As we continue to navigate this new world during a global pandemic, coupled with a Presidential election in the United States, one thing is certain – the blame game. With all of the fallout surrounding the genesis of COVID19, who knew what when, who knows what now, and all of the societal and economic shifts – somebody is going to be blamed. Never ones to take responsibility, politicians the world over have been slowly starting to point the finger at each other, with most of the blame being hoisted on China. In turn, China has also started a media campaign that is blaming the West, and in particular, that of the United States. Despite the recent signing of the Phase 1 trade deal between the US and China, relations between the two nations may be in for some rough waters ahead. Expect the blame game to heat up.
As we enter the spring and summer months of 2020, there is much hope and anticipation that the US economy, among others, will begin “opening” back up and with it a strong economic recovery. We are very skeptical of a strong economic bounce-back. Nevertheless, this is also a Presidential election year and there is no question that the major candidates, President Trump, and most likely, former Vice President, Joe Biden, will step up their rhetoric against China. This rhetoric will likely lead to further distance between the US and China and may cause both sides to engage in economic and cyber warfare to greater degrees than which is already being conducted. In addition, there is the possibility of stepped up aggression by China in the South China Sea and perhaps responses by the US and regional allies. Other physical disputes could take the form of proxy wars, and we believe Venezuela and Iran to be probable candidates. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #USA #China #Peace #War #Trade #Recession
A modern day Bay of Pigs on our hands in Venezuela? Criss-crossing messages from the DoD and State Department with their “intelligence” assessments surrounding the genesis of COVID19. And Israel vowing to continue to bomb targets in Syria until Iran leaves. These are just a few of the items on the agenda during today’s podcast. After all, never let a good crisis go to waste.
In Venezuela, two former US special forces operators have been arrested by the Maduro regime during what they are referring to as a plot to overthrow the Venezuelan government. The US government denies any and all involvement with the matter. However, a private security firm in the US has taken responsibility and the company’s founder has claimed those arrested are “his men.” Venezuela has been a hot spot for US saber rattling over the last couple of years. Recall, just a few months ago during the President’s State of the Union Address, that Juan Guiado, was an honored guest of the President’s. Guiado is the opposition leader in Venezuela, who is also recognized by the US, UK, and several South American countries as the “real” President of Venezuela. Questions remain as to how this matter will be treated with respect to an American response to get these men back into the United States. Questions also remain as to how the Maduro regime will handle the situation. It’s these “little” skirmishes that can turn into something much larger – let us pray this does not happen.
A case of good cop-bad cop? When it comes to intelligence assessments and talking points around the genesis of COVID19, it would appear that the US government is working two different messages. On one hand, we have the broader intelligence community in addition to the Defense Department stating that the US does not know where the COVID19 pandemic actually started – meaning in a wet market in China, a lab, what have you. Yet according to General Mark Milley, Chairman of the Joint Chiefs of Staff, the virus appears to not have been man-made. This is in stark contrast to the recent comments made by Secretary of State, Mike Pompeo, where he insists that there is strong intelligence that the virus was made in a lab in China. Regardless of which may prove to be the case, it appears that the US government continues to plays its games of misinforming and dis-informing the American public. Reminiscent of so many other instances – such as the lead up to the invasion of Iraq.
We conclude the podcast with a discussion of Israel’s defense forces regarding their Syrian operations, African locusts updates, and the German Supreme Court’s ruling on actions undertaken by the European Central Bank (ECB), and what this may mean for the European Union. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #War #Peace #USA #Venezuela #Debt #EU #Recession #Gold #COVID19
The unwinding of the everything bubble coupled with the global pandemic has real effects. Unfortunately, these massive disruptions don’t just upset a few numbers on some corporate balance sheets, but rather they touch so many people personally. With nearly 30 million Americans out of work just over the last six weeks, this poses many serious questions and causes a significant amount of stress on these individuals and families. We discuss all too frequently here how so many Americans live paycheck to paycheck and use credit cards to make ends meet – this environment only makes things that much worse.
Over the weekend, CBS’ 60 Minutes program and a Fox New virtual town-hall, featuring the President, Vice President, and Treasury Secretary, highlighted some of these real effects happening to real people. Whether it was a small business owner who had to close shop and doesn’t know if or when she’ll be able to open up again to the farmers who have been suffering from the trade war(s) and now COVID19, where some smaller farms are dealing with rising suicide rates, to rural hospitals on the brink of collapse, especially if the outbreak hits these areas in larger numbers in the coming days. These are real people with real lives, just trying to make it. And now, because of so many years of flawed economic and political policies, so many will be paying the price – and this is just getting started.
We learned today that the federal government will need to borrow some $3T during Q2 of 2020! For some perspective, the federal government generates about $3-3.5T in tax receipts over the course of the year. So, we’re about to go through this entire amount in only three months! This is not cheap. This is not free. And the costs of these policies will be devastating to the masses. And despite the calls from many Americans to end the tariffs and from farmers discussing how it’s the bigger farms getting most of the farmer “bailouts,” the President and his Administration continue with their story that it’s never been a better time to be a farmer and that China is paying us billions and billions of dollars in tariffs. We suppose if you tell the lie enough times, people will eventually start to believe it? We hope this is not the case. This is the real economy. These are real people. These are real lives. Where’s the leadership? Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Jobs #Recession #Bailouts #Debt #Gold #Oil #USA
We’ve been saying it out loud for a while here at The Kapital News, but now it’s official – the United States of America has turned into a banana republic. During today’s press conference, Jay Powell, Chairman of the Federal Reserve, made it known that now is not the time to worry about deficits and the national debt. Wrong sir! Now is exactly the time to be more concerned and vigilant with respect to deficits and debt levels. Nonetheless this was his message. This is in stark contrast of course to what he has been telling Congress over his recent bi-annual briefings – where in fact Powell has been warning Congress to get a grip when it comes to the deficits and growing national debt.
This too in and of itself is laughable because the Fed holds the keys to keeping Congress in check by informing these politicians that the Fed is not going to be there to buy Uncle Sam’s US Treasuries. The Fed could easily do this which would translate into higher borrowing costs which should make the Congress more hesitant to spend, but of course the Fed is not going to do this. No, no. They would much rather facilitate this insanity, this fraud, and this out of control spending. So, yes, this is why the USA is now officially a banana republic. Simply just print the money and purchase whatever assets you want to whatever degree you want with little to no oversight or accountability. I weep for my country and for the vision that our Founding Father’s had for this nation. This is a true travesty and barely a word of protest from any politician of any party nor from the Trump Administration to the President himself. No checks. No balances. Just money printing and fiscal “stimulus” from a government that is broke, but for borrowing trillions and trillion of dollars. There is no free lunch and the costs of this irresponsibility, criminality, and unethical conduct will be truly costly – especially the everyday American.
In other news we discuss the first print of GDP for Q1 2020, which came in worse than expected at -4.8%. This is the largest contraction since the GFC. It should also be noted that the US didn’t begin its major lock-down until March – the final month of the quarter. So this simply tells us what we already knew and have been discussing for months – that the US economy was slowing down prior to the onset of COVID19. Despite this news, poor housing data, and announcements from Boeing, Lyft, and Uber, that they will be cutting their staffs by 10%, 17%, and 20% respectively, stocks still continued their march higher. Perhaps this is on the back of the news announcement from the biotech company, Gilead Sciences, that once again is stating that their treatment for COVID19 is looking positive. Recall, this is the same company that did this a week ago. Isn’t it highly coincidental that this news story broke at the same time a worse than expected GDP number came out? They don’t even care anymore – they flaunt the fact that the game is rigged right in the open. Welcome to the banana republic. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Bailouts #Recession #Debt #EndTheFed #USA #Depression #Oil #Gold #Revolution #Protests #Inflation #Deflation
There is seemingly no limit to the greed or stupidity of politicians, central bankers, and many on Wall Street and corporate America. As this economic, financial, health, and social crisis continues to unfold, there is nothing but further calls to do more, more, more. Let us not pay attention to the minor detail that the federal government is broke – as is evidenced by a national deficit that is likely to be larger than $4T for FY2020. Let us not pay attention to the minor detail that for decades States’ governments have squandered their citizens’ hard earned tax dollars on vanity projects, fraud, abuse, and waste, and are now on bended-knee seeking more bailouts from a federal government that is also broke. A key distinction between the two, however, is that the latter has a printing press via the Federal Reserve and the former does not. Nevertheless, there is no free lunch and if we are going to be resorting to the printing press to cure all that ails us, then we are turning into a banana republic. The costs of conducting such flawed and fraudulent policies will come in the form of inflation and hyperinflation. Understand this is a process, but it will show itself in due time and the picture will not be a pretty one. These federal policies are all but guaranteeing that what would likely be a severe recession is now going to become a depression.
In other news on today’s podcast we discuss the Fed’s FOMC meeting that will be concluding tomorrow. We also mention the upcoming Q1 2020 GDP figures. And we close the podcast by highlighting some trade figures and recent surveys as to how the current economic situation is affecting everyday Americans. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Bailouts #Recession #Debt #USA #Gold #Inflation #Congress #Depression #Oil #EndTheFed
Well we now have them both! As the Trump Administration readies yet another bailout package, Phase 4, they’re also openly discussing bailing out energy corporations. However, with respect to “assisting” the energy sector, a potential condition of extending any type of “capital” will come with strings attached – the government will take an equity stake. This is completely un-American and should not be tolerated nor considered. The government does not have the authority to lend money – it does have the ability to borrow money. It also does not have the authority to take equity stakes in companies. Well, US Constitution be damned as the government is preparing for exactly that. Furthermore, the US government is broke! We have a $24.5T national debt with a deficit that is likely to be north of $4T for FY2020. And the only way this can be financed is through the printing press. This is now a banana republic. Can you say hyperinflation?
On the negative rates side – we already have them and have had them for some time now on a real basis. However, when we consider the Fed’s own research in noting how balance sheet expansion and contraction also serves as a de facto rate cut or hike, respectively, now begs the question – do we now have nominal negative rates? Given their research and their past decisions, The Kapital News is of the mindset that the US now has de facto negative nominal interest rates. Look no further than the Fed’s balance sheet that now stands near $6.6T and counting. With over $2T added just over the last month. We would think that this would amount to a sizable rate cut. Understand that rates are already back to the zero bound at 0.00 – 0.25 bps. With this recent and continuing balance sheet expansion, it can be reasonably assumed that we are well into negative territory. This is detrimental to financial systems – look no further than to Japan and Europe for a case study.
The United States has failed and the only thing that can save it is a return to free-market capitalism, our Constitutional Republic, and liberty-loving men and women across this country that demand their country back! Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Bailouts #Recession #Debt #Deficits #USA #Congress #Depression #Gold #Oil #EndTheFed #Revolution
Another week and an additional 4.4 million Americans have filed for unemployment insurance. This take the five week total to nearly 26.5 million. These last five weeks of job losses have entirely outstripped the job gains since the end of the Great Financial Crisis (GFC).
PMI figures have also been published globally and we are witnessing levels in both manufacturing and services that are nearing levels not seen since the GFC. In some cases, they are even worse.
The Federal Reserve has updated its balance sheet, which now stands at nearly $6.6T and counting. This represents an increase of around $200 from the week prior. If this rate of increase remains, then we are talking about an increase of $10T on an annualized basis. If this happens, the Fed’s balance sheet would be around $14T. This would then represent about 70% of US GDP. Most of the gains on the balance sheet were from purchases of US Treasuries and mortgage-backed securities. Of course, there is little outside demand for US Treasuries, which is even why a recent analysis by Goldman Sachs suggested that nearly 70% of new Treasury issuance will be purchased by the Federal Reserve. This is virtually debt monetization and more reminiscent of a banana republic as opposed to a Constitutional Republic. There is no free lunch and per a previous podcast, “Free Was Never So Expensive.”
We lastly discuss some recent surveys that highlight the economic and behavioral changes that we’re likely to see once the economy is “opened” up for business. When asked about receiving government spending money directly and what would you do with it, the largest responses were the following – savings, everyday expenses, and payoff debt(s). A handful of other options, primarily centered around spending, all received a response around 5%. Then there was another survey that asked if stay-at-home orders were lifted, how comfortable would you be going to bars and restaurants, getting on an airplane, and going to a large event – by factors of 3 to 1, people would not feel comfortable with those options. This simply confirms what we have been discussing here for weeks – and that is how people will be changing their spending habits and behavioral “norms” for the foreseeable future, which will translate negatively with respect to the economy on a short and mid-term basis. On a longer-term basis, this kind of deleveraging is healthy for an economy and is part of the broader correction. This is a process and will take time. And the more the government tries to “help” the worse the outcomes will be and the longer it will take to recover. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Jobs #Recession #Debt #Gold #Depression #USA #EndTheFed #Congress #Bailouts #Oil
A follow-up discussion on the oil and gas markets as well as how the exact opposite scenario may unfold with respect to gold and silver. These markets are crazy to say the least – a direct result of a decades plus asinine economic experiment that is in the process of unraveling. Congress is ready to pass another spending bill of nearly $500B and we expect that more will be coming in due time. Most of this will be an extension of the forgivable loans program to small and mid-sized companies to assist during the COVID19 lock-downs. However, we anticipate several states around the country are getting ready to line-up, if they haven’t already, to seek assistance from the Federal government. This is laughable as the Federal government is out of money as well – but hey, at least they have access to a printing press via the Fed. In addition, or perhaps in tandem with a states’ spending bill, that of infrastructure spending will also be a part of the “assistance.” The US deficit for FY2020 is already projected to hit nearly $4T and we expect this to be surpassed as even more government and Federal Reserve packages and facilities are announced.
We provide a brief update to the President’s recent call to suspend temporarily, immigration into the USA. We also note how the CDC Director is mentioning that a second wave of COVID19 is likely and that it may be worse than the first wave – since a second wave is likely to strike in tandem with the seasonal flu season this coming winter. As we have been predicting, the IMF (International Monetary Fund), is now seriously contemplating debt forgiveness, especially for third-world countries. They are also considering a near $1T loan package to assist several countries – this will not be enough funding to stave off what is coming. On a central bank note, global money printing just over the past few months has totaled nearly $23T. To put this into context, the GDP of the United States is just over $20T.
And lastly, but definitely not the least or final of problems, is that of a potential “hunger pandemic.” This is what the United Nations is now discussing and preparing for as COVID19 continues to make its way around the world and the health and economic damage that it is leaving in its wake. Given the economic downturn, especially regarding commodities prices, which many third-world and emerging economies are heavily dependent, is now dealing another blow that may lead to the starvation of millions around the world. Again, as The Kapital News has been discussing for months, many of these same countries were protesting prior to COVID19. Now that the environment on multiple fronts is even worse, what do you think these people are going to do now? These protests are not transitory – they are history in the making. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Oil #Gold #USA #Debt #Recession #Bailouts #Depression #Business #Russia #SaudiArabia #China #Protests #War #Peace
In a continuation of our discussion related to moral hazard and the spending/bailout bill, we wanted to talk about the sacrifices people and corporations will likely be making. However, there is still unfortunately, going to be a lot of practices that will continue. Many of the same practices that have led us to so many structural issues that we are currently witnessing.
Corrections in markets are healthy and they are an indicator of a healthy system (even if only quasi-healthy). They correct for imbalances, malinvestments, levels of leverage and indebtedness, poor business decisions and the like. And at the end of these corrections, lessons are hopefully learned so that individuals, corporations, and governments can operate from a healthier foundation. Also, it would be the intent of free-markets to allow for those who made prudent business decisions and maintained healthy balance sheets, the opportunity to acquire the resources that are likely on sale for pennies on the dollar. Thus allowing for better managers to manage more resources. This is turn should lead to a better and healthier economy because you have better decision-makers at the helm. Of course mistakes will be made, but then the next correction, if allowed to, will correct for these inefficiencies as well. And the cycle continues. Get the picture?
Well in our current system, we’re not allowed to feel pain – well at least not those on Wall Street or Corporate America. No, no. They’re allowed to take outsized risks, reap the profits if they’re correct, but if they’re wrong, then their losses become socialized and we the people (taxpayers) have to bail them out. This is ridiculous and entirely immoral, unethical, and un-American. We have the opportunity now to wake up and say enough is enough and to demand the restoration of our Constitution and that of free-market capitalism. However, it appears that given the recent spending bill, passed by both parties, and happily signed into law by the President, that it looks like we’re going to have to wait a little longer for our peaceful revolution. And remember, there is no free lunch – so this government/ central bank “medicine” is likely going to be worse than the disease. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Recession #Bailouts #Debt #Republic #USA #Constitution #Revolution #EndTheFed #Gold
With all of the money printing and fiscal “stimulus” measures being undertaken around the world, when, oh, when, will inflation rear it’s ugly little head? Now, depending on the sector of the economy or a particular good and/or service, there may already be considerable inflation. However, when the United States has amassed over $23T in debt and rising in trillion dollar increments, while heading into a recession, if not depression, then how can this debt be paid off? Possibly through inflation or dare we even say, hyperinflation. Don’t say that it cannot happen, because if history is any guide, then that is almost certain to happen some time in the not too distant future. This will decimate any remaining purchasing power that people have. Savings will be destroyed. Many people who will be out of work due to the recession and/or depression will now have to also deal with ever-higher costs of living. Of course, much of this was predictable because what natural conclusion would follow generations of ever-increasing credit expansions, deficits, and debts on the household, corporate, governmental, and central bank balance sheet? Well we’re witnessing these negative effects coming together all at once and sad to say, we’re just getting started.
So, in our analysis, yes, the stage for inflation if not hyperinflation has been set. It’s a process and it will take time as there are still the effects of deflation hitting global markets because the demand side of the equation has been all but decimated. On the other side when this comes to pass, with all of the monetary and fiscal measures that have been undertaken and all of the debts and unfunded liabilities that remain on the books – a serious question will arise. How is this all to be paid for? Well economic growth is not going to do it because there’s not going to be enough growth to put a dent into the size of these debts – especially not during the years of a recession/depression. Therefore, a logical conclusion is to say it will be “paid” for through inflation/hyperinflation. Again, say good bye to our Constitutional Republic and say hello to our new banana republic. How far we have fallen. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Recession #Debt #Bailouts #Depression #Deficits #USA #Politics #War #Peace #Truth #Justice #EndTheFed #Gold #Oil
