Authored by J. Peder Zane via RealClearPolitics,

There will be no reckoning among Democrats and their media lapdogs regarding their years-long effort to hide President Biden’s mental decline. No one will lose their job, precisely because they were doing their job – spinning false narratives to keep the left in power.

And, let there be no doubt, they will keep doing it. The current focus on Biden’s unfitness will last only until Democrats determine whether or not they can force him out. That effort won’t be easy. Biden is an empty suit with a boundless ego – he truly believes he is a modern-day FDR. Withdrawing because you’re not “all there” would be deeply humiliating.

If it becomes clear Joe won’t go, the party and its propaganda outlets will quickly pivot. Discussions of his physical and mental capacities will be shoved down the memory hole. His continuing gaffes and incoherence will be largely ignored, cast as boring facts that are already “baked in the cake”: Voters know about his limits so what’s the point of harping on them? Late night comics such as Steven Colbert and Jimmy Kimmel will probably try to make his ramblings kind of lovable – Joe says the darndest things. If Biden bows out, his replacement will be cast as the second coming of well, Jesus Christ, offering a path to salvation for an imperiled land.

Whether the candidate is Joe Biden or someone else, the goal will be to make the Democrat standard-bearer disappear from the race. When he or she is mentioned at all, it will be to cast the Biden administration’s unpopular record as one of high achievement. Look at all that the president and the Democrats have accomplished for the American people.

News coverage, instead, will seek to make the contest about Donald Trump’s fitness for office. Policy differences not involving abortion will be buried in the avalanche of personal attacks. New York Times White House correspondent Peter Baker signaled the pivot last Friday when he wrote:

One party has a candidate who is really old and showing it. The other has a candidate who is a convicted felon, adjudicated sexual abuser, business fraudster and self-described aspiring dictator for a day. And also really old. One party wants to replace its candidate. The other does not.

That same day, PBS “NewsHour” host Amna Nawaz characterized Trump as “an antidemocratic candidate with authoritarian tendencies, who is now newly empowered by that Supreme Court immunity ruling.”

With all her signature nuance, MSNBC host Joy Reid succinctly expressed the establishment mindset going forward: “If it’s Biden in a coma, I’m going to vote for Biden in a coma … to keep Hitler out of the White House.”

Even as Biden’s behavior suggests Reid is close to getting her wish, the next four months will be filled with fan-flaming screeds about fascism, Christian nationalism, white supremacy, Jan. 6, and dubious felony convictions. Trump’s hyperbole will be cast as despicable lies while the press ignores Biden’s insistence on repeating long-debunked talking points. Note that Biden’s opening line of the debate – probably his most prepared and rehearsed line of the night – contained two whoppers as he claimed he inherited an economy “in freefall” and that all Trump did in response to COVID was tell people to “inject a little bleach in your arm.” He also repeated the lie that Trump had praised neo-Nazis who marched at Charlottesville – tellingly “Meet the Press” host Kristen Welker branded Trump a liar for correcting Biden about this.

In fairness, we’ve heard this all before – and Trump is still leading the race. The attacks on him have been so vicious and unhinged for so long that it is easy to overlook the truly astounding fact that the man is still standing. Part of this is due to his remarkable toughness; part is due to the out-of-touch incompetence of his foes. They still don’t see that they have overplayed their hand, offering risible caricatures instead of critiques.

Democrats and their propaganda outlets still have power within their own liberal echo chambers, but they can no longer have the trust of the broader public. Most Americans dismiss their bogus narratives, including their longstanding insistence that Biden was at the top of his game. No one can be surprised by his cognitive issues, especially those in government and the media who have observed him up close for years. After interviewing him for a few hours nine months ago, Special Counsel Robert Hur concluded the president was an “elderly man with a poor memory.” The debate simply forced the media to acknowledge what most Americans could see at a greater distance.

It is a sign of the establishment’s cynicism that their only concern is that Biden might not have the capacity to run a winning campaign, not that he is probably unfit to execute the far more demanding and consequential duties of commander in chief.

The real mystery going forward: What other tricks do Democrats and the establishment media have up their sleeves to turn things around? Having already thrown the kitchen sink at Trump, it is hard to imagine that some new narrative about his evil nature will sway undecided voters.

Things could get very dark if they double down on lawfare – don’t be surprised if the Biden-donor judge in New York sentences Trump to jail in the Stormy Daniels case, or if state courts change how and when people can vote.

The pivot is coming and its intent will be clear: to help the Democrats win by any means necessary. Fortunately, we still live in a democracy and the people, not the power brokers, will have the final say.

Authored by Tom Ozimek via The Epoch Times,

A California judge handed Elon Musk a win in a lawsuit filed over the mass firing of staff at Twitter after he took over the social media platform in October 2022.

Mr. Musk and X Corp. (Twitter was rebranded as X in July 2023) were accused of violating provisions of the federal Employee Retirement Income Security Act (ERISA) by allegedly misleading employees about whether he’d honor a severance plan “at least as favorable” as one developed by prior Twitter management, leading some staff to stay at the company longer than they otherwise would have and getting less severance pay than they expected when they were let go.

The class-action lawsuit, which was brought by Courtney McMillian, who oversaw Twitter’s benefits programs, sought at least $500 million in allegedly owed severance pay to some 6,000 laid-off employees.

In a July 9 order, U.S. District Judge Tina Thompson in San Francisco dismissed the complaint against Mr. Musk, arguing that the employees’ claims weren’t covered under ERISA rules in part because the company notified staff after Mr. Musk took over the company that any laid-off staffers would get lower payouts under a new plan.

“Communications were made by Defendants showing that the named Plaintiffs would no longer have access to the earlier plan, which was discontinued or modified greatly,” the judge wrote.

Another factor weighing in favor of dismissal was that the plaintiffs failed to show that the severance plan Mr. Musk promised after taking the company over broke any provisions of ERISA, which sets rules for benefit plans.

“All of Plaintiffs’ claims in their operative complaint require the plan to be governed by ERISA. As such, the complaint fails to state sufficient facts to survive a Motion to Dismiss,” reads the judge’s order.

The judge gave the plaintiffs 21 days to file an amended complaint that states claims to severance pay based on the plans that were in effect after Mr. Musk took over the social media platform.

Requests for comment sent to attorneys representing Mr. Musk and Ms. McMillian were not immediately returned.

Ms. McMillian’s original complaint claimed that under Twitter’s 2019 severance plan, developed by prior management, most workers were promised two months of their base pay plus one week of pay for each full year of service if they were laid off.

Senior employees like Ms. McMillian were promised six months of base pay, plus one week for each full year of experience, according to the complaint.

However, after Mr. Musk took over, laid-off workers were given at most one month of severance and two months’ worth of pay, according to Ms. McMillian’s complaint, which alleged that this was a “fraction” of the $500 million to which laid-off employees were entitled.

Following a round of mass layoffs, Mr. Musk said in a post on Twitter in November 2022 that staff would receive three months’ worth of pay, which he said was 50 percent more than required by law.

While politics and geopolitics dominate the headlines—whether it’s Joe Bien’s mumbling and stumbling or the risks of World War III in Eastern Europe, the Middle East, or the South China Sea—many seem to overlook the ongoing commercial real estate crash in the US. This CRE downturn is set to worsen as remote and hybrid work models drastically reduce demand for traditional office towers.

Bloomberg cited data from the Mortgage Bankers Association, reminding us that banks will face a $1 trillion maturity wall of CRE loans at the end of this year. This only means more bank failures are ahead because of the bad property debt held on balance sheets.

“Compared with the Savings & Loans crisis and 2008, we’re still in the first or second innings” when it comes to distressed CRE assets, said Rebel Cole, a finance professor at Florida Atlantic University who advises Oaktree Capital Management, adding, “There’s a tsunami coming and the waters are pulling out from the beach.”

In a recent note, John Brady, global head of real estate at Oaktree, explained, “We could be on the precipice of one of the most significant real estate distressed investment cycles of the last 40 years.” 

Brady said that “unloved” CRE space will present opportunities for bottom fishing: “Few asset classes are as unloved as commercial real estate and thus we believe there are few better places to find exceptional bargains.”

Data from Preqin show private equity firms are building war chests as the CRE storm is expected to worsen, allowing them to bargain hunt. About 64% of the $400 billion of dry powder on the sidelines is intended for CRE investments across North America, the highest share in two decades. 

The percentage of office CMBS loans that are 30+ days delinquent just hit a decade high. 

Geographically, distressed office loans are piling up in the eastern half of the US. 

Meanwhile, Pimco expects more regional bank failures due to bad property debt. Adding to this, a recent Oaktree report indicates the number of banks that could fail if CRE prices fell just 20% from peaks would exceed 2008.

Charles McGrath, an associate vice president at Preqin, pointed out that higher borrowing costs for longer indicate a decline in dry powder on the sidelines. He said there are signs of a “sharp decline in fundraising and transactions.” 

The day of reckoning for banks nears as strategies like “extend and pretend” to delay recognizing losses on balance sheets are ending. 

Goldman’s Vinay Viswanathan noted earlier this year… 

Here’s a visualization of the upcoming maturity wall. 

What’s clear is the CRE storm is far from over. 

Authored by Salena Zito via RealClearPolitics,

ERIE, Pennsylvania — Despite 40,000 people leaving this city since 1970 (10,000 of them between 2000 and 2016) and having the unfortunate distinction of being the home of the poorest zip code in the state – “ride or die” Erie residents, especially young people who have left for better opportunities only to come back to raise their families here, are a real thing.

They are reshaping the way the city moves and shakes as well as its politics, in what is perhaps not just the most important county in Pennsylvania in determining who will be the next president – but arguably the most important county in the country.

It is a city and county in economic flux, situated halfway between New York City and Chicago along one of the Great Lakes. It has two major interstates, a massive port, and access to robust freight and passenger railroad service. Once a powerhouse of heavy industry, Erie is in the process of remaking itself as the center of “Eds and Meds” (universities and world-renowned hospitals), light manufacturing, and tourism.

Yet the collective memory of what they used to do here is a palpable undercurrent – especially among union workers who, for generations, called Erie’s sprawling 340-acre General Electric locomotive plant their second home. The slow erosion of the good-paying jobs that employed 25,000 in the 60s and dwindled to the current 3,000 has taken its toll emotionally as well as politically.

Still, the people here have been in Erie for generations – often living in close proximity to parents and grandparents, aunts and uncles, cousins, and childhood friends who they believe make their lives richer because of that multi-generational influence.

Erie, which will surprise everyone who has never been here, is the home of one of the most beautiful beaches in the country, located along the shores of popular Presque Isle State Park. The city is lined with 13 miles of bike trails and seven miles of sandy beaches and boasts the state’s only seashore.

For blue-collar residents of western Pennsylvania, eastern Ohio, and the panhandle of West Virginia, Erie is their “Jersey Shore,” complete with the same amenities of camping, seashore cabins, an amusement park along the beaches, and of course, dozens of diners.

The voters here are important. Very important, as Sen. John Fetterman told me in an interview. Every statewide election in Pennsylvania comes down to what Erie voters decide to do.

Once a solid county for Democrats in statewide gubernatorial elections as well as federal elections for president, U.S. Senate, and Congress, Erie shocked the world when the county went from supporting President Obama by a whopping 16 percentage points in 2012 to supporting Donald Trump in 2016 by 40,000 votes.

Four years later, Biden would win the county by roughly the same amount; in between, Democrats Josh Shapiro and John Fetterman would also win the county for governor and U.S. Senate, and a Republican won the county executive’s race for the first time in decades.

In short – win Erie, you win the state. The question is, going into the presidential election, who is winning the hearts and minds of Erie’s swing voters? Because where they go and what is on their minds heading into the election will tell us not just how Pennsylvania is doing, but also how states like Michigan, Wisconsin, Nevada, and Arizona might go, states that are a little less Democratic than the Keystone State.

At Gordon’s butcher shop, owner Kyle Bohrer is sitting with several swing voters who have voted for Trump, Biden, and third-party candidates, and who, with the exception of one voter – his own father – are all fatigued with both Biden and Trump.

Bohrer, 43, is a diamond in the rough – and the kind of outside-the-box thinker that cities like Erie need by the thousands. A fourth-generation Erie resident, he has owned one of Unishippers franchises, a logistics company that, as he says, keeps the family’s lights on.

In 2019, he decided to purchase a meat market called Gordon’s Butcher and Market, a 2,000-square-foot iconic local store that had been in business for 50 years, but was in decline. He bought it, he says, purely on sentiment.

Bohrer went all in, and today the business rivals the top-of-the-line meat markets seen across the country. There is also a spectacular restaurant called Firestone, a bar, a six-pack section stacked with craft beer, and an upscale wine store – all located in one high-end building.

A true homer, Bohrer never left Erie despite the city’s decay, instead throwing his energy into creating a cultural touchstone. The father of three loves bringing people together at his restaurant, even those who hold wildly different political viewpoints.

“I think it is important to be able to have discussions like this, and I think perhaps places like New York or D.C. or Los Angeles think we cannot because they cannot, but look at us here, we all come at this from different political views and we can discuss it, laugh at it and move on,” he said.

Bohrer is center-right; his worldview is moderate and pragmatic, but because he owns a business, he declines to voice whom he supports. Scott Carnes, seated to his left – physically and politically – is more than happy to.

The civil engineer, also 43, is married and the father of two young daughters ages 2 and 5; Carnes grew up in Erie, left for western New York for 10 years, then lived in Pittsburgh for 12 years until he and his wife and family moved back here last year.

“My wife got a job at Erie Insurance and I was able to work remote, which gave us the ability to move, so we came back,” explained Carnes. He says he has voted Democrat all of his life, “The most important issue to me is the economy, an issue ironically that puts me more in line with the Republicans,” he said. But the Biden-Trump debate took its toll.

“I am hoping Biden drops out. I think he’s absolutely going to lose if he stays in. He’s clearly too old to be running the country in my opinion,” he said. Yet if Biden stays in, he would still vote for him: “That is how much I despise Trump.”

Jacqueline Williams is a CPA and small business owner, born and raised in Erie. Williams left here to attend college and then moved to Pittsburgh to start her career before returning with her husband Adam, who is sitting beside her, to raise their family.

The striking mother of a teenager and a 7-year-old said she and her husband run a tax strategy business. “We try to help small business owners save as much as possible on their taxes, legally. And so, the way that the future government goes about changing what was enacted is important to me,” she explained.

One of her biggest concerns heading into the election is Biden’s insistence that he will end the Trump tax breaks for family incomes above $400,000. “So that is definitely going to have an impact on small business owners. The tax brackets are shrinking. They were wider before. Right now, we’re in lower marginal tax brackets, so we’re going to be going into higher ones more quickly, with that change,” she told me.

Williams says if the Trump tax breaks end, then bonus depreciation, which she said is already declining, goes away.

“Which is an incentive to invest in your business,” injects Adam, an attorney.

William says we’re working through a time where we want small business owners to create more opportunities, “And when you take away the tax breaks, that’s harder for them to do,” she explains, adding that it can lead to a snowball effect with small businesses either closing, not investing in their businesses, laying workers off, or not hiring at all.

“It becomes an overall negative, not just for our clients but for my entire community,” she said.  

Williams, 40, has always been a Republican. She voted for Trump in 2016 and voted third party in 2020, and even though she thinks both Trump and Biden are too old, because of the tax implications, she says she will vote for Trump.

Her husband says he will not.

Like Kyle Bohrer, Adam says he and his wife came home to make a difference. “We wanted to have an impact. My belief was, you would be able to look back on the timeline of Erie, and see what we’ve done, and say, ‘We are in the position that we’re in, partially because of the work that those people did.’”

He added, laughing, “So, yeah, that’s a little meta.”

Adam explains that what he loves best about Erie depends on the day. “The name of our law firm is Rust Belt Business Law. We changed the name a few years ago. And the whole idea is, if I wanted my life to be easy, I would go and start a business law firm in Miami, or Silicon Valley, or New York, or Chicago, or you name it,” he said, naming big cities with people with more money to spend.

“The thought was, there are values that this region holds that aren’t held in other places. And you talked about it with understanding. But I think it’s work ethic … I think it’s culture. And our clients are business owners that reflect the values and culture of where they were raised, and how they were raised and we really buy into those values … We believe that all else being equal, hard work will prevail over waiting for something to happen,” he said.

As for this election, he’s leaning toward one of the independent candidates. “Because I am not inspired,” he said. “I’m voting for what I believe in. So many people treat politics like sports, and they’ve got to be part of the winning team. Well, for me, it’s more about what really matters to me. And I believe I would be out of integrity with myself if I voted for either of the two front runners.”

Joe Bohrer is Kyle’s father. A tool and die maker born and raised in Erie, he’s never left to live elsewhere. Joe started his political awareness as a Democrat and began moving away from the party with each election.

“By the time Reagan came along, I was a full Republican,” he said.

Joe is all-in for Trump. He longs for a time when the dignity of work mattered, not just locally, but in the national conversation about hard work. Inflation is his top concern – he says high prices are hurting him.

“I can kind of blame Republicans and Democrats with their spending. So, the more money you spend that you don’t have, it has to diminish buying power. Because there’s not any more goods, but you have more money to spend on goods that aren’t being produced. Especially coming off of COVID,” he said.

He does not understand why Biden doesn’t embrace talking directly to the middle class about inflation. He doesn’t understand his shouting, either.

“It used to be Democrats, I felt, were anti-establishment,” he said. “Now I feel like it’s the opposite. They are establishment.”

For more than two hours, they all discussed their love of their community and how they could better impact it, all within the framework of having very different political worldviews.

Kyle Bohrer says he understands Erie is going to be ground zero for the election – not just for the state but for the entire country. “That is a lot of pressure for voters. I think the candidate who shows they understand the concerns here will translate to other cities and towns like ours and resonate.”

Until then, Bohrer says, “Buckle your seatbelts, Erie, it’s going to be a bumpy ride.”

Salena Zito is a reporter for the Washington Examiner, Wall Street Journal contributor, and co-author of “The Great Revolt: Inside the Populist Coalition Reshaping American Politics.”

Uranium mining stocks soared on Wednesday after a surprise hike in extraction taxes in Kazakhstan, the world’s largest uranium-producing country, which BMO Capital Markets said will limit future supply growth.

As Interfax first reported, the government in Kazakhstan introduced a new Mineral Extraction Tax (MET) for uranium, replacing the existing 6% flat rate MET introduced in 2023.

Per the new code, the new MET rate is to increase to 9% from 6% in 2025. However, the biggest change is from 2026 onwards where the Government has introduced a two-tier MET, calculated based on production output and spot uranium prices (see the table below).

According to BMO analyst Alexander Pearce, the new mineral extraction tax “is a surprise given it was increased in 2023.” He also notes that “the new rates are not marginal, thus the new MET penalizes large mining assets with potential MET of up to 20.5% (18% for anything over 4ktU, or ~10.4Mlb U3O8, plus an additional 2.5% if the uranium price is >US$110/lb).

Pearce calculates the potential impact to cash flow and concludes that the new MET could impact Kazatomprom’s NPV10% by 5-10% and 2025 EBITDA by up to 5%, and that “from 2026 onwards the EBITDA impact could be ~8-12%.”

More significantly, however, he warns that the new rates “appear to provide less incentive for Kazatomprom to increase production, in our view, with less penalty for higher uranium prices than production, which could add to support for the uranium price.”

The bottom line is that “with rates as high as 18% linked to production (from 6%) and additional 2.5% linked to uranium prices, there would now appear to be less incentive to increase production in future year” and “while this could have as much as a 5-12% impact to future cash flow, increasing uncertainty over future supply could drive higher uranium prices“

As news of the new tax spread across markets, the top-performing stocks in the S&P/TSX Composite Index on Wednesday are all uranium miners, led by NexGen Energy +6.8%, Denison Mines +6.8% and Cameco +6.6%. US-trader uranium stocks were also all sharply higher, with names such as CCJ, UEC, URA and URNM all soaring.

Authored by Michael Lebowtiz via RealInvestmentAdvice.com,

As quoted below from an executive summary of a joint report by the Department of Treasury and the Office of Management and Budget (OMB), the current deficit policy is deemed unsustainable. However, they fail to mention how long the Fed, via fiscal dominance, can sustain the unsustainable.

“The debt-to-GDP ratio was approximately 97 percent at the end of FY 2023. Under current policy and based on this report’s assumptions, it is projected to reach 531 percent by 2098. The projected continuous rise of the debt-to-GDP ratio indicates that current policy is unsustainable.” – Financial Report of the United States Government  -February 2024.

Fed speakers will deny any notion that its monetary policy aims in part to help the government fund her debts. Regardless of what they say, we are already in an age of fiscal dominance. Monetary policy must consider the nation’s debt situation.  

Fiscal Dominance

Fiscal dominance is a condition whereby the amount of debt in an economy reaches a point where monetary policy actions must allow Federal debts and deficits to be serviced and funded cost-effectively. By default, such monetary policy decisions will often come at the expense of traditional employment and price goals. As a result, the Fed must further distort the price of money and ultimately lessen the wealth of the nation’s citizens.

The age of fiscal dominance is here. Consider the following paragraphs and graph from our article Stimulus Today Costs Dearly Tomorrow.

A lender or investor should never accept a yield below the inflation rate. If they do, the loan or investment will reduce their purchasing power.

Regardless of what should happen in an economics classroom, the Fed has forced a negative real rate regime upon lenders and investors for the better part of the last 20+ years. The graph below shows the real Fed Funds rate (black). This is Fed Funds less CPI. The gray area shows the percentage of time over running five-year periods that real Fed Funds were negative. Negative real Fed Funds have become the rule, not the exception.

Soaring Debt Outstanding and Rising Rates

The government has added $2.5 trillion in debt over the last four quarters. Of that, over $1 trillion was to pay its interest expenses on the entire debt stock. Despite recent high interest rates, the average interest rate on the debt is still relatively low at 3.06%.

The two graphs below show why a relatively minimal uptick in the average interest rate on the debt is so troublesome. The federal debt (blue) has grown by 8.5% annually over the last ten years. Despite the amount of debt more than doubling over the period, the interest expense on the debt until very recently has remained very low. The first graph shows that the average interest rate increase is barely visible.

However, the second graph shows that the rise in the government’s interest expenses is substantial.

As debt issued years ago with low interest rates matures and new debt with higher interest rates replaces it, the interest expense will keep rising. For context, if we assume the government’s average interest rate is 4.75%, likely close to their weighted average rate on recent debt issuance, the interest expense will rise to $1.65 trillion, not including new debt.

$1.65 trillion is over $300 billion above the government’s next largest expenditure, Social Security. Furthermore, it is double defense spending for 2023. The annual federal deficit has only been above $1.65 trillion twice (2020 and 2021) since its founding in 1776.

While the situation may sound gloomy, lower interest rates solve the problem. If interest rates return to the levels existing before 2022, the interest expense could easily fall below $700 billion, about half of the cost than if rates remain at current levels.

Therefore, interest rates will have to be kept in check by the Fed.

The Fed Understands Their Role

In 2008, Ben Bernanke said QE was a temporary measure that would be reversed once the economy and markets returned to normal. Trillions worth of Treasury purchases later, and the Fed now tells us it’s permanent. Consider the following graph and paragraph by the New York Fed.

“Under the two purely illustrative scenarios, the size of the SOMA portfolio continues to decline to $6.5 trillion and $6.0 trillion, respectively. The portfolio size then remains steady for roughly one year before increasing to keep pace with growth of demand for Federal Reserve liabilities, reaching $9.2 trillion and $8.4 trillion, respectively, by the end of the forecast horizon in 2033.”

The SOMA portfolio is the Fed’s System Open Market Account Holdings. This is the portfolio that holds bonds purchased via QE as well as its other monetary operations.

The graph on the left shows that the Fed expects the SOMA account to rise by about 40% starting in later 2024 through 2032. More importantly, the graph on the right shows that its increase will be commensurate with GDP. In other words, the Fed will continue to help fund the deficit by buying Treasury debt.

Monetary Policy

We know how QE and lower interest rates cut interest expenses, allowing the government to spend recklessly. However, there are other ways the Fed can supplement their efforts if needed. For instance, in our daily Market Commentary from April 24th, we shared the following:

If enacted, the new bank rules would force all banks to “preposition billions more in collateral” at the Fed to support future discount window borrowing. The article estimates that the Fed would require collateral matching up to 40% of a bank’s uninsured deposits, accounting for about 45% of the $17.5 trillion commercial bank deposits. Further, the new rules would require the banks to borrow from the window numerous times a year to help remove the program’s stigma.

In addition to bolstering the banking safety net, it would also force banks to hold significant collateral balances at the Fed. Collateral for Fed loans is quite often U.S. Treasury securities. Accordingly, this new bank rule is another way to help the Treasury fund its massive deficits and stock of outstanding debt from years past.

In late March, we shared another idea floating around Wall Street. Per our article QE By A Different Name Is Still QE we wrote:

Rumor has it that the regulators could eliminate leverage requirements for the GSIBs. Doing so would infinitely expand their capacity to own Treasury securities. That may sound like a perfect solution, but there are two problems: the banks must be able to fund the Treasury assets and avoid losing money on them.  

The bank bailout BTFP enacted in March 2023 addresses the problems. As we wrote:

In a new scheme, bank regulators could eliminate the need for GSIBs to hold capital against Treasury securities while the Fed reenacts some version of BTFP. Under such a regime, the banks could buy Treasury notes and fund them via the BTFP. If the borrowing rate is less than the bond yield, they make money and, therefore, should be very willing to participate, as there is potentially no downside.

Summary

With the Fed willingly helping the government fund her debts, we believe the odds are small that any significant deficit reduction is possible. While the path is unsustainable, it is likely much longer than most pundits appreciate.

However, fiscal dominance comes with a significant cost. The Fed fuels the widening wealth gap by manipulating interest rates and indirectly influencing the stock market. As we have seen glimpses over the last five years, social unrest will likely become more prevalent. With that comes poor economic confidence from consumers and businesses, which in turn generates a headwind to the economy.

It’s not too late to try and fix our fiscal problems, but time is ticking. As the saying goes, Rule #1 of holes: when you are in one, the first thing to do is stop digging.

One day after a stellar 3Y auction, moments ago the Treasury sold $39BN in a 10Y reopening of 9-Year, 10-Month cusip KQ3 in another very strong auction confirming that there are zero concerns about tomorrow’s CPI print, which the street clearly expects to come in below estimates.

The high yield on today’s auction was 4.276%, well below last month’s 4.438% and the lowest since May; it also stopped through the 4.286% When Issued by 1basis point, the second consecutive stop in a row.

While the bid to cover was 2.575, dropping from 2.67 in June, it was above the 6-auction average of 2.52.

The internals were also solid with Indirects taking down 67.6%, also down from the near record 74.6% in June but above the 67.2 recent average. And with Directs grabbing a generous 20.9% of the allotment, the highest since Oct 23, Dealers were left with just 11.5% of the auction the lowest since last August.

Overall, this was a solid auction and one which helped push yields lower from session highs of 4.30% reached just moments prior to the sale.

The most flagrant insider stock trader in DC may be about to cut President Joe Biden loose.

In an appearance on Morning Joe, the former speaker took a different tone from appearances last week supporting Biden, saying: “It’s up to the president to decide if he is going to run. We’re all encouraging him to to make that decision. Because time is running short.”

“Do you want him to run?” asked host Jonathan Lemire.

“I want him to do whatever he decides to do. And that’s the way it is. Whatever he decides we go with.”

(He’s running, idiots… The question is whether he should pull out.)

She also called for a pause on Democrats pouncing on Biden until the NATO conference is over.

“Let’s just hold off. Whatever you’re thinking, either tell somebody privately, but you don’t have to put that out on the table until we see how we go this week.”

Nancy Pelosi tells Morning Joe that she has President Biden’s back.

So should we. pic.twitter.com/pc9Mhhufpy

— Art Candee 🍿🥤 (@ArtCandee) July 10, 2024

When asked if Biden had the overwhelming support of most congressional Democrats, Pelosi demurred, saying “But he’s beloved, he is respected, and people want him to make that decision. Not me.”

On Monday, Pelosi’s office said she has ‘full confidence‘ in Biden.

Perhaps Nancy heard that George Cloony has decreed Biden must step aside… It’s all but officially Joever.

UPDATE: George Clooney loves Joe Biden. We know what that means— Stab him in the back! pic.twitter.com/iyYdRVKQAR

— David Sacks (@DavidSacks) July 10, 2024

By Peter Earle of the American Institute of Economic Research

Since the start of 2024, numerous well-known restaurant chains have announced sizable closures and incrementally more drastic restructuring efforts.

TGI Fridays has closed numerous locations across the US and sold eight corporate-owned locations to strengthen their franchise model and close underperforming stores. Denny’s shut down 57 restaurants in 2023 and announced additional closures for 2024 due to inflationary pressures. Boston Market drastically reduced its number of restaurants from around 300 to just 27 by March 2024, driven by landlord evictions, unpaid bills, and state shutdowns due to unpaid sales taxes. Mod Pizza abruptly closed 27 locations across the US, including five in California, just before the new minimum wage law took effect. Also suddenly, Coco’s Bakery and Carrows chains closed 75 locations, leading to a federal lawsuit by former employees due to the lack of notice provided for the layoffs. PDQ, a regional restaurant chain, closed eight restaurants across North and South Carolina in February 2024 due to market conditions. Outback Steakhouse’s parent company, Bloomin’ Brands, announced the shuttering of 41 locations of Outback Steakhouse, Carrabba’s Italian Grill and Bonefish Grill in February 2024 as part of a major financial restructuring. Subway has been undergoing a massive drawdown, closing over 400 underperforming locations since last year alone. And Applebee’s has been selectively closing locations since the start of 2024, focusing on optimizing its restaurant portfolio by shutting down low-revenue stores.

In 2024, Buffalo Wild Wing will eliminate sixty locations in the United States. IHOP (International House of Pancakes) will wind down 100 locations. Other firms eliminating locations include Pizza Hut, Red Lobster, Hooters, and Chili’s. A handful of others may close down entirely. 

COVID lockdowns significantly weakened chain restaurants by drastically reducing their customer base and revenue streams. This disruption made it difficult for many restaurants to sustain operations, some of which took on more debt in the face of depleted financial reserves. At the start of 2024, FSR (Full Service Restaurant) Magazine summarized:

Another after-shock of COVID was the debt pile. Going back to August 2020, the James Beard Foundation released survey data that suggested only 66 percent of independent bars and restaurants expected to survive the fall season without direct aid. Frothing to the top of this fear was the fact that close to 75 percent reported taking on new debt obligations north of $50,000. Moreso, 12 percent tagged the number at $500,000 and above. Growing debt, and the deterioration in operating performance required to service it, forced heightened levels of investor and debt-holder concern and oversight[.] … This increased debt between 2019 and the last 12 months 2020 by 8.1 percent for limited-service units and 15.7 percent for full-serves. The former, by the fall, sat at more than four times as much debt, while full service was at nearly 50 percent more than 2008 levels … [In] the current environment … 68 percent of full-service restaurants reported carrying some amount of debt. On average, it was $51,863.20 — a number that could creep up as interest rates continue to rise.

FSR continues:

“If debt is a piece of the profit puzzle, food costs are another. In fact, they appear to be an even bigger, more widespread concern … than the year before. This year, 58 percent of operators in the survey said rising inventory costs was their No. 1 source of financial strain, up from 54 percent in 2022.”

The total and annual percentage changes in the index prices of six key ingredients of restaurant and diner menu items, from 2010 to 2020 and then from 2021 to the present, are shown below; in most cases, over the last three years prices have risen at multiples of their annual increases over the prior decade.

Since January 2021, core CPI has risen just over 17 percent, while food-away-from-home prices have risen over 22 percent. 

Core CPI (blue) vs. CPI Food Away From Home (black), 2014 – 2024

Those higher prices have translated to falling foot traffic. As costs of living have risen and pandemic savings have dissipated, eating outside the home has become more costly. Where meals continue to be purchased, order sizes are falling or cheaper items purchased. A small handful of massive firms with tremendous economies of scale are experimenting with lower priced options, but most eateries have cost structures which preclude similarly priced offerings. In fact, some franchisees of those huge restaurant chains are claiming that the depth of those discounts is financially untenable for them. 

Recent data highlights a decline in restaurant visits, with several factors contributing to this trend. A report from Bar and Restaurant points out that many top revenue-generating restaurants experienced significant year-over-year declines in customer traffic in late 2023 and early 2024, with a further pronounced drop in January 2024. This decline is attributed to consumers curtailing their restaurant expenditures and opting for more cost-effective alternatives, such as cooking more meals at home due to high menu prices driven by inflation and wage increases​. (This is also behind recently emerging controversies over tipping quantities and imperatives.)

Similarly, Produce Blue Book reports that same-store sales growth for restaurants was negative in February 2024, marking the worst-performing month since February 2021. Despite a slight improvement in sales growth compared to January, the data suggests that consumers are pulling back on restaurant visits and spending due to financial pressures such as growing credit card balances, high interest rates, and inflation. The expected slowdown in restaurant sales is attributed to these economic factors, which are leading consumers to moderate their restaurant consumption​​. Additionally, QSR Magazine notes that US traffic for limited-service chains fell by 3.5 percent year-over-year in the first quarter of 2024, further illustrating the challenges faced by the restaurant industry in attracting customers​

More recently, atop the compounded challenges of inflation and falling consumer demand are substantial jumps in state minimum wages. Since the start of 2024, more than half of all US states have, or planned to, to raise minimum wages:

*California’s minimum wage, which rose to $16.00 on January 1st, increased again on April 1st, after which all fast food restaurant employees covered by the new law must be paid at least $20.00 per hour.

On July 1, Nevada and Oregon raised their minimum wages to $12 per hour while Washington DC increased theirs from $17 to $17.50 per hour for non-tipped workers and from $8 to $10 per hour for tipped workers. Florida’s minimum wage will rise to $13 per hour on September 30. 

For traditional restaurants, profit margins are generally low, typically ranging between 3 to 5 percent, while in the fast food industry, profit margins are comparatively higher, generally lying between 5 and 8 percent. Estimating the impact of a minimum wage increase on the profitability of these establishments requires a nuanced understanding of their current profit margins and cost structures. Given these average profit margins, labor costs are a major expense, significantly affecting profitability. Any increase in the minimum wage substantially raises costs, squeezing the already narrow profit margins. For traditional restaurants with lower margins, even a small increase in labor costs could result in operations becoming unprofitable if prices aren’t adjusted accordingly or if cost-saving measures aren’t effectively implemented. Even before the substantial rise in wages and the slowing disinflation of the first quarter of 2024, food service industry strains were mounting. 

According to the National Restaurant Association (NRA) Restaurant Business Conditions Survey, nearly all full-service restaurant owners — 92 percent — consider rising food costs a significant challenge. Increased labor costs are not far behind at 90 percent, and 67 percent percent say utilities present a significant challenge. But they’re also spending more on the same things you’re spending more on — dishwasher detergent, hand soap, paper products, linens, laundry services, plates, silverware, and on and on.

A little over two-and-a-half years ago, I wrote about the breakdown of the NYC Pizza Principle as prices began to rise. Restaurants nationwide are now grappling with a financial maelstrom including rising prices, higher minimum wages, falling sales, and in many cases higher debt costs. The health of the industry is summed up by comparing the stability of the National Restaurant Association Performance Index from 2010 through the pandemic with its trajectory since 2021, as the general price level hit four decade highs – and remains elevated to this day.

National Restaurant Association Restaurant Performance Index, 2010 – present

The cumulative impact of these pressures is straining the industry from single-location establishments to nationwide and international chains. If accelerating US unemployment registers the impact of contractionary monetary policy measures on the broader economy, the current difficulties faced by the restaurant sector are likely to escalate. And insofar as those economic conditions persist, all but the stoutest and most well-capitalized food service industry interests may find it increasingly challenging to serve customers, the impact of which will be felt by employees, investors, and peripheral businesses alike.

By Emma Dayton of CampusReform

A Harvard University course this fall semester will study “trans monks,” cross-dressing, “genderless angels,” and intersectionality in the Byzantine Empire (also known as the Eastern Roman Empire). 

The course, “Gender in Byzantium,” focuses “on the entire spectrum of binary and non-binary conceptualizations, representations and performances of gender in Byzantium by exploring textual and visual material alongside recent scholarship on gender and sexuality.”

“Topics for discussion include: normative concepts and representations of masculinity and femininity; asceticism and the gendered body; emotions and gender; same-sex desire and relationships (homosociality); cross-dressing (trans monks?); intersectionality (gender, race and class); authorial (cis- and trans-) gender performance; eunuchs (a ‘third gender’?); incorporeal/genderless angels,” the course description continues. 

One course text, “Byzantine Intersectionality,” labels the terms “transvestite” and “cross-dressing” as “problematic.” Referring to women who pretended to be male eunuchs in order to live as monks, the text adds: “[S]cholars repeatedly have shied away from referring to these figures as ‘transgender,’ instead calling them ‘transvestite nuns,’ ‘cross-dressing’ saints, or women in ‘disguise.’ These pejorative terms, which are pervasive throughout the historiography, negate these subjects’ identification as transgender persons.”

The text gives the example of Marinos, a woman–whom the text consistently refers to as “he” and “him”–who snuck her way into a monastery and successfully passed herself off as a man in order to become a monk. The text also refers to her life as “a typical narrative for a transgender monk.”

Another course text, “Women, Men, and Gender in Christianity,” claims that the Gospels “enshrine” anti-Semitic rhetoric, and that “Gender has been an idea of considerable fluidity throughout history, and throughout Christian history as well.”

“[S]ociety in our current moment is struggling in very literal terms with gender ambiguity—an ambiguity that has always been part of Christian rhetoric,” the text continues. 

Another text, “Byzantine Gender,” states: “The stock [gender] roles do not seem to have been straightjackets but rather a wide repertoire of behaviours that people could mimic or embody in order to craft the responses others would have to them. . . . Gender, like much of social interaction, seems thus to have been highly performative.” 

Harvard offers various other courses focusing on gender and sexuality, such as “Feminism in the Age of Empire,” “Gender & Sexuality in Korean Pop Culture,” “Psychology of the Gendered Body,” and “Power to the People: Black Power, Radial Feminism, and Gay Liberation.”