Wednesday, April 8, 2020



by Harvey Organ, Harvey Organ Blog:


Trump Gets Final List Of Fed Candidates, Yellen Gets The Cold Shoulder


from ZeroHedge:

Picking up on a story reported previously by both the WSJ and Politico – oh and Bloomberg itself – Bloomberg writes that Trump’s advisers have delivered the final list of candidates they recommending as candidates to lead the Fed and have ended the search. While only a “small handful” of the president’s closest advisers have seen the final list of names, it did not prevent them from leaking it, and the result is what we already know from previous leaks namely that in addition to Yellen, Trump is considering Gary Cohn, Kevin Warsh and current Fed governor Jerome Powell, who as Politico reported overnight, is said to have the blessing of Steven Mnuchin.

Also confirming what the WSJ reported previously, Trump’s chief economic advisor Gary Cohn – himself under consideration – has recused himself from the selection process.

In fact, the only incremental news in the latest report seems to be that while Janet Yellen remains under consideration, “few, if any, of Trump’s inner circle are advocating for her re-appointment.”

Furthermore, we can cross out economist Glenn Hubbard and U.S. Bancorp Chairman Richard Davis, both of whom have been floated as possible candidates, although Trump has no intention of interviewing them.  A potential wildcard is Stanford economist John Taylor, a favorite of fiscal conservatives, who is also said to be under consideration.

It has also been previously reported that Trump has spoken to Yellen, Cohn, Warsh and Powell about the Fed post, although there is no frontrunner at the moment.

According to Bloomberg, “the latest developments show that Trump is closer to making a final selection than previously known.” Last Friday, Trump said that he is “two or three weeks away from announcing his nominee” for the post overseeing the nation’s central bank.

Meanwhile, speaking at the Vanity Fair New Establishment Summit on Tuesday in Los Angeles, Jeffrey Gundlach – who accurately predicted Trump’s presidency – predicted that Neel Kashkari would be picked as next Fed chair. “I actually have a very non-consensus point of view. I think it’s going to be Neel Kashkari… He happens to be the most easy money guy that’s in the Federal Reserve system today and that’s why he may win.”

The Bond King said that Trump needs someone who will keep rates low in order to keep his populist reputation and help his base voters and that’s why he’ll pick Kashkari. “A stronger dollar is not good for achieving that agenda,” he said.

Gundlach also is confident that Yellen would not get reappointed: “I
think there is no chance that she wants to be chairwoman, nor do I think
the president wants her to be,” said the manager of $109 billion.

Judging by the latest PredictIt odds, if Gundlach is right, and if he is willing to bet some money on it, he could make a killing, as Kashkari does not even have a contract. As to the current ranking, Warsh remains in top spot with 38{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} odds, although following today’s Politico news, Powell surged to second place with 31{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} odds, and now following the Bloomberg report, John Taylor finds himself in third spot with 20{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} odds, above both Gary Cohn in 4th and Janet Yellen who has tumbled to 5th with just 13{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} odds of being reappointed.

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Where are Europe’s Fault Lines?


by Charles Hugh Smith, Of Two Minds:

Beneath the surface of modern maps, numerous old fault lines still exist. A political earthquake or two might reveal the fractures for all to see.

Correspondent Mark G. and I have long discussed the potential relevancy of old boundaries, alliances and structures in Europe’s future alignments.Examples include the Holy Roman Empire and the Hanseatic League, among others.

In the long view, Europe has cycled between periods of consolidation and fragmentation for two millennia, starting with the Roman Empire and its dissolution. Various mass movements of tribes/peoples led to new political structures and alliances, and a dizzying range of leaders rose to power and schemed their way through an equally dizzying array of wars, alliances and betrayals.

Regardless of the era or players, security is a permanent priority: this includes defensible borders, alliances to counter potential foes, treaties to end hostilities and whatever is necessary to secure access to resources and trade routes.

When consolidation served these priorities, then fragmented polities either consolidated by choice or by conquest. When smaller polities served these priorities, then imperial structures fragmented into naturally cohesive territories that were unified by language, culture and geography.

Security is also economic, as people support structures that keep their bellies filled and enable social stability and mobility.

For the sake of argument, let’s say that the European Union is the high water mark of consolidation, and the next phase is fragmentation. Where are Europe’s natural fault lines? Much has changed in the past 600 years, but geography hasn’t changed, and that defines some basic security threats.

German Army Prepares For “Break-Up Of European Union” Or Worse

The Germans are making contingency plans for the collapse of Europe

Nation-states may appear permanent, but history suggests nothing is as permanent as we might reckon. Polities that were brought into an Imperial orbit but retained their identity and geographic boundaries may be last one on, first one off.

In other cases, old fault lines were merely blurred rather than erased.

Brexit is a one-off in some regards, but if we add Catalonia, we discern the possibility of reversion to older borders and configurations. Could Italy fragment into three polities, North, Rome and the South? The idea seems absurd, but the history of modern states is based on much older structures–structures that made sense then and might once again make sense.

Insecurity feeds fragmentation. Once borders are no longer secure and social stability and mobility decay, people naturally start looking around for solutions, and configurations based on language, geography and culture start looking attractive if the current arrangement is seen as decreasing security rather than increasing it.

Empires tend to fail when the centers of power become self-absorbed in political struggles while the prosperity and security of the imperial lands decline. If we view the EU as a modern-day iteration of Empire, it’s not terribly surprising that the decay of social stability and mobility are fraying the forces holding the Empire of the willing together.

Here are two maps of the Holy Roman Empire, the first circa 962 AD, and the second circa 1555. It seems the bonds between Eastern and Western Europe aren’t as strong as the forces of geography, language and shared security interests binding the polities within the Western and Eastern blocs.

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Government Inflation Metric Hits Highest Level In 6 Years


by Chris Marcus, Miles Franklin:

Last week the Wall Street Journal reported that one of the most commonly viewed inflation metrics rose by 2.9%, as compared to June from a year earlier. Which is certainly alarming in its own right, although perhaps even more so when you read between the lines of the somewhat biased government numbers.

To be clear, I personally stopped putting all that much stock into the BLS numbers that Wall Street looks at about a decade ago after learning how the formulas are revised, and how politicized they have become. Yet to the degree that the numbers are created, published, and then many people respond, it is interesting to think about some of the takeaways of this latest report.

Only One Leader Made Action Plans for This Crisis

by Harley Schlanger, LaRouche PAC:

President Donald Trump met with his “economic team” yesterday afternoon about the accelerating financial crisis; House Democrats will have a hearing with their “economic team”—Barack Obama’s economic advisor Jason Furman of Harvard—Wednesday afternoon. The President will meet with Wall Street “leaders” (banksters who have been fined more than $100 billion for their serial lawlessness). Furman will reportedly propose some “stimulus” of $350 billion over several years. The President’s advisors Larry Kudlow and Treasury Secretary Steven Mnuchin will discuss a small tax cut and loans to small businesses.

Grandma Yellen Pats Markets on the Head and Sends them off to Bed


by David Haggith, The Great Recession Blog:

The sweet grande dame of the central bankster world sees nothing but the brightest future to the furthest horizons for the markets she has been nurturing with her benevolent “wealth effect,” as one of her close colleagues called it. While Grandpa Greenspan routinely warns now that stock and bond markets are in bubbles, Grandma Yellen says,

I don’t want to label what we’re seeing as a bubble. But I would say that asset valuations are generally elevated.… For the stock market, the ratio of price to earnings…is near the high end of its historical range. If we look at for example of commercial real estate and other assets, we’re seeing high valuations.

In other words, we should really be calling it the “everything bubble” where stocks, real estate and “other assets” (such as bonds) are all at the top their curves. But that should be no concern; and, of course, she would not label any of these things as “bubbles” because the would mean she has presided over years of creating an empty world full of financial troubles.

“Bubble, bubble, toil and trouble” would, however, be the best words to describe Yellen’s policy and what is to come out of it. Those might be the words she was incanting over this market brew in the basement of the Fed’s Eccles building, but they are not words you would ever hear the ex-chief central bankster saying in public right as she leaves office. Only historic bankster barons like Greenspan dare invoke the word “bubble” when speaking of what others have created.

Beware this lady’s matzo ball soup. It was cooked in a caldron, and is being served by a cracker. A nice cracker, but a cracker all the same. And, with a cracker, comes the crunch, which is what we  all felt this week.

Yelled demurred on her exit interview Friday that she would have liked to have a longer stay in the top office of the Eccles building.

I would have liked to serve an additional term and I did make that clear, so I will say I was disappointed not to be reappointed. I think things are looking very strong.

“Looking very strong,” she said, as the Dow saluted her exit with a 666-point backward flop on her way out the door, having convulsed the entire week over a mere upward blip the Fed caused in long-term interest rates. Dow futures are pointing down another 744 points beneath the ground this weekend. Yellen, however, was satisfied with this effect on the market.

The Federal Reserve has been on a path of gradual rate increases and if conditions continue as they have been, that process is likely to continue. And as it happens we would expect long rates to move up.

Fair enough. The market should react to any move back toward reality, but it should also be very scared of that reality after years of living inside the Fed’s womb because the Fed has nurtured something that has no capability of living outside in the real world. Naturally, rates will go up as the Fed now solidly engages in quantitative squeezing so the markets immediately start quantitative wheezing. There is however, absolutely no capacity left in this economy to handle higher interest because we have doubled down on debt. That does not leave true resilience of the kind Yellen goes on to talk about. It means we have less capacity to handle real interest rates than we had before the economic collapse … even measured against GDP.

This past week was the first week since the Fed made its September announcement about the October start of the Great Unwind that the Federal Reserve actually delivered on its promise by removing as much money from the nation’s supply as it had said it would. The promise for previous months (October-December) had been a dip-your-toe-in-the-water test amount, and even that test amount wasn’t met. This past week, however, the Fed stepped up to its stage-two level, and even delivered a little bonus by withdrawing $22 billion, instead of the slated $20 billion. This time, the markets felt it and heaved. The entire world heaved, though there are many reasons right now for the world to heave; so it cannot all be blamed on the Fed.

Lovable Grandma Yellen’s comfort with the world’s quantitative wheezing last week underscores a theme I have been stating repeatedly, which is that the Fed believes in its recovery and in its resilience and so will keep tightening the world right (given that its currency is still the global reserve currency) into the next global recession, which shouldn’t be that far off, given the market’s gasps over a mere whisper of interest-rate increases. But, let us look in one simple picture at why markets are so reflexive (as opposed to resilient) toward an uptick in interest:


I’ve written often about the deepening cavern of debt that the US economy is built over. The above picture only represents the debt that the American government is built over, and that is before we deepen the abyss more with the deficits that are likely over time from the Trump Tax Cuts. Grandma Yellen is comfortable with the fact that we float on hot air over such a void, but markets are understandably nervous about what happens when interest on such a void of debt moves up even incrementally. We created that pit of debt because extreme low interest made it easy to do; but now with interest rising …

There simply is no room for any interest increase, so there is little elasticity in markets toward mere hints of an interest increase (in that all areas of the economy would look something like the above graph). The whole world has been enticed to build out on debt like that. Globally, the ratio of all debt to all GDP is at 327%. Just to be clear, that is the highest overhang any time in human history. As a point of reference, nations historically have gotten into trouble somewhere between 100% and 150%. The only reason we are all sustaining at much higher levels of debt right now is that interest is still at aberrational historic lows.

But Grandma Yellen recognizes and fully expects that her move into quantitative squeezing will push interest rates up, and she believes that will all go down nicely with a well-paired glass of bubbly. Therefore, the Fed will not see the market’s current gyrations, which came as soon as it finally notched the squeeze one hole tighter, as being anything other than an adjustment to new conditions, and it will, as Yellen has said, continue to tighten on schedule.

Asset valuations could change I’m not predicting that that would happen and I wouldn’t rule that out.

Pretty sure last week was already a case of asset valuations changing ahead of and while you were talking, Dear Nanna. This is the debt trap that I have long been saying the Fed was creating for itself (and the world), and they are exhibiting exactly the blind self-confidence I anticipated they would. They believe in their program so Lady Yellen can sanguinely tell her listening public that all is going as planned … because that it how it looks to those who believe the reversal of quantitative easing won’t squeeze all the life out of the economy that it formerly injected into it. Problem is the squeeze can be worse than the original expansion because it comes with higher interest payments for everyone who has tanked up on debt, which compounds the tightening. Right now the belt is only pinching, but wait until it becomes a corset.

Yes, asset values will tighten, and this Bankster Belle’s coterie of friends will all see that as part of the plan … not recognizing that a downhill slide is developing everywhere in the world and getting  out of control … until it is too late. Thus, she offers the following inane advice to those who are starting to feel the thrill of the slide in the seat of their pants:

They should be careful and I would stay diversified in their investments. What we look at is the likely resilience of the economy and the financial system.

Diversified into what? There is no protective diversification left (except maybe gold, which the Fed also manipulates at will to save its own proprietary currency). If your primary area of investment is, as it is for most people, your retirement fund, you are limited. You cannot buy gold within that managed set of funds. You cannot buy and hold bonds outright, but can only buy into bond funds, which can experience a liquidity crisis and are already sliding because the low-interest bonds they are loaded with don’t have much value compared to the new rates that are coming. There is no sector of the stock market that is not sliding right now, and Yellen has already acknowledged that real estate could slide, too. This is the everything bubble. There is not a lot of cover for salvation through diversification when everything looks to slide together … and all nations together.

In the area that I’m most familiar with — banking regulation — we’ve put in place very strong improvements to make the financial system more resilient. More and better quality capital. Capital that serves as a buffer…. If there are shocks, it leaves firms able to lend. All of us need to remember the financial crisis and the terrible toll it took on Americans.

We’re glad you are taking a moment to remind your friendly coven of lead banksters that they need to remember the poorer Americans who bailed their sorry butts out (and hopefully the rest of the world that the Fed’s new course will impact). We’re also comforted to know that banks will continue to lend in the next crisis so that we can savee ourselves by deepening the money pit even more. Perhaps we can dig ourselves all the way to hell.

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Desperate Venezuelans Illegally Mining Gold in World-Renowned National Park

by Peter Schiff, Schiff Gold:

Venezuelans have turned to illegally mining gold just to survive.

The Pemon people are native to the region containing Canaima National Park. If you saw the movie Up, you’re familiar with this area. The 500 million-year-old pillars of erosion in the park inspired scenery in the movie. The park also contains world-famous Angel Falls. But with hyperinflation gripping the country and the bolivar virtually worthless, people in the area have turned to digging up football-size mines in search of fragments of gold.

Estimating the shape of the coming crisis

by Alasdair Macleod, GoldMoney:

We don’t know what will trigger the crisis, but a likely candidate is foreign selling of US dollars combining with a collapse in the US government’s finances. Perhaps the coronavirus will turn out to be a black swan event, but the underlying conditions for an economic and monetary crisis already exist.

This article looks at alternative outcomes. It concludes that the current situation bears a worrying resemblance to the collapse of John Law’s Mississippi scheme exactly 300 years ago. The key to understanding why this is so is because of the link forged between asset prices and fiat currencies. One fails, and they both fail, more rapidly than the most bearish bear might expect.

The Fed’s Glue-Sniffing Announcement Yesterday Involving JPMorgan Chase

by Pam Martens and Russ Martens, Wall St On Parade:

Federal Reserve inspectors appear to be on some kind of mind-altering drug or their superiors are simply taking their marching orders from Wall Street cronies in the Trump Administration.

Yesterday the Fed released a terse 104-word statementindicating that the largest and serially charged bank in the U.S., JPMorgan Chase, had shown “evidence of substantial improvements” in its “risk-management program and internal audit functions” and the Fed was therefore removing the dog collar it had put on the bank in January 2013. (JPMorgan Chase had been required to provide written progress reports to the New York Fed in 2013 until further notice – which became six years.) The Fed’s actions in 2013 stemmed from JPMorgan Chase secretly gambling with depositors’ money in exotic derivatives in London and losing at least $6.2 billion of those funds. The incident became infamously known as the London Whale saga after reporters at Bloomberg News and the Wall Street Journal broke the story about the massive, market-distorting derivative trades.

The Fed Is Already Talking About Increasing Its Balance Sheet Again

by Peter Schiff, Schiff Gold:

All of a sudden, the Federal Reserve is considering increasing its balance sheet again.

Remember back in September? QE was on “autopilot.” Then we got the “Powell Pause” and suddenly, the talk was that balance sheet reduction could be winding down. Powell confirmed that was the case just a couple of weeks ago when he told a congressional panel the central bank would be in a position to “to stop runoff later this year.”