February Durable Goods Orders Jumped Ahead Of Global Coronageddon, Thanks To War-Spending
Preliminary data for February durable goods orders showed a surprise improvement (up 1.2% MoM vs expectations of a 0.9% drop) as it appears COVID-19;s impact hadn’t begun to hit quite yet. This resurgence has pushed the YoY growth in headline durable goods orders back into the positive (up 3.0% YoY – the best since January 2019)
Source: Bloomberg
However, ex-Transportation, durable orders fell 0.6% MoM – the biggest drop since Feb 2016… this is the 8th straight month of YoY declines in core durable goods orders…
Source: Bloomberg
And core capital goods orders, which exclude aircraft and military hardware, fell 0.8% after a revised 1% advance in January, because what drove the headline was a 25.7% MoM spike in defense capital goods…
Finally, we note that Capital Goods New Orders (non-defense, ex-aircraft) – a proxy for capital spending and investment – disappointed, falling 0.8% MoM (worse than the 0.4% drop expected.
All of which suggest things were not exactly roaring even before the global virus impact hit.
ABN Amro Abandons 106 Year Physical Gold Business, Clients Forced To Sell
Seven years ago – to the day – Dutch megabank ABN Amro changed its precious metals custodian rules to “no longer allow physical delivery.”
Have no fear, they reassuringly added, your account will be settled at the bid or offer price in the ‘market’ and “you need to do nothing” as “we have your investments in precious metals.”
Changes in the handling of orders in bullion
On 1 April 2013,. ABN AMRO to another custodian for the precious metals gold, silver, platinum and palladium…
…
You need do nothing. We ensure that we have your investments in precious metals now the new way to handle and administer.
At the time, we wondered if this was the canary in the coalmine of potential physical shortages in the precious metals markets. Soon after we saw notable selling pressure in the gold markets with Spot (physical) selling leading futures lower…
At the time it was unclear who the “other custodian” was but we now know ABN Amro transferred the precious metal trade to the Swiss bank UBS.
Crucually, however, at UBS, it was not possible for customers to actually request the gold or silver.
Which brings us to today’s news from Trouw.nl, that ABN Amro customers will no longer be able to put their money into physical gold, silver or platinum.
The bank will discontinue these three investment products next Friday.
Customers will have to sell their positions before April 1. If that does not happen, ABN Amro will do this for them at the prevailing price.
The driver for this decision appears to new EU regulations as Trouw explains:
Because the physical delivery of precious metals is not possible, a precious metal purchased through ABN Amro is not a “direct investment”.
Because it is a complex product, ABN Amro must comply with additional regulations.
Those rules for European financial markets have been tightened.
The cancellation of these accounts by ABN Amro brings to an end a history that goes back to the establishment of the Hollandsche Bank Unie (HBU) in 1914, writes gold trading company Aunexum in retrospect.
Interestingly, as this news breaks, spot gold prices are lagging futures as they both are bid…
With the gold market “breaking down,” as we detailed earlier, amid a record surge in demand for physical gold but also a near shut down in supply as the most productive gold refiners, those located in the southern Swiss town of Ticina, namely Valcambi, Pamp and Argor-Heraeus, now appear to be offline indefinitely; we wonder if the timeliness of ABN’s decision is more about avoiding the potential blowback from their ultimate fiduciary duty over clients’ precious metals investments.
Let’s just hope, for the 200o or so private-banking accounts at ABN (and custodied at UBS) that the Swiss bank can get its hands on some of that ‘deliverable’ before time runs out…
Which anyone who has been to APMEX or any other gold seller in the past few days, has discovered – may not be as easy to source as they hope:
Futures Slide After Bailout Deal Struck As Schumer Says Buybacks Banned
The event everyone was waiting for and knew was just a matter of time, resulting in Tuesday’s biggest one-day rally since 1933 – namely the Congressional taxpayer daylight robbery coronavirus bailout deal which started at $850BN and has since grown to $2 trillion (with an additional $4 trillion in Fed purchasing power) – was finally reached just after midnight on Tuesday and in the early minutes of Wednesday. A vote in the Senate, as well as House approval are still pending.
The result was initial euphoria as the S&P jumped to 2,499 – the exact same high hit last on quad-witching Friday last week… before it rolled over as the news was sold…
… while Treasuries did the mirror image and rebounded with yields sliding to 0.81% as investors waited for details on government rescue packages to counter the hit from the coronavirus.
As US futures faded the news, equity markets across Europe and the U.K. also lost steam from an earlier surge as euro-region leaders inched toward a stimulus accord. The Stoxx 600 index turned red after earlier rising almost 5%
Earlier, Asian stocks fared better, posting their best one-day increase since 2008. All markets in the region were up, with Japan’s Topix Index gaining 6.9% and India’s S&P BSE Sensex Index rising 6.5%. The Topix gained 6.9%, with UT Group and AD Works rising the most. The Shanghai Composite Index rose 2.2%, with Eastern Gold Jade and Shanghai Yimin Commerce Group posting the biggest advances.
However, the mood reversed shortly after 5am ET, perhaps once investors realized that the deal bans buybacks for the foreseeable future, as the top Senate democrate, Chuck Schumer said the bill will “ban stock buybacks for the term of the government assistance plus 1 year on any company receiving a government loan from the bill.“
For a market where buybacks have been the primary buyer of stocks in the past decade, this was hardly welcome news.
As such, investors – who were hoping for U.S. and global equity indexes to post their first back-to-back daily gains since the rout began a month ago, even as economies from Delhi to Milan and Seattle reel from the deepening pandemic – were set to be disappointed. Meanwhile, the number of infections globally continues to mount and Spain reported the largest number of deaths yet in a day, as the world still has a long way way to go before containing the pandemic.
“We still need to see a slowing of the virus cases and a peaking in the U.S.,” Carol Pepper, chief executive officer at Pepper International, told Bloomberg TV. “Because until then we’ll have these huge relief-rally days — then we’ll get a scary day and the market will plunge down again.”
As a result, in addition to risk sliding, WTI crude oil turned lower and Treasuries erased a decline. The dollar initially fell for a second day versus its biggest peers including the euro, however it has since rebounded and threatens to turn green again. The single currency added to Tuesday’s gain as Germany took a step toward declaring a state of emergency to unlock a historic rescue package. A Bloomberg gauge of financial conditions loosened for the first time in six sessions.
Meanwhile, Wall Street analysts who have now shed all pretense of actually analyzing stuff and admitting they are just bailout cheerleaders did what they do best:
“The actions of monetary and fiscal policymakers should help us prevent a Global Financial Crisis-style credit crunch,” Mark Haefele, chief investment officer at UBS Global Wealth Management, wrote to investors. “Tuesday’s sharp equity rally shows that the combination of central banks’ entire playbook and substantial, direct fiscal support can be well-received by markets.”
We wonder what he will say about Wednesday’s action once we close red.
Elsewhere, the greenback weakened against all G-10 peers apart from the yen, which hovered near a one-month low reached against the dollar on Tuesday. Norway’s krone led Group-of-10 gains, rising more than 2% versus the dollar, supported by better risk sentiment and higher oil prices. The pound extended its recovery into a second day; the Australian and New Zealand dollars also gained as speculative funds flipped short positions.
In rates, yields on Treasuries and Bunds edged higher while the curve came off an earlier flattening move.
Market Snapshot
S&P 500 futures down 1.5% to 2,400
STOXX Europe 600 up 3.3% to 314.07
MXAP up 5.6% to 134.49
MXAPJ up 4.6% to 427.28
Nikkei up 8% to 19,546.63
Topix up 6.9% to 1,424.62
Hang Seng Index up 3.8% to 23,527.19
Shanghai Composite up 2.2% to 2,781.59
Sensex up 6.5% to 28,417.57
Australia S&P/ASX 200 up 5.5% to 4,998.07
Kospi up 5.9% to 1,704.76
German 10Y yield rose 3.6 bps to -0.286%
Euro up 0.3% to $1.0824
Italian 10Y yield fell 1.5 bps to 1.394%
Spanish 10Y yield fell 0.3 bps to 0.878%
Brent futures up 1.2% to $27.47/bbl
Gold spot down 1.3% to $1,611.50
U.S. Dollar Index down 0.6% to 101.39
Top Overnight News
The Trump administration is debating whether to defer payments of duties on imported goods from around the world for three months, people familiar with the talks said
German business confidence collapsed the most in three decades after restrictions to slow the spread of the coronavirus forced mass closures of companies and stores across Europe’s largest economy
Germany Finance Minister Olaf Scholz urged lawmakers to open up debt limits to combat a crisis that threatens modern life. New borrowing of 156 billion euros ($169 billion), equivalent to half of Germany’s normal annual spending, will be used to fund social benefits and direct aid to virus-hit companies It’s a period of wait-and-see for money markets after the Federal Reserve’s barrage of actions halted a further blow-out in funding spreads. But many problems remain, including the hoarding of dollars
The squeeze on U.S. currency is putting pressure on emerging Asia debt. Southeast Asian and Indian government and corporate payments are set to jump 67% in 2022 to $41.9 billion, according to data compiled by Bloomberg. Dollar payments are expected to peak at $44.4 billion in 2024
The Federal Reserve tapped BlackRock Inc. to shepherd several debt- buying programs as the U.S. central bank works to revive an economy reeling from the spread of coronavirus
China’s central bank could announce cuts to its benchmark deposit rate in the coming days, the Financial Times, reported, citing two people familiar with the matter
Asian equity markets traded with firm gains as the region took impetus from the historic rally on Wall St where the DJIA jumped by over 2100 points or around 11.4% for its largest daily point gain on record and biggest percentage jump since 1933, with sentiment underpinned by hopes of a stimulus breakthrough which eventually materialized as negotiators reached a deal on the coronavirus stimulus bill and with US President Trump touting a reopen of the US economy by Easter. ASX 200 (+5.5%) surged as the stellar performance stateside reverberated across the region with Real Estate, Industrials and Financials front-running the gains which briefly saw the index notch its biggest intraday gain since October 2008 to briefly surmount the 5k level, while Nikkei 225 (+8.0%) was lifted by the recent JPY-weakness and with the BoJ Summary of Opinions from last week’s emergency meeting suggesting the central bank was flexible and open to another off-schedule meeting. Elsewhere, Hang Seng (+3.8%) and Shanghai Comp. (+2.2%) benefitted from the heightened global risk tone and amid reports the Trump administration is said to mull a 90-day deferral of tariffs on all imported goods from around the world, although the gains were somewhat capped as White House Trade Adviser Navarro refuted the prospects of a tariff deferral and following continued PBoC liquidity inaction. Finally, 10yr JGBs were relatively flat with demand subdued by gains in stocks and in the absence of BoJ purchases in the market today, while the announcement of a coronavirus bill agreement later weighed on prices and to break down support at the 152.00 level.
Top Asian News
China’s Central Bank Considering Benchmark Deposit Rate Cut: FT
China Auto Shares Pare Gains as Beijing Denies Stimulus Report
Pandemic Flags Risks Posed by Share-Backed Debt in India
Worldwide Dollar Crunch Raises Red Flags in Asia’s Debt Market
India Weighs New Credit Line For Mutual Funds Hit by Cash Crunch
As we stand, European equities have wiped out earlier gains (Eurostoxx 50 -1.4%) following the monumental upside seen on Wall Street and in the APAC session overnight amid a concoction of stimulus announcements from the regions. Focus remains on the States after Senators agreed to the Trump administration’s virus rescue bill – which sources note could be worth USD 2.5tln, and with voting to take place later today although details remain light. Back to Europe, the positive sentiment initally resonated across the region, with Germany’s DAX (-2.2%) reclaiming the 10k milestone. However, the 10k level was conceded therafter alongside reports that ECB’s Lagarde asked EZ Finance Ministers yesterday to seriously consider a one-off joint debt issue of coronabonds; a request that was rejected by northern European nation, however, support came from beyond just the southern states. UK’s FTSE (-1.0%) initially underperformed the region before later receiving a boost due to its large financial, mining and energy exposures. European sectors now mostly red, with the exception of Energy names. Airlines experience a bout of reprieve – potentially on back of the anticipated US stimulus package support for domestic carriers acting as a catalyst; easyJet (+8.7%), Ryanair (+1.5%), and Air France-KLM (+5.7%) all trade closer to the top of the Stoxx 600. Elsewhere, E.ON (+9.2%) was bolstered at the open amid YY improvements in results and underlying utility demand from nations working from home. Finally, Adidas (+3.4%), Puma (+5.6%) and Sports Direct (+10.0%) all see tailwinds emanating from Nike earnings – whose shares show gains in excess of 12% pre-market. In terms of bank calls, UBS sees Stoxx 600 index at 340 by year-end and sees a greater upside in UK equities amid cheaper valuations. The Swiss Bank targets FTSE 100 at 6400. As earning season looms, UBS sees European companies reporting a 33% drop in 2020 EPS, with the expectations incorporating a deep recession forecast.
Top European News
German Business Outlook Collapses With Economy Largely Shut Down
France Pushes $4.3 Billion Support Package for Startups
Spain Thinks Coronabonds Are a Good Idea, Foreign Minister Says
Credit Suisse Cut Thiam’s Pay by 15% in Wake of Spy Scandal
Thyssenkrupp Expands Job Cuts in Overhaul of Weak Steel Unit
In FX, the Aussie has extended recovery gains vs its US counterpart and outperformance against most G10 peers amidst another broad upturn in risk sentiment or sheer relief that the US Senate has resolved differences on the circa Usd2 tn Stimulus C bill, including Usd400 bn for the TSF that can be multiplied up to 10 times by the Fed. Aud/Usd has now breached the psychological 0.6000 mark on the way through 0.6050 as Aud/Nzd approaches 1.0300 and the Kiwi meets some resistance around 0.5900 in wake of NZ declaring a state of emergency due to COVID-19. Meanwhile, corrective trade and short covering has carried Cable up beyond 1.1900 and over last year’s 1.1959 low, with Eur/Gbp retreating well below 0.9100 as the single currency stumbles into 1.0850 vs the Greenback in wake of more pronounced weakness in Germany’s final Ifo survey compared to preliminary prints. However, Eur/Usd appears well supported above 1.0800 where decent option expiries roll off (1.2 bn), and with the DXY slipping back from 101.920 to 101.150 within a slightly wider 102.000-101.00 range. Elsewhere, the Loonie is also taking advantage of relative weakness in the Buck, but losing impetus alongside WTI between 1.4297-1.4482 parameters.
CHF/JPY – The Franc and Yen are narrowly mixed against the US Dollar either side of 0.9800 and 111.00 respectively, but the former holding up better despite waning risk appetite and a sharp deterioration in Swiss investor sentiment.
SCANDI/EM – The Norwegian and Swedish Crowns are still in bear retracement mode with Eur/Nok sub-12.0000 and Eur/Sek under 11.0000, while EM currencies are also benefiting from less acute angst over the adverse impact of the coronavirus, for the time being at least as global Central Banks and Governments expend even more efforts to counteract the economic contagion.
In commodities, WTI and Brent front-month futures continued their sentiment-driven climb off near-multi-decade lows, before paring gains amid a broader pullback in sentiment in recent trade. Desks continue to highlight that underlying fundamentals remain largely unchanged, but stimulus hopes provide support for the complex, in the short term at least. Although data has been overshadowed, last night’s Private Inventory data was seemingly constructive for the market – having printed a surprise draw of 1.2mln barrels vs. Exp. build of 2.8mln – traders will now eye the DoE figures for confirmation. That being said, the inventory numbers later today are unlikely to have a sustained impact in prices as the complex takes its cue from macro themes/sentiment. In terms of metals, spot gold trades on either side of USD 1600/oz and re-eyes its 21 DMA to the downside at ~USD 1591.90, with losses seemingly triggered due to increasing flows into riskier assets. Copper prices initially conformed to the risk appetite but have since waned off highs, with relatively uneventful price action in the red metal below 2.25/lb.
US Event Calendar
8:30am: Durable Goods Orders, est. -0.95%, prior -0.2%; Durables Ex Transportation, est. -0.4%, prior 0.8%
8:30am: Cap Goods Orders Nondef Ex Air, est. -0.4%, prior 1.1%; Cap Goods Ship Nondef Ex Air, est. -0.2%, prior 1.0%
9am: FHFA House Price Index MoM, est. 0.4%, prior 0.6%
DB’s Jim Reid concludes the overnight wrap
We’re at a fascinating point in markets now as on one hand Europe is on almost total non-essential shutdown mode without an easy exit strategy whereas the US is straddling between this and the sentiment in Donald Trump’s words that we reported yesterday that the country “was not built to be shutdown”. It seems to us that a large part of yesterday’s huge rally was a legacy of Trump taking a more aggressive stance against prolonged shutdowns in his Monday news conference than his Sunday equivalent where his tone was more towards defeating the virus. He expanded on this theme yesterday by repeating a phrase in a tweet that he’d used the previous day that “The cure cannot be worse (by far) than the problem!”. Larry Kudlow, the Director of the National Economic Council, also said to Fox Business that the Trump Administration would look at whether it was possible to reopen places that weren’t “hot zones”. Mr Trump later said he’d like to have economy open by Easter which confirmed a change in tack. Perhaps he was emboldened by an exceptionally strong session that ended with the S&P 500 at the day’s highs and up +9.38% – the tenth best day on record out of 24,067 trading sessions since daily data started in 1927. It was also the best day since 28 October 2008. The Dow rallied +11.37%, which is best daily performance since March 1933 and the 5th best day since the data starts in 1920 (26,149 trading days).
Taking this all in, the US is at a fork in a road that might mean they escape the worst of the savage economic slump coming down the pike if Mr Trump continues with such a policy. Alternatively they might end up doing what Europe is doing, but later, and in both cases having to deal with the political and human fall out. It would be a gamble of epic proportions but the reality is that Easter is a long way away in terms of virus news so a lot can change.
Not so far away is more US stimulus with headlines out as we go to print saying that the Senate has finally reached an agreement on the near $2tn bill. We don’t have any details yet however the bill is expected to be circulated later today. The general thought though is that this will include checks to most Americans, deferrals of taxes, loans for small businesses, hospital spending and unemployment insurance measures as well as the huge $500bn fund for industries, cities and states.
S&P 500 futures are down -1.13% as we type after paring a slightly bigger decline prior to the stimulus news being released. Asian markets are stronger following the huge gains on Wall Street last night with the Nikkei (+6.93%), Hang Seng (+2.28%), Shanghai Comp (+1.57%) and Kospi (+3.96%) all making headway. The US dollar index is down -0.45% this morning which if holds will be its 3rd continuous decline. As for commodities, Brent crude oil prices are up +2.39% this morning while most base metals are also trading up with iron ore advancing by +3.40%.
Coming back the virus, yesterday afternoon the FT reported that researchers out of the University of Oxford believe that the virus may have already infected as much as half of the UK population or at least more than previously estimated. This would indicate that less than 0.1% of all cases would require hospitalization. The leading epidemiologist on the study cited the need for widespread antibody testing of the British people to have a fuller picture of the epidemic. This has a significantly more sanguine view to the now famous Imperial College report from a couple of weeks back. It brings back the concept of herd immunity into the debate but the reality is that it doesn’t change the near-term stresses on healthcare systems. The antibody test is an interesting one though and something the U.K. government discussed last week. If we can prove that large parts of the population have already had it or have immunity then economies can get back to work quicker. For now we have to treat this study with a high degree of caution but at least it puts a bit of two way into the epidemiology debate.
In terms of the latest numbers, Spain saw its worst day of the pandemic so far, recording 514 deaths on Tuesday, with the total number of cases now at 39,673 according to the health ministry. After being on an overall downward trajectory in recent days, Italy saw a 2pp increase in reported deaths with 743 new deaths from the coronavirus yesterday and confirmed cases in the country now totaling 69,176. Overall new % case growth remained in single digits for the second day as even more stringent protocols were put in place. In the US, case growth in raw numbers continues to increase massively, especially in NY where the 25,665 cases represent over 6% of all cases globally and over half of all cases in the US. Governor Cuomo announced that the state is now testing at a higher per capita rate than both South Korea and China. See the pdf for the latest charts.
Back to markets and Europe was also strong yesterday. The STOXX 600 was up +8.40% for the 3rd best day on record over 8670 sessions since 1987, and the best day since 24 November 2008. The DAX was up +11.04%, the 4th best day in 15,778 trading days we have data for and the best daily gain since 28 October 2008. The FTSE 100 rallied +10.62%, the 2nd best day in 9,457 observations, with only 11 November 2008 seeing a better daily gain.
There were a number of big moves in other markets as well yesterday. Credit saw a very strong day after the Fed buying package gained some traction. In CDS, US CDX IG and HY were -14bps and -154bps tighter and in Europe the equivalent was -16bps and -97bps tighter. In cash we had the first day where there was some positive traction in what feels like a very long time. US IG and HY were -19bps and -32bps tighter while in Europe HY was -27bps tighter.
Meanwhile, Gold saw its largest daily gain (+5.09%) since the day after September 11th, while silver (+7.66%) had its strongest day since November 2008. And this came in spite of the fact that safe havens in other asset classes like US Treasuries or the Japanese Yen moved lower, while the Bloomberg Dollar index ended its run of 10 successive advances to fall -0.72%.
Speaking of which, sovereign bonds sold off throughout the day yesterday, with 10yr Treasury yields up 6.0bps to 0.85% and a level they have held onto this morning in Asia. 10yr bunds were up +5.3bps at -0.32%. However, peripheral spreads in Europe were moving in different directions. While the spread of Italian 10yr yields over bunds fell by -6.8bps to a 3-week low, they continued to widen in Spain and Portugal, up by +7.0bps and +6.1bps respectively as sovereign bonds in both countries underperformed the rest of Europe.
Our economics team published a note trying to assess the damage to Q2 yesterday ahead of more thorough updates later in the week. They conclude that it is possible that the level of GDP falls by 15-30% (non-annualised) on both sides of the Atlantic under various lockdown assumptions. All of this impact may not be felt in Q2. The contraction in Q2 will be a function of how long lockdowns remain in place and how economies recover following being turned back on. Large parts of continental Europe are already on lockdown, which could already mean Q1 sees a contraction of 4-6% qoq.. (For more details see Link here).
Talking of economic impacts, the return of risk appetite in markets yesterday came even though the PMI releases signaled that the global economy was heading for a sharp contraction, with the readings collapsing right across the board. However most people would have expected this but the numbers were still generally weaker than expected. In the Euro Area, the composite PMI fell to 31.4 (vs. 38.8 expected), the lowest level since comparable data was collected going back to July 1998, and below the previous low of 36.2 set in February 2009 at the depths of the financial crisis. There was no respite in the individual country readings either, with France’s composite PMI falling to a record low of 30.2, the UK at a record low of 37.1, and Germany’s down to 37.2, which was “only” its lowest since February 2009.
In terms of the breakdown between manufacturing and services, the general pattern across countries was that services were much harder hit, with the Euro Area services PMI falling to 28.4 (vs. 39.5 expected), which was also a record low going back to 1998. Manufacturing saw far less of a decline though, falling to 44.8 (vs. 39.0 expected) which was “just” its lowest since April 2009. Some of the forward looking measures were more negative in the manufacturing numbers so expect this to go notably lower going forward.
By comparison to Europe, the PMIs from the US were fairly strong reflecting being behind in the lockdown process. The composite PMI did fall to 40.5, the lowest in the series since comparable data began in October 2009, but this was still significantly above the 31.4 reading from the Euro Area. Similarly to the Euro Area, services fell by more-than-expected to 39.1 (vs. 42.0 expected), while manufacturing held up surprisingly well at 49.2 (vs. 43.5 expected), albeit still its worst reading since August 2009.
Other data was similarly dire. We got a glimpse of what could happen to unemployment across the globe from Norway, where data showed that the number of people seeking unemployment benefit has more than tripled over the last two weeks, with registered unemployment now at 10.4%, the highest since WWII.
To the day ahead, and data releases out include the UK’s CPI inflation reading for February as well as the CBI’s distributive trades survey for march. From Germany, there’ll be the final Ifo business climate reading for March, while from the US we’ll get the preliminary readings for durable goods orders and nondefence capital goods orders ex air for February. In addition, the US will also see the release of the MBA’s weekly mortgage applications and January’s FHFA house price index.
Fearing the potential breakdown of law and order as a result of the coronavirus, Hungarians are panic buying guns, with one store reporting a five fold increase in sales.
“We are selling five times as much as in a normal March,” Gabor Vass, a gun store owner in Budapest, told Al Jazeera.
“We could sell 15 times more if we had any more rubber bullet weapons, but we ran out,” he added.
The store suddenly faced a rush of buyers last week despite the fact that Hungary has largely escaped the fate of other European countries, recording 167 coronavirus cases and 7 deaths.
Vass said the firearm purchases were being driven by fears of civil unrest if supplies of essential products run out.
“If people brawl over toilet paper now, what will they do later? Once shops run out of stock, people will take what they need. Police can hardly deal with every petty theft,” he said.
300,000 of Hungary’s 10 million population hold gun licenses, but licenses aren’t necessary for some light arms.
“People have gone nuts,” said Vass.
“They gobble up anything they don’t need a licence for. Gas pistols, rubber bullet guns, and even things like crossbows, which can harm you seriously.”
According to the the Czech arms manufacturers association, there has also been a “double-digit rise in sales” of guns in Hungary’s neighboring country.
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Watch: Putin Dons Hazmat Suit In Rare Visit To Covid-19 Patients
Over the past years international media has been replete with images of Putin on horseback, Putin shirtless, Putin hunting and fishing, and the Russian president even engaged in a taekwondo competition.
But here’s one that’s truly new and a scene we would have never imagined, as Russian media reports:
Russian President Vladimir Putin traded his usual shirt and tie for a hazmat suit as he visited patients receiving treatment for the Covid-19 virus in a Moscow hospital.
Images via Sputnik
This may be the first instance of a major world leader publicly paying a visit to confirmed Covid-19 patients — something which secret service staffers for most world leaders would no doubt warn against, given the personal risks and dangers for the highly contagious disease.
Russia’s official confirmed number of coronavirus cases rose to 495 on Tuesday, though Moscow Mayor Sergei Sobyanin told President Vladimir Putin in a meeting “the real number of those who are sick is much greater” than official numbers indicate, per The Moscow Times.
The Russian leader donned the full protective gear at a treatment center in the Kommunarka area of Moscow on Tuesday.
He was led on a tour of the facility by head physician Denis Protsenko, according to Russian media reports. Health officials reported 57 new cases nation-wide on Tuesay.
Watch Putin gear up to enter the high secure wing of the hospital treating coronavirus patients:
Just prior to the hospital visit and Hazmat suit photo op, Putin attended a meeting with top health officials responsible for overseeing the country’s outbreak response.
The president was informed that at least two of Moscow’s coronavirus patients are deemed in “serious condition” and are currently on ventilators.
Moscow currently has at least seven hospitals specifically outfitted to treat coronavirus patients, according to state sources.
Early this week the Russian president declared the coronavirus situation in the country is “under control” due to early measures and intervention by health authorities.
Chart & data via The Moscow Times
Interestingly CNN and other major outlets in the West seem to agree that Russia has done well in preventing a potentially much bigger outbreak in the country of nearly 150 million people.
Does Russia have coronavirus under control? According to information released by Russian officials, Putin’s strategy seems to have worked. The number of confirmed Russian coronavirus cases is surprisingly low, despite Russia sharing a lengthy border with China and recording its first case back in January.
The numbers are picking up, but Russia — a country of 146 million people — has fewer confirmed cases than Luxembourg, with just 253 people infected. Luxembourg, by contrast, has a population of just 628,000, according to the CIA World Factbook, and by Saturday had reported 670 coronavirus cases with eight deaths.
Russia’s early response measures — such as shutting down its 2,600-mile border with China as early as January 30, and setting up quarantine zones — may have contributed to the delay of a full-blown outbreak, some experts say.
Dr. Melita Vujnovic, the World Health Organization’s representative in Russia, has also praised Russia for aggressive and widespread early testing, which also appears to have helped contained the virus.
The last days and weeks of the coronavirus epidemic give an interesting insight into the human psyche. Elementary liberties are restricted all over the world, such as the freedom of movement or private property. Yet most people accept these restrictions without blinking, as the state declares their indispensability.
A chronology of the events in Madrid:
On Sunday, March 8, a large World Women’s Day demonstration against the alleged rule of the Patriachate was held. There were 120,000 particiants, and members of the government took part in it, marching side by side in the first row. They had called for strong participation.
Just one day later it was announced that starting on Wednesday, March 11, kindergartens, schools, and universities in Madrid would be closed.
Since Sunday, March 14, there a curfew has been in place, which is enforced by police and military force.
Cyclists and joggers trying to keep fit in the fresh air have been fined heavily. Spaniards are no longer even allowed to be in the private gardens of apartment blocks, even if families take turns using them. In short, we are no longer allowed to use our own gardens. They have been temporarily expropriated.
Most people are little bothered by the fact that the state is violating their freedom massively. They regard it as necessary and good. They do not question the state´s authority to restrict our freedom at all. Rather, they denounce those who want to move freely and make use of their property rights. When two brothers were seen playing soccer in the garden of an acquaintance’s apartment block, the police were called.
People denounce playing children, who are regarded as harmful to public health, and put up posters saying “Quédate en casa” (stay at home). This is a block warden mentality. The most worrying thing is the high number of willing state collaborators. The parallels with the past are unnoticed. No one seems to care, and it is not even discussed.
If people are just scared enough, they entrust themselves to a (temporary) dictatorship without grumbling. They give up their freedom in the hope of being saved by state leaders advised by wise experts. Fear makes people controllable. Instead of protesting against the violation of their property rights, they clap their hands every day at 8 p.m. in Spain. Initially, the applause was mainly to show support for doctors and nurses, but in the meantime cheers for the police have been mixed in.
The state leaders plan the violation of liberty centrally. They do not have the necessary information to give a rational answer to the coronacrisis. They take into account the benefits of the curfew and economic shutdown but not the costs, because these are not quantifiable.
One of the immediate costs is the loss of a more rapid immunization of the population. But there are other health costs. Being confined to one’s own four walls, with the corresponding lack of physical exercise, will lead to increased cardiovascular diseases, high blood pressure, strokes, and thromboses, among other things. The psychological burden of being locked up is especially immense. The psychological strain will cause some marriages and families to break up; trauma and depression will be created.
The economic collapse triggered by the political reaction to the coronavirus has its own health costs, such as entrepreneurs who suffer heart attacks and unemployed people who fall into depression or alcohol.
And then there are the economic costs in the narrower sense. The standard of living will fall, perhaps considerably. That depends on how long economic life remains switched off. Sooner or later, supply chains will be threatened, even for essential medicines and food. Already today the range of products in Spanish supermarkets is reduced. This too can shorten lives. Worldwide, a decline in the standard of living will hit especially the poorest of the poor, whose supply of food and medicines will be greatly diminished.
As the costs and benefits are not quantifiable, it is hubris to rely on central planning to address the COVID-19 epidemic and come to the decision to paralyze an entire country – even entire continents (not to mention the (temporary) disappearance of freedom). Unfortunately, frightened people seem to shed few tears for freedom.
There is a shortcut to serfdom, and it is called fear.
“Very Technical Issue” – ECB Won’t Rule Out Purchases Of ETFs
Central banks across the world are deploying every trick in the book to save the broken and bankrupt global economy that was derailed by bat soup. The latest trick, already tried and failed miserably by the Bank of Japan (BOJ), is that the European Central Bank (ECB) could one day start purchasing exchange-traded funds (ETFs) as part of its open market operations.
On Tuesday, ECB policymaker Peter Kazimir was quoted by Reuters as saying the central bank could one day purchase ETFs as part of a stimulus plan but gave no firm decision if the policy would be added to its monetary toolkit.
“It (the purchase of ETF) is a very technical issue that has been open at a technical level and experts are dealing with it. I don’t rule it out for the future but no decision on this topic has been made,” Kazimir said at a presser at the National Bank of Slovakia, which he heads.
We would assume Kazimir’s statement is a trial balloon as in what future policy could be coming next, and the ECB is analyzing how investors responded to the idea of the potential new tool.
ECB policymaker Peter Kazimir
We noted on Monday that the Federal Reserve went full BOJ-tard, by announcing it would soon purchase corporate bond ETFs to prop up the market.
And since the Fed announced it would eventually purchase corporate bond ETFs on Monday — Wall Street was seen front running the Fed on the same day, pouring $1 billion into iShares IBoxx $ Invest Grade Corp Bd Fd (LQD).
As for the ECB and FED, well, they’re likely both going full BOJ-tard, with the descent into Japanification ever faster.
Officials in the Czech Republic say that the country may need to keep its borders closed for 2 years in order to fight a potential second wave of coronavirus.
Czech Crisis Staff head Roman Prymula told Czech Television that border controls may have to be kept in place for an extended period in order to restrict the entry of people from other European countries that have been harder hit by coronavirus.
“The situation in other European countries will not be good, there it will take months and long months,” said Prymula.
Czech Minister of Health Adam Vojtech amplified Prymula’s suggestion.
“The point is to avoid having a second or third wave of the epidemic, so that people from other countries such as Italy, France, Spain, Germany, do not begin to flow [into the Czech Republic],” he told Czech Television.
Quarantine measures that restrict the movement of people and have mandated the closure of restaurants and other businesses, as well as the wearing of face coverings in public, will be extended in the Czech. Republic until at least April 1st.
The measures have been successful, with Prymula highlighting how authorities were able to “flatten the curve” of infections and keep the rate under control.
The country has largely escaped the impact of coronavirus in comparison to other European countries, recording 1,236 cases but just a single death.
Vit Rakusan, leader of the opposition STAN party, said the idea of closing the border for 2 years was draconian.
“I understand and support the ban on traveling during current culmination of the epidemic. But scaring people with two years, this must not be a decision of an epidemiologist, however prominent,” he asserted.
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“Tinderbox For Spread”: UN Braces For Covid-19 Carnage In Refugee Camps
“Around 70 million people are suffering displacement in crowded camps, awaiting the arrival of the coronavirus pandemic,” an alarming report in Foreign Policy begins.
It’s been low on governments’ radar considering many are bogged down battling the pandemic in their midst, but the UN High Commissioner has warned there’s a looming coronavirus disaster soon to hit the over-crowded camps especially across the Middle East and Africa.
“We don’t know, and that’s largely because we haven’t done any testing,” Muhammad Zaman, a professor of bioengineering at Boston University, commented recently on the potential case numbers in the camps. “We need to know how acute the problem is before we come up with an intervention.”
Syrian refugee camp. Source: AFP via Getty/FP
A handful of Covid-19 cases have been confirmed in camps in Iraq as well and with suspected cases in migrant camps on the Greek islands, prompting the UNHCR to initiate a $33 million program to provide additional protective gear and sanitation training for health workers in the camps.
But many officials think it’s only a matter of time before the pandemic unleashes carnage in the camps— the most populated lying in Lebanon an southern Turkey along the Syrian border, with official Turkey numbers at 3.4 million. There are also sprawling camps across sub-Saharan Africa.
An official with the Norwegian Refugee Council, Jan Egeland, predicted that “There will also be carnage when the virus reaches parts of Syria, Yemen and Venezuela where hospitals have been demolished and health systems have collapsed.”
Another humanitarian official recently interviewed by NBC called the already poor conditions camps “a tinderbox for the spread of the disease”.
Azraq refugee camp, near Al Azraq city, Jordan. Image via Middle East Online.
Last week the UN was forced to suspend refugee resettlement abroad due to travel delays and closures due to the coronavirus pandemic. Last year the UNHCR settled a total of 64,000 abroad.
“Refugee families are being directly impacted by these quickly evolving regulations in the course of their travel, with some experiencing extensive delays while others have been stranded or separated from family members,” the agency said in a statement.
The program’s temporary halt also came after there were10 confirmed Covid-19 cases in Germany among recently resettled refugees.
UNHCR spokesman Andrej Mahecic said of the cases: “These are people who are either refugees or asylum seekers.” He told a press briefing the cases are in Munich, Berlin and Heidelberg.
When Mario Draghi’s tenure was approaching its end, I argued for a sterner governor for the European Central Bank (ECB); hence, I was not even slightly enthusiastic when Draghi’s successor turned out to be Christine Lagarde – a patent dove, as can be inferred from her ideological proximity to a famous Keynesian like Olivier Blanchard.
However, I am here to defend the stance she took with her March 12 speech – in which, addressing the economic turmoil spurred by the coronavirus crisis, she declared that it was not a central banker’s job to prevent the occurrence of spreads on financial markets – which has been fiercely attacked both by Italian media and politicians, and even by Italian president Sergio Mattarella. There are three reasons why I deem, for once, Lagarde’s viewpoint to be right. These reasons are based in monetary policy theory, in the institutional framework of European Union, and in the current situation of the Italian economy.
The Limits of Monetary Policy
First, we need to understand that what Lagarde stated—that it is not her job to prevent government bonds’ prices in the European Monetary Union (EMU) from diverging—is absolutely correct from a technical perspective. Indeed, if we consider the theoretical approach to the role of the central bank as a lender of last resort as conceived by both Walter Bagehot and Henry Thornton (both recognized and respected even by mainstream neoclassical economists), we find that actually there should be no room for monetary policy to be influencing assets’ relative prices. In fact, the role of a central bank (i.e., of a lender of last resort in a fiat money and fractional reserve banking system) should be to grant liquidity to temporarily illiquid—but solvent, i.e., structurally sound—commercial banks. In no way should monetary policy be involved in steering (and messing with) asset prices—as has regrettably been occurring in the EMU since the beginning of QE in March 2015—since central banks’ interferences distort the natural market formation of prices, bringing about Cantillon effects and spurring both malinvestment and excessive risk taking (through generally lowering returns on assets and pushing savers to invest in riskier ones).
It is evident that the ECB has already been a hugely interventionist central bank; suffice it to mention that currently the ECB’s balance sheet is roughly 40 percent of the EMU’s GDP and that the European banking system is already flooded with €1.5 trillion in excessive reserves. Hence, it is also frankly hard to see how further room for monetary policy interference in a market capitalist economy could be justifiable—even conceding to hardened shortsighted Keynesians that the current coronavirus shock is a purely demand-side one, which it absolutely is not.
The Institutional Framework of the European Union
Here the argument is pretty simple and straightforward. First of all, we need to remember that EMU is a monetary union in which European national states retain fiscal sovereignty. The problem with such a framework is that Italian monetary nationalists, Keynesian and MMTer (modern monetary theory) pseudoeconomists, and national socialist politicians interpret this international deal as follows: “burdens should be shouldered together and addressed with a common tool (i.e., the currency we all share, the euro), whereas benefits should be enjoyed privately by member states.” Indeed, they do not see (or pretend not to see) that the only way—even under a Keynesian paradigm—whereby monetary policy could be helpful in such a crisis would be if the fiscal policy decision level were the same as the monetary policy one.
This is exactly why the current EMU’s institutional framework—developed in the unideal world we live in, i.e., with fiat money, fractional reserve, and Keynesian macroeconomics—already provides OMT (outright monetary transactions), that is, a safety net for those governments (such as the current Italian one) begging for a monetary policy shield to cover their debt costs. Obviously enough, however, given that the euro is the currency of all Europeans (and not only of Italians), the regulatory framework of OMT requires the applying state to sign a Memorandum of Understanding, which basically transfers its fiscal sovereignty at the European level. So, it is evident that the tool available to the Italian government in order to reduce its financing costs already exists and can be triggered whenever Italian politicians would like to do so.
The problem is that Italian politicians want to squander the dowry of every European (i.e., the euro, which would be inflated and/or whose massive unbalanced injection would cause price distortions) without agreeing to implement those fiscal and institutional reforms that by themselves would suffice to better their public finance lot and to reduce the funding cost of their debt. In other words, Italians want to be saved by the EU without being subject to any conditions. Secondly, we ought not to forget that the ECB has already helped Italian governments a lot: the Public Sector Purchasing Program, indeed, has so far (December 2019) bought roughly €370 billion in Italian bonds and €530 billion in German ones; however, German GDP is now (2019) almost twice as much as Italy’s—meaning that in terms of the proportion of government bond purchases to national GDP Italy has been hugely privileged (530/370 = 1.4) through disproportionate monetary policy support for its public debt funding cost.
The Current Situation of the Italian Economy
To put it bluntly, there is nothing monetary policy could do now for the Italian situation. Italy is a paramount example of a capital-consuming economy, where the investment level has plummeted (Figure 1) and labor productivity stagnates (Figure 2).
Figure 1
Figure 2 : GDP per hour worked (Germany, Italy, EMU), 2010 = 100.
Source: OECD (2020), GDP per hour worked (indicator). Accessed Mar. 13, 2020. DOI: 10.1787/1439e590-en.
Moreover, unfavorable demography (almost one Italian in four is older than 65) and decreasing natality (on average roughly half as many children as were born in the 1950s and ’60s are born annually) put further stress on the frail pension system—which has was very poorly devised in the 1970s and ’80s.
In other words, there exists no magic monetary or financial trick that can save Italy now: the only available path is to reduce pension expenditures (which are the second highest in proportion to GDP among Organisation for Economic Co-operation and Development (OECD) members, immediately after Greece’s) and employ these resources in healthcare and tax reductions. However, those are all policies that do not (or should not) at all concern a central banker, and they are exactly the policies that other European partners would request Italy to enact in order to apply for OMT.
Concluding, Lagarde might have been untoward in her timing and the form of her speech; nonetheless, the substance is ironclad and sound. Italy cannot keep whining and hoping for external help: it needs to handle its fate and must take the courageous—and socially and politically tough—path that it has avoided so far. Economies grow—as Hayekian business cycle theory teaches—only if agents are willing to forego consumption today and save and invest in order to deliver higher output (thanks to increased productivity) tomorrow. There is no shortcut.
