Authored by Eric Peters, CIO of One River Asset Management
“Thank you. I’m happy to take your questions,” said Jay Powell, an inner panic rising, more flight than fight. He’d lowered rates 25bps to 2.00% and knew as well as every reporter in the room that the Federal Reserve has never had so little ammo at an easing cycle’s outset.
When Bernanke first cut in September 2007, he slashed 50bps. That left 475bps until he hit 0%, which happened 15 months later. But back then, all central bankers had ample arsenals. European overnight rates were +3.00% in September 2007. Chinese one-year deposit rates were +3.60% as their GDP expanded at a stunning +11.9% pace. Even Japan’s central bank had lifted rates to +0.50% while still printing yen, buying bonds.
And back in 2007, every developed nation retained ample room to expand debt/GDP ratios to heights previously reserved for wartime.
“But that was then, this is now,” thought Powell, pointing to the first reporter. And something strange happened. America’s Fed Chairman felt himself slip onto autopilot, as he floated outside of his body, rising above to observe the room, in quiet contemplation.
Below stood a naked man at a podium, accomplished, well spoken, a touch flustered, fielding questions, pretending to hold great power. The room was filled with polite reporters, making their usual inquiries.
“The Fed has historically cut rates by an average of 550bps to recover from recession. Yet this poor fellow at the podium has only 200bps left,” thought Powell, floating in the corner.
China’s economy is slowing, drowning in debt. European rates are already -0.40%. Japanese rates -0.10%.
“Negative rates obviously don’t work,” he thought, “And QE hasn’t spurred an investment cycle, just inequality.”
Powell felt pity for the poor fellow below, living a lie. And he quietly wondered,
“When will a reporter finally ask: Now that central banks are becoming impotent, and the politicians are taking over, will you be America’s last independent Chairman?”
via ZeroHedge News https://ift.tt/2KDCkim Tyler Durden
As more information trickles out about the suspicious death of Jeffrey Epstein, AG General William Barr asked the Justice Department’s inspector general on Saturday to launch its own investigation, while the FBI also launched an inncs, as the FBI conducts an investigation of its own.
Law enforcement officials previously said Epstein, 66, hanged himself and was found in a jail cell Saturday morning at roughly 7:30 am. Previously, on July 23, “Epstein was found passed out in his jail cell with marks on his neck.
Epstein was under extra security in a special unit of Metropolitan Correctional Center in Manhattan – but he wasn’t under suicide watch, a prison official told the Times. Bernie Kerek, former commissioner of the New York City Department of Correction, wrote an op-ed for The Hill raising serious doubts about Epstein’s suicide…
[T]he most basic question, in my mind, is why Epstein was in solitary confinement in the first place — something so totally inappropriate for a prisoner already at risk of suicide…
He tried to commit suicide less than two weeks ago and, we were told, was placed in solitary confinement and under a suicide watch.
So how in the world could he commit suicide?
…
There is nothing worse than taking a suicidal prisoner and sticking him into a solitary confinement cell. Common sense and any psychologist, any corrections professional, will tell you that — so why was it done in this instance?
In solitary confinement there is a 15-minute “watch” rule, but that is not the same as a “suicide watch.” A prisoner can asphyxiate himself in 90 seconds and, after eight minutes or so, he will be brain dead.
That’s exactly why around-the-clock supervision is necessary when a prisoner is classified as suicidal. And it requires constant supervision, in person or by technology — cameras.
Just days before his death, revelations about many of the rich and famous individuals who were serviced by his pedophile ring began to emerge; all raising serious suspicions about his death and just what Epstein was ready to make public.
John McAfee had a quit shot across the bow…
I was stunned by Epstein’s suicide, though probably not as much as Epstein himself.
As The Federalist reports, former President Bill Clinton visited the island of convicted pedophile Jeffrey Epstein, who happened to committed suicide after the documents were unveiled.
The documents that detailed the former president’s trips to the island known as Pedo island were reported on Friday and Epstein committed suicide on Saturday.
“Jeffrey Epstein told prison guards and fellow inmates that he believed someone had tried to kill him weeks before his death, a source has revealed,” The Mail said.
The allegations came from Epstein’s alleged “sex slave,” said Virginia Roberts Giuffre, who remembered one trip by the former president to the island.
“Epstein did invite two young brunettes to a dinner which he gave on his Caribbean island for Mr. Clinton shortly after he left office,” the deposition said.
“I’d have been about 17 at the time. I flew to the Caribbean with Jeffrey and then Ghislaine Maxwell went to pick up Bill in a huge black helicopter that Jeffrey had bought her.”
“I remember she was very excited because she got her license around the first year we met. I used to get frightened flying with her but Bill had the secret service with him and I remember him talking about what a good job she did.”
Even the Washington Post had some questions about the suspicious nature of Epstein’s death:
First, consider the MCC itself. It is a high-rise, forbidding administrative detention facility in the south of Manhattan. Its population consists almost entirely of prisoners, like Epstein, awaiting trial in federal court in Manhattan. It has been referred to as the “Guantanamo of New York” for its stringent security measures. It is the facility of choice for notorious federal defendants, often in special administrative segregation units, having previously housed John Gotti, Bernard Madoff, Omar Abdel Rahman and, recently, Joaquín “El Chapo” Guzmán.
In other words, it is the very place to put a high-profile and potentially suicidal defendant such as Epstein.
Second, consider the BOP’s suicide prevention protocol. Epstein was found last month unconscious in his MCC cell with marks on his neck. If he was not on suicide watch, it would be astonishing. Yet if he were on suicide watch, his death would be virtually inconceivable.
The BOP’s suicide prevention protocol entails, first and foremost, human eyes on the prisoner 24 hours a day. It also requires a strict deprivation of anything — shoelaces, sheets, pillowcases — that could possibly be used to hang oneself. It also requires disabling anything that could be used to tie a noose — vents, sprinkler heads, etc.
Finally, we are not talking about inexperienced yokels. BOP personnel, especially at MCC, are the best professionals in the corrections industry, and they receive special training in administrating suicide prevention. Who better to guard against such a horrific development?
As a reminder, here’s a timeline of the Epstein debacle, from the very beginning, text courtesy of Axios
Timeline:
The earliest allegations date back to 2002. They include sexual abuse and exploitation of underage girls and young women, as well as requesting some of the women to recruit others, per the New York Times.
In a 2002 interview with New York Magazine, Trump said he enjoyed Epstein’s company, and, “It is even said that he likes beautiful women as much as I do, and many of them are on the younger side.” Per the Washington Post, Trump has since minimized his friendship with Epstein.
And Trump wasn’t the only president Epstein socialized with. “In his eyes, [Bill] Clinton as a species represents the highest evolutionary form of the political animal,” noted New York Magazine.
2005
A teenage girl’s parents told the Palm Beach police that she had been molested by Epstein in March, according to the Miami Herald and the New York Times.
By October, law enforcement had identified more than 20 possible victims.
2006
In May, the Palm Beach County state attorney referred Epstein’s case to a grand jury, resulting in a single charge of soliciting prostitution.
The FBI opened an investigation in July. 2007
Email records indicate Epstein’s attorneys and prosecutors, led by then-U.S. attorney for the Southern District of Florida, Alexander Acosta, discussed a possible plea deal. 2008
A federal grand jury indicted Epstein on minor prostitution charges.
In a deal with federal prosecutors on June 30, federal charges were dropped in exchange for Epstein pleading guilty to state charges — a single count of solicitation of prostitution with a minor. According to the Miami Herald, “Among the terms agreed upon: that the victims would not be notified, that the deal would be kept under seal and all grand jury subpoenas would be cancelled.”
Epstein began an 18-month sentence in the Palm Beach County stockade in July. He was released 6 days a week to work from his officeTwo of Epstein’s victims filed a lawsuit against the federal government, accusing them of violating their rights, per the New York Times.
2009
Epstein was released in July, 5 months early.
His nonprosecution deal was made public in September.
2011
Two of Epstein’s victims filed a motion in March accusing federal prosecutors of violating their rights by keeping the deal secret, the New York Times reports.
2017
Acosta was confirmed as U.S. labor secretary in April.
The Miami Herald began an investigation of Acosta’s nonprosecution agreement from 2007, discovering that Acosta negotiated a plea deal that granted Epstein immunity from federal sex-trafficking charges.
Reporter Julie Brown pored through records, files and court documents and found more than 80 alleged victims.
2018
Brown’s investigative report was published in November.
2019
A judge ruled in February that prosecutors had broken the law in reaching the previous plea bargain.
Epstein was charged in federal court in Manhattan with sex trafficking and sex trafficking conspiracy. He pleaded not guilty and was held without bail. He was flagged as “an extraordinary risk of flight and danger,” the New York Times writes.
Investigators seized a series of nude photos depicting underage girls from Epstein’s New York City townhouse, according to the New York Times.
In July, House Oversight Committee Chairman Elijah Cummings (D-Md.) requested Acosta’s testimony regarding his role in Epstein’s 2008 plea deal.
Acosta defended his handling of the sex-trafficking case involving Epstein. Acosta resigned in mid-July.
The intrigue: “Even though the criminal prosecution of Mr. Epstein ended this morning, there remained questions about co-conspirators,” Paul Butler, a Georgetown University law professor, told the Washington Post.
Epstein led a “mysterious yet ultra-opulent lifestyle,” writes Axios’ Felix Salmon.
He also had a collection of “powerful pals,” including private equity billionaire Leon Black, per Axios’ Dan Primack. The Miami Herald reports Clinton, Prince Andrew and former Israeli Prime Minister Ehud Barak were in his social circle.
* * *
So what’s next?
The criminal case against Epstein ends with his death, but accusers’ lawyers are still seeking justice for their clients. Civil rights attorney Lisa Bloom on Saturday called for the administrators of Epstein’s estate to “freeze all his assets and hold them for his victims who are filing civil cases.”
Me before Epstein’s death: Conspiracy theories are facile misdirections favored by people who crave simplistic explanations to soothe their own feelings of powerlessness.
Me now: The Illuminati whacked Epstein.
Everything’s on the table.
The bottom line is simple – instead of ending the conspiracy, Epstein’s death has brought new questions about the accusations, investigations and the broader implications.
via ZeroHedge News https://ift.tt/2ZUvD1B Tyler Durden
Bill Murphy, Chairman of the Gold Anti-Trust Action Committee (GATA), says the market manipulators and price suppressers of gold and silver are fighting a losing battle. Murphy explains:
“The open interest on silver is at all-time high levels even though the price is barely $17 per ounce. That shows they are going all out even now to keep it down here. So, at some point, they are going to be overrun. They are going to have what we call a commercial signal failure, where these commercials to the big banks and other people who have been suppressing the price are just completely overrun. A lot of people are not prepared for that, but it is in the works right now. I am pretty sure it is going to occur.”
On gold, Murphy is just as bullish as he looks around the world at the high price of the yellow metal. Murphy says, “Gold is at all-time highs in 73 different countries. “
“In Canada, it is $100 higher than its (previous) all-time highs. The all-time high in U.S. dollars for gold is around $1,900 per ounce. It is going to take that out and start heading for $3,000, and I think it is going to do this faster than people think. The tipping point has been reached, and the gold cartel can’t do what they have done for so long…
It’s interesting, people say it’s the low interest rates (driving the price up). We had low interest rates years ago, but all these things have not mattered. Now, they are talking about low interest rates, negative interest rates and debt levels, and it’s all coming to the forefront at once, and they don’t have the physical gold to do what they did for so long…
I don’t think the gold cartel can do what they have been doing. Everything has changed, and it has to do with the physical market.”
Murphy is most bullish on silver. Murphy says,
“For anyone that wants to get involved in precious metals, silver is going to be a home run. It actually just started…
Gold goes first because the physical market is tight. Then, the industry and silver people are going to make sure they have secure supply, and all of a sudden it’s going to be like a panic…
Silver is the bargain of a lifetime. It’s certainly the cheapest asset on the planet.”
Source: Bloomberg
In closing, Murphy predicts, “Gold and silver are just going to go nuts because there is no room on the downside in a lot of these markets.”
“In other words, if they don’t keep printing the money and going to QE and keep interest rates low, it’s going to cause chaos. All I can say is I think gold and silver are headed for the moon. You are going to get these crashes out of nowhere because all of a sudden it’s like going into a black hole. That can happen, and that is what people need to be concerned about.”
Authored by Andrew Sheet, chief cross-asset strategist at Morgan Stanley
Two questions are swirling around markets at the moment.
First, will central banks provide more or less accommodation than investors expect?
Second, can that accommodation (among other factors) improve the weak cyclical backdrop materially?
On both scores, we are cautious, a key reason why we remain underweight equities and credit.
Before going further, we’d stress that this is not some screed on central bank action, a disquisition on how everything would be better if only different decisions were taken. The Fed, ECB, BoE and BoJ all face extremely difficult (if somewhat different) challenges. They will do what they will do. Our focus is on how their actions may differ from what markets are currently pricing, and the impact going forward. Let’s start by reviewing recent central bank statements and subsequent market gyrations.
On July 25,at the press conference following the ECB meeting, President Mario Draghi stated that further interest rate reductions for July had not been discussed.For some market participants, this apparent lack of urgency came as a surprise. Our interest rate strategists estimated that the markethad placed a 40- 50% probability on a 10bp rate cut at that meeting, following a notable rise in expectations for a cut after the ECB’s Sintra forum.
On July 31, at the press conference after the Federal Reserve’s July meeting, Chair Powell struck a relatively balanced tone, surprising markets that had expected more openness to further, faster easing. Stocks may have fallen since the Fed’s rate cut for several reasons, including increased trade tensions. But it’s important to emphasize just how optimistic markets had become on the scale of accommodation the Fed would provide.
Over the past 20 years, including the post-crisis period, stock and bond prices have generally moved in opposite directions, a function of the fact that equities often prefer better growth to worse, even if it means higher yields. But on July 16, as the Fed’s decision neared, stock and bond prices were moving in the same direction (stocks higher,yields lower) to the greatest extent in over 15 years. The “have your cake and eat it” mentality – the expectation of powerful central bank action lifting both stocks and bonds – raised the bar for disappointment.
The market’s initial reaction to both July central bank statements was to assume less accommodation. But subsequent reactions have assumed more. Expectations for ECB rate cuts rose, to ~17bp by the October meeting, while Fed easing expectations grew, to ~92bp in total cuts through July 2020,and ~31bp in rate cuts by the September meeting of this year.
More visibly, bond yields plunged, with charts bringing to mind a late-1990s internet stock turned upside down. US 30-year bond yields are near an all-time low, 30-year German Bund yields touched an all-time low of -0.10%,and a 100- year Austrian bond that began 2019 with a 1.7% yield has rallied by ~62% year-to-date. But what’s most notable is that as yields have raced lower and markets have priced more and more central bank accommodation, the yield curve in the US and Europe is becoming flatter and flatter. That pricing, at least to us, is consistent with central banks taking increasingly aggressive action, but those moves failing to lift growth or inflation sustainably over the medium term.
Needless to say, that isn’t a great story. Unfortunately, it seems to be confirmed by other markets. Inflation expectations have been falling. Commodity prices have been dropping. Cyclical and small-cap stocks are underperforming. All these dynamics are consistent with continuing growth risks.
Sentiment measures suggest more investor caution in the wake of recent volatility,a good thing. We remain cautious,as we believe that a number of challenges remain. Among them, the risk thathigh policy expectations make disappointment more likely,and that even if those aggressive expectations are met,easing isn’t expected to improve growth or inflation materially.
Hence, we remain underweight equities and credit. In our framework, we view lower yields (especially with a flatter curve) as a negative for risk assets. Higher yields (especially with a steeper curve), signalling an improvement to growth, would likely make us more optimistic.
via ZeroHedge News https://ift.tt/2KtoMqR Tyler Durden
Reason.com’s Mike Riggs talks with Illinois Policy Institute’s Adam Schuster about how to fix the state’s pension debt crisis…
Illinois is running out of time to fix its public sector pension problem. A new report from Moody’s Investors Service identified the Prairie State as one of the two most likely to suffer during an economic downturn. Illinois towns and cities are already paring back government services to pay for generous benefits packages for retirees, and Chicago’s pension debt alone is larger than that of 41 states. That arrangement can’t last forever.
“The worst-case scenario is there’s another national recession, which would cause our pension funds to lose a bunch of their assets again,” says Adam Schuster of the Illinois Policy Institute.
“As the assets shrink, the pension funds go into a financial death spiral. We might end up with some kind of Puerto Rico–style pseudo-bankruptcy or federal bailout. Everybody in the nation is now on the hook for Illinois politicians’ irresponsible decisions.”
The best-case scenario would involve repealing an automatic 3 percent raise that pensioners receive each year of their retirement and requiring workers to pay more into their own plans. Democratic Gov. J.B. Pritzker would prefer to scrap Illinois’ flat income tax and replace it with a progressive tax scheme, which could cause even more people to flee the state. In May, Schuster spoke to Reason‘s Mike Riggs about the pension conundrum.
Q: If somebody had been paying attention 30 years ago, could they have anticipated this pension problem?
A: Thirty years ago would be just about enough time to stop some of the mistakes. We changed the state constitution in 1970 to add a pension protection provision, which essentially says that as of the day of hire, an employee’s benefit formula cannot be changed in any way. So it doesn’t only protect benefits that somebody has already earned. It protects the future growth rate of those benefits for life and gives the state legislature no flexibility to change them.
Q: What happened next?
A: In 1990, Illinois implemented a guaranteed 3 percent compounding cost of living adjustment. So a person’s pension goes up by 3 percent every year regardless of how much inflation there is in the economy. It basically doubles the size of somebody’s pension over the course of 25 years.
We also had a series of governors, both Republican and Democratic, who habitually shorted the system by putting in less than the required contribution. The reason they did that is that the required contributions were unaffordable and never would have been affordable because we overpromised the benefits.
Q: Do Illinois taxpayers know what’s going on?
A: I think there is pretty widespread knowledge about the problem, but there’s also a defeatist apathy. We’ve had five straight years of population loss. We’re losing our prime working-age adults, and poll results say that the No. 1 reason they’re leaving is that the taxes are too high here. And the No. 2 reason they’re leaving is job opportunities are better elsewhere, which is related to No. 1.
Q: What do public sector union leaders say about the pension crisis? How about union members?
A: I appreciate that you make that distinction, because I’ve found there is a huge disparity in how they react to this kind of thing. Union leaders, who are involved in politics and lobbying, are against having this conversation at all. But when I talk to regular rank-and-file union members, they actually think the plan we put forward is a very fair and very reasonable compromise.
Q: What is the short version of your plan?
A: It would amend our constitution so that instead of protecting the future growth rate, it would only protect the pension benefit that somebody has earned to date. So if you retired today, your annuity would be protected, but it would give the legislature flexibility to change retirement ages for younger workers and to change that 3 percent cost of living adjustment, for example.
Q: What happens if Illinois does nothing?
A: I don’t know if you followed at all the story of Harvey, Illinois, but it’s a South Chicago suburb, and they have one of the highest effective property tax rates in the nation. Even still, their police and fire pensions are so underfunded that in order to make their pension payment, they had to lay off dozens of current police officers and firefighters.
Q: That’s what people pay taxes for: government services!
A: Harvey was the canary in the coal mine. Down in Peoria, they’ve had to lay off municipal workers, people who plow the streets. In Rockford, they’re being told they need to sell their city water system. Municipalities around the state are laying off public safety workers today to pay for yesterday’s pensions.
via ZeroHedge News https://ift.tt/2Z1efqO Tyler Durden
Somebody must’ve not been paying attention in biology class.
A rant from feminist YouTube star named Jenny McDermott has gone viral on Twitter over the past few days. In it, McDermott tells her audience that, to create the ideal conditions for the survival of the human race, we must kill all men and male babies.
“We need to kill all men. I am sick of being a baby factory that produces more men who will in the future subjugate me. The solution to that is to kill any man that you see in the streets just any swinging dick. We want the species to go on but we only want it to go on with women in it.”
Don’t believe us? Here’s the clip. And (at least as far as we can tell) it’s not a deep fake.
This is the unhinged feminist youtuber Jenny McDermott. She says the only way to stop men from subjugating her – k!ll them all at birth. “We need to k!ll all men” she says 😵
If McDermott wants to live in a world with no men, she should try moving to this remote polish town of Miejsce Odrzanskie, where, by some fluke of fate, there hasn’t been a man born in nearly a decade, according to the New York Times.
Now, we know the media’s focus lately has been on the angry ‘incel’ men who have perpetrated several high profile mass shootings over the past few years. And though some might cry ‘false equivalence’, there is an equally depraved, equally violent contingent of the feminist movement that doesn’t just want to push men to change their behavior – it wants to get rid of all men.
There’s only one problem: How will they continue the species with only women after the great male holocaust has been completed?
via ZeroHedge News https://ift.tt/2ZVJeWu Tyler Durden
Thinking about college? You may want to consider where you will likely locate to land your first job after you graduate and in what industry.
A good way to do this? Check out the U.S. Census Bureau’s Post-Secondary Employment Outcomes (PSEO), which shows where college graduates get jobs and in what industries.
On top of that, it does it by institution and type of degree.
The data address a major gap in education statistics by providing a much clearer picture of how graduates transition from school to employment.
The PSEO project tabulates employment flows and earnings outcomes by institution, degree level, and degree field, and provides counts of employment by employer industry sector and Census Division.
PSEO does this by linking university transcript data to the Census Bureau’s Longitudinal Employer-Household Dynamics (LEHD) records. Those records list job histories covered by unemployment insurance by employer, which is then linked to industry and location information on the employers.
“Up until now, individual states could only measure earnings and employment outcomes for persons who worked in the same state where they were educated,” said John Abowd, the Census Bureau’s chief scientist and associate director for Research and Methodology.
“Thanks to this pilot,” he said, “states, universities, and prospective students have the opportunity to see employment outcomes by program of study, by region and industry.”
What PSEO Offers
Currently, the PSEO statistics include data from the University of Texas System, Colorado Department of Higher Education, University of Michigan-Ann Arbor, and University of Wisconsin-Madison.
The figures below show where graduates with bachelor’s degrees from four flagship institutions work by Census Division.
Do Graduates Find Jobs Nearby?
There are significant differences in the geographic dispersion of employment for graduates.
UT-Austin, for example, sees most of its students stay in the state, while University of Michigan graduates disperse across a wide geographic area.
University of Colorado Boulder and UW-Madison are somewhere in the middle of these two extremes.
First Post-Graduation Jobs Don’t Always Match Field of Study
In addition to geographic dispersion, PSEO allows users to see the industry sector of employment for graduates.
The graphs below look at industry employment for all bachelor’s recipients in Colorado in three specific fields of study.
It’s clear that graduates in communications are more likely to land jobs in professional services, information and retail industries while social science graduates are more likely to end up in education and health.
Business majors are heavily concentrated in finance/insurance and professional services.
Important to the analysis of career paths, PSEO also measures how specific majors transition into highly-related fields.
The figure below measures the share of graduates from health programs who enter the health industry sector one year after graduation.
Surprisingly, individuals with master’s degrees in health are much less likely to end up working in the health industry than those with shorter-term certificate and associates degrees.
Instead, master’s graduates in health also end up in Education (22.2%) and Public Administration (7.2%).
All these tabulations are available on the PSEO website for download, as well as additional documentation. The Census Bureau is currently developing a data visualization tool for the employment flows data, which is scheduled for release in the coming months.
via ZeroHedge News https://ift.tt/2ORIznZ Tyler Durden
Weeks after Anthony Scaramucci called President Trump a racist for criticizing “the Squad,” the former White House communications director went on MSNBC Thursday night to criticize Trump’s trip to El Paso to visit shooting victims.
“So, look, the president didn’t do well on the trip,” Scaramucci told a panel on Chris Matthews’ “Hardball, adding “He probably would be mad at somebody for saying that … Maybe he’ll tweet something negative about somebody for saying he didn’t do well.”
“But the facts are he did not do well on the trip because if the trip is being made about him and not the demonstration of compassion and love and caring and empathy for those people,” Scaramucci added. “Then it becomes a catastrophe for him, the administration, and it’s also a bad reflection on the country.”
Trump came under fire from the left last week after a video emerged of him talking with pro-Trump hospital staff about his popularity in El Paso, and making his signature ‘thumbs up’ gesture while taking a picture with the family of a shooting victim.
Continuing on, Scaramucci then said that White House employees are “a bunch of cowards” for being too afraid to confront Trump with grievances – instead leaking them to the press.
Three days later, Trump hit back – tweeting on Saturday: “Anthony Scaramucci, who was quickly terminated (11 days) from a position that he was totally incapable of handling, now seems to do nothing but television as the all time expert on ‘President Trump,'”
“Like many other so-called television experts, he knows very little about me.”
…..other than the fact that this Administration has probably done more than any other Administration in its first 2 1/2 years of existence. Anthony, who would do anything to come back in, should remember the only reason he is on TV, and it’s not for being the Mooch!
To which Scaramucci replied on Sunday “For the last 3 years I have fully supported this President. Recently he has said things that divide the country in a way that is unacceptable. So I didn’t pass the 100% litmus test. Eventually he turns on everyone and soon it will be you and then the entire country.”
For the last 3 years I have fully supported this President. Recently he has said things that divide the country in a way that is unacceptable. So I didn’t pass the 100% litmus test. Eventually he turns on everyone and soon it will be you and then the entire country. https://t.co/BUvwujc6LW
“I’m not Steve Bannon, I’m not trying to suck my own cock. I’m not trying to build my own brand off the fucking strength of the president. I’m here to serve the country.” -Anthony Scaramucci
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A few months ago many of us read about the conspiracy theory of “the nuclear option”, according to which China could generate a huge debt crisis in the United States and destroy the US economy if it sold its treasury holdings.
China is an can become a greater economic leader, but the Chinese yuan cannot be a global reserve currency while maintaining capital controls and exchange rate fixing.
This week we have verified that the reality is very different. China has reduced its holdings of U.S. bonds by $ 100 billion since the September 2018 highs and the result is that the U.S. treasury bond has strengthened without the need for Federal Reserve repurchases, while China has been forced to devalue the yuan when the country’s capital flight intensified (more than $40 billion in the first half, according to the IIF, registering the highest figure in ten months in June).
Maintaining misguided capital controls does not prevent capital flights nor strengthen its financial account. The recent imbalances in money supply growth and subsequent bailouts of troubled lenders that triggered the devaluation show that China has an important dollar shortage that cannot be solved keeping outdated policies of intervention in the currency and capital markets. Despite China’s undoubted importance in the global economy, the yuan is only used in 4% of global transactions, according to the BIS, that means less than the Australian dollar or the Swiss franc.
The devaluation of the yuan above 7 per US dollar shows that its financial and monetary systems are overstretched. China has gone from needing two units of debt to create one unit of GDP in 2008 to requiring 6.75 units of debt to generate the same growth (source: Bloomberg and Apple Tree Capital). The foreign currency reserve ratio compared to the broad money supply is less than 12%, when the Asian crisis of 1997 was generated once the same ratio fell below 25%.
Some maintain that the Chinese currency is heavily backed by gold, but the reality is that the country’s total gold reserves do not reach 0.25% of the country’s money supply.
The underlying problem is that China´s central bank has implemented a much more aggressive monetary policy than that of the United States without having the dynamism, financial account and US capital freedom. A mistake that the eurozone must learn, and fast. For China, the opportunity to present itself as a global financial contender would have arrived from implementing a sound money policy, not multiplying the mistakes of other fiat currency policymakers. If China had implemented a sound money policy, there would have been no need for capital controls as the country would receive massive inflows, not outflows. In fact, the soft landing of the economy and the transition from a state-owned low productivity model to a service and technology model would have been faster and more successful.
Capital controls have weakened the Chinese financial system and made it almost impossible for the yuan to become a world reserve currency that dethrones the US dollar. You cannot dethrone a king when you make the same mistakes but multiplied.
What is China’s biggest weaknesses in a trade war? You cannot win a trade war with high debt, capital controls and US exports dependence: A massive Yuan devaluation and domino defaults would cripple the economy.
Unfortunately, it may now be too late as imbalances evidenced by overcapacity and rising debt are probably too high to offset with solid money policies. Now, many countries face the almost inevitable prospect of more currency devaluations, which has triggered pre-emptive responses all around the world. A currency war?
What is a currency war?
A currency war is a conflict between nations trying to artificially devalue their domestic currency in order to be more competitive internationally but also to hurt their opponents. Using the currency to make the other nations less competitive while at the same time weakening their power.
It is based on a myth.
That devaluation helps competitiveness and that having a strong currency is negative. Devaluation is not a tool for exports, it is a tool for cronyism, and destroys the purchasing power of salaries and savings to benefit low productivity sectors and the government. It is a transfer of wealth from citizens to the government.
The decision of the US Administration to consider China a currency manipulator is very relevant and can have significant implications for markets and the global economy, including:
Excluding Chinese firms from US government procurements.
Block or stop trade deals.
Calling for heightened IMF surveillance.
Sanctions to firms trading Yuan and actions at the IMF to take away China’s currency status.
It is very easy to prove that a country is not a currency manipulator. Eliminating capital controls and exchange rate fixing. The US would have never been able to consider China a currency manipulator if the yuan was not artificially fixed daily and capital restrictions had been eliminated.
The problem is that China needs, on the one hand, a strong currency that guarantees the purchasing power of wages and savings in a country where inflation is already underestimated in official figures (read) and, on the other, a weak yuan to artificially make weak sectors appear competitive and increase exports.
Devaluing is not a tool to export, it is a tool to disguise structural imbalances and always harms much more than it benefits.
Unfortunately, in the United States, there are voices that want to “weaponize the dollar” (politically intervene the currency) defending the obsolete and pointless policy of devaluation, which would be the biggest mistake in history and put the US economy and its status as a reserve currency at risk.
If the world gets into a currency war, with the assault on wages and savings that devaluation entails, no one wins.
A currency war is a war against citizens, their salaries and their savings, to benefit inefficient and indebted sectors.
A currency war would devastate the purchasing power of salaries and suppress investment and consumption decisions. When governments attack the currency, the economic agents’ reaction is not to invest and consume more, but a generalized slump in spending and capital allocation.
If a country enters a currency war, it disproportionately hurts its own citizens. If China and the US do it, it will likely lead to a severe global crisis .
A currency war is not about who wins, but who loses the most. And if countries embark on an assault on their citizens’ wealth via devaluation the message to the world is only one: buy reserve of value assets and hide.
via ZeroHedge News https://ift.tt/2MUHYzd Tyler Durden
The expanding chaos of the renewed war in Libya, increasingly a ‘failed state’ if there ever was a prime example of one, now approaching a decade on from its so-called “liberation” in 2011 by US-NATO forces, keeps providing daily and weekly reminders of the Obama-Hillary Clinton legacy of ‘humanitarian intervention’.
On Saturday what is being reported as either a car bomb or possibly a roadside bomb ripped through a neighborhood in the eastern Libyan city of Benghazi near United Nations offices.
The blast killed two UN staff, identified as United Nations Libya mission (UNSMIL) guards, with an additional ten people wounded, some among them children, according to Reuters.
The vehicle was detonated outside a busy shopping mall at a peak time of traffic, given locals are preparing to celebrate the Muslim holiday of Eid al-Adha.
The place is close to the offices of the U.N. Support Mission in Libya. Footage circulated online shows what appear to be burnt U.N.-owned vehicles, while thick smoke rising in the sky.
#Libya– photos showing the aftermath of the IED attack against a UNSMIL vehicle in Hawari, southern #Benghazi. At least 8 casualties reported so far as a result of the incident. pic.twitter.com/aMIPKm87nf
The death toll from the renewed civil war which has involved Gen. Khalifa Haftar’s Benghazi-based LNA attempting to seize the capital of Tripoli from the UN-backed GNA is now in the thousands, with over 105,000 displaced over the past half-year of conflict, according to UN numbers.
Though long ignored in the mainstream media, Libya increasingly looks like Iraq circa 2005, with a recent significant uptick in mass casualty causing bombings and terror attacks in crowded cities.
via ZeroHedge News https://ift.tt/2yQ4cu4 Tyler Durden
