V-Shaped Narrative Dies As Commercial Real Estate Bust Accelerates

V-Shaped Narrative Dies As Commercial Real Estate Bust Accelerates

Tyler Durden

Sat, 06/27/2020 – 11:00

The last week of June marks the time when investors lost hope for a V-shaped economic recovery as confirmed COVID-19 cases are exponentially rising in Texas, Florida, and California, and the Tri-state area imposed quarantine restrictions on travelers. Reopening in some of these states has also been delayed as retailers close up brick and mortar shops for a second time. 

With that being said – the V-shaped recovery narrative is imploding – as many on Wall Street indiscriminately bought stocks (some used picking Scrabble letters to buy) as their belief in the Federal Reserve’s money-printing would lift the economy out of one of the worst downturns since the 1930s. 

Though the economy was never lifted in a V-shaped formation, instead, the stock market rose to new highs as wreckless financial speculation led to an army of Robinhood daytraders buying bankrupted companies

With the euphoric period likely behind us, notably, because the Fed’s balance sheet has contracted over the last several weeks and virus cases across the country are soaring – we now turn our attention to the commercial real estate bust. 

During euphoric periods, like what’s happened over the last several months in financial markets, the bad news is usually overpowered with happy stories (sometimes from Larry Kudlow) – but as sentiment shifts – we must not lose track of the instabilities that can wreck the financial system.

Bloomberg cites a new report via real estate research firm Savills, which details how the Manhattan commercial real estate industry could be headed for a prolonged downturn if there’s no V-shaped recovery in the economy. 

The report says Manhattan’s office rents are likely headed to their lowest levels since 2012, that is if the economy doesn’t have a speedy recovery. That means asking rents could drop by 26% to about $62.47 a square foot, the real estate services firm said. 

A speedy recovery or not – the trend in corporate America is to work from home – companies have found ways to implement remote access for employees – and this trend will only gain momentum. 

That being said, the office market in New York City is headed for a serious bust – with recovery years away. 

“Many assume that when the stay-at-home measures are lifted, there will still be Covid-19 fears that will continue to materially influence behaviors and the economy,” Savills said. “These fears will likely remain until a vaccine or antibody therapy is developed and widely available, which experts currently estimate is at least 12 months away.”

It’s not just the office market that is in trouble – we noted this week that one-third of hotels in the city could go bankrupt

The cracks in commercial real estate have already emerged, in early June, there was a massive jump in CMBS delinquencies, suggesting the bust has only begun. 

For more clarity on the recovery timeframes – UCLA Anderson Forecast’s latest report suggests 2023.

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Writing an Academic Book, Part II: Choosing a Publisher

Books

In my first post in this series, I went over the criteria that should guide your decision on whether to try to write an academic book in the first place. I also explained the limitations of this series, such as that it is primarily intended for current and aspiring academics and policy analysts, and people who are considering publishing a book with an academic press. But let’s say you are in my target audience and you’ve decided you want to write a book. This post addresses the question of how to choose a publisher.

There are hundreds of university presses in the United States alone—academic publishers affiliated with universities. There are also numerous commercial academic publishers—presses that publish primarily academic books, but are not affiliated with a university.  How do you decide which ones to submit to? If you get more than one offer, how do you choose?

There is no definitive right answer to that question. But there are some basic ground rules that can help guide your decisions. First, you probably want to pick three or four publishers to submit to initially. If you do much more than that, they might run out of peer reviewers (as many will not be willing to review the same proposal for two different publishers or consider it unethical to do so). If you only do one or two at a time, you reduce your odds of success, or at least ensure it will take a lot longer. I’ll have more to say about peer review in the next post in this series.

When it comes to choosing your three or four, there is a rough pecking order of publishers, at least in law and the related fields and I am most familiar with (economics, political science, political philosophy). In no particular order, the biggest names are Princeton University Press, Harvard University Press, Oxford University Press, University of Chicago Press, and Cambridge University Press. A few other publishers are close to the same level, or perhaps just below it, depending on who you ask; examples include Stanford University Press and University of Michigan Press. After that, things are a lot less clear, and are more likely to vary by field.

Commercial academic publishers have a less clear-cut pecking order that probably varies more by field. But some of the best-known are Routledge, Edward Elgar, Hart, and Palgrave Macmillan. On the whole, the top commercial academic presses are seen as a bit less prestigious than the top university presses, though again this might vary somewhat by field.

I am not suggesting that all the best books get published by big-name publishers, or that lesser-known ones only publish dregs. Far from it. Even the most famous presses publish some mediocre books (or worse). And there are truly outstanding books that get published by little-known presses. On average, however, there is a rough correlation between the ranking of the publisher and the quality of books and authors they typically get, even if that correlation is far from perfect.

More importantly, from your point of view as an author, both academic and lay readers often use the prestige of the press as a signal of the likely quality of the book and the standing of the author. For that reason, getting a more prestigious publisher can benefit your career, and increase the potential audience for your work.

Perhaps it shouldn’t be that way. Maybe no one should judge a book by its cover—or by its publisher. In an ideal world, that is how it would be. But the purpose of these posts is to help you navigate the world of academic publishing as it actually exists, not the more perfect world we might want to have instead.

Moreover, in a world of limited information and constraints on time and energy, it’s at least somewhat understandable that readers would use the publisher as a signal of quality that helps determine which books to buy and read. Even the most dedicated reader can only read a small fraction of the millions of books out there. Indeed,  even experts in a given subject can only read a small fraction of the books published about it, if that subject is one on which a lot of people write, such as constitutional theory or World War II history. For that reason, they are likely to use “information shortcuts” to guide their reading choices; the name of the publisher will often be one such shortcut, even if not the only one.

As already noted, the rough ranking described above will vary by field to some degree. Some publishers have higher standing in one field than others. For example, my understanding is that Routledge is especially well-regarded in political theory. If you are unsure which publishers bat above their usual “weight” in your field, ask more senior scholars in your area.

Some publishers also have well-regarded book series devoted to a particular topic. For example, the University of North Carolina Press has a well-known (in its field) series on Civil War history. If you write in that area, getting a book published in their series might be the way to go.

Before making a final decision on where to submit, you should also find out the name of the editor at those presses you are considering, who works in your field. Their names can usually be found on the publisher’s website. Some editors have better reputations than others, and that might be relevant to your decision, as well. I will have more to say about working with editors in a future post in this series.

Despite such complications, the quick and dirty truth of the matter is that most academics and policy analysts—particularly those who rarely or never write books themselves—know relatively little about publishers. Lay readers usually know even less. So if your main goal in choosing a publisher is to advance your career and attract more interest in your book, you can’t go far wrong by focusing on the big-name publishers listed earlier in this post. If you can’t get one of them, then—in the minds of most readers—there is likely to be a correlation between the prestige of the university associated with the press, and how good they think the press is—even if the press is actually “better” or “worse” than the associated school is.

Having your book published by Ivy League University Press is likely to impress more readers than Podunk University Press, even if the latter actually has better editors and has published better-quality books, in some objective sense.  Similarly, a press associated with a well-known university will generally look more impressive than a commercial academic publisher.

Perhaps readers should be more discerning, and devote more time to learning about the strengths and weaknesses of different publishers. But most—including even most academics—aren’t willing to take the time and effort to do so. Some simply have too many other demands on their time; others, perhaps, are just lazy. Regardless, this is the reality you have to deal with.

What if your proposal or manuscript gets rejected by all the “top” publishers? In that case, it may well make sense to go down to the next tier. How “low” you are willing to go depends on a lot of factors, including how badly you need to publish a book, and how much the prestige of the publisher matters to you.

At a certain point, continuing to submit to more and more publishers will not be worth it. I can’t tell you exactly when that is. But if your book gets rejected eight or ten or twelve times, there is a good chance you have to either give up the project or revamp it substantially. You should also remember that getting a book considered by the relevant editor and then sent out for peer review (if he or she likes it enough) will usually take two or three months. So plan accordingly—particularly if you need to get a contract for your book quickly.

Most of this advice about the relative standing of publishers should not matter to you if you are such a big name in your field that most of your intended audience will read your books just because you are the person who wrote them. If you’re that successful, you probably don’t need to get a prestigious publisher to advance your career, either. In that event, you can choose a publisher without regard to prestige, and just focus on factors like the quality of the editor, how big a royalty you will get, and so on. But if you’re in that good a position, you probably don’t need my advice anyway!

What if you’re fortunate enough to get more than one offer? If so, congratulations, you’ve beaten the odds!  Good academic publishers generally reject a lot more books than they accept.

If the standing of the publisher matters to you and one of your offers is a much bigger name than the others, that might dictate your choice. Even so, you might be able to use the less prestigious offer as leverage to get concessions from your first choice.

What should you bargain for? That depends on  your sutation. Some authors try to get higher royalties. For reasons noted in my earlier post (most academic books will not make you a lot of money, regardless), this probably should not be a major factor in your decision, in most cases. But if your book seems likely to sell a lot of copies, or you’re in a difficult financial situation, where even a few hundred dollars can make a big difference to you, then you might choose to use your leverage here. In my experience, if one publisher offers a higher royalty than another, the one that offered less will usually be willing to match the higher offer (unless, perhaps, the difference is really large).

You can also try to push for the publisher to make more of an effort at marketing the book and to either give you more free author copies, or commit to sending more free copies to potential reviewers and other influential people of its own accord. This can be very useful in promoting the book! I will have more to say about promotion in a later post.

Personally, I usually focus my efforts on ensuring that the publisher will either do an initial paperback edition of the book or commit to a relatively low price for the initial hardcover (preferably under $30). If you don’t push for this, you could easily end up with a price that is far higher than most readers are willing to pay. Many academic books  are priced at eighty or a hundred dollars a copy.

That price structure is understandable, because most academic books will sell very few copies, except to libraries. And libraries are willing to pay high prices. If the publisher is only going to sell a few hundred copies, mostly to an audience that isn’t price-sensitive, they might as well make as much money per copy as possible. But this price structure is terrible if you want to reach anything approaching a broad audience.

Thus, if you want to promote your book to lay readers or even to academics who don’t have very large expense accounts for book-buying, you want to push as hard as you can to get the publisher to set a lower price. Having a second offer can be a big help in that respect.

The good news is that if you publish one book that sells reasonably well by academic standards (1000-2000 copies or more), publishers will usually be willing to make this concession for your succeeding books, without nearly as much arm-twisting. At that point, they know that it’s actually in their own interest to give you what you want (as they can profit from the extra sales). It worked for me, and it can work for you too.

In the next post in this series—which may not come for a few weeks—I will describe how you can navigate the publication process, and increase your odds of getting your book accepted.

 

 

 

 

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David Stockman On What Could Happen If The Fed Loses Control

David Stockman On What Could Happen If The Fed Loses Control

Tyler Durden

Sat, 06/27/2020 – 10:30

Via InternationalMan.com,

International Man: Recently, Fed Chairman Jerome Powell said the central bank’s money printing is designed to help average Americans, and not Wall Street.

What’s your take on this?

David Stockman: Yes, and if dogs could whistle, the world would be a chorus!

The truth is, in an economy encumbered with nearly $78 trillion of debt already—including $16.2 trillion on households, $16.8 trillion on business, $23 trillion on governments—the last thing we need is even lower interest rates and even bigger incentives to take on debt and leverage.

In fact, in a debt-saturated system, the Fed’s massive bond purchases never transmit anything outside the canyons of Wall Street. This money-printing madness only drives bond prices higher and cap rates lower—meaning relentless and systematic inflation of financial assets’ prices.

As a practical matter, of course, the bottom 90% don’t own enough stock or even inflated government and corporate bonds to shake a stick at. Instead, what meager savings they have accumulated languish in bank deposits, CDs or money market funds earning exactly what the Fed has decreed—nothing!

So, when Powell says he’s only trying to help the average American, you have to wonder whether he is just stupid or the greatest lying fraud yet to occupy the big chair at the Fed.

Then again, it doesn’t really matter why.

The Fed is now a completely rogue institution that is a clear and present danger to the future of prosperity and liberty in America. The tragedy is that the clueless speculators on Wall Street and politicians in Washington don’t even get the joke.

International Man: So far, the Fed has been able to successfully manipulate interest rates to historic lows.

What are some catalysts that could cause the Fed to lose control and interest rates to spike?

David Stockman: They are chasing their tail, faster and faster. The more they expand their balance sheet, thereby injecting into the bond pits a massive artificial bid for governments, corporates, munis, commercial paper and junk, the lower the yields go, and the demand for more debt becomes greater.

Needless to say, when incomes drastically shrink due to the folly of Lockdown Nation, debt should be liquidated, not massively increased. So, the Fed and its fellow-traveling global central banks are setting up our Humpty-Dumpty economy for a very great fall.

That is to say, what will cause the central banks to lose control is the greatest wave of debt defaults in recorded history. On that score, the Fed just issued its Flow of Funds data for Q1, and it leaves nothing to the imagination. Total public and private debt on the US economy now stands at $77.6 trillion, or 3.5X GDP, and we’ll be lucky to post at $21 trillion for the full year of 2020 GDP.

Recall that we supposedly got a wakeup call back in 2008, when the economy plunged into financial crisis and the worst recession since the 1930s; way too much debt was widely identified as the fall guy. But back then, total debt outstanding was just $52.6 trillion, meaning that during the last decade of purported recovery, the US economy actually took on $25 trillion of new debt—a 48% increase.

Moreover, big-spending politicians were not the only culprit. That’s because when the central banks drastically falsify interest rates to sub-economic levels, everyone is incentivized to borrow hand-over-fist. And, most often, it’s for unproductive purposes, such as more transfer payments in the government sector and more financial engineering among the C-suites.

On the eve of the Great Recession, for example, total business debt (corporate and non-corporate) stood at $10.1 trillion and has subsequently soared to $16.8 trillion. That $6.7 trillion gain represents fully 98% of the $6.85 trillion increase in nominal GDP during the same period.

This orgy of borrowing also means that business debt over the past 13 years has grown by 66.5%—far more than the 46.7% expansion of nominal GDP. Accordingly, the business debt burden on GDP has now gone off the charts, and at 78% of GDP, is more than double the pre-1970 level:

Business Debt as Percent of GDP:

  • 1955: 31%

  • 1970: 47%

  • 1980: 49%

  • 1995: 55%

  • 2007: 69%

  • 2020: 78%

Stated differently, chronic financial repression and clubbing of interest rates by the central bank have amounted to a slow-motion burial of the business sector in debt; debt that in recent decades has been overwhelmingly allocated to shrinking the equity base of business enterprises, thereby cycling wealth from the productive economy to the rent-capturing precincts of Wall Street.

Indeed, the Fed’s cheap credit never really leaves the canyons of Wall Street, where it fulsomely rewards carry-traders and risk asset speculators because zero cost money is always and everywhere the mother’s milk of leveraged speculation.

It also causes corporate C-suites to become maniacally obsessed with goosing their stock options via financial engineering gambits like stock buybacks, leveraged recaps and wildly over-priced M&A deals as a substitute for organic growth. Yet these maneuvers merely supplant equity and financial resilience with debt and financial fragility.

So when business bankruptcies soar to unprecedented levels in the month ahead as the economy reels from the folly of Lockdown Nation, the financial fragility part will become crystal clear.

But it also needs to be recalled that even as the interest rate clubbers at the Fed fostered a massive explosion of business debt after the 2008 financial crisis, it did not translate into any growth in productive investment at all.

In fact, real business CapEx minus current capital consumption (depreciation and amortization charged to current period production) is today barely a tad higher than it was 20 years ago on the eve of the dotcom bust.

In short, the Fed has fostered a zombie economy, and it is the collapse of the zombies that will eventually take it down.

International Man: The Fed has printed more money in recent months than it has for its entire history. The government is spending as if trillion is the new billion.

What is going on here?

David Stockman: Here’s an eye-opener to put this madness in perspective. Annual federal outlays posted at $3.896 trillion in 2014 and were the product of 225 years of relentless expansion by the Leviathan on the Potomac.

But it now appears quite certain that the annual deficit in FY 2020 will actually be larger than the total spending level that took more than two centuries to achieve.

That’s right. Owing to the mushrooming coast-to-coast soup lines hastily erected by Washington in response to the collapse of jobs, incomes and business cash flows brought on by Lockdown Nation and the evaporation of tax revenues, Uncle Sam will borrow more this year than the total spending just six years ago.

Stated differently, back in the day, we struggled to keep total federal spending during 1981 under $700 billion. By contrast, the Donald has borrowed nearly 4X that in the last 90 days!

So, yes, perhaps Trump’s one truthful boast is that he is indeed the king of debt.

Needless to say, there is nothing remotely rational, plausible or sustainable about an FY 2020 budget that’s going to end up with revenue south of $3 trillion and spending north of $7 trillion.

That’s not even banana republic league profligacy; it’s just sheer stupidity and madness, bespeaking a bipartisan duopoly in Washington that has had its collective brains turned into sawdust by the relentless, egregious money pumping of the central banks.

For want of doubt, just consider what has happened since March 11 on the eve of the Lockdown Nation’s commencement.

  • The public float of federal debt has soared from $17.85 trillion to $20.24 trillion, gaining $2.39 trillion;

  • The Fed’s balance sheet has exploded from $4.31 trillion to $7.17 trillion, gaining $2.86 trillion.

  • The Fed has, therefore, effectively monetized 119% of the gain in the publicly traded Treasury debt.

Of course, you can’t blame the Donald alone for this insanity; he’s been enabled by two of the greatest crackpots to hold high economic policy positions in American history—Treasury Secretary Mnuchin and Fed Chairman Jay Powell.

As it has happened, we have closely observed every combination of Fed chairman and US treasury secretary since 1970, when we headed off for our first job in the Imperial City, eager to better the world and our own prospects, too.

So, we can say without reservation that the current duo is the worst combo of spineless, principle-free empty suits to plague the nation during the last half-century. And it’s not a close call—even against a ship of fools, which include John B. Connally, G. William Miller, Ben Bernanke, Hank Paulson Jr., Timothy Geithner and Janet Yellen, among considerable others.

After all, if the Treasury Secretary and Fed Chairman are utterly clueless about the grave dangers of the fiscal and monetary bacchanalia now rampant in the imperial city, how in the world will it stop except in some fiery collapse?

*  *  *

Unfortunately there’s little any individual can practically do to change the trajectory of this trend in motion. The best you can and should do is to stay informed so that you can protect yourself in the best way possible. That’s precisely why New York Times bestselling author Doug Casey just released an urgent new report on how to survive and thrive an economic collapse. Click here download the free PDF now.

via ZeroHedge News https://ift.tt/2NA3R6a Tyler Durden

Illicit Raves Across Europe Are Contributing To A Revival In COVID-19 Infections

Illicit Raves Across Europe Are Contributing To A Revival In COVID-19 Infections

Tyler Durden

Sat, 06/27/2020 – 09:55

Thanks in part to an outbreak at a meat processing plant in Germany, and outbreaks connected to beachside parties in places like Lisbon, lockdown conditions were imposed for the first time in weeks in parts of Germany and Portugal, while the WHO warned that Europe saw a jump in new cases last week for the first time in weeks, a dangerous sign considering what’s happening in the US and Brazil.

But while the American press slams Florida Gov Ron DeSantis as beaches in his hard-hit state have reopened amid a surge in cases, parties, often illicit street parties and raves, have become a serious threat in Europe as it becomes clear that the virus spreads the most quickly at relatively intimate parties, like a surprise birthday party in Texas that led to 18 of the more than 70 attendees getting infected.

“Last week, Europe saw an increase in weekly cases for the first time in months,” Hans Kluge, the regional director for Europe, told reporters on Thursday. He did not identify any of the countries, but added that the situation was particularly acute in 11 countries.

According to the Guardian, illicit raves in France and Germany have created problems for local police.

As countries crack down on illicit parties, the task has been largely left to police. This week saw police sporadically clash with the thousands who thronged to Paris’s Canal Saint-Martin and Marais district for the annual Fête de la Musique, while in Berlin more than 100 officers broke up a demonstration that turned into a spontaneous, 3,000-person party earlier this month. In Berlin, police have also warned of a rise in illicit raves in the city’s parks.

Even France saw a 12% jump in daily reported cases over the last week, while Germany saw a stunning 37% jump, thanks largely to the outbreak at the state-run abattoir.

Gatherings have taken place from England to Spain – anywhere warm weather has arrived, which by now is pretty much all of Europe.

Warmer weather and the relaxing of restrictions also fuelled gatherings in England, where police are grappling with a proliferation of parties, hastily organised on social media and held in motorway underpasses, parks and industrial estates. Earlier this month, two illegal raves in Greater Manchester attracted some 6,000 people.In hard-hit Spain, which on Wednesday reported its highest number of cases in three weeks, health officials have long warned about the risks of social gatherings.

“An outbreak brought on by a small, innocent party…just one outbreak could be the start of a new, nationwide epidemic,” Fernando Simón, the health official heading the country’s response to the virus, said in late May after a cluster of cases in the country’s north-east was linked to an illicit birthday party in which four of the 20 or so attendees tested positive.

Even Spanish royalty has been caught attending some of these illicit parties.

Days later another illegal party made headlines around the world and saw Spain slap a €10,400 (£9,400) fine on Belgium’s Prince Joachim after the royal breached the country’s quarantine rules to attend a party in southern Spain. He later tested positive for the virus.

It just goes to show: Europe likes to point fingers, but their citizens, who have been faced with typically more restrictive lockdowns, are so eager for contact that they’re simply defying the government as enforcement intensity lifts.

via ZeroHedge News https://ift.tt/2B6hmrO Tyler Durden

BuzzFeed “Reporter” Who Got Zerohedge Banned On Twitter, Fired For Plagiarism

BuzzFeed “Reporter” Who Got Zerohedge Banned On Twitter, Fired For Plagiarism

Tyler Durden

Sat, 06/27/2020 – 09:20

Almost five short months ago, ‘journalist’ Ryan Broderick was the envy of his fake news peers. The BuzzFeed ‘senior reporter’ had just written a hit-piece against Zero Hedge slamming us over the ‘conspiracy theory’ that COVID-19 may have emerged from a lab in Wuhan, China, and claiming that we doxed one of their scientists. Hours later, we were summarily kicked off of Twitter – a ban which has since been reversed after the social media giant admitted they were in error. Meanwhile, the lab origin ‘conspiracy theory’ has gained widespread support and is now the focus of several international investigations into the CCP lab.

Ryan Broderick via Twitter

Less than 48 hours after our February Twitter ban, internet sleuths discovered that Broderick had previously blogged about pedophilic fantasies involving young boys. Why he wasn’t fired on the spot is anyone’s guess. Perhaps former BuzzFeed editor-in-chief Ben Smith (now with the ‘Pedophilia: A Disorder, Not A Crime‘-promoting New York Times) has a soft spot for Ryan. 

On Friday, Broderick was fired for plagiarism after BuzzFeed‘s new editor-in-chief, Mark Schoofs, published “A Note To Our Readers” detailing eleven instances where Broderick lifted content from other publications without attribution going back to 2013, including his hit-piece against Zero Hedge.

“BuzzFeed News has found that the following articles do not meet our editorial standards, as laid out in our standards and ethics guidelines,” reads Schoofs’ note. “As a result, the articles have been updated to more clearly attribute phrases and sentence construction to material previously published by other news organizations.”

Which is a long-winded way to say: ‘Our Senior Reporter got caught plagiarizing eleven times, so we’re doing damage control.’

And now, Ryan can simply learn to code. Perhaps he should avoid blogging, photography and playgrounds.

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Bailout-Or-Bust For Europe’s Airlines

Bailout-Or-Bust For Europe’s Airlines

Tyler Durden

Sat, 06/27/2020 – 08:45

European airline carriers secured billions worth of government support since the start of the coronavirus pandemic.

Infographic: Bail or bust for Europe's airlines | Statista

You will find more infographics at Statista

Germany’s Lufthansa, the world’s fourth largest airline, received a nine billion euros lifeline, the biggest German corporate rescue caused by COVID-19 so far. This was no exception.

On June 26, for example, the Netherlands announced the details of its financial support for KLM with a bailout package worth of 3.4 billion euros.

Earlier, France announced seven billion euros worth of support for Air France.

However, as Statista’s Raynor de Best notes, this support comes at a cost for the airlines, as most European governments attach environmental conditions to their support.

This is because the sector’s greenhouse gas emissions kept growing up until 2020. Between January and June 2019, for example, carbon emissions from departing flights that originated from Austria and Finland grew by 19 and eight percent, respectively.

via ZeroHedge News https://ift.tt/2CNE2NV Tyler Durden

Canada’s Largest Province Grapples with Food Rules During COVID-19

CanadianBarber

Late Tuesday night, dozens of customers lined up outside a popular bar in Toronto. At midnight, the bar opened its doors, welcoming drinkers into its open-air patio for the first time in months after mandatory closures meant to combat the COVID-19 pandemic.

Given America’s close cultural, economic, and geographic links to Canada, and the fact that country has—like nearly every country to date—done a better job containing COVID-19 than has the United States, it’s worth taking a look at how Canada is reopening its food economy even as some U.S. states that reopened in part are being forced to pump the brakes due to rising numbers of COVID-19 diagnoses and hospital admissions.

Toronto, Canada’s most-populated city, is situated in the province of Ontario. It is Canada’s most populous province by a wide margin. Nearly four in ten Canadians reside in Ontario. The province also boasts more residents than its closest challengers—Quebec and British Columbia—combined.

Canada is facing many of the same challenges with its food system that Americans have been dealing with during the pandemic. Just like here in the United States, for example, while many smaller meat producers are thriving, larger meat processors have been hit by COVID-19 outbreaks among employees. Just like here in the United States, that’s hurt foreign workers particularly hard, given the fact tens of thousands of guest workers from Latin America and other countries plant, harvest, and process much of the food grown in Canada.

“Without them, Canadian farmers can’t feed us,” the Toronto Star editorial board wrote earlier this month. “There’s nothing more essential than that.”

After several Mexican agricultural workers died from COVID-19, in cases linked to outbreaks at more than a dozen Canadian farms—including a particularly severe outbreak in southwestern Ontario—Mexico announced it would halt plans to send vital workers to Canada unless the country agreed to implement steps to reduce the risk of infection among guest workers. After Ontario’s Fruit and Vegetable Growers’ Association recommended this week that all agricultural workers be tested for COVID-19, the province announced it would implement that step and others. Mexico and Canada reopened the worker pipeline this week.

Just as some state and local governments here in the U.S. have done, Ontario lawmakers and regulators have acted to reduce the burden of some food regulations. The province’s agriculture minister, Ernie Hardeman, has spoken before about the need to cut red tape in the food sector. To that end, Ontario lifted a ban this spring on retail-to-consumer cannabis deliveries. Last month, Ontario regulators lowered the minimum price bars and restaurants can sell on takeaway liquor from approximately $2.00 CAD per one-ounce serving to $1.34 CAD per serving.

Of course, no government body should mandate prices for buyers and sellers. But this may be what counts as progress in Ontario. After all, as I wrote in a column last year on the glacial pace of alcohol reforms in the province, decades of inadequate half-measures have been offered up as real reforms. As I noted at the time—well before the pandemic arrived in North America—the province had proposed several startlingly modest booze reforms, such as letting convenience stores sell beer and wine, legalizing happy hour advertisements and tailgating, allowing breweries, wineries, and distilleries serve all but mere samples, and letting local governments allow people to consume alcohol in public parks.

Since the pandemic took hold, Ontario has announced a host of additional measures intended to help reopening food businesses. Those steps include allowing proprietors to open new patios and expand existing ones. That process is needlessly complex.

“Normally what you’d have to do is apply up to four times a year and this would go on for 14 days at a time,” provincial attorney general Doug Downey said. “[T]here would be increased rules around barriers, that kind of stuff. This simplifies it.” Toronto has its own plan in place to facilitate that process, dubbed CaféTO.

But why all that red tape in the first place? Earlier this month, Canada’s National Post suggested alcohol Prohibition in the first half of the 1900s is still engrained the nation’s psyche.

“Canadian cities [are] still dealing with a prohibition hangover from a century ago,” the paper wrote. But the Post also suggested that the pandemic may cause lasting, positive changes in the ways Canada regulates food and drink.

“Decades from now, is it possible we’ll look back on COVID-19 as a turning point in Canada’s alcohol laws, just as we look at prohibition as a turning point in the other direction?” the Post asked. We can only hope that’s the case.

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Canada’s Largest Province Grapples with Food Rules During COVID-19

CanadianBarber

Late Tuesday night, dozens of customers lined up outside a popular bar in Toronto. At midnight, the bar opened its doors, welcoming drinkers into its open-air patio for the first time in months after mandatory closures meant to combat the COVID-19 pandemic.

Given America’s close cultural, economic, and geographic links to Canada, and the fact that country has—like nearly every country to date—done a better job containing COVID-19 than has the United States, it’s worth taking a look at how Canada is reopening its food economy even as some U.S. states that reopened in part are being forced to pump the brakes due to rising numbers of COVID-19 diagnoses and hospital admissions.

Toronto, Canada’s most-populated city, is situated in the province of Ontario. It is Canada’s most populous province by a wide margin. Nearly four in ten Canadians reside in Ontario. The province also boasts more residents than its closest challengers—Quebec and British Columbia—combined.

Canada is facing many of the same challenges with its food system that Americans have been dealing with during the pandemic. Just like here in the United States, for example, while many smaller meat producers are thriving, larger meat processors have been hit by COVID-19 outbreaks among employees. Just like here in the United States, that’s hurt foreign workers particularly hard, given the fact tens of thousands of guest workers from Latin America and other countries plant, harvest, and process much of the food grown in Canada.

“Without them, Canadian farmers can’t feed us,” the Toronto Star editorial board wrote earlier this month. “There’s nothing more essential than that.”

After several Mexican agricultural workers died from COVID-19, in cases linked to outbreaks at more than a dozen Canadian farms—including a particularly severe outbreak in southwestern Ontario—Mexico announced it would halt plans to send vital workers to Canada unless the country agreed to implement steps to reduce the risk of infection among guest workers. After Ontario’s Fruit and Vegetable Growers’ Association recommended this week that all agricultural workers be tested for COVID-19, the province announced it would implement that step and others. Mexico and Canada reopened the worker pipeline this week.

Just as some state and local governments here in the U.S. have done, Ontario lawmakers and regulators have acted to reduce the burden of some food regulations. The province’s agriculture minister, Ernie Hardeman, has spoken before about the need to cut red tape in the food sector. To that end, Ontario lifted a ban this spring on retail-to-consumer cannabis deliveries. Last month, Ontario regulators lowered the minimum price bars and restaurants can sell on takeaway liquor from approximately $2.00 CAD per one-ounce serving to $1.34 CAD per serving.

Of course, no government body should mandate prices for buyers and sellers. But this may be what counts as progress in Ontario. After all, as I wrote in a column last year on the glacial pace of alcohol reforms in the province, decades of inadequate half-measures have been offered up as real reforms. As I noted at the time—well before the pandemic arrived in North America—the province had proposed several startlingly modest booze reforms, such as letting convenience stores sell beer and wine, legalizing happy hour advertisements and tailgating, allowing breweries, wineries, and distilleries serve all but mere samples, and letting local governments allow people to consume alcohol in public parks.

Since the pandemic took hold, Ontario has announced a host of additional measures intended to help reopening food businesses. Those steps include allowing proprietors to open new patios and expand existing ones. That process is needlessly complex.

“Normally what you’d have to do is apply up to four times a year and this would go on for 14 days at a time,” provincial attorney general Doug Downey said. “[T]here would be increased rules around barriers, that kind of stuff. This simplifies it.” Toronto has its own plan in place to facilitate that process, dubbed CaféTO.

But why all that red tape in the first place? Earlier this month, Canada’s National Post suggested alcohol Prohibition in the first half of the 1900s is still engrained the nation’s psyche.

“Canadian cities [are] still dealing with a prohibition hangover from a century ago,” the paper wrote. But the Post also suggested that the pandemic may cause lasting, positive changes in the ways Canada regulates food and drink.

“Decades from now, is it possible we’ll look back on COVID-19 as a turning point in Canada’s alcohol laws, just as we look at prohibition as a turning point in the other direction?” the Post asked. We can only hope that’s the case.

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Central Banker Musical Chairs: Fed Exits LBMA Board, Banque de France Joins

Central Banker Musical Chairs: Fed Exits LBMA Board, Banque de France Joins

Tyler Durden

Sat, 06/27/2020 – 08:10

Submitted by Ronan Manly, BullionStar.com

For a group famous for its caution in appearing associated with and endorsing gold, Western central bankers seem to have made an exception when it comes to sitting on the board of directors of the world’s largest bullion bank gold cartel, the London Bullion Market Association (LBMA). But maybe that’s the point. Because, if central banks and their proxies are close to the action in the gold market, they will be able to control their interests, as well as influence and control others.

Which may explain why Isabelle Strauss-Kahn, former Market Operations director of the Banque de France (BdF), and formerly at the World Bank and Bank for International Settlements (BIS), is being appointed to the Board of the LBMA as an “Independent” non-executive director, with effect from 1st July. The Banque de France market operations role also included Strauss-Kahn being in charge of the French central bank’s gold and FX reserve management.

Until the Music Stops

In a classic case of musical chairs, Strauss-Kahn’s new appointment comes from a vacancy which has arisen due to the departure from another “Independent” LBMA board non-executive director, former Federal Reserve Bank of New York (FRBNY) head of FED Markets Group, Simon Potter. Potter had left the Fed in May 2019 and joined the LBMA board just last January.

But although Potter, who was also system open market account manager when at the FRBNY, had a brief stint on the LBMA, it coincided with some memorable gold market action when both the London and COMEX gold markets blew up in the week of 23 March, and when the LBMA and COMEX hit the panic button, rolling out there “nothing to see here” messages for the mainstream media.

The Other Strauss-Khan

Isabelle Strauss-Kahn, who is also a member of the advisory board of the LBMA cheerleading organization, the World Gold Council , additionally has the distinction of being the sister-in-law of the infamous Dominique Strauss-Kahn (DSK) who many people will recognize as former managing director of the International Monetary Fund (IMF) from 2007 until that gig was cut short by his inglorious IMF exit in May 2011. Isabelle’s husband is Marc-Olivier Strauss-Kahn (MOSK), career executive at the Banque de France, and older brother of DSK.

DSK has left the building – Dominique Strauss-Kahn

Brother-in-law DSK also knows a thing or two about gold, having been IMF managing director during the time when the IMF claims to have sold 403.3 tonnes of gold between October 2009 and December 2010 in a series of ‘off-market’ sales to the central banks of India, Sri Lanka, Bangladesh and Mauritius ( a combined 222 tonnes), and secretive ‘on-market’ sales of the remaining 181.3 tonnes, possibly to China or to bail out bullion banks.

In fact, Isabelle Strauss-Kahn, her husband Marc-Olivier Strauss-Kahn (MOSK), and MOSK’s brother Dominique (DSK) were all living in Washington D.C. from 2008 onwards due to their respective jobs at the World bank, Banque de France US representative, and International Monetary Fund, respectively, so if gold was a frequent subject of discussion at their dinner parties, it would not have been a surprise.

MOSK was from 2008 to 2011 the “representative in America of the Banque de France” in Washington, as well as “senior visiting advisor” at the FED, as well as French administrator at the Inter-American Development Bank, a post that Christine Lagarde, then French finance minister, is said to have helped organize for him. Lagarde herself would go on to be managing director of the IMF in 2011 after DSK departed, showing the small circle in which these French central bank and monetary elites move.

Racketeering, Spoofing, Market Manipulation and Fraud

Note for the record that this LBMA Board is the same board that until September 2019 included one Michael Nowak, JP Morgan managing director and head of the bank’s global precious metals desk. Until that is, Nowak was indicted by the US Department of Justice (DoJ) for a “massive, multiyear scheme to manipulate the precious metals markets” over an 8 year period. This involved according to the DoJ, a “racketeering conspiracy”,”wire fraud affecting a financial institution, bank fraud”, “conspiracy under the RICO Act, widespread spoofing, market manipulation and fraud”. Quite a mouthful.

A series of unfortunate indictments which even the LBMA could not spin their way out of, and once again in panic mood reacted by removing Nowak from the LBMA Board a few days after the scandal blew up. So yes, this is the same LBMA Board we are referring to here.

Independent of What Exactly?

On Isabelle Strauss Kahn’s appointment to this same above board LBMA Board, Ruth Crowell, LBMA chief executive said: “We look forward to working with Isabelle, whose extensive experience in the financial services industry – specifically with central banks, will further strengthen LBMA’s global reach and independence of the Board.

With central banks some of the main players in the gold market through their secretive gold leading, swaps and leases, not to mention their behind the scenes accumulation, distribution and repatriation of the yellow metal, the degree of ‘independence’ that influential former central bankers can have when on the board of the LBMA is debatable, to put it mildly. “Independent of what?” may be the best question, and why the secrecy?

Let’s not forget that other claimed ‘Independent’ member of the LBMA Board, the Chairman of the LBMA Board in fact, Paul Fisher, came to the LBMA in September 2016 after a career with the Bank of England, where “from 2002, he ran the Bank’s Foreign Exchange Division where he had a constructive relationship with the LBMA and developed a working knowledge of the bullion market” (perhaps a working knowledge of how to intervene in the London Fixing in the style of his predecessor “gold operator” Terry Smeeton). Fisher’s LBMA appointment at the time led to an incisive tweet from Jim Rickards which nicely summed up the move:

Banks pick central banker to head #gold market. Like putting an oil exec in charge of Tesla: https://t.co/mwHzNQCBZU pic.twitter.com/k2oJJPdYnh

At the Behest of the Bank of England

But with the LBMA actually established in 1987 at the behest of the Bank of England  when the Bank tapped bullion banks of the likes of N.M. Rothschild, J.Aron (now Goldman), Morgan Guaranty Trust, and Mocatta & Goldsmid to formalise the  London bullion bank cartel, can anyone be surprised that central bankers alumni from the three largest gold trading central banks in the world, the Bank of England, New York Federal Reserve and Banque de France, are invited onto or place themselves on the LBMA board?

Not only that but that the three people in question (Fisher, Potter and Strauss-Kahn) are all former heads of the foreign exchange and gold market departments at their central banks, and expertly versed in market operations (i.e. FX and currency interventions). What are the chances of this happening unless it was a pre-planned drive to recruit these people or else the central banks made an offer the LBMA could not refuse?

Gold to Central Bankers is like the Sun to Vampires

For a profession with a long and documented history and a vested interest in containing the gold price through gold price smoothing and stabilization operations, or as Strauss-Kahn’s predecessors at the Bank for International Settlements in Basel said “to break the psychology of the market”, the question that maybe should be asked is what are former central bankers (indeed the very heads of market operations) even doing near the gold market, let alone on the board of directors of the LBMA? Unless, shock horror, they are there to represent the interests of central banks, interests which are proven to want to scupper gold’s free market price performance.

With Isabelle Strauss-Kahn now on ‘Board” with the bullion banks, we can also ask how safe and unemcumbered are the Banque de France gold reserves, all 2435.4 tonnes of them, nearly all of which are stored in the Banque de France “La Souterraine”gold vaults, in the 8th lower basement below the Bank’s mammoth headquarters in Paris.

“La Souterraine” – Banque de France gold vaults, Paris

Given that JP Morgan opened a gold account with the Banque de France towards the end of 2018 to take advantage of the Banque de France’s gold services (which include gold lending), will those French gold bars stay safe in the silence of the Parisian vaults, or will the main security entrance of the Banque de France on Rue de Valois be now seeing more activity, as more Good Delivery gold bars flow out of the vault in security trucks destined for “liquidity and market operations”? The answer to that is that we may never know, for while central banks constantly claim to be transparent in the gold market, they are nothing of the sort, quite the opposite actually.

In October 2018, Isabelle Strauss Kahn’s first dalliance with the LBMA was penning an article for the LBMA publication the Alchemist with the misleading title of “Removing the Cloak from Central Bank Gold Operations”, which was filled with anecdotes and many words but which unsurprisingly did not remove any cloak from the gold market.

Absent were any mention of the identities of central bank gold holders at the gold storage facilities of the Banque de France, Bank of England, New York Federal Reserve and Swiss National Bank. Absent were any details of the extent of outstanding gold loans and swaps among the world’s central banks or any quantification of  these loans. Absent were the identities of the bullion bank counterparties to these central bank gold loans and swaps. You get the picture. In fact nothing was revealed at all.

Shrouded in Secrecy, the London gold market, especially central bank gold operations

However, the Strauss-Kahn article ended with this nugget from the author on the subject of transparency, when she said that:

In conclusion, while central banks may not disclose everything and must preserve some mystique, as evoked by Stefan Zweig, they should be as open and transparent as possible, and should not seek to be shrouded in mystery just for the sake of it.

Welcome to the world of central bank oxymorons where black is white, and white is black. But a model answer for a central banker who is sure to do well on the LBMA Board and may even be asked to help draft LBMA press releases. Just put non disclosure, mystique, open, transparent, not shrouded in mystery, in the same sentence and hope nobody reads it.

The reference to Stafen Zweig (which Strauss Kahn refers to earlier in her article) is interesting however. Zweig a journalist and novelist, while visiting the “La Souterraine” Banque de France gold vault in Paris in 1932, described the French gold reserves as “the heart of our economic world, the epicentre of the invisible waves that affect markets, stock exchanges, banks”. Zweig was describing how not only gold is the centre of the monetary world, but that gold when it makes its moves, affects the entire system.

In the aftermath of the 23 March 2020 liquidity events that have sent shockwaves through the London and COMEX gold markets, and with the gold price now breaking out in US dollars terms, perhaps Strauss-Kahn and the LBMA Board are about to witness the invisible waves of physical gold that Zweig so perceptively described all those years ago in Paris when visiting the gold vaults of ‘La Souterraine’. Those interested in Stafen Zweig’s perspective can see a modern recreation of his visit to the Banque de France gold vaults here.

This article was originally published on the BullionStar website under the title “Central banker Musical Chairs at the LBMA – Fed exits, Banque de France joins.”

entral banker Musical Chairs at the LBMA – Fed exits, Banque de France joins“.

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Plunging Aerospace And EV Demand Sends Cobalt Prices Tumbling 

Plunging Aerospace And EV Demand Sends Cobalt Prices Tumbling 

Tyler Durden

Sat, 06/27/2020 – 07:35

Cobalt prices slumped to a 10-month low this week due to waning demand from the aerospace and electric vehicle industries – all suggest the V-shaped recovery in the global economy is nothing but a distant dream. 

Airlines are slashing orders for Airbus and Boeing passenger planes as the travel and tourism industry has collapsed. In response, carriers have had to quickly reduce operating capacity by ground fleets of planes until passenger volumes recover. 

Boeing CEO Dave Calhoun recently warned it could take 2-3 years for air travel growth to return to pre-corona levels, adding that long term growth trends could take much longer. 

With reduced flights and declining orders for new planes, demand for cobalt used in jet turbine blades is expected to slump in the back half of the year. 

“The harsh high temperature and pressure environments of the jet engine necessitates regular replacement of turbine blades,” CRU analyst George Heppel told Reuters. “But planes are grounded, turbine blades aren’t being used and don’t need replacing.”

Heppel estimates cobalt demand for the aerospace parts industry will be around 4,442 tonnes this year, a drop of 18% from 2019 and the lowest since 2011. He forecasts a 6,300-tonne surplus this year and global consumption around 131,800 tonnes.

The average spot price of cobalt in the U.S. stood at $15.13, down about 15% since January, hitting lows not seen in ten months. Below are global cobalt prices, prices slumped 4-5 months before the pandemic.  

“The pandemic has affected demand and supply. Cobalt mined from (the Democratic Republic of) Congo is typically exported for refining through Durban in South Africa, where there was lockdown (to halt the spread of the new coronavirus), which created logistical disruptions,” said Roskill analyst Ying Lu. 

Cobalt from the DRC is used in lithium-ion batteries for electric vehicles. Much of it is exported to China, which suggests lower spot prices are the result of declining electric vehicle sales

Weakened cobalt consumption tells us a lot about the global recovery – here’s a hint – world stocks are mispricing the shape of the recovery, it ain’t a “V” but more like a “U” or “L.” 

 

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