Japan's QE On Verge Of Failure As Nobody Wants To Sell To The BOJ

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Japan's QE On Verge Of Failure As Nobody Wants To Sell To The BOJ

Over a decade since central bankers started a stealthy nationalization of capital markets by purchasing a wide range of securities from Trasuries, to MBS, to corporate bonds, to ETFs and single stocks, their actions are finally catching up to them, and in the process breaking the very markets central bankers have worked so hard to prop up. And nowhere is this more obvious than in Japan, where the s

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hrinking universe of Japanese government bonds (as a reminder the BOJ now owns more than 100% of Japanese GDP in JGBs) is "causing havoc" in Japanese money markets as the Bank of Japan continues to buy while dealers refuse to sell.

The result is that rates in Japan's repo market, which traditionally connects holders of bonds with investors looking to borrow them, jumped to a record Tuesday (although they since retreated on Wednesday) because as Bloomberg notes, "the introduction of cheaper, more regular dollar-swap auctions has generated huge demand from U.S. currency-starved dealers who are keeping their JGBs to put them down as collateral."

So here is what the math looks like now that the Fed has launched enhanced swap lines with central banks such as the BOJ, allowing local entities to obtain dollar funding at much lower rates: in last week’s first round of the Fed’s revamped dollar-swap auctions, banks borrowed greenbacks for about 3-months at 0.37%, a massive discount to the near 2% it would cost them in the currency swap market. $32 billion was alloted in the first operation.

This huge difference in available borrowing costs, highlighted in yellow in the chart above, means JGB holders who still haven't offloaded to Kuroda are now unwilling to participate in the BOJ’s bond purchases.

This was readily apparent in Monday’s Rinban operation (i.e., Japan's POMO) across 5-to10-year bonds which saw the lowest offer-to-cover ratio on record, as dealers refused to sell to the BOJ! Other tenors also saw a sharp drop in the amount of bonds offered to sell.

"Demand for JGBs as collateral and its importance now is heightening." SMBC Nikko rates strategist Souichi Takeyama told Bloomberg. And here is the big problem that is now facing the BOJ: "There is little incentive to sell to the BOJ because there are more effective ways to make use of JGBs."

In other words, unless the BOJ provides dealers with a substantial "pick up" in principal relative to market prices, dealers will simply hold on their bonds as they can earn far more by simply renting the bonds out than purchasing any comparable securities. However, that would be frowned upon as it would constitute a clear subsidy to the local banks which, ironically, have been crushed in recent decades by the lack of net interest margin with the entire Japanese yield curve trading flat.

Making matters worse, the surge in demand comes at a time when the Bank of Japan is stepping up its own JGB purchases, in its bid to provide liquidity to financial markets grappling with the worsening coronavirus outbreak. However, with banks now openly refusing to sell to the BOJ, either the Japanese QE will fail, or bond prices will have to rise much more, pushing yields even lower, and further impairing bank interest margin calculations. On net, as Bloomberg notes, "that means less supply available for Japanese banks who have so far tapped over $150 billion in ultra-cheap dollar funding."

The bottom line, according to Takeyama, is that "there is risk that the BOJ offers may not get sufficient bids."

In other words, we may have finally hit a point where the market becomes self-stabilizing, as the very mechanism that central banks used to nationalize capital markets results in so much distortion that market participants no longer have an incentive to use it. In short, QE in Japan, which was first among the developed nations to hit the zero bound (and drop below it) and the first to exponentially ramp up bond purchases, is now on the verge of failure.

Tyler Durden

Wed, 03/25/2020 - 11:45

"Holy Shit, This Is Not The Flu": Medical Worker Describes Terrifying Lung Failure From COVID-19... Even In Young Patients

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"Holy Shit, This Is Not The Flu": Medical Worker Describes Terrifying Lung Failure From COVID-19... Even In Young Patients

Authored by Lizzie Presser via ProPublica

As of Friday, Louisiana was reporting 479 confirmed cases of COVID-19, one of the highest numbers in the country. Ten people had died. The majority of cases are in New Orleans, which now has one confirmed case for every 1,000 residen

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ts. New Orleans had held Mardi Gras celebrations just two weeks before its first patient, with more than a million revelers on its streets.

I spoke to a respiratory therapist there, whose job is to ensure that patients are breathing well. He works in a medium-sized city hospital’s intensive care unit. (We are withholding his name and employer, as he fears retaliation.) Before the virus came to New Orleans, his days were pretty relaxed, nebulizing patients with asthma, adjusting oxygen tubes that run through the nose or, in the most severe cases, setting up and managing ventilators. His patients were usually older, with chronic health conditions and bad lungs.

Since last week, he’s been running ventilators for the sickest COVID-19 patients. Many are relatively young, in their 40s and 50s, and have minimal, if any, preexisting conditions in their charts. He is overwhelmed, stunned by the manifestation of the infection, both its speed and intensity. The ICU where he works has essentially become a coronavirus unit. He estimates that his hospital has admitted dozens of confirmed or presumptive coronavirus patients. About a third have ended up on ventilators.

His hospital had not prepared for this volume before the virus first appeared. One physician had tried to raise alarms, asking about negative pressure rooms and ventilators. Most staff concluded that he was overreacting. “They thought the media was overhyping it,” the respiratory therapist told me. “In retrospect, he was right to be concerned.”

He spoke to me by phone on Thursday about why, exactly, he has been so alarmed. His account has been condensed and edited for clarity.

“Reading about it in the news, I knew it was going to be bad, but we deal with the flu every year so I was thinking: Well, it’s probably not that much worse than the flu. But seeing patients with COVID-19 completely changed my perspective, and it’s a lot more frightening.

This is knocking out what should be perfectly fit, healthy people.

I have patients in their early 40s and, yeah, I was kind of shocked. I’m seeing people who look relatively healthy with a minimal health history, and they are completely wiped out, like they’ve been hit by a truck. This is knocking out what should be perfectly fit, healthy people. Patients will be on minimal support, on a little bit of oxygen, and then all of a sudden, they go into complete respiratory arrest, shut down and can’t breathe at all.”


They suddenly become unresponsive or go into respiratory failure.

“We have an observation unit in the hospital, and we have been admitting patients that had tested positive or are presumptive positive — these are patients that had been in contact with people who were positive. We go and check vitals on patients every four hours, and some are on a continuous cardiac monitor, so we see that their heart rate has a sudden increase or decrease, or someone goes in and sees that the patient is struggling to breathe or is unresponsive. That seems to be what happens to a lot of these patients: They suddenly become unresponsive or go into respiratory failure.

The lung is filled with so much fluid, displacing where the air would normally be.

“It’s called acute respiratory distress syndrome, ARDS. That means the lungs are filled with fluid. And it’s notable for the way the X-ray looks: The entire lung is basically whited out from fluid. Patients with ARDS are extremely difficult to oxygenate. It has a really high mortality rate, about 40%. The way to manage it is to put a patient on a ventilator. The additional pressure helps the oxygen go into the bloodstream.

“Normally, ARDS is something that happens over time as the lungs get more and more inflamed. But with this virus, it seems like it happens overnight. When you’re healthy, your lung is made up of little balloons. Like a tree is made out of a bunch of little leaves, the lung is made of little air sacs that are called the alveoli. When you breathe in, all of those little air sacs inflate, and they have capillaries in the walls, little blood vessels. The oxygen gets from the air in the lung into the blood so it can be carried around the body.

“Typically with ARDS, the lungs become inflamed. It’s like inflammation anywhere: If you have a burn on your arm, the skin around it turns red from additional blood flow. The body is sending it additional nutrients to heal. The problem is, when that happens in your lungs, fluid and extra blood starts going to the lungs. Viruses can injure cells in the walls of the alveoli, so the fluid leaks into the alveoli. A telltale sign of ARDS in an X-ray is what’s called ‘ground glass opacity,’ like an old-fashioned ground glass privacy window in a shower. And lungs look that way because fluid is white on an X-ray, so the lung looks like white ground glass, or sometimes pure white, because the lung is filled with so much fluid, displacing where the air would normally be.

A screenshot of chest radiographs of a man suspected to have COVID-19. (Obtained by ProPublica via the Radiological Society of North America, cited in the paper “Severe Acute Respiratory Disease in a Huanan Seafood Market Worker: Images of an Early Casualty” by Lijuan Qian, Jie Yu and Heshui Shi.)

This severity ... is usually more typical of someone who has a near drowning experience ... or people who inhale caustic gas.

“With our coronavirus patients, once they’re on ventilators, most need about the highest settings that we can do. About 90% oxygen, and 16 of PEEP, positive end-expiratory pressure, which keeps the lung inflated. This is nearly as high as I’ve ever seen. The level we’re at means we are running out of options.

“In my experience, this severity of ARDS is usually more typical of someone who has a near drowning experience — they have a bunch of dirty water in their lungs — or people who inhale caustic gas. Especially for it to have such an acute onset like that. I’ve never seen a microorganism or an infectious process cause such acute damage to the lungs so rapidly. That was what really shocked me.

You’ll try to rip the breathing tube out because you feel it is choking you ...

“It first struck me how different it was when I saw my first coronavirus patient go bad. I was like, Holy shit, this is not the flu. Watching this relatively young guy, gasping for air, pink frothy secretions coming out of his tube and out of his mouth. The ventilator should have been doing the work of breathing but he was still gasping for air, moving his mouth, moving his body, struggling. We had to restrain him. With all the coronavirus patients, we’ve had to restrain them. They really hyperventilate, really struggle to breathe. When you’re in that mindstate of struggling to breathe and delirious with fever, you don’t know when someone is trying to help you, so you’ll try to rip the breathing tube out because you feel it is choking you, but you are drowning.

“When someone has an infection, I’m used to seeing the normal colors you’d associate with it: greens and yellows. The coronavirus patients with ARDS have been having a lot of secretions that are actually pink because they’re filled with blood cells that are leaking into their airways. They are essentially drowning in their own blood and fluids because their lungs are so full. So we’re constantly having to suction out the secretions every time we go into their rooms.”

I do not want to catch this.

“Before this, we were all joking. It’s grim humor. If you are exposed to the virus and test positive and go on quarantine, you get paid. We were all joking: I want to get the coronavirus because then I get a paid vacation from work. And once I saw these patients with it, I was like, Holy shit, I do not want to catch this and I don’t want anyone I know to catch this.

“I worked a long stretch of days last week, and I watched it go from this novelty to a serious issue. We had one or two patients at our hospital, and then five to 10 patients, and then 20 patients. Every day, the intensity kept ratcheting up. More patients, and the patients themselves are starting to get sicker and sicker. When it first started, we all had tons of equipment, tons of supplies, and as we started getting more patients, we started to run out. They had to ration supplies. At first we were trying to use one mask per patient. Then it was just: You get one mask for positive patients, another mask for everyone else. And now it’s just: You get one mask.

“I work 12-hour shifts. Right now, we are running about four times the number of ventilators than we normally have going. We have such a large volume of patients, but it’s really hard to find enough people to fill all the shifts. The caregiver-to-patient ratio has gone down, and you can’t spend as much time with each patient, you can’t adjust the vent settings as aggressively because you’re not going into the room as often. And we’re also trying to avoid going into the room as much as possible to reduce infection risk of staff and to conserve personal protective equipment.”

Even if you survive ... it can also do long-lasting damage.

“But we are trying to wean down the settings on the ventilator as much as possible, because you don’t want someone to be on the ventilator longer than they need to be. Your risk of mortality increases every day that you spend on a ventilator. The high pressures from high vent settings is pushing air into the lung and can overinflate those little balloons. They can pop. It can destroy the alveoli. Even if you survive ARDS, although some damage can heal, it can also do long-lasting damage to the lungs. They can get filled up with scar tissue. ARDS can lead to cognitive decline. Some people’s muscles waste away, and it takes them a long time to recover once they come off the ventilator.

There is a very real possibility that we might run out of ICU beds and at that point I don’t know what happens if patients get sick and need to be intubated and put on a ventilator. Is that person going to die because we don’t have the equipment to keep them alive? What if it goes on for months and dozens of people die because we don’t have the ventilators?

“Hopefully we don’t get there, but if you only have one ventilator, and you have two patients, you’re going to have to go with the one who has a higher likelihood of surviving. And I’m afraid we’ll get to that point. I’ve heard that’s happening in Italy.”


About This Story: The medical details in this story were vetted by an infectious disease doctor, a cardiologist and an internist at three different hospitals. All of the information about ARDS, the condition that the respiratory therapist describes, was fact-checked against peer-reviewed articles and UpToDate, a resource for physicians to check current standards in care, clinical features, and expected complications and outcomes.

Tyler Durden

Sun, 03/22/2020 - 20:00

"Doomed To Failure": Bolton Excoriates Trump On Iran, N.Korea In First Post-Impeachment Appearance

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"Doomed To Failure": Bolton Excoriates Trump On Iran, N.Korea In First Post-Impeachment Appearance

Trump's former national security adviser John Bolton took his former boss's foreign policy to task during comments made at Duke University Monday night in his first public speech since the impeachment inquiry wrapped up, and at a sensitive moment his lawyers are still wrangling over the contents of his soon to published book. On this latter point

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, he briefly expressed simply that "I hope my book is not suppressed" and later said more sharply, “This is an effort to write history. We’ll see what comes out of censorship.”

Evaluating the success of the administration's Iran policy, Bolton said: "I think it’s failing because i don’t think it lives up to its bumper sticker slogan of maximum pressure. I don’t think we’re applying maximum pressure to Iran." 

However, he did hail the Soleimani strike in saying the now deceased IRGC Quds Force chief "deserved exactly what he got" but added, "The only quibble I have is it should've happened sooner." But he cited as among significant "failures" the administration's response or lack thereof to the IRGC's accidental downing of Ukraine International Airlines Flight 752.

Image source: ABC

Bolton also emphasized during the speech entitled “The National Security Challenge of 2020” his familiar theme going back to the Bush White House that “weapons of mass destruction” remain the most “severe” threat to US — especially those possessed by Iran and North Korea. 

Specifically on North Korea, Bolton called the president's attempts to bring Pyongyang in from the cold with direct negotiations “doomed to failure”

Bolton viewed the whole initiative (for which he was largely sidelined from during the last months of his tenure as national security adviser) as having ultimately “wasted two years” and which simultaneously gave North Korea “two year pass.”

Referring to the administration's North Korea policy, Bolton told the audience that "it was perfectly evident it was going to fail."

"There is not a single piece of evidence that the government of North Korea has made a strategic decision to give up the pursuit of nuclear weapons," he added

On Iran, Bolton made clear he wanted the administration to take further steps.

"I don't think we are applying maximum pressure," Bolton said.

He said the sanctions enacted by the Trump administration have had "a very significant effect" but made clear he would like the US to explicitly push for regime change in the country. — CNN

Image source: AFP via Getty

Of course, the Duke University audience was no doubt hoping for more personal anecdotes dishing on Trump and the prospect of addressing the Ukraine angle to the prior impeachment proceedings.

As expected, Bolton spoke sparingly on this:

Asked about Trump’s tweets about him, Bolton is reported to have said he could not comment, pending a White House review of the manuscript for his forthcoming book. “He tweets, but I can’t talk about it. How fair is that?” he said, according to one reporter present.

When asked on Monday what it was like to staff Trump’s 2018 meeting with Putin in Helsinki, Bolton reportedly said: “To pursue the right policies for America, I was willing to put up with a lot.”

“I’m not asking for martyrdom,” he added. “I knew, I think I knew, what I was getting into.”

"For all the focus on Ukraine and impeachment trial: to me there are portions of the manuscript that deal with Ukraine  I view that as the sprinkles on an ice cream sundae, in terms of the book. This is an effort to write history. I did the best I can... We'll see what happens with the censorship," Bolton said.

Tyler Durden

Mon, 02/17/2020 - 23:15

Schiff, Nadler Insist Impeachment "Not A Failure" Despite Plunge In Public Support, Interest

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Schiff, Nadler Insist Impeachment "Not A Failure" Despite Plunge In Public Support, Interest

No matter what the Democrats do to try and juice up some public hysteria about the impeachment process - from delaying votes to 'prime-time' to conjuring images of Trump holding Zelensky's daughter hostage in the basement of The White House - it appears both public interest, and more importantly public support, for the impeachment of President Trump is slumping.

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In the latest sign that Democrats are losing the public's interest, Axios reports that The level of readers' engagement on stories about impeachment has steeply declined since September, according to data from NewsWhip.

Source: NewsWhip

A trend that so vividly exposes the fact that while plenty of attention is being paid to the impeachment saga, it doesn't draw the same level of emotion and enthusiasm that we saw in September.

Specifically, Axios notes that public interest hit its apex when the case against Trump was building and news cycles were driven by new revelations about Trump, Ukraine and the characters involved; but, after two weeks of public testimony in mid-November, the national conversation shifted from the accumulation of evidence to debate over whether that evidence was sufficient for impeachment and conviction.

And so as "interest" fades, so does "support" which, regardless of political affiliation, peaked in October.

For a brief glistening moment on The Hill, public support (based on the polls), topped 50% (on October 14th), but since then it has slid lower...

Source: FiveThirtyEight

As one would imagine, the support is split dramatically between Democrats (84.6%) and Republicans (10.0%) in favor of impeachment, but as the chart below shows, those whose mind remains "independent" - should those unicorns actually exist in the real life - have seen a dramatic slide in support.

Source: FiveThirtyEight

Finally, we note that, in addition to public interest (news report engagement) and public support (polls), the betting markets are also going "the wrong way" as PredictIt shows the odds of Trump serving out his first term are soaring back to pre-impeachment-process highs...

Source: PredictIt/Bloomberg

Simply put, no one trusts the news to get to the facts and when it is as boring, partisan, and predictable as this has been, who can blame them.

And don't forget, Democrats have been planning this 'coup' since before the midterms, but according to the New York Times, Pelosi says she's not going to push moderate Democrats to support the impeachment, saying she has "no message to them" and that "we're not whipping this legislation."

None of this appears to bother Rep. Eric Swalwell, who farted on live TV last week,

"I’m not focused on the polls, I know my colleagues aren’t either... this president used his great vast power to ask a foreign government to help him cheat an election."

Sadly, Mr. Swalwell, with members of your own party mutinying, perhaps it is time to listen to "we, the people" after all.

And despite all the evidence above, House Intelligence Committee Chairman Adam Schiff insisted “it isn’t a failure” during an ABC News interview on Sunday.

“No, it isn’t a failure, at least it’s not a failure in the sense of our constitutional duty in the House,” he said.

Nine months ago, Schiff said that the “only thing worse than putting the country through the trauma of an impeachment is putting the country through the trauma of a failed impeachment.”

Rep. Jerrold Nadler, the House Judiciary Committee chairman whose panel drafted two articles of impeachment, also believes the impeachment push wouldn’t be a failure if not passed in the Senate.

During an interview on Sunday, Nadler was reminded that he previously stated that “before you impeach somebody, you have to persuade the American public that it ought to happen,” including “Trump voters.”

We suspect Pelosi and the core of the Democratic Party base would disagree on whether this whole process has been a "failure" or not.

Tyler Durden

Sun, 12/15/2019 - 16:00




The blame game: When hackers steal your data, is it a corporate failure – or the attackers' fault?

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Or a mix of both?

Sponsored  Organisations are attacked every day: cybercriminals gain a foothold within the corporate network, and data is stolen and operations disrupted. The target of an attack could be your employer, a customer, a social media platform, or an intermediary responsible for secure access control, or financial record holding.…


A Failure Of Leadership In The Muslim World

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A Failure Of Leadership In The Muslim World

Authored by James Durso via RealClearWorld.com,

Bad news about China’s persecution of the Uighurs has been coming thick and fast.

In October, the Citizen Power Institute released a report on the use of forced labor. The report finds that up to 1 million imprisoned Uighurs and members of other Muslim ethnic groups have been

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made to work in China’s cotton value chain, which produces cotton, textiles, and apparel. In November, the New York Times released more than 400 pages of internal Chinese government documents that exposed how China organizes the mass detention of Uighurs.

On July, 22 countries issued a joint statement criticizing China for "disturbing reports of large-scale arbitrary detentions" and "widespread surveillance and restrictions" of Uighurs and other minorities in the country's Xinjiang region. The next day, 37 countries, nearly half of them Muslim-majority and none of them democracies, defended China's human rights record and dismissed the reported detention of up to 2 million Muslims.

Azeem Ibrahim of the U.S. Army War College Strategic Studies Institute has pointed out that the acquiescence of Muslim-majority countries illustrates “’Muslim solidarity’ is a convenient and effective slogan to be thrown at domestic audiences” but, when push comes to a shove from China, you can “forget about the umma.”

This is a serious issue, not a provocation like Everybody Draw Mohammed  Day. Why are leaders in the Islamic world refusing to take a stand?

Two reasons stand out immediately.

First, faith leaders in the Islamic world probably reckon it is futile to chastise the Communist Party of China for actions taken against a non-Han people practicing what the Party sees as an “illegal superstition”. China’s leader, President Xi Jinping, isn’t some Danish cartoonist -- there would be consequences for speaking out.

Continuing in that pragmatic vein, the Saudi Aramco IPO is looking parlous and oil prices are below the $65-per-barrel price Aramco uses to builds its financial assumptions. Saudi Crown Prince Mohammad bin Salman, known as MbS, needs money to complete Saudi Vision 2030, but he would prefer that money to have no strings attached to concerns about human rights -- so, enter the dragon. China has stepped up as a source of capital as the kingdom tries to shift its economy away from energy exports. Xi recently said China was taking a “strategic high view and long-term perspective,” meaning let’s agree not to talk about Uighurs or Jamal Khashoggi. MbS reciprocated by endorsing China’s policies: “We respect and support China’s rights to take counter-terrorism and de-extremism measures to safeguard national security.”

And it’s not just the Saudis.

“Nobody knows nothin’” seems to be the operating principle when someone says “Uighur”.

Turkish President Recep Tayyip Erdogan initially criticized Beijing, but recently muted his comments. With economic relations stalled with the United States and the European Union, the economy weak, and the U.S. Congress threatening sanctions for Russian defense purchases and Turkey’s incursion into Syria, Turkey will continue its turn east. In June, China’s central bank gave Istanbul a $1 billion cash injection, and in August the Industrial and Commercial Bank of China provided a $3.6 billion loan package for Turkey’s energy and transportation sectors.

Pakistan’s normally voluble Prime Minister Imran Khan could only say “[f]rankly, I don’t know much about that” when asked about the plight of the Uighurs, but that may be because of China’s planned investment of $62 billion in ports, infrastructure, industry and energy-generation facilities in Pakistan. And while Pakistan’s Islamist militants as a rule are always ready to raise the issue of persecuted Sunnis, on the issue of Xinjiang’s Uighurs all we get is a “deafening silence.”

Money matters, but it isn’t all about cash. The governments friendly to Beijing know that supporting human rights for Uighurs will lead their own citizens -- even worse, their countries’ religious minorities -- to demand human rights of their own.

China-friendly governments may be successfully dealing with some short- or medium-term cash-flow problems, but they are eroding their legitimacy as defenders of the faith. Into the breach may step groups like the separatist East Turkestan Islamic Movement (ETIM), which may inspire youth, radicals, and the devout.

ETIM was designated a terrorist organization in 2002 by the United States and the United Nations. The U.S. designation might have come in exchange for China’s support for the U.S. attack on Iraq. China’s actions have been ETIM’s best recruiting sergeant. If ETIM narrows its target list to Chinese officials and installations, it may find blind eyes being turned as it takes the fight to its enemies in China and ignores the governments in Central and South Asia.

Uighurs with combat experience in Syria and Afghanistan will want another mission, and fighting is more fun than farming. These new mujahedeen will be ready to fight a Communist regime that suppresses their religion and culture.

What are some lessons for Washington?  

First, if the United States thinks a foreign-policy initiative makes sense, despite disapproval from some Muslim countries, press ahead. The  Trump administration may be testing this idea  by moving the American embassy from Tel Aviv to Jerusalem, recognizing Israeli sovereignty over the Golan Heights, and reversing the U.S. position on the illegality of Israeli settlements on the West Bank.  

And, if China wants troublemakers like Pakistan as allies, let Beijing have them.

What should the U.S. do?

  • First, sincerely warn China of the trouble that lies ahead if a serious terrorist campaign is kicked off by ETIM or a likeminded group. Remind them that their policies may lead to a situation wherein nearby countries offer only perfunctory responses to Chinese demands for counter-terrorism assistance, especially if the terrorists only hit Chinese targets. China will ignore any warnings by the Americans, but Washington will know that it tried.  

  • Provide political support for Central Asian countries like Kazakhstan for refusing to return fleeing Uighurs to China, but follow their lead on how much publicity to give the effort. (Use your “inside voice,” America.) If China cancels investments in Central Asian countries as retaliation, support offsetting development assistance from the World Bank, the European Bank for Reconstruction and Development, the Asian Development Bank, and the Islamic Development Bank.

  • Then, consider allowing the 22 Uighurs who were held at the Guantanamo Bay detainment camp but found to be "no longer enemy combatants" to settle in the United States. It’s likely the Chinese snookered the Americans in the aftermath of 9-11 by portraying all Uighur activists as terrorists, which landed 22 of them in Gitmo for over a decade. In 2009, Congress opposed President Barack Obama’s plan to resettle two Uighurs in the United States. Ten years later, it’s time for Congress to show that its concern for the Uighurs is more than press-release deep.

  • Highlight that the United States continues to be the world’s leading advocate of religious freedom for all, even as the Organization for Islamic Cooperation bent to China’s will and commended it for “providing care to its Muslim citizens”.

  • Last, continue work on a trade deal with China, while continuing to sanction Chinese entities that use forced Muslim labor. Then, deal or not, on November 4, 2020, increase the pressure even more.  

Tyler Durden

Thu, 11/28/2019 - 22:00




Monetary Failure Is Becoming Inevitable

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Monetary Failure Is Becoming Inevitable

Authored by Alasdair Macleod via GoldMoney.com,

This article posits that there is an unpleasant conjunction of events beginning to undermine government finances in advanced nations. They combine the arrival of a long-term trend of rising welfare commitments with an increasing certainty of a global-scale credit crisis, in turn the outcome of a combination of th

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e peak of the credit cycle and increasing trade protectionism. We see the latter already undermining the global economy, catching both governments and investors unexpectedly.

Few observers seem aware that an economic and systemic crisis will occur at a time when government finances are already precarious. However, the consequences are unthinkable for the authorities, and for this reason it is certain such a downturn will lead to a substantial increase in monetary inflation. The scale of the problem needs to be grasped in order to assess how destructive it will be for government finances and ultimately state-issued currencies.


Listening to recent commentaries about the repo failures in New York leads one to suppose there is insufficient money in the system. This is not the real issue, as the chart below of the fiat money quantity for the dollar clearly shows.

The fiat money quantity is the amount of fiat money (in this case US dollars) both in circulation and held in reserve on the central bank’s balance sheet. Before the Lehman crisis, it grew at a fairly constant compound growth rate of 5.86%. Since the Lehman crisis, it has grown at an average of 9.45%, even after the slowdown in its rate of growth that started in January 2017. FMQ is still $5 trillion above where it would have been today if the massive monetary expansion in the wake of the Lehman crisis had not happened. If there is a shortage of money, it is because the process of debt creation to fund current expenditure is spiralling out of control.

It is not just the US. If we take similar (but less detailed) figures for FMQ in other major nations by adding together broad money M3 and central bank balance sheets, we find that it has increased at varying rates for the most important economies. In China, the compound annual growth rate has been 12%, though the growth in Japan at 5.2% and in the Eurozone at 4.9%. has been more subdued, reflecting stagnant levels of bank credit. When for the lack of any other measure statisticians use a GDP money total as a substitute for defining economic progress, we should not be surprised to see that the economies with the greatest rate of monetary growth are reckoned to be the best performing.

Just as GDP tells us nothing about human progress and its benefits to society, other uses of money as a control mechanism for economic management are equally misleading. Much of the monetary expansion has been to fund unproductive government spending. Most of the balance after the government’s cut has fuelled speculation in the financial sector and has funded consumer credit for those whose savings have been tapped out. Not revealed by the acceleration of money supply growth is the wealth transfer effect which impoverishes every productive individual for the benefit of governments, the banking system and the bank’s favoured customers, who are in the main large corporates and directly or indirectly the hedge funds.

Decades of impoverishment by monetary inflation, which has quickened since Lehman, is a very serious matter and is behind the fragility of economic systems dominated by government spending deficits. The reason there appears to be not enough money is because the acceleration of government liabilities in nominal currency terms is catching up with them. Laurence Kotlikoff’s famous 2012 estimate of the US Government’s future commitments of a net present value of over $222bn is very much alive on arrival.

It would be more accurate to say the figure for the US is trending towards infinity. It is already infinity in Japan and the Eurozone, where negative interest rates and bond yields offer the basis for the net present value calculation. As in most things financial, the public is blissfully unaware of the true implications of low and negative interest rates and ultra-low bond yields. They take the view that very low interest rates permit their government to borrow as much as it likes to provide the public with new hospitals, schools and the like. It is a case of fools of politicians and central bankers having turned everyone else into fools, and the few who realise it have no idea how to reverse the process. What they do not see is the government cannot now fund public healthcare and pensions, which make up the bulk of future obligations in a welfare state, without accelerating monetary debasement even more.

No one can know what the true figure is for future government liabilities, of which welfare is an increasing component. Politicians, who claim that a week in politics is the long term, fail to see any problem. The few governments which have raised retirement ages have done so to deal with escalating current welfare liabilities, not addressing those of the future that will lead ultimately to the destruction of what as Westerners we generally agree is civilised democratic society. That is their successors’ problem.

If history and reasoned economic theory is any guide, the demands for credit by the state will terminate in the destruction of government currencies. For the truth of the matter is inflation of money and credit has created the illusion we can all live beyond our income, our income being what we produce.

Nothing, with the sole exceptions of a central bank and its commercial charges can make money without having to advertise for it: the seigniorage is simply taken without public consent. Without questioning how it arises, the extra money allows us to indulge in all our flights of fancy until at some time reality strikes. Rather like Monty Python’s glutton, Mr Creosote, can we force in a little more inflation before we all explode?

The credit cycle is now on the turn

The complaint that the current precarious position faced by major economies is due to a shortage of money is untrue. The problem is one of escalating expenditures, and anyway, the response to any shortage, as we saw recently with problems in the US repo market, is simply to issue more money. But it is no solution, only making the eventual crisis worse.

It is easy to increase the quantity of money, but virtually impossible to increase the quantity of goods to accompany it. For this reason, increases in the quantity of money disadvantage ordinary people, the everyday producers of goods and services in small and medium sized enterprises. And with more money in circulation but the same quantity of goods, the pressure mounts for prices to rise. For a time, consumers can escape price rises by substituting cheaper goods from abroad. This reduces the impact of price rises in the domestic market. Savers are also beneficial for price stability, because they defer their purchases to a future date. But in the absence of savers taking the steam out of inflation-fuelled demand, and contemporary American tariffs on Chinese imports designed to limit them by erasing the price advantage handed to China by America’s monetary inflation, the effect is bound to raise the general level of prices.

Consequently, legacy businesses in America have hoped for a bonanza through not being forced to compete with China. For too long, they have seen the costs of production rise, driven by rising input costs, government regulations, their own expanding bureaucracies, and the natural tendency for expenditure to rise towards the income available. Having been bound hand and foot by red tape they hope that tariffs will protect them from foreign competitors who are not. They maintain their higher uncompetitive prices only to find that consumers, who have not had the benefit of the new free money, are not prepared to pay them or are unable to afford them. Sales volumes suffer and losses begin to accumulate. An international problem provoked by trade protectionism becomes a domestic setback, which is the transition currently hitting the US economy.

We already see the evidence of a developing slump as well in other countries, not directly involved in the trade spat between China and America, but also dependent on the world’s two largest nations measured by trade engaged in their trade war. The member states of the Eurozone are all reporting disappointing internal trade conditions, as are virtually all other nations which report them. The solution, the inflationists say, is more money.

It is a call that has even evolved into a demand that borrowers should be paid to borrow through negative interest rates, killing off the few savers left in the advanced economies. The source for the investment in production deemed necessary to keep the world’s economy from crashing is no longer backed by genuine savings, but by increasing quantities of money conjured out of thin air directly or indirectly by the banking system.

Those that benefit from inflation by expansion of bank credit are those who do not need it, because they are creditworthy and can always raise funds in the market. The problem lies with those who are not creditworthy. No amount of monetary inflation will rescue them, because the banks, in America for instance, have already loaned almost all of the equivalent of their own capital to non-financial borrowers who are deemed to be less than investment grade, in other words junk, both directly and through collateralised loan obligations. In the coming months, or it might even be just a matter of weeks, the banks will protect themselves by turning from providers of liquidity to withdrawing it. Inevitably, a volte-face on credit by the banks will bring on the slump. A systemic crisis will then ensue, and central banks will be forced to ride to the rescue by printing yet more money.

As we saw following the Lehman crisis, the money will be printed to bolster banks’ reserves in return for government debt accumulating at the central bank, so most of that newly printed money ends up covering the government’s deficit through the purchase of government bonds by the central bank.

A credit cycle will have completed: the post-Lehman stabilisation, followed by an uncertain recovery, then a return to normality. Normality matures into complacency, with bank credit being expanded in favour of increasingly risky borrowers. The post-credit expansion crash, mirroring Lehman, is now in the making.

It is a repetitive cycle, the consequence of earlier monetary interventions by the central banks. They have been unable to stop themselves. The decision to pull the plug on Lehman, only a second-rank investment bank, nearly brought down the entire global financial system. No central bank can take that risk again. We can be certain the solution to the next credit crisis will be a further acceleration of the production of money and credit with no one in the financial system being allowed to fail. And the expansion of base money directed at bolstering the banks’ balances will predominantly favour the one borrower class left with any financial standing, the governments.

But what we see is two forces joining together to accelerate the demise of state-issued currencies, which at the end of the day are only backed by the faith and credit the public holds in their governments’ finances. The upcoming credit crunch will occur against a background of a rapidly increasing burden of welfare liabilities, so dramatically identified by Laurence Kotlikoff seven years ago, and likely to have increased markedly from his alarming estimate.

Inevitably, the prolonged suppression of government bond yields will begin to end, and irrespective of central bank interest rate policies, they will rise as investors realise that adjusted for a more realistic estimate of price inflation than that provided by government statisticians, they are a costly safe haven. Then, government finances will become so visibly out of control that even modern monetary theorists will return to their textbooks to see which bit they failed to understand.

The dawning of monetary inflation on the general public

Today, the public is blissfully unaware of the inexorable trend of monetary debasement while enjoying the continuing benefits of government welfare. Government economists tell them that moderately rising prices, the consequence and justification for expanding the quantity of money and credit, are good for them. And who are they to question the experts?

Fortunately, people pursuing their daily lives usually adapt to the circumstances forced upon them by governments. A targeted two per cent inflation rate of prices is not overtly disruptive, and government statisticians have become skilled at goal-seeking price inflation figures. Everyone’s experience of price inflation is different, so government figures become believable by default. But for some considerable time, increases in peoples’ wages have badly lagged the price rises of their normal purchases, which bear little relation to the composition of governments’ consumer price statistics. Coupled with the financial freedom afforded to them to borrow, they have made up the difference between income and expenditure just like any modern government: by borrowing with little or no intention of repaying.

The cause of the problem people face is the continual destruction of their personal wealth by monetary inflation. It has led to a fundamental difference between the credit cycle today and those earlier described in the textbooks of the Austrian School of economists. Before Keynesianism took hold, investment in production was funded by savings. Those savings have been substantially destroyed. Instead of savings being a cushion against uncertainty, for practical purposes they no longer exist.

There are two consequences that concern us here. The first is that the burden of investment and its continuity now falls entirely on the state and its licenced banks, whose only recourse is yet more monetary expansion. The second is the almost total reliance today’s wage earners place on receiving their monthly salary to survive, with a reported 78% of US workers living pay-check to pay-check. British workers are similarly strapped. They have no means of surviving a credit crisis and the economic consequences that follow. That will be another cost that falls to the government and its central bank to add to already escalating welfare commitments.

It is becoming easy to envision the day that the majority of government spending is financed by inflation and inflationary borrowing, through a combination of falling tax revenues and escalating spending commitments. There is also an imbalance between taxpayers, with a mobile wealthy class bearing the bulk of national tax burdens who can up sticks at any time. The question then arises as to how financial markets will react when the triple conjunction of a credit crisis, sharply increased government deficits, and the long-term escalation of welfare costs, materialise in the public consciousness all at the same time.

Ahead of the next credit crisis, the knowledge that things are not quite right has so far led to a flight to perceived safety: in some countries, investors are even paying to own their government’s debt. In the US, the yield on the 10-year US Treasury bond has declined from 3.2% a year ago to 1.4% today.

As the next credit crisis materialises, perceptions of investment risk are bound to change radically. The imperative to print money at an even faster rate will accompany the trend towards deeper negative interest rates, penalising bank deposits, eliminating residual savers from the system. Consequently, if the Fed makes the mistake of even considering negative interest rates, it will put the whole commodity complex firmly into backwardation from the money side because all commodities are priced in dollars.

We can take anticipation of lower and more widespread negative rates as guaranteed when the credit cycle enters its crisis stage. Last time, everyone was so relieved that life after Lehman’s death continued that they still regarded government debt as the risk-free yardstick for financial investment. It would be foolish for a central bank to think this trick could be pulled a second time. Just imagine how high the fiat money quantity in our introductory chart would be above that long-term pre-Lehman trend line. And just think of the damage to the purchasing power of the dollar and the other major fiat currencies from interest rate policies that are bound to drive deposits towards widespread encashment.

This time, the coincidence of a credit crisis and rapidly escalating short- and long-term welfare commitments adds a new dimension to the inflation story. Far from rescuing the global economy, the spreading of zero and negative interest rates can be expected to expose the true worth of fiat currencies. Next time is different in another respect: there is a new generation of educated men and women who through cryptocurrencies have learned of the fiat currency fallacy ahead of the event. In the past, nearly everyone learned of it too late. Now, around the world, particularly in America and China millennials could accelerate the ending of fiat money by triggering an early shift out of fiat into cryptos. Bitcoin at a million dollars becomes no longer pure fancy, only don’t forget that a million dollars might not buy you much.

It is not an expected outcome, except by the very few who understand what is happening to money and the built-in escalation of its quantity. These will include growing numbers in the cryptocurrency community and the few who have studied the subject away from the influence of macroeconomists. Hopefully, they will now include readers of this article.

Anticipating a crack-up boom

As the credit crisis drives monetary expansion into overdrive or leads into a hyperinflationary slump, people are bound to begin to discard their national currencies in favour of any goods they think they might need in future. Minimal cash liquidity becomes the desired position. It can rapidly lead into the final short-lived boom that marks the death of an unbacked fiat currency, when it dawns on the general public that their government’s currency might be worthless. As the conviction of it grows, the pace at which it is dumped for anything of use that they can get their hands on increases exponentially. In Germany, it lasted from about May 1923 until the following November when the mark finally expired.

It has long been a theme of survivalist libertarians that this will occur.

So long as the alternative of owning physical gold and silver exists, it is not necessary to stockpile necessities, unless, that is, disruptions to supplies are anticipated. In a slump, the prices of goods will decline measured in sound money. This, after all, was firmly impressed upon Keynesian inflationists by the experience of the early 1930s, when measured in gold substitutes prices of nearly everything fell heavily. When gold and silver became more desirable relative to owning goods, their purchasing power increases while that of fiat currencies declines.

Putting supply considerations to one side, if in the wake of the next credit crisis the economic conditions of the 1930s return, those that use gold and silver as money will see the prices of their consumer staples fall, so there should be no hurry to hoard them.

Tyler Durden

Sun, 10/13/2019 - 07:00


Business Finance


The Failure Of Impeachment Regime Change

zerohedge News failure impeachment regime change All https://www.zerohedge.com   Discuss    Share

Authored by Jacob Hornberger via The Future of Freedom Foundation,

With what most everyone is calling a stunningly disjointed and extremely disappointing presentation before Congress by Special Counsel and former FBI Director Robert Mueller, it is becoming increasingly clear that the effort to achieve regime change through impeachment is going to fail. Democrats are going to have to rely on the traditional electoral means to remove President Trump from office in 2020.

This is the way it should be. Achie

Read More
ving regime change through impeachment would have converted the United States into a standard banana republic.

Ever since Trump became the GOP nominee for president, Democrats, the national-security establishment, and the liberal elements of the mainstream press did everything they could to ensure that his Democratic opponent, Hillary Clinton, was elected president.

Once Trump became president, however, his opponents refused to accept the electoral outcome and began trying to remove him from office through impeachment.That’s where the anti-Russia brouhaha came into play.

During the campaign, it was increasingly clear that Trump and Clinton were on opposite sides of the Russia controversy. Trump desired to establish friendly relations with Russia, which was exactly what Russia wanted.

But that’s not what the national-security establishment wanted. Ever since the sudden and unexpected end of the Cold War, the Pentagon, CIA, and NSA — the three principal components of the national-security state — did everything they could to make Russia, once again, an official enemy of the United States. Clinton was squarely on the side of the national-security establishment.

That’s why the Pentagon, CIA, and NSA kept the Cold War dinosaur NATO in existence instead of dismantling it. It’s also why they had NATO begin absorbing former members of the Warsaw Pact, enabling U.S. forces and missiles to be stationed ever closer to the Russian border, violating assurances that U.S. officials had given Russia not to expand toward Russia. That’s what the effort to absorb Ukraine into NATO was all about, knowing full well that Russia would respond by protecting its longtime military base in Crimea.

Everything was oriented toward making certain that the United States and Russia would never be on friendly terms. Everything was instead oriented toward making Russia, once again, another Cold War official enemy of the United States.

Why is that the goal of the national-security establishment? Because it needs a justification for its own existence and its own ever-growing power and influence. That justification comes in the form of official enemies, ones that can keep Americans fearful. In that way, the Pentagon, CIA, and NSA can say, “Keep flooding us with U.S. taxpayer money because we are the ones who are keeping you safe from America’s official enemies. Keep giving us totalitarian-like powers over you so that we can keep you safe.”

Of course, Russia isn’t the only official enemy. There is also China, which increasingly is being presented as a Cold War-like “hegemon” that is supposedly threatening U.S. “national security.”

And then there are the smaller official enemies, like Iran, North Korea, Cuba, Venezuela, Syria, the Taliban, the Muslims, the terrorists, ISIS, the drug dealers, and the illegal immigrants, all of which, we are told, are threats to “national security.”

As a candidate, Trump was threatening to upend this racket, at least with respect to Russia and perhaps also by threatening to bring an end to America’s forever wars and its policy of regime-change wars. That posed a grave threat to the national-security establishment, which had been grafted onto America’s federal governmental system after World War II to fight the Cold War against the Soviet Union, America’s World War II partner and ally whose principal member was Russia.

Trump’s friendly attitude toward Russia could not be permitted to stand, not as a presidential candidate and especially not as a U.S. president. That’s when the anti-Russia brouhaha was launched, which accused Trump of being an agent of the Russians, just as some people accused President Eisenhower of being a communist agent of the Soviet Union during the Cold War.

It was a ridiculous accusation from the get-go but its primary purpose was to enable Trump’s opponents to remove him from office long before the next election in 2020. It was designed to be regime change through impeachment.

Once Mueller’s investigative team, despite years of intense investigation, was unable to come up with convincing evidence of a Trump-Russia conspiracy, however, Trump’s detractors fell back on a secondary plan for regime change though impeachment — “obstruction of justice,” a federal crime that is so nebulous and subjective that it is the federal version of “disorderly conduct,” a “crime” that local officials use to target people they don’t like. The sham nature of this alternative theory for regime change was exposed through its supporters refusal to seek Trump’s impeachment for real crimes, such as killing people overseas through illegal undeclared wars and illegal assassinations. With Mueller’s dismal performance before Congress, this alternative attempt at regime change appears to be dead in the water as well.

While Trump’s enemies have been unsuccessful in removing him from office through impeachment, they have, unfortunately, been successful in having him become an opponent of Russia, China, and all of the other official enemies of the U.S national-security state. Not only has Trump continued the forever wars in Afghanistan and the Middle East, he has kept up hostile relations with Russia, initiated a destructive trade war with China, and ratcheted up the U.S. wars on Muslims, the terrorists, the illegal immigrants, the drug dealers, ISIS, and the Taliban. He has also ensured that ever-increasing taxpayer-funded largess continues flooding into the Pentagon, the CIA, and the NSA, no matter how much more debt this adds onto the backs of American taxpayers.

In other words, Trump, like George W. Bush and Barack Obama, has been absorbed into the national-security state blob. They have won. Trump has become one of them. That’s the real success of the unsuccessful effort to remove Trump from office through impeachment regime change.

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