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The Lay of the Land

The Lay of the Land



The markets are an incredible aggregator of information.  The corona crisis has denied grist to the mill.  With so many unknowns, it is as if investors latched on to the US fiscal debate.  A camel, it is said, is a horse made in committee, and so too with the laborious legislative process of the American republic.

When everything is said and done, more is often said than done.  However, this time is different.  Leaving aside the response to the public health emergency, G-10 governments and central banks have responded relatively quickly and boldly.  The 2008-2009 playbook was a starting point, but new features have emerged, including cash payments directly to households, tax deferments, and more countries seemed prepared to have the government absorb some of the labor costs without requiring lay-offs, as Germany has done for years.   Small and medium-sized businesses are also receiving more official support than past crises.  Several countries, including the US, Germany, and the UK are preparing to take equity stakes in large businesses that require assistance

The markets have recently appeared to take its cues from ebb and flow of progress toward a substantial fiscal response by the US.  Now that it is in hand, an important question is what will be the next focus.  Of course,  a wary eye is watching the curves of contagion and concerned about possible setbacks in countries where the curves had seemed to turn.  Given the magnitude of the economic contraction that is coming, the 30-38% slide of the bench equity benchmarks (from the high earlier this year to last week's trough) seems broadly rationale.

Now that G7 has gone to war-footing, which means previous practical and ideological limits are overcome, the panic among investors has calmed.  The extent of official response and the ability to scale many of the programs may be encouraging asset managers as portfolios are adjusted at the end of month and quarter. After practically goading officials into action, it is as if the markets now validate the extent of the response, and are going with official desires instead of fighting them. To the extent that a rising dollar tightens global liquidity, the implication of the crisis response is for a weaker dollar.  The ECB has made it clear that the inter-governmental bond spreads are indeed part of its transmission mechanism.  Its actions have once again countered revaluation risk (a country leaves the monetary union), and investors will think twice about re-visiting those extremes again.

The dollar unwound a good part of its recent gains last week.  The Dollar Index fell by 4.4% last week,  offsetting in full the previous week's gain, and retracing more than half of the dramatic gains that had lifted it from the year and a half low on March 9 (~94.65) to the three-year high on March 20 (~103).  It is not clear the role of the Fed swaps with foreign central banks played in the dollar's sharp sell-off last week.  

Consider the Canadian dollar, which snapped a four-week slide with a 2.65% gain, despite an unexpected 50 basis point rate cut at the end of the week. There was no take-up of dollar swaps, and the three-month cross-currency swap was virtually unchanged last week.  The dollar's weakness also coincided with large rallies in equity markets, even if gains were pared in the US and Europe ahead of the weekend.  Bonds yields also fell in most G10 countries and premiums over German bunds in Europe narrowed.  

Next week, the debate in the US may heat-up about whether the shutdown in the US should end or be lengthened will intensify. The shutdown decisions were made by state and local officials, not Washington DC.  It may take more than assurances from politicians and statistical references to the slowing of the rate of the rate of change to make people feel safe again.  Ubiquitous testing with quick, reliable results are important, and only then will people, businesses, investors, and the government have the information to discount different scenarios with confidence.

Crisis tests our fortitude, and it tests our leaders.  It is also an opportunity for other leaders to emerge, like the unemployed electrician in shipyards of Gdansk, who jumped a fence and helped launch Solidarity, which arguably did more to end the generation-long Cold War than the hundreds of billions of dollars spent on armaments.   In the US, notably, two officials, ironically on different sides of the issues, have seen their approval rating rise, President Trump and New York Governor Cuomo.  On their third attempt and fourth attempts, the UK Prime Minister Johnson and Chancellor of the Exchequer Sunak struck the right note. They went big and bold in ways that even Labour may applaud, like absorbing some (80% of wages costs for those impacted by Covid-19) and expanding welfare support. Leaving aside the particulars, it does seem reasonable to expect a common response is to support leaders in the middle of a crisis.

The major industrialized countries have not provided much global leadership.  Last week, the G7 failed to issue a statement, even one with platitudes about the shared commitment to do whatever it takes.  According to a German account, the problem stemmed from opposition to the US insistence that Covid-19 was called the Wuhan Flu.    The World Health Organization does not name viruses after a city or country because of the stigma (yes, it is not clear where the Spanish Flu began, but experts seem to think it most likely was not Spain).

That at least some US officials are moving to try to frame the issue before it has been resolved ought not to be surprising.  Clearly, China and Russia are trying to do the same thing by selling medical supplies to European countries in ways one must be suspicious of as trying to sow seeds of discord and false information.  Germany and France were criticized earlier this month. Still, they have stepped up, sharing masks and protective suits to Italy, for example, and have shared in hospital capacity for patients from both Italy and France.  On the other side of the crisis, re-onshoring medical goods capacity seems to be a likely and obvious response for the US and Europe.

Germany also rose to the occasion in terms of fiscal policy.  The public health crisis and the economic emergency has overcome inhibitions about deficit spending.  It also supports the relaxation of the EU's fiscal rules for others.  Those that supported a joint bond issuance during the sovereign debt crisis a decade ago, again, are advocating it now.  Those that were opposed, especially, but not limited to Germany and the Netherlands, have not been swayed.  The high debt burdens of the deficit countries to begin with, and insufficient structural reform continues to discourage the creditors from agreeing to take on such financial responsibilities implied by joint debt.

Speculation earlier this quarter that the major central banks had exhausted their tool kit seems quaint now.  The Federal Reserve and European Central Bank have both taken some unprecedented measures.  The Fed included local government debt for the first time, and a facility to support corporate debt and will have a program shortly to help small and medium-sized businesses.  It extended temporary swap lines with several central banks and offer those with permanent facilities a daily auction of seven-day swaps.  Although financial institutions in other countries are struggling to secure dollar funding, the limited extension of the swap line to countries that the US deems important could be a missed opportunity to underscore the dollar's role as an international public good, a utility, if you will.  The more the dollar is seen weaponized, the greater the desire for an alternative.

The ECB's Pandemic Emergency Purchase Progam is bold.  It will have the capacity to buy up to 750 bln euros.  While it was announced on March 18, it was not until a week later than the legal documents made it clear innovation.  In the past bond-buying programs, the ECB was directed by the capital key (which roughly corresponds to a country's GDP weighting) and an issuer cap of 33%.  The new program eschews such self-imposed limits, and explicitly abandoned the issuer limit, and expanded the instruments to include instruments maturing in as little as 70 days (previously one0-year was the shortest).  Note that at least initially, Germany has indicated it would finance its new borrowings in the bill market.  The ECB has nearly full discretion and it makes this policy lever more powerful.

There is no doubt that economic data in the coming months will be dreadful.  The markets do not seem particularly sensitive to the high-frequency data.  This was the message from the reaction to the flash PMIs (sank) and US weekly jobless claims (3.28 mln, record).  It is the closest thing to a real-time read on the world's largest economy.  Another rise of more than three million is expected.  Consider the hospitality sector, broadly understood to include hotels, air and ground travel, restaurants and bars, sporting events, public performances, etc., employ 10% of the US workforce.  Construction and auto production has shut. St. Louis Fed President Bullard estimated that 30% of American workers have jobs requiring person-to-person contact. Continuing claims will draw attention as the spiking higher too. A Reuters/IPSOS polls found nearly one-in-four in the US has said they have been either furloughed or laid off due to the coronavirus.  

Because of the when the survey is conducted for the monthly non-farm payroll rolls may not capture the magnitude of the disruption.  The Bloomberg survey found a median forecast of a loss fo 100k jobs while the Dow Jones survey found a median forecast of a 56k loss.  In either case, it will provide to be a small drop in the bucket of the wave of lay-offs that have begun.  March auto sales may draw some attention (Bloomberg consensus is for 13.75 mln seasonally-adjusted annual rate vs. 16.83 mln in February), and obvious risk is on the downside.  In 2009, auto sales bottomed near 9.0 mln.  The dramatic US economic contraction underway and the disruption to trade will likely translate into an improvement in the US balance in the first half.  The February trade balance figures (April 2) may be too early to see the impact.

While the flash PMI reports will be finalized, there has been little data about prices.  The eurozone will change this with its preliminary March CPI report on March 30.  A pandemic is a powerful deflationary force on the region that had a 1.2% core and headline rate of CPI in February.  The strategic goal is to preserve aggregate demand and maintain the circuit of capital (markets and banks). There are bound to be some distortions, inflation is understood to be an increase in the general price level, not relative prices.  Still, the concern about the inflationary implications of the aggregate demand support before output increases may be indicative that a nadir has passed.

Japan's February data is likely to begin reflecting the very early days of the crisis as China's New Year holiday was extended.  The recovery of the world's third-largest economy from the tax hike and tsunami last October has been cut short and this will be evident in the weakness in February retail sales and industrial production.  The Tankan Survey is will likely deteriorate markedly.  Because of how supplier-deliveries used, the flash manufacturing PMI reading may have held up better than what is really the case. The Tankan Survey may show more convergence.

Among the most interesting reports will be China.  The general sense from anecdotes, traffic reports, and air pollution readings, and the like, is that the Chinese economy is still falling it is doing so at a slower pace.  It appears to be a point of pride for Chinese leadership that the country emerges first from the crises. If this is a global reset of sorts, China wants to have a strong position.  Yet there seems to be little appreciation for the deep level of mistrust of the data of any kind.  Indeed, this credibility gap has only widened during the pandemic.  This may be one of the biggest obstacles for China to overcome.


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Are Voters Recoiling Against Disorder?

Are Voters Recoiling Against Disorder?

Authored by Michael Barone via The Epoch Times (emphasis ours),

The headlines coming out of the Super…



Are Voters Recoiling Against Disorder?

Authored by Michael Barone via The Epoch Times (emphasis ours),

The headlines coming out of the Super Tuesday primaries have got it right. Barring cataclysmic changes, Donald Trump and Joe Biden will be the Republican and Democratic nominees for president in 2024.

(Left) President Joe Biden delivers remarks on canceling student debt at Culver City Julian Dixon Library in Culver City, Calif., on Feb. 21, 2024. (Right) Republican presidential candidate and former U.S. President Donald Trump stands on stage during a campaign event at Big League Dreams Las Vegas in Las Vegas, Nev., on Jan. 27, 2024. (Mario Tama/Getty Images; David Becker/Getty Images)

With Nikki Haley’s withdrawal, there will be no more significantly contested primaries or caucuses—the earliest both parties’ races have been over since something like the current primary-dominated system was put in place in 1972.

The primary results have spotlighted some of both nominees’ weaknesses.

Donald Trump lost high-income, high-educated constituencies, including the entire metro area—aka the Swamp. Many but by no means all Haley votes there were cast by Biden Democrats. Mr. Trump can’t afford to lose too many of the others in target states like Pennsylvania and Michigan.

Majorities and large minorities of voters in overwhelmingly Latino counties in Texas’s Rio Grande Valley and some in Houston voted against Joe Biden, and even more against Senate nominee Rep. Colin Allred (D-Texas).

Returns from Hispanic precincts in New Hampshire and Massachusetts show the same thing. Mr. Biden can’t afford to lose too many Latino votes in target states like Arizona and Georgia.

When Mr. Trump rode down that escalator in 2015, commentators assumed he’d repel Latinos. Instead, Latino voters nationally, and especially the closest eyewitnesses of Biden’s open-border policy, have been trending heavily Republican.

High-income liberal Democrats may sport lawn signs proclaiming, “In this house, we believe ... no human is illegal.” The logical consequence of that belief is an open border. But modest-income folks in border counties know that flows of illegal immigrants result in disorder, disease, and crime.

There is plenty of impatience with increased disorder in election returns below the presidential level. Consider Los Angeles County, America’s largest county, with nearly 10 million people, more people than 40 of the 50 states. It voted 71 percent for Mr. Biden in 2020.

Current returns show county District Attorney George Gascon winning only 21 percent of the vote in the nonpartisan primary. He’ll apparently face Republican Nathan Hochman, a critic of his liberal policies, in November.

Gascon, elected after the May 2020 death of counterfeit-passing suspect George Floyd in Minneapolis, is one of many county prosecutors supported by billionaire George Soros. His policies include not charging juveniles as adults, not seeking higher penalties for gang membership or use of firearms, and bringing fewer misdemeanor cases.

The predictable result has been increased car thefts, burglaries, and personal robberies. Some 120 assistant district attorneys have left the office, and there’s a backlog of 10,000 unprosecuted cases.

More than a dozen other Soros-backed and similarly liberal prosecutors have faced strong opposition or have left office.

St. Louis prosecutor Kim Gardner resigned last May amid lawsuits seeking her removal, Milwaukee’s John Chisholm retired in January, and Baltimore’s Marilyn Mosby was defeated in July 2022 and convicted of perjury in September 2023. Last November, Loudoun County, Virginia, voters (62 percent Biden) ousted liberal Buta Biberaj, who declined to prosecute a transgender student for assault, and in June 2022 voters in San Francisco (85 percent Biden) recalled famed radical Chesa Boudin.

Similarly, this Tuesday, voters in San Francisco passed ballot measures strengthening police powers and requiring treatment of drug-addicted welfare recipients.

In retrospect, it appears the Floyd video, appearing after three months of COVID-19 confinement, sparked a frenzied, even crazed reaction, especially among the highly educated and articulate. One fatal incident was seen as proof that America’s “systemic racism” was worse than ever and that police forces should be defunded and perhaps abolished.

2020 was “the year America went crazy,” I wrote in January 2021, a year in which police funding was actually cut by Democrats in New York, Los Angeles, San Francisco, Seattle, and Denver. A year in which young New York Times (NYT) staffers claimed they were endangered by the publication of Sen. Tom Cotton’s (R-Ark.) opinion article advocating calling in military forces if necessary to stop rioting, as had been done in Detroit in 1967 and Los Angeles in 1992. A craven NYT publisher even fired the editorial page editor for running the article.

Evidence of visible and tangible discontent with increasing violence and its consequences—barren and locked shelves in Manhattan chain drugstores, skyrocketing carjackings in Washington, D.C.—is as unmistakable in polls and election results as it is in daily life in large metropolitan areas. Maybe 2024 will turn out to be the year even liberal America stopped acting crazy.

Chaos and disorder work against incumbents, as they did in 1968 when Democrats saw their party’s popular vote fall from 61 percent to 43 percent.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times or ZeroHedge.

Tyler Durden Sat, 03/09/2024 - 23:20

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Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Authored by Zachary Stieber via The Epoch Times (emphasis ours),




Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

The U.S. Department of Veterans Affairs (VA) reviewed no data when deciding in 2023 to keep its COVID-19 vaccine mandate in place.

Doses of a COVID-19 vaccine in Washington in a file image. (Jacquelyn Martin/Pool/AFP via Getty Images)

VA Secretary Denis McDonough said on May 1, 2023, that the end of many other federal mandates “will not impact current policies at the Department of Veterans Affairs.”

He said the mandate was remaining for VA health care personnel “to ensure the safety of veterans and our colleagues.”

Mr. McDonough did not cite any studies or other data. A VA spokesperson declined to provide any data that was reviewed when deciding not to rescind the mandate. The Epoch Times submitted a Freedom of Information Act for “all documents outlining which data was relied upon when establishing the mandate when deciding to keep the mandate in place.”

The agency searched for such data and did not find any.

The VA does not even attempt to justify its policies with science, because it can’t,” Leslie Manookian, president and founder of the Health Freedom Defense Fund, told The Epoch Times.

“The VA just trusts that the process and cost of challenging its unfounded policies is so onerous, most people are dissuaded from even trying,” she added.

The VA’s mandate remains in place to this day.

The VA’s website claims that vaccines “help protect you from getting severe illness” and “offer good protection against most COVID-19 variants,” pointing in part to observational data from the U.S. Centers for Disease Control and Prevention (CDC) that estimate the vaccines provide poor protection against symptomatic infection and transient shielding against hospitalization.

There have also been increasing concerns among outside scientists about confirmed side effects like heart inflammation—the VA hid a safety signal it detected for the inflammation—and possible side effects such as tinnitus, which shift the benefit-risk calculus.

President Joe Biden imposed a slate of COVID-19 vaccine mandates in 2021. The VA was the first federal agency to implement a mandate.

President Biden rescinded the mandates in May 2023, citing a drop in COVID-19 cases and hospitalizations. His administration maintains the choice to require vaccines was the right one and saved lives.

“Our administration’s vaccination requirements helped ensure the safety of workers in critical workforces including those in the healthcare and education sectors, protecting themselves and the populations they serve, and strengthening their ability to provide services without disruptions to operations,” the White House said.

Some experts said requiring vaccination meant many younger people were forced to get a vaccine despite the risks potentially outweighing the benefits, leaving fewer doses for older adults.

By mandating the vaccines to younger people and those with natural immunity from having had COVID, older people in the U.S. and other countries did not have access to them, and many people might have died because of that,” Martin Kulldorff, a professor of medicine on leave from Harvard Medical School, told The Epoch Times previously.

The VA was one of just a handful of agencies to keep its mandate in place following the removal of many federal mandates.

“At this time, the vaccine requirement will remain in effect for VA health care personnel, including VA psychologists, pharmacists, social workers, nursing assistants, physical therapists, respiratory therapists, peer specialists, medical support assistants, engineers, housekeepers, and other clinical, administrative, and infrastructure support employees,” Mr. McDonough wrote to VA employees at the time.

This also includes VA volunteers and contractors. Effectively, this means that any Veterans Health Administration (VHA) employee, volunteer, or contractor who works in VHA facilities, visits VHA facilities, or provides direct care to those we serve will still be subject to the vaccine requirement at this time,” he said. “We continue to monitor and discuss this requirement, and we will provide more information about the vaccination requirements for VA health care employees soon. As always, we will process requests for vaccination exceptions in accordance with applicable laws, regulations, and policies.”

The version of the shots cleared in the fall of 2022, and available through the fall of 2023, did not have any clinical trial data supporting them.

A new version was approved in the fall of 2023 because there were indications that the shots not only offered temporary protection but also that the level of protection was lower than what was observed during earlier stages of the pandemic.

Ms. Manookian, whose group has challenged several of the federal mandates, said that the mandate “illustrates the dangers of the administrative state and how these federal agencies have become a law unto themselves.”

Tyler Durden Sat, 03/09/2024 - 22:10

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The Coming Of The Police State In America

The Coming Of The Police State In America

Authored by Jeffrey Tucker via The Epoch Times,

The National Guard and the State Police are now…



The Coming Of The Police State In America

Authored by Jeffrey Tucker via The Epoch Times,

The National Guard and the State Police are now patrolling the New York City subway system in an attempt to do something about the explosion of crime. As part of this, there are bag checks and new surveillance of all passengers. No legislation, no debate, just an edict from the mayor.

Many citizens who rely on this system for transportation might welcome this. It’s a city of strict gun control, and no one knows for sure if they have the right to defend themselves. Merchants have been harassed and even arrested for trying to stop looting and pillaging in their own shops.

The message has been sent: Only the police can do this job. Whether they do it or not is another matter.

Things on the subway system have gotten crazy. If you know it well, you can manage to travel safely, but visitors to the city who take the wrong train at the wrong time are taking grave risks.

In actual fact, it’s guaranteed that this will only end in confiscating knives and other things that people carry in order to protect themselves while leaving the actual criminals even more free to prey on citizens.

The law-abiding will suffer and the criminals will grow more numerous. It will not end well.

When you step back from the details, what we have is the dawning of a genuine police state in the United States. It only starts in New York City. Where is the Guard going to be deployed next? Anywhere is possible.

If the crime is bad enough, citizens will welcome it. It must have been this way in most times and places that when the police state arrives, the people cheer.

We will all have our own stories of how this came to be. Some might begin with the passage of the Patriot Act and the establishment of the Department of Homeland Security in 2001. Some will focus on gun control and the taking away of citizens’ rights to defend themselves.

My own version of events is closer in time. It began four years ago this month with lockdowns. That’s what shattered the capacity of civil society to function in the United States. Everything that has happened since follows like one domino tumbling after another.

It goes like this:

1) lockdown,

2) loss of moral compass and spreading of loneliness and nihilism,

3) rioting resulting from citizen frustration, 4) police absent because of ideological hectoring,

5) a rise in uncontrolled immigration/refugees,

6) an epidemic of ill health from substance abuse and otherwise,

7) businesses flee the city

8) cities fall into decay, and that results in

9) more surveillance and police state.

The 10th stage is the sacking of liberty and civilization itself.

It doesn’t fall out this way at every point in history, but this seems like a solid outline of what happened in this case. Four years is a very short period of time to see all of this unfold. But it is a fact that New York City was more-or-less civilized only four years ago. No one could have predicted that it would come to this so quickly.

But once the lockdowns happened, all bets were off. Here we had a policy that most directly trampled on all freedoms that we had taken for granted. Schools, businesses, and churches were slammed shut, with various levels of enforcement. The entire workforce was divided between essential and nonessential, and there was widespread confusion about who precisely was in charge of designating and enforcing this.

It felt like martial law at the time, as if all normal civilian law had been displaced by something else. That something had to do with public health, but there was clearly more going on, because suddenly our social media posts were censored and we were being asked to do things that made no sense, such as mask up for a virus that evaded mask protection and walk in only one direction in grocery aisles.

Vast amounts of the white-collar workforce stayed home—and their kids, too—until it became too much to bear. The city became a ghost town. Most U.S. cities were the same.

As the months of disaster rolled on, the captives were let out of their houses for the summer in order to protest racism but no other reason. As a way of excusing this, the same public health authorities said that racism was a virus as bad as COVID-19, so therefore it was permitted.

The protests had turned to riots in many cities, and the police were being defunded and discouraged to do anything about the problem. Citizens watched in horror as downtowns burned and drug-crazed freaks took over whole sections of cities. It was like every standard of decency had been zapped out of an entire swath of the population.

Meanwhile, large checks were arriving in people’s bank accounts, defying every normal economic expectation. How could people not be working and get their bank accounts more flush with cash than ever? There was a new law that didn’t even require that people pay rent. How weird was that? Even student loans didn’t need to be paid.

By the fall, recess from lockdown was over and everyone was told to go home again. But this time they had a job to do: They were supposed to vote. Not at the polling places, because going there would only spread germs, or so the media said. When the voting results finally came in, it was the absentee ballots that swung the election in favor of the opposition party that actually wanted more lockdowns and eventually pushed vaccine mandates on the whole population.

The new party in control took note of the large population movements out of cities and states that they controlled. This would have a large effect on voting patterns in the future. But they had a plan. They would open the borders to millions of people in the guise of caring for refugees. These new warm bodies would become voters in time and certainly count on the census when it came time to reapportion political power.

Meanwhile, the native population had begun to swim in ill health from substance abuse, widespread depression, and demoralization, plus vaccine injury. This increased dependency on the very institutions that had caused the problem in the first place: the medical/scientific establishment.

The rise of crime drove the small businesses out of the city. They had barely survived the lockdowns, but they certainly could not survive the crime epidemic. This undermined the tax base of the city and allowed the criminals to take further control.

The same cities became sanctuaries for the waves of migrants sacking the country, and partisan mayors actually used tax dollars to house these invaders in high-end hotels in the name of having compassion for the stranger. Citizens were pushed out to make way for rampaging migrant hordes, as incredible as this seems.

But with that, of course, crime rose ever further, inciting citizen anger and providing a pretext to bring in the police state in the form of the National Guard, now tasked with cracking down on crime in the transportation system.

What’s the next step? It’s probably already here: mass surveillance and censorship, plus ever-expanding police power. This will be accompanied by further population movements, as those with the means to do so flee the city and even the country and leave it for everyone else to suffer.

As I tell the story, all of this seems inevitable. It is not. It could have been stopped at any point. A wise and prudent political leadership could have admitted the error from the beginning and called on the country to rediscover freedom, decency, and the difference between right and wrong. But ego and pride stopped that from happening, and we are left with the consequences.

The government grows ever bigger and civil society ever less capable of managing itself in large urban centers. Disaster is unfolding in real time, mitigated only by a rising stock market and a financial system that has yet to fall apart completely.

Are we at the middle stages of total collapse, or at the point where the population and people in leadership positions wise up and decide to put an end to the downward slide? It’s hard to know. But this much we do know: There is a growing pocket of resistance out there that is fed up and refuses to sit by and watch this great country be sacked and taken over by everything it was set up to prevent.

Tyler Durden Sat, 03/09/2024 - 16:20

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