Category: zerohedge

Senior editor, Ash Bennington, joins managing editor, Ed Harrison, to discuss secular stagnation, initial jobless claims, and the fiscal cliff. They begin by exploring Ed’s takeaways from his interviews with Milton Berg and Charlie McElligott, their contrarian stances, and how price signal distortion is pointing toward secular stagnation. Ed and Ash also parse the differences between seasonally adjusted and non-seasonally adjusted initial jobless claims and how the treatment of the data shapes the way an investor understands employment trends during the pandemic. They wrap up their discussion by considering USPS funding, the lapse in fiscal aid, and the significant political tail risks ahead for this election cycle. In the intro, Peter Cooper reviews the latest initial jobless claims numbers and the plight of essential workers.

After more than two years of investigations, the DoJ has finally determined that Yale university’s discriminatory practices during the admissions process amounted to evidence of discrimination against white and Asian-American applicants, in violation of a federal civil rights statute.

The DoJ’s two-year investigation concluded that Yale “rejects scores of Asian American and white applicants each year based on their race, whom it otherwise would admit.”

Not only did Trump’s DoJ pick up the previously rejected 2016 complaint, breathing new life into a movement to return US civil rights policy concerning collegiate admissions back to the standard from the Bush era, which was “race blind” admissions. After many years of squawking about that standard being unfair, the Obama Administration ushered in a new “affirmative action” policy that called for quotas.  Trump officially reversed the policy in July 2018.

“Yale’s race discrimination imposes undue and unlawful penalties on racially-disfavored applicants, including in particular Asian American and White applicants,” Assistant Attorney General Eric Dreiband, the head of the department’s civil rights division, wrote in a letter to the college’s attorneys.

The complaint was based on years of complaints from white and asian applicants who claim they were only rejected because their race made them “similar” to other applicants. Phrases like “she doesn’t have the right profile” – with “profile” being used as a kind of dog whistle for “she’s not the right race” – were uncovered in the records obtained by the DoJ from schools including Yale, Harvard and Dartmouth.

The findings detailed in a letter to Yale’s attorneys mark the Trump administration’s latest step in advancing its college admissions agenda (a low-key critical issue for many white suburban mothers, who spend dozens of hours stressing about their child’s academic future, as we learned during the College Admissions scandal, an extreme example of this instinct.

Prosecutors found that Yale has been discriminating against applicants to its undergraduate program based on their race and national origin and “that race is the determinative factor in hundreds of admissions decisions each year.” The investigation found that Asian American and white students have “only one-tenth to one-fourth of the likelihood of admission as African American applicants with comparable academic credentials.”

“Unlawfully dividing Americans into racial and ethnic blocs fosters stereotypes, bitterness, and division,” Dreiband said in a statement. “It is past time for American institutions to recognize that all people should be treated with decency and respect and without unlawful regard to the color of their skin.”

The investigation also found that Yale uses race as a factor in multiple steps of the admissions process and that Yale “racially balances its classes.”

As the AP reminds us, SCOTUS precedent has a narrowly defined procedure for how race can be factored in to promote diversity. Schools are responsible for showing why their consideration of race is appropriate.

Yale has previously denied that its admissions process discriminates against Asian Americans or any other ethnic group. Responding to the 2018 announcement of the investigation, Yale’s president said race is just one of “a multitude” of factors the school considers when weighing applications.

Yale denied the DoJ’s allegations – and remember, right now, allegations is all they are.

“Yale College could fill its entire entering class several times over with applicants who reach the 99th percentile in standardized testing and who have perfect high school grade point averages, but we do not base admission on such numbers alone,” President Peter Salovey wrote. “Rather, we look at the whole person when selecting whom to admit among the many thousands of highly qualified applicants.”

Over the previous 15 years, he said, the number of Asian American students in Yale’s incoming classes grew from 14% to 22%. He added that the school’s approach “complies fully with all legal requirements and has been endorsed repeatedly by the Supreme Court.”

The Justice Department has demanded that Yale immediately stop and agree not to use race or national origin for upcoming admissions.

This isn’t the first time the DoJ has tried to unilaterally pressure top colleges into eliminating the Obama-era “affirmative action” policies Harvard and other schools ahve also been found guilty of the same violations. The DoJ is now demanding that Yale must come up with a detailed plan to factor in race via the Trump administration’s guidleines, or simply revert back to the blind admissions of yore

Knowing the prevailing sentiments in the world of academia, we suspect they will resist the administration, at least at first, before trying to come to some kind of compromise.

By Mark Hemingway of Real Clear Investigations

David Brock, the onetime anti-Clinton journalist turned Hillary Clinton ally and aggressive promoter of Democratic media narratives in recent decades, faces legal actions and disclosures portraying his organizations as working so closely with the Clinton campaign in 2016 that they broke the law.

The conservative Patriots Foundation alleges in a lawsuit being filed today in U.S. District Court for the District of Columbia that an improperly porous relationship among four Brock-founded organizations amounted to illegal coordination with the Clinton campaign in violation of Federal Election Commission regulations. The best known of the four groups is Media Matters for America, which highlights what it calls media bias from the right. The other three are the American Bridge 21st Century PAC; the American Bridge 21st Century Foundation; and the Correct the Record PAC.  

“American Bridge 21st Century PAC claimed that it was independent of the Clinton campaign so that it could make independent expenditures,” the Patriots Foundation said in a statement provided to RealClearInvestigations. “American Bridge is run by the same people who run Media Matters and Correct the Record, however, which we know coordinated with the Clinton campaign.

“They all work from the same offices,” the statement continued, “Brock was paid by all of them, American Bridge and Correct the Record shared at least 6 employees, and Correct the Record made in-kind contributions to American Bridge PAC. American Bridge’s supposedly independent activity was just as coordinated as Media Matters’ and Correct the Record’s activity – meaning that American Bridge’s [expenditures] were really excessive and illegal contributions to Hillary Clinton’s campaign.”

Representatives for the organizations did not respond to requests for comment (Correct the Record is now inactive).  Nor did Brock himself or the Clinton campaign.

This past April, the Patriots Foundation filed an FEC complaint against Brock’s organizations. Since the agency hasn’t acted on it within a requisite 120 days, the Patriots Foundation is now suing the FEC as allowed under campaign finance laws. The Patriots Foundation also filed complaints with the IRS last spring regarding Media Matters and the American Bridge Foundation, but there is no legal remedy to force the IRS’s hand in court as with the FEC. 

The tactics of Media Matters are generally acknowledged as politically aggressive in a way many see at odds with the organization’s 501(c)(3) nonprofit tax status, which stipulates nonpartisanship. In 2008, The New York Times described Media Matters as a “nonprofit, highly partisan research organization.” The Patriots Foundation alleges that in 2016 Media Matters ceased merely appearing to be partisan — it acted openly as an arm of the Hillary Clinton campaign. A December 2016 report in the liberal-leaning magazine the New Republic, highlighted by the group, substantiates this assessment:

The organization [Media Matters] had long ceased to be a mere watchdog, having positioned itself at the center of a group of public relations and advocacy outfits whose mission was to help put Clinton in the White House. … In our numerous conversations with past Media Matters staff, there was a consensus that in the lead-up to Clinton’s announcement of her candidacy in 2015, the organization’s priority shifted away from the mission stated on its website — “comprehensively monitoring, analyzing, and correcting conservative misinformation” — and towards running defense for Clinton. The former staffers we spoke to largely felt that this damaged Media Matters’ credibility and hurt the work it did in other areas. “The closer we got to the 2016 election the less it became about actually debunking conservative misinformation and more it became about just defending Hillary Clinton from every blogger in their mother’s basement,” one former staffer told us. This was, moreover, a repeat of what Media Matters did in 2008, when there was a rift between staffers and management over the favoring of Clinton in her race against then-Senator Barack Obama.

Media Matters staffers recounted internal fights over the group’s devotion to Clinton. Employees were ordered to critique NPR’s Terry Gross for asking Clinton some questions about why it took her so long to support same-sex marriage.

But the staff reportedly felt Gross’ questions were fair, and according to the New Republic, “nearly everyone we spoke to who worked there at the time felt that a similar article would not have been written about a different politician.” Media Matters’ research director, Jeremy Holden ended up writing the story because other staffers were unwilling to put their name on it. Holden did not respond to a request for comment.

Media Matters employees were also reportedly frustrated by the organization’s obsession with defending Clinton at the expense of other liberal causes. “Former staffers pointed out several stories that fell within Media Matters’ ambit that should have been better covered. … On the site, there are 1,468 posts tagged with ‘Hillary Clinton’ as opposed to just 26 tagged ‘Bernie Sanders,’” according to the New Republic.

In addition to media reports, internal communications at the Clinton campaign further reveal that it was treating Media Matters as a campaign surrogate and coordinating with the group.

A campaign strategy memo released by WikiLeaks notes that the Clinton campaign reported using the Brock group to “muddy the waters” when it came to issues where Clinton was vulnerable by “working with MMFA to highlight examples of when the press won’t cover the same issues with Republicans.” Another email released by WikiLeaks has Clinton’s press secretary, Nick Merrill, planning to push back on a Vanity Fair story about Clinton campaign vice chair Huma Abedin, which hadn’t been published yet, saying, “We have MMFA, CtR, and core surrogates lined up, which we can expand on tomorrow.” Media Matters published a piece criticizing the Vanity Fair story the following day.

“CtR” in Merrill’s email refers to the Correct the Record PAC. The PAC has been dormant since the 2016 election cycle, but “coordinat[ed] directly with Clinton’s campaign,” Politico reported. The CTR PAC even took money directly from the Clinton campaign – during the 2016 election cycle CTR took in $8.5 million in donations, including a donation of $275,615 in 2015 from Hillary for America. From its inception, the PAC skirted rules that prevent such entities and campaigns from directly coordinating with campaigns by claiming all its activities were covered by an FEC exemption regarding public communications. 

“Correct the Record believes it can avoid the coordination ban by relying on a 2006 Federal Election Commission regulation that declared that content posted online for free, such as blogs, is off limits from regulation,” notes a 2015 Washington Post report. “The ‘Internet exemption’ said that such free postings do not constitute campaign expenditures, allowing independent groups to consult with candidates about the content they post on their sites.” The Patriots Foundation FEC complaint strongly disputes that the operations of the CTR PAC were defensible under this interpretation, noting that the PAC spent money on polling and other activities that don’t constitute communications.

Organizationally, there also appears to have been not much separation between CTR and Brock’s other PAC, American Bridge. “During the 2016 election, Brock claimed that AB PAC remained independent of both the Clinton campaign and CTR PAC so that it could make independent expenditures in support of Clinton,” notes the Patriots Foundation FEC complaint. “However, he continued to collect a salary from both PACs, and disclosure reports show that the committees shared at least seven overlapping staff members at various times during 2016. Moreover, AB PAC reported making in-kind disbursements to CTR PAC in 2016.” (In addition to getting paid by both PACs, Brock drew a salary of $278,566 from Media Matters as well, 2017 tax records show.

Overall, the American Bridge Foundation was the largest donor to the AB PAC in the 2016 and 2018 election cycles. As a 501(c)4 nonprofit, the AB Foundation is not required to disclose its own donors. Other notable donors to the AB PAC include George Soros, who gave AB PAC $2 million between 2015 and 2016. Some of America’s biggest unions – the SEIU, AFL-CIO, NEA, AFT, and AFSCME – all made six-figure donations in the 2016 election cycle. And Win McCormack, the owner and publisher of the New Republic, gave $100,000 to the AB PAC five months before his publication ran the story on Media Matters’ troubles.

Not the First Time

The Patriots Foundation alleges that the legally required separation between the groups did not exist. The two organizations shared staff, office space, and equipment, but the AB Foundation stated in IRS filings the “two entities have entered into a cost-sharing agreement to allocate shared overhead costs so that neither entity is financially supporting the activities of the other.”

But other audited financial statements from the AB Foundation note they did “not have a formal agreement relating to the allocation of expenses between the two entities” and “allocations were made based on management and budget estimates.” Those estimates varied wildly. The AB Foundation gave the PAC some $2.9 million “for salary, rent, and expenses” in 2015; $720,000 in 2016; $4.5 million in 2017; and $3.3 million in 2018. In many of those years, the AB Foundation also claimed to owe AB PAC more than it paid, also by varying amounts.

This is not the first time one of Brock’s organizations has been challenged for running afoul of FEC regulations. Last year, the Campaign Legal Center filed a complaint regarding the Correct the Record PAC’s claim that it could coordinate with the Clinton campaign under the public Internet communications exemption. FEC attorneys agreed with the Campaign Legal Center but the FEC, which has been understaffed during the Trump administration, only had four of six members on the commission. The complaint was dismissed when the two GOP commissioners sided with the CTR PAC, leaving the commission deadlocked. The Campaign Legal Center is still litigating the matter.

The Patriots Foundation complaint is different in that it addresses the coordination across all of the Brock organizations, as well as the allegations American Bridge PAC inaccurately reported the operational costs it shares with the American Bridge Foundation.

The Patriots Foundation told RealClearInvestigations it is not seeking remedies from the FEC beyond what was outlined in its original complaint. That complaint asks the FEC to “elicit admission of the violations from each of the respondents, conduct a robust investigation to determine the scope of the alleged violations, bar respondents from continuing violative activities, and collect civil penalties in amounts commensurate with the gravity of these serious ongoing violations.”

The IRS action filed by the Patriots Foundation seeks to revoke the tax-exempt status of Media Matters and the AB PAC, and calls for both to be compelled to pay applicable taxes while improperly operating as tax exempt, plus applicable financial penalties, while referring both to the Justice Department for criminal prosecution.

At the start of the 2020 hurricane season, we said: this “season could be above average, with 13 to 19 named storms.” 

Already 40% through the season, nine storms have been named, with Tropical Depression Eleven could be the next one named on Thursday. 

Bloomberg reports the hurricane season is about to go “from bad to worse with La Nina odds up.”

The odds the equatorial Pacific will remain neutral, or even spin up a La Nina, have risen in the last month, the U.S. Climate Prediction Center said. In either state, the weather patterns over the Pacific actually decrease hurricane-killing wind shear across the Atlantic, allowing more storms to form and strengthen. –Bloomberg

Odds for La Nina have increased to 60% from 54% a month ago for the September to November timeframe. 

There is a ~60% chance of La Niña development during Northern Hemisphere fall 2020 and continuing through winter 2020-21 (~55% chance). A #LaNina watch remains active. https://t.co/5zlzaYJ1Lp pic.twitter.com/Vglhy601Xq

— NWSCPC (@NWSCPC) August 13, 2020

The National Oceanic and Atmospheric Administration (NOAA) and Colorado State University said as many as 25 storms could form this year, which could be the highest number since 2005, when 28 were recorded and Hurricane Katrina slammed into the city of New Orleans, unleashing $125 billion in damage along the Gulf Coast. 

With Increasing odds for a La Nina this fall, resulting in what could be a super active hurricane season. President Trump has redirected the use of funds from the Federal Emergency Management Agency’s (FEMA) disaster relief programs to pay tens of millions of unemployed, broke, and hungry Americans, devastated by the virus-induced recession. 

As the odds of La Niña influence continue to grow in the Atlantic Ocean, here’s a recap of U.S. hurricane landfall frequency per ENSO phase since 1871. pic.twitter.com/7mcwngG1lV

— Steve Bowen (@SteveBowenWx) June 30, 2020

But don’t worry about FEMA funds running out, the Trump administration is running record deficits and will have the Treasury issue bonds to fund the gap. 

Authored by Jesse Felder via TheFelderReport.com,

Back in October, I published a blog post titled, “This Is What Monetization of the Debt Looks Like,” arguing that the Fed’s intervention in the repo market at the time was not a return to “quantitative easing,” as many critics suggested at the time, but simply the central bank acting as lender of last resort to the Federal Government. It was, in its purest form, a commitment to monetize that amount of debt that could not be absorbed by the market.

Now, nearly 10 months later, it appears that this commitment has only grown stronger.

What it really amounts to is “fiscal dominance,” a scenario in which a country’s debt grows so large that the central bank is forced to abandon whatever ostensible mandate it has been given for a new, unspoken one:

…print as much money as is required to fund the government and prevent a debt spiral.

It only takes a glance at the chart below to understand that the Fed is now being forced to play “follow the leader.” As former chief economist for the BIS William White put it,

“At some point, people realise that the government can’t support the debt burden without going back to the central bank to print more money. This is a tipping point.”

We have now reached that tipping point.

Investors should understand that this is a marked change from the monetary policy of the past in which the Fed could pursue its dual mandate without being hindered by fiscal policy. Fiscal policy is now officially taking the wheel and the dual mandate is taking a back seat. And if inflation does, indeed, make a comeback then the central bank’s ability to manage it could be severely hobbled by this new mandate to monetize the debt to whatever extent is necessary.

Perhaps this is why Jerome Powell keeps telling us he is committed to creating inflation: so when it does arise he can say (in his best Pee Wee Herman voice), “I meant do that.” Because the perception that the Fed has explicitly engineered inflation may prove to be its only hope at preventing hyperinflation.

At some point, though, it will become obvious to all that the Fed abandoned its mandate of stable prices, not because it believed it was the right thing for the economy but because the federal government rewrote the mandate for them, even if it wasn’t done explicitly.

One week ago, we published a remarkable interview with two former Fed economists – Simon Potter and Julia Coronado – who have tremendous impact and influence on prevailing thinking at the Federal Reserve, and who hinted at the Fed’s last ditch reflationary strategy: wiring digital money into the bank accounts of Americans, bypassing the reserve system entirely, and sparking an inflationary conflagration. As we said last Monday, “the two propose creating a monetary tool that they call recession insurance bonds, which draw on some of the advances in digital payments, which will be wired instantly to Americans.“

“One of the issues Congress had in passing the Cares Act is identifying who’s got mainly tip income, who doesn’t have sick days. If society wanted, you could use large datasets to direct fiscal transfers to those people.” – Bloomberg Interview with Coronado And Potter

And while this idea may have seemed absolutely ludicrous as recently as just one year ago, the fact that the just as ludicrous Helicopter Money is now de facto policy means that direct deposits of cash by the Fed into individual accounts is becoming increasingly probable, the only thing missing is the “digital currency” that would be used by the central bank.

Addressing this issue, on Thursday afternoon, Federal Reserve Governor Lael Brainard hinted once again at the coming monetary revolution when she said that the Fed is studying the opportunities and challenges presented by central bank digital currencies.

“To enhance the Federal Reserve’s understanding of digital currencies, the Federal Reserve Bank of Boston is collaborating with researchers at the Massachusetts Institute of Technology in a multi-year effort to build and test a hypothetical digital currency oriented to central bank uses.”

The objectives of our research and experimentation across the Federal Reserve System are to assess the safety and efficiency of digital currency systems, to inform our understanding of private-sector arrangements, and to give us hands-on experience to understand the opportunities and limitations of possible technologies for digital forms of central bank money. These efforts are intended to ensure that we fully understand the potential as well as the associated risks and possible unintended consequences that new technologies present in the payments arena.

In prepared remarks of a speech titled simply enough “An Update on Digital Currencies” and prepared for delivery Thursday at a Fed technology event, Brainard said that “a significant policy process would be required to consider the issuance of a CBDC, along with extensive deliberations and engagement with other parts of the federal government and a broad set of other stakeholders.”

The punchline: “It is important to understand how the existing provisions of the Federal Reserve Act with regard to currency issuance apply to a CBDC and whether a CBDC would have legal tender status, depending on the design. The Federal Reserve has not made a decision whether to undertake such a significant policy process, as we are taking the time and effort to understand the significant implications of digital currencies and CBDCs around the globe.”

So what would prompt the Fed to undertake this significant policy process? Why another crisis, of course.

For those who missed our comments on the recent interview with Potter and Coronado which lays out quite clearly just what is coming and what the motive is behind the Fed’s fascination with digital currencies, here are excerpts from our Aug 3 post again: From “The Fed Is Planning To Send Money Directly To Americans In The Next Crisis“

* * *

We read with great interest a Bloomberg interview published on Saturday with two former central bank officials: Simon Potter, who led the Federal Reserve Bank of New York’s markets group i.e., he was the head of the Fed’s Plunge Protection Team for years, and Julia Coronado, who spent eight years as an economist for the Fed’s Board of Governors, who are among the innovators brainstorming solutions to what has emerged as the most crucial and difficult problem facing the Fed: get money swiftly to people who need it most in a crisis.

The response was striking: the two propose creating a monetary tool that they call recession insurance bonds, which draw on some of the advances in digital payments, which will be wired instantly to Americans.

As Coronado explains the details, Congress would grant the Federal Reserve an additional tool for providing support—say, a percent of GDP [in a lump sum that would be divided equally and distributed] to households in a recession. Recession insurance bonds would be zero-coupon securities, a contingent asset of households that would basically lie in wait. The trigger could be reaching the zero lower bound on interest rates or, as economist Claudia Sahm has proposed, a 0.5 percentage point increase in the unemployment rate. The Fed would then activate the securities and deposit the funds digitally in households’ apps.

As Potter then elucidates, “it took Congress too long to get money to people, and it’s too clunky. We need a separate infrastructure. The Fed could buy the bonds quickly without going to the private market. On March 15 they could have said interest rates are now at zero, we’re activating X amount of the bonds, and we’ll be tracking the unemployment rate—if it increases above this level, we’ll buy more. The bonds will be on the asset side of the Fed’s balance sheet; the digital dollars in people’s accounts will be on the liability side.”

And that, in a nutshell, is how the Fed will stimulate the economy in the next crisis in hopes of circumventing the reserve creation process: it will use digital money apps (which explains the Fed’s recent fascination with cryptocurrency and digital money) to transfer money directly to US consumers.

To be sure, the narrative is already set for how the Fed will “sell” this direct transfer of money to the rest of the world and the broader US population: as Coronado explains “it’s the most efficient from a macroeconomic standpoint in supporting spending and confidence. The fear of unemployment acts as an accelerant on a recession. There’s a shock—people are losing their jobs or worry about losing their jobs. They get very risk-averse. [By] getting money to consumers you can limit the depth and duration of a recession.”

And the kicker:

“you could actually generate real inflation. It could be beneficial for not only avoiding negative rates but creating a more healthy interest-rate market, a more healthy yield curve.”

So there you have it: the one thing that was missing from a decade of monetary tinkering by the Fed, the spark of inflation, will finally arrive as the Fed gives money to those most likely to spend it: the lower and middle classes of society.

But wait, there’s more: now that the Fed is implicitly focusing on racial inequality, and soon explicitly with Joe Biden going so far as to urge the Fed to fight “racial economic inequality” and former Minneapolis Fed president Kocherlakota writing an op-ed in which he said the Fed “should have a third mandate on racial inquality“, the stage is now set for the Fed to specifically release funds for those who have “suffered from inequality”, and once the time comes when the narrative allows to deploy reparations or direct funding to minorities, the Fed will be ready.

* * *

Below we republish the Bloomberg Markets interview with Coronado and Potter because it lays out, very clearly, just what the next monetary stimulus will look like now that helicopter money is fully engaged and money is about to be sent by the Fed directly to those Americans the Fed finds to be “in need.”

BLOOMBERG MARKETS: How would recession insurance bonds work?

JULIA CORONADO: Congress would grant the Federal Reserve an additional tool for providing support—say, a percent of GDP [in a lump sum that would be divided equally and distributed] to households in a recession. Recession insurance bonds would be zero-coupon securities, a contingent asset of households that would basically lie in wait. The trigger could be reaching the zero lower bound on interest rates or, as economist Claudia Sahm has proposed, a 0.5 percentage point increase in the unemployment rate. The Fed would then activate the securities and deposit the funds digitally in households’ apps.

And so instead of these gyrations we’ve been going through to get money to households, it would happen instantaneously.

SIMON POTTER: It took Congress too long to get money to people, and it’s too clunky. We need a separate infrastructure. The Fed could buy the bonds quickly without going to the private market. On March 15 they could have said interest rates are now at zero, we’re activating X amount of the bonds, and we’ll be tracking the unemployment rate—if it increases above this level, we’ll buy more. The bonds will be on the asset side of the Fed’s balance sheet; the digital dollars in people’s accounts will be on the liability side.

BM: Aside from speed, what are the main advantages of this approach?

JC: It’s the most efficient from a macroeconomic standpoint in supporting spending and confidence. The fear of unemployment acts as an accelerant on a recession. There’s a shock—people are losing their jobs or worry about losing their jobs. They get very risk-averse. [By] getting money to consumers you can limit the depth and duration of a recession. And you could actually generate real inflation. It could be beneficial for not only avoiding negative rates but creating a more healthy interest-rate market, a more healthy yield curve.

BM: What are the origins of the idea?

JC: The Bank of England has proposals for digital currency. And a number of people have talked about the need for monetary financing—the idea that the interest-rate tool is simply less effective in lower growth, slower credit growth economies. Helicopter money [making direct payments to the public] goes back to Milton Friedman, but Ben Bernanke revisited it. Some people proposed doing that through financing fiscal stimulus. We think going directly to consumers is more efficient than wading through that sticky fiscal process.

BM: This policy could be complementary to Treasury stimulus?

JC: It’s not a replacement for fiscal policy. It makes sense from a fiscal perspective, for example, to authorize unemployment insurance benefits for people who lose their jobs and other assistance for medical-care providers in the current situation.

SP: The central bank is not elected. It cannot make allocation decisions about fiscal transfers. It’s now being pushed to make allocation decisions around credit with the Treasury, because we believe this situation is so unique that the private sector cannot make those decisions itself. The simplest way to do this would be a lump sum. Not in the way Congress did it. We’d take the bluntness of monetary policy and say anyone who’s eligible should get the same amount of bonds.

Fiscal controls could use the same infrastructure. The imperative to invest in it is high. Nearly all Treasury payments at some point touch the Fed because it’s the Treasury’s bank. The digital payment providers—called interface providers in the Bank of England proposal—would manage these accounts and link them to the Fed and Treasury.

BM: What are the objections from the Fed, and other challenges?

SP: The reaction from some of my former colleagues a while ago to the notion of helicopter money was not the most embracing. Some of those concerns have disappeared.

The two objections were related to the switch of deposits in normal times from the traditional banking system into digital accounts and the extra stress in crisis times as people want to get safe. An account with the central bank is safe because the central bank can always print money to honor that claim. A private bank can’t do that because their asset side has all kinds of credit on it. What we’ve created is a narrow bank-type model [narrow banks only take deposits and invest them in the safest assets] that’s small and fit for purpose, with a cap of $10,000 [per person].

JC: One challenge is making it profitable for digital providers. We want strict limitations on the fees so we’re reaching people that are underbanked, but we also want a public-private partnership with a diversity of competitors jumping into this market. Privacy is just as important, because one thing that might induce them is access to people’s data. As the Fed, are you blessing that, and what structure do you put around that?

SP: We’ll all have to deal with deep questions of privacy in the digital world. One of the issues Congress had in passing the Cares Act is identifying who’s got mainly tip income, who doesn’t have sick days. If society wanted, you could use large datasets to direct fiscal transfers to those people. But that’s a job for Congress.

BM: Have you seen similar trials elsewhere?

SP: Sweden is a leader in thinking about this in part because they had a large decline in cash use. China is testing versions of digital currency. Fintech firms in the U.S. are interested in this—there’s a stable coin version of our proposal. There’s easily sufficient innovation within the U.S. to do this. How to do it in a way that’s well regulated and serving the public purpose is something the Fed should focus on over the next few years. It would be a key accomplishment of the Fed and Treasury to get this infrastructure in place.

Authored by Simon Black via SovereignMan.com,

Does anyone else find this ironic?

In the age of #MeToo and BLM, the most ‘woke’ political party in the Land of the Free has chosen a guy with multiple sexual misconduct allegations as its presidential nominee; and a lady who locked up countless black people (many for victimless crimes) as its vice presidential nominee?

These are true statements, of course.

Joe Biden was accused of sexual assault a few months ago by a former staffer; he summarily dismissed the allegation, even though he told the Washington Post (prior to being accused) that women who accuse men of sexual assault should be believed:

“For a woman to come forward in the glaring lights of focus, nationally, you’ve got to start off with the presumption that at least the essence of what she’s talking about is real. . .”

On top of that, Biden has been accused by several other women of incredibly inappropriate behavior, bordering on the absurd.

Lucy Flores, for example, said that Biden– while he was still Vice President– came up behind her, put his hands on her shoulders, inhaled the scent of her hair, and then slowly kissed the back of her head.

Eva Murry said that Joe Biden complimented the size of her breasts when she was just 14 years old back in 2008: “Fourteen? You’re very well endowed for 14.”

There was also the 13-year old daughter of Senator Chris Coons; at Coons’ swearing-in ceremony in 2015, Biden was filmed pulling himself closer to her, gently grabbing her arm and moving his lips towards her head.

When he leaned in to kiss her forehead, she tried squirming away, looking extremely uncomfortable… at which point her mom had to politely intervene.

I mean, these stories are pretty much endless. At a minimum it’s seriously creepy.

Then there’s Kamala Harris, whose record as District Attorney involved convicting nearly 2,000 marijuana cases, averaging nearly 300 per year.

That’s high. Based on data from the San Francisco District Attorney’s office, Harris’ annual marijuana conviction rate was only exceeded once (in 1993).

But more than that– as California’s Attorney General, Harris refused to support mandatory police body cameras. She did, however, support the death penalty.

She even insisted that a black death row inmate, Kevin Cooper, be executed, even though Cooper argued that DNA evidence would prove his innocence. Harris opposed allowing Cooper to present new evidence… until the New York Times finally wrote an article about his harsh treatment.

Back in 2011, the US Supreme Court ordered the State of California to release 33,000 prisoners, because its state prison system was ‘unconstitutionally’ overcrowded.

Harris was Attorney General at the time, and her office pushed back on the Supreme Court’s order, claiming that prison inmates (who are predominantly minorities) were cheap labor and needed to help fight wildfires.

And even the New York Times acknowledges that Harris “largely avoided intervening in cases involving killings by the police.”

Her inaction was so pronounced that protesters in her hometown of Oakland started distributing fliers saying “Tell Attorney General Kamala Harris to prosecute killer cops! It’s her job!”

In 2014 after the police shooting of Michael Brown in Ferguson, Missouri, Harris (as California’s Attorney General) faced a lot pressure to investigate cases in her case where police had shot minorities.

She declined to do so, claiming, according to the New York Times, “it was not her job.”

You get the idea.

I would also be remiss if I didn’t comment on Harris’ ridiculous selection process.

In a normal, rational world, when you hire someone for a job, you choose whoever is the most highly qualified for the position.

That alone should be the deciding factor… not something as silly as DNA or sexual orientation.

I have hundreds of employees across my various businesses; every single person was put in their position solely because they were the best fit for the job.

Sovereign Man’s parent company is run by a woman. My bank is run by a woman. I have people of various races in senior positions.

And honestly I even hate writing this… I hate describing a great executive as ‘a woman’ or ‘minority’, because, who cares?

To even even bring up such pointless attributes about them denigrates their amazing talent. They were, in no way, hired to check a box. They were hired because they’re the most qualified.

And that’s supposed to be the priority when you hire someone… at least, in a normal, rational world.

But our world is not rational. And hiring someone based on qualifications is no longer a priority.

Joe Biden’s campaign highlighted this new priority of the day when he decided from the outset that his running mate must be a black female, effectively eliminating 93% of the population from consideration for the job.

Bear in mind, this is the person who could potentially become President should something happen to Biden. So it’s a fairly important job.

But rather than consider all possible candidates, he started with a narrow subset… because the priority now is what’s hanging (or not hanging) between someone’s legs, and the level of melanin in their skin.

Everything else (including actual qualifications for the job) come second.

Again, it shouldn’t matter. If the best qualified person for the job is a disabled, pansexual, non-binary Native American, then that’s the person who should be chosen.

I’ve been writing about this a lot lately– this idea that priorities have radically shifted.

Universities no longer prioritize well-rounded education. The media no longer prioritizes truth. Businesses can no longer prioritize profit. The government in no way prioritizes fiscal responsibility.

And as a I wrote yesterday, even the military can no longer keep national defense as its top priority.

Marxism and wokeness are now the priorities. And you can see it everywhere.

[ZH: we give the last word to @Barnes_Law who summed it all up very succinctly:]

“In order to appeal to disaffected black voters who might lean toward protest voting (Kanye) or not voting (2016), Democrats ingeniously picked the one black candidate whose parents are not from America, whose ancestors had slaves, and who spent her career locking up black men…”

*  *  *

On another note… We think gold could DOUBLE and silver could increase by up to 5 TIMES in the next few years. That’s why we published a new, 50-page long Ultimate Guide on Gold & Silver that you can download here.

In a lawsuit that is taking the tech industry by surprise, especially considering the rumors, widely discounted, that Apple might buy TikTok, it appears Epic Games, the creator of “Fortnite”, has just filed a lawsuit against Apple, accusing it of “unfair and anti-competitive actions….undertaken….to maintain its monopoly in two distinct, multibillion dollar markets: (i) the iOS App Distribution Market, and (ii) the iOS In-App Payment Processing Market (each as defined below).”

Clearly intended to be widely quoted in the press, the summary of the 65-page filing included bombastic language directed at the monolithic consumer tech behemoth and world’s most valuable company. Perhaps the most striking was a paragraph contrasting Apple’s recent behavior to its infamous “1984” add accusing IBM of anticompetitive practices.

“Fast forward to 2020, and Apple has become what it once railed against: the behemoth seeking to control markets, block competition, and stifle innovation. Apple is bigger, more powerful, more entrenched, and more pernicious than the monopolists of yesteryear. At a market cap of nearly $2 trillion, Apple’s size and reach far exceeds that of any technology monopolist in history…”

VentureBeat is calling it the “App Store War”: Earlier, Apple deleted Fortnite from its App Store for installing a direct-payment system for the popular game, which cut out Apple’s sales infrastructure, including its lucrative fee-collection machine. Apple has long maintained that fees like this are more akin to electricity bills, than onerous, anticompetitive penalties. Now, Epic Games is taking a stand against the Cupertino tech behemoth.

Shots have been fired in what could be a gigantic App Store war. Apple deleted Fortnite after Epic Games deliberately violated terms of service by adding a direct payment for the popular game, cutting out Apple from sales.

Epic Games announced its Fortnite “mega drop,” a permanent discount on V-bucks (Fortnite’s in-game currency) and other cash purchases in the game of up to 20%. It also introduced a new direct-payment option. If you purchased V-bucks in the game through the iOS App Store or Google Play, the cost is the same as it used to be. But under the new direct option, the discount is included.

There’s a lot at stake in this battle. Measurement firm Sensor Tower said Fortnite saw approximately 2.4 million installs in the last 30 days and generated $43.4 million in consumer spending on the App Store globally. To date, the game has reached 133.2 million installs and seen $1.2 billion in spending worldwide on the App Store alone.

The lawsuit comes just weeks before Apple CEO Tim Cook – aka “Tim Apple” – joined Mark Zuckerberg, Jeff Bezos and Alphabet’s Sundar Pitchai in front of the House Judiciary Committee for a hearing on anticompetitive practices in the tech industry, an issue that has plagued American jurisprudence since the late 1990s, when Bill Gates was in the hot seat.

Of course, the pressure isn’t only coming from the US…Europe is redoubling its efforts to circumscribe American tech giants’ role in the European digital marketplace.

Annnnnd two months after the Europeans opened official antitrust investigation into Apple’s app store. I’d wager a few euros @vestager will be watching this play out with *some* interest. https://t.co/FTh64AAhhU

— Mark Di Stefano (@MarkDiStef) August 13, 2020

Tim Sweeney, Epic’s founder, tweeted a short film apparently explaining the situation 45 minutes ago, the title: “Nineteen-Eighty-Fortnite”.

Fortnite Party Royale will premiere a new short: Nineteen Eighty-Fortnite. Join us at 4PM ET. pic.twitter.com/BWvndK3gDt

— Fortnite (@FortniteGame) August 13, 2020

Read the lawsuit below:

Apple Complaint 734589783 by Zerohedge Janitor on Scribd

Everything was lining up nicely for a new record high in the S&P 500 this morning after the better than expected claims data (only 963,000 Americans filed for first time claims last week!!)… and then the 30Y auction hit (at 1400ET) and was a disastrophe coinciding with a spike back above the record closing high for the S&P…

Just one ‘wafer-thin mint’ more of fiscal and monetary largesse…?

Triggering weakness in bonds and stocks and a bid for gold and silver…

Nasdaq managed to bounce back from its drop but the rest of the US majors ended red…

The momo/value rotation un-rotation accelerated…

Source: Bloomberg

Value stocks continued to sink after their surge earlier in the week…

Source: Bloomberg

Bonds were clubbed like a baby seal, with the longer-end up around 5bps (2Y unch)…

Source: Bloomberg

30Y Yields are back at the June FOMC Minutes release levels…

Source: Bloomberg

We do note that while this move higher in rates ‘feels’ large, it is of a smaller scale than the early June bear

Source: Bloomberg

And while bonds and stocks were hit, gold was bid on the auction ‘fail’ (though came back and steadied after)…

Silver followed a similar path but was strongly higher on the day…

There was a major divergence between real rates (spiked) and gold (spiked) after the auction chaos…

Source: Bloomberg

Mark Gutman (@MarkGutman9) noted this odd move:

“Interesting to see Gold up & Bonds down. Yields are kept low so there isn’t enough demand at the price. Fed will be forced to buy more to keep yields low, in turn pushing fair prices higher thus reducing demand even more – forcing the Fed to buy even more. Cycle of death.“

Of course, all this (falling bond and stock prices and rising vol) was bad news for Risk-Parity funds and may lead to some exaggerated swings as forced deleveraging takes place…

The Dollar ended the day lower but rallied as the SHTF this afternoon…

Source: Bloomberg

CNH weakened after Larry Kudlow’s comments…

Source: Bloomberg

Bitcoin trod water on the day, recovering from some overnight weakness…

Source: Bloomberg

Copper continued to tumble…

And oil ended lower…

The Gold/Silver ratio erased most of last week’s spike thanks to silver’s gains today, but stalled again around 70x…

Source: Bloomberg

Finally, is time up?

Source: Bloomberg

And it’s still a long way for bonds and stocks to ‘meet in the middle’…

Source: Bloomberg

David Portnoy has been having a good Thursday. Earlier, Goldman Sachs’ research department initiated Penn National – Portnoy’s stake in the company from the Barstool deal comprises the bulk of his wealth – with a price target of $60 a share, 20% higher than the price at Wednesday night’s close. As a result, the stock soared.

Apparently, Portnoy is trying to parlay this latest success into riding bitcoin “to da moon”, as they say. In a series of tweets, he proclaimed that the pioneering digital currency is going to “12,000,000,000”.

1200 here we come #Bitcoin pic.twitter.com/KpU8A8PX4I

— Dave Portnoy (@stoolpresidente) August 13, 2020

I meant 12000000000 https://t.co/o7TyVUM4wq

— Dave Portnoy (@stoolpresidente) August 13, 2020

Does this mean Portnoy is once again essentially frontrunning his arm of “DDTG” loyalists”? It’s possible.

Perhaps Bitcoin’s performance in recent weeks has  Portnoy convinced that traders who have argued for bitcoin as a more appealing alternative to gold – despite its many, many flaws (to be fair, we’re not saying the pet rock is perfect) – might be on the right track.

Of course, on a more fundamental level, buying bitcoin requires making a bet that the systems underlying bitcoin  – namely, the internet, and the bitcoin network – won’t ever be compromised. To be sure, it’s fair to argue that the “digital gold” that’s growing in popularity thanks to ETFs like GLD carries similar risks.