Submitted by Gun Owners of America,

Remember the Cornyn-Murphy Compromise that Gun Owners of America and our members warned Congress about? We were loud and clear about how this legislation did nothing to end mass public murders and only infringed on gun owners’ rights.

We attempted to warn elected officials. Nevertheless, Congress rushed to sign gun rights away, including 15 Republican Senators who enabled the passage of the “Bipartisan Safer Communities Act.”

Well, President Biden just announced that he’ll be using his “regulatory authority” to implement Universal Background Checks thanks to that bill.

When we told the anti-gunners in Congress how this bill was poison and would just add fuel to the fire for President Biden to go beyond what was written, compromise-hungry swamp monsters didn’t believe us.

Well, we hate to say, “I told you so,” but that’s exactly what happened. The Biden Administration, by their own admission, is going around Congress to infringe on your rights.

President Biden wants to use the expanded definition of “engaged in the business” to force you to file a background check for every single time you purchase a firearm.

According to the White House, the President is directing the Attorney General to move the U.S. as close to universal background checks as possible without additional legislation by supposedly clarifying the statutory definition of who is “engaged in the business” of dealing in firearms, as updated by the Bipartisan Safer Communities Act.

It seems that Biden would rather harass law-abiding gun owners who sell as few as just one firearm per year than lock up the criminals who are responsible for gun violence.

For those who are unfamiliar with this fight, President Obama attempted a similar executive order towards the end of his term in 2016. Obama attempted to expand the definition of gun “dealer” to: 

– Restrict private transfers of firearms under the guise of the so-called loopholes “online and at gun shows.”

– Prosecute those who sell even as many as one firearm unless they obtain a Federal Firearms License.

– Punishing this otherwise lawful behavior with “up to five years in prison and fines up to $250,000.”

While Biden has just announced his executive order, we currently have no specifics on what that will entail. Obama’s executive order gives us a look into the future of what this rulemaking could potentially look like. 

While the Biden administration may think this move is popular, the support for Universal Background Checks is fake.

The fact is, most people who are polled in these anti-gun surveys don’t fully understand what a Universal Background Check is, or that they’re actually Universal Registration Checks.

According to a survey of 1,000 people done by the Crime Prevention Research Center, 86% say they support background checks on all gun sales or transfers, but as soon as they’re asked follow-up questions which explain how this would look as policy, support starts to drop.

For example, when survey participants were asked a question with context on how the law would affect them, 44% now say they oppose Universal Background Checks, and only 42% say they support them.

Universal Background Checks don’t stop crime or criminals, instead they limit the ability of law-abiding citizens from being able to innocently transfer firearms to each other.

The goal of President Biden’s new backdoor universal background check scheme is to turn as many private citizens as possible who sell their guns into FFLs, restricting their ability to conduct private gun transfers without being recorded in the ATF’s illegal national federal registry. 

Remember, the ATF already has a database of nearly one billion gun and gun owner records in their West Virginia facility.

GOA will do everything in our power to defend your gun rights from this infringement. We’ll lobby Congress, participate in any rulemaking, and challenge it in court when it is published and becomes possible.

*   *   *

We’ll hold the line for you in Washington. We are No Compromise. Join the Fight Now. 

Authored by David Stockman via InternationalMan.com,

Why would you throw-in the towel now? We are referring to the Fed’s belated battle against inflation, which evidences few signs of having been successful.

Yet that’s what the entitled herd on Wall Street is loudly demanding. As usual, they want the stock indexes to start going back up after an extended drought and are using the purported “financial crisis” among smaller banks as the pretext.

Well, no, there isn’t any preventable crisis in the small banking sector. As we have demonstrated with respect to SVB and Signature Bank, and these are only the tip of the iceberg, the reckless cowboys who were running these institutions put their uninsured depositors at risk, and both should now be getting their just deserts.

To wit, executive stock options in the sector have plunged or become worthless, and that’s exactly the way capitalism is supposed to work. Likewise, on an honest free market their negligent large depositors should be losing their shirts, too.

After all, who ever told the latter that they were guaranteed 100 cents on the dollar by Uncle Sam? So it was their job, not the responsibility of the state, to look out for the safety of their money.

If the American people actually wanted the big boys bailed out, the Congress has had decades since at least the savings and loan crisis back in the 1980s to legislate a safety net for all depositors. But it didn’t for the good reason that 100% deposit guarantees would be a sure-fire recipe for reckless speculation by bankers on the asset-side of their balance sheets; and also because there was no consensus to put taxpayers in harms’ way in behalf of the working cash of Fortune 500 companies, smaller businesses, hedge funds, affluent depositors and an assortment of Silicon Valley VCs, founders, start-ups and billionaires, among countless others of the undeserving.

And for crying out loud, forget this baloney about the bailouts aren’t costing taxpayers a dime because they are being paid for by the banks via insurance premium payments to the FDIC fund. Well, yes, when the Congress wants to disguise a tax they call it an “insurance premium”, as if its victims had the choice to elect coverage or not. But when $18 trillion of deposits are being assessed in order to bailout careless large depositors who paid no attention to what was happening to their money, then that’s an onerous tax by any other name.

Accordingly, Washington’s panicked bailout of $9 trillion of uninsured deposits held by big and small companies, hedge funds and affluent customers over the weekend was therefore nothing less than a gift to the undeserving. And now we find out the two banks that have been explicitly funded 100% by Uncle Sam—SVB and Signature Bank—were deep into woke investing and conduct. That makes the bailout by Janet Yellen & Co. especially galling.

For crying out loud, this is how the poison of wokeness and ESG spread like wild-fire among American businesses in the first place. The latter should have ordinarily been a bulwark of conservative values and common sense, but years of ultra-easy money from the Fed and the precedent of bailout-after-bailout since the 1980s allowed top executives to take their noses off the grindstone of safe and sustainable profitability in favor of a purely political agenda.

In any event, inflation is still raging and wage workers are still taking it on the chin. During February real wages dropped for the 23rd consecutive month. So the Fed needs to stay on its anti-inflation playbook, come hell or high water. That means it needs to keep raising rates until their after-inflation level is meaningfully positive, which is not yet remotely the case.

Indeed, unlike Tall Paul Volcker back in the late 1970s, who inherited 10-year Treasury yields at -2.0% and raised them to +10% over the next several years, real interest rates are still deeply underwater as we show below. The cries to stop the rate increases, therefore, are just damn nonsense.

In fact, in any sane world these are not even “increases”. They are long overdue normalization of interest rates that have been absurdly pinned to the zero bound for upwards of a decade.

And the Fed most certainly should not throw in the rate increase towel owing to a Wall Street proclaimed “crisis” in the small banking sector. That’s the long-standing wolf cry of the entitled class of speculators decamped in the digital canyons of Wall Street.

Yes, regional banks were playing fast and loose with depositor money, but even the biggest of these did not amount to a hill of beans in the great scheme of the nation’s $25 trillion GDP. As we showed a few days ago, both the recently departed SVB and Signature Bank each accounted for barely one-half of one percent of the nation’s $30 trillion of banking system assets.

If a few more local and regional banks need to be closed, therefore, so be it. Sooner or later the piper has to be paid.

Y/Y Change In Real Hourly Earnings, March 2021 to February 2023

For want of doubt, here is the pattern of the annual rate of change in the two-year stacked CPI. During the 18 months after January 2021 it soared from 1.9% to 7.1%. Yet notwithstanding the Fed’s purported anti-inflation campaign since March 2022, there has been no meaningful retreat from the June 2022 peak. That is, when you take the “base effects” out if the equation, it is clear that the CPI has been stranded at 40-year high levels at 7.0% ever since.

Annual Change, Two-Year Stacked CPI:

• January 2021: 1.9%;

• June 2021: 2.9%;

• January 2022: 4.5%;

• June 2022: 7.1%;

• July 2022: 6.8%;

• August 2022: 6.7%;

• September 2022: 6.8%;

• October 2022: 7.0%;

• November 2022:7.0%;

• December 2022: 6.8%;

• January 2023: 7.0%;

• February 2023: 7.0%

Nor is that the extent of the inflationary warning signs in the February CPI report. For example, plunging used car prices and the rollover of asking rents were supposed to be saving the day, bringing the headline CPI rate rapidly back toward the Fed’s 2.00% target.

But it’s not happening—-at least in the real world. On the matter of used vehicles there is nothing more authoritative than the Manheim used car auction index. But this real world index is going back up again, even as the green eyershades at the BLS insist that used vehicle prices are still going down.

Manheim Used Vehicle Index Change Versus CPI Used Vehicle Index

• One Month (February): +4.3% vs. -2.8%;

• Three Months: +7.8% vs. -5.3%;

• Six Months: +2.0% vs. -11.0%

Eventually, of course, the BLS will make revisions and adjustments to catch-up with the real world, meaning that the purported anti-inflation impact of used car prices will soon turn into a booster shot.

Likewise, the CPI shelter index for February was up at a near record 0.8% on a M/M basis and 8.1% from last February. As is evident from the chart, this component—which accounts for 24% of the weight in the headline CPI and 40% of the core CPI—is still accelerating, not cooling.

Change In CPI Shelter Index, Month/Month (Purple) and Year/Year (Black), 2021 to 2023

As we have previously noted, the argument that “asking rents” fell sharply during the back half of 2022 and that the CPI is therefore mis-reporting rent increases doesn’t wash. That because “asking rents” on new contracts account for just 1/12 of the rental market at best, and the reported numbers from private real estate companies are not seasonally adjusted.

As is evident in the chart below, rental rates always go down during the fall, and then come roaring back in the spring and early summer. In fact, right on schedule the February report by the Apartment List was back in positive territory.

In any event, what the CPI shelter index captures is the rolling increase in the total rent roll, not just the new contracts executed during the current month. And that means for the balance of this year at least—even if the overall housing market continues to weaken– average rents will be significantly higher on a year-over-year basis.

Finally, there was one further component in the February report that makes a mockery of the claim that the CPI is fixing to cliff-dive and that the Fed can therefore take its foot off the neck of the Wall Street gamblers. To wit, upwards of 60% of the CPI is accounted for by services less energy services, and this component was up 7.3% on a Y/Y basis, marking the largest such gain in 41 years!

So the Fed needs to keep its nose to the anti-inflation grindstone. It is not yet even close to turning the tide.

Y/Y Change In CPI For Services Less Energy, 2000 to 2023

As to the matter of imprudently managed banks, isn’t it finally time that all parties concerned – including large depositors – are made to pay the price for their feckless and reckless indifference to financial risk?

As a reminder, the unfolding of financial markets during 2022 was a screaming wake-up call that mis-matched bank portfolios were a train wreck waiting to happen. After all, last year the 30–year UST tanked by 39.2%, marking the greatest one-year decline since, well, 1754!

Likewise, the 10–year UST fell by 17.8%, another record vaporization of value. That’s why, of course, unrealized bank portfolio losses went from $15 billion in Q4 2021 to a staggering $650 billion in Q4 2022. And no one was hiding the ball—every dime of these potential losses were reported in the quarterly SEC filings.

Yet, and yet, bank executives and uninsured depositors sat on their hands because these soaring risks were not running through the income statement and thereby causing bank stock prices to fall even further. The whole theory behind this greatest ever outbreak of benign neglect was that all of the impacted Treasury and Agency securities generating these potential losses would be held to maturity and repaid in full.

Alas, that predicate was valid only to the extent that uninsured depositors sat on their hands permanently, and that imprudent folks like Peter Thiel and Ken Griffin would never yell “fire in the theater”.

They did, of course, and then the even greater fools in Washington enacted a $9 trillion deposit guarantee during the course of panicked deliberations in the White House Sunday afternoon.

So now that $18 trillion worth of US bank deposits have been totally euthanized economically by the geniuses in Washington, how do you stop bank managements from running wild on the asset-side of their balance sheet?

After all, they have already been making ungodly sums of money by mismatching their balance sheets, and now its Katie-bar-the-door.

Indeed, the Signature Bank fiasco is a poster boy for the art of minting fake profits off dangerous balance sheets. Not far below the surface we find the same old bank failure culprit: Namely, dirt cheap deposits thanks to the Fed, mismatched with substantially higher yielding but problematic assets.

Thus, in 2022 Signature Bank earned an average of 3.11% on its $114.3 billion of earning assets, while its cost of funding was just 0.88% on its $103.4 billion of deposits. In dollar terms, the assets generated $3.56 billion of gross income, while the bank paid out just $0.913 billion on its deposits.

Alas, if this were the widget business the above figures would amount to a sterling gross margin of 74%. And the resulting $2.54 billion of net interest margin wasn’t eaten up by SG&A, either. Net operating expense/fee income amounted to just $700 million, making Signature Bank an apparent goldmine in 2022

Yet just like that it was gone!

The reason is that its income statement was way too good to be true. The bank primarily catered to business operations in law, real estate and other professional services. Accordingly, like the case of SVB, fully 90% of its deposits base was not FDIC insured mom and pop savings accounts, but consisted of the working cash balances of its client firms.

At the same time, $70.2 billion of its $114.3 billion of earning assets were in commercial loans, mortgages and leases, which accounted for $2.80 billion of its $3.56 billion in gross income, owing to an average 4.0% yield on this part of the portfolio.

So at the heart of the operation was a 4% asset yield matched with a 0.88% deposit cost. And also a highly illiquid, sticky asset book (e.g. taxi medallion loans and low income housing mortgages) matched with deposits which were potentially hot and mobile, should its uninsured depositors ever get nervous and take flight.

They did, and in a New York minute the Signature Bank profits machine vaporized. And that’s to say nothing of its fixed income book which was drastically underwater owing to last year’s fixed income market bloodbath.

The only thing missing from Signature Bank’s financial picture is that it was not one of the 30 too-big-to-fail SIFIs (systemically important financial institutions), which were given a backdoor guarantee of uninsured depositors by Dodd-Frank. Then, like JP Morgan, its deposit costs would have been even cheaper and its fake profits even more fulsome.

As of 6:15 Pm Sunday night, of course, every bank now has the 100% safety net for uninsured deposits. This means that the 5,000 still living banks will have every opportunity to ignore their depositors and play even more artificial and remunerative games by mismatching their assets and liabilities.

Stated differently, banks have been way the hell too profitable thanks to the Fed’s insane financial repression and the rampant moral hazard of the bank regulatory and deposit insurance schemes. The top half dozen or so SIFI banks have actually booked more than $1 trillion of net income in the last eight years exactly because the geniuses in Washington have back-stopped and drastically cheapened their deposit carry costs.

The stock answer to all this from Washington and Wall Street alike is not to worry because new powers to the bank regulators will keep the cowboys from gestating more SVBs and Signature Banks.

Well, here is what Michael Barr, the top bank regulator on the Federal Reserve Board, had to say last Thursday morning when the fire at SVB was already raging:

 “The banks we regulate, in contrast, are well protected from bank runs through a robust array of supervisory requirements.”

Or, as Elon Musk might have said, funding secured!

So at the end of the day there is no preventable financial crisis. What there is amounts to a systematic financial travesty that goes back to the hideously low money market regime that the Fed maintained since the eve of the financial crisis back in 2008, coupled with the evil of deposit insurance, both de jure and de facto.

The implicit policy of the Federal Reserve, as measured by the inflation-adjusted level of its target Fed funds rate, has been to blow-up the banking system by flooding it with dirt cheap deposit costs.

In fact, during the 180 months since Lehman there have been only seven months when the real rate was positive; and even then it was positive by just a hair as depicted by the blue bars peeking above the zero line in the chart below during early 2019.

Inflation-Adjusted Federal Funds Rate, 2008-2023

Likewise, it should be evident by now that deposit insurance has nothing to do with either sound money or a prudent banking industry.

It has remained in place for decades because it is a social policy-–protection of the little guy—parading as a financial stabilization measure.

But it doesn’t stabilize—it inherently and egregiously de-stabilizes, as has been implicit in every financial crisis during the last half century.

So if they want “social policy” for the little guy and the blue-haired ladies, give these folks access to a $250,000 government savings account paying 50 basis points of interest as far as the eye can see. For every one else, let them be the watch-dogs of their own money in the commercial banking system.

That’s the very predicate of a stable banking system and sustainable free market prosperity.

*  *  *

The truth is, we’re on the cusp of an economic crisis that could eclipse anything we’ve seen before. And most people won’t be prepared for what’s coming. That’s exactly why bestselling author Doug Casey and his team just released a free report with all the details on how to survive an economic collapse. Click here to download the PDF now.

Americans have been battered by two years of negative real wage growth as personal savings are depleted while credit card debts jump to record highs. Shelter inflation continues to soar while housing affordability is at its lowest in decades. 

Homeownership has become unattainable for folks who earn below $100k due to elevated mortgage rates and high home prices, forcing many buyers to stay on the sidelines this spring season. 

For those with economic mobility and remote work capabilities, a new report via the fintech website SmartAsset shows the top cities where a $100k household income no longer means living from paycheck to paycheck. 

SmartAsset analyzed the after-tax income of 76 major cities and then adjusted those figures for the cost of living in each place. What they found is $100k might go the furthest in Memphis. 

Here are the key findings from the report:

$100K goes furthest in Memphis. The city may be known as the “Home of the Blues,” but Memphis’ low cost of living surely won’t make you sing them. A $100,000 salary is worth more here ($86,444) than in any other city in our study after subtracting taxes and adjusting for the cost of living.

Texas cities dominate the top 10. Thanks to no state income tax and the low cost of living, the Lone Star State looms large in our study. Seven out of the 10 cities in our top 10 are located in Texas. After deducting taxes and adjusting for the cost of living, a $100,000 salary on average is worth $77,885 across the 10 Texas cities that we analyzed in our study.

Oklahoma City has the lowest cost of living. A $100,000 goes a long way in the Sooner State’s largest city, considering that the cost of living is only 83.2% of the national average – the lowest out of all 76 cities in our study. A $100,000 salary is worth $84,498 in Oklahoma City after adjusting for the cost of living.

In New York City, $100K amounts to just $35,791 when you consider taxes and the cost of living. Taxes and cost of living take a big bite out of a $100,000 income in the Big Apple, which ranked last in our analysis. After adjusting for those factors, $100,000 is worth just $35,791.

And the top ten places in the US where $100k goes the furthest:

1. Memphis, TN

A person earning $100,000 per year in Memphis takes home $74,515 after federal and local taxes (the state of Tennessee doesn’t tax earned income). Considering the city has a cost of living that’s almost 14% lower than the national average, those after-tax earnings are actually worth $86,444 when adjusting for the cost of living.

2. El Paso, TX

A $100,000 salary in El Paso is worth $84,966 after subtracting taxes and adjusting for the local cost of living. A person who makes $100,000 a year in this West Texas city of over 678,000 residents takes home $74,515 after taxes. El Paso’s cost of living is just 87.7% of the national average.

3. Oklahoma City, OK

Someone making $100,000 in Oklahoma City will take home $70,302 after taxes. But thanks to the lowest cost of living in our study, those after-tax earnings are worth considerably more: $84,498.

4. Corpus Christi, TX

A $100,00 annual salary is worth $83,443 in Corpus Christi after deducting taxes and adjusting for the local cost of living. Located on the Gulf Coast of Texas, Corpus Christi’s cost of living is 10.7% lower than the national average.

5. Lubbock, TX

A person who earns $100,000 per year in Lubbock can expect to take home $74,515 after taxes are deducted from their paychecks. Since the cost of living in Lubbock is just 89.4% of the national average, that person’s take-home pay is actually worth $83,350 after adjusting for the cost of living.

6. Houston, TX

Like the other Texas cities in the top 10, a $100,000 salary in Houston is reduced to $74,515 after taxes. Those earnings, however, are worth $81,350 when adjusting for Houston’s cost of living, which is 91.8% of the national average.

7 (tie). San Antonio, Fort Worth and Arlington, TX

A $100,000 salary is worth the same amount of money in three Texas cities: San Antonio, Fort Worth and Arlington. Thanks to identical tax treatment and no state income tax, a person earning $100,000 takes home $74,515 in each city. That money is worth $80,124 when you adjust for the cost of living in all three cities, which is 7% lower than the national average.

10. St. Louis, MO

St. Louis rounds out the top 10. While taxes reduce a $100,000 salary to $69,531, the city’s low cost of living (87% of the national average) makes those after-tax dollars go even further. As a result, a $100,000 salary in St. Louis is worth $79,921 after subtracting taxes and adjusting for the cost of living.

One potential solution for those aiming for financial independence and reduced reliance on the government could be a move to one of the ten cities SmartAsset listed. 

Authored by Jonathan Turley,

There is an interesting development in the controversy at Stanford Law School where U.S. Circuit Court Judge Kyle Duncan was shouted down by law students and condemned by a law school dean for discussing his conservative judicial views.

Student protesters reportedly published the names of students in the Federalist Society online as part of their cancel campaign.

However, Aaron Sibarium, a journalist for the Washington Free Beacon has said that a board member of the Stanford National Lawyers Guild, sent an email demanding the Free Beacon remove her name and those of other students from their reporting because it is threatening and dangerous.

Sibarium tweeted that “On Sunday, I identified board members of the Stanford National Lawyers Guild–one of the groups responsible for the posters–who in a public statement described the protest as ‘Stanford Law School at its best.’ A few hours later, the board demanded I redact their names.”

It was a highly ironic moment to be sure. However, I am more interested in another aspect of the controversy. I wrote earlier about the joint apology letter of Stanford President Marc Tessier-Lavigne and Law School Dean Jenny Martinez. Neither Tessier-Lavigne nor Martinez promise to hold these students accountable or to sanction Steinbach. They merely express regret that “staff members who should have enforced university policies failed to do so, and instead intervened in inappropriate ways that are not aligned with the university’s commitment to free speech.”

This latest controversy highlights the fact that the identity of some of these students (including those on videotape) who disrupted a speaker at the law school are known to the school.

In this case, it was a federal appellate judge but we have seen this type of “deplatforming” at other schools.

These students — and many faculty — voice a twisted view that silencing the free speech of others is a form of free speech.

A chilling poll was released by 2021 College Free Speech Rankings after questioning a huge body of 37,000 students at 159 top-ranked U.S. colleges and universities. It found that sixty-six percent of college students think shouting down a speaker to stop them from speaking is a legitimate form of free speech.  Another 23 percent believe violence can be used to cancel a speech. That is roughly one out of four supporting violence.

They are getting these values from faculty members. Many schools have largely purged their ranks of conservative and libertarian faculty. This trend is supported by anti-free speech websites like Above the Law where Editor Joe Patrice defended “predominantly liberal faculties” and argued that hiring a conservative professor is akin to allowing a believer in geocentrism to teach. He also mocked surveys showing that conservative students are fearful of speaking freely in class, dismissing these students as “just… conservatives being sad that everyone else makes fun of them.”

What is notable is that Martinez did not even pledge to hold students accountable for stopping the speech by Judge Duncan. Yet, that is still more than other law deans. When Professor Josh Blackman was stopped from speaking about “the importance of free speech” at CUNY law school, CUNY Law Dean Mary Lu Bilek insisted that disrupting the speech on free speech was free speech. (Bilek later cancelled herself after using a controversial term in a meeting and resigned).

At the University of California, Santa Barbara, professors actually rallied around a professor who physically assaulted pro-life advocates and tore down their display.

These students have been raised from elementary schools to law school in a speech phobic environment where free speech is treated as harmful. That was evident in the disgraceful Stanford event.

Now, however, they want to be able to target others while objecting to being named themselves. Much like the Yale law students who cancelled an event and then objected to campus police being present, this objection from Stanford law students illustrates the sense of privilege and exceptionalism by many in the anti-free speech movement.

The focus, however, should not be on the hypocrisy of these students but the passivity of the faculty. Unless students are held accountable for preventing free speech on campus, the apologies from the President and Dean are meaningless.

A CNN reporter fell victim to a ‘smash-and-grab‘ robbery while reporting on San Francisco’s “rampant street crime.” 

In a series of tweets on Friday, CNN correspondent Kyung Lah described how her rental car’s rear window was smashed within seconds by thieves who then made off with her bags.

“Got robbed. Again,” Lah wrote. “[CNN producer Jason Kravarik] & I were at city hall in San Francisco to do an interview for @CNN. We had security to watch our rental car + crew car. Thieves did this in under 4 seconds. Security stopped the jerks from stealing other bags. But seriously- this is ridiculous.”

Got robbed. Again. @jasonkCNN & I were at city hall in San Francisco to do an interview for @CNN. We had security to watch our rental car + crew car. Thieves did this in under 4 seconds. Security stopped the jerks from stealing other bags. But seriously- this is ridiculous pic.twitter.com/3zcCzckavW

— Kyung Lah (@KyungLahCNN) March 17, 2023

Even though Lah hired ‘private security,’ the crooks were able to flee the scene.  

Our hired security guard tried to grab the crooks (I’m glad he didn’t get hurt!) but he got this picture of the getaway car.
To the jerks who stole our stuff— I hope someone on this site sees your plate and you get caught pic.twitter.com/k7VL0J9JHJ

— Kyung Lah (@KyungLahCNN) March 17, 2023

The irony is that the reporter at the left-leaning news outlet was filming a segment on “rampant street crime” in San Francisco, now considered the “shoplifting capital of America” because of progressive prosecutors who refuse to enforce criminal laws.

Surging crime, open-air drug dealing, and robberies are a byproduct of failed social justice reforms by progressive politicians, such as George Soros-backed District Attorney Chesa Boudin, who was booted out of office last June by angry voters. 

Twitter users had fun with this: 

defund the police is going great

— Shibetoshi Nakamoto (@BillyM2k) March 18, 2023

Looks smashy but mostly peaceful

— Sam Ikin (@sam_ikin) March 18, 2023

You sure this wasn’t climate change?

— Chris Walkey (@ChrisWalkey) March 18, 2023

Too bad you work for an organization that spends 24/7 shilling for the very people whose policies have made this possible.

— Jesus = Answer (@hollis4congress) March 18, 2023

Authored by Kenneth Rogoff, op-ed via The Financial Times,

The Fed’s expansive actions to prevent the Silicon Valley Bank collapse from becoming systemic, followed by the Swiss National Bank’s massive lifeline to troubled Credit Suisse, left little doubt this week that financial leaders are determined to act decisively when fear starts to set in. Let us leave moral hazard for another day.

But even if risks of a 2023 financial Armageddon have been contained, not all the differences with 2008 are quite so reassuring.

Back then, inflation was a non-issue and deflation — falling prices — quickly became one. Today, core inflation in the US and Europe is still running hot, and one really has to strain the definition of “transitory” to argue that it is not a problem. Global debt, both public and private, has also skyrocketed. This would not be such an issue if forward looking, long-term real interest rates were to take a deep dive, as they did in the secular stagnation years prior to 2022.

Unfortunately, however, ultra-low borrowing rates are not something that can be counted on this time around.

First and foremost, I would argue that if one looks at long-term historical patterns in real interest rates (as Paul Schmelzing, Barbara Rossi and I have), major shocks — for example, the big drop after the 2008 financial crisis — tend to fade over time. There are also structural reasons: for one thing, global debt (public and private) exploded after 2008, partly as an endogenous response to the low rates, partly as a necessary response to the pandemic. Other factors that are pushing up long-term real rates include the massive costs of the green transition and the coming increase in defence expenditure around the world. The rise of populism will presumably help alleviate inequality, but higher taxes will lower trend growth even as higher spending adds to upwards pressure on rates.

What this means is that even after inflation abates, central banks may need to keep the general level of interest rates higher over the next decade than they did in the last one, just to keep inflation stable.

Another significant difference between now and post-2008 is the far weaker position of China. Beijing’s fiscal stimulus after the financial crisis played a key role in maintaining global demand, particularly for commodities but also for German manufacturing and European luxury goods. Much of it went into real estate and infrastructure, the country’s massive go-to growth sector.

Today, however, after years of building at breakneck speed, China is running into the same kinds of diminishing returns as Japan began to experience in the late 1980s (the famous “bridges to nowhere”) and the former Soviet Union saw in the late 1960s. Combine that with over-centralisation of decision-making, extraordinarily adverse demographics, and creeping deglobalisation, and it becomes clear that China will not be able to play such an outsized role in holding up global growth during the next global recession.

Last, but not least, the 2008 crisis came during a period of relative global peace, which is hardly the case now. The Russian war in Ukraine has been a continuing supply shock that accounts for a significant part of the inflation problem that central banks are now trying to deal with.

Looking back on the past two weeks of banking stress, we should be thankful that this did not happen sooner. With sharply rising central bank rates, and a troubled underlying economic backdrop, it is inevitable that there will be many business casualties and normally emerging market debtors as well. So far, several low-middle income countries have defaulted, but there are likely to be more to come. Surely there will be other problems besides tech, for example the commercial real estate sector in the US, which is hit by rising interest rates even as major city office occupancy remains only about 50 per cent. Of course the financial system, including lightly regulated “shadow banks,” must be housing some of the losses.

Advanced economy governments are not all necessarily immune.

They may have long since “graduated” from sovereign debt crises, but not from partial default through surprise high inflation.

How should the Federal Reserve weigh all these issues in deciding on its rate policy next week?

After the banking tremors, it is certainly not going to forge ahead with a 50 basis point (half a per cent) increase as the European Central Bank did on Thursday, surprising markets. But then the ECB is playing catchup to the Fed.

If nothing else, the optics of once again bailing out the financial sector while tightening the screws on Main Street are not good. Yet, like the ECB, the Fed cannot lightly dismiss persistent core inflation over 5 per cent. Probably, it will opt for a 25 basis point increase if the banking sector seems calm again, but if there are still some jitters it could perfectly well say the direction of travel is still up, but it needs to take a pause.

It is far easier to hold off political pressures in an era where global interest rate and price pressures are pushing downwards. Not anymore. Those days are over and things are going to get harder for the Fed. The trade-offs it faces next week might only be the start.

By Dhaval Joshi, chief strategist at BCA Research

Exactly one year ago today, the US Federal Reserve embarked on the most aggressive tightening cycle in modern history. It comes as no surprise then that the US has just passed two of the three staging posts to recession.

The first staging post is a housing recession. US residential fixed investment (home building) has slumped by a fifth. This is significant because post-1970 housing recessions have predicted economic recessions with a perfect four out of four success rate: 1974; 1980; 1990; and 2007 (Chart 1).

The second staging post is bank failures. Banks tend to fail just before recessions begin. Ahead of the recession that began in December 2007, no US bank failed in 2005 or 2006. The first three bank failures happened in February, September, and October of 2007, just before the recession onset.

Fast forward, and no US bank failed in 2021 or 2022. The first bank failures of this cycle – Silicon Valley Bank and Signature Bank – have just happened. If history is any guide, the start of bank failures presages an economic recession that is more imminent than many people anticipate (Chart 2).

To be clear, it is not the direct impact of the housing recession or the bank failures that causes the economic recession. The housing recession and bank failures are simply the early warning signs – the ‘canaries in the coal mine’ – that tell us that high interest rates are killing the economy.

The US Economy Has Passed Two Staging Posts To Recession. Here’s The Third

Many economists argue that once a recession is staring you in the face, you can promptly cut interest rates to stop it in its
tracks. Good luck with that. This is like arguing that once the iceberg was staring you in the face, you could promptly reverse the engines to save the Titanic.

Interest rates work with a lag. The impact of tightening takes time to be felt. To repeat, the first US rate hike happened exactly a year ago today, but we are seeing the first bank failures now.

In a downturn, the ‘corrective’ impact of loosening also takes time to be felt. Conversely, the ‘self-reinforcing’ feedback that  accelerates the downturn – like a bank run, or households increasing their precautionary saving in response to higher unemployment – is immediate.

This makes a recession a non-linear system. Once you’ve passed the point of no return, it is too late to reverse the engines. You cannot avoid the iceberg. In the case of the US economy, once the unemployment rate has increased by 0.5 percent, it has always gone on to increase by well over 2 percent (Chart 3).

So, the third and final staging post to recession is the US unemployment rate increasing by 0.5 percent. So far, it is up by 0.2 percent.

How The ‘Most Anticipated Recession Ever’ Is Still Unanticipated

Is the coming recession the most anticipated ever? The Philly Fed’s latest so-called ‘anxious index’, showed that the proportion of economists expecting the US economy to contract in the second, third, and fourth quarters of 2023 stood at 42 percent, 45 percent, and 41 percent respectively. These are among the most pessimistic readings for any time that a recession hasn’t already begun (Chart 4).

Still, the proportion of economists predicting a recession is a minority. This is confirmed by the survey’s overall forecast for US GDP that shows no decline through the next four quarters – though admittedly, that was in mid-February before the recent bank failures (Chart 5).

The absence of a forecasted recession might reflect the bias of economists to sugar-coat their predictions, given their asymmetric incentive structure. For an economist’s standing, the best thing is to be right. But if you are wrong, it is better to miss a recession, than to forecast a recession that does not happen. On this basis, peak pessimism should never increase above the high 40s. Yet it does.

Once a recession begins, it is no longer taboo to forecast a contraction in the economy. As the sugar-coating of  economists’ forecasts ends, the anxious index can surge to above 70 percent, and forecasts for the economy can collapse. In this important regard, the most anticipated recession is still very unanticipated.

Interest Rates, Profits, And Crude Oil Are Not Fully Anticipating A Recession

In the financial markets, the deeply inverted US yield curve means that the bond market is forecasting aggressive rate cuts – around 200 basis points through the next two years. As the Fed only cuts aggressively in a recession, the bond market is anticipating a recession.

That said, the forecasted pace of cutting, at 25 basis points per quarter, is too low – given that in previous recessions the pace of cutting has been 80-150 basis points per quarter. Meaning, the bond market is not fully anticipating a recession (Chart 6).

Our February 8th recommendation to buy the December 2024 Fed funds future FFZ24 is panning out very well. The position is in huge profit and a big part of the expected gains have been made. Traders may wish to crystallize those gains, but the rally will end only when the rates curve fully anticipates a recession. Meanwhile, long bonds (10-year and longer maturity) have at least 10 percent price upside.

What about the stock market? Many people argue that the bear market since early 2022 indicates that the stock market is anticipating a recession. This is wrong. The slump in stocks is mostly due to a slump in valuations, caused by the bear market in bonds.  Profit forecasts have not slumped (Chart 7).

Based on previous recessions, these profit forecasts are vulnerable to at least a 20 percent downgrade. Mitigating this somewhat, an uplift to bond valuations will boost stock valuations, and limit further downside in the stock market to around 10 percent.

Bonds have outperformed stocks in every recession of the past 75 years, including the recessions of the inflationary 1970s. But with bonds only now starting to outperform stocks, bonds versus stocks is not yet anticipating a recession.

Turning to commodities, the oil market is not anticipating a recession either. Crude oil demand tracks world GDP, albeit deflated by 1.6 percent a year due to steady gains in energy efficiency. This means that the 2 percent annual growth forecast for world oil demand through 2023-24 would require world GDP to grow at a 3.6 percent clip through the next two years (Chart 8).

Yet even a “soft landing” in the US and Europe would cause growth in developed economies to slow to around 1 percent. Meanwhile, China’s outgoing Premier Li Keqiang recently announced China’s GDP target for 2023 at “about 5 percent.” This makes the oil market’s implied forecast for demand growth far too rosy, and in a recession the destruction of oil demand always outweighs any cutbacks to supply.

Hence, as I explained in Why Oil Is Headed To $55, the crude oil price has a further 25 percent downside.

To summarise for a 6-12 month investment horizon, bonds have a 10 percent upside, stocks have a 10 percent downside, and crude oil has a 25 percent downside.

Bankers at the London branch of Silicon Valley Bank reportedly received tens of millions of dollars in bonuses just days after the Bank of England orchestrated a rescue package that led to Europe’s largest lender, HSBC, buying the failed bank’s subsidary for just £1, Sky News reports.

Sources described the bonus pool as “modest”, and said it totalled between £15m and £20m.

It was unclear on Saturday how much had been awarded to Erin Platts, the UK bank’s chief executive or her senior colleagues.

One insider said the bonus payments were a signal of HSBC’s confidence in the talent base at its new subsidiary and that the buyer had been keen to honour previously agreed payments in order to help retain key staff. –Sky

What’s more, bonuses were reportedly doled out to US staff just hours before the Santa Clara, California-based bank collapsed. The bank was taken into FDIC ownership, while SVB Financial Group has filed for Chapter 11 bankruptcy protection as it looks to find buyers for their remaining assets.

The UK arm of (formerly) SVB employs around 700 people. The London branch’s ‘guided demolition’ was coordinated with UK Prime Minister Rishi Sunak, who played a pivotal role in an emergency auction that drew interest from several challenger banks, including the Bank of London and Oaknorth.

According to insiders, if HSBC hadn’t stepped up, the bonuses wouldn’t have been paid, while another insider pointed out that stock held by senior executives and other employees had been rendered worthless amid the implosion.

“The UK’s tech sector is genuinely world-leading and of huge importance to the British economy, supporting hundreds of thousands of jobs,” said chancellor Jeremy Hunt. “We have worked urgently to deliver on that promise and find a solution that will provide SVB UK’s customers with confidence.”

“[This] ensures customer deposits are protected and can bank as normal, with no taxpayer support.”

The government had been lobbied intensively last weekend by hundreds of tech entrepreneurs about the parlous state of SVB UK.

They warned of “an existential threat to the UK tech sector”, adding: “The Bank of England’s assessment that SVB going into administration would have limited impact on the UK economy displays a dangerous lack of understanding of the sector and the role it plays in the wider economy, both today and in the future.”

The founders warned Mr Hunt that the collapse of SVB UK would “cripple the sector and set the ecosystem back 20 years”. -Sky

“Many businesses will be sent into involuntary liquidation overnight,” were SVB UK not rescued, wrote the entrepreneurs.

By Tsvetana Paraskova of OilPrice.com

The world’s biggest international oil and gas firms continue to pledge lower-emission operations to supply the world with the hydrocarbons it needs and will need in the future.    Unfortunately for Big Oil, not all basins and areas of production are equal, so companies have focused in recent years on investing in the most prolific operations that yield the most profitable oil with relatively lower emissions than in other locations.    

To keep investors in the sector, the largest oil firms continue to tout their progress in reducing emissions. But to create additional value for shareholders via higher returns, companies are prioritizing specific basins and resources they believe will yield the cheapest-to-extract oil and natural gas in their portfolios.  

In the era of ESG investment and the energy crisis following the Russian invasion of Ukraine, Big Oil is now juggling the need to keep producing oil and gas with the imperative to cut emissions if they want to continue to have a license to operate.

Despite the surge in renewable energy in recent years, the world still relies on fossil fuels for more than 80% of its energy needs.  

“Strike The Right Balance”

Policies and companies need to strike the right balance between energy security and ways to cut emissions from oil and gas, ExxonMobil’s chief executive Darren Woods said at the CERAWeek by S&P Global conference last week. 

“It would be a mistake to abandon any one of those objectives,” Woods added. 

ExxonMobil targets to grow its Permian production to 1 million barrels per day (bpd) and, at the same time, reach net-zero emissions at its operated unconventional assets in the Permian by 2030. 

“One of the points in doing that is to demonstrate to the world that we can do both,” Woods at CERAWeek. 

Exxon is also one the least emission-intensive refiners in the world, the executive added. 

If Exxon doesn’t make the diesel and gasoline the world needs, someone else – with higher emission intensity operations – will, and there wouldn’t be a net benefit for the world in terms of emissions abatement, Woods noted. 

There is a recognition of how urgent the issue is and “how enormous the lift is,” he said. The solutions will vary according to the circumstances around the world, Woods said. 

The other U.S. supermajor, Chevron, said on its Investor Day 2023 last month, “We’re making progress toward our upstream CO2 intensity reduction targets. We continue to prioritize the projects expected to return the largest reduction in carbon emissions cost efficiently.” 

Chevron looks to advance more than 100 projects this year to lower the carbon intensity of its operations, focusing on energy management, flaring reduction, and methane management, among others. 

“Our goal on methane is simple – keep it in the pipe.” 

The New Advantaged Resources

Very productive fields and newer basins tend to be less emission-intensive per barrel due to the sheer volumes of production and new designs to make extraction in newer fields less carbon-intensive, by electrifying operations, for example, analysts tell The Wall Street Journal.

In the deepwater U.S. Gulf of Mexico and onshore Saudi Arabia, per-barrel production is among the cheapest and cleanest at the same time because the wells there are very productive, Julie Wilson, research director of global exploration at Wood Mackenzie, told the Journal. 

Norway also boasts some of the lowest-emission barrels globally. 

Operators offshore Norway have started to replace gas turbines with electricity from onshore – Norway’s electricity comes predominantly from hydropower – bringing down emissions from the newer oilfields. 

For example, Phase 2 of the giant Johan Sverdrup oilfield will emit 0.67 kilograms (kg) of CO2 per barrel of produced oil, thanks to power from shore, operator Equinor says. The global average is 15 kg/barrel, according to the Norwegian major.  

However, “truly advantaged resources, with low breakeven (resilience to low prices) and emissions (sustainability in scope 1 and 2 terms) are anything but plentiful,” Andrew Latham, Vice President, Energy Research at Wood Mackenzie, said in a recent report.  

“The world is far from the end of the hydrocarbon era,” Latham said. 

According to WoodMac’s base-case Energy Transition Outlook (ETO), oil demand peaks in 2030, before declining slowly to 94 million barrels per day (bpd) in 2050. Even in the Accelerated Energy Transition (AET) outlook of global net zero by 2050 and achieving the most ambitious targets in the Paris Agreement, oil demand will still be 33 million bpd by 2050.  

“As things stand, we see enough to satisfy only about half of our base-case oil and gas demand forecast to 2050,” WoodMac’s Latham says.         

“This problem of ‘peak advantage’ looms ever larger and presents a huge and urgent call to action. As recent supply interruptions serve to remind us, we neglect the upstream at our peril. Both oil and, in particular, gas will continue to need huge and sustained investment.” 

Since the COVID-19 pandemic, Americans have taken on significantly more debt to buy vehicles. This is especially true for Gen Z and Millennials, who the Federal Reserve believes may have borrowed beyond their means.

In this infographic, Visual Capitalist’s Marcu Lu visualizes data from the Fed’s most recent consumer debt update.

Aggressive Borrowing

The first chart in this graphic shows the growth in outstanding car loans between Q2 2020 (start of the pandemic) to Q4 2022 (latest available).

We can see that Americans under the age of 40 have grown their vehicle-related debt the most. It’s natural for Gen Z (ages 11-26) to have higher growth figures because many of them are buying their first car, but 31% is quite high relatively speaking.

Part of this can be attributed to today’s inflationary environment, which has pushed used car prices to new highs. Supply chain issues have also resulted in over 30% of new cars being sold above MSRP.

Because of these rising prices, the Fed reports that the average auto loan is now $24,000, up 41% from 2019’s value of $17,000.

Spiking Delinquencies

Interest rates on auto loans are typically fixed, meaning many young Americans were able to take advantage of the low rates seen during the pandemic.

Despite this, one in five Gen Zs say that their car payments account for over 20% of their after-tax income.

Shown in the second chart of this infographic, the amount of auto debt transitioning into serious delinquency is much higher for Gen Z and Millennials. Throughout 2022, these generations saw $20 billion in auto debt fall 90+ days behind.

The outlook for these struggling borrowers is bleak. First there’s inflation, which has pushed up the prices of most consumer goods. This eats into their ability to make car payments.

Second is rising interest rates, which make credit card debt—another pain point for young borrowers—even more costly. Finally, there’s student loans, which are expected to resume in summer 2023. Payments on student debt have been suspended since the beginning of the COVID-19 pandemic.