Month: July 2019

Chicago’s Lightfoot Demands State-Taxpayer Bailout, Then Offers CTU A 5-year Contract, 14% Raise

Authored by Ted Dabrowski and John Klingner via WirePoints.org,

You have to wonder whether Chicago Mayor Lori Lightfoot really thought she could get away with it. 

Just three weeks ago, she was demanding a state taxpayer bailout of her city’s nearly bankrupt pension funds. The problem was so big, she said, she’d risk her “re-election” over it. Eventually, Gov. J.B. Pritzker denied her bailout request for obvious reasons – the state is just one notch from a junk rating.

Now news reports confirm that Lightfoot has offered the Chicago Teachers’ Union a five-year contract that will cost taxpayers another $325 million. That includes guaranteed raises of more than 14 percent over the life of the contract. And that, of course, turns into more pension benefits and an even bigger pension hole for CPS.

That’s an expensive gift for a city that Lightfoot claims is in need of a multi-billion dollar bailout.

That about-face should infuriate every downstate Illinoisan. If the bailout had gone through, here’s what all Illinoisans would have been paying for: 

1. Chicago teachers are already highest paid vs. teachers in similar districts.

Chicago teachers are the nation’s highest paid when compared to the largest school districts with traditional salary schedules, according to data from the National Center on Teacher Quality.

For example, a Chicago teacher with a master’s degree receives $80,000 a year after ten years of work. In contrast, an equivalent teacher in New York City makes $70,000 and a Los Angeles teacher makes $60,000.

A big reason for that is due to how fast Chicago teacher salaries grow. The average new teacher with one to four years under her belt starts out with a salary just above $50,000. By the time that teacher reaches 10 to 14 years of service, her salary grows to more than $85,000 annually.

2. The average career Chicago teacher will get $2 million in total pension benefits, far more than ordinary Illinoisans.

High salaries translate into big pension benefits for career teachers. The average CPS teacher who retired in 2018 with 30-34 years of service had a final average salary of nearly $98,000 and a starting pension of over $70,000. Their average retirement age was 61.

That pension will increase automatically by 3 percent each year and by year 25 of retirement, the pension will be double its starting amount. In all, the average retired career Chicago teacher will collect over $2.1 million in benefits over the course of her retirement.

In contrast, an ordinary Illinoisan at retirement would need to have around $1.5 million in his or her account at retirement to collect the same amount of benefits as a career Chicago teacher. Most Illinoisans will never save that amount of money.

3. Taxpayers still “pick up” a majority of Chicago teacher pension contributions.

Not only do Chicago teachers receive millions in pension benefits, they contribute almost nothing towards them over the course of their careers.

Chicago teachers are supposed to contribute 9 percent of their salary every year towards their pensions. But every year since 1981, CPS has paid for, or “picked up” 7 of that 9 percent.

That means Chicago teachers only have to pay 2 percent of their salary towards their own pensions every year. That costs Chicagoans over $100 million a year.

Rahm tried to reform pickups in 2016, but he was rebuffed by the union. Only new workers lost the pickup. And even then, the district gave out extra 3.5 percent raises in exchange.

4. CPS is losing students but spending more on them than ever before.

One of the CTU’s contract demands calls on CPS to spend money to hire more teachers and even more support staff. That might make sense in a dynamic, rapidly growing city with a growing school population.

But CPS is losing students and has been for nearly 20 years. At the same time, the district’s spending per student has jumped.

In all, CPS’ per student spending has doubled since 2000 according to ISBE, even as the district’s enrollment has fallen by nearly 75,000 students, or 17 percent, over the same time period.

5. Near empty, failing schools should be closed and their resources redirected.

Declining enrollment is hitting some Chicago schools particularly hard.

In 2017, the Chicago Tribune examined the demographics of some of the most underpopulated schools in Chicago. It found the enrollment of the 17 worst schools has dropped from nearly 20,000 in 2008 to just over 4,600 today. Their buildings are, on average, filled to just 20 percent capacity. 

And the few students that do attend aren’t getting a good education. In those schools, no more than 8 percent of students are ready for college. Despite that, the CPS hasn’t closed the nearly-empty, failing schools. 

*  *  *

Lightfoot has landed some great punches when taking on corruption in City Hall, but when it comes to finances, she’s acting just like any other Chicago politician.

She said she’d “risk her political career” to tackle pensions. Making downstate taxpayers foot the city’s pension bills is hardly a “risk.”

via ZeroHedge News https://ift.tt/2JNcRTc Tyler Durden

The Precog Fed: Vice Chair Clarida Says Fed Shouldn’t Wait For Economy To Turn Down To Cut Rates

There was something bizarre in yesterday’s latest Beige Book: it painted an unexpectedly strong picture of the economy. Here, again, are the key points we pulled from the summary of various regional Feds’ takes on the current state of the US economy:

  • In most Districts, sales of retail goods increased slightly overall,
  • Activity in the nonfinancial services sector rose further
  • Tourism activity was broadly solid, with Atlanta and Richmond recording robust growth in this sector,
  • Some Districts continued to report healthy expansion in the transportation sector.
  • Home sales picked up somewhat, but residential construction activity was flat.
  • Nonresidential construction activity increased or remained strong in most re-porting Districts, and commercial rents rose
  • A modest pickup in manufacturing activity since the last reporting period was observed in a few Districts
  • Increased demand for loans was broad-based, with all but two Districts noting some growth in financing activity
  • Employment grew at a modest pace, as labor markets remained tight; contacts across the country experiencing difficulties filling open positions.
    • The reports noted continued worker shortages across most sectors, especially in construction, information technology, and health care.
  • Compensation grew at a modest-to-moderate pace, similar to the last reporting period, although some contacts emphasized significant increases in entry-level wages.
  • Rate of price inflation was stable to down slightly from the prior reporting period. Districts generally saw some increases in input costs, stemming from higher tariffs and rising labor costs.
  • Reduced supply boosted prices for some agricultural goods; some Districts noted increased upward transportation pricing pressures, while others highlighted price declines due to reduced demand for shipping services.

But why good news bizarre? Because as NY Fed president John Williams made clear today, not only is the Fed cutting in July, but the Fed will likely continue cutting until we get back to ZIRP again:

“First, take swift action when faced with adverse economic conditions. Second, keep interest rates lower for longer. And third, adapt monetary policy strategies to succeed in the context of low r-star and the ZLB.”

Williams’ comment resulted in market odds for two rate cuts in July surging from the low 20s to 65%!

But the big surprise isn’t what Williams said – after all he is a well-known dove. What we found even more interesting is what Fed Vice Chair and former Pimco employee, Richard Clarida – once known as a centrist – said during a Fox Business interview.

Indeed, Clarida shocked markets when he buried the Fed’s “data dependent” protocol, by saying that the Fed should not respond to data, but to what the Fed believes the data will be (ignoring for a minute that the Fed’s track record at predicting the future is far worse than even that of Wall Street). When asked to define his take on the economy and what optimal monetary policy should be, Clarida said that the U.S. economy is in a good place but uncertainties about the outlook have increased, and “under ideal monetary policy you adjust policy to keep the economy on an even keel.”

In other words, “You don’t want to wait” for the economy to turn down, Clarida said, adding that “when interest rates are close to zero, it’s important to act preemptively, shocking traders because his framing immediately brought up the thought experiment of what should happen if there is a recession, or depression, in 10, 20, 50, or even 100 years from now. Well, according to Clarida, it is now the Fed’s job to not only be data-dependent, but pre-data dependent, and even though the economy is firing on all cylinders now, the fact that at some arbitrary point in the future the economy may contract and a recession ensue, is now a sufficient reason for the Fed to cut rates as much as it wants at any given moment.

Richard Clarida

And in his latest attempt to cover for the upcoming rate cut, Clarida said that while recent U.S. indicators have been mixed – actually they have been quite strong – but just because “global data has been disappointing” and inflation has been coming in on the “soft side”, the Fed has room to act.

To summarize: the US central bank is now not only the world’s central bank, but like Tom Cruise, it has the liberty to act and do anything it sees appropriate to prevent some event from killing the US economy.

And just like that not only ZIRP, but also NIRP and stock market QE is virtually assured. Because since some time, in the distant future, a depression awaits, so the Fed has full liberty to act now and prevent it, clearly oblivious that by intervening preemptively, the Fed is assuring that the buildup of imbalances will be staggering and the next depression will be unlike anything the world has ever seen.

via ZeroHedge News https://ift.tt/2YZzeex Tyler Durden

Joy Behar Has No Idea What the ACLU Does or That Hate Speech Is Protected Under the First Amendment

There are many, many ways a concerned American could respond to the repulsively racist and nativist “Send her back!” chant at President Donald Trump’s rally last night in Greenville, N.C., during which the crowd cheered for the forceful removal from the U.S. of Rep. Ilhan Omar (D–Minn.), a Somali-born American citizen.

Joy Behar of The View, who is in many ways a professional journalist, somehow managed to articulate one of the least informed responses.

The ladies of The View started their show today by unanimously expressing contempt for the behavior at Trump’s rally. Then Behar asks, “Why can’t he be brought up on charges of hate speech? Why can’t he be sued by the ACLU [American Civil Liberties Union] for hate speech? I don’t get it. How does he get away with this?”

In the clip, available here at The Hill, you can nearly hear co-host Sunny Hostin start to explain something about hate speech, but then co-host Megan McCain introduces a new clip.

For the benefit of Behar and other Americans asking themselves the same question, here is why Trump cannot be brought up on charges of hate speech:

  • “Hate speech” is protected by the First Amendment of the Constitution. Yelling for Omar to go back to Somalia (or to be forcibly sent to Somalia) is gross, but falls under free speech protections as an opinion.
  • In the event we did have laws against “hate speech,” they’d be enforced by the government, not by the ACLU. Given that Trump runs the branch of government that would enforce such laws, and that he regularly declares the media to be the “enemy of the people,” we should be reassured, not upset, that there is no law against “hate speech.”
  • The ACLU opposes laws against hate speech. In the free speech position paper on their site, the ACLU explains that “we should not give the government the power to decide which opinions are hateful, for history has taught us that government is more apt to use this power to prosecute minorities than to protect them. As one federal judge has put it, tolerating hateful speech is ‘the best protection we have against any Nazi-type regime in this country.'”

And an aside to Joe Concha and The Hill: When somebody like Behar says something obviously inaccurate like this, feel free to use your platform and your journalism skills to help her understand how the First Amendment works. After all, it’s why you and I have jobs.

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Joy Behar Has No Idea What the ACLU Does or That Hate Speech Is Protected Under the First Amendment

There are many, many ways a concerned American could respond to the repulsively racist and nativist “Send her back!” chant at President Donald Trump’s rally last night in Greenville, N.C., during which the crowd cheered for the forceful removal from the U.S. of Rep. Ilhan Omar (D–Minn.), a Somali-born American citizen.

Joy Behar of The View, who is in many ways a professional journalist, somehow managed to articulate one of the least informed responses.

The ladies of The View started their show today by unanimously expressing contempt for the behavior at Trump’s rally. Then Behar asks, “Why can’t he be brought up on charges of hate speech? Why can’t he be sued by the ACLU [American Civil Liberties Union] for hate speech? I don’t get it. How does he get away with this?”

In the clip, available here at The Hill, you can nearly hear co-host Sunny Hostin start to explain something about hate speech, but then co-host Megan McCain introduces a new clip.

For the benefit of Behar and other Americans asking themselves the same question, here is why Trump cannot be brought up on charges of hate speech:

  • “Hate speech” is protected by the First Amendment of the Constitution. Yelling for Omar to go back to Somalia (or to be forcibly sent to Somalia) is gross, but falls under free speech protections as an opinion.
  • In the event we did have laws against “hate speech,” they’d be enforced by the government, not by the ACLU. Given that Trump runs the branch of government that would enforce such laws, and that he regularly declares the media to be the “enemy of the people,” we should be reassured, not upset, that there is no law against “hate speech.”
  • The ACLU opposes laws against hate speech. In the free speech position paper on their site, the ACLU explains that “we should not give the government the power to decide which opinions are hateful, for history has taught us that government is more apt to use this power to prosecute minorities than to protect them. As one federal judge has put it, tolerating hateful speech is ‘the best protection we have against any Nazi-type regime in this country.'”

And an aside to Joe Concha and The Hill: When somebody like Behar says something obviously inaccurate like this, feel free to use your platform and your journalism skills to help her understand how the First Amendment works. After all, it’s why you and I have jobs.

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The Three ‘D’s Of Doom: Debt, Default, Depression

Authored by Charles Hugh Smith via OfTwoMinds blog,

“Borrowing our way out of debt” generates the three Ds of Doom: debt leads to default which ushers in Depression.

Let’s start by defining Economic Depression: a Depression is a Recession that isn’t fixed by conventional fiscal and monetary stimulus. In other words, when a recession drags on despite massive fiscal and monetary stimulus being thrown into the economy, then the stimulus-resistant stagnation is called a Depression.

Here’s why we’re heading into a Depression: debt exhaustion. As the charts below illustrate, the U.S. (and global) economy has only “grown” in the 21st century by expanding debt roughly four times faster than GDP or earned income.

Costs for big-ticket essentials such as housing, healthcare and government services are soaring while wages stagnate or decline in purchasing power.What’s purchasing power? Rather than get caught in the endless thicket of defining inflation, ask yourself this: how much of X does one hour of labor buy now compared to 20 years ago? For example, how much healthcare does an hour of labor buy now? How many days of rent does an hour of labor buy now compared to 1999? How many hours of labor are required to pay a parking ticket now compared to 1999?

Our earnings are buying less of every big-ticket expense that’s essential, and we’ve covered the gigantic hole in our budget with debt. The only way the status quo could continue conjuring an illusion of “prosperity” is by borrowing fantastic sums of money, all to be paid with future earnings and taxes.

At some point, the borrower is unable to borrow more. Even at 0.1% rate of interest, borrowers can’t borrow more because they can’t even manage the principal payment, never mind the interest. That’s debt exhaustion: borrowers can’t borrow more without ramping up the risk of default.

When wages are stagnant and big-ticket items are soaring in cost, that leaves less available to service more debt. We can cover expenses by borrowing more for a while, but there’s an endgame to this trick: even at zero interest, servicing the debt exceeds income.

Marginal borrowers default, and the resulting losses collapse marginal lenders.Recall that every debt is somebody else’s asset and income stream. When a student defaults on a student loan, that erases the asset and income stream of a mutual fund, pension fund, etc.

In other words, defaults are not cost free. They wipe out assets and income streams, never to return.

For the past 20 years, the trick to escaping recessions has been to lower interest rates and flood the financial system with new credit. If everyone would just borrow more and spend every cent of the new money, the economy will start “growing” again.

But we’ve reached the point where most wage earners can’t borrow more, corporations shouldn’t borrow more and the top tier of earners no longer want to borrow more. Governments can always borrow more, but eventually servicing the ballooning debt starts crowding out other spending, and the solution–borrowing more to cover the interest payments–spirals out of control.

Lowering interest rates and giving banks and financiers “free money” doesn’t increase wages or household incomes or corporate profits. Nor do these monetary tricks magically turn marginal borrowers into creditworthy risks.

Borrowing more to fill the hole left by declining purchasing power only works in the short-term. We’ve burned the 20 years that this trickery can work, and now we face the endgame: borrowing more only increases defaults, which trigger losses in wealth and income that will be measured in the trillions.

Take a look at systemwide debt in the U.S. Does this look remotely sustainable? If the answer is yes, you might want to dial back your Ibogaine consumption.

Here’s student loans. One trillion here and one trillion there, and pretty soon you’re talking about entire generations of debt-serfs and a bunch of pension funds that are going to suffer catastrophic losses when the student borrowers default.

Meanwhile, labor’s share of the economy (wages and salaries) has been in structural decline the entire 21st century. Lowering interest rates to zero doesn’t mean it’s free to borrow more; the principal payments loom large in every student loan, auto loan, mortgage, etc.

There’s less–a lot less–available to fund more borrowing after those stagnating wages pay for rent or a mortgage/property taxes, healthcare, childcare, student loans, etc. This chart depicts healthcare costs, but rent, childcare, higher education, etc. all mirror similar increases.

“Borrowing our way out of debt” generates the three Ds of Doom: debt leads to default which ushers in Depression.

*  *  *

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San Francisco Has Ditched Its Dumb ‘IPO Tax’ (For Now)

The city of San Francisco will abandon a controversial plan to ask residents whether they wanted to tax tech startups going public for the first time.

The so-called “IPO Tax” (that’s shorthand for “initial public offering”) was slated to go on the city’s ballot in November, but city officials pulled that proposal this week. Instead, a more generic tax on business revenue will be put in front of voters later this year. Both are attempts by the city government to capture a portion of the one-time windfalls that can occur when tech startups based in the city—think Uber, Pinterest, and other so-called “unicorns”—hit the stock market for the first time.

City Supervisor Gordon Mar, who sponsored the proposal, told Recode earlier this year that the 1.5 percent tax would net $50 million annually for city services. That money would provide for “shared prosperity,” he said, suggesting that it could be put towards affordable housing projects in the famously expensive Bay Area real estate market.

But the proposal was never really a tax on IPOs at all. Instead, it would have hiked an existing city tax on stock-based compensation, meaning that all businesses who pay employees and executives with stocks would have been subject to the levy. Calling it an “IPO tax” was never anything more than clever marketing by city officials.

Ultimately, the city’s besieged business community won out. For now.

Mar’s spokesman told The Wall Street Journal that removing the tax from the November ballot was only a temporary setback and that Mar intends to have a similar measure ready for the 2020 ballot.

It’s likely true that we haven’t seen the last of city-level efforts to hit tech companies with new, higher taxes. Indeed, last month’s announcement of the “IPO tax” was cheered by progressive commentators as a productive way to eat the newly rich of the tech world.

But San Francisco would be wise to leave the IPO tax in the trash can. For one thing, the city should look to its own history for a lesson. Tech companies dominate modern San Francisco because the city cut taxes to lure them there in the first place. Sure, some of the big ones might stick around now that they’re established, but there is nothing that guarantees the next round of startups will set up shop in the Bay. Capital is highly mobile, and small tech firms—almost by definition—have the ability to locate anywhere. “Firms already hampered by the high cost of operations here will have another reason to expand or relocate elsewhere,” the San Francisco Chronicle‘s editorial board wrote in May.

Second, the tax wouldn’t have done much to fix the city’s housing and inequality issues. Solving that will require repealing loads of zoning codes and regulations so that more housing can be built. As Reason‘s Christian Britschgi has reported, San Francisco has held up the development of new apartment buildings for reasons as absurd as where shadows from the structure will fall.

Soaking tech startups won’t fix that.

Kerry Jackson, a fellow with the free-market Pacific Research Institute, calls the IPO tax “outrageous and extortionate.”

“When politicians see wealth being created in the private sector,” Jackson writes, “they always find a way to get their hands on the dollars, though they never earned a cent of the income.”

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Fed Hints At Rapid Return To ZIRP, Sends Everything Soaring As Dollar Plunges

NYFed Williams basically implied ZIRP is coming back and soon and that sent the market’s expectations for July rate cuts soaring (50bps now at 65%!)…

NOTE – a week ago, Fed Chair Powell jawboned the odds of a 50bps cut down to ZERO!!

Piling on, Fed’s Clarida added that research suggests acting preemptively when rates are low.

Gold, Bonds, & Stocks soared as the dollar dumped…

Seriously!! At record high stock prices!!!!

And all of that silliness sent stocks soaring… The Dow scrambled back to unchanged at the bell

 

With Nasdaq ripping back from its Netlfix-ing (even if NFLX didn’t budge – NFLX lost “A Deutsche Bank” in market cap today)…

 

S&P 500 desperately pushed higher to try and regain 3,000…

 

Trannies were tempestuous this week but remain entirely decoupled from global growth…

 

FANG Stocks (thanks to NFLX) reversed as expected at serious resistance…

 

IG and HY credit have notably decoupled…

 

Stocks and bonds remain drastically decoupled…

 

Treasury yields tumbled after Fed’s Williams comments..

10Y Yield is heading back towards 2.0%…

 

The (3m10Y) yield curve was steepening intraday (heading back towards 0) until Williams spoke…

 

Debt Ceiling Anxiety is building fast in the Bills curve…

 

The Dollar collapsed after Fed’s Williams ZIRP comments…

 

Yuan spiked…

 

USDJPY plunged to near 1-month lows, decoupling from stocks…

 

After more ugliness overnight, Cryptos surged today…

 

With Bitcoin blasting back above $10k…

 

Silver extended its huge week as crude crashed…

 

Gold surged on Williams comments…

 

Silver spiked over 2%…

 

Silver continues to outperform gold (off 26 year lows relative to the yellow metal)…

 

WTI continued its rapid decline, accelerating further on Iran nuclear deal headlines…

 

HY Energy credit has widened dramatically…

 

Oil’s slide has been largely ignored by stocks…

 

Finally, what do you want to hold here? Stocks or Silver?

 

And as far as the ridiculous spike in Philly Fed (the biggest jump in a decade), Gluskin-Sheff’s David Rosenberg clarifies:

Trade accordingly…

And before we leave, is noone else somewhat worried about what exactly it is that The Fed is panicking about that prompts them to jawbone the odds of a 50bps rate cut this aggressively with stocks at record highs?

via ZeroHedge News https://ift.tt/2O4fSnB Tyler Durden

San Francisco Has Ditched Its Dumb ‘IPO Tax’ (For Now)

The city of San Francisco will abandon a controversial plan to ask residents whether they wanted to tax tech startups going public for the first time.

The so-called “IPO Tax” (that’s shorthand for “initial public offering”) was slated to go on the city’s ballot in November, but city officials pulled that proposal this week. Instead, a more generic tax on business revenue will be put in front of voters later this year. Both are attempts by the city government to capture a portion of the one-time windfalls that can occur when tech startups based in the city—think Uber, Pinterest, and other so-called “unicorns”—hit the stock market for the first time.

City Supervisor Gordon Mar, who sponsored the proposal, told Recode earlier this year that the 1.5 percent tax would net $50 million annually for city services. That money would provide for “shared prosperity,” he said, suggesting that it could be put towards affordable housing projects in the famously expensive Bay Area real estate market.

But the proposal was never really a tax on IPOs at all. Instead, it would have hiked an existing city tax on stock-based compensation, meaning that all businesses who pay employees and executives with stocks would have been subject to the levy. Calling it an “IPO tax” was never anything more than clever marketing by city officials.

Ultimately, the city’s besieged business community won out. For now.

Mar’s spokesman told The Wall Street Journal that removing the tax from the November ballot was only a temporary setback and that Mar intends to have a similar measure ready for the 2020 ballot.

It’s likely true that we haven’t seen the last of city-level efforts to hit tech companies with new, higher taxes. Indeed, last month’s announcement of the “IPO tax” was cheered by progressive commentators as a productive way to eat the newly rich of the tech world.

But San Francisco would be wise to leave the IPO tax in the trash can. For one thing, the city should look to its own history for a lesson. Tech companies dominate modern San Francisco because the city cut taxes to lure them there in the first place. Sure, some of the big ones might stick around now that they’re established, but there is nothing that guarantees the next round of startups will set up shop in the Bay. Capital is highly mobile, and small tech firms—almost by definition—have the ability to locate anywhere. “Firms already hampered by the high cost of operations here will have another reason to expand or relocate elsewhere,” the San Francisco Chronicle‘s editorial board wrote in May.

Second, the tax wouldn’t have done much to fix the city’s housing and inequality issues. Solving that will require repealing loads of zoning codes and regulations so that more housing can be built. As Reason‘s Christian Britschgi has reported, San Francisco has held up the development of new apartment buildings for reasons as absurd as where shadows from the structure will fall.

Soaking tech startups won’t fix that.

Kerry Jackson, a fellow with the free-market Pacific Research Institute, calls the IPO tax “outrageous and extortionate.”

“When politicians see wealth being created in the private sector,” Jackson writes, “they always find a way to get their hands on the dollars, though they never earned a cent of the income.”

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The “Final False Dawn” Looms

Authored by Jeffrey Snider via Alhambra Investment Partners,

Not A Paradox Nor A Conundrum: TICked at Powell

It seems a paradox, at least like it is backwards. The financial media doesn’t help because good editorial standards rely upon the opinions and beliefs of credentialed people who have no idea what they are talking about. If you hold high office in some central bank, we are to assume you are competent about monetary issues.

It’s all given a gloss of geopolitics, too, which isn’t helpful. The dollar destruction people are also onboard with how interest rates have nowhere to go but up. If the dollar is to be globally rebuked, so must UST’s given how there’s so much deficit to be financed. Who’s left to do it without foreign assistance?

What I am talking about is “selling UST’s.” It seems just that straightforward. Why else would foreigners be dumping US assets? They hate America, probably hate Trump, and like the Chinese are keen to create a new world order that isn’t politically SWIFT-centric.

And if these overseas haters aren’t going to buy US assets any longer, how in the world can the government auction its debt for anything beyond huge discounts to where it is priced now? The bond market must plunge.

Anyway, that’s what you’ll hear and read each and every time the TIC data comes out. Foreigners are ditching the dollar with every UST coupon they dispose of.

And yet, the dollar remains as unchallenged as ever (it seems like people were making a big deal out of petroyuan, for example, but that was ages ago, just like bilateral CNY swaps even further back in history) and paradoxically whenever foreign officials are dumping their Treasuries, yields on them go down.

It’s not a paradox at all, of course, it is merely another conundrum for the Alan Greenspan’s of the world. These people who hold high office predicated not on banking and monetary competence but which Ivy League Economics degree they hold; repeating only the things passed to them in academic theory no matter how much contrary practice they come up against.

As a statistician, the true nature and basis of their schooling, they can become the successful general manager of a Major League Baseball team but are utterly lost in economy, markets, and most of all money.

In April last year, the benchmark 10-year UST yield had moved to as a high as 3.03% which was the highest in years. In that same month, foreign governments and central banks began discarding their US federal government debt. Both of those things were characterized as evidence for the utterly ridiculous inflation hysteria.

Over the fourteen months since, including April 2018 and concluding with the latest TIC data for May 2019, official selling has totaled an astounding $314.5 billion.

Almost a third of a trillion has been dumped. And yet, it was just two weeks ago that UST 10s yields had dipped below 2%. They are closer again to all-time lows than they are to last year’s highs, let alone rates much higher.

It is, it can only be, a fundamental misunderstanding of how things really work. This isn’t actually a surprise; if you’ve followed Economics and especially its takeover of central banking you know what really happened.

Long ago, central banks found out they could no longer define (forget measure) money. Realizing the difficultly of the task, they just stopped trying. In place of technical capabilities, it was assumed that none were needed; that managing people’s expectations by moving the federal funds target rate around a quarter point here or there would suffice.

The assumption seemed to be a valid one, made so upon “evidence” of the Great “Moderation.”

Our big problem in 2019 is in how nobody grasped the operational implications of 2008. It disproved the assumption. That’s really all the Global Financial Crisis had been; proof that interest rate targeting and expectations management amounted to nothing more than an untested puppet show. About as effective, too. When the world needed some real monetary intervention, Ben Bernanke and crew had no idea what to do.

The only real difference between interest rate targeting and QE is how the latter is a tested puppet show.

The big parts of that monetary evolution were both its strangeness (Greenspan’s “proliferation of products”) and its location. Offshore. Offshore. Offshore. Shadow money, and, as many are now learning, shadow shadow money.

But how does any current central banker like Jay Powell stand up in front of the public and admit to what can only be described as decades of monetary dereliction? It might first start with an otherwise nondescript blog post written out of the Fed’s New York branch, followed up by what might seem to be in orthodox terms a peculiar speech in Paris this week (thanks M. Simmons).

The global nature of the financial crisis and the channels through which it spread sharply highlight the interconnectedness of our economic, financial, and policy environments.

Chairman Powell, giving this speech, then added that this posed challenges for domestic monetary policy (you think?), something which “requires that we understand the anticipated effects of these interconnections and incorporate them into our policy decisionmaking.”

In 2015, Janet Yellen’s Fed had dismissed “overseas turmoil” during Euro$ #3. It seems as if Jay Powell doesn’t have the same luxury, not with a potentially more disruptive Euro$ #4 and rate cuts staring him in the face just a few weeks from now.

It’s not even close to admitting eurodollars as being the real global reserve, and therefore the malfunction in that system which explains both “selling UST’s” (global dollar shortage) as well as the concurrent contradictory behavior of their yields (flight to safety, meaning liquidity hoarding). This isn’t even much of a first step (Powell is blaming differences in monetary policies for contributing to overseas turmoil).

It is the bare minimum: official recognition that the story you’ve been told for decades isn’t so simple and straightforward as you’ve been told. There’s stuff going on out there in the rest of the world that actually does matter. What I wrote last week applies here:

New York central bankers finally come out and admit offshore dollars are important, that they must play some fuzzy role in things, but don’t yet grasp just how important. 

Jay Powell isn’t going to admit tomorrow to how the Fed was really a bystander to the Great “Moderation” and that its top Economists were just too eager to take the credit for what was a historical accident.

Don’t get too excited, however. Janet Yellen in 2016, not surprisingly, finally began expressing doubts, too, before then embracing globally synchronized growth in 2017.

As I’ve written before, it’s not these eurodollar squeezes that are the worst. It is the reflations in between. Just when reluctant central bankers finally open their eyes just a little, like that, the urgency disappears and the recovery fantasy begins anew. The worst thing is how it repeats over and over, the only constant these false dawns each and every time.

The end result? The mainstream still believes interest rates have nowhere to go but up, even when they fall, and that selling UST’s is an act of geopolitical defiance rather than the sustained monetary incompetence which, when truly discovered, will actually point the world in the direction of actual rather than imagined recovery. The final false dawn. 

via ZeroHedge News https://ift.tt/2Lt2VSe Tyler Durden

Russian Researcher Plans To Gene-Edit Embryos To Cure Deafness

Five congenitally deaf couples have agreed to allow their embryos to be edited by Russian biologist Denis Rebrikov, who will use CRISPR to correct the defective GJB2 genes that are responsible for their hearing loss. Since both would-be parents harbor two copies of the gene, their children would necessarily also be deaf.

So far as is known, CRISPR gene-editing of human embryos has only been done by Chinese biophysicist He Jiankui. He announced the birth in November of two girls whose genomes he had edited using CRISPR with the goal of making them immune to the HIV/AIDS virus. He was widely denounced for conducting an unethical and risky treatment. Some of the condemnations were justified: The technique’s safety is unknown and the babies’ parents likely were not provided with enough information to give truly informed consent. Despite being reproached for ethical lapses, He has reportedly been approached quietly by several fertility clinics that are interested in offering gene-editing services to their clients.

Since the hearing loss versions of the GJB2 gene are recessive, Rebrikov aims to use CRISPR to correct one version of the GJB2 genes, thus enabling the gene-edited child to hear. Earlier this month, researchers at Harvard using CRISPR successfully edited a mouse gene associated with hearing loss.

One of the chief safety concerns with CRISPR is the possibility of off-target mutations that could result in unintended harms to gene-edited babies. In other words, there is the risk of editing a gene you don’t intend to, producing results you also don’t intend. However, performing the edit at the one-cell stage enables reproductive clinicians to excise and test cells taken at a later stage of embryonic development to make sure the edit has been properly made and that no dangerous off-target mutations have occurred.

Many of He’s critics point out that there are now effective ways to treat and prevent HIV/AIDS—including a possible vaccine—without resorting to gene-editing. Similarly, it is possible to correct hearing loss through the use of a cochlear implant device. It is worth noting that, in the United States, the cochlear implant devices and associated treatments can cost up to $100,000. Although gene-editing would obviously involve additional costs, the price of one cycle of IVF treatments is around $8,000 in Russia and about $12,000 in the U.S.

Hearing loss is not a fatal disease and obviously many deaf folks live happy and fulfilling lives. So should Rebrikov be allowed to proceed with his gene-editing plans? Assuming adequate safety precautions are in place and that parents clearly understand the risks and benefits from the proposed treatments, the answer is yes.

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