Kyle Bass’s Hayman Capital has been having a rough year thanks to its widely publicized bet against China’s currency, which has more than reversed its 2016 decline – its largest annual drop since 1994 - as the People’s Bank of China has cracked down on potentially destabilizing capital outflows. However, Bass – unlike a handful of other former China bears who’ve been forced to scale back, or even reverse, their positions – has said that he is standing by his belief that China’s corporate sector is massively overleveraged, and overdue for a collapse that could destabilize the global economy. Chinese banks, according to Bass, have more than $40 trillion in assets held against $2 trillion.
We felt reminded of this story when a good friend (who invests for a living) visited us this summer. He inter alia told us about an acquaintance of his, whom he described as an autopilot investor who only very rarely looks at the market and has a record of getting the wrong ideas at the wrong time. His latest idea was noteworthy: he thought it would be a good idea to “sell volatility” (by writing puts, if memory serves). This was in July, just before the VIX reached a new all time low.
There must be something about being named US Ambassador to the UN that brings out the inner mass murderer in people. Madeline Albright famously admitted that she thought 500,000 dead Iraqi children due to US sanctions was "worth it." John Bolton never met a disagreement he didn't want to turn into a war. Samantha Power barked about human rights while her Administration's drones snuffed out human life in unprecedented numbers.....Ponder this for a minute: Assad has just defeated ISIS in Deir Ezzor. ISIS is the reason the US has invaded Syrian sovereignty and initiated military action. Yet according to Nikki Haley Assad's reward for wiping out ISIS is that he must be deposed -- presumably in favor of US-backed rebels who have been in bed with ISIS for six years! Is Nikki Haley pro-ISIS? Is she pro-al-Qaeda? Is she evil or just stupid?
At this late stage of the cycle, Beijing’s bid to direct finance into productive economic investment will surely achieve about the same results as similar desires during the late-twenties U.S. Bubble period. Officials at some point will need to bite the bullet and rein in system Credit. It’s the nature of Credit Bubbles that risk rises exponentially during “Terminal Phase” excess. In simple terms, the quantity of new Credit expands greatly while quality deteriorates rapidly. A hypothetical chart of systemic risk – that had been rising left to right steadily for years - takes a moon shot.
This is patent nonsense because all of those things do not touch on the JCPOA. So, Tillerson has obviously gotten his marching orders on where things go with Iran next (badly and belligerently). It’s his job to sell them by talking at everyone, demanding compliance. Since Rex hasn’t resigned yet, it’s obvious he’s comfortable with this turn to the insane. Which brings me to Jimmy Carter and North Korea.
But will the grenade tossed into his own party’s midst achieve his agenda – radical, reflationary tax legislation? David Stockman has long argued that there is no possible GOP majority for a FY 2018 budget resolution that adds trillions of dollars to Trump’s defense, border control, veterans, and infrastructure build-ups, plus unfunded tax cuts. And which comes in addition to the $10 trillion to $12 trillion of new debt that is already built in to government expenditure through to 2027. Stockman is likely right. And he is likely right too, that the bottom line is that the only tax bill which can pass by year-end is one that would be dictated by Democrats – Schumer and Pelosi – in return for the next kick-the-can extension of the debt ceiling and CR (continuing resolution) for the current fiscal year. Republicans therefore will likely be entering the mid-term elections naked – with nothing of any substance to show voters. Thus, the GOP fears a blood-letting.
Every month the government apparatchiks at the Bureau of Lies and Scams (BLS) dutifully announces inflation is still running below 2%. Janet Yellen then gives a speech where she notes her concern inflation is too low and she needs to keep interest rates near zero to save humanity from the scourge of too low inflation. I don’t know how I could survive without 2% inflation reducing my purchasing power.
Harvard University’s John F. Kennedy School of Government has shown that it is no profile in courage by withdrawing a visiting fellowship that had been awarded to Chelsea Manning, who served seven years in prison for revealing U.S. war crimes committed in Iraq and Afghanistan. The Kennedy School caved in to pressure from people who shared in responsibility for those and other crimes, including former CIA Deputy Director Michael Morell, who resigned his own fellowship in protest and denounced Manning as “a convicted felon and leaker of classified information.”
Instead, both Congress and the Bush 43 administration reacted predictably to 9/11 and poured it on: we will spend whatever it takes, do whatever it takes, and go wherever it takes to get the people who did this. 16 years later, the War on Terror™ has yielded hundreds of thousands of dead and injured Americans, Iraqis, and Afghans, ongoing and intractable wars disguised as nation building, the Patriot Act, illegal executive actions, trillions in new federal debt, vastly increased federal surveillance powers, rubber stamped FISA court warrants, TSA at the airports, a useless Department of Homeland Security, overflowing VA hospitals, and increasingly militarized police here at home. More importantly, it has yielded a distressing complacency toward grotesque federal power.
Thinking American must choose between Hamilton and Jefferson, whose contrary visions of the future were contested in the first days of the Constitution. If you are happy with big government, big banks, big business, big military, and judicial dictatorship, then you have Hamilton to thank. His legacy of nationalism, centralization, crony capitalism and military adventurism is all around us. If you prefer the Jeffersonian version of an American regime (or even if you don?t) McClanahan’s new book is for you. This is not simply a polemic. McClanahan, who is proving to be one of the ablest truly relevant historians of our time, has given us a definitive, deeply-researched chapter and verse and long perspective of who this bad man was and how he is the fountain of our current discontents.” -CLYDE WILSON, professor of history, emeritus, University of South Carolina.