Watch: Dramatic Footage Shows Chadian Military Jet ‘Accidentally’ Fires Missile At Senior Commander’s Home
A missile was ‘accidentally’ fired from a Chadian military jet while sitting on the tarmac, preparing for an anti-jihadist mission in Chad. The missile struck a nearby house, killing five people, reported DefPost.
The incident occurred on Friday (April 17), involving a Russian-made Sukhoi Su-25 of the Chadian Air Force. Local media said the missile was fired from the warplane parked on the tarmac at the Adji Kossei airbase, bordering N’Djamena International Airport, an international airport serving N’Djamena, the capital city of Chad.
Local media said the blast destroyed the home of Mahamat Saleh Arim, deputy commander of the presidential guard and a close ally of President Idriss Deby Itno. Five people were reported dead. It was also reported that the missile struck several meters from the Chad headquarters of anti-jihadist Operation Barkhane, an operation that started in 2014 and is led by the French military to exterminate Islamist groups in Africa’s Sahel region.
“Following the accidental explosion of a rocket that occurred in the morning from a ground device of the Chadian Air Force, which caused several victims near the Kosseï Base, the French soldiers of the Barkhane force are immediately intervened in support of the Chadian security services to provide assistance to the victims.
Lifting, excavation and medical transport equipment, as well as several dozen Barkhane force personnel, including firefighters and medical personnel, were mobilized for rapid clearance of the affected area. Three wounded were taken into emergency care at the hospital of the French military base. The French Embassy in N’Djamena offers its deepest condolences to the families of the victims,” the French Embassy in N’Djamena wrote in an online statement.
The dramatic footage was caught on the airbase’s CCTV camera, shows the missile being fired from the Su-25.
Joseph Dempsey, a defense and military analysis research associate at the International Institute for Strategic Studies, said if the missile did not go off course, it would have hit or at leased “crossed” French military assets.
Had the #Chad rocket not gone off course – with fatal consequences – it would have crossed to opposite #France military operated apron – note @Armee_de_lair C-130 in foreground of video pic.twitter.com/idDV8xfuDQ
“An investigation is underway to determine the circumstances of this incident,” said Youssouf Tom, public prosecutor at the N’Djamena High Court.
“The plane was taking off when the bomb broke loose, and hit a private residence in the city that houses soldiers’ families next to the airbase,” military personnel at the airbase told AFP.
The Chadian Air Force has a fleet of Russian-made Sukhoi jets that have been used to conduct aerial bombing raids against Boko Haram militants in the Lake Chad region.
The answer to the question is “YES.” The large bailed-out creditors will end up with the property of the non-bailed-out debtors who are being pushed deeper into debt with “bail-out loans” and fees and penalties for missed debt payments. Write-offs for the One Percent, and more indebtedness for everyone else.
Turn your mind to the economy. The US has a work force of 164,000,000. The unemployment forecast from the work closedowns is 30%. That would mean 49,000,000 people who are potential rioters. (We are half way there with today’s report of a 16% unemployment rate with 22 million unemployed). Many of these people were already living paycheck to paycheck, could not raise $400, and their debts leave them no discretionary income. As they could barely service their debts when employed, how do they service them when unemployed and when their small businesses are closed and incurring costs but have no revenues? Loans further indebt them. The cash payouts to the unemployed might cover food and housing but will not service their debts.
Fast food franchises and stores in malls are saying they are not paying their rents for three months. Mall owners won’t be able to pay their creditors. The bailout works for no one except those who caused the problem. As they are being bailed out, they will have the money to buy up or foreclose on the bankrupted businesses. More property will be concentrated in fewer hands.
The bail-out scheme concocted by the New York banks and Trump’s Treasury Secretary, who earned the name “the foreclosure king” during his Wall Street career, leaves creditors whole and debtors deeper in debt.
The more debt is concentrated in fewer hands and the more indebted everyone else becomes, the less consumer purchasing power there is to drive the economy. The foreclosed assets become less valuable as their profitability declines with consumer purchasing power.
The destruction of the US economy has been underway since global corporations moved middle class jobs offshore.
It has been underway since the financial sector diverted a larger share of consumer income to the service of debt.
It has been underway since corporations invested their profits in buying back their own shares instead of expanding their production capabilities.
It has been underway since Quantitative Easing inflated stock and bond prices beyond realistic values.
It has been going on since the rules against concentration were set aside and the Glass-Steagall Act was repealed.
It has been going on since endless wars crowded out infrastructure investment and social safety net expansion.
Is this a plot or stupidity? Whatever the answer, the economy is being destroyed.
The economic problem is that private sector debt, both personal and corporate, is too great to be paid. This problem existed prior to the closedown. The closedown means that there is even less income with which to service the unsustainable level of debt. This is not a problem that can be fixed with more debt.
The problem is that banks lend to finance the purchase of existing financial assets, not to exand the economy’s productive potential.
The problem is that corporations use their profits and borrow money in order to buy back their own equity instead of investing in their businesses. The executives indebt the corporations while decapitalizing them, and they are rewarded for doing so with “performance bonuses.”
The problem is that global corporations thinking short-term moved high-productivity, high-value-added US jobs to Asia, thus reducing earned income in the US, impairing state and local tax base, and causing the Federal Reserve to substitute a growth in consumer debt in place of the lost consumer income growth.
The people in charge of the fix are only fixing it for themselves and in a short-sighted way. There is only one way to fix the situation, and that is to write down private sector debts to levels that can be serviced. As the creditors are being bailed out regardless, their loan losses don’t matter.
The bank and corporate bailouts are an opportunity to fix the economy in other important ways. In effect, the bailouts amount to nationalization. The government should accept the ownership that it is purchasing. Then the government can break up the “banks too big to fail” and separate investment from commercial banking without having to pass new Glass-Steagall legislation and without having to battle against financial lobbying in Congress. Once broken up, the banks could be sold off. This would take enormous vulnerability out of the financial system and restore financial competition. With corporations in government hands, the jobs could be brought home from overseas. The middle class would be restored.
These measures together with a debt writedown would restore consumer purchasing power. Pent-up demand would propel the economy to higher growth as occurred following World War II.
This is a real solution to a real problem. But with the One Percent in charge of the problem, we are not going to get a real solution. We are going to get more money used to push up prices of financial assets and paper over unsustainable debt and a dying economy with an artificially-inflated stock market.
The elite have failed us too many times. It is time to dethrone them.
Having been the first to correctly predict the Fed’s “nuclear bomb” response to the coronavirus pandemic as early as March 3 when in his 27th Global Money Notes “Covid-19 and Global Dollar Funding” he warned about the unprecedented dollar short squeeze that was set to rock global financial markets, Credit Suisse and former NY Fed repo guru Zoltan Pozsar has been one step ahead of the Fed – and virtually everyone else – when it comes to how the Fed’s monetary plumbing and liquidity operations are interwoven during times of crisis, and how to best unclog them when an black swan bat event like the global economic shutdown hits.
Which is why the Fed must have breathed a big sigh of relief when in his latest note “U.S. Dollar Libor and War Finance“, Pozsar gave the Fed’s unlimited liquidity injection over the past 4 weeks the thumbs up, saying that the “The Fed’s liquidity injections are working” pointing out that “Global dollar funding conditions have eased, and U.S. dollar Libor-OIS spreads started to tighten.”
Specifically, Pozsar lays out four reasons why he is confident that the market’s funding crisis is now over (which includes an interesting if tangential discussion on whether the Fed is sending a “Machiavellian” or “Bagehotian” message on benchmark rate reform – i.e., Libor vs SOFR – which readers can parse on their own in the attached note) and concludes that…
The machinery of war finance is in full swing and liquidity injections over the past month have stabilized funding markets and are compressing Libor-OIS spreads from the top down.
Yet despite the nuclear bomb of liquidity which appears to have fixed most of the funding conditions that snapped in the second half of March, there is one thing that Pozsar believes can still spoil the party, the same thing we discussed last week when we pointed out that in order to boost the cash balance at the Treasury to a record $960BN…
… the Treasury had unleashed an unprecedented flood of T-Bill issuance, which in the past 12 trading days has amounted to a record $1.5 trillion in gross new debt sold between T-Bills and Cash Management Bills, as shown below.
It is the chart above – the unprecedented burst in Bill supply – that Pozsar is keeping his eyes on and warning that while things may be getting better, and the Fed’s “machinery of war finance is easing unsecured funding pressures from the top down” the risk is that “bill supply can complicate this picture from the bottom up.”
Specifically, the sudden avalanche of Bill supply – and to think less than a month ago there was such a shortage of Bills, we were seeing negative yields through three months…
… which the Treasury is using to prefund the multi-trillion fiscal stimulus (and will have to be rolled every few weeks), Bill supply last week pushed Treasury bill yields from below OIS to 20 bps above OIS. To Pozsar this spike is ominous and suggests that the market may be nearing a tipping point on the front-end. The only solution: the Fed has to launch yield curve control to contain OIS as further supply without yield curve control – and there will be a lot of future supply – could push bill yields higher, “which would risk undoing the improvement that the Fed’s liquidity and regulatory measures helped engineer”, the repo guru warns.
The immediate – and potentially dangerous – consequence of sharply higher yields is that it would offset much of the Fed’s actions and serve as a liquidity drain: according to Pozsar, “higher bill yields could pull funds away from the FX swap market as foreign central banks put their dollars into bills, not FX swaps, and as bill-OIS spreads grind more positive, they will push FX swap implied yields higher, OIS-OIS cross-currency bases more negative and that will limit how much more U.S. dollar Libor-OIS spreads can tighten from here.”
This is how the Credit Suisse strategist dissects this potential landmine:
For all the talk about the war on an invisible enemy and war finance, we haven’t heard from the Debt Management Office of the Treasury and the Fed about the need for the monetary financing of the CARES Act and further stimulus measures. The exemption of Treasuries from the leverage ratio frees up demand for supply (“limitless inventories”), but the near-term supply of bills is too much and can push bills yields higher from here, risking a reversal to the improved funding conditions the Fed worked so hard to achieve.
So what should the Fed do? Simple: since Powell has already nationalized virtually all of the long-end with unlimited QE (and one can argue has taken over the corporate bond market by purchasing IG and HY bonds), the Fed will have to go all the way, and take over the entire yield curve, fixing the front-end by pegging three month T-Bill yields at OIS rates, to wit:
The Fed has done a lot and yield curve control where they peg three month Treasury bill yields at OIS rates and is the only thing the Fed has not done yet, but soon will have to. The target range for overnight rates and the OIS curve – the bottom layer of the money market cake – are the Fed’s monetary sanctum. Everything the Fed does is priced based on variables within that sanctum: the top of the band, IOR, IOR plus a spread and OIS plus a spread.
Incidentally it is not just repo “god” Pozsar who believes the next step for the Fed is yield curve control is Deutsche Bank’s rates strategist Stephen Zeng, although where Zeng disagrees with Pozsar is that latest move by the Fed which is now just a matter of time, will keep the system in a state of artificial balance since the Fed has to be far more worried about the long-end:
As volatility and market liquidity continue to normalize, the Fed’s market functioning-oriented purchases should slow further. On the other hand, uncertainty around the extent of economic damage the virus has caused and rapidly-increasing Treasury issuance to fund the fiscal stimulus suggest the Fed will be cautious in unwinding the pace of purchases… This reduction should coincide with a very gradual and staggered reopening of the US economy in the coming months.
Beyond June, we think the objective of these purchases will pivot towards more traditional goals of supporting a more rapid rebound and ensuring that the scarring effects of this crisis are as limited as possible. With inflation stuck below target and likely to move lower, inflation expectations anchored at uncomfortably low levels, and unemployment rising sharply, the Fed has every reason to ensure that financial conditions remain exceptionally accommodative. In this context, we foresee the Fed adopting front-end yield curve control (YCC) in late Q2 or Q3 that sets caps on Treasury yields out to about three years.
But…
While YCC may be a necessary policy response, it is not sufficient since it focuses on the front-end. In the US, medium- and long-term rates are more relevant for impacting financial conditions important to business and consumer economic decisions. If implemented, front-end YCC should be paired with more traditional QE that purchases securities across the curve and keeps long-end rates contained as well.
In short, the only thing that experts agree will avoid another crisis in the bond – and funding – markets is if the Fed effectively takes over the entire yield curve, ending capital markets as we know them, and launching “price discovery” by decree. While we have no doubt that the Fed will go the length, we can’t help but remember that such terminal central planning did not have a happy ending for the USSR.
Greenwich Mansions Are Finally Back In Demand, But Only As Short-Term Quarantine Escapes
The Greenwich housing market had been cooling off significantly over the last 12-18 months – that was, until the government tried to keep everybody quarantined in Manhattan.
The state of the union for Greenwich in January of this year was that sales listings were falling…
…and buyers were demanding discounts.
Now, thanks to the government mandated quarantine of New York City, interest in homes in the area has skyrocketed – no longer for luxury long term housing, but rather as short-term rental escapes from the pandemic’s epicenter in the city.
City-dwellers are now bidding up leases in the Connecticut town, which has suddenly become a hot spot for people who have the financial means to make their way out of the city, according to Bloomberg.
Joanne Mancuso, an agent at Houlihan Lawrence, said: “It kind of builds. You got a couple of calls, and then all of sudden, the flurry came in.”
A listing that she had been shopping for $32,000 per month – a 9,261 sq. foot house on North Street with a pool – recently found a tenant who was willing to pay 56% more than the list price. The owners had previously sought a yearlong tenant when they put the house on the market in January. There were no takers, despite 6 people looking at the house.
During the week of March 16, when NYC closed schools, interest in the home suddenly surged. Three offers came in over the course of just 48 hours. The owners went with the tenants who wanted to stay the longest: 10 weeks. The renters are a family, with their grandparents and children, from Manhattan who “wanted to get out [to Greenwich] as soon as possible”.
In March, 53 single family homes in Greenwich were leased, which is nearly double the 27 from March 2019. In about 25% of the deals, tenants agreed to pay above the asking rents.
So far in April, 32 lease agreements have been signed compared to 14 last year. Homes are being rented for an average of $15,172, up from $8,817. 5 of the 32 deals this month went off above the asking price. One 3,200 sq. foot home that was being listed for $8,000 per month found a tenant for $8,700.
Broker Blake Delany seems to think the rental interest could help sales later this year. It reduces the amount of homes available to buy and promotes living in the town, Delany said.
“Interest in the Greenwich market will have increased. A lot of tenants are going to see that living in the suburbs is quite nice.”
There is no way authorities can limit the coronavirus and restore global growth and debt expansion to December 2019 levels.
Authorities around the world are between a rock and a hard place: they need policies that both limit the spread of the coronavirus and allow their economies to “open for business.” The two demands are inherently incompatible, and so neither one can be fulfilled.
The problem is the intrinsic natures of the virus and the global economy. This virus is highly contagious during its asymptomatic phase, which is long (5 to 20 days), and therefore impossible to control with the conventional tools of identifying people with symptoms and isolating them, and tracking their contacts with others.
While there is much we do not know for certainty about Covid-19, what’s clear (and not well-reported) is that its lethality is not exactly like a normal flu. The number of otherwise healthy people under the age of 60 who die of a regular flu is near-zero. The number of otherwise healthy people under the age of 60 who die of Covid-19 is not large as a percentage of cases but it is worryingly above zero. A great many otherwise healthy people under the age of 60 have died of Covid-19.
Yes, the vast majority of those who die are elderly and suffering from chronic health issues, but the number of younger, healthier people who are dying makes this virus consequentially different from a typical flu.
Everyone looking at total deaths (currently much lower than the fatalities in a typical flu season) is missing the semi-random lethality of Covid-19 in younger, healthier people, or at least certain strains of the virus in certain conditions (air pollution, viral load, etc.) and in not yet fully understood sub-populations.
This uncertainty and semi-randomness means authorities cannot claim that Covid-19 is “no worse than a regular flu” because the number of 40-year old doctors, nurses, transit employees, etc. who die of regular flu is near-zero, but the number who are dying of Covid-19 is far above zero.
In a regular flu season, people with healthy immune systems have little fear of dying of the flu. But Covid-19 is killing enough otherwise healthy people that there cannot be absolute certainty that the risk of death is essentially zero. This is an enormous difference psychologically, a difference that is currently under-appreciated.
The global economy is much like a shark: it must keep moving forward in growth and debt expansion or it dies. This reality is poorly understood and therefore of paramount importance.
The difference is debt. A large percentage of global consumption is ultimately based on debt. Debt masks a variety of inefficiencies, but the drag of inefficiencies and unproductive profiteering is visible if we look at the rate of “growth” and the rate of “debt expansion.”
In the past 12 years, debt has exploded higher globally just to maintain weak growth. Where $1 in new debt once increased GDP by 50 cents, now it boosts GDP by 5 cents–or by some measures, zero. It’s taking more and more debt to keep the “growth” shark moving forward.
The problem is debt must be serviced: interest must be paid and principal paid down. Even at near-zero interest rates, the principal payments loom large.
Debt has a built-in opportunity cost. Once the borrower takes on more debt, a chunk of income must be allotted to paying the new debt. That income is no longer available to be saved or invested or spent on goods and services; it’s tied up for the life of the loan.
Eventually, borrowers’ income is completely consumed by debt service and paying essentials such as rent and food. There is no income left after essentials and debt service are paid.
So what happens when income falls? There is no longer enough income to pay all the expenses, and so what does the household or company do? It pays the essential bills and defaults on the debt, i.e. stops servicing the debt.
The lender can pursue legal action to collect the debt, but heavily indebted households and companies simply don’t have the income or assets to pay the loan back. They declare bankruptcy and all their lenders must eat the loss.
This has far-reaching consequences. Lenders saddled with huge losses due to mass defaults are insolvent, and must conserve earnings to rebuild their capital requirements. To stem the flood of losses, they have to tighten lending standards and avoid making loans to over-indebted households and companies.
But reducing their lending to marginal borrowers greatly reduces their income, as marginal borrowers must pay higher interest rates, and so these are the most profitable loans lenders can make.
You see the feedback loop here: less lending, less profits, and lenders’ losses pile up. The banking sector unravels.
As in 2008, we see central banks bailing out insolvent lenders, but as I explained in a recent blog post, bailouts are not the same as revenues. Bailing out lenders and over-indebted corporations doesn’t magically create new creditworthy borrowers. Buy The Tumor, Sell the News (April 10, 2020)
Bailouts are short-term emergency measures, but they don’t restore the foundations of sustainable debt: credit-worthy borrowers.
From the point of view of the potential borrower, why borrow more money to spend on a superfluous vacation if income is uncertain? Why buy a house if there’s a chance it might decline in value by 20%? Wouldn’t it be wiser to delay purchases funded by more debt? Of course it’s wiser.
Let’s add up the uncertainties:
1. Covid-19 is not as risk-free for healthy people as ordinary flu. Therefore there is an uncertainty that favors caution and prudence and risk avoidance.
2. From the point of view of potential borrowers, there is also uncertainty about future income and asset values, and so lowering risk makes sense. The easiest way to avoid risk is not take on new debts to fund discretionary purchases and save money to create a cushion against uncertainties.
3. From the point of view of lenders, there is uncertainty about the creditworthiness of borrowers, households and companies alike. The past is not a good guide to the future: households with sterling credit may default if a primary wage earner loses their job.
Charging marginal borrowers higher interest rates is no longer a low-risk strategy, as what good is a month or two of higher interest if the borrower defaults and the lender is stuck with an enormous loss?
These uncertainties cannot be dialed back to zero. To truly limit the spread and semi-random lethality of Covid-19, authorities will have to make extreme measures permanent–for example, mass testing of the populace on a scale never seen, plus identifying those at lower risk (those who have recovered, etc.) and those at higher risk (elderly people with multiple health issues) and imposing different rules of conduct on each group.
Economically, the global financial system will unravel if debt expansion ceases or reverses, and incomes decline or even become uncertain.
Recall that the absolute number of defaults does not have to rise by much to sink the system. Even if there are no additional defaults, once debt stops expanding, the system unravels, as it requires expanding debt to fund expanding consumption (“growth”) and the continuing purchase of assets at bubble-top high valuations.
Once assets decline in market value, the system unravels, as bubble-top valued assets are the collateral holding up the world’s mountain of debt. Once the collateral shrinks, the system becomes increasingly prone to a self-reinforcing collapse of lending and asset crashes, as sellers can’t find any buyers and lenders can’t find any creditworthy borrowers with solid collateral and income.
For an example, consider global tourism and travel, including business-related travel. This sector accounts for roughly 10% of global GDP ($9.25 trillion). Tourism worldwide – Statistics & Facts. In 1960, about 25 million people traveled internationally. In 2019, the number of international travelers was 1.4 billion. This is a 56-fold increase.
When I moved to Hawaii as a young teen in 1969, the state had just cracked the 1 million visitors per year line. In 2019, 10.4 million visitors came to Hawaii.
Tourism and even business travel are the epitome of discretionary spending. What happens to incomes, asset valuations, collateral and debt defaults if global tourism only recovers to 50% of 2019 levels?
That would reduce global GDP by 5%, but this drop will trigger financial consequences many multiples of 5%.
What happens to the pricey room rental rates that have become standard? What happens to the incomes of AirBnB hosts? How many will seek to sell their properties or default on their mortgages?
What happens to property values in cities dependent on tourism when a significant percentage of AirBnB owners try to sell their properties? Who will want to take the risk of buying a property which could lose much of its value going forward?
Another apt analogy for the global financial system is an airliner. Airliners are optimized for flying at high altitudes at speeds of between 500 and 575 miles per hour. This is their envelope of maximum fuel efficiency.
While an airliner is physically able to fly at 500 feet, its fuel efficiency will be greatly reduced. Just as airliners cannot fly above a maximum altitude (around 45,000 feet) or approach the speed of sound (Mach 1), they cannot reach their maximum range flying at 500 feet.
The airliner is optimized for a very narrow envelope, and once it leaves that envelope, bad things happen: its engines flame out, it runs out of fuel, etc.
The global economy is optimized for a vast, steady expansion of debt to fund an equally vast and steady increase in consumption. Once it slips out of this narrow envelope, it crashes.
Central banks and governments can mask this in the short-term by substituting bailouts for revenues, but bailouts are not sustainable replacements for revenues, incomes, profits and debt service. The global economy has already fallen out of its sustainable envelope, and the only questions are its rate of descent and how long the remaining fuel will last.
There is no way authorities can limit the coronavirus and restore global growth and debt expansion to December 2019 levels. This is not what people want to hear, but it’s the reality we will have to deal with.
This essay was drawn from Musings Report 15. The Musings Reports are emailed weekly to subscribers and patrons. To subscribe or become a patron, please visit how to subscribe/become a patron.
One of the more entertaining and fake narratives in the world right now is that China’s economy has experienced a “V-shaped post-covid” recovery, with various economic indicators such as trade and PMIs (if not so much GDP), staging a miraculous recovery after the economy collapsed in February. Not only is this not true, with vast stretches of China’s output still shut down as a result of collapsing demand, both domestically and internationally, but watching Beijing huff and puff even as it sends conflicting signals in hopes of further stimulating the economy is downright hilarious.
Case in point, last Wednesday China cut the rate on its one-year Medium Term Lending Facility – or the cost the central bank charges on 1-year funding to banks – from 3.15% to 2.95%, which of course is just one of the many, many rates that have emerged in China in recent years in a time when Beijing is afraid of cutting the overnight funding rates as China’s economy remains an overlevered time bomb. Indeed, as Rabobank’s Michael Every wrote last week, “yet again we have a muddle over which rate really matters most in that economy, but the underlying picture is crystal clear. China needs to get far more liquidity into the real economy, but can’t match the level of easing being seen abroad for fear of destabilising CNY and ending up dealing with the kind of USD real politik being shown above.“
Indeed, as China’s Politburo made clear during a meeting on April 17, more cuts would be coming (almost as if there isn’t really a V-shaped recovery but there is a whole lot of new liquidity). As Goldman reported, the most tangible and meaningful statements from the meeting chaired by President Xi “was the mentioning of RRR and interest rate cuts in the discussion of monetary policy stance. While this language is vague in the sense that RRR cuts could be partial, which the PBOC has done a number of times already, and it is not clear which interest rate needs to be cut, the short-term interbank rate has already been guided to a very low level, so the mention of these likely increases the odds of broad-based RRR cut and/or a benchmark deposit rate cut.“
Yet while China has been leery of touching it RRR which it cut last at the start of the year, it had no choice but to cut more and with traders expecting some announcement out of the PBOC, the Chinese central bank did not disappoint when on Monday morning it announced that China cut the 1 and 5-Year Prime rate – the benchmark rate local financial institutions charge for new loans – from 4.05% to 3.85%, and from 4.75% to 4.65%, respectively, sending both rates to their historic lows (which is not really all the long since China only introduced the Loan Prime Rate, better known as China’s Libor, only last summer). The rate decided by a group of 18 banks is released on or around the 20th of every month and is reported in the form of a spread over the interest rate of the central bank’s medium-term loans. The steady decline in the LPR since August last year has led to lower borrowing costs in the wider economy, and also to lower profits for banks.
According to Bloomberg, some analysts had expected a cut of 20 basis points after the central bank trimmed several of its policy rates since the last LPR was set in March, and added liquidity to the financial system. The five-year tenor, a reference for mortgages, was cut to 4.65% on Monday versus 4.75% in March.
In addition to the MLF cut last week, the central bank also cut the cost of short-term open market operations in late March by the most since 2015, and announced a two-phase cut to the reserve ratio requirement for smaller banks.
And, as noted above, hours after the dismal economic reports, the country’s leaders pledged to deliver more stimulus including interest rate cuts to boost domestic demand. Authorities will keep liquidity “reasonably ample” by cutting the amount of reserves banks need to hold, China Central Television reported after a meeting chaired by President Xi Jinping.
As Coronavirus Depression Continues, Americans Are Putting Their Rent On Credit Cards
Despite what the stock market would have you believe, the United States is sinking further into a depression. And the unemployed are now resorting to putting their rent on credit cards.
It’s a temporarily solution that may help tenants get through a month or two, but it’s ultimately driving an already broke consumer deeper into debt that will cripple them in the long term. About 84% of tenants in the U.S. have paid full or partial rent through April 12, the WSJ reports, a number that has risen significantly since the first week of April.
But credit cards as a form of payment are also rising by 13%, compared to the first three months of the year. The number of tenants paying with a credit card is up 30% when compared to the same period in March.
While sometimes tenants pay rent with credit cards to boost their credit score or earn rewards, this is increasingly looking like a desperation scenario, where credit cards could be the last fallback before tenants start filing for bankruptcy and wind up out on the street.
In general, electronic payments have risen since the start of the pandemic. Building owners will sometimes accept credit cards through apartment management software or third party apps. Even with interest rates near 0%, the average interest rate on a credit card is still in the double digits. It’s even higher for those taking cash advances.
While some landlords and creditors have said they would make provisions for those who have lost their jobs, the credit bureaus will be far more unforgiving. They will be offering no special treatment, according to the WSJ, because a revision to the CARE act that would have prevented them from reporting negative information due to the pandemic was left out at the last minute.
Some landlords have offered to absorb the transaction costs related to using credit cards. “Once we saw where things were going with this pandemic, a lot of our rules just kind of went out the window,” one landlord said.
But if unemployment doesn’t start to arrive by the time many of these tenants have to pay May rent, they could be faced with far more dire consequences.
Bruce McClary, spokesman for the National Foundation for Credit Counseling, said: “Your rent payment isn’t the only thing you owe, and chances are you have other financial commitments you’re having to keep on track as well.”
Over 22 million people have applied for unemployment over the past fourweeks.
Government intervention into the market is always, and without fail, the wrong response to an economic problem. Politicians justify their intervention with ‘saving jobs,’ ‘dealing with a crisis’ or simply, ‘because I can.’
They only focus on the ‘seen’ and ignore the ‘unseen’ effects of their policies, selling them to voters on that basis alone. This is the first rule of economic analysis.
No discussion of the secondary or tertiary effects is allowed.
Even though those effects are often far worse. But because they are harder to predict and more pernicious and diffuse they are ultimately ignored.
President Trump is no different in this than any other politician. In fact, he may be one of the worst examples of a politician doing too much in history. To Trump nothing cannot be fixed without his direct application of the weight and force of the U.S. government.
From sanctions to tariffs, stimulus spending to bailouts, Trump has become the WWE Version of FDR in the past month. The latest bailout to the oil industry Trump is proposing is paying drillers to leave their oil in the ground.
The Energy Department has drafted a plan to compensate companies for sitting on as much as 365 million barrels worth of oil reserves and counting it as part of the U.S. government’s emergency stockpile, said senior administration officials, who asked not to be identified describing deliberations prior to a decision and announcement.
Federal law already gives the Energy Department authority to set aside as much as 1 billion barrels of oil for emergencies — without dictating where they should go. That creates a legal opening for storing crude outside the government’s existing reserve and even blocking its extraction in the first place.
The keep-it-in-the-ground plan, which would require billions of dollars in appropriations from Congress, could be unprecedented and reflects a Trump administration push to help domestic drillers battered by a surge of oil production and a collapse of demand tied to the coronavirus.
I’ve warned for years that Trump’s policies of antagonizing the world would come back to bite him. The frantic response by his administration to the breaking of the world financial system through the collapse in oil prices is precisely because he pursued his “Energy Dominance” policy which sought to make America the price-maker in oil versus being a price-taker.
It put the U.S. in the vulnerable position it was in in March, having spent trillions in ramping up domestic production while attacking competition around the world — Russia, Iran, Iraq, Venezuela.
Trump’s “Best Economy Ever” was built on a foundation of quicksand and now he’s scrambling to prop it up before it sinks into oblivion.
He put himself in this position with his insane and ridiculous belligerence in foreign policy around the world. If you don’t think Putin’s decision to say no to OPEC+ production cuts in March which precipitated this collapse wasn’t a direct response to Trump’s lunatic antics in Iraq, Syria and Iran then you are either willfully obtuse, a moron or both. (I told you in my last article I’m done mincing words).
He put himself in this position by intervening in the oil markets at every level and now the worm has turned on him.
For most of 2019 we wondered what the world would look like at $200 per barrel oil in the case of a U.S. war with Iran. But the truth is it would look a helluva lot like the world today at $20 per barrel.
And it’s not going to improve anytime soon. Trump is right to push to open the U.S. economy up regardless of the status of COVID-19 because the best way to save the oil industry is to get people working and raising the demand for oil.
The U.S. had a grenade dropped on its budget. It looks like a nuclear bomb, but that’s only because of the continued arrogance and necessity of politicians, like Trump, needing to be ‘seen’ doing something caused far more damage than it would have if they hadn’t intervened in the first place.
The adage, “never let a crisis go to waste,” is apropos here. Politicians use the cover of crisis to act. They have to be ‘seen’ acting rather than not. Trump is acutely aware of this because he truly can’t stand criticism.
A man without principles, Trump acts mostly out of his need to deflect criticism and be ‘seen’ by his base as their champion.
You could argue this ‘pay-not-to-drill’ plan is Trump’s way of getting around agreeing to production cuts with OPEC+ publicly, but that would be giving him far too much credit (more of that willful obtuseness I mentioned earlier)
But, really this is just another ridiculous bailout no different than FDR paying farmers not to plant (which we still do nearly 90 years later) and burning crops while people were starving.
And the unseen effects of these bailouts and alphabet soup programs of asset purchases will be the final wholesale looting of what once was the engine of the U.S.’s economic greatness, the middle class.
Trump thinks he’s saving middle class jobs here but he’s destroying them. These were jobs that should never have existed in the first place. Extending them into the future only prolongs the agony while the money spent mostly goes to the vultures hanging around D.C. to save themselves.
The fact that every action taken so far by the Trump administration to counter the effects of the deflationary spiral set off last money has been to bail out someone else, tells you no one in D.C. is even paying lip service to the unseen effects of their actions.
Moral Hazard? We don’t have time for that!
And the people surrounding Trump, including Trump himself, know this and can’t help themselves.
This is not an economic one but rather a crisis of confidence and faith in the role of government. This is why they are acting so swiftly, to save themselves, not us.
If they’d get out of our way and let the market clear, which it will do eventually anyway, we could all get back to productive work that much faster.
We crossed the monetary Rubicon last month.From here on out it will be an endless series of Hollywood Red Carpet openings while they further destroy what’s left the discipline of the market and hollow out what’s left of our lives.
The government has always been an economic vandal, obsessed with first-order effects to further is own ends. As the after-effects of this period of history present themselves we’ll come to understand this even more acutely.
By the time Trump and his band of economic ignoramuses are done there won’t be an America worth making great again. That’s the future once seen, you can’t unsee.
Study Finds Doing This Regularly Is Likely To Prevent COVID-19 Hospitalization
Multiple reports have been issued over the past month carefully documenting many of the underlying health issues which make the chances much higher for COVID-19 infected individuals of landing in the hospital, and possibly death.
Foremost among these is the pervasive American problem of obesity, and the often corresponding disease of diabetes. “Young adults with obesity are more likely to be hospitalized, even if they have no other health problems, studies show,” a New York Timesreport detailed days ago.
However, in the first weeks and months of the crisis it seems there were few studies and reports advancing the opposite: what are ways and individual might prevent infection or at least greatly mitigate its severity?
Researcher Zhen Yan, PhD, University of Virginia School of Medicine. Image source: UVA Health
Newsweek reported Friday on new University of Virginia School of Medicine, which found regular exercise is behind healthier immune systems able to withstand and beat the virus.
Specifically regular exercise is likely to prevent COVID-19 patients from developing severe complications like acute respiratory distress syndrome (ARDS), a common cause of death among the infected, the study found.
“According to the study, between 3 and 17 percent of all COVID-19 patients will develop ARDS, while available data from the Centers for Disease Control and Prevention estimates that between 20 and 42 percent of all patients hospitalized with COVID-19 will develop ARDS,” Newsweek reports. Of these about 45 percent of patients who develop severe ARDS will die, according to researchers.
In his research, Yan studied a powerful antioxidant that is released throughout the body when exercising, which showed to help prevent disease, such as ARDS. The antioxidant is known as “extracellular superoxide dismutase” (EcSOD), which is created naturally by our muscles, but Yan’s studies discovered an increase in production when exercising.
“These findings strongly support that enhanced EcSOD expression from skeletal muscle or other tissues/organ, which can be redistributed to lung tissue, could be a viable preventative/therapeutic measures in reducing the risk and severity of ARDS,” Yan’s study says.
“Our findings suggest aerobic exercise is particularly potent in stimulating EcSOD expression,” Zhen Yan, head researcher at the University of Virginia School of Medicine stated to Newsweek. “With that said, weight training helps maintain or even increase muscle mass. More muscle mass will likely lead to more EcSOD production, hence more benefits.” Yan’s team used mice running “about 10 miles/day” as part of the studey.
“Generally speaking, 30 min moderate intensity exercise per day would be enough to have many of the health benefits,” Dr. Yan added.
Obesity has been linked with COVID-19 complications in recent studies. Image: istockphoto
Further Yan emphasized the following following exercises as producing the most EcSOD in the body:
Aerobics.
Weight lifting.
Running.
“Aerobic exercise can be easily done at home, such as [a] stationary bike, aerobic floor exercise and rowing machines. Of course, canoeing, biking and running outside with strict social distance are good options,” he said.
