Feb 022021
 
 February 2, 2021  Posted by at 10:36 am Finance Tagged with: , , , , , , , , , ,  27 Responses »


MC Escher Relativity 1953

 

Is Robinhood The Devil in Sheep’s Clothing? (Neville)
Physical Premium To Paper Hits Record As Silver Market Tears In Two (ZH)
Papering Over the Rot (Chris Hedges)
How To Redesign COVID Vaccines So They Protect Against Variants (Nature)
COVID19 Vaccine Developers Ask SEC to Help Keep Price Setting Secret (DP)
The Brazil Variant Is Exposing the World’s Vulnerability (Atl.)
Fauci 180º: Double Masking For Covid-19 Doesn’t ‘Make A Difference’ (JTN)
Oversight Board Reverses Facebook Removal Of HCQ Post (JTN)
The Game is On (Jim Kunstler)
Figures Tied To Past Controversies Increasingly Land Jobs On Team Biden (JTN)
Why You Haven’t Seen A Sit-Down Biden Interview Yet (Pol.)
Hundreds Deported Under Biden, Including Witness To Massacre (AP)
Biden Considers Revoking Trump’s Rights To Be Briefed On Secrets (DM)
Kerry Gifts Wall Street the Green New Deal (Pettifor)
Twitter Suspends Account of Group That Called For Regulating Big Tech (JTN)

 

 

 

 

“Back in Washington, they’ve found a company to crucify who turned out to be even bigger hypocrites than they are. Quite the bi-partisan cause!”

Is Robinhood The Devil in Sheep’s Clothing? (Neville)

Robinhood fancies themselves as commission free trading which is giving normal people free access to the stock market. They are the Facebook of the financial world. You think it’s free, but your data ends up being sold to another big business who profits off of it more than you do. For Zuckerberg, he sells all your data to businesses across the world. For Robinhood, they sell your data to Ken Griffin and other High Frequency Trading shops. You could write a book on the nuances of it, but let’s leave it there for now. As Facebook and (anti)social media grew too large, it has created mass hysterias. Neuroscientist and philosopher, Sam Harris, speaks on his podcast about humans losing sense of their rationality. Because of the constant propaganda being thrown on social media, humans are having a hard time deciphering truths and often create false realities.

Humans end up giving their attention to the most extreme personalities (watch the Tekashi69 Documentary on HBO) and the values of balance and a middle class lifestyle go out the door. In the same way that Facebook has distorted human perception, Robinhood is doing this to capital markets, which might be even scarier. If no one knows the value of things, then how do we attempt to live in a civilized society and trade value for value? Stan Druckenmiller has said that there should be some sort of hurdle rate for investment into the market. Perhaps this is what he saw coming? One of the words that I am shorting over the next five years is ‘scale’. One of the words that will likely replace it is ‘balance’. With balance, you get real growth and real innovation. You accept the fact you are human and fallible while constantly trying to learn from your failures. With scale, you just want to control things as fast as you can at the expense of the herd.

I worked as a trader for 12 years before tapping out and realizing my job was getting eaten alive by algorithms & high-frequency-trading. I tried to out-hustle it, but the incentive to make things cheaper for the end consumer to buy stocks inevitably won. As a free market capitalist, I have to give passive investment, HFT & Robinhood some major props. What they did was brilliant, but I can’t help but ask myself whether we’ve sacrificed social stability in that pursuit of scale. Behind closed doors, I know they are concerned and they can’t unwind what they’ve built. I get messages from Wall Street friends everyday now who can’t openly speak about it, but know how messed up the capital markets are.

With retail equity and call buying at all time records, liquidity could get funky if pay-for-order flow providers pull back at all. CEO’s at Schwab, TD and Virtu will likely try to distance themselves from that model. In the interim, Robinhood will likely do a nice round of mea-culpas with the best PR firms on the market and apologize to everyone about the GameStop situation. The big VC’s on Robinhood’s cap table who are obsessed with scale will make their calls into Washington. Back in Washington, they’ve found a company to crucify who turned out to be even bigger hypocrites than they are. Quite the bi-partisan cause!

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What will be the new normal? Can’t imagine it will be like the old one.

Physical Premium To Paper Hits Record As Silver Market Tears In Two (ZH)

APMEX Statement On Current Market Conditions:

In the last week, we have seen a dramatic shift in Silver demand from our customers. For example, the ratio of ounces sold per day was running about two times earlier in the week and closer to four times the average demand by the end of the week. Once markets closed on Friday, we saw demand hit as much as six times a typical business day and more than 12 times a normal weekend day. Combined with the extremely high demand levels, we are also seeing a surge in new customers. On Saturday alone, we added as many new customers as we usually add in a week.

Any Precious Metal dealer will take a long position in the futures market to protect against spot price exposure when the markets open. We do this because it is our goal not to take a speculative position on metal. The weekends are unique as we are not able to real-time hedge our position. We took an aggressive position this weekend, but clearly could not have predicted the volumes that were seen. We have partnerships around to world that allowed us to cover these long positions, but only to a point. Once we exceeded our comfort levels, we had little choice but to stop the sale of Silver on our website. This was a difficult decision to make and unprecedented in our history.

As we evaluate the markets, it is difficult to know where Silver’s price and demand will go in the coming day and weeks. APMEX is highly capitalized and has more than $150 million in inventory to support demand. We have made strategic decisions to procure additional metal, locking up any metal we can find in the market place. We suspect premiums will rise and rise quickly, as we are seeing significant increases in our costs, when we can even locate the metal. It is also highly likely that we will need an additional day or two to fill orders based on current order counts. The one guarantee we can make to our customers is that you will only be sold metal that is on-site, or we have procured the metal with a firm commitment date from our partners. In markets like this, we feel this is the best approach a retailer can take, as no one can predict product availability.

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“The new wealth comes from a cartel capitalism far more concentrated and far more criminal than any of the cartels built by the old robber barons of the 19th century.”

Papering Over the Rot (Chris Hedges)

The death spiral of the American Empire will not be halted with civility. It will not be halted with the 42 executive orders signed by President Joe Biden, however welcome many are, especially since they can, with a new chief executive, be immediately revoked. It will not be halted by removing Donald Trump, and the crackpot conspiracy theorists, Christian fascists and racists who support him, from social media. It will not be halted by locking up the Proud Boys and the clueless protestors who stormed the Congress on Jan. 6. and took selfies in Vice President Mike Pence’s Senate chair. It will not be halted by restoring the frayed alliances with our European allies or rejoining the World Health Organization or the Paris Climate Agreement.


Mr. Fish

All of these measures are window dressing, masking the root cause of the demise of America — unchecked oligarchic power and greed. The longer wealth is funneled upwards into the hands of a tiny, oligarchic cabal, who put Biden into office and whose interests he assiduously serves, we are doomed. Once an oligarchy seizes power, deforming governing institutions to exclusively serve their narrow interests and turning the citizenry into serfs, there are only two options, as Aristotle pointed out — tyranny or revolution. The staggering concentration of wealth and obscene avarice of the very rich now dwarfs the hedonism and excesses of the world’s most heinous despots and wealthiest capitalists of the past.

In 2015, shortly before he died, Forbes estimated David Rockefeller’s net worth was $3 billion. The Shah of Iran looted an estimated $1 billion from his country. Ferdinand and Imelda Marcos amassed between $5 and $10 billion. And the former Zimbabwean President Robert Mugabe was worth about a billion. Jeff Bezos and Elon Musk are each at $180 billion. The new wealth comes from a cartel capitalism far more concentrated and far more criminal than any of the cartels built by the old robber barons of the 19th century.

It was made possible by Presidents Ronald Reagan and Bill Clinton who, in exchange for corporate money to fund their campaigns and later Clinton’s foundation and post-presidency opulent lifestyle, abolished the regulations that once protected the citizenry from the worst forms of monopoly exploitation. The demolishing of regulations made possible the largest upwards transference of wealth in American history. Whatever you say about Trump, he at least initiated moves to break up Facebook, Google, Amazon and the other Silicon Valley monopolists, none of which will happen under Biden, whose campaign these corporations bankrolled. And that has to be one of the reasons these digital platforms disappeared Trump from social media.

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We’re all hostages to these companies now. No-one talks about boosting your immune system, or getting fitter, natural defenses are not done.

How To Redesign COVID Vaccines So They Protect Against Variants (Nature)

Labs worldwide are racing to understand the threat that emerging coronavirus variants pose for vaccines. But early insights from these studies are mixed and incomplete. A variant identified in late 2020 in South Africa, called 501Y.V2 (also known as variant B.1.351), is among the most worrying. Lab assays have found that it carries mutations that sap the potency of virus-inactivating ‘neutralizing antibodies’ that were made by people who received either the Pfizer or Moderna RNA vaccines. Whether these changes are enough to lower the effectiveness of those vaccines is not clear, says Subbarao. “That is the million-dollar question, because we don’t know how much antibody you need.” Other immune responses that vaccines prompt might help to protect against the effects of variants.

But on 28 January, biotech firm Novavax released data from clinical trials showing that its experimental vaccine, designed to combat the original virus, was about 85% effective against a variant identified in the United Kingdom — but less than 50% effective against 501Y.V2. That drop is concerning, say researchers, because it indicates that 501Y.V2 and other variants like it can cause a significant drop in vaccines’ effectiveness. “I think it’s inevitable for the vaccines to maintain tip-top efficacy, they will need to be updated. The only question is how often and when,” says Paul Bieniasz, a virologist at the Rockefeller University in New York City who co-led one of the neutralizing-antibody studies. Scientists, health officials and vaccine makers are starting to hash this out. Researchers are only beginning to learn how different mutations alter vaccine responses and how evolutionary forces can cause mutations to spread. “I certainly wouldn’t update them now,” says Bieniasz.

One model that COVID vaccine updates could follow is that of seasonal flu vaccines, says Subbarao, who directs the World Health Organization Collaborating Centre for Reference and Research on Influenza in Melbourne. Centres including hers monitor emerging flu strains for genetic changes that might influence vaccines’ effectiveness. Researchers use studies with ferret and human antibodies to determine whether a new flu strain is likely to evade a previous season’s vaccine, and therefore necessitate an update. These reviews are conducted annually for each hemisphere’s flu season, and changes are made only when a vaccine-evading strain is widespread, says Subbarao. “If it’s localized to one region, one country, we wouldn’t change the vaccine for the whole hemisphere.”

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Drug pricing is not the scandal here.

COVID19 Vaccine Developers Ask SEC to Help Keep Price Setting Secret (DP)

When the U.S. government awarded over $10 billion in contracts and advance- purchase commitments to drug companies working on COVID-19 vaccine and treatments, it did not require the recipients of government money to agree to offer their products at fair prices or share intellectual property rights to enable faster production. Now, two of the companies awarded those contracts—Pfizer and Johnson & Johnson—are trying to prevent shareholders from voting on resolutions to require the companies to disclose information about the impact of government funding on vaccine access. The U.S. government has purchased 200 million doses of the Pfizer vaccine and 100 million doses of the Johnson & Johnson vaccines, for about $20 and $10 per dose, respectively.

The shareholder resolutions, filed by members of the Interfaith Center on Corporate Responsibility (ICCR), a shareholder activism organization, ask those two companies to inform their shareholders how “receipt of public financial support for development and manufacture of products for COVID-19 is being, or will be, taken into account when making decisions that affect access to such products, such as setting prices.” Similar resolutions were also filed at Eli Lilly, Gilead, Merck, and Regeneron. Both Pfizer and Johnson & Johnson filed “no action requests” with the Securities and Exchange Commission (SEC) in December, asking the agency to rule that the companies can withhold the proposals from shareholders.

In nearly identical filings prepared by the same lawyer, both Pfizer and Johnson & Johnson argued that the proposals attempt to “micromanage” the companies “by requesting an intricately detailed report.” Meg Jones-Monteiro, ICCR’s health equity director, called the micromanaging claim “ludicrous.” The claim that investors are trying to “micromanage” the companies comes from an SEC precedent finding that certain “ordinary business operations” should not be subject to shareholder oversight. But Jones-Monteiro argues that the issue of vaccine pricing during pandemics doesn’t fall into this category.

“Anything related to drug pricing has been established as a social policy issue,” Jones-Monteiro told The Daily Poster, meaning it isn’t just ordinary business that doesn’t need any shareholder oversight. She noted that the proposals don’t ask about ordinary pricing decisions or ask for intricate details about pricing algorithms. “We are asking very generally: did you take government funding into account? And how did you take it into account?” Oxfam, an ICCR member who filed the proposed resolution with Johnson & Johnson, wrote in a supporting statement that “JNJ stated publicly that it will distribute a COVID-19 vaccine on a “nonprofit” basis,” adding: “JNJ has not clarified what ‘nonprofit’ means when the government funds a significant portion of the research and development cost.”

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Pretty bad.

The Brazil Variant Is Exposing the World’s Vulnerability (Atl.)

Even in a year of horrendous suffering, what is unfolding in Brazil stands out. In the rainforest city of Manaus, home to 2 million people, bodies are reportedly being dropped into mass graves as quickly as they can be dug. Hospitals have run out of oxygen, and people with potentially treatable cases of COVID-19 are dying of asphyxia. This nature and scale of mortality have not been seen since the first months of the pandemic. This is happening in a very unlikely place. Manaus saw a devastating outbreak last April that similarly overwhelmed systems, infecting the majority of the city. Because the morbidity was so ubiquitous, many scientists believed the population had since developed a high level of immunity that would preclude another devastating wave of infection.

On the whole, Brazil has already reported the second-highest death toll in the world (though half that of the United States). As the country headed into summer, the worst was thought to be behind it. Data seemed to support the idea that herd immunity in Manaus was near. In Science this month, researchers mapped the virus’s takeover last year: In April, blood tests found that 4.8 percent of the city’s population had antibodies to SARS-CoV-2. By June, the number was up to 52.5 percent. Since people who get infected do not always test positive for antibodies, the researchers estimated that by June about two-thirds of the city had been infected. By November, the estimate was about 76 percent. In The Lancet this week, a team of Brazilian researchers noted that even if these estimates were off by a large margin, infection on this scale “should confer important population immunity to avoid a larger outbreak.”

Indeed, it seemed to. The city was able to largely reopen and remain open throughout its winter with low levels of COVID-19 cases. Yet now, the nightmare scenario is happening a second time. The situation defies expert expectations about how immunity would help protect the hardest-hit populations. By estimates of leading infectious-disease specialists, such as Anthony Fauci, when roughly 70 to 75 percent of the population is immune, there can still be clusters of cases, but sustaining a large-scale outbreak becomes mathematically impossible. Still somehow, according to The Washington Post, hospitals in Manaus that had thought they were well prepared are now overwhelmed.

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What a clown.

Fauci 180º: Double Masking For Covid-19 Doesn’t ‘Make A Difference’ (JTN)

First he said don’t wear a mask. Then he said wear a mask. Then he said wear two masks. Then he said just wear one mask. Keeping up with Dr. Anthony Fauci’s mask-wearing recommendations is getting tough. Back in March, just as the COVID-19 pandemic was emerging, Fauci, the country’s top infectious disease expert, said, “There’s no reason to be walking around with a mask.” “When you’re in the middle of an outbreak, wearing a mask might make people feel a little bit better and it might even block a droplet, but it’s not providing the perfect protection that people think that it is,” the doctor said on CBS News. Of course, we didn’t know much back then, and how to slow the spread has since evolved.

Soon after Fauci made his comments, experts – including those in the Center for Disease Control and Prevention – said Americans should wear masks, citing estimates that 40% or more of those infected were asymptomatic but could still spread the virus. “We were not aware that 40% to 45% of people were asymptomatic, nor were we aware that a substantial proportion of people who get infected get infected from people who are without symptoms. That makes it overwhelmingly important for everyone to wear a mask,” Fauci said in September, noting that “the data now are very, very clear.”

Fauci, an immunologist and director of the National Institute of Allergy and Infectious Diseases who served on President Trump’s White House Coronavirus Task Force and is now President Biden’s chief medical adviser on COVID-19, said last month that wearing two masks is likely more effective than wearing one. “If you have a physical covering with one layer, you put another layer on it, just makes common sense that it likely would be more effective,” Fauci told NBC News. Then over the weekend, Fauci said: “There are many people who feel, you know, if you want to have an extra little bit of protection, maybe I should put two masks on. There’s nothing wrong with that, but there’s no data that indicates that that is going to make a difference and that’s the reason why the CDC has not changed the recommendation.”

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HCQ research has been dead since April, thanks to the Lancet. That’s also when the vaccine trials started.

Oversight Board Reverses Facebook Removal Of HCQ Post (JTN)

Facebook’s independent Oversight Board has reversed the social media platform’s decision to remove an October 2020 post pertaining to the drug hydroxychloroquine in the treatment of COVID-19. “In October 2020, a user posted a video and accompanying text in French in a public Facebook group related to COVID-19,” the board explained on its website. “The post alleged a scandal at the Agence Nationale de Sécurité du Médicament (the French agency responsible for regulating health products), which refused to authorize hydroxychloroquine combined with azithromycin for use against COVID-19, but authorized and promoted remdesivir. The user criticized the lack of a health strategy in France and stated that “[Didier] Raoult’s cure” is being used elsewhere to save lives.

“The user’s post also questioned what society had to lose by allowing doctors to prescribe in an emergency a “harmless drug” when the first symptoms of COVID-19 appear.” While the person’s post pushed back against a government policy, it did not urge people to obtain or take medicine without a prescription, the board noted. “[The] user was opposing a governmental policy and aimed to change that policy,” the board said in explaining its ruling. “The combination of medicines that the post claims constitute a cure are not available without a prescription in France and the content does not encourage people to buy or take drugs without a prescription. Considering these and other contextual factors, the Board noted that Facebook had not demonstrated the post would rise to the level of imminent harm, as required by its own rule in the Community Standards.”

Facebook also failed to show why it did not opt for a less severe remedy than removing the post from the platform, the panel found. “Given that Facebook has a range of tools to deal with misinformation, such as providing users with additional context, the company failed to demonstrate why it did not choose a less intrusive option than removing the content,” the board explained. The board also determined that the social media giant’s misinformation and imminent harm rule is too vague and recommended that the platform consolidate and clarify its standards on health misinformation in one place.

“The Board also found Facebook’s misinformation and imminent harm rule, which this post is said to have violated, to be inappropriately vague and inconsistent with international human rights standards,” the panel said. “A patchwork of policies found on different parts of Facebook’s website make it difficult for users to understand what content is prohibited. Changes to Facebook’s COVID-19 policies announced in the company’s Newsroom have not always been reflected in its Community Standards, while some of these changes even appear to contradict them.”

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“It looks like they mean bidness.”

The Game is On (Jim Kunstler)

It’s been fifty years since precious metals enjoyed any official peg with the US dollar, but for five thousand years previously gold and silver were money itself and paper currencies became mere representations of that money. That relationship ended in 1971 when President Nixon closed the “window” that allowed foreign countries to redeem gold in exchange for dollars they accumulated from the commercial trade of goods — and, our dollar being the world’s supreme reserve currency, the rest of the world’s currencies followed.

Despite all efforts since then by banking authorities to denigrate the value and the role of gold and silver in financial affairs, the “barbarous relics” retained a persistent influence in men’s minds because of their intrinsic qualities. These were: the vested energy they represented from mining and refining, their physical durability, portability, and divisibility, their freedom from counterparty obligations, and, especially in modern times, their vital usefulness in electronics and other industrial applications. The latter quality is greatly reinforced by the powerful wish to transition from a fossil fuel economy to an alt-energy economy of solar cells and wind turbines — a wish that probably won’t come true.

And so, as promised by the subreddit vigilantes, the silver price was up around $3 or ten percent in overnight trading going into the week’s Monday open. It looks like they mean bidness. And that could mean many things. The most obvious is a very conscious effort to punish the high hats of Wall Street for years of lawless game-playing that made them ultra-rich and left everybody else in the country impoverished. Some of the vigilantes frankly express the desire to wreck the degenerate banking system altogether, a great purge of evil to restore something like God-fearing accountability, moving toward a fresh and honest re-start of markets and banking. I’m not convinced that we would get any such orderly re-start in the sense that global banking could be reconstructed along pre-2020 lines.

Rather, wrecking the banks in a daisy-chain of shattered obligations would be an express ticket to the Palookaville of neo-medievalism I’ve been warning about, and probably in a sharp, disorderly, violent, and deadly episode of losing everything that has made us civilized. In any case, the country has already prepped itself for some kind of spectacular failure with all the social mind-fuckery of the past four years that eventuated with the empty shell of Joe Biden in the White House, and millions of his supporters swept into an epic hysteria of manufactured moral outrage over pseudo-realities initiated by academic racketeers and then weaponized by our politicians. But the game is on, whether you like it or not. This may be a last opportunity to get your minds right before you lose your country and your future.

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There are hundreds of them.

Figures Tied To Past Controversies Increasingly Land Jobs On Team Biden (JTN)

Jake Sullivan was one of the most prolific users of Hillary Clinton’s forbidden email server. Now he’s Joe Biden’s national security adviser. Undersecretary of State Victoria Nuland previously had ties to Christopher Steele in the Russia scandal. White House domestic adviser Susan Rice once falsely declared the Benghazi terror attack was provoked by an anti-Muslim video and later wrote the famously curious did-it-by-the-books email in the Russia scandal during her last minutes in he Obama administration. And top Securities and Exchange Commission enforcement official Melissa Hodgman is married to Peter Strzok, the fired FBI agent who supervised the discredited Crossfire Hurricane probe into Russia-Trump collusion. As Biden fills out his team, the list of people tied to past scandals and controversy keeps getting bigger.


And the pattern has some prominent Republicans taking note. “If you look at the larger picture, the Russia hoaxers, the people that were pushing this out from the very beginning and lying about it after the fact, they’re all at the top echelons of the Biden administration,” former House Intelligence Committee chairman Devin Nunes (R-Calif.) said Sunday. During an appearance on Fox News’ Sunday show hosted by Maria Bartiromo, Nunes took issue with Hodgman’s appointment as acting chief of the SEC enforcement division, saying while she “could be a great public servant,” it created the appearance of a Democratic payback to her husband for pursuing Trump. “Looks like Peter Strozk is actually going to get reimbursed for all of his troubles,” Nunes said. “The guy lost his job, but nothing’s happened to him at this point.”

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Incompetence as a strategic move.

Why You Haven’t Seen A Sit-Down Biden Interview Yet (Pol.)

Joe Biden waited nearly four decades to become the most powerful man in the free world. Now that he is, he’s making himself scarce. Biden is leaning on doctors and health experts to publicly detail his Covid policy. He’s relying on his Cabinet, economic advisers and other high-ranking administration officials to help sell his nearly $2 trillion rescue package. Biden’s press team, meanwhile, is standing in for their boss by blanketing TV programs with pledges to tell the truth even when it’s inconvenient. It’s one of the more arresting shifts after four years of a president who delighted in torturing the media with sudden pronouncements that often surprised and befuddled his own advisers.

“He trusts them, and Americans will trust experts,” John Anzalone, a top Biden adviser and campaign pollster, said of the president’s approach to his team. “Plus,” he added, “Biden is dealing with multiple crises and is a good delegator.” White House aides describe the strategy not so much as delegation but as an concerted effort to restore confidence with a public battered by the contradictory messaging and scorched-earth politics of the Trump years. In just over a week, the White House has booked 80 TV and radio interviews with 20 senior administration officials, members of the Covid-19 response team and Cabinet secretary designates. They’ve had officials on each major network, booking them on every Sunday show in the first week.

And they worked with CNN to have three of the doctors in charge of its Covid-19 response take questions from the public during a coronavirus town hall, said Mariel Sáez, the White House director of broadcast media. Who’s not been booked for any sit-down interviews: Biden. But the president hasn’t exactly been absent either. He appeared for brief ceremonies where he signed executive orders and delivered mostly scripted remarks. He’s taken a handful of questions from the news media. And he’s expected to give a major foreign policy address on Monday amid a planned trip to the State Department, his first visit to a Cabinet agency.

As main protagonists go, Biden’s role has been comparatively limited — a startling contrast to the omnipresent president who preceded him. Donald Trump didn’t so much love the spotlight as he sought to totally consume it. Whether he was sending Twitter screeds at all hours or shouting answers over the ear-splitting blades of his presidential aircraft, Trump craved media attention like no American leader before him.

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Who built the cages?

Hundreds Deported Under Biden, Including Witness To Massacre (AP)

President Joe Biden’s administration has deported hundreds of immigrants in its early days despite his campaign pledge to stop removing most people in the U.S. illegally at the beginning of his term. A federal judge last week ordered the Biden administration not to enforce a 100-day moratorium on deportations, but the ruling did not require the government to schedule them. In recent days, U.S. Immigration and Customs Enforcement has deported immigrants to at least three countries: 15 people to Jamaica on Thursday and 269 people to Guatemala and Honduras on Friday. More deportation flights were scheduled Monday.

It’s unclear how many of those people are considered national security or public safety threats or had recently crossed the border illegally, the priority under new guidance that the Department of Homeland Security issued to enforcement agencies and that took effect Monday. Some of the people put on the flights may have been expelled — which is a quicker process than deportation — under a public health order that former President Donald Trump invoked during the coronavirus pandemic and that Biden has kept in place. In the border city of El Paso, Texas, immigration authorities on Friday deported a woman who witnessed the 2019 massacre at a Walmart that left 22 people dead.

She had agreed to be a witness against the gunman and has met with the local district attorney’s office, according to her lawyers. Rosa was pulled over Wednesday for a broken brake light, detained based on previous traffic warrants, then transferred to ICE, which deported her before she could reach her attorney, said Melissa Lopez, executive director of the nonprofit Diocesan Migrant & Refugee Services, which represents her.

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They want him off the map.

Biden Considers Revoking Trump’s Rights To Be Briefed On Secrets (DM)

The Biden administration is reviewing whether to take away the ability of former President Donald Trump to receive classified security briefings as the former president in the wake of the Capitol riot.White House spokeswoman Jen Psaki punted on the question when asked about a topic that also came up during the transition – but also confirmed Monday the administration was reviewing the matter. ‘This is a good question,’ said Psaki. ‘It’s something that’s obviously under review.’ The review comes as Trump critics demand he be forced to relinquish some of the perks of power that follow a president even after he leaves office. Former presidents get classified briefings by tradition – although not at the very highest levels reserved for the current officeholder.

In Trump’s case, the briefings would go to a former president who failed to attend the inauguration and spent months claiming that he had ‘won.’ Trump’s statement on his impeachment legal team over the weekend referred to him as the ’45th president of the United States.’ Trump has a small staff that has been running out of Mar-a-Lago. Former presidents get a substantial office stipend, and Secret Service protection costing up to $1 million per year. Even Trump’s adult children are getting Secret Service protection for the next six months, ABC News reported this month. If the Senate were to convict Trump of ‘incitement of insurrection’ following his impeachment trial, it could also vote to strip him of his ability to hold future office. It is unclear what current perks, if any, would go away if he were convicted.

Trump caused an uproar during his 2017 meeting with Russian Foreign Minister Sergei Lavrov and former ambassador to the U.S. Sergei Kislyak after it was reported he revealed highly classified information about ISIS in Syria to the U.S. adversary. He gave up highly sensitive information from a U.S. ally, reported to be Israel, that resulted in the U.S. having to extract a top-level source inside the Russian government. Trump also once tweeted out what appeared to be a classified photo of an Iranian nuclear installation. Trump said he had the power to declassify material. All that preceded the Capitol riots, which followed Trump telling his supporters to ‘fight’ on the day Congress was counting the Electoral College vote.

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“Green” has more than one meaning. It’s what the Paris accord is based on.

Kerry Gifts Wall Street the Green New Deal (Pettifor)

Last week the Biden team delivered their first press conference on the Democrat’s much-anticipated Climate Plan. The good news is that Climate Envoy, John Kerry and Advisor, Gina McCarthy are talking about the Climate Plan delivering “Good paying Union Jobs”. All hail to that ambition. The bad news is that this ain’t no Rooseveltian New Deal. Roosevelt confronted Wall St from the get go. His administration systematically drained the Street of power, and made it servant to the economy and ecosystem. Henry Morgenthau, Roosevelt’s Treasury Secretary could rightly boast: “We moved the financial capital from London and Wall Street right to my desk at the Treasury. (Rauchway, 2017, p. 227)”

John Kerry on behalf of President Biden did the reverse. With breath-taking haste he genuflected to Wall St. by paying homage to the CEO of Blackrock, and then implied the mighty United States government was dependent on Wall St titans to deliver those “Good paying Union Jobs”. Kerry began the press conference by welcoming CEO Larry Fink’s recent letter and “the new awareness among asset managers about the need to be putting resources into this endeavour.” Remember readers, that Larry Fink presides over assets valued at $8.6 trillion. Blackrock’s clients include pension funds, insurance companies, charities, endowment funds and central banks. Tucked into that basket are your pensions, your insurance, your charitable donations – and your taxpayer-backed central bank.

And just this weekend, Gillian Tett of the Financial Times reminded us, in an article titled – Wall St.’s New Mantra: Green is Good – that Blackrock “Exploded in size and power this century by amassing exchange traded funds and “passive’ strategies that automatically track mainstream indices, such as the S&P 500 – which include fossil fuels… to which Blackrock is heavily exposed…” In other words, this private company uses the world’s savings to make massive capital gains from ‘passive’ almost effortless investment strategies. Worse they use their power to accelerate the climate crisis by investing “heavily” in fossil fuels. All that is bad enough. But Blackrock is able to amass their vast, global power because economists and politicians (including ‘the Left’ of the political spectrum) have conceded that power to them.

John Kerry is our witness. After paying homage to CEO Fink, Kerry placed the United States government in the role of humble supplicant – and effectively begged Wall St. to come to the rescue of the Biden Climate Plan. He could not have addressed the Street more plainly: “What the financiers, the big banks, the asset managers, private investors, venture capital, are all discovering is that there is a lot of money to be made in the jobs to be created in these sectors…” Gina McCarthy, National Climate Advisor, drove home the point: “The question won’t be, will the private sector buy into it? The private sector is going to drive it…”

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“Twitter has silenced JCN and the 30 million small business owners it represents..”

Twitter Suspends Account of Group That Called For Regulating Big Tech (JTN)

Twitter has suspended the account of the Job Creators Network, a nonpartisan group that advocates for small businesses and policies that protect Main Street jobs. According to the group, the social media giant sent them a message late last week saying JCN had violated Twitter’s “rules against platform manipulation and spam.” Company President and CEO Alfredo Ortiz rejects that claim, saying the deplatforming effort is retaliation against JCN for implying that Twitter should be regulated as a utility. “Twitter has silenced JCN and the 30 million small business owners it represents after JCN implied that the tech giant should be regulated as a utility,” Ortiz said in a statement. “Given that JCN’s internal review demonstrates we did not violate Twitter’s terms and conditions, the tech giant’s bold move is likely pure retaliation against us for our position on tech regulations.”


Twitter on Monday did not respond immediately to several attempts to contact the company to learn why JCN, which advocates for lower taxes and progressive policies, had been removed from the site. Last month, Ortiz wrote an op-ed published by RealClearPolitics titled, “Big Tech’s Conservative Purge Changes the Free Speech Debate.” JCN Chief Communications Officer Elaine Parker on Monday told the “John Solomon Reports” podcast the op-ed argued for Washington to begin regulating social media platforms and other tech giants as utilities. “The reason behind that is because it would it would preclude them from excluding services based on political beliefs and ideology,” Parker told host John Solomon. “I mean, when when you’re getting your phone service through AT&T, they don’t care who you vote for, or who you support or what your political background is. They just want to sell you a service … right?”

Read more …

 

 

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“It is my great hope someday, to see science and decision makers rediscover what the ancients have always known. Namely that our highest currency is respect.”
– Nassim Nicholas Taleb

 

 

“Strap yourself to a tree with roots.”
– Bob Dylan

 

 

This So Real

 

 

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Feb 012021
 
 February 1, 2021  Posted by at 10:21 am Finance Tagged with: , , , , , , , , ,  30 Responses »


Balthus Therèse dreaming 1938

 

The Store of Value Generation is Kicking Your Ass (Mark Cuban)
Is Robinhood On The Brink Of Collapse? (GIH)
Silver Prices, Miners Surge As Retail Buyers Pile In (R.)
To The Brink And Back On GameStop (R.)
Melvin Capital Loses 53% In January Over Bet Against GameStop (RT)
Bill Gates, Big Pharma and Entrenching The Vaccine Apartheid (M&G)
France & Germany Threaten AstraZeneca With Legal Action (RT)
GOP Tries To Gut Survival Checks (DP)
Trump Announces New Lawyers To Lead Impeachment Defense Team (JTN)
ExxonMobil and Chevron Held Merger Talks In 2020 (G.)
China Building Digital Silk Road From Asia Through Africa To Europe (RT)
Vitamin B1 Deficiencies Are Plaguing Fish and Birds (Atl.)

 

 

 

 

 

 

“Wall Street and the agency that governs it, the SEC have become fat and happy. Fat and Happy makes old school slow and resistant to change.”

The Store of Value Generation is Kicking Your Ass (Mark Cuban)

[..] there are a growing number of investors and traders who think that the digital goods and CryptoAsset marketplaces are better than old school physical markets and the stock market and most of them are young. They love the fact that NO ONE has power over them. That there is no central authority and they get the results of their own efforts without some government agency or big company fucking with them. Every negative , consequential financial moment in their collective lives has been the result of some massive entity getting greedy and fucking things up for them. On the flipside, they have also been watching some of their peers gain wealth with Crypto and Digital Assets, most starting with not much capital.

Those peers have also been very vocal about the lack of interference by Old Schoolers with Crpto and Digital Assests and much of those gains have come from all of them doing the same thing, buying and Holding On for Dear Life. They have learned that with digital assets, acting in unison can bring wealth to those who otherwise would not have access to it. That is power and they know it and they are learning how to use it. So what does this have to do with Wall Street Bets (WSB) and $GME and the other stocks they are trading ? Well, it’s pretty obvious that the WSB traders are applying the same principles of the digital/CryptoAsset world to the stock market and they are loving the fact that the old schoolers are hating it.

They know that Wall Street hasn’t changed much in generations. Sure it has gone digital in many respects, but the way the game has been played has not changed. Wall Street is 100pct top down controlled and regulated. Which stock is next in the S&P 500 ? Which is removed ? No one knows, but it is provocative and can change fortunes for investors. SEC decides to use their own in-house Administrative Law Judges and prevent defendants from having their constitutional right to a jury trial ? Yup. You can’t afford to fight them. Tough shit. Big brokerages get to have calls and put out notes to their millions of clients with price targets in hopes of moving markets, but think its wrong for Sub Reddits to do the same ? Yup. The ultimate in stock manipulations, corporate stock buy backs were illegal prior to 1982, till the SEC put a former Broker CEO in charge. Wanna guess what has happened to CEO compensation since then ?

Wall Street and the agency that governs it, the SEC have become fat and happy. Fat and Happy makes old school slow and resistant to change. Very resistant. And obviously very unaware of the change that is happening around them.

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What hat does Robinhood have on?

“For equity brokers who clear their orders properly, there is no reason to limit $GME purchases to one. There is no reason to limit withdrawals..”

Is Robinhood On The Brink Of Collapse? (GIH)

The question remains – is Robinhood running a b-book. For those who are not familiar with OTC brokerage, a b-book is where the losers trade. When you open an account, you get flagged either as a winner or a loser, if you are on the A-Server then your trades flow through to the market, this is known in OTC as “Straight Through Processing” minus a small fee, or the “A-Book.” The “B-Book” or “Broker Book” or “Bad Book” depending on who you ask, is where your trades are placed directly against the broker itself – like spread betting. In this case, the customer losses become the brokers profits, and the reverse. This typically works well for brokers as most retail traders lose. But is Robinhood running a b-book? The answer is we don’t know and would not know, because a b-book broker would never disclose it.

According to public data, this may be a complex convoluted b-book. Citadel not only pays Robinhood for order flow data, Citadel Securities also clears orders for Robinhood. Not only that, Robinhood gets 35% of it’s revenue from Citadel: According to a June report from the Financial Times, $39 million of Robinhood’s revenues from equities and options order flow came from Citadel Securities, a market maker sister firm of Citadel. At the time, this represented more than 35% of the trading platform’s revenues. Which looks like the FXCM trick; Robinhood is not operating a b-book. They clear through Citadel Securities, a market maker, who b-books the trades (goes short basically) by not clearing them. In addition to that, Citadel is heavily invested in Melvin Capital, the hedge fund with a massive short position in $GME.

NOTE: It is not possible to short private equity stock. Robinhood is currently a private company, available on private markets. They claim to have plans for an IPO but so did Refco. If Robinhood’s book is as toxic as it seems, there is no way out for the firm other than to drive the prices of these stocks back down, or to simply reverse the positions which never really existed in the first place. They might want to call b-book mastermind Dror “Drew” Niv who was able to mask his b-booking operation by creating an offshore entity who was the sole counterparty of transactions below a certain size. He’s currently chumming it up with his bros in Greenwich, CT since his firm FXCM has been permanently banned by the NFA.

We aren’t saying that Robinhood is a fraud, we are saying that all the signs are there. For equity brokers who clear their orders properly, there is no reason to limit $GME purchases to one. There is no reason to limit withdrawals, or need ‘liquidity’ for net cap requirements. Running a broker-dealer is not so complicated like an OTC desk, orders match up and it’s all exchange traded. Broker dealers don’t take any risk, at least any meaningful risk. Market makers do. This is the question that we should be asking Vladimir – are you acting as an agent or a principal?

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WallStreetBets is now setting prices?

Silver Prices, Miners Surge As Retail Buyers Pile In (R.)

Silver prices leapt to a five-month high on Monday and small silver miners listed in Australia surged after social media calls to buy the metal and emulate the frenzy that has driven GameStop shares up 1,500% in two weeks. Spot silver rose as much as 7.4% to $28.99 an ounce, the highest since mid-August. Shares in a handful of mining firms such as Argent Minerals, Boab Metals and Investigator Resources leapt more than 15%. Coin-selling websites also reported unprecedented demand and flagged delays in delivering bullion. The moves are the latest example of small-time traders buying en masse, particularly of stocks and other assets that were heavily bet against, resulting in large losses for major investors.


“There is this curious situation now where the Reddit crowd has turned its sights on a bigger whale in terms of trying to catalyse something of a short squeeze in the silver market,” said Kyle Rodda, an analyst at brokerage IG Markets in Melbourne. “The most important factor here is that silver is heavily shorted, the paper market is much, much larger than the underlying commodity can justify,” he said. “There’s a lot of commentary on these platforms to pile in to the miners.” Silver prices are up 15% since Wednesday’s close, around when messages began circulating on forums such as Reddit encouraging users to buy the metal and drive up prices.

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“..the idea to short GameStop had long been a favorite at exclusive “idea dinners”, where fund managers swap their best trades.”

To The Brink And Back On GameStop (R.)

The extent of losses has exposed a big weakness on Wall Street. Analytics firm S3 said GameStop short sellers had mark-to-market losses of nearly $20 billion so far this year. Several hedge fund managers said the idea to short GameStop had long been a favorite at exclusive “idea dinners”, where fund managers swap their best trades. Managers also noted traders, many of whom who work at multi-strategy funds that employ pods of portfolio managers, traders and analysts, often know each other well and may compare notes. Gabe Plotkin’s Melvin Capital, one of the funds gored most by GameStop’s gains, took a $2.75 billion bailout from his one-time mentor Steve Cohen and Citadel’s Ken Griffin. The funds involved have taken a dent: Cohen’s Point72 Asset Management lost roughly 15% in January partly because of its investment in Melvin.


Melvin’s assets slid during the month from around $12.5 billion to $8 billion, a source familiar with the situation said. Maplelane Capital, another fund that bet against GameStop, had lost roughly 45% in January, a person familiar with the fund’s returns said. Even Viking Global Investors, one of the world’s best-performing hedge funds, was off some 7%, people familiar with the returns said. “Being short consensus stocks is just bad business,” said Dinakar Singh, a former Goldman Sachs trader who now runs hedge fund Axon Capital and was not short the stock. “It is great while it is working but when it isn’t anymore one guy’s problem triggers everyone’s headache. It becomes a circular disaster.”

Read more …

This is not over.

Melvin Capital Loses 53% In January Over Bet Against GameStop (RT)

Hedge fund Melvin Capital felt the effects of the buying spree spurred by individual buyers from the r/WallStreetBets subreddit account, with the group losing 53 percent in January. Despite the loss, Melvin Capital received fresh cash from investors by the end of January after taking heavy losses due to the unexpected and record stock gains for companies like GameStop, according to a source cited by Reuters. Melvin started January with $12.5 billion in assets, but is closing out the month with $8 billion, according to the Wall Street Journal’s report on the losses. It closed out its short position on GameStop in the wake of the massive surge. Other groups like Citron have also felt the squeeze by betting against GameStop and have closed their short positions with heavy losses.


GameStop became the center of controversy after motivated buyers sought to flood the market and increase its stock price aiming to upset Wall Street hedge funds. Trading at a mere $10 a share in October, GameStop closed out Friday at $325 a share. It has seen a total gain of over 1000 percent this year. Redditors also invested into other surprising companies like AMC leading to a frenzy on Wall Street as longtime investors found themselves trading in a quickly fluctuating and unpredictable market. Traders who bought into GameStop mainly did so through the app Robinhood, which controversially stepped in and halted trading on certain companies and then limited it, claiming this was a move to prevent market manipulation.

Read more …

Rania Khalek: “Too bad there’s so much hatred for bill gates over a conspiracy theory that he wants to micro chip us when actually he’s just a billionaire monster trying to cash in on vaccine profits.”

Bill Gates, Big Pharma and Entrenching The Vaccine Apartheid (M&G)

In October 2020, diplomats from South Africa and India approached the World Trade Organisation (WTO) with a revolutionary proposal. Together, the two countries argued that countries should be allowed to ignore any patents related to Covid-19 vaccines, for the duration of the pandemic. In other words: everyone should be allowed to manufacture the vaccine, without penalty. In their official communication, the countries said: “As new diagnostics, therapeutics and vaccines for Covid-19 are developed, there are significant concerns [about] how these will be made available promptly, in sufficient quantities and at affordable prices to meet global demand.” Just a few weeks later, Pfizer and BioNTech announced the first successful phase three trials for a Covid-19 vaccine, followed swiftly by Moderna and AstraZeneca.

In developing countries, jubilation at the prospect of a swift end to the devastating pandemic turned quickly into fear and anger, as it became clear that vaccines would only be made available to the rich, with little thought to equitable distribution. Canada, the worst offender, has pre-ordered so many vaccines that it will be able to vaccinate each of its citizens six times over. In the UK and US, it is four vaccines per person; and two each in the EU and Australia. The vaccines that have been made available to the developing world are either untested — such as the Chinese and Russian vaccines, for which insufficient clinical trial data has been released — or expensive. South Africa has ordered 1.5-million doses of the AstraZeneca vaccine, but will pay more than double what the EU is paying per dose.

The EU says that it is entitled to a lower price because it invested in the vaccine’s development — nevermind that the AstraZeneca vaccine was literally tested on the bodies of South Africans who volunteered to be part of the clinical trial in Johannesburg. In lower income countries, the situation is even worse. As of 18 January, 39-million vaccine doses had been administered in the world’s 50 richest countries, compared to just 25 individual doses in low-income countries. It appears that South Africa and India were right. Under the current rules, the vaccine cannot be made quickly or cheaply enough to meet global demand, which vaccines are only going to those countries that can afford it. This is a “catastrophic moral failure”, said the head of the World Health Organisation (WHO), Tedros Adhanom Ghebreyesus.

Some activists have described the situation as a “vaccine apartheid”. Nonetheless, the proposal for a patent waiver has been repeatedly rejected at the WTO by wealthier countries including the European Union, the United Kingdom, US and Switzerland; countries which, as Reuters wryly noted, are “all home to major pharmaceutical companies”. They also all enjoy early access to the vaccine. Nor has South Africa and India’s proposal received support from the most influential non-state actor in global public health: Bill Gates. The pandemic has been good to Gates. In 2020, the Microsoft cofounder added $18-billion to his fortune, which now stands at a cool $131-billion (the annual GDP of Ethiopia, a country of 112-million people, is $96-billion). He is the fourth-richest person in the world.

The Bill and Melinda Gates Foundation has since its inception in 2000 spent more than $54-billion combating diseases such as polio and malaria and bolstering the health systems of developing countries. It funds everything from governments to civil society organisations to health journalism outlets, which means it has an enormous say in how health policy is shaped and communicated. It also contributes 12% of the WHO’s total budget. But despite Gates’ stated commitment to an equitable distribution of the Covid vaccine, he is refusing to back South Africa and India’s calls for a waiver on patents.

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The wrong fight.

France & Germany Threaten AstraZeneca With Legal Action (RT)

Tensions in a row between AstraZeneca and the EU over vaccine shortages have heightened further as Paris and Berlin said the company should face penalties or even legal action if it turns out it preferred Britons to Europeans. “I am not saying that there is a problem but if there is a problem and that [they] have favored other destinations, other countries – for example the UK – over us then we will defend our interests,” France’s Secretary of State for European Affairs Clement Beaune told the French Radio J on Sunday, adding that the company is now facing “serious accusations” and that is not something that Brussels treats “lightly.” The official then said that the British-Swedish vaccine manufacturer could face “penalties or sanctions” if found to have prioritized its British clients over the European ones.


Beaune added that Brussels could punish the company by refusing to order any supplementary doses or imposing penalties “foreseen by the contract.” The EU has struck an advance purchase agreement with AstraZeneca worth €336 million ($407.8 million) but not all of the money has been paid to the company. Beaune admitted that there is an investigation into AstraZeneca that is still ongoing and the Europeans first need “clarity and transparency.” Still, he said, “if there has been a preference granted to the British, then that’s a problem.” A similarly stark rebuke came from Germany, where the Economy Minister Peter Altmaier told Die Welt daily that “if it turns out that individual companies are not complying with their obligations, a decision must be made about legal consequences.”

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Biden promised the $2,000 checks “immediately”. Where are they? Why try and blame this on the GOP instead?

GOP Tries To Gut Survival Checks (DP)

A group of Republican senators is pushing to cut the size of the next round of COVID-19 relief checks and significantly limit who’s eligible to receive the payments, as the Biden administration continues to indicate that it would be open to further restricting who’s eligible for survival checks. Last month, President Joe Biden promised that $2,000 checks would “go out the door immediately” if Democrats managed to win the two Georgia senate runoff races and claim control of the Senate. After Democrats pulled off two miracle victories in Georgia, Biden quickly narrowed his pledge to new $1,400 checks, asserting that the $600 checks authorized by Congress in December were a down payment on his plan.


On Sunday, ten moderate Republicans proposed new $1,000 checks instead as part of their own scaled-down coronavirus relief package. Under their proposal, survival checks would go to far fewer Americans than in previous relief bills — only to “families who need assistance the most,” according to a letter they sent to the White House. While the details haven’t been released yet, one Republican involved in the effort, Sen. Rob Portman of Ohio, told CNN on Sunday that direct payments should only go to individuals earning less than $50,000 and families earning less than $100,000. In previous COVID relief bills, full rounds of survival checks have gone to individuals earning up to $75,000 and couples earning up to $150,000. Limiting assistance the way Portman described would cut off relief to millions of Americans who have previously received economic impact payments.

Read more …

Like the spotlight?

Trump Announces New Lawyers To Lead Impeachment Defense Team (JTN)

Lawyers David Schoen and Bruce L. Castor Jr. will lead former President Trump’s impeachment trial defense team, according to an announcement on Sunday from the Office of Donald J. Trump. The announcement notes that the two attorneys consider the impeachment unconstitutional and that Schoen had already been working with Trump and other advisors to get ready for the approaching Senate trial. “It is an honor to represent the 45th President, Donald J. Trump, and the United States Constitution,” Schoen said in a statement included in the announcement. “I consider it a privilege to represent the 45th President,” Castor said. “The strength of our Constitution is about to be tested like never before in our history. It is strong and resilient. A document written for the ages, and it will triumph over partisanship yet again, and always.” The House of Representatives voted in favor of impeaching Trump earlier this month during the waning days of his term in office.

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110 years after Standard Oil.

ExxonMobil and Chevron Held Merger Talks In 2020 (G.)

The chief executives of American oil companies ExxonMobil and Chevron held preliminary talks in early 2020 to explore combining the two largest US oil producers in what would have been the biggest merger of all time, according to people familiar with the matter. The discussions, which are no longer ongoing, are being seen as having tested the waters for the huge corporate marriage after the coronavirus pandemic shook the world last year, the Wall Street Journal reported on Sunday. Such consequential discussions are indicative of the pressure the energy sector’s most dominant companies faced as Covid-19 took hold and crude prices plunged. The talks between Exxon chief executive, Darren Woods, and Chevron CEO, Mike Wirth, were serious enough for legal documents involving certain aspects of the merger discussions to be drafted, one of the sources told Reuters.

[..] The discussions were described as preliminary and although were not ongoing could come back in the future. Such a deal would reunite the two largest descendants of John D Rockefeller’s Standard Oil monopoly, which was broken up by US regulators in 1911, and reshaped the oil industry, the Journal reported. A combined company’s market value could top $350bn, creating the world’s second largest oil company by market capitalization and production, second only to Saudi Arabia’s state oil producer, Aramco. Such a big American oil merger could run into regulatory and antitrust hurdles in the new Biden [presidency], which has taken the US back into the Paris climate accords.

Last week Biden signed new environmental orders, saying the climate crisis was an existential threat demanding urgent remedies and introduced his team, including former secretary of state John Kerry as the new US climate global envoy. During the election campaign last October, Biden said he would push the US to “transition away from the oil industry”.

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Huawei.

China Building Digital Silk Road From Asia Through Africa To Europe (RT)

The final stretch of a cross-border fiber optic cable is set to be laid by China in Pakistan to create the Digital Silk Road (DSR), Nikkei Asia reports. The DSR is part of the broader Chinese Belt and Road Initiative (BRI).
The fiber cable will link to the Pakistan East Africa Connecting Europe (PEACE) submarine cable in the Arabian Sea, to service countries participating in BRI, and Europe. It is currently being laid between Pakistan’s Rawalpindi city and the port cities of Karachi and Gwadar. The $240-million project, which is in partnership with China’s Huawei Technologies, was approved by the government last week.

The laying of sea cable in Pakistan’s territorial waters will begin in March, following government approval this month for Cybernet, a local internet service provider, to construct an Arabian Sea landing station in Karachi. The Mediterranean section of the cable is already being laid, and runs from Egypt to France. The 15,000 kilometer-long cable is expected to go into service later this year. The PEACE cable will provide the shortest direct internet route between participating countries, and will drastically reduce internet data transfer speeds.

It is expected to help reduce Pakistan’s exposure to internet outages from damaged submarine cables by providing an additional route for internet connectivity. According to Eyck Freymann, author of ‘One Belt One Road: Chinese Power Meets the World,’ the BRI is evolving to place less emphasis on traditional heavy infrastructure, and more on high-tech cooperation and digital services. He told Nikkei Asia that “Beijing wants to dominate the physical infrastructure underlying global communications, particularly the internet,” adding: “This will give it an advantage in internationalizing its tech sector and pursuing future tech-related deals with partner countries.”

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“..some unexplained process is compromising the foundation of the Earth’s food web by depleting ecosystems of this critical nutrient.”

Vitamin B1 Deficiencies Are Plaguing Fish and Birds (Atl.)

Disoriented little fish caught the attention of staff members at the Coleman National Fish Hatchery in Red Bluff, California, in early January 2020. Looking down into the outdoor tanks—called raceways—the facility’s employees noticed that among the dark, olive-colored clouds of live fish, there were occasional slivers of silver from the undersides of tiny fry that were struggling to swim. These small fish would roll onto their sides, sink to the bottom for a moment, spring back upright, swim a few strokes, and then roll over again. Many were dying, too. While a few hundred mortalities daily in a facility containing millions of fish is normal, something was definitely amiss. Daily mortality “was in the thousands, and it didn’t go down,” says Brett Galyean, complex manager at the hatchery.

Galyean and his team had already hatched and released into the raceways between six and seven million fish—about half of Coleman’s annual production—and the prospect of losing many or most of them began to seem very real. Biologists at the California-Nevada Fish Health Center, an on-site lab at the hatchery, which is located on a tributary of the Sacramento River, inspected the fish but couldn’t make a diagnosis. A few samples were sent to the University of California, Davis, for more testing. Around that time, Galyean recalls, other salmon hatcheries in the state began reporting unusually high mortality rates in their fish. Whatever was afflicting Coleman’s salmon was evidently impacting fish across Northern California. Short of better explanations, Galyean and his colleagues grew concerned that a virus was sweeping through their brood.

Grasping for ideas as thousands of fish expired each day, they turned to the internet, where they dug up research on nutritional deficiencies in trout from the Great Lakes, as well as Atlantic salmon on the East Coast. Several decades ago, sick and dying fish in these regions had been found to be deficient in thiamine, or vitamin B1—a basic building block of life, critical to the functioning of cells and in converting food into energy. Encouraged by this finding, biologists at the Fish Health Center ran a trial, submerging about half of the fry in a bath of water and dissolved thiamine powder. It worked like a charm, Galyean says. After several hours, nearly all of the treated fish were behaving normally, while symptoms continued in an untreated control group.

Coleman, as well as the other hatcheries, scaled up the treatment and applied it to more than a million fry. It did the job in the short term, but it didn’t solve the underlying problem. Because the fish acquire thiamine by ingesting it through their food, and females pass nutrients to their eggs, the troubling new condition indicated that something was amiss in the Pacific Ocean—the last place the fish eat before entering fresh water to spawn. Now, California researchers investigating the source of the salmon’s nutritional problems find themselves contributing to an international effort to understand thiamine deficiency, a disorder that seems to be on the rise in marine ecosystems across much of the planet. It’s causing illness and death in birds, fish, invertebrates, and possibly mammals, leading scientists to suspect that some unexplained process is compromising the foundation of the Earth’s food web by depleting ecosystems of this critical nutrient.

Read more …

 

 

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Jan 312021
 
 January 31, 2021  Posted by at 10:23 am Finance Tagged with: , , , , , , , , , , , ,  37 Responses »


Tamara de Lempicka The refugees 1937

 

Reddit Preparing To Unleash “World’s Biggest Short Squeeze” In Silver (ZH)
Bitcoin Could Be About To Become The New GameStop (F.)
Just 0.04% Of Israelis Caught COVID19 After 2 Shots Of Pfizer Vaccine (JPost)
‘Get to Zero’ or Face Catastrophe (Tyee)
Germany Threatens Legal Action Over Vaccine Delivery Delays (G.)
Mighty Amazon Looks All But Unassailable As Covid Continues (O.)
Navalny Scam Sells Empty Concrete Shell As ‘Putin’s Luxurious Palace’ (MoA)
Trump’s Top Impeachment Lawyer Has Left His Team (Pol.)
Ohio Lawmakers Want To Mark Trump’s Birthday As ‘Donald J. Trump Day’ (JTN)
The Secret Social Network Of Trees (SMH)

 

 

 

 

Most infections are among the youngest. That doesn’t sound good.

 

 

Long John Silver.

Reddit Preparing To Unleash “World’s Biggest Short Squeeze” In Silver (ZH)

While all eyes have been focused on GameStop and a handful of other heavily-shorted stocks as they exploded higher under continuous fire from WallStreetBets traders igniting a short-squeeze coinciding with a gamma-squeeze, the last few days saw another asset suddenly get in the crosshairs of the ‘Reddit-Raiders’ – Silver. On Thursday, we asked “Is The Reddit Rebellion About To Descend On The Precious Metals Market?” … One WallStreetBets user (jjalj30) posted the following last night: “Silver Bullion Market is one of the most manipulated on earth. Any short squeeze in silver paper shorts would be EPIC. We know billion banks are manipulating gold and silver to cover real inflation. Both the industrial case and monetary case, debt printing has never been more favorable for the No. 1 inflation hedge Silver.

Inflation adjusted Silver should be at 1000$ instead of 25$. Link to post removed by mods. Why not squeeze $SLV to real physical price. Think about the Gainz. If you don’t care about the gains, think about the banks like JP MORGAN you’d be destroying along the way. Tldr- Corner the market. GV thinks its possible to squeeze $SLV, FUCK AFTER SEEING $AG AND $GME EVEN I THINK WE CAN DO IT. BUY $SLV GO ALL IN TH GAINZ WILL BE UNLIMITED. DEMAND PHYSICAL IF YOU CAN. FUCK THE BANKS. Disclaimer: This is not Financial advice. I am not a financial services professional. This is my personal opinion and speculation as an uneducated and uninformed person.”

…and judging by the unprecedented flows into the Silver ETF (SLV) they just got started… SLV saw inflows of almost one billion dollars on Friday, almost double the previous record inflow for this 15 year-old ETF.

 

 

Rainman Sacks
https://twitter.com/i/status/1355368285592715265

Read more …

There are more candidates.

Bitcoin Could Be About To Become The New GameStop (F.)

Bitcoin has surged this week, climbing after Tesla TSLA -5% chief executive Elon Musk gave the cryptocurrency a tacit endorsement. Musk sent the bitcoin price sharply higher as a long-running battle between bullish retail traders organised via Reddit’s WallStreetBets forum and Wall Street hedge funds that have long been shorting GameStop shares reached its climax—with regulators and brokerages trying to calm frantic markets with heavy-handed restrictions. Now, data has revealed hedge funds are short bitcoin to the tune of more than $1 billion, even as retail traders pile into bitcoin and other cryptocurrencies. Hedge funds have been increasing their bitcoin short positions—effectively bets that the price of an asset will fall—since the bitcoin price began climbing in October, data from crypto news and analysis company The Block showed.

The net short position in bitcoin futures is now the biggest it has ever been, according to the CFTC’s latest Traders in Financial Futures report. The bitcoin price has soared around 200% since October, surging to over $40,000 per bitcoin before falling back slightly. The blistering bitcoin rally has largely been put down to institutional investors warming to the cryptocurrency and payments giants such as PayPal adding their support—though bubble fears have emerged. As hedge funds increasingly bet against the bitcoin price, to some extent covering their long positions, retail traders empowered by apps and bored by lockdowns are speculating on bitcoin and everything else.

“Being stuck at home due to pandemic lockdowns and restrictions seems to have spurred an influx of day traders,” Frédérique Carrier, head of investment strategy at RBC Wealth Management, wrote in a note. “Investor attitudes are being shaped by the headline-making gains of some high-profile issues. For example, the 35% gain made by bitcoin in the first nine days of 2021, on the heels of a fivefold surge in price from March to December 2020; or the more-than-sixfold increase in GameStop shares in less than two weeks to January 26; or even Tesla, now the fifth-largest stock in the S&P 500 by market capitalisation, with a market cap larger than that of the major U.S., European, and Japanese automakers combined.”

Read more …

Encouraging, but too early to draw conclusions.

Just 0.04% Of Israelis Caught COVID19 After 2 Shots Of Pfizer Vaccine (JPost)

A total of 371 out of 715,425 Israelis who passed at least a week after receiving two doses of the Pfizer coronavirus vaccine have contracted the virus – 0.04%, with 16 being sent to the hospital – according to a Health Ministry report released on Thursday. Immunity to COVID-19 is supposed to kick in a week after receiving the second dose of the Pfizer vaccine. According to the studies conducted by Pfizer, the vaccine had an efficacy of about 95%, which is considered very high. The Israeli data appear to confirm the inoculation’s effectiveness, showing an even more promising result.

Later in the day, Maccabi Healthcare Services – one of the country’s four health maintenance organizations – released the first results of the vaccination campaign of its members, with the organization also comparing the data to a control group that did not get inoculated. Some 248,000 Maccabi members were already a week after the second shot as of Thursday. Of those, just 66 got infected with the virus, the majority of them over the age of 55 and about half of them with preexisting conditions. All those infected experienced only a mild form of the disease, and none were hospitalized.

Over the same period of time, some 8,250 new cases of COVID-19 emerged in the control group of some 900,000 people having a diverse health profile. Those who were not inoculated were therefore 11 times more likely to get the disease than those who were immunized, showing 92% effectiveness. “The fact that seven to 18 days after receiving the second dose the vaccine shows a 92% efficacy is very encouraging data,” according to Dr. Anat Aka Zohar, head of Maccabi’s Information and Digital Health Division. “We will continue to monitor the situation to see if the number increases and reaches the 95% demonstrated during the Pfizer study.”

Read more …

“We pretended we could live with this virus and that vaccines would save the day. We were wrong. Dead wrong.”

‘Get to Zero’ or Face Catastrophe (Tyee)

Are you tired of COVID? I fucking am. But as a longtime science writer and the author of two books on pandemics, I have to report what you probably don’t want to hear. We have entered the grimmest phase of this pandemic. And contrary to what our politicians say, there is only one way to deal with a rapidly mutating virus that demonstrates the real power of exponential growth: Go hard. Act early. And go to zero. Last January, one strain of this novel virus began its assured global conquest, and since then our leaders have hardly learned a goddamn thing. So yes, I am angry, and I will not disguise my frustration with comfortable or polite language. In the last three months, several super-variants have emerged that are 30 to 70 per cent more infectious than the original Wuhan strain.

The old COVID-19 doubled its numbers every 40 days under a particular set of restrictions; under the same conditions, the variants double every 10 days. That means they can outrun any vaccination campaign.* That means if you haven’t eliminated — or almost eliminated — cases in your region, you are going to learn the meaning of grief. These highly-contagious variants have emerged in jurisdictions with high infection rates: the U.K., Brazil, South Africa and California. They became global tourists months ago, before you read about them. Meanwhile, governments still do not understand the threat at hand. To illustrate it, British mathematician Adam Kucharski recently compared a virus mutation that was 50 per cent more deadly with one that increased transmission by 50 per cent.

With a reproduction rate of about 1.1 and a death rate of 0.8 per cent, current strains of COVID-19 now deliver 129 deaths per 10,000 infections. A virus that is 50 per cent more lethal will kill 193 people in a month. A variant that is more transmissible wins the game with 978 deaths in just one month. The virus is finding its optimal configuration, its ideal form for contagiousness. And you thought this was over? Now don’t think of these variants as the same old COVID-19. That’s a big mistake. They actually represent an entirely new pandemic. In this new maelstrom, this complex coronavirus is just getting warmed up. It has the potential to become even more infectious than the current variants. We allowed this to happen by not taking the measures needed to go to zero, doing whatever was needed to eliminate COVID-19 in our province or country. We pretended we could live with this virus and that vaccines would save the day. We were wrong. Dead wrong.

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This feels like the wrong fight.

Germany Threatens Legal Action Over Vaccine Delivery Delays (G.)

In case you missed this earlier: Germany’s government on Sunday threatened legal action against laboratories failing to deliver coronavirus vaccines to the European Union on schedule, amid tension over delays to deliveries from AstraZeneca, AFP reports.“If it turns out that companies have not respected their obligations, we will have to decide the legal consequences,” economy minister Peter Altmaier told German daily Die Welt. There has been growing tension in recent weeks between European leaders and the British-Swedish pharmaceutical giant AstraZeneca, which has fallen behind on promised delivers of its Covid-19 vaccine.The company said it could now deliver only a quarter of the doses originally promised to the bloc for the first quarter of the year because of problems at one of its European factories.


Brussels has implicitly accused AstraZeneca of giving preferential treatment to Britain at the expense of the EU.The EU briefly threatened to restrict vaccine exports to Northern Ireland by overriding part of the Brexit deal with Britain that allowed the free flow of goods over the Irish border. It backed down after British prime minister Boris Johnson voiced “grave concerns”. AstraZeneca is not the only drugs company in the firing line. Last week Italy threatened legal action against US pharmaceutical firm Pfizer over delays. Top German officials are due to meet with the drugs manufacturers to thrash out the problems.On Friday the European Medicines Agency cleared the vaccine produced by AstraZeneca for use inside the EU, the third Covid vaccine it has approved after Pfizer-BioNTech and Moderna.

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There goes small business.

Mighty Amazon Looks All But Unassailable As Covid Continues (O.)

The earliest references to the “one-stop shop” emerged during the first decades of 20th century as the fast-growing US economy spurred rapid retail innovation. A single location for various products provides obvious benefits: removing the hassle of travelling around town to visit different stores. Jeff Bezos redefined that logic for the internet age, making Amazon a dominant (and perhaps ambivalent) force first in selling books, and then in pretty much everything else. Before 2020 Amazon was a phenomenon, but the coronavirus pandemic has made it all but ubiquitous. The numbers in its financial results for the last three months of 2020, to be published on Tuesday, will be even bigger than Amazon’s earlier instalments in the first pandemic year.


Christmas and Thanksgiving always make the final quarter of the year the strongest for Amazon. Christmas 2020 will mainly be remembered for locked-down celebrations, but analysts predict that it will also mark the first time Amazon’s revenue surpasses $100bn in one quarter. In fact, consensus estimates collated by S&P Global Market Intelligence are forecasting sales of about $120bn – 37% up on the same period in 2019. Profits before tax are pegged at $4.4bn – shy of the record $6.8bn it made in the three months to September, but higher than any single quarter before the pandemic. It was only in 2016 that single-quarter profits topped $1bn, but that’s because the Bezos strategy is to invest spare cash in relentless, ruthless expansion and innovation, so that rivals cannot creep up on it.

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The story has been sold since 2010. CIA.

Navalny Scam Sells Empty Concrete Shell As ‘Putin’s Luxurious Palace’ (MoA)

In 2010 some minor Russian businessman, Sergei Kolesnikov, who had pissed off people above his pay grade, resettled from Russia to Estonia. To make himself interesting, and likely to get financial support, he made up a story. David Ignatius, the CIA’s resident writer at the Washington Post, picked it up: You can see the sprawling, Italian-style palace on the Black Sea in satellite photos. There’s a fitness spa, a hideaway “tea house,” a concert amphitheater and a pad for three helicopters. It’s still under construction, but already the cost is said to total more than $1 billion. And most amazing of all, according to a Russian whistleblower named Sergey Kolesnikov, it was predominantly paid for with money donated by Russian businessmen for the use of Prime Minister Vladimir Putin.

The funds have come “mainly through a combination of corruption, bribery and theft,” charges Kolesnikov, a businessman who until November 2009 worked for one of the companies he alleges was investing money for Putin. In 2012 BBC Newsnight again picked up the story and made it into a nine minutes long anti-Putin segment. Putin’s Palace? A Mystery Black Sea Mansion Fit For A Tsar “On a thickly wooded mountainside overlooking Russia’s Black Sea coast, an extraordinary building has gradually taken shape. It is alleged to be a palace built for the personal use of Vladimir Putin, with massive and illegal use of state funds. Originally conceived, it is said, as a modest holiday house with a swimming pool, it now boasts a magnificent columned facade reminiscent of the country palaces Russian tsars built in the 18th Century. The massive wrought-iron gates into the courtyard are topped with a golden imperial eagle. Outside are formal gardens, a private theatre, a landing pad with bays for three helicopters, and accommodation for security guards.”

At the end of 2020 the ‘Putin’s palace’ story was recycled to promote the rightwing Russian nationalist and anti-corruption campaigner Alexey Navalny. Navalny was at that time in Germany’s Black Forrest area where he recovered from an alleged poisoning. A studio was needed to produce a video about the ‘palace’. A German producer couple who had recently opened a TV-studio received a request. As the German daily Badische Zeitung reported (my translation): “Early December a request arrived via email from a U.S. production company in Los Angeles. There was talk of a documentation. It was looking for adequate locations, people and equipment in southern Germany. The German producers did not know the company, even though they have good contacts in L.A., but the request made a very professional impression.

The studio was rented to create the ‘palace’ material for the Navalny campaign. “The studio was actually only rented for just under a week, but the filmmakers liked the location with its atmosphere and the cinematic possibilities so much that the shooting was extended to a total of two weeks and parts of the 20-person international crew from Berlin, where actually a last shoot was planned before the flight to Moscow came to Kirchzarten.” On January 17 Navalny flew back to Russia and was immediately arrested for having violated his probation in a case where he had been sentenced for funneling a company’s money into his own pockets. On January 19 Navalny’s anti-corruption campaign FBK uploaded a two hour long polemic in which Navalny repeats the decade old claim that there is a palace at the Black Sea that is actually owned by Putin. But none of the many documents he provides proves that Putin is in any way involved in the project.

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Trump and his lawyers. A sordid tale all around.

Trump’s Top Impeachment Lawyer Has Left His Team (Pol.)

Former President Donald Trump has lost his top impeachment lawyer just days before his trial is to begin, a person familiar with his legal strategy and two attorneys close to the team confirmed on Saturday night. Butch Bowers, a South Carolina lawyer who was reportedly set to play a major role in the Senate’s trial of the former president, is now no longer with the team. Deborah Barbier, another South Carolina lawyer, won’t be either. The person described it as a “mutual decision” and said new names will be announced shortly. In addition, CNN reported on Saturday night that a third member of Trump’s prospective legal team, Josh Howard, was also leaving. The network reported that the ex-president had wanted his lawyers to focus on erroneous arguments of mass election fraud rather than the constitutionality of impeaching an ex-president.

The decision by Bowers, Barbier, and Howard to not join the team raised immediate questions, both about what compelled them to part ways and who actually will play the role of lawyer to Trump when the impeachment trial starts in early February. Trump has had difficulty finding legal help for his second impeachment, with some of the lawyers who worked on his first trial saying they wouldn’t do the same this go around. Bowers’ hiring was first announced by Trump ally and South Carolina Sen. Lindsey Graham. A longtime Republican attorney, Bowers represented former South Carolina Govs. Mark Sanford and Nikki Haley, and had experience in election law.

News outlets in South Carolina also named trial attorneys Greg Harris and Johnny Gasser as part of Trump’s impeachment team, although aides to Trump never officially confirmed who would be representing the former president. Trump’s first legal filing in the impeachment trial is due this coming Tuesday. In a statement, Trump spokesperson Jason Miller did not address the uncertainty around the legal team but, rather, railed against impeachment itself, noting that the vast majority of Senate Republicans voted that convicting a former president is an unconstitutional act — a conclusion with which legal scholars disagree.

Read more …

What do you mean Not The Onion?

Ohio Lawmakers Want To Mark Trump’s Birthday As ‘Donald J. Trump Day’ (JTN)

Two Ohio lawmakers are reportedly seeking support from their fellow legislators to mark former President Donald Trump’s birthday in that state as “President Donald J. Trump Day.” State Reps. Reggie Stoltzfus and Jon Cross reached out to lawmakers in the Ohio House on Friday, asking them to “recognize the accomplishments of [Trump’s] administration, and [show] that the Ohio House believes it is imperative we set aside a day to celebrate one of the greatest presidents in American history.” The lawmakers are seeking to designate June 14, Trump’s birthday, as the holiday in question. The news was first reported in the Ohio Capitol Journal, which said it obtained the co-sponsor request sent by Stoltzfus and Cross. In addition to being Trump’s birthday, the United States also marks June 14 as Flag Day, commemorating the date in 1777 on which the Continental Congress officially adopted the flag of the United States.

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Wonderful.

The Secret Social Network Of Trees (SMH)

By the time she was in grad school at Oregon State University, however, Simard understood that commercial clear-cutting had largely superseded the sustainable logging practices of the past. Loggers were replacing diverse forests with homogeneous plantations, evenly spaced in upturned soil stripped of most underbrush. Without any competitors, the thinking went, the newly planted trees would thrive. Instead, they were frequently more vulnerable to disease and climatic stress than trees in old-growth forests. In particular, Simard noticed that up to 10 per cent of newly planted Douglas fir were likely to get sick and die whenever nearby aspen, paper birch and cottonwood were removed. The reasons were unclear.

The planted saplings had plenty of space, and they received more light and water than trees in old, dense forests. So why were they so frail? Simard suspected the answer was buried in the soil. Underground, trees and fungi form partnerships known as mycorrhizae: threadlike fungi envelop and fuse with tree roots, helping them extract water and nutrients like phosphorus and nitrogen in exchange for some of the carbon-rich sugars the trees make through photosynthesis. Research had demonstrated that mycorrhizae also connected plants to one another and that these associations might be ecologically important, but most scientists had studied them in greenhouses and laboratories, not in the wild.

For her doctoral thesis, Simard decided to investigate fungal links between Douglas fir and paper birch in the forests of British Columbia. Apart from her supervisor, she didn’t receive much encouragement from her mostly male peers. “The old foresters were like, “Why don t you just study growth and yield? ” Simard told me. “I was more interested in how these plants interact. They thought it was all very girlie.” Now a professor of forest ecology at the University of British Columbia, Simard, who is 60, has studied webs of root and fungi in the Arctic, temperate and coastal forests of North America for nearly three decades. Her initial inklings about the importance of mycorrhizal networks were prescient, inspiring whole new lines of research that ultimately overturned long-standing misconceptions about forest ecosystems.

By analysing the DNA in root tips and tracing the movement of molecules through underground conduits, Simard has discovered that fungal threads link nearly every tree in a forest – even trees of different species. Carbon, water, nutrients, alarm signals and hormones can pass from tree to tree through these subterranean circuits. Resources tend to flow from the oldest and biggest trees to the youngest and smallest. Chemical alarm signals generated by one tree prepare nearby trees for danger. Seedlings severed from the forest’s underground lifelines are much more likely to die than their networked counterparts. And if a tree is on the brink of death, it sometimes bequeaths a substantial share of its carbon to its neighbours.

Read more …

 

 

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Sep 112015
 
 September 11, 2015  Posted by at 1:33 pm Finance Tagged with: , , , , , , ,  18 Responses »


Lewis Wickes Hine Game of craps. Cincinnati, Ohio 1908

The following is a veritable tour de force by Nicole Foss on the value of gold in a crashing economy, for different people in different circumstances.

Nicole Foss: In light of the rapidly-propagating loss of confidence, and consequent shift to deflation, with falling prices across the board as a result, it is appropriate to review our stance on gold. The yellow metal is often perceived as a panacea – a safe haven guarding against all manner of potential financial disruption. It has long been our stance at the Automatic Earth that this is far too simplistic a position to take. We live in a complex world for which there are no simple one-dimensional solutions. It is important to distinguish between the markets for paper gold and for physical gold, and to understand the risks inherent in gold ownership in order to manage them. As we wrote back in 2009:

Firstly, the goldbugs are right that physical gold is real money (unlike paper gold, which is just another Ponzi scheme). It has held its value for thousands of years and will continue to do so over the long term. However, that does not mean that gold prices cannot fall or that purchasing gold now is the right way for everyone to preserve capital….People’s circumstances are different. Those circumstances determine their freedom of action, both now and in the future.

Bubble Dynamics

It is our view that (paper) gold has been in a bubble which peaked in 2011, along with the rest of the commodity complex. It has been subjected to the same dynamic as other commodities, which have collectively lost touch with their own fundamentals as they have become increasingly over-financialized. Financialization moves the dynamics into the virtual world, while simultaneously subjecting them to perverse incentives. Substantial price movements having at best a tenuous connection with actual supply and demand are the result.

Commodity tops are fear-driven, generally on fear of scarcity. This causes market participants to anticipate ever greater demand and tighter supply, to the point where price is bid up in advance of what the fundamentals would justify. In addition, in bubble times momentum chasing becomes a major factor, with speculators assuming that which rises will continue to do so. Once ever-increasing prices become received wisdom, it no longer matters what one has to pay to buy, because there is a false perception that someone else will always pay more. This is true for a while, until it abruptly is not – until the Greatest Fool has been found. At that point a sharp reversal is on the cards.

Our view of market dynamics as swings of positive feedback in a fractal structure is grounded in human psychology.  There are no efficient markets, no rational utility maximization, no equilibrium, no negative feedback, no perfect competition and no perfect information – in short the mainstream model for the functioning of markets bears no resemblance to reality. Prices do not reflect the fundamentals, but the collective state of confidence of market participants engaging in subconscious herding behaviour. 

We agree with George Soros that markets are reflexive:

Soros rejected the prevailing idea that “market prices are … passive reflections of the underlying fundamentals”, a dogma he dismissed as market fundamentalism, or that there were stabilizing forces which would automatically drive prices back towards equilibrium. Instead, Soros propounded a theory of “reflexivity”, in which fundamentals shape perceptions and prices, but prices and perceptions also shape fundamentals. Instead of a one-way, linear relationship in which causality flows from fundamentals to prices and perceptions, Soros developed the theory of a loop in which prices, fundamentals and perceptions all act on one another. “I contend that financial markets are always wrong in the sense that they operate with a prevailing bias, but that the bias can actually validate itself by influencing not only market prices but also the fundamentals that market prices are supposed to reflect”. 

Later he writes more bluntly: “[The efficient market hypothesis and theory of rational expectations] claims that the markets are always right; my proposition is that markets are almost always wrong but often they can validate themselves”. Beyond a certain point, self-reinforcing feedback loops become unsustainable. But in the meantime positive feedback causes bubbles to inflate further and for longer than anyone could have foreseen at the outset. “Typically, a self-reinforcing process undergoes orderly corrections in the early stages, and, if it survives them, the bias tends to be reinforced, and is less easily shaken. When the process is advanced, corrections become scarcer and the danger of a climactic reversal greater”….

….Crucially, the successful speculator responds to bubbles not by shorting them and waiting for stabilizing forces to drive the market quickly back to some fundamental value, but by identifying them early and riding the wave, hoping to get out before the whole edifice finally comes crashing down. Reading people (other investors, narratives) is as important — if not more important — as understanding the fundamentals of an asset itself. Identifying the next “new new thing” earlier than the rest of the crowd and getting aboard, and then being willing to liquidate before the deluge, is at the heart of the speculator’s success….

….Using the Soros idea of a bubble as a process, rather than simply a frothy end-state, gold has already been a bubble for some time as an ever larger group of investors has climbed aboard, propelling prices higher.

This is of course a perfect description of the Ponzi dynamics upon which bubbles are based, where the winners are those who get in early and out early, leaving everyone else holding an empty bag. This has been a consistent theme at The Automatic Earth. Bubbles are very much a process, one of collectively developing a commitment to a view which transitions from being merely self-reinforcing to becoming firmly entrenched to being publicly indisputable, unless one wishes to be dismissed as insane. Unfortunately, contrarians are typically viewed as insane just at the point where their perspective is the most crucial.

Apart from the fundamental model, we also agree with Soros’ 2010 opinion that gold was forming the “ultimate bubble”:

Soros: In this world, gold is the ultimate bubble because apart from the cost of actually digging it out of the ground it has almost no real fundamentals other than price itself. Investors have been buying it precisely because the price has been going up and is expected to carry on rising. Rising prices have created their own demand. It is the ultimately reflexive investment.

In August 2011, gold had reached the blow-off euphoria stage, with everyone having already bet on further prices rises, and therefore no one left to place the further bets required to take the price higher. In our view this constituted a major top:
 

August 2011: Of all the commodity bubbles, it is the end of the explosive rise in gold that is set to surprise the largest number of people. Very few expect it to follow silver’s lead, but that is exactly what we are suggesting. Gold has been increasingly considered to be the ultimate safe haven. The certainty has been so great that prices rose by hundreds of dollars an ounce in a blow-off top over a mere two months. The speculative reversal currently underway should be rapid and devastating for the True Believers in gold’s ability to defy gravity eternally.

Sentiment is the crucial contrarian indicator:

Ultimately, one has to recognize that the metals are not driven by inflation nor are they driven by deflation. We have clear periods of time in our history where they have acted in the exact opposite manner in which each of the prominent camps would have believed. So, maybe there is another driver of metals which can be relied upon at all times? My answer to that question is that market sentiment is what can be relied upon at all times to point you in the correct direction for the precious metals….One must analyze the market before them irrespective of what other markets may or may not be doing. The main reason is because sentiment is what drives each market, and it varies by market.

The behaviour of central banks is highly indicative of major turning points, given that their actions are lagging indicators of persistent trends, as we have pointed out before:
 

The Automatic Earth, August 2011: Central banks are buying gold, which some consider to be a major vote of confidence, and therefore bullish for gold prices. However, it is instructive to look at the previous behaviour of central banks in relation to gold prices. When gold hit its low point eleven years ago, after a long and drawn out decline, central bankers were selling, in an atmosphere where gold was dismissed as a mere industrial metal of little interest, or even as a ‘barbarous relic’. 

Selling by central banks, which are always one of the last parties to act on developing received wisdom, was actually a very strong contrarian signal that gold was bottoming. They would not have been selling if they had anticipated a major price run up, but central banks are reactive rather than proactive, and often suffer from considerable inertia. As a result they tend to be overtaken by events. Regarding them as omnipotent directors and acting accordingly is therefore very dangerous. 

Now we are seeing the opposite scenario. After eleven years of increasingly sharp rises, central banks are finally buying, and they are doing so at a time when the received wisdom is that gold will continue to reach for the sky. Once again, central banks are issuing a strong contrarian signal, this time in the opposite direction. While commentators opine that central banks will hold their gold even if they develop an urgent need for cash, this is highly unlikely. In a deflationary environment, it is cash that is scarce, and cash that everyone, including central bankers, will be chasing.

An urgent need for cash does indeed appear to be precipitating selling, and this rationale is going to become far more powerful in the relatively near future:

Gold is now sitting on a 5-year low after China dumped 5 tonnes of gold into the Shanghai markets on Monday during the first minutes of trading, with a slow, but steady sell-off continuing through the week. IVN has reported on China’s financial crisis since February, and this was not a wholly unexpected move to liquidity.

The psychology has once again shifted. Instead of a barbarous relic, gold is now being referred to as a “pet rock” of questionable value:

Gold is supposed to be a haven amid hard times and soft money. So why, even as Greece has defaulted, the euro has sunk against the dollar, and the Chinese stock market has stumbled, has gold been sitting there like a pet rock? Trading this week below $1,150 an ounce, the yellow metal has fallen more than 39% since it peaked at nearly $1,900 in August 2011. Since June 2014, investors have yanked $3 billion out of funds investing in precious metals, estimates Morningstar, the financial-research firm; total assets at precious-metal funds have shrunk 20% in 12 months. “A lot of investors have become disillusioned with gold,” says Suki Cooper, head of metals research at Barclays in New York. “Safe-haven demand hasn’t been strong enough to lift prices, but has only been strong enough to keep them from falling.”

Many people may have bought gold for the wrong reasons: because of its glittering 18.7% average annual return between 2002 and 2011, because of its purportedly magical inflation-fighting properties, because it is supposed to shine in the darkest of days. But gold’s long-term returns are muted, it isn’t a panacea for inflation, and it does well in response to unexpected crises—but not long-simmering troubles like the Greek situation.

It is not inflation we are facing, and therefore not an inflation hedge that is currently required:

Inflation continues to undershoot the Fed’s goals despite extremely low interest rates and years of massive bond purchases. In fact, the recent collapse in the commodities complex is only lowering inflation and inflation expectations. Everything from coffee, sugar, beans to crude oil is heading south. Industrial metals like copper and aluminum have renewed their tumble in recent days as soft global economic growth hurts demand and supply gluts deepen. All of that is creating an anti-inflationary environment that sucks the air out of the gold market.

Much darker days are coming as we move into a highly deflationary era, driven by an inevitable credit implosion. Such an event will be relatively rapid, as it always has been in the past, given that credit expansion creates virtual wealth in the form of copious ‘financial assets’ with little or no connection to any form of tangible underlying wealth:

Laurens Swinkels, a senior researcher at Norges Bank Investment Management in Oslo, reckons that the total market value of the world’s financial assets at the end of 2014 was about $102.7 trillion. The World Gold Council estimates that the world’s total quantity of gold held for investment was about $1.4 trillion as of late 2014. So, if you held the same proportion of gold as the world’s investors as a whole, you would allocate 1.3% of your investment portfolio to it.

Of course there are many forms of tangible real wealth besides gold, but even if one included all forms of collateral, there remains an extreme crisis of under-collateralization, or an extreme quantity of excess claims to underlying real wealth. That which has no substance can disappear very quickly back into the thin air from where it originated:

In the days of a gold – or more correctly – a gold exchange standard, the collapse of excessive bank credit was always sudden, and vicious in proportion to the previous expansion. Since credit was expanded out of thin air by banks without underlying stocks of gold to cover it, inevitably slumping prices became associated with bank failures, and central banks were set up to insulate commercial banks from this brutal reality. Saving over-extended banks always requires the artificial lowering of interest rates and the expansion of the money quantity to restrain the currency’s purchasing power from rising against declining commodities. Gold therefore remains a store of value for savers because it cannot be devalued in this way by a central bank.

It is not is not, however, always possible to save over-extended banks. It depends on the degree to which they are over-extended and the existence, or lack thereof, of a lender of last resort with sufficiently deep pockets. 2008 was an extremely expensive attempt to disguise an intractable financial predicament while simultaneously making it worse by propping up the credit Ponzi scheme – doubling down on a losing bet. During the bursting of particularly large financial bubbles, the system breakdown is likely to be sufficiently extreme to preclude attempts to expand the money supply for many years, meaning that neither the banking system nor the value of financial assets can be saved. Deflation and economic depression are mutually reinforcing and this will be the dominant dynamic for a prolonged period. Gold, and other forms of tangible assets, will remain stores of value during this period.

Paper Gold Versus Physical Gold

Gold has not yet retraced it’s steps to an extent which would indicate a full correction of the preceding advance. In paper terms, it has much further to fall, especially as the world moves further into the deflationary spiral which is only just beginning. Gold has already fallen to its cost of production, with up to half of primary producers losing money at the current price, but in a deflationary spiral we can expect a major undershoot in a race to the cost of the lowest price producer. The implication is that prices can fall many hundreds of dollars an ounce more, which is exactly what we expect.

As we said in 2011::
 

Expect to hear all about the enormous Ponzi scheme in paper gold, and a lot more about plated tungsten masquerading as gold. It doesn’t even matter whether or not that rumour is true. What matters is whether or not people believe it, and how it could feed into a spiral of fear as prices fall….Typically a speculative bubble is followed by the reversal of speculation causing prices to fall, and then by falling demand, which undermines prices further. As the bubble unwinds, people begin to jump on a new bandwagon in the opposite direction, chasing momentum as always. The need to access cash by selling whatever can be sold (rather than what one might like to sell), and the on-going collapse of the effective money supply as credit tightens mercilessly, will also factor into the developing vicious circle.

 

This is the scenario that is now unfolding, particularly in relation to the realization of excess claims to underlying real wealth in the gold market. The paper Ponzi scheme in gold is extreme, with over vastly more paper gold claims than actual gold in existence, and this leverage ratio has greatly increased in recent times, particularly in the last month:


This means that what was already a record dilution factor, with over 200 ounces of paper gold claims for every ounce of deliverable gold, just soared even more, and following today’s [September 9th] 8% drop, there is now a unprecedented 228 ounces of paper claims for every ounce of deliverable “registered” gold.

In fact, this may represent a significant underestimate of the real smoke-and-mirrors problem:

The numerical reports from which fancy graphs and and dry detailed data presentations are created originate from the Too Big To Fail Banks. I’ve said for quite some time that IF the bullion banks who control the Comex and the LBMA are submitting honest data reports for the Comex and LBMA, it would be the only business line in which they do not hide the truth and report fraudulent numbers. What is the probability of that?…

….The obvious conclusion is that the supply deficits in gold and silver are being remedied by hypothecating gold and silver bars from allocated accounts held at bullion banks, including the accounts held in behalf of the gold/silver ETFs, like GLD and SLV. This is why ABN Amro and Rabobank stopped allowing their physical gold account investors to take physical delivery of the gold they thought they have invested in – the gold was not there to deliver. This also occurred in 2013.

Where there is pure paper with nothing to back it up, there is considerable potential for large price movements independent of physical supply and demand:

For investors the present marketplace for gold and silver and other precious metals, has lost any real connection to the regular forces of supply and demand. The issuance of paper gold and silver has allowed a separation from market forces. It has divorced the true monetary values from the quantities of precious metals that are actually in existence. This has vastly inflated the supposed supply, thus putting a downward pressure on price.

The reality is that there is far less physical gold and silver than the supply of the paper equivalence. This situation is allowed to exist because there are many players and speculators in the market that do not actually take possession of their holdings. What they have instead, is pieces of paper that gives an impression of ownership. As long as only a small and manageable number of participants in the futures markets for both gold and silver actually demand delivery of their investment, spot prices can move independently of the real fundamentals.

There is considerable debate as to whether this constitutes active manipulation. Some would argue (in an analogous commodity situation), that dynamics in over-financialized markets move prices as an emergent property, without necessarily having malignant motives or prior outcomes in mind:

The huge drop in oil prices came from the action of traders who had bid up the price of crude in the futures market by momentum trading based on unrealistic assumptions about demand growth. When the price started heading in the opposite direction, traders couldn’t catch a bid on their positions, and the whole market went drastically net short, bidding down the price of the commodity….We can see from this that without the slightest bit of skullduggery, the futures market can greatly affect commodity prices in ways that have nothing to do with supply and demand.

Others suggest that movements in the paper market constitute deliberate manipulation:

An enormous amount of paper gold contracts were dumped into the Comex’s globex electronic trading system during one of the slowest trading periods at any point in time during the trading week (July 19th). A bona fide seller trying to sell a big position at the best possible execution prices would never have dumped a position like this. The only explanation is that someone wanted to drive the price the price of gold lower and make a point of doing so. This particular occurrence in the gold market has been a recurring event over the life of the gold bull market. However, the frequency of the above trading pattern has significantly increased since 2011….There is a definitive correlation between the big spike in gold OTC derivatives and the downward pressure on the price of gold.

Gaming the paper gold market by further inflating the Ponzi scheme can engineer considerable collateral advantages, even as it increases the extent of leverage, and therefore of under-collateralization:

Precious metal prices are determined in the futures market, where paper contracts representing bullion are settled in cash, not in markets where the actual metals are bought and sold. As the Comex is predominantly a cash settlement market, there is little risk in uncovered contracts (an uncovered contract is a promise to deliver gold that the seller of the contract does not possess). This means that it is easy to increase the supply of gold in the futures market where price is established simply by printing uncovered (naked) contracts. Selling naked shorts is a way to artificially increase the supply of bullion in the futures market where price is determined. The supply of paper contracts representing gold increases, but not the supply of physical bullion.

As we have documented on a number of occasions, the prices of bullion are being systematically driven down by the sudden appearance and sale during thinly traded times of day and night of uncovered future contracts representing massive amounts of bullion. In the space of a few minutes or less massive amounts of gold and silver shorts are dumped into the Comex market, dramatically increasing the supply of paper claims to bullion. If purchasers of these shorts stood for delivery, the Comex would fail. Comex bullion futures are used for speculation and by hedge funds to manage the risk/return characteristics of metrics like the Sharpe Ratio. The hedge funds are concerned with indexing the price of gold and silver and not with the rate of return performance of their bullion contracts.

A rational speculator faced with strong demand for bullion and constrained supply would not short the market. Moreover, no rational actor who wished to unwind a large gold position would dump the entirety of his position on the market all at once. What then explains the massive naked shorts that are hurled into the market during thinly traded times? The bullion banks are the primary market-makers in bullion futures. They are also clearing members of the Comex, which gives them access to data such as the positions of the hedge funds and the prices at which stop-loss orders are triggered. They time their sales of uncovered shorts to trigger stop-loss sales and then cover their short sales by purchasing contracts at the price that they have forced down, pocketing the profits from the manipulation.

As always, this is at the expense of smaller investors:

According to the Zero Hedge piece, the equivalent of 17 tons of gold was sold on the New York Comex in two bursts in one morning. Think how crazy that is. A seller trying to optimize profits would not make huge sales like this in a short period of time. The size of the sale itself causes the price to drop. Someone (person or entity) owning that much gold would know such things. So, one has to wonder why someone would work against its own interests like that.

The only answer I can come up with is that the sellers had already accumulated huge short positions in derivatives that they wanted to push into the money. The bottom line effect was that someone who wanted a lot of real gold got it, and the seller probably made a bundle on the other side of trade by shorting in the paper market. Two deep-pocketed entities came out happy. Rank and file gold investors were left licking their wounds.

Some regard gold’s rather more ambivalent recent image as evidence that powerful parties are attempting to undermine gold’s monetary legitimacy, presumably in order to drive the price down and purchase it in quantity at a much lower price:

The bullion banks’ attack on gold is being augmented with a spate of stories in the financial media denying any usefulness of gold. On July 17 the Wall Street Journal declared that honesty about gold requires recognition that gold is nothing but a pet rock. Other commentators declare gold to be in a bear market despite the strong demand for physical metal and supply constraints, and some influential party is determined that gold not be regarded as money.

Why a sudden spate of claims that gold is not money? Gold is considered a part of the United States’ official monetary reserves, which is also the case for central banks and the IMF. The IMF accepts gold as repayment for credit extended. The US Treasury’s Office of the Comptroller of the Currency classifies gold as a currency, as can be seen in the OCC’s latest quarterly report on bank derivatives activities in which the OCC places gold futures in the foreign exchange derivatives classification.

The manipulation of the gold price by injecting large quantities of freshly printed uncovered contracts into the Comex market is an empirical fact. The sudden debunking of gold in the financial press is circumstantial evidence that a full-scale attack on gold’s function as a systemic warning signal is underway.

While it is possible that gold’s recent bad press could be an attempt to talk the price down for nefarious purposes, it is not necessary to invoke conspiracy. Just as gold sentiment was extremely bearish at it’s price nadir in 2000, and then rose to fever pitch as the price increased to nearly $1900/ounce, one would expect sentiment to have gone off the boil with prices down substantially over the last four years. Price and sentiment move in tandem in a self-reinforcing feedback loop. Considering the huge extent of excess claims to underlying physical gold, and therefore the approaching destruction of virtual wealth as the paper gold pyramid implodes, both price and sentiment would appear to have much further to go to the downside. At the point where gold sentiment is the diametric opposite of its peak in 2011, price will be bottoming, but a great deal of upheaval will be unfolding at that point, and paper gold will likely be essentially worthless:

If the owners of this paper gold begin to want a conversion to physical gold, panic will ensue and the entire market in precious metals will collapse. The ratio between paper gold and physical gold is now at a record low of 0.08%. This situation has now become a Ponzi scheme, where the majority of investors will be wiped out, when the next crisis unfolds. It is no longer a matter of if, but when this happens.

Apart from the machinations in the paper gold, and silver, markets, physical precious metals are increasingly in demand, and for a considerable premium over the spot price as supplies tighten. The divergence between paper prices and physical prices will continue to widen, with a major discontinuity expected in the future at the point where extent of the paper Ponzi scheme is finally recognized:

Public demand for physical bars and coins of gold and silver are soaring, since the middle of June. At the same time demand for paper gold and silver has leveled off and is actually falling during this period. As a result, government and private mints are struggling to maintain sufficient supplies of precious metals, for the orders they receive. Some have even been forced to temporarily halt sales. Interest in buying physical gold and especially silver, is at the highest level since the financial meltdown of 2008.

Premiums are already being given, above the spot price for both raw gold and silver, at a number of private mints. Some major national depots in the United States are running empty and more investors than ever, are seeking physical delivery of their investment from Comex (Commodity Exchange) warehouses, which are rapidly becoming depleted as well….

…For the first time, knowledge of the thin inventory of gold and silver held in exchange vaults that back the enormous volumes of paper being traded on a daily basis, is beginning to seep out. For those who are shorting these metals, they are counting on being able to settle accounts in cash or to make a withdrawal from a vault. If too many investors start wanting delivery of gold and silver, the whole present corrupt system will rapidly unravel….

….The United States Mint in July ran out of silver the same day the price of the metal dropped to the lowest level in 2015. The same month the US Mint had sold 170,000 ounces of gold. This was the highest rate since April of 2013 and the fifth highest rate on record. Yet, it was occurring as gold was dipping to the lowest price in five years. The Perth Mint in Australia is also struggling to keep up with demand, as interest surges with new customers in Asia, Europe and the United States. The problem for the mint is the amount of unrefined gold delivered, is not meeting the present physical demand.

In Europe numerous dealers had their inventories emptied, as investors decided given the financial crisis in Greece, that owning gold and silver would be a hedge against any further instability. The UK (United Kingdom) Royal Mint for example, saw demand from Greek customers alone, double earlier this summer. In the United States the amount of Comex registered gold dropped to 359,519 ounces or just over 10 tons, by the beginning of this month. It has never been lower. Meanwhile, the paper gold demand for these remaining stocks, is at a whopping 43.5 million ounces.

Gold’s physical movements are somewhat obscure, but it appears that significant parties are already seeking physical delivery:

Back in April, the publication said that JPMorgan Chase, which has the largest private gold vault in the world, showed a 20% drop in “eligible” gold in its vault in one day. That day was April 5, just five days before the two-day $210 plunge in gold prices. (Eligible gold is gold stored that is not registered to a specific owner, but is available to be either registered or traded.)…Comex-registered gold remained relatively flat in the following days. JPMorgan’s vault is one of the Comex vaults, so the data suggest that the gold was not reclassified from “eligible” to “registered” but actually left the building.

Where did it go? China? India? Russia? We will probably never know. We do know that while the price of paper gold (ETFs, funds, stocks, futures) plunged, demand for the actual metal soared, with buyers paying significant premiums to the spot price.

It is no surprise to see ‘cashing out’ of a Ponzi scheme before a crash that is obviously coming, and this this case ‘cashing out’ means claiming physical possession before a flood of claims collapses the paper gold market. It will, however, be interesting to see what transpires when that crash occurs. Physical gold must be stored somewhere, and the security of storage is also suspect, especially in times of upheaval were storage companies involved in many different aspects of the financial system may fail. As account holders at MF Global discovered in 2011, holders of financial derivatives enjoy super-priority in bankruptcy. Customer segregated accounts had been fraudulently pledged as collateral for derivative bets in Europe that went against the company. Despite the fraud involved, the customer accounts, including those holding physical gold, were removed by the owners of the derivative rights. 

Thus even those who take physical possession early may lose later to paper claims by those higher up the ‘financial food chain’ if they store their wealth within the system and are therefore dependent on the solvency of middle-men. Warehouse receipts for gold will be worthless if the warehouse has been emptied, and possession will be nine tenths of the law. This is already happening:

By the time auditors and lawyers got access to Bullion Direct’s 14th-floor offices six weeks ago, there were only a handful of gold and silver coins in an office safe. A second vault it had recently rented held only slightly more. An estimated $30 million in cash, metal bullion and valuable coins, meanwhile, had vanished. The cumulative weight of the unaccounted for metal is the equivalent of dozens of standard-sized gold bullion bars and hundreds of silver ones. Also missing are an estimated 1,400 ounces of platinum and palladium.

What is clear is that the news has devastated those who believed the company was safekeeping the futures they’d bet on the rounds and bricks of gold and silver. Some lost hundreds of thousands of dollars’ worth of the precious metal with little apparent prospect of regaining it. Jesse Moore, an attorney representing several creditors, predicted that investors can hope to recover 2 or 3 percent of their money, at best….Philosophically, the disappearance of their precious metal has left many Bullion Direct customers, who turned to gold as a safe port in a turbulent financial world, with a crisis of confidence. Attracted to an investment specifically because of its detachment from a government and financial system they didn’t believe in, now that their treasure has disappeared they find themselves wondering what, really, is permanent.

Similarly, safety deposit boxes may well not be secure. They would not be accessible in a systemic banking crisis, and are too obvious a location for the storage of valuables. Following a bank holiday, or a raid by authorities looking for what they believe are ill-gotten gains, as they did in 2008, there may be nothing left to recover:

More than 300 officers and staff were involved in simultaneous raids at three depots in London’s Park Lane, Hampstead and Edgware. Officers have secured the concrete and steel vaults and will take several weeks to remove each box, using angle grinders, to a secret location where they will be prized open with diamond-tipped drills. It is believed that a top tier of criminal masterminds may have rented out “the majority” of the boxes. The safe-keeping company – Safe Deposit Centres Ltd – has been operating for more than 20 years.

Metropolitan Police Assistant Commissioner John Yates said: “Each box will be treated as a crime scene in its own right.” Members of the public who have innocently and legally stored their valuables were “inevitably” going to get swept up in the disruption, it was predicted.

In short, if you do not own metals in physical form, you do not own them at all, and ownership is only as secure as the storage method chosen:

To those who have some gold ETF certificates in a brokerage account, which by law are the possession by DTCC’s Cede & Co. – a bank owned institution – we wish the best of luck to anyone hoping to preserve or even recover any of the invested wealth in such instruments.

Confiscation?

In times of extreme financial crisis, states are highly likely to seek to control the money supply. As previously noted, gold has been considered money for thousands of years, whether or not a gold standard is in force. Financial crisis will involve the loss of monetary equivalence for credit instruments representing promises which will obviously not be kept, leaving relatively few forms of wealth still accepted as having value. Cash, particularly US dollars and a few other favoured currencies, will hold value for the period of deleveraging, but only precious metals will likely retain value in the longer term. The desire to control the supply is going to be powerful, as it was in the United States during the Great Depression of the 1930s, when gold was subject to confiscation.

The Emergency Banking Act of 1933 amended the Trading With the Enemy act of 1917, which had granted the President power to investigate, regulate, or prohibit any transactions in foreign exchange, export or earmarkings of gold or silver coin or bullion or currency by any person within the United States, and to prevent the hoarding of gold by Americans. The provisions of the earlier Act, referring to wars and enemies were extended in 1933 in order to encompass “any other period of national emergency declared by the President”, specifically the protection of a currency on a gold standard at the time.

Emergencies allow for legislation to be rushed through with little scrutiny:

A key piece of legislation in this story is the Emergency Banking Act of 1933, which Congress passed on March 9 without having read it and after only the most trivial debate. House Minority Leader Bertrand H. Snell (R-NY) generously conceded that it was “entirely out of the ordinary” to pass legislation that “is not even in print at the time it is offered.” He urged his colleagues to pass it all the same: “The house is burning down, and the President of the United States says this is the way to put out the fire. And to me at this time there is only one answer to this question, and that is to give the President what he demands and says is necessary to meet the situation.”

Executive Order 6102 under the 1933 Act criminalized the possession of monetary gold by any individual, partnership, association or corporation, requiring that gold be exchanged for paper currency. In accordance with the eminent domain clause of the 5th Amendment, market value compensation was paid at $20.67 per ounce.

Only a month was given for compliance, and the penalty for non-compliance was $10,000 and up to ten years imprisonment. Only jewellery and a few rare collectable coins were exempted. Since currency had previously be convertible into gold on demand, those who surrendered their gold would not initially have thought the surrender permanent, but this reality dawned shortly, especially after the Gold Reserve Act of 1934 altered the conversion price by fiat to $35 per ounce, engineering a devaluation of the gold-based dollar. The Act also made gold clauses in private contracts unenforceable, forcing payment in paper currency instead, without reference to an equivalent value of gold, despite the fact that such contracts had been deliberately constructed to guard against the risk of a currency devaluation:

On June 5, 1933, at the behest of the president, Congress took the next step, passing a joint resolution making it illegal to “require payment in gold or a particular kind of coin or currency, or in an amount in money of the United States measured thereby.” Any provision in a private or public contract promising payment in gold was thereby nullified. Payment could be made in whatever the government declared to be legal tender, and gold could not be used even as a yardstick for determining how much paper money would be owed.

After 1934, only foreign governments and central banks were allowed to convert dollars into gold, and only until 1971. Gold ownership remained off-limits to ordinary people until 1975, but the restriction could be circumvented by those with the means to do so through off-shoring:

Many Americans dutifully turned in their meager holdings. But not everyone. Many simply ignored the order, assumed the risks and stashed them away knowing that gold was more valuable than the paper given in exchange. Keeping it literally meant the difference between living or dying for some. There are not significant historical legal records of US citizens being fined or imprisoned for failing to comply. This was the bottom of the depression and average citizens did not have large quantities of gold. Many were jobless, bankrupt and barely surviving; selling pencils and apples on the street corners as so often depicted in the old black and white newsreels from that era. 

But wealthy businessmen, bankers and society elites did own considerable gold. They obviously did not turn in their gold. How do we know? Most of the US mint made gold coins that were in circulation at the time ($2.50, $5.00, $10.00 and $20.00 denominations, but mostly the 10 and 20 dollar coins) were simply shipped off in bags by the thousands to European banks (primarily in Switzerland and Great Britain) for anonymous safekeeping, far away from the reach of US authorities. They simply sat there in darkness and dust buried at the bottom of bank vaults. When gold ownership was again legalized for US citizens in 1975, tons of the coins appeared back on the US market.

In the depths of the Depression, President Roosevelt was attempting to decrease unemployment, raise wages and increase the money supply, but these goals were complicated by the country’s adherence to the gold standard. Gold confiscation allowed for greater concentration of wealth in the hands of the government in order to fund the programmes of the New Deal:

The forced call-in was done not as a punitive measure against gold owners but as a way to enrich the government at the expense of the entire US population, whose purchasing power would be reduced in the future by both inflation and the subsequent devaluation. The government’s new-found wealth supported New Deal programs such as Social Security (1937)….The motivation of the government for a call-in must be to gain some value, not to merely to deprive, discourage or punish investors. In 1933 the purpose was to enable the government to expand the money supply to overcome deflation and to fund the vast social programs of the New Deal, something impossible to do when the country was on the gold standard and the public held significant quantities of gold.

Ironically, the devaluation created an incentive for foreigners to export their gold to the United States, even as many wealthy Americans were preserving their holdings by sending them in the other direction. In combination with domestic confiscation, foreign inflows resulted in a substantial increase in the supply of gold in the hands of the US Treasury:

Even in 1900 the U.S. only held 602 tonnes of gold in reserve. This was 61 tonnes less than Russia and only 57 tonnes more than France. Over the next 20 years countries’ reserves grew as the amount of gold in the market increased and as normal trading occurred. However, in the 1930s there was a sudden shift up in reserves in the U.S. From 1930 to 1940, treasury holdings had tripled, mostly due to foreign investing….The Bank of France also saw over 200 tonnes of gold get transferred to New York following the raising of prices in America.

This in turn allowed for a major expansion of the money supply during the Depression:

The Gold Reserve Act, an act of monetary policy, drastically increased the growth rate of the Gross National Product (GNP) from 1933 to 1941. Between 1933 and 1937 the GNP in the United States grew at an average rate of over 8 percent. This growth in real output is due primarily to a growth in the money supply M1, which grew at an average rate of 10 percent per year between 1933 and 1937. Previously held beliefs about the recovery from the Great Depression held that the growth was due to fiscal policy and the United States’ participation in World War II. “Friedman and Schwartz stated that the ‘rapid rate [of growth of the money stock] in three successive years from June 1933 to June 1936… was a consequence of the gold inflow produced by the revaluation of gold plus the flight of capital to the United States’”. Treasury holdings of gold in the US tripled from 6,358 in 1930 to 8,998 in 1935 (after the Act) then to 19,543 metric tonnes of fine gold by 1940.

The largest inflow of gold during this period was in direct response to the revaluation of gold. An increase in M1, which is a result of an inflow of gold, would also lower real interest rates, thus stimulating the purchases of durable consumer goods by reducing the opportunity cost of spending. If the Gold Reserve Act had not been enacted, and money supply would have followed its historical trend, then real GNP would have been approximately 25 percent lower in 1937 and 50 percent lower in 1942.

For the following forty years, the US government was able to build enormous gold reserves:

Not only did the government remove the incentive for ordinary citizens to hold gold by establishing price and criminal controls over possession, it also changed the rules in the middle of the game allowing it to build up a massive gold hoard of over 8000 tons today which is maintained at Fort Knox, and is, to the best of our knowledge, unauditable by any mere mortal. Critically, it made the US government the sole source and monopoly agent of gold purchases, using reserve fiat currency it could print with impunity, beginning in 1933 and continuing through 1974 when the limitation on gold ownership was repealed after President Gerald Ford signed a bill legalizing private ownership of gold coins, bars and certificates by an act of Congress codified in Pub.L. 93-373, which went into effect December 31, 1974. In summary, the US government, which is now the largest official holder of physical gold in the world, had 40 years of uncontested zero cost gold accumulation.

The gold confiscation of the Depression years has been described as “grabbing private wealth, and using it to try and reboot the system”. At the time, this was motivated by a combination of the gold standard and the holding of gold reserves by a significant fraction of the population:

It is important to realize that the motivation for confiscating gold which existed for FDR in 1933 has largely disappeared. Back then the U.S. was still on the gold standard (the U.K. had been forced off 18 months earlier). So seizing private gold and then devaluing the currency was in fact a 1930s version of quantitative easing. Saving our banks from their stupidity still means swelling the money supply, and hurting cautious savers by devaluing their wealth.

While gold is still hoarded by governments (and increasingly by fast-growing emerging economies), it is only tenuously tied to our currency system as the “foundation” of sovereign reserves. Gold also makes a disappointing asset to grab, especially in the rich but troubled West. Because few people own it compared for instance to real estate (a sitting duck for local government levies and the new talk of “wealth taxes”) or readily-captured financial assets such as pension pots (already so enticing to distressed governments in Argentina, Hungary and Portugal).

The risk of such a confiscation occurring again in modern times is complicated. The rationale for doing so has changed, since the gold standard is no longer operative. So some regard the risk as remote:

To assess the likelihood of confiscation today, we need to look at what the government could gain by calling in privately held gold. My view is that the Federal government has little to gain by calling in gold today and that therefore the likelihood of confiscation is remote. Because the size and cost of the federal government has expanded so much since the 1930’s, and because the quantities of gold currently held by Americans are too small to fund the huge federal budget for more than a few weeks, the government has little to gain by a call-in today. Furthermore, doing so would send the dollar tumbling toward worthlessness, which would be a disaster when so many dollar-denominated bonds are held as central bank reserves by creditor nations like China. So, while confiscation is certainly possible, we consider it unlikely….Investors who are concerned about confiscation today are often assiduous about keeping their purchases from any one dealer small and their holdings secret. Some avoid keeping their gold in a bank safe-deposit box, and some keep their gold in a non-bank vault outside the country.

Others point out that the mechanisms for a modern confiscation still exist:

On March 9, 1933, the statute was amended to declare (as it remains today) that “during time of war or during any other period of national emergency declared by the President,” the President may regulate or prohibit (under such rules and regulations as the President may prescribe) the hoarding of gold bullion.

Other jurisdictions besides the USA also have confiscation mechanisms on the books, albeit presently in suspension. These could quickly be revived if it were thought expedient:

In Australia, part IV of the Banking Act 1959 allows the Commonwealth government to seize private citizens’ gold in return for paper money where the Governor-General “is satisfied that it is expedient so to do, for the protection of the currency or of the public credit of the Commonwealth.” On January 30, 1976, this part’s operation was “suspended”.

Targeting other more prevalent forms of private wealth may well be a more significant risk at this point. Indeed it is already happening in our current era, for instance with the hijacking of pension funds. Expect significant attacks on real estate holdings as well, since this form of wealth is a ‘sitting duck’ to which punitive property taxation can be applied. Unlike the 1930s, however, confiscation of private wealth by the government will not be able to fund a recovery along the lines of the New Deal. The ocean of bad debt is simply too large this time for any amount of confiscated wealth to fill the gap.

Storing gold outside of one’s home country, in order to avoid whatever confiscation risk may exist today, is a consistent theme, exactly as it was in the 1930s:

People can also own gold in ways which make it inaccessible to government decree. In our opinion, a good way to own gold is directly (i.e. not through a trust), in allocated physical form, and offshore, in a place with a strong tradition for protecting international investors’ property.  This makes it a tough target for confiscation by your government, and one that would upset other countries for little reward.  BullionVault stores gold in four separate jurisdictions, all of which have a reasonable (if imperfect) tradition of defending private property rights: London, New York, Zurich and Singapore. There are clear potential benefits to diversifying physical property across international jurisdictions.

Even with the reduced focus on the monetary role of gold in recent times, it is not at all difficult to imagine desperate governments seeking to concentrate ownership in their own hands. This would not be a simple matter, but it would be extremely naive to presume that the attempt would not be made. Ultimately, consolidation of central control over money is the goal, and that requires preventing capital preservation by the public:

Since gold acts as a stand-alone asset that is not another’s liability, it functioned as an effective store of value prior to 1933 for those who either converted a portion of their capital to gold bullion or withdrew their savings from the banking system in the form of gold coins before the crisis struck. Those who did not have gold as part of their savings plan found themselves at the mercy of events when the stock market crashed and the banks closed their doors (many of which had already been bankrupted)….

….That, by the way, is the primary reason governments tend to restrict gold ownership when confronted with widespread bank runs and failing financial markets. Governments seize gold not because they need the money; they seize it to cut off the escape route and force capital flows back into banks and financial markets. As an aside, that is precisely the reason why governments have an interest in controlling the price of gold. Former Fed chairman Paul Volcker, it has been copiously reported, once said, “Gold is my enemy. I’m always watching what it is doing.”…Gold, in the end, is not just competition for the dollar; it is competition for bank deposits, stocks and bonds most particularly during times of economic stress — and that is the source of enduring interest among policy-makers.

As Alan Greenspan wrote in 1966, gold represents economic freedom. It is economic independence – the ability to opt out of the system – which is inimical to the Ponzi dynamics upon which the system is based. Ponzi schemes require continued buy-in, therefore buy-in becomes less and less optional over time, as the potential lack of it becomes an ever greater threat to an increasingly tenuous credit expansion. Credit expansion actively requires that there be no safe store of value, and therefore no true independence:

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights.

Greenspan’s focus is on government spending and the welfare state, but this is far too narrow a focus. Public spending and debt is much less of an issue than private credit expansion and debt. The bulk of the Ponzi scheme requiring continued buy-in is based in the private sector, in derivatives and shadow banking. This is the heart of the credit expansion that governments are required by their Big Capital paymasters to protect. Regulations preventing independence and opting-out result from pervasive regulatory capture. The system creates artificial scarcity and rationing on price, forcing the population to obtain the essentials of its own existence through ever greater amounts of borrowing, and in doing so pay its dues to the system as it keeps the credit expansion going. The end comes when the debt overhang is so large that it can no longer be serviced, even by all the income streams of the productive economy which credit expansion has so thoroughly parasitized. The supply of willing borrowers and lenders dries up, and the game is over.

It is not simply deficit spending which amounts to a confiscation of wealth, but the global credit Ponzi scheme which has generated a vast excess of claims to underlying real wealth. As we have pointed out many times before at the Automatic Earth, those excess claims will be invalidated in the coming financial crisis. People will be trying to protect and fulfil their claims, but larger entities will be trying to prevent them from doing so. Under such circumstances, an attempt at gold confiscation, even in the absence of a gold standard, seems to be a very real threat.

Putting Gold Ownership in Perspective

Gold ownership is not a panacea, nor a guarantee of security. It could even represent a threat to personal security. Confiscation is a distinct possibility during a substantial economic contraction. At least gold, unlike real estate, is, for the time being, capable of being transferred to another jurisdiction for remote storage. The risk, of course, is whether or not it might be possible to reclaim it from another location at some point in the future, given that the degree of upheaval is likely to be larger this time than in the 1930s, and that possession is nine tenths of the law.

If stored remotely, its usefulness in the meantime would be very limited. If concealed locally under a confiscation scenario, rather than held in a foreign ‘secure facility’, it may still be extremely difficult and dangerous to exchange for anything of more immediate value, such as cash, or essential supplies. Even with the best forethought, gold ownership is no guarantee of wealth preservation in a major depression. Depressions are not times when much of anything can be guaranteed. 

Gold represents an extremely concentrated source of value, and it is not always advisable to own that which others are very highly motivated to obtain for themselves. Being too close to a highly concentrated source of value is comparable to being too close to the centre of power. If everyone wants what you have, having it creates substantial risks in its own right, and creates a need to manage those additional risks. Where risk management would become too complex or expensive, taking the risk in the first place may not be the best course of action. Other lower risk strategies, with better risk management potential, may be preferable.

The advisability of owning gold would depend very much on one’s own personal circumstances. There are many things one would wish to secure first, before pondering gold as an option. Cash will temporarily be king in a deflationary scenario, where a systemic banking crisis is increasingly likely. As we have seen in Cyprus, for instance, a country can be forced to revert to a cash-only economy very rapidly, meaning that access to cash would be critical for obtaining supplies not already in storage. Supplies cannot normally be purchased directly with gold, and if cash is exceptionally scarce, the cash price for distressed gold sales would not be high. 

While all fiat currencies are destined to die eventually, and competitive devaluation currency wars have indeed already begun, cash will nevertheless be necessary during the period of deleveraging, and is likely to see its purchasing power rise substantially in relation to goods and services domestically. The falling prices characteristic of deflationary times, as prices follow a contracting money supply to the downside, amount to  bull market in cash, for those lucky enough to have some. However, as the vast majority of the money supply is credit rather than physical cash, and ephemeral credit is going to disappear under such circumstances, little cash will remain, and relatively few will have any unless they have secured it in advance.

Following the destruction of much of the money supply with the evaporation of credit, those with very scarce cash would be less an less likely to want to part with it as the value of access to liquidity rises. What little actual cash remains is likely to be hoarded, so that very little cash circulates.

In other words, the velocity of money is going to fall much further than it already has. Obtaining cash will become very difficult, even as the need for it becomes acute. Supplies could be exchanged for gold, but under a scenario where such a thing might be necessary, distressed gold exchange would not result in as many supplies as one might think. Cash on hand will be more important in the initial stages of a financial crisis than gold, as it is cash that confers freedom of action, including the freedom to seize opportunities presented. 

The argument relating to cash does have caveats however, in that where currency re-issue is a substantial risk in the short term, holding much of such a currency makes much less sense. This is clearly the case in the European Union, where the single currency is already under threat and national currencies are arguably likely to be revived within the foreseeable future. 

Another higher priority than gold ownership would be the elimination of debt. Debt repayments create a structural dependence on cash flow at a time when cash will likely be very difficult to come by. Eliminating debt will remove this requirement for cash and secure important assets, such as homes, from the potential for foreclosure. A debt servicing requirement at a time when debt servicing is becoming increasingly difficult (due to high unemployment, falling salaries, rising taxation and pay-as-you-go services), would be a factor in forcing distressed gold sales at much lower prices than one would get today. In addition, the burden of debt will rise as the increasing perception of risk creates a move towards much higher interest rates. This will compound the potential for distressed gold sales.

Obtaining critical supplies and control over the essentials of one’s own existence would also be a higher priority than gold ownership. Securing access to food, water, energy and other essentials would confer relative peace of mind, and also reduce the need for cash going forward. Ultimately, one cannot eat gold. Also, while prices fall in a deflation, volatile currency inter-relationships are going to affect the price of imported goods, meaning that not all prices will necessarily fall, where imported goods are denominated in weak currencies. Imports could rise in price, or cease to be available at all as the evaporation of credit undermines international trade, hence certain imported goods should be obtained as a matter of priority.

In addition, a good strategy could be the establishment of a business dealing in essential goods and services, with local supply chains and local distribution networks. Returns will typically be low in comparison to the returns one might be used to from financial speculation, but the risks will also be much lower, and will be far more manageable with a certain amount of forethought. Deploying a certain amount of capital in the real economy today in order to set up such ventures could secure a vital source of income in the future, as well as providing a means of maintaining essential social stability in uncertain times. This would be a far better use of resources than purchasing a hoard of gold. Business risks during a liquidity crunch would be very large, so a substantial operating cushion would probably be required, however.

For ordinary people, having cash on hand, getting out of debt and securing access to essential supplies is likely to push them to, or beyond, their financial limits. They may need to pool resources with family or friends in order to be able to accomplish these goals, or make hard choices between them. Gold ownership makes little sense unless these hurdles have already been crossed. It represents an insurance policy for those who can afford to own it, but such insurance is a luxury that will not be available to all.

Those who can afford the luxury of insurance are likely to be those who have all higher priority issues already addressed and who can afford to sit on their gold for perhaps twenty years without relying on the value it represents in the meantime. In other words, the benefit of gold ownership would accrue to those who would not need to make distressed sales over the next few years when gold prices would be very depressed – those who are wealthy enough not to have to make hard choices between competing basic priorities. 

For those who can afford to hold gold for the long term, and who are lucky enough to have found a secure and trustworthy storage mechanism in the meantime, gold will hold its value in terms of goods. One can buy approximately the same number of loaves of bread for an ounce of gold as one could have done during the Roman Empire. At that time an ounce of gold would have bought a good toga, and now it would buy a good suit.

It represents a long term store of value for those who are both wealthy enough to own it, and lucky enough to keep it, but this will be a very small minority. For most people, wealth will be measured not in terms of gold, but in terms of far more prosaic, but far more essential commodities and skills. For most people, wealth will not be measured in terms of having something inert to bury in a hole in the ground, or to send abroad for someone else to bury in an armoured hole in the ground.

The real value of gold will always be difficult to establish, as that relative value will always depend on prevailing circumstances, and so many of those circumstances will be subject to rapid change in the coming era of extreme volatility:

And you will put lightning in a bottle before you figure out what gold is really worth. With greenhorns in gold starting to figure all this out, the price has gotten tarnished. It is time to call owning gold what it is: an act of faith….Own gold if you feel you must, but admit honestly that you are relying on hope and imagination. Because gold, unlike stocks, bonds, real estate and other financial assets, generates no income, valuing it is all but impossible. It’s intrinsically worthless or intrinsically priceless. You can build a financial model to value it, but every input is going to be your imagination.

Nov 062014
 
 November 6, 2014  Posted by at 3:02 pm Finance Tagged with: , , , , , ,  1 Response »


Dorothea Lange Country store, Person County, NC Jul 1939

Dollar-Yen Breaks Above 115, What Next? (CNBC)
BoJ’s Surprise Easing Showers Wealth On Japan’s Top Billionaires (Bloomberg)
Kuroda Has Draghi in a Bind as Euro Soars Against Yen (Bloomberg)
Kuroda Stimulus Drives Government Borrowing Costs to Record Low (BW)
Japan Union Boss Criticises Pension Fund Strategy Shift (FT)
Ben Bernanke: Quantitative Easing Will Be Difficult For The ECB (CNBC)
BOJ Runs Into Critical Analysts After Kuroda Easing Shock (Bloomberg)
Mario Draghi’s Efforts To Save EMU Have Hit The Berlin Wall (AEP)
It’s Now Total War Against The BRICS (Pepe Escobar)
‘Devil’s Metal’ Burns Investors As Gold Melts Down (CNBC)
Luxembourg Rubber-Stamps Tax Avoidance On Industrial Scale (Guardian)
Interest Rates Are So Low Germans Pay To Keep Money In Banks (Telegraph)
French Banks Warn On Country’s ‘Difficult’, ‘Incoherent’ Economy (CNBC)
Pace Of UK Economic Growth Expected To Halve As Service Sector Slows (Guardian)
300,000 More British Live In Dire Poverty Than Already Thought (Guardian)
The Trouble With Mass Delusions (Paul Singer)
Uncertainties Surround Nicaragua’s New Panama Canal Competitor (Spiegel)
What’s The Environmental Impact Of Modern Warfare? (Guardian)
Texas Oil Town Makes History As Residents Say No To Fracking (Guardian)

120 is the alleged big breaking point. We’re getting close and moving fast.

Dollar-Yen Breaks Above 115, What Next? (CNBC)

The dollar-yen broke above the 115 level for the first time in seven years on Thursday. Active U.S. dollar buying pushed the pair as high as 115.40 in the Asian trading session, according to market participants. The Bank of Japan’s (BoJ) second round of monetary easing, announced last Friday, has ignited a powerful rally in dollar-yen, which is up over 9% year to date. Despite the rapid rise, analysts believe the rally is far from over. “The fact that the easing move on Friday was a surprise provides the market with some scope to ‘chase’ as USD/JPY rises to reflect the policy surprise, and any pull-back is likely to be shallow as market participants use the opportunity to ‘buy the dip’,” Fiona Lake strategist at Goldman Sachs wrote in a note late Wednesday. The bank, which has a target of 125 by end-2016, expects the yen will continue to weaken against the greenback as a function of diverging monetary policies and likely deterioration in Japan’s external balance as the Government Pension Investment Fund (GPIF) buys more external assets.

GPIF, the world’s largest pension fund, last week announced new asset allocation targets. Under the new allocation guidelines, Japanese stocks and foreign stocks will account for 25% of the fund’s holdings, up from 12% each previously. The fund will put 35% of its money in domestic bonds, down from 60%, while the ratio for overseas bonds will rise to 15% from 11%. Nomura expects swifter gains in the dollar-yen, forecasting 121 by end-June 2015 and 125 by end-December. “USD/JPY has already reacted very positively to the two policy announcements, but we still see upside risks for USD/JPY, both in the short and medium term,” Yujiro Goto, foreign-exchange strategist at Nomura wrote in a note this week.

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It’s like cosmic background radiation: The world looks the same wherever you look.

BoJ’s Surprise Easing Showers Wealth On Japan’s Top Billionaires (Bloomberg)

The Bank of Japan’s unexpected stimulus has already made the country’s richest even wealthier, adding more than $3 billion to the four top billionaires’ net worth. Fast Retailing Co. Chairman Tadashi Yanai, Japan’s richest person, saw his fortune grow by about $2 billion in the three trading days since the central bank’s Oct. 31 announcement that sparked a plunge in the yen and a rally in stocks. While billionaires such as Yanai gained, the central bank’s unprecedented asset purchases to support economic growth have yet to show evidence of spreading beyond Japan’s wealthiest people and corporations. Toyota, the country’s biggest company, yesterday cited the weaker yen in raising its annual profit forecast to a record 2 trillion yen ($17 billion). “The top 10% or 20% are getting richer, on the other hand the bottom 20% to 30% are becoming poorer,” said Tatsushi Maeno, head of Japanese equities at Pinebridge Investments Japan Co. “The equity market rally could accelerate this trend.”

Masayoshi Son, founder of SoftBank Corp. and Japan’s second-richest person, is up by $182 million since the BOJ decision, according to the Bloomberg Billionaires Index. Keyence Corp. Chairman Takemitsu Takizaki, the country’s No. 3 billionaire, added $434 million to his fortune and Rakuten Inc. President Hiroshi Mikitani, the next richest, saw an extra $393 million, based on closing prices yesterday. Estimates of billionaires’ net worths were compiled based on the billionaires’ shareholdings and other assets, and the yen’s value versus the dollar as of yesterday. Stocks also rallied after Japan’s $1.1 trillion Government Pension Investment Fund said it would buy more local shares. “The short-term result is good for everybody,” said Masayuki Kubota, chief strategist at Rakuten Securities Economic Research Institute. “It’s the government directly intervening in the Japanese equity market.”

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Looks like Draghi’s in a bind from many different sides. When’s he going to pick up the message and go away?

Kuroda Has Draghi in a Bind as Euro Soars Against Yen (Bloomberg)

Mario Draghi has something new to worry about as he prepares for tomorrow’s European Central Bank policy meeting: the euro-yen exchange rate. The yen approached a six-year low versus the shared European currency after Bank of Japan Governor Haruhiko Kuroda surprised investors late last week by extending his record stimulus program. Kuroda’s actions jeopardize the weaker euro that analysts say Draghi needs to reflate the economy, heaping pressure on him to come up with a policy response. “Kuroda has thrown down the gauntlet to Draghi,” Robert Rennie, the head of currency and commodity strategy at Westpac Banking Corp., said yesterday by phone from Sydney. “Whether Draghi will, or can, accept the challenge remains to be seen.”

Unless Draghi emulates the large-scale government-bond purchases, or quantitative easing, of his BOJ counterparts, money borrowed cheaply in Japan could increasingly flow into European assets, propping up the 18-nation currency, Rennie said. Most analysts expect policy makers to refrain from changes at tomorrow’s meeting, while they remain split over the odds of sovereign asset purchases. Some see a higher likelihood of additional easing at the December gathering. The BOJ got out ahead of many of its peers by announcing on Oct. 31 that it raised the annual target for enlarging its monetary base to 80 trillion yen ($704 billion) from 60 to 70 trillion yen previously.

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Problem is, it’s all so destructive: going back to a normally functioning economy gets harder every day.

Kuroda Stimulus Drives Government Borrowing Costs to Record Low (BW)

Bank of Japan Governor Haruhiko Kuroda’s unexpected expansion of stimulus last week has driven government borrowing costs to an unprecedented low. An auction of 10-year government debt today resulted in the lowest average yield on record at 0.439%, according to Ministry of Finance data. The previous low was 0.470% in June 2003. Last month, investors began paying the government to lend at sales of three-month debt for the first time ever, with average yields as low as minus 0.0041%. The BOJ surprised investors last week by raising the annual target for an increase in Japanese government bond holdings by 60%. Kuroda reiterated today the central bank will do “whatever it can” to end deflation, a pledge he has made since before embarking on quantitative easing in April last year, and driving yields to record lows.

“This isn’t quite a level where you can buy, but with the BOJ basically snapping up all new issuance, there’s no need to worry about the supply-demand balance,” said Takeo Okuhara, a senior fund manager in Tokyo at Daiwa SB Investments Ltd. The central bank’s expanded plan to buy 8 trillion yen to 12 trillion yen of JGBs per month gives Kuroda leeway to soak up all of the 10 trillion yen in new bonds that the Ministry of Finance sells in the market each month. The central bank is already the largest single holder of Japan’s bonds, topping insurers at the end of March for the first time ever. Japan’s 10-year borrowing costs rose 3 1/2 basis points to 0.475% at 2:51 p.m. in Tokyo from yesterday, when they reached 0.435% for a second day, the lowest since April 5 last year, when the record low of 0.315% was set, a day after Kuroda’s initial quantitative easing announcement.

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The argument: it’s very selfish for the older people to want safe pensions, and the young can only get them if we go to the casino. I can see Japan go to war not too long from now, it’ll seem the only thing left.

Japan Union Boss Criticises Pension Fund Strategy Shift (FT)

The head of Japan’s most powerful federation of labour unions has criticised the shake-up at the national pension fund, arguing that the world’s biggest institutional investor should have consulted workers before committing half of its Y127tn ($1.1tn) in assets to stocks. Last week the Government Pension Investment Fund (GPIF) surprised markets by saying it would more than double its allocation to domestic and foreign equities over the next few years, while cutting its target share of Japanese government bonds from 60% to 35%. The new mix was billed as a way to address rising payments to pensioners, while making the GPIF – which has long had a passive, conservative approach compared with similar bodies outside Japan – a more aggressive, returns-minded investor.

But Nobuaki Koga, the 62-year-old president of the federation known as Rengo, was unimpressed, describing the shift as a “big problem”. “Workers and management have had no say in the decision-making process, even though the money the GPIF is investing belongs to them,” Mr Koga told the Financial Times. “If there are big losses on the stock market, who will take responsibility?” The comments reflect concerns among some senior officials in Japan that the GPIF has been co-opted by the administration of Shinzo Abe in its attempt to haul the economy out of years of deflation. Higher stock prices are seen as a key part of that effort, prompting complaints that the prime minister is in effect gambling with the savings of millions of workers.

Friday’s announcement from the GPIF came within hours of another burst of monetary stimulus from the Bank of Japan and confirmation from the finance ministry that it was preparing a fiscal stimulus package. The measures combined to push up the Nikkei 225 stock average by about 8% in two days. Supporters of the GPIF’s move say criticism is to be expected, as people of Mr Koga’s generation have witnessed the Nikkei sink from a peak of almost 40,000 on the last business day of 1989 to a post-Lehman low of 7,054 in March 2009. “Stocks seem risky if you look at the volatility of month-to-month or year-to-year returns but this is a fund for the next 100 years. We can be patient,” said Takatoshi Ito, former chair of a committee advising on the portfolio reallocation and now deputy chair of a committee on reforming the GPIF’s governance. “Our view is that holding JGBs with coupons of 0.5% presents a significant risk in itself.”

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You think, gnome?

Ben Bernanke: Quantitative Easing Will Be Difficult For The ECB (CNBC)

Former Federal Reserve Chairman Ben Bernanke predicted that the European Central Bank (ECB) would have a rough time implementing U.S-style monetary easing. Speaking Wednesday at the Schwab IMPACT conference, the ex-central bank chief said the ECB faces political barriers to enacting such an aggressive program. “The barriers to doing it are not really economic,” he said. “The legal and political barriers being thrown up are going to make it very difficult to do that.” Bernanke also fired back at critics of the Fed’s own easing programs, accusing them of “bad economics” for saying that QE, which has pushed the institution’s balance sheet past the $4.5 trillion mark, would lead to inflation. The easing program began in 2009 and has had two additional versions since, the latest of which the Janet Yellen-led Open Market Committee terminated last week.

“There never was any risk of inflation. The economy was in great slack. If anything we were worried about deflation,” Bernanke said of economic conditions when QE was first launched. “Four years later there’s not a sign of inflation. The dollar is strengthening. They’re saying, ‘Wait another five years, it’s going to happen.’ It’s not going to happen.” QE came into being after the economy fell into recession during the financial crisis. Bernanke and a team that included then-Treasury Secretary Hank Paulson and his eventual successor, Timothy Geithner, who at the time headed the New York Fed, devised a series of alphabet-soup programs that helped stabilize the financial system. Since the advent of the Troubled Asset Relief Program, QE and other initiatives, the stock market also has rebounded, gaining about 200% off its March 2009 lows.

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The experts think they’re part of the plan.

BOJ Runs Into Critical Analysts After Kuroda Easing Shock (Bloomberg)

Hours after the Bank of Japan caught central-bank watchers off guard by boosting stimulus, officials were fending off complaints about its communications. A meeting on Oct. 31 with about 50 analysts and economists on the BOJ’s new outlook ran on for two hours – twice the usual time – as the discussion turned to how well Governor Haruhiko Kuroda and other officials telegraphed their views before the decision, said people who were present. The questions came like a torrent, with some complaining about the BOJ’s bond purchase plan and its communications with the market, according to analysts who asked not to be named as the gathering was private.

While Kuroda said he didn’t intend to surprise anyone with the decision to bolster already-unprecedented easing, springing the news on the market added to the punch. The risk for Kuroda is that he may undermine the BOJ’s credibility with some people in the market who count on central bank officials for clear and timely communication. “We shouldn’t take Kuroda’s comments at face value,” said Noriatsu Tanji, chief rates strategist at RBS Securities in Tokyo. “He offered a completely different view from what he said just three days earlier. Instead of listening to Kuroda, we should look at prices and the distance to the BOJ’s inflation target.”

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Go Mario, while you can with your face intact.

Mario Draghi’s Efforts To Save EMU Have Hit The Berlin Wall (AEP)

Mario Draghi has finally overplayed his hand. He tried to bounce the European Central Bank into €1 trillion of stimulus without the acquiescence of Europe’s creditor bloc or the political assent of Germany. The counter-attack is in full swing. The Frankfurter Allgemeine talks of a “palace coup”, the German boulevard press of a “Putsch”. I write before knowing the outcome of the ECB’s pre-meeting dinner on Wednesday night, but a blizzard of leaks points to an ugly showdown between Mr Draghi and Bundesbank chief Jens Weidmann. They are at daggers drawn. Mr Draghi is accused of withholding key documents from the ECB’s two German members, lest they use them in their guerrilla campaign to head off quantitative easing. This includes Sabine Lautenschlager, Germany’s enforcer on the six-man executive board, and an open foe of QE.

The chemistry is unrecognisable from July 2012, when Mr Draghi was working hand-in-glove with Ms Lautenschlager’s predecessor, Jorg Asmussen, an Italian speaker and Left-leaning Social Democrat. Together they cooked up the “do-whatever-it-takes” rescue plan for Italy and Spain (OMT). That is why it worked. We now learn from a Reuters report that Mr Draghi defied an explicit order from the governing council when he seemingly promised to boost the ECB’s balance sheet by €1 trillion. He also jumped the gun with a speech in Jackson Hole, giving the very strong impression that the ECB was alarmed by the collapse of the so-called five-year/five-year swap rate and would therefore respond with overpowering force. He had no clearance for this. The governors of all northern and central EMU states – except Finland and Belgium – lean towards the Bundesbank view, foolishly in my view but that is irrelevant. The North-South split is out in the open, and it reflects the raw conflict of interest between the two halves.

The North is competitive. The South is 20pc overvalued, caught in a debt-deflation vice. Data from the IMF show that Germany’s net foreign credit position (NIIP) has risen from 34pc to 48pc of GDP since 2009, Holland’s from 17pc to 46pc. The net debtors are sinking into deeper trouble, France from -9pc to -17pc, Italy from -27pc to -30pc and Spain from -94pc to -98pc. Claims that Spain is safely out of the woods ignore this festering problem.

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The higher dollar is all it takes.

It’s Now Total War Against The BRICS (Pepe Escobar)

Fasten your seat belts: the information war already unleashed against Russia is bound to expand to Brazil, India and China. Brazil, Russia, India and China, as it’s widely known, are the top four members of the BRICS group of emerging powers, which also includes South Africa and will incorporate other Global South nations in the near future. The BRICS immensely annoy Washington – and its Think Tankland – as they embody the concerted Global South push towards a multipolar world. Bottles of Crimean champagne could be bet that the US response to such a process couldn’t be but a sort of total information war – not dissimilar in spirit to the NSA’s deep state Total Information Awareness (TIA), a crucial element of the Pentagon’s Full Spectrum Dominance doctrine. The BRICS are seen as a major threat – so to counteract them implies domination of the information grid.

Vladimir Davydov, director of the Russian Academy of Sciences’ Institute of Latin America, was spot on when he remarked, “The current situation shows that there are attempts to suppress not only Russia but also the BRICS given that the global role of this association has only intensified.” Russia demonization has quickly escalated in the US from sanctions related to Ukraine to Putin as the “new Hitler” and the resurrection of the time-tested Cold War scare “The Russians are coming”. In the case of Brazil the information war already started way before the reelection of President Dilma Rousseff. As much as Wall Street and its local comprador elites were doing everything to tank what they define as a “statist” economy, Dilma was also personally demonized. Not so far-fetched steps in the near future might include sanctions on China because of its “aggressive” position in the South China Sea, or Hong Kong, or Tibet; sanctions on India because of Kashmir; sanctions on Brazil because of human rights violations or excess deforestation.

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A world of hurt.

‘Devil’s Metal’ Burns Investors As Gold Melts Down (CNBC)

Gold and silver have been crushed this week, burned by the rising dollar and the outflow of money looking for a home in stocks and other investments. Some analysts said the metals look like they should be close to a floor, but they stop short of calling a bottom based on the factors that are driving prices lower, including ETF withdrawals. Even a rush of coin buying, causing the U.S. Mint to temporarily run out of silver American Eagle coins, hasn’t yet turned the tide, “I’ve been pretty morose on gold for quite some time. Maybe it’s a little bit lower than we would have thought. … We had a one-two punch and a knockout,” said Bart Melek, head of commodities strategy at TD Securities. He said the hawkish tone of the Fed last week helped send gold reeling, and any positive moves in the dollar add to its decline. “It’s not likely we’re going to see an outright rout at this point. We’re kind of holding on key support levels. I think it will very much depend on how equity markets do and how the economy looks.”

The December Gold contract fell below $1,150 an ounce, and is now off more than 6.5% in the past five days. Silver is even weaker, and Melek said it could fall into the $14.50 zone. Silver is down more than 10.5% in the same time, and the December futures contract was down 3.2% at $15.44 an ounce in afternoon trading Wednesday. “It’s even more slaughtered. Although the fundamentals of silver are much stronger than the fundamentals of gold, who cares? The only thing that matters is what the dollar is doing. Money still wants to flow to stocks and that’s what it will continue to do,” said Dennis Gartman, publisher of the Gartman Letter.

Silver is much more volatile than gold and can lead prices higher, but also lower as it is doing now. “It burns investors. That’s why they call it the devil’s metal,” said one analyst. Gold also has been selling off as the world appears to be more concerned about disinflation than inflation, with weaker economies and the drop in crude. The dollar index is up 1.7% in the past five days. “The strength in the dollar is so substantial. The crude market weakness is so substantial. Where else can it go? It will keep going until it stops. It’s a bull market for the dollar, and that trumps all other concerns,” said Gartman.

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Brilliant.

Luxembourg Rubber-Stamps Tax Avoidance On Industrial Scale (Guardian)

An unprecedented international investigation into tax deals struck with Luxembourg has uncovered the multi-billion dollar tax secrets of some of the world’s largest multinational corporations. A cache of almost 28,000 pages of leaked tax agreements, returns and other sensitive papers relating to over 1,000 businesses paints a damning picture of an EU state which is quietly rubber-stamping tax avoidance on an industrial scale. The documents show that major companies — including drugs group Shire, City trading firm Icap and vacuum cleaner firm Dyson, who are headquartered in the UK or Ireland — have used complex webs of internal loans and interest payments which have slashed the companies’ tax bills. These arrangements, signed off by the Grand Duchy, are perfectly legal.

The documents also show how some 340 companies from around the world arranged specially-designed corporate structures with the Luxembourg authorities. The businesses include corporations such as Pepsi, Ikea, Accenture, Burberry, Procter & Gamble, Heinz, JP Morgan and FedEx. Leaked papers relating to the Coach handbag firm, drugs group Abbott Laboratories, Amazon, Deutsche Bank and Australian financial group Macquarie are also included. [.] Stephen Shay, a Harvard Law School professor who has held senior tax roles in the US Treasury and who last year gave expert testimony on Apple’s tax avoidance structures in a Senate investigation, said: “Clearly the database is evidencing a pervasive enabling by Luxembourg of multinationals’ avoidance of taxes [around the world].” He described the Grand Duchy as being “like a magical fairyland.”

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We live in a distorted world.

Interest Rates Are So Low Germans Pay To Keep Money In Banks (Telegraph)

Record low interest rates around the world have been hitting savers’ holdings for years, but things have become even worse in Germany. Deutsche Skatbank, a medium-sized co-operative based in Altenburg, East Germany, has introduced an interest rate of -0.25pc for certain clients, blaming the European Central Bank’s negative rates. The ECB cut one of its three key rates to less than zero in June and has since reduced them further in a desperate attempt to ward off deflation. “We can no longer offer cover costs due to the current interest rate environment,” the bank said. “The lowering of the interest rate for certain deposits with Deutsche Skatbank [is due to] the negative results from the analogous changes in interest rates, both at the ECB and in the interbank market.” Those with deposits of more than €500,000 (£393,000), will, rather than receiving interest on their deposits, have an interest rate of -0.25pc per annum. However, the bank said it would only actually apply this if balances went above €3m.

To put it another way, certain depositors are better off putting their money under the mattress. Because of the threshold, it only applies to very rich savers and institutions, but further ECB attempts to boost growth may have see this trend continue. The ECB is under pressure to introduce quantitative easing in a last-ditch attempt to boost growth, and has already started a version dubbed “QE-lite”. In June, when the ECB introduced negative rates, it said: “There will be no direct impact on your savings. Only banks that deposit money in certain accounts at the ECB have to pay.” However, it added: “Commercial banks may of course choose to lower interest rates for savers.” Low interest rates and quantitative easing have hit savers’ returns since the financial crisis.Additionally, banks’ extremely low funding costs due to the Funding for Lending Scheme and low market rates supported by implict government subsidies, have meant they do not have to attract savers to raise funds. There is a very direct correlation between interest rates and savings rates, which have been below inflation for years.

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Wonder what their true numbers are, their derivatives portfolio’s etc.

French Banks Warn On Country’s ‘Difficult’, ‘Incoherent’ Economy (CNBC)

French lender Societe Generale posted a 56% rise in third quarter net profit on Thursday, to €836 million ($1.04 billion), in spite of what the bank’s deputy chief executive described as a “difficult environment.” This sentiment was backed by the CEO of rival Credit Agricole who criticized a “lack of coherence” in French economic policy. SocGen’s net profit figures beat estimates from analysts polled by Reuters of €794 million. However, revenues slipped in the same period, down 1.8% at €5.9 billion, slightly above analysts’ forecasts. Deputy chief executive Severin Cabannes gave three reasons why the group saw such a rise in profit. “Firstly, we had a good commercial dynamic across all our businesses, secondly we had a strict control of all our costs which decreased in absolute terms compared to last year and third, we had a sharp drop in the cost of risk as anticipated.” Loan loss provisions were down by 41% and provisions for litigation remained at €900 million.

The latest figures come after the lender, which is France’s second-largest by market value, reported a 7.8% rise in net profits, to €1.030 billion ($1.38 billion) in the second quarter, and increased its litigation provisions. Elsewhere Thursday, French bank Credit Agricole also reported an increase in third-quarter net profit to €758 million, up 4.1% year on year. Revenues rose 4.0% year-on-year in the same period to €4.0 billion. The bank said there was good business momentum and a continued fall in the cost of risk “despite a challenging economic, regulatory and fiscal environment,” chief executive Jean-Paul Chifflet said in an earning’s statement. However, Chifflet added that a weakness in the French economy weighed on the business and criticized a “lack of coherence” in French economic policy. Speaking to reporters in a conference call, Chifflet said “signs of recovery are proving elusive, unemployment is high, the real estate market is in correction, the public deficit continues to overshoot amid insufficient spending cuts,” Reuters reported.

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So can we shut up now about that great economy?

Pace Of UK Economic Growth Expected To Halve As Service Sector Slows (Guardian)

The pace of Britain’s recovery is expected to almost halve by the end of the year after a survey showed the service sector expanded at the slowest pace in almost 18 months in October. In the first quarter of the year, the UK registered a rise in GDP of 0.9%, but analysts said the slowdown since the summer meant the final quarter was likely to see growth fall to 0.5%, taking pressure off the Bank of England to raise interest rates. Echoing similar trends in manufacturing and construction, the Markit/CIPS services purchasing managers’ index (PMI) fell from 58.7 in September to 56.2, the lowest level of expansion since April 2013. Britain’s rate of growth still continues to outstrip that of the eurozone, with businesses reporting and businesses reported that they intend to hire more staff. Robert Wood, chief UK economist at Berenberg bank, said the latest figures revealed that growth rates had returned to “more reasonable levels” and showed that Britain would continue to grow strongly. “Keep some perspective, the PMI is still strong and the sharp slowdown may be a flash in the pan,” he said.

“New business flows remain very strong and firms are sufficiently enamoured with the UK’s prospects that they are still hiring strongly.” Markit said new business growth was the main prop to higher levels of activity. In its monthly report, the financial data provider said: “October’s data indicated the 22nd successive monthly increase in incoming new work, and respondents commented on success in securing new work via higher marketing and improved client engagement.” Reflecting the weaker outlook, sterling sank to a one-year low of $1.59. In July, the currency topped $1.70 but has fallen back as the prospect of interest rate rises began to wane. Warning signs of a sharper than expected deceleration towards the end of the year was reflected in comments about the uncertainty for exports. While the US remains a strong export market for the UK businesses, the eurozone has entered a period of contraction, with several countries falling back into a third recession since the 2008 banking crash.

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This is what I find a disgrace.

300,000 More British Live In Dire Poverty Than Already Thought (Guardian)

The number of people living in dire poverty in Britain is 300,000 more than previously thought due to poorer households facing a higher cost of living than the well off, according to a study released on Wednesday. A report produced by the Institute for Fiscal Studies found that soaring prices for food and fuel over the past decade have had a bigger impact on struggling families who spend more of their budgets on staple goods. By contrast, richer households had been the beneficiaries of the drop in mortgage rates and lower motoring costs. The study by the IFS for the Joseph Rowntree Foundation said the government method for calculating absolute poverty – the number of people living below a breadline that rises each year in line with the cost of living – assumed that all households faced the same inflation rate. But in the six years from early 2008 to early 2014, the cost of energy had risen by 67% and the cost of food by 32%. Over the same period the retail prices index – a measure of the cost of a basket of goods and services – had gone up by 22%.

The IFS report said the poorest 20% of households spent 8% of their budgets on energy and 20% on food, while the richest 20% spent 4% on energy and 11% on food. Poorer households allocated 3% of their budgets to mortgage interest payments, which have fallen by 40% since 2008 due to the cut in official interest from 5% to 0.5%. Richer households spend 8% of their budgets on servicing home loans. As a result, the IFS concluded that since 2008-09 the annual inflation rate faced by the poorest 20% had been higher than it was for the richest 20% of households. That meant the official measure of absolute poverty understated the figure by 0.5% – or 300,000. The report said, however, that poverty had not been systematically understated, and that in earlier years absolute poverty would have been lower using its new definition based on the different inflation rates facing rich and poor.

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Word.

The Trouble With Mass Delusions (Paul Singer)

The trouble with mass delusions is that they are recognized as such only when they are over – when the dazzling absurdity of certain widely held beliefs is unmasked by subsequent events. Interestingly, many delusions relate to war. At the beginning of World War I, there was a widespread misconception that the war would be over in months. In hindsight, this delusion was fueled by a deep misunderstanding, among citizens and military experts alike, of the impact that evolving technology would have on modern warfare. Parenthetically, we would argue that the current drawdown of military capability throughout the developed world is based on a delusion that ignores thousands of years of immutable, or at least always repeating, human history of almost continuous (in the grand scheme of things) warfare. Economics also provides its share of delusions, including the debt-fueled bubbles of both the 1920s stock market and the first dotcom boom.

The real estate boom of the 2000s was another one, as excess demand was fueled by the combination of near-free money, the most marginal financial products ever invented, and the frenetic selling of houses to people who could not afford them and did not actually own them in any meaningful sense of the word. These examples are easy, because they were mass beliefs that were unreasonable in the extreme at the time they were held. Of course, at the time not everyone held the same deluded views, but the disbelievers were (and always are) discredited, demoralized and ignored while the delusions were alive. The problem is that while the delusions remain intact there is no proof available to convince the believers of their folly. Simply repeating that a mass belief is crazy does not make it so (nor convince anyone else that it is nuts). Furthermore, the amount of time necessary to reveal the truth is sometimes too long for nonbelievers to bear, so they just stop trying.

There is a current set of delusions that is powerful and dangerous: that monetary debasement can be infinitely pursued without negative consequences; that the financial system is now solid and sound; that the low volatility and high prices of stocks, high-end real estate and bonds are real; that bonds are a safe haven; and that large financial institutions which get into trouble in the future can be unwound in a much safer way than they could be in 2008 We have discussed each of these elements in the pages of this report and previous ones in an attempt to reveal the fallacy and unsustainability of such beliefs. But, as stated above, they will only enter the history books as mass delusions if they are unmasked in the future as unjustifiable and erroneous beliefs at the time they were held. We think that test will be met, perhaps soon.

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Yeah, we reallly need to prepare for more transport and bigger ships and more trade and what not, in the face of peak oil. We are so smart it hurts. But the techno happy majority among us will not be stopped by anything but harsh reality.

Uncertainties Surround Nicaragua’s New Panama Canal Competitor (Spiegel)

Wearing orange overalls and sun hats, the Chinese arrived in Río Brito by helicopter before being escorted by soldiers to the river bank – right to the spot where José Enot Solís always throws out his fishing net. The Chinese drilled a hole into the ground, then another and another. “They punched holes all over the shore,” the fisherman says. He points to a grapefruit-sized opening in the mud, over one meter deep. Next to it lie bits of paper bearing Chinese writing. Aside from that, though, there isn’t much else to see of the monumental and controversial project that is to be built here: The Interoceanic Grand Canal, a second shipping channel between the Atlantic and Pacific. The waterway is to stretch from Río Brito on the Pacific coast to the mouth of the Punta Gorda river on the Caribbean coast. Beyond that, though, curiously little is known about the details of the project.

Only Nicaraguan President Daniel Ortega and his closest advisors know how much money has already been invested, what will happen with the people living along the route and when the first construction workers from China arrive. Studies regarding the environmental and social impact of the undertaking don’t exist. The timeline is tight. The first ship is scheduled to sail into Río Brito, which will become part of the canal, in just five years. When completed, the waterway will be 278 kilometers (173 miles) long, 230 meters (755 feet) wide and up to 30 meters (100 feet) deep, much larger than the Panama Canal to the south. A 500-meter wide security zone is planned for both sides of the waterway. And it will be able to handle enormous vessels belonging to the post-panamax category, some of which can carry more than 18,000 containers.

Thus far, only a few dozen Chinese experts are in Nicaragua and have been carrying out test drilling at the mouth of the river since the end of last year. They are measuring the speed at which the river flows, groundwater levels and soil properties. Not long ago, police established a checkpoint at the site and it is possible that the entire area will ultimately be closed off. For now, though, the region remains a paradise for natural scientists and surfers. Sea turtles lay their eggs on the beach and a tropical dry forest stretches out behind it to the south, reaching far beyond the border into Costa Rica. But if the river here is dredged and straightened out as planned, the village on Río Brito will cease to exist.

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” .. only 11 countries in the world are not involved in any conflict – despite this being “the most peaceful century in human history.”

What’s The Environmental Impact Of Modern Warfare? (Guardian)

UN secretary general Ban Ki-moon has called on nations to do more to protect the environment from the devastation wrought by warfare. “The environment has long been a silent casualty of war and armed conflict. From the contamination of land and the destruction of forests to the plunder of natural resources and the collapse of management systems, the environmental consequences of war are often widespread and devastating,” said Ban in a statement for the UN’s International Day for Preventing the Exploitation of the Environment in War and Armed Conflict on Thursday. “Let us reaffirm our commitment to protect the environment from the impacts of war, and to prevent future conflicts over natural resources.” War changes our parameters. In the face of actual or perceived threat, acts that would normally be abhorrent become acceptable and even routine. One of the first of our sensibilities to be discarded is the protection of the environment, says Catherine Lutz, a professor on war and its impacts at the Watson Institute for International Studies.

“There is this notion that it is life or death for a nation so you don’t worry about niceties. We have this idea that human beings are separate from their environment and that you could save a human life through military means and military preparation and then worry about these secondary things later,” she says. According to the Institute for Economics and Peace, only 11 countries in the world are not involved in any conflict – despite this being “the most peaceful century in human history”. In war, the environment suffers from neglect, exploitation, human desperation and deliberate abuse. But even in relatively peaceful countries the forces assembled to maintain security consume vast resources with relative impunity. During the first Gulf War, the US bombed Iraq with 340 tonnes of missiles containing depleted uranium. Mac Skelton, a researcher at Johns Hopkins University, has conducted extensive field work in Iraq on the increased rate of radiation-related cancers, which has been linked to the shells used by the US and UK militaries.

Skelton and others suggest the radiation from these weapons has poisoned the soil and water of Iraq, making the environment carcinogenic. The UK government says these accusations are false. No comprehensive study has been done to establish or disprove the link between cancer and depleted uranium weapons.

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“The town is probably the most heavily fracked in the country.”

Texas Oil Town Makes History As Residents Say No To Fracking (Guardian)

The Texas town where America’s oil and natural gas boom began has voted to ban fracking, in a stunning rebuke to the industry. Denton, a college town on the edge of the Barnett Shale, voted by 59% to ban fracking inside the city limits, a first for any locality in Texas. Organisers said they hoped it would give a boost to anti-fracking activists in other states. More than 15 million Americans now live within a mile of an oil or gas well. “It should send a signal to industry that if the people in Texas – where fracking was invented – can’t live with it, nobody can,” said Sharon Wilson, the Texas organiser for EarthWorks, who lives in Denton. An energy group on Wednesday asked for an immediate injunction to keep the ban from being enforced. Tom Phillips, an attorney for the Texas Oil and Gas association, told the Associated Press the courts must “give a prompt and authoritative answer” on whether the ban violates the Texas state constitution.

Athens in Ohio and San Benito and Mendocino counties in California also voted to ban fracking on Tuesday. Similar measures were defeated in Gates Mills, Kent and Youngstown, Ohio, as well as Santa Barbara, California. Denton remains a solidly Republican town, and oil companies reportedly spent $700,000 to defeat the ban, according to the Denton Record-Chronicle – nearly $6 for every resident. “It was more like David and Godzilla then David and Goliath,” Wilson said. But she said residents were fed up with the noise and disruption of fracking, and the constant traffic and fumes from wells and trucks operating in residential neighbourhoods. The town is probably the most heavily fracked in the country.

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