Americans are spending too much on their new vehicles, and the average household can no longer afford $1,000 monthly payments. Consequently, a growing number of folks are turning to the secondary market for used cars even though prices are reaccelerating this spring. 

Business Insider and Consumer Reports have constructed a report of the best-used car’s money can buy for under $15,000. 

The small cars, sedans, trucks, and SUVs listed below are considered the most reliable, affordable, and equipped with modern safety features built within the last decade. 

Here’s the list: 

Small car under $10,000: Nissan Leaf (2013, 2015)

Midsized car under $10,000: Subaru Legacy (2013)

Midsized SUV under $10,000: Nissan Murano (2014)

Small car under $12,000: Ford C-Max (2014-2016) 

Small car under $14,000:Toyota Prius C (2013-2015)

Luxury car in the $10,000-$15,000 range: Lincoln MKZ (2014-2015)

Minivan/wagon in the $10,000-$15,000 range: Toyota Venza (2013-2014)

Small SUVs in the $10,000-$15,000 range: Mazda CX-5 (2014-2016) and Toyota RAV4 (2013)

Pickup truck in the $10,000-$15,000 range: Toyota Tacoma (2013)

The list above would be perfect for Gen Z and Millennials, who are drowning in insurmountable debts and inflation. 

Authored by Matthew Vadum via The Epoch Times (emphasis ours),

The U.S. Department of Justice (DOJ) is asking the Supreme Court to overturn an appeals court ruling that struck down a federal law preventing people under domestic violence-related restraining orders from having guns.

The Biden administration asked in its new petition (pdf) for the high court to hear the case on a “highly expedited schedule” because of the “significant disruptive consequences” of the lower court’s ruling. The petition was reportedly filed with the court on March 17 but had not been docketed as of press time.

The case comes as courts nationwide are playing catchup regarding the Supreme Court’s landmark June 2022 ruling in New York State Rifle and Pistol Association v. Bruen that held firearms restrictions must be deeply rooted in American history if they are to survive constitutional scrutiny.

Senate Judiciary Committee chairman Dick Durbin (D-Ill.) said on March 15 that the Bruen ruling offers little guidance to lower courts on interpreting the decision, as Courthouse News Service reported.

“The gun lobby saw Bruen as a landmark win, but it is a significant challenge for police, law enforcement, and the population of America when it comes to public safety,” Durbin said.

The case involves Zackey Rahimi of Texas, who pled guilty to violating a 1994 federal law –Section 922(g)(8) of Title 18 of the U.S. Code— that prohibits a person who is subject to a domestic-violence restraining order from possessing a firearm. Rahimi was involved in five shooting incidents after the restraining order was entered against him in February 2020.

But when the U.S. Court of Appeals for the 5th Circuit took up Rahimi’s case earlier this year, it overturned the law, finding it was no longer constitutional according to the principles laid down in Bruen.

The government failed “to demonstrate that § 922(g)(8)’s restriction of the Second Amendment right fits within our Nation’s historical tradition of firearm regulation,” the panel stated. The ban on the possession of firearms by someone under a domestic violence-related restraining order “is an outlier that our ancestors would never have accepted.”

U.S. Attorney General Merrick Garland said last month the DOJ would appeal the ruling but did not provide a timeline for doing so.

“Nearly 30 years ago, Congress determined that a person who is subject to a court order that restrains him or her from threatening an intimate partner or child cannot lawfully possess a firearm,” Garland said in a Feb. 2 statement.

Read more here…

Authored by Jamie Joseph via The Epoch Times,

Almost half of California is out of a drought, including San Francisco, Sacramento, and Los Angeles, according to data released by the U.S. Drought Monitor March 16.

But with so much Sierra Nevada Mountain snowpack, the possibility of flooding is a new concern, forecasters in the National Weather Service Office of Water Prediction warned.

According to the drought monitor, about 45 percent of the state is now out of a drought including nearly all of Central California.

But some swaths of Northern and Southern California remain in “abnormally dry” and “moderate drought” conditions.

(Courtesy of the U.S. Drought Monitor)

California has experienced severe drought conditions, off and on, since 2006, leading to water rationing and regulations, in urban and agricultural zones and unprecedentedly low reservoir levels statewide.

But its long-standing water woes took a positive turn after a series of storms that started in December.

By mid-January, the mountain snowpack reportedly exceeded 200 percent, according to the National Weather Service.

According to the state’s water data, reservoirs that were once depleted are now filling up with some over 80 percent full – and groundwater reserves have received a significant boost.

(Screenshot via California Department of Water Resources)

Due to the excessive snowpack, the National Weather Service warned March 16 that approximately 15 million Californians are at risk for some type of flooding in their communities, including 1.4 million for major flooding and another 6.4 million may be hit moderately.

More rain, according to forecasters, is expected next Tuesday and Wednesday.

Authored by Jeffrey Tucker via DailyReckoning.com,

I recently spoke at one of my favorite venues, the Liberty Forum in New Hampshire, which is an annual conference center on the Free State Project.

It’s designed to encourage people to pick up and move to the freest state in the country for community and to help protect the state from the fate that befell Massachusetts, Connecticut, and Rhode Island.

My first time speaking there was 2012, I believe, and I came away with an interesting revelation, which I can summarize as “Liberty is a hands-on task.”

In my career until that time, the problem of economic and political matters were mostly matters of theory and I had spent most of my time reading and distributing high theory, a task I loved and still do.

But coming to this event in New Hampshire I found something else entirely; a group of people who were busy doing things in practice to live freer lives.

They were small business people, real-estate agents, people with alternative currency systems, people raising and selling food on and from their own farms, organizers of houses of worship and community centers, homeschoolers and school entrepreneurs, and much more besides, including office holders focusing on laws and legislation.

It was here, for example, that I acquired my first Bitcoin, which in the early days showed great promise finally to recreate money in a way that government could not ruin.

It struck me at the time as among the greatest inventions of the human mind.

Tellingly, it did not come from academia (so far as we know) but from tinkerers who wanted to solve the problem of double spending on digital monetary units.

It was genius.

The economics journals ignored it for many years, of course.

Doers

At this event were and are the practitioners. There is not one path forward but many, each person creatively implementing their own version of the freedom ideal. I recall being puzzled a bit by this approach but later inspired.

I felt like a pianist who had only known scales who finds himself listening to a concerto by Liszt. I came to realize the difference between theory and practice, between the academic class and the people in clinical practice.

Theory should never be put down but we make a mistake in thinking that this is the whole of the task. Theory alone introduces its own dangers of following a logic to the point of absurdity that goes unnoticed. Minor mistakes in thinking can metastasize and create models that make no sense in reality.

Theory unchecked by practical experience can even be catastrophic.

I knew an architect at university who received a large grant to develop a community of residences, which he did according to the highest standards of then-fashionable art and a theoretically informed sense of how people should live.

The results were intriguing but the builders fought with the architect the entire time. The roofs had no overhang, the wiring and pipes under the houses on stilts had no covering, and the bathrooms had no doors, to mention just three problems.

Sure enough, once houses went on the market and faced the first winter, many design elements had to change. Residents put doors on bathrooms, the roofs were all retrofitted, and the open basements were all closed in and insulated.

This was all made necessary once the first rains led to flooding and the first freeze caused all pipes to burst. In essence, the result was a disaster simply because the architect was a designer and not a builder.

There is a lesson in this. Theory without a reality check can make the world unlivable. This is because theorists can build beautiful models that hide grave errors, intentionally or not, and there is no means by which their mistakes are revealed until you test them against the real world.

You never want them in charge of the whole project.

The Theorists Dictated COVID Policy

This is essentially what happened in the Covid years. The designers of the response were academics, bureaucrats, modelers, and other highly credentialed experts. Sidelined were medical practitioners, clinical workers, and other people with hands-on experience in dealing with healthcare.

As time went on a massive chasm opened between the two camps with the theorists and modelers prevailing with media megaphone.

Meanwhile, the doctors, nurses, teachers, parents, elderly in nursing homes, and really the whole of everyone else were left without discretion, their concerns and issues not only ignored but censored and blotted out from public life.

To return to the above analogy, the houses were flooding, the pipes were bursting, the residents humiliated, but there was no one to fix the problem because the architect was sure that he was right.

The problem is nowhere more clear than on the issue of early treatment. Doctors know how to deal with respiratory infections. Among the products in their toolkit are nasal rinses, zinc and vitamins, hydroxychloroquine and ivermectin, steroids, and antibiotics.

None of this was a focus of the CDC or the NIH. They had their sights on one thing only, the novel gene therapy they would call a vaccine, and they even went further to remove as far as possible repurposed drugs from the market.

This was a mind-boggling response because it contradicted all practical and clinical experience. What is the first thing one should do when faced with a new pathogen? Figure out how to make sick people get better.

Aside from invasive ventilation, the government and academic theorists had no answers except for everyone to lock down and wait for the shot, which turned out to be a flop.

Fantasyland

Here is the essence of the scandal without precedent that took place all over the world. The theorists triumphed entirely over the practitioners. The job of the rest of us was to place ourselves into their models.

We were supposed to comply in order to “flatten the curve” as if any kind of widespread viral infection could be so easily modeled. We were supposed to watch the databases online to make sure we would all be doing the right thing according to someone else’s plan.

Meanwhile, for nearly two years, if you could leave your home and go to the downtown area of anywhere in the US, you saw boarded up businesses, empty streets, and the periodic saddened straggler making his way through alleyways in a mask while the kids and parents sat lonely at home consuming streaming videos and living on social media.

The disaster was obvious to everyone but those who created it.

As time went on, we came to realize that the experiment was much bigger than we thought. They were not just trying to mitigate a pathogen. They were attempting to rebuild “the infrastructures of human existence.”

Here we have a paradigmatic example of theory gone mad, a vision wholly unconstrained from any reality, a cockamamie idea wholly unmoored from practical tangibilities. It’s utter madness. And yet they had the power and the rest still do not.

And even today, precious few have admitted that anything went wrong. They are still blocking unvaccinated foreigners from travel, still mandating shots for kids and students, still pushing for human separation with 15-minute cities, and still swearing without a shred of evidence that they saved millions of lives.

If you doubt it, they will send you to an academic study hosted on the website of the NIH.

What Makes Society Work?

It was the triumph of theory over practice and experience. And look what they did to the world!

The writings of Friedrich Hayek, building on Adam Smith, take the insight to a deeper level.

There are many answers to social problems that are not readily part of human cognition in the present generation, certainly not to the theorists in charge, and not even to any one of us as intellectuals.

Rather, the essential knowledge that makes society work properly — in vast amounts of its functioning — and to the advantage of all its members, is dispersed among millions and billions of minds, living tacitly in our mental spaces, and it is often the product of habits and rituals of living that are inherited from long experience deep in history.

We take all of this for granted and hardly think about it. Much of it is inaccessible to us and certainly cannot be extracted, modeled, and codified into a grand plan.

The great lesson of our time should certainly include grave incredulity toward any philosopher king who comes along to tell us that it is all wrong and must be replaced with a wholly new way, else we will all die from a scary new threat, whether be a new pathogen or a change in the climate or some other invisible enemy.

Looked at this way, it’s truly hard to believe that anyone gave the time of day to these people in the first place.

George Washington University Law Professor Jonathan Turley panned reports of the looming potential case against former President Donald Trump after the former commander-in-chief announced he may be arrested in the next week.

As The Epoch Times’ Jack Phillips reports below, alleged unnamed court sources have told multiple news outlets that Trump could be indicted in the near future, while Trump said via Truth Social that he expects to be arrested by Manhattan District Attorney Alvin Bragg’s office on Tuesday. Bragg’s office has not publicly confirmed reports that he may possibly indict the former president for allegedly misclassifying a $130,000 hush payment made to Stormy Daniels in 2016.

Trump has denied claims that he had an affair with Daniels in the early 2000s.  However, unconfirmed reports alleged that a grand jury in New York has been empaneled and may be seeking an indictment of the former president.

But Turley said that based on those reports, the DA’s case against Trump “is legally pathetic” and “is struggling to twist state laws to effectively prosecute a federal case long ago rejected by the Justice Department against Trump.”

“In 2018 (yes, that is how long this theory has been around), I wrote how difficult such a federal case would be under existing election laws. Now, six years later, the same theory may be shoehorned into a state claim,” wrote Turley, who was a former expert witness for Trump’s first impeachment trial, for The Hill.

“While we still do not know the specific state charges in the anticipated indictment, the most-discussed would fall under Section 175 for falsifying business records, based on the claim that Trump used legal expenses to conceal the alleged hush-payments that were supposedly used to violate federal election laws,” Turley said.

“While some legal experts have insisted such concealment is clearly a criminal matter that must be charged, they were conspicuously silent when Hillary Clinton faced a not-dissimilar campaign-finance allegation.”

He noted that a Section 175 charge “would normally be a misdemeanor” and that the “only way to convert it into a Class E felony requires a showing that the ‘intent to defraud includes an intent to commit another crime or to aid or conceal the commission thereof.’ That other crime would appear to be the federal election violations which the Justice Department previously declined to charge.”

Bragg’s office, meanwhile, could not prosecute the charge as a misdemeanor as it falls outside the two-year statute of limitations, Turley wrote. Instead, Bragg would have to pursue a felony charge.

“Prosecutors working under Bragg’s predecessor, Cyrus Vance Jr., also reportedly rejected the viability of using a New York law to effectively charge a federal offense,” Turley noted.  

DA Bragg (who was elected with a million dollars of support from George Soros funneled through the Color of Change PAC) also previously expressed doubts about the Daniels case and shut it down when he took office several years ago, he said, adding that two lead prosecutors resigned at the time.

“…Bragg himself threw a flag on this play. I mean, he stopped the two prosecutors who were moving toward a trial. They resigned in protest. One of them then wrote a book. In my view, that book was deeply improper and unprofessional. The book was about prosecuting someone who had not been charged, let alone convicted. But it triggered a huge amount of pressure on Bragg. It does appear that it works. He then proceeded to bring this case.“

If Trump is indicted, it may require Trump to travel to the district attorney’s office in downtown New York to surrender. In white-collar cases, the defendant’s lawyers and prosecutors typically agree on a date and time, rather than arresting the person at home.

Trump would have his fingerprints and mugshot taken and would appear for arraignment in court. He would likely be released on his own recognizance and allowed to head home, legal analysts told Reuters.

Trump’s lawyer, Joe Tacopina, told CNBC on Friday that Trump would surrender if charged. If Trump refused to come in voluntarily, prosecutors could seek to have him extradited from Florida, where he currently resides.

On Saturday, Trump spokesperson Steven Cheung told The Epoch Times in an emailed statement that the former president has not been formally notified of any pending arrest. Both Cheung and Trump accused Bragg, a Democrat who received $1 million in campaign cash from a George Soros-linked organization, of targeting him for political gain and could try to seek dismissal of the charges on those grounds.

“There has been no notification, other than illegal leaks from the Justice Dept. and the DA’s office, to NBC and other fake news carriers, that the George Soros-funded Radical Left Democrat prosecutor in Manhattan has decided to take his Witch-Hunt to the next level,” Cheung said.

“President Trump is rightfully highlighting his innocence and the weaponization of our injustice system,” he added.

The Manhattan District Attorney’s Office has not responded to a request for comment.

As Jonathan Turley concludes, via The Hill, while some will view it as poetic justice for this former reality-TV host to be tried like a televised talent show, the damage to the legal system is immense whenever political pressure overwhelms prosecutorial judgment. The criminal justice system can be a terrible weapon when used for political purposes, an all-too-familiar spectacle in countries where political foes can be targeted by the party in power.

None of this means Trump is blameless or should not be charged in other cases. However, we seem to be on the verge of watching a prosecution by plebiscite in this case.

The season opener of “America’s Got Trump” might be a guaranteed hit with its New York audience — but it should be a flop as a prosecution.

Comedian Trevor Noah once said America is fifty little countries masquerading as one.

From an economic sense, this might carry some truth. As Visual Capitalist’s Aran Alai details below, when looking at the economic output of each state, especially the largest and wealthiest ones, they often compare to or even exceed the GDPs of entire nations.

To illustrate, this visual from StatsPanda looks at California’s $3.36 trillion GDP using data from The World Bank and compares it to 10 sizable country economies.

Let’s take a closer look.

Sizing Up California’s GDP in 2021

California’s $3+ trillion GDP is an enormous figure in its own right, so it’s no surprise that it is larger than certain nations’ economic output.

But even when comparing with economies like Malaysia, Colombia, and Finland, all among the top 50 countries by GDP, California stands tall.

What’s more, these 10 countries are quite densely populated, with a combined population of 653 million compared to California’s 39 million total.

A Closer Look At California’s Economy

What makes California’s GDP so vast and their economy so powerful?

Relative population is a big factor, as the state is the most populous in the U.S. with roughly 12% of the country’s population calling it home. But since California’s GDP makes up over 15% of the country’s economic output, there must be something else at work.

One key driver is the technology sector. Not only does Silicon Valley generate massive amounts of technological output, this also translates directly to wealth and economic activity. Many tech markets follow winner-take-all dynamics, bringing large revenues back to the state. In addition, smaller technology companies are frequently gobbled up by larger competitors, adding wealth back into the mix through M&A.

This might partly explain why California’s GDP is actually estimated to overtake Germany’s in the coming years and become the world’s 4th largest economy.

Authored by Yves Smith via NakedCapitalism.com,

Typically, financial crises, as in the sort that might or actually do impair the banking system, are the result of leveraged speculation. Is this one of those rare instances when this time might actually be different, via rising wealth inequality creating new levels of hot money that can slosh in and out of banks, making many of them fundamentally less stable?

Now admittedly, the continued rise in wealth inequality is an effect of sustained low central bank interest rates, which goosed asset prices generally and particularly favored speculative plays as investors reached for returns. A great deal of commentary has correctly focused on the effects of deflating these asset bubbles and how the rollback of paper wealth can be particularly harmful to financial firms that wrongfooted the correction.

But the reduction in wealth also produces a system wide reduction in liquidity (mind you, we’ve always thought liquidity is not the virtue that investment touts make it out to be; the world got by just fine in the stone ages with less that instantaneous trading times and higher transaction costs). The effect in a regime, where for better or worse, there are (or have been) lots of big fish with tons of cash who are accustomed to moving it quickly would wind up looking like an emerging market, where US interest rate moves wind up producing huge and destabilizing waves of hot money moving in and out. It appears not to have occurred to the authorities that we were restructuring our financial system so as to make it possible to generate banana-republic levels of upheaval.

The Great Crash blew back to the banking system because stock buyers were making heavy use of margin loans, and on top of that, stock operators were creating leveraged structures (trusts of trusts of trusts). By contrast, the 1987 crash, the result of leveraged buyouts producing a stock market bubble, didn’t do lasting damage, and neither did the later leveraged buyout collapse and large-scale workouts o LBO loans (a big reason is that the loans were syndicated and big foreign banks were big buyers but they didn’t eat enough of this bad US cooking to get really sick). But the Japanese financial crisis was the result of a dual commercial real estate and stock market crash, together on a scale that has stalled Japanese growth for decades. The 2008 crisis looks like a housing crisis, but the severity of the damage resulted from credit default swaps creating synthetic subprime debt that was four to six times real economy exposures.

This is a long-winded way of saying that herd behavior in bad lending and/or leveraged speculation produced enough in the way of actual or soon to be realized losses to damage a lot of banks. And banks are interconnected: if one bank gets in trouble, its depositors are the customers or employers of customers of other banks. If those linked customers of other banks have an unexpected hit to income, they could default on their debt payments, propagating damage across the system.

The crisis of the past week was not that. Three different banks with very different business strategies and asset mixes got in trouble at the same time. Some like Barney Frank, on the board of Signature Bank, argue that the common element was a regulatory crackdown on banks too cozy with the crypto industry. But that’s not really the case with Silicon Valley Bank, which has been suffering for a while from declines in its deposits due to a falloff in new funding all across tech land, as well as more difficult business conditions leading to not much in the way of new customers and falling deposit balances at most existing customers.

What the three banks did have in common was a very high level of uninsured deposits which made them particularly vulnerable to runs and therefore should have led the banks’ managements to be very mindful of asset-liability mismatches and liquidity. And they should have focused on fees rather than the balance sheet to achieve better than ho-hum profits.

Silicon Valley Bank has attempted to wrap itself in the mantle of being a stalwart of those rent-extracting innovative tech companies. But Silicon Valley Bank is hiding behind the skirts of venture capital firms. They are the ones who provided and then kept organizing the influx of capital to these companies. The story of the life of a venture capital backed business is multiple rounds of equity funding. Borrowing is very rarely a significant source of capital. So the idea that Silicon Valley Bank was a lender to portfolio companies is greatly exaggerated.2

Both the press and several readers have confirmed that the reason for Silicon Valley Bank’s lock on the banking business of venture-capital-funded companies was that the VCs required that the companies keep their deposits there. And that’s because the VCs could keep much tighter tabs on their investee companies by having the bank monitor fund in and outflows on a more active basis than the VCs could via periodic management and financial reports.

Now what flows from that? One of the basic rules of business is that it is vastly cheaper to keep customers than find them. Silicon Valley Bank would be highly motivated to attract and retain both the fund and the personal business of its venture capital kingpins. Accordingly, the press has pointed out that loans to vineyards and venture capital honchos’ mortgages were important businesses. It’s not hard to think that these were done on preferential terms to members of a big VC firm’s “family” as a loyalty bonus of sorts.

On top of that, recall that Silicon Valley Bank bought Boston Private with over $10 billion in assets, in July 2021. The wealth management firm also had a very strong registered investment adviser platform and additional assets under management. That suggests Silicon Valley recognized increasingly that the care and feeding of its rich individual clients was core to its strategy.

It’s impossible to prove at this juncture, but I strongly suspect that the individual account withdrawals were at least as important to Silicon Valley Bank’s demise as any corporate pullouts. One tell was the demand for a backstop of all unsecured deposits, and not accounts that held payrolls. A search engine gander quickly shows that it’s recommended practice for companies to keep their payroll funds in a bank account separate from that of operating funds. One has to assume that the venture capital overlords would have their portfolio companies adhere to these practices.

The press also had anecdata about wealthy customers in Boston getting so rowdy when trying to get their money out that the bank called the police, as well as Peter Thiel (to the tune of $50 million), Oprah, and Harry & Meghan as serious depositors.

Similarly, there is evidence that the run at Signature Bank was that of rich people. Lambert presented this tidbit from the Wall Street Journal yesterday in Water Cooler:

A rush by New York City real-estate investors to yank money out of Signature Bank last week played a significant role in the bank’s collapse, according to building owners and state regulators. The withdrawals gained momentum as talk circulated about the exposure Signature had to cryptocurrency firms and that its fate might follow the same path as Silicon Valley Bank, which suffered a run on the bank last week before collapsing and forcing the government to step in. Word that landlords were withdrawing cash spread rapidly in the close-knit community of New York’s real-estate families, prompting others to follow suit. Regulators closed Signature Bank on Sunday in one of the biggest bank failures in U.S. history. Real-estate investor Marx Realty was among the many New York firms to cash out, withdrawing several million dollars early last week from Signature accounts tied to an office building, said chief executive Craig Deitelzweig.

This selection also illustrates a point that makes it hard to analyze these bank crashes well. The very wealthy regularly use corporate entities for personal investments, so looking at corporate versus purely individual account holdings is often misleading in terms of who is holding the strings. A business owned by a billionaire does not operate like a similar-sized company with a typical corporate governance structure.

Ironically, First Republic Bank, which holds itself out as primarily a private bank, had the lowest level of uninsured deposits, 67% versus 86% at Silicon Valley Bank and 89% at Signature. But its balance sheet was heavy on long-term municipal bonds, which are not eligible collateral at the discount window or the Fed’s new Bank Term Funding Program facility. Hence the need for a private bailout.

Before you say, “Well, even if there was time to figure out how to backstop payrolls, which there wasn’t, we had to go whole hag because contagion,” that is not a satisfactory answer. Because nearly all banks have sizable Treasury and/or agency holdings (First Republic was unusual), the new Fed interventions come very close to being a full backstop of uninsured deposits. That means vastly more subsidized gambling. There should be a great increase in supervision and regulation to try to prevent more sudden meltdowns, which one would expect to become more frequent otherwise due to even greater government backstopping:

As Georgetown law professor Adam Levitin put it:

….. the Bank Term Funding Program bears some consideration. No one in the private market would lend against securities at face, rather than at market. But that’s what the Fed’s doing in order to enable banks that have held-to-maturity securities avoid loss realization. The Bank Term Funding Program is a lifeline for banks that failed at banking 101—managing interest rate risk. The whole nature of banking is that it involves balancing long-term assets and short-term liabilities. Firms that can’t do that well probably shouldn’t be in the banking business.

Moreover, European banking regulators, regularly been criticized for last minute, kick-the-can interventions, are finding out how the US rules-based order of “we get to rewrite the rules when we feel like it” works in their arena. From the Financial Times:

Europe’s financial regulators are furious at the handling of the Silicon Valley Bank collapse, privately accusing US authorities of tearing up a rule book for failed banks that they had helped to write.

While the disapproval has yet to be conveyed in a formal setting, some of the region’s top policymakers are seething over the decision to cover all depositors at SVB, fearing it will undermine a globally agreed regime.

One senior eurozone official described their shock at the “total and utter incompetence” of US authorities, particularly after a decade and a half of “long and boring meetings” with Americans advocating an end to bailouts.

Europe’s supervisors are particularly irate at the US decision to break with its own standard of guaranteeing only the first $250,000 of deposits by invoking a “systemic risk exception” — despite claiming the California-based lender was too small to face rules aimed at preventing a rerun of the 2008 global financial crisis.

Mind you, the Europeans are not being hypocrites. They forced the unsecured depositors at Cyprus bank to take 47.5% haircuts in its banking crisis. Admittedly those were banks in a country seen as a money laundering haven, but it had a lot of British retirees banking there too. The EU also tried to get banks to use bail-in structures like co/cos bonds. The US was skeptical of them and as we predicted, they had perverse effects. But the point is the EU has made a much more serious attempt at renouncing bailouts than we have, even if they have yet to find the secret sauce.

And they are not shy about calling out who bears the cost. Again from the Financial Times:

The US has claimed SVB’s failure will not hit taxpayers because other banks will cover the cost of bailing out uninsured depositors — over and above what can be recouped from the lender’s assets.

However, a European regulator said that claim was a “joke”, as US banks were likely to pass the cost on to their customers. “At the end of the day, this is a bailout paid for by the ordinary people and it’s a bailout of the rich venture capitalists which is really wrong,” he said.

So not only are the bailouts an effect of rising wealth concentration, they are going to make it worse. Nicely played.

By Michael Wilson, chief equity strategist at Morgan Stanley

Over the past two weeks, the markets have been fixated (rightly) on the rapid failure of two major banks that up until very recently had been viewed as “safe” depository institutions. The reason for their demise is crystal clear in hindsight and not that surprising when you see what they were doing with the deposits and the fact that interest rates are up 500bp year over year. The uninsured deposit backstop put in place last weekend by the Fed/FDIC will help to alleviate further major bank runs, but it won’t stop the already tight lending standards across the banking industry from getting even tighter. It also won’t prevent the cost of deposits from rising, thereby pressuring net interest margins. In short, the risk of a credit crunch has increased materially.

Bond markets have exhibited extreme volatility around these developments as market participants realize the ramifications of tighter credit. The yield curve has bull steepened by 60bp in a matter of days, something seen only a few times in history and usually the bond market’s way of saying recession risk is now more elevated. An inversion of the curve  typically signals a recession within 12 months, but the real risk starts when it re-steepens from the trough. Meanwhile, the ECB decided to raise rates by 50bp last week despite Europe’s own banking crisis and very sluggish economy. The German Bund curve seemed to disagree with that decision and bull steepened by 50bp.

If growth is likely to slow from the effective tightening rolling through the US banking system, as we expect, and the bond market seems to be supporting that conclusion, why on earth did US stocks rally last week? We think it had to do with the view we have heard from some clients that the Fed/FDIC bailout of depositors is a form of quantitative easing (QE) and provides the catalyst for stocks to go higher [ZH: it may not be technically right now, but give it a few weeks and a few more failed banks].

While the massive increase in Fed balance sheet reserves last week does reliquefy the banking system, it does little in terms of creating new money that can flow into the economy or the markets, at least beyond a brief period of, say, a few days or weeks. Secondarily, the fact that the Fed is lending, not buying, also matters. If a bank borrows from the Fed, it is expanding its own balance sheet, making leverage ratios more binding. When the Fed buys the security, the seller of that security has balance sheet space made available for renewed expansion. That is not the case in this situation.

According to the Fed’s weekly release of its balance sheet on Wednesday, the Fed was lending depository institutions $308B, up $303B week over week. Of this, $153B was primary credit through the discount window, which is often viewed  as temporary borrowing and unlikely to translate into new credit creation for the economy. $143B was a loan to the bridge banks the FDIC created for Silicon Valley Bank and Signature. These reserves are obviously going nowhere. Only $12B was lending through its new Bank Term Funding Program (BTFP), which is viewed as more permanent but also unlikely to end up converting into new loans in the near term. In short, none of these reserves will likely transmit to the economy as bank deposits normally do. Instead, we believe the overall velocity of money in the banking system is likely to fall sharply and more than offset any increase in reserves, especially given the temporary/emergency nature of these funds. Moody’s recent downgrade of the entire sector will likely contribute further to this deceleration.

Over the past month, the correlation between stocks and bonds has reversed and is now negative. In other words, stocks go down when rates fall and vice versa. This is in sharp contrast to most of the past year when stocks were more worried about inflation, the Fed’s reaction to it, and rates going higher. Instead, the path of stocks is now about growth, and our conviction that earnings forecasts are 15-20% too high has increased. From an equity market perspective, the events of the past week mean that credit availability is decreasing for a wide swath of the economy, which may be the catalyst that finally convinces market participants the equity risk premium (ERP) is way too low. We have been waiting patiently for this acknowledgment because with it comes the real buying opportunity.

Just to remind readers, the S&P 500 ERP is currently 220bp. Given the risk to the earnings outlook, risk/reward in US equities remains unattractive until the ERP is at least 350-400bp, in our view.

More in the full note available to pro subs.

On Saturday, President Biden’s social media galaxy brains tweeted out a twice-corrected lie, quoting the president telling said lie, that billionaires are getting away paying just 3% of their average earnings in taxes.

“You know the average tax billionaires pay?

THREE PERCENT.

No billionaire should be paying a lower tax than somebody working as a schoolteacher or firefighter,” reads the erroneous tweet.

To which Musk replied: “I paid 53% taxes on my Tesla stock options (40% Federal & 13% state), so I must be lifting the average!“

“I also paid more income tax than anyone ever in the history of Earth for 2021 and will do that again in 2022.”

I certainly agree that everyone should pay taxes and not engage in elaborate tax-avoidance schemes.

Would be curious to hear how these other “billionaires” are so good at avoiding taxes!

We should get rid of GRATs, but maybe other things too.

— Elon Musk (@elonmusk) March 18, 2023

As Ian Bremmer points out, “the 3% number isn’t even close to true.” 

Bremmer’s tweet includes a screenshot from CNN, which fact check’s the claim and notes that it’s from a 2021 finding that found the 400 wealthiest billionaire families pay an average of 8.2% of their income in federal taxes.

In response so Biden’s original claim that was fact checked, the White House published a corrected transcript.

the 3% number isn’t even close to true pic.twitter.com/62oX3tKlLx

— ian bremmer (@ianbremmer) March 19, 2023

Politifact found that the 25 highest-earning billionaires are paying around 16% in federal taxes, while most teachers and firefighters pay between zero and 15%.

By Eric Peters, CIO of One River Asset Management

“They went big last weekend, which was the right thing to do,” said the Chairman, a veteran of financial crises, the two of us discussing the ongoing bank run, how policy can end it.

“But the market always tests statements of confidence, whether from companies or the government,” he continued.

“This week, at the first real test, policymakers mumbled.”

Treasury Secretary Yellen’s responses to Senator Lankford in Thursday’s Senate hearing gave a glimmer of light to the worst fears of small business owners and savers at America’s non systemically important banks. 

The administration’s failure to dash these fears for depositors of $2, $5, $10 million has created a two-tier banking system in which the big banks are safe and most others are not.

“The American people should know that the banking system, which is at the core of our economy, is a safe place for them to keep their money. And this is particularly true for the middle class and small business owners, who generally do not have easy access to treasuries. The idea that their banks are unsafe for their day-to-day operations and needs is absurd.”

How we got here and how to prevent a repeat is a matter for another day. The fear and potential damage must be stemmed immediately.

“For regulators and policy makers in times of stress, silence is the reward for good work,” said the Chairman.

“In 2020, we went big on everything. The times called for it. For example, can you imagine if we had allowed the entire airline industry to be liquidated?”

The cost of restarting the world’s largest economy with a severely crippled airline industry would have been staggering.

“So, despite last weekend’s actions, deposits are flowing from small banks to large ones, and deposits at big banks are shifting into treasuries. The decisions that drive these flows are binary and irreversible. These are not tactical portfolio shifts of a percent or two, these are not moves to slightly trim exposure to small banks. These are zero-to-one decisions, all-or-nothing shifts,” said the Chairman.

“The market is testing whether they will go big again. And the longer it takes them, the deeper the damage, and the more aggressively they will need to go, the bigger the “big” in go big.”

[ZH: the market is already showing The Fed the way in the short-term interest rate market – one more small token hike and then cut-cut-cut for the next two years!]

[ZH: Did The Fed just get the message from the market and “go big” enough, with its global swap line plan?]