China Launches Military Patrols Near Taiwan As Tsai & McCarthy Meet
For the second time within a year, Taiwan’s President Tsai Ing-wen will meet with a sitting US House Speaker. This time it could prove just as provocative as Nancy Pelosi’s August trip to Taipei, which triggered massive Chinese PLA drills which encircled Taiwan, and saw Chinese forces repeatedly breach the median line in the Taiwan Strait.
She’s meeting with US House Speaker Kevin McCarthy at the Ronald Reagan Presidential Library in California’s Simi Valley on Wednesday, alongside a bipartisan group of US lawmakers.
This marks the first time in history that Taiwan’s president meets with a house speaker on American soil. China has once again warned both sides against going through with such a visit, and has put its military on alert.
The military has already stepped up patrols near Taiwan, and is expected to conduct more muscle-flexing on news the meeting has commenced.
“Special joint patrol and inspection operation began today in the central and northern parts of the Taiwan Strait,” the Chinese Maritime Safety Administration announced Wednesday. Chinese Foreign Ministry spokeswoman Mao Ning the day prior reiterated that the Tsai-McCarthy meeting contradicts the One China principle.
NOW – Speaker McCarthy meets with Taiwan President Tsai Ing-wen. China has warned the U.S. not to go ahead with the meeting.pic.twitter.com/kUKMNRhoky
Tsai is currently on a 10-day trip to the US, including visits to two Central American states that are among the 13 global countries which formally recognize Taiwan independence.
China’s Consulate General in Los Angeles lashed out ahead of the McCarthy meeting, saying it is “not conducive to regional peace, security and stability,” while warning it will “undermine the political foundation” of China-US relations.
PLA recently held multiple land, naval, air exercises focusing on amphibious landing missions, with experts predicting more drills to come should Taiwan regional leader Tsai meet with US house speaker McCarthy. https://t.co/OHD6GKaDmQpic.twitter.com/QvPZuaRRdF
“We will closely follow the development of the situation and resolutely safeguard national sovereignty and territorial integrity,” the consulate said Monday.
The White House has urged Beijing not to ‘overreact’ – with NSC spokesman John Kirby saying Wednesday, that there’s “no reason for China to overreact to the McCarthy-Tsai meeting”.
“No Reason” For Malaysia To Rely On US Dollar, PM Warns As Yuan Influence Grows
“sheesh… that escalated quickly…”
In October 2022, Chinese government researchers proposed a digital currency based on a basket of Asian currencies.
In late March, China and Brazil agreed to transact solely in their national currencies, cutting out the greenback completely.
Also, in late March, a Russian state official spoke of a new currency for the BRICS alliance, as reported by Cointelegraph. It would be another effort to distance itself from the dollar, incorporating the burgeoning economies of Brazil, Russia, India, China and South Africa.
On April 4, South China Morning Post Columnist Alex Lo opinedadditional reasons for dollar distancing could exist.
Malaysia no longer believes it is necessary to depend on the U.S. dollar, Prime Minister Anwar Ibrahim said during an address to the nation’s parliament.
Following last week’s state visit to China, the Malaysian prime minister revealed that Beijing is open to deliberations with Kuala Lumpur to establish an Asian Monetary Fund.
“When I had a meeting with President Xi Jinping, he immediately said, ‘I refer to Anwar’s proposal on the Asian Monetary Fund,’ and he welcomed discussions,” Anwar told lawmakers on Tuesday.
“There is no reason for Malaysia to continue depending on the dollar.”
The concept of an Asian Monetary Fund (AMF) was first proposed in 1997 by the Japanese government during the regional financial crisis. The objective would be that Asian countries fund the organization and ensure ample liquidity levels to weather economic storm clouds. However, the group was never formed due to U.S. and Chinese opposition.
Now that several economies have strengthened considerably since then, such as China and Japan, Anwar thinks now is the time to “discuss this.”
Anwar, who also serves as the finance minister, further confirmed that the two countries negotiated bilateral trade in yuan and ringgit after the Chinese government invested $39 billion into the Malaysian economy.
Many Asian countries, particularly net food importers, have been negatively affected by the greenback’s strength over the last eight years.
Since 2015, the U.S. Dollar Index (DXY), a gauge of the greenback against a basket of currencies, has mostly remained above 90.00. After the U.S. Federal Reserve began raising interest rates in March 2022, the dollar accelerated to its best level since the early 2000s. This was a headache for Asian currencies, including the Malaysian ringgit. The U.S. dollar had soared as much as 9 percent against the ringgit in October, before paring some of these gains.
China Grows Yuan’s Influence
Last summer, China created a yuan-pooling program with the Bank for International Settlements (BIS), an institution for central banks. The Renminbi Liquidity Arrangement (RLA) would provide liquidity to countries in the Asia-Pacific Region during economic turmoil and market volatility.
Chinese yuan and U.S. dollar banknotes, on Feb. 10, 2020. (Dado Ruvic/Illustration/Reuters)
The scheme includes the People’s Bank of China (PBC), the Central Bank of Chile, the Hong Kong Monetary Authority, the Bank of Indonesia, and the Central Bank of Malaysia.
Experts note this is part of the Chinese government’s broader objective to internationalize the yuan. In recent years, China has signed dozens of bilateral currency-swap agreements, including with Western central banks, such as the Bank of England and the European Central Bank (ECB).
The Chinese yuan’s presence in foreign exchange reserves rose 0.81 percent quarter over quarter, to $298.44 billion to close out 2022, according to the International Monetary Fund’s (IMF) Currency Composition of Official Foreign Exchange Reserves (COFER) statistics. But the yuan’s share of global forex reserves was down 11.51 percent year over year in the fourth quarter.
While the de-dollarization campaign has generated significant momentum over the last 12 months, critics have asserted that global financial markets will take a long time to accept and trust the yuan.
However, while speaking at a financial forum on April 4, PBC governor Yi Gang noted that China would install safeguards and employ measures to protect the yuan and maintain financial stability.
In addition, the open market could play a crucial role in keeping the currency in check and preventing policymakers from currency manipulation. The CME Group launched options trading for yuan futures on Monday. This trading mechanism allows investors to bet or hedge against moves in the Chinese currency.
But the growing prominence of the yuan and the broader de-dollarization campaign could be bad news for the international community, says U.S. senator Marco Rubio (R-Fla.).
Rubio warned that U.S. sanctions would become worthless over the next five years as more countries aligning with China will utilize currencies other than the dollar.
“Just today, Brazil … the largest country in the Western hemisphere, south of us, cut a trade deal with China,” Rubio said in an interview with Sean Hannity on Fox News.
“They’re going to … trade in their own currencies to get right around the dollar.”
Brazil and China signed an agreement on March 29 to settle trade and financial transactions in yuan and reals, effectively abandoning the U.S. dollar.
“They are creating a secondary economy in the world totally independent of the United States,” Rubio added.
“We won’t have to talk about sanctions in five years because there will be so many countries transacting in currencies other than the dollar that we won’t have the ability to sanction them.”
New data compiled by Bloomberg highlighted that the Chinese yuan surpassed the U.S. dollar as the most traded currency in Russia.
Twitter placed a label on NPR’s account Tuesday describing the outlet as “State-affiliated media,” with owner Elon Musk commenting that the description “seems accurate.”
Twitter’s guidelines state “Labels on state-affiliated accounts provide additional context about accounts that are controlled by certain official representatives of governments, state-affiliated media entities, and individuals associated with those entities.”
Musk quoted Twitter’s Help Center, which notes that “State-affiliated media is defined as outlets where the state exercises control over editorial content through financial resources, direct or indirect political pressures, and/or control over production and distribution.”
Labeling @NPR state-affiliated media is wholly inaccurate and untruthful. NPR gets LESS THAN 2% of its funding from grants through the federal government. NPR’s newsroom is an absolutely free and independent newsroom; always has been. This label is a LIE and an insult. pic.twitter.com/2iS04hMeQ1
— Ashley Westerman (Valdez) (@_aswesterman) April 5, 2023
Others noted that Twitter’s guidelines also state that “State-financed media organizations with editorial independence, like the BBC in the UK for example, are not defined as state-affiliated media for the purposes of this policy.”
Twitter branding @NPR “state-affiliated media” literally conflicts with its own policy:
“State-financed media organizations with editorial independence, like the BBC in the UK or NPR in the US for example, are not defined as state-affiliated media…” 🤯https://t.co/u2bg3QICMSpic.twitter.com/FOCrac61Jm
BBC gets about 70% of its funding from the government (via license fees), NPR gets about 1-2%. Former is not listed as state-affiliate media, but NPR is. Along with deverifying NY Times, illustrates how Musk is the one running a propaganda outfit to fit with his political views. https://t.co/OjZabXAKz2
In 2020, Twitter made the move to label many accounts, including Russian media outlets RT and Sputnik, as well as reporters working for them as ‘state-affiliated media’, and said it would prevent tweets from those accounts appearing on the home screen, in notifications, or in searches.
Twitter claimed it was doing this “to make the experience more transparent,” adding that “we don’t let state-affiliated media accounts advertise on Twitter. We’ll also no longer include them or their Tweets in recommendations, as we continue to support a free and independent press.”
For clarity: we don’t let state-affiliated media accounts advertise on Twitter. We’ll also no longer include them or their Tweets in recommendations, as we continue to support a free and independent press.
How much taxpayer funding NPR receives is unclear, with much of it being hidden in the form of grants, but estimates have suggested NPR’s budget is made up of 25 percent of taxpayer dollars, with its member stations receiving another 40 percent of public funds. Others argue it’s less than 2 percent.
NEW: Twitter has changed NPR’s Twitter handle to say “US state-affiliated media”
Elon Musk is now listing NPR as US state affiliated media. Good😂. But the hardcore US govt propaganda VOA is not listed. What is happening???? pic.twitter.com/o5kFzRzLUk
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China Weighs Rare Earth Magnet Export Ban In Retaliation To Biden Chip Crackdown
If China thought trade war with Trump was bad, little did they know how much worse it would get under Joe “Big Guy” Biden.
As Rabobank’s Michael Every wrote this morning, “don’t forget President Biden is already running a US trade policy far more protectionist than his predecessor’s” and the latest example of that came this morning when Japan decided to join United States and the Netherlands in restricting exports of chipmaking gear to China, as the cold chip war between China and the west enters an exciting new phase.
Of course, Beijing wasn’t going to just sit there and do nothing as the US piled sanction upon sanction in hopes of sending China back into the stone age, and many expected that China would retaliate by squeezing the west where it had the most leverage, namely by limiting exports of another key tech supply-chain product: rare earth metals, and where China is the world’s dominant producer.
Well, it appears they were right because as the Nikkei reports, China is considering “prohibiting exports of certain rare-earth magnet technology in a move that would counter the U.S.’s advantage in the high-tech arena.” To do this, officials will file amendments to a technology export restriction list, which was last updated in 2020. In total, there are 43 amendments or additions in the draft list first announced in December by the commerce and technology ministries. Officials have finished taking public comments from experts, and the changes are expected to go into force this year.
The revisions would “either ban or restrict exports of technology to process and refine rare-earth elements. There are also proposed provisions that would prohibit or limit exports of alloy tech for making high-performance magnets derived from rare earths.”
As regular readers know, high performance magnets are used in a wide range of applications, such as motors for electric vehicles and various high-tech military devices.
The last time China suspended exports of rare earths, was in 2010 when it halted shipments to Japan following tensions surrounding the Japan-administered Senkaku Islands, which Beijing claims and calls the Diaoyu. Japan specializes in making high-performance magnets from rare earths while the U.S. produces products that use the magnets. That episode led to a heightened sense of alarm in Japan and the U.S. on the economic security front.
Since then, Washington has moved to forge a rare-earth supply chain on U.S. soil. And while China’s share of all rare earths produced globally dropped to roughly 70% last year from about 90% a decade earlier, according to the U.S. Geological Survey, China still remains the dominant producer of rare earths.
Furthermore, China still holds a tight grip on processing rare earths. Ironically, most rare earths extracted in the U.S. go to China for refining before being shipped back to the U.S. Good luck with that going forward.
Understandably, amid the heightened China-U.S. tensions, both Washington and Tokyo are developing rare-earth supply chains that are less dependent on China. The two countries are sharply restricting exports of advanced semiconductor technology to China with the aim of blunting the nation’s rise in the high-tech field.
The Chinese government, meanwhile, is looking to turn the country into a high-tech manufacturing superpower that can compete with the U.S. Because China is behind when it comes to advanced semiconductors, “they’re likely going to use rare earths as a bargaining chip since rare earths are a weak point for Japan and the U.S.” said a source in the resources industry.
“Japan intends to endeavor to strengthen supply chains for critical minerals and other commodities,” Japanese Chief Cabinet Secretary Hirokazu Matsuno told reporters Wednesday. “We’ll continue to closely monitor the institutional impact from China,” Matsuno added.
UBS Chair Warns Of ‘Execution Risks’ In Credit Suisse Takeover; Says Integration Will Take Four Years
Integrating Credit Suisse into UBS will take three to four years, presenting considerable risks, according to UBS Chairman Colm Kelleher. On Wednesday, he addressed an audience of over a thousand shareholders in Basel, Switzerland.
Kelleher told the audience that last month’s emergency rescue of Credit Suisse was a “historic day and a day we hoped would never come.” On that day, UBS agreed to buy its rival for 3 billion Swiss francs to prevent a bank failure that could’ve sparked the next financial crisis.
“You have to understand that there is a huge amount of risk in integrating these businesses,” Kelleher said, adding the integration is expected to take approximately three to four years, excluding the non-core investment bank portfolio of Credit Suisse.
He explained, “Credit Suisse was an icon of the Swiss economy, a bank that played a vital role in the economic development of Switzerland and a global and respected player.” And he said, “Credit Suisse will no longer be an independent company.”
BREAKING: The merger with Credit Suisse means “a new beginning and huge opportunities,” says Colm Kelleher, UBS Chairman as he opens the bank’s AGM https://t.co/0qivqzkSsLpic.twitter.com/QDli0txBnz
In a separate presentation, UBS Vice Chairman Lukas Gahwiler mentioned that it was too early to talk about headcount reductions and the future of Credit Suisse’s Swiss business. Multiple reports show that UBS plans to reduce 20-30% of the combined entity’s global workforce.
On Wednesday, Sergio Ermotti will reassume the role of UBS CEO to oversee the integration. Ermotti, who previously ran UBS for nine years, will succeed Ralph Hamers.
A brief overview of Ermotti’s background: He was in charge of UBS from 2011 until February 2020, playing a pivotal role in the bank’s resurgence after the 2008 financial crisis. Ermotti is credited with restrategizing the bank’s core focus to less risky businesses, including scaling down investment bank operations while boosting its wealth management unit.
Let’s step back from today’s banking financial crisis and look at the bigger picture. That will help us to understand the system dynamics, and estimate how long the crisis might last, and how destructive it might be.
As a preliminary matter, let’s distinguish between a recession (even a bad one) and a financial crisis. They’re different.
A recession is a part of the business cycle. It involves some combination of tighter monetary conditions, higher unemployment, business failures, inventory dumping, declines in industrial output and declining GDP.
In recent decades, we’ve had recessions in 1973, 1980, 1981, 1990, 2000, 2007 and 2020. That’s a tempo of one recession about every seven years, although the recessions of 1980 and 1981 show that back-to-back recessions are possible.
Of those, the 2007 recession lasted the longest (one year and six months). The 2020 recession produced the most severe decline in GDP (down 19.2%).
The U.S. is likely in another recession right now, but we won’t have confirmation of that until more first-half data is revealed.
Over the same 50-year period, we’ve had a succession of financial crises.
These included the Latin American debt crisis (1982–1987), the Savings & Loan Crisis (1986–1989), the Black Monday crash (Oct. 19, 1987), the Nikkei collapse (1990), the Mexican Tequila Crisis (1994), The Asia-Russia-LTCM crisis (1997–1998), the dot-com crash (2000) and the subprime mortgage crisis (2007–2008).
That’s eight crises in 50 years or a tempo of one crisis about every six years.
So much for the “Black Swan” theory, and the idea of 5-sigma events that occur once every 14,000 years. That’s junk science. These things happen all the time.
What’s interesting about financial crises is that they are rarely the same. Some produce large losses but there’s no acute stage where the financial system is hanging by a thread. The Latin American debt crisis, the S&L crisis, and the Nikkei collapse fit into that category.
They lasted for years, but they were manageable in a cash and accounting sense. In some ways, the Nikkei collapse is still going on thirty-five years after it happened because the Nikkei stock index has never recovered the 40,000 level it hit in late 1989.
Other crises were acute but came and went without threatening the banking system. The 1987 flash crash was a good example. It happened, but not much else happened. Two days after the crash turned out to be a great time to buy stocks!
A similar analysis applies to the Mexican Tequila Crisis and the Dot.com collapse. They were over quickly, the banking system as a whole was never threatened, and astute investors with cash could buy in at the low and ride the next wave up.
The only two crises that did come close to destroying the global financial system were the Asia-Russia-LTCM crisis in 1998, and the Subprime Mortgage Crisis in 2007 – 2008.
Even those crises had important differences.
The Asia-Russia-LTCM crisis was acute but there was no recession. Economic growth and the stock market bubble didn’t peak until 2000.
What sets the 2007 – 2008 crisis apart is that it was an existential financial crisis and a severe recession. (The 2020 recession was the most severe, but there was no financial crisis).
If we set the clock at 1973 and count 1998 and 2008 as the only existential crises, then the tempo is once every twenty-five years. That’s a small sample. The last acute crisis was fifteen years ago.
We can draw several conclusions from this data.
The first is that recessions and financial crises are different.
The second is that recessions have much in common but financial crises tend to be idiosyncratic and unpredictable.
The third is that existential financial crises really are rare; only two in the past fifty years.
The fourth and most important conclusion is that the combination of a recession and an existential financial crisis is extremely rare.
The events of 2007 – 2008 are the only such combined case in our timeline.
You have to go back to the Great Depression of 1929 – 1940 to find a similar case. That period involved two recessions (1929-1933 and 1937-1938), a massive wave of bank failures (1931-1933), continual currency devaluations, and a collapse of world trade.
Now for the all-important question: Is history repeating itself?
Read on for the answer.
Is History Ready to Repeat Itself?
For our purposes, this history shines a light on the combined crises of 2008. Is history now repeating in its own curvilinear way?
The evidence that we are in a recession is powerful. Low unemployment is almost irrelevant because labor force participation is also low. World trade is contracting. Industrial output is declining. Wholesale inventories are high, which means markdowns and lower profit margins are on the way. Interest rates are still going up and inflation is still sapping real wages.
Much of Europe and Japan are already in recession. The China “reopening” is a flop. The stock market has been volatile but the trend is not your friend. Treasury yield curves are steeply inverted, a condition last seen in 2007. The recession part of the Recession+Crisis condition is already here.
What about another global financial crisis? We know that a banking crisis has already begun. Here’s the casualty list from just this month:
Silvergate Bank – Announced its bankruptcy on March 8
Silicon Valley Bank – Taken over by the FDIC on March 10
Signature Bank – Taken over by the FDIC on March 12
First Republic Bank – $30 billion liquidity rescue by 11 banks on March 16
Credit Suisse – Swiss government shotgun wedding with UBS on March 19
That’s five bank failures or rescues in eleven days including Credit Suisse, one of the largest banks in the world and the second largest in Switzerland. Combined losses of stockholders and creditors of these institutions exceed $200 billion. Market losses in the banking sector are much greater.
These failures and rescues were accompanied by extraordinary regulatory actions. The FDIC abandoned its $250,000 deposit insurance limit and effectively guaranteed all the depositors in Silicon Valley Bank and Signature Bank, a guarantee of over $200 billion in deposits. This will deplete the FDIC insurance fund and require higher insurance premiums from solvent banks, the cost of which will ultimately be borne by consumers.
The Federal Reserve went further and offered to lend money at par for any government securities tendered as collateral by member banks even if the collateral was worth only 80% or 90% of par. These collateralized loans will be financed with newly printed money, which might exceed $1 trillion.
These actions have thrown the U.S. banking system and bank depositors into utter confusion. Are all bank deposits now insured or just the ones Janet Yellen decides are “systemically important?” What’s the basis for that decision? What about the fact that unrealized losses on U.S. bank portfolios of government securities now exceed $700 billion?
If those losses are realized to provide cash to fleeing depositors, it could wipe out much of the capital of the banking system.
The most important question is: Is the crisis over? Has the Fed done enough to reassure depositors that the system is sound? Has the panic subsided?
The answer is, no. The panic is just getting started.
We base that answer on the history of the two acute financial crises in recent decades — 1998 and 2008. The 1998 crisis reached the acute stage on September 28, 1998, just before the rescue of LTCM. We were hours away from the sequential shutdown of every stock and bond exchange in the world.
But that crisis began in June 1997 with the devaluation of the Thai Baht and massive capital flight from Asia and then Russia. It took fifteen months to go from a serious crisis to an existential threat.
Likewise, the 2008 crisis reached the acute stage on September 15, 2008, with the bankruptcy filing of Lehman Brothers. But that crisis began in the spring of 2007 when HSBC surprised markets with an announcement that mortgage losses had exceeded expectations.
It then continued through the summer of 2007 with the failures of two Bear Stearns high-yield mortgage funds, and the closure of a Société Générale money market fund. The panic then caused the failures of Bear Stearns (March 2008), Fannie Mae and Freddie Mac (June 2008), and other institutions before reaching Lehman Brothers.
For that matter, the panic continued after Lehman to include AIG, General Electric, the commercial paper market, and General Motors before finally subsiding on March 9, 2009. Starting with the HSBC announcement, the subprime mortgage panic and domino effects lasted twenty-four months from March 2007 to March 2009.
Averaging our two examples (1998, 2008) the average duration of these financial crises is about twenty months. This new crisis is one-month old. It could have a long way to run.
On the other hand, this crisis could reach the acute stage faster. That’s because of technology that makes a bank run move at the speed of light. With an iPhone you can initiate a $1 billion wire transfer from a failing bank while you’re waiting in line at McDonald’s. No need to line up around the block in the rain waiting your turn.
In addition, the regulatory response is faster because they’ve seen this movie before. That begs the question of whether regulators are out of bullets because they’ve already guaranteed almost everything so they don’t have more rabbits to pull out of the hat.
This could be the crisis where the panic moves from the banks to the dollar itself. If savers lose confidence in the Fed (we’re almost there) not only will the banks collapse, but the dollar will collapse also. At that point, the only solution is gold bullion.
Further evidence comes from the fact that no sooner was the Credit Suisse shotgun wedding completed than investors aimed their sights at Deutsche Bank, another perennial weak link in the chain. Who’s next? Barclays? Santander? We don’t know. Neither do regulators or investors. But we do know more failures are coming.
By the way, this is not really a banking crisis even though it plays out in the form of bank failures. What’s going on is a crisis caused by a shortage of Treasury bill collateral to support derivatives positions and shrinking balance sheets as a consequence of the collateral shortage.
Why doesn’t the Treasury just issue, say, $2 trillion of new T-bills and let the primary dealers and Fed underwrite them with as much printed money as needed? One reason is that neither Jay Powell nor Janet Yellen understands what we just described.
The other reason is that we’re up against the X-Date when the Treasury runs out of cash and can’t borrow more because of the debt ceiling. Is Congress ready to raise the debt ceiling? Nope. It’s the usual Democrat versus Republican game of chicken with no resolution in sight.
So, we go from bank runs to a Treasury bill shortage to a debt ceiling standoff in no time. Do regulators and financial journalists understand this? No, they don’t know how to connect the dots. But you get it.
We may not be able to prevent the crisis, but we can see it coming and prepare accordingly to preserve wealth. Step one is to get gold. That will see you through the storm.
Israeli Cops Beat Worshippers At Al Aqsa Mosque – Rockets Fly From Gaza – IDF Bombs Strip
Smoldering tensions between Arabs and Israelis burst into warfare over Tuesday night, following a provocative Israeli attack on worshippers at one of Islam’s most sacred places.
The violence was initiated when Israeli police raided Jerusalem’s Al Aqsa Mosque, brutally beating worshippers. Outrage swept across Palestinian communities, sparking marches, confrontations with Israeli troops, and rocket attacks from the Gaza Strip. The violence spiraled higher, as the Israeli Air Force bombed Gaza.
The Israeli raid on the Al Aqsa Mosque came during Islam’s holy month of Ramadan. Middle East Eye reports that hundreds of men, women and children were staying overnight to pray, a practice called Itikaf. The Israeli government controls access to Al Aqsa, and prohibits Itikaf there except for the final 10 days of Ramadan. Palestinians have ignored that prohibition, apparently with Israeli acquiescence.
Not this time. Around 10pm local time, police entered the mosque grounds and began clearing the faithful from exterior courtyards. As that played out peacefully, dozens of others locked themselves inside the Qibli prayer hall in an attempt to dodge eviction.
An hour later, heavily-equipped police smashed windows of the prayer hall and unleashed a stun gun and tear gas barrage. Storming into the hall, the police began beating worshippers. Video footage appears to show police pummeling worshippers cowering on the floor.
BREAKING: Israeli police brutally beat Palestinian worshippers inside al Aqsa mosque in Jerusalem during Ramadan. pic.twitter.com/IiFU10qI5c
Haaretz reports that the overnight worshippers were motivated in part by Israeli settlers calling for Jews to sacrifice goats at the Al Aqsa mosque on Wednesday, as Passover starts. The mosque is situated on land also revered by Jews, who call it the Temple Mount. The long-standing arrangement on this sensitive land is for Jews to visit but not worship there — and certainly not to sacrifice animals.
A female worshipper told Middle East Eye that, while women were eventually allowed to leave the prayer hall, the men were brutally beaten and arrested. “Every single one of them was harshly beaten. Every single man,” she said. A witness told Reuters, “They detained people and put the young men face down on the ground while they continued beating them.”
Compounding the provocation to not only Palestinians but the Muslim world, tweeted videos show the interior of the prayer hall was left in a shambles:
תיעוד שיוצא לפנות בוקר ממסגד אל אקצא. הסרטונים שיוצאים מהמתחם מגבירים את הקריאת לתגובה בזירה הפלסטינית לרבות מרצועת עזה. pic.twitter.com/WDQFSBuwRZ
The Saudi Arabian, Egyptian and Jordanian governments condemned the incident. “The storming of the blessed Al-Aqsa Mosque and attacking it and the worshipers is a flagrant violation,” said Jordan’s statement. Jordan’s condemnation carries extra weight, as the kingdom has acted as custodian of Jerusalem’s holy sites for almost a century.
A spokesperson for Palestinian President Mahmoud Abbas said, “We warn the occupation against crossing red lines at holy sites, which will lead to a big explosion.”
Explosions ensued. Hamas called Israel’s action “an unprecedented crime,” and Gaza militants retaliated with a salvo of around rockets fired at Israel.
⚡️The moment the rockets were fired from Gaza towards occupied Sderot.
A food factory in Sderot was reportedly struck, without casualties. This widely-circulated video is said to show the impact, with workers scrambling to reach shelter:
Video: Gaza rocket landed at a factory in Sderot, Southern Israel; No injuries reported pic.twitter.com/X3IQ8Rttla
— Local Focus – Security Alerts (@LocalFocus1) April 5, 2023
Video appeared to show Iron Dome defensive missiles neutralizing some of the rockets:
What appears to be two Iron Dome Tamir interceptors launched towards rocket fire from the Gaza Strip a short time ago. pic.twitter.com/q2tA5ze8eL
According to Reuters, witnesses say Israeli tanks fired shells at Hamas positions near the border fence. The Israeli Air Force struck back with bombs, with this video said to show some of the destruction:
My beloved #Gaza wakes up to this massive bombing after a brutal night in Al-Aqsa Mosque. Airstrikes in Ramadan is an ongoing trauma for Gazas which recalls painful memories of previous offensives, also took place in Ramadan. pic.twitter.com/wjBAWOU7J7
Over the past months, Israel has been rocked by enormous upheaval against the Benjamin Netanyahu government’s proposals to reform the Supreme Court, which prompts a question: Was the Al Aqsa raid intended to spark a violent Palestinian response that distracts and unites Israel’s Jews?
Scrape away the complexity and every economic crisis and crash boils down to the precarious asymmetry between collateral and the debt secured by that collateral collapsing.
It’s really that simple.
In eras of easy credit, both creditworthy and marginal borrowers are suddenly able to borrow more. This flood of new cash seeking a return fuels red-hot demand for conventional assets considered “safe investments” (real estate, blue chip stocks and bonds), demand of which given the limited supply of “safe” assets pushes valuations of these assets to the moon.
In the euphoric atmosphere generated by easy credit and a soaring asset valuations, some of the easy credit sloshes into marginal investments (farmland that is only briefly productive if it rains enough, for example), high-risk speculative ventures based on sizzle rather than actual steak and outright frauds passed off as legitimate “sure-fire opportunities.”
The price people are willing to pay for all these assets soars as the demand created by easy credit increases. And why does credit continue increasing? The assets rising in value create more collateral, which then supports more credit.
This self-reinforcing feedback appears highly virtuous in the expansion phase: The grazing land bought to put under the plow just doubled in value, so the owners can borrow more and use the cash to expand their purchase of more grazing land.
The same mechanism is at work in every asset: homes, commercial real estate, stocks and bonds. The more the asset gains in value, the more collateral becomes available to support more credit.
The Illusion of Safety
Since there’s plenty of collateral to back up the new loans, both borrowers and lenders see the profitable expansion of credit as “safe.”
This safety is illusory, as it’s resting on an unstable pile of sand: bubble valuations driven by easy credit. We all know that price is set by what somebody will pay for the asset. What attracts less attention is price is also set by how much somebody can borrow to buy the asset.
Once the borrower has maxed out their ability to borrow (their income and assets owned cannot support more debt) or credit conditions tighten, then those who might have paid even higher prices for assets had they been able to borrow more money can no longer borrow enough to bid the asset higher.
Since price is set on the margin (i.e., by the last sales), the normal churn of selling is enough to push valuations down. At first the euphoria is undented by the decline, but as credit tightens (interest rates rise and lending standards tighten, cutting off marginal buyers and ventures) then buyers become scarce and skittish sellers proliferate.
Questions about fundamental valuations arise, and sky-high valuations are found wanting as tightening credit reduces sales, revenues and profits. Once the “endless growth” story weakens, the claims that bubble prices are “fair value” evaporate.
The Inevitable Landslide
As defaults rise, lenders are forced to tighten credit further. The first tumbling rocks are ignored but eventually the defaults trigger a landslide, and the credit-inflated bubble in asset valuations collapses.
As valuations plummet, so too does the collateral backing all the new debt. Debt that appeared “safe” is soon exposed as a potential push into insolvency. When the bungalow doubled in value from $500,000 to $1 million, the trajectory of valuation gains looked predictably rosy:
Every decade housing prices went up 30% or more. So originating a mortgage for $800,000 on a house that looked to be worth $1.3 million in a few years looked rock-solid safe.
But the $1 million was a bubble based solely on easy, abundant, low-cost credit. When credit tightens, the home is slowly but surely repriced at its pre-bubble valuation ($500,000) or perhaps much lower, if that value was merely an artifact of a previous unpopped bubble.
Now the collateral is $300,000 less than the mortgage. The owner who made a down payment of $200,000 will be wiped out by a forced sale at $500,000, and the lender (or owner of the mortgage) will take a $300,000 loss.
Given the banking system is set up to absorb only modest, incremental losses, losses of this magnitude render the lender insolvent. The lender’s capital base is drained to zero by the losses and then pushed into negative net worth by continued losses.
The collateral collapses when bubbles pop, but the debt loaned against the now-phantom collateral remains.
Just a “Policy Error”
This is the story of the Great Depression, a story that’s unloved because it calls into question the current series of credit-inflated bubbles and resulting financial crises. So the story is reworked into something more palatable such as “the Federal Reserve made a policy error.”
This encourages the fantasy that if central banks choose the right policies, credit bubbles and valuations detached from reality can both keep expanding forever. The reality is credit bubbles always pop, as the expansion of borrowing eventually exceeds the income and collateral of marginal borrowers and this tsunami of cash eventually pours into marginal high-risk speculative ventures that go bust.
There is no way to thread the needle so credit-asset bubbles never pop. Yet here we are, watching the global Everything Bubble finally start collapsing, guaranteeing the collapse of collateral and all the debt issued on that collateral, and the rabble is arguing about what policy tweaks are needed to reinflate the bubble and save the global economy from bankruptcy.
Sorry, but global bankruptcy is already baked in. Too much debt has been piled on phantom collateral and income streams derived from bubble assets rising (for example, capital gains, development taxes, etc.).
The asymmetry is now so extreme that even a modest decline in asset valuations/collateral due to a garden-variety business-cycle recession of tightening financial conditions will trigger the collapse of The Everything Bubble and the mountain of global debt resting on the wind-blown sands of phantom collateral.
There are persuasive reasons to suspect global debt far exceeds the official level around $300 trillion, most saliently, the largely opaque shadow banking system. When assets roughly double in a few years, bubble symmetry suggests that valuations will decline back to the starting point of the bubble in roughly the same time span.
The resulting erosion of collateral will collapse the global credit bubble, a repricing/reset that will bankrupt the global economy and financial system.
Trump Says “Never Thought It Could Happen In America” After Historic “Fake Case” Arraignment
(Update 1900ET): Following his Tuesday arraignment in New York in front of a “Trump-hating judge,” former President Donald Trump went hard against his enemies in front of a crowd at Mar-a-Lago.
“This fake case was brought only to interfere with the upcoming 2024 presidential election and it should be dropped immediately,” said Trump. “I never thought anything like this could happen in America.”
“It’s an insult to our country as the world is already laughing at us”
“The only crime that I’ve committed is to fearlessly defend our nation from those who seek to destroy it,” said Trump, before going off on Manhattan DA Alan Bragg.
“The criminal is [Alvin Bragg] … he should be prosecuted, or at a minimum, he should resign,” he continued.
DONALD TRUMP: “The only crime that I’ve committed is to fearlessly defend our nation from those who seek to destroy it.”
And in perhaps the best line of the night; “I have a Trump hating judge with a Trump hating wife and family, whose daughter worked for Kamala Harris and now receives money from the Biden/Harris campaign…It’s right out of the old Soviet Union. That’s where we are!“
TRUMP: “I have a Trump hating judge with a Trump hating wife and family, whose daughter worked for Kamala Harris and now receives money from the Biden/Harris campaign…It’s right out of the old Soviet Union. That’s where we are!” pic.twitter.com/XYF0gxdZyW
(Update 1900ET): As announced earlier on Tuesday, former President Trump is giving a press conference from his Mar-a-Lago home in Florida following his indictment over hush money allegedly paid to former porn star Stormy Daniels in the runup to the 2016 US election.
Watch live:
Take a shot every time he says ‘witch hunt’, and two shots every time he calls the Manhattan DA ‘Fat Alvin.”
You know you’ve got a bad case when…
John Bolton on Alvin Bragg’s indictment: “This is even weaker than I feared it would be and I think it’s easily subject to being dismissed or a quick acquittal for Trump.”pic.twitter.com/K8Cbw8d6Ru
(Update 1730ET): Former President Donald Trump pleaded not guilty on Tuesday to 34 felony counts of falsifying business records in the first degree, according to unsealed court records.
The felony charges were announced by Manhattan Judge Juan Merchan (whose daughter worked on the Biden-Harris campaign) – marking the first former president in US history to be criminally charged.
“The evidence will show that [Trump] did so to cover up crimes related to the 2016 election,” said Manhattan District Attorney Alvin Bragg, who refused to cite the “underlying crimes” related to the books and record counts “because the law does not so require.”
Alvin Bragg, sometimes called “Fat Alvin”, built his case off of copying and pasting the same charge 34 times around “concealing another crime” in order to make it a felony but didn’t include the crime being covered up in the indictment because “the law does not so require” pic.twitter.com/6AOvqRkYv2
Trump was arrested at around 1:35 p.m. ET and appeared before Merchan, who barred the media from broadcasting the proceedings. Photographers were allowed to enter the courtroom prior to the proceedings began, before they were told to leave.
CBS‘s Scott MacFarlane described the courtroom “as stuffy, warm, and feeling like an old middle school, not like ornate federal courtrooms.”
Trump now heads back to his Mar-a-Lago home in Florida, where he’ll hold a press conference. Merchan notably warned Trump not to make social media posts that could foment unrest among his supporters, and also expressed concern that Trump could divulge sensitive information online. Trump’s attorneys, however, told reporters that would not happen.
The case is scheduled to continue on December 4th.
Even Mitt Romney thinks this is bullshit.
“I believe President Trump’s character and conduct make him unfit for office. Even so, I believe the New York prosecutor has stretched to reach felony criminal charges in order to fit a political agenda,” said the longtime Trump foe.
House Speaker Kevin McCarthy (R-CA) also commented, tweeting: “Alvin Bragg is attempting to interfere in our democratic process by invoking federal law to bring politicized charges against President Trump, admittedly using federal funds, while at the same time arguing that the peoples’ representatives in Congress lack jurisdiction to investigate this farce.“
Stay tuned for Trump’s presser.
* * *
Update (1535ET): The Manhattan District Attorney’s office is holding a press conference following the indictment of former President Trump on 34 felony counts of falsifying business records – charges which federal prosecutors declined to pursue.
Watch:
During the presser, Manhattan DA Alvin Bragg was asked about the underlying crime, which isn’t in the indictment. Bragg responded that several laws are at play, including election law 17-152. As the NYT’s Jonah Bromwich notes, “One of the unusual things about this case is the application of a state election law to a federal election and Trump’s lawyers are sure to seize on that in their challenges to the prosecution.”
“True and accurate business records are important everywhere,” said Bragg, adding that they are more important in Manhattan, the financial center of the world.
Of note, the charges against Trump are all class-E felonies, the lowest category of felony offense in New York, which carry a maximum prison sentence of four years. The judge in the case says he will not impose a gag order at this time, but warned Trump not to make social media posts which could ‘foment unrest.’ the Associated Press reports.
And according to the NY Times, “Under New York law, falsifying business records is generally a misdemeanor. But prosecutors can escalate the charge when they believe a person falsified business records in order to commit another crime or hide the committing of a crime.”
The next in-person hearing for Trump has been scheduled for December 4th, per CNN.
Update (1445ET): After surrendering himself for arrest at the courthouse in Manhattan around 1:30 p.m. ET, former President Trump sat for his arraignment, where he pleaded not guilty to 34 felony counts of falsifying business records over his alleged role in hush money payments to two women toward the end of his 2016 presidential campaign.
The Manhattan DA’s office will hold a press conference after the arraignment.
Meanwhile…
So let’s parse this out: She tries to extort Trump for “hush money”. He pays, which is not a crime. She violates the agreement, going public, and he sues. She looses, and has to pay damages.
But 7 years later, an ambitious and partisan DA, who’s policy is to downgrade felonies…
Former President Trump is being arraigned today on a reported 34 felony counts for falsification of business records in connection with a $130,000 payment made to former adult film star Stormy Daniels (real name Stephanie Clifford).
Trump’s arraignment hearing is set to begin at 2:15 p.m. ET. According to Yahoo‘s Michael Isikoff (of Steele Dossier hoax peddling fame), Trump won’t be put in handcuffs, placed in a jail cell, or be subjected to a mugshot, after Manhattan DA Alvin Bragg’s office consulted with the Secret Service and New York City court officials.
The stated reason for handcuffing defendants is on the grounds that the suspect might be a flight risk or a threat to the district attorney or court personnel, neither of which were judged to be relevant to the handling of a former president protected at all times by a phalanx of Secret Service agents. -Yahoo
On Monday afternoon Trump landed at New York’s LaGuardia Airport, after which he spent the night at Trump Tower. His attorneys are expected to immediately file a motion to dismiss.
According to Trump attorney Joe Tacopina, rumors that the judge in the case will impose a gag order on Trump are false.
“Can’t be. Won’t happen. I don’t believe anyone is even looking for that. That would really set ablaze the passions and the tempers that already have been inflamed by this case. People view this as a political persecution,” he said.
Watch live:
In response to the rumor, Rep Jim Jordan (R-OH) issued a statement saying that the House Judiciary Committee is “deeply concerned” over what would amount to an “unconstitutional gag order.”
On Monday Tacopina noted that Trump is dominating polls among GOP primary contenders, and said that Americans are growing “frustrated” with the case against the former president.
“They are now understanding that the weaponization of the justice system is a real thing. Attempting to gag a United States citizen that is a defendant, not a lawyer, not a litigant but a defendant in the case, especially—that’s a First Amendment violation obviously. It has to be balanced against a right to a fair trial,” he said. “But imagine putting a gag on Donald Trump when he’s the frontrunner for the Republican Party for the presidential office,” Tacopina continued.
“Imagine during the campaign he’s told, you know, ‘I can’t speak about the case.’ When people ask him questions, he has to just say, ‘sorry, I have a gag order.’ Obviously, that’s not going to happen.”
The 2024 presidential campaign technically began months ago with the first announced candidates. Yet April 4 will be “Super Tuesday” for America’s first carceral presidential campaign, with the arrest and arraignment of Donald Trump. With the exception of the socialist (and incarcerated) Eugene Debs in 1920, we have not faced the prospect of a president who could be elected with both a term of office and a term of imprisonment.
The New York indictment of Trump has been widely criticized as politically motivated and legally flawed. Manhattan District Attorney Alvin Bragg boasted during his 2021 campaign about being best suited to go after Trump, and he is making good on his boast with a highly dubious bootstrapped legal theory.
The New York indictment will face considerable challenges. Those challenges will likely take some time to resolve, and if this case follows the customary schedule of criminal matters, it still may be pending when Americans go to the polls to select the next president in 2024.
In addition, a Georgia grand jury reportedly has finished its work on other charges against Trump. Weeks ago, Emily Kohrs, the forewoman of that special grand jury, gave a series of bizarre giggling interviews about nailing Trump. It is a mystery, given Kohrs’ apparent confirmation of pending charges, why Fulton County District Attorney Fani Willis has held back on an indictment.
Although stronger than the Manhattan case, the Georgia case has its own problems but could make it to trial because those problems are largely fact questions generally left to jurors. But it too would likely be pending by Election Day 2024.
The most serious threat among the potential cases is being developed by Justice Department special counsel Jack Smith. His investigation of Trump’s role in the Jan. 6, 2021, Capitol riot is unlikely to result in charges and, if it does, is unlikely to survive challenges on First Amendment grounds. His investigation of the Mar-a-Lago classified-documents controversy presents a far more established — and, frankly, easier — route for prosecution. From its earliest filings, the Justice Department maintained there is evidence of obstruction and false statements — claims that it could use to distinguish any prosecution from the unlawful possession of classified material by President Joe Biden or former Vice President Mike Pence.
Smith is under a tight schedule if he wants to charge Trump, though. Since the Justice Department (incorrectly in my view) maintains that a sitting president cannot be indicted, Smith would have to charge and, ideally, try Trump before Election Day. Indeed, the Justice Department strives to avoid any major legal steps that might impact voting near to an election — a period that could stretch back to the late summer of 2024.
What this means is that Trump could face as many as three sets of criminal charges in three different jurisdictions as he campaigns for the presidency. He would likely seek accommodations from courts to delay any trial during the campaign.
Whether or not Trump can delay a trial, much of 2024 will be focused on carceral rather than political issues. Trump has long claimed that Democrats are weaponizing the criminal justice system against him and other Republicans. Bragg has given him the case positive for proving that allegation, especially since Bragg ran for office on his ability to find a criminal charge against Trump.
The question is what happens if any of these efforts succeed.
I previously raised the prospect of an actual indictment in converting the election into a debate for presidential self-pardons. Article II of the Constitution states that a president may “grant reprieves and pardons for offenses against the United States, except in cases of impeachment.” There is no language specifying who may or may not be the subject of a pardon, and presidents have abused the pardon power to protect political allies and even family members.
Numerous legal analysts have argued those constitutional provisions “make no sense if the president could pardon himself.” Yet it seems highly doubtful that courts would agree. Despite the massive gravitational pull of Trump on the legal analysis of many pundits, there is nothing in the Constitution to exclude presidents alone from pardon eligibility. The Supreme Court stated in Schick v. Reed that “the pardoning power is an enumerated power of the Constitution and … its limitations, if any, must be found in the Constitution itself.”
While a newly elected Trump could only pardon himself for the federal crimes, it is the federal case that likely represents the greatest threat to him. Moreover, the two state cases would add to Trump’s narrative of facing ‘political prosecutions’ from a ‘weaponized’ legal system on every level. Trump often campaigns on just such a primal level. He knows that a man chased by a dog can spark public outcry — but a man chased by a pack of dogs can spark public outrage.
It is not simply the election that could take a carceral turn, however.
What would happen if Trump were elected but convicted in either state case? Such a trial would likely occur after the election. Even if courts extended a trial until after the 2024 election, it would be difficult to delay it for four years.
I have long maintained that a sitting president can be indicted and tried. Almost 25 years ago, I wrote an academic work, “‘From Pillar to Post’: The Prosecution of Sitting Presidents,” that challenged immunity theories protecting presidents. I do not believe the indictment of a president or former president is a national tragedy. To the contrary, it is the ultimate affirmation that no one is above the law.
However, that doesn’t mean it wouldn’t get weird if Trump loses in court but wins in the election.
If Trump were convicted in a state proceeding, it would not bar him from running — or serving — as president. A state judge could grant probation or an alternative sentence to avoid imprisonment. Moreover, appeals on the issue of incarceration could take years to address a state order conflicting with the performance of a federal function. Once that time was exhausted, a court could order any incarceration to be delayed until after the end of the presidential term, since Trump could not be elected a third time.
We may have to face one of these scenarios. The question is whether voters may not only accept this prospect but some might even invite it. Regardless of how it works out, this election is about to take a carceral turn.
Elections often raise the politics of crime — but in this election, it may be hard to separate the politics from the crime.
Jonathan Turley is the Shapiro Professor of Public Interest Law at The George Washington University. Follow him on Twitter @JonathanTurley.
As Statista’s Katharina Buchholz reports, the researchers that also hail from the World Bank, Harvard University and the Kiel Institute for the World Economy identified 22 countries that were bailed out by Chinese loans when they ran into liquidity problems between 2000 and 2021.
Countries that utilized these loans in an especially high number of years, i.e. rolled over their loans into subsequent years include Pakistan, Mongolia, Argentina and Sri Lanka.
The latter country tapped China’s central bank for the first time in 2021 before defaulting on its debt anyways in 2022. Argentina and Mongolia were also identified by the report as countries that have been in dire financial distress since the early 2010s and were using China as a lender of last resort despite the country’s loan terms being less favorable than lower-interest bailouts offered by the IMF or the U.S. Fed. The list of Chinese bailouts also includes countries experiencing major inflation events, like aforementioned Pakistan, Turkey and Egypt.
The report finds that repeated rollovers of the Chinese loans provided by central bank liquidity swaps place them in a dubious gray area that set them apart from similar lending practices, for example liquidity swaps by the U.S. Fed. These are also often used in crises situations but must be paid back within 12 months or declared as actual debt. The Fed loans are most often used by developed nations, while developing and middle-income countries – many of them also having accumulated regular debt to China – have been increasingly turning to the Asian superpower for emergency aid. These countries have therefore been able to hold on to swap lines for expended periods of time without having to declare more external debt, but at a higher cost and at a loss of transparency in international debt.
Bailout amounts provided by China remained quite low in the 2000s and early 2010s, before shooting up from 2015 onwards, climbing to a total of $100 billion for the two decades. The two most common ways in which these loans work is through a liquidity swap with the Chinese Central Bank – where most of the outstanding balances of around $40 billion were located as of 2021 – or through credit lines from Chinese state-owned banks. Three countries, Venezuela, South Sudan and Ecuador, received prepayments on goods they were to deliver to China.
