Tag: news

Following more than a week of widespread peaceful protests pockmarked by occasional homicidal violence, arson, assault and looting, activists are hoping to assemble a massive demonstration in Washington DC, with some hoping to draw a million people to the capital just one day after Mayor Muriel Bowser renamed the street leading up to Lafayette Square after ‘Black Lives Matter’.

The bright yellow letters spelling out the words ‘Black Lives Matter’ were put in place for a reason: for what we imagine will be an extremely powerful photo op as police and national guardsmen move to disperse the crowds, revealing the message below as tyrannical Trump gazes out the window, twirls his mustache while cackling loudly.

Demonstrations against police brutality following George Floyd’s death are expected to continue for the 12th night on Saturday.

Though he didn’t give a crowd size estimate, the chief of the Washington DC police says he expects Saturday’s gathering to be one of the biggest so far.

“We have a lot of public, open source information to suggest that the event on this upcoming Saturday may be one of the largest we’ve ever had in the city,” Washington DC Police Chief Peter Newsham told local media, adding that much of the city center would be closed to traffic from early in the day.

Newsham did not give a crowd estimate. Local media has predicted tens of thousands of attendees.

Demonstrators in the Washington DC area are still sore over the national guard’s decision to use tear gas and rubber bullets to clear Lafayette Square for a presidential photo-op at St. John’s Church, angering the Episcopal Church in the process.

Further south, in North Carolina, Governor Roy Cooper is ordering all flags at state facilities to be lowered to half-staff from sunrise to sunset on Saturday to honor Floyd, who was born in Fayetteville. A televised memorial service will also be held in the city on Saturday, per USAToday.

On Friday, marches and gatherings took place in Atlanta, Los Angeles, Minneapolis, Miami, New York and Denver, among other places, while protesters massed again, in the rain, in front of the White House. The night-time protests were largely peaceful but tension remains high even as authorities in several places take steps to reform police procedures. Politicians and judges around the country also announced new restrictions on law enforcement powers and tactics, including a federal judge in Denver, who ordered city police to stop using tear gas, plastic bullets and other “less-than-lethal” devices such as flash grenades, claiming that too many peaceful protesters and journalists have been injured by police.

“These are peaceful demonstrators, journalists, and medics who have been targeted with extreme tactics meant to suppress riots, not to suppress demonstrations,” U.S. District Judge R. Brooke Jackson wrote in the ruling.

In Minneapolis, Democratic city leaders voted to end the use of knee restraints and choke-holds, where pressure is applied to the neck.

In California, Gov Gavin Newsom ended state police training of carotid restraints, and ordered officers not to use the tactic.

In New York, Gov Andrew Cuomo said his state should lead the way in passing “Say Their Name” reforms, including making police disciplinary records publicly available, while also banning the chokehold (which we thought had already been banned following the killing of Eric Garner).

“Mr Floyd’s murder was the breaking point,” Cuomo said. “People are saying ‘enough is enough’.”

The cause of the peaceful protesters received a major boost last night from the NFL, which admitted for the first time that it was “wrong” to oppose players who kneeled.

Once again, the demonstrators in the US expect sympathizers from around the world to join in, with more demonstrations at American embassies and consulates in Europe expected.

Already, thousands have gathered in London’s Parliament Square “in solidarity” with their American peers.

The protest, which has so far proven to be entirely peaceful, according to CNN. At one point, everybody too a knee in unison.

Once again Portland, Ore., roughly 20 adults were arrested and one juvenile was detained last night as peaceful demonstrations morphed into violent street battles into the night, as agitators threw bricks and bottles at cops.

As if the world needed another reason to be bullish after Friday’s jobs number surprise, one doctor from University of Pittsburgh Medical Center is doing his best to keep the rally going.

Dr. Donald Yealy, the chair of emergency medicine at UPMC, says that fewer people are testing positive for the virus and those who test positive don’t seem to be getting as sick. 

“All signs that we have available right now show that this virus is less prevalent than it was weeks ago,” he said, according to PennLive.  “Among people who test positive, the total amount of the virus the patient has is much less than in the earlier stages of the pandemic.”

He also said the proportion of those needing a ventilator has fallen. “We see all of this as evidence that COVID-19 cases are less severe than when this first started,” the doctor said.

The doctor’s sample set includes western and central Pennsylvania and other communities in New York and Maryland served by UPMC. 4% of UPMC’s 30,000 coronavirus tests it has conducted have come back positive, he said. He also said UPMC has tested about 8,000 people who had no symptoms at all, of which about 20 tested positive. 

He also said that fears about getting the virus from someone with no symptoms is unlikely.

“Your risk of getting into a car accident if you go back and forth across the turnpike in Pennsylvania is greater than your risk of being positive for asymptomatic COVID-19 infection. This should give you some reassurance that the risk of catching COVID-19 … from someone who doesn’t even know they have the infection, in our communities, is very small.”

The doctor attributes the fall in prevalence to the weather, potential genetic changes, better medical decisions and people minding their hygiene better. 

Authored by James Rickards via The Daily Reckoning,

Why gold?

That’s a question I’m asked frequently. It’s usually followed by a comment along the lines of, “I don’t get it. It’s just a shiny rock. People dig it out of the ground and then put it back in the ground. What’s the point?”

I usually begin my reply by saying, “It’s not a rock, it’s a metal” and then go from there.

I have a lot of sympathy in these conversations. The fact that people don’t know much about gold today is not exactly their fault. The economics establishment of policymakers, academics and central bankers have closed ranks around the idea that gold is a taboo subject.

You can teach it in mining colleges, but don’t dare teach it in economics departments. If you have a kind word for gold in a monetary context, you are immediately labeled a “gold nut,” “gold bug,” “Neanderthal” or something worse. You are excluded from the conversation. Case closed.

Your correspondent holding a gold bar in a vault near Zurich, Switzerland. The bar is a so-called “good delivery” bar under the rules of the London Bullion Market Association. That means the bar weighs approximately 400 ounces, is 99.9% purity (or higher), and has a specified shape and dimensions. The bar I’m holding is worth about $700,000 at current market prices. In 1971 it was worth $14,000.

It wasn’t always this way. I was a graduate student in international economics in 1973-1974. Many observers believe that the gold standard “ended” on August 15, 1971 when President Nixon suspended the redemption of dollars for gold by foreign trading partners. That’s not exactly what happened.

Nixon’s announcement was a big deal. But, he intended the suspension to be “temporary” and he said so in the announcement. The idea was to call a kind of “time out” on redemptions, hold a new international monetary conference similar to Bretton Woods in 1944, devalue the dollar against gold (and other currencies such as the German Deutschemark and Japanese Yen), and then return to the gold standard at the new exchange rates.

I was able to confirm this plan with two of Nixon’s advisors who were with him at Camp David in 1971 when he made the announcement. I spoke to Kenneth Dam (an executive branch lawyer) and Paul Volcker (at the time, the Deputy Secretary of the Treasury). They both confirmed that the suspension of gold redemptions was meant to be temporary, and the goal was to return to gold at new prices.

Some of what Nixon wanted did happen, and some did not. The international conference took place in Washington, DC in December 1971 and resulted in the Smithsonian Agreement. The dollar was devalued from $35 per ounce to $38 per ounce (it was later devalued again to $42.22 per ounce), and the dollar was devalued against the major currencies of Germany, Japan, the UK, France and Italy.

Yet, the return to a true gold standard never happened. This was a chaotic time in the history of international monetary policy. Germany and Japan moved to floating exchange rates under the misguided influence of Milton Friedman who did not really understand the role of currencies in international trade and direct foreign investment. France dug in her heels and insisted on a return to a true gold standard.

Also, Nixon got caught up in his 1972 reelection campaign to be followed closely by the Watergate scandal, so he lost focus on gold. In the end, the devaluation was on the books but official gold convertibility never returned.

All of this monetary wrangling took a few years to play out. It was not until 1974 that the IMF officially declared that gold was not a monetary asset (although the IMF carried thousands of gold on its books in the 1970s, and still has 2,814 tons of gold, the third largest holding in the world after the U.S. and Germany).

The result was that my Class of 1974 was the last class to be taught gold as a monetary asset. If you took economics after that, gold had been consigned to the history books. No one taught it and no one learned it. Gold was still a “commodity” and something that was taught in mining colleges, but not in economics.

No wonder most people today don’t understand gold.

Maybe gold was banned from the classroom, but it was not banned from the real world. In fact, there was another major development just one year after I graduated. In 1974, President Ford signed a law that reversed President Franklin Roosevelt’s notorious Executive Order 6102. FDR made ownership of gold bullion by American citizens illegal in 1933. Gold was contraband like heroin or machine guns.

President Ford legalized it again. For the first time in over 40 years, it was once again legal for Americans to own gold coins and bars. The official gold standard was dead, but a new “private gold standard” had just begun.

That’s when things got interesting.

Now that gold traded freely, we saw the beginning of bull and bear markets, something that doesn’t happen on a gold standard where the price is fixed.

The two great bull markets were 1971-1980 (gold up 2,200%) and 1999-2011 (gold up 760%). In between these bull markets were the two bear markets (1981-1998 and 2011-2015), but the long-term trend is undeniable. Since 1971, gold is up 5,000% even after the bear market setbacks.

Now the third great bull market is underway. It began on December 16, 2015 when gold bottomed at $1,050 per ounce at the end of the 2011-2015 bear market. Since then, gold is up over 65%. That’s a nice gain, but it’s small change compared to 2,200% and 760% gains in the last two bull markets.

When it comes to capital and commodity markets, nothing moves in a straight line, especially gold.

But this pattern suggests the biggest gains in gold prices are yet to come. And right now, my models are telling me that gold is poised for historic gains as the third great bull market gains steam.

Right now gold’s trading at over $1,700. What could push it firmly over $2,000 per ounce and headed higher?

There are three main drivers:

The first is a loss of confidence in the U.S. dollar in response to massive money printing to bail out investors in the pandemic. If central banks have to use gold as a reference point to restore confidence, the price will have to be $10,000 per ounce or higher. Any lower price would force central banks to reduce their money supplies to maintain parity, which would be highly deflationary.

The second driver is a simple continuation of the bull market. Using the prior two bull markets as reference points, a simple average of those gains during those durations would put gold at $14,000 per ounce or higher by 2025.

The third driver is panic buying in response to a new disaster. This could take the form of a “second wave” of infections from the Wuhan Virus, a failure of a gold ETF or the COMEX exchange to honor physical delivery requirements, or a victory by Joe Biden in the presidential election.

The gold market is not priced for any of these outcomes right now. It won’t take all three events to drive gold higher. Any one would do just fine. But, none of the three can be ruled out.

These events (and others) would push gold well past $2,000 per ounce, on its way to $3,000 per ounce and ultimately much higher along the lines described above.

The COVID-19 pandemic and ensuing lockdowns across the world have led to a recession, if not depression, unseen since the 1930s. It has resulted in unprecedented job loss and economic declines in both developed and emerging economies. 

Central bankers have spent the last several months flooding global markets with liquidity, lowering rates to the zero lower bound, and unleashing massive bond-buying programs, a bid to arrest declines in asset prices. No matter what the Neel Kashkaris of the central banking world do — their attempts to flood markets with liquidity will likely fail to engineer a V-shaped recovery in world trade (though they have certainly engineered a V-shaped recovery in stocks). 

Research firm Inchcape Shipping Services is reporting just that, as the path to recovery for world trade will not resemble a classic “V” and be much slower than previously thought. 

Inchcape’s chief commercial officer Christopher Crookall told Bloomberg:

 “There’s going to be a much slower recovery than has previously been envisaged because demand won’t rebound instantly,” said Crookall. 

Crookall said the supply-side story in Asia has yet to be revived because the demand story in Europe and North America is offline. Without Western demand, reviving Asian factories will not be possible; thus, world trade won’t rebound. 

Inchcape’s most optimistic 2020 scenario for business activity in the global economy (a proxy for physical world trade) is one that will drop 10% YoY. 

Another shipping firm, Arrow Shipbroking, said overall trade volumes would plunge by 10-12% YoY, in line with what Inchcape’s estimate says. 

Burak Cetinok, head of research at Arrow Shipbroking, said container shipping has plunged due to waning consumer demand in the West. He said dry cargo and tankers had been less affected because those vessels were used as floating storage.

“It seems that the worst is behind us with improvement in Asian demand and the western world slowly coming back to life,” said Cetinok, adding that collapsed consumer demand for energy products has left markets oversupplied. 

He said with high unemployment in Western countries, demand for products, many of which are made in Asia, will be much less and result in depressed trade flows.  

As for an actual shipper, A.P. Moller-Maersk A/S, the world’s largest container line, warned last month that world trade would continue to falter with volumes declining by at least a quarter in 2Q20. 

Maersk dashed all hope that a V-shaped recovery will be seen in the back half of the year, instead suggesting a U-shaped recovery is more plausible. 

The World Trade Organization (WTO) published its Goods Trade Barometer in late May, which suggested a sharp contraction in world trade will extend through 2Q. 

BofA’s latest Fund Manager Survey, which polled 223 participants with $651 billion in AUM, showed the vast majority of financial professionals remain incredibly bearish on the global economy. Respondents do not expect global manufacturing PMI to rise back above 50 until 4Q20. 

It could take several years or more for global GDP to recover back to 2019 levels. 

Baltic Dry Index provides a glimpse into the status of world trade — so far, world trade is stagnate — though equity markets are soaring as if there was a recovery. 

Bonds are not buying the phony V-shaped recovery narrative of an economic rebound. 

Investing legend Stan Druckenmiller called the V-shaped recovery a fantasy during his latest webcast.

Authored by MN Gordon via EconomicPrism.com,

“And the will of Zeus was moving towards its end.” 

– Homer

Symbiotic Disharmony

The recline and flail of western civilization beats on.  Pandemic, economic collapse, full societal breakdown.  The sequence grooves from one to the next with the symbiotic disharmony of a minor pentatonic scale.

Peaceful protests devolved to rioting, looting, and structure fires in our own lowly hamlet last Sunday.  The Long Beach police couldn’t stop the vandals.  So the National Guard was summoned to quell the ransacking.  Some Guardsmen even stuck around to help out with the cleanup effort the following day.

The refrain – pandemic, economic collapse, full societal breakdown – has been repeated in many cities across the country.  For each: The time is now.  The place is here.

The progression from government pandemic lockdown orders to government curfew orders has been as natural as day to night and back again.  The difference between the two is subtle; like the difference between ketchup and catsup.  The main variance is the local authorities, in what must be an act of public service, now spam our mobile phone each afternoon with warnings to not venture out past curfew.

The events of the last weeks and months have been well covered.  We’ll leave the ongoing documentation tasks to those better qualified.  Instead, we’ll take a step back and look around.  Our aim today is to better understand what’s going on…so we may better anticipate – and plan for – what’s next.

Where to begin?

Human Stampedes

The mass impulse of a cattle stampede can be triggered by something as innocuous as a blowing tumbleweed.  A sudden startle, or a perceived threat, is all it takes to setoff this mass uncontrolled running.  Once the herd collectively begins charging in one direction it’ll eliminate everything in its path.

The only chance a rancher has is to fire off a pistol with the hope it turns the herd into itself.  If the rancher is successful, they’ll stampede in a giant circle.  If the rancher isn’t, they’ll run off a cliff.

Modern man, like Bos taurus, is also predisposed to herd behavior.  What’s more, the human animal will take just about anything and everything to the extreme.

Religious pilgrimages, sporting events, music concerts, New Year’s Eve celebrations, political rallies, and peaceful protests gone bad have all triggered deadly human stampedes.  In 2015, for instance, over 2,400 people were trampled to death during the Hajj Stampede in Saudi Arabia.

Financial markets also open countless avenues for mobs to stampede down.  The fear and greed prospects of scarcity and abundance offer remarkable opportunities for extreme human folly.  Manias, panics, and crashes come to pass with shocking regularity.

After an abundance of speculations have piled up on one side of a trade, they must eventually reverse course and charge elsewhere.  The precise moment and duration are never clear.  But, when the time comes, those standing in harm’s way get trampled.

Pandemic, Economic Collapse, Full Societal Breakdown

Social moods and mass collective movements cycle over and under in ways that are only really predictable in hindsight.  Though, if you keep an ear to the ground you may hear whispers of what’s coming.

The solution to high prices, of course, is high prices.  Yet the lessons of the past are often the wrong instructions for the future.

For example, the key lessons from the 1930s were that one should have no debt and keep a large stash of cash outside the banking system.  Other lessons were to plant a vegetable garden,  and to hoard scraps of aluminum and bags of flour and sugar.

Yet those that heeded the lessons of the 1930s and held cash through the 1970s were rewarded with a significant loss of purchasing power.  Their industry and thrift were covertly subtracted from their bank accounts.  The landscape had shifted.

Because the key lessons from the 1970s were that one should borrow large amounts of money; and, one should not hold a stash of cash.  This was especially true if the borrowed money was used to buy a house.  The debt burden was quickly cut in half and house prices ballooned up.

The median unadjusted house value in 1960 was $11,900.  By 1990, it was $79,100.  Over the course of a 30-year loan, monthly payments on a house bought in 1960 were reduced to pocket change.  And by 1990, it took $4.42 to purchase what $1 could buy in1960.  House prices increased at a rate near double consumer prices.

The result is that one generation shuns credit like the black plague of death.  The next laps it up like pigs eating slop.  What are the lessons from yesterday to be applied to tomorrow?

The lesson from the Great Recession is that the Fed can flood financial markets with unlimited credit that’s created out of thin air without consumer price inflation.  Naturally, we’re suspicious of this lesson.

You see, the Fed’s cheap credit flowed into stocks, bonds, and real estate.  The upper crust, which own financial assets, benefited from this rising tide of liquidity.  Working class and middle class wage earners barely treaded water.

Now, as the economy’s buckled, the Fed’s up to its antics again.  But this time rather than just bailouts for big business and financial markets, the people demand bailouts too.  And the modern monetary theory (MMT) crowd can point to the lesson of the past decade, and the lack of price inflation, as justification for printing money.

This, alas, will prove to be the wrong lesson entirely.  As economic output slumps and unemployment spikes the free money will not solve the wealth disparity problem.  Rather, it’ll exasperate it…along with social discord, discontent, and dissonance.

By now you know the tune: Pandemic, economic collapse, full societal breakdown.

Sing it loud, sing it proud!