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No Talk In The Dollar Shadows

The company isn’t bankrupt, it just doesn’t have the right currency in its reach to repay debts coming due. YPF is Argentina’s (former) gold mine, in this case the black gold of energy exploitation. State-owned, the business has obviously close…

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The company isn’t bankrupt, it just doesn’t have the right currency in its reach to repay debts coming due. YPF is Argentina’s (former) gold mine, in this case the black gold of energy exploitation. State-owned, the business has obviously close ties to the ruling powers-that-be and a privileged place to go along with them. Its formal name, Yacimientos Petrolíferos Fiscales, literally translates as “fiscal oilfields.”

But no matter the primo spot in the Argentinian hierarchy, no government can deliver the dollars they don’t have – and cannot conceivably obtain. It really is that simple at times like these, confusion instead created by the disingenuous interpretations of what particularly the US central bank actually does (moral suasion that seems a lot less moral these days).

According to the IMF, YPF’s government reported to this particularly noteworthy supra-national organization that the country, through its own central bank, Banco Central de la República Argentin (BCRA), holds less than $39 billion in total reserves (as of November 2020). That’s not nearly enough should YPF as well as Argentina Telecom repay Eurobonds (bonds sold in offshore markets which raised US$ funds) expiring this year and next.




This is not normally an issue during normal times because an energy business is typically one which can easily obtain a relatively efficient and sustained flow of US$ liabilities (via offshore banks, the eurodollar system). If necessary, the government can and often does raise dollars, too, and in Argentina’s case it spent much of 2016, all of 2017, and then the first couple months of 2018 doing just that.

The idea is to increase the level of national reserves such that if the eurodollar market turns from best friend to biggest foe, the government and central bank might be able to cover up and smooth out the rough patch.

Argentine officials knew they were toast, however, right from the beginning of Euro$ #4. Just look at the currency’s trading history from that point onward:



The Macri government was already negotiating with the IMF for a dollar-based bailout just two weeks into the peso’s initial descent. What that tells us is that eurodollar conditions, the shadow stuff, goes on often unnoticed even by the currency’s exchange value. In other words, officials in-country knew they were in dollar trouble before it really showed up in the peso.

You could see it working backward underneath that whole time, in the shadows, even as inflation certainty the rest of the world reached its hysterical peak. I wrote in February 2018:

No. Argentina is, in fact, a pretty good if more extreme example of what’s been taking place over the past few months. Lost in this current euphoria about inflation and “globally synchronized growth” has been several troubling developments in money and global “dollar” liquidity; an escalation as I’ve called it several times since September [2017].

There are two much broader implications, therefore, contained just within the single chart above. First, the peso wasn’t an outlier in April 2018; far from it. Rather, the reason was problems building up across the entire eurodollar system (Euro$ #4), which had meant Argentina’s funding disruption wasn’t an Argentinian funding disruption at all. It was a global dollar shortage which was more easily clarified in how it more visibly impacted the system’s weaker pieces like the peso.

Second, the IMF and official “rescue.” What’s most glaring about the chart above, or should be, is that from the moment Macri contacted Christine Lagarde’s folks for bailout talks what has transpired has been the exact opposite of a rescue. The biggest action in IMF history has become its biggest blunder, an ongoing fiasco that very negatively impacts real lives.

They really have no idea what they are doing when it comes to dollars and sense.

To try to stave off oblivion in 2020, with oil prices even further depressed (recent rebound included) along with economic activity, BCRA delivered even more capital tightening back in September last year. Any “entities”, including YPF, with “hard currency” external debt (US$) expiring at any time between October 15, 2020 and March 31, 2021 has to submit a plan, and receive permission, which at the very least requires 40% of the principal to be repaid in the “official exchange market” of Argentina.

The other 60% must be restructured for at least another two years using some kind of debt swap.

It’s actually the 40% which is creating more recent bother, and not just for YPF. The official exchange market isn’t anywhere close to the actual market exchange peso-for-dollars because there aren’t any dollars available in the official market. One key reason is that even with capital controls, dollar reserves continue to dwindle officially; unofficially, who has any dollars left?

YPF has offered to restructure another $6.25 billion just this month but has run into trouble finding any takers for the “official” currency portion. Rock has met hard place.

And what this really means, big picture, is that Argentina is admitting that there is really no way for it and any company associated with the country to raise US$ funding without yet another IMF or similar “saving.” Talks, it has been said, are ongoing between the two because…

What’s being said about conditions generally to begin 2021 is that the dollar is closer to crashing than anything resembling a continuing dollar shortage. Its exchange value down, down big according to most commentary, due to an overactive Jay Powell and his Federal Reserve digitally flooding the whole globe with bank reserves. A deluge that’s reported to be (far) more likely to overdo it than come up short.

Thus, Argentina sticks out for all the wrong reasons. Again. Typically, its plight is merely dismissed as the usual basket case reverting to type. Their problems are their own making, nothing more than idiosyncratic factors having nothing to do with the rest of the world US central bankers have (allegedly) brilliantly saved. 

Just like they said when the crisis first erupted back in early 2018.

Unexpectedly, of course. And “they” get their interpretations from central bankers – like Christine Lagarde, given the short trip failing upward to now top the European Central Bank – who always and everywhere claim any kind of monetary shortage, even the one staring you in the face, is impossible.

Moral suasion, indeed.



It is clear, though, that it is the eurodollar what drives growth here (and around the rest of the EM world); that when eurodollars globally had been plentiful and truly abundant via the global bank (not central bank) channels, that’s exactly when Argentina found a sustained measure of economic success. Dollars in, economy up. No dollars easily available, especially since 2011, one problem after another.

Dollar problems, since 2011 especially, these haven’t been limited to just Argentina, have they?

Dazzled by DXY and its euro component unwinding unfounded Brexit fears has given pace to broad misperception well beyond these specific locales of South America. The dollar isn’t acting like that – at all. No crash anywhere on the horizon. On the contrary, it remains elsewhere more like Argentina than European euro.

That’s not to say the dollar is rising again, broadly speaking, it’s not; that’s only where the peso is the current outlier.




But why hasn’t the dollar gone far lower against the rest of the planet given this presumed flood of dollars? And its stubbornness is most evident right in the EM currency crosses that represent these most vulnerable parts. The reason is the eurodollar system is more dry than overflowing, even now, certainly of what still hides in the shadows behind stubborn exchange values.

And it’s not just non-European dollar exchange rates where the hints of shadow uncertainty can be witnessed. Just look at the Treasury market (or German, if you like):




As my podcast co-host Emil Kalinowski quite rightly pointed out recently, the UST curve is hardly anything like the inflationary warning sign it’s being made out to be. On the contrary, like the persistent dollar exchange value, why hasn’t the yield curve moved a whole lot more than what little it has?

In fact, the curve today is significantly shrunk underneath where it had been one year ago – back when the growing specter of global deflation and money shortage was rapidly rising in probability. The yield curve today lingers yet underneath the lowest point (September 2019) of the so-called recession scare of the prior summer (which proved to be a bit more than a scare, even before COVID).

And this with a pandemic vaccine rolled out, and the Treasury Department’s TGA surely to be pilfered down to zero at some point over the coming months if not weeks.

Compared to the top of Inflation Hysteria #1, when Argentina’s peso was already undermining that story, today is no comparison whatsoever.

But Argentina continues to undercut the dollar crash, dollar flood, inflationary story anyway. It may seem like a global dollar shortage is hard to see awash as we all are in reflationary certainty and excessive monetary hysteria. That, like early 2018, is all talk.

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Chinese migration to US is nothing new – but the reasons for recent surge at Southern border are

A gloomier economic outlook in China and tightening state control have combined with the influence of social media in encouraging migration.

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Chinese migrants wait for a boat after having walked across the Darien Gap from Colombia to Panama. AP Photo/Natacha Pisarenko

The brief closure of the Darien Gap – a perilous 66-mile jungle journey linking South American and Central America – in February 2024 temporarily halted one of the Western Hemisphere’s busiest migration routes. It also highlighted its importance to a small but growing group of people that depend on that pass to make it to the U.S.: Chinese migrants.

While a record 2.5 million migrants were detained at the United States’ southwestern land border in 2023, only about 37,000 were from China.

I’m a scholar of migration and China. What I find most remarkable in these figures is the speed with which the number of Chinese migrants is growing. Nearly 10 times as many Chinese migrants crossed the southern border in 2023 as in 2022. In December 2023 alone, U.S. Border Patrol officials reported encounters with about 6,000 Chinese migrants, in contrast to the 900 they reported a year earlier in December 2022.

The dramatic uptick is the result of a confluence of factors that range from a slowing Chinese economy and tightening political control by President Xi Jinping to the easy access to online information on Chinese social media about how to make the trip.

Middle-class migrants

Journalists reporting from the border have generalized that Chinese migrants come largely from the self-employed middle class. They are not rich enough to use education or work opportunities as a means of entry, but they can afford to fly across the world.

According to a report from Reuters, in many cases those attempting to make the crossing are small-business owners who saw irreparable damage to their primary or sole source of income due to China’s “zero COVID” policies. The migrants are women, men and, in some cases, children accompanying parents from all over China.

Chinese nationals have long made the journey to the United States seeking economic opportunity or political freedom. Based on recent media interviews with migrants coming by way of South America and the U.S.’s southern border, the increase in numbers seems driven by two factors.

First, the most common path for immigration for Chinese nationals is through a student visa or H1-B visa for skilled workers. But travel restrictions during the early months of the pandemic temporarily stalled migration from China. Immigrant visas are out of reach for many Chinese nationals without family or vocation-based preferences, and tourist visas require a personal interview with a U.S. consulate to gauge the likelihood of the traveler returning to China.

Social media tutorials

Second, with the legal routes for immigration difficult to follow, social media accounts have outlined alternatives for Chinese who feel an urgent need to emigrate. Accounts on Douyin, the TikTok clone available in mainland China, document locations open for visa-free travel by Chinese passport holders. On TikTok itself, migrants could find information on where to cross the border, as well as information about transportation and smugglers, commonly known as “snakeheads,” who are experienced with bringing migrants on the journey north.

With virtual private networks, immigrants can also gather information from U.S. apps such as X, YouTube, Facebook and other sites that are otherwise blocked by Chinese censors.

Inspired by social media posts that both offer practical guides and celebrate the journey, thousands of Chinese migrants have been flying to Ecuador, which allows visa-free travel for Chinese citizens, and then making their way over land to the U.S.-Mexican border.

This journey involves trekking through the Darien Gap, which despite its notoriety as a dangerous crossing has become an increasingly common route for migrants from Venezuela, Colombia and all over the world.

In addition to information about crossing the Darien Gap, these social media posts highlight the best places to cross the border. This has led to a large share of Chinese asylum seekers following the same path to Mexico’s Baja California to cross the border near San Diego.

Chinese migration to US is nothing new

The rapid increase in numbers and the ease of accessing information via social media on their smartphones are new innovations. But there is a longer history of Chinese migration to the U.S. over the southern border – and at the hands of smugglers.

From 1882 to 1943, the United States banned all immigration by male Chinese laborers and most Chinese women. A combination of economic competition and racist concerns about Chinese culture and assimilability ensured that the Chinese would be the first ethnic group to enter the United States illegally.

With legal options for arrival eliminated, some Chinese migrants took advantage of the relative ease of movement between the U.S. and Mexico during those years. While some migrants adopted Mexican names and spoke enough Spanish to pass as migrant workers, others used borrowed identities or paperwork from Chinese people with a right of entry, like U.S.-born citizens. Similarly to what we are seeing today, it was middle- and working-class Chinese who more frequently turned to illegal means. Those with money and education were able to circumvent the law by arriving as students or members of the merchant class, both exceptions to the exclusion law.

Though these Chinese exclusion laws officially ended in 1943, restrictions on migration from Asia continued until Congress revised U.S. immigration law in the Hart-Celler Act in 1965. New priorities for immigrant visas that stressed vocational skills as well as family reunification, alongside then Chinese leader Deng Xiaoping’s policies of “reform and opening,” helped many Chinese migrants make their way legally to the U.S. in the 1980s and 1990s.

Even after the restrictive immigration laws ended, Chinese migrants without the education or family connections often needed for U.S. visas continued to take dangerous routes with the help of “snakeheads.”

One notorious incident occurred in 1993, when a ship called the Golden Venture ran aground near New York, resulting in the drowning deaths of 10 Chinese migrants and the arrest and conviction of the snakeheads attempting to smuggle hundreds of Chinese migrants into the United States.

Existing tensions

Though there is plenty of precedent for Chinese migrants arriving without documentation, Chinese asylum seekers have better odds of success than many of the other migrants making the dangerous journey north.

An estimated 55% of Chinese asylum seekers are successful in making their claims, often citing political oppression and lack of religious freedom in China as motivations. By contrast, only 29% of Venezuelans seeking asylum in the U.S. have their claim granted, and the number is even lower for Colombians, at 19%.

The new halt on the migratory highway from the south has affected thousands of new migrants seeking refuge in the U.S. But the mix of push factors from their home country and encouragement on social media means that Chinese migrants will continue to seek routes to America.

And with both migration and the perceived threat from China likely to be features of the upcoming U.S. election, there is a risk that increased Chinese migration could become politicized, leaning further into existing tensions between Washington and Beijing.

Meredith Oyen does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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Is the National Guard a solution to school violence?

School board members in one Massachusetts district have called for the National Guard to address student misbehavior. Does their request have merit? A…

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Every now and then, an elected official will suggest bringing in the National Guard to deal with violence that seems out of control.

A city council member in Washington suggested doing so in 2023 to combat the city’s rising violence. So did a Pennsylvania representative concerned about violence in Philadelphia in 2022.

In February 2024, officials in Massachusetts requested the National Guard be deployed to a more unexpected location – to a high school.

Brockton High School has been struggling with student fights, drug use and disrespect toward staff. One school staffer said she was trampled by a crowd rushing to see a fight. Many teachers call in sick to work each day, leaving the school understaffed.

As a researcher who studies school discipline, I know Brockton’s situation is part of a national trend of principals and teachers who have been struggling to deal with perceived increases in student misbehavior since the pandemic.

A review of how the National Guard has been deployed to schools in the past shows the guard can provide service to schools in cases of exceptional need. Yet, doing so does not always end well.

How have schools used the National Guard before?

In 1957, the National Guard blocked nine Black students’ attempts to desegregate Central High School in Little Rock, Arkansas. While the governor claimed this was for safety, the National Guard effectively delayed desegregation of the school – as did the mobs of white individuals outside. Ironically, weeks later, the National Guard and the U.S. Army would enforce integration and the safety of the “Little Rock Nine” on orders from President Dwight Eisenhower.

Three men from the mob around Little Rock’s Central High School are driven from the area at bayonet-point by soldiers of the 101st Airborne Division on Sept. 25, 1957. The presence of the troops permitted the nine Black students to enter the school with only minor background incidents. Bettmann via Getty Images

One of the most tragic cases of the National Guard in an educational setting came in 1970 at Kent State University. The National Guard was brought to campus to respond to protests over American involvement in the Vietnam War. The guardsmen fatally shot four students.

In 2012, then-Sen. Barbara Boxer, a Democrat from California, proposed funding to use the National Guard to provide school security in the wake of the Sandy Hook school shooting. The bill was not passed.

More recently, the National Guard filled teacher shortages in New Mexico’s K-12 schools during the quarantines and sickness of the pandemic. While the idea did not catch on nationally, teachers and school personnel in New Mexico generally reported positive experiences.

Can the National Guard address school discipline?

The National Guard’s mission includes responding to domestic emergencies. Members of the guard are part-time service members who maintain civilian lives. Some are students themselves in colleges and universities. Does this mission and training position the National Guard to respond to incidents of student misbehavior and school violence?

On the one hand, New Mexico’s pandemic experience shows the National Guard could be a stopgap to staffing shortages in unusual circumstances. Similarly, the guards’ eventual role in ensuring student safety during school desegregation in Arkansas demonstrates their potential to address exceptional cases in schools, such as racially motivated mob violence. And, of course, many schools have had military personnel teaching and mentoring through Junior ROTC programs for years.

Those seeking to bring the National Guard to Brockton High School have made similar arguments. They note that staffing shortages have contributed to behavior problems.

One school board member stated: “I know that the first thought that comes to mind when you hear ‘National Guard’ is uniform and arms, and that’s not the case. They’re people like us. They’re educated. They’re trained, and we just need their assistance right now. … We need more staff to support our staff and help the students learn (and) have a safe environment.”

Yet, there are reasons to question whether calls for the National Guard are the best way to address school misconduct and behavior. First, the National Guard is a temporary measure that does little to address the underlying causes of student misbehavior and school violence.

Research has shown that students benefit from effective teaching, meaningful and sustained relationships with school personnel and positive school environments. Such educative and supportive environments have been linked to safer schools. National Guard members are not trained as educators or counselors and, as a temporary measure, would not remain in the school to establish durable relationships with students.

What is more, a military presence – particularly if uniformed or armed – may make students feel less welcome at school or escalate situations.

Schools have already seen an increase in militarization. For example, school police departments have gone so far as to acquire grenade launchers and mine-resistant armored vehicles.

Research has found that school police make students more likely to be suspended and to be arrested. Similarly, while a National Guard presence may address misbehavior temporarily, their presence could similarly result in students experiencing punitive or exclusionary responses to behavior.

Students deserve a solution other than the guard

School violence and disruptions are serious problems that can harm students. Unfortunately, schools and educators have increasingly viewed student misbehavior as a problem to be dealt with through suspensions and police involvement.

A number of people – from the NAACP to the local mayor and other members of the school board – have criticized Brockton’s request for the National Guard. Governor Maura Healey has said she will not deploy the guard to the school.

However, the case of Brockton High School points to real needs. Educators there, like in other schools nationally, are facing a tough situation and perceive a lack of support and resources.

Many schools need more teachers and staff. Students need access to mentors and counselors. With these resources, schools can better ensure educators are able to do their jobs without military intervention.

F. Chris Curran has received funding from the US Department of Justice, the Bureau of Justice Assistance, and the American Civil Liberties Union for work on school safety and discipline.

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Rand Paul Teases Senate GOP Leader Run – Musk Says “I Would Support”

Rand Paul Teases Senate GOP Leader Run – Musk Says "I Would Support"

Republican Kentucky Senator Rand Paul on Friday hinted that he may jump…

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Rand Paul Teases Senate GOP Leader Run - Musk Says "I Would Support"

Republican Kentucky Senator Rand Paul on Friday hinted that he may jump into the race to become the next Senate GOP leader, and Elon Musk was quick to support the idea. Republicans must find a successor for periodically malfunctioning Mitch McConnell, who recently announced he'll step down in November, though intending to keep his Senate seat until his term ends in January 2027, when he'd be within weeks of turning 86. 

So far, the announced field consists of two quintessential establishment types: John Cornyn of Texas and John Thune of South Dakota. While John Barrasso's name had been thrown around as one of "The Three Johns" considered top contenders, the Wyoming senator on Tuesday said he'll instead seek the number two slot as party whip. 

Paul used X to tease his potential bid for the position which -- if the GOP takes back the upper chamber in November -- could graduate from Minority Leader to Majority Leader. He started by telling his 5.1 million followers he'd had lots of people asking him about his interest in running...

...then followed up with a poll in which he predictably annihilated Cornyn and Thune, taking a 96% share as of Friday night, with the other two below 2% each. 

Elon Musk was quick to back the idea of Paul as GOP leader, while daring Cornyn and Thune to follow Paul's lead by throwing their names out for consideration by the Twitter-verse X-verse. 

Paul has been a stalwart opponent of security-state mass surveillance, foreign interventionism -- to include shoveling billions of dollars into the proxy war in Ukraine -- and out-of-control spending in general. He demonstrated the latter passion on the Senate floor this week as he ridiculed the latest kick-the-can spending package:   

In February, Paul used Senate rules to force his colleagues into a grueling Super Bowl weekend of votes, as he worked to derail a $95 billion foreign aid bill. "I think we should stay here as long as it takes,” said Paul. “If it takes a week or a month, I’ll force them to stay here to discuss why they think the border of Ukraine is more important than the US border.”

Don't expect a Majority Leader Paul to ditch the filibuster -- he's been a hardy user of the legislative delay tactic. In 2013, he spoke for 13 hours to fight the nomination of John Brennan as CIA director. In 2015, he orated for 10-and-a-half-hours to oppose extension of the Patriot Act

Rand Paul amid his 10 1/2 hour filibuster in 2015

Among the general public, Paul is probably best known as Capitol Hill's chief tormentor of Dr. Anthony Fauci, who was director of the National Institute of Allergy and Infectious Disease during the Covid-19 pandemic. Paul says the evidence indicates the virus emerged from China's Wuhan Institute of Virology. He's accused Fauci and other members of the US government public health apparatus of evading questions about their funding of the Chinese lab's "gain of function" research, which takes natural viruses and morphs them into something more dangerous. Paul has pointedly said that Fauci committed perjury in congressional hearings and that he belongs in jail "without question."   

Musk is neither the only nor the first noteworthy figure to back Paul for party leader. Just hours after McConnell announced his upcoming step-down from leadership, independent 2024 presidential candidate Robert F. Kennedy, Jr voiced his support: 

In a testament to the extent to which the establishment recoils at the libertarian-minded Paul, mainstream media outlets -- which have been quick to report on other developments in the majority leader race -- pretended not to notice that Paul had signaled his interest in the job. More than 24 hours after Paul's test-the-waters tweet-fest began, not a single major outlet had brought it to the attention of their audience. 

That may be his strongest endorsement yet. 

Tyler Durden Sun, 03/10/2024 - 20:25

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