Prins: “We’re Living In A Permanent Distortion”

Prins: “We’re Living In A Permanent Distortion” Tyler Durden Sun, 07/05/2020 – 22:00

Via Greg Hunter’s USAWatchdog.com,

Three time best-selling book author Nomi Prins says long before the Covid 19 crisis, the global economy was faltering big time.  The Fed stepped in with the start of massive money printing in late 2019 to save the day. 

Prins explains, “We were already in crisis mode as I mentioned at the end of my last book going into 2019.”

“What did we see at the end of 2019?  We saw this pivot, and I call it phase two. . . . Central banks had pivoted to easing mode. . . . Come September, October, November and December, the Fed is producing repo operations.  Those are short-term lending operations that are supposed to be the purview of the banks . . . . The Fed is not supposed to get involved, but it did.  The Fed had all kinds of excuses.  It said it was not QE, but it was. . . . The debt at the end of 2019 for the world was three times GDP.  For every $ 3 borrowed, only $ 1 of economic activity occurred.  That’s what we started 2020 with.  Throw a pandemic into that . . . and you have a long drawn out financial and economic crisis.”

Now, the money printing has gone into overdrive to save the system from the virus crisis.  The social and economic damage, according to Prins, is profound and not going away.  Prins points out,

“We are not going to pay back this debt, and this is global.  Nobody is even considering trying to pay back the debt that has been created.  Let’s think about why that debt has been created.  It’s not just because the economy slowed down.  That’s one reason and kind of an excuse.  The reality is the Fed is on steroids, and other central banks are on steroids . . . throughout the world in a larger number and larger magnitude than in the wake of the financial crisis of 2008.  This means all this new debt created is even cheaper than the debt created going into the 2008 crisis.  So, more debt, created more cheaply, means less incentive to pay it back and more incentive to push it down the road and grow it.  You’ve got this snowball of debt rolling down this high mountain, and it’s rolling and growing and getting bigger.  The mountain, which is the main street economy, is coming down as the snow ball is coming down, and the main street economy itself, that foundation, is really shaky. . . . How does this end?  It ends with us, the foundation, which is the main street economy, by both that snowball of debt and the avalanche of the mountain.  That’s going to be a multi-decade problem.

Prins says this next stage has a brand new name and explains,

I call this a ‘Permanent Distortion.’  I have not used this term in prior books, but I am using it because . . . the disconnect between financial assets, equity markets and the real economy . . . has become massive

There is going to be this endless supply of artificial stimulation into the markets. . . . Former New York Fed President Bill Dudley said the Fed’s balance sheet is going to $ 10 trillion.  That’s what I have been saying, and now he finally said it.  That’s not going away anytime soon.  That’s not being unwound anytime soon.  That becomes permanent lift to financial assets. . . . In the wake of that, less real capital gets used for infrastructure, research and development, growth and retooling the economy and getting jobs into this new period.”

Prins says gold prices are going to “follow the expansion of the Fed’s balance sheet.”  It is that simple, and Prins predicts,

“As we saw in the wake of the financial crisis of 2008, gold and silver will have the ability to go up quite substantially as the Fed’s book increases in size, which we know it is going to do.  We have been told that multiple times by many different words by Federal Reserve Chairman Jerome Powell.”

In closing, Prins says, “We are continuing to drive up asset bubbles where we don’t have the real economy to back it up…” 

“The more this ‘Permanent Distortion’ gets bigger, the more the likelihood the next crisis will happen… and it will be from a higher height.  It will be from a larger bubble, a bigger snowball accelerating downward more quickly.  I don’t think we are out of this crisis.  I think the markets are going to have a bumpy ride as the economy has a bumpier ride.”

Join Greg Hunter as he goes One-on-One with three time best-selling author Nomi Prins.

*  *  *

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Low-Income Households Crushed By Covid Inflation Shock

Low-Income Households Crushed By Covid Inflation Shock Tyler Durden Sun, 07/05/2020 – 21:30

As The Fed continues to flood the system with money – insisting that inflation is merely a boogeyman and it is doing everything in its power to support the middle class, Bloomberg has found that inflation due to coronavirus is real, and is disproportionately hammering poor households.

Due to higher grocery and housing costs for the bare necessities during the pandemic lockdown, the study found that the bottom 10% of households by income currently face inflation of 1.5%, while those in the top 10% face 1%. Meanwhile, the official overall average in May was 0.1%.

According to the report, the difference is primarily due to changes in consumption habits during the pandemic – as households have been forced to buy more food, which has shot up in price, while spending less on recreational activities and transportation. 

In a period of protest and increasing anger about inequality, the differential inflation rate experienced by low- and high-income households is a concern,” said Bloomberg Economics’ Björn van Roye and Tom Orlik.

The suggestion the virus is less disinflationary than many economists believe poses a challenge for the Federal Reserve which is eyeing a slower inflation rate than that experienced by lower earners, who are instead facing a steady erosion of their purchasing power. –Bloomberg

“Taken together with concerns about central banks bailing out investors ahead of firms and workers, and the benefits rich, asset-owning households gain from quantitative easing, it adds to the sense that central banks are unintentional contributors to the problem of inequality,” they added.

Meanwhile, adding insult to injury, CCN points out that blue-collar workers are more likely to contract the virus, adding “If you can’t work remotely and you haven’t been laid off, chances are you’re headed into work and putting yourself at risk every day.”

Looking a bit more closely at spending habits during the pandemic, Opportunity Insights, which contributed to Bloomberg‘s report, found that those in the top income quartile had a significant decline in spending of 53%, while those in the bottom quartile spent virtually the same.

High-income households cut spending primarily because of health concerns rather than a loss of income or purchasing  power. Spending fell most  on  services  that require in-person interaction and thereby carry a risk of COVID-19 infection, such as transportation  and  food services.

The pattern of spending reductions during this recession differs sharply  from that of prior recessions, during which spending on services remained essentially unchanged while spending on durable goods (e.g., new appliances or cars) fell sharply. –Opportunity Insights

Opportunity Insights also found that small businesses in the most affluent zip codes lost over 70% of their revenue due to COVID-19, vs. 30% in the least affluent (low rent) zip codes. Meanwhile, reopenings have had little impact on economic activity, as illustrated by Colorado – which reopened on May 1, vs. New Mexico, which reopened on May 16.

And while stimulus payments significantly increased consumer spending – particularly among low-income households, they didn’t lead to large gains for businesses hardest-hit by the pandemic – small businesses in affluent areas.

Even more surprising is that Opportunity Insights found that $ 500 billion in PPP loans had virtually no impact on employment rates.

Which begs the question: is there a vaccine for ineffective fiscal policy? (we already know that the only solution to failed monetary policy is much more of it).


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Senate Bill Would Ban Federal Use Of Facial Recognition Systems

Senate Bill Would Ban Federal Use Of Facial Recognition Systems Tyler Durden Sun, 07/05/2020 – 21:00

Submitted by Sovereign Man Explorer

This Week’s Intelligence

Senate bill would ban federal use of facial recognition systems

What happened:

A bill in the Senate would issue a presumptive ban on the use of any facial recognition systems by any federal agencies.

That means unless a government agency or bureau is specifically authorized by Congress, they cannot deploy real time facial recognition surveillance or use it to identify people in photos and video later.

The bill would also keep certain federal funds from city and state law enforcement who use biometric surveillance, like facial recognition.

What this means:

Facial recognition technology is too easy to abuse. The government is supposed to go through due process before investigating citizens.

Even just learning the identity of someone is supposed to require reasonable suspicion that a crime has been committed.

But facial recognition is a pre-emptive “search” revealing the identity of anyone on camera.

And in addition to the due process concerns, facial recognition is a good way to quell dissent and protest from anyone afraid of being identified and targeted by the government for speaking out.

* * *

Colorado Police Reform bill on its way to ending qualified immunity

What happened:

A bill has passed the Colorado Senate which would end qualified immunity in the state.

If the bill becomes law, it would mean police could be sued and charged for crimes they commit while acting in their official capacity as police officers.

The bill also requires officers to intervene if a colleague is committing a crime or face possible charges themselves.

It also permanently strips officers of their certification to be police officers if they are convicted or plead guilty to any excessive force violations.

What this means:

Qualified immunity is the legal doctrine that protects police from legal consequences if they claim they thought their actions were legal and necessary to do their job.

To hold police accountable essentially requires a matching precedent that says a specific behavior or incident of brutality is not protected.

Ending qualified immunity is a good first step towards holding police to the same legal standards as everyone else.

* * *

New Mexico Supreme Court says governments can snoop bank records

What happened:

The third party doctrine is used by the federal government to spy on anyone they want without a warrant.

The idea is once a citizen gives information to a third party like a bank or internet provider, they have voluntarily given it away.

The New Mexico Supreme Court just extended that power to state governments.

So now it isn’t just the feds who can dig through your records without a warrant. State agencies and grand juries can do the same.

What this means:

Genius. The government forces banks to collect information on customers. And that means the customers have “voluntarily” handed that information to the bank.

So of course then the bank can “voluntarily” give your information to the government.

Of course this is all absurd mental gymnastics which trample the intention of privacy protections.

But this is how the government operates. And little hole in your rights will be exploited, until the right no longer exists at all.

* * *

Biological male wins vote for Female District Leader in New York City

What happened:

For about 100 years, the Democratic Party in New York City has elected one male and one female party leader in each district.

This is not a government position, but an unpaid internal party role. It was a feminist idea to allow women to gain a foothold in politics.

But now a biological male identifying as a woman has been elected to the Female District Leader position in Queens, New York City.

For the first time since the position was created, the district will have no natural born female representation in the party.

What this means:

We are into freedom. Frankly, what someone wants to do with their own body is their own business.

But it’s hard to ignore the effects this has on natural born women with an XX chromosome.

Feminists have long been warning that the gender issue would meld into a sex issue, and women would lose protections in areas like competitive sports, and privacy.

Apparently, all it takes to be a woman is to declare it.


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Texas Sees Record Jump In COVID-19 Hospitalizations: Live Updates

Texas Sees Record Jump In COVID-19 Hospitalizations: Live Updates Tyler Durden Sun, 07/05/2020 – 20:45

Summary:

  • Texas sees record jump in hospitalizations
  • California reports jump in daily cases
  • Taj Mahal closed until further notice
  • India draws nearer to Russia amid another record jump in cases
  • World sees record jump in COVID-19 cases
  • Florida reports 9,999 new cases
  • Arizona sees roughlt 3,500 new cases
  • South Africa sees record jump in new cases
  • US reports 53k cases for Sunday
  • WHO cancels hydroxychloroquine trials
  • Russia cases near 700k
  • Japan sees another 277 new cases

* * *

Update (1900ET): Texas saw daily hospitalizations reach a fresh record high on Sunday as 8,181 patients with the virus were admitted to hospitals around the state, even as the number of new COVID-19 cases reported declined day-over-day.

Texas reported 3,449 new confirmed cases of COVID-19 Sunday, after a record high of 8,258 Saturday.

State health officials also reported 29 additional deaths, bringing the totals to 2,637 deaths and 195,239 confirmed cases, per state data.

Officials in cities like Austin are pushing Gov Abbott to return control to municipalities to allow some places to implement new stay-at-home orders, a measure the governor has resisted despite making mask-wearing mandatory. Mayor Steve Adler, a Democrat, said as much on CNN’s “State of the Union” Sunday as he warned that hospitals have been facing a crisis and ICUs could be overrun in as few as 10 days. A few counties warned that their ICUs had been overwhelmed over the last couple of days, and hospitals in Houston have already needed to transport some patients 50 miles away. In the Houston area, Democratic Harris County Judge Lina Hidalgo claimed a stay-at-home order is needed.

* * *

Update (1435ET): California reported another 5,410 new cases (+2.1%) on Sunday (remember, the cases are reported with a 24 hour delay). The positivity rate was 6.3%, down slightly from the rates seen on Thursday and Friday.

The new cases brought the state’s total case count count climbed to  260,155

The state also reported 17 deaths on Saturday…

…which means mortality continues to trend lower across the state.

* * *

Update (1430ET): Already, it looks like India reported another record (or near record) total of new cases on Sunday.

The post-lockdown surge in the world’s second-most-populous nation took India’s total tally to more than 673,000 cases and 19,268 deaths, moving India closer to surpassing badly-hit Russia, the world’s third-most infected nation.

…officials have announced that the Taj Mahal, India’s most popular tourist attraction and one of the seven wonders of the modern world, won’t reopen any time soon.

“The Taj Mahal, which is in the Taj Ganj police station jurisdiction, is a ‘containment zone’,” a document released by Agra’s District Magistrate Prabhu N Singh stated late Sunday.

Containment zones are where high infection rates have been detected, with all activity except essential services halted.

* * *

The world celebrated America’s independence by reporting 212,000 new cases of the Coronavirus yesterday, with roughly half that total came from the US, India and Brazil alone.

Data from Johns Hopkins put the number at 207k:

JHU put the number of cases confirmed in the US yesterday at 52,391, with 7.6% of tests coming back positive.

Source: JHU

The last record high in the US arrived on July 3, when 57,549 people tested positive for the first time.

Following studies showing hydroxychloroquine can be effective at mitigating symptoms in patients if taken early enough in the life of the infection, the WHO said yesterday that it planned to discontinue trials of the Trump-approved malaria drug, along with a combination HIV drugs known as lopinavir/ritonavir in hospitalised patients with COVID-19 after the medications failed to reduce mortality.

This comes almost exactly a month after the WHO decided to resume trials of the drug.

Worldwide cases have reached 11.23 million while 6.04 million patients have recovered, according to the latest Johns Hopkins University tally. The number of deaths worldwide hit more than 530,000.

Already, Arizona and Florida have reported their case numbers for the last 24 hours, with both states seeing a minor retreat from the all-time highs in daily case numbers.

As of Sunday, coronavirus cases are on the rise in 34 states over the past week, with 12 seeing an increase of more than 50%. Three states, Kentucky, New Hampshire and Vermont, are reporting a decline in cases.

Florida reported 9,999 new coronavirus cases Sunday, coming one day after the state set a record for most cases in a single day with a total of 11,458 new cases, which also surpassed New York’s previous single-day high of 11,434, which was recorded in mid-April.

Arizona reported 3,536 new cases, and 4 deaths, bringing its total confirmed to 98,089 1,809 coronavirus-related deaths, according to the state’s latest numbers.

New York, meanwhile, saw another 533 new cases and 8 fatalities.

He also confirmed the state would move on to phase 3 tomorrow.

Internationally, the Philippines reported its biggest jump in new cases with 2,434, taking its total count to 44,254, the health ministry said.

South Africa is reporting more than 10,000 new confirmed coronavirus cases for the first time in a single day, bringing the country’s total confirmed cases to more than 187,977, by far the most of any country in Africa.

South Africa also has surpassed the deaths of 3,000 people in the outbreak.

As more of the Middle East rolls back restrictions, Saudi Arabia’s coronavirus cases have surpassed 200,000 and neighboring UAE has 50,000, with the number of new cases climbing after both countries fully lifted curfews last month.

Russia reported 6,736 new cases, bringing its total to 681,251, with 134 new deaths bringing its death toll to 10,161. India saw its biggest surge in COVID-19 cases, with 24,850 new cases and 613 deaths in the last 24 hours. The country’s tally of infections rose to 673,165 as the death toll increased to 19,268, according to health ministry data.

FInally, Japan reported 277 new coronavirus cases Sunday morning, bringing the country’s total number of cases to 20,234 (19,522 on land and 712 on the Diamond Princess cruise ship).


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Jim Bovard: Old Coins Taught Me To Never Trust The Government

Jim Bovard: Old Coins Taught Me To Never Trust The Government Tyler Durden Sun, 07/05/2020 – 20:00

Authored by Jim Bovard via The Libertarian Institute,

Old coins vaccinated me against trusting politicians long before I grew my first scruffy beard. I began collecting coins when I was eight years old in 1965, the year President Lyndon Johnson began eliminating all the silver in new dimes, quarters, and half dollars. LBJ swore that there would be no profit in “hoarding” earlier coins “for the value of their silver content.” Wrong, dude: silver coins are now worth roughly fifteen times their face value.

History had always enthralled me, and handling old coins was like shaking hands with the pioneers who built this country. I wondered if the double dented 1853 quarter I bought at a coin show was ever involved in Huckleberry Finn–type adventures when “two bits” could buy a zesty time. I had a battered copper two-cent piece from 1864, the same year that Union general Phil Sheridan burned down the Shenandoah Valley where I was raised. Some of the coins I collected might now be banned as hate symbols, such as Indian Head pennies and Buffalo nickels (with an Indian portrait engraved on the front).

In the era of this nation’s birth, currency was often recognized as a character issue—specifically, the contemptible character of politicians. Shortly before the 1787 Constitutional Convention, George Washington warned that unsecured paper money would “ruin commerce, oppress the honest, and open the door to every species of fraud and injustice.”

But as time passed, Americans forgot the peril of letting politicians ravage their currency. In 1933, the US had the largest gold reserves of any nation in the world. But fear of devaluation spurred a panic, which President Franklin Roosevelt invoked to justify seizing people’s gold to give himself “freedom of action” to lower the dollar’s value. FDR denounced anyone who refused to turn in their gold as a “hoarder” who faced ten years in prison and a $ 250,000 fine.

FDR’s prohibition effectively banished from circulation the most glorious coin design in American history—the twenty-dollar Saint-Gaudens Double Eagle gold piece. I was captivated by early American coin designs, especially those featuring idealized female images emblazoned with the word liberty. I was unaware that George Washington refused to allow his own image on the nation’s coins because it would be too “monarchical.” Until 1909, there was an unwritten law that no portrait appear on any American coin in circulation. That changed with the hundredth anniversary of the birth of Abraham Lincoln, whom the Republican Party found profitable to canonize on pennies.

By the mid-twentieth century, American coinage had degenerated into paeans to dead politicians. Portraits of Franklin Roosevelt, John F. Kennedy, and Dwight Eisenhower were slapped onto coins almost as soon as their pulses stopped. This reflected a sea change in values as Americans were encouraged to expect more from their leaders than from their own freedom.

The Double Eagle, which was designed by sculptor Augustus St. Gaudens, is widely considered to be the most beautiful US coin ever minted.

Coin dealing helped me recognize early on that a government promise is not worth a plug nickel. From 1878 onwards, the US Mint printed silver certificates, a form of paper currency. My 1935 silver certificate stated: “This certifies that there is on deposit in the Treasury of the United States of America One Dollar in Silver Payable to the Bearer on Demand.” But in the 1960s, that became inconvenient so the government simply nullified the promise.

On August 15, 1971, President Richard Nixon announced that the US would cease paying gold to redeem the dollars held by foreign central banks. The dollar thus became a fiat currency—something which possessed value solely because politicians said so. Nixon assured Americans that his default would “help us snap out of the self-doubt, the self-disparagement that saps our energy and erodes our confidence in ourselves.” Regrettably, this particular treachery was not included on the list of indictable offenses that the House Judiciary Committee enacted a few years later.

After Nixon’s declaration of economic martial law, I lost my enthusiasm for squirreling away one memento from each mint and each year in the Whitman blue coin folders that permeated many 1960s childhoods. I shifted from collecting to investing, hoping that old coins would be a good defense against Nixon’s “New Economics.” Prices for pristine coin specimens were far higher and more volatile than the value of some of the barely legible slabs of metal I previously amassed. A single blemish could slash the value of a rare coin by 80 percent (same problem I had with some manuscripts I’ve submitted over the years).

Coin values were pump primed by the Federal Reserve’s deluge of paper dollars to create an artificial boom to boost Nixon’s reelection campaign and supplemented by wage and price controls that wreaked havoc. Inflation almost quadrupled between 1972 and 1974, and I soaked up the cynicism and outrage prevailing in coin investment and hard money newsletters. I poured most of the money from the jobs I did during high school into rare coins. Because rare coins were appreciating almost across the board, it was difficult not to be lucky in a rising market. The biggest peril was the endless scam artists seeking to fleece people with false promises of lofty gains or fraudulent grading of rare coins—a pox that continues to this day.

After graduating high school in 1974, I began working a construction job. When I got laid off, I saw it as a sign from God (or at least from the market) to buy gold. Investment newsletters and political debacles convinced me the dollar was heading for a crash. I sold most of my rare coins and plunked all my available cash into gold and also took out a consumer finance loan at 18 percent to purchase even more. That interest rate was the gauge of my blind confidence. Nixon’s resignation in August 1974 did wonders to redeem my gamble.

My coin and gold speculations helped pay for my brief stints in college, with some greenbacks left over to cover living expenses during my first literary strikeouts. I eventually shifted into journalism and migrated to the Washington area.

Two weeks after I moved into a shabby group house in the District of Columbia in 1983, I pawned the last gem of my coin collection—the 1885 five-dollar gold piece that my Irish American grandmother had given me fifteen years earlier. She was a dear sweet lady who would have appreciated that her gift helped cover the rent for a few more weeks until I finally consistently hit solid paydirt later that year. (Thanks, Reader’s Digest!)

Wheeling and dealing with coins inoculated me against Beltway-style agoraphobia—a pathological dread of any unregulated market. The market set the price for 1950 Jefferson nickels coined in Denver based on the relatively small mintage chased by growing legions of young collectors. Nixon boosted the price of milk after the dairy lobby pledged $ 2 million in illegal contributions. It was nuts to permit politicians to control prices when there was no way to control politicians. Having watched coin values whipsaw over the prior decade, I recognized that value was subjective. The test of a fair price is the voluntary consent of each party to the bargain, “the free will which constitutes fair exchanges,” as Senator John Taylor wrote in 1822. Seven years ago, President Barack Obama, talking about how the government was losing money minting the lowest denomination coin, declared, “The penny, I think, ends up being a good metaphor for some of the larger problems we got.” Actually, the collapse of our currency’s value is a curse, not a metaphor. The dollar has lost 85 percent of its purchasing power since Nixon closed the gold window.

For a century, American coinage and currency policies have veered between “government as a damn rascal” and “government as a village idiot.” I remain mystified how anyone continues trusting their rulers after the government formally repudiates its promises. But I still appreciate old coins with beautiful designs that incarnated the American creed that no man has a right to be enshrined above anyone else.


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How Deutsche Bank Helped Con The Public Into Believing In Wirecard

How Deutsche Bank Helped Con The Public Into Believing In Wirecard Tyler Durden Sun, 07/05/2020 – 19:30

More reporting on the Wirecard situation has emerged over the long weekend in the US, and none of it is flattering.

As a court-appointed administrator begins the process of managing what’s left of Wirecard through the insolvency process, while doing the best the government can to compensate shareholders who were deceived by the onetime fintech darling, WSJ reports that the (now former) COO, Jan Marsalek, has disappeared, with many suspecting that the longtime COO – who probably knows where many of the bodies are buried – has gone on the run as German prosecutors seek to question hi,.

His motives aren’t too difficult to discern: With CEO Markus Braun out on bail, it’s likely that Marsalek, who’s suspected of playing a critical role in maintaining the company’s complex shell game with the “Asian third-parties” which helped Wirecard conceal its accounting fraud, even from the auditors who apparently never bothered to actually check these accounts.

When the FT reported last year that most of Wirecard’s actual profits were generated by its opaque Asian businesses, the company denied it, with CEO Markus Braun insisting this was “simply not true”.  But once again, it appears the FT reporters were spot-on, as an appendix to to KPMG’s damning third-party report obtained exclusively by the FT purports to show.

Per the FT, Wirecard’s core business in Europe and the Americas has been lossmaking for years, which means the only Wirecard subsidiaries worth any money are those tied to the company’s most opaque operations, which might make it more difficult to sell the business lines that aren’t impacted by the fraud, and which still have value (theoretically, at least).

Some background: German payments group collapsed into insolvency last month after revealing that €1.9 billion ($ 2.1 billion) in cash in its accounts actually “didn’t exist”, exposing the “highly profitable” payments company and lender as a fraud.

According to its EY-audited financial reports, between 2016 and 2018 Wirecard generated operating margins of around 22% and almost doubled annual earnings before interest and taxes to €439 million. However, these profits appear to have existed largely on paper, according to the section of the KMPG report (which has already been made public, though the appendix has not) obtained by the FT. The businesses in question are WC’s payments business in Europe and Asia, and its credit card business in Europe and North America. Not only were these businesses lossmaking, but they’ve become increasingly money-losing in recent years.

During this time, Wirecard contended that its opaque Asian business more than offset these losses. But now it appears that 2/3rds of that businesses profits were completely imaginary. The company’s activities outside Asia haven’t actually generated a profit since 2016.

Wirecard’s court-appointed administrator Michael Jaffé is facing a difficult task as he tries to manage the sale of a few profitable business lines in WC’s banking and payments businesses. As more damning information comes to light, a sale of Wirecard’s subsidiaries needs to happen within weeks or they will lose any remaining value. “Wirecard has very few physical assets, and the risk is that many of its clients will switch to rivals soon,” said an anonymous source quoted by the FT. That source also claimed that the legal claims against Wirecard’s former management and its auditor (EY)  said one of the people, adding that Wirecard’s legal claims against its former management and its accountant may be more valuable than its remaining operating business.

Several buyers have expressed interest, including – most notably – Deutsche Bank, which maintains it is best positioned to integrate Wirecard’s legit businesses into its existing operations.

In an extraordinary example of how banks can sometimes abuse the “Chinese Wall” that’s supposed to exist between the stock analysts and the investment bankers, Deutsche Bank, over the course of a year, hedged all of its loan exposure (some $ 300 million in loans to both Wirecard and its (now former) chief executive, Markus Braun) to Wirecard. Meanwhile, its independent investment-management unit (DWS) piled into Wirecard’s shares, and DB’s analysts issued at least one “buy” rating on the DAX component’s shares.

As Wirecard’s shares eclipsed those of Germany financial champions like Deutsche Bank and Commerzbank (which WDI would later replace as a component of the DAX), the financial establishment in the country went from treating Wirecard like a pariah or a novelty (the company got its start providing payments infrastructure to adult entertainment sites and other shadier corners of the Internet) to a true national champion.

One of DB’s most egregious decisions involving Wirecard was hiring Andreas Loetscher, the Ernst & Young partner who oversaw several audits of Wirecard’s results, as chief accounting officer. Loetscher is now under investigation by German authorities.

Source: BBG

When the FT, published its first story alleging certain ‘accounting irregularities’ at Wirecard (the first in a series led by intrepid investigative reporter Dan McCrum) DB’s investment bankers immediately started worrying about the bank’s exposure should the company’s shares (against which all of DB’s loans were collateralized).

At Deutsche Bank, some executives grew alarmed, including Garth Ritchie, the head of investment banking at the time. Ritchie’s skepticism had arisen in part from conversations with hedge-fund clients that had conducted their own research into the firm’s workings, and who had been betting against the stock. His unit oversaw a 150 million-euro loan to Braun that was secured by Wirecard shares, so if the shares fell, the bank could lose a lot of money.

Risk managers led by Stuart Lewis, Deutsche Bank’s chief risk officer, were also worried. The lender had agreed to provide around 120 million euros to Wirecard as part of that firm’s revolving credit facility, but the payments company was expanding very rapidly and Deutsche Bank didn’t fully understand all the factors at play. They reduced their exposure and increased their hedge in the wake of the FT story.

When Wirecard approached DB about a merger last spring, the bank courteously declined. As its bankers sold off chunks of its Wirecard exposure, they made sure to do so quietly, so as not to spark a market panic that the biggest bank in Germany was getting cold feet on Wirecard. When SoftBank stepped up and invested €900 million in a complicated capital injection, DB’s analysts upped their rating on Wirecard stock to buy from hold, and projected 20% upside.

Later that year, when SoftBank got cold feet and started looking for a way out of its partnership with Wirecard, DB declined to help underwrite a convertible bond sold by Wirecard as part of the deal last spring. And while the bank did underwrite a €500 million bond deal for Wirecard in September, the entire inventory of debt was sold on to investors. The bank was more than happy to underwrite this debt and sell it on to yield-starve institutions despite having declined to underwrite a more complicated debt security for fear of getting stuck with too much of the product on its books, according to BBG.

When Wirecard shares sold off last fall, DWS doubled down. Yet, by the time Wirecard spiraled into insolvency in the spring, a margin loan to CEO Braun was off the bank’s books. But DB apparently helped Braun find another lender in the form of German bank Oldenburgische Landesbank, a small regional lender backed by private equity investors including Apollo Global Management.

Although DB is among a group of 15 lenders owed some €1.6 billion by Wirecard, its actual exposure is closer to €70 million, assuming the credit facility was 90% drawn down. Commerzbank, ABN Amro and ING are each owed twice as much.

And here’s the kicker: With Wirecard headed for insolvency, Deutsche Bank is now considering buying Wirecard’s banking operations, which have been ringfenced from the rest of the company by BaFin. After all that, DB could walk away with the only profitable business in the entire toxic company at a substantial discount. And with the explicit help of BaFin, the German securities regulator that actively protected Wirecard by attacking the FT and its reporters and even going so far as to bar short-selling in Wirecard shares. Most analysts believe that the company’s lending business will be worthless soon if clients go elsewhere. That should set the stage for DB to acquire the business at a substantial discount.

In summary, DB basically did more than any other member of the German establishment (perhaps aside from BaFin) to legitimize Wirecard. Now, DB is set to become one of the biggest beneficiaries of the company’s historic collapse.


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67 Shot, 13 Fatally, Over Fourth of July Weekend In Chicago: Police

67 Shot, 13 Fatally, Over Fourth of July Weekend In Chicago: Police Tyler Durden Sun, 07/05/2020 – 19:00

Authored by Jack Phillips via The Epoch Times,

At least 67 people were shot, including 13 fatally, over the Independence Day weekend in Chicago, according to authorities.

Nine of the weekend’s victims were minors, and two children died, officials told Fox32. That includes 14-year-old boy who was among four people who were killed in the South Side neighborhood Englewood on Saturday evening.

The victims were at a large gathering on the street at around 11:35 p.m. on South Carpenter Street. Four males then approached the group and began shooting, police said, adding that the 14-year-old boy was shot in the back before he was taken to Comer Children’s Hospital, where he was later pronounced dead.

The three other males, who were not identified, were pronounced dead at the scene and at the University of Chicago Medical Center, police said.

In the same incident, an 11-year-old boy suffered a bullet graze wound, and a 15-year-old boy was shot in the abdomen. They were taken to the Comer hospital, and both are currently in fair condition, authorities said.

Officials said a 7-year-old girl was shot in the head while standing on the sidewalk at her grandmother’s house during a Fourth of July celebration at 7 p.m. in Austin on the West Side, according to The Associated Press.

“Tonight, a 7-year-old girl in Austin joined a list of teenagers and children whose hopes and dreams were ended by the barrel of a gun,” Mayor Lori Lightfoot wrote on Twitter on Saturday.

“As a city, we must wrap our arms around our youth so they understand there’s a future for them that isn’t wrapped up in gun violence.”

In the incident, according to police, suspects emerged from a vehicle and started shooting. No suspects have been apprehended.

Chicago Police Chief of Operations Fred Waller told NBC5 that the violence against children needs to end.

“You gotta be tired of this,” he said.

“Chicago’s heart is broken again. Austin’s heart is broken again … I’m tired of this.”

Meanwhile, in a later incident at around 2:15 a.m. on Sunday in the South Side, a 21-year-old man was shot to death while standing on the sidewalk, police said. An hour before that, a woman was shot and five men were injured when a person opened fire at a crowd setting off fireworks in the West Side’s Lawndale neighborhood.

Commenting on the latest violence, president Trump tweeted that shootings are significantly also in NYC “where people are demanding that @NYGovCuomo & @NYCMayor act now. Federal Government ready, willing and able to help, if asked!”


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China New Car Sales Crash 37% In 4th Week Of June

China New Car Sales Crash 37% In 4th Week Of June Tyler Durden Sun, 07/05/2020 – 18:30

June does not appear to be shaping up to be the month where Chinese auto sales “bounce back”. Dealing with recessionary headwinds pre-Covid, the world’s largest auto market has been decimated by the effect of the pandemic and doesn’t look to be leading the world to any type of meaningful recovery any time soon.

Overnight the China Passenger Car Association said that retail car sales were down 37% YOY for the 4th week of June.

Average daily sales were down to 51,627 during June 22-27. This is a 6% sequential fall from the same week in May, indicating little respite or improvement from the pressure of the coronavirus pandemic on the industry. PCA blamed “seasonal factors” for the drop, which is a funny way to say “Chinese-borne virus ravaging the entire planet”. 

This also paints an ugly picture for June’s new car sales number, since we reported about 3 weeks ago that the first week in June was also off to an ugly start. In that article, we noted that retail car sales fell 10% year over year – but more importantly 20% from the same period in May – in the first week of June.

June’s interim data comes after what looked like the beginning of a rebound for the industry in May, to the extent that we can trust the numbers coming out of Beijing. This news comes despite better than expected results in May, where sales showed a 12% increase year over year. 

According to The Detroit Bureau, premium and luxury passenger car retail sales led the charge in May, rising 28% last month compared with year-ago results. Those vehicles accounted for 1.61 million of the month’s 2.14 million vehicles sold.

The China Association of Automobile Manufacturers, or CAAM, had predicted an 11.7% jump for May, including commercial vehicle sales in its results. Predictions for June look ominous: the CPCA has said that June sales will decline in part because June 2019 was such a strong month for the industry.

Meanwhile, the Chinese government is attempting to spur demand with new policies aimed at enticing buyers, according to Bloomberg, citing an unnamed automotive industry group in China. 

Recall, we have recently noted that U.S. auto manufacturers are also teeing up sizeable incentives to get buyers back into showrooms. Europe is following suit, with Volkswagen starting a sales initiative to revive demand, including improved leasing and financing terms. 

Outlook for the year in China remains less-than-optimistic. The CAAM predicts that sales will drop 15% to 25% for the year, depending on whether or not the country is able to further slow the spread of the virus.

June’s full retail vehicle sales data should be available in days. 


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“Concept Incubator” Envisages Babies Being Grown At Home In A Pod

“Concept Incubator” Envisages Babies Being Grown At Home In A Pod Tyler Durden Sun, 07/05/2020 – 18:00

Authored by Paul Joseph Watson via Summit News,

A “concept incubator” envisages a dystopian future where babies are grown inside sophisticated electronic pods which completely replace the womb and pregnancy.

The promotional video for the baby pod stresses how parents will be able to focus on other things like work while the pod baby is taken care of by the machine.

“Parents would be able to live their lives normally,” states the promo, as if having a baby naturally is abnormal.

“It has a dock to insert food,” states the promo as a woman is shown pouring green gunk into a canister. There’s also a “microphone” attached so people can “speak to the foetus.”

The pod, which thankfully is just an “idea” at this stage, was *birthed* by students at Product Design Arnhem.

According to Tech Insider, the arrival of the pod baby is “only a matter of time” because it is not that different from lambs already being grown inside “biobags.”

Responses on Twitter to the pod baby concept were not overly enthusiastic.

The happy clappy promotional video did not make mention of the fact that this all sounds like some horrific dystopian hybrid of Aldous Huxley’s Brave New World and a plot from Black Mirror.

Huxley’s 1932 classic portrayed a soft form of totalitarianism where children are biologically engineered from birth in test tubes where each one is given a predestined course in life which is dependent on the conditioning techniques used on its decanted embryo.

While the “concept incubator” falls far short of that scenario, it does promote the idea of dehumanizing the baby by removing the mother from the process entirely.

As we have previously highlighted, the tech elite seems to be obsessed with further atomizing human beings by making them do literally everything from within the confines of a pod, whether that be living, exercising, working, or eating.

Since the coronavirus outbreak, numerous restaurants have announced that they’ll be enclosing diners within pods or greenhouses, despite the fact that they will obviously overheat in summer.

“Transparent corrals for beach-goers. Dining pods. Clear boxes for students. The demand for plexiglass protective shields has never been higher,” announced the Wall Street Journal this week.

*  *  *

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Manhattan Apartment Sales Plummet, Worst In Three Decades

Manhattan Apartment Sales Plummet, Worst In Three Decades Tyler Durden Sun, 07/05/2020 – 17:30

The virus pandemic and social unrest have sparked an exodus of city dwellers to rural communities and towns. Remote access for work, and the recession, coupled with high unemployment, will extend this outbound emigration trend for the next several years as people seek cheaper living accommodations ex-metro areas. 

It appears the factors mentioned above have dealt a heavy blow to the Manhattan real estate market, which suggests a correction in apartment prices are ahead.

Manhattan apartment sales plunged 54% in 2Q20 compared with the same period last year, marking the most significant decline in 30-years, according to Miller Samuel and Douglas Elliman. The median sales price fell 18% to $ 1 million, the largest decline in a decade. According to real estate firm Compass, there were only 1,147 sales in the quarter, the lowest on record, due mostly because of coronavirus lockdowns barred agents from showing apartments until June 22.

“Manhattan was effectively shut down throughout the second quarter until the final week,” the report said. 

“Agents are going nonstop right now,” said Bess Freedman, CEO of Brown Harris Stevens, told CNBC.

“Sellers can’t be married to pre-pandemic prices,” Freedman said. “Everyone needs to be reasonable and fair about the new environment.”

“There is going to be an incredible supply of rentals,” he said. “We are going to see a lot of negotiating and landlord incentives.”

The latest indicator that the Manhattan real estate market is turning could be the number of signed contracts in June, were down 76%, compared with the same time last year.

Further, an entire floor apartment at the “coveted” One57 building, one of the flagships of billionaire’s row, just sold for $ 28 million about six years after it was initially purchased for $ 47.4 million. 

It marks a 41% discount for the luxury apartment in the span of about a half-decade. The plunge in prices would be the most significant discount to date at the building. 

If readers aren’t familiar with the current exodus trends ex-cities – here’s the latest:

Coast to coast, people are fleeing cities: 

Some have even fled to the Caribbean: 

To sum up, if you haven’t considered leaving a major city – now might be the time, due mostly because a correction in housing prices is likely underway. 


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