Category: zerohedge

We live in truly fascinating times.

On Friday, a bankruptcy judge approved Hertz’ unprecedented, stunning attempt to sell up to $1 billion in stock in the bankrupt company taking advantage of the euphoria gripping retail speculators who have sent the worthless stock as high as $6/share, knowing full well there is a virtually zero chance that stock will have any value after the reorganization process is complete and bondholders are impaired. Still, as a result of purely bureaucratic considerations, the judge approved the request:

“The cost [of equity financing] is significantly less than a loan . . . and the dollars that come in will go to the value of the enterprise as a whole,” said Judge Mary Walrath of the US bankruptcy court in Delaware.

What is remarkable is that none other than Hertz’ own lawyer, Tom Lauria from White and Case, admitted that the stock is worthless – or will be worthless once the euphoria dies down.

At the court hearing, held by video, he acknowledged that while travel had slowly picked up in recent weeks, the trading price of Hertz shares was “disconnected from fundamentals.”

“New platforms for day traders may be facilitating this,” Lauria said quoted by the FT, referring to Robinhood, the stock trading app popular with young retail investors. “There are forces at work that us non-financial people, that we can only observe.”

Tom’s “naive” joking aside, he is essentially admitting that Hertz, together with the creditors and the bankruptcy judge, are all complicit in taking advantage of ignorant, momentum-chasing traders who have made a market that makes no sense, and yet just because there is clear demand for the stock at a price point of over $2/share, they will take advantage of this opportunity and sell at the money.

And sure enough, they will do so quickly, before the euphoria fades: Lauria said Hertz may try to tap the market as soon as late Friday or Monday, because once the bid disappears, this historic opportunity will be gone too.

In a statement provided to the Financial Times, Lauria, said: “Through vigilance and creativity, Hertz has now gotten the opportunity to turn things around a bit. If successful, it may be able to reinforce its balance sheet by actually capitalizing on the truly extraordinary set of circumstances that have followed in the wake of Covid-19.”

By the “extraordinary circumstances” Lauria meant the epic bubble euphoria unleashed by the Fed’s recent actions which sent stocks soaring by a record 40% in the past three months before the euphoria fizzled modestly on Thursday, and which has sent retail investors into a panic scramble to buy any stock that goes down with zero regard for fundamentals… just as the Fed intended.

Naturally, the newly formed committee of unsecured creditors was fully supportive of the share sale, since the new capital would rank lower than even unsecured liabilities, and all the money raised from Robinhooders would go straight into creditors’ pockets. 

Yet even as Hertz’ unsecured bonds naturally jumped on the news that the company could proceed with this first-ever “Initial Bankruptcy Offering”, with the most actively traded bonds, the 5.5% notes due 2024, rising 12.5 cents to 48.5 cents on the dollar and five other Hertz bonds traded up by at least 5 cents on the dollar Friday afternoon, the creditors – those who know what the true value of the company is based on actual facts and data – still kept the $4 billion in non-auto ABS bonds below 50 cents on the dollar, suggesting a more than $2 billion impairment and confirming that the equity will be worthless, something which everyone – including the bankruptcy court judge – knows, yet nobody on Robinhood seems to be aware of.

Instead, having pushed the market cap of HTZ stock back to $400MM in market cap, the Robinhooders are effectively saying that none of the bonds will be impaired and will get a par recovery. Apparently nobody told the creditors this. Maybe Robinhood should just open up its platform to allow its Gen-Z userbase to also buy corporate debt: in that case the Fed would never have to buy another junk bond every again as every single fixed income asset would be trading limit up.

“The equity raise is mind-boggling to me,” said David Skeel, a professor of bankruptcy law at the University of Pennsylvania. “I’ve never heard of a firm selling more stock in the middle of a bankruptcy case — it seems like a naked ploy to take advantage of an irrational movement in the market.”

Skeel is right: the opportunistic Hertz “offering” of worthless stock is nothing more than a “naked ploy to take advantage” of gullible investors who have been sent into a buying frenzy by none other than the Fed, and since there is only a small window of opportunity in which the company can capitalize on this some would argue rational exuberance – after all it is greenlighted by the Fed itself which last week admitted it would never burst a bubble if it means losing even one low paying job – Hertz will rush to get this deal done as soon as Monday morning. And since all those retail investors who will be allowed to participate in the offering will lose their money, one wonders just what is the purpose of the SEC if not to protect the most gullible investors from self-admitted, professional opportunists who are taking advantage of the froth in the market.

One final point: as Tesla Charts points out, by approving the Hertz offering, the US Bankruptcy Court has now opened a can of worms whereby any company that is about to file for bankruptcy (or is already bankrupt), but has been swept up in the Robinhood buying frenzy, will try do the same and dump billions in stock to retail daytraders in hopes of boosting cash levels even if it means a total loss for all those who participate, as long as there is a large, red disclaimer in the offering warning that the shares you are about to buy are worthless.

Board members at $CHK,

Before filing for bankruptcy, do an at-the-market offering of all unissued stock from your latest shelf registration. In the prospectus, spell out your intent to file, and make clear the shares you are selling are essentially worthless.

You’re welcome,
TC

— TC (@TESLAcharts) June 13, 2020

A small cluster of cases discovered late this week in Beijing’s Fengtai district prompted authorities to keep local children out of school, while a wider net of concentrated testing has revealed, once again, a startling reality: while 4 symptomatic cases were reportedly uncovered, according to the Chinese state press, another 45 ‘asymptomatic’ cases were also uncovered, leading China’s totalitarian contact tracers to a local seafood market.

Authorities have ordered the market shut for a deep cleaning after determining that it was the epicenter of the latest outbreak.

In a surprisingly lengthy report, the Global Times explores the role of China’s sprawling food markets in spreading the virus.

Beijing’s seafood markets have entered the public spotlight after two confirmed cases along with 45 merchants in relation to a local market tested positive for COVID-19, with many discussing the reasoning behind seafood markets becoming hot spots for the novel coronavirus.

The COVID-19 outbreak in Wuhan, the capital city of Hubei Province, was reportedly first detected in the Huanan seafood market in the city, and this new discovery of confirmed cases and quite a many positive nucleic acid tests in Beijing are also closely related to seafood markets.

Seafood markets are generally referred to as markets that sell seafood, however such places usually don’t sell only seafood but also other meats – beef and lamb, for example. But like food markets, seafood markets are more susceptible to the novel coronavirus due to its humid environment and large flow of customers, Yang Zhanqiu, deputy director of the pathogen biology department at Wuhan University, told the Global Times on Saturday.

We must admit, we were surprised by the frankness of the state media reports. Is this a sign that Beijing intends to make good on its promises to be more open and honest with the international community now that the WHO has officially OK’d an “independent” investigation into the origins of the outbreak in Wuhan?

Perhaps.

More likely, these reports were just scratching the surface. And so it was that just a few hours later, Reuters reported on Saturday morning that the area around a major food market in Fengtai had assumed a “wartime” posture – part of Beijing’s textbook response to new clusters – as investigators and contact tracers swarmed the southwestern area of Beijing, where Fengtai and the Xinfadi market are situated.

Remember: Beijing’s playbook for tackling new clusters relies on mass testing and the resumption of strict lockdown conditions. Out of some 517 tested in the district, 45 tested positive via throat swab after visiting the market, according to Chu Junwei, a district official, told a briefing. None of these patients were showing symptoms of COVID-19, Chu said, but he added that 11 nearby neighborhoods surrounding the market, which purports to be the largest agricultural wholesale market in Asia, have been placed on lockdown, with 24-hour guards in place.

“In accordance with the principle of putting the safety of the masses and health first, we have adopted lockdown measures for the Xinfadi market and surrounding neighbourhoods,” Chu said.

The district is in a “wartime emergency mode,” he added.

Reuters added that the outbreak underlines just how easily the virus can recur even in “countries which have had great success in curbing the spread of the virus, clusters can sometimes easily arise.” We’ve been seeing more of these oblique and deferential references to Beijing’s containment effort in the English-language foreign press. Then we remember that all the reporters who refused to kowtow to Beijing have already been expelled from the country.

The Xinfadi market was shut down at 3 am local time, and authorities have plans to test some 10k employees and patrons.

The entire Xinfadi market was shut down at 3 a.m. on Saturday (1900 GMT on Friday), after two men working at a meat research centre who had recently visited the market were reported to have the virus. It was not immediately clear how they had been infected.

On Saturday, market entrances were blocked and police stood guard. Beijing authorities had earlier halted beef and mutton trading at the market and had closed other wholesale markets around the city.

They plan for more than 10,000 people at the Xinfadi market to take nucleic acid tests to detect coronavirus infections.

According to the Xinfadi website, more than 1,500 tonnes of seafood, 18,000 tonnes of vegetables and 20,000 tonnes of fruit are traded at the market daily.

In total, 6 symptomatic cases discovered in Beijing on Friday had all been tied to the market. Now, authorities across China are scrutinizing local food markets.

A city spokesman told the briefing that all six COVID-19 patients confirmed in Beijing on Friday had visited the Xinfadi market. The capital will suspend sports events and tourists from other parts of China, effective immediately, he said.

Beijing’s Yonghe temple and National Theatre also announced they would close from Saturday, and the city government said it had dropped plans to reopen schools on Monday for students in grades one through three because of the new cases.

One person at an agricultural market in the city’s northwestern Haidian district also tested positive for the coronavirus, Chu said.

Highlighting the new sense of alarm within the city, health authorities visited the home of a Reuters reporter in Beijing’s Dongcheng district on Saturday to ask whether she had visited the Xinfadi market, which is 15 km (9 miles) away. They said the visit was part of patrols Dongcheng was conducting.

And following reports in state-run newspapers that the coronavirus was discovered on chopping boards used for imported salmon at the market, major supermarkets in Beijing removed salmon from their shelves overnight.

That concern also spread to other cities, with a major agricultural wholesale market in Chengdu, the capital of the southwestern province of Sichuan, saying it would remove salmon products from its shelves from Saturday.

In Nanjing, capital of the eastern province of Jiangsu, a local association of restaurants said it would halt the serving of foods containing raw seafood or animal products.

As armed guards took their places and locals were asked to return to their homes and stay there until further notice, locals interviewed by Reuters said they were confident the government had everything under control.

Some Beijing residents, including a man shopping at a Carrefour supermarket in Fengtai district, said they were confident authorities had the situation under control.

“If I were worried, I wouldn’t come here to buy meat. I believe it has been quarantined,” said the man, who gave his surname as Zhang.

One mouthpiece for the CCP assured the public that everything will be fine – just another speedbump on the way to eradicating SARS-CoV-2.

Beijing is seeing a new outbreak of COVID-19, prompting the city to take urgent measures. Stupid US government, watch carefully this time how the Chinese people control the epidemic scientifically. This will help you reflect on your own failure of epidemic control. pic.twitter.com/l4QXFQ2Jun

— Hu Xijin 胡锡进 (@HuXijin_GT) June 13, 2020

Let’s hope they have enough food and other essentials stashed to last them for a few days, or a few weeks.

As lockdowns ease across Europe, professional stock traders, many of whom were forced to work remotely for the last several months, are beginning to rethink their work-life balance in a post-corona world. Bloomberg found, in a new survey of traders, that a majority want to continue working from home in the future. 

About 80% of the 85 traders said they would like to work remotely for at least some of the workweek once strict social distancing ends. In a more extensive survey pool, Bloomberg found 90% of the responses from 254 traders want a restructured work-life that is remote. 

“There was an accepted norm that at least to fulfill some roles effectively, you had to be in the office for extended hours, and that would be the only way to work,” said Joseph Sproul, associate director at Alpha FMC, a London-based consultancy firm to the wealth management industry.

“The experience over the last two months has shown that there are other ways of working, and in some roles, a much more balanced approach can be just as effective, if not more effective,” Sproul said. 

Professional traders surveyed by Bloomberg could be in luck as Danske Bank A/S recently announced employees can work from home for at least a quarter of the week. JPMorgan Chase & Co. told employees that its offices would be kept half full for the “foreseeable future.”

Matthew McLoughlin, London-based head of trading at Liontrust Investment Partners LLP, said splitting the workweek up between the office and home would improve work-life balance: 

“I have been surprised how well shifting the world of trading to working from home has gone,” McLoughlin said. “I have thoroughly enjoyed working from home and can definitely say that I have never felt both mentally and physically healthier. I feel that my company has benefited too, I am able to work longer hours where necessary, while still enjoying more free time due to the lack of commute.”

Bloomberg said 97% of analysts and 94% of fund managers surveyed said they would like to see a balance of office and home in the future. About 58% of the folks surveyed were based in London, and the rest were in Paris, Frankfurt, and Amsterdam. About 33% were traders, 19% fund managers, and 47% analysts. 

While lockdowns and social unrest have become the norm in many Western countries, more than half of the respondents said they would consider moving out of metro areas. 

The tide is indeed shifting for anyone who works on a trading floor — Bloomberg Intelligence said Europe could double to 30% of employees working at home across all industries. It also said Norway, Spain, and France are some member states that are witnessing the quickest changes of people working from home.   

With concerns over a second coronavirus wave emerging  — many firms will likely leave their trading floors operating at less than full capacity through 2020, which means people in the financial industry working from home should probably build out their home offices if they have not already. 

133 days after Twitter “permanently” banned Zero Hedge on January 31, the social network has reinstated us after admitting it made an error.

As a reminder, what happened in late January was confusing. Shortly after we asked if “This [Is] The Man Behind The Global Coronavirus Pandemic“, referring to Wuhan Institute Of Virology scientist Peng Zhou (who three months later was being investigated by western spy agencies for his role in creating Covid) and some low-grade “reporter” from Buzzfeed decided to report us  to Twitter for “doxxing” Zhou using publicly available information, Twitter told us that the account had been suspended for “violating Twitter rules against abuse and harassment”, which was false as we neither incited abuse nor harrassment, but merely asked questions. But the confusing part is that at the same time, Twitter fabricated an entirely different explanation for its decision when speaking to outside media, telling them the suspension was due to “platform manipulation” –  whatever that means.

An odd mix of conflicting explanations but in any case, neither was true as we said at the time,  and as we further told Bloomberg, the suspension was “unjustified, and likely motivated by reasons other than the stated ones” adding that “we are confident that we did not violate any of the stated Twitter terms: we neither incited harassment, nor did we ‘dox’ the public official, whose contact information is as of this moment listed on the Wuhan institute’s website.”

Fast forward to late Friday night, when unexpectedly we received a brief email from Twitter Support informing us that “we made an error in our enforcement action” as a result of which “we have unsuspended your account.”

Speaking to Bloomberg, a Twitter spokesperson said that “we made an error in our enforcement action in this case. Based on additional context from the account holder in appeal, we have reinstated the account. We have a dedicated appeals process for all account holders.”

Funny how mistakes happen when you ban first and ask questions later (and only when prompted to do so).

In any case, no bad blood right – honest mistake? Well, not really: before all this happened, none other than Twitter’s CEO was following us.

Not anymore.

The @zerohedge account also remains highly shadow banned (try searching for the actual zerohedge account on twitter, good luck), perhaps as an innocuous consequence of the “error.”

That’s OK though, we never expected an apology. We are just glad that we will be able to share facts and perspectives with our now 700K Twitter followers, a number which has spiked by more than 30K in just the past few hours since the suspension was overturned.

Authored by Paul Joseph Watson via Summit News,

Despite weeks of anti-police protests, a clear majority of Americans agree with President Trump that the vast majority of officers are doing a good job.

Respondents were asked by Rasmussen:

“Do you agree or disagree with the following statement: “Our police have been letting us live in peace, and we want to make sure we don’t have any bad actors in there. [But] 99% of them are great, great people.”

56% of likely U.S. voters agree with Trump while 30% don’t agree. 14% remain unsure.

The poll also found that only 16% of Americans think a police-free society is a likely outcome.

Movements to defund police departments have gained traction across the country following the death of George Floyd at the hands of a Minneapolis cop.

Earlier this week, New York police boss Mike O’Meara went off on the media’s efforts to demonize officers.

“Stop treating us like animals and thugs and start treating us with some respect … Our legislators abandoned us. The press is vilifying us. It’s disgusting,” said O’Meara.

WATCH 🚨 New York police boss Mike O’Meara went off on the media today:

“Stop treating us like animals and thugs and start treating us with some respect … Our legislators abandoned us. The press is vilifying us. It’s disgusting.” pic.twitter.com/CXOPARKff7

— August Takala (@AugustTakala) June 9, 2020

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As Tanzania begins negotiations over potential debt relief as part of a G-20 program to help out the poorest nations, President John Magufuli proclaimed this week that his country has been rendered “coronavirus free” thanks to the power of prayer.

We reported a few weeks back that Magufuli had kicked out representatives from the WHO (after purportedly tricking them into testing samples of a papaya for COVID-19), drawing criticism from several of its neighbors. He also claimed a mixture of ginger and lemonade cured his son of the virus.

Tanzania’s number of COVID-19 cases has been stuck at 509 for six weeks as the country stopped updating its numbers. Opposition politicians claim the true number is closer to 10k.

Magufuli has accused his opponents of exaggerating the impact of the virus as part of a conspiracy to drive him from power. But like Zika before it, the coronavirus has come and gone, he said, vanquished during ‘three days of prayer’.

“When I came to power they said we have cases of the Zika virus and I fired the person who announced that … Since I fired him five years ago, Tanzania has not had cases of Zika,” Magufuli said at a teachers’ conference Friday in the capital, Dodoma.

“Then they said we have Ebola knowing that tourists will not come to a country which has Ebola and people will not work here if there is Ebola,” he said, adding that no one had died of that virus.

“Now we have corona. They said bodies will be lying on streets in Africa. But they did not know God loves Tanzania,” Magufuli said. “We prayed for three days and the coronavirus is finished.”

Opposition lawmakers meanwhile have accused the president of “de-congesting” hospitals to make the problem seem less serious.

Authored by Alasdair Macleod via GoldMoney.com,

The doyenne of MMT, Stephanie Kelton, has published a book this week explaining modern monetary theory. This article examines the foundations of MMT which Kelton explained in an earlier video released last year.

Introduction

Macroeconomics has become so far removed from reality that its practitioners cannot understand what is happening in the real economy. Never has this been more obvious than today. While they claim to be economically literate, macroeconomists are in thrall to their paymasters; a combination of government, quasi-government and financial institutions with a vested interest in not looking too closely at the full consequences of government economic and monetary policies. From this neo-Keynesian macro world, the latest spinoff is modern monetary theory, which is little more than a logical extension of Keynesianism —justifying intervention by the state and the use of fiat currency being expanded limitlessly. MMT is the end of the line for arguments based on macroeconomic fallacies that have their origin in Keynes.

Stephanie Kelton’s book, The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy was released on Tuesday (9 June):

“Stephanie Kelton’s brilliant exploration of MMT dramatically changes our understanding of how we can deal with crucial issues ranging from poverty and inequality to creating jobs, expanding health care coverage, climate change, and building resilient infrastructure.”

That is the first sentence of Amazon’s sales pitch. If these claims are true, the world’s economic problems are easily solved. But we must put aside the marketing hyperbole and look at MMT seriously.

Deficit spending is MMT’s solution to everything

A short essay cannot do justice to a book just released —selected reviewers get pre-publication copies in good time for that purpose. Instead I shall comment on Kelton’s earlier explanation of MMT, which she provided in a video aired by CNBC, recorded in March 2019. Since we are talking of economic theory, it should stand the test of time, being as relevant today as when it was when recorded over a year ago. Therefore, we are entitled to assume her book is an extension of the main points she made in the video.

If the basics are not right, then the rest of it can be ignored and the book will only mislead its readers. In this article, I address each substantive point in the earlier video. “SK” is Stephanie Kelton, quoted verbatim, and my commentary follows.

SK

MMT starts with a simple observation, and that is that the US dollar is a simple public monopoly. In other words, the United States currency comes from the United States government; it can’t come from anywhere else. So, what that means is that the federal government is nothing like a household. In order for households or private businesses to be able to spend they’ve got to come up with the money, right? And the federal government can never run out of money. It cannot face a solvency problem with bills coming due that it can’t afford to pay. It never has to worry about finding the money in order to be able to spend.

Comment

In other words, MMT is a rehash of the state theory of money, made famous by Georg Knapp in 1905. Which, incidentally, allowed Bismarck to finance Germany’s military build-up before the First World War and led to Germany’s hyperinflation, which destroyed the mark in late-1923. There is nothing new in this theory, and it has been lauded by inflationists of different stripes since unbacked fiat currencies emerged.

The argument deployed here is a common device used by economists in debate to mislead their audience into believing macroeconomics is somehow on a higher plain than human action. The statement that public finances differ from household finances is only true to the extent that a government with a fiat currency can for a period of time cover its deficit by printing money. In every other respect, it is governed by the same laws of finance and money as the rest of us.

But the state cannot print money indefinitely. The state’s insolvency is only deferred by monetary inflation for as long as it can pluck wealth from its population by debauching the currency. And the more it inflates, the more it has to inflate until it is forced by markets to face up to this fact.

SK

So, the deficit definitely matters; it’s just that it matters in ways that we’re not normally taught to understand. Normally I think people tend to hear deficit and think it’s something that we should strive to eliminate; that we shouldn’t be running budget deficits; that there is evidence of fiscal irresponsibility. And the truth is the deficit can be too big. Evidence of a deficit that’s too big would be inflation.

Comment

Here, Kelton presumes the state can control the degree to which it funds itself by monetary expansion. But the state is like a junkie: once hooked on free-and-easy money it is virtually impossible for it to stop using monetary debasement as an increasingly important source of finance.

What Kelton does not tell us is that there is a cost to inflationary financing: the transfer of wealth from those that have savings and earnings valued and paid for in the state’s currency. The beneficiaries are the government, its agencies and its crony favourites — usually commercial banks and big businesses. In other words, by debasing money for its own benefit the state is impoverishing those it claims to help.

By regarding inflation as a rise in the general level of prices, Kelton seems to think that so long as price rises are contained by a ceiling, then the state can expand the quantity of money as much as it likes. But that assumption must be conditional on the state being able or willing to restrict the expansion of money if the objective is exceeded.

Because that is demonstrably not true, by changing statistical methods of measuring the general level of prices an alternative has been found. Shadowstats.com and the Chapwood index have concluded that the general level of prices has been rising at an annual rate closer to 10% than the 1.5–2% reported by US government econometricians. To the extent these independent estimates are correct, the evidence of inflation Skelton refers to is concealed, invalidating her proposition.

On every level this statement by Skelton is flawed. Correctly stated, inflation is not the rate of increase of prices but the rate of increase of the quantity of money. A rise in the general level of prices is the symptom, not the disease. This lack of proper definition by all neo-Keynesians, sometimes unconscious, sometimes deliberate, impedes understanding. By misleading us, and probably herself in this way, Kelton is simply following the established example common to all inflationists.

SK

But the deficit can also be too small. It can be too small to support demand in the economy and evidence of a deficit that is too small is unemployment; so if you think of the government deficit as the difference between what the government spends into the economy and what it taxes back out then imagine a government that spends $100 into the US economy but it only taxes 90 of those dollars back out. We label that a government deficit; we record that on the government’s books. What we forget to do is pay attention to the fact that there’s now $10 somewhere in the economy that wouldn’t have been there otherwise, that is put there by the government’s deficit.

In other words their deficits become our surpluses and so when we talk about the government having all this red ink, we have to remind ourselves that their red ink becomes our black ink and their deficits are our surpluses and the question is then should you expand fiscal policy? Should you run bigger budget deficits in order to boost growth?

Comment

It is a common error to think that deficit spending is the solution to unemployment. The state lacks the entrepreneurial knowledge to direct capital resources to satisfy consumers’ needs and wants and it usually ends up satisfying its own non-commercial objectives instead. Furthermore, by diverting resources from free markets which allocate capital resources more efficiently, state intervention becomes an overall economic burden, reducing a nation’s economic potential.

Macroeconomists of all stripes believe in deficit spending to stimulate the economy, failing to realise that the monetary expansion sets in motion a cycle of credit. The Keynesian idea was to use deficit spending to reduce the impact of a business slump and to encourage confidence to return. The reduction in lending risk that followed then encouraged banks to expand bank credit, a means of monetary expansion which the banks are licenced by the state to provide. Invariably, bankers become greedy and when the boom has run its course, they realise they have taken on too much risk. Bankers’ greed rapidly turns to fear and bank credit contracts, driving the economy into the next slump.

It has been like this for nearly two centuries. Structural reform of the banking system to remove bank credit expansion is part of the solution. The other part is for governments to always run balanced budgets instead of making the credit cycle even more destabilising through deficit spending.

To state that a government deficit gifts money to the private non-financial sector that otherwise would not exist is the basic belief behind macroeconomics. It is misguided. Let us first assume the deficit is funded by savers. In that case, the economy is starved of investment funds which would otherwise have been more positively deployed, and Kelton’s $10 gift to the economy is borrowed from savers and is not an extra distribution. Alternatively, if its origin is an inflation of the currency, then the population itself has paid for it through monetary debasement.

SK

So, what is the objective, what is the proper policy goal, and I think the right policy goal is to maintain a balanced economy where you’re at full employment. You’re guarding against an acceleration and inflation risk. And economists tend to understand that the kinds of things that you can do to boost longer term growth are investments in things like education, infrastructure, R&D. Those are the sorts of things that tend to accelerate productivity growth so that longer term real GDP growth can be higher.

So, there are ways in which the government can make investments today that increase deficits today that produce higher growth tomorrow and build in the extra capacity to absorb those higher deficits.

Comment

Kelton states a government should maintain a balanced economy with full employment. Beside the slippery notion of a balanced economy, she skips over several inconvenient truths. The first is the embodiment of Say’s Law (in common with all neo-Keynesians she would doubtless reject it), which describes how and why we divide our labour, specialising in what we are most skilled at producing in order to satisfy our broader needs and wants. It follows that if a non-productive state detracts from the division of productive labour by taxing it, telling it what it should need and want, and devalues its medium of exchange, the human progress produced by an unfettered economy is compromised.

The government is not needed to provide education, infrastructure and R&D, all of which are provided more effectively by private individuals cooperating with each other. The longer-term benefits, which she describes as productivity and real GDP growth should not be the concern of governments. With respect to productivity, that is the business of employers who in an unfettered economy will always seek the most efficient use of capital resources, of which labour is but one.

GDP is just a money total, and the deflator to yield “real” GDP serves no purpose other than for those who define inflation as rising prices. And even that statistic is tamed: if the true rate of inflation is closer to independent analysts’ forecasts, such as those of Shadowstats and the Chapwood Index as mentioned above, then the evidence of the magnitude of wealth transfer from the productive economy to the government would be revealed as extremely destructive.

In setting an appropriate level of deficit financing, Kelton says the state can guard against “an acceleration and [of?] inflation risk”. There is no evidence this is the case, and, furthermore, she has been contradicted by central banks who have now openly stated they will inflate without limit.

SK

So, it’s impossible really to put a number on it. Nobody can know how much debt is too much debt. If you look at Japan today you see a country where the debt to GDP ratio is something like 240%, orders of magnitude above where the US is today or even where the US is forecast to be in the future. And so the question is how is Japan able to sustain a debt of that size. Wouldn’t it have an inflation problem? Would it lead to rising interest rates? Wouldn’t this be destructive in some way? The answer to all those questions as Japan has demonstrated now for years is simply, no. Japan’s debt is close to 240% of GDP, almost a quadrillion. That’s a very big number. Again, long term interest rates are very close to zero. There’s no inflation problem and so despite the size of the debt there are no negative consequences as a result. I think Japan teaches us a really import lesson.

Comment

Following the Second World War there were two successful monetary systems set up: Germany’s until it was folded into the euro, and that of Japan. Both shared the same characteristic: the encouragement and preservation of savings, which provided the financial capital for post-war recovery. The Japanese and German states did not intervene, pursuing generally sound money policies. They were deemed by observers at the time as economic miracles, compared with the stagnation of Keynesian-driven and socialistic economies intent on redistributing wealth. Japan’s population still retains the savings ethos, which means that when the Bank of Japan expands the money supply it is banked by the population when they receive it, fuelling investment, rather than spent on inflating consumer prices. That is the explanation for why Japan’s economic system, despite the state’s best efforts to undermine it, shows little price inflation and continued stability.

To use the Japanese model as the basis for a comparison with the US economy is dangerously wrong-headed.

SK

Think about what happened after World War Two when the US national debt went in excess of 100% –close to 125% of GDP. If we were talking about it the way we talk about it today as burdening future generations, as posing a grave national security risk, we would have to scratch our heads and say, wait a minute; do we think that our grandparents burdening the next generation with all of those bonds that were sold during World War Two to win the war, build the strongest middle class – all that  produced the longest period of peacetime prosperity. The Golden age of capital; all of that followed in the wake of fighting World War Two, increasing deficits massively, increasing the size of the national debt. And, of course, the next generation inherits those bonds. They don’t become burdens to the next generation, they become their assets.

The only potential risk with the national debt increasing over time is inflation and to the extent that you don’t believe the US has a long-term inflation problem you shouldn’t believe the US is facing a long-term debt problem.

Comment

During the Second World War, it is true that US government debt had expanded enormously, but again Kelton skips over the subsequent facts. On the back of the Marshall plan and other US dollar post-war foreign financing schemes — many of which were to keep emerging nations out of the USSR’s sphere of influence — American corporations expanded their activities abroad, bringing employment and wealth back to America. Dollars were being printed for export, and not just to pay for expensive wars in Korea and Vietnam. This sleight of hand was finally exposed when the London gold pool collapsed in the late sixties.

The Bretton Woods agreement in 1944 tied the dollar to gold, permitting foreign central banks and certain intra-national organisations to demand gold from the US Treasury in exchange for dollars at the official rate of $35. In 1945, after the agreement was implemented, the US Treasury had amassed 17,848 tonnes of monetary gold, which by 1950 had increased to 20,279 tonnes. In 1950, the estimated above-ground stocks were 51,760 tonnes, of which total monetary gold was 31,096 tonnes.

In other words, in 1950 the US had a virtual monopoly on monetary gold and its holding was about 40% of all above-ground stocks. This enabled the US to keep the inflationary symptoms of monetary expansion at bay, at the expense of its gold stockpile. The belief that the expansion of debt, which is fundamentally the consequence of monetary expansion, was benign and will continue to be so is therefore badly flawed. This became evident following President Nixon’s ending of the Bretton Woods agreement in August 1971, since when measured in gold the dollar has lost 98% of its purchasing power.

Today, we lack the monetary stability that the golden fig-leaf of the Bretton Woods era provided, and the consequences of the expansion of national debts in all currencies, advocated by MMT, will turn out to be very different from those of the post-war period. Inheriting government bonds, as Kelton puts it, is likely to turn out to be a worthless legacy.

As to the belief that the US does not face a long-term debt and inflation problem, current events are now undermining that supposition.

SK

So, the best defence against inflation is a good offence and what MMT does is to try to be, I think kind of hypersensitive to the risks of inflation. I don’t see any other macro school of thought pay as careful attention as we do to the inflation risk question.

Comment

Kelton appears to be contradicting herself in this extract. The context suggests a dispute with, offence against, or dismissal of those who worry about inflation. All while MMT claims to be hypersensitive its dangers.

As stated above, inflation is the expansion of the money quantity, not an immeasurable price effect. Her claim to be hypersensitive to inflation cannot stand scrutiny unless it is applied to money, not prices. But her statement that MMT pays more attention than any other macro school to price inflation exposes all macro schools to the accusation of inflationism — correctly.

We can agree on that slender point. But she fails to mention Austrian economic theory, particularly that espoused by von Mises who persistently condemned inflationism, based on sound economic theory and deductive reasoning. This omission might be explained on the basis that Austrian economics is not a neo-Keynesian macroeconomic theory. But Kelton, like most neo-Keynesians, may not be aware of the existence of the Austrian school let alone the rigorousness of its methods.

SK

So what we would say is, look, if you are Congress and if you are considering a new spending bill, instead of thinking about the ways in which that new spending will add to the deficit or add to the debt you should be thinking about the ways in which that new spending has the risk of accelerating inflation and then avoid doing that. So instead of going to the Congressional Budget Office and saying we’d like to know what this bill will do to the debt and the deficit over time, instead go to the Congressional Budget Office or other government agencies and say we’re considering passing this trillion-dollar investment in infrastructure. This is our bill. Would you look at it, and we plan to do this spending over the course of the next five years. Tell us if that would create problems in the real economy. Evaluate the inflation risk and come back to us and give us some feedback. That’s the kind of responsible budgeting that I think that I would like to see Congress begin to move towards.

Comment

For Kelton to earlier observe that MMT pays more attention to inflation risk than any other form of macroeconomics and then to imply Congress is over-concerned with inflation — the consequence of budget deficits — is, to say the least, inconsistent.

The central problem with asking the CBO and similar advisory bodies to forecast spending effects is that economic calculations are being asked of administrators and bureaucrats unequipped for the task. Furthermore, the economists among them are all trained and employed to enhance the role of the state, with limited understanding and usually with no commercial experience of the non-financial private sector.

Quantifying the risk of price inflation — which is what she actually refers to — is impossible. It is naïve to assume that the money spent on a project has different impacts on the general level of prices in ways that can be quantified beforehand. Assuming it is funded by means other than of savings, all state spending is inflationary and dilutes the existing stock of money to the advantages of some and the disadvantage of others. Furthermore, it is often erroneously assumed that government debt acquired by the banks and not subsequently sold to the Fed represents investment as opposed to inflationary funding.

It is doubtful that anyone in government agencies or Congress fully understands the impossibility of forecasting the consequences of government spending, particularly when they rely on inappropriate economic modelling. It is clearly nonsensical to say spending a trillion on one project is going to be less inflationary than spending it on an alternative one.

Congress always pushes for extra spending, and whatever the CBO or other agency might say, any advice is bound to be modified in the legislative process; this is the basis of pork-barrel politics which is likely to be further encouraged by MMT’s free-spending policies.

SK

 So the question about what to do if inflation becomes a problem is a different one and I think the first thing you have to do is say is what is driving inflation, because to think that the inflation that is going to become important at some future date is likely to be the result of too much aggregate spending is really hard to believe. I mean the US economy hasn’t experienced what we might call demand-pull inflation for almost a century. The types of inflation that have been important in the US have almost always come on the cost side: what we call cost-push inflation. They come about because of things like oil price shocks. You might see increases in headline inflation rates because the housing component or healthcare and so when you think about how to fight inflation if you’ve got inflation resulting from energy price increases you probably not going to do much to have the Fed raise interest rates or even have Congress raise taxes. You got to do something else that’s going to work so I reject the idea that MMT is about using taxes to fight inflation. That’s a mischaracterization of pretty much everything we’ve written but people say it all the time.

Comment  

We have already pointed out Kelton’s mischaracterisation of inflation. In this final part Kelton makes the additional mistake of segregating inflation drivers to cost or demand factors. The error is to not understand that the role of money is to permit the consumer to make choices, to compare one good or service with another in pursuit of want satisfaction. If oil prices rise, the consumers’ preferences will simply change to accommodate that fact. Changes like this happen all the time, even under a gold standard. The key to understanding what drives prices is that consumers make choices, valuing one good against another, and money is simply the mechanism for doing so.

Kelton’s allocation of inflation to cost-push factors is consistent with the cost of production theory of prices. While usually true of government monopolies and being the basis of Marxian philosophy, it is not true of free markets. Instead, MMT-ers are effectively advocating policies whereby consumer choices should not have to be made and money is expanded so that consumers can acquire more or less everything they desire. Economically, this is simply nonsense.

Conclusion

By taking little more than a few moments to consider MMT we find there is little in it that is new. It adds nothing to neo-Keynesian macroeconomics except its extremism. On Tuesday (9 June) Professor Paul Krugman tweeted; “I agree with Kelton about deficits not being a problem.  But I get that from perfectly conventional macroeconomics, not MMT. What does MMT contribute here?”

Just so.

Kelton makes naïve claims about controlling inflation, which she believes is an increase in the general level of prices. Unwarranted faith is placed in the state’s management of the economy, and in her belief it can use money responsibly as its primary management tool. This is despite all the empirical evidence to the contrary, and it flies in the face of properly reasoned economic theory.

There can only be one conclusion: MMT is an ephemeral macroeconomic cult which tells us much about the psychological condition of a wider belief system running out of road. It is perhaps symptomatic of peak macroeconomics, about to slide down the other side of diminishing influence into catastrophic failure, then ultimately, it’s rejection.

The evidence of a final catastrophe for macroeconomics is mounting. Decades of increasing state intervention, driven by neo-Keynesian economic policies from which macroeconomics owes its origins, have led us to the edge of the greatest economic chasm since the 1930s, and possibly much worse than that. And the MMT-ers favourite tool of economic management, fiat currency, will almost certainly be with us for not very much longer.

Authored by Paul Ryder via Counterpunch.org,

Five times in the last ninety years, elements of the U.S. power structure have tried to oust a sitting president without an election.

The efforts were aimed at Franklin Roosevelt, John Kennedy, Richard Nixon, Bill Clinton, and Donald Trump.

Two attempts succeeded and three failed… so far.

Franklin Roosevelt

President Franklin Roosevelt took office in 1933 as the Great Depression was battering much of the world. Workers were striking, organizing unions, and escalating their demands. Fascists had taken power in Italy and Germany and were threatening to do so elsewhere.

Prominent Wall Street bankers and industrialists said the only way to keep communism at bay was to adopt fascism and align with Italy and Germany. Roosevelt rejected that view, and the plotting began.

The plan was to have 500,000 World War I veterans march on Washington, D.C. They would overwhelm the city, reduce Roosevelt to a figurehead, and transfer power to the Wall Street plotters.

They decided Marine Corps Major General Smedley Butler, then the most decorated Marine in U.S. history, should lead the coup. This was a mistake. When their emissary told Butler what they had in mind, and said they could raise $300 million for it, he said, “If you get 500,000 soldiers advocating anything smelling of Fascism, I am going to get 500,000 more and lick the hell out of you and we will have a real war right at home.”

After Butler chewed them out, he reported everything to the U.S. House Un-American Activities Committee, including the plotters’ names he knew, officials with J.P. Morgan & Company, Guaranty Trust Company, Dupont Chemical, Singer Sewing Machine Company, and the Remington Arms Company. They all denied it, but Butler had convinced the Committee it was true.

Roosevelt did not want a public confrontation, so the House Committee quietly wrapped up its work. FBI Director J. Edgar Hoover dispatched agents to tell each plotter they would be under surveillance for treasonous activities. The plot was shelved.

The lesson of this fiasco was money isn’t everything. The Wall Street titans had no experience with overthrowing a U.S. president. They had no operational arm. They did not know where to start.

John Kennedy

By the time President Kennedy took office in 1961, the military budget had grown twenty times larger in real dollars than in 1933. The money was paying for a military-industrial complex, including the Pentagon, weapons manufacturers, State Department, CIA, FBI, NSA, Atomic Energy Commission, NASA, Members of Congress, think tanks, universities, and a battalion of friendly reporters. The sprawling power system had become strong enough to perpetuate itself and to remove a president if necessary.

What the Pentagon and CIA wanted first from President Kennedy was the overthrow of the new socialist Cuban leader, Fidel Castro. They organized an assault by Cuban exiles, assuring Kennedy it would spark a successful anti-Castro uprising in Cuba. When it did not, they demanded Kennedy send in U.S. combat forces. He refused, and the Cuban army captured 1,110 Cuban exiles and killed another 114. The Bay of Pigs invasion became known as the “Bay of Pigs fiasco.” Kennedy realized the Pentagon and CIA had known all along the exiles could not succeed on their own. They had tried to trick him into a direct U.S. invasion.

Kennedy fired both CIA Director Allen Dulles and his chief Bay of Pigs planner, Richard Bissell, and threatened to “shatter the CIA into a thousand pieces and scatter it to the winds.”

CIA leaders and the Joint Chiefs of Staff at the Defense Department were livid and continued to press him to authorize a U.S. invasion of Cuba. With the Cuban missile crisis in 1962, they saw a perfect opportunity for it. Again, Kennedy refused.

The next year, 1963, a fusillade of bullets removed Kennedy from office. His successor, Lyndon Johnson, promptly appointed the blue-ribbon Warren Commission to figure out who did it. The Commission’s day-to-day work was led by Allen Dulles, the former CIA Director JFK had fired. In the end, the Commission report declared the assassination to be the work of a deranged loner, Lee Harvey Oswald.

Most Americans were not convinced. In every one of nine Gallup polls taken since 1963, a majority of respondents have said they thought others had been involved in a conspiracy. Of the four people who knew the most about what happened — Lyndon Johnson, Robert Kennedy, Richard Nixon, and Fidel Castro – none agreed with the Warren Commission report.

If it was not just one loner, who was in on the conspiracy? We may never know all the details of this very cold case, such as the name of the person who fired the fatal bullet. We have learned some things, however. The easiest of these is that the CIA was involved in the Kennedy assassination at every juncture, from preparation to execution to the cover-up.

Not only was the CIA everywhere, they had ample motive, namely Kennedy’s refusal to invade Cuba. And, unlike the Wall Street plotters of the 1930s, they had experience with covert operations, overthrowing governments, and assassinating leaders. That is what the CIA was created to do.

It is not necessary to prove the triggerman was employed by the CIA, or CIA leaders made a formal decision to kill the president, or everyone in the CIA even knew what was happening, or no one else was involved, to realize the CIA was heavily involved.

Richard Nixon

The Watergate story is familiar. President Richard Nixon ordered his staff to commit crimes and cover them up. Two budding Washington Post reporters, Bob Woodward and Carl Bernstein, exposed him. Nixon resigned and left town in disgrace before Congress could impeach and remove him.

The story came from Woodward and Bernstein’s articles and their book, All the President’s Men (1974). Actor Robert Redford then turned it into a popular movie with the same name (1976).

In the following decades, however, this satisfying morality play has been undermined by 2,000 pages of investigative books by Jim Hougan (Secret Agenda, 1984), Len Colodny and Robert Gettlin (Silent Coup, 1991), James Rosen (The Strong Man, 2008), Russ Baker (Family of Secrets, 2009), Phil Stanford (White House Call Girl, 2013), Tim Weiner (One Man Against the World, 2015) and Ray Locker (Nixon’s Gamble, 2016; Haig’s Coup, 2019).

Each examined Watergate from a different angle and found new clues to what happened. Adding all these clues creates a quite different story, showing how thoroughly the military industrial complex dominates Washington.

If you made a chart of the newly discovered CIA and Pentagon links to Watergate, it would fill a large wall. To put it another way, if you remove the CIA and the Pentagon from the story, Nixon would have completed his second term and retired with dignity.

Watergate really started in 1969, on Nixon’s first day in office. The President and his National Security Adviser, Henry Kissinger, cut the Department of Defense, State Department, and the CIA out of foreign policy decision-making. The two men brought all policymaking into the National Security Council in the White House. They would often not inform the three main foreign policy agencies about policy changes until the last minute, fearing leaks or sabotage.

Predictably, this created chronic bureaucratic warfare between the three agencies and the White House. When there were disagreements about policy, there was no way to resolve them. Spying and leaking inevitably followed. In turn, Nixon and Kissinger told the agencies even less.

Left out in the cold, the Pentagon and the CIA moved against Nixon.

To see how this wasn’t apparent from the Woodward and Bernstein story, consider the man who was the reporters’ pipeline to the truth, a secret source called Deep Throat. Finally, in 2005, Woodward said it was former FBI Associate Director Mark Felt. Nixon had rejected Felt for the top FBI spot when long time Director J. Edgar Hoover died, so he had a plausible motive.

The mystery seemed solved, except the revisionist histories had already shown Felt was only one of many sources giving the two reporters damaging information on Nixon. Deep Throat was actually a composite character, and the bombshell stories mostly originated in two places, the Department of Defense and the CIA. These were the very agencies with which Nixon and Kissinger had been at war.

By 1974, with his trusted advisors gone, Nixon found himself relying on two Pentagon officials to help him avoid removal from office. They were Chief of Staff General Alexander Haig, most recently Vice Chief of Staff of the Army, and J. Fred Buzhardt, who was both Special White House Counsel for Watergate Matters and General Counsel for the Department of Defense.

Not surprisingly, these two military men spent months maneuvering Nixon into deeper trouble. After the House Judiciary Committee sent impeachment articles to the House floor, Nixon knew the House would impeach him and the Senate would convict and remove him. Nixon resigned.

Bill Clinton

In 1998, the Republican-controlled U.S. House of Representatives impeached President Bill Clinton for perjury and obstruction of justice concerning his sexual exploitation of a 22-year-old White House intern. The case then went to the U.S. Senate, where the Constitution required a two-thirds vote of the Senators present to convict and remove Clinton. The two impeachment articles failed, and Clinton completed his second term.

Why did the Republicans fail? In the Senate, the Republican advantage was only 55-45, well short of the 67-vote supermajority needed to convict and remove Clinton.

Since Bill Clinton was not at odds with the military-industrial complex, Wall Street, or any other power center, the GOP couldn’t count on help persuading Democratic Senators to vote for removal. In fact, the core of Clinton’s agenda matched the 1992 Republican platform, favoring NAFTA, tough criminal sentencing, ending welfare, NATO expansion, a hard line on Cuba, and so on. The GOP knew the prospects in the Senate were hopeless.

The impeachment of Clinton, then, was not a genuine attempt to remove him. It was merely a partisan exercise in muddying up the Democrats as the 2000 election approached.

Donald Trump

The attempt to remove Donald Trump, called Russiagate, began as a 2016 campaign attack by Hillary Clinton. The charges against him continued in the press after Election Day, and ever since. In 2019, Democrats took a variation on Russiagate, called Ukrainegate, and used it to impeach Trump in the House of Representatives. The GOP-controlled Senate inevitably did not convict him. It ended up as a replay of the Clinton impeachment. Trump stayed in the Oval Office.

What exactly was the Democrats’ plan? A successful Senate vote was never possible, so why would the Democrats devote three and a half years just to get an impeachment without removal?

From their actions, it appears the Democrats were fixed on Watergate as the model for ousting a president without an election.

That would be understandable. All but one of the top Democratic politicians in 2016 had been young adults during Watergate. In 1974, Bill Clinton was 28, Hillary Clinton was 27, Nancy Pelosi was 34, Harry Reid was 35, Chuck Schumer was 24, Joe Biden was 31, John Podesta was 25, and David Axelrod was 19. They were absorbing the Watergate story every day. The exception, Barack Obama, was only 13 at the time. Watergate would be their frame of reference.

Accordingly, the Democrats staged a Watergate-style morality play, with Donald Trump playing the role of Richard Nixon. It was complete with a flow of shocking revelations, dramatic Congressional hearings, a Special Counsel, indictment of underlings who could be squeezed for evidence against higher-ups, watching the president’s poll ratings skid, disapproving newspaper editorials, and peeling off votes of Republican Senators. All this was supposed to result in the president’s resignation or impeachment and removal.

It did not work.

One problem was the series of bombshell news stories coming from unnamed intelligence sources. These included the DNC hack, local election board tampering, the Christopher Steele Dossier, St. Petersburg click-bait factory, sabotaging the Vermont utility grid, and so on. One after another the stories collapsed, usually for lack of evidence.

In addition, the president’s favorability ratings did not plummet as they had during Watergate. Richard Nixon’s approval rating fell from 67% in January 1973 to 24% by the time he resigned. By contrast, Donald Trump’s approval rating, 45% in January 2017, had only fallen to 44% by the time of his impeachment.

The underlying problem was the Democrats did not understand Watergate. They thought Nixon was foiled by tenacious crusading reporters and their savvy editor. In fact, Nixon ran afoul of the military industrial complex, which guided the press to the outcome it wanted.

In the case of Trump, the Pentagon, CIA, and the rest understood how to manage the new president. They would tolerate his rally outbursts, NATO tantrums, and raving midnight tweets because they knew they could get what they wanted from him when it mattered.

While the Democrats labored to portray Trump as soft on Russia, his actual policies have been in line with the bi-partisan foreign policy consensus to give the Pentagon and weapons manufacturers what they want. This includes sharp increases in overall military spending, a trillion dollars in new nuclear weapons, new types of nuclear weapons, destroying a series of U.S.-Russian arms control treaties, advancing NATO to the Russian border, tough economic sanctions on Russia, providing weapons to Ukraine and Poland to use against Russia, killing Russians in Syria, ejecting Russian diplomats from the United States, conducting war exercises on Russia’s border, and trying to stop Russian energy exports to Europe.

If the Democrats had understood Watergate, they would have noticed a key condition was missing: aggravated conflict between the president and the military-industrial complex. That is why the Democrats failed.

Of course, as 2020 election day approaches, President Trump has managed to create a triple crisis — his bungled COVID-19 response, the resulting economic paralysis, and his inciting a coast-to-coast police rampage — which may doom him with no effort by the Democrats. No one knows at this point.

It is fair to say, however, that if Trump can’t regain his composure and resolve his current clash with the Pentagon, he will be taught a cold lesson about power.

An autonomous aerial vehicle technology company called Ehang has launched the world’s first commercial Urban Air Mobility (UAM) service in China. 

The EHang 216 drone can carry fly two human passengers, has been exhibited in China and Europe over the last several years. We noted in April 2019, the drone flew in Vienna. Now it will be flying people from the LN Garden Hotel in Nansha, a coastal district in Guangzhou.

The partnership between EHang and LN Holdings will begin with a pilot program in the near term — marks the world’s first hotel offering passenger drone service to patrons. The drone will first provide aerial sightseeing tours, traveler transportation, air logistics, and aerial media light shows. 

EHang and the hotel will eventually expand the air travel network to the regional community, offering drone-taxi service to patrons.

CEO of EHang, Hu Huazh, said the partnership with LN Holdings would help transform “Guangzhou into a global air mobility pilot city.” 

“Guests of LN Garden Hotel will experience our one-stop intelligent AAV services, including the unique aerial sightseeing, convenient and autonomous air deliveries, and high-tech aerial light shows,” said Huazh. 

General manager of LN Group and chairman of LN Holdings, Liang Lingfeng, said: “We own a large chain of resources in the tourism industry, covering travel, brand hotels, conventions, exhibitions, and scenic attractions. By leveraging our controlling shareholder LN Group’s ability to integrate its resources in the consumer sector, cooperating with EHang could generate incremental products and services..” 

“We can fulfill customers’ travel demands in the air and on the ground by combining intelligent technology with the tourist experience. Eventually, we will provide new products and services across different sectors, business categories, and regions in the country,” said Lingfeng. 

The new service lays a foundation for regulators around the world to establish international guidelines that will benefit the long-term development of UAM services. The flying car market is expected to be a billion-dollar industry by the end of the decade. 

Video: EHang 216 embarks on world’s first UAM hotel service

At the moment, the most significant barrier to flying cars is regulation, especially in the US, where Federal Aviation Administration (FAA) has set the rules on air travel — usually seen as an international standard. 

Authored by Soeren Kern via The Gatestone Institute,

U.S. Attorney General William Barr has blamed Antifa — a militant “anti-fascist” movement — for the violence that has erupted at George Floyd protests across the United States. “The violence instigated and carried out by Antifa and other similar groups in connection with the rioting is domestic terrorism and will be treated accordingly,” he said.

Barr also said that the federal government has evidence that Antifa “hijacked” legitimate protests around the country to “engage in lawlessness, violent rioting, arson, looting of businesses, and public property assaults on law enforcement officers and innocent people, and even the murder of a federal agent.” Earlier, U.S. President Donald J. Trump had instructed the U.S. Justice Department to designate Antifa as a terrorist organization.

Academics and media outlets sympathetic to Antifa have argued that the group cannot be classified as a terrorist organization because, they claim, it is a vaguely-defined protest movement that lacks a centralized structure. Mark Bray, a vocal apologist for Antifa in America and author of the book “Antifa: The Anti-Fascist Handbook,” asserts that Antifa “is not an overarching organization with a chain of command.”

Empirical and anecdotal evidence shows that Antifa is, in fact, highly networked, well-funded and has a global presence. It has a flat organizational structure with dozens and possibly hundreds of local groups. Not surprisingly, the U.S. Department of Justice is currently investigating individuals linked to Antifa as a step to unmasking the broader organization.

In the United States, Antifa’s ideology, tactics and goals, far from being novel, are borrowed almost entirely from Antifa groups in Europe, where so-called anti-fascist groups, in one form or another, have been active, almost without interruption, for a century.

What is Antifa?

Antifa can be described as a transnational insurgency movement that endeavors, often with extreme violence, to subvert liberal democracy, with the aim of replacing global capitalism with communism. Antifa’s stated long-term objective, both in America and abroad, is to establish a communist world order. In the United States, Antifa’s immediate aim is to bring about the demise of the Trump administration.

Antifa’s nemeses include law enforcement, which is viewed as enforcing the established order. A common tactic used by Antifa in the United States and Europe is to employ extreme violence and destruction of public and private property to goad the police into a reaction, which then “proves” Antifa’s claim that the government is “fascist.”

Antifa claims to oppose “fascism,” a term it often uses as a broad-brush pejorative to discredit those who hold opposing political beliefs. The traditional meaning of “fascism” as defined by Webster’s Dictionary is “a totalitarian governmental system led by a dictator and emphasizing an aggressive nationalism, militarism, and often racism.”

Antifa holds the Marxist-Leninist definition of fascism which equates it with capitalism. “The fight against fascism is only won when the capitalist system has been shattered and a classless society has been achieved,” according to the German Antifa group, Antifaschistischer Aufbau München.

Germany’s BfV domestic intelligence agency, in a special report on left-wing extremism, noted:

“Antifa’s fight against right-wing extremists is a smokescreen. The real goal remains the ‘bourgeois-democratic state,’ which, in the reading of left-wing extremists, accepts and promotes ‘fascism’ as a possible form of rule and therefore does not fight it sufficiently. Ultimately, it is argued, ‘fascism’ is rooted in the social and political structures of ‘capitalism.’ Accordingly, left-wing extremists, in their ‘antifascist’ activities, focus above all on the elimination of the ‘capitalist system.'”

Matthew Knouff, author of An Outsider’s Guide to Antifa: Volume II, explained Antifa’s ideology this way:

“The basic philosophy of Antifa focuses on the battle between three basic forces: fascism, racism and capitalism — all three of which are interrelated according to Antifa…. with fascism being considered the final expression or stage of capitalism, capitalism being a means to oppress, and racism being an oppressive mechanism related to fascism.”

In an essay, “What Antifa and the Original Fascists Have In Common,” Antony Mueller, a German professor of economics who currently teaches in Brazil, described how Antifa’s militant anti-capitalism masquerading as anti-fascism reveals its own fascism:

“After the left has pocketed the concept of liberalism and turned the word into the opposite of its original meaning, the Antifa-movement uses a false terminology to hide its true agenda. While calling themselves ‘antifascist’ and declaring fascism the enemy, the Antifa itself is a foremost fascist movement.

“The members of Antifa are not opponents to fascism but themselves its genuine representatives. Communism, Socialism and Fascism are united by the common band of anti-capitalism and anti-liberalism.

“The Antifa movement is a fascist movement. The enemy of this movement is not fascism but liberty, peace and prosperity.”

Antifa’s Ideological Origins

The ideological origins of Antifa can be traced back to the Soviet Union roughly a century ago. In 1921 and 1922, the Communist International (Comintern) developed the so-called united front tactic to “unify the working masses through agitation and organization” … “at the international level and in each individual country” against “capitalism” and “fascism” — two terms that often were used interchangeably.

The world’s first anti-fascist group, Arditi del Popolo (People’s Courageous Militia), was founded in Italy in June 1921 to resist the rise of Benito Mussolini’s National Fascist Party, which itself was established to prevent the possibility of a Bolshevik revolution on the Italian Peninsula. Many of the group’s 20,000 members, consisting of communists and anarchists, later joined the International Brigades during the Spanish Civil War (1936–39).

In Germany, the Communist Party of Germany established the paramilitary group Roter Frontkämpferbund (Red Front Fighters League) in July 1924. The group was banned due to its extreme violence. Many of its 130,000 members continued their activities underground or in local successor organizations such as the Kampfbund gegen den Faschismus (Fighting-Alliance Against Fascism).

In Slovenia, the militant anti-fascist movement TIGR was established in 1927 to oppose the Italianization of Slovene ethnic areas after the collapse of the Austro-Hungarian Empire. The group, which was disbanded in 1941, specialized in assassinating Italian police and military personnel.

In Spain, the Communist Party established the Milicias Antifascistas Obreras y Campesinas (Antifascist Worker and Peasant Militias), which were active in the 1930s.

The modern Antifa movement derives its name from a group called Antifaschistische Aktion, founded in May 1932 by Stalinist leaders of the Communist Party of Germany. The group was established to fight fascists, a term the party used to describe all of the other pro-capitalist political parties in Germany. The primary objective of Antifaschistische Aktion was to abolish capitalism, according to a detailed history of the group. The group, which had more than 1,500 founding members, went underground after Nazis seized power in 1933.

A German-language pamphlet — “80 Years of Anti-Fascist Actions” (80 Jahre Antifaschistische Aktion)” — describes in minute detail the continuous historical thread of the Antifa movement from its ideological origins in the 1920s to the present day. The document states:

“Antifascism has always fundamentally been an anti-capitalist strategy. This is why the symbol of the Antifaschistische Aktion has never lost its inspirational power…. Anti-fascism is more of a strategy than an ideology.”

During the post-war period, Germany’s Antifa movement reappeared in various manifestations, including the radical student protest movement of the 1960s, and the leftist insurgency groups that were active throughout the 1970s, 1980s and 1990s.

The Red Army Faction (RAF), also known as the Baader-Meinhof Gang, was a Marxist urban guerrilla group that carried out assassinations, bombings and kidnappings aimed at bringing revolution to West Germany, which the group characterized as a fascist holdover of the Nazi era. Over the course of three decades, the RAF murdered more than 30 people and injured over 200.

After the collapse of the communist government in East Germany in 1989-90, it was discovered that the RAF had been given training, shelter, and supplies by the Stasi, the secret police of the former communist regime.

John Philip Jenkins, Distinguished Professor of History at Baylor University, described the group’s tactics, which are similar to those used by Antifa today:

“The goal of their terrorist campaign was to trigger an aggressive response from the government, which group members believed would spark a broader revolutionary movement.”

RAF founder Ulrike Meinhof explained the relationship between violent left-wing extremism and the police: “The guy in uniform is a pig, not a human being. That means we don’t have to talk to him and it is wrong to talk to these people at all. And of course, you can shoot.”

Bettina Röhl, a German journalist and daughter of Meinhof, argues that the modern Antifa movement is a continuation of the Red Army Faction. The main difference is that, unlike the RAF, Antifa’s members are afraid to reveal their identities. In a June 2020 essay published by the Swiss newspaper Neue Zürcher Zeitung, Röhl also drew attention to the fact that Antifa is not only officially tolerated, but is being paid by the German government to fight the far right:

“The RAF idolized the communist dictatorships in China, North Korea, North Vietnam, in Cuba, which were transfigured by the New Left as better countries on the right path to the best communism….

“The flourishing left-wing radicalism in the West, which brutally strikes at the opening of the European Central Bank headquarters in Frankfurt, at every G-20 summit or every year on May 1 in Berlin, has achieved the highest level of establishment in the state, not least thanks to the support by quite a few MPs from political parties, journalists and relevant experts.

“Compared to the RAF, the militant Antifa only lacks prominent faces. Out of cowardice, its members cover their faces and keep their names secret. Antifa constantly threatens violence and attacks against politicians and police officers. It promotes senseless damage to property amounting to vast sums. Nevertheless, MP Renate Künast (Greens) recently complained in the Bundestag that Antifa groups had not been adequately funded by the state in recent decades. She was concerned that ‘NGOs and Antifa groups do not always have to struggle to raise money and can only conclude short-term employment contracts from year to year.’ There was applause for this from Alliance 90 / The Greens, from the left and from SPD deputies.

“One may ask the question of whether Antifa is something like an official RAF, a terrorist group with money from the state under the guise of ‘fighting against the right.'”

Germany’s BfV domestic intelligence agency explains Antifa’s glorification of violence:

“For left-wing extremists, ‘Capitalism’ is interpreted as triggering wars, racism, ecological disasters, social inequality and gentrification. ‘Capitalism’ is therefore more than just a mere economic order. In left-wing extremist discourse, it determines the social and political form as well as the vision of a radical social and political reorganization. Whether anarchist or communist: Parliamentary democracy as a so-called bourgeois form of rule should be ‘overcome’ in any case.

“For this reason, left-wing extremists usually ignore or legitimize human rights violations in socialist or communist dictatorships or in states that they allegedly see threatened by the ‘West.’ To this day, both orthodox communists and autonomous activists justify, praise and celebrate the left-wing terrorist Red Army Faction or foreign left-wing terrorists as alleged ‘liberation movements’ or even ‘resistance fighters.'”

Meanwhile, in Britain, Anti-Fascist Action (AFA), a militant anti-fascist group founded in 1985, gave birth to the Antifa movement in the United States. In Germany, the Antifaschistische Aktion-Bundesweite Organisation (AABO) was founded in 1992 to combine the efforts of smaller Antifa groups scattered around the country.

In Sweden, Antifascistisk Aktion (AFA), a militant Antifa group founded in 1993, established a three-decade track record for using extreme violence against its opponents. In France, the Antifa group L’Action antifasciste, is known for its fierce opposition to the State of Israel.

After the fall of the Berlin Wall in 1989 and the collapse of communism in 1990, the Antifa movement opened a new front against neoliberal globalization.

Attac, established in France in 1989 to promote a global tax on financial transactions, now leads the so-called alter-globalization movement, which, like the Global Justice Movement, is opposed to capitalism. In 1999, Attac was present in Seattle during violent demonstrations that led to the failure of WTO negotiations. Attac also participated in anti-capitalist demonstrations against the G7, the G20, the WTO, and the war in Iraq. Today, the association is active in 40 countries, with more than a thousand local groups and hundreds of organizations supporting the network. Attac’s decentralized and non-hierarchical organizational structure appears to be the model being used by Antifa.

In February 2016, the International Committee of the Fourth International advanced the political foundations of the global anti-war movement, which, like Antifa, blames capitalism and neoliberal globalism for the existence of military conflict:

“The new anti-war movement must be anti-capitalist and socialist, since there can be no serious struggle against war except in the fight to end the dictatorship of finance capital and the economic system that is the fundamental cause of militarism and war.”

In July 2017, more than 100,000 anti-globalization and Antifa protesters converged on the German city of Hamburg to protest the G20 summit. Leftist mobs laid waste to the city center. An Antifa group called “G20 Welcome to Hell” bragged about how it was able to mobilize Antifa groups from across the world:

“The summit mobilizations have been precious moments of meeting and co-operation of left-wing and anti-capitalist groups and networks from all over Europe and world-wide. We have been sharing experiences and fighting together, attending international meetings, being attacked by cops supported by the military, re-organizing our forces and fighting back. Anti-globalization movement has changed, but our networks endure. We are active locally in our regions, cities, villages and forests. But we are also fighting trans-nationally.”

Germany’s domestic security service, in an annual report, added:

“Left-wing extremist structures tried to shift the public debate about the violent G20 summit protests in their favor. With the distribution of photos and reports of allegedly disproportionate police measures during the summit protests, they promoted an image of a state that denounced legitimate protests and put them down with police violence. Against such a state, they said, ‘militant resistance’ is not only legitimate, but also necessary.”

Part II of this series will examine the activities of Antifa in Germany and the United States.