Month: December 2020

While new- and existing-home sales fell in November, analysts expected pending-home-sales to stabilize unchanged (after falling 1.1% in October) but instead it tumbled 2.6% MoM – its third monthly decline in a row.

This is also the worst MoM drop since April when COVID lockdowns were widespread. This monthly drop also weakened the YoY surge to +16.0%.

Source: Bloomberg

Pending home sales declined in all four major U.S. regions. The gauge of contract signings in the West dropped 4.7% to a four-month low. In the Midwest, pending sales declined 3.1%, while in the South they fell 1.1%.

“The latest monthly decline is largely due to the shortage of inventory and fast-rising home prices,” Lawrence Yun, NAR’s chief economist, said in a statement.

“The market is incredibly swift this winter with the listed homes going under contract on average at less than a month due to a backlog of buyers wanting to take advantage of record-low mortgage rates.”

Having reached an all-time record high in August, it seems the buying-panic has abated…

Source: Bloomberg

Despite rates at record lows – and falling – it seems exuberance in the housing market (mostly felt by homebuilders not homebuyers) is starting to roll over.

 

 

 

The trade agreement negotiated between the UK and EU has, as expected, passed the House of Commons in a vote of 521 to 73, with a few members from a range of parties rejecting the deal for various reasons, even as the Labour leadership backed it.

The pound, which had been sliding all morning, jerked higher on the headline.

The vote puts the deal on track to become international law within hours.

Authored by Michael Lebowitz via RealInvestmentAdvice.com,

Fiscal policy shifted into turbo-charged, warp speed, overdrive early into the COVID related recession. To facilitate the borrowing binge, the Federal Reserve took unprecedented monetary actions. In 2020, the fiscal deficit (November 2019- October 2020) rose $3.1 trillion and was matched one for one with a $3.2 trillion increase in the Fed’s balance sheet.

The Fed is indirectly funding the government, but are they printing money? Technically they are not. However, they are inching closer through various funding programs in coordination with the Treasury Department.

Will the Fed ever print money? In our opinion, it is becoming increasingly likely as the requirements to service the interest and principal on existing debt, plus new debt, far exceeds what the economy is producing.

Given the increasingly dire mismatch between debt and economic activity, we think it is helpful to retell a tale we wrote about in 2015.  This article is more than a history lesson. It effectively illustrates the road on which the U.S. and many other nations currently travel.

This story is not a forecast but a simple reminder of what has repeatedly happened in the past.  

As you read, notice the lines French politicians use to persuade the opposition to justify money printing.  Note the similarities to the rationales used by central bankers, MMT’ers, and neo-Keynesian economists today. Then, as now, monetary policy is promoted as a cure for economic ills. As we are now constantly reminded, massive monetary actions have manageable consequences, and failure is blamed on not acting boldly enough.

Our gratitude to the late Andrew D. White, on whose work we relied heavily. The exquisite account of France circa the 1780-the 1790s was well documented in his paper entitled “Fiat Money Inflation in France” published in-1896. Any unattributed quotes were taken from his paper.

Before The Presses Rolled

During the 1700’s France accumulated significant debts under the reigns of King Louis XV and King Louis XVI. The combination of wars, significant financial support of America in the Revolutionary War, and lavish government spending were key drivers of the deficit. Through the latter part of the century, numerous financial reforms were enacted to stem the problem, but none were successful. On a few occasions, politicians supporting fiscal austerity resigned or were fired because belt-tightening was not popular, and the King certainly didn’t want a revolution on his hands. For example, in 1776, newly anointed Finance Minister Jacques Necker believed France was much better off by taking large loans from other countries instead of increasing taxes, as his recently fired predecessor argued. Necker was ultimately replaced seven years later when it was discovered France had heavy debt loads, unsustainable deficits, and no means to pay it back.

By the late 1780s, the gravity of France’s fiscal deficit was becoming severe. Widespread concerns helped the General Assembly introduce spending cuts and tax increases. They were somewhat effective, but the deficit was very slow to decrease. However, the problem was the citizens were tired of the economic stagnation that resulted from belt-tightening. The medicine of austerity was working but the leaders didn’t have the patience to rule over a stagnant economy for much longer. The following quote from White sums up the situation well:

“Statesmanlike measures, careful watching and wise management would, doubtless, have ere long led to a return of confidence, a reappearance of money and a resumption of business; but this involved patience and self-denial, and, thus far in human history, these are the rarest products of political wisdom. Few nations have ever been able to exercise these virtues, and France was not then one of these few.”

By 1789, commoners, politicians, and royalty alike continuously voiced their impatience with the weak economy. This led to the notion that printing money could revive the economy. The idea gained popularity and was widely discussed in public meetings, informal clubs, and even the National Assembly. In early 1790, detailed discussions within the Assembly on money printing became more frequent. Within a few short months, chatter and rumor of printing money snowballed into a plan. The quickly evolving proposal was to confiscate church land, which represented more than a quarter of France’s acreage to “back” newly printed Assignats (the word assignat is derived from the Latin word assignatum – something appointed or assigned). This was a stark departure from the silver and gold-backed Livre, the currency of France at the time.

Assembly debate was lively, with strong opinions on both sides of the issue. Those against it understood that printing fiat money failed miserably many times in the past. In fact, the French experience with the Mississippi bubble crisis of 1720 resulted from the over-issuance of paper money. That crisis caused, in White’s words, “the most frightful catastrophe France had then experienced.” History was on the side of those opposed to the new plan.

Those in favor looked beyond history and believed this time would be different. They believed the amount of money printed could be controlled and ultimately pulled back if necessary. It was also argued new money would encourage people to spend, and economic activity would surely pick up. Another popular argument was France would benefit by selling the confiscated lands to its people, and these funds would help pay off its debts. In addition, land ownership by the masses strengthened French patriotism.

Those in favor of printing won the debate. As we have seen many times before and after this event, hope and greed won out over logic, common sense, and most importantly, history. Per White- 

“But the current toward paper money had become irresistible. It was constantly urged, and with a great show of force, that if any nation could safely issue it, France was now that nation; that she was fully warned by her severe experience under John Law; that she was now a constitutional government, controlled by an enlightened, patriotic people,–not, as in the days of the former issues of paper money, an absolute monarchy controlled by politicians and adventurers; that she was able to secure every livre of her paper money by a virtual mortgage on a landed domain vastly greater in value than the entire issue; that, with men like Bailly, Mirabeau, and Necker at her head, she could not commit the financial mistakes and crimes from which France had suffered under John Law, the Regent Duke of Orleans and Cardinal Dubois.” 

This time was different in their collective minds!

April 1790

The final decree was passed, and 400 million Assignats, backed by confiscated church property, were issued. The notes were quickly put into circulation and “engraved in the best style of the art,” as shown below.

As one might suspect, the church decried the action, but the large majority of the French were in favor. The press and assemblymen extolled the virtues of this new money. They spoke and wrote of future prosperity and an end to the economic oppression. They thought they found a cure for their economic ills.

Upon the issuance of the new money, economic activity picked up almost immediately. As expected, the money allowed for a portion of the national debt to be paid off as well. Confidence and trade expanded. The summer of 1790 proved to be an economic boom time for France.

Fall 1790

The good times were limited. By October, economic activity was back in decline, and with it came a renewed call for more money printing. Per White- “The old remedy immediately and naturally recurred to the minds of men. Throughout the country began a cry for another issue of paper.”  The deliberations regarding money printing were rekindled with many of the same arguments on both sides of the debate re-hashed. A new argument for those in favor of printing was simply that the original 400 million Assignats was not enough.

While those favoring money printing acknowledged the dangers of their actions, they were also dismissive of them at the same time. These Assemblymen believed if a little medicine appeared to work with no side effects, why not take more. Debate this time around was easier for the pro-printing consortium. Of note were a well-respected elder statesman of the Assembly and a national hero named Gabriel Riqueti, Comte de Mirabeau (Mirabeau). During the first round of debates, Mirabeau was firmly against the issuance of the new currency. In fact, he said the following: “A nursery of tyranny, corruption, and delusion; a veritable debauch of authority in delirium” in regards to paper money. He even called the issuance of money “a loan to an armed robber.”

While Mirabeau clearly understood the effects of printing money, he was now swayed by the arguments of a stronger economy. He also appreciated the benefits of making a large class of landholders for the first time.  Mirabeau reversed his opinion and joined the ranks of those believing France could control the inflationary side effects. He now argued for one more issue of Assignats. As a precautionary measure, he insisted that as soon as paper became abundant, self-governing laws of economics would ensure the money was retired. Mirabeau went as far as recommending the new amount of printed money should be enough to pay down France’s entire debt – 2,400 million!

The naysayers warned of the ills of the proposed second printing. Of note was Necker. If you recall, he was partially responsible for the debt buildup that led to France’s problems. Necker “predicted terrible evils” and offered other means to accomplish economic growth. His opinions were not popular and Necker was “spurned as a man of the past” by the Assembly and ultimately left France forever. An influential pamphlet, written by Du Pont de Nemours was popular amongst the nays and was read to the Assembly. It declared that doubling the money supply would “simply increase prices, disturb values, alarm capital, diminishes legitimate enterprise, and so decreases the demand for both products and for labor. The only persons to be helped by it are the rich who have large debts to pay.”

The arguments of Neckar and Du Pont de Nemours fell on deaf ears. Those in favor rebutted with comments that printing more money was “the only means to ensure happiness, glory, and liberty to the French nation”. They took the prior debate a step further and now theorized that the gold and silver Livres would be undesirable as Assignats would be the only currency people demanded.

On the 29th of September, 1790, a bill authorizing the issuance of 800 million Assignats was passed. The bill also decreed that when Assignats were paid back to the government for the land they should be burned. This added measure was thought of as a way to ensure the newly printed money was not inflationary.

White commented:

“France was now fully committed to a policy of inflation; and, if there had been any question of this before, all doubts were removed” he went on discussing how “exceedingly difficult it is stopping a nation once in the full tide of a depreciating currency.”

It turns out the money returned to the government wasn’t burned but was re-issued in smaller denominations. Within a short period, 160 million was paid to the government for lands and was reissued “under the pleas of necessity.”

June 1791

Nine months after the second issue of 800 million Assignats and another cycle of good economic activity followed by bad, pressure grew for more money printing. With little fanfare or debate, a new issue of 600 million was issued. With it, once again came “solemn pledges to keep down the amount in circulation.”

Like the previous two, this experience was followed by a brief period of optimism that quickly faded. With each successive printing came currency depreciation and higher prices. Despite the beliefs of those in favor of printing, hoarding of gold and silver-backed coins was occurring. The French people were watching their paper money lose value and becoming more interested in preserving their wealth. The coins were in limited supply while paper money was being printed with increasing frequency. In their minds, gold and silver offered the stability that paper money was rapidly losing.

“Still another troublesome fact began to now appear. Though paper money had increased in amount, prosperity had steadily diminished. In spite of all the paper issues, commercial activity grew more and more spasmodic. Enterprise was chilled and business became more and more stagnant.”

With each new issue came increased trade and a more robust economy. The problem was the activity wasn’t based on anything but new money. As such, it had very little staying power, and the positive benefits quickly eroded. Businesses were handcuffed. They found it hard to make any decisions in fear the currency would continue to drop in value. Prices continued to rise. Speculation and hoarding were becoming the primary drivers of the economy. “Commerce was dead; betting took its place.” With higher prices, employees were laid off as merchants struggled to cover increasing costs.

The only ones genuinely benefiting were manufacturers producing goods for foreign countries and the stockbrokers. The rapidly declining value of their currency attracted orders from other countries that could now purchase French goods very cheaply. Those businesses and consumers that relied on goods from outside the country were battered by higher prices. With the increased money supply and economic uncertainty, the “ordinary motives for savings and care diminished.” Speculation increased significantly. While some stock investors in the urban regions were exploiting the condition, the onus fell on the working man. Inflation, weakening currency, and lack of jobs was damaging to a large majority of Frenchmen.

The economic conditions also brought on more crime and increased instances of bribery of government officials. Conditions were described by White as “the decay of a true sense of national pride.”

December 1791

A new issue of 300 million more Assignats was ordered to be printed. With that decree, it was also ordered that a previous limit on the total amount to be printed be repudiated. By this point, it was estimated the value of their currency was cut in half and inflation was rampant.

April-July 1792

Another 600 million Assignats were printed. The presses rolled on and after a few more printings it was estimated a total of 3,500 million Assignats now existed. The issuances continued through 1792 and 1793.

“The consequences of these overissues now began to be more painfully evident to the people at large. Articles of common consumption became enormously dear and prices were constantly rising. Orators in the Legislative Assembly, clubs, local meetings, and elsewhere now endeavored to enlighten people by assigning every reason for this depreciation save the true one. They declaimed against the corruption of the ministry, the want of patriotism among the Moderates, the intrigues of the emigrant nobles, the hard-heartedness of the rich, the monopolizing spirit of the merchants, the perversity of the shopkeepers, —each and all of these as causes of the difficulty.”

French Revolution

Throughout 1792 and 1793, mobs were demanding necessities such as bread, sugar, and coffee. Peaceful demonstrations turned violent, and plundering of the local shops was commonplace. The French Revolution was born.

Money printing was not the sole cause of the revolution, but it certainly helped light the fuse. In all fairness, the French people were demanding the same liberties they helped America fight for. The idea of a Monarchy was fading, and those supporting democratic principles were leading the charge. In hindsight, money printing was a last-ditch effort to create prosperity and keep the Revolution at bay. Poverty and despair spread through France. Malnutrition and hunger due to lost employment and inflation fed the Revolution. In 1792 a republic was proclaimed, and in the following year, King Louis XVI was sent to the guillotines.

Conclusion

The story retold in this article echoes that of other nations before and after it. The language, promises, and ultimately the excuses used by the politicians are a familiar refrain. There is nothing new with money printing or “quantitative easing” as modern-day central bankers call it. Despite the passing of over 200 years and substantial development globally, plus ça change (the more that changes, the more it is the same thing).

Gold has a long history serving as a tool of wealth preservation. After numerous financial crises caused by the debasement of currencies, have modern-day economists and central bankers finally figured out how to print money with no consequences? Despite our wishes to the contrary, every action still has an equal and opposite reaction (consequence). The investment pundits who see nothing wrong with the actions of the world central banks regard holding gold as ridiculous. We consider an allocation to gold as a matter of prudence given what we have seen and expect to see from central bankers desperate to maintain the status quo. 

Hopefully, after reading this you will understand a little protection may go a long way in what may not be as clear cut an economic future as some would lead us to believe.

A huge explosion has rocked the civilian international airport in the southern Yemeni city of Aden, which killed at least 16 people and wounded over 60 on Wednesday. The death count has continued to soar in the hours after apparent terror attack’s aftermath.

The source of the blast was immediately unclear but local security sources told Reuters that multiple mortar shells struck the airport’s main terminal just as top government officials belonging to the pro-Saudi and internationally recognized government arrived. It’s also being looked at as a possible direct bombing of the airplane carrying the government delegation.

No government officials were among the injured, but they were the apparent targets of the bombings.

As Fox News summarizes of some of the Iran-focused accusations now flying around:

The members of the Yemeni government’s newly formed Cabinet, including Prime Minister Maeen Abdulmalik Saeed, were greeted with a loud explosion soon after its plane landed Wednesday in the city of Aden, in what an official is calling a “cowardly terrorist attack carried out by the Iranian-backed Houthi militia.”

NEW – video of the explosion(s) at Aden Airport in #Yemen. Initial reports claim either mortars or drones were used in the attack.pic.twitter.com/HIha6sdUpO

— Disclose.tv 🚨 (@disclosetv) December 30, 2020

The government delegation could be seen in video footage disembarking their plane just as an explosion unleased chaos, with people darting for cover.

AFP: Video of a missile attack!
At least 10 killed, dozens wounded in #Yemen airport blasts.#Aden. pic.twitter.com/oRvODCYfSH

— Ahmad Algohbary (@AhmadAlgohbary) December 30, 2020

Since the grinding war began half a decade ago Tehran has been seen as the key external backer to the Shia Houthi rebels, supplying them with weapons including short to mid-range ballistic missiles used to strike neighboring Saudi Arabia. 

“It would have been a disaster if the plane was bombed,” Yemeni Communication Minister Naguib al-Awg, who was traveling with the delegation on board the plane said. 

I strongly condemn the attack at Aden airport, shortly after a plane carrying the new Government of Yemen landed, killing & injuring many innocent civilians. I express my condolences to the people and Government of Yemen.
It is important to bring #Yemen urgently back to peace.

— UN GA President (@UN_PGA) December 30, 2020

The plane full of government ministers did indeed appear to the be target, in order to presumably wipe out top officials. Aden’s health office has in the last hours updated the death toll to at least 16 people killed and 60 wounded by the explosion.

Authored by Benjamin Zeisloft via Campus Reform,

Rep. Tulsi Gabbard (D-Hawaii) introduced legislation to ban biological males from participating in women’s sports.

Gabbard, a Democrat who ran for the 2020 presidential nomination for her party, is the sponsor of H.R. 8932, the “Protect Women’s Sports Act,” alongside Reps. Markwayne Mullin, (R-Okla.), Bill Flores (R-Texas), Bill Johnson (R-Ohio), Rep. Alexander Mooney (R-W.V.), and Rep. Jeff Duncan (R-S.C.).

The legislation aims “to provide that for purposes of determining compliance with Title IX of the Education Amendments of 1972 in athletics, sex shall be determined on the basis of biological sex as determined at birth by a physician.”

In a joint press release with Mullin, Gabbard explained that Title IX “led to a generational shift that impacted countless women, creating life-changing opportunities for girls and women that never existed before.”

“However, Title IX is being weakened by some states who are misinterpreting Title IX, creating uncertainty, undue hardship and lost opportunities for female athletes,” continued the congresswoman from Hawaii. “Our legislation protects Title IX’s original intent which was based on the general biological distinction between men and women athletes based on sex.”

“It is critical that the legacy of Title IX continues to ensure women and girls in sports have the opportunity to compete and excel on a level playing field,” she added.

Mullin added that “Title IX was designed to give women and girls an equal chance to succeed, including in sports. Allowing biological males to compete in women’s sports diminishes that equality and takes away from the original intent of Title IX.”

Title IX exists to ensure that “no person in the United States shall, on the basis of sex, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any education program or activity receiving Federal financial assistance,” according to the U.S. Department of Education.

The Trump administration reversed Obama-era Title IX rules related to protecting due process for those accused of sexual assault in the summer of 2020, as Campus Reform previously reported.

Emilie Kao, director of the Heritage Foundation’s DeVos Center for Religion and Civil Society, told Campus Reform that “Rep. Gabbard took a courageous stand for fairness and female athletes around the country.”

“Biology matters in many areas,” she explained.

“It matters in sports because it determines competitiveness, performance, and results. There is widespread bipartisan support for keeping male and female sports separate. Americans know that the law should protect fair competition by acknowledging the reality of sex differences.”

Campus Reform reached out to Gabbard’s office for comment; this article will be updated accordingly.

After an Israeli man reportedly died just 2 hours after receiving his first dose of the COVID-19 vaccine, authorities in the Swiss Canton of Lucerne said on Wednesday that one of the first people in the country to receive the vaccine has died, though whether his death had anything to do with the inoculation hasn’t yet been determined.

The canton has yet to release any additional details about the exact amount of time that passed between the inoculation and the man’s death.

Lucerne was the site of the first vaccinations in Switzerland beginning last week, with a shot from Pfizer and its German partner BioNTech given primarily to elderly people. Switzerland has received 107K vaccine doses, so far, and expects to get 250K per month starting next year.

“We are aware of the case,” a spokesperson said, before adding that the death had been referred to Swiss drugs regulator Swissmedic. Swissmedic didn’t comment further.

Pfizer and BioNTech’s vaccine is the only vaccine approved, so far, in Switzerland. The EU has just started approving the jabs on an emergency-use basis, with the first injections starting earlier this week.

Authored by Pat Buchanan via Buchanan.org,

Who could have predicted how dreadful a year 2020 would be.

By this New Year’s Eve, 19 million to 20 million Americans will have contracted a deadly virus in a pandemic that exploded out of China to carry off 333,000 Americans, one of every 1,000 of us.

As 2021 begins, Americans will be dying at the rate of 10,000 a week and contracting the virus at a rate of more than 1 million new cases a week.

Yet, during that same year, miracles occurred. Vaccines were created, tested and mass-produced by Pfizer and Moderna that could, with 95% effectiveness, stop this virus cold.

If Americans can reach “herd immunity” — from having caught and survived the virus or having been vaccinated against it — the COVID-19 pandemic might be contained by the summer of 2021.

Economically, the pandemic caused the worst crash since the Great Depression with scores of thousands of schools closed and empty, and scores of thousands of stores, bars and restaurants shuttered, many never to open again.

Yet, in the same year, the Dow Jones Industrial Average broke every record, crossing the 30,000 mark, again and again, with the NASDAQ and S&P 500 reaching new highs.

Thus, as tens of millions of Americans saw their savings wiped out and had trouble making rent payments and feeding their families, some investors saw their stock portfolios surge. Yes, Virginia, there are two Americas.

On Memorial Day weekend, a white police officer in Minneapolis was taped kneeling for nine minutes on the neck of a Black suspect.

Hours later, George Floyd would die, and his death would trigger protests against police brutality that quickly degenerated into radical and racial rioting unseen since the 1960s.

The arson, looting and attacks on police caused a backlash that spread across the country when the demands of antifa and Black Lives Matter suddenly became, “Defund the Police!” That anti-cop slogan did for law enforcement reform what rioters’ cries of “Burn, baby, burn!” did for the civil rights movement in the ’60s.

By the time the fires burned out, Middle America was recoiling against the left for indulging the anarchists and denouncing Democratic leaders who refused to condemn the rioting.

Still, despite the pandemic, the third of a million dead, the crash and the seemingly endless riots, President Donald Trump won 74 million votes, the largest total of any president in history. And he held the Senate for the Republicans and added more than a dozen seats in the House.

Yet, Joe Biden, who would be crushed in the Iowa caucuses and New Hampshire primary and lose Nevada to Bernie Sanders, would be rescued by a massive Black turnout in South Carolina. Revived, he would go on to win the Democratic nomination on the first ballot.

Sheltering in his basement through the fall, Biden would run up a 7 million-vote victory over Donald Trump, though his verbal and mental deterioration was almost painfully obvious in his few public appearances.

Another wake-up call to how polarized we are came with an orgy of icon-smashing of statues and monuments, from Columbus to presidents Washington, Jefferson, Lincoln, Teddy Roosevelt and Woodrow Wilson.

A large slice of America’s academic and intellectual elite detests the men who created and built the country America has become. Not a positive omen for those who believe America has done great things, greater than any nation, and can do them again.

As America was shaken by its vulnerability to a pandemic, the U.S. saw its warships and warplanes challenged in the South and East China Seas and Taiwan Strait by a China, which, admonished to allow greater democracy in Hong Kong, proceeded to extinguish the existing democracy there. And the world and the West did nothing.

Revelations that China was running concentration camps in its interior to “reeducate” Muslim Uighurs in what it means to be a patriot in a nation dominated by Han Chinese and ruled by the Chinese Communist Party evoked only verbal protests.

By year’s end, it was not America warning China but Beijing warning America that manifestations of political or military solidarity with Taiwan, and arms sales to the island, would constitute interference in the internal affairs of China — as Taiwan belongs to China.

Suddenly, a great awakening about the character of the regime we have pampered with investment and trade for three decades appeared stark.

Unable to stand up to a China in which they invested so many hopes, the American establishment turns to Russia — a nation with one-tenth China’s population and one-tenth of its economy, and no army or navy to match Beijing’s — as its adversary of choice.

But while President Vladimir Putin may fulfill well the role of villain, his principal foreign intervention in 2020 was to play the role of peacemaker in the South Caucasus’ war between Azerbaijan and Armenia.