The Price of an Erratic President

Perhaps the strangest thing about the story that President Donald Trump has expressed interest in using nuclear bombs to stop hurricanes was that it didn’t seem all that strange. Almost no one thought to ask “Can you believe it?” because almost everyone automatically did, while simultaneously acknowledging that in reality, no such intervention would be tried.

So instead of sustained incredulity, there were jokes, and a few #WellActuallys, and eventually Trump himself declared that the story was fake news. But for the most part, the story, first reported by Axios, came and went with the daily tides of Twitter conversation. Trump wants to deploy nuclear weapons to stop summer storms? Wild stuff! 2019, right? Moving on.

One way to understand this is as a basically healthy reaction to the brainfarts of a particularly brainfart-prone president, one who thinks out loud—or online—and who indulges a variety of odd obsessions that rarely become actual policy. Both in public and in private, Trump has a habit of floating half-baked bad ideas that are unlikely to ever be implemented. For many people, constantly worrying about the small chance that they one day might happen is simply too exhausting to keep up.

Yet in another way, the nuke-the-hurricanes episode was a reminder of the ways Trump’s erratic personal behavior has led to a widespread acceptance of presidential ideas that are not only kooky but dangerous, or at least rather risky, even if those ideas are nearly certain to remain unimplemented.

Take, for example, Trump’s declaration last week that American companies “are hereby ordered to immediately start looking for an alternative to China.” This was a presidential “order” that also wasn’t obviously an order in any official sense; it came with no proposed timeline, no potential penalties, and no legally enforceable procedure to back it up. And yet both White House aides and Trump himself nonetheless argued that it could become one if the president were so inclined.

In theory, the argument went, Trump could use the International Emergency Economic Powers Act (IEEPA) of 1977 to declare a state of emergency, expanding the powers granted to the executive, potentially giving him the authority to order U.S. businesses to cease operations in China. Experts disagree about whether the IEEPA could plausibly justify such an order. But it’s fair to say that using it in the way Trump has suggested would be clearly unprecedented and arguably abusive, and that it would almost certainly end up in court.

Still, it is at least possible to imagine a scenario in which Trump finds legal cover for such an order. The result, in turn, would be vast and unpredictable economic consequences for both the American economy and the international order, as two economic superpowers turned a series of economic skirmishes into an all-out economic war. It’s hard to say exactly how it would play out, but as one manufacturer told The New York Times last week, a mandatory exit of U.S. businesses from China “could cause a global depression, not recession.”

Yet just as most people reasonably assume that Trump probably won’t try using nuclear weapons to manage bad weather, few, I suspect, worry that he would ever really try to compel American businesses to fully cut economic ties with another country. It’s an idle threat made by a president with a penchant for bluster, and no more—and thus about as easy to ignore as the idea of deploying a nuclear deterrent against a hurricane.

Or at least that’s what we hope, because the problem with Trump is that it’s almost impossible to ever be fully certain that he won’t eventually pursue his wilder ideas, to be confident that he won’t one day pick up his phone and tweet out an order to pull out of China’s economy that is an actual order, backed up by the force and power of the federal government. This is especially true when it comes to trade and immigration, where Trump has proven willing to act in ways that predecessors of both parties probably would have avoided.

The result is generalized political and economic instability, and a pervasive precariousness to American life. This helps feed more exotic, conspiracy-adjacent theories about Trump himself. And over time, it may well take a serious toll on the American economy. Indeed, some economic consequences are already being felt. Trump’s announcement of tariff hikes last week, combined with his threats against both China and the U.S. Federal Reserve, rattled already jittery markets, sending stocks to their fourth weekly loss in a row.

The point isn’t merely that Trump shouldn’t be playing weatherman with the world’s biggest nuclear arsenal (although he shouldn’t), or that tariffs and trade wars are bad news for the economy (although they are). It’s that Trump’s mercurial behavior, and the lingering possibility that he might try to follow through on one of his more eccentric ideas, exacts a regular low-level toll on our fortunes. He is a constant source of economic and political uncertainty. And that uncertainty, even in the absence of actual action, is bad enough. It makes it harder for businesses to plan future operations, harder for ordinary Americans to plan their retirements, and harder for America’s allies on the international stage to work together.

So no, Trump probably won’t nuke a hurricane, and no, he probably won’t force American companies to stop operating in China, just as he didn’t ever completely close the border with Mexico, despite his threat to do so. Which means that no, you probably shouldn’t spend too much time worrying about the possibility that he might do any of these things, or whatever harebrained idea he tweets out tomorrow. But there’s a lot riding on all those “probably”s, and on the slim-but-real chance that one day a he-probably-won’t will somehow become an actually-he-did. And that alone is cause enough for concern. 

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Elizabeth Warren’s Pitch for ‘Economic Patriotism’ Is Full of Intellectual Dishonesty and Economic Fallacies

Sen. Elizabeth Warren (D–Mass.) is promising to protect Americans from the scourge of…pencils?

In a new video posted to Twitter over the weekend, the presidential candidate promises to create a new federal agency that would expand on the protectionist measures undertaken by Donald Trump. She’s even borrowing Trumpian rhetoric for the project, which she calls “economic patriotism,” as she promises that a Warren administration would put the interests of American workers first.

Warren’s attack on corporations that supposedly harm Americans by shifting jobs overseas is full of intellectual dishonesty and economic fallacies. Rather than making a case for greater government involvement in the corporate boardrooms of America, the video succeeds only at highlighting how misinformed and misguided such interventions are, regardless of whether they are executed by Trump or Warren.

“There are a lot of giant companies who like to call themselves ‘American,’ but face it: they have no loyalty or allegiance to America,” she says in the video.

As proof, Warren points to the “famous no. 2 pencil,” which is mostly manufactured in Mexico and China. Her video doesn’t make clear why pencils should have to be made in America—or why that lack of good, pencil-making jobs in America is a problem.

That Warren chose to use pencils to illustrate the supposed need for “economic patriotism” is darkly hilarious to anyone familiar with “I, Pencil,” the Lawrence Reed’s 1958 parable about the merits of free markets and comparative advantage. Reed’s lesson is that no one on the planet has the means or knowledge to make an item as mundane and ubiquitous as a simple pencil. A pencil requires wood, graphite, brass, and rubber, but each component part is the result of supply chains that might stretch around the world—from the forests of the Pacific Northwest to the mines of Mexico to the factories of Indonesia.

“Neither the worker in the oil field nor the chemist nor the digger of graphite or clay nor any who mans or makes the ships or trains or trucks nor the one who runs the machine that does the knurling on my bit of metal nor the president of the company performs his singular task because he wants me,” Reed wrote in the role of the eponymous pencil. “Each one wants me less, perhaps, than does a child in the first grade.”

And yet we have pencils. Tons of them. Not only that, but the process for obtaining and combining those various component parts is so efficient—despite “the absence of a master mind” directing all those activities, Reed notes—that you can buy dozens of pencils for no more than a few dollars. The simple pencil is a miracle of the modern world, and of trade that crisscrosses national borders.

What is true about pencils is true about almost everything else you buy too. There’s not really any such thing as an “American” or “foreign” automobile anymore. Not when the world’s biggest BMW plant is in South Carolina, and when the assembly line for a single car seat might zig-zag across the U.S.-Mexico border five or six times. The iPhone is engineered in the United States, is manufactured in China, and contains components sourced all over the world.

That Warren fails to grasp this—or that she cynically believes voters don’t grasp it—makes her no better than Trump when it comes to trade policy. Indeed, Trump’s use (and abuse) of executive power to implement his own myopic and self-defeating trade policies may have only paved the way for a more competent protectionist like Warren, if she ends up in the White House.

It’s worth noting that Warren’s proposal for a new federal department to oversee her “economic patriotism” scheme would potentially streamline some government functions. She says the new Department of Economic Development would replace the Commerce Department and “a handful of other government agencies.” Consolidation of the federal bureaucracy can be a good way to root out unnecessary overlap between existing agencies, but this seems like an effort at reorganizing a bunch of things the feds shouldn’t be doing in the first place.

Beyond that, there’s little truth to the claim that American manufacturing has been hollowed out by trade. Foreign investment in American manufacturing reached record highs in 2018, and American manufacturing output has tripled since 1980.

Warren’s proposal smacks of a disingenuous attack on the benefits of free markets, with Warren trying—and failing—to make American corporations seem like a foreign threat.

“The truth is,” she claims in the video,” these American companies have only one real loyalty, and that’s to their shareholders, a third of whom are foreign investors.”

What about other two-thirds of those shareholders Warren is trying to demonize? Well, they would be Americans, of course.

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Elizabeth Warren’s Pitch for ‘Economic Patriotism’ Is Full of Intellectual Dishonesty and Economic Fallacies

Sen. Elizabeth Warren (D–Mass.) is promising to protect Americans from the scourge of…pencils?

In a new video posted to Twitter over the weekend, the presidential candidate promises to create a new federal agency that would expand on the protectionist measures undertaken by Donald Trump. She’s even borrowing Trumpian rhetoric for the project, which she calls “economic patriotism,” as she promises that a Warren administration would put the interests of American workers first.

Warren’s attack on corporations that supposedly harm Americans by shifting jobs overseas is full of intellectual dishonesty and economic fallacies. Rather than making a case for greater government involvement in the corporate boardrooms of America, the video succeeds only at highlighting how misinformed and misguided such interventions are, regardless of whether they are executed by Trump or Warren.

“There are a lot of giant companies who like to call themselves ‘American,’ but face it: they have no loyalty or allegiance to America,” she says in the video.

As proof, Warren points to the “famous no. 2 pencil,” which is mostly manufactured in Mexico and China. Her video doesn’t make clear why pencils should have to be made in America—or why that lack of good, pencil-making jobs in America is a problem.

That Warren chose to use pencils to illustrate the supposed need for “economic patriotism” is darkly hilarious to anyone familiar with “I, Pencil,” the Lawrence Reed’s 1958 parable about the merits of free markets and comparative advantage. Reed’s lesson is that no one on the planet has the means or knowledge to make an item as mundane and ubiquitous as a simple pencil. A pencil requires wood, graphite, brass, and rubber, but each component part is the result of supply chains that might stretch around the world—from the forests of the Pacific Northwest to the mines of Mexico to the factories of Indonesia.

“Neither the worker in the oil field nor the chemist nor the digger of graphite or clay nor any who mans or makes the ships or trains or trucks nor the one who runs the machine that does the knurling on my bit of metal nor the president of the company performs his singular task because he wants me,” Reed wrote in the role of the eponymous pencil. “Each one wants me less, perhaps, than does a child in the first grade.”

And yet we have pencils. Tons of them. Not only that, but the process for obtaining and combining those various component parts is so efficient—despite “the absence of a master mind” directing all those activities, Reed notes—that you can buy dozens of pencils for no more than a few dollars. The simple pencil is a miracle of the modern world, and of trade that crisscrosses national borders.

What is true about pencils is true about almost everything else you buy too. There’s not really any such thing as an “American” or “foreign” automobile anymore. Not when the world’s biggest BMW plant is in South Carolina, and when the assembly line for a single car seat might zig-zag across the U.S.-Mexico border five or six times. The iPhone is engineered in the United States, is manufactured in China, and contains components sourced all over the world.

That Warren fails to grasp this—or that she cynically believes voters don’t grasp it—makes her no better than Trump when it comes to trade policy. Indeed, Trump’s use (and abuse) of executive power to implement his own myopic and self-defeating trade policies may have only paved the way for a more competent protectionist like Warren, if she ends up in the White House.

It’s worth noting that Warren’s proposal for a new federal department to oversee her “economic patriotism” scheme would potentially streamline some government functions. She says the new Department of Economic Development would replace the Commerce Department and “a handful of other government agencies.” Consolidation of the federal bureaucracy can be a good way to root out unnecessary overlap between existing agencies, but this seems like an effort at reorganizing a bunch of things the feds shouldn’t be doing in the first place.

Beyond that, there’s little truth to the claim that American manufacturing has been hollowed out by trade. Foreign investment in American manufacturing reached record highs in 2018, and American manufacturing output has tripled since 1980.

Warren’s proposal smacks of a disingenuous attack on the benefits of free markets, with Warren trying—and failing—to make American corporations seem like a foreign threat.

“The truth is,” she claims in the video,” these American companies have only one real loyalty, and that’s to their shareholders, a third of whom are foreign investors.”

What about other two-thirds of those shareholders Warren is trying to demonize? Well, they would be Americans, of course.

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Johnson & Johnson Ordered To Pay $572 Million In Landmark Opioid Trial

In the first of potentially thousands of verdicts against pharmaceutical companies accused of inciting the opioid epidemic, an Oklahoma judge on Monday ruled that Johnson & Johnson must pay a $572 million penalty for allegedly helping to fuel the opioid epidemic with irresponsible marketing practices, Reuters reports.

Judge Thad Balkman, of Cleveland County District Court in Norman, Oklahoma issued the ruling shortly after 4 pm ET on Monday. The penalty was only a fraction of the roughly $17 billion that the plaintiffs had been seeking, helping send J&J shares rocketing higher in the after-hours session.

The case, brought by Oklahoma Attorney General Mike Hunter, is the first out of potentially thousands of lawsuits filed by state and local governments against opioid manufacturers and distributors that could go to trial. Only a few cases have been settled, according to Bloomberg. The case is critical, legal experts say, because it will provide defendants with a clearer benchmark for what they can expect.

If J&J loses, Hunter hopes to use the money to help Oklahoma mitigate the fallout from the opioid epidemic over the next three decades by funding treatment and prevention programs.

The trial was held after Oklahoma resolved claims against OxyContin maker Purdue Pharma in March for $270 million, and against Teva Pharmaceutical Industries in May for $85 million, leaving J&J as the lone major defendant.

The seven-week, non-jury trial has been closely watched by plaintiffs and defendants in some 2,000 opioid lawsuits pending before a federal judge in Ohio. The judge has been pushing for a settlement ahead of an October trial.

Lawyers for the state of Oklahoma argued that J&J conducted a years-long marketing campaign that minimized the drug’s addictive qualities. J&J has denied wrongdoing, and insisted that Oklahoma’s case rest

via ZeroHedge News https://ift.tt/2U539QI Tyler Durden

Google Cracks Down on Employees’ Political Speech

Google is attempting to curtail its employees’ workplace speech on political subjects. This is a departure from the company’s previous policy of openness to political speech, and it is likely a result of conservatives’ persistent claims that Google is biased against them.

This should serve as a warning for the right: Attacking tech companies for perceived bias toward conservatives—and explicitly threatening government intervention—is likely to make the companies default toward even more censorship.

News of Google’s change of heart with respect to internal speech comes from Recode‘s Shirin Gaffary, who writes:

Google has long been known for allowing and even encouraging employees to debate and organize around controversial topics, including its product launches and national politics. That’s caused problems for the company, particularly as it’s scaled in size in an increasingly polarized political climate.

Shortly after President Trump was elected in 2016, Google co-founder Sergey Brin said in an all-hands company meeting that he found the election “deeply offensive” as “an immigrant and a refugee.” He remarked that “many people apparently don’t share the values that we have.” Almost two years later, Breitbart News leaked video of that meeting, fueling conservative claims (including from President Trump himself) that the company is biased against Republicans.

Under the new policies, Google employees will be prevented from making statements that “insult, demean, or humiliate” the company’s employees, business partners, or “others”—including public figures. A Google spokesperson confirmed to Recode that those public figures would include elected officials such as Trump.

Employees won’t be allowed to engage in heated political debates that, for example, encourage or organize employees to vote for or against a specific candidate.

Many on the right were upset about the firing of James Damore, who penned an internal memo criticizing the company’s diversity measures. I can understand and even sympathize with some of these gripes—yes, many Big Tech companies are disproportionately staffed and run by progressives, who take a less favorable view of conservative speech than liberal speech—but putting the fear of God (or, worse, the federal government) into them may very well backfire.

When Google, Facebook, or Twitter employees discussing how much they dislike President Donald Trump is treated as proof of bias, the companies will have an incentive to crack down on all political speech. They are private entities, and they have the right to set whatever policies regarding employee speech that they think are more conducive to a healthy workplace—but the public freakout over their alleged biases might well tip the scales in the direction of less speech, period.

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Stocks Jump On Trump-Pump But Yield Curve Inverts Most In Over 12 Years

“Talk, Talk” is what sparked a furious 700-Dow-point pumpathon off overnight lows. The question is – did they?

Chinese stocks closed before Trump jawboned markets higher, catching down to Friday’s US collapse…

Source: Bloomberg

European stocks opened lower but ramped like every other risk asset on Trump hype about a “call” with China (UK was closed)…

Source: Bloomberg

 

US equities managed gains thanks to Trump’s trade talk tales overnight but went nowhere intraday…

NOTE – look at the close!!!

 

But remain well down from Thursday’s close…

 

Volume was over 20% below average (not helped with UK’s holiday)

Source: Bloomberg

Futures show the real action as algos lifted markets overnight then snapped higher when Trump talked of “talks”… BUT The Dow could not break above its 61.8% retracement of the Friday plunge…

 

The Dow bounced off its 200DMA…again

 

Notably, the odds of a trade deal spiked at the open but rapidly fell back as the day wore on…

Source: Bloomberg

 

Treasury bonds ended marginally higher on the day as the initial yield collapse was ramped higher across Europe’s open (UK closed)…

Source: Bloomberg

Crazy shifts in yields (UK was closed) left 10Y and 30Y (back below 2.00%) marginally unchanged after plunging in Asia…

Source: Bloomberg

But the yield curve collapsed (2s10s closed at its most inverted since May 2007)… 3rd day of closing inversion in a row…

Source: Bloomberg

But it’s the 3m10Y spread that matters most and that has also collapsed to new cycle lows…

Source: Bloomberg

Treasury vol exploded higher…

Source: Bloomberg

The Dollar surged back today, erasing Fib 61.8% of the Friday plunge…

Source: Bloomberg

Turkish Lira flash-crashed an unreal 15% at the open (not seen in chart) but bounced back to still end significantly weaker on the day…

Source: Bloomberg

A stunning plunge in the yuan at the open saw some bounce (very modestly stronger fix) but that faded as the day went on…

Source: Bloomberg

Asian FX plummeted to its lowest since 2009…

Source: Bloomberg

Cryptos spiked overnight but faded all day to end lower from Friday…

Source: Bloomberg

But Bitcoin held above $10k…

Source: Bloomberg

Commodities were crazy today with copper and gold mirroring each other, silver shrugging it all off as crude crumbled…

Source: Bloomberg

 

WTI tumbled to a $52 handle briefly overnight, before algos ripped it up to erase Friday’s loss, before it dumped all the way back down (reportedly in possible US-Iran tension easing)…

 

Gold managed to hold on to very modest gains after being dumped at the EU open (as Trump spoke) – after spiking above $1560 in Futs and $1550 spot…

Silver, on the other hand, was up well over 1%, refusing to listen to Trump…

Pushing Silver to dramatically outperform gold on the day…

Source: Bloomberg

As Yuan continues to weaken against the barbarous relic…

Source: Bloomberg

Finally, as Bloomberg’s Vincent Cignarella notes, the “McCulley Indicator” is rolling over. In markets speak, that means that the Capital Goods New Orders Non-defense Ex Aircraft & Parts series has been falling since November 2017 and is currently at 0.3%. (The measure is named for former PIMCO managing director Paul McCulley, who viewed it as a recession indicator.)

Source: Bloomberg

Over the last 20 years, when the data print has crossed below zero on a three-month Y/Y basis, a recession has followed.

via ZeroHedge News https://ift.tt/2LcPV06 Tyler Durden

Google Cracks Down on Employees’ Political Speech

Google is attempting to curtail its employees’ workplace speech on political subjects. This is a departure from the company’s previous policy of openness to political speech, and it is likely a result of conservatives’ persistent claims that Google is biased against them.

This should serve as a warning for the right: Attacking tech companies for perceived bias toward conservatives—and explicitly threatening government intervention—is likely to make the companies default toward even more censorship.

News of Google’s change of heart with respect to internal speech comes from Recode‘s Shirin Gaffary, who writes:

Google has long been known for allowing and even encouraging employees to debate and organize around controversial topics, including its product launches and national politics. That’s caused problems for the company, particularly as it’s scaled in size in an increasingly polarized political climate.

Shortly after President Trump was elected in 2016, Google co-founder Sergey Brin said in an all-hands company meeting that he found the election “deeply offensive” as “an immigrant and a refugee.” He remarked that “many people apparently don’t share the values that we have.” Almost two years later, Breitbart News leaked video of that meeting, fueling conservative claims (including from President Trump himself) that the company is biased against Republicans.

Under the new policies, Google employees will be prevented from making statements that “insult, demean, or humiliate” the company’s employees, business partners, or “others”—including public figures. A Google spokesperson confirmed to Recode that those public figures would include elected officials such as Trump.

Employees won’t be allowed to engage in heated political debates that, for example, encourage or organize employees to vote for or against a specific candidate.

Many on the right were upset about the firing of James Damore, who penned an internal memo criticizing the company’s diversity measures. I can understand and even sympathize with some of these gripes—yes, many Big Tech companies are disproportionately staffed and run by progressives, who take a less favorable view of conservative speech than liberal speech—but putting the fear of God (or, worse, the federal government) into them may very well backfire.

When Google, Facebook, or Twitter employees discussing how much they dislike President Donald Trump is treated as proof of bias, the companies will have an incentive to crack down on all political speech. They are private entities, and they have the right to set whatever policies regarding employee speech that they think are more conducive to a healthy workplace—but the public freakout over their alleged biases might well tip the scales in the direction of less speech, period.

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“Pet Rock” Indeed: Bank of America Says Buy Gold As Central Banks Lose Control

What a difference a few years makes. Back in the summer of 2015, a WSJ op-ed writer,  who somehow was unaware of the past 6,000 years of human history, infamously and embarrassingly said “Let’s Be Honest About Gold: It’s a Pet Rock.” Fast forward to today, when with every central bank once again rushing to debase its currency in what increasingly appears to be the final race to the debasement bottom, when even BOE head Mark Carney recommends that it is time to retire the dollar as the world’s reserve currency, pet rock gold has emerged as the second best performing asset of the year… and at the rate it is going –4th in 2017, 3rd in 2018, 2nd in 2019 – gold will be the standout asset class of 2020.

Which naturally has sparked comparisons for gold’s performance in 2019 with 2008+, when gold exploded higher as the financial system nearly collapsed and central banks started injecting trillions in liquidity into the system to keep it afloat.

Are such comparisons appropriate?

As Bank of America writes in “anatomy of two gold bull markets”, in comparing the gold bull markets in 2008 and 2018, real rates remain key price drivers, while a critical difference in market dynamics – this time around  – is that central banks have been unable to reflate global economies and even as metrics like the value and proportion of negative yielding assets has been increasing, further easing is on the cards. Linked to that, Bank of America makes a stunning admissions: “the risk of quantitative failure, which was not a concern in 2008, makes gold an attractive asset.”

BofA summarizes the key gold drivers in 2008+ and 2018+ across three key metrics: real interest rates, USD and volatility.

Taking a step back, for those who have not been following the performance of gold in the past year, the yellow metal has been one of the best performing commodities over the past year, rallying by 31% since bottoming in August 2018, as whon in the first chart which highlights that recent price dynamics have to some extent mirrored those seen in 2008+; the data also shows that the current bull market is still young. Partially because of that, Bank of America notes that it has been frequently been asked how the current macro backdrop compares to dynamics 10 years ago.

So what sparked the tremendous 2008 rally which lasted for the next three years?

Looking back at the Great Financial Crisis, central banks reacted to the turmoil on financial markets by easing monetary policy through both traditional, but increasingly also non-traditional policy tools

Since gold is a non-yielding asset, the reduction in opportunity costs and uncertainty over where the global economy and markets were headed made the commodity an interesting investment.

This is shown in Chart 4, which suggests that sharp declines in US real rates post GFC were accompanied by steady increases in gold quotations. Yet, US rates then started to change direction in 2013, the year Fed chairman Ben Bernanke caused the taper tantrum announcing that the Fed would gradually reduce its bond purchases (Chart 5). This effectively put an end to gold increases.

After the gold price rally ended, and fell sharply in the wake of the taper tantrum, gold prices then remained subdued also because ongoing monetary policy support kept markets buoyant. This is shown in chart 6, which highlights that falling volatility was ultimately accompanied by lower gold quotations. Of course, this was also influenced by an acceleration of the US economy, which picked up post GFC and in 2015 printed some of the highest growth rates in a decade

Unfortunately, the central banks’ fairy tale did not last, and the “strong economic growth” came with a significant wrinkle: inflation remained well below the 2% target. The chart shows data for the US, but the lack of upward pressure on general price levels has been equally pronounced in other countries/ regions including Japan/ Europe.

Yet notwithstanding the ongoing lack of reflation, central banks around the world seem adamant that monetary easing will ultimately do the job – as in it didn’t work last time, but it will work this time, we promise – and hence expectations are for more stimulus. The side-effects of that are mirrored by Chart 8 and Chart 9: value and proportion of debt with negative yields has risen almost exponentially of late and this has been a powerful driver of the gold.

This, according to BofA commodity strategists, has various implications. Most notably, “ultra-easy monetary policies have led to distortions across various asset classes”; worse – and these are not our words, but of Bank of America – “it also stopped normal economic adjustment/ renewal mechanisms by for instance sustaining economic participants that would normally have gone out of business”, i.e. a record number of zombie corporations.

In addition, as everyone knows, debt levels have continued to increase, making it more difficult for central banks to normalize monetary policy as 2018 showed so vividly (and for Powell, painfully).

Which brings us to BofA’s conclusion: “We fear that this dynamic could ultimately lead to “quantitative failure”, under which markets refocus on those elevated liabilities and the lack of global growth, which would in all likelihood lead to a material increase in volatility.”

How does gold fall into this: “At the same time, and perhaps perversely, such a sell-off may prompt central banks to ease more aggressively, making gold an even more attractive asset to hold.”

In other words, as the world approaches the financial endgame and central banks are out of ammo beside just doing more of the same – that led the world to the current catastrophic state – gold will be the biggest beneficiary of the upcoming financial cataclysm. And, no, this is not some fringe blog predicting the apocalypse, this is the prediction of one the 4 largest US banks.

And with that we hand it over to the WSJ’s Jason Zweig for his “Per Rock” sequel…

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‘I Still Think They’re Heroes,’ Houston’s Police Chief Says of the Cops Who Killed a Couple During a Fraudulent Drug Raid

“I still think they’re heroes,” Houston Police Chief Art Acevedo says of the narcotics officers who shot and killed Dennis Tuttle and Rhogena Nicholas during a fraudulent drug raid at their Harding Street home on January 28. At a press conference Friday, Acevedo said that Gerald Goines, the officer who instigated the raid by falsely claiming that a confidential informant had bought heroin from Tuttle at the house the day before, and Steven Bryant, who bolstered Goines’ cover story, had “dishonored” their badges and the Houston Police Department (HPD). But Acevedo insisted that the other officers who participated in the raid had “acted in good faith” and killed the couple in self-defense.

Goines was charged with two counts of felony murder on Friday. “Because false information was provided to a magistrate in order to secure a search warrant,” Harris County District Attorney Kim Ogg explained during another press conference on Friday, “Goines’ actions violated Texas Penal Code 37.10,” which makes “tampering with a governmental record” a felony when it is done “to defraud or harm another.” And because Goines’ false statements led to a no-knock raid in which two people were killed, Ogg said, his conduct met the definition of felony murder, which occurs when someone, in the course of a felony, commits “an act clearly dangerous to human life that causes the death of an individual.” Felony murder is punishable by five years to life in prison.

Bryant faces a charge of tampering with a governmental record, a second-degree felony punishable by two to 20 years in prison. In an offense-report supplement Bryant wrote two days after the raid, Ogg said, he claimed he had assisted Goines in the investigation of drug dealing at the Harding Street house. Goines named Bryant in his search warrant affidavit, saying he had verified that the “brown powder substance” supposedly purchased from Tuttle was black-tar heroin. Ogg said Goines later admitted to HPD investigators that Bryant had done no such thing. Goines also admitted that no informant had bought heroin at the house. Instead he switched to claiming he had made the purchase himself, although he could not say whether Tuttle was the man who had sold heroin to him.

Ogg said Bryant also falsely claimed in his supplemental report that, after the raid, he “recovered a plastic bag that contained a white napkin and two small packets of a brown powdery substance that he knew, based on his skill and expertise, contained heroin.” He added that he “recognized the drugs as the same drugs allegedly purchased” by the confidential informant. That was a pretty brazen lie, since the official search warrant inventory said nothing about heroin or any other evidence of drug dealing. The only drugs the police recovered were personal-use quantities of marijuana and cocaine.

Acevedo, who initially defended the raid and described Goines as a hero, wants credit for investigating this fiasco. But he also wants us to believe that the fraud committed by Goines and Bryant, both of whom retired after the raid, does not implicate their colleagues in Narcotics Squad 15 or suggest broader problems in the HPD Narcotics Division. “I don’t have any indication it’s a pattern and practice,” Acevedo said three weeks after the raid, by which time the Houston Chronicle and other local news outlets had noted Goines’ history of alleged testilying and sloppy evidence handling.

Ogg, by contrast, says her office is continuing to investigate the integrity of Squad 15 by reviewing more than 14,000 cases it has generated. “While today the focus is on Gerald Goines and Steven Bryant, there may be more to the story,” she said on Friday. “The purpose of the broader investigation of Gerald Goines’ past cases and of the squad’s ties to these 14,000 different cases is…to determine if this was a single act by rogue officers or whether it’s part of a greater and pre-existing problem in that squad or that division.”

Ogg said a Harris County grand jury will soon convene to consider additional charges against Goines and Bryant as well as possible charges against other officers. “We have had individuals contact our office who had prior contact with Officer Goines,” Ogg said, “and there are other complaints that we are reviewing.” Apart from his involvement in this particular case, Goines, who served the HPD for 34 years, faces allegations that he stole money, drugs, and guns.

“We recognize that the community has been violated,” Ogg said, “and I want to assure my fellow Houstonians and other residents of Harris County that we are getting to the truth. You’ve heard Chapter 1. Each day, we uncover more, and with each fact we work toward doing justice. The breach of the public trust gives us great pause in this case, because our democracy depends on the public’s trust of law enforcement and the courts.”

It seems premature, to say the least, to conclude that officers who for years worked alongside a cop as corrupt as Goines seems to have been bear no responsibility for what looks like a pattern of dishonesty and shoddy work. Even if we focus on their actions the day of the raid, the “hero” label that Acevedo says they still deserve hardly seems apt. According to the official police account, these officers broke into the house without warning and immediately killed the couple’s dog with a shotgun, setting off an exchange of gunfire that killed the residents and injured four officers, including Goines, who according to Ogg had falsely portrayed Tuttle as a dangerous character who routinely carried an apparently nonexistent 9mm semi-automatic pistol in his waistband.

“Mr. Tuttle shot at them,” Acevedo said on Friday. “Nothing in the evidence shows he did not shoot these officers.” Actually, an independent forensic examination of the house commissioned by Nicholas’ family has cast doubt on the HPD’s claim that Tuttle fired at them with a .357 Magnum revolver as they entered.

Michael Maloney, a retired supervisory special agent with the Naval Criminal Investigative Service, also found evidence that contradicted the claim that police shot Nicholas because they saw her reaching for the shotgun carried by the first officer through the door as he sat on a couch where he had collapsed after being hit by gunfire. Maloney found that Nicholas “was fatally struck by a bullet from a weapon fired outside the Harding Street Home by a person shooting from a position where the shooter could not have seen Ms. Nicholas at the time she was fatally shot.”

Nor is it clear that the wounded officers were all struck by rounds from the revolver. After the raid, Acevedo responded indignantly to the suggestion that the officers might have been hit by friendly fire, and the HPD has refused to answer questions on that point. “As far as who is responsible for those officers’ injuries,” Ogg said on Friday, “the Texas Rangers have assisted us in that portion of the investigation” and “their findings will be presented to the grand jury.”

Leaving all those issues aside, it is clear that the narcotics officers recklessly provoked the violence they encountered. There is no video of the raid, and Tuttle is not around to give his side of the story. But it is plausible that he did not realize the armed men who burst into his house and killed his dog, who were not wearing uniforms, were police officers. Nicholas’ mother, who talked to her on the phone shortly before the raid, said she and Tuttle were about to take an afternoon nap, which suggests they were awakened by the tumult at their door and the ensuing shotgun blast around 5 p.m.

By imposing new restrictions on no-knock warrants, Acevedo has implicitly admitted that such “dynamic entries” in run-of-the-mill drug cases pose unjustified risks. On Friday he said no such warrants have been served by Houston police since the Harding Street raid, which suggests they were not necessary to begin with.

In addition to inventing a heroin purchase that never happened, Goines justified the no-knock raid with boilerplate claiming that “knocking and announcing would be dangerous, futile, or would inhibit the effective investigation of the offense.” The only specific evidence he cited to support that claim was that “a weapon was observed during the narcotic investigation”—specifically, “a semi-auto hand gun of a 9mm caliber” that was supposedly seen by the nonexistent confidential informant the day before the raid but was not recovered from the house.

Houston Municipal Court Judge Gordon Marcum, who approved the no-knock warrant, had no way of knowing that Goines had invented the informant, the “controlled buy,” and the handgun. But there were clues in Goines’ affidavit that something fishy was going on. Although Goines claimed his warrant application was the culmination of a two-week investigation, he described Tuttle as “a white male, whose name is unknown.” Apparently Goines had been investigating drug dealing at the house for two weeks, but he had not bothered to look up the names of its owners. Nor had he observed any evidence of drug dealing at the house that was worth mentioning (aside from the fictional transaction) or interviewed neighbors who had noticed suspicious activity there.

Acevedo has said Goines’ “investigation” was triggered by a January 8 call in which “the mother of a young woman” reported that her daughter “was in there doing heroin.” That unidentified caller, according to Acevedo, had described Tuttle and Nicholas as armed and dangerous. He said their home was known locally as “a drug house” and “a problem location,” a claim that has been contradicted by neighbors in interviews with the local press.

While there is a record of the call to which Acevedo referred, it contains no details about the nature of the complaint. The Houston Chronicle reports that the genesis of Goines’ investigation was “a tip scrawled on a yellow legal pad” by one of the officers who responded to the January 8 call but found no evidence of criminal activity. It looks like that piece of paper was the sole justification for the deadly raid that came two weeks later.

Michael Doyle, a lawyer hired by Nicholas’ mother and brother, has cited evidence of lax supervision that allowed the raid to proceed. When informants provide “specific information about criminal activities,” their identity “is required to be documented and readily accessible to police managers,” Doyle noted in a July 25 petition seeking to depose Narcotics Division supervisors. “HPD’s managers knew from the beginning that there was no documented [confidential informant] significant meeting record in its files supporting the assault on the Harding Street Home.”

Acevedo, who became Houston’s police chief in 2016 after a checkered history with the California Highway Patrol and the Austin Police Department, bears ultimate responsibility for this disaster and the supervisory practices that enabled it. The fact that he continues to describe the officers who killed Tuttle and Nicholas as “heroes,” while tarring the couple as dangerous drug dealers despite the lack of evidence against them, suggests he cannot be trusted to get the Houston Police Department’s house in order.

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‘I Still Think They’re Heroes,’ Houston’s Police Chief Says of the Cops Who Killed a Couple During a Fraudulent Drug Raid

“I still think they’re heroes,” Houston Police Chief Art Acevedo says of the narcotics officers who shot and killed Dennis Tuttle and Rhogena Nicholas during a fraudulent drug raid at their Harding Street home on January 28. At a press conference Friday, Acevedo said that Gerald Goines, the officer who instigated the raid by falsely claiming that a confidential informant had bought heroin from Tuttle at the house the day before, and Steven Bryant, who bolstered Goines’ cover story, had “dishonored” their badges and the Houston Police Department (HPD). But Acevedo insisted that the other officers who participated in the raid had “acted in good faith” and killed the couple in self-defense.

Goines was charged with two counts of felony murder on Friday. “Because false information was provided to a magistrate in order to secure a search warrant,” Harris County District Attorney Kim Ogg explained during another Friday press conference, “Goines’ actions violated Texas Penal Code 37.10,” which makes “tampering with a governmental record” a felony when it is done “to defraud or harm another.” And because Goines’ false statements led to a no-knock raid in which two people were killed, Ogg explained, his conduct met the definition of felony murder, which occurs when someone, during the commission of a felony, commits “an act clearly dangerous to human life that causes the death of an individual.” Felony murder is punishable by five years to life in prison.

Bryant faces a charge of tampering with a governmental record, a second-degree felony punishable by two to 20 years in prison. In an offense-report supplement Bryant wrote two days after the raid, Ogg said, he claimed he had assisted Goines in the investigation of drug dealing at the Harding Street house. Goines named Bryant in his search warrant affidavit, saying he had verified that the “brown powder substance” supposedly purchased from Tuttle was black-tar heroin. Ogg said Goines later admitted to HPD investigators that Bryant had done no such thing. Goines also admitted that no informant had bought heroin at the house. Instead he switched to claiming he had made the purchase himself, although he could not say whether Tuttle was the man who had sold heroin to him.

Ogg said Bryant also falsely claimed in his supplemental report that, after the raid, he “recovered a plastic bag that contained a white napkin and two small packets of a brown powdery substance that he knew, based on his skill and expertise, contained heroin.” He added that he “recognized the drugs as the same drugs allegedly purchased” by the confidential informant. That was a pretty brazen lie, since the official search warrant inventory said nothing about heroin or any other evidence of drug dealing. The only drugs the police recovered were personal-use quantities of marijuana and cocaine.

Acevedo, who initially defended the raid and described Goines as a hero, wants credit for investigating this fiasco. But he also wants us to believe that the fraud committed by Goines and Bryant, both of whom retired after the raid, does not implicate their colleagues in Narcotics Squad 15 or suggest broader problems in the HPD Narcotics Division. “I don’t have any indication it’s a pattern and practice,” Acevedo said three weeks after the raid, by which time the Houston Chronicle and other local news outlets had noted Goines’ alleged history of testilying and sloppy evidence handling.

Ogg, by contrast, says her office is continuing to investigate integrity of Squad 15 by reviewing more than 14,000 cases it has generated. “While today the focus is on Gerald Goines and Steven Bryant, there may be more to the story,” she said on Friday. “The purpose of the broader investigation of Gerald Goines’ past cases and of the squad’s ties to these 14,000 different cases is…to determine if this was a single act by rogue officers or whether it’s part of a greater and pre-existing problem in that squad or that division.”

Ogg said a Harris County grand jury will soon convene to consider additional charges against Goines and Bryant as well as possible charges against other officers. “We have had individuals contact our office who had prior contact with Officer Goines,” Ogg said, “and there are other complaints that we are reviewing.” Apart from his involvement in this particular case, Goines, who served the HPD for 34 years, faces allegations that he stole money, drugs, and guns.

“We recognize that the community has been violated,” Ogg said, “and I want to assure my fellow Houstonians and other residents of Harris County that we are getting to the truth. You’ve heard Chapter 1. Each day, we uncover more, and with each fact we work toward doing justice. The breach of the public trust gives us great pause in this case, because our democracy depends on the public’s trust of law enforcement and the courts.”

It seems premature, to say the least, to conclude that officers who for years worked alongside a cop as apparently corrupt as Goines bear no responsibility for what looks like a pattern of dishonesty and shoddy work. Even if we focus on their actions the day of the raid, the “hero” label that Acevedo says they still deserve hardly seems apt. According to the official police account, these officers broke into the house without warning and immediately killed the couple’s dog with a shotgun, setting off an exchange of gunfire that killed the residents and injured four officers, including Goines, who according to Ogg had falsely portrayed Tuttle as a dangerous character who routinely carried an apparently nonexistent 9mm semi-automatic pistol in his waistband.

“Mr. Tuttle shot at them,” Acevedo said on Friday. “Nothing in the evidence shows he did not shoot these officers.” Actually, an independent forensic examination of the house commissioned by Nicholas’ family has cast doubt on the HPD’s claim that Tuttle fired at them with a .357 Magnum revolver as they entered the house.

Michael Maloney, a retired supervisory special agent with the Naval Criminal Investigative Service, also found evidence that contradicted the claim that police shot Nicholas because they saw her reaching for the shotgun carried by the first officer through the door as he sat on a couch where he had collapsed after being hit by gunfire. Maloney found that Nicholas “was fatally struck by a bullet from a weapon fired outside the Harding Street Home by a person shooting from a position where the shooter could not have seen Ms. Nicholas at the time she was fatally shot.”

Nor is it clear that the wounded officers were all struck by rounds from the revolver. After the raid, Acevedo responded indignantly to the suggestion that the officers might have been hit by friendly fire, and the HPD has refused to answer questions on that point. “As far as who is responsible for those officers’ injuries,” Ogg said on Friday, “the Texas Rangers have assisted us in that portion of the investigation” and “their findings will be presented to the grand jury.”

Leaving all those issues aside, it is clear that the narcotics officers recklessly provoked the violence they encountered. There is no video of the raid, and Tuttle is not around to give his side of the story. But it is plausible that he did not realize the armed men who burst into his house and killed his dog, and who were not wearing uniforms, were police officers. Nicholas’ mother, who talked to her on the phone shortly before the raid, said she and Tuttle were about to take an afternoon nap, which suggests they were awakened by the tumult at their door and the ensuing shotgun blast around 5 p.m.

By imposing new restrictions on no-knock warrants, Acevedo has implicitly admitted that such “dynamic entries” in run-of-the-mill drug cases pose unjustified risks. On Friday he said no such warrants have been served by Houston police since the Harding Street raid, which suggests they were not necessary to begin with.

In addition to inventing a heroin purchase that never happened, Goines justified the no-knock raid with boilerplate claiming that “knocking and announcing would be dangerous, futile, or would inhibit the effective investigation of the offense.” The only specific evidence he cited to support that claim was that “a weapon was observed during the narcotic investigation”—specifically, “a semi-auto hand gun of a 9mm caliber” that was supposedly observed by the nonexistent confidential informant the day before the raid but was not recovered from the house.

Houston Municipal Court Judge Gordon Marcum, who approved the no-knock warrant, had no way of knowing that Goines had invented the informant, the “controlled buy,” and the handgun. But there were clues in Goines’ affidavit that something fishy was going on. Although Goines claimed his warrant application was the culmination of a two-week investigation, he described Tuttle as “a white male, whose name is unknown.” Apparently Goines had been investigating drug dealing at the house for two weeks, but he had not bothered to look up the names of its owners. Nor had he observed any evidence of drug dealing at the house (aside from the fictional transaction) that was worth mentioning or interviewed neighbors who had noticed suspicious activity there.

Acevedo has said Goines’ “investigation” was triggered by a January 8 call in which “the mother of a young woman” reported that her daughter “was in there doing heroin.” That unidentified caller, according to Acevedo, had described Tuttle and Nicholas as armed and dangerous. He said their home was known locally as “a drug house” and “a problem location,” a claim that has been contradicted by neighbors in interviews with the local press.

While there is a record of the call to which Acevedo referred, it contains no details about the nature of the complaint. The Houston Chronicle reports that the genesis of Goines’ investigation was “a tip scrawled on a yellow legal pad” by one of the officers who responded to the January 8 call, which turned up no evidence of criminal activity. It looks like that piece of paper was the sole justification for the deadly raid that came two weeks later.

Michael Doyle, a lawyer hired by Nicholas’ mother and brother, has cited evidence of lax supervision that allowed the raid to proceed. When informants provide “specific information about criminal activities,” their identity “is required to be documented and readily accessible to police managers,” Doyle noted in a July 25 petition seeking to depose Narcotics Division supervisors. “HPD’s managers knew from the beginning that there was no documented [confidential informant] significant meeting record in its files supporting the assault on the Harding Street Home.”

Acevedo, who became Houston’s police chief in 2016 after a checkered history with the California Highway Patrol and the Austin Police Department, bears ultimate responsibility for this disaster and the supervisory practices that enabled it. The fact that he continues to describe the officers who killed Tuttle and Nicholas as “heroes,” while tarring the couple as dangerous drug dealers despite the lack of evidence against them, suggests he cannot be trusted to get the Houston Police Department’s house in order.

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