Category: zerohedge

Authored by Ryan McMaken via The Mises Institute,

The coerced economic “shutdowns” – enforced with fines, arrests, and revoked business licenses – are not the natural outgrowth of a pandemic. They are the result of policy decisions taken by politicians who have suspended constitutional institutions and legal recognition of basic human rights. These politicians have instead imposed a new form of central planning based on an unproven, theoretical set of ideas about police-enforced “social distancing.”

Suspending the rule of law and civil rights will have enormous consequences in terms of human life counted in suicides, drug overdoses, and other grave health problems resulting from unemployment, denial of “elective” medical care, and social isolation.

None of that is being considered, however, since it is now fashionable to have governments determine whether or not people may open their businesses or leave their homes. So far, the strategy for dealing with the resulting economic collapse is no more sophisticated than record-breaking deficit spending, followed by debt monetization via money printing. In short, politicians, bureaucrats, and their supporters have insisted a single policy goal—ending the spread of a disease—be allowed to destroy all other values and considerations in society.

Has it even worked? Mounting evidence says no.

In The Lancet, Swedish infectious disease clinician (and World Health Organization (WHO) advisor) Johan Giesecke concluded:

It has become clear that a hard lockdown does not protect old and frail people living in care homes – a population the lockdown was designed to protect. Neither does it decrease mortality from COVID-19, which is evident when comparing the UK’s experience with that of other European countries.

At best, lockdowns push cases into the future, they do not lower total deaths. Gieseck continues:

Measures to flatten the curve might have an effect, but a lockdown only pushes the severe cases into the future—it will not prevent them. Admittedly, countries have managed to slow down spread so as not to overburden health-care systems, and, yes, effective drugs that save lives might soon be developed, but this pandemic is swift, and those drugs have to be developed, tested, and marketed quickly. Much hope is put in vaccines, but they will take time, and with the unclear protective immunological response to infection, it is not certain that vaccines will be very effective.

As a public policy measure, the lack of evidence that lockdowns work must be balanced with the fact that we have already observed that economic destruction is costly in terms of human life.

Yet in the public debate, lockdown enthusiasts insist that any deviation from the lockdown will result in total deaths far exceeding those places where there are lockdowns. So far, there is no evidence of this.

In a new study titled “Full Lockdown Policies in Western Europe Countries Have No Evident Impacts on the COVID-19 Epidemic,” author Thomas Meunier writes, “total deaths numbers using pre-lockdown trends suggest that no lives were saved by this strategy, in comparison with pre-lockdown, less restrictive, social distancing policies.” That is, the “full lockdown policies of France, Italy, Spain and United Kingdom haven’t had the expected effects in the evolution of the COVID-19 epidemic.”1

The premise here is not that voluntary “social distancing” has no effect. Rather, the question is to whether “police-enforced home containment” works to limit the spread of disease. Meunier concludes it does not.

Meanwhile a study by polititical scientist Wilfred Reilly compared lockdown policies and COVID-19 fatalities among US states. Reilly writes:

The question the model set out to ask was whether lockdown states experience fewer Covid-19 cases and deaths than social-distancing states, adjusted for all of the above variables. The answer? No. The impact of state-response strategy on both my cases and deaths measures was utterly insignificant. The “p-value” for the variable representing strategy was 0.94 when it was regressed against the deaths metric, which means there is a 94 per cent chance that any relationship between the different measures and Covid-19 deaths was the result of pure random chance.

Overall, however, the fact that good-sized regions from Utah to Sweden to much of East Asia have avoided harsh lockdowns without being overrun by Covid-19 is notable.

Another study on lockdowns—again, we’re talking about forced business closures and stay-at-home orders here—is this study by researcher Lyman Stone at the American Enterprise Institute. Stone notes that areas where lockdowns were imposed either had already experienced a downward trend in deaths before the lockdown could have possibly shown effects or showed the same trend as the year prior. In other words, lockdown advocates have been taking credit for trends that had already been observed before lockdowns were forced on the population.

Stone writes:

Here’s the thing: there’s no evidence of lockdowns working. If strict lockdowns actually saved lives, I would be all for them, even if they had large economic costs. But the scientific and medical case for strict lockdowns is paper-thin.

Experience increasingly suggests that a more targeted approach is better for those who actually want to limit the spread of disease among the most vulnerable. The overwhelming majority—nearly 75 percent—of deaths from COVID-19 occur in patients over sixty-five years of age. Of those, approximately 90 percent have other underlying conditions. Thus, limiting the spread of COVID-19 is most critical among those who are already engaged with the healthcare system and are elderly. In the US and Europe, more than half of COVID-19 deaths are occuring in nursing homes and similar institutions.

This is why Matt Ridley at The Spectator quite reasonably observes that testing, not lockdowns, appears to be the key factor in limiting deaths from COVID-19. Those areas where testing is widespread have performed better:

Yet it is not obvious why testing would make a difference, especially to the death rate. Testing does not cure the disease. Germany’s strange achievement of a consistently low case fatality rate seems baffling—until you think through where most early cases were found: in hospitals. By doing a lot more testing, countries like Germany might have partly kept the virus from spreading within the healthcare system. Germany, Japan and Hong Kong had different and more effective protocols in place from day one to prevent the virus spreading within care homes and hospitals.

The horrible truth is that it now looks like in many of the early cases, the disease was probably caught in hospitals and doctors’ surgeries. That is where the virus kept returning, in the lungs of sick people, and that is where the next person often caught it, including plenty of healthcare workers. Many of these may not have realised they had it, or thought they had a mild cold. They then gave it to yet more elderly patients who were in hospital for other reasons, some of whom were sent back to care homes when the National Health Service made space on the wards for the expected wave of coronavirus patients.

We could contrast this with the policies of Governor Andrew Cuomo in New York, who mandated that nursing homes accept new residents without testing. This method nearly ensures that the disease will spread quickly among those who are most likely to die from it.

Meanwhile, Governor Cuomo saw fit to impose police-enforced lockdowns on the entire population of New York, ensuring economic ruin and ruined health for many non-COVID patients who were then cut off from vital treatments. Yet, disturbingly, lockdown fetishists like Cuomo are hailed as wise statesmen who “acted decisively” to prevent the spread of disease.

But this is the sort of regime we now live under. In the minds of many, it is better to abolish human rights and consign millions to destitution in the name of pursuing trendy unproven policies. The prolockdown party has even turned basic fundamentals of policy debate upside down. As Stone notes:

At this point, the question I usually get is, “What’s your evidence that lockdowns don’t work?”

It’s a strange question. Why should I have to prove that lockdownsdon’t work? The burden of proof is to show that they do work! If you’re going to essentially cancel the civil liberties of the entire population for a few weeks, you should probably have evidence that the strategy will work. And there, lockdown advocates fail miserably, because they simply don’t have evidence.

With economic output crashing worldwide and unemployment soaring to Great Depression levels, governments are already looking for a way out. Don’t expect to hear any mea culpas from politicians, but we can already see how governments are quickly moving toward a voluntary social-distancing, nonlockdown strategy. This comes even after politicians and disease “experts” have been insisting that lockdowns must be imposed indefinitely until there’s a vaccine.

The longer the lockdown-created economic destruction continues, the greater will be the threat of social unrest and even economic free fall. The political reality is thst the current situation cannot be sustained without threatening the regimes in power themselves. In an article for Foreign Policy titled “Sweden’s Coronavirus Strategy Will Soon Be the World’s,” authors Nils Karlson, Charlotta Stern, and Daniel B. Klein suggest that regimes will be forced to retreat to a Swedish model:

As the pain of national lockdowns grows intolerable and countries realize that managing—rather than defeating—the pandemic is the only realistic option, more and more of them will begin to open up. Smart social distancing to keep health-care systems from being overwhelmed, improved therapies for the afflicted, and better protections for at-risk groups can help reduce the human toll. But at the end of the day, increased—and ultimately, herd—immunity may be the only viable defense against the disease, so long as vulnerable groups are protected along the way. Whatever marks Sweden deserves for managing the pandemic, other nations are beginning to see that it is ahead of the curve.

One week ago we reported that after avoiding the capital markets for weeks, the Federal Reserve finally started waving corporate bond ETFs in, and as of May 13 owned $305 million in corporate bond ETFs under the Corporate Credit Facility, i.e., the corporate bond ETF buying program.

With the Fed set to provide its latest weekly balance sheet update at 4:30pm today, some are curious how many more bond ETFs (i.e., LQD and HYG) the Fed purchased in the past week to make sure stocks can only go up as companies use the mispriced bond market to issue even more bonds (up to $1 trillion YTD at last check) and repurchase their stock, if much more quietly.

According to BofA’s credit strategist Hans Mikkelsen, the Fed has continued buying at roughly that average daily pace and the bank’s expectation is that the Fed will report holding around $2.5bn of corporate bond ETFs as of Tuesday this week.

Looking at daily IG ETF inflows they have risen to about $780bn after the Fed began buying from $360bn the prior period. Meanwhile, HY ETF inflows actually declined.

Trace data shows an estimated $5.3bn increase in dealer inventories after the Fed began buying ETFs, no doubt in part artificial because ETF creations are unreported and thus not subtracted from Trace…

… when dealers feed the Fed. IG and HY ETFs are trading at 0.44% and 0.30% premiums, respectively, on average, suggesting some limitations on specific ETFs the Fed can buy.

In short: the Fed likely purchased $2.5 billion in bond ETFs in the past week, once again steamrolling over even the faintest pretense that price discovery remains in a market where the perpetually high LQD and JNK prices mean companies can and will issue trillions in debt which they will promptly turn around and use to fund even more buybacks, as the Fed now fully owns the final bubble, the one where Soviet-style central planning is on full display.

Authored by Daniel Payne via JustTheNews.com,

YouTube on Wednesday reinstated a video it has previously censored in which several medical doctors suggested that the drug hydroxychloroquine might be useful in treating coronavirus, with the company reportedly claiming at the time of censorship that the presentation was “dangerous.” 

The video report, presented by Sharyl Attkisson at Full Measure News, examined the possible benefits of hydroxychloroquine as a treatment for COVID-19 and the possible financial interest some parties have in downplaying the drug and promoting a separate treatment called remdesivir. 

One of the doctors interviewed in the video, William O’Neill, tells Attkisson, also a Just the News contributor, that there is “some value” to hydroxychloroquine and “it has to be tested.”

O’Neill, a cardiologist in Detroit, has prescribed the drug to multiple patients and “saw improvement in all of them,” Attkisson reported.

At the Henry Ford Health System, where O’Neill works, officials are working with hydroxychloroquine and remdesivir. The doctor said the media campaign against the drug, which began around the time President Trump first started touting it, has left patients “scared to use the drug without any scientifically valid concern.”

“We’ve talked with our colleagues at the University of Minnesota who are doing a similar study, and at the University of Washington,” he said.

“We’ve treated 400 patients and haven’t seen a single adverse event. And what’s happening is because of this fake news and fake science, the true scientific efforts are being harmed because people now are so worried that they don’t want to enroll in the trials.” 

Another physician, Dr. Jane Orient, the executive director of the Association of American Physicians and Surgeons as well as a clinical lecturer at the University of Arizona College of Medicine, urged viewers to “look at the money” when it comes to the two drugs. 

“There’s no big profits made in hydroxychloroquine,” said Orient.

“It’s very cheap, easy to manufacture, been around for 70 years. It’s generic. Remdesivir is a new drug that could be very expensive and very lucrative if it’s ever approved. So I think we really do have to consider there’s some financial interest involved here.” 

‘These are organized efforts’

Sharyl Attkisson on Wednesday afternoon told Just the News that it wasn’t immediately clear when the video was removed

It was originally uploaded to YouTube two days ago. Attkisson said YouTube had removed the presentation with a note claiming that it was “dangerous,” without offering any explanation as to why. 

She said Full Measure News appealed the removal, after which YouTube subsequently reinstated it. 

Attkisson cited a critical report by Media Matters, published the same day as her report, as the likely cause of the removal. 

“These are organized efforts,” she said, arguing that politically biased parties are behind efforts to remove or censor contrarian information on social media.

 “They know they can use these systems to limit information. It’s very frightening because I feel like if something’s not done, in five years, we’re going to be telling our kids, ‘There was once a time we could get any information we wanted on the Internet.’ That’s changing. We can’t anymore.”

She noted recent efforts by Democratic Rep. Adam Schiff, the chairman of the House Intelligence Committee, to pressure social media companies to censor and downgrade “harmful” coronavirus-related material and push users instead toward information from the World Health Organization.

“I don’t know why we’re allowing this,” Attkisson said.

“Nobody appointed Adam Schiff to police our content on social media.”

Full Measure News noted that it tried to contact White House coronavirus task force member Dr. Anthony Fauci, the drug company Gilead (which manufactures remdesivir), and numerous doctors who have “criticized or are skeptical of hydroxycholoroquine.” None responded to the interview requests. 

Shortly after it became clear that China has run out of patience with Hong Kong, when as reported earlier China’s National Congress adopted a resolution calling for a new National Security law in Hong Kong, US senators immediately responded to China’s attempt to further crackdown on Hong Kong autonomy as Beijing moves to stop widespread pro-democracy protests that have challenged leader Xi Jinping, by introducing a bipartisan bill that would sanction Chinese party officials and entities who enforce the new national-security laws in Hong Kong, with the legislation also would penalizing banks that do business with the entities, according to the WSJ.

The latest bill in a recent barrage of legislation targeting China comes one day after the Senate also passed a bill that could force the de-listing of Chinese companies in the US.

Senators Chris Van Hollen (D., Md.) and Pat Toomey (R., Pa) said they had been working on the bill already but Thursday’s developments made the legislation more urgent, and said they would urge Senate leaders to take up the matter quickly.

“We would impose penalties on individuals who are complicit in China’s illegal crackdown in Hong Kong,” Van Hollen said quoted by the WSJ. He called the move by Beijing “a gross violation” of China’s agreement with the U.K. to preserve more freedom and autonomy in the territory. Toomey called the move by China “very, very deeply disturbing.”

Last year, Trump signed a bill designed to show solidarity with pro-democracy protesters in Hong Kong, despite expressing concerns it could complicate U.S.-China trade talks.

So far stocks have continued to ignore the constant escalation in tensions between the US and China clearly convinced that it is all just political theater, but when it comes to Hong Kong and US intervention in what Beijing deems “local matters”, not to mention the ongoing feud over the origin of the coronavirus crisis, China couldn’t be more serious, and with the China’s National People’s Congress starting tomorrow, a harsh response is inevitable.

Authored by Michael Snyder via TheMostImportantNews.com,

Initially, we were told that the coronavirus lockdowns would just “temporarily” disrupt the U.S. economy, but now it is becoming clear that a lot of the damage will be permanent. 

We are starting to see businesses go belly up all over the country, and this includes some of the most iconic names in the retail world.  When J.C. Penney announced that it would be declaring bankruptcy and closing hundreds of stores, I warned that would just be the tip of the iceberg, and that has definitely turned out to be the case.  In fact, on Wednesday many analysts were absolutely shocked when news broke that Victoria’s Secret has decided to shut down about 250 stores…

Victoria’s Secret plans to permanently close approximately 250 stores in the U.S. and Canada in 2020, its parent company L Brands announced Wednesday.

L Brands also plans to permanently close 50 Bath & Body Works stores in the U.S. and one in Canada, according to information the company posted online as part of its quarterly earnings.

If this pandemic had passed quickly, perhaps those stores wouldn’t have needed to be shut down.  But at this point it has become obvious that this virus is going to be with us for a long time to come.  In fact, the WHO just announced that on a global basis we just witnessed the largest number of newly confirmed cases on a single day so far.

Another major retailer that is closing down stores is Pier 1 Imports.  In fact, it is being reported that not a single one of their locations will survive…

Pier 1 Imports, which previously said it would close half of its fleet of stores, now plans to close all of its locations.

The retailer, based in Fort Worth, Texas, announced in a news release Tuesday that it was seeking bankruptcy court approval to begin an “orderly wind-down” when stores are able to reopen “following the government-mandated closures during the COVID-19 pandemic.”

I was never a huge fan of Pier 1 Imports, but my wife liked to visit and see what they had, but now we will never be able to do that again.

Something about that really saddens me.

Of course it isn’t just retailers that are collapsing.  Car rental giant Hertz “is on the verge of bankrutpcy”, and things are not looking good at all…

Hertz is on the verge of bankruptcy. At the end of April, it disclosed it had missed a large amount of lease payments on its rental cars. Since then, it has entered into forbearance and waiver agreements with these lenders that give it until May 22 to come up with the money and a plan. Its cars, now parked at various parking lots around the country, are collateral for this debt.

Some of you old timers might remember the old Hertz commercials featuring O.J. Simpson.  Those were much simpler times, and to be honest I really miss them.

Unfortunately, times have really changed, and I seriously doubt that Hertz will be able to survive much longer in this very harsh economic environment.

Needless to say, a lot of businesses are going to die in the weeks and months ahead of us.  As I discussed the other day, it is now being projected that approximately one out of every four restaurants in the United States will be closing down permanently.

Can you imagine what this is going to look like?

We are going to have abandoned buildings all over the place, and this will especially be true in our more impoverished communities.

The only chance we have of pulling out of this economic death spiral is if there is a full scale return to normal economic activity all across America, but that isn’t going to happen any time soon.

Fear of COVID-19 is going to paralyze small and big businesses alike for the foreseeable future, and every new outbreak is going to spark more overreactions.

For instance, Ford just shut down two major production facilities just a few days after “reopening” them…

Just days after reopening its American assembly plants, Ford temporarily shut down two separate factories because employees tested positive for Covid-19.

One plant in Chicago that builds the Ford Explorer, the Lincoln Aviator and the Ford Interceptor police car stopped operations Tuesday afternoon after two employees tested positive for Covid-19. Then, Ford’s plant in Dearborn Michigan that makes its bestselling F-150 pickup, shut down Wednesday.

If we keep shutting things down every time someone gets sick, our economic problems are just going to get worse and worse.

Look, the truth is that lots more people are going to get sick and lots more people are going to die.  In fact, one new study has concluded that the U.S. death toll will more than triple by the end of 2020 “even if current social distancing habits continue for months on end”…

A new study suggests the number of Americans who will die after contracting the novel coronavirus is likely to more than triple by the end of the year, even if current social distancing habits continue for months on end.

The study, conducted by the Comparative Health Outcomes, Policy and Economics Institute at the University of Washington’s School of Pharmacy, found that 1.3 percent of those who show symptoms of COVID-19 die, an infection fatality rate that is 13 times higher than a bad influenza season.

Of course it certainly doesn’t help that we continue to allow people from other countries where COVID-19 is raging to fly into the U.S. without any special screening whatsoever…

A glamorous Russian blogger says she has proved that the US is open for foreign tourism again, despite the pandemic, according to video obtained by DailyMail.com.

Sofia Semyonova, 33, a fitness model, told how she traveled on a crammed Aeroflot flight with 500-plus passengers with ‘no social distancing’ from Moscow to New York City.

She used her B2 tourist visa to enter America from Russia’s coronavirus epicentre ‘in 30 seconds without any extra questions’.

I don’t know how this could possibly be happening, but apparently it is.

Eventually, COVID-19 will literally be just about everywhere, and almost everyone in the entire country will be exposed to it.

And fear of this virus will paralyze our economy for the foreseeable future.

So the truth is that the “for lease” and “space available” signs that you are now seeing are just the start.

A lot more are coming, and it is going to be a very dark chapter for our nation.

The American people are dying to go back to work and normalcy… but the left says no, let’s wait, and wait, and wait… as the partisan divide in America has overflowed into the pandemic

As The New York Times recently noted, Robert Griffin, research director of the nonpartisan Democracy Fund Voter Study Group, provided The Times with demographic data from a May 7-13 survey describing voters who oppose lockdown policies. They are decisively Republican (at 55 percent) compared with 27 percent Democratic and 17 percent independent; majority male, at 58 percent; largely white (69 percent compared with 7 percent black and 17 percent Hispanic); and less well educated, 74 percent without college degrees, 24 percent with degrees.

What are some of the forces driving the split between those who prioritize the economy and those whose primary concern is the physical health of the population?

W. Bradford Wilcox, a sociologist at the University of Virginia, emailed in response to my inquiry:

Progressives have grown more likely to embrace a culture of “safetyism” in recent years. This safetyism seeks to protect them and those who are deemed the most vulnerable members of our society from threats to their emotional and physical well-being.

In the case of Covid-19, he continued,

progressives are willing to embrace the maximal measures to protect themselves, the public, and the most vulnerable among us from this threat.

In contrast, according to Wilcox,

many conservatives are most concerned about protecting the American way of life, a way of life they see as integrally bound up with liberty and the free market.

Because many on the political right see the lockdowns as impinging “on their liberty, the free market’s workings, and their financial well-being,” he continued, “many conservatives want the lockdowns ended as quickly as possible.”

*  *  *

Liberty Nation’s Tim Donner discusses  the state of our divided nation with Political Columnist Joe Schaeffer, Economics Maven Andrew Moran and Legal Affairs Editor Scott Cosenza…

This week’s show is all about resetting the nation, the economy, the presidential race – and let’s not forget no less than 468 congressional races that will shape our political future. We’ll go from where things were before we hit the pause button for two months, to where we stand as we begin rebuilding an economy with over 38 million of our fellow Americans filing for unemployment in the last 9 weeks… through no fault of their own.

 

Via dlacalle.com,

Disconnect between markets and economic reality:

“There is a huge disconnect between markets and the economic reality, and it’s fundamentally based on the view that 2020 is a lost year and therefore what investors need to think about is 2021 is a recovery year. It looks a very dangerous bet to me because if there’s anything that we have learned from this crisis is that estimates for 2021 remain excessively optimistic, and that the V-shaped recovery is more than elusive.”

Reaction to liquidity injections:

“The reaction of markets has been very aggressive to the liquidity injections coming from the Federal Reserve and the European central banks. But I think that at the same time that level of risk-taking is too high considering the challenges both on the economic growth recovery, but more importantly, because it’s been driven by the most cyclical sectors, the recovery in earnings cash flow and balance sheets.”

Gold miners/ BANG stocks:

“I personally always say that if you want to look at the world of metals or commodities, and you want to invest in the fundamentals of those metals or those commodities, the best way to play it is through the commodity itself, or the macro, not through equities, because cost of capital is also rising and there are challenges of financing.”

Covid-19 vaccine/implications for gold:

“There are two things that we know about Covid viruses.

One is that there has never been a vaccine for a coronavirus. That’s something that we need to pay a lot of attention to when we get these levels of optimism in the market about the vaccine. When 18 previous types of viruses have never seen a vaccine, you cannot expect it to happen or at least happen as quickly as markets would want.

The second is there is likely to be a treatment, there is likely to be a way to live with Covid-19.

What is the outlook for gold in that environment? Well if anything gold is proven in 2019 that in an environment in which markets remain positive and remain attracted to a certain level of expectation of economic growth, gold and the dollar do and can rise in tandem.”

“Gold is currently working as an alternative and as a de-correlated asset to a downturn. But we must remember as well that it is a pretty good inflation hedge. So, in general I think that the outlook for gold even in and in a recovery is actually pretty good.”

Gold/silver ratio

“I always tell my clients that if you like gold you certainly have to like silver.  I don’t understand why you would be long silver short gold or have it as a pair. I think that you need to have both. But I don’t believe in the debate about the ratio of gold to silver. Reminds me of the debate about the ratio of oil to natural gas. And I think that that was a mistake in the past.”

“Silver has its own fundamentals. They’re pretty good fundamentals in supply and demand. Silver is a precious metal that has numerous positive elements in order to be comfortably bullish. However, it is not money. This is the important thing in a monetary debasement craziness like the one that we’re living is that the only asset that has been proven for centuries to be money is gold. And I think that will maintain the ratio high.

Will gold continue to be bullish?

“I don’t think that gold is going to be as bullish relative to the dollar because of the high shortage of US dollars that exists in the economy right now, which is about between 13 to 20 trillion.

However, global investors are likely to look for opportunities to find a good investment relative to their currency now.

So Brazilian investors, Turkish investors, Chinese investors, Japanese investors, European investors are likely to see a much better return of gold relative to their currencies than relative to the US.”

While certain companies have continued with their buybacks even if it might seem ill-advised from a corporate strategy standpoint, banks have mostly abstained, while plunging profits have prompted some to suspend their dividends.  

That’s probably for the best, according to a new opinion column published in the FT by the head of the IMF. As shares of banks around the world take a pounding thanks to the twin headwinds of low interest rates and a bleak economic outlook, we suspect more management teams – perhaps at the behest of activists nipping at their heels, or simply to try and hit their performance targets – might relapse and indulge once again in corporate America’s favorite mechanism for returning capital to shareholders.

Unfortunately, returning capital to shareholders is not what banks should be doing right now, according to the IMF’s Kristalina Georgieva, who penned a column in today’s FT calling on banks to stop all buybacks and dividends and shore up cash to ensure they have adequate capital buffers to withstand any turbulence that might be coming down the pike.

* * *

After the 2008 financial crisis, global regulators required banks to increase their prudential buffers of high-quality capital and liquidity. That significantly strengthened the resilience of the financial system. Many observers now cite those buffers as a bulwark against the adverse effects of the Covid-19 pandemic. But as we brace ourselves for a deep recession in 2020, and only partial recovery in 2021, this resilience will be tested. Having in place strong capital and liquidity positions to support fresh credit will be essential. One of the steps needed to reinforce bank buffers is retaining earnings from ongoing operations.

These are not insignificant. IMF staff calculate that the 30 global systemically important banks distributed about $250bn in dividends and share buybacks last year. This year they should retain earnings to build capital in the system. Of course, this has unpleasant implications for shareholders, including retail and small institutional investors, for whom bank dividends may be an important source of regular income.

Nonetheless, in the face of the abrupt economic contraction, there is a strong case for further strengthening banks’ capital base. Here are the reasons. Building stronger buffers is aligned with the array of actions undertaken to stabilise the economy. Governments are deploying fiscal measures in trillions of dollars, including financing that provides a backstop for borrowers who are tapping bank loans.

Central banks have innovated and provided extraordinary liquidity support to a wide range of markets. Bank supervisors have exercised flexibility to the fullest possible extent by encouraging banks to restructure loan repayments, easing regulatory requirements, and allowing banks to draw down their buffers temporarily.

The interests of bank shareholders are aligned with those of bank supervisors and customers. All stakeholders will ultimately benefit if banks preserve capital instead of paying out to shareholders during the pandemic. Protecting the banking sector’s strength now means that, once the recovery picks up, shareholders can expect large payouts — indeed the more profits retained now, the larger the eventual payout.

The need to preserve capital is already being recognised and needs to be so more widely. In some countries, banks have voluntarily decided to collectively suspend shareholder payouts and buybacks. In others, supervisors have had to push. In March, the Bank of England asked banks to suspend plans to pay dividends and cash bonuses to executives, indicating it was ready to use its supervisory powers if anyone refused. Eventually the banks all complied. In Brazil, supervisors have had to use their authority to suspend payouts in a collective manner.

Collective decisions are vital. Banks that take action on their own could be penalised by investors who fail to understand the need to restrict payouts. All banks should be covered – whether state-owned or private, whether commercial or investment. But no bank can do it alone, and if banks’ collective will is not there, then supervisors should take the decision for them.

Today, supervisors in many countries use stress tests to determine whether – and by how much – payouts should be restricted.

Pioneered by the IMF more than 20 years ago, these tests quantify the additional capital needed to keep banks resilient in the face of crisis, and are a vital guidepost helping us now to traverse an unfamiliar territory. It is time to update these tests to take into account the increased likelihood of more adverse economic scenarios caused by the pandemic.

To ensure global consistency, international co-ordination is key. The IMF and the Financial Stability Board can help achieve this. Memories from the last global crisis still linger. The public sector is doing what it can to help prevent another banking crisis from happening again. Shareholders have both an interest and an obligation to do the same.

The writer is managing director of the IMF

* * *

Source: FT

Via Greg Hunter’s USAWatchdog.com ,

With every new revelation about what President Trump calls “Obamagate,” you see the curtain being torn down and revealing the corrupt players who were running America and attacking our Republic.

Former CIA Officer and counter-terrorism expert Kevin Shipp, who wrote a book about the Deep State called “From the Company of Shadows,” says any hint that POTUS is a tool of the Deep State is preposterous.

Shipp explains, “That is absolutely ridiculous…”

“Donald Trump has confronted the Shadow Government and Deep State more than any other president in history, and that includes JFK. JFK did, of course, confront the Deep State and we saw what happened there. 

There has been no other president that has had the guts to expose the Shadow Government and Deep State like Donald Trump has. What has the Deep State done? They have gone after him with a vengeance. Why would the Deep State attack their own with attacks to try to destroy him and his family if he wasn’t threatening to expose the Deep State? No, he’s not a Deep State president. He’s not perfect. We all know that. There are members of his cabinet that we are concerned about with connections to some of the central banks. We all know that, but Donald Trump is not Deep State. He is splitting the Deep State wide open.

Look what DNI Rick Grenell just presented to the President. He authorized for release of names of all the unmaskers. Trump is exposing the Deep State, and, personally, I am proud of him because I have been waiting for this for 20 years for a president to come out and expose these things.”

On the virus crisis, Shipp says it’s turned into a political weapon for the Left. Shipp contends, “They (Democrats) want to delay any solution to the Coronavirus until the election so they can keep the economy ruined and point the finger at Donald Trump…”

“That’s one of the things they want to do. They also want mail-in ballots because that is one of the easiest ways to engage in election fraud. There is a report that just came out that people are getting mail-in ballots that already have the Democrat party checked on the box when they open it up, and they are not Democrats.

You better believe they are going to try to engage in voter fraud using mail-in ballots. There is no doubt about it because they are going to lose badly, and they know it. So, they have to do that. You bet.”

The Democrats in the House are going to try, once again, to impeach President Trump for Russian collision. Recently released documents show it was a proven total hoax that they made up, and, yet, the Dems are going to try this again before the 2020 election. What’s going on? Shipp says,

“This is the last gasp of Democrat Congressional tyrants trying one last time to remove this elected President. It’s laughable…

What this is, is desperation on the part of Pelosi and Schumer. This is desperation on their part knowing that the whole thing was disproven and shot down by the evidence. If Trump gets elected a second time, you will see investigations into Congress, Senate, Obamagate and China. These people are desperate to keep that stuff from coming out.

You think President Trump is exposing them now? You wait until he gets elected a second time. That’s why they are so terrified, and they are trying everything they can to keep him from being elected.”

Join Greg Hunter of USAWatchdog.com as he goes One-on-One with CIA whistleblower Kevin Shipp.

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Kevin Shipp’s website is called FortheLoveofFreedom.net…

On Wednesday, CNBC declared that for the first time since the coronavirus arrived in the US, all 50 states had started lifting restrictions imposed during the nearly 2-month lockdown that upended the global economy and inspired the most expansive exercise of fiscal and monetary might in the history of the modern world.

And despite the NYT’s certitude when it reported on projections calling for 3,000 days/death by June 1, the number of cases and deaths reported across the US have continued to decline as states like Georgia have aggressively reopened their economies. Nearly a month has passed since Georgia started to reopen, and ironically, deaths and cases have climbed in states that haven’t reopened.

But in an editorial published by the USAToday ed board in Wednesday’s edition, the paper’s editors reminded us why these tactics have been so successful: small businesses and consumers have mostly shown discretion and returned only in drips and drabs, with early indicators of economic activity mostly mixed.

While the government has pumped “emergency liquidity” into the economy at a staggering rate, many businesses are worried about an issue that the federal government has been strangely reluctant to confront: What happens if a customer files a lawsuit claiming they or a family member got sick at your business?

OSHA has been reluctant to tackle the issue as well, mostly because of a difficult political conundrum for President Trump: his administration has been reluctant to issue one set of universal guidelines, saying that each state’s circumstances are different and that they should be responsible for writing their own guidelines.

If the virus wanes and a second wave never arrives, this problem should eventually go away on its own. But with more than 100 million Chinese citizens back under “partial lockdown”, relying on such an unlikely outcome wouldn’t be prudent.

Democrats in Congress have used the issue as leverage to try and pressure the president into releasing comprehensive CDC guidelines that were leaked to the press a few weeks back. They claim that Trump and Congressional Republicans can’t have it “both ways” – demanding that businesses receive protection without releasing guidelines detailing best practices for these businesses to follow.

The USAToday editorial board expounds on this argument in the editorial below (courtesy of USAToday):

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Amid all the economic ruin inflicted by a pandemic, businessman Kevin Smartt said he has tried to do the right thing. “We have chosen to put people first over economics,” the CEO of Kwik Chek convenience stores in Texas told the Senate Judiciary Committee last week.

Smartt has kept all 600 employees working even as fuel sales fell 40% and in-stores sales 17%. Workers wear masks and gloves, and they disinfect counters every several minutes. Hand sanitizers are out, and tape marks are on the floor to keep customers apart.

Federal, state and local health guidelines are confusing and even conflicting, Smartt said, yet he has worked hard to comply, and the last thing he needs is to worry about getting sued: “We should not be punished with unfair lawsuits just because we kept our doors open for the American public.”

Over 100,000 small businesses have closed

He has a point, as businesses across the nation begin to reopen amid the worst economic crisis since the Great Depression. Economists project that more than 100,000 small companies have already permanently shuttered under the economic tyranny of COVID-19.

It’s why the Senate is debating whether to grant liability protection to businesses, and why Majority Leader Mitch McConnell said the failure to do so in any new stimulus bill would be a red line GOP senators won’t cross. McConnell last week explained that what’s needed is “a legal safe harbor for businesses, nonprofits, governments, workers and schools who are following public health guidelines to the best of their ability.”

Fair enough. But the first question is what exactly are those public health guidelines that, if businesses followed, would grant them immunity from lawsuits?

Companies are still waiting. Most states don’t have the scientific wherewithal to create best-business practices for a deadly illness that, each day, scientists are learning more about. It calls for the kind of expertise within the U.S. Centers for Disease Control and Prevention, and the kind of workplace regulation found at the federal Occupational Safety and Health Administration.

Second wave of COVID-19 coming

But OSHA has punted on this issue, leaving safety options to businesses.

CDC scientists, meanwhile, drafted precisely what’s needed — detailed steps on how best to protect students, travelers, employees and worshipers for schools, transit systems, businesses and churches. But the White House has shelved that and has chosen, instead, for the CDC to issue a vague and broad checklist to be followed.

The Trump administration has joined McConnell in calling for business liability protection. But the president can’t have it both ways. He can’t urge Congress to protect companies from coronavirus claims if they follow public health guidelines, without providing those companies public health guidelines. Neither can trial lawyers benefit from a Catch-22 where businesses get neither clear direction from public health authorities nor protection from lawsuits.

Sen. Lindsey Graham, R-S.C., chairman of the Senate Judiciary Committee that called Smartt as a witness, has it right. “The sooner we can come up with a regulatory, OSHA-driven process to allow big, small and intermediate businesses (guidance), the better off we’ll be,” Graham said last week.

Only a few dozen COVID-19 lawsuits have been filed. But the number could rise, particularly if the virus returns with a vengeance in the fall, as scientists on the White House Coronavirus Task Force are predicting. Temporary liability protection for businesses that are trying to do the right thing as they’re being battered by a virus-driven recession would be fair.

But the federal government must first step up to produce a science-based road map for companies on how best to keep customers and employees safe – how best to do the right thing.

* * *

Source: USAToday