Russia Central Bank Bans Selling Of Russian Securities By Foreigners

Russia Central Bank Bans Selling Of Russian Securities By Foreigners

As the west piles sanctions upon sanctions seeking to crush the Russian economy, moments ago Reuters reported that Russia has made sure that at least those foreigners who have invested in Russian capital markets will have to stay for the ride.

According to Reuters, the Russian central bank – which the US and EU decided will be sanctioned and as a result all transactions will be banned – has ordered market players to reject foreign clients’ bids to sell Russian securities from 0400 GMT on Monday, according to a central bank document seen by Reuters.

Expect more retaliatory steps by Russia, including the weaponization of its energy exports as the tit-for-tat escalates to an unprecedented degree. And while Russia’s actions may be limited in scope in terms of how much damage they can inflict on the west, former NY Fed staffer Zoltan Pozsar has warned that even without direct action from Russia the markets may be facing an unprecedented crisis which approaches the Lehman weekend in scope, or as Bloomberg’s Nikos Chrysoloras puts it “We seem to be tailspinning into chaos. I have covered crises before, but nothing comes even close.”

 

Tyler Durden
Sun, 02/27/2022 – 18:11

via ZeroHedge News https://ift.tt/IWbVEYq Tyler Durden

Belarus’ Lukashenko Says West Is Pushing Russia Into “Third World War”

Belarus’ Lukashenko Says West Is Pushing Russia Into “Third World War”

Belarusian President Alexander Lukashenko responded to the drastically ratcheting sanctions being slapped on Moscow as the West is increasingly unified behind the move to block Russia’s SWIFT access and taking measures against its central bank. He warned Sunday that NATO countries are pushing Russia into a “third world war”

The alarming words came just as Putin placed his nuclear force posture on “high alert” Sunday over what he called “aggressive statements” by NATO top officials. A statement from the United Nations then called the possibility of nuclear conflict “inconceivable”.

Via BELTA/Reuters

Lukashenko said in his latest Sunday comments as quoted and translated in regional media: “Now there is a lot of talk against the banking sector. Gas, oil, SWIFT. It’s worse than war. This is pushing Russia into a third world war.”

He specified that if the West didn’t start backing off from these extreme measures, the ending could lead to nuclear conflict. He called for “restraint” in this regard, even though in the past two months of tensions leading up to the war in Ukraine he issued an invitation for Putin to host Russian nukes on Belarusian soil.

“We need to be restrained here so as not to get into trouble. Because nuclear war is the end of everything.”

“We have experience. We discussed this theme with Putin more than once. We’ll survive. It is impossible to starve us to death,Lukashenko said.

He vowed that both Belarus and Russia were readying retaliatory measures that he described as being “very tangible” but said Minsk and Moscow would be thinking them over “very carefully”. 

But he warned that should the West or NATO countries ever move nuclear weapons into bordering states with Russia, that Moscow will respond in kind – especially by moving nukes into Belarus. Currently, Ukraine and Russia are expected to begin initial talks “without preconditions” near the Belarusian border.

Tyler Durden
Sun, 02/27/2022 – 17:45

via ZeroHedge News https://ift.tt/LwWcz02 Tyler Durden

‘The 55 Day Rule’ Expires Tomorrow

‘The 55 Day Rule’ Expires Tomorrow

OptionStrategist.com’s Lawrence G. McMillan makes an interesting observation…

Most people don’t realize that the Crash of 1929 and the Crash of 1987 both occurred exactly 55 calendar days after the stock market had topped.

All prices in this article are closing prices on the day being referenced.

1929: the peak in the Dow was reached on September 3rd, when it closed at 381.17.

55 calendar days after September 3rd was (Monday) October 28th. That was the exact date of the Crash of 1929, with the Dow down 40.58 points, or 13.5%.

1987: the Dow topped out at 2722.42 on August 25th.

55 calendar days later was (Monday) October 19th when the Dow collapsed 507.99 points, or 22.6% in one day!

This year, the Dow topped out on January 4th, and…

55 days later is Monday (!) February 28th.

In both 1929 and 1987, there was a sharp market decline in the week preceding the Crash, so that is something else to watch for.

These Crashes just didn’t appear out of thin air.

Tyler Durden
Sun, 02/27/2022 – 17:10

via ZeroHedge News https://ift.tt/az3V6UX Tyler Durden

UN Reports 368,000 Ukrainian Refugees Have Fled War-Torn Country

UN Reports 368,000 Ukrainian Refugees Have Fled War-Torn Country

The United Nations estimates 368,000 Ukrainian refugees have crossed into neighboring countries, with the bulk ending up in Poland, and others have sought safety in Hungary, Moldova, Romania due to the Russian invasion, and that number appears to be increasing by the day. 

“The number of refugees from Ukraine who have crossed to Poland, Hungary, Romania, Moldova and other countries is escalating and is now 368,000. The governments and people of those countries are welcoming refugees,” UN refugee chief Filippo Grandi tweeted on Sunday.

Since Russian forces began a full-scale invasion of Ukraine on Thursday to “demilitarize” the country, a mass exodus of Ukrainians is underway to escape cities and towns, clogging up highways and railways as people moved westward towards Poland, Slovakia, Hungary, and Romania. 

The scale of the mass exodus could be the largest seen in years. The UN forecasts with cash, food, and fuel dwindling in Ukraine, as many as 5 million people could flee the country for neighboring ones. It may soon supersede Europe’s humanitarian emergency in 2015 when more than a million Syrian, Iraqi, and Afghan refugees entered the continent. 

For now, Central Europe is welcoming Ukrainian refugees with open arms, and Poland is expected to accommodate up to a million new ones. Videos and pictures are circulating on Twitter showing the exodus at multiple border checkpoints between Ukraine and other countries. 

Poland, which has seen the largest influx, pledged their support to refugees. The US Army’s 82nd Airborne Division is helping Poland with the inflow of refugees. As the conflict in Ukraine drags on, Europe’s welcome mat remains open. 

Tyler Durden
Sun, 02/27/2022 – 16:35

via ZeroHedge News https://ift.tt/jPo2HfG Tyler Durden

Former White House Physician Says Biden Is Not Cognitively Fit To Deal With Russia Crisis

Former White House Physician Says Biden Is Not Cognitively Fit To Deal With Russia Crisis

Authored by Paul Joseph Watson via Summit News,

Former White House physician Ronny Jackson responded to Russia’s attack on Ukraine by warning that Joe Biden is not “cognitively… fit to be our president right now.”

The current Texas Republican Congressman made the comments on Fox News after Vladimir Putin ordered the bombardment of Ukrainian military infrastructure across the country.

“The whole country is seeing his mental cognitive issues on display for over a year now, and there’s really no question in most people’s minds that there’s something going on with him,” said Jackson.

“He’s not cognitively the same as he used to be and, in my mind, not fit to be our president right now,” he added.

The Congressman said that the 79-year-old representing America at a time when a message of strength needs to be sent isn’t going to end well.

“Every time he gets up and talks to the American people, it’s not just the American people that are watching him speak, it’s the whole world, and that’s part of what the problem is here,” said Jackson.

“[Biden] looks tired, he looks weak, he looks confused, he’s incoherent, and it sends a message of weakness all over the world, and they’re seizing up on that,” he added.

A poll last week revealed that two thirds of Americans want to see Biden take the same cognitive competence test that Trump took when he was in office.

During a press conference last month, Biden stumbled into yet another embarrassing gaffe when he suggested a “minor incursion” into Ukraine would go unpunished.

As we highlighted earlier, Donald Trump questioned why Biden had failed to make a public appearance in the hours after the Russian attack, with the White House announcing he will only appear sometime later this afternoon.

“I don’t think he’s monitoring, I think he is probably sleeping right now,” said Trump.

*  *  *

Brand new merch now available! Get it at https://www.pjwshop.com/

In the age of mass Silicon Valley censorship It is crucial that we stay in touch. I need you to sign up for my free newsletter here. Support my sponsor – Turbo Force – a supercharged boost of clean energy without the comedown. Get early access, exclusive content and behinds the scenes stuff by following me on Locals.

Tyler Durden
Sun, 02/27/2022 – 16:00

via ZeroHedge News https://ift.tt/RQT50Ax Tyler Durden

Law & Contemporary Problems Symposium on “Sex in Law” Publishes Disputed Article

The journal Law & Contemporary Problems has published its first issue of 2022, an interdisciplinary symposium on “Sex in Law.” Among the contributions to the symposium is an article by philosopher Kathleen Stock, “The Importance of Referring to Human Sex in Language.” In this article, Stock argues that “abandoning orthodox biology-based understandings of ‘woman,’ ‘man,’ ‘girl’ and ‘boy’ deprives language-users with immensely valuable tools to analyse and explain the material and social world. Meanwhile, any supposed gains are partial and uncertain.” The inclusion of this article prompted some student editors of the journal to resign, as covered in this post.

The full symposium presents articles from a range of normative and disciplinary perspectives, addressing contemporary questions about how questions of sex, gender, and sexuality are and should be addressed in the law. In addition to Stock, contributors include Edward Schiappa, Joshua D. Safer, Anne B. Goldstein, Richard Chused, Anthony Michael Kreis, Wickliffe Shreve, Joanna Harper, June Carbone, and Madeleine Pape.

As a result of the controversy, no student editors are listed on the journal’s masthead for this issue. Instead is the following statement:

As a general matter, student staff members of the journal Law & Contemporary Problems (L&CP) do not select articles for the symposium issues in its volumes. As L&CP is organized and operates, issue proposals are approved by the journal’s faculty board and article selections are made by the special editors. The student role is typically to produce the issues once articles have been finalized by the authors and special editors. In the case of this issue, 85-1: Sex in Law, no articles have been read, edited, or reviewed by any L&CP student staff editors or executive board members acting in their official capacities as journal members. Over the summer of 2021, eight 3L students resigned from the journal and the remainder of the 3L membership voted not to have student members contribute to this symposium in their official capacities; these decisions were in response to the inclusion of Kathleen Stock’s essay and the faculty board’s rejection of the student executive board’s request for use of a style guide on uniform language for the issue which the student executive board’s membership considered necessary to avoid harm to the transgender community.

The issue’s foreword, by Professors Doriane Coleman and Kimberly Krawiec (who were the editors of this issue), also addresses the controversy. They write:

We want to close with an expression of gratitude to the students who helped edit this volume after a number of editors and journal members resigned from the board or refused to work on it, for reasons explained in their statement on the masthead page. This includes the research assistants of individual authors, who did work that would normally have been completed by the student board, as well as Duke Law students who volunteered their time without pay or institutional credit to produce the rest. Among the latter, we especially want to recognize Meredith Criner who acted as de facto editor-in-chief even as she also did a lot of the below-the-line work normally reserved for junior members of the student board.

The post Law & Contemporary Problems Symposium on "Sex in Law" Publishes Disputed Article appeared first on Reason.com.

from Latest https://ift.tt/3xTimhb
via IFTTT

Law & Contemporary Problems Symposium on “Sex in Law” Publishes Disputed Article

The journal Law & Contemporary Problems has published its first issue of 2022, an interdisciplinary symposium on “Sex in Law.” Among the contributions to the symposium is an article by philosopher Kathleen Stock, “The Importance of Referring to Human Sex in Language.” In this article, Stock argues that “abandoning orthodox biology-based understandings of ‘woman,’ ‘man,’ ‘girl’ and ‘boy’ deprives language-users with immensely valuable tools to analyse and explain the material and social world. Meanwhile, any supposed gains are partial and uncertain.” The inclusion of this article prompted some student editors of the journal to resign, as covered in this post.

The full symposium presents articles from a range of normative and disciplinary perspectives, addressing contemporary questions about how questions of sex, gender, and sexuality are and should be addressed in the law. In addition to Stock, contributors include Edward Schiappa, Joshua D. Safer, Anne B. Goldstein, Richard Chused, Anthony Michael Kreis, Wickliffe Shreve, Joanna Harper, June Carbone, and Madeleine Pape.

As a result of the controversy, no student editors are listed on the journal’s masthead for this issue. Instead is the following statement:

As a general matter, student staff members of the journal Law & Contemporary Problems (L&CP) do not select articles for the symposium issues in its volumes. As L&CP is organized and operates, issue proposals are approved by the journal’s faculty board and article selections are made by the special editors. The student role is typically to produce the issues once articles have been finalized by the authors and special editors. In the case of this issue, 85-1: Sex in Law, no articles have been read, edited, or reviewed by any L&CP student staff editors or executive board members acting in their official capacities as journal members. Over the summer of 2021, eight 3L students resigned from the journal and the remainder of the 3L membership voted not to have student members contribute to this symposium in their official capacities; these decisions were in response to the inclusion of Kathleen Stock’s essay and the faculty board’s rejection of the student executive board’s request for use of a style guide on uniform language for the issue which the student executive board’s membership considered necessary to avoid harm to the transgender community.

The issue’s foreword, by Professors Doriane Coleman and Kimberly Krawiec (who were the editors of this issue), also addresses the controversy. They write:

We want to close with an expression of gratitude to the students who helped edit this volume after a number of editors and journal members resigned from the board or refused to work on it, for reasons explained in their statement on the masthead page. This includes the research assistants of individual authors, who did work that would normally have been completed by the student board, as well as Duke Law students who volunteered their time without pay or institutional credit to produce the rest. Among the latter, we especially want to recognize Meredith Criner who acted as de facto editor-in-chief even as she also did a lot of the below-the-line work normally reserved for junior members of the student board.

The post Law & Contemporary Problems Symposium on "Sex in Law" Publishes Disputed Article appeared first on Reason.com.

from Latest https://ift.tt/3xTimhb
via IFTTT

Pozsar Warns Of Another “Lehman Weekend” As Russia Sanctions May Trigger Central Bank Liquidity Flood

Pozsar Warns Of Another “Lehman Weekend” As Russia Sanctions May Trigger Central Bank Liquidity Flood

In a remarkable show of force and unity, western powers cast aside all their previous concerns about Russian energy supplies and uniliaterally announced the nuclear option of imposing sanctions on the Russian central bank coupled with targeted exclusions from SWIFT of key Russian banks.

  • *EU APPROVES BANNING ALL TRANSACTIONS WITH RUSSIAN CENTRAL BANK

The move has sparked a bank run in Russia, as locals scramble to pull out whatever hard currency they can get their hands on before it runs out, and is certain to trigger chaotic moves in FX and commodities when markets reopen in a few hours. Already some Russian banks are offering to exchange rubles for dollars at a rate of 171 rubles per dollar on Sunday, compared to the official closing price of 83 on Friday before the European/US announcement about targeting the Russian central bank. In other words we are looking at a 50%+ devaluation of the Ruble. Additionally, widespread announcements of divestments in Russian equities by the likes of BP pls and the Norwegian sovereign wealth fund mean that the Russian market will be a bloodbath on Monday.

As Bloomberg notes, commodities are heading for a manic start to the week as investors scramble to assess how the West’s latest sanctions on Russia will affect flows of energy, metals and crops.

The coming days are fraught with event risk for crude, even aside from the sanctions fallout. There’s a midweek meeting of OPEC+ on output; the Biden administration may tap stockpiles; and Iranian nuclear talks look to be nearing a conclusion. On top of that, American crude inventories at the key Cushing hubcould sink to the lowest since 2014 if there’s another modest draw.

Meanwhile, Goldman Sachs said that despite the rally in prices, it’s unlikely OPEC+ will choose to quicken the pace at which the alliance has been restoring supplies, citing Russia’s “essential role” in the grouping.

And while Europe’s moment of unity is certainly inspiting, it doesn’t answer the question just how the continent will replace the massive amount of energy that flow every single day via the countless Russian pipelines into Europe, which are now for most intents and purposes shut.

But a bigger question – and one which has so far not been pursued – is what happens to the western financial system as a result of the sudden expulsion of Russia – and its billions of dollars – from the global monetary system.

One somewhat dire take comes from Bear Traps report author Larry McDonald who writes overnight that we need urgently to know what is actually sanctioned here: “They – Olaf – Macron – Biden – will try and dance around risk with a targeted swift but they’re probably not qualified to do so” adding that “It’s like a Lehman weekend with clueless politicians trying to find risk in the dark.

“If they sanctioned the central bank and the transfer agents for Eurobonds then Russia will default on all foreign debt immediately. And if Russia tries to find a back door through China we will fine or sanction Chinese banks. Another thing, Germany can play swift tough guy but Macron has to protect most vulnerable Soc Gen and Draghi is probably trying to protect vulnerable Italian banks like intesa.”

While that take may be a bit extreme as it presupposes Europe has rushed into the wholesale sanctions without any backup plans, a more nuanced take comes from Credit Suisse repo guru and monetary plumbing expert, Zoltan Pozsar, who took a detour from his extensive narrative of how the Fed’s QT will impact the market and instead focuses on what could be a “Lehman weekend” for funding markets as a result of Western sanctions on Russia which as Zoltan notes is a “surplus agent” – i.e., an entity which typically lends a lot of funds in the Eurodollar market. The Bank of Russia has over $450 billion in non-gold FX reserves, and the private sector has over $500 billion of liquid investments as shown below

First, some background on where Russian central bank assets are located

As shown in the chart below, of Russia’s close to $1 trillion of liquid wealth, just over $300 billion is in short-term money market instruments, and Pozsar estimates that about $200 billion of this represents the lending of US dollars in the FX swap market.

This, however, is not immediately obvious from the Bank of Russia’s reports, which as the Credit Suisse strategist notes don’t mention FX swaps and list only about $100 billion in US dollar exposures. As such, Pozsar cautions that the published numbers require careful interpretation: Thus, according to the Bank of Russia’s latest Foreign Exchange and Gold Asset Management report, U.S. dollar assets made up about 20% of Russia’s non-gold FX reserves at the end of June 2021, which is way down from 50% at the end of March 2018

As a reminder, in April 2018, Russia sold all its cash Treasury securities – both the central bank and the private sector – but as Zoltan notes, there are tell-tale signs in the data that the proceeds from these sales went into the FX swap market. In other words, “FX reserves are still in U.S. dollars, but not onshore. They are offshore in the Eurodollar market.”

As further proof that Russian reserves have entered the swap market, Pozsar notes a substantial increase in Russia’s claims on foreign central banks after it sold U.S. Treasuries (see chart belowe), adding that on-balance sheet manifestations of FX swaps (the spot sale and forward purchase of U.S. dollars for other currencies) are non-U.S. dollar assets that the lender of U.S. dollars buys with the local currency collateral received against U.S. dollars: “For central banks, these are typically deposits at other central banks.”

Chasing the trail of where Russian central bank reserves can be found, Figure 3 shows the big increase in the Bank of Russia’s claims on foreign central banks and the typical year-end spikes that come as lenders in the FX swap market lend more to harvest year-end funding premia: “In recent years – because QE during the pandemic compressed dollar premia – the data also shows a shift in the reinvestment strategy toward short-term debt issued by supranationals.” The chart above shows Zoltan’s estimate of the Bank of Russia’s U.S. dollar exposure with adjustments for dollars lent through FX swaps. The share hasn’t much changed since 2018 – it’s still about 50%, which is more reasonable than the reported 20% for a country that is a big exporter of commodities priced in U.S. dollars.

Assuming that Russia has roughly $200 billion in FX swaps, the Hungarian repo expert then points the Bank of Russia and the private sector have claims on foreign banks in the form of deposits in the amount of about $50 billion each – likely a mix of euro- and U.S. dollar- denominated deposits, which is how Zoltan arrived at the $300 billion total above.

Market Impact of Sanctions

If Russian short-term money market instruments are roughly 30% of its total liquid wealth of $1 trillion, as the above calculations suggest, Zoltan then warns that “$300 billion deployed in the money markets is a lot. $300 billion is enough to push spreads around in funding markets.” He then goes on to note that “$300 billion – in the extreme – can either be potentially trapped by sanctions, or moved somehow from West to East to avoid being trapped by sanctions. Each would be a market event.

What happens if the funds get frozen through sanctions – an event which the CS analyst says “would turn a surplus agent into a deficit agent, which in turn would lead to missed payments, much like the onset of Covid-19 led to missed payments and turned surplus agents into deficit agents.”

The downside case if indeed this is similar to the start of Covid when overnight trillions in short-term funding markets were frozen, is something the market should discount according to Pozsar. Alternatively, as he explains it more simply, “consider the notion that if you owe the bank $1 million, that’s your problem, but if you owe the bank $1 billion, that’s the bank’s problem.

One potential loophole Russia has is that as surplus agent, it can move surplus funds from Western financial centers and institutions to financial centers, financial institutions, and central banks elsewhere (i.e., in the east, such as China) that would then re-cycle surpluses back into the financial system.

However, that would mean the partial “tear-up” of matched FX swap books and outflows of operating deposits (as public and private surpluses are moved, respectively) from Western banks. But that would be their funding problem – as deficit agents, these institutions may then have to tap the dollar swap lines.

And here things start getting ugly, because as Pozsar puts it, “when flows change, spreads can gap.”

Escalation and central bank response

Conceding ahead of the weekend’s escalation that he is no expert on geopolitics, nor does he know which way events will unfold either on the ground or in the domain of sanctions, Pozsar cautions that “if things escalate, it’s hard not to see a direct impact on FX swaps and U.S. dollar Libor fixings given Russia’s vast financial surpluses and where those surpluses are deployed.” Or as he put it “
Whoever moves first, there is a funding impact either way…”

Which brings us to Pozsar’s latest must read note (available to professional subs), which was published after we learned that the Russian central bank will be sanctioned effectively triggering the worst case scenario for funding markets, and in which Pozsar writes that “I’ll never forget the late-night briefing on Friday before Lehman’s bankruptcy where according to one line of argument Lehman’s problems were so widely understood that the system had enough time to hedge itself so that the actual default would be manageable.” Well, as he sarcastically notes, “It didn’t turn out like that” adding that “if a bank closes a $200 billion balance sheet on Friday and doesn’t open on Monday, someone’s $200 billion wasn’t hedged by definition.”

The same applies with exclusions from SWIFT. According to Pozsar, exclusions from SWIFT “will lead to missed payments and giant overdrafts similar to the missed payments and giant overdrafts that we saw in March 2020.”

As a reminder, back then Zoltan was perhaps the first to warn – loudly – that “supply chains are payment chains in reverse” and that lockdowns would lead to missed payments everywhere. Today, all global payments go through SWIFT (including payments for commodities) and so the Credit Suisse strategist notes that “exclusions from SWIFT will lead to missed payments everywhere again” or as he puts it, “Just as covid virus froze the flow of goods and services that led to missed payments, war has led to exclusions from SWIFT that will lead to missed payments again…. But by design, and not without a risk of retaliation: if a freeze in activity can lead to missed payments, an inability to receive payments through SWIFT can freeze the flow of goods, services, and commodities like gas or neon in kind.

Being a monetary plumbing expert, Pozsar is in his prime to warn that “we are dealing with pipelines here – financial and real. In the present context, they are two sides of the same coin. Inability to receive may mean unwillingness to send. Commodity flows aside, one would assume that central banks would re-activate daily swap line operations now that the SWIFT option got invoked.

In other words, central banks should stand ready to make markets on Monday again.

As an aside, the Russia central bank appears to have anticipated at least a part of the current escalation, because as noted above, “the Bank of Russia (BoR) has neither Treasuries to repo with the new FIMA repo facility, nor dollar swap lines with the Fed, and if its assets are frozen, it can’t raise dollars to provide for its domestic banks.” It does, however, have swap lines where the rehypothecation pathway can be severed… and it also has lots of gold.

Why does that matter? Well, as Pozsar explains in a quick crash course on “moneyness”, central bank deposits, bank deposits, and securities are all “inside money” – that is, money and money-like claims that are someone else’s liability – and it’s situations like this when “outside money” – money claims like gold bullion that are no one’s liability – is king, especially if stored in vaults domestically. Unlike balances at the Deutsche Bundesbank, western G-SIBs, or Euroclear, you control what you have.

The best example of course is Gold, which is a sovereign’s money under the mattress, and as Pozsar notes, “the Bank of Russia has more of it than deposits at foreign central banks!”

The silver, or rather golden lining for Russia, is that gold can be pledged under repo operations to cover one’s dollar needs (something which both Venezuela and Turkey have done) with a willing, collateral-rich central bank that has enough Treasuries to repo (such as China), or perhaps even the BIS (which owes its origin to reparation payments), and one can accumulate dollar surpluses anew through ongoing commodity exports away from financial centers in the West by seeding financial centers in the East.

Indeed, As Pozsar puts it, “the options appear limitless”, as long as there is a willing counterparty to transact with Russia:

  • U.S. dollars from Treasuries via repos.
  • U.S. dollars from local currency via FX swaps.
  • U.S. dollars from gold via whatever we’ll end up calling that…

But this is where the repo plumbing guru warns again that such “transitions are never smooth” especially since “banking is about double entry bookkeeping: My assets are your liabilities like the blue and red veins in a body in one’s elementary biology book.”

Lehman weekend 2.0

Which brings us to the punchline of Pozsar’s warning: “there is no difference between Lehman unable to pay back money funds because its tri-party clearing agent is unwilling to unwind o/n repo trades, and banks unable to receive and make payments because they are out of SWIFT.” He then adds that the Herstatt risk – or settlement risk – owes its name to a mishap at a single bank, but “the risk in the current  scenario involves an entire country’s banking system.”

And here comes Pozsar with another Lehman analogy:

Banks’ inability to make payments due to their exclusion from SWIFT is the same as Lehman’s inability to make payments due to its clearing bank’s unwillingness to send payments on its behalf. History does not repeat itself, but it rhymes…

The bottom line from Pozsar, and one which western leaders appears to have ignored in their pursuit of a unified statement against Russia, is that “the consequence of excluding banks from SWIFT is real, and so is the need for central banks to re-activate daily U.S. dollar funds supplying operations.”

And just to underscore the point of how serious it will get in the coming hours (not days), the Hungarian warns that “excess reserves and o/n RRP balances won’t be enough.” Instead, we will see the Fed’s most powerful stabilizing intervention in play: a spike in liquidity swaps, which are currently at zero.

As Pozsar concludes, it appears that the Ukraine war has translated into yet another Fed balance sheet-boosting crisis just like covid, and “so the Fed’s balance sheet might expand again before it contracts via QT – and not just because of the swap lines. The FIMA repo facility is also there to turn collateral into dollars – anonymously, away from the prying eye of dealers, if a central bank becomes a friendly correspondent for a sanctioned central bank turning gold into cash.”

That, or an unforeseen call on unwanted reserves in the o/n RRP facility as the correspondents flood the repo market with collateral before QT even began.

And just like that we are back to square one: keep an eye on press releases from the Fed ahead of Monday’s open announcing the central bank’s readiness to keep the world flush with dollars as the Ukraine worst-case scenario is now reality.

The full Pozsar notes are available to professional subs in the usual place.

Tyler Durden
Sun, 02/27/2022 – 15:20

via ZeroHedge News https://ift.tt/6GWqBwk Tyler Durden

Patricians Vs. Plebeians: The Great Realignment

Patricians Vs. Plebeians: The Great Realignment

Authored by Jeffrey Tucker via The Brownstone Institute,

When I was a kid – and the same with my parents when they were young – you could count on certain fundamentals in politics. The Chamber of Commerce represented business, and business generally favored free enterprise. Not always, but mostly. 

Small businesses could become big and big could become small, but they generally opposed socialism, big government, regulation, and high taxes. For this reason, they generally supported the Republican Party. 

It was also a time of class malleability, with people moving in and out and up and down. There were always gaps between rich, middle, and poor but they were not as wide as now, and there was a healthy rotation among them. 

In the last ten years, and accelerating dramatically in the last three, this has changed. Big business consolidated and centered on tech and finance. Then it became entrenched. The laptoppers educated at woke universities ported their values into the workplace, gained managerial control, and deployed HR departments as their mechanism of control. The politics of these industries followed, and now it is the base of the Democrats. 

It’s strange because I’m old enough to remember when everyone on the left defended: civil liberties, freedom of speech, the working classes, schooling, small business, the poor, public accommodations for everyone, peace, and democracy. It opposed witch hunts, segregation, class privilege, big business, war, and dictatorship. Or so it seemed. 

Anyone paying a modicum of attention to modern political trends knows that this is no longer true, and that accounts for why so many on the left are disaffected (and that includes many writers at Brownstone). The evidence is everywhere (the apostasy of Noam Chomsky and Naomi Klein come to mind) but sealed by two reliably left publications: The Nation and Mother Jones. The former’s push for forever lockdowns has been relentless while the latter just launched an anti-trucker campaign against what everyone used to think were basic civil liberties. (Both sites are hard to navigate for all the pop-up ads and commercial pushes.) 

All of this happened almost imperceptibly sometime after the turn of the millennium, and set the stage for the rise of Trump in all his working-class appeal. That cemented the deal. The Republicans lost the backing of the most influential sectors of economic life, and the Democrats could count on the backing of the most highly capitalized and powerful players in the whole information economy. 

Which is to say that the Democrats are the party of the rich. And the entrenched rich somehow found themselves on the side of lockdowns and mandates. 

The Democratic Party was built by people who have for many decades pretended to be the champions of the poor, the vulnerable, the workers, the proletariat, and so on. They built huge systems to address them and serve them. Then it changed. They became the champions of closures. They shut the schools and churches, and wrecked small businesses. Their policies imposed unconscionable burdens on the very people they claimed to support. 

Comments Jacob Siegel of the Tablet: 

It’s not simply that the rich have gotten richer, though that’s certainly true as America’s billionaires added $2.1 trillion to their net worth during the pandemic. It’s Silicon Valley corporations with close ties to the Democratic party, like Google, that have benefited most.

While the tech companies have few actual employees compared to older productive industries, their largesse now directly subsidizes whole sectors of the professional class economy, including journalism. Individual professionals may not have become richer during the pandemic but, unlike hundreds of thousands of American workers who lost their jobs — many of whom worked in the small businesses that were shuttered over the past two years — their employment was mostly secure.

Perhaps it’s not surprising, then, that those professionals would instinctively internalize Covid policies that enriched their tech oligarch patrons as a personal victory and defense of their own status. 

As a result, the Democrats have massively alienated their voter base, leaving them with only strongly reliable support among elite classes. 

And what of the Republicans? I can sum it up in a word: truckers. The policies of the last two years relied on them fundamentally but forgot about them otherwise. They were pushed too far, in all countries. Now they have said: enough. They are in revolt, as a proxy not only for transportation workers but the whole of the working class, including independent businesses. 

Don’t forget that the number of “excess deaths” among small businesses during the pandemic in the US was 200,000. One of the most striking facts is that 41% of black-owned businesses were destroyed. It really amounted to a kind of slaughter that has fundamentally shaken the whole commercial sector in the US and all over the world. What you see on the streets of Ottawa today (also in DC and Jerusalem) is the result of this realignment. 

It feels like class war because it is. It’s not the one Karl Marx dreamed of, where the workers and peasants rise up against the rich to demand their surplus value. It’s the rich working with the government, media, and tech to put down the demands of the less privileged in society who are calling for a restoration of simple freedom and rights. 

Among the less privileged are workers, small businesses, moms pushed out of professional life during lockdowns, religious people who still have an attachment to their communities, and generally people who value their personal independence.

All this kindling was in place when the vaccination mandates finally lit the fire. Forcibly jabbing people with a medicine they do not believe they need is a good way to alienate people forever. They might go along to keep their jobs, but they will come out on the other side more furious than ever. 

That fury is boiling over around the world today. Some mayors are responding by getting rid of all controls and mandates. This happened in DC this week, without explanation. The real reasons likely trace to the hospitality and restaurant industry in DC, which had been devastated by the mandates that have driven so many people to surrounding states. In addition, the large African American community in DC seriously resented the mandates. Among DC whites, 71% are vaccinated but that’s true of only 56% of blacks. The appalling reality is that nearly half of the blacks in DC were banned from public accommodation under the mandates. That’s truly untenable. 

We’ll likely see New York and Boston flip soon too. Meanwhile, other governments are taking the totalitarian route. Justin Trudeau in Canada has invoked emergency powers to become the would-be dictator over the whole country. 

Long an admirer of China’s authoritarian, one-party rule, his new dictatorship seems completely untenable, but we shall see. We thought that rule by the Chinese Communist Party looked untenable in light of the masses gathered at Tiananmen Square. We know how that ended. Will Trudeau attempt a Tiannamen solution?

To top it all off, most of the country is on the verge of experiencing double-digit inflation, a policy that is utterly wrecking the poor and reducing the purchasing power of everything. Despite all the promises and predictions that the worst would be over by now, the worst certainly lies ahead. 

People yesterday were once again pretending to be shocked at the Producer Price Index, which saw a one-month increase of 1% and a 9.7% increase year-over-year. That can only translate to ever higher prices for the consumer. 

Check out this chart on who is being hurt the most. 

This might be the most portentous moment in our political lives: the commercial elite, the new Patrician class, is drifting full fascist, while the Plebeians (the ancient designation of commoners) are pushing for uncompromised freedom. That’s an upheaval that realigns nearly everything. 

All of this should remind us that the history of liberalism (in its traditional sense meaning freedom) is a history of revolt against elites. It was a brief moment in history in the twentieth century when liberal values reliably overlapped with the interests of big business – and hence why there remains such confusion today in the world over what is liberal, what is conservative, what is left, and what is right. 

Lockdowns and mandates have reshuffled political alliances, it would appear. They have created a clearer demarcation than we’ve seen in our lifetimes between the Zoom-class Patricians and the freedom-loving Plebeians. Engaging that struggle with intelligence and clarity is what’s necessary to recapture the cultural affection for, and the political practice of, the liberty we once knew.

Tyler Durden
Sun, 02/27/2022 – 14:44

via ZeroHedge News https://ift.tt/dNyPsEj Tyler Durden

OPEC+ Likely To Stand By Plans To Only “Gradually” Increase Production, Despite Crude Volatility

OPEC+ Likely To Stand By Plans To Only “Gradually” Increase Production, Despite Crude Volatility

OPEC+ is likely to stand by its plan to only “gradually” increase oil production despite the mounting volatility in the commodity as a result of Russia’s invasion of Ukraine.

Several delegates said that when OPEC+ meets this week, it will “probably” not wind up modifying its plans of adding 400,000 barrels per day to the market, Bloomberg reported

Seemingly as part of their justification for holding steady, delegates said that last week’s spike in prices “was triggered mostly by geopolitics and did not reflect an imbalance between supply and demand”. 

The 23 nation alliance, which includes Russia, will meet on Wednesday to talk about its output goals for April. However, as Bloomberg notes, Saudi Energy Minister Abdulaziz bin Salman does have a history of “surprising markets”. 

OPEC+ has been under pressure from importers of late to help reduce the cost at the pump. But nations like Saudi Arabia have so far ignored the pressure, stating they are committed to the OPEC+ agreement and what the alliance determines. Unilateral rises in production are unlikely, delegates said. 

OPEC+ is pumping almost 1 million barrels a day below its target, the International Agency Energy said this month. Many nations are struggling to reach their quotas, the report says. 

Recall, in January, we wrote Harris Kupperman said that oil prices were “out of OPEC’s hands” at this point due to increased demand. 

“Governments around the world are stimulating demand. They’re going crazy. They’re printing money and subsidizing users. At the same time, they’re making it amazingly painful for producers to produce oil. They’re withholding permits and blocking pipelines,” he said. “They’re already talking about excess profits taxes and carbon taxes are next. Why would anyone increase production under these circumstances? Hence, non-OPEC production isn’t going up much.”

He concluded: “So, OPEC is left to make up the balance. They can talk about raising production by 400k/d, but they’re already almost out of spare capacity. They aren’t even hitting their own internal targets. It’s increasingly out of their hands at this point. Oil is going higher.”

Tyler Durden
Sun, 02/27/2022 – 14:05

via ZeroHedge News https://ift.tt/EQuNx4a Tyler Durden