The Congressional Budget Office reveals shocking forecasts for immigration, debt and spending for the next 30 years…
How do you know a politician is lying to you? Simple: His lips are moving.
Yes, it’s an old one – but none the worse for that.
The 2020 election season is getting into full swing. Politicians on all sides are ramping up their rhetoric, including their promises, forecasts and accusations.
But it’s fascinating what you can find out if you just read official documents. Especially some of the fine print.
And here are 10 remarkable forecasts and assumptions that Washington is making and isn’t telling you. These are all contained in the Congressional Budget Office’s most recent Long-Term Budget Outlook, the cornerstone document of government financial and economic planning.
1. We’re going to have a lot more immigrants. A lot. They’re expecting a net 22.5 million more immigrants to come to the U.S. over the next 20 years. By 2049, they’re expecting immigration to account for a stunning 87% of annual population growth.
2. We’re going to have a lot more illegal immigrants. Despite the current bluster and the scandals at the border, the CBO expects we’ll have 2.4 million more illegal immigrants (or “undocumented residents,” or whatever) in 20 years’ time than we have today.
3. We’re going to be up to our eyeballs in debt. The national debt is expected to skyrocket to an “unprecedented” 144% of gross domestic product by 2049, or twice the level today. That would put the debt just under $100 trillion. The figure today: Around $18 trillion. As recently as 2000: $4 trillion. Oh, and this isn’t even the worst-case scenario: The national debt could exceed 200% of GDP in 30 years’ time, the CBO acknowledges.
4. We’re going to owe so much money that by 2049 the annual interest on the debt will be about 5% of gross domestic product — roughly the share that we spend today on Social Security. And that’s even if interest rates stay low. Despite rising debt and federal spending, the government is expecting — or hoping — the average rate on federal debt will rise only from today’s lowly 2.4% to 4.2%, still modest by historic standards, by 2049.
5. This debt, and these deficits, will damage the economy. They will crowd private investment out of the debt markets, reducing income and growth, says the CBO. And as we’ll have to borrow more and more from abroad to finance the government, they’ll lead to bigger and bigger interest payments leaving the country.
6. Social Security, Medicare, other health programs and net interest are going to soak up so much of the budget that we’re going to have to slash everything else to the smallest share of the economy in 70 years – just 7%. The average over the past 50 years: 11%.
7. Just to keep the federal deficit to these levels, your taxes will go up. The Obama tax hike on “Cadillac” health-insurance plans will kick in starting in 2022, and the 2017 Trump tax cuts will expire in 2025.
8. Most working stiffs can say goodbye to any other tax cuts. Uncle Sam is explicitly relying on your taxes to go up thanks to “bracket creep,” where income-tax brackets rise only in line with inflation while your income — you hope — rises faster.
9. While tax rates go up for most people, they won’t for those earning the most. That’s because more and more of their income will be above the Social Security “cap,” saving them an effective 12.4% a year. The cap this year is $132,900.
10. Meanwhile, working stiffs will be taxed at twice the marginal rate of those who live on dividends. By 2049, says the CBO, labor income will be taxed at a marginal rate of 32%, compared to just 16% for capital income. Good to know, isn’t it?
It would be great to see some of this stuff come up in the presidential race, wouldn’t it?
via ZeroHedge News https://ift.tt/2M0fyo1 Tyler Durden
In a dramatically unsettling move for global stability, China’s offshore yuan just collapsed below 7/USD – plunging a stunning 12 handles to its weakest on record against the dollar.
This is the weakest offshore yuan has ever been against the dollar…
The last time China’s yuan moved with this velocity, the tremors rippled dramatically and rapidly through the rest of global financial markets.
As we pointed out earlier…
If CNH breaks 7, all hell will break loose as China declares start of currency war
“This week’s fixings will send very important signals on the PBOC’s stance,” said Tommy Xie, an economist at Oversea-Chinese Banking Corp. “
A rate that’s stronger than 6.9 shows China’s preference for stability, but one that’s weaker will be seen as a strong hint that more drops will be allowed.”
Kyle Bass suggests the capital exodus has only just begun…
The King of Thailand held a ceremony this week to promote one of his top generals and longtime girlfriends as his official mistress and royal concubine – a role that has been vacant since the early 1920s.
King Maha Vajiralongkorn, better known as King Rama X, named Major-General Sineenat Wongvajirapakdi as his official royal consort in a ceremony depicted below.
King Rama X officially names Major-General Sineenat Wongvajirapakdi as his new royal consort
During the ceremony, which took place on Rama X’s 67th birthday, he awarded his new concubine Sineenat with four medals, including the Most Illustrious Order of Chula Chom Klao, 1st Class and the Most Exalted Order of the White Elephant, Fox News reports.
General Suthida Vajiralongkorn, the King’s wife, was present for the ceremony as well.
He married his first cousin Princess Soamsawali Kitiyakara in 1977 and had one child. That marriage ended in divorce, but not before Rama fathered five other children with Yuvadhida Polpraserth, who later became his second wife. They divorced in 2001. Then Rama X married his third wife, with whom he had one child before divorcing in 2014.
This is the first time that a Thai King has had more than one official partner since the end of the absolute monarchy in 1932.
via ZeroHedge News https://ift.tt/2YLt6cR Tyler Durden
For the first time in U.S. history, renewable energies briefly generated more electricity than coal in April this year, according to the Institute for Energy Economics and Financial Analysis. This development is significant for U.S. clean energy champions, environmental advocates, and a coal industry that has anchored U.S. energy for much of the 20th Century. Renewable energy potential merits review of trends and evolving dynamics in a dramatically changing U.S. energy sector.
New innovations and technologies, including large-scale shale extraction, has led to an abundance of domestic oil and gas. The cheap price of natural gas enabled it to surpass coal as America’s primary power source in 2016. Now, renewable energy sources (e.g., wind, solar, hydroelectric, and bioenergy) have shown capable of outperforming coal and are projected to bump it to third place for the long-term.
Natural gas and renewable energies are proving to be more efficient, cleaner and more cost-efficient than coal. Furthermore, the average U.S. coal plant is approximately 40 years old, requiring costly maintenance and repairs. New coal plants are more expensive to build than renewable and natural gas counterparts.
Coal is also the country’s leading source of carbon emissions that contribute to climate change. The American Lung Association believes the effects of coal pollution kill about 7,500 Americans every year.
These factors have taken a significant toll. The coal industry that employed almost 900,000 American workers at its height in the 1920s, now employs approximately 53,000. According to The Week, there are more Americans “who work at nail salons, bowling alleys or Arby’s.” Since 2014, six of the top 10 U.S. coal mining companies have at one time declared bankruptcy.
This strategy seemingly resonated in the 2016 presidential election. In most of the top coal producing states, Donald Trump won by margins of 15 to 47 percent.
Robert Murray, CEO of leading coal producer Murray Energy, has been an influential, behind-the-scenes player. Murray donated at least $300,000 to Trump’s presidential inauguration and another $1 million to a super political action committee (PAC) to support Trump’s agenda for the 2018 congressional elections.
A January 2018 New York Times article uncovered an “Action Plan” drafted by Murray and sent to the White House shortly after the inauguration which outlines numerous demands. Some of these include eliminating environmental regulations and standards, such as the Clean Power Plan; dismissing scientific findings; abandoning international climate agreements, such as the Paris Climate Accord; overhauling U.S. mining safety and health standards; and cutting the staff of the Environmental Protection Agency (EPA) by at least half. EPA Administrator Andrew Wheeler, a former coal industry lobbyist and attorney for Robert Murray, has been a key ally. According to the Times, “the White House and federal agencies have completed or are on track to fulfill most of the 16 detailed requests.”
Despite these efforts, demand for coal and coal competitiveness has not seen a meaningful turnaround. In President Trump’s first two years in office, more coal-fired power plants shut down than during the entirety of Barack Obama’s first term, according to data from the U.S. Energy Information Administration (EIA). The year 2018 alone represented a near-record for coal-fired plant closures. Demand for coal for energy and steel production are declining in Europe, the main target for US coal exports. In Asia, where there is still growing coal demand, US coal faces logistical disadvantages and competition from China, the world’s largest producer of coal. Looking forward, EIA’s 2019 projections call for coal production to decline even faster than it would have under the Obama Clean Power Plan.
One measure currently under executive consideration is a 90-day coal stockpile mandate for national security purposes under the Defense Production Act. Such a requirement could artificially inflate domestic demand for coal. It remains to be seen if it will be enacted and whether it, and the overall reform efforts, will help Trump’s reelection bid in coal mining states or fall short of expectations set in 2016.
Risk Outlook
Coal currently produces 28 percent of US electricity annually compared with 34 percent provided by natural gas and 18 percent by renewables. Globally, coal accounts for roughly one-third of current energy production. While approximately 90 percent of US coal is used for energy production, it is also used for steel production and cement manufacturing.
The coal industry has, at times, boosted productivity and increased employment through the export market and particularly when overseas markets have needed to supplement supplies. Productivity and employment increases have been short-term and temporary anomalies to an otherwise downward trend. US EIA forecasts a slight increase for natural gas in the coming decades, a sharp rise for renewables, and a steady decline for coal energy. By 2050, renewables are projected to supply 31 percent of US energy to 17 percent for coal.
Coal assuredly will continue to be a significant part of the global energy sector for the foreseeable future. That future is likely to be characterized by fluctuating and diminishing demand, changing regulatory and market conditions, the potential for slowed global growth, and the likelihood of continued technological advances that provide for cleaner, cheaper alternatives. For investors in a position to assume higher risks, there could be short-term opportunities in buying and consolidating coal assets. Making such opportunities profitable would require close market monitoring and a capacity to react quickly. More cautious energy sector investors will want to diversify their portfolio and keep an eye on trends that have dramatically reshaped the sector in recent years and ultimately will yield an energy market quite different than the one today.
via ZeroHedge News https://ift.tt/2ZHsamU Tyler Durden
Douglas Adams famously suggested that the answer to life, the universe and everything is 42.
In the world of the political elite, the answer is Russiagate.
What has caused the electorate to turn on the political elite, to defeat Hillary and to rush to Brexit? Why, the evil Russians, of course, are behind it all.
It was the Russians who hacked the DNC and published Hillary’s emails, thus causing her to lose the election because… the Russians, dammit, who cares what was in the emails? It was the Russians.
It is the Russians who are behind Wikileaks,and Julian Assange is a Putin agent (as is that evil Craig Murray).
It was the Russians who swayed the 1,300,000,000 dollar Presidential election campaign result with 100,000 dollars worth of Facebook advertising.
It was the evil Russians who once did a dodgy trade deal with Aaron Banks then did something improbable with Cambridge Analytica that hypnotised people en masse via Facebook into supporting Brexit.
All of this is known to be true by every Blairite, every Clintonite, by the BBC, by CNN, by the Guardian, the New York Times and the Washington Post. “The Russians did it” is the article of faith for the political elite who cannot understand why the electorate rejected the triangulated “consensus” the elite constructed and sold to us, where the filthy rich get ever richer and the rest of us have falling incomes, low employment rights and scanty welfare benefits. You don’t like that system? You have been hypnotised and misled by evil Russian trolls and hackers.
Except virtually none of this is true. Mueller’s inability to defend in person his deeply flawed report took a certain amount of steam out of the blame Russia campaign. But what should have killed off “Russiagate” forever is the judgement of Judge John G Koetl of the Federal District Court of New York.
In a lawsuit brought by the Democratic National Committee against Russia and against Wikileaks, and against inter alia Donald Trump Jr, Jared Kushner, Paul Manafort and Julian Assange, for the first time the claims of collusion between Trump and Russia were subjected to actual scrutiny in a court of law. And Judge Koetl concluded that, quite simply, the claims made as the basis of Russiagate are insufficient to even warrant a hearing.
The judgement is 81 pages long, but if you want to understand the truth about the entire “Russiagate” spin it is well worth reading it in full. Otherwise let me walk you through it.
This is the crucial point about Koetl’s judgement. In considering dismissing a case at the outset in response to a motion to dismiss from the defence, the judge is obliged to give the plaintiff every benefit and to take the alleged facts described by the DNC as true. The stage of challenging and testing those facts has not been reached. The question Koetl is answering is this. Accepting for the moment the DNC’s facts as true, on the face of it, even if everything that the Democratic National Committee alleged happened, did indeed happen, is there the basis for a case? And his answer is a comprehensive no. Even the facts alleged to comprise the Russiagate narrative do not mount up to a plausible case.
The consequence of this procedure is of course that in this judgement Koetl is accepting the DNC’s “facts”. The judgement is therefore written entirely on the assumption that the Russians did hack the DNC computers as alleged by the plaintiff (the Democratic National Committee), and that meetings and correspondence took place as the DNC alleged and their content was also what the DNC alleged. It is vital to understand in reading the document that Koetl is not stating that he finds these “facts” to be true. Doubtless had the trial proceeded many of them would have been challenged by the defendants and their evidentiary basis tested in court. It is simply at this stage the only question Koetl is answering is whether, assuming the facts alleged all to be true, there are grounds for trial.
Judge Koetl’s subsequent dismissal of the Russiagate nonsense is a problem for the mainstream media and their favourite narrative. They have largely chosen to pretend it never happened, but when obliged to mention it have attempted to misrepresent this as the judge confirming that the Russians hacked the DNC. It very definitely and specifically is not that; the judge was obliged to rule on the procedural motion to dismiss on the basis of assuming the allegation to be true. Legal distinctions, even very plain ones like this, are perhaps difficult for the average cut and paste mainstream media stenographer to understand. But the widespread failure to report the meaning of Koetl’s judgement fairly is inexcusable.
The key finding is this. Even accepting the DNC’s evidence at face value, the judge ruled that it provides no evidence of collusion between Russia, Wikileaks or any of the named parties to hack the DNC’s computers. It is best expressed here in this dismissal of the charge that a property violation was committed, but in fact the same ruling by the judge that no evidence has been presented of any collusion for an illegal purpose, runs through the dismissal of each and every one of the varied charges put forward by the DNC as grounds for their suit.
Judge Koetl goes further and asserts that Wikileaks, as a news organisation, had every right to obtain and publish the emails in exercise of a fundamental First Amendment right. The judge also specifically notes that no evidence has been put forward by the DNC that shows any relationship between Russia and Wikileaks. Wikileaks, accepting the DNC’s version of events, merely contacted the website that first leaked some of the emails, in order to ask to publish them.
Judge Koetl also notes firmly that while various contacts are alleged by the DNC between individuals from Trump’s campaign and individuals allegedly linked to the Russian government, no evidence at all has been put forward to show that the content of any of those meetings had anything to do with either Wikileaks or the DNC’s emails.
In short, Koetl dismissed the case entirely because simply no evidence has been produced of the existence of any collusion between Wikileaks, the Trump campaign and Russia. That does not mean that the evidence has been seen and is judged unconvincing. In a situation where the judge is duty bound to give credence to the plaintiff’s evidence and not judge its probability, there simply was no evidence of collusion to which he could give credence. The entire Russia-Wikileaks-Trump fabrication is a total nonsense. But I don’t suppose that fact will kill it off.
The major implication for the Assange extradition case of the Koetl judgement is his robust and unequivocal statement of the obvious truth that Wikileaks is a news organisation and its right to publish documents, specifically including stolen documents, is protected by the First Amendment when those documents touch on the public interest.
…
These arguments are certainly helpful to Assange in the extradition case. But it must be noted that the extradition request has been drafted to try to get round the law by alleging that Wikileaks were complicit in the actual theft of documents by Chelsea Manning. Judge Koetl does not address this question as he was presented with no evidence that Wikileaks had contact with the “hackers” prior to their obtaining the documents, so the question did not arise before him. In the extradition request, the attempt is to argue that Assange encouraged and abetted Manning in obtaining the material. This is supposed to be a different argument.
In fact this attempt to undermine the First Amendment has no merit. Cultivation of an insider source is a normal part of journalistic activity, and encouraging an official to leak material in the public interest is an everyday occurrence in such cultivation. In the “Watergate” precedent, for example, the “Deep Throat” source, Mark Felt of the FBI, was cultivated and encouraged over a period by Bernstein. In addition to which, Manning’s access to the documents could not be characterised as “theft”. Leaking of official secrets by an insider is a very different thing to a hack from outside.
And in conclusion, I should state emphatically that while Judge Koetl was obliged to accept for the time being the allegation that the Russians had hacked the DNC as alleged, in fact this never happened. The emails came from a leak not a hack. The Mueller Inquiry’s refusal to take evidence from the actual publisher of the leaks, Julian Assange, in itself discredits his report. Mueller should also have taken crucial evidence from Bill Binney, former Technical Director of the NSA, who has explained in detail why an outside hack was technically impossible based on the forensic evidence provided.
The other key point that proves Mueller’s Inquiry was never a serious search for truth is that at no stage was any independent forensic independence taken from the DNC’s servers, instead the word of the DNC’s own security consultants was simply accepted as true. Finally no progress has been made – or is intended to be made – on the question of who killed Seth Rich, while the pretend police investigation has “lost” his laptop.
Though why anybody would believe Robert Mueller about anything is completely beyond me.
So there we have it. Russiagate as a theory is as completely exploded as the appalling Guardian front page lie published by Kath Viner and Luke Harding fabricating the “secret meetings” between Paul Manafort and Julian Assange in the Ecuadorean Embassy. But the political class and the mainstream media, both in the service of billionaires, have moved on to a stage where truth is irrelevant, and I do not doubt that Russiagate stories will thus persist. They are so useful for the finances of the armaments and security industries, and in keeping the population in fear and jingoist politicians in power.
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Unlike his adversaries including the Integrity Initiative, the 77th Brigade, Bellingcat, the Atlantic Council and hundreds of other warmongering propaganda operations, Craig’s blog has no source of state, corporate or institutional finance whatsoever. It runs entirely on voluntary subscriptions from its readers – many of whom do not necessarily agree with the every article, but welcome the alternative voice, insider information and debate. Subscriptions to keep Craig’s blog going are gratefully received.
via ZeroHedge News https://ift.tt/2OBnTAu Tyler Durden
The state of California is taking a page out of Malcom X’s book to ensure that future generations of students know that capitalism is an inherently ‘racist’ – and just as bad as the patriarchy, white supremacy and ‘ableism,’ according to a recent Op-Ed by Stanford University Hoover Institution research fellow Williamson M. Evers.
At issue – the state’s Department of Education has solicited public comments on a new “Ethnic Studies Model Curriculum” until Aug. 15, which will dictate how public school teachers can instruct their students in the field of “ethnic studies.” It was created by an advisory board of teachers, academics and bureaucrats – and “It’s as bad as you imagine,” writes Evers.
Ethnic studies is described in the document as “the interdisciplinary study of race, ethnicity, and indigeneity with an emphasis on experiences of people of color in the United States.” But that’s not all it is. “It is the study of intersectional and ancestral roots, coloniality, hegemony, and a dignified world where many worlds fit, for present and future generations.” It is the “xdisciplinary [sic], loving, and critical praxis of holistic humanity.”
The document is filled with fashionable academic jargon like “positionalities,” “hybridities,” “nepantlas” and “misogynoir.” It includes faddish social-science lingo like “cis-heteropatriarchy” that may make sense to radical university professors and activists but doesn’t mean much to the regular folks who send their children to California’s public schools. It is difficult to comprehend the depth and breadth of the ideological bias and misrepresentations without reading the whole curriculum—something few will want to do.
Begin with economics. Capitalism is described as a “form of power and oppression,” alongside “patriarchy,” “racism,” “white supremacy” and “ableism.” Capitalism and capitalists appear as villains several times in the document. –WSJ
California is turning public schools into political brainwashing centers. They’re going to teach far left ideology to kids as fact and if you have a kid who won’t go along with it… How’ll they be graded or ostracized?
So glad we left the insane asylum known as California.
As far as politics go – one of the proposed courses would explore the African-American experience “from the precolonial ancestral roots in Africa to the trans-Atlantic slave trade and enslaved people’s uprisings in the antebellum South, to the elements of Hip Hop and African cultural retentions.”
Because the best way to move beyond the (Southern Democrat) history of slavery in America is to constantly remind everyone about it, apparently.
Teachers are encouraged to cite the biographies of “potentially significant figures” such as Angela Davis, Frantz Fanon and Bobby Seale. Convicted cop-killers Mumia Abu-Jamal and Assata Shakur are also on the list. Students are taught that the life of George Jackson matters “now more than ever.” Jackson, while in prison, became “a revolutionary warrior for Black liberation and prison reform.” The Latino section’s people of significance include Puerto Rican nationalists Oscar López Rivera, a member of a paramilitary group that carried out more than 130 bomb attacks, and Lolita Lebrón, who was convicted of attempted murder in a group assault that wounded five congressmen.
Housing policy gets the treatment. The curriculum describes subprime loans as an attack on home buyers with low incomes rather than a misguided attempt by the government to help such home buyers. Politicians—Republicans and Democrats—imposed lower underwriting standards on the home-loan industry. Republicans billed it as a way to expand the middle class, while Democrats crowed that it would aid the poor. –WSJ
When it comes to Native Americans, California’s new curriculum would have students “offer their responses to a fictional environmentalist speech by Chief Seattle as well as an anodyne quote about relationships from the recently deceased rapper Nipsey Hussle,” according to Evers, who adds that “the Chief Seattle error is part of a larger problem. The curriculum perpetuates the myth that the Indians had the same values as present-day ecologists. In truth, Native Americans had a mixed approach to nature. The curriculum writers should have looked carefully at the scholarly evidence presented in Shepard Krech’s 1999 book, “The Ecological Indian”—about, for example, the setting of brush fires that got out of control and the needless killing of buffalo, beaver and deer.“
It was almost ten years ago that we first profiled the most important trading desk in the world: not one situated in any of the (increasingly empty) massive trading floors of the world’s commercial banks located in either the financial district, midtown or Connecticut, but the one inside the 9th floor of 33 Liberty Street, the home New York Fed, the one which is also known in trader folklore as the “Plunge Protection Team.”
Mr. Sack, 39 years old, is an economist who runs the markets group at the Federal Reserve Bank of New York.The group runs the Fed’s trading, making it the bridge between the marble corridors of the Federal Reserve in Washington and the bustling trading floors of Wall Street.
The center of life in the markets group is a glass-enclosed conference room situated next to a small cluster of trading desks on the ninth floor of the New York Fed. It overflows with people for a daily 9:20 a.m. meeting run by Mr. Sack. A few stray pictures of Alan Greenspan, the former Fed chairman, still hang on pillars nearby.
The markets group grew enormously during the crisis, from about 225 employees to 400 people who monitor the markets for the Fed, manage its portfolio and run the many new trading programs it has started. The Fed holds more than 20,000 individual securities.
Of course, back then said “most important trading desk” was controlled by one Brian Sack, then only 39-year-old, who has since moved on to the far more lucrative pastures of DE Shaw. Sack was replaced in the summer of 2012, by the levitating market wizard, Simon Potter, who promptly realized that to crush the bears one simply had to crush the VIX specs, and the rest would promptly follow.
Then, in the end of May 2019, something unexpected happened: Simon Potter, arguably the most important trader in the world, manning the world’s most important trading desk, unexpectedly announced his “resignation.” Not only that, but Potter took with him the second most important person at the NY Fed’s “Plunge Protection Team”, the head of the Financial Services Group, Richard Dzina.
Simon Potter
What was odd, as we briefly noted two months ago, was the sudden and unexpected nature of this departure: it came from nowhere, and prompted some very delicate and substantial questions about continuity at the desk that has so far managed to keep the US stock market from entering a bear market since the global financial crisis over a decade ago.
Now, thanks to Bloomberg, we have a much more detailed look into what transpired at the trading desk of the “Plunge Protection Team”, and what we learn is that the past year said institution which forms the bedrock of support for the US capital market has been gripped by what at times is sheer chaos.
Why? Perhaps it will not come as a surprise to anyone, that the reason for said chaos is another career economist, in this case the “new” president of the New York Fed, John Williams (no relation to the Star Wars guy).
As Bloomberg details in a “must read” report, “an unusual level of internal tension broke out in recent weeks at the fortress-like Federal Reserve Bank of New York in lower Manhattan.” This was prompted by the sudden departure of the two longtime officials mentioned above, which “shook staff, sank morale and drew attention to the leadership of the New York Fed under John Williams as he enters his second year at the helm.” And yes, this is the same John Williams who two weeks ago prompted a mini market tantrum following one of the most epic communication fuck ups by a central banker.
As Bloomberg writes “the story involves Simon Potter, who ran the all-important markets desk, and Richard Dzina, head of the financial services group. Both were abruptly relieved of their roles in late May by Williams. Little explanation was given, but according to current and former New York Fed employees, as well as those close to the bank, the nature of the exits, by fault or design, seemed to be a warning: fall in line.”
It is not clear exactly what the two titans of US capital markets had to “fall in line” for, but two things are certain – i) Potter did not “resign”, he was fired by Williams, and ii) now that an economist with zero capital markets experience is in charge, and following his termination of Potter and Dzina, the world is one step closer to collapse as a clueless PhD hack is in charge of the most important market in the world.
The economist in question is John Williams, whom Bloomberg laughably described as “a widely respected and oft-cited monetary economist who ran the San Francisco Fed for seven years” which is amusing for a regional Fed that was at the epicenter of the housing crisis (granted under Yellen, not Williams, but still), and which is best known for incinerating taxpayer funds for such profoundly insightful research reports as “why is water wet” (we jest, but a real example of their cutting edge research was whether it was still worth going to college). In any case, when Williams was appointed for the top job in New York – a Fed which has a far closer link to capital markets than any other – this “raised eyebrows from the outset. A finance-industry background has traditionally been seen as a key qualification, something he lacked.“
Bingo. And what’s worse, Williams – in what was likely an ego tantrum – inexplicably fired the two most important people in his inner circle who have had their pulse on the capital markets for the past decade.
The consequences were immediate, and visible to all:
Williams, who during his San Francisco Fed days often mentioned his reluctance to pay too much attention to short-term swings in the markets, came under fire on July 18 after saying in a speech that central banks should act quickly “at the first sign of economic distress.”
With the remarks coming just a day before Fed officials entered a quiet period prior to their July 30-31 policy meeting, traders immediately took his comments to mean a more-aggressive rate cut was in store. The New York Fed issued a rare clarification walking back his comments later that day, causing another sharp move in the opposite direction.
As Bloomberg adds, the “kerfuffle prompted Ward McCarthy, chief financial economist at Jefferies, to say in a July 22 note to clients that “until proven otherwise, President Williams will remain a communication liability and a probable source of market volatility.” This, again, is the guy who is in charge of the world’s most important trading desk!
The Williams fiasco It also caught the attention of President Donald Trump, who has been openly critical of Fed policy. He tweeted, “I like New York Fed President John Williams first statement much better than his second.”
Williams inability to communicate with markets aside, Bloomberg correctly points out that “as Williams reorganizes the leadership ranks and puts his stamp on the New York Fed, the ousters of Potter and Dzina leave the reserve bank without two of its most experienced hands.“
For those readers who are unfamiliar with our historical obsession with Potter, Bloomberg gives a broad overview of his background:
Potter, who holds a Ph.D. in economics from University of Wisconsin-Madison, started at the New York Fed in 1998. As head of the markets desk, he oversaw the end of the Fed’s massive bond-buying program known as quantitative easing, as well as the unwind that began in October 2017.
Potter was also responsible for briefing policy makers on the state of financial markets at the Fed’s rate-setting meetings. He met with Powell about three weeks after he was relieved of his duties, according to the chairman’s calendar. A Fed spokesman declined to comment on the reason for the meeting or what was discussed.
Dzina, a former Army officer, began his career at the Fed as a bank examiner in 1991 before working his way up the ranks. In addition to leading the financial services group, he also managed a key network central to the U.S. payments system called Fedwire. He’s been described in conversations with those who know him as a steady hand who projected confidence and a team-first attitude. His oft-repeated credo was, “Mission First, People Always.”
So what caused the rift that led to the termination of Potter and his associate? Curiously, that’s one thing that remains unknown. As Bloomberg writes, “it’s still unclear whether any specific disagreements prompted the removals. But those close to the New York Fed say Potter and Dzina, who were known for being strong-minded, did not align with Williams on issues related to managerial strategy.”
In any event, there’s little doubt many were surprised by how it all went down, Bloomberg notes. What is curious is that until now at least, the market was not aware that the two stalwart guardians of the S&P500, and the heads of the PPT departed after what appears to have been a clash of egos – and styles – with the current, and supremely clueless, head of the NY Fed. The market may be in for a very rude awakening.
Ironically, Potter’s termination is something right out of Trump’s pinkslipping of Comey:
Williams told Potter of the decision over the phone while the latter was out of town and was scheduled to travel to Hong Kong for a speech on regulatory reform, according to people with direct knowledge of the situation, who aren’t authorized to speak publicly.
And just like at the FBI, the NY Fed appears to be turning on Williams:
Employees put questions to Williams at a town hall-style meeting in June, two weeks after the departures, expressing their frustration over the message Williams seemed to be sending, according to people familiar with the matter. Williams responded by talking about the need for a cohesive vision among the bank’s top executives, without elaborating on the specifics of the decision.
Typical econobabble – lots of SAT words, little substance, and absolutely no clue what to do when the market crashes, which at this rate may come very soon.
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Fast forward to today when the NY Fed has yet to announce who will succeed Potter and Dzina on a permanent basis. In the meantime, Michael Strine, the institution’s first vice president and Williams’ second-in-command, is managing Fedwire. Traditionally, the network is overseen by the first vice president, but was instead delegated to Dzina by Williams’ predecessor, William Dudley, when Strine was promoted to the role in 2015, according to Bloomberg.
To be sure, whoever replaces Potter and Dzina will have plenty to contend with.
On Wednesday, the Fed reduced its benchmark interest rate for the first time in over a decade and signaled more cuts may be in store later this year. New York Fed staffers have also been charged with looking into a new repurchase-agreement facility to provide liquidity to the banking system as cash becomes increasingly scarce. No less important are efforts to modernize Fedwire, which suffered a rare outage this year.
And then there is the risk of a sharp market drop lingering behind every corner, as the only thing that keeps the market propped up is the traders’ explicit faith (and hope) in the Fed’s ability to support it. The problem is that with Williams at the helm of the PPT, such an ability does not exist. And the moment the market realizes this is precisely when Potter will be so very desperately needed. Alas, at that very moment, Potter will be half a world away, sitting on a beach somewhere, collecting twenty zero percent…
via ZeroHedge News https://ift.tt/2OFqFoA Tyler Durden
The G-20 Summit in Japan brought 20 finance ministers and central bank governors to officially commit to implementing the guidelines of the Financial Action Task Force (FATF). The lack of regulation in the crypto markets can be fertile ground for money laundering, terrorist financing, tax evasion, etc. Therefore, it is not surprising why the FATF guidelines are calling for the end of anonymity in the crypto market.
In fact, after the G-20’s determination to comply with the FATF standards, we are soon going to see their implementation around the world, and crypto users will be required to put aside their privacy — and for some, even their ideology — in order to use services under the control of the regulator.
White vs. black crypto markets
Pretty soon, what we are going to get is two separate groups of crypto addresses: clean crypto and black-market crypto. To get into the clean group, you must declare your crypto addresses, account numbers, location information, beneficiary’s name, etc. If you choose not to disclose this information, you will be automatically assigned to the black-market group.
The standards require crypto exchanges to perform extensive Know Your Client (KYC) and Anti-Money Laundering (AML) procedures. Each address will be identified and linked to a specific person, and there won’t be any anonymous addresses coming in and out of the exchanges. This might be the end of the crypto world as we know it.
While many users will mourn the loss of their privacy, the bright side of these standards is the ability to integrate the crypto market into traditional financial markets, which can lead to a significant increase in usage and the ability to cash out crypto to fiat within the banking system.
However, because of the anarchist nature of some hodlers, there will be some who choose to retain their privacy and to be a part of the black-market group. As Jeff Horowitz, chief compliance officer at Coinbase, said:
“I get why the FATF wants to do this. But applying bank regulations to this industry could drive more people to conduct person-to-person transactions, which would result in less transparency for law enforcement.”
Therefore, it is necessary to carefully consider which side to belong to — because once you go black, you can never go back. If you choose to have your addresses in the black market, it will be tough to “come clean” and use them without the risk of facing criminal charges.
While the specific identification method identifies the exact Bitcoin (BTC) that the user sold, and calculates his/her tax liability on the sale of the actual Bitcoin based on the blockchain evidence, the first-in-first-out (FIFO) method is not taking under consideration real-time user activity. Basically, to calculate in the FIFO method, one has to make a list of all purchases and another list of all sales. Then, to do the matching: Take the first one in the purchase list and calculate the tax results as if he/she sold it at the price and on the date from the first sale in the sales list. This results in an over taxation, especially if you bought your first Bitcoin in the early years.
In order to calculate using the specific identification method, one has to identify – using evidence from the blockchain – the purchase dates and sales date of all Bitcoin that came in and out of his/her wallet for the same tax year. Then, he/she must match the purchase and sale dates and prices of the same Bitcoin using blockchain data, and finally calculate the tax liability.
The specific identification method, just like the new FATF regulation, will require the crypto taxpayer to disclose all his/her crypto addresses. Will the IRS enforce it? Stay tuned, and we will soon find out.
Anonymity claimed to be one of the fundamental essences of crypto, but will this regulation destroy cryptocurrency? Probably not. Meanwhile, the European Union’s regulatory frameworksets a goal “to unveil the anonymity,” calling it “the biggest problem for combating money laundering and countering terrorist financing.” Regulation is an inevitable step in the process of market maturation, and is a major and significant step toward a much broader adoption.
Will crypto exchanges successfully adapt to the new regulation or is it a technical challenge that they are unable to implement? Will the IRS also ask for a declaration of crypto addresses? Let us know what you think in the comment section below.
via ZeroHedge News https://ift.tt/2YGCQkL Tyler Durden
Just when you thought flying coach couldn’t get anymore uncomfortable – and that airline companies couldn’t find a way to squeeze one more dollar out of each flight – Cebu Air in the Philippines says it plans on cramming a record 460 seats on some of its new A330 planes, according to Bloomberg. Cebu is moving kitchens and bathrooms on the plane to accomplish the task.
The 460 seats are 20 more than the plane’s current maximum.
Mathieu De Marchi, a Bangkok-based consultant at Landrum and Brown said: “It’s all a matter of squeezing as many passengers as they can. It’s only going to get worse over the next decade.”
And despite the protests of unhappy customers, packing more people onto flights has been a key to turning around the airline industry in recent years. In Asia, the strategy is the “bread and butter for low cost carriers” that serve a continent where 100 million people fly for the first time every year.
The demand coming out of Asia has led to shortages in everything from pilots to mechanics to airports to runways. Airlines do everything they can to avoid buying new aircraft and having to pay for extra landing rights at airports.
AirAsia is buying larger planes to deal with the problem. The budget airline said in June it was changing an order for hundreds of aircraft to larger models that carry 50 more people and are capable of flying 600 miles further. Other airlines are simply “bolting in more chairs,” like RyanAir. RyanAir led this charge in 2014 when they ordered new high density jets from Boeing with 8 more seats each than normal. Cathay Pacific airlines started cramming an extra seat into each economy row in its Boeing 777-300’s in 2017.
This cost the passengers about 1 inch of person space each.
And so less legroom is now the norm. Rows in economy were about 34 inches apart in the early 2000’s. Now, they’re about 30 to 31 inches. 28 inches can even be found on short flights. The size of seats has narrowed, also, from about 18.5 inches to 17 inches on average.
Often times, air rage occurs in economy class, where a lack of personal space can make people feel trapped and contentious.
Janet Bednarek, an aviation historian at the University of Dayton, Ohio, said:“Smaller seats are less controversial in Asia, partly because Asians tend to have slighter builds than Americans or Europeans. Where people are smaller on average it is not as big an issue. Many people are willing to put up with discomfort in exchange for low-price tickets.”
In addition to personal space shrinking, prices have also come down. For instance, some international flights now cost less than half of what they did a decade ago, as competition from low cost carriers has forced all airlines to adapt, and charge for many items that were once free – including space.
For instance, a one way ticket from Shanghai to Manila can be less than $100 on Cebu Air. But the seats you’ll get are only 16.5 inches wide. Cebu placed a $6.8 billion order for Airbus jets in June that includes 16 higher capacity A330neos.
Airbus says the plane is made to fit 260 to 300 passengers. For bare-bones economy, Cebu will look to seat as many as 460.
via ZeroHedge News https://ift.tt/2YEPe8F Tyler Durden
On Friday, when we learned courtesy of the WSJ that Trump imposed the latest, and very unexpected, round of Chinese tariffs less than 24 hours after Powell’s “insufficient” rate cut, he did so by overruling Treasury Secretary Steven Mnuchin in at least giving Beijing the courtesy of an advance notice, and instead China – like the rest of the world – learned what was coming by reading Trump’s twitter feed, resulting in a violent market selloff. Commenting on this development, we said on Friday that Trump’s refusal “suggested that the trade hawks are now fully in charge of the situation in the White House.”
It turns out we were more right than even we expected, because on Sunday, because as the WSJ reported today in its extensive post-mortem, not only did Trump overrule Mnuchin’s tacit suggestion, but he also overruled all of his advisors – with the exception of trade hawk Navarro – when deciding to ramp up tariffs on China “after a heated exchange in which he insisted levies were the best way to make Beijing comply with U.S. demands.”
We already know the backstory: the trade talks which took place in Shanghai early last week, were brief and unproductive, with U.S. Trade Rep Robert Lighthizer and Treasury Secretary Steven Mnuchin both in China for just over 24 hours, and their itinerary consisted of a dinner the night they arrived and a meeting that lasted about three hours Wednesday. The outcome was a disaster for anyone who was hoping for trade talk progress.
Then, upon their return, the trade negotiators and other top advisers congregated early Thursday afternoon in the Oval Office to brief Mr. Trump on the talks. Lighthizer and Mnuchin conveyed that they didn’t yield the kind of results that Mr. Trump had intended, the people said.
While we already knew of this meeting, it is what happened during, that was first reported by the WSJ today. According to the report, Trump, who had a re-election rally scheduled in Ohio later that day, “wanted to be able to assure farmers—who have been hardest hit by the trade fight as China scaled back purchases of U.S. corn, soybeans and pork—that he had at least secured concrete commitments from the Chinese that they would boost their purchases of U.S. agricultural exports.”
However, that was not meant to be, and “to his frustration, Messrs. Lighthizer and Mnuchin couldn’t give him any guarantees.”
That’s when an angry Trump exploded: “Tariffs,” the president boomed to those present, including national-security adviser John Bolton, top economic adviser Lawrence Kudlow, China adviser Peter Navarro and acting chief of staff Mick Mulvaney.
And the punchline: all of them, except for China hawk Navarro, adamantly objected to the tariffs, the WSJ sources said. That spurred a debate lasting nearly two hours, although at the end “the president said his patience had worn thin and stood by his argument that tariffs were the best form of leverage.” Also, as a reminder, Beijing insists that tariffs must be dropped in return for concessions demanded by the U.S., virtually assuring that any change for a deal breakthrough is now even less.
In the end, Trump’s advisers conceded and helped the president draft the tweet announcing an extension of tariffs to essentially all Chinese imports.
What is even more striking, is that Trump’s decision followed weeks of advice from some of his top advisers, including his son-in-law Jared Kushner, to put China talks on the back burner, according to the people and a former administration official. Instead, the advisers urged Trump to focus on other trade pacts, including the pending deal with Canada and Mexico, which still needs congressional approval, as well as talks with Japan, which in recent weeks have gained momentum, these people said.
The proponents for not escalating the trade feud with China argued that any deal with Beijing is likely to be attacked as too soft by Democrats in Congress, and that an escalation in tariffs will eventually start to become a drag on the economy.
There is of course the “other” reason for the tariffs: the Trump-Fed feedback loop discussed extensively earlier today…
… and as the WSJ notes, “Trump’s resolve to impose the tariffs may have been further strengthened by the Federal Reserve’s decision just one day earlier to cut its benchmark interest rate by a quarter percentage point, which could give an already strong U.S. economy extra fizz.”
Then there is the fact that contrary to export warnings, the US economy has not suffered as a result of the ongoing trade war – unlike that of China, whose GDP is plumbing record lows – while inflation has remained dormant, failing to rise due to tariffs.
“The economic effects (of the trade dispute), at least in President Trump’s eyes, haven’t been massive on the U.S. economy and he’s got what he thinks the Fed is lowering rates to accommodate his trade policy,” said Chad Bown, a senior fellow at the Peterson Institute for International Economics. “Perhaps that emboldened him to do more tariffs.”
Of course, this too will soon change if Trump follows through with the 3rd round of largely “consumer-focused” tariffs (as described here)…
… which will have a far more immediate and profound impact on inflation, resulting in not only surging prices…
… but also an economic slowdown, which will likely translate into a stagflation in the coming months, with the Fed trapped to make any material monetary policy changes.
Meanwhile, China – which surely did not expect this adverse escalation in relations – has even bigger fish to fry with the situation over the ongoing instability in Hong Kong and ever more aggressive protests, likely forcing Beijing to intervene directly, as it warned over the past 48 hours it would unless protests fizzled out, which they are unlikely to do. And just so it has a pretext to do so, last week, just before the trade talks got under way, China’s Foreign Ministry accused Washington of being behind mass antigovernment protests in Hong Kong, with a spokeswoman calling them “the work of the U.S.”
What this means is that the chance of any trade deal resolution is now at best a mirage:
“Within Chinese government circles, there are strong voices against any deal with the Trump administration,“ said Myron Brilliant, head of International Affairs at the U.S. Chamber of Commerce. “With each escalation by either government, the two sides grow further apart and prospects of a comprehensive high-standard agreement more remote.”
Still, despite the deterioration in talks, Mr. Trump signaled confidence in the U.S. position from his New Jersey golf resort on Saturday. “Things are going along very well with China,” he said on Twitter, although it is fair to say that not even the algos believed that.
“They are paying us Tens of Billions of Dollars, made possible by their monetary devaluations and pumping in massive amounts of cash to keep their system going. So far our consumer is paying nothing—and no inflation. No help from Fed!”
Perversely, the Fed ishelping – it is doing so by underwriting Trump’s trade war, and the more said trade conflict escalates, the more aggressively the Fed will be bound to ease, helping Trump achieve his goal of at least boosting stocks temporarily higher…. before they crash.
Why? Because as BofA explained earlier today, the game theoretical equilibrium that has emerged for the trade war is one of “no pain, no deal”, and while a substantial equity market correction could delay the threatened tariffs, so far the market refuses to even consider a “substantial correction” – while the S&P 500 did sell off by almost 2% on Thursday after the tariffs were announced, this is a negligible drop from an all time high in the S&P above 3,000.
As a result, and given that markets were at all-time highs just a few days earlier, BofA believes that it will probably take at least a textbook definition market correction (i.e., a 10% decline) to move the needle on trade policy.
In short: the fate of the US-China trade war it in the hands of the market now, just as it was in November and December, when Trump capitulated faced with the prospect of an S&P500 bear market. This time won’t be different.
via ZeroHedge News https://ift.tt/2GLJqAc Tyler Durden
