Month: June 2020

The Treasury Secretary and Fed chair will discuss their approach to rescuing the economy at a House Financial Services Committee hearing on Tuesday.

We suspect the two will have somewhat different views of the way ahead with Mnuchin signaling confidence in the v-shaped recovery and Powell continuing to stress unprecedented uncertainty.

Both will likely agree that their efforts saved the ‘economy’ (and by economy, we mean the stock market)…

Watch Live:

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Fed Chair Powell’s Full Prepared Remarks below: (emphasis ours)

Chairwoman Waters, Ranking Member McHenry, and other members of the Committee, thank you for the opportunity to testify today to discuss the extraordinary challenges our nation is facing and the steps we are taking to address them.

We meet as the pandemic continues to cause tremendous hardship, taking lives and livelihoods both at home and around the world. This is a global public health crisis, and we remain grateful to our health-care professionals for delivering the most important response, and to our essential workers who help us meet our daily needs. These dedicated people put themselves at risk day after day in service to others and to our country.

Beginning in March, the virus and the forceful measures taken to control its spread induced a sharp decline in economic activity and a surge in job losses. Indicators of spending and production plummeted in April, and the decline in real gross domestic product, or GDP, in the second quarter is likely to be the largest on record. The arrival of the pandemic gave rise to tremendous strains in some essential financial markets, impairing the flow of credit in the economy and threatening an even greater weakening of economic activity and loss of jobs.

The crisis was met by swift and forceful policy action across the government, including the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). This direct support is making a critical difference not just in helping families and businesses in a time of need, but also in limiting long-lasting damage to our economy.

As the economy reopens, incoming data are beginning to reflect a resumption of economic activity: Many businesses are opening their doors, hiring is picking up, and spending is increasing. Employment moved higher, and consumer spending rebounded strongly in May. We have entered an important new phase and have done so sooner than expected. While this bounceback in economic activity is welcome, it also presents new challenges—notably, the need to keep the virus in check.

While recent economic data offer some positive signs, we are keeping in mind that more than 20 million Americans have lost their jobs, and that the pain has not been evenly spread. The rise in joblessness has been especially severe for lower-wage workers, for women, and for African Americans and Hispanics. This reversal of economic fortune has caused a level of pain that is hard to capture in words as lives are upended amid great uncertainty about the future.

Output and employment remain far below their pre-pandemic levels. The path forward for the economy is extraordinarily uncertain and will depend in large part on our success in containing the virus. A full recovery is unlikely until people are confident that it is safe to reengage in a broad range of activities.

The path forward will also depend on the policy actions taken at all levels of government to provide relief and to support the recovery for as long as needed.

The Federal Reserve’s response to these extraordinary developments has been guided by our mandate to promote maximum employment and stable prices for the American people as well as our role in fostering the stability of the financial system. Our actions and programs directly support the flow of credit to households, to businesses of all sizes, and to state and local governments. These programs benefit Main Street by providing financing where it is not otherwise available, helping employers to keep their workers, and allowing consumers to continue spending. In many cases, by serving as a backstop to key financial markets, the programs help increase the willingness of private lenders to extend credit and ease financial conditions for families and businesses across the country. The passage of the CARES Act by Congress was critical in enabling the Federal Reserve and the Treasury Department to establish many of these lending programs. We are strongly committed to using these programs, as well as our other tools, to do what we can to provide stability, to ensure that the recovery will be as strong as possible, and to limit lasting damage to the economy.

In discussing the actions we have taken, I will begin with monetary policy. In March, we lowered our policy interest rate to near zero, and we expect to maintain interest rates at this level until we are confident that the economy has weathered recent events and is on track to achieve our maximum-employment and price-stability goals.

In addition to these steps, we took forceful measures in four areas: open market operations to restore market functioning; actions to improve liquidity conditions in short-term funding markets; programs, in coordination with the Treasury Department, to facilitate more directly the flow of credit to households, businesses, and state and local governments; and measures to encourage banks to use their substantial capital and liquidity buffers built up over the past decade to support the economy during this difficult time.

Let me now turn to our open market operations. As tensions and uncertainty rose in mid-March, investors moved rapidly toward cash and shorter-term government securities, and the markets for Treasury securities and agency mortgage-backed securities, or MBS, started to experience strains. These markets are critical to the overall functioning of the financial system and to the transmission of monetary policy to the broader economy. In response, the Federal Open Market Committee purchased Treasury securities and agency MBS in the amounts needed to support smooth market functioning. With these purchases, market conditions improved substantially, and in early April we began to gradually reduce our pace of purchases. To sustain smooth market functioning and thereby foster the effective transmission of monetary policy to broader financial conditions, we will increase our holdings of Treasury securities and agency MBS over the coming months at least at the current pace. We will closely monitor developments and are prepared to adjust our plans as appropriate to support our goals.

Amid the tensions and uncertainties of mid-March and as a more adverse outlook for the economy took hold, investors exhibited greater risk aversion and pulled away from longer-term and riskier assets as well as from some money market mutual funds. To help stabilize short-term funding markets, we lengthened the term and lowered the rate on discount window loans to depository institutions. The Board also established, with the approval of the Treasury Department, the Primary Dealer Credit Facility (PDCF) under our emergency lending authority in section 13(3) of the Federal Reserve Act. Under the PDCF, the Federal Reserve provides loans against good collateral to primary dealers that are critical intermediaries in short-term funding markets. Similar to the large-scale purchases of Treasury securities and agency MBS that I mentioned earlier, this facility helps restore normal market functioning.

In addition, under section 13(3) and together with the Treasury Department, we set up the Commercial Paper Funding Facility, or CPFF, and the Money Market Mutual Fund Liquidity Facility, or MMLF. Millions of Americans put their savings into these markets, and employers use them to secure short-term funding to meet payroll and support their operations. Both of these facilities have equity provided by the Treasury Department to protect the Federal Reserve from losses. After the announcement and implementation of these facilities, indicators of market functioning in commercial paper and other short-term funding markets improved substantially, and rapid outflows from prime and tax-exempt money market funds stopped.

In mid-March, offshore U.S. dollar funding markets also came under stress. In response, the Federal Reserve and several other central banks announced the expansion and enhancement of dollar liquidity swap lines. In addition, the Federal Reserve introduced a new temporary Treasury repurchase agreement facility for foreign monetary authorities. These actions helped stabilize global U.S. dollar funding markets, and they continue to support the smooth functioning of U.S. Treasury and other financial markets as well as U.S. economic conditions.

As it became clear the pandemic would significantly disrupt economies around the world, markets for longer-term debt also faced strains. The cost of borrowing rose sharply for those issuing corporate bonds, municipal debt, and asset-backed securities (ABS) backed by consumer and small business loans. In effect, creditworthy households, businesses, and state and local governments were unable to borrow at reasonable rates and other terms, which would have further reduced economic activity. In addition, small and medium-sized businesses that traditionally rely on bank lending faced large increases in their funding needs as measures taken to contain the spread of the virus forced them to temporarily close or limit operations, substantially curtailing revenues.

To support the longer-term financing that is critical to economic activity, the Federal Reserve, in cooperation with the Department of the Treasury and using equity provided for that purpose under the CARES Act, announced a number of emergency lending facilities under section 13(3) of the Federal Reserve Act. These facilities are designed to ensure that credit would flow to borrowers and thus support economic activity.

On March 23, the Board announced that it would support consumer and business lending by establishing the Term Asset-Backed Securities Loan Facility (TALF). The TALF is authorized to extend up to $100 billion in loans and is backed by $10 billion in CARES Act equity. This facility lends against top-rated securities backed by auto loans, credit card loans, other consumer and business loans, commercial mortgage-backed securities, and other assets. The TALF supports credit access by consumers and businesses and provides liquidity to the broader ABS market. The facility made its first loans on June 25, and, to date, has extended $252 million in loans to eligible borrowers. Since the TALF was announced, ABS spreads have contracted significantly. Thus, the facility might be used relatively little and mainly serve as a backstop, assuring lenders that they will have access to funding and giving them the confidence to make loans to households and businesses.

To support the credit needs of large employers, the Federal Reserve also established the Primary Market Corporate Credit Facility (PMCCF) and the Secondary Market Corporate Credit Facility (SMCCF). These facilities primarily purchase bonds issued by U.S. companies that were investment grade on March 22, 2020. The two facilities have a combined purchase capacity of up to $750 billion and are backed by $75 billion in CARES Act equity. Final terms and operational details on the PMCCF were announced on June 29, and it stands ready to purchase newly issued corporate bonds and syndicated loans, serving as a backstop for businesses seeking to refinance their existing credit or obtain new funding. The SMCCF buys outstanding corporate bonds and shares in corporate bond exchange-traded funds (ETFs) to facilitate smooth functioning of the secondary market. The SMCCF complements the PMCCF, because improvements in secondary-market functioning associated with the SMCCF facilitate access by companies to bond and loan markets on reasonable terms. The SMCCF launched with ETF purchases on May 12. Earlier this month, the facility began gradually reducing purchases of ETFs as it started buying a broad and diversified portfolio of individual corporate bonds to more directly support smooth functioning and market liquidity in the secondary market. Purchase volumes are tied to market functioning and are currently at very low levels. The facility currently holds a total of about $10 billion in bonds and ETF shares.

Following the announcement of the two corporate credit facilities in late March, conditions in the corporate bond market improved significantly. Credit spreads on investment-grade bonds retraced much of the widening experienced in February and March, and issuance in the primary market rebounded strongly. In the secondary market, liquidity also improved, and by mid-April, flows out of mutual funds and ETFs specializing in corporate bonds reversed.

The Federal Reserve also launched the Main Street Lending Program, which is designed to provide loans to small and medium-sized businesses that were in good financial standing before the pandemic; such firms generally are dependent on bank lending for credit because they are too small to tap bond markets directly. Under the Main Street program, banks originate new loans or increase the size of existing loans to eligible businesses and sell loan participations to the Federal Reserve. The facility is backed by $75 billion in CARES Act equity and can purchase up to $600 billion in loan participations. The Federal Reserve has published all of the legal documents that borrowers and lenders will need to sign under the program and lender registration began on June 15. Loan participations will be purchased soon. Additionally, the Federal Reserve recently sought feedback on a proposal to expand the Main Street program to include loans made to small and medium-sized nonprofit organizations, such as hospitals and universities. Nonprofits provide vital services around the country, and the program would likewise offer them support.

While businesses in certain sectors that were particularly hard hit by the pandemic have reported continued difficulty in accessing credit, the Small Business Administration’s Paycheck Protection Program (PPP), which draws from existing bank lines, has apparently met the immediate credit needs of many small businesses. In the months ahead, Main Street loans may prove a valuable resource for firms that were in sound financial condition prior to the pandemic.

To bolster the effectiveness of the Small Business Administration’s PPP, on April 16, the Federal Reserve launched the Paycheck Protection Program Liquidity Facility. The facility supplies liquidity to lenders backed by their PPP loans to small businesses and has the capacity to lend up to the full amount of the PPP. As of last week, the facility held over $65 billion in outstanding term loans to participating financial institutions. The most recent monthly survey from the National Federation of Independent Business released in May indicates that small businesses have been able to meet their funding needs in recent months largely due to the PPP.

To help state and local governments better manage cash flow pressures in order to continue to serve households and businesses in their communities, the Federal Reserve, together with the Treasury Department, established the Municipal Liquidity Facility (MLF). The MLF is backed by $35 billion of CARES Act equity and has the capacity to purchase up to $500 billion of short-term debt directly from U.S. states, counties, cities, and certain multistate entities. The facility became operational on May 26, and, to date, the MLF has purchased $1.2 billion worth of short-term municipal debt. With the MLF and other facilities in place as a backstop to the private market, many parts of the municipal bond market have significantly recovered from the unprecedented stress experienced earlier this year. Municipal bond yields have declined considerably, issuance has been robust over the past two months, and market conditions have improved

The tools that the Federal Reserve is using under its 13(3) authority are for times of emergency, such as the ones we have been living through. When economic and financial conditions improve, we will put these tools back in the toolbox.

The final area where we took steps was in bank regulation. The Board made several adjustments, many temporary, to encourage banks to use their positions of strength to support households and businesses. Unlike the 2008 financial crisis, banks entered this period with substantial capital and liquidity buffers and improved risk-management and operational resiliency. As a result, they have been well positioned to cushion the financial shocks we are seeing. In contrast to the 2008 crisis when banks pulled back from lending and amplified the economic shock, in this crisis they have greatly expanded loans to customers and have helped support the economy.

The Federal Reserve has been entrusted with an important mission, and we have taken unprecedented steps in very rapid fashion over the past few months. In doing so, we embrace our responsibility to the American people to be as transparent as possible. With regard to the facilities backed by equity from the CARES Act, we have conducted broad outreach and sought public input that has been crucial in their development. For example, in response to comments received, the Treasury and the Federal Reserve have made a number of changes to expand the scope of the Main Street Lending Program to cover a broader range of borrowers and to increase the flexibility of loan terms. And we are now disclosing and will continue to disclose, on a monthly basis, names and details of participants in each facility; amounts borrowed and interest rate charged; and overall costs, revenues, and fees for each of these facilities.

We recognize that our actions are only part of a broader public-sector response. Congress’s passage of the CARES Act was critical in enabling the Federal Reserve and the Treasury Department to establish many of the lending programs. The CARES Act and other legislation provide direct help to people, businesses, and communities. This direct support can make a critical difference not just in helping families and businesses in a time of need, but also in limiting long-lasting damage to our economy. We understand that the work of the Federal Reserve touches communities, families, and businesses across the country. Everything we do is in service to our public mission. We are committed to using our full range of tools to support the economy and to help assure that the recovery from this difficult period will be as robust as possible.

Thank you. I’d be happy to take your questions.

A group of Congressional Democrats will be briefed at the White House Tuesday in response to ongoing accusations that Trump was made aware of but ignored what The New York Times described last Friday as a Russian military intelligence operation that sought to kill American troops in Afghanistan by issuing bounties to Taliban fighters. 

This following a Monday briefing of at least seven Republican lawmakers, also as both Republican and Democratic leaders demand answers and full briefings from the CIA and Pentagon. Crucially it remains, however, that the White House and the Office of the Director of National Intelligence have firmly rejected that the president was ever briefed.

On Saturday Director of National Intelligence John Ratcliffe said in a statement that he had “confirmed that neither the President nor the Vice President were ever briefed on any intelligence alleged by the New York Times in its reporting.” 

And Trump said further in a Saturday night tweet: “Intel just reported to me that they did not find this info credible, and therefore did not report it to me or VP.”

A carefully worded and to be expected somewhat vague Monday evening statement from CIA Director Gina Haspel appeared to vindicate the White House’s assertion of lack of credible intelligence behind it. Essentially the CIA director seemed to reference the danger of “cherry-picking” from lower level unvetted raw information.

“When developing intelligence assessments, initial tactical reports often require additional collection and validation,” Haspel said.

“Leaks compromise and disrupt the critical interagency work to collect, assess, and ascribe culpability,” she added, strongly suggesting that indeed there was not enough to go on concerning the Russian bounty allegations for it to rise to the level of the commander-in-chief.

Translation from CIA director’s intelligence-speak: there is no confirmed intelligence to support the sensationalized story based on one initial report — which makes little sense — of Russians bribing Taliban to kill U.S. troops. https://t.co/rB5kERtsg0

— Gareth Porter (@GarethPorter) June 30, 2020

A number of pundits took this as a clear denial that there was anything significant or worthy of briefing the president on regarding alleged “Russian bounties” — meaning it was likely deemed “chatter” or unsubstantiated rumor picked up either by US or British intelligence — and subsequently leaked to the press to revive the pretty much dead Russiagate narrative of some level of “Trump-Putin collusion”.  

Still, Congress wants answers in what’s already indeed looking like a revived Russiagate scenario conveniently timed for the outrage machine to kick into full gear just ahead of the November election. 

House Armed Services Committee Chairman Adam Smith (D-Wash.) said: “If the reports are true, that the administration knew about this Russian operation and did nothing, they have broken the trust of those who serve and the commitment to their families to ensure their loved one’s safety,” according to The Hill. “It is imperative that the House Armed Services Committee receive detailed answers from the Department of Defense.”

The media just discovered that American troops have been dying in Afghanistan for 19 years because this week there’s an anti-Trump angle.

— Max Abrahms (@MaxAbrahms) June 29, 2020

And of course newly minted “resistance hero” John Bolton, busy with a media blitz promoting his book, made statements to NBC’s Meet the Press on Sunday stating his belief that the president was likely briefed on the matter. The former national security adviser called the Trump denial “remarkable” — enough to grab headlines.

But considering his careful, ambiguous remarks, it’s clear that belief is the operative word here: 

“He can disown everything if no-one ever told him about it,” Bolton said… “It looks like just another day in the office at the Trump White House.”

Bolton said he didn’t know the quality of the intelligence on the Russian bounty plan, or the extent of it. And not all information that flows through the many U.S. intelligence agencies is passed on to the commander in chief, Bolton noted.

“There needs to be a filter of intelligence for any president, especially for this president,” he said.

“Active Russian aggression like that against American servicemen is a very, very serious matter,” Bolton added.

So at this point we are still merely at the level of “impossible to verify or confirm anything”, despite the major outlets behind the original story, namely the NY Times and Washington Post, claiming to have “confirmed” each other’s reporting. 

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Meanwhile, speaking of America’s longest war, does anyone at all of Capitol Hill remember this actual confirmed and exhaustively documented story?

Dubious spy-sourced #BountyGate story getting WAY more traction than WaPo’s bombshell Afghanistan Papers last December, exposing DC conspiracy of lies to keep their disastrous war going. That deeply-reported story vanished w/out consequences. https://t.co/i4uAsDC4Bt

— Mark Ames (@MarkAmesExiled) June 29, 2020

Authored by Jonathan Turley,

Twitter remorse is an emotion that millions experience daily. 

For most, a delete is sufficient until next Thanksgiving when a sibling brings it up at the table. 

For The Democratic National Committee, The Washington Post, and the White House there is no such thing as a deletion as shown this week. 

• The week began with a controversy over President Donald Trump retweeting a video of supporters, including one screaming “White Power.” 

• Then the Washington Post global opinions editor Karen Attiah was under fire for a tweet suggesting that all white women are lucky that they are not targeted for “revenge.” 

• Most recently, the Democratic National Committee retweeted a message that Trump visiting Mount Rushmore was a “celebration of white supremacy.” 

Notably, none of these tweets were actually defended, just deleted.

Trump deleted the video of a tweet showing Trump supporters and anti-Trump protesters engaged in an intense shouting match with one supporter yelling “White Power.”  The media legitimately spent exhaustive coverage on the tweet.  Trump has long been criticized for racially inflammatory rhetoric and the use of imagery and videos viewed by many as racist.  Given the controversies that range from Central Park Five to the Charlottesville protests, the tweeting of a video showing someone yelling “White Power” is news.

However, the media did not comparatively spend much coverage on the DNC tweeting that Mount Rushmore glorifies “white supremacy.”  That message appeared on the official Twitter account of  the Democratic National Committee when it shared shared a link to an article containing criticism of the visit as “glorifying white supremacy at Mount Rushmore- a region once sacred to tribal communities.”  George Washington, Thomas Jefferson, Theodore Roosevelt and Abraham Lincoln are shown at the site.

There was also comparatively little coverage of the tweet of Attiah even though this was a direct statement, not a retweet.  Yet, it received virtually no coverage or criticism.  he full tweet read:

“The lies & tears of White women hath wrought: -The 1921 Tulsa Massacre – Murder of Emmet Till – Exclusion of Black women from feminist movements – 53% of white women voting for Trump. White women are lucky that we are just calling them ‘Karen’s.’ And not calling for revenge.”

For those of us still reeling over the recent apology of the New York Times (and removal of its editor) for publishing a column from a conservative U.S. Senator, the lack of media coverage of a major editor’s posting is notable. My point is not that I want to see Attiah forced out. I do not.  Indeed, like many, I praised her efforts to highlight the murder of the writer Jamal Khashoggi by the Saudi government.  Moreover, Attiah is hardly the first person to have poster’s remorse of a tweet. We have all had such moments.

My point is the classic free speech and free press concern raised repeatedly on this blog over the consistency of standards.  I still believe that the New York Times’ actions will live in journalistic infamy.  It represented the lowest moment for that newspaper in abandoning any semblance of viewpoint neutrality while making echo-journalism a virtual official policy of the publication.

The coin of the realm for journalism has always been not just neutrality but consistency. The similar concern arises over the lack of coverage of the DNC controversy over the “White Supremacy” tweet as opposed to the Trump tweet over the “White Power” tweet. I think both tweets were outrageous.  Yet, there remains a decidedly different response from the media. Both the DNC and Trump are actively engaged in a presidential election season where issues of races are being discussed extensively and passionately.

The fact is that I view all of these tweets are likely the result of incautious, negligent, or thoughtless moments. I tend not to ascribe evil or racist or hateful motivations when simple stupidity or spontaneity could be the reason for a controversy. A tweet is a dangerous invitation for heedlessly moments as this week has already shown.

With the current state of coronavirus infections in the US increasingly about political considerations (especially whether a second wave will lead to another round of shutdowns, more economic carnage, millions more unemployed and crush Trump’s re-election chances) and far less about actual epidemiology and standards of care, two ideological camps have emerged – one which tries to overstate the impact of the pandemic in the US by focusing on the recent surge in new cases in sunbelt states (while ignoring the role recent protests and riots played in said surge), and another which, in downplaying the severity of the coronavirus, has been emphasizing the increasing testing which arguably also explains the jump in confirmed covid cases while underscoring the decline in covid-linked fatalities. This divergence is shown in the chart below.

Of course, this is a simplified assessment of the current debate. For a more nuanced take we go to JPM’s Nikolaos Panigirtzoglou who over the weekend wrote that the bank sees little evidence that the virus transmission rate, the so-called R, is increasing at an alarming rate.

Additionally, the JPM analyst notes that the evidence from China, Western Europe and from the North Eastern US states suggests that higher mobility post-lockdown has not seen a significantly higher R or a significant rise in hospitalizations. Furthermore, “the increase in cases in some Southern and Western US states and some countries such as Brazil or India do not imply a big second wave, but rather a situation where it takes longer for states to come out of the first wave as they either did not as strict lockdowns in place or relaxed them prior to shifting more meaningfully down the virus curve.”

Panigirtzoglou also reminds us that most of the US states reporting significant increases in reported cases have also reported large increases in testing. If we instead focus on hospitalization data from the CDC to gauge severity of the outbreaks, they suggest far more modest increases in most cases.

That said, there is a clear reflexivity in behavior in the context of the recent news, and while the severity thus far looks more muted, JPM points out that negative headlines as well as the risk of some roll-back of re-opening measures, as already announced in Texas, California, Arizona and New Jersey could induce more cautious behavior by people and potentially slow the growth recovery going forward. “If this downside risk materializes It would mean that we get more of a U rather than of a V shaped growth trajectory”, according to JPM.

Going back to the original point of “cases vs fatalities”, we hand the mic over to Nordea’s Andreas Steno Larsen who has argued in recent days that despite the recent deterioration in statistics, the US economy is unlikely to see similar shut downs to those experienced in March as the economic cost is simply too large.

As Larsen writes, pointing to the chart at the top, “the new increase in the amount of daily cases on a global scale is yet to morph into a re-increase in the amount of daily fatalities. Fatal cases are currently flatlining or maybe trending slightly upwards around 4-5000 a day. BUT (!), bear in mind that fatal cases are lagging the number of confirmed cases, why the jury is still out.”

The Nordea strategist then proposes that if the amount of fatal cases doesn’t increase more compared to current case count, “it likely reflects either i) that testing capabilities have been ramped up markedly, ii) that the virus is spreading in areas with a younger population (e.g. India and Brazil) or iii) that the CFR (case fatality ratio) is decreasing. We mostly buy into a combo of factor i) and ii).”

Larsen then echoes JPMorgan, and warning that consumption may take a “lock-down like” hit if the virus spread is not under  control, said that a “hammer and dance” strategy (swift total lockdown followed by a wide testing strategy) is ultimately the cheapest medium-term strategy. In this context, Europe is currently outsmarting the US on the Covid-19 strategy as is evident from the recent new case-spike in the US, which has led to setbacks for the re-opening momentum compared to Europe.

And, just like Panigirtzoglou, Larsen cautions against interpreting the renewed spike as a second wave, since it is mostly a result of a pick-up in cases in states that weren’t hit (materially) initially: “This is rather just the first material wave in areas that were not affected at the outset, while we are thankfully still yet to see a double-spike in e.g. the early epicentres as New York, Lombardia in Italy and Castilla La Nueva in Spain.”

That said, the Nordea strategist says that he doesn’t buy Trump’s message that “increased testing” is behind the case-spike as “the ratio of positive tests to negative tests are on the rise in e.g. Florida and Texas, which is a clear sign that the virus is spreading faster.”

While one may debate that, one thing Larsen is certainly correct about is that “with a clear increase in the virus momentum in Swing states, we would expect a big rhetorical battle between Governors and Trumps administration to be upcoming.”

As Larsen summarizes, “we are entering “crunch time” on fatalities since they should start to rise in early July given the lead/lag structure versus new cases.”

If fatalities don’t spike early in July, then people will conclude that it’s probably spreading amongst a part of the population that is not as sensitive, or that it is a resulted of increased testing or that the virus has become less deadly as we move into the summer months. Governors in Texas, California and Florida seem to have concluded that the below correlation holds, but the jury is still out.

His conclusion: “The next 6-10 days will be crucial.”

Just a day after the counterfeit China gold bar story hit the market, precious metals are bid this morning with Gold futures surging above $1800 for the first time since Nov 2011…

Breaking above May’s highs…

We asked yesterday – What happens next: a panicked scramble to procure physical gold, one which even our friends at the BIS will be powerless to stop from sending the price of the precious metal to all time highs.  

It appears that has begun…

Silver also soared back above $18…

Gold is tracking higher along with global negative-yielding debt…

This move comes, as SchiffGold.com notes, as Citibank has joined other mainstream gold bulls calling for record gold prices.

Citi raised its gold price forecast this week. It now projects a three-month price of $1,825 per ounce and for the yellow metal to head into record territory in 2021. Citi analysts expect gold to eclipse the $2,000 mark early next year.

Citibank joins several other mainstream players that now project record gold prices in the coming months. Last week, we reported Goldman Sachs now forecasts record gold prices within the next 12 months and Bank of America released a note saying gold could break its US dollar record by the end of the year if it continues to breach key resistance levels.

Meanwhile, SGMC Capital Founder & CEO Massimiliano Bondurri told Bloomberg he thinks gold may hit close to $2,000 by the end of this year and could rally further due to dollar weakness.

It can rally much, much further than here, for a number of reasons. First of all, we expect dollar depreciation to continue, so that’s likely to benefit gold.”

And Edison Investment Research is even more bullish, saying gold has the potential to go as high as $3,000.

Gold has been on a strong run over the last couple of weeks as the number of coronavirus cases has surged. Bullion is up better than 12% in this quarter.

Safe-haven demand has given gold a boost, but the big driver is the Federal Reserve and its unprecedented money printing. As US Global CEO Frank Holmes recently pointed out, there is a strong correlation between the expansion of the central bank’s balance sheet and the price of gold. We’ve already seen the balance sheet balloon by over $3 trillion in response to the coronavirus pandemic and it currently stands at over $7 trillion. Holmes said he thinks the central bank will likely grow its balance sheet to $10 trillion before all is said and done. If history is any teacher, that could mean $4,000 gold.

Edison director Charles Gibson also emphasized the correlation between the Fed balance sheet and the price of gold.

The reason this is significant is because, since 1967, the price of gold has shown an extremely strong (0.909) correlation with the total US monetary base. Gibson. The more dollars that either are, or could be, in circulation, the higher the expected gold price.”

Along with bullishness for gold, we’re starting to see some mainstream concern about dollar debasement – something Peter Schiff has been talking about for years. In its note, Goldman Sachs cited “continued debasement concerns” and a weaker dollar as two of the factors it sees driving gold higher.

Yale economist Stephen Roach’s recently warned that “the era of the US dollar’s ‘exorbitant privilege’ as the world’s primary reserve currency is coming to an end.” Meanwhile, Guggenheim Investments Chief Investment Officer Scott Minerd said that while “there are no signs the world is questioning the value of the US dollar” right now, it’s clear that the greenback is  “slowly losing market share as the world’s reserve currency.”

And he said buying gold is the key to offsetting the dollar’s decline.

With the Fed going all-in on financing the government deficit, the US dollar could be at risk to negative speculation of its status as the dominant global reserve currency. Investing in gold may help offset this trend.”

Is the world losing faith in fiat?

As a flood of advertisers suspend their campaigns on Facebook over ‘hate speech’ (perhaps the convenient excuse they were looking for), the Silicon Valley social media giant announced that starting today, they’re radically altering the way people see news – prioritizing original reporting, while demoting stories from anonymous authors, according to a Tuesday announcement.

In other words, Facebook will now better control what information users are exposed to – as opposed to allowing content to organically trend, and articles written anonymously are now considered unsuitable regardless of merit.

Facebook does acknowledge that “in some areas, transparency can put journalists at risk so we are only doing this in limited markets to start, taking into account the press environment in which publishers operate,” however we’re guessing that’s simply legalese designed to cover that base. We shall see.

According to Axios, the company will use artificial intelligence to identify which original stories to promote, which means that subsequent reporting that provides missing context or alternate views on events will also be muted.

Axios also notes that Google admitted to adjusting its algorithms last year in order to boost original reporting.

Last October, Facebook rolled out a “News” tab, which includes reporting from the Wall Street Journal, USA Today, and BuzzFeed – which just fired a guy for plagiarism.

We now know that Tesla’s Autopilot was to blame – yet again – for another near-fatal accident that took place last December. A Massachusetts State Police trooper had just pulled over a vehicle on the side of Route 24 in West Bridgewater when the trooper’s vehicle was slammed into by the Tesla. 

The driver who was pulled over, Maria Smith, said: “It just happened so quick. Before I knew it, my car was flying forward. I looked behind me, and my whole back windshield was blown out. There was glass in my hair.”

A man “driving” the Tesla had slammed into the State Police cruiser that, in turn, wound up slamming into the stopped SUV.  Nicholas Ciarlone, the driver is now facing a negligent driving charge, according to NBC 10.

The car was “finally stopped several hundred feet ahead” by another state trooper.

Court documents shows that when a trooper responded to the scene to help, Ciarlone said that he “must not have been paying attention.” Recall, at the time of the accident, we reported that the driver said that he had put the car in Autopilot because he was checking on his dog in the back seat. 

Smith said: “I thought that was terrifying. To think the sensors are not equipped enough to pick up a police car with its sirens and lights on the highway.”

At the time of the accident, state police took it as an opportunity to remind people that there are no vehicles yet that are fully automated. 

“Regardless of your vehicle’s capabilities, when operating a vehicle your full attention is required at all times to ensure safe driving,” state police concluded.

Even the NBC 10 article pointed out a number of other Autopilot accidents that have occurred recently, including:

• A deadly collision with a tractor trailer in Florida in 2016;

• A fatal crash into a concrete barrier on a California highway in 2018;

• A Utah driver who slammed her Tesla into a stopped fire truck at a red light;

• A collision involving a stopped Connecticut State Police vehicle last year.

Auto safety watchdog Sean Kane said about Autopilot: “We are all involved in a clinical trial that we didn’t sign up for.”

Recall, we wrote in January 2020 that Senator Ed Markey had referred to Autopilot as a “flawed system”. He said at the beginning of the year that Tesla should rebrand its driver-assist technologies and take “additional steps to ensure drivers pay attention to the road while using the system.”