Tag: finance

Submitted by Eric Zuesse, originally posted at Strategic Culture

The medical journal, The Lancet, is one of the world’s Big Three scientific journals of medicine; that’s the triumvirate of authorities for physicians worldwide, and the other two are the Journal of the American Medical Association, and the New England Journal of Medicine. On August 27th The Lancet published “Measuring universal health coverage based on an index of effective coverage of health services in 204 countries and territories”. Here is the visual that’s in it, which shows the United States as having, by far, the world’s costliest medical care, at around $9,000 per person per year, and yet as having lower quality of health care than virtually all other industrialized nations do:

Here is another such study, showing the same thing, and calculating it more simply:

What explains this?

Quite simply, the United States is the world’s most corrupt nation, and medical care is such an extreme necessity when a citizen needs it, so that they’ll pay whatever the system charges them for it — and investing in healthcare products and services is therefore enormously profitable in the United States. Actually, the only other market-sector that competes with it for providing simultaneously high returns and low risk (the combination that offers the best of both worlds to investors) is consumer staples, such as foods, which likewise are necessities of life. When people are desperate, they’ll pay, whatever the cost, because these are things they don’t just want — they need. Here, from Maksim Papenkov’s award-winning 6 February 2020 paper, “An Empirical Asset Pricing Model Accommodating the Sector-Heterogeneity of Risk”, is his sector-specific calculation of stock-market profitability during 2000-2018, showing that “HC” Health Care, and “CS” Consumer Staples, were the best at combining low risk with high returns, during that 19-year period:

(“CD” there is Consumer Discretionary and includes Automobiles and Hotels. It’s the only sector that has higher returns than Health Care, but those returns are twice as risky. The S&P500 have lower returns than Health Care and slightly higher riskiness. At the opposite end, “IT” Information Technology is both the riskiest and the least profitable; and “F” Financials are the second-worst sector for investors. The most-profitable sectors are the necessities, the sectors that take the most from the most-desperate.)

In May 2017, Axene Health Partners published their actuary, Chris Slaybaugh’s, study, “International Healthcare Systems: The US Versus the World”, which stated:

The United States is the only industrialized country in the world that does not have Universal Health Coverage for all citizens. … Rather than one system, United States citizens and residents are insured under a variety of sometimes overlapping systems. The United States is also the only developed country where a significant number of citizens are permitted to be uninsured and where a person’s employment can determine whether they have insurance and what insurance they have. … The extent to which medical bills contribute to bankruptcy is hard to tease out from other factors, but even those who are skeptical of the claim that medical costs cause the majority of bankruptcies concede that they are a significant contributor.13

In the rest of the developed world, by contrast, medical costs are rarely or never cited as a driver behind personal bankruptcy.

In fact, CNBC headlined on 11 February 2019, “This is the real reason most Americans file for bankruptcy” and reported that,

Two-thirds of people who file for bankruptcy cite medical issues as a key contributor to their financial downfall.

While the high cost of health care has historically been a trigger for bankruptcy filings, the research shows that the implementation of the Affordable Care Act [“Obamacare”] has not improved things.

What most people do not realize, according to one researcher, is that their health insurance may not be enough to protect them.

While Barack Obama was running for President in 2008, he was promising to provide Americans with a “public option” in order to reduce profits for health insurance companies and thus lower costs, but he dropped that proposal immediately when he won the 2008 election, and he never pushed for it (not even to use as a bargaining chip with the Republicans in shaping his Obamacare). (In fact, Obama chose the conservative head of the Senate Finance Committee, Democratic Senator Max Baucus, to draft his Obamacare, because Baucus was against there being a public option, and because the progressive Democratic Senator Ted Kennedy’s Health, Education & Labor Committee had just drafted an Obamacare with a public option — Obama refused to have Kennedy draft his healthcare legislation. Obama was actually against there being a public option; only his public rhetoric was for it. Joe Biden is apparently now following the same tactic, of lying promises to the public, and true promises to his billionaire backers, to win the White House.) Obama promised the public “universal coverage”, which means 100% of the population covered, like in all other advanced economies, and his Obamacare increased the percentage insured from 84.5% when he came into office in 2009, to 87.7% two years after Obamacare started in 2013 — around 3%, by 2015 (which was after two years). That was still far short of the promised 100%. He was lying through his teeth in order to win election, and the ‘news’-media still hide (instead of expose) the fact that he did, and that he was actually an agent of the billionaires. He’s now the big hero among Democrats, because maybe Trump is even worse. Trump is up-front about his fascism. And Trump’s opponent now is another hypocrite (after Obama), Obama’s V.P., Joe Biden, who was the U.S. Senate’s leading Democratic Party segregationist and won his nomination by claiming to have been instead a civil-rights champion. Everything in U.S. politics is bait-and-switch. That’s the reality in America’s ‘democracy’: a bait-and-switch ‘democracy’, which serves actually only the wealthiest few. The politicians who are elected serve only the wealthy and well-connected.

America is the most libertarian, or “neo-liberal,” of the advanced industrial nations, and this is why it has the world’s most overpriced medical care. It provides the most liberty for the billionaires.

One of the few extremely bold Americans who rose high in the U.S. healthcare system and tried to tell the public how intensely corrupt it is, has been Marcia Angell, M.D, who held numerous prestigious posts in the U.S. medical system, and she was for a while the Editor-in-Chief of the New England Journal of Medicine. On 15 January 2009, Dr. Angell headlined “Drug Companies & Doctors: A Story of Corruption”, and wrote:

Conflicts of interest pervade medicine. … It is simply no longer possible to believe much of the clinical research that is published, or to rely on the judgment of trusted physicians or authoritative medical guidelines. I take no pleasure in this conclusion, which I reached slowly and reluctantly over my two decades as an editor of The New England Journal of Medicine. … So many reforms would be necessary to restore integrity to clinical research and medical practice that they cannot be summarized briefly. Many would involve congressional legislation and changes in the FDA, including its drug approval process. But there is clearly also a need for the medical profession to wean itself from industry money almost entirely. … Breaking the dependence of the medical profession on the pharmaceutical industry will take more than appointing committees and other gestures. It will take a sharp break from an extremely lucrative pattern of behavior. But if the medical profession does not put an end to this corruption voluntarily, it will lose the confidence of the public. …

She had said, nine years earlier:

If we had set out to design the worst system that we could imagine, we couldn’t have imagined one as bad as we have. … Our health care system is based on the premise that health care is a commodity like VCRs or computers and that it should be distributed according to the ability to pay. … That market ideology is what has made the health care system so dreadful, so bad at what it does. … That is a fundamental mistake in the way this country, and only this country, looks at health care. … The only way to both reduce cost and increase access and quality is to change the system, to scrap it and start over. … I would pay for health care in a single payer system, and what goes into that pot can vary. In Germany, employers have to contribute to that pot. I don’t think that’s a good idea. I would rather see it come straight out of tax revenues.

Experts who are that public-spirited and knowledgeable about the system should be appointed by U.S. Presidents to lead the FDA and the Department of Health and Human Services, but the billionaires prevent that (of course).

On June 27th, NPR headlined “After Pushing Lies, Former Cigna Executive Praises Canada’s Health Care System”, and interviewed a retired PR executive for America’s health insurance companies, who said that maybe the work that he had done smearing Canada’s socialized health insurance — “to spread misinformation about Canada or use cherry-picked data and anecdotes” so as to deceive Americans to accept America’s existing medical system — was partly to blame for America’s having performed significantly worse than Canada had done on the coronavirus crisis. (As of 29 August 2020, Canada had 3,378 cases per million and was the 76th worst out of 215 countries, whereas U.S. had 18,522 cases per million and was the 9th-worst. On deaths, Canada was the 27th-worst at 241, whereas U.S. was the 11th-worst at 564.)

America’s billionaires derive the vast majority of their net worth from stocks (capital gains and dividends), and from interest that’s paid to them; and, since nothing does this for them better than healthcare investments, the current for-profit system in health care is terrific for them; and these few hundred people, billionaires, extract this wealth from the hundreds of millions of Americans, the general public, and want to continue doing so, and they consequently finance politicians such as Joe Biden and Donald Trump (and their predecessors, such as Bush and Clinton), and they also set up ‘charitable’ foundations, and donate to medical schools, so as to inculcate this libertarian belief, not just into the public, but especially into the students and professors, who receive that trickle-down from them, as employees and future employees. While many in academe are against it, they’re not the ones who get advanced to the prestigious and high-paid positions. “He that pays the piper calls the tune.” It’s top-down (aristocracy), and it only pretends to be bottom-up (democracy). And, so, the corruption continues, and Americans die younger, and poorer, because of this aristocratically controlled system. It’s the American way. It’s the American system. Of corruption. Americans call it “capitalism.”

Of course, another area in which the U.S. Government is extraordinarily corrupt is its Military-Industrial Complex; and, on August 28th, a former top official of the NSA, Bill Binney, provided, online, an in-depth description of what he personally knows about that. His personal knowledge is enormous concerning within the Government itself, but not outside it — i.e., not regarding the corporations and billionaires who control the economic rewards system that the top public officials, who typically are agents of the “Deep State” (the billionaires), are serving. However, what he says there is informative and highly reliable regarding the way that the Government’s bureaucracy itself functions, and he is extraordinarily honest about the intense corruption within the official Government. He makes clear that the U.S. Constitution is being systematically and routinely violated by top U.S. officials; so, the U.S. Government routinely violates the U.S. Constitution, in this ‘democracy’, where the system functions like clockwork, for the billionaires.

A new survey via CNBC and Acorns Invest commissioned by SurveyMonkey, found that the virus-induced recession wiped out 14% or about 46 million American’s emergency savings. 

About 17% had to tap into emergency savings to cover living expenses, 11% had to borrow money to cover everyday expenses, 6% stopped contributing to 401(k) or other retirement accounts, and 5% asked for rent relief. 

The survey of more than 5,400 adults in August found that older millennials depleted their emergency savings the most. About 26% of those aged 25 to 34 said their savings had been drained as they struggled to survive the downturn. Only 6% of boomers drained savings; they’ve been through multiple boom/bust cycles and understand the importance of saving for a rainy day. Unlike millennials who have only been through one recession. 

The survey’s findings outline a similar message from former Federal Reserve Chair Janet Yellen last week, where she warned in an op-ed, published in The New York Times, that millions of Americans are suffering. She said monetary policy by itself could not save the economy from the downturn, and the solution will require additional rounds of fiscal stimulus to thwart a deepening fiscal cliff. 

The virus-induced recession has caused unprecedented economic damage, while more than 30 million American’s are collecting unemployment benefits. The labor market recovery has stalled as the Fed’s new policy to raise the inflation target above 2% will result in a higher cost of living for tens of millions broke, jobless Americans. 

What’s even more stunning is that a quarter of all personal income is derived from the government.

This merely underscores the uneven, or K-shaped nature of the the recovery: where the political elites and ultra-wealthy were bailed out by the Fed, while millions of serfs, i.e., low-income folks, have (almost) completely run out of savings, depleted stimulus funds, and some can no longer afford food as the fiscal cliff  hits the 31 day mark on Tuesday.

Congress and the Fed better beware: stress low-income households enough, they will eventually assemble and revolt, striking at the one building that has so far avoided the protesters’ focus: the Marriner Eccles building.

As New York, which successfully managed to hold most of its primary votes mostly by mail, has opened an online portal allowing residents to request an absentee ballot.

Gov Andrew Cuomo acted unilaterally to allow any person concerned about COVID-19 risk to request an absentee ballot, even as some southern states rule that COVID-19 fears aren’t a valid reason to vote absentee. ;

NYers have until Oct. 27 to mail in their ballots.

The absentee ballot portal went live Tuesday, and Cuomo heralded the launch as a move toward ensuring free and fair elections.

“As the November election approaches, we know that many voters feel vulnerable in the midst of this pandemic,” he said. “In line with the sweeping reforms we have implemented to make it easier for New Yorkers to exercise their right to vote, today we launch the online portal through which every registered voter concerned about COVID-19 can obtain an absentee ballot.”

USPS has advised Americans to request ballots no later than 15 days before the Nov. 3 vote.

To request a ballot, users must enter their birth date, county and ZIP code to confirm that you are already registered to vote. You are then taken to a page where you decide how you want the absentee ballot delivered.

Interestingly, when we tested the portal, we found that it didn’t include any requests for sensitive private information like an individual’s social security number. An individual could request an absentee ballot simply by entering in another individual’s birthday, address and zip code – all information that’s easily attainable.

The screen shots below are from the website for NYC’s board of elections. City-dwellers are directed there to finish the application, but virtually all of the same questions, and the complete lack of security, are the same.

We sincerely hope this doesn’t create a massive crush of fraudulent requests, as any motivated individual could use social media to fraudulently apply for absentee ballots, if only to prove a point.

And NY isn’t alone.

Three states are building or have launched a portal to allow voters to request absentee ballots online:
-Georgia
-Michigan
-New Yorkhttps://t.co/jMMA2N4SDz

— FiveThirtyEight (@FiveThirtyEight) August 14, 2020

By Jeffrey Jones of Gallup,

The coronavirus pandemic has led to a surge in remote work. However, that surge is more apparent in the number of remote working days for telecommuters than in the number of workers moving from on-site to at-home work.

Since Gallup last asked about remote work in October 2019, there has been a modest uptick in the percentage of U.S. workers who report having ever telecommuted for work, from 42% to 49%. The recent figures demonstrate the growth in remote work over recent decades from 9% in Gallup’s initial measurement in 1995.

While the percentage of U.S. workers who have telecommuted has changed modestly, the average number of workdays telecommuters are working from home has more than doubled, from 5.8 days per month last fall to 11.9 days currently. Among all U.S. workers, the average number of telecommuting days has also more than doubled, from 2.4 per month to 5.8.

These results are based on Gallup’s annual Work and Education poll, conducted July 30-Aug. 12.

The poll finds 26% of U.S. workers currently saying they have worked entirely from home in recent weeks, while 51% are working entirely from a location outside their home, with one in five reporting a mix of on-site and remote work.

Nearly half of those who have ever telecommuted, 45%, say they have been working entirely from home in recent weeks, with another 14% working mostly from home. This question had not been asked previously, so it is not possible to know how those figures compare with before the pandemic.

However, 13% of telecommuters and 5% of all workers in 2019 said they worked from home 20 days a month (assuming 20 monthly workdays). Now, the figures are 45% and 22%, respectively.

College Graduates Much More Likely to Work Remotely

As might be expected, telecommuting is much more common among Americans with a college degree than those without one. Employed college graduates are more than twice as likely as employees without a college degree to work remotely. This is seen in the percentages reporting that they have ever telecommuted, as well as in the number of days they report working remotely and in their self-reports of whether they are currently working entirely from home.

The survey also shows that working women are more likely than working men to be performing their job functions remotely.

The differences between younger and older workers’ likelihood to work remotely are not statistically meaningful.

An analysis of prior Gallup data on occupation finds that the vast majority of college graduates work in what can be considered white-collar occupations, and that women are much more likely than men to do so.

Last year, an average of 63% of college graduates versus 29% of college nongraduates had ever telecommuted, so the growth in telecommuting has come almost entirely among those with higher educational attainment. Also, before this year, men and women were about equally likely to say they had ever telecommuted for work. The emerging gender gap in remote work probably reflects women’s greater presence in white-collar than blue-collar jobs.

Implications

The widespread closure of businesses and schools to control the spread of the coronavirus sent unemployment soaring. The jobs situation would have been much worse if not for advances in technology that allow many workers to complete their work remotely. Close to half of U.S. workers have now taken advantage of opportunities to telecommute, and currently about one-quarter are doing so every workday.

Of course, not every job can be done remotely; therefore, the growth of telecommuting has a ceiling. Half of U.S. workers currently say they do their job entirely at a location outside their home. Given this, and that half of U.S. workers report they have never telecommuted, the growth in the proportion of the workforce that could telecommute may have reached that ceiling during the pandemic. Further growth in remote work may thus come in the amount of time workers spend outside the office or work site, rather than in the number of workers who do so.

Having an expanded remote workforce alters the dynamics for employers in many ways. Remote work changes the considerations on where employers can find and attract new hires. For example, flexible work arrangements have special appeal to millennials and women. But remote work also can create both challenges and opportunities when it comes to worker engagement, worker productivity and maintaining company culture. The COVID-19 pandemic has accelerated the trend toward remote work and has made companies’ policies toward it even more crucial to their success.

Readers may recall New York City’s MTA proposed drastic transit cuts and higher fares after losing an astonishing $200 million per week after a collapse in ridership following the virus pandemic. As a result, the transit authority is preparing for a “doomsday scenario” to include a 40% reduction in service for both commuter trains and busses, a move that would result in longer travel times and make commuting a nightmare. 

A reduction in NYC’s transit system could be nearing if Washington doesn’t pass another coronavirus relief package. Both Republicans are Democrats have stalled for at least a month in agreeing on the dollar amount of the next round of stimulus, already resulting in a dangerous fiscal cliff that could soon jeopardize the nation’s economic recovery. 

If transit cuts are seen, the effects could be devastating to the city’s economy, said Bill Rudin, CEO of Rudin Management, and chairman of the Real Estate Board of New York, who spoke with The Real Deal. 

“The ability to move people effectively, expeditiously, efficiently is critical to our economic engine,” Rudin said.

The latest mobility trends report via Apple shows people using NYC public transportation on Sept. 1 continues to remain halved of what it was before the virus. 

One look at Time Squares on Tuesday afternoon and foot traffic remains dead – the city is still a “ghost town.”

Nicole Gelinas, a senior fellow at the Manhattan Institute, focused on transportation and infrastructure policy, said the transport authority “could not persist very long in continuing full service with just a fraction of their fare and toll revenue.” 

Gelinas said, “I do think they need more money from the federal government and also need to look at rational cost-cutting.”

Drastic cuts to the city’s transit system could slow the economic recovery in the metro area as the velocity of people moving around, transacting, and or just doing business that uses public transportation be much slower than pre-virus times. Longer travel times would undoubtedly lead to continued ridership losses and more future cuts to service. 

Scott Rechler, chairman and CEO of RXR Realty, who is also chairman of the Regional Plan Association and a former MTA board member, claims transit cuts “would be catastrophic for the real estate industry,” as well as the city’s overall economy. 

Already, real estate prices in Manhattan are pressured as folks and businesses are leaving the borough for rural communities amid depressionary unemployment, virus pandemic, social unrest, and surging violent crime. 

If Congress can’t agree on the next round of stimulus in the near term, NYC’s MTA could undergo transit cuts, resulting in a chain reaction that would cripple the city’s already limping recovery.

Submitted by Simon Watkins, of OilPrice.com

One of the themes that is emerging as we review investment candidates is the era of oil growth, which is at least going to take a substantial pause, if it is indeed, not totally in the rear view. Company after company has told us that “maintenance capex” is all they are allocating at current oil prices.  An example of this mindset is Parsley Energy, (NYSE:PE) which reduced its capex budget by 50% year over year. This new era of growth restraint has implications for the world energy market that isn’t reflected in the energy structure at present.

Drilling and fracking each picked up slightly from the week prior. Hence the question I pose about seeing the bottom in activity. We saw a bump similar to this once before this summer, and then each category fell back into decline for a month or so. I am not betting that we’ll see another boost this week, as the trading range for WTI just isn’t supportive enough for a big activity inflection.

I remain committed to my previously established targets for shale exit production ~5 mm BOEPD. The next way point will be the EIA-914 on Monday.

Why are we where we are?

That’s a question I’ve been wrestling with regards to the pricing of WTI. Oil has definitely plateaued in recent weeks, after a nice run in the spring and early summer. A brief investigation reveals one likely source of the lack of volatility.

The answer could be hedging. Using a trading strategy known as a Strangle, funds, and large institutions with exposure to commodities-oil in this case, can limit this with puts and calls. A put gives you the right to sell WTI-for example at a future price, while a call gives you the right to buy at a different price, thus limiting the impact of volatility on your position.

Source  Hedging on this scale has a potential to result in a big dislocation in the market. In a recent WSJ article Marwan Younes, chief investment officer of Massar Capital Management commented: ‘’Hedging has the consequence to push prices back within that range. Historically, long periods of calm in financial markets have tended to end with a burst of volatility. It feels like we have two tectonic plates building up energy. The day it gives way will be a fairly eventful day.’’

This is an interesting idea that is supportive of my general diatribe about oil going higher and breaking out of this range. Particularly as regards Younes final line that I have italicized. We need a catalyst for this to happen, and it’s hard to say just what that will be.

I don’t trade futures contracts. I just don’t have the attention span or the temperament to stay that focused on the market. I figure the money I am missing out on in a success case, is more than compensated for by sleeping fairly well at night, and consuming less Maalox.

Under-investment in supply, “Chickens” are coming home to roost

Paul Sankey is a well-known securities analyst, formerly with a big firm-Mizuho, and now on his own. I’ve followed him for years. Sankey has some interesting ideas that coincide with my own. Chief among them is the idea that the oil market is approaching a precipice of supply short-fall that will simply be breath-taking when its full effects land out.

Another area of agreement between us is that years of under-investment in replacing barrels from aging Brown-field developments will ultimately constrict supply and drive prices higher.

Focusing mainly on the decline rate of shale and the lack of new drilling, I’ve made the point repeatedly in OilPrice articles that the shale miracle in the U.S. is over. Here is a link to my most recent writing on this topic. Shale was thought to be impervious to decline by many. Some of us (speaking of myself here) always knew better as we understood the short-decline nature of the rock. Now companies are taking write-offs on shale as they did deepwater assets a few years ago, meaning there are reserves we thought would be available in the years ahead that will now be uneconomic.

The short-lived era of the U.S as “swing-producer” for oil has ended.

Why “war-premiums” for oil don’t last

One thing we should be able to agree on is that the world currently assumes unlimited supplies of crude oil, now the norm thanks to overproduction the last few years, will continue to be the base case going forward.

Is the world right? Obviously you know I don’t think so, but we are certainly getting mixed signals right now. It is worth noting when a giant hurricane that shuts down 80% of the GoM’s producing and refining capacity doesn’t move the market even a little higher it speaks strongly to the markets confidence about future supply.

As noted in the EIA graphic below, last week we edged down still further toward the 500 million barrels mark in inventories, and still crickets from the oil market. It should be noted that this represents about a 30 day supply at current consumption rates.

We think that the +/- 3-mm BOEPD supply/demand gap will accelerate as the year closes, and these inventory draws will continue.

I have previously identified several hot spots that could explode at any time, creating an instant inflection for oil. You know them well. Iran, Venezuela, Iraq, Libya are all experiencing severe economic and social disharmony for various reasons, but no one is shooting at one another taking a war-premium completely out of the price. Should we be so complacent?

One interesting aspect of a war-premium is that it doesn’t last for long. History tells us the sharp spikes in price due to conflict are short-lived, and oil driven higher by conflict reverts quickly to its previous range. The world continues to spin on its axis, infrastructure that may be damaged or destroyed is quickly rebuilt, and importantly no one goes without. A good example is the recent attack on Saudi oilfields in 2019 by Iran. Oil spiked to $80 from $60 overnight, and quickly fell back to $60, and then to $50, and then to $40. Fear comes out of the market as rapidly as it enters.

What the chart above tells us is that war premiums soon fade. Take the spike circa 1990 when the U.S. led coalition began the response to Iraq’s invasion of Kuwait. A brief spike to $80 was quickly followed by a rapid collapse to the mid-$30’s and over most the next decade to a low below $20. It then took another 10 years for oil to peak again, this time in the financial collapse of 2008.

One takeaway from this chart is that wars are over so quickly these days (Afghanistan excepted), that they don’t have much prolonged impact on the perception of supply security.

Much more important are key producer decisions to restrict production. For example the Arab oil embargo of the early 1970’s led to a 30-year uptrend that was only broken when they opened the taps in 1998. A decision they quickly regretted when the oil price crashed. A “V” shaped rebound led to nearly another 20 years of higher prices, until in 2014, OPEC again opened the taps. This seems to be a mistake they are unable to stop making as they did it again earlier this year.

In short while a shooting war changes the dynamic briefly, decisions by producers have a much more pronounced effect on oil prices.

Your takeaway

Inflation is on the horizon. It’s been ages since we had to worry about generally rising prices. The full effects of the dynamic imposed by the virus, lower employment, business failures, etc. have led governments around the world to print trillions of dollars to provide liquidity. A lesson perhaps learned in 2008 when governments were slow to provide this under-pinning to world markets. The net effect of this is always inflation.

Last week the Chairman of the Federal Reserve, (Fed) Jerome Powell reinforced their position on employment vs inflation making a change to their historic stance of combating inflation. In this speech Powell let it be known that it will let inflation run…to a degree, in support of putting people back to work. Up to this point the Fed had established an arbitrary 2% limit for inflation before it would move proactively to tighten the money supply to drive it down.

This is bullish for oil prices and oil equities in general, telling us we are on the right track with our overall thesis of higher oil prices. Interest rates will stay down hurting savers, but commodities and equities will rise. Oil is a commodity.

Nothing good lasts forever, as Australia just discovered when after seemingly defeating the gravity of the business cycle and lasting a record 29 year without an economic contraction, the country tumbled head first into its first recession in almost 30 years, which also happened to be the worst on record as its Q2 GDP plunged -6.3% Y/Y, worse even than the consensus estimate of a -6.0% drop.

GDP plunged 7% sequentially from the first three months of the year – hammered by the renewed Covid outbreak and lockdown in Victoria state – the first back-to-back quarterly declines since 1991. The sequential drop also was larger than economist forecasts of a 6% drop.

As Bloomberg notes, “Australia’s record run of avoiding two consecutive quarters of negative GDP, which included avoiding recessions during the 1997 Asian Financial Crisis, the Dot Com Bubble and the 2008 global financial crisis, has come to an end with the largest contraction on record according to ABS data dating back to 1959. It now joins much of the world in succumbing to a pandemic-induced downturn.”

The report also showed:

• Household spending plunged 12.1%, subtracting 6.7 percentage points from GDP; government spending rose 2.9%, adding 0.6 percentage point
• Investment in new and used dwellings fell 7.3% in the quarter
• Net exports contributed 1 percentage point to GDP
• Just like in the US, the savings rate soared, hitting 19.8%, the highest rate since 1974

Australia’s desire to declare an early victory against covid which was accompanied by an early lifting of restrictions and reopening of its economy, proved catastrophic and has been offset by an almost two-month lockdown in Melbourne, the nation’s second-largest city with about 5 million people, crushing any hopes of a recovery.

In March, Australia’s Reserve Bank cut its cash rate to a record-low 0.25% and set the same target for the three-year bond yield as it aims to lower borrowing costs across the economy. As Bloomberg notes, the RBA predicts the renewed lockdown will lift unemployment to about 10% later this year.

The government, meantime, has followed the rest of the world in flooding the country with fiscal stimulus, injecting tens of billions of dollars into the economy including its signature JobKeeper wage subsidy program designed to keep workers attached to firms as it tries to maintain employment connections until activity can resume.

The silver lining is that the stimulus unleashed in China – Australia’s top trading partner (which is in jeoaprdy due to an escalating diplomatic feud) – to revive its economy is also fueling demand for Australian commodities and lifting prices, keeping the terms of trade elevated in the second quarter. In Q2, Australia saw a record current-account surplus of A$17.7 billion ($13.1 billion) aided by the weaker dollar and the country nation’s closed international borders which is keeping people from traveling abroad.

Meanwhile, on Tuesday the central bank boosted a line of cheap funding to banks to A$200 billion. In addition to supporting the economy, that should also help ease some of the upward pressure on the currency by confirming the RBA’s commitment to keeping conditions accommodative until activity recovers.

While the recession was widely expected, the aussie dollar slumped against the dollar, sliding from 0.7375 before the news to 0.7337 before paring some of the losses. The Australian dollar has benefited from Australia’s trade position, soaring almost 30% from a nadir in March.

Ever since the first shots were fired in the US-China trade/tech/cold war in 2016, Beijing has frequently threatened to use its strategic position as the world’s pre-eminent supplier of rare earth metals – a group of 17 elements used in everything from sophisticated weapons to cell phones to wind turbines to electric cars – as potential leverage which it could wield in response to any perceived foreign (read US) aggression, even if it has so far refused to use this particular trump card. And with Sino-US relations deteriorating by the day, pushing China ever closer to the day it may in fact ban rare earth exports to the US, US House lawmakers are now taking advance measures for when that day finally comes, and have introduced a bipartisan bill aimed at seeking to curb US dependence on China for rare earths.

The legislation was co-authored by Republican Lance Gooden and Democrat Vicente Gonzalez, both of Texas, and is similar to that introduced in May by Senator Ted Cruz. Republicans Will Hurd, Roger Williams, Pete Olson and Randy Weber, as well as Democrat Henry Cuellar, are co-sponsors of the bill. All are Texas representatives. The measure would give tax incentives for companies involved in the mining, reclaiming and recycling of critical minerals and metals from deposits in the US, Bloomberg reported.

The bill is also part of a recent push in Congress to shift supply chains, especially in sectors viewed as critical for national defense, away from China and back toward the US; predictably, the effort has drawn broad support from domestic rare-earth companies which anticipate a major financial windfall should the bill pass.

“The tax incentive seeks to level the playing field with regard to the subsidies China provides from mine to magnet,” Pini Althaus, chief executive officer of USA Rare Earth, which is developing the Round Top Mountain deposit in Texas, said in a phone interview. “It would significantly improve the bottom line of any domestic rare earth project.”

Althaus also said the House measure which China would surely claim is a subsidy prohibited by the WTO, reduces the potential for China to dissuade investment in U.S.-based rare earth projects and supply chains, because those businesses will be better able to compete.

Last year, amid mounting concerns China would limit shipments of rare earths as the trade war escalated, Trump ordered the Defense Department to spur production of rare-earth magnets.

The legislation “lowers the cost of capital, which is the goal because China has lowered the cost of capital for their sector, and our sector needs to be able to compete,” Jim Litinsky, the incoming CEO of MP Materials, currently the sole U.S. miner of the minerals, said in a phone interview. “It’s probably the one thing I’ve seen everyone get behind.”

Authored by Collin Jones via The Post Millennial (emphasis ours)

A district attorney in California reportedly told members of law enforcement that they should consider the needs of looters before deciding to charge them with looting.

Costa County District Attorney Diana Becton expressed her view that officers should consider whether “the target business” was “open or closed” at the time the looting took place, and “what was the manner and means” by which the looters had managed to get inside the business, the Daily Wire reported.

The charging guidelines were laid out by Jennifer Van Laar of RedState, which are as follows:

1.) Was this theft offense substantially motivated by the state of emergency, or simply a theft offense which occurred contemporaneous to the declared state of emergency?

2.) Was the target business open or closed to the public during the state of emergency? ii. What was the manner and means by which the suspect gained entry to the business? iii. What was the nature/quantity/value of the goods targeted? iv. Was the theft committed for financial gain or personal need? v. Is there an articulable reason why another statute wouldn’t adequately address the particular incident?

Van Laar goes on to quote Shouse California Law Group: “Under Penal Code 463 PC, California law defines ‘looting’ as taking advantage of a state of emergency to commit burglary, grand theft or petty theft. Looting charges can be filed as a misdemeanor or a felony and is punishable by up to 3 years in jail.

Becton’s ideas run counter to those in charge of Sacramento County, where Sheriff Scott Jones reportedly requested on Friday that the federal government send in the National Guard after “roughly 200 protesters broke windows at the downtown offices of the sheriff, district attorney and other government agencies the night before.”

Jones was flanked by “blown-up photographs” depicting protesters dressed in body armor during a protest that took place Thursday, and he referred to the demonstrations as an “attempted insurrection.” Sacramento County District Attorney Anne Marie Schubert suggested that the actions of the demonstrators was planned.

“It’s been one day and I’m already done with this,” Jones said during a Friday news conference.

I wonder why many of the agitators reportedly came from out-of-state?https://t.co/4g9qcyF1ht

— Angel ❌ (@AngelOfficial) August 31, 2020

The Daily Wire reported that Becton is the same district attorney who charged a couple with a “hate crime” for painting over a Black Lives Matter mural in front of the Wakefield Taylor Courthouse.

Becton has also garnered a name for herself in co-authoring an opinion piece for Politico alongside district attorneys Kim Foxx of Chicago, St. Louis’ Kim Gardener and two two others, writing: “Our criminal legal system was constructed to control Black people and people of color. Its injustices are not new but are deeply rooted in our country’s shameful history of slavery and legacy of racial violence. The system is acting exactly as it was intended to, and that is the problem. We should know: We’re Black, we’re female, and we’re prosecutors. We work as the gatekeepers in this flawed system. And we have some ideas for how to fix it.”

Becton is not the only one supporting the idea of looting. Vicky Osterweil penned a book entitled “In Defense of Looting,” where she argued that “looting is a powerful tool to bring about real, lasting change in society.” Osterweil even denigrated small businesses, in writing: “When it comes to small business, family owned business or locally owned business, they are no more likely to provide worker protections. They are no more likely to have to provide good stuff for the community than big businesses.”

MSNBC personality Joy Reid is under fire once again after making an allegedly “Islamaphobic” comment”. But this time, her accuser is none other than controversial Democratic Congresswoman Ilhan Omar, who herself has refused to apologize for comments that were heralded as anti-semitic, while once blithely – and publicly – dismissing 9/11 as “a thing that happened”.

Omar and a anti-defamation league-type group called Muslim Advocates complained that Reid made callously Islamophobic remarks on air during a broadcast the other night.

Reid’s crime? She compared the way President Trump acts to the way “Muslims” act. She intended to compare Trump’s behavior to that of somebody like Turkish leader Recep Tayyip Erdogan, which is hilarious because in reality, there is no real grounds for comparison. Even their rhetorical styles differ markedly, though both have shown a penchant for “interfering” with the central bank.

But that’s not how it came out.

During her show, Reid said, “the leaders, let’s say in the Muslim world, talk a lot of violent talk and encourage their supporters to be willing to commit violence, including on their own bodies, in order to win against whoever they decide is the enemy. We in the U.S. media describe that as they are radicalizing those people—particularly they are radicalizing young people. That’s how we talk about the way Muslims act. When you see what Donald Trump is doing, is that any different from what we describe as radicalizing people?””

In a statement, Muslim Advocates demanded that Reid “apologize on air tonight.”

“Joy Reid must apologize on air tonight for spreading the false, dangerous myth that Muslims are inherently radical and violent. MSNBC also needs to take action to ensure anti-Muslim bigotry has no place on its network. Muslims have been gunned down in their homes and houses of worship by people who believe in the very same hateful, false smears that Reid shared on her program. This is deadly serious and it’s part of a dangerous, longstanding pattern. 

Omar made a similar request.

Honestly, this kinda of casual Islamophobia is hurtful and dangerous.

We deserve better and an apology for the painful moment for so many Muslims around our country should be forthcoming. https://t.co/megnZyL9dd

— Ilhan Omar (@IlhanMN) September 1, 2020

This isn’t the first time Reid has been in the cross-hairs of Islamic rights groups. Back in 2018, a furor was unleashed when several old blog posts bearing homophobic and Islamophobic messages were unearthed.

Here’s an excerpt from one particularly “problematic” post:

“My feeling is that the only reason that a world war between civilizations has not already broken out is that the vast majority of Muslims living in the world today are so desperately poor that they have the time, energy and resources for only the occasional burst of AK-47 fire into the air from the garbage and sewage laden streets outside of their mud huts. Give them resources and I fear that they will come after us everywhere that they can find us, which is to say everywhere.”

Her use of the phrase “mud huts” is particularly appalling.

Yet, Reid survived past scandals and managed to hang on to her job at MSNBC. It’s almost like the news organization can’t fire her.

Last time around, Reid laughably made things worse by claiming that “hackers” published the offending blog posts under her name.

Will Reid make history as one of the first people to mendaciously cry “deep fake?”