, we still find
Parsees [sic] living in dispersion and worshipping the holy fire of Ormuz.
[3]
After Voltaire, commentary on the relationship between the economic activity of the Jews and other aspects of their behavior and
history, a key theme in modern middleman minority theory, were common points of discussion and debate. Jakob Friedrich Fries (1773
-- 1843), an avowedly anti-Semitic German philosopher, argued in his essay On the Danger to the Well-Being and Character of the
Germans Presented by the Jews (1816), that Jews adopted their historical middleman role willingly, out of a hunger for profit
and an innate sense of separateness, rather than being forced into it by broader economic structures and contexts (which again are
a major focus of modern middleman minority theory). For Fries,
Both in Germany and abroad the Jews had free states where they enjoyed every right, and even countries where they reigned --
but their sordidness, their mania for deceitful, second-hand dealing always remained the same. They shy away from industrious
occupations not because they are hindered from pursuing them but simply because they do not want to.
Following Bauer and Fries -- and before modern scholarship on the subject, the most prominent invocation of ideas similar to modern
middleman minority theory can be observed in the work of Karl Marx. In fact, Marx's essay On the Jewish Problem is an explicit
reply to Bauer, with Marx accusing Bauer of "a one-sided conception of the Jewish problem."
[4] Marx decried Bauer's focus on religious
matters, perceiving the roots of the Jewish problem to reside instead in resource competition and raw economics. In many of his arguments
and assessments of the economic and sociological position of the Jews, Marx anticipated Edna Bonacich (1940 -- ), the Jewish Marxist
anti-Zionist sociologist who essentially invented middleman minority theory in its modern form (and whose work will be discussed
below), in arguing for a structural-contextual explanation of the middleman role of the Jews. In this view, the historical development
of Capital essentially invites and entices certain sojourning or diaspora groups, including the Jews, to adopt lucrative but exploitative
and antagonistic roles within society. In the words of Marx, "we recognize therefore in Judaism a generally present anti-social element
which has been raised to its present peak by historical development , in which the Jews eagerly assisted ." [emphasis
added] These antagonistic roles then generate host hostility, which reinforces ethnocentrism and negative characteristics in the
minority, accelerating and deepening conflict.
Marx's emphasis on economic opportunity and the capitalist superstructure influenced later writers such as the German economist
Wilhelm Roscher (1817 -- 1894), Werner Sombart (1863 -- 1941), Max Weber (1864 -- 1920), and Georg Simmel (1858 -- 1918), all of
whom attempted in some form to trace the relationship of ethnicity to occupational choice (a major concern of modern middleman minority
theory), with particular attention paid to the Jews. In keeping with his flamboyant Marxism, Sombart was closest to Marx's ideas
on the Jews, arguing in The Jews and Modern Capitalism (1911) that Capital had drawn Jews into their influential, exploitative,
and lucrative roles in such a comprehensive manner that Jews had become a kind of ur-middleman minority, and thus were both the prime
movers of modern capitalism and the very embodiment of exploitative capital itself. Later, in Der moderne Kapitalismus (1913),
Sombart claimed that the middleman nature of the Jews had become endemic in society, creating generations of mere "traders," a bourgeois
"Jewish species" whose entire intellectual and emotional world is "directed to the money value of conditions and dealings, who therefore
calculates everything in terms of money." This "spirit of Moloch" compelled the entrepreneur to "make money relentlessly until at
last he conceives this as the real goal of all activity and all existence."
[5] For Sombart, the origins of the
worst of modern capitalism can be found in the early middleman role of the Jews, their medieval semi-nomadic quest for usury-derived
profit and Victorian hawking of shoddy goods being a precursor to modern advertising and the mass production of superfluous and quickly
obsolete consumer products.
Max Weber's interpretation of the Jewish middleman role was slightly softer, with Weber advancing the notion of "pariah capitalism."
Pariah capitalists, who include the Jews as well as the Parsis, the Overseas Indians, and the Overseas Chinese, are groups whose
characteristics and situational contexts make them prone to willingly adopt socially negative positions in order to obtain wealth
and influence. For Weber, capitalism itself was not intrinsically bad. The Puritans, with their industry and hard work, were held
up in Weber's The Protestant Ethic and the Spirit of Capitalism (1904/5) as exemplars of positive, "rational" capitalism.
Jews, and other pariah capitalists, however, invariably advanced a negative "irrational" capitalism typified by consumer credit,
speculation, and colonialism. According to Weber, middleman minorities or "pariah capitalist groups" perverted the essentially good
nature of capitalism because of their practice of "dual ethics," or moral double-standards, which was itself a product of their sojourning
nature and situational context. Weber also perceived Judaism itself as reinforcing the Jewish preference for pariah capitalism.
[6]
Softer still were the ideas of Wilhelm Roscher, one of the founders of the historical school of political economy. Roscher was
part of the historical economist or European Institutionalist movement (which also influenced Weber) that argued for a study of economics
based on empirical work that laid special methodological emphasis on context, rather than logical philosophy. Roscher's emphasis
on context and the historical development of capitalism are exemplified in his 1875 essay "The Status of the Jews in the Middle Ages
Considered from the Standpoint of Commercial Policy."[7] In this essay, Roscher presented capitalism as neither inherently good or
bad, and he made the argument that Jews, who like other middleman minorities were economic modernizers, were positive influences
and crucial to the development of a burgeoning economic trading system. Gideon Reuveni offers the following summary:
According to Roscher, the modernizing role of the Jews explains the change in attitudes within the social majority: from tolerance
and acceptance to exclusion and persecution. In other words, once, in the eyes of the majority the role of the Jews becomes superfluous,
resentments towards the Jews become more prevalent. This cycle in relations towards Jews, Roscher observed, was not specific to
the relationship between Jews and non-Jews but was rather a general development among many peoples who allow their economies to
be administered by a foreign and more highly cultivated people, but later, upon having reached the necessary level of development
themselves, often after intense struggles, try to emancipate themselves from this tutelage. According to Roscher, "one may defiantly
speak in this connection of a historical law here."
[8]
Similar to Roscher's ideas were the theories of the Jewish Marxist anti-Zionist Abram Leon (1918 -- 1944). Leon, a Polish Jew
said to have been executed at Auschwitz at the age of 26, published
The Jewish Question: A Marxist Interpretation around 1942, in
which he proposed that Jews were a "people-class." For Leon, "Judaism mirrors the interests of a pre-capitalist mercantile class."
He explains,
Judaism was an indispensable factor in precapitalist society. It was a fundamental organism within it. That is what explains the
two-thousand-year existence of Judaism in the Diaspora. The Jew was as characteristic a personage in feudal society as the lord and
the serf. It was no accident that a foreign element played the role of "capital" in feudal society. Feudal society as such
could not create a capitalist element; as soon as it was able to do so, precisely then it ceased being feudal. Nor was it accidental
that the Jew remained a foreigner in the midst of feudal society. The "capital" of precapitalist society existed outside of its economic
system. From the moment that capital begins to emerge from the womb of this social system and takes the place of the borrowed organ,
the Jew is eliminated and feudal society ceases to be feudal. It is modern capitalism that has posed the Jewish problem. Not because
the Jews today number close to twenty million people (the proportion of Jews to non-Jews has declined greatly since the Roman era)
but because capitalism destroyed the secular basis for the existence of Judaism. Capitalism destroyed feudal society; and with it
the function of the Jewish people-class. History doomed this people-class to disappearance; and thus the Jewish problem arose. The
Jewish problem is the problem of adapting Judaism to modern society.
Georg Simmel, an ethnically Jewish sociologist, philosopher, and critic, moved in much the same theoretical direction as Roscher
and Leon, as evidenced in his famous and still influential essay "Der Fremde" ("The Stranger") (1908). Simmel argued that certain
groups like Jews and other diaspora peoples may be members of host nations in a spatial sense but not in a social sense. They may
be in the nation, but not of it. These groups are both near and far, familiar and foreign. This contextual scenario
influences the behavior of "stranger" groups by permitting them freedom from convention and allowing them access to an alleged greater
objectivity. For Simmel, "the Stranger," the classic example of which in his estimation is the Jew, is "the person who comes today
and stays tomorrow. He is, so to speak, the potential wanderer: although he has not moved on, he has not quite overcome the freedom
of coming and going." [9] This freedom,
argues Simmel, makes "the Stranger" ideally suited to fulfil the role of middleman minority.
[10] As with Roscher's theory, which
is markedly contradicted in several key areas of the historical record, there are a number of obvious logical and evidential problems
with Simmel's theory, and these will be discussed later.
Between Simmel's 1908 essay and the 1970s, middleman minority theories continued to be advanced. With the exception of Philip
Curtin and his Cross-cultural Trade in World History (1984), these efforts were developed primarily by Jewish scholars, and
overwhelmingly within the context of trying to explicitly or implicitly explore, explain, or offer apologetics for the Jewish experience.
For example, Abner Cohen (1921 -- 2001), was an anthropologist at the University of London, who advanced, in his influential work
Urban Ethnicity (1974) and numerous other publications, the idea that there are "trading diasporas."
[11] Of particular interest are Cohen's
ideas about "visibility strategies" pursued by such groups:
The use of symbols to maintain group boundaries can thus be seen as a cultural strategy. In fact, many groups in traditional
and modern societies find that their interests are guarded better through invisible organisations such as cousinhoods, membership
in a common set of social clubs, religious ties, and informal networks, than through a highly visible, formally recognised institution.
At times, ethnic groups may need to heighten their visibility as strangers to maintain their interests while in other instances
they may wish to lower their profile and appear to be an integral part of the society.
[12]
This bears a striking similarity to the sixth chapter of Kevin MacDonald's Separation and Its Discontents , which is concerned
with visibility strategies, especially among crypto-Jews, and concludes with the argument that "this attempt to maintain separatism
while nevertheless making the barriers less visible is the crux of the problem of post-Enlightenment Judaism."
[13] In fact, beginning in the 1970s,
middleman minority theory began to develop several ideas that dovetail very well with the concept of Judaism as a group evolutionary
strategy. Nowhere is this more apparent than in the work of Edna Bonacich.
Although the modern refinement of middleman minority theory is often traced to Hubert Blalock's 1967 Toward a Theory of Minority-Group
Relations , the greater scholarly interest has been shown in Edna Bonacich's 1973 American Sociological Review article
"A Theory of Middleman Minorities." [14]
Bonacich sought to refine and systematize Blalock's theory within an anti-capitalist framework, essentially making the argument that
all group conflict in such scenarios is the result of a rational competition for resources in which group characteristics and interests
play a crucial role. A Jewish Marxist and anti-Zionist, Bonacich's interpretations borrow heavily from Marx, Sombart, Weber, Roscher,
and Leon, to the extent that Bonacich essentially concurs that capitalism created opportunities for exploitative middleman communities
and the Jews and other middleman minorities, who possess certain predisposing characteristics including dual loyalty and a level
of unscrupulousness, willingly and enthusiastically engaged in these roles.
Bonacich is well-known for her work on East Asian middleman minorities in the United States, especially her 1980 monograph
The Economic Basis of Ethnic Solidarity: Small Business in the Japanese American Community , but her earliest work on middleman
minorities clearly demonstrates a concern with the Jewish experience.
[15] In her discussion of middleman
minorities in the 1973 article, Bonacich describes Jews as "perhaps the epitome of the form." Some of the key features of the 1973
article include the arguments that Jews and other middleman minorities are essentially economic "teams," and that these teams rely
upon very high levels of ethnocentrism and related social and economic strategies, which in turn enable them to succeed in individualistic
societies. Bonacich writes,
The modern industrial capitalist treats his workers impartially as economic instruments; he is as willing to exploit his own
son as he is a stranger. This universalism, the isolation of each competitor, is absent in middleman economic activity, where
primordial ties of family, region, sect, and ethnicity unite people against the surrounding, often individualistic economy
. [emphasis added] [16]
Bonacich makes some very interesting, and controversial, remarks on the nature of conflict between middleman minorities and their
hosts, with special reference to Jews. For Bonacich, accusations that Jews have simply been scapegoats for the woes of Europeans
are based on nothing more than a "surface impression."
[17] While noting that middleman minorities "are noteworthy for the acute hostility they have faced," it remains that,
host members have reason for feeling hostile toward middleman groups. Even the extremity of the host reaction can be
understood as "conflict" behavior. The reason is that the economic and organisational power of middleman groups makes them
extremely difficult to dislodge. The difficulty of breaking entrenched middleman monopolies, the difficulty of controlling
the growth and extension of their economic power, pushes host countries to ever more extreme reactions. One finds increasingly
harsh measures, piled on one another, until, when all else fails, "final solutions" are enacted.
[18] [emphasis added]
Bonacich has also argued that Jews and other middleman minorities do engage in economic and social "dual loyalty," and that middleman
minorities do in fact "drain" resources away from host populations and can become very powerful as a result. This then frequently
causes host elites and masses to unite against the sojourning element, a conflict that can escalate rapidly if the sojourning element
refuses to give up its monopolies. Bonacich explicitly rejects any idea that "host hostility is self-generated (from psychological
problems or cultural traditions)," arguing instead that "the middleman and the host society come in conflict because elements in
each group have incompatible goals." With her apparent justification of host violence against middleman minorities, including Jews,
as well as her objective view of certain Jewish characteristics, Bonacich's theory has been heavily criticized in some quarters,
despite its ongoing influence in contemporary sociology. Robert Cherry, for example, has lamented that Bonacich's ideas on middleman
minorities "reinforce persistent, negative Jewish stereotypes."
[19]
Discussion
Before moving to an assessment of the merits and inadequacies of middleman minority theory in explaining Jewish history, it's
worth reflecting on the history of the theory in light of Steven Pinker's claim that it represents a rival, or "more convincing,"
analysis of the Jewish historical trajectory. The first problem, of course, is that, despite Pinker's lavish praise, Thomas Sowell
is not remotely regarded within scholarship as a leading or original thinker in the area of middleman minority theory. Not only does
discussion of middleman minorities form a relatively small element of Sowell's Migrations And Cultures , but what does appear
is highly derivative of the work of Edna Bonacich, Walter Zenner, and others.
A further problem is Pinker's assumption that there exists a single, unified theory on middleman minorities that will help explain
the Jewish historical experience, and that somehow this will also be sufficient to counter the theory of Kevin MacDonald, or at least
offer a more convincing framework that would allow MacDonald's ideas to be dispensed with. As should already be clear from this brief,
and incomplete, bibliographical overview, within middleman minority theory there is a plethora of often competing interpretations,
as well as a general problem of definitions. Walter Zenner, a key proponent of middleman minority theory, concedes that "we tend
to make our definitions and models fit the prototypical group. For decades, the Jews were the archetype."
[20] In other words, for a considerable
time, middleman minority theory was built around trying to explain the experience of Jews, with other groups haphazardly mapped onto
the theory in way that tried to give the impression of similarity, even where these similarities were thin to non-existent. Bonacich
has made roughly the same argument, asserting that middleman minority theory should be regarded as incomplete because it can only
point to an "ideal type," and
In reality there are problems of fit between any actual ethnic group and this picture, problems in establishing which or how
many of the traits a population need have before it can be classified as a middleman minority.
[21]
Bonacich, very reasonably in my opinion, proposes that middleman minority theory, of which she herself is a pioneer, is something
of a misnomer and should be regarded as little more than "a useful sensitiser to a host of interrelated variables."
[22] One is therefore pressed by Pinker's claim to ask not only which of the many strands of middleman minority theories Steven
Pinker is praising, but also just how "convincing" and "magisterial" he can find it given the field's leading contemporary thinkers
regard their work in such ambiguous terms.
Finally, it is not at all clear how any of the aspects of middleman minority theory obviate the need for a deeper theoretical
framework in which to understand the behaviors and contexts under study. Middleman minority theory, as remarked above, is an incomplete
tool, and has little to offer in terms of deeper explanatory value for such relevant key concepts under discussion as resource competition,
ecological strategies, visibility strategies, psychological attitudes toward the majority, and social identity theory. One of the
strong points of Kevin MacDonald's work, which is truly cross-disciplinary and unusually well-equipped in terms of the relevant historical
literature, is that is does offer such an analysis, and can be argued to fill a lot of the logical and evidential gaps of middleman
minority theory. This is not to say that the two frameworks are in opposition, but that the concept of a group evolutionary strategy
can be usefully and seamlessly integrated into middleman minority theory, especially in relation to Jews.
It's been continually remarked by many scholars in the field that Jews should be regarded as either an "ideal type," "the epitome
of the form," a singular example, or otherwise unique case -- even within the context of broad comparative approaches with other
trading diaspora peoples. The qualities that have made Jews so unique -- cultural, historical, religious, and even biological --
are rarely remarked or elaborated upon in sociological studies of middleman minorities, which are often lacking in depth in terms
of their historical analysis. As will be discussed below, Zenner, in particular, has highlighted ways in which Jews do not fit the
standard middleman minority pattern, especially in terms of their extravagant and influential involvement in the culture and politics
of the host nation (see also MacDonald's Diaspora
Peoples on the Overseas Chinese, xlii ff). Unfortunately, middleman minority literature has little to say in terms of further
explanatory theory on how or why Jews came to both define and exceed the middleman typology. Here, middleman minority theory not
only isn't a rival for MacDonald's work, it positively cries out for it.
"American Jews do not fit the sojourner pattern, since their political involvement goes far beyond the support of Jewish causes.
Much Jewish political activity, whether right, center, or left, can be related to a perception of how to make America and the
world safe for Jews. American Jewish support for domestic liberalism and internationalism can be interpreted in this way."
Walter Zenner, "American Jewry in the light of Middleman Minority Theories," 1980.
[23]
Merits of Middleman Minority Theory
The most obvious merit of middleman minority theory is that, like Kevin MacDonald's theory of a group evolutionary strategy, it
places an unusual and welcome emphasis on rational resource competition as the basis for social conflict involving certain minorities.
By offering a socio-economic explanation for hostility toward Jews, middleman minority theory represents a unique space within academia
where the otherwise ubiquitous "pure prejudice" idea that host hostility is self-generated (from psychological problems or cultural
traditions) is summarily and comprehensively dismissed. Although this has not come without criticism, as seen in Robert Cherry's
denunciation of Edna Bonacich's work as reinforcing bigotry
[24] , this emphasis has been able
to continue largely untroubled thanks to its advancement under a hardline traditional Marxist interpretive veneer.
Middleman minority theory, especially the variant advanced by Bonacich, also insists that host populations do have interests,
and that these interests are genuinely and seriously threatened by middleman minorities who drain away resources. These minorities
then use their accumulated resources to build up power and influence, sometimes even to the extent of gaining considerable economic,
social, and political monopolies over the hosts. Since these monopolies can be very difficult to dislodge, and since monopolies may
satisfy some interests of host populations or segments of host populations, middleman minority theory insists that it is rational
and somewhat inevitable that increasingly harsh and even violent measures will be taken against the offending minority. As a result,
middleman minority theory offers a far more plausible and objective understanding of group conflict than many of the ideas that dominate
the academic discussion of group conflict, especially conflict involving Jews. In addition, the outright rejection of "scapegoat"
theories as "superficial," and the lack of appeals to concepts of victimhood in such a framework, can only be described in the context
of the current academic climate as utterly refreshing.
A second major merit of middleman minority theory is the emphasis that some strands place on the characteristics of the
minorities themselves. Middleman minority theory contains within it three basic theoretical approaches. Context-based theories like
that of Roscher, and revived to some degree by Nathan Cofnas (who is particularly concerned with the urban environment-context),
argue that middleman minorities are essentially creatures of the societies in which they are found, and are for the most part created
by opportunities, status gaps, and vacuums over which they have no control and which have nothing to do with their inherent characteristics
(a slight advantage in intelligence being the only characteristic that Cofnas feels comfortable in applying). Situational theories,
like that advanced by Simmel are similar, but place more emphasis on the culturally-located role of the trader, the Stranger, and
the "sojourner as trader," as the determinant factor in the creation of middleman minorities. Culture-based, or characteristic-based,
middleman minority theories, however, tend to be more numerous, and more convincing. These theories, like that advanced by Weber
and given tacit assent by Bonacich and Zenner, place strong emphasis on the broad range of traditions, ideologies, behaviors, and
aptitudes of middleman minority groups.
The most frequently highlighted of such traits within middleman minority theory is ethnocentrism, which again dovetails with the
primary emphasis of Kevin MacDonald's theory. Ethnocentrism is acknowledged as a central factor in the maintenance of self-segregation
among middleman minority groups, and is often supported by ideological beliefs such as the caste system, or what Zenner describes
as "the Chosen People complex." [25]
Ethnocentrism in middleman minorities is presented as crucial to understanding host hostility not only because of the way it facilitates
the draining of resources from the host population, but also because of highly antagonistic correlates such as dual loyalty and a
willingness to engage in lucrative but morally destructive (for the host) trading. Walter Zenner speaks of a "double standard of
morality" that is
Expressed in dealings with outsiders, such as lending to them with interest, unscrupulous selling practices, and providing
outsiders with illicit means of gratifying their appetites, while at the same time, denying the same means to in-group members.
[26]
An excellent example of this process in action is the fact
Israel
is the largest producer and host of international online gambling sites , while making it illegal for its own citizens to use
such sites. Of course, we are talking here about a nation state rather than a minority population, but this contradiction, and the
nature of Israel within the international community, will be discussed in a critique of the narrowness of middleman minority theory
later.
A further merit of middleman minority theory is the heavy emphasis the cultural-characteristic interpretation places on group
strategies. Middleman minorities, again with Jews being held up by both Zenner and Bonacich as an exemplar or especially acute case,
are said to engage in constantly adaptive activity in order to manage their visibility, ensure their safety, advance their interests,
accumulate power and wealth, and entrench themselves ever deeper within the host. Bonacich has indicated that Jews are especially
keen to remain entrenched in the West, and the United States in particular, because it is financially and politically lucrative,
and only a catastrophic weakening of their monopolies would bring an end to existing strategies.
[27] Zenner goes as far as to claim
that "much of the content of American Jewish life can be seen as visibility strategies. Strategy here includes both unconscious mechanisms
of coping with situations and consciously formulated plans."
[28] Zenner speaks of a "dynamic process"
whereby Jews minimise visibility to avoid hostility, maximise visibility when pursuing certain interests, and generally work unceasingly
to make their image more favorable in the minds of the host. Again, all of this corresponds very well with one of the central themes
of the Culture of Critique -- the idea that Jewish involvement in certain intellectual movements could be seen in the context
of a pursuit of Jewish interests either consciously or in ways that involved unconscious motivations and self-deception. It also
maps very closely to MacDonald's framework on Jewish crypsis and other attempts to mitigate anti-Semitism, advanced in the sixth
chapter of Separation and Its Discontents .
Problems in Middleman Minority Theory
Given the prevalence of Jews in the development and promotion of the modern incarnation of middleman minority theory, including
Georg Simmel, Edna Bonacich, Abner Cohen, Abram Leon, Walter Zenner, Werner Cahnman,
[29] Donald Horowitz,
[30] Gideon Reuveni,
[31] Ivan Light, Steven J. Gold,
[32] and Robert Silverman,
[33] a reasonable concern might be
that middleman minority theory is itself an intellectual "visibility strategy." Just as it has been posited that Jews tend to support
mass migration because it will result in Jews becoming "one among many" ethnic minorities, and thus in their logic less conspicuous
and therefore safer, middleman minority theory can act to reduce Jewish visibility by offering the idea that Jews are just one among
many diaspora trading groups and their history and behavior is therefore not unique or worthy of special attention. It remains the
case that even in those interpretations which highlight negative Jewish behavior and portray host responses as rational (e.g. the
work of Bonacich and Zenner), the proposed framework still insists on some level of commonality, no matter how tenuous, with the
experiences of other minority groups, and it ultimately places the blame for conflict on a much broader context, often the impersonal
historical development of capitalism.
In other words, while the framework can deny that Jews are "victims" of host nations, these theories also deny that host nations
are truly the victims of Jewish exploitation. Both are simply argued to be the victims of capitalism, and any sense of individual
or group agency is rhetorically dissolved. Again, this acts to lower Jewish visibility and culpability and remains attractive for
that reason. There are certainly good reasons along this line of thought for proposing that Steven Pinker's promotion of the theory
over Kevin MacDonald's ideas has less to do with a serious engagement with the content of the work of Bonacich et al. and significantly
more to do with deflecting the entire conversation into an area of discussion in which Pinker feels Jews are less visible.
A major problem with middleman minority theory is that it has a very uncomfortable and unsatisfactory way of handling the obviously
unique aspects of the Jewish experience, especially in relation to the unprecedented involvement of Jews in post-Enlightenment Western
culture and politics, something for which there is absolutely no parallel among other diaspora trading groups anywhere. As has been
discussed, middleman minority theory was essentially first created, consciously or unconsciously, by scholars anxious to find a way
to explain the Jewish experience. Attempts to connect this experience, amounting to some two millennia of history, with the much
more modern and straightforward experiences of, for example, the Chinese in the Philippines or the Japanese in America, have been
doomed to the grossest of generalizations and the clumsiest of associations. This has resulted in a steady stream of admissions within
the field that the best way to interpret middleman minority theory is simply that it proposes an "ideal type" (essentially the Jews)
with unfortunate "problems of fit between any actual ethnic group and this picture [the Jewish experience]."
[34] Zenner has conceded that the
concept has been very "difficult to define so as to cover all groups so designated."
[35] All of which calls into question
whether this concept possesses any real efficacy as an analytical or predictive tool in a comparative sense at all.
An interesting point of difference between the Jewish experience and that of other diaspora trading peoples is that the latter
are acknowledged as possessing a genuine sense of sojourn. In other words, their first generations tend to be truly temporary, semi-nomadic
groups who aim to make money before eventually returning to a homeland. A subtly different experience is observed in the Jews, as
noted by Jack Kugelmass in his 1981 PhD thesis Native Aliens: The Jews of Poland as a Middleman Minority . For Kugelmass,
"the so-called "middleman" character of the Jew is seen as an aspect of the Jewish sense of sojourn, which unlike most sojourns
is ideological rather than sociological in nature ." [emphasis added] Another way of phrasing this would be to say that the Jewish
sense of sojourn is cultural-biological rather than contextual, and since the concept of sojourning has been a major feature of Jewish
life since at least the writing of the Exodus, this difference between other groups is really so stark as to require a distinct analysis
-- something offered to an unparalleled degree in Kevin MacDonald's A People That Shall Dwell Alone . In this analysis, it
would appear that, unlike a relatively small number of other peoples who have merely adopted some tactics in order to pursue a specific
diaspora trade role, Jews have, from time immemorial, given themselves over entirely to these strategies as an entire way of life
-- the "middleman minority" as a raison d'être .
This absolutely crucial distinction is linked to the remarkable fact of contemporary political life that the state of Israel exists
largely according to the same strategies employed by Jews when in a diaspora condition. As stated above, an excellent example of
the dual morality process in action is the fact Israel is the largest producer and host of international online gambling sites
, while making it illegal for its own citizens to use such sites. The creation of the state of Israel has also exacerbated, rather
than ameliorated, issues of dual loyalty in Jewish minority populations, even if these issues are more or less kept out of the public
eye through diplomatic soothing around Israeli spying and the maintenance of certain taboos in the mass media. Israel itself would
appear to be a kind of middleman minority archetype within the international community, cultivating close and lucrative ties with
the elite (the United States), while engaging in more or less unchallenged exploitative and oppressive activities against lower social
orders (Palestinians, and other
vulnerable or indebted population groups in South America).
Like the "ideal type" of middleman minority, Israel heavily drains the resources even of its allies (U.S. military and diplomatic
aid) and pursues its strategies in a ceaseless quest for security, while maintaining moral double standards and being rather shameless
in engaging in what Zenner has described as the classic overrepresentation of middleman minorities in "morally shady" activities.
[36] Even in recent years, Israel has become notorious in the
international organ trade ,
moneylending , and allegations of humanitarian atrocities. Israeli newspapers have also described their country as a "
monopoly nation " due to the intense tendency towards economic monopoly in the country's business life -- a key feature of middleman
minority life that Jews appear to continue to embody to an extent unparalleled in any other ethnic group. Further evidence for the
apparently deep-seated, rather than contextual, nature of "middleman" traits in Jews might be found in studies indicative of a biological
underpinning to Jewish ethnocentrism, such as that described by Kevin MacDonald in the Preface to the Culture of Critique
:
Developmental psychologists have found unusually intense fear reactions among Israeli infants in response to strangers, while
the opposite pattern is found for infants from North Germany. The Israeli infants were much more likely to become "inconsolably
upset" in reaction to strangers, whereas the North German infants had relatively minor reactions to strangers. The Israeli babies
therefore tended to have an unusual degree of stranger anxiety, while the North German babies were the opposite -- findings that
fit with the hypothesis that Europeans and Jews are on opposite ends of scales of xenophobia and ethnocentrism.
As well as dealing poorly with obviously unique aspects of the Jewish experience, a significant portion of middleman minority
theory is devoted to context-based narratives that are often in stark contrast to, or completely disproven by, the historical record.
With the exception of the work of Kevin MacDonald, which demonstrates a very extensive engagement with works of history, a general
weakness in all of the late twentieth-century sociological studies discussed above is the fact that, despite their incredibly ambitious
claims about the historical trajectory of capitalism or middleman minority populations, there is a quite serious neglect of any of
the relevant historiography. This leads, in the case of the modern adherents of Simmel, Roscher, and Leon, to the constant repetition
of error-laden tropes such as the idea that Jews turned to commerce because they were prohibited from owning land (rather than arriving
as profit-seeking financiers), that Jews were most often invited into nations by elites seeking a financial stimulus, or that Jews
were banished from countries once their position as loan merchant was superfluous. In fact, these three tropes, all of which remove
Jewish agency and characteristics from consideration, are essentially the pillars of context-based middleman minority theory pertaining
to Jews, and are absolutely crucial to Roscher's ideas in particular.
The historical record is now acknowledged as more or less complete in relation to the issue of the Jewish ownership of land. It
has been conclusively established, for example, that the general trend across Europe was that Jews were in fact able to possess and
own land during the centuries immediately following their initial spread and expansion in Europe (c.1000 -- 1300). Restrictions on
land ownership were later enacted as penalties for exploitation or as part of a system of elite land transfer -- e.g., the desire
of the English kings to obtain the land of indebted lesser knights, and doing so by financially compensating Jewish moneylenders
for forfeited lands they could no longer legally hold.
One of the correlates of the land ownership trope is the astonishingly naive assumption that land ownership would preclude involvement
in financial speculation. Again, the historical record contradicts this. Mark Meyerson's Princeton-published A Jewish Renaissance
in Fifteenth-Century Spain (2010), for example, offers an expansive analysis of Jewish landowners in Spain who "did not necessarily
cultivate the land themselves" and combined wine production operations worked by non-Jewish peasants with "lending operations and
tax farming." [37] Pointing to the
prevalence of early Jewish land ownership in Poland, France, and Germany, in which Jews enjoyed a "privileged status available to
few Christians," Norman Roth has described the trope that Jews were forced out of agriculture by restrictive laws and the violence
of the Crusades as "patently absurd."
[38]
The theory that Jews, and by tenuous implication other middleman minorities, were most often invited into nations by elites
seeking a financial stimulus or to fill a "status gap," is also contradicted by the historical record. The early entry and expansion
of Jews in Europe is relatively well-documented, the dominant trend being that Jews either presented themselves before elites in
order to solicit business, or that they acted as financiers for conquest and then followed in the wake of the conquerors (e.g., the
well-documented role of Jewish financiers in Norman Conquest of England and Strongbow's conquest of Ireland).
[39] Ireland's Annals of Innisfallen
(1079 A.D.) record: "Five Jews came from over sea with gifts to Tairdelbach [King of Munster], and they were sent back again over
sea." Unless Tairdelbach (Turlough O'Brien, 1009 -- 86) had undergone a dramatic change of mind, it's likely that the arrival of
the Jews hadn't been preceded by an invitation. In fact, unsolicited approaches for request to settle and establish financial activities
are in evidence from the time of O'Brien to the 1655 "Humble Address" of Manasse ben Israel to the English government.
A very common form of government documentation found in the study of Early Modern Jewish communities are the charters outlining
their terms of settlement, and these are very revealing. Rather than act as economic catalysts, Jews are more frequently observed
following the trail of already economically improving areas, hoping to profit from their advancement. As Felicitas Schmeider has
pointed out, in terms of the German context, "permission to settle Jews in a newly privileged town is one thing kings were frequently,
if not regularly, asked for, especially in the thirteenth and fourteenth centuries."
[40]
The theory that Jews were banished from countries once their position as loan merchant or general role as a middleman minority
was superfluous is also forcefully contradicted by the historical record. Just as medieval Jews perceived that they were the innocent
victims of evil Gentiles, so Jewish historiography has overwhelmingly portrayed the expulsions as the result of "rumors, prejudices,
and insinuating and irrational accusations."
[41] Context-based middleman minorities
theories absorbed these tropes and reinvented them in narratives that blamed the expulsions on the fact that Capital had simply exhausted
the usefulness of the Jews. Such understandings of the expulsions have only very recently come to be revised, most saliently in the
work of Harvard historian Rowan W. Dorin, whose 2015 doctoral thesis and subsequent publications have for the first time helped to
fully contextualize the mass expulsions of Jews in Europe during the medieval period, 1200 -- 1450.
[42]
Dorin points out that Jews were never specifically targeted for expulsion qua Jews, but as usurers, and notes that the
vast majority of expulsions in the period targeted "Christians hailing from northern Italy." Jews were expelled, like these Christian
usurers, for their actions, choices, and behaviors. What the period witnessed was not a wave of irrational anti-Jewish actions, or
for that matter an impersonal reflex of glutted Capital, but rather a widespread ecclesiastical reaction against the spread
of moneylending among Christians that eventually absorbed Jews into its considerations for common sense reasons. A number of laws
and statutes, for example Usuranum voraginem , were designed in order to provide a schedule of punishments for foreign/travelling
Christian moneylenders. These laws contained provisions for excommunication and a prohibition on renting property in certain locales.
The latter effectively prohibited such moneylenders from taking up residence in those locations, and compelled their expulsion in
cases where they were already domiciled. It was only after these laws were in effect that some theologians and clerics began to question
why they weren't also applied to Jews who, in the words of historian Gavin Langmuir, were then "disproportionately engaged in moneylending
in northern Europe by the late 12th century."
[43] The Church had historically objected
to the expulsion of Jews in the belief that their scattered presence fulfilled theological and eschatological functions. It was only
via the broader, largely common sense, application of newly developed anti-usury laws that such obstructions to confrontations with
Jews became theologically and ecclesiastically permissible, if not entirely desirable. And once this Rubicon had been crossed, it
paved the way for a rapid series of expulsions of Jewish usury colonies from European towns and cities, a process that accelerated
rapidly between the thirteenth and fifteenth centuries.
The lack of engagement with developments in historiography is worsened to a large extent by the absence of a truly cross-disciplinary
approach in most, if not all, existing middleman minority analyses. This is particularly glaring in the works of Bonacich and Zenner
which, while making multiple and apparently crucial references to conscious and unconscious group "strategies," fail to engage in
any kind of historiographical or psychological scholarly contextualization. How exactly such strategies as "visibility strategies"
can operate at group level are left completely unexplained and without any substantial evidence beyond common sense observations
of Jewish behavior. The lack of a cross-disciplinary approach in such instances doesn't necessarily mean that these ideas are wrong,
or that "visibility strategies" don't exist, but it does mean that explanations and evidence are still required. To date, the only
convincing attempt to fill in such gaps, and offer a truly cross-disciplinary approach (incorporating history, sociology, and psychology)
to the idea of group strategies, is found in the work of Kevin MacDonald.
Conclusion
As stated at the outset of this essay, it isn't at all clear how any of the aspects of middleman minority theory obviate the need
for a deeper theoretical framework in which to understand the behaviors and contexts under study. Middleman minority theory, as remarked
above, is an incomplete tool, and has little to offer in terms of deeper explanatory value for such relevant key concepts under discussion
as resource competition, ecological strategies, visibility strategies, and social identity theory. Middleman minority theory, or
at least some strands of it, is useful and valuable in the study of Jews to the extent that it places an unusual emphasis on group
conflict as arising from resource competition, the characteristics of Jews (including Jewish ethnocentrism), and the existence of
group strategies. There are, however, multiple, serious inadequacies in middleman minority theory, including the possibility that
it is in part itself a "visibility strategy," that is has a general problem of definitions, that it fails to adequately deal with
unique qualities of the Jews and their experiences, that it generally fails to engage with the historical record, and that it has
no real explanatory or predictive frameworks for many of the ideas it discusses, including group strategies. I am forced to concur
with Edna Bonacich that, in regards to the study of Jews, middleman minority theory should be conceived, at best, as "a useful sensitiser
to a host of interrelated variables."
[44]
Notes
[1] Bonacich, Edna. "A Theory
of Middleman Minorities." American Sociological Review 38, no. 5 (1973): 583 -- 94, (589).
[2] Francois-Marie Arouet de
Voltaire, Oeuvres Complètes (Geneva, 1756), Vol. 7. Ch.1. See also Dictionnaire Philosophique (Basle, 1764), Vol. 14
.
[3] B. Bauer, The Jewish Problem
( Die Judenfrage , 1843) ed Ellis Rivkin and trans. Helen Lederer (Cincinnati: Hebrew Union College -- Jewish Institute of
Religion, 1958).
[4] K. Marx, On the Jewish
Problem ( Zur Judenfrage , 1844) ed Ellis Rivkin and trans. Helen Lederer (Cincinnati: Hebrew Union College -- Jewish
Institute of Religion, 1958).
[5] W. Sombart, Der moderne
Kapitalismus , Munich and Leipzig 1913. This work was published in an English translation by E. Epstein under the title, The
Quintessence of Capitalism , London, 1915.
[6] W. P. Zenner, Minorities
in the Middle: A Cross-Cultural Analysis (Albany: State University of New York, 1991), 5.
[7] W. Roscher, "Die Stellung der Juden im Mittelalter, betrachtet vom Standpunkt der allgemeine Handelspolitik," Zeitschrift
für die gesamte Staatswissenschaft Bd. 31 (1875) S. 503 -- 526.
[8] G. Reuveni, "Prolegomena
to an "Economic Turn" in Jewish History," in G. Reuveni (ed) The Economy in Jewish History: New Perspectives on the Interrelationship
Between Ethnicity and Economic Life (Berghahn, 2011), 3.
[9] As the son of Catholic and
Lutheran converts from Judaism, Simmel's relationship to his Jewishness is fascinating in itself. See A. Morris-Reich, The Quest
for Jewish Assimilation in Modern Social Science , (New York: Routledge, 2008), chapter 4. For the influence of Simmel's stranger
minority theory see Werner Cahnman, "Pariahs, Strangers, and Court Jews -- A Conceptual Classification," Sociological Analysis, 35
(1974); C. R. Hallpike, "Some problems in Cross-Cultural Comparison," in The Translation of Culture , T. Beidelman (ed), (London:
Tavistock, 1971); Hilda Kuper, "Strangers in Plural Societies: Asians in South Africa and Uganda," in Pluralism in Africa
, Leo Kuper and M. G. Smith (eds) (Berkeley: University of California Press, 1971); Jack H. Porter, "The Urban Middleman: A Comparative
Analysis," Comparative Social Research , 4 (1981); R. A. Reminick, "The Evil Eye Belief among the Amhara of Ethiopia," Ethnology,
13 (1974), W. Shack and E. Skinner, Strangers in African Societies (Berkelely: University of California Press, 1979); Paul
Siu, "The Sojourner," American Journal of Sociology , 58, (1952).
[10] J. Stone, Racial Conflict
in Contemporary Society , (Cambridge: Harvard University Press, 1985), 96.
[11] This coinage is frequently
attributed to Philip Curtin, who employs the term in his Cross-cultural Trade in World History (1984), but the term was in
use by Cohen, within a strict thematic sense, as early as the latter's 1974 chapter "Cultural Strategies in the Organisation of Trading
Diasporas," in C. Meillassoux (ed) The Development of Indigenous Trade and Markets in West Africa (London, 1971).
[12] Quoted in W. P. Zenner,
Minorities in the Middle: A Cross-Cultural Analysis (Albany: State University of New York, 1991), 8.
[13] K. MacDonald, Separation
and Its Discontents: Toward an Evolutionary Theory of Anti-Semitism , 187.
[14] E. Bonacich, "A Theory
of Middleman Minorities." American Sociological Review 38, no. 5 (1973): 583 -- 94.
[15] E. Bonacich, The Economic
Basis of Ethnic Solidarity: Small Business in the Japanese American Community (Berekely: University of California Press, 1980).
[19] R. Cherry, "American Jewry
and Bonacich's Middleman Minority Theory," Review of Radical Political Economics , 22 (2 -- 3), 158 -- 173, 161.
[20] W. P. Zenner, Minorities
in the Middle: A Cross-Cultural Analysis (Albany: State University of New York, 1991), 10. See also W. Zenner, "American Jewry
in the light of middleman minority theories," Contemporary Jewry , 5:1 (1980), 11 -- 30, 18. Zenner argues that "As a synthetic
concept, the phrase "middleman minority" is difficult to define so as to cover all groups so designated."
[21] E. Bonacich, The Economic
Basis of Ethnic Solidarity: Small Business in the Japanese American Community (Berekely: University of California Press, 1980),
22. See also E. Bonacich, "A Theory of Middleman Minorities." American Sociological Review 38, no. 5 (1973): 583 -- 94, 585.
[27] E. Bonacich, "A Theory
of Middleman Minorities." American Sociological Review 38, no. 5 (1973): 583-94, 592.
[28] W. Zenner, "American Jewry
in the light of middleman minority theories," Contemporary Jewry , 5:1 (1980), 11-30, 23.
[29] W. Cahnman, "Pariahs, Strangers
and Court Jews," Sociological Analysis 35, 3 (1974): 155-66.
[30] D. Horowitz, Ethnic
Groups in Conflict (Berkeley: University of California Press, 1985).
[31] G. Reuveni (ed) The
Economy in Jewish History: New Perspectives on the Interrelationship Between Ethnicity and Economic Life (Berghahn, 2011).
[32] I. Light & S. J. Gold,
Ethnic Economies (Bingley: Emerald, 2000).
[33] R. Silverman, Doing
Business in Minority Markets (New York: Garland, 2000).
[34] E. Bonacich, The Economic
Basis of Ethnic Solidarity: Small Business in the Japanese American Community (Berekely: University of California Press, 1980),
22.
[35] W. Zenner, "American Jewry
in the light of middleman minority theories," Contemporary Jewry , 5:1 (1980), 11-30, 13.
[37] M. D. Meyerson, A Jewish
Renaissance in Fifteenth-Century Spain (Princeton: Princeton University Press, 2010), 111.
[38] N. Roth, Medieval Jewish
Civilization: An Encyclopedia (New York: Routledge, 2003),
[39] J. Hillaby, "Jewish Colonisation
in the Twelfth Century," in P. Skinner (ed), The Jews in Medieval Britain: Historical, Literary, and Archaeological Perspectives
(Woodbridge: Boydell Press, 2003), 36.
[40] F. Schmeider, "Various
Ethnic and Religious Groups in Medieval German Towns? Some Evidence and Reflections," in, Segregation, Integration, Assimilation:
Religious and Ethnic Groups in the Medieval Towns of Central and Eastern Europe (Burlington: Ashgate, 2009), 15.
[41] Joseph Pérez, History
of a Tragedy: The Expulsion of the Jews from Spain (Chicago: University of Illinois Press, 2007), 60.
[42] R. W. Dorin, Banishing
Usury: The Expulsion of Foreign Moneylenders in Medieval Europe, 1200 -- 1450 (Harvard PhD dissertation, 2015); R. W. Dorin, "Once
the Jews have been Expelled," Intent and Interpretation in Late Medieval Canon Law," Law and History Review , Vol. 34, No.
2 (2016), 335-362.
[43] G. Langmuir, History,
Religion, and Antisemitism (Los Angeles: University of California Press, 1990), 304.
Sowell’s A Conflict of Visions has nothing to say about race, but it and its successors pretty much nail what is wrong
with today’s progressives. And it’s the same as what was wrong with yesterday’s progressives.
If we survive 2020, this volume will be what he’s remembered for.
The Zionist thinkers understood the unnatural and dangerous situation of the Jews in the Diaspora, and seized the first opportunity
to re-reform the Jewish people as a normal nation in its homeland. In only one generation, all the Jewish communities in the Eastern
lands liquidated their affairs and joined movement. The same with the powerful Russian and Ukrainian communities, they moved (mostly)
to Israel. Last year, about 30,000 American Jews gave up their precious citizenship and moved to Israel. I foresee in two generations
a more or less Jew-less America. What I am saying is that the Jews do not like their middleman foreigner status. In Marx etc.
time there were no alternatives. Now there is Israel. Some 55% of the Jews have already moved there.
Israel is the largest producer and host of international online gambling sites, while making it illegal for its own citizens
to use such sites
It should be noted that Monaco does the same thing with its gambling casinos. It has long been unlawful for Monaco’s own Monégasque
citizens to enter into those casinos to gamble.
Also, the ultra-high level of Jewish involvement in pornography sales is another relevant area here.
One of those Jewish pornography-meisters was Jimmy ‘Jimbo’ Wales, afterwards recruited to head the CIA-Mossad Wikipedia, where
paedophilic persons have been able to persistently post fake biographies of themselves and smears against their victims. Jimmy
Wales has attended birthday parties of Israeli Presidents, and received a $1 million ‘prize’ from Tel Aviv University.
The most obvious merit of middleman minority theory is that, like Kevin MacDonald’s theory of a group evolutionary strategy,
it places an unusual and welcome emphasis on rational resource competition as the basis for social conflict involving certain
minorities. By offering a socio-economic explanation for hostility toward Jews, middleman minority theory represents a unique
space within academia where the otherwise ubiquitous “pure prejudice” idea that host hostility is self-generated (from psychological
problems or cultural traditions) is summarily and comprehensively dismissed.
The Jews like to cast themselves as “just another struggling minority trying to make it among the oppressive majority.” This
ignores the international Zionist (Jewish supremacist) agenda, and the pathological Jewish drive for totalitarian control.
Where does that drive originate? Jesus of Nazareth, apparently Hebrew, preached the opposite, and called organized Jewish hypocrisy,
greed, corruption and double standards “the Synagogue of Satan.” Of course, the corrupt Jewish Moneychangers (the Jewish establishment
of his era) in bed with the Roman Empire didn’t like that one bit, and so instigated his murder. When the cosmopolitan Hebrew
mob, prompted by the corrupt Jewish establishment, chose the criminal Barabbas over Jesus, the Jews made their choice for ideological
evil and corruption.
That is a choice they affirm time and again, day after day, year after year, century after century.
Whether one wants to read this decision as a cosmic moral judgement on the Jews, or simply as a rational economic decision
by the Jews (choosing systematic corruption and shady insider back room deals over honest work) makes no difference. They chose
the path they chose, and they affirm that decision every day through their corrupt, criminal and murderous international Zionist
works.
One doesn’t have to be a Christian to wear the Jon Carpenter sunglasses from The Live which allow one to see that the Judeo-Imperial
“ruling class are [social] aliens concealing their appearance and manipulating people to spend money, breed, and accept the status
quo with subliminal messages in mass media,” but it helps.
One doesn’t have to be a Christian to know that Jewish infiltrated Empires working in concert with a corrupt establishment
are bad news, but again, it helps.
In Britain Jews are clearly influential but the Norman ruling class has had it’s grip on the UK ever since they landed here
in 1066, indeed William the Conqueror was mentioned in the article above, he certainly had his uses for Jews, there is little
information available though as to just how many Jews arrived and what lead King William 1 to bring them over with his troops.
As of present much of inner London is owned by aristocratic families who can trace their descent to King Williams troops
Also a considerable proportion of high status people in Britain were educated at just a few private schools including a great
deal of our present government
In Britain it is often a case of who you know, not what you know that determines whether you will reach the top of society
or not, compared to other European countries like Germany and Finland in Britain there is a tendency for the higher classes to
promote people on the basis of whether they have a background in common with them rather than merit, just like the Jews.
When I was going to university there, the corner stores were all Chinese. As were the Laundromats. I suspect the children all
became doctors and lawyers and graduated from the need to continue operating them.
As per usual, Andrew Joyce demonstrates that he is an objective social scientific historian by flooding his article with a
preponderance of documentable verifiable factual data.
However, to my mind there is one ‘word’ in this 8,000+ word tour de force; one very important word that all lovers of Western
history and culture dedicated to the perpetuation of that history and culture should focus on … one word: ‘NATION’!
At the very top of his essay Joyce quotes Voltaire:
“Voltaire concluded that, some surface similarities aside ,
‘It is certain that the Jewish nation is the most singular that the world has ever seen.
’ ”
Similarly he quotes Bruno Bauer:
“The base [of the tenacity of the Jewish national spirit ] … the character of that [Jewish] nation.
..”
Some say Jews are a ‘ race’ , some say they are an ‘ethnicity’, some say they are a ‘religion’. The case
can be and is made for all these, in Voltarie’s words, “surface similarities” . However, none capture the essence of what
constitutes the basis for Jewish POWER.
Jews are a worldwide profoundly unified ideological NATION. And that ideological unity is the basis of their national power.
This unity was succinctly captured in an interview with a Mossad agent when he said:
“I can knock on the door of any Jew in the world and I will be invited in.”
Ideological unified nations are powerful nations, and are conquers. The Jews are one of the most ideologically unified nations
in the world. The power derived from that unity has allowed them to conquer the most economically and militarily powerful country
in the world – America.
Further, by conquering America, the wealthiest and most powerful country in Western Civilization, the Jews have de facto conquered
the whole of the West.
Ideological unified nations are strong.
Ideological dis-unified nations are weak.
So call ‘Color Revolutions’ are manifestations of dis-unified nations who in turn are weak and conquerable by strong unified nations.
We have seen numerous weak nation color revolutions in Africa, Middle East and Europe. Now we are experiencing an American
color revolution.
The American ‘color revolution’ is the Jewish nation delivering the ‘coup de grace’ to America and the West.
Andrew Joyce, your articles are so God-damned good!
Jewish behavior reminds me of narcissism: sense of entitlement, self-centered, feeling of superiority, manipulative and deceitful
behavior, desire for power and control, will suck a host dry, and once they’ve gotten what they want, will easily discard the
host. Highly competitive, status-oriented.
Don’t dare call them out on anything because that causes them to feel shame, and that’s like driving a stake through them.
They work behind the scenes, secretly. They must always be seen in a good light. They will smear and destroy you (your reputation,
your job, your life) if you expose them. They will retaliate in ways you would never be able to because they don’t have a conscience,
and this is why they win and are so hard to fight. Very vindictive. No qualms about lying or twisting the truth.
They are never content, always working to change things in their favor, to get the upper hand. Most people just want to live
their lives, so they acquiesce, but this is a mistake because one day you turn around to realize they now own the farm! If they
don’t get their way, they just regroup and come at you from another angle. They keep wearing you down, chipping away at you until
you give in. It is really something to behold because you just can’t believe their gall.
Their rabbis keep them in line by using fear (fear of the other), and fear is the greatest motivator/persuader. Keeps them
solidly as one. They’re constantly reminded of the Holocaust, the ovens that are lurking around every corner, as well as the injustices
they have suffered (through no fault of their own – ha!). Keeps them neurotic and they don’t stray.
@Oliver Elkington rville, Fitzroy,
Marshall, and Spencer. The Guardian , Independent and Telegraph wrote articles in 2011 and 2013 alleging such persons
still ‘run’ Britain. Lefties use this ploy to attack the Conservative Party whose members tend to be wealthy like champagne socialists.
Back to the point raised by neutral , none of the above mentioned newspapers would run similar stories on Jewry. That
is the litmus test of who really rules.
Despite being a tiny minority Jews have shaped modern Britain. This has been documented here by Joyce, Langdon and others.
Sure the middle man theory explains everything, but needs some footnotes:
-These middle men are specifically encouraged to cheat us, it’s written in their holy books
-they regard us as animals in human form, with either no souls or much lesser souls
-they regard us as having been created ONLY to serve them.
The modern industrial capitalist treats his workers impartially as economic instruments; he is as willing to exploit
his own son as he is a stranger. This universalism, the isolation of each competitor, is absent in middleman economic activity,
where primordial ties of family, region, sect, and ethnicity unite people against the surrounding, often individualistic economy.
The modern finance capitalist …..
Industrial capitalism after it was invented in the American Colonies, was characterized by injection of state capital (not
Jewish finance capital) into industry, to then improve the labor value of the population. American labor was in short supply relative
to the large land mass available.
Industrial Capitalist will treat his workers as valuable contributors, because their labor value is constantly being improved
upon by improved public health, and improved infrastructure such as roads and phone systems. Industrial Capitalist economic method
is to raise up the existing people, and not import low wage “coolie labor.”
The highest form of industrial capitalism was probably Germany, which adopted the American System through Frederick List.
Workers in industrial capitalist Germany had access to best facilities of that era, their work hours were made sensible (no
longer exploitative). Autobahns were built, and industry was built up using state capital (not finance capital) to high levels
of productivity.
Finance Capitalism is Jewish usury method. Finance Capitalism is middleman theory taken to extremes.
The middleman is a hidden string puller whose god is Moloch. The middleman is the third entity in man’s relations, usurping
the role of the King.
It is the King who is to have the role of settling disputes, dispensing with just law, and overseeing high civilization. It
is impossible to have high civilization with Jews operating as middlemen.
Finance capitalism’s big bang event is traced to Amsterdam’s Jews invading Britain.
1) Debt Spreading Private Banking .. the Bank of England in 1694. This event stripped the sovereign King of his money power
and transferred it to hidden bank stock owners.
2) Stock Market Capital. Absentee ownership of Companies. Hidden String Pullers control corporations, rather than the employees
of said companies. The first manifestation was both the Dutch and English India Companies.
3) Allowing Company stock to be on-sold into markets. The logic of prices and money (Moloch) is now tied to private banking
ledger credit entry. BOE creates the private bank credit that is used in “free markets.”
4) Corporation charters are now perpetual, and corporations are held up as being more than a god created human. Being perpetual
is more than being a human, where said human has a finite life span.
Jews are anti-logos, so everything they touch turns to shit. There is a religious and spiritual element to Jews, who are against
the natural order.
Virtually all of the “American System” politicians were assassinated. Countries that attempted to adopt “industrial capitalism”
of the American system were invaded and destroyed in world wars. The world wars were engineered in back room deals, using hidden
string pulling tactics.
America was turned in 1912, and is now under Jewish finance capitalism control. The founding fathers of America would be appalled
if they were alive today.
Hindus are like Jews–they love money and believe themselves to be a special people (as exemplified by your PM Modi and his
RSS buddies). Because of the caste system, Hindus barely tolerate lower caste Hindus.
This comment is aimed at Andrew Joyce, the writer of the article. Good job Andrew.
In addition to finance big bang event I discuss above, there was also the attack on Christianity. So the big bang event was
multi-dimensional, and informs today’s reality.
Here is your quote on Sombart:
For Sombart, the origins of the worst of modern capitalism can be found in the early middleman role of the Jews, their medieval
semi-nomadic quest for usury-derived profit and Victorian hawking of shoddy goods being a precursor to modern advertising and
the mass production of superfluous and quickly obsolete consumer products.
Here is another quote from Sombart, which I think is critical:
Werner Sombart in his book “The Jews and Modern Capitalism” came to an important conclusion.”That which is called Puritanism
is in reality Judaism.”
Our Jewish friends in Amsterdam created puritan Judeo-Christianity, which is a perversion of Jesus’ teachings. Jesus started
his mission on the Jubilee year, aiming precisely at the Pharisee class. Jesus also whipped the money changers, his only act of
violence.
Weber also has some problems in his non treatment of usury:
Max Weber’s book, “The Protestant Ethic and the Spirit of Capitalism,” created a split definition. Jewish capitalism on
one side, and Puritan (Calvanist) on the other. Jewish capitalism was speculative pariah capitalism, while Puritan was bourgeois
organization of labor. Weber excluded the problem of usury, thus obscuring what is necessary to see. The Puritan was excluded
from blame.
Let that sink for a moment. I think you understimate – as did I – just how radical this site and it’s owner are, as well as
the majority of the commenters, and just what they are tiptoeing around, and have been for some time. I also think within another
few years, their position will become explicit.
Incidentally, I argely agree that in a few decades most Jews will be flourishing in Israel, but I do think the US will always
have a large and prosperous Jewish community as well, forever. It isn’t going anywhere.
@Tom Verso th the surface of
JSI’s success that they rarely, if ever, see beheath that surface to what is obviously the real cancer of the human race. That’s
why what we’re witnessing today is nothing less than
The Pyrrhic Victory of Jewish Supremacy Inc.
For evidence look at the following:
City – New York
State – California
Country – The USA
Continent – Europe
Civilization – The West
They have conquered the above the way a tumor conquers a human organism.
He can’t – yet – express what he is really trying to say clearly and simply, he has to bury it in a thicket of dense verbiage
which is tedious to cut through.
In a few years, I think Unz will have developed to the point where writers like Joyce can make their point crystal clear in
simple language.
@AaronB e that they have developed
may eventually topple under its own weight, thereby liberating them from their tragic quest to find and hold external phantoms
responsible for their own traumas.
Clarity for Joyce would likely be something like “my father was mean, controlling and made me feel bad, he was always
trying to bring me low to make him feel big, I now need to heal to come to terms with it.”
Sorry Joyce that you feel bad. That’s real. Stop doing yourself the disservice of pretending your hurt is actually your concern
for the world or whatever. That is stupid.
Judaism is an ethnic/religious supremacist ideology that sees the rest as nothing more than cattle to be exploited, so according
to Jewish dogmas if you don’t declare the Jews to be your masters, you are technically anti-Semitic.
Formation of the ruling classes has a close relation with the level of civilization and the
type of society. Ruling class under every condition try to reproduce itself particularly by
domination on political forces like power, wealth and the ruling class tends to be come
hereditary. In fact, descents of ruling class members have a high life chances to have the
traits necessary to be a ruling class member (Mosca 1939, pp. 60-61). In general, prior to
democracy, membership of ruling class was not only de facto but also de jure. In democracy, de
jure transfer of political possession to descendants of ruling class members impossible and not
legitimized but it is now de facto.
According to Mosca, historically, ruling class try to justify its existence and policies by
using some universal moral principles, superiority etc., lately, scientific theory and
knowledge like Social Darwinism, division of labor is also employed for the same purposes.
Mosca particularly rejects these two theses to use in political purposes. To Mosca, at a
certain level of civilization, ruling classes do not justify their power exclusively by de
facto possession of it, but try to find a moral and legal basis for it. This legal and moral
basis or principles on which the power of the political class rests is called "political
formula" by Mosca. The formula has a unique structure in all societies.
"lTjhe political formula must be based on the special beliefs and the strongest sentiments
of the current social group or at least upon the beliefs and sentiments of the particular
portion of that group which hold political preeminence"(Mosca 1939, p.71,72).
In fact ruling class like Pareto's elite strata consist of two strata: (a) the highest
stratum; and (b) second stratum. The highest stratum is the core of the ruling class but it
could not sufficiently lead and direct the society unless the second stratum helps. Second
stratum is the larger than the higher stratum in number and has all the capacities of
leadership in the country. Even autocratic systems do have it. Not only political but also any
type of social organization needs the second stratum in order to be possible (Mosca 1939,
p.404, 430).
The members of the ruling class are recruited almost entirely from the dominant, majority
group in the society. If the society has a number of minorities and if this rule is not
followed due to weaknesses of dominant group, political system can meet serious political
crisis. The same thing occurs when there are considerable differences between in the
culture, and in customs of the ruling class and subject classes (Mosca 1939, p.l05,106-7).
Weaknesses of dominant group in society and isolation of lower classes from the ruling
classes can lead to political upheaval in the country and as a result of this upheaval subject
classes' representatives can have places in the ruling class. Because when isolation takes
place, another ruling class emerges among the subject classes that often hostile to the old
ruling class (Mosca 1939, pp. 107- 8). Furthermore, due to reciprocal isolation of classes,
the character of upper classes change, they become weak in bold and aggressiveness and richer
in "soft" remissive individuals. On the same track, when there is fragmentation in the
society, new groups form and each one of them makes up of its own leaders and followers. In
fact, revolutions are another source of replacement of ruling class (Mosca 1939, p.163,
199).
When Mosca compares the political systems, he says that communist and socialist societies
would beyond any doubt managed by officials and he sees these regimes as utopia. On democracy,
he says, although gradual increase of universal suffrage, actual power has remained partly in
wealthiest and the middle classes. At the same time, for Mosca, middle class is necessary
for democracy, and when middle class declines, politic regimes in democratic countries turns to
a plutocratic dictatorship, or bureaucratic dictatorship. (Mosca 1939, p.391).
According to Mosca, ruling class has a responsive character to social change in the society
and there is a close relation between level of civilization and character of ruling classes.
According to these two complementary proposition, it can be said that ruling class is subject
of social change rather than actor of it. For example, change in division of labor from lower
to higher and change in political force from military to wealth have changed the type of state
from federal to bureaucratic state (Mosca 1939, p. 81, 83 ). There it seems that Mosca admits a
linear social change in history, as opposite to Pareto.
As seen, Mosca's theory is basically based on organized minorities' superiority over
unorganized majority. This organized minority consists of ruling class, but for Mosca it is not
necessarily mean that always interest of ruling class and subject classes are different. To him
,in contrast they coincide many times. He saw the future of socialist system by saying that it
will be governed by officials.
This feature of socialist system is well documented by Milovon Dijilas in his work: New
Classes. But Mosca failed to see that one day, majority will also be able to organize. As C. W.
Mills pointed put, democratic western societies have experienced important transformations: (1)
from the organized minority and unorganized majority to relatively unorganized minority and
organized majority, and (2) from the elite state to an organized state.( Mills 1965, pp.
161-162).
Therefore minorities and elites in today's society are less powerful than majorities. Elites
have relatively lost their privileges, and more importantly, their monopoly over society.
"... Elites are a small proportion of the population (on the order of 1 percent) who concentrate social power in their hands (see my previous post and especially its discussion in the comments that reveal the complex dimensions of this concept). In the United States, for example, they include (but are not limited to) elected politicians, top civil service bureaucrats, and the owners and managers of Fortune 500 companies (see Who Rules America? ). ..."
"... As individual elites retire, they are replaced from the pool of elite aspirants . There are always more elite aspirants than positions for them to occupy. Intra-elite competition is the process that sorts aspirants into successful elites and aspirants whose ambition to enter the elite ranks is frustrated. Competition among the elites occurs on multiple levels. ..."
"... Excessive elite competition, on the other hand, results in increasing social and political instability. The supply of power positions in a society is relatively, or even absolutely, inelastic. For example, there are only 435 U.S. Representatives, 100 Senators, and one President. A great expansion in the numbers of elite aspirants means that increasingly large numbers of them are frustrated, and some of those, the more ambitious and ruthless ones, turn into counter-elites . In other words, masses of frustrated elite aspirants become breeding grounds for radical groups and revolutionary movements. ..."
"... Intense intra-elite competition, however, leads to the rise of rival power networks, which increasingly subvert the rules of political engagement to get ahead of the opposition. Instead of competing on their own merits, or the merits of their political platforms, candidates increasingly rely on "dirty tricks" such as character assassination (and, in historical cases, literal assassination). As a result, excessive competition results in the unraveling of prosocial, cooperative norms (this is a general phenomenon that is not limited to political life). ..."
"... Because the supply of power positions is relatively inelastic, most of the action is on the demand side. Simply put, it is the excessive expansion of elite aspirant numbers (or "elite overproduction") that drives up intra-elite competition ..."
"... There are two main "pumps" producing aspirants for elite positions in America: education and wealth. On the education side, of particular importance are the law degree (for a political career) and the MBA (to climb the corporate ladder). Over the past four decades, according to the American Bar Association, the number of lawyers tripled from 400,000 to 1.2 million. The number of MBAs conferred by business schools over the same period grew six-fold (details in Ages of Discord ). ..."
"... It's contradictory to bemoan the spread of the 'neoliberal' ethos, and simultaneously talk about elite fragmentation. The evidence Turchin marshalls for elite fragmentation is basically the bimodal distribution of lawyers' incomes, and the degree of legislative polarisation. He ignores the much wider evidence of capitalist unity and concentration in support of 'neoliberal' policies. ..."
"... while elites have colluded to capture the political process we might not expect them to all agree on what to do with the political process once it has been captured. ..."
"... There is no intra-capitalist unity. Some elites shouldn't even be called capitalists because the monopoly power they seek completely eliminates the free market. Other elites who want to control the political process do want a free market. They are in conflict. ..."
"... The concept of "ecological overshoot and collapse" applies to human ecology too. We're certainly in overshoot, so some form of collapse is coming (even if a technological miracle occurred, like cheap energy from nuclear fusion, it would only postpone the day of reckoning). ..."
"... As to "intra-elite competition", it is well underway in much of the upper middle class and the 1%, according to the statistics documented by Peter Turchin above. But it is just revving up among the super-elites – the billionaire class, with Trump being the first really visible eruption. ..."
"... When an imperial economy can longer expand easily, all of Peter's dynamics come into play with greater force, not just the elite competition, but the increasing exploitation of the common people in order to maintain elite expansion. The latter has been going on since Reagan in the form of escalating economic inequality. = popular immiseration. ..."
"... I liked the intra-elite discussions in "Ages of Discord" and it made me an even more strident believer in term limits. At least moving people out of the Congress after eight years will "free up" some space for other elite aspirants. ..."
"... Political elites are the proxies PT uses as evidence for his theory, but as he himself says, "American power holders are wealth holders". And I believe the definition I have effectively used here, "owners of capital", is consistent with his concept of elites or magnates in Secular Cycles -- a book I admire tremendously. ..."
"... Your average Congressman is not as powerful today as he was 100 years ago. Cabinet members used to do something of substance and now act more like front men, while policy making is centralized in the White House. You have more and more aspirants for fewer and fewer positions of substance. That ramps up intensity of competition even more than just over-production of JDs and MBAs. ..."
"... Agreed, the overproduction of elites developed in parallel with the change in social norms that extolled competition and downplayed cooperation. But these two dynamics may be causally related -- it's not a pure coincidence that the two trends developed in parallel. ..."
"... It seems to me that one of the most important factors in intra-elite competition, is the degree of skill of the frustrated aspirants. If there are lots of people who want to be elite but can't crack the system to get in, that may not be a problem if those frustrated aspirants aren't particularly good at organization, motivation, leadership, etc. ..."
"... If, on the other hand, the frustrated aspirants are nearly as good at this sort of thing as those actually in power, and especially if they are better at it than the incumbents (who somehow through tradition or family connections or what-have-you remain on top), then you have a much better chance of the frustrated aspirants being able to kick up trouble. ..."
"... I wonder if any of the commentators here have considered that the [neoliberal] cabal now in power in the US (not elsewhere) are not in power to "take power" except for a temporary period. They don't want to run the federal government, they want to destroy it, except for the police state and the military. ..."
Intra-elite competition is one of the most important factors explaining massive waves of
social and political instability, which periodically afflict complex, state-level societies.
This idea was proposed by Jack Goldstone
nearly 30 years ago . Goldstone tested it empirically by analyzing the structural
precursors of the English Civil War, the French Revolution, and seventeenth century's crises in
Turkey and China. Other researchers (including Sergey Nefedov, Andrey Korotayev, and myself)
extended Goldstone's theory and tested it in such different societies as Ancient Rome, Egypt,
and Mesopotamia; medieval England, France, and China; the European revolutions of 1848 and the
Russian Revolutions of 1905 and 1917; and the Arab Spring uprisings. Closer to home, recent
research indicates that the stability of modern democratic societies is also undermined by
excessive competition among the elites (see Ages of Discord for a
structural-demographic analysis of American history). Why is intra-elite competition such an
important driver of instability?
Elites are a small proportion of the population (on the order of 1 percent) who
concentrate social power in their hands (see my previous post and especially
its discussion in the comments that reveal the complex dimensions of this concept). In the
United States, for example, they include (but are not limited to) elected politicians, top
civil service bureaucrats, and the owners and managers of Fortune 500 companies (see
Who Rules America? ).
As
individual elites retire, they are replaced from the pool of elite aspirants . There are
always more elite aspirants than positions for them to occupy. Intra-elite competition
is the process that sorts aspirants into successful elites and aspirants whose ambition to
enter the elite ranks is frustrated. Competition among the elites occurs on multiple levels.
Thus, lower-ranked elites (for example, state representatives) may also be aspirants for the
next level (e.g., U.S. Congress), and so on, all the way up to POTUS.
Moderate intra-elite competition need not be harmful to an orderly and efficient functioning
of the society; in fact, it's usually beneficial because it results in better-qualified
candidates being selected. Additionally, competition can help weed out incompetent or corrupt
office-holders. However, it is important to keep in mind that the social effects of elite
competition depend critically on the norms and institutions that regulate it and channel it
into such societally productive forms.
Excessive elite competition, on the other hand, results in increasing social and political
instability. The supply of power positions in a society is relatively, or even absolutely,
inelastic. For example, there are only 435 U.S. Representatives, 100 Senators, and one
President. A great expansion in the numbers of elite aspirants means that increasingly large
numbers of them are frustrated, and some of those, the more ambitious and ruthless ones, turn
into counter-elites . In other words, masses of frustrated elite aspirants become
breeding grounds for radical groups and revolutionary movements.
Another consequence of excessive competition among elite aspirants is its effect on the
social norms regulating politically acceptable conduct. Norms are effective only as long as the
majority follows them, and violators are punished. Maintaining such norms is the job for the
elites themselves.
Intense intra-elite competition, however, leads to the rise of rival power networks, which
increasingly subvert the rules of political engagement to get ahead of the opposition. Instead
of competing on their own merits, or the merits of their political platforms, candidates
increasingly rely on "dirty tricks" such as character assassination (and, in historical cases,
literal assassination). As a result, excessive competition results in the unraveling of
prosocial, cooperative norms (this is a general phenomenon that is not limited to political
life).
Death of Gaius Gracchus (François Topino-Lebrun)
Source
Intra-elite competition, thus, has a nonlinear effect on social function: moderate levels
are good, excessive levels are bad. What are the social forces leading to excessive
competition?
Because the supply of power positions is relatively inelastic, most of the action is on the
demand side. Simply put, it is the excessive expansion of elite aspirant numbers (or "elite
overproduction") that drives up intra-elite competition. Let's again use the contemporary
America as an example to illustrate this idea (although, I emphasize, similar social processes
have operated in all complex large-scale human societies since they arose some 5,000 years
ago).
There are two main "pumps" producing aspirants for elite positions in America: education and
wealth. On the education side, of particular importance are the law degree (for a political
career) and the MBA (to climb the corporate ladder). Over the past four decades, according to
the American Bar Association, the number of lawyers tripled from 400,000 to 1.2 million. The
number of MBAs conferred by business schools over the same period grew six-fold (details in
Ages of Discord ).
On the wealth side we see a similar expansion of numbers, driven by growing inequality of
income and wealth over the last 40 years. The proverbial "1 percent" becomes "2 percent", then
"3 percent" For example, today there are five times as many households with wealth exceeding
$10 million (in 1995 dollars), compared to 1980. Some of these wealth-holders give money to
candidates, but others choose to run for political office themselves.
Elite overproduction in the US has already driven up the intensity of intra-elite
competition. A reasonable proxy for escalating political competition here is the total cost of
election for congressional races, which has grown (in inflation-adjusted dollars) from $2.4
billion in 1998 to $4.3 billion in 2016 ( Center for Responsive
Politics ). Another clear sign is the unraveling of social norms regulating political
discourse and process that has become glaringly obvious during the 2016 presidential
election.
Analysis of past societies indicates that, if intra-elite competition is allowed to
escalate, it will increasingly take more violent forms. A typical outcome of this process is a
massive outbreak of political violence, often ending in a state collapse, a revolution, or a
civil war (or all of the above).
Works for China too. One can see two main sources: The Imperial family, which with
vast-scale polygyny grew inordinately in a short time; and the examination system,
producing more and more successful candidates over time (this was a problem mainly after
Song greatly expanded the exams). The poor Imperial family deserves some pity–toward
the end of a dynasty you had all these 13th cousins 10 times removed starving to death on
the Russian frontier. (I exaggerate only slightly. By the end of the empire in 1911, there
were tens of thousands of Imperial relatives.) Naturally the competition got pretty fierce
late in the dynasties. When the empire thrived, the system could blot all these people up,
and find places for them. When the empire was going down hill, or conflicted, it meant
trouble.
I believe Peter Turchin is deeply mistaken about elite competition in modern societies.
I repeat my comment on intra-elite competition from a previous post:
In an agrarian society, elite wealth was based on land, more specifically, on extracting
a fraction of the output of the commoners working the land. When there was a demographic
crisis (land-labour ratio fell and immiseration set in), elite incomes fell, and elites
sought to maintain their lifestyles by increasing the rate of extraction. But squeezing
peasants even more when there's already a demographic crisis only exacerbates popular
immiseration. At some point the only way for elites to increase, or even just preserve,
their incomes was at the expense of other elites. Thus you have elite fragmentation and
internecine competition. And thus sociopolitical instability. Makes a lot of sense. It fits
a lot of historical cases.
However, this theory makes no sense in modern industrial societies.
(1) Wealth is no longer fixed in the long run. Modern economies reliably grow at 1-2%
rates. Much of that growth is concentrated at the top, even when measured income inequality
is relatively low. So the competitive pressure within elites is much less than in any
agrarian society governed by Malthusian-Ricardian-Brennerian-Goldstone-Turchin cycles.
(2) Besides, in a modern society, you need *more*, not less, intra-elite cooperation (a)
in order to increase economic inequality; (b) in order for the elites to capture a greater
share of the economic growth; (c) in order for capitalists reduce the bargaining power of
labour; and (d) in order for elites to capture the state.
In fact, politics in a modern society is a pretty small part of the field in which elites
can play compared with anti-competitive practices -- i.e., collusion, mergers, monopolies,
trusts, and other ways of reducing competition and concentrating power in the supply of
goods and the demand for labour. These are all acts of elite cooperation. Capitalists are,
right now, in unprecedented unity. They agree on unions, immigration, wages, trade,
regulations, etc. That unity is necessary to generate the inequality in the first
place.
Therefore, state capture and rent-seeking are now *cooperative*: conspiracies to rig the
rules and increase markups against the public interest require collusion. Owners of one
mobile telephony operator don't have to clash with the owners of another mobile telephony
operator: they can band together to lobby the government. Compared with the rise of
monopoly concentration, elites wrangling over Trump or Brexit is a sideshow.
Almost everybody who is concerned about rising inequality implicitly recognises this:
from Krugman to Stiglitz to Milanovic to even Turchin's friends at Evonomics, they have
argued that inequality stems in great measure from anti-competitive practises.
It's contradictory to bemoan the spread of the 'neoliberal' ethos, and simultaneously talk
about elite fragmentation. The evidence Turchin marshalls for elite fragmentation is
basically the bimodal distribution of lawyers' incomes, and the degree of legislative
polarisation. He ignores the much wider evidence of capitalist unity and concentration in
support of 'neoliberal' policies.
Fernando E.Mora December 31, 2016 at 4:05 am
I think you must read Fred Hirsch's "Social Limits to Growth" to understand the
difference between the always possible growth in MATERIALl wealth and the (no-)growth
of POSITIONAL wealth in which Peter's point can also be solidly (and perhaps more
accurately) based.
I would certainly agree that if economic growth were zero or negative, PT's
elite competition theory might make more sense. Which is why I think SD theory is
still quite applicable to many contemporary developing countries, such as those in
the Arab world. Also, the collapse into civil wars in many African countries in the
1980s and 1990s was preceded by a large expansion of educated people at the same
time economic growth more or less came to a halt.
Peter Turchin January 1, 2017 at 7:17 pm
This comment requires a lengthier rebuttal, but for now just two points:
1. In the blog post I specifically used the political elites to illustrate my major
point. Your response, unfortunately, is a standard economic one that measures
everything in money. As I said, I will probably have to write another post to explain
why this is wrong-headed.
2. Why do you assume that the "capitalist class" will be automatically able to
cooperate to impose their will on the rest of the society? There is, after all, the
problem of collective action.
Stephen Morris January 1, 2017 at 8:04 pm
Speaking as a former investment banker involved in the privatisation of public
assets – who has seen at first hand generations of politicians captured by
business interests – I suggest that anyone with direct experience of this
matter would realise that any collective action problem faced by the capitalist
class in negligible in comparison which the collective action problem faced by
citizens under the non-democratic system of purely "elective" goverrnment (i.e.
"government-by-politicians').
Re #1 -- No, I do not measure everything in money, so please do not write a
whole post as though that's what I argued. I said that elites now *collude* to
capture the political process, which they do. They don't need to compete for
political positions because they cooperate in capturing it. Goldman Sachs has
access to the Treasury department whether the party in power is Republican or
Democratic. (Besides, you also use some money proxies for intra-elite
competition/cooperation: the distribution of lawyers' salaries, or the Great Merger
Movement.)
Re #2 -- I do not assume it. The evidence is overwhelming that concentration is
increasing, markups are rising, monopoly power is expanding. All of that is
evidence of intra-capitalist cooperation and unity.
Peter Turchin frequently cites the work of Martin Gilens, who has repeatedly
shown that public policy largely reflects the preferences of the very richest of US
society. That's not elite competition. That's elite cooperation in capturing of the
political process. The problem with Turchin's framework is that he sees even modern
societies through the Roman framework of Optimates v. Populares.
edwardturner January 2, 2017 at 11:52 am
pseudoerasmus, I pretty much agree with what you say. However, while elites
have colluded to capture the political process we might not expect them to all
agree on what to do with the political process once it has been captured.
There is no intra-capitalist unity. Some elites shouldn't even be called
capitalists because the monopoly power they seek completely eliminates the free
market. Other elites who want to control the political process do want a free
market. They are in conflict.
The common thread here is the presence of powerful elites who cooperate.
Historically the monopoly power elites have cooperated without much resistence
but the free market elites have begun to cooperate against them and have had
success in the election of Donald Trump.
If it is people power we want then the general trend will look like
cooperation as whoever wins the conflict will be cooperating economic
elites.
I question whether there is a qualitative difference today. It's still about the
claims embodied by "wealth," and the power those claims impart to wealthholders. The
mechanisms are different, but the wealth/power relationships are pretty much the
same.
The crux, in my view, is concentration of wealth (hence power). Which has the virtue
of being nicely quantifiable, in concept if not necessarily in practice.
As concentration increases and the "elite" gets smaller, the rope-ladder hanging
down from the elite gets shorter and rattier. eg: The 90% were always excluded. Now the
2%-10% are. That change could result in a different type or intensity of social
conflict.
On the other hand that intra-"elite" competition might just be a by-product and
analytical distraction. The elite vs "the rest" is the issue, and all we need to look
at is the size of the elite. That could be nicely encapsulated in a "wealth
concentration" metric.
Problem is getting a consistent measure of that wealth concentration. Hell, the U.S.
national accounts didn't even tally wealth until 2006, and still don't even touch on
wealth distribution.
Assembling such a (validly consistent) measure across historical societies would be
tough. Atkinson, Wolff, Piketty&Co, etc. have managed over recent decades to
assemble data on richer countries going back a century or so. Perhaps one could do
similar for the Roman Empire, at least roughly? But across many societies and
millennia? Tough.
In agrarian societies, the wealth that conferred status -- land and state
offices -- were fixed in the long run. In modern societies, the supply of status
positions is not fixed and is in fact highly elastic.
Yes the quantity of wealth was fixed. But I'm talking about the
concentration of wealth and power. Compare a society in which the 1% has all
the wealth and (real) power, compared to one where it's more broadly
distributed among the 10%.
IOW, whaddaya mean by "elite," buster?
>the supply of status positions is not fixed and is in fact highly
elastic
Totally agree. Increasing wealth does not mean that the quantity of
status positions is increasing. The absolute or percentage count of "the elite"
could shrink (wealth could concentrate) even as wealth increases.
Increasing wealth might be presumed to give more entree to aspirants than a
fixed-wealth scenario, but I just have no idea whether that is actually the
case.
Dick Burkhart December 30, 2016 at 6:47 pm
You claim that "wealth is no longer fixed in the long run", yet that claim is the most
fundamental fallacy of contemporary economics. "Limits-to-growth" is not a choice but a
fact of science. Already the global economy is stagnating, mostly for this reason, and it
is headed toward contraction sometime during the coming generation, despite all the hype
about new technologies.
The concept of "ecological overshoot and collapse" applies to human ecology too. We're
certainly in overshoot, so some form of collapse is coming (even if a technological miracle
occurred, like cheap energy from nuclear fusion, it would only postpone the day of
reckoning).
As to "intra-elite competition", it is well underway in much of the upper middle class
and the 1%, according to the statistics documented by Peter Turchin above. But it is just
revving up among the super-elites – the billionaire class, with Trump being the first
really visible eruption. In fact, Donald Trump's election is the perfect example of how
this competition plays out once it hits the main stage. So don't confuse tactical
cooperation among increasingly greedy factions of the elites with the kind of yawning
political fractures that are now opening up as unscrupulous opportunists like Trump
discover that they can exploit a disgruntled part of the populace to "trump" the more
conventional elites. And as "limits-to-growth" blocks the customary relief valve of
expansion, then elite exploitation and popular revolt will increase until something there
is some kind of show stopper.
Dick Burkhart December 30, 2016 at 8:29 pm
Like most economists, you've got it totally backward: The non-material part is
completely dependent on cheap resources, especially cheap, and compatible ecosystem
conditions. Those resources only seem to disappear from the economy, because they
are so cheap. But, as in the rest of nature, all that complexity comes from the
surplus of energy and other resources.
After all, we could not live without good air. Yet it costs nothing most of the
time, so doesn't even enter into conventional economics.
Well, Dick Burkhart, as I said earlier, even if ecological exhaustion and
collapse were coming, (a) that is not related to current economic problems; and
(b) it's also not part of Peter Turchin's diagnosis.
Dick Burkhart December 31, 2016 at
9:19 pm
In fact climate change is already taking an increasing economic toll
– from extreme weather events, ocean acidification, desertification
in some areas, etc. These costs could increase rapidly if certain tipping
points are reached.
But, yes, the larger immediate effects are coming from resource
depletion, especially the peaking of conventional oil in 2006.
Unconventional oil, like tar sands and fracked oil, is much more expensive,
hence produces less wealth, less economic growth. Even much of the newer
conventional oil is less productive, as it is often harder to
find or requires tertiary methods of recovery. Similar dynamics apply to
coal, natural gas, and many other resources, except that depletion may not
be as far advanced as for oil. Economic growth has slowed dramatically even
in China, despite their phony growth numbers, and I expect increasing
political turmoil there, too, over the next decade or two.
When an imperial economy can longer expand easily, all of Peter's
dynamics come into play with greater force, not just the elite competition,
but the increasing exploitation of the common people in order to maintain
elite expansion. The latter has been going on since Reagan in the form of
escalating economic inequality. = popular immiseration.
Paolo Ghirri December 31, 2016 at 2:34 pm
"current problems have nothing to do with anything ecological or resource
constraints."
yes they have: for a pre industrial civilization what is vital is energy
surplus, energy surplus that came from agriculture production. so as an example 18
have to work to produce food and 2 can live as soldier, priest and so on.
for a
industrial civilization energy surplus came from oil. from 1973 to 2016 the energy
surplus pro-capita is falling: in a developed country the pro capita surplus now is
75% lower than in 1973.
the gap is covered with debt. so in the short run we have:
1) energy price escalation (in real term the 2016 average oil price is the double
of 2000) 2) agricultural stress: more frequent spike in food price, combined with
food shortfall in the most vulnerable country (arab spring: food price in 2011 are
229% higher than the 2000-2004 average) 3) energy sprawl: investment in energy
infrascructure will absorb rising proportion 4) economic stagnation: fail to
recover from setbacks as robustly as it has in the past 5) inflation
with the single exception of inflation (but if we check only necessary to live item
i'm not so sure) all of the above features has already become firnly established in
recent years, wich underlines the point that energy-surplus economy has reached its
tipping point
Terry Lowman December 30, 2016 at 7:20 pm
The reason the elites cooperate is to get a leg up in the competition. It recently
occurred to me that the Forbes 400 list of America's wealthiest families gives people a
rank, a competitor. Without the list, one might be complacent with a mere $3 billion, but
knowing others have tens of billions, makes you a "just ran". Better tune up your
capitalist machine so you can outshine everyone else, right?
Peter Turchin January 1, 2017 at 7:19 pm
The supply of "status" is by its nature inelastic. There is only one top person in
anything, and only ten in the Top 10.
edwardturner January 2, 2017 at 11:57 am
True but people who cannot be the king of general things will be happy to be
known as the king of their specialism.
The more specialisms that exist for people to get to the top of the more stable
a society will be.
edwardturner January 2, 2017 at 12:02 pm
you could say that the king of the military is the king of kings but in the age
of nuclear buttons it's simply boring. you can't blow anything up without getting
blown up yourself. you can use non-nuclear military power but non-nuclear power in
the age we are living in only wins you the war, it doesn't win you the war and the
peace. to win the peace today you need to be king of something other than the
military.
Rick Derris December 30, 2016 at 9:50 pm
I liked the intra-elite discussions in "Ages of Discord" and it made me an even more
strident believer in term limits. At least moving people out of the Congress after eight
years will "free up" some space for other elite aspirants. I don't care if your politics
are on the side of Strom Thurmond or Ted Kennedy – both were in the Congress for far
too long.
Of course, term limits did nothing to keep a 2nd Cuomo out of the NY Governor's mansion,
but at least it means we only have to watch one Cuomo on CNN.
Rich December 31, 2016 at 1:09 am
Pseudoerasmus, good arguments. The consolidation of money, as well as markets, is very
large right now and it does seem like that would take coordination of an ownership class or
at least similar lines of thinking among those elites. But, are we talking about a
different set of elites? There may be different populations of elites: capitalist and
political. Personally, I think the proxies Peter use describe a political elite population
rather than a capitalist elite population. The two combine for many, but there may be
distinct capitalist and political populations with each having distinct behavior patterns.
The worrisome insight for me is that it's the political elites that end up bringing us to
our knees.
"Personally, I think the proxies Peter use describe a political elite population
rather than a capitalist elite population.
Political elites are the proxies PT uses as evidence for his theory, but as he
himself says, "American power holders are wealth holders". And I believe the definition
I have effectively used here, "owners of capital", is consistent with his concept of
elites or magnates in Secular Cycles -- a book I admire tremendously.
Note also that PT uses the Great Merger Movement in US history (1895-1905) as
evidence of the beginnings of elite cooperation. Well, another wave of capital
concentration has existed now for decades, since the 1980s.
Rich Howard December 31, 2016 at 4:40 pm
Political elites may be more likely to be rich, but the rich is a larger
population with only a fraction politically aspirant. PT'S model relates political
aspirants to political breakdown. And because it works so well, in so many cases,
it suggests there is a more universal social process at work than rich/poor,
unemployment rates, too many weapons, resource depletion etc.
Jason December 31, 2016 at 7:42 am
I like the theory but isn't there more to the story. On one side you have elite aspirant
overproduction. On the other side, you have increasing concentration of power -- the iron
law of oligarchy (in the sense of this wikipedia link: https://en.wikipedia.org/wiki/Iron_law_of_oligarchy
)
Your average Congressman is not as powerful today as he was 100 years ago. Cabinet
members used to do something of substance and now act more like front men, while policy
making is centralized in the White House. You have more and more aspirants for fewer and fewer positions of substance. That ramps
up intensity of competition even more than just over-production of JDs and MBAs.
Plus the barriers to entry for competition has lowered too. Now celebrities fight with
JDs for political positions. Rap stars compete with MBAs for business tycoon success.
At all levels of society, you have greater and greater competition for fewer and fewer
rewards. Hyper-competition all around. Now perhaps the competition at the gateway to the
elite is particularly important because elites are important, and failure to get in makes
them the aspirants powerful disgruntled people, but I think the mechanism is more than just
over-production of JDs and MBAs.
I think it might have started as a well intentioned project to increase the quality of
our elites by introducing competition and lowering barriers to entry. And at the the same
time, increasing the rewards to winners (incentivizing max effort). Result though is brutal
intra-elite fighting. Particularly in times of overall lowered growth.
Peter Turchin January 1, 2017 at 7:24 pm
Agreed, the overproduction of elites developed in parallel with the change in social
norms that extolled competition and downplayed cooperation. But these two dynamics may
be causally related -- it's not a pure coincidence that the two trends developed in
parallel.
One point I haven't seen discussed much is that the number of "powerful" positions is
fixed, by law, but not unchangeable. For example, in the 19th century it was arguably more
important to be a city councilman or state legislator than a Congressmen, because more
actual decisions were being made at the city and state level and the percentage of the
economy under the control of the federal government was smaller. If there is less federal
largesse to distribute, then there is less power in helping to decide how it is
distributed. It is somewhat analogous to why being a U.S. Senator now is more important
than being a U.N. functionary; the United Nations may represent a larger domain, but it has
a lot less control over that domain than a national government.
Thus, one would expect that the more centralized control of a region is, the more
intra-elite competition there will be, because there are fewer positions which really
matter. A modern example of this might be that the transfer of power from national to
European Union administration would result in more intra-elite competition. On the other
hand, devolving power back down to a lower level would result in more positions that have
some power, and less competition for each.
Jason January 1, 2017 at 12:49 am
That's exactly what I was getting at too, Ross. The number of good positions
available depends on the power gradient of the society. How much power is centralized
vs distributed. The whole Iron Law of Oligarchy developed in recognition that over
time, power tends to centralize, so it's not fixed by law and unchangeable for all
time. It's not so much inequality between ordinary people and the elite, but among
elites.
Plus it ossifies, in that these enhanced elite positions are then passed out
patrilineally, which results in fewer actual positions being open to aspirants.
The net result is heightened competition for entry and promotion within the elite,
with more and more of the victories happening by methods outside the norm, e.g. dirty
tricks, patronage, fake news etc.
This probably happens in all societies, but growth (creating more opportunities),
wars (resetting the table), inefficiency (placating the failed aspirants with
consolation prizes) keep internal collapse at bay. It's when you have a dynamic of High
Inequality, Low Growth, High Efficiency / Lean, No Wars that Elite Competition starts
getting out of hand.
(I say this despite hating wars, but you can't argue with their effect on resetting
the table. Hate bribes/corruption too, but things like congressional pork barrels kept
congressman feeling important and in-line. Efficiency is also a self evident good, but
that means no consolation prizes for failure. Growth may eventually run into limits due
to carrying capacity of ecosystem .).
To me, it resembles a game of musical chairs with too few chairs, and when the music
is playing much too fast. As Chuck Prince famously said in the Global Financial Crisis:
"As long as the music is playing, you've got to get up and dance." Whether or not
dancing is destructive, elites have to keep dancing to keep their chair.
I also hate wars, but I am reminded of Mancur Olson's theory that nations
recovering from a major disaster or a major military defeat usually have
above-average growth for a few decades. The idea is that when, as with the South in
the U.S. after the Civil War or with Germany and Japan after WWII, the elite in
society have suffered a setback so severe that their hold on society is disrupted,
there will be a period during which they are less able to set government policy in
their favor rather than the collective welfare.
SDT would have a somewhat different explanation of this. I agree with you that
rapid growth would be another way to reduce the intra-elite competition; it seems
the most likely explanation for the "missing" peak in non-governmental violence in
the U.S. in the 1820's that Peter Turchin pointed out earlier.
Peter Turchin January 1, 2017 at 7:32 pm
Historically, rapid growth coupled with equitable redistribution of its
gains is typically associated with peaceful and internally stable periods. But
you need both (growth and equity).
This idea is kind of half-formed, but I'll put it out there. It seems to me that one of
the most important factors in intra-elite competition, is the degree of skill of the
frustrated aspirants. If there are lots of people who want to be elite but can't crack the
system to get in, that may not be a problem if those frustrated aspirants aren't
particularly good at organization, motivation, leadership, etc.
If, on the other hand, the frustrated aspirants are nearly as good at this sort of thing
as those actually in power, and especially if they are better at it than the incumbents
(who somehow through tradition or family connections or what-have-you remain on top), then
you have a much better chance of the frustrated aspirants being able to kick up
trouble.
Of course, part of being good at leadership is getting the opportunity to practice, and
a post-secondary education almost always includes some practice at a more professional set
of social skills. But if the people getting spots in power remain better at political
organization than the people who don't, it is less likely to result in disruption, I think.
It seems that trouble would come when the ruling elite is either not especially good at
leading (e.g. they inherited their position or bought their way in with somebody else's
money), or they were good at leading in a previous time, and changes in society or
technology have changed what skills are necessary for leadership.
In all these cases, I think "good at leadership" would be a relative term, which is to
say the current elite relative to the frustrated aspirants. How you could measure such
skill, of course, is the key question about which I have as of yet nothing to say (I did
say the idea was half-formed).
steven t johnson January 1, 2017 at 8:10 am
Although intra-elite competition and inter-elite competition are conceptually distinct, is
that true in practice? Is Carlos Slim an intraelite competitor with Jeff Bezos, in the form
of rivalry between the New York Times and the Washington Post? If this is interelite
competition, how does structural-demographic theory address the issues of how external
factors impinge on the cycle? (I'm a little shaky on how interior and exterior are defined
in the first place. As for example, was there a cycle for Burgundy?)
Peter Turchin January 1, 2017 at 7:34 pm
Unlike "intra-elite competition", "inter-elite competition" is not a concept in SDT
(and like you I would be hard put to think what it could refer to).
edwardturner January 1, 2017 at 12:34 pm
The supply of power positions in a society is relatively, or even absolutely, inelastic. For example, there are only
435 U.S. Representatives, 100 Senators, and one President.
This is not quite true. The supply of power positions can be elastic to a point.
How about the growth in number of CEOs and NGOs and the heads of INGOs over the last 50
years? So-called non-state actors have become powerful as they influence the law-making
processes in a variety of ways.
These big chiefs are positions of power and influence. In many cases, they call the
shots and Presidents and Prime Ministers are only the PR guys.
The US President is not the most powerful person in the world. He doesn't have the
highest security clearance in the United States. He is not allowed to know everything.
The idea the US President is the most powerful man is a claim based on a theory of how
the US political system works in idealised sense, and on simple US nationalism.
The fact that the supply of power positions is elastic – that there has been a
flouresence of alternative power structures to the state hierarchy – suggests that
wealth can to a degree put off or delay elite competition.
It is only when the rug is pulled from under the alternative prestigious hierarchies and
the state tries to dominate all on its own – that is when problems will begin. Keep
the funding going, maintain non-state avenues for prestige and create even more, the
fluoresence will continue.
edwardturner January 1, 2017 at 12:36 pm
interested readers might like to read my report for Cliodynamics: Why Has the Number
of International Non-Governmental Organizations Exploded since 1960?
A point made in arthashastra, that fight among princes is more dangerous than fight
among commoners. However, I wud like to ask what predictions are u unable to do. There is
no real knowledge which doesnt admit what its limitations are, or admits inability to
explain something. Even in physics, where humans have gained incredible knowledge, there is
much to know. Also, on issue of religion, could one argue that but for christianity &
islam world wud have devekped faster as information in math/science wud have gathered pace,
exchanged between different lands easily.Thank you.
Peter Turchin January 1, 2017 at 7:43 pm
Interesting that Arthashastra foresees a major message of the SDT.
On the role of religion there are a lot of recent books from the cultural evolutionary
perspective, including David Wilson, Ara Norenzayan, and Dominic Johnson (I might also
mention my own Ultrasociety).
Dick Burkhart January 1, 2017 at 11:16 pm
Even direct democracy is not a cure-all. Here in Washington State, our initiative
and referendum process has been corrupted at times by big money interests: First put
together a sophisticated campaign around some catch phrases that will have popular
support on a topic where the opposition, even if widespread, is likely to be diffuse.
Then sneak in some coded language that privileges a wealthy special interest. Then use
paid signature gatherers. Then assemble a massive advertising campaign, one that will
outspend the likely opposition, maybe even by 10 to 1.
Certain people get very good at this and quickly learn to sell their services to the
highest bidder. The current master of such campaign here is a guy named Tim Eyman, and
he has been quite successful. But some companies, like Costco, have done the same thing
all by themselves.
Moral: You need to get "money out of politics" in all ways, and it's a never ending
battle until you've eliminated concentrated wealth and power itself.
Peter Turchin January 2, 2017 at 10:01 pm
Stephen Morris: you will find my response in an old post:
Prof Turchin, is there any data on the Supply of Elite Positions in Historic
Societies?
It doesn't feel instinctively right that it's inelastic, but perhaps there's really the
case. It feels slightly more likely to be right to say that it's capped somehow (inelastic
as to upside, more elastic as to downside).
But it seems like the sort of thing you should be able to answer with a History
Database. Has there been any attempts to measure this?
Peter Turchin January 2, 2017 at 10:06 pm
In fact, your are in luck, because we provide such statistics for a number of
historical societies in Secular Cycles http://peterturchin.com/secular-cycles/
Note, I didn't say it was inelastic. In most cases, it's relatively inelastic, so
that the growth in the number of aspirants greatly overmatches the growth in the supply
of the positions. Only in few instances the supply is absolutely inelastic (only one
POTUS).
Deficiencies in the concept of elite competition
Let's start with the definition of elite: "small proportion of the population that
concentrates power in their hands"
His theory lacks an aspect that must be fundamental before even proceeding in a discussion
on the "dynamics" of the elites and is that it is not able to explain in a satisfactory way
the origin of the so-called "elites". According to its definition it seems that the elites
are rather the manifestation of a particular phenomenon that is "concentration of power"; A
phenomenon that manifests itself socially in the form of the so-called "elite", which
hereafter I call the ruling class (I think it is a terminology in which we can all
agree).
But if we assume that the dominant classes are only a manifestation of the phenomenon of
the concentration of power, our attention must first be fixed in that aspect so we try to
break it down into its fundamental parts
. Apparently the concept of power gives to understand the concept of dominion (some will
have other words in mind but as surely they closely resemble the concept of domain I think
that it suffices to refer us to this one) and we do not refer to any type of domain but to
a domain Of social nature, a social domain. We will now say that this social domain
manifests itself in the form of economic and political dominion, I think we will agree on
this point.
Now let us collect the fruits of these arguments. We have a different and more precise
definition, which in no way invalidates the original, and we say: The ruling class is that
small proportion of the population that concentrates economic and political dominion in
their hands. I believe that we will agree that economic dominance is nothing but greater
possession of capital and that political dominance is but a major influence on a state
structure (the word "state" is used in a modern sense).
Now we have: the ruling class is that small proportion of the population that concentrates
the greatest possession of capital and the greatest influence within a state structure in
their hands. The last part of " in your hands" is understood by what we can eliminate it
and we have the following:
The ruling class is that small proportion of the population that concentrates the greatest
possession of capital and the greatest influence on a state structure.
Now the possession of capital depends on its production or of the association with someone
who produces capital. And it is revealed to us that the ruling class, apart from having
influence in a state structure, needs to produce capital or be associated with someone who
produces capital directly or indirectly.
Thanks to this we see clearly that competition between elites is a competition for economic
benefits and influence. Obviously the economic aspect is more significant than the aspect
of influence. It follows that a fall in economic profits, ie a fall in capital production
(a crisis), would directly or indirectly exacerbate the competition for greater economic
benefits, that is, increase the number of aspirants to elitist . The competition of elites
is not the cause of the crisis is one of the consequences of the crisis.
I must make a small correction in my analysis. By capital I wanted to let you
understand profit, so the use of that term in this argument is actually inappropriate
because I wanted to use the word capital in a Marxist sense.
Federico January 8, 2017 at 5:23 pm
Hello Dr Turchin, I was wondering if you are familiar with Richard Lachmann's "elite
conflict theory". It is a verbal theory, but one that he has successfully used to explain
fiscal crises, hegemonic cycles, and the rise of modern capitalist economies. What do you
think about it?
Best,
Federico
Shaun Bartone February 27, 2017 at 3:47 pm
I wonder if any of the commentators here have considered that the [neoliberal] cabal now in power in
the US (not elsewhere) are not in power to "take power" except for a temporary period. They
don't want to run the federal government, they want to destroy it, except for the police
state and the military.
They want to eliminate the EPA, vacate the State Dept and many
other Depts, except for a few high-placed cronies, wipe all financial, labour, consumer and
environmental regulations off the books; eliminate or reduce to a bare minimum federal
health insurance, medicaid, medicare and Social Security, crush public education, privatize
everything they can sell, and so on. They are not in power to "govern" but to destroy
government. This is all being done with a fairly unified agenda: to free "the market" from
any restrictions whatsoever, so that they -- global elites -- can make as much money as
possible. It's a cabal of global corporations, militarists, Christian sovereign white
supremacists, fossil fuel giants and bankers, and I think there's a high degree of
cooperation for the agenda. The revolution is the cabal run by Trump/Bannon who are more
extreme and ideological than any previous faction, who have no tolerance for compromise.
They have an apocalyptic vision of grinding it all down to a bare minimum police state.
The latest data compiled by the International
Labour Organization (ILO) sheds new light on COVID-19's "devastating" impact on the labor
market reveals a "massive" drop in labor income and hours for workers worldwide.
Global labor income plunged 10.7%, or $3.5 trillion, in the first nine months of 2020,
compared with the same period in 2019, ILO's new report found, which is one of the first
measurements to quantify the deep economic scarring that has left the global economy paralyzed.
The figure excludes income derived by governments to compensate for labor loss during the
pandemic.
The report, titled " ILO
Monitor: COVID-19 and the world of work. Sixth edition," was published on Wednesday (Sept.
23), notes how global labor hour losses in the first nine months of 2020 have been
"considerably larger" than the estimate from the previous report issued in late June.
The report found the largest income loss was primarily in lower-middle income countries,
where the labor income losses reached 15.1%.
"Workplace closures continue to disrupt labor markets around the world, leading to
working-hour losses that are higher than previously estimated," ILO said.
The United Nations agency said global working-hour losses are expected to remain elevated in
3Q20, at 12.1%, or equivalent to 345 million full-time equivalent (FTE) jobs (based on a
48-hour working week). The revised downside projections for 4Q20 suggest a more pessimistic
outlook for the global economy is ahead .
ILO's baseline scenario, for working-hour losses, in the fourth quarter, is -8.6%. The most
optimistic is +5.7%, while the most pessimistic is -18%.
"The latest data confirm that working-hour losses are reflected in higher levels of
unemployment and inactivity, with inactivity increasing to a greater extent than unemployment.
Rising inactivity is a notable feature of the current job crisis calling for strong policy
attention. The decline in employment numbers has generally been greater for women than for
men," ILO said.
The driver behind increased working-hour losses in developing and emerging economies is that
informal employment continues to be affected by strict public health orders to mitigate the
virus spread.
ILO said there's a "clear correlation" between how much fiscal stimulus a country does and
working-hour losses. For example, more stimulus has offset a reduction in working hours. Many
of these stimulus packages have been observed in high-income countries, as emerging and
developing economies had limited borrowing capacity to finance such measures.
ILO Director-General Guy Ryder warned about a "huge fiscal stimulus gap," and the dire need
for governments to unleash more fiscal stimulus to mitigate additional stresses in the global
labor market.
"Just as we need to redouble our efforts to beat the virus, so we need to act urgently and
at scale to overcome its economic, social, and employment impacts. That includes sustaining
support for jobs, businesses, and incomes," Ryder said in a statement.
A record of 25% of all
personal income in the US is derived from the government via stimulus programs. Without
stimulus, the economy craters.
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With ILO's report noting more labor market stress is ahead for the final quarter of the
year, it all suggests there will be no "V"- shaped recovery in 2H20.
And this could be the moment where Wall Street realizes the shape of the recovery was never
a "V," resulting
in the next wave down in stocks.
Why does neoclassical economics produce ponzi schemes of inflated asset prices?
It makes you think you are creating wealth by inflating asset prices
Bank credit flows into inflating asset prices, debt rises faster than GDP and you
eventually get a financial crisis.
No one notices the private debt building up in the economy as neoclassical economics
doesn't consider debt.
This economics still has its 1920s problems. What is the fundamental flaw in the free
market theory of neoclassical economics? The University of Chicago worked that out in the
1930s after last time. Banks can inflate asset prices with the money they create from bank
loans.
Henry Simons and Irving Fisher supported the Chicago Plan to take away the bankers ability
to create money.
"Simons envisioned banks that would have a choice of two types of holdings: long-term
bonds and cash. Simultaneously, they would hold increased reserves, up to 100%. Simons saw
this as beneficial in that its ultimate consequences would be the prevention of
"bank-financed inflation of securities and real estate" through the leveraged creation of
secondary forms of money."
It looks like they did have some idea what the problem was.At the end of the 1920s, the US
was a ponzi scheme of inflated asset prices. The use of neoclassical economics and the belief
in free markets, made them think that inflated asset prices represented real wealth
accumulation.
1929 – Wakey, wakey time. Why did it cause the US financial system to collapse in
1929? Bankers get to create money out of nothing, through bank loans, and get to charge
interest on it.
Bankers do need to ensure the vast majority of that money gets paid back, and this is
where they get into serious trouble.
Banking requires prudent lending.
If someone can't repay a loan, they need to repossess that asset and sell it to recoup
that money. If they use bank loans to inflate asset prices they get into a world of trouble
when those asset prices collapse.
As the real estate and stock market collapsed the banks became insolvent as their assets
didn't cover their liabilities.
They could no longer repossess and sell those assets to cover the outstanding loans and
they do need to get most of the money they lend out back again to balance their books.
The banks become insolvent and collapsed, along with the US economy.
When banks have been lending to inflate asset prices the financial system is in a
precarious state and can easily collapse.
What was the ponzi scheme of inflated asset prices that collapsed in Japan in 1991?
Japanese real estate.
They avoided a Great Depression by saving the banks.
They killed growth for the next 30 years by leaving the debt in place.
What was the ponzi scheme of inflated asset prices that collapsed in 2008?
"It's nearly $14 trillion pyramid of super leveraged toxic assets was built on the back of
$1.4 trillion of US sub-prime loans, and dispersed throughout the world" All the Presidents
Bankers, Nomi Prins.
They avoided a Great Depression by saving the banks.
They left Western economies struggling by leaving the debt in place, just like Japan.
It's not as bad as Japan as we didn't let asset prices crash in the West, but it is this
problem has made our economies so sluggish since 2008.
In 2020, the world is a ponzi scheme of inflated asset prices.
The use of neoclassical economics and the belief in free markets, made them think that
inflated asset prices represented real wealth accumulation.
The central banks have to keep pumping in liquidity to stop all the ponzi schemes
collapsing.
If the ponzi schemes collapse, this feeds back into the financial system when bankers have
been lending to inflate asset prices.
play_arrow
Sound of the Suburbs , 1 hour ago
Bankers make the most money when they are driving your economy towards a financial
crisis.
You don't want to leave them to their own devices.
On a BBC documentary, comparing 1929 to 2008, it said the last time US bankers made as
much money as they did before 2008 was in the 1920s.
Bankers make the most money when they are driving your economy into a financial
crisis.
The financial crisis appears to come out of a clear blue sky when you use an economics
that doesn't consider debt.
The economics of globalisation has always had an Achilles' heel.
The 1920s roared with debt based consumption and speculation until it all tipped over into
the debt deflation of the Great Depression. No one realised the problems that were building
up in the economy as they used an economics that doesn't look at debt, neoclassical
economics.
Not considering private debt is the Achilles' heel of neoclassical economics.
Sound of the Suburbs , 1 hour ago
Come on.
Wakey, wakey.
You are just repeating 1920s mistakes.
The Americans wrapped a new ideology, neoliberalism, around 1920s economics and repeated
the economic mistakes of the 1920s.
Policymakers couldn't see what Glass-Steagall did, as they thought banks were financial
intermediaries.
It separates the money creation side of banking from the investment side of banking, and
stops bankers producing securities; they buy themselves with money they create out of
nothing.
"By early 1929, loans from these non-banking sources were approximately equal to those
from the banks. Later they became much greater. The Federal Reserve Authorities took it for
granted that they had no influence over these funds"
He's talking about "shadow banking".
They thought leverage was great before 1929; they saw what happened when it worked in
reverse after 1929.
Leverage acts like a multiplier.
It multiplies profits on the way up.
It multiplies losses on the way down.
Today's bankers seem to have learnt something from past mistakes.
They took the multiplied profits on the way up.
Taxpayers picked up the multiplied losses on the way down.
Mariner Eccles, FED chair 1934 -- 48, observed what the capital accumulation of
neoclassical economics did to the US economy in the 1920s.
"a giant suction pump had by 1929 to 1930 drawn into a few hands an increasing proportion
of currently produced wealth. This served then as capital accumulations. But by taking
purchasing power out of the hands of mass consumers, the savers denied themselves the kind of
effective demand for their products which would justify reinvestment of the capital
accumulation in new plants. In consequence as in a poker game where the chips were
concentrated in fewer and fewer hands, the other fellows could stay in the game only by
borrowing. When the credit ran out, the game stopped"
The problem; wealth concentrates until the system collapses.
"The other fellows could stay in the game only by borrowing." Mariner Eccles, FED chair
1934 -- 48
Your wages aren't high enough, have a Payday loan.
You need a house, have a sub-prime mortgage.
You need a car, have a sub-prime auto loan.
You need a good education, have a student loan.
Still not getting by?
Load up on credit cards.
"When the credit ran out, the game stopped" Mariner Eccles, FED chair 1934 -- 48
...... etc .....
x_Maurizio , 1 hour ago
DISAGREE ON EVERY SINGLE WORD, in particular with this:
rules/regulations/capital requirements have infected the global banking system and
rendered it a harvesting operation for retail and a derivatives rule/regulation/capital
requirment evasion device for the pursuit of profit
absolutely false.
Banking system is in the 4th part of a cycle that they have created !
The first part has been capital harvesting (1970-1980)
The second part has been deregulation and hunt for stellar return on investment
The third part is financialisation and plunder of real economy
The fourth part is the destruction of real economy through debt, deflation, extreme
financial activity seeking for Yields. The banks have been the fortresses of globalisation.
Commercial banking has been absorbed by investment banking. In this deflationary
environment Commercial Banking has practice NO ROI.
You want to see the Banks working again? Reintroduce the Glass Steagall and separate again
investment and commercial banking. Repeal all what has been done between 1987 and 1999. THAT
will stop globalisation, that will stop the slow bleeding-to-death of westerne economies,
that will save commercial banking and our capitalistic societies.
For eight-and-a-half decades, most Republican legislators (and some Democrats) have been
trying to get rid of Social Security .
The first step in Trump's assault on Social Security's funding took effect Sept. 1st.
On Trump's orders, the IRS ordered corporations to stop withholding Social Security
contributions from paychecks, through the end of the year.
Speaking on Fox Business recently, Trump advisor Larry Kudlow said that later this year
Trump will order the IRS to continue the deferral indefinitely.
Social Security's chief actuary wrote that if Social Security is defunded, some benefits
will be reduced next year, and that benefits will disappear entirely by the end of 2023.
If you are, or if you know someone on Social Security, please pass the word!
International Man : Thanks to the shutdowns, economic activity on main street is at a
standstill. Government, corporate, and personal debt is skyrocketing. Yet, the stock market is
in a mania. Has the stock market become out of touch with reality, and if so, what are the
consequences of that?
David Stockman : Both ends of the Acela Corridor have lost their marbles. This year, Uncle
Sam borrowed $4 trillion in six months, the Fed printed $3 trillion in three months, and Wall
Street drove the S&P 500 to 52X reported LTM earnings in the context of a deeper economic
plunge than occurred in the worst quarter of the 1930s.
Therefore, Washington has become disconnected from any semblance of fidelity to sound money
and fiscal rectitude, while Wall Street has turned into an outright casino, valuing stocks
based on endless Fed liquidity injections and the delusion that momentum chasing is an
investment strategy.
With respect to the rampant folly in the Imperial City, Treasury Secretary Stevie Mnuchin
has always reminded us of Alfred E. Neuman of "Me Worry?" fame at Mad Magazine. Recently, he
more than earned that moniker when, in the context of the current monetary and fiscal lunacy,
he proclaimed that, "Now is not the time to worry about shrinking the deficit or shrinking the
Fed balance sheet."
That was the so-called Conservative Party speaking, and it is a shrill reminder that the
Trumpified GOP has gone utterly AWOL when it comes to its true job in American democracy,
namely, resisting the Government Party (Dems) and its affinity for feeding the Leviathan on the
Potomac.
That is to say, according to even the Keynesian deficit apologists at the CBO, Uncle Sam
will spend $6.6 trillion during the current fiscal year (FY 2020) while collecting only $3.3
trillion in revenue. That's Banana Republic stuff -- borrowing 50% of every dollar spent.
Yet the advisory ranks of the potentially incoming Kamala Harris regency are even worse.
They are loaded with "deficits don't matter" ideologues and MMT crackpots who noisily argue
that massive monetization of the public debt is not just a virtue, but utterly imperative.
Needless to say, this bipartisan commitment to all-in stimulus is financial catnip to the
Wall Street gamblers because they are actually capitalizing into today's nosebleed stock
prices, not the present drastically impaired economy on Main Street but a pro forma simulacrum
of future prosperity based on the delusional presumption that massive debt and money-pumping
actually create economic growth and wealth.
The fact is, industrial production in August posted at a level first achieved in March 2006,
and manufacturing output weighed in at levels originally attained in December 2004. So the
misbegotten lockdowns and COVID-hysteria have cost the US economy 14–16 years of
industrial production growth, yet this massive setback was not caused by some mysterious
Keynesian-style faltering of "demand" that can allegedly be compensated for by new Fed credits
plucked from thin air.
To the contrary, the current depression is the result of the visible shutdown and quarantine
orders of the state, which are likely to linger for months to come or even intensify as the
fall-winter flu season arrives. Undoubtedly, the Virus Patrol will spur further outbreaks of
public fear based on "bad numbers" from the CDC, which are actually an agglomeration of cases
and deaths from normal influenza, pneumonia, and a myriad of life-threatening comorbidities,
not pure cases of the COVID alone.
But beguiled by "stimulus" and hopium, Wall Street completely ignores the contradiction
between over-the-top demand stimulus and what amounts to supply-side contraction owing to
economic martial law.
So, at 3400 on the S&P 500, the current LTM price-to-earnings ratio ranges between 52.1
times the earnings CEOs and CFOs certify on penalty of jail time ($65 per share) or 27 times
the Wall Street brush-stroked and curated version ($125 per share), from which all asset
write-offs, restructuring charges, and other one-timers/mistakes have been finessed out.
Of course, these deleted GAAP charges reflect the consumption of real corporate resources,
such as purchase price goodwill that gets written off when a merger or acquisition goes sour,
or the write-down of investments in factories, warehouses, and stores that get closed. As such,
they absolutely do diminish company resources and shareholder net worth over time.
But for decades now, Wall Street has so relentlessly and assiduously ripped anything that
smells like a "one-timer" out of company earnings filings with the Securities and Exchange
Commission (SEC) that it no longer even knows what GAAP earnings actually are.
And it pretends that these discarded debits (and credits) to income are simply lumpy things
that even out in the wash over time. They do not.
If ex-items reporting was merely a neutral smoothing mechanism, reported GAAP earnings and
"operating earnings" would be equal when aggregated over several years, or even a full business
cycle.
Yet during the last 100 quarters, there have been essentially zero instances in which
reported GAAP earnings exceeded "operating income."
So, in aggregate terms, several trillions of corporate write-downs and losses have been
swept under the rug.
During the second quarter of 2020, for example, GAAP earnings reported to the SEC totaled
$145.8 billion for the S&P 500 companies, while the ex-items earnings curated by the street
posted at $222.3 billion. That amounts to the deletion of nearly $77 billion of write-downs and
mistakes, and it inflated the aggregate earnings number by more than 52%.
The game is all about goosing the earnings number in order to minimize the apparent
price-to-earnings multiple, thereby supporting the fiction that stocks are reasonably valued
and that nary a bubble is to be found, at least in the broad market represented by the S&P
500.
Still, valuing the market at 52 times trailing-12-month earnings during the present parlous
moment in time -- or even 27 times if you want to give the financial engineering jockeys in the
C-suites a hall-pass for $77 billion of mistakes and losses this quarter alone -- is nothing
short of nuts.
Yet, the gamblers in the casino hardly know it.
Wall Street has already decided that current-year results don't matter a whit: the
nosebleed-level trailing P/E multiples currently being racked up are simply being shoved into
the memory hole on the presumption that the sell side's evergreen hockey sticks will come true
about four quarters into the future, and if they don't, a heavy dose of ex-items bark-stripping
will gussy up actual earnings when they come in.
Still, if you think that a forward P/E multiple of, say, 17.5 times is just fine and that
flushing the one-timers is OK, then you still need $193 per share of operating earnings by the
second quarter of 2021 to justify today's index level.
Then again, a 54% gain in operating earnings over the next four quarters ($193 per share in
the second quarter of 2021 versus $125 per share in the second quarter of 2020) is not simply a
tall order; it's downright delusional.
International Man : What could derail the Fed's ability to pump up the stock market casino
with all this easy money? They simultaneously want zero interest rates and more inflation. It
seems something has to give.
David Stockman : Yes, what's going to "give" sooner or later is the entire house of monetary
cards erected by the Fed and its fellow-traveling global central banks over the last several
decades. What they are doing is based on the triple error that inflation is too low, that
deeply repressed and falsified interest rates fuel real growth, and that private savers are a
hindrance to optimal economic function and need to be euthanized via confiscation of the real
(after-inflation) value of their capital.
In the first place, as Paul Volcker pointedly reminded, there is nothing in the pre-1990
textbooks that says 2.00% inflation is desirable and is to be pursued with fanatical intensity
-- even if actual inflation comes in only a few basis points below the magic target.
Indeed, if the 2% target is zealously pursued via prolonged pegging of interest rates to the
zero bound and the massive purchase of bonds and other securities, the result is actually
inimical to economic growth and sustainable gains in real wealth.
That's because falsified interest rates and inflated financial asset values lead to massive
malinvestment via rampant financial engineering in the corporate sector and reckless borrowing
to fund transfer payments and economic waste in the public sector.
Nor is that a mere theoretical possibility. The rolling 10-year real GDP growth rate has now
fallen to just 1.5% per annum, or barely one-third of the 3–4% per year rolling averages
which prevailed during the heyday of reasonably sound money and fiscal rectitude prior to
1971.
Beyond that, there really hasn't been any inflation shortfall from the 2% target, unless
measured by the Fed's flakey yardstick called the PCE deflator. For instance, since December
1996, when Greenspan uttered his irrational exuberance warning, the CPI is up by 2.09% per
annum and the more stable 16% trimmed-mean CPI is up by 2.12% per annum.
That hardly constitutes a "shortfall" from target, but the Eccles Building money-printers
make the claim anyway because the PCE deflator gained slightly less over that 23 year period,
averaging an increase of 1.71 per annum.
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The truth is, no one except groupthink besotted central bankers would think that a mere 30
basis point shortfall over more than two decades justifies the massive financial fraud of
pumping trillions of fiat credit into the financial system.
That's especially the case because the PCE deflator drastically underweights shelter costs
and doesn't even measure the purchasing power of money against a fixed basket of goods and
services over time, anyway. Instead, it is actually a tool of GDP accounting that reflects the
changing mix of goods and services supplied to the household sector.
That is to say, if someone chooses to live in a tepee and spend nearly all of their paycheck
on computers, TVs, and other high-tech gadgets that have been rapidly falling in price, that
doesn't improve the exchange value of the dollar wages they earn; it just means that their
tepee may be getting crowded with tech gadgets.
The same is true of the aggregate level. Just because the mix of goods and services changes
over time, that doesn't miraculously rescue the purchasing power of the dollar
from the ravages of inflation .
Nor does it alleviate the savaging of lower- and middle-class living standards that are the
direct product of the Fed's misguided commitment to inflation targeting. In fact, during that
same 23-year period, the annual rate of increase for professional services, shelter, food away
from home, medical services, and education expense has been 2.6%, 2.7%, 2.8%, 3.5%, and 4.5%,
respectively.
So once you set aside the foolishness of 2% inflation targeting and the Fed's sawed-off
inflation measuring stick (the PCE deflator), what you really have is growth stunting monetary
madness. There is no other way to explain a Fed balance sheet that went from $4.2 trillion on
March 4 this year to $7.2 trillion by June 10.
After all, the first $3 trillion of Fed balance sheet took nearly 100 years to generate,
from its opening in 1914 to breaching the $3 trillion marker for the first time in March 2013.
That the Fed has now become a monetary doomsday machine, therefore, is no longer in doubt.
* * *
The truth is, we're on the cusp of a economic crisis that could eclipse anything we've seen
before. And most people won't be prepared for what's coming. That's exactly why bestselling
author Doug Casey and his team
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Click here to download the PDF now.
High-yield bond default rates may double as companies struggle with a protracted economic
downturn even as the Federal Reserve props up valuations, said Jeffrey Gundlach.
The investment grade corporate debt market has skewed toward lower quality BBB- rated debt,
but if just 50% of that were to be downgraded it could fuel a near doubling of the high-yield
market, Gundlach said Tuesday on a webcast for his firm's flagship DoubleLine Total Return Bond Fund .
Gundlach's views reflect broad skepticism about the market's connection to economic
realities. He criticized the Fed's emergency actions as buoying asset prices and spurring
unsustainable corporate borrowing binges.
Risk assets such as equities and high yield credit markets are responding to this support,
and government stimulus, disproportionately as the Covid-19 pandemic remains a threat to the
recovery, he said.
"It's foolhardy to believe that one can have this kind of a shock to an economy and it just
gets healed through a one-shot deal" from the Treasury, he said.
Gundlach pointed out that the global GDP forecast is -3.9%, whereas the U.S. lags at -5%
despite the country's response to the Covid-19 crisis being "one of the highest in the
world."
Highlighting the effect of the weekly $600 stimulus checks, he called it a distortion of the
personal-income spending picture akin to the Fed's effect on the markets.
"This is a large incentive to stay on public assistance," Gundlach said, noting that benefit
payments have exceeded many workers' regular income.
Gundlach also snubbed one of the market's favorite trades on a U.S. recovery, saying he's
"betting against" the inflation-linked bond market. TIPS products have seen some of the
strongest monthly inflows in four years, and market-implied expectations for inflation have
touched a 2020 high. Gundlach repeated that the impact of the pandemic is deflationary.
In the days, weeks, and months immediately following the 9/11 attacks, Arab-Americans,
South Asian-Americans, Muslim-Americans, and Sikh-Americans were the targets of widespread
hate violence. Many of the perpetrators of these acts of hate violence claimed they were
acting patriotically by retaliating against those responsible for 9/11.
...
Just after September 11, numerous Arabs, Muslims, and individuals perceived to be Arab or
Muslim were assaulted, and some killed, by individuals who believed they were responsible
for or connected to the attacks on the World Trade Center and Pentagon. The first backlash
killing occurred four days after September 11.
Balbir Singh Sodhi was shot to death on September 15 as he was planting flowers outside
his Chevron gas station. The man who shot Sodhi, Frank Roque, had told an employee of an
Applebee's restaurant that he was "going to go out and shoot some towel heads." Roque
mistakenly thought Sodhi was Arab because Sodhi, an immigrant from India, had a beard and
wore a turban as part of his Sikh faith. After shooting Sodhi, Roque drove to a Mobil gas
station a few miles away and shot at a Lebanese-American clerk. He then drove to a home he
once owned and shot and almost hit an Afghani man who was coming out the front door. When
he was arrested two hours later, Roque shouted, "I stand for America all the way."
The next two killings were committed by a man named Mark Stroman. On September 15, 2001,
Stroman shot and killed Waquar Hassan, an immigrant from Pakistan, at Hassan's grocery
store in Dallas, Texas. On October 4, 2001, Stroman shot and killed Vasudev Patel, an
immigrant from India and a naturalized U.S. citizen, while Patel was working at his Shell
station convenience store. A store video camera recorded the killing, helping police to
identify Stroman as the killer. Stroman later told a Dallas television station that he shot
Hassan and Patel because, "We're at war. I did what I had to do. I did it to retaliate
against those who retaliated against us."
Beyond these killings, there were more than a thousand other anti-Muslim or anti-Arab
acts of hate which took the form of physical assaults, verbal harassment and intimidation,
arson, attacks on mosques, vandalism, and other property damage.
Instead of "calming prejudice" the GB Bush administration institutionalized hate
crimes:
First, in the weeks immediately following the September 11 attacks, the government began
secretly arresting and detaining Arab, Muslim, and South Asian men. Within the first two
months after the attacks, the government had detained at least 1,200 men.
...
Second, in November 2001, the Department of Justice began efforts to "interview"
approximately 5,000 men between the ages of 18 and 33 from Middle Eastern or Muslim nations
who had arrived in the United States within the previous two years on a temporary student,
tourist, or business visa and were lawful residents of the United States. Four months
later, the government announced it would seek to interview an additional 3,000 men from
countries with an Al Qaeda presence.
...
Third, in September 2002, the government implemented a "Special Registration" program also
known as NSEERS (National Security Entry-Exit Registration System), requiring immigrant men
from 26 mostly Muslim countries to register their name, address, telephone number, place of
birth, date of arrival in the United States, height, weight, hair and eye color, financial
information and the addresses, birth dates and phone numbers of parents and any foreign
friends with the government.
Besides all that a rather useless security theater was installed at U.S. airports which
has costs many billions in lost time and productivity ever since. The Patriot Act was
introduced which allowed for unlimited spying on private citizens. Wars were launched that
were claimed to be justified by 9/11. These were "mass outbreaks of anti-Muslim sentiment and
violence. Many were killed and maimed in them. People were tortured and vanished. All of this
happened largely to applause of a majority of the U.S. people which were glued to 24 and dreamed of being "terrorist
hunters".
Anyone with a functional memory knows that the U.S. reaction to 9/11 was anything but
"pretty calm". It is ridiculous that Krugman is claiming that.
I find it a bit humorous b that you are critical of Krugman for his 911 dementia when for
years many of us finance types have railed about how morally corrupt the logic and thinking
of Paul Krugman is.
Paul Krugman is to economics what Bernie Sanders has become for the purported "left" side
of the "right wing" uni-party....a sheep dog for the easily led.
Paul Krugman is an acolyte for the God of Mammon/global private finance elite.
While spreading anger and hate toward Arab people, The Bush Administration rescued the
many members of the Kingdom's family from all around the US and escorted their flights out of
the US to safety in Saudi Arabia.
Distracting the public big time was Dick Cheney, VP, who insisted from the very next day
that the plot to hit the Twin Towers was Saddam's plot.
So, the historical record and US response was skewed from the getgo. AQ and Bin Laden
didn't concern the neocons. They wanted the US to go to Iraq again, and this time start a
wide war that would spread to Syria and Lebanon and Iran.
It was easy times to spread fear and hate, and Cheney and the war mongers of CENTCOM were
riding high. Americans were scared of all Arabs, all Sunnis, all Shiites, from anywhere. They
were all the same in the public's mind. Enemies.
It was perfect and has led to 19 years of endless wars. Add ISIS and al Nusra and the
Taliban and you have an endless soup of enemies.
krugman is a terrible shill for the neo-cons and liberal-interventionists of the 21st
century
at my age, I shouldn't really be surprised any more by what american "intellectuals" and
"nobel prize winners" say about anything..... but I am.
He's neo-liberal interventionist moron of the first rank, and saying what he did actually
normalizes the war mania and war-mongering which has become so staple in mainstream thought
and the "think tanks" and is now practically part of the american DNA and "culture".
shame on krugman
...
It appears the Deep State has attacked the USA's people twice in two decades--on 911 and with
the decision to let as many die as possible by deliberately not doing anything to mitigate
the impact of COVID-19 and allowing the real economy to atrophy so even more will die in the
long run.
Posted by: karlof1 | Sep 11 2020 19:40 utc | 34
Talking about tilting at windmills - I'll never forget Robert Fisk angrily pointing out
that the Yankees knew where to find Al CIA-duh because they extended the cave complex at Tora
Bora to help Al CIA-duh, equipped with 10,000 US Stinger Missiles, kick the Russians out of
Afghanistan in the 1980s!!!
(The Yankees had to wait for 10+ years to invade Afghanistan because it takes that long
for Stingers to pass their Use By date)
@michaelj72. "krugman is a terrible shill for the neo-cons and liberal-interventionists of
the 21st century"
Actually, Paul Krugman was a strong and outspoken opponent of the Iraq War since early
2003 and possibly earlier. He was amongst the few mainstream liberal commentators to take
that stand.
If MoA readers and commenters were to read the entire series of Krugman's tweets, six in
all, they will see mention of how the Bush govt began exploiting the events of 11 September
2001 almost immediately. Though the example Krugman actually uses would make most people
cringe at what it suggests about the bubble he lives in and how far removed it is from most
people's lives and experiences, and his reference to a "horrible war" does not mention either
Afghanistan or Iraq.
It has to be said that Twitter is not designed very well for the kind of informal
conversational commentary that people often use it for. But then you would think Krugman
would use something other than Twitter to discuss and compare 9/11 with the impact of
COVID-19.
The real issue I have with Krugman's Tweet is that he is revising history and bending over
backwards to apologise for Dubya in a way to criticise Donald Trump's performance as
President.
b " Anyone with a functional memory knows that the U.S. reaction to 9/11 was anything but
"pretty calm". It is ridiculous that Krugman is claiming that. "
Careful with that axe b, you are talking about Biden's chief economic adviser and likely
appointee as Chair of the Fed. How does this look?
Volker
Greenspan
Bernanke
Yellen
Powell
Krugman
Reading Krugman's columns in 2016, I had a strong to overwhelming sense that this was a
person revving up for a spot in Hillary's White House or cabinet. For some reason it isn't
hitting me as strongly this time around – he may not have as close connections in
Biden's circle – but it certainly would not be a surprise to see him take a turn
through the media/government revolving door if Trump loses (though, fwiw, I don't think it
will be a job at the Fed).
Yep. Pretty staggering how a few disgruntled ex-CIA contractors managed to, deliberately
or not, help the US Gov't launch the biggest world war operation right under the noses of the
brainwashed masses.
99% of Westerners still are clueless as to explaining the last 20 years in a broader
geopolitical context.
#28: "The antiwar protests in the US were small and insignificant."
No they were not. Millions of people demonstrated against the planned war, in the US,
in the UK, and around the world...
We mustn't forget how the vast majority of those who allegedly were anti-war suddenly went
totally pro-war silent upon Obama coming in.
But that pales compared to the vile spectacle of all the self-alleged
"anti-authoritarians", "anti-propagandists" "dissidents", who suddenly regard the government
media as the literal voice of God, where their alleged God speaks of Covid.
His book, End this Depression Now, is pretty weak. He has no theory of why the crash
occurred. He critiques the austerity agenda but doesn't understand that government spending
CAN create tax liabilities for capital down the road and eat into profits, thus blocking
expanded investments and growth. Moronic libertarians hate Krugman just because they are
right wing assholes who think, like fairies, that a free market without the state will work
fine and self correct. Marx debunked this fairy tale thoroughly in Capital Volume 1, showing
that, even if we start with the mythical free market of libertarian morons, capitalism will
still operate according to the general law by which concentration and centralization lead to
class polarization. In any case, in volume 3 of Capital, Marx develops his laws of crisis,
showing that the cycles of expansion and depression under capitalism follow the movements of
the rate of profit, which itself is determined by the ratio of the value of sunk capital in
production technologies to the rate of exploitation (profits/wages). If the former rises more
than the latter, the rate of profit sinks, along with investment, output and employment.
Financial crises then set in.
The empirical evidence in the data bears out Marx's theory, not Krugman's dumb notion of
aggregate demand, or the stupid libertarian focus on interest rates.
We could discuss here all day about the sociological subject of the American people's true
positioning in the aftermath of 9/11. It would be, sincerely, a waste of time.
The important thing to grasp over this episode - from the point of view of History - is
this: it was a strategic victory for al-Qaeda . The USA took the bait (all scripted?)
and went into a quagmire in Iraq and Afghanistan. In a few years, the surplus the USA had
accumulated with the sacking and absorption of the Soviet space during Bill Clinton
evaporated and became a huge deficit in the Empire's accounts. Not long after, the 2008
financial meltdown happened, burying Bushism in a spectacular way.
There's a debate about the size of the hole the invasion of Iraq and Afghanistan cost the
American Empire. Some put it into the dozens of billions of USDs; others put it into the
trillions of USDs range. We will never know. What we know is that the hole was big enough to
both erase the American surplus and to not avoid the financial meltdown of 2008.
Either the expansion through the Middle East wasn't fast and provided riches enough to
keep up with the Empire's voracious appetite or the invasion itself already represented a
last, desperate attempt by the Empire to avoid its imminent collapse. We know, however, that
POTUS Bush had a list of countries he wanted to invade beyond Iraq (the "Axis of Evil") which
contained a secret country (Venezuela). He was conscious Iraq and Afghanistan wouldn't be
enough. Whatever the case, he didn't have the time, and the financial meltdown happened in
his last year in the White House.
They knew who the perps of 9/11 were: their "own" Saudi irregulars in the CIA's US main
land training camps, who started practicing on the "wrong"- domestic American- targets. These
guys were officially entered without any background checks.
The Bush and Bin Laden families go way back in money making. That is why George had to ponder
so long in that Florida kindergarten after hearing about the attacks: he had a suspicion. The
Saudi only fly out after 9/11 confirms that.
Paul Krugman Is a pro. Completely owned by Deep State. His purpose is to deflect
discussion and prevent questioning the official version of 9/11 , and get people chasing
something completely irrelevant. Well done Paul, most have taken the bait.
DISAGREE ON EVERY SINGLE WORD, in particular with this:
rules/regulations/capital requirements have infected the global banking system and
rendered it a harvesting operation for retail and a derivatives rule/regulation/capital
requirment evasion device for the pursuit of profit
absolutely false.
Banking system is in the 4th part of a cycle that they have created !
The first part has been capital harvesting (1970-1980)
The second part has been deregulation and hunt for stellar return on investment
The third part is financialisation and plunder of real economy
The fourth part is the destruction of real economy through debt, deflation, extreme
financial activity seeking for Yields.
The banks have been the fortresses of globalisation. Commercial banking has been absorbed
by investment banking. In this deflationary environment Commercial Banking has practice NO
ROI.
You want to see the Banks working again?
Reintroduce the Glass Steagall and separate again investment and commercial banking.
Repeal all what has been done between 1987 and 1999.
THAT will stop globalisation, that will stop the slow bleeding-to-death of westerne
economies, that will save commercial banking and our capitalistic societies.
Every stock market bubble begins with a story, and make no mistake -- this is a stock market
bubble. A virus forced the country to shut down and accelerated the gains in a select few
technology stocks that are uniquely capable of thriving with everyone stuck at home. A central
bank took quick action to prevent financial markets from seizing up, pushing interest rates
about as low as they could go.
The stock market now is completely disconnected from the economy. Stein's Law, which he expressed in 1976 states: "If
something cannot go on forever, it will stop."
Notable quotes:
"... Junk Bonds play a critical role in highlighted investor sentiment. When junk bonds (lower-rated debt) is performing well, then that means investors are taking more risks. When junk bonds struggle, that means investors are taking on less risk. ..."
"... At the same time, there is a divergence between the stock market (the S&P 500 made new all-time highs) and Junk Bonds (well below all-time highs and 5 percent off 2019 highs). ..."
As investors, we have several tools and indicators at our disposal.
Whether it is technical indicators such as Fibonacci levels, moving averages, or price
supports, or fundamental indicators such as corporate earnings or economic data, we have a lot
of information to use when making decisions.
Today's chart incorporates both. Junk Bonds play a critical role in highlighted investor
sentiment. When junk bonds (lower-rated debt) is performing well, then that means investors are
taking more risks. When junk bonds struggle, that means investors are taking on less risk.
So today, we highlight the Junk Bonds ETF (JNK). Using
technical analysis, we can see that JNK is trading near line (A), a price level that has served
as support and resistance over the past several years. It is currently serving as price
resistance.
At the same time, there is a divergence between the stock market (the S&P 500 made new
all-time highs) and Junk Bonds (well below all-time highs and 5 percent off 2019 highs).
So this is an important resistance test for junk bonds. Will Junk Bonds (JNK) break down
from here (bearish) or break out (bullish).
What happens here will send an important message to stocks (and investors)!
Just as a poetic discussion of the weather is not meteorology, so an issuance of moral
pronouncements or political creeds about the economy is not economics. Economics is a study of
cause-and-effect relationships in an economy.
-- Thomas Sowell
The first lesson of economics is scarcity: There is never enough of anything to satisfy all
those who want it. The first lesson of politics is to disregard the first lesson of
economics.
-- Thomas Sowell
Economics is the painful elaboration of the obvious.
The curious task of economics is to demonstrate to men how little they really know about
what they imagine they can design.
-- Friedrich von Hayek
I can't imagine economists admitting how little they actually know. If they admitted to
themselves, it would hurt their ego. If they admitted to others, it would hurt their job
prospects.
-- Joseph Mattes, Vienna (The Economist, letters December 04, 2010)
The use of mathematics has brought rigor to economics. Unfortunately, it has also
brought mortis .
-- Attributed to Robert Heilbroner
A study of economics usually reveals that the best time to buy anything is last year.
-- Marty Allen
Economic statistics are like a bikini, what they reveal is important, what they conceal is
vital
-- Attributed to Professor Sir Frank Holmes, Victoria University, Wellington, New Zealand,
1967.
Doing econometrics is like trying to learn the laws of electricity by playing the radio.
-- Guy Orcutt
Economists
The First Law of Economists: For every economist, there exists an equal and opposite
economist.
The Second Law of Economists: They're both wrong.
-- David Wildasin
"Murphys law of economic policy": Economists have the least influence on policy where they
know the most and are most agreed; they have the most influence on policy where they know the
least and disagree most vehemently.
-- Alan S. Blinder
An economist is someone who, when he finds something that works in practice, tries to make
it work in theory.
The purpose of studying economics is not to acquire a set of ready-made answers to economic
questions, but to learn how to avoid being deceived by economists.
-- Joan Violet Robinson
An economist is an expert who will know tomorrow why the things he predicted yesterday
didn't happen today.
-- Laurence J. Peter
Having a[n in] house economist became for many business people something like havinga
resident astrologer for the royal court: I don't quite understand what this fellow is saying
but there must be something to it.
-- Linden. (Jan. 11, 1993). Dreary Days in the Dismal Science. Forbes. Pp. 68-70.
Economics is the only field in which two people can get a Nobel Prize for saying exactly the
opposite thing.
Economists do it with models.
-- Heard at the LSE
Bentley's second Law of Economics: The only thing more dangerous than an economist is an
amateur economist!
Berta's Fundamental Law of Economic Rents.. "The only thing more dangerous than an amateur
economist is a professional economist."
Definition: Policy Analyst is someone unethical enough to be a lawyer, impractical enough to
be a theologian, and pedantic enough to be an economist.
Q: Why did God create economists ?
A: In order to make weather forecasters look good.
Q: Why has astrology been invented?
A: So that economy could be an accurate science.
Economists have forecasted 9 out of the last 5 recessions.
An econometrician and an astrologer are arguing about their subjects. The astrologer says,
"Astrology is more scientific. My predictions come out right half the time. Yours can't even
reach that proportion". The econometrician replies, "That's because of external shocks. Stars
don't have those".
When an economist says the evidence is "mixed," he or she means that theory says one thing
and data says the opposite.
-- Attributed to Richard Thaler, now at the Univ of Chicago
The last severe depression and banking crisis could not have been achieved by normal civil
servants and politicians, it required economists involvement.
Taxes
State run lotteries: think of them as tax breaks for the intelligent.
-- Evan Leibovitch
Inflation
Inflation is the one form of taxation that can be imposed without legislation.
-- Milton Friedman
Having a little inflation is like being a little pregnant–inflation feeds on itself
and quickly passes the "little" mark.
-- Dian Cohen
Trade and Trade Barriers
Tariffs, quotas and other import restrictions protect the business of the rich at the
expense of high cost of living for the poor. Their intent is to deprive you of the right to
choose, and to force you to buy the high-priced inferior products of politically favored
companies.
-- Alan Burris, A Liberty Primer
Perhaps the removal of trade restrictions throughout the world would do more for the cause
of universal peace than can any political union of peoples separated by trade barriers.
-- Frank Chodorov
When goods don't cross borders, soldiers will.
-- Fredric Bastiat, early French economist
The primary reason for a tariff is that it enables the exploitation of the domestic consumer
by a process indistinguishable from sheer robbery.
-- Albert Jay Nock
Regulation
Regulation - which is based on force and fear - undermines the moral base of business
dealings. It becomes cheaper to bribe a building inspector than to meet his standards of
construction. A fly-by-night securities operator can quickly meet all the S.E.C. requirements,
gain the inference of respectability, and proceed to fleece the public. In an unregulated
economy, the operator would have had to spend a number of years in reputable dealings before he
could earn a position of trust sufficient to induce a number of investors to place funds with
him. Protection of the consumer by regulation is thus illusory.
-- Alan Greenspan
You fucking academic eggheads! You don't know shit. You can't deregulate this industry.
You're going to wreck it. You don't know a goddamn thing!
-- Robert Crandall, boss of American Airlines, to an unnamed Senate lawyer in 1971
Government
The direct use of physical force is so poor a solution to the problem of limited resources
that it is commonly employed only by small children and great nations.
-- David Friedman
Government Spending
See, when the Government spends money, it creates jobs; whereas when the money is left in
the hands of Taxpayers, God only knows what they do with it. Bake it into pies, probably.
Anything to avoid creating jobs.
-- Dave Barry
I don't think you can spend yourself rich.
-- George Humphrey
Capitalism and Free Markets
A major source of objection to a free economy is precisely that it gives people what they
want instead of what a particular group thinks they ought to want. Underlying most arguments
against the free market is a lack of belief in freedom itself.
-- Milton Friedman
The most important single central fact about a free market is that no exchange takes place
unless both parties benefit.
-- Milton Friedman
The only thing worse than being exploited by capitalism is not being exploited by
capitalism.
-- Joan Violet Robinson
Manufacturing and commercial monopolies owe their origin not to a tendency imminent in a
capitalist economy but to governmental interventionist policy directed against free trade and
laissez faire.
-- Ludwig Mises, "Socialism"
If an exchange between two parties is voluntary, it will not take place unless both believe
they will benefit from it. Most economic fallacies derive from the neglect of this simple
insight, from the tendency to assume that there is a fixed pie, that one party can only gain at
the expense of another.
-- Milton Friedman
States with central-planning regimes [ ] do tend to consume much less energy (and much less
of everything else) [ ] than do Americans. There is a word for that: poverty.
-- The Politically Incorrect Guide to Socialism
Central Banks
Any system which gives so much power and so much discretion to a few men, [so] that mistakes
– excusable or not – can have such far reaching effects, is a bad system. It is a
bad system to believers in freedom just because it gives a few men such power without any
effective check by the body politic – this is the key political argument against an
independent central bank To paraphrase Clemenceau: money is much too serious a matter to be
left to the Central Bankers.
-- Milton Friedman
A central banker walks into a pizzeria to order a pizza.
When the pizza is done, he goes up to the counter get it. There a clerk asks him: "Should I
cut it into six pieces or eight pieces?"
The central banker replies: "I'm feeling rather hungry right now. You'd better cut it into
eight pieces."
Intellectual Property
For one thing, there are many "inventions" that are not patentable. The "inventor" of the
supermarket, for example, conferred great benefits on his fellowmen for which he could not
charge them. Insofar as the same kind of ability is required for the one kind of invention as
for the other, the existence of patents tends to divert activity to patentable inventions.
-- Milton Friedman
Slavery
From the experience of all ages and nations, I believe, that the work done by freemen comes
cheaper in the end than the work performed by slaves.
The work done by slaves, though it appears to cost only their maintenance, is in the end the
dearest of any. A person who can acquire no property can have no other interest but to eat as
much and to labour as little as possible.
Whatever work he does, beyond what is sufficient to purchase his own maintenance, can be
squeezed out of him by violence only, and not by any interest of his own.
-- Adam Smith
Prohibition
It is because it's prohibited. See, if you look at the drug war from a purely economic point
of view, the role of the government is to protect the drug cartel. That's literally true.
-- Milton Friedman
In the Long Run
John Maynard Keynes: "In the long run we are all dead."
Joan Robinson: "Yes, but not all at the same time."
Minimum Wage and Unemployment
The real minimum wage is zero: unemployment.
-- Thomas Sowell
All of the progress that the US has made over the last couple of centuries has come from
unemployment. It has come from figuring out how to produce more goods with fewer workers,
thereby releasing labor to be more productive in other areas. It has never come about through
permanent unemployment, but temporary unemployment, in the process of shifting people from one
area to another.
-- Milton Friedman
Misc
Talk is cheap. Supply exceeds Demand.
It is difficult to get a man to understand something when his salary depends on his not
understanding it.
-- Upton Sinclair
When you start paying people to be poor, you wind up with an awful lot of poor people.
-- Milton Friedman
of course the country could never listen to this guy .it just makes too much damn sense.
-- ryanx0 about Milton Friedman [http://www.youtube.com/watch?v=Se_TJzB9-z0]
Every individual necessarily labors to render the annual revenue of society as great as he
can. He generally neither intends to promote the public interest, nor knows how much he is
promoting it. He intends only his own gain, and he is, in this, as in many other cases, led by
an invisible hand to promote an end which was not part of his intention.
-- Adam Smith, Wealth of Nations
SOCIALISM: You have two cows. State takes one and give it to someone else.
COMMUNISM: You have two cows. State takes both of them and gives you milk.
FASCISM: You have two cows. State takes both of them and sell you milk.
NAZISM: You have two cows. State takes both of them and shoot you.
BUREAUCRACY: You have two cows. State takes both of them, kill one and spill the milk in
system of sewage.
CAPITALISM: You have two cows. You sell one and buy a bull.
Back during the Solidarity days, I heard that the following joke was being told in
Poland:
A man goes into the Bank of Gdansk to make a deposit. Since he has never kept money in a bank before, he is a little nervous.
"What happens if the Bank of Gdansk should fail?" he asks.
"Well, in that case your money would be insured by the Bank of Warsaw."
"But, what if the Bank of Warsaw fails?"
"Well, there'd be no problem, because the Bank of Warsaw is insured by the National Bank of Poland."
"And if the National Bank of Poland fails?"
"Then your money would be insured by the Bank of Moscow."
"And what if the Bank of Moscow fails?"
"Then your money would be insured by the Great Bank of the Soviet Union."
"And if that bank fails?"
"Well, in that case, you'd lose all your money. But, wouldn't it be worth it?"
All models are wrong but some are useful.
-- George Box
I'd rather be vaguely right than precisely wrong.
-- J.M.Keynes; Found in Forbes magazine 01/25/1999 issue. In the Numbers Game column by
Bernard Cohen
Far better an approximate answer to the right question, which is often vague, than an exact
answer to the wrong question, which can always be made precise.
-- J. Tukey
There is an entirely leisure class located at both ends of the economic spectrum
In my US youth we trained with .30 cal Simi auto rifles at public school, and had also at
public school, rifle teams that used .22 target rifles.
Wally was the only white guy on the
teams (there were several schools)...
The racial stuff was all there, but so also was an
intact industrial plant... a fella couldn't walk down the street without stumbling into a
job.
Welder, fitter, fabricator, assembly line work, foundries and forges and shipyards and
mines were running double shifts and the unions were strong...even rich people were afraid to
cross a picketline...
and the income tax was about 75%...
In a long and adventurous life slumming 'round I have been threatened with guns dozens of
time...Every Time a cop was holding the gun, with "one up the spout" (it's "policy") and
finger on the trigger. Not once was there an arrest. Not once. Beatdachitoutta, well, several
times, kidnapped too, but never actually arrested. Actually pretty much a boyscout. And
white. Yes, the cops are azzhones, like Dylan said, the cops doaneed you and man they expect
the same.
I think the "problem" with the views here @ MoA in regard the "civil war" lies in
fundamental assumptions.
Simply try assuming that the US has ended, what you're seeing is denouement. Then forget
about it...it's like chemistry, and "da fat's in da fire". Outcome is backed in. Like the
corpse rotting back to it's constituent chemistry.
Igor Panarin's prediction, and also Deagle's prediction, may well be the proximate
situation when the reaction bombe cools off.
The fact that a delusional "ruling class" is at war with itself as well as the common
people stands as strong evidence...
In a sense the USA is a theocratic society with neoliberal religion as the state religion. Not that different from the
USSR whioch also was a theocratic society with some perversion of Marxism as the state religion.
I capitulate. Ron you are correct, we are post peak.
Post Peak
OK, now what?
It is so strange to be post-peak and not have high prices for crude,
and food.
I guess that will be coming.
note- biofuels should not be counted in liquids tally. It is a different animal, with the
source being dependent on farming and soil, not drilling and geology. Just because ethanol is
used for propulsion shouldn't matter- electrons and batteries aren't counted either, and
rightly so. Those belong in a different category- transportation energy.
I have argued for several years that peak oil is a low price phenomenon, not a high priced
phenomenon.
The most overrated law in economics is that of supply and demand. This law suffers from
what Richard Feynman called "vagueness" (see https://www.youtube.com/watch?v=EYPapE-3FRw
). The problem is that it is always satisfied and hence gives absolutely no information about
prices.
Another problem with market theory (beyond vagueness) is that it lacks a time axis.
The theory states that the relationship between price and supply moves along the demand
curve, but doesn't say how fast, just that "in the long run" the system will reach
equilibrium. Being in equilibrium means being somewhere on the demand curve.
So for example, if prices go up, the demand quantity is expected to go down. The question
is when.
Where does this go wrong? In classical market theory, for example, unemployment is
impossible, because if labor supply outstrips demand prices (wages) should fall until until
equilibrium is attained. This has been observed to be false on many occasions, including
right now.
As Feymann states in the video, "If it disagrees with experiment, it's WRONG! That's all
there is to it." Classical economics isn't just too vague, it is wrong.
Keynes joked about this that in the long term we'll all be dead. He meant equilibrium will
never be reached, so we are never on the demand curve. He argued that "sticky prices",
meaning the unwillingness to accept pay cuts, kept labor markets permanently out of
equilibrium.
It's worth pondering whether oil prices are "sticky" as well. Saying yes is saying the law
of supply and demand doesn't apply (in the short term). This year we have seen that both
OPEC's politicking and panicky traders can cause wild swings in price unrelated to supply and
demand.
Where market theory is vague is the shape of the demand curve. For example, if oil supply
can't meet demand in the near future, as some here have posited, how high will prices go?
Some claim it will go over $200, as people get desperate for it. Some claim that higher
prices would increase efforts to find and drill more, putting a lid on prices. Some claim the
shortage would crash the world economy, depressing prices. Some claim that faced with oil
shortages, the world would simply switch to EVs, or stop wasting the gunk on poorly designed
transportation systems, so prices would stay more or less the same.
Who is right? Nobody knows. So we don't know the shape of the demand curve. The theory is
hopelessly vague.
I have argued for several years that peak oil is a low price phenomenon, not a high
priced phenomenon.
Schinzy,
The price of crude oil is only part of the Peakoil phenomenon. How much is left in the
ground counts, however more important is at which velocity the remaining Gb can be
extracted. I am not a geologist, but common sense says that when an oilfield is well depleted
(50-70%) the most of the remaining barrels will be extracted at a much lower speed, even at
very high oilprices. With secondary and tertiary EOR technology most conventional oilfields
will not produce the same or close to the same amount of barrels/day as before for many more
years. That's also my conclusion from what I have read more than a decade ago.
Of course with high oilprices new, relatively small, oil fields will come online and (more
advanced) EOR will start in other fields, but no matter how you look at it: depletion never
stops. With most oilfields in the world past-peak, only a tremendous amount of money (needed
to develop EOR) can prevent world crude oilproduction from falling like a rock. And all those
EOR technologies will deplete oilfields faster. Big gains in the beginning, more
disappointments later.
Will there be significant amount of shale oil developed in the future in other countries than
the U.S. ? If so, is that wise, regarding an already existing runaway climate change ?
Modelling political instability is the subject of cliodynamcs, see https://en.wikipedia.org/wiki/Cliodynamics
. The graph on that page seems to link political instability with inequality. My suspicion is
that it is also linked to scarcity.
Wall Street is very story driven. They wasted a decade throwing money at tight oil and
lost billions. It's hard to see how this tight oil story gets resuscitated. The '10s saw free
debt, low regulatory regime, no effective alternatives to oil, skilled work force, entrenched
globalized oil markets, no pandemics, etc, and they STILL lost hundreds of billions. Wall
Street wants to lose their money in new ways. At least they get some novelty out of it.
"... $40s WTI and Brent are wholly unsustainable prices. I'd argue that $50s and $60s are also if growth is being sought outside of a few areas. ..."
"... SS, there is no doubt that the pandemic will hasten peak oil supply. Many shut-in wells will not re-open. Frac spreads are being sold for scrap. Rigs are being decommissioned. Plus we are still producing at 80 to 90% of former levels. That means depletion is still continuing. So when they do get around to producing flat out again, the oil will just not be there. ..."
"... close to 100,000 job losses in the oil industry, many folks in their 50s and 60s. Hard to see how they bring folks on for another boom with the loss of all that skilled labor. ..."
"... So, maybe $100 oil over a period of time could turn this tide, but sub-$50 WTI sure won't. ..."
"... Yes, the future is hard to predict. But absent some tremendous financial return potential, why would young people have any interest in making a career of US upstream E & P? ..."
OPEC peaked in 2016, Russia peaked in 2019, and the USA very likely peaked in 2019 also.
And the vast majority of all other nations have peaked also as evidenced by their continuing
decline. That should be enough evidence for anyone.
SS, there is no doubt that the pandemic will hasten peak oil supply. Many shut-in
wells will not re-open. Frac spreads are being sold for scrap. Rigs are being decommissioned.
Plus we are still producing at 80 to 90% of former levels. That means depletion is still
continuing. So when they do get around to producing flat out again, the oil will just not be
there.
As to the longevity of the pandemic, one can only guess. But things will never be back to
the free and easy ways of the past. International travel will never be back to what it once
was. There will be fewer travel vacations even within nations. The possibility of the virus
returning will forever be on everyone's mind.
Also close to 100,000 job losses in the oil industry, many folks in their 50s and 60s.
Hard to see how they bring folks on for another boom with the loss of all that skilled
labor.
Once that a, in most cases, curative combination of medicines is available and one or a
few very effective vaccins are registered and rolled out, it remains to be seen how 'normal'
life will get again.
I don't think the virus will be forever on everyone's mind. Already now many young people
have started to party like before the pandemic, even in Europe (infections rising in almost
all European countries, so a lot of 'Trumpites' and Bolsonarites' also in Europe).
When vaccines are widely available at least everyone who is planning to travel by plane
will be going to get a vaccin.
A good chance that vacations and air travel is close to normal somewhere in 2022 or 2023.
The pandemic will eventually subside an the US and other nations that have responded
poorly to the pandemic will eventually learn from nations that have responded relatively
better, compare Europe and US.
If peak supply is reached, but demand resumes 1% annual growth, I expect we will soon see
Brent at $65/bo+/-5 at minimum, by 2025 to 2030.
Dennis. Brent $65 in 2025-30 is only helpful if one or both of the following happens:
1. Capital markets continue to the pattern of 2015-19 and fund drilling that provides
marginal returns or losses, but has no hope of providing superior returns.
2. Some other new, economical supply source is discovered.
Low oil prices to 2025-2030 would seem to mean supply will be constrained unless one or
both of the above occur.
Conventional oil pretty much peaked in 2005.
I look at $10K invested in a major oil company in 2010. I look at $10K invested in a shale
company in 2010. I then compare that to the S&P 500 return since 2010, all other industry
groups, specific companies, etc.
Investing in oil is like investing in tobacco. The only allure is yield. Upstream E &
P will have to keep borrowing to pay the dividend even if oil returns to $50 Brent. Same with
$60 Brent.
Dennis. One thing that you are missing is just how poor the future of the upstream oil
industry is.
When the shale boom started, EV's were a pipe dream.
When the shale boom started, there wasn't widespread sentiment against oil. Global
warming/climate change was on the radar, but not like now.
BP is trying to remake itself in large part because they cannot find talented and skilled
younger workers who want to work for a fossil fuel company.
We have been in this industry since the 1970s. We have some of the best leases in our
field and have made more money in this industry than in our professions or in other
investments. There is a third generation in our family ranging from late teens to mid
twenties. None are interested at all in this family business/investment. Same for one of my
best friends who makes his living at this. Same for another, whose engineer son started
working with him out of college, but before oil crashed in 2014 left and took a job in a
"Green Energy" field.
Mike is in the same boat.
I know all of the major players in our field. All companies are family owned. There are a
total of four in all of those families working in oil and gas who are under the age of 50,
and those four are at or nearing 40, and started working in their family oil companies at
least over 15 years ago.
As I have posted before, our employees range from 47-61 years of age. The two we hired who
were in their twenties have both long ago left, and no longer work in upstream E & P.
We have participated in some Zoom meetings with the National Stripper Well Association.
Almost all on those meetings is old (50-80 years old).
We hope to sell out on the next recovery, if that ever comes. But we are concerned there
will not be any buyers.
So, maybe $100 oil over a period of time could turn this tide, but sub-$50 WTI sure
won't.
Yes, the future is hard to predict. But absent some tremendous financial return
potential, why would young people have any interest in making a career of US upstream E &
P?
I capitulate. Ron you are correct, we are post peak.
Post Peak
OK, now what?
It is so strange to be post-peak and not have high prices for crude,
and food.
I guess that will be coming.
note- biofuels should not be counted in liquids tally. It is a different animal, with the
source being dependent on farming and soil, not drilling and geology. Just because ethanol is
used for propulsion shouldn't matter- electrons and batteries aren't counted either, and
rightly so. Those belong in a different category- transportation energy.
I have argued for several years that peak oil is a low price phenomenon, not a high priced
phenomenon.
The most overrated law in economics is that of supply and demand. This law suffers from
what Richard Feynman called "vagueness" (see https://www.youtube.com/watch?v=EYPapE-3FRw
). The problem is that it is always satisfied and hence gives absolutely no information about
prices.
Another problem with market theory (beyond vagueness) is that it lacks a time axis.
The theory states that the relationship between price and supply moves along the demand
curve, but doesn't say how fast, just that "in the long run" the system will reach
equilibrium. Being in equilibrium means being somewhere on the demand curve.
So for example, if prices go up, the demand quantity is expected to go down. The question
is when.
Where does this go wrong? In classical market theory, for example, unemployment is
impossible, because if labor supply outstrips demand prices (wages) should fall until until
equilibrium is attained. This has been observed to be false on many occasions, including
right now.
As Feymann states in the video, "If it disagrees with experiment, it's WRONG! That's all
there is to it." Classical economics isn't just too vague, it is wrong.
Keynes joked about this that in the long term we'll all be dead. He meant equilibrium will
never be reached, so we are never on the demand curve. He argued that "sticky prices",
meaning the unwillingness to accept pay cuts, kept labor markets permanently out of
equilibrium.
It's worth pondering whether oil prices are "sticky" as well. Saying yes is saying the law
of supply and demand doesn't apply (in the short term). This year we have seen that both
OPEC's politicking and panicky traders can cause wild swings in price unrelated to supply and
demand.
Where market theory is vague is the shape of the demand curve. For example, if oil supply
can't meet demand in the near future, as some here have posited, how high will prices go?
Some claim it will go over $200, as people get desperate for it. Some claim that higher
prices would increase efforts to find and drill more, putting a lid on prices. Some claim the
shortage would crash the world economy, depressing prices. Some claim that faced with oil
shortages, the world would simply switch to EVs, or stop wasting the gunk on poorly designed
transportation systems, so prices would stay more or less the same.
Who is right? Nobody knows. So we don't know the shape of the demand curve. The theory is
hopelessly vague.
A comment posted on ^peakoil.com^ . Interesting .
"The price action of WTI shows it quite clearly that the non oil extracting part of the
economy can't afford to pay a high enough price that would allow the extracting, processing
and delivery of oil products to it.
It's that simple, most of the oil still in the ground will stay there unless somehow you
find a way to pay $100++ per barrel. The last 12 years has shown that we can't!
The best yearly average weekly price of WTI was right around $100
Average weekly price of WTI for years 2008 thru 2013 was $88.
Average weekly price of WTI for years 2014 thru 2019 was $53.
The trend is what it is and it shows no signs of changing, the price of WTI is still
hitting lower lows and lower high.
I have no idea what the future will bring but the next 3 years are going to be interesting
and not in a good way.
Have fun everyone."
Dennis,repeating myself ,the price of oil is going to trend down . Supply and demand
curves do not apply where the world^s economic system is now placed . Alimbiquated has done a
very good job explaining that .
Much of the fall in output of the other 9 is from Iran, Nigeria, Libya, and Venezuela,
much of that decline is due to political problems
No doubt it was. But political upheaval is part of the story, and always will be. There
will be political problems ongoing for decades. Dennis, if your model excludes political
problems, then you are living in a dream world.
Anyway, in addition to the political problems that you point out in those four nations,
which will most likely continue, we have the natural decline in the other five nations in the
chart below.
Yes and oil prices have been low from Nov 2018 until now, do you expect that to continue
for the next 10 years? I do not, perhaps that's the difference. 2025 to 2030 there is likely
to be a new peak for World C plus C centered 12 month average output probably 1 to 3 Mb per
day higher than the Nov 2018 peak. This assumes oil prices reach $64/bo or higher in 2020$ by
June 2030.
I seem to recall, not too long ago, various talking heads prattling on about how USA LTO
is now the new "swing producer"/source of swing supply. I guess we'll now get to see how well
it swings on and off, as swing producers are wont to do.
My WAG is that it doesn't swing back on so well, as the swing off phase seems to be damaging
(not just a tap you see), and when demand recovers after COVID, circa 2023, we'll see a price
run up. Perhaps it'll be a damaging price run up. 2023 will be in the middle of Biden's first
term, presumably.
And: Nigeria and Venezuela could ramp up their production only very, very slowly. They
could not stem the general trend. Lybia is too little to make any serious difference. The
only real wildcard is Iran. And it's the less probable to be played.
The economy will roll over soon, probably by early 2021. Whatever party has the presidency
won't matter. As the Dollar dies, so will the country because the dollar's status is the only
thing preventing hyperinflation and a total lockup of everything that moves at least for a
few months.
The carnival barkers in both parties are just rearranging the deck chairs on the Titanic.
If you haven't stocked up on food, water and ammo you better do so now.
Lawlessness in the major cities is just the opening act. Wait till people are hungry and
thrown out on the streets due to the stupidity of the Covid lock down madness.
I capitulate. Ron you are correct, we are post peak.
Post Peak
OK, now what?
It is so strange to be post-peak and not have high prices for crude,
and food.
I guess that will be coming.
NOTE:
biofuels should not be counted in liquids tally. It is a different animal, with the
source being dependent on farming and soil, not drilling and geology.
Just because ethanol is
used for propulsion shouldn't matter -- electrons and batteries aren't counted either, and
rightly so. Those belong in a different category- transportation energy.
I have argued for several years that peak oil is a low price phenomenon, not a high priced
phenomenon.
The most overrated law in economics is that of supply and demand. This law suffers from
what Richard Feynman called "vagueness" (see https://www.youtube.com/watch?v=EYPapE-3FRw
). The problem is that it is always satisfied and hence gives absolutely no information about
prices.
Another problem with market theory (beyond vagueness) is that it lacks a time axis. The theory states that the relationship between price and supply moves along the demand
curve, but doesn't say how fast, just that "in the long run" the system will reach
equilibrium. Being in equilibrium means being somewhere on the demand curve.
So for example, if prices go up, the demand quantity is expected to go down. The question
is when.
Where does this go wrong? In classical market theory, for example, unemployment is
impossible, because if labor supply outstrips demand prices (wages) should fall until until
equilibrium is attained. This has been observed to be false on many occasions, including
right now.
As Feymann states in the video, "If it disagrees with experiment, it's WRONG! That's all
there is to it." Classical economics isn't just too vague, it is wrong.
Keynes joked about this that in the long term we'll all be dead. He meant equilibrium will
never be reached, so we are never on the demand curve. He argued that "sticky prices",
meaning the unwillingness to accept pay cuts, kept labor markets permanently out of
equilibrium.
It's worth pondering whether oil prices are "sticky" as well. Saying yes is saying the law
of supply and demand doesn't apply (in the short term). This year we have seen that both
OPEC's politicking and panicky traders can cause wild swings in price unrelated to supply and
demand.
Where market theory is vague is the shape of the demand curve. For example, if oil supply
can't meet demand in the near future, as some here have posited, how high will prices go?
Some claim it will go over $200, as people get desperate for it. Some claim that higher
prices would increase efforts to find and drill more, putting a lid on prices. Some claim the
shortage would crash the world economy, depressing prices. Some claim that faced with oil
shortages, the world would simply switch to EVs, or stop wasting the gunk on poorly designed
transportation systems, so prices would stay more or less the same.
Who is right? Nobody knows. So we don't know the shape of the demand curve. The theory is
hopelessly vague.
I have argued for several years that peak oil is a low price phenomenon, not a high
priced phenomenon.
Schinzy,
The price of crude oil is only part of the Peakoil phenomenon.
How much is left in the
ground counts, however more important is at which velocity the remaining Gb can be
extracted. I am not a geologist, but common sense says that when an oilfield is well depleted
(50-70%) the most of the remaining barrels will be extracted at a much lower speed, even at
very high oilprices.
With secondary and tertiary EOR technology most conventional oilfields
will not produce the same or close to the same amount of barrels/day as before for many more
years. That's also my conclusion from what I have read more than a decade ago.
Of course with high oilprices new, relatively small, oil fields will come online and (more
advanced) EOR will start in other fields, but no matter how you look at it: depletion never
stops.
With most oilfields in the world past-peak, only a tremendous amount of money (needed
to develop EOR) can prevent world crude oil production from falling like a rock. And all those
EOR technologies will deplete oilfields faster.
Big gains in the beginning, more
disappointments later.
Will there be significant amount of shale oil developed in the future in other countries than
the U.S. ? If so, is that wise, regarding an already existing runaway climate change ?
Hands up those who think the election will only have a 'marginal' effect?
"Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens
Martin Gilens and Benjamin I. Page
Each of four theoretical traditions in the study of American politics -- which can be
characterized as theories of Majoritarian Electoral Democracy, Economic-Elite Domination, and
two types of interest-group pluralism, Majoritarian Pluralism and Biased Pluralism -- offers
different predictions about which sets of actors have how much influence over public
policy: average citizens; economic elites; and organized interest groups, mass-based or
business-oriented. A great deal of empirical research speaks to the policy influence of
one or another set of actors, but until recently it has not been possible to test these
contrasting theoretical predictions against each other within a single statistical model. We
report on an effort to do so, using a unique data set that includes measures of the key
variables for 1,779 policy issues.
Multivariate analysis indicates that economic elites and organized groups representing
business interests have substantial independent impacts on U.S. government policy, while
average citizens and mass-based interest groups have little or no independent
influence.
The results provide substantial support for theories of Economic-Elite Domination and for
theories of Biased Pluralism, but not for theories of Majoritarian Electoral Democracy or
Majoritarian Pluralism. "
Hey there! It's me, the stock market. I know it's weird to write you like this, but I felt
like I needed to drop a quick thank-you note for everything you've done for me this year. I
mean, your big ol' balance sheet is almost $3 trillion larger since early March! You're backing
up the truck and loading it with Treasuries and corporate bonds and bond ETFs, all to keep the
competition to stocks from fixed-income yields as limited as Jim Cramer's understanding of me.
It's been a dream come true, honestly. I mean, fess up: Have you been reading my diary?!
... ... ...
So please do me a solid and keep this thank-you note in mind when you host your virtual
Jackson Hole summit. No cowboy stuff, OK? If I hear anybody mutter something about "irrational
exuberance," I swear I'm gonna blow my top and hurt a few of these Robinhood types, you got
that? The Lord giveth, and the Lord taketh away. It's what I do -- and I'm good at it! But
right now, this is still a lot of fun for me...
The disconnect between the all time highs in the stock market and the broader economy has
never been greater (with even Janet Yellen , one of
the main architects of this disconnect, agreeing), and one of the places where this chasm is
most glaring, is in the staggering number of major corporations filing for bankruptcy in 2020.
Indeed, this year large US corporate bankruptcy filings are running at a record pace and are
set to surpass levels reached during the financial crisis in 2009 (when the S&P was far
from an all time high).
According to FT calculations , as of
August 17, a record 45 companies each with more than $1 billion in assets has filed for Chapter
11 this year; this compares with 38 for the same period of 2009 during the depths of the
financial crisis and is more than double last year's figure of 18 over the comparable period
.
In total, 157 companies with liabilities over $50 million have filed for Chapter 11
bankruptcy this year and as we warned several
months ago, many more are coming.
"We are in the first innings of this bankruptcy cycle. It will spread far across industries
as we get deeper into the crisis. It's going to be a bumpy ride," said Ben Schlafman, chief
operating officer at New Generation Research.
The spike in bankruptcies comes despite trillions of dollars in government aid to mitigate
the fallout of the coronavirus pandemic on businesses, highlighting the catastrophic and
lasting impact Covid-19 is having on the US economy. Or perhaps those trillions in government
aid are going to the wrong recipients, and as a result companies that stand to benefit from
mass defaults are now sporting record market caps. In fact, the irony is that in its pursuit to
crush monopolies such as Amazon and Google, the government has made them bigger and stronger
than they have ever been.
Meanwhile, with the US economy driving right over the fiscal cliff as Congress failed to
extend emergency covid benefits, sending spending by those receiving Unemployment Insurance
sharply lower ...
... and millions of Americans about to lose their job (again), a new default wave is just
waiting to be unleashed.
"Ending the $600 per week federal unemployment benefits will push tens of millions of
Americans into, or uncomfortably close to, poverty. They won't have the money to buy billions
of dollars worth of goods and services. As a result, the entire economy will suffer. Small
businesses will continue to suffer the most because they're already precarious," said Robert
Reich, Bill Clinton's labor secretary.
For now, the brunt of the default wave has been felt by oil and gas companies as low (and on
one historic occasion, negative) crude prices crippled dozens of businesses. There have been 33
filings to date according to the
Oil Patch Bankruptcy Monitor from Haynes and Boone, including Chesapeake, Whiting Petroleum
and Diamond Offshore Drilling. There were only 14 last year.
While not quite as bad as the E&P sector, retail businesses with assets of more than $50MM
have also been severely affected with 24 filing for bankruptcy, a three-fold jump from last
year. They have been among the hardest hit by the government-mandated lockdowns, which
prevented stores from opening and drove consumers to online retailers such as Amazon. Burdened
by debts, some of which were built up under private equity ownership, several prominent
retailers have been forced to file for Chapter 11.
Some of the most iconic names that have filed this year include Neiman Marcus, which
struggled for years with a heavy debt burden from its 2005 leveraged buyout by TPG and Warburg
Pincus, and which finally filed for bankruptcy in May with liabilities of $6.7bn. JCPenney,
also saddled with billions in debt, filed for Chapter 11 bankruptcy in May. Brooks Brothers,
the venerable suit retailer that once counted Abraham Lincoln and John F Kennedy among its
clients, did the same in July.
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"The Covid-19 pandemic is reshaping consumer buying habits. Therefore, we will continue to
see large retail, energy, and transportation businesses taking advantage of the tools provided
by a formal bankruptcy to restructure to be more profitable and competitive in the long term,"
said Deirdre O'Connor, managing director of corporate restructuring at legal services group
Epiq.
And while several businesses tried to reopen in late May and June (and some amusingly tried
to unfile for bankruptcy just so they were eligible for bailout loans), a recent flare-up in
coronavirus cases and deaths in several US states choked the recovery, forcing many business
owners to close again.
"It pains me to say this, but bankruptcy is a growth industry in America," New Generation's
Schlafman dismally concluded.
The last recession, from 2007 to 2009, was brutal because of twin crashes in both the financial and housing markets. The
S&P
500 plunged 56%
from top to bottom, and
home
values fell 27%
. The daunting loss of wealth took years to recover and left prolonged scars on the U.S. economy.
These twin bubbles are detached from what's happening in the real economy, where unemployed has nearly tripled, from 5.8 million
workers in February to 16.3 million now. Most
broad
measures of economic activity
show that the coronavirus recession bottomed out in May, with gradual progress since then. But
we've only recovered about one-third of the jobs and output we've lost, and there's no sign of a quick improvement any time soon.
A return to normal only seems possible once there's a widely available coronavirus vaccine, maybe within 9 or 12 months.
The Fed's aggressive action is a political lifeline to President Trump, who would have a far worse mess to explain to voters if
the Fed weren't administering emergency CPR. As is, millions of Americans benefiting from the twin bubbles stoked by the Federal
Reserve might feel okay. The
S&P
500 set a record high this week
, with the index now up 52% from its bear-market low on March 23. Many analysts say it makes
no sense for stocks to be on a tear while the real economy is on its knees, but if you sold stocks today for a 51% gain that
would be real money in your bank account. Those gains are largely due to the Fed goosing asset prices, but that doesn't make the
money less real.
Homeowners are benefitting, too. Historically low mortgage rates
pushed
existing home sales
to the highest level in 14 years this week. Sales of new homes are soaring, too, and the increased demand
is pushing home values up.
This might seem unfair. The Fed's actions are benefiting shareholders and homeowners, who arguably need help least. But it's the
usual trickle-down wait for families not lucky enough to own stocks or real estate. But for all its might, the Fed has limited
power to reach into the economy and target aid beyond financial markets. That's Congress's job. And this economy would be
dreadfully worse if the stock-market was down 30% or 40% and homeowners were losing equity rather than gaining it.
This week's Trump-o-meter reads WEAK, the third-lowest rating, which is an improving over the FAILING and SAD readings of the
last several weeks.
Source: Yahoo Finance
More
Trump still faces an uphill path to reelection, on account of his dismissive response to the coronavirus, which has kept the
economy from entering the quick, V-shaped recovery he's hoping for. Democratic nominee Joe Biden leads Trump by
7.4
percentage points nationally
, a larger edge than Hillary Clinton had over Trump at the same point in 2016. Biden's Democrats
held a solid virtual convention this week, and Biden easily disproved Trump's claim that he's senile. Trump will now fill the
airwaves with his own four-day nominating convention, though he could be upstaged by the
mounting
uproar at the postal service
, the
strange
new indictment
of his 2016 campaign manager Steve Bannon or some other brewing scandal.
With 10 weeks until the election, the economy shows halting progress, suggesting it may not be much better by the time voters
cast their ballots. The Oxford Economics weekly economy tracker improved slightly this week, but initial unemployment claims once
again shot past the startling 1 million level. In
a
new Yahoo Finance-Harris poll
, 51% of respondents said they expect the economy to worsen within the next three months, while
only 31% expect it to improve. Trump obviously hopes otherwise, and he will likely claim exaggerated progress as the election
hits the home stretch. After all, look at that record stock market.
The broad market (S&P 500) is trading at the highest forward PE multiples since November
1999, but the financial press is rife with mendacious piffle claiming there is no bubble. For
example, in celebration of Tuesday's all-time high on the S&P 500, one James Mackintosh of
the Wall Street Journal minced no words:
Except, the Everything Bubble is in the imagination of the many investors complaining
about it. First, it isn't everything. Second, it isn't a bubble .
Right. Supposedly, the above statement is true because energy sector stock prices are in the
tank, but the market is being rationally led by the tech giants where allegedly solid prospects
for earnings growth are being rewarded with higher PE multiples owing to ultra-low interest
rates.
...Lower rates mean profits further in the future matter more to the share price , so
companies with steady earnings no matter what the economy does are worth more. Those that are
sensitive to the economy are worth less, because future earnings are expected to be hit.
Growth stocks do incredibly well, because their future earnings are expected to be higher
and, at least for those thought immune to economic weakness, worth more as well thanks to
lower rates.
Apply this framework and there's no bubble. U.S. stocks are more highly valued than in the
past because they are dominated by big growth stocks, themselves justifiably more highly
valued thanks to low rates.
The sheer laziness and conformism of today's so-called financial journalists is a wonder to
behold. When the leader of the tech growth stocks, Apple, crossed the $2 trillion market cap
barrier for the first time today, thereby embodying more market cap than the entire Russell
2000 of small cap US companies, Mackintosh's colleague at the Wall Street Journal spewed the
same groupthink:
The stock has more than doubled from its March 23 low, boosted by steady demand
for the company's devices and better-than-feared results in its core iPhone business as
millions of Americans work from home.
Steady sales growth is driving the string of achievements. Apple's sales rose to $260
billion in the fiscal year ended in September from $216 billion three years prior. The
company has even grown sales during the pandemic: For the quarter ended in June, they rose
11% from a year earlier to nearly $60 billion, exceeding Wall Street expectations. Earnings
surged to $11.25 billion.
Apple is not a growth stock. Period.
The three-year sales gain cited by the WSJ amounted to only 6.4% per annum, but also
reflects what amounts to journalistic malpractice.
That's because the starting figure of $216 billion for Apple's FY 2016 sales actually
reflected a 7.8% decline from sales of $234 billion in FY 2015. So the four-years growth rate
of sales through FY 2019 was, well, a mere 2.67% per annum.
Likewise, the 11% sales gain during the June 2020 quarter versus prior year is completely
misleading. During the past four quarters, the year-over-year sales gains have been all over
the lot, posting at 10.9%, 1.0%, 8.8% and 1.8% respectively. Accordingly, for the LTM period
ended in June, the sales gain was just 5.7% – hardly a barn-burning growth figure.
Likewise, the purported June quarter earnings "surge" to $11.25 billion was nothing of the
kind. During the 2018 June quarter, for instance, net income posted higher at $11.52 billion .
The surging at issue, therefore, was one of backward motion.
In fact, the only thing about Apple which has been in a growth mode during the last five
years is the company's PE multiple, which has essentially doubled from 14X to 35X at today's
record share price.
As to the actual 5-year trend of sales and earnings growth, not so much.
Back in June 2015 Apple was valued at $715 billion on the strength of its unparalleled tech
product franchise, which was reflected in $224 billion of annual sales and $50.7 billion of LTM
profits.
Still, there was a reason for the modest implied PE multiple of 14.1X : Namely, the tech
behemoth's growth rate was rapidly slowing – freighted down by the inherent limits
embedded in its enormous scale and the then modest expectations for earnings expansion in the
immediate years ahead.
Those modest expectations were accurate. Five years later, the LTM figures for June 2020
came in at $273.9 billion of sales and $58.4 billion of net income.
Yes, the latter figure represents a lot of profits, but it embodies hardly a modicum of
growth. In fact, Apple's five-year sales growth rate was just 4.1% , while its net income
growth rate clocked in at only 2.9% per annum.
Moreover, there has been no recent growth spurt to accelerate these five-year trend rates of
growth. The two-year growth rates are even slower, with sales posting at 3.6% per annum and net
income rising by just 2.03% per year. Wiser:
Getting Beyond ... Hastie, ReidBest Price: $1.07Buy New $14.14(as of 04:01 EDT -
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Needless to say, the doubling of Apple's PE multiple has nothing to do with its punk
five-year net income growth rate of 2.9% per annum; it's about the Fed's radical repression of
interest rate and the resulting diversion of trillions of borrowed capital into the inflation
of risk asset capitalization rates.
Nor is Apple some kind of outlier, albeit it is the monster of the tech midway. Overall, the
so-called Fab Five (Amazon, Apple, Microsoft, Facebook and Google) reflect the same multiple
inflation story; and they are obviously the pile driver that is pushing the heavily ETF and
indexer-driven stock market up into the nosebleed section of history.
Thus, back in June 2014, the Fab Five's combined market cap weighed-in at $1.63 trillion and
accounted for 9.5% of the overall S&P 500's market cap of about $17.0 trillion .
Fast forward six years, and the Fab Five were valued at today's close at $7.1 trillion ,
which accounts for 26% of the $27.7 trillion total market cap of the S&P 500.
So, yes, the term "pile-driver" is probably an understatement. Fully 50% of the S&P
500's $10.7 trillion market cap gain since June 2014 is attributable to the Fab Five.
At the same time, the combined net income of the Fab Five has risen from $76.3 billion to
$170.7 billion, meaning that the already frisky PE multiple of 21.4X for the group as a whole
in June 2014 has now stands at 42.0X .
Obviously, averages can be misleading, but they do not lie. The composite net income growth
rate of the Fab Five "growth stocks" has been just 14.4% over the past six years.
In a world which is literally unwinding at the seams owing to the Covid pandemic and a $260
trillion burden of debt, a valuation multiple equal to 42X or nearly three times the trailing
growth rate makes no sense whatsoever.
That's because the James Mackintosh groupthink cited above is marred with a mighty flaw. To
wit, you can't value earnings into the indefinite future owing to today's ultra-low interest
rates that are definitely not sustainable.
The Fed's policy of radical interest rate repression simply defies the laws of finance and
common sense because real yields are negative, and in the long-run negative real yields are an
oxymoron.
The chart below is the smoking gun. Once upon a time there was meaningful daylight between
the brown line (nominal yield on the benchmark 10-year UST) and the purple line (running
inflation rate measured by the 16% trimmed mean CPI).
That is, even so-called risk-free US Treasury debt had a real yield of 200-400 basis points
to account for taxes and a real return on investment.
But after the final leap into monetary madness commencing with the financial crisis of
2008-2009, the real yield had virtually disappeared; and then after the massive $3 trillion Fed
bond-buying spree commencing in mid-March, the benchmark security of the entire global fixed
income market went deeply negative in real terms.
As of the latest month, the running inflation rate clocked-in at 2.27% (June LTM) compared
to an all-time low yield on the 10-year UST of 52 basis points a few weeks back.
Needless to say, when the real cost of risk-free benchmark debt is negative 175 basis points
, you are not in an indefinitely sustainable steady state. You are actually courting financial
disaster.
That's especially because fiscal policy in the US and elsewhere around the world has become
completely unhinged.
So unless the Fed and other central banks continue their massive bond purchases in response
to this tsunami of public debt, the bond pits are heading for a train-wreck some time soon; and
if the central banks continue to print at current lunatic rates, the monetary system itself
will go into meltdown.
Still, the misbegotten idea that the stock market isn't overvalued because bond prices have
been massively inflated by central bank money-pumping is just one instance of the present
tyranny of groupthink – called to attention by Apple's crossing the $2 trillion market
cap barrier.
In fact, groupthink is omnipresent in the the mainstream narrative and so-called news. The
nearly universal belief that the Covid-lockdowns were necessary and effective and that the
coronavirus can be stopped by brute-force economic and social regimentation is another case in
point – underscored by a new analysis of the Swedish outcome.
The mainstream narrative, of course, is that Sweden's no lockdown policy – the
schools, restaurants, movies, gyms, malls etc. remained open – was a disastrous failure,
thereby vindicating the universal quarantine approach of Dr. Fauci, Governor Cuomo and the rest
of the Blue State Virus Patrol.
But that's based on the irrelevant observation that Sweden's overall WITH-Covid mortality
rate of 56 per 100,000 is far higher than that of Norway, Finland and Denmark.
The truth is, Sweden's mortality rate happened in the long-term care facilities, where 75%
of the country's 5,800 WITH-Covid deaths to date (August 18) have occurred, and which is
neither here nor there when it comes to lockdowns of the non-elderly population.
Fortunately, a breakdown of Sweden's WITH-covid deaths by detailed age brackets is readily
available and it puts the kibosh on Dr. Fauci's Lockdown Nation folly.
Number of WITH-Covid deaths/ Population/Rate per 100,000 by age cohort:
0-9 years: 1/1.22 million/ 0.08 per 100,000;
10-19 years: 0/1.19 million/ 0.0 per 100,000;
20-29: 10/1.31 million/ 0.77 per 100,000;
30-39 years: 16/1.37 million/ 1.16 per 100,000;
40-49 years: 45/1.31 million/ 3.42 per 100,000;
50-59 years: 162/1.27 million/ 12.8 per 100,000;
60-69 years: 398/1.14 million/ 34.8 per 100,000;
70-79 years: 1,250/.917 million/ 128.7 per 100,000;
80-90 years: 2,408/.425 million/ 567.0 per 100,000;
90 years plus: 1,512/.119 million/ 1,271.0 per 100,000.
So, yes, Sweden has a WITH-Covid mortality rate of 56 per 100,000 for the entire country.
But 26% of those deaths occurred among the population 90 years and older, which accounts for
just 1.1% of Sweden's population.
Similarly, 67% of the deaths were among the population 80 years and older and 93% were among
those aged 65 or more. By contrast, persons 65 and older account for just 19% of Sweden's
population, and the preponderant share of the latter, who have suffered serious illness or
death from the Covid, were already in long-term care facilities and programs.
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Needless to say, locking down the schools, gyms, restaurants and malls does nothing for the
institutionalized population of the vulnerable elderly and co-morbid. Sheltering and treating
the latter in place, rather than quarantining the younger, healthier populations, is the
self-evident answer.
Indeed, the virtue of Sweden's anti-lockdown strategy virtually screams out from the
schedule above. Sweden did not close its schools, yet there has been just one WITH-Covid death
among its 2.4 million school age children under 20 years.
Likewise, there have been just 71 deaths among its 4.0 million prime working and consuming
age population (age 20-49). That's a rounding error mortality rate of 1.77 per 100,000. Who in
their right mind would want to shutdown the economy based on such infinitesimal risks?
Stated differently, the risk of death from Covid in Sweden has been 720X higher for the
largely institutionalized 90 and over population compared to the prime working age group (20-49
years); and has also been 157X higher for the entire population 65 and over than for prime
workers and the population that is the preponderant patron of the social congregation sectors
of the economy.
Fortunately, Sweden also has readily available data on normal, year-in-and-year-out
mortality, which rate is about 862 per 100,000 for the total population. But when you breakdown
these normal mortality rates by age cohort and cause of death, the insanity of Lockdown Nation
become all the more apparent.
Specifically, there are about 3,429 deaths per year in Sweden from auto crashes, falls,
drownings, electrocutions, poisonings and other accidents, and these account for about 4% of
Sweden's 2019 death total from all causes of 89,000.
However, when you look at mortality rates per 100,000 from accidents alone, the starling
result is that the existing risk of death from accidents is far higher than from the Covid for
the entire 8.4 million population under 65 years of age, and for the young and middle-aged
decidedly so.
Mortality rates per 100,000 for accidents versus Covid and ratio of accident/Covid risk:
0-14 years; 1.38 versus 0.06=25X;
15-44 years: 12.3 versus 1.2=10X;
45-64 years: 20.6 versus 15.4=1.34X;
65 years & older: 115 versus 257=0.45X.
In short, when the ordinary risk of death is 10-25X greater for accidents than from the
Covid for the young and working population, you don't shutdown the economy and the main avenues
of social congregation.
Due to enlightened leadership by Sweden's health professionals and leading epidemiologists,
they got it right, and now both new cases and WITH-Covid deaths have virtually disappeared.
And that's to say nothing of the fact, that Sweden's Q2 GDP decline of just 8.6% was far
better than the double digit declines in the US and most European countries, which imposed far
more draconian lockdowns.
In America, by contrast, the tyranny of groupthink on the matter has become so great that
college football and in-person college classes are being closed from coast-to-coast when the
risk of serious illness or death among the college age population here, like in Sweden, is
virtually nil. Roacheforque , 1 hour ago
It never ceases to amaze me what social media has revealed. 90% of people who use social
media are FOLLOWERS. They may have original thoughts but are afraid to express them. So they
copy and paste other people's thoughts as their own, to either intentionally or inadvertently
encourage groupthink.
Social correctness, political correctness and the outrageous fear of 'being different" are
a huge part of the reason as to why meritocracy, individualism and the freedoms and liberties
that come with them, are under attack. It's presented as socialism or even collectivism, but
it's really about conformity, obedience and fear.
In a word "disgusting" to the exceptional people who used to thrive in the merit-based,
free market capitalist environment that is now being obliterated.
Salisarsims , 50 minutes ago
It's mostly sociopaths and psychopaths who thrive in capitalism, and there's nothing merit
based to most of corporate America.
snatchpounder , 38 minutes ago
It's mostly sociopaths and psychopaths who thrive in politics, and there's nothing merit
based to most of corporate America.
fify
worstpersonintheworld , 38 minutes ago
nah it's people with a functioning brain
Cluster_Frak , 8 minutes ago
I thought, it was all about being different among the liberal woke. However, the woke
proved themselves to be nothing but Bolshevik Facist. You either must think what they think
or you are discriminated against. It only took 10 years to reach a point of extreme
intolerance.
NIRP_BTFD , 43 minutes ago
The power of propaganda. People overestimate covid death toll by a factor of 100. Btw not
only in the UK.
UK public 'believe coronavirus death toll 100 times higher than it really is'
Here are a few takeaways from the Democratic Convention:
The Democrats are running on the
same platform they ran on in 2016. The Democrats put style above substance, flashy optics above
ideas or issues. The Democrats think that hollow tributes to "diversity" and "inclusion" will
win the election. The Democrats have abandoned white, working class voters opting instead for
people of color. The Democrats have learned nothing from Hillary Clinton's defeat in 2016.
In 2016, Democrat front-runner, Hillary Clinton lost the election because she failed to see
her support was eroding in the key Rust Belt states of Pennsylvania, Michigan and Wisconsin.
Trump won all three states with a measly 77, 651 votes total. All three states were expected to
go Democrat but flipped to the GOP due to Clinton's support for free trade and immigration
policies that cost jobs and imposed unwelcome demographic changes on the working people of
those states. The Democrats and Hillary have never accepted the factual version of how the
election was lost. Instead, they fabricated a conspiracy theory about Trump colluding with
Russia. Although the Mueller Report proved that the claims of meddling were baseless, Clinton
and the Dems continue to trot them out at every opportunity. On Tuesday at the convention,
Hillary again reiterated the lie that Trump stole the election. She said:
"Vote like our lives and livelihoods are on the line, because they are. Remember: Joe and
Kamala can win 3 million more votes and still lose. Take it from me. We need numbers so
overwhelming Trump can't sneak or steal his way to victory."
The determination on the part of the Democrats to mischaracterize what actually happened in
the election is not a trivial matter. It suggests that deception is central to their governing
style. Party leaders do not think their supporters are entitled to know the truth but rather
believe that events must be shaped in a way that best serves their overall political interests.
For Democrats, lying is not a personal failing, but an opportunity for enhancing their grip on
power. This is from an article in The Guardian:
"Donald Trump's electoral college victory rests on the shoulders of more than 200
so-called "pivot counties" across the US. That is, counties that voted for Barack Obama only
four years earlier. The most decisive of these swings occurred in Pennsylvania's Luzerne
county, nestled in the north-east part of the state There, voters gave Trump a nearly
20-point victory after going for Obama by almost 5% in 2012. But Trump's win in Luzerne
was also noteworthy for its magnitude. His 26,000 vote plurality in Luzerne comprised almost
three-fifths of his plurality in the state as a whole, and with it Pennsylvania's 20 coveted
electoral votes ." ("
The Forgotten review: Ben Bradlee Jr delivers 2020 lessons for Democrats" , The
Guardian )
Critical battleground states tilted in Trump's favor because Democratic policies had
decimated their communities and eviscerated their standard of living. Author Ben Bradlee Jr.
explains this phenom in his book "The Forgotten" which should be required reading at the DNC.
Here's a clip from the review at the Guardian:
"The Forgotten documents the ravages of deindustrialization, lost jobs, crime and drugs.
It captures the sense of displacement tied to a changing and less monochromatic America.
Once upon a time, Luzerne was home to coal and textiles, dominated by Protestants from
Wales and Catholics from Ireland and continental Europe. Not any more. Luzerne is poorer and
smaller, for many a less recognizable place. Not surprisingly, immigration and Nafta come in
for constant criticism. " (The Guardian)
This is the real reason Hillary was defeated. Russia had nothing to do with it. The Dems
abandoned the white working-class people who had always voted for them and began to cobble
together their Rainbow coalition. When Hillary denounced these people as "Deplorables", it
forced more of them to join Trump team. The rest is history. Here's more from the same
article:
"In the absence of a recession, however, the party stands to face the same electoral
map it did in 2016. In fact, Ohio now looks an even tougher nut to crack. Much as the
Democratic base loathes the president, reality cannot be wished away. Luzerne would be a
good place for the party to start addressing this reality. " ( The Guardian
)
The point we're trying to make is that the effectiveness of the Democrat Convention can only
be measured in terms of its impact on potential voters. So, why have the Dems shrugged off any
effort to reach out to the people who could help them win?
It's not that complicated. The Dems are merely abandoning the people who, they believe, will
leave anyway as their globalist economic agenda becomes more apparent putting more downward
pressure on overall living standards. It's worth noting, that when Obama left office in 2016,
this process was already well-underway. According to a Gallup poll, 71 percent of the people
said they were dissatisfied with the way things were going. (in Obama's last year.) Only 27
percent said they're satisfied. So, even though Obama's personal approval ratings remained
high, his handling of the economy was extremely unpopular. (except on Wall Street, of
course.)
During this same period, the PEW Research Center conducted a survey titled: "Campaign
Exposes Fissures Over Issues, Values and How Life Has Changed in the U.S" which showed why
Trump was steadily gaining on Hillary. Here are a few excerpts from the report:
"Among GOP voters, fully 75% of those who support Donald Trump for the Republican
presidential nomination say life for people like them has gotten worse "
"GOP voters who support Trump also stand out for their pessimism about the nation's
economy and their own financial situations: 48% rate current economic conditions in the U.S.
as "poor.
"Within the GOP, anger at government is heavily concentrated among Trump supporters
– 50% say they are angry at government "
"Among Republicans, a majority of those who back Trump (61%) view the system as unfair
among Trump supporters, 67% say trade agreements are bad thing "
"Half of Trump supporters (50%) say they are angry at the federal government . Anger at
government – and politics – is much more pronounced among Trump backers than
among supporters of any other presidential candidate, Republican or Democrat " ("
Campaign Exposes Fissures Over Issues, Values and How Life Has Changed in the U.S ", PEW
Research Center)
So, a higher percentage of Trump supporters think they are getting screwed-over by an unfair
system. They think "free trade" only benefits the rich, they think the government is
unresponsive to their needs, they think the system is rigged, and they're really, really
mad.
So, which speaker at the Democrat Convention addressed the concerns or complaints of white
working-class people who now almost-universally harbor these same feelings??
No one, because no one in the Democrat party plans to do anything about these issues, in
fact, just the opposite. Now that the Dems have been subsumed by Wall Street and their big
globalist donors, things are going to get dramatically worse for working people who will see a
vicious attack on essential social services and programs as soon as the election is over. The
massive build-up of debt– by mainly Democrat Governors who deliberately drove their
states into bankruptcy at the behest of Fauci's Vaccine Gestapo– will now be met by a
growing demand for austerity on a scale unlike anything we've experienced in the last century.
The country is being prepared for an excruciating restructuring that will create a permanent
underclass that will provide an endless source of sweatshop labor for the multinational
carpetbaggers. Those jobs will likely go to members of the Dems rainbow coalition while white,
working class people in America's heartland –with their strong sense of patriotism–
will be seen as a potential threat to the emerging new order.
It's clear that the Dems anticipate resistance to their plan by the contemptible way they
have branded struggling workers as "white nationalists" and "racists". But is it true or are
the Democrats and their deep-pocket allies preemptively denigrating these people and supporting
BLM rioters to head-off growing resistance to their strategy of total control through
widespread mayhem, decimation of the economy and extermination of the American middle class?
Author CJ Hopkins summed it up like this in a recent article at The Unz Review:
"What we are experiencing is not the "return of fascism." It is the global capitalist
empire restoring order, putting down the populist insurgency that took them by surprise in
2016.
The White Black Nationalist Color Revolution, the fake apocalyptic plague, all the
insanity of 2020 it has been in the pipeline all along. It has been since the moment Trump
won the election. No, it is not about Trump, the man. It has never been about Trump, the
man
GloboCap needs to crush Donald Trump not because he is a threat to the empire , but
because he became a symbol of populist resistance to global capitalism and its increasingly
aggressive "woke" ideology . It is this populist resistance to its ideology that GloboCap
is determined to crush, no matter how much social chaos and destruction it unleashes in the
process.. ." (" The White Black
Nationalist Color Revolution" , CJ Hopkins, The Unz Review )
Bingo. It is the "populist resistance to global capitalism" that is the defacto enemy of the
Party elite, the same elites who conspired with senior-level members of the Intelligence
Community, the FBI, the DOJ and the Obama White House to spy on the Trump Campaign, infiltrate
the presidential transition, and to try to topple the elected government. And while the coup
plotters have still not been brought to justice, they are now within spitting distance of their
ultimate objective, which is seizing executive power and using it to crush the fledgling
opposition, impose a one-party system of government, and transform America into a corporate
superstate ruled by Global Capital. Here's a clip from an article by Gary D. Barnett at Lew
Rockwell:
"By the end of this next planned phase of the 'virus' scare, a global reset of the world
economy will be ready to launch. This reset will be mammoth in scope, as everything we have
known will be restructured. Those out of work in the final stage will most likely stay out of
work, pushing the dependency state to new levels sought by the ruling class. Controlling
the population will be a key component of the plan, including population size, birth rates,
movement, and personal contact among individuals. The elimination of normal human interaction
is sought, and this is only the beginning . The ultimate goal is total control, and every
tool in the box of the tyrants will be used to gain that control. Restraint by the ruling
class will be non-existent, as this staged reset is now going forward at a very accelerated
pace." (
"The Economic Insanity of This Coronavirus Pandemic Plot and the Coming Global Reset ",
Lew Rockwell )
The coup plotters have chosen the candidates they want to carry out the next phase of their
operation. All they need now is to win the election.
@ThreeCranes trol -- China had already agreed to play ball, but was still gathering the
infrastructure. S. Korea and a few other nations took the work in the meantime.
Meantime, as Sam Francis (RIP) noted in the early nineties, Main Street USA turned into
dollar stores and flea markets and retail dumps and fast food pits.
Yes, nations that make things control the future. They also develop consumer economies.
Thus in a few more years stuff made in China be beyond the price range of the average
American.
Is Covid the most perfect distraction that could have hit the world? The timing couldn't
have been more perfect for the European and American economies. We know that there were major
problems in the financial system back in August-September 2019 when both the ECB and the Fed
declared that they would do what it takes. And since then we have seen massive injections of
liquidity in the form of QE and Repos.
The world was never informed what the financial problems were but it is obvious that this
was the hangover from the 2006-9 financial crisis which was never solved but just deferred with
the help of unlimited money printing and credit expansion. There was clearly something rotten
in the kingdom of the financial world.
So was it just coincidence that Coronavirus started spreading around the world in
January-February this year in the middle of a serious crisis in the financial system?
Throughout history, initiating a crisis has always been a popular remedy that leaders have
applied to divert attention from the real problem whether it be political or financial.
The normal course of action would be a military conflict. This would both enable massive
money printing and also alarming the people which would result in more votes for the ruling
government.
The American writer Henry Louis Mencken understood the purpose of these actions:
I am not someone who subscribes to conspiracy theories. But however the Coronavirus started,
the timing seems more than coincidental. CV has certainly diverted the attention away from the
underlying problems in the financial system and undeniably seems like a hobgoblin. But whether
it is a hobgoblin or not, it has allowed some governments around the world to blame it all on
CV and run huge deficits combined with massive liquidity injections.
The coming likely implosion of the financial system and depression will for decades be
blamed on a pandemic which was only a catalyst and never the cause of the fall of the global
economy. The real cause is a rotten financial system and an unmanageable debt burden which I
have discussed in many articles.
CORONAVIRUS – OUTCOME WORSE WITH AUTOCRATIC
LEADERS
If we look at the effects of CV on various countries the differences are astounding. Sweden
which has had virtually no lockdown saw an 8.6% fall in GDP in Q2. Much of the fall was due to
lower exports as other countries bought less Swedish products. Switzerland which only has had a
very limited lockdown had a 6.4% GDP fall in Q2.
If we then look at the two countries which have totally mismanaged the situation – USA
and UK, the outcome is disastrous. US GDP fell 32.9% in Q2 and the UK GDP was down 20.4%.
(MIS-)MANAGEMENT OF CV
It is clear that the countries that have big ego autocratic leaders have fared the
worst. Sweden and Switzerland have delegated the CV policy to health officials whilst in the US
and UK much of the policy, or lack of, has come from the top.
Sadly the US and the UK have both had high numbers of CV cases and deaths. And in spite of
major lockdowns, these two countries have seen a catastrophic decline in their economies, a
fall which will take many years to recover from.
BEST RUN COUNTRIES HAVE BEST CORONA
RECORD
It is clearly no coincidence that Sweden and Switzerland have strong and well managed
economies also whilst the US and the UK are running big deficits and debts. And with the poor
economic state of the two latter countries, their economies will continue to suffer badly.
Personally I don't believe that there will be an effective vaccine for years or ever.
Historically, any flu vaccine takes years to develop and is only effective in less than 30% of
vaccinated people.
We are also seeing CV coming back in many countries that have lifted the lockdowns like for
example Germany, Spain and France. Therefore it seems very likely that there will not be any
major global recovery in 2021 either.
The biggest dilemma is that CV is not the real cause of the economic downturn but only the
catalyst. As I explained above, the virus has allowed weak countries to print huge amounts of
worthless money to prop up a financial system in an economy which was already on the verge of
imploding before CV started. But fortunately for leaders such as Trump and Johnson they have
been lucky to hide their ailing economies behind the CV curtain. So for them CV has been a very
lucky excuse.
As the US, UK and many economies will be forced to continue or increase government handouts
to suffering people and companies, all these countries' will fall further into the quagmire of
debt, deficits and economic decline.
"... McLaughlin and Associates, a national survey research group requested by Trump to examine the findings, said the results were an effort on the part of "Democratic operatives" to "counter the enthusiasm of Trump voters." Meanwhile, the right-leaning polling agency, Rasmussen, reported that Trump enjoys a 44 percent approval rating, which reflects the usual margin of difference. ..."
"... At the same time, many people must be wondering how Joe Biden, 77, has been able to garner such glowing poll numbers. After all, when the former vice president finally ventured to speak in public after an 88-day disappearing act, it only served to make people question the possibility of his "cognitive decline," a subject the mainstream media seems unwilling to consider in any great depth. ..."
"... Although the United States has certainly suffered from a double whammy of Covid-19 and race riots, the situation does not appear to be as bleak as the media would have everyone believe. In May, for example, analysts expressed disbelief as the economy added 2.5 million jobs, with the unemployment rate declining to 13.3 percent from 14.7 percent. Market watchers had been anticipating a loss of 7.25 million jobs and an unemployment rate of 19.0 percent. Meanwhile, Wall Street continues to weather the storm. ..."
In an era of fake news, can we trust the MSM polls that show Trump badly trailing Biden in the race for the US presidency?
Consult just about any US media resource and a trend is quickly discernible: Donald Trump is sagging in popularity while his likely
Democratic opponent, Joe Biden, soars like an eagle. Are these polls really to be believed?
Is there a conflict of interest greater than that of the US media conducting a public opinion poll on Donald J. Trump?
It appears to be a self-indulgent activity, a bit like climate change activists gathering opinions on the merits of air travel,
for example, or a New York Yankees fan organizing a poll to determine who the best baseball player was, Babe Ruth or David Wright.
In other words, those asking the questions may be very tempted, in deference to their own prejudices, to get the answers they
seek.
Perform a quick Google search on 'Trump poll numbers' and you will likely experience some deja vu. As in 2016, when the media
showed Trump trailing far behind Hillary Clinton, the same media want us to believe that the presidential incumbent is now eating
Joe Biden's dust on the road to the White House.
The New York Times, for example, in an opinion poll it
conducted
in cahoots with ultra-liberal Siena College, showed Biden ahead of Trump by 14 percentage points, pulling 50 percent of the vote
compared with just 36 percent for the president.
In another survey, this one
carried out by USA Today and Suffolk University, Trump garnered 41 percent to Biden's 53 percent. What the poll failed to say,
however, is that in 2016, the editorial board at USA Today took the unprecedented step of taking
sides in that year's presidential race, declaring Trump "unfit for the presidency."
Suffolk University, meanwhile, is situated in snobby Boston, Massachusetts, a formidable Democratic stronghold where Hillary Clinton
secured 60 percent of the 2016 vote compared to Trump's 32.8 percent. No chance of bias there.
Then there was the poll by CNN,
which Trump regularly slams as 'fake news,' where it was said that the incumbent leader was trailing Biden by a whopping 14 points.
The Trump campaign, arguing that just 25 percent of the contacted respondents were Republican, condemned the survey as "defamatory,
and misleading" with the goal of creating "an anti-Trump narrative."
McLaughlin and Associates, a national survey research group requested by Trump to examine the findings,
said the results were an effort on the
part of "Democratic operatives" to "counter the enthusiasm of Trump voters." Meanwhile, the right-leaning polling agency,
Rasmussen, reported
that Trump enjoys a 44 percent approval rating, which reflects the usual margin of difference.
It's important to note that the media, which has a snarling political dog in the Trump-Biden fight, follows up on its dubious
polls with stories based on those very same polls. CNN, for example,
aired a segment that asked, 'What would happen if Trump lost in November but refused to leave office?' Even Fox News, considered
to be 'Trump friendly,' wondered if Trump would drop out of the race due to low poll numbers.
At the same time, many people must be wondering how Joe Biden, 77, has been able to garner such glowing poll numbers. After all,
when the former vice president finally ventured to speak in public after an 88-day disappearing act, it only served to make people
question the possibility of his "cognitive decline,"
a subject the mainstream media seems unwilling to consider in any great depth.
Although the United States has certainly suffered from a double whammy of Covid-19 and race riots, the situation does not
appear to be as bleak as the media would have everyone believe. In May, for example, analysts expressed disbelief as the economy
added 2.5 million jobs, with the unemployment rate declining to 13.3 percent from 14.7 percent. Market watchers had been anticipating
a loss of 7.25 million jobs and an unemployment rate of 19.0 percent. Meanwhile, Wall Street continues to weather the storm.
In short, the country remains resilient in the face of unprecedented challenges, yet Trump's popularity continues to dwindle.
Does the US leader have good reason to question the media-sponsored polls that show him in the basement, exactly where Joe Biden
has been organizing his campaign from for months, or should the American people trust the findings?
Given the way the mainstream media has treated Trump over the course of his first term in office, it seems that whatever the media
reports on the most divisive American president in living memory must be taken with a very generous handful of salt.
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The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those
of RT.
Robert Bridge is an American writer and journalist. He is the author of the book, 'Midnight
in the American Empire,' How Corporations and Their Political Servants are Destroying the American Dream.
"... Since the collapse of the Soviet Union, the world has not seen these levels of concentration of ownership. The Soviet Union did not die because of apparent ideological reasons but due to economic bankruptcy caused by its uncompetitive monopolistic economy. Our verdict is that the US is heading in the same direction. ..."
"... In a future instalment of this report, we will show that the oligarchization of America – the placing it under the rule of the One Percent (or perhaps more accurately the 0.1%, if not 0.01%) - has been a deliberate ideologically driven long-term project to establish absolute economic power over the US and its political system and further extend that to involve an absolute global hegemony (the latter project thankfully thwarted by China and Russia). ..."
"... In present-day United States a few major investors – equity funds or private capital - are as a rule cross-owned by each other, forming investor oligopolies, which in turn own the business oligopolies. ..."
"... A study has shown that among a sample of the 1,500 largest US firms (S&P 1500), the probability of one major shareholder holding significant shares in two competing firms had jumped to 90% in 2014, while having been just 16% in 1999. (*2). ..."
"... Institutional investors like BlackRock, Vanguard, State Street, Fidelity, and JP Morgan, now own 80% of all stock in S&P 500 listed companies. The Big Three investors - BlackRock, Vanguard and State Street – alone constitute the largest shareholder in 88% of S&P 500 firms, which roughly correspond to America's 500 largest corporations. (*3). Both BlackRock and Vanguard are among the top five shareholders of almost 70% of America's largest 2,000 publicly traded corporations. (*4). ..."
A close-knit oligarchy controls all major corporations. Monopolization of ownership in US
economy fast approaching Soviet levels
Starting with Ronald Reagan's presidency, the US government willingly decided to ignore the
anti-trust laws so that corporations would have free rein to set up monopolies. With each
successive president the monopolistic concentration of business and shareholding in America has
grown precipitously eventually to reach the monstrous levels of the present day.
Today's level of monopolistic concentration is of such unprecedented levels that we may
without hesitation designate the US economy as a giant oligopoly. From economic power follows
political power, therefore the economic oligopoly translates into a political oligarchy. (It
seems, though, that the transformation has rather gone the other way around, a ferocious set of
oligarchs have consolidated their economic and political power beginning from the turn of the
twentieth century). The conclusion that
the US is an oligarchy finds support in a 2014 by a Princeton University study.
Since the collapse of the Soviet Union, the world has not seen these levels of concentration
of ownership. The Soviet Union did not die because of apparent ideological reasons but due to
economic bankruptcy caused by its uncompetitive monopolistic economy. Our verdict is that the
US is heading in the same direction.
In a later report, we will demonstrate how all sectors of the US economy have fallen prey to
monopolization and how the corporate oligopoly has been set up across the country. This post
essentially serves as an appendix to that future report by providing the shocking details of
the concentration of corporate ownership.
Apart from illustrating the monopolization at the level of shareholding of the major
investors and corporations, we will in a follow-up post take a somewhat closer look at one
particularly fatal aspect of this phenomenon, namely the
consolidation of media (posted simultaneously with the present one) in the hands of
absurdly few oligarch corporations. In there, we will discuss the monopolies of the tech giants
and their ownership concentration together with the traditional media because they rightfully
belong to the same category directly restricting speech and the distribution of opinions in
society.
In a future instalment of this report, we will show that the oligarchization of America
– the placing it under the rule of the One Percent (or perhaps more accurately the 0.1%,
if not 0.01%) - has been a deliberate ideologically driven long-term project to establish
absolute economic power over the US and its political system and further extend that to involve
an absolute global hegemony (the latter project thankfully thwarted by China and Russia). To
achieve these goals, it has been crucial for the oligarchs to control and direct the narrative
on economy and war, on all public discourse on social affairs. By seizing the media, the
oligarchs have created a monstrous propaganda machine, which controls the opinions of the
majority of the US population.
We use the words 'monopoly,' 'monopolies,' and 'monopolization' in a broad sense and subsume
under these concepts all kinds of market dominance be it by one company or two or a small
number of companies, that is, oligopolies. At the end of the analysis, it is not of great
importance how many corporations share in the market dominance, rather what counts is the death
of competition and the position enabling market abuse, either through absolute dominance,
collusion, or by a de facto extinction of normal market competition. Therefore we use the term
'monopolization' to describe the process of reaching a critical level of non-competition on a
market. Correspondingly, we may denote 'monopoly companies' two corporations of a duopoly or
several of an oligopoly.
Horizontal shareholding – the cementation of the
oligarchy
One especially perfidious aspect of this concentration of ownership is that the same few
institutional investors have acquired undisputable control of the leading corporations in
practically all the most important sectors of industry. The situation when one or several
investors own controlling or significant shares of the top corporations in a given industry
(business sector) is referred to as horizontal shareholding . (*1). In present-day United
States a few major investors – equity funds or private capital - are as a rule
cross-owned by each other, forming investor oligopolies, which in turn own the business
oligopolies.
A study has shown that among a sample of the 1,500 largest US firms (S&P 1500), the
probability of one major shareholder holding significant shares in two competing firms had
jumped to 90% in 2014, while having been just 16% in 1999. (*2).
Institutional investors like BlackRock, Vanguard, State Street, Fidelity, and JP Morgan, now
own 80% of all stock in S&P 500 listed companies. The Big Three investors - BlackRock,
Vanguard and State Street – alone constitute the largest shareholder in 88% of S&P
500 firms, which roughly correspond to America's 500 largest corporations. (*3). Both BlackRock
and Vanguard are among the top five shareholders of almost 70% of America's largest 2,000
publicly traded corporations. (*4).
Blackrock had as of 2016 $6.2 trillion worth of assets under management, Vanguard $5.1
trillion, whereas State Street has dropped to a distant third with only $1 trillion in assets.
This compares with a total market capitalization of US stocks according to Russell
3000 of $30 trillion at end of 2017 (From 2016 to 2017, the Big Three has of course also
put on assets).Blackrock and Vanguard would then alone own more than one-third of all US
publicly listed shares.
From an expanded sample that includes the 3,000 largest publicly listed corporations
(Russell 3000 index), institutions owned (2016) about
78% of the equity .
The speed of concentration the US economy in the hands of institutions has been incredible.
Still back in 1950s, their share of the equity was 10%, by 1980 it was 30% after which the
concentration has rapidly grown to the present day approximately 80%. (*5). Another study puts
the present (2016) stock market capitalization held by institutional investors at 70%. (*6).
(The slight difference can possibly be explained by variations in the samples of companies
included).
As a result of taking into account the common ownership at investor level, it emerges that
the US economy is yet much more monopolized than it was previously thought when the focus had
been on the operational business corporation alone detached from their owners. (*7).
The
Oligarch owners assert their control
Apologists for monopolies have argued that the institutional investors who manage passive
capital are passive in their own conduct as shareholders as well. (*8). Even if that would be
true it would come with vastly detrimental consequences for the economy as that would mean that
in effect there would be no shareholder control at all and the corporate executives would
manage the companies exclusively with their own short-term benefits in mind, inevitably leading
to corruption and the loss of the common benefits businesses on a normally functioning
competitive market would bring.
In fact, there seems to have been a period in the US economy – before the rapid
monopolization of the last decade -when such passive investors had relinquished control to the
executives. (*9). But with the emergence of the Big Three investors and the astonishing
concentration of ownership that does not seem to hold water any longer. (*10). In fact, there
need not be any speculation about the matter as the monopolist owners are quite candid about
their ways. For example, BlackRock's CEO Larry Fink sends out
an annual guiding letter to his subject, practically to all the largest firms of the US and
increasingly also Europe and the rest of the West. In his pastoral, the CEO shares his view of
the global conditions affecting business prospects and calls for companies to adjust their
strategies accordingly.
The investor will eventually review the management's strategic plans for compliance with the
guidelines. Effectively, the BlackRock CEO has in this way assumed the role of a giant central
planner, rather like the Gosplan, the central planning agency of the Soviet command
economy.
The 2019 letter (referenced above) contains this striking passage, which should quell all
doubts about the extent to which BlackRock exercises its powers:
"As we seek to build long-term value for our clients through engagement, our aim is not to
micromanage a company's operations. Instead, our primary focus is to ensure board
accountability for creating long-term value. However, a long-term approach should not be
confused with an infinitely patient one. When BlackRock does not see progress despite ongoing
engagement, or companies are insufficiently responsive to our efforts to protect our clients'
long-term economic interests, we do not hesitate to exercise our right to vote against
incumbent directors or misaligned executive compensation."
Considering the striking facts rendered above, we should bear in mind that the establishment
of this virtually absolute oligarch ownership over all the largest corporations of the United
States is a relatively new phenomenon. We should therefore expect that the centralized control
and centralized planning will rapidly grow in extent as the power is asserted and methods are
refined.
Most of the capital of those institutional investors consists of so-called passive capital,
that is, such cases of investments where the investor has no intention of trying to achieve any
kind of control of the companies it invests in, the only motivation being to achieve as high as
possible a yield. In the overwhelming majority of the cases the funds flow into the major
institutional investors, which invest the money at their will in any corporations. The original
investors do not retain any control of the institutional investors, and do not expect it
either. Technically the institutional investors like BlackRock and Vanguard act as fiduciary
asset managers. But here's the rub, while the people who commit their assets to the funds may
be considered as passive investors, the institutional investors who employ those funds are most
certainly not.
Cross-ownership of oligarch corporations
To make matters yet worse, it must be kept in mind that the oligopolistic investors in turn
are frequently cross-owned by each other. (*11). In fact, there is no transparent way of
discovering who in fact controls the major institutional investors.
One of the major institutional investors, Vanguard is ghost owned insofar as it does not
have any owners at all in the traditional sense of the concept. The company claims that it is
owned by the multiple funds that it has itself set up and which it manages. This is how the
company puts it on
their home page : "At Vanguard, there are no outside owners, and therefore, no conflicting
loyalties. The company is owned by its funds, which in turn are owned by their shareholders --
including you, if you're a Vanguard fund investor." At the end of the analysis, it would then
seem that Vanguard is owned by Vanguard itself, certainly nobody should swallow the charade
that those funds stuffed with passive investor money would exercise any ownership control over
the superstructure Vanguard. We therefore assume that there is some group of people (other than
the company directors) that have retained the actual control of Vanguard behind the scenes
(perhaps through one or a few of the funds). In fact, we believe that all three (BlackRock,
State Street and Vanguard) are tightly controlled by a group of US oligarchs (or more widely
transatlantic oligarchs), who prefer not to brandish their power. It is beyond the scope of
this study and our means to investigate this hypothesis, but whatever, it is bad enough that as
a proven fact these three investor corporations wield this control over most of the American
economy. We also know that the three act in concert wherever they hold shares.
(*12).
Now, let's see who are the formal owners of these institutional investors
In considering these ownership charts, please, bear in mind that we have not consistently
examined to what degree the real control of one or another company has been arranged through a
scheme of issuing different classes of shares, where a special class of shares give vastly more
voting rights than the ordinary shares. One source asserts
that 355 of the companies in the Russell index consisting of the 3000 largest corporations
employ such a dual voting-class structure, or 11.8% of all major corporations.
We have mostly relied on www.stockzoa.com for the shareholder data. However, this and
other sources tend to list only the so-called institutional investors while omitting corporate
insiders and other individuals. (We have no idea why such strange practice is employed
IMO NATO should have ended with the fall of the USSR. It now "confronts" a largely
imaginary threat, concocted for the purpose of maintaining the status quo in US government
expenditures for defense and supporting the imperial dreams of the neocons.
Does anyone really think Russia is going to invade the Baltics? Really?
Isn't the western alliance for all intents & purposes already dead?
It is a shame as it could work together to counter the totalitarian CCP. But Mama Merkel
it seems would rather get a few yuan from the communists and turn a blind eye to CCP
authoritarianism until it becomes obvious that the CCP are ruthless and will be competing
with Germany around the world for machine tools and autos by undercutting them on price and
heavily subsidizing their companies until German industry is destroyed.
I have heard of these elusive creatures called "Europeans", but have yet to meet one, so
am not able to comment on their alleged "smug superiority". How many divisions do they
have?
If anything drives the US and Europe apart, it will be trade, not security. Germany is
clearly chafing under the US bit, which sacrifices European industry to US interests --
sanctions on Nordstream 2, trade with Russia, trade with Iran, and China and Huawei. The US
clearly prioritizes it's own LNG , finance, technology and arms industries over European
prosperity. It amazes me that it has taken Europe so long to wake up.
Biden will do nothing to change that dynamic, since he is beholden to the same interests
as Trump.
Does anyone really think Russia is going to invade the Baltics? The Baltics and most
likely the Poles do with past history in mind. I would like to see them and the Ukrainians
transition into something like the Finns who acknowledge Russian power but maintain their
independence. Right now they are looking at NATO as their guarantee of independence in the
future. Who can blame them when looking at history.
The Trump admin's (and for that matter, Trump's own instincts) are and have continuously
been quite correct with regards to EU's defense expenditures agenda. The European 'humanists'
take advantage of the American defense umbrella inside their own countries so they can afford
to NOT spend on defense and instead spend more on domestic and economic development. So while
America continues to pay for the EU's defense it cannot afford to invest in its own domestic
programs (infrastructure, etc.) adequately. These Europeans then with the collaboration of
their Atlanticist fellows on the other side of the pond do nation-building and
democratization projects (call it endless wars) abroad, such as in Afghanistan. Just don't
ask them about their track record in this department.
However, the thing is when their immediate interests are in danger they forget about
America in a heartbeat. Examples, Germany's Nordstream pipeline with Russia, 5G
infrastructure and development, trade with China, Paris climate accord, etc.
I tend to believe that EU knows best how to make an existential threat out of Russia.
Anyone still remembers the novichok incident back in 2018? The thing with Russia is that from
the POV of EU, they view their Eastern neighbor as a solid and stable illiberal system that
is not within the ideological orbit of the western liberal democracy and thus they feel
threatened by that ideologically, NOT a scenario in which from Tallinn to Toulouse is invaded
and captured by Putin. In this endeavor they also have found willing partners in
'anti-authoritarian' hawks such as Bob Kagan, Hilary, Sam Power et.al that tow the same line
and advocate for NATO expansion and other similar projects.
The EU in definitely terrified of a scenario in which the U.S. (under a nationalist
conservative administration) starts de-funding NATO or withdraws its troops from Europe. In
this case they need to cut public spending and allocate more on defense which has a clear
impact on the 'democratic spirit' of EU's over-hyped social democracy.
In the past few years we have seen the rise of right-wing populsit nationalist parties in
pretty much every single major EU country. I believe there are strong tendencies in the Trump
admin-if DJT manages to stay in power for another 4 years- to do a little *something
something* about EU's decades-long nefarious free-riding of U.S. defense umbrella and I don't
think the effeminate EU leaders will gonna like it very much.
Barbara Ann - You say "I have heard of these elusive creatures called "Europeans", but
have yet to meet one, so am not able to comment on their alleged "smug superiority". How many
divisions do they have?"
The term "European" has become disputed territory. As an Englishman I regard myself fully
as "European" as any German or Frenchman but for many the term now seems to mean exclusively
"Member of the European Union". Tricky, that one.
Me, I prefer the term "Westerner". It takes in the so-called "Anglosphere" as well and
therefore covers all the ground without going into the fact that some parts have become
considerably less powerful over the last century and others considerably more. Also
accommodates without fuss the fact that the cultural centre of gravity, at some indeterminate
time in that last century, moved across from Paris, Vienna and Berlin to New York and parts
west.
Not always to your advantage, to you as an American that is, because a fair chunk of the
Frankfurt mob moved over your way with it. You caught from Old Europe the destructive and
vacuous tenets of "Progressivism" and are now sharing the disease in its full vigour with
us.
I mention that last because the violent TDS you see across the Atlantic isn't specifically
European. It's merely that it's natural for progressives to detest Trump or rather, not the
man himself but the "populist" forces he is taken to represent. It's garlic to the vampire
for the progressive, the Little House on the Prairie or its various European equivalents, and
the allergic reaction will become stronger yet. That "smug superiority" you will therefore
find in the States as readily as you will find it here. America or here we live on sufferance
in occupied territory, if we are not progressives ourselves, and should not the occupiers
always be superior and smug?
I went hunting for the Telegraph article the Colonel discusses above. I didn't like that
article at all. It gets the "freeloading" part right but in the context of a Russophobia
that's seemingly set in stone. And the Telegraph is not so much a progressive newspaper as
one that, while throwing a few token bones to its mainly Conservative readership, buys the
progressive Weltanschauung just as much as the Guardian or New York Times.
"How many divisions do they have?" A few more than the pope but maybe that's not
the point. I recently tried to follow the twists and turns of Mrs May's negotiations with the
EU as they related to defence. I got the impression that in the matter of defence the supply
of divisions could safely be left to the Americans. It was the allocation of defence
contracts that they were all concerned about.
Residing in Europe in the late 1960's at a US joint NATO military attachment in Northern
Italy, we mused were we there to keep our eye on the Russians, or in fact keep our eyes on
the Germans. One still saw in the back rooms, AXIS memorabilia.
As an aside: the only reason Michelle Obama chose as one of her FLOTUS projects - support
of military families -- was so she could get Uncle Sam to jet her around to all those US
military bases still in Europe for tea with the commander's wife and then on to her real
purpose - shopping and having fun with friends and families she was able to drag along. On
our dime.
My last visit to Europe found there are now more Turks, than former "Europeans; except in
France where they were more Algerians, than native French. And of course UK has long been
little more than the entrenched polyglot of their vast far flung Empire.
Indeed, who is a "European" today. Birth rate demographics from the former colonies, boat
people or import of cheap labor has now taken over anything we used to call "European". Can a
resident Turk really serve up a perfect plate of raclette in Switzerland? One word answer:
no. And that is a sad loss. One must instead shift their tastes to shwarma, if one wants
European food today.
In regard to Europeans--and perhaps some Australians whom I've met--I have often felt that
they in some ways did feel a bit superior to Americans.
Their sense of superiority, however, seemed more rooted in a sense of cultural
superiority. Those on the blog who viewed the comic rendition of the Three Little Pigs that
was recently posted here might think of that and its wonderful ending about the house that
was "American made." it was a wonderful ending for that well-known tale and a great defense
of our culture's current limited and plain vocabulary in some groups.
As an English major and English teacher, so much of the great literature that we taught
did come from England. I took three Comps when I earned my Masters: English literature from
Beowulf (which I read in Old English) to Chaucer's Catterbury Tales (which I read in Middle
English) and then to Virginia Woolf.
For my comp in American literature, I read from Washington Irving to the modern American
writers at the time I was in college.
My third comp was in Modern Linguistic Theory.
Of course we taught Shakespeare and Dickens---English writers--to our junior high and high
school classes. We studied mostly American writers in regard to short stories, as short
stories are considered the American genre. Our teaching of poetry covered both English and
American poets. As far as novels go, we taught both English and American novels.
Russian and German novelists were also on our list of reading for our comps. (We read them
in English translation.)
In summary, American culture was often overshadowed by the many longer centureies of
European culture in much of my college career.
What the Europeans can't deny, though they may want to, is that the tehcology and
innovation in things like automobile production, electricity, telephones, and into space
expoloration ---many things like that--is where we can indeed be quite proud.
They can continue to feel culturally superior to us if it makes them feel better. I defy
them, however, to minimize our importance in World War II.
A European was understood, in Iran, to be a Christian. A Turk in Germany or and Algerian
in France is just that, a Turk, an Algerian, i.e. another Muslim.
There are professional and managerial middle class French Muslims in Paris and elsewhere,
but are they French? I do not know how assimilated they are.
" he will follow some Trump-era objectives, because that is what American interests
demand, thus showing that Trump was no extremist on China."
So if Biden and Trump both want something, that shows that it isn't extreme. How does that
work again?
The drive for confrontation with Russia contradicts Europe's desire to do buisness with her.
Hence the end of the Western Alliance.
"The US faces a rapidly escalating political crisis. The losing party in November will
undoubtedly go to the federal courts to claim that their opponents cheated in the
process."
They all went along with electronic voting and postal ballots. Now they're all going to
complain about the consequences.
Of course NATO should have disappeared together with the Berlin Wall, but it is alive,
kicking and ever looking for trouble, Belarus comes to mind.
The problem with propaganda is that the emitter ends up believing it, Europe does not need
any protection, we have the means to protect ourselves.
The US is an occupation force, and on top of it demands payment for it. Pick up your gear and
go home, and by the way, Europe should worry about countries armed to their teeth by the US,
I'm thinking about Morocco for instance, since I live in Spain. The beautiful line of the
Sierra that I contemplate every morning while stretching has been contaminated with a radar
station of the Aegis system, and that means we in our quite and beautiful Andalusian town are
a target for the biggies. Stop believing your propaganda, pick up your gear and let everybody
take care of themselves, the benefits will be for the US population in the first place, and
the world will rejoice.
The reason German military contribution to the "western alliance" is what it is is very
simple.
It is according to the incentives that threats that German leadership perceives.
First: Objective strategic things:
Essentially, noone is going to invade Germany. This removes one major reason to have a large
army. Secondly, Germany is not going to productively (in terms of return of investment)
invade anyone else. This removes the second major reason to have a large army. There is
something to be said to have a cadre army that can be surged into a real army if conditions
change.
Second: Incentives of German political leaders.
While the degree of German vassal stateness concerning the USA is up to a degree of debate,
that the USA has a lot of influence over Germany is in my view not. Schröder got elite
regime changed over his Iraq war opposition (it was amazing that literally all the newspaper
were against him, had a big impact on me growing up during this time).
Essentially, if you are in Nato, at some point, Uncle Sam will invite you to some adventure.
If you say yes to this adventure you commit your armed forces to some confrontation in the
middle east if you are lucky, or against Russia in Eastern Europe if you are unlucky. Your
population is not going to like this, and you may face losing elections over this. It is also
expensive in terms of life and material (although not very expensive compared to actual wars
against competent enemies).
If you say no, Uncle Sam will be displeased with you and will make this known for example by
sicking the entire "Transatlantic leadership networks" on you, which can also make you lose
the next election.
Essentially, if Uncle Sam comes asking, you lose the next election if you say yes, and you
also lose if you say no. Saying no is on balance cheaper, because you dont incurr the
financial and human costs of joing a random US adventure on top of the risk of losing the
next election.
The winning play is to get your army in such a state that Uncle Sam will not even ask.
Germany basically did create condition that enabled this.
Its a reasonably happy state for Germany to be in.
We are basically doing Brave Soldier Schweijk on the national level.
Solutions from a US pov:
1: Do less military adventures. If you do less adventures, people will fear being
shanghaied along less. This will decrease the drawbacks associated with having a reasonable
military as a Nato state.
2: Dont soft regime change governments that say no to your foreign adventures. Instead,
maybe listen to them. Had the US listend to French and German criticism regarding the wisdom
of going to war with Iraq, the US and also a lot of others would have been much better
off.
3: Make it clear that particpation in foreign adventures is actually voluntary instead of
"voluntary", make also clear that participation in defensive operations is not voluntary and
is what Nato was created for and that you expect a considerable contribution towards this.
Also, do some actual exercises. For example, if Germany claims that its military expenditure
is sufficient, stress test this premise by having a realistic exercise in which a German
divisions goes up against an American one. Yes, do some division size exercizes pretty
please. Heck, after ensuring that this exercize wont be a failfest, have some Indian be the
referee.
Now we are getting to the heart of the matter. My jest about never having met a European
was of course designed to illustrate that "Europe" is a secondary construct. Never has a
person, upon meeting me, introduced themselves as a "European".
Europe is a moveable feast and even territorial definitions are slippery. "Europeans" I
think, must be characterized by short memories, for was it not less than 25 years ago that
European NATO planes bombed their fellow Europeans in Bosnia? It can't have been an accident
either, as I understand the op. was called "Operation Deliberate Force".
If Europe is synonymous with the EU it has precisely zero divisions and though you
yourself may remain "Western", you are as a consequence of Brexit no longer "European". No, I
think you and Polish Janitor are close by identifying "European" as a progressive/liberal,
democratic (read "globalist") value system. An insufficiency of "European-ness" can thus be
used to justify NATO involvement across various geographies - from Bosnia to Afghanistan
(& shortly Belarus?).
But of course the "European" members of NATO are hardly on the same page. It looks not at
all unlikely that two of its members may go to war in the Eastern Mediterranean.
I agree with you re the Telegraph article btw. "European" smugness is well represented in
that organ.
No. They did NOT all go along with "electronic voting and postal ballots." The 50 states
each run federal elections in any way they please. The US Constitution requires that. There
are a wide variety of voting machines in use and only a few states use mailed in ballots. the
Republican Party particularly opposes mail in voting.
You should be complaining to the politicians you elect. They're the ones requesting US
military protection. Prior to Trump, our governments were quite happy to provide that
protection. He's now asking for some cost sharing.
Be careful though, before you know it Spain could become a vassal of the Chinese
communists as many countries in Africa are finding out now. Hopefully you can continue to
extract euros from the Germans and Dutch while battling the separatists in Catalonia. There's
a thin veneer between stability & strife.
Paco, with a huge cost of lives and treasure the US was twice asked to clean up Europe's
self-inflicted messes in the past century. Promise you won't call on us again, and we can
talk. I know, past is not necessarily prologue but do at least meet us half way. It is only
good manners.
Barbara Ann - Lots of Europes of course. "My" Europe may no longer be on the active list.
Traces here and there. Few green shoots that are visible to me. Many rank growths overlaying
it.
Also many "European Unions". They exist all right, in uneasy company.
So many "EU's". A ramshackle Northern European trading empire - I think that's too
unstable to be long for this world but I could be wrong. A nascent superpower, that denied by
many but for some their central aim.
A bureaucratic growth. A handy market place for all. A Holocaust memorial centre; when the
EU politicians find themselves in a tight spot they can always call on Auschwitz and all fall
back in line. I saw Mrs Merkel pull that trick at the last but one Munich Security Conference
and all there, because Mrs Merkel was at that time in a very tight spot, applauded with
relief.
A Progressive Shangri-La, all the more enticing for never being defined. Those adherents
of that "EU" do actually call themselves "EU citizens" and I see the term is becoming more
common usage. Maybe those are the self proclaimed "European citizens" you have not met.
And the producer of reams of lifeless prescription that seek to force all into the same
mould and tough on the poor devils who can't fit the model. And on their families.
Lots of "EU's". I like none of them. While we wait for that edifice of delusion to
collapse I hope the damage it does to "My" Europe is not irreparable.
@ Diana Croissant: "They can continue to feel culturally superior to us if it makes
them feel better. I defy them, however, to minimize our importance in World War II."
Jack, with all due respect, the politician who committed treason and gave away Spanish
territory for a foreign power to install bases died in 1975, nobody voted for him, general
Franco, an ally of Hitler, someone who sent over 50k troops to the siege of Leningrad, one of
the greatest crimes in the history of mankind, a million casualties, mainly civilians, dead
by hunger and disease, that fascist ally of Hitler we had to endure for 40 years, the price
to close your eyes and your nose not to smell the stench were bases, an occupying force
watching one of the strategic straights in Rota, close to Gibraltar, plus other bases inland.
I could go on, and remind you of 4H bombs dropped over Palomares after a broken arrow
incident, one of them broke and plutonium is still poisoning an area that your government is
not willing to clean. So that is what foreign occupation looks like, if something goes wrong,
well, we are protecting you . they say. History should be taught with a bit more detail in
the USA.
I'm afraid you're reading the dynamics of the European/US relationship quite incorrectly.
Bluntly, you have the facts wrong.
This site, and particularly the Colonel's committee of correspondence, is packed with
experts who have lived in this field and know their way around it. So I don't venture a
comprehensive rebuttal myself - my knowledge is partial and I do not have the background to
be sure of getting it dead right. But here -
"Essentially, if you are in Nato, at some point, Uncle Sam will invite you to some
adventure. If you say yes to this adventure you commit your armed forces to some
confrontation in the middle east if you are lucky, or against Russia in Eastern Europe if you
are unlucky."
That is transparent nonsense.
Obama has stated that it was the Europeans, including the UK, who pushed him into some
middle East interventions. I don't think he was shooting a line. The leaked Blumenthal emails
confirm that and we merely have to look at the thrust of French military actions to
understand that the French in particular push continually for intervention in the ME.
They are still doing so, and not for R2P purposes. They would see the ME and parts of
Africa as part of the EU sphere of influence and their initial reaction to Trump's abortive
attempt to withdraw from Syria shows they would be more than prepared to go it alone there if
they could.
A squalid bunch, and here I must include my own country in that verdict. Reliant on US
logistics and military strength they seek to pursue their own interests and could they but do
so they would do so unassisted. Don't pretend that it's the Americans who force them into
these genocidal adventures.
As for the Ukraine, we see from Sakwa's unflattering study of the EU adventure there that
that was building up well before 2014. The dramatic rejection of the EU deal was the prelude
to the coup. The Ashton tape shows an astonishing degree of EU intervention in Ukrainian
internal affairs before that coup. And from the Nuland tape we get a glimpse of the EU regime
change project that shows it was deeply implicated.
Pushed into the Ukrainian adventure by the US? Rubbish. The EU and its constituent members
were attempting to play their own hand and were not merely following the US lead
submissively.
We hear little of European neocon ventures. But what little has surfaced about them shows
that your picture of peace loving Europeans dragged into these conflicts by an overbearing
"Uncle Sam" is dishonest and misleading.
So I tell my German friends and relatives when they push the same line. They look at me
with disbelief and go off and hunt around the internet themselves. And then come back and do
not disagree. I suggest you do the same. The facts are all there, even for those of us
without inside knowledge or who lack the requisite background.
When I lived in Europe it seemed like all the post offices had banks which offered basic
services like checking and savings. They should do that here.
seryanhoj , 2 hours ago
They have a simple ' people's ' banking system for people that don't feel up to going to
to one if the majors, and probably deal in small smounts.
The same system handles distributions from the various social schemes. Also they give low
or no cost access to buy government securities, and savings schemes. It sound a bit 'Big
Brover' , but in practice it feels good.
Demeter55 , 46 minutes ago
You are threatening the banksters! They need every last penny!
Russia-China "Dedollarization" Reaches "Breakthrough Moment" As Countries Ditch Greenback
For Bilateral Trade by Tyler Durden Thu, 08/06/2020 - 21:55
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Late last year, data released by the PBOC and the Russian Central Bank shone a light on a
disturbing - at least, for the US - trend: As the Trump Administration ratcheted up sanctions
pressure on Russia and China, both countries and their central banks have substantially
"diversified" their foreign-currency reserves, dumping dollars and buying up gold and each
other's currencies.
Back in September, we wrote about the PBOC and RCB building their reserves of gold bullion
to levels not seen in years. The Russian Central Bank became one of the world's largest buyers
of bullion last year (at least among the world's central banks). At the time, we also
introduced this chart.
We've been writing about the impending demise of the greenback for years now, and of course
we're not alone. Some well-regarded economists have theorized that the fall of the greenback
could be a good thing for humanity - it could open the door to a multi-currency basket, or
better yet, a global current (bitcoin perhaps?) - by allowing us to transition to a global
monetary system with with less endemic instability.
Though, to be sure, the greenback is hardly the first "global currency".
Falling confidence in the greenback has been masked by the Fed's aggressive buying, as
central bankers in the Eccles Building now fear that the asset bubbles they've blown are big
enough to harm the real economy, so we must wait for exactly the right time to let the air out
of these bubbles so they don't ruin people's lives and upset the global economic apple cart. As
the coronavirus outbreak has taught us, that time may never come.
But all the while, Russia and China have been quietly weening off of the dollar, and instead
using rubles and yuan to settle transnational trade.
Since we live in a world where commerce is directed by the whims of the free market (at
least, in theory), the Kremlin can just make Russian and Chinese companies substitute yuan and
rubles for dollars with the flip of a switch:
as Russian President Vladimir Putin once exclaimed , the US's aggressive sanctions policy
risks destroying the dollar's reserve status by forcing more companies from Russia and China to
search for alternatives to transacting in dollars, if for no other reason than to keep costs
down (international economic sanctions can make moving money abroad difficult).
In 2019, Putin gleefully revealed that Russia had reduced the dollar holdings of its central
bank by $101 billion, cutting the total in half.
And according to new data from the Russian Central Bank and Federal Customs Service, the
dollar's share of bilateral trade between Russia and China fell below 50% for the first time in
modern history.
Businesses only used the greenback for roughly 46% of settlements between the two countries.
Over the same period, the euro constituted an all-time high of 30%. While other national
currencies accounted for 24%, also a new high.
As one 'expert' told the Nikkei Asian Review, it's just the latest sign that Russia and
China are forming a "de-dollarization alliance" to diminish the economic heft of Washington's
sanctions powers, and its de facto control of SWIFT, the primary inter-bank messaging service
via which banks move money from country to country.
The shift is happening much more quickly than the US probably expected. As recently as 2015,
more than 90% of bilateral trade between China and Russia was conducted in dollars.
Alexey Maslov, director of the Institute of Far Eastern Studies at the Russian Academy of
Sciences, told the Nikkei Asian Review that the Russia-China "dedollarization" was
approaching a "breakthrough moment" that could elevate their relationship to a de facto
alliance.
"The collaboration between Russia and China in the financial sphere tells us that they are
finally finding the parameters for a new alliance with each other," he said. "Many expected
that this would be a military alliance or a trading alliance, but now the alliance is moving
more in the banking and financial direction, and that is what can guarantee independence for
both countries."
Dedollarization has been a priority for Russia and China since 2014, when they began
expanding economic cooperation following Moscow's estrangement from the West over its
annexation of Crimea. Replacing the dollar in trade settlements became a necessity to
sidestep U.S. sanctions against Russia.
"Any wire transaction that takes place in the world involving U.S. dollars is at some
point cleared through a U.S. bank," explained Dmitry Dolgin, ING Bank's chief economist for
Russia. "That means that the U.S. government can tell that bank to freeze certain
transactions."
The process gained further momentum after the Donald Trump administration imposed tariffs on
hundreds of billions of dollars worth of Chinese goods. Whereas previously Moscow had taken
the initiative on dedollarization, Beijing came to view it as critical, too.
"Only very recently did the Chinese state and major economic entities begin to feel that
they might end up in a similar situation as our Russian counterparts: being the target of the
sanctions and potentially even getting shut out of the SWIFT system," said Zhang Xin, a
research fellow at the Center for Russian Studies at Shanghai's East China Normal
University.
As commentators focus on the hospitalisations of two Gulf monarchs, and permutate likely
succession issues, they may miss the wood for the succession trees: Of course, the death of
either the Emir of Kuwait (91 years old) or King Salman of Saudi Arabia (84 years old) is a
serious political matter. King Salman's particularly has the potential to upturn the region (or
not). Yet Gulf stability today rests less on who succeeds, but rather on tectonic shifts in
geo-finance and politics that are just becoming visible. Time to move on from stale ruminations
about who's 'up and coming', and who's 'down and out' in these dysfunctional families.
The stark fact is that Gulf stability rests on selling enough energy to buy-off internal
discontents, and to pay for supersized surveillance and security set-ups.
For the moment, times are hard, but the States' financial 'cushions' are just about
holding-up (albeit only for the big three: Saudi Arabia, Abu Dhabi and Qatar). For others the
situation is dire. The question is, will this present status quo persist? This is where the
warnings of shifts in certain global tectonic plates becomes salient.
The Kuwaiti succession struggle is emblematic of the Gulf rift: One candidate for Emir, (the
brother), stands with Saudi Arabia and its Wahhabi-led 'war' on Sunni Islamists (the Muslim
Brotherhood). Whereas the other, (the eldest son), is actively backed by the Muslim
Brotherhood, Qatar and Turkey. Thus, Kuwait sits on firmly on the Gulf abyss – a region
with significant, but disempowered Shi'a minorities, and a Sunni camp divided and 'at war' with
itself over support for the Muslim Brotherhood; or what is (politely called) 'autocratic
secular stability'.
Interesting though this is, is this really still so relevant?
The Gulf, perhaps more significantly, is held hostage to two huge financial bubbles. The
real risk to these States may prove to come from these bubbles, which are the very devil to
prick-down into any gentle, expelling of gas. They are sustained by mass psychology –
which can pivot on a dime – and usually end catastrophically in a market 'tantrum', or a
'bust' – and with consequent risk of depression, should Central Banks ever try to lift
the foot off the monetary accelerator.
The U.S. ubiquitous 'asset bubble' is famous. Central Bankers have been worrying about it
for years. And the Fed is throwing money at it – with abandon – to keep it from
popping. But as indicated earlier, such bubbles are highly vulnerable to psychology – and
that may be turning, as the celebrated V-shaped, expected economic recovery recedes into the
virus-induced distance. But for now, investors believe that the Fed daren't let it implode
– that the Fed has absolutely no option but go on throwing more and more money at it (at
least until November elections & then what?).
Less visible is that other vast 'asset bubble': The Chinese domestic property market. With
its closed capital account, China has a huge sum (some $40 trillion) sloshing around in
collective bank accounts. That money can't go abroad (at least legally), so it rotates around
between three asset markets: apartments, stocks, and commodities somewhat whimsically. But
investing in apartments is absolutely king! 96%
of urban Chinese own more than one: 75% of private wealth is represented by investments in
condos – albeit with 21% standing empty in urban China, for lack of a tenant.
Long story, short, the Chinese massively chase property valuations. Indeed, as the WSJ has
noted "the central problem in China is that buyers have figured out the government doesn't
appear to be willing to let the market fall. If home prices did drop significantly, it would
wipe out most citizens' primary source of wealth, and potentially trigger unrest". Even during
the pandemic – or, perhaps because of it as the Chinese piled-in – prices rose 4.9%
in June, year on year. The total
value of Chinese homes and developers' inventory hit $52 trillion in 2019, according to
Goldman Sachs; i.e. twice the size of the U.S. residential market, and outstripping even the
entire U.S. bond market.
If it sounds just like America's QE-inflated asset markets, that's because it is. As things
stand, both the Chinese residential and the U.S. equity bubbles are unstable. Which might
fracture fist? Who knows but bubbles are also vulnerable to pop on geo-political events (such
as a U.S. naval landing on one of China's disputed South Sea islands, to which
China is promising , absolutely, a military response).
No one has any idea how Chinese officials can manage the property bubble, without
destabilizing the broader economy. And even should the market stay strong, it creates headaches
for policy makers, who have had to hold off on more aggressive economic stimulus this year
– which some analysts say is needed, partly because of fears it will inflate
housing further.
Ah there it is: Out in plain view – the risk. The condo-trade has hijacked the entire
Chinese economy, tying officials' hands. This, at the moment when Trump's trade war has turned
into a new ideological cold war targeting the Chinese Communist Party. What if the Chinese
economy, under further U.S. sanctions, slides further, or if Covid 19 resurges (as it is in
Hong Kong)? Will then the housing market break, causing recession or depression? It is, after
all, China and Asia that buy the bulk of Gulf energy: Demand shrinks, and price falls. The fate
of the Gulf States' economies – and stability – is tied to these mega-bubbles not
popping.
Bubbles are one factor, but there are also signs of the tectonic plates drifting apart in a
different way, but no less threatening. Bankers Goldman Sachs sits at the very heart of the
western financial system – and incidentally staffs much of Team Trump, as well as the
Federal Reserve.
And Goldman wrote something this week that one might not expect from such a system stalwart:
Its commodity strategist Jeffrey Currie,
wrote that "real concerns around the longevity of the U.S. dollar as a reserve currency
have started to emerge".
What? Goldman says the dollar might lose its reserve currency status. Unthinkable? Well that
would be the standard view. Dollar hegemony and sanctions have long been seen as Washington's
stranglehold on the world through which to preserve U.S. primacy. America's 'hidden war', as it
were. Trump clearly views the dollar as the bludgeon that can make America Great Again.
Furthermore, as Trump and Mnuchin – and now Congress – have taken control of the
Treasury arsenal, the roll-out of new sanctions bludgeoning has turned into a deluge.
But there has also been within certain U.S. circles, a contrarian view. Which is that the
U.S. needs to 're-boot' its economic model with a Tech-led, 'supply-side' miracle to end growth
stagnation. Too much debt suffocates an economy, and populates it with zombie enterprises.
In 2014, Jared Bernstein, Obama's former chief economist said that the U.S. Dollar
must
lose its reserve status , if such a re-boot were to be done. He explained why, in a New
York Times op-ed:
"There are few truisms about the world economy, but for decades, one has been the role of
the United States dollar as the world's reserve currency. It's a core principle of American
economic policy. After all, who wouldn't want their currency to be the one that foreign banks
and governments want to hold in reserve?
"But new research reveals that what was once a privilege is now a burden, undermining job
growth, pumping up budget and trade deficits and inflating financial bubbles. To get the
American economy on track, the government needs to drop its commitment to maintaining the
dollar's reserve-currency status."
In essence, this is the Davos Great Reset line
. Christine Lagarde, in the same year, called too for a 'reset' (or re-boot) of monetary policy
(in the face of "bubbles growing here and there) – and to deal with stagnant growth and
unemployment. And this week, the U.S. Council on Foreign Relations issued a paper entitled:
It
is Time to Abandon Dollar Hegemony .
That, we repeat, is the globalist line. The CFR has been a progenitor of both the European
and Davos projects. It is not Trump's. He is fighting to keep America as the seat of western
power, and not to accede that role to Merkel's European project – or to China.
So why would Goldman Sachs say such a thing? Attend carefully to Goldman's framing: It is
not the Davos line. Instead, Currie writes that the soaring disconnect between spiking gold
price and a weakening dollar "is being driven by a potential shift in the U.S. Fed towards an
inflationary bias, against a backdrop of rising geopolitical tensions, elevated U.S. domestic
political and social uncertainty, and a growing second wave of covid-19 related
infections".
Translation: It is about U.S. explosive debt accumulation, on account of the Coronavirus
lockdown. In a world where there is already over $100 trillion in dollar-denominated debt, on
which the U.S. cannot default; nor will it ever be repaid. It can therefore only be inflated
away. That is to say the debt can only be managed through debasing the currency. (Debt jubilees
are viewed as beyond the pale.)
That is to say, Goldman's man says dollar debasement is firmly on the Fed agenda. And that
means that "real concerns around the longevity of the U.S. dollar as a reserve currency, have
started to emerge".
It is a nuanced message: It hints that the monetary experiment, which began in 1971, is
ending. Currie is telling U.S. that the U.S. is no longer able to manage an economy with this
much debt – simply by printing new currency, and with its hands tied on other options.
The debt situation already is unprecedented – and the pandemic is accelerating the
process.
In short, things are starting to spin out of control, which is not the same as advocating a
re-boot. And the debasement of money is inevitable. That's why Currie points to the disconnect
between the gold price (which usually governments like to repress), and a weakening dollar. If
it is out of the Fed's control, it is ultimately (post-November) out of Trump's hands, too.
Should confidence in the dollar begin to evaporate, all fiat currencies will sink in tandem
– as G20 Central Banks are bound by the same policies as the U.S.. China's situation is
complicated. It would in one way be harmed by dollar debasement, but in another way, a general
debasement of fiat currency would offer China and Russia the crisis (i.e. the opportunity), to
escape the dollar's knee pressed onto their throats.
And for Gulf States? The slump in oil prices this year already has prompted some investors
to bet against Gulf nations' currencies, putting longstanding currency pegs with the dollar
under pressure. GCC states have kept their currencies glued to the dollar since the 1970s, but
low oil demand, combined with dollar weakness would exacerbate the threat to Gulf 'pegs', as
their trade deficits blow out. Were a peg to break, it is not clear there would be any obvious
floor to that currency, in present circumstances.
Against such a backdrop, the royal successions underway in Gulf States might perhaps be
regarded a sideshow.
The mafia methods used are often packaged as monopoly powers such copyrights, patents,
transformation of public goods into for profit private enterprizes (privatization), takeovers and
bankruptcy, private ownership of the highest levels of nearly all governments, and just 6 own 92%
of all media.
Takeover of Tik Toc by Microsoft is just one demonstrating of a wider trend -- the tend
toward gangster capitalism. BTW Chinese proposes complete divestment. That spells big trouble for
US heavyweights such as Amazon, Google and Facebook.
"We lie to deceive ourselves, we lie to comfort others, we lie out of pity, we lie out of
shame, to encourage, to hide our misery, we lie out of honesty. We lie for freedom."
Trump blames China every chance he can and the Democrats either agree or offer mealy-mouthed
protest.
Notable quotes:
"... It comes to light that at least 125 US companies owned or invested in by Chinese entities, including Chinese SOE, received hundreds of millions in PPP loans backed by the US SBS. ..."
"... This level of capitalust interconnection between elite investors and governments belies all the heated talk of cold war by politicians on both sides as well as useful idiots the world over. ..."
"... "If this is also national security, then US national security is synonymous with hegemony." ..."
China has never banned US high-tech companies from doing business in the country. What the
Chinese government demands is that what they do in China should comply with Chinese law.
That's all . It was some US companies that refused to comply with Chinese laws.
Google used to have a position in the Chinese market. It itself pulled out of China a
decade ago, while other companies were accused in the US of kowtowing to China when they
tried to design their specific versions for the Chinese market. This leaves no US internet
giant currently operating in China.
TikTok operates in the US in full compliance with US laws and is completely cut off from
Douyin, its Chinese equivalent. Users in the Chinese mainland cannot register for TikTok
even if they bypass the so-called great firewall . TikTok does not violate any US
law but fully cooperates with the US administration.
The US claim that TikTok threatens its own national security is a purely hypothetical
and unwarranted charge - just like the groundless accusation that Huawei gathers
intelligence for the Chinese government. This is fundamentally different from China's
refusal to allow the original versions of Facebook and Twitter to enter China and require
them to operate in accordance with Chinese laws.
In just three paragraphs, the Global Times killed two myths: that a "great firewall"
exists and that China censorship things from the West (i.e. that the Chinese people is
"living in the darkness").
I had a teacher who traveled to China recently. He went to a local bar (100% Mainland
Chinese) as soon as he landed. He was having difficulty accessing Google (I think it was
either Gmail or Google Drive). He tried, tried, tried but couldn't do it. When the locals
there realized he was trying to access Google products, they promptly and calmly told him he
should use VPN because Google didn't operate in China. No drama, no fear of a local police
officer suddenly coming to the place to arrest them.
They know what Apple, Google and Facebook are. It's just that China has better local
options for the same product.
Not that globalization is a one way street by any means.
It comes to light that at least 125 US companies owned or invested in by Chinese entities,
including Chinese SOE, received hundreds of millions in PPP loans backed by the US SBS.
This level of capitalust interconnection between elite investors and governments belies
all the heated talk of cold war by politicians on both sides as well as useful idiots the
world over.
Why even favorite Chinese PR flack Pepe Escobar recently characterized the Stupidity Trap
aka Thucydides Trap as childish nonsense.
"If this is also national security, then US national security is synonymous with
hegemony."
That is precisely the problem. Unfortunately, the current US economy has become dependent on
advantages arising from unrivaled geopolitical power. Take it away too suddenly, and there
would be a painful economic transition to become a normal nation again.
"... Case in point, reporting today on the newly disclosed Ghisline Maxwell documents only mentioned Prince Andrew and not a word about Bill Clinton ..."
"... believe James Murdoch was part of the "we are all gonna die in <11 years" Green New Deal school of thought. ..."
"James Murdoch, the younger son of media mogul Rupert Murdoch, has resigned from the board
of News Corporation citing "disagreements over editorial content".
In a filing to US regulators, he said he also disagreed with some "strategic decisions" made
by the company.
The exact nature of the disagreements was not detailed.
... ... ..,
I watch a lot of TeeVee news on all the major networks including the two Foxnews
channels.
It has become apparent to me over the last year or so that there is an internal ideology
contest at Fox between the hard core conservatives like Dobbs. Carlson, Mark Levin, Bartiromo,
Degan McDowell, etc. and a much more liberal set of people like Chris Wallace, Cavuto and the
newer reporters at the White House. I expect that the departure of James Murdoch will result in
more uniformly conservative reporting and commentary on Fox. I say that presuming that James
Murdoch was a major force in trying to push Foxnews toward the left.
I am surprised that Murdoch sent his son to Harvard. pl
Been noticing a lot of irresponsible reporting of late in the WSJ - not on the opinion
page, but in some pretty sloppy reporting with a lot of editorial bias in what is included
and what is intentionally left out.
Case in point, reporting today on the newly disclosed Ghisline Maxwell documents only
mentioned Prince Andrew and not a word about Bill Clinton . Doesn't WSJ know its readers
draw from multiple media sources that have provided original content? Everyday there are
several similar, bias by omission, articles.
One can only hope newly constituted management team will finally get rid of Peggy
Noonan.
I'm 52, won't live past 80 and have $1.6 million. 'I am tired of both the rat race and workplace
politics.' Should I retire?
More
I don't have much in savings and feel lost. What can I do? Dear Wondering in Alamo, You bring up a question I
think a lot of people have been asking themselves lately.
https://s.yimg.com/rq/darla/4-2-1/html/r-sf.html
Start survey
U.S.
Your retirement distributions won't be taxed in these states: AARP
Ann Schmidt
,
Fox Business
•
July
31, 2020
There are 12 states that won't tax your distributions from
401(k)
plans,
IRAs or pensions, according to a recent report from
AARP
.
Of those states, nine -- Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas,
Washington and Wyoming -- don't have state income taxes.
Some states only partially tax retirement distributions, AARP reported. In Colorado, taxpayers over 65
can remove
$24,000
from
their federal AGI for their state taxes, according to AARP.
Other states have policies for taxes on retirement distributions that depend on your occupation before
retirement. For example, in Connecticut, teachers can subtract 25 percent of their retirement income from
federal AGI.
There are also 29 states that don't tax
military
retirement
income at all, AARP reported. Those states include Alabama, Arkansas, Connecticut, Hawaii, Idaho,
Illinois, Kansas, Louisiana, Maine, Massachusetts, Missouri, New Jersey, North Dakota, Ohio, Oregon,
Pennsylvania, Rhode Island, South Carolina, West Virginia and Wisconsin.
The remaining 21 states tax some or all of military retirement income, according to AARP.
One exception is in Virginia, where only recipients of the Congressional Medal of Honor are exempt from
taxes on their military retirement income, AARP reported.
"... Perhaps he was even the initiator of the White Helmets? My take away from those reports is that Cummings and Johnson have commenced a transition strategy within the UK and that the future of Integrity Initiative and its bogan crew may be limited. ..."
"... They have also restrained the MI6 manipulators that would conspire and contrive the overt 'Hate Russia' policy. Not that Bojo and Cummings will necessarily change anything other than a superficial rearrangement in their favour (for a month or two anyway). ..."
"... Caitlin Johnston has recently posted an astute analysis of the current distraction politics and why we should not be distracted by Covid19 rants from seeing the immediate rendition of the great game. ..."
"... I guess the UK will be less overt re Russia but expect the Libyan war to escalate as UKUSAI use Turkey in Libya to push back against Russia and even Sisi in Egypt. ..."
"... The UK could stage yet another 'Suez incident' with this mendacious confluence of opportunities. ..."
"... The USA has become the patsy for these thugs, when will they rise? ..."
Thank you for those John Helmer reports. I note that the new head of MI6 is a lover of all
fine Turkish things including Erdoghan. "Richard Moore, currently a third-ranking official of
the Foreign Office, an ex-Ambassador to Turkey; an ex-MI6 agent; and a Harvard graduate".
Perhaps he was even the initiator of the White Helmets? My take away from those reports is
that Cummings and Johnson have commenced a transition strategy within the UK and that the
future of Integrity Initiative and its bogan crew may be limited.
They have also restrained
the MI6 manipulators that would conspire and contrive the overt 'Hate Russia' policy. Not
that Bojo and Cummings will necessarily change anything other than a superficial
rearrangement in their favour (for a month or two anyway).
AtaBrit #9 includes an excellent link to a National Interest report on Turkey and is worth
the read in this context of the rise and rise of Richard Moore. Thank you AtaBrit.
I guess the UK will be less overt re Russia but expect the Libyan war to escalate as
UKUSAI use Turkey in Libya to push back against Russia and even Sisi in Egypt. They have a
willing US president now and likely continuing in the next few years (be it Trump or Biden).
The UK could stage yet another 'Suez incident' with this mendacious confluence of
opportunities.
The USA has become the patsy for these thugs, when will they rise?
Where will America's productivity miracle come from?
Public education is not teaching students what they need to know to compete in the global
economy.
According to the National Center for Education Statistics, math scores of U.S. students rank
30th in the world. The East Asian peers of today's American students will eat their lunch in
the growth industries of tomorrow.
Here's where Black Lives Matter has a real opportunity.
The protests. The riots. The calls for reparation payments. Social justice wealth transfers.
White privilege taxes. All the nonsense. Where's the strategy? Where's the long-range
'strategery'?
No doubt, those selling BLM T-shirts in Walmart parking lots are exercising gumption. But
it's not gonna cut it. Moreover, like bingo winnings, reparation payments will be quickly
squandered while the unhappiness remains.
And as far as we can tell the BLM movement is empty of ideas and without
direction.
lay_arrow
chubbar , 14 minutes ago
"If BLM was strategic"?????? Holy ****, if they were strategic they'd be making damn sure
that testing, like SAT scores, were no longer accepted as proof of accomplishment or
learning. Oh, wait?.......
Let's all agree, blacks don't want a "head to head" test, EVER.
I don't give a crap what they say, they don't want to be judged on MERIT, they love the
skin color test. That way they can always claim racism instead of ability.
libtears , 40 minutes ago
The BLM Movement is definitely empty of ideas and clear leadership. Their supposed goals
are all over the map from day to day. They are rudderless mobs of filthy vagrants and
criminal elements make up most of their movement.
What's going on which is credited to BLM has nothing to do with black people for the most
part. Commies have co-opted this movement and are engaging in anarchy to take down the system
of government. They will do whatever they want at all costs because they believe they have
the moral high ground. They are radicals just like people call them.
The best thing that could happen is for these loser mayors and governors to enforce the
law against these mobs of filthy scum.
How can you even reason with a mob of idiots that don't even have one, if not a hierarchy
of leadership and clear goals that they agree upon?
These people are taking a page out of the Bolshevik book on revolution. And they're much
weaker than the Bolsheviks, mentally and physically. One good thump on the head and these
b!tches are crying.
The longer the public allows teaching institutions to promote BLM the worse this sh!t is
going to get.
...
JaxPavan , 42 minutes ago
The Ford Foundation gave BLM $100 million to engage in terrorism. Who do you think bought
all those ultra high end looting vehicles?
quanttech , 39 minutes ago
Indeed, the BLM organization is primarily funded by mostly white-run corporations and
foundations. The money rules.
HopefulCynical , 22 minutes ago
And WHO is in control of the Ford Foundtion? WHO?!
Plunge in Consumption of Services Leads to Record 32.9 Percent Drop in GDP
By DEAN BAKER
The saving rate hit a record 25.7 percent level in the first quarter, indicating that few of
the pandemic checks were spent.
The Gross Domestic Product (GDP) shrank at a record 32.9 percent annual rate in the second
quarter. While almost all the major categories of GDP fell sharply, a 43.5 percent drop in
consumption of services was the largest factor, accounting for 22.9 percentage points of the
drop in the quarter. Nonresidential fixed investment also fell sharply, dropping at a 27.0
percent annual rate. Residential investment fell at a 38.7 percent annual rate.
The plunge in service consumption was expected since this was the segment of the economy
hardest hit by the shutdowns. Within services, health care, food services and hotels, and
recreation were the biggest factors reducing growth by 9.5 percentage points, 5.6 percentage
points, and 4.7 percentage points, respectively.
Spending on health care services fell at a 62.7 percent annual rate in the quarter. This was
due to people putting off a wide range of medical and dental checkups and procedures, which far
more than offset the care needed by coronavirus patients. The annual rate of decline for food
and hotel services was 81.2 percent and for recreation services 93.5 percent.
Consumption of nondurable goods fell at a 15.9 percent annual rate. Declines in clothing and
gasoline purchases were the biggest factors, taking 1.0 percentage point and 0.9 percentage
points off the quarter's growth, respectively. Demand for durable goods fell at just a 1.4
percent rate, but this followed a decline of 12.5 percent in the first quarter. Interestingly,
spending on cars actually rose slightly in the quarter, adding 0.15 percentage points to
growth.
Consumption expenditures by nonprofits serving households rose at 182.5 percent annual rate,
adding 3.0 percentage points to the quarter's growth. This reflects the effort by private
foundations and charities to ameliorate the hardships being experienced by many households.
Both structure and equipment investment fell sharply in the quarter, declining at 34.9
percent and 37.7 percent annual rates, respectively. The drop in equipment investment is
especially striking since it fell at a 15.2 percent rate in the first quarter. Investment in
intellectual products fell at a more modest 7.2 percent annual rate. Residential investment
fell at a 38.7 percent annual rate, although this followed a jump of 19.0 percent in the first
quarter.
Exports and imports both fell sharply, with exports dropping at a 64.1 percent rate and
imports falling at a 53.4 percent rate. Because US imports are so much larger than exports,
trade actually added 0.7 percentage points to growth in the quarter.
Federal government spending rose at a 17.4 percent annual rate, driven by a 39.7 percent
increase in non-defense spending, presumably most of which is pandemic related. State and local
spending fell at a 5.6 percent rate, likely reflecting school closings in the quarter.
[Graph]
Prices fell sharply in the quarter, with the Personal Consumption Expenditure (PCE) deflator
falling at a 1.9 percent annual rate and the core PCE falling at a 1.1 percent annual rate.
These declines reflected sharp drops in the price of items such as gasoline, hotels, and
clothes. Many of these declines were already being reversed by the end of the quarter. They
will almost certainly not continue into the third quarter.
The savings rate soared to a record 25.7 percent. This reflects the jump in disposable
income attributable to the pandemic checks, coupled with the sharp drop in spending. Nominal
disposable income rose at a 42.1 percent annual rate. This rise was, of course, uneven, with
people who were still getting their regular paychecks or retirees seeing large jumps in income
from the pandemic checks, but with many of the unemployed seeing sharp drops.
With the economy mostly reopened, despite serious outbreaks of the pandemic in large parts
of the country, we are virtually certain to see strong growth in the third quarter. But even if
the economy grows at a 15 or 20 percent annual rate, it would be nowhere close to recovering
the losses from the last two quarters.
The shape of the rescue package currently being debated will also be hugely important. In
addition to the unemployment insurance supplements that will be necessary for laid-off workers
to sustain their consumption, state and local governments will need large amounts of money both
to avoid layoffs and to implement programs for the safe reopening of schools, workplaces and
businesses. In this context, it is very difficult to see any economic rationale for the $1,200
pandemic checks.
After some level inequality is akin to cancel -- it can destroy the society. In a countries
with very high level of inequality the government can't rely on loyalty of people. It also leads
to the proliferation of "guard labor" in one form or another.
Just think what it means for the USA counterintelligence now. Add to this the collapse of the
neoliberal ideology which also does not help to instill the loyalty.
Yves here. So many of health costs of inequality are obvious, yet most people seem trained
to look past them. And Congress fiddles about a new stimulus package, with the odds of getting
it back on track soon not looking very good, while Americans have rent and mortgage payments
looming.
By Richard D. Wolff, professor of economics emeritus at the University of Massachusetts,
Amherst, and a visiting professor in the Graduate Program in International Affairs of the New
School University, in New York. Wolff's weekly show, "Economic Update," is syndicated by more
than 100 radio stations and goes to 55 million TV receivers via Free Speech TV. His two recent
books with Democracy at Work are Understanding Marxism and Understanding Socialism , both
available at democracyatwork.info . Produced by Economy for All , a project
of the Independent Media Institute
Capitalism, as Thomas Piketty's Capital in the Twenty-First Century shows,
relentlessly worsens wealth and income inequalities. That inherent tendency is only
occasionally stopped or reversed when masses of people rise up against it. That happened, for
example, in western Europe and the U.S. during the 1930s Great Depression. It prompted social
democracy in Europe and the New Deal in the United States. So far in capitalism's history,
however, stoppages or reversals around the world proved temporary. The last half-century
witnessed a neoliberal reaction that rolled back both European social democracy and the New
Deal. Capitalism has always managed to resume its tendential movement toward greater
inequality.
Among the consequences of a system with such a tendency, many are awful. We are living
through one now as the COVID-19 pandemic, inadequately contained by the U.S. system, savages
Americans of middle and lower incomes and wealth markedly more than the rich.
The rich buy better health care and diets, second homes away from crowded cities, better
connections to get government bailouts, and so on. Many of the poor are homeless. Tasteless
advice to "shelter at home" is, for them, absurd. Low-income people are often crowded into the
kinds of dense housing and dense working conditions that facilitate infection. Poor residents
of low-cost nursing homes die disproportionally, as do prison inmates (mostly poor). Pandemic
capitalism distributes death in inverse proportion to wealth and income.
Social distancing has destroyed especially low-wage service sector jobs. Rarely did
top executives lose their positions, and when they did, they found others. The result is a
widened gap between high salaries for some and low or no wages for many. Unemployment invites
employers to lower wages for the still employed because they can. Pandemic capitalism has
provoked a massive increase in money-creation by central banks. That money fuels rising stock
markets and thereby enriches the rich who own most shares. The coincidence of rising stock
markets and mass unemployment plus falling wages only adds momentum to worsening
inequality.
Unequal economic distributions (of income and wealth) finance unequal political outcomes.
Whenever a small minority enjoys concentrated wealth within a society committed to universal
suffrage, the rich quickly understand their vulnerability. The non-wealthy majority can use
universal suffrage to prevail politically. The majority's political power could then undo
the results of the economy including its unequal distribution of income and wealth. The rich
corrupt politics with their money to prevent exactly that outcome. Capitalists spend part of
their wealth to preserve (and enlarge) all of their wealth.
The rich and those eager to join them in the U.S. dominate within both Republican and
Democratic parties. The rich provide most of the donations that sustain candidates and parties,
the funding for armies of lobbyists "advising" legislators, the bribes, and many issue-oriented
public campaigns. The laws and regulations that flow from Washington, states, and cities
reflect the needs and desires of the rich far more than those of the rest of us. The peculiar
structure of U.S. property taxes offers an example. In the U.S., property is divided into two
kinds: tangible and intangible. Tangible property includes land, buildings, business
inventories, automobiles, etc. Intangible property is mostly stocks and bonds. Rich people hold
most of their wealth in the form of intangible property. It is thus remarkable that in the
U.S., only tangible property is subject to property tax. Intangible property is not subject to
any property tax.
The kinds of property (tangible) that many people own get taxed, but the kinds of property
(intangible) mostly owned by the richest minority do not get taxed. If you own a house rented
to tenants, you pay a property tax to the municipality where the house is located. You also pay
an income tax on the received rents to the federal government and likely also the state
government where you live. You are thus taxed twice: once on the value of the property you own
and once on the income you derive from that property. If you sell a $100,000 house and then buy
$100,000 worth of shares, you will owe no property taxes to any level of government in the
United States. You will only owe income tax on dividends paid to you on the shares you own. The
form of property you own determines whether you pay property tax or not.
This property tax system is excellent for those rich enough to buy significant amounts of
shares. The rich used their wealth to get tax laws written that way for them. The rest of us
pay more in taxes because the rich pay less. Because the rich save money -- since their
intangible property is not taxed -- they have that much more to buy the politicians who secure
such a tax system for them. And that tax system worsens inequality of wealth and income.
Unequal economic distributions finance unequal cultural outcomes. For example, the goal of a
unifying, democratizing public school system has always been subverted by economic inequality.
In general (with few exceptions), the better schools cost more to attend. The tutors needed to
help struggling students are affordable for the rich but less so for everyone else. The
children of the wealthy get the private schools, books, quiet rooms, computers, educational
trips, extra art and music lessons, and virtually everything else needed for higher educational
achievement.
Unequal economic distributions finance unequal "natural" outcomes. The U.S. now displays two
differently priced foods. Rich people can afford "organic" while the rest of us worry but still
buy "conventional" food for budget reasons. Countless studies indicate the dangers of
herbicides, pesticides, chemical fertilizers, food processing methods, and additives.
Nonetheless, the two-price food system delivers the better, safer food more to the rich than to
everyone else. Likewise, the rich buy the safer automobiles, more safely equip their homes, and
clean and filter the water they drink and the air they breathe. No wonder the rich live years
longer on average than other people. Inequality is often fatal, not just during pandemics.
In ancient Greece, Plato and Aristotle worried about and discussed the threat to
community, to social cohesion, posed by inequalities of wealth and income. They criticized
markets as institutions because, in their view, markets facilitated and aggravated income and
wealth inequalities. But modern capitalism sanctifies markets and has thus conveniently
forgotten Plato's and Aristotle's cautions and warnings about markets and inequality.
The thousands of years since Plato and Aristotle have seen countless critiques, reforms, and
revolutions directed against wealth and income inequalities. They have rarely succeeded and
have even more rarely persisted. Pessimists have responded, as the Bible does, with the notion
that "the poor shall always be with us." We rather ask the question: Why did so many heroic
efforts at equality fail?
The answer concerns the economic system, and how it organizes the people who work to
produce and distribute the goods and services societies depend on. If its economic organization
splits participants into a small rich minority and a large non-rich majority, the former will
likely be determined to reproduce that organization over time. Slavery (master versus slave)
did; feudalism (lord versus serf) did; and capitalism (employer versus employee) does.
Inequality in the economy is a root cause contributing to society-wide inequalities.
We might then infer that an alternative economic system based on a democratically organized
community producing goods and services -- not split into a dominant minority and a subordinate
majority -- might finally end social inequality.
Wow! I just can say this is very well pointed and that It must be understood we cannot
expect empathy from the well off. Even if some are empathic by nature they just cannot see
what's really happening given how wide is the rift.
inequality is a state of nature. blame god .right.
but here in this humanistic creation, we ought not institutionalize inequality.
That is one of the big points of monetary reform.
The current federal reserve system and the banking system ,having control of the "money
creation" of this country, PROMOTES wealth inequality.
The nationalization of the fed, and the ending of banks creating money; is the main essence
of monetary reform. The people who have been trying to discuss the world with a different
,more equal access to the fiat created "for the people to use, for the economy to
function",point to the growth of inequality by the nature of how the system currently is
structured. They point to how our money is created and by whom.They point to who gets "the
debt"
Some people try to dismiss the 100 year history of the fed promoting inequality as a bug .
but how can someone not see it is a feature, The monetary system we have now was created by
an act of law. It would be unconstitutional ,if not for the federal reserve act. Allowing the
banks to create money.Instead of the congress..as the constitution explicitly stated.
But now, we are no longer a fledgling republic.
The world accepted our fiat, as created by bankers now we ought to create our own money and
retire our national debt.Heal ourselves, to lead forward in the future. Time to write a new
law . https://www.congress.gov/bill/112-thcongress/house-bill/2990/text
Pessimists have responded, as the Bible does, with the notion that "the poor shall
always be with us."
The Bible does not say that, it says:
However, there will be no poor among you , since the Lord will surely bless you in the
land which the Lord your God is giving you as an inheritance to possess, if only you listen
obediently to the voice of the Lord your God, to observe carefully all this commandment which
I am commanding you today. Deuteronomy 15:4 [bold added]
But just a few verses later:
For the poor will never cease to be in the land ; therefore I command you, saying, 'You
shall freely open your hand to your brother, to your needy and poor in your land.'
Deuteronomy 15:11 [bold added]
Taken together, these verses are not about the inevitability of poverty but the
inevitability of poverty from DISOBEDIENCE to what is being commanded – especially, i
suppose, wrt economic justice.
So though we might never completely eliminate poverty, it can certainly be reduced to the
extent we are willing to obey – per the Bible.
And as anyone who has read the Old Testament should know, the US is far from obedience wrt
economic justice (e.g. Deuteronomy 23:19-20, e.g. Leviticus 25).
"If you own a house rented to tenants, you pay a property tax to the municipality where
the house is located."
the above means that you are already up the income ladder enough to not qualify as being low
income _ most of the country is low income since the word Low is comparative – it is
comparative to the cost of living –
So the above property tax is paid by the tenant – the carry costs by the tenant and the
profit – by the tenant.
So the rent is a high cost of living due to the bidding up or asset inflation that most
"investment goes into today"
A key way to reduce inequality is through a tax system that penalizes activities that tend to
raise the cost of living – tax heavier the investments that inflate asset prices
(assets are things already created).
Taxing something is to put a burden upon an activity
Why we tax labor so much – who knows
When it comes to the value of money everything is skewed. If Picketty were analyzing money
as merely a medium of exchange and not a store of wealth he'd have much less inequity. When
the value of money is considered in on-the-ground finance operations "lost opportunity" is
considered into the interest rate. Lost opportunity is totally ignored on a human level.
You'd think that money itself was a person.
Another 1.416 million Americans filed new claims for unemployment benefits last weekOur
politicians want to encourage people "to go back to work", but for millions upon millions of
Americans the jobs that they once had are gone forever.
52 million Americans have filed new claims for unemployment benefits over the past 18
weeksBut many people that live in rural communities are feeling pretty good aboutthings right
now. Even though more than 52 million Americans have filed new claims for unemployment
benefits over the last 18 weeks, the official unemployment rate in many rural counties is
still in the single
digits.
New York's unemployment rate rose to 20.4% last month, according to state-level data
issued
Friday by the Bureau of Labor Statistics that detailed figures for some large metro areas.
That'sup from 18.3% in May and 15% in April.
Los Angeles, the second-largest U.S. city, has seen a similar level of joblessness.Its
unemployment rate recovered slightly in June but remains startlingly high -- at 19.5%, versus
20.6% in May, according to data published Friday by California's Employment Development
Department.
Census Bureau says that things are particular dire for Black and Hispanic renters This
month (JUNE), nearly 28% of Black renters say they haven't paid last month's rent, and \about
46% say they have slight or no confidence they'll be able to pay next month's rent, according
to figures from the Census Bureau's Household Pulse Survey. Hispanic renters face similar
economic strain: 22% say they missed last month's rent and 46% fear they won't make rent next
month.
In April, 78% of those in households experiencing job loss felt that that situation would
be temporarily. But now, 47% think that job loss is likely to be permanent, according to The
Associated Press-NORC Center for Public Affairs Research.
19 percent of all U.S. small businesses were closed, According to Jefferies,
Nearly a quarter of all small businesses in the entire country are closed
And the really bad news is that many of them will never end up reopening
As many as 76,000 small businesses in New York City – a third of the 230,000
citywide – may never reopen after forced to close during the COVID-19 lockdown,
business leaders have warned.
Nearly half of all small-business members of the San Francisco Chamber of Commerce lost 100%
of their sales or closed down completely.
Yelp says that a whopping 60 percent of the restaurants that were initially listed
as"temporarily closed" on their site are now classified as permanetly
closed...
Air travel is another industry that is being absolutely devastated by this pandemic.After
a modest bounce in June, the number of air passengers is starting to fall again.The
resurgence of coronavirus infections is derailing the travel industry's modest recovery. The
number of air passengers processed through TSA security lines fell during the week ended July
20, compared with the prior week, according to Bank of America. This metric is down more than
70% from a year ago.
United (UAL) CEO Scott Kirby told CNBC on Wednesday that the airline doesn't "expect to
get anywhere close to normal until there's a vaccine that's been wiely distributed to a large
portion of the population" !! (Hello Big Pharma Inc.)
http://theeconomiccollapseblog.com/
(Whatever one might think about that blog, but most numbers are proberly back up
with so callled serious sources aka links.)
It is by far its worst quarterly plunge, and has thrown tens of millions out of work and
sent unemployment surging to 14.7 per cent, the US Government said on Thursday (local
time).
The Commerce Department's estimate of the second-quarter decline in the gross domestic
product marked the sharpest such drop, according to records dating back to 1947."
@ b who wrote
"
The economic damage the pandemic has caused in the U.S. is extreme:
"
The pandemic is a set up for the economic damage more than it caused itself, IMO. The
economic system started crashing last September. Empire has been in frantic mode. in case you
hadn't noticed, to find a patsy to blame for the economic crash. I believe that response to
the pandemic was designed to project the most economic impact to cover for the financial
structural deficiencies underneath. Jobs going away to automation is not a new trend, nor is
reduction of consumption due to less disposable income.....there really has been no economic
recovery for the masses since 2008.
And that great Man for Humanity, as some here still believe, Trump has been proposing
things like suspending the payroll tax which would kill the Social Security Insurance
program, pushing back the election to a better time`and deflecting responsibility for the
hundred thousand and counting dead because Empire is designed for profit, not people and
comparison with China's results are telling.
This is what living under the dictatorship of global private finance provides for the
masses which pales in comparison with public finance centered nations.
ll eyes are on the declining number of unemployed. The May and June jobs reports chronicle
the reabsorption of 5.3 million who lost their jobs in the COVID-19 pandemic. Twelve million
jobs to go to reach pre-pandemic employment.
Yet prior to the pandemic, there were 18 million Americans missing from the economy. These
persons were neither employed nor seeking employment -- nor retirees, students or in-home
caregivers -- and therefore were excluded from the Bureau of Labor Statistics count of the
workforce. In order that America emerge from the pandemic stronger than before, a concerted
initiative by federal and state governments to move them back into the economy -- using
existing resources -- must begin now.
...
Research on the social determinants of health finds that employment has a
very strong correlation with positive health outcomes. To exist as a non-participant in
the economy is thus an invitation to dire health outcomes including premature death.
What's more, these individuals are needed as contributors to our national commonweal,
fueling increased economic and social progress. And people engaged in productive activities
are much less likely to engage in negative and destructive behaviors.
... The USDA's food stamp program has a robustly funded, though underutilized, employment
and training grant. States use the excuse of USDA's partial match requirement as a reason to
opt out.
PS likbez@46 reminded me of a line from the movie Reds. Warren Beatty's John Reed spoke of
people who "though Karl Marx wrote a good antitrust law." This was not a favorable comment.
The confusion of socialism and what might be called populism is quite, quite old. Jack
London's The Iron Heel has its hero pointing out even before the Great (Class) War that the
normal operations of capitalism, concentration and centralization, destroyed the middle class
paradise of equal competition. It wasn't conspiracies.
likbez 07.29.20 at 3:30 pm
@steven t johnson 07.29.20 at 3:14 pm (51)
Jack London's The Iron Heel has its hero pointing out even before the Great (Class) War
that the normal operations of capitalism, concentration and centralization, destroyed the
middle class paradise of equal competition.
I think the size of the USA military budget by itself means the doom for the middle class,
even without referring to famous Jack London book (The Iron Heel is cited by George Orwell 's
biographer Michael Shelden as having influenced Orwell's most famous novel Nineteen
Eighty-Four.).
Wall Street and MIC (especially intelligence agencies ; Allen Dulles was a Wall Street
lawyer) are joined at the hip. And they both fully control MSM. As Jack London aptly said:
"The press of the United States? It is a parasitic growth that battens on the capitalist
class. Its function is to serve the established by moulding public opinion, and right well it
serves it." ― Jack London, The Iron Heel
Financial capitalism is bloodthirstily by definition as it needs new markets. It fuels wars.
In a sense, Bolton is the symbol of financial capitalism foreign policy.
It is important to understand that finance capitalism creates positive feedback loop in the
economy increasing instability of the system. So bubbles are immanent feature of finance
capitalism, not some exception or the result of excessive greed.
A weekly survey showed food insecurity at a high in July
Millions are out of work as Congress debates new stimulus
[Image removed]
People wait in their vehicles to receive food at a drive-thru food
distribution event in Chula Vista, California, on May 1.
Food insecurity for U.S. households last week reached its highest reported level since the Census Bureau started
tracking the data in May, with almost 30 million Americans reporting that they'd not had enough to eat at some point
in the seven days through July 21.
In the bureau's weekly Household Pulse Survey, roughly 23.9 million of 249 million respondents indicated they had
"sometimes not enough to eat" for the week ended July 21, while about 5.42 million indicated they had "often not
enough to eat." The survey, which began with the week ended May 5, was published Wednesday.
The number of respondents who sometimes had insufficient food was at its highest point in the survey's 12 weeks. The
number who often experienced food insufficiency was at its highest since the week ended May 26.
Food Insufficiency
A growing number of survey respondents say they don't have enough to eat
U.S Census Bureau Household Pulse Survey
This follows deep recession resulting from the pandemic, which put millions of Americans out of work. Unemployed
Americans have been receiving an extra $600 per week benefit, which is set to expire at the end of July as Congress
debates a new relief package.
Other high-frequency data, including Household Pulse jobs numbers, indicate that the U.S. economic recovery may be
stalling out at virus cases spike around the country and states roll back their reopening plans.
"... The problem for the US is that China is the world's biggest semiconductor market and biggest chip importer on the world ..."
"... these bans are lose lose situation for both the US and China ..."
"... I do not think that Pompeo is smelling blood and moving for the jugular, its not such a situation as China is not that vulnerable, it is more likely to be US elite anger due to the US weakening and China gains during the Covid-19 crisis. ..."
"... Trump strategy of bullying works many times. Supposedly there should be costs for the US in soft power and world opinion, but we are not seeing them. ..."
"... I guess most of the world is too cowardly and prefers to go with the flow. They will abandon the US only after the US lost anyway. Well, it is not an easy situation. Still, the US reactions are very strong and hateful precisely because things are still not good for it and its decline is continuing, regardless of some tactical victories, where in some cases it is a lose lose situation anyway. ..."
A Significant Decline Is Coming For The U.S.james , Jul 27 2020 18:10 utc |
1
by Passer by
In response to several comments in the last
open thread (slightly edited).
Actually there is even some real, and not only relative, decline for the US, for example
US life expectancy is dropping. This is a pretty bad sign for a developed country. Same for
the UK by the way.
On the issue of China gaining during the Covid crisis, they gained in raw power, for
example gained in GDP relatively to the US. And they gained in debt levels too, relatively,
as US debt levels exploded due to the crisis. Now you have V-shaped recovery in China and
poor, W-shaped double dip recovery in the US. With far more debt added.
Of course there is the issue of public relations and soft power. On the one hand the US
blamed China for the pandemic, but on the other hand it embarrassed itself due to its poor
performance in containing the pandemic, compared to other countries. And the US lost points
around the world due to rejecting WHO right in the middle of the pandemic. Europe and
developing countries did not like that at all. Don't forget that Covid also weakened the US
military, they have problems with it, including on ships and overseas bases, and even broke
the biggest US exercise planned in Europe for the last 30 years. And the pandemic in the US
is still raging, its not fixed at all and death rates are increasing again.
Here for example, the futurologists from Pardee Canter that that China gained during the
crisis, in raw capabilities. Future research and relative power between countries is
their specialty :
Research Associate Collin Meisel and Pardee Center Director Jonathan Moyer use IFs
(International Futures) to explore the long-term impact of COVID-19 in China in this Duck
Of Minerva blog post" "Where broad measures of material capabilities are concerned, the
picture is clear: COVID-19 is closing the gap in relative capabilities for the U.S. and
China and accelerating the U.S.-China transition. Through multiple long-term forecast
scenarios using the International Futures tool,
Research Associate Collin Meisel and Pardee Center Director Jonathan Moyer explain on the
Duck of Minerva blog that China is likely to gain approximately one percent of global
power relative to the U.S. by 2030 due to the economic and mortality impacts of COVID-19.
This share of global power is similar to the relative capabilities of Turkey today.
On the issue of the USD, Stephen Roach
also says that there will be a significant decline in the medium term. And the argument
is pretty logical - if the US share in the global economy is declining (and it will be
declining at least up to year 2060), and if the level of US debts is reaching all time high
levels, then the USD will decline. I agree with that argument. It is fully logical.
On the chip/semiconductor issue. David Goldman is skeptical that the US will be able
to stop
China on this :
The chip ban gives the world an enormous incentive to circumvent the US
Basically Huawei still has advanced suppliers, from South Korea and Japan. And
some of them are refusing to yield. The problem for the US is that China is the world's
biggest semiconductor market and biggest chip importer on the world , which gives
enormous initiative for private businesses to circumvent US made equipment in order to export
to China. Then also China is stashing large quantities of chips. By 2025, it should be able
to replace foreign production with homegrown. So these bans are lose lose situation for
both the US and China - yes, this will cause come costs to China up to 2025. But it will
also lead to US companies, such as Qualcomm, to lose the Chinese chip market, which is the
largest in the world, and there is nothing to replace it.
These are hundreds of billions of losses for the US due to gradually losing the most
lucrative market. Thus, in relative terms, China does not lose from these games, as the US
will pay a large price just as China. It is lose-lose situation, but in relative terms the
same. US loses just as China loses. And do not forget that China warned that a full US attack
on Huawei will lead to Boeing being kicked from the country, which is becoming the biggest
aviation market in the world, and will lead to hundreds of billions of losses for that
company too, and will probably burry it under Airbus. China needs lots of planes up to 2028,
when they will replace them with their own, worth hundreds of billions of dollars. Elevating
Airbus over Boeing, which already has big troubles, will be a significant hit for the US
aerospace industry.
So China has cards to play too. On the issue of the US getting some countries to ban
Huawei, it is again lose - lose situation - that is both the US and some of its allies will
lose due to using more expensive 5G equipment and will lose more time to build their
networks. So China loses, and US and some allies lose, but in relative terms things remain
the same between them power-wise, as they both lose. Do not forget that Germany said that
it will continue to use Huawei equipment, and this is the biggest economy in Europe:
Germany's three major telecommunications operators Deutsche Telekom, Vodafone and
Telefonica have been actively promoting 5G in recent years. They implement the "supplier
diversification" strategy and use Huawei equipment in their networks among other vendors.
Peter Altmaier, German minister of economy, told the Frankfurter Allgemeine Zeitung on July
11 that Germany would not exclude Huawei from the country's 5G network rollout. "There can
only be an exclusion if national security is demonstrably at risk. However, we will
strengthen our security measures, regardless of which country the products come from," said
Altmaier. "There is no change in Germany's position," a spokesperson of the country's
Interior Ministry told local broadcaster ARD on July 16.
So we can say that probably half of Europe will be using Huawei. Still, as you said, a
large part of the world will exclude it. Maybe half of world's GDP. Unfortunately things are
not perfect. One bright spot in that is that Huawei is betting on emerging markets, and
emerging markets have higher growth rates than western markets - that is, they will matter
more in the future.
I would agree that the US is harming China, but the damage is not large IMO, as these are
mostly lose lose situations where relative power stays the same. And with time, there will be
significant damages for the US too, such as losing the biggest chip and aviation markets and
the empowerment of Boeing competitors such as Airbus.
So its not too bad in China. Thus, after mentioning all of this, I do not think that
Pompeo is smelling blood and moving for the jugular, its not such a situation as China is not
that vulnerable, it is more likely to be US elite anger due to the US weakening and China
gains during the Covid-19 crisis.
On Hong Kong China had no options. It was a lose-lose situation. If they allowed
everything to stay as it is there would be constant color revolution there and they will be
constantly in the media. Maybe it is better to stop this once and for all. They hoped that
the Covid crisis will give them cover to do this. It did not work very well.
Unfortunately it is right that the Trump strategy of bullying works many times.
Supposedly there should be costs for the US in soft power and world opinion, but we are not
seeing them.
I guess most of the world is too cowardly and prefers to go with the flow. They will
abandon the US only after the US lost anyway. Well, it is not an easy situation. Still, the
US reactions are very strong and hateful precisely because things are still not good for it
and its decline is continuing, regardless of some tactical victories, where in some cases it
is a lose lose situation anyway.
The data shows a
significant decline incoming for the US.
2019 China 1,27 times bigger in GDP/PPP
2030 China 1,8 times bigger in GDP/PPP
US debt to GDP 2019 80%
US debt to GDP 2030 125%
US debt to GDP 2050 230 %
The Highway Trust Fund (HTF) will be depleted by 2021, the Medicare Hospital Insurance (HI)
trust fund by the beginning of 2024, the Social Security Disability Insurance (SSDI) trust
fund in the 2020s, the Pension Benefit Guarantee Corporation (PBGC) Multi-Employer fund at
some point in the mid-2020s, and the Social Security Old-Age and Survivors Insurance (OASI)
trust fund by 2031. We estimate the theoretically combined Social Security OASDI Trust fund
will run out of reserves by 2031.
Military budget (before Covid estimates, Trump budget) 2019 3,2 % of GDP - 2030 2,5 %
of GDP (Could drop to 2,3 % of GDP due to Covid)
Civilian discretionary spending (before Covid estimates) 2019 3,2 % of GDP - 2030 1.8 %
of GDP (drop to all time low) (Could drop further due to Covid)
That is not to mention the big divide in US society, and the ongoing Covid crisis, which
is still not fixed in the US. But is largely fixed in China. Do you see the decline now? They
have a big, big reason to be worried. A significant decline is coming for the US.
Posted by b on July 27, 2020 at 17:53 UTC | Permalink
thanks for highlighting 'passer by's post b... i agree with them for the most part... it
reminds me of a game of chess where pieces are being removed from the board.. it is a lose-
lose, but ultimately, it is a bigger loss for the usa down the road... for whatever reason
the usa can't see that the financial sanctions, bullying and etc, only go so far and others
work around this as we see with russia, iran, venezuala and china in particular...
the one comment i would view differently then passer by is this one - "Unfortunately it is
right that the Trump strategy of bullying works many times. Supposedly there should be costs
for the US in soft power and world opinion, but we are not seeing them." i think the usa is
losing it's position in terms of soft power and world opinion but you won't be reading about
it in the western msm.. that is going to come out later after the emergence of a new reality
is very clear for all to see... the trump strategy is really more of the same and it is like
a medicine that loses it's power over time and becomes ineffective - sort of like
antibiotics...
In other words the western oligarchs will lose out to the eastern oligarchs in the Great
Trade War under the cover of a fake pandemic.
Or perhaps the global oligarchs in general just want the world to follow more in the
Chinese model where the population is more agreeable to total surveillance, social credit
scores and even more out right fascistic government/corp model under the cover of a fake
pandemic.
With respect to "bullying works", in international diplomacy it usually does since weaker
powers have more to lose in a direct diplomatic crisis with a larger power. This is not to
say that they won't push back, but they will be far more strategic in where they do. In
essence, weaker powers have fewer "red lines" but they will still enforce those, while
greater powers have more "red lines", because they have more power to squander on
fundamentally insignificant issues. However, weaker states will still remember being abused
and oppressed, so when the worms turns while they won't be the first to jump ship, they will
be more than eager to pile on and extract some juicy retribution once it is clear they will
not be singled out. I suspect the Germany will be the bellwether, when (if) Germany breaks
from the US on a key aspect on the transatlantic relationship that will be the signal for
others to start jumping ship. If Nordstream 2 go through, then there will be a break within 5
years; if Nordstream is killed, then the break might be delayed for 5 years or more but there
will still be a break when the US pushes Germany to support the next major US regime change
war in the Middle East.
The engineered collapse is being called the "Great Reset" by many outlets already. The
covid nonsense is just a cover for it. Instead of Saudi Arabian terrorist it is a basically a
harmless coronavirus. Just in the days immediately following 911 the "terrorist'' threat was
so overhyped that security theater was employed everywhere. Now sanitation theater is the new
act in town.
Where does anyone get these numbers about military spend as a % of gdp? Have you listened
to Katherine Austin Fitts on Corbett Report?
Posted by: oglalla | Jul 27 2020 18:27 utc | 4
Good to see your comment. Lots of anecdotal evidence nationwide about store closures and
many vacancies in business centers, particularly within economic engines of NYC and elsewhere
along the East Coast. IMO, lots of self-censorship by business media while the reality
reported by Shadowstats goes ignored. As for losing the status of #1 economy, that was always
going to occur once China or India became a moderately developed economy. It just happened
that China is far more efficient politically which allowed it to become #1. And until India
improves politically, it will continue to lag behind numerous smaller nations. Too bad there
isn't a place where one can bet on the great likelihood that the Outlaw US Empire will
outperform all nations in the production of Bullshit and Lies.
I also disagree with the comparison between USA and China gdp and other statistics.
China is not simply competing against USA but against the Empire: 5 eyes, NATO, Euro
poodles, Israel and the Gulf States and others like Mexico, Columbia, Brazil, India.
Anyone that is minimizing the conflict and the advantages of one side vs another is doing
a disservice.
CitizenX @ 26
Agree with your tone and content.
Particularly the third from last paragraph. I think people are missing by choice the growing
ground-swell of public opinion US wide as this blog shows, a multi-faceted detereation of US
political morals and legality.
Combined with a world wide growing awareness of how deranged American leaders now are.
Haterd consumes itself as dose greed.
My ear to the ground tells me, the protests at present are growing some in full sight some
not.
This is not buseness as usual. Then return to normal. The mood now is -- -- - let's settle
this thing once and for all, let's get the job done.
So my personal opinion ? we will see a US regime chainge faster than a lot here predict. Much
faster.
Passer by is correct, no doubt, thanks to incompetent leadership in the US, but this
economic horse race doesn't matter.
What matters above all is that nations should hold it together, "it" being sustainable,
survivable support systems capable of providing for mass populations.We have failed that test
here in our encounter with this pandemic. We have failed to develop a sustainable financial
system. We have failed to meet any sort of environmental goals. We don't even have
environmental goals! Our electoral system doesn't work, either, proof being the election of
this idiot atavistic rich boy. If anyone thinks the election of Trump reflects the will of
the majority of Americans, they are part of the problem.
China is in deep trouble. The CCP's greatest challenge is simply to hold "it" together.
The Party has to perform economic miracles or the country will collapse. Those groups not
satisfied with life in the PRC have no outlet for their voices to be heard. They cannot
protest. They are under the strict control of an increasingly sophisticated but tiny elitist
clique that is only 6.5% of the total population. This clique will not relinquish power and
permit more democratic expression. On the contrary, more and more suppression of dissidence
of any sort will happen. The social scoring system is an especially insidious program of
social control. China's collectivism has turned the country into an ant hill. It is extremely
productive, but people are not ants.
Passer by is looking at the world through a keyhole.
Nightmare' conditions at Chinese factories where Hasbro and Disney toys are made
Investigators found there were serious violations at the factories which were endangering
workers.
In peak production season, employees were working up to 175 overtime hours per month.
Chinese labour law restricts monthly overtime to 36 hours per month, but the report alleged
factories would often ask local governments to implement a "comprehensive working hour
scheme" to override existing legislation.
One wonders if China will run into the same problems of the US in the not too distant
future?
"The End of Sweatshops? Robotisation and the Making of New Skilled Workers in China"
Over the past four decades China has undergone a process of massive industrialisation that
has allowed the country to achieve remarkable economic growth. Because of its large
manufacturing capacity based on a seemingly unlimited supply of cheap migrant labour in light
industries, China has come to be known as the 'workshop of the world'. However, since the
early 2000s the country's labour market has experienced a remarkable transition from labour
surplus to a shortage of labour, which has led to sustained increases in the wages of
ordinary workers. In such a context, since 2015 robotisation has become a driving policy for
industrial upgrading for manufacturing in China, with the slogan 'replacing human workers
with industrial robots' (机器换人) frequently appearing in media
reports and official policy documents.
The early date of "full spectrum dominance" (1996 not 2010) suggests to me that the
doctrine was related the "end of history" thinking of that time. USA Deep State believed its
own propaganda.
It also strengthens my case for the proximate cause for the current conflict originating
in 2014 when the US Deep State suddenly realized the threat that Russia and China Alliance
posed to their plans for global domination.
Not only had they believed their own propaganda but they had overreached with their
attempt to force Russia to capitulate and had been distracted by Israel interests that wanted
to use USA for the greater Israel project.
When I wrote my economic analysis paper on China in 1999, it was quite clear that the 21st
Century was going to become the Asian Century as the Outlaw US Empire would be eclipsed by
Asia's economic dynamism. 20+ years later, my prediction holds true, and it's even stronger
now than then with Russia's resurgence. Both outcomes clearly go against the 500+ years of
Western Global Hegemony and goads numerous people. For students of history like myself,
what's occurring isn't a surprise thanks to the West's adoption of--or should I write forced
indoctrination into--the Neoliberal political-economic philosophy, which is akin to that of
Feudalism since it benefits the same class as that of the Feudal Era. China too was once
Feudal and suffered a massive Civil War that destroyed much of its structure, a conflict
known to the West as The Taiping Rebellion that lasted
almost 14 years, from 1850-1864. One might say that was the first half of China's overall
effort to overthrow Feudalism and Western Imperialism, as the second half began in 1927 and
finally concluded in 1949. That amounts to a large % of years for a newbie nation like the
USA; but for a nation like China inhabited by humans for over 1.3 million years and with
4,500 years of recorded history, it's really just another Dynastic Rollover--something
inconceivable to non-Asians.
In reality, China's a conservative nation, culture and society with a several thousand
year ethos of Collectivism, although that allowed a significant divergence in social
stratification due to the ruling Feudal ways. Those who have read The Good Earth have
an excellent grasp on the nature of Chinese Feudalism, which was embodied by the Kuomintang
or KMT--as with Feudal lords, KMT leaders were deemed "Gangsters" by US Generals and
diplomats during and after WW2. General Marshall wrote in 1947 it was clear to him that the
KMT would lose to the CPC, that there was no good reason to throw good money after bad, and
it would be best for the USA and the West to accept the fact of a Communist China (all noted
by Kolko in his Politics of War ). Contemporary China when compared to China as
depicted in 1931 by Pearl Buck is one of the most amazing human achievements of all time, and
the conservative Chinese government intends to keep it that way through a series of well
thought-out plans. That's the reality. It can be accepted and worked with as numerous nations
realize, or it be somehow seen as unacceptable and fought against in what will prove to be a
losing effort since all China need do is parry the blows and reflect them back upon its
opponent using skills it developed over several thousand years. It would be much easier to
join China than fight.
It's misleading to assess the National Military Capability of various countries in $US terms.
The West's M-IC is privately owned and puts shareholder profit before all else. And the
owners of the Western M-IC also own the politicians who facilitate and approve the rip-offs.
China and Russia's M-IC are owned and controlled by The People via the government and can
therefore get $2+ of value for every $1 invested. For example, one can buy some very nifty
twin-engine bizjets for less than half the price USG pays for a flying Batmobile (F-35) - a
glorified hot-rod with guns.
There is definitely a decline in the USA. Deaths of despair and from the coronavirus are
too great to ignore anymore. 150,000 dead and counting are not nothing. The Western Empire
has fallen. The U.S. federal government failed. The Imperialists are quarantined at home.
The question is if the 19th century North American Empire from Hawaii to Puerto Rico
survives. The Elite have bet it all on a vaccine or patentable treatment to give the
Pharmaceutical Industry billions of dollars. However, quick cheap paper monoclonal antigen
tests would make testing at home before going to work or school practical.
This would end viral transmission and the pandemic. No drug jackpot for the 10%. Instead
public health is ignored as Americans die. The silence is deafening. The protests in the
Pacific Northwest are not about slavery. They are about the 90% of Americans being treated as
disposable trash.
150,000 dead and counting are not nothing. The Western Empire has fallen.
No offense VV but I can't help thinking that you (and maybe some others) are talking past the
issue.
To be clear, the issue is this: Will the West's decline play a role in the US/Empire's
ability and willingness to confront Russia-China? Or is the oft-heard refrain that US/Empire
can not 'win' against China (implying that they shouldn't/won't bother trying!)
because of its decline (usually attributed to 'late-state capitalism') just wishful
thinking?
Virtually everyone here has agreed that the West - especially USA - hasn't fought the
virus correctly and with vigor. And virtually everyone agrees that there has been a relative
decline in USA/West and in some areas an absolute decline.
IMO what is ignored is that:
from the perspective of the US 'Deep State' or Western power-elite the failure to fight
the virus is a net positive if the repercussions are blamed on China (in addition to
other 'positives' from their perspective: saving on cost of care to elderly, boosting Big
Pharma profits, etc.) -
In fact, deliberate mistakes and mounting only a token effort (as we've seen)
is exactly what we should expect from a craven power-elite that want to further their
interests;
the overall decline, while troublesome - especially to the ordinary blokes who get the
short end of that decline - is not yet significant enough to prevent USA/Empire from
countering the Russia-China 'upstarts' aggressively.
I likened the hopefulness of the anti-Empire crowd about Western decline to their hopefulness
they previously expressed regarding Turkey. "Erdogan is turning east!" proved to be wrong.
Posted by: Andrei Martyanov | Jul 27 2020 19:01 utc | 14 Within last 10 years China built
surface fleet which in terms of hulls (and "freshness") rivals that of the US. US economy
would have it bottom falling off if it tried to accomplish a similar task.
Nice to see you here again. Yes, I mentioned the relative navy building in the previous
open thread. China's navy will exceed US capability by 2050 and be on parity by 2030-2040
according to reports I've read. That's just ten years to twenty years from now.
Result: US gets kicked out of the South China Sea and has to share the Pacific, Indian
Ocean (as will India with gnashing of teeth) and even the Med with China. China will
undoubtedly project naval power all the way to the Med in support of BRI in the Middle
East.
Posted by: Jackrabbit | Jul 27 2020 20:43 utc | 27 There is decline, and while it has been
mostly relative it is also accelerating - but that hasn't significantly constrained
USA/Empire's response to the upstarts.
I agree. US military power isn't going away in ten years or twenty. China may achieve
parity at some point (and can do serious damage now). But that doesn't obviate the fact that,
short of nuclear war, the US is still in a position to throw its weight around and will
continue to do so until forced back by a (hopefully conventional) military defeat of serious
proportions, i.e., not just "give up and go home". And economic woes won't change that as
long as the taxpayer can be fleeced - and they will be, for at least a few more decades.
@ 62 A.L. "Would it be a surprise to you than there are many many protests in China at the
grass root level everyday?"
There are indeed protests all the time, which is the fire under the local Party leaders
that keeps them dancing. Usually the protests are against local corruption or mismanagement
and are not serious. People can get what they want this way. Each year at the general Party
gathering, however, special note is taken of "mass incidents", that is, protests on a larger
scale, and overtly political events such as those in the Uighur province of Xinjiang and in
Hong Kong. Any protest that challenges the control of the Party is not permitted. The current
protests in the US could not happen in China because they challenge political orthodoxy. The
Chinese don't just roll over on command for the CCP to scratch their bellies and the Party
knows just how volatile the political situation could be if mishandled. China is developing
into the ultimate surveillance state. There are lots of Chinese like that little guy that
stood down the tank at Tienanmen in 1989. Eventually that guy is going to say: "There is some
shit I will not eat!" The Party knows this.
Several years ago (close to 10) I noted that the US would be bringing back US companies
from China, that it would actually subsidize their relocation. It's only logical. I saw China
as becoming hostile to US corporations: in light of how things are going today it's the US
govt becoming hostile toward US companies in China. Make huge profits and then get free money
to return back to the US: and be welcomed as victorious troops arriving back from some
glorious war.
It's Musical Chairs. As the music plays more and more chairs are being removed. Capitalism
has been the most efficient economic system in which to trigger an economic collapse. WTF did
people think would happen with basing economic systems on the impossible, basing on perpetual
growth on a finite planet. All of this was readily foreseeable using SIMPLE MATH.
China is in deep trouble. The CCP's greatest challenge is simply to hold "it" together.
The Party has to perform economic miracles or the country will collapse.
How do you square your dire prediction of China's collapse with the
Edelman trust barometer of 2019 (warning: PDF file), where China scores 88 on the trust
index and the US scores 60?
The COVID-19 pandemic revealed that all the "leading" western countries are unable
to handle even a relatively moderate public health crisis. The neoliberal economic model
considers any aspect of society that isn't generating a profit as ideologically unsound and
targets these areas for "reform" (i.e. privatization).
Sometimes this is done outright, as when a public utility or service is sold to a private,
for-profit operator (e.g. British Rail in the UK). But when the government thinks the public
will resist and push back it is done by stealth, usually by starving the targeted
service/organization of funds and then farming out parts of it to for-profit companies in the
name of "efficiency", "innovation", "resilience" or some other neoliberal doublespeak concept
(they all mean only one thing of course: PROFIT). This is currently happening to the US
Postal Service.
Every public healthcare system in the so-called "advanced" nations encompassed by the
EU/NATO and Five Spies has been underfunded and subjected to stealth privatization for
decades. Furthermore, people in neoliberal societies exist to serve as fodder and raw
material for "the economy" (i.e. the plutocrat or oligarch class) and there is no mechanism
to deal with emergencies that can't be milked for a profit. Hence, the half arsed,
incompetent, making-it up-as-they-go-along response to COVID-19 that simply writes off older
and sick people as expendable.
Neoliberalism began as a US/UK project, that's why poverty, crime, inadequate health care
and social services etc. and governmental and societal dysfunction generally is more advanced
there than in, say, Canada and Germany.
So, yes, the US is in decline, maybe even collapsing, but that doesn't mean the imperial
lackey countries are immune to the forces tearing apart the United States. They are just
proceeding down that road at a slower pace. If the US falls, the west falls...globalization
takes no prisoners.
I live in Canada where sometimes people get a bit smug about how great everything is here
compared to the US. In British Columbia, for example, opiate overdose deaths are at a record
high and have killed many many more people than COVID-19 since the pandemic began. Housing in
cities like Vancouver is increasingly unaffordable, there aren't enough jobs that pay a
living wage, permanent homeless camps exist in city parks, there are entire blocks where
people who live in their vehicles park etc.etc.
The reality is that it's the west that is in decline, not only the United States.
China is developing into the ultimate surveillance state.
Posted by: jadan | Jul 28 2020 1:30 utc | 95
But don't you see, dear jadan, it is for the good of the people, if only the rest of the
world could see the benevolence of Big Brother we would all be much happier at least that is
what the thought police has told me to think. One government, one heart, one mind. Long Live
the PRC revolution./s
Amidst all of the nonsense in the discussion section of the following link, I believe
there are some germane comments from individuals that work in the semiconductor space that
touch on some of the challenges China's chip industry faces. link
I hope their hiring of 3,000 experienced chip engineers accelerates their learning curve.
Developing a chip industry on a moment's notice, let alone competing with Samsung and TSMC,
is no small chore.
One item not mentioned in the above article is whether China could build many consumer
components based on domestic 14nm (or larger) technology. Given China used to spend more
importing chips than oil, I assume that even less advanced chips used for TVs, etc. as
opposed to cellphones, would be very helpful for China's consumer electronics
manufacturing.
They are also making some strides in the flash memory and CPU space, but production
quantities are still very low.
Health, education, infrastructure, research and development. The backbone of prosperity.
These will all continue no matter trade war or cold war but barring hot war. There must be a
doubling time for this - something like an R0. Cold war and sanctions will only serve to
increase R&D
US mistakes, hubris ect move in the opposite direction, mistakes multiplying
mistakes.
@Schmoe 105
thanks, interesting. Here is a complementary tho less detailed article on some of the same
topics I ran across recently: China Speeds Up
Advanced Chip Development [semiconductorengineering.com]
One important point, clearly visible in the tables in the seekingalpha article linked by
Schmoe, is that the ultra-small 14nm/7nm stuff is for specialized (but strategically
important) applications. Most consumer electronics, industry, and everything else is 40-60nm
and up, although of course smaller has benefits to older applications in improve power (i.e.
mobile applications and servers) and cost (higher density/wafer)
US as an one excuse for its current hostilities against China is 'intellectual property'
theft. Makes me think of ninja Chinese sneaking around removing peoples brains.
But back to semiconductors. One of China's biggest imports is chips, mostly made by machines
using US tech. Many industries are highly specialized and it often makes sense from small
community level to national and global level to by a product from those that specialist in
that product.
China has been content to buy chips, but that will now change due to necessity. Yankistan can
now expect to get its brains hacked, but I am also reminded of the Scientists in the
Manhattan Project being the ones to pass on much information to the Soviet Union.
Yankistan will be leaking like a sieve. I guess that's why both oz and the poms are beefing
up their secret police laws. Wont be long before we are getting shot trying to run through
checkpoint charlie to the free east.
It is clear that the US is in decline. It is clear the US military is bloated and
overpriced but it can still turn most countries into rubble (even without using nuclear
weapons) and has done a few recently. Mostly the US uses its reserve currency status and
control of financial networks to punish countries that do not go along with its program. Can
you say sanctions. but as Hemingway said about bankruptcy - it happens slowly and then all at
once - is probably how it will continue to go. It is even losing its technological advantage.
Boeing used to be the leader and made reliable planes. Now they sometimes fall out of the
air. Things like high speed railways used to be the kind of thing the US did well. Now
California can't get one built. China has built thousands of miles of them. Russia built a 19
kilometer bridge to Crimea in 2 years after 2 years of planning. It appears to be competently
built on time and on budget. Do you really think this could happen in the USA now? In the 70s
the US was the leader in environmental actions. I wonder if the present day Congress could
even pass bills comparable to the Clean Air ACT or the Clean water bill. US national politics
are a mean joke. Our choice this year for President - two 70+ old white men with mental
issues. Our health system is overpriced. Medical bills are one of the main reasons for
personal bankruptcies. As others mentioned the US life expectancy is falling. As Dmitri Orlov
who watched the Soviet Empire fail said - Empire hollowed out the Soviet Union till it
failed, I see it doing the same thing in the US.
The current 'adjustment' in the USD & living standards is just what the doctor ordered
to allow elites to roll out "tech wave 2" - there is precious little gain to be had from
further staffing & wages cuts to the average shit-kicker, so now the bourgeoisie,
medicos, architects, academics, writers plus all the rest of the tertiary educated types who
blew hundreds of thousands on an education guaranteed to keep them employed, are about to be
tossed on the scrap heap.
We already know from previous stunts such as 911 & the 2008 'global financial
meltdown' that those most disadvantaged by this entirely predictable destruction of lives
will be easily diverted into time-wasting and pointless arguments about the real cause
of the mess.
This will allow the elites to use that diversion to funnel all federal funds into
subsidising the capital costs of the retooling, as both parties have begun to with the
despicable CARES Act, supported by the mad christian right in the senate, as well as the
so-called socialists in the Congress squad.
All the Cares Act does is inject capital into big corporations, boosting their stock price
& leaving citizens to lose most of their unemployment benefit. Citizens get evicted from
their homes. This time it will be tenants as well as home owners.
Both of those factions of elite enablers are going to create a great deal of noise and
crass finger pointing. The squad will jump up and down about this being a deliberate attack
on citizens by the elite while senate fundies will claim that this 'retooling' is the result
of unreasonable pay & working conditions demands by the communist unions.
What should be a universal expression of disgust will be reduced to just another culture
war.
Neither will ever admit that it is far too late to be worrying about cause, it is time to
concern themselves with effect, because to do so would create focus back on where the money
was going at time when it is important to be saying "everyone is hurting, including the
elites". Fools.
Eventually when the deed has been done assorted scummy senators & creepy congress
people will announce "It is time to move on" That will be a signal that treasury tanks are
dry, the elites have gotten everything which wasn't nailed down so now the citizens can roll
clawing & scratching in the mud.
I have no doubt that will be the direction of discussion here as well, it is much easier
to sit at a keyboard digging out obscure 'facts' that 'prove' one point of view or another,
than it is to leave the keyboard behind and put work into resisting the elites and in doing
so forcing a change that is more citizen friendly.
With the return of Russia to the geo-political arena, US can no longer destroy counties at
will through conventional weapons nor color revolutions and AQ freedom fighters.
Trump decided to go nuclear, so Russia placed its nuclear umbrella over it allies.
US can no longer destroy countries at will. It can attack a country and risk ensuring its own
destruction.
So back to hybrid war and proxie war ... but now the field is narrowed down to five-eyes and
in the case of China - India.
So to keep Russia out, yankistan has to rely on conventional war and hybrid war, though we
are looking at a country where the lunatics are in charge of the asylum so anything could
happen.
The MNCs producing it, the MSS, NSA and GCHQ, the IoT idiots and all authoritarians on the
globe. Consumers are happy with 3G: many don't even have 4G reception - give that to
them.
With IoT more unemployment, more electricity and Internet dependency, more chance of hacks
or natural disruptions (solar flares), more 1984.
The Chinese Communist Party wants a tributary international system where smaller countries
are deferential to larger powers, instead of a rules-based international order where
small countries enjoy equal rights.
The US/UK declining won't bother most billionaires with those passports: they just buy any
other. Stuck are the millions of others.
Equally "China" ascending brings joy for all billionaires around the globe holding stock
depending on Chinese near monopolies, including Anglo-es.
Some middle class Chinese are beginning to see that dying "rich" is is very limited goal,
as zero can be taken to the Here After and the price for this Now is too high. Money is not
everything. Welcome to this select club, Chinese brothers and sisters. Sure, a bit is good to
live but amassing is a waste of precious time and attention.
The US lacks the capacity to erect an "economic wall" that can stop China's
development. Trump's "trade war" was an attempt to do just that, and America got
steamrolled.
To be sure, the US can attempt even more irrational and desperate acts such as trying to
seize assets owned by Chinese people and organizations in the US, but that would be America
shooting itself in the head rather than just the foot.
The US simply does not posses the ability to "take the wind out of China's sails" .
That is not something that is within America's power to accomplish without going kinetic by,
for instance, trying to enforce a naval blockade of China's maritime transport routes. At
this point there are no economic measures America can take that will not do vastly more
damage to America than to China. Both trade war and bio attack were the best options America
had, and America has suffered grievously from those efforts with relatively minimal impact on
China. China's economy remains fundamentally strong while America's economy is
devastated.
As for disrupting China's international development efforts, America has been trying its
hardest for years now with the only impact being minor delays in China's plans. The only way
to truly disrupt China's international development efforts would be to offer a better deal,
but America no longer has anything to offer that is better. The only option left to America
to delay the BRI for longer would be a kinetic one, and the door is closing on that.
from the perspective of the US 'Deep State' or Western power-elite the failure to fight the
virus is a net positive if the repercussions are blamed on China (in addition to other
'positives' from their perspective: saving on cost of care to elderly, boosting Big Pharma
profits, etc.) -
It will not be possible to blame China, simply because no one believes the US press any
longer, and there is no convincing the woman or man on the street that US handling of the
virus has been in any way competent. We may not understand its virulence, and we perhaps
don't understand yet how to cope with it, but the example of China has been clear from the
earliest moments, and that speaks louder than any false rhetoric can claim.
We know what we have been experiencing in comparison with others who acted with celerity,
and that basically was what was needed. The US chose to go it alone, at its peril. It stuck
by a set of rules it had made for itself in these last years - rules which have not benefited
the people at large. It all comes down to that.
I would not quote a Zionist dominated source like Wikipedia on anything politically
sensitive and the article you refer to is in any case 10 years out of date. However if you
read it it refers to two foreign-owned firms, and it mentions that there are (In 2010)plans
to double wages in the next ten years which has happened. The article also states"
Strikes are not new in China. Chinese authorities have long tolerated limited, local
protests by workers unhappy over wages or other issues.[40] The Pearl River Delta alone has
up to 10,000 labor disputes each year. In the spring of 2008, a local union official
described strikes as "as natural as arguments between a husband and wife".[41] The Chinese
government sought balance on the issue; while it has recently repeated calls for increased
domestic consumption through wage increases and regulations, it is also aware that labour
unrest could cause political instability.[42][43]
In response to the string of employee suicides at Foxconn, Guangdong CPC chief Wang Yang
called on companies to improve their treatment of workers. Wang said that "economic growth
should be people-oriented".[44] As the strikes intensified, Wang went further by calling
for more effective negotiations mechanisms, particularly the reform of existing trade
unions. At the same time, authorities began shutting down some websites reporting on the
labour incidents, and have restricted reporting, particularly on strikes occurring at
domestic-owned factories.[46][47] Guangdong province also announced plans to
"professionalize union staff" by taking union representatives off of company payroll to
ensure their independence from management influence.
Which indicates to me that the suicides alerted the government to the fact that
these firms were making the lives of their workers miserable and took steps to improve the
control of them. They obviously realized that the Union officials had been bought by the
management. I wonder how the British government or the USG would have reacted? What I am
certain about is that the MSM would have been much less enthusiastic about reporting it.
IMO, taking a good look at Brazil's situation provides close to a mirror image for those
within the Outlaw US Empire having trouble seeing clearly. Too often we forget to look
South at the great sewer and its misery US Imperialism's created. It may be getting
defeated in Eurasia, but it's winning in Latin America.
That sewer of misery was running full flush during Susan Rice's rise through the
ranks.
National Security Adviser to Obummer 2013 - 2017,
US Ambassador to the UN 2009 - 2013
Do read the rest:
And well beyond South America.
Now she is close to seizing the prize of VP to Biden. She is a iron war horse of
formidable capacity and mendacity given her past roles. She has few redeeming features. She
will conform exactly to the dictats of the permanent state and she will easily step right
over Joe Biden as he either falls or is taken down at the most opportune time.
What drole sense of humour thought of this - the hapless Trump squeezed between two black
American presidents. Seems like something the Clintons dreamed up.
"It was asked upthread if the US citizenry would trade its no-longer existing Superpower
status for decent living standards.... There're only two forces keeping the American people
from attaining freedom from the above fundamental fear and having lifelong security: The
Duopoly and its Donor Class, the Rentier Class of Feudalistic Parasites that are the enemy of
virtually all humanity."
The US citizenry will choose decent living standards in a heartbeat, but the present
arrangement for eating off the labour of deplorables is just too profitable for the Duopoly
& Donor Class to be permitted to change for a couple decades more.
Perhaps they will move on when there is no more meat on the American corpse, or when they
have built up a sufficiently large group of useful idiots in China to begin eating off the
backs of deplorables with Chinese characteristics.
Anything is possible, with the right amount of moolah, even overcoming Confucian morals.
Joshua Wong comes to mind, who not only does idiotic, but actually looks idiotic.
On the issue of the USD, Stephen Roach
also says that there will be a significant decline in the medium term. And the argument
is pretty logical - if the US share in the global economy is declining (and it will be
declining at least up to year 2060), and if the level of US debts is reaching all time high
levels, then the USD will decline. I agree with that argument. It is fully logical.
Quibble on the significance of US dollar; from the cited article "Roach is calling for the
dollar to soon decline 35% against its major rivals". That would take the EURUSD back to its 2008 high. Not something
that changes the balance of power.
But I think the rest of the story is true.
Certainly in the US we have everything we need to reverse our decline, build a better life
for everyone living here, and stop trying to "compete" by sabotaging everyone else. Sadly
zero sign of this being a priority on either side of the mainstream political spectrum.
If JP Morgan, Gold Sacks and other major asset managers are betting on this 'bear' you can
be damn certain that they are doing everything in their power to make it a reality. They will
shakedown every gutless, spineless politician/health official/scientist they can find to
ensure their profits keep rolling in.
Yes, the conclusion we must take from this crisis is that the USA (and most of the West,
if not all the West) is now declining in absolute terms, not only in relative ones. That's
what makes this 2020 crisis special for the time period analyzed.
Relative decline is nothing special for the Americans. During the High Cold War itself
(1945-1969), the USA itself declined relatively to Japan, which simply grew even more. You
can even talk about a relative decline in relation to Germany during the same period, at
least in some areas. The difference lied in the fact that Germany and Japan were minuscule
countries under full military control and were fellow capitalist nations. When necessity
came, the USA simply ordered both countries to value their currencies in relation to the USD
and decades of geopolitical gain evaporated in five years. This is not the case with
China.
But what fascinates me more is the flux of History. The USSR was better than China in
almost every single relevant aspect in the 1950s-1960s, but it lost the Cold War because it
had the bad luck to face the capitalist powers at their historical best. China, being much
inferior, is being able to gain terrain over the capitalist powers for more than 40 years and
counting for the simple fact they were able to survive and live to see capitalism in its
decline.
That's why Putin correctly stated the end of the USSR was the biggest catastrophe of the
20th Century. If it could survive for mere 17 years more, it would've lived to face
capitalism on all fours, after the 2008 meltdown, and get a second chance.
China, being much inferior, is being able to gain terrain over the capitalist powers for
more than 40 years and counting for the simple fact they were able to survive and live to see
capitalism in its decline.
Posted by: vk | Jul 27 2020 19:35 utc | 21
I would say it was that China began opening itself up more to capitalist oligarchs and
intergrating itself into the world economy beginning with the Nixon years. In particular the
western oligarchs shipping their manufacturing base to china. That cheap Chinese labor was
too hard to pass up.
The engine of capitalism is cheap labor, slave labor if possible.
Now China has a decent size consumerist/middle class which gives it the leverage along
with the manufacturing. It not magic
Exactly so. Anyone can massage those data points to say anything they want. And that is
precisely what's being done by the USG. Since admitting that they are in decline is a non
starter for them, these types of numbers are always trotted out. That isn't to say though,
that everybody isn't massaging their numbers as well to cast them in a shining light for
whomever the audience for which it is intended.
I cannot take seriously any analysis that suggests another crippled fiat currency will
somehow supplant the USD. The Euro? That is laughable. Cleanest dirty shirt analogy still
holds true. Look at Japan over the past 30 years of debt accumulation to see how long this
can go on. The yuan is no better given China's own debt frenzy since 2008. The only economy
that is structured to weather the next 20 years of decline is Russia with abundant land,
ample hydrocarbons, a functioning domestic industrial/agricultural base, effective military
deterrence, little debt and ample gold reserves. Putin is is far from perfect but he's done
an incredible job preparing his country for what comes next.
All fiat is set for a dramatic decline against real assets. You need only look at all fiat
currencies dropping against the price of gold which is a surrogate for all hard asset prices.
Dirty fiat shirts one and all.
You can also just search for the Kitco Gold-Currency Price page if you do not wish to
click on the shortened link (but I confirmed destination on checkshorturl).
It's no longer the grand chess board in Eurasia. It is now a whack-a-mole policy.
The hydra's head (BRI) that is flowing out of the dragon will be popping up here and there.
Wherever it does, it has to be whacked like a mole. There is so much whacking (no pun
intended) that can be done before the empire exhausts itself. In a logistics game, the empire
will always lose, to the local actor with enough resources to devour it.
We've also seen that other local actors /empire lackeys (I'm looking at you India) can't be
much help stopping the hydra either.
On Roach's comments, when a Yale University senior fellow and former Morgan Stanley Asia
chairman tells you that the USD is about to drop precipitously, you can bet he's working
behind the scenes to make that exact event happen. Of course it's logical. He's part of the
creation of the chain of logic.
Posted by: Anonymous | Jul 27 2020 18:48 utc | 9
Bingo! Engineered collapse under the guise of a fake pandemic.
Nice review. Recall Global Times reported China's GDP rose 3.2% in 2Q versus a 5-9%
drop for Outlaw US Empire. Also recall the need to deal with Real GDP, not the falsified
numbers provided by USG that count negatives as positives. The following are Shadowstats "Economic Headlines" :
"Second-quarter 2020 Real New Orders for Durable Goods plunged an annualized 55% (-55%),
down 22% (-22%) year-to-year / June Cass Freight Index® continued bottom-bouncing,
running counter to the 'recovered' Retail Sales / June Building Permits and Housing Starts
saw some rebound in the month having collapsed respectively at annualized rates of 56% (-56%)
and 76% (-76%) in the quarter / Not-credible inflation-adjusted headline June Retail Sales
recovered pre-Pandemic levels in a stronger than expected real 6.9% monthly gain (nominal
sales gain of 7.5% held just shy of recovery) / Contracting for the third consecutive
quarter, second-quarter real Retail Sales fell at a 24.2% (-24.2%) annualized pace / On top
of downside revisions, June Industrial Production gained 5.4% in the month, fell 10.8%
(-10.8%) year-to-year, with Second-Quarter 2020 activity collapsing at a 42.6% (-42.6%)
annualized pace, following a first quarter drop of 6.8% (-6.8%)."
From the sidebar comment of 23 July:
"Reporting of Deepest-Ever GDP Decline Looms on July 30th • Annualized 49.1% (-49.1%)
Quarterly Plunge in Household Survey Employed Was Consistent With a Real Second-Quarter 2020
GDP Annualized Collapse of 50% (-50%) and Year-to-Year Drop of 16.1% (-16.1%) •
Potential Third-Quarter 2020 GDP Annualized 20% Rebound Still Would Be Down 12.7% (-12.7%)
Year-to-Year, Rivaling Great Depression Depths and Post-World War II Readjustment."
Although it's yet to be updated for 2Q figures, here's the GDP
chart , which in Real Terms is worse than the blue line depicts
So, contrary to JR's assertions, the Outlaw US Empire is in economic freefall. And unless
the eviction moratorium is extended nationally, a massive crisis awaits as noted by the
article I linked to in the Week in Review thread. Add the fact that most of China's ASEAN
trade partners have recovered from COVID while BRI Eurasian projects continue, China's
economy will continue to grow, which is where its focus is at as reiterated almost daily by
China's media and reported here.
As for the US Dollar, this William Pesek
item reviews the many times it was predicted to drown but didn't, although this time may
be different:
"More recently, Stephen Roach of Yale University has hit the speaking circuit to argue
that the 'TINA defense' – 'there is no alternative' – is no longer operative.
"'If TINA is the dollar's only hope, look out below,' Roach wrote in a
recent Bloomberg column . 'America's saving and current-account problems are about to
come into play with a vengeance. And the rest of the world is starting to look less bad.
"'Yes, a weaker dollar would boost US competitiveness, but only for a while.
Notwithstanding the hubris of American exceptionalism, no leading nation has ever devalued
its way to sustained prosperity.""
There're others cited by Pesek who provide decent reasoning for downgrading the dollar
which he balances against past history, thus leading to this conclusion:
"Yet the risk of a reckoning is rising along with awareness of how the Trump era is
exacerbating all of America's imbalances, and creating new ones few could have
predicted."
What's certain--a great many US citizens are going to experience incredible financial pain
for a considerable length of time, which may or may not alter the basic political situation
within the Outlaw US Empire.
Absolutely false numbers since actual Chinese economy is much larger than American one.
With or w/o PPP adjustments. I would go out on a limb here and state that at this stage in
2020 real size of Chinese economy is about 2.5-3 times larger than that of the US. In other
words--it already dwarfs US economy.
Military budget (before Covid estimates, Trump budget) 2019 3,2 % of GDP - 2030 2,5 % of
GDP (Could drop to 2,3 % of GDP due to Covid)
These are also meaningless numbers since they do not account for actual military
capability, especially when based on a fraudulent US GDP numbers. Within last 10 years China
built surface fleet which in terms of hulls (and "freshness") rivals that of the US. US
economy would have it bottom falling off if it tried to accomplish a similar task.
Amid all the strange, alarming and exciting things that have happened lately, the fact that
real long-term (30-year) interest rates have fallen below zero has been largely overlooked. Yet
this is the end of capitalism, at least as it has traditionally been understood. Interest is
the pure form of return to capital, excluding any return to monopoly power, corporate control,
managerial skills or compensation for risk.
If there is no real return to capital, then then there is no capitalism. In case it isn't
obvious, I'll make the point in subsequent posts that there is no reason to expect the system
that replaces capitalism (I'll call it plutocracy for the moment) to be an improvement.
But first let's look at the real 30-year bond rate. The US Treasury is currently offering an
inflation-protected 30 year bond at a rate of -0.3 per cent. That is, if you buy the bond at
say, age 35, you can get your money back, less a 10 per cent reduction in real value, when you
are 65. This rate has fallen from 2 per cent, when the bond was introduced in 2010, and started
declining sharply in late 2018, before the pandemic, and while the Federal funds rate was
rising.
In thinking about the future of the economic system, interest rates on 30-year bonds are
much more significant than the 'cash' rates set by central banks, such as the Federal Funds
rate, which have been at or near zero ever since the GFC, or the short-term market rates they
influence. These rates aren't critical in evaluating long-term investments.
The central idea of capitalism is, as the name implies, that of capital. Capital is
accumulated through saving, then invested in machines, buildings and other capital assets to be
used by workers in producing goods and services. Part of the value of those goods and services
is paid out as wages, and the rest is returned to capital, as interest on loans and bonds or as
profits for shareholders. Some of the return to capital is saved and reinvested, allowing
growth to continue indefinitely. Workers, on this account, can become capitalists too, by
saving and investing some of their wages. At a minimum, they should be able to save enough,
while working, to finance a decent standard of living in retirement.
But what happens if there is no return to capital? The collapse of interest rates on
government means that's already true for anyone who wants a secure investment. And the
situation isn't any different for the two remaining AAA-rated corporate borrowers, Microsoft
and Johnson and Johnson. Microsoft is currently offering a rate of 2.5 per cent on 30-year
bonds, and has exchanged lots of outstanding debt for new bonds at that rate (paying a 40 per
cent premium for higher-interest bonds). That's a real return of 0.5 per cent if you assume
that the Fed sticks to its current 2 per cent target and hits it on average. (There's a lot
more room for inflation to surprise on the upside, in my view). If you allow a 15 per cent risk
that Microsoft will go bankrupt some time before 2050, the expected real return falls to
zero.
To complete the picture of returns to capital, we need to look at stock markets and
corporate profits. That'll be the subject of another post.
John Quiggin 07.26.20 at 3:32 am (no link)
It's tempting to link all of this to the long-term historical decline in interest rates
that led 19th century economists, most notably Marx, to talk about the declining rate of
profit. But that decline came to an end in late C19. Real interest rates bounced about in the
20th century with no obvious trend. Much of the earlier decline may be have been due to a
reduction in default risk as capitalism became established, but that's just speculation on my
part.
Also, I plan to talk more about Keynes' thoughts on the euthanasia of the rentier, which
seems to be happening, although without much in the way of anaesthesia.
There is capital and then there is capital -- calling different things by the same name to
avoid (!?) confusion.
The process of capital investment -- using money to mobilize resources to strategically
alter the costs of production well in advance of sale or consumption -- that process has
always depended directly on the ability to assemble and exercise essentially political power.
There is nothing pure about it, and nothing at all, should you exclude any return to monopoly
power, corporate control, managerial skills or compensation for risk. The most substantial
returns from capital investment are only available to the fount of political power, the
state. The debility or senility of the state as provider of public goods might have something
to do with the inability to earn a return on investment.
Money, qua money -- "wealth" of the purely nominal sort unrelated to mobilizing resources
to productive purpose -- has only one purpose: insurance. "Insurance" in this very broad
sense can include cruel uses of money, facilitated by deflation: usury, debt peonage -- even
the words are cruel.
Central banks have been trained to flood the markets with "liquidity" to stave off the day
of reckoning for fraud and foolishness. It is as if the want to prove every bad thing the
Austrians ever said about them.
The true heart of capitalism is "other people's money". Borrowing money to lend money. For
this purpose, there is no one interest rate. There is borrowing at 0% to lend at 27% or 400%
or whatever horrific rate can be baked into a private equity deal or some crazy scheme of
insurance bound to drive up the cost of whatever services the purchase of which they finance
parasitically.
Hidari 07.26.20 at 9:10 am (no link)
If anything, this understates the matter, and understates what extraordinarily unusual
times we live in.
According to this site (and yes, it looks a bit dodgy, and no I have no idea who these
people are, so caveat lector) interest rates are the lowest, worldwide, generally speaking,
than they have been in 670 years.
This other dubious site makes the even more dubious claim (based on rather questionable
evidence), that current world wide interest rates are the lowest they have ever been
.
The first site suggests some opinions as to why this might be the case (assuming it is the
case), which I lightheartedly put forward as semi-serious 'solution' to this mystery.
1: Productivity Growth. As everyone has noticed, in the 'advanced' capitalist states,
productivity is dropping, as is 'inventiveness' broadly defined (this can be measured by
patents). Have you all noticed that when you were growing up, there was a life changing
technology development almost ever year or so, and since the development of the smartphone,
it's all basically stopped? (Electrification of existing commodities, e.g. cars, don't count,
and nor do things that don't exist and which will never exist, like genuinely self-driving
cars or moonbases/trips to Mars). CF John Horgan's The End of Science, and the concept of
'low hanging fruit' which all seem to have been pretty much picked by now. No new products
means no new firms to sell them, means less tax money, means less growth.
2: Demographics. Some 'optimists' have predicted that population will begin to drop this
century. Even assuming they are correct, which is dubious, have you ever considered what that
means? Old people are more conservative than young people, less productive, more sick, need
more care. Ageing societies are not politically liberal vibrant societies. What we are likely
to have is the worst of both worlds, in which population continues to increase for the next
few decades in the Global South, increasingly ravaged by climate change, and drops in the
Global North, meaning more conservatism, more Trumps, more of a 'gerontocracy', and of course
whipping up hostility to immigrants facing their burning countries might keep them in
power.
3: Economic Growth. Capitalism needs new markets, and now, as Branko Milanovic has pointed
out in 'Capitalism, Alone', there are no new markets. Everywhere is capitalist so there are
now no mechanisms available to 'pump prime' growth. There's no new source of cheap labour, no
new source of new consumers (China previously supplied that, keeping the global economy
booming in the 1990s and until 2008 but that effect seems to be failing).
Also, of course, climate change, the 'death of birth' the ongoing ecopalypse etc.
So, by the mid to late 21st century (science fiction, prediction alert!), negative
interest rates might be the norm. Indeed, this has already begun in Japan, which in many ways
shows the way ahead to our future: an ageing, conservative, sick population, in a low growth
country, where there is very little political or cultural change for decades, and where the
major political 'debates' are how best to keep out foreigners.
As John will presumably go onto argue, this will more strongly resemble societies from the
ancient world more than post-Renaissance capitalist societies, with gigantic inequality,
little scientific or economic growth (or change), huge swathes of the population kept
controlled and constrained via debt peonage (a sort of modern feudalism), increasingly
hollowed out and pointless 'democratic' polities, and real power remaining with a de facto
aristocratic class who made their money by inheriting it and kept it not by building things
and making them, but by tax dodging and other 'financial' tricks, in a mediatised world that
spends billions persuading the populace that none of this is happening (this is essentially
the story of Trump).
It seems to me that you are talking from the perspective of the financier, or saver, who
buys bonds and receives little, no, or negative return. But the capitalist is a
borrower, not a saver; a seller of bonds, not a buyer of bonds. She borrows money in order to
make investments in productive, as opposed to financial, capital.
So low interest rates suit the capitalist just fine. What can be a problem for the
capitalist is a low return on investment. Low growth – which we also have in the rich
economies – is therefore a problem for capitalism because it tends to imply a low
average return on investment. But in a world of zero interest rates, of course, you only need
a minimal return on your investment in order to make it profitable. So capitalists and
capitalism are still doing fine.
Put another way: when talking about 'the return on capital', at a minimum we have to
distinguish between the return on financial capital and the return on investment.
Final note: as you know, Larry Summers and co-authors have been writing about the secular
decline in interest rates and its causes for a few years now, as part of the discussion of
secular stagnation.
Will somebody finally admit that the Washington consensus (that a policy mix consisting of
tight fiscal policy and loose monetary policy) has been failure, on it's own terms. All it
has done has inflated asset prices to such an extent that nobody trusts their value (hence
negative expected return).
Secularly increasing the level of private indebtedness doesn't make the system more
resiliant. When you express it in those terms it sounds ridiculous, and yet that is what has
been official policy for thirty years.
We need to be aiming ot increase government debt at a rate sufficient to maintain the
money supply and should be aiming to gradually reduce the level of private indebtedness.
I need to make my macro policy ideas more complete I think before people misunderstand
what I mean.
We need
1. to run moderate deficits and securarly monetarise at least a significant fraction of
them
2. actively redistribute income
3. remove the tax incentives encouraging debt over equity
4. discourage speculative lending on a no redemtion basis (especially lending to risky
debters on the basis of expected asset inflation).
Tim Worstall 07.26.20 at 10:32 am (no link)
I think it's Tyler who says never reason from a price change?
"But first let's look at the real 30-year bond rate. The US Treasury is currently offering
an inflation-protected 30 year bond at a rate of -0.3 per cent."
How about a minor corollary, be careful of reasoning from a manipulated price?
What is the purpose of QE? To lower the risk free interest rate. We've a lot of QE at
present – some $7 trillion on the Fed balance sheet, something like that? That risk
free rate is definitely manipulated.
We can, of course, assume that the manipulation is going to last forever. But that would
be a strong assumption. If we're trying to think about the underlying structure of the
economy, rather than the current surface state of it, perhaps we might want to consider what
the risk free interest rate would be without the manipulation. What would the 30 year
inflation protected bond be paying in the absence of the $7 trillion of QE?
At a guess I'd say rather more than it currently is. Which is the same statement as QE
works at its declared aim. It being that absenceofQE interest rate that should inform this
speculation about capitalism.
Capitalism, briefly described, is the 'the rewards of saving, organized' or 'the principle
of indefinitely deferred consumption.' Everything else is the results of that. If you
repudiate that completely – then what are the implications? In the extreme, everyone
must consume everything immediately. One major motivation for this is that if nothing lasts
or is at high risk of being confiscated – in infinite regress.
"The central idea of capitalism is, as the name implies, that of capital. Capital is
accumulated through saving, then invested in machines, buildings and other capital assets to
be used by workers in producing goods and services. Part of the value of those goods and
services is paid out as wages, and the rest is returned to capital, as interest on loans and
bonds or as profits for shareholders. Some of the return to capital is saved and reinvested,
allowing growth to continue indefinitely. Workers, on this account, can become capitalists
too, by saving and investing some of their wages. At a minimum, they should be able to save
enough, while working, to finance a decent standard of living in retirement."
Sentence by sentence
" central idea " is not capital, I think, but capital markets. Perhaps a subtle
difference, but important nonetheless. Capital in this sense was held by Roman bankers I
think.
" capital is accumulated through saving " Historically capital was accumulated by robbery,
taxation, expropriation of church lands, state efforts to create currency -- accumulate gold
-- and a national market. Currently, capital is largely credit, from central banks, ordinary
banks and shadow banking institutions too numerous to name.
" invested in machines, buildings and other capital assets " I do not think a medieval
lord building a water mill was doing capitalism nor a central bank isn't. I don't think a
peasant in Tang China was doing capitalism nor do I think a George Washington buying property
claims on the frontier wasn't.
" Part of the value of those goods and services is paid out as wages " The labor is
borrowed first, then paid later. Currently that's usually two weeks later, but it has been
quarterly or even annually if I remember correctly.
" the rest is returned to capital, as interest on loans and bonds or as profits for
shareholders." Interest long predated capitalism so it's not even clear how this relates. But
if it does, interest historically was a kind of guaranteed profit, where risk was annulled by
a property claim in default of re-payment. But if memory serves, there were capitalist
enterprises predating a shares market, called partnerships, where ownership of the enterprise
and the ongoing profits may be conceptually distinct but weren't in practice.
"Some of the return to capital is saved and reinvested " Credit. Also, the difference
between a peasant saving and buying the neighbors' land when they fall on hard times is
different from a Rockefeller buying oil companies, much less a mutual fund buying stocks.
" allowing growth to continue indefinitely." In a fully developed capitalist economy,
growth is never indefinite, but always goes in cycles. If physical plant was a destructible
as money, stocks, bonds, etc., humanity might be back in caves?
"Workers, on this account, can become capitalists too, by saving and investing some of
their wages." A practical definition of capitalist would be someone who someone who invests,
in a factory or a hedge fund, to make a profit. There is a difference between a worker who
buys a house to live in and a capitalist who buys a house to rent out.
"At a minimum, they should be able to save enough, while working, to finance a decent
standard of living in retirement." This is a kind sentiment, which I approve. But given that
capitalist countries like imperial Britain in the nineteenth century did not provide enough
food for the majority of the working class to reach modern-day stature, this doesn't seem to
have much to do with economics. Pious wishes are not useful analysis in my opinion.
Anyone who actually read may think, quibble, quibble, quibble. But framing the issue like
this is misleading I think.
Normally (by which I mean during booms) in a capitalist economy part of aggregate demand
comes from net investment.
Continuous net investment requires more and more workers, which lowers unemployment and
increases the wage share; at some point profits fall too much, capitalists stop investing but
they don't buy consumer goods either, so this causes a paradox of thrift effect and a
crash.
The specific level of wages where this happens is not fixed though, and in recent times the
wage share fell throughout the cycle.
This means that through the cycle and even towards the peak the profit share is quite high,
but since capitalists don't want to invest in real capital anymore they invest in speculative
capital like houses, bitcoins etc..
Speculative capital reacts to increased demand in terms of price instead than in terms of
quantity (in the 19th century this speculative capital was mostly land), so as the profit
share increases throughout the cycle the wealth to income ratio increases. This increased
wealth with fixed income necessariously lead to lower returns on wealth (note, on wealth, not
on physical capital, as the profit share is still high).
This bubbly effect is needed to keep demand up so the government has to get along (e. G. If
the fed increased the interest rate now it would cause a huge crisis).
This is not really different from what happened pre WW2; IMHO it is just a consequence of the
winding down of the new deal, that caused the wage share to fall.
@Tim Worstall
We don't know what the "natural" interest rate would be, but my understanding is that the fed
can only push the interest rate up, not down.
In the end the interest rate reflects the expected return on new investment, but if nobody
wants to invest that rate is 0?
J-D 07.27.20 at 4:53 am (no link)
There's production of real goods and services, and then there's money. The relationship
between the amount of the first and the amount of the second is not straightforward, nor
even present in many cases (eg the roughly half of production that takes place in the
non-monetised sectors of the 'economy').
I'm not sure what difference it makes to your general point (maybe it makes none), but
since you refer in that easy way to 'production of real goods and services', I want to point
out that there's production of goods and then there's production of services.
Consider, as one example of each category, candles and haircuts.
Candles can be produced without being being consumed. The production of candles can easily
be understood as distinct from the consumption of candles. Some candles get produced and then
never get consumed. It makes sense, when referring to a business which sells candles, to ask
how many candles it has available for sale.
Haircuts cannot be produced without being consumed. The production of a haircut and the
consumption of a haircut are most easily understood as being the same event. It does not make
sense to refer to a haircut as produced but not consumed. It does not make sense, when
referring to a business which sells haircuts, to ask how many haircuts it has available for
sale.
Paul @7 A capitalist is an owner of capital: therefore a direct investor or lender.
Someone who operates on borrowed capital, seeking a profit over and above the market return,
is an entrepreneur. This, at least is the standard terminology.
In the standard classical or neoclassical model, the super-profits of the entrepreneur are
ultimately competed away. The things that matter, in the long run, are labour and
capital.
Risk and uncertainty change this, and I'll talk more about that soon.
Tim W. If the central bank can determine the rate of return to capital indefinitely into
the future, capitalism really is finished. The point of QE was to reduce short-term rates in
the emergency conditions of the GFC, The emergency has now become permanent, it seems.
@20 "If either US party genuinely cared about innovation or small businesses as the engine
of growth, we'd have had universal health insurance, "
A point Dean Baker has been making for many years. Although it's not quite as slam dunk as
he puts it as being. The US has a low rate of new business formation as a whole. And a high
rate for businesses designed or funded to expand into reasonably sized workforces. The bit
the US is missing is the small company that opens as and intends to remain small.
Which rather supports Baker's point actually. As such larger, better funded start ups etc
will have the money to be able to provide health care. In a manner in which the one man bands
the US is deficient in don't.
@25 " The point of QE was to reduce short-term rates in the emergency conditions of the
GFC,"
We seem to disagree on that point. The traditional tools work rather nicely in determining
short term interest rates. We do, generally, say that the central bank controls them after
all. It's the longer term that is more market influenced and that longer term that QE was
aimed at.
"If the central bank can determine the rate of return to capital indefinitely into the
future, capitalism really is finished."
And this:
"Amid all the strange, alarming and exciting things that have happened lately, the fact
that real long-term (30-year) interest rates have fallen below zero has been largely
overlooked. Yet this is the end of capitalism, at least as it has traditionally been
understood. Interest is the pure form of return to capital, excluding any return to monopoly
power, corporate control, managerial skills or compensation for risk."
It poses a difficulty, perhaps a decisive one, for investment, yes. But investment and
capitalism are not synonymous.
Well, assuming that we agree on hte following. A workers' cooperative is not capitalism.
Do we agree? But a workers' cooperative faces all the same decisions about how much of
current income should be put by for investment in future production and output. That it's the
income of the workers making the decision doesn't change the difference that the absence of
interest makes. It's still the same change in how much be given up now in order to gain
whatever in the future.
Investment, that is, not being the defining feature of capitalism. So changes in the terms
of investment don't, to me at least, seem to kill it off. Whatever it is that will be changed
is much wider than capitalsim – it would seem to be the terms of investment in whatever
socioeconomic system we've got.
As to what is the defining feature of capitalsim I take that to be that the investors
– the capitalists – are not part of whatever organisation is being invested in. I
don't see a zero interest rate as changing the desirability – say, investor
diversification, possibly limited liability, the possibility of mobilising the assets of tens
of thousands, millions, into a project – nor the undesirability – anomie and all
that of capitalism.
A zero interest rate changes all calculations about investment, not merely capitalist
ones.
@
"To complete the picture of returns to capital, we need to look at stock markets and
corporate profits".
and at some "Capitalists" – who always look at the whole "Picture" in order to only
play only the Casinos which offer the highest returns.
Like "the Stock" or the Real Estate Casino – and as the Real Estate Casino is
tanking BIGLY again -(even more "bigly" than in 2008) – there are only Stocks (kind of)
left –
and if – there – the gamblers will realise that the Party is over – too
– soon "the Utmost Clever Capitalist will have to go back to the "Liquidation Casino"
where y'all get EVERYTHING "for peanuts" – (Bugattis – Ferraris – Golden
Toilets – Whole Hotels and Casino – some tacky Chandeliers) – from the
STUPID -(and overextended) – Capitalist – like Trump.
As I hope that everybody here knows – that Trump already is bankrupt and after he will
be send back to golfing – he will have a very difficult time – finding one of his
golf courses – who still is profitable – and where his employers don't stare at
him – when he cheats – and behind his back tell each other:
"There golfs the Cheating Loser".
AND nothing – NOTHING hurts a Capitalist more -(besides losing all of his Capital)
–
than considered to be a really bad golfer!
One of the most frustrating aspects of any discussion of capitalism is that no two people
seem to mean the same thing with that term. The most common equivocation is, of course, its
redefinition into free markets plus democratic elections, cleverly allowing the No True
Scotsmanning of anti-communist dictatorships and monopolies as "not capitalism at all" and
enabling the person using this definition to tally the victims of capitalist expansion up to
a nice round zero.
To me, capitalism is a system where a minority of people own the means of production, and
the rest are legally free but forced to sell their labour to the former class to earn their
living. A few decades of very poor returns on bonds does not mean that there is a new system
of "no capitalism" with social arrangements as comparably different to capitalism as the
slave economies of antiquity, tribal societies, or Medieval feudalism, just as not having
free elections does not change the economic system into "not capitalism".
Regarding the reason for low returns, I get the problems of constantly reinflating
bubbles, but I would take one step further back and ask why they exist in the first place
when they had not existed for several decades c. 1940-1980ish. It seems to me as if the
underlying problem is low wage growth and inequality. It is a situation of too much money
sloshing around in the hands of billionaires and large companies, desperately trying to find
some worthwhile investment opportunity but coming up largely with (1) loaning it out or (2)
chasing speculative bubble after speculative bubble.
Why? Because most of that money is NOT being moved through the hands of the working class,
who therefore cannot buy enough stuff, and therefore investment into producing additional
stuff for the working class is not profitable. Too much money is constantly extracted from
the economy, so the economy regularly stalls and has to be kept from crashing by the next
injection of new money. But that injection goes to those who have enough money already to
lobby for getting more, and only rarely to those who would immediately spend it on a new car,
renovations, travel, clothes, better food, etc., so the downward spiral continues. (I see
that MisterMr has expressed a very similar view.)
But even if that were all resolved by returning to an economically sustainable high tax,
high wage system, we would next have to talk about sustainable consumption and limits to
economic growth.
So: what Hidari said, only I would use more present tense than future.
Climate change is now. Population grows and aging populations in one place combined with
too many young people with too little water and fertile land in another place is now. Very
nearly the whole world already having been turned into capitalist market is now.
Perhaps most importantly, because it is what stands in the way of solving any of these
problems: the malaise of contemporary politics in the richest countries seems to be precisely
that it is dominated by well-off retirees who more reliably vote than young and poor citizens
and who very reliably vote conservative. And it is not even only voting. When I was a young
adult in my home country I was very politically active. As I remember our meetings, the local
SPD (~labour) chapter was 2% young, progressive activists, 18% teachers and public servants
in their 50s, and 80% pensioners who would reliably elect the most conservative of the second
group to be chapter president, mayoral candidate, etc. The composition of the Tory party
membership in the UK is another case in point, as is the primary electorate of the two large
parties in the USA.
We are living in the world Hidari envisions for the second half of the century.
Lee Arnold,
I am a bit puzzled by your point "Regulations, zoning, government control, unions,
socialization of private financial losses, rent-seeking ("socialism" in the current
parlance)". Union power is at the moment extremely weak, and while the other factors are
stronger you are mixing extremely different things into one. I don't understand, for example,
how socialisation of losses would inhibit innovation, as it would allow an investor to take
more risks without going broke. Conversely, "regulations" is the exact opposite in that they
aim to keep investors from socialising losses.
I'm just curious why nobody addressed this sentence:
"Secularly increasing the level of private indebtedness doesn't make the system more
resiliant. When you express it in those terms it sounds ridiculous, and yet that is what has
been official policy for thirty years."
Are you all missing the wood for the trees? Seems to me everybody is looking for something
complicated when it is staring them in the face.
Pointing to negative interest rates on 30-year Treasuries doesn't mean that "capitalism"
is over. Capitalism is a whole series of political acts (laws, regulations, incentives) that
force the population to behave in a certain way. None of that has gone away, despite low or
negative interest rates. If you doubt it, note that–at least in the
USA–bankruptcy courts are about to have a world-historical run, dealing with an order
of magnitude increase in business and personal bankruptcy cases. How will society handle the
"social costs" of Covid-19? By putting people through a legal proceeding that largely imposes
those costs on those directly involved–because in the USA the legal system (AKA the
"real capitalism") absolutely believes in atomistic individualism, and all the manipulations
of the Federal Reserve do nothing about any of that.
What this does show is that the economics profession as a ridiculous
tendency–without which it would collapse back into the more realistic subject
"political economy"–to try to focus on "the economy" as if that were an entity
completely divorced from, independent of, and possibly epistemically prior to the
political/legal framework surrounding it. In the economics profession, an awful lot of work
is done by the phrase "all else being equal," where the most important causal
pieces–which are political–are studiously ignored.
@
"–at least in the USA–bankruptcy courts are about to have a world-historical
run"
and this morning I went through Stresa – where. it doesn't look a lot better
–
BUT in between all the emptiness and the closed symbols of Capitalism there was one
infinity pool – absolutely BEAUTIFUL -(as Trump would say) – with a BEAUTIFUL
view over the Lake and not a chaise empty – and when I came back to the Isola Pescatore
there wasn't a place empty at lunch – with all the usual joyful Lunchers from the
Homeland Italy and Switzerland, France, Germany – and I even saw an Old Dude with a
Oxfors University T-Shirt.
AND the two Mahogany Rivas in Front of the restaurant proved that Capitalism isn't dead
(yet) and that it will take a lot more to kill at least "Italian Capitalism".
John: It's not an easy step to equate long-term bond rates (e.g. the 30-year Treasury) to
overall capitalist profits. According to Dead Bearded German Guy Who Must Not Be Named in
Economics, the following is incorrect:
"Interest is the pure form of return to capital, excluding any return to monopoly power,
corporate control, managerial skills or compensation for risk."
Interest, monopoly power, corporate control, managerial skills, and compensation for risk
are determinants of profits from the point of view of individual capitalists, but Marx would
stress that these are superficial aspects of capital and that what matters in the end is
first, surplus labor converted into surplus value, and second the ability to realize surplus
value in a macroeconomic setting. Interest, dividends, rents, plus corporate profit and
proprietor/partner income taxes are all redistribution of surplus value according to him. I
am not in full agreement with Marx, as I think resource extraction and non-human labor are
also sources of economic surplus, but that is tangential to this point.
I would argue that the downward trend in long term interest rates over the past decade is
caused by an increased realization difficulty. Part of this difficulty is under-consumption:
the wage share of income has fallen over the past two decades, real median incomes have been
stagnant and in many regions real incomes lower than the median have fallen. The only way to
prop up consumer spending in such an environment, especially spending on longer-term durable
items such as houses and cars and longer-term intangibles such as education, is to have lower
interest rates.
Second, the falling long-term rate may be indicative of what some macroeconomists call
secular stagnation. As in perceived higher risk for investment projects due to lower
productivity growth (in fact, the main driver of equipment investment is to ratify new
technologies: potential productivity growth drives investment which drives actual
productivity growth). With low potential productivity growth, perceived investment projects
are riskier, causing a greater balance of capital to move to safe assets -- Treasuries --
thus driving down the T-bond rate.
What drives potential productivity growth is a black box, but the simplified heterodox
economics argument is that strong aggregate demand correlates with strong consumer spending,
which correlates with high relative wage costs, which correlates with increased productivity
gain searches looking for either Fordist or Marx-specific (i.e. labor-saving) innovations, or
niche-specific productivity gain searches where increased use-value for new commodities
translates into increased nominal productivity.
Overall, a Marxist or Marx-influenced economist would point to the low labor share as
pulling down productivity growth and thus pulling down long-term interest rates for safe
assets such a Treasuries, whereas a secular stagnation analyst would point to the lack of
epoch-making innovations (e.g., the end of geographical widening and capacity increasing for
electronic technologies as opposed to data processing deepening) plus reduced business
confidence in the post-2008 period and reduced global financial confidence in quick-flowing
capital post-1997 as depressing business investment and thus pushing down on safe asset
interest rates. The two explanations are not mutually exclusive.
None of this should point to either a coming end to capitalism or to Keynes's fairy tale
euthanasia of the rentier; as long as there is capitalism (and possibly even after
capitalism) there will be rentiers. But the trend in interest rates does point to the need
for global capitalism to have a new regime that discards neoliberalism. Low interest rates
correlate with stagnant or even falling real labor income, which correlates with populist
demagogy and increased international instability. Only when the international and domestic
political instability is sorted out is it possible to shift back to a non-neoliberal
capitalist regime and to usher in another 1945-1970 type growth period in which rentiers are
subdued but definitely not euthanized.
This is somewhat teased by JQs last comment up above, but real 30Y rates are not below
zero. Real rates including the risk and liquidity premium attached to Treasuries are below
zero and that's a different thing entirely.
From an investment market perspective – which is what's being measured in the rates
JQ cites – ever since Dodd Frank there has been an actual scarcity of UST paper of most
kinds. That seems hard to believe in the context of +20T of government debt, but in fact from
a supply/demand standpoint there is not near enough.
The reason is various collateral and settlement requirements imposed on banks post GFC. It
used to be that collateral was anything a counterparty was willing to accept, now its only
government paper – full stop. Accordingly the +$20T of debt (not all of which is held
in a way that can be used as collateral) is collateralizing several times that amount of
commercial and personal borrowing.
When economies grow the demand for Treasuries rises. When the economy contracts
uncertainty rises, demanding more collateral and increasing the demand for Treasuries. There
is no steady state that produces a liquidation. This is what 50bp of US10T means to the
investment markets and why its probable that it will eventually hit zero.
Whether that spells the end of capitalism or not seems dubious since JPM, Goldman, Citi et
all seem to have several Trillion of capital and lending acitivity that suggests things are
just fine.
Finally, as a practical matter, there is an over-abundance of money or money like
instruments. Everything from Bit-coin to collateralized debt all is available to fund the
capitalist, the entreprenuer, idiots and fools. This is what will end badly – not
government debt at Zero real coupon.
When reading about the past, present, and anticipated development of our political
economies, I have taken to substituting the neologism "Investorism" for "Capitalism." Marx
lies decades back in my reading, but I remember him saying that he was describing social
systems. Not religions or ideologies, except as they functioned in social systems. Capitalism
/ Investorism is the social system in which private investors – who, per #27, "are not
part of whatever organisation is being invested in" – call the shots. That the interest
rate has dropped below zero has many implications, many of which are opaque to me. But I
expect that the investing class is going to have 90% of the input (and a veto over) the
responses
I don't think I understand capitalism more than superficially. And as both the OP and the
comments demonstrate, neither does anybody else. I think nobody really has much of a clue,
neither the capitalists, the bankers, the Corporate Leaders, the economists, nor
unfortunately the anticapitalists, socialists and anarchists.
I was trying to make a comprehensive list of all of the reasons, given by both the left
and the right, for the perceived lack of jobs and business opportunities, despite the decline
of interest rates since around 1980. Whether the reasons are logical or not. So I gathered
disparate and opposite reasons under broad categories. Safety nets (Fake Dave #30) is a good
addition to the list: the left says we need them to reduce risk, the right says they slow
down growth.
Labor unions, always blamed by conservatives for impeding business, saw a decline since
around 1980 but of course their decline did not increase the rate of business startups.
Public sector unions are still under attack today for making government "inefficient" thus a
presumed drag on growth and opportunity. Libertarians e.g. Rand Paul even blame the
socialization of losses: I don't understand that, any more than you do. (Although they
scarcely practice what they preach.)
My point is that I don't think that any of the reasons, nor all of them together, will
explain what has been going on for 40 years. If you smooth out the graphs of 10-year, 30-year
Treasury rates and new business formation since around 1980, the declines look almost linear.
Maybe capitalism has been massively successful, so successful that it is putting itself out
of business, and we are growing out of it, just like Keynes and Schumpeter said we would.
While we are sorting it out, I would suggest creating a government monopsony that
guarantees human needs which will still allow private entrepreneurialism for innovations.
Not being an economist of any kind I can only offer my 2 cents worth for consideration.
There is so much money floating around in the upper reaches of the economy that interest
rates are of little concern to its denizens. Their problem is one shared with drug dealers;
where do you stash your money to keep it safe? Investing in zero or negative interest bonds
is like paying a small fee for a safety deposit box for your valuables. Having more money
than you could possibly spend makes it reasonable to buy luxury real estate and let it sit
empty. Property taxes and maintenance represent negative cash flow, but who cares?
@37
"I don't think I understand capitalism more than superficially. And as both the OP and the
comments demonstrate, neither does anybody else".
Hey!
I did – as I read the definition of "Capitalism" before commenting – and as the
definition says:
"An economic and political system in which a country's trade and industry are controlled by
private owners for profit, rather than by the state".
AND the Virus now made sure that even in the utmost "capitalistic" countries "the economic
and political system" HAS to be controlled by "the state"-(at least for the time being)
"Capitalism" is dead -(for the time being)
and let's NOT forget how the hunt for "good" returns – motivated all of these people
getting into the Stock Casino – during the lockdown – as there was nothing else
to do – for a lock downed Capitalist) – than calling his or her broker
–
And did you guys ever see the numbers of new "Investors(gamblers) during the lockdown? It
included ALL these retirees of my family who NEVER EVER would play with Stocks if there
(still) would be "decent" returns from saving accounts.
So in a very (ironius?) way the low interest rates created a whole new "class" of
InvestmentCapitalist who NOW pray that sooner than later "Capitalism" -(in accordance to the
words definition) returns to "an economic and political system in which a country's trade and
industry are controlled by private owners for profit, rather than by the state".
"... By Dr. Karin Kneissl , who works as an energy analyst and book author. She served as the Austrian minister of foreign affairs between 2017-2019. She is currently writing her book 'Die Mobilitätswende' (Mobility in transition), to be published this summer. ..."
"... "humanitarian corridor" ..."
"... "good opposition" ..."
"... "humanitarian war," ..."
"... "worst mistake." ..."
"... "geopolitical commission." ..."
"... "community of the good ones" ..."
"... "Friends of Libya," ..."
"... "good opposition" ..."
"... "exclusive economic zone" ..."
"... "other actors" ..."
"... "mare nostrum" ..."
"... Think your friends would be interested? Share this story! ..."
By
Dr.
Karin Kneissl
, who works as an energy analyst and book author. She served as the Austrian minister of foreign affairs
between 2017-2019. She is currently writing her book 'Die Mobilitätswende' (Mobility in transition), to be published this
summer.
A confrontation between the two NATO states France and Turkey continues to trouble the Mediterranean region; Egyptian forces
are mobilizing. And many other military players are continuing operations there.
In March 2011, during a hectic weekend, the French delegation to the UN
Security Council managed to convince all other member States of the Council to support Resolution 1973. It was all about a
"humanitarian
corridor"
for Benghazi, which was considered the
"good opposition"
by the
government of Nicolas Sarkozy. One of his whisperers was the controversial philosopher Bernard-Henri Levy, who supported a
French intervention. Levy, fond of the
"humanitarian war,"
found a congenial
partner in Sarkozy.
France was at root of crisis
Muammar Gaddafi had been received generously with all his tents in the park of
the Elysée, but suddenly he was coined the bad guy. The same had happened to Saddam Hussein in Iraq. It was not the Arab
dictator who had changed; it was his usefulness to his allies. The Libyans had been distributing huge amounts of money in
Europe, in particular in Rome and Paris at various levels. In certain cases they knew too much. Plus, the Libyans had been
protecting the southern border of the Mediterranean for the European Union.
So, the French started the war in 2011, took the British on board, which made
the entire adventure look a bit like a replay of the Suez intervention of 1956, the official end of European colonial
interventions. A humanitarian intervention changed into regime change on day two, which was March 20, 2011. Various UN
Security Council members felt trapped by the French.
The US was asked to help, with then-Secretary of State Hillary Clinton and
many other advisers in favor of joining that war. President Obama, however, was reluctant but, in the end, he gave in. In one
of his last interviews while still in the White House, Obama stated that the aftermath of the war in Libya was his
"worst
mistake."
Libya ever since has mostly remained a dossier in the hands of administrative
officials in Washington, but not on the top presidential agenda anymore. This practice has been slightly shifting in the past
weeks. US President Donald Trump and France's Emmanuel Macron had a phone conversation on how to deescalate the situation
there. Trump also spoke on that very topic with Turkish President Recep T. Erdogan. Paris supports General Haftar in his war
against the Turkish-backed Government of National Accord, which is also supported by the European Union, in theory
The triggering momentum for the current rise in tensions was a naval clash
between French- and Turkish-supported vessels. Both nations are NATO members, and an internal alliance investigation is
underway. But France decided to pull out of the NATO naval operation that enforces the Libya arms embargo, set up during the
high-level Berlin conference on Libya in mid-January 2020. Without the French vessels it will be even more toothless than its
critics already deem it. This very initiative on Libya was the first test for the new European commission headed by Ursula von
der Leyen and claiming to be a
"geopolitical commission."
The EU strives to speak
the language of power but keeps failing in Libya, where two members, namely Italy and France, are pursuing very different
goals. Rome is anxious about migration while Paris cares more about the terrorist threat. But both have an interest in
commodities.
When Gaddafi was reintegrated in the
"community
of the good ones"
in early 2004 after a curious British legal twisting on the Lockerbie attack of December 1988, a
bonanza for oil and gas concessions started. The Italian energy company ENI and BP were among the first to have a big foot in
the door. I studied some of those contracts and asked myself why companies were ready to accept such terms. The answer was
maybe in the then rise in the oil price of oil and the proximity of Libya to the European market.
Interestingly, in September 2011, the very day of the opening ceremony of the
Paris conference dubbed
"Friends of Libya,"
a secret oil deal for the French
company Total was published by the French daily Libération. The
"good opposition"
had
promised the French an interesting range of oil concessions. Oil production continuously fell with the rise of the war,
attracting sponsors, militias and smugglers from all horizons. The situation in Libya has since been called 'somalization,'
but it would become even worse, since many more regional powers got involved in Libya than ever was the case in hunger-ridden
Somalia.
In exchange for its military assistance, Turkey recently gained access to
exploration fields off Libya's shores. Ankara had identified an
"exclusive economic
zone"
with the government in Tripoli, which disregards the UN Convention on the Law of the Sea. Actually, Israel made the
same bilateral demarcation with Cyprus about ten years ago, when Noble Energy started its delineation of blocs in the Levant
Basin. So Turkey is infringing on Greek and Cypriot territorial waters, while President Macron keeps reminding his EU
colleagues of the
"other actors"
in the Mediterranean Sea. Alas, it is nobody's
"mare
nostrum"
as it was 2,000 years ago in the Roman era. In principle, all states which have ratified the UN Convention on
the Law of the Sea should simply comply with their legal obligations.
The crucial question remains: who has which leverage to de-escalate? Is it the
US President, who seemingly has acted more wisely on certain issues in recent times? Or will Russian and Turkish diplomacy be
able to negotiate and implement a truce? The tightrope-walk diplomacy between these last two countries is a most interesting
example of classical diplomacy: interest-based and focused; able to conduct hard-core relations even in times of direct
military confrontation and assassinations (remember the Russian Ambassador Karlov, shot by his Turkish bodyguard in Ankara in
December 2016?).
Meanwhile, yet another actor could move in to complicate everything even more.
On July 20, the Egyptian parliament voted unanimously for the deployment of the national army outside its borders, thereby
taking the risk of direct confrontation with Turkey in Libya. Egyptian troops would be mobilized in support of the eastern
forces of General Khalifa Haftar. Furthermore, Cairo would thereby compete even more obviously with Algeria, spending a
fortune on military control of its border with Libya. Algeria in the past could rely on US support in the region, but with the
gradual decline in US engagement in that part of the world, the country faces a fairly existential crisis.
There are currently two powers, among those involved in Libya, that can still
contain the next stage of a decade of proxy wars started by a French philosopher and various EU oil interests: Russia and the
USA.
Think your friends would be interested? Share this story!
The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those
of RT.
Quizblorg
48 minutes ago
Does anything here make sense? No, because France this, Italy that is not how the world is run. The parties
involved here go far beyond countries. Also no mention of Saudi-Arabia/Israel. Who engineered the "Arab
Spring"?
It's difficult to understand what's going on in the world because powerful people actively
manipulate public understanding of what's going on in the world.
Powerful people actively manipulate public understanding of what's going on in the world
because if the public understood what's going on in the world, they would rise up and use their
strength of numbers to overthrow the powerful.
The public would rise up and use their strength of numbers to overthrow the powerful if they
understood what's going on in their world because then they would understand that the powerful
have been exploiting, oppressing, robbing, cheating and deceiving them while destroying the
ecosystem, stockpiling weapons of Armageddon and waging endless wars, for no other reason than
so that they can maintain and expand their power.
The public do not rise up and use their strength of numbers to overthrow the powerful
because they have been successfully manipulated into not wanting to.
The American Revolution was a catastrophe for its economy, which had to endure decades of
reconstruction. In order to neutralize the threat of the British Empire, it stroke multiple
trade deals with it.
The USA is home to the father of protectionism: Alexander Hamilton. He stated that a
national industry in its infancy should be protected from its more mature competition. The
USA followed his advice and protected its nascent industry from the British threat.
When the British Empire begun to degenerate, the Americans used the cheap British capital
in excess in the financial markets to build up their infrastructure, specially their
railways. Australia did the same.
The Founding Fathers did what they had to do in order to protect their country and make it
flourish. When the ideology of the time stated they shouldn't, they invented a new ideology
that stated they should. And the could: when the British and French tried to destroy the USA
through a sea embargo, they responded in kind (Embargo Act of 1807) and prevailed; they did
not cave in to the then imperial powers.
So, I don't understand why so many Americans are offended with China. The capitalist world
tried to keep China poor and as a raw material exporter, sweatshop conglomeration. China
didn't accept this, and decided to fight back. The result is here for all of us to see.
Another revision by the IMF (the first one was some -2%, and I called here it was "too
optimistic").
I think a -6.6% fall in GDP is plausible for the USA. The USA, as the HQ of capitalism, has
tools and weapons that the rest of the world doesn't have, so, if they get lucky, a mere 6.6%
fall is possible.
But, all in all, I still think it's still too optimistic. For example, the IMF still refuses
to admit a second wave will come to the West.
The MMTers reading your article will take umbrage at your use of finance .
According to MMT, all government spending is financed by creating money. The
problem of where to get the money is a non-problem.
Once the government has spent money into existence, the real problem is how to distribute
the social opportunity cost of the spending, especially if the government has spent money to
allocate real resources away from the production of private goods and services.
MMT makes this distinction precisely because they (we?) want to eliminate the rich as a
veto point for spending. We don't need to get their money in order to spend it, and they
cannot (or we should not let them) essentially restrict spending by obstructing the
government's taxation of their wealth.
If we want to get the money belonging to the rich (and we do!), we want to do so because
we don't want them to have it, for whatever reason.
There's another reason to be explicit about the difference between financing and
distributing opportunity costs. If the rich have a lot of money that is not in circulation
(in the national economy), and the government taxing that money to "pay for" its spending
will do nothing to control inflation or distribute opportunity costs. Removing money that is
not circulating has no effect on prices. It seems theoretically possible to balance the
budget financially but still see price-level inflation.
I haven't done any specific investigation into the GND, but it seems uncontroversial that
it will involve allocating substantial real resources to the creation of a nonpolluting
power, transportation, and agricultural infrastructure. However, the effect on the real
economy and the price level seems uncontroversially complicated. Some of the real resources
will be previously unallocated, and we will simply be transferring demand from
welfare-supported to work-supported, with no effect on the price level. Some of the demand
created will indirectly cause an increase in private production, putting unused industrial
capacity to work; the increase in circulating money will cause a corresponding increase in
real private production, and again have no net effect on the price level. And some of the
real resources will indeed be transferred from private production with no corresponding
offset; taxes, "enforced" borrowing, and other monetary interventions will be needed to keep
price inflation manageable.
I don't know of (and, like Lee A. Arnold above, would very much like to see) a model
showing what effect something like the GND would have on the real economy. Under
normal circumstances, the fiscal impact is a good proxy for the real impact. But
circumstances are far from normal, so think that the fiscal impact is no longer a valuable
proxy for modeling the real impact.
"The ultimate constraint on money creation is inflation. That hasn't been a problem lately
and (as I'll argue in more detail later) the world is in need of a fair bit of inflation,
probably at an annual rate of about 4 per cent for the foreseeable future. It's unclear how
much expansion of the monetary base would generate this outcome, while avoiding the risk of a
resurgence of inflation like that of the 1970s"
I don't agree that this is the problem: IMO the direct cause of [keynesian] inflation is
the wage-price spiral, and not money creation per se (this also implies a problem, which is
that if we want an high level of employment because we want an higer bargaining power for
workers we can't really avoid wage-price spirals and therefore inflation).
Money creation by itself creates wealth, not income, and the kind of economic policies we
had in recent decades caused an increase in the wealth/income ratio (or in other words the
creation of a lot of fictitious capital) more than inflation.
So the real problem of "money creation" today is that it generates financial bubbles, rather
than inflation.
The difference between money printing and government debt, from this point of view, is just
that money is a 0% interest financial asset, whereas bonds bear at least some interest, so
money creation pushes the general interest rate down more than bond creation, but this again
is a consequence of the increase of the wealth/income ratio (since more wealth extracts
profits from the same quantity of income).
"Substantial reductions in private consumption and investment will be needed to make room
for the required public expenditure, and that can only be achieved through a combination of
taxation and debt."
In my view the problem is that taxation is needed to avoid bubbles, and therefore what we
need is to tax income from wealth and wealth itself (in order to push down the wealth/income
ratio).
To put it in more familiar keynesian terms, the problem is that the ex-ante saving rate is
too high, so that currently we need an increase in debt levels (bubbles) to ricycle ex-ante
savings into consumption; we need taxation to push down the ex-ante saving rate.
But, the problem is, is it possible to have a capitalist economy running without economic
crises while the wealth/income ratio goes down (which means that a lot of people see their
relative wealth go down)?
IMO this is really difficult, and also explains the political problem for policieswhose
purpose is to push down the wealth/income ratio, since these policies look like just some way
to be mean against wealth owners, without an immediate economic reason, and when the bubble
pops everyone blames the banks and the financial sector, not the excessively high ex-ante
saving rate, that is instead perceived as a virtue.
Recent quantitative easing of only 2% of GDP doesn't provide much of a bound on how much
can be tolerated without causing too much inflation. Inflation is still up against the zero
lower bound, and it seems plausible that we could get more than a factor of two more money
creation. Which does get us into the green new deal range.
@1 The Green part is (comparatively) easy and low cost. It's the New Deal (free college
tuition, Job Guarantee, single-payer health etc) that will require a bit transfer of
resources.
@6 Transfers of real resources or financial resources? Single-payer requires an expansion
of suppliers in the healthcare sector to meet the uncovered demand, and those suppliers will
be new taxpayers. College learning will be going more on-line, a tendency accelerated by this
pandemic and anticipating the next pandemic, so we need, not many more buildings, but more
professors, but they too will be new taxpayers. The jobs guarantee could be structured to
generate sector expansions, not merely makework. So couldn't all of these eventuate in
expanded sectors, ergo more taxes? Government investment at rock-bottom interest rates?
Only too much is enough, we want to print and spend enough to change expectations.
Currently, the dollar is the reserve currency I think largely for "safe haven" reasons,
i.e. the oligarchs who have all the assets believe the US will be the last place to inflate,
devalue, or elect an expropriating left-wing gov't.
After 40+ years of capital share gains and worker immiseration in terms of real and social
wages and labour solidarity, and assuming we have under President S Kelton control only of
printing and spending but no ability to raise progressive redistributive taxes how much MMT
financed spending will it take to have the average worker believe that her real wages, social
wages, standard of living, opportunities etc will improve relative to capital and the rich
for the next forty years? And have the oligarchs also believe it?
That's how much.
Alan White 07.19.20 at 1:21 am (no link)
John, what say you about US/global military spending, which if cut and reallocated in the
low double digits could transform society? Do you think it's just politically untouchable? If
the US cut its military budget by say 25% it would still be formidable, especially given its
nuclear deterrent. For the life of me I can never understand why military budgets are
sacrosanct. Is it just WW2 and Cold War hangover? Couldn't the obvious effects of climate
change and the fragility of the economy subject to natural threats like the pandemic change
attitudes about overfunding the military (like the debacle of the F-35 program)?
@Tim Worstall: The political poles shifted, but less than you might think. Southern pols
were overwhelmingly opposed, and nearly all of them were D (the entire old Confederacy had
only 11 R Reps and only 1 R Senator). Northern pols, including Dirksen, were overwhelmingly
in favor, and they were split between the two parties. But if you break it down by party
and region, a larger percentage of Ds than Rs voted for the bill within each region.
https://www.theguardian.com/commentisfree/2013/aug/28/republicans-party-of-civil-rights
An interesting example of Simpson's paradox.
I don't know about the Democratic Party, but there was an important shift in the
Republican Party: the thing is, that shift took place in the nineteenth century, not the
twentieth. At the end of the Civil War, the Republican Party really was the party of civil
rights, with champions of equality prominent within it; after the end of the Reconstruction
this ceased to be true. Of course the Republican Party has changed further since then,
because everything changes; but it hasn't changed as rapidly since the late nineteenth
century as it did after the Civil War.
Alan White @13 Military spending is about 3.4 per cent of US GDP, compared to 2 per cent
or less most places. So that's a significant and unproductive use of resources that could be
redirected to better effect. But the income of the top 1 per cent is around 20 per cent of
total income. If that was cut in half, there would be little or no reduction in the
productive services supplied by this group. If you want big change, that's where you need to
look.
I think some of the reluctance to cut military spending in the US is the extent to which
it acts as a politically unassailable source of fiscal stimulus and "welfare" in a country
where such things are otherwise anathema. Well, that and all of the grift it represents for
the donor class.
"... The ruling effectively ends the privileged access companies in the United States had to personal data from Europe and puts the country on a similar footing to other nations outside the bloc, meaning data transfers are likely to face closer scrutiny. ..."
"... The so-called Privacy Shield was set up in 2016 by Washington and Brussels to protect personal data when it is sent to the United States for commercial use after a previous agreement known as Safe Harbour was ruled invalid in 2015. ..."
U.S. Secretary of State Mike Pompeo said on Friday the United States was "deeply disappointed" in a ruling
on Thursday by Europe's highest court that a trans-Atlantic data transfer deal is invalid because of concerns about U.S. surveillance.
Pompeo said in a statement that the United States would review the consequences and implications of the decision by the Court
of Justice of the European Union that could disrupt thousands of companies that rely on the agreement.
"We are deeply disappointed that the Court of Justice of the European Union ... has invalidated the EU-U.S. Privacy Shield framework,"
Pompeo said.
"The United States will continue to work closely with the EU to find a mechanism to enable the essential unimpeded commercial
transfer of data from the EU to the United States," he added.
The ruling effectively ends the privileged access companies in the United States had to personal data from Europe and puts the
country on a similar footing to other nations outside the bloc, meaning data transfers are likely to face closer scrutiny.
The so-called Privacy Shield was set up in 2016 by Washington and Brussels to protect personal data when it is sent to the United
States for commercial use after a previous agreement known as Safe Harbour was ruled invalid in 2015.
More than 5,000 companies have signed up to it but the Privacy Shield was challenged in a long-running dispute between Facebook
and Austrian privacy activist Max Schrems, who has campaigned about the risk of U.S. intelligence agencies accessing data on Europeans.
(Reporting by Daphne Psaledakis; editing by Jonathan Oatis)
With tens of millions of Americans out of work, people fleeing cities for rural communities,
others working from home, online shopping flourishing, and the
virus remerging in many states forcing governors to pause or reverse reopenings,
consultancy firm KPMG
International has some bad news for those betting the economy is going to "rocket ship"
recovery as President Trump boasts about at press conferences and on Twitter. The consultancy
firm warns "social-distancing measures" will "dramatically cut the amount of miles Americans
travel by car" (fewer miles driven is terrible news for an economy driven by consumer
spending).
The effects of COVID-19 will be felt for years. The response to the virus has accelerated
powerful behavioral changes that will continue to shape how Americans use automobiles. We
believe the changes in commuting and e-commerce are here to stay and that the combined effect
of reduced commuting and shopping journeys could be as much as 270 billion fewer vehicle
miles traveled (VMT) each year in the US. -KPMG
"Today the Department of State is updating the public guidance for CAATSA authorities
to include Nord Stream 2 and the second line of TurkStream 2. This action puts investments or
other activities that are related to these Russian energy export pipelines at risk of US
sanctions. It's a clear warning to companies aiding and abetting Russia's malign influence
projects and will not be tolerated. Get out now or risk the consequences".
Pompeo speaking at a press conference today.
CAATSA -- Countering America's Adversaries Through Sanctions Act
So Russia and Turkey are "adversaries" of the USA?
In what way?
Do these states wish to wage war against the USA?
Is it adversarial to United States interest to compete economically with the hegemon?
Who cares? Really, is Pompeo still scary? If he has a functioning brain, he should realize
that all these blatant efforts to reserve markets for America by sanctioning all its
competitors out of the picture is having the opposite effect, and frightening customers away
from becoming dependent on American products which might be withheld on a whim when America
wants political concessions. 'Will not be tolerated' – what a pompous ass. Sanction
away. The consequence is well-known to be seizure of assets held in the United States or an
inability to do business in the United States. That will frighten some into submission
– like the UK, which was threatened with the cessation of intelligence-sharing with the
USA (sure you can spare it?) if it did not drop Huawei from its 5G networks. But others will
take prudent steps to limit their exposure to such threats, in the certain knowledge that if
they work, they will encourage the USA to use the technique again.
As Joe Biden tries to split the difference between the midwestern swing-state voters and the
Sanders faithful,
he's released an economic plan - a plan that bears the imprimatur of his one-time foe
Bernie Sanders - that, in its attempt to be everything to every one, effectively promises
everything to every one.
Buy American. Green New Deal. Corporate tax hikes. Trillions of dollars spent on
infrastructure to install the latest eco-nonsense with money that should be going to roads,
bridges, rails and airports. Docks and highways. Things people actually need and use. And who
knows? Depending on his running mate, maybe we'll get a massive student-debt jubilee, too. All
on the federal government's tab.
Now that MMT has gone from fringe idea to mainstream, making Stephanie Kelton, a
cryptomarxist who believes that the link between value and money can be completely severed, so
long as we tax the wealthiest among us enough to keep inflation low. It doesn't take a genius
to suspect that an 'economic theory' grounded in the idea that governments can take on
unlimited amounts of debt and never stick anybody with the tab sounds absurd - even
dangerous.
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We say dangerous because Kelton's greatest sin is offering pandering politicians more cover
to encourage their spendthrift ways. During a recent interview with Macro Hive, former Central
Bank of India Governor and University of Chicago Professor Raghuram Rajan delivered a succinct
and insightful explanation of why MMT is so dangerous.
"We talked about sustainability and one of the big topics in markets at least is this
whole idea of QE MMT infinity, the ability of sovereigns to borrow. Now in developed
countries, they have historical capital they've built up and credibility," Rajan's
interviewer began. "But you're starting to also see this idea...you're starting to see more
emerging market countries experiment with it, including Indonesia and several others."
But at the same time "yields are very low, and if you look at emerging market spreads,
they're very low...so markets are telling you that they aren't worried. Yet we know debt levels
are high, and there's more talk in debt markets of QE and MMT."
Does the fact that markets seem content with the status quo (at least for now) validate
Kelton's argument?
Of course not, Rajan explained. Because while the complexities of the global financial
system, and the dollar's role within it, have allowed the Fed to spearhead this great monetary,
as the veteran central banker explained, there's no such thing as a free lunch.
"We know that markets can be complacent until a certain point and then they turn on a
time. We are at this point in a benign phase supported by an enormous amount of central bank
liquidity emanating from the primary reserve currencies, the euro area, the US Fed and to
some extent the Bank of Japan and the Bank of England."
"But we must also recognize is that there are no free lunches. If there's one statement
you want to keep to pound into the head of every policy maker, it's that there are no free
lunches. If you borrow today, there is a presumption that it will be repaired at some point,
so you are in a sense taking away resources from somebody else in the future."
" Now it may be a generation or two down the line will be on the hook for this ...whether
they can pass it on to their children is an open question...but you're definitely taking away
their ability to borrow by borrowing today."
.While burdening future generations doesn't seem to come up much in cryptomarxist essays
about the moral imperative of expansive fiscal spending - some have gone so far as to argue
that the federal government has a moral obligation to forgive student debt - Rajan acknowledges
that the idea is "seductive" for all the wrong reasons.
"So the idea that there are free lunches...which certainly is what the lay person takes
away from MMT...is very sort of attractive, seductive - but it's absolute nonsense."
If that's the message that's going to be communicated, then that's wrong.
Asked to elaborate, he continued...
"There are times when you can spend a little bit more, but you are still making a trade off
and evaluating this trade off well...I think that's the right thing to do. If that's the
message from MMT, then I'm fine with that. There are periods where you have more leeway."
"The message can't be 'Don't Worry, Be Happy' it has to be 'yes take advantage of periods
when you have a little more spending capacity but use it wisely, because there's no such thing
as a free lunch and you will have to repay it at some point... that's what any sensible
economic theory will tell you, and I think that's what we understand now."
"When banks aren't lending, when inflation is low, it is possible for the central bank to
expand its balance sheet somewhat ...and finance more activities that the government wants to
undertake. That doesn't mean it's free debt it's equivalent to debt issued by the government -
think of the central bank issuing debt as the same as the government issuing debt: it's the
consolidated balance sheet you're looking at."
"Somebody is responsible for payment, it's either the central bank or the government."
"At low interest rates it doesn't really matter who it is, but as inflation picks ups it
does matter a little more who it is because the central bank often is financing itself with
effectively forced loans from the banking sector, and there's a limit to how much the banking
sector is willing to do that, especially as economic activity picks up."
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"So my sense is yes there is some room now but it doesn't mean the debt level doesn't matter
and it doesn't mean that we should just keep spending without thought of who's going to repay.
And I think the big philosophical issues are how much are you going to bail out companies...why
should Joe Schmoe...why should his taxes go to bail out a capital owner? After all, neither of
them saw the pandemic coming...neither is responsible for the pandemic...so why should one bail
out the property rights of another?"
"It strikes me these guys who want to open up the government wallet and spend to protect
everybody from the consequences of the pandemic don't realize that there's one person who's
bearing the hit: it may not be you, but it might be your children."
"And the question is: Why do they have to pay when they have no part in this?"
Remember: As Rajan explains, we must recognize that our resources are limited and use them
wisely. Keep that in mind when Democratic politicians are trying to spend trillions of dollars
of public money to outfit private buildings with solar panels or whatever 'Green New Deal'
infrastructure travesty AOC & Co come up with.
The good news is that the unstoppable juggernaut of globalization has fallen to it's
knees. Countries and societies around the world will have to look at ways they came become
independent and self sufficient,at least to some degree. It's like "War of the Worlds"
really, the best effort of humanity to contain the plague fails, but a random natural
occurrence saves humanity from the brink of destruction. Hopefully some real scientists will
be allowed to mitigate the medical disaster, but one thing is for sure, the grand plan of
turning everyone into a nomad competing for pennies on the international market, for the sole
benefit of the richest among the rich, is dead. Some really hard times are coming for the
international nomads/ parasites, and hopefully humanity will move to some more beneficial
culture, and have a real chance to survive as a species, in the long term.
Even the good news for the world's auto market seems to be bad news right now.
Day ago,
when detailing China's passenger auto sales plunge for the month of June, we noted that the
China Association of Automobile Manufacturers has been predicting for the last few months that
auto sales would fall between 15% and 25% for the year.
Those predictions have now been adjusted slightly upward , to a drop of 10% to 20%, despite
the fact that China's auto market still appears to be leading the global market into several
more years of deep recession. Recall, the auto market was already facing headwinds and China's
market specifically was already contracting for several years before the pandemic.
And while passenger vehicles fell 6.5% in June ,
as we noted , total vehicle sales rose 11.6% for the month to 2.3 million units, likely
helping lead to the revised predictions for the year. The driving force behind total vehicles
rising was a 63% surge in commercial vehicles, which also saw a 8.6% rise in the first half of
2020, likely due to vehicles being used to manage the spread of the virus in the country
... .... ....
This news comes despite better than expected results in May, where sales
showed a 12% increase year over year.
According to The
Detroit Bureau , premium and luxury passenger car retail sales led the charge in May,
rising 28% last month compared with year-ago results. Luxury vehicles maintained their strength
in June.
Recall,
we have recently noted that U.S. auto manufacturers are also teeing up sizeable incentives
to get buyers back into showrooms. Europe is following suit, with Volkswagen starting a sales
initiative to revive demand, including improved leasing and financing terms.
Funny how the visa-free map from before the COVID-19 pandemic is roughly equal to the
extent of the American Empire itself.
And the loss of foreign students signifies much more than the mere loss of income for the
American universities: it also means the loss of grip over the provinces' regional
elites.
Most of the foreign students in the USA are sons and daughters of the regional elites.
They live the American way of life, get westernized, and go back to their countries (which
they will likely rule) with a liberal ideology ingrained in their minds. They are the rough
equivalent to what the hostage was during Antiquity. To lose 263,000 hostages in less than
one year would be a devastating blow to American diplomacy.
One commenter mentioned a brain drain in relation to foreign students no longer coming to
America but I guess the brain drain will occur when out of work professors start heading off
to other countries like China in search of work.
Posted by msmash on Friday July 10, 2020 @02:45PM from the closer-look dept. Technology
startups have been
laying off tens of thousands of workers to cope with the economic fallout of the
coronavirus pandemic, potentially blunting a key innovation pipeline for the enterprise
information-technology market, according to industry analysts. From a report: "Startups are
a great source of innovation in the IT industry, but are now especially cash constrained," said
Max Azaham, a senior research director at research and consulting firm Gartner. Mr. Azaham said
the coronavirus has made startup investors far more risk averse, resulting in a sharp downturn
in investment capital for IT companies looking to raise less than $100 million. As of last
week, nearly 70,000 tech-startup employees world-wide had lost jobs since March, led by
ventures in the transportation, financial and travel sectors, according to a report by
U.K.-based brokerage BuyShares.co.uk.
Startups in the San Francisco region, including Silicon Valley, have shed more than
25,500 jobs, including layoffs at high-profile companies such as Uber, Groupon and Airbnb, the
report said. Uber in May announced more than 6,500 layoffs, cutting roughly a quarter of its
workforce. A month earlier, Lyft said it would cut about 17% of its workforce, furlough workers
and slash pay in cost-cutting efforts to cope with lost sales during the coronavirus pandemic.
Startups developing artificial intelligence and other emerging digital tools fall under the
category of tech-sector employers, which have cut jobs for four consecutive months, said Tim
Herbert, executive vice president for research and market intelligence at IT industry trade
group CompTIA. The cuts included a record 112,000 layoffs in April, as tech companies scrambled
to slash costs, according to CompTIA's analysis of federal employment data.
During the pandemic, readers may recall several of our pieces describing what life would be
like in a post corona world.
From restaurants to
flying to gambling to hotels to
gyms to interacting with people to even
housing trends - we highlighted how social distancing would transform the economy.
As the transformation becomes more evident by the week, we want to focus on automation and
artificial intelligence - and how these two things are allowing hotels, well at least one in
California, to accommodate patrons with contactless room service.
Hotel Trio in Healdsburg, California, is surrounded by wineries and restaurants in
Healdsburg/Sonoma County region, recently hired a new worker named "Rosé the Robot" that
delivers food, water, wine, beer, and other necessities, reported
Sonoma Magazine .
"As Rosé approaches a room with a delivery, she calls the phone to let the guest know
she's outside. A tablet-sized screen on Rosé's head greets the guest as they open the
door, and confirms the order. Next, she opens a lid on top of her head and reveals a storage
compartment containing the ordered items. Rosé then communicates a handful of questions
surrounding customer satisfaction via her screen. She bids farewell, turns around and as she
heads back toward her docking station near the front desk, she emits chirps that sound like a
mix between R2D2 and a little bird," said Sonoma Magazine.
Henry Harteveldt, a travel industry analyst at Atmospheric Research Group in San Francisco,
said robots would be integrated into the hotel experience.
"This is a part of travel that will see major growth in the years ahead," Harteveldt
said.
Rosé is manufactured by Savioke, a San Jose-based company that has dozens of robots
in hotels nationwide.
The tradeoff of a contactless environment where automation and artificial intelligence
replace humans to mitigate the spread of a virus is permanent
job loss .
When we last looked at real-time consumer spending data
one month ago , we saw a stunning rebound in Bank of America credit and debit card spending
trends, with total card spending ex-autos essentially recovering pre-covid levels by early
June.
No doubt, a big part of this was due to the surge in Personal Income since the start of the
current recession, which as we explained earlier was a
function of the extremely generous fiscal stimulus which meant that on a per capita basis,
claimants received roughly $788/week ($41k annualized) on average, well above the usual amount
of roughly $300 in a normal labor environment ($15-$16k annualized).
Let it Go , 6 minutes ago
What consumers buy matters a great deal. When looking at the policies flowing out of
Washington it is clear many politicians seem to have no idea that all consumer spending and
purchases are not created equal. The fact is, consumers should take a long look at how their
purchases will impact the economy over time.
Where money flows and who it enriches is a key component of economics, the failure to
consider this is a blind spot many people have. The article below delves into this important
issue.
People are stupid.
Me, I have money in the bank, but a low income, so I spend less than my income, my
bank-account grows. That is me, in Old skool Europe. My bank-account = >
750.000€.
But I don't need it, I'm a minimalist, always was, but I like the thought that I have it, to
fall back when I'm tired.
America, credit cards, spends all you want. Even if you don't get it.
I remember that interview with a woman, after the sacking of Lehman Brothers. She made a
super-high figure income (more than I wish for), but she spend it all while it lasted.
And now she was on the streets and homeless. How is that even possible?
She worked for Lehman, but she was utterly stupid? "Can I apply for that job, coz I'm so
much smarter."
It happens here in the old continent too, but the impact is lessened, because of our
social systems.
I rest my case.
Let it Go , 44 seconds ago
Yes they are stupid! It is difficult to reconcile the fact that 60% of the millennials
surveyed say they believe they will be wealthy "within 1 to 10 years" considering that 59% of
those in this age group said they still live paycheck to paycheck . Making this even harder
to understand is it appears many people now feel that in order to be "rich," they need to be
worth an average of $2.3 million.
This amount is more than 20 times the actual median net worth of U.S. households. More on
the subject of wealth in America in the article below.
Existing theories of economics and the financial system cannot match successfully with
current conditions.
Long term data on stock index breadth, corporate earnings, Treasury yields and S&P
500 dividend yield strongly suggest a fundamental break with the past is in progress.
Past economic and financial system models, analytical tools and metrics will have to be
entirely reconsidered and reconstructed.
The Secular Systemic Shift now underway is so profound and so far-reaching and so
all-encompassing that it is probably analogous to the shift occasioned by the Age of
Enlightenment, the Scientific Revolution, the American Revolution and (later) the
Industrial Revolution.
Recently, in the wake of the dramatic, catalyzing events associated with the COVID-19
pandemic, analysts have struggled to match the action in the Economy with that of the
Financial System. Existing disparities of inequality and maldistribution have been
dramatically exacerbated as the financial indices have soared. In no quarter is there found
any real explanation for the utter failure of all existent theories to anticipate or explain
our current experience. The general reaction is one of befuddled annoyance. Irrespective of
viewpoint, left or right, economists and market analysts are trying to figure out why the
emergent reality does not conform to their model of how things should be and the default
tendency is to wag a finger of blame at the other side of the aisle.
In the Eisenhower era, corporations paid over 1/3 of the federal budget. Tariffs on imports
also paid a large percentage. The top marginal personal income tax rate was 70%.
In the 1960s, my father worked for Bell Aerosystems. The CEO made $120K managing 20,000
employees and building surface ship and rocket engines for Gemini and Apollo. Dad made $12K in
an administrative role and experienced machinists made $18K.
The system WORKED for most everyone.
Today, chief executives make 300X the earning of peons. Corporations pay only 6% of the
federal budget. Amazon paid ZERO corporate income tax. Apple paid 2%. Lockheed Martin paid
14%.
And where are they going to move, Colonel? Maybe LM will go to Russia or China? Maybe Amazon
will move to Alexandria and make life miserable there? Microsoft to Bangalore or Little
Rock?
Race to the bottom pandering to corporations, which has been the case for 40+ years now.
There is absolutely nothing wrong with expecting corporations to pay taxes. I have no idea what
is the basis of the objection. Do any of the readers here pay more than corporations? I sure
do!
Germany eased strict social distancing restrictions on April 20 and started the process of
reopening its economy as the virus pandemic curve flatten. However, the consequence of closing
businesses and forcing people to stay home, along with shutdowns of international commerce,
resulted in a deep recession in the first half of the year for the exporting nation.
A new survey via the German Chambers of Commerce (reported by
Reuters ) said 83% of domestic firms with high international exposure had experienced a
collapse in revenues. Many of these firms, about 93% of respondents, said the global economy
could improve in 2021 or beyond.
The survey is an eye-opener for Europe's largest economy, and one of the largest exporting
nations in the world, suggesting a global economic recovery in the shape of a "V" is not
feasible for the back half of 2020. About 15% of the 3,300 companies surveyed said their annual
turnover is expected to be halved.
It was noted the impact of the virus-induced downturn, whereas at the start of the pandemic,
crushed travel and tourism, has now impacted other sectors and rippled through the economy in
the form of a demand shock.
Fifty-nine percent of respondents this month (July) warned of slumping demand for their
products and services, up from 57% in April.
Under such conditions, firms are unwilling to invest - more than half of the respondents
said they're cutting CapEx abroad, compared with 35% in April.
We noted on Tuesday, global CapEx is expected to be slashed, on average, 12%, which is much
larger than the 11.3% decline during the global financial crisis in 2008-09. Global
capital expenditure weakness suggests a weak recovery is ahead.
German Chambers of Industry and Commerce released a report on Wednesday indicating exports
will drop by 15% in 2020 with a slight recovery in 2021.
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The German government has unveiled a $146 billion stimulus package to jump-start the
severely damaged economy. However, it appears the recovery, so far, has been a dead cat bounce
that will not revert to 2019 growth activity levels for the next several years, or
longer...
German industrial production has a long ways to go...
So what must be done to supercharge a recovery? Well, we offer insight here .
"... The "involuntary furloughs" would include up to 15,000 flight attendants, 11,000 customer service and gate agents, 5,500 maintenance workers, and 2,250 pilots. Another 1,300 management and support staff will be laid off on October 1, the company said. ..."
"... Delta Airlines told pilots in late June that it would send WARN notices to 2,558 pilots, or nearly 20% of its pilots, notifying them of potential furloughs. Last week, Delta said that it may cut the number of flights it had scheduled for August due to lack of demand. A month ago, Delta issued the mother or all revenue warnings . ..."
With Covid-19 cases surging in the US and in other countries, airline industry ticket sales
for both domestic and international flights are declining again, as demand has turned south,
according to a presentation to employees by United Airlines, filed
with the SEC on July 7.
UA's presentation included the two charts below of new ticket sales for future travel, by
"all carriers and sales channels," based on data by Direct Data Solutions (DDS) through July 2.
They show the percentage decline in industry-wide ticket sales for domestic and international
travel from the same period last year (in a 7-day moving average). The charts are titled,
"Increase in Covid-19 cases negatively impacting industry demand":
The first chart shows the decline in ticket sales for domestic flights, in terms of the
number of passengers (blue line) and dollar revenues by the industry (purple line):
This second chart shows the decline in international ticket sales in terms of the number of
passengers:
So that's the end of any pretense of a "V-shaped" recovery of ticket sales. And it's likely
that not just airlines are impacted by this resurgence in Covid-19 cases. But airlines are
already teetering on the edge.
Yesterday, United Airlines announced that 36,000 employees in the US, or 45% of its US
workforce, could face "involuntary furloughs" on on or after October 1. That's the day after
the restrictions attached to the $25 billion in payroll aid under the CARES act expire.
United's memo of the layoffs went out to employees in order to comply with a federal law
that requires employers to give employees at least 60 days' prior warning before mass layoffs,
the so-called WARN notices.
The "involuntary furloughs" would include up to 15,000 flight attendants, 11,000 customer
service and gate agents, 5,500 maintenance workers, and 2,250 pilots. Another 1,300 management
and support staff will be laid off on October 1, the company said.
"The reality is that United simply cannot continue at our current payroll level past
October 1 in an environment where travel demand is so depressed. And involuntary furloughs
come as a last resort, after months of company-wide cost-cutting and capital-raising," the
company said.
Delta Airlines told pilots in late June that it would send WARN notices to 2,558 pilots, or
nearly 20% of its pilots, notifying them of potential furloughs. Last week, Delta said that it
may cut the number of flights it had scheduled for August due to lack of demand. A month ago,
Delta issued the mother or all revenue warnings .
All airlines have been trying to cut their workforce with voluntary measures and have been
offering severance packages and early retirement packages to nudge employees out the door
without having to lay them off. Over the next few weeks, as the 60-day period before October 1
approaches, more airlines will follow United in announcing mass layoffs.
The drama of the dropping ticket sales due to the Covid-19 resurgence is not yet reflected
in the TSA's checkpoint screenings at US airports
– a measure of how many people are getting on a plane. They were still down 74.4%
yesterday, compared to the same weekday last year. They have risen since the low point in
April, but at a painfully slow pace.
The TSA checkpoint screenings are a lagging indicator. These people bought their tickets
often weeks or months ago. The declining ticket purchases in recent days will be reflected in
future TSA screenings:
Four months into the crisis, airlines are still only flying a quarter of the passengers that
they flew last year at this time, and they're having trouble hanging on.
United told reporters today that despite the radical cost cuts and capacity reductions, it
is still burning $40 million per day. That's $1.2 billion a month, month after month. And it
said that it could not count on further government support to cover payroll costs from October
1 forward. The company said that 26,000 employees had already taken part in the voluntary
severance programs so far this year.
The V-shaped recovery of airline stocks is also funny looking. The WOLF STREET airline index
of the seven largest US airlines – Alaska, American, Delta, JetBlue, Southwest, Spirit,
and United – remains in dismal territory, down 49% from the Good Times in mid-January
2020, and down 60% from the Better Times in January 2018 (market cap data via YCharts ):
The market cap of all seven airlines has plunged since mid-January, but with different
nuances, as of the close today:
United: -59%
Delta: -57%
American: -50%
Spirit: -50%
JetBlue: -48%
Alaska: -46%
Southwest: -35%.
It's going to be a long tough slog for passenger traffic to recover. In addition to the
issues related to the Pandemic, there is now a structural issue: Business travelers, the most
profitable segment for airlines, may not fully recover in a very long time because companies
have now discovered that video conferencing and video chats can effectively replace many
trips.
Sure, there will be some business travel after the Pandemic disappears as an issue, but a
lot less than there was before. This is a huge savings in time and money for companies. But
it's a deep long-term hole for airlines.
Despite the hope-restoring nonfarm payrolls "recovery" and the over-hyped bounce in retail
sales (ignoring the lack of 'V' in industrial production) and 'soft' sentiment surveys (which
are biased by their nature as diffusion indices to bounce back hard), for the sixteenth week in
a row, over 1 million Americans filed for unemployment benefits for the first time (1.314mm was
slightly better than the 1.375mm expected).
Source: Bloomberg
Texas, New Jersey, and Louisiana suffered the biggest increases in jobless claims in the
prior week...
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That brings the sixteen-week total to 49.993 million, dramatically more than at any period
in American history. However, as the chart above shows, the second derivative is slowing down
drastically (even though the 1.314 million rise this last week is still higher than any other
week in history outside of the pandemic)
Continuing Claims did drop very modestly but hardly a signal that "re-opening" is
accelerating! And definitely not confirming the payrolls or sentiment data...
Source: Bloomberg
And as we noted previously, what is most disturbing is that in the last sixteen weeks, far
more than twice as many Americans have filed for unemployment than jobs gained during the last
decade since the end of the Great Recession ... (22.13 million gained in a decade, 49.993
million lost in 16 weeks)
Worse still, the final numbers will likely be worsened due to the bailout itself (and its
fiscal cliff): as a reminder, the Coronavirus Aid, Relief, and Economic Security (CARES) Act,
passed on March 27, could contribute to new records being reached in coming weeks as it
increases eligibility for jobless claims to self-employed and gig workers, extends the maximum
number of weeks that one can receive benefits, and provides an additional $600 per week until
July 31.
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Finally, it is notable, we have lost 378 jobs for every confirmed US death from COVID-19
(132,309) .
Was it worth it?
The big question remains - what happens when the $600 CARES Act bonuses stop flowing?
New
research from Yelp shows that as of June 15, there were nearly 140,000 total business
closures on the website since March 1. When compared to similar research released in April,
which showed more than 175,000 business closures, these latest numbers indicate that more
than 20% of businesses closed in April have reopened.
In March, restaurants had the highest numbers of business closures listed on the app
compared to other industries, and the rate of closure has remained high. Of the businesses
that closed, 17% are restaurants, and 53% of those restaurant closures are indicated as
permanent on Yelp. Retail, however, is the hardest hit overall.
During the peak of the pandemic, the number of diners seated across Yelp Reservations
and Waitlist dropped essentially to zero. In early June, numbers of diners seated are down
57% of pre-pandemic levels.
Predictions about the restaurant industry's fate in a post-pandemic world
have been abundant throughout the crisis . The National Restaurant Association estimated
that 15% of restaurants could close, while Barclay's estimate is more optimistic, predicting
approximately 10% of restaurants will shutter permanently.
Though it's hard to find a silver lining in Yelp's data, some predictions have been more
dire still. In May, OpenTable said
one in four restaurants were at risk for closure, for example, though those numbers focus
on restaurants that use the reservations platform. Casual or fine dining sit-down restaurants
and mom-and-pop concepts that are not well capitalized are expected to experience the brunt of
this crisis. The
Independent Restaurant Coalition , for example, forecast that as many as 85% of independent
restaurants could permanently close by the end of the year.
Yelp's data does illustrate how some restaurants have been able to weather the storm,
however, reporting a 10-fold increase in searches for takeout since March 10, for example.
Takeout and delivery searches are up 148%, with Yelp predicting this off-premise trend could be
here to stay.
The research also shows that restaurants catering to group dining are making a comeback,
with fondue searches up 123%, tapas bars up 98%, hot pot up 49% and buffets up 17%. Conversely,
searches for cuisines that were popular during the past three months have begun to wane,
including pizza (down 28%), Chinese (down 26%) and fast food (down 18%).
While the pendulum has swung toward group dining, perhaps due to pent up demand after
three-plus-months of safer at home orders and dining room closures in some markets, this
interest could be short lived. This data was released before
a number of states --
New Jersey , New York
and California among them --
have delayed or re-closed some or all of their restaurants due to spiking coronavirus cases.
Extended closures will further challenge operators who are burning through cash to maintain
rent, labor and other costs. Restaurants with the strongest balance sheets and best access to
capital have the best chance to endure sustained closures. The industry will favor the haves
and weed out the have-nots, a trend that has become clearer as major chains like Taco Bell,
Domino's and McDonald's
have announced massive hiring sprees .
The virus pandemic and socio-economic shockwave across the US (read ad hoc protests and
riots), and more specifically in top metro areas, has created much uncertainty for city
dwellers who are now fleeing for suburbs.
Over the past several months, we have documented city dwellers leaving big cities for
suburbs, small towns and communities to isolate from the virus and socio-economic tensions
unfolding in many metros. While the exodus from cities is still in the early stages, it's now
believed by at least one expert, that city dwellers could continue to flee US metros for the
next 18-24 months.
"I think the next 18 to 24 months are going to show a lot of exodus out of central
business districts, as you can expect," Hessam Nadji, president and CEO of Marcus &
Millichap, who spoke with
CNBC on Tuesday.
"We're seeing there's a lot of office vacancy, for example, in the suburbs that have now
been absorbed; there's a lot of demand for rental homes that we're seeing because people are
fleeing especially hot spots like New York, but ... you just have to keep a long-term view on
it," Nadji said.
He said over the next several years - suburban areas will see exponential demand. Already,
real estate searches for suburban zip codes surged 13% in May, according to data via
Realtor.com.
We've already noted that New York and the Bay Area are seeing residents migrate to
suburbs.
Nadji said people are also fleeing to the outskirts of Seattle and Miami.
"It was a trend that was starting to happen already over the last two or three years. You
have to remember that 60% of millennials are now in their 30s," Nadji said. "While they
really enjoyed the lifestyle of central business districts and the lack of commuting ... we
were beginning to see them migrate back out as they were getting married and having kids,"
and the "health crisis has really accelerated that pattern."
He said the outbound migration from cities would also result in businesses chasing employees
to the suburbs. Nadji said people won't "permanently" lose interest in cities - at the moment,
this is an "overreaction" to the ongoing virus pandemic.
"We saw that [demand sap] post 9/11 and those tragedies, of course, because of the
reluctance to want to locate in high-visibility high rises in downtown[s]," Nadji explained.
"Eighteen to 24 months later, that [concern] began to dissipate. So, it's a normal reaction.
I just don't think we should count out the long-term prospects of the benefits of central
business districts."
What's different today is that the country has stumbled into one of the worst public health
crises in decades, tens of millions of people are unemployed, and the entire transformation of
the economy, which includes working remotely will lead to permanent population loss for city
centers - where living standards are in declines - as well as cost of living as a Manhattan
studio costs the same as a "mansion" in the suburbs.
Guess who is most excited about this exodus? Well, baby boomers, because they
bought/built oversized McMansions , with brick on front and stucco on back, in the late
1990s and early 2000s - and whose attempts to offload this real estate has been met with poor
demand... until now.
yellowsub , 8 hours ago
It can't last for 2 years, the property bubble in many areas outside of NYC on the NJ side
is already close to peak prices before the crash... Most of these areas are not places where
you want to raise your child in their schools.
"... This gradual, almost imperceptible erosion is the essence of neofeudalism, a process of transferring political and economic power from commoners to a new Financial Aristocracy/Nobility. ..."
Our society has a legal structure of self-rule and ownership of capital, but in reality it is a Neofeudal
Oligarchy.
Now that the pandemic is over and the economy is roaring again--so the stock market says--we're heading straight
back up into the good old days of 2019.
Nothing to worry about, we've recovered the trajectory of higher
and higher, better every day in every way.
Everything's great except the fatal rot at the heart of the U.S. economy hasn't even been acknowledged, much less
addressed:
every sector of the economy is nothing but one form of
neofeudal
extortion
or another.
Let's spin the time machine back to the late Middle Ages, at the height of feudalism, and imagine we're trying to
get a boatload of goods to the nearest city to sell.
As we drift down the river, we're constantly being
stopped and charged a fee for transiting one small fiefdom after another. When we finally reach the city, there's
an entry fee for bringing our goods to market.
Note that none of these fees were payments for improvements to transport or for services rendered; they were
simply extortion.
This was the
economic
structure of feudalism
: petty fiefdoms levied extortionate fees that funded the lifestyles of nobility.
This is why I have long called America's economy
neofeudal
:
we pay ever higher fees for services that are degrading, not improving.
This is the essence of extortion:
we don't get any improvement in goods and services for the extra money we're forced to pay.
Consider higher education: costs are soaring while the value of the "product"--a college diploma--declines.
What
extra value are students receiving for the doubling of tuition and fees? The short answer is "none." College
diplomas are in over-supply, and studies have found that a majority of students learn remarkably little of value
in college.
As I explain in my book
The
Nearly Free University and the Emerging Economy
, the solution is to
accredit
the student, not the institution
. If the student learned very little, he/she doesn't get
credentialed.
Were students to have access to the best classroom lectures online (nearly free), and on-the-job apprenticeships
in the workplace, (nearly free or perhaps even paid), learning would be significantly improved and costs reduced
by 80% to 90%.
In this structure, there's no need for costly campuses or administration; the entire structure of higher education
could be largely automated with software, except for the workplace apprenticeships which focus on case studies and
real-world projects that are creating value in the here and now.
Consider healthcare: has the quality of healthcare doubled along with costs?
Are Americans significantly
healthier as the costs of healthcare have tripled? The aggregate health of Americans has arguably declined, while
the stresses placed on frontline care providers by the ever-heavier burdens of compliance and paperwork have
increased.
What about the $200 hammers and $300 million F-35 aircraft of the defense industry?
Once again, as costs
have soared, the quality and effectiveness of the products being supplied has arguable declined.
How about state and local government services? Are they improving as taxes and junk fees rise?
Once
again, government services are often declining in quality as taxes and fees increase by leaps and bounds.
In sector after sector, the quality of the goods and services has declined while costs have soared. This is the
acme of neofeudalism:
insiders and the New Nobility are skimming fortunes as prices skyrocket and the
quality of the goods and services provided plummet.
Look at the cost increases in higher education, healthcare and childcare
and ask yourself if the quality
of those services have risen in lockstep with price increases.
This is nothing but neofeudal extortion.
The cartels raise prices and we're forced to pay them, just as
feudal commoners were forced to pay.
But extortion isn't the only feature of neofeudalism that is leading to collapse.
Just as important is
the slow erosion of commoners' self-rule and ownership of meaningful, productive capital.
This gradual, almost imperceptible erosion is the essence of neofeudalism,
a process of transferring
political and economic power from commoners to a new Financial Aristocracy/Nobility.
If we examine the "wealth" of the middle class/working class (however you define them, the defining characteristic
of both is the reliance on labor for income, as opposed to living off the income earned by capital), we find the
primary capital asset is the family home, which as I have explained many times, is unproductive--in essence, a
form of consumption rather than a source of income.
In a globalized, financialized economy, the only capital worth owning is mobile capital, capital that can be
shifted by a keystroke to avoid devaluation or earn a a higher return.
Housing and pensions are "stranded capital," forms of capital that are not mobile unless they are liquidated
before crises or expropriations occur.
I am also struck by the ever-rising barriers to starting or even operating small businesses, a core form of
capital, as enterprises generate income and (potentially) capital gains. (The pandemic has only increased barriers
that were already high.)
The capital and managerial expertise required to launch and grow a legal enterprise is significant, which is at
least partly why a nation of self-employed farmers, shopkeepers, artisans and traders is now a nation of employees
of government and large corporations.
What sort of capital can be acquired by the average commoner now?
Enough to match the wealth and
political power of financial Nobility?
Summary: "The U.S. government does not represent the interests of the majority of the country's citizens, but is
instead ruled by those of the rich and powerful, a new study from Princeton and Northwestern universities has
concluded."
Neofeudalism is not a re-run of feudalism. It's a new and improved, state-corporate version of indentured
servitude.
The process of devolving to feudalism required the erosion of peasants' rights to own
productive assets, which in an agrarian economy meant ownership of land.
Ownership of land was replaced with various obligations to the local feudal lord or monastery-- free labor for
time periods ranging from a few days to months; a share of one's grain harvest, and so on.
The other key dynamic of feudalism was the removal of the peasantry from the public sphere. In the pre-feudal era
(for example, the reign of Charlemagne), peasants could still attend public councils and make their voices heard,
and there was a rough system of justice in which peasants could petition authorities for redress.
From the capitalist perspective, feudalism restricted serfs' access to cash markets where they could sell their
labor or harvests.
The
key feature of capitalism isn't just markets-- it's unrestricted ownership of productive assets
--land,
tools, workshops, and the social capital of skills, networks, trading associations, guilds, etc.
Our system is Neofeudal because the non-elites have no real voice in the public sphere, and ownership of
productive capital is indirectly suppressed by the state-corporate duopoly.
Our society has a legal structure of self-rule and ownership of capital, but in reality it is a Neofeudal
Oligarchy.
The decline is visible, and so is the trajectory to collapse.
The unprecedented implosion of U.S. commercial real estate during the coronavirus pandemic
is likely to get worse as newly delinquent CMBS loans are surging as the list of retail store
closures continues to rise.
Trepp's June
CMBS remittance report showed CMBS delinquencies hit a high of 10.32%, not seen since 2012.
It was noted that that retail CRE loans were in rough shape.
Many retail shops are heavily indebted, some have already declared bankruptcy, while others
are quickly shrinking their operating size, by reducing store footprint to rein in cost as the
virus-induced recession, blended with a plunge in consumption, along with a shift to online, is
resulting in a rapid acceleration of the retail apocalypse.
Coresight Research's latest forecast has
upwards of 25,000 retail stores could close by year end.
Forbes has released an updated list of confirmed store closures. So far, it looks like
8,708 store units have or will shutter operations this year, and could quickly surpass 2019
totals of 9,302, in a matter of months.
With thousands of retail stores closing and the economy contracting, the next conversation
Wall Street will have is about deep economic scarring and permanent job loss.
Already, 3
million jobs have been eliminated from the economy, some of which have come from the
closure of retail stores. The bad news about permanent job loss is that it's a consumption
killer, resulting in less spending at retailers, suggesting an even greater amount of store
closures beyond anyone's wild guess could be seen over the next 12-24 months.
This all suggests there's no V-shaped recovery this year - one might want to hunker down for
a prolonged downturn, as explained here
.
"... I would submit that the legitimacy of the elite professional and managerial classes is being called into question, for want of performance or any sense of responsibility. The urban PMC are the core constituency of the establishment Democratic Party. The vestigial working class elements and the ideological Left are distant memories and oppressed minorities seeking social justice, mere props. ..."
"... The thing is, the political classes -- the millionaire media pundits, the politicians, the lobbyists, the generals, the journamalists, the manipulative political operatives and propagandists, the pious policy "experts", the highly paid executives and financial managers running monopolies into the ground and non-profits into irrelevance -- they have enacted their neo-liberal agenda and it doesn't work. ..."
"... This in a country that cannot manufacture PPE. Or win a war. Trump, in his fumbling way, might get the U.S. out of Afghanistan, but the NY Times -- who brought us WMD not that long ago -- reports the Russians are paying bounties on American soldiers killed. No report on the treatment of Julian Assange though. Boeing is going to get the 737 Max in the air real soon now. Citibank is borrowing at 0.03 from the Fed and lending to credit card users at 27% and may be insolvent. ..."
"... So, let us assume the Democrats, after nominating an elderly SOB who had a hand in the crime bill that gave the U.S. the highest incarceration rate in the world, the bankruptcy bill that saddled tens of millions with credit card and student debt that cannot be discharged, and every stupid war of the last nearly twenty years, will suddenly see the necessity of radical change. And, after making an alliance with conservative Republicans hostile to even Trump's fake populism in order to elect Biden, seeing the light on radical reform is so likely! So plausible. ..."
mainstream Democrats recognize the need for radical change, and Biden will align with
the mainstream position as he always has done
You said you would leave this, your third assumption, to comments, so here is my
comment.
The U.S. is in the midst of a deep legitimacy crisis and contrary to popular belief among
liberals, it is not Trump particularly whose legitimacy is being called into question. Oh,
sure, there have been relentless attacks on him -- from partisan opponents and from much of
mainstream media -- but like the "anti-racism" of the recent protests -- much of it is
dissembling and distraction. Charges of colluding with Putin to win the 2016 election turned
out to be fake news -- rather obviously so from the beginning -- but a big enough mob went down
that path with no self-awareness. I am not saying Trump is not an egregiously bad President; he
is. But, notice please, before you go assuming that mainstream Democrats are going wake up in
2021 wanting to govern in the real world , that they have not shown much inclination toward
truth-telling or critical realism these last 20 years.
It is July. By January 2021, the U.S. economy will have suffered a structural collapse in
multiple sectors. That is the economic consequence of the pandemic. Restaurants, shopping
malls, bars, colleges, hotels, airlines, cruise lines -- easily 15% of the workforce will be
unemployed and another 25% seriously underemployed.
Did I mention that the U.S. is undergoing a legitimacy crisis?? Whose legitimacy is being
called into question?
I would submit that the legitimacy of the elite professional and managerial classes is being
called into question, for want of performance or any sense of responsibility. The urban PMC are
the core constituency of the establishment Democratic Party. The vestigial working class
elements and the ideological Left are distant memories and oppressed minorities seeking social
justice, mere props.
I would say the Party establishment is confident they can put the
re-animated corpse of Biden into the White House. And look how gleefully they welcome
Republican never-Trumpers into the clubhouse! If you were one of the fools and tools who
thought Obama did not want Republicans to control Congress, you are getting another chance to
see how the Obama Alumni Association works with the Lincoln Project, how happy they are to
deliver the kind of policy that appeals to rich, old, suburban Republican women.
The thing is, the political classes -- the millionaire media pundits, the politicians, the
lobbyists, the generals, the journamalists, the manipulative political operatives and
propagandists, the pious policy "experts", the highly paid executives and financial managers
running monopolies into the ground and non-profits into irrelevance -- they have enacted their
neo-liberal agenda and it doesn't work.
We have just watched the once highly touted CDC completely botch the great Pandemic. They
could not devise a test. They screwed up the rules on who could or should be tested. They lied
early on about the need to wear masks. They staged a moral panic over a need for ventilators,
when ventilators are a terrible therapeutic alternative. In the new Puritanism, they shut down
public beaches but they watched passively as liberal heroes like Cuomo set off a holocaust by
sending COVID-19 patients to nursing homes.
This in a country that cannot manufacture PPE. Or win a war. Trump, in his fumbling way,
might get the U.S. out of Afghanistan, but the NY Times -- who brought us WMD not that long ago
-- reports the Russians are paying bounties on American soldiers killed. No report on the
treatment of Julian Assange though. Boeing is going to get the 737 Max in the air real soon
now. Citibank is borrowing at 0.03 from the Fed and lending to credit card users at 27% and may
be insolvent.
So, let us assume the Democrats, after nominating an elderly SOB who had a hand in the
crime bill that gave the U.S. the highest incarceration rate in the world, the bankruptcy bill
that saddled tens of millions with credit card and student debt that cannot be discharged, and
every stupid war of the last nearly twenty years, will suddenly see the necessity of radical
change. And, after making an alliance with conservative Republicans hostile to even Trump's
fake populism in order to elect Biden, seeing the light on radical reform is so likely! So
plausible.
And, what's the play? The carrot of bi-partisan cooperation coupled with the fearful stick
of abolishing the filibuster someday somehow if they don't play nice. You do realize that only
Republicans are allowed to manipulate the filibuster and only in ways that favor their agenda
of, say, stacking the courts? And, the strategic vision? Reinforcing the Rube Goldberg
contraption which is Obamacare? You do know Biden is on record as adamantly opposed to
Medicare4all? And, that Medicaid is a need-based nightmare of controlled deprivation? In a
country where public health is such a shambles that a pandemic is running out of control.
'All the attention in this thread so far has been on the political dimension of uncertainty,
but it seems to me the public health dimension is also crucial and quite up in the air. What
will the trajectory of the virus look like in the US over the next several months? Will
infections continue to explode out of control?'
Not just the public health, but the economic effects of the public health. As I pointed out
in a previous thread, it's not difficult to work out why Trump looked like he was going to win
in January: the stock market was booming, unemployment was low, crime was low, there were no
new wars it's not a mystery.
People vote with their wallets.
If Trump someone manages to face down the neo-liberals in his own party and arrange for a
gigantic stimulus bill (bigger than the last one) and keeps 'benefits' going past August, he is
in with a shout. If he doesn't, and if the economy continues its path to free fall, he will
lose.
People vote with their wallets. It is not difficult. You don't need to invoke Russia and
etc. to work out why Trump won in 2016 (the impact of the Obama stimulus package, which was too
small, hadn't et 'percolated through' to people's bank balances at that point). And, if Trump
loses in 2020, the reasons will be self-evident and nothing to do with 'people seeing through
him' or 'brave liberals averted a turn to fascism'. If he loses it will be because he screwed
up on the 'good' economy.
Three time best-selling book author Nomi Prins says long before the Covid 19 crisis, the
global economy was faltering big time. The Fed stepped in with the start of massive money
printing in late 2019 to save the day.
Prins explains, " We were already in crisis mode as I mentioned at the end of my last book
going into 2019."
"What did we see at the end of 2019? We saw this pivot, and I call it phase two. . . .
Central banks had pivoted to easing mode . . . . Come September, October, November and
December, the Fed is producing repo operations. Those are short-term lending operations
that are supposed to be the purview of the banks . . . . The Fed is not supposed to get
involved, but it did. The Fed had all kinds of excuses. It said it was not QE, but it was.
. . . The debt at the end of 2019 for the world was three times GDP. For every $3 borrowed,
only $1 of economic activity occurred. That's what we started 2020 with. Throw a pandemic
into that . . . and you have a long drawn out financial and economic crisis."
Now, the money printing has gone into overdrive to save the system from the virus crisis.
The social and economic damage, according to Prins, is profound and not going away. Prins
points out,
"We are not going to pay back this debt, and this is global. Nobody is even considering
trying to pay back the debt that has been created. Let's think about why that debt has been
created. It's not just because the economy slowed down. That's one reason and kind of an
excuse. The reality is the Fed is on steroids, and other central banks are on steroids . .
. throughout the world in a larger number and larger magnitude than in the wake of the
financial crisis of 2008. This means all this new debt created is even cheaper than the
debt created going into the 2008 crisis. So, more debt, created more cheaply, means less
incentive to pay it back and more incentive to push it down the road and grow it. You've
got this snowball of debt rolling down this high mountain, and it's rolling and growing and
getting bigger. The mountain, which is the main street economy, is coming down as the snow
ball is coming down, and the main street economy itself, that foundation, is really shaky.
. . . How does this end? It ends with us, the foundation, which is the main street economy,
by both that snowball of debt and the avalanche of the mountain. That's going to be a
multi-decade problem. "
Prins says this next stage has a brand new name and explains,
" I call this a 'Permanent Distortion.' I have not used this term in prior books, but I
am using it because . . . the disconnect between financial assets, equity markets and the
real economy . . . has become massive ...
There is going to be this endless supply of artificial stimulation into the markets. . .
. Former New York Fed President Bill Dudley said the Fed's balance sheet is going to $10
trillion. That's what I have been saying, and now he finally said it. That's not going away
anytime soon. That's not being unwound anytime soon. That becomes permanent lift to
financial assets . . . . In the wake of that, less real capital gets used for
infrastructure, research and development, growth and retooling the economy and getting jobs
into this new period."
Prins says gold prices are going to "follow the expansion of the Fed's balance sheet." It
is that simple, and Prins predicts,
"As we saw in the wake of the financial crisis of 2008, gold and silver will have the
ability to go up quite substantially as the Fed's book increases in size, which we know it
is going to do. We have been told that multiple times by many different words by Federal
Reserve Chairman Jerome Powell."
In closing, Prins says, " We are continuing to drive up asset bubbles where we don't have
the real economy to back it up..."
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"The more this 'Permanent Distortion' gets bigger, the more the likelihood the next
crisis will happen... and it will be from a higher height. It will be from a larger bubble,
a bigger snowball accelerating downward more quickly. I don't think we are out of this
crisis. I think the markets are going to have a bumpy ride as the economy has a bumpier
ride ."
Join Greg Hunter as he goes One-on-One with three time best-selling author Nomi Prins.
The Central Banks will buy up the debt and then liquidate it. Some currencies may be
re-issued. Get over it. Not the end of the world.
hugin-o-munin , 20 minutes ago
I used to listen closely to what Nomi said before but now it is only more of the usual
talk. The world is a very slow place and it takes a long time until new realizations spread
but when they do there is little possibility to stop it. Right now the USD is dying as a
world reserve currency. It is slow and strictly kept away as a talking point in media.
The US behaves and continues down a path that is only accelerating this process because
it is not up to the US what happens to the USD, it is up to the rest of the world. This is
a truth that no American wants to accept but it is a fact. The more aggressive and arrogant
the US becomes the faster this will happen and a part of me thinks that is precisely the
plan. It will not matter what either the Fed or Treasury does.
Nomi talks about price inflation hitting smaller and poorer nations right now but
doesn't even come close to the fact that this is also happening in the US right now albeit
much slower. Greg Hunter was too stuck on finding ways to praise Trump as usual to even
push this question, if he even recognized it. The gospel from Wall Street and most
certainly Goldman Sachs that the USD can never be questioned is all over this interview and
which is why these 'former' truth tellers are just that - former.
algol_dog , 35 minutes ago
Futures at new highs tonight. This week will break S&P highs for the year. Amazing
time ...
Motorhead , 40 minutes ago
We've been hearing the same old stuff for easily 10-15 years from Jim Willie, Eric King,
Peter Schiff, various/numerous gold bugs. et al., ad nauseam. Yeah, one day, they might be
right, but repeating the same mantra for over a decade, one is bound to be right
eventually.
Balance-Sheet , 54 minutes ago
If it is permanent it is reality not a distortion and this is the point. The 1900s are
long over and will not be returning nor will the 1800s be returning for that matter.
Will the National Debt ever be paid off? No and there was never any intention to do
so.
The Fed is in charge and does not need to account to anyone other than Congress and its
Banking and Budgeting committees therefore provides explanations it hopes people can
understand though this might be ill advised in and of itself.
Will the Fed balance sheet go to 10T? It might but only if it seems necessary and that
depends of future circumstances which in very fluid conditions cannot be forecast
accurately especially when politicians snap the economy on and off again and again.
Do taxpayers have to pay back the Fed balance sheet? No.
Does the US Treasury or the Fed crowd out private investment making it less available or
at higher interest rates. NO! and obviously not, right? Everyone can see that.
The Gold Standard is o-v-e-r and there are no practical limitations to the amount of
dollars that can be authorized by Congress to the level deemed necessary.
Doesn't this mean the USG will issue unlimited e-dollars? No, anything can happen in a
thought experiment of course but the target is to make sure that the supply of USD is just
a little more than enough.
If a mistake is made can excess USD is issued can the excess be withdrawn? Yes, billions
of dollars die every day anyway as loans mature and all UST issues like bonds that mature
in Fed custody simply disappear automatically upon maturity. All of the 'dollars' and the
bonds are electronic and are simply deleted electronically invisibly and with no PR
issues.
Does Nomi Prins know this? Probably but, hey, she is trying to make a living here so
must slightly overfulfill your existing expectations. That is just excellent marketing- you
want the customer- that's you- to get a slightly heavy pour. :-)
indus creed , 58 minutes ago
Prins has co-hosted the TYT (The Young Turks) program on Youtube. In case you are
wondering, TYT are deluded, woke supporters of AOC/The_Squad types.
"... "In a period of protest and increasing anger about inequality, the differential inflation rate experienced by low- and high-income households is a concern," said Bloomberg Economics' Björn van Roye and Tom Orlik. ..."
The coronavirus is inflicting a price shock on low income Americans that risks further driving up inequality.
In a study released this week, Bloomberg Economics
estimated higher grocery and housing costs for lockdown necessities meant those households whose incomes are in the bottom 10%
currently face inflation of 1.5% compared with 1.0% for the top 10% and the official 0.1% overall average recorded in May.
Recalculating Inflation
'Have nots' suffered disproportionately as virus changed buying patterns
Note: Inflation for the lowest (highest) 10% takes the alternative CPI basket for the lowest (highest) decile of household income
before taxes from the 2018 Consumer Expenditure Survey
The explanation for the difference lies in how the Covid-19 pandemic has changed consumption patterns by forcing households to
buy more food while spending less on transportation or recreational activities.
"In a period of protest and increasing anger about inequality, the differential inflation rate experienced by low- and high-income
households is a concern," said Bloomberg Economics' Björn van Roye and Tom Orlik.
The suggestion the virus is less disinflationary than many economists believe poses a challenge for the Federal Reserve which
is eyeing a slower inflation rate than that experienced by lower earners, who are instead facing a steady erosion of their purchasing
power.
"Taken together with concerns about central banks bailing out investors ahead of firms and workers, and the benefits rich, asset-owning
households gain from quantitative easing, it adds to the sense that central banks are unintentional contributors to the problem of
inequality," van Roye and Orlik said.
"... So called “Democrats”, especially Biden himself, and Biden entourage are sellouts to financial oligarchy. They represent defeated in 2016 wing of the US neoliberal elite — adherents to classic neoliberalism and neoliberal globalization. ..."
"... To expect them to attempt anything of value other the kicking the neoliberalism can down the road is extremely naive. ..."
The more you tie your analysis of economic consequences to the assumption of a Democratic
victory in the Presidential election and a Democratic majority in the Senate, the more of it
will be at risk of being rendered moot by the Republicans retaining either the Presidency or
a Senate majority or both, but I guess you know that and are implicitly accepting the risk of
having to do a lot of rewriting in that event (if the book is supposed to appear after the
elections) or of the book rapidly losing value after the elections (if it’s supposed to
appear earlier).
By the same logic, the more you tie your analysis of economic consequences to one
particular the way the political strategic battle will play out following the election of a
Democratic President and Congressional majority, the more of it will be at risk of being
rendered moot by the Democrats pursuing a different strategy. Given the initial assumption of
a Democratic President with Democratic majorities in both houses of Congress, I suggest you
would do better with a short discussion at a very high level of generality about why
(a) you
expect the Democrats to have the necessary political determination to overcome obstructionism
by a Senate minority and/or the Supreme Court and
(b) you believe there are strategic and
procedural options available (not necessarily just one option) by which the Democrats could
overcome Senate and/or Supreme Court opposition to a substantial extent if not entirely. You
may be right in advising the selection of health care as the issue to fight on, but if the
Democrats choose a different one and achieve a similar procedural victory, the economic
consequences will be much the same, surely?
I’m assuming that the title is supposed to be a genuine indication of the main topic
of the book and not a way of disguising a real topic of ‘What’s Going to Happen
Next’ or ‘What Should Happen Next’, which would not be quite the same.
If the Democrats take the White House and Congress they’ll have a very short window
to get anything done. The plutocracy will react by weakening the dollar e.g. by moving small
amounts into the euro, cryptocurrencies and/or even the renmimbi. Interest rates will rise,
and this will frighten many (or most) of the Democrats into austerity measures to reduce the
budget deficit.
Thus will arise the old propaganda refrain that Democrats don’t know
what they are doing, and the resulting frustrations, and Fox News falsehoods, might prompt
voters to return Congress to Republican control in the midterms.
Therefore the Democrats should adopt a strategy of getting a few irreversible things done
at the very beginning by ditching the filibuster and passing some popular programs which
might ALSO help the party against Republican propaganda in future elections. This can be done
in healthcare, comprehensive immigration reform, infrastructure, and new constitutional
amendments.
Healthcare — Push for a public option so people can choose to join a national single
payer: “Health Care National Choice.” 70% of the people want this. This can grow
to subsume and finally eliminate Medicaid, which is a tough sell to many state governments
and their voters because they have to pick up half the Medicaid costs after several
years.
Immigration — Pass the total package: improved border security (including fencing)
and an expanded immigration court system + immediate citizenship for DACA and a path to
citizenship for the 11 million other illegals. “Comprehensive Immigration
Reform.” 70% of the people want this, too. It has been proposed a half-dozen times in
one form or another since Bill Clinton’s presidency, and the moderate Republicans come
on board, but the rightwing fringe opposes it so it doesn’t get passed, and then the
Republicans lie in the very next election that the Democrats want open borders. This insanity
has to stop — stop being victims of the rope-a-dope, and get rid of the filibuster!
Constitutional amendments — 1. Amendment against anonymous property holdings: A. End
to dark money campaign contributions. B. End to anonymous shell corporations. C. Any
candidate for US President must release the last ten years of tax returns.
Amendment against executive misconduct: A. Executive branch inspectors general shall not
be removed but by Congressional approval. B. Not complying with Congressional subpoenas is an
impeachable offense. C. In the case of House impeachment, “executive privilege”
is automatically voided. D. If a President is removed from office, all of his or her pardons
are automatically voided and the miscreants returned to jail.
likbez 07.05.20 at 2:29 am
So called “Democrats”, especially Biden himself, and Biden entourage are sellouts to financial oligarchy. They
represent defeated in 2016 wing of the US neoliberal elite — adherents to classic neoliberalism and neoliberal globalization.
To expect them to attempt anything of value other the kicking the neoliberalism can down the road is extremely naive.
In this sense Lee A. Arnold post ( 07.04.20 at 5:20 pm #12) is completely detached from reality.
"... This lady is sitting there lying trying to prove a point. I have been in enough arguments to kow when someone is just arguing to keep the discussion going ..."
The bottom line is, they want to take away any problem solving skills that might build character, because someone might get
hurt! Victimhood culture run amuck.
Mathematics is the cornerstone of all forms of trade, communications, home economics and every other aspect of life. Truth
is they're dumbing everyone down to control populations!
I have Master's Degree in Mechanical Engineering and I'm 62-years old. I have never once cared about the history of mathematics,
other than a curiosity. Knowing the history of mathematics never helped me once to solve an ordinary second order differential
equation.
When a person lies while giving an interview they should be shocked or something. This lady is sitting there lying trying
to prove a point. I have been in enough arguments to kow when someone is just arguing to keep the discussion going. She has
already lost the argument deflected and differed responsibility when confronted with the legitimacy of the paper.
Go exercise healthy body makes a healthy mind not the other way around.
"... I agree that globalism is/will be heading into the dumpers, but I see no chance that US-based manufacturing is going to make any significant come-back. ..."
"... What market will there be for US-manufactured goods? US "consumers" are heavily in debt and facing continued downward pressures on income. ..."
"... There will certainly be, especially given the eye-opener of COVID-19, a big push to have medical (which includes associated tech) production capacities reinvigorated in the US. ..."
"... More "disposable" income goes toward medical expenditures. Less money goes toward creating export items; wealth creation only occurs through a positive increase in balance of trade. And on the opposite end of the spectrum, death, the US will likely continue, for the mid-term, to export weaponry; but, don't expect enough growth here to mean much (margins will drop as competition increases, so figure downward pressure on net export $$). ..."
"... the planet cannot comply with our economic model's dependency on perpetual growth: there can NOT be perpetual growth on a finite planet. US manufacturing requires, as it always has, export markets; requires ever-increasing exports: this is really true for all others. Higher standards of living in the US (and add in increasing medical costs which factor into cost of goods sold) means that the price of US-manufactured goods will be less affordable to peoples outside of the US. ..."
"... I'll also note that the notion of there being a cycle, a parabolic curve, in civilizations is well noted/documented in Sir John Glubb's The Fate of Empires and Search for Survival (you can find electronic bootlegged copies on the Internet)- HIGHLY recommended reading! ..."
"... All of this is pretty much reflected in Wall Street companies ramp-ups in stock-buy-backs. That's money that's NOT put in R&D or expansion. I'm pretty sure that the brains in all of this KNOW what the situation is: growth is never coming back. ..."
"... Make no mistake, what we're facing is NOT another recession or depression, it's not part of what we think as a downturn in the "business cycle," as though we'll "pull out of it," it's basically an end to the super-cycle ..."
"... We are at the peak (slightly past peak, but not far enough to realize it yet) and there is no returning. Per-capita income and energy consumption have peaked. There's not enough resources and not enough new demand (younger people, people that have wealth) to keep the perpetual growth machine going. ..."
I agree that globalism is/will be heading into the dumpers, but I see no chance that US-based manufacturing is going to
make any significant come-back.
The world's economy is in contraction. Although capital, what actual capital exists, will have to try and do something "productive,"
it is confronted by this fact, that everything is facing contraction. During times of contraction it's a game of acquisition rather
than expanding capacity: the sum total is STILL contraction; and the contraction WILL be a reduction in excess, excess manufacturing
and labor.
What market will there be for US-manufactured goods? US "consumers" are heavily in debt and facing continued downward pressures
on income. China is self-sufficient (enough) other than energy (which can be acquired outside of US markets). Most every other
country is in a position of declining wealth (per capita income levels peaked and in decline). And manufacturing continues to
increase its automation (less workers means less consumers).
There will certainly be, especially given the eye-opener of COVID-19, a big push to have medical (which includes associated
tech) production capacities reinvigorated in the US. One has to look at this in The Big Picture of what it means, and that's that
the US population is aging (and in poor health).
More "disposable" income goes toward medical expenditures. Less money goes toward
creating export items; wealth creation only occurs through a positive increase in balance of trade. And on the opposite end of
the spectrum, death, the US will likely continue, for the mid-term, to export weaponry; but, don't expect enough growth here to
mean much (margins will drop as competition increases, so figure downward pressure on net export $$).
Lastly, and it's the reason why global trade is being knocked down, is that the planet cannot comply with our economic model's
dependency on perpetual growth: there can NOT be perpetual growth on a finite planet. US manufacturing requires, as it always
has, export markets; requires ever-increasing exports: this is really true for all others. Higher standards of living in the US
(and add in increasing medical costs which factor into cost of goods sold) means that the price of US-manufactured goods will
be less affordable to peoples outside of the US.
And here too is the fact that other countries' populations are also aging. Years
ago I dove into the demographics angle/assessment to find out that ALL countries ramp and age and that you can see countries'
energy consumption rise and their their net trade balance swing negative- there's a direct correlation: go to the CIA's Factbook
and look at demographics and energy and the graphs tell the story.
I'll also note that the notion of there being a cycle, a parabolic
curve, in civilizations is well noted/documented in Sir John Glubb's The Fate of Empires and Search for Survival (you can find
electronic bootlegged copies on the Internet)- HIGHLY recommended reading!
All of this is pretty much reflected in Wall Street companies ramp-ups in stock-buy-backs. That's money that's NOT put in R&D
or expansion. I'm pretty sure that the brains in all of this KNOW what the situation is: growth is never coming back.
MANY years ago I stated that we will one day face "economies of scale in reverse." We NEVER considered that growth couldn't
continue forever. There was never a though about what would happen with the reverse "of economies of scale."
Make no mistake,
what we're facing is NOT another recession or depression, it's not part of what we think as a downturn in the "business cycle,"
as though we'll "pull out of it," it's basically an end to the super-cycle.
We will never be able to replicate the state of things
as they are. We are at the peak (slightly past peak, but not far enough to realize it yet) and there is no returning. Per-capita
income and energy consumption have peaked. There's not enough resources and not enough new demand (younger people, people that
have wealth) to keep the perpetual growth machine going.
Cue bono? Not black people (actually she is an Indian, which until recently was a caste
society). Is she a victim of "affirmative action" policy and occupies a position for which there
are more worthy academically candidates. University is not sinecure, at least it should not
be.
How good is she as an academic? Is she mentally stable?
The decision of Cambridge University to promote her after such an idiotic tweet creates
several additional questions.
Petition against Prof Priyamvada Gopal now off line. Additionally I noticed earlier today
that the comments given on the site voicing why they were signing had all been removed, but not
on other petitions. As of yesterday evening these comments were peaceful, and not personal,
just things like 'because it is racist' and 'do I even need to give a reason'?
The petition had nearly 25,000 signed supporters earlier today, and new signings were
flooding in at over 1/sec when I checked.
In addition in an affront to common decency the University/College promoted her whilst
they had stated earlier they were aware of the controversial nature of her tweets.
Her original tweet was deleted by Twitter as a breach of community guidelines. She also
reports that, in spite of senselessly provoking people at a delicate time with racist tweets,
that the extremely racist responses she got from some far right people was being looked at by
the Police.
All in all this establishes a systematic problem. Being deliberately vague means you cannot
use context as a defence, and the context of all her tweets shows some extreme patterns of
thinking against certain groups that casts very considerable doubts on the validity of such a
defense. Moreover, context hasn't been a defence when others have been prosecuted for far less.
Nobody, including Cambridge academics, should be above the law.
To those people that think that what she said was justified because she was trying to
defend BLM from supposed alternative movements, all she in fact did do was to achieve the
opposite of that.
If one wishes to convey complex ideas a teacher of English in her position *must know* that
this requires a long form medium to provide argumentation, and that Twitter is no such place to
do it due to its character count. But taking in all the other comments she has made, its very
clear the double standards and overall bias that really does amount to overt prejudice.
At the very least she is so contradictory, immature and incompetent as to make a mockery
of her college and for that reason at minimum, she should lose her job. I'm sorry to say that
as well.
But something about this whole episode feels like a jumping the shark moment. I don't think
this is going away all that easily.
@Rev. Spooner bout the Bill of Rights or the Constitution or community. Those are a joke
to people whose money is made transnational.
The lumpens who have never traveled out of their state have no concept of geographic
dimensions. They have never even left home. They think everyone is as patriotic as them and
will fight and die for their country and their community.
I assure none of the elite care a whit. Penthouses look the same from Manhattan to
Tokyo.
Ask the Boers in South Africa or Polish in Detroit who did not "sniff the wind" in
time.
The guy who has a gun loaded in his pocket as an insurance policy has a plan and it does
not end well for the person who hit him.
The elites have two or three passports, own businesses overseas, own houses.
The
Close Relationship Between the Rich and Politics.
5.0 out of 5 stars
The
Close Relationship Between the Rich and Politics.
Reviewed in the United States on January 15, 2009
Verified Purchase
In this large book Kevin Phillips takes the reader on a lesson of economics and
politics. Much of the history in WEALTH AND DEMOCRACY is of the American variety. He does, however, examine Spain,
Holland,and Britain and the commonality these past governments have with the current American political and economic scene.
The biggest common thread is the shrinking of the middle class a/k/a stratification of wealth.
One of Mr. Phillips observations is that in the 1990s transnational corporations posted record earnings while hiring few
Americans. Sometimes slashing employment to boost the bottom line.
Along that line he quotes Peter Cepelli, a professor at Wharton School of Business- "Today, a CEO would be embarrassed to
admit he sacrificed profits to protect employees or a community."
He also describes the shifting of the tax burden from corporations to low and middle income individuals through FICA taxes.
His quote on page 242 sums up American politics of the 1890s- "For two or three decades, then, democracy was corrupted at
its constitutional core. Control of the Senate secured not just that chamber but the federal courts, the U.S.Supreme Court,
and the U.S. Army to the service of American industry and finance."
He demonstrates in this book that wealth has been a factor in the politics of the United States from the very start.
Finance (banking) has had it's proponents like Hamilton and some presidents through time while it has also had it's
opponents; most notably Thomas Jefferson and Andrew Jackson.
The author takes a look at the worth of some former Cabinet members, Warren Harding's especially, although he wasn't the
only president to tap the wealthy for his service.
Another interesting point that Mr. Phillips makes is that globalization can be, and has been in the past, reversed.
One of the curious inclusions in this book is found on page 71. It's an excerpt of a letter from FDR to Col. Edmund Mandell
House. (House is a rather controversial, mysterious figure in American political history and the subject of conspiracy
theories. He was a close adviser to Woodrow Wilson during his presidency). "The real truth... is, as you and I know, that a
financial element in the larger centers has owned the government ever since the days of Andrew Jackson- and I am not wholly
excepting the Administration of W.W. The country is going through a repetition of Jackson's fight with the Bank of the
United Sates- only on a bigger and broader basis."
The author also quotes such figures as John Kenneth Galbraith and Thorstein Veblen
The moral of WEALTH AND DEMOCRACY as I take it, is that our economic ills now are nothing more than a recurring pattern
that has been experienced by various powerful governments in their heydays. Part of the problem is hubris or the belief
that it can't happen again.
This is a large book and some sections are laborious to read, but the message of the book is comprehensible and detailed
very well. It may just be the most detailed book on the subject of wealth and it's adverse affect on government, especially
a democratic form of government.
The imposition of the nationwide lockdowns required elite consensus. There's no way that a
project of that magnitude could have been carried out absent the nearly universal support of
establishment elites and their lackeys in the political class. There must have also been a
fairly-detailed media strategy that excluded the voices of lockdown opponents while– at
the same time– promoting an extremely dubious theory of universal quarantine that had no
basis in science, no historical precedent, and no chance of preventing the long-term spread of
the infection. All of this suggests that the lockdowns were not a spontaneous overreaction to a
fairly-mild virus that kills roughly 1 in 500 mainly-older and infirm victims, but a
comprehensive and thoroughly-vetted plan to impose "shock therapy" on the US economy in order
to achieve the long-term strategic ambitions of ruling class elites. As one sardonic official
opined, "Never let a crisis go to waste."
It was clear from the beginning, that the lockdowns were going to have a catastrophic effect
on the economy, and so they have. As of today, 30 million people have lost their jobs, tens of
thousands of small and medium-sized businesses have been shuttered, second quarter GDP has
plunged to an eye watering -45.5 percent (Atlanta Fed), and the economy has experienced its
greatest shock in history. Even so, pundits in the mainstream media, remain steadfast in their
opposition to lifting the lockdowns or modifying the medical martial law edicts that have been
arbitrarily imposed by mainly-liberal governors across the country. Why? Why would the
so-called "experts throw their weight behind such a sketchy policy when they knew how much
suffering it was going to cause for ordinary working people? And why has the media continued to
attack countries like Sweden who merely settled on a more conventional approach instead of
imposing a full-blown lockdown? Swedish leaders and epidemiologists were unaware that adopting
their own policy would be seen as a sign of defiance by their global overlords, but it was.
Elites have decided that there can be no challenge to their idiotic lockdown model which is why
Sweden had to be punished, ridiculed, and dragged through the mud. The treatment of Sweden
further underscores the fact that the lockdown policy (and the destruction of the US economy)
was not a random and impulsive act, but one part of a broader plan to restructure the economy
to better serve the interests of elites. That's what's really going on. The lockdowns are being
used to "reset" the economy and impose a new social order.
But why would corporate mandarins agree to a plan that would shrink their earnings and
eviscerate short-term profitability?
Why? Because of the the stock market, that's why. The recycling of earnings into financial
assets has replaced product sales as the primary driver of profits. As you may have noticed,
both the Fed and the US Treasury have taken unprecedented steps to ensure that stock prices
will only go higher. To date, the Fed and Treasury have committed $8 trillion dollars to
backstopping the weaker areas of the market in an effort to flood the market with liquidity.
"Backstopping" is an innocuous-sounding term that analysts use to conceal what is really going
on, which is, the Fed is "price fixing", buying up trillions of dollars of corporate debt,
ETF's, MBS, and US Treasuries to keep prices artificially high in order to reward the investor
class it secretly serves. This is why the corporations and Tech giants are not concerned about
the vast devastation that has been inflicted on the economy. They'll still be raking hefty
profits via the stock market while the real economy slips deeper into a long-term coma.
Besides, when the lockdowns are finally lifted, these same corporations will see a surge of
consolidation brought on by the destruction of so many Mom and Pop industries that couldn't
survive the downturn. No doubt, the expansion of America's tenacious monopolies factored
heavily into the calculation to blow up the economy. Meanwhile, the deepening slump will
undoubtedly create a permanent underclass that will eagerly work for a pittance of what they
earned before the crash. So, there you have it: Profitability, consolidation and cheap labor.
Why wouldn't corporate bosses love the idea of crashing the economy? It's a win-win situation
for them.
We should have seen this coming. It's been clear since the Russiagate fiasco that elites had
settled on a more aggressive form of social control via nonstop disinformation presented as
headline news based on spurious accusations from anonymous sources, none of who were were ever
identified, and none of whose claims could ever be verified. The media continued this
"breathless" saturation campaign without pause and without the slightest hesitation even after
its central claims were exposed as lies. If you are a liberal who watches the liberal cable
channels or reads the New York Times, you might still be unaware that the central claim that
the emails were stolen from the DNC by Russia (or anyone else for that matter) has not only
been disproved, but also, that Mueller, Comey, Clapper etc knew the story was false way back in
2017. Let that sink in for a minute. They all knew it was a lie after the cyber security team
(Crowdstrike) that inspected the DNC computers testified that there was no evidence that the
emails had been "exfiltrated". In other words, there was no proof the emails were stolen. There
was no justification for the Mueller investigation because there was no evidence that the DNC
emails had been hacked, downloaded or pilfered. The whole thing was a hoax from the get go.
There's no way to overstate the importance these recent findings, in fact, our understanding
of Russiagate must be applied to the lockdowns, the Black Lives Matter protests and other
psychological operations still in the making. What's critical to grasp is not simply that the
allegations were based on false claims, (which they were) but that a large number of
senior-level officials in law enforcement (FBI), intel agencies, media and the White House knew
with absolute certainty that the claims were false (from 2017 and on) but continued to
propagate fake stories, spy on members of the new administration and use whatever tools they
had at their disposal to overthrow an elected president. The guilty parties in this ruse have
never admitted their guilt nor have they changed their fictitious storyline which still
routinely appears in the media to this day. What we can glean from this incident, is that there
is a vast secret state operating within the government, media and the DNC, that does not accept
our system of government, does not accept the results of elections and will lie, cheat and
steal to achieve their nefarious objectives. . That's the lesson of Russiagate that has to be
applied to both the lockdowns and the Black Lives Matter protests. They are just the next phase
of the ongoing war on the American people.
The lockdowns are an Americanized version of the "Shock Doctrine", that is, the country has
been thrust into a severe crisis that will result in the implementing of neoliberal economic
policies such as privatization, deregulation and cuts to social services. Already many of the
liberal governors have driven their states into bankruptcy ensuring that budgets will have to
be slashed, more jobs will be lost, funding for education and vital infrastructure will shrink,
and assistance to the poor and needy will be sharply reduced. Shutting down the US economy,
will create a catastrophe unlike anything we have ever seen in the United States. US Treasuries
will likely loose their risk-free status while the dollar's as days as the "world's reserve
currency" are probably numbered. That "exorbitant privilege" is based on confidence, and
confidence in US leadership is at its lowest point in history.
It's not surprising that the Black Lives Matter protests took place at the same time as the
lockdowns. The looting, rioting and desecration of statues provided the perfect one-two punch
for those who see some tactical advantage in intensifying public anxiety by exacerbating racial
tensions and splitting the country into two warring camps. Divide and conquer remains the modus
operandi of imperialists everywhere. That same rule applies here. Here's more background from
an article at the Off-Guardian:
"It is no coincidence that another Soros funded activism group Black Lives Matter has
diverted the spotlight away from the lockdown's broader impact on the fundamental human
rights of billions of people, using the reliable methods of divide and rule, to highlight the
plight of specific strata's of society, and not all.
It's worth pointing out that BLM's activity spikes every four years . Always prior to the
elections in the US, as African Americans make up an important social segment of Democrat
votes. The same Democrats who play both sides like any smart gambler would. The Clintons, for
example, are investors into BLM"s partner, the anti-fascist ANTIFA. While Hilary Clinton's
mentor (and best friend) was former KKK leader Robert Byrd.
BLM is a massively hyped, TV-made, politicized event, that panders to the populist and
escapist appetite of the people. Blinding them from their true call to arms in defense of the
universal rights of everyone . Cashing in on the youths pent-up aggression . And weaponising
the tiger locked in a rattled cage for 3-months, and unleashed by puppet masters as the
mob
As a general rule of thumb, it is safe to assume that if a social movement has the backing
of big industry, big philanthropy or big politics, then its ideals run contrary to citizen
empowerment." (" The Co-opting
of Activism by the State ", Off-Guardian)
Black Lives Matter protests provide another significant diversion from the massive
destruction of the US economy. This basic plan has been used effectively many times in the
past, most notably in the year following the invasion of Iraq. Some readers will remember how
Iraqis militants fought US occupation forces following the invasion in 2003. The escalating
violence and rising death-toll created a public relations nightmare for the Bush team that
finally settled on a plan for crushing the resistance by arming and training Shia death squads.
But the Bushies wanted to confuse the public about what they were really up to, so they
concocted a narrative about a "sectarian war" that was intended to divert attention from the
attacks on American soldiers.
In order to make the narrative more believable, US intel agents devised a plan to blow up
the Shia's most sacred religious site, the Golden Dome Mosque of Samarra, and blame it on Sunni
extremists. The incident was then used to convince the American people that what was taking
place in Iraq was not a war over foreign occupation, but a bitter sectarian conflict between
Sunnis and Shia in which the US was just an impartial referee. The killing of George Floyd has
been used in much the same way as the implosion of the mosque. It creates a credible narrative
for a massive and coordinated protests that have less to do with racial injustice than they do
with diverting attention from the destruction of the economy and sowing division among the
American people. This is a classic example of how elites use myth and media to conceal their
trouble-making and escape any accountability for their actions.
Check out this excerpt from a paper by Carlo Caduff, an academic at King's College London,
in a journal called Medical Anthropology Quarterly. It's entitled "What Went Wrong: Corona and
the World After the Full Stop":
" Across the world, the pandemic unleashed authoritarian longings in democratic societies
allowing governments to seize the opportunity, create states of exception and push political
agendas. Commentators have presented the pandemic as a chance for the West to learn
authoritarianism from the East. This pandemic risks teaching people to love power and call
for its meticulous application . As a result of the unforeseeable social, political and
economic consequences of today's sweeping measures, governments across the world have
launched record "stimulus" bills costing trillions of dollars, pounds, pesos, rand and rupees
. The trillions that governments are spending now as "stimulus" packages surpass even those
of the 2008 financial crisis and will need to be paid for somehow. . .. If austerity policies
of the past are at the root of the current crisis with overwhelmed healthcare systems in some
countries, the rapidly rising public debt is creating the perfect conditions for more
austerity in the future. The pandemic response will have major implications for the public
funding of education, welfare, social security, environment and health in the future." (
Lockdownskeptics.org )
This is precisely right. The country has been deliberately plunged into another Great
Depression with the clear intention of imposing harsh austerity measures that will eviscerate
Social Security, Medicare, Medicaid and any other social safteynet programs that benefit
ordinary working people, retirees, or anyone else for that matter. None of it is random,
spontaneous or spur-of-the-moment policymaking. It's all drawn from a centuries-old Imperial
Playbook that's being used by scheming elites to implement their final plan for America: Tear
down the statues, destroy the icons and symbols, rewrite the history, crush the populist
resistance, create a permanent underclass that will work for pennies on the dollar, pit one
group against the other by inciting racial hatred, political polarization and fratricidal
warfare, promote the vandals who burn and loot our cities, attack anyone who speaks the truth,
and offer unlimited support to the party that has aligned itself with the corrupt Intel
agencies, the traitorous media, the sinister deep state, and the tyrannical elites who are
determined to control the all the levers of state power and crush anyone who gets in their
way.
I think there's a lot to what Mike says. However, if we accept his premise we must also
accept dangers of that premise.
Essentially, Mike is saying that Elites have used Covid & BLM etc shenanigans to advance
a political/economic purpose: ie that the Fed/Treasury will blast huge chunks of liquidity to
them via buying up any equities & bonds however dubious or junk they are. Secondary
benefits include across the board austerity & working people desperate enough to almost
sell themselves into slavery.
Elites have therefore bet BIG. Big returns but a potential for big losses Elites may have
to contend with a real economy which becomes so bad it affects the fictitious economy of
equities & bonds. An economy that no amount of Fed injections can save. And in trying to
save it, maybe the Fed will finally injure the dollar to the point where is effectively loses
it reserve status.
Manufacturing company 7-Sigma
made headlines when it decided to leave Minneapolis as a result of the company's plant
being burned by rioters. "They don't care about my business," 7-Sigma owner Kris Wyrobek old
the Star-Tribune . After more than 30 years in the city, the company isn't staying, nor are any
of the company's fifty jobs. But the costs of being victimized in protests is just one of many
reasons homeowners and businesses may be realizing life and business in central cities has lost
its luster. The ongoing threat of more business lockdowns, more riots, higher taxes, and
failing schools may induce many Americans to flee, once again, to the suburbs as their parents
or grandparents did.
This goes well beyond the fear of the disease many journalists have assumed is behind the
observed beginnings of an exodus from cities. Yes, many in the upper classes have fled the
cities for their mountain homes and yachts for "health reasons." But these people are
relatively few in number and their thinking quixotic. They can afford to drop everything and
leave cities overnight.
But the larger impacts are likely to be felt as middle class homeowners and business owners
conclude they'd simply rather avoid the edicts and neglect of mayors and city councils in
central cities who thinking nothing of issuing job-destroying "stay-at-home" orders while
allowing rioters and vandals free rein.
The real cost to cities is likely to emerge over time. It will come in the form of families
and shop owners who decide it's best to move their businesses ten miles down the road to a
neighboring city that will actually do something about rioters. It will come in the form of
families which decide their next home will be just a little bit farther from the urban
dictator-mayors who have the heaviest hands in enforcing lockdowns and business closures. It
will come in the form of potential new business owners and homeowners will be decide to never
purchase property to start a business in central cities in the first place.
The Decline
of Cities at Mid-Century
We may be seeing something reminiscent what happened in America's large central cities
during the 1970s and 1980s. Many Americans concluded these cities had become unlivable and
crime infested. Many concluded these were places that were quite inhospitable to doing
business. So they left. (Forced busing for "integration" purposes was a factor as well.)
In some cases, there were dramatic events that illustrated the trend. The late sixties in
New York saw several strikes by city workers. Transit and sanitation in the city became a
disaster. The 1977 blackout in New York City ended in widespread riots that induced many
businesses to pack up and never return. Many households followed.
But for the most part, cities saw an exodus that took many years and slowly hollowed out the
finances and tax revenues of big cities. Areas of Detroit fell into ruin. By the mid seventies,
New York City was lurching from one fiscal crisis to another.
St. Louis, Cleveland, Buffalo, and Detroit each shrank by more than 20 percent. Vast
stretches of urban land were left virtually deserted.
More than half of large cities lost population from 1950 to 1980.
There were other factors at work as well, of course. The central cities were often hit the
hardest as the old Rust Belt went into decline after the region was destroyed by labor unions
and city and state laws that made business in the region inefficient and uncompetitive.
Business owners and workers who possessed any real ambition or entrepreneurial spirit had good
reason to leave the region altogether.
City centers, built on an old manufacturing-based working class never recovered.
The situation today is a bit different. During the 1990s, core cities began to recover from
their mid-century decline and many officials and intellectuals in these areas began cultivating
the so-called " creative
class " (also known as the " bohemian bourgeoisie ") with the idea
that young artists, engineers, architects, and tech workers might be convinced to move into
city centers and and revitalize local urban economies. It appears to have worked in many
cases.
But in 2020 America the hey day of the new techno-city may be over.
Civil Unrest
The case of the Sigma-7 closure in Minneapolis is just the most famous case of central
cities' hostility to businesses within their borders. We're not hearing about the many small
less-notable businesses that won't re-open in the wake of riots. In other cities, such as
Chicago, city officials are now
begging retailers to not leave the city.
Meanwhile, a number of small businesses now within the "CHOP" zone in Seattle is suing the
city for abandoning businesses to the whims of the leftist mob.
As reported by the local NBC affiliate, local businesses have been threatened and harassed
by the bosses of the "Capitol Hill Occupation Protest" (CHOP) zone in the city. The city
government, the plaintiffs have concluded, essentially have abandoned these businesses to the
new "government":
The City's decision has subjected businesses, employees, and residents of that
neighborhood to extensive property damage, public safety dangers, and an inability to use and
access their properties.
Minneapolis and Seattle aren't the only cities the prospect of continued civil unrest. with
forty million new unemployment filings in recent months, the US faces a worrisome period of
highly elevated unemployment. Many of the worst-affected workers will be lower-income
populations living in core cities. This won't help the prospect of a speedy return to placid
city environments.
Regime Uncertainty
As government experts and media pundits emphasize growth in reported COVID-19 cases, the
prospect of renewed lockdowns now looms, as well. This is a threat at the state level and in
many suburban local governments. But experience strongly suggests that those political
jurisdictions controled by political leftists are likely to embrace the longest and harshest
lockdowns. In many states, such as Texas and Colorado and California and Pennsylvania, local
governments in big cities embraced lockdowns more enthusiastically than the surrounding regions
and at the state capitols. "Regime uncertainty" -- uncertainty about what business-killing
regulations a government might embrace next -- appears to be greater in central cities.
Business owners are likely to remember this. In the medium- and long-term, business owners
and potential business owners will gravitate to those areas where the threat of harsh lockdowns
is smaller.
The Rise of the "Work-at-Home" Trend
If the work-at-home trend persists, core cities will have lost one of their main draws:
namely, the prospect of a shorter commute for those who can afford a home close-in to the
employment centers. Even if daily commutes are just reduced -- say, to a three-days-per-week
schedule -- the commute-time cost of a home in the suburbs falls dramatically. Without the need
to sit in traffic five days per week, more expensive city homes and the congrestion and crime
of city centers becomes far less attractive.
Declining Tax Revenue and Urban Blight
On top of it all will come big cuts to city budgets as COVID lockdowns decimated
tax revenues . All cities and states
will be impacted , but if the most productive taxpayers move out of the core cities, it is
these areas that will feel the brunt of revenue shortfalls. In other words, a shift of
productivity toward the suburbs and small cities will hollow out big city budgets and school
district budgets as well. This will only encourage businesses and families to stay away in even
larger numbers. Families will seek to avoid school districts and decline, and employers won't
want to become part of a shrinking tax base where tax increases are frequently eyed by
politicians as a way out.
The Beginnings of a Trend?
All of this will take time to play out. Yes, we've started to see those with means leave big
cities already. The New York Times has reported on numerous former residents of New York City
who have left for the surrounding regions. The Times asks "is New York City worth it anymore?"
and points out "the pandemic send young New Yorkers packing."
But these remains a small percentage of the overall population. Most homeowners, families,
and business owners need time to move their businesses, sell their properties, and be convinced
it's time to move on.
None of this should be interpreted, however, as a trend away from metropolitan areas
overall. There appears to be little risk that large numbers of Americans will be quitting metro
areas for rural villages and towns. Some will. But most will notice that metro areas still have
most of the jobs, most of the cultural institutions, and most of the health care services. What
can't be said is that core cities have a monopoly on these resources. In recent decades,
suburbs and small cities have increasingly become places that host a wide variety of sports
teams, museums, convention centers, hospitals, and more. Metro areas are still a good place to
be. But old core cities? Not so much.
History will repeat itself as the grand experiment of bloated private finance capitalist
theft unravels and so it is worth reviewing how this transformation was achieved and to avoid old
errors and uninformed blunders.
Yesterday the shareholders of Lufthansa voted
to accept the government bailout:
Lufthansa (LHAG.DE) shareholders on Thursday backed a 9 billion euro ($10 billion)
government bailout, securing the future of Germany's flagship airline after it was brought
to the brink of collapse by the COVID-19 pandemic.
The plan, backed by 98% of the shareholder capital that cast a vote at the online
meeting, will see Berlin take a 20% stake in Lufthansa and two board seats.
Shares in the company, which employs around 138,000 people, closed 7.1% higher, having
risen strongly earlier after top shareholder Heinz Hermann Thiele dropped objections to the
deal.
Also on Thursday, European Union regulators approved Lufthansa's 6 billion euro
recapitalisation, part of the bailout deal, subject to a ban on dividends, share buybacks
and some acquisitions until state support is repaid .
The deal structuring is interesting and quite favorable for the government.
The government bought newly issued Lufthansa shares for a total of $300 million which will
give it 20% of the ownership of the company. These shares were valued at a quarter of their
current value. The government will additionally provide €5.7 billion in 'silent
capital'. That is a loan structured as a form of preferred shares that are entitled to a
preferred dividend. This will have to be paid back before other shareholders will again get
dividends. Lufthansa has a right to pay back the silent capital. But the 20% of the ownership
via shares will stay with the government until it decides to sell it.
An additional 3 billion euro credit line is
provided by a government owned bank.
This is a much better deal for the taxpayer
than in the U.S. where the airlines which were bailed out only had to provide stock
warrants which allow the government to buy some shares if it chooses to.
The Lufthansa deal prevents the bankruptcy of the company and a potentially unfriendly
foreign takeover. Lufthansa was quite profitable before the onset of the coronavirus crisis.
It is a good airline and it is now likely to survive. In a few years it will again make
profits.
Currently, the share price is about €10.4, which corresponds to a very generous
valuation of about 4 times estimated book value. It is also way higher than the €2.56
per share the German government paid. This discount of more than 75% suggests shares of
Deutsche Lufthansa are way overvalued.
The share price may currently be overvalued and may well sink. But without the bailout
deal the shares would have been worthless.
There is also a deal that will keep most of Lufthansa's employees in
their jobs :
[T]ough decisions lie ahead, with Lufthansa working on a restructuring plan in which up to
22,000 jobs could be at risk - although CEO Carsten Spohr told Bild newspaper that hours
and wages could be reduced by a fifth instead of axing a fifth of jobs .
This sounds like a company wide introduction of a four day work week though with only 80%
of the former full pay.
The cabin crew union has already agreed to such a deal and the pilot and ground worker
unions will likely also do so. There currently ain't many airline jobs available elsewhere so
for most of the employees this is a better deal than a potential long term unemployment.
I really like how this has turned out. A good company has been saved. The government has
set the right conditions and it may even profit from the deal. The shareholders have taken a
large haircut but will not lose all of their money. The employees will keep their jobs but
with a reduced time and pay.
It would have been better if all this had not been necessary. But in the current situation
it is the best that can be done.
All parties have taken a "we are all in the same boat" attitude to make this happen.
This should be an example for those bailout deals that will still have to be made.
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Posted by b on June 26, 2020 at 18:13 UTC |
Permalink Yes, a Galaxy of difference between the cash giveaways called bailouts by the
Outlaw US Empire and the partial nationalization of the airline that gains something for the
German public in exchange for the infusion of capital. I expect to see more of this sort of
activity as the EU begins to overthrow Neoliberalism.
No comment on the shocking US corporate theft. Actually, here's one: that country is looking
worse than the USSR in the late 80's and the Marie Antoinette class will have to offer much
more than cake to avoid a revolution...
Revenue Increase €36.42 billion (2019
Operating income Decrease €2.0 billion (2019
Net income Decrease €1.21 billion (2019
Total assets Increase €42.66 billion (2019
Total equity Increase €10.15 billion (2019
So the German Gov't paid 10 billion for a 20% stake in a company that yielded only a 3-4 %
net profit at 100% of its total equity value. Never mind share valuations... can someone
explain how that is actually a good deal for the German Govt please? Perhaps i am just giving
the numbers a simplified look. Perhaps, given the immense power of private equity these days,
everything has become relative.
"According to our data, Deutsche Lufthansa AG ...
... and paid its CEO total annual compensation worth
€4.4m over the year to December 2018"
--------------------------------
Did our carsten spohr CEO:
take a cut, help the TEAM effort, fall on the sword ?
~4,400,000 EUR = carsten's take
Perhaps carsten provide the example to take a 90% cut of ~3,960,000 EUR, leaving him with
a "paltry"
~~~440,000 EUR ( ~10 x average_German_salary )
@~~~44,000 EUR salary, then employee cost = ~80,000 EUR
Granted, the Lufthansa deal is far less toxic than the corporate bailouts we have seen in the
United States, which are really just theft, and encouraging financially sloppy behavior and
effectively subsidizing stock-buy back programs and other financial engineering rubbish.
But I am still skeptical that it's all THAT good a deal. I mean, don't forget, if a
company goes bankrupt its assets don't go up in smoke. It goes into receivership, the
stockholders lose money, and the management that steered the company onto the rocks get
fired, and replaced with hopefully better managers. The planes are still there, the employees
are still working, etc. Granted that a government has a vested interest in not letting it get
chopped up and dispersed, there is no need to preserve either stockholders or current
management to keep the airline functioning.
The essence of capitalism is that people who make bad investments should lose money.
Granted, the Lufthansa deal is far less toxic than the corporate bailouts we have seen in the
United States, which are really just theft, and encouraging financially sloppy behavior and
effectively subsidizing stock-buy back programs and other financial engineering rubbish.
But I am still skeptical that it's all THAT good a deal. I mean, don't forget, if a
company goes bankrupt its assets don't go up in smoke. It goes into receivership, the
stockholders lose money, and the management that steered the company onto the rocks get
fired, and replaced with hopefully better managers. The planes are still there, the employees
are still working, etc. Granted that a government has a vested interest in not letting it get
chopped up and dispersed, there is no need to preserve either stockholders or current
management to keep the airline functioning.
The essence of capitalism is that people who make bad investments should lose money.
QANTAS CEO Alan Joyce took home A$23.9m in 2018.
In March 2020 he offered to work for free for the rest of the year ...
the Financial Year ...
which ends June 30, 2020.
If somebody still calls this "market economy" the normal way would be: bankruptcy, first are
served the employees, second the creditors. Shareholders lose, risk doesn't pay off all the
time (except you own the government). The trade mark "Lufthansa" would be part of the
insolvency estate, as well as all the planes. Used planes would be very cheap following the
market rule of high offer vs. low demand. Personal is available as well. Good conditions for
creating a new airline ... What exactly is the reason to throw billions of Euros into this?
The gouvernement could for a part of this money create a national state owned carrier out of
the insolvency estate.
The roadway to hell is paved with the best of intentions.
If a government is going to subsidize the transportation industry in its country to the
benefit of the most public, why start with airlines that serve the top few of the public.
Is this deal better than what is happening in the US? It is too soon to tell but I think
it is quite possible that the shift to fast train increases and airlines are reduced to more
intercontinental.
Without this action being done within a larger context of nationalization (partial or
otherwise) of segments of core economic sectors, I question its efficacy. Where is the public
discussion about bigger picture futures for countries?....crickets!!!
A similar deal as Lufthansa was done between the Hong Kong government and its flag carrier
Cathay Pacific. Even though Cathay's employees were some of the most vocal and organisers of
strikes and various anti-government protests and riots.
And, to top it off, this bail out violates one of the most sacred moral principles of
capitalism/liberalism: the risk is the onus of the entrepreneur by definition; that's what
justifies his absorption of the entire lucre if it pans out.
The worker gave up his freedom of enterprise in exchange for the security and constancy
("fixity") of the wage. Therefore it is his right within the capitalist moral code that
he/she be weathered from risk taken by his/her entrepreneur. Those Lufhansa workers should've
never have come to the point of taking a 20% cut in their salaries to cover for their bosses'
risks. Pandemics are natural disasters, and, for natural disasters, the capitalist system has
the insurance industry - which was created exactly for situations like these (as is well
historically documented).
Curious fact: in the 2008 meltdown, the USG had to bail out the world's biggest insurance
company - AIG - because it flat out went bust (too many of its clients went bankrupt at the
same time). Ironies of ironies - or, as I like to say, the farce of the "self-regulating"
myth of the "free market".
Yup, all around the world this is where the real fleecing of the poor and middle class will
happen. Take ungodly sums of money from the poor and give it to the rich and then the rich
can use loop holes not to pay it back. Any poor person not paying their taxes will go to
jail. Any CEO who finds a loop hole to not pay back will be obscenely rewarded. Welcome to
the real world Neo.
Similar to the model the Clark government came up with on Air NZ after the idiot private
shareholders nearly destroyed the airline in the noughties. Except the government insisted on
a complete takeover, then during the Natz term in office the shareholding by government has
been reduced to 52%. Everyone else was meant to be kiwi shareholder for such a 'strategic'
asset but of course the right left plenty of loopholes and the foreign ownership increased
dramatically.
The reason governments even neolib ones move to protect national airlines is simple. They are
needed in times of disaster or war to be used for emergency transport but the big one is the
way that landing rights were allocated back in the old days still holds largely. Losing an
airline to an overseas buyer can mean the destruction of the reciprocal basis upon which
international landing rights are allocated, if one allows their national carrier to be bought
by an external airline hell can be wrought with tourism.
Lufthansa may have 80 slots a week for landing in NY then departing. Emirates buys into
Lufthansa, get controlling stake, then then decides that all the NY slots be routed through
Dubai, then Germany loses access for tourists from amerika to Germany. Emirates hooks up the
new slots with the China timetable establishing new big route and Lufthansa goes down the
gurgler.
This stuff is common because slots at major airports are very hard to come by, no nation
state wants to lose them.
I dont wish to go deep in the numbers. But im sure the german government is not as corrupt as
usa in bailouts. Thats why its citzens still trust in its governing. Here in good o usa no
one trust government or even each other
Posted by: Yeah, Right | Jun 26 2020 23:40 utc | 34
??
Choosing winners/losers has worked out so well in the case of Amtrak to name one example,
pointing this out is riding a high horse?
But as you say, it has always been this way, it will always be this way, so we should just
ignore the fraud and incompetence that .gov bailout encourage and be a happy little debt
slaves..-got it,good point /sarc
The so called market purists who believe that capitalism is some thing sacred which must be
left free of interference from the people who use it pay for it and depend upon it always
miss the basic point especially if they are amerikan where high levels of selfish corruption
have endured for centuries. Not all administrations are that dissolute, the trick of
separating citizens from their government is advanced in amerika so far that most see
government as separate entity from citizens, whereas in Germany where standards are decaying
they have not decayed to the point that no one trusts all politicians all the time.
Therefore government ownership can be seen as citizen participation which is vital at a
time like this because the effects of a national airline failing extend well beyond a few
wealthy shareholders losing some wealth.
In the case of Air NZ the board was sacked, most senior execs were shown the door without
abnormal compensation & the shareholders were bought out at close to current market
valuation, they got pennies for their greedy investment.
I do not know the structure of the Lufthansa buyin but the fact that shareholders resisted
indicates that they don't feel as though they are going to do well from the deal.Perhaps they
had buyers for Lufthansa's international landing slots already lined up on the side and hoped
to make big bucks on that - screw German workers, small businesses dependent on tourism or
the public faced with uncertain travel routes.
One difference is the brand of the fiat notes (money): while Germany has the Euro - fairly
ok -, the US has the magic dollar, the world's trade and finance medium, so they can print
them almost scot-free.
The German central government deal with Lufthansa is indeed better than the self payment
of the privatized FED to its owner banks and friends for all Germans. Democratic governments
are openly elected every 4-5 years by the public; not so the FED directors.
The problem is that Germany is a capitalist State. That's not how a capitalist State
should work. This is a sign worse things are yet to come (decline). Take for example the
human body: you can feel the signs of old age, and you know they mean permanent decline, not
the beginning of something new. There is no alchemy in the real world.
I didn't propose Lufthansa to go down: I proposed for Lufthansa management to go down.
Chop some upper-management heads off and you get your solvency back. EUR 18 billion is
nothing for a company of that size: I'm sure if they gave up one year of their profits would
already be more than enough to cover for the hole.
Unless, of course, the hole is bigger than the officially declared.
The management of a company is not the company: the soul of a company is its
infrastructure, its organization and its workers - specially its highly specialized workers
(the ones with the "know-how"). The first hydroelectric dam of the USSR was built with
American engineers - not American management or American money. You don't have to have a
bunch of executives to build civilization and wealth; it is the worker who is the soul of
civilization and progress.
As I said: if Lufthansa was in such a good shape and only needed mere EUR 18 billion,
there would be a line of private banks offering the loan with generously low interest (as it
would be an automatic win for the bank, no matter how low the "return on capital"; and wins
are rare in today's world, so you can't be too picky). Either it did resort to the government
because it could (a show of strength to the German people) or its finances are not so great
as the owner of this blog state they are. I hope, for the general welfare of the German
people, that it was just a show of strength, because if it is dire finances, then those EUR
18 billion are just the amuse-buche.
P.S.: Governments owning some share of the key national companies is common practice in
the First World nations. In France, if I'm not mistaken, there's a Law where the government
must be the owner of at least 16% of the shares of every "strategic" companies. The UK
frequently nationalizes bankrupt companies it deems strategic - only to re-privatize them
later, when they are profitable again (the Thatcher method). If State ownership of shares was
equal to socialism, we would've been living in a socialist world many decades ago.
International Man : Recently, Fed Chairman Jerome Powell said the central bank's money
printing is designed to help average Americans, and not Wall Street.
What's your take on this?
David Stockman : Yes, and if dogs could whistle, the world would be a chorus!
The truth is, in an economy encumbered with nearly $78 trillion of debt already --
including $16.2 trillion on households, $16.8 trillion on business, $23 trillion on
governments -- the last thing we need is even lower interest rates and even bigger incentives
to take on debt and leverage.
In fact, in a debt-saturated system, the Fed's massive bond purchases never transmit
anything outside the canyons of Wall Street. This money-printing madness only drives bond
prices higher and cap rates lower -- meaning relentless and systematic inflation of financial
assets' prices.
As a practical matter, of course, the bottom 90% don't own enough stock or even inflated
government and corporate bonds to shake a stick at. Instead, what meager savings they have
accumulated languish in bank deposits, CDs or money market funds earning exactly what the Fed
has decreed -- nothing!
So, when Powell says he's only trying to help the average American, you have to wonder
whether he is just stupid or the greatest lying fraud yet to occupy the big chair at the
Fed.
Then again, it doesn't really matter why.
The Fed is now a completely rogue institution that is a clear and present danger to the
future of prosperity and liberty in America. The tragedy is that the clueless speculators on
Wall Street and politicians in Washington don't even get the joke.
International Man : So far, the Fed has been able to successfully manipulate interest rates
to historic lows.
What are some catalysts that could cause the Fed to lose control and interest rates to
spike?
David Stockman : They are chasing their tail, faster and faster. The more they expand
their balance sheet, thereby injecting into the bond pits a massive artificial bid for
governments, corporates, munis, commercial paper and junk, the lower the yields go, and the
demand for more debt becomes greater.
Needless to say, when incomes drastically shrink due to the folly of Lockdown Nation, debt
should be liquidated, not massively increased. So, the Fed and its fellow-traveling global
central banks are setting up our Humpty-Dumpty economy for a very great fall.
That is to say, what will cause the central banks to lose control is the greatest wave of
debt defaults in recorded history. On that score, the Fed just issued its Flow of Funds data
for Q1, and it leaves nothing to the imagination. Total public and private debt on the US
economy now stands at $77.6 trillion, or 3.5X GDP, and we'll be lucky to post at $21 trillion
for the full year of 2020 GDP.
Recall that we supposedly got a wakeup call back in 2008, when the economy plunged into
financial crisis and the worst recession since the 1930s; way too much debt was widely
identified as the fall guy. But back then, total debt outstanding was just $52.6 trillion,
meaning that during the last decade of purported recovery, the US economy actually took on
$25 trillion of new debt -- a 48% increase.
Moreover, big-spending politicians were not the only culprit. That's because when the
central banks drastically falsify interest rates to sub-economic levels, everyone is
incentivized to borrow hand-over-fist. And, most often, it's for unproductive purposes, such
as more transfer payments in the government sector and more financial engineering among the
C-suites.
On the eve of the Great Recession, for example, total business debt (corporate and
non-corporate) stood at $10.1 trillion and has subsequently soared to $16.8 trillion. That
$6.7 trillion gain represents fully 98% of the $6.85 trillion increase in nominal GDP during
the same period.
This orgy of borrowing also means that business debt over the past 13 years has grown by
66.5% -- far more than the 46.7% expansion of nominal GDP. Accordingly, the business debt
burden on GDP has now gone off the charts, and at 78% of GDP, is more than double the
pre-1970 level:
Business Debt as Percent of GDP:
1955: 31%
1970: 47%
1980: 49%
1995: 55%
2007: 69%
2020: 78%
Stated differently, chronic financial repression and clubbing of interest rates by the
central bank have amounted to a slow-motion burial of the business sector in debt; debt that
in recent decades has been overwhelmingly allocated to shrinking the equity base of business
enterprises, thereby cycling wealth from the productive economy to the rent-capturing
precincts of Wall Street.
Indeed, the Fed's cheap credit never really leaves the canyons of Wall Street, where it
fulsomely rewards carry-traders and risk asset speculators because zero cost money is always
and everywhere the mother's milk of leveraged speculation.
It also causes corporate C-suites to become maniacally obsessed with goosing their stock
options via financial engineering gambits like stock buybacks, leveraged recaps and wildly
over-priced M&A deals as a substitute for organic growth. Yet these maneuvers merely
supplant equity and financial resilience with debt and financial fragility.
So when business bankruptcies soar to unprecedented levels in the month ahead as the
economy reels from the folly of Lockdown Nation, the financial fragility part will become
crystal clear.
But it also needs to be recalled that even as the interest rate clubbers at the Fed
fostered a massive explosion of business debt after the 2008 financial crisis, it did not
translate into any growth in productive investment at all.
In fact, real business CapEx minus current capital consumption (depreciation and
amortization charged to current period production) is today barely a tad higher than it was
20 years ago on the eve of the dotcom bust.
In short, the Fed has fostered a zombie economy, and it is the collapse of the zombies
that will eventually take it down.
David Stockman : Here's an eye-opener to put this madness in perspective. Annual federal
outlays posted at $3.896 trillion in 2014 and were the product of 225 years of relentless
expansion by the Leviathan on the Potomac.
But it now appears quite certain that the annual deficit in FY 2020 will actually be
larger than the total spending level that took more than two centuries to achieve.
That's right. Owing to the mushrooming coast-to-coast soup lines hastily erected by
Washington in response to the collapse of jobs, incomes and business cash flows brought on by
Lockdown Nation and the evaporation of tax revenues, Uncle Sam will borrow more this year
than the total spending just six years ago.
Stated differently, back in the day, we struggled to keep total federal spending during
1981 under $700 billion. By contrast, the Donald has borrowed nearly 4X that in the last 90
days!
So, yes, perhaps Trump's one truthful boast is that he is indeed the king of debt.
Needless to say, there is nothing remotely rational, plausible or sustainable about an FY
2020 budget that's going to end up with revenue south of $3 trillion and spending north of $7
trillion.
That's not even banana republic league profligacy; it's just sheer stupidity and madness,
bespeaking a bipartisan duopoly in Washington that has had its collective brains turned into
sawdust by the relentless, egregious money pumping of the central banks.
For want of doubt, just consider what has happened since March 11 on the eve of the
Lockdown Nation's commencement.
The public float of federal debt has soared from $17.85 trillion to $20.24 trillion,
gaining $2.39 trillion;
The Fed's balance sheet has exploded from $4.31 trillion to $7.17 trillion, gaining
$2.86 trillion.
The Fed has, therefore, effectively monetized 119% of the gain in the publicly traded
Treasury debt.
Of course, you can't blame the Donald alone for this insanity; he's been enabled by two of
the greatest crackpots to hold high economic policy positions in American history -- Treasury
Secretary Mnuchin and Fed Chairman Jay Powell.
As it has happened, we have closely observed every combination of Fed chairman and US
treasury secretary since 1970, when we headed off for our first job in the Imperial City,
eager to better the world and our own prospects, too.
So, we can say without reservation that the current duo is the worst combo of spineless,
principle-free empty suits to plague the nation during the last half-century. And it's not a
close call -- even against a ship of fools, which include John B. Connally, G. William
Miller, Ben Bernanke, Hank Paulson Jr., Timothy Geithner and Janet Yellen, among considerable
others.
After all, if the Treasury Secretary and Fed Chairman are utterly clueless about the grave
dangers of the fiscal and monetary bacchanalia now rampant in the imperial city, how in the
world will it stop except in some fiery collapse?
* * *
Unfortunately there's little any individual can practically do to change the trajectory of
this trend in motion. The best you can and should do is to stay informed so that you can
protect yourself in the best way possible. That's precisely why New York Times bestselling
author Doug Casey just released
an urgent new report on how to survive and thrive an economic collapse.
Click here download the free PDF now .
"Restaurant Of The Future" - KFC Unveils Automated Store With Robots And Food Lockers
by Tyler Durden Fri,
06/26/2020 - 22:05 Fast-food chain Kentucky Fried Chicken (KFC) has debuted the "restaurant of
the future," one where automation dominates the storefront, and little to no interaction is
seen between customers and employees, reported NBC News .
After the chicken is fried and sides are prepped by humans, the order is placed on a
conveyor belt and travels to the front of the store. A robotic arm waits for the order to
arrive, then grabs it off the conveyor belt and places it into a secured food
locker.
A KFC representative told NBC News that the new store is located in Moscow and was built
months before the virus outbreak. The representative said the contactless store is the future
of frontend fast-food restaurants because it's more sanitary.
Disbanding human cashiers and order preppers at the front of a fast-food store will be the
next big trend in the industry through 2030. Making these restaurants contactless between
customers and employees will lower the probabilities of transmitting the virus.
Automating the frontend of a fast-food restaurant will come at a tremendous cost, that is,
significant job loss . Nationwide (as of 2018), there were around 3.8 million employed at
fast-food restaurants. Automation and artificial intelligence are set displace millions of jobs
in the years ahead.
As for the new automated KFC restaurant in Moscow, well, it's a glimpse of what is coming to
America - this will lead to the widespread job loss that will force politicians to unveil
universal basic income .
"... The lockdown would have been survivable if the economy hadn't been over-indebted, over-leveraged, burdened by insanely high costs, stripmined by greedy monopolies, dependent on stock market fraud, destabilized by extreme inequality, corrupted by political pay-to-play and addicted to speculation. ..."
"... The top 5% technocrat/managerial class have done very well for themselves in the speculative run-up of destabilizing inequality, and since they run the narrative machines, we're swamped with happy stories about the economy, all of which boil down to this absurd fantasy: since I'm doing so well, everyone else must be doing well, too. ..."
"... Zombie corporations are rushing to borrow billions of dollars (thanks to the Federal Reserve) but increasing their debt is only doing more of what created their fragility in the first place . ..."
Once you allow your economy to become dependent on extremes of debt, leverage, inequality,
legalized looting, monopoly, pay-to-play politics and speculative asset bubbles, a depression
is inevitable.
The pandemic lockdown will be blamed for the Greater Depression, but the lockdown only
toppled all the dominoes that were already lined up. The lockdown would have been survivable if
the economy hadn't been over-indebted, over-leveraged, burdened by insanely high costs, stripmined by greedy monopolies, dependent on stock market fraud, destabilized by extreme
inequality, corrupted by political pay-to-play and addicted to speculation.
The apologists always blame depressions on central banks not printing money fast enough,
while overlooking the real drivers: debt, high costs and dependence on speculative bubbles. As
noted here many times, revenues and income can quickly slide lower, but debt must be serviced
regardless of revenues and income.
Once debt payments dominate expenses, any wobble in revenues / income / cash flow triggers
default.
Regarding unbearably high costs that only go higher, year after year: as noted here many
times, Sickcare Will
Bankrupt the Nation all by itself , never mind soaring higher education / student loan debt
serfdom, skyrocketing rents, junk fees, taxes, etc.
The truth is the cost of living is
unaffordable but we can't even acknowledge this obvious fact because even acknowledging it
would threaten the entire house of cards. So instead we play-act as if we believe the bogus
"inflation is dead" narratives.
The top 5% technocrat/managerial class have done very well for themselves in the speculative
run-up of destabilizing inequality, and since they run the narrative machines, we're swamped
with happy stories about the economy, all of which boil down to this absurd fantasy: since I'm
doing so well, everyone else must be doing well, too.
Since the top 5% own the lion's share of the nation's productive assets--stocks, bonds,
business equity, investment real estate, etc.-- the enormous asset bubbles have greatly boosted
their wealth and income. This has enabled the wealthy to service their debt or pay it off. The
bottom 95% aren't quite so well-placed to survive a decline in income.
Everyone who was barely keeping their head above water in making their debt payments is
already in default or will soon be in default. Since the banks and shadow-banking lenders have
gorged on the profits skimmed by loaning huge sums to marginal borrowers, now that these
marginal borrowers are defaulting en masse the banks and lenders are about to be crushed by one
wave of catastrophic losses after another.
Student loans--already in mass default. Credit cards--the wave is rolling in as we speak.
Auto loans--looking like Waimea Bay on a big day. Mortgages--better not to look.
Corporate debt has exploded to unprecedented levels, and this is what will break the
financial system. Zombie corporations are rushing to borrow billions of dollars (thanks to the
Federal Reserve) but increasing their debt is only doing more of what created their fragility
in the first place .
Being able to borrow more to service your old debts is not solvency, it's merely the
semblance of solvency. We're in the eye of the hurricane right now, as everyone holds their
breath and hopes some sort of magic will make all the debt that has to be serviced every month
vanish.
It's worth recalling that every dollar of debt is someone else's asset and the source of
their income. So when the defaults and bankruptcies sweep through the financial system, they'll
obliterate all the "wealth" of those holding bundled student and auto loan securities, mortgage
backed securities, corporate bonds, and destroy the income streams these trillions in debt
generated.
All the linked fragilities and dependencies of our economy are like lines of dominoes: one
default topples the entire line of dominoes of debt, leverage, derivatives, counterparty risk,
credit default swaps and most devastating of all, any certainty that borrowers won't default in
the future.
If banks and lenders can't lend with a high degree of certainty, lending dries up and
profits collapse, along with the consumer spending that was enabled by the borrowing.
Despite their high incomes and net worth, some consequential percentage of top 5% households
bringing in $300,000 a year are one layoff away from default: never mind their pristine 830
credit score; that was last month. Next month,next quarter, next year--all bets are off.
Once you allow your economy to become dependent on extremes of debt, leverage, inequality,
legalized looting , monopoly, pay-to-play politics and speculative asset bubbles, a depression
is inevitable. The only question is "when," and that's been answered, though nobody wants to
hear it: 2020 and beyond.
It didn't have to end this way. If our leadership / Power Elites had acted to reduce all
these painfully obvious speculative extremes, dependencies and fragilities and made even modest
efforts to limit the exploitation of predatory parasites that generated unprecedented
inequality and corruption over the past 12 years, the economy would have been much less brittle
/ fragile.
Unfortunately, the pandemic chart I composed on February 2, 2020 is still playing out,
increasing uncertainty.
What's the price of systemic fragility and uncertainty? I fear it will be steeper than we're
prepared to pay.
mad
rush " of people leaving the San Francisco Bay Area for rural communities, for Marin
County, Napa wine country, and south to Monterey's Carmel Valley.
"Relatively better performance of single-family homes in relation to multifamily condominium
properties clearly suggests migration from the city centers to the suburbs," Yun said.
" After witnessing several consecutive years of urban revival, the new trend looks to be
in the suburbs as more companies allow greater flexibility to work from home ."
And second-home buyers surged...
Individual investors or second-home buyers, who account for many cash sales, purchased 14%
of homes in May, up from 10% in April 2020 and from 13% in May 2019. All-cash sales accounted
for 17% of transactions in May, up from 15% in April 2020 and down from 19% in May 2019.
Readers now know that wealthy folks aren't just fleeing cities for rural communities - these
folks are leaving the country for the Caribbean as America implodes from within.
"... The fitness of U.S. employers was unsteady as well. The 2010s saw C-suites skeletonize their companies by spending profits on stock buybacks rather than CapEx, never mind setting funds aside for a rainy day. As a result, many firms–large and small–are long overdue for restructuring or liquidation, a Darwinian process that could hamper economic growth for years, possibly even a decade. ..."
Such economic fragility could mean that November's presidential election may not be the
game-changer many assume it will be. What is becoming clearer by the day is that the virus is
more of an accelerant than a prime mover, an added layer of malodorous excrement on a dung heap
already piercing the nostrils. Long before social-distancing went into effect pension systems
were teetering, rents and mortgages were unaffordable, real unemployment was higher than the
Bureau of Labor Statistics reported, industrial production was anemic, and inflation dwarfed
Consumer Price Index (food and energy is excluded). Worse, the most reliable consumers in the
U.S. economy heretofore have been Baby Boomers, now the most susceptible demographic to the
virus.
The fitness of U.S. employers was unsteady as well. The 2010s saw C-suites skeletonize their
companies by spending profits on stock buybacks rather than CapEx, never mind setting funds
aside for a rainy day. As a result, many firms–large and small–are long overdue for
restructuring or liquidation, a Darwinian process that could hamper economic growth for years,
possibly even a decade.
Against these headwinds, the next administration is facing monstrous storms ahead. Contrary
to the soothsayers of "V" shaped recoveries, the prospects for a robust rebound are fading by
the month. All this is to say that it might not matter who wins in November as much as
previously thought. If Biden wins his chances at stimulating economic recovery, then soothing
Washington's dysfunctional rancor, and speedily recalibrating U.S. trade vis-à-vis China
et al in a deglobalizing world are slim to none. A seasoned Trump second term might fair better
but whoever is elected president will experience far less freedom of maneuver as economic
turbulence resets the policy agenda.
Trump's struggles might be encouraging to the soporific septuagenarian Joe Biden whose
political fortunes appear ascendant, at least for the moment. As the Trump administration
scrambles to suppress the coronavirus brush fire and more incendiary economic conflagrations
spread democrats are foaming at the mouth. However, while the situation may oust a wobbly Trump
the economic woes of the country are severe enough to bury the Democratic Party the way the
Great Depression slaughtered the Republicans.
On these points, it seems to me that history does not rhyme as much as clarify. It appears
as though U.S. politics is headed for a permutation, a fundamental restructuring that will
change how Americans are governed every bit as much as it reshapes the economy. Thomas Kuhn's
classic The Structure of Scientific Revolutions reminds us that "crisis often proliferates new
discoveries," ones that often result in "paradigm destruction." Regardless of who is elected in
November, it is very likely the next president is fated to defend a besieged paradigm, a
twentieth-century government that lacks the policy tools, financial resources and transmission
mechanisms required to solve twenty-first-century economic puzzles.
As the election fast approaches Treasury Secretary Steven Mnuchin and Chairman Jerome
Powell–the dynamic duo of the wryly dubbed "Feasury"–are pulling out all the stops
to mitigate economic fallout. Many sectors are begging for federal help as are municipalities
who fear that recovery without federal money is doubtful. At their request, trillions more in
relief are likely on their way. The question is: will there be any ammunition left for the next
president, whoever he is, to govern effectively?
Cameron Macgregor is an entrepreneur, blogger and writer. He is the CEO of Ad Actum, a
Global Free Speech Alliance.
Exchange traded funds are bought and sold like shares but operate as index-tracking funds,
passively following specific indices such as the S&P 500, the benchmark index of America's
largest corporations and the index in which most people invest. Today the fast-growing ETF
sector controls
nearly half of all investments in US stocks, and it is highly concentrated. The sector is
dominated by just three giant American asset managers – BlackRock, Vanguard and State
Street, the "Big Three" – with BlackRock the clear global leader. By 2017,
the Big Three together had become the largest shareholder in almost 90% of S&P 500
firms, including Apple, Microsoft, ExxonMobil, General Electric and Coca-Cola. BlackRock also
owns major interests in
nearly every mega-bank and in major media.
In March 2020, based on its expertise with the Maiden Lane facilities and its sophisticated
Aladdin risk-monitoring software, BlackRock got the job of dispensing Federal Reserve funds
through eleven "special purpose vehicles" authorized under the CARES Act. Like the Maiden Lane
facilities, these vehicles were designed to allow the Fed, which is legally limited to
purchasing safe federally-guaranteed assets, to finance the purchase of riskier assets in the
market.
Blackrock Bails Itself Out
The national lockdown left states, cities and local businesses in desperate need of federal
government aid. But
according to David Dayen in The American Prospect , as of May 30 (the Fed's last
monthly report), the only purchases made under the Fed's new BlackRock-administered SPVs were
ETFs, mainly owned by BlackRock itself. Between May 14 and May 20, about $1.58 billion in ETFs
were bought through the Secondary Market Corporate Credit Facility (SMCCF), of which $746
million or about 47% came from BlackRock ETFs. The Fed continued to buy more ETFs after May 20,
and investors piled in behind, resulting in huge inflows into BlackRock's corporate bond
ETFs.
In fact, these ETFs needed a bailout; and BlackRock used its very favorable position with
the government to get one. The complicated mechanisms and risks underlying ETFs are
explained in an April 3 article by business law professor Ryan Clements, who begins his
post:
Exchange-Traded Funds (ETFs) are at the heart of the COVID-19 financial crisis . Over
forty percent of the trading volume during the mid-March selloff was in ETFs .
The ETFs were trading well below the value of their underlying bonds, which were
dropping like a rock . Some ETFs were failing altogether. The problem was something critics
had long warned of: while ETFs are very liquid, trading on demand like stocks, the assets that
make up their portfolios are not. When the market drops and investors flee, the ETFs can have
trouble coming up with the funds to settle up without trading at a deep discount; and that is
what was happening in March.
According
to a May 3 article in The National , "The sector was ultimately saved by the US
Federal Reserve's pledge on March 23 to buy investment-grade credit and certain ETFs. This
provided the liquidity needed to rescue bonds that had been floundering in a market with no
buyers."
Prof. Clements states that if the Fed had not stepped in, "a 'doom loop' could have
materialized where continued selling pressure in the ETF market exacerbated a fire-sale in the
underlying [bonds], and again vice-versa, in a procyclical pile-on with devastating
consequences." He observes:
There's an unsettling form of market alchemy that takes place when illiquid,
over-the-counter bonds are transformed into instantly liquid ETFs. ETF "liquidity
transformation" is now being supported by the government, just like liquidity transformation in
mortgage backed securities and shadow banking was supported in 2008.
Working for Whom?
BlackRock got a bailout with no debate in Congress, no "penalty" interest rate of the sort
imposed on states and cities borrowing in the Fed's Municipal Liquidity Facility, no
complicated paperwork or waiting in line for scarce Small Business Administration loans, no
strings attached. It just quietly bailed itself out.
It might be argued that this bailout was good and necessary, since the market was saved from
a disastrous "doom loop," and so were the pension funds and the savings of millions of
investors. Although BlackRock has a controlling interest in all the major corporations in the
S&P 500, it professes not to "own" the funds. It just acts as a kind of "custodian" for its
investors -- or so it claims. But BlackRock and the other Big 3 ETFs vote the corporations'
shares; so from the point of view of management, they are the owners. And as observed in a 2017
article from the University of Amsterdam titled "
These Three Firms Own Corporate America ," they vote 90% of the time in favor of
management. That means they tend to vote against shareholder initiatives, against labor, and
against the public interest. BlackRock is not actually working for us, although we the American
people have now become its largest client base.
In a 2018 review titled " Blackrock
– The Company That Owns the World ", a multinational research group called
Investigate Europe concluded that BlackRock "undermines competition through owning shares in
competing companies, blurs boundaries between private capital and government affairs by working
closely with regulators, and advocates for privatization of pension schemes in order to channel
savings capital into its own funds."
Daniela Gabor, Professor of Macroeconomics at the University of Western England in Bristol,
concluded after following a number of regulatory debates in Brussels that it was no longer the
banks that wielded the financial power; it was the asset managers.
She said :
We are often told that a manager is there to invest our money for our old age. But it's much
more than that. In my opinion, BlackRock reflects the renunciation of the welfare state. Its
rise in power goes hand-in-hand with ongoing structural changes; in finance, but also in the
nature of the social contract that unites the citizen and the state.
That these structural changes are planned and deliberate is evident in BlackRock's August
2019 white paper laying out an economic reset that has now been implemented with BlackRock at
the helm.
Public policy is made today in ways that favor the stock market, which is considered the
barometer of the economy, although it has little to do with the strength of the real,
productive economy. Giant pension and other investment funds largely control the stock market,
and the asset managers control the funds. That effectively puts BlackRock, the largest and most
influential asset manager, in the driver's seat in controlling the economy.
As
Peter Ewart notes in a May 14 article on BlackRock titled "Foxes in the Henhouse," today
the economic system "is not classical capitalism but rather state monopoly capitalism, where
giant enterprises are regularly backstopped with public funds and the boundaries between the
state and the financial oligarchy are virtually non-existent."
If the corporate oligarchs are too big and strategically important to be broken up under the
antitrust laws, rather than bailing them out they should be nationalized and put directly into
the service of the public. At the very least, BlackRock should be regulated as a
too-big-to-fail Systemically Important Financial Institution. Better yet would be to regulate
it as a public utility. No private, unelected entity should have the power over the economy
that BlackRock has, without a legally enforceable fiduciary duty to wield it in the public
interest.
@jadan
I believe Ellen Brown has long called for nationalization of the Fed.
She has been a tireless advocate for state banks and for public control of the money supply,
and a leading critic of the private control of the issuance of money through debt.
The Federal Reserve Act was created in conspiracy and its passage was a great crime against
the American people.
"You gotta hand it to the conspiracy theorists, because, in fact, there was a conspiracy,"
Roger Lowenstein told Ky Ryssdall during an interview on NPR about Lowenstein's book "America's
Bank."
The men who wrote the Federal Reserve Act even wore disguises and snuck off in the night to
a Victorian mansion on the ominously named Jekyll Island where they did their dirty work:
> Americans have trouble deciding what's fake and what's not
> until reality personally bites them on the ass.
> Posted by: jadan | Jun 20 2020 2:00 utc | 79
They know the economic devastation is real. There are 50,000 unpaid unemployment claims --
just in Kentucky. The establishment press has found a shiny new object called "Juneteenth"
but the catastrophe for 30 million unemployed workers is steady getting worse.
For the county I live in, out of 72,000 people, ten got sick and one died, for the past
six months. Meanwhile, about 350 people die every six months from all causes (about 1%). So
no one here knows anyone sick or dead from the virus, but the crisis, including getting food,
is everywhere.
With this "improvement" we hopefully might see the collapse of some of the most
reckless hedge funds the next year, or earlier. Adding to them a couple of private equity
sharks would be an icing on the cake, but this scum tends to be pretty resilient. They
are masters of offloading losses on public.
Disconnect between the stock market casino and the status of the USA manufacturing is
real and it can't last forever. The FIRE sector which dominates the USA GDP is parasitic
in nature, and parasite usually weakens the host to the point of collapse.
Moreover, Covid19 serves as a powerful catalyst for further degrading the neoliberal
globalization even in areas that are not connected with the role of China.
As Herbert Stein put it on a different subject, but which now is fully applicable to
the neoliberal globalization:
If something cannot go on forever, it will stop.
Per table 1 in https://fas.org/sgp/crs/misc/R45090.pdf ,
real wages for USA men at the 50% percentile level are down -5.1% over the 1979 to 2018
time frame. Now we can probably talk about over 10%.
That's another sign that the USA financial casino might eventually go the way of
Trump's Taj Mahal.
And many middle class lemmings who are completely indoctrinated into neoliberalism and
connected with it deification of markets might be mercilessly fleeced. Especially those
who recklessly play with the stock market having zero understanding of the economics, and
relying on some crazy "chartist" recommendations :-)
Or who stupidly preserved overweighed stocks allocation in the 401K plans after
retirement. That might includes some "Vanguard loving" folk, who posts here.
Another issue with all types of education is that lots of students, especially foreign students, depend very heavily on
restarats temp jobs and casual hospitality work.
4. Colleges will have a lot of trouble this fall . First, they are losing nearly all their
full-freight-paying Chinese students, between concern over US Covid-19 risks, Administration
hostility, and travel restrictions. That alone is a big blow.
On top of that, some are planning to reopen but MIT's announcement yesterday, that
it will not allow all students to return to campus, probably represents a new normal.
Well-placed MIT alumni read the university's decision as driven significantly by a desire to
protect faculty and staff; I hear from sources with contacts at other universities that
administrators that they see no way to put kids in dorms without running unacceptably high
Covid risks.
Remember, even though kids almost never die of Covid-19, but there is a risk of serious
damage. 1/2 the asymptomatic cases on the Diamond Princess now show abnormal lungs. And
remember those cruises have half the people on board as crew, and the crew skews young. College
is a lot less appealing if you don't stay in a dorm.
Just as diminished activity in central business districts has negative knock-on effects to
nearby business, so to do hollowed-out colleges and universities have for their communities,
as described in more depth in a recent Bloomberg story .
The coming college semester is a big question mark. The influx of students is entangled with real estate,
shopping and the biggest in my town, restaurants and bars. Not to mention the college sports season which
supported so many AirBnB's here.
They are starting the year early here (UNC Chapel Hill) and ending it early as well, on Thanksgiving! And
up to 1000 new students will be learning from home instead of coming to campus.
Big question mark -- MIT's president Reif yesterday noted that
"At least for the fall, we can only
bring some of our undergraduates back to campus."
and
"Everything that can be taught effectively
online will be taught online."
Courses are comparatively easy, but labs, research, and sports look doubtful if/when case counts start
marching up again.
"... Racism, especially directed toward blacks, along with “identity wedge,” is a perfect tool for disarming poor white, and suppressing their struggle for a better standard of living, which considerably dropped under neoliberalism. ..."
"... In other words, by providing poor whites with a stratum of the population that has even lower social status, neoliberals manage to co-opt them to support the policies which economically ate detrimental to their standard of living as well as to suppress the protest against the redistribution of wealth up and dismantling of the New Deal capitalist social protection network. ..."
"... This is a pretty sophisticated, pretty evil scheme if you ask me. In a way, “Floydgate” can be viewed as a variation on the same theme. A very dirty game indeed, when the issue of provision of meaningful jobs for working poor, social equality, and social protection for low-income workers of any color is replaced with a real but of secondary importance issue of police violence against blacks. ..."
"What's being protected? The social order that feeds the wealthy at the expense of the
working poor. " -- Neuberger
In the aftermath of these movements, the police increasingly presented themselves as a
thin blue line protecting civilization, by which they meant bourgeois civilization, from the
disorder of the working class. -- Mitrani
I think this ties in, if only indirectly, with the way so many peaceful recent protests
seemed to turn violent after the police showed up. It's possible I suppose the police want to
create disorder to frighten not only the protestors with immediate harm but also frighten the
bourgeois about the threate of a "dangerous mob". Historically violent protests created a
political backlash that usually benefited political conservatives and the wealthy owners.
(The current protests may be different in this regard. The violence seems to have
Sorry, but the title sent my mind back to the days of old -- of old Daley, that is, and his
immortal quote from 1968: "Gentlemen, let's get the thing straight, once and for all. The
policeman isn't there to create disorder; the policeman is there to preserve disorder."
LOL!!! great quote. Talk about saying it the way it is.
It kind of goes along with, "Police violence is focused overwhelmingly on men lowest on the
socio-economic ladder: in rural areas outside the South, predominately white men; in the
Southwest, disproportionately Hispanic men; in mid-size and major cities, disproportionately
black men. Significantly, in the rural South, where the population is racially mixed, white men
and black men are killed by police at nearly identical rates."
I bang my head on the table sometimes because poor white men and poor men of color are so
often placed at odds when they increasingly face (mostly) the same problems. God forbid someone
tried to unite them, there might really be some pearl clutching then.
Great response! I am sure you have more to add to this. A while back, I was researching the
issues you state in your last paragraph. Was about ten pages into it and had to stop as I was
drawn out of state and country. From my research.
While not as overt in the 20th century, the distinction of black slave versus poor white man
has kept the class system alive and well in the US in the development of a discriminatory
informal caste system. This distraction of a class level lower than the poorest of the white
has kept them from concentrating on the disproportionate, and growing, distribution of wealth
and income in the US. For the lower class, an allowed luxury, a place in the hierarchy and a
sure form of self esteem insurance.
Sennett and Cobb (1972) observed that class distinction sets up a contest between upper and
lower class with the lower social class always losing and promulgating a perception amongst
themselves the educated and upper classes are in a position to judge and draw a conclusion of
them being less than equal. The hidden injury is in the regard to the person perceiving himself
as a piece of the woodwork or seen as a function such as "George the Porter." It was not the
status or material wealth causing the harsh feelings; but, the feeling of being treated less
than equal, having little status, and the resulting shame. The answer for many was
violence.
James Gilligan wrote "Violence; Reflections on A National Epidemic." He worked as a prison
psychiatrist and talked with many of the inmates of the issues of inequality and feeling less
than those around them. His finding are in his book which is not a long read and adds to the
discussion.
A little John Adams for you.
" The poor man's conscience is clear . . . he does not feel guilty and has no reason to .
. . yet, he is ashamed. Mankind takes no notice of him. He rambles unheeded.
In the midst of a crowd; at a church; in the market . . . he is in as much obscurity as
he would be in a garret or a cellar.
He is not disapproved, censured, or reproached; he is not seen . . . To be wholly
overlooked, and to know it, are intolerable ."
Racism, especially directed toward blacks, along with “identity wedge,” is a
perfect tool for disarming poor white, and suppressing their struggle for a better standard of
living, which considerably dropped under neoliberalism.
In other words, by providing poor whites with a stratum of the population that has even
lower social status, neoliberals manage to co-opt them to support the policies which
economically ate detrimental to their standard of living as well as to suppress the protest
against the redistribution of wealth up and dismantling of the New Deal capitalist social
protection network.
This is a pretty sophisticated, pretty evil scheme if you ask me. In a way,
“Floydgate” can be viewed as a variation on the same theme. A very dirty game
indeed, when the issue of provision of meaningful jobs for working poor, social equality, and
social protection for low-income workers of any color is replaced with a real but of secondary
importance issue of police violence against blacks.
This is another way to explain “What’s the matter with Kansas” effect.
MLK Jr. tried, and look what happened to him once he really got some traction. If the Rev.
William Barber’s Poor People’s Campaign picks up steam, I’m afraid the same
thing will happen to him.
I wish it were only pearl-clutching that the money power would resort to, but that’s
not the way it works.
In most countries, the police are there solely to protect the Haves from the Have-Nots. In
fact, when the average frustrated citizen has trouble, the last people he would consider
turning to are the police.
This is why in the Third World, the only job of lower social standing than
“policeman” is “police informer”.
The anti-rascist identity of the recent protests rests on a much larger base of class
warfare waged over the past 40 years against the entire population led by a determined
oligarchy and enforced by their political, media and militarized police retainers. This same
oligarchy, with a despicable zeal and revolting media-orchestrated campaign–co-branding
the movement with it’s usual corporate perpetrators– distorts escalating carceral
and economic violence solely through a lens of racial conflict and their time-tested toothless
reforms. A few unlucky “peace officers” may have to TOFTT until the furor recedes,
can’t be helped.
Crowding out debt relief, single payer health, living wages, affordable housing and actual
justice reform from the debate that would benefit African Americans more than any other
demographic is the goal.
The handful of Emperors far prefer kabuki theater and random ritual Seppuku than facing the
rage of millions of staring down the barrel of zero income, debt, bankruptcy, evictions and
dispossession. The Praetorians will follow the money as always.
I suppose we’ll get some boulevards re-named and a paid Juneteenth holiday to
compensate for the destruction 100+ years of labor rights struggle, so there’s that..
Homestead, Ludlow, Haymarket, Matewan — the list is long……
Working men and women asking for justice gunned down by the cops. There will always be men
ready to murder on command as long as the orders come from the rich and powerful. We are at a
moment in history folks were some of us, today mostly people of color, are willing to put their
lives on the line. It’s an ongoing struggle.
So how can a tier of society(the police)…. be what a society needs…? When as this story and many others show how and why the police were formed…. to break
heads. When they have been “the tool” of the elite…forever. when so many of them are such dishonest,immoral ,wanna be fascists. and the main direction of the US is towards a police state and fascists running the
show…. both republican and democrat. With technology being the boot on the neck of the
people… and the police are there to take it to the streets. Can those elusive “good apples” turn the whole rotten barrel into sweet smelling
apple pie? That is a big ask. Or should the structure be liquidated, sell their army toys. fill the ranks with people who are
not pathological liars and abusers and /or racists; of one sort or another. Get rid of the
mentality of overcompensation by uber machismo. and make them watch the andy griffith show.
They ought to learn that they can be respected if they are good people, and that they are not
respected because they seek respect through fear and intimidation. Is that idiot cry of theirs, .. the whole yelling at you; demanding absolute obedience to
arbitrary ,assinine orders, really working to get them respect… or is it just something
they get off on? When the police are shown to be bad, they strike by work slowdown, or letting a little chaos
loose themselves. So the people know they need them… So any reform of the police will go
through the police not doing their jobs…. but then something like better communities may
result. less people being busted and harassed , or pulled over for the sake of a quota….
may just show we don’t need so much policing anyway. And then if the new social workers
brigade starts intervening in peoples with issues when they are young and in school …
maybe fewer will be in the system. Couple that with the police not throwing their family in
jail for nothing, and forcing them to pay fines for breaking stupid laws. The system will have
less of a load, and the new , better cops without attitudes will be able to handle their
communities in a way that works for everyone. Making them a net positive, as opposed to now
where they are a net negative. Also,
The drug war is over. The cops have only done the bidding of the organized criminal elements who make their bread and
butter because of prohibition. our representatives can legally smoke pot , and grow it in their windowboxes in the capital
dc., but people in many places are still living in fear of police using possession of some
substance,as a pretext to take all their stuff,throw them in jail. but besides the cops, there are the prosecutors…. they earn their salaries by stealing
it from poor people through fines for things that ought to be legal. This is one way to drain
money from poor communities, causing people to go steal from others in society to pay their
court costs. and who is gonna come and bust down your door… when you can’t pay a fine and
choose to pay rent and buy your kids food instead…. the cops. just doing their
jobs.. Evil is the banality of business as usual
The late Kevin R C O’Brien noted that in every case where the Police had been ordered
to “Round up the usual suspects” they have done so, and delivered them where
ordered. It did not matter who the “Usual suspects” were, or to what fate they were to be
delivered. They are the King’s men and they do the King’s bidding.
To have a reasonable discussion, I think that it should be recognized that modern police are
but one leg of a triad. The first of course is the police who appear to seem themselves as not
part of a community but as enforcers in that community. To swipe an idea from Mao, the police
should move amongst the people as a fish swims in the sea. Not be a patrolling shark that
attacks who they want at will knowing that there will be no repercussions against them. When
you get to the point that you have police arresting children in school for infractions of
school discipline – giving them a police record – you know that things have gotten
out of hand.
The next leg is the courts which of course includes prosecutors. It is my understanding that
prosecutors are elected to office in the US and so have incentives to appear to be tough on
crime”” . They seem to operate more like ‘Let’s Make a Deal’ from
what I have read. When they tell some kid that he has a choice of 1,000 years in prison on
trumped up charges or pleads guilty to a smaller offence, you know that that is not justice at
work. Judges too operate in their own world and will always take the word of a policeman as a
witness.
And the third leg is the prisons which operate as sweatshops for corporate America. It is in
the interest of the police and the courts to fill up the prisons to overflowing. Anybody
remember the Pennsylvania “kids for cash” scandal where kids lives were being
ruined with criminal records that were bogus so that some people could make a profit? And what
sort of prison system is it where a private contractor can build a prison without a
contract at all , knowing that the government (California in this case) will nonetheless
fill it up for a good profit.
In short, in sorting out police doctrine and methods like is happening now, it should be
recognized that they are actually only the face of a set of problems.
I spent some time in the Silver Valley of northern Idaho. This area was the
hot bed of
labor unrest during the 1890’s. Federal troops controlled the area 3 separate
times,1892, 1894 and 1899. Twice miners hijacked trains loaded them with dynamite and drove
them to mining company stamping mills that they then blew up. Dozens of deaths in shoot outs.
The entire male population was herded up and placed in concentration camps for weeks. The end
result was the assassination of the Governor in 1905. Interestingly this history has been completely expunged. There is a mining museum in the town
which doesn’t mention a word on these events. Even nationwide there seems to be a
complete erasure of what real labor unrest can look like..
Yeah, labor unrest does get swept under the rug. Howard zinn had examples in his works “the peoples history of the United
States” The pictched battles in upstate new york with the Van Rennselear’s in the 1840’s
breaking up rennselearwyk…. the million acre estate of theirs . it was a rent
strike. people remembering , we have been here before doesn’t help the case of the
establishment… so they try to not let it happen. We get experts telling us…. well, this is all new… we need experts… to
tell you… what to think. It is like watching the footage from the past 100 years on film of blacks marching for their
rights… and being told.. reform is coming.. the more things change, the more things stay
the same. decade after decade.century after century… time to start figuring this out people. so, the enemy is us…. now what?
Doubtless the facts presented above are correct, but shouldn’t one point out that the
21st century is quite different from the 19th and therefore analogizing the current situation
to what went on before is quite facile? For example it’s no longer necessary for the
police to put down strikes because strike actions barely still exist. In our current US the
working class has diminished greatly while the middle class has expanded. We are a much richer
country overall with a lot more people–not just those one percenters–concerned
about crime. Whatever one thinks of the police, politically an attempt to go back to the 18th
century isn’t going to fly.
” the 21st century is quite different from the 19th ” From the Guardian
“How Starbucks, Target, Google and Microsoft quietly fund police through private
donations”
More than 25 large corporations in the past three years have contributed funding to
private police foundations, new report says.
These foundations receive millions of dollars a year from private and corporate donors,
according to the report, and are able to use the funds to purchase equipment and weapons with
little public input. The analysis notes, for example, how the Los Angeles police department
in 2007 used foundation funding to purchase surveillance software from controversial
technology firm Palantir. Buying the technology with private foundation funding rather than
its public budget allowed the department to bypass requirements to hold public meetings and
gain approval from the city council.
The Houston police foundation has purchased for the local police department a variety of
equipment, including Swat equipment, sound equipment and dogs for the K-9 unit, according to
the report. The Philadelphia police foundation purchased for its police force long guns,
drones and ballistic helmets, and the Atlanta police foundation helped fund a major
surveillance network of over 12,000 cameras.
In addition to weaponry, foundation funding can also go toward specialized training and
support programs that complement the department’s policing strategies, according to one
police foundation.
“Not a lot of people are aware of this public-private partnership where corporations
and wealthy donors are able to siphon money into police forces with little to no
oversight,” said Gin Armstrong, a senior research analyst at LittleSis.
Maybe it is just me, but things don’t seem to be all that different.
While it is true, this is a new century. knowing how the present came to be, is entirely necessary to be able to attempt any move
forward. The likelihood of making the same old mistakes is almost certain, if one doesn’t try to
use the past as a reference. And considering the effect of propaganda and revisionism in the formation of peoples opinions,
we do need ” learning against learning” to borrow a Jesuit strategy against the
reformation, but this time it should embrace reality, rather than sow falsehoods. But I do agree, We have never been here before, and now is a great time to reset everything. With all due
respect to “getting it right” or at least “better”. and knowing the false fables of righteousness, is what people need to know, before they go
about “burning down the house”.
You know it’s not as though white people aren’t also afraid of the police.
Alfred Hitchcock said he was deathly afraid of police and that paranoia informed many of his
movies. Woody Allen has a funny scene in Annie Hall where he is pulled over by a cop and is
comically flustered. White people also get shot and killed by the police as the rightwingers
are constantly pointing out.
And thousands of people in the streets tell us that police reform is necessary. But the
country is not going to get rid of them and replace police with social workers so why even talk
about it? I’d say the above is interesting….not terribly relevant.
Straight-up fact: The police weren’t created to preserve and protect. They were
created to maintain order, over certain subjected classes and races of people,
including–for many white people, too–many of our ancestors, too.*
And the question that arises from this: Are we willing to the subjects in a police state?
Are we willing to continue to let our Black and brown brothers and sisters be subjected BY such
a police state, and to half-wittingly be party TO it?
Or do we want to exercise AGENCY over “our” government(s), and
decide–anew–how we go out our vast, vast array of social ills.
Obviously, armed police officers with an average of six months training–almost all
from the white underclass–are a pretty f*cking blunt instrument to bring to bear.
On our own heads. On those who we and history have consigned to second-class
citizenship. Warning: this is a revolutionary situation. We should embrace it.
*Acceding to white supremacy, becoming “white” and often joining that police
order, if you were poor, was the road out of such subjectivity. My grandfather’s father,
for example, was said to have fled a failed revolution in Bohemia to come here. Look back
through history, you will find plenty of reason to feel solidarity, too. Race alone cannot
divide us if we are intent on the lessons of that history.
It’s a good argument for keeping business small and evenly distributed. Promote the
distribution of small enterprises all around the countryside and it’ll be a preventative
against mergers and monopolies and giant corporations. Legislate for small business everywhere.
When mega corporations turn into godzilla they are no longer efficient. They just tweak the
statistics to imply that they are making such a profit that that means they are efficient.
Maybe their robots are. Maybe their security forces are. But rapacious capitalism is almost
comical, if not pathetic, when there is nothing left to rape. Which is where we now find
ourselves. They’ve been allowed to evolve into private monopolies and have sucked the
life out of the rest of the economy because they provide no employment, no training, no health
care, no responsible maintenance for themselves; they set up tax havens, etc. And they produce
way too much crap. We need far less consumption to save the planet. If we need monopolies to
create equal distribution let them be state-owned monopolies. States do a good job. I’m
thinking here of the State owned liquor stores in Utah. Even tho’ it’d be nice to
buy wine in the grocery store, the state does a good job of supplying booze at a good price.
(They are in the process now of setting up marijuana stores. Yes, Utah.) And they hire lotsa
people. And they generate a nice tax revenue. I think medical care should be the same way
– but on a national scale. This way we don’t need to bludgeon the poor. Until we
can turn things around, we need to give the poor a state owned and controlled place to live
– commonly thought of as a house. We’re gonna need to do food stamps too. If we
must put up with private enterprise at the expense of public welfare, just so that we keep a
certain optimism toward “free enterprise” and keep it nurtured because: sometimes a
great notion, then let’s restrict it from becoming a plague. But let’s not kill
capitalism just because it almost killed society. Let’s remake it. As it is now
it’s just dragging itself around like a cave troll. It is no longer fit for purpose.
Protect and serve MMT to the 10%. And no, the answer can not be give MMT to everyone and
complain about automation replacing the population. Also, slavery is not a white issue;
it’s a control issue, going back to Africa, which is once again being pumped with
debt.
Looking at how the term redneck was twisted to serve it’s current function is
revealing. Fear, insecurity, control. Educate your own.
"... Alastair Crooke has masterfully shown how the geoeconomic game, as Trump sees it, is above all to preserve the power of the U.S. dollar ..."
"... Russiagate, now totally debunked , has unfolded in effect as a running coup: a color non-revolution metastasizing into Ukrainegate and the impeachment fiasco. In this poorly scripted and evidence-free morality play with shades of Watergate, Trump was cast by the Democrats as Nixon. ..."
"... Black Lives Matter, the organization and its ramifications, is essentially being instrumentalized by selected corporate interests to accelerate their own priority: to crush the U.S. working classes into a state of perpetual anomie, as a new automated economy rises. ..."
"... What's fascinating is how this current strategy of tension scenario is being developed as a classic CIA/NED playbook color revolution. An undisputed, genuine grievance -- over police brutality and systemic racism -- has been completely manipulated, showered with lavish funds, infiltrated, and even weaponized against "the regime". ..."
"... in yet another priceless historical irony, "Assad must go" metastasized into "Trump must go". ..."
"... the majority of the population is considered expendable. It helps that the instrumentalized are playing their part to perfection, totally legitimized by mainstream media . No one will hear lavishly funded Black Lives Matter addressing the real heart of the matter: the reset of the predatory Restored Neoliberalism project, barely purged of its veneer of Hybrid Neofascism. The blueprint is the Great Reset to be launched by the World Economic Forum in January 2021. ..."
"... It will be fascinating to watch how Trump deals with this "Summer of Love" remake of Maidan transposed to the Seattle commune ..."
The division of the English-speaking community into two great powers -- "one aristocratic,
'chosen' and imperial; and one democratic, 'chosen' and manifest destiny-driven", as Philips
correctly establishes -- was accomplished by, what else, a war triptych: the English Civil War,
the American revolution and the U.S. Civil War.
Now, we may be at the threshold of a fourth war -- with unpredictable and unforeseen
consequences.
As it stands, what we have is a do-or-die clash of models: MAGA against an exclusivist
Fed/Wall Street/Silicon Valley-controlled system.
MAGA -- which is a rehash of the American dream -- simply cannot happen when society is
viciously polarized; vast sectors of the middle class are being completely erased; and mass
immigration is coming from the Global South.
In contrast, the Fed as a Wall Street hedge fund meets Silicon Valley model, a supremely
elitist 0.001% concoction, has ample margins to thrive.
The model is based on even more rigid corporate monopoly; the preeminence of capital
markets, where a Wall Street boom is guaranteed by government debt-buybacks of its own debt;
and life itself regulated by algorithms and Big Data.
This is the Brave New World dreamed by the techno-financial Masters of the Universe.
Trump's MAGA woes have been compounded by a shoddy geopolitical move in tandem with Law and
Order: his re-election campaign will be under the sign of "China, China, China." When in
trouble, blame a foreign enemy.
That comes from serially failed opportunist Steve Bannon and his Chinese billionaire
sidekick Guo Wengui, or Miles Guo. Here they are in Statue of Liberty mode announcing their no
holds barred infowar campaign to demonize the Chinese Communist Party (CCP) to Kingdom Come and
"free the Chinese people".
Bannon's preferred talking point is that if his infowar fails, there will be "kinetic war".
That is nonsense. Beijing's
priorities are elsewhere. Only a few neo-conned Dr. Strangeloves would envisage "kinetic
war"- as in a pre-emptive nuclear strike against Chinese territory.
Alastair Crooke has masterfully
shown how the geoeconomic game, as Trump sees it, is above all to preserve the power of the
U.S. dollar : "His particular concern would be to see a Europe that was umbilically linked
to the financial and technological heavyweight that is China. This, in itself, effectively
would presage a different world financial governance."
But then there's
The Leopard syndrome: "If we want things to stay as they are, things will have to change".
Enter Covid-19 as a particle accelerator, used by the Masters of the Universe to tweak "things"
a bit so they not only stay as they are but the Master grip on the world tightens.
The problem is Covid-19 behaves as a set of -- uncontrollable -- free electrons. That means
nobody, even the Masters of the Universe, is able to really weigh the full consequences of a
runaway, compounded financial/social crisis.
Deconstructing Nixon-Trump
Russiagate, now totally
debunked , has unfolded in effect as a running coup: a color non-revolution metastasizing
into Ukrainegate and the impeachment fiasco. In this poorly scripted and evidence-free morality
play with shades of Watergate, Trump was cast by the Democrats as Nixon.
Big mistake. Watergate had nothing to do with a
Hollywood-celebrated couple of daring reporters. Watergate represented the
industrial-military-security-media complex going after Nixon. Deep Throat and other sources
came from inside the Deep State. And it was not by accident that they were steering the
Washington Post -- which, among other roles, plays the part of CIA mouthpiece to
perfection.
Trump is a completely different matter. The Deep State keeps him under control. One just
needs to look at the record: more funds for the Pentagon, $1 trillion in brand new nuclear
weapons, perennial sanctions on Russia, non-stop threats to Russia's western borders, (failed)
efforts to derail Nord Stream 2. And this is only a partial list.
So, from a Deep State point of view, the geopolitical front -- containment of Russia-China
-- is assured. Domestically, it's much more complicated.
As much as Black Lives Matter does not threaten the system even remotely like the Black
Panthers in the 60s, Trump believes his own Law & Order, like Nixon, will once again
prevail. The key will be to attract the white women suburban vote. Republican pollsters are
extremely
optimistic and even talking about a "landslide".
Yet the behavior of an extra crucial vector must be understood: what corporate America
wants.
When we look at who's supporting Black Lives Matter -- and Antifa -- we find, among others,
Adidas, Amazon, Airbnb, American Express, Bank of America, BMW, Burger King, Citigroup, Coca
Cola, DHL, Disney, eBay, General Motors, Goldman Sachs, Google, IBM, Mastercard, McDonald's,
Microsoft, Netflix, Nike, Pfizer, Procter & Gamble, Sony, Starbucks, Twitter, Verizon,
WalMart, Warner Brothers and YouTube.
This who's who would suggest a completely isolated Trump. But then we have to look at what
really matters; the class war dynamics in what is in fact a caste system , as Laurence Brahm
argues.
Black Lives Matter, the organization and its ramifications, is essentially being
instrumentalized by selected corporate interests to accelerate their own priority: to crush the
U.S. working classes into a state of perpetual anomie, as a new automated economy
rises.
That may always happen under Trump. But it will be faster without Trump. What's
fascinating is how this current strategy of tension scenario is being developed as a classic
CIA/NED playbook color revolution. An undisputed, genuine grievance -- over police brutality
and systemic racism -- has been completely manipulated, showered with lavish funds,
infiltrated, and even weaponized against "the regime".
Just to control Trump is
not enough for the Deep State -- due to the maximum instability and unreliability of his
Demented Narcissus persona. Thus, in yet another priceless historical irony, "Assad must
go" metastasized into "Trump must go".
The cadaver in the basement
One must never lose track of the fundamental objectives of those who firmly control that
assembly of bought and paid for patsies in Capitol Hill: to always privilege Divide and Rule --
on class, race, identity politics.
After all, the majority of the population is considered expendable. It helps that the
instrumentalized are playing their part to perfection, totally legitimized by
mainstream media . No one will hear lavishly funded Black
Lives Matter addressing the real heart of the matter: the reset of the predatory
Restored Neoliberalism project, barely purged of its veneer of Hybrid Neofascism. The
blueprint is the Great
Reset to be launched by the World Economic Forum in January 2021.
It will be fascinating to watch how Trump deals with this "Summer of Love" remake of
Maidan transposed to the Seattle commune . The hint from Team Trump circles is that he
will do nothing: a coalition of white supremacists and motorcycle gangs might take care of the
"problem" on the Fourth of July.
None of this sweetens the fact that Trump is at the heart of a crossfire hurricane: his
disastrous response to Covid-19; the upcoming, devastating effects of the New Great Depression;
and his intimations pointing to what could turn into martial law.
Still, the legendary Hollywood maxim -- "no one knows anything" -- rules. Even running with
a semi-cadaver in a basement, the Democrats may win in November just by doing nothing. Yet
Teflon Trump should never be underestimated. The Deep State may even realize he's more useful
than they think.
An undisputed, genuine grievance – over police brutality and systemic
racism…
Even Candace Owens understands that police are more likely to be killed or injured by
“suspects” than the “suspects” are to be killed or injured by police.
The militarization of police departments is a genuine grievance. The relatively few acts of
actual police brutality out of millions of contacts in a year is not.
If there is “systemic racism”, it is systemic against White males.
There is no genuine systemic racism other than non-specific word games. Is there systemic
racism in China? How about Japan?
Societies are a racial construct. They are built for the people/drivers that
“invented” the society. Why would a Chinese or Japanese care about what a German
or Nigerian thought should be done for their society?
"... "By the Department of Labor's own admission, these are investments that are more complex, more opaque, less liquid, more difficult to value, with often higher costs than the investments that are traditionally offered through retirement plans," Roper said in an interview with Yahoo Finance. ..."
Managers of 401(k) plans now have the ability invest in private equity. In other words, your
401(k ) could soon take stakes in private companies.
The goal, according to Labor Secretary Eugene
Scalia is to allow investors to "gain access to alternative investments" and "ensure that ordinary people investing for retirement
have the opportunities they need for a secure
retirement
." The Department of Labor laid things out in a
letter that says putting 401(k) money into private-equity funds would not "violate the fiduciary's duties" of certain retirement
plan sponsors.
But some experts see a big downside.
Barbara Roper, the Director of Investor Protection
at the Consumer Federation of America, said the "significant risks" associated with private equity investments haven't been adequately
addressed.
"By the Department of Labor's own admission, these are investments that are more complex, more opaque, less liquid, more
difficult to value, with often higher costs than the investments that are traditionally offered through retirement plans," Roper
said in an interview with Yahoo Finance.
You 'could do much, much worse'
The DOL letter means that a 401(k) manager could now decide to invest in private-equity funds that previously were not accessible.
These funds traditionally have been reserved for the wealthiest traders and institutional investors. They typically come with higher
risk since private companies are not required to disclose nearly the same about of data with the SEC as public companies do.
The new rule could be tempting for average savers who may now have a roundabout way to get a piece of a company – like SpaceX
or AirBnB – that's still private. The American Investment Council, which represents the private equity industry, has
lauded the change , saying it will strengthen Americans' retirement security.
One thing that remains up in the air is how quickly the managers of the big retirement plans will embrace their new options. Companies
like Vanguard and Fidelity have not yet offered comment on the new guidelines. Another
outstanding question is whether these plans would list private-equity funds among the options for savers to choose from, or whether
private equity would simply be mixed into existing funds.
Alexis Leondis, an opinion columnist for Bloomberg,
recently asked if the move is worth the risks. “Many plan sponsors don't have the sophistication or background in alternatives
to fully understand the complicated structures of many private equity funds," she wrote.
Roper said that “the dispersion of returns in the private-equity fund space is huge, much broader than it is in the public markets.”
And while the returns for over-performing private equity funds can, indeed, beat the public markets, “if you get in a below average
fund, you could do much, much worse," she said.
An example of a big downside in private equity fund is SoftBank’s Vision fund. That fund
recently announced losses of $24 billion
after failed investments in WeWork and OneWeb.
According to
a 2018 study by the Stanford Center on Longevity, about half of American workers are saving money through a retirement plan at
work. Access to and participation in 401(k)s is much lower among younger workers.
A report from the National Institute on Retirement Security found that two-thirds of working millennials have nothing saved for
retirement.
A second rule change, over financial advice
A second change is coming soon and is expected to relax restrictions on the advice financial professionals give about their retirement
investments.
The change,
passed by the SEC last year with a compliance deadline of June 30, says brokers must act “in the best interest of the retail customer
at the time the recommendation is made, without placing your financial or other interest ahead of the retail customer’s interests.”
SEC Chairman Jay Clayton has said that the change is part of "raising the standard of conduct for broker-dealers," while he has
discussed in interviews how the best interest standard is different than a fiduciary standard.
According to the Consumer Federation of America, the move could lead to an understanding that investment advisers are not true
fiduciaries. A fiduciary is someone legally obligated to act in the best financial interests of the clients they are advising.
Roper
says that this potential new rule gives broker-dealers and investment advisers “virtually unlimited ability to act as advisers,
while simultaneously failing to regulate them accordingly.” They can now “mislead their customers into believing they are getting
trusted, best interest advice when they are actually getting investing recommendations biased by toxic conflicts of interest,” she
said.
Roper appeared as part of Yahoo Finance’s ongoing partnership with the
Funding our Future campaign, a group of organizations
advocating for increased retirement security for Americans.
Consumer Federation of America is an association of non-profit consumer organizations. More than 250 groups – from local agencies
like the New York City Department of Consumer Affairs to private groups across the country – participate in the federation.
All of these changes may not be noticed by certain savers who are often encouraged to take a “set it and forget it” approach to
their retirement.
If their 401(k) provider does end up getting involved in private equity, advocates like Roper say that "the promise of improved performance
is not necessarily met by the reality."
Ben Werschkul is a producer for Yahoo Finance in Washington, DC.
Recall, it was just days ago that
we pointed out Cornell professor and friend of Zero Hedge Dave Collum was publicly shamed
by Cornell for daring to express the "wrong" opinion about current events on social media. Now,
there's a second Cornell professor coming under fire for his critique of the Black Lives Matter
movement.
Cornell Law School professor William A. Jacobson has challenged any student or faculty
member to a public debate about the Black Lives Matter movement after he says liberals on
campus have launched a "coordinated effort" to have him fired from his job. At least 15 emails
from alumni have been sent to the dean, demanding that action be taken, according to Fox News
.
"There is an effort underway to get me fired at Cornell Law School, where I've worked since
November 2007, or if not fired, at least denounced publicly by the school,"
Jacobson wrote on Thursday . "I condemn in the strongest terms any insinuation that I am
racist."
Jacobson founded the website Legal
Insurrection and says he's had an "awkward relationship" with the university for years as a
result. The recent outrage comes as a result of two posts he recently made on his site:
"Those posts accurately detail the history of how the Black Lives Matters Movement started,
and the agenda of the founders which is playing out in the cultural purge and rioting taking
place now," Jacobson said.
He recently wrote on his blog: "Living as a conservative on a liberal campus is like being
the mouse waiting for the cat to pounce. For over 12 years, the Cornell cat did not pounce.
Though there were frequent and aggressive attempts by outsiders to get me fired, including
threats and harassment, it always came from off campus."
"Not until now, to the best of my knowledge, has there been an effort from inside the
Cornell community to get me fired," he says.
"The effort appears coordinated, as some of the emails were in a template form. All of the
emails as of Monday were from graduates within the past 10 years," he continued. Jacobson's
"clinical faculty colleagues, apparently in consultation with the Black Law Students
Association" drafted and published a letter denouncing 'commentators, some of them attached to
Ivy League Institutions, who are leading a smear campaign against Black Lives Matter.'"
Cornell
responded , backhandedly defending the Professor's right to his own opinion:
"...the Law School's commitment to academic freedom does not constitute endorsement or
approval of individual faculty speech. But to take disciplinary action against him for the
views he has expressed would fatally pit our values against one another in ways that would
corrode our ability to operate as an academic institution."
"This is not just about me. It's about the intellectual freedom and vibrancy of Cornell and
other higher education institutions, and the society at large. Open inquiry and debate are core
features of a vibrant intellectual community," he stated.
"I challenge a representative of those student groups and a faculty member of their choosing
to a public debate at the law school regarding the Black Lives Matter Movement, so that I can
present my argument and confront the false allegations in real-time rather than having to
respond to baseless community email blasts."
"I condemn in the strongest terms any insinuation that I am racist, and I greatly resent any
attempt to leverage meritless accusations in hopes of causing me reputational harm. While such
efforts might succeed in scaring others in a similar position, I will not be intimidated,"
Jacobson concluded.
"... The objective of the elites was to wrest control of resources eg land and/or timber plus so-called royal warrants that controlled who was allowed to produce, sell export products to who, grab allocation out of the control of the mobs of greedy royal favorites, then into the hands of the new American elites. ..."
"... The bagmen & courtiers grew fat at the expense of the colonists and generally the bagman, who also spied on the locals for obvious reasons, would go back to England once he had made his stash. ..."
"... The American elites wanted and, after the revolution got, the power to control economic development for themselves.Hence the birth of lobbyists simultaneous with the birth of the American nation state. ..."
"... IMO the constitution was about as meaningful to the leaders of the revolution as campaign promises are to contemporary politicians.That is, something to be used as self protection without ever implementing. ..."
I'm always amused, nah that is a little harsh - dumbfounded is more reasonable, when
Americans express dismay that 'their' constitution is not being adhered to by the elites.
The minutiae of American political history hasn't greatly concerned me after a superficial
study at high school, when I realized that the political structure is corrupt and was
designed to facilitate corruption.
The seeming caring & sharing soundbites pushed out by the 'framers' scum such as
Thomas Jefferson was purely for show, an attempt to gather the cannon fodder to one side.
This was simple as the colonial media had been harping on about 'taxation without
representation' for decades.
It wasn't just taxes, in fact for the American based elites that was likely the least of
it. The objective of the elites was to wrest control of resources eg land and/or timber plus
so-called royal warrants that controlled who was allowed to produce, sell export products to
who, grab allocation out of the control of the mobs of greedy royal favorites, then into the
hands of the new American elites.
A well placed courtier would put a bagman into the regional center of a particular colony
(each colony becoming a 'state' post revolution), so that if someone wanted to, I dunno, say
export huge quantities of cotton, the courtier would charge that 'colonial' for getting the
initial warrant, then take a hefty % of the return on the product - all collected by the
on-site bagman then divvied up.
The bagmen & courtiers grew fat at the expense of the colonists and generally the
bagman, who also spied on the locals for obvious reasons, would go back to England once he
had made his stash.
The system was ponderous inaccurate & very expensive. Something had to be done, but
selling revolutionary change to the masses on the basis of the need to enrich the already
wealthy was not likely to be a winner. Consequently the high faulting blather.
The American elites wanted and, after the revolution got, the power to control economic
development for themselves.Hence the birth of lobbyists simultaneous with the birth of the American nation state.
IMO the constitution was about as meaningful to the leaders of the revolution as campaign
promises are to contemporary politicians.That is, something to be used as self protection without ever implementing.
"... Old saying: A Recession is when your neighbor loses their Job. A Depression is when you lose your Job. ..."
"... A lot of mega wealthy people are cheats. They get insider info, they don't pay people and do all they can to provide the least amount of value possible while tricking suckers into buying their crap. Don't even get me started on trust fund brats who come out of the womb thinking they are Warren buffet level genius in business. ..."
"... There's a documentary about Wal-Mart that has the best title ever: The High Cost of Low Cost ..."
"... Globalism killed the American dream. We can buy cheap goods made somewhere else if we have a job here that pays us enough money. ..."
You can't just move to American cities to pursue opportunity; even the high wages paid in
New York are rendered unhelpful because the cost of housing is so high.
Martin Luther King, Jr. was vilified and ultimately murdered when he was helping organize
a Poor People's Campaign. Racial justice means economic justice.
A lot of mega wealthy people are cheats. They get insider info, they don't pay people and
do all they can to provide the least amount of value possible while tricking suckers into
buying their crap. Don't even get me started on trust fund brats who come out of the womb
thinking they are Warren buffet level genius in business.
Nailed it. As a millennial, I'm sick of being told to just "deal with it" when the cards
have always been stacked against me. Am I surviving? Yes. Am I thriving? No.
When the reserve status of the American dollar goes away, then it will become apparent how
poor the US really is. You cannot maintain a country without retention of the ability to
manufacture the articles you use on a daily basis. The military budget and all the jobs it
brings will have to shrink catastrophically.
...and sometimes you CAN'T afford to move. You can't find a decent job. You certainly
can't build a meaningful savings. You can't find an apartment. And if you have kids? That
makes it even harder. I've been trying to move for years, but the conditions have to be
perfect to do it responsibly. The American Dream died for me once I realized that no matter
the choices I made, my four years of college, my years of saving and working hard....I do NOT
have upward mobility. For me, the American Dream is dead. I've been finding a new dream. The
human dream.
This is a very truncated view. You need to expand your thinking. WHY has the system been
so overtly corrupted? It's globalism that has pushed all this economic pressure on the
millennials and the middle class. It was the elites, working with corrupt politicians, that
rigged the game so the law benefited them.
This is all reversible. History shows that capitalism can be properly regulated in a way
that benefits all. The answer to the problem is to bring back those rules, not implement
socialism.
Trump has:
- Ended the free trade deals
- Imposed Protective tarriffs to defend American jobs and workers
- Lowered corporate taxes to incentivize business to locate within us borders.
- Limited immigration to reduce the supply of low skilled labor within US borders.
The result? before COVID hit the average American worker saw the first inflation adjusted
wage increase in over 30 years!
This is why the fake news and hollywood continue to propagandize the masses into hating
Trump.
Trump is implementing economic policies good for the people and bad for the elites
Krystal Ball exposes the delusion of the American dream.
About Rising: Rising is a weekday morning show with bipartisan hosts that breaks the mold of
morning TV by taking viewers inside the halls of Washington power like never before. The show
leans into the day's political cycle with cutting edge analysis from DC insiders who can
predict what is going to happen.
It also sets the day's political agenda by breaking exclusive
news with a team of scoop-driven reporters and demanding answers during interviews with the
country's most important political newsmakers.
Got my degree just as the great recession hit. Couldn't find real work for 3 years, not
using my degree... But it was work. now after 8 years, im laid off. I did everything "right".
do good in school, go to college, get a job...
I've never been fired in my life. its always,
"Your contract is up" "Sorry we cant afford to keep you", "You can make more money collecting!
but we'll give a recommendation if you find anything."
Now I'm back where i started... only
now I have new house and a family to support... no pressure.
This happened prior to Crooke writing his current article
Just read that piece. I was fascinated to see him referencing an article by "Walrus" over
at SST (which was a particularly BS article in my view.) However, he referenced the concept
of Walrus' article about a "billionaire network" controlling everything by corrupting people
over 40.
My reaction to that is: Isn't that how it was always done throughout history? The rich
control the less-rich who control the less-rich - using his matryoshka example.
His main thesis is that younger ideologist are setting up a more serious divide in US
society than the old "Liberal vs Conservative" or "North vs South" division, and that this is
putting pressure on the "billionaires network."
I'm not sure how to regard that concept yet. On the one hand, I know that the old "young
vs old" dynamic is always at work - and generally irrelevant since it is the old that
controls the money and the military power. OTOH, there is a new phenomenon in the last
decades, starting with the availability of networks, and then growing with the availability
of affordable personal computers, and now exploding with the presence of the Internet. That
phenomenon is hacking. And it is the youth that control that technology.
I referenced the "cyberpunk" sci-fi genre a few threads back. If one is familiar with the
hacker community and the infosec profession, ne if struck by the massive disparity between
the capabilities of the attackers and that of the defenders of networks. No matter what the
defenders do, there is no stopping an adversary which has motivation, resources and time. The
defender has to always be right, the attacker only has to be right once.
This translates to the current situation socially - but only to a limited degree. Hackers
are a particular breed intellectually and emotionally. Their attitudes and abilities do not
translate to the rest of people their age. Their political and social attitudes *may*, to
some degree, depending on the hacker.
But most hackers have a decidedly anti-authoritarian, if not libertarian, or dare I say
anarchist, attitude. They can join with others, but that tends to be at arm's length. So I
don't see the majority of them empowering a "youth collectivism" or whatever one wants to
call the general social and political attitude of the young today.
I *do* see them being willing to take on political and social power. That was the entire
reference point of the cyberpunk genre: technically proficient iconoclasts marginalized as
criminals taking on (and frequently losing) TPTB depicted as corporations and the state.
I see the rise of hacking as a direct threat to the "billionaires network" (if such a
thing actually exists as a coordinated entity.) The only question is whether the hackers have
a coherent view of their potential. I suspect they don't, much like the "Woke" (see below).
But they could - and if they did, they'd be very dangerous since there is no real way to stop
them, and their numbers are growing worldwide as more Third World societies develop middle
classes that can afford to own computers while still not providing an adequate economy for
their people (places like India, Malaysia and Indonesia.)
"One aspect he apparently overlooks is the very poor understanding of history and
contemporary events exhibited on all sides--the "woke" are asleep as they know nothing of
Anti-Federalism or of the Class-based rationale related to the genesis of Police, although
they seem to be aware of the social control goals of that Genesis in both North and South
as we examined last week."
Agreed. That's my problem with the "Woke" - they're even more ignorant than their parents
were, even if they're more socially conscious. They believe things that aren't correct just
as much as their parents did - they just believe different incorrect things.
"The Class War is also sidelined despite the reality of it being the most important
factor in the equation--The .1% being the genuine looters..."
Agreed.
"IMO, there's no discernable ideological direction aside from some basic demands
related to policing and the racism connected to it because those in the streets lack the
tools to articulate a complete vision--something that's very difficult to do when you don't
know where you've actually been and the happenings over the past 75 years that have shaped
the current landscape"
Indeed. One has to burrow rather deeply into first principles to formulate a coherent
philosophy - and I don't see anyone doing that. I had nine years in a Federal prison to
re-orient myself and I benefited from having a previous forty years of exposure to concepts
outside the mainstream "left vs right" dichotomy. I doubt many of these people on the streets
have a clue as to what should be done either on their personal level or a social
level.
Trump just changed the rules to let Wall Street's most predatory industry get its hands on hundreds of billions of dollars of
ordinary workers' retirement savings. Now his friends in private equity are celebrating.
If politics is the art of the sleight of hand, then Donald Trump is one of the deftest magicians of all time -- a master of creating
mesmerizing spectacles, while his minions quietly rob everything in sight. This David Copperfield routine has become so mundane we
are practically numb to it, but the trick Trump just pulled off for his billionaire pals was something particularly special -- it
could end up being one of the single biggest financial heists in history.
The Trump administration's new directive came just a few months after private equity billionaire Stephen Schwarzman -- who had
been pushing for the change -- poured $3 million
into a super PAC backing Trump's reelection bid.
While long-standing worker-protection regulations have prevented 401(k) plans from investing in high-risk private equity firms,
the letter now permits corporations to funnel that money to those firms, which charge notoriously giant fees.
Trump's administration argued that workers should feel fortunate and thankful that the administration will now let employers turn
their savings over to private equity barons.
"This information letter will help Americans saving for retirement gain access to alternative investments that often provide strong
returns," labor secretary Eugene Scalia said
in a statement announcing the new policy. "The letter helps level the playing field for ordinary investors and is another step
by the department to ensure that ordinary people investing for retirement have the opportunities they need for a secure retirement."
In practice, private equity firms will now be allowed to access -- and skim fees off of -- the
$9 trillion in 100
million workers' 401(k) plans and IRAs.
"If just 5 percent of the money in these retirement funds were available to private equity, it would be a windfall of $435 billion
-- real money even to private equity millionaires and billionaires,"
wrote Eileen Appelbaum of the Center for Economic and Policy Research (CEPR).
The Labor Department letter is the result of all that private equity influence -- and at a particularly opportune time. The
industry -- including
Partners Group -- has recently been fretting about a decline in fees during the COVID-19 pandemic. The letter offers the potential
for a bailout for the industry, paid for by millions of workers' retirement savings.
That said, this is not some temporary relief during a fleeting crisis -- this is the culmination of a long-term campaign by Schwarzman.
Six days after Trump was inaugurated, the Blackstone chief said that he had been dreaming of a president who would change the law
to let his firm make bank off workers' 401(k) savings.
"In life you have to have a dream," Schwarzman told analysts in
January 2017 , days after Trump's inauguration. "One of the dreams is our desire and the market's need to have more access at
retail to alternative asset products . . . A lot of people are not allowed to put those into retirement vehicles and other types.
And one of the interesting issues when you have a new government is whether they want to continue that type of prohibition or not.
Because what it's doing is denying people sort of a better retirement, and if there's a change in that area that becomes a huge opportunity
for the firm."
Like Shelley Levene's smarmy real-estate sales pitch in
Glengarry Glen Ross , Schwarzman's argument is that private equity offers ordinary Americans terrific untapped investment upside.
In his telling, workers have been unfairly deprived of these opportunities under the old laws -- and not surprisingly, both the Trump
Labor Department and some of the business press have credulously echoed that line.
"Everyday investors may soon be able to get a piece of private equity action," effused the lede of the New York Times
' report on the Labor Department letter, as if this is a sweet get-rich-quick opportunity for the average working man.
But only days after the change, a landmark
study was released, telling the real story of private equity.
The report by University of Oxford professor Ludovic Phalippou shows that in the last fifteen years, private equity firms generally
have not provided better returns to investors than low-fee stock index funds. In the process, a handful of private equity firms and
their executives have raked in roughly $230 billion in fees from investors like public pension funds and university endowments.
"This wealth transfer might be one of the largest in the history of modern finance: from a few hundred million pension scheme
members to a few thousand people working in private equity," Phalippou concludes.
Politicians have enabled this redistribution.
In Washington, federal lawmakers have
preserved a tax loophole
that allows private equity moguls to classify their winnings as capital gains rather than income, thereby paying far lower tax rates
than ordinary workers.
Meanwhile, in states and cities, local officials have continued to
direct more and more of government workers' pension savings to politically connected private equity firms. Those officials have
been hoping that private equity investments would produce outsize returns that might forestall tax hikes necessary to raise revenue
and fund the pension benefits promised to public-sector workers. But overall, those returns were not significantly better than the
stock market, and they came with giant fees.
In its letter, the Trump administration actually acknowledged some of these pitfalls of private equity investments, noting that
they involve "more complex, and typically, higher fees." But that wasn't enough to stop the Labor Department from shoving millions
of unwitting workers and retirees into private equity's maw just a few years after
Blackstone
and other major private equity firms were sanctioned
by regulators for fleecing investors.
The Quest for Dumb Money
The private equity industry is hardly short on cash -- the industry was sitting on roughly
$1.5 trillion of undeployed capital at the end of 2019. The reason the Labor Department letter is so important to the industry
is because 401(k)s and IRAs represent a particular kind of capital that private equity firms love -- so-called
"dumb money."
Unlike a share of publicly traded stock whose price is the same for all investors, a private equity investment's fees can vary
widely from investor to investor. Private equity firms are therefore always eager to find investors willing to accept the highest
possible fees. "Dumb money" refers to such investors -- entities like pension funds, 401(k) plans, and university endowments that
are pools of other people's money directed by officials with no personal skin in the investment decisions.
Wall Street sees these funds as "dumb" -- and particularly lucrative -- because the officials negotiating on retirees' or universities'
behalf may not drive as hard a bargain on fees and terms as, say, an individual billionaire or an insurance company trying to protect
its cash reserves.
This wiggle room with dumb money can be enormously lucrative for private equity firms: a recent
study by Stanford and Harvard researchers
found that had public pensions all received the same private equity fee rates, they "would have earned nearly $45 billion more on
their investments."
In other words: that is $45 billion of earnings that could have gone to retirees, but instead went to private equity firms and
other wealthy investors because pension fund managers didn't secure better fees and terms.
That part about "other unobserved investors" is key -- private equity firms explicitly say in their
SEC filings that they can and will offer different investors different fees and terms on the exact same investments. It is a
situation that has caused
some retirees to wonder whether their dumb money is being used to pad the profits of smarter, politically connected investors
who negotiate better terms in the same private equity investments.
Now that Trump's Labor Department has opened the floodgates, a lot more money could end up flowing into these opaque deals, enriching
private equity executives and their friends -- while leaving workers'
meager retirement savings even further depleted.
End Mark
David Sirota is editor-at-large at Jacobin . He edits the Too Much Information newsletter and previously served as a senior
adviser and speechwriter on Bernie Sanders's 2020 presidential campaign. You can subscribe to David Sirota's newsletter "Too Much
Information" here . Andrew Perez contributed research to this
story.
"... This program is 100 percent listener supported! You can join the hundreds of financial sponsors who make this show possible by becoming a member on our Patreon page . ..."
Since April, he has uncovered how COVID-19
came
to be a boon for the ultra-wealthy , reporting that America's billionaires, including Jeff Bezos, Bill Gates, Warren Buffet,
Michael Bloomberg and others, accrued more wealth in the first three weeks of the lockdown than they made in total prior to 1980.
Billionaire wealth surged by $484 billion in just three months, while a record 40 million Americans filed for unemployment.
This economic phenomenon, the largest radical transfer of wealth out of the hands of taxpayers and into the hands of billionaires,
was the largest taxpayer bailout of the wealthy in American history.
As MacLeod reported,
In the last 30 years, U.S. billionaire wealth soared by over 1100 percent while median household wealth increased by barely
five percent. In 1990, the total wealth held by America's billionaire class was $240 billion; today that number stands at $2.95
trillion. Thus, America's billionaires accrued more wealth in just the past three weeks than they made in total prior to 1980."
While the pandemic and subsequent lockdown turned the world upside down for working-class people, forcing upon them school closures,
long lines at the grocery store, empty shelves, panic buying, record unemployment, and miles-long bread lines, little media attention
was given to the Billionaires buying islands and land where they could enjoy life in first-class bunkers built to withstand a nuclear
war.
If anything, the coronavirus has lifted the veil to expose the growing inequality in the United States, an unfortunate reality
in the world's richest country.
Macleod leaves us with a salient statistic, explaining that while Amazon owner Jeff Bezos makes $1 million every three minutes,
"Amazon staff, directly employed by Bezos, also
risk
their lives for measly pay.
One-third of all Amazon
workers in Arizona, for example, are enrolled in the food stamps program, their wages so low that they cannot afford to pay for food."
Alan MacLeod joins MintCast to explain all of this and how the coming economic crash that is expected to contract the economy
by 40 percent will only advance the interests of America's ultra-wealthy and increase their wealth even further.
America already faces a reality in which less than one thousand billionaires influence policies that ensure more tax obligations
for the working class to the benefit of ultra-wealthy oligarchs. Corporate media ensures this reality by presenting billionaires
in a positive light, often as philanthropists who run charitable organizations. Yet, in reality, they are little more than big fish
eating off of the hard work of the working class.
This program is 100 percent listener supported! You can join the hundreds of financial sponsors who make this show possible
by becoming a member on our Patreon page .
Subscribe to this podcast on iTunes
, Spotify and
SoundCloud . Please leave us a review and share this segmen t.
Mnar Muhawesh is founder, CEO and editor in chief of MintPress News, and is also a regular speaker on responsible journalism,
sexism, neoconservativism within the media and journalism start-ups.
MintPress News is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 International License.
A strange mixture of Black nationalism with Black Bolshevism is a very interesting and pretty alarming phenomenon. It proved to
be a pretty toxic mix. But it is far from being new. We saw how the Eugčne Pottier famous song
International lines "We have been naught we
shall be all." and "Servile masses arise, arise." unfolded before under Stalinism in Soviet Russia.
We also saw Lysenkoism in Academia before, and it was not a pretty picture. Some Russian/Soviet scientists such as Academician Vavilov
paid with their life for the sin of not being politically correct. From this letter it is clear that the some departments
already reached the stage tragically close to that situation.
Lysenkoism was "politically correct" (a term invented by Lenin) because it was consistent with the broader Marxist doctrine.
Marxists wanted to believe that heredity had a limited role even among humans, and that human characteristics changed by living
under socialism would be inherited by subsequent generations of humans. Thus would be created the selfless new Soviet man
"Lysenko was consequently embraced and lionized by the Soviet media propaganda machine. Scientists who promoted Lysenkoism with
faked data and destroyed counterevidence were favored with government funding and official recognition and award. Lysenko and his
followers and media acolytes responded to critics by impugning their motives, and denouncing them as bourgeois fascists resisting
the advance of the new modern Marxism."
The Disgraceful Episode Of Lysenkoism Brings Us Global Warming Theory
Notable quotes:
"... In the extended links and resources you provided, I could not find a single instance of substantial counter-argument or alternative narrative to explain the under-representation of black individuals in academia or their over-representation in the criminal justice system. ..."
"... any cogent objections to this thesis have been raised by sober voices, including from within the black community itself, such as Thomas Sowell and Wilfred Reilly. These people are not racists or 'Uncle Toms'. They are intelligent scholars who reject a narrative that strips black people of agency and systematically externalizes the problems of the black community onto outsiders . Their view is entirely absent from the departmental and UCB-wide communiques. ..."
"... The claim that the difficulties that the black community faces are entirely causally explained by exogenous factors in the form of white systemic racism, white supremacy, and other forms of white discrimination remains a problematic hypothesis that should be vigorously challenged by historians ..."
"... Would we characterize criminal justice as a systemically misandrist conspiracy against innocent American men? I hope you see that this type of reasoning is flawed, and requires a significant suspension of our rational faculties. Black people are not incarcerated at higher rates than their involvement in violent crime would predict . This fact has been demonstrated multiple times across multiple jurisdictions in multiple countries. ..."
"... If we claim that the criminal justice system is white-supremacist, why is it that Asian Americans, Indian Americans, and Nigerian Americans are incarcerated at vastly lower rates than white Americans? ..."
"... Increasingly, we are being called upon to comply and subscribe to BLM's problematic view of history , and the department is being presented as unified on the matter. In particular, ethnic minorities are being aggressively marshaled into a single position. Any apparent unity is surely a function of the fact that dissent could almost certainly lead to expulsion or cancellation for those of us in a precarious position , which is no small number. ..."
"... The vast majority of violence visited on the black community is committed by black people . There are virtually no marches for these invisible victims, no public silences, no heartfelt letters from the UC regents, deans, and departmental heads. The message is clear: Black lives only matter when whites take them. Black violence is expected and insoluble, while white violence requires explanation and demands solution. Please look into your hearts and see how monstrously bigoted this formulation truly is. ..."
"... The claim that black intraracial violence is the product of redlining, slavery, and other injustices is a largely historical claim. It is for historians, therefore, to explain why Japanese internment or the massacre of European Jewry hasn't led to equivalent rates of dysfunction and low SES performance among Japanese and Jewish Americans respectively. ..."
"... Arab Americans have been viciously demonized since 9/11, as have Chinese Americans more recently. However, both groups outperform white Americans on nearly all SES indices - as do Nigerian Americans , who incidentally have black skin. It is for historians to point out and discuss these anomalies. However, no real discussion is possible in the current climate at our department . The explanation is provided to us, disagreement with it is racist, and the job of historians is to further explore additional ways in which the explanation is additionally correct. This is a mockery of the historical profession. ..."
"... Donating to BLM today is to indirectly donate to Joe Biden's 2020 campaign. This is grotesque given the fact that the American cities with the worst rates of black-on-black violence and police-on-black violence are overwhelmingly Democrat-run. Minneapolis itself has been entirely in the hands of Democrats for over five decades ; the 'systemic racism' there was built by successive Democrat administrations. ..."
"... The total alliance of major corporations involved in human exploitation with BLM should be a warning flag to us, and yet this damning evidence goes unnoticed, purposefully ignored, or perversely celebrated. We are the useful idiots of the wealthiest classes , carrying water for Jeff Bezos and other actual, real, modern-day slavers. Starbucks, an organisation using literal black slaves in its coffee plantation suppliers, is in favor of BLM. Sony, an organisation using cobalt mined by yet more literal black slaves, many of whom are children, is in favor of BLM. And so, apparently, are we. The absence of counter-narrative enables this obscenity. Fiat lux, indeed. ..."
"... MLK would likely be called an Uncle Tom if he spoke on our campus today . We are training leaders who intend, explicitly, to destroy one of the only truly successful ethnically diverse societies in modern history. As the PRC, an ethnonationalist and aggressively racially chauvinist national polity with null immigration and no concept of jus solis increasingly presents itself as the global political alternative to the US, I ask you: Is this wise? Are we really doing the right thing? ..."
I am one of your colleagues at the University of California, Berkeley. I have met you both personally but do not know you closely,
and am contacting you anonymously, with apologies. I am worried that writing this email publicly might lead to me losing my job,
and likely all future jobs in my field.
In your recent departmental emails you mentioned our pledge to diversity, but I am increasingly alarmed by the absence of diversity
of opinion on the topic of the recent protests and our community response to them.
In the extended links and resources you provided, I could not find a single instance of substantial counter-argument or alternative
narrative to explain the under-representation of black individuals in academia or their over-representation in the criminal justice
system. The explanation provided in your documentation, to the near exclusion of all others, is univariate: the problems of
the black community are caused by whites, or, when whites are not physically present, by the infiltration of white supremacy and
white systemic racism into American brains, souls, and institutions.
Many cogent objections to this thesis have been raised by sober voices, including from within the black community itself,
such as Thomas Sowell and Wilfred Reilly. These people are not racists or 'Uncle Toms'. They are intelligent scholars who reject
a narrative that strips black people of agency and systematically externalizes the problems of the black community onto outsiders
. Their view is entirely absent from the departmental and UCB-wide communiques.
The claim that the difficulties that the black community faces are entirely causally explained by exogenous factors in the
form of white systemic racism, white supremacy, and other forms of white discrimination remains a problematic hypothesis that should
be vigorously challenged by historians . Instead, it is being treated as an axiomatic and actionable truth without serious consideration
of its profound flaws, or its worrying implication of total black impotence. This hypothesis is transforming our institution and
our culture, without any space for dissent outside of a tightly policed, narrow discourse.
A counternarrative exists. If you have time, please consider examining some of the documents I attach at the end of this email.
Overwhelmingly, the reasoning provided by BLM and allies is either primarily anecdotal (as in the case with the bulk of Ta-Nehisi
Coates' undeniably moving article) or it is transparently motivated. As an example of the latter problem, consider the proportion
of black incarcerated Americans. This proportion is often used to characterize the criminal justice system as anti-black. However,
if we use the precise same methodology, we would have to conclude that the criminal justice system is even more anti-male than it
is anti-black .
Would we characterize criminal justice as a systemically misandrist conspiracy against innocent American men? I hope you see
that this type of reasoning is flawed, and requires a significant suspension of our rational faculties. Black people are not incarcerated
at higher rates than their involvement in violent crime would predict . This fact has been demonstrated multiple times across multiple
jurisdictions in multiple countries.
And yet, I see my department uncritically reproducing a narrative that diminishes black agency in favor of a white-centric explanation
that appeals to the department's apparent desire to shoulder the 'white man's burden' and to promote a narrative of white guilt .
If we claim that the criminal justice system is white-supremacist, why is it that Asian Americans, Indian Americans, and Nigerian
Americans are incarcerated at vastly lower rates than white Americans? This is a funny sort of white supremacy. Even Jewish
Americans are incarcerated less than gentile whites. I think it's fair to say that your average white supremacist disapproves of
Jews. And yet, these alleged white supremacists incarcerate gentiles at vastly higher rates than Jews. None of this is addressed
in your literature. None of this is explained, beyond hand-waving and ad hominems. "Those are racist dogwhistles". "The model minority
myth is white supremacist". "Only fascists talk about black-on-black crime", ad nauseam.
These types of statements do not amount to counterarguments: they are simply arbitrary offensive classifications, intended to
silence and oppress discourse . Any serious historian will recognize these for the silencing orthodoxy tactics they are , common
to suppressive regimes, doctrines, and religions throughout time and space. They are intended to crush real diversity and permanently
exile the culture of robust criticism from our department.
Increasingly, we are being called upon to comply and subscribe to BLM's problematic view of history , and the department is
being presented as unified on the matter. In particular, ethnic minorities are being aggressively marshaled into a single position.
Any apparent unity is surely a function of the fact that dissent could almost certainly lead to expulsion or cancellation for those
of us in a precarious position , which is no small number.
I personally don't dare speak out against the BLM narrative , and with this barrage of alleged unity being mass-produced by the
administration, tenured professoriat, the UC administration, corporate America, and the media, the punishment for dissent is a clear
danger at a time of widespread economic vulnerability. I am certain that if my name were attached to this email, I would lose my
job and all future jobs, even though I believe in and can justify every word I type.
The vast majority of violence visited on the black community is committed by black people . There are virtually no marches
for these invisible victims, no public silences, no heartfelt letters from the UC regents, deans, and departmental heads. The message
is clear: Black lives only matter when whites take them. Black violence is expected and insoluble, while white violence requires
explanation and demands solution. Please look into your hearts and see how monstrously bigoted this formulation truly is.
No discussion is permitted for nonblack victims of black violence, who proportionally outnumber black victims of nonblack violence.
This is especially bitter in the Bay Area, where Asian victimization by black assailants has reached epidemic proportions, to the
point that the SF police chief has advised Asians to stop hanging good-luck charms on their doors, as this attracts the attention
of (overwhelmingly black) home invaders . Home invaders like George Floyd . For this actual, lived, physically experienced reality
of violence in the USA, there are no marches, no tearful emails from departmental heads, no support from McDonald's and Wal-Mart.
For the History department, our silence is not a mere abrogation of our duty to shed light on the truth: it is a rejection of it.
The claim that black intraracial violence is the product of redlining, slavery, and other injustices is a largely historical
claim. It is for historians, therefore, to explain why Japanese internment or the massacre of European Jewry hasn't led to equivalent
rates of dysfunction and low SES performance among Japanese and Jewish Americans respectively.
Arab Americans have been viciously demonized since 9/11, as have Chinese Americans more recently. However, both groups outperform
white Americans on nearly all SES indices - as do Nigerian Americans , who incidentally have black skin. It is for historians to
point out and discuss these anomalies. However, no real discussion is possible in the current climate at our department . The explanation
is provided to us, disagreement with it is racist, and the job of historians is to further explore additional ways in which the explanation
is additionally correct. This is a mockery of the historical profession.
Most troublingly, our department appears to have been entirely captured by the interests of the Democratic National Convention,
and the Democratic Party more broadly. To explain what I mean, consider what happens if you choose to donate to Black Lives Matter,
an organization UCB History has explicitly promoted in its recent mailers. All donations to the official BLM website are immediately
redirected to ActBlue Charities , an organization primarily concerned with bankrolling election campaigns for Democrat candidates.
Donating to BLM today is to indirectly donate to Joe Biden's 2020 campaign. This is grotesque given the fact that the American
cities with the worst rates of black-on-black violence and police-on-black violence are overwhelmingly Democrat-run. Minneapolis
itself has been entirely in the hands of Democrats for over five decades ; the 'systemic racism' there was built by successive Democrat
administrations.
The patronizing and condescending attitudes of Democrat leaders towards the black community, exemplified by nearly every Biden
statement on the black race, all but guarantee a perpetual state of misery, resentment, poverty, and the attendant grievance politics
which are simultaneously annihilating American political discourse and black lives. And yet, donating to BLM is bankrolling the election
campaigns of men like Mayor Frey, who saw their cities devolve into violence . This is a grotesque capture of a good-faith movement
for necessary police reform, and of our department, by a political party. Even worse, there are virtually no avenues for dissent
in academic circles . I refuse to serve the Party, and so should you.
The total alliance of major corporations involved in human exploitation with BLM should be a warning flag to us, and yet this
damning evidence goes unnoticed, purposefully ignored, or perversely celebrated. We are the useful idiots of the wealthiest classes
, carrying water for Jeff Bezos and other actual, real, modern-day slavers. Starbucks, an organisation using literal black slaves
in its coffee plantation suppliers, is in favor of BLM. Sony, an organisation using cobalt mined by yet more literal black slaves,
many of whom are children, is in favor of BLM. And so, apparently, are we. The absence of counter-narrative enables this obscenity.
Fiat lux, indeed.
There also exists a large constituency of what can only be called 'race hustlers': hucksters of all colors who benefit from stoking
the fires of racial conflict to secure administrative jobs, charity management positions, academic jobs and advancement, or personal
political entrepreneurship.
Given the direction our history department appears to be taking far from any commitment to truth , we can regard ourselves as
a formative training institution for this brand of snake-oil salespeople. Their activities are corrosive, demolishing any hope at
harmonious racial coexistence in our nation and colonizing our political and institutional life. Many of their voices are unironically
segregationist.
MLK would likely be called an Uncle Tom if he spoke on our campus today . We are training leaders who intend, explicitly,
to destroy one of the only truly successful ethnically diverse societies in modern history. As the PRC, an ethnonationalist and aggressively
racially chauvinist national polity with null immigration and no concept of jus solis increasingly presents itself as the global
political alternative to the US, I ask you: Is this wise? Are we really doing the right thing?
As a final point, our university and department has made multiple statements celebrating and eulogizing George Floyd. Floyd was
a multiple felon who once held a pregnant black woman at gunpoint. He broke into her home with a gang of men and pointed a gun at
her pregnant stomach. He terrorized the women in his community. He sired and abandoned multiple children , playing no part in their
support or upbringing, failing one of the most basic tests of decency for a human being. He was a drug-addict and sometime drug-dealer,
a swindler who preyed upon his honest and hard-working neighbors .
And yet, the regents of UC and the historians of the UCB History department are celebrating this violent criminal, elevating his
name to virtual sainthood . A man who hurt women. A man who hurt black women. With the full collaboration of the UCB history department,
corporate America, most mainstream media outlets, and some of the wealthiest and most privileged opinion-shaping elites of the USA,
he has become a culture hero, buried in a golden casket, his (recognized) family showered with gifts and praise . Americans are being
socially pressured into kneeling for this violent, abusive misogynist . A generation of black men are being coerced into identifying
with George Floyd, the absolute worst specimen of our race and species.
I'm ashamed of my department. I would say that I'm ashamed of both of you, but perhaps you agree with me, and are simply afraid,
as I am, of the backlash of speaking the truth. It's hard to know what kneeling means, when you have to kneel to keep your job.
It shouldn't affect the strength of my argument above, but for the record, I write as a person of color . My family have been
personally victimized by men like Floyd. We are aware of the condescending depredations of the Democrat party against our race. The
humiliating assumption that we are too stupid to do STEM , that we need special help and lower requirements to get ahead in life,
is richly familiar to us. I sometimes wonder if it wouldn't be easier to deal with open fascists, who at least would be straightforward
in calling me a subhuman, and who are unlikely to share my race.
The ever-present soft bigotry of low expectations and the permanent claim that the solutions to the plight of my people rest exclusively
on the goodwill of whites rather than on our own hard work is psychologically devastating . No other group in America is systematically
demoralized in this way by its alleged allies. A whole generation of black children are being taught that only by begging and weeping
and screaming will they get handouts from guilt-ridden whites.
No message will more surely devastate their futures, especially if whites run out of guilt, or indeed if America runs out of whites.
If this had been done to Japanese Americans, or Jewish Americans, or Chinese Americans, then Chinatown and Japantown would surely
be no different to the roughest parts of Baltimore and East St. Louis today. The History department of UCB is now an integral institutional
promulgator of a destructive and denigrating fallacy about the black race.
I hope you appreciate the frustration behind this message. I do not support BLM. I do not support the Democrat grievance agenda
and the Party's uncontested capture of our department. I do not support the Party co-opting my race, as Biden recently did in his
disturbing interview, claiming that voting Democrat and being black are isomorphic. I condemn the manner of George Floyd's death
and join you in calling for greater police accountability and police reform. However, I will not pretend that George Floyd was anything
other than a violent misogynist, a brutal man who met a predictably brutal end .
I also want to protect the practice of history. Cleo is no grovelling handmaiden to politicians and corporations. Like us, she
is free. play_arrow
Blacks will always be poor and fucked in life when 75% of black infants are born to single most likely welfare dependent mothers...
And the more amount of welfare monies spent to combat poverty the worse this problem will grow...
taketheredpill , 37 minutes ago
Anonymous....
1) Is he really a Professor at Berkeley?
2) Is he really a Professor anywhere?
3) Is he really Black?
4) Is he really a He?
LEEPERMAX , 44 minutes ago
BLM is an international organization. They solicit tax free charitable donations via ActBlue. ActBlue then funnels billions
of dollars to DNC campaigns. This is a violation of campaign finance law and allows foreign influence in American elections.
CRM114 , 44 minutes ago
I've pointed this out before:
In 2015, after the Freddie Gray death Officers were hung out to dry by the Mayor of Baltimore (yes, her, the Chair of the DNC
in 2016), active policing in Baltimore basically stopped. They just count the bodies now. The clearance rate for homicides has
dropped to, well, we don't know because the Police refuse to say, but it appears to be under 15%. The homicide rate jumped 50%
almost immediately and has stayed there. 95% of homicides are black on black.
The Baltimore Sun keeps excellent records, so you can check this all for yourself.
Looking at killings by cops; if we take the worst case and exclude all the ones where the victim was armed and independent
witnesses state fired first, and assume all the others were cop murders, then there's about 1 cop murder every 3 years, which
means that since has now stopped and the homicide rate's gone up...
For every black man now not murdered by a cop, 400 more black men are murdered by other black men.
taketheredpill , 46 minutes ago
"As an example of the latter problem, consider the proportion of black incarcerated Americans. This proportion is often used
to characterize the criminal justice system as anti-black. However, if we use the precise same methodology, we would have to conclude
that the criminal justice system is even more anti-male than it is anti-black ."
It is the RATIO of UNARMED BLACK MALES KILLED to UNARMED WHITE MALES KILLED in RELATION TO % OF POPULATION. RATIO.
RATIO. UNARMED.
BLACK % POPULATION 13% BLACK % UNARMED MEN KILLED 37%
WHITE % POPULATION 74% BLACK % UNARMED MEN KILLED 45%
Is there a trend of MORE Black people being killed by police?
No. But there is an underlying difference in the numbers that is bad.
>>>>> As of 2018, Unarmed Blacks made up 36% of all people UNARMED killed by police. But black people make up 13% of the (unarmed)
population.
There's a massive Silent Majority of Americans , including black Americans, that are fed up with this absurd nonsense.
While there's a Vocal Minority of Americans : including Democrats, the media, corporations and race hustlers, that wish to
continue to promulgate a FALSE NARRATIVE into perpetuity...because it's a lucrative industry.
Gaius Konstantine , 57 minutes ago
A short while ago I had an ex friend get into it with me about how Europeans (whites), were the most destructive race on the
planet, responsible for all the world's evil. I pointed out to him that Genghis Khan, an Asian, slaughtered millions at a time
when technology made this a remarkable feat. I reminded him the Japanese gleefully killed millions in China and that the American
Indian Empires ran 24/7 human sacrifices with some also practicing cannibalism. His poor libtard brain couldn't handle the fact
that evil is a human trait, not restricted to a particular race and we parted (good riddance)
But along with evil, there is accomplishment. Europeans created Empires and pursued science, The Asians also participated in
these pursuits and even the Aztec and Inca built marvelous cities and massive states spanning vast stretches of territory. The
only race that accomplished little save entering the stone age is the Africans. Are we supposed to give them a participation trophy
to make them feel better? Is this feeling of inferiority what is truly behind their constant rage?
Police in the US have been militarized for a long time now and kill many more unarmed whites than they do blacks, where is
the outrage? I'm getting the feeling that this isn't really about George, just an excuse to do what savages do.
lwilland1012 , 1 hour ago
"Truth is treason in an empire of lies."
George Orwell
You know that the reason he is anonymous is that Berkley would strip him of his teaching credentials and there would be multiple
attempts on his life...
Ignatius , 1 hour ago
" The vast majority of violence visited on the black community is committed by black people . There are virtually no marches
for these invisible victims, no public silences, no heartfelt letters from the UC regents, deans, and departmental heads. The
message is clear: Black lives only matter when whites take them. Black violence is expected and insoluble, while white violence
requires explanation and demands solution. Please look into your hearts and see how monstrously bigoted this formulation truly
is."
A former fed who trained the police in Buffalo believes the elderly protester who was hospitalized after a cop pushed him
to the ground "got away lightly" and "took a dive," according to a report.
The retired FBI agent, Gary DiLaura,
told The Sun
he thinks there's no chance Buffalo officers will be convicted of assault over the
now-viral video showing the
longtime
peace activist Martin Gugino fall and left bleeding on the ground.
" I can't believe that they didn't deck him. If that would have been a 40-year-old guy going up there, I guarantee you they'd
have been all over him, " DiLaura said.
" He absolutely got away lightly. He got a light push and in my humble opinion, he took a dive and the dive backfired because
he hit his head. Maybe it'll knock a little bit of sense into him, " added the former fed, who trained Buffalo police on firearms
and defensive tactics, according to the report...
It's a great brainwashing process, which goes very slow[ly] and is divided [into] four basic stages. The first one [is]
demoralization ; it takes from 15-20 years to demoralize a nation. Why that many years? Because this is the minimum number
of years which [is required] to educate one generation of students in the country of your enemy, exposed to the ideology of
the enemy. In other words, Marxist-Leninist ideology is being pumped into the soft heads of at least three generations of American
students, without being challenged, or counter-balanced by the basic values of Americanism (American patriotism).
The result? The result you can see. Most of the people who graduated in the sixties (drop-outs or half-baked intellectuals)
are now occupying the positions of power in the government, civil service, business, mass media, [and the] educational system.
You are stuck with them. You cannot get rid of them. T hey are contaminated; they are programmed to think and react to certain
stimuli in a certain pattern. You cannot change their mind[s], even if you expose them to authentic information, even if you
prove that white is white and black is black, you still cannot change the basic perception and the logic of behavior. In other
words, these people... the process of demoralization is complete and irreversible. To [rid] society of these people, you need
another twenty or fifteen years to educate a new generation of patriotically-minded and common sense people, who would be acting
in favor and in the interests of United States society.
Yuri Bezmenov
American Psycho , 16 minutes ago
This article was one of the most articulate and succinct rebuttals to the BLM political power grab. I too have been calling
these "allies" useful idiots and I am happy to hear this professor doing the same. Bravo professor!
And now there is the Epstein matter, which threatens not only former president Bill Clinton,
but a cosmos of political, financial, and entertainment "stars" in countless ugly incidents
that involve a kind of personal corruption that has no political context but says an awful lot
about the obliteration of moral and ethical boundaries by the people who ended up running
things in this fretful moment of US history.
Private equity is essential a mafia style business: they aid to blled thier victim dry.
Notable quotes:
"... By the end of 2018, available cash was so tight that Prospect got a $41 million infusion from Leonard Green and members of its management, according to Moody's. The ratings firm downgraded Prospect deeper into junk last year at B3, citing "shareholder-friendly policies" and the higher leverage resulting from the $457 million dividend. ..."
"... Meanwhile, care quality ratings for seven of the 10 Prospect hospitals evaluated by the Centers for Medicare and Medicaid Services, or CMS, have declined since 2016, according to HMP Metrics, a health-care facility analytics service. CMS ranks facilities from 1 to 5 stars, with 5 being the best. ..."
"... Most Prospect hospitals sit at the bottom rungs of quality assessments, according to the agency's hospital comparison database. Nine have a two-star rating or below, placing them in the lowest 30% of rated hospitals, according to CMS data. Just one Prospect-owned hospital -- Roger Williams Medical Center in Rhode Island -- earned a three-star rating. ..."
"... "Private equity owners, seeking high returns, may be even more willing to cut costs in crucial ways than even other for-profit health care companies," she said in an interview. ..."
Roughly a third of Germans expect fewer business trips and more video conferences in the
years following the outbreak of the coronavirus, according to a study published on Thursday.
Explore dynamic updates of the earth's key data points Open the Data Dash Close
While that's slightly less than in the rest of the world, Germany's environment minister
sees an opportunity to improve the climate and the quality of life by commuting less.
"Nobody wants life to remain like it was during the pandemic," said Svenja Schulze, who
presented the study carried out by Ernst & Young and the Wuppertal Institut think tank.
"But we should keep some of the new routines."
About a quarter of employees worked at home at least part of the time during the pandemic,
according to the paper. Internet traffic related to video conferences rose 120% in a sample
measurement at a digital crosspoint in Frankfurt, the research showed.
According to the authors of the study, passenger traffic could be reduced long-term by
around 8% if home office and remote access are promoted.
As with allmost everything that occurs as a university, the purpose of the commencement
speech is not to provide a service to the students, but to make the institution's faculty and
staff feel important...
...It should be noted that most students who attend commencement ceremonies couldn't care
less who the celebrity speaker is. Most of them are there because they like the ritualistic
aspects of it, and virtually no one remembers what is said at commencement speeches in any
case.
The fact that most students (i.e., paying customers) just want to "feel graduated" by going
to these ceremonies should be a tip to the faculty that speakers should be non-controversial.
But, because these administrators want attention and influence, they often insist on bringing
in controversial political figures and causing even more grief for their customers, as if four
years of over-priced classes and social conditioning wasn't enough.
The fact colleges and universities couldn't care less about the people who pay the bills was
reinforced all the more this year when most universities shut down as a result of the COVID-19
panic. Most higher education institutions insisted on charging students full price even though
"college" was reduced to series of Zoom meetings and online assignments. Obviously, that's not
what most students paid for. College administrators, of course, were adamant that the students
keep paying through the nose for services not rendered
...
Fortunately, some of the more intelligent university trustees have already done away
with it altogether. Cep notes:
As Jason Song of The Los Angeles Times noticed, current Washington and Lee President
Kenneth Ruscio explained in 2009: "The wise and fiscally prudent Board determined that in
future years our graduates and families should rest easy knowing that if they had to endure a
worthless Commencement address, it would at least be inexpensive," meaning the president
gives the only speech.
Tennessee Patriot , 4 minutes ago
Best example I ever heard of describing a graduation ceremony:
Imagine you are sitting there in the hot sun, wrapped in a shower curtain, listening to
someone read a NYC Phone book for 3 hours.
I had to do that for HS, two Bachelor's Degrees, a Masters, two daughters & two out of
7 Grandbabies.
No thanks. Highly overrated ********. If it was up to me, they can mail it to me and lets
go straight to the party afterwards.
Handful of Dust , 1 hour ago
" I mean, you got the first mainstream African-American who is articulate and bright and
clean and a nice-looking guy. I mean, that's a storybook, man."
Joe Biden, referring to the Kenyan at the beginning of the 2008 Democratic primary
campaign, Jan. 31, 2007.
"He's like magic. Some day they'll be calling him The Magic *****!"
Yen Cross , 1 hour ago
The longer these kids are away from their indoctrination camps, the better.
Bear , 1 hour ago
"As many colleges struggle with tight budgets" ... what a crook, they have so much money
they can pay their professors 250,000 to toe the line and they a support staff of thousands
... America's most corrup institution (after the FED)
Too bad, but # blacklivesmatter per
its core organization @ Blklivesmatter just torpedoed itself,
with its full-fledged support of # defundthepolice
: "We call for a national defunding of police." Suuuure. They knew this is non-starter, and tried a sensible Orwell 1984
of saying,
Uhlig now faces a social media campaign, led by a prominent University of Michigan economist, to get him booted as editor of the
Journal of Political Economy . Here is another leader of the professional lynch mob:
I am calling for the resignation of Harald Uhlig ( @ haralduhlig
) as the editor of the Journal of Political Economy. If you would like to add your name to this call, it is posted at
https:// forms.gle/9uiJVqCAXBDBg6 8N9 . It will be delivered by end of
day 6/10 (tomorrow).
To: The editors of the Journal of Political Economy and President of The University of Chicago Press We, the undersigned,
call for the resignation of Harald Uhlig, the Bruce Allen and Barbara...
There has been a rash of firings of editors this week. One interesting thing - judging by the publications listed and by the
cringing, groveling apologies given by these editors, they are liberals who are being eaten by up-and-coming radicals. It's like
the liberals had no idea what hit them.
I used to worry the future would be like "1984". Then the Soviet Union fell, things seemed OK tor awhile. After 9/11, I worried
the future would be like "Khartoum". But now, it looks like it is going to be a weird combination of "Invasion of the Body-Snatchers"
and "Planet of the Apes".
Now seeing reports on Twitter that the Seattle Autonomous Zone now has its first warlord. America truly is a diverse place.
You have hippie communes, religious sects, semi-autonomous Indian reservations, a gerontocracy in Washington, and now your very
own Africa style fiefdom complete with warlord.
I really am sorry. This must be so depressing to watch as an American.
Arizona State journalism school retracts offer to new dean because of an "insensitive" tweets and comments - by insensitive
we mean, not sufficiently zealous and not hip to the full-spectrum wokeness. Online student petitions follow, and you know the
rest of the story.
This is madness. The true late stages of a revolution where they start eating their own.
Those tweets above (and countless others like them) just demonstrate the absolute intellectual and moral rot that now reigns
in academia. I saw one yesterday by an attorney for a prominent activist organization who said he couldn't understand why the
Constitution isn't interpreted as "requiring" the demolition of the Robert E. Lee statue in Virginia, and others like it. I'm
having a harder time understanding how he ever graduated from an accredited law school.
Forget "defund the police," perhaps "defund universities" would be the best place to start healing what ails contemporary culture.
The rot started there, not only with the "anti-racist" (as opposed to "mere" non-racism) cant, it with gender ideology (Judith
Butler), Cultural Marxism, etc. When "pc" first became a common term in the early '90s I thought it passing fad. We now see the
result of the decades long radical march through the institutions bearing fruit, and it's more strange and rotten fruit than ever.
Woke leftists are the people who believe in the myth of aggregate Black intellectual parity with Whites and Asians the least.
That's why they constantly do absolutely everything in their power to juke the statistics, like allowing Black students to not
have to take exams, which is really just an extension of this same principle at work in "affirmative action."
The French Revolution, the Bolshevik Revolution, the Great Leap Forward, the Khmer Rouge--100,000,000 people were murdered
in the name of extreme egalitarianism across the 20th century. When leftism gets out of control, tragedy happens.
I have no idea why you believe hard totalitarian methods aren't coming. I'm not sure what the answer is. We can expect no help
from the Republican party. That much is certain. A disturbing number of people have not yet awoken from their dogmatic slumber.
Who is Amy Siskind going to call to arrest Tucker Carlson and bring him to a tribunal? The defunded police?
It seems to me that the left has gone about this bassackwards. First you ashcan the Second Amendment, THEN you take away their
First Amendment Rights. You most certainly do not go around silencing people with political correctness, then go around announcing
your intention to kulak an entire group of very well-armed people. But that's just my opinion...
Rod, I disagree that a "soft totalitarianism" is what awaits us if these barbarians are allowed to run around unopposed. The
notion of human rights is a product of the religion they despise, so I see no reason why they would respect this ideal when dealing
with vile white wreckers of the multi-cultural utopia they have envisioned.
Looks like there are some elements of systemic crisis of neoliberalism in the current
situation. a revived Cold War (against Russia and China) is a desperate attempt to find a
scapegoat and switch attention of population from the subservience of both Party to Wall Street
and MIC. To the "Full spectrum Dominance" doctrine which ensure record levels of military
spending, sealing money from working class and lower middle class. At the same time top 20% of
population still support neoliberalism so the current riots will pass like Occupy Wall Street
movement.
Notable quotes:
"... Today's mass unemployment also threatens those still employed, the remaining 120 million members of the U.S. labor force. ..."
"... the predictable results of mass joblessness in the U.S. are deepening social divisions, renewed racism, social protests, and government repression (often violent). ..."
"... By thereby blocking, if only temporarily, a powerful emerging opposition, Democratic Party leaders deterred mass opposition to bailouts, unemployment, minimal COVID-19 testing, and all the government's other failures. They just want to win the November 2020 election. Biden's vague "return to normal" promises are offered as soothing antidotes to the Trump/GOP's crisis-wracked, fear-mongering divisiveness. Trump plunges ahead with a radically pro-capitalist agenda coupled with reactionary cultural and political warfare against civil rights and liberties. ..."
"... Global isolation accompanies the U.S.'s declining economic and political footprints. Its technological supremacy is increasingly challenged globally and especially in and by China. ..."
"... Further China-bashing -- pursued by both major parties -- will only slow global economic growth just when many circumstances converge to make that the least desirable future. Record-breaking levels of government, corporate and household debt make the U.S. economy exceptionally vulnerable to future shocks and cyclical downturns. ..."
"... No "return to normal" after the combined systemic shocks of the COVID-19 pandemic and capitalist depression is likely. ..."
"... Richard D. Wolff, Professor of economics emeritus at the University of Massachusetts, Amherst, and a visiting professor in the Graduate Program in International Affairs of the New School University, in New York. Wolff's weekly show, "Economic Update," is syndicated by more than 100 radio stations and goes to 55 million TV receivers via Free Speech TV. His two recent books with Democracy at Work are Understanding Marxism and Understanding Socialism, both available at democracyatwork.info. This article was produced by Economy for All , a project of the Independent Media Institute. ..."
"... democracy needs an alternative! ..."
"... In a rather simplistic understanding of these issues, I too have often wondered about this endless "growth" goal. How can we have long-term a system, whose inner logic requires constant growth to remain 'viable' – on a planet with finite resources? A collision of the two seems inevitable at some point. Am I missing something? ..."
"... Economic growth and human population growth have been disasters for much of the animal/plant world (insects, large mammals, forests, oceans). ..."
"... Human focused economists seem to ignore this vitally important earth inhabiting non-human constituency in the quest for the, always assumed necessary, headline economic growth. ..."
June 10,
2020 Capitalism has always had business cycles. The capitalist enterprises that produce
goods and services are distinctively organized around the conflicted relationship of employer
and employees and the competitive relationship of markets. These central relationships of
capitalism together generate cyclical instability. Wherever capitalism became a society's
economic system over the last three centuries, business cycles recurred every four to seven
years. Capitalism has mechanisms to survive its cycles, but they are painful, especially when
employers fire employees. Widespread pain (unemployment, bankruptcies, disrupted public
finances, etc.) brought the label "crisis" to capitalism's cyclical downturns. Only on special
occasions, and rarely, did the cyclical crises in capitalism become crises of capitalism as a
system. That has usually required other non-economic problems (political, cultural, and/or
natural) to reach crescendo peaks around the same time as a cyclical economic downturn. Today
is a time of crisis both in and of U.S. capitalism.
U.S. economic policy now focuses on what is already the worst business cycle downturn since
the 1929 crash. As data accumulate, it may well prove to be the worst in global capitalism's
entire history. Forty million jobless U.S. workers find incomes lost, savings disappearing and
over-indebted family finances worsening.
Today's mass unemployment also threatens those still employed, the remaining 120 million
members of the U.S. labor force. Mass unemployment always invites employers to cut wages,
benefits and working conditions. If any of their employees quit, many among the millions of
unemployed will accept those abandoned jobs. Knowing that, most employees accept their
employers' cuts. Employers will justify them as required by "the pandemic" or by what they say
are its effects on their profits.
Led by Trump and the Republicans and tolerated by the Democrats' leaders, U.S. employers are
intensifying class war against workers. That is what mass joblessness accomplishes. On one
hand, Washington bails out employers with trillions of dollars. On the other, Washington
enables (by funding) a mass joblessness that directly undermines the entire working class.
Germany and France, for example, could not allow such joblessness because of their labor
movements' and socialist parties' social influences. In sharp contrast, the predictable
results of mass joblessness in the U.S. are deepening social divisions, renewed racism, social
protests, and government repression (often violent).
... ... ...
By thereby blocking, if only temporarily, a powerful emerging opposition, Democratic
Party leaders deterred mass opposition to bailouts, unemployment, minimal COVID-19 testing, and
all the government's other failures. They just want to win the November 2020 election. Biden's
vague "return to normal" promises are offered as soothing antidotes to the Trump/GOP's
crisis-wracked, fear-mongering divisiveness. Trump plunges ahead with a radically
pro-capitalist agenda coupled with reactionary cultural and political warfare against civil
rights and liberties.
It is the old GOP strategy but a much more extreme version. The Democrats counter with
reactionary responses: a revived Cold War (against Russia and/or China) and a domestic safety
less shredded than what the GOP plans. Culture wars are perhaps the only realm where Democrats
sense some votes in not caving further to right-wing pressures.
Alternating Democratic and Republican governments produced today's impasse. Global
isolation accompanies the U.S.'s declining economic and political footprints. Its technological
supremacy is increasingly challenged globally and especially in and by China. Efforts to
break that challenge have not succeeded and will not likely do better in the future. Further
China-bashing -- pursued by both major parties -- will only slow global economic growth just
when many circumstances converge to make that the least desirable future. Record-breaking
levels of government, corporate and household debt make the U.S. economy exceptionally
vulnerable to future shocks and cyclical downturns.
The U.S. population below 40 years of age struggles increasingly with unsustainable debts.
The jobs and incomes it faces have already undermined access to the "American Dream" they were
promised as children. Nor have they much hope for the future as today's pandemic-cum-crash
imposes more hardships on them. That protests surge, provoked further by government repression,
should surprise no one.
Repeated polls where half the young "prefer socialism over capitalism" reflect growing
antipathy to their deteriorating capitalist reality. In the Cold War-shaped U.S. school system
since the late 1940s, socialism's substantive theories and practices were not seriously taught.
Debates among socialists over how socialism was changing or should change remain largely
unknown. Today's growing interests in critiques of capitalism and in socialism's varieties
reflect young peoples' rejection of Cold War taboos as well as a capitalism that has failed
them.
No "return to normal" after the combined systemic shocks of the COVID-19 pandemic and
capitalist depression is likely. Many want no such return because they believe that that normal
led to both the pandemic and the economic crash. They also believe that the managers of that
old normal -- corporate CEOs in both their private and governmental positions -- should face
tough public scrutiny and opposition because of where that normal led and where it will likely
lead again.
Those managers are not solving the problems they helped to create: utterly inadequate
testing for the virus, bigger-than-ever bailouts for the biggest banks and corporations, mass
unemployment, and deepening wealth and income inequalities.
Why then keep those managers in power? We should not expect different results from them now
than when conditions were "normal."
Of course protests flared up in and around African American communities. Beyond their long
history of suffering social and employment discrimination and police oppression, it is
important to remember that those communities suffered worst in the Great Recession of
2008-2009. Their unemployment then shot up, they lost homes disproportionately to foreclosures,
etc. They have died from the coronavirus significantly more than white communities. Because of
disproportionate reliance on low-paid service sector jobs, they have once again suffered
disproportionately in 2020's crash of U.S. capitalism. When a president then blatantly panders
to white supremacy and white supremacists, while making and repeating racist comments, the
ingredients are in place to provoke protests. However useful for Trump/GOP electoral campaigns,
social protests and oppressive police responses add sharp social conflicts to the already
disastrous combination of viral pandemic and economic crash.
Trump is a product and sign of U.S. capitalism's exhaustion. The long, cozy governmental
alternation between GOP and Democrats after the trauma of the 1930s Great Depression had
achieved its purpose. It had undone FDR's redistribution of wealth from the top to the middle
and the bottom. It had "fixed" that problem by reversing the redistribution of wealth and
income. The ideological cover for that "fix" was bipartisan demonization of domestic socialism
combined with bipartisan pursuit of Cold War with the USSR. The major GOP vs. Democratic Party
dispute concerned the modes and extents of governmental support for private capitalism (as in
Keynes vs. Friedman, etc.). That minor squabble got raised to the status of "the major issue"
for politicians, journalists, and academics to debate because they caved to the taboo on
debates over capitalism vs. socialism.
Capitalism has so extremely redistributed wealth and income to the top 1 percent, so mired
the vast majority in overwork and excess debt, and so extinguished "good jobs" (via relocating
them abroad and automation) that the system itself draws ever-deeper disaffection, criticism,
and opposition. At first, deepening social divisions expressed the system's disintegration. Now
open street protests take the U.S. a step closer to a full-on crisis of the system.
Trump subordinated the old managers of capitalism by politically threatening them with
aroused, angry small businesses and middle-income workers. Trump promises the latter a return
to what they had before the upwards redistribution of wealth hurt them. He tells the old
managers that he and his base alone can secure their social positions atop an upwardly
redistributed contemporary capitalism. They will save the old managers from Bernie,
"progressivism" and "socialism." The Democratic Party's old, "centrist" leadership offers weak,
partial opposition, hoping Trump goes too far and implodes the GOP.
In the wake of the pandemic and the massive unemployment used to "manage" it, wages and
benefits will take major hits in the months and years ahead. Wealth will be further
redistributed upward. Social divisions will deepen and so will social protests. This crisis in
capitalism is also a crisis of capitalism.
Richard D. Wolff, Professor of economics emeritus at the University of Massachusetts,
Amherst, and a visiting professor in the Graduate Program in International Affairs of the New
School University, in New York. Wolff's weekly show, "Economic Update," is syndicated by more
than 100 radio stations and goes to 55 million TV receivers via Free Speech TV. His two recent
books with Democracy at Work are Understanding Marxism and Understanding Socialism, both
available at democracyatwork.info. This article was produced by Economy for All , a project of the
Independent Media Institute.
(IMO) things could've been righted in 2009-2010, when US capitalism had two wheels over
the precipice and the political will was there for systemic change.
instead the system floored the accelerator and the bus is off the cliff
If only Democrats, Pelosi and Bide were around to do something then! (sarc)
+2 The good ship America, capsized, can right itself and escape what seems to be
inevitable submergence by reversing regressive policies embraced by both political parties
since the Reagan "revolution". But both parties also seemed doomed to irrelevance, because
both have, as Wolff describes, just played musical chairs over four decades. Little surprise
that the only growing political affiliation is "Independent": democracy needs an
alternative! Even BEFORE COVID-19, those under 40 could not find sustainable employment,
and those over 40 were jettisoned as too expensive to maintain. Meanwhile the mainstream
media supply a steady diet of trivia and misinformation, gushing over stock market rebounds
or growth in Jeff Bezos' literal mountain of wealth, while a realistic 25% of the work force
(including those in the darling "gig" economy) don't have a job or a paycheck, and can't make
the rent. Unbelievable. And a disgrace in any country with the means to correct it.
The political response to this virus and the ensuing economic collapse is but one preview
to our future: we should study it, and hard. A vaccine may take a few years to put in place,
but there is no "vaccine" against profound environmental shifts on the horizon, broadly
labeled climate change. A response that avoids enormous human suffering requires planning and
transformations on space and time scales unlike anything we have faced heretofore. The bad
news: these shifts are already manifest and likely irreversible. The good news: a response
will require everyone's labor, creativity, and collaboration. This means planning,
cooperation, and work , much of which can't be automated easily. These are political
and economic transformations in which we will have no choice, if we are to survive.
Emphasizing that there will be radical reduction in energy/resource use in the near
future, either planned or unplanned. The Club of Rome models appear to be still spot on.
Good article that makes many valid points. One I disagree with though is:
will only slow global economic growth just when many circumstances converge to make that
the least desirable future
Why is growth always the goal? Given the looming climate change catastrophe, economic
growth is the enemy. We must figure out how to live in a zero-growth (i.e. balanced) economy
or we will kill off the human race. A lot of the tensions we see are because it is no longer
possible to "grow" the economy in a way that benefits all segments of society. Energy and GDP
are related. As we run out of the former the latter must adjust.
In a rather simplistic understanding of these issues, I too have often wondered about this
endless "growth" goal. How can we have long-term a system, whose inner logic requires
constant growth to remain 'viable' – on a planet with finite resources? A collision of
the two seems inevitable at some point. Am I missing something?
Economic growth and human population growth have been disasters for much of the
animal/plant world (insects, large mammals, forests, oceans).
Human focused economists seem to ignore this vitally important earth inhabiting non-human
constituency in the quest for the, always assumed necessary, headline economic growth.
As we follow in the path of our already distressed animal/plant kingdom, achieving a
"balanced" economy without a great deal of human distress seems unlikely to this reader .
I noticed there are a lot of people here that still have faith in capitalism. The problem
is only with the demented variation found in the USA, they say; the European model is the way
to go, they say...
"... How much of this is virtue signalling by Mitt Romney and others of the elite? Is he willing to disgorge himself of the the hundreds of millions he took from Americans through his company Bain? ..."
These far right social conservatives lost yesterday and they don't even realize it. Mitt
Romney marched with BLM. Mitt is no radical on social issues (he certainly is on. Taxes on
the rich) you won't convince a single one of these hard right wing people that systemic
racism is real, even when you give examples like the North Carolina Republican Party
disenfranchising blacks "with surgical precision" or the direct evidence of the commenter
Dukeboy who states he is a retired police officer and is obviously a white supremacists. But
you don't need to convince them of anything. This is the same group who would have been
against the civil rights protests in the '60's. They aren't needed to create a massive
change.
The hubris to think that your feelings of guilt would be meaningful to black people is off
the charts.
"My local school has been underfunded for generations due to the property tax funding system
and redlining but Karen feels bad about it so all is right with the world!"-Said no black
person ever.
How much of this is virtue signalling by Mitt Romney and others of the elite? Is he
willing to disgorge himself of the the hundreds of millions he took from Americans through
his company Bain?
How much? 100% of it. Romney is a vicious corporate raider who has destroyed countless
jobs and by extension, lives. How many suicides have followed in the wake of Bain's corporate
takeovers? When Romney lived in Belmont, MA, he and his wife petitioned the town to not allow
ambulances to go down their street with sirens on. Seriously.
"... Moreover, people do distinguish between needs and wants. Americans need to eat, but they mostly don't need to eat out. They don't need to travel. Restaurant owners and airlines therefore have two problems: they can't cover costs while their capacity is limited for public-health reasons, and demand would be down even if the coronavirus disappeared. This explains why many businesses are not reopening even though they legally can. Others are reopening, but fear they cannot hold out for long. And the many millions of workers in America's vast services sector are realizing that their jobs are simply not essential. ..."
"... America's economic plight is structural. It is not simply the consequence of Trump's incompetence or House Speaker Nancy Pelosi's poor political strategy. It reflects systemic changes over 50 years that have created an economy based on global demand for advanced goods, consumer demand for frills, and ever-growing household and business debts. This economy was in many ways prosperous, and it provided jobs and incomes to many millions. Yet it was a house of cards, and COVID-19 has blown it down. ..."
In the 1960s, the US had a balanced economy that produced goods for both businesses and
households, at all levels of technology, with a fairly small (and tightly regulated) financial
sector. It produced largely for itself, importing mainly commodities.
Today, the US produces for the world, mainly advanced investment goods and services, in
sectors such as aerospace, information technology, arms, oilfield services, and finance. And it
imports far more consumer goods, such as clothing, electronics, cars, and car parts, than it
did a half-century ago.
And whereas cars, televisions, and household appliances drove US consumer demand in the
1960s, a much larger share of domestic spending today goes (or went) to restaurants, bars,
hotels, resorts, gyms, salons, coffee shops, and tattoo parlors, as well as college tuition and
doctor's visits. Tens of millions of Americans work in these sectors.
Finally, American household spending in the 1960s was powered by rising wages and growing
home equity. But wages have been largely stagnant since at least 2000, and spending increases
since 2010 were powered by rising personal and corporate debts. House values are now stagnant
at best, and will likely fall in the months ahead.
Mainstream economics pays little attention to such structural questions. Instead, it assumes
that business investment responds mostly to the consumer, whose spending is dictated equally by
income and desire. The distinction between "essential" and "superfluous" does not exist. Debt
burdens are largely ignored.
But demand for many US-made capital goods now depends on global conditions. Orders for new
aircraft will not recover while half of all existing planes are grounded. At current prices,
the global oil industry is not drilling new wells. Even at home, though existing construction
projects may be completed, plans for new office towers or retail outlets won't be launched
soon. And as people commute less, cars will last longer, so demand for them (and gasoline) will
suffer.
Faced with radical uncertainty, US consumers will save more and spend less. Even if the
government replaces their lost incomes for a time, people know that stimulus is short term.
What they do not know is when the next job offer – or layoff – will come along.
Moreover, people do distinguish between needs and wants. Americans need to eat, but they
mostly don't need to eat out. They don't need to travel. Restaurant owners and airlines
therefore have two problems: they can't cover costs while their capacity is limited for
public-health reasons, and demand would be down even if the coronavirus disappeared. This
explains why many businesses are not reopening even though they legally can. Others are
reopening, but fear they cannot hold out for long. And the many millions of workers in
America's vast services sector are realizing that their jobs are simply not essential.
Meanwhile, US household debts – rent, mortgage, and utility arrears, as well as
interest on education and car loans – have continued to mount. True, stimulus checks have
helped: defaults have so far been modest, and many landlords have been accommodating. But as
people face long periods with lower incomes, they will continue to hoard funds to ensure that
they can repay their fixed debts. As if all this were not enough, falling sales- and income-tax
revenues are prompting US state and local governments to cut spending, compounding the loss of
jobs and incomes.
America's economic plight is structural. It is not simply the consequence of Trump's
incompetence or House Speaker Nancy Pelosi's poor political strategy. It reflects systemic
changes over 50 years that have created an economy based on global demand for advanced goods,
consumer demand for frills, and ever-growing household and business debts. This economy was in
many ways prosperous, and it provided jobs and incomes to many millions. Yet it was a house of
cards, and COVID-19 has blown it down.
"Reopen America" is therefore an economic and political fantasy. Incumbent politicians crave
a cheery growth rebound, and the depth of the collapse makes possible some attractive
short-term numbers. But taking them seriously will merely set the stage for a new round of
disillusion. As nationwide protests against systemic racism and police brutality show,
disillusion is America's one big growth sector right now.
In many way this is just a wishful thinking. Saker's hyperbolic rhetoric is just cheap
propaganda and does not help to decifer the issues the USA faces!
Looks like Clinton wing of Dems is willing to burn their own house to get rid of Trump. "If I
had to guess, I'd say it's the neoliberal, CIA-Obama faction vs. the Trump-Military faction,
(Pompeo et al)" But why? Why Obamagate is picking up steam? Looks Barry CIA Obama is still a
player. Is he also a reason we have senile Biden is the candidate for President on the Dem side?
Are we seeing the power of a CIA community organizer, color-revolutionary pulling strings across
multiple strata of society?
The current riots create pressure of Trump and attempt are made to use them as the third act
of anti-Trump revolution but this clearly is nor a civil war. Like other protests before it
(Civil rights marches, anti-Vietnam and Iraq wars, Occupy) little to no substantive changes have
been introduced insofar as reining in of the war machine, the pursuit of social and economic
justice (universal free education and health care, equal employment and housing opportunities,
scaling down of the MIC and the Prison Industrial Complex, degrade Israel and Saudi lobbies,
etc.
They are not about any of these because they encompass all of these issues, and more.
It is important to always keep in mind the distinction between the concepts of " cause " and
"pretext". And while it is true that all the factors listed above are real (at least to some
degree, and without looking at the distinction between cause and effect), none of them are the
true cause of what we are witnessing. At most, the above are pretexts, triggers if you want,
but the real cause of what is taking place today is the systemic collapse of the US
society.
The next thing which we must also keep in mind is that evidence of correlation is not
evidence of causality . Take, for example, this article from CNN entitled "US
black-white inequality in 6 stark charts" which completely conflates the two concepts and
which includes the following sentence (stress added) " Those disparities exist because of a
long history of policies that excluded and exploited black Americans, said Valerie Wilson,
director of the program on race, ethnicity and the economy at the Economic Policy Institute, a
left-leaning group. " The word "because" clearly point to a causality, yet absolutely nothing
in the article or data support this. The US media is chock-full of such conflations of
correlation and causality, yet it is rarely denounced.
For a society, any society, to function a number of factors that make up the social contract
need to be present. The exact list that make up these factors will depend on each individual
country, but they would typically include some kind of social consensus, the acceptance by most
people of the legitimacy of the government and its institutions, often a unifying ideology or,
at least, common values, the presence of a stable middle-class, the reasonable hope for a
functioning "social life", educational institutions etc. Finally, and cynically, it always
helps the ruling elites if they can provide enough circuses (TV) and bread (food) to most
citizens. This is even true of so-called authoritarian/totalitarian societies which, contrary
to the liberal myth, typically do enjoy the support of a large segment of the population (if
only because these regimes are often more capable of providing for the basic needs of
society).
Right now, I would argue that the US government has almost completely lost its ability to
deliver any of those factors, or act to repair the broken social contract. In fact, what we can
observe is the exact opposite: the US society is highly divided, as is the US ruling class
(which is even more important). Not only that, but ever since the election of Trump, all the
vociferous Trump-haters have been undermining the legitimacy not only of Trump himself, but of
the political system which made his election possible. I have been saying that for years: by
saying "not my President" the Trump-haters have de-legitimized not only Trump personally, but
also de-legitimized the Executive branch as such.
This is an absolutely amazing phenomenon: while for almost four years Trump has been
destroying the US Empire externally, Trump-haters spent the same four years destroying the US
from the inside! If we look past the (largely fictional) differences between the Republicrats
and the Demolicans we can see that they operate like a demolition tag-team of sorts and while
they hate each other with a passion, they both contribute to bringing down both the Empire
and the United States. For anybody who has studied dialectics this would be very predictable
but, alas, dialectics are not taught anymore, hence the stunned "deer in the headlights" look
on the faces of most people today.
Finally, it is pretty clear that for all its disclaimers about supporting only the "peaceful
protestors" and its condemnation of the "out of town looters", most of the US media (as well as
the alt media) is completely unable to give a moral/ethical evaluation of what is taking place.
What I mean by this is the following:
And this ain't nothing. Nothing. Not compared to 1967-68.
But you young people don't know nothing. Especially about history. So, no surprise
there.
Si1ver1ock says: Show
Comment
June 5, 2020 at 3:14 am GMT • 100 Words If I had to guess, I'd say it's the
neoliberal, CIA-Obama faction vs the Trump-Military faction, (Pompeo et al)
This came to a head just as Obama-gate was picking up steam. Obama is still a player. He
is the reason we have Biden for President on the Dem side, for example.
My guess is that you are seeing the power of a CIA community organizer,
color-revolutionary, Jedi psyop master, pulling strings across multiple strata of
society.
Trump and Obama don't like each other for some reason.
Begun? It's been in process for many decades. It might have begun in the early 20th
century. What's new here? Focusing on recent times, jobs disappeared in the 70's. Inflation
exploded at the same time. Negro antagonism began in the 60's. Replacement of the white
population accelerated in 1965 and continued relentlessly to the current moment.
We are seeing the looting phase of the business known as the United States of America.
Refer to an informative scene from the movie Goodfellas. The criminals got control of a
business, looted it into bankruptcy and burned the place down. Except in this case there
are no Italians involved. And you know who replaces them in our real life experience.
Espinoza says: Show
Comment
June 5, 2020 at 6:44 am GMT It's controlled demolition. First unjustified lockdown.
Then unjustified race riots. The deep state is intent on destroying Trump.
If US is divided into mutually hostile territories, guess where the majority will go.
That is right. They will go to white dominated areas as they do now to white dominated
neighborhoods.
Can no one stop the deep state?
Brewer says: Show Comment
June 5, 2020 at 7:17 am GMT • 100 Words Seen it all before. How short do memories
have to be to forget Kent State, Rodney King, the Civil Rights protests of the sixties,
Harlem riot of 1964, the Watts riot of 1965 et al ?
America is and will remain a deeply disturbed society given that their entire
philosophy, lifestyle and Politics is based on consumerism. Winners (no matter how
unethical) are heroes, losers (no matter how unjustly) are despised.
America will bump and grind on through bankruptcy, both morally and economically. It is
the Judaic way.
Simple fact is that most Americans are ignorant of History and are therefore condemned
to go on repeating the past.
Why (Oh, why) do the empires – or at least very successful countries collapse? The
answer is actually very simple. Because the elites of such successful entities lose touch
with reality.
The elites in every country, even the worst s ** tholes on the planet earth are always
going to be OK, better than the ordinary citizens – that's the whole point of being an
elite – to avoid the suffering of the common people.
And because there is no mechanism to increase the suffering of the elites in tandem with
the suffering of the ordinary population – when the times are tough – the elites
fail to respond to the difficulties that ordinary citizens face.
The elites start living in a fantasy world where they believe that as long as they are OK,
the country is OK. But the elites are going to be OK right up to the moment the country
collapses, so that's not an accurate measure of how the country is doing. The country can be
in the doldrums and the elites will still be OK.
That disconnect from reality is what prevents them to undertake measures that will
alleviate the plight of the majority of the population.
To make the things even worse, the elites of the enlightened west (that's how you call
countries that are struck by lightning) seems to have found a way to progressively increase
the benefits for themselves proportionately to the decrease of good fortunes coming the way
of the common citizens, thus further removing any incentive to act on behalf of the majority
of the population and further increasing the chasm that separates the haves from the have
nots.
@Cyrano Really good comment Cyrano.
1.
"Because the elites of such successful entities lose touch with reality."
2.
Elites have "found a way to progressively increase the benefits for themselves
proportionately to the decrease of good fortunes coming the way of the common citizens, thus
further removing any incentive to act on behalf of the majority of the population and further
increasing the chasm that separates the haves from the have nots."
In fact, the wealthier Elites become, the greater the chasm between them & the 99.9%
becomes, the more desperate Elites come to feel about their situation. Call it subconscious
guilt or conscious fear & insecurity but the richer & more powerful they feel, the
more they demand -- more .
The idea that they could at least fore-stall problems by a few reforms that would cost them
little (ie, a "people's QE") is unthinkable. "If we give 'em an inch, they'll demand a
mile"
Such acts of sensible benevolence are felt to be demeaning & dangerous.
And further, they've spent 40 years restructuring society & economy to serve their
interests, any reform now, however trivial, could undermine that structure. Reform itself is
an act of self contradiction to a class that has never missed a chance to take-take-take for
40 years.
US Elites are not a tree that can bend in the wind. They are completely rigid. Only events of
god-almighty significance will break them.
The current shenanigans will not do that. But, given rates of unemployment, & contraction
of GDP, given the distinct possibility of vast future immiseration, current events may be the
first breathe of a god almighty wind set to blow the whole shithouse down.
Unfortunately, current events are politically vacuous & offer no sign of real political
conscious.
Lack of political direction can only lead to anarchy -- & anarchy is just as likely to
strengthen the Elite hand as anything else.
Irrespective of whether either faction will succeed in instrumentalizing the riots, what
we are seeing today is a systemic collapse of the US society.
Amen. The collapse is systemic , it is social , and it has been gathering
momentum for decades. Thank you, Saker, for pointing that out. It's about time someone above
the battle invested serious thought in what's really going on in the hearts, minds and
streets. Your analysis is head and shoulders above the rabble-rousing we get from parochial
home-grown U.S. pundits, who deal only in labelling their personal heroes or villains du jour
(Blacks, Cops, White Supremacists, Jews, Climate Change, Empire, Bat viruses, Trump, and so
forth).
Those who agree with Saker's brilliant analysis and seek a deeper understanding of
mechanism at work may want to consult Joseph A. Tainter's The Collapse of Complex
Societies (Cambridge 1988). He invokes archaeological case studies to prove that what we
are seeing is actually a function of the law of diminishing returns (which is way broader
than economics). Complexity advances to a point at which the rulers' latest fixes for arising
problems do more harm than good since all these separate "solutions" invariably have an
unforeseen systemic effect.
At that point a system's traditional cheer-leading investment to engender social esprit
and voluntary compliance for a common good is no longer credible and the ruling elite is then
forced to resort to raw repression of dissent, which is much more costly than just benign
propaganda. All key institutions collapse not in isolation but systemically, and chunks of a
fragmenting society must spall off in order to save themselves from ruin. The inevitable
systemic collapse runs its course.
"And because there is no mechanism to increase the suffering of the elites in tandem
with the suffering of the ordinary population – when the times are tough – the
elites fail to respond to the difficulties that ordinary citizens face."
As you said: That's what makes them an elite.
"The elites start living in a fantasy world where they believe that as long as they are
OK, the country is OK. But the elites are going to be OK right up to the moment the country
collapses, so that's not an accurate measure of how the country is doing."
And when America finally does collapse, and their "fantasy world" ends, they'll fly off in
their private jet to one of their homes in New Zealand, Australia, or Switzerland.
The elites start living in a fantasy world where they believe that as long as they are
OK, the country is OK. But the elites are going to be OK right up to the moment the country
collapses, so that's not an accurate measure of how the country is doing. The country can
be in the doldrums and the elites will still be OK.
That disconnect from reality is what prevents them to undertake measures that will
alleviate the plight of the majority of the population.
I beg to differ a bit. This is true only as far elites are of capitalist and/or
aristocratic kind. You probably draw your conclusions from the French and Russian
revolutions.
However, I would argue that political elites in the former communist countries did try to
reform the system for the benefit of the citizens and, after seeing their efforts fail, had
the integrity to step down peacefully. The only possible exception being China where reforms
were fruitfull.
Unironically, one could argue that communist elites, having no personal wealth and stakes,
remained honest and true to their essential creed of serving the greater common good. When
the deep crisis of socialism in 1980s seemed to require that they step down and contries
abandon socialist order, they indeed steped down in the interest of the common good as it was
perceived at the time.
Now we see that we may have to reconsider the whole "fall of communism" thing again, but,
this theme is, off course, tangential to this article's topic.
What I find amazing is that no side in the USA even blinked when the Congress authorized
spending USD 10 trillion to keep the system afloat. It's like if this never happened, or like
if it was a normal thing.
"The gig economy is just a way for corporations to cut the cost of employees, by turning them into subcontractors. They blur
the line between employee and subcontractors by having tight rules like an employer, and since most people have a employee
mentality, the company nurtures the idea that they somehow are more like employees, then they get mostly good workers, working
hard for very little compensation. The Gig economy is just another sign of our failing way of life."
Notable quotes:
"... The gig economy would be great if we lived in a society where health care is free, food is cheap, housing is common, and nobody suffers from economic Issues Which is not what we are living in ..."
"... Neo-liberals - we support freedom and stuff. Removes mask Is actually corporation lapdogs. ..."
Unlike most developments in the employment market, the Gig Economy has received a great deal
of press attention and established itself firmly as a point of reference in the popular
consciousness. In recent years, increasing numbers of people have turned to services such as
Uber, Lyft, Deliveroo, Just Eat, TaskRabbit and Fiverr as either a side hustle or their main
source of income.
Following on from my video on neoliberalism and neoliberal capitalism, in today's episode of
What the Theory?, we look deeper into how the gig economy (or sharing economy) works and what
differentiates it from the rest of the economy. We ask whether the gig economy is truly an
opportunity for those wanting a more flexible work arrangement or whether it is simply a means
for multinational corporations to circumvent hard-won workers rights and labour laws.
Finally, we also consider whether there might be some historical precedents to the sharing
economy in the early industrial period and look at some of the challenges facing those
attempting to organise Deliveroo riders, Uber drivers and other gig economy workers into trade
unions in order to negotiate for better rates of pay and conditions.
Unregulated capitalism? You mean like child labor and passing the hat when a worker dies
in an accident? They don't want workers. They want people who are desperate.
Well, how far it all goes is something that remains to be seen. I don't think we'll get as
far as child labour but the curation of dependence is something that's definitely in
progress.
Daxton Lyon except the majority of entrepreneurs and business owners didn't come Into
their business ownership via merit. You are forgetting that most of these people are born
into a situation where they have access to capital, access to legal services and education.
Sure there are a minority of people who make it from nothing but that number is diminishingly
small.
Daxton Lyon "You don't like the gig? Do something else." Too bad the economy is currently
setup to where around half of individuals are limited to gig and don't have the resources and
money to do anything else.
Daxton Lyon "If any of you did, your panzy responses regarding corporate greed would be
squashed!" No, they wouldn't, but keep performing those red herrings and hasty,
extremely-worshipping generalizations about entrepreneurship to distract from the point; I'm
sure they'll catch on.
The gig economy would be great if we lived in a society where health care is free, food is
cheap, housing is common, and nobody suffers from economic Issues Which is not what we are
living in
The stock market is BOOMING! Truly a remarkable recovery. It's almost as if the travails of
the last three months never happened. Everyone is happy and right back to where they were
financially. The future is so bright we gotta wear shades. Celebration time, come on! DOW 35K
by EOY2020!
The government is underwriting a booming stock market!
And no infrastructure related jobs program in sight even though it's been on the table for
more than a decade. Apparently the US infrastructure is just fine thank you. But the MIC and
intelligence community need more money.
The Democrats are complicit in this fiasco. Biden, LOL, weak.
As already noted by some commentators, the recent protests have almost as much to do with
a rapidly collapsing economy with horrible prospects of recovery for millions of people, as
with racism. There's a lot of resentment, unease and fear out there. Racism is only one
trigger for the ongoing unrest. There's also an element of blowing off some steam after the
COVID restrictions.
COVID is still a major issue BTW! But it seems as if the cost for herd immunity has now
been factored in and rationalized away and people are going to accept the sacrifices of tens
of thousands more dead and handicapped by after effects. Amazing how quickly COVID is
becoming a non-issue. The administration has very effectively sidestepped the problem, aided
and abetted by the media.
Any meager gains in employee pay and benefits eked out over the last 10 years as low
unemployment ("Thank god for all the crappy jobs, I have three of them!") finally pressured
some improvement, have been decimated. One step forward, ten back. Watch the Job Quality
Index (JQI).
Not only have millions lost their livelihoods but also their crappy healthcare
insurance.
The wealth divide is exploding as billionaires are reaping huge government largesse, much
of it tax free.
With millions of people remaining unemployed or under-employed over an extended period of
time and as the government begins to remove financial aid for the poorest, as homelessness
explodes, as people get sick and have no insurance, as personal debt balloons, etc. these
recent protests might look like playground tiffs.
It's remarkable to me that the stock market, even if decoupled from the real economy, is
this sanguine over future prospects.
Something seems very wrong with this picture. When the youngsters realize how much of
their future has been mortgaged to prop all this up, watch out.
I also expect the very heavy militarized responses to civil unrest to continue and
amplify. Protests will not be tolerated and a significant portion of the US citizenry will
fully support the harsh crackdowns in the name of law and order. The retired 401K set for
example. To be a protester will take guts and fortitude.
Well, at least we can look forward to the November election to fix all of this.
You cannot print money into infrastructure. That's money fetishism.
The Marshall Plan would be only USD 100 billion in today's values. It wasn't about the
money: the Marshall Plan worked because, in 1946, the USA was the financial center of the
world and had an excess industrial capacity large enough to rebuild a much smaller place
(Western Europe). USDs flowed into Western Europe, which could only buy American goods and
equipment - which the Americans had to sell. American resources then flowed to Western
Europe, which in turn flowed back to the USA in USDs. That the USD was backed by gold at the
time had nothing to do with this process, but it may have accelerated the universalization of
the USD.
The USA (I'm here including all of its provinces: European Peninsula, Latin America,
SE-Asia, India, Japan, South Korea, Taiwan, Hong Kong and Australia) is a capitalist society,
which means it plans its economy according to the social profit rate. The social profit rate
is determined by the national average of profit rates among all the individual capitals in
said country. That means economy is always planned by the private, not the public, sector.
The White House is impotent here.
Profit rate self-regulates based on the different degrees of organic composition of
capital (OCC) of each country/region. To simplify, the tendency is this: value flows from the
countries with lesser OCCs to countries with higher OCCs. Taking the European Union as an
example, we have that Germany (the country with the higher OCC) will have large and chronic
trade surpluses with the rest.
However, the higher the OCC, the lower is the profit rate. As OCC gets to a certain
critical level, profit rates begin to plummet, and structural crisis of capitalism occur. In
order to stop this process, "financialization" begins.
The case of the USA is that its financialization process has been running for so long that
its already existing infrastructure is crumbling. However, the fact that it is crumbling is
just the symptom, not the cause. The real cause is that the USA begun to financialize first
because it reached an extremely high OCC first.
At first, the USA didn't rebuild its infrastructure simply because it is not profitable.
Now, it doesn't do it for the simple fact it can't: with much pain, it managed to bring
astronauts beck to the ISS; the infrastructural abyss is now at more than USD 1.1 trn and
widening. By now it would have to import a lot of material and expertise from other countries
if it really wanted to rebuild and update its infrastructure. Industry lost so much
importance in the US economy that, last year, American industry fell to a record level (due
to the trade war against China) and the US GDP actually rose - due to the financial sector
and services sector compensating for the loss.
The most extreme case of a First World country turning into a mere financial hub is the
UK: its trade deficit already is at a gargantuan -14%, and its budget only doesn't collapse
because its huge financial hub in London covers that up to more than 7% (i.e. halves).
Financial hub? Call it what it is. A laundromat for dirty money and ill-gotten gains. Problem
is, or problem for those who aren't the extractive wealthy elite which is most of us, more
and more money is dirty money and ill-gotten gains even if it is "made" legally. The most
recent multi-trillion dollar handout, looting and pillaging actually, to the wealthy
extractive elite as part of the so-called "stimulus package" was perfectly legal but dirty
money and ill-gotten gains nonetheless.
The stock market is not only a depravity indicator and an indicator of wealth disparity,
it's also a massive laundromat for legal and illegal ill-gotten gains. I would venture that
at least 30% of the stock market is comprised of black market illegal money being laundered
at any given time.
FIRE is a term used my Michael Hudson and other likeminded political-economists. He uses
it so often it's hard to provide the initial instance. However, Hudson did write two books
about how the FIRE sector gained its dominance, Killing the Host & J is for Junk
Economics . It this video interview
from 2017 , Hudson explains to Max Keiser about the latter book and how it relates to the
just completed election, which begins at the 12:45 mark. That website also links to all
previous Keiser Reports where I hope to find the specific interview that discusses the
FIRE sector. This one does too, but it's not the specific topic discussed. I guarantee you'll
learn a lot from the 10.5 minute interview!
Petri Krohn wants redistribution of wealth. Let's look at the idea.
The opposing viewpoint says wealth is not a pie. Wealth comes from growth, innovation,
creativity. It is many pies.
Of course, you can't bake your own pie without capital. So, how do we redistribute
capital?
You can get it from the government via the banks, if they are 'ordered' to grant loans.
They aren't. So, you can't get it from government or banks.
You can take it from the already wealthy. Taxes is the historic way to take wealth from
the wealthy. But the tax schedule no longer takes significant amounts from the wealthy. And
Congress is corrupted by the wealthy so that route is closed also. There will be no major new
taxes on the wealthy.
How can we redistribute wealth, then?
Simplest way is Development Zones with no taxes for a 5-10 years. Investors will pour
money in from around the world. New businesses can be started, innovation can be nourished
and people can prosper.
Use the system to expand the base of participation and do it in the zones of poverty and
redevelopment where the poor and disadvantaged are.
China does this. It works. Other nations do it. They call them FTZ (free trade zones).
Russia has some.
Trump was going to do this with his original Infrastructure program. The Dems stopped it.
Won't allow any progress.
But, this is the way to go. You raise people out of poverty, your increase their options
and income, you grow their region, and lots of new pies are baked.
And who, exactly, is going to do the hard labor required of these infrastructure
projects?
Certainly none of the horribly obese Americans I see waddling around, nor many of the
young folks stuck with their snouts into soma social media. Most of the youngsters I know
have zero clue about working with tools, doing a job right, working hard for not much pay,
etc. Males of color living in ghettos while their baby-mommas live off welfare? Hardly.
And where are people going to get the training needed? The Polytechnic Science trade
school in the city I grew up in - San Francisco - was torn down long ago. Few in the trades
can afford to live in San Francisco any more, even if they could get a job.
Maybe folks like my father who wielded a shovel building roads during the WPA and hated it
so much he joined the Army. In other words, hardworking immigrants, or first generation born
of immigrants with little education (my dad).
Posted by: Red Ryder | Jun 3 2020 19:14 utc | 15 says: 'How can we redistribute wealth,
then?'
An economy's wealth is what it produces. The U.S. produces a lot less then it consumes, so
it is in debt, and half of its population is poor.
The financial elites, who run the U.S. have gotten wealthy, not by producing something of
value, but by strip mining the financial assets of the rest of the population.
If you want to produce wealth, and distribute it properly:
1. Get rid of the U.S.$ as the world's reserve currency. This will allow U.S.$ to be
radically devalued.
2. With a devalued dollar, the U.S. will be forced into domestic production (i.e. real
wealth creation). Good paying jobs, producing real things, is a very effective way of
properly distributing wealth.
3. Carry out a massive infrastructure program to rebuild the U.S.' worn-out
infrastructure. The infrastructure itselr, as well as the good paying jobs associated with
creating it, is an effective way to distribute wealth.
4. Provide basic health-care and education (including university) to all. This is again a
very effective way of distributing wealth, while at the same time supplying a work force
capable of carrying out high value added jobs necessary for a goods producing economy.
5. Break-up or regulate the cartels. Profit margins and executive salaries have radically
expanded in recent years. This is a sign of lack of competition. Wherever there is inadequate
competition the economic actors need to be regulated or broken up. Lower prices, resulting
from a normalization of profits and exagerated salary disparities, is another excellent way
to distribute wealth.
6. Reduce military expenditures. Most of the military expenditures, beyond what is really
needed for defense, are nothing but waste, and at the same time a transfer of wealth from the
masses to the military industrial complex.
7. Pay for government sponsored health-care, education and infrastructure with a
significant increase in taxes on the wealthy.
8. The massive devaluation of the dollar, combined with infrastructure spending and
re-industrialization will no doubt cause significant inflation, at least in the short term.
Inflation will reduce both the value of financial assets and debt, again representing a
redistribution of wealth from the elites to the indebted masses.
Using the GINI index as a gauge (
https://www.census.gov/library/visualizations/2015/demo/gini-index-of-money-income-and-equivalence-adjusted-income--1967.html),
Income inequality increased substantially over the past 40 years, from a GINI coefficient of
0.36, moderate, to 0.46, extreme. This change happened as a result of deliberate economic
policies designed to enable the transfer of wealth from the masses to the elites. To reverse
this mal-distribution of wealth, the policies that led to this need to be reversed as
well.
And don't expect the Democrats to do it. They are fully in the pocket of the 'Globalists'
who have been the principle beneficiaries of this massive transfer of wealth since 1980.
@ Posted by: Winni Puu | Jun 3 2020 21:33 utc | 47
The problem with large infrastructure projects is that they do not only get old through
physical degeneration, but also through moral degeneration (i.e. they get outdated).
The USA had USD 1.1 trn in old infrastructure (mainly from the 50s-60s) which need repair.
However, if the USG spends those USD 1.1 trn, the American people will just be getting what
existed before - there's no technological advantage here. So, while the USA spends USD 1.1
trn on 50s technology, China will be spending the same on state-of-the-art, therefore getting
a military advantage (because better infrastructure attracts more wealth, both in the form of
foreign investment and in the form of rising productivity of labor).
Also, when you do this large-scale technological leap, it just can't be any kind of
innovation: it has to be a revolutionary technology, which both greatly increases labor
productivity and is future proof (i.e. can last at least 50 years, ideally at least 100
years).
So, this is not just your average bean-counting. When a given national government is so
far behind in infrastructure, it has a though decision to make: fix what already exists (with
minor and gradual improvements) or do you go all-in with a revolutionary technology to try to
do a "great leap"? And that's just the technocratic side of the problem - in capitalism you
have the factor that it is the social profit rate that decides what's built and what isn't,
by how much and when.
The boss of Amazon Jeff Bezos is 65 this year, is worth over a trillion dollars, assuming he
lives up the age of 90, converts the assets into cash, does absolutely nothing except
spending the money, he has $3 655 347 to run through each hour 24/7 for the rest of his life.
If one assumes he has to sleep, eat, go to the bathroom which cuts the number of spending
hours (say) by half, he must go through over seven million dollars each and every hour until
he drops dead.
This is obscene, it exceeds his needs by such a margin that one cannot but wonder at the
sanity of a society that cannot be bothered to address it. This is not to call for income to
be distributed equitably, that would destroy the only mechanism that past evidence shows is
the driving force for improving living standards for all, but for such distribution to be
sane, nothing more nothing else, sanity should inform the creation of laws governing income
distribution on every society, including the Republic's. Any such sane arrangements should
include the distribution of both income and accumulated wealth, the major disparity in
today's society isn't only in income distribution, but even more so in wealth ownership.
The U.S. has a service economy. Some 70% of its gross domestic product is generated by
personal consumption. The emergency measures taken to slow down the covid-19 pandemic decreased
consumption by a huge margin. The GDPNow model by the Federal Reserve Bank of Atlanta
shows the slump
:
The growth rate of real gross domestic product (GDP) is a key indicator of economic activity,
but the official estimate is released with a delay. Our GDPNow forecasting model provides a
"nowcast" of the official estimate prior to its release by estimating GDP growth using a
methodology similar to the one used by the U.S. Bureau of Economic Analysis.
...
Latest estimate: -52.8 percent -- June 1, 2020
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the
second quarter of 2020 is -52.8 percent on June 1, down from -51.2 percent on May 29.
The GDPnow model gives a snapshot of GDP on any given day. It is not the GDP for the year,
which will be down much less, but just a moment in time.
With the lockdowns loosening the GDP will certainly increase again. But a haircut missed due
to the lockdown will not result in a desire to get two haircuts. The meals not eaten in a
restaurant during the last two month will not be made up by additional meals eaten after the
reopening. The losses are for real.
With the end of the lockdown half of the 40 million currently unemployed will likely soon be
back to work. The jobs of the other 20 million will not come back for a long time. The travel
and hospitality sectors will be most effected. People who do not make money can not spend
any.
The unemployed and the economy will not be impressed by Trump's current fake 'law and order'
show or by his pandering to Evangelicals.
If Trump is as smart as he claims to be he will ask Congress for a huge amount of money to
be spend on infrastructure programs over the next three years. That money should be shared for
projects on the national, state and local level. There are plenty of bridges, roads and rails
that need repairs or replacements.
But Trump isn't as smart as he claims and the people around him, as well as Trump himself,
are from the FIRE economy - the F inance, Insurance, and Real Estate sectors. Such people do
not value the real economy where real stuff is made and used.
The stock market, on which Trump is fixated, has long ceased to be a reflection of the real
economy. Propping it up again and again, as the Fed and the Treasury do, may well enrich
Trump's friends, but it does nothing for the voters he needs to get reelected.
Does he not understand that?
And why, by the way, ain't the Democrats out in front demanding that more be done to create
new jobs? They seem to have totally vanished from the scene.
Posted by b on June 3, 2020 at 17:35 UTC |
Permalink
"And why, by the way, ain't the Democrats out in front demanding that more be done to create
new jobs?"
Don't say ain't or your mother will faint.
Your father will fall in a bucket of paint.
Your sister will cry. Your brother will die.
Your dog will call the FBI.
"And why, by the way, ain't the Democrats out in front demanding that more be done to create
new jobs? "
Because the Dems are NOT an opposition party. The entire mess we are in, is a bipartisan
project accomplished over several decades. Although Trump is in the limelight right now, he
is actually a symptom of a much larger underlying disease, caused by both parties.
I don't think the Dems want to win. Nobody wants the next four years. Hell, nobody wants the
next eight years or twelve or sixteen. Except the criminally insane autocrats.
Not that I think the Dems in control of the executive and legislative branches would
change the course of events. The collapse is in full swing. It's a steam roller at this
point. A freight train. An avalanche. There's no more blood to squeeze from the rocks. Game
over. Except it and manage the decline as humanely and constructively and equitably as
possible or else let chaos reign and lead which is an existential gambit for sure but one the
extractive elites appear to have chosen.
The individual states need to realize they are on their own. Trump and Congressional gopers
and dems have abandoned them in favor of working full time for FIRE (very new and revealing
term for me) and various other elite interests. Each state will need to form various
alliances with other states to develop proverbial out of the box solutions including
developing independent import and trade agreements with China and the EU among others.
You cannot print money into infrastructure. That's money fetishism.
The Marshall Plan would be only USD 100 billion in today's values. It wasn't about the
money: the Marshall Plan worked because, in 1946, the USA was the financial center of the
world and had an excess industrial capacity large enough to rebuild a much smaller place
(Western Europe). USDs flowed into Western Europe, which could only buy American goods and
equipment - which the Americans had to sell. American resources then flowed to Western
Europe, which in turn flowed back to the USA in USDs. That the USD was backed by gold at the
time had nothing to do with this process, but it may have accelerated the universalization of
the USD.
The USA (I'm here including all of its provinces: European Peninsula, Latin America,
SE-Asia, India, Japan, South Korea, Taiwan, Hong Kong and Australia) is a capitalist society,
which means it plans its economy according to the social profit rate. The social profit rate
is determined by the national average of profit rates among all the individual capitals in
said country. That means economy is always planned by the private, not the public, sector.
The White House is impotent here.
Profit rate self-regulates based on the different degrees of organic composition of
capital (OCC) of each country/region. To simplify, the tendency is this: value flows from the
countries with lesser OCCs to countries with higher OCCs. Taking the European Union as an
example, we have that Germany (the country with the higher OCC) will have large and chronic
trade surpluses with the rest.
However, the higher the OCC, the lower is the profit rate. As OCC gets to a certain
critical level, profit rates begin to plummet, and structural crisis of capitalism occur. In
order to stop this process, "financialization" begins.
The case of the USA is that its financialization process has been running for so long that
its already existing infrastructure is crumbling. However, the fact that it is crumbling is
just the symptom, not the cause. The real cause is that the USA begun to financialize first
because it reached an extremely high OCC first.
At first, the USA didn't rebuild its infrastructure simply because it is not profitable.
Now, it doesn't do it for the simple fact it can't: with much pain, it managed to bring
astronauts beck to the ISS; the infrastructural abyss is now at more than USD 1.1 trn and
widening. By now it would have to import a lot of material and expertise from other countries
if it really wanted to rebuild and update its infrastructure. Industry lost so much
importance in the US economy that, last year, American industry fell to a record level (due
to the trade war against China) and the US GDP actually rose - due to the financial sector
and services sector compensating for the loss.
The most extreme case of a First World country turning into a mere financial hub is the
UK: its trade deficit already is at a gargantuan -14%, and its budget only doesn't collapse
because its huge financial hub in London covers that up to more than 7% (i.e. halves).
While I agree with spending on infrastructure projects like we did during the great
depression and more, it should be noted that this is not going to save the service economy.
Very few people actually work in construction and allied trades directly. So while in normal
times, this kind of spending would be a huge shot in the arm because these folks would then
spend in the service economy, coronafear will reduce the effect considerably.
We have destroyed our economy and reduced our civil liberties, perhaps irrevocably, for a
virus that kills less than 1% of the population and almost all of whose victims are the
elderly and ill, usually both. As recently as a hundred years ago, humanity used to be faced
with diseases like smallpox, various plagues, and assorted bacteriological diseases that
would routinely kill 30-70% of the population ... and we kept on. What has happened to
us?
If she joined the ticket as former Vice President Joe Biden's running mate, our broken
land might mend.
We collectively must implore a reluctant Michelle Obama to make herself available to
join Joe Biden's ticket as the Democratic Party's vice presidential nominee. Let me explain
why.
On top of a global pandemic, our cities now are facing massive unrest, violence and
destruction, and threats to the social order, arising from yet another series of horrific
killings of unarmed African-American men and women by the police -- and all built upon
decades of racial injustice and inequality.
No, it is not about racism. Electing a Black president will not save America. The real
issue is the economic system. America needs
a major redistribution of wealth.
Does he not understand that ? Yes he does, all to well. Becouse they planned it that way,
when they deliberately released the corona virus germ warfare weapon!
As I wrote here 3 months ago 'they won't need so many strawberry pickers becouse ther won't
be so many to eat strawberry's! Think about it. Agend 21. Starts 2020.
The democrats are all part of this genocide.
How long has it taken to recruit train and equip the storm troopers on the streets of
America right now.
America will regret what it voted for /wished for.
Financial hub? Call it what it is. A laundromat for dirty money and ill-gotten gains. Problem
is, or problem for those who aren't the extractive wealthy elite which is most of us, more
and more money is dirty money and ill-gotten gains even if it is "made" legally. The most
recent multi-trillion dollar handout, looting and pillaging actually, to the wealthy
extractive elite as part of the so-called "stimulus package" was perfectly legal but dirty
money and ill-gotten gains nonetheless.
The stock market is not only a depravity indicator and an indicator of wealth disparity,
it's also a massive laundromat for legal and illegal ill-gotten gains. I would venture that
at least 30% of the stock market is comprised of black market illegal money being laundered
at any given time.
If Trump is as smart as he claims to be he will...
He doesn't need to be smart per se.
He just needs to be **smarter** than Joe Biden.
Just like he was smarter than Hillary + all the legacy media in 2016 to such an extent
that to deny they had been outsmarted... #Russiagate was born lol
The irony is that Biden is a lowlife who inflames hatred and reinforces divisions while
holding up a moral shield. He has always chosen expedient lies over the truth to get elected.
Support for him shows a desperate hate of Trump.
The Soviet Union collapsed because the Soviet Economic-Political Elite discovered that they
could make more money and have more power by breaking the Union apart to devour the public
utilities. The US Economic-Political elite have now made a similar decision. But whereas the
Soviet Union had hard assets that could be privatised for profit, the US has public expenses
that will be eliminated in order to free up resources for more financialization. The US elite
will break apart the US as a nation state in order to harvest public pension funds, social
security will be privatised and public debt will explode as the government (through the
Federal Reserve) will guarantee stock market prices - get ready for DOW 50,000 in the next 5
years and a 40 trillion national debt, also get ready for collapse of the US as a functioning
state the day after that.
FIRE is a term used my Michael Hudson and other likeminded political-economists. He uses
it so often it's hard to provide the initial instance. However, Hudson did write two books
about how the FIRE sector gained its dominance, Killing the Host & J is for Junk
Economics . It this video interview
from 2017 , Hudson explains to Max Keiser about the latter book and how it relates to the
just completed election, which begins at the 12:45 mark. That website also links to all
previous Keiser Reports where I hope to find the specific interview that discusses the
FIRE sector. This one does too, but it's not the specific topic discussed. I guarantee you'll
learn a lot from the 10.5 minute interview!
There is some evidence that "cooler heads" are exerting a "veto" influence on the Trump
admin, but who exactly they are is not apparent. But so far this year the US was on the brink
of a) attacking Iran with Air Force and missiles. b) dropping nuclear option on China through
withdrawal of HK privileges, sanctioning CPC officials, and cancelling thousands of student
visas. and c) ordering the military into the streets to "dominate" the protesters. All of
these events seemed a sure thing until they suddenly didn't in fact occur.
I expect some kind of "unity ticket" will be offered to the American people for November
and some degree of mild reforms initiated to help the vast majority get by.
Progressive Democrats had their best opportunity since the 1960s handed to them in the
wake of Trumps's election, and most of them effectively squandered it by allowing their
energy to be diverted into the Russiagate/impeachment nothing-burger box.
Petri Krohn wants redistribution of wealth. Let's look at the idea.
The opposing viewpoint says wealth is not a pie. Wealth comes from growth, innovation,
creativity. It is many pies.
Of course, you can't bake your own pie without capital. So, how do we redistribute
capital?
You can get it from the government via the banks, if they are 'ordered' to grant loans.
They aren't. So, you can't get it from government or banks.
You can take it from the already wealthy. Taxes is the historic way to take wealth from
the wealthy. But the tax schedule no longer takes significant amounts from the wealthy. And
Congress is corrupted by the wealthy so that route is closed also. There will be no major new
taxes on the wealthy.
How can we redistribute wealth, then?
Simplest way is Development Zones with no taxes for a 5-10 years. Investors will pour
money in from around the world. New businesses can be started, innovation can be nourished
and people can prosper.
Use the system to expand the base of participation and do it in the zones of poverty and
redevelopment where the poor and disadvantaged are.
China does this. It works. Other nations do it. They call them FTZ (free trade zones).
Russia has some.
Trump was going to do this with his original Infrastructure program. The Dems stopped it.
Won't allow any progress.
But, this is the way to go. You raise people out of poverty, your increase their options
and income, you grow their region, and lots of new pies are baked.
The 1% made their decision to milk all the wealth long before the USSR's implosion. The
regeneration of the Rentier Class began in Europe after the 1848 Revolutions and took
hold of power during the latter half of the Victorian Age of the British Empire. Hudson
explains how the erasure of Classical Economists from college curricula began after WW1 and
connects it to the privatization of the Treasury via the Fed in 1913. The demise of Simon
Patten and his school of thought was replaced by what became known as the Chicago School. Its
first attempt to gain all the wealth was destroyed by the Ponzi Scheme it engineered during
the 1920s. Forced underground from 1929-1945, it emerged from WW2 very strong since its
manipulation of the university educational system still held, and the Cold War was contrived
in part to make the Chicago School THE paramount economic thought center with Harvard as a
close second. There's more to the story, but that'll suffice for now.
At least this is what the brave people on FOX are saying. The ones who feel very secure in
their jobs. Just a few weeks ago the talking points were ... 'Democrats are traitors because
they are scared that the economic boom is going to start just before the election'.
These people really believe that all you need is another capital gains tax cut and
everything will go back to normal. Don't any of these people think about the permanent trauma
on the rest of us? Sure, once Fauci gives us the call clear, I'm taking the last of my
savings and going to Disneyland and going to go to restaurants. Heck no. I'm terrified.
Consumers even the most profligate ones are going to permanently change their behavior. BTW
if you are really cynical, many will become more cautious and some just might break down and
become drug addicts. I don't see a happy medium here.
"... Russiagate became a convenient replacement explanation absolving an incompetent political establishment for its complicity in what happened in 2016, and not just the failure to see it coming. ..."
"... Because of the immediate arrival of the collusion theory, neither Wolf Blitzer nor any politician ever had to look into the camera and say, "I guess people hated us so much they were even willing to vote for Donald Trump ..."
" Russiagate became a convenient replacement explanation absolving an incompetent political establishment for its complicity
in what happened in 2016, and not just the failure to see it coming.
Because of the immediate arrival of the collusion theory, neither Wolf Blitzer nor any politician ever had to look into
the camera and say, "I guess people hated us so much they were even willing to vote for Donald Trump ."
As a peedupon all I can see is that the elite seem to be fighting amongst themselves or (IMO) providing cover for ongoing elite
power/control efforts. It might not be about private/public finance in a bigger picture but I can't see anything else that makes
sense
"... The media would sensationalize any act of violence involving white on black and brown. They ignored all the violence of black and brown on white. This uneven media reporting was based on their desire to reinforce the mantra of "white people are evil racists, black and brown people are victims and good." ..."
"... Because it would paint themselves as supporters of "social justice" they created a false version of reality where everything bad in society was because of white people being racist. Never mind the actual causes of societal discontent being the exploitation by the elite. Because the media is the elite they don't want you to hate them. So they created a false victimizer they could blame for all the problems of society. ..."
"Partisan politics has created severe divisions in society. Such divisions restrict and
disturb people's thinking. People's support for a particular party is only a matter of
stance, which provides a shelter to politicians who violate people's interests.
"As elections come and go, it is simply about one group of elites replacing the other. The
intertwined interests between the two groups are much greater than those between the
victorious one and the electorate who vote for them.
"To cover such deception, the key agenda in the US is either a partisan fight or a
conflict with foreign countries. The severe racial discrimination and wealth disparities are
marginalized topics."
I wonder if the writer would like to see his conclusion proven wrong:
"Judging from the superficial comments and statements from US politicians on the protests,
the outsiders can easily draw the conclusion that solving problems is not on the minds of the
country, and elites are just fearlessly waiting for this wave of demonstrations to die
out."
In order to solve problems, one must know their components and roots, and that demands
honesty in making the assessment. Looking back at the assessments of Cornel West and the
producers of the Four Horsemen documentary, the main culprit is the broken political
system/failed social experiment, which are essentially one in the same as the flawed system
produced the failure. Most of us have determined that changing the system via the system will
never work because the system has empowered a Class that has no intentions on allowing its
power to be diminished, and that Class is currently using the system to further impoverish
and enslave the citizenry into Debt Peonage while increasing its own power. The #1 problem is
removing the Financial Parasite Class from power. Yes, at the moment that seems as difficult
as destroying the Death Star's reactor before it blows up Yavin 4, but the stakes involved
are every bit as high as those portrayed in Lucas's Star Wars , as the Evil of the
Empire and that of the Parasite Class are the same Evil.
What political demand could one possibly make by now, and of whom would you make it? Reform
is impossible, and there's no legitimate authority left (if there ever was in the first
place).
Posted by: Russ | Jun 1 2020 17:49 utc | 23
Indeed, apart from the shock of witnessing one of them murderd in plain daylight as if he
were a vermin, I think that the people, especially young, reacted that anarchic way because
they really see no future. They see how their country functions at steering wheel blows
especially through the pandemic, preview they will e in the need soon, even that they will be
murdered without contemeplation,and go out there to grab whatever they could...
We forget that they are under Trump regime and Trump has supported always their foes,
witnessing such assassination in plain daylight, without any officila doing nothing, not even
charging the obvious culprits was felt by tese people as if the hunting season on nigers and
lefties" had been declared. No other way yo ucan explain the sudden union of such ammount of
black and white young people. Thye felt all targets of the ops or of Trump´s white
supreamcist militias after four years of being dgreaded as subhumans. In fact, were not for
the riots to turn so violent, I fear carnages of all these peoples would have started.
The people, brainwashed or not, at least when they are young, still conserve some survival
instincts and some common sense too.
Yes, the republican model of organization is naturally unstable and doomed to collapse.
Everybody knows what happened to the Roman Republic: tendency to polarization, civil war and
collapse.
However, the reverse is also true: when the economy is flying high, every political system
works. Everybody is happy when there's wealth for everybody.
The present problem, therefore, is inherent to the capitalist system, not with the
republican system per se.
The media and politicians have repeated a mantra for years n order to gain power by
exploiting social and racial faultlines. They didn't want to deal with the actual cause of
societal discontent which is their own support of an exploitative economic system which
disempowers and pushed down everyone but the 1%. So they invented a false cause of discontent
in order to appear as saviors who are bringing a message of Hope and Change
White people are racist. White people are inherently evil and greedy. THAT IS THE PROBLEM.
Black and Brown people are good, Black and Brown people are victims of the racist greedy
evil white people.
White people are racist. White people are inherently evil and greedy. THAT IS THE
PROBLEM. Black and Brown people are good, Black and Brown people are victims of the racist
greedy evil white people.
After enough time has gone by, we have a generation of young people of all colors who
believe the above mantra with all their heart because of hearing that mantra every day in the
media, in schools, in movies, from leaders. The media knowing that, would then look for ways
to exploit their hatred of "white racism against black and brown people."
The media would sensationalize any act of violence involving white on black and brown.
They ignored all the violence of black and brown on white. This uneven media reporting was
based on their desire to reinforce the mantra of "white people are evil racists, black and
brown people are victims and good."
Because it would paint themselves as supporters of "social justice" they created a
false version of reality where everything bad in society was because of white people being
racist. Never mind the actual causes of societal discontent being the exploitation by the
elite. Because the media is the elite they don't want you to hate them. So they created a
false victimizer they could blame for all the problems of society.
Because violence from black and brown on white was never reported by the media except in
local news, people only heard from the national narrative of white violence of black and
brown because people don't pay attention to local news. They grew up believing the police
only abused black and brown people, they grew up believing that random street violence was
only from white people against black and brown. None of which is true.
This was bound to end up with a generation of people who believed the false narrative
where America is a nation where black and brown people are always the victims, and white
people are always the victimizers. And as you can see in the riots, the rioters are almost
all under 30. A generation has grown up being brainwashed by the mantra:
White people are racist. White people are inherently evil and greedy. THAT IS THE PROBLEM.
Black and Brown people are good, Black and Brown people are victims of the racist greedy
evil white people.
That is why so many people are perfectly fine with the violence and looting based on a few
recent incidents of white on black violence. During the same time period there was plenty of
black on black violence, plenty of brown on brown violence, and plenty of black and brown on
white violence. But the national media never highlights any violence but white on black and
brown. That is what has led to the new normal where any violence involving white on black or
brown will be blown up WAY out of proportion to the reality of violence in America. Which is
an equal opportunity game. A generation of people has grown up to believe that white racism
is the cause of all the problems.
Meanwhile the elites sit in their yachts and laugh. The rabble are busy fighting over race
when the real issue is ignored. The media has done their job admirably. Their job is to
deflect rage from the elite to racism. From wealthy exploitation of the commons, to racism.
As long as the underclasses are busy blaming racism then the politicians, business leaders,
and media are satisfied because they are the actual ones to blame. They are the enemy.
They blame racism for all the problems as a way to hide that truth of their own culpability
for the problems in society. THEIR OWN GREED AND CONTEMPT FOR THE UNDERCLASS.
Don't understand the protests? What you're seeing is people pushed to the edge
By KAREEM ABDUL-JABBAR – Los Angeles Times
What was your first reaction when you saw the video of the white cop kneeling on
George Floyd's neck while Floyd croaked, "I can't breathe"?
If you're white, you probably muttered a horrified, "Oh, my God" while shaking your
head at the cruel injustice. If you're black, you probably leapt to your feet, cursed,
maybe threw something (certainly wanted to throw something), while shouting, "Not @#$%!
again!" Then you remember the two white vigilantes accused of murdering Ahmaud Arbery as
he jogged through their neighborhood in February, and how if it wasn't for that video
emerging a few weeks ago, they would have gotten away with it. And how those Minneapolis
cops claimed Floyd was resisting arrest but a store's video showed he wasn't. And how the
cop on Floyd's neck wasn't an enraged redneck stereotype, but a sworn officer who looked
calm and entitled and devoid of pity: the banality of evil incarnate.
Maybe you also are thinking about the Karen in Central Park who called 911 claiming
the black man who asked her to put a leash on her dog was threatening her. Or the black
Yale University grad student napping in the common room of her dorm who was reported by a
white student. Because you realize it's not just a supposed "black criminal" who is
targeted, it's the whole spectrum of black faces from Yonkers to Yale.
You start to wonder if it should be all black people who wear body cams, not the
cops.
What do you see when you see angry black protesters amassing outside police stations
with raised fists? If you're white, you may be thinking, "They certainly aren't social
distancing." Then you notice the black faces looting Target and you think, "Well, that
just hurts their cause." Then you see the police station on fire and you wag a finger
saying, "That's putting the cause backward."
You're not wrong -- but you're not right, either. The black community is used to the
institutional racism inherent in education, the justice system and jobs. And even though
we do all the conventional things to raise public and political awareness -- write
articulate and insightful pieces in the Atlantic, explain the continued devastation on
CNN, support candidates who promise change -- the needle hardly budges.
But COVID-19 has been slamming the consequences of all that home as we die at a
significantly higher rate than whites, are the first to lose our jobs, and watch
helplessly as Republicans try to keep us from voting .
Bert Schlitz , May 31, 2020 7:14 pm
The protests are self centered crap blacks do year after year. Considering 370 whites over
100 Latinos were killed by cops, many as bad as that guy in minnie. Blacks have a Trumptard
mentality. We have a ecological disaster, a economic disaster and pandemic(when th they are
spreading). Yet let's whine about one bad cop related homicide.
This may begin the breakup of the Democratic party and the blacks. The differences are just
to large.
Kaleberg , May 31, 2020 9:40 pm
It's rather sad that it takes a massive civil disturbance to get the authorities to arrest a
man videotaped killing another. You'd think that would just happen as a matter of course, but
that's how it works in this country.
THE WAY BACK -- THE ONLY WAY BACK -- BOTH ECONOMICALLY AND POLITICALLY (pardon me if I take
up a lot of space -- almost everyone else has said most of what they want to say)
The minimum wage itself should only mark the highest wage that we presume firms with highest
labor costs can pay* -- like fast food with 25% labor costs. Lower labor cost businesses --
e.g., retail like Walgreens and Target with 10-15% labor costs can potentially pay north of
$20/hr; Walmart with 7% labor costs, $25/hr!
That kind of income can only be squeezed out of the consumer market (meaning out of the
consumer) by labor union bargaining.
Raise fast food wages from $10/hr to $15/hr and prices go up only a doable 12.5%. Raise
Walgreens, Target from $10/hr to $20/hr and prices there only go up a piddling 6.25%. Keeping
the math easy here -- I know that Walgreens and Target pay more to start but that only
reinforces my argument about how much labor income is being left on the (missing) bargaining
table.
Hook up Walmart with 7% labor costs with the Teamsters Union and the wage and benefit sky
might be the limit! Don't forget (everybody seems to) that as more income shifts to lower wage
workers, more demand starts to come from lower wage workers -- reinforcing their job security
as they spend more proportionately at lower wage firms (does not work for low wage employees of
high end restaurants -- the exception that actually proves the rule).
Add in sector wide labor agreements and watch Germany appear on this side of the Atlantic
overnight.
* * * * * *
If Republicans held the House in the last (115th) Congress they would have passed
HR2723-Employee Rights Act -- mandating new union recertification/decertification paper ballots
in any bargaining unit that has had experienced "turnover, expansion, or alteration by merger
of unit represented employees exceeding 50 percent of the bargaining unit" by the date of the
enactment -- and for all time from thereafter. Trump would have signed it and virtually every
union in the country would have experienced mandated recert/decert votes in every bargaining
unit. https://www.congress.gov/bill/115th-congress/house-bill/2723/text
Democrats can make the most obvious point about what was lacking in the Republican bill by
pretending to be for a cert/recert bill that mandates union ballots only at places where there
is no union now. Republicans jumping up and down can scream the point for us that there is no
reason to have ballots in non union places and not in unionized workplaces -- and vice
versa.
* * * * * *
Biggest problem advocating the vastly attractive and all healing proposal of federally
mandated cert/recert/decert elections seems to be that nobody will discuss it as long as nobody
else discusses it -- some kind of innate social behavior I think, from deep in our (pea sized)
midbrains. How else can you explain the perfect pitch's neglect. I suspect that if I waved a
$100 bill in front of a bunch of progressives and offered it to the first one would say the
words out loud: "Regularly scheduled union elections are the only way to restore shared
prosperity and political fairness to America", that I might not get one taker. FWIW.
Another big problem when I try to talk to workers about this on the street -- just to get a
reaction -- is that more than half have no idea in the world what unions are all about. Those
who do understand, think the idea so sensible they often think action must be pending.
econ101 should tell you that the eitc is a subsidy to the corporations that hire droves of
low-paid workers, with meagre spillover to the workers themselves. More effective and
persistent improvements to social justice would come from significant increases to the minimum
wage, societal support to unionization, and other efforts to increase the threshold of what is
considered by society to be the bare minimum of compensation for work.
The concomitant decline in the value of the dollar and the terms of trade would be small
compared to the reduction in inequality.
Bernard , June 1, 2020 5:21 pm
such a third world country as America , riots are the only way to get heard for some. the
Elite have been looting us blind for decades, the Covid bail outs to Corporations by the Elites
in DC as the latest installment of Capitalist theft know as Business as Usual.
it's all about the money.
sick,sick country praising capitalism over everything else.
the comfortable white people are afraid of losing what they have. Divide and Conquer is the
Republican and now Democratic way they run America.
to the rich go the spoils. the rest, well. screw them .
the Lee Atwater idea to use coded language when St. Reagan implemented the destruction of
America society, coincided with St. Thatcher's destruction of England.
the White elites post Civil War in the South knew how to divide the poor whites and the poor
blacks.
that is how we got to where we are now.
Did you see any of the bankers go to jail for the 2008 ripoff?
not one and they got bonuses for their "deeds."
America, such a nation of Grifters, Thieves and Scam artist. like Pelosi , McConnel and all
the people in DC and the Business men who sold out our country and the American people for
"small change".
God forbid Corporations should ever have to pay for the damage they have done to America and
its" people. My RIGHT to Greed trumps your right to clean air, water, safe neighborhoods, says
Capitalism!
the Rich get richer and the poor get poorer, Everybody Knows!!!
But let's not focus on things lest some uncomfortable truths.
The nightly news, when talking about the effect of the pandemic on the populace in, say, Southeast Asian, African,
South American, countries, invariably refer to the tenuous hold on life of their working poor; they don't really have
a job. Each day they rise and go forth looking for work that pays enough that they and their family can continue to
subsist. It is, in some countries, a long-standing problem.
Sound too familiar? Sometime in the late 80s (??) Americans began to see day labors line up at Home Depot and Lowe's
lots in numbers not seen since The Great Depression. Manufacturing Corporations began subbing out their work to
sub-contractors, otherwise known as employees without benefits; Construction Contractors subbed out construction work to
these employees without benefits; Engineering Firms subbed out engineering to these employees without benefits;
Landscapers' workers were now sub-contractors/independent contractors; Here, in the SF Bay Area, time and again, we
saw vans loads of undocumented Hispanics under a 'Labor Contractor' come in from the Central Valley to build condos; the
white Contractor for the project didn't have a single employee; none of the workers got a W-2. Recall watching, sometime
in the 90s (??), a familiar, well dressed, rotund guest from Wall Street, on the PBS News Hour, forcefully proclaiming
to the TV audience:
American workers are going to have to learn to compete with the Chinese; Civil Service employees, factory
employees, are all going to have to work for less
All this subcontracting, independent contractors, was a scam, a scam meant to circumvent paying going wages and
benefits, to enhance profit margins; a scam that transferred more wealth to the top.
Meanwhile back at The Ranch, after the H1B Immigration Act of 1990, Microsoft could hire programmers from India for
one-half the cost of a citizen programmer. Half of Bill Gates' fortune was resultant these labor savings; the other half
was made off those not US Citizens. Taking a cue, Banks, Bio-Techs, some City and State Governments began
subcontracting out their programming to H1Bs. Often, the subcontractors/labor contractors (often themselves immigrants)
providing the programmers, held the programmers' passports/visas for security.
In the aftermath of Hurricane Katrina,
friends of Bush/Cheney made fortunes on clean up contracts they subbed out for next to nothing; the
independent/subcontractor scam was now officially governmentally sanctioned.
By about 2000 we began to hear the term gig-workers applied to these employees without benefits. Uber appeared in
2007 to be followed by Lift. Both are scams based on paying less than prevailing wages, on not providing worker
benefits,
These days, the nightly news, when talking about the effect of the pandemic on the populace in America, shows footage
of Food Banks in California with lines 2! miles long. Many of those waiting in these lines didn't have a real job
before; they were gig-workers; they can't apply for Unemployment Benefits. It is estimated that 1.6 million American
workers (1% of the workforce) are gig-workers; they don't have a real job. That 1% is in addition to the 16 million
American workers (10% of the workforce) that are independent contractors. Of the more than 40 million currently
unemployed Americans, some 17 million are either gig-workers or subcontractors/independent contractors. All of these are
scams meant to transfer more wealth to the top. All of these are scams with American Workers the victims; scams, in a
race to the bottom.
Democrats in the so called battle ground states would clean up at the polls with this. Why do you think
those states strayed? It was because Obama and Hillary had no idea what they really needed. Voters had no
idea what they SPECIFICALLY needed either -- UNIONS! They had been deunionized so thoroughly for so long
that they THEMSELVES no long knew what they were missing (frogs in the slowly boiling pot).
In 1988 Jesse Jackson took the Democratic primary in Michigan with 54% against Dukakis and Gephardt.
Obama beat Wall Street Romney and red-white-and-blue McCain in Wisconsin, Ohio and Michigan. But nobody
told these voters -- because nobody seems to remember -- what they really needed. These voter just knew by
2016 that Democrats had not what they needed and looked elsewhere -- anywhere else!
Strom presents an easy as can be, on-step-back treatment that should go down oh, so smoothly and
sweetly. What do you think?
Matthew young
,
May 31, 2020 10:51 am
Not overnight, but a few days in 1972 when Nixon fouled the defaults and none of us knew how badly at
the time.
Reseting prices takes a long time, it is not magic and Nixon had fouled the precious metals market,
overnight. That and all the commodities market needed a restructure to adapt to our new regime.
Our way out was to export price instability to Asia. My suggestion this time is to think through the
math a bit before we all suddenly freak and do another over nighter. Think about how one might spread the
partial default over a 15 year period.
All of us, stuck with 40 years of flat earth economic planning without a clue. Now we have a year at
best to nail down the Lucas criteria and get a default done with some science behind it.
I doubt it. I figure we will all go to monetary meetup with our insurance contracts ready to be
confirmed. That is impossible and Trump will be stuck doing a volatile, overnight partial default, like
Nixon.,
EMichael
,
May 31, 2020 12:02 pm
Dennis,
The states you mentioned have overwhelmingly voted Rep for the last 3 decades in their state races. One
of them has instituted right to work laws, and the other two have come very close to doing the same.
The white working class cares nothing about unions at all. They have been voting against them for
decades. It's why union rights and membership has deteriorated for 5 decades.
run75441
,
May 31, 2020 12:32 pm
EM:
Notably, I had posted the 2016 presidential election numbers numbers for MI, PA, and WI which
resulted in an "anyone but Trump or Clinton vote" and gave th election to Trump. The "anyone but Trump
or Clinton vote" resulted in a historical high for the "others" category and was anywhere from 3 to 6
times higher than previously experienced in other presidential elections. It also resulted in those
three states casting Electoral votes for a Republican presidential candidate since 1992 – MI, 1988 –
PA, and 1988 – WI. While this does defeat your comment above on those states voting Republican, it does
not take away from your other comment on Sarandon. People punished themselves with Trump in spite of
every obvious clue he demonstrated of being a loon. In this case the white working class voted against
themselves for Trump and those of Sarandon's ilk helped them along by voting for "others."
EMichael
,
May 31, 2020 12:45 pm
Run, I stated in "state elections".
Y'know one other thing I have seen in MI voting is that the amount of people who voted did not cast a
voted for President also was the highest ever. Thinking these are the same people like Sarandon. It was
close to 90,000 in MI.
"87,810: Number of voters this election who cast a ballot but did not cast a vote for president. That
compares to 49,840 undervotes for president in 2012.
5 percent: Proportion of voters who opted for a third-party candidate in this election, compared to 1
percent in 2012."
Thanks for your comment and the link. Wow! Where to start, huh?
SEIU was a player from the get go, but I don't want to go there just now.
Before Reagan, there was the first rust belt move to the non-union south. Why was the south so
anti-union? I think this stuff is engendered from infancy and most of us are incapable of thinking anew
when it comes to stuff our parents 'taught' us. MLK was the best thing that ever happened to the dirt-road
poor south, yet they hated him and they hated the very unions that might have lifted them up. They did
seem to take pleasure in the yanks' loss of jobs.
I think the Reagan era was prelude to what is going on now, i.e., going backward while yelling whee
look at me go. No doubt, Reagan turned union members against their own unions. But, the genesis of demise
probably lay with automation and the early offshoring to Mexico. By Reagan, the car plants were losing
jobs to Toyota and Honda and automation. By 1990, car plants that had previously employed 5,000, now
automated, produced more cars employing only 1200. At the time, much of the nation's wealth was still
derived from car production.
Skipping forward a bit, the democrats blew it for years with all their talk about the 'middle-class'
without realizing it was the 'disappearing middle-class'. They ignored the poor working-class vote and
lost election after election.
I've come to not like the term labor, think it affords capital an undeserved status, though much
diminished, I think thought all workers would be better off in a union. Otherwise, as we are witnessing,
there is no parity between workers and wealth; we are in a race to the bottom with the wealth increasingly
go to the top.
ken melvin
,
May 31, 2020 1:15 pm
Matthew – thanks for your comment
I think that we are into a transition (about 45 yrs into) as great as the industrial revolution. We, as
probably those poor souls of the 18th and 19th centuries did, are floundering, unable to come to terms
with what is going on.
I also think that those such as the Kochs have a good grasp of what is going on and are moving to
protect themselves and their class.
ken melvin
,
May 31, 2020 1:21 pm
EMichael, thanks for the comment
Are you implying that the politicians are way behind the curve? If so, I think that you are right.
Let me share what I was thinking last night about thinking:
Descartes' problem was that he desperately wanted to make philosophy work within the framework of his
religion, Catholicism. Paul Krugman desperately wants to make economics all work within the Holy Duality
of Capitalism and Free Markets. Even Joe Stiglitz can't step out of this text. All things being possible,
it is possible that either could come up with a solution to today's economic problems that would fit
within the Two; but the odds are not good. Better to think anew.
We see politicians try and try to find solutions for today's problems from within their own
dogmas/ideologies. Even if they can't, they persist, they still try to impose these dogmas/ideologies in
the desperate hope they might work if only applied to a greater degree. How else explain any belief that
markets could anticipate and respond to pandemics? That markets could best respond to housing demand?
Racism Is the Biggest Reason the U.S. Safety Net Is So Weak
Harvard economist Alberto Alesina, who died last week, found that ethnic divisions made the country less
effective at providing public goods.
7:50 AM · May 31, 2020
The Alesina/Glaeser/Sacerdote paper on why America doesn't have a European-style welfare state -- racism
-- had a big impact on my own thinking 2/
For a long time anyone who pointed out that the modern GOP is basically a party that serves plutocratic
ends by weaponizing white racism was treated as "shrill" and partisan. Can we now admit the obvious? 3/
EMichael
,
May 31, 2020 1:53 pm
Ken,
Half the politicians are behind the curve. When George Wallace showed the GOP how to win elections
(Don't ever get outniggerred) the Dem Party failed to see and react to it. Then the Kochs of the world
stepped in with the John Birch society (fromerly the KKK) and started playing race against class, which
resulted in the white working class supporting anti-labor pols and legislation.
The election of Obama caused the racists to go totally off the reservation with the Tea Party (formerly
the KKK and the John Birch Society) and lead us to where we are now.
Of course, the corporate world followed the blueprint.
Way past time for the Dem Party to start attacking on a constant basis the racist GOP. And also to
start appealing more to workers, though the 2016 platform certainly did that to a large degree, and the
2020 platform looks to be mush more supportive of labor than ever.
"It's a detailed and aggressive agenda that includes doubling the minimum wage and tripling funding for
schools with low-income students. He is proposing the most sweeping overhaul of immigration policy in a
generation, the biggest pro-union push in three generations, and the most ambitious environmental agenda
of all time.
If Democrats take back the Senate in the fall, Biden could make his agenda happen. A primary is about
airing disagreements, but legislating is about building consensus. The Democratic Party largely agrees on
a suite of big policy changes that would improve the lives of millions of Americans in meaningful ways.
Biden has detailed, considered plans to put much of this agenda in place. But getting these plans done
will be driven much more by the outcome of the congressional elections than his questioned ambition.
A big minimum wage increase
Biden's commitment to raising the federal minimum wage from its current $7.25 to $15 an hour is one of
the least talked-about plans at stake in the 2020 election.
In the 2016 cycle when Hillary Clinton and Bernie Sanders disagreed about raising the minimum wage to
$15 per hour, the debate was the subject of extensive coverage. By the 2020 cycle, all the major
Democratic candidates were on board, so it didn't come up much. But it's significant that this is no
longer controversial in Democratic Party circles. If the party is broadly comfortable with the wage hike
as a matter of both politics and substance, Democrats in Congress are likely to make it happen if it's at
all possible.
Noji Olaigbe, left, from the Fight for $15 minimum wage movement, speaks during a McDonald's workers'
strike in Fort Lauderdale, Florida, on May 23, 2019. David Santiago/Miami Herald/Tribune News
Service/Getty Images
The $15-an-hour minimum wage increase is also a signature issue for Biden. He endorsed New York's
version of it in the fall of 2015, back when he was vice president and his boss Barack Obama was pushing a
smaller federal raise.
A big minimum wage hike polls well, it aligns with Biden's thematic emphasis on "the dignity of work,"
and it's a topic on which he's genuinely been a leader. It reflects his political sensibilities, which are
moderate but in a decidedly more populist mode than Obama's technocratic one.
Biden has a big Plan A to support organized labor, and a Plan B that's still consequential and
considerably more plausible politically.
Beyond a general disposition to be a good coalition partner to organized labor, the centerpiece of his
union agenda is support for the PRO Act, which passed the House of Representatives earlier this year.
That bill, were it to become law, would be the biggest victory for unions and collective bargaining
since the end of World War II -- overriding state "right to work" laws, barring mandatory anti-union
briefings from management during organizing campaigns, imposing much more meaningful financial penalties
on companies that illegally fire workers for pro-union activity, and allowing organizing through a
streamlined card check process. Separately, Biden and House Democrats have lined up behind a Public
Service Freedom to Negotiate Act that would bolster public sector workers' collective bargaining rights. "
One of the big issues here is Biden not committing to killing the filibuster, in addition to Dem
Senators not in agreement either. That would be a disaster for any legislation.
Makes sense not to run on ending the filibuster now, as there is a chance trump can win and teh GOP
keeps the Senate. But if the opposite happens and Biden wins and Dems take the Senate, they will have to
pivot quickly to getting rid of the filibuster. Apply any and all possible pressure to those Dem Senators
who do not agree with that. Threaten them with losing committee posts; primary opponents; the kitchen
sink.
Yes, it poses a risk in the event the Reps get a trifecta again, but it is time to flood progressive
legislation into law, and getting rid of the filibuster is the only way.
And if they can hit the trifecta and bring this platform to fruition, they won't have to worry about a
GOP trifecta for a long, long time. Possibly forever.
Why Doesn't the United States Have a European-Style Welfare State?
By Alberto Alesina, Edward Glaeser and Bruce Sacerdote
Abstract
European countries are much more generous to the poor relative to the US level of generosity. Economic
models suggest that redistribution is a function of the variance and skewness of the pre-tax income
distribution, the volatility of income (perhaps because of trade shocks), the social costs of taxation and
the expected income mobility of the median voter. None of these factors appear to explain the differences
between the US and Europe. Instead, the differences appear to be the result of racial heterogeneity in the
US and American political institutions. Racial animosity in the US makes redistribution to the poor, who
are disproportionately black, unappealing to many voters. American political institutions limited the
growth of a socialist party, and more generally limited the political power of the poor.
rick shapiro
,
May 31, 2020 2:07 pm
This dynamic is not limited to low-skill jobs. I have seen it at work in electronics engineering. When
I was a sprat, job shoppers got an hourly wage nearly twice that of their company peers, because they had
no benefits or long-term employment. Today, job shoppers are actually paid less than company engineers;
and the companies are outsourcing ever more of their staffing to the brokers.
Without labor market frictions, the iron law of wages drives wages to starvation levels. As sophisticated
uberization software eliminates the frictions that have protected middle class wages in the recent past,
we will all need to enlist unionization and government wage standards to protect us.
ken melvin
,
May 31, 2020 2:29 pm
Rick
The big engineering offices of the 70s were decimated and worse by the mid-90s; mostly by the advent of
computers w/ software. One engineer could now do the work of 10 and didn't need any draftsman.
rick shapiro
,
May 31, 2020 2:40 pm
I was speaking of engineers with equal skill in the same office. Many at GE Avionics were laid off, and
came back as lower paid contract empoyees.
ken melvin
,
May 31, 2020 2:46 pm
Rick
Die biden
ken melvin
,
May 31, 2020 2:52 pm
beiden
The both
ken melvin
,
May 31, 2020 3:05 pm
EMichael
Minimum wage, the row about the $600, all such things endanger the indentured servant economic model
so favored in the south. Keep them poor and hungry and they will work for next to nothing. 'Still they
persist.' On PBS, a black woman cooking for a restaurant said that she was being paid less than $4/hr.
Don't understand the protests? What you're seeing is people pushed to the edge
By KAREEM ABDUL-JABBAR – Los Angeles Times
What was your first reaction when you saw the video of the white cop kneeling on George Floyd's neck
while Floyd croaked, "I can't breathe"?
If you're white, you probably muttered a horrified, "Oh, my God" while shaking your head at the cruel
injustice. If you're black, you probably leapt to your feet, cursed, maybe threw something (certainly
wanted to throw something), while shouting, "Not @#$%! again!" Then you remember the two white vigilantes
accused of murdering Ahmaud Arbery as he jogged through their neighborhood in February, and how if it
wasn't for that video emerging a few weeks ago, they would have gotten away with it. And how those
Minneapolis cops claimed Floyd was resisting arrest but a store's video showed he wasn't. And how the cop
on Floyd's neck wasn't an enraged redneck stereotype, but a sworn officer who looked calm and entitled and
devoid of pity: the banality of evil incarnate.
Maybe you also are thinking about the Karen in Central Park who called 911 claiming the black man who
asked her to put a leash on her dog was threatening her. Or the black Yale University grad student napping
in the common room of her dorm who was reported by a white student. Because you realize it's not just a
supposed "black criminal" who is targeted, it's the whole spectrum of black faces from Yonkers to Yale.
You start to wonder if it should be all black people who wear body cams, not the cops.
What do you see when you see angry black protesters amassing outside police stations with raised fists?
If you're white, you may be thinking, "They certainly aren't social distancing." Then you notice the black
faces looting Target and you think, "Well, that just hurts their cause." Then you see the police station
on fire and you wag a finger saying, "That's putting the cause backward."
You're not wrong -- but you're not right, either. The black community is used to the institutional
racism inherent in education, the justice system and jobs. And even though we do all the conventional
things to raise public and political awareness -- write articulate and insightful pieces in the Atlantic,
explain the continued devastation on CNN, support candidates who promise change -- the needle hardly
budges.
But COVID-19 has been slamming the consequences of all that home as we die at a significantly higher
rate than whites, are the first to lose our jobs, and watch helplessly as Republicans try to keep us from
voting .
run75441
,
May 31, 2020 9:39 pm
anne:
If you rcomments are not appearing they are going to spam, Just let me know and I will fish them out
of spam. Just approved 4 of yours.
Bert Schlitz
,
May 31, 2020 7:14 pm
The protests are self centered crap blacks do year after year. Considering 370 whites over 100 Latinos
were killed by cops, many as bad as that guy in minnie. Blacks have a Trumptard mentality. We have a
ecological disaster, a economic disaster and pandemic(when th they are spreading). Yet let's whine about
one bad cop related homicide.
This may begin the breakup of the Democratic party and the blacks. The differences are just to large.
Kaleberg
,
May 31, 2020 9:40 pm
It's rather sad that it takes a massive civil disturbance to get the authorities to arrest a man
videotaped killing another. You'd think that would just happen as a matter of course, but that's how it
works in this country.
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"... What is happening now is the exact same thing as Hong Kong. In any given instance of mass revolt, you have two warring factions, usually funded at the top by diametrically opposed elites. ..."
"... In Hong Kong, it is pro-western, old-guard/money versus Chinese new-guard. ..."
"... Look at the degree of organization (or lack thereof) which was able to politically assassinate Gen. Flynn! You had the dem establishment and billionaires like the Clintons, Obama-faction sycophants all the way up to the top. ..."
You are completely wrong, of course. What is happening now is the exact same thing as Hong Kong. In any given instance of mass revolt, you have two warring factions, usually funded at the top by diametrically opposed elites.
In Hong Kong, it is pro-western, old-guard/money versus Chinese new-guard. In America, we have the old-guard/money represented currently by the DJT-phenomenon, meaning Anti-globalist nationalists, and,
on the other side, you have new-money internationalists and neolibs represented by billionaires, big-tech, the democratic party
and garden-variety globalists.
Look at the degree of organization (or lack thereof) which was able to politically assassinate Gen. Flynn! You had the dem
establishment and billionaires like the Clintons, Obama-faction sycophants all the way up to the top.
You think that this event is entirely grassroots? Give me a f*cking break, vk. You are such a blatantly obvious Chinese shill, no doubt probably employed by globalist entities,
that the fact you are unable to employ an effective and probable analysis on these current "protests" reaffirm to me exactly what
you are and what you stand for.
You could also have the same oligarchs funding both sides in a divide and conquer strategy. This is a common strategy that
has been used in Turkey among others in the runup to the 1980 coup. It was also used by the US and Israel in their funding of
both sides in the Iran/Iraq war in the 80s.
In the former it was used to ramp up violence to justify a military coup. That is very probable here, except that martial law
might be the objective. Similar to the Iran/Iraq, the stoking of violence between liberals and conservatives may simply be to
wear them out for when the economy truly tanks to justify in the minds of the sheeple a greater oppression of demonstrations in
future.
US is becoming like Israel even more. Considering same people rule both countries, and same people train cops in both of them,
is it surprising 99%-ers in US are becoming treated like Palestinians?
Capitalism always prevails: everything else is either a prop up or an obstacle. An
obstacle is expected to be either ignored or destroyed. In this context, there's only so
much Asian hive mind culture (fascism) can do.
Oh, and wages are also at historical lows. The Phillips Curve is a farce, neoclassical
theory is a fraud
Nathan Tankus continues his series on the Feds response to the coronavirus. This one I think
is interesting because he makes explicit the connection between monetary and fiscal policy
and how it affects the social situation.
The Federal Reserve's Coronavirus Crisis Actions, Explained (Part 7)
Riots, Municipalities and Monetary Policy
""It feels a little silly to be publishing a technical series on the Federal Reserve's
crisis response while the United States burns from another round of police murdering Black
people. On one level, what's happening has very little to do with the intricacies of central
banking. On another level, they are intimately related. Our macroeconomic policy mix is
centered around monetary policy and our fiscal safety net has been increasingly ripped apart.
Since fiscal policy is a much more flexible tool that can be targeted to specific sectors and
groups while replacing and increasing income and wealth, it is the best tool for dealing with
discrete social problems and making sure that no one is left behind. The last major challenge
to our economic policy mix came in the 1970s when Coretta Scott King co-founded the Full
Employment Action Council to advocate for a legally enforceable right to a job. . As Coretta
said:
When Martin Luther_King, Jr., left us in 1968, he was leading the struggle for jobs and
income for every American. Martin Luther King, Jr., understood that the right to sit at a
lunch counter is no right at all when you are without a job to pay for the lunch. He knew
that the right to_attend a college is no right at all without a job to finance the education.
And the right to live in a decent neighborhood is no right at all Without a job to pay the
mortgage or rent. Many of the gains of the last two decades are threatened by the disastrous
levels of joblessness among mmonty Americans. I fear that the civil rights legislation we
struggled for, and some died for, is about to be repealed by the harsh reality of high
unemployment and persistent poverty. [...]
In my view, it's important to contextualize monetary policy in this way as these political
issues are inseparable from the technical questions of macroeconomic stabilization. Trying to
analyze the technical details of monetary policy without this context is at its core an
analytical error. People live or die, and uprise or not, based on the macroeconomic and
social policy a society pursues. I write about and advocate shifting to a fiscal policy
centered macroeconomic policy framework where financial regulation plays a subordinate
distributional, and demand restriction, role because I think that framework is the only
that's up to the task of responding to climate change and the deprivation that's leading to
civil unrest.
That framework may seem unrealistic and far away, but social instability tends to make the
seemingly unrealistic possible. The New Deal was unimaginable in the years before it
happened- and so was reconstruction
The big announcement from this month, which is mainly a negative one, is the update to the
Municipal Liquidity Facility which made it far more restrictive than many had anticipated. It
feels like a painful irony that I'm writing about this just as a major metropolitan area
erupted. With that said, it's time to dig into the minutiae ...
"... Instead of reining in the "globalist elites" he so vociferously ran against or those corporations "who have no loyalty to America," his one legislative achievement has been to award them a massive tax cut. Through it, he has maintained their favorite mix of low revenue intake and high deficits which gives Republicans a pretext to "starve the beast" and induce fiscal anorexia. ..."
"... Trump ran as a populist firebrand -- a fusion of Huey Long and Ross Perot -- and while he never abandoned that style, he has governed for the most part as a milquetoast free market Republican in perfect tandem with Paul Ryan and Mitch McConnell, one whose solution to everything is more tax cuts and deregulation: a kind of turbo-charged "high-energy Jeb." ..."
"... With the outbreak of COVID-19, many on the reformist right are hoping for the emergence of the President Trump they thought they were promised, a leader just as ready to break out of the donor-enforced "small government" straitjacket while in power as he was during the campaign. ..."
"... The heightened rhetoric against China will continue -- the one thing Trump is good at -- but it is unlikely to be matched with the required policy ..."
"... If neoliberalism excused inequality at home by extolling the equalization of incomes across the globe (millions of Chinese raised from poverty, while millions of American workers fall back into it!), the new position must shift emphasis back to ensuring a more equitable domestic distribution of wealth and opportunity across all classes and communities in this country. ..."
"... It is worth pondering what might have happened if the administration had gone the other way and followed the last piece of policy advice given by Steve Bannon before his ouster in August 2017. Bannon suggested raising the top marginal income tax rate to 44 percent while "arguing that it would actually hit left-wing millionaires in Silicon Valley, on Wall Street, and in Hollywood." ..."
"... It might well have put Trump on the path to becoming what Daniel Patrick Moynihan once proposed as a model for Richard Nixon when he gifted the 37th president a biography of Disraeli, namely a Tory Republican who could outsmart the left by crafting broad popular coalitions based on a blending of patriotic cultural conservatism with class-conscious economic and social policy. ..."
"... Then and even more so now, the idea resonates: a Reuters/Ipsos poll from January found that 64 percent of Americans support a wealth tax, a majority of Republicans included. Poll after poll has reaffirmed this. It seems as if there is right-wing populist support for taxing the rich more. ..."
"... There is one more thing to be said about the significance of taxing the rich. Up until very recently, there has been a prevailing tendency among the reformist right (with some important exceptions) to couch criticism of the elites primarily or even exclusively in cultural terms. There seems to have been a polite hesitation at taking the cultural critique to its logical economic conclusions. It is easy to excoriate the excesses of elite identity politics, the "woke" part of woke capitalism; it's something all conservatives -- and indeed growing numbers of liberals and socialists -- agree on. Fish in a barrel. ..."
"... But to challenge the capitalism part, i.e. free market orthodoxy, not in a secondary or tertiary way, but head on and in specific policy terms as Lofgren and a few others have done, would involve confronting difficult truths, namely that the biggest beneficiaries of tax cuts and Reaganite economic policy in general, which most conservatives enthusiastically promoted for four decades, are the selfsame decadent coastal elites they claim to oppose. It is they who more than anyone else thrive on financialized globalization, arbitrage and offshoring. ..."
"... In other words, it amounts to an honest recognition of the complicity of conservatism in the mess we're in, which is perhaps a psychological bridge too far for too many on the right, reformist or not. (Trigger Warning!) This separation of culture and economics has led to the farce of a self-styled nationalist president lining the pockets of his nominal enemies, the globalist ruling class. ..."
"... A conservative call to tax the rich would signal that the right is ready to end this charade and chart a course toward a more patriotic, public-spirited and yes, proudly hyphenated capitalism. ..."
"... Michael Cuenco is a writer on politics and policy. He has also written for American Affairs. ..."
They also left worker wages stagnant and increased the deficit. Where is our more nationalist economic policy?
Much has been written about the disappointment of certain segments of the right in the apparent capitulation of Donald Trump to
the agenda of the conservative establishment.
Instead of reining in the "globalist elites" he so vociferously ran against or those corporations "who have no loyalty to America,"
his one legislative achievement has been to award them a massive tax cut. Through it, he has maintained their favorite mix of low
revenue intake and high deficits which gives Republicans a pretext to "starve the beast" and induce fiscal anorexia.
The president has granted them as well their ideal labor market through an ingenious formula: double down on mostly symbolic raids
(as opposed to systemic solutions like Mandatory E-Verify) and ramp up the rhetoric about "shithole countries" to distract the media,
but keep the supply of cheap, exploitable low-skill labor (legal and illegal) intact for the business lobby.
Trump ran as a populist firebrand -- a fusion of Huey Long and Ross Perot -- and while he never abandoned that style, he has governed
for the most part as a milquetoast free market Republican in perfect tandem with Paul Ryan and Mitch McConnell, one whose solution
to everything is more tax cuts and deregulation: a kind of turbo-charged "high-energy Jeb."
With the outbreak of COVID-19, many on the reformist right are hoping for the emergence of the President Trump they thought they
were promised, a leader just as ready to break out of the donor-enforced "small government" straitjacket while in power as he was
during the campaign.
Despite signs of progress, what's more likely is a return to business as usual. Already the GOP's impulse for austerity and parsimony
is proving to be stronger than any willingness to think and act outside the box.
The heightened rhetoric against China will continue -- the one thing Trump is good at -- but it is unlikely to be matched with
the required policy, such as a long-term plan to reshore U.S. industry (that doesn't just rely on blindly giving corporations the
benefit of the doubt). At this point, we already know where the president's priorities lie when given a choice between the advancement
of America's workers or continued labor arbitrage and carte blanche corporate handouts.
Lest they be engulfed by it like everyone else, the reformist right should ask: is there any way to stand athwart the supply-side
swamp yelling Stop?
Many of these conservatives lament the Trump tax cut not just because it was a disaster that failed to spark reinvestment, left
wages stagnant, needlessly blew up the deficit and served as a slush fund for stock buybacks, but more fundamentally because it betrayed
the overwhelming intellectual inertia and lack of imagination that characterizes conservative policymaking.
More than in any other issue then, a distinct position on taxes would make the new conservatism truly worth distinguishing from
the old: tax cuts were after all the defining policy dogma of the neoliberal Reagan era.
If neoliberalism excused inequality at home by extolling the equalization of incomes across the globe (millions of Chinese raised
from poverty, while millions of American workers fall back into it!), the new position must shift emphasis back to ensuring a more
equitable domestic distribution of wealth and opportunity across all classes and communities in this country.
A reformulation of fiscal policy along populist economic nationalist lines can help with that.
It is worth pondering what might have happened if the administration had gone the other way and followed the last piece of policy
advice given by Steve Bannon before his ouster in August 2017. Bannon suggested raising the top marginal income tax rate to 44 percent
while "arguing that it would actually hit left-wing millionaires in Silicon Valley, on Wall Street, and in Hollywood."
Such a move would have been nothing short of revolutionary: it would have been a faithful and full-blown expression of the populist
economic nationalism Trump ran on; it would have presented a genuine material threat to the elite ruling class of both parties, and
likely would have pre-empted the shock value of Alexandria Ocasio-Cortez proposing a 70 percent top marginal rate.
It might well have put Trump on the path to becoming what Daniel Patrick Moynihan once proposed as a model for Richard Nixon when
he gifted the 37th president a biography of Disraeli, namely a Tory Republican who could outsmart the left by crafting broad popular
coalitions based on a blending of patriotic cultural conservatism with class-conscious economic and social policy.
Not that Trump would have needed to go back to Nixon or Disraeli for instruction on the matter. In 1999, long before Elizabeth
Warren came along on the national scene, a presidential candidate eyeing the Reform Party nomination contemplated the imposition
of a 14.25 percent wealth tax on America's richest citizens in order to pay off the national debt: his name was Donald Trump.
What ever happened to that guy? The Trump of 1999 was onto something. Maybe this could be a way to deal with our post-pandemic
deficits.
Then and even more so now, the idea resonates: a Reuters/Ipsos poll from January found that 64 percent of Americans support a
wealth tax, a majority of Republicans included. Poll after poll has reaffirmed this. It seems as if there is right-wing populist
support for taxing the rich more.
To the common refrain, "the rich are just going to find ways to shelter their income or relocate it offshore," I have written
elsewhere about the concrete policy measures countries can and have taken to clip the wings of mobile global capital and prevent
such an outcome.
I have written as well about how taxing the rich and tightening the screws on tax enforcement have implications that go beyond
the merely redistributive approach to fiscal policy conventionally favored by the left; about how it can be a form of leverage against
an unaccountable investor class used to shopping at home and abroad for the most opaque assets in which to hoard vast amounts of
essentially idle capital.
A deft administration would use aggressive fiscal policy as an inducement for this irresponsible class to make things right by
reinvesting in such priorities as the wages and well-being of workers, the vitality of communities, the strength of strategic industries
and the productivity of the real economy – or else Uncle Sam will tax their wealth and do it for them.
It would also be an assertion of national sovereignty against globalization's command for countries to stay "competitive" by immiserating
their citizens with ever-lower taxes on capital holders and ever more loose and "flexible" labor markets in a never-ending race to
the bottom.
Mike Lofgren has penned a marvelous essay in these pages about the virtual secession of the rich from the American nation, "with
their prehensile greed, their asocial cultural values, and their absence of civic responsibility."
What better way to remind them that they are still citizens of a country and members of a society -- and not just floating streams
of deracinated capital -- than by making them perform that most basic of civic duties, paying one's fair share and contributing to
the commonweal? America need not revert to the 70-90 percent top marginal rates of the bolshevik administrations of Truman, Eisenhower
or Kennedy, but proposals for modest moves in that direction would be welcome.
There is one more thing to be said about the significance of taxing the rich. Up until very recently, there has been a prevailing
tendency among the reformist right (with some important exceptions) to couch criticism of the elites primarily or even exclusively
in cultural terms. There seems to have been a polite hesitation at taking the cultural critique to its logical economic conclusions.
It is easy to excoriate the excesses of elite identity politics, the "woke" part of woke capitalism; it's something all conservatives
-- and indeed growing numbers of liberals and socialists -- agree on. Fish in a barrel.
But to challenge the capitalism part, i.e. free market orthodoxy, not in a secondary or tertiary way, but head on and in specific
policy terms as Lofgren and a few others have done, would involve confronting difficult truths, namely that the biggest beneficiaries
of tax cuts and Reaganite economic policy in general, which most conservatives enthusiastically promoted for four decades, are the
selfsame decadent coastal elites they claim to oppose. It is they who more than anyone else thrive on financialized globalization,
arbitrage and offshoring.
In other words, it amounts to an honest recognition of the complicity of conservatism in the mess we're in, which is perhaps
a psychological bridge too far for too many on the right, reformist or not. (Trigger Warning!) This separation of culture and economics
has led to the farce of a self-styled nationalist president lining the pockets of his nominal enemies, the globalist ruling class.
Already, the White House is proposing yet another gigantic corporate tax cut. Using the exact same discredited logic as the last
one, senior economic advisor Larry Kudlow wants Americans to trust him when he says that halving the already lowered 2017 rate to
10.5 percent will encourage these eminently reasonable multinationals to reinvest. There he goes again.
A conservative call to tax the rich would signal that the right is ready to end this charade and chart a course toward a more
patriotic, public-spirited and yes, proudly hyphenated capitalism.
Michael Cuenco is a writer on politics and policy. He has also written for American Affairs.
"America need not revert to the 70-90 percent top marginal rates of the bolshevik administrations of Truman, Eisenhower or Kennedy,
but proposals for modest moves in that direction would be welcome."
Those tax rates were offset by direct investment in the US economy. So if I invested in the stock market, I'd get a 90% tax
rate because that doesn't produce actual wealth. On the other hand, if I invested in building factories that created thousands
of jobs for American citizens, my tax rate may fall to 0%. And those policies created a fantastic economy that we oldsters remember
as the golden age. That wasn't bolshevism, it was competitive capitalism. What we have today is libertarianism. And as long as
conservatives are going to let the libertarian boogey-man's nose under the tent, we are going to have this ugly, bifurcated economy.
Your choice. Man up.
You ever tell hear of sarcasm, bud? I think that's what the author was going for. Don't think he was trying to say that Ike and
Truman were Bolsheviks but was rather making fun of libertarians who hyperbolically associate high tax rates with socialism and
Soviet Communism...
We absolutely do not have libertarianism operating in this country today. There is simply no evidence that there is any
sort of libertarian economic or political system in place. Oh sure, you'll whine "but globalism without actually defining
what globalism is, or what is wrong about precisely, but just that it's somehow wrong and that libertarians are to blame for it.
There's a good word for such an argument: bullshit.
We have an economy that is extraordinarily dominated by the state via mandates, regulations, and monetary interference that is
most decidedly not libertarian in any way whatsoever. The current system though does create and perpetuate a system of
rent-seeking cronies who conform rather nicely to the descriptions of said actors by Buchanan and Tullock. The problems of the
modern economy are the result of state interference, not its absence, and Cuenco's sorry policy prescriptions do nothing to minimize
the state but instead just create a different set of rent-seeking cronies for which the wealth and incomes of the nation are to
be expropriated.
If you can point to how the current situation is in any way "libertarian" without creating your own perfect little lazy straw
man definition then by all means do so. Until then your retort is without
substance (you see a no true Scotsman reply doesn't work if the facts are in the favor of the person supposedly making such an
argument. Here you fail to establish why what I said is such a case; saying it doesn't make it so). When Kent makes some throwaway
comment that we're somehow living in some sort of libertarian era he's full of it, you know it, and all you can do is provide
some weak "no true Scotsman" defense? Come on and man up, stop appealing to artificial complaints of fallacious argumentation,
and give me an actual solid argument with evidence beyond "this is so libertarian" that we're living in some libertarian golden
age that's driving the oppression of the masses.
Busted unions, contracting out and privatization, deregulation of vast swaths of the economy since the late 1970's (Jimmy Carter
has gotten kudos from libertarian writers for his de-regulatory efforts), lowered tax rates, especially on financial speculation
and concentrated wealth, a blind eye or shrugged shoulder to anti-trust law and corporate consolidation. Yeah, nothing to see
here, no partial victories for the libertarian wings of the ruling class or the GOP, at all. The Koch Brothers accomplished nothing,
absolutely nothing, since David was the Libertarian Party's nominee for Vice President in 1980; all that money gone to waste.
Sure.
So, now some sort of "partial victory" means we're living in some sort of libertarian era? And what exactly was so wonderful about
all the things you listed being perpetuated? So, union "busting" is terrible, but union corruption was a great part of our national
solidarity and should have been protected? Deregulation of vast swathes of the economy? You mean the elimination of government
controlled cartels in the form of trucking and airlines? You mean the sorts of things that have enabled the working class folks
you supposedly favor to travel to places that were previously out of reach for them and only accessible to the rich for their
vacations? Yes, that's truly terrible. Again, you're on the side of the little guy, right? Lowered taxes? Are you seriously going
to argue that the traditional conservative position has been for high tax rates? What are taxes placed upon? People and property.
What do conservatives want to protect? People and property. So... arguing for higher taxes or saying that low taxes are bad or
even especially, libertarian, is really going off the rails. That's just bad reasoning. And regarding financialization, those
weren't especially libertarian in their enacting, but rather flow directly out of the consequences of the modern Progressive implementation
of neo-Keynesian monetary and fiscal policy. Suffice it to say, I don't think you'll find too many arguments from libertarians
that the policies encouraging financialization were good or followed libertarian economic policy prescriptions. Moreover, they
led entirely to the repulsive "too big to fail" situation and if there's one thing that libertarians hold to is that there is
no such thing (or shouldn't be) as "too big to fail." The objection to anti-trust law is that it was regularly abused and actually
created government-protected firms that harmed consumers. If you think anti-trust laws are good things and should be supported
by conservatives then by all means encourage Joe Biden to have Elizabeth Warren as his vice-presidential running mate and go vote
Democrat this fall.
"The problems of the modern economy are the result of state interference, not its absence". That's because the "state interference"
is working as proxy for the interests of vulture capitalist.
What we have today is vulture capitalism as opposed to free enterprise capitalism.
Exactly. The existence of a vulture capitalist or crony capitalist economy, which we have in many sectors, is evidence that "libertarianism"
is nothing more than a convenient totem to invoke as a rationale for complaint against the outcomes of the existing crony capitalist
state of affairs. My contention is that Cuenco, et al are simply advocating for a replacement of the cronies and vultures.
A very similar article(but probably coming at it from a slightly different angle) wouldn't look out of place in a socialist publication.
The culture war really is a pointless waste of time that keeps working class people from working towards a common solution to
shared problems.
I used to think that conservatism was about protecting private property and not, like Cuenco, in coming up with ever more excuses
for expropriating it.
No, that's libertarianism (or more properly propertarianism). Conservatism is first and foremost about responsibility to God,
community, family and self. Property is only of value in its utility towards a means.
As I see it, here are examples of how "conservatives" have actually practiced their "responsibility to God, community, family
and self":
The genocide of Native Americans
The slavery and murder of blacks
Their opposition to child labor laws, to womens' suffrage, etc.
Their support of Jim Crow laws
Their opposition to ending slavery and opposition to desegregation
Opposition to Civil Liberties Laws
Willingness to block, or curtail, voting rights.
Hyping the "imminent threat" of an ever more powerful communist menace bearing
down on us from the late 40s to the "unanticipated" collapse of the
USSR in '91. All of which was little more than endless "threat inflation" used
by our defense industry-corporate kleptocrats to justify monstrous increases
in deficits that have been "invested" in our meddlesome, murderous militarism all around the world, with the torture and deaths
of millions from S. E. Asia, to Indonesia, to Latin America, to the Middle East, to Africa, etc.
Violations of privacy rights (conservative hero J. Edgar Hoover's illegal domestic surveillance and acts of domestic terrorism,
"justified" by
his loopy paranoia about commies on every corner and under every bed.)
Toppling of democracies to install totalitarian despots in Iran
("Ike" '53), Guatemala (Ike, again, '54), Chile (Nixon '73), Brazil (LBJ, '64) and many, many more countries.
Strong support of the Vietnam War, the wars in Laos and Cambodia, and the Iraq War, which, according to conservative W. Bush,
God had inspired.
The myriad "dirty wars" we've fought around the world, and not only in Latin America.
With a few, notable exceptions, conservatives have routinely been on the wrong side of these issues. For the most part, it
has been the left, particularly the "hard left," that has gotten it right.
So conservatism should be entirely about taking people's property "for the good of the country"? That the purpose of a country
is to loot the people? That the people exist for the government and not the government for the people? Seems Edmund Burke and
Russell Kirk would like to have a word with you Adm.
To quote Kirk as just one example of your fundamental error:
Seventh, conservatives are persuaded that freedom and property are closely linked . [Apparently, Adm. you dispute
Kirk's assertion and accuse him thereby of conflating libertarianism and conservatism. Yes, I know Kirk was a hater of the
idea of patriotism, but he was such a raging libertarian what else could he do?] Separate property from private possession,
and Leviathan becomes master of all. Upon the foundation of private property, great civilizations are built. The more widespread
is the possession of private property, the more stable and productive is a commonwealth. Economic levelling[this
is the outcome of Cuenco's policy prescriptions by the way] , conservatives maintain, is not economic progress. Getting
and spending are not the chief aims of human existence; but a sound economic basis for the person, the family, and the commonwealth
is much to be desired.
So, either "Mr. Conservative" Russell Kirk wasn't really a conservative but a man who horribly conflated libertarianism and
conservatism, or we can say that Kirk was a conservative and that he recognized the protection of private property as crucial
in minimizing the control and reach of the Leviathan state. If the latter holds, then maybe what we've established is that AdmBenson
isn't particularly conservative.
"The more widespread is the possession of private property, the more stable and productive is a commonwealth." This status quo
has produced precisely the opposite of this. Wealth, assets, capital has been captured by the elite. The pitchforks are coming.
See this CBO chart:
View Hide
Conservatives accept taxes as a part of citizenship. Since taxes can't be avoided, a conservative insists on democratic representation
and has a general desire to get maximum bang for their taxpayer buck.
Libertarians, on the other hand, see everything through the lens of an individual's property rights. Taxes and regulation are
infringements on those rights, so a libertarian is always at war with their own government. They're not interested in bang for
their taxpayer buck, they just want the government to go away. I can't fault people for believing this way, but I can point out
that it is severely faulty as the operating philosophy beyond anything but a small community.
As for me not being particularly conservative, ya got me. It really depends on time of day and the level of sunspot activity.
I should have put the /s on my reply, but your response did give me a good chuckle. Besides, for that finger pointing at you,
there were three more pointing back at me.
And somehow people continually fall for the Trickle Down economic theory. George HW Bush was correct when he called this VooDoo
economics. Fiscal irresponsibility at it's finest.
Nah people don't fall for it, republicans do. The rest of us know this stuff doesn't work. We didn't need an additional datapoint
to realize that. The Tax Cuts and Jobs act was the single most unpopular piece of legislation to ever pass since polling began.
It never had support outside of the Republican Party which is why it's never had majority support.
John Kenneth Galbraith called Trickle Down "economics", "Oats and Horse Economics". If you feed the horse a lot of oats, eventually
some be left on the road...
Mitch is fully owned by Trump as is every republican that holds office except Romney. Mitch can't go to the bathroom with out
asking Trumps permission.
Mitch is owned by corporations and he likes it that way. He basically says as much whenever campaign finance reform pops up and
he defends the status quo.
Yep. The guy who declared war on the Tea Party. The guy who changed his tune entirely about China when he married into the family
of a shipping magnate.
I'm eagerly awaiting a GOP plan for economic restructuring. I've been waiting for decade(s). Surely there is someone in the entire
body of think tanks, congressional staffers, and political class that can propose a genuine and comprehensive plan for how to
rebalance production, education, and technology for the better of ALL Americans. Surely...
I honestly wonder if Jack Kemp might have had a "Road to Damascus" conversion away from his pseudo-libertarian and supply side
economic convictions if he had lived through the decade after the Great Recession. Probably not, given his political and economic
activity up until his death.
Trump pushed the tax cut because it saves him at least $20 million each year in taxes, probably closer to $50 million. That's
the only reason he does anything, because he benefits personally.
Thank you very much for posting the link to the wonderful essay by Mike Lofgren. Written 8 years ago it feels even more actual
than then. I have bookmarked it for future reference.
Looking at the US it always comes to my mind the way Rome and then Byzantium fell: a total erosion of the tax-base the rich
refused to pay anything to the imperial coffers, and then some of the rich had land bigger than some modern countries... And then
the barbarians came...
Lofgren: "What I mean by secession is a withdrawal into enclaves, an internal immigration, whereby the rich disconnect themselves
from the civic life of the nation and from any concern about its well being except as a place to extract loot."
That was in 2012, but that was what struck me about my well-to-do classmates
when I transferred from Cal State Long Beach to Columbia University in 1977 . Suddenly I was among people who saw America,
American laws, and a shared sense of civic responsibility as quaint, bothersome, rather tangential to the project of promoting
oneself and/or one's special interest.
The only way that factories would come back is when Americans start buying made in America. We can't wait for ANY government to
bring those factories and jobs ( and technology) . Only people voting with their pocketbooks can do it.
Still waiting for the day the first American asks "What have WE done wrong?" Rather than just following in Trumps step
and playing the victim card every step of the way and wondering why nothing gets better.
"... "I understand that people are angry, but they shouldn't just endanger businesses without even a thought to enriching themselves through leveraged buyouts and across-the-board terminations..." ..."
"I understand that people are angry, but they shouldn't just endanger businesses without
even a thought to enriching themselves through leveraged buyouts and across-the-board
terminations..."
"Look, we all have the right to protest, but that doesn't mean you can just rush in and
destroy any business without gathering a group of clandestine investors to purchase it at a
severely reduced price and slowly bleed it to death," said Facebook commenter Amy Mulrain,
echoing the sentiments of detractors nationwide who blasted the demonstrators for not hiring
a consultant group to take stock of a struggling company's assets before plundering.
" I understand that people are angry, but they shouldn't just endanger businesses without
even a thought to enriching themselves through leveraged buyouts and across-the-board
terminations.
It's disgusting to put workers at risk by looting. You do it by chipping away at their
health benefits and eventually laying them off. There's a right way and wrong way to do this.
"
At press time, critics recommended that protestors hold law enforcement accountable by
simply purchasing the Minneapolis police department from taxpayers.
US Lawmakers Propose Total Ban On STEM Visas For Chinese Students by Tyler Durden Thu, 05/28/2020 -
10:45 As the White House prepares to
eject Chinese graduate students with ties to the PLA, three US lawmakers are taking things
a step further - proposing a bill which would ban mainland Chinese students from studying STEM
subjects in the United States .
Two senators and one House member said on Wednesday that the Secure Campus Act would bar
Chinese nationals from obtaining visas for graduate or postgraduate studies in science,
technology, engineering and mathematics. Students from Taiwan and Hong Kong would be exempt ,
according to
SCMP .
"The Chinese Communist Party has long used American universities to conduct espionage on the
United States," said Sen. Tom Cotton (R-AK), one of the bill's sponsors, adding "What's worse
is that their efforts exploit gaps in current law. It's time for that to end."
"The Secure Campus Act will protect our national security and maintain the integrity of the
American research enterprise."
The proposed legislation comes as diplomatic relations have fractured between the world's
two largest economies. The fissures started to show during a trade war that has been rumbling
on for almost two years and have only widened amid accusations about the handling of the
Covid-19 disease outbreak , and the treatment of ethnic minority groups in China.
Hong Kong is the latest flashpoint after Beijing drew up a national security law that
Washington says tramples on the city's mini-constitution. The US threatened retaliation over
the move.
-SCMP
The bill will also tackle China's efforts to recruit talent overseas through their Thousand
Talents Program , an operation launched in 2008 by the CCP which seeks out international
experts in scientific research, innovation and entrepreneurship. It proposes that participants
in China's recruitment of foreigners be made to register under the Foreign Agents Registration
Act (FARA) , and would prohibit Chinese nationals and those participating in China-sponsored
programs from receiving federal grants or working on federally funded R&D in STEM fields
.
Any university, research institute or laboratory receiving federal funding would be required
to attest that they are not knowingly employing participants in China's recruitment programs -
a list of which the US Secretary of State would publish.
US law enforcement and educational agencies have raised red flags about undisclosed ties
between federally funded researchers and foreign governments. A crackdown has included
indictments and dismissals.
In January, Charles Lieber, 60, chairman of the chemistry and chemical biology department
at Harvard University, was arrested and charged for lying about his involvement in the
Thousand Talents Programme .
-SCMP
Meanwhile, earlier this month a professor at the University of Arkansas who received
millions of dollars in research grants, including $500,000 from NASA, was
arrested and charged with one count of wire fraud.
According to the FBI, Ang failed to disclose that he was getting paid by a Chinese
university and Chinese companies in violation of university policy. He is accused of making
false statements while failing to disclose his extensive ties to China as a member of the
"Thousand Talents Scholars" program.
63-year-old Simon Saw-Teong Ang is the
director of the school's High Density Electronics Center, which received funding from the
National Science Foundation (NSF), Department of Energy (DOE), Department of Defense (DOD) and
NASA. Since 2013, Ang has been the primary investigator or co-investigator on US
government-funded grants totaling over $5 million, according to the
Washington Examiner .
In November, the Senate Permanent Subcommittee on Investigations chaired by Sen. Rob Portman
(R-OH) released a
109-page bipartisan report which concluded that foreign nations "seek to exploit America's
openness to advance their own national interests," the most ambitious of which "has been
China," according to the Examiner . According to the report, Chinese academics involved in
their so-called 'Thousand Talents' program have been exploiting access to US research labs
.
Backlash
According to SCMP , members of the US scientific community see the US as unfairly targeting
Chinese colleagues , and that the campaigns will discourage talented individuals from pursuing
studies at US universities.
"While we must be vigilant to safeguard research, we must also ensure that the US remains a
desirable and welcoming destination for researchers from around the world," wrote members of
60 groups - including the American Association for the Advancement of Science and the
Federation of American Scientists, in a 2019 letter to science policy officials.
The US lawmakers' proposal follows China's March decision to revoke the press credentials
for US journalists from three major US newspapers - declaring five US media outlets to be
foreign government proxies. In February, the Trump administration labeled five Chinese state
media groups as "foreign missions" (via SCMP ).
What Are the Three Concurrent Crises of the Coronavirus Depression? Posted on
May 27, 2020 by Yves Smith Yves here. Like many of
those who are taking this crisis (or crises) seriously, Nathan Tankus has proposed launching
new government programs as a way to tackle specific problems created by the crisis. While this
is eminently logical as well as sound, don't expect anything like that to happen. As political
economist Tom Ferguson pointed out in a presentation we discuss today, the US and most other
advanced economies are taking a neoliberal approach, channeling money and aid through existing
institutions (too often private).
In the first month of this newsletter, I wrote a lot of more big picture pieces about the
nature of our current crisis. The last major piece I wrote on this topic was "How to Pay for the
Pandemic War" . My view hasn't changed much but it's always worth reiterating and restating
in new ways what our major problems are in order to conceptualize how to deal with them. One
way to think about this crisis is it's really three interrelated crises happening all at once.
An Interesting way to frame these crises is to differentiate them by the economists who focused
on their unique problems. We will take them in turn.
The Keynes Crisis
This crisis, and its association with Keynes, is the most obvious and straightforward. John
Maynard Keynes is renowned as an economic theorist who showed in his book The General Theory
of Employment, Interest and Money that there are no automatic processes operating in the
private sector to return economies to full employment and, in fact, they can sustain large
degrees of unemployment for significant periods of time. He referred to this as an
"unemployment equilibrium". While the book itself actually spends very little time on
government spending, the obvious conclusion of his work was that government spending had the
power to increase incomes and employment and thus could deal with shortages of demand. This
lesson, hard learned and easily forgotten, remains as relevant today as when it was first
taught during the Great Depression. It remained relevant a decade ago during the Great
Financial Crisis. We have a grievous lack of demand today, especially for labor.
The most obvious and straightforward way to increase demand is through government spending
and grants. It can be hard for analysts to really focus on this aspect of the crisis because it
is relatively analytically uninteresting. What needs to happen is painfully clear to everyone
but Donald Trump, congressional leadership and the most ideological economists. The only
analytically interesting point regarding the nature of this crisis as a demand crisis is that
despite the disruption to production, the demand effects are much more important and
foundational. Notwithstanding the difficulty that intellectually solved problems have for
holding the attention of analysts, this point needs to be pressed again and again. We have a
demand problem. The most persistent and problematic effects of a collapse in demand is the
social and skill effects on workers. Thus, a policy to increase demand should focus on direct
employment of labor. This problem needs to be responded to and the answer for how much to spend
is "Whatever It Takes" .
The Minsky Crisis
The Minsky Crisis is related to, but distinct from, the Keynes crisis. Hyman Minsky was a
mid-to-late 20th century economist who built his work on top of Keynes and a number of other
economists who were quickly ejected from mainstream conversation. His work grounded concerns
about overall demand, and the demand for labor, in balance sheets and cash flows between
economic actors. He focused his gaze on the causes of financial crises which he correctly saw
as distinct from demand problems. What's important about his work now is that it teaches us
that the most urgent problem of the sudden utter and complete collapse of payments which has
happened in the past few months is the corresponding collapse in cash flows and the threat of a
wave of defaults and bankruptcies. Especially as the production of services can't be safely
restarted (and certainly not at its previous level), the immediate cash flow problem can't be
solved by increasing demand.
As a result, businesses must be given direct grants from the federal government. The Small
Business Association's Payroll Protection Program is meant to do that. As I've discussed
at length however , it has a number of problems. My alternative proposal is an emergency basic
income for all businesses . Dealing with the cash flow problem in this matter can also help
to relieve the Keynes crisis by maintaining and/or increasing the business demand for labor. In
addition to the business cash flow problem, there is also the cash flow problem of households.
Providing them with direct cash payments is critical, as is extending the supplementary
unemployment insurance. In this respect, it's encouraging that the Treasury is now providing
unbanked and underbanked people access to their 1200 payments
with debit cards . Hopefully this will be expanded and improved upon in the weeks and
months to come. Of course, state and local governments also need
basic incomes and the safety net needs to be further nationalized. There is no reason that
the monetary burden of unemployment insurance should be placed on state governments.
The Means Crisis
The economist that this type of crisis is named after may be the most obscure one on this
list. Gardiner Means was one of the most important economists within the New Deal. First at the
Agricultural Adjustment Administration within the Agriculture department, then in other
positions throughout the government, he theorized both the causes of the Great Depression and
ways of remedying it using monetary policy, fiscal policy- and planning . One of his most
notable positions was with the National Resources Planning Board. He rejected the idea that
there was a "price mechanism" that allocated physical resources to different uses which
functioned in the American economy. Instead, he argued that prices were "administered" by
industrial businesses, especially the largest corporations. Instead of prices allocating
resources, it was the direct resource and spending decisions of businesses and governments
which directed them. The Means Crisis is thus the crisis of the physical allocation of
resources between different uses. To respond to it, we need to bring back the notion of
resource planning and the regulation of supply chains. The idea of resource planning has been
severely out of fashion for decades but it's hard to imagine it not making a comeback because
of the Coronavirus Depression. If it somehow doesn't revive in this crisis, the Climate crisis
will surely revive it.
What his work teaches us is we can't rely on prices to reallocate resources. Existing prices
and existing patterns of production and consumption can be sustained relatively easily by
private action. However, profit-seeking businesses are bad at reallocating resources in
response to crises. The uncertainty of how long the crisis will last and whether the costs of
retooling plants and restructuring supply chains can be recouped discourages bold action. It is
often perceived to be cheaper to simply leave productive resources unused than go through such
expenses and uncertainties. Even farms are letting crops rot and euthanizing
animals rather than trying to find ways to reorganize their supply chains. What Means work
teaches us is that the government should step into this breach. It should be directly
physically reallocating resources and organizing production through hiring workers and
guaranteeing private producers markets. Resources left unplanned, are predictably unorganized.
Private
Sector planning works at dealing with medium and long term resource questions but struggles
to move quickly and effectively in times of crisis.
Conclusion
One key ingredient in the policy mix which responds to this crisis should be an "Emergency
Responder Corps". As it happens, Representative Tlaib has made just
such a proposal . Such a labor force could help respond to all three crises at once. It
could be mobilized to facilitate the reallocation of resources, especially their delivery
directly to those who need it most. It would provide many households who are now facing
unemployment with an income- and thus a cash flow. This wouldn't be a cure-all- we still need
the suite of policy programs I described above. This crisis can be managed far better than it
is currently being managed. It is impossible to avoid pain- both medical and economic- at this
late date. However, we can relieve the worst symptoms and put our economy on the road to
permanent resource planning so that we don't ever have to be caught as unprepared ever again.
These three concurrent crises have lessons we badly need to learn in order to deal with the
next crisis- the Climate crisis.
In case you missed it (it seemed to miss most people's mailbox), here's a round-up of the
Second Month
Anniversary of this Newsletter Yesterday . If you are impressed by seeing the interviews,
prominent citations and praise Nathan Tankus' writing has gotten, please consider supporting
that writing by taking a paid subscription here .
The future has taken a hard turn towards the cliff. The Coronavirus Pandemic has turned
the exceptional nation into a pariah state. The governments of USA, Brazil, UK, Spain, Italy,
Sweden, France, Germany and Russia have been proven to be incapable of protecting their
populations. Corporations and/or oligarchs corrupted them. They simply serve to funnel money
to the 99%. The pandemic also shows that the failed states are incapable of addressing other
existential threats; climate change, living with the earth's limited resources or the
thousands of nuclear armed ICBMs. When the globe's tribute money stops flowing west, the
worldwide unpaid mercenaries will stop fighting. The problem is that in the global chaos, the
red button could be pushed and the earth irradiated.
Yes, our current governments are incompetent, but I would suggest willfully blind as even
governments on the gold standard could provide free food or large building programs; it is
not about being able to deal with the crises, but choosing not to as people like Donald
Trump, Nancy Pelosi, and Mitch McConnell have access to the same, or better, information as
any of us do; they just chose to ignore the screaming and game the crises for their own and
their patrons' benefit. The Treasury and the Fed both are saying in their opaque statements
that direct stimulus is needed. Our political leadership chooses to ignore the near certainty
of a second wave of infections, likely more virulent, and the even greater probability of the
economic collapse of the United States with all the likely riots, deaths, and possible
uprisings.
"These three concurrent crises have lessons we badly need to learn in order to deal with
the next crisis- the Climate crisis.'' NeedIng to learn, I suppose is ok, needing to act,
now, would be preferred. Not knowing how to solve a problem is not ness are in solving it, it
is done all the time in physics. It can be made complicated, to what I keep saying is the
outcome we are going to get: a much simpler set of living arrangements with reality. I do a
lot things on any given day, but I haven't stopped modeling 'reality' using systems theory,
since 2006. It always puts me on edge when economists quote other economists and various
theories of economics to explain reality. No offense, but all that leads to is some analysis,
on iffy data leading to maybe action, but action very limited to the status quo, the cannon,
and whatever's in the codex. I do think it was very well written and as far as economics all
in the relearn of possibility. People being reasonable and all, which they ain't. The
problem, let's call in an 'extinction level event' (really events) is that it needs to be
ameliorated, because 'stopping', is long past.
Alas, as Tankus points out, we do not need to learn lessons.
The Trump government quite intentionally chose to ignore the problem because the fallout
would allow them to achieve their neolib agendas behind the curtain of natural disaster. Just
like 9/11, COVID-19 enables further erosion of civil liberties. It will/has suspended
inconvenient banking and finance rules, etc.
While it will not restore jobs that were headed for obsolescence anyway, WS will restore
the NYSE numbers in time for the November election (barring a pandemic resurgence YTB).
I think "barring a pandemic resurgence" is an unrealistically optimistic assumption,
especially given the following:
Social pressure to relax shutdowns, especially in the US,
Lack of Covid19 herd immunity (which has to be well into the majority to be effective),
Likely absence of effective vaccines,
Likely absence of treatments better than marginally effective,
Early anecdotal evidence that even naturally acquired Covid19 antibodies may not confer
lasting protection from reinfection,
Likely Covid19 viral mutations (very much a known unknown),
Widespread worldwide Government incompetence, incapacity and uncoordination regarding Covid19
management strategies,
"Cat herding" problems in most countries.
Having said that Powell and Mnuchin are likely to throw every financial kitchen sink that
they can print, con, beg, borrow or steal at financial markets in a herculean effort to
protect their dear leader's electoral prospects for November.
More "interesting times" ahead I think.
The solutions discussed here in dry technocratic terms would be a revolutionary change in
power, wealth and expectations. They won't be happening unless things get much worse for the
decision makers.
I think this is an excellent break-down, and it's interesting to me that all three of
these seem to be weighing substantially on our present situation.
However, I see too much short-term optimism here. As best as I can tell, our elites have
gone completely mad and may be irredeemable at this point. I mean this for real. A huge swath
of elites and PMCs too believe that robots that can do all the *essential work* are *just
around the corner* -- that the elimination of the working class in less than a decade is
baked-in. TINA.
Roubini wrote the other day that if our cold war with China escalates, the re-shoring of
manufacturing would leave out workers because it'd all be done with automation. He's wrong
though. The re-shoring won't happen because all the capital investment will be in apps,
software, and robots, like Elon Musk's "alien dreadnought" concept. He *believes* this crap.
So do seemingly many Democrats who appear to be trying to legislate the working class out of
existence while offering a $4000 "coding school" credit as a consolation prize.
So I would add that there is a fourth economic crisis, which is the economic suicide pact.
Elites see Coronavirus as their comet Hale Bopp. They think they can see the robots (aliens?
alien robots?) waving at them from the sky. All they have to do is take the plunge -- commit
economic suicide -- in order to ascend to a higher state of existence. I think we can name
this mad cult the Exit Cult, after planet Exit in Bruno Latour's "A Fictional Planetarium".
The Exit doesn't have to be as literal as launching into space or to Mars. For the Silicon
Valley true believers, it's as much about *transcendence* from a lower/lesser version of
human to a "more advanced" form.
My policy solution for this 4th economic crisis? I think we should fund (whatever it
takes) construction of a very large rocket ship, big enough for all the elites to board to
make their Exit. Ahh yes, the ship will be pretty crowded, but we can promise them their own
private bunker-like dwelling on Mars when they get there. Convince them all to get on-board,
and then launch away! I wonder what the economic multiplier on *that* would be.
"Seems to me that a $30/hr minimum wage and a 20 hr work week would go a long way toward
righting the ship."
The Germans have long done this in economic crashes, insuring low unemployment, partial
subsidy of wages, less work hours and guaranteeing return to place of employment.
Can't have stability here though, it would reduce the desperation, poverty, foreclosures,
evictions and the capture of all assets and incomes to the pathological hoarders.
the third one ( https://en.wikipedia.org/wiki/Gardiner_Means
) interests me the most.
Ive considered myself a Doomer since the Second Invasion of Iraq sent me looking for the
unstated reasons.
From peak oil to peak pretty much everything, I went through the stages of grief and finally
accepted that This Can't Last ..and that it sure looks like Decline and Fall, to me.
so i started thinking about how to prepare for this, and learned that it does indeed "Take a
Village" but this presented it's own difficulty: namely that unless the crisis/crises is/are
evident, and more than obvious, people will stick to what they know.
Intellectual Theorising just isn't enough to justify even small disruptions to habit and
routine.
So even out here in my little petri dish of a county it's difficult to do anything that is a
clear break from Normal like a farmer's market(we have one,finally i have yet to attend(busy
or painful) hear tell it's rather bourgeois ) or some kind of functional public
transportation(regional and sporadic and authoritarianly unpleasant more and more people
walking last 10 years).
But in the midst of a crisis, it's really too late
That the idea of planning ahead outside of Market is regarded as either silly, dangerous or a
necessary evil to be handled and passed by, is a testament to how far we've come in the last
40 or so years .rather, how well we've been remade.
Since my Doomer Awakening(lol), I've tried to become an Appendix backupdrive of the
alimentary microbiome a library filled with classics, and a working giant garden that relies
on fewer and fewer inputs, with the seed saving and general 1850 AD knowledge base that I
figured might be useful.
but it won't be enough.
it takes time and resources and effort to switch gears so rapidly(20 years) as well as the
will and perceived need for doing so.
we've, instead, been trained to be practically the polar opposite: a shoegazing mob of
hyperindividuals myopically grasping at crumbs and stubble.
The writing I see on the wall in big red capital letters: "We near an End".
I believe there is only so much any individual or group or community can do for now. I
believe the highest and best actions we can take are to save as much knowledge as possible
and make sure it will survive to the next TWO generations. I am not sure the next generation
will be able to do much more than survive and help their children survive. To their children
will fall the task of rebuilding, reshaping, and reimagining a more Human Society. Knowledge
will be the most vital tool catalyzing that process.
I believe your library and your stored and taught ways are a highest and best use of the
time we have remaining. However, if you can, you should add knowledge up to circa 1980 to the
knowledge up to 1850. The classics are worth saving but I believe they will be less valuable
than technical monographs, texbooks, and the patent literatures. Wisdom, if lost, can be
relearned. I fear much of our technical knowledge and Science once lost may be lost
forever.
Before retirement I worked as an 'engineer' -- a remarkably flexible work category. My
schooling, training, and work experiences burden me with a particular regard for technology,
Mathematics, and Science -- that 10,000 readings of "Little Home on the Prairie" could never
expunge from my soul.
between 2002 and 2009, when the printer finally died, i printed out gobs of material
ATTRA, and all manner of diy and hacks for real life and big sand filters with biofilm and
just a whole lotsa stuff.
it's in boxes with mothballs and bar-bait.
this in addition to my sort of haphazard collection of textbooks and manuals and the whole
Foxfire series.
I worry about acidic paper, and silverfish and whatever else eats paper.
the Library is a funky broken down old trailer house.
there's only so much one can do.
I too, was struck by that Gardiner Means. No invisible hand of the market for that boy. It
is all really about businesses, especially the largest corporations, doing the actual
deciding. That is why so many economies have been decimated. They are run by people who only
think in terms of this financial quarter's targets and any bonuses up for grabs. Means has
lots of interesting thoughts and if you go to the Wikipedia page on his 1932 book "The Modern
Corporation and Private Property", you see the following-
'Berle and Means argued that the structure of corporate law in the United States in the
1930s enforced the separation of ownership and control because the corporate person formally
owns a corporate entity even while shareholders own shares in the corporate entity and elect
corporate directors who control the company's activities. Compared to the notion of personal
private property, say as one's laptop or bicycle, the functioning of modern company law "has
destroyed the unity that we commonly call property". This occurred for a number of reasons,
foremost being the dispersal of shareholding ownership in big corporations: the typical
shareholder is uninterested in the day-to-day affairs of the company, yet thousands of people
like him or her make up the majority of owners throughout the economy. The result is that
those who are directly interested in day-to-day affairs, the management and the directors,
have the ability to manage the resources of companies to their own advantage without
effective shareholder scrutiny. '
This article about the Beer Game suggests that the problem may be
more fundamental:
The Beer Game is an in-person supply chain simulator, where players play in teams of
four roles: beer retailer, wholesaler, distributor, and manufacturer. The goal is to
minimize costs, with the team who has the lowest costs winning. . . . a single, one-time
persistent bump-up in customer demand plunges the system into wild boom-bust oscillations.
Consistently. Consistently. Always.
Players communicate only via the market. The system always goes haywire – and stays
haywire – in response to shock.
Though having just finished Yanis Varoufakis's excellent Adults in the Room I have
little faith in the capacity of contemporary technocrats to plan effectively. The antagonists
in the book can be divided into two categories: scoundrels and cowards. The cowards are
utterly unreliable (Varoufakis considers some of the most reliable people are former "company
men" who turned coat). But even the scoundrels cannot be relied upon because the complexity
of the institutions and the cowardice of the people within them drains their ability to
act:
The cynic would say that Dr Schäuble was playing a larger game . . . Grexit to him
was an instrument with which to pursue his vision of a smaller, more disciplined Eurozone,
with the troika firmly entrenched in Paris. The cynic would be almost right. Except it
would not be the whole story. As I departed that day, I was not leaving behind me a
Machiavellian dictator; I was leaving behind a sunken heart, a man ostensibly more powerful
than almost anyone in Europe who nevertheless felt utterly powerless to do what he knew was
right. As the great tragedians have taught us, nothing causes greater wretchedness than the
combination of supreme authority and wholesale powerlessness.
Fantastic link. I usually think that game theory is a solution looking for a problem, but
that discussion of the Beer Game and fragility of supply chains was great.
I first became aware of Gardiner Means through listening to a web-lecture: William Waller:
Thorstein Veblen, Business Enterprise, and the Financial Crisis (July 06, 2012).
[https://archive.org/details/WilliamWallerThorsteinVeblenBusinessEnterpriseAndTheFinancialCrisis]
On first hearings of this lecture I noted: Veblen has no theory of markets ~minute 9:00 --
prices? Gardiner Means memo on where do Industrial prices come from.
Veblen when asked why he claimed to be an economist but never wrote about markets had
quipped "I would write about Markets, but I have never seen one outside of economics texts."
[Extremely LOOSE paraphrase]. Near here I recall a reference to Gardiner Means 1935 essay
"Industrial Prices and their Relative Inflexibility", published by the US Government Printing
Office. Strange after searching for almost an hour for a copy of this document -- which
inspired many economics research papers -- I was unable to locate an online copy of the essay
[my bad -- even Google Scholar indicated "NOT AVAILABLE" -- strangely?].
I've been citing John Kenneth Galbraith's New Industrial State for the notion of
large-scale private sector economic planning. Time to dig that book out and look at
Galbraith's bibliography.
Please post any references you find that terminate in downloadable papers or books by
Gardiner Means. I tried to find a copy of his paper "Industrial Prices and their Relative
Inflexibility" published by the US Govt. Printing Office 1935 but I couldn't find any web
copies.
The Depression is long enough ago and recent enough to serve as an interesting model for
the selective permanence of information.
Nathan Tankus has very neatly described the triple threats of Corona and thereby described
some of the avenues for making use of the Corona crisis by those less interested in the
Public Good than their own good. I have found similar clarity in his other posts.
"... "Consumption and hiring started to tick up "in gross terms, not in net terms," Furman said, describing the phenomenon as a "partial rebound." The bounce back "can be very very fast, because people go back to their original job, they get called back from furlough, you put the lights back on in your business. Given how many people were furloughed and how many businesses were closed you can get a big jump out of that. ..."
"... IMO Trump now realizes that he was snookered by the medical equivalent of the Holy Office. Our Auto da Fe has been impressive and nearly fatal but not quite. Trump's statement that he will never shut the economy down again indicates to me that the "scales have fallen" from his eyes. ..."
"... One thing to note are all the diffusion indexes will show large upticks, because of the base effects. U6 will likely be more stubborn. ..."
"... he believes, the way to think about the current economic drop-off, at least in the
first two phases, is more like what happens to a thriving economy during and after a natural
disaster: a quick and steep decline in economic activity followed by a quick and steep
rebound.
The Covid-19 recession started with a sudden shuttering of many businesses, a nationwide
decline in consumption, and massive increase in unemployment. But starting around April 15,
when economic reopening started to spread but the overall numbers still looked grim, Furman
noticed some data that pointed to the kind of recovery that economists often see after a
hurricane or industry-wide catastrophe like the Gulf of Mexico oil spill." politico
******
"Consumption and hiring started to tick up "in gross terms, not in net terms," Furman
said, describing the phenomenon as a "partial rebound." The bounce back "can be very very
fast, because people go back to their original job, they get called back from furlough, you
put the lights back on in your business. Given how many people were furloughed and how many
businesses were closed you can get a big jump out of that. It will look like a V."" politico
--------------
Well, pilgrims, there you have it. If Politico thinks so, it must be so. Do I think the
Democratic Party grandees are deliberately suppressing the economy as long as they can and
bitching and whining as the GOP tries to crank up the machine? Yes, I do. Is that criminal?
Should it be criminal? IMO it should be but to prevent the disintegration of the Great
Republic, we must not treat it as such.
IMO Trump now realizes that he was snookered by the medical equivalent of the Holy Office.
Our Auto da Fe has been impressive and nearly fatal but not quite. Trump's statement that he
will never shut the economy down again indicates to me that the "scales have fallen" from his
eyes.
Are his attempts too little and too late? That could be. Or, maybe not.
The brawny beast that is America is gathering itself up, and looking once again at what
CAN BE, not at what is forbidden us by the Globalist nitwits who would destroy us and make us
into building blocks for their utopia. pl
What I don't understand is how prolonging the lockdown of reliably blue states like my own
WA furthers the Democrat election strategy -- assuming it is what you suggest.
It seems to me that when people in those states feel the totalitarian pinch on their own
livelihood, they might be more inclined to vote against the party that's doing it to them,
tipping the state into the purple or even red column.
Same goes for the battleground states. Seems like a surefire way to throw the election,
not win it.
Can someone explain how this is supposed to work?!?
One thing to note are all the diffusion indexes will show large upticks, because of the
base effects. U6 will likely be more stubborn.
The best comparisons will be unit volumes relative to prior to lockdown. For example,
number of flights or gas consumption prior to and after lockdown ends.
One indicator that I track is used car prices. It is starting a nice uptick particularly
for full size trucks. With all the incentives and financing options I would bet we'll see
growth in even new truck volumes .
On the flip side, IMO, the increased debt and the trillions that the Fed printed up for
Wall St will constrain growth in the medium term.
With respect, I don't agree with your view of what has happened from an economic and
medical sense although I agree with your view of the political machinations of the
democrats.
I said when all this started that the economy would bounce back quickly. I still believe
it will. I also believe that the lockdown was necessary, but now it is thought possible to
open up because the medical system and logistics have now caught up with the pandemic. The
lockdowns bought us time.
Fauci, Birx and Co. were talking of easing up three weeks ago at one of President Trumps
press conferences, I watched most of them live. I don't see the medicos as malevolent
globalists or anything other than public health officials doing their jobs under great
pressure and public scrutiny. I don't think they have drunk any of the numerous glasses of
kool aid that were proffered. They appear to me to have stuck stubbornly to the science.
We too are easing lockdown rules - allegedly in "a controlled and measured manner" but
that is actually BS. Everyone is sick of being cooped up and can't wait. We too have one
State leader - a leftist "democrat" that is dragging their feet in Queensland for political
reasons, our equivalent of Florida. Their borders are currently closed - when they reopen
there will be an absolute avalanche of tourists heading North, us included, to get some warm
weather, that will provide a huge economic spike.
Problem is things were frothy before covid, financial markets were well overextended, the
deficit was out of control, oil won't come back anytime soon. In many ways Trump is a lucky
general, gets to blame the slowdown on the virus and any faltering in the recovery on Dem
governors.
Here is a link to a poll that suggests the globalists have screwed up again (see bottom 1/3
of the link). A large % of Americans polled say they will now avoid products made in China
and would be willing to pay more for the same product if it's made in the USA. They also
think that trade restrictions and tariffs are a good idea. Basically, they like the Trumpian
model. China Joe and his boy Hunter are going to be perceived as being on the wrong side of
this issue by Trump.
you are right. We do not agree. IMO the country wide shutdown was never necessary. What
was needed was a strategy of protection for the vulnerable. The rest could have taken care of
themselves with anti-flu like treatment while therapies and vaccines were developed.
The Democrats deserve it and BTW I don't agree with any of the negatives you state with
regard to the pre-COVID state of things. You just don't like Trump. Neither do I
It is the strategy (poorly conceived) of people whose ideology blinds them to extant
reality, and who think they can mold that reality to their whims through sheer fervency of
their belief in their moral superiority to other, "lesser types." I can't think of a single
historical example where such a strategy has worked out, but there you have it. Then again,
according to them, history also fits into that concept of "malleable reality" as they see it.
They are the makers of history in their own estimation, rather than part of and subject to
it. This is why the Left has never been able to grapple with, and is often outright hostile
to, the notion of unforeseen consequences.
This past weekend our hotel parking lots were pretty full, this is normally a slow time in SW
Florida. It's likely restaurants will be allowed 100% capacity seating with bars opening this
coming Monday.
Reasonable people who want a real economy in the USA should all be voting for President
Trump. If he wins, and I think he will, we're going to have a real boom as smart EU money
moves into USA equities, particularly the NASDAQ.
" blame the slowdown on the virus "
Not gonna happen. He's going to blame the Democrats who issued all those EO declaring who was
essential and who was "seperate but equal". He'll blame China, rightfully so, for spreading
this as far and wide in the West as possible; he'll blame the academics and professional
"resistance" within and without the government for their incompetence and intransigence.
Corky,
"Seems like a surefire way to throw the election, not win it."
it doesn't matter who votes, it only matters now who counts them. Thus the statewide mailings
of ballots to maximize ballot harvesting. At the very least lots of local elections will get
stolen, probably a congressional one too, even if WA doesn't go for Trump in November.
"Both viruses remove marker molecules on the surface of an infected cell that are used by
the immune system to identify invaders, the researchers said in a non-peer reviewed paper
posted on preprint website bioRxiv.org on Sunday. They warned that this commonality could
mean Sars-CoV-2, the clinical name for the virus, could be around for some time, like
HIV...that the coronavirus was showing "some characteristics of viruses causing chronic
infection"."
It appears that an Intelligence report that's come out regarding the CCP and their virus by
French Intelligence (DGSE) isn't getting the traction it deserves.
Eleven years, , 'eleven years'BEFORE the EU signed off on the PRC/CCP Wuhan
lab construction, French DGSE warned that the PRC/CCP's lab was a construction leak and
bio-weapon making facility disaster waiting to happen.
Why was nobody listening at the time? Where were the FIVE EYES in all of this, were they
ignoring French Intelligence's warning, what? Where was the CIA in this? They're supposed to
be the 'external' watchdog, right? It was the Tenet/Goss handover time frame, 2004. But
surely the DGSE warnings had to have been 'flagged' by Langley for a closer scrutiny, right?
What was DIA's read on this at the time?
..."French diplomatic and security advisers, who argued that the Chinese reputation for
poor bio-security could lead to a catastrophic leak.
They also warned that Paris could lose control of the project, and even suggested that
Beijing could harness the technology to make biowarfare weapons."...
Another interesting cavet in the article relates to P4 labs everywhere (including U.S.
facilities)..... "A source told the newspaper: 'What you have to understand is that a P4
[high-level bio-security] laboratory is like a nuclear reprocessing plant. It's a
bacteriological atomic bomb."
An interesting development yesterday: Twitter have flagged a couple of Trump's tweets on
mail-in ballots as "Misleading". A link at the bottom of each tweet says "Get the facts about
mail-in ballots" and directs you to a piece written by Twitter on the subject quoting CNN
& WaPo as having contrary views to the President - hardly news in itself.
Are we seeing the beginning of another insurance policy, in case the economy recovers? It
appears to put Trump in a bind, as shutting down or sanctioning Twitter as a whole would not
only deny Trump his (until yesterday) unfiltered comms channel to his base, but also invite
cries of censorship by the MSM. If he does nothing, what is to stop Twitter 'correcting' more
of this messages? In a later tweet Trump directly
accused Twitter of "..interfering in the 2020 Presidential Election". It will be very
interesting to see how this develops. Here is the first of the offending tweets:
@Barbara
If Israel, Mexico, Great Britain, China, Ukraine, Canada, et.al can interfere in American
elections, and the USA can interfere in the elections of any nation it wishes, why should the
Masters and Commanders of the internet be forbidden the same hobby?
Have you never watched Network? https://americanrhetoric.com/MovieSpeeches/moviespeechnetwork4.html
Same as it ever was.
"... So let's accept reality: median voters aren't driving outcomes anywhere. Bailouts for big business were not popular after 2008 and they are not now, either, especially when ordinary people languish unprotected. Governments and central banks may glance at polls, but they aren't doing what they are doing because of voter sentiment. ..."
"... Let's repeat: What needs to be moved onto the public balance sheet are the costs associated with safely redesigning work. I doubt that most businesses, especially smaller businesses, want to expose their workforces or their customers to serious risk. ..."
"... But if firms are not assisted with the costs of redesigning production for the safety of both, they will cut corners, dig in, and fight many salutary changes. ..."
"... Such aid, obviously, must be monitored closely, which would be easy to do by involving the workforce and looking at real outcomes. Blanket immunity is not a sensible option; whistleblowing laws badly need beefing up in enterprises of all types. ..."
"... The eurozone economy will shrink by 8 to 12 per cent this year, as the "sudden stop of activity" triggers a recession twice as deep as after the 2008 financial crisis, European Central Bank president Christine Lagarde has warned. ..."
"... With the American health care system you would be crazy to risk getting very sick (death might be better :( ) if you understand your health insurance coverage. ..."
"... Infection rates aren't the same everywhere, and the rates of re-opening shouldn't be the same everywhere. In NYC there is still substantial infection, and restrictions should remain. But in my community? I'm not certain that the strict lockdowns were ever warranted. Tens of thousands of people were forced into unemployment, and we've had a handful of deaths in one nursing home. Instead of permitting only the essential, we need to be prohibiting only the clearly dangerous, and using masks for the intermediate situations. Well, at least in my area. ..."
"... Well it's representative of something as the elementary schools reopened 3 weeks ago and retail mostly reopened with mask restrictions. Restaurants are open for takeout and outdoor seating. All to general approval with lines at many establishments. And small gatherings of ten people or less permitted. ..."
"... But are polls and "actual local sentiment" the appropriate parameters to use for making policy decisions, or should we try to quantify actual health risk and use that instead? Most people's ability to evaluate risk is quite poor, and they routinely overestimate the risks of highly visible or publicized dangers while underestimating risks elsewhere. [In my lightly affected area, an office worker is more likely to be killed in an automobile accident on the way to work than by a COVID-19 infection acquired there.] ..."
"... And at some point, we need to let the ~40 million people who lost jobs get back to work. When will that be? Should we wait until COVID-19 is completely stamped out and nobody is scared of it anymore? [That could be years from now, especially if vaccine development efforts go poorly.] If not that, then what metric should be used to determine when re-openings can occur? ..."
"... Paging Slavoj Zizek. The ideological coup de grace administered here where the talking heads managed to blame the quarantine for the virus' damage has been the greatest slight of hand trick in quite some time. ..."
"... Look, you need to realize that there has been no destruction of productive real capital whatsoever. Everything is still standing as it was three months ago. Factories, schools, homes, everything. The crops are (knock on wood) not failing yet either, except for that locust infestation in Eastern Africa and the Middle East that is going on right now. ..."
"... There is absolutely no rational reason why we should not be able to "pause" non-essential activities for however long is necessary to get rid of the virus, then go back to normal life. ..."
"... Things will take a turn for the better only after finance, big corporations and big business admit to their hysteria. They are in pretend mode now. Save face; get some bailout money. Trust us, we can bring the world out of this catastrophe. Because? We are The Free Market, the profit takers; what else is there? If it weren't all so tragic it would be fun watching them crash and burn. In the end they'll probably be as nasty and vindictive about their own self-imposed destruction as Dick Fuld was. Not with a bang; not with a whimper – just with a lot of recrimination and hatred. What else is new? ..."
"... Tom Ferguson made some great points on the social forces, such as how there is no OSHA, no whistleblower process, and no investment by government to help redesign production methods. We were already living in a new gilded age and now it's most likely to get worse. It will happen over 1-7 years, but the social forces look mostly negative. ..."
"... "Get 'em back on the hampster wheel before they start thinking of something better." ..."
It's worth your time because Ferguson looks at the official responses to the Covid-19 crisis
and explains things that might seem nonsensical, above all, why so many governments are
"reopening" even though polls pretty much everywhere say citizens want restrictions in place
longer. Ferguson cuts into the problem by focusing on worker safety as the real dividing
line.
The short version is "follow the money," as in big businesses think ending lockdowns will
help commerce, when as we know, that's not proving to be the case. Core observations (at 16:19
and 17:22):
So let's accept reality:
median voters aren't driving
outcomes anywhere. Bailouts for big
business were not popular after
2008 and they are not now, either,
especially when ordinary people
languish unprotected. Governments
and central banks may glance at
polls, but they aren't doing what
they are doing because of voter
sentiment.
So go back to first principles:
Investment approach to party competition - only appeals that
can be financed can make it in the public policy arena, no
matter how many people might benefit in general (Ferguson,
1995).
Where labor interests are weak or disorganized, power thus
passes by default to blocs of major investor groups. They
drives party competition, sometimes with labor groups in
alliance. The blocs can be empirically analyzed in
multidimensional policy space. Political money is the royal
road to understanding, but the full "spectrum of political
money" is rarely ascertainable. Some countries do have
reasonable data about campaign contributions, but many
don't, including many advanced countries - think Germany or
Italy. Most social scientists would rather study anything except
this subject. Aside: Event analysis often works fine as an
approach, e.g., Ferguson and Voth, Quarterly J. of Economics
2008).
That reinforces neoliberalism. Despite the uses of war metaphors, where combatants would set
up huge new bureaucracies to mobilize resources and people, governments are making
interventions in the Covid-19 crisis though existing firms. But one war analogy that is more
apt is that truth is always the first casualty. Ferguson comments on the terrible and
inconsistent statistics about infection levels and deaths, which are due not just from the
failure to run enough tests but as many suspected, also from the far from accidental failure to
do the best job of counting, particularly of nursing home deaths. One reason Belgium has had
such bad-looking results is that it's been an exception, with officials making considerable
efforts to keep accurate tallies.
The split on protecting workers versus businesses is largely but not entirely on class
lines, with private equity playing an outsized role in pushing for an end to lockdowns.
Ferguson notes that unions representing construction workers have been quietly pushing to end
lockdowns, while white collar workers who are not in a much different position than meatpackers
and retail store employees (in terms of working in close, high risk conditions) like health
care professional and educators, have been acting in a somewhat radicalized manner (nurses and
doctors speaking out; nurses engaging in walkouts; teachers threatening a strike in New York
City, which led to school closures). This parallels the at least 200 strikes chronicled by Mike
Elk at PayDay Report.
Notice this pushback it taking place despite safety needs operating against protests;
Ferguson drily commented on the shrinking of the public space.
Ferguson does think there's a sensible solution, although he recognizes it's not likely to
get done despite the relatively modest cost:
Let's repeat:
What needs to be moved onto the public balance
sheet are the costs associated with safely
redesigning work. I doubt that most businesses,
especially smaller businesses, want to expose their
workforces or their customers to serious risk.
But if
firms are not assisted with the costs of redesigning
production for the safety of both, they will cut
corners, dig in, and fight many salutary changes.
Such aid, obviously, must be monitored closely,
which would be easy to do by involving the
workforce and looking at real outcomes. Blanket
immunity is not a sensible option; whistleblowing
laws badly need beefing up in enterprises of all
types.
Ferguson also commented that the appearance that things were kinda-sorta stabilizing at a
bad new normal (if you consider 25% unemployment, properly measured, a spike in childhood
hunger, many unable to pay rents or mortgages and deferrals not long term solution) was
deceptive. In the 2008 crisis, where the damage was more localized, even with large sectors
impaired (residential real estate in certain countries; the banking system via housing-related
derivative bets), there was lots of G-7 and G-20 communication and a good bit of cooperation.
Trump's America First policy has put the kibosh on that. Ferguson is particularly concerned
about the parlous state of the EU/Eurozone. He sees a not-trivial risk of national politics
taking the fore, above all in Germany, leading to actions that could produce another Credit
Anstalt (with the most likely blowup taking place in the Italian banking sector).
As he concludes:
The atmosphere between the great powers often
more resembles the eve of the (failed) London
Conference of 1933 than what happened a decade
ago.
International economic coordination is just not
happening and as in the 1930s, emerging market
debt problems look overwhelming.
And I am too polite to note the possibility that
German domestic politics might yet produce a
disaster in the Eurozone that uncomfortably
resembles the 1931 breakdown, though the
domestic political constellation is not at all
comparable.
Let's hope somebody develops a vaccine.
There's a lot more meat in the talk and the Q&A, so I hope you can find the time to
listen to it.
Sadly, the CEO of Merck confirmed what ought to have been obvious (as your humble blogger
and Lambert have repeatedly pointed out in asides in posts and comments): a vaccine in even 18
months would be heroic. The comments from Merck are even more of a dampener by virtue of Merck
being a big vaccine player. From the Financial Times
today :
Merck chief executive Ken Frazier has cast doubt on the 12 to 18-month timeframe to
develop an effective coronavirus vaccine, describing the widely mooted schedule as "very
aggressive".
"It is not something I would put out there that I would want to hold Merck to," the US
pharmaceutical group's chief told the Financial Times, adding that vaccines should be tested
in "very large" clinical trials that take several months if not years to complete.
"You want to make sure that when you put a vaccine into millions if not billions of
people, it is safe," he said .
"Our experience suggests those are very aggressive compared to other timelines for getting
a safe and effective vaccine," Mr Frazier said when asked whether he thought the oft-repeated
goal was realistic.
And Christine Lagarde confirmed that the Eurozone had taken a worse hit than in the
financial crisis. Again from the pink paper
:
The eurozone economy will shrink by 8 to 12 per cent this year, as the "sudden stop of
activity" triggers a recession twice as deep as after the 2008 financial crisis, European
Central Bank president Christine Lagarde has warned.
Ms Lagarde painted a gloomy picture of how the eurozone will emerge from the coronavirus
pandemic as she told students on a live webinar that they faced "a massive economic crisis
and one that was literally unheard of in peacetime for the damage it is causing".
The ECB president, who will next week announce its latest monetary policy decision, said
the "mild scenario" it outlined this month for a 5 per cent contraction in the eurozone
economy this year was "in my humble view already outdated".
She said the eurozone economy was "very likely" to end up "somewhere in between the medium
and the severe scenario", meaning the economy would contract by 8 per cent or 12 per cent.
Adding that the bloc's economy shrank 4 to 5 per cent after the financial crisis over a
decade ago, she said "here we are talking about probably double that".
As Ferguson said, "If you want a happy ending, watch a Disney movie."
I don't agree that people are reluctant about reopening. Almost everyone I talk to who is
working and not retired in my rural area is all-in for reopening. Sure if you are an urban
person with uninterrupted income working from home your calculation may be different –
but for those who make their living working with their bodies, (I guess that's a pretty good
dividing line between working class and bourgeois), the shutdown has been a disaster and they
are getting very impatient with it. And the heavy-handed enforcement.
I know some more working class people that are leery (they cancelled camping with us)
– they know if they get sick it'll be possibly house losing expensive.
And they lost their house in the Great Recession too. This would be in exoburb Madison,
WI.
With the American health care system you would be crazy to risk getting very sick (death
might be better :( ) if you understand your health insurance coverage.
@furies: YMMV indeed. People in my semi-rural area are also pushing to open back up. Of
course, this probably has something to do with the fact that our infection rates are well
below the national average. [And less than 2% of NYC's rates.] Heck, things are so quiet here
that our hospitals ended up laying off staff, having postponed elective procedures and
screening exams in preparation for a COVID-19 wave that never came.
Infection rates aren't the same everywhere, and the rates of re-opening shouldn't be the
same everywhere. In NYC there is still substantial infection, and restrictions should remain.
But in my community? I'm not certain that the strict lockdowns were ever warranted.
Tens of thousands of people were forced into unemployment, and we've had a handful of deaths
in one nursing home. Instead of permitting only the essential, we need to be prohibiting only
the clearly dangerous, and using masks for the intermediate situations. Well, at least in my
area.
I suggest you look at Alabama and think twice. Our infection rates are spiking up and it
hasn't even been two weeks since restrictions were removed (save schools and colleges not
being in session).
Moreover, the urban/non-urban distinction looks spurious. Seoul, which has a big public
transportation network and is larger than NYC, has had all of two Covid-19 deaths versus over
20,000 for NYC. Hong Kong, another high density city, got the virus under control despite a
bad start. By contrast, low density, low controls Sweden moved into having the highest per
capita death rate in the world in the last week.
Well it's representative of something as the elementary schools reopened 3 weeks ago and
retail mostly reopened with mask restrictions. Restaurants are open for takeout and outdoor
seating. All to general approval with lines at many establishments. And small gatherings of
ten people or less permitted.
I'm not a pollster and I generally take them as relatively inaccurate but I get out a lot
and life goes on.
I suggest you read the post. It appears you didn't.
1. Your local restrictions are still very severe (except for the opening of schools)
compared to plenty of places. In most of the South, everything is open except schools, no
mask requirements, no limits on gathering size. Some places here for instance, like some gyms
and a very few churches, have voluntarily delayed opening to June 1 to get social distancing
procedures in place, and I stress those are self-imposed.
2. More important, you don't have any evidence of actual local sentiment. Your perspective
appears to reflect consumer, and not worker, sentiment.
Businesses are behind the anti-lockdown pressure and media reporting will reflect
government and business messaging. Have you spoken to any health care workers? Retail store
employees who are in a position to speak candidly?
Many are still staying home out of fear of coronavirus, so they see the lockdown lifting
as premature:
But are polls and "actual local sentiment" the appropriate parameters to use for making
policy decisions, or should we try to quantify actual health risk and use that
instead? Most people's ability to evaluate risk is quite poor, and they routinely
overestimate the risks of highly visible or publicized dangers while underestimating risks
elsewhere. [In my lightly affected area, an office worker is more likely to be killed in an
automobile accident on the way to work than by a COVID-19 infection acquired there.]
And at some point, we need to let the ~40 million people who lost jobs get back to work.
When will that be? Should we wait until COVID-19 is completely stamped out and nobody is
scared of it anymore? [That could be years from now, especially if vaccine development
efforts go poorly.] If not that, then what metric should be used to determine when
re-openings can occur?
With all due respect, you didn't answer my question. What metric should be used to
determine when re-openings can occur? If now is too early, then when?
And you misread me. I'm not cavalier about COVID-19. I'm well aware of how severe it is.
But I'm also alarmed by the job losses. We've literally thrown 20% of the workforce out of
work. Now I agree that some of those jobs were doomed anyway (like in the travel and tourism
industries), but I personally know nearly a dozen people who were ordered out of work who
could have kept working safely by wearing masks, cleaning shared contact surfaces, and
taking a few other precautions.
And your previous comments about Hong Kong are interesting. Authorities there imposed
restrictions that suppressed the virus even with their high population density, but they did
it without the tremendous job losses . I'm having a hard time finding firm statistics,
but it appears that fewer than 5% of HK workers lost their jobs. What did they do differently
so that people could keep working?
And regarding officials not wearing masks on TV? I totally agree with you. We desperately
need to be wearing more masks in the US. I'd just like to see more people be able to do so
from work. Especially for those who can't work from their computers at home.
Paging Slavoj Zizek. The ideological coup de grace administered here where the talking
heads managed to blame the quarantine for the virus' damage has been the greatest slight of
hand trick in quite some time.
Thank you for continuing to hammer home this point, Yves. I feel like I'm having this
conversation with almost everyone I know.
Look, you need to realize that there has been no destruction of productive real capital
whatsoever. Everything is still standing as it was three months ago. Factories, schools,
homes, everything. The crops are (knock on wood) not failing yet either, except for that
locust infestation in Eastern Africa and the Middle East that is going on right now.
There is absolutely no rational reason why we should not be able to "pause" non-essential
activities for however long is necessary to get rid of the virus, then go back to normal
life.
Not just that, but not doing so ensures there will be no return to normal, because until
an effective vaccine that can be produced and distributed in billions of doses becomes
available, there will be no return to "normal", whether shelter-in-place orders are in effect
or not.
From which it directly follows that the real problem right now is that we have a totally
dysfunctional socioeconomic system that is not fit to serve the needs of society and has to
go.
Yet who is your anger directed towards?
Looks like it is not the people who designed this system to serve own interest and who are
now clearly planning on sacrificing many millions of lives over the coming 2-3 years in order
to not have to change it. And on doing so while tricking much of the rest of the population
that this is being done for the common good
Me and most of my people are planning to stay locked down and let the yahoos get out and
test that herd immunity thing first. (No surprise that we are mostly able to work from
home.)
I'd be totally cool with it if it were 100% optional. Let the people have the freedom to
infect themselves if they want! But it's not optional if you have to risk exposure to feed
your family.
Our big concern had been one relative who works as a prison guard at Rikers. Luckily, she
broke her foot and has been on leave.
Still, my 19-year-old is dying (!!) to go back to college in Santa Cruz in the fall. I'm
worried about that second wave.
Here in Suffolk county Long Island (where those protesters were yelling at the TV newsguy the
other day), traffic has been ticking upward since last week.
Looks to be a meaty preso. I will dig into it later.
Unfortunately the freedom to "infect themselves" also increases the likelihood that they
will extend the time and extent of the pandemic.
In Orange County, CA where the beaches are crowded with lots of congregating younger
people, the number of infections is 3X's higher in the 18-24 Y.O. cohort than in the over 60
cohort. Not until more younger folks get hospitalized (and monetarily burdened) will the
concern for spreading the virus improve. Or when they take the virus home and their
parents/grandparents succumb.
Ferguson points out that he's heard (and he has impeccable contacts at that level) that
some central bankers and other government officials discussed how Covid-19 could helpfully
reduce pension obligations. So some parties are explicit about wanting to shorten the
lifespans of their citizens.
I like seeing the words "resources" and "management" together. Which reminds me -- has there ever been a starker illustration of the fundamental insanity
of our system than the COVID disruption?
So for a brief moment of two to three months we are forced to not waste our limited
nonrenewable resources on pointless activities with no long-term benefit to humanity such as
jetting around the globe for business meetings whose main goal is figuring out how to destroy
everything even faster and on vacations to exotic destinations. And what is the reaction?
Everything is falling apart
One would think that not having to waste our precious geological inheritance that will not
be regenerated for another 100-200 million years would be a reason to celebrate. But no,
instead the system is crashing and everyone is up in arms about why we are not burning our
proverbial furniture as fast as we can
An organized and thorough response from our federal government was necessary for the
country to see itself as one. The effort was negligent, disorganized and reflected the
management of a real estate swindler. Deficit spending, on behalf of the forty percent of the
country with little or no savings, should have been the priority and would be the priority of
a right thinking administration. About four one thousandths of the country has become
infected. What happens when an event occurs that affects eight one thousandths of our
citizens?
An organized and thorough response from our federal government was necessary for the
country to see itself as one. The effort was negligent, disorganized and reflected the
management
A+1–in that first statement– for seeing where step one was so misplaced -- imo
also
Kudlow talking about a "back to work bonus". How about a hotline into the TBTF tip sheet
boiler room to front-run then dump the next miracle vaccine Scam-Co fraud to be touted on
CNBC the next day? SEC will look the other way on their p-rn monitors, as usual.
I'm one of the yahoos out every day, which includes a 90 minute hilly trail run through
the woods at a few public "undisclosed locations". Hint: the governor of this state is in no
condition to chase me even if I was carrying a 200 pound backpack. Admittedly I'm pretty good
in the 60+ year old age group.
Up here in southwestern New York state, the insanely popular ice cream stand, famous in
our small village as being the local gathering place from Memorial Day weekend though Labor
Day, frequented by ice cream lovers wearing red MAGA caps .. remains closed. You can get your
ice cream cone fix at the tiny general store around the corner, but my local information
source reports that the ice cream scoopers are unmasked and ungloved, so older people are
staying away. We are currently sticking with the half gallon in the freezer and scooping our
own.
A Massachusetts ice cream shop temporarily closed and one of its employees quit after
the owner says his staff faced an onslaught of harassment when reopening for the first time
over the weekend after being shuttered amid the coronavirus pandemic.
..The TV station reported that Lawrence had asked customers to place orders an hour before
pickup, but on the first day back, his limited staff faced harsh comments and vulgarity
from angry customers who demanded ice cream.
"One of my best workers quit yesterday at the end of her shift, she stuck it through her
shift," Lawrence told Boston 25 News. "But the words she was called and the language, you
wouldn't even say in a men's locker room. And to say it to a 17-year-old kid, they should
be ashamed of themselves."
Because they stuck to ordering over the phone only, and taking the orders out to the
customers, they lost their composure. I can't and won't understand this outlook that a
business has to cater to me, right now, or I will harass you.
Regarding the vaccine: IMO, the big shortcut will be 3rd phase of clinical assays which
would need at least 60.000 subjects and a long lasting survey on efficacy. IMO we might run,
almost directly, for massive vaccinations without knowing the real efficacy and with more or
less good indications on safety. There are, here and there, subtle indications this could be
the way to accelerate this. Big pharma won't probably be big players in this game as they
will guard their backs against any potential problem.
Anectotally, in Madrid, with a neolib regional government, all communications,
applications, forms have been diverted to private autentication firms through a fee ignoring
the already existing official and free autentication methods. And it is not that easy to
notice this is the only way to do it. If someone is doing, for instance an application for
the recognition of dependent relatives, which requires certain amount of documentation, a new
bussines is contracting an agent that will do the bureocracy for you, and of course, eat on
the corresponding economic support for the dependent or those caring them. This is their way
to try to reduce the effectiveness of such programs: interposing middlemen here and
there.
And yeah, counting, 27.500 deaths so far when excess mortality has been about 43.000.
Neoliberals don't give a . on nursing homes even when they are running the businesses. In the
late years private equity has been investing heavily on nursing homes cos a growing industry
ya know? Let's not start with their business model because it is nauseating.
Chinese vaccine trials, with so supposedly low disease incidence, will have to move their
phase III to, let's say, Africa unless they do these at home with many millions individuals
in each trial. For instance the whole Hubei province should be a trial.
Things will take a turn for the better only after finance, big corporations and big
business admit to their hysteria. They are in pretend mode now. Save face; get some bailout
money. Trust us, we can bring the world out of this catastrophe. Because? We are The Free
Market, the profit takers; what else is there? If it weren't all so tragic it would be fun
watching them crash and burn. In the end they'll probably be as nasty and vindictive about
their own self-imposed destruction as Dick Fuld was. Not with a bang; not with a whimper
– just with a lot of recrimination and hatred. What else is new?
Tom Ferguson made some great points on the social forces, such as how there is no OSHA, no
whistleblower process, and no investment by government to help redesign production methods.
We were already living in a new gilded age and now it's most likely to get worse. It will
happen over 1-7 years, but the social forces look mostly negative.
I frequently think that the push to "open up" now is really a push to prevent people from
thinking about transformational politics and systems. Get 'em back on the hampster wheel
before they start thinking of something better.
Yes. And why is limited testing not a purposeful way to avoid responsibility for a better
documented catastrophe? Ya wanna look like Belgium? If you don't gather the data, they can't
hurt you, says the machine. It's all swept up as fog of war. A well-established practice,
which I seldom see considered by analysts.
Some things will be fixed, but some industries will be permanently affected. the amount of
long term damage is unclear. Unemployment probably will be higher as many jobs will simply be
eliminated and robots take place of regular workers.
Re-opening a fragile, brittle, bankrupt, hopelessly perverse and corrupt "normal" won't fix
what's broken.
The stock market is in a frenzy of euphoria at the re-opening of the economy. Too bad the
re-opening won't fix what's broken. As I've been noting recently, the real problem is the
systemic fragility of the U.S. economy, which has lurched from one new extreme to the next to
maintain a thin, brittle veneer of normalcy.
Fragile economies cannot survive any impact with reality that disrupts the distortions that
are keeping the illusion of "growth" from shattering. For the past two decades, every collision
with reality cracked the illusion, and the "fix" was to duct-tape the pieces together with new
extremes of money-creation, debt, risk and speculative excess.
While the stock market has soared, the real world falls apart. If your region needs a new
bridge built, count on about 20 years to get all the "stakeholders" to agree and get the thing
actually built. Count on the cost quintupling from $500 million to $2.5 billion. Count on
corners being cut as costs skyrocket, so those cheap steel bolts from China that are already
rusting before the bridge is even finished? Oops. Replacing them will add millions to the
already bloated budget.
Want to add a passenger stop on an existing railroad line? Count on 20 years to get it done.
The complexity thicket of every regulatory agency with the power to say "no" basically
guarantees the project will never get approved, because every one of these bureaucracies
justifies its existence by saying "no." Sorry, you need another study, another environmental
review, and so on.
Need a new landfill? I hope you started the process 15 years ago, so you'll get approval in
only five more years. Every agency with the power to say "no" will stretch out the approval, so
they have guaranteed "work" for another decade or two.
Did your subway fares double? Was the excuse repairing a crumbling system? Did the work get
done on budget and on time? You must be joking, right? All the fare increase did was cover the
costs of skyrocketing salaries, pensions and administrative costs. Repairs to the tracks and
cars-- that's extra. Let's float a $1 billion bond so nobody have to tighten their belts, and
have riders pay for it indirectly, through higher taxes to pay the exorbitant costs of 20 years
of interest on the bond.
Have you been thrown off your bicycle by the giant potholes in the city's "bike lanes"? The
city reluctantly admits that these streets that haven't been maintained for decades--yes,
decades. The city once paid for street maintenance out of its general budget, but alas, that's
been eaten up by skyrocketing salaries, pensions and administrative costs, so now we need to
float $100 million bond to fund filling potholes. If all goes according to plan (ha-ha), we
should be able to re-pave the streets that have been crumbling for 20 years in... the next 20
years.
These real-world examples are just four of thousands of manifestations of a broken system.
Rather than make tough choices that drain power and wealth from vested interests, we simply
borrow more money, in ever increasing amounts, to keep the entrenched interests and elites
happy.
There are two "solutions" in the status quo: dump the debt on taxpayers or on powerless
debt-serfs--for example, college students. (See chart below of the $1.6 trillion that's
stripmining student debt-serfs.)
Who benefits from selling all the municipal bonds, bundled student loans, etc. to investors
starving for a yield above 0.1%? Wall Street, of course.
The problem is that while debt has soared, productivity and earned income have stagnated.
The statistical narrative has been ruthlessly gamed to hide the erosion of living standards,
but even with the bogus "low inflation" of official statistics, wages for the bottom 95% have
stagnated for decades.
Measures of productivity have also been gamed to mask the ugly reality that the vast
majority of the U.S. economy is stagnating under the weight of interest payments on debt,
mal-investments in speculative gambles, higher junk fees and taxes, crushing regulatory
compliance, high costs imposed by monopolies and cartels and a well-cloaked decline in the
quality of just about everything the bottom 95% uses or owns.
What little productivity gains have been made have been skimmed by the top 5%. Coupled with
the Federal Reserve's single-minded goosing of the one signaling device it controls, the stock
market, the top 0.1% in America own more wealth than the bottom 80%.
If productivity stagnates and winners take all , the wages of the bottom 95% cannot rise.
Real wealth is only created by increases in the productivity of labor and capital; everything
else is phantom wealth.
The only way stagnant incomes can support more debt is if interest rates decline. Presto,
the Fed dropped interest rates to near-zero a decade ago. Of course you and I can't actually
borrow millions for 0.1%; that privilege is reserved for financiers and other financial
parasites and predators.
Debt-serfs were able to refinance their crushing mortgages to save a few bucks, and so they
can afford to 1) take on more debt and 2) pay higher taxes to fund the ballooning public
debt.
Every one of these extremes has increased the systemic fragility of the American economy.
This fragility is reflected in the impoverishment of the bottom 95%, the thin line between
solvency and bankruptcy, the decay of public trust in institutions run for the benefit of
entrenched interests, and the quickening erosion of America's social contract.
Re-opening a fragile, brittle, bankrupt, hopelessly perverse and corrupt "normal" won't fix
what's broken.
Bevin @13 you seem to have somehow mixed up the future with the present, what you describe is
not what the UK is today.
Given the unprecedented outflow of Government funds due to Covid-19 support of society
something is going to have to happen to fund it, either borrowing in the markets or taxing it
back or letting hyperinflation rip. This would apply regardless of who was in power.
Not only is money being spent but tax revenues are being crushed. All of them. At the
national level Income Tax, Corporation Tax, VAT, Business Rates and local level Council Tax
plus any others I omit, are cratering. Something will have to give.
Unless Governments perform some kind of miracle and get economic activities back up very
quickly what you describe will be coming to a country near you, including the UK. We are
heading into the abyss and few understand that the life we have enjoyed was by running up
debt on our national credit cards and is in the rear view mirror, the future could be very
bleak. Your description of the UK might prove to have been too optimistic.
The Party in power is probably immaterial, but perhaps you could suggest an alternative to
"privatising and slashing benefits" as you put it?
I can't see any alternative to selling what assets they can (not much left now to
sell)(not many buyers either in the new debt maxed out World), cutting Government operating
costs (forget High Speed Rail and Trident replacement), reducing by capping all benefits
including all Government funded pensions, Civil Service, military etc as well as the State
Pension.
Using the fiat system to print money in order to keep some liquidity in a depressed market
will not - can not, in fact be inflationary much less the inanely hyperbolic 'hyper'
inflationary. The only danger is that rightist dingbats who see the revelation of free money
as they call it, may inspire a wake up in the fools who imagine that economies are actually
run on the 'balance the books' tosh.
Balance the books, the mantra that all governments, neolib, conservative and fascist have
been feeding to the population for the last half century has been a lie. The actual
government policies have been counter to that, so as to best enable their backers to steal
this nonsense 'money' as they desire.
All this 'money' that has been generated by so called 'financial service industries' is
'free' in exactly the same way and yet that isn't claimed to be inflationary, so it beggars
belief that any rational person could claim producing money in exactly the same way but 1) at
lower amounts than the city of london plus all the dodgy service industries across the UK who
make this 'money' while producing nothing up until the lockdown & 2) distributing that
direct to consumers thereby ensuring there will be no asset inflation is suddenly deemed to
be destructive. They only thing destroyed will be deceitful economists' & politicians'
already dubious credibility.
The top nine nations with the most coronavirus cases were members of the Western Empire
(former democracies weakened by corporations and oligarchs to promote global trade) or the
Elite reaching an understanding with Authoritarians. "Profit over lives" was the result.
Endless wars, offshoring, corruption, exploitation and despair led to the decreased life
expectancy in the USA and England.
The novel coronavirus pandemic is the direct result of these dysfunctional governments.
Corporations see the epidemic as a profit center for their magical treatment or vaccine.
There is no US national public health system. US hospitals and nursing homes primary purpose
is to make money for stockholders and mangers. It is of no matter that nearly 100,000
Americans have died so far with many more to come. No great wealth will be spent to fight the
pandemic nationally in the USA using the proven public health practices of universal testing,
contact tracing and isolation of the ill.
This is now a bipolar world. The USA and UK are pariah nations quarantined from the
nations that have controlled the virus. The Western Empire has fallen.
The Democrats are just as responsible for the mess as the Republicans. I have yet to
receive my mail-in ballot for the postponed June 2nd Maryland primary. Besides being
incarcerated at home, it looks like I am also disenfranchised. Yet, I am very lucky, once
again, but for how long?
Either a democratic constitutional government retakes control of the USA or a second civil
war between the credentialed and the left-behind is inevitable. The aristocracy always loses
but with wholesale chaos, major loss of life and redistribution of wealth.
This is an extraordinary dangerous time for Homo sapiens due the Pandemic and the
resulting Greatest Depression leading to unrest, scapegoating and confrontation which could
result in the use of nuclear weapons. Plus, climate change looms ahead. How can this possibly
be addressed if the developed world is unable to control a once in a century pandemic; let
alone, evolve a sustainable civilization that can survive on a finite planet.
This article underlines the point that I have tried to make that we have moved beyond the
neo-liberal stage. All that remains is for politicians and their owner/trainers to face up to
reality- if they don't make changes, the people will.
Already the crisis is well beyond the ability of either the UK or the US governments to
manage it- the measures needed involve a total repudiation of the policies of the past half
century. The reforms necessary begin with the kind of minimal socialist programme put forward
by Corbyn in the last two elections, but they will have to go much further. In the UK House
of Commons there are perhaps a dozen members who can see this. The political system is like a
beached whale, floundering around as it dies-only a lot less majestic.
It needs to be added, with special reference to those who venerate the EU, that the EU is
at least as vulnerable to the problems that its inbuilt bias towards neo-liberalism will
cause it as the system disintegrates.
Keynes gave the capitalist ruling class tools to extend its existence, the neo-liberals,
contemptuously dismissed them as cowardly compromises- "Real Men bust Unions" is the
neo-liberal motto. Now the reckoning is coming and Keynes is suddenly looking very clever.
And modern.
Lyttenburgh says:
May 25, 2020 at 5:00 am"I mean, geopolitically. It'll still likely to continue,
because money needs to be spent, research needs to continue, and military keynesianism
is, I believe, an essential component of the US economy."
Will a real breadwinner in da house of the US of A please stand up?
"Lockheed, the world's largest defense company, already has hired more than 2,365
new employees since March when many U.S. companies began furloughing or layoff workers
amid coronavirus stay-at-home orders. In addition, Lockheed is "actively recruiting for
over 4,600 roles," in 39 states and Washington, D.C., the company said in a statement
Friday.
"Northrop Grumman says it could hire as many 10,000 this year. Raytheon
Technologies another 2,000. Boeing, which is preparing to cut 10 percent of its
160,000-employee workforce as the airlines predict at least a three-year drop in sales,
is advertising more than 600 open positions in the United States, largely in its
defense, space, cybersecurity and intelligence units ."
[ ]
"Pay cuts, furloughs and a hiring freeze has hit Raytheon Technologies'
commercial business, a major supplier to planemakers. But it's a different story on the
defense side of the house where there are 2,000 job openings. Last month, the Air Force
chose Raytheon to build a new nuclear cruise missile, a project Hayes said could be
worth $10 billion over its lifetime.
"In recent years, Lockheed has been expanding its missiles and space businesses
as the Pentagon has increased focus and spending in these sectors.
[ ]
"Northrop Grumman, the fourth-largest U.S. defense company, expects "significant
headcount growth this year because of the program volume increases sales growth, as
well as the anticipated awards in the latter half of this year," CEO Kathy Warden said
on the company's quarterly earnings call last week.
"The company also has been increasingly winning classified contracts as the U.S.
military has shifted spending to develop new weapons to counter China . Northrop is
building a new stealth bomber and a new intercontinental ballistic missile for the Air
Force.
""We are actively recruiting for 10,000 open positions and we hired more than
3,500 people in the first quarter, which included more than 1,300 new hires in March,"
Warden said."
"Since [Trump] took office, only Fiat Chrysler and defense contractor Lockheed
Martin have added a meaningful number of net new workers.
Lockheed's U.S. headcount is up about 15%. Fiat's employment is up about 11%,
with some gains coming from broader North American operations. The net gain of jobs at
the two companies is about 22,800 since the end of 2016, according to company
disclosures."
See? Seeeee? How can you argue against the power of the Money, Professor? Cuz
war-machine choo-choo has no brakes.
"... "Well, I think it's automatic. Because they're already cutting. I mean, if you look, they're cutting back. Because it's it's market. It's demand. It's supply and demand. They're already cutting back, and they're cutting back very seriously," ..."
The United States is on track to cut 1.7 million barrels of oil production per day,
according to Reuters calculations of state and company data shared on Thursday. It was US
President Donald Trump that suggested
at the beginning of April, prior to the most recent OPEC deal signing that the United
States would cut its oil output as a natural response to the worsening market conditions. The
statement was not initially good enough for OPEC, who wanted more of a commitment from the
world's largest producer and consumer of crude oil.
"Well, I think it's automatic. Because they're already cutting. I mean, if you look,
they're cutting back. Because it's it's market. It's demand. It's supply and demand. They're
already cutting back, and they're cutting back very seriously," US President Trump said at
a press briefing early last month.
US Energy Secretary said last month that the DoE expected that production in the United
States would fall by between two and three million bpd by the end of the year -- it appears the
cuts have come even quicker than the department expected.
The need for the production cuts grew more evident as the United States shut down nearly all
activity in an attempt to flatten that curve of infections that sought to overwhelm the
country's healthcare system. Doing so, however, has idled much of the economy and crippled
demand -- and as such, its oil and gas industry that fuels that economy.
The cuts from US producers may seek to quiet the disgruntlement of OPEC and Russia, in
particular, who expressed their displeasure that the US would not require its producers to curb
production. After all, the US shale industry has benefited greatly from previous rounds of OPEC
cuts.
"... The findings paint a grim picture of the devastating and lasting impact recession has on corporate performance. To be sure, a shocking seventeen percent of the companies failed, were acquired or decided to go private. ..."
"... Meanwhile, three years after the recession forty percent of the companies hadn't recovered to precession sales and profit levels. And, approximately 80% of public companies had not rebounded to their pre-recession growth rates in sales and profits a full three years after the recession. ..."
"... Almost all business people agree that the current crisis marks an inflection point. The business world has changed and firms need to remake (i.e., downsize) their organizations to fit in the new normal. Companies will operate with a smaller footprint, but more debt. ..."
Submitted by Joe
Carson , former chief economist at Allianz
The Fed's debt-bridge policy is designed to improve the flow of credit to businesses to
avoid a devastating credit crunch. Never before has one of the monetary policy solutions to
combat recession been to extend credit to struggling, profit losing businesses.
There is no precedent for record business borrowing during a recession. The scale of
business failures during and after the economy exits recession will far exceed that of the
Great Financial Recession.
The Fed's Debt-Bridge Policy
The traditional way for monetary policy to build a bridge from recession to recovery is
through the lowering of official interest rates. In time, the reduction of interest rates
triggers a refinancing cycle, lowering interest costs, and improving liquidity positions. The
"reliquification" process enables firms (and individuals) to exit recession with stronger
liquidity and lower debt burdens.
With official interest rates relatively low the "reliquification" process was not a viable
policy option to combat the abrupt contraction in the economy. So policymakers were forced to
support the flow of credit to the economy by purchasing securities and provide direct financing
to sectors where it is not otherwise available or too costly.
So instead of contracting, which is the typical pattern during the recession, the flow of
private credit has exploded to the upside. Since the start of 2020, commercial and industrial
loans have increased over $750 billion to a record $3.1 trillion. That increase nearly matches
the cumulative increase in corporate bank borrowing of the past 6 years.
At the same time, US corporations have tapped the capital markets for hundreds of billions
of new debt. Through early May corporations have issued nearly $300 billion in new debt, twice
as much as the comparable period one year ago.
An addition of $1 trillion of new liabilities over a few months is a big number in the best
of times. Yet, record corporate borrowing during bad times increases the risk of business
failures and defaults. Here's why.
A Harvard Business study released in 2010 analyzed corporate performance during three global
recessions from 1980 to 2000. Sales and profit performance of 4700 public companies were
analyzed three years before and three years after the recession.
The findings paint a grim picture of the devastating and lasting impact recession has on
corporate performance. To be sure, a shocking seventeen percent of the companies failed, were
acquired or decided to go private.
Meanwhile, three years after the recession forty percent of the companies hadn't recovered
to precession sales and profit levels. And, approximately 80% of public companies had not
rebounded to their pre-recession growth rates in sales and profits a full three years after the
recession.
Almost all business people agree that the current crisis marks an inflection point. The
business world has changed and firms need to remake (i.e., downsize) their organizations to fit
in the new normal. Companies will operate with a smaller footprint, but more debt.
There is no precedent for record corporate borrowing during a recession. As a result,
investors need to brace for an economy unlikely to resemble the one before, with an uneven and
slow growth, and record corporate failures.
"... The coronavirus crisis has thrown the global economy into cardiac arrest, and now you are acutely aware of the very markets that you had previously just assumed would function as normal. The first indication was the precipitous drop in the stock market that took place in late February. Then, as the United States began to enter quarantine, the labor market collapsed and hundreds of millions of people were suddenly out of work. Shortages in a few key commodities -- masks, ventilators, toilet paper -- began to appear. ..."
How will the coronavirus transform the relationship between state and market? A look at oil,
food, and finance.
You pay little attention to the systems of your body --
circulatory, digestive, pulmonary -- unless something goes wrong.
These automatic systems ordinarily go about their business, like unseen clockwork, while you
think about a vexing problem at work, drink your morning cup of coffee, walk up and down
stairs, and head out to your car to begin your morning commute. If you had to focus your
attention on breathing, pushing blood through your veins, and metabolizing food, you'd have no
time or energy to do anything else. The body abhors the micromanaging of the mind.
The same applies to the world's markets. They whir away in the background of your life,
providing loans to your business, coffee beans to your nearby supermarket, labor to build your
house, gas to fill your car. You take all of these markets for granted. All you have to concern
yourself with is earning enough money to gain access to these goods and services. That's what
it means to live in a modern economy. The days of hunting and gathering, of complete
self-sufficiency, are long past.
And then, in a series of sickening shifts, the markets go haywire. As with a heart attack,
you no longer can take the optimal performance of these systems for granted.
The coronavirus crisis has thrown the global economy into cardiac arrest, and now you
are acutely aware of the very markets that you had previously just assumed would function as
normal. The first indication was the precipitous drop in the stock market that took place in
late February. Then, as the United States began to enter quarantine, the labor market collapsed
and hundreds of millions of people were suddenly out of work. Shortages in a few key
commodities -- masks, ventilators, toilet paper -- began to appear.
It is one of the central tenets of laissez-faire capitalism that markets behave like
automatic systems, that an "invisible hand" regulates supply and demand. Market fundamentalists
believe that the less the government interferes with these automatic systems, the better. They
argue, to the contrary, that markets should increasingly take over government functions: a
privatized post office, for instance, or Social Security accounts subjected to the stock
market.
Market fundamentalists are like Christian Scientists. They refuse government intervention
just as the faithful reject medical intervention. Much like God's grace, the invisible hand
operates independent of human plan.
Then something happens, like a pandemic, which tests this faith. States around the world are
now spending trillions of dollars to intervene in the economy: to bail out banks, save
businesses, help out the unemployed. Countries are imposing export controls on key commodities.
As in wartime, governments are directing manufacturers to produce critical goods to fill an
unexpected demand for greater supply.
These are emergency interventions. The market fundamentalist looks forward to the day when
stay-at-home restrictions are lifted, people go back to work, the stock market barrels back
into bull mode, and the invisible hand, with perhaps a few Band-aids across the knuckles,
returns to its job.
But some pandemics fundamentally alter the economy. In such emergencies, people realize that
an economy is constructed and thus can be reconstructed. Are we now at just such a moment in
world history? Will the coronavirus permanently transform the relationship between the state
and the market?
Let's take a look at three key markets -- oil, food, and finance -- to measure the impact of
the pandemic and the prospects for transformation.
Oil
Shutterstock
In 2007, Ecuadorian President Rafael Correa
offered to forgo digging for oil beneath the Yasuni national park in exchange for $3.6
billion from the international community. No one took him up on the offer.
When the U.S. price of oil went below zero last week, I immediately thought of Correa's
offer. The mainstream scoffed at the Ecuadorian leader back in 2007. How on earth could you
possibly propose to keep oil under the earth? The world economy runs on fossil fuels. You might
as well ask your kid to keep her Halloween candy uneaten in the back of the cupboard.
Today, however, the world is glutted with oil. The global recession has radically reduced
the need for oil and gas.
In the United States, transportation absorbs
nearly 70 percent of oil consumption. With airplanes grounded, fewer trains and busses in
operation, and highways uncongested, the demand for oil has dropped precipitously. Businesses,
too, are using less energy. It's not just oil. Companies devoted to pumping natural gas out of
shale deposits are filing for bankruptcy as their market value drops precipitously: the price
of a share of fracking giant Whiting Petroleum fell from $150 a couple years ago to 67
cents on March 31.
It's gotten to the point that you almost can't give away the stuff.
After all, if you somehow found yourself with a bunch of barrels of oil, where would you
store it? Oil-storage tanks in the United State are near capacity. "Oil supertankers are
looking like petroleum paparazzi, crowding the Los Angeles shoreline, either as floating
storage or waiting on some kind of turn in sentiment," Brian Sullivan
writes at CNBC . "With prices higher in coming months, for now it pays to sit on oil and
hope to sell it for more money down the pipeline."
Oil-producing nations, after years of boosting their supplies, finally agreed in mid-April
to cut production
by 10 percent -- about 10 million gallons a day. In other words, they are deciding to leave
oil in the ground. Now, however, it doesn't even qualify as a half-measure, since demand has
dropped by 35 percent. The oil producers are awaiting the end of recession, when the
quarantined go back to work, and everyone jumps on their transport of choice to make up for
lost travel. They are awaiting a return to normal.
But the market for fossil fuels is not normal. The notion that the invisible hand will steer
economies in a sustainable direction is hogwash. We are long past the moment when we should
have paid Correa and everyone else to leave the oil and gas in the ground and move toward a
world powered entirely by clean energy. The market treats the environment either as a commodity
like any other or as an "externality" that doesn't factor into the final price of goods and
services. That is so nineteenth century.
Climate change demands an intervention into the energy markets with restrictions on
production, subsidies for clean energies like solar, and government purchases of electric cars.
Returning to "normal" after the pandemic is not a viable option.
Food
Shutterstock
Like the oil exporters, food producers in the United States are restricting production as
well.
In Delaware and Maryland, chicken producers are euthanizing
two million chickens because the processing plants don't have enough workers. Sickness and
death in these facilities, which has caused closures that are disrupting the supply chain, has
prompted Trump to classify
such plants as "critical infrastructure" that needs to remain open. Meanwhile, thousands of
acres of fruits and vegetables
are rotting in the fields in Florida because of the suspension of bulk food sales to
schools, theme parks, and restaurants. The shortage of pickers -- often migrant laborers whose
mobility has been restricted -- is complicating harvests.
Unlike oil, however, the overall demand for food remains high. The grocery business
is
booming . Food banks are
overwhelmed by a surge unlike any in recent decades. The U.S. Department of Agriculture
ordinarily could swoop in and buy up surplus production -- as it did for soybean growers during
the trade war with China -- for use in food banks and other distribution programs. But as with
so many other government agencies in the Trump era, the USDA has been slow
to act , despite repeated pleas from growers and governors.
The pandemic is highlighting all the problems that have long plagued the food supply. First,
there is the mismatch between supply and demand. Around
820 million people globally didn't have enough to eat in 2018, a figure that had been
rising for three years in a row, and contrasts with another rising number: the 672 million
obese people in the world. In the United States, fully 40 percent of food goes to waste every year.
So, obviously the invisible hand does a pretty poor job of achieving market equilibrium.
Second, despite a growing movement to eat locally and seasonally, the food system still eats
up a huge amount of energy. The problem lies not so much with bananas arriving by cargo ship,
which is relatively efficient, but with perishable items delivered by plane . And it's what we eat,
rather than where the products come from, that matters most. "Regardless of whether you compare
the footprint of foods in terms of their weight (e.g. one kilogram of cheese versus one
kilogram of peas); protein content; or calories, the overall conclusion is the same,"
writes
Hannah Ritchie. "Plant-based foods tend to have a lower carbon footprint than meat and dairy.
In many cases a much smaller footprint."
Third, because of economies of scale and abysmal labor practices, food in the industrialized
world is too often grown by agribusiness, processed by transnational corporations, and picked
or handled by workers who don't even make close to a living wage.
Returning to this kind of food system after the pandemic fades would be truly unappetizing.
The livable wage campaign must spread to the countryside, meat substitutes must get an
additional lift through government and institutional purchases, and innovative programs like
the Too Good to Go app in Europe -- which sells extra restaurant and supermarket food at a
discount -- must be brought to the United States to cut down on food waste and get meals to
those in need.
Finance
Shutterstock
The financial crisis of 2008-2009 exposed the fragility and fundamental inequality of the
global financial system. But all along the invisible hand has been pickpocketing poor Peter to
pay prosperous Paul. Bankers, stockbrokers, and financial gurus have constructed a casino-like
system that occasionally doles out a few pennies to the people playing the slots even as it
enriches the house -- the top 1-2 percent -- at every turn.
The most outrageous part of this scheme is that the financial crisis demonstrated just how
bad the financiers were at their own game. Not only did they not go to prison for illegal
activities, they were with a few exceptions not even punished economically for their market
failures. They were either too big, too rich, or too powerful for the government to allow them
to fail.
In The New Yorker , Nick Paumgarten quotes
a prominent investment banker at a bond fund:
"In the financial crisis, we won the war but lost the peace." Instead of investing in
infrastructure, education, and job retraining, we emphasized, via a central-bank policy of
quantitative easing (what some people call printing money), the value of risk assets, like
stocks. "We collectively fell in love with finance," he said.
After the last financial crisis, the wealthy, who are heavily invested in the stock market,
did quite well, while everyone else took a hit.
Explains Colin Schultz in Smithsonian magazine: "While families hovering around the
average net worth lost 36 percent over the past decade -- dropping from $87,992 in 2003 to
$56,335 in 2013 -- people in the top 95th percentile actually gained 14 percent in the same
tumultuous period -- going from $740,700 in 2003 to $834,100 in 2013."
The Trump administration is clearly in love with finance. Even before the pandemic hit,
Trump's tax reform provided the top six U.S. banks with $32
billion in savings . That's more than what the 2008 bank bailout provided (and remember,
banks mostly paid back those earlier loans). The stock market also benefited from
an unprecedented upswing in stock buybacks -- $2 trillion combined in 2018 and 2019 -- that
enriched shareholders at the expense of workers.
The $2 trillion in initial stimulus funds that the U.S. government is providing this time
around has gone to individuals (those Trump-signed checks in the mail), small businesses
(except when it went to big businesses), hospitals, and unemployed workers. There's also money
for farmers, schools, food stamps, and (alas) the Pentagon. Future rounds of stimulus spending
might include infrastructure, more aid to states and localities, and funds for smaller
banks.
There's not much enthusiasm, at least publicly, to bail out Wall Street. Stock buybacks were
explicitly excluded from the stimulus package. Meanwhile, the stock market has begun to climb
out of the basement in the last couple weeks, largely on the strength of the news of all this
new money being pumped into the economy.
But just as the tax bill was a covert giveaway to financial institutions, so have been
several of the administration's pandemic responses. Quantitative easing, by which the Federal
Reserve buys bonds and mortgage-backed securities, has increased the amount of liquidity
available to financial institutions.
In the latest effort, the Fed announced that it will buy $500 billion in corporate bonds,
but without
any of the strings attached to other assistance such as limits on stock buybacks or
executive compensation. The banks are even nickel and diming people by seizing
stimulus check deposits to cover overdrawn accounts.
Out of a total pie of around $6 trillion in potential stimulus spending, banks and major
corporations are well-placed to grab the lion's share.
Writes Nomi Prins at TomDispatch:
In the end, according to the president, that could mean $4.5 trillion in support for
big banks and corporate entities versus something like $1.4 trillion for regular Americans,
small businesses, hospitals, and local and state governments. That 3.5 to 1 ratio signals
that, as in 2008, the Treasury and the Fed are focused on big banks and large corporations,
not everyday Americans.
Invisible hand? Hardly. That's the very visible hand of government tilting the financial
markets even more in favor of the rich. As for the invisible enrichment that goes on beneath
the surface, otherwise known as corruption, the Trump administration has
gutted the oversight mechanisms that could bring those abuses to light.
It's time to end America's love affair with finance. That means, in the short term, higher
taxes on the very rich,
limitations on CEO pay built into all bailouts, and reviving all the reasonable proposals
for reforming the financial sector that were either left out of or didn't get full implemented
in the Dodd-Frank Wall Street Reform and Consumer Protection Act passed in the wake of the last
financial crisis.
Post-Pandemic Economics
Shutterstock
The Black Death depopulated Europe, killing as much as 60
percent of the population in the middle of the fourteenth century. Feudalism depended on
lots of peasants working the land to support the one percent of that era. By carrying off so
many of these workers, the Black Death made a major contribution to eroding the foundations of
the dominant economic system of the time.
The coronavirus will not kill anywhere near as many people as the Black Death did. But it
may well contribute to exposing the failures of "free markets" and the scandal of governments
intervening in the economy on behalf of this era's one percent. The pandemic is already, thanks
to huge stimulus packages, undermining the "small government" canard. A state apparatus
deliberately hobbled by the Trump administration -- after earlier "reforms" by both parties --
did a piss-poor job of dealing with this crisis. That doesn't bode well for dealing with the
even larger challenge of climate change.
The short-term fixes described above in the oil, food, and finance sectors are necessary but
insufficient. They shift the balance more toward the government and away from the "free"
market. They're not unlike the New Deal: reforming capitalism to save capitalism. But this
pandemic is pointing to an even more fundamental transformation, to a new definition of
economics.
The tweaking of markets to achieve optimal performance is much like the rejiggering of
earth-centric models of the universe that took place in the Middle Ages. These models became
more and more complex to account for new astronomical discoveries. Then along came Copernicus
with a heliocentric model that accounted for all the new data. It took some time, however, for
the old model to lose favor, despite its obvious failures.
The global economy remains market-centered, even though the evidence has been mounting that
these markets are failing us and the planet. Tweaking this model isn't good enough. We need a
new Copernicus who will provide a new theory that fits our unfolding reality, a new
environment-centered economics that can maximize not profit but the well-being of living
things. John Feffer is the director of Foreign Policy In Focus.
So not only ambulance service was destroyed by private equity, they now added other specialties. I wonder is those criminals who
insert unnecessary stents in patients are connected to private equity.
Images removed
Notable quotes:
"... "You can't serve two masters. You can't serve patients and investors" ..."
"... Morganroth's defense of pandemic Botox might seem odd, but it made perfect sense within the logic of the U.S. health-care system, which has seen Wall Street investors invade its every corner, engineering medical practices and hospitals to maximize profits as if they were little different from grocery stores. At the center of this story are private equity firms, which saw the explosive growth of health-care spending and have been buying up physician staffing companies, surgery centers, and everything else in sight. ..."
"... But some doctors say that the private equity playbook, which involves buying companies, drastically cutting costs, and then selling for a profit -- the goal is generally to make an annualized return of 20% to 30% within three to five years -- creates problems that are unique to health care. "I know private equity does this in other industries, but in medicine you're dealing with people's health and their lives," says Michael Rains, a doctor who worked at U.S. Dermatology Partners , a big private equity-backed chain. "You can't serve two masters. You can't serve patients and investors." ..."
"... Yet over the past decade, lawyers devised a structure that allows investors to buy a medical practice without technically owning it: the MSO, or management service organization. Today, when an investment firm buys a doctor's office, what it's actually buying are the office's "nonclinical" assets. In theory, physicians control all medical decisions and agree to pay a management fee to a newly created company, which handles administrative tasks such as billing and marketing. ..."
"... Businessweek ..."
"... When individual doctors sell, they generally receive $2 million to $7 million each, with 30% to 40% of that paid in equity in the group. After the acquisition, doctors get a lower salary and are asked to help recruit other doctors to sell their practices or to join as employees. ..."
"... Patients, for the most part, are in the dark. Unlike when your mortgage changes hands, you usually aren't notified when a big investment firm buys your doctor. Sometimes the sign on the door bearing the physician's name stays put, and subtle changes in operations or unfamiliar fees may be the only clues that anything has happened. ..."
"... At Advanced Dermatology & Cosmetic Surgery , the largest private equity-backed group in the field, with more than 150 locations across the U.S., that sense of discomfort came shortly after Audax Group bought a controlling stake in what was then a much smaller chain in 2011. The new management team introduced a scorecard that rewarded offices with cash if they met daily and monthly financial goals, according to a lawsuit filed in 2013 against the company by one of its dermatologists. The doctor alleged that the bonus program encouraged staff to do as many procedures as possible, rather than strictly addressing patients' medical needs. ..."
"... Most dermatologists use outside labs and pathologists, but private equity-owned groups buy up existing labs and hire their own pathologists. Then doctors are encouraged to refer patients within the group and send biopsy slides to the company-owned labs, keeping the entire chain of revenue in-house. ..."
"... Now comes the cost-cutting. This is supposed to be the hallmark of private equity, and, done right, it can work to the benefit of doctors and patients. But there are pitfalls unique to medicine, where aggressive cuts can lead to problems, some of them merely inconvenient and some potentially dangerous. ..."
"... A doctor at Advanced Dermatology says that waiting for corporate approvals means his office is routinely left without enough gauze, antiseptic solution, and toilet paper. Even before the great toilet paper shortage of 2020, he would travel with a few rolls in the trunk of his car, to spare patients when an office inevitably ran out. The company declined to comment. ..."
"... One paradox of the Covid-19 pandemic has been that even as the virus has focused the entire country on health care, it's been a financial disaster for the industry. And so, while emergency room doctors and nurses care for the sick -- comforting those who would otherwise die alone, and in some cases dying themselves -- private equity-backed staffing companies and hospitals have been cutting pay for ER doctors. These hospitals, like the big medical practices, make a large portion of their money from elective procedures and have been forced into wrenching compromises. ..."
"... For investors with capital, on the other hand, the economic fallout from the virus is a huge opportunity. Stay-at-home orders have left small practices more financially strained than they've ever been. That will likely accelerate sales to private equity firms, according to Marc Cabrera, an investment banker focused on health-care deals at Oppenheimer & Co. Independent doctors or groups that previously rebuffed offers from deep-pocketed backers "will reconsider their options," he says. ..."
"... Many doctors may ultimately come to regret cashing out, but it's hard to get out once you're in. As part of an acquisition, the private equity groups typically require doctors to sign yearslong contracts, with noncompete clauses that prevent them from working in the surrounding area. ..."
Not long after Gavin Newsom, the governor of California, ordered the state's 40 million residents to stay home to stop the spread
of the new coronavirus, Dr. Greg Morganroth called his team of doctors and said their dermatology group was staying open.
Morganroth is chief executive officer of the California Skin Institute
, which he founded in 2007 as a single office in Mountain View. He's since expanded to more than 40 locations using a financing
strategy that's become exceedingly common in American health care: private equity. In this case, he took out a loan from
Goldman Sachs Group Inc. that could eventually convert to an
equity stake. CSI is now the largest dermatology chain in California.
But the Covid-19 pandemic
put Morganroth in a precarious position. Most medical procedures were characterized as
nonessential by government officials and practitioners. Doctors were closing offices, and patients were staying away to limit
their potential exposure to the virus.
CSI took a different approach. Morganroth explained his thinking on April 2 in a Zoom call with more than 170 dermatologists from
around the country organized by the Cosmetic Surgery Forum, an industry conference. Contrary to what they might have heard, Morganroth
told them, they should consider staying open during the pandemic. "Many of us are over-interpreting guidelines," he said.
For a moment there was an awkward silence. Doctors had thought they were signing up for advice on how to apply for
government money that would help them meet payroll while they were shut down; they hadn't expected to be told not to shut down
at all. Morganroth continued: "We are going to be in a two-year war, and we need to make strategic plans for our businesses that
enable us to survive and to rebound."
Back at CSI, the company's front-office staff was working the phones, calling patients in some of the worst-hit areas and reminding
them to show up for their appointments, even for cosmetic procedures such as Botox injections to treat wrinkles. During the videoconference,
Morganroth argued that offering Botox in a pandemic wasn't so different from a grocery store allowing customers to buy candy alongside
staples.
"If I had a food supply company and had to stay open, and I had meat, bread, and milk, would I stop making lime and strawberry
licorice?" Morganroth asked. "I would make everything and go forward."
From a public-health point of view, some of the doctors believed, this was questionable. Common reasons for visiting a dermatologist's
office -- skin screenings, mole removals, acne consultations -- aren't particularly time sensitive. Serious matters, such as suspected
cancers and dangerous rashes, can be handled, at least initially, with
telemedicine consultations . Then doctors can weigh the risks for their patients and determine who needs to come in. In a statement,
CSI says that it followed local and state laws for staying open, while providing "necessary care" for patients, and that it had not
required doctors to come to work.
"You can't serve two masters. You can't serve patients and investors"
Morganroth's defense of pandemic Botox might seem odd, but it made perfect sense within the logic of the U.S. health-care system,
which has seen Wall Street investors invade its every corner, engineering medical practices and hospitals to maximize profits as
if they were little different from grocery stores. At the center of this story are private equity firms, which saw the explosive
growth of health-care spending and have been buying up physician staffing companies, surgery centers, and everything else in sight.
Over the past five years, the firms have invested more than $10 billion in medical practices, with a special focus on dermatology,
which is seen as a hot industry because of the aging population. Baby boomers suffer from high rates of two potentially lucrative
conditions: skin cancer and vanity. Some estimates suggest that private equity already owns more than 10% of the U.S dermatology
market. And firms have started to expand into other specialties, including women's health, urology, and gastroenterology.
There's nothing inherently wrong with any of this. But some doctors say that the private equity playbook, which involves
buying companies, drastically cutting costs, and then selling for a profit -- the goal is generally to make an annualized return
of 20% to 30% within three to five years -- creates problems that are unique to health care. "I know private equity does this in
other industries, but in medicine you're dealing with people's health and their lives," says Michael Rains, a doctor who worked
at
U.S. Dermatology Partners , a big private equity-backed
chain. "You can't serve two masters. You can't serve patients and investors."
Investment firms, and the practices they fund, say these concerns are overblown. They point out that they're giving doctors a
financial shelter from the rapidly changing medical environment, a particularly attractive prospect now, and that money from private
equity firms has expanded care to more patients. But they've also made it next to impossible to track the industry's impact or reach.
Firms rarely announce their investments and routinely subject doctors to nondisclosure agreements that make it difficult for them
to speak publicly. Bloomberg Businessweek spoke to dozens of doctors at 10 large private equity-backed dermatology groups.
Those interviews, along with information obtained from other employees, investors, lawyers, court filings, and company records, reveal
how the firms operate, and why they sometimes fail patients.
The process is never exactly the same, but there are familiar patterns, which tend to play out in five steps.
Step 1: Marriage
The strange thing about private equity money in medicine is that for-profit investors have long been prevented from buying doctor's
offices. Corporate ownership goes against a doctrine set by the American Medical
Association , the main trade group for doctors in the U.S., and is prohibited by law in many states, including Texas and New
Jersey. For most of the past 100 years, if you wanted to make money on a medical practice, you needed to have a medical license.
Yet over the past decade, lawyers devised a structure that allows investors to buy a medical practice without technically owning
it: the MSO, or management service organization. Today, when an investment firm buys a doctor's office, what it's actually buying
are the office's "nonclinical" assets. In theory, physicians control all medical decisions and agree to pay a management fee to a
newly created company, which handles administrative tasks such as billing and marketing.
In practice, though, investors expect some influence over medical decision-making, which, after all, is connected to profits.
"When we partner with you, it's a marriage," said Matt Jameson, a managing director at BlueMountain Capital, a $17 billion firm that
recently invested in a women's health company, while speaking at a conference in New York in September. "We have to believe it. You
have to believe it. It's not going to be something where clinical is completely not touched." (When contacted by Businessweek
, Jameson asked to clarify his comments. "Doctors and other qualified healthcare professionals at the providers we've invested
in make medical decisions," he said in a statement.)
The typical buyout starts with the acquisition of a big, popular practice, often with multiple doctors and several locations,
for as much as $100 million. (Investors typically pay between 9 and 12 times annual profit.) This practice functions as an anchor,
like a name-brand department store at a shopping mall, attracting patients and doctors to the new group as it expands. Then comes
the roll-up: The private equity firm purchases smaller offices and solo practices, giving the group a regional presence.
As part of the new structure, investors deal with paperwork and save money by buying medical supplies in bulk. Crucially they
also negotiate higher insurance reimbursement rates. One dermatologist who sold her practice to the California Skin Institute says
she was surprised to find out the bigger group's payouts from insurers were $25 to $125 more per visit.
When individual doctors sell, they generally receive $2 million to $7 million each, with 30% to 40% of that paid in equity in
the group. After the acquisition, doctors get a lower salary and are asked to help recruit other doctors to sell their practices
or to join as employees.
At first, doctors are generally thrilled by all of this. They have financial security and can focus on treating patients without
the stress of running a business. Patients, for the most part, are in the dark. Unlike when your mortgage changes hands, you usually
aren't notified when a big investment firm buys your doctor. Sometimes the sign on the door bearing the physician's name stays put,
and subtle changes in operations or unfamiliar fees may be the only clues that anything has happened.
Step 2: Growth
The promise of more patients is a big draw for doctors. By sharing marketing costs and adding locations, the new companies can
advertise more and attract customers. Private equity-owned practices have been diligent users of social media, announcing newly added
doctors and posting coupons on Twitter and Instagram. But these practices can be aggressive in ways that make some doctors uncomfortable.
At Advanced Dermatology & Cosmetic Surgery , the largest
private equity-backed group in the field, with more than 150 locations across the U.S., that sense of discomfort came shortly after
Audax Group bought a controlling stake in what was then a
much smaller chain in 2011. The new management team introduced a scorecard that rewarded offices with cash if they met daily and
monthly financial goals, according to a lawsuit filed in 2013 against the company by one of its dermatologists. The doctor alleged
that the bonus program encouraged staff to do as many procedures as possible, rather than strictly addressing patients' medical needs.
In some of the company's Florida offices, the doctor alleged, medical assistants responded to the bonus structure by ticking extra
boxes on exam reports, stating that doctors checked many more areas of the body than they actually had. That led to higher patient
bills, defrauding the government under its Medicare program, according to the lawsuit. The federal government declined to join the
case, and it was dismissed about a year after it was filed. Advanced and Audax declined to comment.
One-Stop Skin Care
By buying up labs and adding specialists, private equity-owned dermatology groups get paid at every step of a patient's treatment.
Data: Estimated Medicare reimbursement rates for the Miami area, Sensus Healthcare sales presentation
Private equity-backed practices also try to increase revenue by adding more-lucrative procedures, according to doctors interviewed
by Businessweek . In dermatology, this means more cosmetics, laser treatments, radiation, and especially Mohs surgeries
-- a specialized skin cancer procedure that removes growths from delicate areas like the face and neck one layer at a time, to limit
scarring. The surgery involves expensive equipment and specialized doctors, so some large medical groups keep costs down by assembling
traveling Mohs teams, who fly in from other states. Others create mobile labs in vans that set up in clinics' parking lots.
Most dermatologists use outside labs and pathologists, but private equity-owned groups buy up existing labs and hire their own
pathologists. Then doctors are encouraged to refer patients within the group and send biopsy slides to the company-owned labs, keeping
the entire chain of revenue in-house. This takes advantage of a regulatory quirk that has made dermatology, and a handful of other
specialties, attractive to private equity. Under the 1989 Stark Law, doctors aren't allowed to make patient referrals for their own
financial gain. An exception was made for some fields because it's more convenient for patients, explains Dr. Sailesh Konda, a Mohs
surgeon and professor at the University of Florida. "But that can be abused."
Step 3: Synergy
Now comes the cost-cutting. This is supposed to be the hallmark of private equity, and, done right, it can work to the benefit
of doctors and patients. But there are pitfalls unique to medicine, where aggressive cuts can lead to problems, some of them merely
inconvenient and some potentially dangerous.
A doctor at Advanced Dermatology says that waiting for corporate approvals means his office is routinely left without enough gauze,
antiseptic solution, and toilet paper. Even before the great
toilet paper shortage of 2020, he would travel with a few rolls in the trunk of his car, to spare patients when an office inevitably
ran out. The company declined to comment.
At the country's second-biggest skin-care group, U.S. Dermatology
Partners , a former doctor says a regional manager switched to a cheaper brand of needles and sutures without consulting the
medical staff. The quality was so poor, she says, they would often break off in her patients' bodies. Mortified, she'd have to dig
them out and start over. She complained to managers but couldn't get better supplies, she says. Paul Singh, U.S. Dermatology's CEO,
says the company uses a "reputable, global vendor for medical supplies." "While our group may have standardized purchasing processes,
individual providers have the autonomy to procure specific supplies that they need for a particular patient situation or patient
population," he says in a statement.
Doctors who join a private equity-backed group generally sign contracts that state they'll never have to compromise their medical
judgment, but some say that management began to intervene there, too. Dermatologists at most of the companies say they were pushed
to see as many as twice the number of patients a day, which made them feel rushed and unable to provide the same quality of care.
Others were forced to discuss their cases with managers or medical directors, who asked the doctors to explain why they weren't sending
more patients for surgery. Multiple practices also encouraged doctors to send home Mohs surgery patients with open wounds and have
them come back the next day for stitches -- or to have a different doctor do the closure the same day -- because that would allow
the practice to collect more from insurers.
That's if doctors are performing the procedures at all. At Advanced Dermatology, several doctors say they were asked to claim
that physician assistants, or PAs, were under their supervision when they weren't seeing patients in the same building, or even the
same town. Because PAs are paid less than dermatologists, this allowed the company to keep costs low while growing the business.
In a statement, Eric Hunt, Advanced's general counsel and chief compliance officer says that having PAs on staff enables the company
to "provide access to quality dermatological care to more patients."
Step 4. Rolling Up the Roll-Up
Advanced Dermatology was sold in 2016 by Audax to Harvest
Partners LP , following a pattern that's typical in the industry. At some point, after costs have been cut and profits maximized,
most private equity-owned medical groups will be sold, often to another private equity firm, which will then try to somehow make
the company even more profitable.
Having reduced most of the obvious costs, Advanced Dermatology began skimping on more important supplies, including Hylenex, according
to doctors and other employees. The drug is an expensive reversal agent used when cosmetic fillers, which are supposed to make skin
look plumper, go wrong. Not having enough is dangerous: Patients who get an injection that inadvertently blocks a blood vessel can
be left with dead sections of skin or even go blind if they don't get enough Hylenex in a matter of hours. The company says that
it stocks Hylenex in every office that performs cosmetic procedures, and that it "has no records of any provider being denied an
order for this medication."
Advanced Dermatology also started giving even more authority to PAs, according to doctors and staff. Without enough oversight
some were missing deadly skin cancers, they say. Others were doing too many biopsies and cutting out much larger areas of skin than
necessary, leaving patients with big scars. Doctors who complained about the bad behavior say they saw PAs moved to other locations
rather than fired or given more supervision. Hunt, the company's lawyer, says that all PAs get six months of training and are supervised
by experienced doctors.
The staff coined a new medical diagnosis, "pre- pre- pre-cancer"
Advanced Dermatology also put more pressure on doctors to send biopsies to in-house labs. The move made sense financially, but
some of the doctors didn't trust the lab. One of its two pathologists in Delray Beach, Fla., Steven Glanz, had a history of misdiagnosing
benign tumors, which led patients to undergo surgeries that were later found to be unnecessary, according to doctors who worked with
him. Dermatologists who warned that Glanz was a danger to patients say that their complaints to Dr. Matt Leavitt, the group's founder
and CEO, were ignored. More procedures, doctors knew, brought in more money.
Glanz, who had been with the practice since its early days, was known to read slides under a microscope with a pistol on his desk.
After he was arrested with a handgun, a folding knife, and a vial of methamphetamine crystals, he was fired and Florida's state medical
board fined him $10,000, requiring him to complete a five-hour course on ethics before he could resume practicing. But his former
colleagues were unsettled; they knew Glanz's signature was on years of reports that determined treatment for patients. Some slides
were reevaluated, and pathologists noticed mistakes. Managers told some doctors and their staff that patients, even those who'd been
misdiagnosed and had unnecessary procedures, were not to be told. Glanz pleaded guilty to stalking and a firearms violation and was
sentenced to probation. When a reporter called his office and identified herself, the receptionist hung up. Further attempts to reach
Glanz were unsuccessful. Advanced's Hunt says that he was "formally released from employment three years ago," but did not comment
further.
Of course, some doctors pushed ethical boundaries long before private equity came into the picture. But critics of the industry,
including doctors and investors, say management teams put in place by private equity firms tend to look the other way as long as
a medical practice is profitable. Of the dermatologists with the highest biopsy rates in the country (between 4 and 11 per patient,
per year), almost 25% were affiliated with private equity-backed groups, according to Dr. Joseph Francis, a Mohs surgeon and data
researcher at the University of Florida.
Medical providers may have also been blurring ethical lines at U.S. Dermatology Partners, which was until recently on its second
private equity owner, Abry Partners LLC . At four of the
company's offices in Texas, a doctor and his PAs were doing more biopsies than necessary, according to employees. These employees
say the staff routinely called patients with benign lichenoid keratosis, small brownish blotches that usually go away on their own,
and told them the growths should be removed. Under instruction from the doctor, the staff coined a new medical diagnosis, "pre- pre-
pre-cancer," and then talked patients into coming in for removal, employees say. Singh, the U.S. Dermatology CEO, says that the company
trusts doctors to make the right decisions and that it monitors them through routine audits.
Step 5: Sell-Off
In some cases the cost-cutting either becomes impossible or leads to compromises in care too obvious to ignore. In 2016 a
DermOne LLC office in Irving, Texas, had been using a faulty
autoclave machine to sterilize surgical equipment -- the state and county health departments identified 137 patients that needed
to get tested for blood-borne diseases such as HIV and hepatitis. By 2018, DermOne's backer, Westwind Investors, wanted out.
Westwind had been one of the earliest firms to build a big dermatology business -- with practices in five states -- but others
had grown larger. After the debacle in Irving, the Nevada-based firm sold DermOne's medical records and patient lists, as well as
some of its offices, to other groups. It dissolved the remaining offices, leaving some patients abruptly without care. Westwind did
not respond to repeated requests for comment. Two other private equity-backed groups, TruDerm and Select Dermatology LLC, have also
gone out of business in the past two years.
The surviving chains have been saddled with large piles of debt they're now struggling to repay. In January, U.S. Dermatology
Partners defaulted on a $377 million loan, meaning the private equity backer, Abry Partners, had to hand over the keys to its lenders,
Golub Capital ,
Carlyle Group , and
Ares Management , which will now oversee a chain with almost
100 locations, receiving 1 million visits from patients a year. Abry did not respond to requests for comment .
For the medical groups that make it, the game plan is to eventually sell to the largest players, such as
KKR ,
Blackstone Group , and
Apollo Global Management . Pioneering investors, including Audax,
are now buying practices in other fields -- a concerning development to critics who note that the areas that are currently attracting
investment, such as urology, generally involve more invasive procedures. Should doctors performing vasectomies be thinking about
the dollar-rate returns for KKR -- or any private investor?
"It's ultimately going to backfire," says Dr. Jane Grant-Kels, a veteran dermatologist and professor at the University of Connecticut
School of Medicine. "There's a limit to how much money you can make when you're sticking knives into human skin for profit."
One paradox of the Covid-19 pandemic has been that even as the virus has focused the entire country on health care, it's been
a financial disaster for the industry. And so, while emergency room doctors and nurses care for the sick -- comforting those who
would otherwise die alone, and in some cases
dying themselves
-- private equity-backed staffing companies and hospitals have been
cutting pay for ER doctors. These hospitals, like the big medical practices, make a large portion of their money from elective
procedures and have been forced into wrenching compromises.
For investors with capital, on the other hand, the economic fallout from the virus is a huge opportunity. Stay-at-home orders
have left small practices more financially strained than they've ever been. That will likely accelerate sales to private equity firms,
according to Marc Cabrera, an investment banker focused on health-care deals at Oppenheimer & Co. Independent doctors or groups that
previously rebuffed offers from deep-pocketed backers "will reconsider their options," he says.
Many doctors may ultimately come to regret cashing out, but it's hard to get out once you're in. As part of an acquisition, the
private equity groups typically require doctors to sign yearslong contracts, with noncompete clauses that prevent them from working
in the surrounding area.
As governors throughout the nation ease restrictions on businesses, Advanced Dermatology is opening its most profitable offices
first. The company received an undisclosed sum under the Cares Act, as part of the government relief package intended for health-care
workers. Hunt, Advanced's chief compliance officer, told employees in an email earlier this month that the money would be used for
protective gear, such as masks, and to replace "millions of dollars" in lost revenue.
The group had closed most of its offices since the stay-at-home orders were issued in March, cutting pay for doctors and furloughing
staff. With cities and states beginning to consider reopening, doctors and PAs say they've been told they should be prepared for
a full schedule. Hunt says the company is following the appropriate safety measures, but employees fear it will be nearly impossible
to keep patients apart in waiting rooms. Opening in a reduced capacity, they understand, is not an option.
Now we are coming to the new Digital Revolution, with workers being replaced by smart
computers and an AI future. Millions of office workers already function as a human interface to
the computer. You may have noticed this as you talk with them: they are trained to avoid making
decisions; they say sentences that were scripted for them, and the decisions are made by the
computer that was programmed to do their master's will. As lockdown had forced millions to
communicate with computers directly, a lot of workers became superfluous.
The process of shedding millions of workers in the existing economic system is likely to be
painful for the unemployed. The virus-blamed lockdown and digital control allows the owners of
the digital companies to carry out the revolution with minimal risks for them. What would need
an army and police involvement against riotous unemployed workers, can be achieved with greater
ease under threat of the pandemic. The economy will be modernized and made more efficient.
Alas, for us this script presages the fate of highly qualified weavers in 18 th
century England, even if we shall avoid the total AI takeover Terminator-style.
Probably the scariest piece of news is not about the numbers of "infected". It is a
meaningless word, for there are persistent carriers who do not succumb to disease; the vast
majority of the "infected" are asymptomatic, meaning they aren't sick and aren't infectious;
the number of "infected" is in direct proportion to the number of tests; the tests are dubious
at best, and none is verified by the methods accepted in pre-corona medicine, while the
methodology approved and enforced by the WHO can't be described as scientific. It is not about
deaths, for we do not experience more deaths than in 2018. Moreover, in many countries, notably
in France and in Norway there are 30% fewer deaths in certain weeks of April and May in this
year than in the last year.
The scariest piece of news is that Zoom is worth more than the seven
biggest airlines . These airlines with their accumulated labour (millions of working hours,
hundreds of thousands of employees, highly trained pilots, masses of sophisticated equipment)
just can't be worth as much as a job done in a month by a few programmers and which can be done
anew in a month. Money and stock market prices are useful tools if they measure human efforts;
they do not that anymore. What began with bankers earning more money in a day than a hundred
qualified workers and engineers in their lifetime, ended with the hi-tech lords earning more
than a million workers in their lifetime. It means that Money had banked on the Digital
Economy, a Union made in Hell, while the real economy came up for grabs. Money decided that we
won't fly anymore. They, the new masters, will fly in their private jets; the era of mass
access is over. You will get satisfied with Zoom and PornHub, instead of the real
thing.
Added to this the negative oil future price and the emission centres issuing more and more
money, trying to smother the fire with gasoline, and you will get a picture of the coming
world. There is probably no place for you and me in this world.
Is the great AI update of technology an objective need, and will it eventually bring good
for mankind? Perhaps. But it does not mean the process should be drafted by Money and the
Digital Economy, explained by MSM, justified by bio-horrors and carried on at public expense.
It has to be done differently if we want to preserve the achievements of the long (1945-2020)
peace stretch.
Trump is mostly concerned with giving handouts to the MIC because he thinks "the economy" is
based on jobs in the MIC since that is what they tell him is where US manufacturing is now
based.
Posted by: Kali | May 23 2020 18:16 utc | 2
To a degree, it is true. However, the problem with MIC as an economic stimulant is rather
pitiful multiplier effect. For starters, the costs are hopelessly bloated. Under rather
watchful Putin, Russia does its piece of arms race at a very small fraction of American
costs. By the same token, pro-economy effects of arms spending in USA are seriously diluted
-- the spending is surely there, but the extend of activity is debatable For example, in
aerospace, there is a big potential for civilian applications of technologies developed for
the military. Scant evidence in Boeing that should be a prime beneficiary. The fabled toilet
seat (that cost many thousands of dollars) similarly failed to find civilian applications.
Civilians inclined to overpriced toilets, like Mr. Trump himself, rely on low-tech methods
like gold-plating.
A wider problem is shared by entire GOP: aversion to any government programs, and least of
all industry promoting programs, that could benefit ordinary citizens. This is the exclusive
domain of the free market! Once you refuse to consider that, only MIC remains, plus some
boondogles like interstate highways. Heaven forfend to improve public transit or to repair
almost-proverbial crumbling dams and bridges.
We have to ask cui bono - who benefits from a new nuclear arms race? General Electric,
Boeing, Honeywell International, Lockheed Martin, Northrop Grumman et al. No one else really.
Since these corporations also own the Congress and have zillions to fund Trump's re-election,
they will probably get the go-ahead to spend the rest of the world into oblivion.
Apart from the obvious fact that the MIC is the only viable engine of propulsion of the
American "real economy" (a.k.a. "manufacturing"), there's the more macabre fact that, if we
take Trump's administration first military papers into consideration, it seems there's a
growing coterie inside the Pentagon and the WH that firmly believes MAD can be broken
vis-a-vis China.
Hence the "Prompt Global Strike" doctrine (which is taking form with the commission of the
new B-21 "Raider" strategic bomber, won by Northrop Grumman), the rise of the concept of
"tactical nukes" (hence the extinction of the START, and the Incirlik Base imbroglio post
failed coup against Erdogan) and, most importantly, the new doctrine of "bringing manufacture
back".
The USA is suffering from a structural valorization problem. The only way out is finding
new vital space through which it can initiate a new cycle of valorization. The only
significant vital space to be carved out in the 21st Century is China, with its 600
million-sized middle class (the world's largest middle class, therefore the world's largest
potential consumer market). It won two decades with the opening of the ex-Soviet vital space,
but it was depleted in the 2000s, finally exploding in 2006-2008.
How many decades does the Americans think they can earn by a hypothetical unilateral
destruction of China?
Having a treaty that limits power (in this case nuclear) on the same level for the US and any
other country is simply totally against the ideology of US Superority/Exeptionalism.
That seems to be the driving (psychological and ideological) factor behind this charade.
And like this sick ideology always ends: It too will backfire.
@gepay: another problem is people that disagree with Bernhard on COVID, but then use this
disagreement to not read his artciles anymore.
So many people only want to read what they want to hear, and run away at the first real
different view.
The narcissism, that our neoliberal societies inducded in its people the last decade shows..
And seeing both sides and everything in between is not possible anymore for a majority it
seems.
And living in a bubble is so comforting and easy in todays world. On MSM and on Alt Media
alike.
"...that may well fit Trump's plans of pushing all arms control regimes into oblivion."
It's not just arms control regimes, as the WHO business showed. This is the Roy Cohn agenda
showing up again- the old GOP objection to the UN and all other international organisations.
It is pure ideology-the US has gained immensely from dominating the organisations of which it
is a part, leaving them makes no sense at all.
As to 'spending China to oblivion". This only works when every Pentagon dollar spent
forces China or Russia to spend a dollar themselves. In such a contest the richest country
wins. But that only works in the context of pre-nuclear warfare. With the nuclear deterrent
it becomes possible to opt out of all the money wasting nonsense represented by the Pentagon
budget, sit back and say, as the Chinese diplomat evidently did, "Just try it."
Which adds up to the conclusion that it is wholly irrational of the United States to denounce
treaties designed to reduce the likelihood of nuclear weapons being used: it is to the
advantage of Washington that other powers, potential rivals, are forced to build up
conventional forces because they are bound by treaty not to rely on nuclear weapons.
So, again: pure ideology designed for domestic consumption and advanced by the most
reactionary elements in American society- the Jesse Helms good ol' boys who make the neo-cons
look almost human.
He likes economic war (against everybody), they want actual war. Laguerre | May 23 2020 20:17
utc
Trump has a primitive mercantile mind. There is nothing inherently wrong about
mercantilism, but a primitive version of anything tends to be mediocre at best. Thus he loves
war that give profit, like Yemen where natives are bombed with expensive products made in USA
(and unfortunately, also UK, France etc., but the bulk goes to USA). Then he loves wars the
he thinks will give profit, like "keeping oil fields in Syria". Some people told him that oil
fields are profitable (although they can go bankrupt just like casinos).
Privately, I think that Trump wanted to make a war with Iran, but the generals explained
him what kind of disaster that would be.
One difference is that Democrats are aligned with uber Zionist of slightly less rabid
variety than Republicans. A bit like black bears vs grizzlies. Unfortunately, like in the
animal kingdom, when the push comes to shove, black bears defer to grizzlies, so on the side
of Palestinians etc. there is no difference.
Billingslea's "spending ... into oblivion" statement reflects the belief, still widespread
among US neocon political / military elites, that the Soviet Union was brought down and
destroyed by its attempts to keep up with US military spending throughout the 1980s. This
alone tells us how steeped in past fantasy the entire US political and military establishment
must be. Compared to Rip van Winkle, these people are comatose.
Spending the enemy into oblivion may be "tried and true" practice but only when the enemy
is much poorer than yourself in arms production and in one type of weapons manufacture. That
certainly does not apply to either Russia or China these days. Both nations think more
strategically and do not waste precious resources in parading and projecting military power
abroad, or rely almost exclusively on old, decaying technologies and a narrow mindset
obsessed with always being top dog in everything.
The most important aspects of economic life can proceed with only those
modifications.
Tourism is some 10% of world GDP. It's going to take a massive hit, lockdown or no
lockdown. Air travel took a massive hit before the lockdown, empty planes were flying often.
While the official lockdowns undoubtedly led to a contraction in economic activity, a huge
portion (probably most) of the economic damage would be incurred anyway. For example I will
personally not be eating out in the foreseeable future (a vaccine would change that), and I
did so at least every other month. It's not very frequent, but I visited relatively expensive
restaurants, so my reduced consumption probably disproportionately hits the higher end jobs
in the sector. I know people who used to eat out more frequently (and in expensive
restaurants), who are now staying home. Lazy people who had a gym membership to soothe their
conscience will now feel less guilty if they just cancel it.
Some people believe that if we just restrict or basically shut down huge sectors of the
economy, then the rest can still carry on as if nothing happened. That's just wrong. People
who work in restaurants or gyms are now going to reduce their own consumption, for example
they won't be buying new cars any time soon. This in turn reduces consumption by people
employed (or previously employed) in those sectors.
So unfortunately no, I don't think the rest of the economy could carry on like before.
@Anatoly Karlin The
lockdown actions in the US were, by my estimation, about 6 weeks too late. 6 weeks earlier
and maybe actions could have been phased in (monitor results) and not blanket panic. Even in
that time frame we had serious suspicion of asymptomatic spread. We could have started masks
for everyone, restricting air travel and cruises, isolated nursing home and started shutting
down schools. Yes, I know children don't get the large complications however, it beggars
belief that stuffed in schools then going home; kids would not be vectors.
In any case the US economy was primed to collapse anyway. Losing the China supply chain
was significant and would have happened even if no virus was found in the US.
P.S. I think it's going to get worse; (I'm surprised it already hasn't) but I think
unemployment is going to be bankrupting states.
From comments: "
neoliberalism to be a techno-economic order of control, requiring a state apparatus to enforce
wholly artificial directives. Also, the work of recent critics of data markets such as Shoshana
Zuboff has shown capitalism to be evolving into a totalitarian system of control through
cybernetic data aggregation."
"... By rolling back the state, neoliberalism was supposed to have allowed autonomy and
creativity to flourish. Instead, it has delivered a semi-privatised authoritarianism more
oppressive than the system it replaced. ..."
"... Workers find themselves enmeshed in a Kafkaesque bureaucracy , centrally controlled and
micromanaged. Organisations that depend on a cooperative ethic – such as schools and
hospitals – are stripped down, hectored and forced to conform to suffocating diktats. The
introduction of private capital into public services – that would herald a glorious new age
of choice and openness – is brutally enforced. The doctrine promises diversity and freedom
but demands conformity and silence. ..."
"... Their problem is that neoliberal theology, as well as seeking to roll back the state,
insists that collective bargaining and other forms of worker power be eliminated (in the name of
freedom, of course). So the marketisation and semi-privatisation of public services became not so
much a means of pursuing efficiency as an instrument of control. ..."
"... Public-service workers are now subjected to a panoptical regime of monitoring and
assessment, using the benchmarks von Mises rightly warned were inapplicable and absurd. The
bureaucratic quantification of public administration goes far beyond an attempt at discerning
efficacy. It has become an end in itself. ..."
Notable quotes:
"... By rolling back the state, neoliberalism was supposed to have allowed autonomy and creativity to flourish. Instead, it has delivered a semi-privatised authoritarianism more oppressive than the system it replaced. ..."
"... Workers find themselves enmeshed in a Kafkaesque bureaucracy , centrally controlled and micromanaged. Organisations that depend on a cooperative ethic – such as schools and hospitals – are stripped down, hectored and forced to conform to suffocating diktats. The introduction of private capital into public services – that would herald a glorious new age of choice and openness – is brutally enforced. The doctrine promises diversity and freedom but demands conformity and silence. ..."
"... Their problem is that neoliberal theology, as well as seeking to roll back the state, insists that collective bargaining and other forms of worker power be eliminated (in the name of freedom, of course). So the marketisation and semi-privatisation of public services became not so much a means of pursuing efficiency as an instrument of control. ..."
"... Public-service workers are now subjected to a panoptical regime of monitoring and assessment, using the benchmarks von Mises rightly warned were inapplicable and absurd. The bureaucratic quantification of public administration goes far beyond an attempt at discerning efficacy. It has become an end in itself. ..."
"... The other point to be made is that the return of fundamentalist nationalism is arguably a radicalized form of neoliberalism. ..."
"... Therefore, neoliberal hegemony can only be perpetuated with authoritarian, nationalist ideologies and an order of market feudalism. In other words, neoliberalism's authoritarian orientations, previously effaced beneath discourses of egalitarian free-enterprise, become overt. ..."
"... The market is no longer an enabler of private enterprise, but something more like a medieval religion, conferring ultimate authority on a demagogue. Individual entrepreneurs collectivise into a 'people' serving a market which has become synonymous with nationhood. ..."
Thousands of people march through London to protest against underfunding and privatisation
of the NHS. Photograph: Wiktor Szymanowicz/Barcroft Images M y life was saved last year by the
Churchill Hospital in Oxford, through a skilful procedure
to remove a cancer from my body . Now I will need another operation, to remove my jaw from
the floor. I've just learned what was happening at the hospital while I was being treated. On
the surface, it ran smoothly. Underneath, unknown to me, was fury and tumult. Many of the staff
had objected to a decision by the National Health Service
to privatise the hospital's cancer scanning . They complained that the scanners the private
company was offering were less sensitive than the hospital's own machines. Privatisation, they
said, would put patients at risk. In response,
as the Guardian revealed last week , NHS England threatened to sue the hospital for libel
if its staff continued to criticise the decision.
The dominant system of political thought in this country, which produced both the creeping
privatisation of public health services and this astonishing attempt to stifle free speech,
promised to save us from dehumanising bureaucracy. By rolling back the state, neoliberalism
was supposed to have allowed autonomy and creativity to flourish. Instead, it has delivered a
semi-privatised authoritarianism more oppressive than the system it replaced.
Workers find themselves enmeshed in a
Kafkaesque bureaucracy , centrally controlled and micromanaged. Organisations that depend
on a cooperative ethic – such as schools and hospitals – are stripped down,
hectored and forced to conform to suffocating diktats. The introduction of private capital into
public services – that would herald a glorious new age of choice and openness – is
brutally enforced. The doctrine promises diversity and freedom but demands conformity and
silence.
Much of the theory behind these transformations arises from the work of Ludwig von Mises. In
his book Bureaucracy , published in 1944, he
argued that there could be no accommodation between capitalism and socialism. The creation of
the National Health Service in the UK, the New Deal in the US and other experiments in social
democracy would lead inexorably to the bureaucratic totalitarianism of the Soviet Union and
Nazi Germany.
He recognised that some state bureaucracy was inevitable; there were certain functions that
could not be discharged without it. But unless the role of the state is minimised –
confined to defence, security, taxation, customs and not much else – workers would be
reduced to cogs "in a vast bureaucratic machine", deprived of initiative and free will.
By contrast, those who labour within an "unhampered capitalist system" are "free men", whose
liberty is guaranteed by "an economic democracy in which every penny gives a right to vote". He
forgot to add that some people, in his capitalist utopia, have more votes than others. And
those votes become a source of power.
His ideas, alongside the writings of
Friedrich Hayek , Milton Friedman and other neoliberal thinkers, have been applied in this
country by Margaret Thatcher, David Cameron, Theresa May and, to an alarming extent, Tony
Blair. All of those have attempted to privatise or marketise public services in the name of
freedom and efficiency, but they keep hitting the same snag: democracy. People want essential
services to remain public, and they are right to do so.
If you hand public services to private companies, either you create a private monopoly,
which can use its dominance to extract wealth and shape the system to serve its own needs
– or you introduce competition, creating an incoherent, fragmented service characterised
by the institutional failure you can see every day on our railways. We're not idiots, even if
we are treated as such. We know what the profit motive does to public services.
So successive governments decided that if they could not privatise our core services
outright, they would subject them to "market discipline". Von Mises repeatedly warned against
this approach. "No reform could transform a public office into a sort of private enterprise,"
he cautioned. The value of public administration "cannot be expressed in terms of money".
"Government efficiency and industrial efficiency are entirely different things."
"Intellectual work cannot be measured and valued by mechanical devices." "You cannot
'measure' a doctor according to the time he employs in examining one case." They ignored his
warnings.
Their problem is that neoliberal theology, as well as seeking to roll back the state,
insists that collective bargaining and other forms of worker power be eliminated (in the name
of freedom, of course). So the marketisation and semi-privatisation of public services became
not so much a means of pursuing efficiency as an instrument of control.
Public-service workers are now subjected to a panoptical regime of monitoring and
assessment, using the benchmarks von Mises rightly warned were inapplicable and absurd. The
bureaucratic quantification of public administration goes far beyond an attempt at discerning
efficacy. It has become an end in itself.
Its perversities afflict all public services. Schools teach to the test , depriving
children of a rounded and useful education. Hospitals manipulate waiting times, shuffling
patients from one list to another. Police forces ignore some crimes, reclassify others, and
persuade suspects to admit to extra offences to improve their statistics . Universities urge their
researchers to
write quick and superficial papers , instead of deep monographs, to maximise their scores
under the research excellence framework.
As a result, public services become highly inefficient for an obvious reason: the
destruction of staff morale. Skilled people, including surgeons whose training costs hundreds
of thousands of pounds, resign or retire early because of the stress and misery the system
causes. The leakage of talent is a far greater waste than any inefficiencies this quantomania
claims to address.
New extremes in the surveillance and control of workers are not, of course, confined to the
public sector. Amazon has patented
a wristband that can track workers' movements and detect the slightest deviation from
protocol. Technologies are used to monitor peoples' keystrokes, language, moods and tone of
voice. Some companies have begun to experiment with the
micro-chipping of their staff . As the philosopher Byung-Chul
Han points out , neoliberal work practices, epitomised by the gig economy, that
reclassifies workers as independent contractors, internalise exploitation. "Everyone is a
self-exploiting worker in their own enterprise."
The freedom we were promised turns out to be
freedom for capital , gained at the expense of human liberty. The system neoliberalism has
created is a bureaucracy that tends towards absolutism, produced in the public services by
managers mimicking corporate executives, imposing inappropriate and self-defeating efficiency
measures, and in the private sector by subjection to faceless technologies that can brook no
argument or complaint.
Attempts to resist are met by ever more extreme methods, such as the threatened lawsuit at
the Churchill Hospital. Such instruments of control crush autonomy and creativity. It is true
that the Soviet bureaucracy von Mises rightly denounced reduced its workers to subjugated
drones. But the system his disciples have created is heading the same way.
The other point to be made is that the return of fundamentalist nationalism is arguably a
radicalized form of neoliberalism. If 'free markets' of enterprising individuals have
been tested to destruction, then capitalism is unable to articulate an ideology with which to
legitimise itself.
Therefore, neoliberal hegemony can only be perpetuated with authoritarian, nationalist
ideologies and an order of market feudalism. In other words, neoliberalism's authoritarian
orientations, previously effaced beneath discourses of egalitarian free-enterprise, become
overt.
The market is no longer an enabler of private enterprise, but something more like a
medieval religion, conferring ultimate authority on a demagogue. Individual entrepreneurs
collectivise into a 'people' serving a market which has become synonymous with
nationhood.
A corporate state emerges, free of the regulatory fetters of democracy. The final
restriction on the market - democracy itself - is removed. There then is no separate market
and state, just a totalitarian market state.
This is the best piece of writing on neoliberalism I have ever seen. Look, 'what is in
general good and probably most importantly what is in the future good'. Why are we
collectively not viewing everything that way? Surely those thoughts should drive us all?
Pinkie123: So good to read your understandings of neoliberalism. The political project is the
imposition of the all seeing all knowing 'market' on all aspects of human life. This version
of the market is an 'information processor'. Speaking of the different idea of the
laissez-faire version of market/non market areas and the function of the night watchman state
are you aware there are different neoliberalisms? The EU for example runs on the version
called 'ordoliberalism'. I understand that this still sees some areas of society as separate
from 'the market'?
ADamnSmith: Philip Mirowski has discussed this 'under the radar' aspect of neoliberalism. How
to impose 'the market' on human affairs - best not to be to explicit about what you are
doing. Only recently has some knowledge about the actual neoliberal project been appearing.
Most people think of neoliberalism as 'making the rich richer' - just a ramped up version of
capitalism. That's how the left has thought of it and they have been ineffective in stopping
its implementation.
Finally. A writer who can talk about neoliberalism as NOT being a retro version of classical
laissez faire liberalism. It is about imposing "The Market" as the sole arbiter of Truth on
us all.
Only the 'Market' knows what is true in life - no need for 'democracy' or 'education'.
Neoliberals believe - unlike classical liberals with their view of people as rational
individuals acting in their own self-interest - people are inherently 'unreliable', stupid.
Only entrepreneurs - those close to the market - can know 'the truth' about anything. To
succeed we all need to take our cues in life from what the market tells us. Neoliberalism is
not about a 'small state'. The state is repurposed to impose the 'all knowing' market on
everyone and everything. That is neoliberalism's political project. It is ultimately not
about 'economics'.
The left have been entirely wrong to believe that neoliberalism is a mobilisation of
anarchic, 'free' markets. It never was so. Only a few more acute thinkers on the left
(Jacques Ranciere, Foucault, Deleuze and, more recently, Mark Fisher, Wendy Brown, Will
Davies and David Graeber) have understood neoliberalism to be a techno-economic order of
control, requiring a state apparatus to enforce wholly artificial directives. Also, the work
of recent critics of data markets such as Shoshana Zuboff has shown capitalism to be evolving
into a totalitarian system of control through cybernetic data aggregation.
Only in theory is neoliberalism a form of laissez-faire. Neoliberalism is not a case of the
state saying, as it were: 'OK everyone, we'll impose some very broad legal parameters, so
we'll make sure the police will turn up if someone breaks into your house; but otherwise
we'll hang back and let you do what you want'. Hayek is perfectly clear that a strong state
is required to force people to act according to market logic. If left to their own devices,
they might collectivise, think up dangerous utopian ideologies, and the next thing you know
there would be socialism. This the paradox of neoliberalism as an intellectual critique of
government: a socialist state can only be prohibited with an equally strong state. That is,
neoliberals are not opposed to a state as such, but to a specifically centrally-planned state
based on principles of social justice - a state which, to Hayek's mind, could only end in t
totalitarianism. Because concepts of social justice are expressed in language, neoliberals
are suspicious of linguistic concepts, regarding them as politically dangerous. Their
preference has always been for numbers. Hence, market bureaucracy aims for the quantification
of all values - translating the entirety of social reality into metrics, data, objectively
measurable price signals. Numbers are safe. The laws of numbers never change. Numbers do not
lead to revolutions. Hence, all the audit, performance review and tick-boxing that has been
enforced into public institutions serves to render them forever subservient to numerical
(market) logic. However, because social institutions are not measurable, attempts to make
them so become increasingly mystical and absurd. Administrators manage data that has no
relation to reality. Quantitatively unmeasurable things - like happiness or success - are
measured, with absurd results.
It should be understood (and I speak above all as a critic of neoliberalism) that
neoliberal ideology is not merely a system of class power, but an entire metaphysic, a way of
understanding the world that has an emotional hold over people. For any ideology to
universalize itself, it must be based on some very powerful ideas. Hayek and Von Mises were
Jewish fugitives of Nazism, living through the worst horrors of twentieth-century
totalitarianism. There are passages of Hayek's that describe a world operating according to
the rules of a benign abstract system that make it sound rather lovely. To understand
neoliberalism, we must see that it has an appeal.
However, there is no perfect order of price signals. People do not simply act according to
economic self-interest. Therefore, neoliberalism is a utopian political project like any
other, requiring the brute power of the state to enforce ideological tenets. With tragic
irony, the neoliberal order eventually becomes not dissimilar to the totalitarian regimes
that Hayek railed against.
Nationalised rail in the UK was under-funded and 'set up to fail' in its latter phase to make
privatisation seem like an attractive prospect. I have travelled by train under both
nationalisation and privatisation and the latter has been an unmitigated disaster in my
experience. Under privatisation, public services are run for the benefit of shareholders and
CEO's, rather than customers and citizens and under the opaque shroud of undemocratic
'commercial confidentiality'.
What has been very noticeable about the development of bureaucracy in the public and private
spheres over the last 40 years (since Thatcher govt of 79) has been the way systems are
designed now to place responsibility and culpability on the workers delivering the services -
Teachers, Nurses, social workers, etc. While those making the policies, passing the laws,
overseeing the regulations- viz. the people 'at the top', now no longer take the rap when
something goes wrong- they may be the Captain of their particular ship, but the
responsibility now rests with the man sweeping the decks. Instead they are covered by tying
up in knots those teachers etc. having to fill in endless check lists and reports, which have
as much use as clicking 'yes' one has understood those long legal terms provided by software
companies.... yet are legally binding. So how the hell do we get out of this mess? By us as
individuals uniting through unions or whatever and saying NO. No to your dumb educational
directives, No to your cruel welfare policies, No to your stupid NHS mismanagement.... there
would be a lot of No's but eventually we could say collectively 'Yes I did the right thing'.
'The left wing dialogue about neoliberalism used to be that it was the Wild West and that
anything goes. Now apparently it's a machine of mass control.'
It is the Wild West and anything goes for the corporate entities, and a machine of control
of the masses. Hence the wish of neoliberals to remove legislation that protects workers and
consumers.
COVID Kills Hospitality Industry, Crushes NYC Hotels, Triggers CMBS Implosion by
Tyler Durden Fri,
05/22/2020 - 09:15 The global hospitality industry is facing one of the worst crashes in
history, and New York City, the epicenter of COVID-19 in the US, has seen its tourism industry
decimated. With no rebound in sight, the second great depression for commercial real estate is
ahead and could lead to a massive default wave of shopping malls and luxury hotels.
Judging by the
ongoing collapse in commercial real estate, as we recently noted , CMBX 6, which track 25
commercial-mortgage-backed securities with high exposure to 2012 shopping mall loans, has
tumbled during lockdowns, resulting in a handsome payout for the likes of Carl Icahn, McNamara
and others who were short the tranche.
Last week we said, "keep a close eye on CMBX 9" with its "outlier exposure to hotels which
have quickly emerged as the most impacted sector from the pandemic, this may well be the next
big short."
The various CMBX series are shown in the chart below, with CMBX 9 most notable for its 17%
exposure to hotels.
While the broader market has rebounded, CMBX 9 has experienced a swan dive.
Several key observations in the Manhattan hotel industry have been seen this month, suggest
the tide is turning for the industry. Let's start with the newest piece of information is that
The Times Square Edition, a newly constructed multi-million dollar hotel located in Midtown
Manhattan, is set to pull the plug on operations by late summer.
Marriott International Inc. operates the hotel under the Edition brand, says it "has
provided advance notice to employees, government officials and union officials" that all
operations on the property will grind to a halt on August 13.
This suggests Marriot doesn't see a V-shaped recovery in the tourism industry this year.
Maybe Marriot is taking advice from Scott Minerd, the CIO of Guggenheim Investments, who
recently said a
recovery in the economy could take upwards of "four years ."
Bloomberg reviewed new documents in the ongoing foreclosure proceeding show Marriot
informed owner Maefield Development in March that "a cash shortfall due to the outbreak could
put the developer in default on its contract with the lodging giant."
Moody's Investors Service valued the mixed-use property at more than $2.4 billion in 2018 --
considering the economic crash and commercial real estate implosion, the value of the property
is likely much lower.
Even when New York City reopens, hotels in Manhattan generally rely on international travel
and large conferences, which are several things that may not return to 2019 activity trends for
several years. This has made it challenging for hotel operators to cover debt payments and
labor costs, suggesting defaults and closures could be dead ahead.
Jonathan Falik, CEO at JF Capital Advisors, recently told Bloomberg that too many rooms are
empty in the city and warns not all hotels will survive.
Last week, Sunstone Hotel Investors Inc. wrote down its Hilton Times Square hotel to less
than its $77 million mortgage. Sunstone is currently in discussions with lenders to either
restructure or handover the property.
Data firm Trepp said $1 billion dollars in late payments were seen in CMBSs used to finance
New York hotels. The second great depression in commercial real estate has arrived, many
shopping malls and hotels may not survive.
"... This whole crisis is all about recapitalization or restructuring the debt. The Fed is bailing out the creditors (Big Surprise!) and forcing corporate America through bankruptcy. ..."
We understood ourselves as the means that make the rich richer.
Then came the latest wisdom: "Money makes money." They have come to believe their own
lies, and those lies are being subsidised by our taxes. The moment when "everything" will
belong to One Account seems to be upon us. I expect foreclosures and bankruptcies amongst the
non-investing classes. All shortfalls to be augmented by tax money. Next, we await Zion
unveiling our new King. Once again, not one atom of deviation from the plan as laid out in
the Protocols. it is of utter importance that we do not turn upon another. In that sense, I
suggest more of Unz's readers start looking at Black people as possible comrades in this
engagement, we are confronted by a common enemy, the one that taught us the "value" of racism
in the first place. They have divided us, now they will conquer.
Or we can just stand together. If we refuse to fight, it will be us against Bill Gates'
robots, and his microcephalic pilots are still too young to be drafted. This is, however, our
last chance, I be thinking.
Been wondering some years now, why 'retailing' is such a popular investment, when nobody has
no money left to buy stuff with. Now we know.
Gilad, these are some thoughts I jotted down a few weeks ago.
This whole crisis is all about recapitalization or restructuring the debt. The Fed is
bailing out the creditors (Big Surprise!) and forcing corporate America through bankruptcy.
The Virus is being used as a pretext for forcing the economy into a kind of controlled
depression (demolition) and debt restructuring. The Virus and China are being used as the
fall guys for the collapse. In 2008-09 the Banks and WS were bailed out and not forced into
bankruptcy. The Fed then reinflated and drove up asset prices along with more than doubling
the debt from levels that were already overextended. In The Great Restructuring that's taking
place now, the Money Boys are basically transferring the income and assets of Main Street to
the Creditors as they deflate the debt and bail themselves out. The whole scam could more
accurately be called "The Great Heist" or the Money Power's perverted or mammonic version of
a Debt Jubilee.
President Donald Trump told Republican senators during a private lunch Tuesday that he is willing to let expanded unemployment
benefits expire at the end of July, a decision that would
massively slash the incomes of tens of millions
of people who have lost their jobs due to the Covid-19 crisis.
The Washington Post
reported Tuesday that the president "privately expressed opposition to extending a weekly $600 boost in unemployment insurance
for laid-off workers affected by the coronavirus pandemic, according to three officials familiar with his remarks."
House Democrats passed legislation last week that would extend the beefed-up unemployment benefits through January of 2021 as
experts and government officials -- including Federal Reserve chair Jerome Powell --
warn the
U.S. unemployment rate could soon reach 25%. The unemployment insurance boost under the CARES Act is set to expire on July 31, even
as many
people have yet to receive their first check.
"With nearly 1 in 5 Americans out of work, Donald Trump's plan is to cut off the boost to unemployment benefits and shower his
wealthy buddies with more tax cuts," Sen. Ron Wyden (D-Ore.), one of the architects of the unemployment insurance expansion,
toldHuffPost . "This is the worst economic crisis in 100 years and Donald Trump is doubling down on Herbert Hoover's economic
playbook and pushing workers to risk their health for his political benefit."
Sen. Lindsey Graham (R-S.C.) -- who
declared earlier this month that Congress will only extend the boosted unemployment insurance "over our dead bodies" -- said
after the private lunch that Trump believes the benefits are "hurting the economic recovery." Graham was one of several Republican
senators who
opposed the initial expansion of unemployment benefits as too generous.
An
analysis
released last week by the Hamilton Project, an initiative of the Brookings Institution, found that expanded unemployment benefits
offset "roughly half of lost wages and salaries in April." Unemployment insurance has "been essential to families, and is vital for
keeping the economy from cratering further," the authors of the analysis noted.
Ernie Tedeschi, a former Treasury Department economist,
estimated that "come July 31, if the emergency
UI top-up isn't extended, unemployed workers will effectively get a pay cut of 50-75% overnight."
"It's increasingly looking like there won't be enough labor demand to hire them all back at that point," Tedeschi tweeted.
The latest Labor Department statistics showed that
more than 36 million
people in the U.S. have filed jobless claims since mid-March as mass layoffs continue in the absence of government action to
keep workers on company payrolls. Despite the grim numbers, the Post 's Jeff Stein reported Tuesday that the White House
is "
predicting a swift economic recovery " as it resists additional efforts to provide relief to frontline workers and the unemployed.
On top of rejecting an extension of enhanced unemployment insurance, Trump last month
publicly voiced opposition to another round of direct stimulus payments, instead advocating a cut to the tax that funds Social
Security and Medicare.
Initially, we were told that the coronavirus lockdowns would just "temporarily" disrupt the
U.S. economy, but now it is becoming clear that a lot of the damage will be permanent.
We are starting to see businesses go belly up all over the country, and this includes some
of the most iconic names in the retail world. When J.C. Penney announced that it would be
declaring bankruptcy and closing
hundreds of stores , I warned that would just be
the tip of the iceberg , and that has definitely turned out to be the case. In fact, on
Wednesday many analysts were absolutely shocked when news broke that Victoria's Secret
has decided to shut down about 250 stores
Victoria's Secret plans to permanently close approximately 250 stores in the U.S. and
Canada in 2020, its parent company L Brands announced Wednesday.
L Brands also plans to permanently close 50 Bath & Body Works stores in the U.S. and
one in Canada, according to information the company posted online as part of its quarterly
earnings.
If this pandemic had passed quickly, perhaps those stores wouldn't have needed to be shut
down. But at this point it has become obvious that this virus is going to be with us for a long
time to come. In fact, the WHO just announced that on a global basis we just witnessed the
largest number of newly confirmed cases on a single day so far.
Pier 1 Imports, which previously said it would close half of its fleet of stores, now
plans to close all of its locations.
The retailer, based in Fort Worth, Texas, announced in a news release Tuesday that it was
seeking bankruptcy court approval to begin an "orderly wind-down" when stores are able to
reopen "following the government-mandated closures during the COVID-19 pandemic."
I was never a huge fan of Pier 1 Imports, but my wife liked to visit and see what they had,
but now we will never be able to do that again.
Something about that really saddens me.
Of course it isn't just retailers that are collapsing. Car rental giant Hertz
"is on the verge of bankrutpcy" , and things are not looking good at all
Hertz is on the verge of bankruptcy. At the end of April, it disclosed it had missed a
large amount of lease payments on its rental cars. Since then, it has entered into
forbearance and waiver agreements with these lenders that give it until May 22 to come up
with the money and a plan. Its cars, now parked at various parking lots around the country,
are collateral for this debt.
Some of you old timers might remember the old Hertz commercials featuring O.J. Simpson . Those were much
simpler times, and to be honest I really miss them.
Unfortunately, times have really changed, and I seriously doubt that Hertz will be able to
survive much longer in this very harsh economic environment.
Needless to say, a lot of businesses are going to die in the weeks and months ahead of us.
As I discussed
the other day , it is now being projected that approximately one out of every four
restaurants in the United States will be closing down permanently.
Can you imagine what this is going to look like?
We are going to have abandoned buildings all over the place, and this will especially be
true in our more impoverished communities.
The only chance we have of pulling out of this economic death spiral is if there is a full
scale return to normal economic activity all across America, but that isn't going to happen any
time soon.
Fear of COVID-19 is going to paralyze small and big businesses alike for the foreseeable
future, and every new outbreak is going to spark more overreactions.
Just days after reopening its American assembly plants, Ford temporarily shut down two
separate factories because employees tested positive for Covid-19.
One plant in Chicago that builds the Ford Explorer, the Lincoln Aviator and the Ford
Interceptor police car stopped operations Tuesday afternoon after two employees tested
positive for Covid-19. Then, Ford's plant in Dearborn Michigan that makes its bestselling
F-150 pickup, shut down Wednesday.
If we keep shutting things down every time someone gets sick, our economic problems are just
going to get worse and worse.
A new study suggests the number of Americans who will die after contracting the novel
coronavirus is likely to more than triple by the end of the year, even if current social
distancing habits continue for months on end.
The study, conducted by the Comparative Health Outcomes, Policy and Economics Institute at
the University of Washington's School of Pharmacy, found that 1.3 percent of those who show
symptoms of COVID-19 die, an infection fatality rate that is 13 times higher than a bad
influenza season.
Of course it certainly doesn't help that we continue to allow people from other countries
where COVID-19 is raging to fly into the U.S.
without any special screening whatsoever
A glamorous Russian blogger says she has proved that the US is open for foreign tourism
again, despite the pandemic, according to video obtained by DailyMail.com .
Sofia Semyonova, 33, a fitness model, told how she traveled on a crammed Aeroflot flight
with 500-plus passengers with 'no social distancing' from Moscow to New York City.
She used her B2 tourist visa to enter America from Russia's coronavirus epicentre 'in 30
seconds without any extra questions'.
I don't know how this could possibly be happening, but apparently it is.
Eventually, COVID-19 will literally be just about everywhere, and almost everyone in the
entire country will be exposed to it.
And fear of this virus will paralyze our economy for the foreseeable future.
So the truth is that the "for lease" and "space available" signs that you are now seeing are
just the start.
A lot more are coming, and it is going to be a very dark chapter for our nation.
"..all of these tin pot dictatorship oil rich countries are really a sick bunch.... i guess it is the byproduct off having too
much money and not enough brains..
@james@ 3
karlofi beat me to it james - or were you referring to Alberta?
I suggest you read this
Atlantic article , "We Are Living in a Failed State: The coronavirus didn't break
America. It revealed what was already broken."
And either before or during, take a gander at this Real GDP
graph that still understates the genuine amount of GDP shrinkage since parasitic
financial "gains" are added to GDP instead of subtracted as a cost to the real economy.
Essentially since GHW Bush's recession, the real economy of the Outlaw US Empire's shrunk
about 1.5% annually or @45% overall with the vast majority of economic gains accruing to the
top 10%. That grim reality is the #1 reason why Trump won in 2016, and why he stands a very
good chance of losing in 2020--"It's the economy, stupid."
President Trump said Wednesday the coronavirus
crisis is worse than the 9/11 terrorist attacks, and Americans won't allow it to go on any
longer.
"I don't think people will stand for it," Mr. Trump told reporters in the Oval
Office. "The country won't stand for it. It's not sustainable."
He said the pandemic "is worse than Pearl Harbor."
...Asked about soaring unemployment being a potential liability for him in an election year,
the president replied, "Nobody's blaming me for that. I built the greatest economy and I'm
going to rebuild it again. This was an artificially induced unemployment."
US Coronavirus "Bailout" Scam Is $6 Trillion Giveaway to Wall Street Michael Hudson April 21, 2020 6,800 Words
73 Comments Reply
Facing the Covid-19 pandemic, the US Congress rammed through the CARES Act -- which
economist Michael Hudson explains is not a "bailout" but a massive, $6 trillion giveaway to
Wall Street, banks, large corporations, and stockholders.
Max Blumenthal and Ben Norton discuss the enormous financial scam with Hudson, who reveals
how the economy actually works, with the Federal Reserve printing money so rich elites don't
lose their investments.
MICHAEL HUDSON: Just think of when, in the debates with Bernie Sanders during the spring,
Biden and Klobuchar kept saying, 'What we're paying for Medicare-for-All will be $1 trillion
over 10 years.' Well, here the Fed can create $1.5 trillion in one week just to buy stocks.
Why is it okay for the Fed to create $1.5 trillion to buy stocks to prevent rich people from
losing on their stocks, when it's not okay to print only $1 trillion to pay for free Medicare
for the entire population? This is crazy!
The idea is that only the rich should be allowed to print money for themselves, but the
government should not be allowed to print money for any public purpose, any social purpose --
not for medicine, not for schools, not for personal budgets, not for full employment -- but
only to give to the 1 percent.
People hesitate to think that. They think, 'It can't possibly be this bad.' But for those of
us who have worked on Wall Street, for 60 years in my case, that's what the numbers show.
But you don't have the media talking about actual numbers. They talk about just words, and
they use euphemisms. It's a kind of Orwellian vocabulary, describing an inside-out world.
(Intro – 1:58)
BEN NORTON: The world is suffering right now from one of the worst economic crises in modern
history. Definitely the worst crisis since the 2008 financial crash. And many economics experts
are saying that we're living through the worst recession actually since the Great Depression of
1929.
Well joining us to discuss this today, we have one of the best contemporary economists, who
is really well prepared to explain what has been going on in this global recession during the
coronavirus pandemic. And specifically today we're gonna talk about the $6 trillion bailout
package that the US Congress has passed.
The Trump administration is basically taking Obama's corporate bailout on steroids, and
injecting trillions of dollars into the corporate sector. And today to discuss what exactly the
coronavirus bailout means, we are joined by the economist Michael Hudson.
He is the author of many books. And in the second part of this episode we're gonna talk
about his book Super Imperialism: The Economic Strategy of American Empire . So that'll
be much more in the vein of kind of traditional Moderate Rebels episodes, where we talk about
imperialism, US foreign policy, and all of that.
Michael Hudson is also a former Wall Street financial analyst, so he's very well prepared to
talk about the financial thievery that goes on on Wall Street. And he is a distinguished
research professor of economics at the University of Missouri, Kansas City.
So Michael, let's just get started here. Can you respond to this global depression that
we're living through right now amid the Covid-19 pandemic? And what do you think about this new
bailout that was passed?
(3:50)
MICHAEL HUDSON: Well the word bailout, as you just pointed out, really was used by Obama and
only applies to the banks. The word coronavirus is just put in as an advertising slogan.
Banks and corporations, airlines, have a whole wish list that they had their lawyers and
lobbyists prepare for just such an opportunity. And when the opportunity comes up -- whether
it's 9/11 with the Patriot Act, or whether it's today's coronavirus -- they just pasted the
word coronavirus onto an act, which should be called a giveaway to the big banking sector.
Let's talk about who's not bailed out. Who's not bailed out are the small business owners,
the restaurants, the companies that you walk down the street in New York or other cities, and
they're all shuttered with closed signs. Their rent is accumulating, month after month.
Restaurants, gyms and stores are small-markup businesses, small-margin businesses, where,
once you have no sales for maybe three months and rent accruing for three months, they're not
going to have enough money to earn the profits to pay the rents that have mounted up for the
last three months.
The other people that are not being bailed out are the workers -- especially the people they
call the prime necessary workers, which is their euphemism for minimum-wage workers without any
job security. There have been huge layoffs of minimum-wage labor, manual labor, all sorts of
labor.
They're not getting income, but their rents are accruing. And their utility bills are
accruing. Their student loans are accruing. And their credit card debts are mounting up at
interest and penalty rates, which are even larger than the interest rates. So all of these
debts are accruing.
The real explosion is going to come in three months, when all of a sudden, this money falls
due. The governor of New York has said, "Well we have a moratorium on actually evicting people
for three months." So there are restaurants and other people, individuals, wage-earners, who
are going to be able to live in their apartments and not be evicted. But at the end of three
months, that's when the eviction notices are going to come. And people are going to decide, is
it worth it?
Well, especially restaurants are going to decide. And they're going to say, "There is no way
that we can make the money to pay, because we haven't had the income to pay." They're going to
go out of business. They're not going to be helped.
The similar type of giveaway occurred after 9/11. I had a house for 20 years in Tribeca, one
block from the World Trade Center. The money was given by the government to the landlords but
not to the small businesses that rented there -- the Xerox shops and the other things. The
landlords took all of the ostensible rent loss for themselves, and still tried to charge rent
to the xerox shops, the food shops, and ended up collecting twice, and driving them out.
So you're having the pretense of a bailout, but the bailout really is an Obama-style
bailout. It goes to the banks; it goes to those companies that have drawn up wish lists by
their lobbyists, such as the airlines, Boeing and the large banks.
The banks and the real estate interests are going to be the biggest gainers. They have
changed the real estate law so that the real estate owners, for a generation, will be income
tax free. They are allowed to charge depreciation, and have other fast write-offs to pretend
that their real estate is losing value, regardless of whether it's going up and up in
value.
Donald Trump says that he loves depreciation, because he can claim that he's losing money,
and gets a tax write-off, even while his property prices go up.
So there's a lot of small print. The devil is in the small print of the giveaway. And then
President Trump has his own half-a-trillion-dollar slush fund that he says he doesn't have to
inform a Congress or be subject to any Freedom of Information law. He gets to give to his
backers in the Republican States.
And states and municipalities are left broke. Imagine New York City and other states. Most
states and cities, have balanced budget constitutional restrictions. That means they're not
allowed to run a deficit.
Now if these states and cities have to pay unemployment insurance, and have to pay carrying
charges on the schools and public services, but are not getting the sales taxes, not getting
the income taxes, from the restaurants and all the businesses that are closed, or from the
workers that are laid off, they're going to be left with a huge deficit.
Nothing is done about that. There has been no attempt to save them. So three months from
now, you're going to have broke states, broke municipalities, labor that cannot, whose savings
was wiped out.
As I'm sure you've reported on your show, the Federal Reserve says that half of Americans do
not have $400 for emergency saving. Well now they're going to be running up thousands of
dollars of rent and monthly bills.
So the disaster is about to hit. They will not be bailed out. But no major investor, really
will lose. You've seen last week, the stock market made the largest jump since the depression
-- the largest jump in in 90 years. And that's because Trump says, "The economy is the stock
market, and the stock market is the One Percent."
So from the very beginning, his point of reference for the market and for the economy is the
One Percent. The 99 Percent are simply overhead. Industry is an overhead. Agriculture is an
overhead. And labor is an overhead, to what really is a financialized economy that is writing
the whole bailout.
It's not a bailout -- it's a huge giveaway that makes them richer than they ever were
before.
(10:48)
BEN NORTON: Yeah and Michael, related to that -- you mentioned that fine print is important.
But I also have a kind of bigger question. And I don't really know where exactly these numbers
come from.
Officially the bailout is $2 trillion. Many media outlets reported it as effectively $4
trillion. But actually, according to Larry Kudlow -- who is the director of the US National
Economic Council, he's the Trump administration's kind of chief economist -- Larry Kudlow is
now saying that it's actually $6 trillion in total, which is a quarter of all of US GDP.
And that includes $4 trillion in lending power for the Federal Reserve, as well as $2
trillion in the aid package.
So there is discussion of this aid package, but actually the aid package of $2 trillion is
actually half the size of the $4 trillion that is given to the Federal Reserve.
What exactly is that $4 trillion that the Federal Reserve has? Is this some kind of slush
fund, or how does it work?
(11:52)
MICHAEL HUDSON: No, the Federal Reserve was given special powers to create 10 times as many
loans or swaps as others. The Federal Reserve represents the commercial banks and commercial
investors.
Now here's the problem: a lot of companies were issuing junk bonds. They were going way down
in price, especially junk bonds for the fracking industry. The Federal Reserve says, "We're
going to be backed up by the Treasury. We can just create -- as you know, Modern Monetary
Theory -- we can just create money on a computer, and swap. So we will, say, 'Give us your
poor.' It's like the Statue of Liberty: 'Give us your poor, your oppressed,' or Aladdin's old
lamps for new: Give us your junk bonds, and we will give you a bona fide Federal Reserve
deposit."
So the Federal Reserve has been pumping trillions and trillions of dollars into the stock
market. That's what's been pushing up the stock market, the Federal Reserve. The bailout has
gone to the stock market. As if the stock market got coronavirus! Stocks don't get coronavirus!
They don't get sick on the virus! And yet it's the stock market that's going up through the
Federal Reserve.
There's also another $2 trillion dollars, $2 to $4 trillion that the US government has, over
and above the $2 trillion that's going to the people. So most of the calculations that have
been published cite it as a $10 trillion bailout. Of which the newspapers, to avoid
embarrassing Mr. Trump, only refer to the money given to the the wage earners. And they're sort
of embarrassed that the vast majority are given to the financial sector that doesn't need a
bailout, but that doesn't want to lose a single penny from the virus.
So when you see the stock market recovered almost to what it was before the virus, while the
economy is going down, you realize, wait a minute they're saving the 1 percent, or the 10
percent of the population that own 85 percent of the stocks and bonds. They're saving the
banks. They're not saving the people, and they're not saving the economy; they're not saving
industry; and they're not saving small businesses.
So it's an amazing hypocrisy that the mainstream press is not discussing, which is why your
show is so important.
(14:29)
MAX BLUMENTHAL: Yeah and here in Washington, DC, we got I think $500 million from the, I
guess what you accurately describe as the stock market bailout. And that's a lot less than a
number of red states that are less populous than Washington, DC got. So there's a massive
shafting here.
And then the city has only been able to provide for certain parts of the economy.
Undocumented immigrants, who do a lot of work here, got nothing from the city. Vendors, which
are a big part of the informal economy in DC, even though they have to be regulated, got
nothing.
And then you mention all of these sectors of the economy -- young people, college-educated
young people who are deep in debt, and therefore less inclined to spend -- are getting shafted
here.
So you have called for a solution -- well I guess, knowing so many of those people, they
contribute so little to the economy because they can't; they're just putting all their money
into debt. So you have called for a debt jubilee.
You say that debts that can't be paid won't be, and this is the best way out.
Maybe you can explain to our viewers and listeners what that is and why it would be the best
remedy?
(15:42)
MICHAEL HUDSON: Well here's what happens if you don't write down the debts that are just
going to accrue in the next three months: If you don't say, "The rents will not have to be
paid, and workers will not have to pay the debts that mount up," if you leave those debts on
the books, and you make the workers liable to keep paying the student debts, and the other
debts, and the mortgage debts, and the rents, then they're not going to have any money left to
buy goods and services.
When it's all over, they're going to get their paychecks, and off the top is going to be the
wage withholding, and the tax withholding, and the Medicare, and if they don't want to get
kicked out of their houses, they're going to have to pay all of this money that's accrued while
they're not making an income.
So you're going to have a shrinkage of the economy, a vast shrinkage. How can they afford to
buy anything but the most basic necessities, the cheapest food, the necessary transport?
Obviously they're not going to buy the kinds of goods and services that are supposed to be part
of the circular flow.
Economics textbooks say employers pay the workers so the workers can have enough money to
buy what they produce. But the workers don't spend their income only on what they produce. They
spend most of their income on rent, on debt service, on taxes, on finance, insurance, and real
estate. And this is the only part of the economy that is being enabled to survive.
So how can you have the superstructure of rents and debts, of insurance charges, on an
economy that doesn't have the income to buy goods and services? And if they can't buy goods and
services, you're going to have the stores closing down, because people can't afford to buy what
the stores are selling.
You're going to have a whole wave of closures. And you're going to go down the streets, and
certainly in cities like New York, or where I live in Queens, just outside of Manhattan, where
block after block, they're going to be "For rent" signs. It's going to be empty.
And the only way to avoid that is for a debt write-down.
Now you've had this occurring for 5,000 years. I'll give you an example that may be easy to
understand.
In Babylonia, we have the Laws of Hammurabi, in 1800 BC. One of the laws says that when you
would buy beer or other things, they would write it on a tab in the bar, in the ale house, and
all the debts were owed when the harvest was in. You'd pay the debt seasonally.
Well Hammurabi said, if there's a drought, or if there's a flood, then you don't have to pay
the debts. Most debts were owed to the palace, and others.
The implied policy is that, "The reason we're doing this is, if we don't do that, then
you're going to have these debtors become debt servants, bond servants to the creditors;
they're going to owe their labor to the creditors; they're going to lose their land to the
creditors; and they won't be able to work on public infrastructure projects; they won't work
for Babylonia; they won't serve in the army, and we can be invaded; and they won't be able to
use their crops as taxes, because they'll owe the crops as debts. So we're going to write it
down."
So the whole idea for thousands of years, of every Near Eastern ruler starting his reign by
writing down the debts, was to begin everything in balance.
Because they realized, just mathematically, debts grow at compound interest. You've seen the
coronavirus increase at an exponential rate. That's how debts accumulate interest, at an
exponential rate.
But the economy grows in an S-curve, and then it tapers off. The American economy, the GDP
since the Obama bailouts of 2008, the entire growth of the GDP has only accrued to 5 percent of
the population. 95 percent of the GDP. But the population for 95 percent, the industry and
agriculture, that's actually gone down.
So we're already in a 12-year depression, the Obama depression, that they like to call a
recession, because most of the media are Democratic Party people.
But you're going to have this recession turn into a genuine depression, and it will continue
until the public debt, that is state and local debts, are written down; the mortgage debts
written down; and the personal debts written down, starting with the student loans, the most
obviously unpayable debt.
And the choice is, do you want to depression, or do you want the banks to be able to collect
all the economic surplus for themselves? Well Donald Trump, supported unanimously by the
Democratic Congress, says, "We want to protect the banks, not the population, not the economy.
Let the economy shrink, as long as our constituents, the donor class, are able to avoid making
a loss. Let's make the loss borne by the 99 percent, not our donor class."
(21:17)
BEN NORTON: Yeah, and Michael, you mentioned something, getting back to the Federal Reserve
and understanding how this whole system works. I mean frankly it seems to me to kind of be a
house of cards.
But you mentioned this idea of Modern Monetary Theory and just kind of creating money out of
nothing. Can you talk more about that? You know this is a term that's become more prominent,
especially on the left: MMT, modern monetary theory.
There are socialists who argue in support of MMT and then there are others who are kind of
skeptical of the whole notion that you can just print all this money to fund these social
programs that you want to create, and that it won't create inflation.
But at the same time, you and other people point out that that's exactly how the economy
already works. Where for instance, you want to fund a war, there's never -- you know frequently
when someone on the left asks for universal health care or free public education, members not
only of the Republican Party but many neoliberal Democrats often say, "Well yeah, where are you
gonna get the money from?" And the response of some of the MMT supporters is, "Well we just
fund the program, and we just create the money because we control the creation of the
dollar."
And we see that same attitude used actually by the Federal Reserve right now, but to bail
out Wall Street. "Yeah we're just gonna print" -- they printed $1.5 trillion, and then just
gave it, they just injected it right into Wall Street.
So does that not create inflation, or what exactly is happening economically there? I mean
to me, it seems like a scam; it seems like totally a scam.
(22:59)
MICHAEL HUDSON: Since 2008, you have had the greatest inflation of money in history. And you
have also had the greatest inflation in history, but it's entirely asset price inflation.
You're absolutely right: the money has gone into the stock market and the bond market, to
support bond prices, meaning you've had the biggest bond boom in history. You've had a huge
stock market boom. But consumer prices have gone down. So here you have an enormous amount of
money creation, and consumer prices and real wages have been drifting down.
So they are really two economies. The question is, are you going to create money for public
purposes by spending it into the economy, on industry, agriculture, and the goods and service
production and consumption economy Or, are you going to put it into the financial economy?
Well the whole way of our banking system is that banks create credit. If you go into a bank
and you take out a loan, you say, I'm gonna borrow $5,000 for something. The banker doesn't go
and say, let me see if we have any money to loan you; he says, okay I will write a loan on my
computer. I will credit your deposit with $5,000, and you will sign this IOU, and we have an
asset. And the asset is $5000, on which we're going to charge interest on what we pay you.
So it's just done by computer, on a balance sheet. And as long as money is created on a
computer, the only cost is the electricity used to make that debt record.
Now the banks, when they make loans, 80 percent are against real estate. So they say, in
case you can't pay, you're pledging your real estate – the home you're buying, or the
commercial building you're buying, as collateral. So we'll lend you up to 80 percent, maybe 100
percent, of the value of what you're buying, and that's the collateral we have.
So they lend against collateral. Well, if you lend the money against collateral to buy a
building, or to buy stocks and bonds, which are the other collateral, then obviously this money
you're creating to buy houses, or commercial real estate, or stocks and bonds are going to bid
the price up.
Banks don't give loans for people who say, I want to go shopping and buy more goods because
I need the money. That may be a little bit, that's what credit cards are for, but that's a
small portion of the overall money supply. So banks don't make loans to buy goods and services;
they make loans to buy assets that obviously inflate the price of assets.
And the more money that you pay for houses that are rising in price, or medical insurance,
or stocks and bonds, to make a retirement income for your pension fund; the more money you pay
for houses that are inflating in price because of bank credit, the less money you have to buy
goods and services.
So actually, the more money they create, the more consumer prices for goods and services
fall. It's the exact opposite of the usual theory.
On my website I have many articles about that, and I have something today in
Counterpunch on that. It's on how the economy works the opposite of the way the textbook
says.
Now unfortunately the left-wing doesn't really study finance and money much. The discussion
of finance and money has been monopolized by the right-wing, so left-wingers think, they don't
realize that they're picking up a kind of junk theory of monetary relations and debt relations
that's all picked up from the right-wing of the political spectrum.
It's a kind of parallel universe. That's not how the economy really works, but in a way that
sort of is easy to understand. And it's very easy to make an erroneous, oversimplified view of
the world easy to understand.
And when it's repeated again and again and again, in the media, the New York Times and
MSNBC, people really think that, well, maybe that's how the world works -- more money is going
to push up prices, so we better not push for it, we better go along with trickle-down
theory.
And most of the left believes in trickle-down theory. The Democratic Party leadership is
absolutely convinced, if you just give enough money to the top 1 percent, or 5 percent, or Wall
Street, it'll all trickle down.
(27:49)
BEN NORTON: Well of course the Democratic Party is not the left.
MICHAEL HUDSON: That's right, but it pretends to be. And it has crowded out the left. You
can see in the recent election primaries that its job is to protect the Republican Party from
any critique by the left, interjecting itself in between the Republican Party and any possible
reform movement.
BEN NORTON: Exactly.
(28:20)
MAX BLUMENTHAL: Well they stood up really strongly against the bailout -- I mean what was
it, 96 to nothing? And in the voice vote, I was listening to the voice vote last night in the
House; I didn't hear AOC's voice against it.
MICHAEL HUDSON: They did a voice so that everybody could say, "Oh it wasn't me!"
MAX BLUMENTHAL: No, no! So you mentioned that foreclosure king Steve Mnnuchin gets like a
$500 billion slush fund. I haven't heard much discussion about that. What will he do with this
sort of opaque slush fund, and how will this -- I mean it's a leading question, but how will
this kind of reinforce or consolidate inequality for the next generation?
(29:10)
MICHAEL HUDSON: Well gee, I hope he gives some of it to Kamala Harris, who was the attorney
general who let him do all of this, and who thoroughly backed him and led the foreclosure, was
the iron fist behind his foreclosure program. So I'm sure he'll press for Kamala to be the vice
president on the ticket.
The Democrats have a problem. How can they guarantee that they have their candidate win?
Their candidate is Donald Trump. How can they make sure that they have such a weak candidate
that he's sure to lose to Donald Trump? And the choice is, we'll get a vice president that's so
unpopular that they're sure to lose.
Now it's a race between Kamala Harris and the Minnesota lady.
MAX BLUMENTHAL: Klobuchar? The one who throws staplers at her staff. She seems very
charming.
MICHAEL HUDSON: Uh, I don't know about that. But my wife can't even look at her on
television. But I think that the pretense is that she'll help get Minnesota, as if Minnesotans,
where I'm from, are so dumb just to vote for somebody from there. But by getting Minnesota,
they'll lose the whole rest of the country.
So I think she'll be the vice president, because that guarantees a Trump victory. And that
will enable the Democrats to say, here -- they'll have the president they want, that is for
their donor class, but they can say, "That's not us; that's the Republicans." So that's the
Democratic strategy.
MAX BLUMENTHAL: Right, then they can raise loads of money for the "Resistance," and all of
the outside think tanks. And that was the old Republican, William F. Buckley strategy, is we're
better throwing rocks outside the building and raising a ton of money for the National Review
than actually having to govern. And that seems like the Democratic strategy.
But I guess I was asking about how you see the economy transforming, because the Obama
bailout sort of transformed it or consolidated the gig economy, where everyone has to work
three to five jobs, and what was supposed to be a highly educated middle class is deeply in
debt.
Where do you see it after this next tranche of stock market bailouts?
(31:29)
MICHAEL HUDSON: Ok, let's look at three months from now. Smaller companies are going to be
squeezed, because all of their expenses are going to go up. Small companies have had to run up
debts, and they have all sorts of other problems, and their earnings, their prospective
profits, are not going to look that good. Because there's not going to be a market for the
things that they sell, because of the debt deflation that I talked about.
So what's going to happen? You're going to have a bonanza for private equity capital. The
liquid, the 1 percent that have access to bank credit and have their own equity capital are
going to come in and pick up a lot of real estate that's going to be defaulted on -- just like
they did after Obama evicted his constituency, the mob with pitchforks, and evicted them.
Blackstone will pick up more real estate. Big companies are going to pick up small
companies. You're going to emerge with a highly monopolized economy, much more centralized.
The important thing to realize about free-market economics and libertarianism, is
libertarians advocate central planning, The Chicago School of monetarists advocate central
planning; the free marketers want central planning. But the banks are to be the planners, not
the government. They want to exclude the government from planning, except to the extent that
they can take over the government, as Trump has done, and plan all of the income to be
transferred to themselves from the rest of the economy.
So we're going to have a much more centrally planned by a coalition of monopolies and the
government. In the 1930s, that was called fascism.
MAX BLUMENTHAL: It's what we call a "public-private partnership" or something.
MICHAEL HUDSON: Right.
MAX BLUMENTHAL: Just really quickly, and maybe we can kind of transition after this, but you
mentioned Blackstone. I think this is one of the key components of the bailout. They own so
much stake in so many of the companies getting bailed out. Can you just describe their role and
what they are?
(33:38)
MICHAEL HUDSON: It's appropriate that they were put in charge of bailout. So if they're the
largest company buying up defaulted real estate and buying, picking up the weak -- it's called
moving assets from the weak hands to the strong -- then they might as well be put in charge,
because they're going to be the company doing all the grabbing. So of course they're in charge
of it.
It's called grabitization. That was the Russian word for privatization in the 1990s. So
grabitization is I think a better word than public-private partnership. It's not really a
partner; it's sort of a one-way partnership; there's one subsidiary partner. It's really
financialization and grabitization.
MAX BLUMENTHAL: Right, just the looting of state assets.
BEN NORTON: Going back one step here, Michael, you were talking about the way that people
should think about how the economy actually works. And I mentioned MMT. Can you kind of just
walk through that again? Because you were talking about how actually, when the Fed creates -- I
mean really to me, as someone, I'm definitely not an economics expert, I just don't understand
really how this whole process works, because to me it just seems simply like, they're literally
just creating money and just giving it to banks, and corporate elites, and rich people.
I mean maybe that's what it is. But I don't understand, this is like the biggest scheme I
can imagine, where the Federal Reserve is creating all of this money, printing -- they're
physically printing money is my understanding. And then they're just giving it to these banks,
to bondholders. And then, but you said that what does is, instead of actually creating
inflation, all that does is, if I understood correctly, it boosts the value of assets like real
estate, while at the same time deflating wages and commodity prices.
So if that's the case, then how should people who are advocating for socialized programs
like Medicare for All, free public education, and maternity leave, and childcare, and all of
these programs that the Bernie Sanders campaign and movement have been advocating for, how
should we talk about the way to pay for all of those programs, if the reality of the economy is
that the Fed is printing trillions of dollars, and then just giving that cash to banks?
(36:11)
MICHAEL HUDSON: Well I think the reason you're having trouble understanding MMT is because
what you described is what's happening, but you think, "But that's unfair!" And there's a
tendency to think, if it's unfair --
MAX BLUMENTHAL: It's not just unfair. It's the biggest scheme I can imagine. There's no
other word other than just a con scheme.
MICHAEL HUDSON: Yes, and the brain recoils from thinking, "Can the government really be
doing that to us?" Well, yes it can.
And just think of when, in the debates with Bernie Sanders during the spring, Biden, and
Klobuchar keep saying, 'What we're paying for Medicare-for-All will be $1 trillion over 10
years.' Well here the Fed can create $1.5 trillion in one week just to buy stocks.
Why is it okay for the Fed to create $1.5 trillion to buy stocks to prevent rich people from
losing on their stocks, when it's not okay to print only $1 trillion to pay for free Medicare
for the entire population? This is crazy!
The idea that only the rich should be allowed to print money for themselves, but the
government should not be allowed to print money for any public purpose, any social purpose --
not for medicine, not for schools, not for personal budgets, not for full employment -- but
only to give to the 1 percent.
People hesitate to think that. They think, 'It can't possibly be this bad.' But for those of
us who have worked on Wall Street, for 60 years in my case, that's what the numbers show.
But you don't have the media talking about actual numbers. They talk about just words, and
they use euphemisms. It's a kind of Orwellian vocabulary, describing an inside-out world that
they're talking about.
They will buy stock; they'll say we're going to buy a million shares of Boeing; they'll just
write a check, and the check will be from the Federal Reserve, and Boeing will get the money.
The Federal Reserve can create a deposit, just like a banker will write you a loan when you go
in and borrow. It's done on a computer – without levying taxes. The Fed can do the same
thing.
Stephanie Kelton, my department chairman for many years at the University of Missouri at
Kansas City, describes this. The University of Missouri's website, New Economic Perspectives
has a description of it. So if people want to google either her, UMKC, or what I've written, or
Randall Wray at the Levy Institute, you'll get walked through.
If you're not already thinking in terms of balance sheets, which most people don't, you have
to sort of just read it again and again, and then all of a sudden, "Ah, now I get. It's a
ripoff! It's created out of nothing. Now I get it."
BEN NORTON: It's just a house of cards. To me it proves the kind -- there used to be this
kind of very blunt orthodox Marxist view that the economy strictly follows politics, and it
seems to me this is a case where the economy is just created by politics.
MICHAEL HUDSON: That's true, and that's not an un-Marxist position. Marx did distinguish
between oligarchies and democracies, and finance capitalist economies and industrial capitalist
economies.
MAX BLUMENTHAL: Right. And the $17 billion for "urgent national security measures" was
straight into the pockets of Boeing, which had its 737 maxes falling out of the sky, and had
been clamoring for this bailout for a long time.
I mean you saw 3M, the maker of these masks which are suddenly unavailable, gained a total
exemption from lawsuits, if the masks that it mass-produced now somehow failed.
So all of these things stuffed into the bailout were what industry and finance had been
clamoring for for years. And they finally had the opportunity to do it.
(Outro – 40:38)
BEN NORTON: All right, we're gonna take a pause there. That was the end of part one of our
interview here with the economist Michael Hudson. He is a Wall Street financial analyst, a
distinguished research professor of economics at the University of Missouri Kansas City, and of
course the author of many books on economics.
You can find some of his work at michael-hudson.com . We will link to that in the show notes. He
has interviews with transcripts and articles.
You can also find some of his economics work and the work of some of his like-minded
colleagues at the economics department at the University of Missouri Kansas City website. I
will link to that as well in the show notes. You can find the show notes at moderaterebels.com .
In part two of this episode, we're going to continue our discussion of the house of cards
that is the international financial system, the economic system. And in the second part we're
going to talk about his book "Super Imperialism: The Economic Strategy of American Empire."
This is an incredible book. You know here at Moderate Rebels, Max and I frequently talk
about the political and military side of imperialism. Michael Hudson just spells out, in
easy-to-understand terms, how imperialism works at an economic level, how the US government and
the Treasury, through the backing of military force, force countries around the world to buy US
bonds, Treasury bonds, and how there's basically just a con scheme where countries pay for
their own US military occupation through buying US Treasury bonds.
Michael Hudson explains that all in really simple terms. And we also talk about the rise of
China, and how China does pose a so-called threat, in scare quotes, to not the American people
but rather to the hegemony of the US financial system -- and the main financial instruments,
the weapons that the US uses to maintain that hegemony, the International Monetary Fund, the
IMF, and the World Bank.
And Hudson describes how, in his terms, the IMF, and the World Bank, specifically, are some
of the most evil institutions that are really maintaining the American dictatorial,
authoritarian chokehold on the global financial system.
If you want to support this program, Moderate Rebels, and the kind of independent interviews
we do like this, giving a platform to some of these voices who you're never going to hear in
mainstream corporate media, you can go to Patreon.com/ModerateRebels . Please consider supporting
us. And definitely join us in part. See you soon.
Oh and seems increasingly evident that the response to the virus was planned and exaggerated
in effort to distract from imminent financial collapse and provide cover for yet again
another bank and government bailout. While the people cower in their hovels the bankers are
popping champagne poolside on private refuges.
This effect is most notable in US maybe the erstwhile sole remaining "solvent" western
nation - only because they own the printer for worlds currency.
By Peter Dorman, professor of economics at The Evergreen State College. Originally
published at Econospeak
Donald Trump, cheering on
his "warriors" who demand that states lift their lockdown and distancing orders (where they
have them), would have you believe this is about bringing the economy back to life so ordinary
people can get their jobs and normal lives back. Elitist
liberals who work from home and have country estates to retreat to don't care, but "real"
people do.
The reality is different. The shuttering of stores, restaurants, hotels and workplaces
didn't begin with government orders and won't end with them. If the rate of new infection
and death is too high, a lot of people won't go along. Not everyone, but enough to make a huge
economic difference. Ask any small business owner what it would mean for demand to drop by
25-50%. Lifting government orders won't magically restore the economic conditions of
mid-winter. So what's it about? Even as it makes a big PR show of supporting state by state
"liberation" in America, the Trump administration is
advising state governments on how to remove workers from unemployment insurance once orders
are lifted. Without government directives, employers can demand workers show up, and if they
refuse they no longer qualify. And why might workers refuse? Perhaps because their workplaces
are still unsafe and they have vulnerable family members they want to keep from getting
infected? Not good enough -- once the state has been "liberated".
How should we respond to this travesty? First, of course, by telling the truth that an
anti-worker, anti-human campaign is being conducted under the guise of defending workers. If
the Democrats weren't themselves such a tool of business interests we might hear that narrative
from them, but the rest of us are free to speak out and should start doing it, loudly, wherever
we can.
Second, one of the laws of the land is the Occupational Safety and Health Act of 1970, which
gives workers the right to
refuse imminently hazardous work. This hasn't been used very often, nor is there much case
law around it, but the current pandemic is a good reason to pull it out of storage.
If there are public interest law firms looking for something useful to do during distancing,
they could advertise their willingness to defend workers who need to stay home until work is
safe -- while still getting their paycheck. If employers thought the choice was between public
support for workers sitting out the pandemic or their support for them we might hear less about
"liberation".
They want to throw people off of unemployment while using the virus threat to stop any
serious protests against that. It is literally biological warfare against working people.
Same class war as before, but now with CBW.
Taught it for years. This is the biggest net and is the # 1 Cited Violation for 1910/1926
and MSHA–ever.
OSHA 654 5(a)1 The General Duty Clause.
OSHA Laws & Regulations OSH Act of 1970
OSH Act of 1970
Table of Contents
General Duty Clause
Complete OSH Act Version ("All-in-One")
SEC.
5.
Duties
(a)
Each employer --
(1)
29 USC 654
shall furnish to each of his employees employment and a place of employment which are free
from recognized hazards that are causing or are likely to cause death or serious physical
harm to his employees;
(2)
shall comply with occupational safety and health standards promulgated under this Act.
(b)
Each employee shall comply with occupational safety and health standards and all rules,
regulations, and orders issued pursuant to this Act which are applicable to his own actions
and conduct.
Quick Take –Two way street.
Employers mus t mitigate hazards. Employees must comply with mitigation.
No Employer Mitigation=Breaking the Law=No Employee requirement to work in Unsafe
Conditions.
"Lifting all boats" was always a lie. It was simply a way to sell trickle down by claiming
that the objectively observable inequality it produced would somehow help everyone,
eventually, sort of. There was not and has never been a plan by the Conservative Movement to
lift all boats. Only a plan to feign interest in doing so.
I agree with most of your comment except the "smarter" part.
They don't seem smart to me, they openly plunder and loot and spit in the populace's
faces. They don't even pretend to believe in or work for a "common good" anymore, really.
That is the story of the 21st Century in the US, starting with Baby Bush II. (Okay, I get
that the Obama crew seemed "smart" or sophisticated to the PMC and comfortable liberals, but
how smart were they if they led to the open Kleptocratic Disruption of Trumpism and the God
Emperor?)
What the Elites have that the proles don't is in-group solidarity. (And a captured Media
establishment.) They protect their own, while the hoi polloi fight one another for
scraps.
What is the death rate among the working age population?
Seem like a tough hill to die on given the curve has flattened, hospitals are not
overflowing, and the economy is teetering on the edge of depression.
No one has a vaccine, this isn't going away any time soon. It's time to focus on
protecting the most vulnerable instead of pretending this effects everyone equally.
Allow states to cut benefits? Come on, UI benefits are taxed for pete's sake. 'Available
to work' basically means you have start at 8am the next day which is doesn't align with any
reality of hiring except in low end service sector jobs.
The other really significant thing is that 're-opening' doesn't necessarily mean returning
to business. For example, Musk insists on re-opening Tesla the assumption being that sales
are there to be had if they re-open. But if not no sales, no need for employees back down the
drain we go.
Same for restaurants. retail, hotels, transit and white collar jobs – attorneys,
architects, CPAs
The poorest and the most desperate actually. Some people still have not received any money
from the state or federal governments. The quarantine started about two months ago. So no
job, no income, no money, and no joke. No matter how shrewd or smart you are sometimes you
are not making the decisions. Reality makes them for you.
Well till the markets crashes again and they need to save the assets of the
wealthiest.
I just got a text from a buddy who is an electrician. His company just told him they are
not expecting to take any major work till second quarter of next year. They will only be
taking emergency calls. This is in Chicago.
Granted, it's a union site, but one point that they make is how union saturation raises
the wages for all workers within a given region.
In Appalachia, I was offered $15hr. to work as an electrician. In Chicagoland, starting
wages were close to or more than double that. Guess where I went in order to establish a
salary history? And no, the cost of living is really not too different between those two
places, but opportunities sure were.
(moderators: in response to an "Eat the Rich!" comment, I posted a link with recipes: I
apologize for this. Admittedly, it was in poor taste.)
It's not a popular position to point out that a particular financial risk is overblown. But
when everyone in Corporate America and investor-land is in "Where's my bailout?" mode, the
usual motivations are reversed. Normally, "Nothing to see here, move along" is the default
position when the great unwashed public worries about too much leverage, opacity, and tricky
practices. But when central banks are doling out trillions, sounding alarms, whether warranted
or not, is the way to get someone else to eat the risks you took for fun and profit. And as
we'll demonstrate, the Financial Times looks to have become an unwitting tool of CLO
(collateralized loan obligation) investors who haven't yet gotten their Fed handout.
The article in question is headlined: CLOs: ground zero for the
next stage of the financial crisis? The headline and the breathless tone set the reader up
for the idea that these complex structures will blow up the financial system, just the way
their cousins, collateralized debt obligations, did in the financial crisis.
But as we'll explain, the absolute size of the CLO market, and banks' not-much exposure to
the risky parts of it, means that absent fraud (or a systemically important bank and wobbly
bank having gotten high and binged, and the pink paper and others would likey have gotten wind
of that by now), there's no risk to the banking system. And in the hoary old days of the crisis
just past and its predecessors, that was the justification for throwing official money in big
volumes to clean up bad lending decisions: that as much as it would seem proper to let
incompetent institutions go tits up, letting banks fail tends to engulf even healthy banks,
since no one can tell from the outside very well how solvent a particular institution is, and
hurts innocents like depositors (even with deposit insurance, it is pretty much impossible for
a business of any size not to have way above the guaranteed amount in its accounts regularly,
if nothing else when it issues payroll).
So what the Financial Times piece is effectively getting worked out about is that some
investors will lose money. Newflash! Investing involves risk! Who'd have thunk it!
In other words, this Financial Times piece is implicitly selling the idea that the
consequences of some deep pockets taking hits is just oh-too-dangerous. This is Greenspan put
thinking on steroids. And sadly, it seems to be treated as a reasonable line of thinking.
Wealth must be spared. The hell with those who live from labor income.
What CLOs Are and Why Comparisons to CDOs Are Spurious
By way of background, a pet peeve of ours is that the financial crisis is widely depicted as
a housing crisis when it was in fact a derivatives crisis. If we had merely had subprime and
Alt-A loans go bust, the result would have been on the order of the S&L crisis plus maybe
another 50%. Bad but nothing like the seize up of the global financial markets that took place
in September 2008.
As we explained long-form in ECONNED, collateralized debt obligations consisting
substantially of the risky tranches of subprime mortgage bonds (the BBB and BBB- layers)
dressed up the part of of subprime securitizations that no one wanted to buy. The top tranches
of those CDOs, comprising 60+% of par value, were rated AAA.
But even that wasn't sufficient to blow up the global financial system. Demand by subprime
shorts and banks seeking protection for the loans they were advancing to the likes of subprime
lenders like New Century and IndyMac led to the use of substantially synthetic (made mainly of
credit default swaps rather than tranches of actual bonds with actual mortgage loans behind
them) as a way to generate artificially cheap insurance on the riskiest rated layer of subprime
debt. Those derivate exposure have been estimated at 4-6X the real economy exposures. The
reason the financial system blew up is that the side bets were a significant multiple of real
economy activity, and the parties on the wrong side of those wagers were systemically
important, highly leveraged players like AIG, the monolines, Eurobanks, Citigroup, and
Merrill.
It is also important to remember the base line. Banks have repeatedly managed to blow
themselves up in entirely conventional ways, with good old fashioned loans. Remember the Latin
American debt crisis? The commodities bust of the early 1990s, which crated energy and real
estate lenders in the oil patch? The afore-mentioned S&L crisis? The not as well publicized
LBO loan crisis of the late 1980s and early 1990s? Oh, and how about one of the mothers of bad
lending, the Japanese commercial (and to a lesser degree residential) real estate bubble and
bust?
Now let's look at CLOs. They are intrinsically less risky than asset-backed-securities CDOs,
which the press took to calling just "CDOs".
Those CDOs were resecuritizations. They were created from the riskiest parts of mortgage
securitizations made of risky loans, as in subprime or Alt-As. Those tranches usually
represented only 3% of the entire deal. They'd be worth 100% if the losses on the subprime RMBS
was 8% or less, and totally wiped out if the losses were higher than 11%. Since subprime losses
averaged more like 40%, nearly all these CDOs were complete wipeouts.
By contrast CLOs are made from risky corporate loans, so-called "leveraged loans" typically
made when a private equity firm is buying a portfolio company. So they are more analogous to a
subprime RMBS (residential mortgage backed securitization) in terms of the risk level of the
assets. 1 Note that even with the high level of subprime losses, AAA
tranches of RMBS lost only 0.42% on average .
Even though there was a tidal wave of risky "leveraged loans" to fund deals at sky-high
prices right before the last crisis, and a lot of them wound up in CLOs, while their value
traded down afterwards there were no losses. Admittedly, the Fed dropping interest rates and
manipulating long-term rates lower allowed many of the pre-crisis loans to be refied at lower
rates. But the Fed didn't engage in measure intended to rescue corporate borrowers; they were
just lucky beneficiaries.
Nevertheless, CLO structures have been made more conservative since the last crisis.
See here for geeky details .
But with the bottom dropping out of the entire economy, a lot of former sure-looking bets
won't work out so well.
But should we even care about CLOs? First, the market isn't all that large. S&P in early
2020 pegged it at $675 billion. By contrast, the subprime market, depending on whether or not
you included Alt-As, was estimated back in the day at $1.3 trillion to a bit over $2 trillion.
And US GDP was $14.5 trillion in 2007 versus $21 trillion in 2019. Using Pimco's forecast of 5%
contraction for the full year, you still get roughly $20 trillion, showing that the relative
importance of subprime lending has fallen even further. And that's before you factor in the way
that credit default swaps greatly magnified the real economy exposures and concentrated them at
systemically important, fragile players.
This chart from Guggenheim Investors is a little dated, since it shows a smaller CLO market
size but it gives a good idea of who buys what:
The key bit: what do banks own? They are the ones that have to be saved even when they do
really dumb things; the other players are supposed to be savvy investors who can take
losses.
You can see that banks are the big owners of the AAA tranches, which have shown over time to
have enough loss protection that you'll get all your money. And they are listed third as owners
of other investment grade tranches, which means they are less important players than insurers
and money managers.
CLO holdings at U.S. banks increased by roughly 12% in 2019, to $99.5 billion, with a
number of banks growing their CLO securities exposure by double-digit rates, according to
year-end filings with the Federal Reserve .
What is perhaps most striking about the results is the high degree of concentration of CLO
debt inside the three banking entities, relative to the rest of the banking sector. At $80.2
billion, the three largest holders make up nearly 81% of all U.S. bank CLO holdings.
However, the size of CLO holdings as a percentage of the top-three banks' investment
portfolios is relatively small. For JPMorgan Chase, Wells Fargo, and Citigroup, CLOs as a
percentage of total securities on book are 7.5%, 6.9%, and 6.0%, according to Y-9C data.
Now, at just under $100 billion, total U.S. bank exposure represents roughly 15% of the
$675 billion CLO market. Assuming that U.S. CLO AAA supply is around $400 billion and that
most of U.S. bank CLO holdings are AAA, then U.S. banks can be said to hold roughly 25% of
all AAA supply, according to researchers from Wells Fargo.
Japanese banks can also be expected to hold near the same amount, or around 25% of the
total AAA supply of U.S. CLOs, according to Wells Fargo.
So who is at risk? Apparently the equity tranche, the bottom 8.5% in the chart above:
Waterfall of payments in CLOs, via Morgan Stanley, which estimates that 85% of outstanding
CLOs in the U.S. may fail their junior over-collateralization (OC) tests as leveraged loans
default. pic.twitter.com/cx2GFlAXL5
To translate: securitizations have risk buffers in the form of overcollateralization and
excess spread. "Overcollateralization" results from the fact that the loans in a securitization
have a higher principal amount that than the total par amount of all the tranches. Say $100 of
loans have $103 of loans. The $3 is the overcollateralization and the CLO documents describe
who gets how much benefit from it. 2
What the tweet is saying is that the losses on the loans look like they'll get to be high
enough that the equity layer in some (many? most?) CLOs will stop getting interest payments.
But again, why should we care? If all the equity tranches stop paying out, that was shy of $60
billion in par value. And it's not a total bust since they got payments in full before their
investment crapped out. And the owners are primarily hedge funds. This is just not worth
getting lathered up about, particularly in comparison to all the other exploding
loss-bombs.
Likely Reason for the Financial Times' Hyperventilating
Despite being a "Long Read," meaning it presents itself as having more reporting behind it
than a typical story, it's remarkable to see the Financial Times duck the real story, private
equity leverage, which predictably leads lots of lenders holding the bag at the end of every
financial cycle.
And the article also sidesteps another key question: did CLOs make the situation worse than
the old-fasioned approach of syndicating leveraged loans (which foreign banks took down in size
in the first LBO wave in the 1980s)? Quite honestly, I suspect you can argue it both ways. On
the one hand, unless the benefit of CLO risk slicing and dicing went entirely to the sponsors
and packagers (possible), investors presumably were willing to accept lower interest rates to
get more finely tuned risk exposures. That would somewhat lower the cost of private equity
lending, but it's not clear that this made anything more than a marginal difference.
3
On the other, CLOs per the discussion above really did move a lot of the risky exposures out
of the hands of usually self-destructive banks and over to investors who bill themselves as
sophisticated and able to take risk.
The Financial Times account does provide market size (using JP Morgan data, which gives a
slightly higher level that S&P did), albeit a bit of the way into the piece, but no
distribution of exposures by rating or who the various investors are. And before the authors
get to that, they hand wring over a debt restructuring of medical staffing company Envision
Health. As vlade pointed out by e-mail:
The headline is fearmongering and a lot of comments lapped it up.
Thinking about it, the picking of the health company and saying how it's going to suffer
is also there, implying "if you don't bail out the debt, look at how bad things will
happen."
Vlade is not exaggerating. The article waves the "saving us from coronavirus" flag:
In the midst of a global pandemic, emergency rooms across the US have fallen strangely
quiet as patients with other illnesses have stayed away for fear of contracting Covid-19. As
a result, one of the surprising corporate casualties of the coronavirus crisis could be some
of the companies that provide staff for hospitals.
Envision, one of the largest medical staffing companies, completed a restructuring of its
roughly $7bn of debt this month as it moved to stave off bankruptcy.
US readers of this site know better than to see Envision as a good actor. As we've written
several times, based on the gumshoe work of private equity expert Eileen Appelbaum, KKR-owned
Envision and Blackstone's Team Health have been lead players in the "surprise billing" and
other price gouging schemes. The fact that Congress and some states have been working on
legislation to end surprise billing is why Envision's bonds are in trouble. And that reaction
also shows how important the fleecing is to the company's bottom line.
In fact, one has to wonder if the Envision staffing cuts mentioned later in the piece are a
shot across legislators' bows: "Nice ERs you have. Shame if something were to happen to
them."
This chart also serves to exaggerate how bad things are:
The viewer's eye naturally goes to the top line, for the BB tranches the yields have risen
the most. Those BB instruments are a mere 3-4% of the total value of the CLO market!
They are rounding error. By contrast, the AAA tranches are yielding pretty much what they did
in later 2019. Yes, they aren't trading the same as other AAA instruments, but seasoned
structured credit investors ought to know that these AAA creations can and often do trade down
in crises, unlike Treasuries and government guaranteed credits.
Moreover, eyeballing the charts, yields have improved since mid-late April, meaning
investors are less edgy, when even then, Reuters reported that new CLO deals were getting done
on reasonable terms.
From an April 22 story :
There has been US $39.4bn of US CLOs arranged this year through April 19, inline with the
US$38.7bn sold during the same period last year, according to the data from LPC, a unit of
Refinitiv. A record US$128.1bn of US CLOs was arranged in 2018.
US CLO issuance this year has been challenged as spreads on Triple A tranches, the largest
and most senior piece of the funds, have continued to widen, hitting an average of 136.2bp in
March, slightly tighter than the more than two-year wide of 138bp in February, according to
the data. The wide spreads can cut into returns paid to equity holders, who are paid last
after all other debtholders receive their distributions, and may cut into overall
issuance.
"Spread levels on US CLOs still look relatively attractive compared to other securitized
products and corporates," Collin Chan, a CLO strategist at Bank of America Merrill Lynch,
said in an email
"Although the arbitrage for new-issue deals has compressed, (CLOs) are still getting done
because equity investors still find the levels acceptable," Chan said. "Insofar that we do
not see significant spread tightening in the loan market while CLO spreads stay wide,
dealflow could certainly continue."
Now as the Financial Times article points out, some CLOs are more wobbly:
More than 100 CLOs were failing at least one trigger brought on by escalating triple C
loans, according to April data compiled by Barclays, with 40 failing tests for their triple B
rated tranche or higher -- debt that is regarded as investment grade. Twelve have also failed
tests up to the double-A rated tranche, according to BofA.
It's hard to know how significant this is without having dollar values. The Financial Times
also warns that one-third of the BBB tranches are on review for a downgrade, but again, I find
it hard to be sympathetic. If you bought BBB paper, you knew there was decent risk it would
decay into junk. However some of these bonds are held by life insurers, who are restricted in
how much they hold in non-rated/non-investment grade assets. They usually max out that bucket
with real estate. So if their BBBs get downgraded, they'd probably have to sell.
So why all this unseemly whining? The most obvious explanation is that the Fed isn't doing
much for CLOs. One has to wonder if money men have been playing up how bad things supposedly
are to get more rescue money.
From the Wall Street Journal on April 22 :
The Federal Reserve will lend $2.3 trillion to support the economy The Fed excluded some
securities tied to corporate loans and commercial real estate that were among the newest,
fastest-growing segments of the bond markets
The [$100 billion] TALF program won't include the vast majority of a popular structured
security known as a collateralized loan obligation, which is made up of corporate debt
generally used to finance buyouts. The program does include so-called static CLOs which don't
allow for reinvestment of loan proceeds, but those account for only a small share of the
market. The vast majority of CLOs allow such reinvestment and aren't included.
The central bank threw some small additional bones to the CLO market earlier this week, but
still left most CLOs ineligible.
From Bloomberg :
The Federal Reserve revised its Term Asset-Backed Securities Loan Facility to allow CLOs
that hold a broader range of leveraged loans to be used as collateral.
The Fed will now accept new AAA CLOs with leveraged loans, including refinanced loans,
that priced as far back as January 2019, according to a statement Tuesday on the central
bank's website. Previously, eligible collateralized loan obligations could only hold
newly-originated loans .
Yet the changes will only go so far, market watchers say. The terms still require eligible
CLOs be static vehicles wherein managers can't actively trade the loans underpinning the
deals, a structure that makes up only a small portion of the market.
It is really a shame to see what has happened to the Financial Times. It was the only major
media outlet before the crisis where quite a few writers, particularly Gillian Tett but also
John Authers, Martin Wolf, and John Dizard, saw that risk was being underprices across all
credit markets and sent clear warnings that things could end very badly, when the US financial
press was uniformly in la-la land.
Since the crisis, the paper has gone firmly neoliberal, and perhaps due to the lack of time
to do reporting on top of being now the US editor, Tett veers from doing extremely insightful
pieces reminiscent of her glory days as capital markets reporter, to doing far too many
articles that have all the hallmarks of her having spent too much time with people talking
their book. Similarly, this CLO article does show the authors did a lot of legwork, yet somehow
missed or chose not to address the most important questions.
_____
1 And remember, at least so far, we don't have evidence of widespread lending
fraud, a big feature of the subprime mania. However, a key difference is that with
mortgage-backed securities, the mortgages are transferred through several intermediaries to a
trust and they stay there. Certificates are then sold that represent the rights to interest and
principal payments made to that trust. With CLOs and CDOs, they can be "static" meaning the
loans (or RMBS tranches) are set at the get-go and don't change, or "active," meaning a manager
can trade assets in and out from time to time, subject to overall restrictions. Most CLOs are
active.
2 I haven't seen any actual CLO documents, so some of my interpretations from
CDOs and RMBs may be a bit wide of the mark. RMBS had distinct waterfalls for principal and
interest payments. This chart covers only interest payments. It doesn't mention that the deals
almost certainly had "excess spread", meaning that loans that paid, say, an average of 7.5%
across the CLO would have total interest payments of only 7.2% across all CLO tranches. This
chart presupposes that the excess spread is already gone and required interest payments are at
risk, so the equity tranche takes the hit first.
The article does have good detail on this issue. Basically, downgrades of loans are
producing breaches of collateral quality tests, and that looks set to cut interest payments to
the equity layer:
Typically, CLOs are permitted under their own rules to hold up to 7.5 per cent of their
assets in triple C rated debt. If they stay within this threshold then managers of the CLOs
can treat the loans they own as if they are worth 100 cents on the dollar.
This is because when a CLO is created, the underlying portfolio of loans is larger than
managers need to pay off debt investors. This is known as over-collateralisation. So long as
the number of loans that are near to defaulting remains below the 7.5 per cent threshold, the
portfolio is treated as though there will be enough money left at the end to pay
investors.
However, if a CLO exceeds its triple C bucket, as many now have, then the lowest priced
loans above the threshold are required to be valued at a market price. In a crisis, with loan
prices having fallen sharply, this lowers the overall value of the portfolio of loans
reported by the CLO. That in turn can impact how investors are paid.
If the value of excess collateral slips by more than a few percentage points, managers
typically first cut off 50 per cent of any interest payments on the underlying loans that
would have gone to equity holders and use it to buy more loans, with the aim of increasing
the value of the portfolio and correcting the breach.
If the value of the underlying loans falls further, then all money is cut off to equity
investors. That money is used not only to pay interest to debt investors but to start paying
back the principal of the debt, beginning with the triple A rated bonds.
3 Even if private equity firms could achieve somewhat higher leverage levels,
that's not a big bennie. Private equity has for many years been sitting on tons of "dry
powder," meaning uncalled capital. So their equity isn't a scarce commodity. Thus the gain is a
marginal decrease in interest charges. Helpful but hard to see as significant.
The article is actually fascinating case of journalism.
It's obvious it's a reasonably well researched and all, but the main conclusions (CLOs
will kill us all, and securitised products per se are nuke equivalents) it draws (which are
actually not spelled out in the article as explicitly as in the headline) are just
nothingburgers when it could have been a great article on the PE leverage and how it makes
the current economic crisis worse.
One has to wonder whether the authors are dumb (unlikely, as the article has a lot of
detail), naive, or actively shilling for the investors (remember, FT is now owned by Nikkei,
and largest CLO holder is a Japanese bank) or some combination.
I know some of the FT's journalists. From conversations with them over the past dozen
years, your final phrase is spot on.
Shilling is probably the main cause. Why? Some of the younger journalists see colleagues
like Martin Wolf, Gillian Tett and Rana Foroohar on the celebrity circuit, appearing on talk
shows and at Davos and getting commissions from publishers. They wish to join these circles,
but financial institutions and other investors are gatekeepers, so they must cooperate.
If they can't join that celebrity circuit, they can advise governments and lecture at
Harvard like Camilla Cavendish, who never stops bragging about being responsible for the UK's
sugar tax and wagging her upper middle class finger at us plebs, or they can head public
affairs at big corporations or act as public relations advisers to oligarchs.
There are two classes of journalists at the FT. It does feel class based. There are the
reporters on the daily output, e.g. the banking team, and the weekly shills like Simon Kuper,
Robert Shrimsley and Jim Pickard.
Editorial control is more tightly exercised by Nikkei as time goes on.
Do you remember the FT's expose of the Presidents' Club a few years ago? That gathering
had been going on for thirty years and was an open secret. In order to show its right on
credentials and target a new readership, the FT deployed a dozen plus hacks, well, hackettes,
to infiltrate the gathering.
I'd add another class to the FT journous – FT Alphaville. For me, FTA is the only
part of FT worth reading. Paradoxically, it's the only one that's free.
As a regular reader of FT Alphaville and a subscriber to FT itself, I have to agree with
Ives' and vlade's observations on what once was a reasonable mainstream paper. They have
drunk the kool-aid.
But don't give up totally on the comments, there're plenty of ankle biters out there.
So I will put my quibbling hat on, and I should prophylactic-ally note I pretty much agree
with everything you wrote subject to a couple of caveats.
I wrote something up as a consultancy exercise on this early last year, which is why I am
under the misapprehension that I know a little about it. Also I know Mr. Rosner has been all
over this subject for a year, at least! Indeed definitely longer. Indeed Mr. Rosner has been
warning about the risks associated with this, and the BDC-type lending for quite some time!
But that is his "victory lap" to take.
1) BoE estimated global leveraged loan market as being around $3.2bn. They would have
agreed with Guggenheim about around 45%-50% of that market being CLOs. So its probably a
bigger market than S&P estimated. I think the BIS suggested $2.4bn for LL and once again
about 50% of that being CLOs. I suspect S&P were looking at only North America. But I
would still have guessed that $600bn number is too small. Europe?
2) Lobbying for free money! Yup, thats exactly why you hire financial PRs. If everyone
else is getting bailed out then, the Fin PRs need to show they are doing something. Call
Tracey Alloway! I am told the trade groups in DC are lobbying like crazy on behalf of the
shadow banks too! MBS REITS etc.
3) Totally agree re private equity being behind the push to rescue these guys. Personally,
I think they do have a nasty problem. The underlying leveraged loans need to eventually be
refinanced. If you deplete the pool of equity in the deals you will struggle to find more.
The CLOs will enter run-off mode and will not participate in new financings. That will happen
around 7.5% CCC content. The PE guys desperate need the CLOs to remain alive. In this kind of
structured credit, a shortage of any type of credit, either equity, mezz or one of the higher
credit tranches will kill new or rollover deals. So if you want to prevent a cascading series
of defaults resulting in pretty much ALL CLOs going into runoff mode, then you need the Fed
to step in.
4) Vlade is right. Japan in the form of Norinchukin or Japan Post own about 10% of all the
AAA tranches. The FSA did a review and suggested they lighten up a while back. Last time i
looked they had been doing so the glacial way, by allowing maturities to slowly reduce their
position.
It looks a lot like a death spiral too me.
All that said, I have a very tiny violin in my hands. While I dont blame our PE overlords
for trying to steal more money from the tax payers, I dont know why the tax payer should play
ball. Apologies for the inevitable typos and forgive if I have misunderstood or misreported
myself.
I think the whole CLO market is around 1trln (give or take a few hundred bln). So still a
small fraction of say junk bonds market, or even RMBS market.
The important thing is as Yves notes, in 2008 the RMBS market was overlaid by massive
derivative positions. I'm not aware of the CLO derivative market being there much. I know
that 15 years ago you had a lot of synthetic CLOs, but those went out of favour as the CDS
market liquidity (and especially CDS on leveraged loans) evaporated. They did start coming
back a bit, not still nowhwere near the glory days of 2005-6.
Anything with a substantial leverage will kill the financial system. Conversely, only a
few things that are not levered will.
My worry on EU banks are actually covered bonds. If the EU RE market tanks, it would kill
covered bond markets where they often require 80 or better LTV in the pool. And covered bonds
are a crucial funding vehicle for a lot of EU banks, so the states would have to step in (if
they were allowed to).
Working for two of the scummiest originators, I know well about the two Japanese banks you
name. For some reason, they allow another Japanese securities house to advise them into this
abyss.
Because interest rates should be indicative of risk – at least I think that is how
it used to work – then no bail for investors as all risk can have loss and total loss
at that.
The reason the last crisis was so bad in 2008 was, in my opinion and for the reason as
follows –
All business, all consumers, all people need certain basics to survive – Food –
Water -Shelter and Land upon which to do all the above.
-- -- So with all the lending – as much as possible then and today with PE and
leverage; risk be damned as they knew bailouts would be used in that great con and it's new
version of the old today- -- Its only outcome was to raise the cost of housing – rent
(land), business overhead, farm land prices thus products therefrom and everything produced
on the planet (people playing the real estate game and realtors and all associated, wrongly
believed they were gaining wealth but – it was zero gain because if you wanted to
continue living you had to pay the higher costs wrought by the great con game – this
con perpetrated by financial puffers and criminals – aided by many of the rest of us
who were conned into thinking this great inflation of assets was and is the only way –
the brave, heroic, patriotic – survival of the fittest, smartest, hard earned way to
get ahead – and be damned those who didn't jump on board the great gravy train robbery
–
Of course, as this is all now the norm, and all made proper by great grants made to the
institutions of higher learning (to make sure the proper economic and finance learning is
taught) and larger grants made to the institutions of government (to make sure the proper
economic and financial governing is practiced) so the rest of can be assured that the
criminals the corruption and fraud is protected by law and the aristocracy is free to do as
they wish – as of course is their inherited right.
So the planet burns and a virus is showing us how the (current false definition) Free
Market has – and continues to screw the vast majority of the planet out of the
planet.
I hope that more people really start to examine and propose alternatives to the current
FIRE sector Free Market which is and continues to be the true and only impediment to solving
the worlds problems IE sixth extinction event and global geochemical disaster (global warming
is one).
I propose taxing the crap out of rentier activities and financial predation – Tax
the crap out of those things known to cause asset price inflation and are destructive to the
planet and raise the cost of living.
The Free Market needs to mean Free From Rentier, Preditory, and Unnecessary overhead
tolls.
Currently the negative is taxed lightly and the positive is burdened –
Switch the burdens around and the easy money would be made by doing the right thing –
it would make earning money through financial predation much more difficult.
Anyway – some random thought to chew on –
And yes – should investors ever take losses on money lent on interest? – sure
they should – why I thought that is why interest was charged – shows ya how
little I know.
And if investors take losses based on False Warranties and Representations made by the
financial engineers – well let them engineers make it up to the investors –
instead of what happened in 2008 when Obama (I voted for him which makes me a sucker) saved
em from pitchforks.
Hi all, this one is right in my wheelhouse as I spent 10+ years working for one of the big
CLO Trustees.
Yves' take is generally correct. What I find most comforting is that there was never a
return of structures that incorporated a ton of CDS contracts. In fact, I haven't seen any
kind of return of CDS contracts at all. Good riddance! Those things were poison!
Lehman did a ton of those pre-crisis and when they went bust, they left a big legal and
financial mess as the deals couldn't function without Lehman in the middle of them. They had
way too many conflicting roles. I suspect a lot of them were created for Lehman to lay off
risk onto their wealth management customers and other marks.
CDSese trade, especially the indices and names that are in the indices, but those
generally tend to have a fairly liquid underlying bond market. And the overall CDS market is
fraction of what it used to be.
Fortunately though the more idiotic CDSes (like the LCDS – CDS on leveraged loans)
are gone, and as you say, the synthetic CLOs too..
Thank you for these details. A little surprising. And as if I didn't already hate PE
enough. One of the surprising things is that the Fed did actually show some restraint. I hope
it holds. I think we need to emancipate PE from the Market altogether.
Economics, the time line:
Classical economics – observations and deductions from the world of small state,
unregulated capitalism around them
Neoclassical economics – Where did that come from?
Keynesian economics – observations, deductions and fixes for the problems of
neoclassical economics
Neoclassical economics – Why is that back again?
We thought small state, unregulated capitalism was something that it wasn't as our ideas
came from neoclassical economics, which has little connection with classical economics.
On bringing it back again, we had lost everything that had been learned in the 1930s, by
which time it had already demonstrated its flaws.
The Mont Pelerin society developed the parallel universe of neoliberalism from neoclassical
economics.
FDR saved capitalism from itself with the New Deal.
Many right wingers weren't happy about this at all and longed for the good old days when they
had the economic freedom to make lots of money and bring capitalism to its knees.
Of course, they didn't take any responsibility for the problems they had caused and they
plotted to get back to the way things had been before.
In the 1980s they succeeded, but all the old problems would re-emerge.
As a CEO, I can use the company's money to do share buybacks, boost the share price, cash
in my share options and get my bonus.
Share buybacks were found to be a cause of the 1929 crash and made illegal in the 1930s.
What lifted US stocks to 1929 levels in 1929?
Margin lending and share buybacks.
What lifted US stocks to 1929 levels in 2019?
Margin lending and share buybacks.
A former US congressman has been looking at the data. https://www.youtube.com/watch?v=7zu3SgXx3q4
At the end of the 1920s, the US was a ponzi scheme of over-inflated asset prices.
The use of neoclassical economics and the belief in free markets, made them think that
over-inflated asset prices represented real wealth accumulation.
1929 – Wakey, wakey time
Let's have another go.
Oh blimey, it's still the same.
Why did it cause the US financial system to collapse?
Bankers get to create money out of nothing, through bank loans, and get to charge interest on
it.
https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf
What could possibly go wrong?
Bankers do need to ensure the vast majority of that money gets paid back, and this is where
they keep falling flat on their faces.
Banking requires prudent lending.
If someone can't repay a loan, they need to repossess that asset and sell it to recoup that
money. If they use bank loans to inflate asset prices they get into a world of trouble when
those asset prices collapse.
As the real estate and stock market collapsed the banks became insolvent as their assets
didn't cover their liabilities.
They could no longer repossess and sell those assets to cover the outstanding loans and they
do need to get most of the money they lend out back again to balance their books.
The banks become insolvent and collapsed, along with the US economy.
When banks have been lending to inflate asset prices the financial system is in a
precarious state and can easily collapse. "It's nearly $14 trillion pyramid of super leveraged toxic assets was built on the back of
$1.4 trillion of US sub-prime loans, and dispersed throughout the world" All the
Presidents Bankers, Nomi Prins.
When this little lot lost almost all its value overnight, the Western banking system became
insolvent.
Western taxpayers had to recapitalise the banks and make up for all the loses the bankers had
made on bad loans they had made to inflate asset prices.
Free market thinking split into two separate paths in the 1930s.
We took the wrong path.
In the 1930s, Hayek was as the London School of Economics trying to put a new slant on old
ideas, while the Americans were working out what had gone wrong in the 1920s.
The University of Chicago had worked out what had gone wrong with free market thinking
before, but we followed Hayek who hadn't.
In the 1930s, the University of Chicago realised it was the bank's ability to create money
that had upset their free market theories.
The Chicago Plan was named after its strongest proponent, Henry Simons, from the University
of Chicago.
He wanted free markets in every other area, but Government created money.
To get meaningful price signals from the markets they had to take away the bank's ability to
create money.
Henry Simons was a founder member of the Chicago School of Economics and he had worked out
what was wrong with his beliefs in free markets in the 1930s.
Banks can inflate asset prices with the money they create from bank loans.
https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf
Henry Simons and Irving Fisher supported the Chicago Plan to take away the bankers ability to
create money. "Simons envisioned banks that would have a choice of two types of holdings: long-term
bonds and cash. Simultaneously, they would hold increased reserves, up to 100%. Simons saw
this as beneficial in that its ultimate consequences would be the prevention of
"bank-financed inflation of securities and real estate" through the leveraged creation of
secondary forms of money." https://www.newworldencyclopedia.org/entry/Henry_Calvert_Simons
Real estate lending was actually the biggest problem lending category leading to 1929.
Richard Vague had noticed real estate lending balloon from 5 trillion to 10 trillion from
2001 – 2007 and went back to look at the data before 1929.
Henry Simons and Irving Fisher supported the Chicago Plan to take away the bankers ability
to create money. "Stocks have reached what looks like a permanently high plateau." Irving Fisher
1929.
This 1920's neoclassical economist that believed in free markets knew this was a stable
equilibrium. He became a laughing stock, but worked out where he had gone wrong.
Banks can inflate asset prices with the money they create from bank loans, and he knew his
belief in free markets was dependent on the Chicago Plan, as he had worked out the cause of
his earlier mistake.
Margin lending had inflated the US stock market to ridiculous levels.
" . they plotted to get back to the way things had been before."
I've got a good idea, you'll like this.
You can attract modern liberals to dodgy, old, 1920's neoclassical economics if you bolt on
identity politics.
Inequality exists on two axes:
Y-axis – top to bottom
X-axis – Across genders, races, etc ..
The traditional Left work on the Y-axis and would be a problem as you want to increase Y-axis
inequality.
The Liberal Left will work on the X-axis.
You can increase Y-axis inequality while the Liberal left are busy on the X-axis.
The 1930's solution of the Chicago Plan was one way of keeping bank credit out of the
markets.
There are other ways.
You could use the corset controls the UK used before 1980.
This kept bank credit away from financial speculation and debt grew with GDP.
https://www.housepricecrash.co.uk/forum/uploads/monthly_2018_02/Screen-Shot-2017-04-21-at-13_53_09.png.e32e8fee4ffd68b566ed5235dc1266c2.png
Before 1980 – banks lending into the right places that result in GDP growth (business
and industry, creating new products and services in the economy)
Debt grows with GDP
After 1980 – banks lending into the wrong places that don't result in GDP growth (real
estate and financial speculation)
Debt rises faster than GDP
OR ..
Richard Werner worked out what went wrong in Japan.
The BoJ used to use window/credit guidance to steer bank credit away from financial
speculation and towards business and industry.
This was the basis for all the Asian Tiger economies, until they discovered financial
liberalisation and the Asian Crisis followed shortly after that.
OR ..
Germany uses small non-profit banks that are very local to communities and businesses.
There is no gain from financial speculation and they are closely tied to the people they
serve.
Awesome piece, Yves! Remember your outstanding work from 10 years go) Couple of
questions:
1. Dont you think the derivatives will be a problem again? This time due to corporate credit
risk and FX moves? CDS exposure to GM, GE, Ford is many times their cash debt and should they
go down (even if the Fed holds bonds) the CDS losses could be in many trillions if we account
for all possible corporate defaults. Also, FX derivatives notional is orders of magnitude
larger than credit one and large swings in euro/dollar etc could also kill a lot of
players.
2. Isn't PE in trouble? Some of them are clearly OK but is it really true that all of PE
players are sitting on mountains of cash? I am far from this market, could anybody opine on
which PE firms could be hurt?)) TIA!))
apenultimate
on Thu, 05/14/2020 - 9:50am The past week's unemployment claims came out today, and add
another 2.98 million to the pile. This brings total unemployment claims for the past 8 weeks
(two months or so) to 36.5 million.
Determining unemployment percentages depends on what data you use. The Bureau of Labor
Statistics (BLS) shows the employment numbers for the United States in August 2019 as ~157
million ( https://www.bls.gov/cps/cpsaat08.htm ). Admittedly,
that's not March 2020 statistics, but employment numbers would not change all that much in half
of a year.
The St. Louis Federal Reserve has a different set of statistics that show 205.5 million
Americans employed in March 2020 ( https://fred.stlouisfed.org/series/LFWA64TTUSM647S
). (They show the August 2019 period with employment at 206 million.)
Why the huge difference? I have no idea. But going forward, I'll use both to determine
unemployment numbers. Remember that in early March 2020, unemployment was already around
3%.
Using the BLS statistics, we get an unemployment rate of 23.16% for the past 8 weeks. Add on
the previous 3% of people unemployed, and you reach 26.16% unemployment.
Using the St. Louis Fed statistics, we get an unemployment rate of 17.76% for the past 8
weeks. Add on the previous 3% of people unemployed, and you reach 20.76% unemployment.
The peak rate of unemployment during The Great Depression was 24.9%. The peak rate of
unemployment during the the Great Recession in 2008 was 10%.
According to BLS statistics, we are already greater than Great Depression unemployment
numbers.
According to the St. Louis Fed, we are already more than double Great Recession numbers and
only about 4 percentage points away from Great Depression peaks.
The Labor Department last week reported April unemployment for the United states at 14.7%,
but this according to their own admission was undercounting the real rates. Be careful of any
numbers coming out of the mainstream media or government sources.
Some jobs will definitely come back, but many will not. For example, JC Penny's reported
that they are permanently closing 200 of their 850 nationwide stores. Those jobs will not be
coming back. There are weekly reports of many cafes, restaurants, and small businesses
shuttering their doors for good. Those jobs will not be coming back.
Even for the companies that do not shut down, it may be a long haul before economic activity
has picked up enough to bring workers back. In most cases, it will not be a quick recovery.
Hang on for a very rough ride. 2 users have voted.
• Headline April 2020 Unemployment Really Was Around 20%, Not 15%
• Bureau of Labor Statistics Disclosed Erroneous Unemployment Surveying for a Second
Month
• About 7.5 Million People in the April Household Survey Were Misclassified as Employed
Instead of Unemployed, per the BLS
• Headline April U.3 Unemployment at 14.7%, Should Have Been 19.5%
• The BLS Had Disclosed the Same Surveying Error Last Month; Where Headline March 2020 U.3
Was 4.4%, It Should Have Been 5.3%
• Per the BLS, Headline Data Will Not Be Corrected: "To maintain data integrity, no ad hoc
actions are taken to reclassify survey responses."
• Nonetheless, Headline April Unemployment Soared to Historic Highs from March: U.3 from
4.4% to 14.7%, U.6 from 8.7% to 22.8% and ShadowStats from 22.9% to 35.4%
• More Realistic, Those Same Unemployment Numbers, Corrected: U.3 from 5.3 % to 19.5%, U.6
from 9.6% to 27.7% and ShadowStats from 23.7% to 39.6%
• April 2020 Payrolls Collapsed by an Unprecedented 20.5 Million Jobs
• Annual Growth in April 2020 Money Supply Measures Soared to Historic Highs
• U.S. Economic Activity Has Collapsed to Great Depression Levels, with the Federal
Reserve Creating Unlimited Money
stated in the very beginning of this video, that of people who were employed in February of
this year, nearly 40% of those earning $40,000 or less have become unemployed. This is an
unprecedented human tragedy that Congress in all their bailouts now totalling about $8 Trillion
have seen fit to throw a one time pittance of $1,200. With mountains of cash going to
corporations and lobbyists, Congress insultingly gave real suffering Americans a few pennies
and in effect told them that their lives do not matter to Washington DC.
I am still highlighting these because of their leading nature for the economy overall. These
were uniformly very negative:
the average manufacturing workweek fell -2.1 hours from 40.4 to 38.3 hours. This is one
of the 10 components of the LEI and will be a big negative.
Manufacturing jobs fell by 1.3 million. Manufacturing has lost 1.364 million jobs in the
past 2 months.
construction jobs fell by -975,000. In the past 2 months 1.08 million construction jobs
have been lost.
Residential construction jobs, which are even more leading, declined by -117,600. In the
past two months together there have been -119,200 lost jobs.
temporary jobs declined by -842,000.
the number of people unemployed for 5 weeks or less rose by 14.3 million.
Professional and business employment fell by -2.128 million, or -10.0% for the
month.
Amateur Socialist , May 9, 2020 8:43 am
This disaster is only getting started. Uncertainty regarding employment stability is
hitting health care workers. In the middle of a worldwide pandemic. People with relatively
secure jobs are wondering about their families and loved ones needing additional support.
Which will continue to limit discretionary spending and on it goes.
"Debts which cannot be repaid will not be repaid" as Michael Hudson has been warning for
decades. The thing about capitalism is that it works fine as a theory but it's just not
practical in the real world. The one that includes humans who are not economists.
the virus results to the population pale in comparison to the economic/social aspects.
We now know far more about Covid19 – the Lockdown should end
Gottlieb pointed to a study, which
has not yet been peer-reviewed, that examined outbreaks in 320 Chinese cities outside Hubei
province, where the coronavirus is believed to have originated, between Jan. 4 and Feb. 11 and
found only one outbreak that occurred outdoors.
But we digress: Blankfein actually made some good points about the situation facing the
American economy during one of his longest and most casual interviews since leaving Goldman
more than a year ago. The notion - pushed by CNN, MSNBC, etc - that President Trump is picking
'saving the economy' over 'saving lives' isn't really accurate, Blankfein explained, because -
and he's parroting an argument made by
an actual real-life ER doctor here - leaving the economy and more importantly the
health-care system closed for months risks serious repercussions for the public health.
"It's really health vs health, because poverty, GDP is really a health issue," Blankfein
said.
When I was in Sweden last summer, I was perplexed how unhealthy many Swedes look. The picture
in Denmark was completely different. Curiously, the Covid-19 incidence rates in Denmark, Norway
and Sweden mostly mirror my (superficial and subjective) impression of the health of the citizens
of these countries. Lots of obesity in Sweden, lots of cyclists in Denmark.
here are the numbers of deaths " due" to corona in Switzerland .
00 -19 years old 0 death
20 -29 years old 1 death
30 -39 years old 4 deaths
40 -49 years old 2 deaths
50 -59 years old 23 deaths
60 -69 years old 84 deaths
70 -79 years old 243 deaths
80+ years old 776 deaths
Total for that country 1133
"Lifting all boats" was always a lie. It was simply a way to sell trickle down by claiming
that the objectively observable inequality it produced would somehow help everyone,
eventually, sort of. There was not and has never been a plan by the Conservative Movement to
lift all boats. Only a plan to feign interest in doing so.
I see the current situation more like the sinking of the Titanic (whether caused by the
virus or shady financial dealing, it doesn't matter). The rich passengers get the lifeboats
and the rest of the passengers get the ice water. A few survived in the water, so it's time
to look to the future. Crony capitalism in a nutshell.
"... It should be obvious that if leverage is used to fund the purchase of financial assets those assets will inflate in price greatly. If the leverage is not used for financial assets and is used instead for funding new production then financial assets stay in proportion to GDP. That is of course currently the fundamental weakness in western economies. ..."
When augmented with leverage, the exponential dynamic inherent in debt guarantees that
financial value runs away far ahead of any amount of GDP implied.
_________________________________________________
You changed the subject slightly.
It should be obvious that if leverage is used to fund the purchase of financial assets
those assets will inflate in price greatly. If the leverage is not used for financial assets
and is used instead for funding new production then financial assets stay in proportion to
GDP.
That is of course currently the fundamental weakness in western economies.
So when firms issue bonds and use the money to buy back their own stock then stocks become
over-inflated while obviously production stagnates. That practice used to be illegal and will
likely become illegal again when the recent damage this practice is eventually realized.
You are correct that the boom and bust cycles that are the direct consequence of the
instability that results from the mismatch of financial assets to productive assets is the
mechanism, for those who can take advantage of it, to transfer wealth from others to
themselves.
But just like a virus if the parasites become too lethal to the host the parasites will die
also.
The International Labour Organization (ILO) has warned that
around half of the world's workforce, or 1.6 billion workers, are at imminent risk of losing
their livelihood because of the economic impact of the coronavirus pandemic. In its latest
report, the UN agency stated that those hardest hit by the financial effects of the Covid-19
outbreak have been 'informal economy' workers, including the self-employed and those on a
short-term contract.
"The first month of the crisis is estimated to have resulted in a drop of 60 percent in
the income of informal workers globally," the ILO said of the economic damage already
caused by the pandemic.
The deepening crisis in many parts of the world has left more than 436 million businesses
facing financial hardship and possible closure, the ILO stated, which will inevitably hurt
workers. The report listed the worst-hit sectors as manufacturing, accommodation and food
services, wholesale and retail trade, and real estate.
"For millions of workers, no income means no food, no security and no future," ILO
Director-General Guy Ryder said of the stark impact of an economic dip.
He added that, according to ILO data, there is expected to be a "massive" rise in
poverty levels worldwide, unless governments recognize the need to reconstruct their economies
around better working practices and "not a return to the pre-pandemic world of precarious
work for the majority."
Since the novel coronavirus emerged in China late last year, over 3.1 million cases have
been confirmed around the world, and more than 216,000 people have died. Drastic lockdowns to
limit its spread have taken a dire toll on the global economy, prompting market turmoil and
numerous projections of the heavy recession to strike this year.
"... Hospital chains in USA are in the hands of private equity as are Care Homes and whole swathes of infrastructure. Where PE does not hold the equity, management has simply leveraged to the hilt as at Boeing. Using Debt to fund Share Buybacks is the biggest waste of capital and puts business in run-off like a Mutual Fund. In the time Covid-19 has been in the Media most Western governments could have set up a Manufacturing Facility to produce PPE to any specified design. It is not like starting a space program. ..."
"... The truth is that Politics is full of lawyers - nice schools, nice universities, nice offices with the highest-tech product being a PC and a Webcam. In the days when military service was combat related rather than pen pushing and degree chasing, and people actually knew how trucking functioned and machines ran in factories - it was evident how the command system worked from desk to shop-floor. ..."
"... Today it is all Windbaggery. Failure is too well rewarded and Success easily wiped from the Doers by the Talkers. ..."
"... They wondered if Wuhan was China's "Chernobyl Moment"...- in fact it is the Chernobyl for The Western Societal Model. After all, Wall Street should be able to fix this situation - Masters of The Universe - they are where the Physics grads go to program trading systems - that is where the talented are sucked into the Brave New World. Why hasn't Wall Street solved it. What has Jamie Dimon done - he is always ready with comments ..."
I tend to ignore academic articles contrasting 21st Century pandemics with those in
predominantly agrarian economies centuries ago. They are interesting in their own right but
not prescriptive in any way unless you are obsessed with Labour Theory of Value and Ricardian
Rent Theory.
That the global economy is in deep trouble was evident in 2019 and it is now enduring a
step-change down into the abyss. The frantic 2008 policy of propping up Asset (Debt) prices
with easy liquidity through Bank Money now meets the reality that Main Street is being
poleaxed even more than hitherto.
Hospital chains in USA are in the hands of private equity as are Care Homes and whole
swathes of infrastructure. Where PE does not hold the equity, management has simply leveraged
to the hilt as at Boeing. Using Debt to fund Share Buybacks is the biggest waste of capital
and puts business in run-off like a Mutual Fund. In the time Covid-19 has been in the Media
most Western governments could have set up a Manufacturing Facility to produce PPE to any
specified design. It is not like starting a space program.
The truth is that Politics is full of lawyers - nice schools, nice universities, nice
offices with the highest-tech product being a PC and a Webcam. In the days when military
service was combat related rather than pen pushing and degree chasing, and people actually
knew how trucking functioned and machines ran in factories - it was evident how the command
system worked from desk to shop-floor.
Today it is all Windbaggery. Failure is too well rewarded and Success easily wiped
from the Doers by the Talkers.
They wondered if Wuhan was China's "Chernobyl Moment"...- in fact it is the Chernobyl
for The Western Societal Model. After all, Wall Street should be able to fix this situation -
Masters of The Universe - they are where the Physics grads go to program trading systems -
that is where the talented are sucked into the Brave New World. Why hasn't Wall Street solved
it. What has Jamie Dimon done - he is always ready with comments
Time to Re-Engineer these Societies towards Substance and away from Speculation
"... Polls of life satisfaction taken since the outbreak began have reflected a rapid erosion as 33 million Americans have joined the unemployment rolls over the last months. NY Gov Andrew Cuomo said during a recent daily briefing that NY is seeing a spike in drug and alcohol abuse as people sit around all day with nothing to do and nowhere to go. ..."
"... But of course the tremendous levels of financial uncertainty coupled with the unique characteristics of this crisis make it pretty much impossible to model - any research is really an educated guess, at best. ..."
"... "Unemployment is going to have a very important impact on deaths of despair." ..."
"... His proposed strategies including investing more resources in helping unemployed people find meaningful work, and/or training the armies of contact tracers that de Blasio has now promised to hire to spot people at risk of self-harm. ..."
Doctors ,
scientists policymakers and even 'non-experts' posting on social media have argued that
shuttering the health-care system to all non-emergency care risks sparking other public health
crises from a spike in heart attacks and advanced cancer diagnoses, to so-called "deaths of
despair."
In some
areas, a spike in suicides has already been recorded since the start of the outbreak. And
now, a newly published paper released Friday has attempted to quantify deaths that might occur
because of the mental-health ramifications of widespread economic chaos caused by the crisis.
The research - which hasn't yet been peer-reviewed - found the isolation, grief and economic
hardship related to COVID-19 are conspiring to supercharge America's already-burgeoning
mental-health crisis, likely setting the stage for tens of thousands of suicides down the
line.
Specifically, the researchers tabulated that as many as 75k additional "deaths of despair"
could be caused by the outbreak and the economy-crushing measures implemented to stop the
spreads. "Deaths of despair" typically refer to suicides and substance-abuse-related deaths,
according to
Bloomberg .
The research was carried out by the Well Being Trust and researchers affiliated with the
American Academy of Family Physicians. One of the report's authors said he hopes the research
is eventually proven to be incorrect.
"I hope in 10 years people look back and say, 'Wow, they way overestimated it,'" said John
Westfall, director of the Robert Graham Center for Policy Studies in Family Medicine and
Primary Care, who co-wrote the report.
But the sizable spike in suicides, overdoses etc since the last major crisis (the financial
crisis) is reason to be concerned.
Even as the American economy rebounded after the last recession, suicides and overdoses cut
into Americans' life expectancy. Mental health experts worry that the economic uncertainty and
social isolation of the pandemic will make things worse at a time when the health care system
is already overwhelmed. The suicide rate in the US has already been rising for two decades, and
in 2018 hit its highest level since 1941, Bloomberg reported, citing a piece published by JAMA
Psychiatry (a prestigious medical journal) back in April.
"There's a paradox," said Jeffrey Reynolds, president of a Long Island-based nonprofit
social services agency, the Family and Children's Association. " Social isolation protects us
from a contagious, life-threatening virus, but at the same time it puts people at risk for
things that are the biggest killers in the United States: suicide, overdose and diseases
related to alcohol abuse."
Polls of life satisfaction taken since the outbreak began have reflected a rapid erosion as
33 million Americans have joined the unemployment rolls over the last months. NY Gov Andrew
Cuomo said during a recent daily briefing that NY is seeing a spike in drug and alcohol abuse
as people sit around all day with nothing to do and nowhere to go.
"One of the main things people should take away from this paper is that employment
matters," said Benjamin Miller, chief strategy officer at the Well Being Trust and a clinical
psychologist who worked on the paper. "It matters for our economic livelihood, and for our
mental and emotional health."
But of course the tremendous levels of financial uncertainty coupled with the unique
characteristics of this crisis make it pretty much impossible to model - any research is really
an educated guess, at best.
Still, the researchers believe it's a useful warning, and something important for policy
makers to keep in mind.
"It's useful to have a wake-up call," said Ken Duckworth, chief medical officer at the
National Alliance on Mental Illness. "Unemployment is going to have a very important impact
on deaths of despair."
Benjamin Miller, chief strategy officer at the Well Being Trust and a clinical psychologist
who worked on the paper, proposed several solutions that could be enacted to, uh, depress the
number of suicides.
His proposed strategies including investing more resources in helping unemployed people find
meaningful work, and/or training the armies of contact tracers that de Blasio has now promised
to hire to spot people at risk of self-harm.
Here Is The Real April Jobs Report: 42 Million Unemployed, by Tyler Durden Sun, 05/10/2020 - 15:30
Friday's job report - according to which a record 20.5 million jobs were lost in April, some
10x more than the depths of the Great Depression, resulting in a 14.7% unemployment rate - was
ugly enough as is, the NYT summarizing the catastrophic nature of the economic collapse with
the following creative front page.
The truth, unfortunately is even uglier.
While it is true that what the BLS reported that the April unemployment rate (UR) was less
than expected (14.7% versus consensus of 16.0%) and the drop in payroll employment of 20.5
million was also less than the 22.0 million expected, Standard Chartered bank has calculated
that adjustments to the headline unemployment rate push the effective number of unemployed to
42 million and the effective UR rate to 25.5%, higher even than the U-6 underemployment rate of
22.8%. Worse, if one treats underemployed in line with the U-6 methodology, the true April
unemployment number would rise to an mindblowing 27.5%.
How does one get these numbers? As the bank's chief FX strategist Steve Englander explains,
start with the 23.1 million unemployed as published by BLS. To this add 8.1mn people who have
dropped out of the labor force since February (previously the labor force had been growing
steadily, so these are likely unemployed).
Add back 7.5MM workers classified as 'employed but not at work for other reasons' –
BLS states that these workers are likely misclassified as employed, when they are in fact
unemployed. Involuntary part-time work for economic reasons has gone up by 6.6MM and we treat
these as half-unemployed (i.e., a contribution of 3.3MM).
This totals almost 42 Million effectively unemployed. Keep the civilian labor force
denominator at February's 164.5 million, which results in a 25.5% estimate for effective
unemployment, and if Englander treated involuntary part-time workers as completely unemployed,
the resulting unemployment rate would be at 27.5%.
Commenting on the April BLS report, Englander writes that "bad data for the mid-March to
April period is largely anticipated by investors; these data were neither good nor bad enough
to force investors to adjust expectations." He also expects the May labor data to show
deterioration at a slower pace, but think that investors are looking at the balance between
initial and continuing claims to assess the pace at which reopening would lead to better
labor-market outcomes.
And while a slowdown in the collapse is to be expected - after all, there are only so many
workers that can be fired - don't expect it any time soon. As we first noted on Friday, White
House economic adviser Kevin Hassett - who said
two weeks ago that Q2 GDP would be the biggest negative number since the great depression -
has set the groundwork for an even scariee number next month as the statistics catch up to the
reality, warning that unemployment could hit 20% in May, up from 14.7% in April, or rather down
from the real 27.5% unemployment rate.
" I think just looking at the flow of initial claims, it looks like we're probably going to
get close to 20 percent in the next report ," Hassett told CNN 's "State of the Union" on
Sunday, refusing to admit that the actual number when one eliminates the BLS fudges is already
far higher.
He added that the rate will depend on whether the virus "has really abated" and if economies
are "really going again."
"I would guess middle of summer is when we're going to start to go into the transition
phase," said Hassett, adding that he hopes the third and fourth quarters will bring "very
strong" growth.
"Just looking at the flow of initial claims that it looks like we're probably going to get
close to 20% in the next report," senior White House economic adviser Kevin Hassett says
about US unemployment. #CNNSOTU
pic.twitter.com/bTN85AJaMD
Looking ahead at the May data, Englander is similarly gloomy and warns that initial claims
have totaled 7 million since the April survey week and there is no sign that continuing claims
are turning down due to rehiring or reopening, adding that "at this point it does not look like
May employment data will show improvement or even stability. "
The incoming data look consistent with the baseline UR breaching 20% in May , especially
if the responses on "employed but not at work for other reasons" change.
In summary, the Trump admin is hoping that within a few months the bottom will be in for the
economy, it is also hoping that the official government reports eventually catch down to
reality, and that at some point the two series - the actual economy and how the government
actually represents it - will converge. The question is when, and just how massive the
discrepancy between truth and the "official data" will grow until that happens.
"This [real workers going back to work for their bosses' profits] must happen now, or we
are all doomed."
I really laughed at that.
What is doomed is the American empire. It will take a few years for that doom to play out,
but history books will likely put the date for the demise of the empire back in March.
The burger-flipping servant economy isn't coming back, and it will be decades before
America can rebuild a significant manufacturing economy. Get used to this "Greater
Depression" because it will be with us a while, particularly after the next couple waves
of the covid hit.
Hint: If you don't have a big 75" wall screen TV yet and want one, you might want to make
that investment before the "decoupling" goes any further. They will cost a year or two
salary afterwards.
Even some of the most ardent supporters of the fraud that is Keynesian economics now admit
the entire modern economic system is on the verge of collapse for one main reason: the marginal
utility of debt is collapsing, with ever more debt required to generate an increase in
underlying GDP.
And tied to that, is another reason why any day now the current system may be the last: the
marginal utility of every new QE is now declining to the point where soon virtually none of the
money created by the Fed out of thin air will enter the economy and instead will be stuck in
capital markets, resulting in hyperinflation for asset prices even as the broader economy
collapses. Or, as BMO's Daniel Krieter writes, "QE has fed through to the real economy in a
slower manner than previous QE campaigns" and for each dollar the Fed's balance sheet has
grown, M1 money supply has increased about $0.32, compared to $0.96 and $0.74 in QE1 and QE2.
"The expansionary policy thus far has mostly resulted in increased asset prices", BMO writes
concluding what had been obvious to us and our readers since 2009. Only now we are ten years
closer to what is the inevitable endgame, one where the Fed has no impact on M1, which will
also be known as the "game over" phase.
But let's back up.
Traditionally, as BMO explains, we analyze the business cycle from a classical economic
perspective where monetary authorities are more passive and "the invisible hand" guides
economies (this used to be the case before the Fed went all Politburo on the USSA and decided
to nationalize capital markets, crushing any "signal" the bond market may have; the final step
will be the launch of Yield Curve Control which will be game over for the market). In this
context, we look at interest rates, which can theoretically be defined as the rate that makes
the consumer indifferent between consumption today and consumption tomorrow. R* is the
(unknowable) natural rate of interest that supports full employment and stable interest rates.
In theory, if r<r*, then consumption today is preferable and the economy is expanding. If
r>r*, consumption saving is preferable and the economy is contracting.
In an expansionary phase, prices and consumption are increasing. Because prices and
investment opportunities are high, demand for money among consumers/businesses is high, and
interest rates (r) increase alongside borrowing . When r rises to the rate of r*, consumption
slows, earnings fall, and a recession ensues. R* falls as uncertainty and risk aversion grow.
This is a "business cycle" recession (and as long as the Fed is around, we will never have one
of those again as the Fed has now also killed the business cycle... just as the USSR tried to
do).
However, a recession can also be caused by some external shock to the economy that produced
further declines in r*. This is because r* is reactive to uncertainty with a strong negative
correlation. The greater the uncertainty, the lower r* falls.
In recession, r falls as consumption remains low as long as it is greater than r*. Defaults
accelerate the drop in r. With the passage of time, r* rises slowly as the uncertainty/risk
aversion surrounding the shock and/or end of business cycle fades. However the longer firms go
without earnings due to low consumption, the more defaults are realized and the more r drops.
At some point, the combination of falling r and rising r* results in r <= r*. Once this
happens, consumption/ investment picks up and the economy enters recovery.
In addition to accelerating declines in r, defaults experienced during recession also lower
the cost of labor and capital goods as the resources of failed companies are returned to the
economy. In addition, barriers to entry in certain industries fall as "old guard" firms go out
of business. Thus, as the economy enters recovery, this combination of cheaper labor/capital
goods and lower barriers to entry leads to strong business investment and increases growth
potential during the ensuing expansion.
This is how the world works in theory. Unfortunately, since 1913, theory has not worked due
to the intervention of the Fed. So now let's look at how all this works in reality, and
introduce an active central bank with a wider range of monetary policy tools at its
disposal.
As the economy cools, the central bank lowers r in an attempt to spur consumption by forcing
r<r*. Consumption increases in response, and recession/defaults are avoided. But business
resources aren't returned to the economy. Recovery will be less robust due to fewer relative
attractive investment opportunities. As Krieter argues, this was the experience of 2001.
Now in 2008, a shock in the form of subprime mortgages hits the economy and uncertainty
skyrockets. R* moves into negative territory as shown in a recent San Francisco Fed study. The
Fed moves rates lower, but is constrained by the zero bound. In order to further "lower r", the
Fed embarks on asset purchases during QE and is successful in spurring consumption, as
evidenced by the strong correlation between increases in excess reserves and increases in M1.
M1 is the most basic measure of money supply and includes essentially only cash and
checking/demand bank accounts.
The theory is that for a good or service to be consumed, it must be paid for out of M1.
Therefore, the increase in M1
following QE is a measure of the degree to which QE results in actual consumption.
Note "lower r" in quotation marks in the previous bullet because r is at the zero bound and
cannot (at least in the United States) be lowered further. Therefore QE increases money supply
which is meant to spur consumption, which is the same desired effect of lower interest rates.
In a sense, money supply increases are synthetic interest rate decreases (and synthetic capital
market increases) .
The combination of QE-driven consumption (r falling) and fading uncertainty after a trillion
dollar fiscal stimulus package (r* rising) ultimately pulls the economy out of recession.
However, the pace of response in 08/09 was slower. QE was not announced until late November
2008, after large defaults were already experienced. Fiscal stimulus in the form of the ARRA
package didn't arrive until February 2009 with an additional lag in implementation that
featured incremental defaults. In the end, almost a trillion dollars' worth of debt was
affected by default in 2008/09, but QE certainly prevented actual defaults from being likely
exponentially greater. BMO notes however that defaults avoided were once again economic
resources that were not returned to the economy and barriers to entry that are not lowered.
This argues that attractive investment opportunities following the financial crisis were not as
abundant as the depth of recession would suggest.
As a result, the recovery was slow, ultimately prompting the Fed to embark on additional
rounds of quantitative easing in an attempt to spur increased consumption.
Which brings us to the seeds of the Fed's own demise: the problem is that QE appears to be
experiencing diminishing returns, as evidenced by a falling correlation between excess reserves
and M1 in successive episodes of QE following the financial crisis. As QE leads to a direct
increase in bank reserves, only a fraction is translated into money supply growth, and thus
potentially consumption and investment. QE1 was highly effective and an important factor behind
pulling the economy out of recession. QE2 had a marginally lower, but still high, follow
through of .735 indicating that on average, $0.74 of each dollar of QE translated to increased
money supply. We observe elevated inflation and personal consumption rates during the period of
QE2 as evidence of its effectiveness. However, during Q3, the correlation fell to just $0.28
and resulted in very little inflation of GDP growth. Through this lens, the impact of QE on the
real economy has diminished over time.
How does BMO explain the diminishing impact of QE?
Diminishing marginal utility of consumption: QE (and monetary policy) is often referred
to as "borrowing from the future". However, there is only a limited amount of future
consumption that can be pulled into the current period via monetary policy. This could apply
to consumption of durable goods: as rates have been relatively low for a long period of time,
demand for credit no longer increases at the same rate with incrementally lower interest
rates. At some point, consumption does not bring sufficient to utility no matter how long
prices or interest rates are.
Wealth disparity: Wealth disparity exacerbates the impact of diminishing marginal utility
of consumption. For reasons discussed in further detail below, QE tends to inflate the price
of financial assets, making those who own the assets more wealthy. A large percentage of QE
money ends up in the hands of the wealthy, whose consumption patterns are unlikely to change
in response to a near term increase in wealth.
Inflation expectations: Finally, the crux of monetary policy plays on expectations.
Inflation is self reinforcing as demonstrated by a very high correlation between inflation
and inflation expectations. Around the introduction of QE, there was an expectation that it
could spawn runaway inflation. Having been through multiple rounds of QE without a large
increase in inflation, people have likely generally come to understand that QE is not likely
to result inflation, therefore there is marginally less impetus to consume now.
Following five years of no QE in the United States, it appears the utility of current QE has
increased modestly in comparison to QE3. However, the follow through to consumption still
remains well below levels experienced between Q1 and Q2. It is likely then that current QE is
unlikely spurring much consumption as r isn't influenced lower (via money supply increase) as
much as in the past and likely remains well above r*.
Worse, as we
discussed last week , one can argue that r* is likely lower now than potentially any point
in history, and according to Deutsche Bank it is at an all time low of -1%.
Not only is uncertainty extremely high, but the impact of COVID-19 arguably directly lowers
r*. Recall r can be defined as the rate of interest that makes consumption today indifferent to
consumption in the future. In all economic models, r is assumed to be positive. But when people
are afraid to their leave their house for fear of infection, future consumption actually is
more attractive than current consumption. So r* is arguably negative for fundamental reasons
for the first time. Greatly heightened uncertainty only pushes it even further negative.
When money supply goes up, but consumption fails to be generated (because r remains well
above r*), then savings rates mathematically increase. Therefore, the prices of financial
assets increase generally.
During times of risk aversion, bond prices increase first, but supply of safe assets is
limited, especially as the Fed buys a substantial portion of the Treasury market. Investors are
therefore pushed into riskier assets. But as long as r remains below r*, the more savings go
up, the greater the mechanical move in financial asset prices relative to real economic
activity.
This, according to BMO, is what's driving the paradoxical relationship between bond and
equity prices in recent weeks, and explains why stocks are performing so well despite the
outlook for the greater economy. Money supply that doesn't translate into consumption must
result in higher financial asset prices until defaults result in wealth destruction. What does
this mean for the recovery? The central bank is displaying reduced capacity to further generate
real economic activity as a result of accommodative policy over the past twenty years. This
means that recovery is unlikely until r* increases significantly , which only happens alongside
fading virus uncertainty. This will take a long time.
During that time, one of two things will happen. Either the government will continue to
assist companies in avoiding
bankruptcy, or it will not. If it does, confidence (and r*) will likely return relatively more
quickly at a huge cost to the government. However, there will not be a large return of economic
resources at the end of this recession and the ensuing recovery will be disappointing given the
degree of economic pain currently being felt.
If it does not, defaults could potentially reach historic proportions, and the recession
will be long and painful. However, using the "ripping the bandaid" analogy, this scenario would
result in likely the largest return of economic resources in the history of the country and
lead to a very powerful economic expansion in the wake of the current recession.
Ultimately, the truth likely lies in the middle. The government will continue to provide
relief, though not likely in scale large enough to save all businesses. Defaults and downgrades
will be staggering, but this will increase the capacity of growth in the ensuing economic
recovery.
What does this mean for risk assets? It means that risk assets are being technically
supported by stimulus measures so far, particularly QE that is no longer as effective as it
was. However, a large wave of defaults is unavoidable without an unlikely near-term (and
complete) solution to COVID-19. Heavy defaults, the kinds described in " Biblical"
Wave Of Bankruptcies Is About To Flood The US , will likely bring about another wave of
risk asset price weakness as wealth is destroyed and technical upward pressure on financial
asset prices and a higher percentage of savings demand is met with safe haven assets (Figure
3).
This also explains why the Fed was compelled to enter the bond market, as absent a direct
intervention in the secondary market, bond prices would crater and trigger a self-fulfilling
doom-loop, where lower bond prices lead to higher defaults, lead to even lower prices and so
on. For now, the Fed has managed to delay this process but there is only so much Powell can do
to offset the collapse in fundamentals which will lead to continued ratings erosion, and the
eventual defaults of countless companies, many of which the Fed will be directly invested in.
At that point, the Fed's action in the "market" will become the topic of non-stop Congressional
hearings, and will culminate with doubts emerging about the viability of the dollar as a
reserve currency.
Until this trigger level is reached, however, QE will continues to pose a technical
tailwind, influencing financial asset prices higher. This can be sustained until default rates
increase, which is likely not until June or later as government stimulus money starts to run
dry, and which point assets will likely take another nosedive lower, just as reports of a
second coronavirus pandemic result in (most Democratic) states shuttering again ahead of the
presidential election.
What happens then? Risk assets will continue to slide into the election and into 2021, at
which point as Nordea showed last week, we will hit a point where the lagged effect of the
flood central bank liquidity will finally hit into the S&P500, and result in one final
explosion in risk assets, sending stocks over 40% higher...
... although not of a benign nature but more of what one would expect to see in the Caracas
or Weimar stock market.
Before the April jobs report release, Heidi Shierholz of the Economic Policy Institute
(EPI) warned on Twitter that Friday would be "the most cataclysmic #JobsDay of all of our lives" and shared a chart
showing how recent unemployment claims contrast with the past 80 years, before detailing
current conditions in a 22-tweet thread.
BRACE YOURSELF for the most cataclysmic #JobsDay of
all of our lives. This chart has monthly job changes over the past 80 years. We lost more
than 20 million jobs in April. There has never been anything like this. 1/ pic.twitter.com/eODWpeAb4X
While the 14.7% figure for April is significantly higher than February (3.5%) and
March (4.4%), it fails to capture the full scope of how U.S. workers have been impacted by
temporary business closures and hours reductions that have resulted from the ongoing global
health crisis. The report says 5.1 million Americans had hours cut in April.
Shierholz, senior economist and director of policy at EPI, explained that "only about
two-thirds of coronavirus-related job losses are showing up as unemployed -- the rest are
showing up as having dropped out of the labor force. If all coronavirus-related job losses
had shown up as unemployed, the unemployment rate would now be around 19.0%, not 14.7%."
"Further, about 7.5 million workers are likely being misclassified as 'employed, not at
work' instead of 'temporarily unemployed,'" she continued. "If they were classified correctly
AND all coronavirus-related job losses had shown up as unemployed, the unemployment rate
would be around 23.6%."
She also highlighted EPI's
estimate from April 30 that because of recent job losses, about 12.7 million Americans
have lost their employer-based health insurance -- which EPI researchers called a "
terrifying " indictment of the country's private, for-profit healthcare system,
particularly in the midst of a pandemic.
Former JPMorgan Economist: We Are Heading Towards A Weimar Republic Inflation Setup
by Tyler Durden Sat,
05/09/2020 - 21:30 Submitted by a former JPMorgan economist who wishes to remain anonymous
The everything bubble
Readers will have anticipated the bursting of the bubble that has been re-inflating ever
since 2009. Ultra-loose monetary policy, coupled with deflationary pressures from increased
aggregate supply and investors chasing yield at ever higher risk, meant that almost all asset
classes had reached all time highs just before entering the current bear market.
That there is a bubble, a massive one, is unquestionable. Readers will further have
anticipated that it didn't have to be a global pandemic to burst this bubble. This bubble was
practically looking for a prick - any prick - to burst it. Whether it was a credit event,
liquidity shortages that led to bankruptcies, a terrorist attack, a natural disaster or a bat:
markets had reached a level of fragility where they could not cope with the materialising of
such a tail risk event.
Too much had fueled this fragility: out-of-touch credit ratings, leveraged balance sheets,
stock buybacks, expansionary monetary policy and as a result: out-of-control credit and
debt.
Expect companies in energy to go bust first. Then retail and hospitality. At some stage
their bankruptcies will push creditors into a corner where such lenders will either have to be
bailed out or they will drop like flies (Lehman style). Already banks have slowed their credit
lines to corporates, like in 2008/2009, anticipating that some of their debtors will fail to
repay.
Sure, with more QE flooding the markets a complete wipe-out may be averted, as there is no
political appetite for mass insolvencies (especially in an election year in the US).
The bubble has reached a level where systemically relevant banks will be facing their Lehman
moment sooner rather than later. Lawmakers will not allow such systemically relevant lenders to
go under, as this would practically imply all lights to go out. So the real question at hand
is: at what cost?
At what cost to prevent the Deutsche Banks of this world from going bankrupt?
At what cost to keep the unemployed at bay, because for sure: no job, no income and no
prospects are a recipe for turmoil and civil unrest.
At what cost to counter big institutional sellers exiting the markets who want cash?
At what cost running the biggest budget deficit and current account deficit (in the
US)?
At what cost managing the havoc from Covid-19?
At what cost QE forever?
At what cost etc.
Crossing the Rubicon
On April 27, 2020 CNBC ran a story on "Why the coronavirus crisis may prompt central bankers
to scrap inflation targeting".
If central banks indeed abandon or modify inflation targeting we will certainly be crossing
the Rubicon. Admittedly, there is no other way in answering the above questions.
Policymakers continue to be behind the curve and obviously failed to learn from 2008/2009.
Their last resort is printing money and creating more debt. If central banks have no or a
soft-washed inflation mandate we are heading towards a Weimar Republic style inflation
setup.
With global output staying the same or declining, aggregate demand declining significantly
and the quantity of money in circulation multiplying (by means of handouts or universal basic
incomes), asset prices across asset classes being propped up by central banks, it becomes just
a matter of time until inflation goes from 'subdued' to 'out of hand'.
Asset allocation in this new set up
With central banks either purchasing corporate bonds or accepting them as collateral, it may
be soon until their mandate is being changed to facilitate the buying of equities, too. As
other commentators already noted: we may have abandoned free markets and now head to a
centrally planned set up.
The recent pick-up from the March 2020 lows in stock markets will be short lived. Nothing
has fundamentally improved, other than emergency liquidity provisions by central banks. Expect
a new selloff by year end - re-testing the lows of March - because perfidiously the Fed does
not yet own enough corporate debt/equity to control asset prices!
Central banks will be printing fiat money on a unprecedented scale. With potentially
negative interest rates even in the US, a slowing of global trade and thus reduced supply, the
risk of a surprise inflation increases markedly. If and when this feeds through, asset
allocation becomes key.
Look for uncorrelated asset classes or inflation resistant assets. There is a chance central
banks will own a good part of cross-sector corporate debt/equity when the dust settles and
inflation starts to go through the roof.
The Fed is just following the Congressional mandate of supporting the people who fund our
political system.
It should be clear that the stock market doesn't care about Main Street when you see it
still going up with massive levels of unemployment.
MMT states that the Fed can create these funds that are handed out to business by the
trillions but that is not what MMT 'policy' would want.
Most MMT people are actually against handouts to people in the form of a basic guaranteed
income.
A major cornerstone of MMT policy though is a Job Guarantee. In times like these they
would very much like to see employment supported by these government funds. Not only the
basic job pool of a minimum wage job but also supporting more highly paid skilled employment
such as supervising infrastructure projects etc.
MMT is more concerned with resources than money per se. It doesn't help to have money if
people aren't making stuff, providing food and services etc.
With the
worst jobs report in history under our belt, which saw a record 20.5 million jobs lost in
April, and the stated unemployment rate at 14.7%, some cities have been hit worse than others
by the economic fallout from the pandemic.
To wit, after steadily increasing 2-3% every week for the past two months, the unemployment
rate in San Diego county is at an all-time high of just under 27% - exceeding the previous
record from 1933 set during the Great Depression, according to a report by the San Diego
Association of Governments (SANDAG).
Just a day after
announcing that about 33.5 million Americans have filed jobless claims since mid-March as
the coronavirus pandemic has caused lockdowns worldwide, the U.S. Department of Labor on
Friday revealed
the nation's official unemployment rate hit 14.7% last month -- its highest level since the Great
Depression.
Before the April jobs report release, Heidi Shierholz of the Economic Policy Institute
(EPI) warned on Twitter that Friday would be "the most cataclysmic #JobsDay of all of our lives" and shared a chart
showing how recent unemployment claims contrast with the past 80 years, before detailing
current conditions in a 22-tweet thread.
BRACE YOURSELF for the most cataclysmic #JobsDay of
all of our lives. This chart has monthly job changes over the past 80 years. We lost more
than 20 million jobs in April. There has never been anything like this. 1/ pic.twitter.com/eODWpeAb4X
While the 14.7% figure for April is significantly higher than February (3.5%) and
March (4.4%), it fails to capture the full scope of how U.S. workers have been impacted by
temporary business closures and hours reductions that have resulted from the ongoing global
health crisis. The report says 5.1 million Americans had hours cut in April.
Shierholz, senior economist and director of policy at EPI, explained that "only about
two-thirds of coronavirus-related job losses are showing up as unemployed -- the rest are
showing up as having dropped out of the labor force. If all coronavirus-related job losses
had shown up as unemployed, the unemployment rate would now be around 19.0%, not 14.7%."
"Further, about 7.5 million workers are likely being misclassified as 'employed, not at
work' instead of 'temporarily unemployed,'" she continued. "If they were classified correctly
AND all coronavirus-related job losses had shown up as unemployed, the unemployment rate
would be around 23.6%."
She also highlighted EPI's
estimate from April 30 that because of recent job losses, about 12.7 million Americans
have lost their employer-based health insurance -- which EPI researchers called a "
terrifying " indictment of the country's private, for-profit healthcare system,
particularly in the midst of a pandemic.
By
Richard D. Wolff,
Professor of Economics Emeritus, University of Massachusetts,
Amherst, and Visiting Professor in the Graduate Program in International Affairs of the New School
University, NYC. Wolff's weekly show, Economic Update, is syndicated on over 100 radio stations and goes
to 55 million TV receivers via Free Speech TV and his two recent books with Democracy at Work are
Understanding Marxism and Understanding Socialism both available at
democracyatwork.info
.
We are entering an even Greater Depression than the 1930s, with hundreds of millions thrown out of work
across the world. Capitalism is a broken, unstable system that is beyond repair – but there are
alternatives.
Ninety-one years after the start of the Great Depression (capitalism's worst downturn until now), we are
entering an even Greater Depression. The 1930s were so awful that leaders of capitalist economies ever
since have said they had learned how to avoid any future depressions. All promised to take the steps
needed to avoid them. Those promises have all been broken. Capitalism remains intrinsically unstable.
Read more
Richard D. Wolff: Viruses like Covid-19 are a part of
nature we must accept. But Capitalism-2020 must be destroyed
That instability is revealed in its recurring cycles, recessions, downturns, depressions, crashes,
etc. They have plagued capitalism wherever it has settled in as the prevailing economic system. Now that
the whole world's prevailing economic system is capitalism, we suffer
global
instability. To date, capitalist instability has resisted every effort (monetary and fiscal policies,
Keynesian economics, privatization, deregulation, etc.) to overcome or stop it. And now it is here yet
again.
Across the world, hundreds of millions of workers are unemployed. The tools, equipment, and raw
materials in their factories, offices and stores sit idle, gathering dust and rust. The goods and
services they might have produced do not now emerge to help us through these awful times. Perishable
plants and animals that cannot now be processed are destroyed even as scarcities multiply.
Workers lose their jobs if and when employers – mostly private capitalists – fire them. Employers hire
workers when workers add more value to what the employer sells than the value of those workers' wages.
Hiring then adds to profits. Employers fire workers when they add less than the value of the wages paid
to them. Firing then reduces losses. Employers protect and reproduce their enterprises by maximizing
profits and minimizing losses.
Profit, not the full employment of workers nor of means of production, is "the bottom line" of
capitalists, and thus of capitalism. That is how the system works. Capitalists are rewarded when their
profits are high and punished when they are not.
No-one wants unemployment. Workers want their jobs back; employers want the workers back producing
profitable output; governments want the tax revenues that depend on workers and capitalist employers
actively collaborating to produce.
Yet the capitalist system has regularly produced economic downturns everywhere for three centuries –
on average, every four to seven years. We have had three crashes so far this century: 'dot.com' in 2000,
'sub-prime mortgage' in 2008, and now 'corona' in 2020. That averages out at one crash just under every
seven years – capitalism's 'norm'. Capitalists do not want unemployment, but they regularly generate it.
It is a basic contradiction of their system.
Today's massive US capitalist crisis – over 30 million unemployed and counting, a quarter of the
workforce – shows dramatically that maximizing profit is not maximizing society's well-being. First and
foremost, consider that the unemployed millions continue much of their consumption while ceasing much of
their production. A portion of the wealth produced by those still employed must be
redistributed
to sustain the unemployed. Society thus suffers the usually intense struggles
over the shares of profits versus wages that will be redistributed to the unemployed. These struggles,
both public – over tax structures, for example – and private – for instance, over household budgets – can
be profoundly destabilizing for societies.
Redistribution struggles could be alleviated if, for example, public employment replaced private
unemployment. If the state became the employer of last resort, those fired by private employers could
immediately be rehired by the state to do useful social work.
Then any government paying unemployment benefits would instead pay wages, obtain in return real goods
and services, and distribute them to the public. The 1930s New Deal did exactly that for millions fired
by private employers in the US. A similar alternative (not part of the New Deal) would be to organize the
unemployed into worker co-ops performing socially useful work under contract with the government.
This last alternative is the best, because it would develop a new worker co-op sector of the US
economy. That would provide the US public with direct experience in comparing the capitalist with the
worker co-op sector in terms of working conditions, product quality and price, civic responsibility, etc.
On that concrete, empirical basis, societies could offer people a real, democratic choice as to what
mix of capitalist and worker co-op sectors of the economy they prefer.
The statements, views and opinions expressed in this column are solely
those of the author and do not necessarily represent those of RT.
Even in blissful 'pre rona' December the Fed's repo market had been sounding the alarms that
a serious bubble recession was coming. Nothing apparently was fixed from the last wall street
megadooshbaggery meltdown. See:
This means that even those who built up real estate equity will have a difficult time
short term liquifying that equity, which means that Chase, Wells Fargo, et al have a lot of
pessimism about the US real estate market, the thing they have made so much money on last few
years, and which they were supposed to have fixed.
well pilgrims ;) not only is the economy enduring sudden searing pandemic pain, it is also
feeling the beginning of a big bubble popping recession, which everybody in the financial
world was already freaking about well before the rona arrived. Perhaps endless Fed QE can
prop up equities markets through November, perhaps, but then it's all bets off into 2021 as
numerous wall street debts scams will have to be deleveraged.
The problem here is that there is no countervailing force. Marxist idea that proletariat is
such a force proved to be yet another utopia.
Notable quotes:
"... istory's main engine of economic exploitation – the banking, creditor and financial systems' ever-increasing extraction of value through interest payments. The rentier class and FIRE sector – Finance, Insurance and Real Estate – have long succeeded in depicting themselves as part of a productive economy. Yet for centuries, these sectors were recognized as being parasitic. ..."
"... The essence of a parasite is not only to drain the host's nourishment, but to dull the host's brain so that it does not recognize that the parasite is there. ..."
Jim Vrettos : Welcome once again to the Radical Imagination. I'm your host, Jim
Vrettos. I'm a sociologist whose taught at John Jay College of Criminal Justice and Yeshiva
University here in New York.
Our guest today on the Radical Imagination is Michael Hudson. He was on our March 8th show.
We had such an overwhelmingly positive response to that show that we've asked him to return
today, and he's been gracious enough to accept.
Unlike most economists, he's been a fierce champion and advocate for the economic rights of
the poor, workers, disenfranchised and the vulnerable around the world through his scholarship
and lifelong activism. His unique economic analysis has explored h istory's main engine of
economic exploitation – the banking, creditor and financial systems' ever-increasing
extraction of value through interest payments. The rentier class and FIRE sector –
Finance, Insurance and Real Estate – have long succeeded in depicting themselves as part
of a productive economy. Yet for centuries, these sectors were recognized as being
parasitic.
Now with the United States losing some 10 million jobs in just the past two weeks and the
world awash in debt, the total world gross domestic product is $90 trillion. The public and
private debt is a mind-boggling $260 trillion. The pandemic has given this parasitic sector yet
another, even more vicious opportunity to exploit and devour humanity.
As our guest puts it, the recently passed Trump "Bank and Landlord Relief" bill, mistakenly
named the Coronavirus bill, starts by providing banks with an even larger giveaway of wealth
than they received from Obama in 2008. Helping the banks, financial and real estate sectors in
a so-called free market system is conflated with helping the industrial economy and general
living standards for most Americans. The essence of a parasite is not only to drain the
host's nourishment, but to dull the host's brain so that it does not recognize that the
parasite is there.
"... the nations CEO's become sort of one big club, and the top of the club is the head parasites pulling the strings on the stock market (outfits like Goldman Sachs). ..."
"... NO ONE wants to cross the head parasites, the corrupt political class turns to them as their economic brain trust, and the propaganda class (MSM) spin narratives that comport to the corrupt political class' interests and the corrupt status quo. ..."
As our guest puts it, the recently passed Trump "Bank and Landlord Relief" bill,
mistakenly named the Coronavirus bill, starts by providing banks with an even larger giveaway
of wealth than they received from Obama in 2008. Helping the banks, financial and real estate
sectors in a so-called free market system is conflated with helping the industrial economy
and general living standards for most Americans. The essence of a parasite is not only to
drain the host's nourishment, but to dull the host's brain so that it does not recognize that
the parasite is there.
One of the ways it does this is to entice most of the biggest companies onto the stock
markets, which in turn subordinates them to the financial sector -- more specifically, the
investment bankers. And then the nations CEO's become sort of one big club, and the top of
the club is the head parasites pulling the strings on the stock market (outfits like Goldman
Sachs).
NO ONE wants to cross the head parasites, the corrupt political class turns to them as
their economic brain trust, and the propaganda class (MSM) spin narratives that comport to the
corrupt political class' interests and the corrupt status quo.
This is why [neo]liberalism and neoconservatism are the two sides of the one political coin
that Americans are allowed to choose. Lean left? You'll get a liberal who mostly uses identity
politics to divide and rule. Lean right? You'll get a neocon who mostly uses foreign affairs to
divide and rule. But increasingly, the two cross-over, hence you'll see liberals harping 24/7
about Russiagate and neocons harping 24/7 about Iran, Islam and now China.
None of this is to say that Russia, China and Iran aren't competitors, because they are. But
the liberal and neocon fanatics turn them into existential, kill or be killed
competitors...
Looks like wishful thinking. Neoliberalism despite its trend for redistribution wealth up
probably will survive this crisis. One strong argument here is that the return to the New Deal
capitalism is not impossible as a weak alliance of management and trade union that existed after
WWII was dissolved long ago.
So there is not countervailing force for the dominance of financial capital. It captured that
state and MIC is just an extension of Wall Street -- it racketeers. The same is true about
intelligence agencies, which also are pretty closely connected with Wall Street, especially
CIA.
And so here we are at a fraught moment in the convergent crises of corona virus and the
foundering economic system that it infected, with all its frightful pre-existing conditions. Of
course, it isn't capitalism , so-called, that is failing, but the perversions of capitalism,
starting with the appendage of the troublesome term: ism . It isn't a religion, or even a
pseudo-religion like Zoroastrianism or communism. It's simply the management system for surplus
wealth. In a hyper-complex society, the management of wealth naturally grows hyper-complex,
too, with lavish opportunities and temptations for chicanery, cheating, fraud, and swindling
(the perversions of capital). It's in the interest of the managers to cloak all that
hyper-complex perversity in opaque language, to make it seem okay.
How many ordinary Americans have a clue what all the Municipal Liquidity Facilities, Primary
Dealer Credit Facilities, Primary and Secondary Market Corporate Credit Facilities, Money
Market Mutual Fund Liquidity Facilities, Main Street New Loan Facilities and Expanded Loan
Facilities, Commercial Paper Funding Facilities currency swap lines, the TALFs TARPs, PPPs,
SPVs represent - besides the movement, by keystrokes, of "money" from one netherworld to
another (both conveniently located on Wall Street), usually to the loss of non-elite citizens
generally and to their offspring's offspring's offspring?
Real capital is grounded in the production of real things of real value, of course, and when
it's detached from all that, it's no longer real capital. Money represents capital, and when
the capital isn't real, the money represents nothing!
... ... ...
All this because we just can't face the task of reorganizing our national home economics to
suit new circumstances. So, nature will do it for us. Nature will furnish us with a marvelously
efficient black hole where we can conveniently stash our fake money so that we'll never have to
see it again.
Nature will bust up our giant institutions, our giant corporations, our giant networks of
financial obligations. And after a period of confusion and social disorder, some clever humans
will aggregate into smaller networks and re-organize their activities on a smaller scale that
actually supports truthful relationships between the production of things deemed to hold value
and money that represents those things.
The beauty of springtime is sublime and, as Edmund Burke noted, that very beauty provokes
our thoughts of pain and terror.
xxx 46 minutes ago
I'm not seeing it. The Federal Gub'mint will hand out free Netflix vouchers, along with
SNAP cards, and more than half of Americans will wallow in that like pigs in ****.
Unfortunately, there are just too many that want everything handed to them, and are "OK" with
living in a tiny shithole apartment and eating take-out the rest of their lives. Still
waiting for the "Revolution" that will never happen. They can just print money to infinity,
apparently. And it never inflates, or deflates.
xxx 39 minutes ago
The fed doesn't print money it creates currency ie bondage and they've created trillions
as of late and they're going to create many more trillions. Deflation followed by
hyperinflation, famine and a civil war that will make the last civil war look like child's
play in comparison.
xxx 31 minutes ago
Yes, but one would think that would have happened by this time already. After the last
printing frenzy, I was reading for years how "The End is near", "Hyperinflation",
"Deflation"...hell, Stockman wrote an article a week for like 8 years about that. And it
STILL hasn't happened. Why??? It's like fundamentals don't matter...economics doesn't
matter...so when DOES it matter? How many more trillions from now does it start to
matter?
xxx 12 minutes ago
I agree it's been quite a while since the fed killed the economy and debased the dollar
and I'm surprised the thieving bastards have kept this **** show going so long. But they
can't do it forever and the day of reckoning is coming.
xxx 17 minutes ago
They can only do it as long as the $ has reserve currency status. Once it loses that, all
hell breaks loose.
xxx 6 minutes ago
Reserve currency status will be lost and Amerikans will know true poverty. Not the poverty
we have today with obese useless people on welfare but real grinding poverty with famine. And
all fiat currencies will go to zero in this depression.
Before the coronavirus caused governments to impose lockdowns, whole economies, markets and
even currencies were already on course to be destroyed by a vicious downturn in bank lending at
a time of contracting trade and record debt. The additional strains from the virus have
intensified the crisis further and quickened the pace of all aspects of monetary
destruction.
The coronavirus has permitted America and other Western nations to adopt a war footing by
restricting personal freedom in the interest of the state. As tensions against China rise and
the global economic crisis escalates, these freedoms will be not be returned, being deemed to
be against national interest.
This is an election year for America and the political system is already ramping up blame
for the virus and her economic misfortunes against China. We are entering dangerous territory
when politics mobilises hate against a supposed enemy by using propaganda tactics which are
designed to stir up xenophobic anger.
How China responds will be crucial. Its leadership can defuse the situation with a few
simple changes to its foreign policy, isolating America from her allies in the process. But
does a highly bureaucratic communist leadership have the imagination to do so?
Introduction
One thing is for sure: the world will be different when it emerges from the coronavirus
crisis. Doubtless, on pain of likely death those over seventy years of age must remain
prisoners in their own homes while the younger generations are tasked with the return to
normality. All this is meant to be under government guidance of course. Over the coming months
governments intend to save swathes of business sectors, such as banking, energy production,
utilities and the rest, first by lending the money to pay the bills, and then by rescuing the
failures, taking them into public ownership in many cases.
That is what the post-coronavirus environment can be expected to look like, if, as
governments hope, the recovery is V-shaped. If not, then greater interventions will be visited
on the population to protect it from itself.
While not necessarily intentioned, there has been and will continue to be a dramatic
transfer of freedom from individuals to the state, which the state is always reluctant to let
go when the crisis passes. The evocation of a war against the virus is to facilitate the
transfer of peoples' freedom to the state, because that is what is required to fight a war. But
when it's over, the bureaucrats' instincts are never to return freedoms.
In the vast majority of cases, win or lose, following a war it is usual for a nation to
retain the measures adopted, dropping none of them. It might be called a transitional economy,
kept in place with all the war-time restrictions until an exit path, inevitably to greater
socialism, can be devised. And for America there is a war still to be fought against China for
global domination, justifying yet more control.
Nanny meets fascist socialism
Welcome to the new post-coronavirus intensified socialism. As individuals we have given the
state enormous power over our lives, which will almost certainly be consolidated. The direction
of travel is clear. Not only can big brother censor us, but it can now track our movements more
effectively than the old KGB. If you leave your home, leave your smartphone behind. Wear a
wide-brimmed hat and change your gait, avoiding the cameras. Your money in the bank, or more
correctly in your about-to-be-nationalised bank's money credited to your account, can only be
disposed of for state-regulated products by means of traceable transactions instead of
old-fashioned cash.
Instead of the soviet, we have the nanny state. Nanny knows best. This is the real world of
the 2020s. It is unnatural and will therefore eventually fail. In previous articles I have
written about one aspect of its failure, and that is the impending collapse of unbacked state
currencies. I have pointed out that central banks, and especially the Fed responsible for the
world's reserve currency, are embarking on an exercise in inflation designed, above all, to
uphold the state by maintaining the values of its debt and therefore all other financial
assets. If they fail, and they will because the task is too great, the currencies will fail as
well, and remarkably quickly. Until then, free markets are a primal threat to the system and
must not prevail.
Doubtless, deep state operatives everywhere believe that the threats from their own people
can be contained. Taking that for granted, they are now moving on to contain threats from other
states that don't conform to the West's democratic model. There is now much more propaganda
coming out of America and the UK about the evil Chinese than the evil Chinese are disseminating
about America and Britain.
The story being managed is of a devious state, somehow stealing our souls by selling us
their technology. Mobile 5G puts China into our homes and controls our internet of everything.
It will allow the Chinese to control us . What is not explained is why it is in China's
interest to abuse its customers in this way. What is not explained is why we, as individuals,
will be better off not having Chinese goods and technology. And when Britain's GCHQ
intelligence and security division took Hua Wei's equipment apart, they couldn't find any
evidence of Chinese state spyware anyway.
The irony in all this is that our democratic model, the nanny state, is cover for the same
internal policies as those deployed by the Chinese, admittedly less vicious; but that is
changing. Rather than communist-socialist, both Chinese communism and Western democracies are,
properly defined, fascist-socialist. With communism, the state owns your cow and tells you what
to do with it. With fascism, you own the cow and the state tells you what to do with it. In
these simplistic, but not inaccurate terms, our governments increasingly follow the fascist
creed adopted by the Chinese Communist Party after Mao's death. Give it time and the intense
Chinese-style suppression of free speech could become the defining feature of nanny's
management style as well.
Here we must note a fundamental truth. Socialists of either extreme do not see free markets
as a rival, because they believe they are useful for progressing socialism towards desired
ends. The true rival to your socialism is someone else's socialism. Newly energised Western
state socialism is to be pitted against Chinese state socialism. The World is about to get more
dangerous.
US is upping the propaganda stakes
Last week, US Secretary of State Mike Pompeo said China caused an enormous amount of pain
and will pay a price for what they did with the coronavirus pandemic. On Tuesday, President
Trump threatened to seek reparations from China for infecting Americans. This follows a 57-page
memorandum, entitled Main Messages dated April 17, briefing Republican senators, which was
headed by the following bullet points:
China caused this pandemic by covering it up, lying, and hoarding the world's supply of
medical equipment.
China is an adversary that has stolen millions of American jobs, sent fentanyl to the
United States, and they send religious minorities to concentration camps.
My opponent is soft on China, fails to stand up to the Chinese Communist Party, and can't
be trusted to take them on.
I will stand up to China, bring our manufacturing jobs back home, and push for sanctions
on China for its role in spreading this pandemic.
Clearly, the propaganda war being waged by America against China is undergoing a new lease
of life. And it's not just America: anti-Chinese belligerence is being ramped up through other
national intelligence agencies. Even senior MPs in the UK's Conservative Party and "useful
idiots" in the media are now spouting renewed anti-Chinese propaganda.
On one level, American propaganda can be taken as a defense of President Trump, on the
simplistic basis of finding someone else to blame for his administration's increasingly
desperate economic plight. But the danger is that the White House train has left the station in
the direction of policy escalation with no means of stopping. In this election year someone
must be blamed. To improve his ratings and following an established political tradition of
diverting attention from the domestic scene, Trump must blame foreigners and China is the
easiest target. We are rapidly moving in the direction of unintended consequences.
Meanwhile, we have to hope that President Xi does not take the American bait and escalate
tensions from his side. Xi's equanimity has set the pattern so far. He has made mistakes, and
will almost certainly continue to do so, but his Sun Tzu strategy is making it difficult for
the Americans: "If [the enemy] is in superior strength, evade him".
Of one thing we can be reasonably certain, and that is in a new attack the Trump
administration will escalate trade protectionism against China. It is a policy which will
backfire on America. Assuming no change in the American people's savings habits, the budget
deficit leads almost directly to a trade deficit, the twin deficit syndrome. The trade deficit
is not caused by unfair foreign competition, but as a simple matter of national accounting it
is linked to inflationary funding of government spending. The temporary offset with respect to
the inflationary effect on prices is the expansion of foreign production which ends up as
imports at less inflated prices. Meanwhile, the US's budget deficit is now set to grow
substantially from its trillion-dollar baseline and in the light of recent economic
developments it could easily more than double.
If the trade deficit is to be contained, then measures must be introduced to prevent import
substitution. This is in accordance with enhanced nationalism, typified by Trump's Make America
Great Again slogan. Therefore, the likelihood of America extending trade protectionism beyond
China as the economic crisis progresses is greater than it may currently appear.
Without lower prices for imported goods and consumption generally restricted to domestic
production, inevitably prices for everything will rise at a faster pace. Therefore, at a time
when food prices will almost certainly be rising sharply and causing political difficulties for
Trump, price inflation for all aspects of consumer spending will be getting beyond the managed
control of government statisticians.
Domestically, the combination of an escalating budget deficit and rising consumer prices
will lead to higher interest rates and therefore increased US Treasury borrowing costs. The Fed
will then be unable to control financial asset prices, the dollar will slide, and it could turn
out to be electoral suicide. Trump may not realise it but in this election year he is
conflating two opposing objectives: a geopolitical one against China to improve his political
ratings and an economic one which can be expected to destroy them.
In the past, politicians in this position have responded by clamping down even further on
free markets and personal freedom, evoking Hayek's prophecy of the call for stronger leadership
in his The Road to Serfdom . And with respect to foreign policy, imperialistic motivation
intensifies, which we are already seeing.
Meanwhile, we must hope President Xi stays calm in the face of American self-harm.
"In a Pandemic, the Mob Is the Ultimate Enforcer" [John Authers,
Bloomberg ].
The business perspective: "what really matters to the world's financial movers and shakers
is the great mob of voters out there in the real world, and how they might respond to whatever
measures they take to deal with the pandemic and the economic crisis that has come in its wake.
That, in turn, might owe a lot to the Don
The optics are not good when headlines reveal that scarcely impoverished institutions such
as Harvard University and the Los Angeles Lakers have received public handouts while small
businesses have been unable to get their hands on any money before it runs out.
After the mistakes made in the wake of the last financial crisis, Powell rightly grasps that
it is very important to get it right this time -- or face what might be a dangerous populist
backlash. Or, in our Sopranos analogy, the Mob."
Yesterday when I linked to the event at Lansing, Michigan, I commented that those there
had no idea what they were doing as they were protesting the wrong thing at the wrong
place. Instead, they ought to be occupying the US Treasury building in DC and the NY Fed
Bank in NYC to stop the fraudulent dissemination of $$Trillions to Wall Street criminals
masked as bankers, hedge fund mangers and the like as those locations are where the MAJOR
crimes are occurring as I type this comment. Their behavior casts them as ignorant and
perhaps worse as they're being led into an assault on their own interests while doing
nothing to genuinely defend their wellbeing and that of their kin and progeny. Such
stupidity's been ongoing since 1980-81 when it arose during Reagan's campaign and
continued afterward. That it's being directed/channeled is clear, just as who was
financing the Tea Party rubes was clear--It's the same criminals doing the looting in DC
and NYC.
Given the state of politics within the Outlaw US Empire, such behavior is
unfortunately normal to a certain degree. If it was a gang of Occupy Wall Street
Protesters, the reaction by the forces of coercion would've been vastly different and
very violent. Such is the state of Machiavellianism within as it's worked for many
decades dividing and ruling. With such impediments, attaining the mass solidarity
required to affect the Sea-change required is made extremely difficult, which is why you
observe that nothing's been done for the masses while many things have been done to
further their exploitation.
Both companies on Friday outlined deep cuts in investments in the Permian shale basin, the
top U.S. oilfield where growth in recent years made America the world's top oil producer
and a net exporter for the first time in decades. They each announced global shut-ins of up
to 400,000 barrels per day (bpd) this quarter due to lockdowns to fight the coronavirus
pandemic.
Exxon and Chevron have been rapidly sidelining Permian drilling equipment since the market
started crashing in March. U.S. crude prices have plunged nearly 70% this year, and traded
in negative territory on April 20 for the first time ever.[;]
Sitting inside the credit-resolution group, where Wells Fargo handles struggling
borrowers, the team includes many bankers who previously worked with the same oil and gas
producers in its investment bank.
They work alongside bankruptcy specialists who have been reassigned to focus exclusively
on energy to help Wells Fargo wade through the expected flood of restructurings.
"It's a bloodbath," said one person with knowledge of the bank's oil and gas portfolio,
who was not authorized to speak publicly.[.]
Wells Fargo and JPMorgan Chase & Co (JPM.N) are considered to be the two largest
lenders to U.S. energy companies. Citigroup Inc (C.N) had the largest energy loan book of
any U.S. bank at the end of 2019 because of its international business.[.]
As of the end of March, Wells Fargo had $14.3 billion of oil and gas loans outstanding,
according to filings.[.]
Calling Mr. Powell on the red phone please. The president is on Twitter. The CODE:
Print.
The Feds, in panic mode to stave off the Depression, are unaware they have launched the
Great Reset that will include Healthcare as a priority and not an afterthought as the corona
crisis revealed.
Debt jubilee is on the menu as QE to Infinity for bailing the banks and billionaires takes
us to a very bad ending. Implosion of derivatives will be the tsunami. Derivatives as per
BIS: $640 Trillion, Global debt: $265 Trillion.
The second financial collapse began September 2019. Most were forecasting 2nd Quarter 2020
contraction would mirror 1930s. Few expected 1st Quarter2020 to be there.
A review of the DJ charts displays similarities 2008 and 2020. Two rhymes. In fact DJ 2020
chart mirrors its 2008 chart without adjustments . And again, its the banks; not a care for
mainstreet.
Roughly 41% of working-age adults say their families have experienced a job loss, a
decrease in work hours or other employment-related declines in income in recent weeks,
according to a new analysis by the Urban Institute.
Underscoring the jump in financial distress around the country: More than 4 in 10 of
Americans whose work was affected by the pandemic said they weren't able to pay the rent,
mortgage or utility bills; skipped medical care; or were at risk of going hungry.
31% of survey respondents reported their families cut spending on food.
28% were forced to use savings or take on credit card debt to pay their bills.
69% of those whose family incomes were below the poverty level were unable to pay for their
housing, were food insecure or were unable to seek needed medical care.
Thank you for an excellent article on what is happening. My only criticism is that it appears
that these things "just happen". With your insight and erudition, could you please address
"why" the situation has arisen. What could be the motivation behind actions and policies
which so clearly will destroy not only the 99% but also the basic wealth of the1%?
This is not something new, but a recurrent theme in world affairs.
" Behind all the
governments and the armies there was a big subterranean movement going on, engineered by very
dangerous people." "Since I entered politics, I have chiefly had men's views confided to me
privately. Some of the biggest men in the United States, in the field of commerce and
manufacture, are afraid of something. They know that there is a power somewhere so organised,
so subtle, so watchful, so interlocked, so complete, so pervasive, that they better not speak
above their breath when they speak in condemnation of it."
-- Woodrow Wilson, 28th President of the United States (1856-1924) "So you see, my dear
Coningsby, that the world is governed by very different personages from what is imagined by
those who are not behind the scenes." -- Benjamin Disraeli, British Prime Minister
(1804-1881) President Franklin Delano Roosevelt wrote in November 1933 to Col. Edward House:
"The real truth of the matter is, as you and I know, that a financial element in the larger
centers has owned the government since the days of Andrew Jackson."
It is undeniable that China has made impressive achievements since the Maosits revolution to
date. BUT lets be realistic pre1973 China still a Nation with markedly 3th world living
standards, even today with a soft racist inuendos , people speak about the Chinese must adopt
better hygiene standards personally and privately.
Before 1973 China had mainly 3th world status, eversince Nixon (or Kissinger?) opened
China US Corporate Capitalists inundated Chinas economic landscape, in other words the real,
KEY bases for Chinas economic success remain USA Corporations majority perhaps more than 70%
of their industrial output, although China has wisely constraint, restrain the USA/World
FINANCIAL cartels..(Soros speclation against te yuan, ans Soros Opensociety inflkuence in
HongKong)
Can China remain stable internally with a growing well travel educated savvy middle
class, and a POOR lower working class with meager salaries, slave like labor conditions, and
oppressive political controls, that's a recipe for a social cauldron..
Will the Chinese proletariat demand more "democracy" western/eastern oriented
reforms??..
... ... ...
China has become GREAT because the USA decided to become poor a Spartan, byzantinne,
militaristic, mercenary rogue nation at service of the Globaloists ELITES which do not care
about that cosmological romantic lyrical notion of America.
"... First of all, because Stoics believe that our true good resides in our own character and actions, they would frequently remind themselves to distinguish between what's "up to us" and what isn't. Modern Stoics tend to call this "the dichotomy of control" and many people find this distinction alone helpful in alleviating stress. What happens to me is never directly under my control, never completely ..."
"... Marcus likes to ask himself, "What virtue has nature given me to deal with this situation?" That naturally leads to the question: "How do other people cope with similar challenges?" Stoics reflect on character strengths such as wisdom, patience and self-discipline, which potentially make them more resilient in the face of adversity. They try to exemplify these virtues and bring them to bear on the challenges they face in daily life, during a crisis like the pandemic. They learn from how other people cope. Even historical figures or fictional characters can serve as role models. ..."
"... fear does us more harm than the things of which we're afraid. ..."
"... Finally, during a pandemic, you may have to confront the risk, the possibility, of your own death. Since the day you were born, that's always been on the cards. Most of us find it easier to bury our heads in the sand. Avoidance is the No1 most popular coping strategy in the world. We live in denial of the self-evident fact that we all die eventually. ..."
"... "All that comes to pass", he tells himself, even illness and death, should be as "familiar as the rose in spring and the fruit in autumn". Marcus Aurelius, through decades of training in Stoicism, in other words, had taught himself to face death with the steady calm of someone who has done so countless times already in the past. ..."
T he Roman emperor Marcus Aurelius Antoninus was the last famous
Stoic philosopher of antiquity. During the last 14 years of his life he faced one of the worst
plagues in European history. The Antonine Plague, named after him, was probably caused by a
strain of the smallpox virus. It's estimated to have killed up to 5 million people, possibly
including Marcus himself.
="rich-link__link u-faux-block-link__overlay" aria-label="'What it means to be an American':
Abraham Lincoln and a nation divided"
href="https://www.theguardian.com/books/2020/apr/11/abraham-lincoln-verge-book-ted-widmer-interview">
From AD166 to around AD180, repeated outbreaks occurred throughout the known world. Roman
historians describe the legions being devastated, and entire towns and villages being
depopulated and going to ruin. Rome itself was particularly badly affected, carts leaving the
city each day piled high with dead bodies.
In the middle of this plague, Marcus wrote a book, known as The Meditations, which records
the moral and psychological advice he gave himself at this time. He frequently applies Stoic
philosophy to the challenges of coping with pain, illness, anxiety and loss. It's no stretch of
the imagination to view The Meditations as a manual for developing precisely the mental
resilience skills required to cope with a pandemic.
First of all, because Stoics believe that our true good resides in our own character and
actions, they would frequently remind themselves to distinguish between what's "up to us" and
what isn't. Modern Stoics tend to call this "the dichotomy of control" and many people find
this distinction alone helpful in alleviating stress. What happens to me is never directly
under my control, never completely up to me, but my own thoughts and actions are
– at least the voluntary ones. The pandemic isn't really under my control but
the way I behave in response to it is.
Much, if not all, of our thinking is also up to us. Hence, "It's not events that upset us
but rather our opinions about them." More specifically, our judgment that something is really
bad, awful or even catastrophic, causes our distress.
This is one of the basic psychological principles of Stoicism. It's also the basic
premise of modern cognitive behavioral therapy (CBT), the leading evidence-based form of
psychotherapy. The pioneers of CBT, Albert Ellis and Aaron T Beck, both describe Stoicism as
the philosophical inspiration for their approach. It's not the virus that makes us afraid but
rather our opinions about it. Nor is it the inconsiderate actions of others, those ignoring
social distancing recommendations, that make us angry so much as our opinions about them.
Many people are struck, on reading The Meditations, by the fact that it opens with a chapter
in which Marcus lists the qualities he most admires in other individuals, about 17 friends,
members of his family and teachers. This is an extended example of one of the central practices
of Stoicism.
Marcus likes to ask himself, "What virtue has nature given me to deal with this
situation?" That naturally leads to the question: "How do other people cope with similar
challenges?" Stoics reflect on character strengths such as wisdom, patience and
self-discipline, which potentially make them more resilient in the face of adversity. They try
to exemplify these virtues and bring them to bear on the challenges they face in daily life,
during a crisis like the pandemic. They learn from how other people cope. Even historical
figures or fictional characters can serve as role models.
With all of this in mind, it's easier to understand another common slogan of Stoicism:
fear does us more harm than the things of which we're afraid. This applies to
unhealthy emotions in general, which the Stoics term "passions" – from pathos ,
the source of our word "pathological". It's true, first of all, in a superficial sense. Even if
you have a 99% chance, or more, of surviving the pandemic, worry and anxiety may be ruining
your life and driving you crazy. In extreme cases some people may even take their own
lives.
In that respect, it's easy to see how fear can do us more harm than the things of which
we're afraid because it can impinge on our physical health and quality of life. However, this
saying also has a deeper meaning for Stoics. The virus can only harm your body – the
worst it can do is kill you. However, fear penetrates into the moral core of our being. It can
destroy your humanity if you let it. For the Stoics that's a fate worse than death.
Finally, during a pandemic, you may have to confront the risk, the possibility, of your
own death. Since the day you were born, that's always been on the cards. Most of us find it
easier to bury our heads in the sand. Avoidance is the No1 most popular coping strategy in the
world. We live in denial of the self-evident fact that we all die eventually. The
Stoics believed that when we're confronted with our own mortality, and grasp its implications,
that can change our perspective on life quite dramatically. Any one of us could die at any
moment. Life doesn't go on forever.
We're told this was what Marcus was thinking about on his deathbed. According to one
historian, his circle of friends were distraught. Marcus calmly asked why they were weeping for
him when, in fact, they should accept both sickness and death as inevitable, part of nature and
the common lot of mankind. He returns to this theme many times throughout The Meditations.
"All that comes to pass", he tells himself, even illness and death, should be as
"familiar as the rose in spring and the fruit in autumn". Marcus Aurelius, through decades of
training in Stoicism, in other words, had taught himself to face death with the steady calm of
someone who has done so countless times already in the past.
Donald Robertson is cognitive behavioural therapist and the author of several books on
philosophy and psychotherapy, including Stoicism and the Art of Happiness and How to Think Like
a Roman Emperor: The Stoic Philosophy of Marcus Aurelius
Indeed, the unfolding collapse now underway shouldn't be called either a recession or a
depression. These terms denote the macroeconomic contraction triggered by bursting credit or
other financial bubbles and they usually take many months to reach full intensity.
But this one literally arrived at warp speed and with orders of magnitude greater
contractionary force than normal business cycle downturns. It is therefore sui generis ;
it stemmed from panicked officialdom who ordered households and businesses alike to abruptly
"cease and desist" from their daily economic activity upon penalty of fine, jail and public
opprobrium.
The good folks at Moody's Analytics captured the breathtaking speed of the resulting plunge
in the chart below in which they tracked the number of U.S. counties falling under lockdown
orders (blue bars) with an estimate of the cumulative loss in daily GDP (ascending red
line).
Whether this is accurate to the percentage point is immaterial and will be adjudicated after
several years of jobs and GDP data revisions. But what can't be gainsaid is that in the short
span between March 16 and April 6th depicted in the graphic -- something like one-third of US
GDP ceased to happen.
When in the modern day world of nearly unfathomably complex economic linkages, incredibly
long supply chains and interactive feed-back loops you have one-third of economic activity go
dark in just 21 days, the damage is likely to be enormous, even if the interruption is
comparatively short-lived.
But in the present instance the US economy was so fragile and deeply impaired owing to
30-years of debt, speculation and malinvestment-fueled false prosperity that it resembled an
economic hemophiliac stumbling into a knife fight. The bleeding will be profuse and
long-lasting because the American body economic had no defenses.
We shall lay out chapter and verse on the cash flow vulnerability of the preponderant share
of US households and businesses in subsequent installments. But sometimes a picture is truly
worth a thousand words and this– cars lined-up at a San Diego food bank -- is one of
them.
Ordinary urban poor folk don't line up at the soup kitchen in their late vintage autos and
SUVs. This is the hand-to-mouth economy lined up for food in cars that will soon be nabbed by
the repo man.
So the question recurs. Why did Lockdown Nation strike the everyday American economy out of
the blue and who is responsible?
That is to say, Lockdown Nation itself is the product of a contagion of public policy
Hysteria, so who is Patient Zero?
We think there is little doubt that it is the Donald himself, as we chronicle below. It is
only his overweening, pugnacious, polarizing political persona that could have transformed a
moderate public health threat into a politicized death struggle that is literally suffocating
the American economy and the social life which depends upon it.
But for want of doubt let us remind that there was never any case for Lockdown Nation -- not
on March 16 when the Trump White House issued its stay-at-home guidelines nor subsequently --
based on the pubic health impact of the coronavirus.
That's because Covid-19 would be considered a despicable bully if it were an animate being.
It overwhelmingly brings serious illness and death upon the old, frail and already
disease-ridden, not the general population.
Even many of the rare deaths among younger people appear to be attributable to an unusual
genetic condition which causes the number one killer of the coronavirus -- the human immune
system -- to launch an unhinged counterattack called a "cytokine storm" that ends up maiming or
killing the patient, not the virus (fortunately, there are immune system suppressants that can
treat these if caught early enough).
Thus, as of April 25 when the CDC had scored 40,072 "confirmed or presumed" Covid19 deaths,
the breakdown by age was unassailably dispositive:
· Age 0-14: 5 deaths among 60.9 million or a mortality rate of 0.008 per 100,000;
· Age 15-34: 354 deaths among 88.7 million or a mortality rate of 0.39 per 100,000;
· Age 35-64: 7,907 deaths among 125.8 million or a mortality rate of 6.3 per
100,000;
· Age 65-84: 19,840 deaths among 45.9 million or a mortality rate of 43.2 per
100,000;
· Age 85 and older: 11,966 deaths among 6.54 million or a mortality rate of 182.9 per
100,000.
So the average mortality rate for the entire US population as of April 25, which was 12.2
deaths per 100,000, is completely meaningless from the perspective of remedial public health
policy. It is a reminder of the old adage that you can drown in a river with an average depth
of 3 feet if you end up in a deep, vicious eddy pool.
Likewise, you don't rationally shut down schools when the mortality rate for kids is a
rounding error; and keeping the kids out of school does nothing for their grandparents and
great-grandparents if they are self-isolated anyway, as the should be, when their mortality
risk is 22,800 times higher!
Indeed, among the cohorts of the working age population age 35-64, there is absolutely no
basis in the mortality rates for shutting down places of work. The normal, total mortality rate
for this 126 million-strong core of the work force, in fact, is nearly 500 per 100,000
annually.
So the Covid death count to date amounts to just 1.3% of the normal mortality rate. What
posse of fools advised the Donald, therefore, to monkey-hammer the working economy on account
of that?
Moreover, our eddy pool analogy could not be more spot on. A new analysis of elderly New
York hospital patients who died WITH Covid-19 showed that 94% suffered from at least one
life-threatening morbidity such as hypertension or respiratory illnesses, and 88% had at least
two.
That is to say, based one age alone, the Covid is a perfect case of the Pareto 20/80 rule.
In this case, the 65 years and older population (52.4 million) accounts for 16% of the US total
population (327.2 million) but 79% of the WITH Covid-19 deaths.
But when you overlay, the comorbidity incidence among those 16%, the real highly vulnerable
population turns out to be 5% or less.
So the fact that we got to Lockdown Nation with lightening speed given these facts is surely
a case of President Truman's famous sign on his Oval Office desk that read, "the buck stops
here".
The truth is, the Donald is lazy, weak, indecisive, notoriously ill-informed and an
atrocious chooser of advisors, and it is exactly those attributes that lead to the March 16
stay-at-home guidelines from the Oval Office.
Had the Donald not foolishly embraced the misbegotten project of the Infectious Disease
Lobby to stop the spread of the coronavirus through the US population cold, which is
self-evidently impossible with a ultra-contagious airborne virus, the Dem mayors and governors
would not have had the political hall pass to instantly pile on the lockdown wagon.
Ironically, the Dems were desperately searching for a way to discredit the Donald's phony
Greatest Economy Ever boast, and the Donald handed them what amounts to an economic bunker
buster bomb on a platter.
Indeed, choosing bad advisors and listening to them is the Donald signature failing. After
all, if the gravamen of your foreign policy is America First and you appoint as your top
national security advisor the most unhinged apostle of Empire First on the entire planet, John
Bolton, you are either stupid as hell or semi-comatose.
So the Donald is, in fact, the Patient Zero who spread the virus of Lockdown Nation because
he was either too lazy or too dumb ask the obvious question, as we will amplify in Part 2.
But in the meanwhile, WSJ columnist Holman Jenkins got it right:
We started off sensibly. 'This is not something [American families] generally need to worry
about,' said CDC's Dr. Nancy Messonnier in mid-January. 'It's a very, very low risk to the
United States,' said Dr. Anthony Fauci a week later.
Bill de Blasio, mayor of New York, urged residents to go about their business normally as
recently as March 11.
But then on March 16, the Donald entered the White House briefing room and
announced a sweeping plan to slow the spread of the coronavirus.
And it was based on the extremely bad advice of Dr. Fauci and the Scarf Lady (Deborah Birx),
both lifetime government bureaucrats who had absolutely no concept of the economic Mayhem that
Lockdown Nation would instantly foster.
So Patient Zero thereafter droned on night after night during this reality TV show in the
stupid belief that the US economy was so strong that it could handle a 15-day Spring
Vacation.
Never was a US President more misguided:
Stay home for 15 days, he told Americans. Avoid groups of more than 10 people. 'If everyone
makes this change, or these critical changes, and sacrifices now, we will rally together as
one nation and we will defeat the virus,' he said.
On Sunday, the night before Day 15, Trump told the country to stick with the plan for
another month, until April 30.
'The better you do, the faster this whole nightmare will end,' Trump said.
'We're getting rid of the virus,' he said. 'That's what we're doing. That's the best thing
we can do. By the way, for the markets. For everything. It's very simple. It's a very simple
solution. We want to get rid of it.'
Indeed, the Donald got so bamboozled in part because of his own massively
exaggerated view of his role. He came to view the absolutely catastrophic stay-at-home
guidelines as merely another case of closing things down which aren't his to close–like
the border with Mexico.
Trump described the decision to issue the guidelines as 'one of the most difficult decisions
I've ever made' and said he was skeptical when his medical experts came to him with the plan.
'I wasn't happy about it,' he said on Fox News last week. 'They came in -- experts -- and
they said, "We are going to have to close the country." I said, "We have never closed the
country before. This has never happened before." I said, "Are you serious about this?"
But without hardly a further moment of reflection, he promptly declared himself a
War President, and we were off the races to Lockdown Nation.
But on this matter, the great Randolph Bourne was more than clairvoyant fully one century
ago:
The moment war is declared, however, the mass of the people, through some spiritual alchemy,
become convinced that they have willed and executed the deed themselves.
They then, with the exception of a few malcontents, proceed to allow themselves to be
regimented, coerced, deranged in all the environments of their lives, and turned into a solid
manufactory of destruction toward whatever other people may have, in the appointed scheme of
things, come within the range of the Government's disapprobation.
The citizen throws off his contempt and indifference to Government, identifies himself
with its purposes, revives all his military memories and symbols, and the State once more
walks, an august presence, through the imaginations of men.
Even as Americans struggle to deal with a deadly and seemingly unprecedented pandemic, it
isn't too soon to wonder how the present crisis will shape our collective understanding about
the dangers that we face, and the best means for addressing them.
One thing, however, is obvious: the military and other tools of force and coercion that are
generally useful against traditional threats -- from invading foreign armies to swarms of
killer drones -- are essentially irrelevant against killer bugs. Indeed, as the plight of
the aircraft carrier USS Theodore Roosevelt reminds us , military personnel might be more
vulnerable to infectious diseases than the general population.
... ... ...
Military-centric solutions, however, may be upended by COVID-19. Americans no longer feel
safe, even in their own homes. The threat posed by an invisible silent killer is even more
ominous than that of terrorists who were also mostly invisible ( or perhaps
non-existent ). In a time when the United States' physical security can no longer be taken
for granted, will Americans be as tolerant of a national security strategy aimed at protecting
others from invasion or coercion? And will they be willing to pay for a military geared to
fighting foreign enemies abroad, especially when more urgent threats are already here?
Opportunity costs
The need to balance between foreign and domestic priorities is ever-present. In his "
Chance for
Peace " speech of April 1953, President Dwight Eisenhower famously spelled out the
tradeoffs.
"Every gun that is made, every warship launched, every rocket fired signifies, in the
final sense," he said then, "a theft from those who hunger and are not fed, those who are cold
and are not clothed."
He observed that a bomber cost the equivalent of 30 schools, "two fine, fully equipped
hospitals" or "50 miles of concrete highway."
Teachers would later point to that speech, invoking Eisenhower's name to justify cuts in
military spending to obtain increases for education. Others wished for the day when schools
would have all that they needed, while the Air Force would have to hold a bake sale to buy a
bomber. Doctors and nurses are now broaching similar issues with respect to intensive care
units and personal protective equipment.
To critics, such calls were always silly and short-sighted. The United States could have it
all, they told us. Good schools, good healthcare and a military capable of fighting many
battles simultaneously, including on behalf of others.
Zero-sum thinking, and fiscal conservativism generally, they said, unnecessarily forced the
United States to fight its adversaries with one arm tied behind its back. By unleashing
America's growth potential, fueled by government spending -- including spending on the military
-- we would create an economy that could pay for both guns and butter.
Those claims persist. When the United States was waging wars in Iraq and Afghanistan, plus
hunting al-Qaida on at least four continents, defense spending advocates dismissed calls to
actually pay for such wars with higher taxes or major cuts in popular social programs.
Even after the 2008 financial crisis, they dismissed talk of offsets or spending caps as
reckless and unnecessary.
Plus, advocates for higher defense spending are always quick to add, don't forget about the
spin offs -- from the microwave to the Internet to GPS. Government investment into basic
research for the military made possible a range of consumer goods that wouldn't exist in the
absence of such activity.
To be sure, some military spending might be relevant in the current crisis. The lab at Fort
Detrick, in Frederick, Maryland – -- officially the U.S. Army Medical Research Institute
of Infectious Diseases -- is now
on the frontline of the search for a vaccine against COVID-19 .
The facility represents a tiny fraction of the entire Army budget, however, and has often
been a tempting target for those seeking funds for other more urgent priorities. Earlier this
year, the Trump administration proposed to cut $104 million from the lab's budget. Now, they're
looking to boost funding for the institute and other labs by $900 million. Is this an
early indication that our priorities have actually changed?
In the post COVID-19 era, who will call for cutting the budget of an agency that might have
stopped the outbreak in 2020? Who will argue that hospital beds or N-95 masks aren't needed,
but that the cost of maintaining U.S. troops in Europe is an expense that we simply must bear?
Who will say that more F-35s are vitally important for our security, but we don't need to
research how to defeat an invisible killer?
We may get a sense soon. A poll taken just before the current crisis found a healthy
plurality of Americans believing that U.S. military
spending was about right . But in the just-passed $2.2 trillion aid package, the Pentagon
came away with about $10 billion -- a mere 0.5 percent of the total, and a far cry from the
roughly 55 percent of discretionary spending that it receives in a typical year.
All of the above
Pentagon spending advocates are likely to argue that we cannot prioritize. To take our eyes
off foreign threats while addressing the one here among us, they will say, would expose the
entire planet to extreme peril.
Ever since the dawning of the nuclear age, we envisioned this grave danger as a
life-extinguishing mushroom cloud -- actually many mushroom clouds. In the last few weeks,
we've seen glimpses of a different danger; patients gasping for air as a microbe attacks their
lungs, and left in hallways, or in the streets, because there aren't enough ICU hospital beds
or ventilators. Can we care for all of these people, while also spending hundreds of billions
of dollars on a military that operates mostly far from our own shores?
The tradeoffs are rarely so stark. Soldiers and Marines proved commendably flexible after
9/11. Ships and planes can be moved. But the military instrument that was useful for dealing
with petty tyrants from Saddam Hussein to Muammar Gaddafi, and was even suitable for use
against terror group leaders, seems uniquely unsuited for defeating microscopic
pathogens.
Nevertheless, the safe bet is that inertia will prevail. Strategists and policymakers will
push to retain the fight-forward approach for most traditional threats, and then layer the
additional expenses required to deal with infectious diseases on top of all the rest.
But while the coronavirus won't change everything, it will change many things. The
response to it has already put enormous strain on the U.S. economy. Sen. Chris Murphy (D-Conn.)
called on U.S. policymakers to begin preparing now for the next pandemic. It seems
inevitable that measures taken to avoid a repeat of the current crisis will impose costs, much
as the post-9/11 response did for nearly every person and industry.
COVID-19's more lasting effects, however, could be seen in whether, and how, we restructure
our government, and what it means for civil liberties. A U.S. government strong enough to
mobilize all of society's resources against all threats would compel us to depart from our
founding traditions, and would ultimately threaten Americans' freedom and prosperity. We might
be getting a glimpse of that today, with stay-at-home orders, compulsory business closures, and
yet another massive increase in debt-funded government spending.
Sensing the danger of overreaction to crises, President Eisenhower sought "balance in and
among national programs," as he explained in his farewell address , "between
the private and the public economy" and "between action of the moment and the national welfare
of the future."
Finding that balance post-COVID-19 will require us to revisit all of the things that we say
we need to do to keep us safe. And it should entail finally shifting resources away from the
military, and dropping a militarized approach to global problems, in favor of the many other
instruments of American power and influence.
Some will know who Hyman Minsky was, some won't. Hudson gives him the primary credit for
providing the foundation for Modern Monetary Theory, and he gets praise from Keen, Wolfe and
many others too. On the occasion of his 100th birthday, here's a
long essay that seeks the following:
"But the question still stands: Was Minsky in fact a communist? Of course not. But, a
century after his birth, it is useful to clarify often neglected aspects of his intellectual
biography."
Since Minsky's referenced so often by Hudson particularly, I think this piece will be
helpful for those of us following the serious economic issues now in play. I'd reserve an
hour for a critical read.
"Around 2008, we lost 8.7 million jobs and the whole thing. Right now, we're losing that
many jobs about every 10 days," Hassett said. "And so the economic lift for policymakers
is an extraordinary one."
NEW: White House senior adviser Kevin Hassett tells @gstephanopoulos that the
economic outlook is a "really grave situation.""We're going to be looking at an unemployment
rate that approaches rates that I think we saw during the Great Depression." https://t.co/vM8WcrQKg0
pic.twitter.com/ds7QtseNqe
Unemployment peaked during the Great Depression in 1933 when rates hit 25 percent. They have
only topped 10 percent twice since then, once in 1982 and again in 2009.
Over 26 million Americans have filed for unemployment benefits during the Covid-19 pandemic,
and it will likely top 27 million very soon once what could be millions of backlogged claims
can be processed. The Congressional budget office forecasts the unemployment rate rising from 3.8
percent to 14 percent in the second quarter of 2020 and then 16 percent in quarter three and
finally making its way down to 10.1 percent by the end of 2021.
karlof1 @ 100, thank you. Both your links were well worth reading, especially as no
interrupting ads or distracting obstructions made it possible to do so. I'll just highly
recommend the Crooke article for its historical references and suggestion of hopeful outcome.
I was much reminded of the Oedipus cycle which focuses on plague in Thebes as the pivotal
point of ultimate pressure - that last grain of sand, so to speak. History doesn't repeat,
fortunately, but it does rhyme! And knowledge is indeed power.
Thanks for your replies! There're plenty of happenings, writings and videos to keep a
person very busy if that's the desire--those expressing boredom are actually confessing
laziness. As April concludes, we'll soon be treated to the latest economic stats. Here's part
of what the owner of Shadowstats had to say today:
"PENDING PANDEMIC AND OIL-PRICE IMPACT: Initial Contraction in First-Quarter 2020 GDP
Likely Will Be Deeper Than the 3.5% (-3.5%) Consensus / ShadowStats Forecasts an Annualized
1q2020 GDP Drop of 7.1% (-7.1%), Deepest Since Great Recession Depths; Second-Quarter GDP
Likely the Deepest Drop Since the Great Depression, If Not Worse / Headline April 2020
Unemployment Should Soar to About 21%, Worst Since Great Depression."
A U6 unemployment of 21% would send actual unemployment as tracked by Shadowstats to close
to 40% and overall GDP shrinkage may go beyond 10% annualized. Real per capita GDP may fall
below that of 1970, which will cause a fiscal crisis in every state as they fall way short of
projected revenues. There's already a caustic debate happening between states and the
Treasury and State Departments about bailing them out instead of the Money Power. Talk of
Secession and Nullification are becoming louder rekindling arguments never really solved from
the 1820s&30s. Try as they might, Trump and Pompeo's campaign to blame it all on China
will fail as the economic problems have remained since 2008-9, statistical trickery
notwithstanding. One thing's already certain: This election year will be like no other.
Going back to our thesis that "
The Market Is Now Just 5 Stocks ", Kostin next notes that because many of the recent
outperformers had also been market leaders prior to the coronacrisis, their recent gains have
led to a surge in already- elevated market concentration.
While coming into 2020, the five largest S&P 500 stocks accounted for 18% of index
market cap, matching the share at the peak of the Tech Bubble in March 2000, since then, those
stocks (MSFT, AAPL, AMZN, GOOGL, FB) have risen to account for 20% of market cap, representing
the highest concentration on record.
Which brings us to Goldman's ominous warning #1 : "We
opined in January that the earnings power and valuations of the top five stocks suggested they
could avoid the fate of the top stocks in 2000. However, the further market concentration
rises, the harder it will be for the S&P 500 index to keep rising without more broad-based
participation . " In other words, if the dispersion continues to soar, and if the entire upside
in the S&P500 is thanks to just five stocks, not even Goldman can see a happy ending.
If that wasn't enough, Goldman also has an ominous warning #2 , namely that sharp declines
in market breadth in the past, of the kind we see now, have often signaled large market
drawdowns. For example, in addition to the Tech Bubble, breadth narrowed ahead of the
recessions in 1990 and 2008 and the economic slowdowns of 2011 and 2016. This is also observed
empirically, as historically sharply narrowing breadth has signaled below-average 1-, 3-, and
6-month S&P 500 returns as well as larger-than-average prospective drawdowns.
That said, Goldman refuses to put a timeline to its dour outlook, and notes that periods of
narrow market breadth can last for extended periods. Since 1980, the breadth measure charted in
Exhibit 2 has indicated 14 episodes of breadth narrowing more than one standard deviation, as
it does today. The median episode persisted for three months, with the longest lasting 27
months from 1998-2000.
However, eventually, "narrow market breadth is always resolved the same way. Often, narrow
rallies lead to large drawdowns as the handful of market leaders ultimately fail to generate
enough fundamental earnings strength to justify elevated valuations and investor crowding. In
these cases, the market leaders "catch down" to weaker peers." This is the scenario laid out by
Nomura last
week in our post " Spectacular Momentum Crash" Imminent As Record Human Hedge Fund Selling
Meets Furious Robot CTAs Buying ." In other cases, an improving economic outlook and
strengthening investor sentiment help laggards "catch up" to the market leaders, which also
results in a violent drawdown as the leaders get repriced sharply lower .
The bottom line, however, is that in both cases, "on a relative basis the outperformance of
market leaders eventually gives way to underperformance."
What does this mean in practical terms? As Goldman concludes, since 1980, its long/short
Momentum factor has generated a median unconditional 12-month return of +400 bp "but a 12-month
return of -300 bp following periods of narrow market breadth like today." In short, while it
may not necessarily be "spectacular", Goldman agrees with Nomura that a momentum crash is dead
ahead. And with that pessimistic view, Goldman - which just two weeks ago called the "bottom"
in the S&P500, has
joined Morgan Stanley's "notorious bear-turned-bull" Michael Wilson in warning that stocks
are now overbought and that a "correction will begin soon."
This is a time to be "extremely careful," Icahn said in an interview Friday on Bloomberg
Television.
The 84-year-old's reasoning is simple - and terrifying for the average commission-raker and
asset-gatherer - having traded through every stock-market crash since the Great Depression, the
future is just too unpredictable for the S&P 500 to be trading at almost 20 times next 12m
earnings estimates ...
"You cannot really justify that multiple," Icahn said.
Watching a fight yesterday in Walmart between couple of fat American female sweathogs over
TP convinced me that Uncle Sam will be flushed down the toilet long before the EU.
As I've written in the past few weeks, the number of initial jobless claims correlates
roughly with the number of net new jobs added or subtracted in any given month. Normally
there is too much noise for it to be of much value, but with the huge spike in the past
month, the signal will come through much more strongly.
@anon Lets add to the bigger picture. With regards to Israel: Exceptions don't make the
rule.
_______
The forces that off-shored the jobs, to then make wage arbitrage and become masters of the
universe, are the very same ones that are now demonizing China.
They are "international" in outlook, and the only national country that matters to them is
Israel.
In general, it is a "class" of people -sometimes called "Davos Man" who goes by other
names, such as globo-homo, ZOG (zionist world government), Ne0-Con, Neo-Liberal.
Globo-Homo couldn't resist the wage arbitrage that China represented after the Berlin Wall
fell in 1990. Clinton gave China effective MFN status in 1993. Wall Street begins Green Mail
Coercion Techniques against American industry to then off-shore jobs.
China also runs a simultaneous gambit against the U.S. by buying up TBills instead of
goods from U.S. main-street. This then insures that U.S. dollar is propped up against the
Yuan e.g. currency manipulation. The China/Wall Street Gambit is in full swing, and
globo-homo is happy.
Globo-Homo doesn't care about the destruction of American Mainstreet, because only prices
matter, and they are getting rich. China becomes the workshop for the world.
There are still elements within Globo-Homo that like their easy money derived from
ownership of transplanted industry.
If you look at today's propaganda emission center for China psy-ops you will see that it
is another mouthpiece and organ of the "international." They are festooned with neo-liberals
and ne0-cons.
Why the sudden shift, where China is the golden goose, to becoming the enemy?
Summary: There are two main enemies against American Mainstreet Labor. There is the
internal and international enemy of globo homo centered in Wall Street and London, and there
are elements within China that used Mercantile techniques to continue imbalanced trade and
theft of American patrimony and industry.
Globo homo has new marching orders, as they have belatedly realized that they got played.
The jig is up, you cannot operate the usury mechanism, do speculation, and RIG THE WORLD,
forever.
The U.S. military security state has communicated clearly, they don't like their
"international" supply chains and loss of U.S. domestic manufacturing. Globo Homo has long
used the US. military as a Golem which protected movement of ships from China's east
coast.
Atlantacist Method: Raw materials come into China by Ship, and finished Goods leave by
ship. Globo Homo ownership class takes the increment of production and wage arbitrage as
gains. Wall Street/London is a hero, main street is a zero.
A quick study of history shows that when exploiting elites are doing great, they all
faithfully support each other, but when things start to go south, they immediately turn on each
other. The best recent example of this phenomenon is the schism in the US ruling elites who,
since the election of Trump, have immediately turned on each other and are now viciously
fighting like "spiders in a can" (to use a Russian expression). In fact, this is so true that
it can even be used as a very reliable diagnostic tool: when your enemies are all united, then
they are probably confident in their victory, but as soon as they turn on each other, you
*know* that things are looking very bad for your opponents. Likewise, we now see how southern
Europeans are getting really angry with their northern "EU allies" (
Macron seems to be falling in line behind Trump even if he uses a more careful and
diplomatic language). Finally, the way the US CIA has one foreign policy, the Pentagon another
and Foggy Bottom one of its own (even if limited to sanctions and finger-pointing) tells you
pretty much all you need to know to see how deep the systemic crisis of the Empire has
become.
This cannot be overemphasized: "Last, but most certainly not least, the Europeans will find
out (and some already have), that the US literally does not give a damn about not only
regular Europeans, but even about the European ruling classes."
That has been the defining pattern of WASP culture since its formation (or completion with
the rise of Anglo-Saxon Puritanism). But it is more generally a hallmark of Germanic
pagans/warlords. It is about endless rapine with honor given to those who help those above
them secure more spoils. There is zero concern for the working man (whether he tends cattle
to feed the rich or rows the viking boats), and the honor for others in the chain of command
lasts only as long as they profit those above them.
The chief Elites of the Anglo-Zionist Empire are, obviously, all tied directly to the US.
The Brit Elites have the honorary position of being the second most prestigious. Every other
nation's Elites are on rather thin ice. The second that French Elite stop pimping for Uncle
Sam is the second that the Elites of the Anglo-Zionist Empire see them as trash that must be
removed.
The naive backers of the EU still assume that that alliance is what saves them from the US
inflicting direct overlordship. They are damned fools, because the EU acts in concert with
the Anglo-Zionist Empire on all major matters that, ultimately, will make all of Western
Europe a playpen for the Anglo-Zionist Elites.
And for our VDARE crowd – that is the reality of the spread of English language and
of WASP run empire. When it moves from a small local church and community, WASP culture must
be perpetually imperialistic and philoSemitic. It must destroy non-WASP European cultures,
forcing their leaders to bow and assimilate to WASP hegemony.
MMT is brilliant and it's really embarrassing that it took The Deadliest Pandemic™ for
some folks to come round to it. We all collectively print an extra bit of money - and give it
to each other!
There are historic examples documented of successful applications of the concept, look no
further than to the earnest witness of Baron Munchausen pulling himself out of a swamp by his
own hair. https://en.wikipedia.org/wiki/Baron_Munchausen
Hudson also has another video posted to
his site , "An interview on the Radical Imagination: Imagining How Financial Parasites
and Debt Bondage Are Destroying Us," which is based on his book Killing the Host .
It's a recent video interview that's @50 minutes long prefaced by the Occupy Wall Street
Anthem and introduction.
One aspect of MMT that must be made clear is it advocates the use of public banking or the
Treasury to pump capital in the form of money into the productive economy , not the
parasitic economy the Fed supports--the difference is huge and vital. For MMT to succeed
within the Outlaw US Empire, the Fed must be liquidated. For more, please read the essay I
linked to @35.
Musburger @ 3 : "What do you folks think about MMT?"
Re-inflation of a depressed economy can be achieved by government spending into:
public investment
employment
income transfers
income support
labour
tangible capital
infrastructure.
This is "good" MMT.
"Bad" MMT, or fake MMT, is government spending into WallStreet, handouts to:
the banks
large corporations
speculators
bondholders.
The March 2020 CAREs Act is bad MMT as was the 2008 bailout. This one is same as that one
but "on steroids."
Both bailouts further empower(ed):
rentiers (the landlord class),
monopolies,
the financial creditor class
and cast most of the rest of the US population into reduced circumstances, poverty and/or
debt servitude. They burden the working economy with overhead and debt that cannot be paid.
Bad MMT.
While the MMT school has a healthy diversity within it, USG applications have flipped the
theory on its head, says Hudson. See below for link.
(Remember Cheney's, "We are all Keynesians now"? )
Worse, Bad MMT does more than simply bailout the top 1%. It also increases the parasitic
power of financialization on the real economy. As we have repeatedly seen, now most
dramatically, the financial sector is incapable of planning for anything other than its own
fictional valorization.
Libertarians' freedom from government dogma excoriates against centralized planning and
yet, ironically, the end result of their "government is bad" path forced upon us in USA led
directly to central 'planning' by default -- by parasitic-on-the real-economy privatized
finance sector, a form of fascism not democracy or liberty.
USA'ns public health crisis occurs as states, which are required by law to not run
deficits, face huge costs that will force more austerity on their populations. More callous,
they are forced to compete against each other as they purchase essential equipment and
technology (from for-profit privateers) to deal with the highly infectious novel virus, and
the fed indemnifies the privateer mask makers!!!
What is the root of inequality today? Debt and the monopolization of real estate.
What are solutions?
Wipe out and roll back debt overhead on production and consumption.
This is "good" MMT.
Bad MMT furthers the debt burden on society, concentrates monopolization and cements in
central planning by parasitic private finance sector.
If ever there was a time, it's now. Oil has bottomed out. They can top off the national
reserves on the cheap and profit when their war sends prices up again. Maybe it's why The
Orange Goober has ordered the Navy to "shoot down" any Iranian boats that
harass/approach/rudely gesture at US ships.
Ritter's article worries me. There is now a sales argument for war: "don't worry about oil
prices going sky high, Iran can't use that weapon against us now!".
You over excitable little Iran war-monkeys really should take time out of your busy
war-monkey daily-schedules to learn something about the topography of Iran and it's defensive
and offensive military capabilities.
It would certainly save everyone else from having to listen to you being wrong yet
again.
You're on the right track. There's a huge supply glut as all forms of storage are mostly
filled as proven by the negative WTI pricing. Global demand is still being destroyed. War in
the Persian Gulf region will further destroy demand; and since very little oil's being
shipped from there, the supply glut won't be used up anytime soon--certainly not quickly
enough to see a sharp rebound in oil price. The crucial point is domestic US refineries have
cut back their runs as their margins are even thinner than before, plus demand destruction is
still occurring, thus the domestic storage glut. The wife and I jested last night if we only
had a rail spur we could order up a couple of tank cars full of unleaded at the current very
distressed price and be set for a longtime.
As The
Saker notes in his latest , Trump must make the voting public look everywhere except at
him and Congress, the bellowing at Iran being part of that entire theatre. Yes, a mistake
could have very negative consequences for the USN and all US assets in the region as well as
Occupied Palestine--the overall underlying dynamic hasn't changed since Trump broke the Iran
Nuclear Treaty. Too add further insult to Trump and Pompeo, Iran's doing a
much better job at containing COVID-19 than the Outlaw US Empire :
"The US pandemic death toll is this week heading above 50,000 compared with Iran's figure
of 5,300. Considering the respective population numbers of 330 and 80 million that suggests
Iran is doing a much better job at containing the virus. On a per-capita basis, according to
publicly available data, Iran's mortality rate is less than half that of the US.
"This is while the US has sanctioned Iran to the hilt. American sanctions – arguably
illegal under international law – have hit Iran's ability to import medical supplies to
cope with COVID-19 and other fatal diseases, yet Iran through its own resources is evidently
managing the crisis much better than the US."
As with the Tar Baby, the more wrestling the Outlaw US Empire does the weaker it gets.
They can't invade. That's your own moronic straw-man. And yes, it would further cut supply
and prices would go up. The current bottom is due to overproduction but so long as
civilization cranks along the oil gets used eventually.
South Korea's GDP fell 1.4% (non annualized). That emergencial swap deal by the Fed saved
the day, but it can't last forever. The BoK is optimistic, and still thinks the South Korean
GDP will end 2020 growing. Blind hope.
Required Minimum Distributions (RMDs) generally are minimum amounts that a retirement plan
account owner must withdraw annually starting with the year that he or she reaches 72 (70
½ if you reach 70 ½ before January 1, 2020), if later, the year in which he or
she retires. However, if the retirement plan account is an IRA or the account owner is a 5%
owner of the business sponsoring the retirement plan, the RMDs must begin once the account
holder is age 72 (70 ½ if you reach 70 ½ before January 1, 2020), regardless of
whether he or she is retired.
Retirement plan participants and IRA owners, including owners of SEP IRAs and SIMPLE IRAs,
are responsible for taking the correct amount of RMDs on time every year from their accounts,
and they face stiff penalties for failure to take RMDs.
When a retirement plan account owner or IRA owner, who dies before January 1, 2020, dies
before RMDs have begun, generally, the entire amount of the owner's benefit must be distributed
to the beneficiary who is an individual either (1) within 5 years of the owner's death, or (2)
over the life of the beneficiary starting no later than one year following the owner's death.
For defined contribution plan participants, or Individual Retirement Account owners, who die
after December 31, 2019, (with a delayed effective date for certain collectively bargained
plans), the SECURE Act requires the entire balance of the participant's account be distributed
within ten years. There is an exception for a surviving spouse, a child who has not reached the
age of majority, a disabled or chronically ill person or a person not more than ten years
younger than the employee or IRA account owner. The new 10-year rule applies regardless of
whether the participant dies before, on, or after, the required beginning date, now age 72.
The RMD rules apply to all employer sponsored retirement plans, including
profit-sharing plans, 401(k) plans, 403(b) plans, and 457(b) plans. The RMD rules also apply
to traditional IRAs and IRA-based plans such as SEPs, SARSEPs, and SIMPLE IRAs.
The RMD rules also apply to Roth 401(k) accounts. However, the RMD rules do not apply to
Roth IRAs while the owner is alive.
You must take your first required minimum distribution for the year in which you turn age 72
(70 ½ if you reach 70 ½ before January 1, 2020). However, the first payment can
be delayed until April 1 of 2020 if you turn 70½ in 2019. If you reach 70½ in
2020, you have to take your first RMD by April 1 of the year after you reach the age of 72. For
all subsequent years, including the year in which you were paid the first RMD by April 1, you
must take the RMD by December 31 of the year.
A different deadline may apply to RMDs from pre-1987 contributions to a 403(b) plan (see FAQ
5 below).
Return
to List of FAQsHow is the amount of the required minimum distribution
calculated?
Generally, a RMD is calculated for each account by dividing the prior December 31 balance of
that IRA or retirement plan account by a life expectancy factor that IRS publishes in Tables in
Publication 590-B ,
Distributions from Individual Retirement Arrangements (IRAs) . Choose the life expectancy
table to use based on your situation.
Joint and
Last Survivor Table - use this if the sole beneficiary of the account is your spouse and
your spouse is more than 10 years younger than you
Uniform
Lifetime Table - use this if your spouse is not your sole beneficiary or your spouse is
not more than 10 years younger
It goes without saying that the consequences to workers are damaging to catastrophic.
Normally, being unemployed for more than six months is a near-insurmountable barrier to getting
hired again. Perhaps coronavirus will create a better new normal on this front, of companies
taking a more understanding view of crisis-induced resume gaps.
By Cheryl Carleton,
Assistant Professor of Economics, Villanova University. Originally published at The
Conversation
The labor market is changing rapidly with the onset of the coronavirus pandemic.
When
the economy starts to open up again, employers will need to consider rehiring or replacing
workers, or hiring workers with a different mix of skills. The cost of replacing an employee is
high for employers, and being out of work is harmful for workers, who may be replaced with
artificial intelligence or contractors and risk losing their skills.
There is no denying that the U.S. was experiencing a tight
labor market and a low rate of unemployment before the coronavirus pandemic took hold. For
some fields, particularly health care and services deemed essential by local governments, the
labor market continues to be tight.
A sudden massive loss of demand for their goods and services is forcing companies to make
quick decisions, and some employers may underestimate the cost to replace good employees.
Knowing these costs may encourage them to keep more of their workers on the payroll.
Where Are the Costs?
There are costs involved in losing a worker and replacing them, such as completing paperwork
when they leave, advertising the open position, reviewing resumes, interviewing candidates and
training the new worker.
Once a new worker is hired, others must also spend time training them, and it will take some
time for the new worker to achieve the same level of productivity as the worker who left.
Another cost is the loss in social capital . Social capital is
the relationships between individuals at work that take time to build and add to the
productivity of the firm.
The Center for American Progress drilled in deeper. They found the costs of replacing
workers who earn less than US$30,000 per year to be 16% of annual salary, or $3,200 for an
individual earning $20,000 per year.
For those earning $30,000 to $50,000 per year, it is estimated to cost about 20% of annual
salary, or $8,000 for an individual earning $40,000. For highly educated executive positions,
replacement costs are estimated to be 213% of annual salary – $213,000 for a CEO earning
$100,000 per year.
The much
higher cost for replacing CEOs is partly due to the fact that they require higher levels of
education, greater training, and firms may lose clients and institutional knowledge with such
turnovers.
Employee Alternatives
This high cost of losing and replacing workers has important implications for organizations,
consumers and workers, especially now with
an estimated 15 million unemployed .
For those workers where the costs to replace them are high, firms will try to accommodate
them. Strategies may include maintaining pay, increasing benefits and retraining. These actions
are also costly, so firms will
weigh them against the cost of simply
hiring new workers .
This means businesses face high costs to replace workers in the future, and high costs to
retain current workers, leading to higher costs for consumers who buy the firms' goods and
services.
While the above consequences might sound great for workers that organizations choose to
keep, these are not the only ways in which firms can respond.
The high cost of replacing workers, along with the increased uncertainty about the economy
may cause businesses to use
more automation and robots . Though such switches may entail a significant upfront cost,
once they are made the firms then have more control over their production processes.
Another alternative for firms is to hire fewer permanent employees and turn instead
to contract workers . With
contract workers, employers are not responsible for benefits, and they can more simply increase
or decrease the number of workers as needed.
While this may increase employment for some workers, it will decrease it for others and it
has serious implications for the availability of health and pension benefits as well as
unemployment benefits, as the current crisis has revealed.
Businesses might also consider limiting the scope of what some workers do to limit the cost
of replacing them. If the scope of a worker's job is limited, then fewer areas will be impacted
by the individual leaving, and the costs to train a replacement will be lower. For workers,
however, it means fewer opportunities to gain experience.
For example, instead of training workers on several or all parts of the production process,
the business may limit them to one specific aspect. It will then be less costly for the firm to
replace them and the worker will have less experience to add to their resume. This also means
less bargaining power for employees.
Some Win, But Others Lose
The high cost of losing and then hiring new workers along with increased restrictions on
hiring nonresidents might mean higher wages and increased benefits for some workers.
However, the high degree of uncertainty in the current labor market, along with the
potential increase in contract
workers and
automation means that some workers will not realize these potential gains, and all of us as
consumers will most likely end up paying higher prices for the goods and services we buy.
The coronavirus pandemic has upended the global economic system, and just as importantly,
cast out 40 years of neoliberal orthodoxy that dominated the industrialized world.
Forget about the "
new world order ." Offshoring and global supply chains are out; regional and local
production is in. Market fundamentalism is passé; regulation is the norm. Public health
is now more valuable than just-in-time supply systems. Stockpiling and industrial capacity
suddenly make more sense, which may have future implications in
the recently revived antitrust debate in the U.S.
Biodata will drive the next phase of social management and surveillance, with near-term
consequences for the way countries handle immigration and customs. Health care and education
will become digitally integrated the way newspapers and television were 10 years ago. Health
care itself will increasingly be seen as a necessary public good, rather than a private right,
until now in the U.S. predicated on age, employment or income levels. Each of these will
produce political tensions within their constituencies and in the society generally as they
adapt to the new normal.
This political sea change doesn't represent a sudden conversion to full-on socialism, but
simply a case of minimizing our future risks of infection by providing full-on universal
coverage. Beyond that, as Professor Michael Sandel
has argued , one has to query the "moral logic" of providing "coronavirus treatment for the
uninsured," while leaving "health coverage in ordinary times to the market" (especially when
our concept of what constitutes "ordinary times" has been upended).
Internationally, there will be many positive and substantial international shifts to address
overdue global public health needs and accords on mitigating climate change. And it is finally
dawning on Western-allied economic planners that the military price tag that made so-called
cheap oil and cheap labor possible is vastly higher than investment in advanced research and
next-generation manufacturing.
This also means that the old North (developed world) versus South (emerging world) division
that
long preoccupied scholars and policymakers in the post–World War II period will
become increasingly stark again, particularly for those emerging economies that have hitherto
attracted investment largely on the grounds of being repositories of low-cost labor. They will
now find themselves picking sides as they seek assistance in an increasingly divided and
multipolar world.
The fault lines of the next economic era have already begun to surface, creating friction
with the previous international structure of banking and finance, trade and industry. There is
a force beyond elites and critical industries driving this: The proletariat has literally
become the "precariat."
In the U.S. and Europe, the staggering number of service economy workers are going to be
quickly politicized by the shortfalls: People have seen a collapse in income, and big failures
in education, and health care. Union-busting, pension fleecing, and austerity budgets and new
technologies that concentrate wealth away from labor have created a circumstance where
ownership and profit models must be revisited to sustain stability. The needs are too acute to
be distracted by the lies of Trump, or the inadequate responses in other parts of the
industrialized world. The current crisis will likely prompt geopolitical and economic shifts
and dislocations we haven't seen since World War II.
Death of Chimerica, the Rise of New
Production Blocs
One of the biggest casualties of the current order is the breakdown of "
Chimerica ," the decades-old nexus between the U.S. and Chinese economies, along with other
leading countries' partnerships with Chinese manufacturing. While the geopolitics of blame for
the origins of coronavirus continue to shake out, the process that saw a decrease in exports
from China to the U.S. from
$816 billion in 2018 to $757 billion in 2019 will accelerate and intensify over the next
decade.
While a decoupling is unlikely to lead to armed conflict, a Cold War style of competition
could emerge as a new global fault line. Much as the Cold War did not preclude some degree of
collaboration between the U.S. and the former Soviet Union, so too today there may still be
areas of cooperation between Washington and Beijing from climate to public health, advanced
research to weapons proliferation.
Nor does this shift necessarily spell the sudden collapse of Chinese power or influence --
it has a colossal and still-growing domestic market and is on the international leaderboard for
a wide range of advanced indicators. But its status as the world's most desirable offshore
manufacturing hub is a thing of the past, along with the economic stability that steady inflows
of foreign capital brought with it. It does show a susceptibility to domestic stress, with the
Hong Kong protests last year providing a hint of what is in store as the party leadership can't
pivot to new realities that include slower economic growth and declining foreign
investment.
As investment flows turn inward back to industrialized countries, there will likely be
corresponding diminution of the global labor arbitrage emanating from the emerging world. In
general, that's a negative for the global South, but potentially a positive factor for workers
elsewhere, whose wages and living standards have stagnated for decades as they lost jobs to
competing overseas low-cost manufacturing centers (the increase in inequality
is principally a product of 40 years of sustained attacks on unions). The jobs won't be the
same, but to be sure, manufacturing incomes exceed those of the service industry.
As each country adopts a "
sauve-qui-peut " mentality, businesses and investors are drawing the necessary conclusions.
Coronavirus has been a wake-up call, as countries trying to import medical goods from existing
global supply chains face a
shortage of air and ocean freight options to ship goods back to home markets. Already, the
Japanese government has announced its plans "to spend over $2 billion to help its country's
firms move production out of China,"
according to the Spectator Index . The
EU leadership is publicly indicating a policy of subsidy and state investment in companies
to prevent Chinese buyouts or undercutting prices.
Two billion dollars is small potatoes compared to what is likely to be spent by the U.S. and
other countries going forward. And it can't simply be done via research and development tax
credits. The state can and must drive this redomiciling process in other ways: via
local content requirements (LCRs) , tariffs, quotas and/or government procurement local
sourcing requirements. And with a $750-billion-plus budget, the U.S. military will likely play
a role here, as it
ponders disruptions from overseas supply sources .
Of course, if the U.S. does this, other parts of the world -- China, the EU, Japan -- will
likely do the same, which will accelerate the regionalization trends in trade. This may mean
that some U.S. firms will have to operate in foreign markets through local subsidiaries with
local content preferences and local workforces (that is how it worked in the 1920s -- Ford UK
was a mostly local British company, different from the U.S. Ford Motor Company, but with shared
profits).
An examination of U.S. planning for the post-1945 world reveals the emphasis was on free
trade in raw materials mostly, not finished goods. (The U.S. only adopted one-way "free trade"
with its Asian and European allies later as a Cold War measure to accelerate their development
and keep them in the American orbit.)
Domestically within the U.S., as
Dalia Marin writes , the coming declines in interest rates will accelerate "robot adoption"
by 75.7 percent, with concentration "in the sectors that are most exposed to global value
chains. In Germany, that means autos and transport equipment, electronics, and textiles --
industries that import around 12 percent of their inputs from low-wage countries. Globally, the
industries where the most reshoring activity is taking place are chemicals, metal products, and
electrical products and electronics."
As the coronavirus pandemic is illustrating, a viable industrial ecosystem cannot work
effectively if it is dispersed to too many geographic extremities or there are insufficient
redundancies built into the transportation of goods back into the home market (rail, highway,
etc.). Proximity has become a significant competitive advantage for manufacturers, and a
strategic advantage for governments. But the U.S. government must play an expanded role in the
planning process. The U.S. is still a leader in many high-tech areas, but is suffering the
consequences of a generation-long effort to undermine the government's natural role as an
economic planner.
In the form of the regionalized blocs that are being sketched, in the Americas, Mexico is
likely to be one of the leading recipients of American foreign direct investment (FDI). It
already has a
$17 billion medical device industry and is sure to absorb much more capacity from China.
This has
already started to happen as a result of the U.S.–Mexico–Canada Agreement (USMCA,
or new NAFTA) . Furthermore, the
Washington Post reports that "[a]s demand soars for medical devices and personal protective
equipment in the fight against the coronavirus, the United States has turned to the phalanx of
factories south of the border that are now the outfitters of many U.S. hospitals." This is in
addition to the
thousands of assembly plants already in place in Mexico since the establishment of NAFTA.
Indeed, if the jobs that had moved to China move to Mexico, Central America, and South America,
this likely addresses many long-standing social tensions in regard to immigration management,
currency imbalances and corresponding black market industries (ironically, it also likely means
the end of Trump's wall, as the industrial ecosystem of the Americas becomes more cohesive and
widespread).
Big Business Is Good Business
But this will also have significant impacts closer to home: Much as Franklin Delano
Roosevelt ultimately
prioritized domestic ramp-ups in wartime production over trust-busting , so too national
champions are likely to feature more prominently today, as domestic scale and balance sheet
strength are given precedence to accommodate the drive to revive employment quickly,
and work collaboratively to halt the spread of the coronavirus . The scale of companies
will not be regarded as a political problem if they can both deliver for consumers and show the
capacity of following political direction for what the public's needs are. Tech companies like
Apple and Google are stepping up to fill the void left by
massive federal government dysfunction . The "
break up Big Tech " voices are nowhere to be heard at the moment.
We still need a more robust form of regulation for these corporate behemoths, but via a
system of regulation that is "function-centric," rather than size-centric. As co-author
Marshall Auerback
has written before , this kind of regulation "restricts the range of corporate activities
(e.g., structural separation so as to prevent companies like Amazon and Google from owning both
the platform as well as participating as a seller on that platform), or the prices such
companies can charge (as regulators often do for utilities or railways). These considerations
would be 'size neutral': they would apply independently of corporate size per se."
Capitalism has always had its plutocrats, but scaling back America's overly financialized
model (by preventing stock buybacks, to cite one example) would represent a useful reform and
prevent a lot of economic waste. Instead of going to enrich executives and shareholders beyond
the dreams of
Croesus , that measure might help to ensure that the profits of these companies will be
directed to the workers' wages (which also means supporting increased unionization), or plowed
back into investment (e.g., increased robotics).
Biodata, Privacy, and an End to Pandemic
Profiteering
And there are fault lines in the business world. The pharmaceutical and medical research
industries face immense pressure from other businesses to end the pandemic so they can get back
to profitability. That means temporarily setting aside profits and pooling intellectual
property to encourage collaborative efforts on the part of biotech and pharmaceutical companies
to find proper treatments for COVID-19, and make them freely available, especially if
governments were to waive antitrust scrutiny in exchange for all of the data Big Pharma
companies collectively hold. As
the Guardian reports , "[t]here is a precedent. Last June, 10 of the world's largest
pharmaceutical companies -- including Johnson & Johnson, AstraZeneca and GlaxoSmithKline --
announced they would pool data for an AI-based search for new antibiotics, which are
urgently needed as antibiotic-resistant bacteria have proliferated across the world,
threatening the growth of untreatable disease."
Privacy advocates are already expressing concerns about a growing and overweening medical
surveillance state. These surveillance concerns lack historical context: From the 19th century
on, serious health problems were met by hardline government policies to reduce them. Policies
ranging from quarantine to vaccine were not always mandatory, but there was an understanding
that personal concessions had to be made to manage a huge population and an advanced society;
the Constitution was not a suicide pact. We can further alleviate those concerns today by
ensuring that the information uncovered does not become a precondition or additional cost of
receiving insurance coverage. In light of coronavirus, cost savings of incorporating biodata
into immigration and customs are a no-brainer for governments, and are certain to cause
friction with individuals who may not want to give blood or saliva to get a visa or work
permit, and agribusiness leaders who know that safety measures cut into profitability. But the
scales have tipped in the other direction.
North Versus South
What about the other countries in the developing world that don't have close geographic
proximity to a home market, or abundant supplies of key commodities required for 21st-century
manufacturing needs, or even a well-developed manufacturing base (in other words, the countries
that have hitherto been large recipients of investment solely on the grounds of cheap labor)?
Many of them have faced immediate pressure with the collapse in global trade, unprecedented
capital flight that is sure to grow as the coronavirus spreads, all the while coping with
COVID-19 with highly inadequate health systems.
In the meantime,
the multi-trillion-dollar market for emerging market debt , both sovereign bonds and
commercial paper, has collapsed. Many of these countries, via their state pension funds and
sovereign wealth funds, have become the ultimate endpoint for many of the newer asset-backed
securities that finally revived years after the 2008 financial crisis. This has become the
potential new stress point in the $52 trillion "
shadow banking " market. The U.S. Federal Reserve has sought to ease the funding stresses
of much of the developing economies by offering central bank swap lines. It has also broadened
prime dealer collateral acceptance rules, and set up commercial paper swap facilities, all of
which have eased short-term funding pressures in these economies that have incurred substantial
dollar liabilities.
As the emerging world central banks then start to lend on those lines to their own banks, it
should start to alleviate the shortage of dollars in the offshore dollar funding markets. We
are starting to see some easing of stresses,
notably in Indonesia -- because it's an exporter of resources more than a cheap labor price
economy.
But whereas in previous emerging markets crises, China was able to buttress these economies
via initiatives such as the "
Belt and Road Initiative ," Beijing itself is likely to be buffeted by the twin shocks of
declining global trade and a reversal of foreign direct investment, which declined 8.6 percent
in the first
two months of this year .
Longer-term, many other countries face comparable challenges to China: Capital controls,
collapsing domestic currencies, and widespread debt defaults are likely to become the norm.
That's already
happened to serial defaulter Argentina again . South Africa has been
downgraded to junk status . Turkey remains vulnerable. The so-called "BRICS" economies --
Brazil, Russia, India, China and South Africa -- are all sinking like bricks. The problem is
exacerbated by the fact that coronavirus and likely future pandemics will create additional
stresses on developing economies that depend on their labor price advantage in the
international marketplace to survive.
By contrast, countries like South Korea and Taiwan have had a "good crisis." Both have
vibrant manufacturing sectors and created successful multiparty democracies.
Foreign investment in South Korea continued to grow in the first quarter of this year, as
it rapidly moved to contain the spread of COVID-19 through an extensive testing regime (while
keeping its economy open). Similarly in Taiwan, by activating a national emergency response
system launched in 2004 (following the SARS virus), that country has mounted
a thoroughly competent coronavirus intervention of unprecedented effectiveness . The
results speak for themselves: as of April 15, in
South Korea, a mere 225 deaths , while in
Taiwan, an astonishingly low total of six deaths in a country of 24 million people -- this
despite far more exposure to infected Chinese visitors than Italy, Spain or the U.S.
Of course, the very success of Taiwan's response revives another potential fault line,
namely the tension underlying the
"One China" policy. Before COVID-19, it is noteworthy that the WHO "even refused to
publicly report Taiwan's cases of SARS until public pressure prompted numbers to be published
under the label of 'Taiwan, province of China,'"
according to Dr. Anish Koka . At the very least, Taiwan's divergent approach and success at
fighting the pandemic will bolster its pro-independence factions.
The question of foreign nations upholding Taiwan's sovereignty with regard to China is
increasingly thorny, given Beijing's growing military capacities. This will present an ongoing
diplomatic challenge to Western parties who seek to increase engagement with Taipei without
heightening tensions in the region.
A Recalculation of 'Economic Value'
We have outlined many fault lines likely to be exposed or exacerbated as a consequence of
COVID-19. Happily, there is one fault line likely to be slammed shut: namely, the false
dichotomy that has long existed between economic growth and environmentalism. The
Global Assessment from the Intergovernmental Science-Policy Platform on Biodiversity and
Ecosystem Services reports that "land degradation has reduced the productivity of 23
percent of the global land surface, up to US$577 billion in annual global crops are at risk
from pollinator loss and 100-300 million people are at increased risk of floods and hurricanes
because of loss of coastal habitats and protection." Likewise, the study cites the fact that as
of 2015, 33 percent of marine fish stocks "were being harvested at unsustainable levels," and
notes the rise of plastic pollution (which "has
increased tenfold since 1980 "), both of which play a key role in degrading ecosystems in a
manner that ultimately destroys economic growth.
Finally, repeated pandemics over the past few decades have shown these are not blips, but
recurrent features of today's world. Hence, there is an increasing public appetite for
regulation to deal with this ongoing problem. Some industries, such as agribusinesses, won't
like this, but the concerns are well-founded. According to
expert Josh Balk , 75 percent of new diseases start in domestic and wild-caught animals,
and 2.2 million people die each year from illnesses transferred from animals. The majority of
these are transferred from poorly regulated factory farm chickens, cows and pigs; still, the "
wet markets" of Asia and Africa, and the trade in potential "
transfer species ," such as pangolins, a major driver of the
$19 billion-a-year global trade in illegal wildlife, must also be addressed. Beijing has
suggested it will
ban trade in illegal wildlife and seek tighter regulation of the wet markets . The latter
in particular may be easier said than done, according to
Dr. Zhenzhong Si , a research associate at Canada's University of Waterloo who specializes
in Chinese food security, sustainability, and rural development. Dr. Si
argued that "[b]anning wet markets is not only going to be impossible, but will also be
destructive for urban food security in China as they play such a pivotal role in ensuring urban
residents' access to affordable and healthy food."
To be fair, this isn't the first time that the sacred tenets of the global economic
framework have dealt with a crisis that seemed to usher in a new era. The same thing happened
in the aftermath of the financial crisis of 2008. But that was largely seen as a financial
crisis, a product of faulty global financial plumbing that nobody truly understood, as opposed
to a widespread social collapse closely approximating the conditions of the Great Depression as
we have today.
Not only has the current lockdown put the entire global economy into deep freeze, but it
also came amidst a backdrop of widespread political and social upheaval, and a faux recovery
whose fruits were largely restricted to the top tier. A collateralized debt obligation is not
intuitively easy to grasp. By contrast, being forced to stay at home, deprived of vital income
and isolated from loved ones, while health care workers perish from overwork and lack of
protective gear, is a different order of magnitude.
Even as we re-integrate, it is hard to envisage a return to the "old normal." Trade patterns
will change. Self-sufficiency and geographic proximity will be prioritized over global
integration. There will be new winners and losers, but it is worth noting that the model of
capitalism we are describing -- one that does not feature obscenely overcompensated CEO pay
co-existing with serf labor and the widespread offshoring of manufacturing -- has existed in
different forms in the U.S. from 1945 into the 1980s, and still exists in parts of Europe
(Germany) and East Asia (Japan, South Korea, Taiwan) to this day.
Our everyday lives will be impacted as selective quarantines and some forms of social
distancing become the new normal (much as they were when we dealt with tuberculosis epidemics).
All of this has implications for a multitude of industries: restaurants, leisure, travel,
tourism, sporting events, entertainment, and media, as well as our evolving definition of
"essential" industries. Even our concept of personal privacy will likely have to be amended,
especially in regard to medical matters. Concerns about medical surveillance -- stigma (STDs,
alcoholism, mental illness) and denial of insurance -- can be alleviated if everyone is
guaranteed treatment regardless of ability to pay, which will mean greater government intrusion
into the lives of citizens and activities of businesses as the public sector seeks to socialize
costs.
Taken in aggregate, we are about to experience the most profound social, economic and
political changes since World War II.
"... The banks would be squeezed, but Trump says that although we can't save the people, we can save the banks. The Federal Reserve has enough money to keep all the banks afloat, even if they're not getting the mortgage payments, even if they're not able to collect on their loans ..."
"... The political consequences will be huge. A wide public demand for more social policies will come into conflict with a recalcitrant oligarchy. Can that conflict be solved within the current U.S. system? ..."
True, the USD is (and will) only get stronger as it is the universal fiat currency - but
that's only true for the USD as a financial asset.
The USA will never suffer from high inflation, but printing money indefinitely has concrete
consequences even for them: the USD will still get weaker in purchase power, thanks to the
Triffin Paradox ,
and it will still result in an equivalent in deindustrialization (as the fiat currencies of the
rest of the world get even weaker vis-a-vis the USD).
Eternal and infinite printing of USD is not unconsequential to the USA. Very far from
it.
During the last four weeks 22 million workers in the U.S. filed for unemployment
insurance. Some 10 to 15 million additional workers were not eligible but also lost their
jobs.
Ross: Ultimately, where does this end? Because if in 12 weeks time, people can't
afford to enter into the social norms, enter into the economy, live, put bread on the
table, where does that logically finish?
Michael Hudson: With the American economy looking pretty much like Greece. It'll
be austerity. There will be people who don't have jobs. They are going to be evicted from
their apartments. They will have run through their savings. They will not be able to pay
their credit card debt and other debts so arrears are going to rise.
The banks would be squeezed, but Trump says that although we can't save the people,
we can save the banks. The Federal Reserve has enough money to keep all the banks afloat,
even if they're not getting the mortgage payments, even if they're not able to collect on
their loans . The banks can now make up for the money they're not getting by having a
huge new market: lending money to private capital and to the large companies to buy out
these small businesses that are going under. It's a bonanza.
"U.S. stocks are pricing in a V-shaped economic recovery even more keenly than elsewhere in
the world, so are vulnerable in the case that exits from lockdowns globally and in the U.S.
prove more complicated," said Edmund Shing, head of global equity derivative strategy at
BNP Paribas SA.
The crisis will not be over before the fat lady sings. That lady has not even entered the
house. A recovery will not be V-shaped. The economy will not spring back into action as soon
as the lockdowns are over. It will be a long slog. The U.S. economy always depends on
consumer resilience. But with more than 30 million people out of jobs there will be a huge
fall of demand compared to before the pandemic.
It is also likely that there will be more than one wave of the pandemic. During summer the
case numbers will probably recede but they are likely to go up again during the fall. In
between the pandemic will slowly burn through more of the population but mostly out of view
because of
many asymptomatic cases . When it comes back it will be in a different way. During the
first wave the infections started first in place A then in place B then place C all depending
on traffic and contact pattern. But the second wave will likely come, as it did during the
Spanish flu, as one big wall that will hit all places at the same time. That will make it
more difficult to allocate resources.
Pandemics are, as Nassim Taleb and other have
pointed out , fat tail
events where normal statistics no longer
apply . They are not symmetric Gaussian distributions curves where the way down from high
case numbers has a similar shape as the way up had. The way down is actually much longer and
more of a very slow decline which might even include additional eruptions.
To expect a V-shaped return to a normal economy under these circumstance is foolish.
The political consequences will be huge. A wide public demand for more social policies
will come into conflict with a recalcitrant oligarchy. Can that conflict be solved within the
current U.S. system?
There are a few signs for hope. The first two vaccines developed in China are now in their
first phase of human testing and more are coming. Some of them may actually work. A mass
producible effective vaccine would mean that the fat lady has started to sing.
There is also the curiosity that most children not only do not fall ill with the covid-19
disease but do not get infected at all. Further research into the phenomenon could point to a
protection mechanism that might be exploitable for the protecting grown ups.
On the sad side the Economist has started to systematically cover 'excess death'
from the pandemic and finds that all official death
numbers are serious undercounts.
Posted by b on April 16, 2020 at 17:49 UTC | Permalink
Seems like the alternatives are a muddled rearrangement similar to the post-Soviet space
with consequent criminality and social collapse or a Bonapartist administrative adventure if
the US military doesn't resist demands for it to arbitrate the conflict between public and
oligarchs.
Treasury Sec Mnuchin said, in early March, that the economy is fundamentally sound.
He was wrong.
The US and other advanced economies (like Germany and Japan) were seriously slowing
down.
Yes, stock markets were high, inflation was low, housing was strong and unemployment was
low.
But rates of corporate profit were sinking, corporate debt was at record levels, real
business investment was negligible, wages were up but still at ridiculously low historical
levels, and inequality kept growing. World trade had also slowed considerably. Trump's tax
cuts for the rich were merely pocketed or used for stock buybacks. Low interest rates kept
things afloat, and the Fed had already reversed course on monetary tightening.
The US was on the verge of a recession, and the pandemic was merely an extreme
trigger.
Marxist economic theory says that a crisis is resolved when enough dead capital is purged,
labor devalued, and profit rates restored.
That will mean a further concentration of capital at the top, and further immisseration of
the working class.
The US state is so captured by capital that it won't manage the crisis equitably.
The pool of social misery will be a source of fascist and revolutionary socialist
politics.
This will create more instability.
Lastly, we can't ignore the working out of capitalist contradictions through
inter-imperialist rivalries.
In our era, that means rivalries between the US, Russia and China, with Germany and Japan
included in a second tier.
Expect Trump to escalate the trade war, further restrict exports to China, block Chinese
corporate requirements, and threathen China's debt holdings as some form of "reparations."
Expect military saber rattling to increase around Taiwan in addition to shows of strength
from Guam (B52 flights).
In other words, recall Bukharin's warning that trade wars are only "partial sorties." In
the end, they will be solved by "real force...the force of arms."
What we are witnessing is an unprecedented concentration of all contradictions of global
capitalism and imperialism.
As usual, I'll point readers to Shadowstats for its most recent reporting. An example:
"Week-Ended April 11th New Unemployment Claims Continued to Surge, Consistent With April
2020 U.3 Unemployment of Over 22%, Versus 4.4% in March (April 16th, Department of Labor -
DOL)."
Note those are the doctored Department of Labor stats, not those displayed by Shadowstats,
whose current graph doesn't yet include the latest figures. It reported unemployment at 22.9%
as of 3 April; so, we should expect real unemployment to be over 40% when its next graphic's
published.
I must emphasize the importance of following what's being reported by Max and Stacy on the
Keiser Report
and suggest starting with the March 26 episode or earlier if possible. The meat of the
program's delivered in the first 13-15 minute segment, the second half being an interview
with Max and that show's guest, most of which I skip when watching with the wife; the
program's synopses usually provide the guest's name. So, those 10 shows listed at the link
would take @150 minutes to watch--a very short amount of time given the amount of information
supplied.
The Hudson transcript b cites at the top comes from this
Renegade Inc program where he's teamed with Socialist Economist Richard Wolff that
I've linked to in several comments. It's under 30 minutes, too, and another excellent
investment of your time. Wolff has two new items at his website , his recent RT op/ed blasting Capitalism and the
video of his recent Crosstalk appearance. I also suggest following economist
Steven Keen's Twitter from
where you can get to his Patreon page and such for even more info.
Yes, it's close to a fulltime job just to keep abreast with current events let alone dig
into the past, which is why news media is so important as is their failure. Most people are
now at home and have the time to become informed. Let's all continue trying to help them and
ourselves.
The global elites have no one to blame but themselves for the economic catastrophe that is
currently unfolding as a result of the corona virus pandemic. There will also be no where to
hide and probably no where to stash their ill gotten wealth. After decades of advocating and
practicing discredited economic policies that can be best described as warmed-over late 19th
and early 20th century economics, (aka: austerity) the chickens, so to speak, are coming home
to roost. The same will apply to the political hacks, grafters and corporate greed heads who
also made this economic disaster possible. What the end result will be however, is unknown.
The future can go in many ways. But as the late Robert Heilbroner wrote in his book "The
Worldly Philosophers" some 70 years ago: "Economics is the only science that puts men on the
barricades."
During the last four weeks 22 million workers in the U.S. filed for unemployment insurance.
Some 10 to 15 million additional workers were not eligible but also lost their jobs.
Ross: Ultimately, where does this end? Because if in 12 weeks time, people can't afford to
enter into the social norms, enter into the economy, live, put bread on the table, where does
that logically finish?
Michael Hudson: With the American economy looking pretty much like Greece. It'll be
austerity. There will be people who don't have jobs. They are going to be evicted from their
apartments. They will have run through their savings. They will not be able to pay their
credit card debt and other debts so arrears are going to rise. The banks would be squeezed,
but Trump says that although we can't save the people, we can save the banks. The Federal
Reserve has enough money to keep all the banks afloat, even if they're not getting the
mortgage payments, even if they're not able to collect on their loans. The banks can now make
up for the money they're not getting by having a huge new market: lending money to private
capital and to the large companies to buy out these small businesses that are going under.
It's a bonanza.
"U.S. stocks are pricing in a V-shaped economic recovery even more keenly than elsewhere in
the world, so are vulnerable in the case that exits from lockdowns globally and in the U.S.
prove more complicated," said Edmund Shing, head of global equity derivative strategy at BNP
Paribas SA.
The crisis will not be over before the fat lady sings. That lady has not even entered the
house. A recovery will not be V-shaped. The economy will not spring back into action as soon as
the lockdowns are over. It will be a long slog. The U.S. economy always depends on consumer
resilience. But with more than 30 million people out of jobs there will be a huge fall of
demand compared to before the pandemic.
It is also likely that there will be more than one wave of the pandemic. During summer the
case numbers will probably recede but they are likely to go up again during the fall. In
between the pandemic will slowly burn through more of the population but mostly out of view
because of
many asymptomatic cases . When it comes back it will be in a different way. During the
first wave the infections started first in place A then in place B then place C all depending
on traffic and contact pattern. But the second wave will likely come, as it did during the
Spanish flu, as one big wall that will hit all places at the same time. That will make it more
difficult to allocate resources.
Pandemics are, as Nassim Taleb and other have
pointed out , fat tail
events where normal statistics no longer apply
. They are not symmetric Gaussian distributions curves where the way down from high case
numbers has a similar shape as the way up had. The way down is actually much longer and more of
a very slow decline which might even include additional eruptions.
To expect a V-shaped return to a normal economy under these circumstance is foolish.
The political consequences will be huge. A wide public demand for more social policies will
come into conflict with a recalcitrant oligarchy. Can that conflict be solved within the
current U.S. system?
There are a few signs for hope. The first two vaccines developed in China are now in their
first phase of human testing and more are coming. Some of them may actually work. A mass
producible effective vaccine would mean that the fat lady has started to sing.
There is also the curiosity that most children not only do not fall ill with the covid-19
disease but do not get infected at all. Further research into the phenomenon could point to a
protection mechanism that might be exploitable for the protecting grown ups.
On the sad side the Economist has started to systematically cover 'excess death' from
the pandemic and finds that all official death
numbers are serious undercounts.
Posted by b on April 16, 2020 at 17:49 UTC | Permalink
During the last four weeks 22 million workers in the U.S. filed for unemployment
insurance. Some 10 to 15 million additional workers were not eligible but also lost their
jobs.
Ross: Ultimately, where does this end? Because if in 12 weeks time, people can't afford to
enter into the social norms, enter into the economy, live, put bread on the table, where
does that logically finish?
Michael Hudson: With the American economy looking pretty much like Greece. It'll be
austerity. There will be people who don't have jobs. They are going to be evicted from
their apartments. They will have run through their savings. They will not be able to pay
their credit card debt and other debts so arrears are going to rise. The banks would be
squeezed, but Trump says that although we can't save the people, we can save the banks. The
Federal Reserve has enough money to keep all the banks afloat, even if they're not getting
the mortgage payments, even if they're not able to collect on their loans. The banks can
now make up for the money they're not getting by having a huge new market: lending money to
private capital and to the large companies to buy out these small businesses that are going
under. It's a bonanza.
"U.S. stocks are pricing in a V-shaped economic recovery even more keenly than elsewhere in
the world, so are vulnerable in the case that exits from lockdowns globally and in the U.S.
prove more complicated," said Edmund Shing, head of global equity derivative strategy at
BNP Paribas SA.
The crisis will not be over before the fat lady sings. That lady has not even entered the
house. A recovery will not be V-shaped. The economy will not spring back into action as soon
as the lockdowns are over. It will be a long slog. The U.S. economy always depends on
consumer resilience. But with more than 30 million people out of jobs there will be a huge
fall of demand compared to before the pandemic.
It is also likely that there will be more than one wave of the pandemic. During summer the
case numbers will probably recede but they are likely to go up again during the fall. In
between the pandemic will slowly burn through more of the population but mostly out of view
because of
many asymptomatic cases . When it comes back it will be in a different way. During the
first wave the infections started first in place A then in place B then place C all depending
on traffic and contact pattern. But the second wave will likely come, as it did during the
Spanish flu, as one big wall that will hit all places at the same time. That will make it
more difficult to allocate resources.
Pandemics are, as Nassim Taleb and other have
pointed out , fat tail
events where normal statistics no longer
apply . They are not symmetric Gaussian distributions curves where the way down from high
case numbers has a similar shape as the way up had. The way down is actually much longer and
more of a very slow decline which might even include additional eruptions.
To expect a V-shaped return to a normal economy under these circumstance is foolish.
The political consequences will be huge. A wide public demand for more social policies
will come into conflict with a recalcitrant oligarchy. Can that conflict be solved within the
current U.S. system?
There are a few signs for hope. The first two vaccines developed in China are now in their
first phase of human testing and more are coming. Some of them may actually work. A mass
producible effective vaccine would mean that the fat lady has started to sing.
There is also the curiosity that most children not only do not fall ill with the covid-19
disease but do not get infected at all. Further research into the phenomenon could point to a
protection mechanism that might be exploitable for the protecting grown ups.
On the sad side the Economist has started to systematically cover 'excess death'
from the pandemic and finds that all official death
numbers are serious undercounts.
Posted by b on April 16, 2020 at 17:49 UTC | Permalink
Seems like the alternatives are a muddled rearrangement similar to the post-Soviet space with
consequent criminality and social collapse or a Bonapartist administrative adventure if the
US military doesn't resist demands for it to arbitrate the conflict between public and
oligarchs.
It is good to see an article focusing on the effects on the economy and how that effects
people, because that is the real disaster from the actions of the governments.
Also good to see a reference to the Spanish flu, where 50-100 million people died world
wide. Today the number is 143 thousand, a number 3 orders of magnitudes smaller.
Canada has got UBI up and running already. Spain too https://www.citynews1130.com/2020/04/15/feds-expand-emergency-benefit-program/
Are you a grocery or delivery worker?
"As part of expanded relief measures, Trudeau said the federal government was working with
provinces to top up the pay of essential workers who earn less than $2,500 a month."
Those 1200 check that came in, my granda did not get one because my mom claims her as a
dependent, also my 20 year old cousin didnt get his because his mom claim him depended on her
taxes. Any excuse they can find to not give you that check they will find it, but mega corps
can get trillions no problem
Treasury Sec Mnuchin said, in early March, that the economy is fundamentally sound.
He was wrong.
The US and other advanced economies (like Germany and Japan) were seriously slowing
down.
Yes, stock markets were high, inflation was low, housing was strong and unemployment was
low.
But rates of corporate profit were sinking, corporate debt was at record levels, real
business investment was negligible, wages were up but still at ridiculously low historical
levels, and inequality kept growing. World trade had also slowed considerably. Trump's tax
cuts for the rich were merely pocketed or used for stock buybacks. Low interest rates kept
things afloat, and the Fed had already reversed course on monetary tightening.
The US was on the verge of a recession, and the pandemic was merely an extreme
trigger.
Marxist economic theory says that a crisis is resolved when enough dead capital is purged,
labor devalued, and profit rates restored.
That will mean a further concentration of capital at the top, and further immisseration of
the working class.
The US state is so captured by capital that it won't manage the crisis equitably.
The pool of social misery will be a source of fascist and revolutionary socialist
politics.
This will create more instability.
Lastly, we can't ignore the working out of capitalist contradictions through
inter-imperialist rivalries.
In our era, that means rivalries between the US, Russia and China, with Germany and Japan
included in a second tier.
Expect Trump to escalate the trade war, further restrict exports to China, block Chinese
corporate requirements, and threathen China's debt holdings as some form of "reparations."
Expect military saber rattling to increase around Taiwan in addition to shows of strength
from Guam (B52 flights).
In other words, recall Bukharin's warning that trade wars are only "partial sorties." In
the end, they will be solved by "real force...the force of arms."
What we are witnessing is an unprecedented concentration of all contradictions of global
capitalism and imperialism.
I refuse to look at this situation as anything more than an opportunity for the wide change
for the West that many here have advocated over the years.
There will always be the temptation to ask for mercy during this time and a return to
NWO-globalist-consumer-driven Nightmare where populations outright ignore the horrible
behavior around the globe that the elite spread and make victim-countries endure.
What y'all have been railing against for years is the terrible grip of the globalists and
the absolute hilarious excuse for global government in the U.N. and similar supranational
entities.
Why then, would you ask for relief, when what we will see in the next few years is the
truth stripped bare and their narrative fall away? In order for this to happen, the U.S. and
the West need to suffer. I don't see what is so hard to take from this notion.
Those who genuinely care for their neighbor will again rise to the front with the chance
to reaffirm what humanity needs to do to live in balance.
Of course people will die. But life is not worth living in darkness.
As usual, I'll point readers to Shadowstats for its most recent reporting. An example:
"Week-Ended April 11th New Unemployment Claims Continued to Surge, Consistent With April
2020 U.3 Unemployment of Over 22%, Versus 4.4% in March (April 16th, Department of Labor -
DOL)."
Note those are the doctored Department of Labor stats, not those displayed by Shadowstats,
whose current graph doesn't yet include the latest figures. It reported unemployment at 22.9%
as of 3 April; so, we should expect real unemployment to be over 40% when its next graphic's
published.
I must emphasize the importance of following what's being reported by Max and Stacy on the
Keiser Report
and suggest starting with the March 26 episode or earlier if possible. The meat of the
program's delivered in the first 13-15 minute segment, the second half being an interview
with Max and that show's guest, most of which I skip when watching with the wife; the
program's synopses usually provide the guest's name. So, those 10 shows listed at the link
would take @150 minutes to watch--a very short amount of time given the amount of information
supplied.
The Hudson transcript b cites at the top comes from this
Renegade Inc program where he's teamed with Socialist Economist Richard Wolff that
I've linked to in several comments. It's under 30 minutes, too, and another excellent
investment of your time. Wolff has two new items at his website , his recent RT op/ed blasting Capitalism and the
video of his recent Crosstalk appearance. I also suggest following economist
Steven Keen's Twitter from
where you can get to his Patreon page and such for even more info.
Yes, it's close to a fulltime job just to keep abreast with current events let alone dig
into the past, which is why news media is so important as is their failure. Most people are
now at home and have the time to become informed. Let's all continue trying to help them and
ourselves.
The global elites have no one to blame but themselves for the economic catastrophe that is
currently unfolding as a result of the corona virus pandemic. There will also be no where to
hide and probably no where to stash their ill gotten wealth. After decades of advocating and
practicing discredited economic policies that can be best described as warmed-over late 19th
and early 20th century economics, (aka: austerity) the chickens, so to speak, are coming home
to roost. The same will apply to the political hacks, grafters and corporate greed heads who
also made this economic disaster possible. What the end result will be however, is unknown.
The future can go in many ways. But as the late Robert Heilbroner wrote in his book "The
Worldly Philosophers" some 70 years ago: "Economics is the only science that puts men on the
barricades."
Of course people will die. But life is not worth living in darkness.
Stacy invokes Dicken's Tale of Two Cities in
this
Keiser Report episode that speaks to your above quote. The main point is things
will worsen much more before any improvement occurs. Stacy being an optimist sees something
better emerging from the wreckage, while Max remains cynical--mirroring the feelings of many
here. IMO, invoking Dickens was masterful. We should be as lucky as the French to emerge at
the end of the Napoleonic Era with a Republic; but, even that will take prodigious effort and
struggle.
You'll recall that Fed policy always consists of
the same three mistakes 1) Keeping interest rates too low for too long, resulting in too
much debt; 2) Raising interest rates to try to gently deflate the debt bubble; and 3) Cutting
rates in a panic when stocks fall and the economy goes into recession.
Well, here comes the Big Bang: Mistake #4 – rarely seen, but always
regretted.
Mistake #4 is what the feds do when their backs are to the wall when they've run out of
Mistakes 1 through 3.
It's a typical political trade-off. The future is sacrificed for the present. And the
welfare of the public is tossed aside to buy money, power, and influence for the
elite.
Every debt expansion ends in a debt contraction. Stocks crash. Jobs are lost. The
economy goes into reverse, correcting the mistakes of the previous boom.
Investors see their money entombed. Householders await foreclosures. The authorities
scream: Apocalypse Now!
I have few to add to Posted by: Prof K | Apr 16 2020 18:57 utc | 8.
Only like to complement his comment on two very important aspects to pay attention to from
now on:
1) This pandemic is different from 2008 for the fact that, while 2008 was a general crisis
of capitalism that was triggered from the American financial system, the COVID-19 crisis is a
general crisis of capitalism that was triggered from the "real economy", i.e. the producitive
process of capital. This makes the COVID-19 crisis a much more formidable obstacle to
capitalist reproduction than the 2008 Wall Street/European Union meltdown. And it's important
to highlight 2008 also wasn't really V-shaped: it evolved into a depression after the 2010
euphoria.
2) It's very unlikely the USA will collapse in a single historical event. As a
capitalist nation, the USA is much more decentralized, fragmented and anarchic (in production
and distribution of the wealth it produces and consumes) than the USSR. The USSR was a
centrally planned economy: when Gorbachev committed the mistake of demoralizing and
destroying the CPSU, he automatically destroyed the USSR. That will not be the case of
the USA: the fall of Washington D.C. - or even Wall Street - would not be the immediate end
of the USA. The most likely scenario for an end of the USA would be for a gradual and
constant degeneration of its social structure, with or without balkanization (probably with).
This balkanization would be very violent, because local capitalists would assemble private
armies and fight against each other for supremacy and the reunification of the USA (a la
Roman Empire). It would be a Mad Max cum Yugoslavia scenario. The problem with this
is: who would be in control of the American nuclear arsenal? Will the USAAF be capable of
stopping with the balkanization process and thus keep the country united? Will the USA
anihilate the rest of the world before it would disappear, in an act of nihilism? A lot of
known unknowns - let alone unknown unknowns.
"Dollar Demisers" will be disappointed, but then since tmany of tgem claim to know a lot of
theory but seem to have absolutely zero actual experience of the practice, disappointment is
something they should by used to by now.
It's not just the "petro-Dollar" you should be looking at, it's the "Debt-Dollar"
"Last November, in a then-boring but now-prescient 10-part series (I socialistically
re-interpreted ex-Wall Streeter Nomi Prins' book Collusion, which chronologically detailed
the QE-spreading collusion between G20 central banks since 2008), I wrote the following in
Part 3: QE paid for a foreign buying spree: developing countries hurt the most:
"Yet by
flooding the world with trillions of dollars via QE the US was able to, paradoxically,
maintain dollar dependence despite their crimes. The US dollar share of global reserves today
is 62%, almost exactly what it was in 2008. Combined with the other source of the crisis
– the euro – the two combine for 82% of global reserves. By comparison, the yuan
– which so many predict is about to dethrone the dollar – is at below 2%; I
wouldn't hold my breath."
But corona is different, right? Two percent and 62% will suddenly change places,
right?
No, more QE is more of the same thing, and this is a "thing" which has worked exactly as
designed; it is also a "thing" which is never broached in the Mainstream Media: "A way to
create debt traps which increase Western control over their neo-imperial subjects.
Neoliberal-capitalism financial policies must be viewed as a neo-imperial tool, of
course."
People are acting as if Western neoliberalism hasn't worked, LOL? It has worked
spectacularly well but only for their 1% and not for "the nation", exactly as designed.
Many fine semi-dissident commentators apparently do not follow high finance, nor can they
interpret their actions, even though high finance is the West's vanguard party (thus the
theme of my recent series – "bankocracy"); they often incorrectly focus on an
easier-to-grasp storyline of nationalist competition, which (like racism, sexism or
tribalism) simply cannot ultimately take precedence over class warfare.
I'm not being dogmatic – this simply provides the fullest explanation of economic
events. Reject what socialists could call the "conspiracy" of the 1% via class warfare? Then
you likely move on to absurd, unprovable "conspiracy theories" involving secret cults,
elaborate handshakes, ritual sacrifice, etc.
This is the bottom line which (whom I will call) "dollar-demisers" simply do not
understand: For better or for worse (certainly worse), the US and their greenback are still
the gold standard when it comes to 1%er perceptions of a safe harbour in a crisis.
This will hold true in 2020 just as it did in 2008.
Many semi-dissident analysts unwittingly take a rather Trotskyist view that capitalism
will eventually implode under the weight of its own contradictions. It won't – some
rats always find a way to survive a sinking ship, eh? Thus, open socialist combat is the only
way to defeat modern Western capitalism, and also to satisfyingly explain what is going on in
the Western Great Recession/Depression 2.
So maybe the yuan will become the dominant currency but not in two months, nor two years
– maybe two decades? That's a big "maybe". In my lifetime, I think.
Until then, please believe me: Western globalisation/neoliberalism has a LOT of ammo,
clout, clients, banks, real money, real gold, fake money and paper gold to keep their mighty
dollar on top. Socialism teaches us: it is NOT just Americans who will deploy these
weapons."
The recovery will NOT be, but Trump will distract all Americans by screaming against China
and how China is responsible for everything. Expect Americans to fall in line and the anti
Russia hysteria to now turn into super anti China hysteria. Expect attacks against Asians in
USA
And all because the Chinese were greedy bastards eager to make money and they quickly forgot
history and how the Ango Saxon treated them just merely 150 years ago.
As somebody who grew up in Communist Eastern Europe it the 70s, I vividly remember how we
were warned how the Americans will try to hurt us by spreading bio weapons. This was grilled
into us over and over. The Communists knew. China better gt prepared, the West will try to
rip them a brand new assholes. And they got nobody to blame but themselves!
30 million jobless claims is no big deal to the federal government or Wall Street.
Average income in the United States is $63,000.
+30 million new joblessness.
30 million X 63,000 = $1.89 trillion dollars
Let's round that up to $2 trillion dollars.
We already had $2 trillion+ Overnight REPO Operations since last September...for the banks
hoarding money.
We already had $2 trillion+ QE4 or whatever number it is in December or January.
The CARES Act is priced in at just over $2.4 trillion and probably more like $4.5-to-6
trillion dollars.
Face it because with that scale the Federal Government could have sent $60,000 to $100,000
to every household, prisoner and homeless person in America and I guarantee the economy would
still be humming. And most importantly, the rich people never would have been seen a decline
in their net worth because working people pay their bills on time
/div> "..Until then, please believe me: Western globalisation/neoliberalism
has a LOT of ammo, clout, clients, banks, real money, real gold, fake money and paper gold to
keep their mighty dollar on top. Socialism teaches us: it is NOT just Americans who will deploy
these weapons."
Realist@19
I won't believe you because you are wrong.
But I do recognise the depth of the sincerity behind your trust in the imperialists. It is
clear from all that you post that you cannot conceive of a future in the US is not hegemonic
and its oligarchy omnipotent. It is not surprising that you consider history, even pandemic
diseases, to be nothing less than the unfolding of the Imperial ruling class's Wish Lists.
"..Until then, please believe me: Western globalisation/neoliberalism has a LOT of ammo,
clout, clients, banks, real money, real gold, fake money and paper gold to keep their mighty
dollar on top. Socialism teaches us: it is NOT just Americans who will deploy these
weapons."
Realist@19
I won't believe you because you are wrong.
But I do recognise the depth of the sincerity behind your trust in the imperialists. It is
clear from all that you post that you cannot conceive of a future in the US is not hegemonic
and its oligarchy omnipotent. It is not surprising that you consider history, even pandemic
diseases, to be nothing less than the unfolding of the Imperial ruling class's Wish Lists.
The USA consists of states that are already asserting quite a few powers and prerogatives
in this situation. Some of them have set themselves against the fed. govt. and the states'
citizens are following their governors, not Trump. (Certainly the presidential election is
looking more and more like a sideshow of some kind.) I think all American states have a
strong state identity; in addition many have a strong regional identity (I can't speak for
other parts of the country, but this is the case in New England; [not surprising, as this is
the best part of the country (;-)]. Actually, being a small, somewhat isolated with small
states and high education levels is a lot better than being stuck in a "region" that is
surrounded by other US states, e.g., Tennessee has borders with I think eight states; the
whole NE region borders just one US state, New York).
I think there is a good chance that balkanization could be a gradual process whereby
states and regions see the emergence of politicians able to deal with the health and economic
challenges statewide and regionwide, create and protect local prerogatives and populations,
and are willing to stand up to DC. We have a tradition of states' rights, and this may come
to be interpreted in ndw ways. I think this is already happening, de facto.
US states already have their own administrative structures and full repertoire of
departments --- health, education, conservation, transportation, housing, revenue, etc.
I can imagine more clashes between states and DC than between states.
(Bloomberg) -- Legendary short-seller Jim Chanos said he's troubled that private equity is
seeking financial aid from the federal government due to the economic impact of the coronavirus
epidemic.
"'I'm a little bemused, puzzled and somewhat outraged, I guess, that private equity would be
pushing to the front of the line to try to get taxpayer assistance," he said in an interview
Thursday on Bloomberg Television.
The Federal Reserve's move Thursday to throw a lifeline to small and mid-sized businesses
and fund the purchases of some types of high-yield bonds has has been seen by some market
participants as helping the private equity firms who owns some of these companies. Those firms
earlier this week were dealt a setback in their attempt to gain access to billions of dollars
of loans that the U.S. government is doling out to help businesses hit hard by the pandemic,
Bloomberg reported.
Chanos said a look at the year-end letters for the four biggest publicly-traded private
equity firms showed they had more than $300 billion in dry powder to put to use.
"I think private equity is possibly at a crossroads similar to where hedge funds were post
the global financial crisis," said Chanos, who runs hedge fund Kynikos Associates. "People are
going to start to judge the high fees and the illiquidity and think: 'Am I really getting the
return commensurate for the risk?"
For more articles like this, please visit us at bloomberg.com
Has anyone seen what is happening to US finances? US Federal Budget $5,571 billion. Budget
Deficit $2,130 billion.
Trump is borrowing 38 cents for every dollar he spends. This will get substantially worse
with the CV.
This is the prime mover for most of Trump's behaviour. Trying to solve his intractable
economic and financial problems at the expense of other countries. Sometimes this is outright
looting.
Finding assorted specious pretexts to steal the assets of foreign countries, Venezuela,
Iraq, Iran, anyone who has anything worth stealing.
The virus may be the next excuse to seize Chinese assets. People like Rubio and Cruz are
demanding that Chinese holdings of Treasury Bills be declared null and void, and $4 trillion
of Chinese assets confiscated. They may try to seize Saudi assets in a similar fashion, using
9/11 as a pretext.
Otherwise Trump is quite open about running a global protection racket. "They gotta pay
us! They gotta pay us!! They gotta pay us for their protection!!", croaking like a cheap
Mafia hood.
He demands that other countries buy their weapons, energy and agricultural products from
the US at inflated prices and give preferential access to their raw materials and
markets.
This is the rationale for the trade wars and sanctions, nou just against countries like
China and Iran, but even the most obsequious satellites, Canada, Mexico, Germany, the EU,
Japan and S, Korea.
This crude looting and extortion is extremely unlikely to be successful, even in the short
term.
It is said that one of the reasons the Roman Empire collapsed is simply that they ran out
of people to rob and enslave.
Trump's America is rapidly reaching that point.
All financial assistance for the average man is being offered on the basis of massive future
debt. Everything handed to us now will eventually need to be paid back, and if the sums become
high enough, and I believe they already have, that debt will remain for our children and
grandchildren.
The system is coming to the rescue of itself, even enriching itself, while posturing as
saving us. Post-coronavirus, we will once more emerge into the sunshine land of mass migration,
low wages, cheap foreign labor, and the meaningless gluttony of consumerism, only this time our
taxes will be higher, our children will be poorer, and our governments, staffed with hostile
elites, will have more powers of surveillance and coercion than at any time in history.
It is here, I think, in the dismal aftermath rather than in the eye of the coronavirus
storm, that resource competition will intensify. I hesitate to offer such a theory, for fear
that it might be construed as yet another instance of kicking the can of revolution down the
road, making of it an event of religious expectation always on the horizon but never coming to
fruition.
And yet I can't escape the feeling that no matter what rule changes are brought into the
game, when we once more emerge from our homes to resume play there will be less to lose and we
will be against an opponent that, if not staggered, will be weakened by having had to redraw
its game plan during half-time.
" Forget the politicians. The politicians are put there to give you the idea you have
freedom of choice. You don't. You have no choice. You have owners. They own you. They own
everything . They own all the important land, they own and control the corporations
that've long since bought and paid for, the senate, the congress, the state houses, the city
halls, they got the judges in their back pocket, and they own all the big media companies so
they control just about all of the news and the information you get to hear. They got you by
the balls. They spend billions of dollars every year lobbying to get what they want. Well, we
know what they want. They want more for themselves and less for everybody else. But I'll tell
you what they don't want. They don't want a population of citizens capable of critical
thinking. They don't want well informed, well educated people capable of critical thinking.
They're not interested in that. That doesn't help them." ― George Carlin
"Americans need to use this time at home to call their Senators and Reps in Congress
and demand the separation of federally-insured, deposit-taking banks from the casinos on Wall
Street. We're talking about nothing less than the survival of this country and how the next
generation is going to view the character and courage of our generation."
"... The B&M Gates Foundation was likely originally set up with some good intentions (to combat malaria and other Third World diseases), but probably mainly as a legal vehicle to shield some of his mega-wealth. ..."
I tend to dismiss ALL of Bill Gates' recent pandemic related public actions, statements (eg.:
TED talks, Event 201 pro/con buzz, funding Covid vacccine factories (sheesh! There's been ~17
years of coronavirus vaccine r&d failures since cov-SARS popped up 2003 and cov-MERV in
2013) as just more PSYOPS distraction foisted upon the public by the "Intelligence
Community", for their own purposes.
The B&M Gates Foundation was likely originally set up with some good intentions (to
combat malaria and other Third World diseases), but probably mainly as a legal vehicle to
shield some of his mega-wealth.
But then, after Gates got snared, perhaps in
2011? at one or more of the Intel community's "Epstein pedo-trap" blackmail factories, he
became their bitch-tool for evermore.
That's just how they (whoever kept Epstein and his operations protected) roll.
And now Gates is their captive asset, and everything he says or does is according to the
Invisible Hand's plans.
The financial elites are pushing a narrative that asset prices, sales and profits
will all return to January 2020 levels as soon as the Covid-19 pandemic fades. Get real,
baby. Nothing is going back to January 2020 levels. Rather than the "V-shaped
recovery" expected by Goldman Sachs et al., the crash in asset prices will eventually
gather momentum.
Why? It's simple: for 20 years we've over-invested in speculative bubbles and
squandered borrowed money on consumption and under-invested in productivity-increasing
assets. To understand why the market value of assets will relentlessly reprice
lower--a process sure to be interrupted with manic rallies and false dawns of hope
that a return to speculative good times is just around the corner--let's start with the
basics: the only sustainable way to increase broad-based wealth is to boost
productivity across the entire economy.
That means producing more goods and services with less capital, less labor and fewer
inputs such as energy.
Rather than boost productivity, we've lowered productivity via mal-investment and
by propping up unproductive sectors with immense sums of borrowed money --money that
accrues interest.
The poster child for this dynamic is higher education : rather than being
pushed to innovate as costs skyrocketed, the higher education cartel passed its
inefficiencies and bloated cost structure onto students, who have paid for the bloat with
$1. 6 trillion in student loans few can afford. (See chart below.)
As for Corporate America squandering
$4.5 trillion on stock buybacks (Wolf Richter)-- the effective gains on
productivity from this stupendous sum is not just zero--it's negative, as the resulting
speculative bubble suckered in institutions and individuals who'd been stripped of safe
returns by the Federal Reserve's low-interest-rates-forever policy.
What could that $4.5 trillion have purchased in terms of increasing the
productivity of the entire economy? Considerably more than the zero productivity
generated by stock buybacks.
The net result of uneven gains in productivity and the asymmetric distribution of
whatever gains have been made is stagnant wages for the bottom 90% and rising costs for
everyone. Those of us who are self-employed or owners of small businesses know that
healthcare insurance costs have been ratcheting higher by 10% or more annually for
years.
Whatever gains in health that have been purchased with the additional trillions of
dollars poured into the healthcare cartels have been offset with declining life spans,
soaring addictions to opioids and numerous broad-based declines in overall health.
The widespread addiction to smartphones and social media have deranged and
distracted millions, crushing productivity while greatly increasing loneliness,
insecurity and a host of social ills.
Two dynamics define the economy in the 21st century:
1. We have substituted debt-driven speculation for productive
investment
2. We have substituted debt for earnings
This is why the repricing of speculative-bubble assets can't be stopped:debt-driven speculation is not a sustainable substitute for investing in
increasing productivity, and debt-fueled consumption masquerading as "investment" is not
a sustainable substitute for limiting consumption to what we earn and save.
All bubbles pop, period. Once Corporate America's credit lines are pulled and
its revenues and profits plummet, the financial manipulation of stock buybacks will
end. That spells the end of the 12-year bull market in stocks.
As the tide of speculative mania ebbs and confidence wanes, the world's housing
bubbles will all pop, and the $1.4 million bungalows will drift back down to their Bubble
#1 highs around $400,000, and perhaps even drop from there.
As for collectibles and other play-things of the super-wealthy: the bids will soon
vanish and yachts will be set adrift to avoid paying the dock fees.
Back in December, when the world was still confused about what
exactly happened before (and after) the September repocalypse - which has since exploded
thousand-fold resulting in the Fed now doing daily $1 T rillion repo operations - we said that
in addition to the implicit bailout of JPM (which we
described here first , and subsequently
others ), by restarting its repo operations the Fed was also bailing out dozens of hedge
funds engaging in highly levered trades involving a relative value compression trade in the
Treasury cash/swap basis ... almost identical to what LTCM was doing ahead of its 1998 bailout,
which is also why we titled the article "
The Fed Was Suddenly Facing Multiple LTCMs ."
In a nutshell, the article explained why and how the return of the Fed's repo ops was
nothing more than the Fed preemptively bailing out all those hedge funds that would have
imploded had basis trades gone haywire. Below is a key excerpt from that post:
One increasingly popular hedge fund strategy involves buying US Treasuries while selling
equivalent derivatives contracts, such as interest rate futures, and pocketing the arb, or
difference in price between the two. While on its own this trade is not very profitable,
given the close relationship in price between the two sides of the trade. But as LTCM knows
too well, that's what leverage is for. Lots and lots and lots of leverage.
We also said that "hedge funds such as Millennium, Citadel and Point 72 are not only active
in the repo market, they are also the most heavily leveraged multi-strat funds in the world,
taking something like $20-$30 billion in net AUM and levering it up to $200 billion. They
achieve said leverage using repo."
Needless to say, as always when this website presents something the mainstream press hasn't
even considered, our explanation of what really happen ahead and during the September
repocalypse was met with the traditional mockery and derision by the financial
"intelligentsia."
Until today, three months later, when
Bloomberg finally confirmed everything we said.
In an article discussing how and why the Fed unleashed its March 12 repo bazooka,
Bloomberg writes that "when coronavirus panic kicked off unprecedented turmoil in
Treasuries last week, hedge fund leverage was lurking" and goes on to "explain" something we
said back in December :
The [hedge funds] use borrowed money from the repurchase market for the popular basis
trade, which exploits price differences between cash Treasuries and futures. Though
individual firms' borrowing is a closely guarded metric, people familiar with the
transactions said some of them levered up as much as 50 times their own wagers. Leveraged
funds' exposure to the basis strategy could be as much as $650 billion, JPMorgan Chase &
Co. strategists said.
Does that sound like "the Fed suddenly facing multiple LTCMs"? Because to us it sure does.
And more importantly, what happened in the days ahead of last week's credit market debacle is
precisely what happened ahead of the September repo snafu, only with exponentially more
destructive power.
The catalyst for last week's re-repocalypse was the historic surge in Treasurys that saw the
10Y drop as low as 0.31%, and the 30Y drop below 1%. As investors scrambled into Treasurys,
"hedge funds got hammered" again, and the result was "a difficulty in completing trades" which
as Bloomberg correctly writes "was a contributing factor to the Federal Reserve's decision to
pledge $5 trillion to keep markets running smoothly."
High leverage amplifies profits and losses and can be responsible for forced liquidations
-- and market fluctuations. This week, a sell-off in Treasury futures tied to margin calls
pushed outstanding contracts to their lowest level since 2018. Many firms also get funding
from money markets, whose problems have prompted the Fed to provide emergency funding
And there it is - just as we said, the Fed's first priority in the bailout waterfall, long
before consumers and businesses were even considered, was the sanctity and stability of those
multibillion hedge funds that suddenly faced a spectacular implosion... just like in the case
of the original LTCM. Only it's even more poetic, because whereas with LTCM - which blew up
when an economic black swan (the Russian default and the Asian crisis of 1997) blew out the
LTCM basis trades, forcing the first Fed bailout in the modern era, what happened last week may
have been the very last bailout cascade in Fed history, only this time it will involve
everything, not just one solitary hedge fund run by idiot Nobel-prize winners.
"Too big to fail is back, and this time it's not the banks, it's levered financial
institutions," said Mark Yusko, the chief executive officer of Morgan Creek Capital. Yusko -
who apparently forget to the original Fed bailout was not of a bank but of a levered financial
institution (LTCM) said he supported the Fed's stepping in, but added that hedge fund firms
have gotten too big by borrowing too much. "It's a bailout," Yusko said,
repeating what we said in December.
And whereas Bloomberg failed to connect the dots last year, this time around it actually did
some original reporting and found some of the smaller funds that would have been devastated had
the Fed not stepped in with its trillion-dollar a day repos:
ExodusPoint Capital Management lost 4% this month through March 13, on pace for its worst
month ever, according to people familiar with the situation. It was unclear how much the
basis trade contributed to the loss.
An LMR Partners' fund fell 12.5% in the first two weeks of this month and spurred the
firm to raise new capital.
Capula Investment Management's Global Relative Value Fund dropped 5.2%, people said, and
Field Street Capital Management's fixed-income relative-value flagship fund, in which the
basis trade is substantial, sank 14.5% and had to reduce the size of its positions.
That said, that's just three macro hedge funds out of a universe of hundreds, and what is
important, is that the trade was so ubiquitous (thanks to those hedge fund idea dinners) that
everyone was doing it.
"We've had 10 years of a perfect paradise and so people have been picking up pennies
thinking there's no risk in holding strategies like the basis trade," said Kathryn Kaminski,
chief research strategist and portfolio manager at AlphaSimplex Group. "A lot of the
strategies, like the basis, that hedge funds tend to use don't work when markets aren't stable.
You'll see more of these types of blowouts."
Curiously, and contrary to totally unfounded recent rumors, some of the far bigger firms
fared better: as Bloomberg notes, the market unwind had a relatively small impact on
multi-strategy funds Citadel and Millennium Management, although as we reported yesterday
Millennium is closing several "trading pods" after weathering a modest 2.7% drop this month
through March 12, and was down 1.9% for the year. In light of the S&P's 30% drop, that may
seem like a stunning performance, but somehow Izzy Englander always manages to pull out a rabit
out of hat (someone may want to check into what the HFT guys on the 6th floor of 666 Fifth are
doing for the answer to that).
But whereas the mega-levered Millennium and Citadel, whose in house risk-management lackeys
are truly draconian in their position limits, managed to avert a debacle by unwinding the
positions quickly after sustaining small losses - courtesy of the Fed's massively expanded
$500BN repos - others were not so lucky, and many other firms focuses on the basis trade
suffered far steeper losses.
One among them was BlueCrest Capital Management, whose trader Raymond Wang was fired on
March 9, the day after that historic Sunday night when the 30Y traded bidless for hours as the
S&P crashed limit down, because he couldn't find a buyer for the investment firm's losing
positions in the basis trade. Other firms, who had less leverage on, survived until that
Thursday when the Fed launched the repo bazooka, allowing all those who had the basis trade on
to quietly exit stage left, bailed out by a deceiving Fed that told the world its mission was
to rescue main street when in reality it was just making sure the billionaires had someone to
dump their money-losing positions to.
"enlightened capitalists -- Bill Gates" People who say that just don't know this guy's
history. His "foundation" is simply a stock laundering mechanism. It was cited years ago by
the government for putting out so little of its funds that it barely qualified under US law.
It's a scam. You take the billions of dollars worth of stock you can't sell in large
quantities to convert to cash due to laws about that and you "donate" it to a foundation -
run by your father. Then the foundation sells the stock and uses it to buy control of
companies you want to invest in.
Posted by: gm | Apr 5 2020 17:35 utc | 29 The B&M Gates Foundation was likely originally
set up with some good intentions (to combat malaria and other Third World diseases), but
probably mainly as a legal vehicle to shield some of his mega-wealth.
Exactly. I read about that years ago as I indicated in my above post.
"But then, after Gates got snared, perhaps in 201? at one or more of the Intel community's
"Epstein pedo-trap" blackmail factories, he became their bitch-tool for evermore."
I don't know that Gates is a pedo. I don't think he needs to be to explain his behavior.
He's simply *always* been known as a greedy S.O.B. who spent his time in college taking money
from his friends in poker games. His father is a big time lawyer, so you can imagine where he
got his greed genes.
Not that greed per se bothers me - but I dislike greedy people who also produce crap
products like Windows.
In a recent candid interview, Bill Gates outlined that, despite the comparatively small
threat of Coronavirus, he and his colleagues "don't want a lot of recovered people" who have
acquired natural immunity. They instead are hoping we become reliant on vaccines and
anti-viral medication.
Shockingly, Gates also suggests people be made to have a digital ID showing their
vaccination status, and that people without this "digital immunity proof" would not be
allowed to travel. Such an approach would mean very big money for vaccine producers.
Despite what the stock market would have you believe, the United States is sinking further
into a depression. And the unemployed are now resorting to putting their rent on credit
cards.
It's a temporarily solution that may help tenants get through a month or two, but it's
ultimately driving an already broke consumer deeper into debt that will cripple them in the
long term. About 84% of tenants in the U.S. have paid full or partial rent through April 12,
the
WSJ reports , a number that has risen significantly since the first week of April.
But credit cards as a form of payment are also rising by 13%, compared to the first three
months of the year. The number of tenants paying with a credit card is up 30% when compared to
the same period in March.
While sometimes tenants pay rent with credit cards to boost their credit score or earn
rewards, this is increasingly looking like a desperation scenario, where credit cards could be
the last fallback before tenants start filing for bankruptcy and wind up out on the street.
In general, electronic payments have risen since the start of the pandemic. Building owners
will sometimes accept credit cards through apartment management software or third party apps.
Even with interest rates near 0%, the average interest rate on a credit card is still in the
double digits. It's even higher for those taking cash advances.
While some landlords and creditors have said they would make provisions for those who have
lost their jobs, the credit bureaus will be far more unforgiving. They will be offering no
special treatment, according to the WSJ, because a revision to the CARE act that would have
prevented them from reporting negative information due to the pandemic was left out at the last
minute.
Some landlords have offered to absorb the transaction costs related to using credit cards.
"Once we saw where things were going with this pandemic, a lot of our rules just kind of went
out the window," one landlord said.
But if unemployment doesn't start to arrive by the time many of these tenants have to pay
May rent, they could be faced with far more dire consequences.
Bruce McClary, spokesman for the National Foundation for Credit Counseling, said: "Your rent
payment isn't the only thing you owe, and chances are you have other financial commitments
you're having to keep on track as well."
Over 22 million people have applied for unemployment over the past fourweeks.
Let me cut through all this speculative noise with Occam's Razor.
The virus is natural. The CCP elites are using it in exactly the same way the USG and EU
elites are. Both financial systems and economies were clearly crashing beginning in early
September. Now the elites get to blame all the troubles on a virus (which isn't actually
killing anyone in interesting numbers). Absent the WuFlu they'd all risk getting strung up
pretty soon. Now instead of being called out for the decade+ of ineptitude that lead to a
collapsing global bubble economy, they get to be praised as heroes that saved everyone from
dying.
Now that I've cleared up all that nonsense about a bioweapon and grand scheme to kneecap
China, I have to say that the "China inevitably taking over" narrative is rather ridiculous,
flu or not. Japan re-ascendant and taking back Manchokou is more believable.
As the USA washes its hands of these messes overseas and pulls back homeward, China is in
the worst position.
All its neighbors hate it and will check it.
China has been the #1 beneficiary of Pax Americana this century. Well, Americans are
rapidly losing interest in that project.
Gates reiterates the dire consequences for the global economy later in the interview.
"We need a clear message about that," Gates said starting at 26:52 .
"It is really tragic that the economic effects of this are very dramatic. I mean, nothing
like this has ever happened to the economy in our lifetimes. But bringing the economy back and
doing [sic] money, that's more of a reversible thing than bringing people back to life. So
we're going to take the pain in the economic dimension, huge pain, in order to minimize the
pain in disease and death dimension."
However, this goes directly against the imperative to balance the benefits and costs of the
screening, testing and treatment measures for each ailment – as successfully promulgated
for years by, for example, the Choosing Wisely
campaign – to provide the maximum benefit to individual patients and society as a
whole.
Even more importantly, as noted in an
April 1 article in OffGuardian , there may be dramatically more deaths from the economic
breakdown than from COVID-19 itself.
Invisible Man ,
Some things I'd love to see a journalist bluntly ask Mr. Gates in the near future:
"Why are you, Mr. Gates, with no formal training in medicine or biology, no special
knowledge of virology or epidemiology, suddenly the foremost expert on Covid in the world?
What makes you the decider of policy? Is it just that we live in a world dominated by the
golden rule, where he who has the gold makes the rules?"
"Why do you ignore the statistical evidence that Covid19 has yet to impact Europe's
overall mortality rate?"
"Why do you wilfully ignore the two dozen or so experts who have come forward to
vehemently criticize and refute the narrative being pushed that we're in the midst of a
deadly pandemic? Their assertions are consistent with the statistical evidence. Yours are
not."
It's not even spring yet, and we already know it takes a virus to mercilessly shatter the
Goddess of the Market. Last Friday, Goldman Sachs told no fewer than 1,500 corporations that
there was no systemic risk. That was false.
New York banking sources told me the truth: systemic risk became way more severe in 2020
than in 1979, 1987 or 2008 because of the hugely heightened danger that the $1.5 quadrillion
derivative market would collapse.
As the sources put it, history had never before seen anything like the Fed's intervention
via its little understood elimination of commercial bank reserve requirements, unleashing a
potential unlimited expansion of credit to prevent a derivative implosion stemming from a total
commodity and stock market collapse of all stocks around the world.
Those bankers thought it would work, but as we know by now all the sound and fury signified
nothing. The ghost of a derivative implosion – in this case not caused by the previous
possibility, the shutting down of the Strait of Hormuz – remains.
We are still barely starting to understand the consequences of Covid-19 for the future of
neoliberal turbo-capitalism. What's certain is that the whole global economy has been hit by an
insidious, literally invisible circuit breaker. This may be just a "coincidence." Or this may
be, as some are boldly
arguing , part of a possible, massive psy-op creating the perfect geopolitlcal and social
engineering environment for full-spectrum dominance.
About the narrative that the pandemic is hyped to cover for robbery, that could be, if we
assume that the Lords of Capital are really stupid.
Well, OK, they are really stupid, but one would think they are in a position to realize
that they are just printing money and giving it to themselves. It is only among the simple
plebes (that's us) that a quantity of dollars has meaning. For the Lords of Capital it is all
about percentage of market share controlled. Playing this game will inflate away some of the
value of cash wealth we plebes have and put it in the capitalists' pockets, but not so huge
an amount that it looks like. More critically, this is cranking up the pressure in the debt
bubble while giving other countries more reason to unload their dollar reserves. I cannot see
how that will turn out well for the empire's capitalist elites.
Posted by: William Gruff | Apr 3 2020 19:09 utc | 335
These "Lords of Capital" have offloaded most of their bad debts onto the Fed, which means
onto the taxpayer. In turn, they've fully loaded their coffers with cash so that once
mortgages begin going into default they'll be well-positioned to be buying. And they'll be
the only ones with the "capital" to purchase these assets, including all of the businesses
both large and small which will go bankrupt during this contrived pandemic.
What if these "Lords of Capital" have decided that they already have enough wealth and now
they want to create a permanent class of serfs who can never own, must always rent, can never
retire, and who get no health care. What if we've got a dystopian future in store for us that
even George Orwell couldn't have imagined?
This is a heist, and money isn't the only thing that's being stolen. Power, control,
freedom, and futures are also being stolen right now while we debate IFC versus CFR and
collectively wonder if we're actually seeing an increase in deaths or an increase in deaths
attributed to "coronavirus".
If the presumption is correct and comes to pass, which, I believe, is in the making, the
game's a different one.
It is not about cash positions but about hard assets. Wealth is always only relative, if I
have 1000$ you've got 10000$, then you'll be 10x 'richer' than I, no matter what. In a
depression scenario with massive devaluation of assets like housing, with or without
inflation, many households, small businesses, farmers ... will fail to meet their financial
obligations. Then the funny money they've given to themselves will come in very very handy.
They're going to buy up pretty much everything, leaving the plebs with one option:
serfdom.
NEW YORK (Reuters) - U.S. borrowers seeking a reprieve from mortgage, auto or credit card
payments because of coronavirus hardships are not getting the help they expected from big
banks that promised assistance in recent weeks.
JPMorgan Chase & Co (JPM.N), Bank of America Corp (BAC.N), Wells Fargo & Co
(WFC.N) and Citigroup Inc (C.N) are among lenders that announced programs to help customers
whose income has suddenly dropped because of illness, layoffs or government-imposed
business closures stemming from the pandemic.
But fine print can prevent customers from getting assistance, borrowers and bank sources
said.
For instance, lenders offering 90-day forbearance on mortgage payments are limited in
how they can structure help for customers whose loans are owned by investors.
Mortgage-bond holders are still requiring monthly payments even if borrowers do not pay.
Banks have been willing to foot the bill for a few months, but will ultimately need
cooperation from investors.
Some customers are finding they are expected to write a big check as soon as the grace
period ends, rather than having missed payments tacked onto the end of the loan.[.]
Thousands of U.S. banks, including some of the country's largest lenders, have said they
may not participate in the federal government's small-business rescue program due to
concerns about taking on too much legal and financial risk, five people with direct
knowledge of industry discussions told Reuters.[.]
The small business owner has a mandatory "to Close order" - no cash flow and is expected
to (a) take on additional loans to stay afloat and (b) sign a document attesting to their
eligibility and other requirements, thereby relieving the industry of responsibility for
potential misconduct.
Anyone thinking the U.S. will have a quick recovery is delusional.
"👉Some say reaction to CV is worse than CV (Bc Econ damage)
"I get it, but remember, CV didn't force: 👇
"1. Mkt cap/gdp 150%+
"2. Corp debt all time high
"3. Consumer debt all time high
"4. Dependency on ZIRP/QE
"5. No savings
"6. Econ built on debt+asset bubbles
I posted earlier of USJ indefinite detention application UK is already rolling out a
version. How many coincidences does one need to validate a conspiracy - opps coincidence
theory?
Global depression? China appears to be getting back to work, Russia appears to be acting
normally, Japan appears to have streets full of shoppers, unlike here in my area. A couple of
months of reduced economic activity is going to freeze up the system?
The West appears to be falling apart. Much of this is from the massive market of counter
party risk and derivatives. Hedge funds were caught on the wrong side of the trade margined
up to the hilt. All cash was in the market. Now there is a "dollar shortage" as everyone
moves back to cash and is hoarding it.
In reality the market was falling apart before this happened. Behind the scenes and the
FED was pumping liquidity into the market prior to November 2019. Capitalism was leveraged to
the hilt and in no position to withstand a short term shock. They will get to socialize their
risk.
I feel for the small business owners who have their lives in a business. They are hurting.
Screw the hedge funds, let them die. Make the companies sell their stock back into the market
or use it as collateral for a loan from the lender of last resort if needed.
Things will get back to normal and the games will go on as the system's survival depends
on the rigged game.
Max Keiser: Workers who are getting sub living wages, in meatpacking or in delivery
services or gig economy, are now in a position to raise their wages. Are workers at a point
where they can start to bring back organized labour and bring back the power of collective
bargaining or are they going to blow it
Michael Hudson: They're certainly motivated to, simply over the issue of workplace safety
and the protection against the virus and the fact that they're being laid off at will by the
employers with really no backup. So you would think that the the whole health plan, the
points raised by Bernie Sanders, are certainly going to catalyze this and if they don't
organize it means that they're just going to surrender quietly and make the economy end up
looking like Greece. Where everybody gets poorer and poorer, they get unhappy, they commit
suicide or they emigrate, and their lifespans shorten. That's really the alternative.
Imagine what's going to happen in three months when all of a sudden, they haven't been
employed, all of the rent has been in abeyance is going to fall due. And the restaurants and
small businesses they work for can't afford to open because they can't afford to pay the
rent, which is their largest expense, for the last three months while they've been shut down
There's going to be a wholesale unemployment, homelessness will increase - if this doesn't
trigger people acting in their self-interest I don't think anything will.
What Trump ought to do is not just fire Powell, but every other Fed board member, disband the
Fed completely, and return its duties to the Treasury from where they were pirated in 1913,
which is one of the main sources of our current globalized problem--the privatization of
Central Banks.
That would be the financial equivalent of jailing the main heroin supplier of urban
ghettos and rolling up the entire racket. And there're plenty of prescriptions available as
what to do next. Again, this discussion
with Hudson and Ellen Brown has several which build on those Hudson makes in
this video interview I've linked before.
Again as b shows, it's the political protectors of the Creditors who won't allow any
change to occur. Recall the book touting Clinton's 1992 campaign-- Mandate for Change
--and Obama's mantra--Change you can Believe in. That the NY Times and Senator Cotton were
appalled is close to a Sea Change in sentiment. Most troublesome is the prognosis that this
won't just dieoff come the warm heat of summer. Chinese researchers have shown the virus can
survive a longtime at bodyheat temps:
"The length of time it lasts on the surface depends on factors such as temperature and the
type of surface, for example at around 37C (98F), it can survive for two to three days on
glass, fabric, metal, plastic or paper."
It's entirely possible that the elderly population will need to adopt a continual defense
mode of behavior when out in areas of high public concentrations & transit until a
confidence in resistance is attained or a vaccine becomes available.
One thing ought to becoming very clear to people everywhere: The people who got us into
this mess are not at all qualified to get us out--they either need to be jailed or
retired.
The so-called 'new global economy' (NGE) that has been been so loudly touted for the last 40
some years by some academics, economists, Wall Street con artists and other such riff-raff,
appears to be crumbling faster by each passing day because of the coronavirus pandemic.
These so-called very serious know-it-alls have shown themselves to be nothing more than a
bunch of 21st century snake oil salesmen, offering up what can be best described as warmed
over late 19th - early 20th century economics.
Lord John Maynard Keynes has been vindicated! However do not expect any of these to
publicly or privately admit they sold a load of manure to a gullible public. No siree!
The NGE is their cherished baby and they will follow the first rule of arrogant and stupid
management: Never admit you are wrong!
It's easy for the rich and the upper middle class to preach for the laissez-faire route: they
can stay in their second houses in isolation without losing a penny.
But they lose money if production stops (because mass quarantine has the same practical
effect of a general strike) - that's why they want the wheel to keep spinning.
But here's a surprise: poor people want to surivive too. So pardon the USD 80 billion loss
at Wall Street, I want to enhance my chances of survival.
Here's a look at some of the hardest hit sectors in the S&P 500, and how far they've
fallen in the past 30 days.
ENERGY (-47%)
The S&P energy sector has plunged more 47% in the past month. The price of oil continues
a steady decline toward $30 per barrel. Saudi Arabia on Wednesday directed its oil company
Aramco to increase its maximum production capacity as it squared off with Russia, even as
airlines cut flights, shippers dial back deliveries of goods and people are being told to stay
home. In its monthly report Wednesday, OPEC revised down its projections for global oil demand
growth this year, while raising projections for supply. That is a recipe for plunging energy
prices and layoffs in the oil patch. Shares in Exxon are down about 38% in the past 30 days.
Already, energy giants like Exxon and Occidental Petroleum have cut spending. The latter cut
its dividend by 86% Tuesday to save cash.
FINANCE AND BANKING (-33%)
Banks have been punished by falling interest rates. Interest payments on loans are a major
source of revenue. The Fed last week lowered its main borrowing rate by half a point to combat
the economic drag from the outbreak. Analysts suspect another cut may be coming soon. But there
is also the anticipation of slowing global economic growth, which was already underway before
the pandemic hit. That would mean slowing business, and fewer fees, for banks that employ
millions of people. On Thursday, the U.S. Federal Reserve injected $500 billion into short-term
lending markets to address disruptions in the Treasury market. It is also broadening its
ongoing purchases of Treasurys to include longer-term bonds. The action, being led by the New
York Fed, is intended to keep credit markets functioning and ensure that banks can continue to
provide loans to businesses and other borrowers across the economy.
INDUSTRY AND MANUFACTURING (-32%)
Manufacturers are also taking a hit as businesses pull back on orders for goods due to the
impact of the spreading coronavirus. Companies like Ingersoll Rand, which makes a wide range of
industrial products including many used by the oil and gas industry, has seen its shares lose a
third of their value in the past 30 days. Major manufactures like Caterpillar and Deere and
just beginning to stabilize from a trade war between the world's two largest economies, China
and the United States. Caterpillar on Thursday reported broad declines in retail sales for the
three-month rolling period ending in February, with worldwide sales slumping 11% following a 7%
decline from January.
DISCRETIONARY SPENDING (-27%)
The broad sector that covers everything from the sale of a Big Mac, a Barbie doll, Gap jeans
or a Disneyland vacation -- is taking a beating as people cancel trips, avoid the mall or shut
in. Airlines and cruise ships have been the most notable losers amid government travel bans,
infections on cruise ships and a sudden aversion to boarding a commercial aircraft. Shares in
airlines are down more than 40% in the past month and cruise ships stocks, which are grouped
with resorts and hotels, are down about 50%. Princess Cruises, which had one of its ships
quarantined off the coast of Japan last month, said Thursday that it would suspend global
operations through early May. Starbucks stores in the U.S. and Canada may become drive-thru
only while others could limit the number of people allowed inside, the company said Thursday.
Shares in the coffee chain plunged 7% Thursday to a 52-week low and are down almost 30% in the
past month. And more bad news for anyone thinking they would self-quarantine on the couch and
watch their favorite team: the NHL is following the NBA's lead and suspending its season amid
the coronavirus outbreak. Major League Baseball is delaying the start of its season by at least
two weeks. And the NCAA canceled the men's and women's Division I basketball tournaments. And
hold off on that Disneyland vacation: Disneyland Resort said it will close Disneyland Park and
Disney California Adventure Park through the end of the month, though there have been no
reported cases of the new virus. The announcement doesn't affect Disney World in Florida.
TECHNOLOGY (-26%)
Technology companies have not been immune to the Wall Street coronavirus sell-off during the
past 30 days. China manufactures a wide range of parts for U.S. tech companies, and when the
country shut down most of its factories last month, it disrupted the supply chain and left
companies without products to ship. Additionally, companies from every sector are likely
trimming non-essential spending until the pandemic passes. That means fewer tech upgrades or
overhauls, and individuals may pull back on spending as well for everything from iPhones to
Xboxes. Alphabet, which owns Google, has lost about one-quarter of its value in the past month.
Chipmaker Dell has seen its stock fall about 37% during the same stretch.
Apparently the West will now end up with both a much lower stock market and a large covid 19
crisis. At some levels the government is taking this very seriously, at others not so much.
People have to listen and become informed and the corporate media appears to be holding back
and not helping.
I am not so sure that Trump derangement syndrome is not playing out in the media coverage.
How does one stop a habit of three years of derangement in an instant? So much BS has been
spun off over the last three years I suspect that it is carrying over into this crisis.
There are a myriad of local, state, and federal bureaucracies assigned to the task and it
is impossible to create a perfect symphony of action across all levels.
The spread across the world seems to have come from tourists from China visiting various
countries. Now that the eyes are on the Western countries no one is reporting on business in
China; are the factories coming back online?
Wall Street blames the coronavirus for the current crash for the same
reason the Democratic Party blames Russia for losing in 2016: to avoid responsibility.
A month ago I
said :
"the stock market is massively overvalued . Right now
the stock market is a bubble in search of a pin."
"... The budget deficit is simply a ruse to make you believe that government funding is limited when in reality they create money on demand with a few keystrokes. ..."
"... Thus there is always money for corporate welfare, the military, tax relief and benefits for the oligarchy but never money for health care, education, infrastructure, etc. ..."
In the broadest sense the US deficit is a measure of how much money the govt has created (not entirely accurate as the creation
of money - really debt - has been largely outsourced to private banks). If the national debt was 'paid off' It would suck all
the money out of society and the economy would collapse.
The Fed doesn't need taxes as revenue as it just creates whatever money it needs. The budget deficit is simply a ruse to
make you believe that government funding is limited when in reality they create money on demand with a few keystrokes.
Thus there is always money for corporate welfare, the military, tax relief and benefits for the oligarchy but never money
for health care, education, infrastructure, etc. The deficit is 1/2 of a balance sheet, the deficit on the govt side is balanced
by a surplus (money in circulation) in the economy. Note that states are revenue constrained and depend on taxes and federal outlays
to operate as they cannot create their own money on demand.
But what about inflation? Too much money in circulation lowers its value. Taxes are the real federal economic regulatory mechanism.
When there is inflation, higher taxes directly remove money from circulation. The disinformation campaign is that interest rates
control inflation, which has a) repeatedly been demonstrated false and b) is simply another system of rewards for the banking
cartel.
The best metaphor is a sink. The faucet is the creation of money, the basin is the economy, and the drain is taxes. When the
sink starts to overflow (inflation) the solution is to open up the drain (raise taxes).
Note also that this is for a sovereign economy, one that is controlled by the government. The EU has effectively destroyed
all the sovereign economies in Europe with its central bank. Thus Greece, Italy, Spain, etc. have no control of their own economies
and as such are unable to economically regulate themselves and subject to foreign predatory forces.
" i listened to about 3 mins of some bill gates ted talkish thing, wondering, will these dim
bulbs ever assume responsibility for anything?
all the msm talking heads have been revealed for what they are: state propagandists. not
one krugmanian friedmanite will ever say, "I didn't see this coming and I pimped myself out
for the last 40 years selling snake oil and getting nobel prizes for it and have revealed
myself to be unqualified to turn on a light switch no matter how much money I have made and
recognition I have received. Clearly I know nothing". why would anyone listen to an msm
personality that's been sold to them as some kind of "expert"?
"... To make this process more equitable, why not permanently place those equities into a sovereign wealth fund, and use the annual dividend flow to improve programs that benefit the broader populace, like social security and M4A ? Other countries , like Norway , have such funds and use them in this way. Heck , so does Alaska , for that matter. ..."
So, now the FED is considering purchasing equities , so as to defend the portfolio values
of the already-wealthy , who own most of that equity. This will likely be a regular practice
in every crisis going forward ( see Japan ) , and we know that we are now a distinctly
crisis-prone country , and can expect at least one crisis per decade , and probably more.
To make this process more equitable, why not permanently place those equities into a
sovereign wealth fund, and use the annual dividend flow to improve programs that benefit the
broader populace, like social security and M4A ? Other countries , like Norway , have such
funds and use them in this way. Heck , so does Alaska , for that matter.
Why don't we do it ? Most of you already know why. If you don't , just watch some old
George Carlin clips on Youtube.
I agree Marko. Thank you for your thoughtful comment. I believe what you are proposing, or
something like it, has to be done for systemically important entities, such as banks,
telecoms, health, insurance, and national defense providers that own the largest share of
their markets. We must do as you say, if we are not to be held hostage to the absentee
landlords who currently own our nation for their sole benefit.
Dfnslblty , April 7, 2020 at 13:56
Socialization via nationalization is your excellent proposal.
Privatization in public areas – education, banking, medicine, oil and water- has robbed
Citizens and destroyed the environment.
We can elect officials to bring equality to governance, or we can continue to live as
serfs.
"... There is no reason why the collapse of the system should lead to something worse. Indeed it is hard to conceive of any worse system that could possibly survive. ..."
"... a collapse in global trade unlike anything we've seen since the 1930s. ..."
"... The Fed is already set to monetize double the total U.S. Treasury debt issuance. The global task would overwhelm it – in an avalanche of money-printing. ..."
"... "Does Mnuchin then, believe his and Trump's narrative, that the virus will soon pass, and the economy will rapidly bounce-back? If so, and it turns out that the virus does not rapidly disappear, then Mnuchin's stance portends a coming, tragic débacle. ..."
Alistair Crooke at Strategic Culture is worth looking at today.
He's predicting the collapse of the US dollar and the international trading system.
A New World Order indeed. But also a tabula rasa.
There is no reason why the collapse of the system should lead to something worse. Indeed
it is hard to conceive of any worse system that could possibly survive.
Instead of howling calamity and predicting a reality that is likely to be no worse than
that already in operation for the bulk of the world's population -- does anyone think that the
people scrabbling every hour to stay alive in the world's slums, care or ought to care
whether our internet traffic is pouring into a imperial database? Does anyone doubt that it
has been for years?
Instead of arguing how many corona virus corpses can be attributed to obesity and sugary
diets we could be discussing the possibilities that Disaster Socialism opens up.
After all the rational response to calamities and collapses is always socialist in the
sense that communities come together, help one another and rebuild themselves. If the world
trade system does collapse there will be an immediate necessity for rationing, social
distribution and the development-Cuban style- of food production. Tools will have to be
appropriated, land too and labour organised.
The whole substructure of capitalism-private property and commodity production- will have
to be pushed aside like rubble in an earthquake.
The current basis of petrochemical agriculture will have to be abandoned- and three cheers
for that!- and organic, labour intensive horticultural techniques used in their place.
There will be, at one and the same time, mass unemployment and an urgent need for
labour.
Out of such crises a new world can be born. There is no reason why it should be one
designed by the enemies of life who controlled the one currently failing.
Crooke explains what is about to happen
"...the crucial point is made by Professor Rogoff: "We're looking at a commodity-price
collapse – and a collapse in global trade unlike anything we've seen since the 1930s.
An avalanche of government-debt crises is sure to follow, he said, and "the system just can't
handle this many defaults and restructurings – at the same time".
"This simply is beyond the U.S. Fed, or the U.S. Treasury's capacities, by a long shot.
The Fed is already set to monetize double the total U.S. Treasury debt issuance. The global
task would overwhelm it – in an avalanche of money-printing.
"Does Mnuchin then, believe his and Trump's narrative, that the virus will soon pass, and
the economy will rapidly bounce-back? If so, and it turns out that the virus does not rapidly
disappear, then Mnuchin's stance portends a coming, tragic débacle. And with further
massive money issuance, a collapse in confidence in the dollar. (President Putin would have
been proved right, but he will not welcome, assuredly, being proved right in such a
destructive manner)..."
Sick. Unconscionable. There is a shortage of lamp posts and piano wire.
[.]in a press conference late on Thursday, Steven Mnuchin said that he will double the
interest rate on the SBA loan from 0.50% to 1.00% in order to appease banks seeking higher
interest rates to participate in the Treasury's bailout program and lend money to the same
taxpayers who bailed them out 12 years ago.
These are same banks, mind you, that just sold all $1.6 trillion in securities to the
Fed to expand their balance sheets capacity in the past three weeks, and which also just
benefited from the Fed's decision to remove Treasurys and deposits from the Fed's SLR test,
freeing up another $1.6 trillion in liquidity.
And yet, despite all this, these banks - which include JPMorgan Chase, Bank of America,
Wells Fargo Citigroup, Truist Bank and PNC - which were bailed out in 2008 and again bailed
out 3 weeks ago with the Fed's various alphabet soup programs, couldn't agree to give Main
Street a helping hand, and instead of offering loans at a modest 0.5%, demanded no less
than 1%, which is 75-100 bps above where they can borrow cash from the Fed. Because
charging America's middle class an 19.95% credit card APR is not enough, and anything less
than 1.0% on a loan that is explicitly backstopped by the Treasury would be
uneconomical.[.]
My harping question: Why would a small business owner, forced to close, and without a
cashflow take on more debt?
"... The old financial capitalism of always, refurbished by the new decrees on pandemic, whose hedge funds, already present in the Mediterranean countries applying usury interests to basic needs ( and rights ) of the population, like homes market, will fall like vulture on the so longed health and pension systems of now re-indebted countries who already were doing well before the pandemic started ( and even better than their Calvinist prepotent disloyal "partners" of the north, as the graphic on the situation of main banks in the EU i posted in the week review thread so clearly show ). ..."
Simply, some countries, in the twilight of their most profiteering industries and from
which they are known ( namely cars, aircrafts, fracking oil, and so on...), and the inability
of easily continue plundering developing countries without entering expensive and unending
wars, have thought of reconverting their "productive" fabric and thus keep profiting from
medical and pharma industries ( and for this they needed to create a new strong market
before...)
The old financial capitalism of always, refurbished by the new decrees on pandemic, whose
hedge funds, already present in the Mediterranean countries applying usury interests to basic
needs ( and rights ) of the population, like homes market, will fall like vulture on the so
longed health and pension systems of now re-indebted countries who already were doing well
before the pandemic started ( and even better than their Calvinist prepotent disloyal
"partners" of the north, as the graphic on the situation of main banks in the EU i posted in
the week review thread so clearly show ).
"... There has been a huge amount of planning for a pandemic. It seems likely that that planning has also included how a pandemic can be gamed to benefit TPTB. We are seeing plenty of CYA propaganda that excuses government failures and attempt to minimize the virus threat. But IMO they know that they're doing. ..."
"... Trump team failed to follow NSC's pandemic playbook ..."
"... In a subsequent section, the playbook details steps to take if there's evidence that the virus is spreading among humans, which the World Health Organization concluded by Jan. 22, or the U.S. government declared a public health emergency, which HHS Secretary Alex Azar did on Jan. 31. ..."
"... Under that timeline, the federal government by late January should have been taking a lead role in "coordination of workforce protection activities including [personal protective equipment] determination, procurement and deployment." Those efforts are only now getting underway, health workers and doctors say. ..."
"... The problem is that the measures that needed to be taken directly contradicted the capitalist insistence on immediate profits: building reserve capacity into the health system (or rather refraining from the temptation to slim down the system to the very minimum needed capacity) was just something that capitalist regimes, desperate to cut taxes and otherwise distribute public funds to the wealthy, could not bring themselves to do. ..."
"... A case in point-to which I gave a link to in the paywalled Toronto Star on an earlier thread -- was the revelation that, after the Sars outbreak the Province of Ontario, following the advice of a Judicial enquiry, stockpiled respirators and masks against just such an emergency as we face today. 55 million masks, in fact, were purchased and, after 2017, destroyed or sold. ..."
I see no evidence of an owngoal. I see an engineered recession depression. I see enforcement
of lockdown. I see laws banning large gatherings. I see complete inability of any section of
the population to physically protest without incurring the full wrath of law enforcement and
many of their fellow citizens. Hardly a word of protest has been uttered regarding the transfer
of massive debt liabilities onto the taxpayer
One problem with your hypothesis is that 2+ years ago, Greenspan came out and admitted to
the fact of an unsustainable, massive bubble in the Bond Market. I linked to this Keiser Report that noted his
admission/confession , plus there are a great many other reports and essays relating to the
falsity of the economic figures and what they're attempting to conceal. Furthermore as behavior
by TrumpCo, particularly Pompeo's, shows, they were ecstatic in January at China's declaration
of the COVID-19 attack and initially ignored what China said it would do in response--shutdown.
Indeed, it took about 6 weeks for the reality of what China said to reach the tiny brains of
TrumpCo and elsewhere within the West's financial matrix. As I wrote, it didn't matter if the
event was natural or premeditated; what mattered was the very unanticipated Chinese and then
South Korean responses--they weren't gamed whatsoever as proven by TrumpCo's response. It's as
plain as day.
Deflating the Wall Street Bubble, a 'bailout' for Boeing, and accelerating 'decoupling'
provide powerful reasons for creating or gaming the Covid-19 crisis.
The Western response has been slow and ineffective. The reason for this is largely
neoliberal-thinking that puts capital before people. Essentially, the response has been
gamed. Yet people are still reluctant to blame authorities.
TPTB allowed the virus to spread so that China could be blamed and Boeing and Wall
Street could be bailed out. But apparently that wasn't enough. 'Spring Break' celebrations
in USA were allowed to continue. Was that just an innocent failure? Did they really not
understand that the virus could be spread widely via such a large-scale event?
Go-along to get along is still the order of the day for elites and Stockholm
Syndrome is still strong in the middle-class. Until there is outrage and
accountability, the gaming will continue.
Every delay, every failure means more virus infection.. more deaths.. more economic
damage - and justifies more stringent measures later.
'Herd immunity' and happy talk of vaccine development justify delays and a lax response.
Most consider a virus to be 12 months or more away. Long before a virus we may see severe
economic and social dislocations and possible imposition of martial law in parts of the
West.
<> <> <> <> <>
There has been a huge amount of planning for a pandemic. It seems likely that that
planning has also included how a pandemic can be gamed to benefit TPTB. We are seeing
plenty of CYA propaganda that excuses government failures and attempt to minimize the virus
threat. But IMO they know that they're doing.
"The U.S. government will use all powers at its disposal to prevent, slow or
mitigate the spread of an emerging infectious disease threat," according to the
playbook's built-in "assumptions" about fighting future threats. "The American public
will look to the U.S. government for action when multi-state or other significant events
occur."
. . .
Trump has claimed that his administration could not have foreseen the coronavirus
pandemic, which has spread to all 50 states and more than 180 nations, sickening more
than 460,000 people around the world. "Nobody ever expected a thing like this," Trump
said in a Fox News interview on Tuesday.
. . .
In a subsequent section, the playbook details steps to take if there's evidence
that the virus is spreading among humans, which the World Health Organization concluded
by Jan. 22, or the U.S. government declared a public health emergency, which HHS
Secretary Alex Azar did on Jan. 31.
Under that timeline, the federal government by late January should have been
taking a lead role in "coordination of workforce protection activities including
[personal protective equipment] determination, procurement and deployment." Those efforts
are only now getting underway, health workers and doctors say.
"There has been a huge amount of planning for a pandemic.." Jackrabbit@19
There has been a lot of planning for a pandemic. That there would be one was never in
doubt. It was regarded as being inevitable.
The problem is that the measures that needed to be taken directly contradicted the
capitalist insistence on immediate profits: building reserve capacity into the health
system (or rather refraining from the temptation to slim down the system to the very
minimum needed capacity) was just something that capitalist regimes, desperate to cut taxes
and otherwise distribute public funds to the wealthy, could not bring themselves to
do.
A case in point-to which I gave a link to in the paywalled Toronto Star on an
earlier thread -- was the revelation that, after the Sars outbreak the Province of Ontario,
following the advice of a Judicial enquiry, stockpiled respirators and masks against just
such an emergency as we face today. 55 million masks, in fact, were purchased and, after
2017, destroyed or sold.
"..It seems likely that that planning has also included how a pandemic can be gamed
to benefit TPTB. We are seeing plenty of CYA propaganda that excuses government failures
and attempt to minimize the virus threat. But IMO they know that they're doing."
If by 'planning' you are referring to brainstorming by businesses, individuals and
political interest groups you are right. But it doesn't mean much: it is of the nature of
this society that there is a never ending fountain of ideas on how to make money out of
disasters of every kind. In that respect the virus is simply another Bear market.
Those who infer, from the fact that capitalists and political opportunists never miss an
opportunity to turn a profit, that the pandemic was deliberately shaped in order to impose
an authoritarian order beg the question as to why the ruling class would want to do so.
Looking back on the 1930s it would be interesting to see how many people put forward the
theory that the Wall St Crash was deliberately engineered in order to: (fill in this space
according to taste.)
That is how many people apart from the Nazis who "knew" that the Jews were behind it and
used it for their own nefarious purposes.
(For those with limited understanding of the language by "knew" I mean 'insisted without
evidence'.
Only complete idiots believe that The Crash was deliberately brought about. Just as
today only fascists and idiots believe that the pandemic was planned and implemented in
order to advance the agendas of TPTB.
Only complete idiots believe that The Crash was deliberately brought about. Just as today
only fascists and idiots believe that the pandemic was planned and implemented in order to
advance the agendas of TPTB.
Posted by: bevin | Mar 29 2020 21:05 utc | 59
Keep in mind, as you read the words of this idiot, that he spent months (if not years)
polluting the comment threads on this very website, screaming words and phrases like
"racist" and "useless conspiracist" at anyone correctly claiming that ISIS was a
US/Anglo-Zio proxy.
The man is an idiot, his ability to correctly analyse events in realtime is completely
non-existant
Adding all that to the fact that coronavirus genome
variations in Iran and Italy were sequenced and it was revealed they do not belong to the
variety that infected Wuhan, Chinese media are now openly asking questions and drawing a
connection with the shutting down in August last year of the "unsafe" military bioweapon
lab at Fort Detrick, the Military Games, and the Wuhan epidemic. Some of these questions
had been asked -- with no response -- inside the U.S. itself.
Extra questions linger about the opaque Event 201 in New York on October 18, 2019: a
rehearsal for a worldwide pandemic caused by a deadly virus -- which happened to be
coronavirus. This magnificent coincidence happened one month before the outbreak in
Wuhan.
Event 201 was sponsored by Bill & Melinda Gates Foundation, the World Economic Forum
(WEF), the CIA, Bloomberg, John Hopkins Foundation and the UN. The World Military Games
opened in Wuhan on the exact same day.
Irrespective of its origin, which is still not conclusively established, as much as
Trump tweets about the "Chinese virus," COVID-19 already poses immensely serious questions
about biopolitics (where's Foucault when we need him?) and bio-terror.
The working hypothesis of coronavirus as a very powerful but not Armageddon-provoking
bio-weapon unveils it as a perfect vehicle for widespread social control -- on a global
scale.
I cannot speak for bevin, but I think that claiming that the pandemic -not
necessarily the original outbreak in China but the spreading of the virus to the US and
northern Europe- is part of the empire's plan does not make sense. Perhaps that is what
bevin is saying.
I don't know if virus is bioengineered (by US), time will tell. What I do believe that
there is very strong evidence virus originated in US in fall last year and they decided to
throw it at China using those military games to ruin it.
But US's glorious plan completely backfired, oh the horror, who could foresee that.
Except that literally every US plan, proxy, tool etc. in recent history backfired.
"What they needed was some method of absolving themselves of all blame." --Realist
@83
Could be, but if so it is still a massively incompetent own-goal. "They" may be
dodging personal blame, but "they" are shifting that blame to the very economic
paradigm that "they" depend upon for their power in society.
I don't think that will work out quite the way "they" hope, if indeed this is all
their plan.
But US's glorious plan completely backfired, oh the horror, who could foresee that.
Posted by: Abe | Mar 29 2020 23:46 utc | 87
What's your proof it backfired?
If the target was not limited, not local but global, then how has it "backfired"
A virus with a 4 to 14 day incubation period before infection became detectable, during
which the host would spread it liberally, was hardly, if engineered, intended to be
confined locally
Could be, but if so it is still a massively incompetent own-goal. "They" may be dodging
personal blame, but "they" are shifting that blame to the very economic paradigm that
"they" depend upon for their power in society.
I don't think that will work out quite the way "they" hope, if indeed this is all their
plan.
"... Bear in mind yet again that the TOTAL death count from two months of this virus in US still hasn't reached ONE DAY of deaths from ordinary flu. In fact the public health folks have been doing most things right in most places. The outbreak started in Seattle, which has been in rebellion against normal public health measures (border controls, vaccines) for a long time. ..."
Bear in mind yet again that the TOTAL death count from two months of this virus in US still
hasn't reached ONE DAY of deaths from ordinary flu. In fact the public health folks have been
doing most things right in most places. The outbreak started in Seattle, which has been in
rebellion against normal public health measures (border controls, vaccines) for a long time.
Last year, the CDC reports 45 million cases of Influenza in America (14% of population), with
21 million hospital visits, 810,000 hospitalizations, and 61,000 deaths. If America reaches
10,000 deaths with this virus, given the constant media exposure and policy driven towards
fear; the entire nation will go into dischord. Go outside, breath fresh air, smile, soak up
the sunlight, laugh, and exercise.
"... its all looking more and more like disaster capitalism in its purest, blood-stained form, a massive smash and grab raid on ordinary people... ..."
To me the coronavirus numbers increasingly DON'T justify the economically suicidal lock downs
- its all looking more and more like disaster capitalism in its purest, blood-stained form, a
massive smash and grab raid on ordinary people...
"... Kostin forecasts 2020 S&P 500 earnings will decline by 5 percent to $157 due to "supply-chain disruption, weak US and global consumption, and lower oil prices and interest rates." He thinks earnings will collapse in the second and third quarters before rebounding in the fourth quarter and for the full year. ..."
The COVID-19 outbreak has disrupted supply chains, eroded demand, curbed travel and prompted
employee furloughs, all resulting in a hit to corporate earnings.
Kostin forecasts 2020 S&P 500 earnings will decline by 5 percent to $157 due to
"supply-chain disruption, weak US and global consumption, and lower oil prices and interest
rates." He thinks earnings will collapse in the second and third quarters before rebounding in
the fourth quarter and for the full year.
His preferred valuation approach is to compare the S&P 500's earnings yield with the
yield on the 10-year note. Assuming an earnings yield of 7.2 percent and a 10-year yield of 0.5
percent, equating to a yield gap of 665 basis points, Kostin's base case is for the S&P 500
to bottom at 2,450.
However, in the event that the gap widens to 770 basis points, as it did during the global
financial crisis, the S&P 500 would fall to about 2,000, he said.
"... The US airline industry has spent a decade shoving itself into harm's way by strip-mining their balance sheets to fund share buybacks and goose top executive stock options. ..."
"... For crying out loud – the reckless irresponsibility of it is mind-boggling. That's because for decades upon decades this has been a highly cyclical industry – vulnerable to global dislocations caused by recessions, storms, wars, terror and more. Accordingly, airline companies absolutely need deep equity balance sheets and ample standby liquidity, even at the expense of short-term earnings. ..."
"... Needless to say, the Big Four US airlines – Delta, United, American, and Southwest – were having none of financial rationality, prudence and common sense. ..."
"... If the Big Four Airlines can't raise enough cash in the high cost long term debt markets or by issuing highly dilutive preferred stock or equity, there is only one solution – and that is chapter 11. Holy moly, that's why we have this legal protection procedure. ..."
"... Of course, the airlines are only the poster boy for this long overdue moment of truth. The problem is universal ..."
The nerve of it is a wonder to behold. The US airline industry has spent a decade shoving
itself into harm's way by strip-mining their balance sheets to fund share buybacks and goose
top executive stock options.
For crying out loud – the reckless irresponsibility of it is mind-boggling. That's
because for decades upon decades this has been a highly cyclical industry – vulnerable to
global dislocations caused by recessions, storms, wars, terror and more. Accordingly, airline
companies absolutely need deep equity balance sheets and ample standby liquidity, even at the
expense of short-term earnings.
Needless to say, the Big Four US airlines – Delta, United, American, and Southwest
– were having none of financial rationality, prudence and common sense. As Wolf Richter
properly pointed out:
"These stocks are now getting crushed because they may run out of cash in a few months,
yet they would be the primary recipients of that $50 billion bailout, well, after they
wasted, blew, and incinerated willfully and recklessly together $43.7 billion in cash on
share buybacks since 2012 for the sole purpose of enriching the very shareholders that will
now be bailed out by the taxpayer ."
We say nothing doing!
If the Big Four Airlines can't raise enough cash in the high cost long term debt markets or
by issuing highly dilutive preferred stock or equity, there is only one solution – and
that is chapter 11. Holy moly, that's why we have this legal protection procedure.
The airlines will have precious little business for the duration of the great COVID spring
break anyway. So let the court-appointed trustees operate with the same skeleton crews that the
airlines will be running even if they get the bailout. The level of customer service and
employment will be essentially the same in either case.
More importantly, let the gamblers and so-called investors who piled into these stocks get
their just deserts. That is, a 100% loss on their gambling stakes because that's all it ever
was when the Big Four's combined market cap hit $130 billion compared to just $43 billion
now.
Even more importantly, let these bankrupt shareholders file class action suits against the
idiots and clowns in the C-suites and on the boards of directors who made such foolish
decisions in the first place. Hopefully, these cats would be legally stalked and harassed to
the ends of the earth as an object lesson in the personal cost of imperiling corporate balance
sheets to feather their own stock options nest.
Of course, the airlines are only the poster boy for this long overdue moment of truth. The
problem is universal because today's rotten regime of Keynesian central banking has caused the
entire financial system and main street economy to become riddled with rank speculation and
reckless disregard for financial discipline and prudence.
And the crime starts right in the Eccles Building where over the last several decades an
inbred posse of PhDs and Washington apparatchiks have taken it upon themselves to destroy
honest price discovery in the money and capital markets in the name of levitating financial
asset prices and thereby fostering more growth, jobs, incomes and spending than the main street
economy would allegedly produce on its own.
Self-evidently, main street didn't need no stinkin' help from a wanna be 12-member monetary
politburo. They have created serial bubbles that have gotten more inflated with each cycle,
leaving the main street economy exposed to increasingly brutal episodes of correction when the
proverbial Black Swan, or Black Bat, as the case may be, makes its grim appearance.
Still, the very idea that agents of the state could have enough information and wisdom to
best the work of millions of traders, investors, speculators and dealers was ridiculous from
the start; and the further idea that financial assets prices falsified by the FOMC to the
second decimal point could cause main street to produce more output, jobs, efficiency and real
living standard gains than would be the case under market determined financial asset prices was
even more ludicrous.
Self-evidently, the only thing Keynesian central bankers have accomplished has been to fuel
egregious speculations in the canyons of Wall Street; drain main street businesses of real
productive investment; and leave businesses and households living hand-to-mouth and therefore
vulnerable to even short-run interruptions of cash flow.
So we will say it again: Hand-to-mouth economics is not the natural modality on the free
market; it is a malignant product of bad money and the debt-fueled speculative manias that are
the consequence of Keynesian central banking.
Left to their own devices on the free market, households save and provide for rainy days,
regardless of income level or social status.
Likewise, in a world not poisoned by cheap debt and falsified costs of capital, businesses
nurture their balance sheets and provide for cash flow interruptions either by buying insurance
or setting aside liquid reserves and equity capital based shock absorbers.
That's the real message of this – the second great financial heart attack of the last
decade. But rather than allowing the rot to be purged, the central bankers are now out pouring
kerosene on the fires.
That is, insisting upon even greater central bank intrusion in the financial markets and
even more egregious falsification of the prices of money, debt and every manner of risk assets.
In effect, they are advocating the complete euthanasia of market prices in the financial system
in favor of their own administered price folly.
At some point the very chutzpah of it gets downright maddening. We are referring to this
morning's missive in the FT from the Boobsie Twins, Ben Bernanke, and Janet Yellen, who were
major architects of the disaster now underway.
Yet they now want the Fed to have expanded powers to buy corporate debt and who knows what
else:
The Fed could ask Congress for the authority to buy limited amounts of investment-grade
corporate debt . Most central banks already have this power, and the European Central Bank
and the Bank of England regularly use it. The Fed's intervention could help restart that part
of the corporate debt market, which is under significant stress. Such a programme would have
to be carefully calibrated to minimise the credit risk taken by the Fed while still providing
needed liquidity to an essential market.
The bolded part is a risible lie. There is absolutely nothing wrong with the corporate debt
market that even a modicum of honest interest rates could not handle.
That's evident from the price chart of the largest corporate bond ETF shown below. It is
trading no lower than in previous risk-off periods including November-December 2018, January
2016, late 2013 and during the US debt ceiling crisis of August 2011.
Yes, it has plunged from the absurd levels reached during the stock markets blow-off top a
few weeks ago.
But so what? At the February extreme, the implied yield on corporate debt was hardly 2.6% ,
and even after the price plunge of recent days the implied yield is just 3.7% .
So what in the world are the Boobsie Twins talking about? Do they really think we are stupid
enough to believe that a 3.7% investment grade yield is an end of the world crisis that
requires the Fed to put its Big Fat Thumb on this sector of the rates market, too, after it has
already reduced sovereign debt to yield-free status?
Indeed, when you look at the real corporate debt yield after inflation it is downright
minuscule at 1.35% . So these Keynesian morons want the Fed to buy massive amounts of
investment grade corporate debt with fiat credits snatched from thin air because they think,
apparently, that the US economy will collapse at a real yield to just 1.35% after the current
running level of inflation.
So what we have here is a far more insidious reality. Namely, the reaction function of
Keynesian central bankers past and present has degenerated into an Atlas Syndrome.
These cats think they have the entire $85 trillion world economy on their shoulders and that
any time there is an abrupt re-pricing of the hideous financial bubbles they have inflated,
they propose to throw financial sanity to the winds lest the whole financial system and economy
splatter against the wall.
It won't, of course, because re-pricing of financial assets back to quasi-sane levels is
actually what is desperately needed to stop the violent boom and bust cycles that have been
gaining momentum under their tutelage for three decades now.
Stated differently, if Keynesian central banks fear a 3.7% investment grade bond yield, what
they actually fear is the price mechanism itself.
That's the heart of the matter: All of the emergency facilities and new legislative
authority proposals emanating from the central bankers and their Wall Street acolytes and
shills are designed to eviscerate and override the price mechanism in the financial
markets.
The very absurdity and danger of that idea, however, is dramatized in spades by the
juxtaposition of what happened yesterday. Presumably, the Boobsie Twins were emailing their
draft FT op ed back and forth during market daylight hours.
Alas, the corporate bond market was so badly "broken" as they penned up their SOS proposal
that, well, the largest amount of corporate debt deals of the year was brought to market!
That's right. About $28 billion of new deals were priced yesterday, of which $10 billion
were was 20+ years.
Duh. If that's "broken", we truly do not understand what financial planet these Keynesian
central bankers actually inhabit.
On the other hand, we know full well where drastic and sustained repression of bond yields
have already led.
To wit, to a massive scramble for yield among money managers, which in turn has fueled the
outbreak of epic-scale financial engineering in the C-suites. That's because they could sell
ultra-cheap debt for any cockamamie purpose that pleased Wall Street, including idiotic
empire-building through M&A and the depletion of corporate cash reserves and debt capacity
in order to fund massive stock buybacks and other balance sheet impairments.
Indeed, from the point of view of the central banker Atlas Syndrome, financial price
repression is the gift that keeps on giving. Having dissipated their balance sheet liquidity on
financial engineering, corporations now allegedly are facing a liquidity squeeze owing to the
COVID-19 supply-side shocks.
So without missing a beat, the Fed was out with a resurrection of the emergency commercial
paper funding facility that was used during the 2008 crisis to rescue con men like General
Electric's Jeff Immelt, who had loaded his $600 billion balance sheet with upwards of $200
million of cheap commercial paper.
As explained below, that particular facility ended up so malodorous even in the eyes of the
fools who populate Capitol Hill that they forbade the Fed from using it in the future without
the permission of the Secretary of the Treasury.
Little did they anticipate, of course, that during the next financial meltdown the office
would be occupied by the greatest flunky to ever hold the post, and that his real job as the
Donald's campaign finance chairman would be to tap the public till for whatever it would take
to insure his re-election.
So now that Secy Mnuchin has green-flagged this abomination, just recall briefly what
happened last time around.
Back then the alleged titan of corporate America didn't cotton to the idea of paying 5% or
7% or even 10% to rollover his short-term funding, least the hit to earnings would have
monkey-hammered his 2008 bonus and the value of his massive stock options.
So Immelt went running to his Goldman Sachs benefactor, Hank Paulson, who soon persuaded
Bernanke to open up a window at the Fed under its emergency section 13-3 authority.
That action guaranteed virtually unlimited commercial paper funding at the Fed window's
ultra-cheap rates so as not to disturb the year end bonuses of Immelt or hundreds of other CEOs
who had put their companies in harm's way be over-reliance on cheap short-term funding.
As it happened, the commercial paper bailout didn't help GE anyway, as perhaps indicated by
the shrinkage of its market cap from $500 billion at the peak to $55 billion a present.
But more importantly, there was absolutely no shortage of cash available to GE when Immelt
pulled his crony capitalist raid 12 years ago. What it needed to do was fill the approximate
$30 billion hole in its balance sheet by raising long-term debt, preferred stock or even common
stock.
Yet, the mere statement of the obvious underscores the entire scam behind the Fed's
intrusions into the money and capital markets with these so-called emergency facilities. To
wit, they have nothing to do with insuring the companies have the cash to meet their payrolls
or pay other bills as is so mendaciously claimed by Wall Street and the Eccles Building.
No, it's about keeping the cost of capital ultra low and minimizing the hit to earnings that
might result from tapping higher cost capital markets, which are still wide-open at a higher
yield per yesterday's massive pricing of new corporate debt issues.
In more unvarnished terms, the only real function of this massive new commercial paper
facility, which the Fed has stood up practically overnight, is protection of corporate
earnings, CEO bonuses and stock options and the remaining winnings of Wall Street gamblers.
The chart below highlights the massive lie behind this new facility. The ostensible reason
was that commercial paper yields spiked in the last few days from practically nothing to hardly
much more.
In the case of AA rated three-month nonfinancial commercial paper, the yield rose from 0.86%
on March 10 to 1.80% Friday afternoon.
But so f*cking what!
Back on February 27 when the stock market was just off its all-time highs, and when Powell
was claiming the US economy was in a "good place "and the Donald was ballyhooing the Greatest
Economy Ever the yield on this prime 90 day paper was actually higher at 1.56% !
Think about that one. In less than three weeks the Fed has panicked into resurrecting the
Jeff Immelt Memorial Scam with commercial paper rates so low as to make a mockery of the notion
of a shock or a malfunction in the plumbing.
[ZH: But it's the spread that counts.]
Still, the dutiful shills of the Wall Street Journal cut and pasted the Fed's press release
to this effect:
To ease escalating strains in credit markets. Turmoil escalated in commercial paper in
recent days, sending the cost of borrowing for companies sharply higher , in some cases above
the cost of selling 30-year bonds. Investors including money-market funds have sold
commercial paper, saddling dealers such as JPMorgan Chase & Co. and Goldman Sachs Group
Inc. with more inventory at a time when they could least accommodate it .
Oh, pulease!
Here is the 20 year history of the AA rated three month nonfinancial commercial paper yield.
Self-evidently, a 1.34% interest rate is not going to break the American economy, nor would
2.00% or 4.00% or even 6.00%.
Indeed, if the market were allowed to clear at those levels the only "shock" which would
trouble Wall Street would be the plunging stock prices which might result from companies having
to pay a market rate of interest or issue dilutive amounts of common stock or long-term
debt.
"... Today's oncoming economic meltdown can only be prevented if the lessons of 1933 are taken seriously. It is time for a 21st Century Pecora Commission. ..."
Today's oncoming economic meltdown can only be prevented if the lessons of 1933 are taken
seriously. It is time for a 21st Century Pecora Commission.
Will we be lucky enough to have
another Ferdinand Pecora, another Smedley Butler, another FDR? Will the American Sheeple wake
up to demand justice from the powerful swamp dwellers?
"... "A global recession -- perhaps of record dimensions -- is a near certainty," he said. Guterres cited a report by the International Labor Organization that said workers around the world could lose $3.4 trillion in income by the end of this year. ..."
"... I have always looked at unemployment as a measure of recession. I hardly pay attention to GDP. Two charts I follow to know how the US economy is doing are related to new unemployment claims and to continuing unemployment claims. Based on the trend in the continuing unemployment claims, sometime between Thanksgiving and Christmas the started trending up and continued up to today. I've been assuming the US economy was in trouble starting at the end of last year ..."
"... As a casual observer of the economy, I though a recession was going to happen . The only question I had was when. The virus accelerated things. ..."
"... We were living on a phony boom facilitated by cheap credit. People and governments borrowed more than they would because of low interest rates. At 78 years old, I knew that it had to end. It was only a matter of time. ..."
"A global recession -- perhaps of record dimensions -- is a near certainty," he said.
Guterres cited a report by the International Labor Organization that said workers around the
world could lose $3.4 trillion in income by the end of this year.
So far, as of March 19, there have been more than 219,000 coronavirus infections and an
estimated 8,900 deaths.
Guterres said he would participate in an emergency
summit the following week, by teleconferencing, with the leaders of the Group of 20, major
economic powers, who intend to respond to the pandemic. He appealed to
them to have "a particular concern with African countries" and other countries in the
developing world. Saudi Arabia called the meeting.
A prime minister of Portugal from 1995 to 2002 and chief of the UN refugee agency from 2005
to 2015, Guterres said governments and central banks have to guarantee there is liquidity in
the financial system. Banks, he said, have to "support their customers" but "apply that same
logic to the most vulnerable countries" by alleviating their debt.
I have always looked at unemployment as a measure of recession. I hardly pay attention to
GDP. Two charts I follow to know how the US economy is doing are related to new unemployment
claims and to continuing unemployment claims. Based on the trend in the continuing
unemployment claims, sometime between Thanksgiving and Christmas the started trending up and
continued up to today. I've been assuming the US economy was in trouble starting at the end
of last year
If all the other states are as overwhelmed and behind in processing unemployment
applications as Washington State is where I live, the current spike in new applications is
likely VERY understated.
As a casual observer of the economy, I though a recession was going to happen . The only
question I had was when. The virus accelerated things.
We were living on a phony boom
facilitated by cheap credit. People and governments borrowed more than they would because of
low interest rates. At 78 years old, I knew that it had to end. It was only a matter of
time.
You only have to look around and see all of the expensive things people were spending
their borrowed money on to realize it had to end. All kind of consumer good including big
very expensive cars.
Cell phons costing over $1000 and expensive plans. I could go on and on
about excess unnecessary spending. All fueled by cheap money. It had to sometime end and that
time is now. I remember when an interest rate on anew car was considered good if it was 10%
or less. When I financed my home in 1974 the rate was 7.5%. You just can't create money out
of thin air and expect it to continue forever. There is always a time reckoning.
Yeah, all that is excessive ridiculous unnecessary spending, which is why I keep a $60
cell phone, but the real culprit eating young people out of their homes is mortgages, loans,
and insurance. In my city a 1 bedroom cheap apartment is $1000 and you can't rent a room for
under $600. Medical ins is $300 & car insurance is $150 on the cheap end. And it's the
5th in worst paid last time I checked. All that is fueled by excessive lending created by
mortgage backed securities and the ending of glass steagall which let the investment banks
back into the lending business. And the student loan mess also caused by excessive lending
because the govt eats the losses. And excessive lending cash available leads to rising
college prices.
All of it brought to citizens by the CORPORATIONS lobbying/buying your Congress
person.
Yeah, a recession would be a good outcome. I think we may have a depression with massive
unemployment. Not everyone can work from home and a lot of businesses are going to go under
and typically those who cannot work from home will be hurt the most.
It has been a bit galling seeing all of the pieces about working from home in the
mainstream press when much of the American working class doesn't have that option. As usual,
the top 10-20% might be able to weather the storm but the working class will get hit hard and
few people within our elite will care since they will be fine.
I will be bold and say that next month the global economy will begin a depression. In the
U.S. the unemployment rate will be 15%+. As the U.S. slows its trade the world will begin to
run short of USD causing the dollar to rise and emerging markets that borrowed in dollars
will be unable to repay their debts.
I have seen estimates that the fed will need to create 15 trillion to plug the upcoming
dollar shortage. In the meantime emerging markets will slow economic activity resulting in
shortages in the global supply chains.
So in the U.S. people won't have jobs causing them to burn through their savings (if they
have any) and those that have dollars will began to see a shortage of goods because the
global supply chain will be stressed.
In the near term the U.S. will have no choice but to implement a New Deal 2.0 to put money
into people's hands and help people survive. Longer term the buzzword will be regionalization
as the U.S. and the world attempts to restart their economies by bringing their supply chains
closer to home.
One caveat, if the depression gets too severe the population may push back and decide to
ring fence people who are at the most risk of covid-19 and restart the economy regardless of
the medical system.
I think that the US will also have to insource production of many things. It is all well
and good to depend upon an agile global supply chain but when all those chains go through
China it starts to look like a terrible idea. If Trump wanted to win he would push for that
not his damn wall.
"... There is no sign of sudden liquidation from popular exchange-traded funds that buy high yield debt, despite steep price declines ..."
"... The stock market's 15% fall from its February peak is painful, but not panicky. The coronavirus probably will cause a mild contraction of US economic activity during the second and third quarters, as travel and hospitality businesses shrink, consumers avoid shopping malls, and Americans, in general, save rather than spend as a precaution. ..."
"... Collapsing oil prices are a net negative for the economy, because a large part of the energy sector will suspend operations and cancel orders for capital equipment. ..."
Financial panics occur when investors sell what they can, not what they want to. And that happens when they can't
finance their positions. Credit remains freely available for sound borrowers, and the rise in the cost of credit has
been orderly – except for energy companies below investment grade.
There is no sign of sudden liquidation from popular exchange-traded funds that buy high yield debt, despite steep
price declines. Equity multiples shrank and probably will shrink further as the market prices in a mild recession
during 2020. But that's a far cry from 2008, when major banks levered $2 trillion worth of phony AAA-rated securities
sixty-to-one.
The stock market's 15% fall from its February peak is painful, but not panicky. The coronavirus probably will
cause a mild contraction of US economic activity during the second and third quarters, as travel and hospitality
businesses shrink, consumers avoid shopping malls, and Americans, in general, save rather than spend as a precaution.
Consumer spending was the only significant source of US growth during 2019, as investment and manufacturing shrank
in response to the incipient trade war. Strong economic data for the first two months of 2020, including an
exceptionally large increase in February employment, indicated that the US economy was improving after the conclusion
of a "Phase One" trade deal with China – before the coronavirus problem emerged.
Collapsing oil prices are a net negative for the economy, because a large part of the energy sector will suspend
operations and cancel orders for capital equipment. But they also put more money into consumers' pockets, so the
overall impact will be limited.
As the chart shows, the cost of high-yield credit has risen sharply, but it remains
within a longstanding historical range – except for energy, which blew up as the oil price collapsed. Companies with
less-than-investment-grade ratings can still borrow at an all-in cost of 4% to 6%, extremely low by historical
standards, given the extremely low overall level of interest rates.
The spread between LIBOR and investment-grade bonds jumped from around 0.4% to 1.2% during the past few days,
which means that the total cost of borrowing for investment-grade companies is below 2% (with the 10-year yield at
only 0.5%). That is still a record low for corporate borrowing costs. Investment-grade bonds are trading in a liquid
market, and their prices track the Treasury market.
The stock market priced in a perfect world, and now it is pricing a less-than-perfect world. In late February the
trailing price-earnings ratio of the S&P 500 Index was above 22. It now stands at around 19. The long-term average is
16.62. Given that the dividend yield of the S&P 500 of 1.8% now exceeds the yield on the 10-Year Treasury note by 1%,
and is roughly equal to the yield on 10-year investment-grade corporate bonds, equities are not particularly rich.
That suggest that once the smoke clears from the coronavirus problem, there will be good reason to buy equities.
There is even better reason to buy Chinese equities with strong businesses (especially in technology) that have
little debt and strong domestic markets.
A great deal can go wrong from here, to be sure. If the prospect of a mild recession increases the chance that
Sen. Bernie Sanders might win the presidency, there will be good reason to panic. But for the time being, the damage
is foreseeable and limited, and markets are pricing it rationally.
The tectonic shifts and the trajectory of both countries (China and the USA) after this
epidemics end is unpredictable. "Chimerica" type of globalization was in decline before the
epidemic (Huawai, etc) and Trump badly wants decoupling from China. Somebody needs to pay for
those changes. It might well be us. So it is quite probable that those techno Nouveau
riche like us might be soon royally fleeced one way or another.
It might be prudent to have at least 300K in three bank accounts (in the USA only the first
100K are ensured) at 1% or less. Buying TIPs directly from Treasury is another option. I hope
your house is already fully paid.
BTW Marina can get half of your Social Security pension if her own is too small.
Neglected in the grocery store-restaurant food chain talk is the monopsy-likestranglehold
of a company like restaurant supplier Sysco and the mega-grocers.
Farmers who are locked into contracts with Sysco are locked out of contracts with Kroger
or Walmart or Trader Joe or Whole Foods.
And since much of the country has no independent wholesale grocery distribution (cuz there
are no independent grocery stores), farmers have few places to sell their formerly
restaurant-bound Sysco foodstuffs.
If I understand this point right, people might go hungry, or if things become really dire
face starvation, because food that is available will not be delivered, sold, and eaten
because of a now pointless contract?
In this interconnected world, and I assume most farmers have some intertubes access, where
is the app that lets people develop and operate their own informal networks for food
distribution? CSAs already do something like this in a very oval scale, I understand. What
are the impediments to making those connections?
Cargo capacity of a Dodge Caravan is over a ton. Cargo capacity of my Ford Ranger truck is
over a ton and a half. Not the same as the semi and box trailer carrying 20 tons of lettuce
from the Central Valley to Chicago or New York, but then there is likely foodstuffs within
range of even my Ranger. Just takes organizing, and masks and gloves, and a willingness to
tell Sysco to F off. Sysco has really sharp lawyers drafting their adhesion contracts, but
there must be force majeure or other clauses in them that would let people fearful of
retribution out of their corporation-supplied straitjackets.
That's why restaurants are in fact essential businesses: easier to keep the
commercial/institutional supply chain running as is than redirect it to household products
and packaging. In that light, a relatively generous coronavirus benefit makes sense as a
hands-off method to indirectly stimulate that distribution channel and take some pressure off
of supermarkets and that.
Citizen science, anecdata, call it what you will: My usual Mexican spot got humpin' busy a
couple of weeks ago, with typical 15 minute wait times at early dinner one day, closure "for
an hour or so" to catch up a 2hr wait time two days later. Today, early dinner is at 25-30
minutes. My usual Thai spot, which was usually nicely busy, has been closed until further
notice.
Food systems have been under the control of the oligarchs for a long time. Think Heinz and
go from there. The centralization of food is under examination. I know of a former Coca-Cola
marketing exec (think CIA) in Saco who, when not reading "The Red Book" on hs coffee table,
was doing research about food chains in Southern Maine. Anything that isn't homegrown up
there or fished out fo the sea has to come over that bridge in Portsmouth.
I wonder how maintenance and repair or replacement of those roads and bridges, and
dredging and marking of river and ocean channels, will be arranged MMT is only going to work
as long as there is a national "real economy" generating the real wealth that underwrites the
"full faith and credit "
"... It is logical that the failings of the left/right pardigm would be blamed on the voter wherever possible. A great philosopher once wrote: "Don't vote, it just encourages them". ..."
The successes of the Corona virus for the Banking, Corporate military industrial complex: The
lockdown causes the measured stressing and indebting, to the banks (which we are bailing out)
of thousands of small and medium size companies, bringing them to the verge of bankruptcy and
making them ripe for takeover at fire sale prices.
The transfer of trillions in loans and gifts to US corporations, (when they don't need the
money), to buy up the medium size companies that undermine their monopolies and cartels, this
will further entrench the power of the few oligarchs that own the USA. Amazon is allowed to
function and is massively extending it's market share, as it is in effect the only company
allowed by law to provide almost all 'none essential' goods.
The Virus is useful in creating a 'flight to safety' to the dollar, at a time when it's value
is being destroyed by a massive new QE money printing program, which was started to shore-up
the banking liquidity crisis (bank run) which began only weeks before the arrival of the
virus in the American banking system. The Fed is now allowed to provide infinite cash to
shore up the bank.
The military and their surveillance arms, get an extension of surveillance, unrestricted
tracking in cooperation with US tech, and in the case of the UK the removal of warranted
surveillance allowing MI5 and others to track and listen as they wish. For the military this
is also a full martial law dry run, making it a regular tool of the Empire.
Doctortrinate ,
to add Cold wisdom waiting on superfluous folly (w.s) – was never more important time
to keep it warm and on the go . .
Charlotte Russe.
" Groups with shared interests need to organize and mobilize.
agreed, enough with this blinkered cooperation – shared interest that can seek to
guarantee a future with Choice – "build it, and they will come"
jay ,
It is logical that the failings of the left/right pardigm would be blamed on the voter
wherever possible.
A great philosopher once wrote:
"Don't vote, it just encourages them".
"if voting changed anything, they'd make it illegal" Emma Goldman.
Haven't voted for nearly 21 years Jay.
I know this isn't a very popular thought here, but you can cast your vote for either Punch or
Judy, however, the system remains intact the very next day, and next year, and the following
year
and people are still basically wage slaves, large numbers are still homeless, grotesque
inequality everywhere, Trillions spent on weapons and the environment is still being raped
and pillaged by Corporations.
And then you can vote again at the next election. And then the one after that, and on and on.
And the system stays the same.
DunGroanin ,
I mean of their world not just Japan.
Jen ,
You might like to know that current Japanese PM Shinzo Abe is the grandson of a World War II
war criminal ( Nobusuke Kishi ) who after the war helped
to set up an electoral
system that guaranteed the domination of Japanese politics by the conservative Liberal
Democratic Party for nearly 40 years (1955 – 1993) and prevented left-wing parties from
achieving government either in their own right or as significant members of political
coalitions.
The LDP as the ruling party of Japan for nearly 40 years forged connections between
government, government bureaucracy and the country's business sector. If anything, the people
who founded the corporations that make up Japan's business sector are more of a motley and
diverse crew with histories of having been former samurai or landlord families that fell on
hard times and became impoverished, and then later worked their way back up to their current
level of power and influence.
WASHINGTON (Reuters) - President Donald Trump on Thursday is expected to lay out a strategy
to phase out the month-long economic shutdown aimed at stanching the coronavirus pandemic,
despite concerns from health experts, state governors and business leaders about the
dangers of lifting restrictions without widespread testing in place.[.]
The state restrictions have strangled the U.S. economy to an extent not seen since the
Great Depression nearly a century ago. Another 5.2 million more Americans sought
unemployment benefits last week, the Labor Department reported on Thursday, lifting total
filings for claims over the past month to more than 20million.
The Republican president, who has staked his re-election in November on the strength of
the U.S. economy, is scheduled to hold a call with the nation's governors at 3 p.m. (1900
GMT) and said he would announce his plan at a news conference later on Thursday. The White
House coronavirus task force is scheduled to hold its daily public briefing at 5 p.m.
[.]
"The worst thing that could happen would be for us to throw everyone back into the economic
cycle and have to go back to having 97% of our people being told to stay home again,"
Trump's former White House chief economic adviser Gary Cohn told CBS News on
Thursday.[.]
Trump v. Biden. That's the choice and we are doomed.
People will forget all that populism nonsense, and just be grateful for whatever McJobs
they can get to be able to pay the interest on their debts, because, hey global capitalism
isn't so bad compared to living under house arrest!
Hard to imagine that happening in Americastan, where the economy has been completely
destroyed by the lockdown. We'll be lucky 'merely' to have Great Depression levels of
unemployment when this madness finally ends.
For all the MAGApedes out there: Trump had better be seen to be fighting the
lockdown-shysters, not acquiescing to them, if he wants to get re-elected. If he spends the
summer continuing to genuflect before Dr. Falsie, Trump is toast come November.
"... Authored by Joaquin Flores via The Strategic Culture Foundation, ..."
"... the declining rate of profit necessitated by automation, with the increasingly irrational policies, in all spheres, being pursued to salvage the ultimately unsalvageable. ..."
"... Because the present system is premised on a production-consumption and financial model, the solutions to crises are presented as population reduction and what even appears, at least in the case of Europe, as population replacement. As cliché as this may seem, this also appeared to be the policy of the Third Reich when capitalism faced its last major crises culminating in WWII. ..."
The coronavirus pandemic has shown that the twin processes of globalization and planned
obsolescence are deficient and moribund. Globalization was predicated on a number of
assumptions including the perpetuity of consumerism, and the withering away of national
boundaries as transnational corporations so required.
What we see instead is not a globalization process, but instead a process of rising
multipolarity and a rethinking of consumerism itself.
Normally a total market crash and unemployment crisis would usher in a period of militant
labor activity, strikes, walk-outs and community-labor campaigns. We've
seen some of this already . But the 'medical state of emergency' we are in, has effectively
worked like a 'lock-out' . The elites have effectively
flipped-the-script. Instead of workers now demanding a restoration of wages, hours, and
work-place rights, they are clamoring for any chance to work at all, under any conditions
handed down. Elites can 'afford' to do this because they've been given trillions of dollars to
do so. See how that works?
All our lives we've been misinformed over what a growing economy means, what it looks like,
how we identify it. All our lives we've been lied to about what technical improvement literally
means.
A growing economy in fact means that all goods and services become less expensive. That cuts
against inflation. Rather all prices should be deflating – less money ought to buy the
same (or the same money ought to buy more). Technical innovation means that goods should last
longer, not be planned for obsolescence with shorter lifespans.
Unemployment is good if it parallels price deflation. If both reached a zero-point, the
problems we believe we have would be solved.
In a revealing April 2nd article that featured on the BBC's website, Will coronavirus reverse globalisation?
it is proposed that the pandemic exposes the weaknesses and vulnerabilities of a global
supply-chain and manufacturing system, and that this in combination with the over-arching
US-China trade war would see a general tendency towards 're-shoring' of activities. These are
fair points.
But the article misses the point of the underlying problem facing economics in general:
the declining rate of profit necessitated by automation, with the increasingly irrational
policies, in all spheres, being pursued to salvage the ultimately unsalvageable.
The
Karmic Wheel of Production-Consumption
The shut-downs – which seem unnecessary in the numerous widely esteemed experts in
virology and epidemiology – appear to be aimed at stopping the production-consumption
cycle. When we look at the wanton creation of new 'money', to bailout the banks, we are told
that this will not cause inflation/debasement so long as the velocity of money is kept to a minimum.
In other words – so long as there is not a chain reaction of transactions, and the money
'stays still' – this won't cause inflation. It's a specious claim, but one which
justifies the quarantine/lock-down policy which today destroys thousands of small businesses
every day. In the U.S. alone, unemployment claims
will pass 30 million by mid April .
Likewise, this money appears real, it sits digitally as new liquidity on the computer
screens of tran-Atlantic banks – but it cannot be spent, or it tanks the system with
hyper-inflation. More to the point, the BBC piece erroneously continues to assume the necessity
of the production-consumption cycle, spinning wheat into gold forever.
The elites were not wrong to shut-down the cycle per se. The problem is that they cannot
offer the correct hardware in its place – for it puts an end to the very way that they
make money. It is this, which in turn is a major source for the maintenance of their dopamine
equilibrium and narcissist supply.
This is not an economic problem faced by 'the 1%' (the 0.03%) . It is an existential crisis
facing the meaning of their lives, where satisfaction can only be found in ever greater levels
of wealth and control, real or imagined – chasing that dragon, in search of that
ever-elusive high.
So naturally, their solutions are population reduction and other such quasi-genocidal
neo-Malthusian plans. Destruction of humanity – the number one productive-potential force
– resets the hands of time, back to a period where profit levels were higher. The
algorithmically favored coronavirus Instagram campaign of seeing city centers without people
and declaring these 'beautiful' and 'peaceful' is an example of this misanthropic principle at
play.
That the elites have chosen to shut-down the western economy is telling of an historic point
we have reached. And while we are told that production and consumption will return somewhat
'after quarantine', we also hear from the newly-emerged unelected tsars – Bill Gates et
al – that things will never
return to normal .
What we need to end is the entire theory and practice of globalization itself, including
UN
Agenda 21 and the dangerous role of 'book-talking' philanthropists like Gates and his
grossly unbalanced degree of power over policy formation in the Western sphere.
In place of waning globalization, we are seeing the reality of rising multipolarity and
inter-nationalism. With this, the end of the production-consumption cycle, based upon off-shore
production and international assembly, and at the root of it all: planned obsolescence towards
long-term profitability.
The Problem of Globalization Theory
Without a doubt, globalization theory satisfied aspects of descriptive power. But as time
marched forward, its predictive power weakened. Alternate theories began to emerge –
chief among these, multipolarity theory.
The promotion of globalization theory also raises ethical problems. Like a criminologist
'describing' a crime-wave while being invested in new prison construction, globalization theory
was as much theory as it was a policy forced upon the world by the same institutions behind its
popularization in academia and in policy formation. Therefore we should not be surprised with
the rise of solutions like those of Gates. These involve patentable 'vaccines' by for-profit
firms at the expense of buttressing natural human immunities, or using drugs which other
countries are using with effectiveness.
The truth? Globalization is really just a rebrand of the Washington Consensus
– neo-liberal think-tanks and the presumed eternal dominance of institutions like the
World Bank and the International Monetary Fund, which in turn are thinly disguised
conglomerates of the largest trans-Atlantic banking institutions.
So while globalization was often given a humanist veneer that promised global development,
modernization, the end of 'nation-states' which presumably are the source of war; in reality
globalization was premised on continuing and increasing concentration of capital towards the
19th century zones – New York, London, Berlin, and Paris.
'Internationalism' was once rooted in the existence of nations which in turn are only
possible with the existence of culture and peoples, but was hi-jacked by the trans-Atlanticist
project. Before long, the new-left 'internationalists' became champions of the very same
process of imperialism that their forbearers had vehemently opposed. Call it 'globalization'
and show how it's destroying 'toxic nationalism' and creating 'microfinance solutions for women
and girls' –
trot out Malala – and it was bought; hook, line and sinker.
This was not the new era of 'globalization', but rather the usual suspects going back to the
19th century; a 'feel-good' rebranding of the very same 19th century imperialism as described
in J.A Hobson's seminal work from 1902, Imperialism. Its touted 'inevitability' rested not on
the impossibility of alternate models, but on the authority that flows forth from gunboat
diplomacy. But sea power has given way to land power.
In many ways it aligned with the era of de-colonialization and post-colonialism. New nations
could wave their own flags and make their own laws, so long as the traditionally imperialist
western banking institutions controlled the money supply.
But what is emerging is not Washington Consensus 'globalization', but a multipolar model
based in civilizational sovereignty and difference, building products to last – for their
usefulness and not their repeatable retail potential. This cuts against the claims that global
homogenization in all spheres (moral, cultural, economic, political, etc.) was inevitable, as a
consequence of mercantile specialization.
Therefore, inter-nationalism hyphenated as such, reminds us that nations –
civilizations, sovereignty, and their differences – make us stronger as a human species.
Like against viruses, some have stronger natural immunity than others. If people were
identical, one virus could wipe-out all of humanity.
Likewise, an overly-integrated global economy leads to global melt-down and depression when
one node collapses. Rather than independent pillars that could aid each other, the
interdependence is its greatest weakness.
Multipolarity is Reality
This new reality – multipolarity – involves processes which aspects of
globalization theory also suggest and predict for, so there are some honest reasons why experts
could misdiagnose multipolarity as globalization. Overlooked was that the concentration of
capital nodes in various and globally diverse regions by continent, were not exclusively
trans-Atlantic regions as in the standard globalization model of Alpha ++ or Alpha+ cities.
This capital concentration along continental lines was occurring alongside regional economic
development and rising living standards which tended to promote the efficiency of local
transportation as opposed to ocean-travel in the production process. As regional nodes by
continent had increasingly diversified their own domestic production, a general tendency for
transportation costs to increase as individual per capita usage increased, worked against the
viability of an over-reliance on global transit lines.
But among many problems in globalization theory was that the US would always be the primary
consumer of the world's goods, and with it, the trans-Atlantic financial sector. It was also
contingent on the idea that mercantilist conceptions of specialization (by nation or by region)
would always trump autarkic models and ISI (income substitution industrialization). Again, if
middle-class consumer bases are rising in all the world's inhabited continents as multipolarity
explains and predicts, then a global production regimen rationalized towards a trans-Atlantic
consumer base as globalization theory predicts isn't quite as apt.
Because the present system is premised on a production-consumption and financial model,
the solutions to crises are presented as population reduction and what even appears, at least
in the case of Europe, as population replacement. As cliché as this may seem, this also
appeared to be the policy of the Third Reich when capitalism faced its last major crises
culminating in WWII.
Breaking the Wheel
The shutdown reveals the karmic wheel of production-consumption is in truth already broken.
We have already passed the zenith point of what the old paradigm had to offer, and it has long
since entered into a period of decay, economic and moral destruction.
Like the Christ who brings forth a new covenant or the Buddha who emerges to break the wheel
of karma, the new world to be built on the ruins of modernity is a world that liberates the
productive forces, realizing their full potential, and with it the liberation of man from the
machine of the production-consumption cycle.
Planned obsolescence and consumerism (marketing) are the twin evils that have worked towards
the simultaneous
time-wasting enslavement of 'living to work' , and have built globalization based on global
assembly and global mono-culture.
What is important for people and their quality of life is the time to live life, not be
stuck in the grind. We hear politicians and economists talking about 'everyone having a job',
as if what people want is to be away from their families, friends, passions, or hobbies. What's
more – people cannot invent, innovate, or address the greater questions of life and death
– if their nose is to the grindstone.
Now that we are living under an overt system of control, a 'medical state of emergency' with
a frozen economy, we can see that another world is possible. The truth is that most things
which are produced are intentionally made to break at a specific time, so that a re-purchase is
predictable and profits are guaranteed. This compels global supply chains and justifies
artificially induced crashes aimed at upward redistribution and mass expropriations.
Instead of allowing Bill Gates to tour the world to tout a police-state cum population
reduction scheme right after a global virus pandemic struck, one which many believe
he owns the patent for , we can instead address the issues of multipolarity, civilizational
sovereignty, and ending planned obsolescence and the global supply chain, as well as the
off-shoring it necessitates – which the BBC rightly notes, is in question anyhow.
"... JPMorgan Chase & Co, Wells Fargo & Co, Bank of America Corp and Citigroup Inc are each in the process of setting up independent companies to own oil and gas assets, said three people who were not authorized to discuss the matter publicly. The banks are also looking to hire executives with relevant expertise to manage them, the sources said. ..."
"... U.S. oil and gas producers have increasingly relied on banks for cash over the past year, as debt or equity options dried up. Lenders have been conservative in valuing hydrocarbons used as collateral, but recent restructurings have left them spooked. ..."
NEW YORK (Reuters) - Major U.S. lenders are preparing to become operators of oil and gas
fields across the country for the first time in a generation to avoid losses on loans to energy
companies that may go bankrupt, sources aware of the plans told Reuters.
JPMorgan Chase & Co, Wells Fargo & Co, Bank of America Corp and Citigroup Inc
are each in the process of setting up independent companies to own oil and gas assets, said
three people who were not authorized to discuss the matter publicly. The banks are also looking
to hire executives with relevant expertise to manage them, the sources said.
The banks did not provide comment in time for publication.
Energy companies are suffering through a plunge in oil prices caused by the coronavirus
pandemic and a supply glut, with crude prices down more than 60% this year.
Although oil prices may gain support from a potential agreement Thursday between Saudi
Arabia and Russia to cut production, few believe the curtailment can offset a 30% drop in
global fuel demand, as the coronavirus has grounded aircraft, reduced vehicle use and curbed
economic activity more broadly.
Oil and gas companies working in shale basins from Texas to Wyoming are saddled with
debt.
The industry is estimated to owe more than $200 billion to lenders through loans backed by
oil and gas reserves. As revenue has plummeted and assets have declined in value, some
companies are saying they may be unable to repay.
Whiting Petroleum Corp became the first producer to file for Chapter 11 bankruptcy on April
1. Others, including Chesapeake Energy Corp, Denbury Resources Inc and Callon Petroleum Co,
have also hired debt advisers.
If banks do not retain bankrupt assets, they might be forced to sell them for pennies on the
dollar at current prices. The companies they are setting up could manage oil and gas assets
until conditions improve enough to sell at a meaningful value.
Big banks will need to get regulatory waivers to execute their plans, because of limitations
on their involvement with physical commodities, sources said.
Banks are hoping their planned ownership time frame of a year or so will pass a Federal
Reserve requirement that they do not plan to hold assets for a long time. Because lenders would
be stepping in to support part of the economy that is important to any potential rebound, and
which has not gotten direct bailouts from the federal government, that might help applications,
too.
For now, the banks are establishing holding companies that can sit above limited liability
companies (LLCs) containing seized assets. The LLCs would be owned proportionally by banks
participating in the original secured loan.
To run the oil-and-gas operations, banks might hire former industry executives or specialty
firms that have done so for private equity, sources said. Houston-based EnerVest Operating LLC
would be among the most likely operators, sources said.
"We regularly look for opportunities to operate on behalf of other entities, that is no
different in this market," said EnerVest Operating's chief executive, Alex Zazzi.
GETTING ASSERTIVE
U.S. banks have not done anything like this since the late-1980s, when another oil-price
rout bankrupted a bunch of energy companies. More recently, they have relied on restructuring
processes that prioritize them as secured creditors and leave bondholders to seek control in
lieu of payment.
But banks are becoming more assertive because of the coronavirus recession and balance sheet
vulnerabilities that have developed in recent years.
U.S. oil and gas producers have increasingly relied on banks for cash over the past
year, as debt or equity options dried up. Lenders have been conservative in valuing
hydrocarbons used as collateral, but recent restructurings have left them spooked.
Alta Mesa Resources' bankruptcy will likely provide banks with less than two-thirds of their
money, while Sanchez Energy's could leave them with nothing.
The structures banks are setting up will take a few months to establish, sources said. That
gives producers until the fall - the next time banks will evaluate the collateral behind energy
loans - to get their houses in order.
After several years of on-and-off issues with energy borrowers, lenders have little choice
but to take more dramatic steps, said Buddy Clark, a restructuring partner at law firm Haynes
and Boone.
"Banks can now believably wield the threat that they will foreclose on the company and its
properties if they don't pay their loan back," he said.
(Reporting by David French and Imani Moise in New York; Additional Reporting by Elizabeth
Dilts Marshall; Editing by Leslie Adler; Editing by Lauren Tara LaCapra)
A policy that US allies in Europe have recently slammed as 'piracy' is set
to continue, as Washington unabashedly and unapologetically continues blocking shipments from
US soil of personal protective equipment (PPE) -- such as gowns, gloves, and N95 face masks --
which hospitals and health workers desperately need in the fight against COVID-19.
The Hill
reports that "The federal government will begin seizing exports of personal protective
equipment, or PPE, until it decides if the tools should be kept in the country to fight the
coronavirus."
The announcement was made Wednesday by US Customs and Border Protection (CBP), formalizing
an existing controversial practice under Defense Production Act (DPA) which has
recently blocked millions of masks from being exported from Minnesota-based 3M to Canada.
US customs will block all respirators, surgical masks and surgical gloves from going
abroad.
Canadian leaders blasted the move as putting lives in danger, while Germany and France
described the US policy, which has seen recent interventions against shipments from China bound
for Europe, as 'piracy'.
"FEMA and CBP are working together to prevent domestic brokers, distributors, and other
intermediaries from diverting these critical medical resources overseas,"
a joint statement indicated.
"Today's order is another step in our ongoing fight to prevent hoarding, price gouging, and
profiteering by preventing the harmful export of critically needed PPE," the White House also
said in a statement. "It will help ensure that needed PPE is kept in our country and gets to
where it is needed to defeat the virus."
It appears Trump's 'America First' policy in action at a crucial time of crisis , as the US
is the global epicenter for COVID-19, now with over 430,000 confirmed cases - most in New York
state - which has witnessed hospitals running desperately low on supplies, including
ventilators.
However, foreign governments have of late essentially warned 'what goes around comes around'
. Berlin Interior Minister Andreas Geisel at the start of the week stated bluntly of
Washington's brazen policy that it
constitutes a Wild West tactic - essentially warning Europe can play dirty too.
Japan
has allocated $2.2 billion (US) of its $993 billion emergency stimulus package to help
manufacturers relocate production out of China amid the COVID-19 pandemic which began in the
communist nation. According to SCMP , $2 billion (US) will be set aside for companies shifting
production back to Japan , while roughly $223.5 million will be spent on helping companies move
production to other countries, according to
SCMP .
Under normal circumstances, China is Japan's largest trading partner - however imports from
China plummeted nearly 50% in February as the coronavirus pandemic resulted in closed factories
and unfilled orders. Meanwhile, a planned visit by Chinese President Xi Jinping to Japan early
this month - the first such trip in a decade - was postponed with no date rescheduled.
It remains to be seen how the policy will affect Prime Minister Shinzo Abe's years-long
effort to restore relations with China.
" We are doing our best to resume economic development ," Foreign Ministry spokesman Zhao
Lijian told a briefing Wednesday in Beijing, when asked about the move. " In this process, we
hope other countries will act like China and take proper measures to ensure the world economy
will be impacted as little as possible and to ensure that supply chains are impacted as
little as possible ." -
SCMP
China's production trainwreck has revived discussion among Japanese firms over reducing
their reliance on China as a manufacturing base - while the government's panel on future
investment recommended last month that manufacturing of high-value products should shift back
to Japan - while other goods should be diversified across Southeast Asia.
"There will be something of a shift," according to Japan Research Institute economist
Shinichi Seki, who noted that Japanese companies were already considering moving out of China.
"Having this in the budget will definitely provide an impetus." That said, certain industries
such as automotive will likely stay put.
Japan exports a far larger share of parts and partially finished goods to China than other
major industrial nations, according to data compiled for the panel. A February survey by
Tokyo Shoko Research found 37 per cent of the more than 2,600 companies that responded were
diversifying procurement to places other than China amid the coronavirus crisis. -
SCMP
"... Cramped quarters on drilling rigs leave no room for distancing ..."
"... That's led to worries about the safety of the sites, the biggest of which resemble mini-cities with as many as 200 workers, and the nation's dependence on their output. Oil wells in the U.S. Gulf of Mexico supply about 2 million barrels of crude a day, or 15% of U.S. production. ..."
Cramped quarters on drilling rigs leave no room for distancing
Inside more than a thousand offshore drilling rigs and oil production platforms that dot
the Gulf of Mexico, workers navigate narrow corridors, sleep in shared rooms and dine in
crowded mess halls.
It's an environment designed for efficiency -- not for keeping a lethal coronavirus at
bay.
That's led to worries about the safety of the sites, the biggest of which resemble
mini-cities with as many as 200 workers, and the nation's dependence on their output. Oil wells
in the U.S. Gulf of Mexico supply about 2 million barrels of
crude a day, or 15% of U.S. production.
A sound banker, alas! is not one who foresees danger and avoids it, but one who, when
he is ruined, is ruined in a conventional and orthodox way along with his fellows, so that no
one can really blame him. Keynes via Yves
The problem is that the payment system, besides grubby coins and paper Central Bank notes
(e.g. Federal Reserve Notes), must work through private depository institutions or not at
all.
How then can we have a sound economy when it is held hostage by "sound" bankers?
And are not the banks a form of rentier – who rent the Nation its money supply?
Then where are the proposals of the MMT School to euthanize those rentiers?
Jamie Dimon said the coronavirus pandemic will lead to a major economic downturn and stress
mirroring the meltdown that nearly brought down the U.S. financial system in 2008.
"At a minimum, we assume that it will include a bad recession combined with some kind of
financial stress similar to the global financial crisis of 2008," the chief executive officer
of JPMorgan Chase & Co. said Monday in his annual letter to shareholders. "Our bank cannot
be immune to the effects of this kind of stress."
The 23-page letter, his shortest since 2008, came less than a week after Dimon told staff
he'd returned to work after undergoing emergency heart surgery. It was his first public
commentary about the coronavirus since the bank's investor day on Feb. 25. At the time, the
outbreak still seemed a distant threat, with fewer than 60 cases in the U.S. and none in New
York.
Dimon, the only current CEO who steered a major U.S. bank through the financial crisis, said
JPMorgan's earnings will be "down meaningfully" this year, though the bank is "unlikely" to cut
its dividend. Such a move would only result from "extreme prudence," he said, adding that
JPMorgan will give more details on the impact when it reports first-quarter earnings later this
month.
The 64-year-old CEO outlined initiatives his bank is taking to support employees, businesses
and the community, but refrained from offering long opinions about public policy that marked
previous missives.
Read more: What to Know About Recessions as World Heads Into One: QuickTake
He said 180,000, or about 70%, of the firm's employees are working from home, and the bank
is giving payments of $1,000 to those whose jobs don't allow them to work remotely.
JPMorgan has been waiving fees for some loans, allowing customers to defer payments on
mortgages and auto loans, and removing minimum payment requirements on credit cards. It's also
extended $950 million in new loans to small businesses over the past 60 days, and is planning
to lend an additional $150 billion to clients across the world.
Regulatory Review
After the crisis, "we should use the opportunity to closely review the economic response and
determine whether any additional regulatory changes are warranted to improve our financial and
economic system," Dimon wrote. "There will be a time and place for that -- but not now."
Dimon has become a spokesman for Wall Street thanks to his frequent public appearances,
outspoken nature and nearly 15-year tenure at the biggest and most profitable bank in America.
His absence while he recovered from surgery was felt across the industry as policy makers
grappled with dire warnings about the economic effects of the pandemic and governments stepped
up efforts to keep millions of people at home to stem the spread of the highly contagious
virus.
Dimon was more pessimistic about prospects for the economy than some industry figures were
when the scale of the crisis was first becoming clear. A month ago, as stock markets were
sliding, former Goldman Sachs Group Inc. CEO Lloyd Blankfein said in a tweet to "expect quick
recovery when health threat recedes." He said the economy "will avoid systemic damage" that
takes years to work through.
Eye-watering read. Who could have guessed; the great exceptional U.S.A with over 80% under
lockdown, out of the unemployed gate, 10 million stuck at home and jobless.
Reuters presents this grim read. Is this article on a country in equatorial Africa? A
sobering No.
The White House task force on the pandemic estimates the pandemic could kill 100,000 to
240,000 people even if lockdown orders remain in place and Americans abide by
them.[.]
The number of Americans who filed for unemployment benefits last week shattered the
previous high reached just a week earlier, the U.S. government said, as urgent measures to
contain the pandemic slammed the brakes on the economy.
"It takes your breath away," said Justin Hoogendoorn, head of fixed income strategy and
analytics at Piper Sandler in Chicago. "Obviously the immediate reaction to something like
that is going to be fear."
Florida, Georgia, Mississippi and Nevada told people to stay home on Wednesday, raising
to 39 the number of states with such orders. Public health experts call the measures an
urgent necessity but economists say they could lead to economic contraction of 30 percent
or more in the second quarter.[.]
New York City crematories are extending their hours and burning bodies into the night,
with corpses piling up so quickly that city officials are surveying cemeteries elsewhere in
the state for temporary interment sites.
Funeral homes and cemetery directors describe a surge in demand unseen in decades as
COVID-19 cases, the respiratory ailment caused by the novel coronavirus, surpassed 40,000
infections in the city, killing more than 1,000.
"We've been preparing for a worst-case scenario, which is in a lot of ways starting to
materialize," said Mike Lanotte, executive director of the New York State Funeral Directors
Association.[.]
The $42 T rillion question. How will the Fed inflate the busted
bubble balloon..illusion of prosperity? This time it's different.
Even if
they aren't exactly certain how the business model works,
Twitter blue checks and the rest of the mainstream media - having been whipped into an
anti-banker fervor by Bernie Sanders and the last glowing embers of Occupy - never pass up an
opportunity to kick private equity in the nuts.
And if there's one industry where private equity has done the most to directly harm American
public, it's health care.
Envision's Colorado headquarters
During the latter part of the Democratic primary campaign, Bernie Sanders and Elizabeth
Warren primed the pump by extolling the evils of private equity to the public every chance they
got, helping impress the term into the memory banks of legions of twentysomethings how the
industry had contributed to America's health-care crisis, along with a multitude of other
societal ills. Now, with the world in the grip of an unprecedented crisis, the industry is
about to get pilloried once again - but this, much, much bigger than before, we suspect - as
private equity-backed health-care companies, loaded down from their LBO debt binges, are forced
to make cutbacks including slashing pay for doctors and nurses in the middle of a pandemic that
has already killed nearly 9,500 Americans.
And now the KKR-backed Envision Healthcare Corp., one of the biggest medical providers
backed by private equity, is poised to become the poster-child for Wall Street greed as it
informs hundreds of doctors in its employ will not be receiving the bonus checks they had been
expecting in April. Though we suspect this isn't a complete surprise, the cuts will deprive
hundreds of doctors of roughly one-third of their total comp during an already extremely
difficult time for them and their families. The company has promised to repay them at a later
date once their financial situation has improved.
The move risks igniting a blowback that could make KKR one of "the most hated companies in
the world. Just ask Martin Shkreli.
But the reason the company's financial position is so poor in the first place is because
Envision carries more than $7 billion of debt. This debt was amassed during what was, according
to data compiled by
Bloomberg , the third-largest health-care LBO ever.
In a statement, Envision said it's "100% focused" on saving lives during this crisis, even
though its business (ambulatory surgical centers and medical staffing) shrank more than 75% in
two weeks, Bloomberg said. With so many Americans hiding at home and fearful of entering
hospitals and doctor's offices, people are delaying elective and non-emergency care at
unprecedented rates.
"We are on the front lines caring for patients during this unprecedented public health and
economic crisis," the Nashville, Tennessee-based company said. "Envision Healthcare is 100
percent focused on saving lives and sustaining the nation's fragile health-care system. The
safety net we provide for millions of patients must remain fully intact for when we get to
the other side of this national crisis."
Like many companies, Envision completely drew down its two credit lines to provide financial
flexibility in recent weeks (apparently it didn't listen to Larry Kudlow and Mnuchin). The
company spends about $1.5 billion on compensation for physicians quarterly, an insider
reportedly told BBG. The company has about $140 million to $150 million in debt payments due in
the next two weeks, according to Mike Holland of Bloomberg Intelligence, and has $650 million
of cash on its balance sheet. It has warned investors that it might need to raise more
financing if circumstances continue to deteriorate.
The biggest problem for KKR, is that some of the physician groups are planning to sue the
company; litigation could draw unwanted attention to KKR at a time when public anger is
dangerously high.
But as the 'cockroach' theory suggests, Envision isn't alone: The boom in LBOs (part of the
binge on corporate debt that also fueled the surge in buybacks) left many companies, especially
in the health-care space, where many companies were built via a series of costly mergers and
acquisitions.
Congressional Budget Office forecasting 7% decline in 2nd quarter in US GDP (that's -28%
annualized).
source
Clearly even my first pass estimates for the economic damage of lockdowns was extremely
optimistic.
There were more than 3.3 million new unemployment claims reported on March 26. The Q2
unemployment rate "is expected to exceed 10 percent during the second quarter, in part
reflecting the claims reported on March 26 and the 6.6 million new claims reported this
morning [Thursday, April 2]."
The CBO indicated that new claims filed April 2 were 10 times higher than in any single
week from 2007-09, during the financial crisis and recession. And unemployment is likely to
exceed 10%
...
Of course, mortgage delinquencies will explode to near 30%.
"... The number of advertisements for short-time work has skyrocketed to an unprecedented level, and the number of unemployed is also increasing: The Federal Employment Agency expects an increase of up to 200,000 unemployed in April. ..."
"... The virologists had not succeeded in breeding Sars-Cov-2 in initial tests after swabbing various objects in apartments of highly infectious residents, sinks, doorknobs, but also pets such as cats. "For me it looks like the first results that a door handle can only be infectious if someone has coughed in the hand beforehand and then grabs the handle immediately." This suggests that there is no smear infection. Keeping a distance and washing hands is therefore a very effective tool. ..."
"... "We talk a lot about speculation and model calculations. With these, however, only one factor has to be wrong and the whole thing collapses like a house of cards. "That is why facts are so important to make effective decisions. He was therefore surprised that the Robert Koch Institute, as the highest federal authority for infectious diseases, had not previously carried out such an investigation. He sees such tests as a duty for virologists "to find answers for the citizens." ..."
The Corona crisis hits the global economy with great violence: In Germany, too,
restaurants and companies have to pause for weeks, tourism stands still, nothing works in
public life anymore.
The number of advertisements for short-time work has skyrocketed to an unprecedented
level, and the number of unemployed is also increasing: The Federal Employment Agency expects
an increase of up to 200,000 unemployed in April.
And despite the government's aid measures, one thing is certain: the German economy will
not be the same for the foreseeable future once the crisis is over. The existence of many
citizens is under threat.
Hardly anyone had questioned these tough government measures, as it is about saving lives.
But on Tuesday evening a well-known virologist for the first time openly raised doubts about
the need for the shutdown at "Markus Lanz" (ZDF). Did our entrepreneurs have to shut down
unnecessarily?
The virologist Hendrik Streeck from the University Hospital Bonn is currently carrying out
a unique examination in the district of Heinsberg - the epicenter of the coronavirus. There,
the expert collects both the number of infected people and the infection routes in a
representative sample. The study is intended to provide answers to questions such as where
the greatest sources of danger are. How exactly the virus is transmitted. How high the
unreported number of infected people is. The research group around Streeck wants to publish
the first results as early as next week.
The virologists had not succeeded in breeding Sars-Cov-2 in initial tests after swabbing
various objects in apartments of highly infectious residents, sinks, doorknobs, but also pets
such as cats. "For me it looks like the first results that a door handle can only be
infectious if someone has coughed in the hand beforehand and then grabs the handle
immediately." This suggests that there is no smear infection. Keeping a distance and washing
hands is therefore a very effective tool.
However, the risk of infecting someone else while shopping is considered to be low. "We
see how the infections took place. That was not in the supermarket or in the restaurant or at
the butcher's. That was at the parties at the après ski in Ischgl, in the Berlin club,
trumpet ', at the carnival in Gangelt and at the exuberant football games in Bergamo.
In the current discussion about the "shutdown" and the "exit" strategies, which lead again
from a standstill, such reliable facts are important. So that public life doesn't stand still
for too long.
"We talk a lot about speculation and model calculations. With these, however, only one
factor has to be wrong and the whole thing collapses like a house of cards. "That is why
facts are so important to make effective decisions. He was therefore surprised that the
Robert Koch Institute, as the highest federal authority for infectious diseases, had not
previously carried out such an investigation. He sees such tests as a duty for virologists
"to find answers for the citizens."
Did the shutdown come too quickly?
Streeck looks back at the various measures taken by the federal government, which have
gradually restricted life: Larger events have been canceled, schools have been closed down to
exit restrictions. "But I had already said in advance: We want to wait and see what happens.
The virus doesn't obey any politician. "
Measures that are now decided would only be visible in the statistics in two weeks at the
earliest. "You have to give this virus time so that we can see and classify the results of
the measures in the long term."
He had never heard of infections in hairdressing salons, said Streeck. But now they are
closed. It is the same with supermarkets or the like. "We just don't know that infections
have taken place there. I think it's important that we focus on what we really know - and
what we don't. "You have to find the nuances of when exactly an infection occurs. And this
must also be the guideline for reducing certain measures.
A very good way to contain the virus effectively: do a lot of tests like South Korea did.
"If they tested people positively and found a cluster, then they contained the area there,"
says Streeck. A nationwide curfew was not necessary there. "In my eyes, this is a very good
strategy and also a strategy that is feasible in Germany. Because we have the options. "
The virus is really dangerous for the risk groups, so "when it comes to the hospital,
nursing home and old people's home," said the doctor. It is therefore very important to
effectively protect particularly vulnerable people, with weekly corona tests for medical and
nursing staff, for example. Such pool procedures are already used in transfusion medicine to
test blood. So you are not new.
"It is therefore important to develop exactly such ideas. However, many experts are
involved in this development, and not just individual ones. "It is a shame that the
government approached the crisis" rather monothematically ". Unfortunately, there is no round
table with a large number of virologists, in which China is also involved.
Streeck criticizes the lack of objectives in the fight against Corona
"I see what such a curfew does to people," explains the virologist. He himself has friends
who wonder if they still have a job after the crisis. "In relation to other epidemics and
viruses, I find these restrictions to be very drastic." Before taking such measures, Streeck
would have liked to think carefully: "Where do we actually want to go?" He would lack the
precise definition of the objective.
"Our limit is the capacity of the hospitals. Not the number of people infected. But we
never heard where our guideline was. What is our goal? Are 1000 infections a day too much? Or
100? We have to listen to the intensive care physicians who tell us where their limits are.
"They could best assess which measures are the right ones.
Marcel Fratzscher: "A good health system needs a functioning economy"
Streeck therefore supports the fastest possible discussion about an exit strategy. Marcel
Fratzscher, President of the German Institute for Economic Research, explains how great the
danger for the economy is at "Lanz". He speaks of a "catastrophe" with a "rat tail of
problems". Small businesses and the self-employed could only last a few weeks despite
government aid.
Anyone who receives a salary of 60 or 70 percent in short-time work can hardly stay afloat
in the long term. At the same time, the economist feels uncomfortable weighing human lives
against the financial damage - as many in the discussion about an exit strategy do. "Because
a good health system also needs a functioning economy."
One should not play both sides against each other, but rather find a solution that is
acceptable to everyone. After six to eight weeks, the loss caused by the shutdown would
become critical. And that must be avoided.
Let's chalk this up to aristocratic elites. Aristocrats, unlike nobles, are decadent, but
don't stop with that word, understand what it means.
Elites who are not aligned with the actual productive activities of society and are
engaged primarily in activities which are contrary to production, are decadent. This was
true in Ancien Regime France (and deliberately fostered by Louis XIV as a way of
emasculating the nobility.) It is true today of most Western elites: they concentrate on
financial numbers, and not on actual production. Even those who are somewhat competent,
tend not to be truly productive: see the Waltons, who made their money as
distributers–merchants.
According to the National Center for Health Statistics, over 48,000 suicides occurred in the
US in 2018. This equates to an annual rate of about 14 suicides per 100,000 people. As
expected, suicides increase substantially during times of economic depression. For example, as
a result of the 2008 recession there was an approximate 25% increase. Similarly, during a peak
year of the Great Depression, in 1932, the rate rose to 17 suicides per 100,000 people.
Recent
research ties high suicide rates "to the unraveling of the social fabric" that happens when
societal breakdowns occur. People become despondent over economic hardship, the loss of social
structures, loneliness, and related factors.
There is probably no greater example of these kinds of losses than what we are experiencing
today with the extreme response to COVID-19 and the effects will be felt for many years. The
social structures might return in a few months but the economy will not.
Some think that the economy will recover in three years and others think it will never
recover in terms of impact to low-income households, as was the case for the 2008 recession.
However, if we estimate a full recovery in six years, the effects will contribute around 3
suicides per 100,000 people every year during that time for a total of over 59,000
deaths in the United States.
Related to suicides are drug abuse deaths. According to the National Institute on Drug
Abuse, over 67,000 deaths from overdose of illicit or
prescription drugs occurred in 2018. This does not include alcohol abuse. Only 7% were suicides
and 87% were known to be unintentional deaths largely due to drug abuse caused by depression or
other mental conditions. Such conditions can be expected to rise during times of economic
collapse and if we estimate the impact due to COVID-19 over six years as being a 25% increase
(as with suicides) that projects about 87,000 additional deaths due to drug
abuse.
Lack of Medical Coverage or Treatment
Unemployment is expected to rise dramatically as a result of the COVID-19 response and the
effect is already being seen in jobless claims. One of the major impacts of unemployment, apart
from depression and poverty, is a lack of medical coverage.
A Harvard study found nearly
45,000 excess deaths annually linked to lack of health coverage. That was at the
pre-COVID-19 unemployment rate of 4%.
As reported recently, millions
of Americans are losing their jobs in the COVID-19 recession/depression. For every 2%
increase in unemployment, there are about 3.5 million lost jobs.
The US Secretary of Treasury has predicted a 20% unemployment level, which translates to 12
million lost jobs. If the 45,000 excess deaths due to lack of medical coverage increases
uniformly by unemployment rate, we can expect about 225,000 deaths annually due to lack of
medical coverage in the US at 20% unemployment. Extrapolating this over a 6-year period would
mean 1.35 million deaths .
This assumes that funding for important health-related programs are not further cut or
ignored, a bad assumption that means the estimate is probably low.
Beyond lack of coverage, medical services are being reprioritized to respond preferentially
to COVID-19, causing less resources to be available for treatment of other medical conditions.
The capacity of medical service providers has already been significantly impacted by the
COVID-19 response in some areas.
Additionally, clinical trials and drug development are expected to be severely impacted.
This means that important new medicines will not reach the market and people will die who
otherwise would have lived. There is not yet enough information on the overall impact to
medical service provision therefore we will not include an estimate.
Poverty and Food
Access
The Columbia University School of Public Health studied the effects of poverty on death
rates. The investigators found that
4.5% of US deaths were attributable to poverty. That's about 130,000 deaths annually.
How will this be affected by COVID-19? One way to begin estimating is to consider how the
number of people living in poverty will increase.
Before the COVID-19 response, approximately 12% of Americans lived below the officially
defined poverty line. That percentage will undoubtedly rise significantly due to the expected
increase in unemployment. If unemployment rises to 20% (from 4%) as predicted, the number of
people living in poverty could easily double. If that is the extent of the effect, we will see
another 130,000 deaths per year from general poverty.
Although deaths due to poverty are not entirely about food access, it is a significant
factor in that category. In times of economic hardship many people can't afford good food,
causing malnutrition and, in some cases, starvation. People also can't access food causing the
same outcomes. Limited access to nutritious food is a root cause of diet-related diseases,
including diabetes, cardiovascular disease, and infant mortality issues. A recent estimate
suggests 20% of all
deaths worldwide are linked to poor diets.
Food access issues will be further exacerbated with the COVID-19 problem due to the
anticipated issues with food production and prices. If the COVID-19 response lasts for years as
expected, our estimate will need to be a multiple of the 130,000 annual figure. Using the
6-year estimate, we get 780,000 deaths.
Conclusion
The total deaths attributable to the COVID-19 response, from just this limited examination,
are estimated to be:
Suicides 59,000 Drug abuse 87,000 Lack of medical coverage or treatment
1,350,000 Poverty and food access 780,000
These estimates, totaling more than two million deaths above the estimated 150,000 expected
from the virus itself, do not include other predictable issues with the COVID-19 response. An
example is the lack of medical services as stated above. Other examples include the EPA's
suspension of environmental regulations. It has been estimated that the EPA's Clean Air Act
alone has saved
230,000 lives each year.
Moreover, the anticipated failure of the US Postal Service (USPS) will lead to more illness
and death. The USPS "delivers about
1 million lifesaving medications each year and serves as the only delivery link to
Americans living in rural areas."
Even using these low estimates, however, we can see that the response will be much worse
than the virus. The social devastation and economic scarring could last more than six years,
with one expert predicting that it will be "long-lasting and calamitous."
That expert
has noted that he is not overly concerned with the virus itself because "as much as 99
percent of active cases [of COVID-19] in the general population are 'mild' and do not require
specific medical treatment."
Yet he is deeply concerned about the "the social, economic and public health consequences
of this near total meltdown of normal life." He suggests a better alternative is to focus
only on those most susceptible to the virus. Others have reasonably suggested that only those
who are known to be infected should self-quarantine.
Some public health professionals have been pleading with authorities to consider the
implications of the unreasonable response. Many experts
have spoken out publicly, criticizing the overreaction to COVID-19. A professor of medical
microbiology, for example, has
written an open letter to German Chancellor Merkel in an attempt to draw attention to the
concerns.
The real problem we face today is not a virus. The greater problem is that people have
failed to engage in critical thinking due to the fear promoted by some media and government
officials. Fear is the mind killer, as author Frank Herbert once wrote. Ultimately, the fear of
COVID-19 and the lack of critical thinking that has arisen from it are likely to cause far more
deaths than the virus itself.
George Mc ,
List of the effects of this virus (not exhaustive):
• Total shut down on all other news items.
• The speeding up of an economic meltdown which was going to happen anyway but which now
can be attributed to the virus alone.
• The speeding up of the inevitable confrontation between the overlords and the masses
on conditions favourable to the former.
• The reduction of the public to a condition in which most welcome draconian
restrictions
• The harsh and vitriolic gap between those who are urging on the restrictions and those
who are suspicious i.e. a divide and rule matter which threatens to become physically
violent.
• The curtailing and indeed destruction of the rights and protections for the general
population that have been hard won over the last century.
• The reduction of social life to a social media matrix. (And yes I'm using the word
"matrix" in a knowing way.)
• The seemingly legitimate emergence of a police state
• The wrecking of the public sector. Of course this also means the wrecking of the
private sector but that will happen in a bottom up way i.e. smaller businesses tanking, then
slightly larger, then larger still. But by the time it affects the giants, the game can be
called off since the public sector will be gone.
Joerg ,
Some weeks ago on youtube there was a video with an interview with a German virologist Dr.
Köhnlein. Youtube removed this video – but now it is back on youtube again (only
in German): "CORONA – Alles nur Panik (Dr. Köhnlein)" – https://www.youtube.com/watch?v=TVHZ1bLceRw&feature=youtu.be
Toby Russell ,
I've been trying to get a grip on the extent to which the PCR test is used to establish who
has been infected with this alleged virus. Part of my research led me to this very recent
presentation on YouTube by a well credentialed doctor called Andrew Kaufman. In it, he
sets out how inaccurate the test is, that there isn't even a gold standard against which to
assess its accuracy, but the one attempt to do so he could find arrived at an 80%
false-positive rate. I heard from a doctor friend that its inventor, Kary Mullis, insisted it
should never be used for diagnosis. My understanding is that it is being used everywhere but
China, where a new test is being developed. If this is true, the figures we are being
bombarded with are not remotely trustable.
But the main thrust of the presentation by Dr Kaufman is the identity between exosomes and
covid-19. Exosomes are natural cellular defense mechanisms recently becoming known amongst
molecular biologists. They are largely unknown by doctors and nurses. Kaufman's assertion is
that covid-19 is in fact an exosome. He quotes James Hildreth, M.D., President and Chief
Executive Officer at Meharry Medical College and a former professor at John Hopkins: " the
virus is fully an exosome in every sense of the word."
The presentation is about 40 minutes long and followed by a fairly lengthy question and
answer session. Because falsifiable, and because it explains all the oddities of this case, I
feel his theory deserves widespread attention.
The New England Journal of Medicine is the world's leading medical journal. In its 26
March 2020 edition, we find: "[ ] This suggests that the overall clinical consequences of
COVID-19 may ultimately be more akin to a severe seasonal influenza (which has a case
fatality rate of approximately 0.1%) or a pandemic influenza (similar to those in 1957 and
1968) rather than a disease similar to SARS or MERS [ ]"
This article was penned by a few authors, one of whom was none other than Anthony S Fauci.
Yes, THE Anthony S Fauci. Note the case fatality rate. If anyone is interested in a full
translation, please let me know
Cassandra2 ,
The human race is being 'played' and the majority have been conditioned to accept it.
The really SCARY aspect of all this is that even if 97% of the global population were
given a complete insight into what was actually going on and who was (and has been for a
considerable time) manipulating events – what could they do about it?
Answer 'NOTHING'
The people are atomised, disconnected and totally powerless as they have no control over
MASS MEDIA COMMUNICATION . . . . . they do (RE: BBC).
A catalyst is required to unite the human race to establish an effective Counter-Offensive
capable of cleaning the earth of the dark forces currently in play.
(Bloomberg) -- President Donald Trump said he's concerned oil prices have fallen too far and
called Vladimir Putin on Monday to discuss Russia's oil-price war with Saudi Arabia.
The leaders, who also talked about the spread of the coronavirus, agreed to discussions on
oil between energy officials in the two countries, according to the Kremlin. Both leaders
"agreed on the importance of stability in global energy markets," the White House said in a
statement.
The U.S. president said earlier he doesn't want to see the American energy sector "wiped
out" after Russia and Saudi Arabia "both went crazy" and launched into a conflict that
depressed oil prices.
"I never thought I'd be saying that maybe we have to have an oil increase, because we do.
The price is so low," Trump said in an interview on "Fox & Friends."
Crude oil futures tumbled as much as 7.7% in New York, touching an 18-year low.
The Trump-Putin call came at the request of the U.S. and was "prolonged," according to the
Kremlin. Neither the White House or Kremlin statements said specifically how long the two
leaders talked.
Trump's view on the oil dispute marks a shift from earlier this month, when he likened the
plunge in oil prices to a "tax cut" for Americans. The U.S. president spoke to Saudi Crown
Prince Mohammed bin Salman on March 9 about the price war.
Trump has long argued that improving relations between Washington and Moscow could help
solve international disputes. The president said he wanted to discuss trade with Putin, though
he said he expected the Russian president to raise objections to U.S. sanctions. State-run Tass
quoted Kremlin spokesman Dmitry Peskov as saying that Putin didn't ask Trump for sanctions
relief on the call.
Oil tumbled earlier to its lowest point in nearly two decades, heading for the worst quarter
on record as coronavirus lockdowns cascaded through the world's largest economies, leaving the
market overwhelmed by cratering demand and a ballooning surplus. The slump in demand has shut
refineries from South Africa to Canada.
Goldman Sachs Group Inc. estimates consumption will drop by 26 million barrels a day this
week. Meanwhile, Riyadh and Moscow are showing no signs of a detente in their supply battle as
Saudi Arabia announced plans to increase its oil exports in the coming months, despite U.S.
warnings against flooding the market.
Some analysts argue Russia's motivations extend well beyond oil and are complicated by the
federation's anger over U.S. sanctions and opposition to the Nord Stream 2 pipeline linking
Russia to Germany. And the price for getting Russia to back down could be too high.
"Russia's concerns with the U.S. go beyond market share. Putin is frustrated with sanctions
and may be more interested in punishing the U.S. than Saudi Arabia," said Dan Eberhart, a Trump
donor and chief executive of drilling services company Canary LLC. "If Trump wants an agreement
with Putin, he may have to promise to ease up on sanctions. I am not sure he can deliver
without the backing of congress."
Rosneft PJSC over the weekend sold its assets in Venezuela to the Russian government, a move
that shields the Russian oil giant from further U.S. sanctions while keeping Moscow behind the
regime of Nicolas Maduro. Fears of broader sanctions have grown after the U.S. in recent months
slapped restrictions on Rosneft trading companies for handling business with Venezuela.
In the call, the White House said Trump "reiterated that the situation in Venezuela is dire,
and we all have an interest in seeing a democratic transition to end theongoing crisis." The
statement didn't say how Putin responded.
Talks between members of the Organization of Petroleum Exporting Countries and its allies
broke down in early March as Russia refused to sign on to larger production cuts proposed by
Saudi Arabia. The failure to reach an agreement prompted the Saudis to unleash a price war
which, combined with the devastating effect of the virus pandemic, caused the market to
crash.
Global demand is slumping by as much as 20 million barrels a day, about 20%, as billions of
people go into lockdown to slow the spread of the virus. The outlook remains dire, with
traders, banks and analysts forecasting a huge oversupply as governments effectively shut their
economies.
"... Given that the costs of financialization are already borne by the general public, not by the plutocracy, what's the point exactly of destroying the real economy just to open the door to new bail-outs? ..."
The Western populations (especially the American) were already bearing the costs of
financialization in the form of stagnant industrial output, unemployment, decaying
infrastructure, unavailability and/or declining quality of essential services like health
care, rapidly rising cost of living etc. before this and arguably even before the Global
Financial Crisis in 2008. The costs are no more socialized now just because the worthless
assets have been moved to the Federal Reserve's balance sheet.
What the bail-outs after the GFC did accomplish was enabling the financial sector, by
relieving it of the burden of toxic assets, to continue its parasitism on the real economy
through extending new loans to raid companies and to extract wealth from home-owners and
consumers.
Given that the costs of financialization are already borne by the general public, not by
the plutocracy, what's the point exactly of destroying the real economy just to open the door
to new bail-outs? Unlike in 2008, there was, from the perspective of the financial sector, no
need for any bail-outs because the financial system was still operating, up until the
economic crisis that arrived with this pandemic and the resulting shutdowns of the industrial
and service sectors. There is not in reality any debt erased or moved to the general public
(the plutocracy are in fact *not* the ones in debt, they are the ones issuing debt to
industrial companies being hollowed out, to home-owners, students, consumers etc.), but the
pandemic risks the collapse (at the very least the end of its legitimacy) of the entire
current financial system and with it the continuation of the parasitic process of wealth
extraction.
Given that the costs of financialization are already borne by the general public, not
by the plutocracy, what's the point exactly of destroying the real economy just to open the
door to new bail-outs?
'The point' is deflating the bubble, an extraordinary bailout of Boeing and maybe other
corps., and accelerating 'decoupling'. These things would be difficult to accomplish without
a CRISIS! that rises to the level of a 'national emergency'.
US and its system were heading for collapse. Trump and his backers could see that. At the
moment, this is starting to look like the great coronovirus reset. Bailouts coupled to big
changes.
Posted by: Peter AU1 | Mar 30 2020 0:30 utc | 100
++++
Precisely. By socialising the debt liability now the problem is shifted from being the
fault of finance to being the fault of the virus.
Guillotine dodged for now, the can is kicked further down the road. More austerity.
Resultant mass unemployment blamed on the virus and not on the behaviour of the parasitic
finance industry.
The continual inflating of asset prices by the Fed was also seen as a desperate ploy to ward
off deflation
++++++
No, the continual inflating of asset prices was in order to milk the rubes for as long as
feasibly possible. But the game was up in late 2019 when word got out that at least one of
the large banks (imo Deutsche Bank) were having trouble meeting their overnight obligations.
JPM said "we ain't helping" so The Fed went into Repo overdrive to shore the sustem up in the
shortterm
The point is, why would they want to (actively intervene to) deflate the bubble? The
transfer of wealth from the real economy is a continuous process. The longer you can keep a
company like Boeing going, the more of its assets (be it savings in pension funds, machinery,
residual goodwill etc.) you can liquidate and pay out to yourself in the form of interest on
loans (that the company owes to you or your friends), stock buybacks or bonuses.
Same thing with mortgages: The longer you can keep the real estate market in a bubble and
the home owners at least treading water, the longer they can pay you exorbitant interest
rates, and the more of their labor and savings you can siphon off.
In the event of a crash like in 2008, or now due to the coronavirus epidemic, bail-outs
are a necessary intervention to stitch up the balance sheets of the banks, private equity
funds etc. so that this parasitic process can be started up again. That doesn't mean that the
crashes are desired - in fact, the exact opposite. It's not through the bail-outs that the
actual wealth transfer happens, but rather between them.
The point is, why would they want to (actively intervene to) deflate the bubble? The
transfer of wealth from the real economy is a continuous process... It's not through the
bail-outs that the actual wealth transfer happens, but rather between them.
The markets are complex systems and they can get stressed. The expansion was well beyond its
sell-by date and required life-support for much of the duration (QE x , tax cuts,
etc.). A soft landing for Wall Street and recession that can be blamed on
coronavirus/China are less risky than letting the markets crash on their own. There will be
no big 'reset' that some have been hoping for (at least not anytime soon).
And a focus on deflating the bubble is misleading. They had multiple ways to game this
CRISIS!. And protecting favored interests (like Boeing) as well as the system itself is one
just icing on the cake.
Buyback Boom Companies are spending billions buying back their own shares. For the first
three quarters, this year's buybacks have surpassed last year's as the most since the 2008
financial crisis.
Companies spending the most on buybacks through Sept. 30
BUYBACKS, IN BILLIONS
CHANGE IN SHARES CHANGE IN
OUTSTANDING SHARE PRICE $600 billion
Buybacks by all U. S. companies, through Sept. 30 of each year
Apple $30.2
Microsoft 14.2
Qualcomm 9.6
American International Group 7.5
Gilead Sciences 7.0
Oracle 6.8
Wells Fargo 6.7
AbbVie 6.3
Pfizer 6.2
Boeing 6.0
" Faced with this Trump of all people may be forced to adopt some major socialist
principles.
On point, the US will be forced to reverse a percentage of the Trillions [aka the
socialism for Wall Street and big corporations] - the current focus - to a single payer
healthcare system.
Consequences of the CoronaCrisis will roar in 6 months. The grim reality - a great
depression and debt jubilee. Debt and derivative instruments are unsustainable. As noted, the
Credit crisis (Repo market) began in September 2019.
[.] When the Federal Reserve needs to create a hodgepodge of secretive Special Purpose
Vehicles (SPVs) and run bailouts of $4 trillion; and the Fed gets language in the newly
passed stimulus bill that it can hold its meetings in secret with no minutes
provided to the public; and the President of the United States signs the stimulus bill
with a signing statement announcing only he will determine what Congress gets to
know about where the bailout funds go, you know that something is happening under the
surface on Wall Street that is just too repugnant to be reported to the American people.[.]
And when you see three firms like JPMorgan Chase, Deutsche Bank and AIG trading as
outliers to their peers, only a fool wouldn't see them as a potential connection to this
need for super secrecy. [.] (emphasis shown are links)
Btw, Fed balance sheet will likely blow to over $10 Trillion in short order.
JPMorgan Chase has exposure to $1.2 trillion in Credit Default Swaps while Citibank has
exposure to $1.76 trillion for a combined total of $2.96 trillion as of September 30,
2019.
In the same report, the total exposure to Credit Default Swaps (CDS) among all national
banks in the U.S. is $3.7 trillion – meaning that just these two banks are responsible
for 80 percent of that exposure.
LINK
Yes, those CDS that collapsed during 2008 financial crisis are still around. The illusion
of fancy financial instruments.
Yes, the only solution is deglobalization, starting with the MbSing of the corporate and
financial oligarchs. They have been MbSing the rest of us for far too long through their
"bailouts", and systematic destruction of of our nations and societies.
Any private corporation or institution that is to big to fail, is to big to be in private
hands and needs to be nationalized and localized. The people through their governments
(national, regional and local) should be in control of health care (including big pharma),
education, energy, banking, and all other entities formerly known as public utilities. Most
of these should produce products and services at cost, or even at a loss for the benefit of
society.
In addition their needs to be a free transfer of technology among societies. Patent
regimes need to be revised. Patents on life forms need to be banned as was the case up until
35 years ago. They should also be severely restricted in terms of time. Corporate control of
university research needs to be ended, It is purely profit based for the benefit of those
corporations and not for society. Any research that might threaten their profits is censored,
and researchers required to sign non-disclosure agreements.
The world needs to change its approach, but the way Davos or the G-20 "leaders" would like
it to change. They are really interested in more of the same, turbocharging austerity for and
surveillance on the rest of us. This has to end.
@karlof1 | Mar 28 2020 17:26 utc | 29, I agree in general with your hypotheses.
May I suggest a scenario for how these events might unfold.
The unlimited printing of money by the Fed (the initial $4+ Trillion resulting from the
bail-out bill is only the beginning) will destabilize the dollar and cause it to be replaced
as the world's reserve currency. The replacement will likely be the IMF Special Drawing
Rights (SDR) but could also be some form of gold.
Having lost its role as a reserve currency, the US$ will collapse in value. It will go
from being a massively over-valued currency to an under-valued currency.
Inflation in the U.S., particularly related to resources and imported goods, will cause
the price of goods to skyrocket. The U.S. will become materially poorer. It will no longer be
able to afford imported goods, nor will it be able to afford its bloated military and foreign
adventures.
The U.S. will need to redevelop its goods producing sectors in order to produce for
itself what it can no longer import (with over-valued dollars). With an under-valued
currency, it will eventually become an net exporter.
The U.S. government will continue to run massive deficits in order to fund the
transformation of the economy from a military/security economy with overpriced services (that
are for the most part not exportable) to a goods producing export economy. Only when this transformation is substantially complete will the U.S. be able to run
either fiscal or balance of payment surpluses.
In the end the U.S.' massive debts will be inflated away. Likewise the wealthy elites,
whose wealth is largely in U.S. dollar based financial assets, will also see their wealth
inflated away.
The decimating of the financial assets, through inflation, combined with the
re-employment of U.S. workers in goods producing industries will begin to reverse the income
inequality that has taken place over the last 40 years. With the loss of wealth and the
reversal of income inequality, the ability of the elites to control the political system will
be greatly diminished. The voice of the people will gradually be restored.
The above scenarios will take many decades to complete. However, the first two steps are
likely to happen quite quickly, catalyzed by the current crises.
Any pretensions that the
U.S. has to being the Unilateral Super-power or the Indispensable Nation will collapse
alongside the dollar.
@ 55 dh-mtl... quote -" The replacement will likely be the IMF Special Drawing Rights (SDR)
but could also be some form of gold." the problem with this is that the IMF is a big part of
the problem and subject to the same malevolent forces that have brought us to where we are
today... anyone who looks into the imf - world bank and etc. etc. see how they too are a part
of this mafia ponzi scheme.. i wish it was different.. some other path will need to be taken
and it will include a dismantling or a complete redefinition of what these institutions were
supposed to be for... they have been manipulated badly by the west..
i guess i have to say although much of the financial dynamic seems centered around the
us$, it is really not just the us$ that is the problem... let me give you an analogy that you
can relate to... notice the usa imposing sanctions and how the west generally always
complies?? it is the same arrangement on the financial platform too... they all conform to a
particular hierarchy that is corrupt and about maintaining power at fear of losing position
and power themselves... so, it is a hard nut to crack and it will impact not only the usa,
but the whole world when it does start to crack... sort of like what this covid-19 is doing,
but on a larger scale...
Salaried employees pay will be cut 20%; the pay is "deferred" until sometime in the
future, probably the next set of GM bankruptcy proceedings. Some kind of gradual
transformation will not happen without massive debt write-downs, and that is just not going
to happen. So it will be gradually worsening deflation followed by a massive
hyperinflationary event as endless dollars are poured into a shrinking supply of goods and
services.
As for services in the US, they are completely unaffordable for working people. Car
dealers charge $80 an hour for a technician. Lawyers are charging $200 an hour? More? Who can
afford that! College education is a service that charges $40,000 and up for a piece of paper,
permission to have a job. Meanwhile the federal minimum wage is still $7.25 an hour.
There will be a debt jubilee when the dollar utterly collapses; I don't think we will much
like the way it will unfold.
I am of the firm conviction that the Nov 2020 US election is all about deciding who will
be a late-stage soviet leader and the subsequent path is unclear. But if we apply Orlov's
framework for collapse.....
Stage 1: Financial collapse. Faith in "business as usual" is lost
Stage 2: Commercial collapse. Faith that "the market shall provide" is lost
Stage 3: Political collapse. Faith that "the government will take care of you" is lost
Stage 4: Social collapse. Faith that "your people will take care of you" is lost
Stage 5: Cultural collapse. Faith in "the goodness of humanity" is lost
....then the virus has already sped the country through stage 1 and stage 2 is upon it
with the lack of PPE and other essentials. Game is on after the govt stimulus package fails
to have anything more than a short-term effect and the bail-out induced inflation appears.
The vast military structure is as incompetent as the domestic response to the virus, a failed
invasion of some sort will make that clear, and the legionnaires will all be going home as
the dollar collapses.
"... Multivariate analysis indicates that economic elites and organized groups representing business interests have substantial independent impacts on US government policy, while average citizens and mass-based interest groups have little or no independent influence . ..."
"... The results provide substantial support for theories of Economic-Elite Domination and for theories of Biased Pluralism, but not for theories of Majoritarian Electoral Democracy or Majoritarian Pluralism." [Emphasis mine] ..."
"The historical unity of the ruling classes is realized in the State." – Antonio
Gramsci
Its somewhat bemusing that we discuss American politics ad nauseam, when it's been amply
demonstrated that voters in the USA cannot make changes to government policy through their
electoral process.
In fact, I would contend that American democracy has been non-existant since the JFK
assassination (57 years after the event with no charges having been laid) which was
essentially a coup d'état
Don't believe me? Read it and weep
A 2014 study from Princeton University spells bad news for American democracy –
namely, that it no longer exists:
Testing Theories of American Politics: Elites, Interest Groups, and Average
Citizens – Martin Gilens & Benjamin I. Page
"Each of 4 theoretical traditions in the study of American politics -- which can be
characterized as theories of Majoritarian Electoral Democracy, Economic-Elite Domination, and
2 types of interest-group pluralism, Majoritarian Pluralism and Biased Pluralism -- offers
different predictions about which sets of actors have how much influence over public policy:
average citizens; economic elites; and organized interest groups, mass-based or
business-oriented.
A great deal of empirical research speaks to the policy influence of one or another set of
actors, but until recently it has not been possible to test these contrasting theoretical
predictions against each other within a single statistical model. We report on an effort to
do so, using a unique data set which includes measures of the key variables for 1,779 policy
issues.
Multivariate analysis indicates that economic elites and organized groups representing
business interests have substantial independent impacts on US government policy, while
average citizens and mass-based interest groups have little or no independent
influence .
The results provide substantial support for theories of Economic-Elite
Domination and for theories of Biased Pluralism, but not for theories of Majoritarian
Electoral Democracy or Majoritarian Pluralism." [Emphasis mine]
@PTG Mann This is my attempt to shed some light on the "democracy" reality show. In grade
11 I had a subject called Marxism. Yes, I did study Marxism for 1 year only – in high
school. One of the benefits of living in a "communist" country, I guess.
My Marxism professor, when he talked about capitalism, always used USA as an example. Not
because he was impressed with them, but because he believed that it was a common knowledge
that US was running the most austere form of capitalism possible. It's still like that today,
they are just using multiculturalism as a smoke screen to cover up the fact that their
capitalism is the most severe that they could get away with. And the stupid Europeans copy
them, believing that multiculturalism is what makes a country truly liberal. Sure.
Another interesting thing that I remember from my high school Marxism classes is that they
taught us that US has 2 types of elites. 1.Regular elites 2. Political elites. The regular
elites are the real elites, the economic ones, the real movers and shakers. The political
elites are just domestic help, a hired nobodies who do the rich men's bidding. The lines
between these 2 are almost never crossed. As many perks as there are to becoming political
elite, the benefits that you can milk from this new-found bonanza can never amount to the
point of making you qualified to join the real – economic elites. And it goes vice
versa as well. Economic elites usually don't have the interest (unless you are senile old guy
like Bloomberg) to waste time on personally participating in politics – it just doesn't
pay well enough by their standards. Of course, there are always exceptions – Donald
Trump. That's why the real elites hate him so much. Because he wants to sit on 2 chairs, to
belong to both the real elites and the political ones as well. The idea behind the political
elites is to pay them so you can influence them and tell them what to do. How do you
influence someone who doesn't really qualify as a hired help, who is one of you? It makes it
more difficult to boss around. I am not saying that Trump is unbossable, the problem is that
the real elites can't stomach the fact that Trump wants to boss THEM. Unforgivable.
The "democracy" has always been a pipe-dream, designed to prevent the rich f ** ks getting
at each other throats, more than anything else. That's why voting and elections are just a
mirage, political elites are not elected by voters, they are elected by the real (economic)
elites. That's why they throw millions of dollars on campaigns and lobbies and so on. So they
can have the final say about how things should be done, and not leave it to the political
"elites" initiatives.
Trump proved that the move from the economic elites into political elites is feasible,
even though it can be very unpopular with the economic elites, but the move from political
elites into real elites is almost impossible – despite occasional valiant efforts
– like Joe Biden and his son. The political elites simply lack any real cashable skills
that are required in order to make tons of money and qualify for the prestigious club of real
(economic) elites.
Sure the political elites can make a lot of money, but only from the perspective of the
poor. The money that the political elites make compared to the economic ones – is
pocket change. This is actually one of the positives of the American system, people who are
interested in making really big money, don't usually go into politics, because there are much
more and better ways to make more money. This is actually a feature of most of the developing
countries – where there is almost no distinction between real elites and political
elites and the only way to make money is to go into politics, and use corruption as a driving
force for becoming rich.
Sure the political elites can accomplish relative financial successes as well, and
sometimes this can get to their heads, making them delusional, like when Hillary –
white trash herself– called her own people – deplorables. The "democracy" pipe
dream serves another purpose – to create the illusion that the real elites (the rich)
and the poor are in the same predicament together – suffering under the unscrupulous
political elites. Yeah, right.
The other thing that people talk a lot about is communist propaganda. Sure there was some
of it. Having experienced living in both systems – capitalism and "communism" – I
can say that there is a big difference between capitalist and communist propaganda. Communist
propaganda was more of the wishful thinking type, trying to cover up reality because they
wished things could be better. Capitalist propaganda is much more sinister. The sole purpose
of existence of capitalist propaganda is not because they want things to be different and
better, but because they want things to stay the same as long as possible. The purpose of the
capitalist propaganda is to impede progress. Communists at least felt bad that their system
wasn't good enough to satisfy all the needs of the people. Capitalists have no such qualms.
The message that they convey through their "democracy" is that this is as good as it's going
to get, so you better get used to it. No regrets, no attempts to make things better.
It's funny that they bothered to teach us about different kinds of American elites way
back in high school, like that was going to have any practical application in our lives. It's
also unusual that I remember it, because I wasn't a particularly good student in any subject,
including Marxism. Maybe the reason why I remember it, is because after all these years it
still rings true.
Most discussions about and references to the US two-party system presidential elections
remain oblivious to the fact that for all practical purposes the US has only one political
party.
The US has the exact same political system that Mexico had for decades under the PRI: the
party elite decided on who was going to be the next president and then organized elections.
The US is essentially a none-party state (just read or reread Michael Parenti's Democracy
for the Few ).
The fact that the American voter can choose between a psychopath like Mrs. Clinton and a
guy like Trump, or between Trump and a senile moron like Biden (as may be the case this
year), merely serves to prove that the real political decisions are not made by the president
and that he is just a figurehead.
How can it be that a country with 330 million people cannot select even moderately
intelligent, decent, capable candidates for the highest office?
It is a good sign that most Americans understand this and don't bother to vote. Democracy
is a fake anyway, because if our votes would really count, we wouldn't have the right to
vote.
"... Those who have regrets after realizing that COVID-19 isn't a 'pooping disease' were met with signs at various Costco locations informing them that they won't be able to return all that toilet paper, paper towels, sanitizing wipes, water, rice and lysol they bought in anticipation of a societal collapse, ..."
Those who have regrets after realizing that COVID-19 isn't a 'pooping disease' were met with
signs at various Costco locations informing them that they won't be able to return all that
toilet paper, paper towels, sanitizing wipes, water, rice and lysol they bought in anticipation
of a societal collapse, according to brobible
.
lmao Costco basically saying y'all wanted to be extra, y'all gonna deal with your millions
of toilet paper all over your house #sorrytammy
pic.twitter.com/eCFhoiDp33
Enjoy your lifetime supply of toilet paper and wipes you crazy #hoarders !
#Costco is not
taking any more returns. Better start figuring out what you are gonna do with 10 bags of rice
you bought! pic.twitter.com/z2U7tN7ru3
Costco, meanwhile, may have over-bought in anticipation of sustained demand which has
petered out. It looks like "the whole toilet-paper craze has calmed down," tweeted one shopper.
There is also a tendency to think newer=better. I've heard doctors and pharmacists complain
that patients will get offended when prescribed a cheaper, older drug. They want the best and
newest, they need and deserve it!
@Redneck farmer That is because advertising works. Drug companies being allowed to
advertise guaranteed that predators, such as the Sacklers, would want to own drug companies.
More activity on the dark, unethical side of capitalism. There's an entire history of it,
opium wars, Atlantic slave trade, pornography, control of political agents through
pedophilia. The list does go on and strangely enough it's usually the same actors.
At the height of the market turmoil during the previous financial crisis, a Federal Reserve
Bank of New York official confidently told me they would keep throwing stuff at the wall until
something stuck.
This week the US central bank ran some moves from its 2008 playbook -- and then went far
beyond it. Adding to the open-ended buying of US government bonds, the Fed will load up on
investment-grade corporate debt for the first time.
johnbrewster@77
Here's a story from today's Toronto Star. It's a neoliberalism story and goes well with Pepe
Escobar's piece in Asia Times (see above for link)
Basically the Province of Ontario stockpiled everything need for the pandemic that SARs
warned them was bound to come.
Then, a couple of years ago, they destroyed the stockpiles including 55 million
facemasks.
Now there are no face masks to be found and medical staff, inter alia, are having to take
totally unnecessary risks.
Why did this happen? Because neo-liberalism is all about profits and fiscal austerity: as
soon as the masks got beyond their 'best before' date they were destroyed - so the
manufacturers could have another bite at the cherry and sell another 55 million masks. But
then, austerity, the need to finance tax cuts for the wealthy, stepped in so the orders were
not renewed. And people will die, horrible deaths, as a result.
PS to vk # 1. Please think again. Trump has been in a trade war with China for what? a couple
of years? AND, he specifically banned imports of medical supplies from China. Other posters
wave supplied links for this idiocy.
Trump's about as innocent as jack the ripper. You may just be seeing things relatively, as
ghouls like Elliot Abrahms and disgusting Pomposity make Trump seen like an amateur.
The financial system is not the economy even though many people do not recognize the
distinction. This means the gigantic efforts by the world's central banks and governments to
essentially "bail-out" both will prove somewhat ineffective. Covid-19 has become the catalyst
for a major reset of both the financial sector and the Main Street economy, this article will
attempt to give some clarity as to what we might find still standing on the other side of this
crisis. Note the use of the word crisis, anyone who does not view the covid-19 now as a
watershed event is oblivious to the world around them
Originally the title to this piece was "Mind The Lag-Time Gap - The Worst Is Yet To Come."
You may call me Captain Obvious if you hone in on the later part of this title but the first
portion is the most important part. We should make a real effort to remember to mind the gap
between events appearing on the radar and when they actually impact day to day life. There is
such a thing as lag-time, everything is not immediate in our fast-moving world, some events
take time to play out. The covid-19 crisis is greatly complicated because we have no real idea
of how long it will persist. Hints have been made, possibly to ready the population, that this
could or will likely continue for months.
The Sell-off Has Been Dramatic
The scale, scope, and speed at which world markets have sold off and lost value as investors
try to get in front of this thing has been dramatic. Global stock and bond markets have seen an
estimated $25 trillion of 'paper' wealth erased in the last month. This has erased all the
gains from the December 2018 crash lows with more of the impact focused on stocks than bonds.
In its wake, the sell-off has stripped many people of their savings and jeopardized the future
existence of many businesses and financial institutions.
On the flip-side of the carnage is the ramping up of promises that a flood of money and aid
is forthcoming. All options are on the table to get money into the hands that need it, some of
it in the way of adding liquidity, some of it as a gift to anyone with their hand out. The
specifics are spotty at best but one thing we can be sure of is that those lobbying hardest
will get the most. The questions that remain to be answered are, how well this will work and
will this infusion of cash be enough?
This Has Become A giant Game Of Jenga
As the world faces the biggest financial bailout in history it is now being reported in the
news the US, in conjunction with the Federal Reserve, will now lend up to $4 trillion to
businesses affected by the coronavirus pandemic. "Working with the Federal Reserve - we'll have
up to $4 trillion of liquidity that we can use to support the economy," Treasury Secretary
Steven Mnuchin. told Fox News on Sunday. What Mnuchin, a former Goldman Sachs executive, did
not talk about is how dangerous these volatile markets are for the average investor.
Unfortunately, as with most programs unleashed by the "Financial-Political
Complex," we can expect much of the money to rapidly flow to enriching those atop the
wealth pyramid. Another certainty is that when all is said and done those in charge will
rapidly claim things would have been far worse if they had not taken such draconian actions.
People have shown they have a very short memory when it comes to the truth. Many Americans also
have a difficult time understanding a large reason for the rapid growth of inequality is
because the wealthy one-tenth of one percent of the population controls and shapes the nation's
policy to their advantage.
So far covid-19 is a new entry on to the scene. The reality of how it will affect the
economy has yet to be realized and will trickle down to society. What I deem the
Financial-Political Complex will protect its own with a massive bailout under the guise of "the
greater good." This extension of crony capitalism will throw just enough to the masses to
silence their outrage. Large businesses will be the winners while the big losers again will be
the middle-class, small businesses, and social mobility.
A few of the things that may change society are detailed below. Many people think the impact
on labor force participation will remain mild with workers viewing all this as transitory. As
the impact of COVID-19 take root and if activity fails to rapidly normalize, it is possible
more workers may reevaluate their life and decide to exit the labor force altogether. The same
will happen with many small business owners that come to the conclusion this is a sign to close
their doors and retire. Covid-19 has fed fear and insecurity, these are not feelings that
increase investors' desire or take on new risks.
While you hear about the massive aid package the Financial-Political Complex is concocting
to prop up this mess we should not forget they are responsible for much of the damage flowing
from this crisis. For years they ignored the growing weakness on Main Street and focused on
rising GDP numbers that were driven by government deficit spending. Addressing this now is like
trying to turn a battleship around in a lake the size of a bathtub, nearly impossible. If it
can be done it will take a long time. No matter how much money they throw at this the economy
will not turn around on a dime or spring back. Regardless of how the financial sector fares the
economy is destined to feel a great deal of pain.
We are in the second inning of a long game. It is only as this lingers that we begin to feel
the full power of the lag-time effect. Anyone that thinks next month will be a return to
business as usual and fails to mind the gap between expectations and reality is primed for
disappointment. Too big to fail has become deeply embedded in our crony capitalist society and
a key part of the Financial-Political Complex now running the show. If you are not part of this
group I suggest you prepare to be thrown under the bus for "the greater good."
"We cannot let the cure be worse than the problem itself," tweeted the president on Sunday
night, adding that, after the current 15-day shutdown, "we will make a decision as to which way
we want to go."
President Trump is said to be privately expressing a deepening concern at the damage the
coronavirus shutdown is doing to the U.S. economy and debating whether it can be safely
reopened.
Though castigated for his remark, Trump has a point.
The U.S. is rightly using extreme measures to meet the threat and control the virus that
threatens the lives of millions of Americans, with the elderly sick foremost among them. And we
need to do so without killing the economy upon which scores of millions of other Americans
depend.
Clearly, America was unprepared for this pandemic.
And there will be time enough to assess responsibility for the lack of surgical masks,
medical gowns, rubber gloves, respirators, ventilators and hospital beds.
The immediate imperative is to produce those beds and that equipment and get it delivered to
doctors, nurses and hospital staff, the front-line troops in the battle to control the
virus.
However, during this shutdown, all "nonessential businesses" are being closed and their
workers sent home to shelter in place and to keep "social distance" from friends and neighbors
to minimize the risk of spreading this easily transmissible virus.
Unfortunately, what is "nonessential" to some -- bars, restaurants, hotels, stores, cruise
ships, tourist sites, shops, malls -- are places of employment and indispensable sources of
income for millions of other Americans.
Close the businesses where these Americans work and you terminate the paychecks on which
they depend to pay the rent and buy the food and medicines they and their families need to
shelter and live. And if the salaries and wages on which workers depend are cut off, how are
these millions of newly unemployed supposed to live?
How do those who follow the instructions of the president and governors to remain in their
homes get their prescriptions filled and buy the food to feed their families?
How long can the shutdown be sustained if the necessities of life for the unemployed and
unpaid begin to run out? Is it necessary to create an economic and social crisis to solve the
medical crisis?
"We had to destroy the village in order to save it," was a remark attributed to a U.S. Army
officer in the Vietnam War. Must we cripple or destroy the economy to rescue the American
nation from the coronavirus crisis of 2020?
Then there is the matter of time. Many Americans can survive on what they have on hand for
two or four weeks. Far fewer can survive without income for two or four months.
... ... ...
If the medical crisis is allowed to induce an economic crisis that leads to a social crisis,
the American political system, our democratic system, may itself be severely tested.
Yet there is another solution. If you can test everybody who needs it, you can quarantine
everyone who is infected, and let the rest lead their normal lives. This worked in Singapore
and even in one town in Italy.
Moreover, if you can cure or abate the disease before people are critically ill, they won't
need intensive care. So if we keep ramping up the supply of test kits, while rolling out
anti-viral drugs, we can eradicate the virus without a disaster.
Read the entire article here: http://www.progressivepress.com/dox/Common-Sense-vs-the-Coronavirus.doc
@Divine
Right American conflicts with Russia are based partly on self-serving fictions of the
military industrial complex that need an enemy for their continued existence, as well as some
more realistic conflicts involving Eastern Europe and rival interests over oil prices. The US
need for hegemony, which is highly tied to the value of the dollar as a reserve currency,
further thrusts this forward and center(and indeed, into conflict with China as well). This
all is intermingled with a [fake and hypocritical] generalized rejection of "authoritarian"
governments.
China, on the other hand, has no real current conflicts with Russia – most conflicts
involve sales of weaponry and political influence over central Asian states, nothing of vast
importance at least compared to being their the target of an enormous world-spanning
sanctions order or a dedicated trade war.
Your argument has the weird self-contradiction that the CCP both is supposedly the
mind-controlling alien brain of all Asians, while at the same time, not actually benefiting
from any specific conflict with Russia. This also ignores the fact that Asians tend to
assimilate the highest by any population(at nearly 40% intermarriage
in some segments, that Chinese students in particularly no longer tend to stay in the US(
only
20% by 2017 ), and that a overwhelming part of the demographic increase by
immigration is
Indian with long historical and cultural rivalries with China. And far more than Chinese
Americans, who often engage in racial masochism(witness Gordan Chang ), Indian Americans are vastly
more active and influential in American
politics both due to cultural reasons as well as higher verbal IQ. This isn't even
hypothetical: Indian American political writers dominate National Interest articles stressing
for more hawkish Chinese attitudes and were directly contributory to renaming the South China
Seas conflict to the "Indo-Pacific region."
I do agree that the US has long since crippled its resource base. But there's no evidence
that Trump, or anyone else, is demonstrating the barest inkling of trying to resolve it(or
that it is even possible, given the bueaucratic overload and red tape of regulations). Gould
once described evolution as a "drunkard's walk" between complexity, where organisms sometimes
fall trapped inside rail tracks, unable to stumble out.
Indian American political writers dominate National Interest articles stressing for more
hawkish Chinese attitudes and were directly contributory to renaming the South China Seas
conflict to the "Indo-Pacific region."
@Anatoly
Karlin There is apparently a large colony (100.000) of Chinese workers in Lombardy, with
direct flights between Lombardy and Wuhan, so this Italian outbreak is not a coincidence.
Many Italians in Northern Italy sold their leather goods and textiles companies to
China. Italy then allowed 100,000 Chinese from Wuhan/Wenzhou to move to Italy to work in
these factories, with direct Wuhan flights. Result: Northern Italy is Europe's hotspot for
Wuhan Coronavirus
UK had a "herd immunity" strategy from the beginning. They made no real effort at
containment. British government allowed their people to become infected, and only
began to change course after public outrage.
@Felix
Keverich The large Chinese population in Italy has been completely ignored by the media,
in fact China itself seems to have been let completely off the hook. The focus is now on how
terrible Britain and the native British people are.
Someone even posted a Tweet above by a Vietnamese person trying to claim that BRITAIN of
all countries is responsible for the outbreak in Vietnam, I mean what kind of ridiculous
logic is that? Vietnam bloody BORDERS China, the origin and epicentre of the Coronavirus
outbreak, and the Vietnamese are trying to say Britain is the cause? It beggars belief.
less globalization outside North America/Europe/Japan/Australia
You are missing the point of globalization: manufacturing in cheap Third World countries
and rewarding the local compradors with a permission to migrate to the West. That's the deal,
that's what globalization is.
With NA-Europe-Japan all you get is tourism and travel. I would be surprised if we can at
this point convince Chinese and the other cheap labor countries to do the work and forgo the
hope of migration. It was a Faustian deal and those as we know end in hell.
@AP
Calm down, man and stop the stupid blaming game. It seems that your Banderite spin also
includes bashing Chinese which, on the second thought, should not be surprising as there is
only one paymaster. Perhaps you should specialize in Ukraine only and leave China to more
competent haters.
Compare Canada and Italy on Chinese residents: Canada has 5 times more Chinese than Italy
but 62 times less infection cases and 539 times less fatalities than Italy (as of March 16).
Furthermore France and UK have more Chinese than Italy.
What about tourists: In Canada 0.75 mil Chinese tourist but in Italy 3.5 mil Chinese
tourists. So it must be the tourists, right?
So compare Japan with Italy on Chinese tourists: 8.4 mil Chinese tourist in Japan vs. 3.5
mil Chinese tourists in Italy. How many cases in Japan?
So what I am trying to convey is that the expression of the epidemic in different
countries is not congruent with the number of Chinese residents or Chinese tourist.
We will never know where the patients zero (yes plural, there are many patients zero)
really came from. For various political reasons we will not be told and what we will be told
we must be skeptical about. I found interesting data about the first infected in British
Columbia that has huge rather affluent Chinese population. There were as many Iranians as
non-Iranians on the list.
In British Columbia cases 1 to 5 were from China though it does not appear they infected
others while cases 6, 7, , 12 and 14, 15, 19 were traced to Iran. Then the case 22 was from
Iran and also case 31. Case 32 was from Italy, case 35 was from Egypt and case 37 was from
Germany. So out of first 37 cases over 50% were people came form Iran, Egypt, Germany and
Italy. My point is that while Canada has huge Chinese population (1.7 mil) and gets 700,000
Chinese visitors per year it does not look like China was the main vector. In BC it is Iran
and Europe.
One should consider a possibility whether virus introduction to Iran and the Middle East
did precede its introduction in China.
Now let's return to Italy. Most Chinese tourists go to Rome, Florence and Venice. These
cities were not affected as much as Lombardy where there is not that many tourists. So we are
told that Chinese workers could carry the virus. So look at Prato (in Tuscany near Florence)
which has the highest density of Chinese population in Italy. Wiki lists 11,882 (6.32%) for
Prato while the highest absolute number is Milan 18,918 (1.43%). The numbers are probably
outdated as most likely they do not include illegal residents.
"In a single day the positive cases of coronavirus in the province of Prato have
tripled: from 7 to 21 . It is the darkest day since the outbreak began. According to
what was announced in the afternoon of today, March 11, by the bulletin of the regional
council "
"Therefore, 314 patients are currently positive in Tuscany. This is the subdivision by
signaling areas: 71 Florence, 32 Pistoia, 21 Prato (total Asl center: 124), 43 Lucca, 40
Massa Carrara, 34 Pisa, 16 Livorno (total North West Asl: 133), 12 Grosseto, 37 Siena , 14
Arezzo (total Asl southeast: 63)."
So clearly the 2nd largest Chinese community in Italy (and first in density) with 21 cases
(out of 12,246 cases in Italy) did not contribute a lot to the corona virus outbreak in
Italy.
@AP
Calm down, man and stop the stupid blaming game. It seems that your Banderite spin also
includes bashing Chinese which, on the second thought, should not be surprising as there is
only one paymaster. Perhaps you should specialize in Ukraine only and leave China to more
competent haters.
Compare Canada and Italy on Chinese residents: Canada has 5 times more Chinese than Italy
but 62 times less infection cases and 539 times less fatalities than Italy (as of March 16).
Furthermore France and UK have more Chinese than Italy.
What about tourists: In Canada 0.75 mil Chinese tourist but in Italy 3.5 mil Chinese
tourists. So it must be the tourists, right?
So compare Japan with Italy on Chinese tourists: 8.4 mil Chinese tourist in Japan vs. 3.5
mil Chinese tourists in Italy. How many cases in Japan?
So what I am trying to convey is that the expression of the epidemic in different
countries is not congruent with the number of Chinese residents or Chinese tourist.
We will never know where the patients zero (yes plural, there are many patients zero)
really came from. For various political reasons we will not be told and what we will be told
we must be skeptical about. I found interesting data about the first infected in British
Columbia that has huge rather affluent Chinese population. There were as many Iranians as
non-Iranians on the list.
In British Columbia cases 1 to 5 were from China though it does not appear they infected
others while cases 6, 7, , 12 and 14, 15, 19 were traced to Iran. Then the case 22 was from
Iran and also case 31. Case 32 was from Italy, case 35 was from Egypt and case 37 was from
Germany. So out of first 37 cases over 50% were people came form Iran, Egypt, Germany and
Italy. My point is that while Canada has huge Chinese population (1.7 mil) and gets 700,000
Chinese visitors per year it does not look like China was the main vector. In BC it is Iran
and Europe.
One should consider a possibility whether virus introduction to Iran and the Middle East
did precede its introduction in China.
Now let's return to Italy. Most Chinese tourists go to Rome, Florence and Venice. These
cities were not affected as much as Lombardy where there is not that many tourists. So we are
told that Chinese workers could carry the virus. So look at Prato (in Tuscany near Florence)
which has the highest density of Chinese population in Italy. Wiki lists 11,882 (6.32%) for
Prato while the highest absolute number is Milan 18,918 (1.43%). The numbers are probably
outdated as most likely they do not include illegal residents.
"In a single day the positive cases of coronavirus in the province of Prato have
tripled: from 7 to 21 . It is the darkest day since the outbreak began. According to
what was announced in the afternoon of today, March 11, by the bulletin of the regional
council "
"Therefore, 314 patients are currently positive in Tuscany. This is the subdivision by
signaling areas: 71 Florence, 32 Pistoia, 21 Prato (total Asl center: 124), 43 Lucca, 40
Massa Carrara, 34 Pisa, 16 Livorno (total North West Asl: 133), 12 Grosseto, 37 Siena , 14
Arezzo (total Asl southeast: 63)."
So clearly the 2nd largest Chinese community in Italy (and first in density) with 21 cases
(out of 12,246 cases in Italy) did not contribute a lot to the corona virus outbreak in
Italy.
If this started in the USA and spread elsewhere the world would have good cause to
condemn the USA and to judge any subsequent efforts by Americans to help others as "the
least they could do."
Chinese shipments of medical goods are actually to the risk of the own population, where
hospitals are still recovering. While in some ways it is a blatant PR play, its quite a
significant cost amd self-risk that goes beyond "the least they could do."
The Chinese are showing an unprecedented amount of humanity, morality and basic decency
by giving medical aid to more than half the world in genuinely useful forms despite almost
everyone shitting on them by calling this a "Chinese virus" and other garbage.
... ... ...
Here is an article about them in the New York Times. Written soon before the onset of the
plague. It would not be written now – there's too obvious a connection between open
borders, multiculturalism, and death:
As Prato's factories went dark, people began arriving from China to exploit an
opportunity.
Most were from Wenzhou, a coastal city famed for its entrepreneurial spirit. They took
over failed workshops and built new factories. They imported fabric from China, sewing it
into clothing. They cannily imitated the styles of Italian fashion brands, while affixing a
valuable label to their creations -- "Made in Italy."
Chinese groceries and restaurants have emerged to serve the local population. On the
outskirts of the city, Chinese-owned warehouses overflow with racks of clothing destined for
street markets in Florence and Paris.
Among Italian textile workers who have veered to the right, the arrival of the Chinese
tends to get lumped together with African migration as an indignity that has turned Prato
into a city they no longer recognize.
"I don't think it's fair that they come to take jobs away from Italians," says Ms.
Travaglini, the laid-off textile worker. She claims that Chinese companies don't pay taxes
and violate wage laws, reducing pay for everyone.
Since losing her job at a textile factory nearly three years ago, Ms. Travaglini has
survived by fixing clothes for people in her neighborhood. "There are no jobs, not even for
young people," she says.
Chinese-owned factories have jobs, she acknowledges, but she will not apply. "That's all
Chinese people," she says, with evident distaste. "I don't feel at ease."
:::::::::::
Lots of Ukrainians there also. They don't bring such a virus to Italy, but they bring the
virus back to Ukraine.
::::::::::
So nice PR move after killing lots of European old people. One of the sacrificed in Milan
to this virus, Vittorio Gregotti, was an architect who helped build the city. Killed by the
Chinese virus. A symbol of native Italy replaced by migration.
@Kim
The Chinese have internal natural resources and have been vigorously working world wide to
obtain rights to, develop, and extract mineral and energy resources in order to keep
production going. See the documentary Empire of Dust about Chinese getting the rights to
African resources and developing the infrastructure to extract them. Also following the
supposed "war for oil" in Iraq the oil contracts went almost entirely to China. China has a
lot of the mines for the rare earths needed in modern technological products. The largest
single mine used to be in California. A Chinese company bought and re-opened it.
In effect they already own or have contracts for what they need and are much less leveraged
than we are.
As to whether their customers can continue to pay for it, that is a different kettle of fish.
The rest of us have been running up our credit card with them. We have been paying it off by
selling off our countries piece by piece through Chinese purchases of real estate,
businesses, port facilities etc. As China has grown economically they have been developing
their internal market to reduce dependence on Wal-Mart so that might reduce the impact of
poorer foreign markets.
In any event they own a huge infrastructure in plants tooling and human expertise for making
things. Our leaders have deliberately hollowed ours out for profits and cheaper consumer
goods.
"... Financialisation operates through three different conduits: changes in the structure and operation of financial markets, changes in the behaviour of nonfinancial corporations, and changes in economic policy. ..."
"... Yes, the contrived-virus (convid19) is most certainly a smoke screen for global financial collapse ..."
"... The media and the Government are in lockstep. They are quarantining areas and locking down, not to contain the virus but to contain the ensuing violence when people finally and hopefully figure out that they are getting royally screwed. ..."
"... The oil markets are playing a role in the market turmoil. And its not the Corona virus, but the radical state overreaction aided by the cynical shameless hype mongering media that has crashed the markets. ..."
"... Corona as an economic instrument ? Can't argue that medical claims are just as inflated as the amount of money that has been printed. As a companion piece to Frank's excellent article take a look at Renegade Inc's film explaining why a Fiat economy is bound to end in tears. ..."
The years since the 1970s are unprecedented in terms of their volatility in the price of commodities, currencies, real estate
and stocks. There have been 4 waves of financial crises: a large number of banks in three, four or more countries collapsed at
about the same time. Each wave was followed by a recession, and the economic slowdown which began in 2008 was the most severe
and most global since the great depression of the 1930s."
Manias, Crashes and Panics – Kindelberger and Aliber
Interestingly enough 1971 was the year when Nixon took the world off the gold standard, which had been in effect since 1944. Fiat-bugs
please note.
More to the point, however. Booms and busts have always been normal in a capitalist economy. But in recent years this has been
a feature which has been exacerbated by and involves that part of the economy indicated by the acronym FIRE (Finance, Insurance and
Real Estate) and its growing importance in the economy in both qualitative and quantitative terms.
Financialisation is a process whereby financial markets, financial institutions, and financial elites gain greater influence over
economic policy and economic outcomes. Financialisation transforms the functioning of economic systems at both the macro and micro
levels. Its principal impacts are to:
elevate the significance of the financial rent-seeking sector relative to the real value-producing sector
transfer income from the
real value-producing sector to the financial sector
increase income inequality and contribute to wage stagnation
Since 1970 this part of the economy has grown from almost nothing to 8% of US Gross Domestic Product (GDP). This means that one
dollar in every ten is associated with finance. In terms of corporate profits finance's contribution now represents around 40% of
all corporate profits in the US. This is a significant figure and, moreover it does not include those overseas earnings of companies
whose profits are repatriated to their countries of origin.
Thus, the increasing presence and role of finance in overall economic activity and the increase of profits channelled to the financial
sector represent the salient indicators as to what has been termed financialization. It is argued by some that financialization may
put the economy at risk of debt deflation and prolonged recession.
Financialisation operates through three different conduits: changes in the structure and operation of financial markets, changes
in the behaviour of nonfinancial corporations, and changes in economic policy. Countering financialisation calls for a multifaceted
agenda that:
restores policy control over financial markets
challenges the neoliberal economic policy paradigm encouraged by financialisation
makes corporations responsive to interests of stakeholders other than just financial markets
reforms the political process so as
to diminish the influence of corporations and wealthy elites
The rent-seeking nature of finance is common to all forms of insurance, banking, monopolistic pricing, and property. This has
not always been the case, or at least wasn't as pronounced as it is at present. There was a time when the banking system was junior
partner in the relationship between banks and industry. Banks provided industry with loans for investment with a view to maximising
profit for both. This is patently not the case today.
Generally speaking, banks will lend for property purchases, stock buy-backs, and perhaps loans for dubious mergers and acquisitions.
Moreover, when we speak of 'profits' this has now assumed a rather obscure meaning. Profits were generally understood as a realization
of surplus value.
Firms made stuff – goods and services – which had a value, which was then sold on the market at a profit. Given the competitive
nature of the system, firms invested in increased capital formation and output which increased productivity, surplus value and ultimately
profit.
With regard to Investment banks like Goldman Sachs and the commercial banks they do not create value; they are purely rent-extractive.
For example, commercial banks make a loan out of thin air, debit this loan to the would-be mortgagee who then becomes a source of
permanent income flow to the bank for the next 25 years.
Goldman Sachs makes year-on-year 'profits' by doing – what exactly? Nothing particularly useful. But then Goldman Sachs is part
of the cabal of central banks and Treasury departments around the world. It is not unusual to see the interchange of the movers and
shakers of the financial world who oscillate between these institutions. Hank Paulson, Mario Draghi, Steve Mnuchin, Robert Rubin
on and on it goes.
This financialised system now moves in ever-increasing levels of instability. But what did we expect when the whole institutional
structure – its rules, regulations and practises – were deregulated and finance was let off the leash.
Thatcher, Reagan, the 'Big Bang' had set the scene and there was no going back: neoliberalism and globalization had become the
norm. From this point on, however, there followed a litany of crises mostly in the developing world but these disturbances were in
due course to move into the developed world. Serial bubbles began to appear.
US stock prices [which of course would only ever go up] began to decline in the Spring of 2000, and fell by 40% in the next
three years. Whilst the prices of NASDAQ stocks decline by 80%."
Manias, Panics and Crashe s – Kindleberger and Aliber
Chastened monies moved out of this market and into property speculation. It is common knowledge what happened next. The run-up
to 2008 was floated on a sea of cheap credit. The price of stocks pushed property prices to vertiginous heights until – pop, went
the weasel.
The reason was quite simple. Any boom and bust has an inflexion point where boom turns to bust. This is when buyers incomes, and
borrowers inability to extend their loans could no longer support the rise in the price level. Euphoria turned to panic as borrowers
who once clamoured to buy were now desperate to sell. 2008 had arrived.
The strange thing, however, regarding the property price boom-and-bust was that it was based upon pure speculation. Prices went
up, prices went down. Some – a few – made money, quite a few lost money. Investors were wondering what had happened to their gains
which they had made during the up phase. Where had all that money gone?
The short answer is – nowhere. It was never there in the first place. It was fictitious capital. Gains which had appeared and
then disappeared like a will 'o' the wisp. As opposed to physical capital – machinery, labour and raw materials, and money capital
which enabled through purchase the production of value to take place, we have fictitious capital which is a claim on future production.
If my house goes up by 10% that is a capital gain, if everybody's house goes up by 10% that is asset-price inflation
Fictitious capital is a by-product of capitalist accumulation. It is a concept used by Karl Marx in his critique of political
economy. It is introduced in chapter 25 of the third volume of Capital. Fictitious capital contrasts with what Marx calls "real capital",
which is capital actually invested in physical means of production and workers, and "money capital", which is actual funds being
held.
The market value of fictitious capital assets (such as stocks and securities) varies according to the expected return or yield
of those assets in the future, which Marx felt was only indirectly related to the growth of real production. Effectively, fictitious
capital represents "accumulated claims, legal titles, to future production'' and more specifically claims to the income generated
by that production.
The moral of the story is that it is not possible to print wealth or value. Money in its paper representation of the real thing,
e.g., gold, is not wealth it is a claim on wealth.
Of course, this would be lost on establishment economists, bankers, and financial journalists, whose view is that the policy should
be QE, liquidity injections, and so forth. A one-trick pony.
And what has all of this to do with Coronavirus? Well, everything actually.
I take it that we all knew that the grotesquely overleveraged world economy was heading for a 'correction' but that's a rather
a soothing description. "Massive correction" would be a better description. That is the nature of the beast. The world was a bubble
of paper money looking for a pin. It found one.
Have a nice day all.
John ,
The "gold" backed currency is just another myth of stability, gold is controlled by central banks and hoarded by the owners of
such, the syndicate in pc terms for delicate ears. Meaning the syndicate can adjust it as they please and decide what gold is
worth as they've done in the past on a weekly basis. Inflation and deflation are used to rob the vast majority of people and expect
there to be deflation coming up as that is the worst of the two. Price stability is much more desirable across the staples that
people actually need, not what backs the man made tool called currency. The goal of responsible civil government should be full
employment of its citizens (and price stability of essential for living), especially in productive industries, not useless luxury
industries which do not benefit in any way. Now QE is just another form of inflation on a massive scale, good if you have say
a house that will go up, but the more currency you have the less it's worth and the central banksters are using it.
Prices rise
but wages and salaries do not rise anywhere near inflation, it's a slow sinking into poverty and vassalage of which mortgages
are just a form of debt slavery. You can own nothing, you're just a renter of all things to be molded and caged if necessary by
the syndicate owners and their God-State.
At some point no one will be able to afford houses and the crash will come. They DO
NOT CARE if you payoff the debt, what's important is that you pay to service the debt thus keeping you in line. If you go out
of line they can just demand the money now, thus putting you in the streets. When the time comes the God-State will take possession
of all housing, all industry etc and the slavery will be complete. Just like the Soviet Union there will be an elite that are
immune "gods" to all this, there is actually already this today, the "olympians" kingpins etc whatever you want to call them.
Biff ,
Yes, the contrived-virus (convid19) is most certainly a smoke screen for global financial collapse. Another day down
under and another super tanker full of media hype and horseshit arrives. But then it struck me. Most of us know that Convid19
is about as deadly as the common cold.
In fact the Government even tells you this if you listen carefully to press conferences. This to me can only mean one obvious
thing.
The media and the Government are in lockstep. They are quarantining areas and locking down, not to contain the virus but
to contain the ensuing violence when people finally and hopefully figure out that they are getting royally screwed. The warning
flag will be shutdown of social media services or the internet in your area. Then watch out. They have created a world where our
only means of communication is the internet. You can't even make a phone call in Aus without the internet. Imagine it's not there.
Robbobbobin ,
"Yes, the contrived-virus (convid19) is most certainly a smoke screen for global financial collapse."
Are you saying that if COVID-19 were not contrived but a genuine public health problem then it could (so would) not
be used as a smokescreen, i.e. that the contrivance of a virus of some sort (in this case COVID-19) is an essential aspect
of your narrative; that if there were no pathogen engendering a pandemic problem then a serviceable smokescreen could (so would)
not be contrived based on some factor other than a biological one, or are you saying something else altogether?
simply put ,
Money exists to facilitate trade.
So if the economy grows you need to put more money into circulation, if it shrinks you need to take money out of circulation.
That's why a gold standard does not work very well in a modern world, it cannot adapt to the changing environment, you cannot
increase or decrease the amount of gold in the world (not as needed anyway) so you end up with not enough "money" available (or
too much), both disastrous for the economy.
The banking system is corrupt, but not because of fiat money.
Ken Kenn ,
Lenin talked about making Statues out of Gold post a Communist Society so its' inherent worth is in the eye of the shareholder
in its price or it's perceived future price.
Money ( fiat or otherwise ) is only an agreed exchange of labour to price of goods between a group of swindler Capitalists
who ideally would wish that all the other Capitalists to pay their workers more so that they can buy the other Capitalists goods
who don't pay their workers more.
The state of play at the moment is a bit Rooseveltian.
Is it better to be a poorer capitalist temporarily than not a future capitalist at all?
the UK Neo – Liberal position says yes only because there is a tiny chance that the masses will twig what's going on and why
it's going on in this way.
80% of wages is better than 0% of wages/income.
This is predicted to last just 3 months.
If it lasts a year watch it all change.
Fact is- in the end the Middle Classes and down will pick up the tab.
And if the 'We ' are picking up the tab anyway ' We ' may as well demand and get 100% of wages/income.
As Thatcher said – It's our money – not the State's.
Theoretically of course in a democracy.
Toby Russell ,
I don't believe this or that form of money can ever be the be-all-and-end-all form. Fiat has its place, a gold standard
has its place, shells have their place, gift exchanges, IOUs, etc. There are reasonable arguments to be made for each, but each
reasonable argument, to be reasonable, would have to include historical context / societal conditions as a very large part of
its logic.
Far more important than 'money as wealth' is how we culturally understand the nature of wealth that money can only ever
be a claim on (an important function, an important component of wealth). As Rhys points out below, wealth is a slippery thing
– it's subjective to a considerable degree after all – but if one thing unites all 'instances' of it, that would be its networked
nature. There is no wealth at all without some sort of complex, living and healthy ecosystem to generate it, continually,
dynamically. So another feature of wealth would be its dynamic and ever evolving nature. Another would be that there is thus no
final guarantee of Always Having So Much Wealth I Never Have To Work Again. (Whatever work is.
Bullshit jobs, anyone ?)
And as for productivity, well, what's that? Is productivity only productive when wealth is produced? On what definition of
wealth? Good sleep produces health, assuming good exercise, good diet, healthy soil, richly biodiverse ecosystems, etc. The same
is true of friendships, community, trust, fun All things that cannot be manufactured. Not that there's anything wrong with manufacture,
which etymologically comes from manual , the hand, thus skill, craftsmanship, etc. All that good stuff.
So it's slippery, nuanced, open to discussion. What kills wealth, on the other hand – and is killing wealth right in front
of our eyes – is narrow, dogmatic assertions about what it is. One's thing's for sure: it's not money (he asserts dogmatically).
Money needs a thorough demotion, in my view, and things like sleep, community and trust need a great big cultural promotion.
Yet again, we are at a strange and mighty inflection point historically. They're popping up now with alarming regularity! Something
is obviously in the offing.
Will our imaginations and courage fail us this time around?
Here in France last weekend was Acte 70, with a huge number of gilets jaunes out on the streets for the 70th consecutive
week, protesting against 'austerity' and neoliberalism. This weekend, Acte 71, thus far there's been no street protests. I guess
the gilets jaunes will know that it will bring bad publicity for them at the moment. What they are doing instead is issuing
a massive call for everyone to open windows on their home this evening at 9pm, and bash pots and pans as loudly as possible. It'll
be interesting to see how many people will do this.
No singing on balconys baloney here.
Alan Tench ,
Please speculate: why is the number of deaths compared to infections very much lower in all the Scandinavian countries than elsewhere
in Europe? Let's just assume the figures might be reasonably accurate for this one. Also, looking at all the figures (sorry, I
used Wikipedia for this), am I right in suspecting that the number of recoveries is being blatantly unreported in just about every
country?
Ted ,
The oil markets are playing a role in the market turmoil. And its not the Corona virus, but the radical state overreaction
aided by the cynical shameless hype mongering media that has crashed the markets. As the evidence rolls in, the actual Corona
virus, and not whatever it is that is going on in Italy (a radical statistical outlier among all world nations), is rather boring.
Much more boring than the normal flu virus. And let's not forget the possibility of an epidemic of false positives in a radical
increase in PCR testing for Corona virus. Here in the West of the US, only 7% or so of tests yield positive results what if 100%
of those are false positives during the normal tail end of flu season? see for example:
'I have a five pound note, issued by the Bank of England. It clearly states: "I promise to pay the bearer the sum of five
pounds on demand." It is signed by the Chief Cashier on behalf of the Governor of the Bank of England. However, if I were to
take this bank note to the Bank of England and demand my five pounds, I would be swiftly escorted from the building.'
Unlikely. If they could not oblige you there they would certainly refer you to a nearby commercial bank who would be happy
to pay you five one-pound coins, or the equivalent in any lesser denomination, on their behalf, as promised. Of course, that would
not counter your point, but it would keep their promise.
Seamus Padraig ,
OT: If anyone here wants a good laugh, read the comments on this ridiculous tweet.
Very amusing Seamus (but not funny for the victims) however, having read through all the tweets I didn't see one advocating "Spend
many happy hours building your own Lego model of Netanyahu's bulldozers"
Jen ,
CIA must be desperate to recruit kiddies to spy on their parents through online games.
Mike Ellwood ,
Quite. As Minsky said, anyone can create money. The trick is to get it accepted.
Governments who issue currency give it value simply by insisting that their citizens pay them tax in it. And how do the citizens
get the currency in the first place? Governments spend it into the economy.
If you had a closed, autarkic (no imports or exports) economy, government could control the value of its currency pretty closely
if it chose to. It gets more complicated in the real world, where you need to import real resources, and your currency is being
traded in the Foreign Exchange market. It helps if you have something that other countries want, that you can export.
At the end of the day, what matters are real resources (people, as well as things). As we see with the toilet roll panic (and
other, more serious shortages).
Toby Russell ,
Your comment gets my vote, though I would argue that this discussion, and the point you make, needs much more airing. As such,
the argument is not academic, but vital. And this new Bizzaro World we just burst into is the right place for it. And loudly.
Seamus Padraig ,
By the way, Ben Swann did a great show the other night analyzing the media hype surrounding Corona Virus data. Enjoy
The Japan numbers have puzzled me for a while, since they are no slouches when it comes to managing epidemics. Where are the
exploding numbers for this modern plague in Japan?
At some point, folks gotta say that the WHO needs to be reformed or closed down.
John Pretty ,
Ted, there has been no coronavirus epidemic in Japan and no panic:
Japan may have a healthier elderly population compared to the same age demographic in China and other parts of the world due to
diet (less Western junk food consumption over past decades) and rates of smoking probably lower as well. Air pollution levels
in Japan probably much lower due to greater use of public transport and Shinkansen bullet trains in particular since 1960s. No
wonder Japan still wants to go ahead with Tokyo Olympics.
Seamus Padraig ,
Another ringer from Frank Lee!
But then Goldman Sachs is part of the cabal of central banks and Treasury departments around the world. It is not unusual
to see the interchange of the movers and shakers of the financial world who oscillate between these institutions. Hank Paulson,
Mario Draghi, Steve Mnuchin, Robert Rubin
They don't call it Government Sachs for nothing.
#CoronaHoax
DunGroanin ,
Let's play them at their own game.
I want to see McDonnell put out a clear simple response of what measures are actually needed – i listed them a few posts ago
in haste but they still hold:
1. All self employed / free lancers etc ought to be paid at least 60% of their last years submitted accounts on a monthly basis
directly by HMRC – they have their bank details and these figures at hand a simple database query can be constructed and tested
within hours – There can be a max limit to that based on numbers of children.
2. All others without such records ought to be allowed the full and increased benefit amount.
3. The 80% for employees is smoke and mirrors – that also should be 60% and no charges or NI / pensions/ student loans etc
to complicate matters.
4. All rent private and social to be suspended. All interest on mortgages, creditcards, loans and overdrafts to be cancelled
permanently until normal service is resumed (not accumulated aa debt).
5. All capital payments to be suspended.
6. All council tax collections suspended.
7. BBC licence fee cancelled and direct funding by the HMRC introduced to provide pybluc service broadcasting only.
8. All credit ratings and any such nonsense to be suspended on individuals records – nothing should be added for failing to
keep up payments since beginning of March.
9. Any government funds into banks, corporations, pfi's to be accompanied by equity stakes in these and retained until all
such balance sheet investment has been returned.
BigB ,
I see your bubble has yet to pop, DG?
The "massive correction" – that is value destruction – has to happen before any return to "real, productive" values can occur.
Financialisation distorted productive values so much that any "normalisation" would destroy the value of money. Normal service
cannot just be resumed.
Put simply: there is more money than productive goods and services that can be claimed on now, and in the future. A lot more
a lot, lot more. At least 75 times more.
As I've said time after time: the economy has to expand exponentially or it collapses. As it stands: there is no pause or reset
button without massive value destruction. Which could be done responsibly – a la the heterodox economists "jubilee" – or irresponsibly
by keep blowing the everything bubbles with QE 5.
If you understand which mechanism is being employed: you will understand home isolation and draconian lockdowns. If debt deflation
becomes hyperinflation you might wake up in Rhodesia or the Weimar Republic and you know what came next? 🙁
DunGroanin ,
Have you missed the 40% drop in stocks BB?
And the wiping out of business Goodwill value of many a small business?
Its a major scalping. Which we are letting happen as they say 'hide' from each other. The banks are laughing all the way to
the bank.
BigB ,
No: collapse of financial assets is just the prelude. The real contagion is corporate bond market: full of over-leveraged Zombie
corporations. Particularly stressed are BBB bond junkies of the shale market but the whole market is junked out on a decade of
cheap money. When they cannot pay their way – that is, service their debt – then the defaults, layoffs, and delinquencies start
probably in the second quarter.
In other words: it hasn't even started yet. Problem: excessive debt. Solution: create more debt (and buy up the most toxic
bonds). Any rebound makes matters worse in the longer term.
One scenario to watch is when Saudi oil hits the market in April. That will put deflationary pressure on oil which is already
at $23. That could cause things to cascade (all asset classes are proxies for each other – Dr Jack Rasmus check out his blog for
explainers).
The thing is DG: this has sweet FA to do with any virus. The knock-on effect of which would have been containable I guess.
But to start an oil price war? MbS was either recklessly irresponsible, or quite deliberate. My feeling is the latter. It was
coming anyway. What better than to blame *force majeure* of a virus? And have populations on lockdown as the effects wind through
to Main St.
DunGroanin ,
I agree on the whole BB.
The thing about debt is that it can be cancelled! If that means these 'investments' will also be wiped out.
BigB ,
As Michael Hudson says "debts that cannot be paid, will not be paid". We cancel the debts, or we cancel the future. No choice
to be made really, is there?
Mike Ellwood ,
Not sure if this what you meant above, but in case not, NIC should be suspended indefinitely, both for employers and employed,
and self-employed.
Harry Stotle ,
Corona as an economic instrument ?
Can't argue that medical claims are just as inflated as the amount of money that has been printed. As a companion piece to Frank's excellent article take a look at Renegade Inc's film explaining why a Fiat economy is bound
to end in tears.
Welcome to corona capitalism or the corona casino! 😀
nottheonly1 ,
Roughly translated:
The masses owe, what the billionaires own.
What the masses still own, is now taken away.
Those who understand, see that a most generous unconditional guaranteed basic income/compensation for damages suffered on life
and property by those who run the present system, will not suffice.
A system that is sold to the masses as the gold standard of governance and distribution, has driven the collective of the species
closer to extinction. Maybe extinction is the goal after all? If that is not the case, then the UBI accounts to be like a glimpse
into a world without money in any form. A world in which everything is indeed free. Mother Earth has never been compensated for
the damages and destruction done to her and her more connected life forms.
For various reasons, corona-whatever has the potential – and it was created to do/utilize that potential – to virtually/spiritually
grow a mushroom out of homo sapiens' head. Due to the constant absorption of aerosolized air, having glyphosate in the bloodstream
down into the bone marrow, being exposed to wireless **radiation** constantly and occupied with social media 24/7 has rendered
the human immune system a sick joke compared to what it was before the commodification of everything and everything that will
come.
The bucket must stop here. And I am more than willing to go. Just don't make Soylent Green from me. But to allow a human being
to leave, when they decide to be "I'm good! I'm ready!" would also mean to allow fellow humans to leave at their choosing. Before
they are forcefully removed from the pension/social security/Renten system.
Now is the time to end social networking. No more facebook, twitter, or whatever. The addiction of the masses to panic is wholly
abused right now. And the u.s. has a president who thought he could weather it all out alone. And so did many more – doing everything
they can to maintain their grip on power and wealth.
But the gallows are coming. For all of them. And that is not the result of the rulings of corrupt courts. They will join the
only waiting line the rich ever have to experience. The call for the closure of all u.s./il/nato biological weapons laboratories
has echoed yesterday. It will be followed by the end of militarism and killing for profit. Religions are failing human beings,
because they, themselves are untruthful. And Julian Assange? Will he be given a corona?
As it goes with self-dynamical events, this one too, has long taken on a life of its own. The Universe allows for all crimes
to happen, but it does not promote them. It does not judge them. Karma means 'action' and nobody cannot not act. Things need to
be done constantly – if not to barely survive, then surely for the sake of the addiction to the virtual glass pearl that shine
so bright.
And yes, by all means. Remember that traditional Chinese medicine offers a variety of herbal mixtures against practically everything.
People need to boost their immune systems. All wifi must go. Towers must all be dismantled immediately and replaced with fiber
optics. Planned obsolescence must be prohibited. It must all start here, now.
In Argentina, they were sounding the sirens yesterday – because corona is coming. It oddly reminded me of "Incoming ballistic
millie alert! Not a Drill!". I know it's the people in the cities who are hit the hardest. Out on the countryside, one can at
least be outdoors with plants and animals. Animals also suffer from this artificially induced madness. But it would have come
anyway. Now getting back to what's really important.
BigB ,
If the economy really tanks – and it must, but not necessarily this time – they will have to totally restructure society without
work or not enough of it. There is a deeply sinister side to what they are doing. Which is establishing a precedent for further
doings. Imagine what they would do if there was a real economic crisis?
It is going to take a massive and concerted shift in the social conscience to turn it around now. It is the People's own alienated
creative cultural powers that are being enacted by the market state system against the People. It is only the People who can enact
a different system if they get another chance.
nottheonly1 ,
Exactly. Moving forward at this point means also to evolve. One time I was wondering what would happen if everyone would be told
"Don't worry about it. It has already been taken care of."
When society acknowledges its nature to be more organic than bureaucratic. For Life to be much more alive, than following the
needs of the very few.
There is a Mel Brooks classic worth watching: "Life Stinks". It applies as much to the owner class, as does 'Trading Places'
– whereas I am afraid that the owner class was making fun of the working class/poor part of society.
Organic Food security has to be our priority. Ridding ourselves from what is making us really sick to be profited from by the
owner class. Instead of giving ownership of corporations that are bailed out to the 'government' responsible for this mess, ownership
must be transferred to the workers that run the business.
Famed economist Nouriel Roubini predicted that a recession from the worldwide coronavirus (COVID-19) outbreak will be "more severe"
than the global financial crisis, but
fiscal pump-priming is critical to mitigating the impact.
With governments around the world resorting to extreme measures to keep citizens indoors and away from large gatherings, many
on Wall Street are now
expecting a global recession . Known as "Dr. Doom" for his gloomy economic predictions, Roubini added to those voices by telling
Yahoo Finance on Tuesday that markets have reasons to be downbeat.
"For now, there is not much to be optimistic [about], and what we can hope is if there's going to be the right stimulus -- and
it has to be something of at least 3% of GDP -- this is going to be a very severe, but short recession," Roubini told "On The Move"
in an interview.
In order to counteract the widening effects of social distancing, President Donald Trump and his top advisors are
currently debating
a massive stimulus -- including cutting every American a check.
Roubini agreed, suggesting that Congress give $1,000 to "every single U.S. resident" before it's too late.
"It doesn't matter if you're young, old, employed, unemployed, student, formerly employed, partially employed, hourly worker,
contractor, gig, or small business," the New York University economist said.
"Everybody needs at $1,000 or otherwise we'll end up in the Great Depression at this point." Reality will bite soon
Retail and manufacturing data this week offered investors a small hint of the ugliness the pandemic has in store for the economy
-- and neither figure was pretty.
With that in mind, Roubini expects the recession will start during the current quarter, as the pandemic spurs mass closures of
businesses and lost wages for many hourly and service sector workers. He forecasted a contraction in economic growth through the
second quarter, and "most likely" in Q3.
"But if we have the monetary easing we have right now, if we control the pandemics by doing systematic quarantines, maybe by June-July
the pandemic is stopped, and maybe by the fourth quarter of this year we are going to have an economic recovery," he said.
The economist added that the U.S. needs "fiscal stimulus," since the Federal Reserve has done "everything under the sun." Within
the space of a week, the Fed has cut rates to zero, and thrown
trillions at the market in an effort to backstop financial institutions, non-bank corporations and lending markets overall.
Yet Roubini pointed out that what the economy actually needs is fiscal stimulus to backstop falling private demand -- especially
as exports, consumption, residential investment, and capital expenditures collapse.
The Great Panic of 2020 is already one for the history books. Yet the damage has only just
begun. We suspect the stock market crash, economic destruction, and forfeiture of freedoms will
persist long after the coronavirus hobgoblin has been put to bed.
With respect to the stock market, the modus operandi of the last 11 years is being stood on
its head. Rather than 'buy the dip.' The new divine mantra is 'sell the rip.' Here's why
If you recall, the U.S. stock market commenced a multi-year swan dive in autumn of 1929.
About that time, the economy also commenced a decade long Great Depression. Given the rapid and
relentless stock market carnage over the last month, and the prospect of a lengthy depression,
a closer look is in order.
From September 3, 1929 to November 13, 1929, the Dow Jones Industrial Average (DJIA) lost
48.9 percent. Then, as rarely noted, it rallied 48.1 percent through April 17, 1930. This had
the adverse effect of luring the buy the dip crowd back into the stock market just in time for
the next massacre.
The 1929 through 1932 bear market, as noted by Pater Tenebrarum , was like a rubber ball bouncing down
stairs. With each bounce, even the most savvy of investors were given another chance to lose
their money. Taken in sequence, the repeated bounces provided many opportunities to lose money
over and over again.
In the end, the bounce up between November 13, 1929 and April 30, 1930, turned out to be the
ultimate sucker's rally. The DJIA subsequently crashed 89.2 percent from its initial peak,
along with the hopes, dreams, and aspirations of an entire generation.
Such a colossal collapse could never, ever happen again, right?
Well, if it happened before, by definition, it could happen again. Hence, if an interim
bottom is put in over the next several weeks, and the DJIA attempts to retrace towards its
February 12 all-time closing high, take this as a gift. An opportunity to sell the
rip.
Bend the Curve
The economy's being fundamentally pummeled by coronavirus containment. Long term damage will
be sustained. The type of damage that takes a decade – or more – to recover from.
Fake money won't fix it. But, nonetheless, there's no shortage of solutions being offered to
save us from ourselves.
Coronavirus, according to scientific prophecy, spreads exponentially. The only way to
contain it is to "flatten the curve" through "social distancing." The world must "hunker down"
in unison; if not voluntarily, by government decree.
Bars, restaurants, gyms, schools, and many employers are shutting down. San Francisco has
ordered all residents to "shelter in place." The Maltese Falcon can only screech to itself from
within a vacant John's Grill.
The former Mayor of San Francisco, and now California Governor, Gavin Newsom, has ordered all residents to stay at
home until further notice. According to
Newsom , "We need to bend the curve in the state of California."
Perhaps these solutions have merit. But they're disastrous for the economy. Cash flows are
running dry. Credit markets are freezing up. People are losing their jobs. Full mobilization is
needed, we're told, in the war on coronavirus.
For example, Fed Chairman Jay Powell's pulling out all the monetary stops – zero
interest rate policies, quantitative easing, repo madness – to pump liquidity into credit
markets. But that's not all
The Fed's now accepting
stocks as collateral in exchange for liquidity. The Fed also established a Money Market
Mutual Fund Liquidity Facility ( MMLF ). The
sole intent of the MMLF is to keep short-term credit markets from frosting over like the
Alaskan tundra, and breaking the buck.
On the fiscal side, the Treasury Department's angling with Congress to send out $1,000
checks – possibly, two of them – to struggling Americans. Mitt Romney, a man of
discretion, is onboard with $1,000 checks. Chuck Schumer says it won't be enough. Cory Booker
wants to send out
$4,500 checks .
But why stop there? Why not send out $45,000 checks? If a little helicopter money's good,
isn't more always better?
Is the Panic Worse than the Virus?
If only the world was as simple as potato brains Booker believes. Remember, when the U.S.
Treasury borrows money created out of thin air from the Fed to send out checks, it's executing
a program of mass currency debasement.
A check may arrive in your mailbox. But its face value constitutes a fraud. Moreover, this
fraud constitutes a down payment on tomorrow's disorder.
Yet, by the doom being proffered on the matter, mass currency debasement and systematic
hunkering is needed to win the war on coronavirus and save the economy. Or is it?
For perspective, we'll draw from words first scribbled in 1841 by Charles MacKay. Here's a
brief excerpt from MacKay's timeless classic, Extraordinary Popular Delusions and the Madness
of Crowds
"During seasons of great pestilence men have often believed the prophecies of crazed
fanatics, that the end of the world was come. Credulity is always greatest in times of
calamity. Prophecies of all sorts are rife on such occasions, and are readily believed,
whether for good or evil.
"During the great plague, which ravaged all Europe, between the years 1345 and 1350, it
was generally considered that the end of the world was at hand. Pretended prophets were to be
found in all the principal cities of Germany, France, and Italy, predicting that within ten
years the trump of the Archangel would sound, and the Saviour appear in the clouds to call
the earth to judgment."
As far as we can tell, the coronavirus has attracted prophets of all stripes like bees to a
honey pot. Mass coronavirus hysteria has led to public and pretend prophetic histrionics.
Maybe so. Or maybe the mass panic has been slightly overblown. By this, is the panic worse
than the virus? Who knows?
What we do know, is the spring equinox has arrived marking the earliest coming of spring in
124 years. After the last several weeks of winter, we'll take it.
No doubt global elites present a united front to protect their common interest in
maintaining the petrodollar and international banking system, insofar as it supports their
individual interests. However, other than that shared interest, the elite are rife with
factions -- both domestically and especially internationally.
Incredibly globalization as a system seems to have mostly disappeared in 6 weeks. There
are closed frontiers, no more container ships, the ports are empty, no flights and the malls
are closing.
It's not clear where the US public are going to get their electronics, clothing and other
Walmart items unless everything rebounds 100%. If there's no rebound, then it starts to look
like some kind of watershed event equivalent to WW1.
If elites and their interests are the foundation of the NWO, then right now they seem to
be all over the place.
– The globalists want a strong dollar which they ensure with the dollar's reserve
currency role (particularly the petrodollar). The dollar is doing fine now as a refuge, but
with oil approaching $20 a barrel it doesn't look like such a great link longer term, and
what use is a reserve currency when there's no trade?
– Globalism is based on ZIRP (Zero Interest Rate Policy) to keep the West consuming
and allow the issuance of massive debt. Now international bond markets are hesitating in the
face of more massive international issuance to deal with the economic fallout of the
Coronavirus. Interest rates only have to rise to their historic averages to collapse the
whole thing.
– The LGBT, SJW crowd find that racism, diversity and generally anti-White
propaganda has become a non-issue. Everything has become Coronavirus which is actually sort
of equalizing , and putting the focus on what the government needs to do to protect all the
public including Deplorables (unusual turnaround).
– Frontiers are closing with the cheap labour/ multicultural crowd having gone
quiet.
– Many globalist interests are facing bankruptcy as demand disappears, new share and
bond issuance is blocked, credit disappears and a myriad of counterparty risks (finacialized
opaque derivatives) turn into counterparty failures.
– The general inability of Western government elites to handle all these combined
events. Monetary policy doesn't work in a ZIRP environment so they may just resort to
"Helicopter Money" but with shortages of goods this is guaranteed to feed directly into
inflation.
Altogether a remarkable change of direction in a very short time.
@Miro23Coronavirus is certainly a useful way to deflate a speculative bubble. The virus gets the
blame rather the Dumpers in the Pump and Dump cycle. -- Miro23
But, given the precarious state of the global financial system, wouldn't any black swan of
sufficient magnitude suffice to accomplish both deflation and take the blame?
No doubt global elites present a united front to protect their common interest in
maintaining the petrodollar and international banking system, insofar as it supports their
individual interests . However, other than that shared interest, the elite are rife with
factions -- both domestically and especially internationally.
Which explains Tom Dye's assertion that one of the critical roles of the Counsel on
Foreign Relations (CFR) is conflict resolution between competing elite factions. Or, in other
words, I am having a bit of difficulty with the currently popular theory that a
unified, omnipotent and near infallible global elite is behind everything single thing that
happens on the world stage
"... "cash flows for the next two years are going to be much weaker than we had expected, due to the 737 MAX grounding, resulting in worse credit ratios than we had forecast." ..."
Just hours after S&P took the machete to Exxon's long standing AA+
credit rating , moments ago the rating agency went after the company which until just a few
weeks ago seems invincible, and whose stock price has crashed from $350 to $130 in a little
over a month after it announced it was fully drawing down its revolver: Boeing.
S&P cut Boeing's credit rating by two notches late on Monday, to BBB from A- , as its
"cash flows for the next two years are going to be much weaker than we had expected, due to
the 737 MAX grounding, resulting in worse credit ratios than we had forecast." In
addition, S&P notes, "the significant reduction in global air travel due to the coronavirus
will likely result in an increase in aircraft order deferrals, further pressuring cash
flows."
And worst of all, Boeing will likely be downgraded again, as S&P kept it on Credit Watch
negative, meaning it may be just a matter of time before Boeing is downgraded to junk, making
it the world's most iconic fallen angel.
The pandemic, and the global depression it will cause, now make it certain that Boeing will
have to ask for a gigantic government bailout or go into bankruptcy.
With most flights grounded due to the pandemic Boeing is now
thinking about cutting its production and laying off workers.
In the quoted sentence I used the words "the global depression it will cause" with care. I
do indeed believe that a sustained, long-term downturn in economic activity in many countries
will be one of the results of this pandemic.
The airline industry is just one of many that will be hit hard. About 70% of the U.S. GDP is
generated by the service industry. Travel, entertainment, gyms, restaurants and bars, hotels,
education will all be hit extremely hard by the finally coming shutdown. The U.S. will, like
Germany did today, soon shutdown churches, brothels and other entertainment outlets. Only a few
service industries, like healthcare, online gaming and gun
sales , will continue to strive.
"The Empire State survey, the first manufacturing survey we have received in March, is an
ominous sign that the direct shock hitting certain segments of the services sector is spilling
over into a broader sentiment shock that will affect all sectors," JPMorgan economist Jesse
Edgerton said in a note on Monday.
"Our model of the risk of recession beginning within one year based on the economic data
rose by 2.4 [percentage points] on this news, or by about 3.5 standard deviations in the
distribution of daily changes in the model. We expect the coming weeks to bring additional
severe deterioration in many of the economic indicators that we follow."
Less than a month ago, The
Morning Brief highlighted JPMorgan's recession model after it showed recession risks
falling to their lowest level in 15 months.
Now it seems a recession is the base case for most economic forecasters.
Jonathan Miller at Barclays said Monday following the NY Fed report that, "Although the
Empire State Survey is not one of our favored indicators of US manufacturing activity, today's
reading is one of the first pieces of information we have received that seemingly confirms a
strong pullback of activity as the COVID-19 outbreak has spread within the U.S. and
intensified."
Richard Le Sarc The economy was already moribund, a Potemkin village of debt, inequality,
mass poverty and elite excess. Covid19 just delivered that final push, and the whole rotten
edifice came a'tumbling down.
Blubber ,
We're getting a 101 in disaster capitalism – using a hyped up virus to enable the
rebranding and bail out of an economic crash that was coming all along.
The trauma caused by this hysteria will have real and devastating effects on people who
aren't able to maintain a balanced perspective. It's heartbreaking.
R ussia and Saudi Arabia are engaged in an oil price war that has sent shockwaves around
the world, causing the price of oil to tumble and threatening the financial stability, and even
viability, of major international oil companies.
On the surface, this conflict appears to be a fight between two of the world's largest
producers of oil over market share. This may, in fact, be the motive driving Saudi Arabia,
which reacted to Russia's refusal to reduce its level of oil production by slashing the price
it charged per barrel of oil and threatening to increase its oil production, thereby flooding
the global market with cheap oil in an effort to attract customers away from competitors.
Russia's motives appear to be far different -- its target isn't Saudi Arabia, but rather
American shale oil. After absorbing American sanctions that targeted the Russian energy sector,
and working with global partners (including Saudi Arabia) to keep oil prices stable by reducing
oil production even as the United States increased the amount of shale oil it sold on the world
market, Russia had had enough. The advent of the Coronavirus global pandemic had significantly
reduced the demand for oil around the world, stressing the American shale producers.
Russia had been preparing for the eventuality of oil-based economic warfare with the United
States. With U.S. shale producers knocked back on their heels, Russia viewed the time as being
ripe to strike back. Russia's goal is simple: to make American shale oil producers "
share the pain ".
The United States has been slapping sanctions on Russia for more
than six years, ever since Russia took control (and later annexed) the Crimean Peninsula and
threw its weight behind Russian separatists in eastern Ukraine. The first sanctions were issued
on March 6, 2014, through Executive
Order 13660 , targeting "persons who have asserted governmental authority in the Crimean
region without the authorization of the Government of Ukraine that undermine democratic
processes and institutions in Ukraine; threaten its peace, security, stability, sovereignty,
and territorial integrity; and contribute to the misappropriation of its assets."
The most
recent round of sanctions was announced by Secretary of State Mike Pompeo on February 18,
2020, by sanctioning Rosneft Trading S.A., a Swiss-incorporated, Russian-owned oil brokerage
firm, for operating in Venezuela's oil sector. The U.S. also recently targeted the Russian
Nord Stream 2
and
Turk Stream gas pipeline projects.
Russia had been signaling its displeasure over U.S. sanctions from the very beginning. In
July 2014, Russian President Vladimir
Putin warned that U.S. sanctions were "driving into a corner" relations between the two
countries, threatening the "the long-term national interests of the U.S. government and
people." Russia opted to ride out U.S. sanctions, in hopes that there might be a change of
administrations following the 2016 U.S. Presidential elections. Russian President Vladimir
Putin made it clear that he hoped the U.S. might elect someone whose policies would be more
friendly toward Russia, and that once the field of candidates narrowed down to a choice between
Donald Trump and Hillary Clinton, Putin favored
Trump .
"Yes, I did," Putin remarked after the election, during a joint press conference with
President Trump following a summit in Helsinki in July 2018. "Yes, I did. Because he talked
about bringing the U.S.-Russia relationship back to normal."
Putin's comments only reinforced the opinions of those who embraced allegations of Russian
interference in the 2016 U.S. Presidential election as fact and concluded that Putin had some
sort of hold over Trump. Trump's continuous praise of Putin's leadership style only reinforced
these concerns.
Even before he was inaugurated, Trump singled out Putin's refusal to respond in kind to
President Obama's levying of sanctions based upon the assessment of the U.S. intelligence
community that Russia had interfered in the election. "Great move on delay (by V. Putin)
– I always knew he was very smart!"
Trump Tweeted . Trump viewed the Obama sanctions as an effort
to sabotage any chance of a Trump administration repairing relations with Russia, and
interpreted Putin's refusal to engage, despite being pressured to do so by the Russian
Parliament and Foreign Ministry, as a recognition of the same.
This sense of providing political space in the face of domestic pressure worked both ways.
In January 2018, Putin tried to shield his relationship with President Trump by calling the
release of a list containing some 200 names of persons close to the Russian government by the
U.S. Treasury Department as a hostile and "stupid"
move .
"Ordinary Russian citizens, employees and entire industries are behind each of those people
and companies," Putin remarked. "So all 146 million people have essentially been put on this
list. What is the point of this? I don't understand."
From the Russian perspective, the list highlighted the reality that the U.S. viewed the
entire Russian government as an enemy and is a byproduct of the "political paranoia" on the
part of U.S. lawmakers. The consequences of this, senior Russian officials warned, "will be
toxic and undermine prospects for cooperation for years ahead."
While President Trump entered office fully intending to "
get along with Russia ," including the possibility of
relaxing the Obama-era sanctions , the reality of U.S.-Russian relations, especially as
viewed from Congress, has been the strengthening of the Obama sanctions regime. These
sanctions, strengthened over time by new measures signed off by Trump, have had a negative
impact on the Russian economy,
slowing growth and
driving away foreign investment .
While Putin continued to show constraint in the face of these mounting sanctions, the recent
targeting of Russia's energy sector represented a bridge too far. When Saudi pressure to cut
oil production rates coincided with a global reduction in the demand for oil brought on by the
Coronavirus crisis, Russia struck.
The timing of the Russian action is curious, especially given the amount of speculation that
there was some sort of personal relationship between Trump and Putin that the Russian leader
sought to preserve and carry over into a potential second term. But Putin had, for some
time now, been signaling that his patience with Trump had run its course. When speaking to
the press in June 2019 about the state of U.S.-Russian relations, Putin noted that "They
(our relations) are going downhill, they are getting worse and worse," adding that "The current
[i.e., Trump] administration has approved, in my opinion, several dozen decisions on sanctions
against Russia in recent years."
By launching an oil price war on the eve of the American Presidential campaign season, Putin
has sent as strong a signal as possible that he no longer views Trump as an asset, if in fact
he ever did. Putin had hoped Trump could usher in positive change in the trajectory of
relations between the two nations; this clearly had not happened. Instead, in the words of
close Putin ally Igor Sechin , the chief executive of Russian oil giant Rosneft, the U.S.
was using its considerable energy resources as a political weapon, ushering in an era of "power
colonialism" that sought to expand U.S. oil production and market share at the expense of other
nations.
From Russia's perspective, the growth in U.S. oil production -- which doubled in output from
2011 until 2019 -- and the emergence of the U.S. as a net exporter of oil, was directly linked
to the suppression of oil export capability in nations such as Venezuela and Iran through the
imposition of sanctions. While this could be tolerated when the target was a third party, once
the U.S. set its sanctioning practices on Russian energy, the die was cast.
If the goal of the Russian-driven price war is to make U.S. shale companies "share the
pain," they have already succeeded. A similar price war, initiated by Saudi Arabia in 2014 for
the express purpose of suppressing U.S. shale oil production, failed, but only because
investors were willing to prop up the stricken shale producers with massive loans and infusion
of capital. For shale oil producers, who use an expensive methodology of extraction known as
"fracking," to be economically viable, the breakeven price of oil
per barrel needs to be between $40 and $60 dollars. This was the price range the Saudi's
were hoping to sustain when they proposed the cuts in oil production that Russia rejected.
The U.S. shale oil producers, saddled by massive debt and high operational expenses, will
suffer greatly in any sustained oil price war. Already, with the price of oil down to below $35
per barrel,
there is talk of bankruptcy and massive job layoffs -- none of which bode well for Trump in
the coming election.
It's clear that Russia has no intention of backing off anytime soon. According to
the Russian Finance Ministry , said on Russia could weather oil prices of $25-30 per barrel
for between six and ten years. One thing is for certain -- U.S. shale oil companies cannot.
In a sign that the Trump administration might be waking up to the reality of the predicament
it faces, Treasury Secretary Steve Mnuchin quietly met with Russia's Ambassador to the U.S.,
Anatoly Antonov. According to a read out from the Russian Ministry of Foreign Affairs,
the two discussed economic sanctions, the Venezuelan economy, and the potential for "trade
and investment." Mnuchin, the Russians noted, emphasized the "importance of orderly energy
markets."
Russia is unlikely to fold anytime soon. As Admiral Josh Painter, a character in Tom
Clancy's "The Hunt for Red October," famously said , "Russians don't take a dump without
a plan."
Russia didn't enter its current course of action on a whim. Its goals are clearly stated --
to defeat U.S. shale oil -- and the costs of this effort, both economically and politically (up
to and including having Trump lose the 2020 Presidential election) have all been calculated and
considered in advance. The Russian Bear can only be toyed with for so long without generating a
response. We now know what that response is; when the Empire strikes back, it hits hard.
Scott Ritter is a former Marine Corps intelligence officer who served in the former
Soviet Union implementing arms control treaties, in the Persian Gulf during Operation Desert
Storm, and in Iraq overseeing the disarmament of WMD. He is the author of several books,
including his forthcoming, Scorpion King:
America's Embrace of Nuclear Weapons From FDR to Trump (2020).
"... Medical care in the States is just a huge goody bag for everyone except the patient. Doctors run up the bills. Hospitals run up the bills. Insurance companies take their cut. ..."
"... Privatization has its costs. Off-shoring has its costs. Austerity that feeds the rich and powerful has its costs. ..."
The rich, the wealthy, the privileged have to provide for themselves? What, no dog walkers, no maids, no waiters and all the other
little people that make life a joy? Gardners, bus drivers, private nurses, second houses in the Hamptons, a third house in Hawaii–all
cared for by the loving poor?
Cutting interest rates no longer primes the pump? Neo-liberalism on its last legs? What is going to happen when climate and ecological
disruption really hit?
And Bezos now wants his enslaved workers to donate time to help others? King of the mountain, he is. The wonder of neo-liberalism
in love with worker efficiency and low wages, he is.
And how is the health care going? Pharmaceuticals off-shored? The Sacklers and Pelosi–no longer arm in arm? Lobbyists losing their
sting?
How much was universal health to cost? Yet every decent society manages it. And all Biden and the mass media can do is fret on costs.
Both know that it takes time to answer that question–and it seems so clear and so simple–for the gullible.
Anyone ever checked on actual costs of an MRI in Canada compared with an MRI in the states? I have. In the states a full-body
MRI scan costs $15,000 with a $3,000 co-pay. In Canada, at a for profit MRI screening area the same MRI costs $1,500.
How do I know? My son in the U.S. had an MRI–my step-daughter in Canada is an MRI specialist. I asked her for the exact price of
the one my son had in the states – what her hospital charges for those who do not have insurance, i.e., visiting Americans!
Medical care in the States is just a huge goody bag for everyone except the patient. Doctors run up the bills. Hospitals run up
the bills. Insurance companies take their cut.
In the States, the doctors hire squads of secretaries to keep track of everything. They even open their own medical centers that
squeeze the patient dry. Walk into any doctor's office in Canada. One doctor and one helper: Max.
And the waste of time hunting for a package that will serve your needs and choice of doctors? There is no choice in the States
.unless you are rich or a politician! And then worry if you lose your job will you be protected? What a nightmare every way we look
at it.
And the free health care for every senator, representative take it away . Biden and Sanders should pay for health care services
rendered, not suck on the public dole. Same for the POTUS and ex-POTUSes and their wives and children. The health coverage that any
CEO enjoys should be automatically extended to every worker in that company.
And tax cuts for the wealthy? And a military budget both that the DNC and the GOP both love? We going "get" those Ruskies, Cubans,
Venezuelans, and Iranians? God Bless America and its bombers. We still going to pay for privatization of the military?
And what about student debt? Are we going to allow those students to declare bankruptcy? Eh, Biden?
And credit cards that always take a hefty grab of every purchase! The store owner has to pay every time a credit card is used,
just for the privilege of accepting credit cards. The consumer has to pay big time if he forgets a payment.
Why not nationalize banks? Seriously. Charge just five percent interest–enough to meet actual costs? Stop the revolving door between
banking Treasury.
And is branding about to stop? After all, royals and the Obamas make fortunes on branding. Imagine, an ex-POTUS can now easily
afford an $11-12 million house on Martha's Vineyard.
And will we finally see a drop in the locust swarm of ads that plague every corner of the Internet? Gweneth Paltrow is the ultimate
destination of this consumer society: Smell my bottled vagina odor! Step right up and take a sniff.
Privatization has its costs. Off-shoring has its costs. Austerity that feeds the rich and powerful has its costs.
likbez , March 16, 2020 3:42 pm
Thank you Stormy,
You hit the nail.
Privatization has its costs. Off-shoring has its costs. Austerity that feeds the rich and powerful has its costs.
Destruction of the New Deal Capitalism was a tragedy. Only now we start realizing enormous costs of the neoliberalization of
the country.
Casino capitalism now officially entered the second stage of its crisis as the current situation is the direct continuation
of 2008 crisis
Michael Hudson: [00:00:00] There's recognition that commercial banking has become
dysfunctional and that most loans by commercial banks are either against assets – in
which case the lending inflates the prices of real estate, stocks and bonds – or for
corporate takeover loans.
The economy's low-income brackets have not been helped by today's financial system. Here in
New York City, red lining and a visceral class hatred by high finance toward the poor
characterized the major banks. From the very top to the bottom, they were very clear they were
not going to lend to places with racial minorities like the Lower East Side. The Chase
Manhattan Bank told me that the reason was explicitly ethnic, and they didn't want to deal with
poor people.
A lot of people in these neighborhoods used to have savings banks. There were 135 mutual
savings banks in New York City with names like the Bowery Savings Banks, the Dime Savings Bank,
the Immigrant Savings Bank. As their names show, they were specifically to serve the low-income
neighborhoods. But in the 1980s the commercial banks convinced the mutual savings banks to let
themselves be raided. Their capital reserves of the savings banks, was just looted by Wall
Street. The depositors' equity was stripped away (leaving their deposits, to be sure). Sheila
Bair, former head of the FDIC, told me that the commercial banks' cover story was that they
were large enough to provide more capital reserves to lend for low-income neighborhoods. The
reality was that instead, they simply extracted revenue from these neighborhoods. Large parts
of the largest cities in America, from Chicago and New York to others, are underbanked because
of the transformation of commercial banks from providers of mortgages to emptiers-out, just
revenue collectors. That leaves the main recourse in these neighborhoods to pay-day lenders at
usurious interest rates. These lenders have become major new customers for Wall Street bankers,
not the poor who have no comparable access to credit.
Apart from the savings banks, of course, you had the post office banks. When I went to work
on Wall Street in the 1960s, 3 percent of U.S. savings were in the form of post office savings.
The advantage, of course, is that post offices were in every neighborhood. So you actually had
either a local community banking like savings banks – not like today's community banks,
which are commercial banks, lending largely to real estate speculators to capitalize rental
apartments into heavily mortgaged co-ops with much higher financial carrying charges – or
you had post offices. You now have a deprivation of basic bank services in much of the economy,
combined with an increasingly dysfunctional and predatory commercial banking system.
The question is, what's going to happen next time there's a bank crash? Sheila Bair wrote
about after the 2008 crash that the most corrupt bank was Citibank – not only corrupt,
but incompetent. She had wanted to take it over. But Obama and his Secretary of the Treasury,
Tim Geithner, acted as lobbyists for Citibank from the beginning, protecting it from being
taken over. But imagine what would have happened if Citibank would have been become a public
bank – or other banks that are about to have negative equity if there is a downturn in
the stock and bond and real estate market. Imagine what will happen if they were turned into
public banks. They would be able to provide the kind of credit that the commercial banking
system has refused to provide – credit to blacks, Hispanics and poor people that have
just been red-lined in what is becoming a financially polarized dual economy, one for the
wealthy and one for everyone else.
Walt McRee: [00:04:10] Well, power in that realm, of course, lies with the banking
cartel. They look at public banks as a threat. They hate competition of any sort, it seems.
Michael Hudson: [00:04:18] Of course it is a threat.
Walt McRee: [00:04:22] And even when we say, Michael, that we're not going after the
business you're already doing because you aren't lending to small, medium enterprises and so
forth – we want to take on the infrastructure that you don't want to fund, but they still
are pushing back. How will we be able to get past that?
Michael Hudson: [00:04:40] I think you should say that of course you're not going to
take business away from them, because the public community bank or government-owned bank would
not make corporate takeover loans or speculative derivative bets. It would not create the
dysfunctional credit and debt overhead that has been expanding ever since 1999 when the Clinton
administration changed the banking rules.
The problem is that the big commercial banks don't want the productive kind of loans that
public banking would make. For instance, the reason they didn't want to extend credit to the
Lower East Side or the Hudson Yards west side of New York was they wanted to sort of drive out
their residents and gentrify it, by providing the money to the big developers who socially
bulldoze these neighborhoods. Their policy is to kick out as many low-income renters or owners
as they can, and replace them by raising rents from like $50 a month to $5,000 a month. That's
what's happened on the Lower East Side from the time I first lived there to what rents are
today.
There is a fight of the economy's unproductive sector against people who want to use credit
in a productive way that actually helps the economy. I think it's a fight between good and
evil, at least between the productive and unproductive economy, between economics for the
people and economics for the One Percent.
ORDER IT NOW
Ellen Brown: [00:06:14] I wonder, though, if the Fed is going to even allow the banks
to collapse again, with what they just did with the repo market. They can step in at any time
to save anybody. I don't know that Congress, even has a say in it. What do you think?
Michael Hudson: [00:06:30] I think that's right. I've talked to Paul Craig Roberts
and we discuss whether they can just keep on keeping these zombie banks alive. Can they keep
the over-indebted zombie economy alive by the Federal Reserve manipulating the forward stock
and bond markets to support prices? It doesn't actually have to buy stocks and bonds beyond the
$4 trillion it's already put into Quantitative Easing. It can simply make manipulate the
forward market. That doesn't really cost any money until the big crash comes. So I think one
should have a discussion over what President Trump says is a boom that that he's created, with
the stock market going up. Does that mean that the economy is getting richer? Are we fine with
commercial banking the way it is, so that we don't need public banking?
I think you have to expose the fact that what's happened is artificial state intervention.
What we have in the name of free market support of the banks is not a free market at all. It's
a highly centralized market to support the predatory financial sector's wealth against the rest
of the economy. The financial sector's wealth takes the form of credit to the rest of the
economy, extracting interest and amortization, while making loans simply to increase asset
prices for real estate and financial securities, not put new means of production in place to
employ labor. So you have to go beyond the public banking issue as such, and look at the
political context. Ultimately, the way that you defend public banking is to show how the
economy works and how public banking could play a positive role in the economy as it
should work.
Ellen Brown: [00:08:14] Can you explain what you meant by forward lending? I mean,
they don't have to
Michael Hudson: [00:08:19] It's not forward lending, it's buying long. For the stock
market's Dow Jones average, they'll contract to buy all its stocks or those in the S&P 500
in one month, or one week or whatever the timeframe is, for X amount – say, 2% over what
they're selling today. Well, once the plunge protection team issues a guarantee to buy, the
market is going to raise the bid prices for these stocks up to what the Fed and the Treasury
have promised to pay for them. By the time the prices go up, the Fed doesn't actually have to
buy these stocks, because everybody's anticipated that the Fed would buy them at this 2 percent
gain. So it's a self-fulfilling prophecy. We're dealing with a government run by the banks and
the creditor powers to artificially raise asset prices, on credit. This has kept alive a system
that represents itself as creating prosperity. But it's not creating prosperity for the 99
Percent. Public banking would aim at prosperity for the 99 Percent, not just for the One
Percent.
Ellen Brown: [00:09:46] I'm writing about Mexico's AMLO, who is now who has just
announced in January that he will be building 2,700 branches of a public bank in the next two
years. He's expecting 13,000 branches ultimately, so it will be the largest bank in the
country. His reasoning is just what you're saying, that the banks have failed and have not
serviced the poor. His mandate is to help the poor, and he can't do that if they don't have
banking services.
Michael Hudson: [00:10:17] Is that national?
Ellen Brown: [00:10:18] Yes, all across the country.
Walt McRee: [00:10:22] "Loprabrador", AMLO. So we know that a public monetary source
is a public utility. Our vision is to create a network of local and state public banks. That
leads us to the view that what we really need to be targeting is the Federal Reserve, to
ultimately turn it into a publicly-owned entity. Is that folly or
Michael Hudson: [00:10:55] I think the way to get people to support this is if they
understand how the Federal Reserve was created. A few years ago I published an article in an
Indian economic journal (I think it's on my website), about how the Federal Reserve was
created.
[1] "How the U.S. Treasury avoided Chronic Deflation by Relinquishing Monetary Control to Wall
Street," Economic & Political Weekly (India), May 7, 2016. Available on Naked
Capitalism an michael-hudson.com. There was a fight by Wall Street led by J.P. Morgan.
America had a central bank until 1913 – the Treasury. Until 1913 the Treasury was
doing everything that the Federal Reserve began to do. The idea of creating the Federal Reserve
was to take power away from the Treasury. The Treasury wasn't even allowed to be on the board
as an owner of Federal Reserve stock. The idea was to take decision-making away from
Washington, away from democratic politics, and insulate the financial system from the
democratic political system by turning control over to the corporate financial centers -- Wall
Street, Chicago, and the other Federal Reserve districts. They were the same districts as those
that the Treasury already had divided the country into. Remember, these were the decades
leading up to World War I when there was a social democratic revolution from Europe to the
United States. A guiding idea was to democratize banking.
Wall Street very quickly developed a counter strategy to this. And the counter strategy was
the Federal Reserve. You're welcome to republish my article on your site. You and I both aim to
reverse the counterrevolution mounted against classical economics and social democracy. The
entity you're talking about would probably be under the aegis of the Treasury. You'd be putting
the economy back in the direction that the world was moving before World War I derailed these
efforts.
ORDER IT NOW
You talk of nationalizing the Fed. I know people don't like the word nationalizing. How
about thing de-privatizing or de-Thatcherizing the Fed? You have to represent the Fed as having
stolen economic and financial policy away from the public domain. It became part of the
neoliberal project taking form in Austria in the 1930s. You're trying to restore the classical
economic vision of productive versus unproductive credit, productive versus unproductive labor,
and public money as opposed to private money. These distinctions were erased by the censorial
neoliberal counter-revolution.
It's not that you're radical, that these people had a radical revolution to carve away the
financial system from democracy. And you're restoring the classical vision of democratizing,
re-democratizing finance and banking.
Walt McRee: [00:14:12] I want to thank you for saying that, Michael, because
de-privatizing the Federal Reserve is so much more accurate and powerful. You'll recall that we
kind of exchanged a phrase when I said "institutionalized deception.". I think that's really
important. But let's say that prior to that, Stephanie Kelton gets in there, or somebody from
the MMT crowd gets into a new administration prior to de-privatizing the Fed. Does MMT have a
place to play or to emerge in that environment?
Michael Hudson: [00:14:55] Of course, and here's the role: You can leave the
commercial banks to do what they're doing, but you're not going to provide Federal Reserve
credit for them to load down the economy with unproductive debt. The question is, if you're
going to create real community banking via a public banking sector, where will it get the money
to lend out? How do we provide money to the red-lined areas of the economy to actually finance
tangible capital investment and people's living needs, not just predatory lending? The way that
MMT comes in is much like the Chicago plan for one hundred percent reserves. These community
banks will need Treasury-created depository credit beyond the deposits they raise in their
local areas.
They need more money. MMT will provide credit to these banks in exchange for their loan
originations of a productive character, on terms that borrowers can afford, with realistic
mortgages also to build public housing. The new Fed that we're talking about will be a major
depositor and will provider of the capital deposits and reserves to the banks. Right now, it
has provided $4 trillion of Quantitative Easing credit to the banks, not to put into the
economy but only to inflate the stock and bond market and make housing more expensive. Wouldn't
it be much better to provide credit to community banks that actually would make credit
available for productive economic purposes – and not for takeover loans, stock buybacks
and asset speculation?
Productive credit was what everybody expected banking to develop in the late 19th century.
Germany and Central Europe were leading the way. It was called Middle Europa banking, as
opposed to Anglo-American banking. (I discuss this contrast in Killing the Host .) That
was essentially following the classical model, as everybody expected banking to evolve prior to
World War I.
Ellen Brown: [00:17:29] Cool. That's totally what I also wrote about in my latest
book. The Federal Reserve is where you should be getting credit, so you don't have to borrow it
from somewhere else. Everybody thinks this whole repo thing is so contrived. It's
re-hypothecated. One party owns the collateral at night, the other party owns it during the
day. It's all just bluff to make it look like they borrowed something that wasn't really there.
So let's just acknowledge that all money is just credit. And like you say, if you have a good
loan, a good project to be monetized, that's the whole point of a bank. It will turn your
future productivity into something you can spend in the marketplace. And the central bank is
there to provide the credit.
Michael Hudson: [00:18:21] That's right.
Ellen Brown: [00:18:22] Turn it into dollars.
Michael Hudson: [00:18:24] That's right. My way of describing it is to look at
history, to show that this is not a utopian idea. It is what made German and Central European
banking so much more productive in the decades leading up to World War I. So we actually have
historical examples of good banking versus bad banking. But the predators won in the end.
Ellen Brown: [00:18:53] Well, regarding this whole repo thing, one big problem we
have with our public banks is the 110 percent collateralization requirement in California. How
is a bank supposed to make loans if it has to use its deposits to buy securities –
something safe and yielding low interest to back the deposits? It seems to me that what the big
banks do – and I think we could do it, too – is to take those deposits and buy
federal securities at 1.5 percent, and then they turn around and use the securities as
collateral in the repo market, where they pay 1.5 percent. In other words, they earn 1.5
percent and they pay 1.5 percent. So it's a wash. They get their money for free. I think we
could do that, too. Or are only certain players allowed to play that game, and we can't jump
in?
Michael Hudson: [00:19:50] Well, you're the lawyer. Of course they could do it. I
think one of the things that you and other progressives have recommended is that the Fed should
stop paying money to the banks for their reserve deposits. Stop giving them the free giveaway.
If you want to say, "We're against the largest welfare recipients in the country. They're not
the people you think. They're the Wall Street banks. These hypocrites want to cut back Social
Security to balance the budget. They want to cut back medical care and social services, and
make themselves the only welfare recipients."
Ellen Brown: [00:20:30] Right, agreed. But if we just stand on our high horse and say
this has to change, nothing will happen. We could do it ourselves and just show what you're
doing in contrast to what they're doing
ORDER IT NOW
Michael Hudson: [00:20:44] You're asking for symmetry. They're making us carry a big
load on our back, that they don't have to carry. They're loading the dice in their own favor.
You want to unload the dice and stop the insider favoritism. You correctly represent the banks
as being insiders. You have to say, "Look, these insiders are trying to keep a monopoly." You
could use the anti-monopoly legislation that's been on the books since Teddy Roosevelt's time.
You have a lot of legal power to break up the big banks. You could treat them like I think they
could treat the pharmaceutical companies if Bernie gets in.
Walt McRee: [00:21:44] Monopolies are being challenged by the shadow banking
industry. New forms of payment exchange technologies seem to be eating away at that singular
source of credit. What's your prognosis for how that's going to evolve? Will the big banks find
a way to clamp down on that ultimately?
Michael Hudson: [00:22:05] Are we talking about cryptocurrency?
Walt McRee: [00:22:07] That would be one example, yes.
Michael Hudson: [00:22:10] Well,. you can't stop people from gambling. People think
that buying a cryptocurrency is like buying an Andy Warhol etching. Maybe it'll go up in price
if a large number of people want it. But basically, it's junk. It's very speculative. It's
certainly not stable. It goes up and down. One day there may be a solar flare that's going to
wipe out all the bank records for these things. But there is no way to stop people from doing
something that seems to be silly or gambling. You certainly will not insure them. So you will
not give them any protection against loss. You also will want to insulate the economy from
having any transactions in crypto, in these alternative money things that pose a big threat of
loss. They are not real money, because the government will not accept payment of
cryptocurrencies as taxes or for public goods and services. The government will only accept
specified forms of money. You can create any kind of swap or bet. If you want to create the
equivalent of a racetrack on horses. You can do it, but that's a financial racetrack. I think
there may be taxes on racetracks. They were unregulated for a long time. But Hollywood movies
showed that there's a lot of criminalization going on there.
Walt McRee: [00:23:59] We were all amused, well, maybe a little wondering about Max
Kaiser. Ellen and I and Tyson Slokum had some time with him over there just before you were at
his Brooklyn studio, but Max is into Bitcoin in a big way, and he sees it as the new gold.
Michael Hudson: [00:24:20] He told me that a lot of people watch his show because
they're gold bugs or they are interested in Bitcoin. I think he's tried to take a neutral view
of it, certainly in our personal conversations. He's not a gold bug and he's not a Bitcoin or
other bug. But he said that a lot of people want to find out about it, so he has guests on his
show telling people, "Here it is, take your choice." It's part of the new speculative financial
landscape, just like swamps are part of landscape for Florida real estate. So he's going to
cover the whole spectrum. Reuters produces his shows, and the audience wants to hear about
this. So he talks about what they want to hear.
Ellen Brown: [00:25:20] I think he actually does promote Bitcoin. He's heavily
invested in it and he was one of the originals, so he's obviously made a lot of money on
it.
Michael Hudson: [00:25:29] Okay.
Ellen Brown: [00:25:29] I think he agrees that it can't be a national currency. It's
too slow, too expensive, and too environmentally unfriendly. But like you say, it has been a
good investment, just like fine art or something that, if people want it, the value goes up.
Plus, there's a big black market for it, for trading and things that you don't want the
government to know about.
Michael Hudson: [00:25:57] It's a real phenomenon. I know people who benefited from
Andy Warhol. So he saw the phenomenon and he seems to have made money, but when Steve Keen and
I and others got together with him for a couple of days two months ago, the topic never came up
in discussion.
But gold did. I wonder where the gold of Libya went, for instance. Apparently it was all
taken and I understand the US gave it to ISIS. Hillary said it had to go to ISIS to act as our
Foreign Legion. We gave them Libya's weapons. Some of the gold must have just been taken by the
CIA and State Department for dirty tricks for its black operations. Certainly, America wants to
prevent any other country or large gold possessor from having enough gold to try to reinstate
it as a means of settling balance-of-payments deficits. America runs a large military deficit,
so at a certain point, the more money it spends abroad for its 800 military bases, the more
gold it would lose. Just like in General de Gaulle's time during the Vietnam War, although
actually Germany was taking more gold than France. So America wants to keep the dollar at the
center of the world financial system. That really was why it went to war with Libya, because
Libya was one of the first countries to de-dollarize and move its currency toward gold. So
you're having a group of countries – Russia, China, Iran and others – add gold to
their reserves instead of dollars. You're having a de-dollarization move throughout the world
to break free from the US ability to do what it did do Iran.
When Iran borrowed in dollars under the Shah, it used Chase Manhattan Bank as its paying
agent. It put enough money into the account to pay its foreign debts service. But then the
State Department told Chase to screw Iran and refuse to turn over the payment. Now that the
Shah wasn't running Iran, once Chase refused to turn over the payment and froze Iran's account,
that meant that Iran went into default on the entire dollarized foreign debt. It was liable for
a huge amount of capital.
ORDER IT NOW
That was a warning for the rest of the world that no government could safely put its money
in an American bank or an American bank branch, or in a British branch that would act as a
subsidiary of the Pentagon. Because if you do, the bank can simply force you into default at
any time, just like the US CIA can come in and use electronic weaponry to destroy your bank
payment-clearing system. That's why the threat of cutting Russia and China and other countries
off from the Swift Interbank Clearing System led Russia to develop its own clearing system.
With a flick of a switch it can begin to work anytime United States tries to cut Russia off
from the SWIFT payments system. So you're having the whole world de-dollarize very quickly. And
right now the question is what Europe will choose. Are Germany and other countries going to
become part of the de-dollarized system, or remain part of the dollar area?
This is part of the fight against using the IT chips and the communications chips from
Huawei. Huawei did not put US spyware into the system. The United States says that if it can't
have a phone system and communications system that it can control by spyware and use to blow up
your economy, your public utilities, your electrical systems, then you're our enemy, because we
feel insecure without this control. When President Trump said that Huawei was a threat to US
national security, he meant that we don't feel secure unless we have the power to destroy any
economy that acts in any way that is independent of the United States – because you might
do something we don't like. This is the most aggressive concept of security that one could
imagine. So of course the rest of the world is seeing its own national security as having a
financial dimension. The financial dimension is to create a monetary and financial system that
minimizes connections to the dollar except to the extent of having to buy and sell dollars to
stabilize foreign exchange rate.
Ellen Brown: [00:31:31] There's a lot of talk, even among central bankers, that we
need to get off the dollar as a global reserve currency. But it seems to me that gold is also
manipulatable. I mean, it's not the ideal I had envisioned a system where instead of reserves
being a thing, like dollars or gold that you can actually trade, it would just be a measure,
like a yardstick. You would be able to compare one currency to another according to what you
could buy with it. Like you'd have a whole basket of things that everybody uses in every
country. And now that they report that kind of stuff, it wouldn't be all that hard to get the
figures and, you know, just compare and say, well, your dollar will be worth so many pesos in
Mexico or whatever. That was my idea, but what do you think?
Michael Hudson: [00:32:27] That would meet one of the criteria of money, which is as
a measure of value, but it would not do at all for international money. You have to have some
means of constraint. In other words, suppose the United States continued to run another
military budget deficit like it did in the Vietnam War. There is no way that you could use the
balance of payments as a constraint on the policy of deficit countries, which are usually the
military aggressors. The whole idea of going off gold was that under the gold standard no
country can afford to make war, because if you go to war your currency collapses. In 1976,
Herman Kahn and I went to the Treasury and – this is to answer your question. He put up a
map of the world and said, "These are the countries – Scandinavia, Western Europe, the
United States – that don't believe in gold. They're all politically stable social
democratic countries. They have faith in government. No look at these others here's the rest of
the world – India, South America, Africa and most of Asia. these are people that believe
in gold. Why do they believe in gold, but not the Protestant cultural area? Well, they don't
have faith in government. They don't trust governments. They want some option that is
independent of government. Gold is not only to bribe the border guards if they're escaping from
somewhere. They want to be free of governments that have been captured by anti-democratic,
predatory forces."
He said if you tried to think of what you would make that is an alternative to the dollar
that people could understand, well, for thousands of years, people have decided that gold and
silver. (I'm sure that you could add platinum and palladium.) So they have been the ultimate
means of settlement, and hence of international monetary constraint.
Gold isn't to be used as money. It's not to be used as a normal means of payment. What it is
to be used for is as a balance-of-payments constraint on the ability of countries to run up
chronic deficits that are mainly military in character. So I called our presentation "Gold: the
Peaceful Metal." Well, needless to say, the Treasury didn't go for that, because they said that
we had just explained how super-imperialism works via the dollar. So they didn't go back to
gold. We lost that argument.
Ellen Brown: [00:35:34] Isn't the reason we went off gold standard, though, that
there simply isn't enough gold and that we wound up leveraging it, and
Michael Hudson: [00:35:42] No, there's plenty of gold. There wasn't enough gold to
pay for the military deficit. Every month the dollars we spent in Vietnam would be turned over
to the banks in Indo-China. They were French. They'd turn the dollars over to Paris and General
de Gaulle would turn in these dollars for gold. We had to pay in gold for the military deficit,
which was the entire source of the US balance-of-payments deficits in the 50s, 60s and into the
70s. America went off gold so that it could afford to wage war without the constraint of losing
its control over the international monetary system.
Ellen Brown: [00:36:29] We went after gold domestically because it didn't work. I
mean, you had to use fractional reserve lending
Michael Hudson: [00:36:35] Yes, of course gold doesn't work domestically. It's
certainly not an appropriate domestic money supply. I'm only talking about it for settlements
among central banks internationally.
Ellen Brown: [00:36:49] But you said it's not to be traded. But if you don't, how do
you settle your balance of payments?
ORDER IT NOW
Michael Hudson: [00:36:53] It can be traded. There is a market. And you began by
saying, quite correctly, that gold prices are manipulated. Well, right now the US and the
central banks are manipulating its price to keep it low, in the same way that they're
manipulating the stock and bond market by buying forward. Except in the case of gold, they're
selling forward. If they keep agreeing to sell gold at a very low price, people will see that
if they can buy gold at this low price, why should they buy it at a higher price today, as the
price will fall and be driven down. So, yes, gold is manipulated downwards today by the U.S.
– essentially the plunge protection team acting internationally to keep the price of gold
down to discourage other countries and populations from buying it is protection against
collapse of the financial system.
So we're back to the fact that the financial system is dysfunctional. In a functional
financial system, you wouldn't need domestic reference to gold. You'd have a domestic financial
system that works fine without gold. Gold is what you have when the financial system becomes
dysfunctional and there's a breakdown.
Ellen Brown: [00:38:21] Well, it almost seems like you need some sort of global
regulator. But that's like a one-world government, which we all freak out about.
Michael Hudson: [00:38:28] You certainly don't want a one world government. Right now
all the plans for world government are neoliberal. They aim essentially to limit, to break up
democratic government regulation of corporate business, mining and monopolies. The idea of a
one-world government is to destroy any democratic government's ability to make its own laws in
the interests of labor or society. You would have a parallel government of wealth, government
of property. It's what the University of Chicago calls the Law and Economics regime. And this
is, this is fascism on an international scale. And there is a wonderful book by Quinn Slobodian
in 2008, Globalists: The End of Empire and the Birth of Nationalism , showing how these
plans were developed by fascists in the 1930s and by the fascist promoters at the University of
Chicago. The fascist promoters were people like Hayek and von Mises and the Geneva economists
around the League of Nations. So when they say they're anti-government, they're really
anti-democracy. They're for an iron-fisted government by big business, big mining and big oil
– and most of all, by big banks. That is the reason why people don't trust an
international government. It would be an international iron fist of fascism, the way the
current maneuvering of the financial classes and the rentier classes and the neocons
have arranged things.
Ellen Brown: [00:39:56] Well, I totally agree. It's quite frightening. We want
sovereignty for all our little nations, and even our little cities, states and so forth. But it
seems to me, how do you get everybody to work together? For example, Venezuela has the debt
problem that any country has that's heavily in debt to foreigners, or to vulture funds or
whatever. There's not a universally recognized court that you can go to. And, you know,
everybody agrees. It does seem like on some level we need some sort of collaborative effort
where we all agree on the rules.
Michael Hudson: [00:40:33] Absolutely right. Now, of course, the United States would
not recognize any international court. So, again, you'd have all the rest of the world
belonging to the court, and the United States as the outlier. It's like you're the healthy body
and we want to parasitize you. And it will not recognize the court. My Super-Imperialism
reviews the history of this policy.
But you're right: There should be a court that would recognize such things as odious
debt for governments. Venezuela's problem is that under the dictators that the Americans had
installed by assassination and force, Venezuela had pledged its oil reserves as collateral for
its international bonds. That gives a vested interest in the creditors to make it default and
grab its oil reserves and its investments in the United States, the oil distributors it bought.
So, yes, you do need a set of international rules for writing down bad debts. That means an
alternative to the IMF. You need an anti-IMF. Instead of acting on behalf of the creditors
imposing austerity on countries, you should create an organization representing society. And s
the interest of society is to grow. Instead of promoting austerity like the IMF does, it would
promote prosperity. Instead of financing the US government dollarization and giving US control,
it would be part of the de-dollarization group.
So you'd have a pro-growth group of nations – of the world economy – using
finance for growth and development with productive credit. You'd also have the United States
providing predatory credit, austerity, cutting back Social Security, cutting back Medicare and
having a polarizing economy that is shrinking and will end up looking like Greece or Argentina.
The rest of the world would follow more productive and less oligarchic financial policies. That
should ultimately be our global dream. But there's been little preparation for that. The
financial sector's neoliberals have o put together an almost conspiratorial Law and Economics
lobbying group to promote the Trans-Pacific Partnership and World Trade Organization rules
blocking governments from imposing anti-pollution fines or regulating monopolies or closing tax
havens. If you fine an oil company for polluting, the government is obliged under this
international law to pay the oil companies what they would have earned if they would have
continued to poison the environment. This is
Ellen Brown: [00:43:41] Shocking.
Michael Hudson: [00:43:41] Definitely. This is an international deathwish.
Ellen Brown: [00:43:45] Agreed. Totally agreed.
Walt McRee: [00:43:47] We've been speaking with economist Michael Hudson. Our thanks
to him for being on this program again. And you'll be hearing more from Michael on future
editions of It's Our Money.
Walt McRee: [00:43:59] Well, that's it for this edition of It's Our Money with Ellen
Brown. Thanks to our guests or sponsors, Public Banking Associates, and to you for listening.
Be sure to check out Ellen's latest writings on the economy and the changing world of money by
visiting ellenbrown.com. And for more information on public banking, visit
PublicBankingInstitute.org. For information on how local and state governments can obtain
professional insight and council about public banks from key national experts, visit
PublicBankingAssociates.com. I'm Walt McRee. See you next time on It's our Money with Ellen
Brown.
Notes
[1] "How the U.S. Treasury avoided Chronic Deflation by Relinquishing Monetary Control to
Wall Street," Economic & Political Weekly (India), May 7, 2016. Available on Naked
Capitalism an michael-hudson.com.
@dc.sunsets "This is why those who promise to "Plan" economic prosperity are liars and
fools, for they have the PRETENSE of knowledge, nothing more. "
Of course, this point is true -- but its posed as an absolute. No government can "plan" an
entire economy -- we know this from the failings of the USSR etc. But nor can economies be
totally unplanned. The US is not an unplanned economy: its an economy planned by the 1% for
the 1%.
Modern economies are "mixed". There is coordinated planning between the public & private
sector.
Sadly the US Gov' has renounced its responsibilities to "plan". Had the US Gov "planned" it
would never have allowed key industries, knowledge & talent to be off shored to China.
Such off shoring was a private plan by the 1% for the 1%. Worked well -- for them.
Adding complexity to an already far too complex system merely hastens blow out of
distributions that are skewed fat tails and stressed to a breaking point of systemic failure.
Greenspan purposely built a complex financial empire of asset inflation to replace Volcker's
fiscal prudence & macroprudential professionalism system wide.
Once Greenspan has locked in the asset inflation regime & deregulated Glass-Steagall
Act it was off to the races on a credit card for the largest parasite in the financial empire
governing by force.
On September 10th 2001 Donald Rumsfeld announced to the world that the ever incompetent
Pentagon had misplaced $1.3 trillion USD of taxpayer money. On September 11th 2001 Donald
Rumsfeld took part in a clandestine covert US Military operation to assassinate all of the
principle investigators & forensic Chartered Accountants that were about to uncover the
crimes taking place under Donald Rumsfeld's directorship as Pentagon executive.
The USA has always been a system of fraud by stealth of US Military force thugsterism
& all out fascist behaviour.
[.]
While it is still popular to claim that the United States has never defaulted on its debt,
this is a myth. The US has been forced to default a couple of times throughout history, the
last of which being when Richard Nixon&rsquo closed the gold window. By cutting the
ability of foreign governments to redeem US dollars for gold, America was allowed to pay
back past debt with devalued fiat money. This form of default has long been a popular
option for governments with debt obligations it can't or won't honor.
Of course, as Peter Klein wrote last week, even Trump's suggestion of the US
restructuring its debt isn't the doomsday scenario CNBC talking heads have made it out to
be, noting that:
[T]he idea that the US can never restructure or even repudiate the national debt -- that
US Treasuries must always be treated as a unique and magical "risk-free" investment -- is
wildly speculative at best, preposterous at worst.
Murray Rothbard himself advocated for outright repudiating the national debt,
arguing:
The government is an organization, so why not liquidate the assets of that organization
and pay the creditors (the government bondholders) a pro-rata share of those assets? This
solution would cost the taxpayer nothing, and, once again, relieve him of $200 billion in
annual interest payments. The United States government should be forced to disgorge its
assets, sell them at auction, and then pay off the creditors accordingly.
Trump himself has even touched on the possibility of selling of assets held by the
Federal government as a form of debt reduction.[.]
c1ue dear friend, the current level of US debt is unsustainable. Never mind the happy
cheerleaders promoting mighty U.S. is the wealthiest nation on earth. Have no fear our dollar
is good as gold, backed by the full faith and credit of Uncle Sam.
Here is a brief history of U.S.defaults starting with year 1790- LINK
Civilizations depend on toilet paper it seems. Toilet paper is the bellwether commodity of
our age. Capacity production is called for, especially neoclassic econ 101 foolishness.
Nevertheless, overtime at the paper mills is in order.
This is a really brilliant satire !!! Another outstanding work. "Spread the message, not the virus" and "...when they threaten the
Stock Market." Priceless
What makes a nation civilized is not how it acts in times of peace but how it chooses to conduct itself in moments of crisis. Hoarding
stuff for months selfishly and fighting people in markets like animals is not how civilized societies deal with crisis.
Notable quotes:
"... Toilet paper is such a weird thing to be panic-buying... ..."
"... "Global emergencies- when they threaten the stock market" So sad but true ..."
"... "When they threaten the stock market." Boom. ..."
"... I love the term "local government franchise". sounds pretty synonymous to a government run by crooks and impotent political dynasties. ..."
"... I like how this started off completely taking the mick, but then turned, depressingly, into one of the most sensible summaries of our current situation. (I mean it's depressing that comedians seem to be better at communicating than our glorious leaders). ..."
"... "Italians are freaking out the Chinese are hiding out" That was just so freaking hilarious oh my God I love this channel ..."
I like how this started off completely taking the mick, but then turned, depressingly, into one of the most sensible summaries
of our current situation. (I mean it's depressing that comedians seem to be better at communicating than our glorious leaders).
Lucy's heavenly voice and impeccable pronunciation – which transform the coarse language into music to our ears – perfectly
convey the urgent educational message.
Thank you for the "flatten the curve" message. To be honest, I had wondered whether delaying the inevitable was the way to
go - especially in view of the fact that there are going to be, indeed, already have been deaths that are due to knock-on effects
from the corona virus.
"... The plunge in US equities yesterday (12 March) pushed weekly returns down to 7.7 standard deviations below the norm . In statistical science, the odds of a greater-than seven-sigma event of this kind are astronomical to the point of being comical (about one such event every 160 billion years). ..."
While many post-mortems will be written on what, despite Friday's torrid 9% rebound, has been a historic, unforgettable week which
saw the US stock market plunge the most since the worst days of the global financial crisis, one of the more detailed and impactful
was that of Nomura's quant Masanari Takada who put the week's events in simple, easy to understand context: "In little more than
the blink of an eye, the situation has come to look like the 2008 Lehman Brothers crisis all over again."
Below we repost some of the key points from his note as we brace for another historic week, especially since something tells us
- perhaps the Fed's failure to normalize the funding situation - that the events from next week will be even more memorable.
The plunge in US equities yesterday (12 March) pushed weekly returns down to 7.7 standard deviations below the norm . In statistical
science, the odds of a greater-than seven-sigma event of this kind are astronomical to the point of being comical (about one such
event every 160 billion years).
Setting aside legitimate quibbles over the statistical significance of this, we can say with confidence that we are witnessing
a history-making market disaster in real-time.
Looking back at the performance of the DJIA since 1900, market shocks have exceeded the current rout in magnitude on only three
occasions: in 1914 (when a growing financial crisis caused trading in US equities to be halted), in 1929 (the historic market crash
that led to the Great Depression), and in 1987 (the Black Monday event).
US stock market sentiment has also seen a jarringly swift collapse, as equity sentiment has now gone beyond the low point marked
during the 2015 renminbi shock. In little more than the blink of an eye, the situation has come to look like the 2008 Lehman Brothers
crisis all over again.
The Fed has resumed its QE-in-all-but-name in response to the financial market meltdown. Many observers have questioned how effective
the aid will actually be, given that there seems to be no way to put a conclusive stop to COVID-19. Expanded QE did help lift sentiment
in 2015-2016, and therefore think that the Fed can at least help limit the risk of an extreme credit crunch. However, the paralysis
in the international circulation of people and goods already being observed will almost inevitably undermine the market.
DM equities worldwide are in bear markets now. Going by our own data analysis, the pace of the present sell-off has broken all
norms. When a downshift in the market is characterized by unusually steep declines, the usual driver is an outflow from longer-term
investments.
The present market rout is unconventional in that major hedge funds (global macro hedge funds, CTAs) appear to be behind the curve
in their selling [ ZH: just as Goldman warned this week ]. If anything, we see a risk that short-term players may mount an attack
on the downside, ramping up their selling in an attempt to push the market down further.
For example, global macro hedge funds' net exposure to DM equities (estimated from 30- day rolling beta) is still currently flat
or even slightly long. It may be that these investors had been unable to fully imagine a pandemic-driven recession scenario, having
no experience in that vein to draw upon. Global macro hedge funds may have taken this week's abnormal market movements as their cue
to simply offload their long positions in DM equities in their entirety.
There is a growing risk that global macro hedge funds, after liquidating their long positions, will proceed to aggressively build
up short positions. Global macro hedge funds tend not to make spur-of-the-moment trades, but they do tend to stake out positions
that are consistent with the macroeconomic outlook.
In that respect, the S&P 500 dividend yield appears to already reflect market expectations for a slowdown in the US economy. If
the ISM Purchasing Managers Index (average of the readings for manufacturers and non-manufacturers) were to drop to the level recorded
around July 2009 -- as the dividend yield seems to imply -- there is a high likelihood that global macro hedge funds would then (with
some confidence) start expanding their short positions in pursuit of the market downside.
Similarly, CTAs appear to have failed to fully keep up with the drop in share prices in major countries. CTAs have of course been
selling futures to unwind their long positions during this downward move in share prices . But when share prices shift downward abruptly,
the short-term surge in volatility can often hinder trend-followers' ability to participate in short-selling. This is because systematic
trend-following strategies tend to build positions that balance: (1) the strength or weakness of trends; and (2) the level of volatility.
This means that CTAs often wind up following one step behind when trends shift suddenly.
CTAs have turned short on DJIA futures. Because of the rapid pace of the Dow's drop, CTAs have been able to build sufficient short
positions. As they had already preferred short positions with the DJIA below 28,000, CTAs look likely to build short positions rapidly
at current share price levels.
It may be, then, that the market has only just begun staring into the abyss.
The demise of oil is overstated and the rise of renewables is also. Electric cars? Where do
you think the power is going to come from? Forget nukes and hydro as well healed enviros will
fight to the death to stop them. Japan is closing their nukes and going to coal. Same with
Germany. Without a way to store electricity renewables are a lost cause that needs fossil
backup. Molton salt lovers won't tell you about the huge solar molton salt plant near Tonopah
Nevada that's been mothballed for a year due to being totally unreliable. Or the solar plant
at Ivanpah in Nevada that has never lived up to expectations and has to have a gas plant
running full time to make up for night and shortfalls. The grids, especially local grids in
your neighborhood are creaky and will never handle the amount of electricity if we all go to
electric cars and eliminate gas heat, gas hot water, and gas cooking in favor of electric.
When they tell you how much to upgrade the grid they are only talking about the main grid and
not the even larger expense of upgrading the local. Some Australian neighborhoods have had
grid failure with half a dozen electric cars charging at once.
Thanks to US sanctions Venezuela is not pumping much oil. To make up for the loss of the
Venezuelan crude which the US Gulf coast refiners relied on they are now importing a bunch of
heavy crude from RUSSIA along with other Russian petroleum products. Next door to Venezuela
in Guyana huge finds of oil are in the process of being exploited. Point is the more they
look the more oil they find so to say oil is on it's way out is far too premature. Point is
renewables as they now exist are not ready for prime time in a modern society that needs a
constant flow of electricity. Plenty of pie in the sky predictions of we'll solve the
technical problems but not much in results.
In the US we are getting large numbers of wind farms getting old and junked and their
large rotors made of various composites are not recyclable and are now filling up landfills.
Lots of blather of we can recycle worn out batteries, which are lead acid, but not much if we
can do so with lithium ion. Not to mention the cleared land and roads needed to employ wind
and solar and the destruction of animals and their habitat.
Without hookup to the grid all those bragging about their cheap electricity, as power
companies are required to buy their electricity at top dollar, is no longer cheap. Large
solar and wind installations get a paid subsidy for the electricity they produce without
which those renewables are not cost competitive with fossil fuels. The average ratepayer and
taxpayer does not realize they are subsidizing those "competitive" rates.
Neoliberal v Neoclassical economics – what's the difference?
By Claire Connelly
Economics & Finance |
Bookmark to dashboard
Neoliberalism and neo-classical economics are often terms that are used
interchangeably by various economists and financial writers, but actually, there are important differences between
the two. We've had some requests from readers to make that distinction more obvious, so here goes
Neo-classical economic theory puts 'man' as a rational human being at the heart of the
economic system, extrapolating the functions of the economy based on optimised behaviour of rational, well-informed
individuals trading with one in another in what is effectively a barter system (which as I'm sure we all know by now,
never actually existed
).
It is based on the
general equilibrium model
pioneered by late 19th century economist
Leon Walras
, of the
Lausanne School. Ironically, neoclassical economics guarantees full employment because it models a system with no
frictions or inconveniences like trade unions, minimum wage laws or imperfect information. Also false.
It also guarantees that society will find an optimal allocation of resources on its
own, so long as markets are competitive, and there are no externalities, like pollution, which go unaccounted for.
Neoclassicists are concerned about monopoly power, neoliberals are not. Neoclassicists
believe it merits government intervention and regulation. Neoliberals, do not.
It is possible to be a neoclassical without being a neoliberal.
The most important thing to understand is that neoliberalism is a post-war political
movement that grew out of
the Mont Pelerin Society
, a
thought collective that formed a consensus not to put the market at the centre of the state, but to take it over
completely. Its entire objective is to co-opt economics and subvert the public interest to suit the needs of powerful
capitalist institutions and the politicians, economists, financiers, philosophers, bankers, think-tanks and media
organisations that support them.
Neoliberalism is associated with laissez-faire economic liberalism and was pioneered by
economist Milton Friedman & Friedrich Hayeck, but as the economic historian, Philip Mirowski points out, this is a
deliberate deception to trick people into thinking it is concerned about market equilibrium.
It is the doctrine by which white collar crime has been allowed to prosper unprosecuted
while governments of wealthy nations like the US and UK have abdicated their responsibility for employment, health
care, education and the general well-being of the populations they are supposedly elected to serve. In their minds,
government exists only to maintain property rights, defend capitalists and maintain price stability, (which
apparently doesn't count as intervention when it works in the favour of the wealthy).
We
are what we eat, well, in free market terms anyway
Whilst
90% of the US media (film, TV and radio) is controlled by only 6 companies.
Unlike neoclassicists and neoliberals, heterodox economists and other post-Keynesians, reject the notion of general
equilibrium. They believe the economy evolves through non-equilibrium states over time. Heterodox economists believe
governments need to introduce instability-thwarting mechanisms to stabilise the economy, maintain full employment,
and retain social equity.
"Free-market economists may want you to believe that the correct boundaries of the
market can be scientifically determined, but this is incorrect," writes institutional economist, Ha-Joon Chang, in
his book
23 Things They Don't
Tell You About Capitalism
.
https://www.youtube.com/embed/J7m9wfFnH6o
"If the boundaries of what you are studying cannot be scientifically determined, what
you are doing is not a science," writes the Cambridge University economist.
"Recognising that the boundaries of the market are ambiguous and cannot be
determined in an objective way lets us realise that economics is not a science like physics or chemistry, but a
political exercise."
In other words, a strong economy requires constant time, attention, assessment, and
when it is called for, intervention. The rules will not always be the same, nor the causes. But it helps to start
with an understanding
of the role and purpose of
government spending
and
taxation
.
Further Listening
Listen to this interview economic historian Philip Mirowski who delves into the further
nuances of these economic mindsets.
Claire Connelly
Claire Connelly is the lead writer of Renegade Inc. An award-winning freelance journalist, speaker, and
founder of subscription journalism experiment, Hello Humans.
Specialising in economics, technology and policy, Connelly is working on her first book due out in 2018.
With more than a decade of experience under her belt, Claire has written for leading publications
including The Australian Financial Review, The Saturday Paper, ABC, SBS, Crikey, New Matilda, VICE &
others. She is the co-host of The Week In Start-Ups Australia, and features regularly as a commentator on
TV and radio shows including Radio National's Download This Show, ABC's The Drum, Ten's The Project, and
more.
Latest posts by Claire Connelly
(
see
all
)
What were Hayek's contributions to capital theory? Just wondering. I have never
encountered a single person who speaks of "neoliberalism" (a term we ourselves never use to describe what we
believe) who has read a single word of Hayek's economic work. Or who even knows who Ludwig von Mises is.
(Whenever the two economists mentioned are Milton Friedman and F.A. Hayek, I know
I'm dealing with somebody who hasn't read anything.)
Reply
But of course you have read everything and know all, right Tom ? What
specifically is wrong with this account ? If you can't dispute anything within the piece why do you attempt
to dismiss it out of hand by implying without a shred of evidence what someone has or hasn't read ? How
could you possibly know what someone has read or hasn't ?
Reply
What actually is "capital theory", Tom. Why don't you use the term
'neoliberalism?
Why do you think Claire hasn't heard of Mises and why would it be important anyway? Mises and the Austrian
School are part of the problem that the article refers to.
Reply
Sorry. I just don't believe even smart people can manage markets. That's the
nature of markets: they are individual. If you haven't read Von Mises or Hayek, you're missing out on the
thinking of two very smart people. It is hard for me to embrace the idea that – because a market doesn't seem
to function as a person might want it to – persons should be given authority to govern those markets in a way
that suits them. That, in itself, distorts the market.
Reply
I am responding to an article by you in today's The Automatic Earth about the
vengeance of capitalism. I could not get the response area to work so that is why I am coming to you this way.
You write eloquently and I see the creation of increasing suffering due to a form
of capitalism and class privilege in America and globally. I have read and listened to Keen, Hudson and Kelton.
From my review they all approach the ability of a nation that controls their own currency as an ability to
create an unlimited amount of money to use to reduce human suffering with no discussion of the ultimate end
game if we continue to do so.
There is a lot of suffering now and because of climate change, increasing
usurping of jobs by technology and global resource depletion and more a lot more suffering may be coming our
way.
How much money are they (and you) thinking of creating?
What are the implications of creating money at a much more rapid pace than we
have been with no upper limits in sight?
What are the upper limits of money creation? How would we know?
Our present system of capitalism and privilege is like a drug. It feels good at
the start but kills us in the end,
I am fearful that an addiction to the unlimited or substantial and on going use
of money created from thin air will do the same.
What say you?
PS: Please accept with compassion all the typos that are probably in this note.
Reply
You keep forgetting that having the ability to create money also gives you the
ability to destroy that same money. What is collected in tax revenue is destroyed. More money is issued to
create infrastructure. The deficit in a country that can create it's own currency is really just a ratio of
what is collected(destroyed) and what is created(spent).
Now ask yourself what happens when you quit destroying money and keep right on creating it
Reply
The aim of distinguishing neoclassical and neolilberal is of merit. The interview
with Mirowski makes clear, however, that that are numerous strands of neoliberalism that overlap with each
other, with some drawing on neoclassical arguments, and others having a different starting point. But it is not
clear to me that all of them agree on the market fundamentalism, which is generally regarded as the defining
characteristic of neoliberalism. Was Joseph Schumpeter a neoliberal? His ideas about entrepreneurship have
probably done more to make monopoly respectable than the parallel work of von Mises. Schumpeter's thought has
entered the mainstream in the U.S. via Peter Drucker, who thought the modern corporation was the engine of all
forms of human progress. In Germany, Ordo-liberalism was another form of neoliberalism that called for a strong
state. Was this self-contradiction? What I find frustrating in most discussions on the Left of these thinkers
is the inability or unwillingness to recognize the ***partial*** validity of their ideas. On the particular
subject of government interference to protect against monopoly power, it was Gabriel Kolko, a socialist, who
first showed in 1962 that Progressives were responsible for the national monopolies that emerged around 1900.
Even now, progressives fail to comprehend the many ways in which regulation benefits big business and stifles
small business. Designing regulations that do more social and environmental good than harm is much harder than
most progressives seem to recognize. Analyzing the sociology and politics of neoliberal organizations, as
Mirowski does, gets us no closer to finding way to create effective government programs that do not
simultaneously feed the leviathan of an expansive state. I would very much like to know which heterodox
economists are actually addressing the tough problems we face rather than defining the boundaries between
neoclassical thought and their own domain..
Reply
There are a very large number of errors in this piece. Fundamentally, what is
described as "neoclassical economics" is actually just one model, Walras' circa 1870 general equilibrium model.
If one defines neoclassical economics as equivalent to that one model, then there has never been a single
neoclassical economist, as absolutely no one limits attention to that one model.
The body of research most actual economists would describe as "neoclassical
economics" encompasses an enormous body of work which posits that some social phenomena can be understood as
emergent results of individual, intentional behavior. That research includes literally thousands of papers
studying the phenomena the author wrongly believes are simply excluded by assumption, such as unemployment,
unions, minimum wage laws, and imperfect information. There is an entire field, Public Economics, devoted to
the study of "the role and purpose of government spending and taxation."
The idea that government can and should "introduce instability-thwarting
mechanisms to stabilize the economy, maintain full employment, and retain social equity" is also, contrary to
the article's assumptions, very much part of mainstream, neoclassical thought, and has been for almost a
century.
After having implicitly defined mainstream economics as solely the study of a
single 1870 model, the article then also misrepresents heterodox economics. Notably, the Marxian economist
(less than 1% of all economists) such as Chang do not "reject the notion of general equilibrium". Marxian
analysis is explicitly grounded in general equilibrium, both in Marx's work and in modern neo-Marxian form, and
can be expressed in the same analytical framework as the Walrasian model (see for example:
https://www.jstor.org/stable/1911113?seq=1#page_scan_tab_contents
).
The article is correct that neoliberalism is a strain of political thought, and
not economics at all: they're not even the same type of thing, much the same thing. That's all the article
ought to say -- it gets everything about what economists think, and what neoclassical economics is, really, really
wrong.
Chris Auld
Department of Economics
University of Victoria
Reply
Most though not all mainstream economics is neoclassical economics.
Neoclassical economics is based on marginalism, or optimising behaviour,
expected utility theory, and either implicit or explicit general equilibrium analysis. The economy, in the
absence of frictions, would behave like a stable equilibrium system. In a macroeconomic sense, this is the
basis of all versions of the neoclassical synthesis, including second generation dynamic stochastic general
equilibrium models.
These models all have Walrasian and Wicksellian roots. They all assume
optimising behaviour. They always adopt the ergodic hypothesis and these days adopt rational expectations
formation. Not only that, they have all been constructed in defiance of what we know about the history and
nature of money; they all ignore ontological uncertainty, in the Keynesian sense; they all exclude genuinely
endogenous financial instability and crisis; they are biased towards an essentially technological
explanation of income distribution; they all incorporate a natural or non-accelerating inflation rate of
unemployment; they all exhibit long run money neutrality; they all incorporate an efficient markets approach
to financial markets.
There are of course elements of what some would regard these days as
mainstream economics which don't fit under the neoclassical banner. However, for the most part, mainstream =
neoclassicism.
The greatest divide between neoclassical economics and genuine (i.e. not
'new') institutional economics, is the F-twist of Milton Friedman – the notion that unrealistic axiomatic
foundations in some sense don't matter, and neither does an approach which does not naturally incorporate
realistic institutions.
Of course, economists using a neoclassical frame have things to say about
unemployment, minimum wages, etc. But, as Hyman Minsky put it, "The game of policy making is rigged; the
theory used determines the questions that are asked and the options that are presented. The prince is
constrained by the theory of his intellectuals."
You accuse the author of errors, and I think you are ungenerous – and, more
importantly – incorrect. My advice to you is to read Steve Keen's best-seller 'Debunking Economics'. You
could even read my 'Economics for Sustainable Prosperity'. If you read these two books, you will be much
more aware of the limitations of neoclassical economics, and the rich insights available from the many
economists who have worked, and who are working today, outside the neoclassical frame.
Reply
Perhaps you will find them useful in understanding why it's questionable that
neoclassical economics has anything useful to say about financial stability.
Steve Payson, an US economics practictioner of long standing, will talk about his
book 'How Economics Professors Can Stop Failing us' which provides an eye-opening expose on economics
professors that will surely shock anyone who is not familiar with the topic, and even some of those who are
familiar with it. Ellen Quigley has recently completed her research into economics education in the UK and will
provide a perspective on our local profession.
Our mission is to explain how we reached this moment in history to prevent it from
repeating itself. Again. By considering options not previously considered, readers, creators, entrepreneurs, business
and community leaders can make better, more informed and empowered decisions, so we can all begin to think differently
about our personal and public financial stability.
Neoliberalism destroys solidarity; as the result it destroys both the society and individuals
Notable quotes:
"... Thirty years of neoliberalism, free-market forces and privatisation have taken their toll, as relentless pressure to achieve has become normative. If you're reading this sceptically, I put this simple statement to you: meritocratic neoliberalism favours certain personality traits and penalises others. ..."
"... On top of all this, you are flexible and impulsive, always on the lookout for new stimuli and challenges. In practice, this leads to risky behaviour, but never mind, it won't be you who has to pick up the pieces. The source of inspiration for this list? The psychopathy checklist by Robert Hare , the best-known specialist on psychopathy today. ..."
"... the financial crisis illustrated at a macro-social level (for example, in the conflicts between eurozone countries) what a neoliberal meritocracy does to people. Solidarity becomes an expensive luxury and makes way for temporary alliances, the main preoccupation always being to extract more profit from the situation than your competition. Social ties with colleagues weaken, as does emotional commitment to the enterprise or organisation. ..."
"... Bullying used to be confined to schools; now it is a common feature of the workplace. This is a typical symptom of the impotent venting their frustration on the weak – in psychology it's known as displaced aggression. There is a buried sense of fear, ranging from performance anxiety to a broader social fear of the threatening other. ..."
"... Constant evaluations at work cause a decline in autonomy and a growing dependence on external, often shifting, norms ..."
"... More important, though, is the serious damage to people's self-respect. Self-respect largely depends on the recognition that we receive from the other, as thinkers from Hegel to Lacan have shown. Sennett comes to a similar conclusion when he sees the main question for employees these days as being "Who needs me?" For a growing group of people, the answer is: no one. ..."
"... A neoliberal meritocracy would have us believe that success depends on individual effort and talents, meaning responsibility lies entirely with the individual and authorities should give people as much freedom as possible to achieve this goal. ..."
"... the paradox of our era as: "Never have we been so free. Never have we felt so powerless." ..."
An economic system that rewards psychopathic personality traits has changed our ethics and our personalities
'We are forever told that we are freer to choose the course of our lives than ever before, but the freedom to choose
outside the success narrative is limited.'
We tend to perceive our identities as stable and largely separate from outside forces. But over decades of research and therapeutic
practice, I have become convinced that economic change is having a profound effect not only on our values but also on our personalities.
Thirty years of neoliberalism, free-market forces and privatisation have taken their toll, as relentless pressure to achieve has
become normative. If you're reading this sceptically, I put this simple statement to you: meritocratic neoliberalism favours certain
personality traits and penalises others.
There are certain ideal characteristics needed to make a career today. The first is articulateness, the aim being to win over
as many people as possible. Contact can be superficial, but since this applies to most human interaction nowadays, this won't really
be noticed.
It's important to be able to talk up your own capacities as much as you can – you know a lot of people, you've got plenty of experience
under your belt and you recently completed a major project. Later, people will find out that this was mostly hot air, but the fact
that they were initially fooled is down to another personality trait: you can lie convincingly and feel little guilt. That's why
you never take responsibility for your own behaviour.
On top of all this, you are flexible and impulsive, always on the lookout for new stimuli and challenges. In practice, this leads
to risky behaviour, but never mind, it won't be you who has to pick up the pieces. The source of inspiration for this list? The psychopathy
checklist by Robert Hare , the best-known specialist on psychopathy today.
This description is, of course, a caricature taken to extremes. Nevertheless, the financial crisis illustrated at a macro-social
level (for example, in the conflicts between eurozone countries) what a neoliberal meritocracy does to people. Solidarity becomes
an expensive luxury and makes way for temporary alliances, the main preoccupation always being to extract more profit from the situation
than your competition. Social ties with colleagues weaken, as does emotional commitment to the enterprise or organisation.
Bullying used to be confined to schools; now it is a common feature of the workplace. This is a typical symptom of the impotent
venting their frustration on the weak – in psychology it's known as displaced aggression. There is a buried sense of fear, ranging
from performance anxiety to a broader social fear of the threatening other.
Constant evaluations at work cause a decline in autonomy and a growing dependence on external, often shifting, norms.
This results in what the sociologist
Richard Sennett has aptly described
as the "infantilisation of the workers". Adults display childish outbursts of temper and are jealous about trivialities ("She got
a new office chair and I didn't"), tell white lies, resort to deceit, delight in the downfall of others and cherish petty feelings
of revenge. This is the consequence of a system that prevents people from thinking independently and that fails to treat employees
as adults.
More important, though, is the serious damage to people's self-respect. Self-respect largely depends on the recognition that we
receive from the other, as thinkers from Hegel
to Lacan have shown. Sennett comes to a similar conclusion
when he sees the main question for employees these days as being "Who needs me?" For a growing group of people, the answer is: no
one.
Our society constantly proclaims that anyone can make it if they just try hard enough, all the while reinforcing privilege and
putting increasing pressure on its overstretched and exhausted citizens. An increasing number of people fail, feeling humiliated,
guilty and ashamed. We are forever told that we are freer to choose the course of our lives than ever before, but the freedom to
choose outside the success narrative is limited. Furthermore, those who fail are deemed to be losers or scroungers, taking advantage
of our social security system.
A neoliberal meritocracy would have us believe that success depends on individual effort and talents, meaning responsibility lies
entirely with the individual and authorities should give people as much freedom as possible to achieve this goal. For those who believe
in the fairytale of unrestricted choice, self-government and self-management are the pre-eminent political messages, especially if
they appear to promise freedom. Along with the idea of the perfectible individual, the freedom we perceive ourselves as having in
the west is the greatest untruth of this day and age.
The sociologist Zygmunt Bauman neatly summarised the
paradox of our era as: "Never have we been so free. Never have we felt so powerless." We are indeed freer than before, in the sense
that we can criticise religion, take advantage of the new laissez-faire attitude to sex and support any political movement we like.
We can do all these things because they no longer have any significance – freedom of this kind is prompted by indifference. Yet,
on the other hand, our daily lives have become a constant battle against a bureaucracy that would make Kafka weak at the knees. There
are regulations about everything, from the salt content of bread to urban poultry-keeping.
Our presumed freedom is tied to one central condition: we must be successful – that is, "make" something of ourselves. You don't
need to look far for examples. A highly skilled individual who puts parenting before their career comes in for criticism. A person
with a good job who turns down a promotion to invest more time in other things is seen as crazy – unless those other things ensure
success. A young woman who wants to become a primary school teacher is told by her parents that she should start off by getting a
master's degree in economics – a primary school teacher, whatever can she be thinking of?
There are constant laments about the so-called loss of norms and values in our culture. Yet our norms and values make up an integral
and essential part of our identity. So they cannot be lost, only changed. And that is precisely what has happened: a changed economy
reflects changed ethics and brings about changed identity. The current economic system is bringing out the worst in us.
New York Federal Reserve Bank announced Monday it will increase its daily injections of cash
into financial markets by $50 billion to $150 billion as a protective step amid #coronavirus
epidemic.
I see your tangible assets bet and raise another $50 billion per day of presto digitizer
created out of thin air fiat.
Because I CAN!
Now what are you going to do about it huh?
If you crash our ponzi scheme, who are you going to sell your oil and gas to?
That said, in periods of past extreme economic turmoil folks like Steve Mnuchin, with the
trophy British wife, aka The King of Foreclosure, made out like bandits. He's now duce
Trump's Secretary of the Treasury. The prior Republican standard bearer, the Mitt, was also a
Vulture who participated in the hollowing out of the American Industrial Heartland, for
profit.
A life long con man and grifter coupled up with a Jewish vulture capitalist leading a
phony charge to Make America Great Again...?
A script that writes itself.
Sadly..the supposed opposition are also beholding to AIPAC, and it's dictates.
Chuck Schumer says he was appointed by God to be the Guardian of Israel. It's true, and
confirmation is available on the web.
Is he an American or an Israeli? No one should be allowed to be both, should they? Am I
right or wrong?
Why just look at the good ole boys Netanyahu's very good friend , Tabloid Star and huckster
about town the donald to see who is really the Bossman of Murika's gun toting Patriots.
Pretty sad really when you think about it. A Country that ravaged it's indigenous people
to break the land open for settlers of European descent, only to have it fall into the
clutches of a tiny tribe of foreigners who never put skin the game and came in with their
gangsterism and were always about accumulation of wealth and power for themselves.
Welcome to America, haven for the Gangs of New York and Grifters about town.
The Fed was supposed to take away the punchbowl just when the party was getting going,
instead we had the troika of Greenspan, Bernanke, and Yellen gleefully pouring in gallons of
101 Wild Turkey at 2 A.M. and now the hapless Powell is zero-bound and duty-bound to do the
only thing in the modern CB playbook: ease more. TARP and the first trillion? OK, keep the
doors open at Citi. The next 3 trillion in free money (thanks Obama)? Socialist handout to
the rentier class. That bill is now due and payable.
The grotesque distortions in the entire concepts of lending and investing were as plain as
day to see. The four CEOs of the top four Eurozone banks told the tale, quote: "zero interest
rates destroy the banking system". Was anyone listening? Did our titans of central banking,
whose *first* stated job is the stability of the banking system, heed the call? How do
systems and currencies based on the extension of credit even work if lenders are to receive
*nothing* in exchange for taking risk? Riddle me that, Ph.D-breath.
This is malpractice and criminal incompetence on a galactic scale, from our hallowed
universities, who feed a steady monocultured diet of pure neo-Keynesianism, through to our
"financial press" paid cheerleaders, to our mustachioed "economic pundits" who treated the
entire crisis diagnosis and prescription ("we must make things more expensive!!! More
gasoline on the fire!!!") as though it seriously made *any* logical sense at all. In lockstep
they go, right over the plainly and painfully obvious cliff.
So now we get to watch, again, as they play a game of "who gets screwed worse than me?".
The phone lines are absolutely buzzing, as Hapless Jerome realizes his broom is so short it
cannot possibly stop this outbound tide. I'm sure Bezos and Dimon and Gates and Buffet will
be fine, again, Mr. Henry Longbottom of Periwinkle Court, Anytown, Ohio, homeowner, coupla
kids in college, small 401(k) not so much.
As much as Trump has made about as much a hash of this as he possibly could, the Federal
government can't do much save pass some bills to throw money at the problem. And remember, it
is the Dems that are the party of fiscal orthodoxy. They'll be as reluctant to commit big
numbers as the Republicans.
Public health is in the hands of states and localities, not the Feds. In theory, the Feds
can declare an emergency and do things by force, but in practice, states beg for help and
then the Feds declare an emergency and send $ and FEMA and maybe the National Guard.
Our screwed up private health care system is not even remotely fit for or inclined to deal
with a public health crisis. You may have seen in Links how one of America's elite hospitals,
Mass General, told an prestigious private employer that if any of their employees came to the
ER for coronavirus testing, they'd be hauled off by (campus) police. And they didn't offer an
alternative.
Remember how the supposedly oh so technically/bureaucratically competent Obama
Administration botched the comparatively simple Obamacare rollout?
I remember it well. Then they threw money at it with yuuge corporations to try and fix it.
Probably to one of Obomba's buddies.
The whole concept of connectinginsurance cos' databases to the Obamacare site was a patently
bad idea.
At the very least, our favorite neo-liberal democratic President Obama did set up 47
anti-pandemic programs in countries that have enormous vulnerability to deleterious viruses
in order to keep them from spreading worldwide .and President PT Barnum dismantled 37 of
those programs. Maybe we would have a better handle on Coronavirus if he hadn't shuddered
those programs.
Fears of a financial meltdown at least on the scale of the 2008 crisis intensified Monday as
global markets were gripped by panic resulting from the spread of the coronavirus across the
globe and the ensuing oil price war launched by Saudi Arabia over
the weekend.
"The fear today is about a global recession,"
said Thomas Hayes, chairman of management firm Great Hill Capital, as markets headed for
their
worst day since the 2008 crash .
"U.S. futures pointed to heavy losses on Wall Street on Monday. Overseas, London's FTSE
100 fell more than 8 percent to its lowest in three years; Japan's Nikkei index slumped more
than 5 percent and Australia's benchmark shed more than 7 percent. Oil prices suffered the
sharpest plunge since the 1991 Gulf War, while 10-year U.S. bond yields dropped to a record
low as investors sought safety."
While some urged
caution in interpreting the meaning of daily market fluctuations, analysts said there is
reason to fear that destructive economic crisis is on the horizon. Chris Weston, head of
research at the Melbourne-based web trading platform Pepperstone,
toldThe Guardian that "there is genuine panic" in the market, noting that he hasn't
"seen anything like this for years."
On February 24, Grassley and other Senators attended a "top-secret" briefing on the
coronavirus. Why were there virus "secrets"? What were these? Azar later said that all of the
information disclosed was later made public. Maybe. But why entertain the notion of virus
"secrets" in the first place? Because the default procedure is control of information; here
we go again. This complicates the task of the clown-car CDC, which is in well over its head
to begin with.
Coronavirus theme is not the war issue.
Using the threat of "Coronaviruses" is to exsufflate of the World inflation bloated by
International Banking Sector, yet at the same time, it is the "Wall Street project" to
prevent the recurrence of 2008 crisis.
Having said that, extreme measures do need to be taken to slow down the spread,
preserve life, and to prevent catastrophic economic collapse – modern "Just in Time"
supply chains are far more vulnerable and interdependent than the older-fashioned systems
present during the historic pandemics listed; all redundancy has been sacrificed to
maximising fast profit.
The coronavirus is now exposing a far more deadly disease: Namely, the poisonous brew of
easy money, cheap debt, sweeping financialization and unbridled speculation that has been
injected into the American economy by the Fed and Washington politicians.[.]
It has also left the American economy exceedingly vulnerable to external shocks. That's
because 80% of households have no appreciable rainy day funds and businesses have hollowed
out their balance sheets and artificially extended their supply chains to the four corners
of the earth in order to goose short-run profits and share prices.
However, this unprecedented fragility is becoming evident as public health authorities
around the world aggressively move to contain the Covid-19 contagion. This will mean
separating workers from their workplaces, consumers from the malls, diners from the
restaurants, travelers from the airlines, hotels and resorts and much more like and similar
disruptions to the supply-side of the economy.
In short, the world's supply chains are buckling and freezing-up, thereby causing
production and incomes to fall abruptly. In turn, shrunken incomes and cash flows will pull
the legs out from under the edifice of debt and speculation that has been piled atop the
American economy.
So both a renewed financial and economic crisis and an abrupt change of course lie dead
ahead. The 30-year era of False Prosperity is over. [.]
The decade of reckoning that lies ahead is rooted first and foremost in the fecklessly
incurred mega-debts of the private and public sectors alike. Together they have soared to
the staggering sum of $75 trillion.[.]
Yet the proceeds from these massive borrowings were not used to invest and provide for
tomorrow, but to live high on the hog today. After three decades of such artificial
debt-fueled "prosperity", the very warp and woof of American society has been
deformed.[.]
In our ongoing attempts to glean some objective insight into what is actually happening "on
the ground" in the notoriously opaque China, whose economy has been hammered by the Coronavirus
epidemic,
in February we first showed several "alternative" economic indicators such as real-time
measurements of air pollution (a proxy for industrial output), daily coal consumption (a proxy
for electricity usage and manufacturing) and traffic congestion levels (a proxy for commerce
and mobility), before concluding correctly that China's
economy appears to have ground to a halt - the subsequent record drop in China's
manufacturing and service PMI only confirmed this.
... ... ...
Not only that, but as the bank's economists warn, " we are starting to see
evidence of an adverse feedback loop between markets and consumers; this frightens us." Let's
review the signals:
Market indications:
As of Friday, the S&P 500 sold off almost 14.0% from the recent high.
The 3mo-10yr yield curve is inverted by ~18bp, the most since October 2019 when trade war
concerns were dominating the news flow
BofA's global financial stress indicator triggered risk-off for the first time since
August 5 - September 12 2019. While the indicator has been a good signal to buy the dip since
2013, the bank's equity derivatives research team warns that this time may be different given
the nature of this shock.
Freeze in the global credit machine. In the US, high yield bond issuance has slowed and
there was no new US IG corporate issuance this week.
Consumer signs:
In the bank's proprietary consumer survey, BofA has seen some pickup in those noting they
are "very concerned" though it remains modest. And while broad consumer sentiment has been
resilient, as Goldman's data confirmed, this will change drastically in the coming weeks.
... ... ...
The conclusion: so far US consumers haven't showed broad-based fear. But as
BofA reminds us, consumers are very sensitive to big market moves. Case in point: consumer
confidence tumbled following the sell-off in December 2018. Similarly confidence weakened
following the big market move in August 2019. In both cases spending plunged immediately
thereafter. This is more than simply a negative "wealth effect". Consumers see the stock market
as a gauge of the health of the economy and the state of their personal finances; it is also an
indicator of faith in the Fed which has single-handedly kept the stock market ramping for the
past 11 years, avoiding both a bear market and a recession. Which is why when the stock market
sells off violently, it sends an ominous message.
We leave the last words to Bank of America: "We believe that we are in the very early stages
of the adverse feedback loop. In our baseline forecast, we are assuming that it does not
spiral. However, it remains a significant risk and we believe it is prudent to monitor it very
closely."
Creating employment insecurity was the entire point of neoliberal reforms such as
outsourcing, de-skilling and contingent employment. Neoliberal theory had it that desperate
workers work both longer and harder. And they die younger.
We can view "Creepy Joe" and Trump as representatives of "neoliberal plague" The slogan
should be " No Pasaran "
( Dolores Ibárruri's famous battlecry appeal for the defense of the Second Spanish
Republic)
Notable quotes:
"... For those who aren't familiar with Albert Camus' The Plague , disparate lives are brought together during a plague that sweeps through an Algerian city. ..."
"... Through the virus, a new light is being shone on four decades of neoliberal reorganization of political economy. The combination of widespread economic marginalization and a lack of paid time off means that sick and highly contagious workers will have little economic choice but to spread the virus. And the insurance company pricing mechanism intended to dissuade people from overusing health care ('skin in the game') means that only very sick people will 'buy' health care they can't afford. ..."
"... If this last part reads like (Ayn) Randian social theory as interpreted by a budding sociopath in the basement of his dead parent's crumbling tract home, it is basic neoliberal ideology applied to circumstances that we can see playing out in real time. ..."
"... While the American response to the Coronavirus threat seems to be less than robust, there was a near instantaneous response from the Federal Reserve to a 10% decline in stock prices. ..."
"... If priorities seem misplaced, you haven't been paying attention. The statistics on suicides, divorces, drug addiction and self-destructive behavior that result from the loss of employment were understood and widely published by the early 1990s, at the peak of that era's round of mass layoffs. Creating employment insecurity was the entire point of neoliberal reforms such as outsourcing, de-skilling and contingent employment. Neoliberal theory had it that desperate workers work both longer and harder. And they die younger. ..."
"... But how likely is it that people will 'demand' too much healthcare? The starting position of Obamacare was that the American healthcare system provided half the benefit at twice the price of comparable systems. ..."
"... Milton Friedman, one of the founders of neoliberalism through the Mont Pelerin Society, produced a long career's worth of half-baked garbage economics. On the rare occasions when he wasn't helping Chilean fascists toss students out of airplanes in flight, he was pawning his infantile theories off on future Chamber of Commerce and ALEC predators. His positivism was already known to be a farce when he took it up. Here is a primer that explains why it is, and always will be, a farce. ..."
For those who aren't familiar with Albert Camus' The Plague ,
disparate lives are brought together during a plague that sweeps through an Algerian city.
Today, by way of the emergence of a lethal and highly communicable virus (Coronavirus), we --
the people of the West, have an opportunity to reconsider what we mean to one another. The
existential lesson is that through dread and angst we can choose to live, with the
responsibilities that the choice entails, or just fade away.
Through the virus, a new light is being shone on four decades of neoliberal
reorganization of political economy. The combination of widespread economic marginalization and
a lack of paid time off means that sick and highly contagious workers will have little economic
choice but to spread the virus. And the insurance company pricing mechanism intended to
dissuade people from overusing health care ('skin in the game') means that only very sick
people will 'buy' health care they can't afford.
Market provision of virus test kits, vaccines and basic sanitary aids will, in the absence
of government coercion, follow the monopolist's model of under-provision at prices that are
unaffordable for most people. The most fiscally responsible route, in the sense of assuring
that the rich don't pay taxes, is to let those who can't afford health care die. If this means
that tens of millions of people die unnecessarily, markets are a harsh taskmaster. (
3.4% mortality rate @
2X – 3X the contagion rate of the Spanish Flu @ 4 X 1918 population).
If this last part reads like (Ayn) Randian social theory as interpreted by a budding
sociopath in the basement of his dead parent's crumbling tract home, it is basic neoliberal
ideology applied to circumstances that we can see playing out in real time. According to
Ryan Grim of The Intercept, Bill Clinton eliminated the ' reasonable
pricing ' requirement for drugs made by companies that receive government funding. This has
bearing on both commercially developed Coronavirus test kits and vaccines.
Leaving aside technical difficulties that either will or won't be resolved, how would any
substantial portion of the 80% of the population that lives hand-to-mouth be effectively
quarantined when losing an income creates a cascade effect of evictions, foreclosures,
starvation, repossessions, shut-off utilities, etc.? The current system conceived and organized
to make desperate and near desperate workers labor with the minimum of pay and benefits is a
public health disaster by design.
While the American response to the Coronavirus threat seems to be less than robust,
there was a near instantaneous response from the Federal Reserve to a 10% decline in stock
prices. The same Federal Reserve that has been engineering a non-stop rise in stock prices
since Wall Street was bailed out in 2009 knows perfectly well how narrowly stock ownership is
concentrated amongst the rich -- it publishes the data. It quickly lowered the cost of
financial speculation as the cost of Coronavirus tests and a vaccine -- and the question of who
will bear them, remain indeterminate.
If priorities seem misplaced, you haven't been paying attention. The statistics on
suicides, divorces, drug addiction and self-destructive behavior that result from the loss of
employment were understood and widely published by the early 1990s, at the peak of that era's
round of mass layoffs. Creating employment insecurity was the entire point of neoliberal
reforms such as outsourcing, de-skilling and contingent employment. Neoliberal theory had it
that desperate workers work both longer and harder. And they die younger.
The brutality of the logic used by the Obama administration in constructing the ACA,
Obamacare, is worthy of exploration. The premise behind the 'skin in the game' idea is
neoliberalism 101, developed by a founder of neoliberalism, economist Milton Friedman, to
ration health care. The basic idea is that without a price attached to it, people will 'demand'
more health care than they need. That from a public health perspective, oversupplying health
care is better than undersupplying it, is ignored under the premise that public health concerns
are communistic. (Read Friedman).
But how likely is it that people will 'demand' too much healthcare? The starting
position of Obamacare was that the American healthcare system provided half the benefit at
twice the price of comparable systems. Through the 'market' pricing mechanism that
existed, the incentive was for people to avoid purchasing healthcare because it was / is wildly
overpriced. Not considered was that through geographical and specialist 'natural monopolies,'
health care providers had an incentive to undersupply health care by providing high-margin
services to the rich.
Furthermore, why would a healthcare system be considered from the perspective of
individual users? In contrast to the temporal sleight-of-hand where Obamacare 'customers' are
expected to anticipate their illnesses and buy insurance plans that cover them, the entire
premise of health insurance is that illnesses are unpredictable. Isn't the Coronavirus evidence
of this unpredictable nature? And through the nature of pandemics, it is known that some people
will get sick and other people won't. Not known is precisely who will get sick and who
won't.
While there are public health emergency provisions in Obamacare that may or may not be
invoked, why does it make sense in any case to require that people anticipate future illnesses?
Such a program isn't health care and it isn't even health insurance. It is gambling. Guess
right and you live. Guess wrong and you die. Why should we be guessing at all? Prior to
Obamacare, health insurance companies gamed the system with life and death decisions. In true
neoliberal fashion, Obamacare randomized the process as health insurers continue to game the
system.
As I understand it, the public health emergency provision in Obamacare might cover virus
testing and the cost of a vaccine if one is ever found. Great. What about care? How many
readers chose a plan that covers Coronavirus? How many days can you go without a paycheck if
you get sick or are quarantined? Who will take care of your children and for how long? How will
you pay your rent or mortgage? Who will deliver groceries to your house and how will you pay
for them? How will you make the car payment before they repossess it and how will you get to
work without it if you recover?
The rank idiocy -- and the political content, of the frame of individual 'consumers'
overusing health care quickly devolves to the fact that some large portion of the American
people can't afford to go to the doctor when they need to. Even if they can afford the direct
costs, they can't afford the indirect costs. When Obamacare was passed, the U.S. had the worst
health care outcomes among rich countries. Ten years later, the U.S. has the
worst healthcare outcomes among rich countries . And medical bankruptcies are virtually
unchanged since Obamacare was passed.
The reason for focusing on Obamacare is it is the system through which we encounter the
Coronavirus. In the narrow political sense of getting a health care bill passed, Obamacare may
or may not have been 'pragmatic.' In a public health care sense, it is a disaster decades in
the making. The problem wasn't / isn't Mr. Obama per se. It is the radical ideology behind it
that was posed as pragmatism. Mr. Obama's success was to get a bill passed -- a political
accomplishment. It wasn't to create a functioning healthcare system.
The otherworldly nature of neoliberal theory has led to a most brutal of social
philosophies. Mr. Obama later put his energy into lengthening drug company
patents to give drug companies an economic advantage provided by the government. Economist
Dean Baker has made a career out of hammering this general point home. Michael Bloomberg
benefited from government support for both technology and finance. His fortune of $16 billion
in 2009 followed stock prices higher to land him at $64.2 billion in 2020.
Donald Trump inherited a large fortune that likewise followed stock and Manhattan real
estate prices higher. Both he and Mr. Bloomberg could have put their early fortunes into
passive portfolios and received the returns that they claim to be the product of superior
intelligence and hard work. Analytically, if the variability of these fortunes tracks systemic,
rather than personal, factors, then systemic factors explain them. The same is true of most of
the great fortunes of the epoch of finance capitalism that began around 1978.
The point of merging these issues is that they represent flip sides of the neoliberal coin.
In a broad sense, neoliberalism is premised on economic Darwinism, the quasi-religious (it
isn't Darwin) idea that people land where they deserve to land in the social order. This same
idea, that systemic differences in economic outcomes are evidence of systemic causes, applies
here. However, differences in intelligence, initiative and talent don't map to systemic outcomes , meaning that
concentrated wealth isn't a reward for these.
The ignorant brutality of this system appears to be on its way to getting a reality check
through a tiny virus. Unless the Federal government figures this out really fast, most of the
bodies will be carried out of poor and working class neighborhoods like mine. Few here have
health insurance and most health care providers in the area don't take the insurance they do
have. More than a day away from work and many of my neighbors will no longer have jobs.
Evictions are a regular state of affairs in good times. There are no resources to facilitate a
larger-picture response.
Liberalism, of which neoliberalism is a cranky cousin, lives through a patina of pragmatism
until the nukes start flying or a virus hits. Getting healthcare 'consumers' to consider their
market choices follows a narrow logic up to the point where none of the choices are relevant to
a public health emergency. One I plus another I plus another I doesn't equal us. The
fundamental premise of neoliberalism, the Robinsonade I, has
always been a cynical dodge to let rich people keep their loot.
The mortality rate and contagion factor recently reported for Coronavirus (links at top)
place it above the modern benchmark of the Spanish Flu of 1918 in terms of potential lethality.
What should make people angry is how the reconfiguration of political economy intended to make
a few people really rich has put the rest of us at increased risk. These are real people's
lives and they matter.
Finally, for students of neoliberalism: there is no conflation of neoliberalism with
neoclassical economics here. Milton Friedman, one of the founders of neoliberalism through
the Mont Pelerin Society, produced a long career's worth of half-baked garbage economics. On
the rare occasions when he wasn't helping Chilean fascists toss students out of airplanes in
flight, he was pawning his infantile theories off on future Chamber of Commerce and ALEC
predators. His positivism was already known to be a farce when he took it up. Here is a primer that
explains why it is, and always will be, a farce.
Rob Urie is an artist and political economist. His book Zen Economics is
published by CounterPunch Books.
Capital spending is likely in for a prolonged slump because the efforts to contain the
coronavirus will also cause economic growth in the world's advanced economies to slow in
2020
Industries that could be taking a big hit: tourism, airlines, mass entertainment, movies,
sporting events, restaurants, retail malls. A mild recession can't be ruled out. It depends on
how widespread cases are, how long any outbreaks last, and how spooked consumers and businesses
get.
A few businesses will benefit, such as eat-at-home groceries, e-commerce delivery, downloads
of apps and livestreaming.
... ... ...
However bad the situation gets, the hit to global trade is already a given. Expect shortages
of certain goods to begin by late March or April as inventories run out, especially so for
electronics, ingredients for generic drugs and automotive parts.
It is a catalyst. But future is unpredictable. The article is too deterministic and thus
silly. Multiple scenario are possible. The one thing that is missing in many official
pronouncements now is treating the general population as adults and outlining best case and worst
case scenario.
Before onset of neoliberalism, we used to encourage people who were sick to stay home from
work, and sick days were provided,
The economic and behavioral impacts are visible by reduction of regular crowds in cultural
and commercial centers. Demographically, it does hit urban people more than rural dwellers?
It's interesting that hardly anyone is thinking about the economic consequences of 10% of
aged baby boomers checking out this year. Lots of empty homes coming on the market.
For example, can closed schools are providing "distance learning" and teachers continue to be
paid? Or will "distance learning" be off-shored to some corp. somewhere and teachers be laid
off?
This is it! The party is over. The world is now facing the gravest economic and social
downturn in Modern Times (18th century).
We are now entering a period of global crisis that will change the world for a very long
time to come. This should come as no surprise to the people who have studied history and also
read my articles for the last few years. Many others have also warned about the same thing. But
since MSM never talks about the excesses in the world or the risks, 99.9% of people are totally
unprepared for what is coming next.
... ... ...
CORONAVIRUS IS NOT THE CAUSE BUT THE CATALYST
Investors are obviously linking the stock market crashes to the Coronavirus but we must
remember that the virus is not the cause of the falls but only the catalyst. Stocks around the
world have been overvalued on many criteria for quite some time.
The majority of people today are not worried about stocks but instead about the Coronavirus.
Most of us don't understand it since authorities around the world suppress the truth when it
comes to numbers of infected and fatalities . China seems never to have told the truth about
the virus and many countries have followed suit.
The pandemic is spreading exponentially and it can take 3-4 weeks before it breaks out from
the time you are infected.
... I would not be surprised if in the end governments tell people to continue as normal
rather than to quarantine everyone. If the mortality rate is on average not more than 2%, this
is a calculated risk that the authorities are likely to take.
To totally close down countries and production, leading to shortages of food and medicine,
will probably kill more people over time than the virus itself.
FOR INVESTORS BAD NEWS IS
GOOD NEWS – UNTIL NOW
So whilst ordinary people around the world are concerned with the Coronavirus, investors are
focusing on crashing stock markets. Most people are blissfully unaware of the Dow's biggest
point fall ever last week of 4,000 points (14%) or similar falls in other world markets.
Investors love bad news like lower earnings or poor economic figures since this leads to
more economic stimulus. So until a week ago, markets loved the fact that central banks around
the world have embarked on what will be the biggest money printing exercise in history.
Investors are not concerned about the reasons for the massive liquidity injections which are
due to problems in the world's financial system. Instead, more money printing means more credit
and more cash availability for stock market investors. So bad news for the economy has created
ever higher stocks reaching the sky.
Clearly, central banks will soon accelerate money printing and the ones that can, like the
US, will lower rates. The 1/2% rate cut by the Fed on Tuesday seems like panic action. Since
the effects in the US of the Coronavirus have so far been minor, the problems are clearly in
the financial system. Lower rates, more repos, more QE etc. There are clearly major problems in
the system.
The rate cut combined with money printing might create quick bounces in stocks, sucking
everyone in. But this time money printing will only have a very brief effect. Because any
correction up will be short lived and the subsequent big fall will be devastating. So this is
definitely not the time to buy the dips. For anyone in the stock market, much better to get out
on the bounces.
After a string of deaths, some heart-stopping plunges in the stock market and an emergency
rate cut by the Federal Reserve, there is reason to be concerned about the ultimate economic
impact of the coronavirus in the
United States.
The first place to look for answers is China, where the virus has spread most widely. The
news has been grim with
deaths, rolling quarantines and the
economy's seeming to flat line , though the number of new cases has begun to
fall.
Advanced economies like the United States are hardly immune to these effects. To the
contrary, a broad outbreak of the disease in them could be even worse for their economies than
in China. That is because face-to-face service industries -- the kind of businesses that go
into a tailspin when fearful people withdraw from one another -- tend to dominate economies in
high-income countries more than they do in China. If people stay home from school, stop
traveling and don't go to sporting events, the gym or the dentist, the economic consequence
would be worse.
In a sense, this is the economic equivalent of the virus's varied health effects. Just as
the disease poses a particular threat to older patients, it could be especially dangerous for
more mature economies.
This is not to minimize the indiscriminate and widespread
damage that the disease has caused by disrupting the global supply chain. With shortages of
everything from
auto parts to
generic medicines and production delays in things like iPhones and
Diet
Coke , a great deal of pain is coming from the closing of Chinese factories. That
proliferating damage has central banks and financial analysts talking about a global
recession in the coming months.
Nor is it to discount the possibility that the United States will be spared the worst
effects. Scientific and public health efforts might limit the spread of the virus or quickly
find a treatment or vaccine. The warmer weather of summer might slow the spread of the
coronavirus as it usually does with the seasonal flu. Many things could prevent an outbreak as
large as the one in China.
But it is to say that an equivalent outbreak in the United States might easily have a worse
economic impact.
As a baseline, several factors work against the United States. China's authoritarian
government can quarantine entire cities or order people off the streets in a way that would be
hard to imagine in America, presumably giving China an advantage in slowing the spread of the
disease. In addition, a large share of American workers lack paid sick days and
millions lack health care coverage, so people may be less likely to stay home or to get
proper medical care. And 41 percent of China's population lives outside urban areas , more than twice the
share in the United States. Diseases generally spread faster in urban areas.
Beyond those issues, however, is a fundamental difference in economic structure: When people
pull back from interacting with others because of their fear of disease, the things they stop
doing will frequently affect much bigger industries in the United States.
Consider travel. The average American takes three flights a year; the average Chinese person
less than half a flight. And the epidemiological disaster of the Diamond Princess has persuaded
many people to hold off on cruises. That cruise ship stigma alone potentially affects
about 3.5 percent of the United States, which has about 11.5 million passengers each year,
compared with only 0.17 percent of China, which has about 2.3 million passengers.
People may stop attending American sporting events. There have even been calls for the
N.C.A.A. to play its March Madness college basketball tournament
without an audience . But sports is a huge
business in the United States . People
spend upward of 10 times as much on sporting events as they do in China .
And if 60 million Americans stop spending
$19 billion a year on gyms, that would be a much a bigger deal than if the 6.6 million gym
members
in China stopped spending the $6 billion they devote to gyms now.
That's just a start. Who wants to go to the dentist or the hospital during an outbreak if a
visit isn't necessary? Yet health spending is 17 percent of the U.S. economy -- more than triple the
proportion spent in China.
Of course, not every service sector is so much larger than in China. Retail and restaurants,
for example, have comparable shares of gross domestic product in both countries.
But over all, the United States is substantially more reliant on services than China is.
And, on the flip side, agriculture , a sector not noted for day-to-day
social interaction and so potentially less harmed by social withdrawal, is a 10 times larger
share of
China's economy than it is in the United States.
So for all the talk about the global
"supply shock" set off by the coronavirus outbreak and its impact on supply chains, we may
have more to fear from an old-fashioned "demand shock" that emerges when everyone simply stays
home. A major coronavirus epidemic in the United States might be like a big snowstorm that
shuts down most economic activity and social interaction only until the snow is cleared away.
But the coronavirus could be a " Snowmaggedon -style storm" that hits
the whole country and lasts for months.
So go wash your hands for the full 20 seconds. And show some more sympathy for the folks
quarantined in China and elsewhere. Because if it spreads rapidly in the United States, it
could be a heck of a lot worse.
Austan Goolsbee, a professor of economics at the University of Chicago's Booth School
of Business, was an adviser to President Barack Obama. Follow him on Twitter:
@austan_goolsbee
Markets aren't prepared for how severe the fallout of the global spread of coronavirus
could get and the turmoil has only just started, according to the manager of a peer-beating
fund.
The stark warning comes from Allianz Global Investors' portfolio manager Mike Riddell, who
oversees $4.7 billion for the company. "The speed of the market repricing has obviously been
dramatic, however markets have only gone from pricing in no risk of anything to a moderate
risk," Riddell said in a phone interview. "Where we think markets can still move is in
volatility."
Riddell's Strategic Bond Fund, which he manages with Kacper Brzezniak, outperformed 98% of
its peers in the past month, when markets grappled with record-low bond yields, a plunge in
stock markets, spiking currency market volatility and surprise rate cuts from central banks,
including an emergency cut by the U.S. Federal Reserve. Bonds from the U.S. and Germany rallied
on Friday with the 30-year and 10-year yields sliding to a fresh record lows.
The London-based Allianz manager has been bracing for a wobble in markets for a few months
now and thinks the recent repricing is still too mild. He is using options to bet on more
currency swings and also has positioned for short-term U.S. yields to lead declines as he sees
a significant chance the Fed could slash interest rates close to zero.
"If global data really tanks in the coming weeks and months, investors will realize that
central banks can't cure coronaviruses and markets such as currencies and corporate bonds are
still ripe for a correction," Riddell said.
Anon10 says: Show Comment
February 25, 2020 at 9:11 pm GMT 100 Words
@awry From a cui bono perspective, the US conspiracy theory is more plausible than
Limbaugh's China conspiracy theory.
Slowing down China's economic growth and reducing its international trade is in the US
geopolitical interest. That is the whole point of the tariffs, trade war, sanctions on Huawei,
and push to move supply chains out of China.
Well, personally I think the jury is still out whether East Asians are far more vulnerable to
the new coronavirus than whites. The outbreaks in Iran and Italy shift the likelihood
somewhat, but it's still early. Personally, I think the evidence from that cruise ship might
be most definitive.
But if whites are indeed as vulnerable, I'd think that the West might be hit much harder
than China. After all, can we possibly imagine the sort of national lock-down that China has
implemented, apparently with considerable success?
And I'm still very suspicious about the circumstances of the outbreak. It hit China
just before Lunar New Year, the absolutely worst possible time, and the epicenter was Wuhan,
a key transport hub. It really seems an *astonishing* coincidence that 300 American military
servicemen had been visiting Wuhan just prior to the outbreak, at a peak of international
tension.
How would Americans react if 300 PRC officers had visited Chicago, and immediately
afterwards, a deadly new plague broke out in that city, with a major risk of spreading
throughout the country?
Isn't it also rather suspicious that Iran has been hit so hard? So the two countries in
the world most subject to current American hostility just tend to be especially "unlucky"
As for "soft power," I suspect it largely reflects a heavily-lagging indicator of
economic/political power, only somewhat shifted by considerations of pop-culture. If China
continues on its economic/political trajectory, I think it will have plenty of soft power
30-40 years down the road. And if American society/economy collapses, so soon afterward will
our soft power, ignorant rap-stars and basketball players notwithstanding.
Fun theory but it would make more sense if paired with some theory of how the US took
secret steps to protect its own population, e.g., slipped a vaccine in the drinking water.
But it is hard to think of a plausible theory of that sort.
Well, there were some early indications that the virus was especially deadly towards
Chinese and perhaps East Asians rather than whites, though the picture is currently much more
cloudy. But you're looking at things entirely the wrong way
Under normal circumstances, I would be *extremely* skeptical of a possible US biowarfare
attack against China since it would be such a totally insane thing to do. But just last
month, we assassinated a top Iranian leader, and much of everything our government does is
totally insane. So an insane biowarfare attack would just fit into this larger pattern.
Also, consider that a mysterious Swine Flu epidemic suddenly appeared in China during
2019, and destroyed 40% of its primary domestic meat source, certainly a highly suspicious
coincidence.
I'd very strongly recommend that people read this very lengthy article we published a week
ago, which provides a vast amount of background information on the issue. The author is a
highly eccentric American ex-pat living in China, and his own views should be given little
weight. But he provides an enormous wealth of useful information and links, totally excluded
from our worthless MSM:
300 American military servicemen had been visiting Wuhan just prior to the outbreak,
at a peak of international tension.
300 U.S. servicemen of Chinese descent visiting their parents during a National holiday
when hundreds of thousands are travelling? That would be typical.
No, of course not. The Military World Games were being held in Wuhan, and 300 American
servicemen participated. The Wuhan viral outbreak occurred *immediately* afterwards, which
seems extremely suspicious timing to me. Naturally, none of this has been reported in our
totally worthless MSM:
Again, how would America react if 300 Chinese servicemen visited Dallas for an
international event, and immediately afterwards a deadly -- and rather mysterious -- viral
outbreak suddenly occurred in that city
From the earlier days, it has been estimated – and repeatedly confirmed –
that COVID-19 has only a 10% detection rate
mortality with ventilators, drugs, doctors, etc. seems to be ~1% versus 2-3% for people
left to their own devices
If Covid-19 truly has a detection rate of only 10%, then the actual mortality rate is much
lower than what is currently being reported, down to 0.1% with medical treatment versus
0.2-0.3% to people left to their own devices. For comparison, 0.05% of people catching the
flu this year have died. The pandemic of 1918 had a 2.5% mortality.
There seems to be something unusual about the Covid-19 infections in Wuhan that are not
borne out in other areas. There must have been something going on beyond only
person-to-person contact. The virus may have been introduced in an artificial way, perhaps
sprayed as an aerosol over a large area or spread through some other means that would have
had a comparable effect. Outside of Hubei Province, it has proven much easier to control the
disease, and there is a far lower mortality rate.
"The Military World Games were being held in Wuhan, and 300 American servicemen
participated."
Just to add more detail. Even with one of the largest contingent among all participating
countries, an Olympic game giant like US didn't manage to get a single gold medal in Wuhan,
falling behind countries like Tunisia and Namibia. Wonder why?
Isn't it also rather suspicious that Iran has been hit so hard? So the two countries in
the world most subject to current American hostility just tend to be especially
"unlucky"
Iran's largest trade partner is China. There's an outbreak in Japan, South Korea, and
Italy. There'll be an outbreak in the rest of Europe and the USA shortly. I don't think this
is very meaningful, next year no-one will remember which country got it the second time.
@HyperboreanFor an American bioweapon able to paralyse China, the alleged mastermind
appears rather incompetent.
No one suggested that the USA is competent.
The Neocons killed Soleimani. When Trump found out, he claimed it as his own. The
perpetrators had no idea that this catalyst would lead to them being eventually expelled from
Syria and Iraq.
Last week, a US convoy in Syria had to be rescued from the locals by the Russians. But you
won't find that in your lying MSM.
@Half-Jap While technically a true statement, it's more of a semantic difference.
Pneumonia is a life threatening condition along with the associated opportunistic infections.
And it's more or less directly caused by influenza. If someone pushed another person off a
cliff, you would say that it was murder, rather than pointing out that the fundamental force
of gravity and weakness of the falling man's bones was what did him in.
For a more medical example, it's similar to the case of HIV/AIDS. By itself, HIV is a
virus that gradually wipes out the immune system over a decade or so. In all cases, it's
either an opportunistic infection or cancer that actually shuts the body down permanently.
You can trace the causes as far back as you wish, but the HIV virus is the first pathogen
entering the body that ultimately results in its demise.
Well, I'm obviously not suggesting that *most* of the 300 military personnel visiting
Wuhan just prior to the outbreak were involved. But suppose just 2-3 US "ringers" were
included to release the virus during their spare time, perhaps during their visits to the
local "wet market." Again, the timing seems *extremely* suspicious.
Leaving a trail back to yourself is incredibly bad fieldcraft. Using soldiers that are
almost sure to be monitored is too likely to be caught in the act. Without some additional
facts, the timing is simple coincidence not suspicious.
____
Also, Trump just won on trade. Creating a trade problem immediately before an election
makes no sense for the U.S. administration.
There is no motive unless a 3rd party is conspiring against both the U.S. And China
trying to start a war.
well, they might, but not because they're smarter. they are so very clearly
technologically inferior and societally backwards. they're smart enough to be dangerous.
that's about it.
China has already demonstrated a much better response than most governments in its ability
to contain the virus, so your rambles are quite misplaced. The US response, for example, is
for the CDC is stumble around in confusion.
While South Korea has run more than 35,000 coronavirus tests, the United States has
tested only 426 people, not including people who returned on evacuation flights. Only about
a dozen state and local laboratories can now run tests outside of the Centers for Disease
Control and Prevention in Atlanta because the CDC kits sent out nationwide earlier this
month included a faulty component.
In the end, China might end up demonstrating if anything, that it has that is fully
capable of acting decisively and effectively in a disaster in comparison to rivals.
The U.S. markets' deep-in-the-red opening Friday after the release of a very strong
employment report form the Bureau of Labor Statistics confirms the feelings I have had for the
past two weeks. Long-time market watchers will know that bear markets are susceptible to "bear
market bounces" and in fact we have had two of those this week. The yield on the 10-year U.S.
Treasury Note is 0.707%, and the 3-month UST is yielding an astounding 0.42%, well below the
current fed funds target range of 1.00% to 1.25%.
The next direction for a more volatile market
growing terrified about the economic fallout from the coronavirus is anyone's guess, which
probably explains why investors are so nervous right now.
Talk to anyone on the Street and the views on the market's short-term direction vary widely.
They range from those that think we are witnessing a bottoming process underway to those that
believe that now is the ultimate time to buy with the major indices some 10% off the highs
(though numerous individual stocks are down way more).
And of course there is an expanding camp of strategists that believe the next move is
sharply lower in large part because coronavirus will crush global economic activity. To this
group, the
Federal Reserve's emergency rate cut this week is not the equivalent of a cure for
coronavirus and therefore isn't a savior to stocks.
For Hercules Investment CEO James McDonald, the threat of a U.S. recession is by no means
priced into stocks. And investors, said McDonald, would be wise to realize that and position
their portfolios accordingly.
"A recession is imminent, and it's OK," McDonald said on Yahoo Finance's The First Trade . "A 30% correction sounds
scary right, but the Dow, S&P 500 and the Nasdaq rallied to nearly 30% in just one year
last year. If you look at a 35% to 45% trim from here, it sounds bad but it just takes us back
first quarter 2016. Understand that the numbers are relative, it is a good time to anticipate a
major pullback and then get back in the market."
"I think we test the low of the original [low] and then go lower than that. Understand that
a 30%, 40%, 50% pullback in this market only means only we are set back two or three years.
It's not a panic situation," McDonald added.
It's hard to remain calm
While panic selling hasn't begun to grip the markets, one can't be encouraged by the action
this week.
The Dow Jones Industrial Average tanked
more than 600 points on Friday (despite a much stronger than expected February
employment report ...) as COVID-19 infections topped 100,000 globally. Company specific
comments on the coronavirus also continue to weigh on sentiment. Starbucks warned Thursday
evening that its fiscal second quarter earnings would be drilled by 15 cents to 18 cents a
share owing to closed stores in China. That follows Southwest's warning that canceled flights
and routes would hit first quarter sales by $200 million to $300 million.
Not everyone is on board with McDonald's straight shooting on the markets.
"We do not recommend switching away from a balanced allocation at this stage. Policy makers
have clearly entered the race, which should prevent -- for now -- an extended bear market on
risk assets," said SocGen strategist Alain Bokobza.
As we said, the market's next move...is truly anyone's guess. Golfer
3 hours ago Not just stocks; real estate due for a major correction. DC
3 hours ago If your on the verge of retirement, get out of the market. There is no time
to make up a 30%, 40%, 50% drop. I'm out, and will remain out until I feel better about getting
back in. It's called being pro-active. titanbabe54
3 hours ago 30% to 50% correction ?? Because people are panicked over the flu ? Good
grief people, this is a gift of a buying opportunity, especially in the housing market. When
warm weather hits, this flu will dissipate. The media will try to keep the panic going. It's
their last hope to damage the Trumpster. That Dude
3 hours ago I am in the medical field. I AM worried about the elderly, the
immunocompromised, those mid to older folks with pre-existing conditions that will make it
difficult for them to fight off ( eg., diabetes, asthma, COPD, etc.) because of the PANIC you
all are causing. Keep CALM and wash your hands and above all---tend to your sneezes and coughs
like your Momma taught you!!
China has already demonstrated a much better response than most governments in its
ability to contain the virus, so your rambles are quite misplaced. The US response, for
example, is for the CDC is stumble around in confusion .I
n the end, China might end up demonstrating if anything, that it has that is fully
capable of acting decisively and effectively in a disaster in comparison to rivals.
Consider a particularly ironic outcome of this situation, not particularly likely but
certainly possible
Everyone knows that America's ruling elites are criminal, crazy, and also extremely
incompetent.
So perhaps the coronavirus outbreak was indeed a deliberate biowarfare attack against
China, hitting that nation just before Lunar New Year, the worst possible time to produce a
permanent nationwide pandemic. However, the PRC responded with remarkable speed and
efficiency, implementing by far the largest quarantine in human history, and the deadly
disease now seems to be in decline there.
Meanwhile, the disease naturally leaks back into the US, and despite all the advance
warning, our totally incompetent government mismanages the situation, producing a huge
national health disaster, and the collapse of our economy and decrepit political system.
As I said, not particularly likely, but certainly a very fitting end to the American
Empire
@Ron Unz I think the whole thing is somewhat overstated
I think all the empirical evidence showcases that the Wuhan government bungled the
response immensely, hiding information of the Coronavirus until it was too late.
But virtually all the other local and the national Chinese governments did an exceptional
job with containing the virus, especially Xi Jinping's leadership. I think college students
are going to study the rapid response of the National Government in future textbooks on
crisis mamagement. Therefore the non-Wuhan areas had low levels of coronavirus.
In addition, outside of Iran, which isn't really that competent, the only areas to have a
substantial number of coronavirus cases are areas with a massive legal/illegal Chinese
population.
America has some 50 cases, but has the largest Chinese
diaspora of 6 million Chinese and the largest in overall travel with China. Now maybe the
real number of cases is substantially higher, but I really doubt that. Given the absolute
hammering South Korea, Italy, and Japan are having, America seems pretty good, given its
demographics.
I can't predict what is going to happen next, but I think countries like India and
Bangladesh are going to be annihilated by this virus.
Also, the bioweapon meme seems kinda dumb to me. America's East Asian population is vastly
overrepresented in our Technology and Bureaucracy fields, and are very responsible for even
our Deep State. They hold a *huge* chunk of America on our shoulders, including the federal
gov. If such a thing was deliberate by America, wouldn't that destroy the Federal Government
as well? Wouldn't some Chinese/Korean/Japanese/Vietnamese in the higher up know what was
going on and spill the truth? Even our bioweapons industry is probably disproportionately
East Asian, wouldn't some East Asian realize their work is being used to kill someone? If
America was releasing a bioweapon to kill your Chinese grandmother, you would probably speak
up.
Then again, the Military Games coincidence is absolutely fascinating, and it is amazing
the media does not pick up on that. Did someone check if any of the other country
participants got infected as well? If so, then I think it settles it
I call BS Corona is going to kill a few thousands at most . Every time someone catches a cold
the media says the sky is falling . SARS OMG a catastrophe and what ? A thousand deaths . And
what if Corona does kill millions ? With 7,000,000,000 people what are millions ? 10,000,000
<1% . Corona is clickbait that the Americans will use to advance their program of
advancing chaos to make it dangerous to disobey . Personally I hope Corona kills A billion+ .
Shit I'll volunteer to be one .
As far as I know, no one here has mentioned that because of the
globalization drive by Clinton, Bush, and Obama, 85% of the medicines
used in the United States are manufactured in China. Even U.S. troops
depend on medicines from China! China could bring the entire health
system in the U.S. to a stop in a matter of months. This is what our inept
elites have done to America – they gave away the shop. People are beginning
to realize that manufacturing our own medicines is a matter of national
security but it'll take years to bring the factories back to the U.S. So
much for globalization.
Rod Dreher's blog IMHO is the best source for quick info on the coronavirus
because he is in touch with American M.D.'s who are married to women
from China who in turn are in contact with relatives at home and the Chinese
media. Of course, Rod himself can be hysterical at times but, apparently,
that's what it takes to have a successful blog. The M.D.'s are reporting
that the U.S. is already beginning to run out of certain medications, and
recommend stocking up on the basic necessities, i.e., recommend assuming
the mental framework of the survivalists – have plenty of canned goods, etc
and refill your prescriptions ASAP. This is what many people here seem to
forget – the coronavirus's indirect effects due to having no access to medications
may be much worse than the direct pathogenic effects.
The term Globalism has been around from at least the 1960's but its origins come from Cecil
Rhodes Round Tables which were set up around 1900 as a mechanism for Rhodes and his allies from
the British and South African Oligarchs to take over the world. Globalism is another term for
Neoliberalism, which is another term for Corporatism. It is principally pushed by Fake Liberals
who pretend to be lefties, but are actually Corporatists or Corporate Fascists.
Globalism
The aim of Globalism is to transfer all power and wealth from ordinary people to a handful
of Banking Elites, Oligarchs and major Corporate CEO's. The ultimate aim is to set up an anti
democratic, authoritarian one world government where ordinary people are effectively serfs and
have no say, in a system of Neo-Feudalism. We are very nearly already there.
This is being constantly carried out by transferring ever increasing powers from elected
local governments to massive governmental Super States, such as the EU or the Federal
government in Washington DC.
A great example of a Globalist policy was Obama's Corporate Power Grab TPP and TTIP,
Corporate protectionist deals, which transferred power from elected legislatures to
transnational tribunals staffed by Corporate lawyers acting as Judge and Jury.
"Neo-libs" are NOT Centrists. They are extremist supporters of Perpetual War, Corruption,
Corporatism, Authoritarianism & the Transfer of all wealth & power from ordinary ppl to
the Oligarchs & CEOs in the top 0.01%.
With the release of the March Beige Book, we find that as one
bogeyman departs, another arrives.
Nearly two years after Beige Book respondents first mentioned tariffs as an economic concern
in April 2018, the number of instances in which tariffs were discussed was just 11 in March -
the lowest since the term first emerged. However, as tariffs faded from the public's
consciousness, they were replaced with fears about the coronavirus, a term which was never
before used in the beige book and in March saw no less than 48 separate mentions!
Before we look at the detailed contents of the latest Beige Book, here is a quick recap of
how the Fed sees the 3 key core
pillar of the US economy - overall economic activity, employment and wages, and prices - at
this moment.
Overall Economic Activity:
Economic activity expanded at a modest to moderate rate over the past several weeks,
according to the majority of Federal Reserve Districts. The St. Louis and Kansas City
Districts, however, reported no change during this period. And while manufacturing activity
expanded in most parts of the country, here is where we got the first mention of supply
chain, to wit: " there were indications that the coronavirus was negatively impacting travel
and tourism in the U.S. Manufacturing activity expanded in most parts of the country;
however, some supply chain delays were reported as a result of the coronavirus and several
Districts said that producers feared further disruptions in the coming weeks. "
While consumer spending generally picked up (if not for long now that millions of
Americans will avoid all open areas), growth was uneven across the nation, including mixed
reports of auto sales. Looking ahead, the outlook for the near-term was mostly for modest
growth with the coronavirus and the upcoming presidential election cited as potential
risks
Employment and Wages:
Employment increased at a slight to moderate pace, overall, with hiring constrained by a
tight labor market, and "insufficient labor lowered growth for many firms and led to delays
in construction projects." Several employers changed from temporary to permanent workers in
order to attract talent, and firms made efforts to retain workers such as keeping seasonal
workers on staff in the off-season.
While employment grew across most sectors, manufacturers, retailers, and transportation
companies reported lower demand for labor in some Districts. That said, wages grew at a
modest to moderate rate in most Districts, similar to last period, and contacts expected wage
growth to continue in this range. Companies also spent more on benefits, as the cost of
benefits rose and as employers expanded benefits to attract and retain workers.
Prices:
Most Districts reported modest growth in selling prices, as well as in nonlabor input
prices. Here was one of the rare mentions of the recent trade deal: "some firms, particularly
manufacturers, were optimistic that the Phase One trade deal with China would reduce goods
prices, but some still struggled with tariffs and were concerned about how the coronavirus
might affect prices."
Meanwhile, oil and gas prices decreased across the country, which was largely attributed
to weak demand from China because of the coronavirus. Retail prices were up in much of the
country although some retailers had lower costs due to improved trade conditions, while
agriculture price changes varied.
Focusing exclusively on the coronavirus case, here is how the global pandemic is impacting
business, so much so apparently that the Fed decided to cut rates by an emergency 50bps
yesterday to offset the aftereffects of the disease:
Most manufacturers experienced revenue increases ranging from mid single-digit
percentages to more than 20 percent, but two respondents cited revenue declines, both
attributed in part to disruptions related to the coronavirus outbreak in China.
Outlooks continued to be positive, with the coronavirus and the presidential election
cited as risk factors.
One retailer noted that their inventory levels were impacted by the coronavirus in China,
which slowed production at some manufacturing plants.
A textile manufacturer reported flat sales, and two firms, in advanced sensors and
chemicals, pointed to disruptions related to uncertainty and supply chain challenges from the
coronavirus as factors leading to their slower 2020 start.
Although the retail sector is expected to see further weakness and downside macroeconomic
risks were cited in relation to the coronavirus outbreak and the presidential election.
One manufacturing contact noted problems with supply disruptions and shipment delays
related to the coronavirus.
A few New York contacts reported that the coronavirus has deterred visitors, though New
York City hotels have continued to report good business.
The share of firms reporting increased revenues and new orders rose, and the share
reporting decreases in both measures fell significantly. The coronavirus has entered the list
of concerns, which still includes tariffs and tight labor markets
Most banking contacts were optimistic about the overall health of the U.S. economy going
forward but expressed concerns over the potential impact of the coronavirus .
And one amusing twist: according to the Fed, in the Chicago district "contacts expressed
frustration" that Chinese purchases of agricultural goods hadn't happened after Phase One trade
deal "and were concerned that the coronavirus outbreak would be used as an excuse for missing
future trade targets."
Of course, this is precisely what China is hoping to do.
That said, with the Fed having slashed rates in response to the coronavirus panic, it is
only logical that Fed contacts across the nation would be freaking out about the pandemic.
Finally, looking at some choice anecdotes from the various the Fed regions, we find the
following picture of the US economy:
Boston: "Two firms, in advanced sensors and chemicals, pointed to disruptions related to
uncertainty and supply chain challenges from the coronavirus as factors leading to their
slower 2020 start. Seven of ten manufacturers did not mention disruptions from the virus to
date."
New York: "Tourism activity was mixed. A few contacts reported that the coronavirus has
deterred visitors, though New York City hotels have continued to report good business."
Philadelphia: "Inquiries and orders to source parts domestically were increasing because
of tariff uncertainty and are continuing because of the coronavirus. Retailers noted no
supply disruptions because of the coronavirus."
Cleveland: "Transportation firms expressed concern about the potential for supply-chain
bottlenecks as a result of COVID-19. The virus aside, transportation firms expect conditions
to improve slightly in the near future as rising consumer spending leads to increases of
merchandise shipments."
Richmond: "Sales of both new and used autos were strong, although dealers expressed
uncertainty from elections and the coronavirus. In the District of Columbia, some groups
canceled travels because of the coronavirus."
Atlanta: "Due to the coronavirus, cancelled flights to China have reduced air cargo
capacity significantly, which is expected to negatively affect first quarter revenues."
Chicago: "Some manufacturing contacts reported low inventories of inputs produced in
China due to disruptions from the coronavirus outbreak; while most said the impact had been
minimal so far, many expected a larger effect if the disruptions continued much longer."
St. Louis: "Contacts were uncertain about the impact of coronavirus on their business; no
contacts reported a significant impact, but some have experienced travel and shipment
delays."
Minneapolis: " Ice conditions have been less favorable this season in Minnesota and
Wisconsin, cutting into spending from fishermen and snowmobilers in areas where trails cross
lakes."
Kansas City: "After declining for several months, manufacturing activity appeared to be
stabilizing with a slight uptick in activity in February, despite nearly half of firms noting
some negative effect from the coronavirus spread."
Dallas: "Overall retail outlooks weakened slightly, with some contacts voicing concern
over the coronavirus and its impact on supply chains and overall demand. A railroad contact
voiced concern that the coronavirus could reduce shipments from China."
San Francisco: "The COVID-19 outbreak led to decreased aircraft demand from China and
Southeast Asia, with one supplier reporting no orders received in January. Solar energy
equipment manufacturers also experienced delayed order fulfillment due to supply chain
disruptions related to the COVID-19 outbreak."
You'd
think people would be used to it by now. Every couple of years the world is thrust into
hysteria by the latest virus that is threatening to wipe out a significant portion of the
population. Whether it's SARS, Dengue, Ebola, Swine Flu or the Coronavirus, fear becomes the
default emotion while States and their confederate agencies appear do everything they can to
stoke the emotion. The press appears to almost celebrate such panics because the population
flocks to their reports in anticipation they will deliver them the information they need to
survive. One wonders why people still trust the media with their history of getting stories
wrong.
It is common among individuals to see the reports of a "super-flu" spreading and default to
the most debilitating of emotions -- especially when it comes to liberty -- that being fear.
But most people don't go further and ask the question; "What exactly are people afraid of?" Is
it death? Of course, that Is mankind's greatest anxiety, especially for those who have
children. Is it civil unrest? Could the threat of mass illnesses shutting down industries,
thereby making certain items of necessity scarce, cause people to loot not only stores, but
their neighbor? Or could it be another fear?
Most Americans feel the dread in knowing that getting sick and not being able to work for an
extended period of time can put them out on the street. There are a couple stats that should be
looked at, as well as a factor that some people don't know about, and one most don't want to
hear.
The Ratio of Work to 'Thriving'
A formula often overlooked when examing your personal economy is the ratio of "work to
thriving." How many weeks of the year do you need to work to pay for the basics? In a February
27, 2020 CBS article
, Aimee Picchi writes, "The typical male worker must now work 53 weeks -- or more than a year
-- to make enough to cover what American Compass Executive Director Oren Cass calls the annual
"cost of thriving," the earnings required to pay of a basket of essentials such as health care
and housing. By comparison, in 1985 that same typical employee needed to work 30 weeks to cover
those same costs, found a recent analysis from American Compass, a newly formed conservative
economic think tank."
When it comes to female workers the number is even more alarming
, "Women these days need about 66 weeks -- or 13 more weeks than men -- to afford the same
basket of basics, given that they on average earn less than men. But like the typical male
worker, they've also lost ground since 1985, when the average female employee could cover her
basics after 45 weeks of income."
Many people are familiar with the term "cost of living," but the "cost of thriving" would be
a better gauge to follow considering American culture. Cass explains," "The cost of living is
the standard measure that gets talked about a lot, but there is a difference between living and
thriving thriving implies a richer conception of what we believe we are achieving, rather than
just living."
Picchi notes, "The Consumer Price Index -- a standard measure of inflation -- focuses on the
cost of food, clothing, housing and other basics that families require. But that doesn't
necessarily reflect the challenges of paying for things you need to flourish in American
society today, such as the ever-rising cost of keeping a roof over your head or going to
college." Picchi explains the criteria for the cost of thriving index, "Instead of using a
broad range of basics, the Cost of Thriving Index focuses on four components: the cost of a
three-bedroom house, health insurance for a family, one semester at a public college and the
expense of operating a car."
"Those costs have become "difficult for a household budget to accommodate," Cass said."
One Paycheck Away
When you take into consideration that most people are one paycheck away from homelessness,
it's easy to understand why many Americans have taken to advocating for an expansive
Scandinavian-style welfare State. In January of 2019, Forbes writer Zack Friedman
wrote , "according to a 2017 survey, CareerBuilder, a leading job site, found some
startling statistics related to debt, budgeting and making ends meet;
Nearly one in 10 workers making $100,000+ live paycheck to paycheck
More than 1 in 4 workers do not set aside any savings each month
Nearly 3 in 4 workers say they are in debt – and more than half think they
always will be
More than half of minimum wage workers say they have to work more than one job to make
ends meet
28% of workers making $50,000-$99,999 usually or always live paycheck to paycheck, and
70% are in debt
The survey also found that 32% of the nearly 3,500 full-time workers surveyed use a budget
and only 56% save $100 or less a month.
At this point some may assume that this article is only about looking to external factors to
find fault with. Yes, they exist, but this is specifically about two factors: one that the
individual has control of, and another that no president or politician has been able to solve
in the last century even if they wanted to.
The Dreaded Federal Reserve System
The negative implications of having a government controlled central bank are too numerous to
list in an article, but one of them is that your spending power is diminished. As Henry Hazlitt
explained in his 1951 Newsweek column (reprinted at Mises.org), Inflation for Beginners ;
"When the supply of money is increased, people have more money to offer for goods. If the
supply of goods does not increase -- or does not increase as much as the supply of money --
then the prices of goods will go up. Each individual dollar becomes less valuable because there
are more dollars. Therefore, more of them will be offered against, say, a pair of shoes or a
hundred bushels of wheat than before. A "price" is an exchange ratio between a dollar and a
unit of goods. When people have more dollars, they value each dollar less. Goods then rise in
price, not because goods are scarcer than before, but because dollars are more
abundant."
Since
1991 the supply of U.S. dollars has grown beyond what most people realize. According to the
Federal Reserve bank of St. Louis, in January of 1991 there were approximately 283 billion
dollars in circulation. As the 90s progressed and the government instituted the blockade in
Iraq, the Kosovo conflicts and various skirmishes, by November 2000, that number climbs to 576
billion, more than doubling.
Now we come to post 9/11. On September 12, 2001, the money supply was at 613 billion. On
March 19th, 2003, dollars in circulation were at 683 billion. Jumping to the start of the Iraqi
surge in January 2007, we are now at 801 billion.
Fast forward to soon after the 2008 financial crisis and the picture gets bleaker. What has
come to be known as QE1 was started on 11/26/08. It began with the Federal Reserve (FED) buying
600 billion in mortgage backed securities. By its end in June of 2010, the FED raised the money
supply from just under a trillion dollars to 2.1 trillion. QE2 lasted seven months between
November 2010 and June 2011. Starting with 2 trillion in circulation, it was raised to 2.6
trillion. Less than QE1, but still a bigger jump than was seen all through the 1990s and most
of the way through the 2000s. QE3 was implemented in September of 2012. By the end of 2013 the
money supply had been increased to 3.6 trillion dollars. On 9/11/01 the money supply was at 613
billion dollars. Twelve years later, because of preemptive wars and government interference in
the market, the money supply was increased by 250%.
What does this look like in the real-world using home prices as an example? In 2017, CNBC
reported
, "If you want to buy a house this year, you may well be paying around $199,200, the median
price for a home in the U.S., according to Zillow." Compare that coming forward from the start
of World War 2, "In 1940, the median home value in the U.S. was just $2,938. In 1980, it was
$47,200, and by 2000, it had risen to $119,600. Even adjusted for inflation, the median home
price in 1940 would only have been $30,600 in 2000 dollars, according to data from the U.S.
Census."
No one would argue that homes have in fact increased in value. Atlanta added 75,000 to their
population in 2018 alone. If the supply of housing stays static, or doesn't keep up with the
added numbers, prices will increase. This is common in most major metro areas. But the increase
in the money supply has caused prices to skyrocket beyond what the law of "supply and demand"
would dictate.
Take Some Responsibility
When it comes to this part of the discussion the reader may start to bristle. Setting aside
for a moment the facts laid out about the Federal Reserve System, everyone knows someone who is
more prepared than most. Many people know the "prepper" who has 6-months' worth of food
stashed. How many people know the person who has 6-months' worth of income put aside to cover
their bills in case of emergency?
Sure, the Federal Reserve can be blamed for causing the increase in prices in essentials due
to their policies, but is that really an excuse? In 2016, the average American was carrying
$16,061 in credit card debt alone. Assuming an 18.9% interest rate, paying $640 per month, it
would take 15
years and 4 months to pay off that debt. And that's taking into account no further charges
being made.
The simple fact is that most people, even libertarians who know the system is rigged, live
beyond their means. When you add up a mortgage or rental payment, a couple car payments, money
shelled out for the 2.4 kids and the aforementioned credit card payments and even smart people
are a couple paychecks from disaster.
Using the scare of the Coronavirus an example, it is easy to see that not only is the fear
of death a motivating factor when it comes to the inevitable panic associated with a potential
"pandemic," but even the fear of losing a few weeks at work can have people on edge. As
discussed, there are barriers to keep one from being secure in their possessions that are
beyond their control, but there are also common-sense ways to combat obstacles even as great as
a government-rigged money system. Hopefully people will see fit to prepare for such setbacks in
the future as history has shown that this will not be the last impending "catastrophe" to
derail us from our lives.
Update (1650ET) : The House passed a roughly $8.3 billion emergency spending package for
combating the coronavirus outbreak , sending the legislation to the Senate as lawmakers raced
to respond to the quickly spreading disease.
As The Wasll Street Journal reports, the bill provides more than $3 billion for developing
treatments for the disease and allocates $2.2 billion for the Centers for Disease Control and
Prevention to contain the disease , among other measures. Under the legislation, which the
Senate will also likely pass this week, more than $1 billion will go overseas, while $20
million will be made available to fund administrative expenses for loans to U.S. small
businesses.
The final deal includes $300 million for the government to purchase the vaccine and other
therapeutics and make them available to the public.
It calls on Health and Human Services Secretary Alex Azar to use currently available
authority to ensure the price is "affordable in the commercial market," while additionally
stating that he shouldn't delay the drug's development.
The legislation, crafted by top Republicans and Democrats, caps less than two weeks of
negotiations that began when the White House said it planned to spend roughly $2.5 billion on
fighting the disease, an amount lawmakers said was too low. President Trump has subsequently
said he would sign whatever package Congress approves.
Oil producers are facing the biggest drop in demand for their product ever as the
coronavirus spreads around the world, forcing OPEC and its allies to consider emergency
measures.
Research firm IHS Markit said Wednesday that oil demand will suffer its steepest
decline on record in the first quarter -- worse even than during the 2008 global financial
crisis -- as schools and offices close, airlines cancel flights worldwide and a growing
number of people hunker down at home.
Most of the reduction in demand can be traced to China, where the coronavirus has
caused what IHS Markit describes as an "unprecedented stoppage" of economic activity.
But reduced consumption will be widespread, and IHS Markit expects global demand to
drop by 3.8 million barrels per day in the first quarter compared to 2019. Demand in the
first three months of 2019 was 99.8 million barrels per day.
"This is a sudden, instant demand shock -- and the scale of the decline is
unprecedented," said Jim Burkhard, vice president and head of oil markets at IHS
Markit.
A decline of 3.8 million barrels per day is a real bombshell.
Despite claims by China that they have more recoveries than new infections, there is
strong evidence that they are lying. Travel inside China is still almost non-existent and
most industry is still shut down.
"... United said Wednesday it will reduce passenger-carrying capacity 20% on international routes and 10% to 12% in the U.S. United executives expect the reductions will carry into May. ..."
GROUNDED AIRPLANES: United Airlines will cut international and U.S. flying, freeze hiring and ask employees to volunteer for unpaid leave as it struggles with weak demand for travel because of the new virus outbreak. United said Wednesday it will reduce passenger-carrying capacity 20% on international routes and 10% to 12% in the U.S. United executives expect the reductions will carry into May. Beyond that, it depends what happens to bookings over the next few weeks.
United's CEO and president say they hope the moves are enough, but the nature of the outbreak requires the airline to be flexible in how it responds.
ALTERED EXPECTATIONS: General Electric Co. General Electric believes the viral outbreak could have a negative impact of about $300 million to $500 million on its first-quarter industrial free cash flow. Operating profit for the period could be hurt by about $200 million to $300 million. GE said that the expectations are incorporated into its full-year 2020 outlook. Major corporations like Apple, Microsoft and Visa have already cut expectations.
GROUNDED AIRPLANES: United Airlines will cut international and U.S. flying, freeze hiring and ask employees to volunteer for unpaid leave as it struggles with weak demand for travel because of the new virus outbreak. United said Wednesday it will reduce passenger-carrying capacity 20% on international routes and 10% to 12% in the U.S. United executives expect the reductions will carry into May.
Beyond that, it depends what happens to bookings over the next few weeks. United's CEO and president say they hope the moves are enough, but the nature of the outbreak requires the airline to be flexible in how it responds.
ALTERED EXPECTATIONS: General Electric Co. General Electric believes the viral outbreak could have a negative impact of about $300 million to $500 million on its first-quarter industrial free cash flow. Operating profit for the period could be hurt by about $200 million to $300 million. GE said that the expectations are incorporated into its full-year 2020 outlook. Major corporations like Apple, Microsoft and Visa have already cut expectations.
ALTERED EXPECTATIONS: General Electric Co. General Electric believes the viral outbreak could have a negative impact of about $300 million to $500 million on its first-quarter industrial free cash flow. Operating profit for the period could be hurt by about $200 million to $300 million. GE said that the expectations are incorporated into its full-year 2020 outlook. Major corporations like Apple, Microsoft and Visa have already cut expectations.
RATIONING: Kroger Co., the nation's biggest independent grocer, is placing limits on the number of
certain products that customers buy as its shelves are cleared by people doing heavy stocking in preparation
for any spread of the virus. "Due to high demand and to support all customers, we will be limiting the
number of sanitization, cold and flu related products to 5 each per order. Your order may be modified at
time of pickup or delivery," the company said on its website. Amazon is warning same-day grocery customers
that delivery may be limited. Target and Walmart are scrambling to replenish shelves with basics like canned
goods, toilet paper and other household essentials, but have yet to announced rationing.
TRAVEL RESTRICTIONS: The International Air Transport Association says that January had the slowest
monthly year-over-year growth since April 2010, at the time of the volcanic ash cloud crisis in Europe that
led to massive airspace closures and flight cancellations. "January was just the tip of the iceberg in terms
of the traffic impacts we are seeing owing to the COVID-19 outbreak, given that major travel restrictions in
China did not begin until 23 January," said Alexandre de Juniac, the group director general.
Delta will reduce its weekly flying schedule to Japan through April 30 and suspend summer seasonal
service between Seattle and Osaka for 2020 in response to reduced demand due to COVID-19.
Amazon has asked its 800,000 employees worldwide to postpone non-essential travel. It is also conducting
some job interviews on video conference calls instead of in its offices. Ford Motor Co. has banned all
domestic and international travel, unless approved at the highest levels of the company.
General Motors CEO Mary Barra said Wednesday that all international travel by employees has been
restricted.
NETWORKING IS NOT WORKING: Starbucks converted its big annual shareholders meeting in hometown Seattle to
a virtual only event due to concerns about the virus. The meeting will still be held on March 18 as
originally planned. The party-like event which attracted 4,000 shareholders last year was supposed to be
held at a theater in downtown Seattle. A virus cluster has emerged in Washington state, however, with nine
deaths reported.
The 40th Seafood Expo North America/Seafood Processing North America, scheduled for later this month in
Boston, has been postponed. The largest such event in North America typically attracts about 20,000 people.
Organizers cited concerns about safety and travel restrictions. The event takes place in Boston's Seaport
district.
The International Monetary Fund said its spring meetings in Washington, D.C., along with those of the
World Bank, will now be "virtual" to limit the risk from traveling.
The Global Gaming Expo Asia scheduled for later this month in Macao has been pushed back to the end of
July. More than 13,000 people attended last year's expo.
General Motors asked employees who have traveled within the past 14 days to China, South Korea, Japan,
Iran or Italy to skip the high-profile roll out of the company's new slate of electric vehicles, according
to CEO Mary Barra.
F5 Networks Inc. postponed its analyst and investor event due to the virus outbreak. The company was
scheduled to hold the event in New York this week. The cloud technology company, based in Seattle, also
postponed its annual user conference scheduled for mid-March in Orlando, Florida.
CLOSE TO HOME: Amazon says one of its employees in Seattle has contracted the new coronavirus. "We're
supporting the affected employee who is in quarantine," it said in a prepared statement. Amazon said earlier
this week that two of its employees in Milan, Italy, have contracted the virus and are quarantined.
Aflac announced Wednesday that a temporary worker at its call center in Kobe, Japan is infected with the
virus. The individual had attended an event in Osaka where multiple participants also contracted the virus.
The company said it's continuing to monitor the recovery of the infected individual, who is being instructed
to refrain from coming into the office.
STAFF REDUCTIONS: Finnish national carrier Finnair is planning temporary layoffs between 14 days up to
one month for its entire staff based in Finland due to the economic impact caused by coronavirus to the
airline's operations.
More than 6,000 Finnair employees will be affected.
The Finnish flag carrier, which has a total staff of nearly 7,000, has strongly focused on Europe to Asia
flights from its Helsinki hub and has been forced to temporarily cancel flights to mainland China and other
Asian destinations because of the coronavirus.
THE MACRO VIEW: The head of the 189-nation International Monetary Fund said Wednesday that the economic
impact of the spreading coronavirus will be more serious than originally thought.
The IMF is now prepared to make support quickly available to low-income countries through a $50 billion
emergency fund that the group maintains to help nations facing an economic crisis, IMF Managing Director
Kristalina Georgieva said.
"We unfortunately over the past week have seen a shift to a more adverse scenario for the global
economy," said Georgieva.
The IMF's forecast in January that the global economy would rebound to growth of 3.3% this year, up from
2.9% last year, is no longer reliable.
"We know the disease is spreading quickly with over one-third of our membership affected directly,"
Georgieva said. "This is no longer a regional issue. It is a global issue calling for a global response."
SHORT SUPPLY: A U.N. agency estimated Wednesday that a shortage of industrial parts from China caused by
the coronavirus outbreak has set off a "ripple effect" that caused exports from other countries around the
world to drop by $47 billion last month.
The United Nations Conference on Trade and Development says that figures from Chinese businesses suggest
an annualized 2% decline in output in China. That has led to shrinking supplies for automotive, chemicals,
communications and other industries in many countries, in turn reducing their export capacity.
The agency says the preliminary figures show that industries outside of China that rely on components,
parts and other inputs from the country aren't able to export goods as much as they had before the virus
erupted. The outbreak began in the city of Wuhan, shutting down factories and quarantining workers at home.
The drop in Chinese output results in a "ripple effect throughout the global economy" that rises "to the
tune of a $50 billion fall in exports across the world," said said Pamela Coke-Hamilton, director of the
UNCTAD international trade and commodities division.
Exports from the European Union alone made up for about one third of that, or nearly $15.6 billion.
Exports of the United States were second, at nearly $5.8 billion, and Japan was third at almost $5.2
billion.
SHAKEN: The release of the James Bond film "No Time To Die" is being pushed back several months because
of concerns about coronavirus. MGM, Universal and producers Michael G. Wilson and Barbara Broccoli announced
on Twitter Wednesday that the film will be released in November, rather than next month as originally
planned. "No Time To Die" will now hit theaters in the U.K. on Nov. 12 and worldwide on Nov. 25. Publicity
plans for the film in China, Japan and South Korea had already been canceled because of the outbreak.
"... The Centers for Disease Control and Prevention (CDC) is not billing patients for coronavirus testing, according to Business Insider . "But there are other charges you might have to pay, depending on your insurance plan, or lack thereof," Business Insider noted. "A hospital stay in itself could be costly and you would likely have to pay for tests for other viruses or conditions." ..."
"... Congress needs to immediately pass a bill appropriating funding to cover 100% of the cost of all coronavirus testing & care within the United States. We will not have a chance at containing it otherwise. @tedlieu - as my rep, can you please ensure this is brought up? ..."
"... In the case of the Wucinskis, Kliff reported that "the ambulance company that transported [them] charged the family $2,598 for taking them to the hospital." ..."
"... Last week, the Miami Herald reported that Osmel Martinez Azcue "received a notice from his insurance company about a claim for $3,270" after he visited a local hospital fearing that he contracted coronavirus during a work trip to China. ..."
"... Did anyone expect the unconscionable greed of capitalism to cease when a public health crisis emerges? This is just testing for the virus, wait until a vaccine has been developed so expensive that the majority of the US populace can not afford it at all and people are dropping like flies. Wall Street, never-the-less, will continue to have its heydays ..."
"... The very idea that the defense and "Homeland" security budgets are bloated and additional funding approved year after year but the citizens of this country are not afforded 100% health coverage In a time of global health crisis that could become a pandemic. ..."
"Huge surprise medical bills [are] going to make sure people with symptoms don't get tested. That is bad for everyone." by
Jake Johnson, staff writer Public health
advocates, experts, and others are demanding that the federal government cover coronavirus testing and all related costs after several
reports detailed how Americans in recent weeks have been saddled with exorbitant bills following medical evaluations.
Sarah Kliff of the New York Times
reported Saturday
that Pennsylvania native Frank Wucinski "found a pile of medical bills" totaling $3,918 waiting for him and his three-year-old daughter
after they were released from government-mandated quarantine at Marine Corps Air Station in Miramar, California.
"My question is why are we being charged for these stays, if they were mandatory and we had no choice in the matter?" asked Wucinski,
who was evacuated by the U.S. government last month from Wuhan, China, the epicenter of the coronavirus outbreak.
"I assumed it was all being paid for," Wucinski told the Times . "We didn't have a choice. When the bills showed up, it was just
a pit in my stomach, like, 'How do I pay for this?'"
The Centers for Disease Control and Prevention (CDC) is not billing patients for coronavirus testing,
according
to Business Insider . "But there are other charges you might have to pay, depending on your insurance plan, or lack thereof,"
Business Insider noted. "A hospital stay in itself could be costly and you would likely have to pay for tests for other viruses or
conditions."
Lawrence Gostin, a professor of global health law at Georgetown University, told the Times that
"the most important rule of public health is to gain the cooperation of the population."
"There are legal, moral, and public health reasons not to charge the patients,"
Gostin said.
Congress needs to immediately pass a bill appropriating funding to cover 100% of the cost of all coronavirus testing & care
within the United States. We will not have a chance at containing it otherwise.
@tedlieu - as my rep, can you please ensure this
is brought up?
In the case of the Wucinskis, Kliff reported that "the ambulance company that transported [them] charged the family $2,598
for taking them to the hospital."
"An additional $90 in charges came from radiologists who read the patients' X-ray scans and do not work for the hospital," Kliff
noted.
The CDC declined to respond when Kliff asked whether the federal government would cover the costs for patients like the Wucinskis.
The Intercept 's Robert Mackey
wrote
last Friday that the Wucinskis' situation spotlights "how the American government's response to a public health emergency, like trying
to contain a potential coronavirus epidemic, could be handicapped by relying on a system built around private hospitals and for-profit
health insurance providers."
We should be doing everything we can to encourage people with
#COVIDー19 symptoms to come forward.
Huge surprise medical bills is going to make sure people with symptoms don't get tested. That is bad for everyone, regardless
of if you are insured. https://t.co/KOUKTSFVzD
Play this tape to the end and you find people not going to the hospital even if they're really sick. The federal government
needs to announce that they'll pay for all of these bills https://t.co/HfyBFBXhja
Last week, the Miami Herald reported
that Osmel Martinez Azcue "received a notice from his insurance company about a claim for $3,270" after he visited a local hospital
fearing that he contracted coronavirus during a work trip to China.
"He went to Jackson Memorial Hospital, where he said he was placed in a closed-off room," according to the Herald . "Nurses
in protective white suits sprayed some kind of disinfectant smoke under the door before entering, Azcue said. Then hospital staff
members told him he'd need a CT scan to screen for coronavirus, but Azcue said he asked for a flu test first."
Azcue tested positive for the flu and was discharged. "Azcue's experience shows the potential cost of testing for a disease
that epidemiologists fear may develop into a public health crisis in the U.S.," the Herald noted.
Sen. Bernie Sanders (I-Vt.), a 2020 Democratic presidential candidate, highlighted Azcue's case in a tweet last Friday.
"The coronavirus reminds us that we are all in this together," Sanders wrote. "We cannot allow Americans to skip doctor's visits
over outrageous bills. Everyone should get the medical care they need without opening their wallet -- as a matter of justice and
public health."
Last week, as Common Dreams
reported , Sanders argued that the coronavirus outbreak demonstrates the urgent need for Medicare for All.
The coronavirus reminds us that we are all in this together. We cannot allow Americans to skip doctor's visits over outrageous
bills.
Everyone should get the medical care they need without opening their wallet -- as a matter of justice and public health.
https://t.co/c4WQMDESHU
The number of confirmed coronavirus cases in the U.S.
surged by more than two
dozen over the weekend, bringing the total to 89 as the Trump administration continues to
publicly downplay the severity of the outbreak.
Dr. Matt McCarthy, a staff physician at NewYork–Presbyterian Hospital,
said
in an appearance on CNBC 's "Squawk Box" Monday morning that testing for the coronavirus is still not widely available.
"Before I came here this morning, I was in the emergency room seeing patients," McCarthy said. "I still do not have a rapid
diagnostic test available to me."
"I'm here to tell you, right now, at one of the busiest hospitals in the country, I don't have it at my finger tips," added
McCarthy. "I still have to make my case, plead to test people. This is not good. We know that there are 88 cases in the United
States. There are going to be hundreds by middle of week. There's going to be thousands by next week. And this is a testing issue."
Our work is licensed under a Creative Commons Attribution-Share Alike 3.0 License. Feel free to republish and share widely.
Did anyone expect the unconscionable greed of capitalism to cease when a public health crisis emerges? This is just testing
for the virus, wait until a vaccine has been developed so expensive that the majority of the US populace can not afford it at
all and people are dropping like flies. Wall Street, never-the-less, will continue to have its heydays
A wall street bank or private predator may own your emergency room. A surprise bill may await your emergency treatment above
insurance payments or in some instances all of the bill.
An effort was made recently in congress to stop surprise billings but enough dems joined repubs to kill it. More important
to keep campaign dollars flowing than keep people alive.
fernSmerl 12h I know emergency rooms are being purchased by organizations like Tenet (because they are some of
the most expensive levels of care) and M.D.s provided by large agencies. I'm not as up on this as I should be but a friend of
mine tells me that some of this is illegal. I have received bills that were later discharged by challenge. This is worth investigating
further. Atlasoldie 11h Hmmmm A virus that
overwhelmingly kills the elderly and/or those with pre-exisitng conditions.
Sounds like a medical insurance companies wet dream. As well as .gov social security/medicare wet dream.
The very idea that the defense and "Homeland" security budgets are bloated and additional funding approved year after year
but the citizens of this country are not afforded 100% health coverage In a time of global health crisis that could become a pandemic.
And as has been stated, the unconscionable idea suggested that a possible vaccine (a long way away or perhaps not developed at
all) might not be affordable to the workers who pay the taxes that fund the government? That's insane.
Another example of "American Exceptionalism." China doesn't charge its coronavirus patients, neither does South Korea. I guess
they are simply backward countries.
I own my own home after years of hard work paying it off. It's the only thing of value, besides my old truck, that I have.
If I get the virus, I will stay home and try to treat it the best I can. I can't afford to go to the hospital and pay thousands in
medical bills, with the chance that they'll come after my possessions. America, the land of the _______. Fill in the blank. (Hint:
it's no longer free).
There are other ways to protect your home. Homesteading or living trust. I'm not good at this but I know there are ways to
do it. Hopefully, it would never come to that but outcomes are not certain even with treatment in this case.
As someone
who lost a mother at 5 years old I can sympathize with your grief in losing a daughter-in-law and especially seeing her four children
orphaned. However, I think you miss the point here: This is about we becoming a society invested in each others welfare and not a
company town that commodifies everything including the health and well being of us all.
As a revision it is better but flawed. It is a cost containment bill based on the same research as the republican plan with global
budgets and block grants.
Edited: I encourage you to read this: -ttps://www.rand.org/blog/2018/10/misconceptions-about-medicare-for-all.html Giovanna-Lepore10h oldie:
Part D
Higher education is not free but they do need to become free for the students and payed by us as a society.
Part D is a scam, a Republican scam also supported by corporate democrats because of its profit motive and its privatization
Medicare only covers 80% and does not cover eye and dental care and older folks especially need these services. Medicaid helps but there are limits and one cannot necessarily use it where one needs to go.
Expanded, Improved Medicare For All is a vast improvement. because it covers everyone in one big pool and, therefore, much more dignified
than the rob Paul to pay peter system we have.
Social Security too can be improved. Why should it simply be based on the income of the person which means that a person working
in a low paying job in a capitalist system gone wild with greed will often work until they die.
Pell grants can be eliminated when we have what the French have: publicly supported education for everyone.
The demise of unions certainly did not help but it was part of the long strategy of the Right to privatize everything to the enrichment
of the few.
The overall competence that Canada is handling this outbreak, compared to the USA, is stark. First world (Canada) versus third-world
(USA). Testing is practically available for free, to any suspect person, sick or not, as Toronto alone can run 1000 tests a day and
have results in 4 hours. That is far more than all the US's capacity for 330 million people.
I wonder how long before Canada closes its borders to USAns? Me and my wife (both in a vulnerable age/medical group) should seriously
consider fleeing to my brother's place in Toronto as the first announced cases in Pittsburgh are probably only days away. What about
our poor cat though? We could try to smuggle her across the border, but she is a loud and talkative kitty
Don't want to discourage anyone from any protective measures – but the
"low down" from my veggie store today was that a lot of health professionals
shop there and they think it's being hyped by media. Did get this from my NJ Sen. Menendez –
Center for Disease and Control and Prevention (CDC)
There is currently no vaccine to prevent coronavirus disease 2019 (COVID-19). The best way to prevent illness is to avoid being
exposed to this virus. However, everyday preventive actions can help prevent the spread of respiratory diseases:
Wash your hands often
Avoid close contact with people who are sick.
Avoid touching your eyes, nose, and mouth.
Stay home when you are sick.
Cover your cough or sneeze with a tissue, then throw the tissue in the trash.
For more information : htps://www.cdc.gov/coronavirus/2019-ncov/about/prevention-treatment.html
How it spreads : The virus is thought to spread mainly from person-to-person. It may be possible that a person can get
COVID-19 by touching a surface or object that has the virus on it and then touching their own mouth, nose, or possibly their
eyes, but this is not thought to be the main way the virus spreads. [Read more.] https://www.cdc.gov/coronavirus/2019-ncov/about/transmission.html )
Symptoms : For confirmed coronavirus disease 2019 (COVID-19) cases, reported illnesses have ranged from mild symptoms to
severe illness and death. Symptoms can include fever, cough, and shortness of breath.
Don't want to discourage anyone from any protective measures – but the
"low down" from my veggie store today was that a lot of health professionals
shop there and they think it's being hyped by media.
I agree it is being hyped by the media to the point of being fear mongering. At the same time it is being ignored by the administration to such an extent that really little almost nothing is being done. At some point the two together will create an even bigger problem.
It is like the old adage: "Just because you are paranoid doesn't mean they aren't out to get you." Each over/under reach in considering the reality of the situation has its own problem, which multiply when combined. Every morning when I wake up I say a little atheistic prayer to myself before I get out of bed: "Another day and for better or
worse...".
Well, two reported here in Florida tonight. One in my county, one in the county next door. And more of the "we already knew, but told you late". One person checked into the hospital on Wednesday. We hear it Monday night.
Both were ignored far a long time it seems, and 84 in particular are being watched (roommates, friends, hospital workers not alerted
for several days, the usual). But no one knows every place they had been since becoming infected.
Oh, and they have tested a handful of people. No worry?
I can't see anyway that this level of incompetency is an accident. Spring break is just starting usually a 100's of thousand tourist
bonanza.
So the question is do they want to kill us, or just keep us in fear?
I think the later. But the end result is a crap shoot. So once again, it is a gamble with our lives.
The business of America is business. Sometimes that can go too far and this is one of those times. Making money from the loss,
distress, harm and suffering of others is perverse beyond belief.
Companies are worried about the mild cases too. I work for a bank in Chicago with
multiple bldgs in the Loop. Starting yesterday they banned travel between Loop bldgs, and
in-person meetings of more than 5 people (arbitrary, to be sure). Travel domestic and
international was cancelled at the end of January.
If 20% of staff are out sick things stop happening immediately. In-flight projects to
meet regulatory decrees, work to keep an unhappy client onboard, etc.
At my wife's place of employment, a co-worker mentioned that their spouse came to work
sporting a mild cough (All the family members having had a bout with the .. 'flu'. Said
spouse (a public employee) was told by their employer (city/county .. not sure which??) to
go home, as a precaution. Humm .
"... But economics can also influence health outcomes, and not just in terms of NHS resources. For a minority of self employed workers there will be no sick-pay and those without a financial cushion will be put under stress. One of the concerns as far as the spread of the pandemic is concerned is that workers will not be able to afford to self-isolate if they have the disease. So if I was in government I would be thinking of setting up something like a sick-leave fund that such workers could apply to if they get coronavirus symptoms. ..."
"... The government also needs to think about keeping public services and utilities running when workers in those services start falling ill. In fact there are a whole host of things the government should now be doing to prepare for a pandemic. It is at times like these that we really need governments to act fast and think ahead. Do we in the UK , and US citizens , have confidence that the government will do what is required? One lesson of coronavirus may be never put into power politicians that have a habit of ignoring experts. ..."
A little over ten years ago I was approached by some health experts who wanted to look at the
economic effects of a influenza pandemic. They needed someone with a macroeconomic model to
look at the general equilibrium impacts. In the 1990s I had led a small team that constructed a model
called COMPACT, and these health experts and I completed a paper that was subsequently
published in Health
Economics. We reference to other studies that had been done earlier in that paper.
The current coronavirus outbreak will have different characteristics to the pandemic we
studied, and hopefully it will not become a pandemic at all. (In terms of mortality it seems to
be somewhere in between the 'base case' and 'severe case' we looked at in our work.) But I
think there were some general lessons from the exercise we did that will be relevant if this
particular coronavirus does become a global pandemic. One proviso is that a key assumption we
made about the pandemic is that it was mainly a 3 month affair, and obviously what I have to
say is dependent on it being short-lived.
It is worth saying at the start that the bottom line of all this for me is that the economics
are secondary to the health consequences for any pandemic that has a significant fatality rate
(as coronavirus so far appears to have). The economics are important in their own right and as
a warning to avoid drastic measures that do not influence the number of deaths, but beyond that
there is no meaningful trade-off between preventing deaths and losing some percent of GDP for
less than half the year.
Let me start with the least important impact from an economic point of view, and that is the
fall in production due to workers taking more time off sick. It is least important in part
because firms have ways of compensating for this, particularly if illness is spread over the
quarter. For example those who have been sick and come back to work can work overtime. This
will raise costs and might lead to some temporary inflation, but the central bank should ignore
this.
This 'direct' impact of the pandemic will reduce GDP in that quarter by a few percentage
points. The precise number will depend on what proportion of the population that get sick, on
what the fatality rate in the UK turns out to be, and how many people miss work in an attempt
not to get the disease. The impact on GDP for the whole year following the pandemic is much
less at around 1% or 2%, partly because output after the pandemic quarter is higher as firms
replenish diminished stocks and meet postponed demand.
All this assumes schools do not close once the pandemic takes hold. School closures can amplify
the reduction in labour supply if some workers are forced to take time off to look after
children. On the basis of the assumptions we made, if schools close for around 4 weeks that can
multiply the GDP impacts above by as much as a factor of 3, and if they close for a whole
quarter by twice that. If that seems large, remember nationwide school closures impact everyone
with children and not just those with the disease.
But even with all schools closed for 3 months and many people avoiding work when they were not
sick, the largest impact we got for GDP loss over a year was less than 5%. That is a one
quarter very severe recession, but there is no reason why the economy cannot bounce back to
full strength once the pandemic is over. Unlike a normal recession, information on the cause of
the output loss, and therefore when it should end, is clear.
All this assumes that consumers who have not yet got the disease do not alter their behaviour.
For a pandemic that spreads gradually this seems unlikely. The most important lesson I learnt
from doing this study is that the pandemic need not just be a supply shock. It can also be a
demand shock that can hit specific sectors very hard, depending on how consumers behave. This
is because a lot of our consumption nowadays can be called social, by which I mean doing things
that bring you into contact with other people. Things like going to the pub, to restaurants, to
football matches or travel. Other sectors that provide consumption services that involve
personal contact (e.g haircuts) and can easily be postponed may also be hit.
If people start worrying about getting the disease sufficiently to cut back on this social
consumption, the economic impact will be more severe than any numbers discussed so far. One
reason it is severe is that it is partly a permanent loss. Maybe you will have a few more meals
out once the pandemic is over to make up for what you missed when you stayed home, but there is
likely to be a net fall in your consumption of meals out over the year. What I realised when I
did the analysis was just how much of our consumption was social.
This is why the biggest impacts on GDP occur when we have people reducing their social
consumption in an effort not to get the disease. However falls in social consumption do not
scale up all scenarios by the same amount, for the simple reason that supply and demand are
complimentary. If school closures and people taking more time off work increase the size of the
supply shock, the demand shock has less scope to do damage. The largest fall in annual GDP in
all the variants we looked at was 6%.
Could conventional monetary or fiscal policy offset the fall in social consumption? Only
partially, because the drop in consumption is focused on specific sectors. What is more
important, and what we didn't explore in the exercise, is what would happen if the banks failed
to provide bridging finance for the firms having to deal with a sudden fall in demand. The
banks may judge that some businesses that are already indebted may not be able to cope with any
additional short term loans, leading to business closures during the pandemic.
It is in this light that we should view the collapse of stock markets around the world. In
macroeconomic terms this is a one-off shock, so Martin Sandbu is right that the
recent stock market reaction looks overblown. But if many businesses are at financial risk from
the temporary drop in social consumption, that implies a rise in the equity risk premia, which
helps account for the size of the stock market collapse we have seen. (I say 'helps'
deliberately, as much of the impact will be on smaller businesses that do not find their way
into the main stock market indices.)
If I was running the central bank or government, I would have already started having
conversations with banks about not forcing firms into bankruptcy during any pandemic.
But economics can also influence health outcomes, and not just in terms of NHS resources. For a
minority of self employed workers there will be no sick-pay and those without a financial
cushion will be put under stress. One of the concerns as far as the spread of the pandemic is
concerned is that workers will not be able to afford to self-isolate if they have the disease.
So if I was in government I would be thinking of setting up something like a sick-leave fund
that such workers could apply to if they get coronavirus symptoms.
The government also needs to think about keeping public services and utilities running when
workers in those services start falling ill. In fact there are a whole host of things the
government should now be doing to prepare for a pandemic. It is at times like these that we
really need governments to act fast and think ahead. Do
we in the UK , and
US citizens , have confidence that the government will do what is required? One lesson of
coronavirus may be never put into power politicians that have a habit of ignoring experts.
Once confidence and certainty are
lost, the willingness to expand debt and leverage collapses.
Even though the first-order effects of the Covid-19 pandemic are still impossible to
predict, it's already possible to ask: did the pandemic pop all the global financial bubbles?
The
reason we can ask this question is the entire bull mania of the 21st century has been based on a
permanently high rate of expansion of leverage and debt.
The lesson of the 2008-09 Global Financial meltdown was clear:
any decline in the
rate of debt/leverage expansion is enough to threaten financial bubbles, and any absolute decline in
debt and leverage will unleash a cascade that collapses all the speculative bubbles in stocks, real
estate, collectibles, etc.
What's the connection between Covid-19 and the rate of debt/leverage expansion?
Confidence
and certainty: people will make bets on future growth and take on additional debt and leverage when
they feel confident and have a high degree of certainty that the trends are running their way.
Over the past 20 years, the certainty that central banks would support markets has been high, as
central banks stepped in at every wobble. Today's 50 basis-points cut by the Fed sustains that
certainty.
What's now broken is the certainty that central bank interventions will lift risk assets
and the real-world economy.
Given the uncertainties of the eventual consequences of the
pandemic globally, confidence in future trends has been either dented or destroyed, depending on your
perspective and timeline.
Certainty that central bank interventions will push markets and real-world economies higher has
also been dented. What happens if the market tanks after every 50 basis-points cut by the Fed?
We wouldn't be in such a precariously brittle state if the global economy hadn't been
ruthlessly financialized
to the point that market dependence on central bank intervention is
now essentially 100%.
Once confidence and certainty are lost, the willingness to expand debt and leverage
collapses
, and that reduction in the rate of expansion will pop all the global asset bubbles.
World Health Organization (WHO) Director General Tedros Adhanom Ghebreyesus said on Thursday
that it would be a "fatal mistake" for any country to believe it will not be hit. WHO advisor
Ira Longini has said that without aggressive measures to contain the virus, it could ultimately
infect two-thirds of the world, which would mean hundreds of millions of deaths.
The economic damage from the virus could exceed the scale of the 2008 financial crisis. The
recession sparked by the 2008 crisis led to a fall in global GDP by 0.5 percent and destroyed
the jobs of tens of millions of people.
The response of ruling elites and the governments they control to the crisis combines
incompetence with a criminal level of indifference. Nowhere is this more evident than in the
United States.
President Trump, concerned above all about the impact of the coronavirus on the fortunes of
the corporate and financial elite, has sought to downplay the danger and grossly overstate the
level of preparedness. "Whatever happens," he said on Wednesday, "we're totally prepared."
In fact, the US government is completely unprepared for a major outbreak. There is no system
in place to even systematically test for the virus. The individual in California who has been
identified as the first reported case of unknown origin in the US was not given a test for days
after symptoms were first expressed.
There is a severe shortage of the most basic health equipment, including respirator masks
needed by health care workers. The government only has about 30 million on hand, while it is
estimated that 300 million may be required.
The Trump administration has appointed Vice President Mike Pence, whose inaction and
reactionary religious ideology contributed to an HIV outbreak in the state of Indiana when he
was governor, as the government's point person for the coronavirus response. The main purpose
of this appointment is to muzzle any officials whose warnings contradict the response of the
administration.
... ... ...
The political establishment in the United States is engaged in a "debate" over whether $2
billion is adequate (the position of the White House) or $8 billion is required (the position
of the Democrats). Both these figures represent a drop in the bucket compared to the scale of
the global crisis.
The provisioning of health care and treatment cannot be regulated by the
insurance, pharmaceutical and health care companies. Treatment, including any future vaccine,
must be available to everyone, free of charge, on an equal basis.
The giant health care companies must be turned into public utilities, democratically
controlled to meet the urgent social need presented by the coronavirus and other health
emergencies Direct financial support and income compensation for all those impacted by the
economic consequences
Millions of workers face reductions in hours or the loss of their jobs due to the immediate
impact of the coronavirus and its broader economic consequences. They must be compensated in
full for their losses.
Governments and the capitalist elites will argue that there is no money to finance such an
emergency response. This is a lie! The amount spent by the capitalist governments on military
expenditures runs into the trillions of dollars. The annual military budget of the United
States alone is more than one trillion dollars. Moreover, the major capitalist governments, led
by the US Federal Reserve, have allocated virtually unlimited sums of money to drive up the
market value of equities. Within weeks of the 2008 crash, the US government doubled the
national debt overnight to provide liquidity for the stock market and bail out corrupt
investors.
Moreover, staggering sums of money are controlled by an infinitesimal percentage of the
world's population. The wealth of the world's 500 richest people stands at nearly $6 trillion,
following an increase of $1.2 trillion last year alone. The working class must demand that
governments impose emergency taxes on the fortunes of the oligarchs to the extent required by
the emergency.
And yet, he says nothing about simply inventing new money (as Hong Kong has already done),
with zero debt burden, to ensure everyone is ok and the economy survives. ere's Economics
Prof. Steve Keen, this very morning:
> To prevent a financial pandemic on top of a medical one:
1. Make a direct payment now, on a per-capita basis, to all residents via their primary
bank accounts (most effectively, their accounts through which they pay taxes).
As Quantitative Easing has shown, Central Banks have a limitless capacity to purchase
assets from the private sector -- or to provide the private sector with money created by the
Central Bank. Under Quantitative Easing, the US Federal Reserve purchased $80 billion worth
of bonds off the private financial sector every month for almost a decade. Technically, that
was an asset swap: the Federal Reserve credited the financial sector with $80 billion of cash
per month, in return for bonds with a face value of $80 billion per month being credited to
the Federal Reserve's assets.
This does not have to be financed by asset purchases: it is also quite possible for
Central Banks to put a notional asset on their balance sheets to finance. This is already
done by the Bank of England to back the value of the notes issued by Scottish Banks: a bill
known as a Titan with a face value of £100 million balances the value of bank notes
issued by Scottish banks.
The same could be done by any Central Bank to balance a direct cash transfer to the bank
accounts of all residents of its country. Frances Coppola makes the case for this in the
general case of a financial crisis in her book People's Quantitative Easing (Coppola 2019).
This power could be used now to stop a financial crisis happening in the first place.
The payment should be per capita -- as it has been in the country that has already done
this because of the crisis, Hong Kong. The payment there is HK$10,000, or roughly US$2,000.
It does not need to be financed by the Treasury or by taxation: neither were used by the USA
to support its $1 trillion dollars per year Quantitative Easing program. There will be no
"debt burden for future generations".
Recommended reading, the unfashionable Edward Bulwer-Lytton's " Last Days of Pompeii "
for a good exposition of how effete, over urbanised fantasists face reality.
It's could be a big reset button.
JIT and complex long-distance procurement chains have become the norm in efforts to maximise
profits. This virus may make it obvious to all that even a slight disturbance to them can
bring everything to a halt.
Back in the distant past businesses thought about that, holding a reserve stock and having at
least duplex suppliers. Maybe what goes around comes around.
In most areas of the economy, supply and demand are roughly in balance. In the UK health care
sector, extreme rationing is in force. The UK has a very low spending per capita on the NHS
compared to health systems in say the USA or France. The right side of politics doesn't
believe that good access to health care resources is a universal right but something that
should be minimised and de-prioritised. This is why health related issues become major
national problems. The NHS should be funded to meet demand.
I don't see any free market zealots here. Austerity is an interventionist policy driven by
the growth theories of the author of this very article. Similarly, Boris's public
infrastructure projects and levelling up for the North are essentially Keynesian policies,
normally associated with post-War macroeconomic policy. Don't let their bullshit about free
markets fool you.
"Affected countries will, and should, engage in massive deficit spending to shore up their
health systems and prop up their economies"
Austerity is the only thing the Tories know, for ordinary working people anyway. It's a
different story for bankers who got £423 billion of "QE" (newly-printed money) after
2008. No doubt when banks start going bust again as a result of the coronavirus pandemic
it'll be Christmas come early for Tory donors in the City. All of this is entirely
predictable. A leopard doesn't change its spots.
"Affected countries will, and should, engage in massive deficit spending"
Where the hell was this ten years ago? Bearing in mind the death toll from the austerity
you championed is likely significantly higher than the death toll from Convid-19 so far.
America the country with a 5 percent budget deficit and debt approaching 110% of gdp is the
country best prepared for the next recession. Right.. I think I will stick with China, a
country with a fast growing economy for 30 years, producing products the world wants and with
it seems a very effective response to the Covid crisis (new cases down fast).
A supply side recession would usually imply that inflation will rise - the classic response
of central banks to that is interest rate rises. Good job most of the world is not over
indebted..... oh wait.
The shake up is long over due the only issue now is who will be the winners and who will
be the losers
I t is too soon to predict the long-run arc of the coronavirus outbreak. But it is not too
soon to recognise that the next global recession could be around the corner – and that it
may look a lot different from those that began in 2001 and 2008.
For starters, the next recession is likely to emanate from China, and indeed may already be
under way. China is a highly leveraged economy, it cannot afford a sustained pause today
anymore than fast-growing 1980s Japan could. People, businesses and municipalities need funds
to pay back their out-size debts. Sharply adverse demographics, narrowing scope for
technological catch-up, and a huge glut of housing from recurrent stimulus programmes –
not to mention an increasingly centralised decision-making process – already presage
significantly slower growth for China in the next decade.
Moreover, unlike the two previous global recessions this century, the new coronavirus,
Covid-19, implies a supply shock as well as a demand shock. Indeed, one has to go back to the
oil-supply shocks of the mid-1970s to find one as large. Yes, fear of contagion will hit demand
for airlines and global tourism, and precautionary savings will rise. But when tens of millions
of people can't go to work (either because of a lockdown or out of fear), global value chains
break down, borders are blocked, and world trade shrinks because countries distrust of one
another's health statistics, the supply side suffers at least as much.
Affected countries will, and should, engage in massive deficit spending to shore up their
health systems and prop up their economies. The point of saving for a rainy day is to spend
when it rains, and preparing for pandemics, wars, climate crises, and other out-of-the-box
events is precisely why open-ended deficit spending during booms is dangerous.
But policymakers and altogether too many economic commentators fail to grasp how the supply
component may make the next global recession unlike the last two. In contrast to recessions
driven mainly by a demand shortfall, the challenge posed by a supply-side driven downturn is
that it can result in sharp declines in production and widespread bottlenecks. In that case,
generalised shortages – something that some countries have not seen since the gas queues
of 1970s – could ultimately push inflation up, not down.
Admittedly, the initial conditions for containing generalised inflation today are
extraordinarily favourable. But, given that four decades of globalisation has almost certainly
been the main factor underlying low inflation, a sustained retreat behind national borders,
owing to a Covid-19 pandemic (or even lasting fear of pandemic), on top of rising trade
frictions, is a recipe for the return of upward price pressures. In this scenario, rising
inflation could prop up interest rates and challenge both monetary and fiscal policymakers.
It is also noteworthy that the Covid-19 crisis is hitting the world economy when growth is
already soft and many countries are wildly overleveraged. Global growth in 2019 was only 2.9%,
not so far from the 2.5% level that has historically constituted a global recession. Italy's
economy was barely starting to recover before the virus hit. Japan's was already tipping into
recession after an ill-timed hike in the value-added tax, and Germany's has been teetering
amidst political disarray. The United States is in the best shape, but what once seemed like a
15% chance of a recession starting before the presidential and congressional elections in
November now seems much higher.
It might seem strange that the new coronavirus could cause so much economic damage even to
countries that seemingly have the resources and technology to fight back. A key reason is that
earlier generations were much poorer than today, so many more people had to risk going to work.
Unlike today, radical economic pullbacks in response to epidemics that did not kill most people
were not an option.
What has happened in Wuhan, China, the current outbreak's centre, is extreme but
illustrative. The Chinese government has essentially locked down Hubei province, putting its 58
million people under martial law, with ordinary citizens unable to leave their houses except
under very specific circumstances. At the same time, the government apparently has been able to
deliver food and water to Hubei's citizens for roughly six weeks now, something a poor country
could not imagine doing.
Elsewhere in China, a great many people in major cities such as Shanghai and Beijing have
remained indoors most of the time in order to reduce their exposure. Governments in countries
such as South Korea and Italy may not be taking the extreme measures that China has, but many
people are staying home, implying a significant adverse impact on economic activity.
The odds of a global recession have risen dramatically, much more than conventional
forecasts by investors and international institutions care to acknowledge. Policymakers need to
recognise that, besides interest rate cuts and fiscal stimulus, the huge shock to global supply
chains also needs to be addressed. The most immediate relief could come from the US sharply
scaling back its trade-war tariffs, thereby calming markets, exhibiting statesmanship with
China, and putting money in the pockets of US consumers. A global recession is a time for
cooperation, not isolation.
Kenneth Rogoff is professor of economics and public policy at Harvard University. He
was the chief economist of the IMF from 2001 to 2003
In my youth it used to be said that successful economies were based on supplying the home
market first, with surpluses exported. The global economy, based upon JIT cross border supply
lines, could be tested to destruction by the coronavirus. Could it be that, in order to make
our economy more reliant to global shocks, we have to revisit our old thinking.?
The government in China isn't delivering water, that's the being done by existing private
enterprise companies because in much of the country tap water isn't safe to drink or tastes
pretty awful.
Likewise with food that's also delivered by hundreds of thousands of mainly young men on
motor scooters. I've had two deliveries today - water in a 60 litre plastic bottle and four
packs of frozen part cooked lamb ribs from New Zealand. Yesterday it was a tray of 24 cans of
Spanish black beer and the day before a circuit board for my electric toilet. Tomorrow I'm
expecting a stainless steel non-stick saucepan.
One of the problems in the US, leaving aside the confusing "hoax" nonsense from Tump and his
sycophants, is the automatic belief, and not just by Republicans, that whatever America does
is automatically the best in the world. Thus, we have taken the most aggressive steps in
history, the American pandemic response is the best in the world, American doctors know more
than any other doctors and so on and so forth. In fact this is a delusion. The national
response has been fragmented and haphazard, some people are being charged for testing whilst
other advanced economies with universal health care systems have been able to construct a
nationwide response. S. Korea has developed a drive in system of testing. The US government
sends out defective test kits. The UK seems likely to have already developed an antivirus but
the necessity of testing prevents the silly Trumpian response that it will be ready in a
couple of weeks.
In order to resolve any problem we must first understand it. Just to think that because
America is America the problem is solved is delusional.
At the same time, the government apparently has been able to deliver food and water to
Hubei's citizens for roughly six weeks now, something a poor country could not imagine
doing.
Everyone I know in China and everywhere I've been, and that's quite a lot of places,
people have water delivered, in my case in 60 litre plastic bottles which you then put in a
gravity deed or electric pump dispenser. Today I can make a phone call and without speaking
to anyone, often in as little as a few minutes, there's a guy knocking on the door to deliver
and take away the empty. Furthermore they are the only delivery people allowed into the
complex by the security guards. Those full bottles are fairly heavy. For food, drink and
anything else you get a call and have to go down to the gate to collect.
A supply side recession will not be solved by central bank QE programs - that's the gist of
the author's argument. Instead direct intervention is required to avoid possible shortages -
hence the wonderfully evocative picture of 1970s Britain.
Affected countries will, and should, engage in massive deficit spending to shore up
their health systems and prop up their economies.
And bang goes another irony meter when
the father of wrongheaded austerity policies worldwide can say this with a straight face.
Still, I guess finally getting it right should receive some praise. Pity we had a decade of
suffering to get here.
Uk spends 2700 euros per head on health, Germany spends 4300 euros per head on their
health,France spends 3700per head..UK,in comparison with similar sized advanced nations makes
available far fewer resources for health. Not to mention the fewest doctors per head in the
OECD apart from Poland, fewer nurses,fewer hospital beds per 1000.In health the UK is a sick
man.
I have read serious academic stuff about how the Black Death (1347 to 1351) was a boon for
humanity because those that survived were much better off (wealthier). Who knew economic
rationalists have been around for so long (like plagues in a way).
What economics professors would like to tell you is humanity needs to downsize so that the
world biosphere can recover from the plague of humanity.
The next global recession will achieve even more than the last ones, which turn up almost
on schedule every decade:
-- everyone will dump shares & the super rich will buy them up further concentrating
their control over everything
-- there'll be another round of wage decreases which will never be made up when the next wave
of 'wealth' rolls around
-- another generation of graduates will be cast into oblivion as any new jobs that emerge
after the recession will go to the cheapest workers.
I'm speaking as someone who vividly remembers all the recessions from 1960 when it was
called a 'credit squeeze' because so many adults still remembered the Great Depression.
Recessions are just about the only economic event that the IMF can predict.
As I understand it, these payments will come from reserves, not inventing new money. In
addition, politically this is really difficult - what about citizens with no bank account,
what about convicted criminals, what about British citizens versus non-British citizens?
Lastly, as graun says, what if the money is used by people to pay off debt rather than
consume?
the supply side suffers at least as much.
Affected countries will, and should, engage in massive deficit spending to shore up their
health systems and prop up their economies.
But what to spend on?
When the supply side is not supplying, it is difficult to source the materials needed to
expand businesses, create new enterprises or even to build new infrastructure - the stuff you
need to create these things is not being supplied!
As for comparisons with the 1970s - they don't really work any more. As The
Economist explained a couple of weeks ago
Covid-19 presents economic policymakers with a new sort of threat , the world has moved
on. Interest rates are low, inflation is low, we are less dependent on oil and central banks
have few "tricks" left up their sleeves.
It is also true that one of the biggest problems in economics is to determine whether a
recession is caused by lack of supply, or lack of demand. They both look very similar at the
time. The only real way of knowing is to look back, afterwards, and see which remedies pulled
which economies out of recession most successfully. Was it austerity, or stimulus - guess:
heads or tails?
We need the stock markets to drop 25%. We need senseless, unabated consumption to be reined
in. We need to rein in the wealth divide. We need to bring back meaningful value creating
businesses, not those that are eyeballs and clicks generation.
"... I have been a physician now for almost 30 years. It has been a career spanning the very end of the "Marcus Welby" era, and then piece by piece the complete dismantling of the medical profession by the insurance companies and now "non-profit" corporations. When I was young, the leadership structure in the hospitals was completely and utterly controlled by three groups: the physicians, the nurses, and in the case of Catholic hospitals, the church and the nuns, or in non-Catholic hospitals, philanthropic community leaders. ..."
"... There were no four-star mahogany and marble lobbies. There were no 2 million dollar annual salaries for the hospital CEOs. There were no non-profit corporate boards extracting every bit of wealth from the patients to maintain multimillion dollar salaries for the board members and the middle managers. ..."
"... In further conversation, the doctor said that we should be thinking about a world in which a large number of health care workers can't come to work because they are in quarantine or sick with the virus. We are looking at this problem right now. ..."
Read
the whole thread. His basic point is that the US Government did not want to see data that
would indicate community transmission, so it didn't look for that. What do you think? I'm
especially interested in what medical professionals in this blog's readership have to say.
I received this e-mail from Wyoming Doc a couple of days ago, and have his permission to
post it:
I have just learned of the first Coronavirus Death in the USA. It is now getting real.
I would point you to the following links -- I am seeing myself -- but to a greater degree
hearing about rather concerning things happening in our hospitals across the country.
The first is this video:
I would start first with a little background. I have been a physician now for almost 30
years. It has been a career spanning the very end of the "Marcus Welby" era, and then piece
by piece the complete dismantling of the medical profession by the insurance companies and
now "non-profit" corporations. When I was young, the leadership structure in the hospitals
was completely and utterly controlled by three groups: the physicians, the nurses, and in the
case of Catholic hospitals, the church and the nuns, or in non-Catholic hospitals,
philanthropic community leaders.
The focus at the time was mostly on taking care of the most patients the best that could
be done in a compassionate way with the resources available. And believe it or not, in my
opinion, the care that was given in that time was far superior than what is going on now. The
leaders of the hospitals were community leaders, and so was the medical and the nursing
staff. To put it succinctly: they cared about their neighbors. Many, many nights while on
call I would see the nuns right along side the nurses and physicians working themselves to
death to take care of sick patients. These hospitals were never in debt -- the resources and
the donations coming in were used for the expenses going out. There were no four-star
mahogany and marble lobbies. There were no 2 million dollar annual salaries for the hospital
CEOs. There were no non-profit corporate boards extracting every bit of wealth from the
patients to maintain multimillion dollar salaries for the board members and the middle
managers.
When I was a young medical student, a very old professor taught a course in medical
ethics. In one of his most pressing lectures, he discussed the fact that the goals and ideals
of medicine and public health were a complete 180 degrees from the wants and desires of a
free market. He added that every time combining public health/medicine and free markets had
been tried in history it ended in tears -- usually bankrupting the society. It was his
fervent desire that we not allow this to happen to the profession as we entered its ranks,
and to keep an eye out for this at all times.
Well, as everyone knows by now, his worst fears have been realized. Many, probably not
most, members of my profession -- especially the procedure-based specialists and surgeons --
in the past 10-15 years have completely lost sight of the public well-being. Their sights are
now on lucre. The one desire for many of them has been how to make more money more quickly.
They have been aided and abetted by the governing agencies and Boards of all the various
medical specialties. These national leadership organizations have made all the activities of
being a physician so onerous and the billing so difficult that the vast majority of
physicians have no choice but to become employees of these mega-corporations. The physicians
have made a deal to take a back seat to these "businessmen" to keep the cash coming. The
leadership of our hospital systems are no longer physicians, nurses, nuns, and
philanthropists. Nope –it is all MBA all the time. Even the physicians who are
nominally in charge -- ie the ubiquitous Chief Medical Officers of the corporations -- do not
get considered for the jobs unless they have an MBA after their name. And the credentialing
of the leadership teams are just absolutely ridiculous. Look at the websites of your local
hospital and its leadership. It is usual to see things like this: John Doe, MD MBA FACP
PhD FACC. The non-MD credentialing is even more hilarious -- I have no idea what 95% of
these abbreviations mean -- but they have to puff themselves up anyway. The hubris and the
arrogance would be hilarious, but now the crisis is upon us.
About 10-15 years ago, the change began in earnest. One by one, the physicians in charge
were replaced with MBA bureaucrats. The usual committee structure in the hospital --
"Pharmacy & Therapeutics", "Patient Care Committee" etc -- had their physicians, nurses
and pharmacists replaced with bureaucrats. Some of these bureaucrats were MDs and RNs -- the
paycheck was awesome -- and they turned their backs on their duties and their colleagues and
patients on the ground to keep the cash coming. I even lived to see the day when one of my
hospitals fired the MD and RN leadership of the Medical Ethics Committee and replaced them
with an MBA.
Suddenly, the only ethical thing to do was whatever was needed to maximize cash flow. And
any MD or RN who did not like it? Well, you're fired -- see you later. We began to completely
corporatize medical care. Advertisements and billboards everywhere, customer service feedback
surveys flowing in the mail, the list is endless. Public health concerns began to be confined
strictly to things that would boost revenue: colonoscopies, mammograms, labs, vaccinations,
bone density studies, etc. Things that have no revenue flow -- like mental health issues,
opioid abuse, elder care -- well, who cares about that? Very soon, the hospitals began to
merge into gigantic corporations and then they began to collude to control the health care
costs in the community. Our health care systems in all our big cities are gigantic
monopolies. This despite the fact that this kind of behaviour is illegal under federal
statutes. And please note: this is why insurance costs are so enormously high in this country
-- and getting higher every year. Obamacare did NOTHING to stop this; it actually in many
ways has made it much easier to pull off.
Because of this situation and for many other reasons, I decided to make a change in my
life a few years ago. I have now moved to a very small hospital in rural America. In my life
now, the corporate board has now been replaced by a board elected by the taxpayers: they are
truly leaders of the community and do everything in the spirit of what the people need and
are counting on from their hospital. The hospital is led by an MD -- and there are
administrators -- but they too are members of the community. There is an obvious care about
the community and its needs. I have spoken to colleagues across the country this week -- some
big hospitals have done nothing at all to prepare for the crisis. It is no surprise to me
that people in all levels at my current hospital have gone to enormous lengths to make sure
everyone here is ready to go. I feel like I have stepped back in time twenty years. It is a
very good feeling.
In the big city, I had become very accustomed to going to important meetings in the
hospitals -- all controlled by the business leadership now -- and no medical facts or issues
being discussed at all. Anything medical is distilled down to number crunching, revenue
cycles, and "profit centers." Never a word is said about medical facts, public health, impact
on patients, or morality like it used to be -- at least most of the time. Anyone who voices
dissent is ostracized, and finds themselves disinvited and even dismissed from
employment.
So the Youtube video is old hat to me. The people in charge of these critical things in
our world often look like Barbie and Ken. They are cool cucumbers. They know all about
branding, deceptive advertising, maximizing revenue, hiding truths, sucking up. But when
actually asked questions that are critical to the issue at hand -- they often know nothing.
And because they know nothing, nothing gets done. I have seen it many times before and am
sure I will see it again. I read commentary online that people were shocked by that DHS
Chief's answers to questions. I am not shocked -- I am very accustomed to it. Please note:
our entire corporate health care system at the local hospital level in the big cities is now
under the control of people just like him. They are looking for every way they can to defuse
this crisis with calming advertising, words, pleasantries, smiles, and soothing statements. I
am sure that they are also looking for any way they can profit financially from it as well.
All I can say is: Good Luck.
A case in point was the following interaction I was told about yesterday by an old student
of mine who is now a fellow at a major medical center on the East Coast. I heard the same
exact recollection of the story from someone else in the room.
This was a meeting with the upper administration of the hospital system and heads of
departments and multiple physicians and nurses. It occurred between the CEO and a DOC who is
older and near retirement and who is an infectious disease specialist. The discussion about
the current crisis went something like this:
CEO: I am not sure that we need to be preparing like this – this is obviously
overblown – and is really going to damage our budget projections. The HHS seems to
think this is going to go away in the spring anyway. DOC: Why in God's name would you want it to go away in the spring? CEO: (chuckling) What the hell are you talking about? We all want this thing to go away as
soon as possible. DOC – Historically, when pandemics are spread by aerosol droplets, and are as
infectious as this one seems to be, they may recede in the spring -- but then come back in
the fall with horrific fury. Remember the last one -- the Spanish Flu? The first wave was
nothing, but the second and third waves turned the planet into a funeral home. CEO: Oh for God's sake – don't you get it? That will give us time to get a vaccine
-- we will not need to worry about it in October. DOC: A vaccine? you must be kidding. It is never a good idea to rush a vaccine. Remember
the first polio vaccine was rushed to market. It did not work and actually harmed many
children. Remember the swine flu vaccine in the 1970s? It was not properly tested. Very few
died from the swine flu. Hundreds and thousands were maimed or killed by Guillain
Barré Syndrome because of it. And I doubt that half of our population would be even
willing to take it. You do not understand.
CEO: Oh I understand way more than you obviously do. There is already an antiviral --
we will have that as well.
DOC: Really? Again, not really fully tested. And have you looked at the cost? Even a
conservative estimate at the dosing they are using it would be $5000 a day. What is that
going to do to your budget projections when you have 100 people in here in the hospital on
that drug? Do we even have enough in the country for a sudden mass need? I do not
know.
And then CEO looked DOC in the eye and just moved on to something else.
And DOC found out later that he would no longer be welcome at any of these meetings.
Please know this: viruses are not Republicans, they are not Democrats. Viruses are not
going to respond to advertising, sweet words, or revenue cycles. They are going to accomplish
their mission, and that alone. There may be things we are able to do, but we will need all
the medical wisdom in the world focusing on our country as a whole and our local communities.
That is just not happening to the extent it should be. We are going to fight this one with
business school principles.
I again pray all the time that this virus will burn out -- that it will stop, that it will
not get worse. I pray that God will have mercy and allow this to be a close call. But I am
afraid that we have let our society crumble in so many ways –not just medicine -- that
it is going to take a punch in the face to get our attention. This coronavirus may very well
be the brass knuckles.
A follow-up e-mail from him:
This has been one of the most harrowing weeks in my career. The patients are really wigged
out. Multiple times this week, I have seen patients with a cough or fever -- and we cannot ID
a pathogen. That has caused a constant boogeyman to be sitting on my shoulder: fear. I can
see the fear in my staff's eyes, and then on Friday, a nurse suddenly after lunch developed a
101 fever and a bad cough -- again no pathogens. I have a feeling this is happening in many
other places in this country.
We have no way to test these people. I can offer little if any hope. I am telling them to
stay at home, and I can see the horror in their eyes. I am now at the same level of those
physicians in Milano 700 years ago –
So when I get this kind of soul crushing fear in my life, I always call one of my elder
family members. My parents and grandparents are all gone now. The only one left is my 92 year
old Auntie Marina. She lived through hell in Greece during the Nazi occupation and
immediately thereafter. She is an amazing woman. And this is what she said to me.
"My dear, I was there when your parents handed your life and everything you are over to
God. I was right on the front row. He has been preparing you every day of your life since you
were a baby for the duties that you must now perform. Be brave, and sturdy, and do everything
in His name. He will surround you with courage -- and fear not, if he decides this is your
time to go, you will be welcomed by all the saints and angels. But here in our house, we are
going to be lifting you up in prayer, multiple times a day. And I am certain that your
parents are looking down and are very very proud of you."
I am a member of my community and my church. I cannot leave my post -- and I would ask
that you pray for me and my staff for the bravery to continue on. I know that is a lot of
drama, but we are really having fear here on the front lines. I would ask that you keep all
the health care workers in America in your prayers right now.
In further conversation, the doctor said that we should be thinking about a world in which a
large number of health care workers can't come to work because they are in quarantine or sick
with the virus. We are looking at this problem right now.
He also recommends that people follow the coronavirus Reddit, which he says is
well-moderated, and a source of solid information: https://www.reddit.com/r/Coronavirus/
Rate cuts don't do anything in a credit contraction. Matter of fact, they make it worse.
Might as well go to negative rates and really screw things up.
The effective Fed rate should have been 400bps or more considering the rate of inflation
was in the low 2's. If the Fed rate isn't high enough, it robs from the productive economy
and stimulates credit bubbles. This has shown itself 2 straight cycles. The first in subprime
mortgages and now subprime consumer loans(which hopefully won't have the same contagion
effect).
Lets also note, the effective rate being about 2% above the rate of inflation is a JMK
belief.
Below are parts of a ZH article on the financial market front in the civilization war
humanity is engaged in. In case you were not watching, the world markets went down
significantly all last week and the financial world and a few others are wondering what
Hand, The Invisible is going to do.
"
Update (2225ET): Well who could have seen that coming? Following The BoJ's promise to do
'whatever it takes' to stabilize the markets (though nothing about the economy of course),
the reaction was delayed until someone got the tap on the shoulder to buy with both hands and
feet...
NKY Futs are up 900 points from the opening lows...
Dow futures are now up 850 points from the opening lows...
WTI is soaring...
And Treasury yields have reversed dramatically higher...
Did Stevey (Mnuchin, US Treasury Sec.) make the call?
Or is The National Team on the case? (Plunge Protection Team)
"
Their version had graphs and pictures but you get the picture of wild fluctuations based on
promises of public bailouts of private loss
Given the yet to be appreciated global economic impact of the spreading coronavirus, the
next couple of weeks/months should be something to experience....grin. There may be rebounds
but the trajectory seems evident and anticipated for quite some time......death by a thousand
cuts and this is just the significant financial front.
a few who warned ahead of the 2008 financial collapse sees the Coronavirus being the
catalyst for a severe Credit Crunch and not just a supply chain disruptor.
There are mounting risks of a credit crunch in vulnerable sectors of the corporate bond
market
A swath of highly indebted companies face an incipient funding shock and risk being shut
out of the capital markets as the COVID-19 epidemic mushrooms into global crisis, Standard
& Poor's has warned.[.]
Clearly the view two or three weeks ago that this would peak in March is no longer
appropriate. The question becoming very relevant is which companies are going to be able to
refinance," he said..[.]
{from Ambrose's article -
He presents a scary list of zombie companies, many are household names heavy in debt. A mix
of US and European Zcos on the list is: Kraft-Heinz, VW, Macy, Xerox, Western Digital.
Small companies will be forced to lay off workers.
Chinese companies are told to use electricity even if on skeleton staff just for
appearances sake as that usage goes into the data as in measuring GDP. )
Btw, Canada Health and UK are advising their citizens to stock up on meds, food, water and
daily essentials.
A healthy market correction this week, as it was called by some pundits, thankful that the
lack of 'market collars' and 'circuit breakers' allowed buyers and sellers to find each other
without interference. It's almost romantic sounding.
This was the worst week for stocks since 2008, with the SP 500 and Nasdaq down a little over
ten percent.
But it did end on a kind of an upbeat note, as the stock futures recovered today's losses
and managed to go into the weekend in the green.
Several factors contributed to this.
First and foremost, the odds of a rate cut in March jumped to 96.3% today from 8.9% a week
ago, we hear. I am struggling with the notion that cheaper benchmark rates are going to tempt
people to ignore the coronavirus and go to the mall. But it may put a little life back into the
financial asset bubble. Needs must.
The team of Kudlow and Mnuchin managed to rally the banks to smack the crap out of gold and
silver, running the stops and triggering margin calls from the recently increased margin
requirments on the Comex. Since the Banks were struggling with an oversized short position it
certainly helped out the financial system while dampening the enthusiasm for hard assets
No slackers here, there is a two prong effort across the established powers to manage and
control the narrative, while ensuring boatloads of money continue to reach 'the right kinds of
people.'
The spice must flow.
And in a bipartisan celebration of better news, Joe Biden is expected to crush the
opposition (Bernie) in South Carolina this weekend, an all important victory for the forces of
the status quo.
In all seriousness, let's remember those who are suffering with this virus around the world,
struggling to go about their business while trying to protect their livelihoods and
families.
Now is a good time to prepare, if you have not already done so, and to begin engaging in
those simple procedures that may help us weather this.
A healthy market correction this week, as it was called by some pundits, thankful that the
lack of 'market collars' and 'circuit breakers' allowed buyers and sellers to find each other
without interference. It's almost romantic sounding.
This was the worst week for stocks since 2008, with the SP 500 and Nasdaq down a little over
ten percent.
But it did end on a kind of an upbeat note, as the stock futures recovered today's losses
and managed to go into the weekend in the green.
Several factors contributed to this.
First and foremost, the odds of a rate cut in March jumped to 96.3% today from 8.9% a week
ago, we hear. I am struggling with the notion that cheaper benchmark rates are going to tempt
people to ignore the coronavirus and go to the mall. But it may put a little life back into the
financial asset bubble. Needs must.
The team of Kudlow and Mnuchin managed to rally the banks to smack the crap out of gold and
silver, running the stops and triggering margin calls from the recently increased margin
requirments on the Comex. Since the Banks were struggling with an oversized short position it
certainly helped out the financial system while dampening the enthusiasm for hard assets
No slackers here, there is a two prong effort across the established powers to manage and
control the narrative, while ensuring boatloads of money continue to reach 'the right kinds of
people.'
The spice must flow.
And in a bipartisan celebration of better news, Joe Biden is expected to crush the
opposition (Bernie) in South Carolina this weekend, an all important victory for the forces of
the status quo.
In all seriousness, let's remember those who are suffering with this virus around the world,
struggling to go about their business while trying to protect their livelihoods and
families.
Now is a good time to prepare, if you have not already done so, and to begin engaging in
those simple procedures that may help us weather this.
"... With Glass-Steagall now removed, legitimate capital such as pension funds could be used to start a hedge to end all hedges. Billions were now poured into mortgage-backed securities (MBS), a market which had been artificially plunged to record-breaking interest rate lows of 1-2% for over a year by the US Federal Reserve making borrowing easy, and the returns on the investments into the MBSs obscene. ..."
"... This is the system which died in 2008. Contrary to popular belief, nothing was actually resolved. For all the talk of an "FDR revival" under Obama, speculation wasn't actually regulated under the Dodd-Frank Act or the Volker Rule of 2010. No productive credit was created to grow the real economy under a national mission as was the case in 1933-1938. ..."
"... Banks were not broken up while derivatives GREW by 40% with the new bubble concentrated in the corporate/household debt sector now collapsing. During this time, nation states continued to be stripped, as austerity was rammed down the throats of nations. ..."
"... It should be no surprise that in the midst of this despair, a creative alliance was consolidated in defense of the interests of sovereign nation states and humanity at large led by the leadership of Russia and China. ..."
"... The Eurasian nations are already firmly committed to this new system, and if the west is to qualify morally to take part in this new epoch, then the first step will be a return to a Glass-Steagall. ..."
"... Joe Kennedy was tasked by FDR with creating the regulations to reform Wall Street, thus earning him their undying enmity. ..."
"... Joe Kennedy has therefore had a hard press and been accused of the Corbyn disease of anti-semitisms, and I imagine the same old experts will be lining up to give him another kicking ..."
"... I would venture that the coronavirus rollocks is all a cover for the inevitable economic collapse. ..."
"... At last. Sanity. A brilliantly truthful article. Almost totally agree with this history of how the fuck the fucking bankers got their hands on almost fucking everything. ..."
"... Interesting article, but the conclusions are off. That solution (i.e. return to Glass-Steagall) would have worked 20 , maybe 10 years ago. We are way to passed that point. The looters are now part of the system– no one will embrace Glass-Steal. The system is on life support. ..."
(Photo by Philip FONG / AFP) (Photo by PHILIP FONG/AFP via Getty Images)
With last Monday's 1000 point stock market plunge the internet has been set ablaze with discussion of a new crash looming on the
horizon. The fact that such a chain reaction collapse was only kept at bay due to massive liquidity injections by the Federal Reserve's
overnight repo loans should not be ignored.
These injections which began in September 2019, have grown to over $100 billion per night all that to support the largest financial
bubble in human history with global derivatives estimated at $1.2 quadrillion (20 times the global GDP!).
Sadly economic illiteracy is so pervasive among today's modern economists that the real reasons for this crisis have been entirely
misdiagnosed with financial experts from CNN, to Forbes blaming the volatility on the spread of the Corona virus!
Not the Corona Virus: The real cause of the oncoming Financial collapse.
As refreshing as it is to hear candid criticisms of the system's failure and even support for the restoration of Glass-Steagall
bank separation from presidential candidates like Bernie Sanders, Tulsi Gabbard or even the lame Elisabeth Warren we find that in
each case, those candidates are on record supporting policies cooked up by the very same oligarchs they appear to despise in the
form of the Green New Deal.
In spite of what many of its progressive proponents would wish, such a global green reform would not only impose Malthusian depopulation
upon nation states globally were it accepted, but would establish a the supranational authority of a technocratic managerial elite
as enforcers of a "de-carbonization agenda".
Due to the rampant lack of comprehension of how this crisis was created such that such idiotic proposals as "green new deals"
are now seriously being suggested as remedies to our current ills, a bit of history is in order.
Some necessary background
"The money changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the
ancient truths. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary
profit."
Franklin Delano Roosevelt, first Inaugural Address 1933
Knowing that the "money changers" had only been able to create the great bubbles of the 1920s via their access to the deposits
of the commercial banks, Franklin Roosevelt made the core of his battle against the abuses of Wall Street centre around a 1933 legislation
entitled "Glass-Steagall", named after the two federally elected officials who led the reform with FDR.
This was a bill which forced the absolute separation of productive from speculative banking, guaranteeing via the Federal Deposit
Insurance Corporation (FDIC) only those commercial banking assets associated with the productive economy, but forcing any speculative
losses arising from investment banking to be suffered by the gambler. The striking success of this law inspired other countries around
the world to establish similar bank separation.
Alongside principles of capital budgeting, public credit, parity pricing and a commitment to scientific and technological development,
a dynamic had been created that would express the greatest hope for the world, and the greatest fear for the financial empire occupying
the City of London and Wall Street.
The death of John F. Kennedy ushered in a new age of pessimism and cultural irrationalism from which our society has never recovered.
The destruction of a long term vision as exemplified by the space program, the St. Lawrence Seaway and the New Deal projects had
resulted in a tendency within the population to increasingly look upon present pleasures as the only reality, and future goods as
the mystical expression of the sum of present pleasures.
In this new philosophical setting, so alien in previous epochs, money was permitted to act as a power unto itself for short term
gains instead of serving the investments into the real productive wealth of society. With this new paradigm shift into the "now",
a new economic model was adopted to replace the industrial economic model which had proven itself in the years preceding and following
World War II.
The name for this system was "post-industrial monetarism". This would be a system ushered in by Richard Nixon's announcement of
the destruction of the fixed-exchange rate Bretton Woods system and its replacement by the "floating rate" system of post 1971 fame.
During that same fateful year of 1971, another ominous event took place: the formation of the
Rothschild Inter-Alpha Group of banks under the umbrella of the Royal Bank of Scotland, which today controls upwards of 70% of
the global financial system.
The stated intention of this Group would be found in the 1983 speech by Lord Jacob Rothschild:
"two broad types of giant institutions, the worldwide financial service company and the international commercial bank with
a global trading competence, may converge to form the ultimate, all-powerful, many-headed financial conglomerate."
This policy demanded the destruction of the sovereign nation-state system and the imposition of a new feudal structure of world
governance through the age-old scheme of controlling the money system on the one side, and playing on the vices of credulous fools
who, by allowing their nations to be ruled by the belief that hedonistic market forces govern the world, would seal their own children's
doom.
All the while, geopolitical structures foreign to the United States constitutional traditions were imposed by nests of Oxford-trained
Rhodes Scholars and Fabians who converted America into a global "dumb giant" enforcing a neo colonial program under a "Anglo-US Special
Relationship". The Dulles brothers, McGeorge Bundy, Kissinger, and Bush all represent names that advanced this British directed plan
throughout the 20th century.
London's 'Big Bang'
The great "liberalization" of world commerce began with a series of waves through the 1970s, and moved into high gear with the
interest rate hikes of Federal Reserve Chairman Paul Volcker in 1980-82, the effects of which both annihilated much of the small
and medium sized entrepreneurs, opened the speculative gates into the "Savings and Loan" debacle and also helped cartelize mineral,
food, and financial institutions into ever greater behemoths.
Volcker himself described this process as the "controlled disintegration of the US economy" upon becoming Fed Chairman in 1978.
The raising of interest rates to 20-21% not only shut down the life blood of much of the US economic base, but also threw the third
world into greater debt slavery, as nations now had to pay usurious interest on US loans.
In 1986, the City of London announced the beginning of a new era of economic irrationalism with Margaret Thatcher's "Big Bang"
deregulation. This wave of liberalization took the world by storm as it swept aside the separation of commercial, deposit and investment
banking which had been the post-world war cornerstone in ensuring that the will of private finance would never again hold more sway
than the power of sovereign nation-states.
After decades of chipping away at the structure of regulation that FDR's bold intervention into history had built, the "Big Bang"
set a precedent for similar financial de-regulation into the "Universal Banking" model in other parts of the western world.
The Derivative Time Bomb is Set
In September 1987, the 20-year foray into speculation resulted in a 23% collapse of the Dow Jones on October 19, 1987. Within
hours of this crash, international emergency meetings had been convened with former JP Morgan tool Alan Greenspan introducing a "solution"
which would have the future echoes of hyperinflation and fascism written all over it.
"Creative financial instruments" was the Orwellian name given to the new financial asset popularized by Greenspan, but otherwise
known as "derivatives".
New supercomputing technologies were increasingly used in this new venture, not as the support for higher nation building practices,
and space exploration programs as their NASA origins intended, but would rather become perverted to accommodate the creation of new
complex formulas which could associate values to price differentials on securities and insured debts that could then be "hedged"
on those very spot and futures markets made possible via the destruction of the Bretton Woods system in 1971.
So while an exponentially self-generating monster was created that could end nowhere but in a meltdown, "market confidence" rallied
back in force with the new flux of easy money. The physical potential to sustain human life continued to plummet.
NAFTA, the Euro and the End of History
It is no coincidence that within this period, another deadly treaty was passed called the North American Free Trade Agreement
(NAFTA). With this Agreement made law, protective programs that had kept North American factories in the U.S and Canada were struck
down, allowing for the export of the lifeblood of highly skilled industrial workforce to Mexico where skills were low, technologies
lower, and salaries lower still.
With a stripping of its productive assets, North America became increasingly reliant on exporting cheap resources and services
for its means of existence.
Again, the physically productive powers of society would collapse, yet monetary profits in the ephemeral "now" would skyrocket.
This was replicated in Europe with the creation of the Maastricht Treaty in 1992 establishing the Euro by 1994 while the "liberalization"
process of Perestroika replicated this agenda in the former Soviet Union. While some personalities gave this agenda the name "End
of History" and others "the New World Order", the effect was the same.
Universal Banking, NAFTA, Euro integration and the creation of the derivative economy in a space of just several years would induce
a cartelization of finance through newly legalized mergers and acquisitions at a rate never before seen. The multitude of financial
institutions that had existed in the early 1980s were absorbed into each other at great speed through the 1990s in true "survival
of the fittest" fashion. No matter what level of regulation were attempted under this new structure, the degree of conflict of interest,
and private political power was uncontrollable, as evidenced in the United States, by the shutdown of any attempt by Securities and
Exchange Commission head
Brooksley Born
to fight the derivative cancer at its early stages.
By 1999 a politically castrated Bill Clinton found himself signing into law a treaty authored by then Treasury Secretary Larry
Summers known as the Gramm-Leach-Bliley Act, which would be the final nail in the coffin for the Glass-Steagall separation of commercial
and investment banking in the United States.
The new age of unregulated trading and creation of over-the-counter derivatives caused these strange financial instruments to
grow from $60 trillion in 2000 to $600 trillion by 2008.
The 2000-2008 Frenzy
With Glass-Steagall now removed, legitimate capital such as pension funds could be used to start a hedge to end all hedges.
Billions were now poured into mortgage-backed securities (MBS), a market which had been artificially plunged to record-breaking interest
rate lows of 1-2% for over a year by the US Federal Reserve making borrowing easy, and the returns on the investments into the MBSs
obscene.
The obscenity swelled as the values of the houses skyrocketed far beyond the real values to the tune of one hundred thousand dollar
homes selling for 5-6 times that price within the span of several years.
As long as no one assumed this growth was ab-normal, and the unpayable nature of the capital underlying the leveraged assets locked
up in the now infamous "sub-primes" and other illegitimate debt obligations was ignored, then profits were supposed to just continue
infinitely. Anyone who questioned this logic was considered a heretic by the latter-day priesthood.
The stunning "success" of securitizing housing debts immediately induced a wave of sovereign wealth funds to come into prominence
applying the same model that had been used in the case of mortgage-backed securities (MBS) and collateralized debt obligations (CDO)
to the debts of entire nations.
The securitizing of bundled packages of sovereign debts that could then be infinitely leveraged on the de-regulated world markets
would no longer be considered an act of national treason, but the key to easy money.
Conclusion
This is the system which died in 2008. Contrary to popular belief, nothing was actually resolved. For all the talk of an "FDR
revival" under Obama, speculation wasn't actually regulated under the Dodd-Frank Act or the Volker Rule of 2010. No productive credit
was created to grow the real economy under a national mission as was the case in 1933-1938.
Banks were not broken up while derivatives GREW by 40% with the new bubble concentrated in the corporate/household debt sector
now collapsing. During this time, nation states continued to be stripped, as austerity was rammed down the throats of nations.
It should be no surprise that in the midst of this despair, a creative alliance was consolidated in defense of the interests
of sovereign nation states and humanity at large led by the leadership of Russia and China.
This leadership took the form of the China-led Belt and Road Initiative which has grown to embrace over 130 countries today and
looking more and more like an Asian-led version of the New Deal of the 1930s.
Indeed, China's capacity to unleash long term credit for thousands of international long term infrastructure projects was made
possible by the fact that it was the only country on the globe which had not given up the principles of bank separation which were
destroyed in every other nation.
Very few western figures stood up to this self-induced destruction over the decades, but one notable exception here worth mentioning
is the figure of the late American economist Lyndon LaRouche (1922-2019) who not only resisted this process for
over four decades , but fought alongside the Schiller Institute
to promote New Silk Road as early as 1996 .
With the 2016 Brexit and election of President Trump, a new wave of nationalist spirit has become a fire which the technocrats
have lost their capacity to snuff out.
Increasingly, the idea that nation-states have a power over the private banking system has become revived and discussion for reforming
the now dead Trans-Atlantic system is increasingly shaped not by the calls for a "New World Order" as Sir Kissinger would have liked,
but rather for a New Silk Road and a true New Deal.
The Eurasian nations are already firmly committed to this new system, and if the west is to qualify morally to take part in
this new epoch, then the first step will be a return to a Glass-Steagall.
Excellent article which I could almost understand (my eyes glaze over at any mention of filthy lucre). The author makes clear
that the world took a different trajectory after the convenient death of JFK. As I recall from a biography of his father, Ambassador
Joe, was that Joe Kennedy was tasked by FDR with creating the regulations to reform Wall Street, thus earning him their undying
enmity.
Joe Kennedy has therefore had a hard press and been accused of the Corbyn disease of anti-semitisms, and I imagine the
same old experts will be lining up to give him another kicking
Spinky ,
A New Deal? A Green New Deal or a true New Deal? After revealing all of this incredible amount of manipulation of banking without
going the final step to the ultimate controllers of the deep state, and you suggest another New Deal? What the world needs now
is for the control systems to fail, not to be re supported again with handouts from the corporatocracy to the workers. We need
to reclaim our communities with local food security via non corporate food systems based on living soils. We need to reclaim any
kind of semblance of currency sanity with local currencies and supports. We need health care based on food as medicine, food that
is not GMO and chemical based, but based on healthy local ecosystems, not transportation systems spanning the globe, controlled
by central planners of any ideological stripe. Only if we focus on our own local regions can we ever hope to have any semblance
of sanity again. We need to realize that the corporatocracy, the deep state, doesn't concern itself with ideologies other than
as tools to control us with. All they care about is control, like all neurotics. After going through that entire article outlining
the insanity of regulation and control and deregulation and infinity of financial flows and the obvious insanity of all of it,
you surely must see that the ones with the money making the systems work are totally gonzo and the best the rest of us can do
is focus on what we can do locally, like they have done in Greece. We can't control trillionaires with logical arguments. It ain't
gonna happen. Bernie Sanders can become president and he still isn't going to stop the trillionaires and their insane efforts
to control the planet. He will just be a different type of puppet with different types of handouts and control mechanisms. Voting
is pointless and so are efforts at regulation. At this point, the best we can do is abandon the system, focus on our communities
and self sufficiency locally, and try to avoid the system collapse when it falls around us.
It looks like they're rolling out the police state in the UK
https://www.bbc.com/news/uk-51708550 but we'll have to wait until tomorrow (Tuesday) to get a better idea of what the psychopaths are trying to foist on us.
I would venture that the coronavirus rollocks is all a cover for the inevitable economic collapse.
Dungroanin ,
At last. Sanity. A brilliantly truthful article. Almost totally agree with this history of how the fuck the fucking bankers got their hands on almost fucking everything.
The first quibble is that starting history at FDR ignores the period of the creation of the Fed all the way back to it's prototype
the BoE.
The second is about the creation of the Euro which ignores the political economic security desire of the evolving EU – the
EMU and it's years of alignment of the EC preceding Maastricht and the bastardisation of the original vision by the rapid enrollment
of countries and economies for Geopolitical (and even anti-EU) reasons. The EU being more likely to implement a 'Glass-Steagle'
type of alignment through the level-playing-field ever-closet-union. That chalice being liberally poisoned by the global Banker
interests.
Torontonian,
Interesting article, but the conclusions are off. That solution (i.e. return to Glass-Steagall) would have worked 20 , maybe 10 years
ago. We are way to passed that point. The looters are now part of the system– no one will embrace Glass-Steal. The system is on
life support.
he federal government's inadequate testing for coronavirus over the last two months has
meant that the authorities have been oblivious to the
full extent of the outbreak in the U.S.:
The coronavirus has been circulating undetected and has possibly infected scores of people
over the past six weeks in Washington state, according to a genetic analysis of virus samples
that has sobering implications for the entire country amid heightening anxiety about the
likely spread of the disease.
The researchers conducted genetic sequencing of two virus samples. One is from a patient
who traveled from China to Snohomish County in mid-January and was the first person diagnosed
with the disease in the United States. The other came from a recently diagnosed patient in
the same county, a high school student with no travel-related or other known exposure to the
coronavirus. The two samples look almost identical genetically, said Trevor Bedford, a
computational biologist at Fred Hutchinson Cancer Research Center in Seattle who announced
the results of the research on Twitter late Saturday night.
"This strongly suggests that there has been cryptic transmission in Washington State for
the past 6 weeks," Bedford wrote. "I believe we're facing an already substantial outbreak in
Washington State that was not detected until now due to narrow case definition requiring
direct travel to China."
When the administration is determined to minimize the significance of the outbreak and to
pretend that all is well, they are signalling to the relevant agencies that they don't want to
hear contradictory information. It then requires whistle-blowers inside those agencies to
call attention to serious lapses and failures in the government's response, and if it
weren't for these people the public would be even more in the dark about what is happening and
how the government is reacting. The administration's handling of the response has already
proven itself to be quite poor, but that still doesn't fully capture how
chaotic and confused it has been :
Interviews with nearly two dozen administration officials, former White House aides,
public health experts and lawmakers -- many speaking on the condition of anonymity to share
candid assessments and details -- portray a White House scrambling to gain control of a
rudderless response defined by bureaucratic infighting, confusion and misinformation.
"It's complete chaos," a senior administration official said. "Everyone is just trying to
get a handle on what the [expletive] is going on."
The government was ill-prepared for this outbreak and then frittered away what time they had
to get ready. The Trump administration previously
dismantled the part of the National Security Council concerned with organizing a response
to pandemics (thank you, John Bolton). Laurie Garrett
wrote about this last month:
Public health advocates have been ringing alarm bells to no avail. Klain has been warning
for two years that the United States was in grave danger should a pandemic emerge. In 2017
and 2018, the philanthropist billionaire Bill Gates met repeatedly with Bolton and his
predecessor, H.R. McMaster, warning that ongoing cuts to the global health disease
infrastructure would render the United States vulnerable to, as he put it, the "significant
probability of a large and lethal modern-day pandemic occurring in our lifetimes." And an
independent, bipartisan panel formed by the Center for Strategic and International Studies
concluded that lack of preparedness was so acute in the Trump administration that the "United
States must either pay now and gain protection and security or wait for the next epidemic and
pay a much greater price in human and economic costs."
The Trump administration opted for weakening protections for public health on the off-chance
that the bill wouldn't come due while they were in office. Like so many other short-sighted
things they have done over the last three years, this has blown up in their face to the
country's detriment.
ProPublica reported last week on
the CDC's mistakes that led to the lack of adequate testing:
As the highly infectious coronavirus jumped from China to country after country in January
and February, the U.S. Centers for Disease Control and Prevention lost valuable weeks that
could have been used to track its possible spread in the United States because it insisted
upon devising its own test.
The federal agency shunned the World Health Organization test guidelines used by other
countries and set out to create a more complicated test of its own that could identify a
range of similar viruses. But when it was sent to labs across the country in the first week
of February, it didn't work as expected. The CDC test correctly identified COVID-19, the
disease caused by the virus. But in all but a handful of state labs, it falsely flagged the
presence of the other viruses in harmless samples.
As a result, until Wednesday the CDC and the Food and Drug Administration only allowed
those state labs to use the test -- a decision with potentially significant consequences. The
lack of a reliable test prevented local officials from taking a crucial first step in coping
with a possible outbreak -- "surveillance testing" of hundreds of people in possible
hotspots. Epidemiologists in other countries have used this sort of testing to track the
spread of the disease before large numbers of people turn up at hospitals.
Jeremy Konyndyk explains how the CDC effectively blinded itself to the reality of the
problem by defining it so narrowly that they missed what was happening:
The result of that definition, as @JenniferNuzzo and others have
eloquently argued, was that we were blind to community spread – because CDC had defined
suspect cases so narrowly as to exclude that possibility.
Can't see them, so can't test them, so blind to what's happening.
The U.S. has been flying blind in response to the outbreak of this virus. Our government is
lagging badly behind more effective efforts at detection and treatment in other countries, and
the public will pay the price for this negligence and unpreparedness.
Below are parts of a ZH article on the financial market front in the civilization war
humanity is engaged in. In case you were not watching, the world markets went down
significantly all last week and the financial world and a few others are wondering what
Hand, The Invisible is going to do.
"
Update (2225ET): Well who could have seen that coming? Following The BoJ's promise to do
'whatever it takes' to stabilize the markets (though nothing about the economy of course),
the reaction was delayed until someone got the tap on the shoulder to buy with both hands and
feet...
NKY Futs are up 900 points from the opening lows...
Dow futures are now up 850 points from the opening lows...
WTI is soaring...
And Treasury yields have reversed dramatically higher...
Did Stevey (Mnuchin, US Treasury Sec.) make the call?
Or is The National Team on the case? (Plunge Protection Team)
"
Their version had graphs and pictures but you get the picture of wild fluctuations based on
promises of public bailouts of private loss
Given the yet to be appreciated global economic impact of the spreading coronavirus, the
next couple of weeks/months should be something to experience....grin. There may be rebounds
but the trajectory seems evident and anticipated for quite some time......death by a thousand
cuts and this is just the significant financial front.
The article is mostly junk. But it contains some important insights into the rise of Trympism (aka "national neoliberalism") --
nationalist oligarchy. Including the following " the governments that have emerged from the new populist moment are, to date, not
actually pursuing policies that are economically populist."
The real threat to liberal democracy isn't authoritarianism -- it's nationalist oligarchy. Here's how American foreign policy should
change. The real threat to liberal democracy isn't authoritarianism -- it's nationalist oligarchy. Here's how American foreign policy
should change.
Notable quotes:
"... Fascism: A Warning ..."
"... Can it Happen Here? Authoritarianism in America ..."
"... the governments that have emerged from the new populist moment are, to date, not actually pursuing policies that are economically populist. ..."
"... The better and more useful way to view these regimes -- and the threat to democracy emerging at home and abroad because of them -- is as nationalist oligarchies. Oligarchy means rule by a small number of rich people. In an oligarchy, wealthy elites seek to preserve and extend their wealth and power. In his definitive book titled Oligarchy ..."
"... Oligarchies remain in power through two strategies: first, using divide-and-conquer tactics to ensure that a majority doesn't coalesce, and second, by rigging the political system to make it harder for any emerging majority to overthrow them. ..."
"... Rigging the system is, in some ways, a more obvious tactic. It means changing the legal rules of the game or shaping the political marketplace to preserve power. Voting restrictions and suppression, gerrymandering, and manipulation of the media are examples. The common theme is that they insulate the minority in power from democracy; they prevent the population from kicking the rulers out through ordinary political means. ..."
"... Classical Greek Oligarchy ..."
"... Framing today's threat as nationalist oligarchy not only clarifies the challenge but also makes clear how democracy is different -- and what democracy requires. Democracy means more than elections, an independent judiciary, a free press, and various constitutional norms. For democracy to persist, there must also be relative economic equality. If society is deeply unequal economically, the wealthy will dominate politics and transform democracy into an oligarchy. And there must be some degree of social solidarity because, as Lincoln put it, "A house divided against itself cannot stand." ..."
"... We see a number of disturbing signs the United States is breaking down along these dimensions. ..."
"... The view that money is speech under the First Amendment has unleashed wealthy individuals and corporations to spend as much as they want to influence politics. The "doom loop of oligarchy," as Ezra Klein has called it, is an obvious consequence: The wealthy use their money to influence politics and rig policy to increase their wealth, which in turn increases their capacity to influence politics. Meanwhile, we're increasingly divided into like-minded enclaves, and the result is an ever-more toxic degree of partisanship. ..."
"... The Counterinsurgent's Constitution: Law in the Age of Small Wars ..."
"... The Crisis of the Middle-Class Constitution: Why Economic Inequality Threatens our Republic ..."
Ever since the 2016 election, foreign policy commentators and practitioners have been engaged in a series of soul-searching exercises
to understand the great transformations taking place in the world -- and to articulate a framework appropriate to the challenges
of our time. Some have looked backwards, arguing that the liberal international order is collapsing, while others question whether
it ever existed. Another group seems to hope the current messiness is simply a blip and that foreign policy will return to normalcy
after it passes. Perhaps the most prominent group has identified today's great threat as the rise of authoritarianism, autocracy,
and illiberal democracy. They fear that constitutional democracy is receding as norms are broken and institutions are under siege.
Unfortunately, this approach misunderstands the nature of the current crisis. The challenge we face today is not one of authoritarianism,
as so many seem inclined to believe, but of nationalist oligarchy. This form of government feeds populism to the people, delivers
special privileges to the rich and well-connected, and rigs politics to sustain its regime.
... ... ..
Authoritarianism or What?
Across the political spectrum, commentators and scholars have identified -- and warned of -- the global rise of autocracies and
authoritarian governments. They cite Russia, Hungary, the Philippines, and Turkey, among others. Distinguished commentators are increasingly
worried. Former Secretary of State Madeleine Albright recently published a book called Fascism: A Warning . Cass Sunstein
gathered a variety of scholars for a collection titled, Can it Happen Here? Authoritarianism in America .
The authoritarian lens is familiar from the heroic narrative of democracy defeating autocracies in the twentieth century. But
as a framework for understanding today's central geopolitical challenges, it is far too narrow. This is mainly because those who
are worried about the rise of authoritarianism and the crisis of democracy are insufficiently focused on economics. Their emphasis
is almost exclusively political and constitutional -- free speech, voting rights, equal treatment for minorities, independent courts,
and the like. But politics and economics cannot be dissociated from each other, and neither are autonomous from social and cultural
factors. Statesmen and philosophers used to call this "political economy." Political economy looks at economic and political relationships
in concert, and it is attentive to how power is exercised. If authoritarianism is the future, there must be a story of its political
economy -- how it uses politics and economics to gain and hold power. Yet the rise-of-authoritarianism theorists have less to say
about these dynamics.
To be sure, many commentators have discussed populist movements throughout Europe and America, and there has been no shortage
of debate on the extent to which a generation of widening economic inequality has been a contributing factor in their rise. But whatever
the causes of popular discontent, the policy preferences of the people, and the bloviating rhetoric of leaders, the governments
that have emerged from the new populist moment are, to date, not actually pursuing policies that are economically populist.
The better and more useful way to view these regimes -- and the threat to democracy emerging at home and abroad because of
them -- is as nationalist oligarchies. Oligarchy means rule by a small number of rich people. In an oligarchy, wealthy elites seek
to preserve and extend their wealth and power. In his definitive book titled Oligarchy , Jeffrey Winters calls it "wealth
defense." Elites engage in "property defense," protecting what they already have, and "income defense," preserving and extending
their ability to hoard more. Importantly, oligarchy as a governing strategy accounts for both politics and economics. Oligarchs use
economic power to gain and hold political power and, in turn, use politics to expand their economic power.
Those who worry about the rise of authoritarianism and fear the crisis of democracy are insufficiently focused on economics.
The trouble for oligarchs is that their regime involves rule by a small number of wealthy elites. In even a nominally
democratic society, and most countries around the world today are at least that, it should be possible for the much larger majority
to overthrow the oligarchy with either the ballot or the bullet. So how can oligarchy persist? This is where both nationalism and
authoritarianism come into play. Oligarchies remain in power through two strategies: first, using divide-and-conquer tactics
to ensure that a majority doesn't coalesce, and second, by rigging the political system to make it harder for any emerging majority
to overthrow them.
The divide-and-conquer strategy is an old one, and it works through a combination of coercion and co-optation. Nationalism --
whether statist, ethnic, religious, or racial -- serves both functions. It aligns a portion of ordinary people with the ruling oligarchy,
mobilizing them to support the regime and sacrifice for it. At the same time, it divides society, ensuring that the nationalism-inspired
will not join forces with everyone else to overthrow the oligarchs. We thus see fearmongering about minorities and immigrants, and
claims that the country belongs only to its "true" people, whom the leaders represent. Activating these emotional, cultural, and
political identities makes it harder for citizens in the country to unite across these divides and challenge the regime.
Rigging the system is, in some ways, a more obvious tactic. It means changing the legal rules of the game or shaping the political
marketplace to preserve power. Voting restrictions and suppression, gerrymandering, and manipulation of the media are examples. The
common theme is that they insulate the minority in power from democracy; they prevent the population from kicking the rulers out
through ordinary political means. Tactics like these are not new. They have existed, as Matthew Simonton shows in his book
Classical Greek Oligarchy , since at least the time of Pericles and Plato. The consequence, then as now, is that nationalist
oligarchies can continue to deliver economic policies to benefit the wealthy and well-connected.
It is worth noting that even the generation that waged war against fascism in Europe understood that the challenge to democracy
in their time was not just political, but economic and social as well. They believed that the rise of Nazism was tied to the concentration
of economic power in Germany, and that cartels and monopolies not only cooperated with and served the Nazi state, but helped its
rise and later sustained it. As New York Congressman Emanuel Celler, one of the authors of the Anti-Merger Act of 1950, said, quoting
a report filed by Secretary of War Kenneth Royall, "Germany under the Nazi set-up built up a great series of industrial monopolies
in steel, rubber, coal and other materials. The monopolies soon got control of Germany, brought Hitler to power, and forced virtually
the whole world into war." After World War II, Marshall Plan experts not only rebuilt Europe but also exported aggressive American
antitrust and competition laws to the continent because they believed political democracy was impossible without economic democracy.
Framing today's threat as nationalist oligarchy not only clarifies the challenge but also makes clear how democracy is different
-- and what democracy requires. Democracy means more than elections, an independent judiciary, a free press, and various constitutional
norms. For democracy to persist, there must also be relative economic equality. If society is deeply unequal economically, the wealthy
will dominate politics and transform democracy into an oligarchy. And there must be some degree of social solidarity because, as
Lincoln put it, "A house divided against itself cannot stand."
We see a number of disturbing signs the United States is breaking down along these dimensions. Electoral losers in places
like North Carolina seek to entrench their power rather than accept defeat. The view that money is speech under the First Amendment
has unleashed wealthy individuals and corporations to spend as much as they want to influence politics. The "doom loop of oligarchy,"
as Ezra Klein has called it, is an obvious consequence: The wealthy use their money to influence politics and rig policy to increase
their wealth, which in turn increases their capacity to influence politics. Meanwhile, we're increasingly divided into like-minded
enclaves, and the result is an ever-more toxic degree of partisanship.
Addressing our domestic economic and social crises is critical to defending democracy, and a grand strategy for America's future
must incorporate both domestic and foreign policy. But while many have recognized that reviving America's middle class and re-stitching
our social fabric are essential to saving democracy, less attention has been paid to how American foreign policy should be reformed
in order to defend democracy from the threat of nationalist oligarchy.
The Varieties of Nationalist Oligarchy
Just as there are many variations on liberal democracy -- the Swedish model, the French model, the American model -- there
are many varieties of nationalist oligarchy. The story is different in every country, but the elements of nationalist oligarchy
are trending all over the world.
... ... ...
... the European Union funds Hungary's oligarchy, as Orbán draws on EU money to fund about 60 percent of the state projects
that support "the new Fidesz-linked business elite." Nor do Orbán and his allies do much to hide the country's crony capitalist
model. András Lánczi, president of a Fidesz-affiliated think tank, has boldly stated that "if something is done in the national
interest, then it is not corruption." "The new capitalist ruling class," one Hungarian banker comments, "make their money from
the government."
The commentator Jan-Werner Müller captures Orbán's Hungary this way: "Power is secured through wide-ranging control of the
judiciary and the media; behind much talk of protecting hard-pressed families from multinational corporations, there is crony
capitalism, in which one has to be on the right side politically to get ahead economically."
Crony capitalism, coupled with resurgent nationalism and central government control, is also an issue in China. While some
commentators have emphasized "state capitalism" -- when government has a significant ownership stake in companies -- this phenomenon
is not to be confused with crony capitalism. Some countries with state capitalism, like Norway, are widely seen as extremely non-corrupt
and, indeed, are often held up as models of democracy. State capitalism itself is thus not necessarily a problem. Crony capitalism,
in contrast, is an "instrumental union between capitalists and politicians designed to allow the former to acquire wealth, legally
or otherwise, and the latter to seek and retain power." This is the key difference between state capitalism and oligarchy.
... ... ...
Ganesh Sitaraman is a professor of law
and Chancellor's faculty fellow at Vanderbilt Law School, and the author of The Counterinsurgent's Constitution: Law in the
Age of Small Wars and The Crisis of the Middle-Class Constitution: Why Economic Inequality Threatens our Republic
.
Why no recession? Because the bank which until Friday expected no rate cuts in 2020,
suddenly expects no less than three rate cuts, and all of them taking place in the next three
months:
... we would expect some monetary easing from a number of the world's major central banks,
including 75bp of rate cuts by the Federal Reserve through June starting with a 25bp cut in
March. Although moderate Fed rate cuts are unlikely to be very powerful, the committee will
probably be reluctant to disappoint market expectations for substantial rate cuts for fear of
tightening financial conditions further.
Of course, by now Hatzius must be surely getting tired of being called the macroeconomic
"Thomas Stolper" (long-time readers know what that means), and as a result he has quietly
inserted two additional scenarios just to cover all his bases. While the "upside" scenario is
meaningless as it has no hope in hell of occurring, it's the downside one that is more
ominous:
We also consider two alternative scenarios. The upside scenario assumes that the global
spread of the virus is brought under control quickly and supply chain disruptions remain
mostly absent; if so, global GDP would rebound in Q2, risk asset markets would recover
sharply, and central banks may stay on hold. The downside scenario assumes widespread supply
chain disruptions as well as domestic demand weakness across the global economy. This would
involve sharp sequential contraction in global GDP in Q1 and Q2 -- i.e., a global recession
-- and probably an aggressive monetary easing campaign, including a return to the near-zero
funds rate of the post-crisis period.
Notably, not even the market expects a full 3 rate cuts by the end of June, which suggests
that for all its cheerful optimism, Goldman is bracing for its "downside scenario"
materializing.
If "Trump recession" materialize, he and Melania can start packing. As as he will most
probably repeat Bush II blunders in handling the epidemics, his chances are already lower that
they were before.
"Trump is highly concerned about the market and has encouraged aides not to give predictions
that might cause further tremors .In a Twitter post, he misspelled the word 'coronavirus' as
'caronavirus' and wrote that two cable news stations "are doing everything possible to make the
Caronavirus look as bad as possible, including panicking markets, if possible. Likewise their
incompetent Do Nothing Democrat comrades are all talk, no action. USA in great shape!"
As far as the markets, I would be concerned with the China supply chain to the US. At most
there is 5-weeks, three on the ocean and a week on each side getting board ship, unloading, and
customs. Perhaps companies will have 2 -4 weeks in stock already. We are two-3 weeks into this.
China plants are more than likely closed or are half-staffed. Ships woill not call on Chinese
ports till the crisis is over or is pronounced safe.
run75441 , February 28, 2020 6:39 am
PGL:
Yep, he believes he is doomed if the economy tanks. It is actually an opportunity
for him to shine if only he knew how to be presidential and lead the nation.
EMichael , February 28, 2020 9:31 am
So Trump keeps trying to reassure investors about the market when there is not a single
person in the world that would pay attention to his comments on the market.
It's not as if the global economy was doing particularly well before the Wuhan coronavirus'
outbreak. In August, a survey of economists by the National Association for Business Economics
concluded that 72% of analysts expect a US recession to hit by the end of 2021. This percentage
included 38% of economists who believe a recession will strike by the end of this year and 34%
who think it will come next year. A
UN report published in September similarly warned of a worldwide recession this year. In
its case, the report's authors pointed to such risk factors as trade wars, and a no-deal Brexit.
It was clear earlier this month that the coronavirus outbreak could severely damage
the global economy.
On Feb. 12, I wrote that American and Chinese demand had been sustaining the world economy
for the last few years, and if China were shut down due to the virus, the ripple effect through
global supply chains could drag down the rest of world with it. And sure enough, this week
began with news of how the disease is throttling trade flows in and out of China.
Technically called COVID-19 ("coronavirus" actually being the name for a whole family of
viruses), the disease
has now infected at least 77,150 people in China, with 2,592 deaths. On Monday, stock
markets plunged on news that new and rapidly spreading outbreaks are now popping up
in South Korea,
Iran, and Italy . The Dow Jones dropped 3.5 percent -- or 1,000 points -- the S&P 500
fell 3.7 percent, and the Nasdaq plunged 3.7 percent.
The possibility of the virus spreading across the world is certainly unnerving. And while
the World Health Organization has so far avoided declaring the disease an official pandemic,
the organization did say it has "pandemic potential." But we don't even need to posit a
pandemic to see how the virus could tank economies around the world.
An example: Reliable trade data out of China is hard to come by, but a Boston company named
CargoMetrics has been trying to keep tabs. Their data covers not just shipping traffic but how
full the cargo vessels are. And their
index shows a 27 percent decline in Chinese imports from Feb. 7 to Feb. 17 -- a massive
deviation from the average trend in prior years. Dry cargo imports -- things like metals, ores,
grains, wood, coal, and steel products -- are down 40 percent.
China's imports "are totally in freefall," as CargoMetrics' CEO Scott Borgerson put it.
Basically, over the last month, the country has bought way less stuff from the rest of the
world than normal. And while China's exports to the rest of the world aren't suffering quite as
badly, the situation is still "ugly," and down from the historical trends.
At this point, it is well-known that major players like Nike, Hyundai, Apple, and General
Motors are having to curtail some operations, because they rely on Chinese manufacturers for
goods and parts.
But smaller businesses are getting hit , too. Everyone from shoe and blue jean
manufacturers, to electric bicycle makers and outdoor fireplace suppliers and 3D printed
toymakers for children are feeling the pinch, as imports from China they depended on suddenly
dry up -- in some cases, forcing them to switch to other Asian suppliers that are now shutting
down as well , in fear of the spreading disease. In a particularly unpleasant irony,
there are roughly 150 prescription drugs -- "antibiotics, generics, and some branded drugs
without alternatives,"
according to Axios -- that may well experience shortages because of how dependent we
are on Chinese manufacturers to produce them. Even the
fashion industry is not immune. And
it's the same story in other countries that rely on China for their supply chains, from
Australia to Japan.
"The second-largest economy in the world is completely shut down. People aren't totally
pricing that in," Larry Benedict, CEO of The Opportunistic Trader, toldCNBC .
According to the
New York Times , an analysis from JPMorgan concluded that "the immediate impact of a
large China demand and supply shock will be substantial." China's own President Xi Jinping
called the coronavirus a "crisis," as the country reneged on its earlier plans to ease
travel restrictions out of the city of Wuhan, an epicenter of the outbreak.
The basic problem is that the way to contain a disease is to prevent people from traveling
and from interacting in large groups. Which is not limited to, but certainly includes, keeping
them from working -- many factory employees in China, for example, remain stuck at home and
unable to commute to work. "Because the remedies are extreme, even small risks of infection and
of death can have a drastic effect on economic activity," as economist Olivier Blanchard
put
it .
And there's no way "stimulate" a country out of this situation: China has announced various efforts
to prop up its economy, from a hose of new loans to keep companies afloat to a raft of new tax
breaks. But no amount of money can compensate a business model when workers literally aren't
allowed to go to work.
The good news is that, in an already-depressed world economy, economic stimulus can increase
demand throughout the world in the places that haven't been physically hit by the virus yet,
and that could at least provide a cushion as supply chains transition.
Beyond that, the global economy's best hope is that the virus can be contained relatively
soon. The growth of new cases of COVID-19 in China actually peaked earlier this month,
according to
World Health Organization data. And in China itself, six provinces that were more or less
shutdown
have relaxed their emergency ratings , and are allowing companies to bring their workers
back in. (The problem is that it's hard to know precisely what to make of this given given how
untrustworthy
the Chinese government has proven itself to be.) Experts also predict world
economic growth will slow to a measly 1 percent this quarter, but recover soon after.
Of course, all that depends on virus peaking already or soon. Given the outbreaks in Italy
and elsewhere, that doesn't sound like a safe bet.
There's no way to predict the future in a situation like this. But if the outbreak grows
around the world while continuing to drive the Chinese economy into the ground, it's not hard
to see how the world's already-limping economic growth could go negative. In which case, we've
got a coronavirus recession on our hands.
Trump might not survive the Coronavirus, literally (he is over 70 and has a high range of
contacts; the mortality to this age group is close to 10%), or figuratively as voters might
not forgive him inadequate and/or incompetent response (which is given) .
Unfortunately, Bernie is at even higher risk as mortality for 80+ is over 15%, and
pre-existing cardiovascular disease is a serious negative factor.
One can wonder if this will be " Strawthat broke the camel'sback " for Trump. With 10% drop of S&P500 (aka "correction") it is difficult to
talk about booming economy on rallies ( 20% decline marker defines a recession and some
stocks -- like oil sector are already in this territory ). High yield bonds are also going
down, although more slowly. Now suddenly, Trump has nothing to talk about on his rallies, and
he knows it.
A part of rich retirees who are overexposed to stocks constitutes a sizable part of
remaining avid "Trumpers" voter block (kind of double stupidity, if you wish :-) , and some
of them might not forgive Trump the liberty of depriving them honestly earned in 2019 ~10% of
their 401K accounts.
IMHO troubles for Trump just started. Being incompetent DJT and his merry band of grifters
will almost definitely botch the response.
They already made three blunders.
1. When asked if, and when, a vaccine is produced, would the vaccine be affordable to
everyone? They replied; We'll let the "market" decide that. And some part of electorate
probably noted that.
2. The last December, they cut the budget for the CDC (center for disease control).
In this sense appointing Pence as the head of the coronavirus response may be a smart move
by Trump. When and if the pandemic hits big time, exposing the mass incompetence and
unpreparedness of the US government, in combination with the tanking of the stock market,
Trump can, of course, blame Christian Zionist neoconservative Israeli apartheid supporter
Pence for his troubles :-)
But, unfortunately, that will not do him any good.
It's not as if the global economy was doing particularly well before the Wuhan coronavirus'
outbreak. In August, a survey of economists by the National Association for Business Economics
concluded that 72% of analysts expect a US recession to hit by the end of 2021. This percentage
included 38% of economists who believe a recession will strike by the end of this year and 34%
who think it will come next year.
Taking a global view,
a UN report published in September similarly warned of a worldwide recession this year. In
its case, the report's authors pointed to such risk factors as trade wars, currency fluctuations,
long-term interest movements, and also the possibility of a no-deal Brexit.
It was clear earlier this month that the coronavirus outbreak could severely damage
the global economy.
On Feb. 12, I wrote that American and Chinese demand had been sustaining the world economy
for the last few years, and if China were shut down due to the virus, the ripple effect through
global supply chains could drag down the rest of world with it. And sure enough, this week
began with news of how the disease is throttling trade flows in and out of China.
Technically called COVID-19 ("coronavirus" actually being the name for a whole family of
viruses), the disease
has now infected at least 77,150 people in China, with 2,592 deaths. On Monday, stock
markets plunged on news that new and rapidly spreading outbreaks are now popping up
in South Korea,
Iran, and Italy . The Dow Jones dropped 3.5 percent -- or 1,000 points -- the S&P 500
fell 3.7 percent, and the Nasdaq plunged 3.7 percent.
The possibility of the virus spreading across the world is certainly unnerving. And while
the World Health Organization has so far avoided declaring the disease an official pandemic,
the organization did say it has "pandemic potential." But we don't even need to posit a
pandemic to see how the virus could tank economies around the world.
An example: Reliable trade data out of China is hard to come by, but a Boston company named
CargoMetrics has been trying to keep tabs. Their data covers not just shipping traffic but how
full the cargo vessels are. And their
index shows a 27 percent decline in Chinese imports from Feb. 7 to Feb. 17 -- a massive
deviation from the average trend in prior years. Dry cargo imports -- things like metals, ores,
grains, wood, coal, and steel products -- are down 40 percent.
China's imports "are totally in freefall," as CargoMetrics' CEO Scott Borgerson put it.
Basically, over the last month, the country has bought way less stuff from the rest of the
world than normal. And while China's exports to the rest of the world aren't suffering quite as
badly, the situation is still "ugly," and down from the historical trends.
At this point, it is well-known that major players like Nike, Hyundai, Apple, and General
Motors are having to curtail some operations, because they rely on Chinese manufacturers for
goods and parts.
But smaller businesses are getting hit , too. Everyone from shoe and blue jean
manufacturers, to electric bicycle makers and outdoor fireplace suppliers and 3D printed
toymakers for children are feeling the pinch, as imports from China they depended on suddenly
dry up -- in some cases, forcing them to switch to other Asian suppliers that are now shutting
down as well , in fear of the spreading disease. In a particularly unpleasant irony,
there are roughly 150 prescription drugs -- "antibiotics, generics, and some branded drugs
without alternatives,"
according to Axios -- that may well experience shortages because of how dependent we
are on Chinese manufacturers to produce them. Even the
fashion industry is not immune. And
it's the same story in other countries that rely on China for their supply chains, from
Australia to Japan.
"The second-largest economy in the world is completely shut down. People aren't totally
pricing that in," Larry Benedict, CEO of The Opportunistic Trader, toldCNBC .
According to the
New York Times , an analysis from JPMorgan concluded that "the immediate impact of a
large China demand and supply shock will be substantial." China's own President Xi Jinping
called the coronavirus a "crisis," as the country reneged on its earlier plans to ease
travel restrictions out of the city of Wuhan, an epicenter of the outbreak.
The basic problem is that the way to contain a disease is to prevent people from traveling
and from interacting in large groups. Which is not limited to, but certainly includes, keeping
them from working -- many factory employees in China, for example, remain stuck at home and
unable to commute to work. "Because the remedies are extreme, even small risks of infection and
of death can have a drastic effect on economic activity," as economist Olivier Blanchard
put
it .
And there's no way "stimulate" a country out of this situation: China has announced various efforts
to prop up its economy, from a hose of new loans to keep companies afloat to a raft of new tax
breaks. But no amount of money can compensate a business model when workers literally aren't
allowed to go to work.
The good news is that, in an already-depressed world economy, economic stimulus can increase
demand throughout the world in the places that haven't been physically hit by the virus yet,
and that could at least provide a cushion as supply chains transition.
Beyond that, the global economy's best hope is that the virus can be contained relatively
soon. The growth of new cases of COVID-19 in China actually peaked earlier this month,
according to
World Health Organization data. And in China itself, six provinces that were more or less
shutdown
have relaxed their emergency ratings , and are allowing companies to bring their workers
back in. (The problem is that it's hard to know precisely what to make of this given given how
untrustworthy
the Chinese government has proven itself to be.) Experts also predict world
economic growth will slow to a measly 1 percent this quarter, but recover soon after.
Of course, all that depends on virus peaking already or soon. Given the outbreaks in Italy
and elsewhere, that doesn't sound like a safe bet.
There's no way to predict the future in a situation like this. But if the outbreak grows
around the world while continuing to drive the Chinese economy into the ground, it's not hard
to see how the world's already-limping economic growth could go negative. In which case, we've
got a coronavirus recession on our hands.
IIRC correctly, the majority of the worst drops in Dow History have now occurred since
January 2017.
While some of the largest budget deficits -- which are far higher than officially reported
-- have occured since January 2017. Unofficially, those budget deficits exceed any under
Obama.
While Democratic leaders, Nancy Pelosi and Chuck Schumer, aid in approving those
budgets.
Much like Tip O'Neill aided Reagan in producing the first massive deficits.
The direct, actual disruption caused by by a coronavirus pandemic?
Or
Disruption caused by the panicky over-reaction to the potential of of a pandemic?
A little bit off-topic, or very much off-topic but related with Hudson's favourite
theme. This is about potential bankruptcies derived from quarantines almost certainly not
covered by insurance: wouldn't this be an excellent case for debt forgiving?
I dunno. My impression is too much of corporate malfeasance involves the use of
debt. Consolidation, stock buybacks, leveraged everything, hostile
take-everything.
This stacked system is currently confronting two crises it has no good solution to.
One is Covid19 and the other is insurrection. Obama forgave the one percent's debts once
already. No more of that. I'm hoping this is "the great leveling" event.
I can not find a link but a comment here yesterday said China has announced it will
pay all healthcare costs related to Covid for those without insurance. I honestly don't know
if that's true but it lead me to understand that China has a hybrid public/private system
health insurance system. Wikipedia says China provides "basic" healthcare for 95% of the
population which covers roughly 50% of treatment costs. Hmmm I wonder what the treatments
cost
Sadly, promises to cover the cost of treatment are ineffectual without enough
facilities, supplies and healthcare workers.
With regard to the question of "corporate debt", a better way than "forgiveness" IMO
would be "temporary nationalization" by means of some public entity bidding on operating
assets (with, hopefully, the entity still functioning) at a liquidation auction. The senior
creditors (first in line, I think are employees with unpaid back wages due) would get
something; the shareholders -- given the degree of leverage that is customary today -- often
would be wiped out (which they would be in any event under the conditions in
view).
The publicly owned and operated businesses would go private again through conversion
to worker-owned cooperatives. This would take time, which would permit the bugs to be worked
out. I can't imagine that the transition would be smooth.
This kind of conversion from shareholder-owned to worker-owned enterprise has been
proposed previously (don't have links) as something that could be done as ongoing policy
through money creation by the central government and new forms of "eminent domain"
legislation, or simply by purchase of shares in the open markets, New private enterprises
could be created by the former owners using the funds received and, at such time as these
became sufficiently powerful to be problematic, could likewise be converted to cooperatives.
It might be an engine of innovation. Significant regulation would probably be needed to curb
clearly unproductive uses of funds.
Perhaps it's another way that this crisis is creating opportunities that we don't
want to allow to be wasted.
It will be interesting to see what the government of China does, as it will be the
first to face this problem at large scale. Will they turn into a "workers' party"? Hard to
imagine, but the paths out of the current turmoil may contain possibilities that could not be
realistically contemplated just months ago.
How do you prevent this feed-me-seymour financialization-economy from imploding?
Keep feeding it. Biden and his cronies, including little George, knew it. And that has to be
the reason why they passed laws preventing the process of bankruptcy. Like they placed their
bets on winning the war for oil in the middle east at the same time. Why did they think these
bad decisions would keep our economy stable?
"... Neoliberalism and its usual prescriptions – always more markets, always less government – are in fact a perversion of mainstream economics. ..."
"... The term is used as a catchall for anything that smacks of deregulation, liberalisation, privatisation or fiscal austerity. Today it is routinely reviled as a shorthand for the ideas and practices that have produced growing economic insecurity and inequality, led to the loss of our political values and ideals, and even precipitated our current populist backlash. ..."
"... The use of the term "neoliberal" exploded in the 1990s, when it became closely associated with two developments, neither of which Peters's article had mentioned. One of these was financial deregulation, which would culminate in the 2008 financial crash and in the still-lingering euro debacle . The second was economic globalisation, which accelerated thanks to free flows of finance and to a new, more ambitious type of trade agreement. Financialisation and globalisation have become the most overt manifestations of neoliberalism in today's world. ..."
"... That neoliberalism is a slippery, shifting concept, with no explicit lobby of defenders, does not mean that it is irrelevant or unreal. Who can deny that the world has experienced a decisive shift toward markets from the 1980s on? Or that centre-left politicians – Democrats in the US, socialists and social democrats in Europe – enthusiastically adopted some of the central creeds of Thatcherism and Reaganism, such as deregulation, privatisation, financial liberalisation and individual enterprise? Much of our contemporary policy discussion remains infused with principles supposedly grounded in the concept of homo economicus , the perfectly rational human being, found in many economic theories, who always pursues his own self-interest. ..."
Neoliberalism and its usual prescriptions – always more markets, always less government – are in fact a perversion of
mainstream economics.
As even its harshest critics concede, neoliberalism is hard to pin down. In broad terms, it
denotes a preference for markets over government, economic incentives over cultural norms, and
private entrepreneurship over collective action. It has been used to describe a wide range of
phenomena – from Augusto Pinochet to Margaret Thatcher and Ronald Reagan, from the
Clinton Democrats and the UK's New Labour to the economic opening in China and the reform of
the welfare state in Sweden.
The term is used as a catchall for anything that smacks of deregulation, liberalisation,
privatisation or fiscal austerity. Today it is routinely reviled as a shorthand for the ideas
and practices that have produced growing economic insecurity and inequality, led to the loss of
our political values and ideals, and even precipitated our current populist backlash.
We live in the age of neoliberalism, apparently. But who are neoliberalism's adherents and
disseminators – the neoliberals themselves? Oddly, you have to go back a long time to
find anyone explicitly embracing neoliberalism. In 1982, Charles Peters, the longtime editor of
the political magazine Washington Monthly, published an essay titled
A Neo-Liberal's Manifesto . It makes for interesting reading 35 years later, since the
neoliberalism it describes bears little resemblance to today's target of derision. The
politicians Peters names as exemplifying the movement are not the likes of Thatcher and Reagan,
but rather liberals – in the US sense of the word – who have become disillusioned
with unions and big government and dropped their prejudices against markets and the
military.
The use of the term "neoliberal" exploded in the 1990s, when it became closely associated
with two developments, neither of which Peters's article had mentioned. One of these was
financial deregulation, which would culminate in the 2008
financial crash and in the still-lingering euro debacle . The second was economic
globalisation, which accelerated thanks to free flows of finance and to a new, more ambitious
type of trade agreement. Financialisation and globalisation have become the most overt
manifestations of neoliberalism in today's world.
That neoliberalism is a slippery, shifting concept, with no explicit lobby of defenders,
does not mean that it is irrelevant or unreal. Who can deny that the world has experienced a
decisive shift toward markets from the 1980s on? Or that centre-left politicians –
Democrats in the US, socialists and social democrats in Europe – enthusiastically adopted
some of the central creeds of Thatcherism and Reaganism, such as deregulation, privatisation,
financial liberalisation and individual enterprise? Much of our contemporary policy discussion
remains infused with principles supposedly grounded in the concept of homo
economicus , the perfectly rational human being, found in many economic theories, who
always pursues his own self-interest.
But the looseness of the term neoliberalism also means that criticism of it often misses the
mark. There is nothing wrong with markets, private entrepreneurship or incentives – when
deployed appropriately. Their creative use lies behind the most significant economic
achievements of our time. As we heap scorn on neoliberalism, we risk throwing out some of
neoliberalism's useful ideas.
The real trouble is that mainstream economics shades too easily into ideology, constraining
the choices that we appear to have and providing cookie-cutter solutions. A proper
understanding of the economics that lie behind neoliberalism would allow us to identify –
and to reject – ideology when it masquerades as economic science. Most importantly, it
would help us to develop the institutional imagination we badly need to redesign capitalism for
the 21st century.
N eoliberalism is typically understood as being based on key tenets of mainstream economic
science. To see those tenets without the ideology, consider this thought experiment. A
well-known and highly regarded economist lands in a country he has never visited and knows
nothing about. He is brought to a meeting with the country's leading policymakers. "Our country
is in trouble," they tell him. "The economy is stagnant, investment is low, and there is no
growth in sight." They turn to him expectantly: "Please tell us what we should do to make our
economy grow."
The economist pleads ignorance and explains that he knows too little about the country to
make any recommendations. He would need to study the history of the economy, to analyse the
statistics, and to travel around the country before he could say anything.
Facebook
Twitter Pinterest Tony Blair and Bill Clinton: centre-left politicians who enthusiastically
adopted some of the central creeds of Thatcherism and Reaganism. Photograph: Reuters
But his hosts are insistent. "We understand your reticence, and we wish you had the time for
all that," they tell him. "But isn't economics a science, and aren't you one of its most
distinguished practitioners? Even though you do not know much about our economy, surely there
are some general theories and prescriptions you can share with us to guide our economic
policies and reforms."
The economist is now in a bind. He does not want to emulate those economic gurus he has long
criticised for peddling their favourite policy advice. But he feels challenged by the question.
Are there universal truths in economics? Can he say anything valid or useful?
So he begins. The efficiency with which an economy's resources are allocated is a critical
determinant of the economy's performance, he says. Efficiency, in turn, requires aligning the
incentives of households and businesses with social costs and benefits. The incentives faced by
entrepreneurs, investors and producers are particularly important when it comes to economic
growth. Growth needs a system of property rights and contract enforcement that will ensure
those who invest can retain the returns on their investments. And the economy must be open to
ideas and innovations from the rest of the world.
But economies can be derailed by macroeconomic instability, he goes on. Governments must
therefore pursue a sound
monetary policy , which means restricting the growth of liquidity to the increase in
nominal money demand at reasonable inflation. They must ensure fiscal sustainability, so that
the increase in public debt does not outpace national income. And they must carry out
prudential regulation of banks and other financial institutions to prevent the financial system
from taking excessive risk.
Now he is warming to his task. Economics is not just about efficiency and growth, he adds.
Economic principles also carry over to equity and social policy. Economics has little to say about how
much redistribution a society should seek. But it does tell us that the tax base should be as
broad as possible, and that social programmes should be designed in a way that does not
encourage workers to drop out of the labour market.
By the time the economist stops, it appears as if he has laid out a fully fledged neoliberal
agenda. A critic in the audience will have heard all the code words: efficiency, incentives,
property rights, sound money, fiscal prudence. And yet the universal principles that the
economist describes are in fact quite open-ended. They presume a capitalist economy – one
in which investment decisions are made by private individuals and firms – but not much
beyond that. They allow for – indeed, they require – a surprising variety of
institutional arrangements.
So has the economist just delivered a neoliberal screed? We would be mistaken to think so,
and our mistake would consist of associating each abstract term – incentives, property
rights, sound money – with a particular institutional counterpart. And therein lies the
central conceit, and the fatal flaw, of neoliberalism: the belief that first-order economic
principles map on to a unique set of policies, approximated by a Thatcher/Reagan-style
agenda.
Consider property rights. They matter insofar as they allocate returns on investments. An
optimal system would distribute property rights to those who would make the best use of an
asset, and afford protection against those most likely to expropriate the returns. Property
rights are good when they protect innovators from free riders, but they are bad when they
protect them from competition. Depending on the context, a legal regime that provides the
appropriate incentives can look quite different from the standard US-style regime of private
property rights.
This may seem like a semantic point with little practical import; but China's phenomenal
economic success is largely due to its orthodoxy-defying institutional tinkering. China turned
to markets, but did not copy western practices in property rights. Its reforms produced
market-based incentives through a series of unusual institutional arrangements that were better
adapted to the local context. Rather than move directly from state to private ownership, for
example, which would have been stymied by the weakness of the prevailing legal structures, the
country relied on mixed forms of ownership that provided more effective property rights for
entrepreneurs in practice. Township and Village Enterprises (TVEs), which spearheaded Chinese
economic growth during the 1980s, were collectives owned and controlled by local governments.
Even though TVEs were publicly owned, entrepreneurs received the protection they needed against
expropriation. Local governments had a direct stake in the profits of the firms, and hence did
not want to kill the goose that lays the golden eggs.
China relied on a range of such innovations, each delivering the economist's higher-order
economic principles in unfamiliar institutional arrangements. For instance, it shielded its
large state sector from global competition, establishing special economic zones where foreign
firms could operate with different rules than in the rest of the economy. In view of such
departures from orthodox blueprints, describing China's economic reforms as neoliberal –
as critics are inclined to do – distorts more than it reveals. If we are to call this
neoliberalism, we must surely look more kindly on the ideas behind the most dramatic
poverty reduction in history.
One might protest that China's institutional innovations were purely transitional. Perhaps
it will have to converge on western-style institutions to sustain its economic progress. But
this common line of thinking overlooks the diversity of capitalist arrangements that still
prevails among advanced economies, despite the considerable homogenisation of our policy
discourse.
What, after all, are western institutions? The size of the public sector in OECD countries
varies, from a third of the economy in Korea to nearly 60% in Finland. In Iceland, 86% of
workers are members of a trade union; the comparable number in Switzerland is just 16%. In the
US, firms can fire workers almost at will;
French labour laws have historically required employers to jump through many hoops first.
Stock markets have grown to a total value of nearly one-and-a-half times GDP in the US; in
Germany, they are only a third as large, equivalent to just 50% of GDP.
Facebook
Twitter Pinterest 'China turned to markets, but did not copy western practices ... '
Photograph: AFP/Getty
The idea that any one of these models of taxation, labour relations or financial
organisation is inherently superior to the others is belied by the varying economic fortunes
that each of these economies have experienced over recent decades. The US has gone through
successive periods of angst in which its economic institutions were judged inferior to those in
Germany, Japan, China, and now possibly Germany again. Certainly, comparable levels of wealth
and productivity can be produced under very different models of capitalism. We might even go a
step further: today's prevailing models probably come nowhere near exhausting the range of what
might be possible, and desirable, in the future.
The visiting economist in our thought experiment knows all this, and recognises that the
principles he has enunciated need to be filled in with institutional detail before they become
operational. Property rights? Yes, but how? Sound money? Of course, but how? It would perhaps
be easier to criticise his list of principles for being vacuous than to denounce it as a
neoliberal screed.
Still, these principles are not entirely content-free. China, and indeed all countries that
managed to develop rapidly, demonstrate the utility of those principles once they are properly
adapted to local context. Conversely, too many economies have been driven to ruin courtesy of
political leaders who chose to violate them. We need look no further than
Latin American populists or eastern European communist regimes to appreciate the practical
significance of sound money, fiscal sustainability and private incentives.
O f course, economics goes beyond a list of abstract, largely common-sense principles. Much
of the work of economists consists of developing
stylised models of how economies work and then confronting those models with evidence.
Economists tend to think of what they do as progressively refining their understanding of the
world: their models are supposed to get better and better as they are tested and revised over
time. But progress in economics happens differently.
Economists study a social reality that is unlike the physical universe. It is completely
manmade, highly malleable and operates according to different rules across time and space.
Economics advances
not by settling on the right model or theory to answer such questions, but by improving our
understanding of the diversity of causal relationships. Neoliberalism and its customary
remedies – always more markets, always less government – are in fact a perversion
of mainstream economics. Good economists know that the correct answer to any question in
economics is: it depends.
Does an increase in the minimum wage depress employment? Yes, if the labour market is really
competitive and employers have no control over the wage they must pay to attract workers; but
not necessarily otherwise. Does trade liberalisation increase economic growth? Yes, if it
increases the profitability of industries where the bulk of investment and innovation takes
place; but not otherwise. Does more government spending increase employment? Yes, if there is
slack in the economy and wages do not rise; but not otherwise. Does monopoly harm innovation?
Yes and no, depending on a whole host of market circumstances.
Facebook
Twitter Pinterest 'Today [neoliberalism] is routinely reviled as a shorthand for the ideas
that have produced growing economic inequality and precipitated our current populist backlash'
Trump signing an order to take the US out of the TPP trade pact. Photograph: AFP/Getty
In economics, new models rarely supplant older models. The basic competitive-markets model
dating back to Adam Smith has been modified over time by the inclusion, in rough historical
order, of monopoly, externalities, scale economies, incomplete and asymmetric information,
irrational behaviour and many other real-world features. But the older models remain as useful
as ever. Understanding how real markets operate necessitates using different lenses at
different times.
Perhaps maps offer the best analogy. Just like economic models, maps are highly
stylised representations of reality . They are useful precisely because they abstract from
many real-world details that would get in the way. But abstraction also implies that we need a
different map depending on the nature of our journey. If we are travelling by bike, we need a
map of bike trails. If we are to go on foot, we need a map of footpaths. If a new subway is
constructed, we will need a subway map – but we wouldn't throw out the older maps.
Economists tend to be very good at making maps, but not good enough at choosing the one most
suited to the task at hand. When confronted with policy questions of the type our visiting
economist faces, too many of them resort to "benchmark" models that favour the
laissez-faire approach. Kneejerk solutions and hubris replace the richness and humility of
the discussion in the seminar room. John Maynard Keynes once defined economics as the "science
of thinking in terms of models, joined to the art of choosing models which are relevant".
Economists typically have trouble with the "art" part.
This, too, can be illustrated with a parable. A journalist calls an economics professor for
his view on whether free trade is a good idea. The professor responds enthusiastically in the
affirmative. The journalist then goes undercover as a student in the professor's advanced
graduate seminar on international trade. He poses the same question: is free trade good? This
time the professor is stymied. "What do you mean by 'good'?" he responds. "And good for whom?"
The professor then launches into an extensive exegesis that will ultimately culminate in a
heavily hedged statement: "So if the long list of conditions I have just described are
satisfied, and assuming we can tax the beneficiaries to compensate the losers, freer trade has
the potential to increase everyone's wellbeing." If he is in an expansive mood, the professor
might add that the effect of free trade on an economy's longterm growth rate is not clear
either, and would depend on an altogether different set of requirements.
This professor is rather different from the one the journalist encountered previously. On
the record, he exudes self-confidence, not reticence, about the appropriate policy. There is
one and only one model, at least as far as the public conversation is concerned, and there is a
single correct answer, regardless of context. Strangely, the professor deems the knowledge that
he imparts to his advanced students to be inappropriate (or dangerous) for the general public.
Why?
The roots of such behaviour lie deep in the culture of the economics profession. But one
important motive is the zeal to display the profession's crown jewels – market
efficiency, the invisible hand, comparative advantage – in untarnished form, and to
shield them from attack by self-interested barbarians, namely
the protectionists . Unfortunately, these economists typically ignore the barbarians on the
other side of the issue – financiers and multinational corporations whose motives are no
purer and who are all too ready to hijack these ideas for their own benefit.
As a result, economists' contributions to public debate are often biased in one direction,
in favour of more trade, more finance and less government. That is why economists have
developed a reputation as cheerleaders for neoliberalism, even if mainstream economics is very
far from a paean to laissez-faire. The economists who let their enthusiasm for free markets run
wild are in fact not being true to their own discipline.
H ow then should we think about globalisation in order to liberate it from the grip of
neoliberal practices? We must begin by understanding the positive potential of global markets.
Access to world markets in goods, technologies and capital has played an important role in
virtually all of the economic miracles of our time. China is the most recent and powerful
reminder of this historical truth, but it is not the only case. Before China, similar miracles
were performed by South Korea, Taiwan, Japan and a few non-Asian countries such as Mauritius
. All of these countries embraced globalisation rather than turn their backs on it, and they
benefited handsomely.
Defenders of the existing economic order will quickly point to these examples when
globalisation comes into question. What they will fail to say is that almost all of these
countries joined the world economy by violating neoliberal strictures. South Korea and Taiwan,
for instance, heavily subsidised their exporters, the former through the financial system and
the latter through tax incentives. All of them eventually removed most of their import
restrictions, long after economic growth had taken off.
But none, with the sole exception of Chile in the 1980s under Pinochet, followed the
neoliberal recommendation of a rapid opening-up to imports. Chile's
neoliberal experiment eventually produced the worst economic crisis in all of Latin
America. While the details differ across countries, in all cases governments played an active
role in restructuring the economy and buffering it against a volatile external environment.
Industrial policies, restrictions on capital flows and currency controls – all prohibited
in the neoliberal playbook – were rampant.
Facebook
Twitter Pinterest Protest against Nafta in Mexico City in 2008: since the reforms of the
mid-90s, the country's economy has underperformed. Photograph: EPA
By contrast, countries that stuck closest to the neoliberal model of globalisation were
sorely disappointed. Mexico provides a particularly sad example. Following a series of
macroeconomic crises in the mid-1990s, Mexico embraced macroeconomic orthodoxy, extensively
liberalised its economy, freed up the financial system, sharply reduced import restrictions and
signed the North American Free Trade Agreement (Nafta). These policies did produce
macroeconomic stability and a significant rise in foreign trade and internal investment. But
where it counts – in overall productivity and economic growth – the
experiment failed . Since undertaking the reforms, overall productivity in Mexico has
stagnated, and the economy has underperformed even by the undemanding standards of Latin
America.
These outcomes are not a surprise from the perspective of sound economics. They are yet
another manifestation of the need for economic policies to be attuned to the failures to which
markets are prone, and to be tailored to the specific circumstances of each country. No single
blueprint fits all.
A s Peters's 1982 manifesto attests, the meaning of neoliberalism has changed considerably
over time as the label has acquired harder-line connotations with respect to deregulation,
financialisation and globalisation. But there is one thread that connects all versions of
neoliberalism, and that is the
emphasis on economic growth . Peters wrote in 1982 that the emphasis was warranted because
growth is essential to all our social and political ends – community, democracy,
prosperity. Entrepreneurship, private investment and removing obstacles that stand in the way
(such as excessive regulation) were all instruments for achieving economic growth. If a similar
neoliberal manifesto were penned today, it would no doubt make the same point.
Critics often point out that this emphasis on economics debases and sacrifices other
important values such as equality, social inclusion, democratic deliberation and justice. Those
political and social objectives obviously matter enormously, and in some contexts they matter
the most. They cannot always, or even often, be achieved by means of technocratic economic
policies; politics must play a central role.
Still, neoliberals are not wrong when they argue that our most cherished ideals are more
likely to be attained when our economy is vibrant, strong and growing. Where they are wrong is
in believing that there is a unique and universal recipe for improving economic performance, to
which they have access. The fatal flaw of neoliberalism is that it does not even get the
economics right. It must be rejected on its own terms for the simple reason that it is bad
economics.
A version of this article first appeared in Boston
Review
401(k) Millionaires Surge To Record Level Under Trump by Tyler Durden Sat, 02/22/2020 - 19:00
A Fidelity Investments
press release on Thursday said the number of customers with more than $1 million in their
409k
There's a reason why President Trump touted 401k growth during his State of the Union
address last week, because balances are increasing, and it will help him win the
election.
Fidelity noted that 401k millionaires soared last quarter, reaching a record level.
Customers with the brokerage house that have over one million dollars in their 401k hit
233,000, up from 200,000 in Q3, a 17% jump M/M.
The number of IRA millionaires increased to 208,000, also a record high and an increase
from 182,400 in Q3.
All of these new 401k and IRA millionaires were created through President Trump's
pressure on the Federal Reserve to unleash easy money policies to boost the stock
market.
And, of course, as we all know, JPM's
drain of liquidity via Money Markets and reserves parked at the Fed promoted a liquidity
crisis that resulted in "Not QE," which allowed even more liquidity to flow into the stock
market starting last September, the same period when all of these investment accounts soared in
value. Coincidence?
Kevin Barry, president of Workplace Investing at Fidelity Investments, noted in the
release that "growth in savings levels over the last 10 years demonstrates the positive impact
of taking a long-term approach to retirement, and recent Fidelity research demonstrates workers
who do so have reason to feel increasingly confident about their retirement readiness."
"However, as we enter a new decade and continue to see markets rise and fall, it's more
important than ever to remember some of the important elements of a successful retirement
strategy – these include maintaining positive savings habits, ensuring your account has
the right balance of stocks, bonds, and cash, and continuing to focus on your long-term
savings goals," Barry added.
Every chance Trump gets, he tweets or tells everyone that their 409k
Raoul Pal of Real Vision had a good take on it:
The irresponsiblity of this, telling the average person to take more risks this late in
the cycle is simply staggering, regardless of what the markets do. To make them think a 50%
return is low lacks any fiduciary responsibility. This is worse than the Greenspan housing
comments. https://t.co/UqrFbYmoXM
It seems that the Fed's easy money policies over the last year, juicing markets to
all-time highs, could be a vote of confidence by the central bank to get Trump
reelected.
Listening to the howls from Democrats and the applause from Republicans, one would think
President Trump's proposed fiscal year 2021 budget is a radical assault on the welfare state.
The truth is the budget contains some minor spending cuts, most of which are not even real
cuts. Instead they are reductions in the "projected rate of growth." This is equivalent of
saying you are sticking to your diet because you ate five chocolate chip cookies when you
wanted to eat ten.
President Trump's plan reduces the Education Department's budget by nearly eight percent,
leaving the department with "only" 66.6 billion dollars. Cuts to other departments are
similarly small, while reductions in entitlement spending consist mostly of reforms that will
not affect most of those dependent on these programs.
President Trump deserves credit for proposing an 11.6 billion dollars cut in funding for the
Department of State and the US Agency for International Development (USAID). Foreign aid does
little to help impoverished people overseas. Instead, it benefits foreign government officials
willing to do the US government's bidding. The State Department and USAID are extensively
involved in US intervention abroad, including efforts to overthrow governments.
President Trump's budget proposes a number of increases in spending. For example, his budget
spends around 900 million additional dollars on vocational education. It also includes
additional spending on items including infrastructure and childcare.
Few in DC have expressed concern over the fact that President Trump's 4.8 trillion dollars
budget proposal is the largest budget in American history. There is also little outcry from
supposedly antiwar progressive Democrats over Trump's proposal to spend hundreds of billions of
dollars on militarism. This is not surprising, as many progressives are happy to support
increased warfare spending as long as conservatives go along with increased welfare spending.
Similarly, many conservatives are happy to support increased welfare spending as long as it
means that progressives will vote for increased warfare spending. So, Congress is unlikely to
approve any of President Trump's spending cuts, but Congress will gleefully agree to all of his
spending increases.
Even if Congress agrees to all of President Trump's cuts, federal deficits will still be
over one trillion dollars for the next several years. However, President Trump claims the
budget will balance in 15 years. In order to show a balanced budget by 2035, the administration
assumes three percent economic growth for most of the next decade. This level of growth is
unlikely to come to pass. Instead, the current boom will likely end soon, and the economy will
experience another major recession. Signs that we are on the verge of a downturn include rising
homelessness and the Federal Reserve's bailout of the repurchasing market.
The current economic boom is built on debt, and the debt-based economy is facilitated by the
Federal Reserve's easy money policies. The massive amount of debt held by consumers,
businesses, and especially government is the main reason the Fed feels compelled to maintain
historically low interest rates. If rates were to increase to market levels, government
interest payments would be unstable. This would cause the government debt bubble to burst,
leading to a major crisis. However, continuing on the current path of low interest rates will
inevitably lead to a dollar crisis and a collapse of the welfare-warfare Keynesian system.
Continuing to waste billions on wars abroad and failed programs at home while pretending
that we can avoid a crisis via phony cuts and Fed-fueled growth will only make the inevitable
collapse more painful. The only way to avoid economic disaster is to cut spending and audit,
then end, the Federal Reserve.
It seems that Japan's feared bureaucracy has handled the issue without
the advice from any specialist. Cruise ships are perfect to spread diseases. They have
central air condition and central septic systems that can spread viruses to every room on
board. There are many places on board which are commonly used. The crew is usually housed
in less than perfect conditions. Any suspected cases should have been taken off board
immediately. But these were simply told to stay in their cabins which they, of course, did
not do.
The Japanese military has some troops working on the ship but they are only now taking
protective measures which are still
less than sufficient :
About 50 staffers from the Self-Defense Forces are working on the vessel to examine the
passengers, disinfect cabins and transport patients. The ship was quarantined for two
weeks off Yokohama on Feb. 5 to prevent COVID-19 from spreading in Japan.
Those handling medicine are now required to wear masks, gloves, gowns and hair caps,
ministry officials said.
At a news conference, Kono admitted that the Defense Ministry applied the standards --
which are higher than those in use by health ministry officials working on the vessel --
after viewing a video from the ship posted by Dr. Kentaro Iwata of Kobe University
Hospital, who joined the disaster-relief team as a veteran infectious disease
specialist.
On Wednesday 500 Japanese passengers who had tested negative
were let go from the ship without further measures. But many of them will carry the
virus as more new confirmed cases from the ship still appear daily. These people should
have been further isolated. Letting them leave without such measures guarantees that new
outbreaks will soon appear throughout Japan.
This situation might have developed due to political pressure. Japan is supposed to hold
the summer Olympics later this year and it may have wanted to avoid bad headlines. To me it
seems that there will be no Olympics this year and that Japan's Prime Minister Shinzo Abe
will soon hear some harsh
public criticism .
Another big clusters established itself in Daegu, South Korea, where people from a
Christian sect infected each other during mass. There are currently some 130 such cases and
some 70 more spread elsewhere in South Korea.
Iran has a smaller cluster in Qom with 14 cases. It closed all schools and seminaries
and suspended religious gatherings in the city. Other countries report single new cases or
small clusters. This will continue as the disease races around the world. Large new
outbreaks will appear in those many countries which have less than perfect medical systems
or where the authorities want to suppress news of a smaller outbreak.
In the Ukraine rioters had to be brought under control when they protested
against quarantining evacuees from China near their villages.
The economic ripple effect of this epidemic and of the enormous quarantine in China will
be huge. It will be felt everywhere but especially in highly developed
industries :
The impacts on China both intrinsic and psychological are still vastly under estimated.
This is the largest containment/effective imprisonment via quarantine of human being in
world history. People are assuming no ripples from that.
The biggest factor that's not understood is the non linearity of supply chains. A two
week total shut down *does not* mean a two week delay in products to consumer. This is
very different from the tariff impacts, where pricing was adjusted.
A single component missing in a 500+ part product means all levels of production are
moot. Autos and consumer electronics are obvious examples. We have heard from multiple
auto players and Jaguar has publicly stated they have sub 2 weeks of operating
inventory.
Just In Time (JIT) production is a form of operational leverage. And like all forms of
leverage, there is a non linear downside effect. People are not putting it together that
this is a very big deal. It's not a 1 month hit. It's not a 1 quarter hit. It's an annual
hit *right now*.
Some large factories which depend on parts from China will soon have to shut down. Then
their other suppliers will also have to cease production. The loss of income will be felt
throughout the local economies.
The effects of the epidemic may well lead to an end of the globalization of production
processes. Companies will go back to buy locally to be as unaffected as possible from
similar future incidents. This might well be the most positive long term outcome of this
epidemic.
Some large factories which depend on parts from China will soon have to shut down. Then
their other suppliers will also have to cease production. The loss of income will be felt
throughout the local economies.
The ones who are insured won't be monetarily affected. The uninsured will. This may
trigger a bubble burst in the West, though.
The effects of the epidemic may well lead to an end of the globalization of production
processes. Companies will go back to buy locally to be as unaffected as possible from
similar future incidents. This might well be the most positive long term outcome of this
epidemic.
Globalization had already halted after 2008. That was the material base for the
so-called "populist" rise in the Western Civilization. Populism is a symptom, not the
cause, of the halt of globalization.
That doesn't mean, though, the the western countries are heading towards socialism. This
is specially the case with the First World countries, which have powerful armies, and thus
can restore (at least in part) their economies through dispossession of the weaker (Third
World) countries. The working classes of the First World tend to fascism, not
socialism.
That's why China is countering the death of globalization with OBOR. For socialism to
rise, there needs to be world prosperity. If the pot is small, fascism will rise again.
Infodemic continuing to spread.
Gullible people continuing to fail to understand that the real issue isn't the coronavirus,
it is the fear which the infodemic (and outright agitprop) is feeding - and which many of
these people are exacerbating.
China supplies enormous amounts of everything the world uses except energy.
Even food - China doesn't supply as much of the raw, but provides an enormous amount of
processing/handling.
And yes, "just in time" combined with the Lunar New Year holiday and a greatly prolonged
re-ramp time is going to impact everyone, everywhere.
The only question is how much.
The effects of the epidemic may well lead to an end of the globalization of production
processes. Companies will go back to buy locally to be as unaffected as possible from
similar future incidents. This might well be the most positive long term outcome of this
epidemic. I wholeheartedly agree but I have some trouble reconciling this with your
support of the EU and the British remainers.
Pepe Escobar writes about the possibility
that the virus is a bioweapon --but produced by whom? He looks at the Outlaw US
Empire's Hybrid War against China:
"There's no question coronavirus, so far, has been a Heaven-sent politically useful
tool, reaching, with minimum investment, the desired targets of maximized U.S. global power
– even if fleetingly, enhanced by a non-stop propaganda offensive – and China
relatively isolated with its economy semi paralyzed.
"Yet perspective is in order. The CDC estimated that up to 42.9 million people got sick
during the 2018-2019 flu season in the U.S. No less than 647,000 people were hospitalized.
And 61,200 died."
As far as I know, the bioweapon hypothesis has yet to be 100% disproven. IMO, it isn't.
I know how bacteriums and viruses share their DNA such that as I wrote previously humans
must always treat them as their #1 enemy/threat as they're potentially very deadly. It's
also a big mistake for the Outlaw US Empire to gloat about China's misfortune as it's not
immune whatsoever.
I read Escobar on your comment. He does have the Chinese and Persian perspective well in
hand. I still remember Trump at Mar-a-Lago treating Xi to 'beautiful piece of chocolate
cake', and bombing the Syrians.
A threat thrown at Xi and China. That was very telling and the threats, sanctions, have
occurred ever since non stop. This virus is all too convenient and once the dust settles we
may have some reciprocal action.
It is also hard to imagine how "first-world" countries will control the virus if it ever
does get a foothold, since they are scared of their own shadows and can't possibly compete
with the PRC when it comes to ruthlessness (at times there may be advantages to living in a
dictatorship ..)
Container shipping from Chinese ports has collapsed since the outbreak of coronavirus and
has yet to show any sign of recovery, threatening weeks of chaos for manufacturing supply
lines and the broader structure of global trade.
Almost half of the planned sailings on the route from Asia to North Europe have been
cancelled over the last four weeks. A parallel drama is unfolding on routes from the
Pacific Rim to the US and Latin America.
Lars Jensen from SeaIntelligence in Copenhagen said the loss of traffic is running at
300,000 containers a week. This will cause a logistical crunch in Europe in early March
even if the epidemic is brought under control quickly.[.]
Refrigerated ships full of frozen food are unable to enter Chinese ports because
berths are full.... cannot tap into electricity. No dockers or drivers.
In Europe Fiat Chrysler has suspended production. Jaguar Land Rover are flying in parts
in suitcases from China to UK.....
=========
Not just Europe. It's global. Could tip the world into a deep recession. Shortages
abound from everyday essentials,[Walmart, Family Dollar, DollarTree, Home Depot] food,
pharmaceuticals and manufacturers.
Food!!? Yes. garlic in the produce area.
You shop at Costco? Cheesecake - loaded with sodium benzoate- with milk being the last
ingredient listed on the label.
Good question: As one analyst asked; over the next 3-4 months who will want to open a
container from China or buy anything marked "Product of or Made in China?
I do not think the Chinese will counter-attack for this US bio weapon attack.
Why is it that many people dismiss this event as being biological warfare launched by
the US against China? Because it is too horrific. We know that the empire murders by the
thousands and millions without the slightest hesitation or guilt, but for some reason we
assume that even the empire is not so vile and malevolent as to use biological weapons. We
assume that the empire has some sort of conscience that will moderate its behavior, even
though we've never seen evidence of it.
These are people who built armies of literal head-choppers... death squads. They
gleefully murder respected statesmen on diplomatic missions. If they can do nothing else
then they will run you off the road just because they are hatefully psychotic.
This collectively psychotic culture cannot back down from their aggression if they are
losing, so they always escalate that aggression as far as they can.
America is losing its trade war with China, but is running out of economic weapons. From
within its bubble of psychosis America feels it has no choice but to escalate beyond
economic weapons. What other weapons can America possibly use to defeat China at this point
other than bio weapons?
There is no question that this is biological warfare.
That said, China is not going to retaliate and try to hurt Americans.
Why not?
Because unlike America they are not a culture of psychopaths.
Lost in this whole scaremongering affair is the CDC estimates that already for this flu
season 29 million have contracted the flu and 16,000 have died.
The American Sheeple can be herded anywhere with the MSM sheepdogs being controlled by
competent shepherds.
Mr. Gruff: I am told that bioweapons are not considered, by developed world spooks and
military types, to be "useful" as weapons. They are highly unstable, difficult to deploy
and tend to have lots of blowback, as in their effects being next to impossible to predict
and just as likely to result in non-desired outcomes as desired. Yes, Escobar makes a good
point that it sure all looks very, very suspicious, especially given the gigantic Western
anti-China info op that was marched out, and that right quick. But bioweapons are said to
not be considered serious as weapo0ns systems.
"...bioweapons are said to not be considered serious as weapons systems." --casey
@31
That just makes them all the more attractive to the "Shock Doctrine" CIA
gangsters. Agents of chaos love that sort of stuff. Nothing serious, just "bloodying
their nose" a little.
A bio-weapon is a dubious hypothesis, or at the very least, it's not exactly destined to
kill massess of "enemy" people. The virus kills basically 70/80+ years old people, which
isn't exactly a problem for most countries. The heavy load on healthcare system and its
cost might be a reason, but there's many other ways of attaining such a goal. A Trump-ian
desire to limit globalization perhaps, but doubtful as well.
That said, we can only state that China did its job, but it remains to be seen if other
countries are as effective. Japan obviously isn't. I suspect many European countries won't
as well - they're repatriating people from China and cruise ships by commercial flights and
don't bother with quarantines if people have no symptoms. Then there's Iran; was it some
Iranian who came back infected, was it Chinese workers who were let in unquarantined? (if
the latter, then it's a minor failure for China not to have screened them, though the
bigger failure would probably be Iranian immigration authorities)
B's last paragraph seems spot on. Chinese emissions of greenhouse gases are going down
big time, and other countries might learn the virtues of being self-sufficient as much as
possible.
While most of the discussion here centres on supply-chains and manufacturing exports from
China, in Australia it's our service sector that will be hit. We rely on at least three
relationships with China: education (Chinese fee-paying university students), tourism
(AUD$12bn/annum from PRC) and mining exports (iron-ore and coal). The first is the sector I
work in and my university is hysterical about the 6000 PRC students stranded in China under
the travel ban. Each of those students spends a lot of money here on accom, food, etc. and
represent about AUD$100m across the year including tuition fees. As b and others have said,
it's the ramifications and delayed unexamined consequences that will bite already
over-leveraged sectors. And the MSM are very silent on this aspect of the situation,
preferring instead to whip up fear and loathing toward the PRC, which may indeed be the
intent in order to prepare populations for a longer-term 'decoupling' from the Chinese
economy.
It's not that the Outlaw US Empire wouldn't deploy a bioweapon--it did in September
2001, anthrax--but as with The Omega Man and The Walking Dead they're too
unpredictable and can easily blowback on the users. IMO, chemical weapons that are
carcinogens like Agent Orange and glyphosate (Roundup) also ought to be classed as
bioweapons since they attack our biological systems in ways different from "classical"
chemical agents.
The economic affects have yet to even be felt; and if the virus was a bioweapon, its
blowback will severely damage Western economies as they're the most developed and
dependent. Otherwise, we have another deadly strain of virus that must be controlled just
as with all the other viruses.
I wish I had the optimism of some here ! Casey @ 31 for instance.
But we live in a real distopyian world, the most powerful country is run by a psychopathic
mass murderer whose population has been brain washed! To look for logic and reason in the
actions of the insane will never work! Their insane end of story.
So here is the truth it may save a lot of speculation.
Must read. But very long. Solid evidence as to intent, motavation and opportunity
What makes you think the ones using the bioweapons (CIA) care? If a million people in
poor health, or elderly, or with no insurance die in the US these monsters will put that on
the benefit side of the ledger. Less useless eaters leaching the empire's resources (most
of the US population are considered useless eaters now that the country has been largely
de-industrialized). Blowback doesn't faze them in the slightest. Head-chopping terrorists
are rabid dogs... very difficult to control. The CIA's version of James Bond got snuffed in
Benghazi by the very same rabid dogs that he was recruiting for the "American Foreign
Legion" . Has that blowback slowed the CIA down working with these animals? No, of
course not.
Posters are trying to maintain the completely unfounded belief that these people behind
the attacks are rational and intelligent. They are not. They are psychopaths, and that is
not hyperbole. These psychopaths actually like collateral damage, even when it
happens to citizens of the empire. They're laughing about the people dying on the cruise
ships. They are joking with each other about how stupid the useless eaters are for getting
on planes with infected people. They don't see this as a problem at all, aside perhaps from
being disappointed that more people in China are not dying.
Time and again people insist upon fooling themselves into disbelieving how monstrous
these psychotic freaks are, despite the fact of their monstrosity being revealed over and
over.
Try this: Read up on Jeffrey Dahmer. Maybe you think you know a little about him but
most people don't dig too deep because it makes them uncomfortable trying to imagine how
another human being could be that messed up.
Once you get a good idea of what I am referring to by "psychopath" , then try to
imagine an entire global crime syndicate made up of these types of individuals. If you work
at it you may start to get a grasp of what the CIA really is.
Yeah, I agree with your reasoning and have referred to The Establishment of being
wannabe Neros and Caligulas, and elsewhere I've described their philosophy as Libertinism
as designed by the Marquis de Sade. Some movies depicting CIA personnel behaviors come
close to portraying what you describe, like Mr Joshua and ilk from Lethal Weapon .
Not enough people seem to be troubled by the "fictional" Jason Bourne Story. Proven yet
again: Absolute Power corrupts absolutely. It's this aspect that's always troubled me when
thinking about how to disband the CIA. The fiction's horrid enough, and we know the truth's
worse.
Different strain a cold virus causing only a fraction of hospitalizations and deaths from
pneumonia from other infections, are way overhyped by China and international health
organizations. To what end?
Mandatory vaccinations down the road which will cause many adverse effects that will be
underreported, conditioning people to allow governments worldwide to lockdown people
without protest to keep them safe, etc.
This is all a psy-ops operation for greater pharma profits and government control. China
will blame the US for using a biowarfare weapon to gain the peoples nationalist support
(fake enemies are wonderful for that purpise). Despite being "attacked" China will continue
providing America antibiotics, tech gadgets and API's used for drugs and vaccines and will
honor American intellectuals property rights and pay royalties for vaccines they produce
using patented vaccine processes. Fake wrestling man.
Anyone notice it was not until China signed the trade agreement that the virus became
newsworthy?. Gates Event 201 and his documentary on Netflix shows the this was a preplanned
psyops .
For all we know there is not even a new virus. Just a test that detects endogenous viral
proteins present in a percentage of people that get tested when sick or exposed to a sick
person. How would we even know? But lets assume it is a new virus. Just look at the numbers
outside Hubei (numbers not to be trusted), and understand many people had the virus without
symptoms and you see the mortality rate not much greater than influenza and affecting
mostly elderly or other sick people hardest.
From past conversations I've had here at MoA with Clickkid, VK and some others on the
COVID-19 virus as a bioweapon, my conclusion is that it cannot be a bioweapon.
It's too contagious and it has too many modes of transmission for it to be easily
controllable by the attackers using it to subdue an enemy without risking blowback once the
enemy is dead and gone, and the attackers start moving their own people in to mop up and
take over cities and steal equipment, factory machines and armaments where the virus may
still be lingering. A virus that kills people past the age when they've finished raising
families and their own health is in long-term decline? Not ideal - as Clickkid pointed out,
a better bioweapon is one that incapacitates people in the prime of their lives, doesn't
kill them outright but reduces their productivity, maybe also renders them sterile or
infertile.
A vaccine would be a better bioweapon than an actual disease. With the various side
effects that have been reported for it, Gardasil (to prevent cervical cancer in women)
would be ideal as a bioweapon.
my conclusion is that it cannot be a bioweapon.
Bingo!
We have a winner.
It is 96% similar to a 2014 coronavirus, of bat origin, a double stranded positive RNA
virus.
A bat virus, like SARS and MERS, the other two significant coronavirus.
Jen
China has been in lockdown. Factories closed ect. Major resources diverted to stop the
spread. It is a major economic hit to China.
Hygiene is high in China compared to other densely populated parts of Asia. China has been
hit now with a number of exotic viruses ect that have been hits to its economy. Ebola
kicked off in Africa, but other than that, other countries that eat anything and
everything, who's hygiene is often not up to the standard of China do not seem to be
experiencing these outbreaks.
As to using bio weapons, any country that would develop and use them would have also
developed a vaccine.
my comment with LINK @ 25 addressed the just-in-time supply chain, global shipping
disruptions.
Now, the CDC has announced "in the eventuality of" they are getting prepared to adopt
closures:
(Reuters) - U.S. health officials on Friday said they are preparing for the possibility
of the spread of the new coronavirus through U.S. communities that would force closures
of schools and businesses.
The United States has yet to see community spread of the virus that emerged in central
China in late December. But health authorities are preparing medical personnel for the
risk, Nancy Messonnier, an official with the Centers for Disease Control and Prevention
(CDC) told reporters on a conference call.
In coming weeks, if the virus begins to spread through U.S. communities, health
authorities want to be ready to adopt school and business closures like those undertaken
in Asian countries to contain the disease, Messonnier said.[.]
The CDC is taking steps to ensure frontline U.S. healthcare workers have supplies they
need, she added, by working with businesses, hospitals, pharmacies and provisions
manufacturers and distributors on what they can do to get ready.[.]
The United States currently has 13 cases of people diagnosed with the virus within the
country and 21 cases among Americans repatriated on evacuation flights from Wuhan, China,
and from the Diamond Princess cruise ship in Japan, CDC said.
Of 329 Americans evacuated from the cruise ship, 18 tested positive for the
virus. Eleven of them are at University of Nebraska Medical Center, five are in medical
facilities near Travis Air Force Base in California and two are near Lackland Air Force
Base in San Antonio, Texas.[.]
That's the downer that australia experiences after drinking to excess.
He is also the downer that as aus ambassador to UK blew the game with his formal
references to Joe Mifsud and the Papadopolus fiasco in Italy and the Englanders homeland.
Once he had committed his report and used the diplomatic service to deliver it the game had
to follow with a formal presentation to FBI. Then the FISA court evidence and so on.
He also gave $30Mil to the Clinton Foundation for their non work on AIDS in Papua New
Guinea or some scam like that.
Can someone prosecute these thieving scum? But then they are useful idiots to both the
oligarchy and to us mere observers.
It is 96% similar to a 2014 coronavirus, of bat origin, a double stranded positive RNA
virus.
A bat virus, like SARS and MERS, the other two significant coronavirus.
To be any sort of winner one would have to go a further furlong and explain some of the
anomalies being reported or refute those reports etc. To say a coronavirus of today is
closely similar to a (bat derived) coronavirus of yesterday and therefore the source
identified is direct really stretches evidence a little.
WTF do you mean %96? What is the %4 comprised of?
If I drink %96 water with %4 arsenic it is not healthy water eh?
How many bats were sold at the FISH market?
Have they been reduced/banned in their popularity following the last outbreak?
Is the coronavirus species specific?
Try some detailed refutation if you will Duncan Idaho and actually negate the
proposition that the previous coronavirus could not be fiddled to produce this
emergence.
The speed, location and size of this COVID-19 outbreak are not natural and do not fit the
online narratives targeting China.
Attacking China with bioweapons is nothing new, Japan did it with Unit 731 and US did it
during Korean War in 1950s attacking China with Yellow Fever.
These latest attacks on the sounder of pigs with Swine Flu then followed by COVID-19
carefully timed near Chinese New Year at the central of China for maximum impacts. Followed
by the US hypocrisy pretending to help then later lied that China refused the offer.
It has become too obvious the motive of a very well coordinated amount of online disinfo
as deflections with "Eating bat soup, eating wild animals, engineered virus escape from
Wuhan L-4 lab" to pin the blame China for the outbreak.
The amount of intensive of online trolls attacking China to support the anti-China
propaganda narratives above. Have seen these kinds one too many times, like White Helmet
making fake video blaming Syrian government gas attack on Syrian people, Saddam Hussein got
WMD and he ripped babies out of incubators testimony in UN, no less. Muammar Gaddafi
violated human right, et al.
Hong Kong Color revolution, Uighur Islamic Extremist, Tibet Dalai Lama bill, swine flu
attack, virus attack on the people, kidnapping Huawei CFO by Canada, .......... amid
US-China trade war. All the attacks on China intensified when China launched the Belt and
Road Initiative. Can it be more obvious?
The remaining patient contracted the disease from his daughter, who had travelled
along with seven workmates to a training course in Wuhan. The workers who attended the
course were all from the province of Vinh Phuc, where currently 73 persons are suspected of
having contracted the virus. They, and affected areas in the commune (population 10,000)
are under a twenty-day quarantine, due to end on March 3. If anyone tests positive, of
course further quarantine and treatment will follow.
Elsewhere in Vietnam, schools are closed, and will stay closed until at least the
beginning of March, and large gatherings have been suspended. Masks were in short supply
but production is now beginning to meet the demand. The government is attempting to enforce
a quarantine for fourteen days for citizens returning from travel to China; non-citizens
are not being permitted to enter VN from China. (Unfortunately, some people are attempting
to avoid these restrictions by travelling to a third country, and entering Vietnam from
there.)
In sum, there is no large outbreak of the virus in Vietnam as yet, public awareness
campaigns are in full swing, there is clear awareness of the economic impacts in all
sectors, and concentrated nursing care has led to recovery in all cases to date.
What makes you believe the ZOG can surreptitiously attack China with COVID-19 won't carry
out the same attack at home and at the enemies of the ZOG empire?
You are cheering the death of innocent Chinese people, you better think again what makes
you so special that you will be spared.
I stopped reading ZeroHedge as it's the most anti China disinfo portal. They publish
anti China propaganda from Falun Gong, EpochTime, Gatestone, NED, Propaganda outlets from
India, et al.
Also ZeroHedge banned several times for questioning their narratives. But my other
account bashing China, Iran, North Korea, ........ is still alive after more than 10
years.
As the usual suspects fret over the "stability" of the Chinese Communist Party (CCP) and
the Xi Jinping administration, the fact is the Beijing leadership has had to deal with an
accumulation of extremely severe issues: a swine-flu epidemic killing half the stock; the
Trump-concocted trade war; Huawei accused of racketeering and about to be prevented from
buying U.S. made chips; bird flu; coronavirus virtually shutting down half of China.
Add to it the incessant United States government Hybrid War propaganda barrage,
trespassed by acute Sinophobia; everyone from sociopathic "officials" to self-titled
councilors are either advising corporate businesses to divert global supply chains out of
China or concocting outright calls for regime change – with every possible
demonization in between.
There are no holds barred in the all-out offensive to kick the Chinese government while
it's down.
A Pentagon cipher at the Munich Security Conference once again declares China as the
greatest threat, economically and militarily, to the U.S. – and by extension the
West, forcing a wobbly EU already subordinated to NATO to be subservient to Washington on
this remixed Cold War 2.0.
The whole U.S. corporate media complex repeats to exhaustion that Beijing is "lying" and
losing control. Descending to sub-gutter, racist levels, hacks even accuse BRI itself of
being a pandemic, with China "impossible to quarantine".
All that is quite rich, to say the least, oozing from lavishly rewarded slaves of an
unscrupulous, monopolistic, extractive, destructive, depraved, lawless oligarchy which uses
debt offensively to boost their unlimited wealth and power while the lowly U.S. and global
masses use debt defensively to barely survive. As Thomas Piketty has conclusively shown,
inequality always relies on ideology.
We're deep into a vicious intel war. From the point of view of Chinese intelligence, the
current toxic cocktail simply cannot be attributed to just a random series of coincidences.
Beijing has serial motives to piece this extraordinary chain of events as part of a
coordinated Hybrid War, Full Spectrum Dominance attack on China.
Enter the Dragon Killer working hypothesis: a bio-weapon attack capable of causing
immense economic damage but protected by plausible deniability. The only possible move by
the "indispensable nation" on the New Great Game chessboard, considering that the U.S.
cannot win a conventional war on China, and cannot win a nuclear war on China.
A biological warfare weapon?
On the surface, coronavirus is a dream bio-weapon for those fixated on wreaking havoc
across China and praying for regime change.
Yet it's complicated. This report is a decent effort trying to track the origins of
coronavirus. Now compare it with the insights by Dr. Francis Boyle, international law
professor at the University of Illinois and author, among others, of Biowarfare and
Terrorism. He's the man who drafted the U.S. Biological Weapons Anti-Terrorism Act of 1989
signed into law by George H. W. Bush.
Dr. Boyle is convinced coronavirus is an
"offensive biological warfare weapon" that leaped out of the Wuhan BSL-4 laboratory,
although he's "not saying it was done deliberately."
Dr. Boyle adds, "all these BSL-4 labs by United States, Europe, Russia, China, Israel
are all there to research, develop, test biological warfare agents. There's really no
legitimate scientific reason to have BSL-4 labs." His own research led to a whopping $100
billion, by 2015, spent by the United States government on bio-warfare research: "We have
well over 13,000 alleged life science scientists testing biological weapons here in the
United States. Actually this goes back and it even precedes 9/11."
Dr. Boyle directly accuses "the Chinese government under Xi and his comrades" of a cover
up "from the get-go. The first reported case was December 1, so they'd been sitting on this
until they couldn't anymore. And everything they're telling you is a lie. It's
propaganda."
The World Health Organization (WHO), for Dr. Boyle, is also on it: "They've approved
many of these BSL-4 labs ( ) Can't trust anything the WHO says because they're all bought
and paid for by Big Pharma and they work in cahoots with the CDC, which is the United
States government, they work in cahoots with Fort Detrick." Fort Detrick, now a
cutting-edge bio-warfare lab, previously was a notorious CIA den of mind control
"experiments".
Relying on decades of research in bio-warfare, the U.S. Deep State is totally familiar
with all bio-weapon overtones. From Dresden, Hiroshima and Nagasaki to Korea, Vietnam and
Fallujah, the historical record shows the United States government does not blink when it
comes to unleashing weapons of mass destruction on innocent civilians.
For its part, the Pentagon's Defense Advanced Research Project Agency (DARPA) has spent
a fortune researching bats, coronaviruses and gene-editing bio-weapons. Now, conveniently
– as if this was a form of divine intervention – DARPA's "strategic allies"
have been chosen to develop a genetic vaccine.
The 1996 neocon Bible, the Project for a New American Century (PNAC), unambiguously
stated, "advanced forms of biological warfare that can "target" specific genotypes may
transform biological warfare from the realm of terror to a politically useful tool."
There's no question coronavirus, so far, has been a Heaven-sent politically useful tool,
reaching, with minimum investment, the desired targets of maximized U.S. global power
– even if fleetingly, enhanced by a non-stop propaganda offensive – and China
relatively isolated with its economy semi paralyzed.
Yet perspective is in order. The CDC estimated that up to 42.9 million people got sick
during the 2018-2019 flu season in the U.S. No less than 647,000 people were hospitalized.
And 61,200 died.
This report details the Chinese "people's war" against coronavirus.
It's up to Chinese virologists to decode its arguably synthetic origin. How China
reacts, depending on the findings, will have earth-shattering consequences –
literally.
Setting the stage for the Raging Twenties
After managing to reroute trade supply chains across Eurasia to its own advantage and
hollow out the Heartland, American – and subordinated Western – elites are now
staring into a void. And the void is staring back. A "West" ruled by the U.S. is now faced
with irrelevance. BRI is in the process of reversing at least two centuries of Western
dominance.
There's no way the West and especially the "system leader" U.S. will allow it. It all
started with dirty ops stirring trouble across the periphery of Eurasia – from
Ukraine to Syria to Myanmar.
Now it's when the going really gets tough. The targeted assassination of Maj. Gen.
Soleimani plus coronavirus – the Wuhan flu – have really set up the stage for
the Raging Twenties. The designation of choice should actually be WARS – Wuhan Acute
Respiratory Syndrome. That would instantly give the game away as a War against Humanity
– irrespective of where it came from.
Theres been massive media and of course covert pressure to make china submit to US
diktat.. Hongkong riots is one of a mess , indoctrinationg HK young people into rabid
terrorist who rejoice on chinese coronavirus debacle.
now this is funny , these HKers are also chinese descent no matter what their delusional
mind feeds them.. Corona virus practically next door and without chinese effort to contain
it , HK will get wiped out.. yet they are still acting like useful idiots ..
the world knew about these morons and their names , i doubt they are welcome to other
countries even australia banned them entry
Global
Times OP/ED tangentially about virus and more about China/Outlaw US Empire
deteriorating relation. Some meat:
"No matter how you look at it, there will be no winner in this hypothetical cold war,
and the US will not be able to continue its march to greatness unscathed. In a word, the
time has changed, and Sino-US relations are very different from the US-Soviet relations 70
years ago.
"First of all, although the development paths of the two countries are different, China
holds the correct course. For more than 40 years, China has always adhered to the path of
reform and opening up, firmly integrated into and safeguarded the current international
system, and committed itself to a fair and reasonable reform direction. In contrast, the
foreign policy of the present US administration is not only disorderly, but also
increasingly assertive. The US presents itself to the world as a destroyer and subversive
of the international order, which makes it mired in a moral deficit."
A "moral deficit" indeed! In that connection, it ought to be noted that the Boy Scouts
of America filed for bankruptcy because of the numerous lawsuits targeting its pedophile
scoutmasters for which it's liable.
A very deep "recession" aka depression was already expected by those paying attention. How
do the financial elites hide blame for it? Launch a bio-weapon in a nation that is the
world's factory, grinding the world economy to a crawl, and blame the depression on that.
The CIA exists primarily to advance the interests of Wall Street. The timing of this is
just too coincidental.
"Last year, the faculty at Harvard's Kennedy School of Government voted to offer Mr.
Zucman, 33, a tenured position. But Harvard's president and provost nixed the offer, partly
over fears that Mr. Zucman's research could not support the arguments he was making in the
political arena, according to people involved in the process." NYT
He subsequently got a post at the University of California, Berkeley.
In a move that drew outrage from labor unions and progressives, President Donald Trump this week
quietly
took steps to slash
a scheduled pay raise for millions of federal workers from 2.5% to 1% due to
supposed concerns about "keeping the nation on a fiscally sustainable course."
"I have determined that for
2021 the across-the-board base pay increase will be limited to 1.0%," Trump
said
in
a message to Congress on Monday. "This alternative pay plan decision will not materially affect our ability
to attract and retain a well‑qualified federal workforce."
The president's proposed "adjustment" to the scheduled pay raise will take effect in January 2021 unless
Congress passes legislation to override the change.
Just a day after his message to Congress, Trump
tweeted
,
"BEST USA ECONOMY IN HISTORY!"
Critics highlighted the disconnect between the president's justification for cutting the planned raise
for federal workers and his boasts about the state of the U.S. economy.
"Trump claimed we had the 'BEST USA ECONOMY IN HISTORY' and cited 'serious economic conditions affecting
the general welfare' to justify limiting pay increases for federal workers,"
tweeted
Rep.
Steve Cohen (D-Tenn.). "These are contradicting claims. They can't both be true."
This is just the latest action in
@realDonaldTrump
's war on civil
servants. He held their pay hostage during the failed
#TrumpShutdown
,
worked to undermine their collective bargaining rights and proposed cuts to their retirement benefits.
#TrumpBudget
.
Slate
's Elliot Hannon
wrote
Wednesday
that "cutting the 2.5% raise set for 2021 to 1% for millions of federal workers seems a bit austere in the
face of such self-proclaimed boom times."
"Even more absurdly, Trump is justifying ordering the cut on the grounds that the country is in the midst
of a 'national emergency or serious economic conditions affecting the general welfare,' which the White
House says authorizes the president to 'implement alternative plans for pay adjustments,'" Hannon added. "So
which is it? The best economy in the history of economies or a national economic emergency? Either way,
somebody's lying."
Pat Garofalo, managing editor at
Talk Poverty
,
tweeted
that
warnings about fiscal sustainability are not credible coming from the president who
signed
into law $1.5 trillion in tax cuts
for the rich in 2017.
The administration approved trillions of dollars in tax cuts for the wealthy and
corporations, but sure, shortchanging federal employees is what will set the nation on a "fiscally
sustainable course"
https://t.co/3cmDRB5D60
Tony Reardon, president of the National Treasury Employees Union (NTEU), the largest independent union of
federal workers in the U.S., said a 1% pay raise would "do nothing to close the gap between federal employee
salaries and their higher-paid private sector counterparts, it won't keep up with inflation, it won't keep
up with private sector wage increases."
"For an administration that has added $3 trillion to the federal debt, gouging federal employee pay and
benefits in the name of deficit reduction is ridiculous," Reardon said in a
statement
.
"NTEU will fight these regressive proposals on retirement while supporting existing legislation calling for
a 3.5% pay increase in 2021."
(sciencemag.org)
sea of red ink for federal research funding programs in President Donald Trump's latest
budget proposal. The 2021 budget request to Congress released today calls for deep, often
double-digit cuts to R&D spending at major science agencies. From a report: At the same
time, the president wants to put more money into a handful of areas -- notably artificial
intelligence (AI) and quantum information science (QIS) -- to create the new technology needed
for what the budget request calls "industries of the future." Here is a rundown of some of the
numbers from the budget request's R&D chapter. (The numbers reflect the portion of each
agency's budget classified as research, which in most cases is less than its overall
budget.)
1. National Institutes of Health: a cut of 7%, or $2.942 billion, to $36.965 billion.
2. National Science Foundation (NSF): a cut of 6%, or $424 million, to $6.328 billion.
3. Department of Energy's (DOE's) Office of Science: a cut of 17%, or $1.164 billion, to $5.760
billion.
4. NASA science: a cut of 11%, or $758 million, to $6.261 billion.
5. DOE's Advanced Research Projects Agency-Energy: a cut of 173%, which would not only
eliminate the $425 million agency, but also force it to return $311 million to the U.S.
Department of the Treasury.
6. U.S. Department of Agriculture's (USDA's) Agricultural Research Service: a cut of 12%, or
$190 million, to $1.435 billion.
7. National Institute of Standards and Technology: a cut of 19%, or $154 million, to $653
million.
8. National Oceanic and Atmospheric Administration: a cut of 31%, or $300 million, to $678
million.
9. Environmental Protection Agency science and technology: a cut of 37%, or $174 million, to
$318 million.
10. Department of Homeland Security science and technology: a cut of 15%, or $65 million, to
$357 million.
11. U.S. Geological Survey: a cut of 30%, or $200 million, to $460 million.
For a fictional character, homo economicus has had a pretty good run
.
Since the 1950s,
this mono-motivated, self-seeking figure has stalked the pages of economics textbooks, busy deciding each
action according to a rational calculus of personal loss and gain. But more recently his territory has
shrunk as experts on human nature have demonstrated what any decent novelist could have told them: our real
selves are nothing like this.
Unfortunately, many economists still plug this flawed view of people into computer models that determine
all kinds of things that impact our lives, from how much workers get paid to how we value life or common
goods, such as a clean environment. The results can be disastrous.
Typically, economists aren't that keen on admitting that their work is deeply connected to morality --
never mind that Adam Smith himself was a moral philosopher. But if you ask a question as simple as how to
price a used car, you quickly find that moral concerns and economic activity happen together all the time.
In his 2012 book,
The Righteous Mind
, New York University social psychologist Jonathan Haidt
explored why so many perfectly intelligent people have misread human nature– and not just economists, but
plenty of psychologists and even (shocker!) people who identify as politically liberal. For him, the key to
getting to know ourselves properly lies with moral psychology, a newish strain that pulls together
evolutionary, neurological, and social-psychological research on moral emotions and intuitions.
As Haidt sees it, we are creatures driven by moral intuition and attuned to both our personal interests
as well as what's good for the groups with which we identify. He points out that in order to thrive, we have
to appreciate our complex, interactive natures and see each other more clearly and empathetically – an
observation that may be especially useful at a time when threats like climate change and the concentration
of money and power threatens all of us, no matter who we are or what groups we belong to. At the moment, we
aren't doing such a good job of this.
In Haidt's view, the conscious mind is like a press secretary spewing after-the-fact justifications for
decisions already made. Thinkers like David Hume and Sigmund Freud were certainly hip to this idea, but
somehow a lot of economists missed the memo, as did psychologists following dominant rationalist models in
the 1980s and '90s.
Haidt invites us to consider ourselves as a rider (our analytical, rational part) and an elephant (our
emotional, intuitive part). The rider holds the reins, but the beast below is in charge, urged on by the
complex interaction of genetic influence, neural wiring, and social conditioning. The rider can advise the
elephant, but the elephant calls most of the shots.
Fortunately, the elephant is quite intelligent and equipped with all sorts of intuitions that are good
for conscious reasoning. But elephants get very stubborn when threatened and like to stick to what's
familiar. The rider, for her part, is not exactly a reliable character. She's not really searching for
truth, but mostly for ways to justify what the elephant wants.
That's why a rebel economist challenging conventional thinking about subjects like human nature faces a
heavy lift. Experts have to see a lot of evidence accumulating across many studies before they reach a point
where they are finally forced to think differently. Scientific studies are even less helpful in persuading
the general public.
When I asked Haidt how the mavericks could help their cause, he noted that humans are social creatures
more influenced by people than by ideas. So, it matters
who
says something as much as
what
they say. It also makes a difference how they say it: elephants don't like to be insulted, and they lean
towards arguments made by people they like and admire. Not very rational, perhaps, but likely true.
Homo Duplex
The notion that human beings are social creatures is another strike against homo economicus. We are
selfish much of the time, but we are also "groupish," as Haidt puts it, and perhaps better described as
"homo duplex" operating on two levels. Here he offers another animal analogy, suggesting that we're 90%
chimp and 10% bee, meaning that from an evolutionary perspective, we are selfish primates with a more
recently developed a "hivish" overlay that lets us occasionally devote ourselves to helping others, or our
groups.
This helps explain why you can't predict how someone is going to vote based on their narrow
self-interest. Political opinions are like badges of social membership. We don't just ask what's in it for
us, but also what it means to our groups. Having a kid in public school doesn't tell you that a person will
support aid to public schools, probably because there are group interests in play. What unifies us in
groups, Haidt argues, are certain moral foundations that allow us to share emotionally compelling worldviews
that we can easily justify and defend against any attack by outsiders who don't share them. And we can get
pretty nasty about those outsiders.
This begins to sound like ugly tribalism, the kind of stuff that leads to war. But Haidt reminds us that
this propensity also prepares us to get along within our groups and even to cooperate on a large scale -- our
human superpower. We differ from other primates because we exhibit shared intentionality: we're able to plan
things together and work together towards a common goal. You never see two chimps carrying a log – they just
don't act in concert that way. We do, and in our groups we've developed mechanisms to suppress cheaters and
free riders and reap the benefit of division of labor. Groups of early humans may well have triumphed over
other hominids not because they smashed them with clubs , but because they out-cooperated them.
To better understand how we operate in political groups, which have lately become more antagonistic,
Haidt created a map of our moral landscape called Moral Foundations Theory which delineates multiple
"foundations" we presumably use when making moral decisions, including care/harm, fairness/cheating,
loyalty/betrayal, authority/subversion, sanctity/degradation, and liberty/oppression. (Some scholars have
challenged
his system, offering alternative maps). His research indicates that liberals and
conservatives differ in the emphasis they place on each of these foundations, with conservatives tending to
value all six domains equally and liberals valuing the first two much more than the other three.
Haidt argues that liberals tend to home in on care and fairness when they talk about policy issues, which
can put them at a disadvantage vis-ŕ-vis conservatives, who tend to activate the whole range of foundations.
Republicans are thus better able to talk to elephants than Democrats because they possess more ways to go
for the gut, as it were. If Democrats want to win, Haidt warns, they need to think of morality as more than
just care and fairness and to try to better understand that foundations more important to conservatives,
like deference to authority or a reverence for sacredness, are not pathological, but aspects human social
evolution that have helped us survive in many situations.
When he wrote
The Righteous Mind
, Haidt noted that Democrats had espoused a moral vision that
did not resonate with many working class and rural voters. In the current presidential race, he sees some
progress on economic populism from the Bernie Sanders wing, in part because Occupy Wall Street got people
attuned to issues of fairness and the oppression of the 1%. When politicians talk about the abuse of
political and economic power, they can activate not only care and fairness concerns, but also the
liberty/oppression foundation which people respond to across the political spectrum.
But this line is also tricky because, as Haidt pointed out to me, "Americans don't really hate their
rich." (One
recent study
suggested only 25% of Americans have a negative view of the rich, though a majority said
they should be taxed more).
Haidt also worries that many Democrats, particularly elites, are currently engaging with cultural issues
by embracing a what he called a "common enemy" form of identity politics which "demonizes people at the
intersectional point of evil (white men)" rather than focusing on a "common humanity" story which "draws a
larger circle around everyone. (Haidt plunged into controversial territory with his 2018 book,
The
Coddling of the American Mind
, which argues that college campuses are shutting down useful debate
through "safetyism" that protects students from ideas considered harmful or offensive).
He observed to me that while the polarizing Donald Trump may have turned off the younger generation "for
the next few decades," Democrats may be failing "to look seriously at the ways that their social
policies -- and their messengers -- alienate many moderates." Newly "woke" white elites, for example, who see
racism as the driver of nearly every phenomenon, may be having an unintended negative effect in his view.
When they ascribe Trump's victory to racial resentment and ignore the concerns of those who fear sliding
down the economic ladder, for example, they may turn off potential allies. Call a person or a group racist
and you won't be able to convince them to support your view on anything. Their elephants aren't listening.
Haidt acknowledges that our moral matrices are not written in stone; they can and do evolve, sometimes
quite rapidly within a couple of generations. Economic forces surely act to shift attunement to moral
foundations, making people more susceptible, for example, to anti-immigration arguments. If you fail to
consider the economic influence on this kind of moral activation, you'll be less equipped to address
problems like ethnic conflict. Being able to step outside our own moral matrix is essential to persuasion.
We not only have to talk to the elephant, but see the beehive.
We also have to remember the truth is not likely to be something held by any one individual, but rather
something that emerges as a large number of flawed and limited minds exchange views on a given subject. Our
smarts and flexibility are increased by our ability to cooperate and share information. Economists, for
example, improve their understanding of human nature by opening up to other social sciences and the
humanities for insight.
There is evidence that economists are paying attention to moral psychology. In their book
Identity
Economics
, Nobel laurate
George
Akerlof
and Rachel Kranton argue that people identify with "social categories," and that each category,
whether it be Christian, mother, or neighbor, has associated norms or ideals to which people want to aspire.
Sam Bowles'
The Moral Economy
shows that monetary incentives don't work in many situations and that
policies targeting our selfish instincts can actually weaken the institutions which depend on our more
selfless impulses– including financial markets. At the Institute of New Economic Thinking (INET), the
connection between economics and morality has been explored by
INET president Rob
Johnson and political philosopher Michael Sandel
as well as thinkers like
economic historian Robert Skidelsky
and
economist Darrick Hamilton
.
All of this rather bad news for homo economicus. But pretty good news for humanity.
we're 90% chimp and 10% bee, meaning that from an evolutionary perspective, we are selfish primates
with a more recently developed a "hivish" overlay that lets us occasionally devote ourselves to helping
others, or our groups.
Well if one wants to take an "evolutionary perspective" (works for me) then obviously our instincts are
shaped to promote survival of the species and not just the individual. And if that's true then the
Randian/economics version of rational isn't rational at all. Perhaps it would be clearer to talk about this
problem in terms of rational versus irrational rather than appealing to some "altruism gene" that will
supposedly save us. IMO only that rational, intelligent, creative aspect of humans will save us from that
irrational side that is indeed totally instinctive. Somehow we've gotten this far–despite everything–"by the
skin of our teeth." Here's hoping those minds will find a path.
Over what? Carol's point about the sociology of Ayn Rand?
In point of fact, Carol, altruism is always secondary (where it appears) in nature. Selfishness
ensures the fittest genes survive to carry on the species. Only in the face of catastrophe does
altruism at
the individual level become more valuable than selfishness. So, indeed it is because of our
selfishness, because we've struggled by the skin of our teeth, that we as a species have survived and
prospered.
but, but erik, that leaves out all the energy saving advantage we get from a cohesive group
which is also determined to survive and carry on centuries of knowledge on just how to do so .
Just a quick jab: why does Haidt, and others, assume that feelings are inferior to logic and intellect?
Seems to me they are inter-twined, separate-able, but equal in value, if not dimension.
It could be a three way set-up instead of a two way (like markets, which are commonly spoken of as two:
buyer and seller, but are three: buyer, seller, and banker /money man). Man's consciousness could be 1)
feelings, 2) logic /intellect, and 3) the decider (call out to ex-prez W, so got political jab in too!).
In fairness to Haidt, I think he's more nuanced than "rationality good; feelings bad"
I have encountered more of that rather rigid approach among those who have read "Thinking Fast and
Slow" perhaps because that book doesn't do as good a job of outlining as crucial the capacity to
recognize which situations favor System 1 thinking and those which favor System 2 -- a problem compounded
by the emphasis in the book on the rather narrow range of circumstances in which System 2 is clearly
superior.
Jeez – I spent years getting an Econ degree in the homo economus/monetarist era (dark times), when I
should've been making my way through my D&D Dungeon Master's sci fi collection!
I always thought that the Professors who thought up homo economus never went with their wives (as
it was back then) to the grocery store.
The rational choice, always, was the store brand. DelMonte and all other such brands owed their
very existence to non-rational, emotional choices–by tons of people.
'Rational' just means 'consistently following an internally sound logic.' A machine does that –
following the logic of its mechanics. A computer does that – following the logic of code. An animal does
that – following the logic dictated by emotion. And an animal certainly does that better than we humans
whose behaviors become muddled by ideas. Truly, by this measure animals are better machines than humans –
more mechanical, more emotional, more logical, more rational.
That's why a rebel economist challenging conventional thinking about subjects like human nature faces
a heavy lift. Experts have to see a lot of evidence accumulating across many studies before they reach a
point where they are finally forced to think differently.
As an ex-organic chemist, I was astonished to find that more than a few scientists cling to outdated
paradigms with a tenacity that would shame the most rigid religious fundamentalist. Cf. heliobacter,
continental drift, even the heliocentric solar system.
While "continental" drift was first proposed in about 1600 AD it was not completely wrong. Like many
initial geologic theories it was partially correct. It is now known that it is not the "continents" that
move across the earth, but tectonic plates, on which the continents are located, that is creating
movement. The convection of the earths interior magma is thought to be the movement vector for the
plates.
"this propensity also prepares us to get along within our groups and even to cooperate on a large scale --
our human superpower"
Yuval Harari's central point revolves around this. Humans, like other primates, engage in "grooming"
activities to maintain group cohesion. With the development of language, this "grooming" went from picking
lice out of each other's hair (fun!) to gossiping about each other. But this behavior seems to be unable to
maintain a group size larger than 150 individuals, not surprising considering the person-to-person contact
necessary.
To gather a larger group around common goals requires myth, Harari says. Early myths involved gods, often
imagined as living in a separate world with structures parallel to our own. In a polytheistic society, the
head god related to the lesser gods as a king related to his human subjects. In the henotheistic Ancient
Near East, nations like Babylon, Assyria and even the southern Israelite kingdom of Judah envisioned a
parallel war occurring in "heaven" between the national gods when two countries went to war. These days,
there are new, completely secular myths like what Harari calls "Money" that orient our world around
materialism, competition and power.
William H. McNeill also noted the almost universal human behaviours of mass marching/dancing (which
requires and reinforces cooperation) as indicative of a social behaviour rooted in a biological need
We also have "mirror neurons" for a reason -- one that baffles the proponents of "homo economicus"
I was more interested in this article from the political perspective; i.e. what liberals get wrong.
Like many who read this site, I'm interested in the primary elections and want Bernie to win.
But Bernie's message could be better by being more attuned to some of the "Moral Foundation" issues Haidt
raises.
Take Medicare for All which, by most accounts, is the leading issue to most voters:
Talking more about Medicare being a simple and successful 50+ year program appeals to authority. Medicare
Advantage plans can be framed as subversion. Or loyalty / betrayal. Also consider sanctity / degradation.
Talking more about the 80/20 aspect of coverage addresses fairness / cheating and "free stuff"
Not talking about eliminating private insurance shows concern for liberty / oppression. I would actually
make a joke about people who would still want private insurance after M4A becomes available
Just food for thought in terms of how the ideas contained in the article could be applied.
And the next time some nefarious reporter asks how we will pay for this or that; I wish someone will just
say "Mexico will pay for it".
As an economist (M.A. in Econ), I am elated to see Jonathan Haidt's work receive this kind of attention
from serious thinkers. In addition to the reasons cited by Lynn Parramore, I believe Professor Haidt's work
validates, by building on, the work of Humanistic Economics by Professor Mark Lutz (Ph.D. UC-Berkeley) and
Dr. Kenneth Lux. Moreover, Professor Haidt's work appears, to me, to further validate the astute criticisms
of Dean Baker and Mark Weisbrot for neoclassical Marxists' use of "Rational Economic Man" in their
paradigm's modls (no "e"). Having obtained my degree about 25 years ago, basically in humanistic economics,
I am sure that adoption of such thinking by grad students in economics can help rescue humanity from its
current barbaric state. I just hope there's still time left.
On hate and having negative view on the rich
: this article mentions that "only" 25% of
Americans have a negative or very negative view of the rich". Only is the proper word? I would say that is a
lot of bad feelings. Hate is not a sane feeling and we are inclined to hate in stressful situations. So, if
25% of Americans, have these negative feelings (8% very negative) about the rich this spells quite a lot of
despair/stress. It would be interesting a comparison with other countries to evaluate if this is normal by
international standards.
I mention this because stress & despair might explain, at least partially, the relative low turnout in
general elections in the US compared with other OECD countries. Does anybody here know the evolution of
electoral turnout in the US since 1950? Has turnout declined with time?
I remembered an old David Brooks column mentioning that Americans vote their aspirations.
I'm not a fan of Brooks, but this 20 year old column may explain some USA citizens' current
attitudes..
Here is a sample quote (about a proposed Al Gore estate tax):
"The most telling polling result from the 2000 election was from a Time magazine survey that asked
people if they are in the top 1 percent of earners. Nineteen percent of Americans say they are in the
richest 1 percent and a further 20 percent expect to be someday. So right away you have 39 percent of
Americans who thought that when Mr. Gore savaged a plan that favored the top 1 percent, he was taking a
direct shot at them."
While it has been 20 years since this was published, one might suspect American "I'll be rich"
aspirations have taken a beating during this interval.
The economics profession has ridden the hydrocarbon energy spend of the last 100+ years as hydrocarbon
energy has been pulled from the ground and converted into "economic growth".
It will be interesting to see how the profession responds to future events with climate change, peak
human population and peak energy inexorably (in my view) arriving.
One thing that has happened is that over the past several decades so- called liberals have agreed with
conservatives that the market represents freedom and efficiency and the government represents the opposite.
Some younger people are rebelling, but older voters have been hearing this their whole lives without
challenge until Sanders came along.
I just read a description of a Trump rally at the NYT and I think it was accurate. The reporters just
repeated what ordinary people said there. One guy claimed the Democrats have just swung so far left he can't
support them anymore, yet on economics this simply isn't the case. Sanders just represents what Democrats
used to be on economic issues.
I enjoyed the article, and agree with the main ideas, but he was a little rough on our primate cousins.
Chimps may not cooperate by "carrying logs", but, like a lot of social animals, they work together when,
say, hunting other primates. And most social animals have a pretty well-developed sense of fairness (watch
what happens if you give one of your dogs a treat and ignore the other one).
Yes I am trying to think about what chimps would actually need to transport a log for. That famous
jocular saying by one of the researchers "we were beginning to think the difference between us was merely
cultural".
Is that a sense of fairness or a sense of competition or perhaps a sense of both? Each dog would
prefer being the favorite but will accept being the equal.
Dogs are an interesting analogy because in my observation they are, as social animals, so much like
us. Perhaps the main takeaway from the above article is the belief that there is such a thing as "human
nature" and that we have a kinship with the other species. Needless to say such a view was once anathema
in an intellectual climate dominated by religion and a human centric world view. Even now people like
Pence are "dominionists" and believe that humans have been given dominion over the planet and all its
other species because of what it says in the Bible. Power always needs to justify itself–perhaps because
of that innate sense of fairness/competition that you mention.
Haidt got me thinking about language too. His thesis could be talking about the evolution of
language itself. The evolution of rationalization. Since he seems to premise his insights on human
intuition and a certain bedrock of morality that all animals seem to have. Pre language. Can we
attribute the morality of animals to a lack of rationalization? They do seem to lack immorality. If we
were mute, but very intuitive as we are, what effect would our intuition have on our communication
skills and our actions? Raising the question here, Is language the emotional middleman that is always
(duplex) less than rational and causing all this confusion? Sort of thinking here about someone giving
an over-the-top sermon, like an economics professor claiming that we are all homo-economicus.
Morality traditionally implies conscious choice so I'm not sure that's relevant to the animal
world. Guess what I'm saying is that we are similar to certain animals in our instincts, not our
intelligence.
However the language of economic profs is deceptive since they should be saying "irrational self
interest" rather than "rational self interest." Pure selfishness usually ends up being bad even for
the selfish.
Also on this very subject, last night on Nova, the one about dogs, their domestication (or
ours?) and their amazing ability to relate – communicate. They attribute a dog's ability to
communicate to oxytocin – because they thrive on love and friendship. I do believe that because
I've only had one aloof dog and he was very wolf-like. A throwback. Indicating that evolution
tends toward love – not to be too corny. Maybe Oxytocin will save us ;-)
If by "pack animals" you mean species that live in societies I never said they didn't. But
obviously there is also cooperation on some level and social bonding. I do think this is a very
complicated subject and not easily reduced to simplifications by yours truly–not a biologist–or the
above article. But arguably the above is correct in asserting that economists themselves are
ignoring the complications.
And for those interested, here is
a paper published in 2008
that empirically demonstrates that the "Homo economicus" approach in this case
disguised in the form of "median-voter model" is bullshit regarding inequality, redistribution and public
opinion, though they regard it as intelectually compelling. Economists!
>Experts have to see a lot of evidence accumulating across many studies before they reach a point where
they are finally forced to think differently.
Ummm, the whole, underlying maybe, point of the rest of the article is that the dominant economic thought
of our age has nothing to do with evidence. Yet they overthrew Keynes. "Trust us, We're Experts" or
something like that right?
I just finished slogging through The Master and His Emissary by Iain McGilchrist, which harmonizes with
this article. Instead of the rider on an elephant, McGilchrist writes of the functions of the left and right
hemispheres of the brain, which are significantly different. The left brain is verbal, analytical, and task
oriented. It likes straight lines. (This strikes me as a description of the pseudo-accuracy and busyness of
economics.) The right brain sees a larger picture, is less talky, and is generally better at perceiving the
world around us. It is the hemisphere that can attain greater knowledge even if it is not as adept at
expressing such knowledge in words. (The "bee" part of the brain–and more than 10 percent.)
McGilchrist's book is good, but way too long, which is an irony given that he asserts that the left
brain, the emissary, is trying to subvert the master, the part of the brain less likely to go on and on and
on in words.
But this era of too many easy paradigms (economics, "free markets"), too much flimsy analysis (critical
studies, queer studies, economics, New York Times op-ed columnists), and too much talk (social media) is
very much left-brained. I think that what is wearing all of us out is the endless tsunami of word salad.
Economics, with its insistance on rationality rather than reasonableness (left brain rather than right
brain), fell into the salad bowl a long time ago.
Yes. I, too, think this is a very important book. Being retired, I don't think it's too long. I revel
in how much stuff I got for only thirty bucks (or whatever it was -- something like that.)
The neurological case is complete after 94 very dense pages. (535 citations. Pleasantly readable prose,
though, and that bizarre experiment that "proves" that porcupines are monkeys.) After that he traces the
effects and footprints of the two independent modes of thought through philosophy, art, music, and,
generally, the working of our societies from ancient to post-modern.
There's a strong parallel to Daniel Kahneman's Fast and Slow thinking, the right hemisphere being the
fast one. The one wrinkle is that language is the province of the left hemisphere, but Kahnemann finds
that fast thinking is perfectly adept at small-talk, as long as it doesn't get too abstract.
Worst for me is that now that I've read it, I've got to go back into Heidegger, all the other modern
Germans, John Dryden, classical and modern painting, religion
So how would homo economicus work out in anything other than a modern industrial system? In earlier
times, I would say that at the least they would be shunned as a danger to the community or maybe even thrown
out altogether as being incapable of working in a close-knit community. Want a modern example instead? How
about the fact that you cannot have a military based on the idea of homo economicus unless you are talking
about a band of mercenaries. This whole stupid idea is why every relationship these days whether for work,
employment, government, etc is defined by contracts. In short, it is a cookie-cutter idea that come in only
one shape.
"Since the 1950s, this mono-motivated, self-seeking figure has stalked the pages of economics
textbooks, busy deciding each action according to a rational calculus of personal loss and gain."
Advertising gave up with that sort of approach years ago.
Advertisers appeal to deep seated wants and desires and this works really well, so they haven't looked back.
Are the wealthy much more rational?
Let's have a look at adverts targeted at wealthy people.
Are they a long list of specifications and comparisons saying why these products are better?
No.
An advert for a Sunseeker luxury yacht conveys luxury, elegance, being able to get away from it all and
there is usually a young woman in the back in a bikini; the less said about that the better.
What about PR and propoganda?
How do they work?
The same as advertising really, and it's got nothing to do with appealing to rational human beings.
It works; they are not going to be doing it differently anytime soon.
A propos of nothing, long, long ago there was an ad during the Superbowl placed by Cadillac. It was
all about authority, power, celebrity, and it hardly mentioned cars at all, if it even did. Blog
commenters had to work very hard to explain how this was selling Cadillacs. IMHO, it didn't sell
Cadillacs. It told the top Cadillac executives all the things about themselves that they most longed to
hear. It didn't sell cars to wealthy people, it sold the ad itself to the Cadillac C-suite. It worked
like a charm.
Y-axis – top to bottom
X-axis – Across genders, races, etc ..
As long as the Democrats wealthy donors keep them focussed on identity politics and the X-axis, the
donors should be able to keep making progress in the reverse direction on the Y-axis.
and he's MUCH better than Haidt. I recommend this book and lots
of his earlier work, much of it done with Herbert Gintis.
Their 1976 "Schooling in capitalist America" is no less necessary
reading now than it was then, and their 1986 "Democracy & capitalism"
is maybe even more relevant now (Milanovic credits it as a forerunner
to his current "Capitalism, alone", which it is–and much more than that).
More recent stuff is referenced in "The moral economy" and pretty
much always worthwhile.
Morality is a big part of decision making, but I'll argue that is secondary to our cognitive biases that
exist at an even lower level of consciousness to enable us to retain function and decision making in the
face of an overwhelming number of variables.
The opposite of cognitive bias or perhaps the antidote is critical thinking, which must be
taught/learned, so yeah it is preposterous to assume people use solid reasoning that could only come about
with the use of critical thinking, which vasts swaths of society almost never exercise.
The article to me is all over the place, which builds on Haidt's views that seem all over the place too.
Interesting though. Comments too. The experimental data about Haidt's classifications of moral decision
making elements, and where self-described liberals and conservatives rank them in importance was
interesting. I suppose the liberals regarding only two of the six as important could be due to their college
educations. As a math professor I had once observed about a smart student in his class: "he learned his
subject too well". Or to paraphrase Othello: "One that learned not wisely but too well".
The most important takeaway from this is that we should not let economists guide the economy. Not the
economists believing in homo economicus anyway (and, while we are at it, believing in equilibrium as
well). The reason for existence of such a concept is clearly to replace ethics and morality as a guiding
principle of human economic activity with a pseudo- "natural law" (humans by nature are "economicus" –
i.e. self-interested and materialistic – phew!), which once entrenched, relieves those in power from
moral obligations because it safely explains away almost any economic outcome as result of "natural"
forces – i.e. no one to blame (globalization=natural force). It's a great tool for them. Down with it.
The asumption of rationality has been defeated by many economists, as well as psychologists,
sociologists, etc.. Carrying on about this is unncessary. Assuming that humans worry about "care and
fairness' is true. The "12" prophets of the Tanakh (Old Testament") raised this concern numerous times, and
one can find it as a major issue in the Synoptic Gospels. Smith also worried about this in his first book on
economocs, "The Theory of Moral Sentiments." The only reason for any further consideration of "rationality"
in economics is due to the attemprt by economists to treat economics as a "science" like physics. There are
also numerous misguided attempts to mathemaize economics.
But one insidious reason to pretend that economics is a "science" is to justify the idea of a "Nobel
Prize" in economics, or to give a "halo" to economists that win the "Swedish Central Bank Prize in Economic
Scholarship in Memory of Alfred Nobel."
Avner Offer and Gabriel Söderberg have written a good book about the creation of this prize, "The Nobel
Factor." Please note, the words "Nobel Prize" do not seem to appear on either the certificates or medal
awarded.
Daniel Kahneman who won the prize (justifiably, (and John Nash a famous mathematicin who won many real
prizes) notd that giving labels often transfers a false aura to those being labeled. Offer and Söderberg
noted that this is true of the label "winner of the Nobel Prize." Given that there is no decent
encompasssing theory of economics similar to Newton's Laws and how often the prizes are awarded to
economists who don't produce anything like such a theory, we should once and for all abandone the pretense
that economis is a science. It is an attempt to describe social behaviour in a very restricted context.
Leaving it to psychologists, sociologists and others has produce better undertandings of human behaviour.
In last week's State of the Union address, President Trump gave a rosy portrayal of the US
economy. American workers, according to Trump, have never had it so good.
"Wages," he declared, "are rising fast." Household income, he claimed, "is the highest ever
recorded." The results of Trump's policies, since first taking office three years ago, is a
"blue-collar boom." This coincides, according to Trump, with a 70 percent run-up in the stock
market, "adding more than $12 trillion to our nation's wealth." For the American ruling class,
the massive profits they are making on the stock market is the real criterion of economic
success, not the conditions of life for the working class.
The reality is very different than the fantasy which Trump delivered over the country's
airwaves. Corporate profits, dividends and the incomes of wealthy executives are higher than
ever before -- the direct result of unprecedented levels of social misery.
Trump's policies are an acceleration of those pursued under Obama and the Democrats after
2008. The deliberate aim of these policies, which included the 2009 restructuring of the auto
industry, the promotion of for-profit charter schools and the pro-corporate Affordable Care
Act, was to prop up the profits of American capitalism by driving millions of workers into
poverty.
This is the real situation facing American workers:
The jobs bloodbath in the auto
industry
US manufacturing cut 12,000 jobs in January, according to government figures. This continues
a decades-long decline in manufacturing employment, from a high of nearly 20 million in 1979 to
less than 13 million today. January's losses were almost entirely concentrated in the auto and
auto parts industries, which shed 11,000 jobs last month alone. Over the last twelve months,
24,000 US autoworkers lost their jobs.
The betrayal of the strike by the United Auto Workers paved the way for the closure of four
US plants, including the historic Lordstown plant in Ohio. New investments, including a new
battery plant near Lordstown, will be based on lower wages and benefits, and will account for
only a fraction of the jobs lost.
While Trump never tires of nationalist tirades against Mexican and Chinese workers stealing
"American" jobs, these cuts were part of a global jobs massacre in the auto industry, which
eliminated over 500,000 jobs worldwide last year. Auto companies are pursuing an international
strategy to force workers in every country to bear the cost of the emerging downturn in the
industry, and to prepare for the transition to electric and autonomous vehicles, which will
require a vastly reduced workforce.
However, 2019 was only a down payment -- German automakers have announced tens of thousands
of additional job cuts. The disruption to global supply chains caused by the coronavirus,
Ford's disastrous 2019 performance and the impending merger between Fiat Chrysler and French
automaker Peugeot all point to further cuts in 2020 and beyond.
Stagnating and declining
wages
Under Trump, real wages have continued their post-2008 stagnation. According to The
Conversation website, from December 2016 to September 2019, nominal wages rose only 6.79
percent, but even this was almost entirely wiped out by inflation. When "fringe benefits" such
as health insurance, retirement packages, bonuses and other forms of non-wage compensation are
included, total real compensation actually declined by 0.22 percent. In the traditionally
higher-paying manufacturing sector, total real compensation plunged 4.33 percent.
This is particularly pronounced in the traditionally industrial states of the Midwest. In
six of the seven heaviest manufacturing states that voted for Trump in 2016, economic growth
has slowed since 2016, and in all but one, personal income growth is below the national
average, according to Barron's. Trump's vaunted rise in wages for low-income workers is due in
large part to local minimum wage increases -- the federal rate of $7.26 has not budged since
2009 -- which still leaves workers at or near poverty.
Part-time and "gig" work -- the
"new normal"
In his speech, Trump cited the fact that 3.5 million people have joined the workforce.
However, this increase is due almost entirely to a rise in part-time and casual employment,
according to the McKinsey Global Institute. The US employment rate, the percentage of the
working-age population with jobs, remains 3 points lower than in 2000. Full-time employment has
fallen 6.8 percent since the turn of the century, while part-time employment has risen 4.1
percent.
A survey conducted last year by the Federal Reserve found that 3 in 10 American adults rely
on "gig" work for at least part of their income. For half of these workers, gig work represents
10 percent or more of their total income, and 6 percent of gig workers rely on gig work for 90
percent or more of total family income.
This "new normal," together with hundreds of thousands who have given up looking for jobs
altogether, has masked the actual state of the job market by keeping official unemployment
figures at artificial lows. Real unemployment, once underemployed and "discouraged" workers are
added, is 6.9 percent, nearly twice the official rate.
This is bound up with a significant rise in economic insecurity. Forty-four percent of the
US workforce are classified by the Brookings institution as low-wage. Millions of Americans are
one crisis away from destitution; nearly half the country cannot make an unexpected $400
expense without taking on debt.
Inequality at record levels
Karl Marx's observation that "accumulation of wealth at one pole" of society is
"accumulation of misery [and] agony" at the other pole is being decisively confirmed. On the
basis of endemic poverty in the working class, the American ruling class is accumulating
historically obscene levels of wealth.
Three individuals -- Jeff Bezos, Warren Buffett and Bill Gates, own more wealth than the
bottom half of the US population. However, another study by inequality researchers Emmanuel
Saez and Gabriel Zucman found that the bottom half of the country actually has a negative
combined net wealth, meaning their debts are larger than their assets.
Meanwhile, US corporations are making money hand over fist. According to the Federal
Reserve, annualized after-tax profits of $1.8 trillion have increased to three times the level
of 2000. This figure has stayed constant since 2012, the end of Obama's first term. The labor
share of national income, meanwhile, is by far the lowest on record.
These huge profits are being made, not through investments in productive activities -- for
more than a decade, US companies have sat on a $1.5 trillion cash hoard which they refuse to
invest -- but through financial transactions, including stock buybacks and dividends, mergers
and acquisitions and other speculative activities, propped up by Trump through massive
infusions of cash from the Federal Reserve and corporate tax cuts. These irrational and
essentially criminal policies, which amount to the ruling class looting society, are preparing
the way for another economic crisis.
So here we are, with a global economy that's very cost-efficient but not resilient. It's wonderful that Walmart has worked
out how to order a new tube of toothpaste from China the second one is pulled off a shelf in Topeka, KS. But that means there is
no deep storage to draw upon in times of disruption to the status quo. No warehouses stocked with 12 months of future goods.
Just a brilliantly-complicated supply chain thousands of miles long that has to work perfectly for things to keep running.
As an example that drives home this point: we learned during the 2011 earthquake in Japan
that there was just one single
factory making a necessary polymer gel for the odd-shaped lithium batteries used in
smartphones and iPods. There was no backup factory.
We watched closely during that enormous crisis (which also spawned the Fukushima nuclear
disaster) as electronics companies scrambled to triage their remaining supplies and attempt to
find new sources. It was very touch and go. Vast portions of the battery-fueled electronic
industry came within a whisker of simply shutting down production -- all for want of an
esoteric polymer gel.
Yes, the most cost-effective way to make that gel was to house it all in a single plant. But
it made no sense from a redundancy and resilience standpoint.
And did 'we' learn from that experience? Nope.
Supply Chain Armageddon
The global economy is more interdependent than ever. Its supply chains are built on a huge
network of dependencies with many 'single points of failure' strung along its many
branches.
Can anybody predict what will happen next? No.
But we're already seeing early failures as Chinese plants, factories and ports sit idle from
the country's massive quarantine efforts:
China set to lose out on production of 1M vehicles as coronavirus closes car plants
China exports about $70 billion worth of car parts and accessories globally, with roughly
20 percent going to the U.S.
Feb. 5, 2020, 4:32 PM EST
By Paul A. Eisenstein
China could suffer the loss of a million vehicles worth of production as factories in its
crucial automotive industry remain shuttered until at least next week -- and likely longer in
Wuhan, the "motor city" at the center of the coronavirus outbreak.
With more than 24,000 people infected, the impact of the highly contagious disease is also
beginning to be felt by automakers in other parts of the world. Hyundai is suspending
production in its South Korean plants because of a shortage of Chinese-made parts, and even
European car manufacturers could be hit: Volkswagen and BMW could see a dip of 5 percent in
their earnings for the first half of 2020, according to research firm Bernstein.
We're predicting that these auto shutdowns are just beginning. All it takes is a single
component to be unavailable and the entire line has to be shut down.
Is China the sole source for many critical components in the auto industry? Absolutely.
Here's an inside view:
On Monday, Steve Banker and I had the opportunity to speak with Razat Gaurav, CEO of
Llamasoft. Razat had some interesting takes on the outbreak, especially as it relates to the
automotive and pharmaceutical supply chains. On average it takes 30,000 parts to make a
finished automobile.
Due to the virus, production facilities have already indicated that they will have lower
than normal parts volumes. This has left companies scrambling to make contingency plans.
During my conversation with Razat, he mentioned that inventories for most of these automotive
parts are managed on a lean just-in-time basis.
This means that, on average, companies have anywhere between two and twelve weeks of
buffer inventory on-hand for automotive parts. As production volumes are decreasing, this has
the potential to cause quite the global shortage of parts. The buffer inventory will only
last so long, and once the pre-holiday supply runs dry, the industry is going to be in
serious trouble. According to Gaurav: " Most OEMs single source components for new vehicles
and China is a large supplier of those."
"Single sourcing" is exactly what it implies. There's a single factory somewhere churning
out a single component that is absolutely vital to make a motorized vehicle. If that factory
goes away for any length of time, a new source has to be identified or – worse, from a
time and cost standpoint – built from scratch.
But this vulnerability to China-dependent supply chains is by no means unique to the auto
industry:
Last month, the U.S.-China Economic and Security Review Commission held a hearing on the
United States' growing reliance on China's pharmaceutical products. The topic reminded me of
a spirited discussion described in Bob Woodward's book, Fear: Trump in the White House.
In the discussion, Gary Cohn, then chief economic advisor to President Trump, argued
against a trade war with China by invoking a Department of Commerce study that found that 97
percent of all antibiotics in the United States came from China.
That's as close to a 'sole source' as you can get.
And to put the cherry on top: guess the name of the region in China responsible for
producing all if these antibiotics? Yep, Hubei province. With Wuhan its most important
production hub.
Can we find another source for our generic drugs and antibiotics? India, possibly. But here
again we run into the same global interdependency issue:
Another industry that is feeling the impact of the coronavirus is the pharmaceutical
industry. The average buffer inventory for the pharmaceutical industry is between three and
six months. However, this does not tell the full story. Gaurav mentioned that China is
responsible for producing 40 percent of the active pharmaceutical ingredients (APIs) for the
pharmaceutical world.
Additionally, China supplies 80 percent of key starting materials (KSM's), which are the
chemicals in APIs, to India . Put together, this represents 70 percent of all APIs across the
world.
India's production is directly tied to uninterrupted supply from China:
Indian generic drugmakers may face supply shortages from China if coronavirus drags on
Feb 13 (Reuters) – Shortages and potential price increases of generic drugs from
India loom if the coronavirus outbreak disrupts suppliers of pharmaceutical ingredients in
China past April , according to industry experts.
An important supplier of generic drugs to the world, Indian companies procure almost 70%
of the active pharmaceutical ingredients (APIs) for their medicines from China.
India's generic drugmakers say they currently have enough API supplies from China to cover
their operations for up to about three months.
"We are comfortably placed with eight to 10 weeks of key inventory in place," said
Debabrata Chakravorty, head of global sourcing and supply chain for Lupin Ltd, adding that
the company does have some local suppliers for ingredients.
Sun Pharmaceuticals Industries Ltd said it has sufficient inventory of API and raw
materials for the short term and has not seen any major disruption in supplies at the
moment.
The Indian drugmaker, however, said supply has been impacted for a few API products and
the company is closely monitoring the situation. It did not identify the products.
India supplies nearly a third of medicines sold in the United States , the world's largest
and most lucrative healthcare market.
If you're dependent in any way on prescription drugs, it would be entirely rational to chase
down whether those come from China or India and, if they are, begin talks with your doctor
about alternatives or what to do if supplies get pinched.
A Fast-Moving Situation
Look, we entirely get why the authorities and media are downplaying the covid-19 pandemic.
We really do. They feel the need to manage the crisis, which means managing the public
narrative.
But c'mon. Does it make any sense for Apple's stock price to be up while its main Foxconn
manufacturing facility is all but completely shuttered?
Fewer iPhones and Airpods being made should equate with lower future earnings and thus a
lower stock price. But no, AAPL is up handily over the past month:
And this is even crazier. Does it make ANY sense for Boeing's stock to be up $12 over the
past month? As it reported its first year (2019) of NEGATIVE orders and a completely order-free
January (2020)? No, of course not.
But those are the sorts of 'signals' that the officials believe have to be sent in order to
keep the masses from catching on that something really concerning is happening.
Unfortunately, such signals work on the masses. Higher stock prices send a powerful
comforting message that "all is well".
But prudent critical thinkers, which defines those in the Peak Prosperity tribe, can readily
see through the ruse and get busy preparing themselves for what's coming.
It's Time For
Action
The situation with covid-19 is fluid, and fast-moving. Staying on top of the breaking
developments and making sense of them for you is our primary job.
But information without informed action is useless.
After all, knowing something concerning but then doing nothing about it is merely cause for
anxiety if not alarm.
The only ways to remain calm and protect your loved ones from the threat of this pandemic
are rooted in taking smart action.
Yes, we can all hope this blows over. We sincerely wish the macro-planners all the best in
shaping the narrative and keeping the macro economy somehow functioning and glued together.
But we're going to prepare as best we can, here at our micro level because that's our duty
to ourselves, to our families, and to our communities.
Creating A Resilient Defense
Against The Coronavirus
This is a huge moment in history. The first global pandemic at a time when the world economy
is sole-sourced and completely interdependent.
Nobody can predict what will happen next. Autos, drugs who knows what the next industry to
stumble will be?
Given the ridiculously high rate of infectivity of covid-19 there's really no chance of
stopping its spread. The rate is now just a equation of time, luck, and official actions to
aggressively isolate and quarantine infected individuals and communities.
Our position affords us many experienced contacts with experts throughout the world, and
those we know with deep medical training are preparing the most aggressively right now. This
outbreak has their full attention; and that informs us that it should have ours, too.
Which is why our advice is to get busy preparing yourself now.
Particularly useful for those who have recently found their way to PeakProsperity.com, it
offers both a valuable framework to use in preparing for any disaster (including pandemics) and
then details out specific action steps to take today across all aspects of your life (i.e., not
just health & hygiene) against a coronavirus outbreak in your local area.
Amidst the nonsense, folly and euphoria of the last decade long bull
market, a small beacon of hope shines in the form of Warren Buffett's business partner.
These days, the reporting of financial metrics has wandered so far off the path from normal
GAAP earnings that's it's difficult to keep up with companies and decipher their earnings
reports each quarter. The SEC has done little to create uniformity for investors in how
companies disclose their financials and, through their lack of action, have created a fertile
environment for companies to report what Charlie Munger calls "bullshit earnings".
And you know things have gotten bad when the mindless drones bidding up the market over the
last decade were forced to call out WeWork's
"community adjusted" metrics , puking the company's IPO back to its investors before
ridiculing the way the company was making its pre-IPO disclosures in the weeks after.
And now, one of the most well know investors in the world, Charlie Munger, is weighing in.
Yesterday, Munger slammed companies that use "adjusted EBITDA" to report their earnings,
calling the metric exactly what it is: "bullshit earnings".
Munger said that the metric is "ridiculous" and isn't an accurate measure of a company's
profitability,
according to a report by CNBC .
He commented: " I don't like when investment bankers talk about EBITDA. It's ridiculous.
Think of the basic intellectual dishonesty that comes when you start talking about adjusted
EBITDA. You're almost announcing you're a flake."
The conversation came up as a response to Uber, who last week said it would be raising its
"EBITDA profitability" target for the forth quarter of 2020. The stock jumped as a response.
Munger made the comments as part of a broader warning on Thursday at the Daily Journal annual
shareholders meeting.
He commented: "I think there are lots of troubles coming. There's too much wretched excess.
In China, they love to gamble in stocks. This is really stupid. It's hard to imagine anything
dumber than the way the Chinese hold stocks."
In addition, the 96 year old Munger said he believes that the innovation boom that he has
experienced over the course of nearly a century could be coming to an end.
He concluded: "I do think that my generation had the best of all this technological change.
I don't think we're going to get as much improvement in the future because we've gotten so much
already."
3 minutes ago
I'd like to hear what Charlie thinks about buybacks, consensus estimates
that are low-balled, before earnings come out. 4 minutes ago Certainly Berkshire has cash on
hand to invest when the market tanks. It makes sense that Munger would try and help things
along. I don't know that he has made that observation in days past. Why now? No one that smart
is just now figuring these things out. http://quillian.net/blog/the-most-important-thing/
4 minutes ago (Edited) Pretty soon you'll be hearing a company reporting their net profit by
saying "here is our net profit before expenses." 5 minutes ago Charlie, STFU, your're going to
ruin the party. 8 minutes ago Forty thousand grandfathers agree. This is America. 11 minutes
ago Trust business? Fastest way to lose your assets. 14 minutes ago I read a long essay by
Munger where he extols the greatness of an investment in KO (coke). Never once did he mention
any of the adverse health problems of too much sugar and caffeine in our diets. Sugar is
causing an obesity epidemic and the caffeine makes us all hyper and prone to mistakes. I used
to drink it as a programming fluid but I quickly got addicted. I started to notice that my
typing mistakes went way up due to the caffeine. I once saw a psychology textbook where they
fed caffeine to spiders to see how it affected their web building. There webs turned out a
horrible dis-organized mess. I would ban coke from the workplace.
14 minutes ago
I would observe Charlie is right and the corresponding CEOs are overpaid....
17 minutes ago
When have earnings ever been real?
Anyone remember Lucent? 17 minutes ago EBITDA is an anagram for BAITED
Make sense now?
18 minutes ago
A time of fraud. Volatility will eventually reveal the truth.
25 minutes ago
for once this old turtle head said something I agree with. EBITA is for me a
totally useless metric for turd polishers.
36 minutes ago
No respect for Munger.
He got into Harvard because of connections. He was denied, and then the dean got a phone
call from a former dean who new Mungers family.
So Munger went to Harvard law and became lawyer, which is the most corrupt profession bar
none (pun intended). Even though he didnt even have an undergraduate degree.
Then he used his Harvard law to do what they all do: start a firm, make a killing ripping
people off, and then use the money to start a hedge fund.
Guys like Munger contributed exactly zero to society, and raked in billions by circumventing
rules everyone else is forced to follow.
"... that every nation produces what oil they can produce. Production must have some relation to reserves. ..."
"... The normal R/P ratio is around 20. That doesn't mean a nation with an R/P ratio of 20 will run out of oil in 20 years. Because as their production declines, their R/P ratio will still hold at about 20 because they are producing less oil therefore their reserves will go further. So an R/P ratio of about 20 is the norm for normal size conventional fields. ..."
"... For giant and supergiant fields the R/P ratio would be greater and for smaller fields, as well as shale fields, the R/P ratio would be smaller. ..."
"... Using OPEC's reserves data for both OPEC and Non-OPEC, OPEC has an R/P of 109 while Non-OPEC has an R/P ratio of about 12. That OPEC number is absurd beyond belief. ..."
"... If we exclude the heavy oil then OPEC's share is close to the 70% I suggested. How does this square its share of the production numbers for the world. This was my original question. I would like to read what the thoughts of other posters are on this as well. ..."
What is the explanation that Non-OPEC produces more than OPEC, but OPEC has 70% of world
reserves?
Although this might have been the case in the early history of oil production, I
would think that this should not be the case near the peak. If I recall correctly, Campbell
thought that OPEC's stated reserves are actually the estimated values produced by the government for each OPEC country?
Well, 79.4% to be exact Some people really believe that unbelievable crap. Well hell,
there are still people who believe the earth is flat and that the sun revolves around the
earth. So why should we be surprised? Some people will believe anything.
I would like to think that most people on this list know that OPEC quoted reserves is
pure bullshit.
Hey, we have a president who lies every time he tweets. And sometimes he tweets 200 times
a day. And perhaps 45% of the nation believes him. The capacity of humans to believe the
absurd is unbounded.
Anyway if IEA and EIA projections are made on the basis of OPEC claimed reserves, we
have a serious problem.
Well, I have always stated, on this blog as well as The Oil Drum, that every nation produces
what oil they can produce. Production must have some relation to reserves.
The normal R/P ratio is around 20. That doesn't mean a nation with an R/P ratio of 20 will
run out of oil in 20 years. Because as their production declines, their R/P ratio will still
hold at about 20 because they are producing less oil therefore their reserves will go
further. So an R/P ratio of about 20 is the norm for normal size conventional fields.
For giant and supergiant fields the R/P ratio would be greater and for smaller fields, as
well as shale fields, the R/P ratio would be smaller.
If a giant or supergiant field is nearing the end of its life, but infill drilling,
creaming the top of the reservoir, this will throw a monkey wrench into their R/P ratio.
While in its prime, the field may have had an R/P ration of 40 or even greater, its R/P ratio
while being creamed will be much smaller, less than 20.
Using OPEC's reserves data for both OPEC and Non-OPEC, OPEC has an R/P of 109 while
Non-OPEC has an R/P ratio of about 12. That OPEC number is absurd beyond belief.
According to Hubbert methodology, at the peak production the number of years to exhaust
the reserve is N = 2/a in which "a" is the intrinsic growth rate
dQ/dt=a Q (1-Q/Q_0)
From Laherrere's reports for world peak, this is between 0.04 and 0.05. This means that
the R/P ratio is between 40 and 50 at the peak. Thus if we say that 1/2 of the reserves are
left at the peak and we take Laherre's URR = 2500, this gives R/P=1250/35=36 years. These are
ball park figures, but suggest that R/P ~ 20 is low. These numbers are for the entire world
and for example for North Sea at its peak Hubbert's analysis gave a = 0.12, so
R/P=2/0.12=16.6, and this illustrates the fact that smaller fields are closer to your number
R/P=20.
If we exclude the heavy oil then OPEC's share is close to the 70% I suggested. How does
this square its share of the production numbers for the world. This was my original question.
I would like to read what the thoughts of other posters are on this as well.
"... Haftar is a US citizen and has ties to the CIA. The USA's position on Libya is unclear to me. I am not sure the US government is supporting any side. Turkey is the only country I see providing support to Tripoli. It seems to me the usual suspects either back Haftar or are watching from the sidelines. ..."
"... W.r.t Libya, they were producing ~7% of the MENA region consumed oil in 2011, and about 3% of the total MENA production (not big, but enough income to run a country). ..."
"... Before my last post, I was thinking to myself: "Didn't Haftar secure/surround most of the oil infrastructure around 2014?" I was sure I had read it somewhere. But if memory serves he was on a major advance, and then withdrew/got pushed, and made a second comeback in the past 2 years. ..."
"... Haftar has clearly switched sides since his twenty years in Langley. Very common in the Middle East, suddenly switching sides. ..."
@casey #2
Libya was never a major producer - and their production levels fell after "the revolution"
and are still really low. Not at all clear it matters compared to say, US fracking
production.
Haftar is a US citizen and has ties to the CIA. The USA's position on Libya is
unclear to me. I am not sure the US government is supporting any side. Turkey is the only
country I see providing support to Tripoli. It seems to me the usual suspects either back
Haftar or are watching from the sidelines.
You seem to have a panache for declaring "truths" to the bar here and often seem very
agenda-driven, with all due respect.
W.r.t Libya, they were producing ~7% of the MENA region consumed oil in 2011, and about 3%
of the total MENA production (not big, but enough income to run a country).
They were producing in range of 800,000 - 1.2M bpd (wikiped says 1.65M) prior to the
NATO/US/ZIO neo-lib/con blood-lust orgy of death unleashed since 2011.
I know that 3% is not big cookies, but it seems significant to me. When taken at 'oil
production per capita, they sit in the top 10 (until Haftars' latest maneuvers) which means
more ability to spend per citizen. The US sits at 23rd place on this metric. It is
bang-for-your-buck that matters for the people on the ground.
They do hold sizeable reserves, and it is all on the heads of the West that they are not
prospering (albeit under a dictator with a crazy taste in fashion; at least he wasn't Reagan,
Bush 1&2, Clinton 1&2, Obama, or the current dumpster-fire).
If I were in the MENA axis, I would certainly have an inclination to sabotage/destroy ALL
oil infrastructure globally, via whatever means possible. Because that would turn all of
those happy little consumers in the "developed" world against their masters for breach of the
social contract (read delusion) that we live under.
Before my last post, I was thinking to myself: "Didn't Haftar secure/surround most of the
oil infrastructure around 2014?" I was sure I had read it somewhere. But if memory serves he
was on a major advance, and then withdrew/got pushed, and made a second comeback in the past
2 years.
I'm going to have to go and do some more reading on Libya, once I've finished reading
Super Imperialism.
My reading list seems to be growing faster than my ability to keep up of late, thanks to
the collective resources of all you Barflies post. :O)
"Haftar has clearly switched sides" Other some Western press making a bit of noise I see no
evidence of this. In fact the opposite. Any drone strike attempts on Haftar you can link me
to? LOL. Don't pay attention to what the press says. Pay attention to who is getting bombed
and who is not. At the end of the day that is how you tell the truth.
What Libya produced before its "revolution" isn't the issue. They used to produce 1.5M bpd -
they're supposedly producing over 1M bpd now. How much is actually exported vs. used
internally or "lost"?
Sure, 1M bpd is significant compared to world oil production of 82M bpd, but my original
point still stands: 1M bpd (a net fall of 500K bpd vs pre-revolution) is not very significant
vs. the US' increase of oil production by 6M bpd in the same period (2014-2019).
"Sure, 1M bpd is significant compared to world oil production of 82M bpd, but my original
point still stands: 1M bpd (a net fall of 500K bpd vs pre-revolution) is not very significant
vs. the US' increase of oil production by 6M bpd in the same period (2014-2019)."
Three issues arise:
(1) The fracking boom generally only produces condensates NOT OIL, especially in the Permian
basin (96%) which must be blended with heavy crude to process it at US refineries.
Furthermore, some 90% of fracking companies or their investors are losing money and the boom
appears to be short lived.
(2) The US is still a net hydrocarbon importer especially heavy crude such as the Russian
Ural blend. Little wonder why Venezuela and Iran are targets for conquest by the "Masters of
the Universe".
“Yes, fracking production has heavily benefited from cheap money.”
This is a ode word for malinvestment. As a result of poor planning these wildcat fracking
operations fail to properly plan the resource extraction stream leading to failures to plan
for such components as roads, fracking sand inputs and pipeline capacity. https://mises.org/library/malinvestment-not-overinvestment-causes-booms
“Fracking has fundamentally changed the role of imported oil in the US.”
Fracking is just a short term stopgap as wells deplete rapidly. Once the condensate boom goes
bust the US will have to invade a couple of other oil producing countries to promote
democracy and the amerikan way.
“It has fundamentally changed the energy mix in electricity generation - from coal
to natural gas.”
Yes, in the short term low natural gas prices have dramatically reduced the use of coal in
the US (excepting metallurgical coal). Currently natural gas prices are at about
$2.00/1000cuft or $71/1000m3. The price is so low that many producers are shutting down, as
they cannot make money due to the massive short-term glut (malinvestment again).
In many places such as the Permian there is massive flaring to get rid of the excess gas
rather than using it for the public good. This is not to say that no one is making money off
this problem as gas pipeline operators are charging several dollars per 1000cuft to take it
off the producer’s hands. There is a movement to use some of this gas to run well-head
operations and the larger companies are better at it due to economies of scale.
As you know, Cheniere is doing well by helping Trump sell “freedom gas” to
Europe at about $213 per 1000m3 on long term contracts. The US is covering this up by
increasing foreign aid enough to cover the additional costs of “freedom gas”.
“And the net reserves of oil and natural gas enabled by fracking is still far above
the total amount of money burned in the creation of this industry - even at the low oil and
historically low natural gas prices today.”
Please elaborate on this statement as I am missing the point. Can you post a comprehensive
paper on environmental costs into the fracking cost-benefit analysis.
“As for panic in Italy - Italy is the closest EU country to Libya. A cutoff will
affect some people, but there seems to be plenty of other sources happy to step
in.”
“As for panic in Italy - Italy is the closest EU country to Libya. A cutoff will
affect some people, but there seems to be plenty of other sources happy to step
in.”
This is a lot of oil to substitute as indicated by the recent Trump threats to Haftar to
turn on the spigot. In addition, changing the blend requires some refinery operation changes
which might be expensive depending on the substituted oil composition.
"... The thoughtless people who constructed " globalism " overlooked that interdependence is dangerous and can have massive unintended consequences . With or without an epidemic, supplies can be cut off for a number of reasons. For example, strikes, political instability, natural catastrophes, sanctions and other hostilities such as wars, and so forth. Clearly, these dangers to the system are not justified by the lower labor cost and consequent capital gains to shareholders and bonuses to corporate executives. Only the one percent benefits from globalism. ..."
"... Globalism was constructed by people motivated by short-term greed. None of the promises of globalism have been delivered. Globalism is a massive mistake. Yet, almost everywhere political leaders and economists are protective of globalism. So much for human intelligence. ..."
If the coronavirus proves to be serious, as it does not appear to be at the present time,
many economies could be adversely affected. China is the source of many parts supplied to
producers in other countries, and China is the source of the finished products of many US firms
such as Apple. If shipments cannot be made, sales and production outside of China are affected.
Without revenues, employees cannot be paid. Unlike the financial crisis of 2008, this would be
an unemployment crisis and bankruptcy of large manufacturing and marketing corporations.
This is the danger to which globalism makes us vulnerable. If US corporations produced in
the US the products that they market in the US and the world, an epidemic in China would affect
only their Chinese sales, not threaten the companies' revenues.
The thoughtless people who constructed " globalism " overlooked that interdependence is
dangerous and can have massive unintended consequences . With or without an epidemic, supplies
can be cut off for a number of reasons. For example, strikes, political instability, natural
catastrophes, sanctions and other hostilities such as wars, and so forth. Clearly, these
dangers to the system are not justified by the lower labor cost and consequent capital gains to
shareholders and bonuses to corporate executives. Only the one percent benefits from
globalism.
Globalism was constructed by people motivated by short-term greed. None of the promises
of globalism have been delivered. Globalism is a massive mistake. Yet, almost everywhere
political leaders and economists are protective of globalism. So much for human
intelligence.
At this point of time, it is difficult to understand the hysteria over coronavirus and
predictions of global pandemic. In China there are about 24,000 infections and 500 deaths in a
population of 1.3 billion people. This is an inconsequential illness. Compared to the ordinary
seasonal flu that infects millions of people worldwide and kills 600,000, the coronavirus so
far amounts to nothing. Infections outside of China are miniscule and appear to be limited to
Chinese people. It is difficult to know for certain, because of the reluctance to identify
people by race.
Perhaps the coronavirus is just warming up and much worse is to come. If so, world Gross
Domestic Product (GDP) will take a hit. Quarantines prevent work. Finished products and parts
cannot be made and shipped. Sales cannot take place without products to sell. Without revenues
companies cannot pay employees and other expenses. Incomes decline across the world. Companies
go bankrupt.
You can take it from here.
If a deadly coronavirus pandemic or some other one does erupt and there is a world
depression, we should be very clear in our mind that globalism was the cause. Countries whose
governments are so thoughtless or corrupt as to make their populations vulnerable to disruptive
events abroad are medically, economically, socially, and politically unstable.
The consequence of globalism is world instability.
It makes sense for rich countries elites to leverage poor backwards shithole countries to
manufacture the things they need because the elites then don't have to worry about anyone but
themselves. Globalism is wonder as it bypasses all that crazy western nonsense like jobs and
wages and society and hope and such.
Globalism is nothing more than the major central banks finding ways to dump off their
inflation which is the deflation of an ever increasing number countries which the major cb's
used to deflate their currencies. The older the cb you are the worse off yo are. From a since
A.D. perspective only the Sterling is what you have to worry. From my last fiat currency
perspective its the Venisthaler that is un doing everything.
To get more zero's you have to add more nine's. They can not be added as nausem like
people think zero's are. The compensation pool has been shrinking for centuries on end now.
Globalism is an attempt to keep the pool growing at all cost which results relentless asset
appreciation. We are out of nine's. The end result of that is hyper deflation for the man and
hyper reflation for the people. Easily provable at a store named Vons owned by the treasury
retired.
That ladies and gents is your simplified street fed explanation. I am not trying to even
remotely write out the longer technical version.
Having said that meet me at what is known as the small walmart around here, which is the
home of what does MU do, what does MU do at walmart it never gets old fame for a real life
walk thru of what globalism is and looks like. We will then progress to the "Big Walmart" not
even a mile away and I will show you what an out of control system looks like.
So we are clear of what I just said. I live in the only place in the world where when a
tourist ask you where Wal Mart is, you get your choice of size. Whats the difference you
ask??? The small Wal Mart has one main entrance, the big one has three. The lady almost
smacked the **** out of the guy I got that from when she asked what the difference was. The
hand came up. You really had to be there.
Regional trade blocks with relatively balanced resource and production capabilities make
more sense. Globalisation just lead to one country seeking to 'DOMINATE' in every sphere of
global activity, raising the threats of economic and military conflict, as clearly
demonstrated and this with the aim of global enslavement to multinational corporations, the
aim of Globalism, really sick psychopathic stuff.
Regional trade blocks relatively balanced for resource and production, provide stability
within each block and lesson competition for outside resource and commercial competitiveness,
and represents a far more long term stable structure.
Within each trade block, as it is economic rather than socio-political the original
identities of each distinct region can be preserved for the long term, so that future
generations can enjoy and share in the different cultures. Race ******** is race ********,
there is only one race and all of it's people are free to share in which ever culture they
choose or combinations there of. Whether you get to move to those regions and enjoy those
cultures will be done to your personal worth, character and ability to contribute to those
societies, just the way it will be.
Some economic blocks will be far more preferable to others and will attract higher worth
individuals (character and ability to contribute to society), the least and most desirable
will become more so as higher worth individuals move to the most preferable away from the
least preferable and make the most preferable more preferable by their active presence.
I would tip the Japan Australia one to be the most preferable for this century, the next
hard to tell (there are real deep problems in the Americas caused by the USA, the EU had an
bad immigrant problem as in they let in too many bad unvetted immigrants, Africa will be what
Africa will be corrupt and Russia China it depends upon how quickly the modernise and
socially advance, the middle of the middles south east to mid east it depends how long it
takes them to come together and religion is a real problem for them).
I've been wondering if this might be some kind of Globalist Drill. It doesn't make sense,
although there is always the potential it could become worse than it is.
I thought so, too. Strangely enough, Wuhan Chinese are now repatriated from Bali back to
Wuhan?!
Instability is a necessary condition to get more conflicts and then wars going. Weapons
production must be kept up; peace and stability would make make weapons production an
expensive hobby.
It should be clear on what the fight is really about in the US. It's about stopping the rise
of socialism. Regardless of party affiliation, the elites know what the populace wants and
are desperately trying to stop it. I refuse to accept that the Democrats have no idea what
they're doing.
I honestly can't see Sanders getting the nomination with all the corruption openly being
displayed. I would be pleasantly surprised if Sanders did manage to get it, but he still have
to deal with the ELECTORAL COLLEGE (EC). The Electors have the final say. Yes, one can point
out that some States have laws forcing Electors to vote what the populace wants, but that is
being challenged in court. The debate on whether such laws are unconstitutional or not,
remains to be seen. It's too late now to deal with the EC for this election, but people need
to be more active in politics at the State level as that's where Electors are (s)elected.
IF Sanders is genuine then he should prepare to run as an independent just to get the EC
attention.
RR @ 14;
Everything in the U$A today, is driven by the unofficial Party of $, and it's reach
transcends both Dems & repubs. It's cadre is the majority of the D.C. "rule makers", so
we get what they want, not what "we the people" want or need.
They own the banks, MSM media, and even our voting systems.
IMO, to assume one party is to blame for conditions in the U$A is a bit naive.
Question is, can anything the masses do, change the system? Or is rank and file America
just along for the ride?
I'm assuming us peons will get what the party of $ wants this November also.
P.S. If any blame is given, it needs to go to the American public, because " you get the
kind of Gov. you deserve" through your inactions...
It's a lot like living, death is certain, but until that occurs, I'll move forward trying
to mitigate current paradigms.
Pepe Escobar pointed out once that certain members of the "Masters of the Universe" (as he
terms the US elites who actually run things) supported Trump in 2016, and were opposed to
other "Masters" who supported Hillary Clinton. Given that Clinton disappointed her "Masters"
by losing and damaging her credibility with the whole "Russiagate" fiasco, perhaps they
switched sides to Trump - especially given that Trump can be controlled and manipulated more
easily (since he is an idiot and ignoramus) to start the wars the "masters" are yearning for
to improve their corporate profits (regardless of his alleged desire to avoid wars - a
fanciful story also told about Barrack Obama from the beginning as well, which resulted in
Obama destroying four more countries than Bush during his administration.)
So now they've decided the Dems need to be kept out of it for whatever reasons of
incompetent politicking or too much socialism for the "Masters" liking, or whatever. So
they're arranging for the Dems to self-destruct this year.
Just a speculative thought, and I wouldn't put any stock in it absent any real
evidence.
In the end, it doesn't matter. Absent Gabbard being nominated and elected, nothing will
change in US foreign policy anyway. And to quote Percival Rose from the Nikita show about
Gabbard's chances, "That ain't gonna happen."
In December the number of states in expansion was 39. Historically over the past 40 years,
that number dropping to 35 or below has (with the exception of one month in 1986) been the
marker of the onset of a recession.
Note the number is below the lowest level from 2015-16, in which weakness was generally
confined to the Oil patch. It is yet another marker of a slowdown, but not of a recession.
Later this morning we'll get the January ISM manufacturing report, and over the next 48
hours we'll get reports on January auto and truck sales. Both of these will help tell us if the
weakness in the production sector has been spreading or not.
Entrapment of Flynn and his own stupid behavior (for former chief of DIA this really
unass[eble naivity) that facilitated it is an interesting case study here...
David G. Horsman Although I am not
familar with all the players, in context to early 2017 the one part of the article I thought
exaggerated was this:'Probably the most intelligent analysis of the Deep State was written for
The Nation by Greg Grandin. Titled "What is the Deep State?", it makes many very good points
I
n 1956, C. Wright Mills wrote that "the conception of the power elite and of its unity rests
upon the corresponding developments and the coincidence of interests among economic, political,
and military organizations."
If nothing else, the "Trump v. Deep State" framings show that unity is long gone.'The three
seem generally aligned with the people on the outside looking in. Infighting is the norm.
It now appears that this massive euphoria, which culminated in the biggest one-day selloff since
August, may have been a tad excessive, hitting just as China was forced to admit it has a major
viral epidemic on its hands (although in retrospect Ray Dalio's Gartmanesque "
cash
is trash
" declaration just days earlier in Davos, may have been just as powerful a catalyst for
the derisking as the Coronavirus pandemic).
And nowhere was the investor euphoria more apparent than in the tech sector which, as the BofA
chart below shoes, was the most overbought since dotcom bubble.
Then, on Friday, as we duly reported fears that China is losing the fight to contain the
Coronavirus spread finally exploded, and sent the Dow red for the year, with the S&P 500 index now
flat for 2020 as positive early results from 4Q 2019 earnings season offset the economic concerns
of the coronavirus. In short, much of the euphoria that was unleashed by the Fed's launch of QE4 in
October to "fix" the repo market, coupled with central banks cutting rates as if "it's a crisis" in
the words of Bank of America...
... concerns that China's economy may slump to a 5% or lower GDP as a result of the viral
pandemic, have come at the worst possible time. And so, with the market finally cracking,
suddenly panicked investors are asking if what has gone up in almost vertical fashion over the past
year is about to come down.
Namely the handful of tech stocks that has been at the forefront of the S&P's tremendous ascent:
the FAAMGs.
As Goldman's David Kostin write over the weekend, picking up where
Morgan Stanley's Michael Wilson left off two weeks
ago, "today, the S&P 500 market cap is
concentrated in the five largest stocks to a degree not witnessed since the peak of the Tech
bubble.
The five firms – FB, AAPL, MSFT, AMZN, GOOGL – collectively account for 18% of S&P
500 market cap, the largest share since 2000
"...
... even as earnings are slightly less concentrated, with the top five stocks represent 14% of
profits, the highest level since 2015. During the past three months, aggregate FAAMG returns have
been double the S&P 500 index (19% vs. 8%) and generated 37% of the gain for the entire index
during that time. And with most of tech earnings roughly unchanged over the past year, the bulk of
this price increase was the direct result of multiple expansion, which in turn was made possible by
a record expansion in stock buybacks among tech companies.
So with everyone casting a fearful eye to the first tech bubble in 2000, investors are
understandably curious what happened back then, and are we about to witness the second coming of
the dot com bubble bursting.
Here, Kostin, which has a 3,400 year-end price target understandably does everything in its
power to mitigate fears that the Nasdaq is about to experience a second catastrophic plunge. Here
is what Kostin writes:
Twenty years ago, the US equity market was also dominated by five stocks:
MSFT, CSCO, GE, INTC, and XOM. In March 2000, these stocks accounted for 18% of total S&P 500
market cap and were priced at a substantial premium to the index. Collectively, the firms traded
at a forward P/E of 47x (vs. 24x for S&P 500) and 7.3x trailing EV/sales (vs. 2.7x). The
elevated valuations reflected expectations for rapid growth in aggregate earnings and sales
during 2000 and 2001.
In contrast, full-year 2001 results for the five largest stocks in March 2000 came in
nowhere near the lofty initial expectations.
In aggregate, sales fell by 7% (vs.
expectations of +15%), net margins contracted by 150 bp (from 13% to 11% vs. the original
forecast of 1100 bp of margin expansion) and net income fell by 18% (vs. forecast of +14%).
Three of the five firms actually realized negative sales growth in 2001 (INTC: -21%,
XOM: -10%, CSCO: -24%) and three reported negative EPS growth (CSCO: -72%, INTC: -68%, XOM:
-6%).
In contrast to the devastating misses suffered by the "Big Five" in 2000, Goldman claims that
"lower growth expectations, lower valuations, and a greater re-investment ratio suggest the current
concentration may be more sustainable than it proved to be in 2000." To underscore this point,
Goldman shows the following chart according to which valuations of the five largest companies now
are far more manageable compared to 2000.
But as even Goldman admits,
"in order to avoid repeating the share price collapse
experienced by their predecessors, today's market cap leaders will need to at least meet – and
preferably exceed – current consensus growth expectations,"
which, however, "seem more
achievable based on recent results and management guidance. In aggregate, consensus expects a 100
bp sales growth deceleration (from 15% in 2020 to 14% in 2021), a 20 bp margin expansion (19.5% to
19.7%), and a 600 bp EPS growth acceleration (10% to 16%)."
The good news is that at least for now, these market titans have not disappointed, as Bloomberg
pointed out in "
Like
It or Not, Trillion-Dollar Titans Lived Up to Earnings Hype
." Indeed, four of the five FAAMG
stocks reported 4Q 2019 results this week, which generally came in stronger than expected:
Apple reported a revenue and EPS beat
, with quarterly revenues of $92
billion (+9% vs. the year-ago quarter) beating consensus by 4% as demand for iPhones and
wearables better than expected. Subscriptions came in ahead of schedule, despite a deceleration
in services revenue growth to 17% year/year.
Microsoft posted positive results across every segment
. Sales grew by 14%
year/year and executives affirmed guidance for continued double-digit growth in 2020. Consensus
estimates currently forecast 12% sales growth and 11% EPS growth in 2020 and 12% and 14%,
respectively, in 2021.
FB reported strong 4Q results across almost every financial metric.
Overall
revenues jumped by 25% to $21 billion. While ad revenue beat for the fifth consecutive quarter,
slowing growth in mature markets led to some investor concern.
AMZN's Thursday report was the best of the FAAMG lot
. The company reported
4Q revenues of $87 billion (+21%), above consensus forecasts, and AMZN exceeded the high-end of
its revenue guidance for the first time since 1Q 2018.
Yet while the market leaders did not disappoint in the last quarter of 2019 when stocks exploded
higher with the blessing of the Fed's QE4, what about the current quarter and the future? What
happens to revenues and demand, to established supply chains, to profit margins, if the Coronavirus
epidemic keep spreading and tens of millions of Chinese remain under quarantine? What happens to
Apple's iPhone sales in China if the Cupertino company is unable to reopen its store for a month,
or two, or three? What happens to the already depressed global auto industry if Chinese part-makers
can't transport their parts to their core customers? What happens to China's financial system if
the local banking sector is suddenly paralyzed as the great unknown of how the pandemic
will impact the Chinese economy spreads
?
One thing is certain: with the tech sector priced to perfection, and with multiples of the IT
sector at the highest level since the dot com bubble, and the tech setor the most overbought
relative to the broader S&P500...
... anything less than perfection could lead to a violent selloff among the
massively
overbought handful of tech names that have led the market for much of the past year.
As such, it's suddenly up to China to make sure the FAAMGs in particular, and the tech sector,
and S&P500 in general, can sustain the lofty ascent that Donald Trump demands to ensure his
reelection in November. That, however, may be a big ask as the NYT writes in "
China
Kept World in Dark as Outbreak Rippled
" because, well,
why would China have to keep the
world in the dark if indeed the situation was contained, or containable?
And one lack at
the recent action in the NYSE FANG index...
... indicates that traders are increasingly starting to wonder if the mega tech party was
finally ended, not by a black swan, but a black bat...
Tags
Business Finance
I like Moon aka Bernard or whatever but he says the EU needs slightly less regulation. This
stupid giant politically correct police state has like 66,000 laws and they pass 5,000 new
ones a year. Nanny police state fascism and all they do is steal money from the taxpayers of
Europe. It is a Central Bank ponzi scheme that is going to implode.
Most recent joke today is the EU Army which has pretty much no working tanks, planes or
ships. Who are they going to fight anyway? The Russians? God help Europe - maybe Russians and
Putin might reinstate Christianity in Europe and throw off the yoke of the CIA/MIC/Operation
Gladio-Mockingbird from USA.
The impression I'm getting from comments here is that there are still many Europeans (in the
broad sense, both EU and British) in complete denial.
Europe is in decline, not in ascension. The numbers just came out yesterday: 0.1% for the
EU (with France and Italy in recession); UK's number for Q4 are still one month away, but Q3
was also pathetic.
World trade (globalization) has grown to a halt. It's all maxed out already, there are no
more free trade deals to be made.
Germany is in de facto recession. Most worryingly, its industrial output is plummeting -
with only its services sector keeping the whole thing afloat. And we know that's not how the
German economy should work.
The UK is still a capitalist economy - free from the EU or not. It will not invest in
those fabled renewable energy sources from tide, wind etc. etc. if the profit rates are not
high enough. And they are not high enough. The only way, then, for those investments to
happen is if energy prices spike up - very bad news for the British people (which, fair to
say, could happen in or out of the EU, so this is not a Brexit question).
Many countries in Europe tried to invest in those renewable, but apart from insignificant
micro-nations such as Denmark, most failed to supplant the old sources. It was reduced to a
complementary source.
The only reason to think the European Peninsula can rise from the ashes is that it rose
from the ashes before (post-war miracle). But the post-war miracle was a very exceptional
historical period, where a lot of improbable variables aligned. It will certainly not happen
again.
The European peoples should stop with their dellusions of grandeur and accept a treaty of
Eurasian integration, with a subordinate status to Russia and China. You did it before with
the USA in 1945, you can do it again now with Russia/China. That is unexceptional in European
History, and can certainly happen again.
The Commonwealth long since ceased to have any meaning for the UK other than as a
vestige of an expropriative empire, which has been a caricature since 1942[.]
If you think that the land mass of the Commonwealth represents a kind of control comparable
to the EU then you need to study the last century[.]
In that comment you have attracted Her Majesty's displeasure. Suggest a read up of the 53
Commonwealth countries' property ownership in common law - in fee simple>radical
title > The Crown's underlying title in common law. Oh, add the thirteen
colonies prior to the American revolution found unpalatable.
Fun read from George Galloway @RT. Lot's of things independent minded folk can agree with but
pay particular attention to the conclusion / ending and give it a 1 to 10 reality rating.
Think of the absolutely absurd straight line that separates Canada from the U.S. West of
the great lakes.
Now think of that artificially imposed boundary and ask yourself, "What a stupid line,
surely that line wouldn't be able to instill any cultural differences between two artificial
constructs (nations)?"
(Anecdotally, I live in the Pac NW and every time I have ever crossed the border into
Canada it literally feels like you are entering a retiring, European state.)
And then ask yourself how it is possible one country has a national healthcare system
while the other abhors the idea. Or why the U.S. has the worst gun violence in the First
World while Canada has a 1/10th of that number.
Face it, regardless of lines on a map, a national identity still gives a people the choice
to galvanize and develop independently.
I think the EU is in for more trouble in the future than the UK. By the end of this decade,
several central and eastern European countries economies will have grown sufficiently that
their EU yearly subsidies will now become EU payments. In other words, the EU cash cow will
suddenly become a cash drain for some countries. In the meantime, France and Germany will
have the pick up the financial slack caused by Brexit. Put it all together and it seems to me
some trouble ahead for the EU.
I believe you have stated the underlying facts here -
"b is correct tho that the tendency of politicians pretending to be technocrats to
centralise in order to build a trade-able power base must be halted. otherwise the national
devolution movements become superseded by a Brussels top down pyramid management structure
where citizens are too removed from decision makers and the decision makers are too removed
from the results of their decisions."
That's the reason we have to leave the EU.
The next question is how.
The central fact here is that on a key point Brussels is absolutely in the right.
Frictionless access to the Single Market - what we have now - can only go with Dynamic
Alignment - continuing adherence to EU regulations. This fact was obscured during the
vacillations of the May Premiership and may still be being obscured.
Me, I think the "regulatory ecosystem" that the EU has evolved is unsound. It also goes
well beyond the technical setting of standards (most of which are set outside the EU in any
case) and affects matters far removed from the purely technical. But it's what they have and
it's not for us to attempt to change it.
Much of the hostility from the EU derives from the belief that as we leave we are trying
to change their system, and for our own benefit. All the fears of "Cherry picking" and the
rest. But it's not that they won't change. They can't, not without an entire recasting of
that regulatory ecosystem. That would cause chaos if they attempted to do it. Engrenage is
their watchword, the gradual accumulation of regulation and prescription, not demolition or
radical rebuilding.
In short, for the reasons you have given above, we have to leave. When we consider the
"how", we see that there is no magic solution that allows us to leave while continuing
trading as if we have not left. Out really does mean out.
So where's the problem?
We've built up a good many trade links with the 27, the EU countries. They are vulnerable
links, particularly the JIT links. It's going to take time to run down these links and
replace them with new. We have other links as well - through the agencies - that will also
take time to replace.
Such changes could take several years. If Brussels insists on that process happening
overnight the result is serious disruption. On the principle that the EU is so much larger
the calculation is that that disruption would hurt the UK much more than the EU. That is
Brussels' bargaining counter.
Whether Brussels is using that counter for punitive reasons or whether it is using it in
order to retain at least some control over the UK is irrelevant. The threat is there, however
you look at it.
Some think we should face the threat down. I do - I think it is bluff. Others think we
should not face it down - they fear it is not bluff. We wait to see which course the Johnson
administration will adopt, not forgetting that the previous UK administration, and certainly
the previous Parliament, didn't much like Brexit anyway - they wanted to stay in or close -
and we're not yet sure what Johnson's position is.
.
(Note - engrenage as it works in practice explained here)
"The affirmative task we have now is to actually create a new world order."
-- Vice President Joe Biden, April 5, 2013
"Out of these troubled times, our fifth objective -- a new world order -- can
emerge."
-- President George H. W. Bush, September 11, 1990
"We saw deterioration where there should have been positive movement toward a new world
order."
-- Mikhail Gorbachev, October 19, 2011
"I think that his [Obama's] task will be to develop an overall strategy for America in
this period, when really a 'new world order' can be created. It's a great
opportunity."
Remember it was the British that basically established political Zionism as a state back
in Palestine.
It was Trump that declared Jerusalem as the 'eternal capital' of anti-Christ Judaism.
Boris Johnson is a 'passionate Zionist' by his own proclamation.
This is about a realignment of Zionist interest in the English speaking world.
The EU wasn't going to play ball on the terms of American (and British) Zionism.
The English (KJV) world of eschatology demands a pseudo-Christianity to bow down to the
interests of anti-Christ Jewish nationalism. (It is why the U.S. Senate has passed
legislation making it illegal to criticize 'Israel' as 'anti-Semitic')
American evangelicals are being misrepresented by heretics like John Hagee and a
pseudo-Christianity that cares not for Jesus Christ at all but rather maintains a focus only
on 'Israel'. A dual covenant theology mixed with heresies galore served up in a controlled
media that doesn't allow for the recognition of Christianity as the real Israel against a
history of the destruction of ancient Israel because of their rejection of Jesus Christ as
the Son of God.
The New Testament Parable of the Wicked Husbandmen is Jesus foretelling and giving clear
reason for the destruction of anti-Christ Judaism in 70 AD.
The heresies of John Darby and Cyrus Scofield (again nearly exclusively in English) have
created everything from British Israelism to fear and anxiety hustling crapola such as Hal
Lindsey and The Late Great Planet Earth end of the world heresies.
On the basis of Christian heresy has emerged anti-Christ political Zionism and its vast
adherents in the English speaking world now realigning.
The tell tale sign; debt rises much faster than GDP in the US in the 1920s.
(Japan 1980s; US, UK and Euro-zone before 2008; China after 2008)
The bankers were inflating asset prices with bank credit.
Bank credit effectively brings future prosperity into today.
The 1920s boomed on borrowed money and the 1930s were impoverished as they made the
repayments.
In the 1930s, they pondered over where all that wealth had gone to in 1929 and realised
inflating asset prices doesn't create real wealth, they came up with the GDP measure to track
real wealth creation in the economy.
The transfer of existing assets, like stocks and real estate, doesn't create real wealth
and therefore does not add to GDP. The real wealth creation in the economy is measured by
GDP.
Inflated asset prices aren't real wealth, and this can disappear almost over-night, as it
did in 1929 and 2008.
Real wealth creation involves real work, producing new goods and services in the
economy.
Henry Simons was a founder member of the Chicago School of Economics and he had worked out
what was wrong with his beliefs in free markets in the 1930s.
Banks can inflate asset prices with the money they create from bank loans.
Henry Simons and Irving Fisher supported the Chicago Plan to take away the bankers ability
to create money.
"Simons envisioned banks that would have a choice of two types of holdings: long-term
bonds and cash. Simultaneously, they would hold increased reserves, up to 100%. Simons saw
this as beneficial in that its ultimate consequences would be the prevention of
"bank-financed inflation of securities and real estate" through the leveraged creation of
secondary forms of money."
"Stocks have reached what looks like a permanently high plateau." Irving Fisher
1929.
This 1920's neoclassical economist that believed in free markets knew this was a stable
equilibrium. He became a laughing stock, but worked out where he had gone wrong.
Banks can inflate asset prices with the money they create from bank loans, and he knew his
belief in free markets was dependent on the Chicago Plan, as he had worked out the cause of
his earlier mistake.
It was those bankers inflating the US stock market with margin lending.
It's not quite the same this time.
Let the bank's collapse for a Great Depression
Save the banks, but leave the debt in place for Japanification .
How did this old belief set come back again?
A new ideology, neoliberalism, was wrapped around 1920s neoclassical economics, to make it
look brand new.
The reckless bankers and robber barons had made a lot of money in the 1920s and they
rather liked the way things had been before, but after the reckless bankers and robber barons
had run riot in the US in the 1920s, beliefs in economic liberalism and the markets were in
short supply.
Just a few diehards, like Hayek, were left and they were hiding out at the LSE in the UK
in the 1930s. He was looking to put a new slant on those old ideas.
In the 1940s, Hayek put together his theories of the markets being a mechanism for
transmitting the collective wisdom of market participants around the world through pricing.
It was never going to get into the mainstream until nearly everyone had forgotten what
happened last time they believed in the markets.
At last, in the 1980s, the people were ready to believe in the markets again.
Before 1980 – banks lending into the right places that result in GDP growth
(business and industry, creating new products and services in the economy)
Debt grows with GDP
After 1980 – banks lending into the wrong places that don't result in GDP growth
(real estate and financial speculation)
Debt rises much faster than GDP
2008 – Minsky Moment
After 2008 – Balance sheet recession and the economy struggles as debt repayments to
banks destroy money. We are making the repayments on the debt we built up from 1980 –
2008.
What happened in 1979?
The UK eliminated corset controls on banking in 1979 and the banks invaded the mortgage
market and this is where the problem starts.
This is the UK, but everyone has made the same mistake.
One economics, one ideology.
Global groupthink.
At 25.30 mins you can see the super imposed private debt-to-GDP ratios.
What Japan does in the 1980s; the US, the UK and Euro-zone do leading up to 2008 and China
has done more recently.
The tell tale sign of neoclassical economics; debt rises much faster than GDP
The PBoC saw the Chinese Minsky Moment coming and you can too by looking at the chart
above. The Chinese bankers had been loading their economy up with their debt products and it
was just about to crash.
Our experts look at public debt and consumer price inflation, but the problems develop in
private debt and asset price inflation so the "black swan" flies in under their radar.
Davos 2018 – The Chinese know financial crises come from the private debt-to-GDP
ratio and inflated asset prices
thatcher was a neoliberal. neoliberalism is both nationalism (for the long con game) and
globalist (the goal)
The Mont Pelerin Society's (Austria 1940's) favorite "economist" F. v Hayek proposed path
of "liberty" and "freedom" [only for the inbred 1% (Neoliberalism)] (Friedman, Buchanan,
"Chicago School", were later disciples)
1) Deregulate global financial markets - DONE
2) Deregulate global trade - DONE
3) Create the illusion and urgency of national bankruptcy with fake (fiat) debt (thereby
neuter a nation's capability to enforce laws - eliminate the people's ability to defend
against being overwhelmed and consumed by the 1%) - DONE
this manufactured illusion of bankruptcy is critical path for the inbred 1%'s agenda. the
"debt" is used to justify austerity measures for the people, and to tee up, the privatization
plan, which is about transforming the public debt, into private debt, where the 1% can
extract usury, ad infinitum.
#AusterityIsCode4Looting - austerity measures are plain evidence, the system has already
been looted by generational globalist wealth.
then lastly, the kill shot:
4) Privatize Everything. recreate us ALL as permanent rent payers of even the most basic
necessities of life (Air, water, food, shelter, health care). the public debt of a ntion has
been effectively eliminated, transmuted into private debt; the service of which (usury) is
FOREVER- Almost COMPLETE
#PrivatizationIsTheft - privatization today is STRICTLY about prioritizing national
productivity (work) away from the commons and general welfare, extracting and transferring it
to the inbred 1% rent-seeking parasites (Extreme Redistribution of wealth from the people TO
the Billionaires, NOTHING for the people)
"People only accept change when they are faced with necessity, and only recognize
necessity when crisis is upon them."
Same old process...Problem, Reaction, Solution
They corrupt the current system and advance their agenda as far as they can (gaining
public support using the process above). When they detect growing resistance and distrust of
the system...they then encourage and use that trend to advance their agenda further using the
same Problem, Reaction, Solution process. The crash/destruction of the current status quo and
the fear and chaos that comes with it will be blamed on populism/nationalism. The people (in
chaos and fear) will seek safety and security...and will willingly accept the solutions
offered up to them. Rinse and repeat.
The bottom line is they know that acceptance of global centralization of power and
control...is a bottoms up process (the people must willing accept/demand it). It must be
accomplished in evolutionary stages through gradualism. However, when they have reach a
certain point and want to take the next major step, they undermine the peoples trust in the
current system and encourage and use the people's blow-back. Blow-back will be blamed for all
the chaos and fear.
Now, Trump has said offhandedly that there's been talk of reinstating the deductions and
raising the mortgage cap. But for the most part, this seems like
idle talk . The federal budget deficit has exploded, but Trump and his team are still
talking up their tax-reform part 2 (though it's likely this chatter mostly a ruse to pump the
market). But suspect any tax cuts between now and November will be focused squarely on aiding
the midwestern states who handed Trump the presidency.
Since the tax-reform package was passed, what was once a trickle of blue-staters fleeing
places like California, New York, New Jersey, Connecticut and even Texas over the past two
years has become a flood.
And after a smattering of stories detailing the gradual migration from high-cost blue states
and cities like San Francisco and New York (we've paid
close attention to the trend
over the years ), two
WSJ banking reporters have published a deep dive on the trend, signaling its arrival as a
major national issue.
Just like
Carl Icahn and David
Tepper left New York and New Jersey for Florida, millions of Americans are following suit,
swapping Connecticut for Florida, Nevada or Arizona.
Two years after President Trump signed the tax law, its effects are rippling through local
economies and housing markets, pushing some people to move from high-tax states where they
have long lived. Parts of Florida, for example, are getting an influx of buyers from states
such as New York, New Jersey and Illinois.
Though the exact figures have probably changed since the tax reform was passed, this map
helps illustrate how capping SALT and lowering threshold for mortgages impacted each state.
While President Trump, Secretary Mnuchin and the rest of the administration have insisted
that they capped the deductions to end what they described as an unfair subsidy for blue states
. The average US property tax bill in 2018 was about $3,500, according to Attom Data Solutions,
a real-estate data firm cited by WSJ. But in New York, New Jersey and Connecticut, hundreds of
thousands of residents make annual property tax payments well above that level. In New York's
tony Westchester County, the average property tax bill is more than $17,000.
Most of the people interviewed by
WSJ said they had long considered moving to a more tax-friendly state. But for many,
Trump's tax plan was the catalyst to actually act on these impulses.
"It was another bucket of straw on the back of the camel," said John Lee, a
wealth-management executive and longtime resident of the Sacramento, Calif., area. Mr. Lee
and his wife, Tracy, moved their primary residence last winter to Incline Village, a resort
community on the Nevada side of Lake Tahoe.
The Lees kept their California home, where one of their six adult children is living. That
means they are still paying California property taxes. But Mr. Lee estimates the move to
Nevada, which has no state income tax, whacked his state tax bill by 90%.
The impact on housing markets in the ten most heavily taxed states has been impossible to
ignore. The
Manhattan luxury housing market is showing signs of serious distress that's provoking
anxieties among the wealthy developers who were expecting a boom in demand. According to Fitch
Ratings, home-price appreciation in these states declined almost immediately after the tax
reform package was passed. By comparison, home-price appreciation was steady for the 10 states
with the lowest property taxes and levels of mortgage interest.
Among Gen Xers and Boomers who have only recently achieved empty-nest status, plotting an
escape from taxation hell has become a simple tenant of good retirement planning.
Rick Bechtel, head of U.S. residential lending at TD Bank, lives in the Chicago area and
said he recently went to a party where it felt like everyone was planning their moves to
Florida. "It's unbelievable to me the number of conversations that I'm listening to that
begin with 'When are you leaving?' and 'Where are you going?'" he said.
Even some states known for having relatively low taxes are being affected by this trend, as
some residents opt for states with no income tax, like Florida or Nevada.
Trumps supposed tax cut was really a tax increase on many Americans. When I see multi
billion dollar corporations like Amazon paying nothing in taxes because Trump gave them a tax
cut, and working people in blue state paying for those tax cuts by having their taxes
increased, it is little wonder why voters are turning to Sanders.
There is a huge difference between extremely bright students and medicate ones. Bright students are the future of the society and
need to be nurtures and helped in any way possible for the range of specialties that are important (STEM is one example)
There is difference between the degree in computer science and the degree in some obscure nationality studies (let's say Eastern
European studies; few people that are needed can be paid by intelligence agencies ;-) Obscure areas should be generally available only
to well to do students, who can pay for their education.
Like is the case with alcoholism, some student debt is the result of bad personal choices.
Notable quotes:
"... Authored by Zachary Stieber via The Epoch Times, ..."
"... "My daughter's getting out of school, I saved all my money, so she doesn't have any student debt. Am I going to get my money back?" ..."
"... So, we end up paying for people who didn't save any money, then those who did the right thing get screwed, ..."
"... "We did the right thing and we get screwed," ..."
"... "Look, we build a future going forward by making it better. By that same logic what would we have done? Not started Social Security because we didn't start it last week for you or last month for you," ..."
"... "We don't build an America by saddling our kids with debt. We build an America by saying we're going to open up those opportunities for kids to be able to get an education without getting crushed by student loan debt." ..."
"... Sen. Elizabeth Warren (D-Mass.) campaigns in Des Moines, Iowa on Jan. 19, 2020. (Spencer Platt/Getty Images) ..."
"... "I'll direct the Secretary of Education to use their authority to begin to compromise and modify federal student loans consistent with my plan to cancel up to $50,000 in debt for 95% of student loan borrowers (about 42 million people)," ..."
"... A scholarship system awarding free tuition to the top 5% of college applicants (NOT biased by race, gender, etc) who apply to the U.S.'s best STEM programs, hell yes! Free tuition for future Democrat voters, f^%k that! ..."
Sen. Elizabeth Warren (D-Mass.) defended her plan to pay off college loans after being confronted by a father in Iowa in an exchange
that went viral.
Senator Elizabeth Warren is confronted by a father who worked double shifts to pay for his daughters education and wants to
know if he will get his money back. pic.twitter.com/t2GGbAnG08
The father approached Warren, a leading Democratic presidential contender, after a campaign event in Grimes.
"My daughter's getting out of school, I saved all my money, so she doesn't have any student debt. Am I going to get my
money back?" the man asked Warren.
"Of course not," Warren replied.
" So, we end up paying for people who didn't save any money, then those who did the right thing get screwed, " the
father told her.
He then described a friend who makes more money but didn't save up while he worked double shifts to save up to pay for his daughter's
college.
The father became upset, accusing Warren of laughing.
"We did the right thing and we get screwed," he added before walking off.
In an appearance on "CBS This Morning" on Friday, Warren was asked about the exchange.
Last night, a father who saved for his daughter's college education approached
@SenWarren and challenged her proposed student
loan forgiveness plan. @TonyDokoupil asks the
senator for her response: pic.twitter.com/jLUXPqChC6
"Look, we build a future going forward by making it better. By that same logic what would we have done? Not started Social
Security because we didn't start it last week for you or last month for you," Warren said.
Pressed on whether she was saying "tough luck" to people like the father, she said "No." She then recounted how she got to go
to college despite coming from a poor family.
"There was a $50 a semester option for me. I was able to go to college and become a public school teacher because America had
invested in a $50 a semester option for me. Today that's not available," she said.
"We don't build an America by saddling our kids with debt. We build an America by saying we're going to open up those opportunities
for kids to be able to get an education without getting crushed by student loan debt."
Sen. Elizabeth Warren (D-Mass.) campaigns in Des Moines, Iowa on Jan. 19, 2020. (Spencer Platt/Getty Images)
One of Warren's plans is to cancel student loans. According to
her website , on her first day as president
she would cancel student loan debt as well as give free tuition to public colleges and technical schools and ban for-profit colleges
from getting aid from the federal government.
"I'll direct the Secretary of Education to use their authority to begin to compromise and modify federal student loans
consistent with my plan to cancel up to $50,000 in debt for 95% of student loan borrowers (about 42 million people)," Warren
wrote.
"I'll also direct the Secretary of Education to use every existing authority available to rein in the for-profit college industry,
crack down on predatory student lending, and combat the racial disparities in our higher education system."
Sounds an awful lot like the dad above is right those that did the "right thing" are gonna get "screwed."
Warren you bitch, I paid back my student loans responsibly by working my *** off (140k) and now you want to give others a free
ride? I sure hope that I get a refund for all that money I paid back.
Obama did this kinds thing with housing. I got outbid by 100k on a house. The other bidder who got it didn't make his house
payments so Obama restructured his loan knocking off 100k from his loan and giving him a 1% interest rate on it. He again didn't
make his payments and got it restructured again but I didn't hear the terms of that one.
If student loan debt is such a crisis, force every university to use their precious endowment funds to underwrite those loans
AND let those loans get discharged in bankruptcy. Maybe then those schools would start to question whether having a dozen
"Diversity Deans" each being paid $100k+ salaries is really worth the expense (among other things).
A scholarship system awarding free tuition to the top 5% of college applicants (NOT biased by race, gender, etc) who apply
to the U.S.'s best STEM programs, hell yes! Free tuition for future Democrat voters, f^%k that!
The pissed off dad in this story has only one person to be pissed off at: himself, for being stupid. Understand something about
college degrees: 90% of them, including majors like accounting, are not worth the paper they are printed on. Anyone who works
double shifts to pay for anyone's college degree, even their own, is stupid. Look at why college costs so much: go to any state,
and you'll see that 70% or more of the highest paid state employees are employed by public colleges and universities. You need
to play these sons of bitches at their game, use their funny money to pay for the degree, and walk away. If you play the way these
sons of bitches tell you to play, you get what you deserve.
I used their funny money to get a degree that wasn't worth the paper it was printed on and walked away. I don't give a ****
if the sons of bitches grab my tax refund. Why? Because I have my withholdings set up so they get next to nothing in April. It
costs the sons of bitches more to print up the garnishment letter and send it to me than what they're stealing from me. Guess
what I use for an address? P.O. Box (can't serve a summons to a ghost).
If you're going to do what stupid, pissed off dad did, and work double shifts, you need to be trading out of all that funny
money you're being paid for those double shifts, and trading into personal economic leverage (gold first, then silver). Instead
of having bedrock to build multi-generational wealth, he has a daughter with a degree in pouring coffee, and nothing else to show
for it. He only has himself to blame for drinking the Kool Aid. I can grab overtime every Saturday at my job if I want it, and
every last penny of that OT is traded out of funny money and into gold ASAP.
Understand the US real estate market: the only reason it did not die five years ago was because we welcomed rich foreigners
to come in and buy real estate to protect their wealth. We've stopped doing that, we have an over-abundance of domestic sellers
and a severe shortage of domestic buyers. It's also where history says you need to be if you want to build multi-generational
wealth. Warren actually needs to go further than what she's proposing. Not only does she need to discharge 100% of those balances
by EO, she also needs to refund all those tax refunds stolen under false pretenses. Anything less, and we are guaranteed, for
the next 40 years, to have a real estate market and economy which resembles Japan since 1989.
Why do I buy gold? So I can play people like Warren at their game. I'll take whatever loan discharge she gives me, and have
lots of leverage in reserve to take advantage of what will be a once in a lifetime real estate fire sale.
Make those who want to be bailed out have to pay the bailout back by working every non-holiday Saturday (at the minimum wage
rate) for the government and citizens (e.g who need work done around the house, take care of the elderly - in the bathroom) until
the debt is paid back. AND let those who have not taken the debt relief supervise them - getting paid by the government at the
same rate, minimum wage. 🦞🦞🦞🦞🦞
For a decent college it's between 35-70k a year.... Why? 300k a year library professors, if it weren't for tenure the problem
would largely he self correcting as rntrillments drop...
My how times have changed. My son was a college grad circa 1996. He did the JUCO thing for 1 1/2 years , worked a part time
job for the duration, and picked up an A S while making the President's list. I aid, out of pocket all educational expenses while
he lived at home and provided for a nice lifestyle while he was in school. As promised, he finished his education, out of state,
which I paid for all along the way. 2 more years, he graduated, on the Pres list, and picked up his B S. No student debt, in his
words, was one of the the greatest gifts. Today he is debt free, (so am I ), and he is a very happy , financially secure ( until
the world goes upside down) mature adult. Hey Lizzie, send me a check.
They are all ignoring the real problem...the Federal mandated system of the guaranteed student loan program. Anyone with a
pulse can get a guaranteed student loan, thus creating a massive rise in college admissions. The colleges are guaranteed the money
for these loans, while the lender (the US gov't) is not guaranteed to be paid back by the students receiving these loans,. this
created a fool proof, risk free ability for colleges and universities across the country to jack up their tuition costs at over
a 5:1 ratio of income growth over the last 25 years. The problem is the program itself, students need to earn their ability to
enroll in college through hard work and good grades. Currently, any moron with a high school diploma can go to college on a guaranteed
student loan program and the colleges are more than willing to take on any idiot that wants to go to school despite their aspirations,
work ethics, intelligence, achievements, etc. The universities have been given a blank check to expand their campuses, drastically
inflate the salaries and pensions of professors and administrators of these schools all at the expense of this guaranteed "free"
money from the government that only achieved an immense amount of the population going to overpriced schools in order to get a
diploma in useless pursuits like african american studies, philosophy, creative writing, music, criminal justice, arts, basket
weaving, etc.. The skyrocketing costs of colleges and student debt is the direct result of this miserably failed system of the
guaranteed student loan. The majority of which have no business going to higher education because they don't have the aptitude,
work ethic and intelligence necessary to actually receive a degree in anything that benefits the economy and themselves going
forward. 30 years ago the average state college admission was roughly $4k a year for a good state school, today it is roughly
$20k or far more. Meanwhile, the average income has gone up a meaningless amount. Get rid of the guaranteed student loan program
and make the colleges responsible for accepting the responsibility of the loans for their students. I guarantee enrollment will
decrease and costs will decline making it much more affordable for the truly responsible and aspiring student to achieve their
dreams of a degree without a $250k loan needed for completion nor the lifelong strain of debt on their future incomes. The colleges
are raping the system the same as all these shoestring companies take advantage of the medicaid system and give hovarounds and
walking canes, and hearing aids for free because the gov't reimburses them at wildly inflated prices under some federally passed
mandate. The system is the problem, eliminating the debt will only exacerbate it and cost taxpayers trillions more each and every
year as "free" college will now entice every moron with a heartbeat the ability to go to outrageously priced schools with no skin
in the game on the taxpayer's dime. Elizabeth Warren is an idiot....someone needs to have a sit down with her and discuss this
rationale in her luxurious, state of the art TeePee.
While you are correct corrupting academics with huge payoffs is how you secure their votes and the votes of most of the 'students'
for decades to come.
Any group or industry can be paid off and you might think of the system as a set of interlocking payoffs until you get out
to the margins and the fringes where the cash and benefits are a lot thinner.
Everyone who continues to pay taxes to these neo-Bolsheviks is going to get screwed. The only alternative is to stop funding
these criminals completely.
What a sorry presidential canditate! She flat out LIED about being native american to get FREE college. And now this. Where
has America gone????????? Socialism sems to be what most want nowadays. It has NEVER EVER worked anywhere in the world at any
time! If yoou think therwise, just name ONE countryn it has worked in ! What a lying bunch the democrats are..........................
So all if us have to pay for it. Why did I have to pay for University and College in the 1970's if I wanted to further my education
and now that I am older I have to foot the bill for the young people of today? Pay DOUBLE? (just to buy votes for traitors?)
I think NOT! Take your theft from the people, to buy votes of everyone from young people to illegal criminals to outright criminals
in prison to dead people and resign before we decide to arrest you.
Democrats, HANG IT UP! We are NOT paying for YOUR illegitimate votes.
Notice too how all their "we're going to wipe out your debt!" promises never seem to include the big "endowments" of these
fascist colleges that jacked up tuition 1000% over what it used to cost.
No, those creepy commie profs and their freaky administrators get to keep their big TAX FREE endowments AND their big salaries.
Big Gov by Sanders/Warren don't seem to think that's obscene.
You are absolutely correct. 45 years ago you could almost work part time and actually PAY your way through college. Today you
almost need a physicians salary to pay for these OVERPRICED sewers filled with leftist propaganda.
It's obvious that Warren doesn't teach economics or even math. They weren't smart enough when they took out the loans and they
are not good with paying their bills so move the goal posts to bail them out. Has anyone given the thought that maybe they shouldn't
have gone to college at all. Sounds like they will all work for the government anyways.
Rich countries embraced trade multilateralism when it suited them, and now they're abandoning it. That may not be such a bad thing.
The World Trade Organization (WTO) is on its last legs now that the Trump administration has blocked the appointment or reappointment
of judges to the appeals court of its Dispute Settlement Mechanism -- which is the central pillar of the 24-year-old multilateral
body.
Do I regret the demise of the World Trade Organization now that Trump is on a unilateral trade rampage? No. I always saw the WTO
and unilateralism as two faces of U.S. power deployed against those countries seeking to remake the world trading order in a more
equitable and just direction.
Multilateralism and unilateralism have, since the end of the Second World War, been alternative strategies for global hegemony
preferred by competing factions of the U.S. ruling elite.
The Democrats preferred multilateralism because they felt it would both institutionalize the U.S.'s hegemonic status in the world
trading order at the same time that it would make it more legitimate by obtaining the consent of its allies. Republicans, however,
felt that the exercise of U.S. power should be as little constrained by global rules and institutions as possible.
These two views clashed head-on in 1948 during the debate over the ratification of the Havana Charter, which would have established
the International Trade Organization (ITO). After having participated in the negotiations, the Democratic administration of President
Truman did not submit it to the Senate for ratification, worried that the Republicans would successfully block it. The Republicans
argued that ratifying the Havana Charter would be unconstitutional since no legal code could stand above the U.S. Constitution, and
that a treaty governing trade would do precisely that.
Republicans and Democrats agreed to a compromise: the much weaker General Agreement on Tariffs and Trade (GATT), which had little
checks on U.S. trade practices and did not bring under its ambit the global agricultural trade that U.S. corporations dominated.
With trade making up only a small part of U.S. gross domestic product (GDP) then, the U.S. was not worried about the absence of strong
rules on global trade, and felt these would only harm the bottom line of its emerging transnational corporations.
Paradoxically, GATT allowed the rise of a number of formerly minor trading countries into major actors in global trade, which
would not have been possible within an iron-clad free trade regime. These were mainly economies from East Asia like South Korea,
Taiwan, and Malaysia that engaged in aggressive export policies while building up manufacturing industries protected by high tariffs
and import quotas. At the same time, by the 1970s and 1980s, trade accounted for a greater part of U.S. GDP than in the late 1940s,
and U.S. corporations wanted fewer restrictions on their penetration of foreign markets.
So Washington changed its mind in the 1980s, and both Republicans and Democrats agreed to push for a strengthened global trade
regime.
The U.S. was confident that it would benefit mainly its corporations which it saw as the most competitive in the world. The European
Union decided to join the bandwagon for a strengthened international trade regime mainly because, like Washington, it wanted to dump
its massive agricultural surpluses on developing countries.
Leading industries in Europe, the U.S., and Japan -- like the automobile, information, and pharmaceutical industries -- also had
a joint interest in preventing the emergence of new competitors from East and Southeast Asia by making the latter's liberal acquisition
of complex technologies (dubbed "intellectual piracy") a violation of trade rules, or by preventing them from using trade restrictions
to build up their industries.
The result was the World Trade Organization, which came into being in 1995. The WTO, from the perspective of U.S. interests, was
a set of rules and institutions that would promote, consolidate, and legitimize structures of global trade ensuring the hegemony
of US interests.
While free trade was the rhetoric of the WTO, the achievement of monopoly was actually the aim of the WTO's three most important
agreements.
The Agreement on Agriculture (AOA) institutionalized the dumping of U.S. and European surpluses on developing countries by forcing
the latter to end their import quotas and lower their tariffs. The Trade Related Intellectual Property Rights Agreement (TRIPs) sought
to institutionalize U.S. corporations' monopoly of high technology by outlawing reverse engineering and other methods used by developing
countries to get universal access to knowledge. The Trade Related Investment Measures Agreement (TRIMs) sought to prevent countries
from imitating Japan, South Korea, and Malaysia and using trade policy, like reducing imported inputs into finished goods in favor
of local inputs, to build up industries that became significant competitors both in local and global markets.
Then, in 2003, with the heft provided by India, Brazil, and China (a WTO member since 2001), the developing countries in the WTO
were able to prevent the U.S. and EU's attempt to dismantle government protection of small farmers. They foiled attempts to tighten
the already very restrictive TRIPs Agreement, and prevented the joint U.S.-EU attempt to bring investment, government procurement,
and competition policy under the ambit of the WTO.
Following this, the U.S. abandoned the multilateral route. After the Fifth Ministerial of the WTO collapsed in Cancun in 2003,
the Republican Bush administration's Special Trade Representative Robert Zoellick warned: "As the WTO members ponder the future,
the U.S. will not wait: we will move towards free trade with can-do countries."
Over the next few years, the U.S. and the EU preferred to put their efforts into forging bilateral trade agreements or limited
multilateral agreements, like the Trans-Pacific Partnership (TPP) that was the fallback position favored by the Obama administration.
So Trump did not initiate the move back to unilateralism -- he merely brought to its climax, with his trade war with China, a swing
back to unilateralism that had begun with the George W. Bush administration in 2003.
Indeed, Trump's blocking of judges to the WTO's appellate court is simply an extension of the policy of blocking the appointment
or reappointment of judges practiced earlier by the supposedly multilateralist Obama administration. The most notorious trade act
of the U.S. under Obama was its ouster in 2016 of Appellate Body Member Seung Wha Chang of South Korea on the grounds that it did
not agree with the distinguished South Korean jurist's judgments in four trade disputes involving the U.S.
The result, the current global trading system, is a hodge-podge featuring a weakened WTO, failed trade agreements like the TPP,
stalemated or slow-moving negotiations like the Regional Comprehensive Economic Partnership (RCEP), developing country trade arrangements
like Mercosur, bilateral treaties like the South Korea-U.S. free trade agreement, and non-institutionalized bilateral and unilateral
initiatives.
This may, in fact, be the least undesirable of outcomes. For many developing countries, the era of the weak GATT regime from 1948
to 1995 was a dynamic era that left them a lot of development space owing to the lack of pressure for them to open up their agricultural
and manufacturing sectors, weak trade dispute mechanisms, and the absence of anti-development pro-developed country regimes like
TRIPs.
Instead of the chaos that neoliberal ideologues warn us against, current conditions might, in fact, be moving in the direction
of a hybrid GATT-like system that would hold out a larger space for efforts at genuine sustainable development by the global South.
Share this:
One of the principal actors in the Anti-Globalization Movement, FPIF commentator Walden Bello is the author of Deglobalization:
Ideas for a New World Economy (Zed, 2000) and Revisiting and Reclaiming Deglobalization (Focus on the Global South, 2019). He can
be contacted at [email protected]. This article originally
appeared in German in the German periodical Welt-Sichten, Nov 7, 2019
This was a reply to the jarhead Mattis who mentioned the possibly of a preemptive strike on
Russia because of allegations they are violating a missile treaty.
"We have no concept of a preemptive strike," Putin told a forum of international experts
in the southern city of Sochi in response to a question from the audience.
"In such a situation, we expect to be struck by nuclear weapons, but we will not use them"
first, he said.
"The aggressor will have to understand that retaliation is inevitable, that it will be
destroyed and that we, as victims of aggression, as martyrs, will go to heaven.
"They will simply die because they won't even have time to repent,"
Bobbie
last year Russia is a Christian nation since the Soviet Union fell. They believe in the
10 Commandments one of which is do not murder. E D
last year Yup a reply to the jarhead Mattis who mentioned the possibly of a preemptive
strike on Russia because of allegations they are violating a missile treaty.Yup should start
showing the movies 'Fail Safe' New Bedford Incident', 'The Day After', 'Dr Strange Love, '
Missiles of October' now on TV prime time spots. No JFK or RFK to hold the generals in check
this time.and God indeed will judge them for the billions that die.
Reply
last year If it had not been for one brave Soviet officer during the Cuban missle crisis
it is likely few of us would be reading how "unlikely" the communists are to launch a first
strike. I consider Vasili Arkhipov to be a hero but he was not necessarily viewed that way in
Russia. He probably prevented a nuclear world war III. Please read his story... https://www.warhistoryonline.com/cold-war/vasili-cuban-missile-crisis.html
Vasili Arkhipov was a Soviet naval officer who, upon making a split second decision, prevented
the Cuban Missile Crisis from escalating into a nuclear Vasili Arkhipov was a Soviet naval
officer who, upon making a split second decision, prevented the Cuban Missile Crisis from
escalating into a nuclear www.warhistoryonline.com wootendw
last year Just a warning to nutjobs in the US who believe Russia won't use nukes because
they know they'll be destroyed. Even if there isn't a heaven, what happened to Libya and
Qaddafi was WORSE than nuclear war. Having lost 20m in WWII, Russia will certainly use nukes in
defense EVEN IF THE WEST ONLY ATTACKS THEM WITH CONVENTIONAL WEAPONS Bond000000007
last year Russia is obviously not the evil society or culture that the evil west is
drumming propaganda against at every opportunity It is unfortunate the western world has
evolved very negative socially; surviving at the cost of lies, murder, cheating, beliefs in the
cultural superiority of the Anglo-Saxons, domination of the world and name it! If it is true
that Russia has achieved the military advances that Russia has publicly made known and if that
was the western world, then they would have most likely planned for a schedule of striking
Russia and China in order to bring the world to the level of subjugation that was existing in
the colonial era and even practically now where they are telling countries which community
should lead a country at the national level and which ones and which ones should work on
cohesion of the nation etc. Without any pretence, a one world government will bring the world
to subjugation which will be more less comparable to the era of slavery! Alex
last year
One correction: Putin didn't say "our enemies will just die", he said "our enemies will
croak" , he used an informal word 'сдохнут' -
zdokhnut.
It was interesting watching the impeachment vote on the House floor. Several House Democrats
got up and spoke of how impeachment was like the civil rights movement. I guess they forgot
it was the Democratic Party who defended slavery, founded the clan, imposed segregation, and
fought against the civil rights acts of the 1950s and 1960s.
Is it any wonder that the old foreign service establishment "embrace a geopolitical outlook that is simplistic, foolhardy, and
dangerous"?
The foreign service exam of that era (probably no better today) tested substantially on ones knowledge of fiction: novels and
such.
Rather like choosing career foreign service officers based on a person's performance in the entertainment trivia night at the
local watering hole. It was a test of memory not logic or insightfulness or historical perspective. These folks are not latter-day
De Toquevilles or great historians, even if many came from colleges viewed as top drawer.
Former national security officials fight back as Trump attacks impeachment as 'deep
state' conspiracy
"What is happening currently is not normal," said Andrea Kendall-Taylor, who served as
a U.S. intelligence officer on Russia and Eurasia before stepping down in 2018. "This
represents a deviation from the way that these institutions regularly function. And when the
institutions don't work, that is a national security threat."
She was among 90 national security veterans who signed an open letter published Sunday
in support of the anonymous whistleblower who filed a complaint that Trump had acted
improperly in asking the Ukrainian president to investigate Biden in a July phone
call.
Trump has attempted to intimidate other government officials into not cooperating by
casting those who offered information to the whistleblower as "close to spies." The open
letter emphasized that the whistleblower "is protected from certain egregious forms of
retaliation."
Clowns should be increasingly used in redundancy (layoff, firing) meetings until it
becomes the norm and employers start to compete with each other to offer the best clown
redundancy experience and promote it as a benefit.
It would also create clown jobs, which would probably require more clown schools, meaning
that the tuition prices would go through the roof and young people dreaming of becoming
redundancy clowns would either have to come from wealth or take out massive clown loans to
fund their education for clown universities and grad schools. Shareholders can only take so
much top line costs and Wall Street pressure would force corporations to improve return on
investment and reduce redundancy clown labor expenses. Sadly, redundancy clowns would find
themselves training their own replacements – HB1 clowns from "low cost" countries.
Employers would respond to quality criticisms of the HB1 clown experience by publishing
survey results showing very similar almost ex-employee satisfaction with the new clowns.
Eventually, of course, redundancy clowns will be replaced by AI and robots. It's just the
future and we will need to think about how to adapt to it today by putting in place a UBI for
the inevitable redundant redundancy clowns.
"Few economists worked at the Federal Reserve in the early 1950s. Those who were on the
staff of America's central bank were relegated to the basement, at a safe remove from the
corridors where real decisions were made.
Economists had their uses, allowed William McChesney Martin, then the Fed's chairman. But
they also had 'a far greater sense of confidence in their analyses than I have found to be
warranted'. They were best kept down with the surplus furniture and the rats." •
Indeed!
Thatcher was an English politico. It is not what she said, but what she did that counts. She is probably down in Dante's Inferno,
Ring 8, sub-rings 7-10. (Frauds and false councilors.) See, oh wayward sinners:
http://danteworlds.laits.utexas.edu/circle8b.html
Ah, you think that Milton should be at the bottom, eh? Then, I hope that he knows how to ice skate. (He was the worst kind
of 'class traitor.' [His parents were small store owner/managers.])
Ring 8 of the Inferno is for 'frauds' of all sorts, sub-rings 7-10 are reserved for Thieves, Deceivers, Schismatics, and Falsifiers.
Maggie should feel right at home there.
It's just too bad being elected President doesn't come with a 90-day probationary
period that many employers use, because if they did Mike Pence would be considering a 2nd
Term run right now.........
"Government set to inject more than $1 Trillion into US economy this year, but poorly
targeted and still isn't enough to improve the lives of most people".
Spot-on . Whenever I read this nonsense in the NYT or elsewhere I always ask myself the
same question ' Is this deliberate or are they really ignorant ? ' . I suspect the latter,
but I could be wrong.
Excuse me, how can the deficit be increasing [with Trump tax cuts]?
I was told that a simple bell curve graph called the 'Laffer Curve' indicates that cutting
taxes increases growth which increases revenue. Its simply mathematics.
Well, Lawrence H. Summers is right to worry when he says "Can central banking as we know
it be the primary tool of macroeconomic stabilization in the industrial world over the next
decade?"
I remember when Qaddafi was murdered and Libya fell. Within the first day or two a central
bank was set up in Libya. And look how well that is working out for them.
"It sure is weird that the labor market is the only place where the magic of the
marketplace -- price! -- doesn't work."
I also hear weirdness about price considerations when I read investment advice for workers
and their 401ks.
"Don't worry about the price. Invest now as much as you can. You can't predict the market
"
(Looks down at Twitter feed).
Haha so right and we mistakenly claim that economists don't know how the real economy
works. They know, and part of that knowledge is that you need to shill the BS for those with
the money if you wanna get your own piece of said pie.
Hongkong is no longer of great importance for bejing as a financial and trading locus. up and
down the south china sea coast are many cities of far greater importance than Hongkong.
perhaps when the PLA finish in hongkong they can come over here and deal with antifa since
our government at any level does not appear to have the sense or spine to do it
themselves
Some of the other stuff we've encouraged, such as The EU, ETFs, Hi-Frequency Trading, Neil
Woodford and Deutsche Bank look likely to be highly effective vectors of short-term economic
destruction and destabilization
(Edited version of the speech given by the TJ Wormwood, Chief Demonic Officer –
Finance, Lord of 3rd Ring of the 7th Circle, to invited audience at Davos.)
Dear Colleagues,
As you all know, I've been wrecking finance for millennia. [Pause for effect]
Nearly every major big idea, evolutionary leap forward, invention and discovery has improved
the miserable lot of mankind only through their ability to monetise it. Forget the theft of
fire – being able to monetise fire by attracting pretty and willing mates around a warm
campfire, or cooking the food others have hunted, is what mattered. Strip out the noise, and
the rise of mankind is largely due to improvements in the efficiency and ease of means of
exchange.
From the realisation hunters could barter their furs for other goods, to the rise of complex
products to finance global growth – the innovation of financial markets has been a major
driver of success for the Other Side in raising the wellbeing and prosperity of mankind. Pretty
much anything that holds back or disrupts trade, increases costs and holds back services is
naturally positive for our goal of global destabilisation.
So, here is the big plan:
Since 2007 we've been turning the Other Side's successful innovation of financial markets
against them. Global Financial Markets are incredibly rich in opportunities to distort truth,
hide lies, and undermine mankind – generating immediate greed, envy, suspicion and anger.
We've uncovered previously unimaginable ways in which to financially screw the World with
consequences that impact everyone.
We've overlaid the programme with our mastery and understanding of temptation, human greed,
avarice and pride, while adding subtlety and cunning. We merely suggest and advise. We are
facilitating the train-wreck of the global economy by destroying asset values while confounding
their understanding of money and wealth – the pillars of their society.
At its simplest form we are manipulating and driving constant market instability to keep
mankind distracted. Uncertainty clouds their future expectations – so we keep it raining.
A Mortgage crisis one year, followed by a Sovereign Debt crisis the next, spiced with a couple
of bank failures, and threats of global trade war. Overlay with confusion and distraction such
as social media, fake news, Bitcoin and populism, and it all works rather well.
Keep their leaders arguing. Keep the blame game going.
Our success can be seen in current financial asset prices. These are now hopelessly inflated
and distorted by foolish post financial crisis policy decisions. They are bubbles set to pop.
Empower the regulators and bureaucrats to compromise finance through zealous over-regulation,
making banking safer by destroying it. Usher in a new era of trade protectionism, the end of
Free Trade and increase the suspicion some countries are manipulating their currencies for
economic advantage. Sprinkle some dust of political catastrophe, the collapse of law, undo the
fair, just and caring society, while adding some eye of newt and complex environmental threats.
Make the rich so rich they don't notice, and the poor so poor they become invisible. If the
markets remain uncertain, then it distracts mankind from addressing these issues, making
society less stable!
There as some things we're really proud of, including the Euro, Social Media, Investment
Banks, the Tech Boom, and especially Quantitative Easing (which is still delivering confusion
and pain). New Monetary Theory could prove even better – it shows tremendous potential to
thoroughly unsettle confidence in money. Cybercurrencies are particularly fun – despite
coming up with the idea, neither we, nor even the distinguished members of our panel of eternal
guests, understand the why of them. They are libertarian nonsense – so, naturally we
continue to encourage them as get-rich-quick schemes, but they also further undermine
confidence in money and government. We made something up in a bar one night and called it a
Distributed Ledger - the humans ran with it and invented Blockchain, whatever that might
be..
Some of the other stuff we've encouraged, such as The EU, ETFs, Hi-Frequency Trading, Neil
Woodford and Deutsche Bank look likely to be highly effective vectors of short-term economic
destruction and destabilisation, triggering systemic market events and regulatory backlashes
across markets. We are only now exploring the full potential of market illiquidity to rob
billions of pensioners of their savings.
We've persuaded investors to overturn proven tried and tested investment strategies and
wisdoms, nurturing a whole range of overpriced unprofitable US Tech "Unicorn" companies which
we are confident will prove utterly over-hyped and largely worthless. The success of social
media, data mining and new tech has increased levels of dissatisfaction and envy –
especially in our target younger demography.
The way we successfully pinned the blame on banks for the Global Financial Crisis –
despite the fact it was people who wanted mortgages to buy houses and fast cars - ensured
global regulators would over-react. We've allowed regulators to focus on banks while we target
the next financial crisis in other parts of the financial ecosystem.
Regulators forced the banks to de-risk. But risk does not disappear - it just goes somewhere
else. While banks understood risk and had massive staffs to manage risk, risk is now
concentrated in the hands of "investment managers" who are singularly ill-equipped to withstand
the next credit crunch and global recession, (which we've planned for next October – Save
the Date cards have been sent).
We are particularly pleased that many banks now exceed the 2.3 compliance officers for every
profitable banker ratio. Compliance and regulatory costs now exceed 10% of income at some
European banks – a stunning success and substantially decreasing the efficiency of
banking and exchanges.
We've some great new financial ideas we are still experimenting with, some of which show
great promise for further weakening society. Facebook Money is going to be a cracker, and I
particularly like the Spaceship to Mars project if only they knew what awaits them
By hiding inflation in the stock market, we assisted the accumulation of massive wealth by a
tiny percentage of the population to ferment income inequality dissatisfaction. When capital is
concentrated and the workers under the cosh, it creates all the right conditions for weak
disjointed government to aid and abet the rise of destabilising populism.
It's highly satisfying to watch the instability we've created in financial markets drive
fear and distrust across society. The debt crisis we engineered led to global financial
austerity, job insecurity, and rising inequality. We were surprised how easily we pushed the
Gig economy concept to further exploit and cow workers through regulators and authorities
– they barely noticed. Over this we've layered whole new levels of anxiety such as the
unknowns of data theft, the rise in envy coefficients through social media, fake news while
fuelling social distrust through resentment.
We've managed to persuade Governments to follow damaging and contradictory policies. As
society reeled in the wake of the financial crisis, we persuaded policy makers to cut back
spending through "austerity" spending programmes, simultaneously bailing out bankers while
flooding the financial economy with free money through Quantitative Easing.
Effectively we've split the world into two economies. A real economy which is sad, miserable
and deflating, and a financial economy that's insanely optimistic, massively inflated and ripe
to pop on the back of free money.
The resentment, instability, fear and general sense of decay has paid dividends in our drive
to break society by undermining the credibility of the political classes. Our approach to
politics has been simple – deskill the political classes, reduce their effectiveness as
leaders, while engineering economic, social and financial instability to drive rampaging
populist politics – just like in 1932! Populism may ultimately prove short-lived, but
it's difficult to see how the political classes will recover their power in time to reverse the
damages being done to the global environment.
While markets have burned, society become increasingly riven, and politics has failed, we've
distracted the humans from the rising levels of carbon dioxide in the atmosphere which
threatens to create global warming and rising sea levels, while plastics poison the oceans and
soil erosion threatens agriculture.
Now I love the ravenous hunger and sharp pointy teeth of polar bears as much as the next
demon, but needs must... needs must. I was also rather fond of the dinosaurs...
Our approach to ensuring destructive climate change has proved very effective. We've
supported, financed and advised the loudest green lobbies to ensure their message looks
ill-considered, wrong and economic suicide. We also paid big bucks to fund the loudest climate
change deniers. Our innovation of fake news to discredit and mitigate anything positive means
climate change remains a crank topic – even as our polar bears drown.
Meanwhile, through our dominance of global boardrooms and investment firms, we've made sure
that large corporates have bought-out and stifled new technologies that could solve the
environmental crisis.
Our future looks great – because their future is bleak!
"... Contrary to the official rationale, the detention of the Iranian tanker was not consistent with the 2012 EU regulation on sanctions against the Assad government in Syria. The EU Council regulation in question specifies in Article 35 that the sanctions were to apply only within the territory of EU member states, to a national or business entity or onboard an aircraft or vessel "under the jurisdiction of a member state." ..."
"... The notice required the Gibraltar government to detain any such ship for at least 72 hours if it entered "British Gibraltar Territorial Waters." Significantly, however, the video statement by Gibraltar's chief minister Fabian Picardo on July 4 explaining the seizure of the Grace 1 made no such claim and avoided any mention of the precise location of the ship when it was seized. ..."
"... There is a good reason why the chief minister chose not to draw attention to the issue of the ship's location: it is virtually impossible that the ship was in British Gibraltar territorial waters at any time before being boarded. The UK claims territorial waters of three nautical miles from its coast, whereas the Strait of Gibraltar is 7.5 nautical miles wide at its narrowest point. That would make the limit of UK territory just north of the middle of the Strait. ..."
"... But international straits must have clearly defined and separated shipping lanes going in different directions. The Grace 1 was in the shipping lane heading east toward the Mediterranean, which is south of the lane for ships heading west toward the Atlantic and thus clearly closer to the coast of Morocco than to the coast of Gibraltar, as can be seen from this live view of typical ship traffic through the strait . So it is quite implausible that the Grace 1 strayed out of its shipping lane into British territorial waters at any time before it was boarded. ..."
"... Such a move clearly violates the global treaty governing the issue -- the United Nations Convention on the Law of the Sea . Articles 37 through 44 of that agreement, ratified by 167 states, including the UK and the European Union, establish a "regime of transit passage" for international straits like the Strait of Gibraltar that guarantees freedom of navigation for merchant ships. The rules of that regime explicitly forbid states bordering the strait from interfering with the transit passage of a merchant ship, with very narrowly defined exceptions. ..."
"... The evidence indicates, moreover, that the UK's actions were part of a broader scheme coordinated with the Trump administration to tighten pressure on Iran's economy by reducing Iran's ability to export goods. ..."
"... On July 19, Reuters London correspondent Guy Falconbridge reported , "[S]everal diplomatic sources said the United States asked the UK to seize the vessel." ..."
"... Detailed evidence of Bolton deep involvement in the British plan to seize the Iranian tanker has surfaced in reporting on the withdrawal of Panamanian flag status for the Grace 1. ..."
"... The role of Panama's National Security Council signaled Bolton's hand, since he would have been the point of contact with that body. The result of his maneuvering was to leave the Grace 1 without the protection of flag status necessary to sail or visit a port in the middle of its journey. This in conjunction with the British seizure of the ship was yet another episode in the extraordinary American effort to deprive Iran of the most basic sovereign right to participate in the global economy. ..."
"... Back in 2013 2013 there was a rumour afoot that Edward Snowden, who at the time was stuck in the Moscow airport, trapped there by the sudden cancellation mid-flight of his US passport, was going spirited away by the President of Bolivia Evo Morales aboard his private jet. So what the US apparently was lean on it European allies to stop him. This they duly and dutifully did. Spain, France, and others denied overflight rights to the Bolivian jet, forcing it to turn back and land in Austria. There was even a report that once on the ground, the Spanish ambassador to Austria showed up and asked the Bolivian president if he might come out to the plain for a coffee--and presumably to have a poke around to see he could catch Snowden in the act of vanishing into the cargo hold. ..."
"... The rumor turned out to be completely false, but it was the Europeans who wound up with the egg on their face. Not to mention the ones who broke international law. ..."
"... Bolton persuaded the British to play along with the stupid US "maximum pressure" strategy, regardless of its illegality. (Maybe the British government thought that it would placate Trump after Ambassadorgate.) And then of course Pompeo threw them under the bus. It's getting hard to be a US ally (except for Saudi Arabia and Israel.) ..."
"... Spain lodged a formal complaint about the action, because it considers the sea around Gibraltar to be part of its international waters, "We are studying the circumstances and looking at how this affects our sovereignty," Josep Borell, Spain's acting foreign minister, said. So Gibraltar or Spanish waters? Gibraltar – Territorial Waters (1 pg): ..."
"... Worse than the bad behavior of Bolton, and the poodle behavior of Britain, is the utter failure of our press to provide us a skeptical eye and honest look at events. They've been mere stenographers and megaphones for power doing wrong. ..."
"... And this just in. A UK government official has just stated, related to the Iranian tanker stopped near Gibraltar, the UK will not be part of Trump's 'maximum pressure' gambit on Iran. We shall see if Boris Johnson is for or against that policy. ..."
"... John Bolton, war criminal. ..."
"... John Bolton has been desperate for a war with Iran for decades. This is just another escalation in his desperate attempt to get one. He's the classic neocon chicken hawk who is bravely ready to risk and sacrifice other people's lives at the drop of a hat. ..."
"... Since UK is abusing its control of Gibraltar by behaving like a thug, maybe it is better for the international community to support an independent state of Gibraltar, or at least let Spain has it. It will be better for world peace. ..."
"... While I agree with the gist of the article, remember that Bolton has no authority except that which is given to him. So stop blaming Bolton. Blame Trump. ..."
"... The provocations will go on and on until Iran shoots back and then Wash. will get the war it's been trying to start for some time now to pay back all those campaign donors who will profit from another war. ..."
"... The MIC needs constant wars to use up munitions so new ones can be manufactured. It's really just about business and politicians working together for mutual benefit to keep those contributions coming in. With all the other issues facing America, a war with Iran will just add to the end of the USA which is coming faster than you think. ..."
Did John Bolton Light the Fuse of the UK-Iranian Tanker Crisis? Evidence suggests he pressured the Brits to seize an
Iranian ship. Why? More war. By Gareth
Porter •
July 23, 2019
While Iran's seizure of a British tanker near the Strait of Hormuz on Friday was a clear response to the British capture of an
Iranian tanker in the Strait of Gibraltar on July 4, both the UK and U.S. governments are insisting that Iran's operation was illegal
while the British acted legally.
The facts surrounding the British detention of the Iranian ship, however, suggest that, like the Iranian detention of the British
ship, it was an illegal interference with freedom of navigation through an international strait. And even more importantly, evidence
indicates that the British move was part of a bigger scheme coordinated by National Security Advisor John Bolton.
British Foreign Secretary Jeremy Hunt called the Iran seizure of the British-flagged tanker Stena Impero "unacceptable" and insisted
that it is "essential that freedom of navigation is maintained and that all ships can move safely and freely in the region."
But the British denied Iran that same freedom of navigation through the Strait of Gibraltar on July 4.
The rationale for detaining the Iranian vessel and its crew was that it was delivering oil to Syria in violation of EU sanctions.
This was never questioned by Western news media. But a closer look reveals that the UK had no legal right to enforce those sanctions
against that ship, and that it was a blatant violation of the clearly defined global rules that govern the passage of merchant ships
through international straits.
The evidence also reveals that Bolton was actively involved in targeting the Grace 1 from the time it began its journey in May
as part of the broader Trump administration campaign of "maximum pressure" on Iran.
Contrary to the official rationale, the detention of the Iranian tanker was not consistent with the 2012 EU regulation on
sanctions against the Assad government in Syria. The
EU Council regulation in question
specifies in Article 35 that the sanctions were to apply only within the territory of EU member states, to a national or business
entity or onboard an aircraft or vessel "under the jurisdiction of a member state."
The UK government planned to claim that the Iranian ship was under British "jurisdiction" when it was passing through the Strait
of Gibraltar to justify its seizure as legally consistent with the EU regulation. A
maritime news outlet has reported that on July 3, the day before the seizure of the ship, the Gibraltar government, which has
no control over its internal security or foreign affairs, issued
a regulation to provide what it would claim
as a legal pretext for the operation. The regulation gave the "chief minister" of the British the power to detain any ship if there
were "reasonable grounds" to "suspect" that it had been or even that it was even "likely" to be in breach of EU regulations.
The notice required the Gibraltar government to detain any such ship for at least 72 hours if it entered "British Gibraltar
Territorial Waters." Significantly, however, the video statement
by Gibraltar's chief minister Fabian Picardo on July 4 explaining the seizure of the Grace 1 made no such claim and avoided any
mention of the precise location of the ship when it was seized.
There is a good reason why the chief minister chose not to draw attention to the issue of the ship's location: it is virtually
impossible that the ship was in British Gibraltar territorial waters at any time before being boarded. The UK claims
territorial waters of three nautical miles from its coast, whereas
the Strait of Gibraltar is 7.5 nautical miles wide at its narrowest point. That would make the limit of UK territory just north of
the middle of the Strait.
But international straits must have clearly defined and separated shipping lanes going in different directions. The Grace
1 was in the shipping lane heading east
toward the Mediterranean, which is south of the lane for ships heading west toward the Atlantic and thus clearly closer to the
coast of Morocco than to the coast of Gibraltar, as can be seen from this
live view of typical ship traffic
through the strait . So it is quite implausible that the Grace 1 strayed out of its shipping lane into British territorial waters
at any time before it was boarded.
But even if the ship had done so, that would not have given the UK "jurisdiction" over the Grace 1 and allowed it to legally
seize the ship. Such a move clearly violates the global treaty governing the issue -- the
United Nations Convention
on the Law of the Sea . Articles 37 through 44 of that agreement, ratified by 167 states, including the UK and the European Union,
establish a "regime of transit passage" for international straits like the Strait of Gibraltar that guarantees freedom of navigation
for merchant ships. The rules of that regime explicitly forbid states bordering the strait from interfering with the transit passage
of a merchant ship, with very narrowly defined exceptions.
These articles allow coastal states to adopt regulations relating to safety of navigation, pollution control, prevention of fishing,
and "loading or unloading any commodity in contravention of customs, fiscal, immigration or sanitary laws and regulations" of bordering
states -- but for no other reason. The British seizure and detention of the Grace 1 was clearly not related to any of these concerns
and thus a violation of the treaty.
The evidence indicates, moreover, that the UK's actions were part of a broader scheme coordinated with the Trump administration
to tighten pressure on Iran's economy by reducing Iran's ability to export goods.
The statement by Gibraltar's chief minister said the
decision to seize the ship was taken after the receipt of "information" that provided "reasonable grounds" for suspicion that it
was carrying oil destined for Syria's Banyas refinery. That suggested the intelligence had come from a government that neither he
nor the British wished to reveal.
BBC defense correspondent Jonathan Beale reported: "[I]t appears
the intelligence came from the United States." Acting Spanish Foreign Minister Joseph Borrell commented on July 4 that the British
seizure had followed "a demand from the United States to the UK." On July 19, Reuters London correspondent Guy Falconbridge
reported , "[S]everal diplomatic sources said the United States asked the UK to seize the vessel."
Detailed evidence of Bolton deep involvement in the British plan to seize the Iranian tanker has surfaced in reporting on
the withdrawal of Panamanian flag status for the Grace 1.
Panama was the flag state for many of the Iranian-owned vessels carrying various items exported by Iran. But when the Trump administration
reinstated economic sanctions against Iran in October 2018, it included prohibitions on industry services such as insurance and reinsurance.
This decision was accompanied by
political pressure on Panama to withdraw Panamanian flag status from 59 Iranian vessels, many of which were owned by Iranian
state-affiliated companies. Without such flag status, the Iranian-owned vessels could not get insurance for shipments by freighter.
That move was aimed at discouraging ports, canal operators, and private firms from allowing Iranian tankers to use their facilities.
The State Department's Brian Hook, who is in charge of the sanctions,
warned those
entities last November that the Trump administration believed they would be responsible for the costs of an accident involving a
self-insured Iranian tanker.
But the Grace 1 was special case, because it still had Panamanian flag status when it began its long journey around the Southern
tip of Africa on the way to the Mediterranean. That trip began in late May, according to Automatic Identification System
data cited by Riviera Maritime Media . It was no coincidence that the Panamanian Maritime Authority
delisted the Grace 1 on May 29 -- just as the ship was beginning its journey. That decision came immediately after Panama's National
Security Council issued an alert
claiming that the Iranian-owned tanker "may be participating in terrorism financing in supporting the destabilization activities
of some regimes led by terrorist groups."
The Panamanian body did not cite any evidence that the Grace 1 had ever been linked to terrorism.
The role of Panama's National Security Council signaled Bolton's hand, since he would have been the point of contact with
that body. The result of his maneuvering was to leave the Grace 1 without the protection of flag status necessary to sail or visit
a port in the middle of its journey. This in conjunction with the British seizure of the ship was yet another episode in the extraordinary
American effort to deprive Iran of the most basic sovereign right to participate in the global economy.
Now that Iran has detained a British ship in order to force the UK to release the Grace 1, the British Foreign Ministry will claim
that its seizure of the Iranian ship was entirely legitimate. The actual facts, however, put that charge under serious suspicion.
Gareth Porter is an investigative reporter and regular contributor to The American Conservative . He is also the author
of Manufactured Crisis: The Untold Story of the Iran Nuclear Scare.
Honestly the Brits are such idiots, we lied them into a war once. They knew we were lying and went for it anyway. Now the are
falling for it again. Maybe it is May's parting gift to Boris?
Same EU legislation only forbids Syria exporting oil and not EU entities selling to Syria (albeit with some additional paperwork).
However, it doesn't forbid other non-EU states to sell oil to Syria. They are not behaving like the US. And this is also not UN
sanctioned. In fact, UK is also acting against the spirit of JPCOA towards Iran. Speak about Perfidious Albion (others would say
US lapdog).
Back in 2013 2013 there was a rumour afoot that Edward Snowden, who at the time was stuck in the Moscow airport, trapped
there by the sudden cancellation mid-flight of his US passport, was going spirited away by the President of Bolivia Evo Morales
aboard his private jet. So what the US apparently was lean on it European allies to stop him. This they duly and dutifully did.
Spain, France, and others denied overflight rights to the Bolivian jet, forcing it to turn back and land in Austria. There was
even a report that once on the ground, the Spanish ambassador to Austria showed up and asked the Bolivian president if he might
come out to the plain for a coffee--and presumably to have a poke around to see he could catch Snowden in the act of vanishing
into the cargo hold.
The rumor turned out to be completely false, but it was the Europeans who wound up with the egg on their face. Not to mention
the ones who broke international law.
Now we find that once again a European country had (apparently) gone out on a limb for the US--and wound up with egg on its
face for trying to show its loyalty to the US in an all-too-slavish fashion by doing America's dirty work.
Bolton persuaded the British to play along with the stupid US "maximum pressure" strategy, regardless of its illegality. (Maybe
the British government thought that it would placate Trump after Ambassadorgate.) And then of course Pompeo threw them under the
bus. It's getting hard to be a US ally (except for Saudi Arabia and Israel.)
The very fact that the UK tried to present its hijack of Iran Oil as an implementation of EU sanctions dovetail well with Bolton's
objective of creating another of those "international coalitions" without a UN mandate engaging in 'Crimes of Aggression".
The total lack of support from the EU for this UK hijack signals another defeat to both the UK and the neocons of America.
Too bad there isn't an international version of the ACLU to argue Iran's legal case before the EU body. What typically happens
is that Iran will refuse to send representation because that would in effect, acknowledge their authority. The EU will have a
Kangaroo court and enter a vacant decision. This has happened numerous times in the U.S.
Would anyone in the U.S. or EU recognize an Iranian court making similar claims? Speaking of which, the entire point of UN
treaties and international law is to prevent individual countries from passing special purpose legislation targeting specific
countries. Why couldn't Iran pass a law sanctioning EU vessels that tried to use their territorial waters, what is so special
about the EU, because it is an acronym?
Spain lodged a formal complaint about the action, because it considers the sea around Gibraltar to be part of its international
waters, "We are studying the circumstances and looking at how this affects our sovereignty," Josep Borell, Spain's acting foreign
minister, said. So Gibraltar or Spanish waters? Gibraltar – Territorial Waters (1 pg):
https://www.academia.edu/30...
Worse than the bad behavior of Bolton, and the poodle behavior of Britain, is the utter failure of our press to provide us
a skeptical eye and honest look at events. They've been mere stenographers and megaphones for power doing wrong.
Thanks for the investigative reporting. Trump has lied almost 11,000 times, so I think nobody expects the truth from The Trump
Administration anytime soon. Especially if it goes against the narrative.
And this just in. A UK government official has just stated, related to the Iranian tanker stopped near Gibraltar, the UK will
not be part of Trump's 'maximum pressure' gambit on Iran. We shall see if Boris Johnson is for or against that policy.
OK, so why did the Brits go along with it? Are they so stupid as to not figure out that Iran might respond in kind, or did the
Brits not also want war?
John Bolton has been desperate for a war with Iran for decades. This is just another escalation in his desperate attempt to
get one. He's the classic neocon chicken hawk who is bravely ready to risk and sacrifice other people's lives at the drop of a
hat.
Since UK is abusing its control of Gibraltar by behaving like a thug, maybe it is better for the international community to
support an independent state of Gibraltar, or at least let Spain has it. It will be better for world peace.
While I agree with the gist of the article, remember that Bolton has no authority except that which is given to him.
So stop blaming Bolton. Blame Trump.
The provocations will go on and on until Iran shoots back and then Wash. will get the war it's been trying to start for some time
now to pay back all those campaign donors who will profit from another war.
The MIC needs constant wars to use up munitions so
new ones can be manufactured. It's really just about business and politicians working together for mutual benefit to keep those
contributions coming in. With all the other issues facing America, a war with Iran will just add to the end of the USA which is
coming faster than you think.
"When the music stops, in terms of liquidity, things will be complicated. But as long as the
music is playing, you've got to get up and dance. We're still dancing,"
"A baited banker thus desponds,
From his own hand foresees his fall,
They have his soul, who have his bonds;
'Tis like the writing on the wall.
How will the caitiff wretch be scared,
When first he finds himself awake
At the last trumpet, unprepared,
And all his grand account to make!
For in that universal call,
Few bankers will to heaven be mounters;
They'll cry, 'Ye shops, upon us fall!
Conceal and cover us, ye counters!'
When other hands the scales shall hold,
And they, in men's and angels' sight
Produced with all their bills and gold,
'Weigh'd in the balance and found light!'
"... "the administrator uses social science the way the drunk uses a lamppost, for support rather than illumination." Scholars' disinclination to be used in this way helps explain more of the distance. ..."
The evidence suggests that foreign policymakers do not seek insight from scholars, but
rather support for what they already want to do.
As Desch quotes a World War II U.S. Navy anthropologist, "the administrator uses social
science the way the drunk uses a lamppost, for support rather than illumination." Scholars'
disinclination to be used in this way helps explain more of the distance.
"... He would be given a lavish reception in Riyadh, where he would deliver a speech thanking our Saudi allies for leading the brave fight against "Iranian homophobia." ..."
On the bright side, if ever there were a candidate who might be inclined to rethink our
relationship with the Saudis, it's Buttigieg.
Oh, who am I kidding? He would be given a lavish reception in Riyadh, where he would
deliver a speech thanking our Saudi allies for leading the brave fight against "Iranian
homophobia."
This is similar to renaming "French fries" to "freedom fries" after 9/11. You can't overestimate stupidity of government
bureaucrats. They now exceeded the USSR level.
In this case he looks like Bill Clinton impersonalization ;-) That's probably how Adelson controls Bolton ;-)
Notable quotes:
"... Larry Flint had offered a Million dollars to anyone who had proof of republican sexual exploits. He was quickly fingered by someone who attended those clubs. He was forced to accept a temporary position and quietly resigned after a few months so as to avoid facing questions. ..."
@FB Yeah brother,
that POS was called out during his confirmation hearings during baby Bush's presidency. Larry Flint had offered a Million
dollars to anyone who had proof of republican sexual exploits. He was quickly fingered by someone who attended those clubs. He
was forced to accept a temporary position and quietly resigned after a few months so as to avoid facing questions.
Someone said they saw him proposition a teenage girl outside one of the swinger clubs he frequented.
He called OPEC? Just whom at OPEC did he speak with? OPEC is a group of oil exporting
nations. They meet once every six months or so to decide what they will do, if anything.
No one can just call OPEC and OPEC will decide to produce more oil. They have to meet, talk
it over, and decide what to do.
This just shows what a fucking liar Trump really is.
He called OPEC? Just whom at OPEC did he speak with? OPEC is a group of oil exporting
nations. They meet once every six months or so to decide what they will do, if anything.
No one can just call OPEC and OPEC will decide to produce more oil. They have to meet, talk
it over, and decide what to do.
This just shows what a fucking liar Trump really is.
He probably did call someone, and the conversation went kinda like this:
This is Donald Trump.
Aren't you the guy who owns all those hotels?
Yes, but I am also the President of the United States.
I'm sorry to hear that, what can I do for you?
We need for you to pump more oil, and lower gasoline prices.
Why? They are not high enough, yet.
We think they are, and if you don't get pumping I will agree to Nopec.
Then, we will no longer use the dollar to trade with, and you can watch the value of your
currency plummet.
Don't you realize who you are talking to? I am the President of the United States!
Oh yeah. The US, we used to trade with you. Good luck, and good bye!
President Trump didn't say who he had spoken to. Various OPEC officials say that they haven't
spoken to him
Wall Street Journal: OPEC Chief Barkindo Has Not Spoken to President Trump -- Source
Saudi officials: President Trump Has Not Discussed Lowering Oil Prices With Saudis
Trump said he called OPEC
One of the reasons oil prices sank today was because Trump said he "called OPEC" and asked
them to lower oil prices.
OPEC Chief Barkindo said he hasn't spoke with Trump, according to a report. Saudi
officials also say they haven't discussed lowering oil prices with Trump.
Update: Trump is now back and saying he spoke to Saudi Arabia and others about oil
prices.
Lies just roll off Trump's tongue. He thinks people will believe everything he says
without checking anything. What a blooming idiot.
OPEC must have put Trump on hold as gas price is still the same in my neck of the woods.
Laughed like hell when I saw the headline earlier today. Probably eighty percent of folks
believe he can actually do that. The heads of the OPEC countries probably laughed so hard
they spit out their dentures. Difficult to satirize this guy as he does a stellar job of it
himself!
The Trump administration is poised to tell five nations, including allies Japan, South
Korea and Turkey, that they will no longer be exempt from U.S. sanctions if they continue to
import oil from Iran.
U.S. officials say Secretary of State Mike Pompeo plans to announce on Monday that the
administration will not renew sanctions waivers for the five countries when they expire on
May 2.
Refusing to offer new sanctions waivers is the latest sign that Trump is once again giving
in to the most extreme Iran hawks. When sanctions on Iran's oil sector went into effect last
November, the administration initially granted waivers to the top importers of Iranian oil to
avoid a spike in the price of oil, but that is now coming to an end. The economic war that the
U.S. has been waging against Iran over the last year is about to expand to include some of the
world's biggest economies and some of America's leading trading partners. It is certain to
inflict more hardship on the Iranian people, and it will damage relations between the U.S. and
other major economic powers, including China and India, but it will have no discernible effect
on the Iranian government's behavior and policies. India, China, and Turkey are practically
guaranteed to ignore U.S. demands that they eliminate all Iranian oil imports.
The decision to end waivers has implications for world oil markets, which have been
eagerly anticipating President Trump's decision on whether to extend waivers. The officials
said market disruption should be minimal for two reasons: supply is now greater than demand
and Pompeo is also set to announce offsets through commitments from other suppliers such as
Saudi Arabia and the United Arab Emirates. Trump spoke about the issue Thursday with the
UAE's Crown Prince Mohammed bin Zayed al-Nahyan.
Between the administration's Venezuela and Iran oil sanctions and increased instability in
Libya (also supported by the Trump administration), oil prices are nonetheless likely to rise.
Even if they don't, Trump's Iran obsession is causing significant economic dislocation for no
good reason as part of a regime change policy that can't and won't succeed. It cannot be
emphasized enough that the reimposition of sanctions on Iran is completely unwarranted and
represents a betrayal of previous U.S. commitments to Iran and our allies under the Joint
Comprehensive Plan of Action. The decision to refuse any new sanctions waivers is a clear sign
that the most fanatical members of the Trump administration have prevailed in internal debates
and U.S. Iran policy is held hostage to their whims.
Maybe Trump will reap the benefits of this if oil prices go up a lot and it torpedos his
reelection in 2020.
One thing I'm really not clear on how are these proposed sanctions against third parties
(e.g. Japan, etc etc) not a violation of trade agreements? Are there escape clauses in those
agreements that allow the US to do these things, or is it merely that these other countries
are (usually) not willing to rely on the trade agreements' protections because, at the end of
the day, it would mean a trade war with the US, which they're not willing to countenance?
Iran policy ??? What about foreign policy in general ?? Interventionism is NOT what Americans
want, or can afford! No more lives & limbs (and dollars) for foreign countries!!
"Between the administration's Venezuela and Iran oil sanctions and increased instability
in Libya (also supported by the Trump administration), oil prices are nonetheless likely to
rise. Even if they don't, Trump's Iran obsession is causing significant economic dislocation
for no good reason "
But there is a good reason. Forcing up oil prices is a shot in the arm for the Saudi
economy. Remember "Israel first, and Saudi Arabia second". That formula explains most of
Trump's foreign policy, the rest being a jumble of random impulses and the consequences of
infighting among his advisors.
Gas is already $3.20 in the Chicago suburbs, and we are not into the summer driving season
yet. Overseas – India is going to the poll. India imports most of its oil, and Iran is
a major supplier. Yes, the Saudis have been trying to get India to switch over to more Saudi
imports – but it would look like "strong" Modi is giving in to Trump and MBS.
We are going to sanction China for buying Iranian oil? Does anyone seriously think they are
going to submit to that gracefully? Japan and Korea might, they are much smaller and stuck
with us. But China?
And I seriously doubt that sanctioning India for buying Iranian oil will advance our
strategic alliance with them, either.
"President typically take pains to ensure the Pentagon is being
run by Senate confirmed official" .Presidents typically don't put incompetent people in cabinet positions or give his kids top security
level clearances when they have no need and no experience that requires one...well, no one has accused trump of being presidential
or typical - ever
Dianna 4 hours ago
The swamp is now the " Trump Cesspool."
Nonconservative 3 hours ago
Hey deplorables....hows that swamp draining going?...ANYWORD on that great big beautiful health plan with lower premiums and keeping my own doctor?....what about infrastructure?...any
idea when the roads in every city will be driveable again...or did we spend all the money from the US govt. paying Trump to stay
at his own hotels?........hello?......hello deplorables?......anybody home????
Pierre Escargot 1 hour ago
Pentagon to probe if Shanahan used office
to help Boeing. Why not? Robert Mueller's and James Comey turned government service into self-service.
"Monopoly" is such an ugly term. We prefer to call it "market power" these days, because of
course it's a good thing if the job creators and their enterprises have more power to do all
the good things they do for us.
It's clearly class warfare, if not racism, to use the term of abuse, "monopoly", when you
mean "market power".
While U.S. politicians from both parties have given standing ovations for the
U.S. oil and gas industry , investors appear to be losing their enthusiasm. The so-called
shale revolution, the fracking miracle, may have resulted in record oil and gas production in
North America, but the real miracle -- in which shale companies make money fracking that oil
and gas -- has yet to occur.
"Stocks have reached a permanently high plateau", "subprime is contained", "there's no
icebergs this far south" and now "The Fed's balance sheet is not the threat that people seem to
think it is."
Man's ability to willfully ignore 'downside possibilities' and remain cognitively dissonant
far longer than logic (or their pocketbook) should allow seems to know no bound and none other
than
The Federal Reserve's Bill Dudley just unleashed what could be the piece de resistance of
"nothing to see here, move along" agitprop.
Great Picture' Cowboying a Nuke while discussing confidence in the FED, quite appropo'
!
TRUTH @ 9:00; Plus this week, Friday will be Huge !
Should a seated President jail someone that attempted his Assassination, or a Former
President that planned to Nuke the Yellowstone Super Volcano Caldera, or someone that sold
email password to China and CC copied all 'to and from' messages including those highly
Confidential, or blame a former President for planning 911 False Flag attack, or expose
Planned Parenthoods first Amputating tongues for silently shipping in bulk, or expose
Democrat history of Decades of Projecting blame while committing War Crimes, or end 19 Year
War in Afghanistan ( Longest War ) then Syria against Last Night's Congressional Vote to keep
status quo, or 'take a knee' and quit being President !
CLEVELAND -- In a devastatingly sad overestimation of his influence in the professional
world, local father Bruce Tenety, 54, expressed the heartbreaking belief Monday that his
connections could help his son Justin, a recent college graduate, find a job. "You know, I
actually have a friend in the media business, and if you shoot him an email and meet up for
coffee, he just might be able to hook you up with something," said Tenety, who depressingly
appeared to be under the impression that this tenuous contact from a conference he attended
three years ago would not only remember his name, but would also be willing to extend an offer
of employment to a 23-year-old he knows nothing about.
"I also know a guy who works at a PR firm in Mayfield Heights. Old Gary definitely owes me
one from back in the day.
Hell, you could probably call him up right now and get an interview this week. Just tell him
you're Bruce's kid."
At press time, sources confirmed Tenety had noticed his name was suspiciously absent from
the references section on his son's most recent job application.
"... Nonetheless we've had a vote and decided that we will indeed go ahead and make these changes. Sorry about your luck. What? You don't agree! Don't you believe in democracy? You hypocrite you! ..."
We appreciate that you have built a successful career and/or business under the prevailing
laws, and that changing these laws would cause the destruction and/or appropriation of much
of your wealth (while costing us little).
Nonetheless we've had a vote and decided that we
will indeed go ahead and make these changes. Sorry about your luck. What? You don't agree! Don't you believe in democracy? You hypocrite you!
In support of RRC, I looked up their agency expenses, and found they are less than $50
million. That's to pay for keeping up with almost a half million oil and gas wells, thousands
of operators, and multiple other duties, including taking care of a significant amount of
State income. There is a grand total of about 725 employees. Hats off!
"... The fact that obviously deranged fanatic hack has students is a testimony to a sewer level of the US "elite-producing" machine and a pathetic sight contemporary US "elite" represents. ..."
"... "political science" is not a science but pseudo-academic field for losers who do not want to study real history or take courses which actually develop intellect and provide fundamental knowledge. ..."
Early on in her book, Albright says: My students remarked that the Fascist chiefs we remember best were charismatic
Marked in bold is the most terrifying thing about Albright's book and I am not even going to read her pseudo-intellectual excrement.
The fact that obviously deranged fanatic hack has students is a testimony to a sewer level of the US "elite-producing" machine
and a pathetic sight contemporary US "elite" represents.
This is apart from the fact that "political science" is not a science
but pseudo-academic field for losers who do not want to study real history or take courses which actually develop intellect and
provide fundamental knowledge.
In 1906 the great statistician Francis Galton observed a competition to guess the weight of
an ox at a country fair. Eight hundred people entered. Galton, being the kind of man he was,
ran statistical tests on the numbers. He discovered that the average guess was extremely close
to the weight of the ox. This story was told by James Surowiecki, in his entertaining book The
Wisdom of Crowds. 2
Not many people know the events that followed. A few years later, the scales seemed to
become less and less reliable. Repairs would be expensive, but the fair organiser had a
brilliant idea. Since attendees were so good at guessing the weight of an ox, it was
unnecessary' to repair the scales. The organiser would simply ask everyone to guess the weight,
and take the average of their estimates.
A new problem emerged, however. Once weight-guessing competitions became the rage, some
participants tried to cheat. They even tried to get privileged information from the farmer who
had bred the ox. But there was fear that, if some people had an edge, others would be reluctant
to enter the weight-guessing competition. With few entrants, you could not rely on the wisdom
of crowds. The process of weight discovery would be damaged.
So strict regulatory rules were introduced. The farmer was asked to prepare three monthly
bulletins on the development of his ox. These bulletins were posted on the door of the market
for everyone to read. If the farmer gave his friends any other information about the beast,
that information was also to be posted on the market door. And anyone who entered the
competition who had knowledge about the ox that was not available to the world at large would
be expelled from the market. In this way the integrity of the weight-guessing process would be
maintained.
Professional analysts scrutinised the contents of these regulatory' announcements and
advised their clients on their implications. They' wined and dined farmers; but once the
farmers were required to be careful about the information they' disclosed, these lunches became
less useful. Some smarter analysts realised that understanding the nutrition and health of the
ox wasn't that useful anyway. Since the ox was no longer being weighed -- what mattered was the
guesses of the bystanders -- the key' to success lav not in correctly assessing the weight of
the ox but in correctly' assessing what others would guess. Or what other people would guess
others would guess. And so on.
Some people -- such as old Farmer Buffett -- claimed that the results of this process were
more and more divorced from the realities of ox rearing. But he was ignored. True, Farmer
Buffett's beasts did appear healthy and well fed, and his finances ever more prosperous; but he
was a countryman who didn't really understand how markets work.
International bodies were established to define the rules for assessing the weight of the
ox. There were two competing standards -- generally accepted ox-weighing principles, and
international ox-weighing standards. But both agreed on one fundamental principle, which
followed from the need to eliminate the role of subjective assessment by any individual. The
weight of the ox was officially defined as the average of everyone's guesses.
One difficulty was that sometimes there were few, or even no, guesses of the weight of the
ox. But that problem was soon overcome. Mathematicians from the University of Chicago developed
models from which it was possible to estimate what, if there had actually been many guesses as
to the weight of the ox, the average of these guesses would have been. No knowledge of animal
husbandry was required, only a powerful computer.
By' this time, there was a large industry of professional weight-guessers, organisers of
weight-guessing competitions and advisers helping people to refine their guesses. Some people
suggested that it might be cheaper to repair the scales, but they' were derided: why go back to
relying on the judgement of a single auctioneer when you could benefit from the aggregated
wisdom of so many clever people?
And then the ox died. Amid all this activity', no one had remembered to feed it.
SEATTLE -- Deciding at the last minute to hold off due to ethical concerns, Amazon founder
and CEO Jeff Bezos reportedly set aside his latest cost-cutting initiative Wednesday after
realizing it was actually human slavery. "On the surface, it seemed plausible -- owning our
employees' bodies, implementing a mandatory 18-hour workday, restricting their movements, and
not compensating them with anything besides minimal food and shelter -- but then it started to
sound really familiar in a bad way," said Bezos, who acknowledged his fears were confirmed when
Amazon's general counsel kept reporting back that such labor arrangements had been illegal
throughout the United States since 1865. "It's too bad; the increased efficiency and cost
savings would have been tremendous. And now I have to go explain to our shareholders why I
spent $1.8 million outfitting all of our managers with bullwhips, shackles, and branding
irons." Bezos went on to describe the setback as temporary, saying it wouldn't matter in five
to 10 years when his entire workforce was robots.
CHICAGO -- Saying it was ultimately a small price to pay in exchange for the splendid spectacle that has followed, millions of
Americans admitted Thursday that they didn't really mind having their Facebook data stolen if it meant getting to watch that
little fucker squirm.
'Trickle down effect' - the favourite buzzword of neoliberal supporters. I'd like to see
trickle down effect tried at the local pub on the taps by the local mp. Imagine what would
happen. Definitely doesn't pass the pub test.
That'd be like astronomers saying that although Hellenic astrology is pseudoscientific nonsense they can probably do business
with Ptolemaic or Hindu astrology. Other scientists would laugh and call astronomy the dismal physics. Isn't it about time economists
like yourself just told the knuckle dragging ideologues - of whatever colour and salinity - to fuck off?
Trump lost control of foreign policy, when he appointed Pompeo. US voters might elect Hillary with the same effect on foreign policy
as Pompeo.
Notable quotes:
"... It is to Trump's disgrace that he chose Pompeo and the abominable Bolton. At least Trump admits the ME invasions are really about Israel. ..."
"... Energy dominance, lebensraum for Israel and destroying the current Iran are all objectives that fit into one neat package. Those plans look to be coming apart at the moment so it remains to be seen how fanatical Trump is on Israel and MAGA. MAGA as US was at the collapse of the Soviet Union. ..."
"... As for pulling out of the Middle East Bibi must have had a good laugh. Remember when he said he wanted out of Syria. My money is on the US to be in Yemen before too long to protect them from the Saudis (humanitarian) and Iranian backed Houthis, while in reality it will be to secure the enormous oil fields in the North. ..."
"... The importance of oil is not to supply US markets its to deny it to enemies and control oil prices in order to feed international finance/IMF. ..."
Pompeo is a Deep State Israel-firster with a nasty neocon agenda. It is to Trump's disgrace that he chose Pompeo and the abominable
Bolton. At least Trump admits the ME invasions are really about Israel.
Pompeo is a Deep State Israel-firster with a nasty neocon agenda. It is to Trump's disgrace that he chose Pompeo and
the abominable Bolton. At least Trump admits the ME invasions are really about Israel.
Trump, Israel and the Sawdi's. US no longer needs middle east oil for strategic supply. Trump is doing away with the petro-dollar
as that scam has run its course and maintenance is higher than returns. Saudi and other middle east oil is required for global
energy dominance.
Energy dominance, lebensraum for Israel and destroying the current Iran are all objectives that fit into one neat package.
Those plans look to be coming apart at the moment so it remains to be seen how fanatical Trump is on Israel and MAGA. MAGA as
US was at the collapse of the Soviet Union.
As for pulling out of the Middle East Bibi must have had a good laugh. Remember when he said he wanted out of Syria. My money
is on the US to be in Yemen before too long to protect them from the Saudis (humanitarian) and Iranian backed Houthis, while in
reality it will be to secure the enormous oil fields in the North.
Perhaps this was what the Khashoggi trap was all about. The importance of oil is not to supply US markets its to deny it
to enemies and control oil prices in order to feed international finance/IMF.
This is Onion-style humor is this headline. How to spell "taking hostages" in Chinese?
Notable quotes:
"... A White House official told Reuters Trump did not know about a U.S. request for her extradition from Canada before he met Xi and agreed to a 90-day truce in the brewing trade war. ..."
Huawei Technologies Co Ltd's chief financial officer, Meng Wanzhou, the 46-year-old daughter
of the company's founder, was detained in Canada on Dec. 1, the same day Trump and Chinese
President Xi Jinping dined together at the G20 summit in Buenos Aires.
A White House official told Reuters Trump did not know about a U.S. request for her
extradition from Canada before he met Xi and agreed to a 90-day truce in the brewing trade
war.
Ah, yes. Goldman Sachs is
famous for their "good work and integrity".
The US Department of Justice (DOJ) has said about $4.5 billion was misappropriated from 1MDB,
including some money that Goldman Sachs helped raise, by high-level officials of the fund and
their associates from 2009 through 2014.
US prosecutors filed criminal charges against 2 former Goldman Sachs bankers earlier this
month. One of them, Tim Leissner, pleaded guilty to conspiracy to launder money and
conspiracy to violate the Foreign Corrupt Practices Act.
I'm sure it was just a "few bad apples", like Goldman Sachs's Ex-CEO
Lloyd Blankfein , who was personally involved in the transaction.
You might remember Lloyd from his doing "God's
Work" .
There is a special breed or neocon female warmonger in the USA -- chickenhawks who feed from crumbs of military industrial complex.
Is not Haley a replays of Samantha Powell ? The article remains mostly right is you simply replace the names...
Of cause, Haley is a little bit more obnoxious and has no respect for truth whatsoever. she can call while to be black with
straight face.
Notable quotes:
"... Though Power is a big promoter of the "responsibility to protect" or "R2P" she operates with glaring selectivity in deciding who deserves protection as she advances a neocon/liberal interventionist agenda. She is turning "human rights" into an excuse not to resolve conflicts but rather to make them bloodier. ..."
"... Thus, in Power's view, the overthrow and punishment of Syria's President Bashar al-Assad takes precedence over shielding Alawites and other minorities from the likely consequence of Sunni-extremist vengeance. And she has sided with the ethnic Ukrainians in their slaughter of ethnic Russians in eastern Ukraine. ..."
"... For instance, in a March 10, 2003 debate on MSNBC's "Hardball" show -- just nine days before the invasion -- Power said, "An American intervention likely will improve the lives of the Iraqis. Their lives could not get worse, I think it's quite safe to say." However, the lives of Iraqis actually did get worse. Indeed, hundreds of thousands stopped living altogether and a sectarian war continues to tear the country apart to this day. ..."
"... Similarly, regarding Libya, Power was one of the instigators of the U.S.-supported military intervention in 2011 which was disguised as an "R2P" mission to protect civilians in eastern Libya where dictator Muammar Gaddafi had identified the infiltration of terrorist groups. ..."
"... Urged on by then-National Security Council aide Power and Secretary of State Hillary Clinton, Obama agreed to support a military mission that quickly morphed into a "regime change" operation. Gaddafi's troops were bombed from the air and Gaddafi was eventually hunted down, tortured and murdered. ..."
Exclusive: Liberal interventionist Samantha Power along with neocon allies appears to have prevailed in the struggle over
how President Obama will conduct his foreign policy in his last months in office, promoting aggressive strategies that will lead
to more death and destruction, writes Robert Parry.
Propaganda and genocide almost always go hand in hand, with the would-be aggressor stirring up resentment often by assuming the
pose of a victim simply acting in self-defense and then righteously inflicting violence on the targeted group.
U.S. Ambassador to the United Nations Samantha Power understands this dynamic having
written about the
1994 genocide in Rwanda where talk radio played a key role in getting Hutus to kill Tutsis. Yet, Power is now leading propaganda
campaigns laying the groundwork for two potential ethnic slaughters: against the Alawites, Shiites, Christians and other minorities
in Syria and against the ethnic Russians of eastern Ukraine.
Though Power is a big promoter of the "responsibility to protect" or "R2P" she operates with glaring selectivity in deciding who
deserves protection as she advances a neocon/liberal interventionist agenda. She is turning "human rights" into an excuse not to
resolve conflicts but rather to make them bloodier.
Thus, in Power's view, the overthrow and punishment of Syria's President Bashar al-Assad takes precedence over shielding Alawites
and other minorities from the likely consequence of Sunni-extremist vengeance. And she has sided with the ethnic Ukrainians in their
slaughter of ethnic Russians in eastern Ukraine.
In both cases, Power spurns pragmatic negotiations that could avert worsening violence as she asserts a black-and-white depiction
of these crises. More significantly, her strident positions appear to have won the day with President Barack Obama, who has relied
on Power as a foreign policy adviser since his 2008 campaign.
Power's self-righteous approach to human rights deciding that her side wears white hats and the other side wears black hats is
a bracing example of how "human rights activists" have become purveyors of death and destruction or what some critics have deemed
" the weaponization
of human rights. "
We saw this pattern in Iraq in 2002-03 when many "liberal humanitarians" jumped on the pro-war bandwagon in favoring an invasion
to overthrow dictator Saddam Hussein. Power herself didn't support the invasion although she was
rather mealy-mouthed in
her skepticism and sought to hedge her career bets amid the rush to war.
For instance, in a March 10, 2003 debate on MSNBC's "Hardball" show -- just nine days before the invasion -- Power said, "An American
intervention likely will improve the lives of the Iraqis. Their lives could not get worse, I think it's quite safe to say." However, the lives of Iraqis actually did get worse. Indeed, hundreds of thousands stopped living altogether and a sectarian war
continues to tear the country apart to this day.
Power in Power
Similarly, regarding Libya, Power was one of the instigators of the U.S.-supported military intervention in 2011 which was disguised
as an "R2P" mission to protect civilians in eastern Libya where dictator Muammar Gaddafi had identified the infiltration of terrorist
groups.
Urged on by then-National Security Council aide Power and Secretary of State Hillary Clinton, Obama agreed to support a military
mission that quickly morphed into a "regime change" operation. Gaddafi's troops were bombed from the air and Gaddafi was eventually
hunted down, tortured and murdered.
The result, however, was not a bright new day of peace and freedom for Libyans but the disintegration of Libya into a failed state
with violent extremists, including elements of the Islamic State, seizing control of swaths of territory and murdering civilians.
It turns out that Gaddafi was not wrong about some of his enemies.
Today, Power is a leading force opposing meaningful negotiations over Syria and Ukraine, again staking out "moralistic" positions
rejecting possible power-sharing with Assad in Syria and blaming the Ukraine crisis entirely on the Russians. She doesn't seem all
that concerned about impending genocides against Assad's supporters in Syria or ethnic Russians in eastern Ukraine.
In 2012, at a meeting hosted by the United States Holocaust Memorial Museum in Washington, former U.S. Ambassador Peter W. Galbraith
predicted "the next genocide
in the world will likely be against the Alawites in Syria" -- a key constituency behind Assad's secular regime. But Power has continued
to insist that the top priority is Assad's removal.
Similarly, Power has shown little sympathy for members of Ukraine's ethnic Russian minority who saw their elected President Viktor
Yanukovych overthrown in a Feb. 22, 2014 coup spearheaded by neo-Nazis and other right-wing nationalists who had gained effective
control of the Maidan protests. Many of these extremists want an ethnically pure Ukrainian state.
Since then, neo-Nazi units, such as the Azov battalion, have been Kiev's tip of the spear in slaughtering thousands of ethnic
Russians in the east and driving millions from their homes, essentially an ethnic-cleansing campaign in eastern Ukraine.
A Propaganda Speech
Yet, Power traveled to Kiev to deliver a one-sided
propaganda speech on June 11, portraying the post-coup Ukrainian regime simply as a victim of "Russian aggression."
Despite the key role of neo-Nazis
acknowledged even by the U.S.
House of Representatives Power uttered not one word about Ukrainian military abuses which have included reports of death squad
operations targeting ethnic Russians and other Yanukovych supporters.
Skipping over the details of the U.S.-backed and Nazi-driven coup of Feb. 22, 2014, Power traced the conflict instead to "February
2014, when Russia's little green men first started appearing in Crimea." She added that the United Nations' "focus on Ukraine in
the Security Council is important, because it gives me the chance on behalf of the United States to lay out the mounting evidence
of Russia's aggression, its obfuscation, and its outright lies. America is clear-eyed when it comes to seeing the truth about Russia's
destabilizing actions in your country."
Power continued: "The message of the United States throughout this Moscow-manufactured conflict and
the message you heard from President
Obama and other world leaders at last week's meeting of the G7 has never wavered: if Russia continues to disregard the sovereignty
and territorial integrity of Ukraine; and if Russia continues to violate the rules upon which international peace and security rest
then the United States will continue to raise the costs on Russia.
"And we will continue to rally other countries to do the same, reminding them that their silence or inaction in the face of Russian
aggression will not placate Moscow, it will only embolden it.
"But there is something more important that is often lost in the international discussion about Russia's efforts to impose its
will on Ukraine. And that is you the people of Ukraine and your right to determine the course of your own country's future. Or, as
one of the great rallying cries of the Maidan put it: Ukraina po-nad u-se! Ukraine above all else!" [Applause.]
Power went on: "Let me begin with what we know brought people out to the Maidan in the first place. We've all heard a good number
of myths about this. One told by the Yanukovych government and its Russian backers at the time was that the Maidan protesters were
pawns of the West, and did not speak for the 'real' Ukraine.
"A more nefarious myth peddled by Moscow after Yanukovych's fall was that Euromaidan had been engineered by Western capitals in
order to topple a democratically-elected government."
Of course, neither of Power's points was actually a "myth." For instance, the U.S.-funded National Endowment for Democracy was
sponsoring scores of anti-government activists and media operations -- and NED President Carl Gershman had deemed Ukraine "the biggest
prize," albeit a stepping stone toward ousting Russian President Vladimir Putin. [See Consortiumnews.com's "
A Shadow US Foreign Policy ."]
Assistant Secretary of State for European Affairs Victoria Nuland was collaborating with U.S. Ambassador Geoffrey Pyatt how to
"midwife" the change in government with Nuland picking the future leaders of Ukraine "Yats is the guy" referring to Arseniy Yatsenyuk
who was installed as prime minister after the coup. [See Consortiumnews.com's "
The Neocons: Masters of Chaos ."]
The coup itself occurred after Yanukovych pulled back the police to prevent worsening violence.
Armed neo-Nazi and right-wing militias,
organized as "sotins" or 100-man units, then took the offensive and overran government buildings. Yanukovych and other officials
fled for their lives, with Yanukovych narrowly avoiding assassination. In the days following the coup, armed thugs essentially controlled
the government and brutally intimidated any political resistance.
Inventing 'Facts'
But that reality had no place in Power's propaganda speech. Instead, she said:
"The facts tell a different story. As you remember well, then-President Yanukovych abandoned Kyiv of his own accord, only hours
after signing an agreement with opposition leaders that would have led to early elections and democratic reforms.
"And it was only after Yanukovych fled the capital that 328 of the 447 members of the democratically-elected Rada voted to strip
him of his powers including 36 of the 38 members of his own party in parliament at the time. Yanukovych then vanished for several
days, only to eventually reappear little surprise in Russia.
"As is often the case, these myths reveal more about the myth makers than they do about the truth. Moscow's fable was designed
to airbrush the Ukrainian people and their genuine aspirations and demands out of the Maidan, by claiming the movement was fueled
by outsiders.
"Yet, as you all know by living through it and as was clear even to those of us watching your courageous stand from afar the Maidan
was made in Ukraine. A Ukraine of university students and veterans of the Afghan war. Of Ukrainian, Russian, and Tatar speakers.
Of Christians, Muslims, and Jews. "
Power went on with her rhapsodic version of events: "Given the powerful interests that benefited from the corrupt system, achieving
a full transformation was always going to be an uphill battle. And that was before Russian troops occupied Crimea, something the
Kremlin denied at the time, but has since admitted; and it was before Russia began training, arming, bankrolling, and fighting alongside
its separatist proxies in eastern Ukraine, something the Kremlin continues to deny.
"Suddenly, the Ukrainian people faced a battle on two fronts: combating corruption and overhauling broken institutions on the
inside; while simultaneously defending against aggression and destabilization from the outside.
"I don't have to tell you the immense strain that these battles have placed upon you. You feel it in the young men and women,
including some of your family members and friends, who have volunteered or been drafted into the military people who could be helping
build up their nation, but instead are risking their lives to defend it against Russian aggression.
"You feel it in the conflict's impact on your country's economy as instability makes it harder for Ukrainian businesses to attract
foreign investment, deepens inflation, and depresses families' wages. It is felt in the undercurrent of fear in cities like Kharkiv
where citizens have been the victims of multiple bomb attacks, the most lethal of which killed four people, including two teenage
boys, at a rally celebrating the first anniversary of Euromaidan.
"And the impact is felt most directly by the people living in the conflict zone. According to the UN, at least 6,350 people have
been killed in the violence driven by Russia and the separatists including 625 women and children and an additional 1,460 people
are missing; 15,775 people have been wounded. And an estimated 2 million people have been displaced by this conflict. And the real
numbers of killed, missing, wounded, and displaced are likely higher, according to the UN, due to its limited access to areas controlled
by the separatists."
One-Sided Account
Pretty much everything in Power's propaganda speech was blamed on the Russians along with the ethnic Russians and other Ukrainians
resisting the imposition of the new U.S.-backed order. She also ignored the will of the people of Crimea who voted overwhelmingly
in a referendum to secede from Ukraine and rejoin Russia.
The closest she came to criticizing the current regime in Kiev was to note that "investigations into serious crimes such as the
violence in the Maidan and in Odessa have been sluggish, opaque, and marred by serious errors suggesting not only a lack of competence,
but also a lack of will to hold the perpetrators accountable."
Yet, even there, Power failed to note the growing evidence that the neo-Nazis were likely behind the crucial sniper attacks on
Feb. 20, 2014, that killed both police and protesters and touched off the chaos that led to the coup two days later. [A worthwhile
documentary on this mystery is " Maidan Massacre ."]
Nor, did Power spell out that neo-Nazis from the Maidan set fire to the Trade Union Building in Odessa on May 2, 2014,
burning alive scores of ethnic Russians
while spray-painting the building with pro-Nazi graffiti, including hailing the "Galician SS," the Ukrainian auxiliary that helped
Adolf Hitler's SS carry out the Holocaust in Ukraine.
Listening to Power's speech you might not even have picked up that she was obliquely criticizing the U.S.-backed regime in Kiev.
Also, by citing a few touching stories of pro-coup Ukrainians who had died in the conflict, Power implicitly dehumanized the far
larger number of ethnic Russians who opposed the overthrow of their elected president and have been killed by Kiev's brutal "anti-terrorism
operation."
Use of Propaganda
In my nearly four decades covering Washington, I have listened to and read many speeches like the one delivered by Samantha Power.
In the 1980s, President Ronald Reagan would give similar propaganda speeches justifying the slaughter of peasants and workers in
Nicaragua, El Salvador and Guatemala, where the massacres of Mayan Indians were later deemed a "genocide." [See Consortiumnews.com's
" How Reagan Promoted Genocide
."]
Regardless of the reality on the ground, the speeches always made the U.S.-backed side the "good guys" and the other side the
"bad guys" even when "our side" included CIA-affiliated "death squads" and U.S.-equipped military forces slaughtering tens of thousands
of civilians.
During the 1990s, more propaganda speeches were delivered by President George H.W. Bush regarding Panama and Iraq and by President
Bill Clinton regarding Kosovo and Yugoslavia. Then, last decade, the American people were inundated with more propaganda rhetoric
from President George W. Bush justifying the invasion of Iraq and the expansion of the endless "war on terror."
Generally speaking, during much of his first term, Obama was more circumspect in his rhetoric, but he, too, has slid into propaganda-speak
in the latter half of his presidency as he shed his "realist" foreign policy tendencies in favor of "tough-guy/gal" rhetoric favored
by "liberal interventionists," such as Power, and neoconservatives, such as Nuland and her husband Robert Kagan (whom
a chastened Obama invited to
a White House lunch last year).
But the difference between the propaganda of Reagan, Bush-41, Clinton and Bush-43 was that it focused on conflicts in which the
Soviet Union or Russia might object but would likely not be pushed to the edge of nuclear war, nothing as provocative as what the
Obama administration has done in Ukraine, now including dispatching U.S. military advisers.
The likes of Power, Nuland and Obama are not just justifying wars that leave devastation, death and disorder in their wake in
disparate countries around the world, but they are fueling a war on Russia's border.
That was made clear by the end of Power's speech in which she declared: "Ukraine, you may still be bleeding from pain. An aggressive
neighbor may be trying to tear your nation to pieces. Yet you are strong and defiant. You, Ukraine, are standing tall for your freedom.
And if you stand tall together no kleptocrat, no oligarch, and no foreign power can stop you."
There is possibly nothing more reckless than what has emerged as Obama's late-presidential foreign policy, what amounts to a plan
to destabilize Russia and seek "regime change" in the overthrow of Russian President Putin.
Rather than take Putin up on his readiness to cooperate with Obama in trouble spots, such as the Syrian civil war and Iran's nuclear
program, "liberal interventionist" hawks like Power and neocons like Nuland with Obama in tow have chosen confrontation and have
used extreme propaganda to effectively shut the door on negotiation and compromise.
Yet, as with previous neocon/liberal-interventionist schemes, this one lacks on-the-ground realism. Even if it were possible to
so severely damage the Russian economy and to activate U.S.-controlled "non-governmental organizations" to help drive Putin from
office, that doesn't mean a Washington-friendly puppet would be installed in the Kremlin.
Another possible outcome would be the emergence of an extreme Russian nationalist suddenly controlling the nuclear codes and willing
to use them. So, when ambitious ideologues like Power and Nuland get control of U.S. foreign policy in such a sensitive area, what
they're playing with is the very survival of life on planet Earth the ultimate genocide.
Investigative reporter Robert Parry broke many of the Iran-Contra stories for The Associated Press and Newsweek in the 1980s.
You can buy his latest book, America's Stolen Narrative, either in
print here or as an e-book
(from
Amazon and
barnesandnoble.com ). You also can order Robert Parry's trilogy on the Bush Family and its connections to various right-wing
operatives for only $34. The trilogy includes America's Stolen Narrative. For details on this offer,
click here .
incontinent reader , June 15, 2015 at 6:14 pm
It's too bad that people like Nuland and Power have not not been subjected to a retributive justice in which they would be
forced to feel the same pain that they inflict, or, if that is too much to ask, then just to 'disappear (quietly) in the sands
of time' to save their victims from more misery.
Roberto , June 15, 2015 at 10:03 pm
These dopes have no idea that the compensation is forthcoming.
I would like to propose a new lobby that would also be based on a non-address, X Street.
X Street recognizes that the wars fought by the United States since 2001 have brought no benefit to the American people and
have only resulted in financial ruin,
NATO no longer has any raison d’etre and is needlessly provoking the Russians through its expansion. X Street calls on the
United States to dissolve the alliance.
X Street recognizes that America’s lopsided support of the state of Israel has made the United States a target of terrorism,
has weakened the US’s international standing and damaged its reputation, and has negatively impacted on the American economy.
Washington will no longer use its veto power to protect Israeli interests in the UN and other international bodies.
The United States will publicly declare its knowledge that Israel has a nuclear arsenal and will ask the Israeli government
to join the NPT regime and subject its program to IAEA inspection.
X Street believes that nation building and democracy promotion by the United States have been little more than CIA/MOSSAD covert
actions by another name that have harmed America’s reputation and international standing.
The National Endowment for Democracy should be abolished immediately.
I would think that most people have heard of near death experiences.
One feature of such experiences which has sometimes been reported, and which I find very interesting, is that of the life review,
which focuses on the deeds a person has done throughout his or her life, the motives of the deeds, and the effects of the deeds
on others. It has been reported, for instance, that people have re-experienced their deeds not only from their own perspective
but from the perspective of others whom one's deeds have affected.
There is a youtube video about this, titled The Golden Rule Dramatically Illustrated, and featuring NDE researcher Dr. Kenneth
Ring.
There are no such thing as "liberal war hawks", their policies simply based on idiocy where as the result they need to be called
"liberals", depending on kind of government that govern a corrupt and bankrupt system. American capitalism is one of those system.
These people simply lacking a vision for their understanding that they are "liberal". They might be a social liberalists when
it come to people's rights in living the way of life they chose, otherwise it was Bill Clinton who used such "liberal" idea by
politicalizing using liberalism for his gain, these people follow the same path, but they will backstab people as they have in
the past and as they do now.
michael , June 15, 2015 at 6:26 pm
If a coup had not been instigated by the west on Russia's border, installing Nazis a different more positive outcome might
be available, I am quite sure there are Ukrainians who did not want this and wanted a more independent Ukraine, but that is not
what happened! How were the Russians supposed to react? The United States has 1000 military bases around the world, border most
countries, completely encircle Iran, press right up to Russia's borders and encircle China. Again how are the Russians supposed
to React? If this was Mexico the place would be decimated by the Americans and laid to waste just like Iraq!
hbm , June 15, 2015 at 6:41 pm
Looney bleeding-heart Irishwoman with husband Arch-Neocon lunatic Cass Sunstein shaping her opinions and directing her fanaticism.
That's all one really needs to know.
Nibs , June 16, 2015 at 12:28 pm
Exactly, everywhere there is a goy neocon, just look a little further for the malign influence. You can always find it. Soros
was here too, also in the attempted "colour revolution" in Macedonia. They intend to make out like bandits, big big money. Of
course, as mentioned elsewhere, they are physical cowards and prefer to send ordinary Americans to do their fighting and bleeding
for them.
It's somewhat startling after Iraq that they are still there.
But, and forgive the conspiracy angle, I don't believe this is unconnected to the Epstein sex scandal: just see who visited and
is therefore target of blackmail.
Paulrevere01 , June 15, 2015 at 6:50 pm
and this warmonger-doppleganger-to-Nuland-Kagen is married to Grand-Censor-Cass-des-Hubris-Sunstein more black eyes for Yale
and Harvard.
dahoit , June 16, 2015 at 11:12 am
Yes,the Zionist poison ivy league strikes again,with more Zionist stool pigeons to come.Close down education for sale vs.for
knowledge,it produces zombie quislings.
Larry , June 15, 2015 at 7:12 pm
. and even if the U.S. neocon policy in Ukraine succeeds and a shooting war with Russia is somehow avoided, then the American
neocons will still neither be sated or placated. Like the bloodthirsty jackals they are, these neocons will be only emboldened,
and their next coup in Russia's natural security sphere will be the straw that breaks the nuclear camels' backs. They must be
deterred or stopped.
In some tabulations the neocon hijacking of US policy on behalf of Israel has resulted in American gifts to Iran of Iraq, Afghanistan,
Pakistan, Syria, Lebanon, and quite likely Israel. And that's for starters. The rest will implode and do we then have a Persian
Empire.
It looks like a lot of clouds gathering on the horizon, and I cannot say that I find much fault with Pillar's assessment.
The stakes are too high and for all the macho talk all are rightfully very weary of lighting the match.
I rather doubt that there would be much left for anyone to add to their empire. Miles of ruins and deserts, glazed by nuclear
fires do not make for very useful Imperial digs.
I just pray that we are both wrong.
Abe , June 15, 2015 at 7:58 pm
Liberal interventionism is simply left-wing neocon thinking.
“Many eyewitnesses among the Maidan protesters reported snipers firing from the Hotel Ukraina during the massacre of the
protesters, specifically, about killing eight of them. Bullet holes in trees and electricity poles on the site of the massacre
and on the walls of Zhovtnevyi Palace indicate that shots came from the direction of the hotel. There are several similar recorded
testimonies of the eyewitnesses among the protesters about shooters in October Palace and other Maidan-controlled buildings.â€
The “Snipers’ Massacre†on the Maidan in Ukraine
By Ivan Katchanovski, Ph.D.
Boris M Garsky , June 15, 2015 at 8:06 pm
There is nothing to say about Powers; no doubt where she gets her marching orders and script. However, there is no excuse for
being ignorant on the topic of her rantings. I challenge anyone, anywhere to spontaneously assemble and move 100,000 people, even
a few blocks, on 24 hours notice. If you can do it, you are the court magician exemplar. Can't be done. Never has been done; it
takes months to years of preparations and organization before implementation. Yanuckovich was the target of assassination; they
weren't taking chances. No doubt that the Russians told him to skedaddle; that his life was in danger. Doesn't sound spontaneous
to me; sounds like a well planned operation gone wrong- right initially, but wrong eventually. I think that Obama is simply posturing
until the west can figure out how to extricate themselves from another fine mess they got themselves into- AGAIN!
F. G. Sanford , June 15, 2015 at 8:26 pm
I remember during my college days watching "student government" personalities – usually rich kids with no real problems – hurl
themselves into impassioned frenzies over some issue or another. Usually, they were political science(sic) or psychology majors
who were also active in the Speech and Theater Department. The defining characteristic of their existence was to obtain a podium
from which to make impassioned pleas to their fellow students in an effort to demonstrate a proclivity for "leadership". Almost
any issue would do. Samantha Power reminds me of one of those students – ostensibly seeking a role which, if she could have her
way, would make her the prime catalyst in a pivotal issue at the epicenter of a maelstrom that steers the course of human history.
That kind of learned, practiced, studied and rehearsed narcissism doesn't always work out so well. Maybe because the most successful
examples are actually clinical sufferers of…real narcissism. When Power's 'facts' are compared to reality, the obvious conclusions
suggest a range of interpretations from delusional psychosis to criminal perjury. Or, is this a carefully crafted strategy? "Yats"
has recently resorted to the last rabbit he can pull out of a hat: he's turned on the printing presses to pay the bills, and a
currency collapse is imminent. The Nazi factions are impatient with the regime's lack of progress, the people are disgruntled,
those two million refugees have mostly fled to Russia for protection, Northern Europe is being inundated with prostitutes, drug
dealers and the creme de la creme of organized crime from the former Warsaw Pact countries, and in the South, refugees from NATO
destabilizations in North Africa and the Middle East have become an explosive issue. Racism, nationalism and the resurgence of
openly fascist political activity is burgeoning. Europe is boiling with rage. Has Power actually seen the writing on the wall?
If so, why not an impassioned campaign to remind the Ukrainians they have broken institutions, corrupt oligarchs, unscrupulous
kleptocrats, internal corruption and foreign aggression working against them? And by the way, they've failed to adequately investigate
those Nazi atrocities. None of this could POSSIBLY be the fault of U.S. meddling or failed diplomacy. Nope, they brought it on
themselves, but we did everything we could to try and help. The makings of TOTAL collapse are at hand, and one little fillip could
bring down the whole house of cards. So, "You Ukrainians need to stand tall for your freedoms", and if anything goes wrong, you
have nobody to blame but yourselves. Maybe Sammy isn't so delusional after all.
Gregory Kruse , June 16, 2015 at 1:01 pm
She's not delusional, she's just channeling Aleksander Mikhaajlovich Bezobrazov. I guess that does make Obama the Tsar.
Mark , June 15, 2015 at 8:53 pm
All anyone needs to understand about American foreign policy is that anything, including genocide, is not only acceptable but
promoted if it serves "America's corporate or favored campaign funding special interests". The only real principle in play for
all colluding parties -- corporate, mass media, complicit foreign governments (sycophants) and both major domestic political parties
-- is to "win" by compromising or sacrificing everything and everyone required to serve the insatiable hunger for ungodley wealth
and (abusive) power accumulation.
The entire American culture has been corrupted by propaganda and what is irrational human nature and instinct concerning these
matters -- to be accepted among our peers by following the heard -- this reality is being used by the "ruling class" to play the
public like a disposable three dollar fiddle, while they, our "rulers", impose death and destruction along with economic and military
tyranny, directly or by proxy, wherever and whenever they can get away with it.
Bob Loblaw , June 15, 2015 at 9:41 pm
Two words
Electromagnetic Pulse
One well placed warhead will cripple us to the point that we destroy ourselves.
While crude islamists can't pull it off a Russian device is within reach.
Abe , June 15, 2015 at 10:48 pm
As a human-rights entrepreneur who is also a tireless advocate of war, Samantha Power is not aberrant. Elite factions of the
human-rights industry were long ago normalized within the tightly corseted spectrum of American foreign policy.
Power advocates for what she calls "tough, principled, and engaged diplomacy." A more accurate set of adjectives would be "belligerent,
hypocritical, and domineering." The thrust of her work is to make perpetual war possible by designating genocide – real or merely
ideologically constructed – the supreme international crime, instead of war itself. (Under current international law war itself
is the "supreme international crime.") That way the U.S. can perpetually make war for the noblest of purposes without regard for
anachronisms like national sovereignty. Is it any wonder Democrats love her?
The military deployment of US-NATO forces coupled with “non-conventional warfare†â€"including covert intelligence operations,
economic sanctions and the thrust of “regime changeâ€â€" is occurring simultaneously in several regions of the world.
Central to an understanding of war, is the media campaign which grants it legitimacy in the eyes of public opinion. War has
been provided with a humanitarian mandate under NATO’s “Responsibility to Protect†(R2P). The victims of U.S. led wars are
presented as the perpetrators of war.
It sounds to me that these neocons have 2 things in common. They were all born post WW II and have not experienced any war
at home and grew up in a nice suburban area without street crimes. They NEVER were confronted with families who lost their loved
ones in US 'lost' wars in Vietnam, Iraq, Afghanistan that were initiated WITHOUT UN approval and brought home young soldiers who
had lost their limps and were handicapped for the rest of their lives. But just to keep US defence industry turning out hefty
profits.
Secondly, they have watched to many Hollywood movies showing the superior US army beating the 'evil' empire (Reagan) meaning
Soviet Union. USA never honoured their agreements with Gorbachev to keep NATO out of Eastern Europe. President Putin learned his
lessons, he built a strong military with technological advanced equipment so his country will NOT be run over again by the West
such as Napoleon and Hitler did murdering 25 million Russians. President Putin and the Russians want to live in peace they have
suffered too much in the past.
It's US and its vassal NATO aggression in the World and now in Ukraine that make the Russian show their power and demonstrating
'don't fool with us' . US MSM propaganda in Europe is losing its effects and people realizing US geopolitical or colonization
aggression in the world while losing US dominance as well. Like Abraham Lincoln said: You can lie to some people all the time
and you can lie to all the people some time, but you cannot lie to all the people all the time! However with today's powerful
media TV and radio it will take some more time. But Russia's RT News is changing this and gives the audience News contradicting
US MSM propaganda such as NYT and WP which have been brainwashing the public for so long at the discretion of Washington's neocons.
And US taxpayers are paying the bill, wake up America!
Peter Loeb , June 16, 2015 at 6:46 am
DISTRACTION FROM PALESTINIAN/ISRAELI CONFLICT
Excellent profiles and analyses by Mr. Parry as we have all come
to expect.
"[Power] added that the United Nations focus on Ukraine in the
Security Council.." from Parry above.
Here one MUST add the unsaid "and never, never on Palestine/
Israel"! After all, the US has continued time and again to block
investigation by the Security Council of Israeli actions in that
sphere. Evidently Israel maintains according to Power and
many others that Israel with US support are by definition exempt
from any and all rules of international law, application to save
lives in Palestine, attempts to establish a Mideast Nuclear
Free Zone and much much more. The distraction provided
by Ukraine is not only significant for the people of Ukraine but
is cleverly designed to distract all world and domestic opinion
from the atrocities carried on daily by Israel in Palestine both
past, present and future.
-- -Peter Loeb, Boston, MA, USA
Gregory Kruse , June 16, 2015 at 10:28 am
She's like John Bolton in drag.
Abe , June 16, 2015 at 5:52 pm
She is the walrus, goo goo g'joob.
Sammy too "seems averse to compromise, and is apparently committed to the belief that the U.N. and international law undermine
U.S. interests" (aka Israeli interests) http://www.newyorker.com/magazine/2005/03/21/boltonism
"“Remarks such as the references to the 1967 borders show Obama’s continuing lack of real appreciation for Israel’s security.â€
-- Bolton, 2011, interview for National Review online
"There will never be a sunset on America’s commitment to Israel’s security. Never.†-- Power, 2015, speech at American
Israel Public Affairs Committee (AIPAC) conference
ltr , June 16, 2015 at 11:02 am
What a thoroughly amoral person Samantha Power is, all pretense, all hypocrisy, all for selectively determining which lives
are worth allowing.
Wm. Boyce , June 16, 2015 at 11:14 am
Another example of the lack of differences between Democrats and Republicans when it comes to the empire's foreign policy.
It's all about controlling regions and resources, and fueling the U.S. arms industry.
Brendan , June 16, 2015 at 4:29 pm
Samantha Power: "The facts tell a different story. As you remember well, then-President Yanukovych abandoned Kyiv of his own
accord, only hours after signing an agreement with opposition leaders that would have led to early elections and democratic reforms."
There are some glaring omissions in Power's 'facts'. She doesn't explain why Yanukovych suddenly fled Kyiv, so soon after an
agreement with opposition leaders that allowed him to remain as president for several more months.
She didn't mention the rejection of that agreement by the far-right militias who threatened to remove Yanukovych from office
by force if he did not resign by 10 am that day.
That threat might explain his sudden departure. It also might also indicate that his departure wasn't really "of his own accord".
Brendan , June 16, 2015 at 4:34 pm
Samantha Power: "And it was only after Yanukovych fled the capital that 328 of the 447 members of the democratically-elected
Rada voted to strip him of his powers "
The problem with that was that the members of parliament did not have any authority to strip the president of his powers in
the way they did. The only possible conditions to remove a presidential from office are listed in the Ukrainian constitution:
Article 108. The President of Ukraine shall exercise his powers until the assumption of office by the newly elected President
of Ukraine.
The authority of the President of Ukraine shall be subject to an early termination in cases of:
1) resignation;
2) inability to exercise presidential authority for health reasons;
3) removal from office by the procedure of impeachment;
4) his/her death.
Yanukovych was not dead and neither was he unable to exercise his presidential authority due to health reasons. He never resigned,
and in fact continued to state that he was the only legitimate president.
He was not removed from office by the procedure of impeachment, which includes a number of stages, as described in Article
111 of the constitution (see link below). The decision on the impeachment must be adopted by at least three-quarters of the members
of parliament. The number given by Samantha Power was less than three-quarters.
Samantha Power, along with the vast majority of the western media, described the overthrow of President Yanukovych as a normal
democratic vote by parliament. To use Mrs Power's words, "The facts tell a different story". The facts say that it was an unconstitutional
coup.
All of these conflicts seem to be designed to clean out, not only the people, but entire cultures in the regions.
Americans should take heed. What we see the oligarchic criminals in the U.S. doing overseas, is coming to a town near you,
or maybe your own town. Why else do you think they have been dismantling the Constitution and militarizing communities? It looks
like it will be sooner than expected, too.
hammersmith , June 23, 2015 at 10:31 pm
The Bush administration was "little boys on Big Wheels," as one former member described it; The Obama administration is little
girls on Big Wheels.
Roberto , June 15, 2015 at 10:03 pm
These dopes have no idea that the compensation is forthcoming.
I would like to propose a new lobby that would also be based on a non-address, X Street.
X Street recognizes that the wars fought by the United States since 2001 have brought no benefit to the American people and
have only resulted in financial ruin,
NATO no longer has any raison d’etre and is needlessly provoking the Russians through its expansion. X Street calls on the
United States to dissolve the alliance.
X Street recognizes that America’s lopsided support of the state of Israel has made the United States a target of terrorism,
has weakened the US’s international standing and damaged its reputation, and has negatively impacted on the American economy.
Washington will no longer use its veto power to protect Israeli interests in the UN and other international bodies.
The United States will publicly declare its knowledge that Israel has a nuclear arsenal and will ask the Israeli government
to join the NPT regime and subject its program to IAEA inspection.
X Street believes that nation building and democracy promotion by the United States have been little more than CIA/MOSSAD covert
actions by another name that have harmed America’s reputation and international standing.
The National Endowment for Democracy should be abolished immediately.
I would think that most people have heard of near death experiences.
One feature of such experiences which has sometimes been reported, and which I find very interesting, is that of the life review,
which focuses on the deeds a person has done throughout his or her life, the motives of the deeds, and the effects of the deeds
on others. It has been reported, for instance, that people have re-experienced their deeds not only from their own perspective
but from the perspective of others whom one's deeds have affected.
There is a youtube video about this, titled The Golden Rule Dramatically Illustrated, and featuring NDE researcher Dr. Kenneth
Ring.
There are no such thing as "liberal war hawks", their policies simply based on idiocy where as the result they need to be called
"liberals", depending on kind of government that govern a corrupt and bankrupt system. American capitalism is one of those system.
These people simply lacking a vision for their understanding that they are "liberal". They might be a social liberalists when
it come to people's rights in living the way of life they chose, otherwise it was Bill Clinton who used such "liberal" idea by
politicalizing using liberalism for his gain, these people follow the same path, but they will backstab people as they have in
the past and as they do now.
michael , June 15, 2015 at 6:26 pm
If a coup had not been instigated by the west on Russia's border, installing Nazis a different more positive outcome might
be available, I am quite sure there are Ukrainians who did not want this and wanted a more independent Ukraine, but that is not
what happened! How were the Russians supposed to react? The United States has 1000 military bases around the world, border most
countries, completely encircle Iran, press right up to Russia's borders and encircle China. Again how are the Russians supposed
to React? If this was Mexico the place would be decimated by the Americans and laid to waste just like Iraq!
hbm , June 15, 2015 at 6:41 pm
Looney bleeding-heart Irishwoman with husband Arch-Neocon lunatic Cass Sunstein shaping her opinions and directing her fanaticism.
That's all one really needs to know.
Nibs , June 16, 2015 at 12:28 pm
Exactly, everywhere there is a goy neocon, just look a little further for the malign influence. You can always find it. Soros
was here too, also in the attempted "colour revolution" in Macedonia. They intend to make out like bandits, big big money. Of
course, as mentioned elsewhere, they are physical cowards and prefer to send ordinary Americans to do their fighting and bleeding
for them.
It's somewhat startling after Iraq that they are still there.
But, and forgive the conspiracy angle, I don't believe this is unconnected to the Epstein sex scandal: just see who visited and
is therefore target of blackmail.
Paulrevere01 , June 15, 2015 at 6:50 pm
and this warmonger-doppleganger-to-Nuland-Kagen is married to Grand-Censor-Cass-des-Hubris-Sunstein more black eyes for Yale
and Harvard.
dahoit , June 16, 2015 at 11:12 am
Yes,the Zionist poison ivy league strikes again,with more Zionist stool pigeons to come.Close down education for sale vs.for
knowledge,it produces zombie quislings.
Larry , June 15, 2015 at 7:12 pm
. and even if the U.S. neocon policy in Ukraine succeeds and a shooting war with Russia is somehow avoided, then the American
neocons will still neither be sated or placated. Like the bloodthirsty jackals they are, these neocons will be only emboldened,
and their next coup in Russia's natural security sphere will be the straw that breaks the nuclear camels' backs. They must be
deterred or stopped.
In some tabulations the neocon hijacking of US policy on behalf of Israel has resulted in American gifts to Iran of Iraq, Afghanistan,
Pakistan, Syria, Lebanon, and quite likely Israel. And that's for starters. The rest will implode and do we then have a Persian
Empire.
It looks like a lot of clouds gathering on the horizon, and I cannot say that I find much fault with Pillar's assessment.
The stakes are too high and for all the macho talk all are rightfully very weary of lighting the match.
I rather doubt that there would be much left for anyone to add to their empire. Miles of ruins and deserts, glazed by nuclear
fires do not make for very useful Imperial digs.
I just pray that we are both wrong.
Abe , June 15, 2015 at 7:58 pm
Liberal interventionism is simply left-wing neocon thinking.
“Many eyewitnesses among the Maidan protesters reported snipers firing from the Hotel Ukraina during the massacre of the
protesters, specifically, about killing eight of them. Bullet holes in trees and electricity poles on the site of the massacre
and on the walls of Zhovtnevyi Palace indicate that shots came from the direction of the hotel. There are several similar recorded
testimonies of the eyewitnesses among the protesters about shooters in October Palace and other Maidan-controlled buildings.â€
The “Snipers’ Massacre†on the Maidan in Ukraine
By Ivan Katchanovski, Ph.D.
Boris M Garsky , June 15, 2015 at 8:06 pm
There is nothing to say about Powers; no doubt where she gets her marching orders and script. However, there is no excuse for
being ignorant on the topic of her rantings. I challenge anyone, anywhere to spontaneously assemble and move 100,000 people, even
a few blocks, on 24 hours notice. If you can do it, you are the court magician exemplar. Can't be done. Never has been done; it
takes months to years of preparations and organization before implementation. Yanuckovich was the target of assassination; they
weren't taking chances. No doubt that the Russians told him to skedaddle; that his life was in danger. Doesn't sound spontaneous
to me; sounds like a well planned operation gone wrong- right initially, but wrong eventually. I think that Obama is simply posturing
until the west can figure out how to extricate themselves from another fine mess they got themselves into- AGAIN!
F. G. Sanford , June 15, 2015 at 8:26 pm
I remember during my college days watching "student government" personalities – usually rich kids with no real problems – hurl
themselves into impassioned frenzies over some issue or another. Usually, they were political science(sic) or psychology majors
who were also active in the Speech and Theater Department. The defining characteristic of their existence was to obtain a podium
from which to make impassioned pleas to their fellow students in an effort to demonstrate a proclivity for "leadership". Almost
any issue would do. Samantha Power reminds me of one of those students – ostensibly seeking a role which, if she could have her
way, would make her the prime catalyst in a pivotal issue at the epicenter of a maelstrom that steers the course of human history.
That kind of learned, practiced, studied and rehearsed narcissism doesn't always work out so well. Maybe because the most successful
examples are actually clinical sufferers of…real narcissism. When Power's 'facts' are compared to reality, the obvious conclusions
suggest a range of interpretations from delusional psychosis to criminal perjury. Or, is this a carefully crafted strategy? "Yats"
has recently resorted to the last rabbit he can pull out of a hat: he's turned on the printing presses to pay the bills, and a
currency collapse is imminent. The Nazi factions are impatient with the regime's lack of progress, the people are disgruntled,
those two million refugees have mostly fled to Russia for protection, Northern Europe is being inundated with prostitutes, drug
dealers and the creme de la creme of organized crime from the former Warsaw Pact countries, and in the South, refugees from NATO
destabilizations in North Africa and the Middle East have become an explosive issue. Racism, nationalism and the resurgence of
openly fascist political activity is burgeoning. Europe is boiling with rage. Has Power actually seen the writing on the wall?
If so, why not an impassioned campaign to remind the Ukrainians they have broken institutions, corrupt oligarchs, unscrupulous
kleptocrats, internal corruption and foreign aggression working against them? And by the way, they've failed to adequately investigate
those Nazi atrocities. None of this could POSSIBLY be the fault of U.S. meddling or failed diplomacy. Nope, they brought it on
themselves, but we did everything we could to try and help. The makings of TOTAL collapse are at hand, and one little fillip could
bring down the whole house of cards. So, "You Ukrainians need to stand tall for your freedoms", and if anything goes wrong, you
have nobody to blame but yourselves. Maybe Sammy isn't so delusional after all.
Gregory Kruse , June 16, 2015 at 1:01 pm
She's not delusional, she's just channeling Aleksander Mikhaajlovich Bezobrazov. I guess that does make Obama the Tsar.
Mark , June 15, 2015 at 8:53 pm
All anyone needs to understand about American foreign policy is that anything, including genocide, is not only acceptable but
promoted if it serves "America's corporate or favored campaign funding special interests". The only real principle in play for
all colluding parties -- corporate, mass media, complicit foreign governments (sycophants) and both major domestic political parties
-- is to "win" by compromising or sacrificing everything and everyone required to serve the insatiable hunger for ungodley wealth
and (abusive) power accumulation.
The entire American culture has been corrupted by propaganda and what is irrational human nature and instinct concerning these
matters -- to be accepted among our peers by following the heard -- this reality is being used by the "ruling class" to play the
public like a disposable three dollar fiddle, while they, our "rulers", impose death and destruction along with economic and military
tyranny, directly or by proxy, wherever and whenever they can get away with it.
Bob Loblaw , June 15, 2015 at 9:41 pm
Two words
Electromagnetic Pulse
One well placed warhead will cripple us to the point that we destroy ourselves.
While crude islamists can't pull it off a Russian device is within reach.
Abe , June 15, 2015 at 10:48 pm
As a human-rights entrepreneur who is also a tireless advocate of war, Samantha Power is not aberrant. Elite factions of the
human-rights industry were long ago normalized within the tightly corseted spectrum of American foreign policy.
Power advocates for what she calls "tough, principled, and engaged diplomacy." A more accurate set of adjectives would be "belligerent,
hypocritical, and domineering." The thrust of her work is to make perpetual war possible by designating genocide – real or merely
ideologically constructed – the supreme international crime, instead of war itself. (Under current international law war itself
is the "supreme international crime.") That way the U.S. can perpetually make war for the noblest of purposes without regard for
anachronisms like national sovereignty. Is it any wonder Democrats love her?
The military deployment of US-NATO forces coupled with “non-conventional warfare†â€"including covert intelligence operations,
economic sanctions and the thrust of “regime changeâ€â€" is occurring simultaneously in several regions of the world.
Central to an understanding of war, is the media campaign which grants it legitimacy in the eyes of public opinion. War has
been provided with a humanitarian mandate under NATO’s “Responsibility to Protect†(R2P). The victims of U.S. led wars are
presented as the perpetrators of war.
It sounds to me that these neocons have 2 things in common. They were all born post WW II and have not experienced any war
at home and grew up in a nice suburban area without street crimes. They NEVER were confronted with families who lost their loved
ones in US 'lost' wars in Vietnam, Iraq, Afghanistan that were initiated WITHOUT UN approval and brought home young soldiers who
had lost their limps and were handicapped for the rest of their lives. But just to keep US defence industry turning out hefty
profits.
Secondly, they have watched to many Hollywood movies showing the superior US army beating the 'evil' empire (Reagan) meaning
Soviet Union. USA never honoured their agreements with Gorbachev to keep NATO out of Eastern Europe. President Putin learned his
lessons, he built a strong military with technological advanced equipment so his country will NOT be run over again by the West
such as Napoleon and Hitler did murdering 25 million Russians. President Putin and the Russians want to live in peace they have
suffered too much in the past.
It's US and its vassal NATO aggression in the World and now in Ukraine that make the Russian show their power and demonstrating
'don't fool with us' . US MSM propaganda in Europe is losing its effects and people realizing US geopolitical or colonization
aggression in the world while losing US dominance as well. Like Abraham Lincoln said: You can lie to some people all the time
and you can lie to all the people some time, but you cannot lie to all the people all the time! However with today's powerful
media TV and radio it will take some more time. But Russia's RT News is changing this and gives the audience News contradicting
US MSM propaganda such as NYT and WP which have been brainwashing the public for so long at the discretion of Washington's neocons.
And US taxpayers are paying the bill, wake up America!
Peter Loeb , June 16, 2015 at 6:46 am
DISTRACTION FROM PALESTINIAN/ISRAELI CONFLICT
Excellent profiles and analyses by Mr. Parry as we have all come
to expect.
"[Power] added that the United Nations focus on Ukraine in the
Security Council.." from Parry above.
Here one MUST add the unsaid "and never, never on Palestine/
Israel"! After all, the US has continued time and again to block
investigation by the Security Council of Israeli actions in that
sphere. Evidently Israel maintains according to Power and
many others that Israel with US support are by definition exempt
from any and all rules of international law, application to save
lives in Palestine, attempts to establish a Mideast Nuclear
Free Zone and much much more. The distraction provided
by Ukraine is not only significant for the people of Ukraine but
is cleverly designed to distract all world and domestic opinion
from the atrocities carried on daily by Israel in Palestine both
past, present and future.
-- -Peter Loeb, Boston, MA, USA
Gregory Kruse , June 16, 2015 at 10:28 am
She's like John Bolton in drag.
Abe , June 16, 2015 at 5:52 pm
She is the walrus, goo goo g'joob.
Sammy too "seems averse to compromise, and is apparently committed to the belief that the U.N. and international law undermine
U.S. interests" (aka Israeli interests) http://www.newyorker.com/magazine/2005/03/21/boltonism
"“Remarks such as the references to the 1967 borders show Obama’s continuing lack of real appreciation for Israel’s security.â€
-- Bolton, 2011, interview for National Review online
"There will never be a sunset on America’s commitment to Israel’s security. Never.†-- Power, 2015, speech at American
Israel Public Affairs Committee (AIPAC) conference
ltr , June 16, 2015 at 11:02 am
What a thoroughly amoral person Samantha Power is, all pretense, all hypocrisy, all for selectively determining which lives
are worth allowing.
Wm. Boyce , June 16, 2015 at 11:14 am
Another example of the lack of differences between Democrats and Republicans when it comes to the empire's foreign policy.
It's all about controlling regions and resources, and fueling the U.S. arms industry.
Brendan , June 16, 2015 at 4:29 pm
Samantha Power: "The facts tell a different story. As you remember well, then-President Yanukovych abandoned Kyiv of his own
accord, only hours after signing an agreement with opposition leaders that would have led to early elections and democratic reforms."
There are some glaring omissions in Power's 'facts'. She doesn't explain why Yanukovych suddenly fled Kyiv, so soon after an
agreement with opposition leaders that allowed him to remain as president for several more months.
She didn't mention the rejection of that agreement by the far-right militias who threatened to remove Yanukovych from office
by force if he did not resign by 10 am that day.
That threat might explain his sudden departure. It also might also indicate that his departure wasn't really "of his own accord".
Brendan , June 16, 2015 at 4:34 pm
Samantha Power: "And it was only after Yanukovych fled the capital that 328 of the 447 members of the democratically-elected
Rada voted to strip him of his powers "
The problem with that was that the members of parliament did not have any authority to strip the president of his powers in
the way they did. The only possible conditions to remove a presidential from office are listed in the Ukrainian constitution:
Article 108. The President of Ukraine shall exercise his powers until the assumption of office by the newly elected President
of Ukraine.
The authority of the President of Ukraine shall be subject to an early termination in cases of:
1) resignation;
2) inability to exercise presidential authority for health reasons;
3) removal from office by the procedure of impeachment;
4) his/her death.
Yanukovych was not dead and neither was he unable to exercise his presidential authority due to health reasons. He never resigned,
and in fact continued to state that he was the only legitimate president.
He was not removed from office by the procedure of impeachment, which includes a number of stages, as described in Article
111 of the constitution (see link below). The decision on the impeachment must be adopted by at least three-quarters of the members
of parliament. The number given by Samantha Power was less than three-quarters.
Samantha Power, along with the vast majority of the western media, described the overthrow of President Yanukovych as a normal
democratic vote by parliament. To use Mrs Power's words, "The facts tell a different story". The facts say that it was an unconstitutional
coup.
All of these conflicts seem to be designed to clean out, not only the people, but entire cultures in the regions.
Americans should take heed. What we see the oligarchic criminals in the U.S. doing overseas, is coming to a town near you,
or maybe your own town. Why else do you think they have been dismantling the Constitution and militarizing communities? It looks
like it will be sooner than expected, too.
hammersmith , June 23, 2015 at 10:31 pm
The Bush administration was "little boys on Big Wheels," as one former member described it; The Obama administration is little
girls on Big Wheels.
We accompanied that with a prank in which we posed as Potanin calling the Washington Wizards
for courtside seats, Harvard University business school to purchase a degree, and the Augusta
National Golf Club -- brandishing Hiatt's article for access:
eXile : I am Russian banker, so-called robber baron capitalist, am interested in
purchasing your degree.
Harvard : ( pause ) Uh, sir, you can't buy the degree, but you can enroll in our
program. It's an intensive 9 week program, and you receive a certificate, not a degree.
eXile : No, this is no good. Do you realize who I am? Fred Hiatt wrote about me in today
Washington Post, that I am not typical robber baron. I am ze baby billionaire.
Harvard : We read a lot about Russia and it sounds very exciting.
eXile : Of course it exciting. Now I vant Harvard degree.
Harvard : You can't buy a degree.
eXile : Maybe instead I build nice cafe for you on campus. Or I can donate small nightclub
for Harvard degree.
Harvard : Sir, Harvard is a 350-year-old institution. It's not all just about money. We've
turned down princes.
"A minority of Fed officials, however, have become increasingly forceful in registering their concerns. Those officials are
more worried about moving too fast than too slow. They fear that the persistence of sluggish inflation could damage the economy,
for example, by permanently eroding public expectations about the future pace of inflation.
The minutes said that some of those officials are reluctant to vote for additional rate increases until they are convinced
that inflation is indeed gaining strength.
The officials "indicated that their decision about whether to increase the target range in the near term would depend importantly
on whether the upcoming economic data boosted their confidence that inflation was headed toward the Committee's objective.""
"... permanently eroding public expectations about the future pace of inflation..."
[The public, being voting age people at large and all working people and so on, really would rather not expect any inflation
at all. It usually does not work out for them all that well since food prices and other headline inflation goods often rise ahead
of wages and core inflation goods. The public is not going to bail us out of this one. Poor and lower middle income people do
not even have mortgages to refinance. Economic illiteracy among the public is not our friend. The establishment however cannot
afford to make the public more economically literate for fear they will understand how the balance of trade over the last forty
year has ripped them off.]
"It usually does not work out for them all that well since food prices and other headline inflation goods often rise ahead of
wages and core inflation goods."
People also don't like being taxed to pay for infrastructure and public services.
Except for older voters, most people in advanced nations have never experienced moderate inflation.
If macro policy was done entirely by fiscal policy/better trade policy and interest rates were left alone, we'd still see higher
inflation after years of running the economy hot.
I just think that had the government did more fiscal/monetary policy after the financial crisis and allowed inflation to run over
target instead of being paranoid about accelerating inflation, the recovery would have been much quicker and people would have
been much happier even with a little inflation. Hillary would have won and inflation expectations would be higher among people
who think about such things.
When sellers of groceries, household goods, utility services, etc. can successfully raise prices, then shouldn't one think there
is still untapped consumer surplus? People with "extra money" will probably pay more, what do people with no extra money do? Buy
less, substitute down, forgo other more discretionary expenses? Shift other expenses to loaned money? Furniture and appliances
have always had financing programs, not obvious that more is bought on loan.
OTOH where I'm currently shopping, it seems grocery prices were stable over the last year. OTOH "sales" and other frequent short
term price variations are of a larger magnitude than inflation, so it's hard to tell. But a number of years ago I have definitely
noticed YOY price moves - not so now.
Grocery stores operate with very thing margins. Retail prices rise when wholesale prices rise. Rising transportation fuel costs
can push wholesale grocery prices, but a lot of food prices has to do with supply variances due to weather. Demand is not very
price elastic on staples, but luxury demand can fall severely with rising prices. Chuck roast is more of a staple for many people.
Filet mignon is a luxury for most people. Or maybe milk is a staple and candy is a luxury most of the time.
"... The book was The Constitution of Liberty by Frederick Hayek . Its publication, in 1960, marked the transition from an honest, if extreme, philosophy to an outright racket. The philosophy was called neoliberalism . It saw competition as the defining characteristic of human relations. The market would discover a natural hierarchy of winners and losers, creating a more efficient system than could ever be devised through planning or by design. Anything that impeded this process, such as significant tax, regulation, trade union activity or state provision, was counter-productive. Unrestricted entrepreneurs would create the wealth that would trickle down to everyone. ..."
"... But by the time Hayek came to write The Constitution of Liberty, the network of lobbyists and thinkers he had founded was being lavishly funded by multimillionaires who saw the doctrine as a means of defending themselves against democracy. Not every aspect of the neoliberal programme advanced their interests. Hayek, it seems, set out to close the gap. ..."
"... He begins the book by advancing the narrowest possible conception of liberty: an absence of coercion. He rejects such notions as political freedom, universal rights, human equality and the distribution of wealth, all of which, by restricting the behaviour of the wealthy and powerful, intrude on the absolute freedom from coercion he demands. ..."
"... The general thrust is about the gradual hollowing out of the middle class (or more affluent working class, depending on the analytical terms being used), about insecurity, stress, casualisation, rising wage inequality. ..."
"... So Hayek, I feel, is like many theoreticians, in that he seems to want a pure world that will function according to a simple and universal law. The world never was, and never will be that simple, and current economics simply continues to have a blindspot for externalities that overwhelm the logic of an unfettered so-called free market. ..."
"... J.K. Galbraith viewed the rightwing mind as predominantly concerned with figuring out a way to justify the shift of wealth from the immense majority to an elite at the top. I for one regret acutely that he did not (as far as I know) write a volume on his belief in progressive taxation. ..."
"... The system that Clinton developed was an inheritance from George H.W. Bush, Reagan (to a large degree), Carter, with another large assist from Nixon and the Powell Memo. ..."
"... What's changed is the distribution of the gains in GDP growth -- that is in no small part a direct consequence of changes in policy since the 1970s. It isn't some "market place magic". We have made major changes to tax laws since that time. We have weakened collective bargaining, which obviously has a negative impact on wages. We have shifted the economy towards financial services, which has the tendency of increasing inequality. ..."
"... Wages aren't stagnating because people are working less. Wages have stagnated because of dumb policy choices that have tended to incentives looting by those at the top of the income distribution from workers in the lower parts of the economy. ..."
"... "Neoliberalism" is entirely compatible with "growth of the state". Reagan greatly enlarged the state. He privatized several functions and it actually had the effect of increasing spending. ..."
"... When it comes to social safety net programs, e.g. in health care and education -- those programs almost always tend to be more expensive and more complicated when privatized. If the goal was to actually save taxpayer money, in the U.S. at least, it would have made a lot more sense to have a universal Medicare system, rather than a massive patch-work like the ACA and our hybrid market. ..."
"... As for the rest, it's the usual practice of gathering every positive metric available and somehow attributing it to neoliberalism, no matter how tenuous the threads, and as always with zero rigour. Supposedly capitalism alone doubled life expectancy, supports billions of extra lives, invented the railways, and provides the drugs and equipment that keep us alive. As though public education, vaccines, antibiotics, and massive availability of energy has nothing to do with those things. ..."
"... I think the damage was done when the liberal left co-opted neo-liberalism. What happened under Bill Clinton was the development of crony capitalism where for example the US banks were told to lower their credit standards to lend to people who couldn't really afford to service the loans. ..."
The events that led to Donald Trump's election started in England in 1975. At a meeting a few months after Margaret Thatcher became
leader of the Conservative party, one of her colleagues, or so the story goes, was explaining what he saw as the core beliefs of
conservatism. She snapped open her handbag, pulled out a dog-eared book, and
slammed it on the table . "This is what we believe," she said. A political revolution that would sweep the world had begun.
The book was The Constitution
of Liberty by Frederick Hayek . Its publication, in 1960, marked the transition from an honest, if extreme, philosophy to an
outright racket.
The philosophy
was called neoliberalism . It saw competition as the defining characteristic of human relations. The market would discover a
natural hierarchy of winners and losers, creating a more efficient system than could ever be devised through planning or by design.
Anything that impeded this process, such as significant tax, regulation, trade union activity or state provision, was counter-productive.
Unrestricted entrepreneurs would create the wealth that would trickle down to everyone.
This, at any rate, is how it was originally conceived. But by the time Hayek came to write The Constitution of Liberty, the
network of lobbyists and thinkers he had founded was being lavishly funded by multimillionaires who saw the doctrine as a means of
defending themselves against democracy. Not every aspect of the neoliberal programme advanced their interests. Hayek, it seems, set
out to close the gap.
He begins the book by advancing the narrowest possible conception of liberty: an absence of coercion. He rejects such notions
as political freedom, universal rights, human equality and the distribution of wealth, all of which, by restricting the behaviour
of the wealthy and powerful, intrude on the absolute freedom from coercion he demands.
Democracy, by contrast, "is not an ultimate or absolute value". In fact, liberty depends on preventing the majority from exercising
choice over the direction that politics and society might take.
He justifies this position by creating a heroic narrative of extreme wealth. He conflates the economic elite, spending their money
in new ways, with philosophical and scientific pioneers. Just as the political philosopher should be free to think the unthinkable,
so the very rich should be free to do the undoable, without constraint by public interest or public opinion.
The ultra rich are "scouts", "experimenting with new styles of living", who blaze the trails that the rest of society will follow.
The progress of society depends on the liberty of these "independents" to gain as much money as they want and spend it how they wish.
All that is good and useful, therefore, arises from inequality. There should be no connection between merit and reward, no distinction
made between earned and unearned income, and no limit to the rents they can charge.
Inherited wealth is more socially useful than earned wealth: "the idle rich", who don't have to work for their money, can devote
themselves to influencing "fields of thought and opinion, of tastes and beliefs". Even when they seem to be spending money on nothing
but "aimless display", they are in fact acting as society's vanguard.
Hayek softened his opposition to monopolies and hardened his opposition to trade unions. He lambasted progressive taxation and
attempts by the state to raise the general welfare of citizens. He insisted that there is "an overwhelming case against a free health
service for all" and dismissed the conservation of natural resources. It should come as no surprise to those who follow such matters
that he was awarded
the Nobel prize for economics .
By the time Thatcher slammed his book on the table, a lively network of thinktanks, lobbyists and academics promoting Hayek's
doctrines had been established on both sides of the Atlantic,
abundantly financed by some of the world's richest people and
businesses , including DuPont, General Electric, the Coors brewing company, Charles Koch, Richard Mellon Scaife, Lawrence Fertig,
the William Volker Fund and the Earhart Foundation. Using psychology and linguistics to brilliant effect, the thinkers these people
sponsored found the words and arguments required to turn Hayek's anthem to the elite into a plausible political programme.
Thatcherism and Reaganism were not ideologies in their own right: they were just two faces of neoliberalism. Their massive tax
cuts for the rich, crushing of trade unions, reduction in public housing, deregulation, privatisation, outsourcing and competition
in public services were all proposed by Hayek and his disciples. But the real triumph of this network was not its capture of the
right, but its colonisation of parties that once stood for everything Hayek detested.
Bill Clinton and Tony Blair did not possess a narrative of their own. Rather than develop a new political story, they thought
it was sufficient to
triangulate
. In other words, they extracted a few elements of what their parties had once believed, mixed them with elements of what their
opponents believed, and developed from this unlikely combination a "third way".
It was inevitable that the blazing, insurrectionary confidence of neoliberalism would exert a stronger gravitational pull than
the dying star of social democracy. Hayek's triumph could be witnessed everywhere from Blair's expansion of the private finance initiative
to Clinton's
repeal of the Glass-Steagal Act , which had regulated the financial sector. For all his grace and touch, Barack Obama, who didn't
possess a narrative either (except "hope"), was slowly reeled in by those who owned the means of persuasion.
As I warned
in April, the result is first disempowerment then disenfranchisement. If the dominant ideology stops governments from changing
social outcomes, they can no longer respond to the needs of the electorate. Politics becomes irrelevant to people's lives; debate
is reduced to the jabber of a remote elite. The disenfranchised turn instead to a virulent anti-politics in which facts and arguments
are replaced by slogans, symbols and sensation. The man who sank Hillary Clinton's bid for the presidency was not Donald Trump. It
was her husband.
The paradoxical result is that the backlash against neoliberalism's crushing of political choice has elevated just the kind of
man that Hayek worshipped. Trump, who has no coherent politics, is not a classic neoliberal. But he is the perfect representation
of Hayek's "independent"; the beneficiary of inherited wealth, unconstrained by common morality, whose gross predilections strike
a new path that others may follow. The neoliberal thinktankers are now swarming round this hollow man, this empty vessel waiting
to be filled by those who know what they want. The likely result is the demolition of our remaining decencies,
beginning with the agreement to limit global warming .
Those who tell the stories run the world. Politics has failed through a lack of competing narratives. The key task now is to tell
a new story of what it is to be a human in the 21st century. It must be as appealing to some who have voted for Trump and Ukip as
it is to the supporters of Clinton, Bernie Sanders or Jeremy Corbyn.
A few of us have been working on this, and can discern what may be the beginning of a story. It's too early to say much yet, but
at its core is the recognition that – as modern psychology and neuroscience make abundantly clear – human beings, by comparison with
any other animals, are both
remarkably social and
remarkably
unselfish . The atomisation and self-interested behaviour neoliberalism promotes run counter to much of what comprises human
nature.
Hayek told us who we are, and he was wrong. Our first step is to reclaim our humanity.
justamug -> Skytree 16 Nov 2016 18:17
Thanks for the chuckle. On a more serious note - defining neoliberalism is not that easy since it is not a laid out philosophy
like liberalism, or socialism, or communism or facism. Since 2008 the use of the word neoliberalism has increased in frequency
and has come to mean different things to different people.
A common theme appears to be the negative effects of the market on the human condition.
Having read David Harvey's book, and Phillip Mirowski's book (both had a go at defining neoliberalism and tracing its history)
it is clear that neoliberalism is not really coherent set of ideas.
ianfraser3 16 Nov 2016 17:54
EF Schumacher quoted "seek first the kingdom of God" in his epilogue of "Small Is Beautiful: a study of economics as if people
mattered". This was written in the early 1970s before the neoliberal project bit in the USA and the UK. The book is laced with
warnings about the effects of the imposition of neoliberalism on society, people and the planet. The predictions have largely
come true. New politics and economics needed, by leaders who place at the heart of their approach the premise, and fact, that
humans are "by comparison with any other animals, are both remarkably social and remarkably unselfish". It is about reclaiming
our humanity from a project that treats people as just another commodity.
Filipio -> YouDidntBuildThat 16 Nov 2016 17:42
Whoa there, slow down.
Your last post was questioning the reality of neoliberalism as a general policy direction that had become hegemonic across
many governments (and most in the west) over recent decades. Now you seem to be agreeing that the notion does have salience, but
that neoliberalism delivered positive rather than negative consequences.
Well, its an ill wind that blows nobody any good, huh?
Doubtless there were some positive outcomes for particular groups. But recall that the context for this thread is not whether,
on balance, more people benefited from neoliberal policies than were harmed -- an argument that would be most powerful only in
very utilitarian style frameworks of thought (most good for the many, or most harm for only the few). The thread is about the
significance of the impacts of neoliberalism in the rise of Trump. And in specific relation to privatisation (just one dimension
of neoliberalism) one key impact was downsizing (or 'rightsizing'; restructuring). There is a plethora of material, including
sociological and psychological, on the harm caused by shrinking and restructured work-forces as a consequence of privatisation.
Books have been written, even in the business management sector, about how poorly such 'change' was handled and the multiple deleterious
outcomes experienced by employees.
And we're still only talking about one dimension of neoliberalism! Havn't even touched on deregulation yet (notably, labour
market and financial sector).
The general thrust is about the gradual hollowing out of the middle class (or more affluent working class, depending on
the analytical terms being used), about insecurity, stress, casualisation, rising wage inequality.
You want evidence? I'm not doing your research for you. The internet can be a great resource, or merely an echo chamber. The
problem with so many of the alt-right (and this applies on the extreme left as well) is that they only look to confirm their views,
not read widely. Open your eyes, and use your search engine of choice. There is plenty out there. Be open to having your preconceptions
challenged.
RichardErskine -> LECKJ3000 16 Nov 2016 15:38
LECKJ3000 - I am not an economist, but surely the theoretical idealised mechanisms of the market are never realised in practice.
US subsidizing their farmers, in EU too, etc. And for problems that are not only externalities but transnational ones, the idea
that some Hayek mechanism will protect thr ozone layer or limit carbon emissions, without some regulation or tax.
Lord Stern called global warming the greatest market failure in history, but no market, however sophisticated, can deal with
it without some price put on the effluent of product (the excessive CO2 we put into the atmosphere).
As with Montreal and subsequent agreements, there is a way to maintain a level playing field; to promote different substances
for use as refrigerants; and to address the hole in ozone layer; without abandoning the market altogether. Simple is good, because
it avoids over-engineering the interventions (and the unintended consequences you mention).
The same could/ should be true of global warming, but we have left it so late we cannot wait for the (inevitable) fall of fossil
fuels and supremacy of renewables. We need a price on carbon, which is a graduated and fast rising tax essentially on its production
and/or consumption, which has already started to happen ( http://www.worldbank.org/content/dam/Worldbank/document/SDN/background-note_carbon-tax.pdf
), albeit not deep / fast / extensive enough, or international in character, but that will come, if not before the impacts really
bite then soon after.
So Hayek, I feel, is like many theoreticians, in that he seems to want a pure world that will function according to a simple
and universal law. The world never was, and never will be that simple, and current economics simply continues to have a blindspot
for externalities that overwhelm the logic of an unfettered so-called free market.
LionelKent -> greven 16 Nov 2016 14:59
And persistent. J.K. Galbraith viewed the rightwing mind as predominantly concerned with figuring out a way to justify the
shift of wealth from the immense majority to an elite at the top. I for one regret acutely that he did not (as far as I know)
write a volume on his belief in progressive taxation.
RandomLibertarian -> JVRTRL 16 Nov 2016 09:19
Not bad points.
When it comes to social safety net programs, e.g. in health care and education -- those programs almost always tend to be more
expensive and more complicated when privatized. If the goal was to actually save taxpayer money, in the U.S. at least, it would
have made a lot more sense to have a universal Medicare system, rather than a massive patch-work like the ACA and our hybrid market.
Do not forget that the USG, in WW2, took the deliberate step of allowing employers to provide health insurance as a tax-free
benefit - which it still is, being free even from SS and Medicare taxes. In the post-war boom years this resulted in the development
of a system with private rooms, almost on-demand access to specialists, and competitive pay for all involved (while the NHS, by
contrast, increasingly drew on immigrant populations for nurses and below). Next, the large sums of money in the system and a
generous court system empowered a vast malpractice industry. So to call our system in any way a consequence of a free market is
a misnomer.
Entirely state controlled health care systems tend to be even more cost-effective.
Read Megan McArdle's work in this area. The US has had similar cost growth since the 1970s to the rest of the world. The problem
was that it started from a higher base.
Part of the issue is that privatization tends to create feedback mechanism that increase the size of spending in programs.
Even Eisenhower's noted "military industrial complex" is an illustration of what happens when privatization really takes hold.
When government becomes involved in business, business gets involved in government!
Todd Smekens 16 Nov 2016 08:40
Albert Einstein said, "capitalism is evil" in his famous dictum called, "Why Socialism" in 1949. He also called communism,
"evil", so don't jump to conclusions, comrades. ;)
His reasoning was it distorts a human beings longing for the social aspect. I believe George references this in his statement
about people being "unselfish". This is noted by both science and philosophy.
Einstein noted that historically, the conqueror would establish the new order, and since 1949, Western Imperialism has continued
on with the predatory phase of acquiring and implementing democracy/capitalism. This needs to end. As we've learned rapidly, capitalism
isn't sustainable. We are literally overheating the earth which sustains us. Very unwise.
Einstein wrote, "Man is, at one and the same time, a solitary being and a social being. As a solitary being, he attempts to
protect his own existence and that of those who are closest to him, to satisfy his personal desires, and to develop his innate
abilities. As a social being, he seeks to gain the recognition and affection of his fellow human beings, to share in their pleasures,
to comfort them in their sorrows, and to improve their conditions of life. Only the existence of these varied, frequently conflicting,
strivings accounts for the special character of a man, and their specific combination determines the extent to which an individual
can achieve an inner equilibrium and can contribute to the well-being of society."
Personally, I'm glad George and others are working on a new economic and social construct for us "human beings". It's time
we leave the predatory phase of "us versus them", and construct a new society which works for the good of our now, global society.
zavaell -> LECKJ3000 16 Nov 2016 06:28
The problem is that both you and Monbiot fail to mention that your "the spontaneous order of the market" does not recognize
externalities and climate change is outside Hayek's thinking - he never wrote about sustainability or the limits on resources,
let alone the consequences of burning fossil fuels. There is no beauty in what he wrote - it was a cold, mechanical model that
assumed certain human behaviour but not others. Look at today's money-makers - they are nearly all climate change deniers and
we have to have government to reign them in.
aLERNO 16 Nov 2016 04:52
Good, short and concise article. But the FIRST NEOLIBERAL MILESTONE WAS THE 1973 COUP D'ETAT IN CHILE, which not surprisingly
also deposed the first democratically-elected socialist government.
accipiter15 16 Nov 2016 02:34
A great article and explanation of the influence of Hayek on Thatcher. Unfortunately this country is still suffering the consequences
of her tenure and Osborne was also a proponent of her policies and look where we are as a consequence. The referendum gave the
people the opportunity to vent their anger and if we had PR I suspect we would have a greater turn-out and nearly always have
some sort of coalition where nothing gets done that is too hurtful to the population. As for Trump, again his election is an expression
of anger and desperation. However, the American voting system is as unfair as our own - again this has probably been the cause
of the low turn-out. Why should people vote when they do not get fair representation - it is a waste of time and not democratic.
I doubt that Trump is Keynsian I suspect he doesn't have an economic theory at all. I just hope that the current economic thinking
prevailing currently in this country, which is still overshadowed by Thatcher and the free market, with no controls over the city
casino soon collapses and we can start from a fairer and more inclusive base!
JVRTRL -> Keypointist 16 Nov 2016 02:15
The system that Clinton developed was an inheritance from George H.W. Bush, Reagan (to a large degree), Carter, with another
large assist from Nixon and the Powell Memo.
Bill Clinton didn't do it by himself. The GOP did it with him hand-in-hand, with the only resistance coming from a minority
within the Democratic party.
Trump's victory was due to many factors. A large part of it was Hillary Clinton's campaign and the candidate. Part of it was
the effectiveness of the GOP massive resistance strategy during the Obama years, wherein they pursued a course of obstruction
in an effort to slow the rate of the economic recovery (e.g. as evidence of the bad faith, they are resurrecting a $1 trillion
infrastructure bill that Obama originally proposed in 2012, and now that they have full control, all the talk about "deficits"
goes out the window).
Obama and the Democratic party also bear responsibility for not recognizing the full scope of the financial collapse in 2008-2009,
passing a stimulus package that was about $1 trillion short of spending needed to accelerate the recovery by the 2010 mid-terms,
combined with a weak financial regulation law (which the GOP is going to destroy), an overly complicated health care law -- classic
technocratic, neoliberal incremental policy -- and the failure of the Obama administration to hold Wall Street accountable for
criminal misconduct relating to the financial crisis. Obama's decision to push unpopular trade agreements didn't help either.
As part of the post-mortem, the decision to continuing pushing the TPP may have cost Clinton in the rust belt states that went
for Trump. The agreement was unpopular, and her shift on the policy didn't come across as credible. People noticed as well that
Obama was trying to pass the measure through the lame-duck session of Congress post-election. With Trump's election, the TPP is
done too.
JVRTRL daltonknox67 16 Nov 2016 02:00
There is no iron law that says a country has to run large trade deficits. The existence of large trade deficits is usually
a result of policy choices.
Growth also hasn't gone into the tank. What's changed is the distribution of the gains in GDP growth -- that is in no small
part a direct consequence of changes in policy since the 1970s. It isn't some "market place magic". We have made major changes
to tax laws since that time. We have weakened collective bargaining, which obviously has a negative impact on wages. We have shifted
the economy towards financial services, which has the tendency of increasing inequality.
The idea too that people will be "poorer" than in the 1920s and 1930s is just plain ignorant. It has no basis in any of the
data. Wages in the bottom quartile have actually decreased slightly since the 1970s in real terms, but those wages in the 1970s
were still exponentially higher than wages in the 1920s in real terms.
Wages aren't stagnating because people are working less. Wages have stagnated because of dumb policy choices that have tended
to incentives looting by those at the top of the income distribution from workers in the lower parts of the economy. The 2008
bailouts were a clear illustration of this reality. People in industries rigged rules to benefit themselves. They misallocated
resources. Then they went to representatives and taxpayers and asked for a large no-strings attached handout that was effectively
worth trillions of dollars (e.g. hundreds of billions through TARP, trillions more through other programs). As these players become
wealthier, they have an easier time buying politicians to rig rules further to their advantage.
JVRTRL -> RandomLibertarian 16 Nov 2016 01:44
"The tyranny of the 51 per cent is the oldest and most solid argument against a pure democracy."
"Tyranny of the majority" is always a little bizarre, given that the dynamics of majority rule are unlike the governmental
structures of an actual tyranny. Even in the context of the U.S. we had minority rule due to voting restrictions for well over
a century that was effectively a tyranny for anyone who was denied the ability to participation in the elections process. Pure
majorities can go out of control, especially in a country with massive wealth disparities and with weak civic institutions.
On the other hand, this is part of the reason to construct a system of checks and balances. It's also part of the argument
for representative democracy.
"Neoliberalism" is entirely compatible with "growth of the state". Reagan greatly enlarged the state. He privatized several
functions and it actually had the effect of increasing spending.
When it comes to social safety net programs, e.g. in health care and education -- those programs almost always tend to be more
expensive and more complicated when privatized. If the goal was to actually save taxpayer money, in the U.S. at least, it would
have made a lot more sense to have a universal Medicare system, rather than a massive patch-work like the ACA and our hybrid market.
Entirely state controlled health care systems tend to be even more cost-effective. Part of the issue is that privatization
tends to create feedback mechanism that increase the size of spending in programs. Even Eisenhower's noted "military industrial
complex" is an illustration of what happens when privatization really takes hold.
daltonknox67 15 Nov 2016 21:46
After WWII most of the industrialised world had been bombed or fought over with destruction of infrastructure and manufacturing.
The US alone was undamaged. It enjoyed a manufacturing boom that lasted until the 70's when competition from Germany and Japan,
and later Taiwan, Korea and China finally brought it to an end.
As a result Americans born after 1950 will be poorer than the generation born in the 20's and 30's.
This is not a conspiracy or government malfunction. It is a quirk of history. Get over it and try working.
Arma Geddon 15 Nov 2016 21:11
Another nasty neoliberal policy of Reagan and Thatcher, was to close all the mental hospitals, and to sweeten the pill to sell
to the voters, they called it Care in the Community, except by the time those hospitals closed and the people who had to relay
on those institutions, they found out and are still finding out that there is very little care in the community left any more,
thanks to Thatcher's disintegration of the ethos community spirit.
In their neoliberal mantra of thinking, you are on your own now, tough, move on, because you are hopeless and non productive,
hence you are a burden to taxpayers.
Its been that way of thinking for over thirty years, and now the latest group targeted, are the sick and disabled, victims
of the neoliberal made banking crash and its neoliberal inspired austerity, imposed of those least able to fight back or defend
themselves i.e. vulnerable people again!
AlfredHerring GimmeHendrix 15 Nov 2016 20:23
It was in reference to Maggie slapping a copy of Hayek's Constitution of Liberty on the table and saying this is what we believe.
As soon as you introduce the concept of belief you're talking about religion hence completeness while Hayek was writing about
economics which demands consistency. i.e. St. Maggie was just as bad as any Stalinist: economics and religion must be kept separate
or you get a bunch of dead peasants for no reason other than your own vanity.
Ok, religion based on a sky god who made us all is problematic but at least there's always the possibility of supplication
and miracles. Base a religion on economic theory and you're just making sausage of your neighbors kids.
TanTan -> crystaltips2 15 Nov 2016 20:10
If you claim that the only benefit of private enterprise is its taxability, as you did, then why not cut out the middle man
and argue for full state-directed capitalism?
Because it is plainly obvious that private enterprise is not directed toward the public good (and by definition). As we have
both agreed, it needs to have the right regulations and framework to give it some direction in that regard. What "the radical
left" are pointing out is that the idea of private enterprise is now completely out of control, to the point where voters are
disenfranchised because private enterprise has more say over what the government does than the people. Which is clearly a problem.
As for the rest, it's the usual practice of gathering every positive metric available and somehow attributing it to neoliberalism,
no matter how tenuous the threads, and as always with zero rigour. Supposedly capitalism alone doubled life expectancy, supports
billions of extra lives, invented the railways, and provides the drugs and equipment that keep us alive. As though public education,
vaccines, antibiotics, and massive availability of energy has nothing to do with those things.
As for this computer being the invention of capitalism, who knows, but I suppose if one were to believe that everything was
invented and created by capitalism and monetary motives then one might believe that. Energy allotments referred to the limit of
our usage of readily available fossil fuels which you remain blissfully unaware of.
Children have already been educated to agree with you, in no small part due to a fear of the communist regimes at the time,
but at the expense of critical thinking. Questioning the system even when it has plainly been undermined to its core is quickly
labelled "radical" regardless of the normalcy of the query. I don't know what you could possibly think left-wing motives could
be, but your own motives are plain to see when you immediately lump people who care about the planet in with communist idealogues.
If rampant capitalism was going to solve our problems I'm all for it, but it will take a miracle to reverse the damage it has
already done, and only a fool would trust it any further.
YouDidntBuildThat -> Filipio 15 Nov 2016 20:06
Filipo
You argue that a great many government functions have been privatized. I agree. Yet strangely you present zero evidence of
any downsides of that happening. Most of the academic research shows a net benefit, not just on budgets but on employee and customer
satisfaction. See for example.
And despite these privitazation cost savings and alleged neoliberal "austerity" government keeps taking a larger share of our
money, like a malignant cancer. No worries....We're from the government, and we're here to help.
Keypointist 15 Nov 2016 20:04
I think the damage was done when the liberal left co-opted neo-liberalism. What happened under Bill Clinton was the development
of crony capitalism where for example the US banks were told to lower their credit standards to lend to people who couldn't really
afford to service the loans.
It was this that created too big to fail and the financial crisis of 2008. Conservative neo-liberals believe passionately in
competition and hate monopolies. The liberal left removed was was productive about neo-liberalism and replaced it with a kind
of soft state capitalism where big business was protected by the state and the tax payer was called on to bail out these businesses.
THIS more than anything else led to Trump's victory.
As noted yesterday,
gaslighting has often been used in the context of personal relationships to describe a manipulative person's attempts to
undermine and control their romantic partner.
In a larger context, these manipulative techniques can also be applied to our perception of the entire economy:
Questioning, belittling, discounting and undermining our experience of economic "animal spirits" and general conditions.
Overwriting our memory of the economy of the past, again by undermining, questioning and belittling our memories.
Discrediting and marginalizing our definitions of economic well-being, in favor of the manipulator's definition of our well-being.
Using authority and "experts" to disqualify and discredit dissenting views.
Denigrate and deny our lived experience of economic conditions by repeating the institutionalized authority-approved narrative
of "what actually happened."
Disorient, discredit and destroy dissent with a torrent of false statistics, false narratives, false accusations and false
claims of our errors.
As noted yesterday, gaslighting has often been used in the context of personal relationships
to describe a manipulative person's attempts to undermine and control their romantic partner.
In a larger context, these manipulative techniques can also be applied to our perception
of the entire economy:
Questioning, belittling, discounting and undermining our experience of economic "animal spirits"
and general conditions.
Overwriting our memory of the economy of the past, again by undermining, questioning and belittling
our memories.
Discrediting and marginalizing our definitions of economic well-being, in favor of the manipulator's
definition of our well-being.
Using authority and "experts" to disqualify and discredit dissenting views.
Denigrate and deny our lived experience of economic conditions by repeating the institutionalized
authority-approved narrative of "what actually happened."
Disorient, discredit and destroy dissent with a torrent of false statistics, false narratives,
false accusations and false claims of our errors.
Socking away money for retirement is a great idea, but how much do you really need to save? How
long do you need to work to set yourself up comfortably in your golden years? Enter your information
below, the charts and numbers on the right will change as you go along, so try a few different numbers
and see how different scenarios might play out for you.
All amounts are calculated using today's dollar values. The rate of return on investments is
adjusted for a 3% inflation rate.
Below are sample for simulation "reasonably conservative investor" responses. The sample was done
of Sep 4, 2007 so the allocation looks a little bit strange for the market conditions but we have what
we have... What idiots programmed this junk ?
Here are the results of your profile questionnaire. The possible allocation models are Very Defensive,
Defensive, Conservative, Moderate, Moderately Aggressive, Aggressive, and Very Aggressive. Your risk
propensity suggests a Conservative portfolio allocated with the following mix:
The Last but not LeastTechnology is dominated by
two types of people: those who understand what they do not manage and those who manage what they do not understand ~Archibald Putt.
Ph.D
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