Nice latest town to cancel Carnival celebrations
Air China cancels flights between Beijing and Vienna through March 20
US issues travel advisory for Iran, warns US citizens of risk of infection on top of kidnapping and detention
HHS Secretary Azar tells Congress during testimony on Wednesday that all of the infectious disease rapid response fund is “already committed or obligated”
House could vote on coronavirus funding plan during week of March 9
Congress begins talks on virus emergency spending bill
Delta Air Lines reduces flights between US and Seoul
Brazil tracking 20 patients suspected of having the virus
Brazil sees number of cases rising in coming days
Lebanon health ministry confirms 2nd case
Matteo Salvini says Italy should spend €10 billion on coronavirus aid
Russia says it will halt issuing visas to Iranian citizens
The focus remains on Europe and the Middle East now that the number of new cases being confirmed outside China is outbumbering the number of new cases being declared in China (at least according to the ‘official’ numbers).
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Update (0940ET):The Brazilian health ministry said the coronavirus patient arrived in Brazil on a plane from Paris. Exactly when isn’t known.
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Update (0855ET): In the US, Dems are officially doubling-down on their push to politicize the coronavirus outbreak and use it as a cudgel against President Trump by proposing a plan calling for even more money to be spent.
According to Fox’s Chad Pergram, Chuck Schumer is planning a $8.5 billion package that he plans to hand over to the appropriations committee later on Wednesday.
President Trump is holding a press conference later today to discuss the outbreak. Yesterday, he said he would be handing off his administration’s $2.5 billion rescue package to Congress. President Trump has repeatedly insisted that the outbreak is under control, so we suspect that he fears a large number might spur panic.
Of course, in a situation like this, money can only go so far. As the CDC has demonstrated, containing an outbreak is more about decision-making and hard choices.
In other news, as we mentioned earlier, Germany is moving to implement some fiscal stimulus of its own.
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Update (0750ET): While the Germans oppose closing borders in response to the outbreak in Italy, it appears Berlin has stepped up to rescue the market and placate economists begging them to roll out a fiscal stimulus program to stop the European economy from sliding into the gutter.
Futures soared on the headline, which is hardly surprising, as the market has already been primed for German stimulus, even if Berlin has always held the idea at a distance. Back in September, there was all that talk about a “shadow budget”.
As sentiment plunges, WHO’s Dr. Tedros has stepped in to try and soothe rattled investors, warning that government officials, economists, infectious disease researchers and any self-styled ‘experts’ should avoid using the word ‘pandemic’ to describe the outbreak.
Yes, while it does technically meet the definition of a pandemic, that word has some seriously negative connotations which Tedros feels isn’t really appropriate here.
Italy, meanwhile, has reported its 12th death after confirmed cases soared above 300 earlier.
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Update (0730ET):The UK has announced plans to start randomly testing citizens with flu-like symptoms for COVID-19. The plan is part of measures to contain the virus as the UK has managed to avoid reporting any new cases over the past week. In England, random testing will take place at 11 hospitals and 100 doctor’s offices.
“This testing will tell us whether there’s evidence of infection more widespread than we think there is. We don’t think there is at the moment,” Cosford said. He added: “The other thing it will do is, if we do get to the position of more widespread infection across the country, then it will give us early warning that that’s happening.”
So far, only 13 people have been infected.
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Update (0715ET): Abe’s government has officially denied comments made by a senior IOC member who suggested that the Tokyo Games might need to be canceled if the virus is still a threat in late May. IOC member Dick Pound told the AP that “a decision would have to be made by late May” about whether to cancel the games, according to the Washington Post.
The official position of the Japanese government is that the Games will not be canceled. Besides the obvious blowback for Japan’s already sagging economy and tourism industry, cancelling the games would likely have a serious psychological impact on consumer confidence in the world’s third-largest economy.
In other Japan news, Hokkaido, a prefecture in the north ofJapan, has urged schools to temporarily close as it struggles to contain the virus after a string of new cases popped up in the area. It was the prefecture’s first order to close schools since the epidemic began.
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After cementing its largest two-day percentage drop in two years (going by points, it was the biggest two-day drop ever), stocks fell in Europe Wednesday as France reported its second virus-linked death (and first French national; the first was an 80-year-old Chinese tourist), while Spain confirmed 8 new cases within 24 hours.
The Frenchman who passed away on Wednesday was one of three new cases confirmed by health authorities.
Over in the US, the CDCwarned yesterday that “community spread” of the virus is “inevitable,” while President Trump and his administration continued to insist that everything is fine and that the outbreak in the US would soon die down. We also saw Croatia, Austria and Switzerland report their first cases on Tuesday following the EU health commissioner’s declaration that closing borders would be “disproportionate and ineffective.”
“We’re talking about a virus that doesn’t respect borders,” said Italy’s Health Minister Roberto Speranza yesterday.
Are we the only ones who feel that this sounds like justification for closing the border?
Mirroring the situation on the Canary island of Tenerife, Austrian authorities placed a hotel in the Alpine city of Innsbruck under lockdown after a receptionist (an Italian who had recently visited outbreak epicenter Lombardy) tested positive, according to the Washington Post.
Just hours after Brazil confirmed the first case in South America, some of its continental neighbors are going on “maximum alert”. Guatemalan President Alejandro Giammattei said the country was battening down the hatches, and that its hospitals are fully stocked and supplied.
On Wednesday, Greece confirmed its first case in the city of Thessaloniki, while Iran reported 19 new deaths, bringing them, within swinging distance of the 50 deaths that a local lawmaker reported earlier this week. Confirmed cases in the revolutionary Islamic Republic have climbed to 139. According to Al Jazeera, Kuwait confirmed six more cases on Wednesday, bringing its total tally to 18. Bahrain reported three new cases, bringing its national total total to 26 as three women who recently traveled to Iran carried the virus back.
While European officials largely avoided the heavy-handed tactics used in China, government ministers urged people to avoid all “non-essential” travel as the outbreak spreads across Europe. The mystery at the center of the outbreak in Italy has compounded fears, as the lack of understanding contributes to the hysteria surrounding the outbreak.
“There is no prohibition,” said Spain’s health minister, Salvador Illa, according to El Pais. “But unless it is essential, do not go to a risk zone. It’s common sense.”
Rumors circulating around twitter yesterday claimed an official who had met with the Ayatollah only days ago had tested positive for the virus, becoming at least the second government official to catch the virus after the deputy health minister.
The Hong Kong government said it had been contacted by more than 3,000 Hong Kongers in Hubei Province, including 532 in Wuhan, asking for help getting them back to Hong Kong. In order to return to HK, the government said all Hong Kongers in Hubei must register with the government by Feb. 28.
Mongolia has become the latest neighbor to tighten its borders and restrict internal travel. The country said it would restrict travel to and from its capital, Ulaanbaatar, to other provinces until March 3. A transportation minister said the country would take precautions with other flights from Europe, Russia Turkey and Kazakhstan. Egyptair has extended its shut-down of flights to China; flights were supposed to resume on Thursday.
The Philippines, which adopted travel restrictions directed at China, said Wednesday it would also impose travel restrictions on South Korea. The government announced an immediate ban on entry to travelers from North Gyeongsang province, where the coronavirus-hit city of Daegu is located. Japan also announced that it would bar travelers who had visited Daegu or Ceongdo.
Overnight, South Korea reported 115 more cases, in keeping with its 2 – 3 daily updates. The new total: 1,261. That number is, of course, expected to climb over the coming days as the country begins the mass-testing of 200,000 people, including members of the cult-like church that’s found itself at the epicenter of the outbreak in Korea.
Korea also reported that an American soldier was among the 169 cases reported earlier in the day (we noted it late last night).
Israel has yet to detect the virus within its borders, but another hair-raising revelation came to light Wednesday when South Korea’s CDC confirmed that the Korean Air cabin crew infected with the coronavirus had been on a flight between Israel and Incheon.
As Shinzo Abe’s government goes all-out to keep the Olympics on track, the PM announced on Wednesday that all major sporting and cultural events in the country taking place over the next two weeks should be postponed or canceled. This comes after the International Olympic Committee said the Olympic Games would go on no matter what, even if the outbreak keeps travelers away, the Japan Times reports.
Trump Furious With CDC For ‘Spooking’ Market: WaPo
President Trump’s penchant for viewing the stock market’s performance as a barometer of his presidency’s success is widely known to the public by now. So the fact that Trump has been extremely agitated by goings-on back home during his trip to India this week is hardly a surprise.
Usually, we don’t give much credence to the Washington Post’s inside-baseball stories purporting to offer a ‘peak behind the curtain’ while creating a venue for vindictive officials to exact their revenge by anonymously trashing the president or rivals within the administration.
But today, WaPo’s account basically confirms what we suspect has been unfolding behind the scenes, with the president turning on yet another federal agency and blaming it for spooking the markets. In the past, Trump has (either publicly or privately) blamed Democrats, Treasury Secretary Mnuchin, Labor Secretary Wilbur Ross, Boeing and — of course — Jay Powell for the market selloffs.
Now, we can add the CDC to that list.
The paragraph below is basically the heart of WaPo’s story, describing President Trump’s impotent fury at helplessly observing the selloff from afar.
While he has spent the past two days traveling in India, Trump has watched the stock market’s fall closely and believes extreme warnings from the Centers for Disease Control and Prevention have spooked investors, the aides said. Some White House officials have been unhappy with how Health and Human Services Secretary Alex Azar has handled the situation, they said.
The No. 1 rule for successful propaganda is to make sure your source still appears credible to the unengaged reader or viewer. When one insists on pushing a narrative that is completely divergent from the lived experience of millions, credibility can be damaged.
“You don’t want to overly feed the darkness, but if you seem like all you do is happy talk then you lose credibility,” said Gene Sperling, who served as a top economic adviser during the Clinton and Obama administrations. “You get a three-hour high from your happy talk, but lose the long-term ability to be seen as serious, factual and potentially reassuring at a later point when it might be justified. This White House may already be in danger of losing the capacity to be seen as serious.”
Just like the State Department’s decision to bring back 14 infected Americans during their evacuation of the ‘Diamond Princess’, the administration’s approach has left it open to criticism — at least, according to the Washington Post.
Now, White House officials’ efforts to contain the economic fallout from the coronavirus have created new political hazards, as they publicly play down the threat while other federal officials with a background in health and diseases are warning of more severe consequences for inaction. The administration also risks creating new health hazards, should the pressure to assure investors of economic stability undercut its public health message about the mounting threat.
In a statement, the White House defended its response, saying comments have been taken out of context or twisted to distract from the Trump administration’s efforts so far. Administration officials strongly denied that the CDC and White House economic team were at odds on Tuesday.
At least one analyst appeared to agree.
“The CDC is probably more credible about the risks from the coronavirus than anything the Trump economic officials say,” said Chris Rupkey, chief financial economist at MUFG Union Bank. “The market is coming down on the CDC.”
On CNBC, guests complained that the administration’s message sounded muddled and confused yesterday, which certainly didn’t help boost the market’s confidence. Fortunately for investors, the administration has refined its message, as Kudlow and others insisted that Trump’s warnings represent “where we are now”, while the CDC is focused on staving off the worst-case scenario.
A snippet from Kudlow’s appearance on CNBC yesterday is one example:
“We have to err on the side of emergency planning in the United States. They are doing the right thing,” Kudlow said of CDC officials. “I have to worry about the economy and the financial markets… There’s a fear factor right now, and I get that, but what I was trying to say is this thing is not going to go on forever, and our economy is in great shape.”
The White House also blamed Democrats and accused them of trying to deliberately trying to scare markets in an effort to sabotage Trump.
“Unfortunately what we are seeing today is a political effort by the Left and some in the media to distract and disturb the American people with fearful rhetoric and palace intrigue,” White House spokesman Judd Deere said in a statement.
“The United States economy is the strongest in the world thanks to the leadership and policies of President Trump. The virus remains low risk domestically because of the containment actions taken by this Administration since the first of the year.”
President Trump initially dismissed the virus during his trip to Davos in January, and has issued a string of optimistic tweets this week, including encouraging investors to ‘buy the f – king dip’ on Monday. Unfortunately, those who took the president’s advice probably got smoked.
With more than 50 cases confirmed in the US and the CDC warning about imminent community outbreaks, Trump’s words can sound jarring. But remember: The better prepared everyone is, the less likely the virus will spread. And nothing inspires this type of behavior quite as effectively as genuine paranoia.
The only problem is, it will take time before we know for sure whether the Trump Administration’s travel restrictions were effective.
Trump will address the outbreak at 6 pm ET. Watch it live here.
Meanwhile, before we go, we’d like to point out another angle that was unsurprisingly overlooked by WaPo: the CDC’s Dr. Nancy Messonnier is the sister of the former Deputy Attorney General Rod Rosenstein, the one who appointed Special Counsel Robert Mueller and was eventually fired by President Trump following a tense overall tenure.
Is it possible she could be part of the resistance?
Also, as we’ve pointed out previously, the CDC’s diagnostic tests have malfunctioned and only a few states and local health agencies have any tests on hand.
Let it be said that historians will surely marvel — and at some point soon — about the grand delusion of the present era. Namely, the near universal belief that central bankers could print, peg and palaver the main street economy into unfailing expansion and ever rising prosperity and that there were essentially no macro-risks to soaring stock prices that their toolkits couldn’t contain and counteract.
That misbegotten belief had huge untoward consequences. It made economies brittle with too much leverage, financialization and speculation; and fragile with too few shock absorbers and insurance mechanism such as just-in-case inventories, second suppliers and local sources for physical production and back-up liquidity lines and balance sheet reserves for financial operations.
Then came the Black Bat of 2020 (or whatever) with its toxic economic contagion.Racing with virtually lightening speed through an infinitely complex and deeply integrated global supply chain anchored in the Red Ponzi, the breakdown of economic activity is already proving that the central banks are not omnipotent after all.
Just as they cannot print antibodies to stop the coronavirus disease, they can’t print raw materials, intermediates, components and sub-assembly to restart broken supply chains. Super-QE wouldn’t do it; double digit subzero rates wouldn’t help; and openmouth forward guidance would only call to mind King Canute shouting at the incoming sea.
It is too early to tell, of course, as to whether the Covid-19 is the Big Bang or if it will be soon wrestled to ground by public health authorities around the planet, thereby eventually relieving the global supply chains of quarantined workers, grounded planes, ships and trains, depleted inventories and paralyzed business decision processes.
But even assuming the latter, the predicate of central bank omnipotence should now be swept into the dustpan of history. Not only can the Fed not repair and revive disrupted supply chains, but it can’t even accomplish the conventional tasks it has defined for itself. Namely, making domestic inflation rise by 2.00% annually and causing output growth to adhere unfailingly to the path of full-employment GDP, world without end.
That’s because in a world of Peak Debt — -$255 trillion globally and $74 trillion in the U.S. alone — the Fed’s policy tools are not only impotent; they are actually malignant.
It is now more than evident that the impact of massive bond-buying/balance sheet expansion (QE) and brutal repression of money market interest rates never goes beyond the canyons of Wall Street. It just inflates, inflates and inflates further the price of financial assets owing to the symbiotic confluence of carry trade speculators on Wall Street and the huge financial engineering joints that have been fostered in the C-suites of corporate America by central bankers.
As a consequence, capital has been artificially drafted into financial speculation and money dealing. At the same time, household and business balance sheets have been deeply impaired in order to live high on the hog today rather than investing for the long haul and positioning to weather the unpredictable vicissitudes of individual and collective life – illness, accidents, wars, pestilence, droughts and plagues, one of which we are now experiencing.
But virtually none of that vaunted “stimulus” makes its way to main street. Neither output, employment nor inflation is materially impacted by the Fed’s incessant interventions and machinations in the financial markets.
Take the objective of 2.00% inflation targeting that Fed head Lael Brainard was yapping about last week. In the first place we wonder exactly why she’s complaining about persistent inflation shortfalls from target and therefore the need for even more “monetary accommodation” in order to cause inflation to run hotter until it averages 2.00% over a permanent time frame.
The fact is, the CPI less its volatile food and energy components has exceeded 2.00% for 23 months running. How is that a shortfall?
Indeed, we don’t need a magnifying glass to grasp the story in this case. There is nary a single bar below the sacred 2.00% line in the entire 23 month-long chart below.
CPI Less Food And Energy, Year-Over-Year Change Since March 2018
Of course, the Fed has a different inflation measuring stick called the PCE deflator that reads lower per the discussion below. But until the Fed formally adopted inflation targeting in January 2012 based on the PCE deflator, the CPI less food and energy was seen as a serviceable proxy for the trend inflation rate shorn of the temporary volatilities attributed to global food and energy cycles.
Indeed, the low-flation crowd at the Fed and among its megaphones on Wall Street have some serious ‘splain’ to do based on the above. That’s because their argument for 2.00% inflation is that low inflation invites deflation, which, in turn, encourages consumers to defer spending in anticipation of even lower future prices, thereby impairing the spending mainspring of the Keynesian economy.
That’s complete nonsense, of course, least the plummeting price of smart phones would have queried Apple’s $1.4 trillion market cap long ago.
Still, even the Keynesian central bankers have not argued that falling food and energy prices will cause consumers to eat less or to drive fewer miles or freeze in the dark in their homes waiting for fuel prices to stop falling!
Q.E.D. If there is a low-flation problem on the entirety of the CPI which isn’t food and energy, where is it?
And we are not just talking about the last 23 months. Here is the entire span since inflation targeting was adopted. During the 97 month period from January 2012, the CPI less food and energy posted above 2.00% on a year-over-year basis more than half the time, while the average rate at 1.95% per annum was actually check-by-jowl with the target.
So if Brainard really wants multi-year averaging at 2.00%, well, we already have it.
That is, unless they actually want to argue that the 5 basis point per year average miss over nearly a decade is more than a rounding error. That’s preposterous, so it’s also case closed on the low-flation canard.
CPI Less Food And Energy, Year-Over-Year % Change Since January 2012
But there is a larger point implicit in the above. What actual direct control does the Fed have over globally driven commodity prices, as well as their second cousins, manufactured goods, the prices of which are overwhelmingly driven by global markets?
In fact, a disaggregation of the Fed’s owned ballyhooed PCE deflator puts a stake right through the low-flation argument. To wit, during the period since January 2012:
The PCE deflator for services (purple line) is up by 19.4% or 2.31% per annum;
The PCE deflator for goods (red line) is down by –5.3% or –0.70% per annum;
The overall PCE deflator (black line), therefore, has risen by just 1.34% per annum because it is being pull down by global prices for goods — even as the more domestically driven prices for services have persistently exceeded the 2.00% target.
And that’s why the Fed cannot hit its inflation target. Just like it cannot print antibodies or supply chain deliveries, it cannot force inflation to march to its tune because the recent absence of it in the commodities and goods markets is rooted in the global economy.
The level of disingenuous mendacity among Brainard, Powell and the rest of the “moaaaar inflation” gummers could not be more obvious than in the two charts below.
Of course, Brainard & Co. know that the purple line (domestic services) has been marching steadily higher while the red line (globally traded goods) has moved materially lower since the inflation targeting experiment was begun in 2012.
Isn’t it time, therefore, for them to admit they don’t have a snowball’s chance in the hot place of calling the tune on global oil prices or labor intensive manufactures, and therefore they need to give up on what is essentially a stupid project in the first place (inflation does not cause prosperity!).
Or if they must persist with inflation-targeting for reasons of institutional face-saving— then refocus on domestic services (not withstanding the growing impact of the “India Price” for services) and declare victory!
PCE Deflators For Goods, Service and Total Since January 2012
In fact, if you look more closely at the purple line (domestic services) expressed as a year-over-year rate of change, the low-flation lie is there for all to see. For the last eight years it has persistently posted above the 2.00% policy target line.
Also, quite obviously, the total PCE deflator (black line), which is, apparently, the Eccles Building’s holy grail, has fallen short of target because it has been powerfully pulled down from below owing to the worldwide excess of cheap industrial and transportation capital and abundant cheap labor that has been drained from the rice paddies and subsistence villages of Asia.
Not even King Canute would have attempted to roll back that mighty tide, which is exactly what 2.00% inflation targeting on the total PCE deflator amounts to.
Year-Over-Year PCE Deflator Change For Goods, Services And Total Since January 2012
As it happens, the Fed’s impotence with respect to its inflation target is also true on the output and employment front. On that score, it is constantly fine-tuning its money market repression tools (25 bps at a time) and recalibrating its QE bond purchases (and short-lived QT bonds sales).
But exactly why? After all, the extended unfolding of a long but weak-kneed business cycle expansion driven by the inherent tendency of capitalists and workers to want more and produce more has now proven the Fed doesn’t have anything to do with it.
As a theoretical and process matter, households were tapped out collectively at Peak Debt 11 years ago on the eve of the financial crisis and business have been sucked into financial engineering speculations.
This means that the traditional transmission channel from the money, debt and capital markets to main street is completely broken. “Stimulus” never gets to the latter, and, instead, remains sequestered in Wall Street were it functions to finance speculation and drive risk asset prices ever higher.
Moreover, as an empirical matter, where’s the beef?
The blue line represents total industrial production (manufacturing, construction and energy/mining). Since January 2012 it has swung substantially — -from +4.5% annual change to –4.5% annual change. But that substantial oscillation bears no relationship to the doings of Fed policy during this period.
The red line represents quantitative easing (QE) and the year-over year rate of change in the Fed balance sheet. During this eight year period it swung from positive 40% at the peak of QE in 2013 to negative –20% in 2019 during the short-lived QT episode to + 50% during last falls’ repo ruction and the subsequent return to madcap liquidity pumping.
Is there any discernible relationship between the red line and the oscillations of the industrial production index (blue line), which, in turn, drives the less severe stop and go movements of the GDP?
There is not.
The same is true of the traditional policy tool of pegging the Federal funds rate (black line). If they industrial production index could speak, it would say I never knew ya.
In sum, the economy grows owing to the rudiments of capitalism — workers, entrepreneurs, investors, inventors and savers— putting their collective shoulders to the grindstone of production and investment. It heads from the lower left to the upper right – even as it is deflected and oscillated by the rumbling forces of the global economy, and is held back by the fiscal and regulatory barriers thrown in its path by the agencies of the state.
Compared to these elemental forces, the central bankers are strictly bit players, if that.
And that gets us to the great irony of a day when the casino plunged by 1030 Dow Points because the predicate of central bank omnipotence is facing a sudden and unexpected challenge from the growing impact of Covid-19 on the global economy and its vast and intricate supply chains.
The Fed pretends it is entirely about the business of boosting main street and the employment, production, income and inflation metrics by which is performance is measured. Yet as Covid-19 now reminds, it is actually impotent on all that it sanctimoniously claims to be sheparding and enhancing.
At the same time, it claims to be focused on the stock market, if at all, only out of a squinting corner of its collective eye.
All that it does is conditioned and encapsulated by wealth effects theory and a sniveling fear of a Wall Street hissy fits. So it keeps on temporizing, capitulating and re-fueling the bubbles that it dare not allow to correct.
Its true ignominy, however, is becoming ever more apparent. It has impaired main street badly by crushing savers, wage earners and productive investment, while inflating a massive bubble on Wall Street it claims not to see.
But now the bubble has surely reached its asymptote and may well have plowed into the pin that was always lurking it its path.
Yet notwithstanding further bouts of “stimulus” idiocy — such as former Minneapolis Fed President Narayana Kocherlakota’s desperate call today for deep immediate rate cuts (to what, zero?) — it is not even up to the task of sustaining the dangerous financial malignancies it has fostered.
That is to say, by imperiously violating over the last 30 years every law of sound finance, honest money and common sense that the world had learned over the centuries, the central bankers have ended up creating a monster which will be bring on their own demise.
In her first on-the-ground report from Palestine, Abby Martin gives a first-hand look into two of the most attacked refugee camps in the West Bank: Balata and Aida camps. With millions of displaced Palestinians around the world, hundreds of thousands are refugees in their own country — many have lived packed into these refugee camps after being ethnically cleansed from their villages just miles away.