“Sell The News”? Stocks Are Crashing After 2 Massive Pumps Overnight

“Sell The News”? Stocks Are Crashing After 2 Massive Pumps Overnight

Despite getting help from Boeing’s gains, The Dow has now crashed over 1000 points twice from the post-“we have a deal” highs… and is back in the red for the day…

This all has the stench of some major gamma pukes with VIX flying around right at the open…

Bonds had warned that yesterday’s record short-squeeze in stocks wasn’t to be trusted…

Just like the last time we saw a market move like that…

Fade accordingly.

 


Tyler Durden

Wed, 03/25/2020 – 10:12

via ZeroHedge News https://ift.tt/33IWMaC Tyler Durden

Is Wearing a Face Mask in Public To Ward Off COVID-19 a Crime?

Some experts say people who are not infected by the COVID-19 virus but wear face masks in public as a prophylactic measure are behaving irrationally and maybe even irresponsibly given the dearth of such protective gear. In some states, they may also be committing a crime—yet another illustration of questionable rules highlighted by the current pandemic.

More than a dozen states generally ban the wearing of masks in public, a policy driven largely by concerns about the Ku Klux Klan. Virginia, for example, prohibits anyone older than 16 from wearing “any mask, hood or other device whereby a substantial portion of the face is hidden or covered so as to conceal the identity of the wearer” in “any public place” with “the intent to conceal his identity.” That’s a Class 6 felony, punishable by one to five years in prison.

As relevant here, the Virginia ban exempts masks worn “for bona fide medical reasons,” but only if the wearer carries a physician’s affidavit that specifies “the medical necessity for wearing the device and the date on which the wearing of the device will no longer be necessary” or if the governor “expressly waives” the prohibition while declaring a public health emergency. Virginia Gov. Ralph Northam did declare a public health emergency in response to the COVID-19 epidemic on March 12. But the declaration says nothing about the mask ban.

Florida has a similar law. It does not specify any exceptions, and it does not require an intent to conceal one’s identity. Violating the ban is a second-degree misdemeanor, punishable by up to 60 days in jail. Georgia, which also treats public mask wearing as a misdemeanor, makes exceptions for theatrical productions, masquerade balls, Mardis Gras celebrations, “traditional holiday costume on the occasion of the holiday,” masks required for a particular occupation or sporting activity, and gas masks “prescribed in emergency management drills and exercises or emergencies.”

In New York, a masked person who “congregates” in a public place with “other persons so masked” is guilty of loitering, a violation punishable by up to 15 days in jail. That 1854 law, enacted in response to violent protests by tenant farmers, includes an exemption for a properly permitted “masquerade party or like entertainment” but not for disease protection. In 2011, the New York Police Department deployed the mask ban against Occupy Wall Street demonstrators.

Since protesters often wear masks, either as a statement or as a way of protecting themselves against retaliation, these laws have obvious First Amendment implications. Some courts have deemed mask bans unconstitutional, while others have upheld them.

Although it seems unlikely that cops will start busting people for wearing face masks because they are afraid of catching COVID-19, such vague and excessively broad criminal laws give police dangerously wide discretion. A few years ago in Winchester, Virginia, for instance, local cops found the time to arrest a 31-year-old man named Jeremy Putman for walking around while disguised as The Joker.

Since Virginia’s anti-mask law includes exceptions for people wearing “traditional holiday costumes” or “engaged in any bona fide theatrical production or masquerade ball,” Putnam would have been in the clear if had done the same thing on Halloween, Purim, or Mardi Gras, or if he had been shooting a movie or performing a play. But dressing like The Joker just for the hell of it—that was a felony. Winchester police said they “received several calls” about Putman and wanted to “remind the community of the seriousness of the crime.”

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Tech Companies Weren’t Hoarding Masks, They Were Protecting Employees From Wildfire Smoke

U.S. tech companies have been donating a massive number of N95 particulate-filtering face masks to hospitals and health care workers. Holding up the old adage about no good deed going unpunished, some Americans have been lashing out at these companies.

Some of this has come in the form of hostility toward tech giants that’s better suited for government officials here. And, sure, front-line workers in this pandemic shouldn’t have to “rely on Silicon Valley for face masks.” But the fact that Silicon Valley companies are stepping up to provide supplies we lack because of government mishandling of the COVID-19 outbreak response, excessive regulations surrounding who can manufacture medical supplies, and generally poor pandemic prep from federal authorities is hardly a knock against these technology companies.

Some of the hostility has come from folks accusing tech companies of having hoarded N95 masks previously, or implying that there’s something untoward about them having all these masks “just laying around.”

Again, this ire is misplaced. Mask donations are coming from the likes of Facebook, Apple, Salesforce, Tesla, Flexport, Intel, and IBM, all headquartered or with operations in the Bay Area. That’s an area wracked with wildfires, especially these days.

Last year, California amended health regulations to require employers in certain wildfire risk areas to provide voluntary N95 respirator masks for at-risk employees. The regulation, from California’s Occupational Safety and Health Standards Board, took effect in August 2019 and is set to sunset after one year.

The types of masks mandated in California are not surgical N95 masks but those that block particles of dust, smoke, and construction byproducts. Recently, the U.S. Food and Drug Administration relaxed its rules to say that the non-surgical N95 masks were allowed to be used by health care workers and medical facilities.

Facebook CEO Mark Zuckerberg said Facebook’s reserve of masks had been “bought in case the wildfires continued.” (He also said the company is trying to source “a lot more to donate.”)

Do these donations come even remotely near to solving all our mask problems? No. But they still may save a lot of lives and prevent even more infections.

We’re going to need private businesses big and small, state and federal authorities, charitable groups, and countless individuals to work together to get through this. Now isn’t the time for the kind of reactionary, anti-markets, anti-Big Tech bias that’s still too frequently coming from both the political left and right in the wake of COVID-19.


FREE MARKETS

A federal stimulus package was hashed out in Congress yesterday, calling for $2 trillion in direct aid spending. Sen. Chuck Schumer (D–N.Y.) said the package contained “unemployment compensation on steroids.”

White House economic adviser Larry Kudlow said the total price of the economic stimulus plan will be about $6 trillion, once you factor in $4 trillion in Federal Reserve loans–making it the largest economic stimulus plan approved in U.S. history.

Stay tuned for more Reason commentary on the package later today. For now, here are some thoughts from Rep. Justin Amash (I–Vt.):

And check out Billy Binion’s Tuesday interview with Amash about the idea of cutting direct checks to all Americans.


FREE MINDS

Prisons and jails are releasing people incarcerated for nonviolent crimes as facilities face COVID-19 outbreaks. New York City Mayor Bill de Blasio plans to release 300 people from Rikers Island and at least 1,700 jail inmates have already been released in Los Angeles County.

“Thousands of elderly federal inmates are incarcerated in prisons that could become hothouses for COVID-19, and advocates and members of Congress say the Trump administration needs to take rapid action to get them out of harm’s way,” Reason‘s C.J. Ciaramella noted yesterday. “On Tuesday criminal justice groups and lawmakers on both sides of the aisle—not to mention inmates themselves—urged the Trump administration to use existing compassionate release policies, as well as mass clemency or executive orders, to free at-risk federal inmates.”

Related:Why coronavirus in jails should concern us all.”


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Stop Ignoring the Different Needs of Rural Areas and Cities Responding to COVID-19

One-size-fits-all, top-down policies are poor matches for communities of widely varying density, character, risks, and concerns. Unusually for a modern politician, Arizona Gov. Doug Ducey acknowledged this last week. When asked why he was less eager than his counterparts elsewhere to order statewide restrictions in response to the COVID-19 pandemic, Ducey answered:

We want to make decisions that protect public health first and foremost, but also take into account that we have a large state and things are different in Tombstone than they are in Tucson; they’re different in Gilbert than they are in Globe. I’m going to respect local leaders’ decisions.

As COVID-19 spreads across the country, it affects different places in different ways, with some of the starker contrasts being those between cities and rural areas. Ignoring those differences doesn’t just paper over reality; it may exacerbate existing national political tensions.

As I write, New York City is the new epicenter for COVID-19 infections in the U.S. It’s a center for international travel, drawing visitors and people on business from all over the world, with a dynamic culture and a thriving economy. The city is also very densely populated, with over eight million people concentrated so that there are 27,000 of them per square mile. Those factors make New York—the city where I was born—a prime incubator not just for ideas and prosperity, but for new diseases.

“New York is far more crowded than any other major city in the United States … All of those people, in such a small space, appear to have helped the virus spread rapidly through packed subway trains, busy playgrounds and hivelike apartment buildings,” The New York Times reported this week.

Fortunately, as befits a prosperous metropolis, New York City is also home to a long list of hospitals, many of them world-class. That doesn’t mean they won’t be overwhelmed—they’re getting slammed, with worse to come. But they’re top-notch institutions with excellent personnel and resources.

By contrast, Yavapai County, Arizona—where I now make my home—has a total population of around 232,000 people in an area half again as large as Connecticut, with 26 of them per square mile. Dispersed as they are, people in Yavapai County face less danger of infection than do the residents of urban areas. Unfortunately, that doesn’t mean the place gets to sit out the pandemic; COVID-19 is here, and my wife is masked and hoping for the best at her pediatric clinic every day. But it is less of an all-pervasive threat.

Another difference is our medical infrastructure: A thinly populated area with resources to match, Yavapai County has the Yavapai Regional Medical Center, the Verde Valley Medical Center, and a Veterans Affairs facility, for a total of fewer than 400 beds. Which is to say, like other rural areas, Yavapai County offers a lower risk of contagion, but very limited capacity for helping those who do contract COVID-19.

Looking at the characteristics of these very different worlds, and having lived in both, it’s difficult for me to imagine pandemic approaches that make equal sense for places where exposure to others is inherent in exiting an apartment as well as those where “social distancing” is life as usual.

That urban-rural difference is reflected in people’s views of the pandemic.

“The people most likely to say the disease threatens ‘day-to-day life’ in their communities are those living in urban areas in states that have seen relatively high numbers of cases,” with suburban and then rural residents lagging well behind in their perception of danger, Pew Research reported last week.

As does everything in our tribal world, this difference of opinion has political implications. Urban to suburban areas tend to be Democratic, and rural to exurban areas tend to be Republican, which is part of the reason that the country is split into warring camps. That shows in polling about COVID-19, with Pew finding many more Democrats and Democratic-leaning independents (44 percent) than Republicans and Republican-leaning independents (26 percent) seeing the virus as a threat.

Other polls find similar partisan differences, with an NPR/PBS-NewsHour/Marist poll reporting that a majority of Democrats view the virus as a “real threat” while Republicans see it as “blown out of proportion.” Likewise, a Kaiser Family Foundation poll found that 30 percent of Republicans had suffered disruptions to their lives from the virus, compared to 49 percent of Democrats.

That last poll is especially interesting, since it’s not about perceptions but experiences. It suggests that largely urban Democrats are experiencing a different pandemic than largely rural Republicans. That makes sense. By and large, the two groups live different lives, geographically and culturally distinct from one another. Their experiences in many ways are going to differ as a result; COVID-19 is just one more part of the divide.

That divide doesn’t have to be world-shaking if it’s one based on choices. To live in an urban area is to choose to experience life differently than people who live in a rural area. But that divide can be deepened and widened if it’s made worse by decisions imposed from the top without regard for differences in needs, values, and experiences.

Yet top-down and one-size-fits-all appeals to a lot of people who either don’t understand or don’t give a damn that other people live different lives.

Describing the national pause in economic activity as “worse than the problem,” President Trump says he “would love to have the country opened up and just raring to go by Easter.” He calls for a quick return to normality that might work better for some areas than for others depending on the local severity of the pandemic and people’s ability to weather a lockdown with jobs and businesses intact.

His doppelganger, Governor Andrew Cuomo of New York, insists “there should be a uniform federal standard for when cities and states should shut down commerce and schools, or cancel events.” He also wants the federal government to nationalize the production and distribution of medical supplies—a terrible idea under any circumstance, and one that’s bound to interfere with communities’ ability to find their own way through this crisis by subjecting them to decisions made far away.

Of course, Trump is playing to a Republican, heavily rural base, while Cuomo strokes his own urban, Democratic supporters. Neither seems to see any reason why the response might need to vary according to local conditions.

Let me emphasize here that I’m not a pure localist. My preference is always for addressing problems without using coercion. Nobody should get to impose their wills on others, no matter how pure they believe their motivations or how wisely informed they claim to be.

But short of leaving people alone, if government is going to do anything, it should act with respect for the differences among us—like the widely varying densities, preferences, and resources of places like New York City and Yavapai County. If political officials don’t care that “things are different in Tombstone than they are in Tucson,” they risk giving way to even more resentment and antagonism between rural and urban Americans.

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Is Wearing a Face Mask in Public To Ward Off COVID-19 a Crime?

Some experts say people who are not infected by the COVID-19 virus but wear face masks in public as a prophylactic measure are behaving irrationally and maybe even irresponsibly given the dearth of such protective gear. In some states, they may also be committing a crime—yet another illustration of questionable rules highlighted by the current pandemic.

More than a dozen states generally ban the wearing of masks in public, a policy driven largely by concerns about the Ku Klux Klan. Virginia, for example, prohibits anyone older than 16 from wearing “any mask, hood or other device whereby a substantial portion of the face is hidden or covered so as to conceal the identity of the wearer” in “any public place” with “the intent to conceal his identity.” That’s a Class 6 felony, punishable by one to five years in prison.

As relevant here, the Virginia ban exempts masks worn “for bona fide medical reasons,” but only if the wearer carries a physician’s affidavit that specifies “the medical necessity for wearing the device and the date on which the wearing of the device will no longer be necessary” or if the governor “expressly waives” the prohibition while declaring a public health emergency. Virginia Gov. Ralph Northam did declare a public health emergency in response to the COVID-19 epidemic on March 12. But the declaration says nothing about the mask ban.

Florida has a similar law. It does not specify any exceptions, and it does not require an intent to conceal one’s identity. Violating the ban is a second-degree misdemeanor, punishable by up to 60 days in jail. Georgia, which also treats public mask wearing as a misdemeanor, makes exceptions for theatrical productions, masquerade balls, Mardis Gras celebrations, “traditional holiday costume on the occasion of the holiday,” masks required for a particular occupation or sporting activity, and gas masks “prescribed in emergency management drills and exercises or emergencies.”

In New York, a masked person who “congregates” in a public place with “other persons so masked” is guilty of loitering, a violation punishable by up to 15 days in jail. That 1854 law, enacted in response to violent protests by tenant farmers, includes an exemption for a properly permitted “masquerade party or like entertainment” but not for disease protection. In 2011, the New York Police Department deployed the mask ban against Occupy Wall Street demonstrators.

Since protesters often wear masks, either as a statement or as a way of protecting themselves against retaliation, these laws have obvious First Amendment implications. Some courts have deemed mask bans unconstitutional, while others have upheld them.

Although it seems unlikely that cops will start busting people for wearing face masks because they are afraid of catching COVID-19, such vague and excessively broad criminal laws give police dangerously wide discretion. A few years ago in Winchester, Virginia, for instance, local cops found the time to arrest a 31-year-old man named Jeremy Putman for walking around while disguised as The Joker.

Since Virginia’s anti-mask law includes exceptions for people wearing “traditional holiday costumes” or “engaged in any bona fide theatrical production or masquerade ball,” Putnam would have been in the clear if had done the same thing on Halloween, Purim, or Mardi Gras, or if he had been shooting a movie or performing a play. But dressing like The Joker just for the hell of it—that was a felony. Winchester police said they “received several calls” about Putman and wanted to “remind the community of the seriousness of the crime.”

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Tech Companies Weren’t Hoarding Masks, They Were Protecting Employees From Wildfire Smoke

U.S. tech companies have been donating a massive number of N95 particulate-filtering face masks to hospitals and health care workers. Holding up the old adage about no good deed going unpunished, some Americans have been lashing out at these companies.

Some of this has come in the form of hostility toward tech giants that’s better suited for government officials here. And, sure, front-line workers in this pandemic shouldn’t have to “rely on Silicon Valley for face masks.” But the fact that Silicon Valley companies are stepping up to provide supplies we lack because of government mishandling of the COVID-19 outbreak response, excessive regulations surrounding who can manufacture medical supplies, and generally poor pandemic prep from federal authorities is hardly a knock against these technology companies.

Some of the hostility has come from folks accusing tech companies of having hoarded N95 masks previously, or implying that there’s something untoward about them having all these masks “just laying around.”

Again, this ire is misplaced. Mask donations are coming from the likes of Facebook, Apple, Salesforce, Tesla, Flexport, Intel, and IBM, all headquartered or with operations in the Bay Area. That’s an area wracked with wildfires, especially these days.

Last year, California amended health regulations to require employers in certain wildfire risk areas to provide voluntary N95 respirator masks for at-risk employees. The regulation, from California’s Occupational Safety and Health Standards Board, took effect in August 2019 and is set to sunset after one year.

The types of masks mandated in California are not surgical N95 masks but those that block particles of dust, smoke, and construction byproducts. Recently, the U.S. Food and Drug Administration relaxed its rules to say that the non-surgical N95 masks were allowed to be used by health care workers and medical facilities.

Facebook CEO Mark Zuckerberg said Facebook’s reserve of masks had been “bought in case the wildfires continued.” (He also said the company is trying to source “a lot more to donate.”)

Do these donations come even remotely near to solving all our mask problems? No. But they still may save a lot of lives and prevent even more infections.

We’re going to need private businesses big and small, state and federal authorities, charitable groups, and countless individuals to work together to get through this. Now isn’t the time for the kind of reactionary, anti-markets, anti-Big Tech bias that’s still too frequently coming from both the political left and right in the wake of COVID-19.


FREE MARKETS

A federal stimulus package was hashed out in Congress yesterday, calling for $2 trillion in direct aid spending. Sen. Chuck Schumer (D–N.Y.) said the package contained “unemployment compensation on steroids.”

White House economic adviser Larry Kudlow said the total price of the economic stimulus plan will be about $6 trillion, once you factor in $4 trillion in Federal Reserve loans–making it the largest economic stimulus plan approved in U.S. history.

Stay tuned for more Reason commentary on the package later today. For now, here are some thoughts from Rep. Justin Amash (I–Vt.):

And check out Billy Binion’s Tuesday interview with Amash about the idea of cutting direct checks to all Americans.


FREE MINDS

Prisons and jails are releasing people incarcerated for nonviolent crimes as facilities face COVID-19 outbreaks. New York City Mayor Bill de Blasio plans to release 300 people from Rikers Island and at least 1,700 jail inmates have already been released in Los Angeles County.

“Thousands of elderly federal inmates are incarcerated in prisons that could become hothouses for COVID-19, and advocates and members of Congress say the Trump administration needs to take rapid action to get them out of harm’s way,” Reason‘s C.J. Ciaramella noted yesterday. “On Tuesday criminal justice groups and lawmakers on both sides of the aisle—not to mention inmates themselves—urged the Trump administration to use existing compassionate release policies, as well as mass clemency or executive orders, to free at-risk federal inmates.”

Related:Why coronavirus in jails should concern us all.”


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Mortgage Apps Crash Most Since 2009

Mortgage Apps Crash Most Since 2009

While The Fed cut rates to zero and unleashed unprecedented QE and backstops, mortgage rates have spiked in the last two weeks…

Source: Bloomberg

So much for “helping Main Street.” Amid COVID-19 shutdowns and quarantines and related financial turmoil, general anxiety has taken the shine off a renaissance in the housing market as mortgage applications crashed 29.4% week-over-week – the biggest weekly drop since the financial crisis.

Source: Bloomberg

Home-purchase applications dropped by 14.6% while refinancing applications plummeted 33.8%…

Source: Bloomberg

As Bloomberg notes, the decline in applications is an early sign suggesting home sales will slow and that refinancings are coming off a spike. That follows other data indicating a precipitous dropoff in business activity this month as stores and schools shutter to prevent the spread of the virus.

Source: Bloomberg

And with mREITs collapsing left and right, amid margin calls and liquidity chaos which sparked a massive decoupling between mortgage rates and Treasuries, one wonders, aside from MOAR unprecedented-er action by The Fed to buy more mortgages and reliquify those that borrowed short to lend long…

Source: Bloomberg

After all, we live in bailout nation – so why not?


Tyler Durden

Wed, 03/25/2020 – 10:11

via ZeroHedge News https://ift.tt/2QLpmCV Tyler Durden

Despite QEternity & “Record” Bailout-Bill, The US Dollar Shortage Is Intensifying…

Despite QEternity & “Record” Bailout-Bill, The US Dollar Shortage Is Intensifying…

Dear Jay Powell, you have a problem…

Despite unprecedented actions by The Fed:

The FOMC expanded its large scale asset purchase program by promising to purchase ‘in the amounts needed.’ Previously, the FOMC had said it would purchase at least $500bn of Treasury securities and at least $200bn of agency MBS. The FOMC also announced that the agency MBS purchases will include agency commercial MBS.

The Fed also made CPFF more generous in terms of pricing and opened CPFF and MMLF to a wider set of assets.

The Board of Governors relaunched the Term Asset-Backed Securities Loan Facility (TALF), providing loans in exchange for ABS.

Two novel facilities are the Primary Market Corporate Credit Facility (PMCCF) and the Secondary Market Corporate Credit Facility (SMCCF). We are likely to see an increased contribution by the Treasury Department to these facilities once the big fiscal stimulus has been signed.

The dollar funding crisis is rapidly re-accelerating as month-end looms… having erased all of the ‘improvement’ offered by The Fed…

Source: Bloomberg

So, the question is simple – How can the Fed launch an “unlimited” monetary stimulus with congress approving a $2 trillion package and the dollar index remain strong?

The answer, as Daniel Lacalle details below, lies in the rising global dollar shortage, and should be a lesson for monetary alchemists around the world.

The $2 trillion stimulus package agreed by Congress is around 10% of GDP and, if we include the Fed borrowing facilities for working capital, it means $6 trillion in liquidity for consumers and firms over the next nine months.

The stimulus package approved by Congress is made up of the next key items: Permanent fiscal transfers to households and firms of almost $5 trillion. Individuals will receive a $1,200 cash payment ($300 billion in total). The loans for small businesses, which become grants if jobs are maintained ($367 billion). Increase in unemployment insurance payments which now cover 100% of lost wages for four months ($200 billion). $100 billion for the healthcare system, as well as $150bn for state and local governments. The remainder of the package comes from temporary liquidity support to households and firms, including tax delays and waivers. Finally, the use of the Treasury’s Exchange Stabilization Fund for $500bn of loans for non-financial firms.

To this, we must add the massive quantitative easing program announced by the Fed.

First, we must understand that the word “unlimited” is only a communication tool. It is not unlimited. It is limited by the confidence and demand of US dollars.

I have had the pleasure of working with several members of the Federal Reserve, and the truth is that it is not unlimited. But they know that communication matters.

FED BALANCE SHEET 25TH MARCH 2020

The Federal Reserve has identified the Achilles heel of the world economy: the enormous global shortage of dollars. The global dollar shortage is estimated to be $ 13 trillion now, if we deduct dollar-based liabilities from money supply including reserves.

How did we reach such a dollar shortage? In the past 20 years, dollar-denominated debt in emerging and developed economies, led by China, has exploded. The reason is simple, domestic and international investors do not accept local currency risk in large quantities knowing that, in an event like what we are currently experiencing, many countries will decide to make huge devaluations and destroy their bondholders.

According to the Bank of International Settlements, the outstanding amount of dollar-denominated bonds issued by emerging and European countries in addition to China has doubled from $30 to $60 trillion between 2008 and 2019. Those countries now face more than $2 trillion of dollar-denominated maturities in the next two years and, in addition, the fall in exports, GDP and the price of commodities has generated a massive hole in dollar revenues for most economies.

If we take the US dollar reserves of the most indebted countries and deduct the outstanding liabilities with the estimated foreign exchange revenues in this crisis … The global dollar shortage may rise from 13 trillions of dollars in March 2020 to $ 20 trillion in December … And that is if we do not estimate a lasting global recession.

China maintains $3 trillion of reserves and is one of the best-prepared countries, but still, those total reserves cover around 60% of existing commitments. If export revenues collapse, dollar scarcity increases. In 2019, Chinese issuers increased their dollar-denominated debt by $ 200 billion as exports slowed.

Gold reserves are not enough. If we look at the main economies’ gold reserves, they account for less than 2% of money supply. Russia has the largest gold reserves vs money supply. China’s gold reserves: 0.007% of its money supply (M2), Russia’s gold reserves: c9% of its money supply. As such, there is no “gold-backed” currency in the world, and the best protected -in gold- the Ruble, suffers the same volatility in commodity slump and recession times as others due to the same issue of US dollar scarcity, although not even close to the volatility of those LatAm countries that face both falling US dollar reserves and a collapse in demand from their own citizens of their domestic currency (as Argentina)..

The Federal Reserve knows that it has the largest bazooka at its disposal because the rest of the world needs at least $ 20 trillion by the end of the year, so it can increase the balance sheet and support a large deficit increase of $10 trillion and the US dollar shortage would remain.

The US dollar does not weaken excessively because the rest of the countries are facing a huge loss of reserves while at the same time increasing their monetary base in local currency much faster than the Federal Reserve, but without being a global reserve currency.

Second, the accumulation of gold reserves of the central banks of the past years has been more than offset in a few months by the increase in the monetary base of the world-leading countries. In other words, the gold reserves of many countries have increased but at a much slower rate than their monetary base.

The Federal Reserve knows something else: In the current circumstances and with a global crisis on the horizon, global demand for bonds from emerging countries in local currency will likely collapse, far below their financing needs. Dependence on the US dollar increases. Why? When hundreds of countries try to copy the Federal Reserve printing and cutting rates without having the legal, investment and financial security of the United States, they fall into the trap that I comment in my book Escape from the Central Bank Trap (BEP): ignoring the true demand for their domestic currency.

A country cannot expect to have a global reserve currency and maintain capital controls and investment security gaps at the same time.

The ECB will likely understand this shortly when the huge trade surplus that supports the euro collapses in the face of a crisis. Japan learned that lesson by turning the yen into a currency backed by huge dollar savings and increased its legal and investment security to the standards of the US or UK, despite its own monetary madness.

The race to zero of central banks in their monetary madness is not to see who wins, but who loses first. And those that fail are always the ones who play at being the Fed and the US without their economic freedom, legal certainty, and investor security.

The Federal Reserve can be criticized, and rightly so, for its monetary madness, but at least it is the only central bank that truly analyzes the global demand for US dollars and knows that its money supply must increase a lot less than its total currency demand. In reality, the Fed QE is not unlimited, it is limited by the real demand for US currency, something that other central banks ignore or prefer to forget. Can the US dollar lose its global reserve position? Sure it can, but never to a country that decides to commit the same monetary follies as the Fed without their analysis of real demand for the currency they manage.

This should be a lesson for all countries. If you fall into the trap of playing reserve currency and endless printing without understanding demand, your US dollar dependence will intensify.


Tyler Durden

Wed, 03/25/2020 – 09:55

via ZeroHedge News https://ift.tt/2UhgLtR Tyler Durden

Details Of $2 Trillion Coronavirus Stimulus Package Emerge

Details Of $2 Trillion Coronavirus Stimulus Package Emerge

While it will take some time to sort through all the pork contained in the massive $2 trillion coronavirus legislation negotiated between the Trump administration and Congressional leaders early Wednesday, here are some of the major provisions via Bloomberg.

The bill – which still needs to be passed by the Senate and the House – provides direct help to citizens, businesses, hospitals and state and local governments. According to the report, a vote could come in the Senate as soon as today.

According to Senate Minority Leader Chuck Schumer (D-NY), checks would be cut April 6.

Key provisions via Bloomberg:

  • Big Businesses: About $500 billion can be used to back loans and assistance to companies, including $50 billion for loans to U.S. airlines, as well as state and local governments.
  • Small Businesses: More than $350 billion to aid small businesses, including $10 billion in SBA grants of up to $10,000 for small business costs, and $17 billion for SBA to cover six months of payments for businesses with current SBA loans.
  • Hospitals: A $150 billion boost for hospitals and other health-care providers for equipment and supplies.
  • Individuals: Direct payments to lower- and middle-income Americans of $1,200 for each adult, as well as $500 for each child.

Unemployment insurance would be extended to four months, and increased to $600 per week. More workers will be eligible for coverage.

There will also be $30 billion in emergency education funding, $25 billion in transit funding, and $30 billion for the Disaster Relief fund.

Restrictions include:

  • Any company receiving a government loan would be subject to a ban on stock buybacks through the term of the loan, plus an additional year.
  • Executive bonuses will be limited.
  • Steps to safeguard workers must be taken, and a tax credit will encourage employers to keep workers on the payroll.
  • A ban on funds for any company controlled by President Trump or his children, as well as any owned by Vice President Mike Pence, any members of Congress, or heads of executive departments. It will extend to companies controlled by their children, spouses, or in-laws according to Bloomberg.

We will provide more details from the bill as they become available.

Looking ahead to the next round:


Tyler Durden

Wed, 03/25/2020 – 09:42

via ZeroHedge News https://ift.tt/3ae6m7T Tyler Durden

Blain: Is This The Moment To Buy?

Blain: Is This The Moment To Buy?

Blain’s Morning Porridge, submitted by Bill Blain,

Hammersmith Palais, the Bolshoi Ballet, being rather silly and Porridge Oats..”

This morning I have sniffles, a runny nose, I’m sneezing, and I’ve got a stonking headache. I’m certain it’s not the Wuhan flu – the symptoms started soon after I got back from a really fun cycle through the local woods. Its more likely the start of my annual bout with Spring Hay Fever. I am now overdosed on anti-histamines and feel like going back to bed… 

Instead I shall persevere with this morning’s comment!  My sniffles this morning are not a harbinger of doom, but a reminder of normality…..

Things might be better than we think!

It’s difficult to argue with the biggest (10% plus) meltup in stock prices since 1933. It only cost $2 trillion in Government support measures (finally agreed late last night) and the Fed’s QE Infinity on Monday, to put some $3 trillion back onto the value of US stocks y’day. A bargain…! No doubt the market will soar again today as it digests the US plan in detail. No one wants to be late to a rally!

Is it the moment to buy? There are definitely opportunities out there, but don’t get carried away… Yet!

There will still be real damage to factor into prices. We have still to feel the pain of Q1 and Q2 earnings and national economic numbers – which will be frightful. And we have not seen health services in the US and UK exposed to the full trauma of the Coronavirus – which is going to shock us all. We reckon in about 17 days time… 

And then there will be longer term damage to the economy. Even UK wunderkind Chancellor Rishi Sunak admitted the UK can’t save every business. Global supply chains are still pressured and could take months to restore. There will be defaults and we expect to see a significant rise in downgrades, plunging more uncertainty into corporate bonds as first firesales sales of Fallen Angels occur. The knock-on effects of low oil prices on US shale producers will be rock the US system.

Even a best-case guess suggests the consequences of the Coronavirus will be devastating. You can’t get away from it. 

But..  

It’s increasingly clear there is light at the end of the Covid-19 tunnel. Strict lockdown, a focus on hygiene and disinfection, aggressive testing and a massive contact tracing effort seems to have kept transmissions low, and kept new clusters from breaking out in China. The shops are reopening – even in Wuhan itself. In Korea the rise of the virus looks to have been similarly controlled. Other countries in Asia probably benefited from climate and weather – but the rules seem simple:

· When the virus strikes, put strict social distancing in place as quickly as possible to get R down to zero. R is the critical number – the transmission rate, the number of people an infected person infects. We’ve assumed that is between 2 and 3 is a normal economy. The Chinese imposed draconian controls right at the start of the virus, and made a massive effort on hygiene – hand washing and masks (ineffective though they be). They got the R number down to 0.32. That is very strict indeed – and it effectively slowed the infection curve.

It worked – look at the new cases infection line – it was flattening at a far earlier stage than we now see in the curves in the West. Italy is still aggressively rising at a stage where China was beginning to flatten.   

As China reopens they have relaxed the “R number” containment rules, allowing people back to work where necessary if they can’t work from home, maintaining bans on social gathering, and generally trying to keep R below 1. At this stage, the economy starts working again. Eventually, everyone will get to that point.

However, there may be even more positive news.

The critical problem has been knowledge of how many people have the disease – lack of testing means we just don’t really know.

The authorities have been using the limited number of testing kits to test those showing symptoms of the disease, and then those who had contact with carriers – which skews the models. The results of these tests gave us estimates on mortality rates, those likely to be lightly affected, seriously affected and hospitalised. 

But, there was no general testing of the whole population. It would have been impossible with the testing facilities available. 

The anecdotal evidence, including Cabinet Ministers returning to post, and the fact there has been no widespread testing, supports the notion the observed number of people currently in hospitals is way below what we’d expect if we’ve been getting successive infections from China since early January. It doesn’t mean the hospitals won’t still be swamped, but there are fewer people in the ICU wards than we might have expected based on what we suspect the real infection rate is. 

It’s very probable there are far more people infected than the limited testing suggests, which means the disease has a lower mortality rate than we thought. It means more people have probably had it and shrugged it off.  

Yesterday, a large number of readers sent me the “Coronavirus may have infected half of UK population – Oxford study” from the FT.  If it’s right, it could be a real game changer, and mean lockdown can be ended sooner, and the economy kickstarted, perhaps within weeks rather than months. (However, it is based on a very basic and simple epidemic model.)

Rather than only 1/1000 people being hit by Coronavirus so far – the rough number from Italy cases/population, if the virus has spread far more widely, with most people showing no symptoms and those who do suffer having something akin to a light cold, then the reason we aren’t seeing new clusters constantly igniting is because its already so prevalent in the population – who have considerable immunity!

My chums at modelling experts Neuron Capital suggest the key to buying into the Oxford results is that the virus is much less dangerous than assumed by the Imperial team’s study released last week – which triggered Boris Johnson to step up the cumulative lockdown of the UK.  

If the Oxford Study is correct – and it has not yet been tested – and 50% of the population are already immune, then it would validate the assumption in their model that only 0.1% of the population are at risk. By contrast, if we think that the virus is more dangerous, for example with a mortality rate of 3.4%, then it would suggest less than 2% of the UK population has so far contracted the virus. 

Neuron’s modelling suggests that if the world looks more like the assumptions underpinning the Imperial model then we might expect there are currently about around 5% of the population currently infected.

The bottom line is that if the infection rate is much higher, then we will still need lockdown now to protect the health service from crashing due to a wave of very ill patients. But subsequently, we can worry less about subsequent Fat Tail waves of infection. The sensitivity of the assumptions are very important, but will become apparent in coming days as the infection peaks and testing becomes more prevalent. 

It’s a good reason to have multiple different models analysing the crisis. But… somehow the Oxford study makes me feel a little more confident this morning… 


Tyler Durden

Wed, 03/25/2020 – 09:25

via ZeroHedge News https://ift.tt/3dveDWY Tyler Durden