By Tsvetana Paraskova of OilPrice.com

The French electricity grid is at higher risk of strained power supplies in January 2023 than previously estimated due to lower nuclear power generation, France’s power grid operator RTE said in its latest winter preparedness analysis on Friday.

Delays in routine maintenance work at France’s nuclear power stations will lead to a slightly lower nuclear availability this winter than expected back in September, the grid operator said. This raises the risk of a power supply crunch in January, RTE said.

The main uncertainties in France’s power supply are gas supply, the energy situation in neighboring countries, demand, and the rate of restarting of French nuclear reactors, the operator noted.

Nuclear power generation in France has suffered setbacks this year, and currently, just over 50% of the French nuclear power fleet is available. 

Early this month, power giant EDF revised down its estimate for the 2022 French nuclear output to 275-285 TWh, compared to the previous estimate of 280-300 TWh. This lowered estimate takes into account the impact of strikes on maintenance schedules in the autumn of 2022, as well as outage extensions at four nuclear reactors involved in the program of inspections and repairs related to the stress corrosion phenomenon, EDF said in a statement.

France, traditionally a net exporter of electricity, even became a net importer of electricity in the first half of 2022 due to the issues at its nuclear power plants. 

After a drought in the summer, water levels at hydropower reservoirs are back up to normal for this time of the year, while very high gas storage levels in France and the rest of Europe mean that French gas-powered electricity supply will not be threatened this winter, the operator said. 

RTE stressed that under no circumstances does France run a risk of a “blackout”, that is, a total loss of control of the electricity system.

During periods of strained supply, France could avoid outages by reducing consumption by between 1% and 5% in the base-case scenario, and by up to 15% in the worst-case scenario, RTE said.

Authored by Alasdair Macleod via GoldMoney.com,

The gap between fiat currency values and that of legal money, which is gold, has widened so that dollars retain only 2% of their pre-1970s value, and for sterling it is as little as 1%. Yet it is commonly averred that currency is money, and gold is irrelevant.

As the product of statist propaganda, this is incorrect. Originally established in Roman law, legally gold is still money and the states’ debauched currencies are not — only a form of credit. As I demonstrate in this article, the major western central banks will be forced to embark on a new round of currency debasement, likely to put an end to the matter.

Central to my thesis is that commercial bank credit will contract sharply in response to rising interest rates and bond yields. This retrenchment is already ending the everything bubble in financial asset values, is beginning to undermine GDP, and given record levels of balance sheet leverage makes a major banking crisis virtually impossible to avoid. Central banks which are already in a parlous state of their own will be tasked with underwriting the entire credit system.

In discharging their responsibilities to the status quo, central banks will end up destroying their own currencies.

So, why do we persist in pricing everything in failing currencies, when that will almost certainly change?

When the difference between legal money and declining currencies is finally realised, the public will discard currencies entirely reverting to legal money. That time is being brought forward rapidly by current events. 

Why do we impart value to currency and not money?

A question that is not satisfactorily answered today is why is it that an unbacked fiat currency has value as a medium of exchange. Some say that it reflects faith in and the credit standing of the issuer. Others say that by requiring a nation’s subjects to pay taxes and to account for them guarantees its demand. But these replies ignore the consequences of its massive expansion while the state pretends it to be real money. Sometimes, the consequences can seem benign and at others catastrophic. As explanations for the public’s tolerance of repeated failures of currencies, these answers are insufficient.

Let us do a thought experiment to highlight the depth of the problem. We know that over millennia, metallic metals, particularly gold, silver, and copper came to be used as media of exchange. And we also know that the use of their value was broadened through credit in the form of banknotes and bank deposits. The relationships between legal money, that is gold, silver, or copper and credit in its various forms were defined in Roman law in the sixth century. And we also know that this system of money and credit with the value of credit tied to that of money, despite some ups and downs, has served humanity well ever since.

Now let us assume that in the absence of metallic money, in the dawn of economic time a ruler instructed his subjects to use a new currency which he and only he will issue for the public’s use. This would surely be seen as a benefit to everyone, compared with the pre-existing condition of barter. But the question in our minds must be about the durability of the ruler’s new currency. With no precedent, how is the currency to be valued in the context of the ratios between goods and services bought and sold? And how certain can one be about tomorrow’s value in that context? And what happens if the king loses his power, or dies?

Clearly, without a reference to something else, the king’s new currency is a highly risky proposition and sooner or later will simply fail. And even when a new currency has been introduced and linked to an existing form of money, if the tie is then cut the currency will struggle to survive. Without going into the good reasons why this is so, the empirical evidence confirms it. Chinese merchants no longer use Kubla Khan’s paper made out of mulberry leaves, and German citizens no longer use the paper marks of the early 1920s. But they still refer to metallic money.

Yet today, we impart values to paper currencies issued by our governments in defiance of these outcomes. An explanation was provided by the great Austrian economist, Ludwig von Mises in his regression theorem. He reasonably argued that we refer the value of a medium of exchange today to its value to us yesterday. In other words, we know as producers what we will receive today for our product, based on our experience in the immediate past, and in the same way we refer to our currency values as consumers. Similarly, at a previous time, we referred our experience of currency values to our prior experience. In other words, the credibility and value of currencies are based on a regression into the past.

Mises’s regression theory was broadly confirmed by an earlier writer, Jean-Baptiste Say, who in his Treatise on Political Economy observed: 

“Custom, therefore, and not the mandate of authority, designates the specific product that shall pass exclusively as money, whether crown pieces or any other commodity whatever.”[i]

Custom is why we still think of currencies as money, even though for the last fifty-one years their link with money was abandoned. The day after President Nixon cut the umbilical cord between gold and the dollar, we all continued using dollars and all the other currencies as if nothing had happened. But this was the last step in a long process of freeing the paper dollar from being backed by gold. The habit of the public in valuing currency by regression had served the US Government well and has continued to do so.

The role of a medium of exchange

Being backed by no more than government fiat, to properly understand the role that currencies have assumed for themselves, we need to make some comments about why a medium of exchange is needed and its characteristics. The basis was laid out by Jean-Baptiste Say, who described the division of labour and the role of a medium of exchange.

Say observed that human productivity depended on specialisation, with producers obtaining their broader consumption through the medium of exchange. The role of money (and associated credit) is to act as a commodity valued on the basis of its use in exchange. Therefore, money is simply the right, or title, to acquire some consumer satisfaction from someone else. Following on from Say’s law, when any economic quantity is exchanged for any other economic quantity, each is termed the value of the other. But when one of the quantities is money, the other quantities are given a price. Price, therefore, is always value expressed in money. For this reason, money has no price, which is confined entirely to the goods and services in an exchange.

So long as currency and associated forms of credit are firmly attached to money such that there are minimal differences between their values, there should be no price for them either, other than a value difference arising from counterparty risk. A further distinction between money and currencies can arise if their users suspect that the link might break down. It was the breakdown in this relationship between gold and the dollar that led to the failure of the Bretton Woods agreement in 1971.

Therefore, in all logic it is legal money that has no price. But does that mean that when its value differs from that of money, does currency have a price? Not necessarily. So long as currency operates as a medium of exchange, it has a value and not a price. We can say that a dollar is valued at 0.0005682 ounces of gold, or gold is valued at 1760 dollars. As a legacy of the dollar’s regression from the days when it was on a gold standard, we still attribute no price to the dollar, but now we attribute a price to gold. To do so is technically incorrect.

Perhaps an argument for this state of affairs is that gold is subject to Gresham’s law, being hoarded rather than spent. It is the medium of exchange of last resort so rarely circulates. Nevertheless, fiat currencies have consistently lost value relative to legal money, which is gold, so much so that the dollar has lost 98% since the suspension of Bretton Woods, and sterling has lost 99%. Over fifty-one years, the process has been so gradual that users of unanchored currencies as their media of exchange have failed to notice it. 

This gradual loss of purchasing power relative to gold can continue indefinitely, so long as the conditions that have permitted it to happen remain without causing undue alarm. Furthermore, for lack of a replacement it is highly inconvenient for currency users to consider that their currency might be valueless. They will hang on to the myth of its use value until its debasement can no longer be ignored.

What is the purpose of interest rates?

Despite the accumulating evidence that central bank management of interest rates fails to achieve their desired outcomes, monetary policy committees persist in using interest rates as their primary means of economic intervention. It was the central bankers’ economic guru himself who pointed out that interest rates correlated with the general level of prices and not the rate of price inflation. And Keynes even named it Gibson’s paradox after Arthur Gibson, who wrote about it in Banker’s Magazine in 1923 (it had actually been noted by Thomas Tooke a century before). But because he couldn’t understand why these correlations were the opposite of what he expected, Keynes ignored it and so have his epigonic central bankers ever since.

As was often the case, Keynes was looking through the wrong end of the telescope. The reason interest rates rose and fell with the general price level was that price levels were not driven by interest rates, but interest rates reacted to changes in the general level of prices. Interest rates reflect the loss of purchasing power for money when the quantity of credit increases. With their interests firmly attached to time preference, savers required compensation for the debasement of credit, while borrowers — mainly businesses in production — needed to bid up for credit to pay for higher input costs. Essentially, interest rates changed as a lagging indicator, not a leading one as Keynes and his acolytes to this day still assume.

In a nutshell, that is why Gibson’s paradox is not a paradox but a natural consequence of fluctuations in credit and the foreign exchanges and the public’s valuation of it relative to goods. And the way to smooth out the cyclical consequences for prices is to stop discouraging savers from saving and make them personally responsible for their future security. As demonstrated today by Japan’s relatively low CPI inflation rate, a savings driven economy sees credit stimulation fuelling savings rather than consumption, providing capital for manufacturing improvements instead of raising consumer prices. Keynes’s savings paradox — another fatal error — actually points towards the opposite of economic and price stability. 

It is over interest rate management that central banks prove their worthlessness. Even if they had a Damascene conversion, bureaucrats in a government department can never impose decisions that can only be efficiently determined by market forces. It is the same fault exhibited in communist regimes, where the state tries to manage the supply of goods— and we know, unless we have forgotten, the futility of state direction of production. It is exactly the same with monetary policy. Just as the conditions that led the communists to build an iron curtain to prevent their reluctant subjects escaping from authoritarianism, there should be no monetary policy.

Instead, when things don’t go their way, like the communists, bureaucrats double down on their misguided policies suppressing the evidence of their failures. It is something of a miracle that the economic consequences have not been worse. It is testament to the robustness of human action that when officialdom places mountainous hurdles in its path ordinary folk manage to find a way to get on with their lives despite the intervention.

Eventually, the piper must be paid. Misguided interest rate policies led to their suppression to the zero bound, and for the euro, Japanese yen, and Swiss franc, even unnaturally negative deposit rates. Predictably, the distortions of these policies together with central bank credit inflation through quantitative easing are leading to pay-back time. 

Rapidly rising commodity, producer and consumer prices, the consequences of these policy mistakes, are in turn leading to higher time preference discounts. Finally, markets have wrested currency and credit valuations out of central banks’ control, as it slowly dawns on market participants that the whole interest rate game has been an economic fallacy. Foreign creditors are no longer prepared to sit there and accept deposit rates and bond yields which do not compensate them for loss of purchasing power. Time preference is now mauling central bankers and their cherished delusions. They have lost their suppressive control over markets and now we must all face the consequences. Like the fate of the Berlin Wall that had kept Germany’s Ossies penned in, monetary policy control is being demolished.

With purchasing powers for the major currencies now sinking at a more rapid rate than current levels of interest rate and bond yield compensation, the underlying trend for interest rates is now rising and has further to go. Official forecasts that inflation at the CPU level will return to the targeted 2% in a year or two are pie in the sky. 

While Nero-like, central bankers fiddle commercial banks are being burned. A consequence of zero and negative rates has been that commercial bank balance sheet leverage increased stratospherically to compensate for suppressed lending margins. Commercial bankers now have an overriding imperative to claw back their credit expansion in the knowledge that in a rising interest rate environment, their unfettered involvement in non-banking financial activities comes at a cost. Losses on financial collateral are mounting, and the provision of liquidity into mainline non-financial sectors faces losses as well. And when you have a balance sheet leverage ratio of assets to equity of over twenty times (as is the case for the large Japanese and Eurozone banks), balance sheet equity is almost certain to be wiped out.

The imperative for action is immediate. Any banker who does not act with the utmost urgency faces the prospect of being overwhelmed by the new interest rate trend. The chart below shows that the broadest measure of US money supply, which is substantially the counterparty of bank credit is already contracting, having declined by $236bn since March.

Contracting bank credit forces up interest rates due to lower credit supply. This is a trend that cannot be bucked, a factor that has little directly to do with prices. By way of confirmation of the new trend, the following quotation is extracted from the Fed’s monthly Senior Loan Officers’ Opinion Survey for October:

“Over the third quarter, significant net shares of banks reported having tightened standards on C&I [commercial and industrial] loans to firms of all sizes. Banks also reported having tightened most queried terms on C&I loans to firms of all sizes over the third quarter. Tightening was most widely reported for premiums charged on riskier loans, costs of credit lines, and spreads of loan rates over the cost of funds. In addition, significant net shares of banks reported having tightened loan covenants to large and middle-market firms, while moderate net shares of banks reported having tightened covenants to small firms. Similarly, a moderate net share of foreign banks reported having tightened standards for C&I loans.

“Major net shares of banks that reported having tightened standards or terms cited a less favourable or more uncertain economic outlook, a reduced tolerance for risk, and the worsening of industry-specific problems as important reasons for doing so. Significant net shares of banks also cited decreased liquidity in the secondary market for C&I loans and less aggressive competition from other banks or nonbank lenders as important reasons for tightening lending standards and terms.”

Similarly, credit is being withdrawn from financial activities. The following chart reflects collapsing credit levels being provided to speculators.

In the same way that the withdrawal of bank credit undermines nominal GDP (because nearly all GDP transactions are settled in bank credit) the withdrawal of bank credit also undermines financial asset values. And just as it is a mistake to think that a contraction of GDP is driven by a decline in economic activity rather than the availability of bank credit, it is a mistake to ignore the role of bank credit in driving financial market valuations.

The statistics are yet to reflect credit contraction in the Eurozone and Japan, which are the most highly leveraged of the major banking systems. This may be partly due to the rapidity with which credit conditions are deteriorating. And we should note that the advanced socialisation of credit in these two regions probably makes senior managements more beholden to their banking authorities, and less entrepreneurial in their big-picture awareness than their American counterparts. Furthermore, the principal reason for continued monetary expansion reflects both the euro-system and the Bank of Japan’s continuing balance sheet expansion, which feed directly into the commercial banking network bolstering their balance sheets. It is likely to be state-demanded credit which overwhelms the Eurozone and Japan’s statistics, masking deteriorating changes in credit supply for commercial demand. 

The ECB and BOJ’s monetary policies have been to compromise their respective currencies by their continuing credit expansion, which is why their currencies have lost significant ground against the dollar while US interest rates have been rising. Adding to the tension, the US’s Fed has been jawing up its attack on price inflation, but the recent fall in the dollar on the foreign exchanges strongly suggests a pivot in this policy is in sight.

The dilemma facing central banks is one their own making. Having suppressed interest rates to the zero bound and below, the reversal of this trend is now out of their control. Commercial banks will surely react in the face of this new interest rate trend and seek to contract their balance sheets as rapidly as possible. Students of Austrian business cycle theory will not be surprised at the suddenness of this development. But all GDP transactions, with very limited minor cash exceptions at the retail end of gross output are settled in bank credit. Inevitably the withdrawal of credit will cause nominal GDP to contract significantly, a collapse made more severe in real terms when the decline in a currency’s purchasing power is taken into consideration.

The choice now facing bureaucratic officialdom is simple: does it prioritise rescuing financial markets and the non-financial economy from deflation, or does it ignore the economic consequences of protecting the currency instead? The ECB, BOJ and the Bank of England have decided their duty lies with supporting the economy and financial markets. Perhaps driven in part by central banking consensus, the Fed now appears to be choosing to protect the US economy and its financial markets as well. 

The principal policy in the new pivot will be the same: suppress interest rates below their time preference. It is the policy mistake that the bureaucrats always make, and they will double down on their earlier failures. The extent to which they suppress interest rates will be reflected in the loss of purchasing power of their currencies, not in terms of their values against each other, but in their values with respect to energy, commodities, raw materials, foodstuffs, and precious metals. In other words, a new round of higher producer and consumer prices and therefore irresistible pressure for yet higher interest rates will emerge.

The collapse of the everything bubble

The flip side of interest rate trends is the value imparted to assets, both financial and non-financial. It is no accident that the biggest and most widespread global bull market in history has coincided with interest rate suppression to zero and even lower over the last four decades. Equally, a trend of rising interest rates will have the opposite effect.

Unlike bull markets, bear markets are often sudden and shocking, especially where undue speculation has been previously involved. There is no better example than that of the cryptocurrency phenomenon, which has already seen bitcoin fall from a high of $68,000 to $16,000 in twelve months. And in recent days, the collapse of one of the largest crypto-exchanges, FTX, has exposed both hubris and alleged fraud, handmaidens to extreme public speculation, on an unimaginable scale. For any student of the madness of crowds, it would be surprising if the phenomenon of cryptocurrencies actually survives.

Driving this volte-face into bear markets is the decline in bond values. On 20 March 2020, when the Fed reduced its fund rate to zero, the 30-year US Treasury bond yielded 1.18%. Earlier this week the yield stood at 4.06%. That’s a fall in price of over 50%. And time preference suggests that short-term rates, for example over one year, should currently discount a loss of currency’s purchasing power at double current rates, or even more.

For the planners who meddle with interest rates, increases in rates and bond yields on that scale are unimaginable. Monetary policy committees, being government agencies, will think primarily about the effect on government finances. In their nightmares they can envisage tax revenues collapsing, welfare commitments soaring, and borrowing costs mounting. The increased deficit, additional to current shortfalls, would require central banks to accelerate quantitative easing without limitation. To the policy planners, the reasons to bring interest rates both lower and back firmly under control are compelling.

Furthermore, officials believe that a rising stock market is necessary to maintain economic confidence. That also requires the enforcement of a new declining interest rate trend. The argument in favour of a new round of interest rate suppression becomes undeniable. But the effect on fiat currencies will accelerate their loss of purchasing power, undermining confidence in them and leading to yet higher interest rates in the future.

Either way, officialdom loses. And the public will pay the price for meekly going along with these errors.

Managing counterparty risk

Any recovery in financial asset values, such as that currently in play, is bound to be little more than a rally in an ongoing bear market. We must not forget that commercial bankers have to reduce their balance sheets ruthlessly if they are to protect their shareholders. Consequently, as over-leveraged international banks are at a heightened risk of failing in the new interest rate environment, their counterparties face systemic risks increasing sharply. To reduce exposure to these risks, all bankers are duty bound to their shareholders to shrink their obligations to other banks, which means that the estimated $600 trillion of notional over the counter (OTC) derivatives and on the back of it the additional $50 trillion regulated futures exchange derivatives will enter their own secular bear markets. OTC and regulated derivatives are the children of falling interest rates, and with a new trend of rising interest rates their parentage is bound to be tested.

We can now see a further reason why central banks will wish to suppress interest rates and support financial markets. Unless they do so, the risk of widespread market failures between derivative counterparties will threaten to collapse the entire global banking network. And that is in addition to existential risks from customer loan defaults and collapsing collateral values. Central banks will have to stand ready to rescue failing banks and underwrite the entire commercial system. 

To avert this risk, they will wish to stabilise markets and prevent further increases in interest rates. And all central banks which have indulged in QE already have mark-to-market losses that have wiped out their own balance sheet equity. We now face the prospect of central banks that by any commercial measure are themselves financially broken, tasked with saving entire commercial banking networks.

When the trend for interest rates was for them to fall under the influence of increasing supplies of credit, the deployment of that credit was substantially directed into financial assets and increasing speculation. For this reason, markets soared while the increase in the general level of producer and consumer prices was considerably less than the expansion of credit suggested should be the case. That is no longer so, with manufacturers facing substantial increases in their input costs. And now, when they need it most, bank credit is being withdrawn. 

It is not generally realised yet, but the financial world is in transition between economies being driven by asset inflation and suppressed commodity prices, and a new environment of asset deflation while commodity prices increase. And it is in the valuations of unanchored fiat currencies where this transition will be reflected most.

Physical commodities are set replace paper equivalents

The expansion of derivatives when credit was expanding served to soak up demand for commodities which would otherwise have gone into physical metals and energy. In the case of precious metals, this is admitted by those involved in the expansion of London’s bullion market from the 1980s onwards to have been a deliberate policy to suppress gold as a rival to the dollar. 

According to the Bank for International Settlements, at the end of last year gold OTC outstanding swaps and forwards (essentially, the London Bullion Market) stood at the equivalent of 8,968 tonnes of bullion, to which must be added the 1,594 tonnes of paper futures on Comex giving an identified 10,662 tonnes. This is considerably more than the official reserves of the US Treasury, and even its partial replacement with physical bullion will have a major impact on gold values. Silver, which is an extremely tight market, is most of the BIS’s other precious metal statistics content and faces bullion replacement of OTC paper in the order of three billion ounces, to which we must add Comex futures equivalent to a further 700 million ounces. 

On the winding down of derivative markets alone, the impact on precious metal values is bound to be substantial. Furthermore, the common mistake made by almost all derivative traders is to not understand that legal money is physical gold and silver — despite what their regulating governments force them to believe. What they call prices for gold and silver are not prices, but values imparted to legal money from depreciating currencies and associated credit. 

While it may be hard to grasp this seemingly upside-down concept, it is vital to understand that so-called rising prices for gold and silver are in fact falling values for currencies. Some central banks, predominantly in Asia are taking advantage of this ignorance, which is predominantly displayed in western, Keynesian-driven derivative markets.

Perhaps after a currency hiatus and when market misconceptions are ironed out, we can expect legal money values to behave as they should. If a development which is clearly inflationary emerges, it should drive currency values lower relative to gold. But instead, in today’s markets we see them rise because speculators take the view that currencies relative to gold will benefit from higher interest rates. A pause for thought should expose the fallacy of this approach, where the true relationship between money and currencies is assumed away.

In the wake of the suspension of the Bretton Woods agreement and when the purchasing power of currencies subsequently declined, interest rates and the value of gold rose together. In February 1972, gold was valued at $85, while the Fed funds rate was 3.3%. On 21 January 1980 gold was fixed that morning at $850, and the Fed funds rate was 13.82%. When gold increased nine-fold, the Fed’s fund rate had more than quadrupled. And it required Paul Volcker to raise the funds rate to over 19% twice subsequently to slay the inflation dragon. 

In the seventies, the excessive credit-driven speculation that we now witness was absent, along with the accompanying debt leverage in the financial sectors of western economies and in their banking systems. A Volcker-style rise in interest rates today would cause widespread bankruptcies and without doubt crash the entire global banking system. While markets might take us there anyway, as a deliberate act of official policy it can be safely ruled out. 

We must therefore conclude that there is another round of currency destruction in the offing. Potentially, it will be far more extensive than anything seen to date. Not only will central-bank currency and QE expansion fund government deficits and attempt to compensate for the contraction of bank credit while supporting financial markets by firmly suppressing interest rates and bond yields, but insolvent central banks will be tasked with underwriting insolvent commercial banks.

At some stage, the inversion of monetary reality, where legal money is priced in fiat, will change. Instead of legal money being priced in fiat, fiat currencies will be priced in legal money. But that will be the death of the fiat swindle.

Authored by Conrad Black via The Epoch Times (emphasis ours),

The Nov. 8 midterm elections were a watershed in modern American history. The implications of choosing a president whom the public strongly disapproves of and is generally a failure, over a controversial but undoubtedly capable and successful ex-president, are very serious.

That the Democrats and their lock-step allies in the national media succeeded in putting across the colossal smear that former President Donald Trump is a supporter of violence and a threat to the constitutional system could be interpreted as a long step toward the national suicide that Abraham Lincoln foresaw is the only way in which the American project could perish.

Former CIA Director John Brennan called Trump a traitor; former National Intelligence Director James Clapper declared as a matter of settled fact that Trump was a Russian intelligence asset. The corruption of the FBI and the intelligence agencies in the dissemination of the infamous Steele dossier funded by the Hillary Clinton campaign as authentic intelligence revealing Trump as completely unsuited to public office and the profound dishonesty of former FBI Director James Comey in white-washing Clinton’s alleged destruction of subpoenaed evidence and his recourse to surveillance granted in response to false affidavits while attempting to destroy the Trump presidency have escaped legal retribution by the somnambulant Durham investigation, and there will be no retribution for any of it.

Yet, Trump is the tainted protagonist. The Russian collusion hoax was the most monstrous defamation ever inflicted on a U.S. president. The spurious impeachment of him, for an innocuous telephone call to the president of Ukraine about the commercial activities of the Biden family in his country—now notorious but probably a matter of political suppression of the normal working of American justice—was in the same category of misuse of the political system for the lowest and most destructive partisan ends.

It’s obvious that the potentially millions of harvested ballots that couldn’t be verified in the 2020 presidential election could easily have provided the 50,000 vote switchover needed in Pennsylvania and two other states to flip that election to Trump in the Electoral College. The dishonesty of the universal media stone wall that 2020 was a pristine presidential election is compounded by the judiciary’s abdication of its coequal role in government and reassertion of its refusal to consider overturning the apparent presidential election result.

Democratic strategists deserve a near-perfect score for tactical judgment: They rounded up a big majority among young voters by hammering the abortion issue, emphasizing the reduction in marijuana penalties, and championing student loan forgiveness. This and the malicious and unctuous pressing of the safety of democracy as a euphemism for the defamatory nonsense that Trump was a menace to the Constitution turned the minds of an adequate number of voters to produce a dangerously perverse result. They have pretty well given up the former slanders that Trump is a racist, homophobe, and misogynist.

Tabulating all of the votes cast for all offices contested last week, the Republicans outpolled the Democrats all over. The Democrats only took what they needed. Politics is a notoriously unjust occupation; Trump is objectively perhaps among the 10 most successful holders of that office. But he did great harm to himself by his lack of public relations judgment, and this fact in the hands of the political and social media monopoly of his enemies working with the strategists and saboteurs in the Democratic leadership have unfortunately won the match.

But even the voters who rendered such an ambiguous result on Nov. 8 have betrayed a concern that the incompetence of the Biden administration, with the duplicity of the Democratic congressional leaders, can’t go on indefinitely. But they’ve demonstrated that Trump isn’t the man to stop them and to tear the government apart and repopulate it with people with clean hands.

There’s still an important place for Trump to complete the task that he commenced of transporting the Republican Party from the country clubs to the championship of the disadvantaged and working and middle class of America, and to cleaning out the bipartisan infestation of placemen and decayed servitors of the federal political and administrative state. But the former president is far from blameless in his own misfortunes. He warned of the dangers of ballot harvesting in 2020 but was completely inadequate in taking preventive measures or even following up efficiently to challenge the vulnerable points. Instead, we had the well-intended but completely ineffectual efforts of Rudolph Giuliani and Sidney Powell. In order to make his case plausibly, he absolutely had to avoid precisely the sort of outrage that occurred on Jan. 6, 2021. But the fact that Speaker Nancy Pelosi and Washington Mayor Muriel Bowser paid no attention to Trump’s warnings that matters could get out of hand and his offer of 20,000 National Guardsmen indicates the Democrats’ role was a good deal less innocent than they pretend.

But Trump knew what desperate and sleazy people he was dealing with, and he doesn’t have a credible excuse for being so reckless. This condemned him to having to continue to emphasize the 2020 election irregularities in order to justify his calling forth such a huge and discontented crowd at the Washington Elipse on Jan. 6, 2021. Of course, he no more sought an insurrection than Sens. Mitch McConnell (R-Ky.) and Chuck Schumer (D-N.Y.) did.

The only way to complete Trump’s work and root out and politically exterminate those who have corrupted the intelligence and justice arms of the federal government and have dragooned the contemptible but still insidiously influential national political media in full metal jacket Trump-hate, is for Trump to identify and support the successor whom he favors as Republican presidential candidate.

He shouldn’t go back to his 2016 playbook and insult all the other prominent Republicans. He has exchanged enough fire with his Republican enemies, contemptible though many of them are, and did well to win the first round and come so close in the second. The third round last week was an acute disappointment, and the Republican Party doesn’t need, and the American public doesn’t wish for, an internecine war on the scale that would rage if Trump sought another presidential nomination. But another candidate plausibly pledged to the enactment of the Trump program and supported by Trump but not stigmatized by him, could lead the desperately needed national political purgation.

Read more here…

Authored by Pepe Escobar via The Cradle,

The increasingly irrelevant G20 Summit concluded with sure signs that BRICS+ will be the way forward for Global South cooperation…

The redeeming quality of a tense G20 held in Bali – otherwise managed by laudable Indonesian graciousness – was to sharply define which way the geopolitical winds are blowing.

That was encapsulated in the Summit’s two highlights: the much anticipated China-US presidential meeting – representing the most important bilateral relationship of the 21st century – and the final G20 statement.

The 3-hour, 30-minute-long face-to-face meeting between Chinese President Xi Jinping and his US counterpart Joe Biden – requested by the White House – took place at the Chinese delegation’s residence in Bali, and not at the G20 venue at the luxury Apurva Kempinski in Nusa Dua.

The Chinese Ministry of Foreign Affairs concisely outlined what really mattered. Specifically, Xi told Biden that Taiwan independence is simply out of the question. Xi also expressed hope that NATO, the EU, and the US will engage in “comprehensive dialogue” with Russia. Instead of confrontation, the Chinese president chose to highlight the layers of common interest and cooperation.

Biden, according to the Chinese, made several points. The US does not seek a New Cold War; does not support “Taiwan independence;” does not support “two Chinas” or “one China, one Taiwan”; does not seek “decoupling” from China; and does not want to contain Beijing.

However, the recent record shows Xi has few reasons to take Biden at face value.

The final G20 statement was an even fuzzier matter: the result of arduous compromise.

As much as the G20 is self-described as “the premier forum for global economic cooperation,” engaged to “address the world’s major economic challenges,” the G7 inside the G20 in Bali had the summit de facto hijacked by war. “War” gets almost double the number of mentions in the statement compared to “food” after all.

The collective west, including the Japanese vassal state, was bent on including the war in Ukraine and its “economic impacts” – especially the food and energy crisis – in the statement. Yet without offering even a shade of context, related to NATO expansion. What mattered was to blame Russia – for everything.

The Global South effect

It was up to this year’s G20 host Indonesia – and the next host, India – to exercise trademark Asian politeness and consensus building. Jakarta and New Delhi worked extremely hard to find wording that would be acceptable to both Moscow and Beijing. Call it the Global South effect.

Still, China wanted changes in the wording. This was opposed by western states, while Russia did not review the last-minute wording because Foreign Minister Sergey Lavrov had already departed.

On point 3 out of 52, the statement “expresses its deepest regret over the aggression of the Russian Federation against Ukraine and demands the complete and unconditional withdrawal of armed forces from the territory of Ukraine.”

“Russian aggression” is the standard NATO mantra – not shared by virtually the whole Global South.

The statement draws a direct correlation between the war and a non-contextualized “aggravation of pressing problems in the global economy – slowing economic growth, rising inflation, disruption of supply chains, worsening energy, and food security, increased risks to financial stability.”

As for this passage, it could not be more self-evident: “The use or threat of use of nuclear weapons is inadmissible. The peaceful resolution of conflicts, efforts to address crises, as well as diplomacy and dialogue, are vital. Today’s era must not be of war.”

This is ironic given that NATO and its public relations department, the EU, “represented” by the unelected eurocrats of the European Commission, don’t do “diplomacy and dialogue.”

Fixated with war

Instead the US, which controls NATO, has been weaponizing Ukraine, since March, by a whopping $91.3 billion, including the latest presidential request, this month, of $37.7 billion. That happens to be 33 percent more than Russia’s total (italics mine) military spending for 2022.

Extra evidence of the Bali Summit being hijacked by “war” was provided by the emergency meeting, called by the US, to debate what ended up being a Ukrainian S-300 missile falling on a Polish farm, and not the start of WWIII like some tabloids hysterically suggested.

Tellingly, there was absolutely no one from the Global South in the meeting – the sole Asian nation being the Japanese vassal, part of the G7.

Compounding the picture, we had the sinister Davos master Klaus Schwab once again impersonating a Bond villain at the B20 business forum, selling his Great Reset agenda of “rebuilding the world” through pandemics, famines, climate change, cyber attacks, and – of course – wars.

As if this was not ominous enough, Davos and its World Economic Forum are now ordering Africa – completely excluded from the G20 – to pay $2.8 trillion to “meet its obligations” under the Paris Agreement to minimize greenhouse gas emissions.

The demise of the G20 as we know it

The serious fracture between Global North and Global South, so evident in Bali, had already been suggested in Phnom Penh, as Cambodia hosted the East Asia Summit this past weekend.

The 10 members of ASEAN had made it very clear they remain unwilling to follow the US and the G7 in their collective demonization of Russia and in many aspects China.

The Southeast Asians are also not exactly excited by the US-concocted IPEF (Indo-Pacific Economic Framework), which will be irrelevant in terms of slowing down China’s extensive trade and connectivity across Southeast Asia.

And it gets worse. The self-described “leader of the free world” is shunning the extremely important APEC (Asia-Pacific Economic Cooperation) summit in Bangkok at the end of this week.

For very sensitive and sophisticated Asian cultures, this is seen as an affront. APEC, established way back in 1990s to promote trade across the Pacific Rim, is about serious Asia-Pacific business, not Americanized “Indo-Pacific” militarization.

The snub follows Biden’s latest blunder when he erroneously addressed Cambodia’s Hun Sen as “prime minister of Colombia” at the summit in Phnom Penh.

Lining up to join BRICS

It is safe to say that the G20 may have plunged into an irretrievable path toward irrelevancy. Even before the current Southeast Asian summit wave – in Phnom Penh, Bali and Bangkok – Lavrov had already signaled what comes next when he noted that “over a dozen countries” have applied to join BRICS (Brazil, Russia, India, China, South Africa).

Iran, Argentina, and Algeria have formally applied: Iran, alongside Russia, India, and China, is already part of the Eurasian Quad that really matters.

Turkey, Saudi Arabia, Egypt, and Afghanistan are extremely interested in becoming members. Indonesia just applied, in Bali. And then there’s the next wave: Kazakhstan, UAE, Thailand (possibly applying this weekend in Bangkok), Nigeria, Senegal, and Nicaragua.

It’s crucial to note that all of the above sent their Finance Ministers to a BRICS Expansion dialogue in May. A short but serious appraisal of the candidates reveals an astonishing unity in diversity.

Lavrov himself noted that it will take time for the current five BRICS to analyze the immense geopolitical and geoeconomic implications of expanding to the point of virtually reaching the size of the G20 – and without the collective west.

What unites the candidates above all is the possession of massive natural resources: oil and gas, precious metals, rare earths, rare minerals, coal, solar power, timber, agricultural land, fisheries, and fresh water. That’s the imperative when it comes to designing a new resource-based reserve currency to bypass the US dollar.

Let’s assume that it may take up to 2025 to have this new BRICS+ configuration up and running. That would represent roughly 45 percent of confirmed global oil reserves and over 60 percent of confirmed global gas reserves (and that will balloon if gas republic Turkmenistan later joins the group).

The combined GDP – in today’s figures – would be roughly $29.35 trillion; much larger than the US ($23 trillion) and at least double the EU ($14.5 trillion, and falling).

As it stands, BRICS account for 40 percent of the global population and 25 percent of GDP. BRICS+ would congregate 4.257 billion people: over 50 percent of the total global population as it stands.

BRI embraces BRICS+

BRICS+ will be striving towards interconnection with a maze of institutions: the most important are the Shanghai Cooperation Organization (SCO), itself featuring a list of players itching to become full members; strategic OPEC+, de facto led by Russia and Saudi Arabia; and the Belt and Road Initiative (BRI), China’s overarching trade and foreign policy framework for the 21st century. It is worth pointing out that early all crucial Asian players have joined the BRI.

Then there are the close links of BRICS with a plethora of regional trade blocs: ASEAN, Mercosur, GCC (Gulf Cooperation Council), Eurasia Economic Union (EAEU), Arab Trade Zone, African Continental Free Trade Area, ALBA, SAARC, and last but not least the Regional Comprehensive Economic Partnership (RCEP), the largest trade deal on the planet, which includes a majority of BRI partners.

BRICS+ and BRI is a match everywhere you look at it – from West Asia and Central Asia to the Southeast Asians (especially Indonesia and Thailand). The multiplier effect will be key – as BRI members will be inevitably attracting more candidates for BRICS+.

This will inevitably lead to a second wave of BRICS+ hopefuls including, most certainly, Azerbaijan, Mongolia, three more Central Asians (Uzbekistan, Tajikistan, and gas republic Turkmenistan), Pakistan, Vietnam, and Sri Lanka, and in Latin America, a hefty contingent featuring Chile, Cuba, Ecuador, Peru, Uruguay, Bolivia, and Venezuela.

Meanwhile, the role of the BRICS’s New Development Bank (NDB) as well as the China-led Asia Infrastructure Investment Bank (AIIB) will be enhanced – coordinating infrastructure loans across the spectrum, as BRICS+ will be increasingly shunning dictates imposed by the US-dominated IMF and the World Bank.

All of the above barely sketches the width and depth of the geopolitical and geoeconomic realignments further on down the road – affecting every nook and cranny of global trade and supply chain networks. The G7’s obsession in isolating and/or containing the top Eurasian players is turning on itself in the framework of the G20. In the end, it’s the G7 that may be isolated by the BRICS+ irresistible force.

Leftists are now scraping the bottom of the barrel when it comes to arguments in favor of reparations for slavery.  This week, Democrat House Representative Sheila Jackson Lee from the 18th Congressional District surrounding Houston, Texas (one of the only blue districts in the entire state), “demanded” that reparations be made. 

Her argument?  Lee presents the usual debunked social justice narratives claiming that the generations of today are somehow responsible for and benefit from the trespasses of a minority of slave owners who lived centuries ago (Only 1.4% of the population of the US were slave owners in 1860 right before the Civil War according to stats derived from the Census Bureau – This is a number the media continually claims is “not a proper metric,” and yet it is a mathematical fact.  Even if one includes the entire extended family of each slave owner in the metric as beneficiaries, the number is still only 7.4% of the population).   

Lee, who has a noted habit of making some of the dumbest comments of any congressional representative, also insists that black Americans would have had a lesser transmission rate and death rate from covid if they had been paid reparations in advance:

Lee does not cite the specific Harvard study she mentions in her speech that supposedly supports her assertion, but with social justice politics invading scientific inquiry the past few years, it is highly likely that said study is biased and holds no basis in fact.  One could say that ANY person might get better medical treatment if they had more money, but that is the extent of the argument and it has nothing to do with race or reparations or covid for that matter. 

As with most things, equity is a fantasy because nature does not operate on fairness.  Covid is not fair, just as life is not fair.  The reparations game has grown tiresome, most of all because every race, every culture and every religion has faced tyranny and slavery in the past.  There are no exceptions.  Trying to maintain a running tally of who wronged who over thousands of years is impossible and pointless. 

The political left prides itself on being “progressive” to the point that they seek to tear down the past and not let history or heritage determine the future.  Yet, they continue to cling like parasites to their own incomplete version of the history of slavery as a means to get free handouts for many years to come.  This is not progressive, this is regressive and holds our society back from true racial equality in which everyone’s future is decided by their effort and their merit, not the color of their skin.     

Authored by Scott Hill via BombThrower.com,

The dust hasn’t settled, but the smoke is beginning to clear, somewhat… Here’s WTF just happened, and what happens next…

On November 2nd Coindesk published a leaked balance sheet from FTX affiliated market maker Alameda Research.

Ten days later the third largest Crypto exchange in the world was bankrupt and its founder was under international investigation for fraud.

In this article I’ll go through how Crypto giant FTX fell apart. There is a lot of backstory to this situation which I’ll cover in a following article, discussing the beginnings of Alameda research and the story of how a sketchy hedge fund turned into a major exchange.

As you’ve no doubt heard repeatedly this week, self custody of your Crypto is the safest approach until we know who is insolvent and the extent of the contagion. If you’re not confident with self custody, Coinbase and Kraken seem to be the safest Crypto exchanges, but that is still a counterparty risk that I’m not willing to take personally in these market conditions.

The Balance Sheet Leak

The exclusive scoop from Coindesk looked bad for Alameda Research. The firm, which performed market making on FTX as well as taking directional bets and venture capital investments, seemed insolvent on a realized value basis.

Their balance showed $14.6 billion in assets held against $8 billion in liabilities. On paper solvent on a mark-to-market basis, but digging in there was no way that mark was reasonable.

The most egregious example was $5.82 billion worth of FTT tokens on the asset side, around a third locked and the rest unlocked and available to trade. FTT is a token created by FTX, a sort of pseudo-equity token which represented some share of the exchange revenues. Kind of.

FTX had been doing periodic buybacks of the token which were supposed to represent a distribution of exchange revenues to holders. Holding the token also entitled traders to a discount on trading fees. The token was at the time worth around $26. At its peak it was worth around $80.

The main thing that FTT was used for though, was pledging as collateral by FTX and Alameda. 

You read that right, a token which the exchange invented a little over 3 years ago was used as collateral for loans. We know for sure that it was acceptable collateral in various Solana DeFi protocols, which FTX had a significant amount of influence over; but reports are also surfacing that it may have been used to purchase real estate in the Bahamas and quite possibly with various institutional Crypto lending like Genesis which is now facing major problems.

The problem with FTT

There’s nothing inherently wrong with using Crypto tokens as collateral if there is a robust and deep market pricing them. If the loan goes bad, lenders can seize the collateral and sell it off, covering some of their loss.

FTT didn’t have a deep and robust market.

The “flywheel” scheme – via Dirty Bubble Media

There was barely any volume. There was barely any liquidity. If a lender had to sell a large volume in a hurry there weren’t any buyers ready to step in.

While Alameda was claiming to have $5.82 billion of its balance sheet held in FTT tokens, the entire available market cap was less than $4 billion.

Read that again, Alameda’s balance sheet held more than the entire market cap of FTT. 

So this wasn’t a situation where a lender might make a loss on selling the collateral, this was a situation where there were potentially billions in loans floating around in the Crypto ecosystem with essentially no collateral that could be liquidated without detonating the market.

Just to top it off, some of this FTT was likely pledged to multiple lenders.

Industry Reaction

The initial reaction was general indifference. Alameda looked like it was playing with fire and had gone all in on the exchange token for its sister company FTX alongside various other FTX supported coins like Solana and Serum. It was an open secret in the industry that Alameda and FTX were more intertwined than they claimed, but if push came to shove it was assumed that Alameda would be allowed to fail and FTX would continue being the highly profitable exchange that everyone assumed it was.

FTX was highly profitable, right?

There were a few that were calling the bluff, but the main gripes were conflict of interest within FTX related companies and unsavory business practices by FTX, trading against customer positions and liquidating accounts improperly. The usual bucket shop tricks. No one seemed to be expecting a total insolvency across the FTX group of companies.

But still something didn’t feel right. Caroline Ellison, the newly appointed CEO of Alameda Research tried to calm fears on Twitter, claiming that the leaked balance sheet was only a partial balance sheet, there were another $10 billion in assets elsewhere within the corporate structure, and they’ve paid down most of their loans.

It was a strange and deeply unsettling response, shrugging the issue off as if the industry should just take her at her word.

Enter the CZ Dragon

Even CZ, the CEO of rival exchange Binance, didn’t seem to be suggesting that FTX was in trouble. Late on Sunday November 6 CZ announced that he would be liquidating the FTT held by Binance.

All $500 million of it.

Binance had been the sole investor in the seed round for FTX.  In 2021 they were bought out for $2.1 billion in cash and FTT tokens. This alone wasn’t enough to push markets into panic. CZ said he would do this over a number of months, carefully and slowly in an attempt to “minimize the market impact”. In a follow up tweet, CZ said that he was doing “post-exit risk management, learning from Luna”

Everyone in Crypto knew what he meant by “learning from Luna”

In May Luna detonated, dropping to zero. The protocol is now seen as a deeply flawed project in the best possible light and a blatant ponzi scheme in the more realistic assessment.

Did CZ, the most powerful man in Crypto just call FTX a ponzi scheme?

Panic

Crypto industry figures were in disbelief. Surely FTX, the darling of the industry, was a highly profitable, solvent and legitimate business. But the reaction was off and deeply troubling. The CEO of Alameda Research quickly asked CZ if she could buy all of the FTT tokens off-market at a price of $22.

The market smelled blood.

Over the course of the next few hours FTT was aggressively shorted, Caroline had put a floor under it at $22 and traders were going to bleed Alameda dry defending that mark. Why did $22 matter? It’s only conjecture, but it seems likely that below $22 Alameda would be liquidated by its lenders and a cascade of FTT tokens would need to be sold into a market unwilling to buy them, flattening the firm.

But traders only thought they were going after Alameda, the predatory market maker.

 In hindsight it’s obvious, you shouldn’t short an exchange token to death on the exchange that issued it, but FTX was the main venue for the fight for $22. A huge amount of volume flowed through the order books and everyone was looking forward to getting paid as the token dropped, first to $18 and later to $6.

While the traders were battling it out, regular users were getting out.

FTX experienced massive outflows and on-chain analysis showed some deeply troubling signs. Alameda was pulling liquidity from everywhere. Every dollar that was deployed in DeFi got pulled. Weird tokens got dumped. But the liquidity wasn’t going into Alameda’s wallet, it was going into FTX wallets to pay customers.

Surely FTX wasn’t funding customer withdrawals from Alameda’s DeFi degen positions?

FTX was supposed to be a full reserve exchange. As an even higher bar, the terms of depositing with FTX were that customers retained title to their assets. Assets were held on trust, they weren’t supposed to be lent out or touched except as directed by the customer.

SBF concedes

On Sunday afternoon, Sam Bankman-Fried (SBF), the CEO of FTX said that the problems with the Alameda balance sheet were just “unfounded rumors”. He explained that FTX had processed billions of dollars in withdrawals and that they would continue to do so. He claimed that they were hitting node capacity, something that I’ve never heard of, and needed to slow down withdrawals.

By Sunday night, withdrawals of some assets had stopped entirely, but there was no announcement from FTX. Radio silence from the team.

We now know that during this period SBF was frantically going to investors to do an emergency fundraise of between $6-10 billion dollars. The terms which later leaked were insane. It was obvious that no lawyer had reviewed these documents.

They seemed to be written by a child, imitating a businessman, who was in way over his head.

Industry insiders at the time thought that FTX had likely lost some amount of user funds, would need to take a loan to cover them and could move on with rebuilding trust. We were shocked to wake up on Tuesday to the news that Binance had made an offer to buy out FTX entirely, subject to due diligence. This isn’t what a rescue package for a competently run business looks like.

This was a fire sale of a dumpster fire.

The previous day SBF had claimed his exchange was fully solvent, just having minor liquidity issues. The next day he was handing the keys to their main rival. Now that balance sheets have been leaked for FTX we know what Binance would have seen as soon as they started their diligence, a balance sheet crammed with dodgy tokens and full of holes, unaudited and put together in excel with no real supporting evidence.

The rumored sale price was one dollar.

CZ quickly walked away from the deal, citing misuse of customer funds and regulatory concerns; leaving SBF to fix his own mess. With the exchange still operational, but withdrawals closed, SBF posted yet another long thread trying to talk his way out of the problem, claiming to be trying to set everything straight and get emergency funding. While he had not yet admitted that it was all over, he did make a bizarre reference to CZ “well played; you won”

As we came to learn later, for this sociopath that’s all it was, just a game to be won or lost.

The Insanity Begins

The rejection of the deal from Binance was the first mention of misuse of customer funds. Until then there was speculation that there was a minor balance sheet hole, remember, no one knew at that time that SBF had been seeking $6-10 billion in emergency funding. The next day the news started pouring in.

Reuters reported that there was a secret back door in the accounting at FTX which allowed customer funds to be moved around without alerting anyone. It also claimed that $10 billion dollars worth of customer funds had been secretly moved to Alameda.

SBF remained silent, but elsewhere there was chaos. Alameda funds were moving around frantically on chain, placing gigantic bets and actively trading.

Was SBF trying to trade out of it?

Tether put a stop to this later in the day, freezing Alameda’s funds on the request of law enforcement.

On the exchange the chaos was even worse. Justin Sun the founder of Tron had shown up to offer to redeem Tron tokens trapped on FTX. Prices spiked as customers flocked to get cents on the dollar via this exit ramp. There was talk of taking complicated cross-platform trades to make a synthetic exit ramp.

The Bahamas Loophole

As the insanity deepened, FTX posted on Twitter that they were processing a small amount of withdrawals to customers in the Bahamas as requested by local authorities. A week later we found out this was a lie, there was no request, but even at the time it seemed likely to be a way for insiders to exit their funds before the inevitable bankruptcy.

Suddenly, traders with stuck funds were desperately trying to obtain a fraudulent Bahamian passport and complete identity checks in the Bahamas. Some even managed to do it apparently and successfully withdrew funds. Black market prices on passports spiked and a secondary market for trapped funds emerged, with accounts trading for 15 cents on the dollar.

NFTs were being traded for entire balances in order to move the funds to an account which could still withdraw.

On the actual exchange things were just as chaotic. Traders with trapped funds were treating their accounts like paper money, trading nonsense on high leverage and dislocating markets. FTX was removed from pricing feeds to restore order elsewhere.

This was the first time in the whole saga that it became clear, it was all over for FTX.

FTX US halts withdrawals

This entire time the story had been that FTX US was a separate entity. Their funds were firewalled off from FTX international. The exchange remained open for withdrawals and appeared to be functioning properly.

This relative calm on the US side of the company instilled some faith. Surely, despite the havoc going on in the Bahamas, the US exchange was well regulated. Surely, the books were audited and no client funds could go missing in the US.

On Thursday afternoon, FTX US halted withdrawals.

Bankruptcy and the Hack

On Friday morning SBF resurfaced and announced that FTX would be put into bankruptcy. The motion was filed in the US and included FTX US. It would later be revealed that SBF had stepped down as CEO and John J Ray III, a lawyer famous for taking over Enron post-collapse, would be similarly guiding FTX through bankruptcy. Everyone breathed a sigh of relief, it was finally done.

But the fun and games weren’t over

Shortly after the bankruptcy was announced funds started moving on-chain. A lot of funds. Over $600 million left FTX affiliated wallets, moving to fresh wallets. The speculation was that there was a hack, perhaps by an insider looking to get the last of what they could out of FTX.

It quickly became clear that there were two teams working. One appeared to have simply moved worthless tokens into storage, a plausible move by a “white hat” or good guy team seeking to preserve user funds from a compromised system.

The other team, the “black hat” team, took the vast majority of the $600 million and moved it all into Ethereum DeFi, trading other coins into Ethereum tokens and consolidating them all together. This consolidation took place across multiple blockchains and traded with reckless abandoning, losing gigantic sums on slippage along the way.

Once the dust had settled, the hacker was one of the largest individual holders of Ethereum.

We don’t quite have the full story on what happened here yet. The Bahamian authorities claim that they seized the assets, with many assuming that they are referring to the hacked funds. It seems far more likely that they are referring to the “white hat” funds only, as the “black hat” funds demonstrated much more sophistication in blockchain use that could be expected of a regulator.

The funds have stopped moving for now. Sitting idle with more that 241,000 ETH, a little less than $300 million worth. No one really knows what will happen with these funds.

Where are we now?

After a week of complete mayhem as the exchange fell apart and another week for the adults to take over and begin the clean up we have two competing bankruptcy procedures. One taking place in the US, overseen by the lawyer who cleaned up after Enron collapsed. The other taking place in the Bahamas, overseen by two accountants from PriceWaterhouseCoopers and a senior local lawyer who has a decades long history of high level appearances in the Supreme Court of the island nation.

It’s not entirely clear which action will take precedence, but they are opposed to each other. The US bankruptcy is seeking that all the companies be wound up together and users are compensated with whatever assets are left across the entire conglomerate.

It turns out, FTX was made up of over 100 individual companies.

The organization chart looks like the web a drunk spider would spin. It’s not the sort of corporate structure that would be constructed for anything other than hiding funds and playing shell games.

The Bahamian action appears to be seeking to have the main FTX company dealt with separately, screwing US customers out of funds and leaving the bankruptcy in the hands of the Bahamian government which seems to have taken some pretty significant donations from FTX in the past.

In filings made late this week FTX was referred to as a “disorganized mess”. There was a lack of proper accounting. The auditing was done by “the first accounting firm in the metaverse” that doesn’t appear to have a physical address. There appears to have been loans made to company executives in the hundreds of millions of dollars range. There was no corporate board. There was no human resources department. There was no accounting department. There was no real tracking of customer funds.

The lawyer handling the FTX bankruptcy also conducted the Enron bankruptcy. He says this is far worse.

Enough for now

This is just the walkthrough of how everything fell apart in front of our eyes. The corruption, the lies and the scandal have all been uncovered in the wake of this collapse. In another article coming shortly I will cover the rise and fall of FTX and Alameda Research, delving into the backstory that allowed this fraud to grow under the cover of one of the most well regarded companies in the industry.

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Today’s post is from contributing analyst Scott Hill. To receive further updates of this series and our overall investment thesis for digital assets (even in this climate), subscribe to the Bombthrower mailing list. 

NASA’s Artemis 1 Orion capsule is three days into the lunar mission. The uncrewed spacecraft cruises at 1,000 mph and is 215,000 miles from Earth. It’s about 95,000 miles from the Moon and will make a very close powered flyby burn on Monday. 

“Orion’s entry into the lunar sphere of influence will make the Moon, instead of Earth, the main gravitational force acting on the spacecraft,” the space agency wrote in a press release. 

NASA continued: “Flight controllers will conduct an outbound powered flyby burn to harness the force from the Moon’s gravity, accelerate the spacecraft, and direct it toward a distant retrograde orbit beyond the Moon. During the outbound powered flyby, Orion will make its closest approach – approximately 80 miles – above to the lunar surface.” 

Four days later, the second powered flyby burn will “insert Orion into distant retrograde orbit, where it will remain for about a week to test spacecraft systems,” NASA said. 

Additional flyby details will be provided on Saturday following a meeting with NASA officials. 

“Right now, we’re looking good, and we’re ready to go continue executing,” Artemis 1 Flight Director Jeff Radigan said during Friday’s briefing.

NASA has laid out a detailed map of the Artemis 1 mission.

Less than 12 hours into the flight after Orion took off from Launch Pad 39B at the space agency’s Kennedy Space Center in Florida on Wednesday, the first view of Earth from the spacecraft was released to the public. 

As @NASA_Orion begins the #Artemis I mission to the Moon, the spacecraft captured these stunning views of our home planet. pic.twitter.com/Pzk3PDt7sd

— NASA Artemis (@NASAArtemis) November 16, 2022

If Artemis 1 mission is successful, which would end with the Orion capsule splashing down in the Pacific Ocean on Dec. 11, then Artemis 2 and 3 flights will follow. Artemis 2 is scheduled sometime in 2024. That mission will propel four astronauts around the Moon. Then in 2025, Artemis 3 could include a return of humans back to the lunar surface. 

Authored by Steve Watson via Summit News (emphasis ours),

Republican Senators Joh Hawley and Rand Paul took the heads of the FBI and the Department Of Homeland Security to task Thursday, with Hawley at one point directly telling Christopher Wray that he should have been fired a long time ago.

Hawley also targeted Wray for previously leaving a committee hearing early so he could go on a vacation.

“You were at the Senate Judiciary Committee. You remember that I think so. We had to cut that hearing short. We’re supposed to do two rounds of questions. You said you had to be somewhere, so we cut it short. Republicans were not able to ask second round as we had been informed we would,” Hawley noted.

The Senator continued, “The press reported shortly thereafter that the reason that the hearing had to be cut short is because you were flying on a Gulfstream jet for a personal vacation in the Adirondack. Please tell me that’s not accurate.”

It was accurate.

“You left an oversight hearing with the Senate Judiciary Committee required by statute so you could vacation with your family,” Hawley declared, adding “I find that absolutely unbelievable and, frankly, indefensible.”

Senator @HawleyMO roasts FBI Director Christopher Wray for leaving a statutorily-required committee hearing to go on vacation.

Hawley: “So you were going on vacation?”

Wray: “I was, yes” pic.twitter.com/RZLlvdoKwN

— RNC Research (@RNCResearch) November 17, 2022

The Senator then provided examples of how the FBI has been overtly politicised and told Wray that he doesn’t believe he is up to the job of FBI Director anymore.

Hawley asserted “frankly, I think you should have been gone a long time ago. And given your behavior recently, I think it only makes it more clear.”

Hawley then twisted the knife by asking “Are there any travel plans today that we should be aware of, that you have? We’re supposed to have a second round. Will you be here for that?”

Sen. Josh Hawley leaves FBI Director Chris Wray in PANICKED silence after EXPOSING woke FBI for 2 straight minutes pic.twitter.com/8BJaOfzNCE

— Benny Johnson (@bennyjohnson) November 17, 2022

Elsewhere during the hearing, Hawley grilled Secretary of Homeland Security Alejandro Mayorkas regarding the Biden administration reportedly flagging social media posts it doesn’t like as “disinformation” and “pressuring Big Tech to treat American citizens as if they’re threats to Homeland.”

“A federal judge in a federal lawsuit [has said] you are supervising the nerve center of federally directed censorship… Is that constitutional?” Hawley asked.

Mayorkas repeatedly claimed that the allegation are false. 

“You are leveraging private companies to carry out censorship on your behalf. It is dystopian, but worse than that, it is unconstitutional,” Hawley asserted.

“It is also false,” Mayorkas sardonically replied.

Senator @HawleyMO‘s Full Grilling Of DHS Secretary Mayorkas About The “Disinformation Governance Board” And The Biden Administration’s Coordination With Big Tech Companies To Censor Americans

“You have turned your agency into a censorship machine.” pic.twitter.com/VpvFoHlv9c

— The Columbia Bugle 🇺🇸 (@ColumbiaBugle) November 17, 2022

Rand Paul also grilled Wray about reported collusion between the FBI and Facebook, noting “You may think it’s just jolly well to get all this stuff without a warrant that people volunteer to you, but many of us are alarmed that you’re getting this information that are private communications between people, because it is against the law.”

“You work for the government, you should admit to us whether or not you have a program going after our speech,” Paul asserted.

As we highlighted recently, Paul has vowed to introduce legislation that would make it illegal for government agencies and private big tech to secretly collude on such enterprises, noting that “it goes against everything that we all believe in as far as the foundation of our constitutional republic.”

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