“Sounds So Hot And So Fun!” – Sen. Thom Tillis’s Democratic Rival Admits To Sexting With Veteran’s Wife Tyler Durden
Sat, 10/03/2020 – 10:58
One North Carolina political blogger opined in a column published back in September that Sen. Thom Tillis, a North Carolina Republican who is facing a tough re-election bid against Democratic contender Cal Cunningham, who has led Tillis in most polls all year. The race is one of a handful of key “tossups” that Wall Street analysts fear could turn the Senate blue.
Now, the political ramifications of Tillis’s diagnosis aren’t yet clear, though the virus will likely take him out of action for at least 10-14 days. But in a huge gift to Republicans, the Raleigh, Cunningham has become embroiled in a sexting scandal involving a woman who is not his wife. Cunningham is a married father of two, yet he confessed to sending “text messages of a sexual nature” to Arlene Guzman, a public relations strategist from California.
The text messages were first reported Thursday night by a conservative website called National File, which revealed that the Democratic Candidate and retired military officer had exchanged “sexts” with another veteran’s wife. Reporter Patrick Howley – the same reporter who broke the Gov. Ralph Northam blackface scandal – even labeled the PR professional as Cunningham’s “paramour”, suggesting that the two were in the process of planning a romantic tryst.
Cal Cunningham, who is a married father of two, has focused his U.S. Senate campaign against Republican Thom Tillis on Cunningham’s service as a veteran in Iraq and Afghanistan. But Cunningham is evidently engaged in extramarital activity with the wife of a fellow veteran.
Cunningham refers to Guzman Todd in the text messages below as “historically sexy,” imagines kissing her, says he has been dreaming “of our time together,” and the two plan for Cunningham to make up an excuse for his family and ditch a staffer so the two can meet and, in Guzman Todd’s words, “kiss a lot.” Guzman Todd says she wants “a night with you” and Cunningham agrees that he wants that too. Guzman Todd says that “the only thing I want on my to do list is you” and Cunningham says that “Sounds so hot and so fun!”
The news took a day to hit the mainstream political news channels, but Twitter users came together to mock Cunningham over his laughably childish sexts. When Cunningham’s “paramour” texted that the only thing she wanted on her to-do list was “you”, Cunningham replied “that sounds so hot and fun!”
Judging by the contact name in the heading, the texts appear to have been taken from Guzman’s phone.
Cal Cunningham sexting someone who isn’t his wife is the cherry on top of this ridiculous day https://t.co/dLuXMMygox
— sara p the skeleton queen (@sara__pequeno) October 3, 2020
According to the News & Observer, a newspaper based in Raleigh, NC, Cunningham’s campaign has confirmed the authenticity of these text messages. Cunningham apologized for his behavior, but said Friday night that he is not dropping out of the race.
“I have hurt my family, disappointed my friends, and am deeply sorry. The first step in repairing those relationships is taking complete responsibility, which I do. I ask that my family’s privacy be respected in this personal matter,” Cunningham said in a statement sent to The News & Observer.
“I remain grateful and humbled by the ongoing support that North Carolinians have extended in this campaign, and in the remaining weeks before this election I will continue to work to earn the opportunity to fight for the people of our state.”
The texts appear to have been exchanged some time in late July-early August.
Cunningham, 47, is a Lt. Col. in the US Army Reserve and a lawyer. He previously served in the North Carolina state Senate and ran unsuccessfully for the Democratic nomination for the senate seat in 2010, but lost.
Tillis and Cunningham met Thursday night for their third and final debate. According to Real Clear Politics, Tillis is still trailing in the polls.
But Cunningham wouldn’t be the first Democratic candidate to be felled by a sexting scandal.
via ZeroHedge News https://ift.tt/2F0ThVc Tyler Durden
Trying to stay ahead of the government printing press is the modern citizen’s constant worry. There are no hard money central bankers, let alone politicians. Central bankers have stood the idea of present value on its head in attempts to stimulate dead economies and zombie enterprises while providing interest bills to governments with the possibility, although remote, of actually being serviced.
In the United States, in the attempt to outrun the Fed and the Treasury, individuals have taken to the stock market. Investor’s Business Daily’s Matt Krantz tells us, “Meet a new force in the markets: An army of mostly young, highly engaged beginning investors looking to outmaneuver the pros.”
Krantz attributes time and technology to the new burst in stock market trading by novices. “Online brokersare reporting a surge of new accounts and trading activity from individual investors and traders — many with little or no experience but an intense willingness to learn,” he writes.
“The trend could put more Americans on a path to greater wealth and financial security,” Krantz writes, presumably with a straight face.
“But it remains to be seen if the beginning investors will stick around for the long haul — or if they’ll have the investing skills to avoid losses when stocks take a tumble.”
With the Fed pushing rates to zero, individual investors figure they should cash in on the roaring stock market. Trading by individuals has grown since 2017, but Krantz writes that “The trend is now on hyperdrive. Trading volumes at the big three brokers spiked in the first quarter, hitting nearly 270 million shares, Alphacution Research Conservatorysays, citing the most recent data available. That’s more than double the trading activity in the first quarter of 2019.”
It’s not just young people who are risking capital in the boom market. Krantz explains,
The momentum keeps going, and not just because of young people. “We’re seeing high levels of investor engagement in the current environment — increased trading levels and (net new assets) across all age groups,” said Michael Cianfrocca, spokesman at Schwab.
Investors like Melanie Melville, 69, started buying and selling individual stocks more seriously this year, “fulfilling a dream I’ve had a long time.” She added: “I retired last year, found some free money and decided I would try again.” Her father followed markets and paid for her college with profits from CAN SLIM stock investing.
In his book The Ethics of Money Production,Jörg Guido Hülsmann explains, “Carpenters, masons, tailors, and farmers are usually not very astute observers of the international capital markets.” Hülsmann reminds us of the old (and simpler) days when “Putting some gold coins under their mattress or into a safe deposit box saved them many sleepless nights, and it made them independent of financial intermediaries.”
While stock trading is the craze in the US, in Turkey, where the currency (the lira) is under great duress, Turks are doing what they’ve always done, trading the paper their government relentlessly depreciates for gold.
“Turks are piling into gold, long their favorite investment, as the country’s financial system unravels,” write David Gauthier-Villars and Caitlin Ostroff for the Wall Street Journal.
When Istanbul’s Grand Bazaar reopened in June, long lines of people waited outside the its many gold shops to buy gold coins (favored by older Turks) or mini-ingots (favored by the young).
Demand for gold was so strong this summer that the national mint asked employees to work overtime, on weekends, and even during Ramadan to fill orders, Gauthier-Villars and Ostroff write. While Americans are buying FAANG stocks on their phones, Turks are taking an old-school approach.
Gold plays an outsize role in Turkey, both in the financial system and as households’ preferred “under-the-mattress” way to protect their savings against a weakening currency and historically high inflation.
The pile of gold Turks keep at home is estimated at between 3,000 and 5,000 metric tons. That’s between $190 billion and $310 billion at current market prices, or between 25% and 40% of Turkey’s yearly output.
The Turkish central bank “allows lenders to keep up to 15% of their mandatory reserves in the form of scrap gold collected from depositors, as well as 20% in standard gold,” the WSJ reporters write.
“The Turkish treasury regularly issues gold bonds while banks have opened gold accounts and experimented with gold credit cards and gold ATMs.”
Turkish residents have $33 billion in gold deposits at banks. But the government raised its sales tax on gold from 0.2 percent to 1 percent, pushing buyers to the Grand Bazaar and other “gray markets” where the tax isn’t charged.
Gold has outperformed domestic stocks, bonds, and real estate over the past ten years. Safe-box maker and seller Mustafa Tuzcuoglu has seen a 50 percent increase in demand. His customers “keep half of their savings at the bank and half at home. That’s what I’m doing too.”
Hülsmann provides the best reason to hoard gold and silver. “Most importantly, they…[are] extremely suitable for ordinary people.”
You can’t say the same about shares of Tesla.
via ZeroHedge News https://ift.tt/36tC6qz Tyler Durden
Ultra-Rich Collateralize Fancy Artwork And Penthouses To “Access Cheap Money” Tyler Durden
Sat, 10/03/2020 – 09:55
Mortgage lenders have set aside billions of dollars for future defaults as millions of homeowners are in forbearance. This year, lenders have quickly tightened standards for average Americans, only dishing out loans to the ultra-rich.
JPMorgan is one bank that has temporarily stopped accepting new home equity lines of credit, or HELOC, applications due to a surge in delinquencies.
With ordinary folks unable to access cheap credit, even though rates are historically low, the ultra-rich, this year, have been collateralizing everything from artwork to New York penthouses to obtain cheap loans.
We first highlighted this phenomenon back in March, during the dark days of the virus pandemic, days after global equities crashed and credit markets locked up. We noted, “ultra-wealthy are increasingly requesting financing against fine art as a way to build liquidity.”
So maybe, just maybe, over the past decade, the ultra-rich became massive asset gathers, using money that cost basically nothing, to purchase fancy artwork, million-dollar Ferraris, rare wine, and overpriced penthouses in top metro areas. That is, because, when shit hits the fan, these folks can leverage these assets to tap into cheap credit; and since these assets don’t trade on major exchanges and price on a daily basis, aren’t subjected to wild volatility swings.
Bloomberg is out with a report that JPM has issued a massive $42.5 million loan on an NYC penthouse owned by a Russian billionaire’s family. The penthouse, at 15 Central Park West, is worth an estimated $88 million. Russian billionaire Dmitry Rybolovlev tried to sell the property but failed at finding a buyer, has decided to leverage the asset to tap into cheap credit, with an interest rate bearing 2.9%.
“The family tried to sell it a few years later as prices for ultra-expensive properties in the city had started to slip. Instead, they choose to leverage the asset,” Bloomberg noted.
Bloomberg provides several other examples of wealthy people taking out mortgages on their penthouse.
“Outdoor advertising mogul Drew Katz obtained a $15 million mortgage in August for a New York penthouse that he bought four years ago for $22 million, filings show. In April, hedge fund founder Dan Och obtained a $50 million mortgage for a home on Manhattan’s Billionaire’s Row that he acquired last year. The following month, a U.S. company controlled by Mexican heiress Karen Virginia Beckmann — part of the family behind Jose Cuervo tequila — received a $19 million mortgage for a condo it bought three years ago in the same area.”
This signifies that banks are willing to lend to the wealthiest clients, enabling them to weather the virus pandemic better than average folks who have primarily had their credit lines reduced or entirely cut off.
“Rates are low and so clients are looking to take advantage, using some form of debt to be able to access cheap money,” said Casey S. Kriedman, a financial adviser at the Broad Group, a New York-based unit of UBS Global Wealth Management.
Remi Frank, head of BNP Paribas wealth management’s key client group, said, “banks are happy to lend to very rich people, the richer you are the more you borrow.”
More or less, the virus pandemic is exacerbating the wealth inequality gap as the rich survive on cheap credit. Simultaneously, working-poor households have experienced job loss, food insecurity, and depletion of emergency savings.
via ZeroHedge News https://ift.tt/3lg22dz Tyler Durden
Sen. Ron Johnson, Kellyanne Conway Test Positive; 24 Infected In White House COVID-19 Outbreak Tyler Durden
Sat, 10/03/2020 – 09:20
There have been quite a few major developments in the White House COVID-19 outbreak late Friday and into the early hours of Saturday morning. When we last checked in, an anonymously sourced reports from NBC News claimed Trump had developed “shortness of breath” after arriving at Walter Reed.
That news followed reports that Thom Tillis, another member of the group of observers who attended a White House event on Saturday where Trump announced Judge Amy Coney Barrett as his nominee for the Supreme Court seat left by the deceased Ruth Bader Ginsburg.
Photos like this have circulated widely since Tillis became the 6th member of the group to test positive.
We can now identify 6 people who tested positive for COVID-19 after attending Saturday’s disgraceful Amy Coney Barrett coming out party and superspreader event: Trump, Melania Trump, Sen. Thom Tillis, Sen. Mike Lee, Notre Dame President John Jenkins & a White House reporter
As of Saturday morning, 24 people have tested positive in the White House outbreak, as the number of infected staffers who attended the Cleveland debate climbed from 1 to 11.
1+2. President & Melania Trump
3. Bill Stepien, Trump campaign mgr
4. Hope Hicks
5. Kellyanne Conway
Sen. Ron Johnson
6. Sen. Mike Lee
7. Sen. Thom Tillis
8. Ronna McDaniel
9. Notre Dame Pres. Jenkins
10-12. Three WH reporters
13-23. Eleven staffers from Cleveland debate
But as the list above also reflects, three additional major figures in TrumpWorld have tested positive: Former White House advisor Kellyanne Conway, Trump Campaign Manager Bill Stepien, and Sen. Ron Johnson.
Johnson’s announcement hit just minutes ago on Saturday morning with a statement from his office.
He is the third GOP senator to test positive, and – like Lee and Tillis – he also attended Saturday’s event in the Rose Garden.
Preempted by her teenage daughter Claudia, who made headlines earlier this year by speaking out against both her parents before asking AOC to “adopt” her, Conway announced late Friday evening that she had tested positive, becoming at least the 10th person connected to the White House to contract the virus. Conway left the White House over the summer after her daughter’s outbursts created a national scandal. She has apparently become the 7th person to attend that event to also come down with the virus. Three White House reporters have also tested positive.
News of Conway’s diagnosis was preempted by her daughter Claudia, who once again took to TikTok to embarrass her mother, claiming in a series of videos that Kellyanne once told her “masks are stupid”. Claudia also implied her mother got them all sick “for that stupid Amy Coney Barrett thing”.
Meanwhile, George Conway, a longtime critic of Trump and the administration in which his wife serves, tweeted that he was “Livid” about the White House’s cavalier attitude toward the virus.
Though the investigation into the origins of the cluster is only just beginning, contact tracers appear to be focusing on Saturday’s White House event, which Vox News opined increasingly has the making of a “super spreader” event.
That would at the very least account for why no Democrats have gotten sick in the outbreak, since none of them were invited to the press conference. It would also suggest that Joe Biden and Nancy Pelosi are probably in the clear. They’ve both already tested positive as of Friday.
But in a sign that the outbreak might already be spreading beyond Saturday’s gathering, Trump campaign manager Bill Stepien, who announced last night that all Trump campaign events involving the president and the first family would be cancelled, or transitioned to virtual format, has also tested positive. Stepien took the reins over the summer, taking over from Brad Parscale following the Tulsa comeback event disaster. One aide told Politico that Stepien was experiencing “mild flu-like symptoms”. They also reported that Stepien plans to quarantine until he recovers. Deputy Campaign Manager Justin Clark is expected to oversee the campaign from its Arlington Va. headquarters while Stepien works remotely.
With Stepien and GOP leader Ronna McDaniel sickened, two key players of Trump’s political machine are now out of commission.
Though he didn’t attend Saturday’s event in the Rose Garden, Stepien traveled to and from Cleveland for Tuesday’s presidential debate, and joined Trump and Hope Hicks aboard Air Force One. The campaign manager was also with the president in the White House on Monday.
Stepien’s role as campaign manager means participating in dozens of meetings per day. If he was contagious, then many more may need to quarantine, though top Trump cabinet officials including Treasury Secretary Mnuchin and AG Barr have already said they won’t quarantine.
and who did Stepien come in contact with?? All of them have to isolate. What a fucking disaster
— Jennifer ‘Vote Early’ Rubin (@JRubinBlogger) October 3, 2020
All Trump campaign events through next week, when Trump was supposed to swing through the West, have been cancelled as everybody awaits more information on Trump’s condition.
Trump’s doctor released a statement late Friday claiming Trump was “doing well” and that he did not require any “supplemental oxygen”, though he was being treated with Gilead’s remdesivir.
Trump was also treated with a battery of anti-virals and other meds earlier in the evening as well.
Incidentally, the president set off a mini firestorm when he tweeted last night that he was doing “WelI” – with a capital “I” instead of an “L” – spawning a torrent of quasi-serious speculation that the president was sending a secret message by saying he was “going Weli”.
At any rate, WSJ says White House contact tracers are scrambling to test hundreds of people who may have come into contact with those infected. Trump’s doctors insist that his hospital stay will only last “a few days” as a precaution.
Trump walked out of the White House Friday evening wearing a mask and gave a thumbs-up to reporters but did not speak before boarding Marine One at 1816ET and heading to Walter Reed National Military Medical Center. Already, the Washington Post is reporting that Trump’s team made the “preemptive” decision so that he could be seen boarding the helicopter while he could still walk – an attempt to present an image of strength to the American people.
via ZeroHedge News https://ift.tt/3nbuIG9 Tyler Durden
On the 28th September Tobias Ellwood, Tory MP for Bournemouth East, stood up in Parliament and suggested that the British Army and the Ministry of Defense be in charge of distributing and administering “millions of doses” of the Sars-Cov-2 vaccines, as well as issuing “vaccination certificates” which will “allow travel”.
And that’s just the highlights, there’s a lot more vaguely sinister language, camouflaged in his rather drab monotone voice. (You can watch the whole speech here, go to 20:24).
This is a concerning development, one very much worth keeping an eye on.
This is not new behaviour for Ellwood. He has always been a consistent voice for use of the military in response to the “pandemic”. On the 18th of September he requested the Prime Minister make “greater use of our fine armed forces”.
He specifically mentions “managing the narrative”, which is no surprise considering his role as a former Army officer, a current reserves officer, and his known affiliation with the 77th Brigade.
For those who don’t know: The 77th is the British army’s team of “facebook warriors”. An information warfare unit whose job is to “counter misinformation”, “manage the narrative” and generally corral and control the internet conversation.
71 Year Old Former Wall Street Trader Gets 5 Years In Prison For $20 Million Ponzi Scheme Tyler Durden
Sat, 10/03/2020 – 08:45
A former Wall Street trader was sentenced to more than 5 years in prison on Tuesday for raising $20 million from investors and then spending the money on himself.
71 year old Paul A. Rinfret pleaded guilty last October to securities and wire fraud and was sentenced on Tuesday to 63 months in prisons. Rinfret defrauded investors using an entity he created called Plandome Partners, LP, from 2016 to 2019, according to Bloomberg.
Rinfret was accused of selling limited partnership interests in Plandome while telling investors he was using their money to trade S&P futures contracts using a “proprietary algorithm”. And there’s your first warning sign.
He used only a “small portion” of the money for investing, returned $8 million to previous investors, spent $30,000 on an engagement party for his son, rented a $50,000 Hamptons vacation home and bought $35,000 worth of custom kitchen cabinets with the rest.
According to The Daily Mail, he spent “$170,000 on jewelry, watches and cars; more than $105,000 on wine and other alcohol; approximately $12,000 on cigars; and more than $130,000 at restaurants.”
On top of that, he lost $3 million trading, prosecutors said. U.S. District Judge Gregory Woods commented: “Mr. Rinfret’s crimes were reprehensible. They were properly described as brazen.”
Rinfret went “full Madoff” and also sent fake monthly account statements that reported false returns to keep his investors from making withdrawals and to convince additional people to give him money.
Rinfret’s public defender described him as “genuinely remorseful” and said he had “lost everything”, including his money and two of his three children who refuse to talk to him. His lawyer also said that his wife left him on the day of his arrest, which was also his 44th wedding anniversary.
Jennifer Willis, his lawyer, said: “He is a man who has been punished by the collateral consequences of his actions.”
Prosecutors argued for a 63 to 78 month sentence, despite this, telling the judge: “The defendant simply wanted to live a more extravagant life than he was already living and give that appearance to others. That’s it.”
Coincidentally enough, today also seems like a good day to remind people that, to this day, nobody has gone to jail for the 2008 housing crisis.
via ZeroHedge News https://ift.tt/3lbfZJG Tyler Durden
I really do not know how to report Wednesday’s events. Stunning evidence, of extreme quality and interest, was banged out in precis by the lawyers as unnoticed as bags of frozen chips coming off a production line.
The court that had listened to Clair Dobbin spend four hours cross-examining Carey Shenkman on individual phrases of first instance court decisions in tangentially relevant cases, spent four minutes as Noam Chomsky’s brilliant exegesis of the political import of this extradition case was rapidly fired into the court record, without examination, question or placing into the context of the legal arguments about political extradition.
Years ago Noam Chomsky visited Julian Assange at the Ecuadorian Embassy in London
Twenty minutes sufficed for the reading of the “gist” of the astonishing testimony of two witnesses, their identity protected as their lives may be in danger, who stated that the CIA, operating through Sheldon Adelson, planned to kidnap or poison Assange, bugged not only him but his lawyers, and burgled the offices of his Spanish lawyers Baltazar Garzon. This evidence went unchallenged and untested.
The rich and detailed evidence of Patrick Cockburn on Iraq and of Andy Worthington on Afghanistan was, in each case, well worthy of a full day of exposition. I should love at least to have seen both of them in the witness box explaining what to them were the salient points, and adding their personal insights. Instead we got perhaps a sixth of their words read rapidly into the court record. There was much more.
I have noted before, and I hope you have marked my disapproval, that some of the evidence is being edited to remove elements which the US government wish to challenge, and then entered into the court record as uncontested, with just a “gist” read out in court. The witness then does not appear in person. This reduces the process from one of evidence testing in public view to something very different. Wednesday confirmed the acceptance that this “Hearing” is now devolved to an entirely paper exercise. It is in fact no longer a “hearing” at all. You cannot hear a judge reading. Perhaps in future it should be termed not a hearing but an “occasional rustling”, or a “keyboard tapping”. It is an acknowledged, indeed embraced, legal trend in the UK that courts are increasingly paper exercises, as noted by the Supreme Court.
In the past, the general practice was that all the argument and evidence was placed before the court orally, and documents were read out, Lady Hale said.
She added: “The modern practice is quite different. Much more of the argument and evidence is reduced into writing before the hearing takes place. Often, documents are not read out.
“It is difficult, if not impossible, in many cases, especially complicated civil cases, to know what is going on unless you have access to the written material.”
At least twice in the current case, Judge Baraitser has mentioned that the defense gave her three hundred pages of opening argument, and has done so in the context of doubting the need for all this evidence, or at least for lengthy closing arguments which take account of the evidence. She was highly resistant to any exposition by witnesses of their evidence before cross-examination, arguing that their evidence was already in their statements so they did not need to say it. She eventually agreed on a strict limit of just half an hour for witness “orientation”.
Julian Assange’s fiance Stella Moris @StellaMoris1 speaking on the final day of evidence in London extradition hearing:
However much Lady Hale thinks she is helping by setting down a principle that the documentation must be available, having Patrick Cockburn’s statement online somewhere will never have the impact of him standing in the witness box and expounding on it. What happened on Wednesday was that the whole hearing was collapsed, with both defense and prosecution lawyers hurling hundreds of pages of witness statement at Baraitser’s head, saying: “You look at this. We can get finished tomorrow morning and all have a long weekend to prepare our next cases.”
I was so disappointed by the way the case petered out before my eyes, that the adrenaline which has carried me through must have dried up. Returning to my room at lunchtime for a brief doze, when I tried to get up for the afternoon session I was overcome with dizziness. I eventually managed to walk to the court, despite the world having decided to present itself at a variety of sharp and unusual angles, and everything appearing to be under glaring orange sodium light. The Old Bailey staff – who I should say have been really friendly and helpful to me throughout – very kindly took me up in a lift and through the advocate’s robing room to the public gallery.
I am happy to say that after court two pints of Guinness and a cheese and ham toastie had a substantial restorative effect. Those who have followed these reports will understand how frustrating it was to be deprived of James Lewis asking Noam Chomsky how he can venture an opinion on whether this extradition is politically motivated when he is only a Professor of Linguistics, or whether he has ever published any peer-reviewed articles. To attempt to encapsulate the wealth of information skipped through yesterday is not the work of an evening.
What I shall do for now is give you the eloquent and brief statement by Noam Chomsky on the political nature of Julian Assange’s actions:
A friend last night gave me the cold comfort that I should not worry about the hurried close of these proceedings reducing the public gaze on the evidence and the arguments (and I think there were altogether nine witness statements yesterday), because that public gaze had been extremely limited, as indeed I have been continually explaining. In other words, it makes no difference. I follow that argument, but it goes against some fundamental beliefs and motivations I have about bearing witness, which I shall need to develop further in my own mind.
In the next few days I will try to bring you a synthesis and analysis of all that passed on Wednesday. Now I need to go to court and see the last few dribbles of this case, and exchange last glances of friendship with Julian for some months.
via ZeroHedge News https://ift.tt/2SpGcYB Tyler Durden
Mapping COVID-19’s Crushing Impact On International Tourism Tyler Durden
Sat, 10/03/2020 – 07:35
World Tourism Dayis observed each year on September 27 to “foster awareness among the international community of the importance of tourism and its social, cultural, political and economic value.”
While this year’s edition of World Tourism Day was meant to celebrate the role that tourism plays in rural development and providing opportunities outside of big cities, Statista’s Felix Richter notes that the official theme was overshadowed by the COVID-19 pandemic, which has had a crushing impact on tourism around the world.
Earlier this year, the UN’s World Tourism Organization published estimates on how big the impact of the coronavirus pandemic on international tourist arrivals could be. The most positive of the three scenarios published in May assumed that travel restrictions would be lifted in July. Even under this scenario, which has already turned out to be too optimistic with international travel still severely restricted, the UNWTO expected international tourist arrivals to drop by 58 percent this year compared to 2019.
Looking at the latest data covering the first six months of 2020, the UNWTO’s estimates weren’t far off, though. As the following chart shows, international tourist arrivals were down 65 percent globally for the first half of 2020 compared to the same period of 2019.
With the recent uptick in new infections around the world proving a major setback in efforts to reanimate the ailing tourism sector, millions of people are fearing for their livelihood, especially in regions heavily dependent on the influx of international tourists.
via ZeroHedge News https://ift.tt/3n7Kzpc Tyler Durden
On October 2, the Armenian-Azerbaijani war entered its 5th day. Forces of the Azerbaijani military, supported by Turkey, continued their attempts to capture the contested Nagorno-Karabakh Region and to dismantle the self-proclaimed Nagorno-Karabakh Republic, which is overwhelmingly populated by Armenians.
Intense artillery duels and Azerbaijani airstrikes are being reported across the entire frontline in Karabakh, and even near some parts of the Azerbaijani-Armenian border. Nonetheless, the main clashes still take place in the districts of Fizuli and Jabrayil, where Azerbaijan have achieved their main gains capturing several positions from the Armenians. The Azerbaijani artillery together with Turkish-made and Israeli-made combat drones played a key role in the tactical successes of Azerbaijan on the battlefield.
On October 1, the Armenian military even claimed that 4 Azerbeijani combat drones entered Armenian airspace and 3 of them were shot down, allegedly by the S-300 system. Additionally, the Armenian Defense Ministry claimed that its forces had shot down three Azerbaijani fighter jets and two helicopters. The Ministry of Defense of Azerbaijan dismissed the Armenian claims, calling them “complete nonsense and fake news.”
It insists that the Armenian side uses claims about attacks on its territory in an attempt to trigger the Collective Security Treaty Organization pact and obtain direct military support from Russia in the conflict in Karabakh, which formally is not its territory. What is even more strange, despite the 5 days of open war, the Armenian leadership has still not started the process for the recognition of the Nagorno-Karabakh Republic or the official integration of the region into Armenia. Therefore, it has no even theoretical legal grounds to request CSTO help in a conflict on its territory.
Meanwhile, the UK-based Syrian Observatory for Human Rights, known for its anti-Assad and pro-militant stance in the Syrian conflict, reported that dozens of Turkish-backed Syrian militants had been killed, injured or went missing while fighting against Armenian forces in Karabakh. According to the SOHR, 28 of them were killed and 62 others were injured or went missing. The report alleges that at least 850 Turkish-backed Syrian militants were deployed there. It should be noted that, according to Armenian estimates, their number is about 4,000. France and Russia also expressed their concern regarding the moving of militants to the region. In turn, Azerbaijani and Turkish media and officials insist that Armenia deploys members of Kurdish armed groups, considered to be terrorists by Ankara, to the combat zone. Nonetheless, these claims have not so far been supported by any evidence.
The self-styled Neo-Ottoman Empire of President Recent Tayyip Erdogan is on a full-scale propaganda offensive to instigate an Armenian-Azerbaijani war.
On October 1, the United States, Russia and France released a joint statement condemning the violence in the Nagorno-Karabakh region, calling on the sides to accept a ceasefire and return to the negotiating table. In response, President Erdogan made a fierce statement slamming the OSCE and claiming that Azerbaijan should continue its military push to capture the Nagorno-Karabakh region and thus the war with Armenia.
“I would like to declare that we are together with our brothers in Azerbaijan in their struggle for the liberation of their occupied land. The path to lasting peace in this region lies through the withdrawal of Armenia from all the spans of the Azerbaijani lands occupied by them,” Erdogan said addressing the Turkish Parliament. “Especially the so-called Minsk trio America, Russia, France and their seeking of a ceasefire in the face of this negative situation, which has been reflected these days because they have neglected this problem for nearly 30 years, is above all not acceptable,” he added.
In the best traditions of Turkish public diplomacy, Erdogan simultaneously accused Armenia of triggering the military escalation. Meanwhile, Turkish state media reported that during the recent phone call Turkish Foreign Minister Mevlut Cavusoglu told his Russian counterpart Sergey Lavrov that Turkey sees no reason for a ceasefire in Karabakh for as long as the region remains in the hands of Armenian forces.
Earlier, the Turkish leadership at the highest level declared that it is ready to provide any help, including military, to Baku. The Armenian side claims that Turkey is in fact participating in the war on the side of Azerbaijan.
via ZeroHedge News https://ift.tt/3incSfH Tyler Durden
Note: all references to inflation are of the quantity of money and not to the effect on prices unless otherwise indicated.
In last week’s article I showed why empirical evidence of fiat money collapses are relevant to monetary conditions today.
In this article I explain why the purchasing power of the dollar is hostage to foreign sellers, and that if the Fed continues with current monetary policies the dollar will follow the same fate as John Law’s livre in 1720. As always in these situations, there is little public understanding of money and the realisation that monetary policy is designed to tax people for the benefit of their government will come as an unpleasant shock. The speed at which state money then collapses in its utility will be swift. This article concentrates on the US dollar, central to other fiat currencies, and where the monetary and financial imbalances are greatest.
Introduction
In last week’s Goldmoney Insight, Lessons on inflation from the past, I described how there were certain characteristics of Germany’s 1914-23 inflation that collapsed the paper mark which are relevant to our current situation. I drew a parallel between John Law’s inflation and his Mississippi bubble in 1715-20 and the Federal Reserve’s policy of inflating the money supply to sustain a bubble in financial assets today. Law’s bubble popped and resulted in the destruction of his currency and the Fed is pursuing the same policies on the grandest of scales. The contemporary inflations of all the major state-issued currencies will similarly risk a collapse in their purchasing powers, and rapidly at that.
The purpose of monetary inflation is always stated by central banks as being to support the economy consistent with maximum employment and a price inflation target of two per cent. The real purpose is to fund government deficits, which are rising partly due to higher future welfare liabilities becoming current and partly due to the political class finding new reasons to spend money. Underlying this profligacy has been unsustainable tax burdens on underperforming economies. And finally, the coup de grace has been administered by the covid-19 shutdowns.
The effect of monetary inflation, even at two per cent increases, is to transfer wealth from savers, salary-earners, pensioners and welfare beneficiaries to the government. In no way, other than perhaps from temporary distortions, does this benefit the people as a whole. It also transfers wealth from savers to borrowers by diminishing the value of capital over time.
Inflation of the money supply is now going into hyperdrive, so those negative effects are going to get much worse. It is time to move from empirical evidence to the situation today, which is the unprecedented increase in the global rate of monetary inflation and specifically that of the world’s reserve currency, the US dollar.
The dollar’s inflation
No doubt, the reluctance to reduce, or at least contain budget deficits is ruled out by the presidential election in November. But whoever wins, it seems unlikely that government spending will be reined in or tax revenue increased. For the universal truth of unbacked state currencies is that so long as they can be issued to cover budget deficits they will be issued. And as an inflated currency ends up buying less, the pace of its issuance all else being equal will accelerate to compensate. It is one of the driving forces behind hyperinflation of the quantity of money.
Since the Lehman crisis in August 2008, the pace of monetary inflation has accelerated above its long-term average, and the effect is illustrated in Figure 1 below.
Figure 1 includes the latest calculation of the fiat money quantity, to 1 August 2020. FMQ is the sum of Austrian money supply and bank reserves held at the Fed — in other words fiat dollars both in circulation and not in public circulation. Because commercial banks are free to deploy their reserves within the regulatory framework, either as a basis for expanding bank credit or to be withdrawn from the Fed and put into direct circulation, whether in circulation or not bank reserves at the Fed should be regarded as part of the fiat money total.
It can be seen that the rate of FMQ’s growth was fairly constant over a long period of time — 5.86% annualised compounded monthly to be exact — until the Lehman crisis when the rate of growth then took off. Since Leman failed in 2008 FMQ’s total has grown nearly 300%.
Since last March growth in the FMQ has been unprecedented, becoming almost vertical on the chart, triggered by the Fed’s response to the coronavirus. And now a second wave of it has hit Europe and the early stages of a resurgence appears to be hitting the land of the dollar as well. With lingering hopes of a V-shaped recovery being banished, a further substantial increase in FMQ is all but certain.
Already, FMQ exceeds GDP. If we take the last time things were normal, say, in 2005 when the US economy had recovered from the dot-com crash and before bank credit expansion and mortgage lending become overblown, we see that in a functioning relationship FMQ should be between 35%—40% of GDP. But with the US economy now crashing and FMQ accelerating, FMQ is likely to be in excess of 125% of GDP in the coming months.
What is the source of all that extra money? It is raised through quantitative easing by the central bank in a system that bends rules that are intended to stop the Fed from just printing money and handing it to the government. Yet it achieves just that. The US Treasury issues bonds by auction in the normal fashion. The major banks through their prime brokers bid for them in the knowledge that the Fed sets the yield for different maturities through its market operations. The Fed buys Treasury bonds up to the previously announced monthly QE limit, only now there is no limit, giving the primary brokers a guaranteed turn and crediting the selling banks’ reserve accounts with the proceeds.
This arm’s length arrangement absolves the Fed of the sin of direct money-printing but evades the rules by indirect money-printing. The Treasury gets extra funding through this roundabout arrangement. Participating banks generally expand their bank credit to absorb the new issue, which they then sell to the Fed, which in turn credits the banks’ reserve accounts. The Treasury gets the proceeds of the bonds to cover the deficit in government spending, and the banks get expanded reserves. The Fed’s balance sheet sees an increase in its liabilities to commercial banks and an increase in its assets of Treasury bonds. The Fed also funds agency debt in this manner, mostly representing mortgage finance.
Under President Trump, the Treasury’s current deficit initially expanded as a planned supply-side stimulus to the US economy to the tune of just over a trillion dollars before covid-19 created additional financial chaos. Businesses experienced severe dislocation and have suffered a widespread collapse. Consequently, and together with the direct injection of money into each household, the Congressional Budget Office revised its trillion-dollar deficit for the financial year just ended as the following screenshot from its website indicates:
Note how half the government’s income arose from revenues and half is covered by sales of government debt to the public (i.e. the commercial banks), which at the end of fiscal 2020 (ended yesterday) is estimated to total $20.3 trillion. But given that the first half of that fiscal year was pre-lockdown and the annualised rate of the deficit at that time was about a trillion dollars, simplistically the annualised rate of the deficit’s increase since last March is in the region of $4.4 trillion. Incidentally, the CBO’s economic projections look too optimistic given recent events, in which case budget projections for this new calendar year will be adjusted for considerably lower revenue figures, and significantly greater outlays at the least. We shall address the price inflation estimates later in this article.
Why QE is inflationary
On 23 March the Federal Open Markets Committee (FOMC) announced unlimited QE for both US Treasury stock and agency debt as well as however much liquidity commercial banks need.[i] While judging the expansion of the budget deficit to be inflationary, it is only inflationary to the extent that it is not financed by savers, either increasing the proportion of their savings relative to immediate spending, or to the extent they divert their savings from other investment media. In the latter case, citizens have been committing their savings more to equity markets than bond markets. The returns for discretionary portfolios managed on the public’s behalf have also found better returns in equities than in government and corporate bonds, though when assessing increasing investment risk Treasury stock is seen to be a safe haven in bond portfolios. Pension funds and insurance companies also allocate cash flow to US Treasuries and to the extent that this is the case, the issuance of further government debt is non-inflationary.
Furthermore, if a bank does not increase its balance sheet by expanding bank credit, its participation in the Fed’s QE programme is not inflationary either. For this to be the case, it would have to sell existing stock, call in loans or subscribe on behalf of clients.
By seeing them through a Nelsonian blind eye these factors give some encouragement to the Fed in funding the Treasury through QE, particularly since the statistics reflect a jump in savings, as the following chart from the St Louis Fed illustrates.
More correctly, the chart reflects the fall in spending when people locked down, as well as the $1,200 stimulus checks distributed to households at end-April, which marked the peak in the chart. Since then, there has been some downward adjustment, partly because some spending has returned, and the backlog of essential spending, such as property maintenance, is being addressed.
The evidence is not yet strong enough to claim this statistical shift in savings habits is permanent. Furthermore, being calculated as the percentage of personal disposable income that is not spent and given the high levels of personal debt throughout the population, much of these so-called savings will have disappeared into credit card and debt repayments. It is more likely that with rising unemployment and roughly 80% of the American salaried population living paycheque to paycheque, that far from there being a higher savings rate, personal finances have deteriorated so much that money is being withdrawn from savings on a net basis, to acquire life’s essentials. In fact, the savings rate is one of those unmeasurable economic concepts, and the reality is that Joe Average is worse off in today’s contracting economy and is drawing down on savings in order to subsist.
The non-inflationary element of QE then boils down roughly to increases in insurance company and pension fund investments in Treasury stock and the increase in bank holdings and reserves at the Fed not funded through the expansion of bank credit. But this creates another factor: the extent to which existing bond investments are sold in order to subscribe for Treasury stock inevitably undermines corporate bond markets and their ability to satisfy their funding requirements. And it is for this reason the Fed has appointed BlackRock to spearhead its purchases of corporate debt to ensure liquidity is available for those markets and to put a cap on risk premiums. Therefore, where banks do not expand credit to buy new Treasury stock, the Fed steps in to compensate with additional monetary inflation.
It has been necessary to go into the mechanisms behind funding government deficits in some detail to establish the inflationary consequences of QE, and to refute claims by monetary authorities and others that QE is either not or only partly inflationary, and so is consistent with the Fed’s mandate. No, with the exception of insurance and pension fund subscriptions, the Fed’s QE is almost pure monetary inflation
The relationship between inflation and prices
Assuming no change in the average cash balances held by a population, over time there must be an inverse relationship between the expansion in the quantity of money in circulation and the diminution of its purchasing power. This is unarguable in logic and to argue otherwise is to subscribe to a version of monetary perpetual motion. By the same token, while the effects on individual prices also have to allow for changes in the factors specific to them, the effects of monetary debasement on the general level of prices should be clear. Now it is time to introduce a second factor; changes in the average cash balances held by a population.
Changes in cash balances are an expression of relative preferences between money and goods. If a population as a whole is satisfied with the stability of money as the medium of exchange, it will be happy to retain balances surplus to its immediate needs. We see this even with inflating currencies, such as the Japanese yen, where irrespective of the level of interest rates monetary expansion merely accumulates as bank deposits. It is unusual for a population to go to the extremes evident in Japan, but equally, a population which realises its currency is declining in purchasing power has every reason to dispose of it in favour of goods, maintaining lower balances in consequence.
The complete rejection of a currency as the medium of exchange renders it utterly valueless and is the common outcome to every hyperinflationary collapse. Governments that become ensnared by inflationary financing face the growing certainty of a Venezuelan outcome.
For now, monetary authorities around the world are relying on public ignorance about money and the theory of exchange. Those who trouble themselves to consider how their currency’s purchasing power is actually changing will notice how it is declining more rapidly than official statistics say. This is deliberate. After the introduction of widespread indexation in the early 1980s governments devised methods to reduce the costs incurred. Changes in statistical methodology have achieved that, with consumer price indices now entirely suppressed, so much so that central banks claim to be struggling to get the CPI to rise to its two per cent target.
The evidence from independent analysts in America such as Shadowstats and the Chapwood Index is that real world prices there are rising at closer to a ten per cent rate and have been for the last ten years. With the FMQ having grown at a monthly compounding annualised rate of 9.6% from the Lehman crisis to the end of 2019, the truth about price inflation appears closer to independent analysts’ calculation than the official CPI. Furthermore, there is little evidence of noticeable change in savings rates or cash hoarding over the period, which would have affected the general level of prices.
The first to realise that the purchasing power of a currency is declining and will continue to do so are usually those who own it for reasons other than as a normal medium of exchange. These are foreign holders who have accumulated currencies other than their own government’s fiat money as a result of trade and have chosen to retain it instead of selling it in the foreign exchanges. And there is a second group of foreign holders which has diversified investment portfolios into foreign financial markets.
These groups are primarily sensitive to external economic and financial factors, such as changes in the outlook for trade, financial asset values and their requirements to hold liquidity in their own currencies. It stands to reason that a state that manages to run continuing deficits on the balance of trade and retain an accumulation of foreign ownership of its currency is vulnerable to changes in international sentiment. This is the situation the dollar finds itself in, with US Treasury TIC figures revealing foreigners own financial securities worth approximately $20.6 trillion, and additionally bank deposits and commercial and US Treasury short-term bills totalling $6.15 trillion. In other words, foreign ownership of the dollar is 130% of the CBO’s estimate of current US GDP.
The accumulation of foreign dollar positions was due to a number of factors: the dollar is the international reserve currency, trade expectations were of continual global growth, the perpetuation of US trade deficits, increasing portfolio investment and a rising dollar. Global trade is now contracting, and the dollar has begun to decline. Commercial priorities are changing from global expansion to conserving capital.
With the global economic outlook deteriorating rapidly, the dollar is notably over-owned by foreigners, which is not counterbalanced by American ownership of foreign currencies. Most of US foreign financial interests are denominated in dollars with exposure to foreign currencies remarkably small at $714bn at end-June.
China has already declared a policy of reducing her dollar investments in US Treasury bonds and is selling her dollars to buy commodities. Few realise it, but China is doing what ordinary people do when they begin to abandon a currency — dumping it for tangible goods which will cost more in future due to the dollar’s declining purchasing power. And as the dollar’s purchasing power declines measured in commodities more nations are likely to follow China’s lead.
When you see a chart of the expansion of money supply, as illustrated in Figure 2 below and combine that with a falling dollar in the foreign exchanges, it is only a matter of time before increasing members of the domestic population begin to follow the foreigners’ lead.
Compared with the past, there is a generation of millennials which through their understanding of cryptocurrencies has learned about the debasement of fiat currencies by their governments. It remains to be seen whether this knowledge will bring forward the general public’s understanding of monetary affairs for an earlier abandonment of money for goods.
Banking and its cyclical consequences
Not only are some of the global systemically important banks (G-SIBs) highly leveraged on their balance sheets — which one would expect at the end of a period of bank credit expansion — but in most cases stock markets are valuing their equity at a fraction of their balance sheet book values, contrasting with outrageously high valuations for non-financial stocks in the most severe economic downturn ever seen in peacetime.
Table 1 below illustrates the point by incorporating the combination of balance sheet gearing and stock market valuations for all the G-SIBs to give a multiple of balance sheet assets to market capitalisation, ranking them from most dangerous to the least on this measure. The only banks in the list with market capitalisations higher than balance sheet equity — price to book ratios of more than one — are North American banks, which might explain why critical leverages are not recognised as a systemic problem in US financial markets
The three highest leverages by a country mile are of Eurozone banks: remember these are just the G-SIBs — there will be many commercial banks as highly leveraged which are not on this list. To have your equity valued at only 15% of book value, which is the indignity suffered by the French bank, Société Générale, should send warning signals to French banking regulators. But they insist on only looking at the ratio of balance sheet assets to balance sheet equity; which for Soc Gen is still an eye-watering 21.4 times. Unlike the regulator, investors appear to think this bank is most likely bankrupt, its share price little more than a call option on its survival.
It is a problem which particularly affects banks in the Eurozone. And experience tells us that the numbers reported by banks are bolstered by their gaming of the regulatory system, which is why when a bank fails the outcome is always worse than the pre-failure numbers would suggest possible.
Large banks do not operate in national silos, having trade finance activities, foreign exchange and derivative trading, lending in foreign currencies and even substantial branches and subsidiary operations abroad. The idea that a crisis in the Eurozone, or Britain for example, can be contained to national boundaries is wishful thinking. With the exception of Wells Fargo, US G-SIBs come out better than those of other jurisdictions, but that will not save them from a systemic crisis originating elsewhere.
While we can point to the end of the credit cycle, there is no doubt that Covid-19 has precipitated a more immediate crisis for commercial banks. The official talk is no longer of a V-shaped recovery, and businesses are on life support.
In the near future, a banking crisis seems inevitable. The best case is it is contained by either governments nationalising all banks subject to failure, or they end up supported directly by their respective central banks, which given the crisis in the US repo market a year ago can be said to be already happening. For the inflationists there is the consolation that money-printing can then be used to support failing businesses through the banks with obstructive commercial considerations removed.
Interest rates
The principal control mechanism deployed by monetary planners is management of interest rates. They are under the delusion that a reduction of interest rates is a stimulus to industrial investment and therefore the betterment of the economy, whereas all their suppression achieves is the destruction of savings and the advancement of malinvestments.
Their delusions were Keynes’s, and remain so with all his acolytes, among which monetary policy planners are numbered. Interest rates are simply the expression of time preference, the cost that a borrower pays to achieve temporary possession. All goods share this feature, and sound money in free markets reflects an average of the time preference of these goods.
In Keynes’s General Theory, a search of the index reveals just one reference to time preference, which occurs three times on the same page and nowhere else. This vital topic is thus dismissed. Keynes accepted that there is time preference but became confused as to what it represents. He merely saw it as a psychological counterpart to his invention of the propensity to consume and failed to make the connection between time preferences for goods and their monetary representation. Since he judged it to be solely related to money as opposed to possession, for him it left open the possibility that interest rates can be managed for a desired economic outcome. This was despite the evidence of which he was otherwise aware, that managing interest rates with a view to controlling the rate of inflation did not work, and that the correlation was between wholesale borrowing costs and the general price level, not its rate of change represented by an inflation rate.[iv] Keynes named it Gibson’s paradox after its discoverer, but since he could not explain the paradox, he chose to ignore it as have all his followers.
For these reasons, managing interest rates to achieve economic outcomes, including recent introductions of negative rates, has proved to be a lamentable failure. But as the currency loses purchasing power, the reflection of time preferences for goods will see an additional factor related to money itself. Thus, time preference expressed in dollar terms becomes significantly higher than justified solely by the deferred ownership of goods. The foreign exchanges insistence that future currency depreciation due to monetary inflation be taken into account will then render the authority’s task of suppressing interest rates impossible.
The Fed will find that in the absence of a significant increase in savings — something it is determined should not happen anyway — as well as financing a deteriorating Federal deficit, it will have to absorb foreign sales of US Treasury, agency and corporate bonds. Foreigners are then reluctant possessors of surplus dollars.
In the absence of a rising level of domestic savings, a rapidly deteriorating budget deficit feeds through to one or both of two outcomes. As an identity of national accounting and in the absence of an increase in savings, a budget deficit is mirrored by a trade deficit, both of which in this new fiscal year on present indications are likely to expand to anything between three and five trillion dollars. That is the first outcome, and if President Trump is re-elected next month this deterioration will likely lead to increased hostility against America’s importers.
The second problem, in view of the first, is how importers already overloaded with dollars will respond to the increasing quantity of additional dollars accumulating in their bank accounts from an increasing trade imbalance. The answer must be that they have no reason to hold on to them. And unless the US Treasury buys these unwanted dollars, deflating the quantity in circulation, these dollars will end up driving the exchange rate lower and inflating prices in the domestic economy.
We can see the conditions where the dollar is driven down against other currencies as only a first step, and we are now aware that China is in the vanguard of selling dollars for commodities, likely to be joined by others as the dollar declines. Consequently, the purchasing power of the dollar — already deteriorating at a ten per cent clip according to independent estimates — is bound to deteriorate at a greater pace.
By its statements and actions, the Fed confirms a belief that an increase in price inflation can be controlled by raising interest rates. Consequently, a falling dollar in the foreign exchanges will present it with an insuperable dilemma: does it raise interest rates to protect the dollar and thereby burst the bubble in financial assets and force the Federal Government’s finances into insolvency? Or does it just let price inflation rip? The choice will be as black or white as that.
Almost always, central banks in this invidious position end up with a compromise, raising interest rates too little too late. Just occasionally, they raise overnight interest rates to stratospheric levels in an attempt to restore order by squeezing the speculators. Other than the temporary effects of the latter expedient, we know from Gibson’s paradox that raising interest rates to control price inflation does not work. And with 130% of the GDP statistic currently represented by foreign ownership of dollars, the bulk of nearly $27 trillion like an elephant in the room is overhanging the foreign exchanges. Worse still for the Fed, Gibson’s paradox tells us that even if the Fed raised interest rates to compensate fully for loss of purchasing power it would not be sufficient to stabilise the currency: that requires the adoption of sound money policies and a stop to inflationism.
The way to look at it is by understanding the foreigners’ assessment of time preference, comprised of a general level for the exchange of goods and an additional level peculiar to a depreciating currency. Therefore, irrespective of the Fed’s interest rate policy market forces represented by foreign interests will take over control of interest rates, and the Fed’s bond bubble will be burst. Rising yields for US Treasuries will collapse the equity market and the market for corporate debt. These events will threaten any remaining foreign interest in the dollar and its capital markets even further. In short, the policy of inflating a financial asset bubble becomes impossible to sustain and its failure will take the dollar down with it as well.
This was why when John Law’s Mississippi bubble burst three hundred years ago, by October 1720 his currency, the livre, was worthless on the foreign exchanges. The collapse had started eleven months earlier, when Law accelerated the inflation of the livre to support a failing share price. The Fed embarked on a doppelganger acceleration of monetary inflation on 23 March for the whole US bond market. If we replicate the John Law experience, the dollar could become valueless in a matter of months.
It is becoming clear to a growing audience that in the absence of a change in inflationary policies, the days of an unbacked dollar are rapidly coming to an end, and it will take down the international fiat order upon which it is based.
via ZeroHedge News https://ift.tt/2Sm8inr Tyler Durden
