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CWB reports second quarter 2022 financial and strategic performance

CWB reports second quarter 2022 financial and strategic performance
Canada NewsWire
EDMONTON, AB, May 27, 2022

Second Quarter 2022 Highlights (compared to the same period in the prior year)
Diluted earnings pershare (EPS)
Total revenue
Pre-tax, pre…

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CWB reports second quarter 2022 financial and strategic performance

Canada NewsWire

Second Quarter 2022 Highlights (compared to the same period in the prior year)

Diluted earnings per
share (EPS)

Total revenue

Pre-tax, pre-
provision
income(1)

Loans(2)

Branch-raised
deposits(1)

$0.82

$259 million

$120 million

$34.0 billion

$19.9 billion

Consistent with same
quarter last year

Up 5%

Down 5%

Up 9% in total;

Up 13% in Ontario

Up 10%

This news release and accompanying financial highlights are supplementary to CWB's 2022 Second Quarter Report to Shareholders and 2021 Annual Report and should be read in conjunction with those documents.

EDMONTON, AB, May 27, 2022 /CNW/ - CWB Financial Group (TSX: CWB) (CWB) announced financial performance for the three and six months ended April 30, 2022, with quarterly common shareholders' net income of $74 million, up 3% from the same period last year. Our Board of Directors declared a cash dividend of $0.31 per common share, up two cents, or 7% from the dividend declared last year and up one cent, or 3% from last quarter.

"Our teams have built robust pipelines of full-service client opportunities that are already driving strong post-quarter growth. We are confident that we will achieve annual double-digit loan and deposit growth this year," said Chris Fowler, President and CEO. "While the timing of loan and branch-raised deposit growth has been later than expected and put downward pressure on second quarter net interest income and our annual financial outlook, stronger growth delivered in a rising interest rate environment will provide a significant tailwind as we move into next year."

"Our high performing teams continue to deliver on our strategic priorities. The launch of our new retail and small business digital platforms this summer will support continued strong branch-raised deposit growth. We remain very pleased with the progress of our Ontario expansion, with 13% loan growth in the province over the last year and with continued momentum expected from the opening of our new banking centre in Markham this summer."

"We are proud to be recognized in the top 20 on this year's list of Best Workplaces™ in Canada. Our continued rise on this list is powered by a people first culture that supports flexible work, promotes diversity and inclusion, and inspires collaboration and innovation to deliver a differentiated experience to our clients and deliver on our strategy priorities."

(1)      Non-GAAP measure – refer to definitions and detail provided on page 6.

(2)      Excludes the allowance for credit losses.

Financial Performance

Q2 2022,
compared to
Q1 2022(1)

Common shareholders' net income of $74 million

Down 15%

Diluted EPS of $0.82

Down 15%

Adjusted ROE of 10.3%

Down 150 bp

Efficiency ratio of 53.7%

Up 520 bp

Compared to the prior quarter, lower common shareholders' net income was primarily due to the impact of higher non-interest expenses, a higher provision for credit losses and lower revenue. The decline in revenue reflected a 3% decrease in net interest income and a 1% decrease in non-interest income. Lower net interest income reflected sequential 2% loan growth, including 3% in Ontario, more than offset by the impact of three fewer interest-earning days and a five basis point decrease in net interest margin(1). Lower net interest margin reflected higher average liquidity, higher funding costs primarily from senior deposit note issuances in the quarter and an increase in higher-cost broker deposits in our funding mix, partially offset by the net positive impact of the 75 basis point increase in the policy interest rate during the quarter. We expect our net interest margin to expand in the second half of the year to reflect the continued benefit of the higher policy interest rates, and the positive impact of stronger loan and branch-raised deposit(1) growth. Higher non-interest expenses reflect the seasonal increase in employee benefits and continued strategic investment in our people, Advanced Internal Ratings Based (AIRB) tools and processes, digital capabilities, and product offering. These investments are driving a temporary increase in our efficiency ratio, as the resulting benefits to revenue growth are expected to be achieved in future periods. The provision for credit losses on total loans as a percentage of average loans(1) was three basis points higher than the prior quarter, reflective of a two basis point increase in the impaired loan provision and a one basis point increase in the performing loan provision. Our impaired provision of 14 basis points remained below our historical five-year average of 19 basis points.

Q2 2022, compared to Q2 2021(1)

Common shareholders' net income of $74 million

Up 3%

Diluted EPS of $0.82

No change

Adjusted ROE of 10.3%

Down 50 bp

Efficiency ratio of 53.7%

Up 480 bp

Compared to the same quarter last year, common shareholders' net income increased from revenue growth and a decline in the provision for credit losses, partially offset by higher non-interest expenses. Branch-raised deposit growth of 10% reflects our franchise building strategy to expand our full-service client relationships. Revenue growth of 5% reflected a 4% increase in net interest income, driven by 9% loan growth partially offset by an 11 basis point decline in net interest margin, and an 8% increase in non-interest income, primarily due to higher wealth management fees. The decrease in net interest margin primarily reflected the impact of a lower overall loan yield, due to stronger growth in lower yielding portfolios and the impact of a competitive and historically low interest rate environment over a large portion of the last year. This was partially offset by a reduction in fixed rate funding costs, lower average liquidity and the net positive impact of the 75 basis point increase in the policy interest rate during the quarter. Non-interest expenses increased 15% driven by the continued strategic investment in our people, AIRB tools and processes, digital capabilities, and product offering. The provision for credit losses on total loans as a percentage of average loans was six basis points lower than the same quarter last year, which reflected a 13 basis point decrease in the impaired loan provision, partially offset by a seven basis point increase in the performing loan provision, as we recognized a larger recovery last year due to the significant improvement in forecast economic conditions.  

 YTD 2022,
compared to
YTD 2021(1)

Common shareholders' net income of $162 million

Up 7%

Diluted EPS of $1.79

Up 3%

Adjusted ROE of 11.1%

Down 10 bp

Efficiency ratio of 51.0%

Up 320 bp



(1)

Adjusted ROE, efficiency ratio, branch-raised deposits, net interest margin and the provision for credit losses on total loans as a percentage of average loans are non-GAAP measures. Refer to definitions and detail provided on page 6.


bp – basis point

On a year-to-date basis, the increase in common shareholders' net income was driven by 7% growth in revenue and a decline in the provision for credit losses, partially offset by an increase in non-interest expenses. Revenue growth reflected a 6% increase in net interest income attributable to 9% annual loan growth, partially offset by a six basis point decline in net interest margin. Non-interest income was up 10% driven by higher wealth management fees. Non-interest expenses were up 14% and reflected the impact of our strategic investments in our people, AIRB tools and processes, digital capabilities, and product offering. A 12 basis point provision for credit losses on total loans as a percentage of average loans was seven basis points lower than last year, reflective of a 12 basis point decline in the impaired loan provision, partially offset by a five basis point increase in the performing loan provision. The recovery in the performing loan provision was lower this year due to the significant improvement in forecast economic conditions that occurred in the prior year.

Strategic Performance

We continue to transform our capabilities to offer a superior full-service client experience through a complete range of in-person and digital channels. These expanded capabilities, delivered by our highly engaged and client-centric teams, will accelerate growth of full-service client relationships in specifically targeted segments that fit within our strategic growth objectives and prudent risk appetite. Our strategic execution, with current period highlights noted below, will enable us to continue to deliver strong growth of full-service client relationships and capitalize on the opportunities available to us as we continue to expand our presence in the Ontario market. This quarter, we:

  • were recognized by Great Place to Work Canada® as one of this year's top 20 Best WorkplacesTM in Canada, based on our people first culture that supports flexible work, promotes diversity and inclusion, and inspires collaboration and innovation to deliver a differentiated experience to our clients and deliver on our strategic priorities;
  • prepared our personal and small business digital banking platforms for a full-scale launch in the third quarter of 2022. The small business platform will integrate with the Virtual COO (VCOO) solution once fully launched, which will enable features like cash flow predictive modelling and integration to third party accounting platforms. A limited roll-out of the VCOO solution is currently underway, with a full launch scheduled to occur later this year; and,
  • executed an investment commitment in Portage Ventures' third fund, Portage III. Portage, the venture capital arm of multi-asset class alternative investment firm Sagard, is a global fintech-focused investor that invests in, and partners with, some of the world's most innovative financial technology companies. Participation in this fund will further enhance our digital client experience and product offering, through accessing actionable insights into trends shaping the industry and identifying targeted partnership opportunities that leverage our modern technology infrastructure.

Capital Management

Our at-the-market common equity distribution program (ATM) is a dynamic tool that has enabled us to maintain strong capital levels while supporting loan growth as we navigate economic and market volatility. We have issued common shares for net proceeds of $145 million since the launch of our ATM, including $46 million issued this quarter at an average share price of $35.33.

With the near full utilization of our existing ATM, we intend to establish a new ATM in the third quarter. Our new ATM will be used, if needed, to maintain a strong capital position while supporting elevated loan growth. The new ATM program will have consistent terms with our existing ATM, and will allow for the continued incremental share issuances, at our discretion and if needed, of up to an additional $150 million of common shares at market prices in effect at the time. 

About CWB Financial Group

CWB Financial Group (CWB) is the only full-service financial institution in Canada with a strategic focus to meet the unique financial needs of businesses and their owners. We provide our nation-wide clients with full-service business and personal banking, specialized financing, comprehensive wealth management offerings, and trust services. Our teams deliver a uniquely proactive and differentiated level of service to clients in targeted industries where we have deep expertise. Clients choose CWB for our highly personalized service, specialized expertise, customized solutions and faster response times.

As a public company on the Toronto Stock Exchange (TSX), CWB trades under the symbols "CWB" (common shares), "CWB.PR.B" (Series 5 preferred shares) and "CWB.PR.D" (Series 9 preferred shares). We are firmly committed to the responsible creation of value for all our stakeholders and our approach to sustainability will support our continued success. Learn more at www.cwb.com.

Fiscal 2022 Second Quarter Results Conference Call

CWB's second quarter results conference call is scheduled for Friday, May 27, 2022, at 10:00 a.m. ET (8:00 a.m. MT). CWB's executives will comment on financial results and respond to questions from analysts.

The conference call may be accessed on a listen-only basis by dialing (416) 764-8688 (Toronto) or 1 (888) 390-0546 (toll-free) and entering passcode: 51675710. The call will also be webcast live on CWB's website:

www.cwb.com/investor-relations/quarterly-reports.

A replay of the conference call will be available until June 3, 2022 by dialing (416) 764-8677 (Toronto) or 1 (888) 390-0541 (toll-free) and entering passcode: 675710#.

Forward-looking Statements

From time to time, we make written and verbal forward-looking statements. Statements of this type are included in our Annual Report and reports to shareholders and may be included in filings with Canadian securities regulators or in other communications such as media releases and corporate presentations. Forward-looking statements include, but are not limited to, statements about our objectives and strategies, targeted and expected financial results and the outlook for CWB's businesses or for the Canadian economy. Forward-looking statements are typically identified by the words "believe", "expect", "anticipate", "intend", "estimate", "may increase", "may impact", "goal", "focus", "potential", "proposed" and other similar expressions, or future or conditional verbs such as "will", "should", "would" and "could".

By their very nature, forward-looking statements involve numerous assumptions and are subject to inherent risks and uncertainties, which give rise to the possibility that our predictions, forecasts, projections, expectations and conclusions will not prove to be accurate, that our assumptions may not be correct, and that our strategic goals will not be achieved.

A variety of factors, many of which are beyond our control, may cause actual results to differ materially from the expectations expressed in the forward-looking statements. These factors include, but are not limited to, general business and economic conditions in Canada, including housing market conditions, the volatility and level of liquidity in financial markets, fluctuations in interest rates and currency values, the volatility and level of various commodity prices, changes in monetary policy, changes in economic and political conditions, material changes to trade agreements, transition to the Advanced Internal Ratings Based (AIRB) approach for regulatory capital purposes, legislative and regulatory developments, legal developments, the level of competition, the occurrence of natural catastrophes, outbreaks of disease or illness that affect local, national or international economies, supply chain disruptions, changes in accounting standards and policies, information technology and cyber risk, the accuracy and completeness of information we receive about customers and counterparties, the ability to attract and retain key personnel, the ability to complete and integrate acquisitions, reliance on third parties to provide components of business infrastructure, changes in tax laws, technological developments, unexpected changes in consumer spending and saving habits, timely development and introduction of new products, and our ability to anticipate and manage the risks associated with these factors. It is important to note that the preceding list is not exhaustive of possible factors.

Additional information about these factors can be found in the Risk Management sections of our annual MD&A. These and other factors should be considered carefully, and readers are cautioned not to place undue reliance on these forward-looking statements as a number of important factors could cause our actual results to differ materially from the expectations expressed in such forward-looking statements. Any forward-looking statements contained in this document represent our views as of the date hereof. Unless required by securities law, we do not undertake to update any forward-looking statement, whether written or verbal, that may be made from time to time by us or on our behalf. The forward-looking statements contained in this document are presented for the purpose of assisting readers in understanding our financial position and results of operations as at and for the periods ended on the dates presented, as well as our strategic priorities and objectives, and may not be appropriate for other purposes.

Assumptions about the performance of the Canadian economy over the forecast horizon and how it will affect our business are material factors considered when setting organizational objectives and targets. In determining expectations for economic growth, we consider our own forecasts, economic data and forecasts provided by the Canadian government and its agencies, as well as certain private sector forecasts. These forecasts are subject to inherent risks and uncertainties, including but not limited to the COVID-19 pandemic and its evolving impact on the Canadian economy. Where relevant, material economic assumptions underlying forward-looking statements are disclosed within the Outlook and Allowance for Credit Losses sections of our interim and annual MD&A.

Non-GAAP Measures

We use a number of financial measures and ratios to assess our performance against strategic initiatives and operational benchmarks. Some of these financial measures and ratios do not have standardized meanings prescribed by Generally Accepted Accounting Principles (GAAP) and may not be comparable to similar measures presented by other financial institutions. Non-GAAP financial measures and ratios provide readers with an enhanced understanding of how we view our financial performance. These measures and ratios may also provide the ability to analyze trends related to profitability and the effectiveness of our operations and strategies, and are disclosed in compliance with National Instrument 52-112 Non-GAAP and Other Financial Measures Disclosure.

To calculate non-GAAP financial measures, we exclude certain items from our financial results prepared in accordance with IFRS. Adjustments relate to items which we believe are not indicative of underlying operating performance. Our non-GAAP financial measures include:

  • Adjusted non-interest expenses – total non-interest expenses, excluding pre-tax amortization of acquisition-related intangible assets, and acquisition and integration costs. Acquisition and integration costs include direct and incremental costs incurred as part of the execution and integration of the acquisition of the businesses of T.E. Wealth and Leon Frazer & Associates that occurred in June 2020.
  • Adjusted common shareholders' net income – total common shareholders' net income, excluding the amortization of acquisition-related intangible assets, and acquisition and integration costs, net of tax.
  • Pre-tax, pre-provision income – total revenue less adjusted non-interest expenses.

The following table provides a reconciliation of our non-GAAP financial measures to our reported financial results.

Adjusted Financial Measures









For the three months ended


Change from
April 30

  2021


For the six months ended

Change from
April 30

  2021


(unaudited)

(thousands)


April 30

2022



January 31

2022



April 30

2021





April 30

2022



April 30

2021



Non-interest expenses

$

141,457


$

131,407


$

123,056



15

%

$

272,864


$

239,804


14

%

Adjustments (before tax):





















   Amortization of acquisition-related intangible assets(1)


(2,557)



(2,541)



(2,018)



27



(5,098)



(4,009)


27


   Acquisition and integration costs(2)


(58)



-



(274)



(79)



(58)



(417)


(86)


Adjusted non-interest expenses

$

138,842


$

128,866


$

120,764



15

%

$

267,708


$

235,378


14

%






















Common shareholders' net income





















Adjustments (after-tax):

$

74,164


$

87,642


$

71,956



3

%

$

161,806


$

151,193


7

%

   Amortization of acquisition-related intangible assets(1)


1,913



1,901



1,475



30



3,814



2,931


30


   Acquisition and integration costs(2)


44



-



206



(79)



44



315


(86)


Adjusted common shareholders' net income

$

76,121


$

89,543


$

73,637



3

%

$

165,664


$

154,439


7

%






















Total revenue

$

258,761


$

265,976


$

247,106



5

%

$

524,737


$

492,194


7

%

Less:





















   Adjusted non-interest expenses (see above)


138,842



128,866



120,764



15



267,708



235,378


14


Pre-tax, pre-provision income

$

119,919


$

137,110


$

126,342



(5)

%

$

257,029


$

256,816


-

%



(1)

Net of income tax of $644 for the three months ended April 30, 2022 (Q1 2022 - $640, Q2 2021 $543) and $1,284 for the six months ended April 30, 2022 (Q2 2021 - $1,078).

(2)

Negligible income tax impact for the three months ended April 30, 2022 (Q1 2022 – $nil, Q2 2021 – $68) and for the six months ended April 30, 2022 (Q2 2021 - $102).

Non-GAAP ratios are calculated using the non-GAAP financial measures defined above. Our non-GAAP ratios include:

  • Adjusted earnings per common share – diluted earnings per common share calculated with adjusted common shareholders' net income.
  • Adjusted return on common shareholders' equity – annualized adjusted common shareholders' net income divided by average common shareholders' equity, which is total shareholders' equity excluding preferred shares and limited recourse capital notes.
  • Efficiency ratio – adjusted non-interest expenses divided by total revenue.
  • Operating leverage – growth rate of total revenue less growth rate of adjusted non-interest expenses.

Supplementary financial measures are measures that do not have definitions prescribed by GAAP, but do not meet the definition of a non-GAAP financial measure or ratio. Our supplementary financial measures include:

  • Return on assets – annualized common shareholders' net income divided by average total assets.
  • Net interest margin – annualized net interest income divided by average total assets.
  • Return on common shareholders' equity – annualized common shareholders' net income divided by average common shareholders' equity.
  • Write-offs as a percentage of average loans – annualized write-offs divided by average total loans.
  • Book value per common share – total common shareholders' equity divided by total common shares outstanding.
  • Branch-raised deposits – total deposits excluding broker term and capital market deposits.
  • Provision for credit losses on total loans as a percentage of average loans – annualized provision for credit losses on loans, committed but undrawn credit exposures and letters of credit divided by average total loans. Provisions for credit losses related to debt securities measured at fair value through other comprehensive income (FVOCI) and other financial assets are excluded.
  • Provision for credit losses on impaired loans as a percentage of average loans – annualized provision for credit losses on impaired loans divided by average total loans.
  • Provision for credit losses on performing loans as a percentage of average loans – annualized provision for credit losses on performing loans (Stage 1 and 2) divided by average total loans.
  • Average balances – average daily balances.

Selected Financial Highlights


For the three months ended

Change from


For the six months ended

Change from


(unaudited)

(thousands, except per share amounts)


April 30
2022



January 31
2022



April 30
2021


April 30

2021



April 30
2022



April 30
2021


April 30

2021


Results from Operations




















 Net interest income

$

226,109


$

233,072


$

216,964


4

%

$

459,181


$

432,417


6


 Non-interest income


32,652



32,904



30,142


8



65,556



59,777


10


 Total revenue


258,761



265,976



247,106


5



524,737



492,194


7


 Pre-tax, pre-provision income(1)


119,919



137,110



126,342


(5)



257,029



256,816


-


 Common shareholders' net income


74,164



87,642



71,956


3



161,806



151,193


7


Common Share Information




















 Earnings per common share




















   Basic

$

0.82


$

0.98


$

0.83


(1)

%

$

1.80


$

1.74


3


   Diluted


0.82



0.97



0.82


-



1.79



1.73


3


   Adjusted(1)


0.84



0.99



0.84


-



1.83



1.77


3


 Cash dividends


0.30



0.30



0.29


3



0.60



0.58


3


 Book value


33.43



33.64



32.26


4



33.43



32.26


4


 Closing market value


32.41



38.63



33.80


(4)



32.41



33.80


(4)


 Common shares outstanding (thousands)


91,569



90,203



87,162


5



91,569



87,162


5


Performance Measures(1)




















 Return on common shareholders' equity


10.0

%


11.6

%


10.6

%

(60)

bp


10.8

%


10.9

%

(10)

bp

 Adjusted return on common shareholders' equity


10.3



11.8



10.8


(50)



11.1



11.2


(10)


 Return on assets


0.79



0.93



0.84


(5)



0.86



0.87


(1)


 Net interest margin


2.42



2.47



2.53


(11)



2.44



2.50


(6)


 Efficiency ratio


53.7



48.5



48.9


480



51.0



47.8


320


 Operating leverage


(10.3)



(3.9)



(4.2)


(610)



(7.1)



(3.6)


(350)


Credit Quality(1)




















 Provision for credit losses on total loans as a
   percentage of average loans(2)


0.14



0.11



0.20


(6)



0.12



0.19


(7)


 Provision for credit losses on impaired loans as
   a percentage of average loans(2)


0.14



0.12



0.27


(13)



0.13



0.25


(12)


Balance Sheet




















 Assets

$

38,927,826


$

37,684,907


$

35,917,565


8

%









 Loans(3)


34,041,369



33,364,006



31,372,100


9










 Deposits


31,298,278



30,302,691



29,067,025


8










 Debt


3,135,870



3,041,667



2,587,326


21










 Shareholders' equity


3,636,036



3,609,475



3,527,213


3










Off-Balance Sheet




















 Wealth management(4)




















   Assets under management and administration


8,278,744



8,689,298



7,638,959


8










   Assets under advisement(5)


1,992,438



2,185,748



2,006,934


(1)










 Assets under administration - other(6)


14,471,848



14,421,779



12,525,645


16










Capital Adequacy(7)




















 Common equity Tier 1 ratio


8.9

%


9.0

%


8.7

%

20

bp









 Tier 1 ratio


10.8



10.9



11.2


(40)










 Total ratio


12.3



12.5



12.9


(60)










Other




















 Number of full-time equivalent staff


2,617



2,643



2,516


4

%











(1)

Non-GAAP measure – refer to definitions and detail provided on page 6.

(2)

Includes provisions for credit losses on loans, committed but undrawn credit exposures and letters of credit.

(3)

Excludes the allowance for credit losses.

(4)

Certain comparative figures have been reclassified to conform with the current period's presentation.

(5)

Primarily comprised of assets under advisement related to our Indigenous Services wealth management business.

(6)

Comprised of trust assets under administration, third-party leases under administration and loans under service agreements.

(7)

Calculated using the Standardized approach in accordance with guidelines issued by the Office of the Superintendent of Financial Institutions Canada (OSFI).


bp – basis point

SOURCE CWB Financial Group

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Incest Is Best? The Economist Says Copulating-Cousins Cool “In Most Cases”

Incest Is Best? The Economist Says Copulating-Cousins Cool "In Most Cases"

With America facing population collapse thanks to a pandemic which…

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Incest Is Best? The Economist Says Copulating-Cousins Cool "In Most Cases"

With America facing population collapse thanks to a pandemic which compounded already-shrinking birth rates, petrified young men who don't want to get #MeToo'd for trying to get past 1st base, and record numbers of young Americans identifying as anything but heterosexual, The Economist wants you to know that it's "probably fine" to bang your cousin, which they also note is "illegal in 25 American states."

After a dig at Kentucky for a 'quickly withdrawn' proposal to remove "first cousin" from the state list of incestuous family relations, the article goes on to 'ackshually' explain that the risk of genetic mutations among the offspring of first cousins is 'greater' than non-incest relations, however 'the increase is quite small.'

Justifying 'kissing cousins' further, The Economist suggests that it's unfair to prevent incest because "Many other couples face far higher risks of genetic complications for their offspring, and those unions are not banned," such as people with recessive genes for certain disorders, such as sickle-cell anemia or cystic fibrosis, their offspring has a 25% chance of being born with that disorder, "Yet those marriages are allowed."

"The law against first-cousin marriage is a major form of discrimination," said University of Washington Department of Medicine Director of Genetic Counseling, Robin Bennett (M.S., CGC, (she/her)).

Robin Bennett, not a PhD, who says it's fine to bang your cousin

According to Bennett, "the risks are very low and not much different than for any other couple."

The Economist then goes on to let us know that 'the Bible does not directly ban sexual relations between cousins,' ("how else would all of mankind have descended from Adam and Eve?" they write), though "The Roman Catholic Church did later prohibit first cousins from marrying, though exceptions were made for a fee."

That said, there are limits, even for The Economist...

Charles Darwin, the father of evolutionary biology, who married his first cousin in 1839, was reportedly conflicted about his own arrangement. The Darwins had ten children, but three of them died during childhood and three of his surviving children never had any offspring with their spouses. Some historians surmise that the children suffered from genetic abnormalities due to their parents being closely related—the families of Darwin and his wife had a long history of intermarriage.

Yet despite the fairly low genetic risk for most couples, the “ick” factor prevails in Western culture. The family dynamics can be difficult to explain to others. Many consanguineous couples choose to keep quiet, says Ms Bennett. For this reason it is difficult to know how many of these couples exist in America. -The Economist

Maybe the plan is to either get people banging their cousins, or keep the border open while praising Biden's amazing 'jobs recovery'?

Also 'probably' just fine?

Tyler Durden Sat, 02/17/2024 - 20:25

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Exchange Rate Pass Through into Import Prices, CPI

Justin Ho of Marketplace discussed the implications of the import/export price release Thursday. My view was that pass through into import prices was low…

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Justin Ho of Marketplace discussed the implications of the import/export price release Thursday. My view was that pass through into import prices was low in the short run, and even in the long run was not very large, while pass through into the broader price index was unlikely to be large. Not sure I was alone in this view, but here’re my thoughts.

Figure 1: Import price ex-fuel (blue), nominal trade weighted US dollar exchange rate (up is depreciation) (tan), both in logs, 2020M02=0. NBER defined peak-to-trough recession dates shaded gray. Source: BLS, Federal Reserve Board via FRED, NBER, and author’s calculations.

The variables are defined so that one anticipates the two variables to comove positively. In fact, there is not much of a correlation apparent in (log) levels. Since both series are nonstationary, it makes sense to estimate in log first differences. Sampling the data as end-of-quarter, and estimating the regression from 2002Q1-2023Q4 (with four lags of exchange rate), one gets the long run pass through coefficient at about 0.3 (ignoring any other factors like domestic slack and measures for exporting country costs). The adjusted R2 is 0.41. Note that, as in previous studies, the estimated pass through is much less than unity, which makes sense given that most imports are invoiced in US dollars.

Figure 2: First log difference in Import price ex-fuel (blue), nominal trade weighted US dollar exchange rate (up is depreciation) (tan). NBER defined peak-to-trough recession dates shaded gray. Source: BLS, Federal Reserve Board via FRED, NBER, and author’s calculations.

For comparison, Bussiere, della Chiaie and Peltuonen (2014) estimate the long run pass through at about 0.35 for the United States, over the 1990-2011 period. Results from the earlier 2006 Fed survey, discussed here.

What about for broader indices? For the PPI for tradable industries, the estimate is about 0.3 for 2013-20 in Amiti et al. (2022), but  0.7  for 2021, suggesting the pandemic era exhibits different behavior.

What about the impact on the broader indices? Mattschke and Sattiraju (2022) argue dollar appreciation/depreciation have very little impact on PCE inflation. Pointing out that only about 10% of a core consumer basket involves imported goods. (Oil prices denominated dollars, when they rise, are another matter.)

A caveat is in order. In the above literature, the exchange rate is taken as largely exogenous, not completely implausible given the large unpredictable component of nominal exchange rates. That being said, as Forbes, Hjortsoe and Nenova (2018) and Ha, Stocker and Yilmazkuday (2020) notes, the types of shocks (demand, monetary, supply) matter as well. For advanced economies, Ha et al. find the average exchange rate pass through into the CPI to be about 0.10.

 

 

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RFK Jr: The Wuhan Cover-Up & The Rise Of The Biowarfare-Industrial Complex

RFK Jr: The Wuhan Cover-Up & The Rise Of The Biowarfare-Industrial Complex

Authored by Debbie Lerman via The Brownstone Institute,

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RFK Jr: The Wuhan Cover-Up & The Rise Of The Biowarfare-Industrial Complex

Authored by Debbie Lerman via The Brownstone Institute,

The Wuhan Cover-Up and the Terrifying Bioweapons Arms Race (Skyhorse Publishing, December 3, 2023) is a crucial book for understanding how the Covid catastrophe happened. 

I would even go so far as to argue that RFK, Jr.’s new book is the most important Covid chronicle to date, although it ends at the beginning of 2020, before most of us were even aware that a “novel coronavirus” was circulating among us. 

The book explains the CAUSES of the global disaster, which all happened before March 2020. Everything after that are the downstream EFFECTS of what The Wuhan Cover-Up exposes.

Here’s how RFK, Jr. summarizes those effects:

Everyone has now seen that pandemics are another way for the military, intelligence, and public health services to expand their budgets and their power. In 2020, public health, defense, and intelligence agencies weaponized a [Covid-19] pandemic, resulting in unprecedented profits to Big Pharma and the dramatic expansion of the security/surveillance state, including a systemic abandonment of constitutional rights—effectively a coup d’état against liberal democracy globally.

(Kindle edition, p. 385)

Putting Covid in the Biowarfare Context

Interestingly, in the publicity blurb on the book and in interviews about it, RFK, Jr. focuses on “the etiology of the gain-of-function research” and everything that led up to a virus being engineered in a US-funded lab in Wuhan by a group of Chinese and Western scientists.

At the core of this story is RFK, Jr.’s desire to warn readers about the dangers of gain-of-function research, which he shows in the book to be irrefutably a biowarfare – not a public health – endeavor.

But in the process of constructing the argument and supplying the proof for his dire warning, and for his assertion that this type of research should be stopped immediately and forever, RFK, Jr. provides what I find to be an even more compelling story.

The story in the Wuhan Cover-Up that interests me is the rise of the biowarfare-industrial-complex – the global behemoth comprising military/intelligence alliances, Big Pharma, Big Tech, academic and medical institutions, and NGOs – that both created the virus known as SARS-CoV-2 and ran the global response to it.

In this article, I will highlight key parts of The Wuhan Cover-Up that pertain to this storyline – which I believe are downplayed in its publicity materials and are one of the main reasons it has been practically banned from polite society: The book has been so heavily censored that I cannot find a single actual review on Google. Newsweek reported that independent bookstores do not want to carry it. 

A lot of the censorship has to do with mainstream animosity toward RFK, Jr’s presidential campaign. But the explosive content of the book, as reviewed in this article, is also likely a factor.

Top-Level Summary of the Rise of the Biowarfare Industrial Complex, as Told by RFK, Jr.

  • The biowarfare industry started to grow after WWII, when Western intelligence agencies imported Japanese and German scientists to help develop weapons against Communist enemies. This was, in fact, the first task of the newly formed CIA.

  • After 9/11, funding for bioweapons research exploded, and so did the power and reach of the military and intelligence agencies in charge of such research. The research, presented to the public as “pandemic preparedness and response (PPR),” encompassed mostly attempts to engineer deadly pathogens and simultaneously to create countermeasures to them, predominantly vaccines. 

  • So much money was pouring into PPR/bioweapons research that the public health agencies and academic institutions involved in government research all became dependent on it – or, perhaps more accurately, addicted to the money and power this type of research bestowed. Multinational public-private partnerships and “non-governmental organizations” (e.g., The Bill & Melinda Gates Foundation and The Wellcome Trust) were created to fund and promote the need for such research.

  • In the fall of 2019 an engineered pathogen from one of the bioweapons labs in China found its way into the population. All the military, intelligence, and public health officials from China, the US, UK, and other countries, with their pharma and academic partners, conspired to cover up the lab leak, while simultaneously preparing to unleash their countermeasures on the world.

How the Nature of Biowarfare Research Has Not Changed

As RFK, Jr. tells it, the history of today’s biowarfare industry starts after WWII, when German and Japanese scientists were secretly repatriated to assist the intelligence community and military in developing chemical and biological weapons programs. 

It is no coincidence, he argues, that many sinister features of those earlier programs carried forward to the present. These features include:

  • tight alliances with the pharmaceutical industry and the media; 

  • the complicity of academia and medical schools; 

  • the co-opting of journals; 

  • intense secrecy; 

  • pervasive experimentation on human subjects; 

  • liberal use of the word “volunteers;”

  • open-air testing on large unwilling populations; 

  • ethical elasticity; 

  • the normalization of lies; 

  • the use of microbiology to alter and weaponize bugs; 

  • the use of vaccine development as a mask for bioweapons research; 

  • the corruption of the entire medical establishment 

(p. 48)

Even just this list is enough to explain what happened with Covid: Take all these ingredients, add billions of dollars and multinational public-private partnerships involving top research institutions and thousands of scientists, and how could you not get a global disaster? 

Deep CIA-Biowarfare Ties

The Wuhan Cover-Up spends a lot of time documenting the correspondence between the rise of the CIA and the emergence of the modern biowarfare program. 

 RFK, Jr. writes:

…it’s worth reviewing the agency’s seventy-five-year preoccupation with bioweapons, pandemics, and vaccines. Bioweapons development was the CIA’s first love, and has remained its relentless passion. The CIA’s natal obsession with bioweapons pitted the agency against all the idealistic underpinnings of both American democracy and the healing arts of medicine. 

(p. 46)

An important related point emphasized in the book is that bioweapons research is not an obscure, niche industry. Rather, according to The Wuhan Cover-Up, it is a top national defense concern, driving the national security agenda:

Following the collapse of the Soviet Union, the military and intelligence apparatus erected the biosecurity agenda as the new spear tip of American foreign policy. These agencies deftly replaced the fear of the Soviet monolith and creeping communism with a fear of infectious disease, which they have successfully stoked to justify vast expansions in power…

(p. 44)

Shockingly Broad Participation by Academics and Scientists

Because the biosecurity agenda – which focuses on biochemical and medical research – is so central to foreign policy and national security, it controls large swaths of research funding. Thus, as RFK, Jr. documents, it has come to encompass many top academic institutions and thousands of doctors and scientists:

Among the most alarming side effects of the federal preoccupation with bioweapons has been the systematic diversion of vast resources and armies of academic and government scientists away from public health and healing. 

(p. 46)

Today, some thirteen thousand death scientists labor on bioweapons technology on behalf of US military, intelligence, and public health agencies in some four hundred government and university bioweapons labs. 

(p. 83)

Moral Bankruptcy

When faced with Covid “conspiracy theories” – such as those put forth in The Wuhan Cover-Up – people often argue that so many doctors and scientists could not possibly have knowingly agreed to civilization-killing ideas like lockdowns and injections of unsafe medical products into billions of people. They must have believed they were actually saving humanity, right?

Wrong, according to RFK, Jr.:

History has shown again and again the bioweapons agenda’s awesome power to transform compassionate, brilliant, idealistic doctors into monsters. 

(p. 47)

They have, as a class, demonstrated thoroughly warped judgment and a reliable penchant for dishonesty and terrible ideas. 

(p. 87)

Bioweapons Research = Vaccine Research

Another crucial idea bearing on our understanding of the Covid response is that vaccine research is a primary concern for the biowarfare-industrial complex, although it is publicly presented as a public health endeavor.

The book quotes Professor Frances Boyle, author of the Biological Weapons Anti-Terrorism Act of 1989, with this explanation:

You can’t use a bioweapon against your enemy without having in your possession an antidote with which to shield your own team from blowback. For this reason, bioweapons and vaccines are always developed in tandem with each other.

(p. 121)

Moreover, because vaccine research funding goes to both biodefense and public health agencies, they have become inextricably linked:

The military and public health agencies work in close coordination to develop vaccines for military applications, sharing information and working side by side in labs. Vaccine research often serves as a cover or rationale for illegal bioweapons development.

(p. 129)

From an Obsession of US National Security to a Tool of Globalism

As RFK, Jr. writes, after 9/11, Islamic terrorism became the focus of US national defense. After the anthrax attacks, the focus of antiterrorist activities coalesced around the need to predict, prevent, and create countermeasures to biological terrorism. 

This more reliable and terrifying enemy would soon replace the war against Islamic terror—justifying a “forever war” against germs. “Biosecurity,” a.k.a. Pandemic Preparedness and Response (PPR), provided a rationale for US presence in every developing nation.

(p. 149)

And, as further explained by RFK, Jr., the focus on bioterrorism, which first served the American imperialist impulse, then became incorporated into the program of globalism:

The emerging medical/military-industrial complex would soon be citing biosecurity as a pretext for centralized control, coordinated response among nations, a sprawling construction project for new US bioweapons laboratories, the archiving of every germ with weapons potential under the pretext of pandemic protection, the control of the media, the imposition of censorship, the erection of an unprecedented surveillance infrastructure ostensibly needed to “track and trace” infections, universal digital IDs, digital currencies to reduce disease spread, and the ceding of power by national governments to the WHO—in short, globalism. 

(p. 149)

China Becomes a Dominant Biowarfare Research Player

Concurrently, China’s leaders were working on a mission to make China a world leader in science, research, and innovation. According to The Wuhan Cover-Up, the Chinese have been using the West’s march toward globalism to infiltrate “Western academia, businesses, media, cultural groups, and government agencies that speak the language of cooperation, globalism, and public health.” (p. 257)

As part of their infiltration process, the Chinese lavished funding on Western research institutions and scientific publishing houses. And because biomedical/biowarfare research was so central to Western governments and research institutions, the Chinese were able to eventually dominate that space as well.

Thus, the book explains, China was able to “co-opt US academic institutions and US public health agencies into performing backdoor bioweapons research for the Chinese military.” (p. 274)

Why Would the US Do Bioweapons Research in/for China?

This is, perhaps, the most oft-raised question in response to the hypothesis that SARS-CoV-2 was an engineered bioweapon from a lab funded by the Chinese military, the US, and other Western governments.

As RFK, Jr. explains, with the Chinese as major funders of Western institutions, journals and projects related to biomedical research, this strange collaboration was not just unsurprising, but in fact, inevitable:

The Chinese campaign to co-opt leading scientists and the river of Chinese funding to researchers at US and British medical research universities and to the leading scientific journals had, by then, bought China powerful friends across the Western scientific establishment. 

(p. 280)

Furthermore, the interests of China intersect with the interests of major global corporations and NGOs that comprise the biowarfare-industrial-complex – many of which enriched themselves considerably through the Covid response. As RFK, Jr. writes:

There is a natural intersection of interests between Western business titans and a former communist government [the Chinese Communist Party] that has made itself the global model for seamlessly merging corporate with government power, and promoting business growth by suppressing democracy, labor, and human rights. 

(p. 572)

For its part, the US intelligence community has all kinds of reasons – all ultimately geared toward increasing its own power and influence – to engage in sensitive scientific research projects with the Chinese:

The deliberate transfer of our superior bioweapons knowledge to the Chinese—a potential enemy—makes little sense to citizens who think in terms of conventional rivalries between nations. Espionage was clearly among the complex motivations for the US intelligence community supporting Chinese bioweapons research in China. Knowing what the Chinese are up to is the mission of the US intelligence community. But quietly sharing cutting-edge technologies may also serve institutional self-interest. After all, the intelligence community expands its power by reporting the enemy’s expanding capabilities; more frightening capabilities abroad justify increased budgets and increased power at home. 

(p. 388)

Bioweapons expert Dr. Francis Boyle is quoted stating that:

Opportunities to expand institutional power and corporate profits always seem to trump patriotism and duty within the CIA’s bioweapons teams. Patriotism is a polite fiction among the bioweapons set.

(p. 383)

RFK, Jr. adds that the public health agencies, which are heavily involved in, and funded by, biowarfare research, share the CIA’s self-interested non-patriotism:

NIH and NIAID operate under the same perverse incentives that drive destructive conduct across the whole bioweapons field.

(p. 383)

A Convergence of Personal, Political, Financial and Global Interests

In the final chapters of The Wuhan Cover-Up, RFK, Jr. focuses on several key figures in the biowarfare-industrial-complex, including Jeremy Farrar of the Wellcome Trust (now at the WHO), Anthony Fauci of the NIH, and Bill Gates. 

RFK, Jr. uses these figures to show how the Covid pandemic emerged from the toxic stew of ethically compromised biowarfare research standards; military, intelligence, public health, and academic institutions/organizations dependent on biowarfare funding; the involvement of China and global interests in the booming business of “pandemic preparedness and response;” and, of course, the endless pursuit of political power and personal enrichment.

Here’s a great summary of how they all came together, through personal and institutional greed and power-mongering, to unleash the Covid catastrophe on the world:

The evidence suggests that instead of relentlessly protecting public health, Farrar exploited the pandemic to promote the venal financial agendas of his WEF [World Economic Forum] patrons, to transform Western democracies into surveillance states, to expand his personal power and paycheck, and to pander to high-level Chinese officials. Achieving these objectives required Farrar to hide [Covid’s] laboratory origins, a project in which he enlisted a cadre of his medical cartel cronies—those who, thanks to years of funding by Fauci, Farrar, and Gates, now occupy the highest echelons of virology in academia, the regulatory agencies, and pharmaceutical companies. 

(p. 539)

If for nothing else, I would recommend adding The Wuhan Cover-Up to your library as an invaluable resource on leading figures, organizations, and power brokers involved in the biowarfare-industrial-complex.

Conclusions and Comments

It was especially gratifying to me to read The Wuhan Cover-Up (all 600 pages of it), because it validated my own research, showing that the pandemic response was led by the national security/intelligence arms of government, not public health agencies. 

In fact, after reading the first few chapters – the ones that go into the history of chemical and biological warfare and the rise of the biowarfare-industrial-complex – I paradoxically felt an enormous sense of relief. 

Finally, we have a detailed account that shows – beyond what I would consider a reasonable doubt – that the entire Covid catastrophe was caused, and led, by a multinational military-intelligence-academic-pharma-tech-NGO cabal.

RFK, Jr.’s conclusion is that we should look to a future “in which the bio-elites are held responsible for their actions, people regain their rights, and the Constitution is restored to its intended preeminence.”

But how do we do that? 

I am afraid, based on the information in his own book, and the fact that RFK, Jr. himself is being censored and banned so extensively from the public square, that the solution to the problems he exposes is much more difficult and complex than just “holding the bio-elites responsible” which will somehow lead to people regaining their rights.

What we need to do is to shut down, or extract ourselves from, the global biowarfare-industrial-complex that is able to convince (or coerce?) our governments into declaring states of emergency over supposed pandemic threats, and then curtail civil rights and impose massive surveillance, censorship, and propaganda that would not be permitted in non-emergency situations. Not to mention garnering enormous wealth while forcing the world’s population to accept novel, untested, and potentially lethal medical “countermeasures.”

The Wuhan Cover-Up does a better job than any other book or article I have read at exposing the trends, forces, and institutions that brought us the Covid catastrophe – with hundreds of pages of notes and references. What’s frightening is that the enormity of the problem is beyond the scope of the book, not just to solve, but even to fully acknowledge.

Republished from the author’s Substack

Tyler Durden Fri, 02/16/2024 - 23:40

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