Trump's Potential Legacy: 50 Million+ Enemies Of The State

Trump’s Potential Legacy: 50 Million+ Enemies Of The State

Authored by Tho Bishop via The Mises Institute,

Well, they finally got Donald Trump. But he sure scared the bejesus out of them.

It took a massive five-year campaign of hysteria, of fear and hate, orchestrated by all wings of the Ruling Elite, from the respectable right to the activist left. The irony, of course, is that the last actions of Trump’s presidency highlighted how little of a threat he, as an individual, truly was to the deep corruption in America’s government. Lil Wayne may be free, but figures like Julian Assange, Edward Snowden, and Ross Ulbricht are not. The Fed’s big fat bubble has only gotten larger as Wall Street has thrived, while American workers continue to be “discriminated against.”

If historians look back at simply the Trump administration’s policy legacy, the controversial nature of his tenure may confuse. A record of tax cuts, deregulation, runaway spending, an Israeli-Saudi-focused Middle East policy, criminal justice reform, and stacking the federal court with conservative judges on paper seems firmly aligned with the Republican Party of the modern era. Compromises on gun issues, the inability to replace Obamacare—or even reject its core tenets. His calls for larger stimulus relief would perhaps lead some to believe that he was relatively moderate in the current environment.

Looking back, Trump’s most radical act of governance may be his simple embrace of federalism in the face of the coronavirus. Whether this stemmed from a genuine belief in the limits of practical federal power or a desire to have the flexibility to blame governors if a state’s response became unpopular, the administration’s willingness to allow states to take the leading role in devising a policy response allowed for one of the greatest illustrations of the importance of political centralization in recent American history. Trump allowed Florida to be Florida and New York to be New York. The ability to compare state performance has been essential at a time when “medical experts” were being weaponized in support of covid tyranny.

All of this, however, would miss the true significance of the last four years. Trump’s legacy will be that of a political leader who, at a time when American politics was still adjusting to social media and user-created content, leaned into the polarization of American politics rather than pay lip service to “national unity.” A critic would claim this comes from Trump’s unquenchable need to have his ego stoked. A supporter would see a man who understood the need to realign American politics—but the underlying motivations are irrelevant.

Trump’s impact on American politics may result in an even greater impact on the US government than his collaboration with Mitch McConnell on the judiciary.

A variety of polling indicates that as Donald Trump boarded Marine One to retreat to Mar-a-Lago, he does so with most of his voters believing he is the rightful president of the United States. One poll showed almost 80 percent of Republicans “do not trust the results of the 2020 presidential election.” If we estimate that 75 percent of all of Trump’s 2020 voters hold this view, that leaves us with over 50 million Americans who believe they now live under an illegitimate federal government.

This reality terrifies Washington’s political class more than anything Donald Trump could have done while occupying the White House.

As Murray Rothbard illustrated in Anatomy of the State“What the State fears above all, of course, is any fundamental threat to its own power and its own existence.” A vital part of the state’s existence is its ability to justify its action with a mantle of “legitimacy”—which in an age of democracy comes from the notion of the “consent of the governed.”

The result of 50+ million Americans viewing the next president as a fraud imposed on the people is an inauguration taking place in a Washington, DC, that resembles a warzone, surrounded by soldiers whom the regime does not trust with their own ammo.

The downside of America’s regime acting from a place of fear is that it is likely to ruthlessly lash out like most violent predators tend to do. Since the actions at the Capitol on January 6, the corporate press has elevated a collection of “terrorism experts” who have explicitly called for the tools formed in the war on terror to be turned inward to deal with the growing Trump “insurrectionist threat.”

As Glenn Greenwald notes, “No speculation is needed. Those who wield power are demanding it.”

The upside is that the tremendous growth of federal powers has always been dependent upon the public’s understanding that such power was being wielded in their own defense. Therefore, democracy has, rather than being a public check against tyranny, more often been a way of peacefully empowering officials to get away with abuses that autocrats could only manage with explicit violence.

To quote Rothbard:

As Bertrand de Jouvenel has sagely pointed out, through the centuries men have formed concepts designed to check and limit the exercise of State rule; and, one after another, the State, using its intellectual allies, has been able to transform these concepts into intellectual rubber stamps of legitimacy and virtue to attach to its decrees and actions. Originally, in Western Europe, the concept of divine sovereignty held that the kings may rule only according to divine law; the kings turned the concept into a rubber stamp of divine approval for any of the kings’ actions. The concept of parliamentary democracy began as a popular check upon absolute monarchical rule; it ended with parliament being the essential part of the State and its every act totally sovereign.

As such, even if aggressive actions by the Biden administration to address the specter of a Trump-inspired insurrection have the explicit support of nominally Republican leaders such as Mitch McConnell or Kevin McCarthy, how would such action be seen by MAGA America? If forced to choose, would someone like Governor Ron DeSantis align himself with a “bipartisan” effort from Washington elites or choose to be a leader of Biden-era resistance? Even if the resistance to a Biden administration is not ideologically libertarian or fundamentally “antistate,” an explicit rejection of federal domination would be a vital first step toward the sort of political decentralization and self-governance that any peaceful political order ultimately requires.

Of course, all of this assumes that Trump’s base remains loyal—or at least remains hostile to the new regime. If Biden governs the same way he campaigned, by largely staying out of sight and avoiding making any bold statements and commitments one way or another, perhaps the public can be once again pacified and partisan divisions reduced to largely superficial differences, as has been the case for much of the current era.

If, however, the Biden administration governs more like the corporate press and blue Twitter wants him towaging war on gender rolesprioritizing transgender issuespushing for job-killing economic policy during a pandemicacting unilaterally on immigrationpenalizing gun owners“reeducating” Trump supporterstreating MAGA like Al Qaeda, etc. – then the divides between Trump’s America and Biden’s America could become only further entrenched. And that is not even factoring in what happens if America experiences the hardship of an economic crisis.

Trump’s legacy will not be shaped by his actions—or even by how his enemies portray him. Ultimately, it comes down to his base and the movement he inspired. As Lew Rockwell noted in a recent interview with Buck Johnson, “The Jeffersonians were much better than Jefferson. The Taftians were much better than Robert Taft. The Trumpians tend to be much better than Trump.”

Should skepticism of the 2020 election, fueled by a new administration’s actions, finally convince 50+ million Trump supporters that the barbarians in the Beltway do not represent them and to react accordingly, then Trump’s presidency will be—despite his own actions—the disruption that America’s elites truly feared.

Tyler Durden
Sun, 01/24/2021 – 23:30

Source: Zero Hedge, Trump’s Potential Legacy: 50 Million+ Enemies Of The State

Australia Hits Back At Google, Facebook: It's "Inevitable" You'll Soon Pay For Hosting Australian News

Australia Hits Back At Google, Facebook: It’s “Inevitable” You’ll Soon Pay For Hosting Australian News

Neither side is backing down after weeks of standoff between the Australian government and Google over proposed legislation aimed at better compensating and rewarding local news publishers, while bringing greater transparency to the way algorithms employed by Google, Facebook, and YouTube work.

Canberra is now finalizing the bill which will require Google to obtained licenses for all content published by Australian news companies. Google’s parent company Alphabet Inc. oversees an estimated at least 94% of all search traffic in Australia, similar to many other countries globally, at a time it’s coming under increased accusations of using its monopoly power to bully content providers and smaller competitors. 

Australia’s Federal Treasurer and deputy leader of the Liberal Party Josh Frydenberg said on Sunday that it’s “inevitable” that the Silicon Valley tech giants will be paying to use and present Australian content on their platforms and in search engines

“My view is that it is inevitable that the digital giants will be paying for original content,” Frydenberg said just two days after Google threatened to pull its search engine from Australia altogether. This as Canberra is now reportedly finalizing the controversial legislation

“It seems that digital giants did themselves a big disservice last week when they very openly and publicly threatened the Australian public with pulling out of Australia effectively with search if legislation proceeds as it currently stands,” Frydenberg added. 

He further posed the question of humbling Google and Facebook’s unrivaled and “extraordinary power”:

“My view is that it is inevitable that the digital giants will be paying for original content and the choice for Australia, is: Are we world leaders… and first off the rank when it comes to putting in place such a code? Or we can follow others further down the track when they do it.

Google precisely wants to avoid the precedent of regulators backed by an influential government winning this fight. No doubt many more governments, especially in Europe, would follow.

On Friday at a Senate hearing on the matter Google Australia Managing Director Mel Silva told lawmakers“If this version of the Code were to become law, it would give us no real choice but to stop making Google Search available in Australia.”

Facebook is involved too:

On Friday, the pair escalated the dispute by threatening to remove the Google search engine from Australia and Facebook to remove news from the Facebook feeds of all Australian users.

The threats follow the revelation that Google has been experimenting with hiding some Australian news sites from search results, in a move media outlets said was a show of “extraordinary power”.

Days ago Bloomberg cited tech analyst Johan Lidberg, an associate professor at Melbourne’s Monash University, who pointed out, “It’s about control and power.”

He added that Google is seeking to make an example in Australia: “They’re signaling to other regulators they’ll have a fight on their hands if they do this.”

Tyler Durden
Sun, 01/24/2021 – 23:00

Source: Zero Hedge, Australia Hits Back At Google, Facebook: It’s “Inevitable” You’ll Soon Pay For Hosting Australian News

If "Facebook Is Private", Why Are They Feeding Users' Private Messages Directly To The FBI?

If “Facebook Is Private”, Why Are They Feeding Users’ Private Messages Directly To The FBI?

Authored by Matt Agorist via,

Despite decrying censorship when it was happening to them last year, when Donald Trump was banned from Twitter and Facebook earlier this month, the left praised the move by big tech. “Facebook is a private company and can do what they want,” the pro-censorship hypocritical crowd chanted ad nauseum through the digital ether after bad orange man was silenced. But as we have said time and again, Facebook being private is simply not true.

Now, however, Facebook has made an unscrupulous Faustian bargain with the federal government which should eliminate all doubt once and for all. They are now willfully handing over private messages of Trump supporters who talked about the events at the capitol on January 6.

Google, Apple, and Amazon all moved to wipe the pro-Trump social media network Parler from the internet earlier this month because of what users on the platform discussed. It was alleged that the handful of dolts who stormed the capitol on January 6 had solely used Parler to plan their laughable, unarmed, silly, unsuccessful, and pitiful attempt to keep Trump in the White House.

Despite the ragtag group of Trumpians posing for selfies, photo-ops, and hanging from banisters, the only thing they accomplished was having D.C. turned into a scene akin to North Korea for Biden’s inauguration. Most honest experts in the media have acknowledged that though a few members of the mob thought they were part of some historic coup to keep their leader in power, the idea that they had any real chance at an insurrection was misleading at best and sheer propaganda used to further the domestic police and surveillance state at worst.

Deferring all responsibility for the planning of the raid on the capitol, Facebook chief operating officer Sheryl Sandberg had stated shortly after the incident that the protests were largely organized off Facebook. However, she was not telling the truth, and likely knew that large portions of the pro-Trump protests were talked about and organized on Facebook. But was Facebook wiped off the internet like Parler? No, no it was not. Here’s why.

This week, Facebook began furnishing the Federal Bureau of Investigation with data on Trump supporters who discussed the events at the capitol on their platform – up to and including their private messages. Through this action the social media giant is acting as a de facto intelligence collecting arm of the US government.

In contrast, when Syed Farook, otherwise known as the San Bernardino mass shooter, wouldn’t unlock his iPhone for the feds, Apple refused to create a backdoor for them to access it acting as an actual private company supporting the privacy rights of its customers. But Facebook is more than willing to open up its data mining services for their friends in the federal government — because, as we have stated numerous times, Facebook is not private.

As TFTP reported in 2018, Facebook announced that it partnered with the arm of the government-funded Atlantic Council, known as the Digital Forensic Research Lab that was brought on to help the social media behemoth with “real-time insights and updates on emerging threats and disinformation campaigns from around the world.”

The Atlantic Council is the group that NATO uses to whitewash wars and foster hatred toward Russia, which in turn allows them to continue to justify themselves. It’s funded by arms manufacturers like Raytheon, Lockheed Martin, and Boeing. It is also funded by billionaire oligarchs like the Ukraine’s Victor Pinchuk and Saudi billionaire Bahaa Hariri.

The list goes on. The highly unethical HSBC group — who has been caught numerous times laundering money for cartels and terrorists — is listed as one of their top donors. They are also funded by the pharmaceutical industry, Google, Goldman Sachs and others. However, the funding that comes from the United States, the US Army, and the Airforce directly negates the “private” aspect of the partnership.

The “think tank” Facebook partnered with to make decisions on who they censor is directly funded by multiple state actors — including the United States — which voids any and all claims that Facebook is a wholly “private actor.”

The Atlantic Council wields massive influence over mainstream media too, which is why when this partnership was announced, no one in the mainstream press pointed it out as the Orwellian idea that it is. Instead, headlines such as “US think tank’s tiny lab helps Facebook battle fake social media(Reuters)” and “Facebook partners with Atlantic Council to improve election security (The Hill)” were put out to spin the fact that a NATO propaganda arm is now censoring the information Americans see on Facebook.

But this partnership with the state-funded “think tank” is not the only reason Facebook is not private.

From government funded censorship arms to the revolving door of high level bureaucrats who fill the ranks of the oligopolies, the “private company” Facebook concept comes crashing down when taking a closer look. Private-sector firms do not need to be explicitly nationalized to further the establishment’s interests; it’s enough to install their alumni in top regulatory positions. Through these methods, Facebook can put on the façade of privatization while actually acting as deputies for the state but alleviating any constitutional checks in the process.

All the while, whenever the censorship acts in their benefit, half of the masses cheer it on and defend it, keeping resistance at a minimum.

What’s more, as the government hangs the threat of antitrust litigation over their heads, it can force these companies to act in their benefit even without explicit partnerships like that of the Atlantic Council. In fact, prior to the state getting involved in the talks of regulation into big tech, information flowed relatively freely with Facebook only removing racist and violent content. Now, however, as they bend to the will of their partners in the federal government, people like myself find ourselves on 30 day bans for saying “censorship leads to tyranny.”

This is why the answer to the government big tech censorship leviathan lies not in regulation but in boycott. The time is now to get off these platforms who spy on you, ban you, sell you to the highest bidder, and who are tearing society apart. Censorship free platforms exist and are far more user friendly and treat you as the actual customer instead of the sheep they are leading to slaughter. You can check them out here.

Tyler Durden
Sun, 01/24/2021 – 22:30

Source: Zero Hedge, If “Facebook Is Private”, Why Are They Feeding Users’ Private Messages Directly To The FBI?

One City Has An Office Market That Is Even More Dire Than New York's

One City Has An Office Market That Is Even More Dire Than New York’s

According to Bloomberg, real-estate data analytics firm Green Street released a new report outlining how the office space market in San Francisco will be the worst-preforming market in the US for 2021. Even though office vacancies in Manhattan are at record highs, it appears San Francisco tops New York City as companies reevaluating their space thanks to the pandemic. 

Green Street estimates that rent and occupancy may plunge 22% in San Francisco this year, the largest expected decline of any other city in the country. New York was number two with -17%, Los Angeles in third at -9%. 

Source: Bloomberg

All of the cities shown above experienced similar pandemic-related stress of people escaping to suburbs and rural communities because of the virus and social unrest, along with the integration of remote-working, which allowed many people in white-collar jobs to work anywhere they pleased. 

“San Francisco and New York will likely see a permanent resetting of rents as people and businesses look more toward the middle of the country for expansion,” said Danny Ismail, an analyst at Green Street. 

“It’s unlikely that rents and occupancy will return to a level pre-Covid over the next few years,” Ismail warned.

Green Street points out remote-working has forced many companies in major tech and finance hubs to reevaluate how much office space is needed. 

Companies that are exiting these hubs are moving to cheaper metro areas, where the cost of living and tax code are more friendly. Some of those cities benefiting from the migration of companies and people are Nashville, Tennessee; Charlotte, North Carolina; Austin, Texas; and Atlanta. 

Green Street makes a bold prediction that demand for office space will decline by 15% through the mid-point of the decade as businesses will be more inclined to adopt work-at-home lifestyles for their employees to trim costs and boost productivity.

In a separate report, Goldman Sachs Chief Economist Jan Hatzius said last month to clients that work-from-home will be widely adopted by firms and boost productivity.

Tyler Durden
Sun, 01/24/2021 – 22:00

Source: Zero Hedge, One City Has An Office Market That Is Even More Dire Than New York’s

Seattle Interim Police Chief Announces Tougher Policy On Protest Vandalism

Seattle Interim Police Chief Announces Tougher Policy On Protest Vandalism

Authored by Janita Kan via The Epoch Times,

Seattle Police will get tougher on people who vandalize and destroy property during protests, the department interim police chief announced on Saturday ahead of a scheduled demonstration.

Seattle Interim Police Chief Adrian Diaz’s announcement comes after a protest during which buildings were damaged and vandalized in downtown Seattle, including the city’s federal courthouse, on the day of President Joe Biden’s inauguration.

On Jan. 20, people dressed in black were seen marching into the iconic Pike Place Market, with video from the aftermath showing broken windows at a Starbucks. A group of black-clad activists marched along the street carrying a tattered American flag upside down with the anarchy sign spray-painted on it and kicking over garbage containers.

Seattle Police posted photos of the aftermath of the riots that shows multiple vandalized shops and buildings. The department said at the time that police had arrested one person for property damage, a woman for assault, and a man for burglary and property damage.

Multiple windows were shattered at the William Kenzo Nakamura Courthouse in Seattle, Wash., on Jan. 20, 2021. (Seattle Police Department)

The activists are alleged to be members of anarcho-communist group Antifa and other far-left groups. These extremists have taken advantage of a number of peaceful protests calling for police reform by creating a scene of civil unrest and engaging in violence, lighting fires, looting, and damaging property over the summer. Many law enforcement officers were injured during operations to quell the violence and protect public safety.

Diaz told reporters during a conference that he was not sure what cause the rioters were fighting for, adding that he did not believe violent protesters and vandals are promoting a cause.

“The events of breaking windows at a variety of different locations with no meaning,” Diaz told reporters.

“There was no discussion about what they were fighting for, what type of social justice message. That cannot happen. That level of direct action cannot occur. And we are going to immediately address those issues.”

The Seattle Police Department press contact did not immediately respond to The Epoch Times’ request for more details on the new policy and enforcement.

The violence and property destruction in Seattle came alongside similar protests and riots in Portland, Oregon.

In Portland, black-clad activists with their faces covered broke windows and the glass door at the Democratic Party of Oregon’s business office, spray-painting an anarchist symbol over the party sign, video posted on social media shows. Some of them tipped over garbage containers and lit the contents on fire, according to reports.

“We don’t want Biden. We want revenge for police murders, imperialist wars, and fascist massacres,” read a banner they marched under, while others carried a banner reading “We are not governable,” which was dotted with anarchy symbols.

Eight people were arrested in Portland on charges that include rioting and reckless burning.

Sen. Chuck Grassley (R-Iowa) has urged President Joe Biden to condemn the recent actions of the rioters. White House press secretary Jen Psaki said on Saturday that she hasn’t spoken to Biden about the recent unrest.

Independent reporter Andy Ngo, who has been closely monitoring and reporting on Antifa in Portland, said some of the rioters who were arrested at the most recent Portland riots were arrested at previous Black Lives Matter protests in 2020 and released.

In a recent interview with The Epoch Times’ “American Thought Leaders,” Ngo raised concerns over Twitter’s lack of enforcement of their policies when it failed to stop Antifa planning and promoting riots on its platform prior to the riots.

“In Seattle and Portland, there were simultaneous riots that were pre-planned and organized, and also advertised weeks ahead of time on Twitter,” Ngo said.

“Twitter did nothing to take down some of these accounts that were promoting these riots.”

Some of these accounts were ultimately suspended following the inauguration day riots, Ngo said on Friday.

Tyler Durden
Sun, 01/24/2021 – 21:30

Source: Zero Hedge, Seattle Interim Police Chief Announces Tougher Policy On Protest Vandalism

Foreign States Are "Clearly Behind" Pro-Navalny Rallies, Say Russian Lawmakers

Foreign States Are “Clearly Behind” Pro-Navalny Rallies, Say Russian Lawmakers

A top Russian lawmaker has condemned Saturday’s sizeable pro-Navalny protests which involved clashes with police across multiple cities including Moscow and St. Petersburg as “foreign-backed”.

Andrey Klimov, the official who chairs the Senate’s “Federation Council for the Protection of State Sovereignty and Prevention of Interference in Russia’s Internal Affairs,” told Rossiya-1 TV channel on Sunday:

“The commission [of the Federation Council] has reason to believe that the actions of foreign states are clearly behind all these events and all this is happening with the foreign specialists’ assistance,” according to TASS.

Via AP

He alleged further the ‘unauthorized’ demonstrations at the urging of jailed Kremlin opposition leader Alexei Navalny were organized primarily on “foreign digital platforms and messengers.”

“This is an illegal act itself,” Klimov added. A separate statement from another top official said the commission is “ready to promptly examine the files about the possible involvement of foreign forces in disseminating calls to participate in unauthorized events in a number of social networks next weekend.”

The means that further Navalny-related demonstrations, which there are sure to be more of according to his supporters both in Russia and the West, will be deemed “illegal” from the start, and further harsh crackdowns will ensue.

Over the weekend Russia’s Foreign Ministry angrily denounced the fact that in the run-up to the Saturday protests the US Embassy in Moscow publicly posted times and meeting places for planned demonstrations at up to a dozen cities in Russia. 

“All that coincides with Washington’s provocative doctrinal guidelines to encourage ‘protests in the countries with unwanted governments’,” the Foreign Ministry said on Saturday.

“Any attempts of this ‘coverage’ of unauthorized rallies will be regarded as gross interference in our country’s domestic affairs and will lead to a corresponding response,” the statement added.

Tyler Durden
Sun, 01/24/2021 – 21:00

Source: Zero Hedge, Foreign States Are “Clearly Behind” Pro-Navalny Rallies, Say Russian Lawmakers

"Pravda-Level Propaganda" – WaPo Quietly Tries To Memory-Hole Kamala Harris' "Joke" About Starving Inmates

“Pravda-Level Propaganda” – WaPo Quietly Tries To Memory-Hole Kamala Harris’ “Joke” About Starving Inmates

UPDATE 2: None other than Andrew Sullivan has opined on The Washington Post’s bias being exposed, summing things up in his usual succinct but precise manner: “Amazing how rigged the WaPo now is. This is Pravda level propaganda”

*  *  *

UPDATE 1: The Washington Post has updated its website and URLs to restore the original version of the Kamala Harris profile detailed in Reason’s post, below.

“We should have kept both versions of the story on the Post’s site (the original and updated one), rather than redirecting to the updated version,” Kris Coratti, the Post’s vice president for communications, told Reason in a statement on Friday.

“We have now done that, and you will see the link to the original at the top of the updated version.”

*  *  *

Authored by Eric Boehm via,

When The Washington Post published a 2019 campaign trail feature about then-presidential hopeful Kamala Harris’ close relationship with her sister, it opened with a memorable anecdote in which Harris bizarrely compared the rigors of the campaign trail to…life behind bars.

And then proceeded to laugh – at the idea of an inmate begging for a sip of water. It was an extremely cringeworthy moment, even by the high standards set by Harris’ failed presidential campaign.

But now that Harris is vice president, that awful moment has seemingly vanished from the Post’s website after the paper “updated” the piece earlier this month.

Here’s how the first seven paragraphs of that article, published by the Post on July 23, 2019, and bylined by features reporter Ben Terris, originally appeared:

It was the Fourth of July, Independence Day, and Kamala Harris was explaining to her sister, Maya, that campaigns are like prisons.

She’d been recounting how in the days before the Democratic debate in Miami life had actually slowed down to a manageable pace. Kamala, Maya and the rest of the team had spent three days prepping for that contest in a beach-facing hotel suite, where they closed the curtains to blot out the fun. But for all the hours of studying policy and practicing the zingers that would supercharge her candidacy, the trip allowed for a break in an otherwise all-encompassing schedule.

“I actually got sleep,” Kamala said, sitting in a Hilton conference room, beside her sister, and smiling as she recalled walks on the beach with her husband and that one morning SoulCycle class she was able to take.

“That kind of stuff,” Kamala said between sips of iced tea, “which was about bringing a little normal to the days, that was a treat for me.”

“I mean, in some ways it was a treat,” Maya said. “But not really.”

“It’s a treat that a prisoner gets when they ask for, ‘A morsel of food please,’ ” Kamala said shoving her hands forward as if clutching a metal plate, her voice now trembling like an old British man locked in a Dickensian jail cell. “‘And water! I just want wahtahhh….’Your standards really go out the f—ing window.”

Kamala burst into laughter.

It should go without saying that choosing to run for the most powerful political office in the world is absolutely nothing like being behind bars—and getting to squeeze in a morning SoulCycle session before sitting down for an interview with a national newspaper is not remotely the same as dying of thirst. None of this is funny.

The scene was a brilliant bit of reporting and writing because it did what few political features can accomplish: showing, rather than telling, something about the candidate at the center. Harris made her name as a prosecutor, and her track record includes defending dirty cops and laughing off criticism of her history of throwing poor parents in jail when their kids missed school. The Post profile provided a mask-slipping moment that seemed to perfectly capture a warped sense of justice and lack of basic human dignity—all in just a few hundred words.

We’ve republished that passage here because you won’t find it on the Post’s website any longer.

The rest of the profile is still there, but with a new opening anecdote (presumably authored by political reporter Chelsea Janes, whose byline has been added to the piece and who has authored several fawning pieces about Harris this week) that compares now-Vice President Harris’ relationship with her sister to that of former President John F. Kennedy and his brother Robert. After the opening section, the rest of the piece appears nearly identical to the version originally published in July 2019.

But what happened to the old version? The headline for that 18-month-old article still appears on Terris’ page on the Post website with the original date it was published, but clicking the link redirects users to the new version published this month—the version that omits Harris’ awful commentary about campaigns and prisons.

Other links to the original piece also now redirect to the sanitized version. Reason‘s Elizabeth Nolan Brown, for example, highlighted the Terris profile of Harris on the July 24, 2019, version of the Reason Roundup. Click through that link now, however, and you won’t find Harris’ inartful “joke” about inmates dying of thirst.

The original quote might have demonstrated something about Harris—indeed, it suggests why her presidential primary campaign flopped so hard—but its disappearance suggests something about the Post, and about the way traditional political media are preparing to cover Harris now that she’s one heartbeat away from the presidency.

Reason asked the Post why the Harris feature was updated, and if the paper could point to other examples of “updating” political features to remove details that show officials in an unflattering light.

As part of an online series rolled out before President Joe Biden’s and Harris’ inauguration, “we repurposed and updated some of our strong biographical pieces about both political figures,” Molly Gannon Conway, the Post‘s communications manager, told Reason via email on Thursday. “The profile of Maya Harris was updated with new reporting, as noted online, using the existing URL. The original story remains available in print.”

Conway did not include any other examples of content that had been similarly updated. She also did not respond to a question about whether Harris’ team had requested the change. The vice president’s office did not return a request for comment.

The Post, of course, can do whatever it pleases with its own content. It can update or rearrange or delete any detail in any story at any time.

Still, the decision to remove that specific passage—and to replace it with a puffy opening about how Maya has “been a constant companion along Kamala Harris’s journey into history”—is questionable at best. Yes, Harris’ inauguration as America’s first female vice president is historic, but that’s no reason to ignore or erase her troubling history as a cop and politician. It also raises questions about the Post’s approach to covering Harris going forward. At a time when legacy publications are increasingly seen as playing for one political “team” or the other, this type of editorial decision will not do anything to fix that perception—is there any doubt that the Post would not have treated an inartful comment from Mike Pence in the same way?

Intentional or not, the memory-holing of the older version of the piece sends a message that the Post is willing to pave over its own good journalism to protect a powerful politician from her own words.

Luckily, nothing is ever really gone on the internet.

Tyler Durden
Sun, 01/24/2021 – 20:30

Source: Zero Hedge, “Pravda-Level Propaganda” – WaPo Quietly Tries To Memory-Hole Kamala Harris’ “Joke” About Starving Inmates

Ethereum Surges To New Record High As DeFi Boom Re-Accelerates

Ethereum Surges To New Record High As DeFi Boom Re-Accelerates

Coins that power decentralized finance (DeFi) protocols are soaring recently as bitcoin treads water.

While bitcoin grabbed all the headlines early on in the year, it is the rest of the crypto space that is stealing its thunder most recently as Ethereum, the backbone of the smart contracts that define much of the DeFi space, has drastically outperformed…

Source: Bloomberg

That is the highest for ETH relative to BTC since

Source: Bloomberg

In fact, as Bitcoin drifts, Ethereum is up over 17% since Friday…

Source: Bloomberg

Back above the recent highs….

Source: Bloomberg

Making new all-time highs…

Source: Bloomberg

The incredible surge in the price of AAVE (driven as surge in the growth of flash loans) most recently is a good example of what is driving this push into DeFi tokens. As CoinTelegraph notes,

Flash loans allow cryptocurrency holders to collatoralize their portfolio to fund other purchases or new crypto purchases.

The loans also help investors utilize the value in their tokens without the need to sell see them and create a taxable event.

Since launching flash loans less than 12 months ago, more than $1.7 billion have been issued and it’s expected that this figure will increse as the crypto bull market progresses.

Simply put, the crypto market is becoming its own bank.

Tyler Durden
Sun, 01/24/2021 – 20:09

Source: Zero Hedge, Ethereum Surges To New Record High As DeFi Boom Re-Accelerates

Mexican President ALMO Test Positive For Covid

Mexican President ALMO Test Positive For Covid

Mexican President Andres Manuel Lopez Obrador has tested positive for COVID-19, he said on Sunday, adding that his symptoms were light and that he was receiving medical treatment.

“I regret to inform you that I am infected with COVID-19. The symptoms are mild but I am already under medical treatment. As always, I am optimistic. We will all move forward. Dr. Olga Sánchez Cordero will represent me in the morning to report how we do it every day” AMLO tweeted, adding that he will be on top of public affairs from the National Palace “for example, tomorrow I will take a call with President Vladimir Putin because, regardless of friendly relations, there is a possibility that they will send us the Sputnik V vaccine.”

According to a CNN Mexico report, “on Friday he was in a room with FM Marcelo Ebrard too, as they called US President Joe Biden.”

Mexico has been hit very hard by covid, with more than 1.7 million cases and 150k deaths.

Worse, nearly a year into the COVID-19 pandemic, Mexico has entered its darkest phase yet with hospitals in many states near capacity, and ventilators and oxygen tanks in scarce supply. At a medical center erected on a Mexico City military base, the morgue has run out of space.

“In the end you’re just stacking people in piles,” Dr. Giorgio Alberto Franyuti Kelly, chief of biosecurity for the military, who treats patients at the makeshift hospital told the LA Times.

While large-scale vaccination is widely seen as the clearest way out, this last week the government announced that its inoculation program — one of the most ambitious in Latin America — had essentially come to a standstill because the country of 128 million people has received just 766,350 doses of vaccine, all produced by Pfizer-BioNTech. That figure was supposed to hit 1.5 million by the end of the month, but Pfizer now says it can’t meet that goal because it is remodeling one of its factories in Europe to eventually boost production.

Mexican officials described the delay as a minor setback and said shipments from Pfizer are expected to resume Feb. 15.

“It is simply going to be temporarily postponed,” said Mexico’s undersecretary of health, Dr. Hugo López-Gatell, who is leading the nation’s pandemic response.

Unfortunately for AMLO, the vaccine was too late to protect him from the dreaded infection.

Tyler Durden
Sun, 01/24/2021 – 20:05

Source: Zero Hedge, Mexican President ALMO Test Positive For Covid

Goldman Lists The Three Things That Could Go "Really Wrong" In 2021

Goldman Lists The Three Things That Could Go “Really Wrong” In 2021

On Saturday, we showed why according to observations from Credit Suisse and BofA, the “US Economy Is Set To Overheat As Households Are Flooded With $2 Trillion In Excess Savings.” Then, in a note this morning from Morgan Stanley asking “What To Do About All This Optimism” the bank said that “in November, December and now January, no question or concern has come up more often than ‘everyone is optimistic‘.” Finally, the latest Fund Managers Survey showed that investors’ global growth expectations rose by 1% to a net 90%, the 3rd highest growth expectations ever (#1 in March 2002, #2 in November 2020).

This unbridled optimism prompted Goldman to boost its full year US GDP forecast to 6.6%, nearly 50% higher than the 4.1% consensus.

The common theme: record euphoria has gripped not just markets – Wall Street is just as euphoric about the broader economy where “everyone is optimistic” and for a very simple reason: with the Biden admin set to (realistically) unleash at least $1 trillion in new stimulus (down from Biden’s $1.9 trillion target), and also planning to unveil a new multi-trillion infrastructure program later in the year, negative numbers and bearish narratives simply do not matter ahead of this stimulus tsunami.

Whether or not such euphoria is justified – after all, thanks to the Blue Wave, risks from insufficient fiscal aid or substantial scarring effects now look much less likely than a few months ago – but as Goldman’s chief economist Jan Hatzius wrote today in a lengthy note titled “What Could Go Wrong” with the 2021 rebound, other downside risks remain “including uncertainty about how consumers will respond to lingering risks and how new virus mutations will affect virus spread and vaccine efficacy.” Some more details on these three risks:

  • The first downside risk according to Goldman is that consumers remain more cautious than expected, even as mass vaccination and warmer weather greatly reduce virus spread and the risk of infection. While this could restrain the consumption boom, consumer surveys and the resiliency of the consumer thus far suggest such downside is likely limited. 
  • The second, “more concerning downside risk” is that virus mutations significantly increase the bar for herd immunity, either because they are far more infectious or because they decrease the efficacy of existing vaccines. This would likely delay the consumption boom by pushing back the date when the US reaches herd immunity and virus risks diminish substantially.
  • The third, most severe downside risk is the evolution of a vaccine-resistant virus strain that would require a new vaccine and another round of vaccination. Virus-sensitive spending would likely retrench while a new vaccine is developed,and although a new vaccine could be approved in less than five months, the consumption boom would likely be delayed until 2022

Some more details on each of these points as excerpted from the Goldman report:

Downside Risk #1: Greater Consumer Caution

The first risk is that consumers remain more cautious than we expect, even as mass vaccination and warmer weather greatly reduce virus spread and the risk of infection.While our baseline already incorporates some amount of lingering risk aversion, it is possible that demand for virus-sensitive activities remains well below pre-virus trend levels, particularly for the higher-risk population. While this could restrain the consumption boom, consumer surveys and the resiliency of the consumer thus far suggest such downside is likely limited. Surveys indicate that mass vaccination will significantly increase consumers’ willingness to resume virus-sensitive activities, and the experience of other countries that have more effectively controlled the virus also shows that virus-sensitive services can quickly normalize once infections decline. Additionally, our recovery tracker shows that consumer spending has retrenched only slightly despite very bad virus spread over the winter months. To estimate the possible downside from greater consumer caution, we focus on consumer spending of older individuals who are at greater risk from the virus. Based on Consumer Expenditure Survey data, we estimate that spending by individuals above the age of 65 on virus-sensitive activities accounts for 3% of total consumer spending

To assess a downside case with increased consumer caution, we first use surveys of social distancing by age group to project our baseline services spending forecast across age groups, and then assume that services spending recovers 50% more slowly than in our baseline forecast for the older population and 10% more slowly for everyone else. As shown in Exhibit 3, more caution would slow the pace of the consumption boom, but would still likely imply fairly robust growth throughout 2021 of +5.9% on a full year basis (vs. +6.6% in our baseline forecast) and +6.3% on a Q4/Q4 basis (vs. +7.5%).

Downside Risk #2: A Highly Infectious Strain

The second, more concerning downside risk is that recent or future virus mutations sharply increase the bar for herd immunity to levels that take substantially longer to achieve. This could be because the mutations are significantly more infectious, or because the current vaccines are less effective against the new strains.

Exhibit 4 relates the basic reproduction number R0—defined as the number of new cases spread by each case in a population that hasn’t seen the disease before—and vaccine efficacy with the required immunity in the population to reach “herd immunity” under a stylized model. If R0 were 2.5, for example, and infections and vaccines provided an average protection of 80%, reaching herd immunity would require immunity of 86% of the population, acquired either through infection or through vaccination. While vaccine demand appears to have edged up over time (Exhibit 5) and is likely to rise as awareness of efficacy grows, achieving very elevated vaccine coverage might be challenging. This is especially true if lower efficacy or uncertainty about efficacy against new strains further discourages vaccination.

Under the scenario where virus mutations significantly increase the bar for herd immunity, virus spread would remain considerably higher for longer and the consumption boom would likely be both delayed and softer. Exhibit 6 shows a stylized scenario where we assume that the boost from the recovery in services spending is pushed back by two months due to the delay in reaching herd immunity, and subsequent growth in services spending is 30% slower than in our baseline forecast. In this scenario we would expect moderately lower growth in 2021 of +5.1% on a full year basis (vs. +6.6% in our baseline forecast) and +5.4% on a Q4/Q4 basis (vs. +7.5%).

Downside Risk #3: Vaccine-Resistant Variant

The third, most severe downside risk is the evolution of a vaccine-resistant virus strain that would require a new vaccine and another round of vaccination. In this scenario, progress toward herd immunity from current vaccination efforts would be lost or severely set back.

Fortunately, preliminary evidence suggests that current vaccines generate an antibody response to the UK strain and will remain effective (Table 1). Results for the South African strain are both more preliminary and more mixed, with two early studies suggesting some decline in vaccine efficacy. However, experts interpret these results cautiously, and Dr. Richard Lessels (lead author of one study) characterized the results as showing that it was “possible” that that vaccine efficacy may be “slightly diminished.” At this point, it seems unlikely that vaccines will need to be adjusted to remain effective against either new strain, although the South African virus strain has more downside potential.

In addition to the risks from current strains, nearly all experts anticipate that vaccine-resistant strains could evolve, although generally do not believe such an evolution is imminent (Table 1). Instead, a vaccine-resistant virus would likely reflect the accumulation of mutations that lower the efficacy of vaccines over time. The risk that a vaccine-resistant virus strain emerges have risen recently, since higher case counts and more infectious strains increase opportunities for efficacy-lowering mutations to occur. Nevertheless, most viruses (with the seasonal flu as a notable exception) do not mutate in a manner that regularly renders vaccines ineffective, and so we do not incorporate such a mutation in our baseline forecast.

They don’t… but they just might and soon, considering the highly “political” nature of the covid pandemic, which in addition to directly toppling the Trump presidency, has emerged as the most palatable way of mainstreaming MMT and helicopter money, and overhauling the entire fiscal and monetary structure virtually overnight. It’s why one doesn’t have to be a deranged conspiracy theorist to conclude that despite the sudden improvement in the US covid picture since Biden’s inauguration, which as we reported on Friday resulted in a record one-day drop in covid hospitalizations

… if it means that trillions more will be pumped into the economy – again, for political purposes, that the third risk, one of a “vaccine resistant virus strain”, is extremely likely to emerge some time around the summer, not only to extend the lockdowns into 2022 but to give Congress and the Fed political cover for more trillions in Universal Basic Income-funding stimmy checks (while politicians quietly embezzle trillions more).

Tyler Durden
Sun, 01/24/2021 – 20:00

Source: Zero Hedge, Goldman Lists The Three Things That Could Go “Really Wrong” In 2021

Tulsi Gabbard: Domestic-Terrorism Bill Is "A Targeting Of Almost Half Of The Country"

Tulsi Gabbard: Domestic-Terrorism Bill Is “A Targeting Of Almost Half Of The Country”

Authored by Brittany Bernstein via,

Tulsi Gabbard, the former Democratic representative from Hawaii, on Friday expressed concern that a proposed measure to combat domestic terrorism could be used to undermine civil liberties. 

Gabbard’s comments came during an appearance on Fox News Primetime when host Brian Kilmeade asked her if she was “surprised they’re pushing forward with this extra surveillance on would-be domestic terror.”

“It’s so dangerous as you guys have been talking about, this is an issue that all Democrats, Republicans, independents, Libertarians should be extremely concerned about, especially because we don’t have to guess about where this goes or how this ends,” Gabbard said.

She continued:

“When you have people like former CIA Director John Brennan openly talking about how he’s spoken with or heard from appointees and nominees in the Biden administration who are already starting to look across our country for these types of movements similar to the insurgencies they’ve seen overseas, that in his words, he says make up this unholy alliance of religious extremists, racists, bigots, he lists a few others and at the end, even libertarians.”

She said her concern lies in how officials will define the characteristics they are searching for in potential threats.

“What characteristics are we looking for as we are building this profile of a potential extremist, what are we talking about? Religious extremists, are we talking about Christians, evangelical Christians, what is a religious extremist? Is it somebody who is pro-life? Where do you take this?” Gabbard said.

She said the proposed legislation could create “a very dangerous undermining of our civil liberties, our freedoms in our Constitution, and a targeting of almost half of the country.”

“You start looking at obviously, have to be a white person, obviously likely male, libertarians, anyone who loves freedom, liberty, maybe has an American flag outside their house, or people who, you know, attended a Trump rally,” Gabbard said.

The Domestic Terrorism Prevention Act of 2021 was introduced in the House earlier this week in the aftermath of rioting at the U.S. Capitol earlier this month that left five dead.

“Unlike after 9/11, the threat that reared its ugly head on January 6th is from domestic terror groups and extremists, often racially-motivated violent individuals,” Representative Brad Schneider (D., Ill.) said in a statement announcing the bipartisan legislation.

“America must be vigilant to combat those radicalized to violence, and the Domestic Terrorism Prevention Act gives our government the tools to identify, monitor and thwart their illegal activities. Combatting the threat of domestic terrorism and white supremacy is not a Democratic or Republican issue, not left versus right or urban versus rural. Domestic Terrorism is an American issue, a serious threat the we can and must address together,” he said.

Tyler Durden
Sun, 01/24/2021 – 19:35

Source: Zero Hedge, Tulsi Gabbard: Domestic-Terrorism Bill Is “A Targeting Of Almost Half Of The Country”

"He Has Sold Us Out" – Mobs Of Farmers Swarm New Delhi Protesting Modi's New Ag Reforms

“He Has Sold Us Out” – Mobs Of Farmers Swarm New Delhi Protesting Modi’s New Ag Reforms

An angry mob of farmers, some on tractors and others marching in rank and file, are expected to enter India’s capital of New Delhi to protest unfair farming legislation passed several months ago. 

New Delhi Police will allow more than 12,000 farmers on tractors to enter the capital city this week to demonstrate, a senior official told Reuters

Farmers have been outraged with Prime Minister Narendra Modi’s farming law passed late last year. Many mom and pop farmers allege the law favors big corporations. 

In late September, crowds of farmers were spotted across multiple cities, protesting ahead of the signing of farm legislation by the Modi administration that would end the government’s programs to keep commodity prices at fixed levels, therefore allowing free markets to dictate prices.

At the time, Modi said the new farming law would “completely transform the agriculture sector” and empower “tens of millions of farmers” while driving much-needed investments and modernization efforts in the industry. 

For months, farmers have been organizing against Modi and the corporations that control him, according to OffGuardian

OffGuardian, quoting one Indian farmer, said:

“Corporates invested in Modi before the election and brought him to power. He has sold out and is an agent of Ambani and Adani. He is unable to repeal the bills because his owners will scold him. He is trapped. But we are not backing down either.”

Farmers are afraid that corporations will crush crop prices and leave them with little profits. 

Months later, and with some farmers camping on the capital’s outskirts in protest of the new law, the growing opposition parties and farmers’ unions will finally get their say this week. 

Here are the farmers heading to New Delhi. 

“About 25,000 #farmers from across Karnataka would lead a protest rally on Tuesday to Bengaluru from Nelamangla on the city’s outskirts in support of their counterparts’ tractor rally to New Delhi against the 3 farmers’ laws, said state’s farmers leader K. Chandrashekar on Sunday,” tweeted Indo-Asian News Service. 

A mob of angry farmers marches towards New Delhi. 

To note, New Delhi is where all three branches of India’s government are located, with the Rashtrapati Bhavan, Parliament House, and the Supreme Court of India.

Many farmers feel the Modi administration has sold them out to a handful of billionaires in India. With many livelihoods in jeopardy, the unrest among farmers is unlikely to be over. 

Tyler Durden
Sun, 01/24/2021 – 19:10

Source: Zero Hedge, “He Has Sold Us Out” – Mobs Of Farmers Swarm New Delhi Protesting Modi’s New Ag Reforms

Morgan Stanley Asks What To Do About All This Optimism

Morgan Stanley Asks What To Do About All This Optimism

By Andrew Sheets, chief global strategist at Morgan Stanley

A new year. A new presidential term. Both events are traditionally passages from the old to the new, when we look back and look ahead. And both serve as useful and necessary reminders: While it’s a new year and the US has a new president, many of the themes and challenges facing the market look highly familiar.

One of those themes is our belief in stronger growth and reflation. That won’t be my focus today, but it matters. Morgan Stanley’s forecasts for global growth and inflation remain well ahead of consensus estimates for 2021. I’m constantly asked, “Where do you differ?” This area is a big one.

Instead, I want to focus on another familiar theme. From sentiment measures to conference surveys to investor conversations, it’s abundantly clear that there’s an uncomfortable level of agreement that the market outlook is positive. In November, December and now January, no question or concern has come up more often than ‘everyone is optimistic’.

I may be exaggerating a little, but the question remains: What are investors supposed to do with all this optimism? And in light of it, how can we justify our own constructive view?

It is essential to monitor investor sentiment, an indicator as old as the market. But sentiment also requires a disclaimer: Investors tend to get bullish in bull markets (and vice versa). Rising prices and an improving economy tend to make people optimistic. This can cloud the picture; optimism should be higher if this is a sustainable recovery (and we think it is).

Meanwhile, sentiment measures are better at identifying buying opportunities than market tops. One reason may be that the nature of the events that cause investors to panic means they panic together, creating a strong impulse that leads to an investable low. Optimism, in contrast, is more diffuse and has a harder time producing such a singular moment.

Consider three sentiment measures that we follow: The Morgan Stanley Global Risk Demand Index, the put/call ratio and the American Association of Individual Investors Survey (AAII). During bull markets, one-month equity returns best when these indicators are in their lowest decile of optimism. Yet one-month returns are still positive, on average, when these same indicators are in their highest decile of optimism. In short, these sentiment indicators work better for ‘buying low’ than ‘selling high’.

The idea that ‘everyone is optimistic’ is also more complicated than those surveys suggest. Hedge fund net exposure is very high, per analysis from the Morgan Stanley Prime Brokerage Strategic Content Group. But US money market fund balances are also high, still US$680 billion above where they were a year ago. So again the picture is nuanced – heavy activity in certain stocks and options, but less extreme overall investment flows. Hedge funds appear optimistic, but many businesses and individuals are still keeping cash on the sidelines, given the uncertainty.

This nuance extends to market performance. Let’s say that another definition of ‘excessive optimism’ is outsized performance from assets that are already very expensive. But if we look at global equity performance over the last three months, that’s (generally) not what’s happened. In Exhibit 1, we plot three-month global sector performance (the y-axis) against how cheap that sector was three months ago relative to the last 20 years (x-axis). While there are some exceptions, the market has recently been led by sectors with below-average valuations. Tulip mania this is not.

Other measures of performance convey a similarly mixed picture. In the US, expected equity volatility is still above average, and 12-month stock versus bond performance is pretty ‘normal’ versus history. In Europe, equities have only matched German Bunds over both the last 12 months and three years. In FX, a pro-cyclical pair like Canadian dollar/Swiss franc (CAD/CHF) is still near a decade low. Can excessive optimism be found in segments of the market? Certainly. Is it everywhere? We think these datapoints argue that it’s not.

This question of ‘what’s really moved?’ is central to our view of markets in light of this optimism. We think there is more room for equities to outperform bonds in the US and Europe, in line with the usual post-recessionary pattern. We believe that select volatility risk premiums can decline. My colleagues David Adams and Sheena Shah in our global macro strategy team like buying CAD/CHF.

Investors are optimistic. Accepting the limitations of sentiment indicators in calling tops during bull markets, differentiating among the varieties of excess within a rallying market and avoiding segments with the most extreme valuations will all be important.

Tyler Durden
Sun, 01/24/2021 – 18:45

Source: Zero Hedge, Morgan Stanley Asks What To Do About All This Optimism

Preview Of Biden's Executive Orders For Next Week

Preview Of Biden’s Executive Orders For Next Week

Next week President Biden will continue his blitz of executive actions after signing 17 such directives in his first week covering a range of issues – much of which were aimed at undoing various Trump initiatives ranging from immigration to climate policy.

Via The Economist

…whether he knows what he’s signing or not for ‘his’ agenda.

For his second week in office, Biden plans on signing another flurry of executive actions, going further on climate and immigration, while also focusing on health care and other issues. Each day will have a theme, according to The Hill.

Monday will be ‘Buy American’ day, during which Biden will sign an executive order directing agencies to strengthen requirements that goods and services are purchased from American businesses and workers. Biden pledged on the campaign trail to make a $400 billion investment during his first term towards purchasing products made by American workers, as well as tighten loopholes and waivers allowing federal agencies to buy products made overseas.

As The Hill notes, former President Trump signed a ‘buy-American-and-hire-American’ executive order during his first few months in office, aimed at restricting the flow of certain visa-holders, while boosting domestic wages.

Tuesday is ‘Equity’ day, which will include a ‘broad range of executive orders’ related to racial equity.

The president is likely to establish a policing commission and reinstate Obama-era rules on the transfer of military-style equipment to local law enforcement. He is also expected to sign an executive order directing the Department of Justice to improve prison conditions and begin to eliminate the use of private prisons.

Other executive actions lined up for Tuesday include a memorandum directing agencies to strengthen engagement with Native American tribes, a memo ordering the Department of Housing and Urban Development to promote equality in housing, and an order disavowing discrimination against the Asian American and Pacific Islander community. –The Hill

Other Tuesday actions which have yet to be finalized may involve immigration, and reversing a ban on transgender troops serving on active duty.

Wednesday will be ‘Climate’ day, where Biden will announce plans for a US-hosted summit to be held on Earth Day, and likely sign an executive order to “combat climate change domestically and elevates climate change as a national security priority,” as well as reestablish the Presidential Council of Advisors on Science and Technology. The move comes after last week’s executive action to rejoin the Paris Climate Agreement, while revoking a key permit for the Keystone XL pipeline.

Thursday is ‘Health Care’ day – during which Biden will likely rescind the so-called Mexico City policy which bans the use of US funds for foreign orgs which endorse or provide abortions.

The policy, described as a “global gag rule” by reproductive health advocates, was first instated by then-President Reagan, and has been repeatedly rescinded by Democratic presidents and reinstated by Republican presidents in the years since.

Biden will also order a review of the Trump administration’s controversial changes to the Title X family planning program, which required family planning providers participating in the program to stop providing or promoting abortions to remain eligible for funding. 

The president is also slated to sign an executive order aimed at strengthening Medicaid and initiating an open enrollment period under the Affordable Care Act. –The Hill

And finally, Friday will be ‘Immigration’ day – on which Biden will expand some of the immigration-related actions he took on his first day in office. According to The Hill, one of the orders will likely be related to regional migration and border processing, and will rescind Trump-era policies surrounding the asylum program. It will also reportedly contain strategies to address the root causes of Central American migration to the United States. 

Biden will also sign an order establishing a task force to reunify migrant families separated during the Trump administration. Biden himself faced criticism during the Democratic primaries for the Obama administration’s deportation policies, but the Trump administration implemented an official zero tolerance policy that led to the separation of thousands of migrant families.

The president will also sign an order directing an immediate review of the public charge rule “and other actions to remove barriers and restore trust in the legal immigration system, including improving the naturalization process.”

A fourth order, establishing principles to guide the implementation of the Refugee Admission Program, is tentatively on the schedule for Friday but could be scrapped or changed, according to the memo. The Hill

And there you have it. We can’t help but wonder if the press will be herded out of the room if they dare ask Biden to discuss the sweeping changes he’s making?

Tyler Durden
Sun, 01/24/2021 – 18:20

Source: Zero Hedge, Preview Of Biden’s Executive Orders For Next Week

State-By-State Breakdown Of 897 US Hospitals At Risk Of Closing

State-By-State Breakdown Of 897 US Hospitals At Risk Of Closing

By Alya Elison of Becker Hospital Review

More than 500 rural hospitals in the U.S. were at immediate risk of closure before the COVID-19 pandemic because of financial losses and lack of reserves to maintain operations, according to a report from the Center for Healthcare Quality and Payment Reform.

Nearly every state had at least one rural hospital at immediate risk of closure before the pandemic. In 22 states, 25 percent or more of rural hospitals were at immediate risk, according to the report. 

The hospitals identified as being at immediate risk of closure had a cumulative negative total margin over the most recent three-year period, and their financial situation has likely deteriorated because of the pandemic. 

Across the U.S., more than 800 hospitals – 40 percent of all rural hospitals in the country – are either at immediate or high risk of closure. The more than 300 hospitals at high risk closure either have low financial reserves or high dependence on nonpatient service revenues such as local taxes or state subsidies, according to the report. 

Here are the number and percentage of rural hospitals at risk of closing in each state as of January 2021 based on the CHQPR analysis: 

Rural hospitals at high risk of closing: 30 (63 percent) 

Rural hospitals at high risk of closing: 5 (38 percent) 

Rural hospitals at high risk of closing: 4 (22 percent) 

Rural hospitals at high risk of closing: 29 (60 percent) 

Rural hospitals at high risk of closing: 16 (31 percent) 

Rural hospitals at high risk of closing: 11 (27 percent) 

Rural hospitals at high risk of closing: 3 (100 percent) 

Rural hospitals at high risk of closing: 0 (0 percent) 

Rural hospitals at high risk of closing: 7 (35 percent) 

Rural hospitals at high risk of closing: 26 (43 percent) 

Rural hospitals at high risk of closing: 8 (67 percent) 

Rural hospitals at high risk of closing: 7 (25 percent) 

Rural hospitals at high risk of closing: 20 (27 percent) 

Rural hospitals at high risk of closing: 20 (38 percent) 

Rural hospitals at high risk of closing: 40 (44 percent) 

Rural hospitals at high risk of closing: 76 (72 percent) 

Rural hospitals at high risk of closing: 16 (23 percent) 

Rural hospitals at high risk of closing: 26 (53 percent) 

Rural hospitals at high risk of closing: 10 (40 percent) 

Rural hospitals at high risk of closing: 1 (25 percent) 

Rural hospitals at high risk of closing: 2 (40 percent) 

Rural hospitals at high risk of closing: 19 (30 percent) 

Rural hospitals at high risk of closing: 28 (31 percent) 

Rural hospitals at high risk of closing: 41 (62 percent) 

Rural hospitals at high risk of closing: 31 (54 percent) 

Rural hospitals at high risk of closing: 19 (37 percent) 

Rural hospitals at high risk of closing: 24 (33 percent) 

Rural hospitals at high risk of closing: 6 (46 percent) 

New Hampshire
Rural hospitals at high risk of closing: 4 (24 percent) 

New Jersey
Rural hospitals at high risk of closing: 0 (0 percent) 

New Mexico
Rural hospitals at high risk of closing: 6 (25 percent) 

New York
Rural hospitals at high risk of closing: 30 (59 percent) 

North Carolina
Rural hospitals at high risk of closing: 19 (36 percent) 

North Dakota
Rural hospitals at high risk of closing: 16 (43 percent) 

Rural hospitals at high risk of closing: 19 (27 percent) 

Rural hospitals at high risk of closing: 41 (56 percent) 

Rural hospitals at high risk of closing: 11 (34 percent) 

Rural hospitals at high risk of closing: 18 (42 percent) 

Rhode Island
Rural hospitals at high risk of closing: 0 (0 percent) 

South Carolina
Rural hospitals at high risk of closing: 12 (48 percent) 

South Dakota
Rural hospitals at high risk of closing: 11 (24 percent) 

Rural hospitals at high risk of closing: 30 (59 percent) 

Rural hospitals at high risk of closing: 82 (56 percent) 

Rural hospitals at high risk of closing: 3 (14 percent) 

Rural hospitals at high risk of closing: 2 (15 percent) 

Rural hospitals at high risk of closing: 14 (50 percent) 

Rural hospitals at high risk of closing: 20 (50 percent) 

West Virginia
Rural hospitals at high risk of closing: 11 (46 percent) 

Rural hospitals at high risk of closing: 16 (22 percent) 

Rural hospitals at high risk of closing: 7 (30 percent) 

Tyler Durden
Sun, 01/24/2021 – 17:55

Source: Zero Hedge, State-By-State Breakdown Of 897 US Hospitals At Risk Of Closing

Fearing Citywide Economic Collapse, Wall Street Firms Offer Help To Speed Up NYC Vaccinations

Fearing Citywide Economic Collapse, Wall Street Firms Offer Help To Speed Up NYC Vaccinations

Wall Street is offering to help get New York vaccinated and get life back to normal for workers in the Big Apple.

Over the last 12 months of the Covid pandemic, the city has been brutalized by small business shutdowns, financial firms moving south, increasing homicides and the general ineptitude of Mayor Bill de Blasio.  As we have noted here on Zero Hedge, the result has been barren streets and plunging rents. 

Now, financial firms – historically not known for helping anyone but themselves – are reaching out and doing what they can to help distribute the Covid-19 vaccine. They are aiming to show the industry it is safe for employees to come back to Manhattan, Bloomberg notes, before there is “little reason left for them to do so”. 

NYC real estate mogul William Rudin said: “Needles in arms and people back in their seats and offices. We need to get the vaccine out more ubiquitously to every part of the city and get people confident and comfortable, to get them back into the city and back to work.” DJ D-Sol, CEO of Goldman Sachs, agrees. He was among several firms that included Goldman Sachs, JPMorgan, Citigroup and KKR & Co. that offered to help with vaccine distribution and logistics for the city last week.

Meanwhile, Mayor Bill de Blasio is dealing with a shrinking supply of vaccines, which caused him to cancel more than 20,000 appointments for the jab last week. 

As of now, it looks as though working from home is going to continue for at least the first half of 2021 for many firms. “As of Jan. 13, the New York area had an office occupancy rate of about 13%,” Bloomberg notes. It was the second lowest figure, behind only San Francisco, among 10 major U.S. cities. Rents have plunged, as we noted, and retail real estate is flooding the market. Commercial and residential property deals in the city were down 46% last year compared to 2019. This resulted in a $1.6 billion loss in tax revenue for the city.

Workers, meanwhile, are in the midst of giving up on expensive apartment leases and are, instead, moving to the suburbs or cheaper areas of the city. 

Ruth Colp-Haber, CEO of real estate services firm Wharton Property Advisors said: “The office market is the crux of the whole New York City economy. Until office workers come back to the market, restaurants, retail will not revive. Same with mass transit.”

A consortium of Wall Street leaders were on the verge of suggesting employees come back last September, but those ideas ran head-first into a mounting infection rate as the city approached the winter. By December, the few who had returned to work were starting to thin out once again.

But now, the tone has turned more dire. Firms are offering up their distribution networks, including their retail branches and other real estate they own in the city, to try and help. Wall Street leaders seem to have genuine (and warranted) concern about whether or not New York’s economy could simply collapse if it continues down the path it’s on. 

JPMorgan CEO Jamie Dimon – also likely tired of not having an intern bring him coffee every morning – said last week that “hopefully by September” things will be back to normal. He concluded: “You do see people want to go back to work once they feel safe. A vaccine will be a big part of that.”

Tyler Durden
Sun, 01/24/2021 – 17:30

Source: Zero Hedge, Fearing Citywide Economic Collapse, Wall Street Firms Offer Help To Speed Up NYC Vaccinations

Is Gold Money?

Is Gold Money?

Authored by Robert Blumen via The Mises Institute,

Is gold money? Many would say so, and a web search returns tens of thousands of additional affirmative responses. If you want to start a fight with a gold bug, take the opposite view.

But is it so?

To answer the question of whether gold is money requires a definition. This one, from Wikipedia, is typical:

Money is anything that is generally accepted in payment for goods and services and in repayment of debts. The main uses of money are as a medium of exchange, a unit of account, and a store of value.

Wikipedia refers to three properties of money. However, according to the Austrian economist Carl Menger, its acceptability in trade is the defining property. While money undoubtedly does serve as a store of value and a unit of account, these properties are derivative, not definitional properties. The reason that a medium of exchange necessarily is also a store of value is the anticipation of its exchange value in the future.

On this point Menger wrote,

[I]t appears to me to be just as certain that the functions of being a “measure of value” and a “store of value” must not be attributed to money as such, since these functions are of a merely accidental nature and are not an essential part of the concept of money.

Using the above definition, the question of whether any particular good is or is not money, can be posed in this way: is the good in question accepted as the final means of payment for transactions?

At present, in the developed world, nearly every nation has its own money or belongs to a currency union, such as the EU. Some nations in the developing world use the US dollar. In highly inflationary environments, the local currency is often spontaneously rejected in favor of the dollar or another foreign currency. Hardly anywhere do we find gold generally accepted as a means of payment. So gold must fail the definitional test of moneyness.

Is this the end of the argument (and so the end of a very short article)? Not quite. Gold is not money, but it has most of the desirable properties of money, and the process by which it became money in the past gives some clues about how it may become money once again.

A store of value is not necessarily a medium of exchange. As Menger says, a nonmonetary commodity can serve as a store of value:

But the notion that attributes to money as such the function of also transferring “values” from the present into the future must be designated as erroneous. Although metallic money, because of its durability and low cost of preservation, is doubtless suitable for this purpose also, it is nevertheless clear that other commodities are still better suited for it.

Analyst Paul van Eeden has shown that gold has maintained its purchasing power relative to the time that the gold standard ended. In “Is Gold an Inflation Hedge?” I have provided links to Van Eeden’s articles and a more detailed discussion. I will summarize his analysis here. A theoretical gold price equivalent which would give gold the same purchasing power as it had at the end of the gold standard is calculated by taking the convertibility ratio of $35 in 1933, and then multiplying by a factor representing the growth in the quantity of fiat money from that time. Under the classical gold standard, gold was the entire world’s money. By counting worldwide growth in currency (not only US dollars) and comparing it to a worldwide price currency index of the gold price, van Eeden avoids the pitfalls of looking only at gold’s dollar price, which can experience significant volatility due to the dollar’s exchange rate against other national currencies.

Van Eeden’s research shows that, since the end of the gold standard, the price of gold in units of fiat currency has tracked its purchasing-power-equivalent price fairly well, oscillating in a band around its theoretical value. In essence, the purchasing power of gold has been reasonably stable in the time since the end of the gold standard, which is only another way of saying that gold has served as a store of value.

Even today most of the demand for gold is not for direct use, but demand to hold. In the developed world, people purchase coins and bars for storage in vaults. In other areas, people save by accumulating bullion jewelry. Distinct from ornamental jewelry, bullion jewelry has low workmanship value added. Its price is not much greater than the melt value of its metal content.

I wrote the following in “The Myth of the Gold Supply Deficit“:

The World Gold Council estimates that 52% of gold is held as jewelry. James Turk subdivides jewelry holdings into low carat and high carat. The former is purchased mainly for the gold value, as an alternative to buying bars and coins. The latter is purchased mostly for fashion. According to Turk’s estimate (which was published in 1996), monetary jewelry at that time accounted for about 60% of jewelry with fashion jewelry accounting for the remaining 40%. However, even when made into jewelry, the gold is not destroyed and can come back into the market as scrap. The WGC figures show significant recovery from scrap.

That gold continued to be a store of value post–gold standard was unexpected by many economists. In the early 1970s, when the dollar’s link to gold was cut, economist Milton Friedman predicted that the price of gold would collapse.4 The Nobel laureate believed that the gold derived its value from its relationship with the dollar; without gold backing, there would be far less demand for gold. There would, of course, continue to be industrial demand for the metal, but without monetary demand provided by the dollar, the vast supply that had been accumulated during the preceding centuries would overhand the market, depressing the gold price for the foreseeable future. Friedman could not have been more wrong. It was the dollar that collapsed in the 1970s, while the gold price in dollars began a bull run that was not eclipsed in nominal terms until late last year.

A similar and still widely held view in the world of mainstream financial analysts is that gold has been “demonetized.” The argument goes like this: central banks decide what money is; central banks have determined that gold is not money; therefore gold is not money. Only the stupid gold investors haven’t figured this out. This view of the gold market sees the price of gold as determined primarily by central banks (who own an estimated 10–17% of aboveground supply). The critical variable is how they will time the sales of their gold hoards without causing a selling panic as market participants realize that their gold coins and bars have no monetary value.

But why is gold a better store of value than most any of a vast number other nonmonetary goods? Why were Milton Friedman and the other economists wrong? Their error was the assumption that political institutions have the final say over what is and is not money. But this is not so: the market has final say. Looking at the process by which money originated from barter helps to understand why. According to Menger, money came into being through the efforts of individuals to expand the range of goods they could acquire through exchange beyond the possibilities available. Some individuals in a barter economy begin by bartering their goods for a commodity that they do not need but is generally in demand throughout the market, with the intention of later exchanging that commodity for other goods. This strategy is called indirect exchange. These astute traders realize that “the acquisition by trade of the consumption goods that he needs…can proceed…much more quickly, more economically, and with a greatly enhanced probability of success.”

As societies moved from barter to monetary economies, different goods were in competition with each other for use as money. Over time, as monetary exchange expanded in proportion to barter, some commodities were found to work better as money than others, until only a handful of them became “acceptable to everyone in trade.” Those were gold and silver.

What qualities have made gold (and silver) the winners of the monetary competition in centuries past? The qualities most often cited by monetary historians are durability, divisibility, recognizability, portability, scarcity (the difficulty of producing more of it), and a value-to-weight ratio that is neither too high nor too low. Too low a ratio would make it hard to carry enough for spending, while too high a ratio would make small transactions difficult and prevent the commodity from being sufficiently widely owned in the prior barter economy. Gold still has these qualities today. While fiat money has some of them, it fails the scarcity test: it is too easy to create more of it.

The result of market competition is not necessarily permanent. Market competition is an ongoing process. Even when one commodity emerged as money, there continued to be competition from other nonmonetary commodities. Once the world’s money, even gold could have lost its place had a superior alternative emerged. But that is not the reason we no longer use it. Political money did not prove its superiority through a market process. What happened instead was a politically imposed change from a better system to a worse system.

Although the central bankers have used political means to replace gold with paper, they do not have the power to end the competition between their money and commodity money. The “demonetization” of gold by central banks has rigged the competition—but not ended it.

Gold as money may not be over for all time. As the monetary system melts down, gold functions as “shadow money,” an alternative that competes with the political money. It remains a store of value because of its potential to become money again. There is continuing demand for gold as a hedge against the breakdown of the fiat system.

Governments cannot force people to use their money beyond a point. The market will only continue to accept fiat money as long as it works well enough (or even, not too badly). If governments debase their currency beyond a point where it maintains some value over time, people will stop using government currency and switch to something else.

In countries suffering hyperinflation (or even just excessive inflation), people typically start quoting prices and accepting in trade in the more stable currencies of other countries. Earlier this year, VietNamNet reported that land prices are being quoted in gold rather than the local currency, the dong.

The world is lurching through a serious monetary disorder. The proximate cause is the collapse of the housing bubble and the subprime-credit crisis, but the ultimate cause is the inherently unstable monetary system foisted upon us by a banking cartel. Central bankers are called upon to act as lenders of last resort, but in their efforts to inflate their way out of the credit collapse, they risk igniting a hyperinflationary bonfire that will destroy the world’s major fiat currencies. Gold was money once, and could become so again.

[Originally published September 2008.]

Tyler Durden
Sun, 01/24/2021 – 17:05

Source: Zero Hedge, Is Gold Money?

Biden 2020 Run Backed By $145 Million In 'Dark Money'

Biden 2020 Run Backed By $145 Million In ‘Dark Money’

President Biden’s campaign received a record-breaking amount of anonymous donations to outside groups backing him, which means the public “will never have a full accounting of who helped him win the White House,” according to Bloomberg.

In total, $145 million in so-called dark money donations, “a type of fundraising Democrats have decried for years,” backed the Biden campaign – and combined with his $1.5 billion record-breaking haul. Of note, Biden’s campaign called for banning certain types of nonprofits from spending money to influence elections, and that any organization spending over $10,000 to benefit a candidate register with the Federal Election Commission (FEC) and disclose its donors.

They didn’t specifically call on their own supporters to do so, however.

That amount of dark money dwarfs the $28.4 million spent on behalf of his rival, former President Donald Trump. And it tops the previous record of $113 million in anonymous donations backing Republican presidential nominee Mitt Romney in 2012.

Democrats have said they want to ban dark money as uniquely corrupting, since it allows supporters to quietly back a candidate without scrutiny. Yet in their effort to defeat Trump in 2020, they embraced it.Bloomberg

One such dark money recipient, Priorities USA Action Fund designated by Biden as his preferred vehicle for outside spending, backed Biden with $26 million originally (and anonymously) donated to its nonprofit arm, Priorities USA.

Priorities USA Chairman Guy Cecil deflected when asked about the funds, saying in a statement “We weren’t going to unilaterally disarm against Trump and the right- wing forces that enabled him.”

Another entity funneling dark money to benefit Biden was the Future Forward PAC, which spent $104 million backing Biden. While they received tens of millions from known sources, such as $46.9 million from Facebook co-founder Dustin Moskovitz, $3 million from Twilio CEO Jeff Lawson, and $2.6 million from Alphabet’s Eric Schmidt – they received $61 million from Future Forward USA Action – none of which requires disclosure of sources.

The Sixteen Thirty Fund, a nonprofit that sponsors progressive advocacy, donated a total of $55 million in the 2020 election cycle to Democratic super-PACs, including Priorities USA Action Fund and Future Forward PAC, FEC records show. That total was much more than the $3 million it gave in 2018.

Amy Kurtz, executive director of the Sixteen Thirty Fund, said the surge of money to the group, which doesn’t disclose the names of its donors, included people who previously gave to Republicans or had not been engaged in politics.

The flood of dark money to Democrats and progressive groups has complicated their effort to reform the system. –Bloomberg

According to former FEC general counsel Larry Noble, Biden benefited from a campaign finance law loophole – though Noble also noted that dark money is hardly the largest source of cash contributed to campaigns when wealthy donors can simply write eight-figure checks to super-PACs (which have heightened disclosure requirements). Meanwhile, joint fundraising committees can bring in lots of donations as high as $830,500.

That said, donors who wish to remain anonymous can give to political nonprofits, such as Defending Democracy Together – which spent $15.6 million in support of Biden – none of which has to be reported to the FEC. Moreover, donors can give money to nonprofits which then give money to super-PACs, such as in the case of Priorities USA.

Big donors — individuals or corporations — who contributed anonymously will have the same access to decision makers as those whose names were disclosed, but without public awareness of who they are or what influence they might wield.

The whole point of dark money is to avoid public disclosure while getting private credit,” said Meredith McGehee, executive director of Issue One, which advocates for reducing the influence of money on politics. “It’s only dark money to the public.” –Bloomberg

According to the Center for Responsive Politics, Democrats benefited from $326 million in dark money this election cycle – over twice the $148 million that supported Republicans. In some states, Democrats heavily relied on dark money to purchase attack ads against Trump in battleground states such as Michigan, Wisconsin and Pennsylvania.

Not all Democrats are happy with the flood of dark money in the 2020 election cycle.

Dark money is toxic to democracy — period,” said Democratic Senator Sheldon Whitehouse of Rhode Island. “The fact that progressive groups have learned to fight back using similar tactics is no excuse for continuing the plague of dark money in America.

Tyler Durden
Sun, 01/24/2021 – 16:40

Source: Zero Hedge, Biden 2020 Run Backed By 5 Million In ‘Dark Money’

The Mystery Of The Stagnated Productivity Growth

The Mystery Of The Stagnated Productivity Growth

Authored by Tuomas Malinen via,

In late 2017 we reported, as probably the first macroanalytic firm in the world to do so, that the growth of Total Factor Productivity (TFP) has stagnated globally since 2011 (see Figure 1). In the economic community, our finding was met with interest, but also with resistance and disbelief.

Figure 1. The regional and global growth of the Total Factor Productivity (TFP). Source: GnS Economics, Conference Board.

Healthy criticism is naturally the correct way to welcome all radical new findings, but in this case the Modern Monetary Theory (or “MMT”) community in particular attacked our findings with a barrage of (mostly contrived) arguments.

In this somewhat technical blog post, we aim to clarify the misconceptions surrounding the issue, and to briefly summarize why we should, in fact, be gravely concerned about the stagnation of productivity growth.


Effectively, TFP measures the share of GDP growth which cannot be accounted for by capital investment (in equipment and machinery) and the quantity and the improved quality of the labour force (skills and training). Thus, TFP is the “unexplained” element of economic growth.

The existence of such a factor was first postulated as economists failed to capture the entirety of economic growth by changes in capital and labour. To understand the difference between estimates and reality, in 1956 Robert Solow developed the now-famous Solow Model of Economic Growth, which was awarded the Nobel Prize in 1987.

Unfortunately, TFP is hard to measure and no simple data to represent it is available.  It was the Solow Model which first suggested that one can find the value of TFP by collecting data from observed factors for capital, labour and economic growth and then, by applying some basic estimation techniques to the growth model, calculate TFP as the remainder, now known as the “Solow Residual”.

Furthermore, it was discovered that a large part of GDP growth was explained by technological innovation rather than purely by capital and labour. Therefore, the Solow Model inspired a surge in global research on total factor productivity.

It is both unprecedented and unexpected for TFP to stagnate in an economic expansion. Stagnating productivity growth implies that firms are unable to increase their productivity, and that they are unprofitable as well. This is occurs naturally during recessions and crises, when both investments by, and the income of corporations tends to fall.

On the other hand, it is deeply worrying when corporations are unable to increase their productivity in an economic expansion, because it implies that new technology is not flowing into the production process in an effective manner.

The foundations of the Solow model of economic growth

Now, we must take a short walk on the ‘wild-side’ and lay down the foundations of the Solow growth model in order to explain where TFP arises from. We are forced to alter the regular notations due to the limitations of our platform.

In any given economy, the production of goods and services emerges from three main sources: capital, labour, and total factor productivity, or TFP. In Solow’s (1956) growth model, this is illustrated by the formula

where  is shorthand for Gross Domestic Product GDP, the quantity of capital is denoted by K, the labour force by and TFP by A. Note that productive role of capital and labour is expressed by  while total factor productivity A multiplies the GDP produced by capital and labour alone.

Equation (1), even though a simplified expression for the real world, still illustrates the basic idea of TFP. For example, in a case where the capital stock K and the labour force L remain constant, GDP may grow if the TFP increases. Conversely, in spite of investments in capital and labour, GDP may fall under conditions of decreasing TFP.

Equation (1) can be developed further in order to tell a more specific story about the production of Y= GDP. Often used is the multiplicative formula:

which implies that the factors may differ in terms of their relative importance, which in (2) is expressed by the exponents adding up to unity. By taking the logarithms of (2) and then differentiating against time, one can derive an expression which shows how the growth rate of the GDP (Ý/Y) is associated with the growth rates of the factors (Á/A, ´K/K, ´L/L):

The Total Factor Productivity

The multiplicative formula (3) suggests a very straightforward way to estimate the unobservable rate of technical progress by collecting the observable data from growth rate of the GDP (Ý/Y), capital (´K/K), and labour (´L/L). Note that several observations for each element is needed. They may come either from several different countries in a given year, or from a single country over many years. The more observations, the better.

Once the data is collected, one first estimates the reduced formula:

to estimate the average value for the parameters a and b denoted by ã and õ. Since the estimated parameters are sample-averages, the observed growth rate in individual countries or years may differ from the growth rate calculated by ã´K/K + õ´L/L. In general, the difference between the observed and calculated value is called the residual. Equation (3) now says that the reason for the residual to exist is that the term

is missing. Since we already know the values for ã and õ, we can easily calculate the rate of technical progress Á/A, or the growth rate of TFP, for each individual country or year.

Therefore, the rate of technical progress is known as “Solow residual”. The trick is that the Solow model can uncover the unobserved value of the TFP from the observed values of GDP, capital and labour and thus to explain the “unexplained” part of economic growth.

There’s no mystery, but a worry

Every factor (Y, K, L) is calculated in real terms, which means inflation is removed from them using a price deflator. More importantly, the calculation of total factory productivity is not related to price, salaries, capital gains, This is because all monetary values cancel out in its calculation (see for example the Conference Board for details; requires registration).

What is truly troubling, however, is how global TFP growth can stagnate when the economy is growing.

In Q-Review 1/2019, we detailed the process through which economy grows. We wrote:

Long-term economic growth is driven by technical innovations which improve productivity. What this means is that innovations (from spinning-jenny to industrial robots and beyond) increase the productivity of a human worker thus increasing his wage and making products cheaper.

Moreover, we noted that:

However, this process assumes a crucial element, which has been dubbed creative destruction. It means, simply, that more efficient (more productive) methods will replace the old and inefficient. This requires that old firms fail and new firms take their place.

In a capitalist market economy, both the successes and failures of the private sector drive economic progress. The first enables the accumulation of income and capital, while the second exposes unsustainable businesses while encouraging new sustainable businesses in a process Schumpeter called “creative destruction”. 

Thus, the economy grows through the delicate balance between failures and successes. There cannot be one without the another.

The destruction of the creative destruction

As we have been warning since 2013, central banks have, with their excessive meddling in the economy, destroyed price discovery in the capital markets. When risk is not correctly priced in the markets, capital allocation is distorted and poor investment decisions result.

Purchases of government bonds by central banks inflates their prices, making debt financing too cheap, sparing politicians from having to make tough choices fix their ailing economies.  As we are now witnessing in real-time, this leads invariably to over-indebtedness and, eventually, to a debt crisis.

Even more worryingly, low interest rates and easy credit keeps firms that should fail in operation. These so-called ‘zombie companies’ tie-up private capital and bank lending in unprofitable uses leading, first, to stagnated productivity growth in corporations and then, as a result of excessive overall debt levels, to suboptimal economic performance on both a  national (and global) level.

To simplify, central bank meddling is highly detrimental to the economy.

The complete story behind stagnating productivity growth and the wholesale destruction of economies must include the failed policies of governments and the detrimental effects of supra-national control mechanisms. Since the arrival of the pandemic, and the response of governments to it, everything has gone from bad to worse.

*  *  *

We will return to these in detail in the March issues of our Q-Review series

Stay informed how the world economy and the global economic crisis through our Q-Review reports and Deprcon Service, which are available at GnS Store

Tyler Durden
Sun, 01/24/2021 – 16:15

Source: Zero Hedge, The Mystery Of The Stagnated Productivity Growth

Anti-LGBT Church In California Hit With "IED Attack"

Anti-LGBT Church In California Hit With “IED Attack”

An explosion that rocked a church in El Monte, a city in Los Angeles County, California, has prompted an investigation by the FBI on Saturday morning. 

The First Works Baptist church at 2600 Tyler Avenue was apparently bombed with “an IED,” or a homemade or “improvised” explosive device, the FBI said. 

Police and firefighters arrived at the scene early Saturday morning to find smoke coming out of the building, the Los Angeles County Fire Department said.

The controversial church has had a history of being targeted. More recently, a demonstration was held following church members saying the government should execute gay people, San Bernardino hate-speech expert Brian Levin told San Gabriel Valley Tribune

 FBI spokeswoman Laura Eimiller said: 

“As to the question of whether this was a hate crime, that’s always going to be considered among the theories when a house of worship is attacked,” Eimiller said. “But it would be premature to confirm any motive at this time, and we are not ruling any other motive out.”

El Monte police Lt. Christopher Cano said, “it appeared that the walls to the church had been vandalized as well as all the windows.

The windows “appeared at first to be smashed, then we realized that the windows were not smashed, that they had blown out from some explosion,” Cano said.

“Although we do not yet know the motive, I am aware of the anti-LGBTQ+ and misogynist sermons given by the pastor of First Works Baptist Church,” L.A. County Supervisor Hilda Solis said in a statement, “and my office has referred concerning matters about the pastor to the County’s Human Rights Commission, who has been working in collaboration with the City of El Monte to de-escalate the situation.”

The Southern Poverty Law Center (SPLC), a nonprofit legal advocacy organization specializing in civil rights and public interest litigation, labels the church an anti-LBGTQ group on its website

Numerous church members spoke at the “Make America Straight Again” conference in Orlando in 2019, according to SPLC. 

Despite President Joe Biden’s calls for “unity” to bring the fractured country together, it appears the escalation between the left and right are continuing. 

Tyler Durden
Sun, 01/24/2021 – 15:50

Source: Zero Hedge, Anti-LGBT Church In California Hit With “IED Attack”

Biden To Ban Travelers From South Africa After Fauci Flip-Flops On 'Deadliness' Of New Strains

Biden To Ban Travelers From South Africa After Fauci Flip-Flops On ‘Deadliness’ Of New Strains

Just two days after unleashing his latest immigration Executive Order, easing border restrictions and removing President Trump’s travel ban from so-called “majority Muslim” countries, President Biden will impose a ban on most non-U.S. citizens entering the country who have recently been in South Africa starting Saturday in a bid to contain the spread of a new variant of COVID-19, U.S. public health officials told Reuters.

Given that 80% of South Africans are black, the natural question is – is this ban racist?

Or was Trump’s travel ban just good science?

Additionally, Biden on Monday is also reimposing an entry ban on nearly all non-U.S. travelers who have been in Brazil, the United Kingdom, Ireland and 26 countries in Europe that allow travel across open borders, said the sources, who requested anonymity because the plans have not yet been made public.

Notably, Reuters points out that the South African variant, also known as the 501Y.V2 variant, is 50% more infectious and has been detected in at least 20 countries. CDC officials said they would be open to adding additional countries to the list if needed.

The South African variant has not yet been found in the United States but at least 20 U.S. states have detected a UK variant known as B.1.1.7.

Current vaccines appear effective against the UK mutations.

And Dr.Fauci has once again flip-flopped on that variant, now claiming that the new, more virulent strain of the coronavirus is also more deadly.

As The Hill reports, asked by CBS’s Margaret Brennan about his earlier claims that the strain, while more infectious, was apparently no deadlier, Fauci said:

“The data that came out was after they had been saying all along that it did not appear to be more deadly. So that’s where we got that information.”

“When the British investigators looked more closely at the death rate of a certain age group, and they found that it was one per thousand… and then it went up to 1.3 per thousand in a certain group,” Fauci added.

“That’s a significant increase. So the most recent data is in accord with what the Brits are saying. We want to look at the data ourselves, but we have every reason to believe them. They’re a very competent group.”

Fauci went on to say Americans “need to assume now that what has been circulating dominantly in the U.K. does have a certain increase in what we call virulence, namely the power of the virus to cause more damage, including death.

And worse still, Fauci warned separately that “in some cases [the South Africa strain] diminishes the efficacy of the vaccine” but the vaccine was still generally effective.

Has he been ‘liberated’ to give us this advice? Or is this making up for his awful admission last week that the Biden administration is NOT “starting from scratch” and that the Trump administration (of whose COVID Task Force he was a major part) actually did something.

Either way, as hospitalization rates, case increments and deaths slow dramatically – despite Biden’s “worst is yet to come” comments – there is always room for more fear, just as the indoor dining bans are lifted across various blue states…

Tyler Durden
Sun, 01/24/2021 – 15:42

Source: Zero Hedge, Biden To Ban Travelers From South Africa After Fauci Flip-Flops On ‘Deadliness’ Of New Strains

Faces Of Lockdowns

Faces Of Lockdowns

Authored by Amelia Janaskie via The American Institute for Economic Research,

While data, statistics, historical allusions, and appeals to morality all demonstrate the disastrous nature of lockdowns, none show the devastation as vividly as personal stories from those suffering the most. 

Since March 2020, New York City has faced a constant back and forth of new and revised Covid-19 regulations. Although these policies initially appear helpful in Covid mitigation, they are not only ineffective but extremely harmful to people and their livelihoods. We spoke to a few working New Yorkers and found the situation to be just as suspected: businesses on the brink of shutting down for good, students struggling to learn, and unmatched frustration. The anecdotal videos below provide a glimpse into the lives of many people in New York City.

While the individuals interviewed are understandably frustrated, they all exude perseverance, strength, and – above all – hope. 


Irene is no stranger to adversity. In 2018, her husband, Chris, unexpectedly died.

Faced with her grief, Irene juggled raising their four boys with the sudden demand of learning how to run a restaurant. Prior to her husband’s untimely passing, she had not been involved with operating the diner, so when he died, she briefly contemplated selling it. But the restaurant was her husband’s legacy; quitting was not an option, especially for a New Yorker like herself. As a resolute business owner and mother, she refuses to give up her rights to freedom and to earn a living. 


Adam, a special education teacher at a high school in Bay Ridge, Brooklyn, is especially concerned with the academic, social, and emotional well-being of his students during lockdowns.

His students come from a diverse neighborhood and most are from immigrant families. Adam has watched most of his class suffer through remote learning and fall behind academically because of school closures. A significant portion of their families do not have the time, resources, or ability to facilitate learning in a way that at all resembles in-person education.  


Ed’s culinary dreams became a reality in March 2007 when he opened Ed’s Lobster Bar in SoHo.

He successfully led his burgeoning seafood restaurant through the 2007-2008 financial crisis, but 2020 lockdowns brought new and greater challenges. Restaurants have been disproportionately harmed by lockdown restrictions, and like many others, The Lobster Bar has been forced to cut worker pay and limit dining capacity. Looking ahead, Ed hopes to return to a free society where people can choose to participate in the New York economy, all while keeping a determined mindset in the face of hardship. 

Tyler Durden
Sun, 01/24/2021 – 15:25

Source: Zero Hedge, Faces Of Lockdowns

Ray Dalio: "We Are On The Brink Of A Terrible Civil War"

Ray Dalio: “We Are On The Brink Of A Terrible Civil War”

It was over a decade ago that we first warned the Fed’s unconstrained monetary lunacy will eventually result in civil war, a prediction for which Time magazine, which back then was still somewhat relevant, mocked us. This is what Time’s Stephen Gendel said in October 2010:

What is the most likely cause of civil unrest today? Immigration. Gay marriage. Abortion. The results of Election Day. The mosque at Ground Zero. Nope.

Try the Federal Reserve. Nov. 3 is when the Federal Reserve’s next policy committee meeting ends, and if you thought this was just another boring money meeting you would be wrong. It could be the most important meeting in the Fed’s history, maybe. The U.S. central bank is expected to announce its next move to boost the faltering economic recovery. To say there has been considerable debate and anxiety among Fed watchers about what the central bank should do would be an understatement. Chairman Ben Bernanke has indicated in recent speeches that the central bank plans to try to drive down already low interest rates by buying up long-term bonds. A number of people both inside the Fed and out believe this is the wrong move. But one website seems to indicate that Ben’s plan might actually lead to armed conflict. Last week, a post on the blog Zero Hedge said … that the Fed’s plan is not only moronic, but “positions US society one step closer to civil war if not worse.”

* * * * *

The problem is that the Fed directly sets only short-term interest rates. And they are already about as close to zero as you can go. That’s why Bernanke has been talking about something called “quantitative easing.” That’s when the Fed basically creates money to buy the long-term bonds that it doesn’t directly control and drives down those interest rates as well. That should further reduce the cost of borrowing for large companies and homeowners. Some people are calling this “QE2” because the Fed made a similar move during the height of the financial crisis when it bought mortgage bonds. (See photos of the Tea Party movement)

Not everyone agrees this is a good move. In fact, a number of presidents of regional Fed banks, not all of which get to vote at Fed policy meetings, have recently come out against Bernanke’s plan. Some say it sets bad policy. Others think it will stoke inflation, which might be the point. Few, though, have warned of armed conflict. Here’s how Zero Hedge justifies its prediction of why the Fed’s Nov. 3 meeting will lead to violence:

In a very real sense, Bernanke is throwing Granny and Grandpa down the stairs – on purpose. He is literally threatening those at the lower end of the economic strata, along with all who are retired, with starvation and death, and in a just nation where the rule of law controlled instead of being abused by the kleptocrats he would be facing charges of Seditious Conspiracy, as his policies will inevitably lead to the destruction of our republic.

O.K. The idea that Bernanke might kill large swaths of low-income neighborhoods or Florida by his plan to further lower interest rates is a little ridiculous. But there is a point in Zero Hedge’s crazy. Lower rates do tend to favor borrowers over savers. And the largest borrowers in the country are banks, speculators and large corporations. The largest spenders in the U.S., though, tend to be individuals. Consumer spending makes up 70% of the economy. And the vast majority of consumers are on the low end of the income scale. So I think it is a valid question to ask whether the Fed’s desire to drive down interest rates at all costs is working. Companies are already borrowing at low rates. They are just not spending. (Read a special report on the financial crisis blame game)

That being said, civil war, probably not. “It is a gross exaggeration,” says Allan Meltzer, who is a top Fed historian at Carnegie Mellon. “I cannot recall ever learning about riots or civil war even when the Fed made other mistakes.”

All this happened more than a decade ago – since then we have seen not only QE2, but “Twist”, QE3, “NOT QE”, and eventually QEternity last March which mutated into outright and unlimited helicopter money to pay for universal basic income – and while at the time it merely added to our “reputation” of a tinfoil conspiracy blog, it appears we were (sadly) correct again based not only on the increasing tears within the US social fabric which culminated in unprecedented riots and looting last summer and continued social upheavals in recent months, but also in terms of what one of the biggest investing minds of this generation just tweeted. We are referring to Bridgewater founder and billionaire Ray Dalio, who moments ago tweeted that we are “on the brink of a terrible civil war”.

Here is what Dalio just said:

Back in February, I said I wanted a president who could “bring together our country to face our challenges in a more united and less divisive way.”

I wanted someone who would unite people – i.e. who does not view themselves as the leader of the winning side imposing policies the other side would find intolerable.

I believe we are on the brink of a terrible civil war (as I described in The Changing World Order series), where we are at an inflection point between entering a type of hell of fighting or pulling back to work together for peace and prosperity that addresses the big wealth, values, and opportunity gaps we’re now seeing. For that reason I was thrilled to hear what President Biden said at his inauguration. It is consistent with the direction history has shown the country needs to move in.

Now the question is whether the president and both parties will bring that about. Good words and spirit aren’t enough. People will have to agree on both how to grow the pie and how to divide it well. That will require revolutionary change.

Doing it peacefully requires both bipartisanship and skill. It won’t be easy. Our country is still in a terrible financial state and terribly divided.

While Dalio correctly points out the extremely precarious spot where splintered US society stands right now, it is again disappointing that instead of admitting the true poison eating away at the heart of US society, Dalio once again refers to the symptom – the presidency – and not the underlying diseases that brought it on. We are confident that it has to do with the fact that the well-being of Dalio’s own fortune is heavily reliant on not kicking the hornets’ nest of catastrophic monetary policy, but merely diverting attention to whatever is the media taking point bulletin du jour, in this case the ongoing Trump vs Biden narrative clash.

We can only hope that one day Dalio will have the guts to tell the truth about why we are indeed “on the brink of a terrible civil war” and expose the real criminals behind the deadly divisions tearing apart US society.

Tyler Durden
Sun, 01/24/2021 – 15:01

Source: Zero Hedge, Ray Dalio: “We Are On The Brink Of A Terrible Civil War”

CBS Medical Editor Says Americans Should Wear Two Face Masks

CBS Medical Editor Says Americans Should Wear Two Face Masks

Authored by Paul Joseph Watson via Summit News,

CBS4 Medical Editor Dr. Dave Hnida says that Americans should wear not one but TWO face masks if they want to ensure full protection against COVID-19.

“Specifically what we’re saying is that two masks may actually equal the protection you would get from N-95 masks, which is considered the best mask there is short of a complete respirator-type unit,” Hnida said.

Pointing out that football coaches and Joe Biden have been seen “double masking,” Hnida said, “Even in my own family, when we have outside contact — as limited as it may be — we double mask,” adding that “it’s something you may want to consider.”

However, the report warns that “three masks may be going too far, since that could interfere with the ability to breathe.”

“Like the way one mask does, except three times as bad, so that you actually asphyxiate,” commented Dave Blount.

As we previously highlighted, wearing two masks has become a preferred method of virtue signaling on Twitter, with leftists posting selfies to prove they’re a ‘doubleplusgood person’ for social media clout.

A question that repeatedly crops up in response is that if two masks are required to provide full protection, doesn’t this mean that wearing one mask, as Americans have been told to do for the best part of a year, is ineffective?

This past November, a landmark Danish study found that, as the Spectator reported, “there was no statistically significant difference between those who wore masks and those who did not when it came to being infected by Covid-19.”

As soon as the study was released, legacy media outlets fell over each other to attack its credibility in a vitriolic manner strangely absent in response to studies that amplify the consensus narrative on COVID.

Meanwhile, more and more people appear to be wearing masks while doing vigorous exercise despite the fact that this can trigger serious respiratory problems.

For some, it appears that virtue signaling for dopamine is worth risking their own lives for.

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New limited edition merch now available! Click here. In the age of mass Silicon Valley censorship It is crucial that we stay in touch. I need you to sign up for my free newsletter here. Support my sponsor – Turbo Force – a supercharged boost of clean energy without the comedown. Also, I urgently need your financial support here.

Tyler Durden
Sun, 01/24/2021 – 14:35

Source: Zero Hedge, CBS Medical Editor Says Americans Should Wear Two Face Masks

Goldman's Clients Are Freaking Out About A Stock Bubble: Here Is The Bank's Response

Goldman’s Clients Are Freaking Out About A Stock Bubble: Here Is The Bank’s Response

One doesn’t have to be a “legendary” investor to call out bubbles, especially once who correctly called the excesses of the dot com and housing eras, but it helps and it’s probably why Jeremy Grantham had such conviction last week when he said that not only is the market currently an “epic” bubble but that it will suffer a “spectacular” crash in “the next few months.” Needless to say, such an alarmist view is hardly in the best interests of banks who make commissions on two-way trades instead of outright sales (or liquidations), but in a notable departure from tradition, several banks have joined Grantham in calling for a sharp market correction either imminently (Bank of America) or in the second half of the year (Wells Fargo).

To be sure, concerns about an asset bubble have grown so widespread, with the latest Deutsche Bank survey finding the the vast majority of respondents (89%) see some bubbles in financial markets currently…

… that even Goldman’s clients – traditionally among the most cheerful and optimistic of all, pied pipered by the perpetually bullish view of Goldman strategists – are starting to freak out.

As Goldman’s chief equity strategist David Kostin writes in his latest Weekly Kickstart report, “among the questions we receive most frequently from clients is whether US stocks trade at unsustainably high levels (read: “Bubble”).”

So how can Goldman answer without sounding completely idiotic and disingenuous on one hand, denying that valuations are massively stretch and euphoria is everywhere as the latest Citi panic/euphoria model shows

… yet without sparking a liquidation-driven market crash by admitting that it is in fact, a “massive bubble”:

Well here’s how Kostin delicately threads the needle: first, he admits that valuations have indeed rarely (read never) been higher, writing that “on an absolute basis there is no doubt that valuations are extremely elevated. The index trades at the upper end of the historical range when measured using a variety of metrics, including P/E, P/B, EV/sales, EV/EBITDA, and market cap/GDP. These measures point to equity valuation ranking in the 96th historical percentile (Exhibit 2).”

“However”, he then quickly counters before readers call their favorite Goldman salesman and bark the “sell all” order, when “taking into account the yield on Treasuries, corporate credit, or cash, the aggregate stock market index trades at below-average historical valuation.”  Kostin then tries to ease lingering concerns that stocks are in a massive bubble (which they are), writing that “in fact, as economist Robert Shiller recently pointed out, his oft-cited CyclicallyAdjusted P/E Ratio (“CAPE”) shows that equity valuations are “not as absurd as some people think,” provided interest rates remain relatively low. Our economists forecast the 10-year Treasury yield will rise to just 1.5% at the end of 2021 and only exceed 2% in mid-2023.”

Kostin here falls back to the only partially credible justification he can make for exorbitant valuations, namely that near-record low yields means that stocks are cheap compared to bonds, and thus deserving of high multiples.

This, as we explained last December in “No, Low Rates Do Not Lead To Higher Earnings Multiples”, is total rubbish since over time low real rates have never led to – or justified – the record market multiples except for cases when the market was infact in a bubble,  and it’s not just us making this observation but last week, Deutsche Bank’s Jim Reid did too showing the following chart (which was adopted from Jerry Minack and which we first showed on Dec 5):

But why does Kostin, knowing well that his argument has already been debunked, keep making this ridiculous justification for continued buying of risk? Simple, because as he says in the very next sentence, “we expect modestly higher rates will be offset by a declining equity risk premium, leaving the S&P 500 P/E effectively unchanged and allowing strong EPS growth to drive the market towards our year-end target of 4300.

And there you have it: it’s kinda tough to agree there is a bubble when your own S&P price target in 11 months is almost 500 points higher at least when it comes to Goldman’s clients; the answer to what Goldman’s prop book is doing now will have to wait until the congressional hearings after the bubble bursts. As a reminder, back in the 2007 bubble, Goldman’s desk was actively betting on a housing crash by selling CDOs to the very same clients it told to buy CDOs (sometimes in collusion with other major clients such as Pauslon), knowing well that the crash was imminent. But we digress.

Anyway, back to Kostin who naturally realizes that any “all clear” signal would be immediately laughed out by most sophisticated finance professionals (with 89% of them already believing there is a bubble as the DB survey showed, he is caught between a rock and a hard place), and so he is forced to strategically caveat his cheerful assessment, writing that “although the aggregate equity market appears reasonably valued, pockets of the market have recently appeared to demonstrate investor behavior consistent with bubble-like sentiment.”

One such area is unbridled frowth is SPACs. As Kostin then notes, in 2020 (which he dubbed the “Year of the SPAC”), 229 US SPACs raised $76 billion, a figure 6 times greater than in 2019. During the first three weeks of 2021, another 56 SPACs have raised $16 billion, already half the total raised in all of Q4 2020.

According to Goldman calculations (which we presented previously), “if the 5x ratio of equity capital to target M&A enterprise value persists, the $80 billion of uncommitted SPAC capital would drive $400 billion in M&A during the next two years.” However, as he also notes, that is conditional on each of those SPACs finding a suitable private company target and negotiating a merger.

Yet even as Kostin warns that Spacs are clearly one aspect of a market bubble, he doesn’t see it as having dire consequences, to wit:

Low interest rates, the flexible structure, and the two-year window to find a target before returning capital suggest the popularity of SPACs will continue in the near term. Importantly, we see little risk to public equity markets should investor enthusiasm for SPACs subside.

It’s not just SPACs, however, that Goldman is telling its clients to be ware of – as the bank notes next, “the sharp recent outperformance of stocks with negative earnings is another potentially bubble-like phenomenon that many clients have highlighted. During the last 12 months, the shares of firms with negative LTM EBITDA have outpaced the average stock by 40 percentage points (82% vs. 42%), a 97th percentile ranking since 1985. By comparison, negative EBITDA stocks outperformed by a similar 30 pp following the Financial Crisis but by 140 pp in 1999-2000 during the Tech Bubble.” This unprecedented surge in the stock prices of non-profitable tech companies is shown below. If anyone looks at this chart and says no bubble, they should never be allowed to opine on anything finance-related ever again.

Ok fine, at least Goldman admits that there are two clear bubble signs. Wait, wait… there’s a third: as Kostin continues, even “more than the outperformance of negative earners, the recent surge in trading volumes of negative earnings stocks registers as a historical extreme. These firms account for 16% of equity trading volumes, exceeding the 15% share in 2000.” Yet like above, Kostin is reduced to pleading with clients not to worry about this clear and grotesque bubble indicator either, because “although this surge appears unsustainable, it also appears to pose little risk to the broad market because these companies account for just 5% of total market cap.” And just in case you start worrying about the insanity that has gripped retail daytrading, Kostin has some encouragement there too:Similarly, the share of trading volumes in stocks with share prices below $1.00 has doubled in the last two months and ranks in the 99th historical percentile. But these firms only account for 1% of trading volume and less than half of 1% of market value.”

Realizing that he has to expend on why he is dismissing all these clear bubble indicators so generously – or suffer total loss of credibility – Kostin then attempt to do just that, with the following two-paragraph “bubblesplainer”:

Just like in past economic cycles, many stocks with negative earnings today were profitable companies that dipped into unprofitability during the recession.During economic recoveries investors often rotate their portfolios toward firms whose earnings and share prices suffered most during the downturns, particularly in a low interest rate environment that increases the present value of distant future cash flows. Trading activity in stocks with persistently negative earnings during the last three years – unprofitability that cannot be attributed to the pandemic recession –has also been extreme, but these firms amount to just 2% of equity market cap.

Today’s market also lacks the extreme investor leverage that is typical of bubbles. Due in large part to fiscal stimulus, US household disposable income growth was strong in 2020, and the outlook remains positive with further stimulus likely on the way. Excess savings remain elevated and the aggregate US household debt service ratio is nearly the lowest in at least 40 years. As a result, the strong recent inflows to US equities have apparently been funded by cash rather than leverage. While US margin debt has certainly risen in recent months, it currently registers a smaller share of market cap than it has as recently as during 2017-2018. And money market fund assets remain elevated after large inflows in 2020.

In short, yes – the chronic retail momentum-chasers are clearly scrambling to bid up bubble assets, but this in itself is not a risk as they haven’t taken out a third mortgage to do it. Well, let’s wait and see just how much leverage said Robinhooders and redditors have put on as they ravage shorts up and down the market. And that will become apparent only after the crash once the bubble pops, but there’s no need to worry about that happening according to Kostin, because this time is different.

Yet one place where not even Kostin can’t talk down the sheer bubbly euphoria is in high-multiple stocks. As the Goldman strategist admits, “one part of the market that appears frothy and may pose a broader risk is extremely high-growth, high-multiple stocks. Like negative earners and penny stocks, trading volumes and share prices of stocks with EV/sales multiples over 20x have soared. However, these firms are much larger, collectively accounting for 23% of trading volumes during the past month (96th percentile since 1985) and 9% of market cap.”

Of course, even here Kostin has to provide some optimism, and does so by writing that some of this appreciation is appropriate “given record low interest rates. Firms with EV/sales ratios greater than 20x accounted for 2% of trading volumes in 2019. That share rose to 10% in August 2020 as interest rates plunged.”  However, with their share of volumes having doubled again during the most recent market rally…

… Kostin concedes that “history shows investors face long odds of outperforming when buying the most extremely-valued firms.” Why? Because since 1985, the median stock trading at an EV/sales multiple above 20x has generated a subsequent 12-month return of -1%, compared with +6% for the median US stock. The average stock trading above 20x has posted  a stronger return, but still fared worse than the broad market average (+6% vs. +16%).

And just to placate all those Goldman clients who are calling bullshit on everything Kostin just said, he provides them with a handy screen of the 39 US stocks with market caps above $10 billion with both trailing and consensus 2022 EV/sales ratios greater than 20x.

What Goldman is telling its clients here is “short these names if you are so worried about bubbles.” Of course, what will ironically happen in the real world is that as another round of hedge funds piles into these berserker bubble names, the retail and reddit daytrading army will rush into them, forcing another epic short squeeze, and sending this basket of 39 stocks soaring to new even more berserker highs.

Why? Because of the very same entity we have been consistently bashing since our inception 12 years ago: the Federal Reserve of the United States, which first destroyed only capital markets, and is now set to finalize its real mandate – the destruction of not only the middle class but the United States itself, while unleashing what even Ray Dalio now admits will be a “terrible civil war.”

Tyler Durden
Sun, 01/24/2021 – 14:10

Source: Zero Hedge, Goldman’s Clients Are Freaking Out About A Stock Bubble: Here Is The Bank’s Response