Tag: finance

Authored by Tom Luongo via Gold, Goats, ‘n Guns blog,

As much as I hate to invoke The Ayn Rand lest I give off the impression I’m some kind of Objectivist, which I am most certainly not, the engine of the world is coming to a halt.

Money velocity has been falling for years. It is now cratering as we hide in our homes from a bug that eventually we will all have to reconcile with. Credit is the engine of the world of today.

It is the gas which fuels the engine of the world.

COVID-19 has cratered the global economy exposing the internal rot within our hyper-financialized global economy as nothing more than a pyramid of Ponzi schemes…

… piling credit on top of credit until there are no more greater fools to sell the new debt to.

That’s the system we have. And it is collapsing precisely because the world is situated at the point where there is little more productive capacity to monetize and pull that capital from the future to fund the new debt.

It won’t matter if we replace this system with pure helicopter money without debt as the Modern Monetary Theory proponents argue. We’re already doing a version of this by having the central banks buy debt they never intend to sell on the open market. So, the debt itself is without value. The money printed from those bonds is as much scrip as if the bond had never been issued.

But the time lost by people in pursuit of uneconomic ends by mispricing risk and servicing debt they are legally obligated to service is real.

The engine is sputtering as trillions are printed to kick it back over one more time. But the gas has too much ethanol in it. There’s not enough air.

The engine is dying.

And it can no longer outrun the abyss swallowing the world staring back at us saying, “Thanks for the snack, those frackers and restaurants are tasty, but I’m still hungry. Who’s next?”

I’ve been very clear that Europe is the next big meal for the Abyss.

In the end, a home builder here, an over-leveraged bank there are nice. These are but apéritifs in the grand scheme of things. They are like sugar to a starving child, revving it up but not fulfilling its real needs.

Europe’s troubles are multiplying because the basic premise of how to fight this virus and the deflation it is engendering is functionally flawed. More money dropped from helicopters isn’t the solution.

Freeing Europe from the euro is.

And it will set Italy in the post-COVID-19 world at odds completely with the rest of Europe.

Ambrose Evans-Pritchard adds more color to what happened at last week’s meeting of EU national leaders in which both sides of the fiscal divide dug in their heels.

Dutch premier Mark Rutte has become the spokesman for the hardliners – giving political cover to Germany – categorically ruling out emergency “coronabonds” or other forms of debt mutualisation. “It would bring the eurozone into a different realm. You would cross the Rubicon into a eurozone that is more of a transfer union,” he said. “We are against it, but it’s not just us, and I cannot foresee any circumstances in which we would change that position.”

Enrico Letta, Italy’s former-premier and an ardent EU integrationist, accused the Netherlands of leading the pack of “irresponsibles” and trying to “replace the United Kingdom in the role of ‘Doctor No’”. The reflexive use of the UK as a rhetorical foil evades of the true issue. It was not London that blocked moves to fiscal union over the last decade; it was Germany.

Pritchard brings up the spectre of Lega’s Matteo Salvini coming back into the picture, especially as the mood sours among even the most ardent Euro-integrationists like Italian President Sergio Mattarella.

Merkel is hiding behind her quarantine and letting Dutch Prime Minister Mark Rutte speak for her. And that is driving the Italians to the point of no return.

Giuseppe Conte’s government is at a loss to fight the virus. It was ignored by the EU when it asked for help it paid for when this began. As Pritchard points out, what purpose does the EU serve when it won’t act to help a member in need as it is supposed to do?

The answer is the EU’s purpose is to be obeyed.

Italy’s two ways out of this mess is leaving the euro or forcing the northern bloc to cry uncle. But that has to occur within the prospect of removing so many internal roadblocks to Italian economic growth, starting with the euro but entailing much wider reforms, which are most definitely not on the post-Keynesian/MMT technocrats’ agenda.

Italy’s debt numbers are a large part of the hunger of the Abyss and no amount of blackmail by them and France will get Germany to go along with bailing them out.

I discussed these issues and more at length with Alexander Mercouris of The Duran in this series of videos we recorded over the weekend (here, here, and here) in which we tie Europe’s collapse to all the other things we’re experiencing in the world right now.

Most EU economies are fundamentally hampered by the ossified bureaucracy of the EU which is an over-layer of domestic bureaucracies.

And, as such, these national systems are barely capable of acting in a coordinated manner normally, no less with the EU enforcing its fiefdoms at the same time in the face of overwhelming strain.

In all situations the primary objective of all organizations is survival. All else is secondary.

The more credible the threat the more extreme their response.

They will dig in to protect against that threat rather then fulfill their stated mission. In the case of the EU that means using this crisis as the excuse to force fiscal integration and monetary reform on those that don’t want it as a means to survive.

Because in a crisis period there is no time for such luxuries as national sovereignty. There isn’t any reflection that the organization itself is the source of the problem. The organization is a default setting.

And now both sides of the fiscal debate are seeing the other for what they are and the result will most likely be an irreparable fracturing of the European Union.

Italy has now seen the true face of the EU. Conte has now tried histrionics to get his bailout, which won’t actually solve anything, because he’s aligned with the Euro-integrationists. What his country needs is a new currency and different leadership.

But he’s held onto power because his opposition would have already broken with the EU.

Like the obsequious worm that he is, instead of doing the right thing, issuing mini-BOTs, to free up domestic liquidity issues, Conte is looking at putting up the whole of the Italian government’s holdings as collateral against new debt to pay for stimulus of Einsteinian proportions.

This is the ultimate sellout of Italy to the EU. As a proposal it is the ultimate betrayal of the Italian people. These buildings and infrastructure are their legacy and they will be sold as collateral to loan sharks as opposed to reclaiming their national dignity.

There is no market for these bonds. So,who will buy them? The ECB.

Who then owns all of this property, ultimately?

The ECB and therefore the EU.

This is a proposal designed for Merkel to take back to home to the Bundestag and sell to the German people. If they bail out Italy, they will get something in return for their risk.

It’ll be just like they did with Greece in 2015, except then it was Germany forcing this upon them rather than the satrap Italian government offering themselves up like lambs.

But even with this desperation attempt to find buyers for their debt, Italy is facing a bleak future without serious reform.

And the odds are about equal at this point as to whether Germany or Italy breaks the EU. Because neither side can live with the other under the other’s terms.

At it’s core, however, this fight is a symbolic one over the continued belief that government can provide the solutions to our problems rather than being the source of them in the first place.

Socialized markets with bureaucratic controls are incapable of reacting in real time to swiftly changing conditions. No amount of helicopter money will change that. No amount of taxation as social engineering tool will create preferred outcomes.

Because remember when you advocate for things like that, you’re putting in charge of those taxes the same people who are mismanaging them now. Our governments aren’t staffed and run by angels. These are the same misinformed, mal-educated, biased, myopic, flawed people as everyone else.

In short, they are human.

And they have the same pretense to knowledge everyone else does. And they will make the same mistakes as everyone else. Under the pressure of outrunning the Abyss the character of the people in charge of the money reveals itself.

All that does is create the false signal of stability while perpetuating systems that are wholly inadequate to the job. COVID-19 has exposed them ruthlessly.

And still the Abyss stares back, like an implacable kidnapper, demanding its payday. Because there is no escaping the it.

So, while you can chuck funny money in there for as long as you want it doesn’t create value. It doesn’t produce sustainable outcomes. It produces theft and graft, it extends the grift, bails out the unproductive and punishes those that honestly went about their business.

Digging holes and filling them in doesn’t produce wealth anymore than breaking a window stimulates aggregate demand for glass.

It just creates an accounting fiction which costs twice as much as having not dug the hole or broken the window in the first place. It may delay the Abyss from swallowing you until tomorrow.

Until, of course, you run out of time.

And then there won’t be enough credit in the world to keep the engine of the world from sputtering and dying. That’s when real leadership is needed.

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The very first transaction of the INSTEX special purpose ‘alternative’ vehicle between Europe and Iran has been successfully completed, according Germany’s Foreign Ministry Tuesday. “France, Germany and the United Kingdom confirm that INSTEX has successfully concluded its first transaction, facilitating the export of medical goods from Europe to Iran. These goods are now in Iran,” the ministry said in a statement.

It was created over a year ago by European signatories to the 2015 nuclear deal in order to bypass Trump administration Iran-related sanctions, after the Belgium-based SWIFT financial messaging service suspended access for Iranian banks in Nov. 2018 under pressure from Washington.

France, Germany, and the United Kingdom confirmed the first transaction with Iran involving the export of medical goods, at a crucial moment the coronavirus is ravaging the population, and vowed it was the first of many to come. 

France, Germany and the United Kingdom confirm that INSTEX has successfully concluded its first transaction, facilitating the export of medical goods from Europe to Iran. INSTEX and its Iranian counterpart STFI will work on more transactions and enhancing the mechanism. pic.twitter.com/0z4KJwDjuw

— GermanForeignOffice (@GermanyDiplo) March 31, 2020

“Now the first transaction is complete, INSTEX and its Iranian counterpart STFI will work on more transactions and enhancing the mechanism,” the statement said on behalf of the three nuclear deal signatories.

Though Tehran has long criticized the Europeans for bowing to Trump’s sanctions and not doing enough to keep up their end of the JCPOA, the ‘SWIFT-alternative’ of INSTEX is designed to save the nuclear deal by at least partially ensuring trade transactions with Europe continues, also with the assurance that no money directly changes hands.

The mechanism also seeks to woo European companies back into doing business with Iran, and to provide a legal and ‘humanitarian’ means of bypassing US sanctions without fear of penalties.

How INSTEX is designed to work, via Global Trade Law Blog: “The program sets up a trade finance system between Europe and Iran. EU exporters send goods to Iran, submit invoices to INSTEX, and receive payment from the INSTEX entity in Europe. Likewise, Iranian exporters send goods to Europe, submit invoices to the INSTEX-related entity in Iran, and receive payments in Iranian Rials. No U.S. dollars are involved, nor is the SWIFT system (both of which could subject the transactions to U.S. sanctions).”

The timing is sure to not be missed by the Trump administration, given that even amid the global coronavirus pandemic, which has been particularly fierce in Iran – taking over 2,800 lives among 44,600 confirmed cases – the US has kept up its “maximum pressure” campaign, despite critics saying the sanctions are ensuring the further spread of the virus through hitting Iran’s already weakened medical sector hard.

Authored by Paul Joseph Watson via Summit News,

The Spanish government is being sued for gross negligence after it encouraged citizens to attend giant feminist rallies across the country on March 8, potentially exposing hundreds of thousands of people to coronavirus.

“A class action lawsuit filed on March 19 accuses the Spanish government — highly ideological by any standard, as the Communist coalition partner, Podemos, was founded with seed money from the Venezuelan government — of knowingly endangering public safety by encouraging the public to participate in more than 75 feminist marches, held across Spain on March 8, to mark International Women’s Day,” writes Soeren Kern.

The rallies were attended by Spain’s deputy prime minister, as well as the prime minister’s wife and mother.

In Madrid alone, which has been devastated by the coronavirus outbreak, “Thousands of women marched…against gender inequality to mark International Women’s Day, despite concerns the gatherings could help the spread of coronavirus,” reported Reuters.

According to journalist Matthew Bennett, in an apparent effort to downplay the danger of attending the rallies to the public, the Spanish government failed to report new coronavirus cases between March 6 and March 9.

1. Vamos. Veo a algunos incrédulos con lo de la falta de datos Coronavirus de Sanidad el fin de semana del 8M. Lo vimos en su momento: no hubo actualización entre el viernes 6 a las 18:00 horas hasta el lunes 9 de marzo casi a la hora de comer. Miren los pdfs y las estadísticas… pic.twitter.com/yhJJMKvoI7

— Matthew Bennett (@matthewbennett) March 24, 2020

Despite numerous warnings and the government having already ordered major football and basketball matches to be held behind closed doors with no spectators, the Spanish government’s main point man for the coronavirus, Fernando Simón, told the public there was no risk.

“If my son asks me if he can go, I will tell him to do whatever he wants,” said Simón.

One protester at the march even held a sign that said, “Machismo kills more than coronavirus.”

Spain has now lost over 8,000 people to COVID-19.

“The lawsuit, involving more than 5,000 plaintiffs, accuses Spanish Prime Minister Pedro Sánchez and his representatives in Spain’s 17 autonomous regions of “prevarication” — a Spanish legal term that means lying and deceiving,” writes Kern. “The government was allegedly so determined to ensure that the feminist marches took place on March 8 that it deliberately downplayed warnings about the pandemic.”

If found guilty, officials will face a penalty of between nine to 15 years of disqualification from public office.

“The result of the calls for these demonstrations and their direct approval by government delegations and by the inaction of the central government chaired by the accused, Prime Minister Pedro Sánchez, could not be more antagonistic to what the EU indicated in its report. Why was not an order issued to prevent any type of mass event?” asked Víctor Valladares, a Madrid-based lawyer who is leading the lawsuit.

The Spanish government’s culpability for exposing its own citizens to coronavirus in the name of ‘woke’ activism has been almost completely ignored by the western media, despite there being much reporting about a Champions League soccer game in Milan, Italy on February 19th which was attended by 40,000 residents of Bergamo and has been described as a “biological bomb” during which “the virus was widely spread” according to Mayor Giorgio Gori.

As we document in the video below, it wasn’t just in Spain that political leaders were urging citizens to attend huge rallies and parades right as COVID-19 hit hard.

In Italy, the left-wing Mayor of Florence and leftist activist groups urged Italians to hug Chinese people in the street, despite thousands of Chinese migrant workers in northern Italy having potentially been exposed to COVID-19.

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On Tuesday a key pipeline carrying gas between Turkey and Iran exploded at the Gurbulak border gate on the Turkish side near the Iranian border, temporarily halting gas exports from Iran.

Though most international reports treated the blast as mysterious in origin, including some Turkish state broadcasters such as TRT, Iranian leader were quick to blame “terrorists”.

“This morning, terrorists attacked a natural gas pipeline inside Turkey near Iran’s Bazargan border with Turkey… Flow of gas has been halted,” director of the National Iranian Gas Company, Mehdi Jamshidi Dana, said in a statement.

Fire and smoke could be seen billowing from the site throughout the much of the day in dramatic footage captured by Russian media.

“The gas flow on the natural gas pipeline was cut and the fire that had started was extinguished by fire squads,” Turkish broadcaster TRT said, adding that the incident is under investigation.

According to the New York Times, citing Iranian state sources further, Kurdish militants operating in eastern under the PKK are being blamed for the blast :

Iran’s state-run IRNA news agency quoted National Iranian Gas Co. gas dispatching director Mahdi Jamshidi Dana as saying authorities suspected the Kurdistan Workers’ Party, or PKK, likely attacked the pipeline.

Kurdish militants belonging to the outlawed PKK have targeted oil and gas pipelines from Iraq and Iran as part of their more than three-decade old campaign for self-rule in southeast Turkey.

Indeed at the height of fighting between PKK militants and the Turkish state throughout the 1990’s and into the 2000’s the pipeline was attacked and disabled on repeat occasions. 

Turkey reportedly has kept an extremely reduced border security force in the area of late due to the coronavirus pandemic.

“It takes usually three to four days to repair and resume gas exports,” Turkish reports said.

Authored by Judith Bergman via The Gatestone Institute,

A recent report published by Linköping University about the Swedish National Council for Crime Prevention (Brå), “Can Brå be trusted?” has claimed that Brå’s reports are politically biased.

According to Brå’s own website, “Brå is an agency under the auspices of the Ministry of Justice and a knowledge centre for the criminal justice system. The agency’s mandate is to contribute to the development of knowledge within the criminal justice system and the criminal policy area, as well as to promote crime prevention work. Brå is responsible for the official criminal statistics and other statistics, which includes producing, following, analysing, and reporting on criminality and the criminal justice system’s responses to crime”.

It is therefore crucial that Brå fulfill its obligations in a factual and objective manner, not least in the current environment, when Sweden is experiencing a veritable crime wave, including shootings, bombings and other gang-inspired violence that some commentators have likened to “war”.

According to the Linköping University report, the results of which were based primarily on interviews with former and current employees and managers of Brå, in addition to a number of former police chiefs and ministers of justice, Brå’s work is politically biased due to political pressure from the Ministry of Justice as well as the management of Brå. The report states:

“For example, a former employee said that he, together with the Director-General [of Brå] was called to the Ministry of Justice for a conversation with the requirement of a report to be ‘corrected’. The report consisted of an evaluation of a government proposal, concluding that the proposals were harmful. The interviewee realized that the conclusions would be politically unpopular, but had nevertheless written them… Other former employees have pointed out that it was clear that there were political reasons why they were pressured to change content in reports even though these researchers were not called to the Ministry… One employee reported, among other things, that a director-general expressed that ‘there is a reality and a political reality’ when the director-general demanded that an employee change a report…”

The Linköping University report goes on to say:

“Interviews show that adaptation of content in reports has taken place in different ways. A former employee made the following summary: ‘If results were not liked then censorship was used, correction of results, toning down results and highlighting other parts of [the] study that were not so sensitive or that could show positive results'”.

Another employee said:

“After I was hired at Brå, it didn’t take me long to realize that working at Brå is a big challenge. As an employee of Brå, you have to write and think in a certain way. Brå is extremely controlled from the top. There are some people at Brå who run [the organization] with an iron hand. If one were to be a little harsh then one could liken it to a sect. I don’t think they really understand what kind of culture they have created“.

The Linköping report states that there appears to be a culture of silence by which is meant, “norms that create silence among employees, when they do not dare to bring up certain viewpoints, questions or criticism, whether internal or external”.

Ironically, this culture of silence has been symptomatic of Swedish society, where most have been afraid to speak publicly about the problems caused by unfettered migration for fear of being ostracized.

The report also found that Brå appears to strive to hire employees that will “act as obedient bureaucrats at an authority, rather than people who have accepted a researcher’s role”.

The report has caused consternation in Sweden. The Swedish Parliament’s judicial committee has now invited the authors of the report, as well as the general director, to their next meeting. Johan Forsell, the legal spokesman of the Moderate party, said:

“Very serious allegations and accusations are made in the report. Brå is, after all, an expert authority that is supposed to deliver facts that objectively reflect society. We need, quite simply, to get to the bottom of this… Regardless of when it happened and under what political color, the very suspicion of influence is serious enough. But that responsibility now falls on Justice Minister Morgan Johansson”.

Meanwhile, Sweden continues its downward spiral. Last year there were 257 reports of explosions — including attempted explosions — an increase of 59% compared to 2018, according to SVT Nyheter. Yet, only seven people were convicted for any of those 257 crimes. In 2020, at least 10 explosions have already taken place.

According to Stefan Hector, head of the National Operative Unit (NOA):

“Earlier we saw that hand grenades were used. Now we see how homemade explosives are used instead as weapons in conflicts. Either to injure or to terrorize but with a new ruthlessness where they bomb wherever the public is without caring that the public might get hurt”.

According to SVT News, the police and other authorities “do not know” where all the explosives come from. “The issue of explosives as weapons in conflicts is relatively new. This means that we have considerable uncertainty as to where the parts for the explosive charges come from”, Hector said.

“Unless the integration of the newcomers succeeds better, in the long run, the social glue that makes a democratic welfare society of our kind possible risks being torn apart”, professor in political science at the University of Uppsala, Tommy Möller, recently wrote in an op-ed.

Gatestone Institute has described the serious economic, welfare, crime and other challenges that Swedish society now faces as a result of migration into the country, for example here, here, here, here and here.

One issue that Swedish figures of authority are now admitting to having neglected over the years is anti-Semitism. Municipal managers in Malmö, for instance, Sweden’s third-largest city, where immigrants constitute one-third of the population, now say that it took a long time before they “saw the extent” of the problem. Anders Rubin was school council member of the Malmö municipality from 2013 to 2018. “Many students who have a background in the Middle East, and in several Muslim countries, have notions of Jews that are not at all compatible with democratic values,” he told Sydsvenskan recently. He also confessed that the municipality had not taken the complaints of its Jewish citizens seriously. According to Sydsvenskan:

“Anders Rubin says he and the other leading Social Democrats initially underestimated the alarm from the city’s Jews about a growing amount of threats and harassment. He describes it as the municipality management having had their ‘guards down’.”

“It was not felt that there was an established anti-Semitic attitude more than in extremely peripheral right-wing groups. I think we understood that the problem was marginal” admitted Rubin to Sydsvenskan. The newspaper also recounts how in 2009, Malmö’s then-mayor, Ilmar Reepalu, responded to attacks on a Jewish demonstration by saying that Swedish Jews ought to distance themselves from Israel.

“It was only when we began to realize that in some of our immigrant groups there were ideas that were problematic, that we realized that we were forced to do something”, Rubin said. He said there are probably limits to what municipal authorities can do about anti-Semitism.

“To think that we could achieve the frictionless city is a utopia. In such a diversified city as Malmö, one cannot change those types of attitudes by coming from the top and being forceful and telling people what to think. Somehow, it is extremely difficult to drive this down to a municipal political level. I think it is a complicated question, how we as representatives of the majority society should act to influence the attitudes of minorities. It easily becomes counterproductive”.

Perhaps unwittingly, Rubin made a crucial point here: namely, that for years authorities swept serious problems related to migration under the rug, making them taboo and then vilifying those who dared to talk about them in public. The Linköping University report about the culture at Brå, sadly, exposed this pattern.

Authored by Alastair Crooke via The Strategic Culture Foundation,

As the lockdowns across Europe began to bite, the U.S. Establishment began its ‘wobble’. The more elegant amongst élite circles pointed to a dangerous mis-match in timelines: The medical advice has been: ‘lockdown until the virus begins to subside’, but that advice encompassed too, the possibility of Covid-19 returning later in the year in a Phase Two, thus requiring further personal distancing.

Hands shot high in absolute horror amongst some business and Wall Street leaders: Could the U.S. economy sustain such a prospect? Might not a long shutdown inflict permanent damage? Would there even be an economy left – to resurrect – in the wake of ‘peak Coronavirus’?

The mis-match thesis then acquired a third strand: To immediate economic fears standing in contradistinction to longer term medical perspectives was added the third question: Are Americans culturally ‘built’ for lockdown (that is to say, will an individualistic, libertarian-minded – and armed society – acquiesce to being ordered to stay home over a long period)?

Not surprisingly, President Trump – with an advancing Election, and his colours pinned to the mast of sound economic management – hit on the formula that the ‘cure cannot be worse than the disease’: Let’s have the economy open by Easter (12 April – i.e. 15 days hence), he declared.

The issue of the virus is not manufactured, (though there are still many in the U.S., who regard it as an overblown scare), nor is the dilemma of the divergent timelines. Actually – a great deal hangs on how these timelines play out – our global economic and political prospects, no less.

Just about everyone and his dog now claims to have modelled Covid-19. But in truth, we still know very little on which to accurately predict the virus’ course. The ‘data’ is made unreliable: firstly, because not only does the virus have different mutations, but secondly, owing to it acting in two quite different modes: One is mild, or even asymptomatic (the 80%); and the second mode is serious (requiring hospitalisation) – and for a minority of the 20% – deadly.

But consequently, we simply do not know how much of the population is infected, or is still to be infected – precisely owing to its very mildness or, its asymptomatic characteristics amongst the 80 percent-ers. There hasn’t been enough testing – and anyway, given its mild or non-noticeable iteration, many people may have it, but don’t test.

So the data modelling is more ‘art’, than predictive, and therefore introduces economic uncertainty. The damage to the economy is obvious from the first, but the question least considered is the importance of the third strand: Is Trump right when he says that America ‘is not built for lockdown’?

He may be right, in one sense; but if he opts to prioritise a quick opening of the economy over the welfare of the American people, he may face incalculable consequences – should Covid-19 bite him in the backside: Either by mutating (as did the Spanish ‘flu in August 1918); or simply, by beginning a second phase through a resurgence of community infection later in the year.

Plainly, Trump is of the ‘fears are exaggerated’ school of thought, and seems poised to bet his Presidency on it. In this era, viral social media images of hospitals overwhelmed, and of patients fighting to breathe their last, unaided, and lying on the floor, jam-packed in corridors, or in converted gyms – can become politically toxic. The counter- response that the financial system is struggling for oxygen, under lockdown, too, may strike many people as a ‘little lacking’ in common humanity – perhaps?

The dilemma is cruel. And maybe the social timeline ‘strand’ has more substance, than is generally granted? Americans are libertarian in many ways (not least, in their determination to carry arms). This is reflected also, in their deliberate eschewing of a public health programme, and in the purposefully limited support provided to the hourly paid – who are laid off. It is the ethos of individualism, a work ethic and the consequence of a ‘libertarian’ constitution.

The St Louis Chair of the Fed has predicted 30% unemployment and 50% of the economy at standstill by the end of June. Is it sustainable to have these furloughed workers dying in the street, because they cannot afford America’s ‘boutique’ health-service for the wealthy? (we’ve seen videos of people unexpectedly falling down in the street, dying, as passers-by skirt the afflicted victim – from both China and Iran). Such videos would be inflammatory in the U.S.

What happens if ‘lockdown’ were extended, and the unemployed were to attack supermarkets for food they cannot afford; or because the supermarket shelves are empty (this has happened in Europe)? What would videos of the U.S. National Guard look like as they arrive, armed for war, to put down the ‘looters’? What happens if the rioters angry at their plight – and without money – use their right to bear weapons to fight against the National Guardsmen? Can the U.S. national fabric handle such strains? Might it not disintegrate?

Here, the U.S. differs from Europe. America has not, since the Civil War, had to experience the harsh circumstances in hospitals approximating to wartime, on its own soil.

So, is Trump right, then, to prioritise keeping the U.S. economy open? Well, firstly, the notion that bits of the economy can be opened where infection-rates are low, whilst other parts are locked down, seems odd: Covid-19 – we do know – is highly infectious. Those who show no symptoms – whether they are under 50 years, or under 40 years-old – would not preclude them from being silent ‘super-carriers’ of the disease. We have not heard there is a test for anti-bodies, which might signal that an individual enjoys immunity. But unless an area has no infections, putting even one carrier into a workplace, would be sufficient to trigger a localised community infection.

Perhaps then, Trump might be right that anything other than a short (and possibly ineffective) lockdown is not manageable in the U.S.: That it might tear apart an already polarised, armed and inegalitarian, social fabric. There is then, a substantial point here: How far, and for how long, can an U.S. or European society accept a ‘command’ or martial-law administration – before citizens rebel, and head to the beaches for summer? What then?

Is it possible that can Trump may emerge from these events as the ‘saviour of the U.S. economy’? Here, we touch on the key question of the adaptability of élites. Are the U.S. élite capable of true transformation of consciousness as circumstances alter? On the answer to this question will hang the geo-political future. It was the inability of the Soviet elites to give up on their corrupt and privileged status quo that led to the implosion of the USSR in 1987.

We are often told that Americans are great innovators and graspers of opportunity. But today, the U.S. élites are utterly intent on preserving a status quo – as the viability and even the reality of that status quo is being questioned by important insiders. For the élite majority, though, the mind-set is intransigent and adamant. The status quo suits them well. They do not wish to see to see it reformed or changed. They refuse to think differently.

Eventually, the coronavirus will subside; but what will America look like when it does? For the moment, the élites believe that America will look just as it did, in February, before the impact of the pandemic hit U.S. markets. So, we have had the Fed, the Bank of England, the Bank of Japan all doing the same thing, over and over again, hoping that the economy will snap-back to ‘normal’. But it isn’t working.

The Fed fears a collapse in credit (with due reason), but ‘normality’ is not returning from the rush of liquidity hosed across credit markets. In the 2008 crisis, the Fed responded with all sorts of easing. This time the Fed is throwing the ‘kitchen sink’ at markets, offering ‘facilities’ for almost every asset class. At the present rate of growth, the Fed balance sheet will be $6 Trillion in days – and reach a total equivalent to almost 50% of the U.S. GDP by June. Another, unimaginable chunk of debt.

The problem is that the Fed’s measures will fail as stimulus – because it is not a problem of demand shortfall, but of supply-shock – as the globe implements ‘shut-down’ in order to slow infection. But, with recession or depression looming, asset prices are collapsing. Bloomberg has noted that core tenets such as what constitutes a safe asset, or the expectation of returns over the next decade, are all being thrown out of the window – as Central Banks strive to avert a global recession: The latter have unleashed a money tsunami, unlike anything seen before, and the fear of inflation is rising, together with a sense that all the old metrics of what constitutes safe investments are gone for good.

Meanwhile the U.S. Congress has passed a $2 trillion bill to counter the effects of Covid-19. It was well received for a while in the U.S. markets, before they fell again. The bill may help keep a part of the big business status quo alive, for now, but the bottom line is that these spending bills – as Jim Rickards notes – “provide spending but they do not provide stimulus”. And all that spending – like that of the Fed – essentially will be helicopter money: i.e. monetised debt.

The essential dilemma is that the Central Bankers’ Holy Grail – stimulus – depends on consumers, who constitute 70% of the U.S. economy; and on whether they decide consume – and to what extent. And that will depend upon their psychology in the post-Covid-19 era, and not on what the Fed does, or does not, do now.

If consumers get used – during lockdown – to doing without; to economising; they may well decide that increased savings and debt reduction, are the best ways to prepare for straitened times. 83% of U.S. businesses are small or medium sized companies. Some may survive and resume work, but others will not re-open after the lockdown. It will be a different atmosphere: a different economic era.

Of course, the élites want to go ‘back to normal’ as quickly as possible, but the ‘bottom line’ emerging from the Fed’s failure to staunch market paralysis is that that which the élites had thought to be ‘normal’ is proving not to have been normal at all. It is now apparent as having been a financialised bubble – and Covid-19 happens to have been the pin that popped it. This bubble was just the biggest, in a long line of Fed-blown bubbles (NASDAQ, sub-prime mortgages, etc.) – and now, the final ‘everything-bubble’ has burst. There’s nothing now left for the Fed to ‘bubble up’. It’s probably over.

Here’s the larger – global – point. Again, it revolves around psychology: Have these events been the ‘pin’ which also pops some sort of mass psychological bubble (a sealed Cartesian, mental retort)? Will public faith in the status quo crash, along with the financialised ‘everything-bubble’? Will a momentary flash of enlightenment to the house-of-cards reality that Americans had been living, cause them to start seeing their world afresh, and in its raw, hard reality? If so, the world order stands on the cusp of change.

For some time now, a general popular disquiet has been incubating. The question is whether, in the cold post-Covid-19 reality, Americans will begin to cease their acquiescence to – and their co-operation with – the status quo.

This might mean trouble as America and some European states try to manage the pandemic through invoking the necessity of a war-time command-governance. Will people accept such a command system, if they see its principal purpose being the return to a failed status quo ante?

When Goldman’s crude oil analysts wrote on Monday that “This Is The Largest Economic Shock Of Our Lifetimes“, they echoed something we said last week – nameley that the record surge in excess oil output amounting to a mindblowing 20 million barrels daily or roughly 20% of global demand…

… which is the result of the Saudi oil price war which has unleashed a record gusher in Saudi oil production, coupled with a historic crash in oil demand (which Goldman estimated at 26mmb/d), could send the price of landlocked crude oil negative: “this shock is extremely negative for oil prices and is sending landlocked crude prices into negative territory.”

We didn’t have long to wait, because while oil prices for virtually all grades have now collapsed to cash costs…

… Bloomberg points out that in a rather obscure corner of the American physical oil market, crude prices have now officially turned negative as “producers are actually paying consumers to take away the black stuff.”

The first crude stream to price below zero was Wyoming Asphalt Sour, a dense oil used mostly to produce paving bitumen. Energy trading giant Mercuria bid negative 19 cents per barrel in mid-March for the crude, effectively asking producers to pay for the luxury of getting rid of their output.

Echoing Goldman, Elisabeth Murphy, an analyst at consultant ESAI Energy said that “these are landlocked crude with just no buyers. In areas where storage is filling up quickly, prices could go negative. Shut-ins are likely to happen by then.”

While Brent and WTI are hovering just around $20 a barrel, in the world of physical oil where actual barrels change hands  producers are getting much less according to Bloomberg as demand plunges due to the lockdown to contain the spread of the coronavirus.

Oil traders believe other crude streams are likely to see negative prices soon at the well-head as refiners reduce the amount of crude they process, leaving some landlocked crude without easy access to pipeline trapped. Goldman’s Jeffrey Currie explained this pricing divergence as follows:

Brent is a waterborne crude priced on an island in the North Sea, 500 meters from the water. In contrast, WTI is landlocked and 500 miles from the water. As I like to say, I would rather have a high-cost waterborne crude oil that can access a ship than a landlocked pipeline crude sitting behind thousands of miles of pipe, like the crude oils in the US, Russia and Canada.

As we noted last night, when we asked who would see zero dollar oil first, several grades in North America are already trading in single digit territory as the market tries to force some output to shut-in. Canadian Western Select, the benchmark price for the giant oil-sands industry in Canada, fell to $4 on Monday, while Midland Texas was last seen trading just around $10.

Southern Green Canyon in the Gulf of Mexico is worth $11.51 a barrel, Oklahoma Sour is changing hands at $5.75, Nebraska Intermediate at $8, while Wyoming Sweet prices at $3 a barrel, per Bloomberg.

While there is very little hope of a dramatic improvement in the situation, late on Tuesday, President Trump said the U.S. would meet with Saudi Arabia and Russia with the goal of halting the historic plunge in oil prices. Trump, speaking at the White House Tuesday, said he’s raised the issue with Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman.

“They’re going to get together and we’re all going to get together and we’re going to see what we can do,” he said. “The two countries are discussing it. And I am joining at the appropriate time, if need be.”

It’s unclear what if anything Trump “can do” in what is effectively a collusive war between the two nations meant to crush shale oil.

Trump’s intervention comes as April shapes up to be a calamitous month for the oil market. Saudi Arabia plans to boost its supply to a record 12.3 million barrels a day, up from about 9.7 million in February. At the same time, fuel consumption is poised to plummet by 15 million to 22 million barrels as coronavirus-related lockdowns halt transit in much of the world.

There is another problem: oil demand has been so battered by government lockdowns to stop the spread of the coronavirus that any conceivable oil production cut agreement between the U.S., Canada, Russia and OPEC members would still fall well short of what’s needed to shore up the market, Goldman calculated. In fact, assuming roughly 20 million in excess supply currently, the only thing that could balance the oil market is nothing short of both Saudi Arabia and Russia halting all output together. And that will never happen.

Finally, below we put the “long history” of oil prices in context:

Ivy League schools, known for being the most selective colleges in the nation, became a little less selective this year.

Names like Harvard, Dartmouth and Penn have all posted increased acceptance rates for classes that will begin this fall, according to a new report from the Wall Street Journal. 

Harvard admitted 4.9% of the 40,248 people who applied last year compared to its 4.6% acceptance rate the year prior. Dartmouth this year accepted 8.8% of applicants, up from 7.9% last year. Columbia admitted 6.1% of applicants this year, which was up from 5.3% the year prior, as applications dropped by almost 2,500 and the school simultaneously accepted 220 more students.

Yale also saw its acceptance rate move higher, to 6.5% from 6.2%. And Penn’s acceptance rate went from 7.7% to 8.1%.

Colleges, including Ivy League names, have hit an unprecedentedly challenging landscape with the ongoing pandemic shaking up enrollment projections for each university. It is still unknown what the state of the nation will be by the time fall courses are set to begin: will students be allowed on campus? Will residence halls be open? Will foreign students even be allowed to travel to the U.S.?

Some schools pulled extra candidates from their waitlist or “deny” groups in order to make sure they could enroll a full class. Reed College in Oregon saw its acceptance rate surge by 3% and Franklin & Marshall accepted 32% of applicants, which is up 2%.

Cornell said it wasn’t even going to issue public statements about its admission figures any longer. Jonathan Burdick, vice president for enrollment at Cornell said: “While metrics such as application numbers and admissions rates are an area of focus for many as they review annual activity in higher education, Cornell’s thorough and holistic review processes mean that no one applicant’s chances can be guided by ‘averages’.” 

Brown and Princeton both bucked the trend with Brown dropping its admission rate to 6.9% from 7.1% and Princeton dropping its admission rate to 5.6% from 5.8%. 

But at least for now, it looks as though the once exclusive Ivy League isn’t so “exclusive” anymore…

Authored by Jen Hood, via MastersOfBusinessAnalytics.com,

The coronavirus crisis has turned many Americans into amateur data scientists who are studying health data and statistics on a daily basis.

Are the rates of infections rising? Are they rising but accelerating or decelerating? Are the infections rising because of viral spread or because of more testing? How many people are dying each day? Does the data indicate that the virus is dangerous for only old people or young people as well? In many ways solving this crisis hinges on our mastery of data analytics, a subject we specialize in.

By now, the data is clear that coronavirus is dangerous for people of all ages, but it’s particularly lethal for older individuals.

In this article, the team at MastersofBusinessAnalytics.com was compelled to review just how many Americans are over the age of 65 in various places across the country. While this data analysis doesn’t show us how to solve the problem, it can show us just how large the devastation could be.

Across the country, there are over 51 million Americans that are over the age of 65, comprising 16% of the population. Maine and Florida lead the nation with the highest proportion of their population being over the age of 65. Alaska and Utah are the states with the lowest rates of elderly people. Among the largest hundred cities in America, Scottsdale, AZ and Honolulu, HI have the populations with the highest percentage of older Americans.

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It’s important to note that coronavirus is serious for all individuals, not just the elderly. The disease can be debilitating and sometimes deadly, even if you’re healthy.  Even if you’re “asymptomatic” (meaning you have contracted coronavirus and might not know it because you show no symptoms) you could spread it to someone else who could experience very adverse consequences and possible death.

This is to say, it’s important to show the number of people across America that are above 65 years old because they are the most at risk, but that does not absolve younger people from the risks or responsibilities.

The chart below shows that states that have the highest percentage of their population aged 65 and above:

Across the country, Maine and Florida have the highest percentages of their populations that are over the age of 65 and the highest risk group for the virus. Alaska and Utah have the lowest rates of eldery population, with under 12% of their population being under the age of 65 years old.

But just how many older Americans are at risk in each state? While the prior chart looked at the percentage of the population that was over 65, the next chart shows the number of people in each state that are over 65 (in millions).

In California there are approximately 5.7 million people over the age of 65, followed by Florida with 4.4 million and Texas with 3.6 million. In New York, the state with currently the most known coronavirus infections, has the fourth highest population of people over the age of 65. All in all, 18 of the 50 states have more than a million people over the age of 65 that would be extremely high risk for complications due to coronavirus.

Next, let’s look at the cities with the highest percentage of inhabitants over the age of 65:

Scottsdale, AZ, an attractive retirement destination, has the highest percentage of people over the age of 65 by a significant margin. Scottsdale is followed by Honolulu, HI and Hialeah, FL, two warm locations favored by retirees.  Larger cities like Miami and San Francisco also make the top ten cities with a percentage of older Americans.

On the other hand, Irving, TX has the lowest percentage of people under the age of 65, with just 7.4% of the population being in this high risk group. Santa Ana, CA and Austin, TX round out the bottom three cities with the lowest percentage of people under 65 years of age.

Lastly, let’s look at which cities have the most people over the age of 65 living there:

New York City has the most inhabitants over 65+ years old by a huge margin. Almost 1.2 million New Yorkers are over the age of 65, more than twice as many as the second place city, Los Angeles. New York City currently has the highest know number of coronavirus infections in America by a large margin and may soon exceed the total in Wuhan, China.

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In discussions about how to solve the coronavirus economics crisis, some people have suggested that high risk elderly people just need to avoid the virus or that only a small number of people are really at risk. While this sentiment is misguided on a number of different levels, it overlooks the sheer quantity of Americans that are at risk simply because of their age. In states like Florida and Maine and cities like Scottsdale, it would mean risking the health and lives of an enormous part of the population.

Authored by UBS Chief Economist, Paul Donovan

Does anyone know what is happening?

• Economic data is likely to become increasingly unreliable as a result of the coronavirus lockdown. We know the global economy will be bad. We will not know, with much accuracy, just how bad.
• Annualizing data is absurd in the current climate. What happens in the second quarter is not going to be repeated for the rest  of the year. Time to stop annualizing numbers.
• Most economic data is survey based. Industrial production, some unemployment numbers, inflation numbers, GDP and the various sentiment opinion polls need people to fill in surveys. If you are filling in survey forms in a lockdown you are likely to be an unusual person, and possibly not representative.
• Social media spreads fear and affects sentiment. Sentiment affects answers to surveys. Data, like consumer price inflation, includes restaurant prices, but restaurants are closed. What happens when you survey something that is not there?
• Online spending is likely to have increased in lockdowns. Online spending may stay higher after the lockdowns end. It may not be properly captured in official data.
• Some data items are more reliable than others. Investors need to be careful about putting economic numbers into investment models, however. Garbage in means garbage out.

The global economy is going to have a very bad few months. Fear of the coronavirus has changed consumer behavior. Government policy aims to cut GDP growth in most major economies. But we may not really know what is actually going on in these economies. The quality of economic data is going to be affected by shutdowns. So where are the problems?

Annualizing

One problem is the US habit of “annualizing” its data. A few other economies also do this. This is never a great idea in normal times. It is an absurd thing to do now.

Annualization works by saying that what happens in one quarter will keep on happening, exactly the same way, for a year. Economic activity in the second quarter is going to be badly hit by shutdowns. No one imagines that this will be repeated for a whole year. US GDP might drop 7.5% in the second quarter. No sensible economist thinks that US GDP will drop 30% over the next year, but that is how annualization reports it.

The sensible approach is to ignore annualized numbers. Focusing on the quarterly changes is quite bad enough. There is no need to sensationalize the data.

Surveying a shutdown

Nearly all data is survey-based. That is obvious for things like sentiment opinion polls. But US unemployment is also a survey. The unemployment rate is categorized in the “household survey” part of the data. Across the world, industrial production is a survey. Retail sales numbers are surveys. Inflation data are surveys, normally weighted using the results of different surveys. GDP is a mass of surveys put together.

One of the reasons data quality has fallen in recent years is that fewer people fill in surveys. Those that do are less likely to answer all the questions. Surveys are a nuisance to do. In the age of email you can barely leave a shop or hotel without being asked to do a survey. People are fed up of answering questions.

In the current crisis, even fewer people are likely to want to fill in a survey. A business owner is not likely to want to answer detailed questions on retail sales in an economic lockdown. Anyone who does take the time to fill in a survey in the middle of this uncertainty is going to be “unusual”. Right now you probably do not want the opinion of anyone who wants to give you their opinion.

Businesses that are very busy (like food shops) will not answer government data surveys. Businesses that have shut down (like restaurants) will not answer government data surveys. There is a risk that data is based on a smaller and less representative sample of answers in an economic lockdown.

What if there isn’t anything to survey?

Measuring inflation is a problem in a shutdown. In the UK, restaurants and hotels are over 11% of the consumer price index. But restaurants are closed. What do you do about their prices? It seems pointless including the restaurant meals in consumer price inflation. People have stopped spending on various leisure activities and travel. (Unless people cancelled their subscription they will still  spend on gym membership). If people are not spending, should the prices be counted?

In the United States medical care services are over 7% of the consumer price basket. A small sample of treatments are used to represent medical costs. But the medical care people used to pay for is no longer being bought. Medical care is focused on dealing with consequences of the coronavirus. So what is being paid for is now different. This will not be properly reflected in the prices.

Overall the demand shock of phase one should be disinflationary. It is unlikely to be measured properly. Producer prices may be more accurate than consumer prices. Producer prices are not affected by retail stores, or bars and restaurants closing. But some factories are closing (e.g. the auto sector). Gradually producer prices will also try to measure something that is not there.

Natural disasters, strikes and similar events sometimes mean that there is nothing to survey in part of an economy. However, this is often limited to a part of the country (for instance, US hurricanes). Alternatively only a relatively small sector is closed, as with as strike. Estimates can be made for the effect of the lost data. These estimates are often published alongside the numbers. The problem currently is that economies are shutting down nationally. Entire industries are closing. It is not going to be easy to adjust for that.

The rise of online

Economic lockdowns have increased online spending. People are shopping for the things that they need online. This is very evident in online food sales. People are also going online for gaming or films while stuck at home. This is a structural change in the way people consume. The move to online spending may continue after the lockdown. Once people start online spending, they may be more reluctant to go back to shopping in stores. However, economic data can be slow to recognize  such structural breaks. Consumer spending may be under reported if the surge in importance of online spending is not properly captured. It is worth noting that consumption data generally registers the time of sale, not the time of delivery. The sale is recorded, even if there is a delay in the customer receiving their purchase.

Some larger firms are under pressure to close online sales. This is because large numbers of people work together to supply goods in large firms. For smaller firms this is less of a problem. But the fact that smaller firms may find online sales easier may also make such sales harder to capture in economic data. Some firms may also have problems finding supply. This will give an uneven change to online sales. That may also create problems with measurement. If the firms questioned are not representative of the whole sector, the data will not be correct.

There has been some evidence of under-reporting online activity in China. Online services are not generally reported in the economic data. There is also evidence that internet activity grew faster during the recent lockdown than officially reported online retail sales.

What can we look at?

What data can be relied upon in the lockdown period? As a general rule, data that avoids surveys or sentiment will be more reliable US initial jobless claims could be more reliable than US unemployment. Initial jobless claims require people to actually register. Many European unemployment numbers are based on people who file a claim. This will be reliable.

Data, like bank lending, should also be reliable. This has to be supplied for regulatory reasons, and is not done by a survey.

Investors are turning to data sources like electricity use to estimate what is happening to economies. This data needs to be used carefully. People working from home will still contribute to GDP, but electricity consumption will fall. Countries with a lot of manufacturing will tend to have larger drops in electricity use than countries that are more service sector focused, even if GDP falls equally in both places. Industries like steel use a lot of power relative to the amount of GDP they produce.

Similarly, measures of traffic or pollution in cities are only approximate measures of economic activity. Where people are able to work from home they will add to GDP without travelling. Again, the ability to work effectively from home will differ depending on what makes up an economy. A worker making cars will find it difficult to work from home. Economists often work from home.

The challenge

Investors will have to realize that we do not know what is going on during the worst phases of the coronavirus crisis. The quality of economic data is going to be lower. Whole sections of data cannot be captured properly. Data is likely to be revised a lot. The fashion for “big data” also needs to be treated with care. In a period of structural upheaval, economic relationships change.

The UK Office of National Statistics has already warned of reduced quality and reduced detail in some of its data. It has also highlighted the possibility of suspending some data publication.

For a few months, investors need to be very careful about using economic data in investment models. If the data is wrong, models will be wrong. Remember the computing adage—garbage in, garbage out.