President Trump tweeted that he would respect Mr Cain’s wishes and not pursue the nomination.
Russiagate has three purposes.
One is to prevent President Trump from endangering the vast budget and power of the military/security complex by normalizing relations with Russia.
Another, in the words of James Howard Kunstler, is “to conceal the criminal conduct of US government officials meddling in the 2016 election in collusion with the Hillary Clinton campaign,” by focusing all public and political attention on a hoax distraction.
The third is to obstruct Trump’s campaign and distract him from his agenda when he won the election.
Despite the inability of Mueller to find any evidence that Trump or Trump officials colluded with Russia to steal the US presidential election, and the inability of Mueller to find evidence with which to accuse Trump of obstruction of justice, Russiagate has achieved all of its purposes.
Trump has been locked into a hostile relationship with Russia. Neoconservatives have succeeded in worsening this hostile relationship by manipulating Trump into a blatant criminal attempt to overthrow in broad daylight the Venezuelan government.
The Russian Embassy in Washington has prepared an accurate 121-page report in response to Mueller’s report: THE RUSSIAGATE HYSTERIA: A CASE OF SEVERE RUSSOPHOBIA.
Everyone should read this report. It documents the fake news, lies, violations of diplomatic standards and international law, and gratuitous aggressive actions taken against Russia during the period beginning May 18, 2016 and continuing through the issuance of the Mueller Report.
Without explicitly saying so, the report shows that neither the US government nor the American media has a nanoparticle of integrity. Both are criminal organizations that are willing to risk war with Russia in their pursuit of narrow policitized agendas.
This is important information for Americans and the rest of the world to have. Every person, every government and every private organization that supports Washington’s Russophobic policies is contributing to the growing threat of nuclear war.
One hopes also that the entirety of the Russian government, media, and population also read the report as it has equally powerful messages for Russia. The messages are no doubt unintended, but they nevertheless emerge from the embassy’s report.
The Russian government should marvel at its naivete in trusting Washington, US institutions such as Citibank, and US adherence to international law. For 121 pages the report lists transgression against Russia followed by transgression and lie followed by lie; yet the Russian government continued to send diplomatic notes that are never answered, requests for meetings that are never answered, requests for evidence that are never answered. One would think that month after month of abuse would have caused the Russian government to wonder where was the intelligence, “cooperative spirit,” reason, and “common interest in global security” that Russia’s responses to Washington assumed were present in Russia’s “partner.”
The Russian government’s naive and gullible response to Washington played into Washington’s hands. By responding to Washington’s orchestrated Russophobia as if it were some kind of mistake based on bad information, the Russian government allowed Washington to keep the process of demonization alive and thereby contributed to the ongoing demonization of Russia. If, instead, the Russian government had denounced the demonization of Russia as Washington’s act of preparing Americans for war with Russia and had taken a belligerant rather than a complaining stance, the realization that Washington’s policy had serious cost would have spread throughout the US and Europe and voices would have arisen against Washington’s dangerous and reckless policy. Today in place of the uniformity of voice against Russia, there would be dissent opposing Washington’s irresponsible provocations.
The danger of Russian self-delusion is not over. The embassy’s report expresses the hope that now that the Mueller report has concluded that the much heralded collusion has no basis in fact, relations between Washington and Russia can be normalized and cooperation achieved.
There is no such possibility. The Democrats are screaming “coverup” and demanding the resignation of attorney general Barr and Trump’s impeachment. The presstitutes are claiming that the Mueller report vindicates their reporting. Trump continues to use US foreign policy to commit criminal acts. He has declared that the president of Venezuela is the person he picked, not the one Venezuelans elected. He has given to Israel part of Syria as if Syrian territory is his to give. He threatens Iran with war as Israel requires. In other words, American arrogance rises to ever higher heights.
At some point the Russian government and Russian people are going to have to accept the fact that to reach an understanding with Washington Russia must either surrender her sovereignty or become as belligerent as Washington and replace Russia’s useless refutations of Washington’s accusations with accusations of her own. Otherwise, Washington is going to keep pushing until war is the only possible outcome.
Ever now and then we get a vivid reminder that America’s biggest threat are not a handful of Facebook ads bought by the KGB, nor Iran’s already brittle regime, nor Venezuela’s hyperinflating basket case of an economy, but over $100 trillion in unfunded future liabilities. Today was one such day, because that’s when the board of trustees for Social Security and Medicare reported that Medicare’s hospital insurance fund – also known as Medicare Part A – will be depleted in 2026, while Social Security program costs would exceed total income in 2020, for the first time since 1982.
Additionally, and in line with previous forecasts, the report also projected that Social Security funds could be fully depleted by 2035, leading to a devastating hit on expected payouts to retirees and other beneficiaries (read none), unless a comprehensive overhaul of the entire program is implemented in the coming years.
As a reminder, the Medicare trust fund comprises two separate funds: The hospital insurance trust fund is financed mainly through payroll taxes on earnings and income taxes on Social Security benefits. The Supplemental Medical Insurance trust fund is financed by general tax revenue and the premiums enrollees pay.
With uncertainty around possible cost-cutting solutions already weighing on healthcare stocks this year, US healthcare costs are expected to be a hot topic during the 2020 presidential campaign; most provocative of all is Bernie Sanders’ proposal of “Medicare-for-All” – a plan that would eliminate private insurance and shift all Americans to a public healthcare plan.
It now appears, that Bernie’s socialist healthcare vision is at best a pipe dream that will last about 6 more years, in line with Republicans’ complains that the Vermont socialist’s proposal is impractical and too expensive.
“At a time when some are calling for a complete government takeover of the American health car system, the Medicare Trustees have delivered a dose of reality in reminding us that the program’s main trust fund for hospital services can only pay full benefits for seven more years,” Seema Verma, administrator for the Centers for Medicare & Medicaid Services (CMS), said.
Here’s the reason: as the number of Medicare beneficiaries increases from about 58.4 million in 2017 to nearly 80 million by 2030, the number of workers per beneficiary will decline from 3.1 to 2.4. The cost of health care has increased rapidly as well putting further pressure on program costs. HI trust expenditures exceeded taxes for several years up to 2016, and though these outflows and inflows will roughly stabilize for a few years, the fund is projected to be exhausted by 2027. These pressures now and in the future will force lawmakers to find ways to finance promised benefits or cut services or provider payment rates.
Separately, the report said costs associated with the Medicare Supplementary Medical Insurance (SMI) trust fund, which covers drug costs in Part B and D in the program for seniors, are likely to grow steadily from 2.1% of gross domestic product in 2018 to about 3.7% of GDP in 2038, given the aging U.S. population and rising costs.
There was a sliver of good news, and one may have to thank Trump for it: cost projections for Part D drug spending, which covers pharmacy prescription medicines, are actually lower than in last year’s report because of slower price growth and a trend of increasing manufacturer rebates, CMS said.
Some more good news: unlike Medicare Part A, the trustees projected that the SMI fund for Part B and Part D will remain adequately financed into the indefinite future because current law provides financing from general revenues and beneficiary premiums each year to meet the next year’s expected costs.
Finally, in an unexpected twist, the trustees predicted that the Social Security program’s will extend for one more year than projected last year. Which means that instead of being exhausted in 2034, Social Security funding will hit zero in 2035, or as the LA Times put it, “the trust funds’ exhaustion last year was 16 years away; this year it’s still 16 years away.”
That said, the costs of running Social Security will exceed the revenue next year; in 2018 income of $1.003 trillion only barely exceeded the costs of $1 trillion. The program received $885 million from the payroll tax, $83 million in interest and $35 million from taxing benefits, while it spent $988.6 million on benefit payments, $6.7 million on administrative expenses and $4.9 million on railroad retirement expenses.
Costs haven’t exceeded revenues since 1982, but are projected to do so in 2020. After that, costs will then remain higher throughout the 75-year projection period, according to the forecast.The rising costs are a sign of America’s increasing aging population.
Finally, for those eager to save Social Security it could be donw… it will just cost an additional 2.7% from every paycheck. Specifically, the cost of making Social Security fully solvent would require an immediate increase in the payroll tax of nearly 2.7% points, bringing the tax to 15.1% (shared by employers and employees), up from the current 12.4%. Whether or not any Americans will be thrilled with having nearly 3% of each and every paycheck be paid down to fund healthcare for others is a different matter entirely.
Major financial institutions have made it clear that they don’t support SOFR, the Fed’s choice of Libor replacement. And neither financial institutions nor their regulators have a clear plan to resolve the need to replace Libor. No matter how dire you believe the Libor problem to be, however, the underlying problem of debt market illiquidity that the Libor problem reveals is many times bigger. A Libor fix only resolves the issue of illiquidity in the short-term end of the market for unsecured debt.
A recent letter from the trade group Secured Finance Industry Group (SFIG), representing the interests of FNMA and FHLMC among others, put an end to the fiction that major financial institutions support SOFR, the Fed’s choice of Libor replacement.
Financial institutions are justly concerned that SOFR could fatally squeeze bank margins in a crisis.
Nevertheless, the proposed alternatives, such as the changes to Libor proposed by Intercontinental Exchange (ICE), do not fit the regulators’ requirement that the replacement is determined by transactions prices in a liquid market.
Regulators cannot introduce a new financial instrument. Libor’s replacement must be the result of private sector innovation.
A recent Secured Finance Industry Group (SFIG) comment letter is SFIG’s response to a request for comment by the Alternative Reference Rates Committee (ARRC) – a Fed-appointed committee of bankers tasked to solve the Libor problem. The Fed’s ARRC creation was an embarrassingly transparent attempt by the regulators to coopt industry objections to its Libor replacement. ARRC proposes to replace Libor with the Secured Overnight Financing Rate (SOFR) – a Fed-created version of the overnight repurchase agreement rate. The SFIG comment details the objections of financial institutions to SOFR. Importantly, SFIG serves as chair of ARRC. The critical comment letter is thus the final blow to the regulators’ failed effort to gain the appearance of financial institution support for SOFR.
However, more important, neither financial institutions nor their regulators have a clear plan to resolve the need to replace Libor. If replacing Libor were not such a critical matter, the Byzantine machinations of the bank regulators and financial institutions around SOFR would be amusing. However, the pricing of tens of trillions in debt instruments and hundreds of trillions in derivative instruments depends on a smooth transition to some reference rate other than Libor. I contend that this enormous magnitude is a low estimate of the financial market assets at risk due to poorly governed debt markets.
Financial markets’ failure to solve the Libor replacement problem is the result of a misunderstanding of the reasons for the Libor problem. Understanding of Libor suffers from journalistic misdirection, on one hand, and a misunderstanding of the root problem that the Libor brouhaha exemplifies, on the other.
The failure of Libor is a market structure failure. However, the financial press bills Libor’s failure mistakenly as a failure of ethics among bankers. Recorded transcripts of telephone, email, and chat room conversations of small groups of traders provided the evidence of ethical weaknesses leading to attempted market manipulation that drove the post-Financial Crisis Libor embarrassment.
However, markets themselves typically are the best antidote to attempted market manipulation. The market solution to trader cabals formed to alter prices has always been a simple one. In a liquid market, larger market forces inevitably swamp organized efforts to manipulate prices. Cabals don’t work in a liquid market because the manipulators lose money.
The split over a Libor is an enormous opportunity.
Financial institutions have quite reasonably insisted on two key properties that SOFR lacks:
The Libor replacement should be forward-looking. That is, the rate should reflect the market’s opinion of overnight interest costs on average in the coming three months.
The Libor replacement should reflect the interest cost of private unsecured borrowers, instead of the lower interest costs of the Treasury.
Thus, coupled with the TBTF banks’ endorsement of the Intercontinental Exchange Inc. (ICE) candidate for a Libor replacement, the SFIG letter shows that ARRC’s SOFR proposal does not represent the banks and other financial institutions that are ARRC members. Worse, it raises a serious threat: If regulators seize on an index that might potentially bankrupt one or more major financial institutions during a financial crisis, those institutions do not plan to allow the Fed to pass the blame for this disastrous decision to them.
However, the banks (or a third party) will, I believe, have to do more than provide another bank-calculated index. The self-acknowledged problem with the ICE (TBTF-endorsed) Libor replacement is that any index the procedure produces is the result of a transaction selection process by banks themselves. Thus, the ICE fix remains vulnerable to the same ethical vulnerabilities that Libor itself faced.
In short, any satisfactory Libor replacement must be a form of debt that doesn’t exist now. We could throw up our hands and use the hazardous SOFR, but this seems to be a negative way of looking at the situation.
This is an obvious opportunity to seize an enormous hunk of the financial markets in one fell swoop by addressing bond market illiquidity more generally. Moreover, it is an opportunity that anybody with the courage and the capital could pursue. The problem is one of creating a new debt market with a different structure. Such a new market would have no incumbent oligopolies and no reactionary regulators. Capital, a few hotshot IT professionals, and some people with skills of persuasion would be enough ammunition to get the job done. Island overwhelmed the incumbent stock exchanges with less.
Interestingly, in all likelihood, TBTF banks, incumbent exchanges, and regulators are at a disadvantage in the pursuit of a debt market innovation since they are married to old ways of generating revenues. An incumbent TBTF bank pursuing a new market structure, for example, would not find management friendly to ideas such as putting an end to collateral hypothecation in the repo market.
Why are we getting Libor wrong?
SFIG and the TBTF banks also concede that there is no existing instrument that meets the minimal standards required of a Libor replacement – the replacement should be a term (probably three-month or six-month) unsecured debt instrument, traded in a liquid marketplace where recorded transaction prices are the result of the combined forces of supply and demand. SFIG’s comment letter to ARRC’s request to comment on SOFR points to a central quandary that neither SOFR nor its detractors have addressed: No financial instrument meets these criteria today.
Don’t blame the Fed. The Fed did everything imaginable to get industry support for repurchase agreements, the only existing liquid instrument where an honest broker (the Fed) records market transactions. Blame the markets themselves. Organized market participants are adopting the time honored “See no evil; hear no evil; speak no evil” approach. Once ARRC had endorsed SOFR, CME Group (CME) helpfully created a futures contract based on SOFR. All that remained was for the markets to begin trading the SOFR-based instruments. However, that didn’t happen. CME volume in SOFR futures remains a small fraction of Eurodollar (Libor) futures volume. In itself, this is not a failing of the marketplace. It’s simply the market’s recognition that SOFR futures don’t provide adequate protection for their existing risks.
How big is the Libor problem?
No matter how dire you believe the Libor problem to be, the underlying problem of debt market illiquidity that the Libor problem reveals is many times bigger. A Libor fix only resolves the issue of illiquidity in the short-term end of the market for unsecured debt.
Libor became important to society when it began to appear as a factor in the cost of mortgages, municipal debt, and credit card debt. In other words, Libor is different from the interest cost of a corporate bond because of Libor’s visibility. However, of course, all bank debt, no matter how obscure, is a factor in the cost of consumer borrowing.
An exchange trading liquid tailor-made debt issues that capture the primary price risks associated with debt issuance at all maturities would have a massive beneficial effect on the cost of financing. This market would generate transactions comparable to the combined volume of the stock exchanges, assuming turnover in the two markets to be comparable.
What flaw in market structure creates the Libor/debt market liquidity problem? In the markets for corporate liabilities, the issuer is concerned about the market appeal of the terms upon which debt is sold only once – the issue date. After that, any action the corporation might take that benefits its stockholders at the expense of its debtholders faces a single low hurdle: Is it legal? Investors are wise to devote more time and attention to debt acquisition than to share acquisition.
If bondholders could devise an instrument that liberates its holder from the negative effects on debt valuation of the decision-making power of a single issuer, it would be interesting to see what effect that would have on the position within corporate politics of debtholders relative to stockholders. One could imagine the popularity of this buyer-friendly instrument growing relative to the popularity of the current issuer-centric debt issues. As this form of debt grows as a share of the market for debt, the management of this debt would become gatekeepers for bond market liquidity. They might gradually induce issuers to write more buyer-friendly forms of debt.
The legal obligation of corporate management to consider the interest of stockholders when these interests conflict with the interests of debtholders is writ in stone. Nevertheless, there is no legal barrier to investors – the final constituency for all corporate obligations – using their influence to discriminate among debt issues. If debtholders confront stockholders with a positive payoff to pleasing debtholders, there might be multiple systemic improvements. The value of buyer-friendly debt would rise relative to issuer-friendly issues, driving down its interest cost and resulting in capital gains to both debt- and shareholders. The result would be an altogether safer financial system as a whole.
Having a credit card in China is much more of a luxury than it is in the United States, and its exclusivity in China could actually be weighing on China’s economy, according to a new Bloomberg op-ed. More than 66% of Americans over the age of 15 have a credit card, but that number stands at just 21% in China. And it’s not because the Chinese don’t want to spend – a recent survey showed that 44% of Chinese internet users plan to consume more and only 33% intended to scale back.
The lack of credit isn’t because the Chinese are financially irresponsible, either. Most borrow within their means and the average loan usually amounts to a little more than a month’s salary. But the lack of access to credit in China “dramatically undercuts Chinese citizens’ financial security” according to Bloomberg, and cardholders are a privileged bunch.
The average credit card holder in China is a 34-year-old millennial who earns at least $16,400 per year, which is close to three times the average urban income in China. There is an 82% chance that they live in one of the country’s four biggest megacities, including Beijing, Shanghai, Shenzhen and Guangzhou.
Those Chinese without credit cards are forced to either live within their cash flow means, or resort to online borrowing, where loans come relatively easy to those who have established good Sesame Credit, a scoring system developed by Alibaba group. For those who have online loans already, or for those who want to borrow more, peer to peer lending or even payday loans are popular – just as they have grown in popularity in the United States.
But online rates are much higher than those charged by credit cards. This has led to predatory lending scandals across the country in recent years. For instance, US listed company Quidan (QD) sparked outrage in 2017 after it disclosed that more than half of its transactions had annualized rates exceeding 36%, the legal limit. In March, CCTV ran a lengthy interview with a woman whose debt went up 70 fold in three months because she took out a “714 missile loan”, the name for a 7 to 14 day loan. She would’ve never faced these consequences if she had a credit card, which doesn’t charge interest for a whole month, the op-ed argues.
And higher interest rates are starting to weigh on borrowers. Mortgages accounted for 80% of total outstanding debt for those who responded to the survey but such payments are only a small part of monthly obligations for Chinese citizens when compared to other types of debt.
This has led people to ask what banks are doing to help people get credit cards. Lenders can earn about 14.5% effective yield from clients whose 1% delinquency rate makes them prime borrowers. Not only that, the People’s Bank of China now allows commercial banks to package credit card loans into asset-backed securities that they can sell. The typical yield for an ABS is 3% to 5% on the safest tranches.
Boosting the case for broader credit card penetration, borrower creditworthiness is surprisingly transparent in China: if a customer has a checking account with Bank of China, the lender has access to their income and also how much they spend every month. Meanwhile, online lenders and peer to peer lenders have to work off of limited information, like social credit scores.
And yet, because bureaucrats in Beijing believe millenials tend to use credit cards to buy highly risky penny stocks or take out home-improvement loans to speculate on the real estate market, they have been dragging their feet. Regardless, the rise of online lending and fintech companies makes it easy for Chinese citizens to find funding somewhere if they want it. So, why not credit cards? The conclusion: if China wants economic growth to be driven by domestic consumption it should allow its citizens more access to them. After all what’s the worst that could possibly happen if China becomes exactly like America…
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