As far as Bank of America is concerned, there are just two themes one needs to know to explain the current "market" (which as the same Bank of America explained last week, is now manipulated to a never before seen extent): the Great Repression and Great Debasement.
First the Great Repression - also known as "Don't fight the Fed" - which according to BofA CIO Michael Hartnett is the outcome of $8 trillion in central bank asset purchases in just three months in 2020, has crushed interest rates, corporate bond spreads, volatility & bears. The most perfect example of this repression: the US fiscal deficit soared from 7% to 40% of GDP in Q2’20...
... and less than one month later the volatility of US Treasury market fell close to all-time low.
Besides volatility, central bank repression works its magic on yields: case in point Italian & Greek 10-year government bonds which are down to 1%, while US Commercial Mortgage Backed Securities (CMBS) & IG corporate bonds down to 2%, meanwhile the 30-year US mortgage rate just dropped to a record all time low of 3%.
As a result of this unprecedented repression (of reality), the Fed has made everyone a winner:
Fed has made bulls in every asset class a winner…gold, bonds, credit, stocks, real estate all up big since March lows; levered cross-asset risk parity strategy at all-time high.
It also means that BofA's recently preferred "All-weather" portfolio consisting of equal parts of all assets, i.e., 25/25/25/25 stocks, bonds, cash, gold, is up a record 18% in the past 90 days (Chart 7), which is "astounding & abnormal" given 7% historic annual average.
This "can't lose" market has also led to fundamental shift in the zeitgeist, as the traditionally bearish narratives of Q2 such as a Democratic sweep, end of globalization, Japanification, narrow “lockdown” leadership of growth stocks is paradoxically morphing into bullish narratives. Here, Hartnett reminds is that "when the only reason to be bearish is there is no reason to be bearish" that's when you sell. And sure enough, recent market moves justify getting defensive: the global equity market cap has round-tripped from $89tn to $62tn back to $87tn, with BofA warning that it is "hard to see financial conditions getting incrementally easier in July/Aug period of “peak policy” stimulus; summer dip in risk assets (e.g. SPX to 3050) likely."
And yet, all good times come to an end - otherwise the Fed would have printed its way to utopia decades ago - and the with Great Repression in full force, it also means that the Fed is currently pursuing a just as Great Debasement.
Echoing something we have also said, namely that with the bond market now nationalized by the Fed and no longer providing any useful inflationary (or deflationary) signals, the only remaining asset class with any sort of discounting qualities is gold...
... Hartnett writes that interest rate repression means "investors can't hedge the inflationary risk of $11tn of fiscal stimulus via "short bonds"…so investors crowding into "short US dollar", "long gold" hedges.
Indeed, US dollar debasement is well underway as the default narrative for US economy with excess debt, insufficient growth, and maxed-out monetary & fiscal stimulus. However, local currency debasement is also underway everywhere else, and so the next market crisis will lead to an even bigger spike in the dollar as global monetary authorities are faced with an even bigger global synthetic short squeeze than the one which sent the USD soaring to all time highs in March.
Which is why shorting the dollar to hedge debasement may be profitable for a while but eventually lead to catastrophic consequences.
That leaves long gold as the only natural hedge to the central bank "all in" bet of kicking the can until something breaks. That something will likely be gold exploding higher first above $2,000... then $2,500... then $3,000 at which point the Fed's control over fiat currencies, as well asthe illusion that there is no inflation, and the financial regime will finally collapse.
As Hartnett condludes, "the correct historical analog is the late-1960s when themes of “smaller world”, “bigger government”, “monetary & fiscal excess” led to positive nominal returns but also inflection up in inflation.
Secular market trend has been deflation (credit & tech) dominating inflation…$100 of EPS in 1995 now $1,500 in tech sector, but just $425 in everything else (Chart 9 and 10);
yet in 2021 GDP in dollar terms forecast to rise $1.3tn in China, $767bn in EU+UK, versus $612bn in US; global fiscal stimulus the other big 2020 trend...supports rotation from deflation to inflation...and traders note semiconductor stocks are already discounting ISM levels of >60 (Chart 11).
Finally, one look at the price of gold - which just closed at an all time high...
... and it becomes clear that it is now just a matter of time before the financial world as we know it, will end.
"The reason that governments don’t like gold is probably for the same reason that kids don’t like chaperones at the senior prom. Because the chaperones are there to keep the kids in line and prevent them from doing things they really shouldn’t be doing. And that’s really what gold does. It’s kind of like a chaperone for government politicians because it keeps them honest. Because if you have real money, and government wants to spend money on programs, it needs to collect that money in taxes. And that generally puts a brake on a lot of programs because the public doesn’t want to pay.
Gold stands in the way, because you can print paper out of thin air. But gold can’t be printed into existence; it needs to be mined. And if we’re on a gold standard, and gold is money, then the government needs real money. And since it doesn’t have the ability to make it, it has to collect it in taxes before it can spend it back into circulation.”
This issue has seen much skepticism, given that crypto wallets do not resemble the custody requirements of other sorts of assets. Nonetheless, in its interpretive letter on the subject, the OCC wrote:
“The OCC recognizes that, as the financial markets become increasingly technological, there will likely be increasing need for banks and other service providers to leverage new technology and innovative ways to provide traditional services on behalf of customers.”
In the words of the announcement, the new opinion “applies to national banks and federal savings associations of all sizes.”
Acting Comptroller of the Currency Brian Brooks similarly saw the development as part of modernizing banking in the U.S., saying “From safe-deposit boxes to virtual vaults, we must ensure banks can meet the financial services needs of their customers today,”
The OCC’s letter further specifies that bank “custody” of crypto assets is dependent on their access to the keys to the crypto wallets rather than any sort of physical requirement — a confirmation of Andreas Antonopoulos’ famous line of “not your keys, not your coins.” the OCC specifies:
“That national banks may escrow encryption keys used in connection with digital certificates because a key escrow service is a functional equivalent to physical safekeeping.”
OCC’s heightened crypto engagement under Brooks
Coming from Coinbase’s legal team, Brian Brook’s tenure as Acting Comptroller has seen accelerated onboarding of crypto capabilities in the U.S. financial system. Speaking with Cointelegraph in early June, Brooks hinted at his interest in expanding the right to custody crypto.
One month ago, shortly after our return to twitter from "permanent" banishment, when so much public attention had suddenly shifted to the retail daytrading platform Robinhood, we explained just how it is that Robinhood was so efficient at moving markets, and it had nothing to do with Robinhood or its small but dedicated army of 10-year-old daytrading fanatics. Instead, it had everything to do with various High Frequency Trading platforms buying up the retail orderflow that Robinhood was so generously packaging and reselling to the highest bidder, effectively giving HFTs a risk-free way of making pennies from every trade, which would then propagate like wildfire across various trading venues, massively accentuating every small move thanks to the momentum-ignition capabilities of HFT algos.
We then also pointed out that Robinhood engages in a practice called payment-for-order-flow...
... for reasons that would become known shortly.
Unfortunately, both of those tweets no longer exist for the simple reason that just days after they were published, we received an angry letter from Citadel's lawyers at Clare Locke threatening to sue us into oblivion if we did not immediately retract and delete said tweets.
Some key phrases of note from the above text:
"Citadel Securites does not engage in such conduct [i.e., frontrunning] and there was no factual basis whatsoever for ZeroHedge to publish such an incendiary, false, and reckless allegation to its 742,000 Twitter followers" [it's 771,000 now].
"ZeroHedge's statement obviously disparages the lawfulness and integrity of Citadel Securities' business pratices."
"Quite obviously, this most recent iteration of this same harmful allegation was not made in jest."
"We demand that ZeroHedge immediately retract this tweet by deleting it from ZeroHedge's Twitter page... A refusal to promptly take down these remedial steps will be seen as further evidence of actual malice and will only increase the already substantial legal risk faced by you and ZeroHedge."
As the letter correctly notes, this was not the first time Citadel Securities (which is majority-owned by Ken Griffin, the billionaire investor, and is the sister firm to Citadel, the hedge fund he runs) threatened legal action against Zero Hedge for accusing the trading giant of frontrunning orders. On November 22, just hours if not minutes after a tweet of a similar nature, we got a similar legal threat from the same law firm. Again, some of the highlights from that particular letter:
"ZeroHedge's statement obviously disparages the lawfulness and integrity of Mr. Griffin and Citadel Securites's business practices, and thus is defamatory per se.[sic]"
"As you well know, "frontrunning" is an unethical and illegal trading practice."
Needless to say, instead of engaging in a legal battle with the world's richest and most powerful trader and his army of lawyers, we decided to simply comply with their demand. That said, dear gentlemen from ClareLocke - we do know very well that frontrunning is an unethical and illegal trading practice. But we wonder: does your client know that?
The reason why we ask is very simple. According to a Letter of Acceptance (No. 2014041859401), Waiver and Consent published by financial regulator FINRA, none other than Citadel Securities was censured and fined for engaging in - drumroll - "trading ahead of customer orders."
Now we admit that our financial jargon is a bit rusty these days, but "trading ahead of customer orders" sounds awfully similar to another far more popular world, oh yes, frontrunning!
Jargon aside, some of the other highlighted words we are very familiar with, such as "hundreds of thousands"... and "559 instances" in which Citadel traded ahead of customer orders.
Now, we may be getting a little ahead of ourselves here, but it was Citadel's own lawyers that informed us on more than one occasion that:
"frontrunning" is an unethical and illegal trading practice."
So, what are we to make of this? Could it be that Citadel was engaging in at least 559 instance of what its lawyer called "unethical and illegal trading practice." Surely not: after all the lawyers would surely know very well how ridiculous and laughable their letter and threats would look if it ever emerged that Citadel was indeed frontrunning its customers.
But then we read that Finra censured and fined Citadel $700,000 - or as twitter user @KennethDread puts it 0.70% Basquiats...
... and it appears that Citadel may indeed have engaged in some of what its own lawyers called "unethical and illegal" trading practice, especially since Citadel Securities' own General Counsel, Steve Luparello signed the Finra AWC:
Well that's... awkward.
And lest someone ignores all of the above - after all it was published in a fringe, tinfoil conspiracy theory website which according to glorious liberal wizards at Wikipedia is somehow both "far right" and "libertarian" at the same time - here is the far more "erudite" Financial Times explaining what happened:
Over a two-year period until September 2014, the market-maker removed hundreds of thousands of large OTC orders from its automated trading processes, according to Finra. That rendered the orders “inactive” and so they had to be handled manually by human traders.
Citadel Securities then “traded for its own account on the same side of the market at prices that would have satisfied the orders,” without immediately filling the inactive orders at the same or better prices as required by Finra rules, the regulator said.
In February 2014, a sample month reviewed by Finra, the market-maker traded ahead in nearly three-quarters of the inactive orders. “Based on this review, in 559 instances, Citadel Securities traded ahead of 415 inactive OTC customer orders,” the regulator said.
Of course, since the action was launched by Finra and not the SEC - probably for a reason - Citadel was allowed to put the whole sordid affair behind it without admitting or denying the claims. Just one glitch: the company was required to make whole any customers affected, not something a market maker does if they legitimately "deny" anything bad actually happened.
The good news is that neither Citadel nor its lawyers can go after us again for merely reporting what Finra already found because on page 11 of the AWC we read the following:
The Firm may not take any action or make or permit to be made any public statement, including in regulatory filings or otherwise, denying, directly or indirectly, any finding in this AWC or create the impression that the AWC is without factual basis.
Which means that going forward, allegations about Citadel frontran its clients - on at least 559 instances no less - are fair game. That said, Citadel did make a statement to the FT:
"We have addressed all of Finra’s concerns and take very seriously our obligations to comply fully with its rules. The issue relates to a limited number of manually handled orders, most of which occurred in 2012-2014."
Which is a succinct way of summarizing precisely what Finra said. Our own request for comments was not returned by the publication time.
But wait, there's more!
Finra also said Citadel Securities fell short of supervisory requirements and failed to display certain OTC customers’ limit orders: instructions to buy or sell at a specific price, or better. As the FT notes, "nearly half of the 467 limit orders reviewed by the regulator in the six years until September 2018 were found to violate Finra’s requirements to display orders. The bulk of the violations were for failing to execute trades against existing quotations in a timely manner, Finra said."
What does the above mean for clients? Well, they are welcome to sue Citadel Securities and get their money back. As Finra writes, "the imposition of a restitution order or any other monetary sanction herein, and the timing of such ordered payments, does not preclude customers from pursuing their own actions to obtain restitution or other remedies."
What does the above mean for Ken Griffin? Well, as noted above, the penalty is about 0.7% of what the CEO recently paid for a Basquiat painting.
It's also clear that the size of the "penalty" will certainly not force Griffin to mortgage one or more of his extensive properties located in New York, London, Chicago, or Palm Beach and countless others cities across the globe:
One thing that is certain is that "trading" clearly pays, even if it means occasionally and purely unaccidentally "removing hundreds of thousands of mostly larger customer orders" from mandatory Trading Ahead and Limit Order Display Rules and customer protections. Surely that happens every day to all of us.
In fact the only confusion we have at this moment is who is more ironically named: Citadel or Robinhood?
As confirmed by several economic outlets, including Bloomberg, Bank of England governor Andrew Bailey took part in a VTALK with students this past Monday for Speakers for Schools. When the subject of digital currency came up, Bailey said:
We are looking at the question of, should we create a Bank of England digital currency. We’ll go on looking at it, as it does have huge implications on the nature of payments and society. I think in a few years time, we will be heading toward some sort of digital currency.
The digital currency issue will be a very big issue. I hope it is, because that means Covid will be behind us.
Whilst only a short quote, there are several strands to pick up on here.
Consider that this is taking place amidst the Bank for International Settlements ‘Innovation BIS 2025‘ initiative, something which I have regularly written about. This is the ‘hub‘ which brings all leading central banks together in the name of technological innovation.
The RTGS ‘renewal‘ will allow for the bank’s payment system to ‘interface with new payment technologies’, which given the information that the BOE has so far disseminated would likely include distributed ledger technology and blockchain.
For the bank to introduce a CBDC accessible to the public, they will require the reformation of their systems, which is exactly what is happening.
Thirdly, Bailey admits that introducing a CBDC would have ‘huge implications on the nature of payments and society‘. On the payments front, the BOE are pushing the narrative that any CBDC offering would be a ‘complement‘ to cash. It would not, according to them, mean that cash would be withdrawn from circulation. But as I have noted previously, the General Manager of the BIS, Agustin Carstens, made clear in 2019 that in a CBDC world ‘he or she would no longer have the option of paying cash. All purchases would be electronic.‘
The trend of digital payments outstripping cash has been present for several years now. My position is that instead of simply outlawing cash, the state will allow the use of banknotes to fall to the point that the servicing costs of maintaining the cash infrastructure outweigh the amount of cash still in circulation and being used for payment. They will take the gradual approach as opposed to prising cash away from the public. In the end it has the same effect but appears less premeditated. From the perspective of the state, it is much more desirable if people are seen to have made the decision themselves to stop using cash, rather than the state imposing it upon the population.
It was also revealed this week that during the Covid-19 lockdown, over 7,000 ATM’s across the UK were closed due to social distancing measures. This represents over 10% of the UK’s ATM network. Some of these ATM’s still remain out of use, particularly at supermarkets and outside certain bank branches. Equally, some of these branches remain closed four months after the lockdown was introduced, and those that are open are only allowing in a couple of people at a time.
You will recall the hysteria around the supposed dangers of using cash as Covid-19 was labelled a pandemic. On no scientific basis whatsoever, people have been led to believe that handling cash can transmit the virus. This is primarily why cash withdrawals at ATM’s crashed leading into the lockdown by around 50%. This time last year transaction volume was at 50.9 million. Today it is 30.8 million, a 40% drop. From personal experience as a cash office clerk, cash use is now beginning to pick up, but remains well below pre-lockdown levels.
Finally, Bailey commented that he hoped ‘the digital currency issue will be a very big issue‘, because if it was it would mean that ‘Covid will be behind us.‘ A valid question to ask here is why when Covid-19 is ‘behind us‘ should that make the case for a CBDC stronger? The answer lies partly in the growing narrative of life after the pandemic, which plays directly into the World Economic Forum devised ‘Great Reset‘ agenda. Part of the ‘Great Reset‘ includes Blockchain, Financial and Monetary Systems and Digital Economy and New Value Creation.
On first glance, you can see how Covid-19 benefits the drive towards central bank digital currencies.
We are told at every turn that life cannot possibly go back to how it was pre coronavirus, including our relationship with money. Predictably, it did not take global institutions like the BIS long to begin reaffirming the cashless agenda. In April they published a bulletin called, ‘Covid-19, cash, and the future of payments‘ where they stated:
In the context of the current crisis, CBDC would in particular have to be designed allowing for access options for the unbanked and (contact-free) technical interfaces suitable for the whole population. The pandemic may hence put calls for CBDCs into sharper focus, highlighting the value of having access to diverse means of payments, and the need for any means of payments to be resilient against a broad range of threats.
Global planners are seizing on the opportunity that Covid-19 has created. But no one should be deceived into thinking that their prescription for a digital monetary system, with CBDC’s at the center, is only coming to light because of the pandemic. This has been in the works for years.
The banking elites are hoping that once global payment systems have been reformed, CBDC’s will not be far behind. Judging by their own timelines, by 2025 a global network of CBDC’s is a real possibility. The more people that turn away from using cash today, the easier the transition away from tangible assets will prove for those who are angling for it to happen.
It seems like a reset of an economy should work like a reset of your computer: Turn it off and turn it back on again; most problems should be fixed. However, it doesn’t really work that way. Let’s look at a few of the misunderstandings that lead people to believe that the world economy can move to a Green Energy future.
 The economy isn’t really like a computer that can be switched on and off; it is more comparable to a human body that is dead, once it is switched off.
A computer is something that is made by humans. There is a beginning and an end to the process of making it. The computer works because energy in the form of electrical current flows through it. We can turn the electricity off and back on again. Somehow, almost like magic, software issues are resolved, and the system works better after the reset than before.
Even though the economy looks like something made by humans, it really is extremely different. In physics terms, it is a “dissipative structure.” It is able to “grow” only because of energy consumption, such as oil to power trucks and electricity to power machines.
The system is self-organizing in the sense that new businesses are formed based on the resources available and the apparent market for products made using these resources. Old businesses disappear when their products are no longer needed. Customers make decisions regarding what to buy based on their incomes, the amount of debt available to them, and the choice of goods available in the marketplace.
There are many other dissipative structures. Hurricanes and tornadoes are dissipative structures. So are stars. Plants and animals are dissipative structures. Ecosystems of all kinds are dissipative structures. All of these things grow for a time and eventually collapse. If their energy source is taken away, they fail quite quickly. The energy source for humans is food of various types; for plants it is generally sunlight.
Thinking that we can switch the economy off and on again comes close to assuming that we can resurrect human beings after they die. Perhaps this is possible in a religious sense. But assuming that we can do this with an economy requires a huge leap of faith.
 Economic growth has a definite pattern to it, rather than simply increasing without limit.
Many people have developed models reflecting the fact that economic growth seems to come in waves or cycles. Ray Dalio shows a chart describing his view of the economic cycle in a preview to his upcoming book, The Changing World Order. Figure 1 is Dalio’s chart, with some annotations I have added in blue.
Figure 1. New World Order chart by Ray Dalio from an introduction to his theory called The Changing World Order. Annotations in blue added by Gail Tverberg.
Modelers of all kinds would like to think that there are no limits in this world. Actually, there are many limits. It is the fact that economies have to work around limits that leads to cycles such as these. Some examples of limits include inadequate arable land for a growing population, inability to fight off pathogens, and an energy supply that becomes excessively expensive to produce. Cycles can be expected to vary in steepness, both on the upside and the downside of the cycle.
The danger of ignoring these cycles is that researchers tend to create models of future economic growth and future energy consumption that are far out of sync with what really can be expected. Accurate models need to include at least some limited version of overshoot and collapse on a regular basis. Models of the future economy tend to be based on what politicians would like to believe will happen, rather than what actually can be expected to happen in the real world.
 Commodity prices behave differently at different stages of the economic cycle. During the second half of the economic cycle, it becomes difficult to keep commodity prices high enough for producers.
There is a common belief that demand for energy products will always be high, because everyone knows we need energy. Thus, according to this belief, if we have the technology to extract fossil fuels, prices will eventually rise high enough that fossil fuels resources can easily be extracted. Many people have been concerned the we might “run out” of oil. They expect that oil prices will rise to compensate for the shortages. Thus, many people believe that in order to maintain adequate supply, we should be concerned about supplementing fossil fuels with nuclear power and renewable energy.
If we examine oil prices (Figure 2), we see that at least recently, this is not the way oil prices actually behave. Since the spike in oil prices in 2008, the big problem has been prices that fall too low for oil producers. At prices well below $100 per barrel, development of many new oil fields is not economic. Low oil prices are especially a problem in 2020 because travel restrictions associated with the coronavirus pandemic reduce oil demand (and prices) even below where they were previously.
Figure 2. Weekly average spot oil prices for Brent, based on data of the US Energy Information Administration.
Strangely enough, coal prices (Figure 3) seem to follow a very similar pattern to oil prices, even though coal is commonly believed to be available in huge supply, and oil is commonly believed to be in short supply.
Figure 3. Selected Spot Coal Prices, from BP’s 2020 Statistical Review of World Energy. Prices are annual averages. Price for China is Qinhuangdao spot price; price for US is Central Appalachian coal spot index; price for Europe is Northwest European marker price.
Comparing Figures 2 and 3, we see that prices for both oil and coal rose to a peak in 2008, then fell back sharply. The timing of this drop in prices corresponds with the “debt bust” in late 2008 that is shown in Figure 1.
Prices then rose to another peak in 2011, after several years of Quantitative Easing (QE). QE is intended to hold the cost of borrowing down, encouraging the use of more debt. This debt can be used by citizens to buy more goods made with coal and oil (such as cars and solar panels). Thus, QE is a way to increase demand and thus help raise energy prices. In the 2011-2014 period, oil was able to maintain its price better than coal, perhaps because of its short supply. Once the United States discontinued its QE program in 2014, oil prices dropped like a rock (Figure 2).
Prices were very low in 2015 and 2016 for both coal and oil. China stimulated its economy, and prices for both coal and oil were able to rise again in 2017 and 2018. By 2019, prices for both oil and coal were falling again. Figure 2 shows that in 2020, oil prices have fallen again, as the result of all of the demand destruction caused by all of the pandemic shutdowns. Coal prices have also fallen in 2020, according to Trading Economics.
 The low prices since mid-2008 seem to be leading to both peak crude oil and peak coal. Crude oil production started falling in 2019 and can be expected to continue falling in 2020. Coal extraction seems likely to start falling in 2020.
Figure 4 shows that world crude oil production has not grown much since 2004. In fact, OPEC’s production has not grown much since 2004, even though OPEC countries report high oil reserves so, in theory, they could pump more oil if they chose to.
Figure 4. World crude oil production (including condensate) based on data from BP’s 2020 Statistical Review of World Energy. Russia+ refers to the group Commonwealth of Independent States.
In total, BP data shows that world crude oil production fell by 582,000 barrels per day, comparing 2019 to 2018. This represents a drop of 2.0 million barrels per day in OPEC production, offset by smaller increases in production for the US, Canada, and Russia. Crude oil production is expected to fall further in 2020, because of low demand and prices.
Because of continued low coal prices, world coal production has been on a bumpy plateau since 2011. Prices seem to be even lower in 2020 than in 2019, putting further downward pressure on coal extraction in 2020.
Figure 5. World coal production based on data from BP’s 2020 Statistical Review of World Energy.
 Modelers missed the fact that fossil fuel extraction would disappear because of low prices, leaving nearly all reserves and other resources in the ground. Modelers instead assumed that renewables would always be an extension of a fossil fuel-powered system.
The thing that most people do not understand is that commodity prices are set by the laws of physics, so that supply and demand are in balance. Demand is really very close to “affordability.” If there is too much wage/wealth disparity, commodity prices tend to fall too low. In a globalized world, many workers earn only a few dollars a day. Because of their low wages, these low-paid workers cannot afford to purchase very much of the world’s goods and services. The use of robots tends to produce a similar result because robots can’t actually purchase goods and services made by the economy.
Thus, modelers looking at Energy Return on Energy Invested (EROI) for wind and for solar assumed that they would always be used inside of a fossil fuel powered system that could provide heavily subsidized balancing for their intermittent output. They made calculations as if intermittent electricity is equivalent to electricity that can be controlled to provide electricity when it is needed. Their calculations seemed to suggest that making wind and solar would be useful. The thing that was overlooked was that this was only possible within a system where other fuels would provide balancing at a very low cost.
 The same issue of low demand leading to low prices affects commodities of all kinds. As a result, many of the future resources that modelers count on, and that companies depend upon as the basis for borrowing, are unlikely to really be available.
Commodities of all kinds are being affected by low demand and low selling prices. The problem giving rise to low prices seems to be related to excessive specialization, excessive use of capital goods to replace labor, and excessive use of globalization. These issues are all related to the needs of a world economy that depends on a high level of technology. In such an economy, too much of the output of the economy goes to producing devices and to paying highly trained workers. Little is left for non-elite workers.
The low selling prices of commodities makes it impossible for employers to pay adequate wages to most of their workers. These low wages, in turn, feed through to the uprisings we have been seeing in the last couple of years. These uprisings are part of “Revolutions and Wars” mentioned in Figure 1. It is difficult to see how this problem will disappear without a major change in the “World Order,” mentioned in the same figure.
Because the problem of low commodity prices is widespread, our ability to produce electrical backup of all kinds, including the ability to make batteries, can be expected to become an increasing problem. Commodities, such as lithium, suffer from low prices, not unlike the low prices for coal and oil. These low prices lead to cutbacks in their production and local uprisings.
 On a stand-alone basis, intermittent renewables have very limited usefulness. Their true value is close to zero.
If electricity is only available when the sun is shining, or when the wind is blowing, industry cannot plan for its use. Its use must be limited to applications where intermittency doesn’t matter, such as pumping water for animals to drink or desalinating water. No one would attempt to smelt metals with intermittent electricity because the metals would set at the wrong time, if the intermittent electricity suddenly disappeared. No one would power an elevator with intermittent electricity, because a person could easily be trapped between floors. Homeowners would not use electricity to power refrigerators, because, as likely as not, the food would spoil when electricity was off for long periods. Traffic signals would work sometimes, but not others.
Lebanon is an example of a country whose electricity system works only intermittently. It is hard to imagine that any other country would want to imitate Lebanon. Lack of reliable electricity supply leads to protests in Lebanon.
 The true cost of wind and solar has been hidden from everyone, using subsidies whose total cost is hard to determine.
Each country has its own way of providing subsidies to renewables. Most countries give wind and solar the subsidy of “going first.” They are often given a fixed rate as well. Both of these are subsidies. In the US, other subsidies are buried in the tax system. Recently, there has been talk of using QE to help wind and solar providers lower their cost of borrowing.
Newspapers regularly report that the price of wind and solar is at “grid parity,” but this is not an apples to apples comparison. To be useful, electricity needs to be available when users need it. The cost of storage is far too high to allow us to store electricity for weeks and months at a time.
f we were to use intermittent electricity as a substitute for fossil fuels in general, we would need to use intermittent electricity to heat homes and offices in winter. Sunshine is abundant in the summer, but not in the winter. Without storage, solar panels cannot even be counted on to provide homeowners with heat for cooking dinner after the sun sets in the evening. An incredibly huge amount of storage would be needed for storing heat from summer to winter.
China reports that it has $42 billion in unpaid clean energy subsidies, and this amount is getting larger each year. Countries are now becoming poorer and the taxes they are able to collect are lower. Their ability to subsidize a high cost, unreliable electricity system is disappearing.
 Wind, solar, and hydroelectric today only comprise a little under 10% of the world’s energy supply.
We are deluding ourselves if we think we can get along on such a tiny total energy supply.
Figure 6. Hydroelectric, wind, and solar electricity as a percentage of world energy supply, based on BP’s 2020 Statistical Review of World Energy.
Few people understand what a small share of the world’s energy supply wind and solar provide today. The amounts shown in Figure 6 assume that the denominator is total energy (including oil, for example) not just electricity. In 2019, hydroelectric accounts for 6.4% of world energy supply. Wind accounts for 2.2%, and solar accounts for 1.1%. The three together amount to 9.7% of world energy supply.
None of these three energy types is suited for producing food. Oil is currently used for tilling fields, making herbicides and pesticides, and transporting refrigerated crops to market.
 Few people understand how important energy supply is for giving humans control over other species and pathogens.
Control over other species and pathogens has been a multistage effort. In recent years, this effort has involved antibiotics, antivirals and vaccines. Pasteurization became an important technique in the 1800s.
Human’s control over other species started over 100,000 years ago, when humans learned to burn biomass for many uses, including cooking foods, scaring away predators, and burning down entire forests to improve their food supply. In my 2018 post, Supplemental energy puts humans in charge, I wrote about one proof of the importance of humans’ control of fire. In the lower layers of a cave in South Africa, big cats were in charge: There were no carbon deposits from fire and gnawed human bones were scattered around the cave. In the upper layers of the same cave, humans were in clearly charge. There were carbon deposits from fires, and bones of big cats that had been gnawed by humans were scattered around the cave.
We are dealing with COVID-19 now. Today’s hospitals are only possible thanks to a modern mix of energy supply. Drugs are very often made using oil. Personal protective equipment is made in factories around the world and shipped to where it is used, generally using oil for transport.
We do indeed appear to be headed for a Great Reset. There is little chance that Green Energy can play more than a small role, however. Leaders are often confused because of the erroneous modeling that has been done. Given that the world’s oil and coal supply seem to be declining in the near term, the chance that fossil fuel production will ever rise as high as assumptions made in the IPCC reports seems very slim.
It is true that some Green Energy devices may continue to operate for a time. But, as the world economy continues to head downhill, it will be increasingly difficult to make new renewable devices and to repair existing systems. Wholesale electricity prices can be expected to stay very low, leading to the need for continued subsidies for wind and solar.
Figure 1 indicates that we can expect more revolutions and wars at this stage in the cycle. At least part of this unrest will be related to low commodity prices and low wages. Globalization will tend to disappear. Keeping transmission lines repaired will become an increasing problem, as will many other tasks associated with keeping energy supplies available.
In recent articles for Goldmoney I have pointed out the dollar’s vulnerability to a final collapse in its purchasing power. This article focuses on the factors that will determine the future for sterling.
Sterling is exceptionally vulnerable to a systemic banking crisis, with European banks being the most highly geared of the GSIBs. The UK Government, in opting to side with America and cut ties with China, has probably thrown away the one significant chance it has of not seeing sterling collapse with the dollar.
A possible salvation might be to hang onto Germany’s coattails if it leaves a sinking euro to form a hard currency bloc of its own, given her substantial gold reserves. But for now, that has to be a long shot.
And lastly, in common with the Fed and ECB, the Bank of England has taken for itself more power in monetary matters than the politicians are truly aware of, being generally clueless about money.
Conclusion: the pound is unlikely to survive a dollar collapse, which for any serious student of money, is becoming a certainty.
In recent articles I have made a case for the dollar’s demise. Accelerated money-printing is being used to support everything through the coronavirus crisis, which comes on top of a potentially devastating turn in the credit cycle, made worse by the suppression of international trade through tariffs. Only the blind cannot see that with everyone calling for the end of globalisation, it is now actually happening with consequences to follow. Being the grease for global trade the dollar is required by foreigners in fewer quantities and will be sold down by them; they own some $27 trillion in securities, bills and cash, approximately 125% of US GDP in 2019.
It makes the dollar doubly vulnerable to two developing events impacting the domestic front: a global banking crisis and a full-blown depression. The former guarantees an expensive rescue attempt as the Fed has no option but to attempt to underwrite all banking obligations, and the latter will provoke a response of Keynesian inflationism on steroids. Furthermore, such a crisis is bound to lead to dollar long positions being unwound in the foreign exchanges for reasons detailed above, only leaving those required for immediate liquidity needs.
The emerging economic crisis is different from Lehman because it is a collapse of non-financial businesses worldwide undermining the widest extent of banking collateral, while the Lehman Crisis was broadly confined to the unwinding of residential property speculation, predominantly in America. It is therefore a more fundamental liquidation problem, involving considerably greater quantities of debt. Excessive speculation is far easier to wash out of the system than real businesses going bust in large numbers.
A new systemic crisis is imminent because the policy of supporting financial asset values by money-printing will sooner or later fail. Already, it has become impossible for independent observers to reconcile rising stock markets with collapsing businesses, the latter getting irretrievably worse by the day. The commercial banks are stuck in the middle of this crisis, expected to extend credit while their bad debts escalate at a record pace.
The tensions being created by the authorities’ manipulation of markets in defiance of fundamental factors can only result in a systemic crisis coupled with a crash in financial asset values. By binding their future to an inflation of asset prices, a collapse of fiat currencies will prove impossible to avoid. At least, that is the lesson from John Law when in 1720 his Mississippi scheme collapsed in about six months and his livres currency became entirely worthless.
The reason is not hard to discern. An event such as a banking crisis disrupts investor complacency. A banking crisis is always resolved in the short term by an opening of the money spigot by the lenders of last resort. The Fed can attempt to deal with liquidity, but it cannot stop insolvency. The consequences are that risk assets, starting with equities, are sold as insolvencies rise. And as the asset inflation support scheme of the central banks unwinds, bond yields are reassessed. Defaults become commonplace. Junk becomes junk squared and investment grade descends into junk. Next is the reassessment of government funding requirements, and with the costs required to save the non-financial economy laid bare, even government bond yields escape from the central bank’s manipulative control.
Money and debt are like matter and antimatter: when they come together in a financial black hole they cease to exist. A financial cytokine storm is bound to hit the over-owned US dollar first, being everyone’s international fiat currency. Its purchasing power measured initially against other currencies declines, and then against commodities, energy and the values of life’s essentials. The marker for this outcome is the price of gold, rising strongly and increasingly likely to cause its own crisis for bullion banks, which are currently committed to losses of $38bn on the Comex gold futures contract alone. The only solution for the US is to accept a return to gold. But that is wholly against the DNA of the Fed and US Treasury, and it would hand unacceptable power to the Chinese, who have cornered the physical gold market.
We stand therefore on the threshold of a global fiat money destruction, starting with the US dollar, being expressions of faith in our governments, which are descending into bankruptcy. And when a nation’s population realises that the reason for rising prices is not, as their government is likely to aver, the greed of capitalists but the loss of its unbacked currency’s credibility, it will prove impossible to stabilise it.
While the dollar’s fate increasingly appears to be sealed, the question arises over the fate of other currencies. To greater or lesser degrees, the same underlying factors affect all fiat currencies and the dollar’s demise will require survivors to have introduced at least an element of soundness in their backing. In this article, we focus on how sterling might fare in this outcome, and whether the UK’s monetary authorities can rescue it from the dollar’s fate.
Delusions in Westminster and Whitehall
For an international audience it is worth outlining the difference between these two expressions of the same location: Westminster is associated with Parliament and the politicians while Whitehall is associated with the great offices of state, the bureaucratic civil service whose offices are in the Westminster street of that name. The civil service advises the politicians, so both these arms of government must understand and accept the solution to any crisis. With respect to money issues they have been delegated lock stock and barrel to Threadneedle Street, the location of the Bank of England in the City.
The physical separation between Westminster and the City matters. Not only have monetary affairs been fully delegated to the Bank of England but different cultures have evolved, with Westminster and the Treasury in Whitehall assuming monetary policies are competently managed. But, as they say, power corrupts, and absolute power corrupts absolutely. There are no meaningful checks and balances on the Bank of England and its monetary policy. And you cannot sack the Governor without creating a monetary crisis.
The BoE is culturally closer to the ECB, the Fed, and the Bank for International Settlements than Westminster. Monetary policy is no longer focussed on the national interest, but a cadre of unelected central bankers, with more power than the political class, have been cooking up their own objectives. A long time ago, Mayer Amschel Rothschild put it succinctly; “Let me issue and control a nation’s money and I care not who writes the laws”.
The situation in Britain echoes that of America in the 1920s. Calvin Coolidge was the last laissez-faire president. But he did not realise what Benjamin Strong was doing at the relatively new Fed. Strong oversaw manipulation of gold in conjunction with Norman Montague at the Bank of England, the rapid expansion of bank credit and the establishment of a discounted bill market, aiming to copy the success of London’s discount houses. The unwinding of this unbacked credit led to the Wall Street crash and the 1930s depression.
Similarly, a British quasi-libertarian government was elected last year, determined to deal with an overly bureaucratic Whitehall, focused on process instead of objectives. Except, and like Coolidge they don’t realise it, the real power lies with today’s Montague Norman in cahoots with today’s Benjamin Strong — Andrew Bailey and Jay Powell.
We must understand the importance of the relationship between the BoE and the politicians. It makes it virtually impossible for the government to control monetary events. Let us assume that key ministers in the government actually understand the importance of returning to a metallic standard and are willing to give up the facility of financing government spending by inflationary means. It will cut no ice with civil service advisors, who are all committed neo-Keynesians. And the BoE will fight strongly to resist, because a gold standard removes the Bank’s power. It makes it extremely unlikely Britain’s free-market government can ween itself away from inflationary financing, even in a monetary collapse. And the current situation is deteriorating rapidly, too rapidly for a disputing combination of Westminster, Whitehall and the BoE between them to regain control over a collapsing currency.
One possible escape route has been closed off in recent weeks, with the British siding with America and therefore her dollar against China and her inherently more promising economic situation. China’s economic policies are far from ideal in the free market sense. China is like all other major nations, relying on inflationary finance to develop her own infrastructure as well as pan-Asian communications and transport facilities. But at least her currency is backed by a high savings rate of some 45%[ii], which as well as reducing the tendency towards price inflation emanating from monetary inflation, provides needed capital for investment in production.
A propensity to save was the defining characteristic of post-war Germany’s mark and Japan’s yen, which is now shared by China’s yuan. And unlike Britain and her allies China’s welfare commitments are minimal, so future government costs are easier to control.
The UK has decided to side with yesterday’s declining power for democratic and cultural reasons as well as the lure of the “special relationship”. It has rejected an alliance with the most dynamic of the major powers, which with Russia as its sidekick is rapidly becoming the world’s superpower, dominating Eurasia and Africa. When the history of our era is written, be in no doubt that we will see that current events, instigated by America, has given China what she really wants: freedom from American hegemony and from her overvalued currency at a crucial time. She can now progress her economy, thanks to its savers, while America continues to destroy hers through maxed-out consumption and monetary inflation.
Furthermore, China has effectively cornered the physical gold market; checkmate for fiat currencies. And not only will America find it intellectually difficult to return to gold, and virtually impossible to return to the necessary balanced budgets, but anything that promotes gold as money plays to China’s strength and America then loses all hope in the financial war waged against China.
Britain’s banks are especially vulnerable
Based on its pre-eminent role in the financing of trade, for some 200 years the City of London has been a major centre in Europe for international finance. Half that time was spent on a gold standard between the Napoleonic Wars and the First World War. Following the latter, New York became increasingly powerful while London declined. After the Second World War and Britain’s descent into socialism and exchange controls, London became less relevant until the Thatcher era, when the removal of exchange controls and the City’s big-bang restructuring made London fully relevant to global finance once again.
The massive expansion of financial business since the mid-eighties reflected the generally non-nationalistic British approach to business. In the European context this is why the nationalists in Frankfurt and Paris by giving preference to national champions could never compete, and the reason why European banks chose London to base their non-domestic lending and investment banking activities.
A general fiat currency collapse will wipe out virtually all London’s existing financial business: over-the-counter derivatives, trade finance, bonds and eurobonds, equities — these will be only some of the casualties. So far as the UK Government is concerned, tax revenue from these activities are over 10% of its total income and their failure will immediately throw up a matching budget deficit — virtually impossible to finance in these conditions. The other side of the coin is what happens to the UK’s banking system in a global systemic collapse, to which the UK is much exposed because of its financing pre-eminence.
According to the Bank of England’s database, total outstanding financial institutions’ sterling and foreign currency assets at 31 May stood at £8.12 trillion ($10.2 trillion), 3.6 times UK GDP. In a banking crisis the government would have no option but to take these assets on board or to alternatively underwrite loan losses in their entirety. Furthermore, without the continuing support of stable financial asset values — which is inconceivable following a systemic crisis of any magnitude — then net liabilities will be uncovered, and losses will accumulate. In other words, if in this inflationary environment stock markets crash and bond yields rise, the government will be exposed to further catastrophic losses.
The Bank of England’s database does not include assets and liabilities of the foreign subsidiaries of financial institutions which are a further substantial sum. Do not expect their automatic inclusion in any rescue package. These losses will have to be addressed in other financial centres and given that offshore centres do not have safety nets for depositors the losses and consequences will be considerable. Nor do they include shadow banking, estimated by the Office for National Statistics in 2018 to be a further £2.2 trillion, though this figure fluctuates wildly.
There is a further complication, and that is the divorce of Chinese activities from the Anglosphere, affecting both HSBC and Standard Chartered, two major British banks with substantial Chinese and Far Eastern businesses. The politics of the situation are at odds with financial reality, and criticism of China’s non-democratic regime risks ending up in a rescue attempt of these banks by the BoE and the Treasury, while rapidly disappearing business leaves the British holding the remaining liabilities.
The context of Brexit
The UK is negotiating trade terms with the EU to apply following the implementation period which expires at the end of this year. The promise of a golden future, which certainly chimes with the Prime Minister, is embodied in free trade. Free ports are proposed. With members of the Commonwealth free trade agreements can be easily negotiated with good will on both sides, and agreements with Japan and South Korea can be simply novated from existing EU agreements. But the prospect of a fast-tracked agreement with the US may be receding, with President Trump increasingly distracted by domestic concerns in this his election year.
The lack of a trade agreement with the EU is less of a threat to the UK than commonly argued, the greater losers by far being the EU. However, the UK is still financially obligated for EU economic programmes. According to Brexit Central, under the current Multiannual Financial Framework Britain could be on the hook for financial claims up to €478bn, though this is disputed. More important is the UK banking system’s counterparty risk in the event of an EU banking crisis.
In Figure 1, global systemically important banks (GSIBs) in Europe and the UK are highlighted in yellow. The most highly geared banks are in the Eurozone, when total balance sheet assets are compared with the market capitalisation of banks’ equity. Of the fifteen most highly geared, only three banks are not European, and all three UK GSIBs are in this category.
The most extreme of the GSIBs is Société Generale, currently with assets over 100 times its market capitalisation. The difficulties of the major German private banks, Deutsche and Commerzbank (not a GSIB) have been widely publicised, as have those of Italian, Spanish and Greek banks. When a systemic crisis hits global markets, there’s a good chance it will start in the European time zone, for which London remains the financial centre.
It’s not just about COVID-19
So far, planned spending in connection with the coronavirus amounts to an estimated £190bn — about 7% of M1 money. The hope is that once the crisis passes, the economy will revert to normal – the so-called V-shaped recovery. As this prospect recedes, businessmen will review their forecasts, and the majority will either close or downsize their operations.
The purpose of the furlough scheme was to bridge a V-shaped recovery and prevent massive unemployment, but that ends in October, having kept over nine million people out of the unemployment statistics. Unless there is some sort of miracle, many of these will be unemployed when, or even before the furlough scheme ends.
The extra spending on the furlough and other schemes has been covered by the Bank of England’s £200bn quantitative easing programme on a one-off basis. Doubtless, as the situation evolves there will have to be further funding by this route, otherwise funding costs will rise sharply.
Having gone nap on a V-shaped recovery it is not clear how the government plans its exit. Governments almost always make the mistake of thinking there is an economic normal to which a previous situation can return. This is the underlying assumption behind statistical measuring and economic modelling. Instead, economies are dynamic except in a totalitarian regime where everything is rationed by a central committee. But we know that doesn’t work, as demonstrated when the Berlin Wall fell.
There is therefore no “normal” to which to return. Subsidising existing businesses and furloughing staff is an encumbrance to necessary changes in production in order to satisfy consumers, who will have changed their needs and wants. For example, if the coronavirus is conquered and all social interaction returns, it is reasonable to assume that consumers won’t be in the market in large numbers for luxury SUVs to the same extent, yet manufacturers have been investing their production heavily in this direction for the last twenty years. Before the lockdown, retailers deemed it necessary to have branches in every city and every shopping mall, in order to secure and maintain market share. Their priorities have now changed from these strategic objectives to conserving capital.
To be fair to Rishi Sunak, the Chancellor, he appears to understand this point and has made available interest-free finance to small and medium size businesses. Partly, that will be used by businesses to stabilise their finances, but it does give the opportunity for entrepreneurs to fund new ventures. But even then, subsidised capital is usually taken up solely for the opportunity rather than to fund a properly considered venture, leading to malinvestments exposed at the turn of the next credit cycle.
But there is one thing clear: even with a government dominated by ministers more libertarian than any since the Thatcher era and therefore sympathetic to free market solutions, there is no exit plan that fully recognises the role of free markets. Government spending as a proportion of GDP has increased, will increase further and is unlikely to decline. Nor is there any recognition of the global bank credit cycle and its consequences. Forgotten is the downturn in global trade, which for an entrepôt nation is vitally important. For different reasons, the developing crisis for the dollar is also developing for sterling.
Can sterling avoid the dollar’s fate?
The economic solution to preserve the currency can be easily described. The problem is whether those in charge understand it after decades of Keynesian intervention and inflationism. Not only must Keynes’s theories be jettisoned, but the whole macroeconomic paradigm as well. And there must be an unequivocal acceptance that the role of the state must be rolled back to only the defence of the nation, the provision of law and order and to maintain clear, simple contract law. Taxes must be substantially reduced but balanced budgets maintained as well. Socialism must be ditched, and the people be permitted to build and maintain their own wealth.
That it can be achieved without going onto a gold standard was shown in Germany following the collapse of the paper mark in 1923, and again in Germany in 1948 when Ludwig Erhard piloted the nation from post-war destruction to becoming the wealthiest European nation by the time of its reunification. His recipe was simple: remove control of the economy from the Allied military administrations and hand it back to the people.
Germany had monetary stability without gold, but under the Bretton Woods agreement the dollar was a sheet anchor, directly (or indirectly in the case of Britain and France’s colonies). Germany used this breathing space to build her own gold reserves. Low government spending, a growing savings culture and growing exports allowed the foreign exchanges to set a rate for the mark confidently, giving it added credibility for the German people who welcomed the opportunity to save appreciating marks. But today, no such exchange stability will exist when the dollar collapses, except for those nations which take appropriate monetary action.
Therefore, a precondition for stabilising the currency without gold is that there are other stable currencies. After this crisis wipes out purely fiat currencies it will therefore require a return to gold backing for the few survivors. Britain foolishly sold most of her gold when Gordon Brown was Chancellor of the Exchequer and has only 310 tonnes left. As a rule of thumb that works out as £8,600 of M-zero money supply to one ounce of gold, comparing badly with Britain’s European neighbours.
It is worth noting that Germany, France and Italy do have significant gold reserves. A sub-optimal solution for them would be to transfer these reserves to the ECB and the ECB to use them to stabilise the euro. Better solutions can be had. The ECB has shown with its monetary policies to be entirely reliant on unsound money, with which it is destroying the eurozone’s banking system. Its management is incapable of being re-educated. As an institution it should be dismantled before it does any more harm.
Meanwhile, the Bundesbank has been forced into silence on the matter, retaining at its core a few influential sound money men, despairing of a solution. But for them to take over control of ECB policy would be politically divisive, making it virtually impossible to deliver monetary stability.
The practical and political choice would be to withdraw. German politics, informed by two currency collapses in the last hundred years, strongly suggests Germany would choose to go it alone with its own gold-backed currency. Far better for Germany to abandon the money side of the European project. This would be a major development, leading to the destruction of the euro. But with the collapse of the dollar and the current ECB management in charge, this would be seen as an increasingly likely outcome for the euro anyway.
If a new German mark had gold backing, the Netherlands would probably join to form the nucleus of a gold-backed bloc. France and Italy have the gold reserves but lack budgetary control. Whichever way it pans out sound money could emerge in Europe, in which case the right economic policies in the UK might have a chance of stabilising the pound, because there would be a basis of comparative valuation for it on the foreign exchanges and a complete monetary collapse might be avoided. But compared with having and deploying credible gold reserves it would be rather like playing league-level football with your shoelaces tied together.
Despite having the most libertarian government for the last forty years, there is little sign any senior ministers really understand monetary affairs. Furthermore, by giving over responsibility for money to the Bank of England, there is a feeling in Westminster and Whitehall that there is no need to worry about how the Bank achieves agreed targets on unemployment and price inflation. The result is the Bank is now arguably more powerful than the executive, planning monetary policies with other central banks instead of for the direct benefit of the British Isles.
Britain faces a difficult time in the next few months. A global banking crisis can be taken as read, requiring the government and the BoE to backstop all banking obligations. The destructive monetary policies of the ECB, with which the BoE has been complicit, should drive Germany to re-establish the mark, hopefully backing it with gold to form the nucleus of a new European sound money regime, but there is no guarantee of this outcome.
Furthermore, by submitting to America’s anti-China policy, Britain has done away with the one possible economic and monetary lifeline at its disposal. Clearly, no one in government thinks this really matters, showing a lack of strategic vision.
It will be a brave Britton who relies on the survival of his currency through these extraordinary times.
We know that coronavirus death counts are being inflated - we just don't know by how much. After all, how could they not be when there is a financial incentive for states and municipalities to report deaths as coronavirus deaths? And for some states, there may even be a political incentive...
Which is why it shouldn't come as a total surprise when a man who suffered a fatal motorcycle accident in Florida last week was added to the state's Covid-19 death count.
Fox 35 did an investigation where they talked to Orange County Health Officer Dr. Raul Pino about two deaths of people in their 20s that were labeled coronavirus deaths. When they asked if the people who died had underlying conditions, Pino responded: “The first one didn’t have any. He died in a motorcycle accident.”
When he was asked about whether or not the motorcycle victim's data was removed from the state's Covid system, he responded:
“I don’t think so. I have to double-check. We were arguing, discussing, or trying to argue with the state. Not because of the numbers -- it’s 100…it doesn’t make any difference if it's 99 -- but the fact that the individual didn’t die from COVID-19…died in the crash. But you could actually argue that it could have been the COVID-19 that caused him to crash. I don’t know the conclusion of that one.”
This seems to stand at odds with how the Florida Department of Health explained how they were reporting Covid deaths.
The state had told Fox: "A COVID death is determined if COVID19 is listed as the immediate or underlying cause of death, or listed as one of the significant conditions contributing to death. Or, if there is a confirmed COVID-19 infection from a lab test – and the cause of death doesn’t meet exclusion criteria – like trauma, suicide, homicide, overdose, motor-vehicle accident, etc."
“The only thing that I can say to people is the data I provide you with is the data we consume from the state. We offer you the best data that we have,” Pino concluded, copping out.
You can watch Fox's report on the motorcycle accident here:
And for those wondering about how Covid deaths are being counted, this April interview on Fox News with Dr. Scott Jensen does a good job of explaining just some of the issues:
Months ago the USS Theodore Roosevelt carrier disaster which saw over 1,000 crew members infected with COVID-19, cutting short its mission in the western pacific also amid public controversy and division within the Navy's ranks over the handling of the crisis, made it clear that the Pentagon is keenly aware that US national security could be deeply impacted by the pandemic.
During that prior saga China even boasted that its own warships in the region were coronavirus-free, prompting US generals to issue their own statements of continued full military readiness.
But new infected case numbers put out by Military Times reveals the Department of Defense (DoD) is continuing to fight an uphill battle on this front: "Coronavirus cases are up more than 20 percent in service members this week, to 20,212, as the military’s battle against the pandemic continues to mirror the challenges civilian leaders are facing across the country."
Military officials have downplayed this grim milestone of over 20,000 US military cases, including three deaths and 425 hospitalizations, as reflective of the rest of the general population.
Like the civilian population, military cases have more than doubled since April. "From the first soldier diagnosed in South Korea at the end of February, it took until early June for the military to see 10,000 cases. The next 10,000 cases took six weeks," Military Times writes.
It's likely that similar to what was observed in USS Roosevelt cases, most military personnel with coronavirus are asymptomatic, but the DoD has struggled to break this down and provide public data.
One likely explanation for the rise in military cases is that most major installations are located in states like Texas, which has seen spiking numbers across the population. The Military Times report continues:
Defense officials have pointedto local spikes in states like California, Arizona, Texas, Georgia and Florida, all home to multiple military installations, as a possible reason for the increase. After numbers of new cases stabilized in May, the Defense Department has seen a steady increase going back to June, when “re-opening” plans began to roll out across the U.S.
In April, when tensions with China in the East and South China Seas were growing, also after the Roosevelt supercarrier was temporarily taken out of commission by outbreak among the crew, Joint Chiefs Chairman General Mark Milley issued a stern warning to enemies.
"We're still capable and we're still ready no matter what the threat," Milley said at the time. "I wouldn't want any mixed messages going out there to any adversaries that they can take advantage of an opportunity, if you will, at a time of crisis," he added. "That would be a terrible and tragic mistake if they thought that."
It's believed his message was directed mainly at Beijing and the People's Liberation Army (PLA).