Category: zerohedge

Authored by Robert Gore via Straight Line Logic blog,

It’s time for a divorce.

Russiagate, impeachment, the coronavirus power grab, riots, overhyped Trump “scandals” that came and went, and nonstop venom, vitriol, and vituperation come together under this label: the Continuing Tantrum. The presidential election is less than two months away, and we’re being promised the tantrum to end all tantrums, a Super Tantrum, if the harpy and the dotard don’t win.

Children don’t have a shadowy cabal and mainstream political, business, and media figures encouraging (and funding) their tantrums. Unlike Continuing Tantrum partisans, children who tantrum can be spanked or put in time out, they don’t burn down cities or launch coups, and some of them grow up.

The cabal and its useful idiots are giving the rest of us a “your money or your life” proposition.

We either elect Harris/Biden or the cabal launches a coup and their thugs destroy the country. Hillary Clinton already has told Biden not to concede under any circumstances. It’s a regime-change operation similar to those the cabal has waged around the globe for decades. BLM and Antifa are kissing cousins to the US’s cat’s-paw Islamic extremists and Ukrainian neo-nazis. Fomenting violence and chaos, they’re the violent cover for their sponsors’ intrigues. Order won’t emerge from their chaos, unless your idea of order is Afghanistan, Iraq, Syria, Somalia, Libya, and Ukraine.

It’s all laid out in the Transition Integrity Project (TIP), a blueprint of how the cabal intends to install Harris/Biden regardless of the actual election results. Couched in the plausible deniability language of war-gaming and projections, every one of its scenarios—other than a clear Harris win—leads to a constitutional bonfire fueled by street violence, court battles, legislative legerdemain, media propaganda, and possible military intervention. Its authors are circumspect, but one man’s war-gaming and projections are another man’s call to action and instruction manual.

The TIP has about the same chance as a poker player drawing to an inside straight. Trump may deserve to be the fifth white male on Mr. Rushmore if for no other reason than he forced the cabal out of the shadows. He has exposed the unholy alliance of scheming bureaucrats, political figureheads, intelligence operatives, military brass, contractors, second-rate academics, media moguls, and Hollywood airheads that presume to rule us. “The Deep State” was a fringe term when Trump became president, now it’s part of the vernacular. With exposure comes ridicule and scorn; it’s nowhere near as smart or competent as once supposed. Russiagate and the impeachment were maladroit melodramas manipulated by mendacious mediocrities.

The cabal places great store in narrative management. Back in the 1960s and 1970s allegations were first voiced, mostly from the fringe, that the FBI and CIA had infiltrated the mainstream media. There were also complaints, always dismissed, about the media’s liberal bias. Trump derangement syndrome has put the liberal bias on full display, nobody even pretends it doesn’t exist. As for intelligence agency infiltration, the owner of the Washington Post has a huge contract from the CIA and television and cable networks hire ex-spooks as commentators.

Narrative management was easy when there were only three television networks and a few “papers of record.” Now it’s much harder to suppress the truth. The intelligence agencies and their media mouthpieces are subject to constant scrutiny from the alternative media. Once it opens people’s eyes, they stay open; regular AM readers don’t return to mainstream lies.

While the cabal protects its own—the most powerful perpetrators of Russiagate and the impeachment attempted coups may escape punishment—the official and media cover afforded cabal skullduggery is nowhere near as effective as it was for, say, the Kennedy assassinations. Back in the media’s halcyon days, it took a decade before any significant number of people started waking up to the truth about the assassinations. Now we see Plot Holes exposed in real time.

Cable networks broke the television networks’ oligopoly and the information dam began springing leaks. Leaks became gushers with the advent of the Internet and sites devoted to independent investigative journalism, scathing commentary, and non-mainstream news aggregation. The cabal tries buying off the rebels, and if that doesn’t work it deplatforms or demonetizes them. Nevertheless, the rebel alliance continues to find ways to circumvent the Empire. New sites and social media alternatives spring up like weeds and bought-off sites like the Drudge Report see precipitous declines in viewership.

The gathering Super Tantrum, given added impetus by the Supreme Court situation, advertises itself as righteous revolution, but it would be the cabal deposing an outsider and installing chosen insiders. A real revolution overthrows insiders, so call this another attempted coup. Give into your kids’ tantrums and you’ll suffer rule by screams. The cabal thinks it can turn violence on for regime-change and off once it’s successful. That’s wishful thinking. Violence is a race to the bottom and the most bloodthirsty win. Coups often devour their sponsors—you get someone to do the dirty work and you become the dirty work.

Parents who cave in to their children’s tantrums ruin any chance they’ll grow into productive, happy adults. If the Super Tantrum steals the election, the America experiment is over. The Harris Democrats will rejigger the rules so they’ll never lose and America will become a one-party banana republic featuring permanent bio-totalitarianism.

California, New York, and Illinois are previews of coming attractions. They increasingly look like collectivist third-world dumps: the favored few ultra-rich, vanishing middle classes, masses of poor, and rampant crime, corruption, squalor, and seething unrest. And this before their underfunded pensions and welfare systems’ inevitable collapse.

If the Super Tantrum coup succeeds, millions of Trump supporters will know they’ve been robbed and see the writing on the wall for what remains of their freedom and way of life. They’ll be angry, and most of them have firearms. There’s no telling how they’ll respond, but probably not with the restraint to which they responded to the riots or the docility to which they responded to coronavirus totalitarianism. They may launch a righteous revolution of their own, or at least a guerrilla war. The US government hasn’t hadn’t much luck with guerrilla wars the last few decades. A once great nation would become ungovernable and unlivable, especially in the urban hellholes.

To paraphrase divorce decrees, the factions can no longer live in comity, a separation is necessary. That conclusion doesn’t have to be universally embraced. It won’t be embraced by those few who disparage the deplorable productive but dimly realize they’re the golden geese. It will be embraced by people fed up with the garbage. Judging by the numbers of refugees fleeing collectivist states, it already has. They’re taking their outdated fondness for families, livable towns and cities, law and order, property and contract rights, voluntary exchange, hard work, deferred gratification, saving, fiscal sobriety, limited government, individual rights, civility, decency, God, guns, and other cherished hallmarks of their civilization with them.

Once they leave, all the children will have are their tantrums.

One of the biggest contributing factors to the virus’s lethality during the early days of the US coronavirus outbreak was the fact that several states, particularly New York, New Jersey and Massachusetts, failed to secure nursing homes and other facilities where large numbers of vulnerable patients were treated.

And as federal prosecutors look into policies like the disastrous decision to require hospitals to return COVID-19 positive patients to the long-term care facilities where they lived, a policy adopted in NY and several other states, Massachusetts prosecutors are getting a jump on the scape-goating by prosecuting the top administrator and chief doctor of a state-run veterans home that was simply overwhelmed by the virus during the early days of the outbreak.

According to the New York Times, Bennett Walsh, 50, and Dr. David Clinton, 71, were indicted Thursday by a state grand jury on charges related to their work at the facility, the Holyoke Soldiers’ Home in the city of Holyoke. All told, 76 staff and patients died at the home (mostly patients) which housed poor veterans from wars dating back to WWII.

Each man was indicted on five counts for two charges; the specific charges were for caretakers who “wantonly or recklessly” permit or cause bodily injury and abuse, neglect or mistreatment of an older or disabled person.

Lawyers for Mr. Walsh and Dr. Clinton, of Springfield and South Hadley, Mass., could not immediately be reached.

As staff members called out en masse and the coronavirus spread like wildfire through the home, the administrators made some desperate decisions that led to patients being crowded into new wards, with COVID-positive, and non-positive, patients mingling without any protection.

The state a few weeks ago released a lengthy report detailing everything that went wrong at the home. But for those that didn’t read it, the NYT has a quick recap.

Investigators focused on the events of late March, when staff members combined two dementia wards with infected veterans and healthy residents, “increasing the exposure of asymptomatic veterans to the virus,” the attorney general’s office said.

Because of staffing shortages, the facility consolidated the units, which had a total of 42 residents who had different Covid-19 statuses, the office said. Residents who were positive or symptomatic were placed six in a room that typically held four veterans, it said.

Residents believed to be asymptomatic were placed in nine beds in the dining room, where they were “a few feet apart from each other” and next to the room where the infected patients were, it said.

One employee of the facility  told investigators that the decision to merge wards was “the most insane thing I ever saw in my entire life,” according to a report released months later.

“The residents in the consolidated unit were allegedly mingling together, regardless of Covid-19 status,” the office said, adding that this decision was reckless from an infection-control perspective, and placed the asymptomatic veterans at “an increased risk of contracting Covid-19.”

Employee described the decision to combine the wards in horrifying terms. Even patients believed to be asymptomatic were crowded in rooms with only a few feet of space between them, and not far from the infected patients.

One employee of the facility told investigators that the decision to merge wards was “the most insane thing I ever saw in my entire life,” according to a report released months later.

“The residents in the consolidated unit were allegedly mingling together, regardless of Covid-19 status,” the office said, adding that this decision was reckless from an infection-control perspective, and placed the asymptomatic veterans at “an increased risk of contracting Covid-19.”

[…]

In June, investigators released a 174-page report that depicted a facility in chaos, excoriated the decision to combine crowded wards and described conditions in nightmarish terms. In addition to cataloging a series of errors in protecting residents, the report quoted people who worked at the facility, including one who said it “felt like it was moving the concentration camp, we were moving these unknowing veterans off to die.”

Though deaths in the US have turned higher over the past week or so, the virus’s mortality rate has fallen significantly since the spring, as younger people bear the brunt of it. But we’d certainly like to know what the state was doing – if anything – to ensure homes like the veterans home in Holyoke had enough resources to protect their residents.

A new Associated Press poll finds that there has been a massive 15 point swing and that most Americans are now hostile to Black Lives Matter protests.

“The poll from The Associated Press-NORC Center for Public Affairs Research finds that 44% of Americans disapprove of protests in response to police violence against Black Americans, while 39% approve. In June, 54% approved. The new survey was conducted Sept. 11-14, before Wednesday’s announcement that a lone Louisville police officer would be charged in the Taylor case, but not for her actual death.”

As Summit News’ Paul Joseph Watson notes, the figures are also interesting when broken down along racial lines.

Just 35% of white Americans approve of the protests, down from 53% back in June. Just Latinos, 31% approve, compared with 44% in June.

Support for BLM amongst African-Americans has also dropped from 81% to 63%.

As Chris Menahan notes, “AP-NORC chose to exclude Latinos from their chart to make it seem like this is just a Black vs White thing.”

Support for BLM amongst Republicans has also dropped from 29% to 9%. Meanwhile, 70% of Democrats still approve of the protests, while significantly more people on both sides of the political spectrum believe the demonstrations to be “mostly or all violent.”

The survey also finds that belief in the central underpinning narrative pushed by BLM, that blacks are being indiscriminately targeted by police, is being eroded.

“Overall, Americans are less likely than they were in June to say deadly force is more commonly used against a Black person than a white person, 50% vs. 61%. And fewer now say that officers who cause injury or death on the job are treated too leniently by the justice system, 52% vs. 65%.”

The numbers are clear – supporting Black Lives Matter is a losing election issue.

Only when Democrats began to realize that a few weeks ago did they finally denounce the bedlam that has plagued American streets since the end of May.

All of which may explain why BLM scrubbed its “what we believe” page from the organization’s website.

Frankly, as American Thinker’s Silvio Canto, Jr writes, we’re surprised that it took this long.

In other words, it’s amazing that all of those Marxist and anti-family ideas sat on the Black Lives Matter website for so long.

Well, BLM is changing its image, as Jason Whitlock wrote:   

BLM’s “what we believe” page originally exposed the movement’s heavy Marxist influence. The page called for the disruption of the nuclear family. Let me quote it directly.

“We disrupt the Western-prescribed nuclear family structure requirement by supporting each other as extended families and ‘villages’ that collectively care for one another, especially our children, to the degree that mothers, parents and children are comfortable.”

That’s a Marxist concept.

Libby Emmons at The Post Millennial succinctly summarized the BLM agenda, writing that BLM “espouses Marxist principles of communal children and the demise of the family structure over American ideals of individualism and family unity.”

People are finally looking beyond BLM’s catchy slogan and evaluating the actual agenda. The agenda is Karl Marx’s anti-God, pro-communism political theory. BLM scrubbed its “what we believe” page because smart people are distancing themselves from BLM. 

Thank you Jason, for pointing this out.

What continues to amaze is that this information sat on their website during all the riots and violence.  Yet, no one in the media ever asked anything about the people behind BLM or what all of those statements were about.

Things are starting to change, as Jason Whitlock notes, this summer while American sports leagues were swallowing Black Lives Matter’s entire agenda and embedding their slogans onto fields and courts, the Premier Soccer League distanced itself from BLM. 

I think the majority of the UK have now had enough of that organisation.

A new inclusive and politically-neutral anti-racism movement to follow and get behind is much needed.

Black people’s lives matter! ✊🏾

The divisive #BlackLivesMatter organisation, however, DOES NOT! https://t.co/ekdjfvw5Dx

— Karl Henry (@karlhenry08) June 29, 2020

Read this story from early July about EPL stars and their new position on BLM.  Two weeks ago, ESPN reported that Premier League clubs scrapped their BLM badges. 

A mixed picture in the major US equity indices this week with mega-tech-heavy Nasdaq managing gains (busting a three-week losing streak) as The Dow suffered its worst week since June, S&P and Dow down for the 4th week in a row (longest losing streak since Aug 2019)…

But, away from index-land, the media US stock is in bear market, down over 20% year-to-date…

Source: Bloomberg

A much uglier week for European stocks…

Source: Bloomberg

The S&P 500 bounced off “unch” for 2020 today…

 

Cyclicals underperformed this week (down the 4th week in a row – longest losing streak since March collapse)

Source: Bloomberg

Uncertainty around the election continued to rise this week…

Source: Bloomberg

Treasury yields were all lower on the week with the long-end outperforming (30Y -5bps, 2Y -1bps)…

Source: Bloomberg

Real yields surged higher on the week, dragging gold lower…

Source: Bloomberg

The dollar ripped higher this week (5th day higher in the last 6 higher) to its best week since March

Source: Bloomberg

Notably the dollar rallied to the March low pivot…

Source: Bloomberg

We note that the net spec positioning across FX futures was extremely short the USD which may explain the week’s squeeze…

Source: Bloomberg

Cryptos were all lower on the week (even with the rally of the last two days) with Bitcoin the least hit and Ethereum worst…

Source: Bloomberg

Silver was on target for its worst week since Sept 2011 before today’s bounce but all the major commodities were weaker on the week amid a soaring USD…

Source: Bloomberg

The last time silver saw such a drop, it screamed higher…

Source: Bloomberg

WTI ended lower but managed to hold back above $40…

Gold has outperformed silver for 5 of the last 6 days – the biggest weekly outperformance since March…

Source: Bloomberg

Finally, there’s this…

Source: Bloomberg

And, this seemed to sum things up nicely…

One of the biggest takeaways from Amazon’s annual product event is the need for constant recording if that is at home or in the car.

If readers see nothing wrong with the proliferation of mass surveillance, nevertheless, a host of always-on surveillance products operated by a mega-corporation, then now could be the time to purchase a camera-mounted drone that can buzz inside your home, searching for intruders or making sure the stove is not on. 

Ring announced the Always Home Cam during the Amazon event on Thursday, a “compact, lightweight, autonomously flying indoor camera” that can fly around the home, searching for disturbances. 

Ever get a Ring Alarm alert and want to immediately see what’s happening? The Ring Always Home Cam is here to help. This compact, lightweight, autonomously flying indoor camera gives even greater visibility when you’re not home. Learn more: https://t.co/A62pZUuYDa [US Only] pic.twitter.com/13cXKtEeSs

— Ring (@ring) September 24, 2020

The tiny drone will retail for $250 and launches if another Ring product is triggered; It can respond to a whole host of emergencies such as break-ins and fires. After launch, the drone flies to the source of the disturbance, producing a live streaming feed for the end-user. 

The technology sounds wonderful, who wouldn’t want a personal security drone monitoring their home, but again, it’s owned by Amazon, which will undoubtedly raise some red flags about privacy. 

Big Brother Watch, a non-profit British advocacy group, described the drone as the “most chilling home surveillance product” yet.

“It’s difficult to imagine why Amazon thinks anyone wants flying internet cameras linked up to a data-gathering company in the privacy of their own home,” Silkie Carlo from Big Brother Watch told BBC. 

“It’s important to acknowledge the influence that Amazon’s product development is having on communities and the growing surveillance market,” Carlo said. 

If readers are aware, Ring recently partnered with more than 400 law enforcement agencies around the country, allowing police access to homeowners’ camera footage if necessary. The partnerships allow police to tap into millions of internet-connected cameras for solving crimes.

Ring’s deals with police fuel broader questions about privacy, surveillance, and the expanding reach of tech giants and local police into private homes. 

Two weeks ago, when the Fed published its latest monthly breakdown of purchases Secondary Market Corporate Credit Facility which shockingly showed that in the entire month of August, the Fed had not purchased a single corporate bond ETF and had barely purchased any corporate bonds in the open market, we asked if Powell was “sending the market as message.”

In the subsequent two weeks, which saw a sharp drop in risk assets and the Nasdaq sliding into a 10% correction, coupled with a modest rout across the corporate bond sector, many had expected the Fed to revert to its role as custodian of market stability and ramp up its purchases of corporate bonds, if for no other reason then to assure investors that Uncle Jerome was still watching over everyone.

So in what may come as a big surprise to all those praying for the Fed to bail them out, or to at least telegraph that he is keeping an eye on the current tech-led market mess, Powell did no such thing and in fact the Fed’s latest weekly H.4.1 report showed that the corporate credit facilities held $12.911bn of corporate bonds and ETFs as of Tuesday, up a tiny $44 million from $12.867BN the prior week.

And since that implies the Fed bought a paltry $9 million/day of corporate bonds and ETFs on average this past week, down from $19 million/day the prior week, and far, far below the $300 million in daily corporate bond/ETF purchases for much of the early summer, one wonders if Powell is urgently trying to let the market know that it is on its own?

 

 

Authored by Jonathan Turley,

We recently discussed the absurd case of a school sending police to the home of a 12-year-old boy in Colorado because he showed a toy gun inside his own home.  Despite teaching such children virtually, the school treated the toy gun as a violation of “in school” policies.

Now  Ka Mauri Harrison, 9, who attends Woodmere Elementary in Harvey, has been suspended because a teacher spotted a BB gun in his room.  As with the Colorado case, Louisiana school officials defended this new case of virtual insanity.

NOLA.com reported that Ka Mauri was suspended for six days after his teacher spotted a BB gun in his bedroom. He was taking a virtual class on Sept. 11 when his younger brother came bursting into the room and tripped over the BB gun. Ka Mauri was taking an English test, so he quickly grabbed the BB gun and placed it “by his side” and continued the test. When the teacher called him out, Ka Mauri did not answer because his sound was muted during the test. As a result, he was suspended for having a gun “in school.”

The Louisiana Department of Education School Behavior Report listed the incident as “possesses weapons prohibited under federal law.”  Obviously, there is nothing prohibited in the possession of a bb gun, which is not even defined as a “firearm” since it is air-powered.  (The term “firearm” is defined in the Gun Control Act of 1968, 18 U.S.C. Section 921(a)(3), to include “(A) any weapon (including a starter gun), which will, or is designed to or may readily be converted to expel a projectile by the action of an explosive.) It does meet the definition of a weapon or simulated weapon under most school policies. However, those policies were written for the appearance of such toys or weapons in school, not in the home where they are perfectly lawful.

Like many thousands of parents, Nyron Harrison told NOLA.com that he bought a BB gun and taught his son to use it safely.  It was not loaded and Ka Mauri appears to have taken possession to keep it away from his younger brother and then continued with his test.  Even if the teacher had thought it might be a firearm and appropriately called the police for the child’s safety, it was shown not to be a firearm and there was no need for this suspension.

We have been dealing with the insanity of zero tolerance rules for years. Here is a prior column on the subject (and here). Children have been suspended or expelled for drawing stick figures or wearing military hats or bringing Legos shaped like guns or even having Danish in the shape of a gun. Various criminal and disciplinary cases were opened for finger guns. Despite the public outcry over the completely irrational and abusive application of zero tolerance rules, administrators and teachers continue to apply them blindly. If you do not have to exercise judgment, you can never been blamed for any failure. Conversely, even when the public outcry results in a reversal, teachers and administrators never seem punished with the same vigor for showing no judgment or logic in punishing a child.

How is suspension in the best interest of him or the school?  It is not. It is the same blind and callous application of zero tolerance rules that has been denounced for years without no apparent impact on school officials. A simple call to the parents would have sufficed to ask them to be sure that the bb gun is not displayed. Ka Mauri’s parents seem entirely responsible and responsive in these media accounts. Instead of addressing this issue with a modicum of restraint and proportionality, the interest of the child were discarded in a thoughtless and harmful bureaucratic response. There is a need for discipline in this case but it is not Ka Mauri who warrants such action.

Two months ago, Joe Rogan famously questioned why people pay for the “privilege” to live in places like California; where taxes are sky high, likely heading higher, the government is bloated and intrusive and Democratic leadership seems to have no real interest in either being fiscally responsible or (lately) maintaining law and order.

“I’m outta here. I’m gonna go to Texas. I just want to go somewhere in the center of the country, somewhere it’s easier to travel to both places, and somewhere where you have a little bit more freedom.”

“Also I think that um, where we live right here in Los Angeles is overcrowded. And I think, most of the time that’s not a problem. But I think it’s exposing the fact that it’s a real issue, when you look at the number of people that uh, are catching COVID because of this overpopulation issue.”

“When you look at the traffic, when you look at the economic despair, when you look at the homelessness problem that’s accelerated radically over the last six, seven, ten years, I think there’s too many people here,” he continued.

“I think it’s not tenable, I don’t think that it’s manageable. And every mayor does a shit job of doing it because I don’t think anybody could do a great job of it. I think there’s certain things you’re gonna have to deal with when you have a population of whatever the f**k L.A. is, it’s like twenty million plus people,” Rogan said.

Quite a rant… But Rogan is far from alone as the exodus of rich, poor, liberal, conservative California Dreamers has escalated. As we noted at the start of the year, even before the lockdowns forced millions to ‘work from home’ or worse ‘not work’, about 203,000 people left California, a result of the state’s shifting migration patterns and economic strains that are making it harder to afford living here.

The latest high-profile “California leaver” turns out to be $24 billion AUM hedge fund Canyon Partners, which has been a well known fixture in Los Angeles financial circles since its founding in 1990.

As Bloomberg reports, high taxes, congestion, and the fire risks of Southern California, have driven Canyon’s founders, Josh Friedman and Mitch Julis to explore a geographical shift.

According to people familiar with the discussions, Dallas and Austin are the front-runners and the firm expects to make the final decision next month as employees have been pitched the lure of Texas to lead a better life.

Canyon had 177 employees as of the end of 2019, according to its latest regulatory filing.

This exodus from liberal, high-taxation states has been a notable theme on the East Coast, as we recently detailed here, and now seems to be spreading the wealthiest on the West Coast.

Authored by Tom Luongo via Gold, Goats, ‘n Guns blog,

Since the equity market topped a few weeks ago, bears have been going around the room taking turns punching various assets in the face.

It started with equities and moved into Bitcoin which was rejected at $12,000 and promptly collapsed into support around $10,500.

Then it was oil’s turn, which three weeks ago broke down below $40 Brent Crude for the first time since May.

The music finally stopped for copper, gold, silver and the euro. All of them got bushwhacked like they were old people wearing a MAGA hat in Portland this week.

All of this occurred because the U.S. dollar first stopped falling and then had the temerity to put in a weak rally. The USDX, as flawed a measure as anything coming out of pollsters or the BLS, popped off its recent lows to break out definitively above 94.

And as we finish this final full trading week of Q3 we have to ask ourselves are we setting up for another dollar whirlwind in Q4 or will the winds of political unrest keep the dollar weak as the Fed re-enters the market and make the magic money machine go Brrr…?

But given that even the Fed is finally admitting that all this QE is actually deflationary do we really think there’s a real choice in this?

Because if the weekly chart didn’t convince you the next dollar bull wave is in process, then let’s go out in time and see what’s what?

Let’s take this one-step further in time to to complete the picture, because none of this means anything if the long-term chart is bearish. That would just imply a mild reaction rally which will likely fade in Q4 or Q1 2021.

None of this is a done deal since Q3 and September do not close until Wednesday, but the markets are primed for this to occur. That monthly bearish engulfing reversal bar that the USDX is tracing can be seen all across important markets at this point — AAPL, Silver, and the NASDAQ are all flirting with this most bearish of signals.

But the most important one, in my opinion, is the euro as news this week of increasing odds of a no-deal Brexit coupled with breakdowns of the European banking sector and FinCEN releases of turning a blind-eye to money laundering put big pressure on the currency that just won’t die.

This is looking for all the world like a classic false-move in the euro to $1.20 on news of the European fiscal package which gave tax and spend authority to the European Commission for the first time. And while that is a major ‘accomplishment’ for the EU it is also not, at this time practical or germane to the very real problems existent within the European economy.

As COVID-19 news goes against Europe, which feeds The Davos Crowd’s plans for a Great Reset, the euro will come under even stronger pressure in Q4 as economic data worsens.

This is especially true as Donald Trump’s odds of re-election rise, which they are daily. A Trump victory should send the euro into a real tailspin which could breach the March low if things get disorderly.

From shifting polls to collapsing narratives about racially-motivated police killings, the malfeasance surrounding Obamagate and garnering enough votes to replace Ruth Bader Ginsburg on the Supreme Court, Trump looks to be in control of things with forty days to go until election day.

I fully expect at this point for U.S. Attorney John Durham to deal Obama et.al. a massive October Surprise which will offset any weakness in equity markets thanks to a rising dollar.

The markets have traded all summer betting on a Biden victory and political unrest keeping in question the future of investor capital in the U.S. That has kept the dollar weak and the euro falsely strong. It has guided the Yen higher on renewed Chinese economic strength but it hasn’t done anything to whet real appetites for the dollar or dollar-denominated assets.

The 10 year US Treasury has pushed backed towards 65 basis points, the yield curve is flattening because there’s no where to go on the short end of the maturity curve. Mnuchin and the Treasury can still sell record levels of long-dated U.S. debt at record high prices and the auctions not tail badly.

But the most telling thing about all of this is that we haven’t seen any inkling yet of real turmoil in the financial plumbing and yet these bearish technical signals are already happening.

Foreign central banks are still holding their purchases in trust with the Fed in New York, reloading for the next round of currency defense.

From the latest Fed Balance Sheet report, there’s no stress on their balance sheet. Repos are still at zero. Central Bank Liquidity Swaps are still falling, now down over 90% from their peak of $455+ billion in April.

This isn’t to say all is well or anything it is to say that nothing seems imminent and yet, we’re seeing headline-grabbing volatility, a $150 drop in gold prices, a $7 drop in Silver and a 4% move in the euro in a two-week period.

And these are supposed to still be the good times where the economic data is holding up, Pelosi and the Democrats are in full-on “holding our breath until we turn blue and pass out” mode and every day seems one day closer to a permanent fracturing.

If this is what good times look like, the real question we should be asking ourselves now is, “What happens when things get real?”

*  *  *

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The covid-related shutdowns were expected to result in unprecedented economic devastation, and for the most part they did, although that as bad as the US economy suffered in Q1 and Q2, it would have been far, far worse had the government not stepped in. Recall that as DB’s Jim Reid pointed out in July, this has been the “strangest recession in history“, one defined by a surge in personal income – very much unlike the usual collapse observed during recessions.

The reason for this is simple: as we explained a few weeks prior to Reid’s report, the massive fiscal stimulus unleashed by the US government led to the biggest surge in personal income in history…

… making government transfer payments an unheard of 30% of all personal income!

Putting that number in perspective, in the 1950s and 1960s, transfer payment were around 7%. This number rose in the low teens starting in the mid-1970s (or right after the Nixon Shock ended Bretton-Woods and closed the gold window). The number then jumped again after the financial crisis, spiking to the high teens. And now, the coronavirus has officially sent this number into the mid-20% range, after hitting a record high 31% in April.

So for all those who claim that the Fed is now (and has been for the past decade) subsidizing the 1%, that’s true, but with every passing month, the government is also funding the daily life of an ever greater portion of America’s poorest social segments.

Of course, many won’t object to such reliance on the government: after all “welfare for everyone” means more money for doing nothing (and if the Fed gets its way and it can deposit digital dollars directly, it means much more money – all with the intent of inflating away the debt).

The problem is that should this firehose of benefits slow – or close completely – the economic collapse that was mitigated drastically thanks to the covid fiscal stimulus, will come back with a horrific vengeance. Alas, with Congress gridlocked on a 5th fiscal stimulus round, and the economy clearly rolling over as we warned one month ago following the July 31 fiscal cliff which led to a collapse in spending among people who receive unemployment insurance…

… the result of continued inaction could be catastrophic. Here’s why.

As BofA writes this morning, the Brookings institution regularly updates a model that estimates the impact of fiscal policy— Federal State and Local and “automatic stabilizers” —on GDP growth. The impacts depend on both the “multiplier effect” of each action on spending and the lags. For example, the model assumes that people spend 90 cents out of every dollar of unemployment benefits, but that the “propensity to consume” for a number of other programs is much lower. After all a lot of the stimulus funds went to households and firms that are not in distress. Hence the surge in the savings rate.

And, as the chart below shows, according to their estimates, stimulus resulted in a huge 14.1% boost to GDP growth in the second quarter. Since actual GDP fell by 31.7% this implies that the stimulus offset almost a third of the shock to the economy (= 14.1 / (31.7 + 14.1)). It also means that without stimulus, the GDP collapse could have been nearly 50%!

So far so good, but while the record stimulus kept the party going until now, the stimulus is rapidly fading and turns negative starting in the second quarter of next year.

It gets worse: as BofA chief global economist Ethan Harris writes, “the Fiscal Impact data also reminds us of the dangers of policy gridlock coming out of a major recession. The last recession also featured a huge fiscal stimulus—the $831bn (5.8% of GDP) American Recovery and Reinvestment Act of 2009 (ARRA). However, that proved to be the one and only stimulus package.”

As a result, Democrats lost the House in 2010 as a wave of “Tea Party” Republican’s came into the House, freezing discretionary spending. From the end of 2010 to the end of 2015 fiscal policy sliced an average of 1.0% off of GDP growth. The  result was a slow recovery, chronic low inflation and sustained super easy Fed policy.

Needless to say, Americans want more, and as we reported earlier this week, a Gallup poll found that 90% of US consumers demand a new stimulus, while blaming republicans and democrats equally. Meanwhile, as Harris adds, polls suggest that gridlock is one of the more likely outcomes in this election, with Democrats taking the House and White House, but Republicans retaining the Senate; that is also BofA’s baseline forecast. At the same time, Senate Republicans have already begun pushing back against more deficit financed spending, and that is happening before an election and with a Republican President who wants a package.

Naturally, Senate republicans may be even more resistant to deficit spending after the election, particularly if there is a Democrat in the White House. The problem as the final chart shows, is that absent a new stimulus, not only will the delayed aftereffects of the existing stimulus come back to haunt the economy…

… but the lack of new spending will result in a massive double whammy crashing the economy in 2021, which averted a full blown meltdown in Q2, but will find itself scrambling in the coming quarters as the mother of all double dips emerges, and which incidentally is also why the market has been sliding for the past two weeks as the reality of an indefinite stimulus-free future looms all too real.