Global Markets Jump On Hope Trade Tensions Fading, Despite Trump Slamming “STUPID TRADE”

it’s another “glass is half full” moment for global markets, Asian and European markets as well as S&P futures, are heading into the new week well in the green, at least for now, on renewed hopes a deal can be reached between the U.S. and China to avoid a full-blown trade war, following Trump statements over the weekend which have been described as conciliatory, although that may change quickly.

As a result, the the Euro Stoxx 600 is up 0.6%, tracking a rise of 0.7% on S&P 500 futures, which is now well above the 200DMA and also the secondary support level of 2610…

… while the MSCI Asia Pac and Nikkei were both up 0.5% leading to a general sea of green in this morning’s market snapshot.

The reason for the sudden bout of optimism is that on Sunday, President Trump said that he will always be friends with Chinese President Xi Jinping no matter what happens regarding the dispute on trade, while also predicting that the US would prevail and reach agreements with China on trade issues while on the Sunday morning TV circuit,  White House economic adviser Kudlow explicitly stated that this is not a trade war, although his role as Trump’s “good cop” is well known by now.

That conciliation, however, was clearly missing the morning when Trump once again tweeted on the topic of Chinese protectionism, and went so far as slamming the “STUPID TRADE” when it comes to cars between the US and China: 

When a car is sent to the United States from China, there is a Tariff to be paid of 2 1/2%. When a car is sent to China from the United States, there is a Tariff to be paid of 25%. Does that sound like free or fair trade.  No, it sounds like STUPID TRADE –  going on for years!

Also not helping the “conciliation narraitve” was a Bloomberg report at 3am ET that China is looking at CNY devaluation as a tool in their trade spat with the US, according to sources, while China’s Foreign Ministry said that there have been no negotiations with the US, and that the US is to blame for the trade friction.

Meanwhile, a hint that the trade war will only escalate from now, a PBoC policy adviser said that China should invest more in real assets rather than invest in US debt and that US is seeking to restrict China’s rise via trade war. However, there were also contradictory comments from China think-tank CASS that the nation is unlikely to use USTs as a trade war weapon. That said, this appears to be at odds with research from SGH Macro which suggests that their understanding is that China has halted purchases of USTs.

Also not helping global trade tensions were Sunday reports that no deal in principle regarding NAFTA is expected to be announced in the upcoming Summit of Americas in Lima, Peru, contrary to prior expectations.

Finally, moments ago China made it clear it would retaliate any moment to Trump’s latest proposed re-escalation:

  • CHINA HAS DRAFTED DETAILED COUNTERMEASURES ON U.S. TRADE MOVES
  • CHINA FOREIGN MINISTRY COMMENTS ON U.S. PLANNED TARIFFS

Yet despite all this, somehow optimism has prevailed so far, and banks and industrial companies led European stocks to a three-week high, mirroring gains in Asia; just beware of sharp air pockets lower as headlines and Trump tweets start coming out, crushing any fragile optimism that may have emerged.

For now, all ten sectors in Europe trade in positive territory with financial names outperforming as Deutsche Bank (+4.0%) leads the sector after news they have appointed Christian Sewing as CEO; Commerzbank (+1.5%) are also seen higher in sympathy. Elsewhere, energy names modestly lag their peers given price action in the energy sector. Deutsche Bank will be watched after the lender named Christian Sewing to succeed Cryan following weeks of drama. The stock has plummeted nearly 30% since the start of the year, but seems to have found a bottom around 11 euros over the last two weeks.

Asia was likewise buoyant, with the ASX 200 (+0.4%) shrugging off early indecision and trading positive, although weakness in mining and energy names capped upside, while Nikkei 225 (+0.5%) was lifted by JPY weakness. Elsewhere, Shanghai Comp. (+0.2%) recovered from the initial selling seen on the mainland’s re-open from a 4-day closure and first opportunity to react to the additional USD 100bln tariff consideration against China, while Hang Seng (+1.3%) outperformed on declining money market rates after the PBoC resumed liquidity operations after halting for over 2 weeks.

The dollar rebounded after sliding on Friday after a disappointing jobs report, while the Chinese yuan and other emerging market currencies slid amid news that China ia said to be evaluating the potential impact of a gradual yuan depreciation as one of its options in the trade spat with the U.S. The news raised interest around a speech by Chinese President Xi Jinping due Tuesday (more in a subsequent post).

Elsewhere in FX, most Group-of-10 currencies traded in tight ranges, with the yen edging lower as risk sentiment improved, while New Zealand’s dollar outperformed all peers on cross-flow activity against the Aussie. In Russia the currency plunged and the Moex Russia Index of stocks plunged the most in four years after the U.S. sanctioned some prominent Kremlin-connected billionaires and their companies.

Treasuries slipped, while euro-area bonds held steady as European equities climbed. In the U.S. this week, highlights include minutes of the FOMC’s March meeting and inflation data due Wednesday

Commodities rebounded after their worst weekly drop since mid-March, with oil and industrial metals rallying: WTI and Brent crude futures trade modestly higher but in close proximity to some of the lows seen on Friday amid trade concerns and an uptick in the Baker Hughes rig count. Elsewhere, energy-specific newsflow has been relatively quiet over the weekend but traders will continue to be mindful of geopolitical developments with US President Trump  warning Syrian President Bashar al-Assad and allies that they could pay a big price following a suspected chemical attack that killed dozens over the weekend. Furthermore, Iranian President Rouhani has stated that US President Trump will regret any withdrawal from the Iranian nuclear deal and that Iran’s response to the matter will be stronger than imagined. In metals markets, spot gold has fallen victim to the apparent return of risk appetite to the market and the modestly firmer USD. Elsewhere, Dalian iron ore slipped to a 10- month low in Asia-Pac trade amid ongoing trade concerns whilst aluminium has been seen higher during London hours amid the potential fallout of sanctions by the US on Russian aluminium producer Rusal.

Bulletin Headline Summary from RanSquawk

  • European equities begin the week on the front foot, supported by US efforts to alleviate trade concerns
  • Reports suggesting China is looking at CNY devaluation briefly lifts USD
  • Looking ahead, highlights include speeches from ECB’s Praet and Constancio

Market Snapshot

  • S&P 500 futures up 0.7% to 2,624.75
  • STOXX Europe 600 up 0.6% to 376.88
  • German 10Y yield rose 0.6 bps to 0.503%
  • Euro down 0.02% to $1.2278
  • Italian 10Y yield fell 0.8 bps to 1.531%
  • Spanish 10Y yield rose 1.1 bps to 1.243%
  • MXAP up 0.5% to 172.58
  • MXAPJ up 0.6% to 564.16
  • Nikkei up 0.5% to 21,678.26
  • Topix up 0.4% to 1,725.88
  • Hang Seng Index up 1.3% to 30,229.58
  • Shanghai Composite up 0.2% to 3,138.29
  • Sensex up 0.6% to 33,814.89
  • Australia S&P/ASX 200 up 0.3% to 5,808.67
  • Kospi up 0.6% to 2,444.08
  • Brent futures up 0.6% to $67.51/bbl
  • Gold spot down 0.2% to $1,329.84
  • U.S. Dollar Index little changed to 90.14

Top Overnight News from Bloomberg

  • A Syrian airbase was hit with a missile attack early on Monday, the country’s official news agency reported, a day after U.S. President Donald Trump warned of a “big price to pay” in response to reports of a chemical attack outside the nation’s capital. The Pentagon said it wasn’t conducting airstrikes
  • Deutsche Bank AG named Christian Sewing chief executive officer, ending John Cryan’s reign after less than three years as questions mount about the future direction of Europe’s largest investment bank
  • Xi Jinping’s first chance to hit back in person against Donald Trump’s barrage of tariff threats comes in a speech Tuesday at the Boao Forum for Asia — China’s answer to Davos — on the tropical island of Hainan
  • The U.S. has confirmed that Kim Jong Un is willing to talk to President Donald Trump about getting rid of his nuclear weapons, as South Korea claimed when it passed along the North Korean leader’s offer for a historic meeting, according to an administration official
  • Disapproval rating for Japanese Prime Minister Shinzo Abe’s Cabinet exceeded approval rating for the first time in 6 months in a survey conducted by JNN. Approval rating fell 9.3ppts to 40%, while the disapproval rating rose 9.5ppts to 58.4%. He now faces questions in parliament over a cover-up relating to reports on Japan’s controversial dispatch of troops to Iraq years ago
  • A majority of Britons support holding a vote on the final Brexit deal secured by Prime Minister Theresa May, according to a YouGov poll conducted for the pro-remain group Best for Britain
  • In speeches, interviews and Parliament testimony, eight of the nine BOE MPC members, including Governor Carney, have backed the view that tightening is warranted — and at a faster pace than previously thought. But Deputy Governor Cunliffe has been noticeably quiet, raising questions about the views of one the MPC’s most dovish members
  • Barclays is set to split its euro- rates trading team because of Brexit and proposes to move part of the unit that trades eurozone government bonds and interest rate swaps away from its main trading floor in London, the Financial Times reported
  • Hungarian Prime Minister Viktor Orban scored a crushing election victory to clinch a fourth term in a boost to Europe’s populist forces that are challenging the European Union’s multi-cultural, democratic values

Asian stocks initially began the week rangebound with a non-committal tone seen in the region following the stock rout last Friday on Wall St after President Trump upped the ante on possible trade tariffs against China and US NFP data fell short of estimates. However, sentiment then gradually improved throughout the trading day which was attributed to US efforts over the weekend to alleviate trade concerns in which President Trump predicted that the US would reach an agreement with China on trade and after White House economic adviser Kudlow explicitly stated that this is not a trade war. As such, ASX 200 (+0.4%) shrugged off the early indecision and traded positive, although weakness in mining and energy names capped upside, while Nikkei 225 (+0.5%) was lifted by JPY weakness. Elsewhere, Shanghai Comp. (+0.2%) recovered from the initial cobwebs seen on the mainland’s re-open from a 4-day closure and first opportunity to react to the additional USD 100bln tariff consideration against China, while Hang Seng (+1.3%) outperformed on declining money market rates after the PBoC resumed liquidity operations after halting for over 2 weeks. Finally, 10-yr JGBs were uneventful with marginal gains seen as they tracked recent price action in T-notes and with the BoJ also in the market to the tune of JPY 710bln in the belly to super-long end.

Top Asian News

  • Hong Kong’s Most Painful Short Keeps on Breaking Record Highs
  • Noble Group’s Bonds Fall After It Moves Head Office to London
  • Alibaba Funding Makes SenseTime World’s Most Valuable AI Startup

European bourses (Eurostoxx 50 +0.7%) have kicked the week off on the front-foot in fitting with the positivity seen during Asia-Pac hours. Asian bourses were supported by US efforts over the weekend to alleviate trade concerns in which President Trump predicted that the US would reach an agreement with China on trade and after White House economic adviser Kudlow explicitly stated that this is not a trade war. As such, all ten sectors in Europe trade in positive territory with financial names outperforming as Deutsche Bank (+4.0%) leads the sector after news they have appointed Christian Sewing as CEO; Commerzbank (+1.5%) are also seen higher in sympathy. Elsewhere, energy names modestly lag their peers given price action in the energy sector. In terms of other individual movers in what’s been a busy morning of equity newsflow, EDP (+3.8%) have been supported by reports of a potential bid by Engie (-0.5%), Rolls Royce (+1.9%) are seen higher after offloading L’Orange to Woodward for EUR 700mln and shares in Casino (+1.8%) have been lifted by a positive broker move at Deutsche Bank.

Top European News

  • Russian Stocks Sink Most in 2 Years on Sanctions, Syria Tensions
  • Deripaska’s Rusal Roiled by Sanctions as Aluminum Prices Jump
  • Russia Government Said to Seek Ways to Help Sanctioned Oligarchs
  • Any Russian Company Can Now Be Hit by Sanctions, Citigroup Warns
  • U.S. Sanctions Could Impact Oerlikon, Schmolz, Sulzer: ZKB

In FX, the DXY has seen a decent comeback from Friday’s post-NFP data lows and some short-lived gains on the back of source reports about China contemplating Yuan devaluation as an option in its ongoing war of words vs the US on trade and import tariffs. The Index briefly probed above 90.200 compared to lows just above 90.000 as USD/CNY spiked to just over 6.3250 after the PBoC’s official 6.3114 mid-point fix. The Kiwi is back on top of the G10 rankings, but again not really on anything fundamental for the currency or NZ-wise and more on cross flows as the AUD continues to underperform and bear the brunt of any negative repercussions from a full-blown US-China-global trade war. NZD/USD is back near 0.7300 and AUD/NZD is re-testing support just ahead of 1.0500 as AUD/USD continues to reject advances towards 0.7700. Another gainer vs the USD and other majors amidst ongoing bullish Sterling seasonal factors, as Cable pivots 1.4100, EUR/GBP straddles 0.8700 (market contacts noting offers at the figure earlier) and GBP/JPY reclaims 151.00, albeit just. Note, significantly firmer than Halifax house prices also  underpinned the Pound, fleetingly. CAD/EUR/JPY/CHF are all narrowly mixed vs the Greenback in typically quiet early  Monday trade, with USD/CAD still capped ahead of 1.2800 amidst more reports of positive NAFTA talks, though a  deal may not be reached in principle in time for the upcoming Summit of Americas as had been touted. EUR/USD is extremely contained between 1.2660-90, USD/JPY has recoiled around the 107.00 axis and USD/CHF is trapped within 0.9590-0.96

In commodities, WTI and Brent crude futures trade modestly higher but in close proximity to some of the lows seen on Friday amid trade concerns and an uptick in the Baker Hughes rig count. Elsewhere, energy-specific newsflow has been relatively quiet over the weekend but traders will continue to be mindful of geopolitical developments with US President Trump warning Syrian President Bashar al-Assad and allies that they could pay a big price following a suspected chemical attack that killed dozens over the weekend. Furthermore, Iranian President Rouhani has stated that US President Trump will regret any withdrawal from the Iranian nuclear deal and that Iran’s response to the matter will be stronger than imagined. In metals markets, spot gold has fallen victim to the apparent return of risk appetite to the market and the modestly firmer USD. Elsewhere, Dalian iron ore slipped to a 10- month low in Asia-Pac trade amid ongoing trade concerns whilst aluminium has been seen higher during London hours amid the potential fallout of sanctions by the US on Russian aluminium producer Rusal.

It is a quiet start to the week with February trade data in Germany, March house prices data in the UK and the April Sentix investor confidence reading for the Euro area. There is no data due in the US today. The ECB’s Praet is due to participate in a meeting of the European Finance Forum in Frankfurt and ECB’s Constancio in Brussels.

US Event Calendar

  • Nothing major scheduled

DB’s Jim Reid concludes the overnight wrap

Normally the week after payrolls is a little quiet but because the first Friday of the month (ie: payrolls day) was relatively late it means we move into US CPI week very quickly rather than having a week in between payroll and the inflation report. There’s not much point dissecting the consensus for core US CPI this month as the forecast has been 0.2% mom for 29 months now and this month is no different. Over this period 16 months have indeed been at this level but since the start of 2017 only 5 out of 14 have been in line with this forecast. Of the 9 misses, 7 have been below expectations. Outside of US inflation on Wednesday we also have the latest FOMC minutes on the same day, US earnings season starting (with three big banks on Friday the highlight), and of some intrigue we have Facebook’s Zuckerberg’s testimony to a Senate panel on Wednesday. This could impact tech and with it the rest of the market. Elsewhere in the US, the Congressional Budget Office will release the latest US budget deficit  projections this week which would likely determine the potential supply of treasuries over the coming months.

In Europe this week the key will be the final inflation prints due with March CPI reports out in France (Thursday), Germany (Friday) and Spain (Friday). Meanwhile in Asia, China’s CPI and PPI prints for March due on Wednesday and March trade data due on Friday are the highlights. The full day-by-day week ahead is at the end today.

Back to markets on Friday, the Stoxx 600 fell -0.35% while the S&P dropped -2.19% following a further rise in trade tensions and a weaker than expected payrolls report (more below). Over the weekend things haven’t escalated  much but President Trump tweeted “China will take down its trade barriers because it’s the right thing to do…taxes will become reciprocal & a deal will be made on intellectual property”. His officials have tried to calm the markets  somewhat though. Treasury secretary Mnuchin noted the US objective “is to continue to have discussions with China” while his economic adviser Mr Kudlow reiterated “we’re not going to end up in a trade war”. Conversely, White House adviser Navarro noted the threat of tariffs is not merely a bargaining chip, but also conceded that talks with China will take place before any tariffs will take effect. Elsewhere, China’s President Xi will be speaking at the Boao Forum on Tuesday, potentially providing more clues on the evolving situation.

This morning in Asia, markets are trading modestly higher with the Nikkei (+0.59%), Kospi (+0.59%) and Hang Seng  (+1.76%) all up while Chinese bourses are up c0.3% as trading resumed post the holidays. Futures on the S&P are up c0.5% while yields on UST 10y are up c2bp.

Continuing with the weekend developments, CNN has reported that the US and North Korea have been holding secret and direct talks to prepare for the Summit between President Trump and Kim Jong Un, while White House officials have confirmed that Kim is ready to discuss the topic of denuclearization. Elsewhere, Reuters has reported that an in principle NAFTA deal is unlikely at this week’s Lima Summit as negotiations between the three sides are not advanced enough yet.

Now recapping other markets performance from Friday. US bourses were all lower (Dow -2.34%, Nasdaq -2.28%) and all sectors within the S&P were in the red. Equities were initially weighed down by President Trump’s new instructions to the USTR to consider whether higher tariffs on an additional $100bn of goods would be appropriate Then losses accelerated during the day as the Chinese Commerce Ministry quickly responded by indicating that “we will follow suit to the end and at any cost…using new comprehensive countermeasures…” The VIX jumped 13.5% to 21.49 while European equities were relatively calm with modest losses across the board (DAX -0.52%; FTSE -0.22%).

Government bonds were broadly firmer with core 10y bond yields down 2-6bp, partly helped by the risk off tone in equities and the softer payrolls reports (UST 10y -5.9bp to 2.773%; Bunds -2.7bp). In FX, the US dollar index weakened -0.39% while the Euro and Sterling gained 0.33% and 0.64% respectively. Elsewhere, WTI oil retreated -2.33% to $62.06/bbl while Gold gained 0.49%.

Moving onto the various Fed speakers. On Friday, the Fed Chairman Powell has reiterated “further gradual increases in rates” as long as “the economy continues broadly on its current path” while the Fed’s Williams also noted “I’m  confident that we can carry on the process of gradually moving rates up over the next two years while seeing solid (economic) growth”. Over the weekend, the usually dovish Fed’s Evans noted that he is “optimistic that we’re going to get to 2% (CPI), it would be surprising if we didn’t” and that “…gradual (rate) increases is appropriate”. On trade, the Fed’s Powell said its “really too early” to estimate how tariffs will impact the US economy while the Fed’s Kashkari also said “it’s too soon for any of us to judge…none of us know how to weigh the probability of these different outcomes”. He added that the end result of the trade rhetoric “may be something in the middle (of a trade war and lots of chest pounding), where it’s a lot of blusters but it scares businesses and investors”.

Over in Italy, the League party leader Salvini sees “real chance” that the center-right coalition will be able to form the next government with the Five Star Movement as “policy differences are less pronounced that people think”. Looking ahead, the second round of talks with the various party leaders will resume this week in order to break the political gridlock since the March 4 election.

Back in credit, Michal in our team published a report “IG Strategy: Record Primary CSPP Purchases Helped Absorb Heavy March Supply” on Friday night. Apart from the usual analysis of the ECB QE, with a focus on credit, it notes that last month’s corporate supply included a record amount of CSPP-eligible paper, providing the ECB with the opportunity to load up in the primary. Indeed, it did so and in fact more than proportionately, receiving a record primary allocation estimated to be 50% greater than the average since the CSPP began. That has also pushed the share of the CSPP in the overall QE to an all-time high. While this time the ECB could help private investors pick up some of the excess supply in weak markets, it has been a timely reminder of the added pressure credit is going to be under when QE has been tapered off. You can download the full report here.

Before we take a look at today’s calendar, we wrap up with other data releases from Friday. In the US, the March change in non-farm payrolls was below market at 103k (vs. 185k expected) despite a +13k upward revision to    February.

Notably, the March reading followed a strong prior month print of 326k and the three-month average gain of 202k is still well above the 12-month average of 188k. Elsewhere, the average hourly earnings growth was in line at 0.3% mom and 2.7% yoy, while the unemployment rate was steady at 4.1% for the sixth consecutive month.

In Europe, Germany’s February IP was weaker than expected at -1.6% mom (vs. 0.2%) and 2.6% yoy (vs. 4.4%) while France’s February trade deficit was broadly in line (-€5.2 vs. -€5.3bln expected) with exports up 4.2% yoy and imports up 1.3% yoy.

It is a quiet start to the week with February trade data in Germany, March house prices data in the UK and the April Sentix investor confidence reading for the Euro area. There is no data due in the US today. The ECB’s Praet is due to participate in a meeting of the European Finance Forum in Frankfurt and ECB’s Constancio in Brussels.

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China Studying Yuan Devaluation As Retaliation To Trade War; CNH Slides

Last week, with the tit-for-tat Chinese trade war escalating following Trump’s threat to raise Chinese imports tariffs by another $100BN, we said that it is time to buy some Yuan puts, ahead of a potential Chinese devaluation.

Overnight we got a clear lesson why this highly convex trade would be prudent in the current trade war environment, when Bloomberg reported at 3am EDT that China is “evaluating the potential impact of a gradual yuan depreciation” citing people familiar with the matter said, as the country’s leaders are weighing their possible responses in the escalating trade war with President Trump.

As a reminder, a devaluation was one of the “nuclear” retaliation options listed here on Friday, and is certain to provoke an even harsher response by the US. Still, this appears not to have spooked senior Chinese officials who are reportedly studying a “two-pronged analysis of the yuan that was prepared by the government”: one part looks at the effect of using the currency as a tool in trade negotiations with the U.S., while a second part examines what would happen if China depreciates the yuan to offset the impact of any trade deal that curbs exports.

Still, the analysis doesn’t mean officials will carry out a devaluation, which would require approval from top leaders.

In kneejerk response, both the onshore and offshore yuan weakened as much as 0.2% to 6.3186 per dollar in onshore trading and 6.3211 for the offshore pair.

At the same time, the dollar climbed against the yen and other EM currencies in response: “USD seems to be regaining some ground on the back of the headline” said Valentin Marinov, head of G-10 FX research at Credit Agricole. “The story seems to suggest that the Chinese are discussing the idea of FX depreciation rather than work on an imminent change in FX policy.”

Ironically, while Trump has bashed China on the campaign trail and more recently on Twitter, for keeping its currency artificially weak, the yuan has gained about 9% against the greenback since he took office and has been steady in recent weeks despite the escalation of trade tensions between the world’s two largest economies, prompted by a weaker dollar. The Chinese currency touched the strongest level since August 2015 last month.

That said, w\hile a weaker yuan could help President Xi Jinping shore up China’s export industries in the event of widespread tariffs in the U.S., a devaluation comes with plenty of risks, according to Bloomberg:

  • It would encourage Trump to follow through on his threat to brand China a currency manipulator,
  • it would make it more difficult for Chinese companies to service their mountain of offshore debt,
  • It would undermine recent efforts by the government to move toward a more market-oriented exchange rate system.
  • It would expose China to the risk of local financial-market volatility, something authorities have worked hard to subdue in recent years. When China unexpectedly devalued the yuan by about 2 percent in August 2015, the move sent shock-waves through global markets.

“Is it in their interest to devalue yuan? It’s probably unwise,” said Kevin Lai, chief economist for Asia ex-Japan at Daiwa Capital Markets Hong Kong Ltd. “Because if they use devaluation as a weapon, it could hurt China more than the U.S. The currency stability has helped to create a macro stability. If that’s gone, it could destabilize markets, and things would look like 2015 again.”

Which is why many are unconvinced China will actually follow through.

China is unlikely to resort to a devaluation unless it exhausts its other trade-negotiation tools, said Frances Cheung, head of Asia macro strategy at Westpac Banking Corp. in Singapore. The more likely scenario is that the two countries will reach a compromise and China will continue to liberalize its capital account, added Zhou Hao, senior Asia emerging markets economist at Commerzbank AG.

“There are many measures they can take before resorting to this tool,” said Ken Peng, an investment strategist at Citi Private Bank in Hong Kong. “Using yuan depreciation is like sacrificing 800 soldiers of your own to kill just 1,000 enemies.”

Perhaps, although as we noted yesterday, one of the measures suggested by China’s Global Times is to attack the US stock market. It is not clear if that is necessarily a “better option.” It also doesn’t mean market-driven yuan weakness is off the table. The average forecast among analysts tracked by Bloomberg calls for the currency to drop slightly by year-end to 6.38 per dollar.

“There is room for a near-term yuan correction given how much the currency has gained since last year,” said Ken Cheung, a currency strategist at Mizuho Bank Ltd. in Hong Kong. “China would allow market-driven yuan weakness if sentiment fluctuates on trade war concerns. But it’s unlikely for the authorities to engineer another round of significant one-off devaluation.”

Speculation aside, a key event will take place in under 24 hours when traders looking for clues on President Xi’s thinking will get an opportunity to hear him speak personally. On Tuesday he’s scheduled to address the Boao Forum for Asia – China’s answer to Davos – on the tropical island of Hainan.

Meanwhile, courtesy of Bloomberg, here are several research analyst responses to the story that China may devalue its currency:

Citi Private Bank (Ken Peng, investment strategist)

  • China likely won’t devalue the yuan, as further weakness would lead to significant capital outflows, which the government tried to rein in over the past few years
  • Cost of such a measure outweighs benefits; using yuan depreciation is like sacrificing 800 soldiers of your own to kill just 1,000 enemies
  • There are many tools the government can take before resorting to yuan depreciation, such as more tariffs, canceling orders from American companies and even selling U.S. Treasuries
  • The yuan may weaken due to market forces, as it’s rallied too quickly recently and the U.S.-China interest-rate gap has narrowed

Westpac Banking Corp. (Frances Cheung, head of Asia macro strategy)

  • China is unlikely to target a certain level for the yuan in response to the trade conflict when other options aren’t exhausted
  • A stable yuan is in China’s interest, it helps promote foreign interest in yuan assets
  • Response pretty much focuses on trade, though this may be extended to other bilateral flows as China doesn’t import that much from the U.S.
  • Prudent for policymakers to carry out studies such as this from time to time

Daiwa Capital Markets (Kevin Lai, chief economist for Asia ex-Japan)

  • Would be unwise for China to devalue the yuan, as that could hurt China more than the U.S.
  • Currency stability has helped create macro stability; if that’s gone, it could destabilize markets, and things would look like 2015 again

Mizuho Bank (Ken Cheung, strategist)

  • There’s room for near-term yuan correction given how much the currency has gained since last year
  • It’s unlikely China will engineer another significant one-off devaluation — the cost would be too big as it would spark depreciation concerns and go against China’s target to open its market and globalize the yuan

Commerzbank AG (Zhou Hao, economist)

  • Yuan depreciation is a measure China would have to prepare, and there’s nothing unusual for it to be considered in a trade war
  • If China and the U.S. fail to strike a deal, China would definitely weaken the yuan
  • More likely scenario is for the two countries to compromise and China to liberalize capital account

 

 

 

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Italian Coalition Talks Stall Over Ego

Authored by Tom Luongo,

It looked so easy on paper.  The two opposition parties in Italy surged to electoral success on the back of voter frustration with, well, everything.  But, a funny thing happened on the way to political revolt in Italy, egos became more important than reform.

That’s the only way I can describe the actions of League Leader Matteo Salvini in the initial round of talks with fellow populist traveler Five Star Movement (M5S).  Salvini refuses to break his coalition with Forza Italia and its leader Silvio Berlusconi.

And, of course, Berlusconi being the stalking horse for the European Union that he is, refuses to enter into a coalition with Five Star virtue signaling his painted hair off saying, “We are not open to government solutions in which envy and social hate, poverty politics and judicial witch hunts are the cornerstone.”

That First Sip is a Doozy

It is fairly obvious that Salvini is a little drunk on the power of his newfound status of coalition leader. He’s trying to milk it for whatever he can get from it. And that’s the real danger.

Salvini believes a re-vote is in The League’s favor.  But, I wouldn’t be so sure of that.

In response to talks breaking down, M5S Leader Luigi Di Maio made coalition overtures to the Democrats who promptly rejected him.  And that’s expected.  The establishment parties are beholden to Brussels in the end.  It is their job to deliver a result that aligns with further EU integration.

And M5S is certainly not that.

Dragging out coalition talks is part of the strategy of proving that ‘the new guys’ are unfit to rule.

So, Di Maio is getting a little lesson early on here of just whose loyalties lie where and how serious the establishment is at protecting its position.

This is why Salvini is pressing his advantage here.  He knows he can’t enter a coalition with M5S and be the senior partner and that’s what he wants.  The only path to that is another vote.

But, Italian President Mastrella isn’t going to allow that yet.  And the longer this goes on without a resolution, the worse it will get for everyone.  The people of Italy are ticked off.  And Salvini may be fooling himself if he thinks The League can go from 17% to 35% in a year when it is precisely his own ego that is keeping a government from forming.

To do that The League would have to pull support from the Democrats and cannibalize his own coalition.  Meanwhile, the EU and the caretaker government do nothing to solve the problems pressing on the Italian people, raising their frustration further.

It’ll be easy for Berlusconi and the Democrats to point the finger at Salvini and away from themselves.

The more likely scenario is that the south, which pushed M5S over the 30% mark, will harden even further for them while M5S makes in-roads farther north and pushes its totals towards 40%.  At which point the it has far more potential dance partners.

Moreover, it can continue to offer up coalition talks with everyone and campaign on the points that it is trying to be the leader the people voted for.  It’s not their fault there is no government formed.

And that’s why Salvini has a very tight window to negotiate with M5S and he has to be smarter than he’s been going forward.

Protests are Not Endorsements

Because, the truth is that Italians voted for the outsiders in protest.  But, that also means that support can crumble quickly if the leadership doesn’t actually lead.  Voting in those with no experience is a leap of faith that electorates rarely take.

It speaks to the seriousness of the situation in Italy, how close it is to something far uglier than an inconvenient election result.

Salvini needs to read the tea leaves better, cut a deal with Di Maio and prove that both are capable of leading a government through a very difficult period.  Get the experience and you gain that alongside something far more important, the people’s trust.

The time for egos comes after you’ve done the work.

And then you can call for snap elections to further consolidate power.  Salvini should spend some time watching Shinzo Abe in Japan versus staring at his reflection in a mirror.

Political protests are not a positive statement.  They are negative ones.

Salvini must realize this as he has not earned the people’s patience yet.  That comes with accomplishing their desires, not playing power politics and remaining loyal to the very people they rejected.

We had a political revolt here in the U.S. with electing Trump.  The strategy of his opposition was to deny him any wins, no matter how trivial.  By doing that, they figured, they could wear down the people’s frustration with the status quo and prove to them once and for all that this awful state of being is the best they can hope for.

It’s all part of the psy-op.

And, despite Trump’s mis-steps and that insane level of opposition he’s confronted, he has acquitted himself well enough through his first year-plus in office.  His poll numbers are rising and his base has been forgiving, because they rightly see how unfairly he’s been treated.

He’s established himself as someone who can govern, albeit in his own distinct style.

Salvini and Di Maio are in that same position Trump was in.  If M5S and The League formed a coalition tomorrow it would harden their opposition. They can expect the same unfair treatment Trump has endured.

And guess what?  The people will rally around their champions.  If you are going to be a populist.  Be a populist.  Do the people’s work and check your ego at the door.

If a man a flawed and narcissistic as Donald Trump can do it, anyone can.

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UK Ranks Second Best In Affordable Health Care

Despite receiving at times strong criticism, Statista’s Patrick Wagner reports that the NHS – the UK’s national health care service – holds a top spot in comparison to other EU countries when it comes to affordability.

As this graphic shows, of all EU countries, the UK ranks second best just behind Lithuania.

Infographic: UK Ranks Second Best in Affordable Health Care | Statista

You will find more infographics at Statista

Greece, whose health care system was severely affected by the economic crisis, is still in a dire situation.

More than 67 percent of the Greek population said they struggle to finance their health care while not even 3 percent said they are financially able to take care of their health.

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Russian Navy Gets New High-Tech Vessel

Authored by Arkady Savitsky via The Strategic Culture Foundation,

Vasily Bykov, the first project 22160 corvette, started sea trials in April to join service this year. The Black Sea Fleet is to receive six patrol ships of the class by 2022, with two vessels already under construction. Tyler Rogoway, the highly respected military correspondent of the prestigious Drive (War Zone), believes that Project 22160 patrol ships’ “concept is innovative enough that it should be studied by western navies as a source of inspiration for their own future multi-role combat vessels.” He says the ship has “a pretty genius design” with its relatively small frame providing great strike power.

The vessel is 94m-long, 14-m-wide, and 3.4m-high. Patrol speed: 16 knots. Maximum speed: 30 knots. Displacement:1,700-1,800 tons (according to different sources). Endurance: 60 days. Range: 6,000 miles at patrol speeds. Complement: up to 80. The sailors will be quite at home in special design cabins. They’ll have a gym with basketball nets, a library and a sauna at their disposal when off duty.

The armament is really strong to include 57mm А-220М automatic duel-purpose deck gun with a rate of fire of 300rpm installed on the bow of the main deck. Two 2 × 14.5 mm MTPU machine guns and two DP-65 grenade launchers add more punch. Container modules include 324 mm Paket-NK torpedoes.

The 22160 class ships will be armed with the Kalibr-NK land attack cruise missiles that can carry conventional or nuclear warheads. The use of this weapon by Russia in 2015 against terrorist targets in Syria caused jitters in the West. The missile has a second stage that performs a supersonic maneuver at the terminal phase of trajectory to reduce the time for air defense systems to react.

It can deliver a 450 kg (990 lb) warhead to a land target located at a distance of 1,500–2,500 km (930–1,550 mi). The US Navy needs destroyers or cruisers to do it but Russia can use much smaller surface platforms to carry out such a mission. With this corvette in service, the Russian Navy will employ the concept of distributed lethality – something the US Navy littoral combat ships (LCS) have failed to achieveThe Drive article notes that the US Freedom class “don’t pack anywhere near this must punch “though they have over double the displacement”.

The new state-of-the-art can fire up to 12 Igla surface-to-air interceptors.The vessel can be equipped with the Shtil-1 vertical launch system to fire 9M317ME missiles. It can simultaneously engage up to 12 targets flying at altitudes between 5 to 15,000m at ranges between 3,500m and 50km and at speeds below 3,000km/h.

The ship has a hangar and a deck at the aft to operate a multipurpose helicopter of Kamov Ka-27/28/29/30/31 series. Modernized Kamov Ka-27M multipurpose rotary wing aircraft started to enter service a year ago.

An inflatable boat can be used by commando teams if the mission is to liberate a civilian vessel with hostages aboard from pirates.The boat can carry 10 commandos plus two crew members. It is protected from small arms fire and is fast enough to catch up with the ship on the move after the mission is accomplished.

The Pozitiv-ME1 3D active surface and air search radar can detect air targets at a range of 110km at flight altitude of 1km. It can engage incoming anti-ship missiles at a range of 15km at an altitude of 15m and surface targets at a range of 250km. The data is fed to missile fire control and jamming systems. A Pal-N navigation radar installed atop of the bridge is also used to detect and track air or surface targets to prevent incidents and ensure safe passing and maneuvering.

A Vinyetka-EM active/passive sonar system detects the surface ships, submarines and torpedoes. The sonar has a flexible trailing antenna and a towed emitter. The ship is also fitted with aMGK-335EM-03 hull-mounted mid-frequency sonar and a flexible extended towed array sonar.Subversive actions are countered by Pallada underwater scanning system used to detect and track divers.

The patrol ship features a PK-10 close-range decoy dispenser to protect against electro-optical guided threats and radars. A TK-25 ship-based electronic countermeasure system is used to deceive sonar, radar and lasers.The station can detect up to 256 targets simultaneously and carry out interference on four of them.

The ship features a CODAG (combined diesel and gas) type propulsion system with a total output power of 25,000kW. Electrical systems include four 300kW generators and one 100kW emergency and harbor diesel generator.

Stealth technology is used to reduce the visibility of the hull. The ship modular design makes it a real multi-mission vessel capable of blue water and brown water operations. It can protect the nation’s maritime borders and also act as an element of power projection task force with the capability to strike enemy at great distances from home base.

The Black Sea has become a region where tensions are running high as NATO boosts war preparations. There are numerous examples to illustrate this fact. It makes Russia take steps to ensure its security. The Black Sea Fleet today is not the force it was just a few years ago. Ships homeported in Sevastopol or Novorossiysk can sail on the Volga or Don rivers and in the Caspian Sea. Armed with Kalibr missiles installed on rather small platforms – something no other navy has – the Black Sea Fleet units can strike enemy in most of Europe, North Africa, the Middle East and parts of Central Asia. If need be, the ships can deploy far beyond the Black Sea basin to the Mediterranean, the Atlantic and any place they need to go demonstrating the Russian flag in remote maritime areas. The 22160-class ships will become a credible deterrent to make anyone who harbors aggressive plans against Russia think twice before implementing them. 

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The Richest 1% Will Own Two-Thirds Of Global Wealth By 2030, Report Finds

Back in November, Credit Suisse highlighted an alarming – yet altogether unsurprising – milestone in the increasing concentration of global wealth that has been perhaps the most influential force behind the populist revolts that rocked the US in 2016 and have continued to unfurl across Europe. According to the Swiss bank’s annual “global wealth pyramid,” for the first time, the wealthiest 1% of the world’s population had accumulated more than half of its aggregate household wealth.

Credit Suisse’s researchers describe in stark terms how global wealth inequality had actually improved somewhat in the years between the start of the new millennium and the financial crisis – but in the years after, the gap between the world’s richest and poorest individuals widened dramatically, one of the most pernicious aspects of the Fed and the global cabal of central banks pumping easy money into the global financial system.

Pyramid

The researchers said that “our calculations show that the top 1% of global wealth holders started the millennium with 45.5% of all household wealth. This share was about the same until 2006, then fell to 42.5% two years later. The downward trend reversed after 2008 and the share of the top one percent has been on an upward path ever since, passing the 2000 level in 2013 and achieving new peaks every year thereafter. According to our latest estimates, the top one percent own 50.1 percent of all household wealth in the world.”

But while CS’s report was unequivocally dire, a recent report published by the UK Parliament is even more harrowing.

According to the Guardian, projections produced by the House of Commons library suggest that the top 1% of the world’s wealthiest individuals will own roughly 64% of the planet’s wealth by 2030.

An alarming projection produced by the House of Commons library suggests that if trends seen since the 2008 financial crash were to continue, then the top 1% will hold 64% of the world’s wealth by 2030. Even taking the financial crash into account, and measuring their assets over a longer period, they would still hold more than half of all wealth.

Since 2008, the wealth of the richest 1% has been growing at an average of 6% a year – much faster than the 3% growth in wealth of the remaining 99% of the world’s population. Should that continue, the top 1% would hold wealth equating to $305tn (£216.5tn) – up from $140tn today.

Analysts suggest wealth has become concentrated at the top because of recent income inequality, higher rates of saving among the wealthy, and the accumulation of assets. The wealthy also invested a large amount of equity in businesses, stocks and other financial assets, which have handed them disproportionate benefits.

The study was the brainchild of Liam Byrne, a former Labour cabinet minister, who hopes it will factor into the discussion when the financial chiefs of the world’s largest countries meet in Buenos Aires late this year for a G-20 summit.

“If we don’t take steps to rewrite the rules of how our economies work, then we condemn ourselves to a future that remains unequal for good,” he said. “That’s morally bad, and economically disastrous, risking a new explosion in instability, corruption and poverty.”

Unfortunately, the public is extremely sensitive to growing wealth disparity, and polls show most people in the UK are growing increasingly cynical about the prospects for change. Already a plurality of Britons believe the superrich have more influence and power than national governments.

New polling by Opinium suggests that voters perceive a major problem with the influence exerted by the very wealthy. Asked to select a group that would have the most power in 2030, most (34%) said the super-rich, while 28% opted for national governments. In a sign of falling levels of trust, those surveyed said they feared the consequences of wealth inequality would be rising levels of corruption (41%) or the “super-rich enjoying unfair influence on government policy” (43%).

Indeed, even if the incomes of the wealthiest individuals were frozen at 2017 levels, their share of the world’s wealth would still expand thanks to returns on their investments, according to Danny Dorling, a professor at Oxford.

“Even if the income of the wealthiest people in the world stops rising dramatically in the future, their wealth will still grow for some time,” he said. “The last peak of income inequality was in 1913. We are near that again, but even if we reduce inequality now it will continue to grow for one to two more decades.”

One Tory MP quoted by the Guardian pointed out that while wealth inequality remains a problem, liberal capitalism has lifted more people out of poverty than any other system of government. Though this overlooks the fact that, while this holds true in most of the biggest developing countries, in the developed world, the working and middle class are at risk of seeing their standard of living decline vs. that of their parents’ generation.

George Freeman, the Tory MP and former head of the prime minister’s policy board, said: “While mankind has never seen such income inequality, it is also true that mankind has never experienced such rapid increases in living standards. Around the world billions of people are being lifted out of poverty at a pace never seen before. But the extraordinary concentration of global wealth today – fuelled by the pace of technological innovation and globalisation – poses serious challenges.

“If the system of capitalist liberal democracy which has triumphed in the west is to pass the big test of globalisation – and the assault from radical Islam as well as its own internal pressures from post-crash austerity – we need some new thinking on ways to widen opportunity, share ownership and philanthropy. Fast.”

Demands for action from the group include improving productivity to ensure wages rise and reform of capital markets to promote greater equality.

While this sounds like a plausible plan, the obstacles to it being put into practice are myriad – including opposition from corporations and the wealthy, who might prove reluctant to part with what they’ve gained. And even once central banks retract their stimulus and securities valuations inevitably fall, it remains unclear whether this trend can ever be reversed.

One thing’s for sure: While pundits have been eager to call the end of the populist wave, as long as the wealth divide continues to widen, anger toward the status quo will continue to metastasize.

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UK: Funding Textbooks That Teach Children To Blow Themselves Up

Authored by Douglas Murray via The Gatestone Institute,

In 2016, a study carried out by the Organisation for Economic Co-Operation and Development (OECD) found that for literacy in the developed world, England ranks dead last. The same study also stated that for numeracy in the developed world, England ranks second-to-last. Even among graduates from English universities, the OECD study found, one in ten had literacy or numeracy skills that were classified as “low”.

These results are astonishing, not to mention shaming. They reflect decades of misdirection in British education, including the misdirection of resources. Understandably, successive governments complain about a lack of resources. But all of those laments only serve to highlight the strangeness of Britain’s latest priorities in funding education.

This past weekend it emerged that last year the British government funnelled £20 million to Palestinian schools. A review by the Institute for Monitoring Peace and Cultural Tolerance in School Education (IMPACT-se) found that these revenues go towards funding a curriculum which omits teaching peace, promotes the use of violence — specifically jihad — and encourages martyrdom. An analysis of the textbooks used in Palestinian schools funded by the UK government — using UK taxpayers’ money — found that these textbooks, which come from the Palestinian Authority (PA), “exerts pressure over young Palestinians to acts of violence.”

A science textbook intended for 12-year-olds, for example, claims to teach them Newton’s second law of motion in the following way:

“During the first Palestinian uprising, Palestinian youths used slingshots to confront the soldiers of the Zionist Occupation and defend themselves from their treacherous bullets. What is the relationship between the elongation of the slingshot’s rubber and the tensile strength affecting it?”

Another textbook, which is meant to be used for teaching arithmetic to 9-year-olds takes a highly local approach to the matter. Math lessons as provided by the PA — courtesy of the UK government — teach Palestinian children addition by asking them to calculate the number of “martyrs” in various Palestinian uprisings.

Elsewhere, the study found that social studies books included images of children in their school rooms with an empty desk fitted with a sign reading “martyr”. Repeatedly the textbooks refer to the “Occupation”, to “Zionist Occupation”, “Zionists” and much more, all of which perpetuates the notion that Israelis are “invaders” and “oppressors”. In other words, these textbooks are clearly and consistently intended to indoctrinate a new generation of Palestinian children to hatred of their neighbours. Any government genuinely interested in promoting peace would withdraw funding from any entity — wherever in the world it was — which taught violence as such a core part of its curriculum.

The British government, however, has long been strangely shameless when it comes to funding the Palestinian Authority. The British government, for instance, hides behind the claim that the PA’s authorised textbooks for use in Palestinian schools have got better in recent years. In fact, this IMPACT-se report find precisely the opposite. Last year, the PA launched a much-vaunted new school curriculum for children in grades 5-11. Just last week the Minister of State for International Development, Alistair Burt, stated that “all of their [the PA’s] schools in the West Bank are using the revised 2017 PA curriculum.”

The IMPACT-se investigation revealed, however, that “radicalization is pervasive across this new curriculum.” And not just pervasive, but pervasive “to a greater extent than before.” The study found that in textbooks which pretend to be teaching “equal rights'”, girls are encouraged to sacrifice their lives. A textbook aimed at 5th grade children (that is, children aged 10) teaches that “drinking the cup of bitterness with glory is much sweeter than a pleasant long life accompanied by humiliation.” Another textbook urges that “Giving one’s life, sacrifice, fight, jihad and struggle are the most important meanings of life.”

In a statement, in response to the Sunday Times (UK), which broke the story, Alistair Burt, MP, and Minister of State for the Middle East at the Foreign and Commonwealth Office and Minister of State at the Department for International Development, revealed that the UK taxpayer continues to support this radical curriculum of incitement. He admitted that the UK taxpayer funds the wages of 33,000 teachers in the West Bank, who use these curriculums. “UK-funded public servants and teachers… are therefore involved” he said. Instead of investigating these findings or announcing the immediate cessation of funding to the Palestinian Authority until such a time as it stops preaching incitement to another generation of Palestinian children, the UK’s Department for International Development responded to the findings with a typical form of bureaucratese:

“Our support is helping around 25,000 young Palestinians go to school each year. The UK government strongly condemns all forms of violence and incitement to violence.”

Well, the UK government clearly is not so opposed to “all forms of violence and incitement to violence” that it isn’t happy to continue to use millions of pounds of UK taxpayer money to assist the PA in radicalising and inciting Palestinian children.

Pictured: A screenshot from the Sunday Times article exposing the British government’s funding of a Palestinian curriculum which promotes the use of violence — specifically jihad — and encourages martyrdom.

The Department for International Development also announced that it was now “planning to conduct a thorough assessment of the Palestinian curriculum and evidence”. It added that “if we find evidence of material which incites violence, we will take action.” Evidence has been given to it in abundance, not just now but for years.

This is the true scandal for Britain: that while the UK government fails to pump the resources needed into helping young British children to grow up literate and numerate in Britain, it pumps millions of pounds into the Palestinian Authority to make sure that young Palestinian children think that a career of violence is a career worth pursuing. While failing to help British children grow up, the UK government helps Palestinian children to blow themselves up. It is a horrible legacy for any country, but for Britain, a shameful one.

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Lobbying For Slavery In Brazil

Some 10 percent of Brazil’s top politicians received donations by companies entangled in scandals involving modern day slavery. As Statista’s Patrick Wagner notes, even though donations to politicians are not illegal in Brazil, the money received is of questionable origin.

Donators include JBS – the world’s biggest meat producer – and other enterprises that can be found on Brazil’s ‘dirty list’ for slave labor. Over 41 percent of all recipients are part of the influential ruralist caucus, a congressional faction keen on revoking land rights of indigenous communities and limiting efforts to combat slavery.

The following chart shows the top beneficiaries and their party affiliation.

Infographic: Lobbying for Slavery in Brazil | Statista

You will find more infographics at Statista

A total of 16 percent of all parliamentary deputies of the Brazilian Democratic Movement (MDB), the party of President Michel Temerand impeached president Dilma Roussef received said donations. The leftist Workers’ Party (PT) of former president Lula da Silva, who is currently facing imprisonment due to corruption, even has received a stunning 20 percent of donations from companies on the ‘dirty list’.

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How Gun Control Laws For “Mentally Ill” Could Disarm Those Who Question Authority

Authored by John Vibes via The Free Thought Project,

In the growing debate surrounding the natural right to self-defense, one of the most popular proposed methods of gun control has been restrictions on gun-ownership for those who are deemed to be mentally ill.

This is a measure that is often suggested by liberals and conservatives alike, but it is important to stop and consider what something like this might entail.

When any collective group is banned from owning a gun, they are effectively turned into second-class citizens. In the case of mental illness, that classification is so vague and open to interpretation that it could possibly be applied to over half of the population, depending on which criteria you use.

Mental illness can be very hard to identify since there is no kind of official test for most conditions, most people are diagnosed according to the subjective opinions of the doctors that observe them. Even the most severe conditions, like schizophrenia, can be very difficult to identify and is often misdiagnosed.

Psychiatric drugs are another possible factor that could get someone marked by the government as mentally unstable, but a classification like this would allow for large portions of the US population to be disarmed.

According to a 2016 study by JAMA Internal Medicine, more than 1 in 6 Americans are on some type of psychiatric drug. This is not to mention the large number of people who report symptoms of depression or anxiety and don’t take medication.

A policy like this could also allow the government to disarm dissidents and political enemies. As psychiatry became more influential towards the middle of the 20th century, rulers around the world began using “mental illness” as an excuse to lock away anyone who might disagree with them. The Soviet regime became notorious for this practice by labeling all political dissidents as “mentally ill” so they could be locked away in institutions where they were no threat to the establishment.

The United States government also has a long history of slapping unruly citizens with the mark of mental illness. President Franklin Roosevelt famously called his detractors “the lunatic fringe,” and this type of attitude towards activists has carried on in the halls of government to this day.

In the dictionary of mental illnesses, known as DSM-5, published by the American Psychiatric Association, there is actually a condition listed for people who have a problem with authority. Oppositional Defiant Disorder is a name that psychiatrists made up to identify children who won’t do what they are told, and now even adults are being diagnosed with this condition as well.

Meanwhile, politicians and mainstream media are quick to label anyone who questions the official narrative as a “conspiracy theorist,” a term that has been falsely associated with mental illness in pop culture.

A study in 2017 set out to determine whether or not believing in conspiracy theories was a form of mental illness. As expected they found the exact answer that they were looking for, people who don’t trust the government and mainstream media are crazy, and suffering from something called illusory pattern perception.

There is another dilemma that arises in the discussion of disarming people who are accused of having a mental illness, and that is the fact mentally ill people are 10 times more likely to be victims of violence than the rest of society because they are often seen as easy targets.

Complicating matters further is the fact that these people can’t depend on the police to help them in these situations, as studies have shown that the mentally ill are 16 times more likely to be killed by a police officer than the average person.

According to the Virginia-based Treatment Advocacy Center, a minimum of 1 in 4 fatal police encounters ends the life of an individual with severe mental illness.

To prevent mentally ill people from owning firearms is a severe form of “ableist” discrimination, and also opens the door for nearly anyone to be classified as mentally ill.

There are sometimes extreme cases where a person’s mental instability is creating a dangerous situation for the community, like the recent Parkland shooting, for example. In this case, the shooter had a known history of violence, regularly made threats and was visited by police on numerous occasions because of his threatening behavior. In cases like this, it is reasonable to keep an eye on someone, restrict their access to firearms, or possibly quarantine them from society in the most extreme situations.

There are many laws on the books currently would have allowed the FBI or local police to intervene in their initial encounters with the shooter, but they decided that a student known for violent outbursts and talking about carrying out school shootings was not worth looking into.

As TFTP reported earlier this month, there is a law on the books known as the Extreme Risk Protection Order or ERPO, which went into effect in June of 2017. This law is used when a person is considered an “extreme” threat as reported by police and family members. An ERPO must be approved by a judge and only after this person is proven to be a danger to themselves or others can police move in to confiscate their weapons.

These types of targeted approaches specifically aimed at individuals who are a known source of violence in the community would do far more to prevent tragedies from happening, than a wide-reaching law that could threaten the rights and safety of millions of innocent gun owners.

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