Month: February 2022

Authored by Avik Roy via AmericanMind.com,

The digital money revolution is happening—which side of it are you on?

Aspiring Republican politicians and conservative opinionators love talking in darkened tones about the malevolence of elites. And yet, for all the fingers wagged and pixels rendered, conservatives have largely ignored the most economically significant way in which elites actually have rigged the game in their favor. The widening gap between elites and the rest of us comes down in large part to the highly abnormal way in which the United States has defined money for the last 50 years.

Our story begins when Richard Nixon—self-styled tribune of the “silent majority”—tore up the Bretton Woods agreement that had linked the value of the U.S. dollar to the price of gold. In 1944, the Allies had all agreed to fix their own currencies’ exchange rates to the U.S. dollar, based on the American promise that the greenback would maintain its peg to the value of 1/35th of an ounce of gold.

The problem for Nixon was that, by 1971, the rest of the industrialized world held $64 billion worth of claims on the $10 billion of gold that the U.S. actually held. Nixon solved this problem in banana republic fashion, abruptly prohibiting foreign countries from redeeming their dollars for gold and, eventually, abandoning the dollar-to-gold peg altogether.

For a period of time, this tactic appeared successful. Nixon got reelected in a landslide in 1972. But within eight years, the dollar’s value in gold terms had declined by 95%, and the greenback’s purchasing power, as measured by the Consumer Price Index, had been cut in half.

WTF Happened?

Many of the economic trends that conservatives now decry stem directly from Nixon’s abandonment of the Bretton Woods agreement. A colorful website, wtfhappenedin1971.com, compiles a long list of them: most notably, that while the benefits of economic growth were widely shared among all Americans between 1945 and 1971, after the Nixon Shock, they accrued far more to the wealthy.

James Grant, the eminent financial commentator, describes interest rates as “the most consequential prices in capitalism.” Low interest rates make it cheaper to borrow money. Cheaper borrowing—“easy money” in financial parlance—may seem like it benefits everyone, but it doesn’t. Instead, it particularly benefits the most creditworthy individuals and institutions, those who already have the ability to borrow in large amounts: banks, investment funds, corporations, and the wealthy.

And so, contrary to conventional wisdom on the Left and some outliers on the Right, the spectacular growth of wealth inequality is not due to “market fundamentalism.” It’s instead due to unprecedented federal interference in the interest rate market, a form of dirigisme that directly follows from the Nixon Shock.

In a truly free market, interest rates are determined by billions of independent decisions by lenders and borrowers. Interest rates go up when lenders fear that they won’t get their money back, and interest rates go down when lenders worry less about that problem.

In contemporary America, interest rates are not determined by the market. They are dictated by the Federal Reserve. And the effects on our economy are profound. When the Fed lends money to banks at near-zero interest, those banks then put the money in investable assets, like bonds, stocks, and real estate. Artificially juicing the demand for such assets benefits those who already have them; that is, those with the biggest homes and the largest investment portfolios. It used to be that every middle-class American could afford to own a home. Not anymore, thanks to the run-up in home prices driven by Fed-fueled real estate inflation.

The primary method by which the Fed controls interest rates is by manipulating the market for Treasury bonds. These bonds are essentially slices of the federal debt; when you purchase a $100 Treasury bond, you are effectively lending the U.S. $100. The lower the bond price, the higher the interest rate, and vice versa.

Hence, the Fed artificially lowers interest rates by going into the bond market and buying trillions of dollars’ worth of U.S. debt, making it seem like there is great demand to lend money to America, when in fact that demand is declining among outside investors.

This artificial manipulation of supply and demand by the Fed leads to a critical question: how does the Fed get the money it needs to buy up all the debt issued by the Treasury department? By printing it out of thin air.

Cheap Debt

In case I’ve made your head hurt, I will try to summarize in plainer English.

The U.S. has incurred $30 trillion of debt. The U.S. borrows money by issuing Treasury bonds. Not enough investors believe that lending money to the U.S. yields an attractive return, and therefore, not enough investors are buying Treasury bonds. In a truly free market, that set of circumstances would lead interest rates to rise.

But if interest rates rise, the government would face higher borrowing costs to finance its debt. And every economically elite American would also face higher borrowing costs, leading to a contraction of markets where financial institutions and wealthy individuals park their excess borrowed cash: the stock market, the venture capital market, the private equity market, the bond market, and the housing market.

How does this relate back to Nixon and 1971? Because none of this borrowing would be possible if the U.S. dollar were still pegged to gold. Under a gold peg, the Fed wouldn’t be able to artificially increase the quantity of U.S. dollars in circulation without also increasing the quantity of gold it held in reserve.

For most of the past 50 years, there was little that the average American could do to protect himself from this vicious cycle. If you did the “responsible” thing, living within your means, but didn’t have enough to invest in the stock market, your savings declined in value. Even if you made enough to put money in a 401(k), rules promulgated by the Securities and Exchange Commission restrict the best investment opportunities to “accredited investors”: those with annual incomes over $200,000 or net worths over $1 million.

The increasing concentration of capital has enabled an important manifestation of cancel culture, in which coastal elites and the government have increasingly gained the capability to deplatform those whose attributes or views do not comport with those of coastal elites. The most recent example of this phenomenon has occurred in Canada, where citizens have been told that their bank accounts will be frozen if they express support for truckers protesting their government’s vaccine mandates.

Digital Gold

Bitcoin, analogous in some important ways to gold, has emerged as a forceful challenger to all of these trends.

To take one point of comparison: like gold, the amount of Bitcoin is finite and fixed. Unlike the U.S. dollar, whose quantity increases every time the Fed snaps its fingers, Bitcoin’s software architecture prevents its circulating supply from ever exceeding 21 million. Hence, over the long term, Bitcoin is inflation-resistant: its purchasing power is actually increasing relative to the dollar. Since Bitcoin came online in 2009, its Sharpe ratio—a measure of volatility-adjusted returns widely used by investors—exceeds that of every other asset class in the world.

Much as the dollar is divisible into 100 cents, each Bitcoin—worth approximately $38,000 at the time of writing—is divisible into 100 million “satoshis,” making an investment in Bitcoin accessible to anyone with even a few dollars in savings to spare. And because the federal government has classified Bitcoin as “property,” not a “security” under the jurisdiction of the SEC, anyone in any income bracket can own Bitcoin.

These two features enable ordinary Americans to protect themselves from the trends that make everyday life more expensive for everyone other than the wealthiest. As the U.S. debt skyrockets, and the Fed prints ever-greater amounts of money to fund it, Bitcoin helps people protect their savings from a government-driven erosion of their purchasing power.

And it’s not just Americans who benefit from Bitcoin. Alex Gladstein of the Human Rights Forum calculates that over 1.4 billion people around the world are living in countries where inflation exceeds 10% per annum, including citizens of Brazil, Turkey, and Argentina.

Satoshi vs. the Fed

Bitcoin skeptics commonly complain that if Bitcoin can do all of these things, then surely the government will ban it. This gets us to one of Bitcoin’s most important qualities.

Bitcoin is uncensorable, meaning that any person with an internet connection can send it to someone else, irrespective of whether or not the government wants them to. Elizabeth Warren and Janet Yellen have complained vigorously about this “problem,” arguing that only criminals would want to trade in a currency that the government doesn’t control.

But precisely because governments cannot cancel it, Bitcoin enables regular people and political dissidents alike to protect themselves from governments’ economic mismanagement. That is not to say that governments can’t make it hard to use Bitcoin. The U.S. could tax Bitcoin-driven capital gains at a punitive rate, like 80%, driving many investors away from the asset. The government could make it difficult for Americans to exchange their U.S. dollars for Bitcoin, through restrictive banking regulations.

Most dangerously, some senior officials in the Biden administration and at the Federal Reserve are considering developing a crypto version of the U.S. dollar, called a “central bank digital currency,” that is exactly the opposite of Bitcoin. A CBDC would enable the federal government to wipe out the private banking sector, because every savings and checking account could reside at the Fed. The federal government would gain the direct authority to add or subtract deposits in those accounts, or even shut them down.

Some people still send handwritten notes and read the print copy of their local newspaper. But in a CBDC world, there won’t be an option to use plain old paper cash. China is rolling out their own CBDC for the Winter Olympics, with the aim of eventually abolishing paper money.

In other words, the digital monetary revolution unleashed by Nakamoto is here to stay. The only question is whether or not the money of the future will serve the interests of governments and elites, or of ordinary people. Bitcoin is resolutely on the side of the latter.

Despite Friday’s announcement from the CDC that federal masking guidance was finally being eliminated for the majority of the US (there are still some areas that qualify as “high risk” for COVID, but 35 states have already abandoned their own masking guidance), air travelers will still need to don masks for the duration of their flights – at least for the next three weeks.

A TSA order enforcing mask mandates on commercial airplanes doesn’t expire until March 18, and there’s even a possibility that it could be extended.

Rules imposed in the early days of the Biden Administration require mask-wearing across all forms of public transportation, including trains, buses and airplanes. But the TSA order applies only to air travel.

“The mask requirement remains in place and we will continue to assess the duration of the requirement in consultation with CDC,” said TSA spokeswoman Alexa Lopez on Friday.

In fact, pretty soon, public transportation could be one of the few remaining settings where people are required to mask up. Thanks to the CDC’s decision yesterday, masking mandates will even be dropped in schools.

Flight attendants and pilots alike will likely be relieved to see the masking mandates dropped, as enforcing them has led to an unprecedented rash of conflict on commercial airplanes as (often intoxicated) passengers pick fights with other passengers, and staff. Incidents where passengers have been restrained in-flight, and even incidents where planes have been rerouted, have skyrocketed.

The FAA has said the vast majority of these complaints have been mask-related. More than $1 million in fines have been issued by the FAA, and another $400K have been issued by the TSA.

The guidance the CDC issued Friday is based around a new approach to measuring viral risk, this one based more on hospitalization numbers than overall case numbers, which are becoming increasingly harder to measure as more Americans rely on at-home testing to confirm COVID infection.

Under these new guidelines, only about 28% of the population lives in areas where the agency currently recommends universal masking.

Authored by Eva Fu via The Epoch Times (emphasis ours),

Moscow and Beijing have been keeping each other abreast of their plans in the leadup to the Ukraine attack, according to two lawmakers.

“I think they have coordinated and I think that China is in a better position letting Russia go first, to evaluate,” Rep. Ken Buck (R-Colo.) told EpochTV’s “China Insider” program at the Conservative Political Action Conference (CPAC) on Feb. 25.

By watching the world’s reaction on Ukraine, China is trying to gauge its next steps on Taiwan, the self-ruled island that the Chinese Communist Party claims as its own territory and long planned to bring under its control, by force if necessary.

“China has designs on Taiwan,” said the lawmaker during an interview in Orlando, Florida. “And they want to see if the world imposes real sanctions on Russia, and how much it hurts Russian, and what really the willpower is to stop an aggressive nation from gaining further territory.”

Rep. Steve Chabot (R-Ohio) held a similar view.

He made a particular note of Russian leader Vladimir Putin’s meeting with China’s Xi Jinping at the Beijing Olympics’ opening day three weeks ago, which ended with the two countries forming a “no limits” partnership.

“They’ve been plotting behind the scenes,” he told NTD, an affiliate of The Epoch Times, at the CPAC event.

Ukraine was one subject discussed during “in-depth discussions” between the two nations’ foreign ministers, which took place a day prior to the Xi-Putin meeting. From the Kremlin readout, Moscow also “reaffirms its support” for Beijing’s claim that Taiwan is part of China.

Since the Russian invasion of Ukraine, the Chinese foreign ministry has been peppered with questions about whether Xi had prior knowledge about the plan and even gave Putin “his blessing,” but its officials had avoided making a direct answer.

“Russia is an independent major country,” spokesperson Hua Chunying told reporters on Thursday.

She accused the reporter of having “rich” imagination when asked if the timing of the assault, only days after the Beijing Olympics concluded, was coincidental.

‘Distraction’

The intensifying Ukraine crisis is a boon for Beijing, Buck said. A military conflict would shift the U.S. attention away from its rivalry with China, handing Beijing an opportunity to exploit.

“If the United States starts pouring troops into Europe to defend Europe and do our part as a NATO partner, we are not going to be able to do what we want to do or need to do in the Pacific,” said Buck.

“It serves as a distraction,” he added.

“In China’s view, it serves as a way of siphoning off resources that can be used in other areas,” the congressman said. “China is most interested in making sure that this is prolonged, and that Russia continues to maintain a threat to the Baltics, Poland, to Hungary, to other countries in Europe.”

Beijing has so far refrained from directly labeling Russia’s attack on Ukraine as an invasion, but at the same time has maintained that it respects “all countries’ sovereignty and territorial integrity,” an oblique reference to its insistence that Taiwan is part of China.

While the United States is not ready to engage in a ground war with Russia over Ukraine, the stakes are different when it comes to Taiwan, said Buck.

“The will to defend Taiwan is greater than the will to defend Ukraine,” he said.

“The idea that China and the way they have cheated trade relationships, the way they have stolen intellectual property, the way they have made themselves a military power in recent years, and have tried to affect shipping lanes that are necessary for trade, is different,” he said.

“Taiwan sits in a position that could impact our ability to trade with Japan, with Korea and other neighbors,” he added. “And to really embolden China to interfere with strategic trading partners … I don’t think the United States wants that to happen.”

According to a January poll by the Trafalgar Group, an overwhelming majority of Americans are against sending troops or military equipment to Ukraine in the event of a Russian invasion. Only 15 percent of those polled believed that the United States should provide troops, while 30 percent believed it should provide weapons and other supplies only.

By contrast, 58 percent of those polled believed that U.S. military assets should be used to defend Taiwan in the event of an invasion by mainland China.

To deter China from following Russia’s steps requires stronger action by the United States, both lawmakers said.

“It’s absolutely critical that they [Beijing] realize if they attack [Taiwan] that will end up in serious military confrontation with the United States,” Chabot said, in calling Washington to change its long standing policy of strategic ambiguity, in which the United States remains deliberate vague on whether it’d come to Taiwan’s defense in the event of a Chinese invasion.

“China is not being at all helpful,” Chabot added. “But that’s not unexpected because the two chief rivals on the globe right now … the worst of the bad actors are Putin and Xi—Russia and China.”

David Zhang contributed to this report. 

Jeff Gundlach is the latest in a long line of asset managers that are moving operations to Florida.

Gundlach’s DoubleLine Capital LP has moved its principal office, according to a report from Bloomberg this week. Formerly located in Glendale, California, the move tp Tampa comes after Gundlach has publicly complained about quality of life and taxes in California. 

Gundlach isn’t moving to Tampa, however. Regulatory filings this past week noted that “Key decisions impacting the policies and strategy of DoubleLine Capital” and board meetings will now all be made in Florida.

Taxes and quality of life in California have been gripes of the fund manager’s for a while. Florida has served as a popular destination for many asset managers looking to leave major U.S. cities (mostly New York) to escape taxes and lack of law and order. Florida, famously, has no state income tax.

The company’s employees have mostly been working remotely since Covid and have “flexibility” with regard to use of office space, the report says. 

The company’s L.A. location will supplement the Florida office with “personnel and resources necessary to support DoubleLine’s routine day-to-day business”. 

Geoffrey Weinstein, an attorney at law firm Cole Schotz, talked about how easy it is to move a primary resident to Florida to reap the same tax benefits. He told Bloomberg: “The only income tax the partner would have to pay is anything related to California activity. There are probably going to be some major players that move to Tampa.”

Authored by Lorenz Duschamps via The Epoch Times,

A Ukrainian man apparently tried to block a Russian convoy of armored vehicles by stepping in front of the trucks, according to footage of the incident that has since gone viral.

The 28-second video, shared by Ukraine news agency HB, shows an unarmed man running in front of several armed vehicles advancing down a road. The encounter has drawn comparisons to the iconic “tank man” of Tiananmen Square.

“Ukrainian rushes under enemy equipment so that the occupiers do not pass,” the outlet wrote on Twitter along with the video of an unidentified man attempting to obstruct the convoy.

✊🏻Українець кидається під ворожу техніку, щоб окупанти не проїхали pic.twitter.com/cZ29kknqhB

— НВ (@tweetsNV) February 25, 2022

“Tank man” refers to the man who was pictured standing in front of a line of tanks near Tiananmen Square on June 5, 1989—a day after the Chinese Communist Party (CCP) ordered their troops to roll in tanks and open fire on civilians following weeks of protests centered in Tiananmen Square.

Photographer Jeff Widener’s iconic Tank Man shot, in Tiananmen Square, China, on June 5, 1989. (Jeff Weidner)

The CCP has never released a full account of the violence. Days after June 4, 1989, the CCP announced a death toll of about 300, most of them soldiers. However, rights groups and witnesses say thousands of people died. Unnamed sources within the CCP say at least 10,000 people were killed, according to a declassified British diplomatic cable and declassified White House documents.

It’s unclear when and where the Ukrainian man tried to block the convoy. The footage went viral on Friday with many people commenting on the man’s bravery, comparing him to the iconic image of an unidentified Chinese man standing in front of multiple tanks in Beijing.

“Ukraine just got its very own Tank Man,” one person said on Twitter.

Russian forces advanced an assault on Ukraine early on Thursday, with reports of missile strikes and explosions in major Ukrainian cities. Russian tanks and troops appear to have already entered parts of Kyiv, the country’s capital, on Friday, amid heavy fighting with Ukraine’s military forces.

Ukraine’s Ministry of Defense claimed on Friday that about 2,800 Russian soldiers had been killed in the first 36 hours of Russia’s invasion. Russia has not released any casualty figures.

Viktor Liashko, Ukraine’s minister of health, said on Saturday that 198 people were killed and 1115 wounded so far amid Russia’s military operation, including children.

“Unfortunately, according to operational data, we have 198 dead at the hands of the gunpowder, including 3 children, 1115 injured, 33 of which were children,” Liashko said in a statement on Facebook.