Authored by 'El Sultan Bitcoin' via Bitcoin Magazine,

The Bitcoin halving event, a pivotal occurrence, is scheduled for April, 19 2024. This quadrennial event will reduce the block subsidy for Bitcoin miners from 6.25 BTC to 3.125 BTC, thereby halving the reward that miners receive for their efforts.

Such events have historically led to profound shifts in the mining landscape, potentially influencing various economic and operational facets of Bitcoin mining.

ECONOMIC OUTLOOK AND MARKET PREDICTIONS

After the halving, the immediate impact is a considerable decrease in miner revenue due to the reduced block subsidy. This could lead to a decline in the hashrate as less efficient miners may turn unprofitable and exit the network. Luxor’s Hashrate Index Research Team projects about 3-7% of Bitcoin’s hashrate could go offline if Bitcoin’s price maintains its current level. However, if prices fall, up to 16% of the hashrate could become economically unviable, depending on the trajectory of Bitcoin prices and transaction fees post-halving.

The hashrate, a critical security measure for Bitcoin, might adjust along with difficulty levels to align with the new economic realities. Luxor’s analysis suggests different scenarios where the network's hashrate could end up ranging from 639 EH/s to 674 EH/s by year's end, reflecting adjustments to the new earning potential post-halving.

ASIC PRICING AND BREAKEVEN POINTS

Post-halving, the profitability of different ASIC models will become crucial as the mining reward drops. Lower rewards mean that only the most efficient machines will be able to operate profitably if the price of Bitcoin does not see a significant increase. For instance, according to Luxor’s projections, next-generation ASICs like the S19 XP and M30S++ might have breakeven power costs ranging from $0.07/kWh to $0.15/kWh, depending on post-Halving hashprice.

This shift in profitability will likely lead to a repricing of ASIC machines. Historical data suggests that ASIC prices are highly correlated with hashprice; therefore, the anticipated reduction in hashprice will prompt a downward adjustment in ASIC values. This will particularly impact older and less efficient models, potentially accelerating their phase-out from the market.

THE ROLE OF CUSTOM ASIC FIRMWARE POST-HALVING

To combat reduced profitability, miners are increasingly turning to custom ASIC firmware to improve the efficiency of their hardware. Firmware like LuxOS and BraiinsOS can enhance the performance of machines by optimizing their power usage and hashrate output, thus lowering the breakeven point for electricity costs. For example, underclocking an S19 with custom firmware could extend its operational viability by reducing its power draw, thereby maintaining profitability even at lower hashprices.

Public miners, in particular, are adopting custom firmware to boost the efficiency of their fleets. Companies like CleanSpark and Marathon have reported using custom solutions to enhance their operational efficiencies. This trend is expected to grow as more miners seek to maximize their output and minimize costs in the face of decreasing block rewards.

2024 BITCOIN HALVING AND BEYOND

The 2024 Bitcoin Halving is set to reshape the mining landscape significantly, just as previous halvings have. While the exact outcomes are uncertain, the event will undoubtedly present both challenges and opportunities. Miners who plan strategically, taking into account both economic forecasts and operational efficiencies, will be better positioned to navigate the post-halving environment.

For those in the Bitcoin mining industry, staying informed and adaptable will be key to leveraging the halving event as an opportunity rather than a setback. With the right preparations, particularly in ASIC management and firmware optimization, miners can continue to thrive even under tightened economic conditions.

On Wednesday night, against the backdrop of the war in Gaza expanding to Lebanon and Syria, ZeroHedge held a debate to discuss the war in the Middle East.

Debating that question and more at last night’s ZeroHedge debate were talk show host Dennis Prager and Newsweek opinion editor Batya Ungar-Sargon vs. Young Turks founder Cenk Uygur and libertarian Dave Smith. The event was masterfully moderated by Saagar Enjeti, founder of Breaking Points.

Key themes included the morality of Israel's invasion and the broader historical and political context that led to it, historical narratives - including grievances, perceptions of historical rights to land, and the impact of these narratives on current attitudes and policies, and future prospects of potential solutions and the feasibility of peace in the region.

Summarizing the participants' general positions:

• Dennis Prager: Argues that the root of the conflict is the non-acceptance of a Jewish state by Israel's neighbors. He emphasizes that if Israel disarmed, it would lead to genocide against Jews, drawing a parallel between the hostility Israel faces and historical antisemitism.

• Cenk Uygur (The Young Turks): Criticizes the conduct of Israel in the conflict, pointing to the high number of Palestinian casualties and the broader humanitarian impact. He challenges the portrayal of Hamas and Palestinian resistance, comparing it to historical resistance movements against oppression.

• Batya Ungar-Sargon: Focuses on whether Israel's actions since the invasion were just and suggests that while the devastation is immense, Israel's military actions are justified as self-defense against a terrorist group (Hamas) embedded within civilian areas.

• Dave Smith: Discusses the complexities of the situation, suggesting that simplistic narratives about good vs. evil do not capture the realities of the conflict. He stresses that both Israelis and Palestinians include individuals who desire peace and those who pursue more extreme outcomes.

The feedback was overwhelmingly positive, and we agree - it's worth a watch.

Thank you, It was an interesting, informative, and civil debate.

— Freedom Florida, Free America (@Randrenn) April 18, 2024

Everyone should watch this debate

— djbowzer (@djbowzer) April 17, 2024

For those who missed it last night, here are some highlights:

Were the Palestinians actually "offered a state"?

Prager and Smith debated what transpired during the Camp David Accords of 2000 between Bill Clinton, Ehud Barak of Israel, and Yasser Arafat of the Palestinian Authority. The event is commonly used to depict the unwillingness of Palestinians to make necessary compromises for the right to establish their own state.

ZH middle-east war debate highlights:

Were the Palestinians actually "offered a state"?

Prager and Smith debated what transpired during the Camp David Accords of 2000 between Bill Clinton, Ehud Barak of Israel, and Yasser Arafat of the Palestinian Authority. The event is… pic.twitter.com/EpH3N7rMPn

— zerohedge (@zerohedge) April 18, 2024

Israel has a "superior" culture to the Middle East?

Does Israel’s comparatively freer society and more prosperous society grant it moral authority over the war in Gaza? Prager pressed the issue to Smith and Uygur: “How’s this that none of you like to talk about? There are 2 million Palestinians in Israel.”

ZH middle-east war debate highlights:

Israel has a "superior" culture to the Middle East?

Does Israel’s comparatively freer society and more prosperous society grant it moral authority over the war in Gaza? Prager pressed the issue to Smith and Uygur: “How’s this that none of… pic.twitter.com/DvHsSz7ioh

— zerohedge (@zerohedge) April 18, 2024

Smith says there have been atrocities on both sides:

“The internet has a permanent memory” pic.twitter.com/vfN4yjRtm2

— Dave Smith (@ComicDaveSmith) April 18, 2024

Cenk vows a tax strike if the US goes to war with Iran!

As the Iran debate heated up, Cenk Uygur said enough is enough when it comes to Middle Eastern wars, making the firm claim that he will refuse to pay taxes if the U.S. “tries to send one of our guys into the Middle East” to “die for Netanyahu.”

ZH middle-east war debate highlights:

Cenk vows a tax strike if the US goes to war with Iran

As the Iran debate heated up, Cenk Uygur said enough is enough when it comes to Middle Eastern wars, making the firm claim that he will refuse to pay taxes if the U.S. “tries to send… pic.twitter.com/frztg5JBTg

— zerohedge (@zerohedge) April 18, 2024

Netanyahu covertly funded Hamas

Smith challenged Prager and Ungar-Sargon on Netanyahu’s covert campaign to fund Hamas for the purpose of undermining a Palestinian state. Both pro-Israel candidates acknowledged the veracity of such reports but claimed Netanyahu “didn’t know” it would lead to October 7.

Prager then went on to claim that Israel does not commit atrocities (outside of wartime). “That is a libel of Israel and it’s dishonest!” he said when Smith stated that both sides have affected “ungodly” atrocities.

ZH middle-east war debate highlights:

Netanyahu covertly funded Hamas

Smith challenged Prager and Ungar-Sargon on Netanyahu’s covert campaign to fund Hamas for the purpose of undermining a Palestinian state. Both pro-Israel candidates acknowledged the veracity of such… pic.twitter.com/25CMjFOiKU

— zerohedge (@zerohedge) April 18, 2024

pic.twitter.com/R937dhVXKi

— Dave Smith (@ComicDaveSmith) April 18, 2024

Watch the full debate below:

By Irina Slav of OilPrice.com

Crude oil exports from Iran hit the highest level in six years during the first quarter of the year, data from Vortexa cited by the Financial Times has shown.

The daily average over the period stood at 1.56 million barrels, almost all of which was sent to China, earning Tehran some $35 billion.

“The Iranians have mastered the art of sanctions circumvention,” Fernando Ferreira, head of geopolitical risk service at Rapidan Energy Group, told the FT. “If the Biden administration is really going to have an impact, it has to shift the focus to China.”

The news comes as the EU and the United States prepare new sanctions against Iran in a bid to convince Israel to not retaliate against Tehran after the latter’s drone and missile attack on Israeli military targets last weekend.

Iran’s oil industry would be the no-brainer target for new sanctions as suggested by U.S. Treasury Secretary Janet Yellen.

"Clearly, Iran is continuing to export some oil. There may be more that we could do. I don't want to preview our actual sanctions activities, but certainly, that remains in focus as a possible area that we could address," Yellen said earlier this week as quoted by Reuters.

Analysts, however, have told the FT that the Biden administration is reluctant to tighten the sanction noose too much as this would inevitably lead to an increase in oil prices that a president running for re-election cannot really afford in an election year.

Iran is producing record amounts of oil, enabling it to pay for missiles, drones and whatnot, as Biden refuses to enforce Trump's sanctions against Iran oil exports afraid an oil price spike would further crush his approval rating pic.twitter.com/eeX0OnwYBA

— zerohedge (@zerohedge) April 15, 2024

That’s especially relevant in light of the fact that the federal government would hardly be able to repeat the SPR release from 2022 to tame prices at the pump as the reserve sits at the lowest level in 40 years after that 2022 release.

Also, any heavy-handed action against Iran’s oil exports would affect relations with China, which is virtually the only outlet for Iranian crude. That crude, according to the FT, covers a tenth of China’s total oil imports.

By Benjamin Picton of Rabobank

An Eye For An Eye

Treasury yields fell yesterday for the first time this week. The 2-year was down 5.5bps to 4.93%, while Brent crude gave up 3% to be sitting well below the $90/bbl again. Crude is sending some interesting signals. It rose every day in the week of Israel’s suspected attack on an Iranian compound in Syria that killed a senior Quds Force commander. Last week crude vacillated between gains and losses as markets awaited the Iranian response and this week, having ‘bought the rumour’ a fortnight ago, markets appear content to ‘sell the fact’.

That’s not to say that there isn’t another geopolitical shoe yet to drop. It seems very likely that there is. Axios reports that the Israeli war cabinet considered giving the IDF the green light to retaliate on Monday, despite urgings from the White House and the G7 for Israel to do nothing. According to Axios, the decision to strike back is already made, only the timing and the scale remains in question. Israel must now run the calculus on how to extract a price from Iran without overplaying its hand and sparking a multi-front war. Iran has threatened that any attack by Israel could be met with a response that is 10x the scale of the weekend attacks and involving more sophisticated weaponry. Clearly, the stakes are high.

Nevertheless, the price action seems to suggest that markets are untroubled by these reports. Commentary in recent days has variously swung between imminent WWIII (unlikely) and “it’s all just for show” (naïve). The entreaties from G7 leaders for Israel to ‘turn the other cheek’ reveal the extent to which Israel’s position is mis-read in the broader West. The post-protestant instinct of European and American leaders to ‘take the win’ on shooting down the vast majority of Iran’s deadly projectiles is at odds with the Israeli viewpoint.

Israel is THE Jewish state. Bibi - and several members of his war cabinet - are old-covenant kinds of guys. “An eye for an eye and a tooth for a tooth” is more than just a millennia-old theological disposition, it is a security imperative for a country attempting to maintain strategic deterrence while surrounded by foes.

So where does that leave markets? Highly irrational in some respects. Risk premia is being rapidly priced out of the energy complex, despite G7 sanctions on Iran, the threat of interruption in the Strait of Hormuz, and news overnight of new US sanctions on Venezuelan oil. Bear-steepening of the Treasuries curve suggests that markets are much more attuned to the ‘game of basis points’ being played in inflation and policy rate projections, rather than the ‘game of pointing missiles at bases’ being played in the Middle East.

To wit, Fed speakers Bowman and Mester have followed up on Powell’s delayed rate cuts admission of a day ago. Mester – usually a hawk – rolled out the back catalogue by saying that the Fed “need[s] to see more data to be sure of [the] inflation path”. Bowman – a definite hawk – said that “progress on inflation may have stalled” and that “time will tell if policy is sufficiently restrictive.”

That last line makes it sounds as if Bowman doesn’t believe policy is sufficiently restrictive. Is she resigned to the idea of the FOMC erring by keeping the Fed Funds rate unchanged while they cross their fingers and toes that three months of rising inflation is just a bump in the road? Perhaps she’s wise to be wary of assurances that “it’s transitory!”

The Fed isn’t the only central bank with difficult decisions ahead. CPI inflation reports for the UK and New Zealand both threw up concerns yesterday, particularly on the trajectory for services inflation.

New Zealand CPI for Q1 came in at 0.6% q-o-q and 4% y-o-y, which is above the RBNZ’s 3.8% forecast. The services component rose from 4.7% y-o-y to 5.3%, while non-tradable inflation (i.e. inflation generated within the country) rose on a quarterly basis from 1.3% to 1.6%. That means that all of the heavy lifting on the headline rate was done by a larger-than-expected fall in tradeable inflation (-0.7% vs expectations of -0.2% q-o-q) that might actually be transitory, given lag effects for energy and freight prices.

Over in the UK the headline inflation rate fell from 3.4% y-o-y to 3.2% in March. The consensus of the Bloomberg survey was for 3.1%, so this was definitely a miss. The median estimate of surveyed economists on the services component was 5.8%, but the actual result came in at 6%, just one-tick lower than the previous month. Our resident BOE watcher, Stefan Koopman, says that this result – taken in conjunction with the prior day’s labour market data – pretty much rules out a rate cut in May. Stefan expects the BOE to cut in August, with two follow-up cuts later in 2024.

Aussie labor market data released earlier today saw some mean-reversion in the headline employment figures. According to the ABS, Australia shed 6,600 jobs in March after gaining 117,600 in February. Rabobank had been expecting 10,000 jobs to be lost - which puts us equal closest to the pin amongst forecasters - but despite a 1-tick rise, the unemployment rate of 3.8% remained below our forecast (and below the market consensus) because of a fall in participation. All-in-all, it was another strong result for the Aussie labour market that does nothing for the view that Australia will be cutting rates imminently.

Herein lies a developing theme. Stronger-than-expected domestic inflation pressures driven by stronger-than-expected labor market outcomes. Is this likely to change? Not if politicians have anything to do with it. Labor demand in the West is being stoked by fiscal expansion as governments scramble to catch up with China on industrial policy.

Overnight Joe Biden announced a tripling of the 7.5% tariff on Chinese steel and aluminium imports and Mario Draghi gave a speech arguing that “radical change is what is needed”; making the case for Europe to respond to Sino-US protectionism with coordinated industrial policy of its own. According to Draghi, failure to do so will inevitably lead to (further) loss of industry to offshore competitors who provide cheaper energy, lower regulatory burdens and state-subsidies.

Even in small, open economies like Australia the fortress mentality is developing. Prime Minister Anthony Albanese’s ‘A Future Made in Australia’ strategy will be a centrepiece of the upcoming May budget, with new government support for green energy, minerals processing and defence. Treasurer Chalmers says that the budget will contain “significant new public investments”, but that there will also be a heavy emphasis on attracting private investment. That sounds similar to Draghi’s contention that government will call the tune, but the private capital will need to be mobilized to cover the investment gap (see Erik-Jan van Harn’s recent report on France’s over-stretched public finances here).

So, real production is back in vogue, and the workers of developed countries who had their middle-class status offshored by 40-years of neoliberalism are vindicated. But talking is much easier than doing, especially when you lack the infrastructure, the expertise or the labor supply to re-industrialize. If the West is serious about responding to security threats and hostile trade practices with ‘an eye for an eye’ in an environment of real constraints, hard decisions will need to be made on how to allocate scarce labour and capital. THAT will be a huge departure from the pre-Covid paradigm.

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Let's start with these five most recent headlines that show why defense spending needs to increase in a world evolving into a multi-polar state marked by conflict and uncertainty:

• World Stumbles Into "More Dangerous Decade" As Defense Spending Soars, Says Military Think Tank

• Germany Reportedly Goes On Military Spending Spree To Hit NATO Spending Minimums For First Time

• Lockheed Martin Wins $17BN Interceptor Contract To Protect US Homeland

• German Tank Builder Says "New Decade Of Security Policy Begins" As Defense Bull Market Roars

Saab CEO Micael Johansson, who spoke with Bloomberg TV on the sidelines of the European Defence & Security summit in Brussels on Wednesday, expanded more on the risks of escalating conflict in Eastern Europe and the Middle East and how uncertainty will drive defense spending higher. 

Bloomberg's Oliver Crook asked Saab CEO Johansson: "I just want to start with the sort of latest developments that we saw from Iran and Israel and the attacks. Do you think that that is going to encourage even more spending, or do you think it changes things in the defense industry, or is this more of the kind of story that we've been seeing unfold?" 

Johansson responded, "Well I think it's um the political focus on what sort of where the threat environments is in the world will of course change a bit. I'm more worried that the the focus on the war in Ukraine will sort of disappear and that uh that wouldn't be good." 

"I think all tensions, all threat environments, and the political tensions that happen now will definitely drive defense spending. It's hard to say whether this sort of what's happening in the Middle East now will ultimately result in even more defense spending. But I think right now, the focus on Ukraine versus the Middle East is worrying me," he continued. 

Crook then asked: "It's hard to get exact figures on this, but I saw some reporting saying that you know - much has been made as Israel's very successfully shooting down these 300 drones and missiles - though the cost approximate associated with that was sort of $600 million. And I saw that's 2 million per drone - and the economics of that if you have a prolonged conflict doesn't really work. So, as a defense company, how do you think about this? How do you solve that problem?" 

Before Johansson responds, let's introduce readers to Saab, a Swedish aerospace and defense company that supplies NATO countries and allies with missiles and bombs. Some of those weapons include anti-ship missiles, anti-drone missiles, and anti-tank missiles. 

Back to Johansson's response: "You have to take them out with the systems you have, but over time this will change. I think it'll become more efficient, and we're all putting research into this." 

He also reiterates that Europe must boost its military-industrial complex manufacturing capacity to reduce its reliance on weapon imports from outside the EU. 

Here's the interview. 

Early this year, military think tank International Institute of Strategic Studies said global defense spending jumped 9% to a record $2.2 trillion in 2023, driven mostly by heightened geopolitical tensions caused by the Russia-Ukraine conflict. 

In March, former Allied Commander at NATO, Adm. James Stavridis, told Goldman Sachs' Allison Nathan, "In my career, I've never seen a higher level of maritime risk than I do today. That owes first and foremost to the return of great power competition, which we thought was basically over when the Soviet Union collapsed." 

And now, risks of further escalation between Israel and Iran have driven global defense stocks to fresh record highs.  

Johansson is correct. The defense industry is in a bull market. War = moar money for the military-industrial complex. 

Authored by Jonathan Miltmore via The Epoch Times (emphasis ours),

It’s safe to say that diversity, equity, and inclusion (DEI) is one of the more controversial ideas of our time (and a multibillion-dollar industry).

Some, such as Elon Musk, argue that DEI—which, definitionally speaking, means addressing structural inequalities in society—constitutes blatant racism. Others contend that DEI is simply about creating more equitable and harmonious workplaces and offers clear financial benefits to companies as well.

“Study after study has proved that diverse companies perform better than their more homogeneous counterparts,” Inc. reported in 2023. “Companies that don’t foster an inclusive environment or prioritize diversity initiatives do so at their own peril.”

“Proved” is a heavy (and inaccurate) word here, but Inc. isn’t wrong about the abundance of evidence showing that DEI initiatives make companies more profitable. Between 2015 and 2023, McKinsey & Co., a multinational strategy and management consulting firm, released four separate studies showing that DEI initiatives boost corporate earnings. Unfortunately for DEI advocates, the research appears to be bunk.

A new study published in Econ Journal Watch, a semiannual peer-reviewed academic journal, shows that researchers were unable to replicate the results of all four McKinsey studies.

“Our results indicate that despite the imprimatur often given to McKinsey’s 2015, 2018, 2020, and 2023 studies, McKinsey’s studies neither conceptually ... nor empirically ... support the argument that large US public firms can expect on average to deliver improved financial performance if they increase the racial/ethnic diversity of their executives,” professors John R.M. Hand and Jeremiah Green found.

This is not the only research that shows that DEI initiatives are not the panacea for corporate earnings that supporters claim them to be. Writing in the Harvard Business Review, Robin J. Ely, a professor of business administration at Harvard, and David A. Thomas, president of Morehouse College, pointed out that “the rallying cries for more diversity in companies” are not supported “by robust research findings.”

Ms. Ely and Mr. Thomas said, “We say this as scholars who were among the first to demonstrate the potential benefits of more race and gender heterogeneity in organizations.”

The idea that all these studies showing clear financial benefits to DEI are rubbish might be shocking to some readers, but it’s a familiar academic pattern. For more than a decade, scholars and media have publicly worried about the “replication crisis” in science. It turns out that an astonishing number of findings in various fields—from psychology and economics to sociology, medicine, and beyond—fail to hold up when other researchers attempt to replicate the findings, as Vox has explained.

None of this is to say that diversity and inclusion are inherently bad, of course.

I value diversity and am an inclusive person, and I encourage others to be the same. It’s the means that we choose to achieve diversity and inclusion that is the problem, as well as that word wedged in between them: equity. To many, advancing social equity is a paramount value. Because of this, many support illiberal means (in the classical sense) to achieve this end—including supporting policies that actively discriminate on the basis of race.

Coleman Hughes, a fellow at the Manhattan Institute and author of “The End of Race Politics,” recently appeared on “The View” and offered a better approach.

“My argument is that we should try our very best to treat people without regard to race, both in our personal lives and our public policy,” Mr. Hughes told the hosts (who accused him of being “co-opted” by the right).

He is right to say that this is the North Star that we should be aiming for: the equal treatment of all people regardless of race or class.

The great orator and abolitionist Frederick Douglass saw that such a view is the true path to progress.

“In a composite nation like ours, as before the law, there should be no rich, no poor, no high, no low, no white, no black, but common country, common citizenship, equal rights, and a common destiny,” Mr. Douglass noted in a speech in 1867.

The ethos of DEI runs counter to this, which is precisely why both the concept and the industry should be scrapped. A good place to start would be to dispense with the fiction that DEI programs are a rainbow leading to a pot of gold in corporate profits.

Originally published by the Washington Examiner

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times or ZeroHedge.

President Biden has unveiled the administration's promised new sanctions on Iran targeting the country's drone, steel and automotive industries, which is 'punishment' in response to the unprecedented Saturday overnight Iranian ballistic missile and drone attack against Israel.

Biden's Thursday statement presented the sanctions as part of his vow to help defend Israel and all about "holding Iran accountable". Biden touted that during the weekend attack, "Together with our allies and partners, the United States defended Israel."

"The sanctions target leaders and entities connected to the Islamic Revolutionary Guard Corps, Iran’s Defense Ministry, and the Iranian government’s missile and drone program that enabled this brazen assault," he said, also emphasizing that G7 partners are committed to "acting collectively to increase economic pressure on Iran." 

This is toward restricting "Iran's destabilizing military programs" and to utilize sanctions "that further degrade Iran’s military industries." But at the same time US have officials have reportedly been warning Israel behind the scenes that it should not pursue a military strike against Iran. 

Other Western allies, including Germany and the UK, have taken the US stance of wanting to cool any potential escalation which could spiral to major regional war. Prime Minister Netanyahu on Wednesday said he was receiving "all kinds of suggestions and advice," but Israel will nevertheless "make our own decisions, and the State of Israel will do everything necessary to defend itself."

A fresh Thursday statement from US Treasury said the new Iran sanctions are being coordinated with Britain, particularly measures which target the Islamic Republic's drone program.

"We're using Treasury's economic tools to degrade and disrupt key aspects of Iran's malign activity, including its UAV program and the revenue the regime generates to support its terrorism," said Treasury Secretary Janet Yellen. According to details revealed thus far the sanctions target 16 individuals and two entities overseeing Iran's drone production, per Axios:

• Five companies that provide materials for "Iran's Khuzestan Steel Company (KSC)," will also be listed, according to the release.
• In addition, three subsidiaries of the Bahman Group, an Iranian automaker, will also be sanctioned.

But so far it doesn't look like new sanctions on Iranian oil are on the table, which will no doubt result in further Republican anger that Biden has been more worried about gasoline prices (and his own re-election chances) than Israel's security.

In the background is also the last September decision of the White House to release some $6 billion in Iranian oil revenue in exchange for the release of some hostages that were held in Iranian prisons. Critics point out that Biden could hit Tehran's military funding where it really hurts, but is intentionally turning a blind eye - specifically regarding China's massive and ongoing purchases of Iranian oil.

I don't think the word "oil" is in there | #OOTT https://t.co/iHrMZbbKwO

— Javier Blas (@JavierBlas) April 18, 2024

The Wall Street Journal also took a swipe at the administration this week:

Treasury Secretary Janet Yellen said Tuesday that "all options" are on the table to disrupt Iran’s terror financing. Great, and we hope this means the Administration will welcome the 383-11 vote in the House Monday to expand sanctions against Chinese financial institutions that buy Iranian oil.

It's no secret the White House has been reluctant to stiffen sanctions against Iranian oil lest prices rise before the November election. The Administration has looked the other way as Chinese “teapot” refineries have imported an increasing amount of Iranian crude at a discount.

Meanwhile Iran's oil exports are at a six-year high, as FT points out: "Iran is exporting more oil than at any time for the past six years, giving its economy a $35bn-a-year boost even as western countries discuss stepping up sanctions in response to its attack on Israel."

The awkward political dance by the administration is basically summed up in this:

Iran is producing record amounts of oil, enabling it to pay for missiles, drones and whatnot, as Biden refuses to enforce Trump's sanctions against Iran oil exports afraid an oil price spike would further crush his approval rating pic.twitter.com/eeX0OnwYBA

— zerohedge (@zerohedge) April 15, 2024

Yellen alluded to "all options" on Tuesday, and yet Thursday's formal announcements on anti-Iran sanctions curiously leave out anything regarding oil. "Clearly, Iran is continuing to export some oil. There may be more that we could do. I don't want to preview our actual sanctions activities, but certainly, that remains in focus as a possible area that we could address," Yellen had said.

But Republicans are expected to do something about this, in the form of stuffing Iran oil sanctions into the House foreign aid package that House Speaker Mike Johnson is looking to bring to a vote. Senator James Risch of Idaho was cited in Bloomberg as saying "The pot’s boiling right now" as there are "discussions in the two houses to include some of those kinds of things in this package that will hopefully pass out of the House."

Dozens of Google employees just learned they can't treat corporate offices like a college campus. On Wednesday, the Alphabet subsidiary rushed to fire 28 employees who were part of Tuesday sit-in protests against the company's provision of artificial intelligence and cloud services to the State of Israel.  

The protests were organized by a group called No Tech for Apartheid, which had declared Tuesday a "day of action" at Google. At issue: Google's Project Nimbus -- a $1.2 billion cloud and AI contract with Israel -- and the Israeli Defense Forces' use of Google Photos in Gaza, "which has led to the arrest, imprisonment, and torture of thousands of Palestinians with little to no evidence," the group said. "It’s clear that the Israeli military will use any technology available to them for genocidal means." 

Instant karma: @Google employees held a sit-in protest of the Big Tech company's business with Israel.

They were arrested and fired.

Life comes at you fast!pic.twitter.com/rJiysqtPsk

— Kyle Becker (@kylenabecker) April 18, 2024

Last week, Israel's +972 Magazine, citing Israeli intelligence officers, reported on the Israeli Defense Forces' expansive use of AI in its war on Gaza in a system called Lavender. “Human personnel often served only as a ‘rubber stamp’ for the machine’s decisions,” one source said, typically spending only 20 seconds reviewing AI-selected targets "just to make sure the Lavender-marked target is male." The intel sources said that, particularly during the early days, the majority of the resulting dead were "women and children or people who were not involved in the fighting." 

Tuesday's protests were staged in Google's Sunnyvale, California, Seattle and New York City offices. They including livestreamed sit-ins lasting about 10 hours. The protesters weren't just hanging around in hallways or lobbies: In Sunnyvale, they took over the personal office of Google Cloud CEO Thomas Kurian, and wrote a list of demands on his whiteboard. Police were eventually called, and nine employees were arrested for trespassing. 

In a statement, Google laid out its rationale for bringing the hammer down:  

“Physically impeding other employees’ work and preventing them from accessing our facilities is a clear violation of our policies, and completely unacceptable behavior. After refusing multiple requests to leave the premises, law enforcement was engaged to remove them to ensure office safety.

We have so far concluded individual investigations that resulted in the termination of employment for 28 employees, and will continue to investigate and take action as needed.”

No Tech for Apartheid condemned the terminations. “This flagrant act of retaliation is a clear indication that Google values its $1.2 billion contract with the genocidal Israeli government and military more than its own workers—the ones who create real value for executives and shareholders,” the group said in a statement. 

Last month, Google axed this engineer who interrupted a speech being delivered by an Israeli-based Google executive at a tech conference in New York City: 

“I refuse to build technology that powers genocide.”

A Pro-Palestine Google Cloud engineer disrupted Barak Regev, Google Israel managing director During a tech conference held in New York City.

The worker protested Project Nimbus, a contract to sell technology that could be… pic.twitter.com/pjWF3koatp

— Middle East Eye (@MiddleEastEye) March 5, 2024

While labor laws generally give a green light to employee strikes and other disruptive actions aimed at things like wages and work conditions, protesting an employer's choice of customer is something else altogether. However, talking to Bloomberg, San Francisco University labor professor John Logan attempted a tortured argument on the Google protesters' behalf. 

“Tech workers are not like other kinds of workers,” he said. “You can make an argument in this case that having some sort of say or control or ability to protest about how their work product is being used is actually a sort of key issue.”

Google begs to differ, and on Wednesday offered a warning to its remaining employees: "The overwhelming majority of our employees do the right thing. If you’re one of the few who are tempted to think we’re going to overlook conduct that violates our policies, think again."

Authored by Simon White, Bloomberg macro strategist,

The impulse from central-bank reserves in the US, or the change in their change on a monthly basis, points to further short-term resistance for stocks.

The Federal Reserve’s quantitative tightening program is ongoing, but bank reserves still remain almost $400 billion higher than when the Fed began QT in June 2022, even as the total size of the Fed’s balance sheet steadily contracts.

The “Treasury pivot,” its decision to pivot issuance towards bills, was instrumental in allowing risk assets to rally in the face of tight monetary policy, by allowing money market funds to finance the government using reserves it had parked at the Fed’s reverse repo facility.

But for risk assets such as stocks, their shorter-term performance is not just related to by how much reserves are rising, it’s by how much they are accelerating. The chart below shows the impulse in reserves - the one-month change of their one-month change - tracks the one-month change of the S&P. The impulse has been weakening, consistent with the headwinds stocks have been encountering.

The headwinds are likely to continue. In the short term, reserves have fallen due to tax payments. The Treasury’s account at the Fed has risen over $240 billion to $906 billion since last week as taxes came in, with increases in the account removing reserves from the system. The Treasury aims to keep the account around $750 billion, so it should fall again as the Treasury spends the money, re-injecting reserves back into the system.

Nonetheless, reserves are likely to be increasingly challenged as the RRP falls. The facility this week hit its lowest levels in almost two years, to a low of $327 billion. Some of that is tax related, but key is that bill yields, e.g. six and 12-month maturities, are rising again as the amount of interest rate cuts expected from the Fed diminishes. This makes bills more attractive for MMFs, who then pull money out of the RRP to buy them.

Not only will that incrementally make the liquidity backdrop for stocks less friendly this year, it also means funding risks are rising again. In this changing environment, it is prudent for investors to heighten their vigilance.

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One week ago, when Japan's PM Kishida visited the White House and unwittingly sparked the latest Beltway fashion scandal, when Jeff Bezos' current wife appeared dressed as a middle-aged stripper to the dinner honoring the Japanese delegation, sparking online outrage among the commentariat who said Sánchez’s state dinner look was “totally inappropriate,” “embarrassing” and “the trashiest thing” to ever be seen at the black tie White House gala...

Jeff Bezos and Lauren Sanchez arrive hand-in-hand at the state dinner for Japan at the White House. Bezos didn’t answer when asked if he’d be donating to Biden’s campaign. pic.twitter.com/Vw7sTF2Bse

— Judy Kurtz (@JudyKurtz) April 10, 2024

... we said that even though the yen was plunging, it would be virtually impossible for Japan's Ministry of Finance to step in and prop up the imploding currency amid all the official celebrations, as an FX intervention during an official state dinner would look rather impolite and thus, highly un-Japanese.

Luminaries including Clinton, Bezos, Cook, Dimon arriving at White House for black-tie state dinner with Japan's PM Kishida

Poor Japanese MOF can't intervene in FX while this is taking place or it will get really awkward

— zerohedge (@zerohedge) April 10, 2024

However, now that the Japanese state visit is long over, the probability that Tokyo will step in and prop up the collapsing currency any given moment is soaring, especially since overnight the G-7 appears to have reached a tacit "Plaza Accord" lite, one where the US has given a quiet agreement to Japan and Korea to step in and intervene in the FX market to prop up their currencies.

According to Reuters, the United States, Japan and South Korea agreed to "consult closely" on foreign exchange markets in their first trilateral finance dialogue on Wednesday, acknowledging concerns from Tokyo and Seoul over their currencies' recent sharp declines.

The trilateral gathering, attended by Treasury Secretary Janet Yellen, Japanese Finance Minister Shunichi Suzuki and South Korean Finance Minister Choi Sang-mok, was held on the sidelines of the International Monetary Fund and Group of 20 (G20) finance leaders' meetings this week in Washington. Suzuki told reporters he also met Yellen bilaterally on Wednesday and explained Tokyo's readiness to take appropriate action against excessive yen moves, without elaborating.

Japan's top currency diplomat Masato Kanda, who is also in Washington, said authorities would not rule out any options in dealing with excessive yen moves. He declined to comment, when asked about the possibility of coordinated intervention to slow the dollar's ascent against other currencies, including the yen.

The rare warning from the three countries' finance chiefs came as receding expectations of a near-term U.S. interest rate cut pushed the yen to 34-year lows, keeping markets on alert on the chance of an intervention by Japan to prop up the currency.

"We will continue to cooperate to promote sustainable economic growth, financial stability, as well as orderly and well-functioning financial markets," according to a joint statement released after the trilateral meeting.

"We will also continue to consult closely on foreign exchange market developments in line with our existing G20 commitments, while acknowledging serious concerns of Japan and the Republic of Korea about the recent sharp depreciation of the Japanese yen and the Korean won," it said.

The dollar quickly slid to an intraday low of 154.18 yen after the statement, off the 34-year high of 154.79 yen hit on Tuesday, but it has since regained virtually all of the drop as markets continue to make a mockery of Japan, and even this latest green light by the G7 to step in and intervene to keep the dollar weaker, an outcome which is now in the benefit of not only the rest of the world but the US as well.

And indeed, Washington's acknowledgement of the currency concerns from Tokyo and Seoul may lay the groundwork for intervention, analysts said.

"While I don't see a statement like this being enough to boost the yen and avoid an intervention, the language used there is pretty strong and I wouldn't be surprised to see some concrete moves come out of Japan before the week is out," said Helen Given, a currency trader at Monex USA.

"In the last few intervention cycles, American authorities - most notably Janet Yellen - issued statements acknowledging Japan's motivations and providing verbal support," said Karl Schamotta, chief market strategist at Corpay.

"From a strategic perspective, currency intervention is far more likely to succeed when delivered through a coordinated international effort. Unilateral moves are helpful in mitigating volatility, but aren't up to the task of reversing the yen's long rate differential-driven slide," Schamotta added.

Hitting the nail on the head, Keiichi Iguchi, senior strategist at Resona Holdings, said that "the US has effectively given the nod to Japan to intervene on the yen if needed," adding that the market had assumed before heading to the G-20 that any intervention would be alone, but now there is speculation that a coordinated intervention is a possibility. That would be more effective and larger than a single intervention. Such intervention would be by Japan and South Korea intervening to buy their respective currencies at similar times.

Iguchi concludes that if what’s happened with the views of the US, Japan, and South Korea finance ministers at the G-20 spread further, this could slow the speed of dollar appreciation

Bloomberg's Vassilis Karamanis writes that "the factor that invites a fresh outlook on intervention is that it may not be unilateral anymore. Japan’s currency chief Masato Kanda said earlier that G-7 members had reaffirmed that excessive moves in the FX market were harmful for economies. In essence, this leaves the door open to members to intervene in markets under certain circumstances. This isn’t breaking news for the market as we got similar headlines Wednesday, but it’s all the more reason for us to focus on spot and volatility correlation to assess just how concerned traders are when it comes to intervention in the Japanese currency."

Finance leaders of the G7 advanced nations agreed to a Japanese proposal to reaffirm their commitment that excessive volatility and disorderly moves in the currency market were undesirable, Kanda told reporters after the G7 gathering.

In recent months, Japan and South Korea have seen their currencies slide against the dollar in recent weeks due largely to reduced bets of near-term cuts to elevated U.S. interest rates. Increasingly ineffectual verbal warnings by Japanese authorities have failed to keep traders from pushing the yen down near 155 to the dollar, a level seen as Tokyo's line-in-the-sand that heightens the chance of intervention.

Meanwhile, Bank of Korea Governor Rhee Chang-yong said on Wednesday authorities have the resources and tools to smooth out any volatile moves in the country's currency, signaling readiness to intervene in the market to shore up the won.

"Our exchange rate deviated a little bit from what could be justified by market fundamentals," Rhee said in an IMF seminar.

Finance leaders of the G20 major economies have a long-standing agreement that excessive exchange-rate volatility and disorderly currency moves are undesirable. Tokyo has argued this G20 agreement gives it freedom to intervene in the currency market to counter excessive yen moves.

Still, intervention could be costly and there is no guarantee it could reverse the current strong-dollar tide, which is driven by the big gap between U.S. and near-zero Japanese interest rates.

"I'm not sure whether Tokyo would intervene just because the dollar breaks past 155 yen," said Masafumi Yamamoto, chief FX strategist at Japan's Mizuo Securities.

"Authorities probably feel that solo intervention won't have a lasting effect when a strong U.S. economy is pushing back the timing of a Fed rate cut and driving up the dollar," he said.

Others were skeptical an intervention is imminent. Bloomberg analyst Ven Ram writes that a joint intervention along the lines we saw in 1998 when the US authorities waded into the markets, together with Japanese officials, seems unlikely for now. The statement from the Treasury letterhead had this crucial sentence:

“We will continue to cooperate to promote sustainable economic growth, financial stability, as well as orderly and well-functioning financial markets. We will also continue to consult closely on foreign exchange market developments in line with our existing G20 commitments, while acknowledging serious concerns of Japan and the Republic of Korea about the recent sharp depreciation of the Japanese yen and the Korean won.”

Here’s how Ram interpreted that language:

• There is perhaps room for the central banks of Japan and South Korea to combine efforts to draw lines in the sand for their currencies;
• The statement, though, doesn’t give a sense that the US might be keen to join any such efforts. That is especially so in light of Treasury Secretary Janet Yellen’s avowed preference for the markets to determine an appropriate exchange rate.

Back in June 1998, the US and Japan shored up the yen in coordinated intervention, sending the dollar crashing by 4.5% in just one day, so while the markets seem to be interpreting the latest joint statement to mean that there is perhaps approval for coordinated currency intervention, Ram sees it as an admission that the US isn’t interested in joining any such effort.

While Japan and Korean combining efforts to rescue their currencies would have a huge, though temporary, effect on sentiment, it won’t be nearly as dramatic if the US were involved. And since the prospect of an imminent intervention from Japan doesn’t look so compelling, that's why the dollar is just down mildly today.

Still, even Japan may have no choice but to do it alone: Morgan Stanley FX analyst Daniel Blake published an overnight note according to which potential currency intervention rises as the yen approaches a key threshold of 155 against rises as a yen weaker than that level poses risk for Japanese stocks, and also exacerbates momentum reversal in Japanese stocks.

We give the last word to Bloomberg's Paul Dobson who echoed the above sentiment and said that Janet Yellen acknowledged the “serious” concerns expressed by Japan and South Korea over sharp declines in their currencies, offering a green light for them to intervene if necessary. The reason is simple: the US also doesn't want a super-strong, rapidly-appreciating dollar, while its global peers would prefer a little bit more stability for their depreciating currencies.

True, it’s not such a bad thing for the US if it has enhanced purchasing power — for starters, it should help it conquer inflation. But nobody wants other nations to be able to undercut them with way cheaper products and manufacturing for too long.

Imagine if China let the yuan go where the market would like it to be all at once— there’d probably be some pretty hasty protests or retribution.

And it’s worth noting that most larger Asian economies have plenty of firepower if they do need to push back against the dollar, having built up currency reserves for just such an eventuality. That could come in handy, because if the Fed does stay on hold for a lot longer (or starts to hike again) they may well be called on. Perhaps it’s also not such a bad thing for the US

Bottom line, however, is that with Biden still going full debt throttle on the US economy to demonstrate just how amazing Bidenomics is, even if it costs the US $1 trillion in debt every 100 days to maintain this growth illusion and is sowing the seeds of the next financial crisis as even the IMF warned (see IMF Warns Biden's Fiscal Profligacy Poses "Significant Risks" To Global Economy 'In Great Election Year'), any truly aggressive shorting of the US Dollar will likely wait to have until Trump wins the elections at which point the deep state bureaucrats will have no choice but to admit just how ugly the US economic picture really is, and the USD craters.

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Iran's leadership has always strongly asserted that it is not pursuing the development of nuclear weapons, but instead has long sought a peaceful nuclear energy program. Various Ayatollahs over the decades have even declared the atomic bomb to be 'unIslamic' and against the teachings of the Koran.

But that could change, Iran's military now says, should Israel launch an attack against the Islamic Republic following last Saturday's own Iran strike on Israel which was retaliation for the Damascus embassy attack of April 1st.

The commander of Iran's Nuclear Centers Protection and Security Corps of the IRGC, Brigadier General Ahmad Haghtalab, has warned that any aggression against Iran could trigger a review of the country's nuclear stance.

"If Israel attempts to use the threat of attacking our country's nuclear centers as a means to pressure Iran, it is possible and conceivable that the Islamic Republic may reconsider its nuclear doctrine and policies, potentially deviating from previously announced stances," Haghtalab was cited in Tasnim news agency as saying.

"From the very beginning, Iran was ready to counter threats from Israel. Thanks to the use of passive defense plans, as well as the most modern weapons, thanks to the dispersal of nuclear facilities throughout Iran, we are ready to counter any threat from Israel to our nuclear facilities," Haghtalab said.

Iran has long endured suspected Israeli sabotage attacks against its nuclear facilities, especially massive cyberattacks that in some cases crippled operations systems. There have also been several 'mystery' explosions at these locations over the years.

"The International Atomic Energy Agency, the UN’s nuclear watchdog, has repeatedly expressed concerns about Iran’s expansive nuclear program," FT comments. "Tehran has for three years been enriching uranium at levels close to weapons grade."

FT in commenting on the fresh nuclear posture warning from Iran's military leadership has published a map of Iran's nuclear facilities...

Yesterday, an interview was published by Sky News in which a former Israeli Mossad intelligence chief declared that as part of Israel's retaliation currently being mulled by the Netanyahu government, striking Iranian nuclear facilities "is on the table."

The former director of the spy agency, named Zohar Palti, described that he has "no doubt" that PM Netanyahu could "attack sensitive facilities" in Iran as some cabinet ministers are urging it. Palti further said the question of deciding the timing of Israel's retaliation operation is "still ongoing" and that some officials are urging Netanyahu to attack "as soon as possible." However, others in Tuesday's war cabinet meeting argued for getting international backing first, especially from Western partners.

Submitted by QTR's Fringe Finance

Friend of Fringe Finance Lawrence Lepard released his most recent investor letter this week. He gets little coverage in the mainstream media, which, in my opinion, makes him someone worth listening to twice as closely.

Larry was kind enough to allow me to share his thoughts heading into Q2 2024. The letter has been edited ever-so-slightly for formatting, grammar and visuals.

QUARTERLY OVERVIEW 

Globally, the stock markets continued their 45-degree angle rise during the first quarter. Crude oil, and  commodities broadly, also had a stair-step rise consistently during the quarter. Gold and silver and the  miners were an interesting dichotomy. Bullion prices were flat to slightly down in January and February,  and the miners were clobbered during those early months of Q1. However, in March the price of gold  broke through the long-standing $2,070 ceiling and the miners responded, driving the Fund up by 25.4%.  Gold miner indices were down 17% in the first two months before the March move. 

Note that the gold mining stocks still have not provided any leverage to the price of gold. In fact, in the  first quarter they did not even keep pace with the increase in the price of gold. With gold up 8.1% in the  quarter, the gold mining indices were up 2%. Typically, gold miners provide 2x to 3x leverage in terms  of returns; so with gold up 8%, the miners would typically have been up 16% to 24%. This supports our  thesis that the miners are still undervalued and are going to mean revert with a vengeance as this bull  market in gold continues. The gold mining shares have a long way to go before they reflect fair value.

THE MARKETS SPEAK: GOLD BREAKS OUT

We have been waiting for a conclusive Federal Reserve loosening of financial conditions (monetary  expansion) to light a fire under our Fund’s assets. While we have seen some hints that the Fed is going in that  direction, they are sending mixed signals. In our view, the big story in Q1 was that the markets said, “OK,  we have seen enough, we know what’s coming, so let’s get going.”  

In the first quarter, the price of gold definitively broke out from its long-term price cap of ~$2,070 per ounce.  Gold’s price had bumped up against this cap four times over the past four years. Notably, gold topped out at  $1,900 in 2011 before starting a multi-year correction. Breaking through a top that had been in place for over  a decade is a big deal.

And it was not just gold. The other sound money assets have participated too. Bitcoin started the year at  $42,802 and hit an all-time high of $72,740 in early March (up 67% in the Quarter!). Silver also broke  through long-term resistance, although it has much further to go to hit an all-time high. 

Markets reflect current conditions, but more importantly, they price in future expectations. We strongly  believe that more investors are waking up to the monetary trap that the Fed has placed itself in. Consider,  there have been three crises in the last 18 months that the sound money assets are reacting to: 

• October 2022 – UK Gilt crisis…the Bank of England printing 

• March 2023 – Silicon Valley Bank / Regional Bank Crisis….FDIC guarantees all deposits and  Fed prints with the BTFP 

• October 2023 – 10-year U.S. Treasury yield abruptly goes above 5%.....Fed begins Dovish talk,  signals rate hike cycle over and soft pivots 

Gold, Silver and Bitcoin are reacting to both that recent intervention plus front running the next round of  money printing or monetary accommodation that will occur in the coming crisis (and given the debt load,  the next crisis could be massive). This move in sound money assets is different. 

This is best demonstrated in the chart below which shows the price of gold compared to the “real yield”  on the U.S. 10 Year bond (inverted). Note that the “real yield” is the yield on the 10-year U.S. Treasury  bond minus the current expectation for average inflation rates over the next 10 years. For example, today  the 10 year treasuries are yielding about 4.5%, and 10-year inflation swaps are priced at ~2.5%, reflecting  the expectation that inflation will average 2.5% for the next ten years. (we don’t think it will). This leads  to a “real yield” of 2% as shown in the chart below. 

One of the long-standing relationships in finance is that when real yields are higher, gold is less attractive.  Gold pays no yield, but it protects against debasement. When real yields are positive or trending positive, gold suffers. When real yields are negative or trending negative, gold does well. Note the tight correlation  from 2006 to 2020 in the chart below. 

Now, the important point is to look at what happened starting in 2022. Due to the Federal Reserve’s rate  hiking campaign, real yields have gone up substantially and YET, gold went up! In our opinion this is a  huge clue. Something is different. We believe the gold market is sniffing out the global debt and fiscal  problems that are present in the United States and that it is anticipating future monetary debasement.

Given this dramatic de-coupling of the price of gold from the underlying trend in real yields/interest rates, we cannot help but wonder: have conditions changed such that the Fed is impotent and interest rates no  longer have such a strong impact on the price of gold? If so, this is another way in which this decade is  beginning to look more like the 1970’s, where gold actually went up IN SPITE of higher rates of interest  because inflation expectations drove gold higher.  

NARRATIVE SHIFT 

The change in the gold price behavior, when compared to real interest rates, demonstrates the economic  conversation is changing. Broadly speaking, the narrative is shifting, and the mainstream financial world  and investment markets are waking up to what we have been saying for years, to wit: 

The FT article above refers to the UK Gilt crisis which occurred in the Fall of 2022 when Liz Truss  proposed tax cuts and spending increases. This immediately led to a severe sell-off in the UK Gilt (bond)  market and severe weakness in the British Pound. Prime Minister Truss (via the Bank of England) was  forced to reverse these policies in order to stop the market rout, and she also lost her job. 

CBO Director Phillip Swagel, who made the comment in the article, has good company. Fed Chair  Powell has said several times that the U.S. Government’s Fiscal path is not sustainable. Many highly  intelligent investors including Dalio, Druckenmiller, El Erian, Fink, Singer and Tudor Jones have said  the same. 

The entire world is coming to understand that the Fed is trapped and will soon be forced into additional  monetary accommodation. The U.S. Government’s Fiscal situation is out of control, and people and  investors are losing trust. Many people sense that something is wrong, and they are moving to protect  themselves. Remember that the faith in the dollar, as opposed to gold, is based upon trust in the U.S. 

Government. As the schedule below shows, the government is not doing too well in the trust department.

We wondered who the 20% were and then we were reminded that the government employs about 20%  of the population.

Perhaps this is why we see news stories like this: 

USA Today reports Costco’s CFO telling investors: “When we load them on the site, they are typically  gone within a few hours, and we limit them to two per member.” Costco is now expanding into silver  coin sales as well. (h/t Dan Oliver, Myrmikan for the quote).

U.S. FISCAL SITUATION GOES CRITICAL 

Perhaps all of the awareness that we described above is because it is very hard to ignore the math and the  recent headlines like the one below from March 4, 2024:

Now it is unfair to annualize this because there is some lumpiness in the monthly data; however, with  365 days in a year this implies a deficit of $3.65 Trillion/year. In the first Federal fiscal quarter that ended  December 31, 2023, the deficit was $500 Billion implying a $2.0 Trillion annual deficit. Q2, which ended  March 3, was just reported, and the deficit was $600 Billion. For the first half of fiscal 2024 the U.S. Federal Government recorded a $1.1 Trillion dollar deficit. Clearly, the current run rate is much higher. 

Keep in mind that this is all with a relatively healthy economy and stock market. If the debt were to  continue to grow at this rate, it would be comparable to a starting debt of $34 Trillion on December 31,  2023. It (a deficit run rate of $3.65T) would imply an annualized growth rate of 10.7% in the total debt  burden. Annual debt growth of 10.7% compares very unfavorably to estimated GDP growth of 2.0-2.5%.  GDP funds the interest payments on the debt and this is why the math is unrelenting. Something has to  give. And by the way, the trend in this does not look good, the Biden Administration just proposed a  spending budget of $7.3 Trillion for fiscal 2025 which represents a 13% increase in spending. Keep in  mind that tax revenues in fiscal 2023 were only $4.4 Trillion. Where are they going to find the money? 

As we showed in our last Quarterly Letter the growth in Federal Debt is stunning.

The debt growth is a problem for a number of reasons, not the least of which is the increase in the interest  costs for the U.S. Federal Government. As the chart below shows the Federal Government is already  paying interest at a run rate of $1.1 Trillion per year, and unless the Fed cuts the short- term interest rates  by 150 bps (see yellow line), that interest bill will swell to $1.6 Trillion per year by December of 2024.  There is nothing in the chart below which suggests that this monetary system is stable or sustainable. 

We were absolutely stunned when we saw this next chart with two significant pieces of data. First, the  quarterly issuance of Treasury securities is almost back at the peak COVID levels, yet they say we are  not in emergency conditions. Secondly, the pale blue line shows the percentage of securities issued in  short-term bills (under one year in duration) which has swelled enormously. The United States is having  a hard time selling the longer duration notes and bonds, and very notably, this is the historical pattern of  countries suffering from a sovereign debt crisis. They are increasingly forced to finance their debt on a  short-term basis because no one will buy their bonds for a longer duration due to the inflation risk.

FED WATCH: PARTY ON GARTH!  

The Federal Reserve is clearly trapped. In the Fall of 2023, the U.S. 10-Year Bond yield shot up through  5%. This caused the Fed to panic and they jawboned the yield back down to under 4%. They also  indicated via their dot plot that most participants saw three rate cuts coming in 2024 (75 bps). In our year end letter we prematurely called this a pivot. The problem is that the data has not helped their case. A  higher stock market, strong employment figures (probably cooked) and solid economic growth combined  with worse inflation data mean they now have a predicament. The numbers suggest that they are going  to have a hard time attaining their 2% inflation target, and yet the chart of US interest payments on the  previous page suggests that if they do not cut short-term rates, interest expense is going to soar. 

It truly is a case of damned if they do cut rates and damned if they don’t. So what happens? We thought  there was a lot of information in the following AP Release: 

April 3 – AP (Christopher Rugaber): “Federal Reserve officials will likely reduce their benchmark  interest rate later this year, Chair Jerome Powell said…, despite recent reports showing that the  U.S. economy is still strong and that U.S. inflation picked up in January and February. ‘The recent  data do not … materially change the overall picture,’ Powell said…, ‘which continues to be one of  solid growth, a strong but rebalancing labor market, and inflation moving down toward 2% on a  sometimes bumpy path.’ Most Fed officials ‘see it as likely to be appropriate’ to start cutting their  key rate ‘at some point this year,’ he added… Powell also sought to dispel any notion that the  Fed’s interest-rate decisions might be affected by this year’s presidential election campaign.” 

It seems Powell is going to try to “split the baby” and claim that inflation is under control as justification  to cut rates. While we could be wrong, we are beginning to think that Fed Policy does NOT matter  anymore. If the Fed doesn’t cut rates, something blows up and then we get a massive rate reduction and  the big print. If Powell does cut rates, he keeps the game going but at the cost of higher inflation. The  markets have taken away the car keys from the reckless teenager: The Fed. 

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Another forward-looking clue came from the Fed’s Press Conference on March 20, 2024. Powell said  that they were prepared to reduce Quantitative Tightening (QT) in order to make sure there was enough  money in the system. He even referred to the 2019 Repo market blow out. We believe he has been  listening to Lori Logan, the Dallas Fed Governor who is very familiar with the monetary plumbing and  recognizes that the math does not work. Presently, the Fed is reducing its balance sheet by $60 Billion  per month via QT, and the consensus is that they will cut that amount in half soon. 

Above we mentioned the big print, and there is one development which occurred during the quarter that  we think is a very important signal or clue about what is to come. 

On March 5, 2024, the International Swaps and Derivatives Association, Inc. (“ISDA”) wrote  the Fed, FDIC, and OCC, to implement targeted reforms to the supplementary leverage ratio  (the “SLR”). ISDA wrote: “To facilitate participation by banks in U.S. Treasury markets— including clearing U.S. Treasury security transactions for clients—the Agencies should revise  the SLR to permanently exclude on balance sheet U.S. Treasuries from total leverage  exposure, consistent with the scope of the temporary exclusion for U.S. Treasuries that the  Agencies implemented in 2020.”

In plain English – the ISDA is recommending a permanent structure for the banks to perpetually fund US  Treasury issuance and U.S. Deficits. They did this exact same thing in response to COVID in order to  allow the banks to buy Treasuries in unlimited quantities. It is an emergency measure that was  implemented when the U.S. Treasury market became illiquid in March, 2020. This is a huge deal because  it basically amounts to QE infinity. The Banks would have unlimited ability to purchase Treasury debt.  Complete debt monetization “Banana Republic” style. Remember, it has not happened yet, but the ISDA  is owned and controlled by the banks. It is pretty clear that this letter is a trial balloon. 

Despite the Fed’s so-called hawkish stance, the supply of base money is still growing. (as our friend Lyn  Alden educated us, this is due to the draw-down on the Fed’s reverse repo facility). Our friend, and  excellent Macro Analyst Tavi Costa highlighted this issue in the following Tweet.

Our conclusion: the Fed and its banks, sooner or later, will provide more monetary accommodation or  the entire debt structure will collapse. That is just math. Now, they will do everything they can to mask  it, deny it, or create programs that they claim are not “money printing” (as they claimed that the 2023 Bank Term Funding Program was not money printing (it was). But, they will have to print money or  else the system will collapse. The gold and bitcoin prices demonstrate that the markets know this. 

Part 2 of Larry's letter, including his thoughts on gold miners, China, Russia, and gold replacing Treasuries as the neutral reserve asset, can be read here.

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Joe Biden has always been a prolific liar and plagiarist, but on Wednesday he took things to another level.

While attempting to disparage former President Donald Trump for 'skipping out' on a 2018 visit to a military cemetery outside Paris (when in fact the Navy made a 'bad-weather' call), Biden claimed that his uncle, 2nd Lt. Ambrose J. "Bozey" Finnegan Jr., was shot down in World War II and eaten by cannibals.

"He was a hell of an athlete, they tell me, when he was a kid. He flew those single-engine planes as reconnaissance over war zones, and he got shot down in New Guinea. They never found the body because there used to be, there were a lot of cannibals, for real, in that part of New Guinea," Biden said during a Wednesday stop in Pittsburgh - an account which appears in the official transcript of his remarks.

"They never recovered his body, but the government went back when I went down there and they checked and found some parts of the plane," Biden continued.

Except that's total bullshit of course

As Jonathan Turley points out, there was a survivor who gave a detailed account of how Finnegan and another man remained in the plane as it sank. What's more, Bozey's plane was not shot down - it was a Douglas A-20 Havoc with two Pratt & Whitney R-985 Wasp Junior 9-cylinder radial engines. The plane had mechanical problems when it crashed near New Guinea and simply sank into the ocean.

“On May 14, 1944, an A-20 havoc (serial number 42-86768), with a crew of three and one passenger, departed Momote Airfield, Los Negros Island, for a courier flight to Nadzab Airfield, New Guinea. For unknown reasons, this plane was forced to ditch in the ocean off the north coast of New Guinea. Both engines failed at low altitude, and the aircraft’s nose hit the water hard. Three men failed to emerge from the sinking wreck and were lost in the crash. One crew member survived and was rescued by a passing barge. An aerial search the next day found no trace of the missing aircraft or the lost crew members.”

D Day was June 6, 1944... and he says his uncles joined the military on D Day. Ambrose died on May 14, 1944.

Ambrose was not a pilot, & he was not shot down. He was a courier - a passenger on an A-20 bomber that ditched at sea with engine troubles.https://t.co/MwYZejvQXg

— Charles R. Smith🔹 (@softwarnet) April 17, 2024

What's more, Biden repeated it more than once! Watch:

Biden has a new story: Uncle Bosey got shot down in a plane and was possibly eaten by African cannibals. pic.twitter.com/9cSP29GSxx

— End Wokeness (@EndWokeness) April 17, 2024

OMFG. Biden just repeated the story that his Uncle Bosey was shot down and then likely eaten by cannibals during WWII.

This is the 2nd time he said this today. pic.twitter.com/PyLkeRiMoJ

— End Wokeness (@EndWokeness) April 17, 2024

So for those keeping track:

- Not shot down

- Not a single engine plane

- Not eaten by cannibals

All of which was has been in the public domain for decades. And not one reporter following him around pushed back on what could have been googled within seconds.

From the military records related to Ambrose Biden's death:

"Subject plane became lost and was forced to make a crash landing due to lack of fuel."

"2nd Lt. Ambrose was a passenger on an A-20 ... on a courier mission." pic.twitter.com/FKmoN8UcAP

— Zach Parkinson (@AZachParkinson) April 17, 2024

And according to AP - Biden was simply "off on details."

He said his uncle was *EATEN BY CANNIBALS* and the best AP can muster is "Biden is off on details..."

😂😂😂😂😂 https://t.co/HVIh7eRWnK

— ⚡David Angelo⚡ (@MrDavidAngelo) April 18, 2024

Look at them go. pic.twitter.com/5XJ9E5eZ6n

— Stephen L. Miller (@redsteeze) April 18, 2024

Meanwhile, Biden has falsely claimed at least 13 times that his uncle Frank won the Purple Heart, and said that he (Biden) was picked twice to attend the Naval Academy, when no supporting evidence exists.

In 2021, Biden told Jewish leaders that he remembered "spending time at" and "going to" Pittsburgh's Tree of Life synagogue in 2018 after 11 people were murdered in a mass shooting - which also never happened. The White House covered by later claiming he was thinking about a 2019 phone call with the synagogue's rabbi.