Martin Wolf writing in the Financial Times has warned that there will be another “huge” financial crisis given the nature of the modern fractional reserve banking and financial system.
Wolf asks whether there will a “another huge financial crisis” and then answers his question by saying that there will be and warns that banks “are designed to fall. So fall they surely will.”
He warns that a system built on making promises it cannot keep is bound to crash, and crash again:
Will there be another huge financial crisis? As Hamlet said of the fall of a sparrow: “If it be now, ’tis not to come. If it be not to come, it will be now. If it be not now, yet it will come – the readiness is all.” So it is with banks. They are designed to fall. So fall they surely will.
A recent book explores not only this reality but also a radical and original solution. What makes attention to this suggestion even more justified is that its author was at the heart of the monetary establishment before and during the crisis. He is Lord Mervyn King, former governor of the Bank of England. His book is called The End of Alchemy.
The title is appropriate: alchemy lies at the heart of the financial system; moreover, banking was, like alchemy, a medieval idea, but one we have not as yet discarded. We must, argues Lord King, now do so.
As Lord King remarks, the alchemy is “the belief that money kept in banks can be taken out whenever depositors ask for it”.
This is a confidence trick in two senses: it works if, and only if, confidence is strong; and it is fraudulent. Financial institutions make promises that, in likely states of the world, they cannot keep. In good times, this is a lucrative business. In bad times, the authorities have to come to the rescue. It is little wonder, then, that financial institutions have become so large and pay so well.
His solution to the dangerous alchemy of the current banking system is to make Central banks pawnbrokers of last resort. This seems somewhat more prudent than the more dangerous deflationary experiment of bail-ins and confiscating deposits, both individuals and families life savings and indeed SME and corporate deposits above a certain level, in order to bail out failing banks.
Wolf joins a long list of investment and finance experts and even the Prime Minister of Japan who are warning that another global financial crisis is coming. The question is not if, but when.
Breaking News and Commentary Stocks, sterling roiled as ‘Brexit’ poll unnerves (CNBC) Gold Sees Short-Covering, Bargain-Hunting Bounce (Bloomberg) Gold steady after overnight losses; Fed in focus (Reuters) Gold Traders Pay Most in Years to Keep Big Bullish Bets Alive (Bloomberg)
Global commodity assets rise to $220 billion in Aprill – PMs 50% of AUM (Reuters) Gold and Silver Worst Performing Assets In May (Zero Hedge) Disappearing Money and Opportunistic Candidates (Huffington Post) Gold Isn’t A Hedge Against Monetary Disorder, It’s “An Investment In It” (Zero Hedge) Read More Here
Following Mario Draghi's seemingly constant mention of The ECB's credibility during yesterday's press conference, none other than ECB member (and Austrian national bank chief) Ewald Nowotny exclaimed rather oddly that "The ECB is the most independent central bank in the world." This was apparently more than former Greek FinMin Yanis Varoufakis could handle as he unleashed a scathing op-ed to explain why, in fact, The ECB is the least independent central bank exclaiming that "the pretense of independence serves as a fig leaf for interventions that are not only politically driven, but that are also utterly inconsistent with the principles of liberal democracy."
A commitment to the independence of central banks is a vital part of the creed that “serious” policymakers are expected to uphold (privatization, labor-market “flexibility,” and so on). But what are central banks meant to be independent of? The answer seems obvious: governments.
In this sense, the European Central Bank is the quintessentially independent central bank: No single government stands behind it, and it is expressly prohibited from standing behind any of the national governments whose central bank it is. And yet the ECB is the least independent central bank in the developed world.
The key difficulty is the ECB’s “no bailout” clause – the ban on aiding an insolvent member-state government. Because commercial banks are an essential source of funding for member governments, the ECB is forced to refuse liquidity to banks domiciled in insolvent members. Thus, the ECB is founded on rules that prevent it from serving as lender of last resort.
The Achilles heel of this arrangement is the lack of insolvency procedures for euro members. When, for example, Greece became insolvent in 2010, the German and French governments denied its government the right to default on debt held by German and French banks. Greece’s first “bailout” was used to make French and German banks whole. But doing so deepened Greece’s insolvency.
It was at this point that the ECB’s lack of independence was fully exposed. Since 2010, the Greek government has been relying on a sequence of loans that it can never repay to maintain a façade of solvency. A truly independent ECB, adhering to its own rules, should have refused to accept as collateral all debt liabilities guaranteed by the Greek state – government bonds, treasury bills, and the more than €50 billion ($56 billion) of IOUs that Greece’s banks have issued to remain afloat.
Of course, such a refusal would close down Greek banks and lead immediately to Greece’s exit from the eurozone, because the government would be forced to issue its own liquidity. The only alternative would be a meaningful debt restructuring to end Greece’s insolvency. Alas, Europe’s political establishment, unwilling to adopt either option, has chosen to extend Greece’s insolvency – which it pretends has been resolved through new loan tranches.
The ECB’s ongoing acquiescence in the extend-and-pretend charade demanded by Greece’s creditors has demolished its claim to be independent. To keep Greece’s banks open, and accept their government-guaranteed collateral, the ECB is obliged to grant Greek debt an exemption from its no-insolvency rule. And, to keep the noose firmly around Greece’s neck, Germany insists that this exemption is conditional on its approval – or, in euro-speak, that the Eurogroup of eurozone finance ministers confirms that “Greece’s fiscal consolidation and reform program are on track.”
So, in effect, it is politicians that tell the ECB when to cut off liquidity to an entire banking system. While the ECB can claim independence vis-à-vis insolvent, peripheral governments, it is entirely at the mercy of the governments of Europe’s creditor countries.
To illustrate the ECB’s conundrum, it is worthwhile revisiting the creditors’ treatment of the Greek government elected in January 2015. By December 2014, it had become clear that the previous government was on its last legs and that the leftist Syriza party was on its way to power. The governor of Greece’s central bank, an arm of the ECB, “predicted” that markets were facing a liquidity squeeze, implying that a Syriza victory would render the banking system unsafe – a statement that would be inane were it not calculated to start a bank run.
By the time I became Finance Minister that February, after Syriza’s electoral victory, the bank run was in full swing and stocks were in free fall. The reason, of course, was the common knowledge that Germany, vehemently opposed to our government, was about to switch off the green light required by the ECB to maintain the exemptions allowing it to accept Greek collateral.
To stabilize the situation, I flew to London to address financiers with a message of moderation and sensible policies regarding both reforms and debt restructuring. The following morning, the stock exchange rebounded 13%, bank shares rose by more than 20%, and the bank run ceased.
On that day, the ECB, pressured by Germany, rescinded an important part of its exemption, thereby cutting off Greek banks’ direct access to the ECB and diverting them to pricier financing from Greece’s central bank (so-called emergency liquidity assistance). Unsurprisingly, stock prices plummeted and the bank run returned with a vengeance, bleeding €45 billion of deposits out of the system over the next few months. Meanwhile, Germany and other creditors began to push Greece to accept new austerity measures as the price of reversing the “ECB’s” decision.
This was not the ECB’s only politically driven intervention. Equally aggressive was its decision to curtail Greek banks’ spending on government treasuries, by instructing them to refuse debt rollovers. This diminished my ministry’s capacity to repay the International Monetary Fund, which was insisting on drastic pension cuts and on the removal of the last protections for Greek workers.
For five months, as the ECB’s noose tightened, we resisted German and IMF demands for further austerity. Finally, the complete cessation of all liquidity to Greece’s banks in June 2015 forced their closure. This was followed by the final push to divide our government and force the prime minister to capitulate – as he did, accepting the latest extend-and-pretend loan of €85 billion.
Almost a year later, Greece’s creditors were pushing for even greater austerity in exchange for more loan tranches. At this point, Greece’s central-bank governor (who had triggered the original bank run in December 2014) publicly alleged that our government’s stance until June 2015 caused the loss of €45 billion worth of deposits, the ensuing bank closures, and the new extend-and-pretend loans. The bully was blaming the victim, and the ECB was openly embracing its role as enforcer for its political masters: the creditors.
The eurozone’s current design makes ECB independence impossible. Worse, the pretense of independence serves as a fig leaf for interventions that are not only politically driven, but that are also utterly inconsistent with the principles of liberal democracy.
As the policies of central planners are increasingly exposed for the smoke and mirrors 'distraction' that they really are, one wonders how long before not just the elected officials of Europe are roiled to extremist parties but when these un-elected officials – who wield more power than anyone – are finally knocked off their ivory tower?
Forty-one agents of the Secret Service have been disciplined for their roles in leaking information from the personnel file of Rep. Jason Chaffetz in an attempt to embarrass him. Department of Homeland Security Secretary Jeh Johnson says the discipline meted out ranged from letters of reprimand to suspension without pay for up to 45 days.
A year ago, Germany’s Green Party wanted to hold a vote on responsibility for the Ottoman massacres, a systematic expulsion and annihilation of over 1 million ethnic Armenians in 1915.
Germany delayed the vote, not wanting to upset Turkey… until yesterday, when Germany held the vote, upsetting Turkey much more.
After a near-unanimous vote, Turkey recalled its ambassador to Germany calling the vote, “null and void”.
Germany’s parliament condemned the Ottoman massacres of ethnic Armenians as genocide on Thursday in a vote that could damage ties with Turkey and complicate handling of Europe’s migrant crisis.
MPs voted almost unanimously for the motion despite the reservations of the government which battled for months for a delay for fear of the reaction of Recep Tayyip Erdogan, Turkey’s president, who is often criticised for authoritarianism.
Ankara immediately recalled its ambassador for consultations in response to what the Turkish government described as a “null and void” vote.
Mevlut Cavusoglu, foreign minister, said on Twitter: “The way to close dark pages in [Germany’s] own history is not to defame the history of other countries with irresponsible and baseless parliament decisions.”
Mr Erdogan warned this week that passing the resolution would harm “all diplomatic, economic, trade, political, military and Nato relations”. He reacted to the vote by warning of a “serious impact on bilateral relations”, adding that Turkey would consider further actions soon.
Ahead of the vote, Binali Yildirim, Turkey’s prime minister, described the debate as a “test of friendship”. The dispute also comes in the wake of a fragile EU-Turkey deal championed by Ms Merkel that has so far halted refugee flows across the Aegean.
That pact could collapse because Mr Erdogan’s goal of visa-free travel for 80m Turks is mired in EU politics and unlikely to be delivered before October.
The diplomatic arguments have resounded around Germany, prompting pro-Ankara demonstrations from the large ethnic Turkish community, and even death threats to MPs.
More than 20 countries, including France and Russia, as well as Pope Francis, recognize the 1915 killings as genocide.
The US has not, partly out of concern at alienating Turkey, a Nato ally and key Middle East partner.
Lie of the Day
German chancellor Angela Merkel immediately sought to limit the damage, saying ties with Turkey were “broad and strong”.
As proof of the “strength” of the relationship, Turkey pulled its ambassador and Erdogan is “considering actions”.
The “test of friendship” clearly failed.
Will Turkey cancel its refugee agreement with the EU?
If so, that would be a positive outcome for Europe, albeit one that would cause a lot of short term pain.
The benefit is the EU would have to come up with a real solution to the refugee mess rather than making a bargain with the devil.
Shocking scenes are occuring on the streets of San Jose as anti-Trump supporters are chased, punched, kicked, and, as ABC News' Tom Llamas reports "terrorized" as the local police "appears to have lost control." Mobs of protestors, many carrying mexican flags, took over the streets ahead of a Trump rally branding tire irons and burning American flags.
Protestors made up mostly of young ppl. Some throwing up gang signs. There were ppl who came to demonstrate & some who just wanted to brawl
Each Memorial Day 2016, there are numerous articles published which examine the achievements and sacrifices of American veterans killed in action. With that subject thoroughly covered, I thought I might instead confront a topic that many people out there would rather not discuss. Get ready for the discomfort levels to increase dramatically, because we are going to tackle the problems surrounding women in combat.
Now, it has been incredibly trendy the past five years or so to ride the warrior woman bandwagon, and to speak against it is to automatically earn accusations of “misogyny.” With the third-wave feminist and social-justice agenda increasingly out in the open rather than remaining subtly subversive, you really can’t walk anywhere without stepping in a big steaming pile of propaganda.
A large number of films and television shows released today, from Mad Max and Star Wars remakes to comic book movies and TV miniseries galore, all seem to be designed to promote the feminist ideology and the image of women "kicken' ass". An important part of this ideology is the idea that men and women are "exactly" the same in every capacity except genitals. That is to say, everything a man can do, a woman can do just as well or better, including fight and kill.
I have to say, I find the spread of this delusion rather disturbing for several reasons. As a mixed martial arts instructor for over 14 years, I have worked with many men and women in combat training and combat mindset. I have never refused to train a woman based on her gender. That said, as training progresses and they reach a certain level of proficiency, I will always have every woman face off with a man for moderate sparring. From my observations, the experience for some of them can be rather shocking.
For those who have never dealt with a violent assault in their lives, the mental concept of what women are capable of physically rarely matches reality. The sheer disparity in strength and speed between most men and most women is incredible. The average woman’s natural upper body strength alone is only 50% of the average man’s. If you want to witness this vast difference in action, I highly suggest you observe a rape prevention course in your area in which a man in a padded suit simulates an assault on the female students. Invariably, all the women are subdued and immobilized within seconds. When these women come out of training (far wiser than before), many of them purchase a firearm. Even then, their safety in the face of a motivated male assailant with his own firearm is questionable.
I have also trained women within various community preparedness team classes dealing with small arms combat tactics and movement, and of course, they have many limitations, but the biggest is simply being able to function physically at a similar level to male trainees.
I realize that these are merely my own experiences and observations, and your average social justice warrior will argue that there are historical examples of women successfully operating in combat environments. This is not in dispute. I would point out, however, that these instances are the EXCEPTION, not the rule.
To be clear, I am mostly supportive of the idea of women in the military, as long as they meet the same standards required of men, and that those standards are not artificially lowered in order to accommodate women who would otherwise fail. But, the maniacal feminists are driving to make everything in the world “equal” when it simply is not and never will be. If you cannot make men and women equal in every arena naturally, then you have to do it through force or dishonesty or bureaucracy.
Also, it seems to me that the government may not be pushing for women in combat roles only to appease the political correctness cult. The fact that elements of Congress are attempting to add women to the draft (selective service) makes me think that they know something we do not. Is the federal government preparing for war on an even greater scale than is taking place today? If so, then the propaganda parade for women in combat makes perfect sense. Allowing the conscription of women would double the government’s pool of potential cannon fodder.
In the meantime, women are bombarded with fantastical imagery in popular media of 100 pound girls pummeling hordes of 200 pound men and reigning victorious, giving them a false sense of invincibility that will lure them into combat service.
The pressure from military brass and politicians in Washington is bearing down on recruitment and training centers. In 2013, General Martin E. Dempsey laid down an edict proclaiming that if women cannot meet current standards for combat roles, then senior commanders had better lower those standards.
The “Dempsey rule” had its first test in 2015 when the Marines studied the success rate of 29 women in their Infantry Officers Course. Of the 29 women who entered the course, NONE passed the standards. Only four women made it through the first day’s combat endurance test.
The Marines also undertook a nine-month-long experiment to form mixed-gender combat units and study performance rates. The results were dismal. Female participants were injured twice as often as men, were less accurate with infantry small arms and had trouble moving wounded troops from the battlefield.
The Marine study also found that all male units had superior performance in 93 of 134 evaluated tasks compared to mixed gender units.
Washington politicians and military brass have treated these results not as a practical warning, but as a threat to their agenda, claiming that current training standards are “no longer relevant on today’s battlefield”.
As Gen. Dempsey later stated:
“If we do decide that a particular standard is so high that a woman couldn’t make it, the burden is now on the service to come back and explain to the secretary, why is it that high? Does it really have to be that high?”
So, now it becomes the burden of military commanders and trainers to argue the case for every single standard, standards which have been successful for decades but are now deemed “passé”. Meaning, standards that were always considered fair for men must now be treated as unfair for women. This is not only backwards thinking, it is pure insanity which puts all military personnel at risk.
The U.S. Army has essentially already been forced to lower training standards in order to meet what some call “unspoken quotas” of female soldiers. As it turns out, the much lauded recent success of two women in the passage of the Army’s extremely difficult Ranger School was a bit of a farce.
According to multiple sources within Fort Benning, the Ranger School was told that a woman WOULD GRADUATE the first gender integrated assessment of combat leadership; meaning, at least one would be passed regardless of performance.
While 16 other women failed the course outright, Kristine Giest and Shaye Haver were pushed through to graduation. Special treatment included advantages like — women were given two weeks of extra training prior to men arriving at the school, and were acclimated to tests ahead of schedule while men had to attempt the same tests cold bore. Women were allowed multiple attempts to pass the program while men were given a strict pass/fail standard. Women were given extra nutritional counseling and a private Ranger tutor. Women were allowed to practice the land navigation course ahead of schedule; men had to approach the course cold. Women were allowed to repeat portions of the course until achieving a satisfactory score; men were not. A two star general was on the scene during training to cheer for women participants, truly revealing the political nature of the gender integrated assessment.
Kristine Geist was even quoted as saying at a press conference before graduation:
“I thought we were going to be dropped after we failed Darby [obstacle course] the second time… We were offered a day one recycle.”
Clearly, in order for the cultural Marxists in our government to attain “gender equality” in the U.S. military, standards must be decidedly unequal and advantages must be stacked in favor of women. But what are the consequences of this?
Some might argue that it really does not matter if standards are lowered for women; they deserve the same opportunities as men anyway. I disagree.
The beauty of physical prowess, physical competition, mental toughness and yes, even combat, is that superior merit is the ONLY thing that matters. The best rise to the surface immediately, and the inadequate fall by the wayside, and there is no question or argument as to what is “fair” — two men enter, one man leaves — as they say in ‘Thunderdome’.
The winners are the winners, and the results speak for themselves. Unfortunately, this is not the kind of world many Americans are used to living in anymore.
In our increasingly collectivized society, merit is not even a factor anymore. Victim status groups are given special treatment everywhere, regardless of their lack of qualifications or performance. Universities hand out scholarships based on cultural identity rather than grades or test scores. Grants go to minorities and women regardless of credentials. Corporations maintain multicultural quotas due to affirmative action even if said people are less qualified. Everywhere we look, standards are being erased in the name of political correctness and "fairness".
This degrades our society as a whole and diminishes our competitive edge, our capacity for higher productivity, ingenuity and advancements that could improve the lives of millions. When the best people for the job are consistently overlooked in favor of mediocre people, a mediocre culture results. And mediocre cultures have a tendency to implode.
It might be possible to argue that catering to the lowest common denominator in the civilian world will not result in outright death and carnage, but no one can argue that catering to the lowest common denominator in terms of military performance will result in anything but death and carnage.
First, if female participants in training cannot meet the same standards as men and are passed anyway, they will not receive the respect or trust of those soldiers when they enter into combat. No male soldiers will feel safe within a mixed gender unit if the women are sub-par hacks that might get them killed.
Second, lowering the standards for both men and women would result in a military loaded with weaklings.
Third, women in combat through history are marginal and usually fight because of national desperation (the Soviet stand against the Nazi blitzkrieg is an example of such desperation, as well as the Kurdish women fighting ISIS today). A common example used by feminists to argue in favor of women in combat is the Israeli IDF, which conscripts women as well as men. But feminists and pro-female combatant advocates greatly misrepresent the level of participation IDF women have in combat roles. The IDF does not generally place women into special combat units or front line units, and women are confined to light battalions for nothing more than border security. Even the Israelis, with one of the most gender-mixed military’s in the world, knows better than to commit women to heavy combat.
Fourth, military effectiveness usually depends on unit cohesion. This means that they operate best in teams and each member of the team represents a link in the chain. One weak link can result in the failure of the entire chain.
Fifth, some argue that our military is now so "modernized" that the technology allows women combatants to achieve the same level of performance of male combatants. The people who make this claim play too many video games and have obviously never marched 10 to 20 miles with a 50 pound (or more) rucksack on their back and a 8-10 pound rifle in their hands. This is what soldiers do most of the time – move heavy gear into places no one wants to go. Women are completely unequipped for this purely due to biology and current technology is not going to level the field.
Finally, the safety of other soldiers is not the only risk. The women themselves also face extreme health hazards. According to the U.S. Army Institute Of Public Health, in basic combat training women suffer a 114% greater injury rate than men, and a 108% greater injury rate in medical and engineering training.
At least one female Marine captain with considerable courage, Katie Petronio, has come out in opposition to women in combat roles, citing extreme health hazards including infertility, which she now suffers due to the dangerous physical damage incurred during training.
While women are supposedly at no greater risk than men for PTSD, I have to voice one of my greatest concerns here. Military activities are not always in the service of that which is honorable; as Major General Smedley Butler famously said, “War is a racket!” When military personnel fight and die and witness their friends die for what they later discover is an unjust cause, PTSD as well as other disorders will result in higher frequency. The justness of various wars and even the draft is beyond the scope of this article, but a society at war, wrong or right, is basically sending their sons to be mentally battered. Some will make it back stable, and others will not. Now, we are talking about sending our daughters into the same psychological hellscape?
What kind of culture will we have left when both fathers AND mothers are sent off to the meat grinder, perhaps both coming back scarred?
For centuries, men have been going to war to keep women and children safe from witnessing the nightmare of combat at their doorstep. It’s not ideal (a standing army in the U.S. is not even constitutional), but sending women into the fray as well based on false pretenses of ability is even less ideal.
Men and women are undeniably different — one is not better than the other, we just serve different roles in nature, and nature cannot be denied. Women are biologically inclined to bear children and to nurture families. Men are biologically inclined to protect and provide. Men are genetically designed for combat. Women are not. If a woman can meet the same standards as a man in military training, then she deserves the option of that role, but as recent studies have shown, this is not going to happen very often.
Instead, an apparatus of cultural Marxism is forcefully opening a door to disaster; an entire generation of daughters and mothers will be duped into a role they are not built for or prepared for, ending in psychological and physical degradation they have no concept of, and weakening the very foundations of our nation for decades to come.
A new USC Dornsife/Los Angeles Times poll has found … [Sanders] has battled Clinton to a draw among all voters eligible for the Democratic primary, with 44% siding with him to 43% for Clinton.
***
Does this mean that it’s time for Sanders supporters to celebrate?
Not yet …
Clinton still has a 10-point lead among likely voters:
So unless the Sanders campaign steps up its get-out-the-vote effort, he’ll lose.
Even before last weekend’s big Libertarian Party National Convention in Orlando, Reason has been making note that the horrible general election reality of Hillary Clinton vs. Donald Trump has prompted people and the media to take a closer look at the most prominent third party in the United States.
This naturally puts libertarians (both within and independent of the party) in the position of explaining the libertarian mindset to people who don’t really think too much about it or are exposed only to stories dismissing it as craziness. And obviously there are people who are very politically invested in making sure libertarians are seen as total nutters and unserious, holding an untenable philosophy that only crazy or selfish people would believe in.
But sometimes it doesn’t help when some libertarians attempt to argue from an assumption that all people are operating from the same mindset or values of liberty. The coverage of the libertarian debate didn’t help not because the questions were odd (though they kind of were), but because it was primarily for the purpose of appealing to people who are already libertarians. It really wasn’t that much different from the Republican or Democratic debates. Well, there was no slam poetry from the establishment folks, but I could imagine an increasingly desperate Jeb Bush resorting to it if he thought it would help his numbers.
Ken “Popehat” White has a post up this evening worth highlighting, as it suggests a good way to approach arguing for libertarian philosophy to maybe at least get others thinking about why libertarians believe what we do beyond a superficial idea that we’re all beholden to major corporations and marijuana:
I’d like to propose presenting libertarianism as a series of questions rather than a series of answers or policy positions. Even if I don’t agree with people’s answers to these questions, getting them to ask the questions and confront the issues reflected in the questions would promote the values that I care about.
White suggests 10 questions that are mostly designed to get people to think about the impacts of the expansion of government authority. I’ll point out the one I’ve been using ever since George W. Bush was president, and we saw the expansion of the deference given to the president in war-making and surveillance:
What would your worst enemy do with this power?
Aye, there’s the rub. Think of the politician you hate and mistrust most. Do you want that politician administering enforcement of the law you propose, particularly in a time when other branches of government are aligned or weak?
That a lot of people only seem to be thinking about this now that Trump is a nominee is pretty telling. As a libertarian, I can point to another presidential candidate (or actual president) over the past 15 years that has either suggested doing everything Trump has suggested (in a manner more “acceptable” to the establishment) or has actually already done it.
I would like to add two questions that I think about whenever I’m making the case for libertarian limited government to my friends:
Do you really want to punish, fine, arrest, and jail people over this issue?
I often end up bringing up this question when debating more liberal friends over whether wedding-related businesses should be required by law to serve gay couples. It’s interesting having to bring up this question in this context because I used to bring it up decades ago when arguing with conservatives about sodomy laws. Do you really want to put gay men in jail over sex?
And really, the answer is frequently no, they don’t. They want the behavior they don’t like to stop. While I have seen some people expressing glee at the idea of a religious baker or florist being fined, in reality, most supporters of these public accommodation rules don’t actively want to punish anybody. They just want people to shut up and bake the cake or arrange the flowers.
And back years ago, yes there were some people who actually did want to put gay men in jail. But really, what many conservatives wanted was to use the government to send a cultural message of what sort of sexual activity was appropriate because they believed that homosexuality was learned behavior that was harmful to the self. They didn’t want to imprison gay people, but they wanted to make sure their kid didn’t turn out gay.
But these people often don’t stop and think about the fact that the law can’t actually accomplish what they want to accomplish if it’s not enforced. If they’re not willing to punish bakers or florists with fines or potentially put them out of business, they can’t actually force them to comply with this demand. They have to be willing to turn to the police and courts to cause harm to others in order to get their way. If they find this objectionable, that leads to my second question. (If they don’t find this objectionable, note Popehat’s question above about one’s political enemies):
Is there a way to resolve this conflict without getting the government involved?
If people do pull back at the idea of sending police and prosecutors after their adversaries, does that mean they can’t get what they want? Again, going back to the bakers and florists, this is why I’m frequently having to point out that there are many, many alternatives available, and this very specific, fairly rare form of discrimination does not resemble the type of organized, widespread public accommodations discrimination that faced racial minorities. Why is there the assumption that the response needs to be the same?
This usually leads to a “What if . . .?” argument. With bakers and florists it tends toward a scenario where allowing people to discriminate against gay people for any reason will lead to a situation where some isolated gay person in a rural community is denied service from everybody. Be sure to challenge these premises. In this case, many states still don’t cover sexual orientation in their public accommodation laws. If there was any interest in refusing to serve general goods to gay people, it would have already been happening.
I would conclude by suggesting that always treat people as though they actually legitimately believe the things they say they believe, even if you think college professors or preachers or parents or television commercials or whomever unduly influenced them. There’s a famous saying that you can’t reason somebody out of a position they didn’t reason themselves into. There’s a built in assumption in that saying that you’re the reasonable one and they’re not, which makes it easy for anybody to use that saying as a weapon. You have to at least consider that your debate partner here believes that the position that he or she is taking is reasonable. People don’t just randomly believe things. You also can’t reason somebody out of a position if you dismiss the idea that they legitimately believe said position.
Of course, if you question some people too hard, they might accuse you of being a sea lion.
We rang the alarm bell when on Sunday night, one of our “favorite” companies and Asia’s largest, junk-rated commodity trader, Noble Group, unexpectedly announced two jarring developments: the removal of its long-term, ex-Goldman CEO, Yusuf Alireza, as well as the sale of its top performing asset, Noble Americas Energy Solutions. The company said that as a result of the sale it will generate “significant cash proceeds”, which as we then said “is great since Nobel is desperately in need of cash; it also means that the company is losing one more of its star performing assets as it continues to asset strip itself of any potential future growth, and is merely scrambling to preserve solvency and liquidity.“
It appears the cash proceeds raised just 4 days ago were not nearly enough!
Moments ago, this scramble for liquidity hit another unprecedented low, when Noble announced that days after its CEO stepped down, Noble’s Chairman Richard Elman would also be leaving, at the same time as the company unveiled it would issue a massive $500 million rights offering at a whopping 63% discount to the market price, in a move which confirms just how little equity value insolvent, cash bleeding commodity companies really have when push comes to shove and they have to pay down at all costs. It also begs the question why the company did not boost its $3 billion credit facility unveiled just three weeks ago by a token $500 million, which would have been available at a far lower cost of capital.
There are two possible answers: either something went drastically wrong in just the past three weeks and a major need of cash emerged, or Noble is now so devoid of unencumbered assets that it can’t pledge anything to the banks from this point onward, and will be forced to dilute itself to death by a thousand cuts, until the company finally files for bankruptcy as we have been warning is the ultimately endgame since last summer.
As for the rights offering, Bloomberg has the details: The Hong Kong-based company will offer 1 rights share for each existing share at 11 Singapore cents, a 63 percent discount from the close on Thursday, according to a statement on Friday. Of the total 6.54 billion shares to be issued, biggest holder Elman has agreed to take 625.5 million, while China Investment Corp., the third-largest, agreed to take 630.6 million. CIC will get a second seat on the board.
This means that when the stock reopens for trading, its value, already at all time lows (our TERP math is a little rusty) will drop to an even more distressed, and far lower price.
For those who have missed the recent dramatic change in the company’s fortune (for the worse), here is a quick reminder: “Noble Group has endured another turbulent week after announcing the departure of CEO Yusuf Alireza on Monday and saying it planned to sell off a business, Noble Americas Energy Solutions, that less than a month ago he described as a core asset. The trader is seeking a turnaround after its shares collapsed amid the commodity rout and it faced allegations of improper accounting. China is the largest user of metals and energy, key commodities that Noble Group trades and supplies to mainland customers.”
“Noble is still a major player in terms of global commodities and it makes sense strategically for Chinese interests to take a greater interest, given how much of a key player China is in global commodity markets,” said Tim Schroeders, a Melbourne-based portfolio manager at Pengana Capital Ltd., who helps oversee about $1.2 billion.
Even better since there is nobody quite as skilled as China when it comes to throwing good money after bad.
As for the Chairman, at Elman’s request, the board will set up a sub-committee to examine options for his succession, and will identify a replacement to assume the role of non-executive chairman. Elman wishes to step down as executive chairman within the next 12 months, it said. The search will be led by David Eldon, a non-executive director.
The obligatory spin: “The rights issue, together with the sale of Noble Americas Energy Solutions announced last Monday and the previously announced sale of low-return assets and working-capital reduction measures will, in aggregate, generate $2 billion in additional liquidity over the next 12 months,” the company said. “This liquidity will be available to further reduce net debt, and will also significantly improve the group’s financial flexibility.”
In other words, it cost the company its CEO, its Chairman and its most valuable asset, not to mention a massive dilution to existing stakeholders, to buy about year’s worth of operations and debt servicing.
The new shares that aren’t underwritten either by Elman or CIC are being underwritten by a group of banks comprising HSBC Plc, Morgan Stanley, DBS Group Holdings Ltd., Societe Generale SA and ING Groep.
According to data compiled by Bloomberg, Noble Group’s other major shareholders are Prudential Plc, with 9.9 percent; Orbis Group, which has a 9.6 percent holding; and Franklin Resources Inc., with 5.9 percent. They won’t be very happy after the company just took a chainsaw to their holdings.
As noted above, the company obtained a fresh financing totaling $3 billion less than a month ago, while acknowledging some banks had cut credit facilities during the first quarter. It had net debt of $1.9 billion maturing over the next 12 months, Alireza said May 12.
“It is clear from the decisive capital-raising actions that we have initiated post-refinancing that we have moved firmly to re-position our balance sheet.”
Actually, no: the only thing you have succeeded in doing is admit that it was unable to obtain a secure line of credit for all the funds it desperately needed, forcing the cash-burning company into a blue light special liquidation. And if this: Asia’s largest commodity trader, had to give a 63% discount to investors to put more money into it, thereby it also succeeded in giving the world a glimpse of just how massively overvalued commodity-related companies are as a result of the recent historic short squeeze. Luckily, even record squeezes eventually end. For what happens next look no further than Noble.
When we first presented the so-called “Nightmarish Merry Go Round“, dubbed so by Bank of America because of the reflexive, recursive bond – and trap – that has formed between the Fed and markets…
… in which neither can break free from the other, and yet each is more dependent on the other than ever, we said that instead of looking at the relationship as one between the Fed and the market, one can further simplify the relationship as one between the USD, a proxy for Fed tightening or easing intentions, and the Chinese Yuan, a proxy for the Chinese economy, capital outflows and general volatility.
Today, Goldman has released a note which lays out precisely this relationship in what it calls the “RMB-FOMC Monetary Policy Loop”, but before we introduce yet another firm’s realization of just how circular the relationship between central banks and markets has become, here is Goldman’s abrupt reversal on what it think will happen to the Yuan in the near-future, because as Goldman’s Robin Brooks – who has been relentless bullish on the USD – now says that “we shift to an outright negative view on the RMB, in line with this week’s Asia Views and our bearish RMB forecast.”
The reason for Goldman’s sudden bearishness is “because there is a weak link in China’s management of its currency.”
This is how it explains the link:
“To be sure, the government has clearly communicated a shift in focus to a trade-weighted currency basket, de-emphasizing the signal that the bilateral exchange rate versus the Dollar carries. But domestically, the only signal that matters is $/CNY, so that higher fixings could easily re-ignite capital flight, as households and firms anticipate a faster pace of depreciation.”
One need look no further than the recent spike in bitcoin driven by Chinese buying to see this in action, as the local have been scared out of their wits by relentless PBOC intervention in the FX market. Gpldman goes on:
Even though global markets have so far taken weaker fixings in their stride, one regularity over the past year has been that the SPX has fallen sharply within a week or two of $/CNY fixing meaningfully higher, as focus on capital outflows and RMB depreciation has built.
We believe that the risk of a repeat is rising, which in turn could have knock-on effects for the pace of Fed tightening and Dollar strength ahead. We call this the “RMB-FOMC Monetary Policy Loop,” where the importance of the bilateral $/CNY rate domestically may slow the pace of Fed monetary policy normalization, which our US team has also highlighted.”
The implication: sliding CNY means risk off:
[T]he shift to a trade-weighted exchange rate has a weak link, which is that the main signal for households and businesses within China remains the bilateral exchange rate versus the Dollar. As the $/CNY fix has moved higher again over the past month (Exhibit 1), the risk is that this re-ignites capital flight in the same manner it did in August (during the mini-devaluation) and around the turn of the year. This is because capital outflows are heavily expectation-based, such that weaker fixings inevitably fan anxiety that a bigger devaluation is in train. In short, while the shift to a trade-weighted regime certainly makes sense, China is saddled with the history of the bilateral exchange rate, which means that fixing $/CNY weaker is not as easy as it sounds. This matters for global markets because previous episodes when $/CNY has fixed materially higher have seen the SPX fall sharply within one to two weeks…
… with the DAX and NKY marching in lock-step (Exhibit 4). With the Fed approaching another hike over the summer (our US team puts a 70 percent probability on this), the risk of a repeat is growing, which via financial conditions could then loop back into US monetary policy.
Which brings us to what may be the biggest topic of 2015: the collapse in China’s FX reserves, something which Goldman believes is about to be repeated:
From the perspective of China’s policy makers, there is an implicit trade-off between the pace of reserve losses and keeping the exchange rate stable in trade-weighted terms. By way of illustration, capital outflows during the first quarter were -$155bn according to the balance of payments, so that they could amount to -$600bn for the year. Even allowing for continued improvement in the current account, this means that reserve losses could run between -$200bn and -$300bn this year and next, after reserve losses of -$343bn in 2015.
We remain in the camp that the level of China’s reserves (currently around $3,200bn) is more than sufficient to deal with this pace of drawdown, but – realistically speaking – we see a good chance that markets will again speculate over the need for a one-off devaluation, even if the message from policy makers has been that this is not on the cards.
Essentially, what Goldman is saying is that the same “risk off” wave that followed the sharp devaluation episodes of mid and late-2015 is about to return, even though so far the market has been largely sanguine as it still does not really believe that the Fed will follow through with another hike.
Which brings up to the topic of Goldman’s monetary policy “doom loop“, which carries an uncanny resemblance to the “nightmarish merry go round” chart shown top. To wit:
The Fed remains a wild card in all of this. Our base case has been that some tightening in financial conditions, including via the Dollar, is needed to offset strong underlying momentum in growth and inflation. But if financial conditions tighten again on an SPX fall, there is a risk the Fed could again shift dovish, in what we are calling the “RMB-FOMC Monetary Policy Loop,” an implicit recognition that US monetary policy has spillovers to China, which is struggling with the legacy of its bilateral exchange rate peg to the Dollar. The sensitivity of the SPX to RMB weakness is thus something of a stabilizer for the Dollar bloc, potentially preventing the Fed from moving too quickly. That said, our base case remains that the US economy is strong enough to withstand a tightening cycle that will take the Fed funds target to 3.4 percent in Q3 2019.
And the chart.
And there you have it: Goldman just went bearish on the one currency which can destabilize the entire house of cards.
Which begs the question: is Goldman then quietly selling the USD and buying the Yuan, as it is has an alleged tendency of doing by frontrunning its clients… or is its reco genuine this time, and is actually seeking to cause the risk off avalanche. Recall that over the past month, Goldman has gotten both tactically and strategically bearish. It just needed the spark to unleash the fall. By telling clients to sell the Yuan, it may have just found it.