Category Archives: Business

Is a full-blown global banking meltdown in the offing? By Satyajit Das

Posted on March 25, 2023 | Leave a comment

It’s not looking too good. From Satyajit Das at newindianexpress.com:

If everything is fine, then why have US banks borrowed $153 billion at a punitive 4.75% against collateral at the discount window, a larger amount than in 2008/9?

A New Banking Crisis?

Financial crashes like revolutions are impossible until they are inevitable. They typically proceed in stages. Since central banks began to increase interest rates in response to rising inflation, financial markets have been under pressure.

In 2022, there was the crypto meltdown (approximately $2 trillion of losses).

The S&P500 index fell about 20 percent. The largest US technology companies, which include Apple, Microsoft, Alphabet and Amazon, lost around $4.6 trillion in market value  The September 2022 UK gilt crisis may have cost $500 billion. 30 percent of emerging market countries and 60 percent of low-income nations face a debt crisis. The problems have now reached the financial system, with US, European and Japanese banks losing around $460 billion in market value in March 2023.

While it is too early to say whether a full-fledged financial crisis is imminent, the trajectory is unpromising.

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The affected US regional banks had specific failings. The collapse of Silicon Valley Bank (“SVB”) highlighted the interest rate risk of financing holdings of long-term fixed-rate securities with short-term deposits. SVB and First Republic Bank (“FRB”) also illustrate the problem of the $250,000 limit on Federal Deposit Insurance Corporation (“FDIC”) coverage. Over 90 percent of failed SVB and Signature Bank as well as two-thirds of FRB deposits were uninsured, creating a predisposition to a liquidity run in periods of financial uncertainty.

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$3 Billion and Counting, by Eric Peters

Posted on March 24, 2023 | 2 comments

Ford has lost $3 billion on electric vehicles and fully intends to lose even more. From Eric Peters at ericpetersautos.com:

It used to be – how much money can we make? It is now how much money can we lose? At least, that appears to be the reasoning behind “electrification” – the neutral-sounding term commonly used to describe the out-regulating of everything that moves that isn’t battery-powered – in favor of everything that is.

Practically every car company has bought in, as it were – and it is costing them, literally, billions.

Maybe, eventually, everything.

Ford just revealed it expects to lose $3 billion – so far – on “electrification.”

In saner times, the losing of $3 billion would be reason enough to pull the plug. But not when it comes to “electrification.” Ford said it expects to lose more billions – through at least 2026. And this provides the impetus to build two million more battery-powered money-losers by 2026.

Emphasis on “build.”

As opposed to sell.

More exactly, build and sell at a profit.

Aye, there’s the rub.

One can build as many of something as one likes, just the same as one can dig (and fill in) as many holes in the backyard as one likes. According to Marx, this is how “value” is created – as by labor. The flaw in Marx’s reasoning is that there may not be value to others in the labor. If Marx had been right then we could all get rich by digging holes in the backyard and filling them in again. Or by hopping up and down for eight hours every day. But we generally get poor – and tired – doing either because there are very few other people willing to give us money in exchange for our digging (and filling in) holes in the backyard or hpping up and down all day long.

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Horowitz: They knew: FOIA document shows government anticipated mass vaccine injuries, then observed them from day one

Posted on March 24, 2023 | Leave a comment

So, the government knew the vaccines would kill us even before they started killing us. From Daniel Horowitz at conservativereview.com:

Nobody disagrees at this point that there is a plethora of excess deaths and a dearth of births, a trend that should be the number-one alarming public policy issue. Yet when any of us suggest that the gene therapy ubiquitously given to the world right around the time of the jump in these numbers might be responsible, people look at us like we are from Mars. However, it turns out, based on newly released FOIA documents from the CDC, that our government knew about and even anticipated massive reports of injuries from these shots from day one.

Throughout the past two years, the government and media have concocted a conspiracy theory that somehow the CDC’s own VAERS reporting is scammed with fraud by people who have nothing better to do with their lives but spend hours filling out fraudulent vaccine injury reports. They pretend it’s a sort of ex post facto anomaly that nobody expected and that has no credibility in their eyes. Except, as Hebrew University Professor Josh Guetzkow reveals, not only did the CDC know about the vaccine injuries blowing up VAERS at record levels (even before the general public had access to them), the agency contracted with defense contractor General Dynamics to handle the database in anticipation of record use. Then, when the vaccines were released, the CDC had to up the contract to account for even more entries, yet showed no moral qualms about continuing with the campaign without disclosing these revelations to the public.

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How Covid lockdowns primed the current financial crisis, by Christian Parenti

Posted on March 24, 2023 | Leave a comment

First came Covid, then came monetary inflation, then came higher interest rates, and then came a financial crash. From Christian Parenti at thegrayzone.com:

The lockdowns and the stimulus required to keep the economy alive helped drive inflation. Then the Fed jacked up interest rates. And all hell broke loose.

On Friday March 10th, 2023, Silicon Valley Bank (SVB) died of Covid. Alright, it’s a little more complicated than that, but Covid lockdowns followed by massive government stimulus were a critical – and massively under-acknowledged – factor in propelling the bank’s demise.

At the heart of the crisis is the gigantic pile of low-interest debt that was issued during the height of the pandemic. While private-sector pandemic-era debt like corporate bonds also soared, US government debt like Treasury bonds piled up.

In a nutshell, during the pandemic the government issued enormous amounts of extremely low interest government debt — about $4.2 trillion of it. But now interest rates, including on government debt, are higher than they have been in 15 years and investors are dumping their old low-interest debt. As they dump, the resale price of the old debt goes down. The more it declines, the more investors want to dump. And thus, a panic is born. 

To understand the problem fully, the question of US government debt has to be put into its larger context, which is: the pandemic response as a whole.

When news of the Covid virus first broke in December 2019, the 2 Year Treasury bond was being offered at 1.64% interest; the 10 year was at about 1.80%, and the resale value of such bonds on secondary markets was strong. Then, in March 2020, as Covid cases and deaths spiked, the US began to shutter its economy with panicked lockdowns that were supposed to “flatten the curve” or slow the spread of the virus and thus protect the hospitals. But Covid was politicized and the lockdowns were extended. 

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The Fed Backtracks on Future Rate Hikes as Bank Failures Loom Large, by Ryan McMaken

Posted on March 24, 2023 | Leave a comment

The Fed can continue tightening or it can protect banks, but it can’t do both. From Ryan McMaken at mises.org:

The Federal Reserve’s Federal Open Market Committee (FOMC) on Wednesday raised the target policy interest rate (the federal funds rate) to 5.00 percent, an increase of 25 basis points. With this latest increase, the target has increased 4.75 percent since February 2022.

However, with an increase of only 25 basis points, the March meeting is the second month in a row during which the Fed has pulled back from its more substantial rate hikes of 2022. After four 75-basis-point increases in 2022, the committee approved a 50-point increase in December, followed by a 25-point increase in February, and another on Wednesday. 

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Although CPI inflation remains at or above six percent, the FOMC has slowed down in its monetary tightening over the past two months. At Wednesday’s press conference, Fed chairman Jerome Powell moved further into dovish territory.

We should expect more of this as the year wears on. Although CPI inflation remains well above the Fed’s two-percent target, recent bank failures will put the Fed under pressure to force interest rates back down so as to give banks better access to cheap liquidity. In other words, the Fed will have to choose between helping bankers on the one hand and reducing inflation—both monetary and CPI—for regular people on the other. Experience suggests the Fed will side with bankers and will thus move back in the direction of easy money even as price inflation continues to drive up the cost of living. 

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COVID Made McDonald’s a Public Health Savior, by Dr. Joseph Mercola

Posted on March 23, 2023 | Leave a comment

Who knew that Big Macs were a stalwart of public health? From Dr. Joseph Mercola at theburningplatform.com:

covid made mcdonald public health savior

Story at-a-glance

  • The U.S. Department of Health and Human Services (HHS) enlisted McDonald’s to promote its COVID-19 public health education campaign
  • McDonald’s produces and promotes some of the unhealthiest ultraprocessed food on the planet — food that likely played a role in making COVID-19 outcomes worse
  • The joint initiative debuted May 2021 and included use of a McDonald’s billboard in Times Square to promote COVID-19 shots, and HHS promotional material on its hot McCafé cups and McDelivery seal stickers
  • The packaging including imaging and text promoting HHS’ We Can Do This initiative, which is intended to “increase confidence in COVID-19 vaccines and reinforce basic prevention measures”
  • By naming McDonald’s and other junk food giants as partners in the fight against a pandemic, health officials further normalized the consumption of foods that lead to chronic disease and premature death

McDonald’s and “public health” don’t even belong in the same sentence, but this didn’t stop the U.S. Department of Health and Human Services (HHS) from enlisting the fast food giant to promote its COVID-19 public health education campaign.

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There She Goes . . ., by Eric Peters

Posted on March 23, 2023 | Leave a comment

GM has been Government Motors since 2009. From Eric Peters at ericpetersautos.com:

Two big announcements this week and one of them has nothing to do with the pending indictment and frog-marching of the Orange Man.

Here’s the other:

GM has just officially announced the end of the line for Camaro – again.

This has of, course, happened before. Most recently in 2002, after which there was no Camaro for the next eight years – until a reboot in 2010. And prior to that, in 1975, when there was almost no Camaro because there was no Z28 for the next two years, until 1977 – when the Z28 returned.

But this time, the end is likely to be forever.

At least insofar as what the Camaro is – and has been. The name will apparently be rebooted and affixed to – God help us – an electric crossover SUV, a la the Ford Mach e “Mustang.” But unlike Ford, which just launched an all-new Mustang that is defiantly not battery powered, GM intends to launch nothing except battery-powered appliances going forward.

This is what comes of getting “bailed out” by the government. It means getting bought out by the government.

It means getting owned.

That’s what GM has been since the bankruptcy-bailouts of 2009. Yes, the loans were paid back. But there was interest, so to speak. It came in the form of changing the company’s priorities as well as its management. In a free-market schema these would be salutary palliatives, much like someone obese confronted by the early symptoms of diabetes taking the decision to stop eating too much of the wrong foods.

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Raiding The Taxpayer Piggy-Bank, by David Stockman

Posted on March 23, 2023 | Leave a comment

They call it moral hazard because it’s a moral issue. The people responsible should have to pay when things go wrong, not the taxpayers. From David Stockman at lewrockwell.com:

Janet Yellen is one continuous anti-prosperity horror show and the reason is obvious enough. She got her indoctrination at Yale from the granddaddy of Professor Keynes’ US disciples, James Tobin, in the late 1960s and has spent most of her years since then pontificating in academia or dictating from the Fed.

So now with the arrival of screaming evidence that the banking system desperately needs the disciplining effect of depositor flight, she comes out four-square for euthanizing the $9 trillion of still uninsured deposits in the US banking system.

But let’s cut to the chase. Banks not disciplined by their depositors and not at risk for deposit flight are dangerous institutions. They leave bank executives free to swing for the fences on the asset-side of their balance sheets without fear that attentive depositors will move their money to safer pastures.

For crying out loud. It was bad enough during the last several years when deposits were dirt cheap and knuckleheads like those who ran SVB decided to load up their balance sheets with 10-30 year duration assets against overnight demand deposits, most of which were uninsured.

For the moment that allowed them to book outsized profits and reap the consequent benefit of soaring stock options, but these “profits” were phony as a two-dollar bill. That’s because they were being generated off long-term fixed income assets, the prices of which had nowhere to go except down.

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They’re Not All Giving Up, by Eric Peters

Posted on March 22, 2023 | Leave a comment

Ferraris are among the most beautiful and powerful automobiles ever created. The batterymobiles aren’t going to replace them. From Eric Peters at ericpetersautos.com:

What makes a Ferrari worth Ferrari money?

It isn’t a battery.

Chief Technology Officer Michael Hugo Leiters says it’s a V12. The engine that makes a Ferrari sound like one. Not “virtually,” as via the emission of a recording, in the manner of remembering what something used to sound like. The real thing, right now. Leiters says people buy Ferraris for performance and emotion – his word – the latter being something as absent from electric cars as beef is from the Impossible Burger.

The engine defines what a Ferrari is; without it, what you have is what everyone else already has.

Put another way, Ferrari aims to do what Tesla did, except in reverse.

When Tesla began selling cars, it was the only car company selling electric cars. It thus presented something different – as opposed to something the same. A silent Tesla was the opposite of a V12-powered Ferrari such as the 812 GTS recently unveiled in Maranello – Ferrari’s headquarters in Italy. Both are extremely quick cars, but how they are quick is what makes each car not a replication of the other car. The Tesla’s driver stands on the accelerator pedal – EVs have no gas pedal – and the car surges forward silently.

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Lucky and Good, by Patrick Smith

Posted on March 22, 2023 | Leave a comment

Near misses are highlighting just how safe air travel has been . . . and how that’s been taken for granted. From Patrick Smith at askthepilot.com:

A FLURRY of recent close calls finds us nervous. There were near misses on runways in New York, Boston, and Austin. A United Airlines jet plunged to within 800 feet of the ocean after takeoff from Maui. And so on.

The billion-dollar question is, are these incidents symptoms of something gone rotten, or a spate of bad luck? Are they harbingers of disaster, or outliers?

Much discussed are staffing woes both at the airlines and air traffic control. The post-pandemic aviation world is operating at maximum capacity, but with lesser levels of experience and expertise. The job losses during COVID aren’t just measured in raw numbers; there was a brain-drain as well, as many senior employees took early-retirement packages. Now, thousands of new-hire employees are being taken on: pilots, cabin crew, controllers, dispatchers, schedulers, mechanics. They find themselves in a high-stress environment where learning curves are steep and mistakes can be unforgiving or worse.

Whatever the root causes, it’s been alarming enough to gather the FAA and airline officials in an aviation safety summit taking place this week in Washington.

And that’s a good thing. Surely it’s better to be digging into things now, rather than after there’s a catastrophe that kills 250 people. It’s all about being proactive; identifying weaknesses in the safety chain, and fixing them.

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