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Authored by Bruce Wilds via Advancing Time blog,

Half in jest a few years ago, in an article, I suggested that taxation be stopped altogether. With so many people no longer concerned about deficit spending the idea now seems more viable. With so many people thinking that deficit government spending helps drive the economy at some point our leaders and those across the globe might want to give us taxpayers a break. Why not stop taxation entirely?

Just End It! Such a policy would go a long way to diminish the divide polarizing our nation.

I do not know anyone who likes to pay taxes or go through hours and hours of record-keeping and filling out forms in order to comply with our complex tax system. According to the Tax Foundation, Americans spent more than 8.9 billion hours complying with IRS tax filing requirements in 2016. All in all, tax compliance cost the U.S. economy $409 billion during those 12 months. As you know, things have not gotten any easier since that time. With the soaring deficits flowing out of Washington and policies that show no respect for the money hard-working Americans pay into the system lets do this!

Over the years Washington and governments in many countries have shown little in the way of financial restraint. If deficits don’t matter it seems logical that spreading the wealth around by something other than policies focused on redistribution through such a complicated system has merit. Both economists and politicians have considered many over the top solutions to resolve the problem of slow economic growth in a global economy mired in debt. In the past, cutting taxes has been a favorite method to spur consumer spending and pump up growth. The suggestion of placing taxation in the dustbin of history is merely an extension of this idea.

No Taxation Means More Money For Everyone!

If indeed cutting the ties binding us to responsible budgets is the solution to our economic woes and holds the key to prosperity being timid may not have served us well. Forget all the previously considered outlandish ideas, such as a war on cash, forgiving debt through a debt jubilee, giving everyone a guaranteed income, and even injecting money into the economic system by dropping it from a helicopter. Ending taxation in many ways can be seen as having the same effect of economic stimulation.

This is only one in a series of  easy plans to jump-start the economy, the next part when I get around to writing it will be titled, “Just Print More Money.” Both plans constitute a better alternative than going to war to kill off excess labor while ramping up production of self-exploding equipment or building bridges to nowhere. If history is any indication, wealth and jobs flow into any country that has low tax rates so why not take it to the next level. While you could demand that I parade a slew of complex figures and calculations before you proving all this will work, I simply ask you to please show me the same kind of trust we give to those leading us from Washington.

My proposal could be passed in a bipartisan way and should make everyone happy. It should please both Trump voters who claim enough is enough and want to pay way less in taxes as well as those on the far left who can’t get enough free goodies. By shattering the link between taxation and spending we can be far more generous. So I say, eat your heart out Paul Krugman, and you too Ben Bernanke. With all the time both of you have spent pondering the economy in the ivory halls of academia, you have come close but it is I who have proposed the next step in our financial evolution. Ending all taxation of any kind will not render the laws of economics moot or move us much further into the false state of modern voodoo economics than we have already traveled and it is guaranteed to work until it no longer does.

More crude chaos overnight (with AsiaPac oil ETFs trading at “crazy premiums” and Asian oil futures tumbling) has been over-ruled this morning as long-squeezes have morphed into a short-squeeze after Trump ordered the US Navy to “shoot down and destroy any and all Iranian gunboats if they harass our ships at sea”, sending June WTI soaring 40% to $16 before fading modestly into the official inventory data from DOE.

“There’s no way you can predict [it] right now,” Michael Cuggino, portfolio manager at Pacific Heights Asset Management LLC, said on Bloomberg TV.

“It’s virtually impossible until we have more visibility with respect to how to world comes out of the coronavirus on the other side.”

Still, we suspect inventories will be a catalyst for the next leg in these chaotic paper oil markets…

API

• Crude +13.226mm (+13.8mm exp)

• Cushing +4.913mm (+14mm exp)

• Gasoline +3.435mm  (+4.4mm exp)

• Distillates +7.369mm (+3.9mm exp)

DOE

• Crude +15.022mm (+13.8mm exp)

• Cushing +4.776mm (+14mm exp)

• Gasoline +1.017mm (+4.4mm exp)

• Distillates +7.8765mm (+3.9mm exp)

This is the 13th weekly rise in crude inventories…

Source: Bloomberg

Crude stocks soared to their highest since May 2017 (this is the highest level of crude inventory for this time of year ever aside from 2017)…

Source: Bloomberg

Bloomberg Intelligence energy analyst Fernando Valle warns that the roll of WTI contracts showed that all remaining storage at Cushing is booked, even if not yet full… but demand has collapsed…

Source: Bloomberg

Refineries slowed to 67% of utilization last in the previous week, the lowest since 2008.

As Bloomberg Intelligence senior energy analyst Vince Piazza notes, “U.S. crude storage capacity has about three months to go before it’s filled, as demand falls faster than production is declining.”

Following a collapse in US oil rig counts, US oil production is fading back to  its lowest since June 2019…

Source: Bloomberg

The possibility of negative prices has sent a shockwave through the ETF industry. Should the price of the futures they hold fall below zero, ETFs could go “lights out”, Charlie McElligott, a cross-asset macro strategist at Nomura Securities, warned on Tuesday, but June WTI lifted very modestly after the inventory print.

Pierre Andurand, a hedge fund manager who has successfully bet on lower oil prices in recent months, warned that oil ETF investors faced the possibility of being “completely wiped out.”

“Anything that invests in the front two months WTI is a recipe for disaster,” he told Bloomberg TV.

In case you wondered who was/is buying all this oil… it’s easy – Millennial bagholders…

“It is possible that the price of June 2020 contracts will drop to zero or a negative value,” Samsung Asset Management said in its filing. “In the worst-case scenario, the Net Asset Value of the Sub-Fund may drop to zero and investors may suffer a total loss of their investments in the Sub-Fund.

Authored by Steve Watson via Summit News,

The Chinese government has released video it says was shot inside the Wuhan Institute of Virology, in an attempt to counter claims, investigations, and evidence that the coronavirus leaked from the bio-lab.

According to reports, the US government is now ‘near certain’ that the lab was the origin of the virus, and several lawsuits have already been filed stating exactly this.

The video, released by Chinese state media, is said to be from February, and shows scientists in full personal protective equipment working within the lab. An emphasis is placed on the safety measures in place at the lab.

Watch:

In the video, scientist Zhang Huajun demonstrates how workers put on hazmat suits and pass thorough five hermetically sealed chambers before entering the main part of the facility.

Zhang also claims that the lab was designed to prevent leaks by allowing air to only flow inside, and not back out again.

This past weekend, the lab’s deputy director claimed that “There’s no way this virus came from us.”

“They have no evidence or knowledge. This is entirely based on speculation,” Yuan Zhiming told state media, adding that “Part of the purpose is to confuse people, to interfere with our entire epidemic activities or our scientific activities.”

Meanwhile, the World Health Organisation is once again in lockstep with the Chinese denials, insisting that the virus “is not manipulated or constructed in a lab,” and repeating the Chinese government’s talking point that “The Wuhan Institute of Virology has dismissed rumors both that it synthesized the virus or allowed it to escape.”

The new lab video is thought to be a propaganda effort to counter photographs that previously appeared showing broken freezer seals inside the lab where coronavirus samples were being stored:

Submitted by Michael Every of Rabobank

With so much liquidity being thrown into so many markets by so many so fast, it is perhaps understandable that some are wondering when we get inflation, hyper-inflation, and/or currency collapse. However, given we are riddled with World War Two analogies at the moment, allow me to do two Churchill impressions: “Never was so much owed by so many to so few” – and “Never was so much owned by so few.” (Yes, one does not need to read Piketty to know that wealth and income inequality under the Pharaohs was even more unfair than it has been trending under every US President since Nixon, but you hopefully get the point.)  

In short, global debt levels are at records and rising – which is where some see the inflation coming from; and yet wealth and income inequality are also at staggering levels – and rising as mind-blowing liquidity flows not into many pockets but into relatively few.

For all of the staggering scale of fiscal stimulus packages–20% of GDP in Japan, 15% and rising in the UK, and who even knows in the US?–ask yourself this: is the ordinary working family feeling better or worse off right now? Unemployment is soaring but you are lucky enough to get furloughed with 80% pay – isn’t that a 20% pay cut? And is a pay-rise now waiting for you in 2021? And good luck if you own a small business as most of most of the fiscal packages we see are going out in loan support to larger firms. Yet if you give USD1m to a private firm whose revenue has collapsed by USD1m, is this actually stimulus at all? It leaves you at an expensive stand-still – and also means more debt to carry post virus, dragging growth lower.

If that kind of “too much to too few” stimulus worked properly then QE would have worked and we would already be in wonderful hyperinflation: is there really *more* money flowing around than before in *real* economy?

Yes, as we have stressed before, the world is changing very rapidly from the pre-COVID status quo. Taboos against state spending and state aid are collapsing the same way Churchill’s public support did when he won World War Two but then lost in a landslide election favouring socialism, free healthcare, and nationalised industry. Yet the economic damage being wrought by this virus still lies ahead of us long before we suddenly arrive in a promised land of recovery, inflation, and bolshie workers. We are, at worst, at the Dunkirk stage of the war against COVID-19, where a lucky escape means the hard fighting is still ahead of us; or, more optimistically, we are just after the Battle of Stalingrad, where the war’s momentum has decisively shifted but massive pain still lies ahead.

A report in the South China Morning Post today quotes Chinese scientists as saying that they believe the virus has mutated rapidly, and that this explains the apparent discrepancy in the severity of the symptoms and the mortality rates being seen around the world: in short, the European and New York versions may be a different, more lethal strain than those on the US West Coast and in some other countries. If so, what does that imply for lockdown lifting – or for a workable vaccine?

Meanwhile the UK government, for just one example, still can’t give find it within its collective intelligence to tell people to wear masks, despite clear evidence that if both sides in an interaction wear a mask, the potential infection rate plummets; and the same government still can’t manage to source enough masks (or gowns) from anywhere in the world for key health workers – the Health Secretary last night revealing the brilliant innovation of now “talking to manufacturers directly and not middle-men”.

Let’s actually look at “markets”, parts of which can still send signals worth listening to. What is oil saying about where we are along the World-War-Two-to-post-World-War-Two-social-nirvana spectrum? As I type, Brent Crude for June delivery was trading down 16% on the day at a 21-year low while the June WTI contract was -9% after losing half its value on Tuesday – but at least it isn’t massively negative yet. This is even despite President Trump tweeting: “We will never let the great U.S. Oil & Gas Industry down. I have instructed the Secretary of Energy and Secretary of the Treasury to formulate a plan which will make funds available so that these very important companies and jobs will be secured long into the future!” All very Churchillian – but in a 1942 not a 1945 kind of way.

Likewise, 10-year US Treasuries, which until we get full Fed yield curve control are still a valuable indicator, are trading at 0.55%, down 2bp, and hovering around record lows. They don’t smell socialism in the air.

Yet as for emerging markets, even despite low US bond yields all we see is more pain. Mexico surprised with an emergency 50bp cut yesterday taking rates down to 6% and has promised additional liquidity measures. Only another 575bp to go to catch up to where economic reality is for the US, one might say. Indeed, many EM appear to be happily cutting away as inflation disappears – which obviously means much, much more downside for their currencies, even from depleted levels. Turkey is the next to do so today, most likely, where the consensus is a 50bp cut to 9.25%. So only 900bp left to go to catch up to the US, one might say. In turn, this naturally means an even stronger USD – and so lower commodity prices, and weaker EM economies, which are already running to the IMF in record numbers, and lower global growth, and lower global inflation.

Yes, folks, at some point we will all be celebrating in Times Square. It will happen. At some point afterwards the many will then be wanting to ensure that capital does not only flow to the too few – and the reckoning will be awesome for markets to behold.

But for now at least all oil and Treasuries can offer us is blood, sweat, and tears – and not enough protective equipment to deal with them.