All posts by admin46x

Yuan Extends Slide After Massive PBOC Liquidity Injection

Having risen almost non-stop since the start of the year – despite dismal economic data, a still-tightening Fed, and an increasingly ‘easing’ PBOC – the last two days have seen offshore yuan start to fade.

Following stimulus headlines overnight (“but not a flood of liquidity” according to the PBOC), US Sen. Grassley admitted today that Sino-US trade talks had made “little progress” – both of which sent yuan notably lower.

This drop was interrupted by cable’s surprise surge (squeeze) after the Brexit vote (stronger pound, weaker dollar, stronger yuan), but yuan has reverted back down again to the lows after the PBOC injected a near-record amount of liquidity into the financial system.

China’s central bank injected a near-record amount of liquidity via open-market operations amid tax payments and the looming ‘annual’ year-end liquidity crisis.

The PBOC injects net 560b yuan into the banking system using 7-day reverse repo contracts – one of the largest one-day addition on record, according to data compiled by Bloomberg.

The move is aimed at “keeping reasonable and sufficient liquidity in banking system as liquidity falls relatively fast during peak season for tax payments,” according to a statement from the PBOC.

With the Lunar New Year falling on Feb 5th this year (two weeks earlier than last year), we suspect liquidity provisions will be a daily occurrence from here (the last 3 days have seen 340 billion yuan for a 28-day term injected – to cross the new year liquidity threshold).

Do not mistake this for ‘stimulus’ as it will be withdrawn or rolled and merely plugs a hole – that we suspect will grow larger as trade data suggested capital outflows are re-accelerating.

Majority Of Americans Support Raising Top Tax Rate To 70%

Back in 2012, when Europe’s populist tensions were first emerging, France’s socialist president Francois Hollande decided to harness the unhappiness of the proletariat (and distract from what would soon be one of the most disastrous presidencies in French history), and passed a 75% tax on earnings above €1 million as part of his election campaign.

Supported by socialists everywhere, the reform quickly prompted accusations of an anti-business agenda, sparked an exodus of high-profile personalities (France’s richest man, Bernard Arnault, the chief executive of luxury group LVMH, took out Belgian nationality, and the actor Gérard Depardieu also moved across the border to Belgium before obtaining Russian citizenship), sent local stocks tumbling as investors pulled out of France, and local real estate prices plunged.

While initially the supertax saw broad popular support, the resulting slump in the economy prompted a quick reversal in public opinion. “The reform clearly damaged France’s reputation and competitiveness,” said Jorg Stegemann, the head of the executive search firm Kennedy Executive. “It clearly has become harder to attract international senior managers to come to France than it was.”

Despite the backlash Hollande clung to the principle of the supertax even after it was dismissed by the country’s highest court, fearing a revolt by his leftwing allies. The tax was subsequently adjusted to a 50% rate payable by companies after the constitutional council ruling in December 2012. The final nail in the coffin came from the former investment banker who is now France’s president, Emmanuel Macron. A former economic adviser to Hollande, Macron described the supertax as “Cuba without the sun.”

Worse, it was the workers who were hit the hardest: tax lawyer Jean-Philippe Delsol, author on a book on tax exiles called Why I Am Going To Leave France, said that many high earners had agreed with their companies that salaries would be limited during the two years the tax rate applied, and they would “come to an arrangement afterwards.”

Worst of all, however, French finance ministry studies showed that despite all the publicity, the sums obtained from the supertax were meagre, standing at €260m in 2013 and €160m in 2014, and affecting 1,000 staff in 470 companies. Over the same period, the budget deficit soared to €84.7bn.

And so, two years after it was introduced, on January 1, 2015 the French 75% tax quietly disappeared into the history books.

We bring all this up because the next country where an almost identical experiment in socialist wealth redistribution may be attempted is… the United States of America.

While both Democratic Socialist Alexandria Ocasio-Cortez and her Republican critics have called AOC’s proposal to dramatically increase America’s highest tax rate “radical”, according to a new poll released Tuesday indicates that a majority of Americans agrees with the idea.

The latest The Hill-HarrisX survey conducted on Jan. 12 and 13 after the newly elected congresswoman called for the U.S. to raise its highest tax rate to 70%, shocking found that a sizable majority of registered voters, 59%, supports the idea.

While Ocasio-Cortez has not introduced any legislation – yet – to enact the concept, the survey shows that just like in France, a broad cross-section of Americans supports it at present (said majority probably needs to read up on what happened in France after an almost identical tax was implemented 6 years ago).

The “radical” proposal was popular with both sexes: women support the idea by a 62-38 percent margin, while a slightly smaller majority of men back it as well, 55 percent to 45 percent. What is maybe even more surprising is that the proposal is popular in all regions of the country with a majority of Southerners backing it by a 57 to 43 percent margin. Rural voters back it as well, 56 percent to 44 percent.

The surprises don’t end there: increasing the highest tax bracket to 70% has a surprising amount of support among Republican voters. In the Hill-HarrisX poll, 45 percent of GOP voters say they favor it while 55 percent are opposed to it. Independent voters also backed the tax idea by a 60 to 40 percent margin while Democrats were clearly the most in favor, supporting it 71 percent to 29 percent.

Ocasio-Cortez has spearheaded a group of progressive legislators – which includes Sen. Bernie Sanders – who have called for increasing federal income tax rates on wealthier Americans. The New York Democrat kicked off a debate within her party in a Jan. 6 interview with “60 Minutes” during which she said she would support setting the highest tax, which she said would kick in at individuals 10 millionth dollar of income, at 70%.

In her CBS comments, Ocasio-Cortez referenced tax rates that had once been in place during the mid-20th century, when indeed during the 1950s and 60s, the wealthiest Americans were once taxed at a rate in excess of 90 percent. Of course, back then it didn’t take about a 10 minute phone call and a token “investment” to purchase a passport anywhere else in the world, ensuring that those who are targeted by the tax would promptly depart the US and leave the nation with even less tax receipts.

Meanwhile, for AOC – who instead of focusing on abolishing the Fed believes that social inequality can be crushed only thanks to taxes – taxing the super rich is a matter of wealth redistribution: “That doesn’t mean all $10 million are taxed at an extremely high rate, but it means that as you climb up this ladder you should be contributing more,” she said.

The proposal has been met with both criticism and acceptance within the Democratic party. Republicans and conservative commentators have been universally critical, some incorrectly implying that the congresswoman wants to tax all income of the richest Americans at 70 percent.

Commenting on the poll, AOC said that “the majority of Americans respect when you break down reasonable policy proposals that are designed to combat runaway income inequality and help fund priorities they value most? We can win public sentiment, stand our ground, & not be scared by GOP information.”

Oh? What’s that?

The majority of Americans respect when you break down reasonable policy proposals that are designed to combat runaway income inequality and help fund priorities they value most?

We can win public sentiment, stand our ground, & not be scared by GOP information.

— Alexandria Ocasio-Cortez (@AOC) January 15, 2019

Incidentally, that’s probably exactly what Macron would have also tweeted in 2012 when he implemented a similar tax, only to see his approval rating plummet to levels never before seen in French history, prompting him to not even bother running for another term.

Yet Another Fed Study Concludes Phillip’s Curve Is Nonsense

Authored by Mike Shedlock via MishTalk,

Proponents of the Phillips Curve keep looking for ways in which it works. Yet, another study concludes it doesn’t.

The Phillips Curve, an economic model developed by A. W. Phillips purports that inflation and unemployment have a stable and inverse relationship.

This has been a fundamental guiding economic theory used by the Fed for decades to set interest rates. Various studies have proven the theory is bogus, yet proponents keep believing.

For example, in March of 2017, Janet Yellen commented the “Phillips Curve is Alive“.

Cato noted the Phillips Curve Is Dead (except in Federal Reserve and CBO models).

On August 29, 2017 I noted that a Fed Study Shows Phillips Curve Is Useless. Yet, economists keep trying.

Low-Unemployment States vs High-Unemployment States

A new San Francisco Fed study released this week asks Does Ultra-Low Unemployment Spur Rapid Wage Growth?

The idea behind the new study was that we may not see wage growth inflation because we are looking in the wrong places.

The new theory was that wage inflation may be expanding faster in states where labor supply was tightest and unemployment the lowest. Check out the conclusion.


In sum, a careful look at the wage Phillips curve across states yields little evidence supporting the contention that wage growth sharply rises as the labor market reaches especially tight conditions. Of course, the current period may be different from the past. For instance, the typical pattern of local wage growth in a tight local labor market may differ when all other nearby labor markets are experiencing similar tightness, as is currently the case. As a result, geographical labor mobility—which can mute wage pressures in tight markets as workers are attracted to higher-wage areas—may be playing less of a restraining role. With this caveat in mind, given the historical experiences of states in recent decades, we do not foresee a sharp pickup in wage growth nationally if the labor market continues to tighten as many anticipate.

Notice how economists still cling to the notion that something may be different now. In reality, the Phillips Curve isn’t dead, it was never alive to begin with.

Absurd Inflation Discussion

In response to Absurd Inflation Discussion by Fed Jackasses, Pater Tenebrarum at the Acting Man blog pinged me with this comment:

“It is de facto not possible to measure price inflation or a general level of prices. The latter is simply nonsense, it doesn’t exist. Both money and goods are subject to changes in supply and demand, hence there is no yardstick by which the purchasing power of money could be measured. And this is before we get to the fact that adding up and averaging the prices of disparate goods simply makes no logical sense.”

Brandolini’s Law

It’s not just the Phillips Curve either. Keynes thought inflation and recession could not happen at the same time. Yet, people still cling to that too. This leads to:

The bullshit asimmetry: the amount of energy needed to refute bullshit is an order of magnitude bigger than to produce it.

— Alberto Brandolini (@ziobrando) January 11, 2013

The Phillips Curve isn’t dead, it was never alive to begin with. None of the models the Fed relies on works. Repetitive bubbles are proof enough.

USAF Stealth Jet Caught On Camera Performing “Restricted” Combat Maneuvers 

Following the USAF Air Combat announcement on Dec. 4, that the F-35A Lightning II Demonstration Team will perform aerobatic shows in 2019 for the general public in the Lockheed F-35A Lighting II Joint Strike Fighter, demo Capt. Andrew Olson was recently spotted in the stealth jet performing never before seen combat maneuvers during a quick flyover at Luke Air Force Base near Phoenix, Arizona.

A series of clips were posted on Instagram last Thursday and quickly went viral. They were first posted by Instagram account @theromanticjaguar and then reposted by @andyo_dojo, demo pilot Capt. Olson, The Aviationist reported.

“In this clip, Capt. Andrew “Dojo” Olson approaches from the left, executes a pitch-up to the vertical with the first corner of a square loop to the inverted. Then it gets really good. Capt. Olson pulls back hard on the sidestick while inverted, backing off power and executing a quite tight loop. Once back to level flight the F-35A begins a descending flat spiral at almost zero forward airspeed. There is about one full 360° flat spin as Dojo repositions to exit show right,” The Aviationsist said.


All four videos show combat maneuvers not previously seen at US F-35A demonstrations where aerobatics were restricted.

The first fully aerobatic F-35A demo was flown at the Paris Air Show in 2017 by a Lockheed pilot. 

These videos suggest that the general public at upcoming US demonstrations are about to observe incredible aerial combat maneuvers, generally reversed for fierce dogfights.

The F-35A Demo Team will first perform this spring at their first airshow appearance in Melbourne, Florida at the Melbourne Air & Space Show on March 30-31 at Orlando Melbourne International Airport.

The team will fly at 13 venues that will include approximately 32 flight demonstrations in 2019. 

The goal of these demonstrations seems to prove the critics wrong about some F-35 Joint Strike Fighter capabilities. Pundits have claimed the aircraft “can’t dogfight.”

Or, perhaps, showing off new aerobatic moves is a subliminal message to Russia and China, indicating that the US is now prepared for a dogfight with fifth-generation fighter jets. 

Enemy Of The People?

Via The Zman blog,

There has never been a time when normal people did not know the media was biased and biased in a predictable direction. For every non-liberal in the media, there were at least ten liberals. The ratio was probably higher, but then, as now, some lefties liked to pretend they were independents or some third option.

The media used to invest a lot of time denying they had a bias and an agenda, but the only people who believed them were on the Left, which had the odd effect of confirming they had a bias and an agenda.

The thing is though, the media seemed like it was biased in a predictable way.

In the 1980’s, for example, the newspapers featured stories about the so-called homeless crisis on a weekly basis. That’s when we went from calling them bums to pretending their only problem was a lack of shelter. Once Clinton assumed power, the homeless stories disappeared. It was a running joke for a long time, because it was so obvious, but also because it was so predictable. Everyone got the joke, except Lefty.

As many have observed, the mask began to drop during the Clinton years when so many media members quit their jobs and went to work in the administration. It’s hard to maintain the illusion of independence when there is a revolving door between the media and left-wing political operations. That’s when CNN became known as the Clinton News Network, because they were so hilariously in the tank for them. Some tried to maintain the ruse, but any pretense of objectivity ended in the 1990’s.

Again, there was still a sense that it was just bias and that it was predictable and therefore you could adjust for it. Today, that does not appear to be the case. The mainstream media has become advocates, but not necessarily advocates for the Progressive base of the Democratic coalition. They seem to be serving the agendas, financed by private parties operating off-stage. For example, sites like the Huffington Post and Daily Beast are about moral enforcement than news and current events.

The recent harassment of Alex McNabb by Antifa member Christopher Mathias is a great example of the phenomenon. The Huffington Post provides him with a cover identity as a reporter, but in reality someone else is paying his way. His job is as a witch hunter, looking for anyone in violation of the blasphemy laws. This is a strange new phenomenon that does not have a corollary in the past. Even Woodward and Bernstein were legitimate reporters, even if Woodward had deep connections to the intelligence community.

There’s an argument that this sort of religious advocacy is the natural result of the narrative journalism that evolved in the 1960’s and 1970’s. If you are going to report stories, the point is to inform. If you are going to spin tales, then the first goal is to entertain and there is nothing quite as a gripping as a morality tale. These doxxing stories are just campfire stories for the hard thumping loons of the far Left. The point of them is to tell the reader that they must be vigilant as heretics are everywhere.

That’s probably true, but what about stories like this one, where it is clear the New York Times now has a whole department involved in explicit political advocacy. That is a highly organized effort to alter public policy. More important, it is a long term project, going back to the Obama years. The New York Times posted a database of gun owners, with an accompanying map, in a campaign to terrorize gun owners. This goes well beyond bias and even past the morality tales spun by the Huffington Post.

It does not stop there. This story about the death of Saudi national Jamal Khashoggi takes advocacy to another level. As an aside, the story is written by Lee Smith, who was fired from The Weekly Standard by Bill Kristol. His crime was having uncovered Kristol’s involvement in the fake dossier the FBI was using to subvert Trump. The story of Khashoggi’s life and death reads like a Hollywood spy thriller, but it was not a CIA caper. It was an operation apparently run by the the Washington Post.

We’ve come a long way from simple bias. The same media that can’t stop talking about Russian efforts to trick voters into voting the wrong way, was running a covert operation to trick the government into supporting Iran over Saudi Arabia. Unlike the Russians, the Washington Post actually killed someone or at least got someone killed. Unlike the Trump team, the Washington Post was actually working with a foreign country that is often viewed as hostile to American interests.

Trump started calling the media the “enemy of the American people” but he seems to have dropped it for some reason. Maybe the media threatened him. Given what we are seeing, how long before Washington Post reporters are planting car bombs and spiking drinks with polonium? Whether or not they see Americans as the enemy is hard to know, but they certainly don’t see themselves as on the same team as Americans. While they may not be the enemies of the people, they are a short bus ride to that position.