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Just days after the famous (former) deflationista (turned reflationist) Russell Napier explained why he believes that central banks have “become irrelevant” in a world in which governments have taken control of the money supply, none other than Morgan Stanley’s Michael Wilson (whose bullish market outlook on risk assets is predicated on the foundational view that the coming reflationary tsunami will lift all boats) has published a note agreeing with Napier and pointing out that not only is M2 exploding at a pace never seen before, but also writing that “Congress is now a critical player in driving money supply growth, given that the Fed has already committed to expanding its balance sheet as much as needed to support the recovery.”

But how is that any different from the post financial crisis period when M2 also soared yet broad inflation failed to materialize (at least when measured with faulty CPI metrics)? Well, according to Wilson, “this time around, with the financial system in much better shape, and the direct intervention of Congress, there’s a real chance that the money multiplier doesn’t fall so much, and money supply growth remains elevated, thereby driving aggregate demand and inflation – i.e., nominal GDP growth.”

And while Wilson warns that there may be some near-term weakness in stocks due to “uncertainty” until Congress passes the next stimulus round, the long-term picture is clear and “Congress is now in the driver’s seat when it comes to the money supply with its fiscal programs and, as Milton Friedman also famously said, “Nothing is so permanent as a temporary government program.”

This, to Wilson, is potentially more inflationary than appreciated, which means that back-end rates can rise and as the MS strategist concludes “very few portfolios are prepared for such an outcome. Such shifts can happen quickly when they are so unexpected, which invokes one of our own favorite sayings, “being early is on time and arriving on time is late“.“

Below we republish the full note from Michael Wilson, chief equity strategist at Morgan Stanley, as posted in the latest Morgan Stanley Sunday Start.

Who’s Really Driving the Bus?

With the US and global economies in the midst of one of the deepest recessions and output gaps on record, most investors we speak with have dismissed our call for higher inflation risks. They ask how in the world are we going to get inflation with unemployment north of 10%, excess supply in everything from oil to hotel rooms and services no longer in demand?

While we are likely to experience big imbalances in the real economy for several more quarters, if not years, the most powerful leading indicator for inflation has already shown its hand – money supply, or M2. As Milton Friedman famously said 50 years ago,”inflation is always and everywhere a monetary phenomenon”. It’s fair to say we have never observed money supply growth as high as it is today (Exhibit 1). If Mr. Friedman was correct, then isn’t the risk of higher inflation greater than it’s ever been, too? Indeed, the sharp moves higher in breakevens and precious metals suggest that markets are considering the possibility.

Of course, money supply also grew rapidly after the global financial crisis (GFC) and we never saw inflation appear in a meaningful way. This fact has emboldened the view that the Fed can print money at whatever rate it wants and it won’t lead to inflation, at least not enough inflation to cause nominal and real long-term interest rates to rise. Given the current mispricing of long-end rates and crowdedness of long-duration investments of all kinds, this may prove to be a costly assumption.

We’ve argued for the past several months that the policy response to this crisis has been very different than what was used during the GFC. On the monetary front, the Fed reacted much more swiftly and aggressively with its immediate bazooka-style response and direct intervention in credit markets. In short, it went all-in from the beginning, showing no hesitation to do whatever it takes to support markets and the economy. Part of that aggressiveness was also likely attributable to the fact that we didn’t get any meaningful inflation after US$4 trillion in quantitative easing following the GFC. However, it’s the fiscal response that’s really different this time.

• First, the government has been sending money directly to both consumers and small businesses as a means of supporting the economy during the lockdown and reopening – aka ‘helicopter money’.
• Second, it has directly intervened in the lending markets by making loans via the Paycheck Protection and Main Street Lending Programs.
• Finally, and perhaps most importantly for the inflation call, is the decision by Congress to guarantee loans made by commercial banks and to offer mortgage and other liability (rent) forbearance via the CARES Act.

To me, this means that Congress is now a critical player in driving money supply growth, given that the Fed has already committed to expanding its balance sheet as much as needed to support the recovery. The health of the financial system matters too. The Fed can expand its balance sheet, but this might not necessarily translate to aggregate demand or inflation. This is what happened after the GFC. With the financial system impaired, banks were in no position to increase lending. Instead, they shrunk their loan books. This time around, with the financial system in much better shape, and the direct intervention of Congress, there’s a real chance that the money multiplier doesn’t fall so much, and money supply growth remains elevated, thereby driving aggregate demand and inflation – i.e., nominal GDP growth.

Finally, helicopter money and other stimulus programs are popular with the people and popular programs are what politicians run on. Therefore, we find it highly unlikely that Congress will fail to extend the benefits currently being negotiated in an election year. However, this doesn’t mean we won’t need to weather some uncertainty about it before it passes, and this may weigh on equity markets in the near term. In fact, this is what we expect, but we would use any weakness around such a delay to add to equities, especially cyclicals geared to higher inflation and economic growth.

To sum up, Congress is now in the driver’s seat when it comes to the money supply with its fiscal programs and, as Milton Friedman also famously said, “Nothing is so permanent as a temporary government program.” This is potentially more inflationary than appreciated, which means that back-end rates can rise. Very few portfolios are prepared for such an outcome. Such shifts can happen quickly when they are so unexpected, which invokes one of our own favorite sayings, “being early is on time and arriving on time is late“.

Over the past decade, the one common theme despite the political upheaval and growing social and geopolitical instability, was that the market would keep marching higher and the Fed would continue injecting liquidity into the system. The second common theme is that despite sparking unprecedented asset price inflation, price as measured across the broader economy (at least using the flawed CPI metric) would remain subdued (as a reminder, the Fed is desperate to ignite broad inflation as that is the only way the countless trillions of excess debt can be eliminated and yet it has so far failed to do so).

The Fed’s failure to reach its inflation target has sparked broad criticism from the economic establishment, even though as we showed in June, deflation is now a direct function of the Fed’s unconventional monetary policies as the lower yields slide, the lower the propensity to spend. In other words, the harder the Fed fights to stimulate inflation, the more deflation and more saving it spurs as a result (incidentally this is not the first time this “discovery” was made, in December we wrote “One Bank Makes A Stunning Discovery – The Fed’s Rate Cuts Are Now Deflationary“).

In short, ever since the Fed launched QE and NIRP, it has been making the situation it has been trying to “fix” even worse, all the while blowing a massive asset price bubble.

And having recently accepted that its preferred stimulus pathway has failed to boost the broader economy, the blame has fallen on how monetary policy is intermediated, specifically the way the Fed creates excess reserves which end up at commercial banks instead of “tricking down” all the way to the consumer level.

To be sure, with the recent launch of helicopter money, the Fed has tried to short-circuit this process, and in conjunction with the Treasury it has launched “helicopter money” which has resulted in a direct transfer of funds to US corporations (via PPP loans) as well as to end consumers, via the emergency $600 weekly unemployment benefits which however are set to expire unless renewed by Congress as explained last week, as Democrats and Republicans feud over which fiscal stimulus will be implemented next.

Ad yet, the lament is that even as the economy was desperately in need of a massive liquidity tsunami, the funds created by the Fed and Treasury (now that the US operates under a quasi-MMT regime) did not make their way to those who need them the most: end consumers.

Which is why 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: they 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 fund 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 Dean Barker via Campus Reform,

A student at Georgia’s Wesleyan College was reinstated after initially being expelled for social media posts that the school says it now realizes she did not make.

After an investigation and appeal from the student at the all-female campus, the school found that “new information” revealed that the expelled student was not involved in the posts in question.

On June 4, the student, who is remaining nameless, was expelled from the school for allegedly putting out a social media post that contained the n-word. The post was put out by an account claiming to be a student at Wesleyan. The same account also made a Halloween-related post featuring a woman in a green “Border Patrol” shirt posing as if she were arresting a man in a sombrero and serape. The photo was captioned “border?…secured. found him, met him & and just had to get a pic.” 

According to Wesleyan College Alumnae Board of Managers member Jan Lawrence, the board was told that the student provided information proving that a high school photo of the student had been downloaded and reposted by a third party who included the caption.

“On the morning we learned of the information, we launched an investigation and expelled the student that afternoon, giving her the right to appeal as provided in our policies,” college president Vivia Fowler said in an Instagram post. 

The student did appeal, and was reinstated after the university found that “the student did not post the racist content.”

“On July 10, the Wesleyan Student-Faculty Judicial Board, comprised of two faculty members, two staff members and two members of student government, ruled in the student’s favor, overturning the expulsion effective immediately,” Fowler said.

“The committee considered new information that we learned in the weeks following the student’s expulsion, which called into question the accuracy of the original information. This information shows that the student did not post the racist content in early June while enrolled at Wesleyan.”

A version of the statement posted by the Wesleyan College Alumnae Association includes a paragraph lamenting the fact that the process for the investigation was not carried out in a more equitable manner:

“We must be better in how we think, communicate, and act. This passionate call for introspection is very much for the good. But with action comes the responsibility to make decisions rooted in careful analysis, sound consideration, open dialogue, and above all, fairness

Those principles help form the very core of higher education and scientific and cultural inquiry. There is no place for racism at Wesleyan College, and we take seriously our responsibility to combat that scourge across all aspects of our institution.”

The school then used this opportunity to tout its diversity efforts, assuring the community that “even though” a student was wrongly expelled, “that will not deter us from doing our part to denounce racism and hate.”

“In addition, we will continue our work, particularly over the last few years, of promoting diversity, equity and inclusion. We are proud of our diverse student body,” said Fowler in the same announcement. “We are one of the first higher education institutions to offer trainings and workshops on the harmful impact of white privilege.”

“We recently created a Cabinet-level position of Chief Diversity Officer, who also serves as Assistant Dean for Equity and Inclusion,” Fowler added.

Fowler did not respond to Campus Reform’s request for comment in time for publication.

A team of macro analysts from JP Morgan’s sell-side research desk published a lengthy paper aggregating all of their COVID-19-related findings. And while perusing the note, one particular finding caught our eye. In one section of the note, the team addressed a critical question for epidemiologists (and investors): Will the amount of time required to reach “peak” infection rates vary between successive “waves” of the virus? And if so, how might this inform the global policy response?

Succeeding in compressing the “half life” of the wave should be the central focus of policy makers, the analysts argued. And while globally, the policy response in country after country has favored lockdowns, Melbourne is showing right now that, especially when case numbers are small relative to the overall population, lockdowns might not make sense as the most effective way to contain the virus.

As the infection curve starts to resurge in many countries, signaling the next wave, we examine whether the time to arrive at the peak is similar in both the first and second waves. Conceptually, we develop a hypothesis on shorter potential lifespan for the infection curve as the curve moves into the next waves.

In our view, the concept of decay in ‘half-life’, i.e. the time required for a quantity to reduce to half, could be applicable to picturing the next waves.

We think (1) better secondary infection rate control, (2) large mobility tracing and more voluntary testing; and, (3) shorter recovery periods could drive a shorter curve peak.

It is not necessarily so that if more people are infected, a larger part of society would have antibodies and that this would flatten the curve. We note that, in most countries – both developed and developing – the size of infection is only 0.2-0.5% of the total population.

Even if we were to assume about 5x higher unreported infection cases, this is still relatively small. Also, “ring vaccination” is not a strategy yet, as so far we do not have a vaccine widely available for the public.

Over the coming 6-12 months, JPM analysts concluded, it’s likely that a number of factors resulting from lessons learned during the first wave will commingle to help shorten the trough-to-peak dynamic in the ensuing waves.

For the record, this is how the team calculates “secondary infection rate” =, or “R sub zero”, their preferred means of measuring the rate of viral spread.

Here are JPM’s reasons for believing that R-sub-zero will be more restrained during  upcoming waves, including the second and third waves that appear to be rising in Asia and Europe at present.

Sample size (So): Declining. This is due to the large scale of tests conducted and the government push for identification of COVID-19 at an early stage.

Also, the technology tracking infections seems to suggest that the size of susceptible population is smaller than in the last couple of months.

Transmission rate: Rising. Mandatory guidance on wearing a mask in public places seems to be working as the key factor to control the rate of transmission. That said, we believe this is not enough to offset rising human mobility. After reopening, the transmission rate is likely to rise, as social distancing measures are relaxed, human mobility increases, and there is the risk of airborne transmission.

Average duration of recovery: Shortening. As the government ramps up the medical resources and gains more experience in treating the infections, the average duration of recovery is shortening.

All of this suggests that since we likely won’t be able to entirely suppress the virus without a vaccine, the world needs to rethink its approach to keeping cases at bay, and try to find a happy medium that will allow the economy to function as well as possible.

Another important difference between the first wave and the emerging second wave that researchers have observed is the fact that the second wave appears to arrive in smaller, more isolated clusters centered around a particular point of vulnerability (like the house parties in New Jersey and Connecticut).

How does the JPM analysts’ theory hold up against our current research? Admittedly, there’s not a ton of data on there about the onset of second waves. What exists suggests that the theory could very prove reliable. Though, presumably if not enough is done, it also might prove a failure.

Bottom line: Governments need to recognize that small levels of COVID-19 infection will likely need to be tolerated, and attended to with more sustainable measures, like mandatory social distancing, remote or distanced learning and other techniques. Perhaps Sweden’s approach will emerge as an example. Perhaps not.

To minimize damage to the economy will maximizing survival rates and minimizing mortality, governments should build a consensus on the ‘no riskfree’ next step in society (i.e., that the public should accept that a certain number of confirmed cases may exist in society until a vaccine becomes widely available) and that we will all need to do our part to contain the spread once the economy begins to reopen. But moving forward with more lockdowns probably isn’t a reliable solution.

In many countries, like India, it’s simply not an option.

Authored by Jim Quinn via The Burning Platform blog,

“A really efficient totalitarian state would be one in which the all-powerful executive of political bosses and their army of managers control a population of slaves who do not have to be coerced, because they love their servitude.”

– Aldous Huxley, Brave New World

“Every record has been destroyed or falsified, every book rewritten, every picture has been repainted, every statue and street building has been renamed, every date has been altered. And the process is continuing day by day and minute by minute. History has stopped. Nothing exists except an endless present in which the Party is always right.” 

– George Orwell, 1984

Huxley and Orwell were contemporaries. Huxley’s dystopian masterpiece was published in 1932 at the outset of the rise of totalitarianism, while Orwell’s was published in 1949 after 65 million people perished in a World War and Stalin had already murdered tens of millions of his own citizens. Those were dark times. They also coincided with Edward Bernays 1928 publication of Propaganda, in which he revealed the existence of an invisible government who used propaganda to manipulate the minds of the public to insure those controlling the levers of power were able to engineer their desired outcomes.

Debate has raged over the decades whether Huxley’s or Orwell’s dystopian vision of the future would be more accurate. Both visions required the successful use of propaganda by those in power to achieve their agendas. Huxley wrote a letter to Orwell after reading 1984 in 1949, shortly before Orwell’s death. His conclusion was as follows:

“Within the next generation I believe that the world’s rulers will discover that infant conditioning and narco-hypnosis are more efficient, as instruments of government, than clubs and prisons, and that the lust for power can be just as completely satisfied by suggesting people into loving their servitude as by flogging and kicking them into obedience. In other words, I feel that the nightmare of Nineteen Eighty-Four is destined to modulate into the nightmare o f a world having more resemblance to that which I imagined in Brave New World. The change will be brought about as a result of a felt need for increased efficiency. Meanwhile, of course, there may be a large-scale biological and atomic war—in which case we shall have nightmares of other and scarcely  imaginable kinds.”

I would assess Huxley’s vision was more accurate in the West, but Orwell’s was more accurate in regards to Russia, China, and numerous dictatorships in South America and Africa.

The key word is “was”.

Since 9/11, the United States has unequivocally moved in the direction of Orwell’s 1984 vision. We are now experiencing a dystopian amalgamation of the worst of both novels. Virtually every conspiracy theory ridiculed by the corporate controlled media pundits, captured academics, and government apparatchiks over the last few decades have proven to be accurate and true.

But very few are able to discern the truth because The Party/Invisible Government/Deep State has been hugely successful in utilizing propaganda and public education indoctrination to dumb down and manipulate the minds of the masses into believing whatever they are told by their masters. The complete success of this mass psychological conditioning has been on display for the last four months, as the majority have come to love their enslavement and servitude based upon the inept and hysterical misinformation propagated by medical “experts”, government bureaucrats, corrupt politicians, and the fake news media complex.

Huxley’s infant conditioning and narco-hypnosis were close, as public education has not been about learning critical thinking skills for decades, but indoctrination to what the government desires, producing non-questioning workers who can be easily manipulated through propaganda into obedience and conformity. The pervasive use of Ritalin to make boys act more like girls has been heavily pushed by the educational complex (dominated by women), attempting to produce zombies who don’t cause trouble or act like boys should.

The feminization of males has contributed greatly to the downward spiral of our society. Huxley did foresee technology being used to distract the masses, producing a trivial culture, egotism, pleasure seeking and passivity. The boob tube, internet, and social media have fulfilled this prophecy, producing generations of pliable, easily controlled victims, whose minds have been molded and ideas formed by those pulling the strings of our society behind the scenes.

The willingness of tens of millions to unquestioningly believe what they have been told by their leaders and supposed medical “experts” regarding a virus which will not kill 99.97% of the American population is a fascinating exploration of herd mentality and the power of fear propaganda. This nasty virus, supposedly let loose from a Wuhan bio-lab, is less deadly than the annual flu among those under 65 years old and more deadly when purposefully introduced into nursing homes by politicians.

The virus has less negative impact on school age children than the annual flu. But governors, mayors and teachers’ unions are refusing to open schools in the Fall, despite the data and actual experience in European schools proving it is safe to do so. The path of history during 2020 has not been natural or propelled by normal un-manipulated circumstances. The manner in which events have transpired seems staged, well planned, and designed for a purpose not yet revealed to the masses.

The year started with fears of war with Iran after the assassination of a key general in Iraq. The three-year Trump coup by Obama, Clinton and their co-conspirators in the FBI, CIA and Congress was once again collapsing under the weight of lies, fake news, and blind hatred, as Schiff’s impeachment farce crashed and burned. It was Trump’s turn to go on the offensive, as Barr and Durham investigated the coup.

Meanwhile, the gears of the financial system had been seizing up since the middle of 2019 and the Fed was propping up its Wall Street owners, hedge funds, and the billionaire class with “not” QE, while publicly lying that all was well. The Fed was desperately trying to keep the wheels from falling off. The QE, as planned, was pumped into the stock market, driving prices to all-time highs in February, showing all the signs of a blow-off top.

This was when the eleventh year of this Fourth Turning really began to get interesting. It was almost as if the Federal Reserve needed a disaster catalyst as a reason to unleash a torrent of easy money to save their Wall Street benefactors, their corporate crony parasites, and the billionaire oligarchs who constitute the invisible government pulling the wires controlling the nation.

Just in the nick of time the Chinese coronavirus conveniently spread across the globe, dutiful government funded scientists produced models predicting millions of deaths in the U.S., medical “experts” at the behest of Bill Gates convinced Trump to shut down the country based on apocalyptic forecasts, and the stock market plummeted 32% in a matter of weeks. This was the cover Powell and his money printing minions needed to bailout bankers and billionaires with trillions in newly fabricated digital greenbacks.

It is funny the 2009/2010 swine flu pandemic was estimated by the CDC and WHO to have infected 700 million to 1.4 billion people and killed between 150,000 and 575,000, but there were no shutdowns of businesses, no lockdowns of cities and states, no mandatory mask wearing, no school closures, and no deviation from our normal lives. A critical thinking individual might question why no mass panic and fear mongering by the media during the Obama administration pandemic, but hysteria and terror spread by medical “experts”, the left-wing corporate media, the Hollywood elite, and Democrat politicians during this similar scale virus outbreak.

The purposeful destruction of our economy over a bad flu couldn’t be for political purposes. Could it? Has the old “never let a crisis go to waste” mantra been put to good use once again by the left? Those in control of the messaging have panicked the nation and created a 2nd Great Depression over a flu that will not kill 99.97% of the American population. They have been so effective with their panic propaganda a recent poll found Americans believe 9% of the population (30 million people) have died from Covid-19. The stupid, it burns.

I no longer believe in coincidences. The fake news media would classify me as a conspiracy theorist because I question this plandemic, the coordinated and suspiciously funded BLM protests/riots, and the extraordinary transfer of trillions from the public coffers into the pockets of bankers and billionaires. It’s as if a curtain of disbelief has descended upon a nation of actors, all playing a part in this tragic comedy. Shakespeare would be amazed by the plot of this play.

The level of pretending has reached levels that would have been incomprehensible at the outset of this century, when the annual budget was essentially balanced and the Fed’s balance sheet was just over $500 billion. Today we are running a $4 trillion budget deficit and the Fed’s balance sheet is $7 trillion, with Powell, Trump, CNBC, Wall Street, Congress and Robinhood traders pretending this is normal and nothing to be concerned about. Best time to buy stocks. It’s a new paradigm.

The government pretends only 18 million Americans are unemployed when 118 million working age Americans are not working. The government has been sending $600 per week to unemployed Americans, borrowed from future generations, so they will spend it today and make it appear like the economy is recovering. Small businesses pretend they are not bankrupt by pretending to pay employees with money borrowed from the government that they will not pay back, also borrowed from future generations. The Federal Reserve and their Wall Street owners pretend the three trillion increase in the Fed balance sheet was to help Main Street, when it was nothing but another transfer of public wealth to the oligarchs before they pull the plug on this farce of a financial system.

Homeowners and renters pretend to pay their mortgages and rent to banks and landlords. Landlords pretend to pay their mortgages with the pretend rent payments. Consumers pretend to pay their credit card bills and auto loan payments to financial institutions. Young college graduates pretend to make their student loan payments. Wall Street banks and local financial institutions pretend they got paid because the Fed has their back and will print the country back to prosperity.

Who needs to honor their obligations when the Fed is in control? Why do we need to pay taxes, if $4 trillion deficits aren’t a problem? This game of extend and pretend can only last for a short time frame. The avalanche of consumer, commercial, and corporate defaults poised to wipe out this financially engineered pretend recovery is greater than anything witnessed in human history. And the masses are willfully ignorant, because they have been trained to believe in the all-powerful Fed. The surge in precious metals prices and the rapidly declining dollar tells a different story.

I can’t help but visualize our country as Wile E. Coyote hovering in mid-air after going off the cliff, about to plunge into the gully below, and then the anvil lands on his head. The events taking place, the actions of politicians, the blatant disregard for the best interests of the working class by the Powell and his Fed cronies, and the disgraceful display of mis-truths and misinformation spread by the media mouthpieces on behalf of their financial masters, has created a surreal spectacle of impending catastrophe.

I find myself asking whether I’m the one that’s crazy. I have trouble processing what I’m witnessing on a daily basis because the insanity of what is being done is incomprehensible for someone who believes in prudently managing their finances, obeying the law, valuing free speech, allowing free markets to determine winners and losers, having interest rates determined based on risk, and having the freedom and liberty to determine my future based upon my own efforts and initiative.

The part that has me most puzzled, because it seems inconceivable that politicians running large states and major cities would purposefully destroy their economies and businesses while encouraging the looting and burning of their communities, is this is all being done to defeat Trump in November. The economic and physical destruction wrought by the national lockdown for a bad flu and now this engineered race war is inexplicable, unless the true motive is still being hidden by the Deep State/Invisible Government oligarchs who are pulling the levers of this concocted scenario to introduce their new world order, based upon Marxist/Fascist principles and socialized economic policies.

It appears to be a controlled demolition with a nefarious purpose, which won’t be revealed until it is too late. And the majority, just trying to make a living, raise a family, live according to a social contract that worked for centuries, and find some enjoyment during their short time on this earth, are allowing themselves to be led to slaughter by incomprehensibly evil men seeking unlimited wealth, power and control over everyone on the planet.

In Part Two of this article I will attempt to decipher the true motives of the ruling elite and estimate a timeline for this crisis to play out.

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It appears the door has now been fully and finally shut on any Trump administration hopes of a complete ‘re-do’ of the Iran nuclear deal. 

Iranian leader Ayatollah Ali Khamenei said during his annual Eid al-Adha address that there will be no new talks with Washington, and further vowed that Iran will only expand its nuclear program, not give it up.

He further underscored in the speech that the Islamic Republic’s nuclear program remains a “necessity” for the country’s survival and prospering – though it should be underscored that Tehran has long maintained it’s for peaceful civilian nuclear energy.

While the speech was one of typical defiance amid ongoing crippling US sanctions and the ‘maximum pressure’ campaign, Iran’s top cleric and Supreme Leader addressed Trump’s prospects for November in a rare moment.

He underscored that any fresh talks with Washington would only serve to boost Trump’s chances in the upcoming election, and on this basis must be resisted. As The New York Times summarized of the statements:

In a Friday speech for the Eid al-Adha holiday, Ayatollah Khamenei said that entering talks with Washington over Iran’s nuclear program, as President Trump has urged Tehran to do, would only improve Mr. Trump’s chances of being re-elected in November. That, the ayatollah said, was Mr. Trump’s reason for suggesting such talks in the first place.

“He is going to benefit from negotiations,” Ayatollah Khamenei said. “This old man who is in charge in America apparently used negotiations with North Korea as propaganda,” he added — a reference to Mr. Trump’s high-profile nuclear diplomacy on another front, which to date has been mostly fruitless.

Khamenei also emphasized that Iranians must pursue self-sufficiency and complete independence from the US-dominated international economic system, and be prepared to weather the ongoing economic warfare out of Washington and its allies.

Meanwhile, recall that since the start of this year Iran’s enrichment capabilities have grown significantly.

Well done hawks 👍 https://t.co/DS7a5jUGEr

— Max Abrahms (@MaxAbrahms) August 1, 2020

The International Atomic Energy Agency (IAEA) in early June circulated a confidential report which was reported at the time by the Associated Press which detailed the Islamic Republic’s nuclear stockpile rose by a whopping over 50% in the three months prior to May 20.

“The agency said that as of May 20, Iran’s total stockpile of low-enriched uranium amounted to 1,571.6 kilograms (1.73 tons), up from 1,020.9 kilograms (1.1 tons) on Feb. 19,” AP reported. 

Submitted by Joseph Carson, former chief economist at Alliance Bernstein

The Bureau of Economic Analysis (BEA) estimated that Q2 Nominal GDP declined 34.3% annualized, the largest quarterly drop in our lifetime. On March 12, I penned the article “Investors Should Brace for a Record Decline in GDP”. Never did I imagine that the Q2 GDP decline would be nearly 5X times the previous record drop of 7.2% in Nominal GDP in Q4 2008. 

Here’s a few observations.

First, Q2 Nominal GDP was estimated at $19.4 trillion annualized, a drop of over $2 trillion from Q1 level of $21.5 trillion. BEA reports the GDP figures on an annualized basis. So the quarterly rate for Q2 Nominal GDP was $4.85 trillion, a figure that roughly matches the aggregate amount of fiscal and monetary stimulus injected in Q2.

According to my estimates, the combination of federal stimulus payments to individuals plus the expansion of the Federal Reserve Balance sheet amounted to an increase of approximately $5 trillion in aggregate fiscal and monetary stimulus over the three months ending in June. Never before has the scale of fiscal and monetary stimulus matched the nation’s nominal output in a single quarter. 

Second, Q2 nominal consumer spending declined at an annualized rate of 35.8%. But the actual decline is much worse. BEA estimated that people’s rent payments in Q2 increased $ 2 billion to a record $641 billion. BEA estimates consumer spending for rent based on an accrual basis. In other words, BEA methodology assumes people made their rent payments on time and in full. Yet, reports show that more than one-third of renters skipped paying part or all of their rent in Q2. 

Third, Q2 saw a record decline in Nominal output and a record increase in financial (equity) wealth. Based on preliminary data the market capitalization of domestic companies increased by $7 trillion in Q2 while nominal GDP, measured quarterly, declined by approximately $500 billion.

Critics argue that macro valuations of equity markets are less important nowadays. I disagree. Based on my calculations, the ratio of the market capitalization to Nominal GDP stood at 2x times at the end of Q2, surpassing the prior record high of 1.87x times at the end of the tech bubble in Q1 2000.  

In other words, the 2020 equity market is the most expensive (or over-valued) in our lifetime. Current record market valuations indicate an extremely poor risk-reward ratio, even worse than what followed the tech bubble of 2000.

What happens next? The recessionary conditions from the pandemic are not over. And the prospect of reduced or an interruption in federal stimulus will make it worse. 

Investors need to realize that the spending impulse from federal stimulus operates like the flow of new credit. That is, reducing or lowering the flow of stimulus payments to individuals will trigger a sharp drop in spending, especially when so many remain unemployed. Also, people face unpaid credit, rent, and mortgage bills. 

The pandemic crisis is unique in that involves public health, finance, and the economy. An all-out policy package pushed finance and the economy far ahead of the public health crisis. Unfortunately, the public health crisis lives on. So the rebound in finance and the partial recovery in employment are fragile, especially if Congress fails to provide additional financial support until medical science finds a cure for the virus.