Inside the safe deposit box they rented at U.S. Private Vaults in Beverly Hills, California, Jennifer and Paul Snitko kept the sort of things that any law-abiding American might want to store securely: a will, backup copies of their home computer’s hard drive, and some family heirlooms including jewelry, a fancy watch, and a class ring.
The Snitkos are not criminals. They’ve not been charged with any crimes. During his career as an aerospace engineer, Paul even held several security clearances.
But since March 22, they’ve been treated like criminals. The Snitkos’ valuables have been in the possession of federal prosecutors following an FBI raid that resulted in hundreds of safe deposit boxes being seized—despite the fact that the warrant authorizing the raid, as Reasonpreviously reported, explicitly forbade federal agents from conducting “a criminal search or seizure of the contents of the safe-deposit boxes.”
But the FBI did not merely seize the safe deposit boxes housed at U.S. Private Vaults. Federal agents then proceeded to search each box, even brazenly tearing open sealed envelopes and rummaging through the belongings found inside. More than two months after the raid at U.S. Private Vaults, the Snitkos and other innocent people who had their stuff taken have no idea when their valuables might be returned.
“When you’ve done nothing wrong, you shouldn’t be subjected to an investigation,” says Paul Snitko. “That the federal government broke open our safety deposit box was shocking and that we have no idea when we will get our property back is infuriating.”
On Friday, just hours after the Snitkos filed a lawsuit—with help from the Institute for Justice (IJ), a libertarian law firm—challenging what they say was the FBI’s unlawful seizure of their safe deposit box, they finally got some good news. Sort of. According to IJ, the couple received a phone call from the FBI informing them that they would have their property returned in “about two to three weeks from now.”
As of Friday afternoon, two other clients represented in the same lawsuit have not received similar phone calls.
The lawsuit, filed in the U.S. District Court for the Central District of California, joins several other legal actions already launched on behalf of anonymous individuals whose property was similarly caught up in the FBI raid of U.S. Private Vaults. Federal prosecutors have charged U.S. Private Vaults with several crimes including conspiracy to commit money laundering and, earlier this week, filed forfeiture motions against roughly 400 of the nearly 1,000 safe deposit boxes seized in the raid.
As Reason previously reported, the unsealed warrant authorizing the raid of U.S. Private Vaults granted the FBI permission to seize the business’s computers, money counters, security cameras, and “nests” of safe deposit boxes—the large steel frames that effectively act as bookshelves for the boxes themselves. However, FBI procedure required federal agents to take the safe deposit boxes into custody as well.
What happened after that is what’s truly enraging about the situation. Federal agents were supposed to identify the boxes’ owners so property taken in the raid could be returned. In many cases, that was as easy as checking the documents that were taped to the tops of the boxes—but, instead, legal filings show that investigators brazenly rifled through the boxes.
Like other victims of the raid, the Snitkos also had identifying information attached to the lid of their safe deposit box. Opening the box, their lawsuit argues, is a clear violation of their Fourth Amendment rights, while the FBI’s continued retention of their property represents both Fourth Amendment and Fifth Amendment violations.
“The government’s dragnet search of innocent peoples’ private security boxes is the most outrageous Fourth Amendment abuse that the Institute for Justice has ever seen,” says Robert Frommer, a senior attorney with IJ. “It is like the government breaking into every apartment in a building because the landlord was dealing drugs in the lobby.”
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“It is my job as district attorney to keep Orange County safe,” Spitzer said in a press release.
“The public must be given the opportunity to question why the California Department of Corrections and Rehabilitation would decide that returning murders, child molesters, and rapists back into our neighborhoods more quickly somehow constitutes an emergency.”
The lawsuit filed in Sacramento Superior Court is intended to invalidate emergency regulations by the California Department of Corrections and Rehabilitation (CDCR) to release state prisoners that receive credit for good behavior.
The CDCR said it would begin increasing the good conduct credit (GCC) rate for eligible inmates on May 1, affording them an opportunity for early release.
Approved by the California Office of Administrative Law, the move comes as the state looks to increase good behavior incentives of those incarcerated by allowing a reduction of prison time for the well-behaved.
Of those eligible, 63,000 inmates currently incarcerated due to violent crimes will be able to attain “good behavior credits” that will allow them to reduce sentences by one-third. The figure includes 20,000 inmates sentenced to life in prison with the possibility of parole.
Prior to the new rule becoming effective, good behavior credits only granted a one-fifth reduction of prison sentences.
The new law would also allow 10,000 inmates who are imprisoned for a second nonviolent offense under California’s three-strikes law to have their sentences reduced to one-half instead of one-third. Another 2,900 inmates who were convicted of a third nonviolent strike will get similar reductions. In essence, the inmates will receive one day of credit for every day served.
CDCR spokesperson Vicky Waters has said the new measures won’t result in the automatic release of any inmate.
“Under the statute, incarcerated individuals are able to receive credits for good behavior and participation in the rehabilitation program,” Waters told The Epoch Times. “Proposition 57, which voters overwhelmingly approved in 2016 and upheld in November, gave the California Department of Corrections and Rehabilitation the authority to submit regulations to provide additional opportunities for incarcerated people to receive these good conduct credits.
“This effort incentivizes incarcerated individuals to have sustained good behavior and encourages them to participate in rehabilitative and educational programs, which can help reduce recidivism to make our communities safer. Our department’s focus is on a person’s rehabilitation and accountability in a manner that is consistent with public safety.”
Orange County Sheriff’s Department spokesperson Carrie Braun previously told The Epoch Times the department is concerned about both past and potential future victims of crime if the inmates are released prematurely.
“Victims of any crime should be and are of primary importance,” Braun told The Epoch Times. “From the sheriff’s department perspective, we’re very concerned not only about people who have already been the victims of crimes from these individuals, but anyone potentially who could be impacted if someone who were released were to recidivate.”
Inside the safe deposit box they rented at U.S. Private Vaults in Beverly Hills, California, Jennifer and Paul Snitko kept the sort of things that any law-abiding American might want to store securely: a will, backup copies of their home computer’s hard drive, and some family heirlooms including jewelry, a fancy watch, and a class ring.
The Snitkos are not criminals. They’ve not been charged with any crimes. During his career as an aerospace engineer, Paul even held several security clearances.
But since March 22, they’ve been treated like criminals. The Snitkos’ valuables have been in the possession of federal prosecutors following an FBI raid that resulted in hundreds of safe deposit boxes being seized—despite the fact that the warrant authorizing the raid, as Reasonpreviously reported, explicitly forbade federal agents from conducting “a criminal search or seizure of the contents of the safe-deposit boxes.”
But the FBI did not merely seize the safe deposit boxes housed at U.S. Private Vaults. Federal agents then proceeded to search each box, even brazenly tearing open sealed envelopes and rummaging through the belongings found inside. More than two months after the raid at U.S. Private Vaults, the Snitkos and other innocent people who had their stuff taken have no idea when their valuables might be returned.
“When you’ve done nothing wrong, you shouldn’t be subjected to an investigation,” says Paul Snitko. “That the federal government broke open our safety deposit box was shocking and that we have no idea when we will get our property back is infuriating.”
On Friday, just hours after the Snitkos filed a lawsuit—with help from the Institute for Justice (IJ), a libertarian law firm—challenging what they say was the FBI’s unlawful seizure of their safe deposit box, they finally got some good news. Sort of. According to IJ, the couple received a phone call from the FBI informing them that they would have their property returned in “about two to three weeks from now.”
As of Friday afternoon, two other clients represented in the same lawsuit have not received similar phone calls.
The lawsuit, filed in the U.S. District Court for the Central District of California, joins several other legal actions already launched on behalf of anonymous individuals whose property was similarly caught up in the FBI raid of U.S. Private Vaults. Federal prosecutors have charged U.S. Private Vaults with several crimes including conspiracy to commit money laundering and, earlier this week, filed forfeiture motions against roughly 400 of the nearly 1,000 safe deposit boxes seized in the raid.
As Reason previously reported, the unsealed warrant authorizing the raid of U.S. Private Vaults granted the FBI permission to seize the business’s computers, money counters, security cameras, and “nests” of safe deposit boxes—the large steel frames that effectively act as bookshelves for the boxes themselves. However, FBI procedure required federal agents to take the safe deposit boxes into custody as well.
What happened after that is what’s truly enraging about the situation. Federal agents were supposed to identify the boxes’ owners so property taken in the raid could be returned. In many cases, that was as easy as checking the documents that were taped to the tops of the boxes—but, instead, legal filings show that investigators brazenly rifled through the boxes.
Like other victims of the raid, the Snitkos also had identifying information attached to the lid of their safe deposit box. Opening the box, their lawsuit argues, is a clear violation of their Fourth Amendment rights, while the FBI’s continued retention of their property represents both Fourth Amendment and Fifth Amendment violations.
“The government’s dragnet search of innocent peoples’ private security boxes is the most outrageous Fourth Amendment abuse that the Institute for Justice has ever seen,” says Robert Frommer, a senior attorney with IJ. “It is like the government breaking into every apartment in a building because the landlord was dealing drugs in the lobby.”
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“Shame, Shame, Shame” – Trump Laments Memorial Day Drivers Facing Highest Gas Prices In Seven Years
Among the “new” things that Americans will notice during this year’s post-Covid Memorial Day will be skyrocketing prices at the pump.
Drivers are in store for the highest prices in seven years this summer, Reuters writes this week, as retail gas prices are the most expensive since 2014 at about $3.04 per gallon.
And those prices have nowhere to go but up, as a year’s worth of pent up demand for leisure activities, vacation and summer sun come to fruition over the next three or four months. This could drive up prices even further during peak travel weeks during the summer.
“More than 34 million Americans are expected to take to the highways between May 27 and May 31,” AAA predicted, marking a 53% rise from last year.
Devin Gladden, AAA spokesperson, told Reuters: “Ahead of Memorial Day, gas demand is expected to rise as more Americans take to the roads for trips that may have been delayed or avoided because of the pandemic.”
Current gasoline demand is about 9.48 million barrels per day, the highest it has been since March 2020.
With Memorial Day Weekend coming up, tomorrow people start driving in the biggest automobile days of the year.
I’m sorry to say the gasoline prices that you will be confronted with are far higher than they were just a short number of months ago where we had gasoline under $2 a gallon.
Remember as you’re watching the meter tick, and your dollars pile up, how great of a job Donald Trump did as President.
Soon Russia and the Middle East will be making a fortune on oil, and you will be saying how good it was to have me as your President.
Wasn’t it great to be energy independent, but we are energy independent no more.
Shame, shame, shame.
Other than that, have a great Memorial Day Weekend!
GasBuddy’s Patrick De Haan noted that about 6,000 gas stations were still without fuel this week due to the Colonial Pipeline attack earlier this month. That shortage, and the ensuing demand surge to “stock up” on gas helped keep a bid under gas prices.
Recall, this was the scene earlier this month was long lines at the pump in places like Nashville…
And in North Carolina: “The line goes out of the gas station’s parking lot,” said one Twitter user in Carrboro.
And in Florida, where there was massive lines at another Costco in Tallahassee.
A Costco employee just told a car trying to get in line “you’ll have to find the end of the line. I don’t know where that is.” pic.twitter.com/o7f2bm7668
— Alicia Devine, Photojournalist (@alicia_c_devine) May 11, 2021
While things aren’t quite as chaotic heading into the end of May, there is some residual demand pressure that will continue into the Memorial Day holiday, making it likely that prices will only move one direction – up – as the country continues its re-open and Americans hit the road (or the skies) for their summer vacation staples.
“This is still due to the Colonial outage recovery, plus high demand, making it hard for stations to get back on top of things,” De Haan concluded.
Days after an exclusive report by Reason, the Baton Rouge Police Department (BRPD) on Friday defended a traffic stop during which time five officers strip-searched a minor in public in January of last year because the cops allegedly smelled marijuana.
They then entered the family’s home without a warrant or consent. BRPD Chief Murphy J. Paul said in a Friday press conference that an investigation is ongoing as it pertains to the warrantless entry, but that charges were not sustained over the traffic stop and search.
The body camera footage “represents a fraction of what occurred between our officers and civilians,” said the BRPD chief of staff. The department aired additional footage on Friday after a court approved its release.
It did not change the story. Footage, incident reports, disciplinary records, and hearing transcripts obtained and released by Reason on Tuesday paint a troubling picture of what happened that day. That’s particularly true when it comes to the tenure of Sergeant Ken Camallo, who has executed three warrantless searches since 2017 and who appeared to demonstrate a lack of truthfulness while testifying under oath about that January traffic stop. Yet he has continued to serve.
On January 1, 2020, Camallo alleges he pulled over a vehicle for “suspicious driving” after noticing it had out-of-state plates and had been parked in front of a “known drug house.” Upon stopping the car, Camallo, joined by BRPD Officers Troy Lawrence Jr., Neil Porter, Jace Ducote, and Scott Johnson, proceeded to strip-search Clarence Green, then 23, and his 16-year-old brother, yanking down their underwear and prodding their genitals because the cops allegedly smelled marijuana.
They would go on to find weed on Green’s brother. They would also find a firearm on Green, which he was prohibited from owning, as he was on probation for possession of Oxycodone, according to the initial police report.
That same document says the cops then traveled to the Green residence to “release the juvenile to his mother.” They did more than that. After muting their body camera videos, they entered the home without a warrant or consent, and with guns drawn.
Green was indicted for illegally possessing a firearm. After sitting behind bars for 5 months, the state ultimately dropped the charges with little explanation.
A federal judge approved that request, but not before taking the opportunity to rebuke the state for its unconstitutional conduct and to remind the government “of its paramount obligation to seek and serve justice, not convictions.”
“The state agents in this case demonstrated a serious and wanton disregard for Defendant’s constitutional rights, first by initiating a traffic stop on the thinnest of pretext, and then by haphazardly invading Defendant’s home (weapons drawn) to conduct an unjustified, warrantless search,” wrote Judge Brian A. Jackson of the U.S. District Court for the Middle District of Louisiana.
He also suggested the cops may have committed crimes subject to prosecution under state law.
Camallo’s story waffled over time. An edited police report—one of nearly a dozen changing iterations documenting the January 1 interaction—notes that Tanya Green, Clarence’s mother, gave written permission to search his bedroom. That was not present on the initial police reports, Tanya denies providing such consent, and the body camera footage does not show her giving that permission.
Perhaps more importantly, a motions hearing transcript in November 2020 shows Camallo testifying that his disciplinary record was clean—something that Assistant U.S. Attorney Kashan Pathan would go on to confirm when asked point-blank by Jackson.
Yet that wasn’t true. In 2017, a different federal judge dismissed all of the evidence against a man who was charged with various weapons and drug offenses after Camallo conducted another warrantless search on his van. It was Pathan’s office, the U.S. Attorney’s Office for the Middle District of Louisiana, that had no choice but to drop that case—specifically because of Camallo’s behavior. BRPD internal affairs records obtained by Reason show that Camallo had several stains on his record, including a charge for untruthfulness filed in 2019 pertaining to a third warrantless search, as well as disciplinary charges filed in connection to the 2020 incident.
The city last month quietly agreed to pay a $35,000 settlement if the Green family would drop a civil suit—a tacit acknowledgment of just how brutal this case was. But it’s also indicative of how elusive accountability is when the government tramples on your rights. The entire sum will come out of taxpayer dollars, the Greens will not have the opportunity to confront the officers in civil court, and the cops continue to serve on the force.
Police accountability has been the issue du jour over the last year. Relevant to the conversation is qualified immunity, the legal doctrine that makes it insidiously difficult to bring lawsuits against state actors when they violate your rights. Victims may not argue their claims before a jury if the alleged government misbehavior and the circumstances surrounding their cases have not been addressed almost identically in a prior court precedent.
In practice, that’s protected a cop who shot and killed a man who had been sleeping in his car, two cops who assaulted and filed bogus charges again a man who was standing outside of his own home, four cops who beat a man to a pulp after pulling him over for broken lights, and two cops who allegedly stole $225,000 while executing a search warrant.
In other words, should the Greens have proceeded with their suit, they may have found themselves legally barred from stating their case before a jury in civil court. The city’s settlement with them is a testament to how cut and dry their case might have beee, but there are plenty of other shocking instances where the government skirted accountability completely for their actions.
Though the Greens fared better than many victims, they still haven’t gotten real accountability. Worth noting is that internal affairs records obtained for Lawrence show no disciplinary action filed against him.
“If you don’t shut the fuck up, I’m gonna come in and I’m gonna fuck you up,” said Lawrence on that January evening. The reason? Green was trying to warn his brother not to give officers his DNA.
“You think I’m playing with you? I will fuck you up,” Lawrence said.
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Days after an exclusive report by Reason, the Baton Rouge Police Department (BRPD) on Friday defended a traffic stop during which time five officers strip-searched a minor in public in January of last year because the cops allegedly smelled marijuana.
They then entered the family’s home without a warrant or consent. BRPD Chief Murphy J. Paul said in a Friday press conference that an investigation is ongoing as it pertains to the warrantless entry, but that charges were not sustained over the traffic stop and search.
The body camera footage “represents a fraction of what occurred between our officers and civilians,” said the BRPD chief of staff. The department aired additional footage on Friday after a court approved its release.
It did not change the story. Footage, incident reports, disciplinary records, and hearing transcripts obtained and released by Reason on Tuesday paint a troubling picture of what happened that day. That’s particularly true when it comes to the tenure of Sergeant Ken Camallo, who has executed three warrantless searches since 2017 and who appeared to demonstrate a lack of truthfulness while testifying under oath about that January traffic stop. Yet he has continued to serve.
On January 1, 2020, Camallo alleges he pulled over a vehicle for “suspicious driving” after noticing it had out-of-state plates and had been parked in front of a “known drug house.” Upon stopping the car, Camallo, joined by BRPD Officers Troy Lawrence Jr., Neil Porter, Jace Ducote, and Scott Johnson, proceeded to strip-search Clarence Green, then 23, and his 16-year-old brother, yanking down their underwear and prodding their genitals because the cops allegedly smelled marijuana.
They would go on to find weed on Green’s brother. They would also find a firearm on Green, which he was prohibited from owning, as he was on probation for possession of Oxycodone, according to the initial police report.
That same document says the cops then traveled to the Green residence to “release the juvenile to his mother.” They did more than that. After muting their body camera videos, they entered the home without a warrant or consent, and with guns drawn.
Green was indicted for illegally possessing a firearm. After sitting behind bars for 5 months, the state ultimately dropped the charges with little explanation.
A federal judge approved that request, but not before taking the opportunity to rebuke the state for its unconstitutional conduct and to remind the government “of its paramount obligation to seek and serve justice, not convictions.”
“The state agents in this case demonstrated a serious and wanton disregard for Defendant’s constitutional rights, first by initiating a traffic stop on the thinnest of pretext, and then by haphazardly invading Defendant’s home (weapons drawn) to conduct an unjustified, warrantless search,” wrote Judge Brian A. Jackson of the U.S. District Court for the Middle District of Louisiana.
He also suggested the cops may have committed crimes subject to prosecution under state law.
Camallo’s story waffled over time. An edited police report—one of nearly a dozen changing iterations documenting the January 1 interaction—notes that Tanya Green, Clarence’s mother, gave written permission to search his bedroom. That was not present on the initial police reports, Tanya denies providing such consent, and the body camera footage does not show her giving that permission.
Perhaps more importantly, a motions hearing transcript in November 2020 shows Camallo testifying that his disciplinary record was clean—something that Assistant U.S. Attorney Kashan Pathan would go on to confirm when asked point-blank by Jackson.
Yet that wasn’t true. In 2017, a different federal judge dismissed all of the evidence against a man who was charged with various weapons and drug offenses after Camallo conducted another warrantless search on his van. It was Pathan’s office, the U.S. Attorney’s Office for the Middle District of Louisiana, that had no choice but to drop that case—specifically because of Camallo’s behavior. BRPD internal affairs records obtained by Reason show that he had several stains on his record, including a charge for untruthfulness filed in 2019 pertaining to a third warrantless search, as well as disciplinary charges filed in connection to the 2020 incident.
The city last month quietly agreed to pay a $35,000 settlement if the Green family would drop a civil suit—a tacit acknowledgment of just how brutal this case was. But it’s also indicative of how elusive accountability is when the government tramples on your rights. The entire sum will come out of taxpayer dollars, the Greens will not have the opportunity to confront the officers in civil court, and the officers continue to serve on the force.
Police accountability has been the issue du jour over the last year. Relevant to the conversation is qualified immunity, the legal doctrine that makes it insidiously difficult to bring lawsuits against state actors when they violate your rights. Victims may not argue their claims before a jury if the alleged government misbehavior and the circumstances surrounding their cases have not been addressed almost identically in a prior court precedent.
In practice, that’s protected a cop who shot and killed a man who had been sleeping in his car, two cops who assaulted and filed bogus charges again a man who was standing outside of his own home, four cops who beat a man to a pulp after pulling him over for broken lights, and two cops who allegedly stole $225,000 while executing a search warrant.
In other words, should the Greens have proceeded with their suit, they may have found themselves legally barred from stating their case before a jury in civil court. The city’s settlement with them is a testament to how cut and dry this case might be, but there are plenty of other shocking instances where the government skirted accountability completely for their actions.
Though they fared better than many victims, they still won’t get full accountability. Worth noting is that internal affairs records obtained for Lawrence show no disciplinary action filed against him.
“If you don’t shut the fuck up, I’m gonna come in and I’m gonna fuck you up,” said Lawrence on that January evening. The reason? Green was trying to warn his brother not to give officers his DNA as they tried to convince Tanya to give them a swab.
“You think I’m playing with you? I will fuck you up,” Lawrence said.
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Joe Biden is cruising, in a happy-place few politicians reach. Outside of a few grumpy right-wing outlets he faces almost no hostile press questioning, political threats within his own party are minimal, and his approval rating, if one believes the latest Harvard CAPS/Harris poll, hovers at an astonishing 64%.
Biden has the press paper-trained to a degree we haven’t seen in modern times. Not even at the height of the media’s drooling love affair with Barack Obama — a phenomenon I confess I was part of — did we ever see such enthusiastic, reflexive backing of White House messaging. The Biden press even reverses course on a dime when needed, with the past weeks being a supreme example.
Last Friday, word came out via The Washington Post that the Biden administration’s new budget plan wouldn’t contain a host of key ideas proposed on the campaign trail, from a public health care option to raising the estate tax to forgiveness of student debt. Some of these were major, central campaign promises — the idea of a plan to insure “an estimated 97% of Americans,” for instance, was big Biden campaign rhetoric whose passing was barely commemorated. The key line in the Post article:
The White House jettisoned months of planning from agency staff as their initial plan could fuel criticisms that the administration is pushing new spending programs too aggressively.
Say what? Just a few weeks ago, we were being told in headline after headline that Biden was a “transformational” president who’d heroically abandoned fruitless efforts at bipartisanship and moreover had conquered the fear of deficit spending that kept Barack Obama from fulfilling his own “transformative” destiny. Insiders regaled us with tales about how this administration exiled the Clintonian tricksters like Larry Summers who robbed Obama of his legacy by whispering false worries about inflation.
We even saw the bizarre spectacle of Treasury Secretary and erstwhile deficit hawk Janet Yellen publicly throwing down with Summers, battle-rapper style, about his excess fiscal caution, saying the biggest risk wasn’t inflation but if “we don’t do enough” to address the economic damage of the pandemic. Yellen all but told Summers to go back to Cranbrook with his bitch-ass spending fears.
Then a few weeks ago, on Meet The Press, Yellen reverted to form and said that Joe Biden “has made clear that permanent increases in spending should be paid for, and I agree,” adding that “over the long run, deficits need to be contained.” After that came the Post story and word that the administration had backed off a host of plans, including a proposal to lower prescription drug costs, while also engaging with seeming seriousness in “bipartisan” negotiations on an infrastructure/jobs bill.
Why might a Democratic White House recently praised as “radical” by the New York Timesbecause they “stopped devising compromised bills in a bid to win Republican votes” suddenly be interested in getting Republican votes again? Politico hinted at the answer:
There also are deepening doubts about an agreement on how to pay for the infrastructure spending package. Democrats are resistant to tapping leftover Covid-relief money, which the White House argues isn’t sufficient to cover the plan, anyway.
Translation: Biden is worried about deficits, and having Republicans on whom they can pin lower budgetary outlays is once again politically useful. Therefore, bipartisanship is back, fiscal restraint is back, maybe even austerity is back. Good times!
Whatever one’s feeling about the appropriateness of any of these policies, it’s clear the messaging surrounding them has undergone a near-complete turnaround almost overnight, which would normally prompt at least a raised eyebrow or two in media. But all that’s happened is that the moment the Biden administration stopped talking about being “transformative,” the White House press quietly did the same, in silent recognition that they’ll all be selling a different product for while.
Joe Biden’s journey to “transformational” status and back has been an expert political PR campaign. It took a year, and Biden’s camp never had to break a sweat.
Biden had been a symbol of non-change since before disco, and embraced that image at the start of the 2020 campaign. In a fundraiser in June of 2019, he reportedly told supporters he didn’t want to “demonize” the wealthy, that “no one’s standard of living would change,” and that in fact, if he were elected, “nothing will fundamentally change.” It was an iconic line. He was the un-Obama. Even Steven Colbert ripped him for being an inspirational Shepard Fairey poster in reverse.
Biden didn’t push back on the meming and mockery for that incident or a dozen others like it. He seemed to understand that his appeal in the Trump era lay in the perception that he’d lived in the middle of the political road for so long, he wouldn’t know how to find the edge if he tried.
Biden and his aides spent much of the 2020 primary race engaged in what Clinton-era political analysts would have called triangulation. They pushed back against Medicare for All, the decriminalization of border crossings, defunding the police, and other ideas that seemed to be hot among blue voters. “Status Quo Joe,” sneered the New Republic.
The reporters who covered Biden’s campaign every day were told over and over by surrogates that Biden was about stability, not big ideas. Reporters wrote a lot of those stories. When Biden was doing well in polls, we were told he was “an implicit contrast to potentially riskier rivals” who are “offering more disruptive policy platforms,” as the Washington Post put it. At other times, we were cautioned that Biden’s “adult-in-the-room civility and pragmatic compromise” might not cut it, in an era when Democrats wanted an “ideological warrior,” as Politico magazine wrote.
Biden went so far as to describe himself as literally too old to have new ideas, saying voters would have to settle for him being a “bridge” a future group of possibly idea-having politicians. “Look, I view myself as a bridge, not as anything else,” he said in March of 2020. “There’s an entire generation of leaders you saw stand behind me. They are the future of this country.” When the primary race was down to him and Bernie Sanders, he said he was about “results, not revolution.” And with such pronouncements, he walloped Sanders.
There was a paradox in those results. Although the Democratic electorate overwhelmingly chose Biden in the two-horse race, polls suggested they preferred Sanders policy prescriptions on ideas like Medicare for All, a Green New Deal, raising corporate taxes, and so on. Well, maybe they did.
In March of 2020, for instance, at the supposed critical moment of the Sanders-Biden showdown, 66% of voters said they believed the candidate who promised “transformational change” had the best chance of beating Donald Trump. This was compared to 34% who said they believed “someone who promises to build off previous administrations” had the best chance to win. Yet by an almost exact opposite ratio, voters chose Biden at that time.
One way of looking at those results was that many Democrats wanted more of the same, but also wanted to feel like they were voting for “transformative” change. The Biden camp, which had seen both ends of this phenomenon in Obama’s evolving relationship with Democratic voters, seemed to grasp this. Once Sanders was toast and Biden was the de facto nominee, he and his aides began rolling out the word “transform”:
If we come together, we will defeat Donald Trump. And when we do that, we will not only do the hard work of rebuilding this nation — we will transform it.
After George Floyd was killed, the rebrand accelerated. There was a classic trial balloon piece on the theme in Politico. Citing anonymous advisers, the story told of an internal campaign debate. On one side, supposedly, were pragmatists who believed in sticking with the status quo platform that won them the primary. Another group believed a shift in the attitudes of white suburban voters especially made it politically feasible (if not necessary) to embrace a more rad-changey posture. Politico phrased things thusly:
Internally, Biden’s campaign is balancing how to best respond to the transformational demands of protesters while maintaining his commanding lead over Trump. Biden gained the lead by staying largely out of the spotlight as Trump has praised the “beautiful heritage” of the Confederacy and called protesters “thugs.”
In July of last year, Matt Yglesias published “Progressives don’t love Joe Biden, but they’re learning to love his agenda,” in a piece that had maybe the Vox-iest sub-head of all time: “The most transformative presidents in our nation’s history — Lincoln, FDR, LBJ — were not ideologues.”
Biden aides then began telling reporters their guy wasn’t just about “stability” at all, that in fact Joe Biden had always been more of a dreamer than he let on, we just didn’t notice. Heading into Election Night, multiple stories played on this theme of “At Age 750, the Real Joe Biden is Finally Emerging,” and almost all had either a quote from a surrogate using the word “transform,” or a line about how little the public knew about the “real” Biden. “Many people might not know what a policy wonk Biden is at heart,” wrote Eugene Robinson just before the vote, in a piece that put the magic word in the lede:
The hits kept coming. “Joe Biden Has Changed: He’s Preparing for a Transformative Presidency,” wrote Franklin Foer in the Atlantic in October, 2016. “‘Moderate’ Joe Biden has Become the Most Progressive Candidate in History,” wrote the Washington Post, with transition board member Felicia Wong saying Biden’s agenda was “transformative.”
From inauguration on, basically every elected Democrat started calling Biden a “transformational” leader. When Biden called his own Covid-19 relief package “transformational,” critical mass was achieved. Nancy Pelosi promised a “Big, bold, and transformational” infrastructure bill. Jim Clyburn said Biden’s approach was “truly transformational.” The coordination was like something out of a Chinese Olympic parade:
“He’s somebody who really envisions this as a transformational moment…”
The inevitable next step was that TV talking heads and newspaper pundits started using the term like it was their own idea. The list of media people who seem genuinely to believe they independently arrived at the thought, “Joe Biden is a Transformational President” is staggeringly long. It includes everyone from analysts at the Heritage Foundation and the Atlantic Council to David Brooks to Mika Brzezinski and Joe Scarborough. The latter ironically made their assessment before the same Steven Colbert who beat up Biden for being the “nothing will change” guy two years before. The web in the end became a sea of “transformational” headlines:
There are no accidental choices in propaganda. Transformational is less threatening than revolutionary, but also promises less than sweeping or fundamental. It’s a word the Biden campaign started using a year ago and had surrogates pulling oars every day since to get its momentum rolling. By March of this year they didn’t have to row, as pundits muttered it automatically. Then the moment it became expedient, the Biden White House backed off the word and started creeping back in certain expected political directions. Still, they’ll retain the campaign’s PR gains, because none of their pet editorialists will bother outing themselves with a, “Hey, what about that ‘transformative’ thing we talked so much about?” piece.
One of the underreported stories of the 2020 race was that Biden’s handlers somehow ran quite a smart campaign, even as their candidate pooped his drawers and disintegrated mentally on an almost daily basis. They leaned into social media mockery of their candidate, realizing there was an untapped reservoir of Democrat voters who loathed the Twitter discourse far more than most reporters understood, then shifted in the general, and now are shifting back again. The effectiveness of their rhetorical approach has been astounding in its consistency, but there’s only so much credit to give, When you’ve got nothing but friends in the press gallery, everything works.
Bullion Best In May As Tech Wrecks; Bitcoin’s Biggest Bust In A Decade
Well that was a different month – bonds were bid, big-tech dumped (as Meme stocks soared), crypto puked along with the dollar but bullion was best bid.
Is it time to cut the dollar’s rope?
Nasdaq dropped in May – its biggest monthly drop since October (even after its big comeback from mid-month). Trannies outperformed (up for the 4th straight month)…
Source: Bloomberg
Small Caps led this week, just outperforming Nasdaq; as the Dow lagged.NOTE the action very much concentrated around the open every day…
FANG Stocks closed lower in May, biggest monthly drop since September…
Source: Bloomberg
Meme stocks soared in May – the biggest jump since January’s chaos…
Source: Bloomberg
Bonds were bid on the month with the belly outperforming (7Y -5bps)…
Source: Bloomberg
Amid a chaotic month (the payrolls plunge), 10Y yields ended the month back below 1.60%…
Source: Bloomberg
And while real yields pushed lower (more negative) again in May, gold is signaling they have further to fall…
Source: Bloomberg
The Dollar was down for the second straight month, ending May with its lowest monthly close since 2014…
Source: Bloomberg
Bitcoin crashed 37% in May – its worst month since 2011. Ethereum was the least bad horse in the crypto glue factory, falling less than 10% on the month..
Source: Bloomberg
Despite lots of vol, ETH dramatically outperformed BTC for the second straight month…
Source: Bloomberg
Bitcoin was unable to reclaim $40k and closed below the 200DMA once again…
Source: Bloomberg
Commodities were broadly speaking higher in May, up for the 11th month of the last 13…
Source: Bloomberg
Silver’s best month since Dec, Gold’s best month since July, Crude and Copper also up over 4% on the month…
Source: Bloomberg
Spot Gold closed back above $1900 extending gains off the $1700 double-bottom…
Source: Bloomberg
Finally, have a great Memorial Day… with the most expensive gas in 7 years…
Source: Bloomberg
And as inflation soars, production disappoints… Can anyone say “Stagflation”?
With “Amtrak Joe” at the helm, America’s premier passenger rail service is going for broke with the release of its 15-year “Corridor Vision.” The company’s plan, which was published yesterday, calls for service improvements along 25 existing routes, the creation of another 39, and the expansion of service to 160 new cities across the country.
To bring this vision into reality, the for-profit Amtrak is asking for $75 billion in new federal funding and the power to enforce the prioritization of its own passenger trains’ movement on tracks owned by private freight rail companies.
“Now is the time to invest in our country’s infrastructure and future,” said Amtrak CEO Bill Flynn in a press release. “New and improved rail service has the ability to change how our country moves and provides cleaner air, less traffic and a more connected country.”
Prior to the pandemic, Amtrak was receiving roughly $2 billion in federal subsidies each year. The Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020 gave the company another $1 billion in bailout funds. The American Rescue Plan, passed in March 2021, gave it another $1.69 billion.
President Joe Biden, a longtime booster of Amtrak, has proposed spending $80 billion on the company as part of his $2.3 trillion American Jobs Plan. Republicans have proposed a more modest $46 billion for passenger and freight rail, or $22 billion above current spending levels, in their latest infrastructure proposal.
Besides the price tag, both parties’ infrastructure plans are pretty light on the details of how this money would be spent, however.
“Right now, in the infrastructure debate, we’re not really talking about what we’re going to build and what benefit that is supposed to provide. We’re two sides bidding on top-line dollar amounts,” says Marc Scribner, a senior transportation policy analyst at Reason Foundation, the nonprofit that publishes this website. “Amtrak releasing this [plan] yesterday is them trying to get politicians to focus on discrete priorities and real-world implementation.”
In a Wednesday letter to Congress, Flynn laid out four specific asks to lawmakers.
These include creating a “Corridor Development Program” that would use exclusively federal funds to establish new Amtrak routes and subsidize their early operation. Without that program, states would be expected to cover some of those costs.
Flynn has also asked Congress to create a “Passenger Rail Trust Fund” to provide the company with dedicated multiyear federal funding, similar to how the federal government funds highways. Currently, federal subsidies to Amtrak are approved on a year-by-year basis.
Amtrak also wants Congress to give it greater powers to expand its operations onto privately-owned “host railroads” and to sue railroad owners who don’t sufficiently prioritize passenger trains over freight rail trains.
About 70 percent of the miles Amtrak trains travel are on these privately owned freight railroads, according to the Association of American Railroads. Opening up new routes, as the Corridor Vision calls for, would see Amtrak run even more trains on these privately-owned tracks, where they’d potentially be displacing lots of freight traffic.
“When Amtrak is talking about expanding service, they’re not talking about building parallel track,” says Scribner. “Whenever we’re talking about Amtrak service expansion, the other side of that is freight rail service degradation.”
Scribner notes that private, profitable freight rail companies also transport tonnage with far lower emissions than trucks. Should more passenger rail service lead to more freight being shipped on highways, that would count against Amtrak’s own goals of more environmentally-friendly transportation.
Instead of opening up even more money-losing routes around the country, Scriber says Amtrak should focus its efforts on improving service in the Northeast Corridor, where it owns much of the tracks it uses and where it actually competes with intercity air and bus travel.
That they’re loath to focus on that goal, and instead push for more routes to cities outside the Northeast Corridor, has a lot to do with politics. After all, why would a senator vote to fund a rail service that doesn’t run through her state?
“Amtrak’s primary customers aren’t the riders, they’re the politicians in Congress,” says Scribner. This latest $75 billion Corridor Vision reflects that.
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Some tried to downplay concern by pointing out that the gains resulted from the “base effect” of comparing current prices with the artificially depressed “Covid lockdown” prices of March and April of last year. But that ignores the more alarming trend of near-term price acceleration.
According to the Bureau of Labor Statistics, in every month this year, the month-over-month change in prices has been greater than the change in the previous month.
In April prices jumped .8% from March, versus an expected gain of just .2%. Clearly, if this trend continues, or even fails to dramatically reverse, we could be looking at inflation well north of 5 or 6 percent for the calendar year. That would create a big problem.
Despite Federal Reserve officials’ recent assurances that the inflation problem is “transitory,” many investors are concluding that the central bank will have to deal with this problem by tightening monetary policy far sooner than had been expected. This would make sense if the Fed cared about restraining inflation or, more importantly, had the power to do anything to stop it. In truth, we are sailing into these waters with little ability to alter speed or course, and we will be wholly at the mercy of the waves we have spent a generation creating.
Since the era of central bank activism kicked into high gear in 2008, with the quantitative easing programs created in the wake of the Financial Crisis, the U.S. economy has largely avoided the spike in consumer prices that would typically result from monetary stimulus. It is my belief that the injection of trillions of new dollars into the economy merely offset the downward trajectory of prices that should have occurred during a severe recession. But more significantly, the money the Fed created at the time flowed more directly into assets rather than consumer goods.
Interest rate suppression, which is the mechanism of quantitative easing, stimulates the economy through the financial system. Low interest rates encourage more borrowing and have the effect of pushing up asset prices, particularly for stocks, bonds, and real estate. That explains why the era of QE was particularly good for those people who owned lots of those assets (the rich). Lowering the cost of capital also helped businesses hire and expand, thereby increasing the supply of goods and services, keeping consumer price inflation in check. More importantly, a strengthening dollar from 2011-2020 helped keep import prices low and helped sustain rising trade deficits. This allowed us to “export” our inflation to our trading partners as the dollars printed by the Fed flowed out, while real goods flowed in. However, many of the dollars earned by our trading partners were recycled into our financial markets, namely into large-cap tech stocks, adding fuel to the growing asset bubble.
But the stimulus we have seen in the post-Covid world works on a very different level. Although the Fed is currently engaging in a quantitative easing program that is almost 50% larger than it was at its peak a decade ago ($120 billion per month in bond buying now vs. $85 billion then), the real bulk of the Fed’s efforts now involve underwriting the Government’s massive direct stimulus program, which has totaled more than $4 trillion in direct payments to businesses and individuals since March of 2020. According to the CBO, in 2021 more than 40% of the $5.8 trillion expected to be spent by the Federal Government will be financed by debt issuance rather than taxation. The bulk of that debt is financed by Fed money creation. (These figures do not include the $2 trillion in unpaid for infrastructure spending that is currently working its way through Congress.)
Throughout much of the past decade, mainstream economists urged that stimulus effort needed to pivot from the “monetary stimulus” of quantitative easing to the “fiscal stimulus” of government deficit spending. Now we see that since deficit spending is simply financed by monetary expansion, the two are roughly one in the same. But each effects the economy in slightly different ways.
This current stimulus of direct payments to consumers, businesses, and governments, results in spending which creates demand for goods and services. The problem is that this demand is occurring at a time when the supply of goods and services is being artificially suppressed. Through a variety of enhanced unemployment benefits, child-care tax credits, direct stimulus payments, and increased welfare benefits, the government has created conditions where millions of low-income workers make the rational choice to stay home. Recent calculations by Bank of America estimate that workers who earned $32,000 annually before the pandemic could receive more money on unemployment than they would from actual work.
Under these pressures, it should come as no surprise that the April jobs report showed only 266,000 new jobs created when almost one million were expected. Employers were looking to hire, but far fewer people were willing to work. This explains why the labor force is still eight million jobs smaller than it was before the pandemic, even as the economy has largely reopened.
So, we find ourselves in a situation in which the government is simultaneously increasing demand and reducing supply. This is the classic recipe for consumer price increases, and it is showing up in force. The bad news is that nothing on the horizon suggests that government policy will change to address the crisis. History shows that once consumer price increases take hold the cycle becomes very slow to change and hard to break. The experience we had in the last era of catastrophic inflation provides a harrowing example.
The average CPI increase from 1960-1965 was just 1.3%. But in 1966, because of the major increases in deficit spending resulting from the Vietnam War and LBJ’s Great Society, the CPI jumped to 2.9%. It did not fall below 2% again for any calendar year until 1986, a cycle of 20 years. During that period, the CPI (despite continual methodological adjustments which sought to minimize the results) averaged 6.4%. This meant that by 1987 prices had risen by a factor of more than 3.5 times from the base in 1965, causing the dollar to lose 73% of its value over that time.
But it is important to appreciate the extraordinary efforts it took to break the cycle. During the height of the crisis, which lasted from 1973 to 1982, and began after President Nixon ended the U.S. dollar’s convertibility to gold in 1971, the CPI averaged 9.0%. It peaked at a staggering 13.5% in 1980. Two things were needed to reverse the trend.
The most obvious factor was the Fed’s willingness to raise interest rates far above the level of inflation. The very high rates slowed the velocity of money, discouraged borrowing and consumption, encouraged savings, and restored confidence in the dollar. The tough medicine was delivered by Fed Chairman Paul Volcker who ignored the howls of protest from economists and raised the Fed Funds rate to an astounding 20% in 1981. And unlike prior Fed Chairmen, Volker did not relent from the high rates as soon as the CPI dipped. He kept them high until he knew the job was done. The Recession of 1980-1982, at the time the worst downturn since the Great Depression, was the price of the policy. But in the end, it paid off.
The other factor in breaking the back of inflation was the pro-market, lower marginal income tax rates, and anti-regulatory policies of the Reagan administration. The free trade boom over the next 40 years also helped keep price increases in check by tapping the US economy into the price-cutting efficiency of the emerging markets.
But as we kick off the newest chapter of America’s dance with inflation, can anyone expect the type of serious monetary and fiscal responses that were required 40 years ago to be used, or even considered, again?
In 1980, when Volker moved boldly to contain inflation, U.S. Federal Debt as a percentage of GDP stood at 31%, a generational low. As of December 2020, those levels are more than 4 times that at 129%. More importantly, back in 1980, the average maturity on the national debt was close to thirty years. The current average maturity is just over five years.
That means higher rates don’t just impact new deficits, but the entire accumulated national debt as low-yielding debt matures and must be refinanced at much higher rates. While the Congressional Budget Office now predicts that debt to GDP will hit 195% by 2050, I expect that level to be hit much sooner. Similarly, corporate, and personal debt levels in 1980 were a fraction of where they are today. This means that the cost of raising interest rates now will be far higher than it was in 1980.
Higher rates would also severely impact the stock market. We have seen time and again over the past decade just how sensitive stock prices can be to higher interest rates, which raise the cost of capital and cut into share buybacks and dividends. But in comparison to the overall economy, the stock market is significantly larger now than it was in 1980. As of May 2021, the market capitalization of the Wilshire 5000, the broadest U.S. stock index, was 227% of the size of U.S. GDP. In 1980 that level stood at just about 40%. This means that a bear market in stocks would hit the broader economy much harder than it did in the early 1980s.
The real estate market likely would be hit even harder than stocks, where homes are bought based on monthly payments, not price. Those payments are in large part a result of record-low mortgage rates. As a result, home prices are now at record highs. A surge in mortgage rates would cause housing prices to drop, setting up default levels that might be reminiscent of 2007 and 2008. This will create losses for government-guaranteed mortgage lenders, which will require bailouts with more money printed by the Fed.
But suppose the Fed really was willing to bite the bullet and step out in front of inflation no matter the cost. Could it deliver? Bear in mind that the last time the Fed moved to tighten policy, its efforts were incremental in size and glacial in tempo. After running its quantitative easing program at full throttle for more than five years, the Fed finally began to “taper” its asset-buying program in December of 2013. From that point, it took almost five more years to fully wind down the program and lift rates from zero to 2%. (The 2% rates achieved in October 2018 resulted in the largest December drop in stocks since the Great Depression). If inflation took hold at 6 percent now, such slow and casual moves would be insufficient to make a dent. Does anyone really think the Fed could cancel its $120 billion monthly QE program and raise rates to even 2% in a year or two? Not likely.
On the fiscal side, we are in the opening bars of a crescendo of government spending and activism that will make LBJ’s Great Society look tame by comparison. The Biden administration has massively expanded the welfare state and looks poised to double down on these policies for years to come. Its tax policy will hamstring the American corporate sector and force businesses to relocate overseas. The lost economic activity will be replaced by government spending. But unlike 1980, we can’t expect Ronald Reagan to ride to the rescue. The fiscally conservative, free-trade wing of the Republican party has been taken out and shot by big-spending, anti-trade GOP Trump populists. Practically, this means that we have no defense against inflation, and once it takes hold and metastasizes, we will have little capacity to stop it from spiraling out of control. The result would be a falling dollar that diminishes the real value of Americans’ savings and investments.
President Biden has repeated endlessly that no American making less than $400,000 per year will pay more in taxes. That is a lie. Every American, regardless of income, will be hit by the “inflation tax” that will eat away at their savings and diminish the purchasing power of their paycheck just as surely as payroll or income taxes. This idea is explored in greater detail in our February report Taxed by Inflation.
Investors should do what they can now to protect their wealth from the effects of the inflation tax by seeking assets that will potentially hold up if the dollar does not.
