Category: zerohedge

The Turkish gas and oil exploration drama in the East Mediterranean which put Greece and Cyprus on a war footing with Turkish forces has taken a surprise turn. 

Amid the ratcheting pressure on Ankara over alleged incursions into Greece and Cyprus’ economic zones coming from the European Union and United States, it appears Turkey has backed down for now.

Days ago France’s Emmanuel Macron even invoked the threat of EU sanctions, citing that it’s “not acceptable for the maritime space of a European Union member state to be violated or threatened.” Turkey has frequently been source of rifts among fellow NATO member states. 

For the first time, Turkey says its ambitious and expansive, but hugely controversial, gas exploration initiative is on hold. On Tuesday TRT World reports that “Turkey has said it could pause energy-exploration operations in the Eastern Mediterranean Sea for a while pending talks with Greece.”

The announcement came from the office of the president, with spokesman Ibrahim Kalin revealing in a CNN Turk interview that Erdogan told his aides to “be constructive and put this on hold for some time”.

He identified that the seismic exploration vessel “Oruc Reis” was set to search for hydrocarbons “180 kilometers from the island of Meis (Kastellorizo in Greek)” — an area Greece recently said it would deploy military assets to if the Turkish operation was initiated. 

“Despite this our president said while the negotiations are continuing, let’s be constructive and hold (energy search) for a while,” the presidential spokesman said. 

The Greek Navy has said it’s in a state of “heightened readiness” in response to any incursion of Greece’s territorial waters. It boils down to how the rival longtime enemies interpret their offshore zones, with Turkey in the past years using especially its so-called “Turkish Republic of Northern Cyprus” to lay claim to waters entirely surrounding the island. 

Below is a Turkish interpretation of its rightful waters, within which some of Greece’s easternmost islands are located:

Likely helping Turkey to hit the pause button was a forceful message out of US Ambassador to Greece Geoffrey Pyatt earlier this week: “I want to echo the clear message from Washington and elsewhere in Europe, urging Turkish authorities to halt operations that raise tensions in the region, such as plans to survey for natural resources in areas where Greece and Cyprus assert jurisdiction in the eastern Mediterranean,” he said.

Pompeo also earlier this month asserted that the US clearly backed Greece, Cyprus, and the EU’s interpretation of the economic zones and Turkish violations of that territory.

Authored by Raul Diego via MintPressNews.com,

A “mastermind in the field of cyber espionage” will be awarded a lifetime achievement by the state of Israel in September. The “Israel Defense Award” ceremony is slated to take place in the residence of President Reuven Rivlin, himself a former member of the IDF’s intelligence corps, Haman, which is tasked with “collecting, disseminating, and publishing intelligence information.” In addition, prizes will also be handed out to members of three secret cybersecurity projects developed by Mossad, the IDF, the Shin Bet and MAFAT (Administration for the Development of Weapons and Technological Infrastructure) that have made a “long-standing contribution to national security and for initiating many technological solutions”, not to mention the forging of close ties to the U.S. National Security state.

The identity of the “legendary” Israeli spy who is slated to receive the official commendation has not been revealed and has only been referred to as “Aleph”; said to be in his forties and well-known both in Israeli and American intelligence circles. He is described as a “phenomenon” of the cyber field who turned down a lucrative career in the tech industry in order to serve the national interest. The mystery-man was credited with creating a “significant part” of the work in Israeli cybersecurity by an unnamed acquaintance.

Current Israeli Defense Minister and Alternate Prime Minister, Benny Gantz announced the winners and heaped praise on Israel’s “human capital,” whose work proves that there are “no borders in the war on Israel’s security.” Indeed, this statement by the IDF’s former chief of staff can be corroborated by taking a look at the corporate partners who are a part of the winning projects; the first of which is a joint collaboration between the Israeli national intelligence agency, Mossad, the Rafael Company, the Israeli Air Force and a new IDF Intelligence Unit 9900, which “provided the IDF with unique capabilities” and “technological breakthroughs.” The Rafael Company, (Rafael Advanced Defense Systems Ltd.), is also involved in the second project to be recognized by the Israeli state, along with Elbit Systems. Both of these companies have major cybersecurity contracts outside of Israel and the U.S., in particular.

Critical infrastructure

Elbit Systems received a contract from the U.S. government last year to build an “integrated” surveillance system across the Arizona-Mexico border spanning over 200 linear miles. They have since deployed dozens of “sophisticated” cameras on towers along the border and have also secured multi-million dollar contracts to equip an unnamed Southeast Asian navy’s ships with their AI-enabled technology for “complex reconnaissance missions.”

The Rafael Company, meanwhile, is a major player in international weapons systems development and is the principal creator of the “Iron Dome” anti-missile technology through a  subsidiary company, mPrest. The Iron Dome software is currently running on “critical infrastructure systems” in the United States and has been a recent subject of concern for the U.S. military, who refused to integrate the software into its air defense systems after the Israeli company failed to provide the source code, resulting in the loss of a $600 million-dollar contract for the Tel-Aviv-based company.

The Rafael Company subsidiary, nevertheless, has partnered with several American utility companies, providing “mission-critical monitoring” services to sectors of the U.S. power grid. mPrest’s “System of Systems” has been integrated by San Diego Gas & Electric (SDG&E), Southern Company – the second-largest utility company in the United States – and others. The New York Power Authority (NYPA) entered into a partnership with the Israeli company in 2017 to deploy their technology in a number of utility plants across the state.

Leaks by #Israel‘s #intelligence agency, the #Mossad, point to Israel as being behind a month-long string of deadly attacks against #Iran targeting #Iranian civilian and #military #infrastructure, including a #hospital, killing 19 people. https://t.co/NVewNRY0tS #cybersecurity pic.twitter.com/QtWFYFqh2c

— MintPress News (@MintPressNews) July 28, 2020

In the official statement issued by Gantz announcing the prize winners, he gave special attention to the fact that their work “was done in secret,” while President Rivlin lauded the “long nights, days, weeks and months of exhausting and grueling work” put forward by the recipients of the Eliyahu Golomb award, named after the commander and chief architect of the Haganah (the Defence) militia – a paramilitary organization that would eventually become the IDF after the founding of the Jewish state and progenitor of terrorist organizations like Irgun and the Stern Gang.

Old collaborators

The history of the Haganah provides a unique look into the permanent relationship between certain U.S. interests and the state of Israel, dating back to its gestation period during the British mandate of Palestine, as well as a direct link to Israel’s present-day cybersecurity technology apparatus through a young RCA engineer from New York, Dan Fliderblum, who was recruited by the Zionist guerilla to set up a “network of secret radio transmitters in Palestine” to protect their illegal arms smuggling operation. Fliderblum would later change his name to David Avivi and pioneer the Isreali electronics industry.

At the time, an organized crime association comprised of the Sicilian and Jewish mafias, often referred to as “Murder, Inc.” controlled the Port of New York. Meyer Lansky, as leader of the New York crime families, was approached by Haganah operative and close aid to Ben-Gurion, Yehuda Arazi, to help move weapons to Palestine. Arazi was an underground agent who had been doing Ben-Gurion’s bidding throughout Europe for years and was sent to the United States by the future first Prime Minister of Israel to procure heavy armaments, including “aircraft, artillery pieces, tanks [and] antiaircraft guns.”

Jewish mobsters in the United States would henceforth play a pivotal role in obtaining and providing financial and other resources to the Haganah. Notorious Jewish gangsters, like Bugsy Siegel, Longy Zwillman, and Moe Dalitz, met with another Haganah agent every week in 1946 in the back of a Los Angeles restaurant to arrange or deliver money to finance the ongoing war in Palestine.

The extent of the mob’s involvement in these operations came to light when the FBI seized a B-25 bomber obtained by the “syndicate” was forced to return to Newark by bad weather, causing the entire shipment of aircraft, which included twenty AT-6 airplanes, to be confiscated.

As for the man whose name dons the prize Israel will award its undisclosed cyber-tech heroes in a few months’ time, it was his arguments in favor of a “much more extensive and orderly defensive force,” that convinced Ben-Gurion to move ahead with the creation of the IDF and, along with it, the establishment of less suspect partnerships that wouldn’t hinder the social advancement of the Jews involved, like the case of Miami mob figure Sam Kay, who it is claimed, was motivated to aid the Haganah’s arms-smuggling operation to “clean up” his own image and help his daughter marry up.

The candidates

The partners of today’s IDF-linked tech initiatives read more like a blue-chip investment portfolio than a police rap sheet, but the scope of the crimes dwarf those that occurred in the days of jukeboxes and trench coats. The myriad cybersecurity, AI, and IoT startups emerging out of Israel’s state-funded organizations have extensive ties to Fortune 100 companies like Apple, Google, Microsoft, and many others. The vast majority of these startups originate in military outfits like Unit 8200, which has been the center of offensive cyber warfare technology like Stuxnet, co-developed with the United States to take down an Iranian nuclear facility in 2010, among other covert operations and initiatives.

While Israel won’t reveal the names of the winners selected for the Israel Defense prize awarded every year for the past six decades, we can take a few educated guesses as to who might have been some of the finalists. People like Lior Div come to mind; founder of a cybersecurity company called Cybereason, which has been running simulations on behalf of the U.S. government of a foreign-hacked 2020 general election. The table-top exercise predicted dozens of dead Americans, hundreds injured, and an election that never happens.

Div fits the age-range given for the winner of the lifetime achievement award but would be eliminated from consideration if we take the claim seriously that the recipient shied away from the millions he could have made in the private sector. Lior Div’s company is currently valued at just over $1 billion and his own net worth can be assumed to be near that, at least.

There are other potential nominees, such as Amit Yoran, who certainly fits the bill of an individual who is “known in [the Israeli] and the American intelligence community” as reported in several pieces about the mysterious “Aleph.” Yoran fits the age profile, as well, and as former Cybersecurity chief at DHS has the credentials to be recognized in both the halls of the Mossad and CIA’s Langley headquarters. But, he too has thrown his hat into the private sector many times and is currently CEO of a cybersecurity firm called Tenable, which offers solutions to address “vulnerabilities and misconfigurations in your modern IT environment.”

If lifetime achievement is the true criteria, then former head of Mossad, Tamir Pardo, might be considered as the potential candidate that could claim that a “not insignificant part of [Israel’s Defense] work was created by him personally due to his special talent.” Pardo served under Bibi Netanhayu’s brother, Yoni’s military command, and has been a member of Israel’s top brass for a very long time. Pardo once described Mossad as a “criminal organization with a license.” But, far from a critique, Pardo followed his controversial statement by admitting it was “the fun part.”

Authored by Russ Bangs via Off-Guardian.org,

“It has frequently been observed that terror can rule absolutely only over people who are isolated against each other and that therefore one of the primary concerns of tyrannical government is to bring this isolation about. Isolation may be the beginning of terror; it certainly is its most fertile ground; it always is its result. This isolation is, as it were, pretotalitarian; its hallmark is impotence insofar as power always comes from people acting together, acting in concert; isolated people are powerless by definition.”

– Hannah Arendt, The Origins of Totalitarianism

Western civilization, led by the US government and media, has embarked upon a campaign of mass psychological terrorism designed to cover for the collapsing economy, set up a new pretext for Wall Street’s ongoing plunder expedition, radically escalate the police state, deeply traumatize people into submission to total social conformity, and radically aggravate the anti-social, anti-human atomization of the people.

The pretext for this abomination is an epidemic which objectively is comparable to the seasonal flu and is caused by the same kind of Coronavirus we’ve endured so long without totalitarian rampages and mass insanity.

The global evidence is converging on the facts: This flu is somewhat more contagious than the norm and is especially dangerous for those who are aged and already in poor health from pre-existing maladies. It is not especially dangerous for the rest of the population.

The whole concept of “lockdowns” is exactly upside down, exactly the wrong way any sane society would respond to this circumstance.

It’s the vulnerable who should be shielded while nature takes its course among the general population, who should go about life as usual. Dominionist-technocratic rigidity can’t prevent an epidemic from cycling through the population in spite of the delusions of that religion, especially since Western societies began their measures far too late anyway.

So it’s best to let herd immunity develop as fast as it naturally will, at which time the virus recedes from lack of hosts (and is likely to mutate in a milder direction along the way). This is the only way to bring a safer environment for all including the most vulnerable.

The fact that most societies have rejected the sane, scientific route in favor of doomed-to-fail attempts at a forcible violent segregation and sterilization is proof that governments aren’t concerned with the public health (as if we didn’t know that already from a thousand policies of poisoning the environment while gutting the health care system), but are very ardent to use this crisis they artificially generated in order radically to escalate their police state power toward totalitarian goals.

The whole concept of self-isolation and anti-social “distancing” is radically anti-human. We evolved over millions of years to be social creatures living in tight-knit groups. Although modern societies ideologically and socioeconomically work to massify and atomize people, nevertheless almost all of us still seek close human companionship in our lives.

(I suspect most of the internet police-state-mongers are not only fascists at heart but are confirmed misanthropic loners who couldn’t care less about human closeness.)

This terror campaign seeks to blast to pieces any remaining human closeness, which means any remaining humanity as such, the better to isolate individual atoms for subjection to total domination. Arendt wrote profoundly on this goal of totalitarian governments, though even she didn’t envision a state-driven cult of the literal physical repulsion of every atom from every other atom.

So far the people are submitting completely to a terror campaign dedicated to the total eradication of whatever community was left in the world, and especially whatever community was starting to be rebuilt.

Some dream of this terror campaign somehow bringing about a magical collective transformation. They don’t explain how that is supposed to happen when everyone’s so terrorized they’re desperate to detach physically from their own shadows, let alone physically come together with other people. But any kind of political or social action, any kind of movement-building, requires close person-to-person contact.

It seems that for most erstwhile self-alleged dissidents, the fact that social media is no substitute for face-to-face organizing and group action, a fact hitherto universally acknowledged by these dissidents, is another truth suddenly to be jettisoned replaced by its complete antithesis.

Thus the terror campaign is a virus causing those it infects to abdicate all activism and all prospect for all future activism, for as long as they remain insane with the fever of this propaganda terror.

Far more profoundly and evoking despair, the terror campaign is a virus causing those it infects to fear and loathe all human contact, all companionship, all closeness, all things which ever made us human in the first place. Prior totalitarian regimes sought this lack of contact and trust through networks of informers.

These networks are part of today’s terror campaign as well, encouraged from above and spontaneously arising from below as a result of the feeling of terror as well as the exercise of prior petty-evil intentions on the part of petty-evil individuals.

But today’s totalitarian potential is far worse than this. Now the regimes aspiring to total domination have terrorized and brainwashed the vast majority of people into an automatic physical distrust of all other people. One no longer fears that someone is an informer, but fears the very existence of another human being.

Any kind of human relations, from personal friendship and romance to friendly social gatherings and clubs to social and cultural movements become impossible under such circumstances. This threatens to be the end of the very concept of shared humanity, to be replaced by an anthill of slave atoms with no consciousness beyond fear and the most animal concern for food and shelter, which already is allowed or denied in the same way experimenters do with lab rats.

And the more people fear and loathe the literal physical existence of all other people, the more the situation becomes ripe for every epidemic of murder, from the spiking rate of domestic violence and killings to incipient lynch mobs to pogroms to Nazi-style extermination campaigns.

This is the system’s end goal. It’s the logical end where every trend of today leads. All of it is trumped up over an epidemic which objectively is a flu season somewhat rougher than average.

Why do the people want to surrender and throw away all reality and future prospect of shared humanity, happiness, freedom, well-being, over so little? Is this really a terminal totalitarian death cult, the globe as one massive Jonestown?

So far it seems this is what the majority wants. If they don’t really want this consummation of universal death in spirit, emotion and body, they’d better snap out of their terror-induced mental delirium fast, before it’s too late.

While nobody expects any fireworks from the Fed tomorrow or any major market-moving announcement, the FOMC meeting will likely involve a debate over the toolkit with a discussion of how to pivot from “stabilization” to “accommodation” policies according to BofA strategists, who notes that while there likely is an agreement that the next steps should accomplish the goal of “enhancing forward guidance,” they do not think Fed officials have settled on the strategy.

Amid growing fears of covid chaos and renewed economic shutdowns, Powell will likely be grilled on, and will discuss some of the Fed’s options while the minutes released in three weeks will provide more clarity. That said, the statement is likely to provide little new insight, with only a few edits to the current conditions paragraph to highlight improvement thus far, but also express caution over recent signs of slowing in some of the high-frequency indicators.

More importantly, the rates and FX markets expect no new policy action to be taken at the July FOMC meeting, which should lead to a muted reaction across markets (it also sets up markets for a surprise). Instead, according to BofA, market participants will be much more focused on the guidance and “stage setting” that Chair Powell provides on what the next easing steps might look like. On net, a discussion of additional easing measures in the Powell press conference – such as forward guidance, asset purchase duration, and YCC/YCT – risks lower real rates, flatter curve, and weaker USD (and, in the worst case, a very adverse reaction across risk assets).

Economics: a policy discussion

As BofA frames it, there seems to be an agreement among Fed officials on the “what” but not the “how.” The consensus appears to be to send a strong signal that the Fed will be committed to accommodative policy, remaining at the ZLB, well into the recovery and perhaps even until full employment has been reached and inflation is able to run at/above the 2% target. This would be a more dovish strategy than following the 2008-09 recession when the Fed pursued a “normalization” policy, pushing up interest rates prior to achieving trend 2% inflation or closing the output gap. Back then the Fed discussed the balancing act between increasing rates earlier but slower, or waiting and having to hike more quickly. Looking back, it seems many Fed officials believe that waiting longer might have been prudent given that 2% inflation was not achieved and the Fed ended up reversing some of the hikes later in the recovery.

There are several options for the Fed to enhance forward guidance, which are not mutually exclusive:

• the primary focus is on language, potentially using both outcome and calendar-based language. Fed officials seem particularly focused on making sure 2% inflation is reached, which means likely explicitly supporting an overshoot of the inflation target (something which the record surge in gold is clearly sniffing out). This could be done through a commitment to keep rates at zero until 2% is reached on a trend basis but also, perhaps, by reinforcing this language with calendar guidance.
• The secondary focus is on balance-sheet policies such as yield curve caps or targets (YCT) or a change in the composition of the balance sheet (QE). While YCT on the short to medium end of the curve seems like an attractive option, it is still novel and Fed officials appear to want more time to study such a program. Recent language from Fed officials suggests our expectation for YCT to be introduced at the September meeting might end up being too early.

The Fed can choose to employ one or all of these strategies at the same time or phased in, depending on the state of the economy and markets (as a reminder, the worse the economy and the lower the S&P500, the greater the flexibility Powell will have to unleash the next phase, whatever it may be). Certainly, if facing a weaker economy with low realized and expected inflation, the Fed would likely need to be more aggressive. Another scenario would be if the market prematurely prices in hikes thereby tightening financial conditions. The Fed might look to fight this market pricing and push out hike expectations, which could be done through calendar guidance or YCT, most directly (unless of course the Fed wants to push the market lower so it has more degrees of freedom).

Meanwhile, the Fed is also engaging in a prolonged framework review that will likely guide the policy decision. The annual Jackson Hole conference will also take place virtually at the end of August. It has historically been a good forum for central bankers to debate policy and will likely be focused on the best way to achieve enhanced forward guidance.

Fed markets programs: extension likely

The July FOMC meeting will likely see some communication around an extension of Fed and Treasury markets programs. Most markets programs are slated to expire in September as shown in the table below.

However, it is virtually assured that these will all be extended as the Fed will want to keep these programs indefinitely in place to guard against the risk of a more material economic slowdown and potential tightening of financial conditions (and also because any of the “temporary” aspects of the covid crisis are really permanent). BofA anticipates that most programs will be extended until March 2021 (in reality they will never expire). This would reduce the risk of a material tightening of financial conditions in 2H and smooth volatility stemming from year-end dealer balance-sheet constrains.

Most of the programs require Treasury approval for extension, and it is safe to assume that both the Fed and Treasury will be supportive of pushing out their deadline.

Rates: September stage setting and twist potential

According to BofA STIR strategists, the US rates market expects no new policy action to be taken at the July FOMC meeting. Instead, market participants will be much more focused on the guidance and “stage setting” that Chair Powell provides on the next steps to ease policy, including enhanced forward guidance, asset purchase adjustments, and yield curve control (YCC)/yield curve targeting (YCT).

While no change is expected to the Fed’s settings for administered rates (IOER, ON RRP) at this meeting, the rates market is already expecting a very dovish message from the Fed with the timing of the first rate hike not until late 2024 or early 2025 (if ever).

The main challenge for the Fed will be to find ways to “out dove” market expectations in their next easing round likely through:

1. the establishment of an inflation framework that ensures a “durable” increase in core PCE at or above 2% for 6 or 12 months before the first rate increase and
2. a potential reallocation of Treasury purchases to remove additional duration risk from the market.

BofA discusses the potential for a Fed UST twist and likely market reaction below:

Why twist? Recent media reports have suggested the Fed is considering changing the composition of their UST and MBS toward longer-dated securities to further ease financial conditions. This theme was furthered on last week by headlines from William Dudley, former NY Fed head, who noted that the Fed could extend its purchase duration. Both sets of comments come in the context of a Fed that is seeking to “pivot” from market stabilization to monetary easing via some combination of forward guidance, asset purchases, and potential YCC / YCT.

How to twist? The Fed has clear logic to twist upon implementation of enhanced forward guidance or YCC. The argument to twist would be most impactful if the Fed incorporated any calendar dimension to its guidance. For example, a credible Fed commitment not to raise rates or implement YCC until at least end ’22 / end ’24 would reduce the need to purchase securities at this part of the curve. The slated purchases could then be reallocated to longer-dated maturities to extract more duration risk from the market while keeping total purchase quantity the same or lower.

The Fed is currently purchasing $80bn/month of USTs (in proportion to USTs outstanding). BofA shows hypothetical Fed purchase scenarios below (Table 2) where the Fed could cease buying the 0-2.25Y or 0-4.5Y part of the curve, leave TIPS purchases unchanged, and distribute the remaining purchases in proportion to debt outstanding. The Fed could also remove more 10Y duration equivalent risk from the market while maintaining the current monthly purchase pace or lowering it to $65bn/m.

Twist effectiveness? Recall the 2011 twist and relevance of a similar policy today.

2011 twist: The Fed announced its most recent twist in September 2011 (a combination of short-term UST sales and longer-dated UST purchases) in reaction to the sharp risk off and economic slowdown following the US downgrade. This policy was mentioned in the August meeting minutes and was implemented the following meeting. The weighted average maturity of purchases increased substantially while keeping the total amount of UST holdings the same, on average (Chart 1, Table 2). Long-end rates declined materially the day the twist was announced and the curve aggressively bull flattened (Chart 2, Table 3). The month after the twist, rates sold off but the curve remained flatter.

Effectiveness today: Today is very different from 2011 and the Fed knows it. Comparing today vs September 2011: 10 and 30Y rates are 135-200bp lower, curves are significantly flatter, 10Y term premium measures have fallen 80-200bp, the real neutral rate (real 5y5y) has dropped 160bp, and the Chicago Fed fin conditions index is easier (Table 4).

The June FOMC meeting minutes reflect that the Committee is well aware of these dynamics: “declines in the neutral rate of interest, term premiums, and low levels of longer-term yields would likely act as constraints on the effectiveness of asset purchases in the current environment“. However, Treasury WAM and longer-dated issuance is higher, which a Fed twist would offset.

Twist impact: Fed twist would likely result in (1) 30Y UST rally and curve bull flattening, likely on par with 2011, and (2) spread curve steepening. The spread curve move would be driven by a modest cheapening of short-dated USTs vs OIS (less Fed buying) and a richening of longer-dated USTs vs OIS (more Fed buying). Bank front-end policing would likely limit the potential for a material UST-OIS cheapening.

Bottom line: there is rising likelihood for a “twist” operation, especially since the Fed seemingly wants to ease more. This risks wider 30Y spreads and reinforces even lower longer-dated real rate view (currently 10Y TIPS is at a record low -0.93%). Guidance on the likelihood of a Fed twist from Powell’s press conference or July FOMC minutes release (29 August) will be of keen interest to the rates market and the outlook for the long end of the curve. That said, not even BofA expects the Fed to commit to such a policy at this meeting, but likely start the stage-setting process this week.

* * *

Impact on the dollar

With an uneventful FOMC meeting widely anticipated, there is only moderate risk to FX and USD specifically. Still, potential discussion of the Fed’s toolkit (specifically options to ramp up monetary policy support in the event that downside risks are realized) seems a negative USD risk, in BofA’s view, as it is likely to reinforce the widespread belief among market participants in the Fed “put” that has driven up risk assets and undermined the greenback since end-March. For the same reason, extension of current programs may also weigh on USD. And while perception that a credible and effective set of additional Fed stimulus options exists, it would serve to further undermine USD per above, while as BofA ominously warns, “perception that the Fed is out of ammo could cause a reassessment of the Fed “put” and support USD via lower risk assets.”

Sharp USD weakness over in the second half of July has accelerated into this FOMC meeting. Over the last week, the DXY is about -3% lower, with EUR and SEK leading the pack of outperformers against USD. Much of the recent USD weakness is due to (1) buoyancy in risky “reflation”-sensitive assets, which continue to decouple from challenging economic conditions and recently worsening COVID-19 dynamics; as well as (2) the accelerating EUR rally driven by market participants concerned over missing out on bullish price action post-EU Recovery Fund approval (which however does not equate to broad dollar weakness as discussed previously).

Looking forward, BofA expects a reversal in USD weakness despite persistent over-valuation, and forecasts EUR/USD is 1.08 at end-2020 due to COVID-19-related risks to the global and US economies although it concedes that “persistently frothy risk appetite is a risk to this call.”

Authored by Martin Berger via GlobalResearch.ca,

Environmental lawyer Robert F. Kennedy Jr. warned Americans on Thursday to be cautious about any new coronavirus vaccine, pointing out that key parts of testing are being skipped.

“The Moderna vaccine, which is the lead candidate, skipped the animal testing altogether,” Kennedy said during an online debate on mandatory vaccinations with renowned Harvard law professor Alan Dershowitz. The debate was aired by Valuetainment and moderated by Patrick Bet-David.

Kennedy is part of a political family, being the son of Senator Robert F. Kennedy and the nephew of President John F. Kennedy. Both were murdered in the 1960s.

Another aspect of testing was equally unsatisfying, Kennedy said. The Moderna vaccine was tested “on 45 people. They had a high-dose group of 15 people, a medium-dose group of 15 people, and a low growth group of 15 people.”

“In the low-dose group, one of the people was so sick from the vaccine they had to be hospitalized,” he explained.

“That’s six percent. In the high-dose group, three people got so sick they had to be hospitalized. That’s twenty percent.”

In spite of these significant problems,

“they’re going ahead, and making two billion doses of that vaccine.”

Another problem with the testing of the coronavirus vaccine is that it’s tested not on “typical Americans,” but a carefully selected group of people who don’t suffer from certain conditions.

“They use what they call exclusionary criteria,” Kennedy said.

“They are only giving these vaccines in these tests that they’re doing to the healthiest people.”

“If you look at their exclusionary idea criteria: You cannot be pregnant, you cannot be overweight, you must have never smoked a cigarette, you must have never vaped, you must have no respiratory problems in your family, you can’t suffer asthma, you can’t have diabetes, you can’t have rheumatoid arthritis or any autoimmune disease. There has to be no history of seizure in the family. These are the people they’re testing the vaccine on.”

He asked,

“What happens when they give them to the typical American? You know, Sally Six-Pack and Joe Bag of Donuts who’s 50 pounds overweight and has diabetes.”

Kennedy stressed several times that

“any other medicine … that had that kind of profile in its original phase-one study would be [dead on arrival].”

“No medical product in the world would be able to go forward with the profile that Moderna has,” he reiterated.

During the course of the debate, Kennedy also talked about the regular vaccines most people take, from Hepatitis B to the flu shot, emphasizing that no proper testing had ever been done, which is mandatory for any other medication. Vaccines “are the only medical product that does not have to be safety-tested against a placebo,” he explained.

In a study involving placebos, one group of people would be injected with the actual vaccine, while another group would be injected with saline solution, which would not have any effect in preventing a particular disease. The people who are part of the study would then be observed to see if there are any differences between the two groups, both regarding the disease vaccinated against, and side effects.

As these tests are never done on vaccines, “nobody knows the risk profile of any vaccine that is currently on the schedule. And that means nobody can say with any scientific certainty that that vaccine is averting more injuries and deaths than it’s causing.

In fact, it should be the opposite, Kennedy said, with vaccines being tested even more thoroughly than any other medication.

“It’s a medical intervention that is being given to perfectly healthy people to prevent somebody else from getting sick,” he pointed out.

“And it’s the only medicine that’s given to healthy people … and particularly to children who have a whole lifetime in front of them. So you would expect that we would want that particular intervention to have particularly rigorous guarantees that it’s safe.”

Kennedy said

“it’s not hypothetical that vaccines cause injury, and that injuries are not rare. The vaccine courts have paid out four billion dollars” over the past three decades, “and the threshold for getting back into a vaccine court and getting a judgment – [the Department of Health and Human Services] admits that fewer than one percent of people who are injured ever even get to court.”

He mentioned another reason not to trust blindly any company currently producing vaccines in the United States. Each one of the four vaccine producers “is a convicted serial felon: Glaxo, Sanofi, Pfizer, Merck.”

“In the past 10 years, just in the last decade, those companies have paid 35 billion dollars in criminal penalties, damages, fines, for lying to doctors, for defrauding science, for falsifying science, for killing hundreds of thousands of Americans knowingly.”

“It requires a cognitive dissonance,” Kennedy commented, “for people who understand the criminal corporate cultures of these four companies to believe that they’re doing this in every other product that they have, but they’re not doing it with vaccines.”

While Kennedy is often described as being against vaccines altogether, he stressed that he does not oppose vaccines, as such. He accused his critics of “marginalizing me and silencing me” by misrepresenting his actual position.

In May, Kennedy signed an appeal created by Archbishop Carlo Maria Viganò aimed at raising public awareness among people, governments, scientists, and the media about the serious dangers to individual freedom caused during the spread of Covid-19.

The appeal raised concern at one point about a COVID-19 vaccination in relation to human freedom.

“We also ask government leaders to ensure that forms of control over people, whether through tracking systems or any other form of location-finding, are rigorously avoided. The fight against Covid-19, however serious, must not be the pretext for supporting the hidden intentions of supranational bodies that have very strong commercial and political interests in this plan. In particular, citizens must be given the opportunity to refuse these restrictions on personal freedom, without any penalty whatsoever being imposed on those who do not wish to use vaccines, contact tracking or any other similar tool.”

The appeal made it clear that for Catholics it is “morally unacceptable to develop or use vaccines derived from material from aborted fetuses.”

Comments on the YouTube video of the debate between Kennedy and Dershowitz indicated, almost unanimously, that Kennedy had won the debate. Dershowitz conceded many points, arguing, however, that from the point of view of constitutional law, the coronavirus vaccine could be made mandatory.

Dershowitz, who has provided legal counsel to and defended people like Donald Trump, Jeffrey Epstein, and Julian Assange, cited a 1905 Supreme Court ruling as precedent. Jacobson v. Massachusetts upheld the authority of states to enforce compulsory vaccination laws.

Kennedy clarified that the state government at the time had offered people to either be vaccinated or pay a five dollar fine. Dershowitz’s argument, however, was that based on constitutional law, including this precedent, “the state has the power to literally take you to a doctor’s office and plunge a needle into your arm.”

Kennedy said,

“I think there’s a big constitutional chasm between, you know, that remedy, which is paying a fine, and actually going in and holding somebody down and forcibly injecting them.”

President Trump has already said that the new coronavirus vaccine would not be mandatory, but available for those “who want to get it. Not everyone is going to want to get it.” A LifeSiteNews petition saying no to mandatory vaccinations has garnered more than 650,000 signatures and can still be signed here.

The ethical issue of many vaccines being derived from cell lines of aborted babies was not discussed during the debate.

For months, we’ve warned loans granted under the Paycheck Protection Program (PPP) for businesses seeking coronavirus relief funds were susceptible to fraud.

A Florida man was charged Monday after using PPP loans to buy a 2020 Lamborghini Huracan, according to the U.S. Department of Justice (DoJ). 

David T. Hines of Miami, Florida, fraudulently obtained $3.9 million in PPP loans and used those funds to buy the Huracan, shop at luxury stores, and splurge on fancy Miami resorts.

Our story on the guy who feds say used PPP loan money to buy a Lambo, Setai and Fontainebleau stays and Saks sprees. @wsvn #7News #Miami @USPIS_MIA @TheJusticeDept pic.twitter.com/KfKD2g4KxD

— Sheldon Fox-7 News (@fox_sheldon) July 28, 2020

The DoJ charged Hines,29, with one count of bank fraud, one count of making false statements to a bank and one count of engaging in transactions in unlawful proceeds.

The DoJ complaint claims the man requested $13.5 million in PPP loans for four companies with dozens of employees.

“In the days and weeks following the disbursement of PPP funds, the complaint alleges that Hines did not make payroll payments that he claimed on his loan applications,” according to the complaint. “He did, however, make purchases at luxury retailers and resorts in Miami Beach.”

In early July, we reported a Texas man received almost $1 million in PPP loans to support 51 employees at his “Texas Barbecue” company, though the company never existed. The man used the loans to trade cryptocurrency on Coinbase.

Not too long ago, Treasury Secretary Steven Mnuchin said that he is considering “forgiving all small loans, but would need fraud protection,” for businesses. The government has so far approved about $518.1 billion spread over 4.9 million PPP loans since the pandemic began. 

The LA Times notes there are at least a dozen PPP fraud cases filed in 11 states in July. Many of these cases are blatant fraud, such as falsifying tax or business records, lying on applications, and misusing the money. 

While safeguards to prevent PPP fraud appear to be lacking, Senate Republicans have unveiled even more PPP loans for business, which has really upset the Tea Party. “Republicans are now no different than socialist Democrats when it comes to debt,” Senator Rand Paul said. 

While the to-ing and fro-ing over whether $200 is too little and $600 is too much plays out, the bigger issue separating the two sides of the aisle over the next US aid package is unlikely to find a goldilocks ‘just right’ outcome anytime soon.

As a reminder the Senate GOP plan includes:

• $1,200 direct payments, CARES redux

• PPP sequel “to help prevent more layoffs”

• Federal UI bonus, hints at $200/week

• Money for schools

• $ for testing, treatment, vaccines

• Liability shield for biz/hospitals/entities

Senate Majority Leader Mitch McConnell reaffirmed that his proposed changes to liability law must be included wholesale in the aid package during an interview on CNBC, saying…

…the legislation “will have liability protection in it, so we’re not negotiating with the Democrats over that.”

On the other side, as Bloomberg reports, Senator Dick Durbin, the chamber’s No. 2 Democrat, said he doesn’t see any reason his party would support the plan to shield businesses, schools and other organizations from lawsuits over Covid-19 infections from employees or customers.

“This is an effort by the Republicans to seize the moment and to push through changes in tort law that they have been longing for for decades that have nothing to do with Covid-19.”

House Speaker Nancy Pelosi said that the first day of negotiations did not go well:

“It wasn’t a good way for us to begin the discussion.” 

Schumer was less pessimistic, and more bombastic, proclaiming that Democrats have the power and Republicans are desperate:

“I think Republicans are reading the polls. The president is slumping, their Republican Senate candidates are slumping in the polls. They have to show something,”

Adding that:

“We don’t have a majority in the Senate and we can’t pass it alone, but we have a lot of leverage and we’re going to use it,”

But on the bright side, we did not get leaked photos of her standing and pointing across the cabinet desk at members of the Trump admin.

Finally, Trump weighed in, giving himself an out by saying that there are some things in the Republican package that he doesn’t support.

The Senate Republicans’ more modest $1 trillion stimulus package unveiled yesterday remains a far cry from the blockbuster $3.5 trillion proposal that Democrats have proposed and thus, by the end of the farcical theater pretending to be a negotiation, the final sum will likely be closer to the latter than the former…

McConnell is somewhat cornered by pressure from more fiscally responsible conservatives (of course that is all relative). As Senator Kevin Cramer, a North Dakota Republican warned:

“The bigger the price tag gets, the fewer Republicans that will support it.”

And if they do, one wonders what that will do the price of gold?

The chorus calling for a weaker dollar is getting louder, and now includes none other than a stark warning from Goldman Sachs, which in a stunning shot across the bow of the modern monetary system warned overnight that U.S. monetary and fiscal policy (i.e., helicopter money a/k/a MMT) is triggering currency “debasement fears” and that for the first time “real concerns are emerging” about the future of the dollar as a reserve currency.

And while the DXY Index got a rare reprieve from the selling on Tuesday – despite Goldman’s ominous warning – gold continued marching higher, even as technical indicators show signs of near-record overextension.

As Bloomberg’s Ye Xie summarizes, “it seems like a perfect storm for the U.S. currency: the relentless decline of real yields, the U.S.’s inability to control the virus, the overhang of the twin deficits and the dear valuation.” Adding to reserve currency concerns, Bridgewater’s Ray Dalio – who is clearly talking either his or Beijing’s book although these days the two appear interchangeable – warned a Sino-U.S. “capital war” could harm the dollar.

Meanwhile, as Rabobank’s Michael Every has been discussing for the past few months, with the U.S. now using the privileged role of the dollar for political gains, such as penalizing banks over issues in Hong Kong and Xinjiang for instance, it will naturally alarm politicians in other countries, Xie adds.

Indeed, as Xie adds, China is already is quietly reducing its reliance on the dollar in cross-border trade and services. The percentage of the payments and receipts denominated in yuan in total FX transactions by banks for their clients increased to 37% in June, from 19% two years ago, according to data compiled by the State Administration of Foreign Exchange, with the Bloomberg strategist also calculating that the usage of the dollar has declined to 56% from 70% – a decline of ~20%.

While this shift partly reflects local companies’ desire to limit their exposure to FX volatility, it may also mirror an intentional nudge from the authorities… and it’s not just trade.

Picking up on his recent observation that Jack Ma’s decision to list his giant Ant Group in Shanghai and Hong Kong (where it is seeking a $200BN valuation) instead of the US, coupled with the exodus of U.S.-listed Chinese companies from America, Xie writes that this underscores the shift in capital markets, and adds that “by extension, one has to wonder what Beijing might to do with its $1.1 trillion Treasury holdings.”

Guo Shuqing, the party secretary of the PBOC, delivered a stern warning on the U.S. currency last month: “Some people say, ‘Domestic debt is not debt, but external debt is debt. For the United States, even external debt is not debt.’ This seems to have been the case for quite some time in the past, but can it really last for a long time in the future?”

As Xie concludes referring to the chart above, “apparently China isn’t waiting to find out the answer.”

Authored by Jim DeMint, op-ed via The Hill,

Like many Americans, Republicans have had a hard time coming up with a plan to fight back against antifa and the outraged mobs that have terrorized communities across the country. The main goal of these rioters is to defund police departments. It is so insane that it is hard to respond with anything more than confused laughter.

But conservatives in Congress have the right idea to defund the defunders.

Let us back up from the cable news hysteria and remember something important.

Police departments are the primary reason we have the government. When you get right down to it, the government has a monopoly on the legitimate use of force, which means its emissaries are paid to commit premeditated violence when necessary to enforce the laws. Police officers are the emissaries who carry guns and swear to use them only to enforce the laws written by the people.

Yet the party of big government has become so drunk on its “wokeness” that it now wants to eliminate the most basic core functions of the government like fighting crime, enforcing the laws, and protecting public safety. Defunding the police would be like putting on a football game without referees. Someone has to call penalties or the contest will descend into a brawl. There would be more injuries than points.

This principle can be doubly applied when you talk about criminals. What exactly is supposed to deter murderers, drug dealers, human traffickers, and sexual predators from openly plying their trade if there’s no one to stop them? If your city council defunds the police department, and you see a robbery taking place, who do you call? If criminals break into your own house, what are you supposed to do?

The activists have no answer to this. The best they have come up with is to replace police officers with social workers. They seem not to understand that the reason adults become criminals is because the authority structures of family and society have failed and, when that happens, the heroic efforts of social work have proven incapable of fixing the problem. What exactly are social workers supposed to do to armed bank robbers or drug cartel hit squads? Sing “Imagine” by John Lennon to them?

But it is much worse than that. After all, this summer we have seen a glimpse of what life would be like without police in Seattle and Portland. In Seattle, a mob took over a neighborhood, turned it into an autonomous zone, established physical barriers, and declared it an independent state not subject to the city or state. The local government told law enforcement to stand down. What followed was weeks of violent chaos.

The situation was perhaps even worse in Portland. The occupiers were not just trying to establish an autonomous zone outside the authority of the city and state. They actively tried to destroy the legitimate authority of their community. They attacked individuals, threw bottles at police officers, and set fire to the federal courthouse and other property. The liberal politicians in charge have largely sided with the mob. They are more upset about President Trump trying to restore order than the violent mob destroying their city.

These liberal politicians also seem to want to defund police departments. If cities and states are crazy enough to throw their people to the wolves, the Constitution may give them the right to be crazy, although when it involves federal laws and property, the federal government has legitimate reasons to intervene. But if these cities and states refuse federal support, the rest of us should not have to subsidize such lunacy.

Congress must ensure this country has serious leaders. Our lawmakers cannot just lock their doors and hide from the mob. They must take necessary action. When Congress passes its spending bills, it should deny federal law enforcement funds to city councils and state legislators that defund their police. If these mobs want to risk the lives of their fellow citizens to act cool, make them do it on their own dime. It is time to defund the defunders.

By Bloomberg’s Rick Green and Madeleine Ngo

The warning to shareholders of newly bankrupt Ascena Retail Group Inc. could hardly have been more direct. There it is, in black-and-white, on page 5 of the court declaration filed by Ascena’s most senior official just hours into the case:
“Existing common equity in Ascena will be canceled.” Full stop. Creditors will take ownership of the retail chain, which Ascena also made plain.

So how did stock investors respond? By bidding up the shares just shy of 120%, on off-the-charts volume.

It was a similar story for bankrupt Global Eagle Entertainment Inc. The airborne Wi-Fi service jumped more than 50% on July 24 after its court filing, despite warning shareholders earlier in July that they stood to lose everythingto creditors in a Chapter 11 case. And it hearkens back to Hertz Global Holdings Inc., whose stock became Example A of post-bankruptcy rallies.

The persistent mania for busted companies baffles financial advisers. “What’s going on here? I really couldn’t tell you; it’s not something I would ever recommend to anyone,” said George Gagliardi at Coromandel Wealth Management in Lexington, Massachusetts.

“People have too much money to play with,” said Dennis Nolte, an adviser at Florida’s Seacoast Investment Services.

“Most of these traders won’t be around when the bankruptcy proceedings are complete. Just turn the light off when you leave the room, if the lights aren’t turned off by the utility company because there’s no money to pay the bill.”