Author: admin

As controversy rages over major social media platforms intervening when it comes to users expressing political viewpoints, and with the Trump administration lately escalating its burgeoning feud with Silicon Valley over tech giants’ “liability shields”, Facebook has announced it will now allow users to block political ads altogether.

The decision comes amid pressure especially from Democrats and the Left to get Facebook to fact-check political ads to root out alleged “disinformation”. Instead the company has opted to roll out a feature allowing its some two billion individual users to essentially turn off or mute “all social issue, electoral or political ads from candidates and Super PACs.” 

The ‘opt out’ feature will be available on Instagram as well, and seeks to ease the pressure of the question of social media platforms becoming ‘arbiters of truth’. The move is a huge defeat for the Biden campaign, which called for censoring political posts nebulously deemed “disinformation” and “offensive”. 

The Biden campaign previously urged Facebook to “proactively stem the tide of false information” in an open letter to CEO Mark Zuckerberg, including fact-checking political ads two weeks head of any election.

Facebook has been resistant to this call, with the new feature unlikely to satisfy Democrats seeking to shut down what they see as pro-Trump “disinformation” as well as conservative sources.

Facebook announced what the feature will achieve in a post about it’s broader ‘get out the vote’ initiative: 

Starting today for some people and rolling out to everyone in the US over the next few weeks, people will be able to turn off all social issue, electoral or political ads from candidates, Super PACs or other organizations that have the “Paid for by” political disclaimer on them. You can do this on Facebook or Instagram directly from any political or social issue ad or through each platform’s ad settings.

But no doubt there will further be controversy over what constitutes “political”.

The company says users will be able to ‘flag’ content they think is political but still made it through the filters: “if you’ve selected this preference and still see an ad that you think is political, please click the upper right corner of the ad and report it to us,” the statement added.

The feature will be available for some users starting as early as Wednesday. 

Authored by Michael Lebowitz and Jack Scott via RealInvestmentAdvice.com,

The next iteration of monetary policy may well be “yield curve” control?

Debt and interest rates have become the predominant driving force of our economy. Unfortunately, a majority of the debt is unproductive, resulting in declining long-run economic and productivity growth rates.

In the 1950s, each dollar of debt drove nearly 70 cents of economic growth. It has fallen ever since. Recently, each dollar of debt bought less than 30 cents of growth. That number has deteriorated further in the last few months.

The Fed, as manager of monetary policy, can use policy to either encourage long term prosperity or shorter-term economic activity. They have chosen the latter and, as a result, have dug themselves into quite a hole. Each dollar of debt drives less growth than the prior dollar of debt, thus requiring even more debt.

This article explores Yield Curve Control (YCC), a policy tool at the Fed’s disposal to keep digging even deeper into the hole.

The Hole

Government and corporate debt levels are currently increasing at unprecedented rates. Total non-financial debt rose nearly 12% in the first quarter. The amount will surely be much higher when second-quarter data is released.

The federal deficit in the current fiscal year is expected to top $4 trillion. To put that in context, it took 192 years between 1789 and 1981, for America to amass its first $1 trillion of debt.

Only halfway through the year, corporations exceeded $1 trillion of issuance, putting them on par with annual totals from the prior few years.

The graph below shows the ratio of non-financial corporate debt and federal debt to GDP. They both sit at record levels and will rise rapidly when second-quarter GDP is released.

As the ratio of debt to GDP increases, even more debt is needed tomorrow just to maintain current economic activity. For a Fed overly concerned about short-term economic activity, this dilemma creates a self-reinforcing problem. The situation is akin to a Ponzi scheme that needs constant feeding.

Given the Fed’s desire to avoid the slightest economic setback, surging debt levels means the Fed will have to become even more creative and active in managing interest rates. Are they prepared to impose negative interest rates on U.S. society? Although that tactic has been remarkably unproductive in Europe and Japan, the Fed has not formally ruled out negative rates.

Keep Digging

Fed Funds are at zero, and the Fed has not committed to negative interest rates. What else can the Fed do to keep debt flowing?

The Fed sets short term rates but can only indirectly influence long-term rates. Longer-term rates spanning from two-year maturities out to thirty years drive borrowing and consumption.

Quantitative Easing (QE) was introduced in 2008 when the Fed Funds rate hit zero. QE allows the Fed to purchase bonds in an effort to lower interest rates for longer-term maturities. During QE 1, 2, and 3, they bought Treasuries, mortgages, and agency bonds. Despite what one would think, on each occasion, longer-term rates rose. In the last month, they expanded their reach to include large-scale purchases of municipal bonds, corporate debt, and even junk-rated corporate bonds and ETFs.

Steering rates and setting rates are not the same. The question for the Fed is, how can they control interest rates for longer-term securities?

Yield Curve Control – A Bigger Shovel

QE 1, 2, and 3 ran systematically. The Fed set a predetermined amount and timing of QE in which to operate. It was useful in reducing the supply of Treasuries available and forcing investors into riskier assets like junk bonds and stocks. However, it did not allow the Fed to explicitly control the level of interest rates.

The Fed is now considering an enhancement to the way it manages QE. The “upgrade” is called yield curve control (YCC). YCC essentially allows the Fed to do unlimited amounts of QE with no time restraints. Embedded in YCC is the specific goal of targeting particular interest rates across the entire yield curve.

For example, assume the Fed set a 0.75% target yield on the 10-year U.S. Treasury note. They can then employ QE in any amount needed to buy 10-year notes when the rate exceeds that level. If successful, the rate would never exceed 0.75% as traders would learn not to fight the Fed.

It is essential to be clear about the definition of YCC. The Fed represents it as an option for helping them manage the economy through the difficulties the country currently faces. However, YCC is a euphemism for price controls. Price controls are government interference and regulation, establishing prices for specified goods and services.

In this instance, we are talking about the most fundamental component of any economic system, the price of money. Historically, in every case, the implications of price controls have been unfortunate.

Two examples of price controls leap out from recent history:

• Those imposed on gasoline during the Arab oil embargo in 1973 and 1974 that created long lines of cars waiting to fill up at gas stations

• Those set on electricity in the state of California, which contributed to rolling blackouts

Managing the Yield Curve

It is called yield curve control because the central bank effectively manages the shape of the yield curve. A steeper yield curve benefits the banks as they tend to borrow short term and lend long term. Larger profit margins increase their desire to lend and therefore stimulate debt-driven economic activity. Conversely, a flatter or inverted yield curve inhibits lending due to narrower bank profit margins, and consequently, it curtails debt issuance and economic activity.

The problem for the Fed is how they can steepen the yield curve to stimulate lending without letting longer-term rates rise too much? Under YCC, they may squirm out of one trap only to find themselves in a bigger trap. 

History

The Fed would not break new ground with YCC.  In fact, they would be reinitiating a previously used tactic. From 1942 to 1950, the Fed targeted rates to help manage funding costs for WWII. If you are interested in reading more on the U.S. experience with YCC, we suggest the following article from the Federal Reserve: How the Fed Managed the Treasury Yield Curve in the 1940s.

It is worth pointing out that after WWII ended, inflation spiked to double digits, yet the Fed held interest rates at artificially low levels. While bondholders may not have lost money on the bonds per se, they did lose dearly in their purchasing power, as shown below.

More recently, in 2016, Japan set a 0% yield target on its ten-year note. Currently, the bank of Australia is now targeting 0.25% for its three-year bond.

Summary

Federal Reserve Bank of New York President John Williams says that policymakers are “thinking very hard” about targeting specific yields on Treasury securities. Given what we have observed, it seems likely they will implement YCC and, in doing so, choose to keep digging and try to push problems out further into the future.

The problem with these actions is they engender anemic rates of economic growth. Equally concerning, they directly contribute to income inequality, a driving force for social unrest.

The policies the Fed staunchly defends are adverse to the healthy economic and social environment the country so desperately needs. While in crisis mode, investors will cheer them on unaware of the adverse effects it will have on the economy. As they say, there is no such thing as a free lunch.

Given the world beheld scenes last week of Black Lives Matters protesters overrunning parliament square in London while vandalizing and defacing statues and monuments ranging from war memorials to Winston Churchill to even an Abraham Lincoln statue, with police appearing at times to sit back at let the destruction happen, it was only a matter of time before something like the below.

UK Prime Minister Boris Johnson was involved in a car wreck when a protester ran out in front of the convoy as it departed Westminster on Wednesday. 

Boris Johnson’s car involved in collision outside parliament pic.twitter.com/Wexn0PPMEP

— The Independent (@Independent) June 17, 2020

The whole dangerous close call in which Johnson escaped unscathed was caught on video and happened in broad daylight. There were no reports of injuries despite clear damage to the vehicle carrying the prime minister.

The prime minister’s convoy had been making the short drive to Downing Street when the accident happened. 

Though one man is seen darting in front of the cars as they turned onto the street, reportedly a Kurdish protester demanding British action against Turkey, some reports suggested a group of demonstrators had surged toward the convoy just before the accident.

Sky News reported that Johnson’s car had been “targeted by a protester” in an attempt to draw as much attention as possible.

The prime minister’s office confirmed that Johnson had indeed been inside the car, but that he was unhurt. “Yes, that was the PM’s car,” a spokesperson said. “I think the video speaks for itself as to what happened. No reports of anybody being injured.”

Media reports described a “minor fender-bender” but video showing a closer side angle reveals Johnson’s car suffered severe impact. 

Downing St says there are no reports of injuries after Prime Minister Boris Johnson’s car was involved in a collision outside parliament as it left the gates following PMQs.

More on this: https://t.co/4TeHEQEBix pic.twitter.com/Xlzo3KLdZn

— SkyNews (@SkyNews) June 17, 2020

A different angle shows that while damage was relatively minor, Johnson’s car was hit with significant impact.

Police immediately jumped on and apprehended the man seen charging the convoy to cause the wreck.

With over the past weeks various protests outside of key government buildings in both the UK and US getting increasingly out of control, and turning into chaotic scenes of rioting and vandalism, this latest incident is perhaps a ‘wake-up’ call for police at such sensitive sites to get the situation under control.

Authored by Mike Shedlock via MishTalk,

Retail sales surged in May but manufacturing is another story.

The Fed’s Industrial Production and Capacity Utilization puts a big negative spotlight on the emerging V-shaped recovery thesis.

Industrial Production Highlights

• Industrial production increased a weaker than expected  1.4% in May. The Econoday consensus was 2.9%.

• A negative revision took April from -11.2% to -12.5% so essentially there was no rebound at all. 

• Industrial production in May was 15.4% below its pre-pandemic level in February. 

• Manufacturing output rose 3.8% in May but languishes near the lows in the Great Recession.

•  At 92.6% of its 2012 average, the level of total industrial production was 15.3% lower in May than it was a year earlier. 

• Capacity utilization for the industrial sector increased 0.8 percentage point to 64.8% in May, a rate that is 15.0 percentage points below its long-run (1972–2019) average and 1.9 percentage points below its trough during the Great Recession.

Manufacturing and Motor Vehicles and Parts

• Motor vehicles and parts production has “rebounded” to a level “below” the bottom of the 1990 recession.

• Manufacturing is at a 1988 level

Rebound Detail

V-Shape Recovery?

These numbers are not remotely close to anything one would ever associate with a V-shaped recovery.

Retail Sales vs Industrial Production

Earlier today I reported Retail Sales Surge Most on Record But Number is Misleading. 

• Retail sales surged a greater than expected 17.7% in May but the numbers are still well below the pre-pandemic levels.

• Despite the surge, sales numbers are back to levels seen in late 2015 and early 2016. 

Stimulus Checks

People got money and spent it, but they also skipped mortgage payments and credit card payments.

What happens when the checks run out?

Those Out of a Job

There are still 20 million people out of work.

It is foolish to believe they will all be back working the same number of hours at the end of June.

Fed vs Kudlow

• The Fed Warns of High Downside Risks

• Larry Kudlow says “The Economy is Off to the Races“.

True State of the Economy

Today’s dismal industrial production numbers put a better spotlight than retail sales on the true state of the economy.

Off to the Races Not

There are too many things that can go wrong and many of them will. 

It will take years for this economy to recover.

Aunt Jemima survived 130 years: the Great Depression, two World Wars, the Civil Rights movement, Vietnam and 9/11. But the brand has finally been cast aside by Quaker Oats – which is owned by Pepsi – due to its “racist past” at the hands of today’s relentless cancel culture.

PepisCo’s packaged-foods unit said Wednesday it would remove imagery of the black woman from the Aunt Jemima brand’s pancake mixes, syrups and other products, and change its name. The company didn’t disclose the new name, but said packaging changes will appear throughout the fourth quarter.

The company told CNN: “As we work to make progress toward racial equality through several initiatives, we also must take a hard look at our portfolio of brands and ensure they reflect our values and meet our consumers’ expectations.”

The appearance of Aunt Jemima has changed over the years, the article notes. Its name is “based off the song ‘Old Aunt Jemima’ from a minstrel show performer and reportedly sung by slaves,” according to CNN. The logo was based on Nancy Green, who was a cook and missionary worker that NBC later disclosed had been born into slavery. 

“We recognize Aunt Jemima’s origins are based on a racial stereotype. While work has been done over the years to update the brand in a manner intended to be appropriate and respectful, we realize those changes are not enough,” said Kristin Kroepfl, chief marketing officer at PepsiCo’s Quaker Foods North America business. The unit also sells Quaker Oats and Rice-A-Roni.

Despite its iconic history, there have been recurring calls to change the logo for years, with Cornell University professor Riché Richardson one of the latest voices to speak out against it in 2015. He called the logo “very much linked to Southern racism.” 

He also said the logo was based on a “devoted and submissive servant who eagerly nurtured the children of her white master and mistress while neglecting her own.” In 2017, the husband of B. Smith called the logo the epitome of “female humiliation.”

But today the brand is just described by the company as standing for “warmth, nourishment and trust — qualities you’ll find in loving moms from diverse backgrounds who want the very best for their families.”

Gladys Knight was even a spokesperson for the brand in the 1990s, during such time the logo evolved. But that apparently is woefully insufficient in this day and age. Quaker Oats said: “While work has been done over the years to update the brand in a manner intended to be appropriate and respectful, we realize those changes are not enough.”

So it’s best to simply deleted over a century of history and pretend it never existed.

Additionally, the company announced that the Aunt Jemima brand will donate $5 million over the next five years “create meaningful, ongoing support and engagement in the Black community.”

As one user on social media pointed out, the lag time from satire to reality has sadly now become just 5 days.

Lag time from Onion to reality reduced to 5 days pic.twitter.com/CtvQnsf0Ci

— David Burge (@iowahawkblog) June 17, 2020

Farcical-er and farcical-er…

Hertz stock is soaring this morning after comments by SEC Chair sparked ‘optimism’ among the muppet gallery…

SEC Chair Jay Clayton told CNBC this morning that the SEC told Hertz, which filed for bankruptcy during the pandemic, the agency has issues with its plan to sell stock.

“In this particular situation we have let the company know that we have comments on their disclosure,” Clayton said on CNBC’s “Squawk on the Street” on Wednesday.

“In most cases when you let a company know that the SEC has comments on their disclosure they do not go forward until those comments are resolved.”

So it would appear the market is taking that as “good news” for the worthless stock since it will not be diluted by a stock offering… and that’s why someone is panic-buying HTZ stock.

You cannot make this stuff up!

We suspect it will not last!