Via The Cradle

Canada will impose a ban on arms sales to Israel, the country’s Foreign Minister Melanie Joly announced on Tuesday. “It’s a real thing,” Joly told Canadian newspaper The Toronto Star on Tuesday. The decision follows a vote of 204-117 in the Canadian parliament on Monday in favor of ending the sales. While it originally called for a suspension, it was later changed into a full ban. 

“There are a number of existing contracts that are already in place, but this was on a going-forward basis, I think that’s how the minister’s looking at it. There has been a lot of concern expressed with respect to … lethal military sales to Israel during the conflict,” Canadian Defense Minister Bill Blair said Tuesday.

Ottawa had previously temporarily suspended export permits for military goods to Israel. However, Global Affairs Canada, the government body in charge of diplomatic and consular relations, continued to receive applications for weapon exports to Israel, reviewing them on a case-by-case basis. 

Following the parliament vote on Monday, Canada decided to honor the decision. Tel Aviv viewed the motion as an attack on Israel’s ‘right to self-defense’ against Hamas. 

“It is unfortunate that the Canadian government is taking a step that undermines Israel’s right to self-defense against the Hamas murderers who have committed terrible crimes against humanity and against innocent Israeli citizens… History will judge the Canadian government’s current move harshly,” Israeli Foreign Minister Israel Katz said in response. 

The original motion, brought forward by Canada’s New Democratic Party (NDP), included a call for the recognition of a Palestinian state and sanctions on Israeli officials for incitement of genocide. Yet the motion was toned down in a deal between the NDP and Canada’s liberal government. 

“This evening’s vote by Parliament did not go nearly as far as we had hoped for, but is nonetheless a small step forward for ending Canadian complicity in Israel’s genocidal war in Gaza,” Canadians for Justice and Peace in the Middle East (CPJME) said in a statement after the vote on Monday. 

CPJME said it was “deeply disappointed that much of the language in the amended motion has been watered down or modified in a way that promotes false Israeli narratives and an acquiescence to the horrific status quo,” adding that the “watering down of the NDP resolution weakens the significance of Parliament’s vote.”

This is a moral boosting but, unfortunately, an unbinding decision. #Canada‘s government will stop sending weapons to #Israel only when the #US decides to do so. https://t.co/nHBG4oqsS1

— Elijah J. Magnier 🇪🇺 (@ejmalrai) March 20, 2024

Since October 7, Canada has approved at least $21 million worth of new permits for arms exports to Israel. US arms exports to Israel, on the other hand, have been much higher. Since the start of the war, over 100 arms sales to Israel have been approved, among them $106 million worth of tank munitions and $147.5 million worth of shell components.

The UN has repeatedly warned in recent months that states exporting arms or military goods to Israel are at high risk of being complicit in war crimes. Several countries, including Spain, the Netherlands, Japan, and Belgium, have taken similar steps. 

Believe it or not, high prices combined with massive taxation and out of control crime aren’t the keys to keeping the citizens of major American cities happy.

Such was reflected in the results of a new poll, reported on by the NY Post, which revealed this week that only half of New Yorkers plan on staying in the city over the next five years.

A mere 30% said they were happy with the quality of life in the city, the poll – run by The Citizens Budget Commission – also revealed. Additionally, the poll also found merely 37% of New Yorkers now rate public safety in their local area as excellent or good. This marks a significant decline from six years prior, when 50% of residents felt positively about their neighborhood’s safety.

Queens Councilman Robert Holden said to the Post: “People are fed up with the quality of life. There’s a general sense of lawlessness. You go into the CVS and there’s shoplifting. People’s cars get vandalized.”

The survey of 6,600 households revealed half feel unsafe using the subway by day, a stark drop from 2017. It also highlighted significant declines in satisfaction with public education, government services, and cleanliness.

Dissatisfaction grew regarding traffic, safety for cyclists and pedestrians, and subway services. Higher income Manhattan residents and white individuals reported higher satisfaction with city life, although overall contentment with life quality in NYC fell. Yet, 50% were pleased with their neighborhood quality.

Approval varied by income, with 43% of those earning above $200,000 and 30% of those making less than $35,000 expressing satisfaction. In affluent areas, over 70% rated their neighborhood positively, a decline from six years ago. This dissatisfaction coincides with rising major crime rates from 2017 to 2023, per NYPD data.

Jonathan Bowles, Executive Director, Center for an Urban Future added: “The survey is a sobering, but hugely valuable assessment of what things matter the most for New Yorkers right now.”

“Policymakers should take notice and grasp that there’s still a lot of work to do to make the city more livable and affordable.”

Tom Grech, the president and CEO of Queens Chamber of Commerce simply added: “In general, it’s pretty ugly out there. There’s a free for all mentality over there the last couple of years. There’s a little sense of things spiraling out of control. We’ve got to get back to basics.”

Today’s cover: Mayor Adams’ New York is a blunderful life – and it’s only getting worse https://t.co/Um2oTHgsv5 pic.twitter.com/Po4o1tNkXT

— New York Post (@nypost) March 20, 2024

Authored by Michael Lebowitz via RealInvestmentAdvice.com,

The Fed added Quantitative Easing (QE) to its monetary policy toolbox in 2008. At the time, the financial system was imploding. Fed Chair Ben Bernanke bought $1.5 trillion U.S. Treasury and mortgage-backed securities to staunch a financial disaster. The drastic action was sold to the public as a one-time, emergency operation to stabilize the banking system and economy. Since the initial round of QE, there have been four additional rounds, culminating with the mind-boggling $5 trillion operation in 2020 and 2021.

QE is no longer a tool for handling a crisis. It has morphed into a policy to ensure the government can fund itself. However, as we are learning today, QE has its faults. For example, it’s not an appropriate policy in times of high inflation like we have.

That doesn’t mean the Fed can’t provide liquidity to help the Treasury fund the government’s deficits. They just need to be more creative. To that end, rumors are floating around that a new variation of QE will help bridge potential liquidity shortfalls.

The Sad Fiscal Situation

The Federal government now pays over $1 trillion in interest expenses annually. Before they spend a dime on the military, social welfare, or the tens of thousands of other expenditures, one-third of the government’s tax revenue pays for the interest on the $34 trillion in debt, representing deficits of years and decades past.

There are many ways to address deficits and overwhelming debt, such as spending cuts or higher taxes. While logical approaches, politicians favor more debt. Let’s face it: winning an election on the promise of spending cuts and tax increases is hard. It’s even harder to keep your seat in Congress if you try to enact such changes.   

More recently, the Federal Reserve has been forced to help fund today’s deficits and those of years past. We can debate the merits of such irresponsible behavior all day, but for investors, it’s much more critical to assess how the Fed and Treasury might keep the debt scheme going when QE is not an option.

Borrowing For Deficits

Before spreading rumors about a new variation of QE, let’s review the problem. The graph below shows the widening gap between federal spending and tax receipts. Literally, the gap between the two lines amounts to the cumulative Federal deficit. Instead of plotting deficit data, we prefer outstanding total federal debt as it better represents the cumulative onus of deficits.

The graph below shows the Treasury debt has grown annually for the last 57 years by about 1.5% more than the interest expense. Such may not seem like a lot, but 57 years of compounding makes a big difference.  

Declining interest rates for the last 40+ years are to thank for the differential. The green line shows the effective interest rate has steadily dropped until recently. Even with the current instance of higher interest rates, the effective interest rate is only 3.00%.

Fiscal Dominance

The Fed has been increasingly pressed to help the U.S. Treasury maintain the ability to fund its debt at reasonable interest rates. In addition to presiding over lower-than-normal interest rates for the last 30 years, QE helps the cause. By removing Treasury and mortgage-backed securities from the market, the market can more easily absorb new Treasury issuance.

Fiscal dominance, as we are experiencing, occurs when monetary policy helps the Treasury fund its debts. Per The CATO Institute:

Fiscal dominance occurs when central banks use their monetary powers to support the prices of government securities and to peg interest rates at low levels to reduce the costs of servicing sovereign debt.

2019 Revisited

In 2019, before the massive pandemic-related deficits, government spending ramped up over the prior few years due to higher spending and tax cuts. In September 2019, the repo markets strained under the pressure of the growing Treasury demands. The banks had plenty of securities but no cash to lend. For more information on the incident and the importance of liquidity in maintaining financial stability, please read our article, Liquidity Problems.

When a bank, broker, or investor can’t borrow money despite being willing to post U.S. Treasury collateral, that is a clear sign that the banking system lacks liquidity. That is exactly what happened in 2019.

The Fed came to the rescue, offering QE and lowering interest rates.

Shortly later, in March 2020, government spending blossomed with the pandemic, and the Fed was quick to help. As we shared earlier, the Fed, via QE, removed over $5 trillion of assets from the financial markets. That amount was on par with the surge of government debt.

The Fed is mandated to manage policy to achieve maximum employment and stable prices. Mandated or not, recent experiences demonstrate the Fed has become the de facto lender to the Treasury, albeit indirectly.

The Fed Is In Handcuffs

While Jerome Powell and the Fed might like to help the government meet their exorbitant funding needs with lower interest rates and QE, they are shackled. Higher inflation resulting from the pandemic and fiscal and monetary policies force them to reduce their balance sheet and keep rates abnormally high.

Unfortunately, as we wrote in Liquidity Problems, the issuance of Treasury debt rapidly drains excess liquidity from the system.

While the Fed hesitates to cut rates or do QE, they may have another trick up their sleeve.

Spreading Rumors

The following is based on rumors from numerous sources about what the Fed and banking regulators may do to alleviate funding pressures and liquidity shortfalls. 

Banks have regulatory limits on the amount of leverage they can employ. The amount is set by the type and riskiness of assets they hold. For instance, U.S. Treasuries can be leveraged more than a loan to small businesses. A dollar of a bank deposit may allow a bank to buy $5 of a Treasury note but only lend $3 to a riskier borrower.

The regulatory structure currently recognizes eight Global Systematically Important Banks (GSIB). They are as follows:  Bank of America, The Bank of New York, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, State Street, and Wells Fargo & Company.

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. 

BTFP To The Rescue Again

A year ago, the Fed created the Bank Term Funding Program (BTFP) to bail out banks with underwater securities. The program allowed banks to pledge underwater Treasury assets to the Fed. In exchange, the Fed would loan them money equal to the bond’s par value, even though the bonds were trading at discounts to par.

Remember, since 2008, banks no longer have to book gains or losses on assets unless they are impaired or sold.

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.

The Fed still uses its balance sheet in this scheme, but it could sell it to the public as a non-inflationary action, as it did in March 2023 when the BTFP was introduced.

Summary

The federal government’s escalating debt and interest expenses underscore the challenges posed by prolonged deficit spending. The problem has forced the Fed to help the Treasury meet its burgeoning needs. The situation becomes more evident with each passing day.

The recently closed BTFP program and rumors about leverage requirements provide insight into how the Fed might accomplish this tall task while maintaining its hawkish anti-inflationary policy stance.  

Having jawboned the market down from over 6 rate-cuts to only 3 rate-cuts (and confirmed in today’s dot-plot), we suspect Fed Chair Powell will take a small victory lap over the exuberant wishful-thinkers that hoped an ‘easy’ Fed will come rushing back…

The question is – will Powell talk down the hawkish ‘projections’ of the ‘dots’ as he usually does… offering hope to the uber-doves once again?

Maybe the fact that financial conditions are as ‘loose’ now as they were before The Fed started its hiking cycle will slow Powell’s dovish roll…

Watch the Fed press conference live here (due to start at 1430ET):

Via The Brownstone Institute,

At her confirmation hearings, Justice Ketanji Brown Jackson claimed she lacked the expertise to define “woman.” Just two years later, she did not hesitate to redefine the First Amendment and free speech as she advocated for the regime to bulldoze our Constitutional liberties provided they offer sufficiently sanctimonious justifications…

At Monday’s oral arguments in Murthy v. Missouri, Jackson said her “biggest concern” was that the injunction, which prohibits the Biden Administration from colluding with Big Tech to censor Americans, may result in “the First Amendment hamstringing the Government.” 

This, apparently, was of greater concern to Jackson than the revelations that the Intelligence Community held ongoing meetings with social media companies to coordinate censorship demands, that the White House explicitly demanded the censorship of journalists, and that the Department of Homeland Security was instrumental in manipulating citizens ahead of the 2020 presidential election.

But according to Jackson’s outlook, those facts may have actually been encouraging. She scolded counsel, “Some might say the Government actually has a duty to take steps to protect the citizens of this country.”

Jackson’s formulation inverts the structure of constitutional liberties. The Constitution does not limit the powers of citizens; it restrains our elected officials from tyrannical overreach. It is the law that “governs those who govern us,” as law professor Randy Barnett explains.

Impediments to state powers are not flaws in the system; they are the essence of the design. But Jackson offers no deference to these constitutional restraints. Instead, she explained, “I am really worried about…the First Amendment operating in an environment of threatening circumstances.”

Of course, the First Amendment was designed for environments of threatening circumstances.

American history offers no shortage of threats that could be justified to abridge our liberties – from Cholera and Yellow Fever to polio and Spanish flu; from the Red Coats and the XYZ Affair to the Red Army and the War on Terror; from conquering the west to defeating the Nazis. 

The Framers understood the ineradicable threat that power poses to liberty, which is why they were unequivocal that the Government cannot “abridge” constitutionally protected speech, no matter the moral surety of the censors.

At times, the country has failed to live up to this promise, but those instances are rarely heralded. Jackson’s deference to emergencies or “threatening circumstances” is precisely the logic that the Court used to intern the Japanese and jail Eugene Debs. More recently, censors invoked that familiar paternalism to justify censorship of the origin of Covid and the veracity of Hunter Biden’s laptop. 

But the Constitution demands a different path, as explained by Louisiana Solicitor General Benjamin Aguinaga in response to Jackson. The choice between liberty and safety is a false binary. “The Government can’t just run rampant pressuring the platforms to censor private speech,” Aguinaga explained. 

The Biden Administration can promote its interests, deliver its own speeches, and purchase its preferred PSAs. It cannot, however, use vapid slogans of paternalism to usurp the First Amendment.

Justice Alito appeared to see through the justifications for censorship in his questioning of Brian Fletcher, Biden’s Deputy Solicitor General. He asked:

“When I see that the White House and federal officials repeatedly say that Facebook and the federal government should be ‘partners,’ [or] ‘we are on the same team.’ [GOVERNMENT] Officials are demanding answers, ‘I want an answer. I want it right away.’ When they’re unhappy, they curse them out…The only reason why this is taking place is that the federal government has got Section 230 and antitrust in its pocket…And so it’s treating Facebook and these other platforms like their subordinate.Would you do that to the New York Times, The Wall Street Journal, the Associated Press, or any other big newspaper or wire service?”

Meanwhile, Jackson could not grasp the most basic tenets of the First Amendment or free speech. Instead, she fear-mongered with absurd questions of whether the State has a compelling interest in stopping teens from “jumping out of windows.”

In the process, Jackson revealed her intent to defenestrate the First Amendment alongside her fictitious adolescent victims. Her “biggest concern” is that the First Amendment may hinder the regime’s pursuit of power, just as it was designed to do. 

Tyranny has long draped itself in cloaks of benevolent phrasing. The judiciary is meant to safeguard our liberties from aspiring tyrants, even if they espouse the socially fashionable shibboleths of the day. Jackson does not just abdicate that responsibility; she appears to abhor it. We must hope her peers on the Court retain their oath to the Constitution.

It was especially striking for many people listening to these arguments to become aware of the astonishing lack of sophistication on the part of some of these Justices, Jackson in particular, and others had their moments. 

The sidewalks outside the court were filled with actual experts, people who have followed this case closely since its inception, victims of the censorship industrial complex, and people who have read every brief and scoured through the evidence. 

These actual experts and dedicated citizens who know the facts inside and out stood on the sidewalks outside the case while the plaintiffs’ attorney scrambled within the time limits to introduce the topic, possibly for the first time, to these men and women who hold the future of freedom in their hands. 

Unbeknownst to themselves, the Justices themselves are victims of the censorship industrial complex. They could themselves have been plaintiffs in this very case, since they too are consumers of information using technology. And yet, given their status and position, they had to pretend to be above it all, knowing what others do not know, though clearly they did not. 

It was frustrating scene, to say the least. 

Sadly, the oral arguments became bogged down in minutiae over plaintiff standing, the particular wording of this or that email, various farflung hypotheticals, and hand wringing over what will become of the influence of our overlords should the injunction take place. Lost in this thicket of confusion was the bigger trajectory: the clear ambition on the part of the administrative state to become the master curator of the Internet in order to disable the whole promise of a democratized communication technology and introduce full control of the public mind. 

A clear-headed court would strike down the entire ambition. That will not happen, apparently. That said, perhaps it is a very good sign that at least, and after so many years of this deep-state meddling in information flows, the issue has finally gotten the attention of the highest court. 

May this day become a catalyst for what is needed most of all: the formation of a hard-core of informed citizens who absolutely refuse to go along with the censorship no matter what. 

Still angry about the approval of spot BTC ETFs, it appears Liz Warren and her cronies are dead set on stopping Americans choosing their own sovereignty – hoping to stomp out the hopes and dreams of a Spot Ether ETF by classifying it as a security.

As CoinDesk’s report, The Ethereum Foundation – the Swiss non-profit organization at the heart of the Ethereum ecosystem – is under investigation by an unnamed “state authority,” according to the group’s website’s GitHub repository.

The scope of the investigation and its focus was unknown at press time. According to the GitHub commit dated Feb. 26, 2024, “we have received a voluntary enquiry from a state authority that included a requirement for confidentiality.”

The Ethereum Foundation did not return a request for comment.

The investigation comes during a time of change for Ethereum’s technology and at a possible inflection point for its native asset, ETH, which many American investment companies are seeking to offer as an exchange-traded fund. The Securities and Exchange Commission (SEC) has slow-walked their efforts despite recently approving a series of Bitcoin ETFs.

After the publication of this article, Fortune reported the SEC is seeking to classify ETH as a security, a move that would have major implications for Ethereum, an ETH ETF and crypto as a whole. The financial regulator has sent investigative subpoenas to U.S. companies in the past several weeks, according to Fortune’s reporting.

Previously, the Ethereum Foundation’s website contained the following disclosure:

“The Ethereum Foundation (Stiftung Ethereum) has never been contacted by any agency anywhere in the world in a way which requires that contact not to be disclosed. Stiftung Ethereum will publicly disclose any sort of inquiry from government agencies that falls outside the scope of regular business operations.”

That footer was removed in the Feb 26, GitHub commit along with the website’s warrant canary, according to the changelog.

A warrant canary is usually some form of text or visual warning (like a colorful bird, in the case of the Ethereum Foundation), which some companies include on their websites to indicate they’ve never been served with a secret government subpoena or document request.

If a government agency does request information, the company may remove the text, suggesting they received the request without explicitly saying so.

The Ethereum Foundation’s warrant canary was previously removed in 2019 in error and was quickly added back to the website.

Possible explanations

An attorney familiar with the situation said a Swiss regulator may have served a document request to the Ethereum Foundation and may be working with the U.S. Securities and Exchange Commission (SEC).

“I also think it’s fair to say the Ethereum Foundation is not the only entity that they are seeking information from,” the attorney told CoinDesk, saying other overseas entities are receiving scrutiny.

The SEC is evaluating multiple applications for an Ether ETF, but analysts following the process are becoming less optimistic that any such applications will be approved by the federal regulator, citing a lack of engagement between applicants and SEC officials.

“Any rumors of any activity” that the SEC and its overseas counterparts are engaging in may be correlated with the May 23 deadline the SEC faces, the attorney said.

Ethereum’s initial reaction was to ‘sell, sell, sell’, but quickly the humans invokved realized this is nothing new and ramped it back up:

  “it’s another nothing-burger for the algos”…

Nevertheless, the SEC seems dead-set on slow-playing the ETH ETF and Bloomberg’s James Seyfartt and Eric Balchunas have lowered their odds of approval by May 23rd notably…

Public sentiment appears to have also fallen, with Polymarket odds for Ether ETFs being approved by the end of May dwindling to 32%, down from January’s 77% odds.

Polymarket is a decentralized betting platform. Around $2.2 million has been bet on the outcome of the Ether ETFs.

All of this government pressure – in the face of embarrassingly clear evidence of demand and comprehension by the public about crypto ETFS – comes as JPMorgan, Goldman, and Blackrock all view ETH as a much more useful and important asset than BTC, due to its tokenization.

Sen. Elizabeth Warren (D-MA) on Tuesday reintroduced her ‘Ultra-Millionaire’ Tax Act, by which the government would confiscate 2% from households worth between $50 million and $1 billion, and 3% on households worth over $1 billion.

Reps. Pramila Jayapal (D-WA) and Brendan Boyle (D-PA) have introduced a companion bill in the House.

“As President Biden says, no one thinks it’s fair that Jeff Bezos gets enough tax loopholes that he pays at a lower rate than a public school teacher,” Warren said in a statement. “All my bill is asking is that when you make it big, bigger than $50 million dollars, then on that next dollar, you pitch in two cents, so everyone else can have a chance.”

While Warren insists that the bill would affect the wealthiest 100,000 households in the US – roughly 0.05% of the population, Democrats routinely lie to sell voters on their plans, and normalizing the confiscation of assets would obviously open the door to the consideration of confiscation among lower wealth brackets.

And give it to Ukraine?

— Not Jerome Powell (@alifarhat79) March 20, 2024

According to Fox News, Warren’s bill contains additional rules to go after wealth head in trusts as part of a tax minimization strategy, and would give the IRS and additional $100 billion to fund auditing and enforcement efforts. ‘Tax-and-spend’ at its finest.

they could confiscate 100% of people’s wealth and still manage to spend more than that. government income isn’t the problem, it’s spending

— contango after dark (@semisimulacrum) March 20, 2024

Warren’s proposal also includes a 40% “exit tax” on people worth $50 million or more who attempt to renounce their US citizenship to avoid paying the tax (which would obviously happen the moment this bill had a chance in hell of passing).

According to the Whatron Budget Model at the University of Pennsylvania, Warren’s legislation would raise $2.7 trillion over a decade. The analysis also concluded that the wealth tax would reduce capital by 3.1%, slash average hourly wages by 1.2%, and reduce GDP by 1.2% in 2050.

“Smaller federal deficits translate into less crowding out and thus increased national saving and greater capital accumulation. However, wealthy households that face a tax on their savings choose to save less and thus accumulate less capital,” the economists explained in 2021. “The net effect is a decline in the total capital stock of 1.4 percent in 2031 and 3.1 percent in 2050. This decline in capital in turn makes workers less productive, which is reflected by a decline in wages of 0.7 percent in 2031 and 1.2 percent in 2050. Lower private capital leads GDP to decline by 0.6 percent in 2031 and 1.2 percent in 2050.”

Warren’s plan has the support of five other ‘Democratic’ senators, as well as 27 House Democrats and Sen. Bernie Sanders (I-VT). The proposal follows a push by President Biden for higher taxes on businesses and the wealthy at his SOTU speech earlier this month.

“The way to make the tax code fair is to make big corporations and the very wealthy finally pay their share,” Biden read off a teleprompter, asking Congress to raise the minimum corporate tax to 21%, and insisting that billionaires should pay a minimum tax of 25%.

In Nov. 2022, voters in Warren’s home state of Massachusetts narrowly approved a 4% surtax on those making over $1 million – which the state’s Department of Revenue estimates will generate $1.5 billion in revenue for the fiscal year ending this June.

Killing Jobs?

According to Dan Savickas, director of policy at the Taxpayers Protection Alliance, “It is clear that lawmakers at the highest levels of government fundamentally misunderstand what net worth actually means. Senator Warren’s proposal sets out to tax wealth as if net worth reflected cash in the bank. It paints a fictional ‘Scrooge McDuck’ image of these billionaires storing their own money in large swimming pools, just laying around.“

According to Savickas, Warren’s wealth tax would be on investments used by businesses to create jobs, helping the economy – and is not a tax on liquid assets that can easily just be paid to the government.

“A tax on wealth is a tax on gains that have not been realized. Innovators and investors cannot pay off something they don’t have. In order to comply with Senator Warren’s ridiculous scheme to boost her political profile, these businessmen and businesswomen will have to sell off these assets or shrink their operations,” he said, adding “This will cost jobs, plainly and simply. This is as misguided an economic policy proposal as there is right now, and it is the working people Senator Warren purports to champion that will bear the brunt of the consequences.”

By Ven Ram, Bloomberg Markets Live reporter and strategist

The intensity of the selloff in Treasuries may have peaked before this week’s meeting of the Federal Reserve. That means any further increase in yields is likely to be measured, while a dovish dot plot would provoke a tactical short-term rally.

Front-end Treasuries declined the most in almost a year last week, with yields on the two-year maturity soaring by 25 basis points to almost 4.73%. At that level, it wasn’t far from pricing in just two Fed interest rate cuts this year.

Should the Fed’s new dot plot indicate a hawkish pivot, yields could climb to 4.82%, less than 10 basis points higher than the closing level on Monday. While it is possible that yields may jump more in a knee-jerk reaction, that won’t be sustainable.

However, should the dot plot stay unchanged for this year — that is, the Fed retains its December projection of three rate cuts — that would spur the markets to price in the possibility of even more loosening, as they have been for much of this year.

Such a prospect would send two-year yields lower by some 20 basis points from their close on Monday to 4.54%, based on correlations with Fed funds futures.

During the December meeting, as many as eight Fed officials thought that rate cuts in 2024 would amount to 50 basis points or less. So the bar for the median to shift to just two reductions isn’t high.

The case for a hawkish turn may come from inflation: since that dot plot, headline inflation has continued to stay above 3%, while core inflation has been trending close to 4%.

Consequently, several Fed speakers have pushed back on market pricing for imminent rate cuts. Fed Atlanta President Raphael Bostic remarked recently that markets shouldn’t expect back-to-back rate cuts since the central bank is concerned that a new wave of demand could reignite inflation.

Chair Jerome Powell has, however, been more conciliatory, commenting that the Fed isn’t far from the level of confidence needed to loosen policy. That would be an argument for the Fed to stay with its current dot plot.

Meanwhile, the stickiness of recent inflation prints has spurred a debate on the neutral rate, a nirvana state that would prevail when the economy is at full employment and inflation steady. The Laubach-Williams model estimates that the rate is now around 1.12%, compared with the Fed’s dot plot that has traditionally assumed a rate of just 50 basis points. Given that contrast, the spotlight would be on any revision to its estimate of the longer-run interest rate.

All told, Treasuries are now approaching a crossroads, and there is a fair bit of asymmetry in the way they could go in the aftermath of the Fed review.

Two of Hunter Biden’s ex-business partners are testifying live in front of the House Oversight and Accountability Committee, which is investigating President Biden’s alleged involvement in son Hunter’s foreign business dealings.

Watch Live:

“The Biden defenders’ outrageous dishonesty and vile attempts at assassinating my character are as predictable as they are disgusting,” said Tony Bobulinski, a former business partner of the Bidens who went public and blew the whistle shortly before the 2020 US election, in opening comments. “As a former Naval officer, I do not understand this world of partisan outrage and insanity; I struggle to process it, and I despise it.”

Tony Bobulinski savagely inquires where Hunter Biden is: “Should I allow Hunter to give his opening statement first?!” 🤣 pic.twitter.com/Z6BNmZQVW9

— Benny Johnson (@bennyjohnson) March 20, 2024

Watch as the Democrats twist themselves into a pretzel to defend their leader…

House Oversight Committee hearing goes off the rails when Hunter Biden’s former business partner Tony Bobulinski calls out Reps. Jamie Raskin and Dan Goldman for lying on behalf of the Biden Crime Family. pic.twitter.com/Xny4VTbhVc

— Greg Price (@greg_price11) March 20, 2024

Hunter’s former business partner Tony Bobulinski: “It is clear to me that Joe Biden was the brand being sold by the Biden family.” pic.twitter.com/Z8ZZMNFNsS

— The Post Millennial (@TPostMillennial) March 20, 2024

Also testifying will be Jason Galanis, who is currently in federal prison on unrelated fraud charges.

“The entire value-add of Hunter Biden to our business was his family name and his access to his father, Vice President Joe Biden. Because of this access, I agreed to contribute equity ownership to them — Hunter and Devon — for no out-of-pocket cost from them in exchange for their ‘relationship capital,” Galanis will say in his opening statement obtained by the Daily Caller.

On the other side, the Democrats’ key witness is Lev Parnas, who insists that “From shortly after my arrest on October 9, 2019, to now, I have been trying to share the irrefutable truth with you: The American people have been lied to by Trump, Giuliani, & various cohorts of individuals in govt and media positions.”

former Giuliani associate Lev Parnas: “From shortly after my arrest on October 9, 2019, to now, I have been trying to share the irrefutable truth with you: The American people have been lied to by Trump, Giuliani, & various cohorts of individuals in govt and media positions.” pic.twitter.com/q5aHzAk0HL

— Aaron Rupar (@atrupar) March 20, 2024

Developing…

After a strong run in the past few days, oil prices were sliding ahead of this morning’s official DOE inventory and production data (following last night’s 1.5mm barrel crude draw reported by API).

DOE

• Crude -1.95mm

• Cushing -18k

• Gasoline -3.31mm

• Distillates +624k

Crude stocks drew-down for the second week in a row and the drawdowns for Gasoline stocks extended to a 7th straight week…

Source: Bloomberg

Crude production was flat on the week…

Source: Bloomberg

WTI extended the morning’s losses despite the crude and gasoline draws…

Today’s pullback comes after crude prices were pushed into overbought territory and algorithms reached their maximum long positions. With the tailwind of the automated buying diminishing, momentum for crude may be poised to flip to the downside, said Daniel Ghali, a commodity strategist at TD Securities.

However, it does little to slow the inevitable rise of prices at the pump…

Get back to work Mr Biden.