There are many, many bad arguments for taxpayer financing of the arts (Reason TV addressed some of them in this short, fast-paced video). Now that the vulgarian Donald Trump has called for ending the National Endowment for the Arts (NEA) and the National Endowment for the Humanities (NEH) we’ve been treated to a new round of tired briefs in favor of why the government should of course fund the arts. Don’t you know that these cost just pennies per person, the cost of a couple postage stamps, really, if anyone still remembers what the hell those are? Those stupid drones that Barack Obama—who loved the arts!—used to help drop over 26,000 bombs last year cost way more! It’s a peculiar thing: Arts funding is so small—the NEA and NEH cost about $300 million annually—that it makes no sense to cut it but it looms so large that even reducing it by a penny will end culture as we know it.
Many of the arguments to maintain arts funding revolve around the impact on individual starving artists who might not go on to create this or that supposed masterpiece. While the Works Project Administration’s Federal Arts Project might not have directly paid for that much in the way of memorable art (some of it is pretty damn fine, though), its handouts to unemployed artists to write guides, take pictures, put on plays, and paint murals meant they could survive without, you know, looking for work like everyone else. I don’t find most of those arguments particularly interesting or convincing, if only because they ignore all the masterworks that might have been created if, say, the mediocre Archibald MacLeish had been forced to dig ditches by hand and my maternal grandfather had instead been employed as librarian of Congress (at the very least, I’m pretty sure my Italian pops wouldn’t have lobbied as hard or effectively as MacLeish to save Ezra Pound from the firing squad for making propaganda broadcasts for Mussolini).
Then there’s this: The NEA and the NEH only date back to the mid-1960s and were midwifed into life by Lyndon Johnson, arguably the least-cultured president since Andrew Jackson. LBJ, bless his lying-cheating-corrupt little heart, might have thought that the Spartans were a college football team and preferred kicking Hubert Humphrey in the shins to the opera, but goddammit he created two arty fiefdoms in honor of John F. Kennedy to show he wasn’t a total hick! We may never understand how America and Americans got along for nearly 200 years without such orgs, but we goddam know for sure that we can’t ever get rid of them.
Which leads me to the very worst argument I’ve encountered to date for public funding of the arts in general and the NEA and NEH in specific. This comes courtesy of Norman Ornstein, the token liberal at the American Enterprise Institute,
For millenia, a key measure of a nation’s greatness has been appreciation for culture– music, art, dance, theater. Ax NEA, NEH,we lose that
Ornstein’s a political scientist by training, so we might properly ask him whether nations as we know them have in fact been around “for millenia” or are actually a creation of the early modern period. We can grant him more latitude for knowing less about art. Kings, emperors, popes, and other rulers have all sponsored cultural production of course, some of it good and some of it godawful; the real difference-maker came during the Renaissance and later, when private patrons of the arts, a rising class of merchants, and workaday people with money burning a hole in their pocket for the first time in human history created markets in cultural production (by the 18th century, for chrissakes, Samuel Johnson was mocking writers who didn’t write for money). The idea that that a “key measure of a nation’s greatness has been appreciation for culture” (Ornstein implicitly means only high culture) is a totally different question and an irrelevant one. Was 19th century America not a “great” country? Tocqueville, that tackling dummy to which lazy political scientists and journalists on deadline reach out for like a crack whore for a pipe, thought it a plenty great country despite our lack of cultivation:
Taken as a whole, literature in democratic ages can never present, as it does in the periods of aristocracy, an aspect of order, regularity, science, and art; its form, on the contrary, will ordinarily be slighted, sometimes despised. Style will frequently be fantastic, incorrect, over- burdened, and loose, almost always vehement and bold. Authors will aim at rapidity of execution more than at perfection of detail. Small productions will be more common than bulky books; there will be more wit than erudition, more imagination than profundity; and literary performances will bear marks of an untutored and rude vigor of thought, frequently of great variety and singular fecundity. The object of authors will be to astonish rather than to please, and to stir the passions more than to charm the taste.
Americans have always appreciated culture in various ways, though not in ways that Europeans and native-born snobs would always agree with. Twenty years ago (!), Reason magazine published a symposium on “Creating Culture,” and former senior editor Charles Paul Freund’s entry is directly on point here:
“Culture is a process, not a fixed condition,” writes Lawrence W. Levine in Highbrow/Lowbrow: The Emergence of Cultural Hierarchy in America (1988). Exactly. Control of that process is what America’s “culture wars” have always been about. Levine’s anti-canonical book describes the 19th-century cultural struggle, in which a moneyed and educated class took control of such once-popular forms as Shakespeare and opera, embalming them and arrogating to itself the arbitration of Taste.
In 19th century America, as in contemporary America, plenty of us loved culture. Traveling shows would be filled with actors peforming Shakespeare’s greatest hits, a bunch of opera arias taken out of context, and some animal acts. Since before there was a United States, we’ve always been willing to shill out hard-earned coin for plays, books, music, you name it. And yet there’s no reason to believe that, as Ornstein insists, that “appreciation for culture” is what made us great. What made—and makes—America great is precisely that we don’t give a shit about “a nation’s greatness” as much as we care about our own individual plans and hopes. Despite his liberal-Democratic bona fides, Ornstein works at AEI, so he probably believes in national greatness as a foundational category right up there with defense spending.
But if we’re going to be honest, completely defunding the NEA and the NEH (which almost certainly won’t happen anyway) will have less-than-no impact on American greatness or American shittiness. No, that depends on much more basic questions, including: Are we going to keep pursuing a foreign policy that does nothing other than create the next generation of American-hating terrorists?; will we beggar our children in the name of unsustainable and unwise middle-class entitlement programs?; will we disproportionately screw over minorities via the drug war, occupational licensing, and sub-par public schools?; and more. If we want to be a great country, maybe we should stop arresting hundreds of thousands of people a year for simple pot possession. Think of it as a performance piece titled “What If We Gave a Drug War and Nobody Came?” I rush to say that I write as someone who is big on art, music, writing, video, and other forms of creative expression, as someone who got a goddamned Ph.D. in literature because reading and understanding novels was just that important to me. I love art (however defined) and I love culture (whatever it means). And I know for sure that whether tax funds are used to continue the NEA and NEH, it will have no impact on whether America is good, great, or depraved. By one count, the “arts and cultural goods” add $704 billion to the U.S. economy, and you’re telling me that cutting $300 million from the federal budget will kill that?
For the people who work there and the people who get money from the endowments, killing the two agencies would be at least a minor irritation, sure. But to the extent that their work mattered, folks would step in to keep it going or, same thing, they would reduce their asking price to keep them going. Donald Trump is widely and probably accurately described as a brute with no interest in art and culture. This is a guy who relaxes by watching Fox News, not listening to Philip Glass or probably even watching HBO. But however vulgar Trump may be, he doesn’t come close to the primitivism embodied in the idea that a country can only be great when it forces taxpayers to pay for shit they don’t want. That’s not artistic, it’s despotic. And it betrays no understanding of how the creative world works anyway.
Reason’s Jim Epstein explains “Why Government Funding Hurts PBS and NPR.” This is a different but vitally important argument than the one above. Epstein notes that publicly accountable networks necessarily place all sorts of limits on exactly the sort of mongrelization and mutation that lets creative expression flourish, resulting in a large number of creative people leaving the velvet coffins of NPR and PBS to strike out on their own. Watch by clicking below.
In an era of daily internet outrage, Dave Rubin stands out for his willingness to engage a wide spectrum of political opinions with a civil tone. His show, The Rubin Report has hosted the likes of alt-right gadfly Milo Yiannopolous, crusading atheist Sam Harris, and ex-governor-turned-conspiracy-theorist Jesse Ventura, all in a spirit of non-partisan intellectual inquiry.
Chatting with political adversaries has affected Rubin’s politics in unexpected ways. As his beliefs turned towards individualism, he broke with the progressive show The Young Turks over the issue of identity politics. Rubin explains his ideological shift in his influential video, Why I Left the Left, which has racked up 1.7 million views in just a few months.
Today, Rubin describes himself as a classical liberal. “I do believe that the state has some use,” he explains. “Now I don’t want a huge state. I firmly believe in individual liberty more than anything else. And that you have to live the life you want for yourself.” The one-time progressive even cast a vote for Libertarian Party candidate Gary Johnson in the last presidential election.
Although his even-keeled approach to dialogue hasn’t changed much, he now sees value in the outrageous style of internet punditry. “Sometimes there is use in laying out bombs that are going to upset people, because out of the chaos of that, you can actually build some bridges, you can actually find some people waking up,” he says.
Edited by Alex Manning. Cameras by Zach Weissmueller and Austin Bragg
Click below for full text, links, and downloadable versions.
If you’re among the growing minority of investors still under the impression that ‘everything if awesome’ in the auto industry simply because new car sales volumes continue to hover around all time highs, while turning a blind eye to soaring incentive spending and that pesky little debt bubble, then we may need your help with how we should be interpreting the following subprime auto loan delinquency stats from Morgan Stanley.
In a recent report, Jeen Ng of Morgan Stanley took a look at 266 subprime auto ABS deals to assess the underlying ‘health’ of the auto loan market and this is a recap of what he found.
First, despite low unemployment, high consumer confidence and debt-to-income ratios at 30-year lows, 60+ day delinquencies and default rates are soaring back to ‘great recession’ levels for prime and subprime auto securitizations.
Meanwhile, loss severities are also starting to rise…
….just as used car prices come under pressure…
…which likely has something to do with the flood of lease returns that are about to hit the market…
Of course, it can’t be that these deteriorating credit metrics are the result of 21 consecutive quarters of loosening lending standards from 2Q 2011 through 2Q 2016, right?
Lending Standards Have Eased…: While overall household debt remains below pre-crisis peaks, auto debt has ballooned to all-time highs. While this debt grew, the median FICO score of borrowers receiving auto loans fell roughly 30 points from peak to trough. According to the Senior Loan Officer Opinion Survey (SLOOS), auto lenders eased lending standards for 21 consecutive quarters from 2Q 2011 through 2Q 2016.
…but Lenders Now Appear to Be Reversing Course and Tightening Standards: While FICO scores did drop precipitously, they have recovered in recent months, and the SLOOS reports 3 quarters of tightening standards after the 21 of easing. A look at the weighted average FICO scores of loans going into subprime ABS deals reveals similar trends, with a number of lenders reporting increases in these scores over recent years. However, the overall trend has moved lower since 2013.
Meanwhile, just like in the past housing crash, the mix of “deep subprime” collateral being pawned off on the ABS market is soaring…because who else would buy it?
Shift in Deal Mix the Real Culprit: The main driver of this dynamic appears to be that, while individual lenders are increasing their weighted average FICO scores, the securitization market has become more heavily weighted towards issuers that we would consider deep subprime – those with a weighted average FICO score below 550. In fact, since 2010, the share of Subprime Auto ABS origination that has come from these deep subprime deals has increased from 5.1% to 32.5%.
Deep Subprime Driving Delinquencies: Since 2012, 60+ delinquencies of non-deep subprime deals picked up from 3.03% to 3.92%. While that 89bps increase certainly demonstrates deterioration, it pales in comparison to the over 300bps increase coming from these deep subprime deals.
But sure, 18mm new cars per year is probably a ‘normalized’ level of demand for the U.S. market…just like 1.3mm in new home sales was ‘normal’ in 2005.
The narrative of the “Russian hacking” of the US elections has been thrown for a loop following a report the Obama administration blocked FBI Director James Comey’s attempts to go public as early as the summer of 2016 with information on Russia’s alleged campaign to influence the U.S. presidential election, Newsweek reports citing two unidentified sources with knowledge of the matter.
According to Newsweek, Comey pitched the idea of writing an op-ed about a Russian “interference” campaign during a meeting in the White House’s situation room in June or July 2016, well before the Department of Homeland Security and the Office of the Director of National Intelligence accused the Russian government of tampering with the U.S. election in an October 7 statement, the same day as Wikileaks started released the hacked Podesta emails, and the same day that the Trump’s “grab her by the pussy” recording emerged.
“He had a draft of it or an outline. He held up a piece of paper in a meeting and said, ‘I want to go forward, what do people think of this?’” said a Newsweek source with knowledge of the meeting, which included Secretary of State John Kerry, Attorney General Loretta Lynch, the Department of Homeland Security’s director and the national security adviser.
However, the ohe other national security leaders didn’t like the idea, and White House officials thought the announcement should be a coordinated message backed by multiple agencies. “An op-ed doesn’t have the same stature, it comes from one person.”
Newsweek notes that the op-ed would not have mentioned whether the FBI was investigating Donald Trump’s campaign workers or others close to him for links to the Russians’ interference in the election, perhaps because such an investigation did not start until later.
Comey would likely have tried to publish the op-ed in The New York Times, and it would have included much of the same information as the bombshell declassified intelligence report released January 6, which said Russian President Vladimir Putin tried to influence the presidential election, the source said.
What to make of this latest revelation: according to Newsweek, “for supporters of Hillary Clinton, news of the op-ed adds to the frustration over Comey’s public disclosure of details about the investigation into her emails, including at a July press conference, but not about the probe involving Russia and Trump, which began that same month.”
Of course, it remains unclear how and if the election outcome would have changed had Comey published the report: recent reports have suggested that despite allegations of collusion between the Trump campaign and Russia, nothing has been found. In other words, the best that Comey could reveal is that someone may have been trying to hack the DNC, and eventually, John Podesta. And yet, those hacks did nothing to change the actual voting process, they merely shed light on the illicit dealings within the Clinton campaign and the infighting within the DNC, which – as we now know – colluded both internally, with the press and with the Clinton campaign to prevent Bernie Sanders from becoming the Democratic presidential candidate.
In any event, the ball will now be in the Democrats’ court, with fingers pointing right at the White House.
“This raises a lot of questions,” says Jarad Geldner, a senior adviser for the Democratic Coalition Against Trump, which filed a complaint with the Department of Justice’s Office of Professional Responsibility over Comey’s disclosures about the Clinton investigation. “That raises the question of why Comey or [the Department of Justice] or the White House felt that it was OK to hold that [July] press conference on Hillary Clinton’s emails but not to go public with this.”
That would be the Obama White House, for those who have lost track of the timeline.
Worse, as Newsweek adds, it was a sluggish White House that denied Comey and delayed the announcement. “The White House shut it down,” that source says. “They did their usual—nothing.”
Of course, the biggest question raised is why did Obama block Comey in the first place. Or rather, make that rhetorical question.
While we doubt that Obama will suffer the Democrats’ wrath as a result of this latest story, it will be sure to keep the “Russian hacking” narrative topical for at least a few more days, before yet another “Russia story” emerges, and then another, and so on, until hopefully one day the bipartisan Senate probe into alleged Russian meddling “gets to the bottom of this.”
Adam Schiff is a traitor to the United States. Indeed, to all of humanity. He is a traitor, because he is undermining American democracy and the forces for peace.
The Clintons and the Democratic Leadership Council sold out the Democratic constituency, that is, the working class and peace, because they were convinced that they could get more money from Wall Street, the global corporations, and the military/security complex than they could from the labor unions.
The labor unions were going to be destroyed by jobs offshoring and the relocation of US manufacturing abroad. This relocation of American manufacturing would destroy the budgets of the state and local governments in America’s manufacturing regions and result in fierce pressure on the public sector unions, which are being destroyed in turn.
In short, Democratic Party funding was evaporating, and Democrats needed to compete against Republicans for funding from the One Percent.
George Soros helped the Clinton Democrats in this transition, and soon there was no one representing the working class.
Consequently, since Clinton the real median family income of the working class has been falling, and in the 21st century the working class has been buried in unemployment and debt.
But the Democratic Party has prospered, and so have Bill and Hillary Clinton. The Democratic Party raised far more money, especially from the One Percent, than Trump, who allied with the working class, in the past presidential election. Bill & Hillary have a personal fortune of $120 million at least, and $1.6 trillion in their personal foundation that supports their daughter.
Using Government to get rich is an old trick in America, but the Clintons took it to new highs when they flushed the working class and became the whores for Wall Street, Israel, and the military/security complex.
This is where the Democratic Party is today.
The despicable Adam Schiff’s function is to discredit the presidency of Donald Trump by creating an atmosphere in which any interest in establishing normal relations with Russia, thus reducing the tensions that could result in nuclear war, is proof of being a “Putin agent” and a “traitor.”
What Schiff is doing is making it impossible for President Trump to reduce the dangerous tensions between the nuclear superpowers that the Clinton, George W. Bush, and Obama regimes created. These tensions can easily result in nuclear war, as I have often emphasized.
It is extraordinary that Schiff, who endangers the existence of all life on planet Earth, is a hero of the liberal/progressive/left. The pressitute media whores love him. He always gets top billing as he urges on humanity to its final destruction.
How is it that Donald Trump, who says he wants to reduce tensions with Russia is portrayed as a threat, while the liberal/progressive/left, the CIA, and the Democratic Party are portrayed as the salt of the Earth for promulgating nuclear war with Russia (and China)?
I have no explanation as to why the peoples of the West, as ignorant and idiotic as they are, and their ignorance and idiocy are extreme, prefer nuclear war with Russia (and China) instead of normal relations.
But the utterly evil Adam Schiff prefers nuclear war, and that is where he is leading the insouciant West.
And you can bet your last cent that the media whores will continue cheering Schiff on.
The following article is arranged in Question and Answer (Q & A) format. Through the Q & A approach, this article raises some important issues about price discovery in the gold markets and aims to explain the view that the gold price is being set by the paper gold markets.
BullionStar’s CEO Torgny Persson and precious metals analyst Ronan Manly are of the opinion that due to the structure of contemporary gold markets, it is primarily trading activity in the paper gold markets which sets the international price of gold.
Question: The international gold price is constantly quoted in the financial media alongside other major financial indicators. What is this international gold price, and how is it defined?
The international gold price usually refers to the price of gold quoted in US Dollars per troy ounce as traded on the 24-hour global wholesale gold market (XAU/USD). Gold is traded non-stop globally during the entire business week, creating a continuum of international gold price quotes from Sunday evening New York time all the way through to Friday evening New York time. Depending on the context, this international gold price sometimes refers to a spot gold market quote, such as spot gold traded in London, and at other times may refer to the front month of a gold futures contract price as traded on the US Commodity Exchange (COMEX). The front month contract is a nearby month which will usually exhibit the highest trading volume and activity.
The international gold price can also at times be referring to the LBMA Gold Price benchmark price as derived during the London daily gold price auctions (morning and afternoon auctions). LBMA is an abbreviation for London Bullion Market Association.
Therefore, this 'international price' could be referencing a spot gold price, a futures gold price, or a benchmark gold price, but all three would, at a comparable time, be roughly similar in magnitude.
Question: Where does this international gold price come from, where is it derived?
Recent empirical research has determined that gold price discovery is jointly driven by London Over-the-Counter (OTC) spot gold market trading and COMEX gold futures trading, and that the "international gold price" is derived from a combination of London OTC gold prices and COMEX gold futures prices. See “Who sets the price of gold? London or New York (2015)” by Hauptfleisch, Putni?š, and Lucey.
In general, the higher the trading volume and liquidity in a specific asset market, the more that market contributes to discovering prices for that asset. This is also true of the global gold market. Between them, the London OTC and New York trading venues account for the vast majority of global gold trading volume, and in 2015, the London OTC spot market represented approximately 78% of global gold market turnover while COMEX accounted for a further 8% (See Hauptfleisch, Putni?š, and Lucey (2015)).
Based on London gold clearing statistics for 2016, a quick calculation shows that total trading volume in the London OTC gold market is estimated to have been at least the equivalent of 1.5 million tonnes of gold in 2016, while trading volume of the 100 oz COMEX gold futures contract reached 57.5 million contracts during 2016, equivalent to 179,000 tonnes of gold. Gold trading volume on the London OTC gold market in 2016 was therefore about 8.4 times higher than trading volume in the COMEX 100 oz gold futures contract.
LBMA Unallocated Gold Trading, 1.5 million tonnes in 2016
However, COMEX has been found, by the above academic research, to have a larger influence on price discovery than London OTC, despite the lower trading volumes of COMEX. This is most likely due to a combination of factors such as COMEX' accessibility and extended trading hours via use of the GLOBEX platform, the higher transparency of futures trading compared to OTC trading, and the lower transaction costs and ease of leverage in COMEX trading. In contrast, the London OTC gold market has limited trading hours (during London business hours), barriers to wider participation since it's an opaque wholesale market without central clearing, and trading spreads which are dictated by a small number of LBMA bullion bank market-makers and a handful of London-based commodity brokerages.
The bottom line though is that both sets of trading statistics, London OTC and COMEX, are gigantic in comparison to the size of the underlying physical gold markets in London and New York.
Question: So, does the physical gold market or the paper gold market set this international price of gold?
The international gold price is purely set by paper gold markets, in other words it is set by non-physical gold markets. Based on their respective gold market structures, the London OTC gold market and COMEX are both paper gold markets. Supply of and demand for physical gold plays no role in setting the gold price in these markets. Physical gold transactions in all other gold markets just inherit the gold prices that are discovered in these paper gold markets.
The London OTC gold market predominantly involves the trading of synthetic unallocated gold, where trades are cash-settled and not physically delivered (i.e. no delivery of physical gold). These synthetic gold transactions have little connection to any underlying gold holding, hence they are de-facto gold derivative positions. By definition, unallocated gold positions are just a series of claims on bullion banks where the holder is an unsecured creditor of the bank, and the bank has a liability to that claim holder for an amount of gold. The holder, on its side, takes on credit risk towards the bullion bank. The London OTC gold market is therefore merely a venue for trading gold credits.
The London OTC gold market is also one in which the bullion banking participants employ fractional-reserve gold trading to create large amounts of paper gold out of thin air (analogous to commercial lending), where the trading is also leveraged and opaque, and where this paper gold is only fractionally backed by physical gold. This “gold” is essentially synthetic gold. See BullionStar Gold university article "Bullion banking Mechanics" for further details on fractional-reserve gold trading.
Since COMEX only trades exchange-based gold futures contracts, it is, by definition, a derivatives market. Cash-settlement is the norm. Only 1 in 2500 gold futures contracts traded on COMEX is delivered with a transfer of warrants representing metal. The rest of the contracts are cash-settled. This means that 99.96% of COMEX gold futures contracts are cash-settled. See BullionStar US Gold Market Infographic for details.
Given COMEX trading gold futures and London trading synthetic unallocated gold, both the London and COMEX gold markets essentially trade gold derivatives, or paper gold instruments, and by extension, the international gold price is being determined in these paper gold markets.
Beyond the London OTC gold market and COMEX, all other gold trading venues are predominantly price takers that take in and use the gold prices established by the paper gold markets in London and New York. These other markets include physical gold markets around the world which look to the international gold price as an input into their domestic gold price setting mechanisms and conventions.
Question: Explain a little more about the market structures of these London OTC and COMEX markets?
By definition, futures trading is trading of securities whose value is derived from an underlying asset but whose securities are distinct from those of the underlying asset, i.e. derivatives. COMEX gold futures contracts are derivatives on gold. COMEX registered gold stocks are relatively small, very little physical gold is ever delivered on COMEX, and even less physical gold is withdrawn from COMEX approved gold vaults. COMEX gold trading also employs significant leverage. Hauptfleisch, Putni?š, and Lucey (2015) state that “such trades [on COMEX] contribute disproportionately to price discovery”. Note that the COMEX gold futures market is actually a 24-hour market but its liquidity is highest during US trading hours.
Turning to the London OTC gold market, nearly the entire trading volume of the London OTC gold market represents trading in unallocated gold, which to reiterate, merely represents a claim by a position holder on a bullion bank for a certain amount of gold, a claim which is rarely exercised. London OTC gold trades also predominantly cash-settle. Traders, speculators and investors in unallocated gold positions virtually never take delivery of physical gold.
This is a fact confirmed by a UK HMRC / LBMA Memorandum of Understanding published in 2013 which states that in the London gold market “investors acquire an interest in the metals, although in most situations, physical delivery will not occurand in 95% of trades, trading in unallocated metals will be undertaken.” Additionally, in 2011, the then LBMA CEO Stuart Murray also confirmed that there were ‘very substantial amounts of unallocated gold’ held in London.
Dentons states that “the reality of unallocated bullion trading is that buyers and sellers rarely intend for physical delivery to ever take place. Unallocated bullion is used as a means to have “synthetic” holdings of gold and so obtain exposure to the price of gold by reference to the London gold fixing.”
Although the LBMA does not publish gold trading volumes on a regular basis, it did publish a one-off gold trading survey covering Q1 2011 in which it was revealed that during the first quarter of 2011, 10.9 billion ozs of gold (340,000 tonnes) were traded in the London OTC gold market. During the same period, 1.18 billion ozs of gold (36,700 tonnes) were cleared in the London OTC gold market. This would suggest a trading turnover to clearing turnover ratio of 10:1. In the absence of live trading data from the London OTC gold market, this 10:1 proxy ratio can continue to be applied as a multiplier to the LBMA London Gold Market daily clearing statistics, which are published every month, and which are always phenomenally high.
For example, average daily clearing volumes in the London Gold Market during January 2017 totalled 20.5 million ounces. That’s the equivalent 638 tonnes of gold cleared per day in London. On a 10:1 trading to clearing multiple, that’s the equivalent of 6,380 tonnes of gold traded per day, or 1.6 million tonnes of gold traded per year.
Since there are only about 6,500 tonnes of gold stored in London, most of which represents static holdings of central banks, ETFs and other holders, the London OTC gold trading activities are totally disconnected from the underlying physical gold holdings. Furthermore, only about 190,000 tonnes of gold have ever been mined throughout history, half of which are estimated to be held in the form of jewellery. Therefore, the trading of nearly 6,500 tonnes of gold per day within the London OTC gold market has nothing to do with the physical gold market, yet perversely, this trading activity drives global gold price discovery and the pricing of physical bullion trades and transactions.
Revealingly, according to the LBMA bullion bankers who established the reporting of London gold clearing statistics, who specifically were the then LMPCL chairman, Peter Fava, and JP Morgan’s Peter Smith, these LBMA gold clearing statistics include trading activities such as “leveraged speculative forward bets on the gold price” and “investment fund spot price exposure via unallocated positions”, activities which are just side-bets on the gold price. See October 2003 article titled “Clearing the Air Discussing Trends and Influences on London Clearing Statistics“, from LBMA Alchemist Issue 32.
In essence, trading activity in the London gold market predominantly represents huge synthetic artificial gold supply, where paper gold trading is deriving the price of gold, not physical gold trading. Synthetic gold is just created out of thin air as a book-keeping entry and is executed as a cashflow transaction between the contracting parties. There is no purchase of physical gold in such a transaction, no marginal demand for gold. Synthetic paper gold therefore absorbs demand that would otherwise have flowed into the limited physical gold supply, and the gold price therefore fails to represent this demand because demand has been channelled away from physical gold transactions into synthetic gold.
Likewise, if an entity dumps gold futures contracts on the COMEX platform representing millions of ounces of gold, that entity does not need to have held any physical gold, but that transaction has an immediate effect on the international gold price. This has real world impact, because many physical gold transactions around the world take this international gold price as the basis of their transactions.
Although gold clearing volumes and the LBMA's market survey provide some useful inputs into calculating London gold trading volumes, there is very little known publicly about how much physical gold actually trades in the London gold market. This is because the LBMA and its member banks choose not to reveal this information. There is no trade reporting in the London OTC gold market, no reporting of physical gold vault positions, no reporting of the unallocated gold liabilities of LBMA member bullion banks, and no reporting of how much physical gold in total these bullion banks retain to back up their fractional-reserve unallocated gold trading system. However, physical gold trading is by definition an extremely minuscule percentage of average daily trading volumes in the London OTC gold market. For details on the workings of the gold market in London, see BullionStar Infographic the "London Gold Market".
While one of the three components that comprise the London gold clearing statistics is stated to be “physical transfers and shipments by LPMCL clearing members”, the LBMA doesn’t even see fit to publish a breakdown of these 3 components. This compounds the secrecy and is another example of where bullion banks and central banks keep the global gold market in the dark about how much gold is being physically transferred and shipped.
Question: How do local gold markets around the world use the international gold price?
Local gold markets all around the world look to the international gold price, and take in this gold price, usually quoting their local country gold prices in comparison to the international gold price.
In the physical gold market, product pricing of gold coins and bars is based on a combination of the spot gold price plus a premium. The premium is that part of the product price in excess of the value of the precious metal contained in the coin or bar. Given that the physical gold market is a price taker, physical gold market spot prices feed in from where the price is being discovered, i.e. the international gold price.
For example, the 2017 issue of the Royal Canadian Mint 1 troy ounce Gold Maple Leaf bullion coin is quoted on the BullionStar website at a US dollar price which reflects the US dollar spot price of gold plus a premium.
Gold coin and gold bar premiums are based on a number of factors. Part of the premium will reflect natural minting / refining costs such as fabrication, marketing, distribution and insurance costs. If the products have been distributed through a wholesaler, the premium will reflect a wholesaler mark-up. Another component of a premium is semi-variable and reflects physical market imbalances caused by supply and demand fluctuations. If demand for a gold coin or gold bar is high, its premium will increase. If supply of the product is abundant, the premium would tend to be lower than if in short supply.
In general, premiums on gold coins are higher than those on gold bars, while premiums on large gold coins and gold bars are lower than premiums on smaller gold coins and gold bars.
Question: What contribution does the Shanghai Gold Exchange make to gold price discovery and does the SGE, with its large physical trading, influence the international gold price?
The Shanghai Gold Exchange (SGE) is the world’s largest physical gold exchange and nearly all physical gold bars in China flow through the SGE. Gold trading volumes and gold withdrawal statistics for the SGE are certainly impressive. For the year 2016, total SGE gold trading volumes reached 24,338 tonnes, a 43% increase over the 2015 figure of 17,033 tonnes. SGE trading volumes include physical contracts, deferred contracts, OTC trades settled through the SGE, and also trading volumes on the Shanghai international Gold Exchange (SGEI). In 2016, physical gold withdrawals from the SGE totalled 1,970 tonnes, down 24% from 2015’s withdrawals of 2,596 tonnes, but still huge on an absolute basis because these withdrawals represent actual physical gold taken out of the SGE vaults.
By the end of 2016, the SGEI (International Bourse), which was launched in September 2014, had recorded cumulative trading of nearly 9,000 tonnes of gold. The Shanghai Gold Benchmark Price (a.k.a. Shanghai Gold Fix), which was launched on 19 April 2016, is a gold auction for 1 kilo gold bars of 99.99 purity quoted in RMB. Over the 8 months from launch to end of 2016, the Shanghai Gold Fix had traded 569 tonnes, which equates to over 1.5 tonnes per day on average.
All in all, the SGE has generated impressive physical gold trading volumes (24,338 tonnes for 2016) and withdrawals (1970 tonnes for 2016). For the sake of comparison, compare these annual SGE physical gold trading volumes to the bloated London OTC gold market where trading volumes of approximately the equivalent of 6,500 tonnes of gold per day are the norm. Such a comparison reveals the fractional-reserve nature of the London gold market and the fact that physical transactions can only be a minuscule fraction of the London market.
But does SGE trading affect the international gold price as derived in the London OTC and COMEX markets, or is the SGE a price taker?
The short answer is that the SGE does not influence the international price and the SGE is a price taker. There may be some lagged influence by the SGE on the international price but this would require further study. The Chinese gold market is still a closed gold market with market frictions and distortions. Gold can be imported into China but cannot in general be exported out of China. There is therefore no freedom of movement of gold out of China. Gold imports into China are strictly controlled via import licenses and these licenses are only issued to a small number of Chinese and foreign banks.
But it’s worth looking at SGE premiums to see if changes in SGE premiums ever provide any signalling ability for subsequent changes in the international gold price. SGE premiums arise when the Shanghai gold price trades above the international gold price. SGE premiums are a possible gauge to determine whether SGE trading affects the international gold price. In November and December 2016, SGE premiums rose sharply from less than 0.5% to over 3% which was a period in which gold imports into China surged. However, during that same period, the international gold price fell. So in this case, the expanding SGE premiums had no effect on the international gold price.
That example was just eyeballing, but a recent study by Metals Focus (MF) consultancy, titled "Links Between the Chinese and International Gold Prices" also found that the correlations between changes in the LBMA Gold Price (AM) and SGE premiums are not significant and were in some cases even found to be negative, which in summary means that SGE trading was not affecting the international gold price. MF also calculated some lagged correlations to see if SGE premiums influence subsequent changes in the LBMA Gold Price, due to, for example, "increased shipments of bullion to China over subsequent days". MF claims that "SGE premiums have a modest but positive and statistically significant impact on future gold price [LBMA Gold Price] moves" however, correlation is not causation. Properly functioning financial markets are supposed to instantaneously reflect pricing information in other markets, not take days to reflect it. There are also too many other variables which could also be responsible for explaining why the LBMA Gold Price moved higher after SGE premiums had previously moved higher.
However, unlike the OTC and COMEX, the Shanghai Gold Exchange is structured around physical gold price discovery. The establishment of a gold exchange in Shanghai was first referenced in China's 10th Five Year plan in 2001 as an integral part of the nation's gold liberalisation strategy. Following its launch in 2002, the SGE was quick to promote physical gold ownership and by 2004 was allowing private citizens in China to transact on the Exchange and purchase gold bullion. On the SGE, physical delivery of gold is the norm, not the exception. The SGE has a network of 61 gold vaults in 35 cities across China.
This makes the SGE a nature candidate to take the lead in pricing real physical gold and acting as a physical gold price discovery centre if and when the physical gold markets detach from the paper gold markets, and physical gold demand and supply becomes the natural determinant of the international gold price.
LBMA Gold Price auction
Question: What is the significance of the LBMA Gold Price?
The LBMA Gold Price is a twice daily auction for unallocated gold controlled by the LBMA. The final output of the auction is a benchmark gold price. The auction is conducted in US Dollars, however the derived price is also published in 11 other currencies. This auction is the successor to the London Gold Fixing and the benchmark is now a ‘Regulated Benchmark’ under UK financial regulations and is administered by ICE benchmark Administration (IBA), part of the ICE exchange group. But the new auction mechanics are fundamentally similar to the older London Gold Fixing mechanics. The auction opening prices are based on COMEX and London OTC price quotations as well as trading prices at auction opening times, i.e. at 10:30 am and 3:00 pm respectively.
Structurally, the LBMA Gold Price auction has very narrow direct participation, with only a handful of LBMA member bullion banks being authorised by the LBMA to take part. These are the same bullion banks which are the market makers and largest traders in both London OTC gold market trading and in COMEX futures gold trading. The LBMA Gold Price auctions therefore lack broad market participation and is not representative of the broader gold market. The LBMA and ICE Benchmark Administration also refuse to reveal the identities of the auction chairpersons, a refusal which suggests that those now involved have connections to the former scandal tainted London Gold Fixing auction. They also refuse to reveal how the chairperson chooses the opening price for the auctions. See "Six months on ICE – The LBMA Gold Price" for more details.
Not surprisingly, the LBMA gold auctions also settle in unallocated gold, so trading and settlement in the auction is also detached from physical gold markets. Trading volumes in the daily gold auctions usually only reach the equivalent of 1-2 tonnes of unallocated gold transfers, and rarely exceed 3 tonnes. So not only do the LBMA gold auctions not offer wide participation to the thousands of gold trading entities around the world, the volumes traded in the auctions are not representative of the global gold market and the benchmark is therefore not a reliable representation of the global gold market.
Perversely however, the LBMA Gold Price benchmark price is very influential in the gold world in that it is a widely-used valuation source for gold-backed Exchange Traded Funds (ETFs) such as the SPDR Gold Trust and the iShares Gold Trust. Furthermore, it is often used ad a transaction reference price by physical bullion dealers when purchasing physical gold from refineries and suppliers. The LBMA Gold Price is also widely used as a benchmark for valuing financial products such as ISDA gold interest rate swaps, gold options and other gold derivatives, and is even used by other futures exchanges as a reference point on their gold futures contracts, for example the gold futures contract (FGLD) of the Malaysia Derivatives Exchange.
Therefore, this reference price and auction, which is controlled by a handful of bullion banks under the banner of the LBMA, is based on trading synthetic gold, but is referenced widely around the world in countless gold contracts and in countless physical gold markets and retail gold outlets.
Even very large central bank physical gold transactions take this gold fixing reference price derived in London and then use it as a price with which to execute their own independent bi-lateral transactions. For example, when the Swiss National Bank used the Bank for International Settlements (BIS) gold trading desk as its agent to sell hundreds of tonnes of physical gold in the early 2000s, the transaction prices used for the transfers were based on taking the London Gold Fixing price as a reference price. As another example, in 2010, the IMF’s so-called ‘on-market’ gold sales were conducted by a selling agent who also based the sales transfer prices on the London Gold Fixing price. This is the same London Gold Fixing that is currently under investigation in an ongoing New York court class action suit.
Of concern here is that a benchmark that was controlled by a cartel of London-based bullion banks, that was opaque in its operation, and that is currently the subject of a gold price manipulation class action suit, was being used to value very large physical gold transactions. The question must be asked, was this benchmark fit for purpose and to what extent was it representative of the underlying worldwide physical gold market?
Question: So what about outside London and US / NY trading hours. Do other markets contribute more during these other times, for example TOCOM in Japan and MCX in India?
In general, higher trading volumes mean more liquidity to drive price discovery. But since financial markets are integrated, price information rapidly flows between markets due to simultaneously and overlapping trading. Futures markets such as TOCOM in Japan and MCX in India do contribute to gold price discovery, especially at times when the larger markets are not trading, but because these other venues are less liquid, COMEX tends to lead in the lead-lag analysis of futures prices. This finding is according to a study by financial academics from Bangkok University led by Rapeesorn Fuangkasem.
Question: How does gold lending affect the gold price?
The Gold Lending Market is centred in London at the Bank of England. It is here that central banks and commercial bullion banks interact in the execution of ultra-secretive gold lending and gold swaps transactions that increase the available supply of gold. Bullion banks euphemistically refer to this as liquidity provision but these transactions act as a supply overhang on the gold market. Few if any transactional details about the gold lending market are ever made public. If gold lending trade details were market-wide knowledge, their impact would be immediately reflected in the gold price. But they are not. Secrecy about central bank gold lending transactions therefore makes this market informationally inefficient. And when a market is informationally inefficient, the prices in that market do not necessarily reflect the non-public information in that market.
Likewise gold lending and gold swaps are not reported distinct from central bank gold holdings. In the perverse world of central bank accounting policies, gold held and gold lend/swapped is merely reported as one line item of 'Gold and Gold Receivables' on central banks' balance sheets. Therefore, the real state of central bank gold holdings is obscured for any central bank engaged in gold lending or gold swaps.
Gold Lending also provides borrowed physical gold for bullion banks to engage in leveraged fractional-reserve bullion banking and trading, mostly in London where the international spot gold price is predominantly determined. Therefore, gold lending, the leveraged and fractional-reserve nature of gold trading, and the lack of reporting of real central bank gold holdings, all align to have a potentially depressing effect on the gold price as discovered in the London Gold Market.
The Essence of Central Bank Gold Lending to Bullion Banks
Question: Given that paper gold markets determine the gold price, then when or how could physical markets begin determining the gold price?"
There are two sets of gold markets – on the one side, the COMEX gold futures and London OTC unallocated gold spot markets which are both ultra leveraged and which both create gold supply out of thin air, and on the other side, the physical gold markets which inherit the gold prices derived in these paper gold markets. Currently the physical gold markets have no effect on the international gold price.
Any shift away from the dominance of gold price discovery in the paper markets to a dominance of gold price discovery in the physical gold markets could only occur via a disconnect between physical gold prices and paper gold prices. The conditions for such a disconnect to occur would only be possible in an environment in which trading behaviour in the paper markets changed and/or the supply-demand balance in the physical gold market became acutely stressed and out of balance.
A shift in trading behaviour in the paper gold markets refers to an increased preference for converting paper gold claims (unallocated positions or gold futures positions) into physical holdings either directly by exercising conversion rights, or indirectly by selling paper gold and then using the proceeds to buy physical gold. Many of these paper claims are held by institutional and wholesale market clients. An increase at the margin in paper gold holders demanding direct conversion of their paper claims into physical gold would probably make such conversion impossible as cash-settlement of futures and unallocated positions would be introduced and made obligatory by regulators and exchange / marketplace providers.
The indirect option would be to sell paper gold and then buy physical bullion on the physical gold market from bullion dealers such as BullionStar. This move into physical gold would raise physical gold demand to such an extent that it could overwhelm available gold supply. At the same time the international gold price would fall because of selling pressure in the paper gold markets, thereby creating a disconnect between the price of paper gold and the price of physical gold, and would make the continued holding of paper gold claims ever riskier.
One trigger that could prompt a shift in sentiment from paper gold to physical gold would be a realization by a critical mass of paper gold holders that physical gold stocks are finite, while paper gold claims are at best fractionally-backed. The acceptance of this reality would be a self-fulfilling prophesy, prompting more and more paper gold claim holders to attempt to rotate into physical gold.
The contemporary physical gold markets have already witnessed sustained flows of physical gold from West to East over the last number of years driven by huge physical gold demand emanating from China, India and much of the rest of Asia. While physical gold flows are dynamic and while gold flows can and sometimes do reverse out of normal recipient destinations such as Hong Kong, Turkey, Dubai and Thailand, this is not true of China and to a large extent is not true of India either, where gold that gets imported does not come back out again. India has imported over 11,000 tonnes of gold since 2001. China has imported 7,200 tonnes of gold since 2001.
As more and more gold goes into destinations such as China and India in quantities which exceed annual gold mine supply, there is less gold available in above ground stockpiles to meet supply deficits. This is akin to a slow bank run on gold. There is also very little gold stored in the London gold market that is not already accounted for by central bank gold holdings or ETF gold holdings. Coupled with this, if in the future the paper gold holders shift to a preference for converting their paper claims into physical gold, this could also be a catalyst for tipping the physical gold market even further into a situation of excess demand and acute supply stress.
In a scenario of a destructing paper gold market, ownership of physical allocated and segregated gold is paramount. This means physical gold that is unencumbered, free from competing claims and titles, and that cannot be lent out or swapped. The paper gold market is already a gigantic bubble which has expanded to an unsustainable size and whose huge fractionally-backed claims are supported by very small physical gold foundations. The unsustainable nature of such a bubble dictates that it's a matter of when and not if the paper gold bubble bursts. In such a scenario, physical gold ownership is the only thing that can protect against a systemic collapse of the financial system and protect against the destruction of the fractionally-reserved gold banking system.
Footnote:
BullionStar's ideological belief promotes freedom of speech and liberty. Likewise, we believe that open debate produces improved analysis and research. Indeed, the BullionStar blog platform encourages varied opinions and well-researched ideas. Debate is particularly important when applied to the gold market, a market which is often opaque and deliberately shrouded in secrecy by its influential bullion bank and central bank participants.
BullionStar’s precious metals analyst Koos Jansen has a different view and believes that while paper markets might have some short-term impact on price, the physical gold market is more dominant in gold price formation over the long-term. Due to having taken some time off recently for health reasons, Koos did not contribute to the following article. But he recently summarized his view as follows:
"Due to my research in recent years my opinion has shifted from 'the gold price is purely set in the paper markets' to 'the physical market is more dominant in the long-term whereas the paper market has more impact in the short term'. That's where I stand now. If central banks suppress the price over years/decades they need to supply physical gold or the paper and physical price would diverge. Potentially there is a combination of paper and physical schemes at work."
Koos Jansen will, at a later point in time, present his view by answering and publishing the same or similar questions on the BullionStar website.
In a testament to the efficiency of socialism, leftist-run Venezuela has long prided itself on selling its citizens the world’s cheapest gasoline… that is when it has gasoline to sell.
While fuel supplies in the country with the world’s largest proven oil reserves…
… have continued flowing despite monetary collapse and hyperinflation, a domestic oil industry in turmoil and a deepening economic collapse under President Nicolas Maduro that has left the South American country with scant supplies of many basic necessities, that changed last Wednesday when Venezuelans faced their first nationwide shortage of motor fuel since an explosion ripped through one of the world’s largest refineries five years ago. At the time, the government of then-President Hugo Chavez curbed exports to guarantee there was enough fuel at home. This time, however, the problems were all man made and the shortage was mainly due to problems at refineries, as a mix of plant glitches and maintenance cut fuel production in half.
In the immediate aftermath of the shortage, Venezuela’s state oil company, Petroleos de Venezuela, rushed to replenish gasoline supplies in various neighborhoods of Caracas as drivers lined up at filling stations amid a worsening shortage of fuel. While Petroleos de Venezuela, or PDVSA, says the situation is normalizing and blamed the lines on transport delays, the opposition says the company has had to reduce costly fuel imports as it tries to preserve cash to pay its foreign debt. The opposition was likely right.
According to Bloomberg, tanker trucks were seen in several neighborhoods of the capital city resupplying filling stations after local newspaper El Nacional reported widespread shortages across the country. As the company’s crumbling refineries fail to meet domestic demand, imports have become a major drain of cash as the country buys fuel abroad at market prices only to sell it for pennies per gallon at home, unless, of course, one buys abundant gasoline on the black market where its cost is orders of magnitude higher than what one would pay at the gas station.
“Yesterday, I went to three filling stations and I couldn’t fill my tank,” Freddy Bautista, a 26-year-old student, said in an interview while waiting outside of a gas station in the Las Mercedes area of eastern Caracas on Thursday. “I’ve been waiting 30 minutes here, and it seems like I’ll be able to fill up today.”
But the key reason PDVSA has been reducing the money-losing imports as it prepares for $2 billion in bond payments due next month, said Jose Brito, an opposition lawmaker on the National Assembly’s oil commission. “They’re not importing enough because they are saving up to pay the debt,” he said in a telephone interview. “It’s unbelievable that this is happening in an oil producing country.”
It gets better.
While PDVSA was “suddenly” unable to keep the domestic market stocked, it had no problems supplying gasoline to its main export partners such as Cuba and Nicaragua. As Reuters reported, Caracas has continued exporting fuel to political allies and even raised the volume of shipments last month despite warnings within the government-run company that doing so could trigger a domestic supply crunch. Shipments from refineries to the domestic market needed to be redirected to meet those export commitments, internal documents showed.
“Should this additional volume … be exported, it would impact a cargo scheduled for the local market,” read one email obtained by Reuters and sent from an official in the company’s domestic marketing department to its international trade unit. Venezuela last month exported 88,000 barrels per day (bpd) of fuels – equivalent to a fifth of its domestic consumption – to Cuba, Nicaragua and other countries, according to internal PDVSA documents seen by Reuters.
That was up 22,000 bpd on the volumes Venezuela had been shipping to those two countries under accords struck by Chavez to expand his diplomatic clout by lowering their fuel costs through cheap supplies of crude and fuel. The order to increase exports came from PDVSA’s top executives, according to the internal emails seen by Reuters.
Then came the departures.
As Reuters adds, the strain on the country’s fuel system has been worsened by the quiet departure of staff in PDVSA’s trade and supply unit who are key to ensuring fuel gets to where it is needed and making payments for imports, three sources close to the company said. Clearly unconvinced that Venezuela is the socialist paradise shown on brochures, the unit has seen around a dozen key staffers depart since Maduro shook up PDVSA’s top management in January. Among those who left was the head of budget and payments.
“Every week someone leaves for one reason or another,” said a PDVSA source familiar with the unit’s operations. Some have been fired, while others have left since the shake-up inserted political and military officials into top positions and bolstered Maduro’s grip on the company that powers the nation’s economy.
The imposition of leaders with little or no experience in the industry has further disillusioned some of the company’s experienced professionals and accelerated an exodus that had already taken hold as economic and social conditions in Venezuela worsened. A recent internal PDVSA report seen by Reuters mentioned “a low capacity to retain key personnel,” amid salaries of a few dozen dollars a month at the black market rate.
The vacancies have led to all-out chaos inside the state-run energy company: the departure of staff responsible for paying suppliers, as well as a cash crunch in the company and the country, have led to an accumulation of unpaid bills for fuel imports into Venezuela. Had those bills been paid, the supply crunch would have been less acute, company sources said.
About 10 tankers are waiting near PDVSA ports in Venezuela and the Caribbean to discharge fuel for domestic consumption and for oil blending.
Only one vessel bringing fuel imports has been discharged since the beginning of the week, shipping data showed.
PDVSA ordered some of the cargoes as it prepared alternative supplies while refineries undergo maintenance.
As a result of this clusterfuck, Venezuela finds itself in a particular bind: while there are millions of gallons of gasoline parked offshore (not to mention some 300 billion barrels of oil underground) they will remain there indefinitely until PDVSA pays for their cargoes. Should PDVSA pay – up to $20 million per cargo – shortages could blow over relatively soon. However, as noted above, it won’t, as it is saving every dollar for an upcoming bond payment: PDVSA is preparing for some $2.5 billion in bond payments due next month.
Meanwhile, the shortages persist despite calls for calm from PDVSA.
Ysmel Serrano, commercial and supply vice president at PDVSA, said on Twitter last Wednesday that the company has sufficient supply from its refineries and is working to increase shipments to stabilize distribution after transportation delays led to lines at gasoline stations in four states. “We call for calm and to resist false rumors from sectors trying to create chaos in the country!” Serrano said.
The comments came just hours after the company said it had controlled a “minor” fire at the Amuay refinery in Falcon state, the largest refining complex in the country where a 2012 explosion killed dozens of people.
To be sure, shortages are nothing new in Venezuela. The hunt for gasoline is just the latest headache for consumers after years of severe economic contraction and triple-digit inflation have produced shortages of everything from bread to antibiotics.
Unfortunately, even once the bond payment is made there is no assurance the flow of gasoline to the domestic market will resume. Venezuela has been forced to increase imports of finished gasoline and components over the past years as its refinery utilization rates declined because of deteriorating infrastructure and under-investment. The country imported about 75,000 barrels a day of refined products from the U.S. in 2016, according to the U.S. Energy Information Administration.
As Bloomberg writes, in Caracas’ eastern Sucre municipality, around 20 cars were lined up outside of a PDVSA gas station trying to fill up. National police in the Las Mercedes part of the city, meanwhile, were trying to prevent lines from forming outside of filling stations there. Outside of Caracas, El Carabobeno, a newspaper based in the central city of Valencia, reported widespread lines there.
* * *
On Wednesday, Maduro found a way to briefly deflect blame for the ongoing debacle: Venezuela’s public prosecutor ordered the arrest of Marco Antonio Malave, PDVSA’s manager of international trade, for supposed wrongdoing related to fuel purchases for domestic market. Malave was detained at a Venezuelan military facility and his bank accounts have been blocked. The arrest will resolve nothing.
As Devin Nunes (R-CA) faces calls from Democrats to step down from his role as Chairman of the House Intelligence Committee due to concerns over his “impartiality”, a new poll from CBS News reveals that nearly three-quarters of Republicans and half of Independents believe President Trump’s claim that former President Obama wiretapped him during the 2016 campaign.
Of course, like with pretty much any other poll these days, the results were largely split along party lines with the overall results more influenced by “oversamples” of particular groups rather than actual facts.
Nevertheless, here are some of the other takeaways from CBS…
82% of Democrats are absolutely convinced that Trump conspired with Russian spies to steal the 2016 election…how else could Hillary have possibly lost?
Meanwhile, 49% of Americans blame a poorly constructed bill, rather than Trump, for Republicans’ inability to pass a healthcare plan last week.
And CBS sees Trump’s overall approval rating at just 40%.
Of course, we’re not sure exactly when Independents became 43% of the electorate vs. only 26% for Republicans, but we’re sure that CBS must be right.
The European Court of Justice, Europe’s top court, on Tuesday ruled that sanctions imposed by the UK and the EU on Russia’s oil giant Rosneft are valid, in a ruling that also asserts the court’s jurisdiction over the common policy of the European Union (EU).
The EU imposed sanctions on Russia in 2014 over Moscow’s annexation of Crimea, with economic sanctions slapped in July 2014 and reinforced in September 2014, including against certain Russian companies that include Rosneft.
Rosneft had challenged before the High Court of Justice (England & Wales) the validity, in the light of EU law, of the restrictive measures imposed by the European Council on it and the implementing measures adopted by the United Kingdom that are based on the Council acts. The European Court of Justice was asked to rule, in essence, if the acts of the Council and the United Kingdom are valid.
In its ruling published today, the court said that “The restrictive measures adopted by the Council in response to the crisis in Ukraine against certain Russian undertakings, including Rosneft, are valid.”
“The Court holds that the importance of the objectives pursued by the contested acts is such as to justify certain operators being adversely affected. Having regard to the fact that the restrictive measures adopted by the Council in reaction to the crisis in Ukraine have become progressively more severe, interference with Rosneft’s freedom to conduct a business and its right to property cannot be considered to be disproportionate,” the court said.
Following the court ruling, Rosneft issued a statement in which it said it was disappointed by the ruling, and that it considers the court decision “illegal, groundless and politicized”.
The Court refused to admit that the EU sanctions were imposed, in particular, to achieve hidden purposes and are, in fact, an instrument of competitive struggle. Nevertheless, the Court could not explain why the limitations, applied under the pretext of Crimea's accession to Russia, involve access of oil companies to international financial markets, oil production at the Arctic shelf, development of tight reserves, deep-water and shale fields. The Company considers that the sanctions imposed against it by the EU states are primarily aimed at increasing risks of busines operations, obstructing implementation of Rosneft's important projects and thus creating preferences for other oil market players.
The Court ignored its own existing precedents when the decision on EU sanctions was revised by the same court due to lack of substantial evidence. For instance Iranian banks included in the EU sanctions list successfully appealed the EU regulation. The Court stated that they are not related to the nuclear program of the IRI that was the object of sanctions and the existence of the close ties to the government is not a satisfactory argument for including them in the list.
The Court refused to acknowledge that unilateral economic sanctions restrict trade by definition and contradict existing provisions of the Partnership and Cooperation Agreement (PCA) between Russia and the EU, signed in 1994. The EU’s decision to impose the sanctions is, in fact, a legitimated refusal to fulfill its obligations under international law.
“This decision proves that in Europe the rule of law is being substituted with the rule of politics,”said Rosneft, whose chief executive Igor Sechin is a close ally of Vladimir Putin.
When I first started becoming aware of how sleazy, parasitic and corrupt the U.S. economy was, I only had expertise in one industry, financial services. Coming to grips with the blatant criminality of the TBTF Wall Street banks and their enablers at the Federal Reserve and throughout the federal government, I thought this was the main issue that needed to be confronted. What I’ve learned in the years since is pretty much every industry in America is corrupt to the core, more focused on sucking money away from helpless citizens via rent-seeking schemes, versus actually producing a product and adding value. Unfortunately, the healthcare industry is no exception.
Today’s post zeros in on a particular slice of that industry. A group of companies known as Pharmacy Benefit Managers, or PBMs. Companies that seem to extract far more from the public than they give back. It’s a convoluted sector that is difficult to get your head around, which is why we should be thankful that David Dayen wrote an excellent piece on the topic recently. What follows are merely excerpts from his lengthy and highly informative piece, The Hidden Monopolies That Raise Drug Prices. I strongly suggest you read the entire thing.
