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China’s Digital Yuan Comes With An Expiration Date

China’s Digital Yuan Comes With An Expiration Date

It’s been a long time coming, and now it’s almost here.

Last August we reported that China’s Commerce Ministry had released fresh details of a pilot program for the country’s central bank…

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China's Digital Yuan Comes With An Expiration Date

It's been a long time coming, and now it's almost here.

Last August we reported that China's Commerce Ministry had released fresh details of a pilot program for the country's central bank digital currency (CBDC) to be expanded to several metropolitan areas, including Guangdong-Hong Kong-Macao Greater Bay Area, Beijing-Tianjin-Hebei region, and Yangtze River Delta region. This was the inevitable culmination of a process which started back in 2014 when as we reported at the time, "China Readies Digital Currency, IMF Says "Extremely Beneficial".

Fast forward a few months when China's preparations to rollout a digital yuan gathered pace, and we reported in October that China was poised to give legal backing to the launch of its own sovereign digital currency, "cementing its trailblazer status in virtual currencies far ahead of other countries, after already recently experimenting with large-scale trials of actual payments by consumers, which was met with mixed results." Specifically, the South China Morning Post reported that "The People’s Bank of China published a draft law on Friday that would give legal status to the Digital Currency Electronic Payment (DCEP) system, and for the first time the digital yuan has been included and defined as part of the country’s sovereign fiat currency."

The design framework for the digital yuan had been released one year ago on the heels of Facebook's ambitious but disastrous Libra token rollout after founding corporate partners split for lack of confidence in the project and on fears US federal regulators would seek to block it just as they did encrypted-messaging company Telegram's Gram cryptocurrency.

"The draft law would also forbid any party from making or issuing yuan-backed digital tokens to replace the renminbi in the market," the SCMP said.

This in turn brought us to the so-called "Shenzhen case study"  when in October of 2020, China became the first nation to hold a trial run of its digital currency, when the government in Shenzhen carried out a lottery to give away a total of 10 million yuan (about $1.5 million) worth of the digital currency (nearly 2 million people applied and 50,000 people actually "won").

The winners were required to download a digital Renminbi app in order to receive a "red packet" worth 200 digital yuan ($30), which they can then spend at over 3,000 designated retailers in Shenzhen’s Luohu district, according to China Daily. After that, they’ll be able to buy goods from local pharmacies, supermarkets and even Walmart.

The idea was to not only test the technology involved, but boost consumer spending in the wake of the COVID-19 pandemic. In short, China is not only subsidizing the centrally-planned economy by manipulating the supply-side of the question- it now can prop up demand by handing out digital currency to anyone (or everyone).

Of course, unlike traditional central bank account-based currencies such as reserves, or decentralized cryptocurrencies like bitcoin, China’s digital currency would be controlled by the country’s central bank and will be instantly made available at a moment's notice to anyone who can receive it.

And since "China's adoption of digital central bank tokens is expected to be seamless as most of the nation's digital payments already pass through companies like TenCent and AliPay and are already very popular in the country", we concluded that "the successful Shenzhen test means that a broad rollout is just a matter of time."

Still, one thing was missing: a stamp of approval by the gatekeeper of not only the global payments system, but the protector of the dollar reserve system, SWIFT. But as two months ago, China got that too: as we reported in February, "SWIFT, the global system for financial messaging and cross-border payments, has set up a joint venture with the Chinese central bank’s digital currency research institute and clearing centre, in a sign that China is exploring global use of its planned digital yuan."

Actually, not just "exploring" but thanks to year of testing and partial rollouts, Beijing was about to become the first country in the world set to launch the digital yuan, and with both the IMF's and SWIFT's blessing, we said that it was "just a matter of months if not weeks."

We were right, because just a few days ago, China's "cyber yuan" became official when the WSJ finally caught up, writing "China Creates Its Own Digital Currency, a First for Major Economy."

While regular Zero Hedge readers are quite familiar with the details and chronology of China's transition to a digital currency, which incidentally is precisely the opposite of a cryptocurrency and has absolutely nothing to do with Bitcoin, a fact which Peter Thiel may want to dwell on a little more next time before making sweep and wrong statements about bitcoin, the WSJ focuses more on the geopolitical reasons of China's currency evolution - as a reminder, thousand years ago, when money meant coins, China invented paper currency, and now the Chinese government is minting cash digitally, in what the WSJ said is a "re-imagination of money that could shake a pillar of American power" - and specifically how to approach a decoupling from the global reserve currency, the US dollar so not only can Beijing avoid the "nuclear option", a weaponized US dollar, but allow countries that the US seeks to punish like Iran, a viable alternative (remember, the enemies of China's enemies - and none is bigger than the US - is China's friend). Here is the WSJ:

The U.S., as the issuer of dollars that the world’s more than 21,000 banks need to do business, has long demanded insight into major cross-border currency movements. This gives Washington the ability to freeze individuals and institutions out of the global financial system by barring banks from doing transactions with them, a practice criticized as “dollar weaponization.”

...

The digital yuan could give those the U.S. seeks to penalize a way to exchange money without U.S. knowledge. Exchanges wouldn’t need to use SWIFT, the messaging network that is used in money transfers between commercial banks and that can be monitored by the U.S. government.

To be sure, a credible alternative to the dollar, reduces the need to hoard the currency for US trade partners which in turn would have profound implications on global saving patterns, from there, global capital flows. The consequences for the perpetual US current account deficit would be unprecedented.

In addition to realigining the global balance of monetary power virtually overnight, China's the digital currency kills another bird with the same binary stone: it allows unprecedented surveillance and supervision over every single transaction.

[The digital yuan is] also trackable, adding another tool to China’s heavy state surveillance. The government deploys hundreds of millions of facial-recognition cameras to monitor its population, sometimes using them to levy fines for activities such as jaywalking. A digital currency would make it possible to both mete out and collect fines as soon as an infraction was detected.

A burst of cash-accumulation in China last year indicates residents’ concern about the central bank’s eye on every transaction. Song Ke, a finance professor at Renmin University in Beijing, told a recent conference that China’s measure of yuan in circulation, or cash, popped up 10% in 2020.

Then there are the myriad boosts to China's ironclad capital controls:

While China hasn’t published final legislation for the program, the central bank says it may initially impose limits on how much digital yuan individuals can keep on their person, as a way to control how it circulates and provide users a dose of security and privacy.

To be sure, none of this is actually new as we have discussed all these nuances of the digital yuan before. What is now, is this blurb in the WSJ article:

The money itself is programmable. Beijing has tested expiration dates to encourage users to spend it quickly, for times when the economy needs a jump start.

And there you have it: the Keynesian wet dream to boost the velocity of mean finally comes true. For the past decade we have joked that it is only a matter of time before central banks slap on an expiration date on every monetary unit in circulation...

... to offset the creeping petrification of the monetary system, where negative rates have sparked even more saving and not spending as central banks had intended...

... and where only the threat of money confiscation - which is what a monetary expiration date actually does - can spark aggressive spending, and eventually, runaway inflation.

Well, that's precisely what China is now ready to do... and it's only a matter of time before other central banks follow suit.  As a reminder, according to tentative estimates for the rollout of ISO 20022, which is the required universal transaction standard which will make payment in digital currencies possible, we are looking at a 2022 launch date, although China looks ready to go live as soon as this year.

There is one final, geopolitical reason behind China's decision to give its digital currency an expiration date: as Byrne Hobart writes,  "programmable money, tied to real-world identities, and universally tracked by a central bank, starts to look suspiciously like a substitute for the consumer of last resort. Every year that China gets richer, domestic consumption plays a bigger role (exports were 26% of China's GDP in 2010, and 18% last year). If domestic consumption can be tightly controlled, then it's a way to not just increase the volume of consumption but to control the variance of demand for the goods China produces. It's not yet enough to match the size and variability of global demand for China's exports, but every year it gets closer."

In short, while the US and China are both talking seriously about decoupling, the digital yuan - which is now a reality - indicates that China's government is not only more effectively planning for it, but will be the first to fully sever all ties with the US... when the moment comes.

Finally, for those who have missed our reporting on this fascinating issue, here again is Rabobank's Wim Boonstra explaining not only why China will be the first country to launch a digital currency but also looking at what happens next:

China Will Be The First Country To Launch A Digital Currency: What Happens Then

  • China may be the first major country to launch a central bank digital currency or CBDC
  • The Chinese CBDC, named DCEP, will strengthen the position of the central bank and help to further modernize the Chinese economy
  • The DCEP will probably also be available for China’s trade partners, to begin with Africa
  • The DCEP may strengthen the international position of the renminbi to the detriment of the euro
  • The arrival of the DCEP should be a strong wake-up call for Western, especially European, policymakers

Introduction

Most central banks are busy preparing for the potential introduction of central bank digital currency (CBDC). CBDC is a digital currency issued by the central bank. It is sometimes referred to as a digital version of a bank note, but in many cases this is not correct. There are indeed many different potential variants.

So far, virtually all the central banks are keeping their options open as to whether a CBDC will ultimately appear.

China, where a far-reaching trial is under way, is the major exception. If this trial is successful, one can expect the Chinese CBDC to be introduced widely in the near future. China is therefore comfortably leading the way because the country has big ambitions for its digital currency. First, it should provide a sizable boost to the Chinese economy; second, it will concurrently further increase the Chinese government’s control of Chinese society; finally, the new currency is part of an ambitious plan to strengthen the international position of the renminbi, the Chinese currency, and potentially at the expense of the euro in particular. This Chinese decisiveness should spur European policymakers into action by further strengthening the euro.

China: from cash-based to almost completely cashless money in 10 years’ time

Not so long ago, retail payments in China were still almost entirely made in cash. There has been a revolution in payments traffic since that time, and China is now one of the leading countries in cashless payments. Unlike in other countries, such as the Netherlands and Sweden, in China this development did not originate from the banking system, but it was induced by a few key apps from relatively young Fintech companies such as WeChat (Tencent) and Alipay (Ant Financial). These parties, that form a kind of extra layer between the banks and their customers, now have a collective market share of more than 90% in Chinese payments cashless retail payments. The Chinese cashless payments system is already able to settle approximately 100,000 transactions per second.

The Chinese CBDC: DCEP

Against this background, the People’s Bank of China (PBoC), the Chinese central bank, has taken the initiative of developing its own digital currency known as the Digital Currency Electronic Payment (DCEP). Above all, the DCEP is a digital alternative to bank notes, although it has features that differ from cash in certain respects (see below). The DCEP does however have the same value as a renminbi.

The technology that can be used by the public for payments is based on traditional payment technology and not on blockchain technology. This is the only way to achieve the necessary scale. The aim is to reach a capacity of 300,000 transactions per second. The central bank might itself use blockchain, for example for wholesale transactions or settlements in DCEP between private banks. Although the DCEP is a cashless currency that will be held in an account with a private entity, there is also the possibility of using a token-based functionality on for example a chip to effect peer-to-peer payments, even where there is no Internet. This is especially needed for successful adoption in the rural areas of China. This token-based functionality will be widely used, as a result of which the DCEP will compete with cash. A sizable trial has been running for several months in which tens of thousands of people have been participating.

What does the PBoC want to achieve with the DCEP?

The PBoC has several objectives with the introduction of the DCEP.

Prevention of a monopoly in the payment system

The PBoC wants to prevent a situation in which WeChat and AliPay take over the Chinese payment system. It is concerned that the entire payment system will soon fall into the hands of these private parties. The DCEP therefore has to restrict the involvement of these parties and increase the role of the central bank in the payment system. It is even more likely that any key private firm will be prevented to become a dominant player, as ultimately China is not a ‘normal’ market economy (which explains Beijing's current crackdown on Ant Financial far better than just a feud between Xi Jinping and Jack Ma).

Promotion of financial inclusion and further reduction of the role played by cash

Highly efficient cashless payments dominate in large parts of China. But in the poorer regions, especially the rural areas, people have less access to banking services such as regular credit. In these areas, cash still plays an important role. Payments in the criminal underworld, including the illegal gambling industry, are also still largely made in cash. The DCEP will offer people in these regions full access to financial services, but it can also reduce the importance of cash payments. The main aim of the DCEP is therefore to replace cash. In terms of features, it will also closely resemble cash.

Better information on payment flows and prevention of illegal transactions

Unlike payment transactions using a bank account, which by definition leave traces in a bank’s records, cash payments are highly anonymous. As we have said, the DCEP will closely resemble cash, with the possibility of making payments directly from one person to another. Some degree of anonymity would thus appear to be safeguarded. But on further consideration, it becomes clear that the PBoC, and therefore the Chinese government, will have full insight.

To be precise, in a transaction between two people effected with DCEP, anonymity between these two people will be assured, as is the case with a cash payment. But the PBoC can always establish at a later date who were involved in the transaction. This will enable more effective tracing of illegal transactions than if these were effected in cash. But there will also be detailed insight into the payment behavior of individuals.

Restricting capital flight

Although China does not have free cross-border capital movements, capital flight is a common and substantial phenomenon. Capital flight can occur in various ways, and is often difficult to trace. For example, internationally trading Chinese companies can for instance manipulate invoices, as a result of which money can be transferred abroad. People can also use the Bitcoin system to hide money from the authorities and/or transfer it abroad.

The Chinese government, like its counterparts in Europe and the US, is concerned that stablecoins could assume an important role as an alternative to the regular money in circulation, but also may develop into a vehicle for capital flight (read "How The Chinese Use Illegal Online Gambling And Tether To Launder Over $1 Trillion Yuan"). Stablecoins are cryptos like Bitcoin, but unlike Bitcoin they are, at least in theory, secured by financial assets. When Facebook announced in April 2020 that it intends to add national stablecoins to its Libra, a digital currency basket that it announced in 2019, central banks reacted immediately by devoting more urgent attention to CBDC.23 Such stablecoins could for example create the possibility that people could use a Libra-stablecoin to transfer money abroad. With the DCEP, the PBoC intends to slow the momentum of private stablecoins. This is also an important consideration for the Western central banks.

Retention of monetary sovereignty

This is connected with the previous point. If people have easy access to a private stablecoin, it could actually in a sense reduce the role of the national currency. Something similar actually happened in Zimbabwe, where confidence in the national currency completely vanished as a result of hyperinflation and people turned en masse to foreign currencies such as US dollars and South African rand. In such a situation, the national central bank loses control of monetary conditions in its own country. Importantly, however, the DCEP could also be used by China to interfere with monetary sovereignty in other countries.

What about privacy?

The PBoC says it will respect the privacy of people and therefore the anonymity of the transactions but at the same time it says that DCEP will help it to detect illegal transactions. What this probably comes down to in practice is that people will be able to effect payments and retain anonymity between each other, but that the central bank will on the other hand be able to view the transactions. Anonymity will therefore not be guaranteed and the central bank will have much greater insight into people’s payment behaviour than it has at the moment. The DCEP will also have the status of legal tender. This means that Chinese residents will be obliged to accept the DCEP, as confirmed by various statements from the central bank on the issue (South China Morning Post, 10 November 2020). The DCEP is thus not really coming into being as a result of strong demand from the Chinese public, but it is being imposed on the population by the government. Moreover, the way the DCEP is designed, it may develop into a perfect vehicle for a quasi-command economy: it allows all transactions to be monitored, and opens the door for a retreat to a more Soviet model of banking, viz. banking under full state control.

Internationalization of the renminbi

The use of the renminbi in international transactions is still relatively limited, certainly in comparison with the dollar and the euro. But China is working steadily on increasing its usage, and even hopes that one day the renminbi can succeed the dollar as the global reserve currency. China sees the DCEP as an important vehicle for strengthening the renminbi’s international position, as foreigners will also be able to use the DCEP in transactions with China.

The benefit of this for China is that it can settle more of its international trade in (digital) renminbi. China has initially targeted Africa in this respect. Many African countries do not have fully convertible currencies and mutual trade is frequently settled in US dollars, which is expensive. China is aiming to achieve a situation in which African countries can use the DCEP not only in their trade with China, but will also use it for their domestic transactions. This is a good example of how China is aiming to position itself internationally and how various projects and institutions will cooperate under the direction of the government. The newest model of the Huawei smartphone indeed includes an app enabling payment in DCEP without the need for Internet (Eurasia). Huawei is currently already a leading telecoms provider in Africa, which gives China a head start. In other parts of the world, where Huawei is less dominant or even banned, it will off course be less simple for China to push the DCEP ahead.

Note that while China intends to strengthen its own monetary sovereignty with the DCEP, it clearly has no qualms regarding its use to undermine the monetary sovereignty of other countries. If not only a larger proportion of the trade between China and African countries but also part of intra-African trade could soon be settled in DCEP, therefore renminbi, international use of the Chinese currency will significantly increase. Note, that if a larger share of China’s international trade will be conducted in DCEP, it will also become more difficult for Chinese im- and exporters to use trade as a way to channel funds abroad. So it will held the Chinese government to reduce capital flight, although complete elimination of this phenomenon will not be possible.

Decision time: is the DCEP a wake-up call?

China is leading internationally with the introduction of CBDC, and is clearly moving in a different direction than many other countries considering a similar move. The debate in Europe is still mainly about the form the digital euro, its CBDC, should take, the question of whether there is consumer demand for it, and who should pay for it. The Chinese authorities are taking a more strategic approach, and most of all from the perspective of whether a digital currency can contribute to strengthening/entrenching China’s international position.

Assuming that the current Chinese trials are successful, we could very well see the DCEP appear as early as next year. This could be a significant step in the further movement of the Chinese economy towards cashless money. The payments system would be further strengthened by the DCEP, as this will prevent large private parties gaining a duopoly with the market power that this would entail. Financial inclusion would be improved in the underdeveloped areas, and everyone would have access to cashless money and the associated financial services that this would make possible. The black economy would be further reduced, and the Chinese government will have better insight (and control) of the payment behaviour of its citizens to an extent that we in the West would probably see as unacceptable. Lastly, the introduction of the DCEP can discourage capital flight and probably strengthen the renminbi’s international position.

All in all, the DCEP will certainly make a positive contribution to the further development of the Chinese economy. Although the DCEP looks to be less innovative than the CBDCs under consideration by the Western central banks in certain respects, the determination shown by China is undoubtedly impressive.

This Chinese resoluteness also shows that China is working very actively on strengthening the renminbi’s international position, with the central bank and companies such as Huawei working closely together to achieve this. While still a long way off, a scenario in which first parts of the African, but later maybe Asian, Latin American of even some European economies will use the renminbi for cross-border and in due course also domestic transactions is gradually becoming more plausible.

One may also expect China to try to get all countries involved in its Belt and Road Initiative to use the DCEP and therefore the renminbi. Today, the renminbi is still a small currency in comparison to the euro and most of all the dollar. But this situation could change if the DCEP becomes widely accepted. In the context of a situation in which the euro’s international position has more or less stagnated over the last decades, this is at the very least somewhat disconcerting.

Of course we may expect that, once the digital renminbi takes off and gains traction, other central banks will react strongly. Especially the US will be determined to hold on to the dollar’s international dominance. The US authorities will soon understand that a successful digital renminbi may in the long run turn out to be a larger threat to the position of the dollar than the euro ever was. The most important difference is that the euro is institutionally weak and European politicians have so far failed to use their currency as a geopolitical instrument. The Chinese government, in contrast, understand very well the power of money as a ‘peaceful’ instrument to increase international political clout.

But after all the good news may be, that the DCEP also turns out to be the important wake-up call that prompts European policymakers to finally devote serious attention to strengthening the international role of the euro. Having the second currency after the US dollar is maybe not optimal, but is not disastrous. Being third after the Chinese renminbi is a different story. In the end, money talks.

* * *

Appendix: what will the DCEP look like?

The exact design of the DCEP is still not clear. According to the BIS, the DCEP will be what is known as a hybrid CBDC. People will hold balances in their names at the central bank, but transactions will be approved using an intermediate layer of private parties (possibly including commercial banks). There will then be no direct interaction between the central bank and the account holders, but people will have an account in their names at the central bank. This would be similar to the ideas being mooted at other central banks such as the ECB and the Bank of England. Bloomberg, Blockchain News and the China Daily on the other hand describe the DCEP as a two-tier system, in which people will not directly hold accounts with the PBoC. According to these reports, in the Chinese system people will hold only a DCEP account with a bank or, more likely, with a payment service provider. These parties will in turn hold a balance with the PBoC as a liquidity reserve that exactly covers the amount of DCEP. They will also settle interbank payments in DCEP. This kind of system is also known as a synthetic CBDC (sCBDC), as people will not have their own CBDC accounts with the central bank. The PBoC will however receive regular statements of effected transactions.

If this last model is adopted, the Chinese CBDC model would be more like a full (liquidity) reserve bank than a real CBDC. A full liquidity reserve bank is a bank that would hold a 100% cash reserve with the central bank against the CBDC payment accounts held with it. But in the Chinese model, there would be no additional institution created, the existing financial institutions would offer additional accounts that would then be 100% backed by central bank reserves. Statements from the PBoC also suggest the direction is more towards a synthetic model. Technically speaking, this would represent a less innovative move than a true CBDC.

For those looking for more, Goldman's report on "China's digital yuan and its macro implications" can be found in the usual place for all pro subs.

Tyler Durden Sun, 04/11/2021 - 12:32

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Four Years Ago This Week, Freedom Was Torched

Four Years Ago This Week, Freedom Was Torched

Authored by Jeffrey Tucker via The Brownstone Institute,

"Beware the Ides of March,” Shakespeare…

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Four Years Ago This Week, Freedom Was Torched

Authored by Jeffrey Tucker via The Brownstone Institute,

"Beware the Ides of March,” Shakespeare quotes the soothsayer’s warning Julius Caesar about what turned out to be an impending assassination on March 15. The death of American liberty happened around the same time four years ago, when the orders went out from all levels of government to close all indoor and outdoor venues where people gather. 

It was not quite a law and it was never voted on by anyone. Seemingly out of nowhere, people who the public had largely ignored, the public health bureaucrats, all united to tell the executives in charge – mayors, governors, and the president – that the only way to deal with a respiratory virus was to scrap freedom and the Bill of Rights. 

And they did, not only in the US but all over the world. 

The forced closures in the US began on March 6 when the mayor of Austin, Texas, announced the shutdown of the technology and arts festival South by Southwest. Hundreds of thousands of contracts, of attendees and vendors, were instantly scrapped. The mayor said he was acting on the advice of his health experts and they in turn pointed to the CDC, which in turn pointed to the World Health Organization, which in turn pointed to member states and so on. 

There was no record of Covid in Austin, Texas, that day but they were sure they were doing their part to stop the spread. It was the first deployment of the “Zero Covid” strategy that became, for a time, official US policy, just as in China. 

It was never clear precisely who to blame or who would take responsibility, legal or otherwise. 

This Friday evening press conference in Austin was just the beginning. By the next Thursday evening, the lockdown mania reached a full crescendo. Donald Trump went on nationwide television to announce that everything was under control but that he was stopping all travel in and out of US borders, from Europe, the UK, Australia, and New Zealand. American citizens would need to return by Monday or be stuck. 

Americans abroad panicked while spending on tickets home and crowded into international airports with waits up to 8 hours standing shoulder to shoulder. It was the first clear sign: there would be no consistency in the deployment of these edicts. 

There is no historical record of any American president ever issuing global travel restrictions like this without a declaration of war. Until then, and since the age of travel began, every American had taken it for granted that he could buy a ticket and board a plane. That was no longer possible. Very quickly it became even difficult to travel state to state, as most states eventually implemented a two-week quarantine rule. 

The next day, Friday March 13, Broadway closed and New York City began to empty out as any residents who could went to summer homes or out of state. 

On that day, the Trump administration declared the national emergency by invoking the Stafford Act which triggers new powers and resources to the Federal Emergency Management Administration. 

In addition, the Department of Health and Human Services issued a classified document, only to be released to the public months later. The document initiated the lockdowns. It still does not exist on any government website.

The White House Coronavirus Response Task Force, led by the Vice President, will coordinate a whole-of-government approach, including governors, state and local officials, and members of Congress, to develop the best options for the safety, well-being, and health of the American people. HHS is the LFA [Lead Federal Agency] for coordinating the federal response to COVID-19.

Closures were guaranteed:

Recommend significantly limiting public gatherings and cancellation of almost all sporting events, performances, and public and private meetings that cannot be convened by phone. Consider school closures. Issue widespread ‘stay at home’ directives for public and private organizations, with nearly 100% telework for some, although critical public services and infrastructure may need to retain skeleton crews. Law enforcement could shift to focus more on crime prevention, as routine monitoring of storefronts could be important.

In this vision of turnkey totalitarian control of society, the vaccine was pre-approved: “Partner with pharmaceutical industry to produce anti-virals and vaccine.”

The National Security Council was put in charge of policy making. The CDC was just the marketing operation. That’s why it felt like martial law. Without using those words, that’s what was being declared. It even urged information management, with censorship strongly implied.

The timing here is fascinating. This document came out on a Friday. But according to every autobiographical account – from Mike Pence and Scott Gottlieb to Deborah Birx and Jared Kushner – the gathered team did not meet with Trump himself until the weekend of the 14th and 15th, Saturday and Sunday. 

According to their account, this was his first real encounter with the urge that he lock down the whole country. He reluctantly agreed to 15 days to flatten the curve. He announced this on Monday the 16th with the famous line: “All public and private venues where people gather should be closed.”

This makes no sense. The decision had already been made and all enabling documents were already in circulation. 

There are only two possibilities. 

One: the Department of Homeland Security issued this March 13 HHS document without Trump’s knowledge or authority. That seems unlikely. 

Two: Kushner, Birx, Pence, and Gottlieb are lying. They decided on a story and they are sticking to it. 

Trump himself has never explained the timeline or precisely when he decided to greenlight the lockdowns. To this day, he avoids the issue beyond his constant claim that he doesn’t get enough credit for his handling of the pandemic.

With Nixon, the famous question was always what did he know and when did he know it? When it comes to Trump and insofar as concerns Covid lockdowns – unlike the fake allegations of collusion with Russia – we have no investigations. To this day, no one in the corporate media seems even slightly interested in why, how, or when human rights got abolished by bureaucratic edict. 

As part of the lockdowns, the Cybersecurity and Infrastructure Security Agency, which was and is part of the Department of Homeland Security, as set up in 2018, broke the entire American labor force into essential and nonessential.

They also set up and enforced censorship protocols, which is why it seemed like so few objected. In addition, CISA was tasked with overseeing mail-in ballots. 

Only 8 days into the 15, Trump announced that he wanted to open the country by Easter, which was on April 12. His announcement on March 24 was treated as outrageous and irresponsible by the national press but keep in mind: Easter would already take us beyond the initial two-week lockdown. What seemed to be an opening was an extension of closing. 

This announcement by Trump encouraged Birx and Fauci to ask for an additional 30 days of lockdown, which Trump granted. Even on April 23, Trump told Georgia and Florida, which had made noises about reopening, that “It’s too soon.” He publicly fought with the governor of Georgia, who was first to open his state. 

Before the 15 days was over, Congress passed and the president signed the 880-page CARES Act, which authorized the distribution of $2 trillion to states, businesses, and individuals, thus guaranteeing that lockdowns would continue for the duration. 

There was never a stated exit plan beyond Birx’s public statements that she wanted zero cases of Covid in the country. That was never going to happen. It is very likely that the virus had already been circulating in the US and Canada from October 2019. A famous seroprevalence study by Jay Bhattacharya came out in May 2020 discerning that infections and immunity were already widespread in the California county they examined. 

What that implied was two crucial points: there was zero hope for the Zero Covid mission and this pandemic would end as they all did, through endemicity via exposure, not from a vaccine as such. That was certainly not the message that was being broadcast from Washington. The growing sense at the time was that we all had to sit tight and just wait for the inoculation on which pharmaceutical companies were working. 

By summer 2020, you recall what happened. A restless generation of kids fed up with this stay-at-home nonsense seized on the opportunity to protest racial injustice in the killing of George Floyd. Public health officials approved of these gatherings – unlike protests against lockdowns – on grounds that racism was a virus even more serious than Covid. Some of these protests got out of hand and became violent and destructive. 

Meanwhile, substance abuse rage – the liquor and weed stores never closed – and immune systems were being degraded by lack of normal exposure, exactly as the Bakersfield doctors had predicted. Millions of small businesses had closed. The learning losses from school closures were mounting, as it turned out that Zoom school was near worthless. 

It was about this time that Trump seemed to figure out – thanks to the wise council of Dr. Scott Atlas – that he had been played and started urging states to reopen. But it was strange: he seemed to be less in the position of being a president in charge and more of a public pundit, Tweeting out his wishes until his account was banned. He was unable to put the worms back in the can that he had approved opening. 

By that time, and by all accounts, Trump was convinced that the whole effort was a mistake, that he had been trolled into wrecking the country he promised to make great. It was too late. Mail-in ballots had been widely approved, the country was in shambles, the media and public health bureaucrats were ruling the airwaves, and his final months of the campaign failed even to come to grips with the reality on the ground. 

At the time, many people had predicted that once Biden took office and the vaccine was released, Covid would be declared to have been beaten. But that didn’t happen and mainly for one reason: resistance to the vaccine was more intense than anyone had predicted. The Biden administration attempted to impose mandates on the entire US workforce. Thanks to a Supreme Court ruling, that effort was thwarted but not before HR departments around the country had already implemented them. 

As the months rolled on – and four major cities closed all public accommodations to the unvaccinated, who were being demonized for prolonging the pandemic – it became clear that the vaccine could not and would not stop infection or transmission, which means that this shot could not be classified as a public health benefit. Even as a private benefit, the evidence was mixed. Any protection it provided was short-lived and reports of vaccine injury began to mount. Even now, we cannot gain full clarity on the scale of the problem because essential data and documentation remains classified. 

After four years, we find ourselves in a strange position. We still do not know precisely what unfolded in mid-March 2020: who made what decisions, when, and why. There has been no serious attempt at any high level to provide a clear accounting much less assign blame. 

Not even Tucker Carlson, who reportedly played a crucial role in getting Trump to panic over the virus, will tell us the source of his own information or what his source told him. There have been a series of valuable hearings in the House and Senate but they have received little to no press attention, and none have focus on the lockdown orders themselves. 

The prevailing attitude in public life is just to forget the whole thing. And yet we live now in a country very different from the one we inhabited five years ago. Our media is captured. Social media is widely censored in violation of the First Amendment, a problem being taken up by the Supreme Court this month with no certainty of the outcome. The administrative state that seized control has not given up power. Crime has been normalized. Art and music institutions are on the rocks. Public trust in all official institutions is at rock bottom. We don’t even know if we can trust the elections anymore. 

In the early days of lockdown, Henry Kissinger warned that if the mitigation plan does not go well, the world will find itself set “on fire.” He died in 2023. Meanwhile, the world is indeed on fire. The essential struggle in every country on earth today concerns the battle between the authority and power of permanent administration apparatus of the state – the very one that took total control in lockdowns – and the enlightenment ideal of a government that is responsible to the will of the people and the moral demand for freedom and rights. 

How this struggle turns out is the essential story of our times. 

CODA: I’m embedding a copy of PanCAP Adapted, as annotated by Debbie Lerman. You might need to download the whole thing to see the annotations. If you can help with research, please do.

*  *  *

Jeffrey Tucker is the author of the excellent new book 'Life After Lock-Down'

Tyler Durden Mon, 03/11/2024 - 23:40

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Government

CDC Warns Thousands Of Children Sent To ER After Taking Common Sleep Aid

CDC Warns Thousands Of Children Sent To ER After Taking Common Sleep Aid

Authored by Jack Phillips via The Epoch Times (emphasis ours),

A…

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CDC Warns Thousands Of Children Sent To ER After Taking Common Sleep Aid

Authored by Jack Phillips via The Epoch Times (emphasis ours),

A U.S. Centers for Disease Control (CDC) paper released Thursday found that thousands of young children have been taken to the emergency room over the past several years after taking the very common sleep-aid supplement melatonin.

The Centers for Disease Control and Prevention (CDC) headquarters in Atlanta, Georgia, on April 23, 2020. (Tami Chappell/AFP via Getty Images)

The agency said that melatonin, which can come in gummies that are meant for adults, was implicated in about 7 percent of all emergency room visits for young children and infants “for unsupervised medication ingestions,” adding that many incidents were linked to the ingestion of gummy formulations that were flavored. Those incidents occurred between the years 2019 and 2022.

Melatonin is a hormone produced by the human body to regulate its sleep cycle. Supplements, which are sold in a number of different formulas, are generally taken before falling asleep and are popular among people suffering from insomnia, jet lag, chronic pain, or other problems.

The supplement isn’t regulated by the U.S. Food and Drug Administration and does not require child-resistant packaging. However, a number of supplement companies include caps or lids that are difficult for children to open.

The CDC report said that a significant number of melatonin-ingestion cases among young children were due to the children opening bottles that had not been properly closed or were within their reach. Thursday’s report, the agency said, “highlights the importance of educating parents and other caregivers about keeping all medications and supplements (including gummies) out of children’s reach and sight,” including melatonin.

The approximately 11,000 emergency department visits for unsupervised melatonin ingestions by infants and young children during 2019–2022 highlight the importance of educating parents and other caregivers about keeping all medications and supplements (including gummies) out of children’s reach and sight.

The CDC notes that melatonin use among Americans has increased five-fold over the past 25 years or so. That has coincided with a 530 percent increase in poison center calls for melatonin exposures to children between 2012 and 2021, it said, as well as a 420 percent increase in emergency visits for unsupervised melatonin ingestion by young children or infants between 2009 and 2020.

Some health officials advise that children under the age of 3 should avoid taking melatonin unless a doctor says otherwise. Side effects include drowsiness, headaches, agitation, dizziness, and bed wetting.

Other symptoms of too much melatonin include nausea, diarrhea, joint pain, anxiety, and irritability. The supplement can also impact blood pressure.

However, there is no established threshold for a melatonin overdose, officials have said. Most adult melatonin supplements contain a maximum of 10 milligrams of melatonin per serving, and some contain less.

Many people can tolerate even relatively large doses of melatonin without significant harm, officials say. But there is no antidote for an overdose. In cases of a child accidentally ingesting melatonin, doctors often ask a reliable adult to monitor them at home.

Dr. Cora Collette Breuner, with the Seattle Children’s Hospital at the University of Washington, told CNN that parents should speak with a doctor before giving their children the supplement.

“I also tell families, this is not something your child should take forever. Nobody knows what the long-term effects of taking this is on your child’s growth and development,” she told the outlet. “Taking away blue-light-emitting smartphones, tablets, laptops, and television at least two hours before bed will keep melatonin production humming along, as will reading or listening to bedtime stories in a softly lit room, taking a warm bath, or doing light stretches.”

In 2022, researchers found that in 2021, U.S. poison control centers received more than 52,000 calls about children consuming worrisome amounts of the dietary supplement. That’s a six-fold increase from about a decade earlier. Most such calls are about young children who accidentally got into bottles of melatonin, some of which come in the form of gummies for kids, the report said.

Dr. Karima Lelak, an emergency physician at Children’s Hospital of Michigan and the lead author of the study published in 2022 by the CDC, found that in about 83 percent of those calls, the children did not show any symptoms.

However, other children had vomiting, altered breathing, or other symptoms. Over the 10 years studied, more than 4,000 children were hospitalized, five were put on machines to help them breathe, and two children under the age of two died. Most of the hospitalized children were teenagers, and many of those ingestions were thought to be suicide attempts.

Those researchers also suggested that COVID-19 lockdowns and virtual learning forced more children to be at home all day, meaning there were more opportunities for kids to access melatonin. Also, those restrictions may have caused sleep-disrupting stress and anxiety, leading more families to consider melatonin, they suggested.

The Associated Press contributed to this report.

Tyler Durden Mon, 03/11/2024 - 21:40

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International

Red Candle In The Wind

Red Candle In The Wind

By Benjamin PIcton of Rabobank

February non-farm payrolls superficially exceeded market expectations on Friday by…

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Red Candle In The Wind

By Benjamin PIcton of Rabobank

February non-farm payrolls superficially exceeded market expectations on Friday by printing at 275,000 against a consensus call of 200,000. We say superficially, because the downward revisions to prior months totalled 167,000 for December and January, taking the total change in employed persons well below the implied forecast, and helping the unemployment rate to pop two-ticks to 3.9%. The U6 underemployment rate also rose from 7.2% to 7.3%, while average hourly earnings growth fell to 0.2% m-o-m and average weekly hours worked languished at 34.3, equalling pre-pandemic lows.

Undeterred by the devil in the detail, the algos sprang into action once exchanges opened. Market darling NVIDIA hit a new intraday high of $974 before (presumably) the humans took over and sold the stock down more than 10% to close at $875.28. If our suspicions are correct that it was the AIs buying before the humans started selling (no doubt triggering trailing stops on the way down), the irony is not lost on us.

The 1-day chart for NVIDIA now makes for interesting viewing, because the red candle posted on Friday presents quite a strong bearish engulfing signal. Volume traded on the day was almost double the 15-day simple moving average, and similar price action is observable on the 1-day charts for both Intel and AMD. Regular readers will be aware that we have expressed incredulity in the past about the durability the AI thematic melt-up, so it will be interesting to see whether Friday’s sell off is just a profit-taking blip, or a genuine trend reversal.

AI equities aside, this week ought to be important for markets because the BTFP program expires today. That means that the Fed will no longer be loaning cash to the banking system in exchange for collateral pledged at-par. The KBW Regional Banking index has so far taken this in its stride and is trading 30% above the lows established during the mini banking crisis of this time last year, but the Fed’s liquidity facility was effectively an exercise in can-kicking that makes regional banks a sector of the market worth paying attention to in the weeks ahead. Even here in Sydney, regulators are warning of external risks posed to the banking sector from scheduled refinancing of commercial real estate loans following sharp falls in valuations.

Markets are sending signals in other sectors, too. Gold closed at a new record-high of $2178/oz on Friday after trading above $2200/oz briefly. Gold has been going ballistic since the Friday before last, posting gains even on days where 2-year Treasury yields have risen. Gold bugs are buying as real yields fall from the October highs and inflation breakevens creep higher. This is particularly interesting as gold ETFs have been recording net outflows; suggesting that price gains aren’t being driven by a retail pile-in. Are gold buyers now betting on a stagflationary outcome where the Fed cuts without inflation being anchored at the 2% target? The price action around the US CPI release tomorrow ought to be illuminating.

Leaving the day-to-day movements to one side, we are also seeing further signs of structural change at the macro level. The UK budget last week included a provision for the creation of a British ISA. That is, an Individual Savings Account that provides tax breaks to savers who invest their money in the stock of British companies. This follows moves last year to encourage pension funds to head up the risk curve by allocating 5% of their capital to unlisted investments.

As a Hail Mary option for a government cruising toward an electoral drubbing it’s a curious choice, but it’s worth highlighting as cash-strapped governments increasingly see private savings pools as a funding solution for their spending priorities.

Of course, the UK is not alone in making creeping moves towards financial repression. In contrast to announcements today of increased trade liberalisation, Australian Treasurer Jim Chalmers has in the recent past flagged his interest in tapping private pension savings to fund state spending priorities, including defence, public housing and renewable energy projects. Both the UK and Australia appear intent on finding ways to open up the lungs of their economies, but government wants more say in directing private capital flows for state goals.

So, how far is the blurring of the lines between free markets and state planning likely to go? Given the immense and varied budgetary (and security) pressures that governments are facing, could we see a re-up of WWII-era Victory bonds, where private investors are encouraged to do their patriotic duty by directly financing government at negative real rates?

That would really light a fire under the gold market.

Tyler Durden Mon, 03/11/2024 - 19:00

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