Trump Promotes Freedom Caucus Leader Mark Meadows To Chief Of Staff, Sends Mick Mulvaney To Northern Ireland
In the middle of a rapidly escalating pandemic, President Trump has finally decided to fill that chief of staff slot that’s technically been vacant since John Kelly left at the end of 2018.
Mick Mulvaney has been serving as acting chief of staff while also leading the critical Office of Management and Budget (OMB). But many have gotten used to him as chief of staff, a far more visible role where Mulvaney has nevertheless suffered a handful of embarrassing gaffes, despite his overall competence performance. Mulvaney also served as head of the CFPB until December 2018.
However, after more than a year with Mulvaney in the acting role, Trump has apparently decided to appoint North Carolina Congressman and Freedom Caucus leader Mark Meadows, long rumored as a potential chief of staff candidate, to the position in a series of tweets sent at 8pmET on a Friday.
For whatever reason (perhaps because rumors that Mulvaney has somehow displeased Trump are true), Mulvaney is being shipped off to Belfast as the US Special Envoy for Northern Ireland.
Trump made the announcement on Twitter:
“I am pleased to announce that Congressman Mark Meadows will become White House Chief of Staff. I have long known and worked with Mark, and the relationship is a very good one…I want to thank Acting Chief Mick Mulvaney for having served the Administration so well. He will become the United States Special Envoy for Northern Ireland. Thank you!”
I am pleased to announce that Congressman Mark Meadows will become White House Chief of Staff. I have long known and worked with Mark, and the relationship is a very good one….
….I want to thank Acting Chief Mick Mulvaney for having served the Administration so well. He will become the United States Special Envoy for Northern Ireland. Thank you!
Notably, Meadows will get the full title, no “acting” which Mulvaney allegedly kept so he could earn the highest salary of his many roles (that of head of the OMB).
Meadows gets the full title. Not “acting,” which Mulvaney had, and recently told the Oxford Union he kept so he could keep his higher OMB salary. https://t.co/B8x0cjNx1Y
– Fires Mick Mulvaney
– Ships him off to Northern Ireland
– Names Mark Meadows new White House Chief of Staff
– Attacks Governor Jay Inslee
– Botches Grand Princess outbreak
– It’s all falling apart
– Trump is going to prison
– It’s still only 8:15pm
It wouldn’t be a Trump twitter firing if the person being fired didn’t find out at the same time as everyone else…we look forward to Mulvaney telling the world how the secret service showed up at his house in the middle of dinner and told him to pack his bags and grab his passport.
Whatever the reason for this firing (was it a mix of tension-induced panic and rage?, we’re sure we’ll read the ‘full story’ this weekend in the NYT or Washington Post.
MbS Arrests Top Royals On ‘Treason’ At Moment World’s Attention On Coronavirus
A huge development out of Saudi Arabia late Friday via the Wall Street Journal which reports Saudi authorities have detained two prominent royals close to the throne— namely, the ageing King Salman’s brother, Prince Ahmed bin Abdulaziz al Saud, and Prince Mohammed bin Nayef bin Abdulaziz al Saud (often referred to as MBN).
“The Saudi royal court accused the two men of plotting a coup to unseat the king and crown prince, according to people familiar with the situation,” WSJ reports. One of MBN’s brothers, Nawaf, was also reported to be arrested.
Prince Mohammed bin Nayef, right. Getty Images.
Black-clad and masked commandos raided the homes of the two men Friday morning on charges of treason, in what’s being widely interpreted as part of Crown Prince Mohammed bin Salman’s (MbS) broader “purge” of potential powerful rivals and centers of influence, which first began in 2017 when scores of princes and top officials were locked up in the Riyadh Ritz-Carlton.
Perhaps entirely to be expected, Saudi authorities gave no details or evidence of the alleged coup attempt even though a “treason” conviction means they face execution, as the WSJ notes further:
The two men who potentially had once been in line for the throne are now under threat of lifetime imprisonment or execution, said people familiar with the situation. The details of the alleged coup attempt couldn’t be learned.
Crucially both Prince Ahmed and MBN previously spent time as minister of the interior, a very powerful post with direct oversight over troops and Saudi intelligence.
Prince Ahmed bin Abdulaziz. File image via Middle East Monitor.
Bin Nayef, it must be remembered, had initially been in line to be king before being stripped of his powers as Interior Minister in 2017 and King Salman declaring his son MbS heir to the throne.
Following the state-sanctioned (and no doubt MbS-ordered) murder and dismemberment of journalist Jamal Khashoggi in Oct. 2018, any drastic or aggressive consolidation of power related action out of MbS had cooled significantly for a while compared to the period of the near daily headlines coming out of the kingdom in 2017 through early 2018 amid the crackdown.
Though political and business leaders in the West essentially shunned MbS at major public events for much of the year following Khashoggi’s death, bin Salman was quietly “rehabilitated” by the elites and it’s recently seemed ‘business as usual’.
It appears MbS is now once again going back on the offensive, perhaps also given the world’s attention is now focused far away from the crown prince’s political machinations as the Coronavirus fast becomes a global pandemic.
Astronomers in Perth, Australia recently detected and observed the largest explosion ever found in the universe since the Big Bang, according to a study published in the Astrophysics Journal.
“We’ve seen outbursts in the centers of galaxies before but this one is really, really massive,”said Curtin University professor Melanie Johnston-Hollitt.
“And we don’t know why it’s so big. But it happened very slowly—like an explosion in slow motion that took place over hundreds of millions of years.”
Researchers at the Curtin University International Centre for Radio Astronomy were observing the distant galaxy cluster Ophiuchus when they detected a huge explosion at the center of a supermassive black hole, approximately 390 million light-years from Earth. According to scientists, the explosion released five times more energy than the big bang, Science Dailyreported.
In fact, the explosion was so massive that it blew a hole in the cluster plasma (super-heated gas) surrounding the supermassive black hole and also broke the previous record-holder—a cluster known by the designation MS 0735+74.
One author of the study, Dr. Simona Giacintucci who works at the Naval Research Laboratory in the U.S., compared the explosion to the eruption of Mount St. Helens in 1980, in which the top of the mountain was completely blown off.
“The difference is that you could fit 15 Milky Way galaxies in a row into the crater this eruption punched into the cluster’s hot gas,” she said.
X-ray telescopes previously detected a hole in the black hole’s cluster plasma, but astronomers originally discarded the theory that it could have been caused by an energetic explosion because the outburst was believed to be too massive.
“People were skeptical because the size of outburst,” Johnston-Hollitt said. “But it really is that. The Universe is a weird place.”
“This object was actually observed with the Chandra X-ray telescope by a previous team and they saw this bubble in the hot X-ray plasma in the centre of this galaxy cluster, and they said, ‘Well, this can’t be from one of these energetic outputs because it would be enormous; the scale would be unthinkable’. So, they dismissed that possibility,” explained Prof Johnston-Hollitt, who directs the MWA. “But we went back and we observed with low-frequency radio telescopes and discovered that this cavity is filled with radio plasma.”
The scientists realized what they discovered when they observed the Ophiuchus cluster with radio telescopes. Then they saw that the radio data matched the x-ray data, confirming a gigantic expulsion of energy from the cluster.
In total, four telescopes were used to detect and confirm the eruption. Those instruments were NASA’s X-ray Observatory, ESA’s XMM-Newton, the Murchison Widefield Array (MWA) in Western Australia, and the Giant Metrewave Radio Telescope (GMRT) in India.
Johnston-Hollitt, who directs the MWA, compared their discovery to archeologists uncovering the first dinosaur bones. She further stated that with new tools like low-frequency radio telescopes, astronomers can “dig” deeper into space and uncover unusual discoveries like this which teach us about the universe and its history.
Johnston-Hollitt also pointed out that studying the universe at different wavelengths will continue to uncover never-before-seen phenomenas like this one.
“We made this discovery with Phase 1 of the MWA, when the telescope had 2048 antennas pointed towards the sky,” she said.
“We’re soon going to be gathering observations with 4096 antennas, which should be ten times more sensitive. I think that’s pretty exciting.”
“Someone Big Was Utterly Blown The F**k Out”: Here’s The Reason Behind Today’s Unprecedented VIX Move
There was a bizarre moment this afternoon, when in the 40 minutes heading into the final hour of trading, the VIX kept rising and rising, preventing the S&P from doing its sworn duty of spiking higher into the weekend. And then, just after 310pm ET (or 1210 PT), the VIX collapsed, plunging by as much as 14 vols from 54.39 – the highest print since Lehman – to 40.84, the low for the day, and unleashing another unprecedented buying cascade, which almost sent the Dow green.
What happened?
As the following chat session between three individuals, which includes a former CME index option trader (X), all of whom wish to remain anonymous lays out, what happened is that the VIX ramped as a major Chicago market maker was caught in a “short gamma” squeeze, which forced them to keep buying the VIX as the VIX soared, in the process ending the VIX even higher, only to get margin called out of their position by their clearing firm, puking their entire position, and unleashing the VIX avalanche and the 700 Dow point rally. Regular readers will recognize this pattern: it is what happened, only not with the VIX by the ES, back in February 2017, when the Catalyst Hedged Futures Strategy Fund pushed the entire market higher when it, itself, was caught in a similar gamma trap.
Below the the full chat laying out what happened:
X: Someone got carried out of the pit in spx options 15 minutes ago
X: Utterly blown the fuck out
X: Their clearing firm literally liquidated some big market maker in Chicago hahahaha
X: Go to Ceres today
Y: Omfg
X: Someone big literally doesn’t exist anymore
X: WE’RE RUINED MORTIMER
X: It caused a huge dislocation in the vix
X: You could see them blow out 😂
X: God i feel so happy now
X: (Ssssiiiippp)
Z: Someone hacked into this Boise publication and is posting redpills on their Twitter
Z: [link to Boise Weekly hacked twitter account]
Z: Is one of those degenerate leftist weekly publications so common in urban areas
X: Lol nice
Z: What’s going on with the spx?
X: Bro
X: What a lollercoaster
X: Im in cloud 9 right now
X: My old he lush trading firm blew out vs vix 32
X: Now someone else the same size did it vs 48 haha
X: Old hellish*
X: Consolidated trading blew out vs vix 32 last week
X: Verifiable true
Z: Do you know the other firm?
X: I wanna say they were the 4th largest market maker in chicago
X: Asking my friend. Trying to find out
[pictures of VIX vs /ES[H2O] on TOS]
X: That dramatic rise in the vix is inconsistent with the speed and depth of the fall in sp500
X: Someone literally got liquidated around 3 eastern
X: [Z] tell them about consolidated trading
X: “Consolidated Trading was well known across Chicago as degenerate risk takers who would always maintain a short vol/gamma position regardless of market conditions. Finally bit them in the ass last week and they blew out even after the market gave them tons of opportunity to get flat or long vs vix 23”
X: [Screenshot of another chat he’s in]:
Q: Vix 52
Q: 14 day vol is 60 lol
Q: Bro
Q: Someone big in Chicago just got carried out of the pit
Q: Their clearing firm mega puking them out CAUSED A SEVEN POINT DROP IN THE VIX
The Foreign Intelligence Surveillance Court (FISC) on March 5 effectively barred FBI and Justice Department officials involved in the infamous application to surveil former Trump campaign associate Carter Page.
Carter Page
The chief justice of the secret court, James Boasberg, ordered the ban in a 19-page opinion, the latest in a series of developments triggered by the release of the condemning report by the Office of Inspector General (OIG), which examined the four Foreign Intelligence Surveillance Act (FISA) applications the FBI used to spy on Page.
Boasberg wrote, “No DOJ or FBI personnel under disciplinary or criminal review relating to their work on FISA applications shall participate in drafting, verifying, reviewing, or submitting such applications to the court.”
Boasberg also accepted a detailed plan put forth by the FBI to prevent the kinds of significant omissions and misstatements that made their way into the Page FISA applications despite significant vetting by top officials at the bureau and the Department of Justice (DOJ).
“The court is encouraged by the government’s responses to the OIG report and its orders, as the FBI and DOJ have each indicated that the flaws identified in the OIG Report require significant and systemic remedial action,” Boasberg wrote.
The DOJ inspector general released a report in December that found a number of serious omissions and misstatements in the FISA applications on Page. For example, the FBI failed to disclose that Page had a relationship with the CIA, that the agency had approved Page as an operational contact from 2008 to 2013, that Page notified the agency about his contacts with Russians, and that the CIA had assessed that Page was truthful about describing his contacts.
Exacerbating the omission, an FBI attorney altered an email to say that Page was “not a source.”
Boasberg ordered the FBI and DOJ to include in future applications to the court a statement saying that they contain “all information that might reasonably call into question the accuracy of the information or the reasonableness of any F.B.I. assessment in the application, or otherwise raise doubts about the requested findings.”
On the heels of the release of the OIG report, the FISC issued a scathing order, calling on the FBI to explain what is being done to rectify the malpractice flagged by the inspector general. Boasberg also appointed an independent monitor to assess the FBI’s response. The bureau responded with a menu of procedural, training, and oversight reforms, some of which are already being implemented. Boasberg’s order calls for information and status updates on several of the items.
Boasberg filed his order as lawmakers are considering reforming the FISA act. President Donald Trump told Republican lawmakers in a private meeting on March 3 that he would not sign an extension of the surveillance law without reforms, Sen. Rand Paul (R-Ky.) told reporters.
In addition to the issues identified in the wiretap applications, some of the key officials involved in the investigation of the Trump campaign were found to have expressed intense bias against Trump and in favor of his 2016 opponent, Hillary Clinton. The inspector general found no evidence to suggest that the bias motivated the malpractice.
“MILFs In Quarantine” – Coronavirus Porn Sweeps America
The next big trend in porn is Coronavirus-themed videos. Porn sites across the internet have seen an influx of uploads with amateurs banging in bio hazmat suits and or just simply in masks.
Over the last month, Pornhub has seen 115 Coronavirus-themed videos uploaded by wannabe porn stars, otherwise known as amateurs.
There’s a perfectly reasonable explanation for the surge of Coronavirus-themed porn videos, that is, because these amateurs depend on ad revenue to make money, and the only way to survive and generate clicks is to stay super relevant with current events, such as making porn videos about a pandemic that could wipe out the human race.
One of the oddest videos Vice ran across is titled “Bodycam Footage (CDC Agent) Investigates Deserted Wuhan,” features a first-person point of view of a hospital worker stumbling around in the dark, uncovers a creepy hospital patient, and that’s the moment where we will stop describing what happens next…
Here’s a PG-rated version of the creepy Coronavirus-themed porn video:
xHamster spokesperson Alex Hawkin told Vice that Coronavirus-themed porn videos have been surging after it provided free premium accounts to regions affected by the virus.
Another video Vice viewed is titled “COVID-19 Coronavirus: Horny Slut Has to Use Protection During Outbreak!” where amateur pornstar “Chase Poundher” emerges from the hallway wearing a face mask and tells a female performer entering the house, “Wait, don’t you move a foot closer. Haven’t you heard of COVID-19?” Mr. Poundher then lectures her for one minute about the virus, the outbreak in China, and mask safety.
“I think people are attracted to COVID-19 themed porn the same way people who are scared of their shadow are attached to horror movies: We are all searching for things that make us come alive,” Mr. Poundher, told Vice. “COVID-19 is something that brings fear and mystery to pretty much everyone in the world right now… You need to be able to feel something, and what better way to make you feel something than the global crisis we are all in right now.”
Other COVID-19 themed porn videos have surfaced on the internet in the last week, including “MILFs in quarantine,” “Face Sitting Corona Virus – No Mask,” and “TSA Agent Detains Woman Suspected of Coronavirus.”
“We knew that the corona event was ‘good viral material,’ but we also knew it was affecting people in tragic ways,” Mr. Poundher said. “We didn’t want to insult them by making it too real. We personally know people actually stuck in Wuhan and made it with them in mind.” They asked themselves: Would they be offended by this? Or would this take their minds off their situation? “We want the latter.”
The search term “Coronavirus porn” is in a breakout pattern across the US.
Americans are increasingly embracing pandemic doom porn as confirmed cases and deaths surge across the country. Seriously, WTF.
An associate professor and researcher at the University of Tennessee at Knoxville has been arrested for allegedly concealing ties to a Chinese university while receiving federal funding,according to a recent Justice Department press release.
Amning Hu was charged with three counts of wire fraud and three counts of making false statements following a grand jury indictment for “concealing his affiliation with Beijing University of Technology (BJUT) in China” in order to receive a research grant from NASA.
According to the Justice Department, NASA is prohibited from using federal dollars to collaborate with China or Chinese universities. Hu allegedly made “false representations and omissions to UTK about his affiliation with BJUT caused UTK to falsely certify to NASA that UTK was in compliance with federal law.”
The nature of the particular research at issue is currently unclear. AsThe Hill reported, the university has since removed from its website information about the professor’s work. The Beijing University of Technology could not be reached for comment.
“The University of Tennessee has suspended Associate Professor Anming Hu, who was indicted by federal authorities on felony charges. UT officials have cooperated with federal authorities during the investigation. University leadership is fully committed to adherence to grant procedures and the protection of intellectual property.”
U.S. law enforcement officials also took a strong stance.
“The United States Attorney’s Office takes seriously fraudulent conduct that is devised to undermine federally-mandated funding restrictions related to China and Chinese universities,” said U.S. Attorney J. Douglas Overbey for the Eastern District of Tennessee.
“The University of Tennessee has cooperated with the investigation, and the U.S. Attorney’s Office values the university’s assistance in this matter.”
“Hu allegedly committed fraud by hiding his relationship with a Chinese university while receiving funding from NASA,” said Assistant Attorney General for National Security John C. Demers.
“This is just the latest case involving professors or researchers concealing their affiliations with China from their American employers and the U.S. government. We will not tolerate it.”
A ResearchGate profile for Hu stated that his work focused on nanomanufacturing and 3D printing. Hu’s Google Scholar page lists many papers relating to nanoparticles.
According to the Justice Department press release, Hu faces 20 years in prison and a $250,000 fine for each wire fraud charge and as many as five years in prison for each false statement charge. The case is currently under investigation by the FBI and Inspectors General from NASA and the Department of Energy, along with investigators from the Department of Homeland Security.
Hu could not be reached for comment in time for publication.
Iran Hawks Pressuring White House To Halt ‘Humanitarian’ Medicine To Iran Amid Outbreak
An influential US lobbying group tied to Republican hawks is attempting convince the Trump administration to block all medicine sales to Iran after the US Treasury recently opened up humanitarian channels due to Iran’s devastating coronavirus outbreak.
Despite the daily soaring infection rate and death toll, with Iran on Friday confirming 124 deaths amid 4747 confirmed cases — though true numbers are believed much higher — the hawkish pressure group, United Against Nuclear Iran, wants to ensure all medical trade dries up.
Last month the US administration came under fire based on the allegation that aggressive and tightening US-led sanctions of the past two years have actually exacerbated the new Covid-19 crisis in Iran, not only setting the conditions for rapid spread but weakening the medical response for lack of equipment, medicines, and ability to test.
Coronavirus testing in Iran, file image.
However, the White House responded to the criticism by easing sanctions and ensuring humanitarian channels were opened up, specifically to fight the coronavirus, which threatened to spread further through the Middle East.
“The Trump administration is partially reversing course on economic sanctions that have slowed down Iran from importing coronavirus test kits as the country faces down the most deadly COVID-19 outbreak outside of East Asia,” according to a report in The National Interestlast month. This included expanding special financial channels for humanitarian goods and medicine to the Islamic Republic.
An investigative report in The Intercept describes United Against Nuclear Iran (UANI) and its mounting a well-funded “name and shame” operation targeting medical industry companies still doing business with Iran:
UANI says it aims to persuade “the regime in Tehran to desist from its quest for nuclear weapons, while striving not to punish the Iranian people.” (The U.S. intelligence community does not believe that Iran has any desire or plans to build nuclear weapons.) UANI’s efforts, however, have extended beyond sanctions into pressuring companies that do legal trade with Iran, often under the Treasury Department’s humanitarian exemptions to sanctions — including medical-related trades that would presumably aid in combating a massive public health crisis like this coronavirus outbreak.
The pressure group has ties to John Bolton, the Israeli lobby, as well as Republican Party mega-donors and (surprise, surprise) Saudi Arabia and the UAE.
UANI claims its actions continue to be motivated by ensuring Iran cannot pursue over ever acquire a nuclear weapon.
The group is specifically going after companies with humanitarian exemption waivers to conduct limited business with Iran, focused on essential pharmaceutical supplies. The report continues:
UANI operates an “Iran Business Registry” that provides an online database of companies it believes are conducting business in or with Iran — a name-and-shame strategy to increase Iran’s economic isolation. The pressure campaign has targeted multiple medical companies with Treasury Department licenses to conduct trade with Iran. Nine pharmaceutical, biotechnology, and medical-device corporations, all with special licenses, are listed on UANI’s business registry. Companies urged by UANI to “end their Iran business” include Bayer, Merck, Pfizer, Genzyme, AirSep, Medrad, Becton, Dickinson & Company, Eli Lilly, and Abbott Laboratories.
To the surprise of many, the administration last week momentarily put aside the fact that it’s essentially at war with Iran and actually offered to “help” Iran combat the rapidly spreading and deadly coronavirus according to Secretary of State Mike Pompeo’s prior testimony before the House Foreign Affairs Committee on Feb. 28.
But Iran’s foreign ministry slammed America’s offer as “ridiculous”and derided it as propaganda after Washington had already “closed the paths for buying medicine and medical equipment,” according to official statements. As Covid-19 infections continue going global, the blame game is likely only to continue ratcheting up.
Iranian leaders have blamed Washington for the worsening crisis, given the limited ability to import virus testing kits and equipment and medicines. But the State Department under Pompeo has tended to blame countries that have become central to the virus’ spread for deepening the crisis through a severe lack of transparency.
As the coronavirus is spreading around the world, its ramifications on the economy will boost the price of gold.
The coronavirus is swallowing the world. What started in January as a local issue in Wuhan, China, is now a global problem. Although there remains uncertainty around the health hazards of the virus, its impact on the world economy is clear. Early on, we witnessed large segments of the Chinese economy grinding to a halt and supply chains collapsing. As the virus is spreading, major economies will likely suffer the same fate as the Chinese. Across the globe, schools and companies are closed. Events are canceled, and traveling is brought to a minimum. People that can work from home are asked to do so.
Government officials are taking precautions as well and for a good reason. In Iran, 23 Members of Parliament have been infected, and one of Ayatollah Khamenei’s top advisers died of the virus. On Wednesday, the first case of corona in an EU institution was confirmed.
The European Central Bank called off a meeting on Tuesday out of fear for contamination, and the International Monetary Fund decided to change the spring meetings to a virtual format (video conference). In France, President Macron ordered to confiscate all stockpiles of face masks and to nationalize production, just before the news came out by the World Health Organization, that “the mortality rate for COVID-19 [coronavirus] is 3.4% …, higher than previous estimates of about 2%.”
My concern is that the virus has set in motion a domino effect in a brittle world economy. After the Great Financial Crisis, central banks have over-stimulated the economy through quantitative easing (“printing money”) and extremely low interest rates. Unconventional monetary policy has spawned asset bubbles, zombie companies and banks, decreased productivity growth, and global debt to GDP is at a historical high of 322%. Although unconventional monetary policy has worked counterproductive, any subsequent economic downturns will make central banks double down on their previous policy: more stimulus.
Powell says the Fed will aggressively print money to fight next recession.
1) This promise won’t make the government spend less.
2) This is as good as a guarantee the current debt burden will be alleviated through significant inflation.
The first macroeconomic indicators coming in from China are disastrous. The headline Caixin Business Activity Index fell over 25 index points from 51.8 in January to 26.5 in February.
Courtesy Caixin.
The economic shock made Chinese banks—which were already suffering from non-performing loans (NPLs) on their balance sheet before the virus erupted—to take extraordinary measures in not recognizing bad loans, with the explicit approval of regulators in Beijing. More from Bloomberg:
Some of the measures, … include rolling over loans to companies at risk of missing payment deadlines and relaxing guidelines on how to categorize overdue debt
lenders are also … allowing borrowers to skip interest payments for as long as six months
The four biggest state-owned banks are trading at an average 0.5 times their estimated book value for this year, near a record low.
Courtesy Bloomberg.
These are signs of a double-edged problem: companies aren’t making ends meet and banks face insolvency.
The value at which banking stocks are traded relative to their book value is called the “price to book ratio.” As stated by Bloomberg, this ratio is near a record low for Chinese banks (at an average of 0.5). If we simplify the price to book ratio, then it can be said to reveal how the market values a bank’s balance sheet, versus how the bank itself values its balance sheet. When the price to book ratio is below 1 (alternatively below 100%) the market thinks the bank is in bad shape. If the ratio is 0.5, the market thinks the bank is in very bad shape.
European banks are in no better condition. A few months ago, Dutch independent journalist Arno Wellens computed the price to book ratio for Europe’s largest banks. Some banks appeared to be healthy—mainly the ones in countries that are not in the eurozone. But many other Systemically Important Banks, such as Deutsche Bank, Commerzbank, BNP Paribas, Crédit Agricole, Société Générale, UniCredit, Banco Popolare, Banca Monte dei Paschi, and Banco Santander have price to book ratios far below 100%. Insiders know these banks are not healthy (no matter what stresstest they pass).
The coronavirus will cause the economy in Europe to suffer a significant setback (as in China). It will hurt businesses and, in my view, will push the economy into a recession. On Wednesday, European Union officials publicly stated they are “starting the internal reflection” on their methodology for dealing with failing banks. Banks, once again, will face bankruptcy.
Belgian Finance Minister in 2008 says, after he resigned, that the deposit guarantee schemes are fictional. ‘Impossible to pay everybody at the same time €100,000…’ pic.twitter.com/aZJClAJjI9
Gold has been a safe haven for thousands of years. And still, when economies contract, stock markets plummet, and banks fail, gold offers the best protection, as it’s the only financial asset that is no one’s liability. Gold has no counterparty risk and can’t be printed.
Other traditional safe havens are sovereign bonds. In the past years, the gold price in U.S. dollars has been correlated with long term real interest rates. Whenever real interest rates decline, the gold price rises. Real interest rates are calculated by subtracting inflation from, in this case, the nominal interest rate on a 10-year U.S. sovereign bond (UST). On Tuesday, the nominal interest rate on a 10-year UST fell below 1% for the first time ever. I expect nominal rates in the U.S. to further decline (possibly to enter negative territory, as in Europe and Japan). This would be bullish for the price of gold.
The decline in UST yields came after the Federal Reserve cut its baseline interest rate on Tuesday by 0.5% in an attempt to calm markets. Last week the U.S. stock market experienced its fastest correction in history.
Investors are in the process of running down Exter’s inverse pyramid: selling stocks, buying government bonds, and to a certain extent, gold.
I say to a certain extent, as currently gold makes up a small fraction of all financial assets. When I asked Jeffrey Christian from CPM Group how much he estimates gold now represents, he replied over email:
Gold accounted for 0.52% of global financial assets in 2019, up from 0.51% in 2018.
In my view, this means there is still much more upside for gold.
Conclusion
Although I think gold has a lot more upside, it can be a bumpy road. When the economy contracts, deflationary forces can hold back gold. Central banks will not tolerate deflation, though, certainly not with sky-high debt to GDP levels. Deflation causes nominal income to decline, which makes debt unserviceable. This would trigger a chain reaction of defaults. Central banks stand ready to avoid this scenario and will continue to pursue inflation to alleviate the debt burden.
When the economy contracts, or deflation looms, I wouldn’t be surprised if central banks either hand out cash financed by new money creation (helicopter money) or directly devalue their currencies against gold as they did in the 1930s. Both scenarios could significantly increase the price of gold.
NIMBY Seattle-Area Residents Resist Coronavirus Quarantine Plan For Local Motel
Seattle residents are pushing back against officials in King County, Washington, who plan to use emergency powers to buy and renovate an Econo Lodge located south of the city to house coronavirus patients, according to Bloomberg.
The mayor of Kent, Washington – a Seattle suburb near the airport where the 85-bed motel is located, was livid over the plan. While local workers and residents are staunchly opposed as well.
“We’re one of the largest cities in the county, and we know we have a role to play in preventing the spread of the virus,” said Kent Mayor Dana Ralph in a phone interview. “But we were not included in the conversation or decision making.”
This type of consternation is common when a community pushes back against an unwanted project — inspiring the term Nimby for “not in my backyard.” This time, the backlash comes as health officials try to contain a spreading public health crisis, revealing a challenge that many communities across the U.S. may face as they try to slow the outbreak.
“Washington state counties are not the only places where that is going to be discussed,” said Irwin Redlener, a disaster preparedness expert and public health professor at Columbia University in New York. “We might have to adopt procedures and protocols that would be unacceptable in the absence of a true national emergency. In other words, our standards might have to get much more lax.” –Bloomberg
Residents of Kent aren’t the only ones resisting quarantine plans. Last month, federal officials were forced to scrap a plan to house coronavirus evacuees from a cruise ship to a FEMA facility in Anniston, Alabama, after locals and the city council opposed the move.
In Orange County, California, residents are also up in arms over a proposal to place some patients in a state-owned facility.
The Econo Lodge plan would include $4 million for the purchase of the motel and an additional $1.5 million in emergency funds to renovate it, as well as hire as many as 11 existing employees to run the facility. It would be used to house coronavirus patients who are infected but not seriously ill, as part of an effort to keep hospital beds available for those who need them, according to Bloomberg. According to county officials, it was the only property on the market that met their criteria of separate heating and cooling systems for each room, and doors which open to the outside, rather than a hallway.
“From that perspective, a motel is a very good solution,” said NYU School of Public Health professor David Abramson. “They’re almost entirely private spaces.”
On Thursday morning, cars raced by on the highway behind the motel, where a room with a single bed was going for $78.68 a night. Trucks were parked at the edge of the property, which sits near a Denny’s, a bowling alley and a Ford dealership.
Inside, confusion and anger reigned. The front-desk worker at the motel, who asked to not be identified by name, said that she had learned about the plan to quarantine coronavirus patients from news reports and was strongly opposed. She had yet to hear from her manager whether she would still have a job. And, even if she did, she wasn’t sure she wanted it for fear of infecting her family. –Bloomberg
Without interference, the facility could open within two weeks. According to the report, King County officials are also looking at other quarantine locations, including in Seattle.
That is, if the locals don’t stand in the way.
“I’m sorry for the people who are going through this,” said 35-year-old Rupali Handa, who said that officials should quarantine people “somewhere else.”
