Thursday 1 December 2022

Fed Caves, Volker Out, Burns In. A Bad Month.

 Baltic Dry Index. 1355 +28    Brent Crude 85.43

Spot Gold 1783         US 2 Year Yield 4.38 -0.10

Coronavirus Cases 02/04/20 World 1,000,000

Deaths 53,1030

Coronavirus Cases 01/12/22 World 647,989,682

Deaths 6,640,403

Former FTX CEO Sam Bankman-Fried, in possibly the understatement of 2022, said Wednesday, “I’ve had a bad month.”

Fed Chairman Powell capitulated yesterday. In the anti-inflation fight from now on, Volker policies are out, former Fed Chairman Arthur Burns policies are in.

Get gold and silver now, ahead of the Great Stagflation arriving or even worse, the Great Nixonian Error of Fiat Money’s FTX moment.

 

Fed Chair Powell says smaller interest rate hikes could start in December

WASHINGTON – Federal Reserve Chairman Jerome Powell confirmed Wednesday that smaller interest rate increases are likely ahead even as he sees progress in the fight against inflation as largely inadequate.

Echoing recent statements from other central bank officials and comments at the November Fed meeting, Powell said he sees the central bank in position to reduce the size of rate hikes as soon as next month.

But he cautioned that monetary policy is likely to stay restrictive for some time until real signs of progress emerge on inflation.

“Despite some promising developments, we have a long way to go in restoring price stability,” Powell said in remarks delivered at the Brookings Institution.

The chairman noted that policy moves such as interest rate increases and the reduction of the Fed’s bond holdings generally take time to make their way through the system.

“Thus, it makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down,” he added. “The time for moderating the pace of rate increases may come as soon as the December meeting.”

Wall Street applauded the remarks. The Dow Jones Industrial Average closed up 737 points, or 2.18%, to snap a three-session losing streak. Tech stocks fared even better, with the Nasdaq Composite roaring 4.41% higher.

“The on-the-day equity market surge is in part a relief rally,” wrote Krishna Guha, head of global policy and central bank strategy at Evercore ISI. “Many investors feared the Fed chair would take a max hawkish sledgehammer to the recent easing of financial conditions ... That overhang has now gone.

“Despite some promising developments, we have a long way to go in restoring price stability,” Powell said in remarks delivered at the Brookings Institution.

The chairman noted that policy moves such as interest rate increases and the reduction of the Fed’s bond holdings generally take time to make their way through the system.

“Thus, it makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down,” he added. “The time for moderating the pace of rate increases may come as soon as the December meeting.”

Wall Street applauded the remarks. The Dow Jones Industrial Average closed up 737 points, or 2.18%, to snap a three-session losing streak. Tech stocks fared even better, with the Nasdaq Composite roaring 4.41% higher.

“The on-the-day equity market surge is in part a relief rally,” wrote Krishna Guha, head of global policy and central bank strategy at Evercore ISI. “Many investors feared the Fed chair would take a max hawkish sledgehammer to the recent easing of financial conditions ... That overhang has now gone.

----Powell’s remarks come with some halting signs that inflation is ebbing and the ultra-tight labor market is loosening.

Earlier this month, the consumer price index indicated inflation rising but by less than what economists had estimated. Separate reports Wednesday showed private payroll growth far lower than expected in November while job openings also declined.

More

Fed Chair Jerome Powell says smaller rate hikes could come in December (cnbc.com)

Elon Musk says the Fed must cut rates ‘immediately’ to stop a severe recession

Elon Musk thinks a recession is coming and worries the Federal Reserve’s attempts to bring down inflation could make it worse.

In a tweet early Wednesday, the Tesla CEO and Twitter owner called on the Fed “to cut interest rates immediately” or risk “amplifying the probability of a severe recession.”

The remarks came in an exchange with Tesmanian co-founder Vincent Yu in which several others participated.

Later in the thread, NorthmanTrader founder Sven Henrich observes that the Fed “stayed too easy for too long totally misreading inflation and now they’ve tightened aggressively into the highest debt construct ever without accounting for the lag effects of these rate hikes risking they’ll be again late to realize the damage done.”

Musk replied, “Exactly.”

This isn’t the first time Musk has warned of impending economic doom.

In a similar exchange on Oct. 24, the world’s richest man estimated a global recession could last “until the spring ’24,” though he noted he was “just guessing.” That prediction came amid a slew of economic warnings from other business executives including Amazon CEO Jeff Bezos, JPMorgan CEO Jamie Dimon and Goldman Sachs CEO David Solomon.

More

Elon Musk says the Fed must cut rates ‘immediately’ to stop a severe recession (cnbc.com)

Asian stocks jump after Powell hints at rate hike slowdown

SINGAPORE, Dec 1 (Reuters) - Asian equities jumped on Thursday, while the dollar slid as investors poured into risky assets after Federal Reserve Chair Jerome Powell opened the door to a slowdown in the pace of monetary tightening.

In an eagerly-awaited speech, Powell said the central bank could scale back the pace of its interest rate hikes "as soon as December," but cautioned that the fight against inflation was far from over.

Powell's comments at the Brookings Institution in Washington sent Wall Street equities soaring, while the U.S. dollar and Treasury yields fell.

MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) jumped 2% in early Asian trade.

The index posted its biggest monthly gain in nearly 30 years in November as hopes for a Fed pivot towards slower rate hikes gathered steam after four consecutive 75-basis-point increases. But the index was still down about 17.5% on the year.

Japan's Nikkei (.N225) opened 1% higher while Australia's S&P/ASX 200 index (.AXJO) rose 0.85%. E-mini futures for the S&P 500 rose 0.20%.

ING regional head of research Robert Carnell said it will be very hard now for the Fed to push back against market expectations for a slowdown in rate hikes.

"It looks as if Fed Chair Powell didn't get the memo to push back against pivot hopes and keep financial conditions tight before he went to give his speech," he said.

More

Asian stocks jump after Powell hints at rate hike slowdown | Reuters

Finally, in crypto-land, Bitcoin is “artificially propped up” says the ECB! Who knew? 

Bankrupt BlockFi tries the Sheriff of Nottingham approach with SBF over Robinhood.

ECB says Bitcoin is artificially propped up, shouldn't be legitimised

November 30, 2022

FRANKFURT (Reuters) -Bitcoin is being artificially propped up and should not be legitimised by regulators or financial companies as it heads for "irrelevance", the European Central Bank said on Wednesday.

Bitcoin and other cryptocurrencies have been variously presented as an alternative form of money and a shield from the inflationary policies pursued by major central banks such as the ECB in recent years.

But a 75% fall over the past year, just as inflation reared its head, and a string of scandals including the collapse of the FTX exchange this month has given critics among central bankers and regulators ammunition to fight back.

The value of bitcoin peaked at nearly US$69,000 in November 2021 before falling to around US$17,000 by mid-June 2022, where it is still hovering now.

In a blog post using unusually scathing language, the ECB said bitcoin's recent stabilisation was "an artificially induced last gasp before the road to irrelevance".

"Big bitcoin investors have the strongest incentives to keep the euphoria going," authors Ulrich Bindseil and Juergen Schaaf wrote. "At the end of 2020, isolated companies began to promote bitcoin at corporate expense. Some venture capital firms are also still investing heavily."

They said VC investments in the crypto and blockchain industry totalled $17.9 billion as of mid-July but did not provide evidence of price manipulation.

Regulators all over the world are drafting rules for the crypto world, a complex ecosystem that ranges from stablecoins supposedly backed by conventional currencies to forms of lending that happen on the blockchain, or distributed ledger, that underpins those coins.

The ECB blog said regulation could be "misunderstood for approval".

"Since Bitcoin appears to be neither suitable as a payment system nor as a form of investment, it should be treated as neither in regulatory terms and thus should not be legitimised," Bindseil and Schaaf said.

They added the involvement of asset managers, payment service providers, insurers and banks with crypto "suggests to small investors that investments in bitcoin are sound".

"The financial industry should be wary of the long-term damage of promoting bitcoin investments - despite short-term profits they could make," the authors of the blog said.

More

ECB says Bitcoin is artificially propped up, shouldn't be legitimised (msn.com)

Bankrupt crypto lender BlockFi sues Sam Bankman-Fried over shares in trading app Robinhood

29 November 2022

Sam Bankman-Fried, the founder of collapsed cryptocurrency business FTX, is being sued by another bankrupt crypto business over control of a £400m stake in Robinhood.

Lawyers acting for BlockFi, which filed for bankruptcy earlier this week, claim Mr Bankman-Fried pledged shares in Robinhood as collateral for a loan that he subsequently failed to pay, which contributed to BlockFi's collapse.

The two sides are battling over control of the shares as the escalating fallout from FTX’s collapse triggers a wave of litigation.

Legal proceedings, revealed in a Delaware bankruptcy court this week, shed light on how interconnected many leading cryptocurrency companies are behind the scenes, with a complex web of loans and collateral.

At the heart of BlockFi’s case against Mr Bankman-Fried are shares he held in Robinhood, a Nasdaq-listed share trading app valued at $8bn.

Mr Bankman-Fried acquired a 7.6pc stake in Robinhood in May at a time when the stock was trading at an all-time low. The company’s share price soared 25pc when Mr Bankman-Fried’s investment became public knowledge.

The 30-year-old allegedly then pledged his Robinhood shares as collateral to secure a loan from BlockFi, which was once valued at $3bn.

Mr Bankman-Fried allegedly planned to use the loan to prop up FTX.

However, FTX crashed into bankruptcy on Nov 11 with an $8bn hole in its balance sheet after public concerns were raised about its financial health.

More

Bankrupt crypto lender BlockFi sues Sam Bankman-Fried over shares in trading app Robinhood (msn.com)

Broke and down to one credit card: Former FTX CEO Sam Bankman-Fried claims he committed no fraud

Former FTX CEO Sam Bankman-Fried, in possibly the understatement of 2022, said Wednesday, “I’ve had a bad month.”

The former billionaire added that he “didn’t do a good job” at upholding his responsibilities to regulators, customers, and investors in a hotly anticipated conversation with CNBC’s Andrew Ross Sorkin at the Dealbook Summit.

Bankman-Fried’s FTX imploded in mid-November after Coindesk reported irregularities in the company’s balance sheets. The company filed for Chapter 11 bankruptcy protection in Delaware on Nov. 11.

“I didn’t ever try to commit fraud on anyone,” Bankman-Fried said. “I saw it as a thriving business and I was shocked by what happened this month.”

The political mega-donor said he was down to $100,000 and had one working credit card left.

“We completely failed on risk,” Bankman-Fried continued. “That feels pretty embarrassing, in retrospect.”

Bankman-Fried appeared by video feed from the Bahamas, Sorkin said. “I’ve been in the Bahamas for the last year,” Bankman-Fried said when asked about why he remained in the island nation.

Sorkin asked Bankman-Fried what motivated his acquisitions in the crypto industry, given the size of Alameda’s borrowing from companies Bankman-Fried intended to acquire.

Bankman-Fried claimed that he believed that by the middle of 2022, Alameda had repaid all lines of credit to various borrowing desks. But Alameda still owes BlockFi over $670 million, according to court filings.

“What are your lawyers telling you right now? Are they suggesting it’s a good idea for you to be speaking?” Sorkin asked the former billionaire.

“No, they’re very much not.”

“The time that I really knew there was a problem was November 6,” Bankman-Fried said, after Alameda’s sizable FTT position was exposed by Coindesk. “When we looked at that, there was a potential serious problem.”

“Alameda had taken a huge hit” by that point. “We were seeing a run on the bank start,” Bankman-Fried said.

“I was nervous [when] the Alameda balance sheet” was exposed by Coindesk, Bankman-Fried said, but expected the damage was going to be limited to Alameda, not an “existential” crisis for FTX.

More

FTX CEO Sam Bankman-Fried denies crypto exchange fraud (cnbc.com)

Global Inflation/Stagflation/Recession Watch.

Given our Magic Money Tree central banksters and our spendthrift politicians, inflation now needs an entire section of its own.

Hmm. Gold anyone?

ECB warns of losses as it pays price for decade of money printing

November 29, 2022

FRANKFURT (Reuters) - The European Central Bank warned on Tuesday that it might make a loss as high inflation forces it to raise interest rates and foot the bill of a decade of aggressive money printing.

Having raised interest rates to fight runaway prices, the ECB must make huge interest payments to commercial banks on some 5 trillion euros worth of deposits it created via massive bond purchases and cheap loans.

Those stimulus tools, deployed over several years when inflation was too low, were now likely to push the ECB and some of its shareholders, such as the central banks of Germany, the Netherlands and Belgium, into the red.

This might eventually force some of these central banks to seek a bailout that would raise questions about their independence and raise the ire of taxpayers.

"We have to fight (inflation) by raising interest rates, which results in higher interest expenses that we pay to banks," the ECB said in on its website on Tuesday. "In this case our profit falls, and we might even make losses."

Ironically, the central banks of the most fiscally prudent countries will be the hardest-hit because they warehouse a larger share of bank deposits and the bonds they bought on the ECB's behalf yield zero or less.

The Dutch national central bank has openly acknowledged the risk that it might need a recapitalisation by its government, though finance minister Sigrid Kaag later cautioned this was "not yet on the table".

The ECB, which is mostly owned by the national central banks of the 19 countries that have adopted the euro and accounts for 8% of the balance sheet of that so called Eurosystem, said it had other lines of defense.

On top of depleting its provisions, it might tap any income that national central banks make on their monetary policy operations - such as bonds and loans.

And it may defer any remaining loss by writing it on its balance sheet as a claim against future profits - a possibility also cited by the Bundesbank last week.

"Ultimately, the return to a positive interest rate environment supports Eurosystem profitability in the medium term," the ECB said.

Central banks can generally function even if they make losses that deplete all of their capital - as has happened in recent decades in a number of countries including Germany.

Yet ECB doctrine says it should remain well capitalised to protect its independence from governments and its credibility as an inflation fighter.

And euro zone governments have greatly benefitted from the ECB's easy policy, both via lower borrowing costs and via dividends paid by their national central banks, meaning that they could be expected to give some money back.

"It is important to remember that central banks are not like ordinary companies: they can lose money and still operate effectively," the ECB said. "Still, the principle of financial independence implies that national central banks should ultimately always be sufficiently capitalised."

ECB warns of losses as it pays price for decade of money printing (msn.com)

Eurozone inflation drops for first time since mid 2021 and may have ‘passed its peak’

WEDNESDAY 30 NOVEMBER 2022 10:47 AM

Inflation in Europe fell for the first time since mid 2021 and may have passed its peak, fresh figures out today reveal.

Prices across the 19 countries using the euro climbed 10 per cent over the year to November, down from a rate of 10.6 per cent in October, according to Eurostat.

The drop was larger than analysts expected, raising expectations that the European Central Bank (ECB) could slow its aggressive interest rate hike cycle.

Before the figures were released, most experts were pencilling in a third successive 75 basis point rate rise at the ECB’s meeting next month.

However, softening price pressures “supports ECB doves’ calls for a slower pace of rate hikes going forward,” Melanie Debono, senior Europe economist at Pantheon Macroeconomics, said.

President Christine Lagarde and the rest of the ECB’s governing council have been forced to pivot from years of ultra stimulative policy to tightening financial conditions due to inflation hitting record highs this year.

Until this year, interest rates in Europe had been negative since 2013. The ECB signed off its first rate rise since 2011 in the summer and has lifted borrowing costs 75 basis points two times in a row.

That aggressive hiking campaign has been mirrored by the US Federal Reserve and Bank of England, who also have been jolted into reshaping policy by soaring prices. The ECB has lagged behind the pair, with the Bank moving fastest by launching its first rate rise in December 2021.

Analysts reckon the eurozone economy will suffer a tough recession over the next year, driven by rising energy caused by Russia’s invasion of Ukraine prices cooling business activity.

Europe, particularly Germany and Italy, have for years relied on cheap Kremlin gas to power its economy. 

More

Eurozone inflation drops for first time since mid 2021 (cityam.com)

Below, why a “green energy” economy may not be possible, and if it is, it won’t be quick and it will be very inflationary, setting off a new long-term commodity Supercycle. Probably the largest seen so far.

The “New Energy Economy”: An Exercise in Magical Thinking

https://media4.manhattan-institute.org/sites/default/files/R-0319-MM.pdf

Mines, Minerals, and "Green" Energy: A Reality Check

https://www.manhattan-institute.org/mines-minerals-and-green-energy-reality-check

"An Environmental Disaster": An EV Battery Metals Crunch Is On The Horizon As The Industry Races To Recycle

by Tyler Durden Monday, Aug 02, 2021 - 08:40 PM

https://www.zerohedge.com/markets/environmental-disaster-ev-battery-metals-crunch-horizon-industry-races-recycle

Covid-19 Corner

This section will continue until it becomes unneeded.

With Covid-19 starting to become only endemic, this section is close to coming to its end.  

China softens tone on COVID severity after protests

BEIJING, Dec 1 (Reuters) - China is softening its tone on the severity of COVID-19 and easing some coronavirus restrictions even as its daily case toll hovers near record highs, after anger over the world's toughest curbs fuelled protests across the country.

Several cities in the world's second-largest economy, while still reporting new infections, are breaking with practice by lifting district lockdowns and allowing businesses to reopen.

Health authorities announcing the relaxation of measures did not mention the protests, which ranged from candle-lit vigils in Beijing to clashes with the police on the streets of Guangzhou on Tuesday and at an iPhone factory in Zhengzhou last week.

The demonstrations marked the biggest show of civil disobedience in mainland China since President Xi Jinping took power a decade ago and come as the economy is set to enter a new era of much slower growth than seen in decades.

Despite near-record case numbers, Vice Premier Sun Chunlan, who oversees COVID efforts, said the virus's ability to cause disease was weakening, state media reported.

"The country is facing a new situation and new tasks in epidemic prevention and control as the pathogenicity of the Omicron virus weakens, more people are vaccinated and experience in containing the virus is accumulated," Sun said in comments reported in state media.

Sun also urged further "optimisation" of testing, treatment and quarantine policies.

The mention of a weakening pathogenicity contrasts with earlier messages from authorities about the deadliness of the virus.

More

China softens tone on COVID severity after protests | Reuters

Slew of Unusual Adverse Events Becoming More Common After COVID Vaccine Rollout

Nov 27 2022

If we go to a doctor or clinic for a vaccination, be it an influenza shot or a COVID-19 vaccine, we go with the expectation that it is safe.

We usually dismiss mild symptoms, such as headaches, fever, pain, and redness at the injection site, since we are typically informed of them beforehand and expect them to be transient in duration. Thankfully, most of the time, people recover from them and proceed with their lives as before.

 

However, since the rollout of COVID-19 vaccines, a significant proportion of vaccinated people have experienced many unusual adverse events. Doctors are raising concerns. Public health officials and vaccine manufacturers are also addressing the high incidence of blood clots, myocarditis, pericarditis, and menstrual irregularities.

 

Yet, there are thousands more documented health conditions reported to the U.S. Vaccine Adverse Event Reporting System (VAERS)—some appearing very frequently—that have not yet been given the same level of attention.

 

Since their rollout, COVID-19 vaccines have prompted more VAERS adverse event reports than all VAERS reports made in the previous 30 years, comprising over 55 percent of vaccine injury and death reports. These reports have thousands of different adverse event labels.


Although nearly 1.5 million COVID-19 vaccine injury and death reports have been made to VAERS, studies say the true number of adverse reactions is many times higher. The 2005–2009 HHS-funded Harvard Pilgrim study found that less than 1 percent of adverse events following 1.4 million vaccines administered were reported to VAERS; several independent analysts estimate that only 2.5 percent of COVID vaccine adverse reactions are reported to VAERS.

 

The system is also notorious for its redundancy: injection site swelling, vaccine site swelling, and swelling are recorded as separate events, and a person reporting to the system may select one or all three events.

 

Another study found that more serious adverse events are more likely to be reported.

This article examines several now-common adverse events following COVID vaccination. The figures are from the most recent update on Nov. 18, 2022

More

Slew of Unusual Adverse Events Becoming More Common After COVID Vaccine Rollout (theepochtimes.com)

NY Times Coronavirus Vaccine Tracker. https://www.nytimes.com/interactive/2020/science/coronavirus-vaccine-tracker.html

Regulatory Focus COVID-19 vaccine tracker. https://www.raps.org/news-and-articles/news-articles/2020/3/covid-19-vaccine-tracker

Some other useful Covid links.

Johns Hopkins Coronavirus resource centre

https://coronavirus.jhu.edu/map.html

Centers for Disease Control Coronavirus

https://www.cdc.gov/coronavirus/2019-ncov/index.html

The Spectator Covid-19 data tracker (UK)

https://data.spectator.co.uk/city/national

Technology Update.

With events happening fast in the development of solar power and graphene, among other things, I’ve added this section. Updates as they get reported.

Self-driving lorries hit the road in Sweden

Issued on: 30/11/2022 - 07:44

Sodertalje (Sweden) (AFP) – Barrelling down a motorway south of Stockholm in a 40-tonne lorry and trailer, the driver keeps a careful eye on the road but, jarringly, no hands on the wheel.

Instead, the truck drives itself, and veteran driver Roger Nordqvist is at the ready only in case of unexpected problems.

Swedish truck maker Scania is not the only auto manufacturer developing autonomous vehicles, but it recently became the first in Europe to pilot them while delivering commercial goods.

"We take their goods from point A, drive them to point B, fully autonomously," Peter Hafmar, head of autonomous solutions at Scania, tells AFP outside the company's transport lab in Sodertalje, south of Stockholm.

In the pilot project, the self-driving truck is manoeuvring a stretch of some 300 kilometres (186 miles) between Sodertalje and Jonkoping in Sweden's south, delivering fast-food goods.

From the outside, the vehicle looks almost like any other lorry, save for a rail on the roof packed with cameras and two sensors resembling bug antennae on the sides.

Inside the cab, the wheel and seats are where you'd expect to find them, but small devices and screens dot the dashboard and a nest of wires run to the computer rack housed behind the passenger seat.

'Drives better by itself'

Engineer Goran Fjallid sits next to the safety driver in the passenger's seat, eyes glued to his laptop as it receives video from the truck's cameras and flickering text with information about what the vehicle is seeing.

A second screen shows a 3D-visualisation of the truck on the road and all nearby vehicles.

The lorry combines all the input from the various sensors with a GPS system, with the different technologies acting as back-ups for each other.

"If the road markings disappear for a while, then it will use the GPS and it stays perfectly in its lane," Fjallid explains.

"It drives better by itself than when you drive it manually," he adds.

But he acknowledges that a lot of trial and error has gone into getting the truck to that point.

They've had to tweak things like how the truck handles merging onto the motorway, and what to do when another car cuts in front of it.

Every time the truck does something unexpected, such as braking or slowing down for no apparent reason, Fjallid makes a note of the exact timing so the logs and data can be examined.

The lorry's sensors are also calibrated daily before hitting the road.

Hafmar says there are still some hurdles to clear before driverless trucks -- without safety drivers -- become a common sight on roads, both in terms of technology and legislation.

They expect to have this ready by the end of the 2020s or the beginning of 2030s, Hafmar says.

The advent of self-driving trucks can be seen as a threat to the jobs of truck drivers -- one of the world's most common professions.

But Hafmar insists autonomous vehicles are needed to address a global driver shortage.

And, he says, it will be a long time before artificial intelligence will be able to handle all aspects of logistics.

Initially, self-driving lorries will likely be used for long-haul trips, but the last-mile distribution to shops and customers "will happen with human drivers", Hafmar adds.

More

Self-driving lorries hit the road in Sweden (france24.com)

There can be few fields of human endeavour in which history counts for so little as in the world of finance. Past experience, to the extent that it is part of memory at all, is dismissed as the primitive refuge of those who do not have the insight to appreciate the incredible wonders of the present.

John Kenneth Galbraith.

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