A long way down

Why Latin America’s economy has been so badly hurt by covid-19

Global GDP contracted by 3% last year, but that of Latin America and the Caribbean fell by 7%

Before the pandemic hit, Jaime Alirio Pinilla, a 45-year-old in Bogotá, the capital of Colombia, was employed as a construction worker. 

“But because of this shit I lost my job and now work on the streets,” he says, standing behind a steel cart from which he sells orange juice, sweets, cigarettes and coffee.

 Colombia has already had one of the longest lockdowns in the world; now it also faces daily clashes between protesters and security forces, as riots over the economic situation continue for a third week. 

“We've been locked up for more than a year, and we can’t bear this any longer,” says Mr Pinilla. 

“The economy is ruined, we’re surviving, not living.”

The covid-19 pandemic provoked the deepest global recession since the second world war. 

But one region has fared worse economically than any other—and by a stretch. 

Global gdp contracted by 3% last year, but in Latin America and the Caribbean output fell by 7%, the worst of any region tracked by the imf (although India, almost a region in itself, did worse). 

In 2020 people in Latin America worked 16% fewer hours, almost twice the loss globally. 

Several countries in the region have done extraordinarily badly: Peru’s gdp, for instance, fell by 11% last year. 

And whereas some economies are now roaring back as restrictions are lifted, in Latin America the mood is if anything darkening.

The simplest explanation for the region’s terrible performance relates to public health. 

The Economist’s excess death model estimates that Latin America and the Caribbean has the highest number of excess deaths in the pandemic, relative to population, of the world’s regions. 

As vaccinations in other parts of the world reduce the spread of the disease and the damage it causes, in many parts of Latin America the coronavirus rages unchecked. 

In Brazil, where the populist president, Jair Bolsonaro, has refused to wear a face mask or be vaccinated, the official daily death toll at one point exceeded 4,000 a day (it is now about 2,000). 

Even countries that had previously done a good job of controlling the pandemic, such as Uruguay, are struggling with soaring case numbers.

The spread of the disease spurred some governments across the region to implement the world’s toughest lockdowns. 

A quantitative measure produced by Goldman Sachs, a bank, assigns a score from zero to 100 to assess the severity of a country’s rules on lockdown, the degree of adherence to such strictures and any voluntary social distancing (see chart). 

No region has had a more home-bound year than Latin America, with movement 70% more constrained than in North America.

Argentina and Chile have been the world’s second- and fourth-most restricted countries, respectively. 

Peru tops the list. 

There the initial lockdown felt like living through the darkest days of the war against Maoist insurgents in the early 1990s. 

No one was allowed to leave home except to buy groceries. 

Police officers and soldiers strictly enforced a curfew. 

Lockdowns this tough make much economic activity impossible, even if many of the region’s poorest people have little choice but to defy stay-at-home orders in an attempt to make ends meet.

In addition to the severity of Latin America’s outbreak and the associated lockdowns, two other factors have contributed to the region’s painful economic contraction: the structure of local economies, and the scale and design of fiscal stimulus. 

Take economic structure first.

A range of evidence suggests that the region is especially vulnerable to lockdowns. 

Many countries in Latin America and the Caribbean are highly dependent on receipts from international tourists. 

Aruba, a Dutch island in the Caribbean especially reliant on visitors, saw gdp fall by 25% in 2020.

Recent research from the imf finds that employment in what it calls “contact-intensive sectors”—the kind where it is impossible to do a job without being in physical proximity to others—is especially important in Latin America and the Caribbean. 

Jobs in industries such as restaurants, shops or public transport account for 43% of total employment, compared with 30% in emerging markets as a whole.

A region with high inequality, Latin America has an unusually large share of people working as domestic staff for richer folk, which inherently involves the mixing of households. 

For a recent paper, Louisa Acciari of University College London and colleagues surveyed domestic workers in multiple countries, and found stories of inadequate personal-protective equipment and violations of their rights. 

Indeed the first official covid-19 death in Rio de Janeiro last March was a maid who had been infected by her employer, according to state officials; the woman had been to Italy and, they allege, did not bother to send her maid home once she became sick.

The final factor behind the region’s dreadful economic performance is fiscal policy. 

One way of measuring whether a country’s fiscal response to the pandemic has been large enough involves comparing two things: the change in a country’s overall budget deficit, and its lost output during the pandemic. 

Borrowing a methodology developed in a research paper by Goldman Sachs, The Economist calculated the adequacy of pandemic-induced stimulus for 193 countries. 

Many governments around the world have, for every dollar of lost output, boosted their spending by a dollar. 

A few, such as those of the United States and Australia, have been substantially more generous. 

Latin America, although implementing more generous fiscal stimulus than in past recessions, has been stingy even relative to other emerging markets, with the median country adding just 28 cents of extra deficit spending for every dollar of lost output.

The design of the stimulus also has shortcomings. 

Countries with the most successful plans have sent vast amounts of money directly to people. 

That has helped break the link between job losses and cuts in households’ spending, supporting the economy. 

Latin America, by contrast, has mostly focused its resources elsewhere, including on building up underfunded health-care systems.

Not all Latin American countries have taken this route. 

In Brazil, spending by Mr Bolsonaro’s government has made up for lost output almost completely. 

This helped reduce the incidence of extreme poverty even as the pandemic gripped the country, although the level of emergency aid to poor households has recently declined, and hunger and other forms of deprivation are on the rise again.

Yet some governments have been puzzlingly austere. 

Nowhere is this truer than in Mexico, led by the self-proclaimed left-winger Andrés Manuel López Obrador. 

Mexico’s puny stimulus programme (of 17 cents per dollar of lost spending) stems from Mr López Obrador’s monastic and autarkic sensibilities, which make him instinctively leery of debt but especially so when it is funded by foreign financiers. 

In Colombia the protests were sparked by the attempt on April 28th by Iván Duque’s government to push through a tax reform, but have grown into something far larger. 

Much of the discontent stems from the perception of an inadequate or misguided response to covid-19, which has allowed 2.8m people to fall into extreme poverty.

The economic carnage will not last for ever. 

But the annual growth in gdp of 3-4% that Latin America and the Caribbean can expect, once restrictions are safely lifted, remains some way below the rates that the United States and some other countries are about to see. 

A recent surge in commodity prices will help less than many think: an index of world commodity prices remains below where it was for much of the period since the global financial crisis. 

And because of feeble stimulus households have not accumulated big chunks of savings, as they have in many richer countries, so there will be no post-lockdown spending binge. 

As the riots in Colombia show, the region hardest hit by the pandemic faces yet more trouble. 


Doug Nolan

A big week on the inflation front. 

April CPI was reported up 0.8% versus estimates of 0.2%. 

And while the 4.2% y-o-y increase was partly a function of the year ago negative CPI prints, it’s worth noting CPI was up 2.1% in just the past four months. 

“Core” CPI increased a much stronger than expected 0.9% for the month and was up 3.0% year-over-year. 

Used car and truck prices surged 10%, with air fares up 10.2%. 

The CPI’s Housing component increased 0.5% for the month, while gaining only 2.6% y-o-y. 

Producer Prices were also stronger than expected. 

At 0.6%, April’s increase was double estimates. 

The 6.2% y-o-y increase was above the 5.8% estimate - and the strongest price advance in the data series dating back to November 2010. 

Producer Prices surged a notable 3.4% over the past four months. 

April Import Prices were reported up 0.7% for the month. 

This pushed the y-o-y price increase to 10.6%, up from March’s 7.0% - to the strongest import price inflation since October 2011. 

Prices for Industrial Supplies jumped another 1.7%, this following March’s 5.2% surge. 

The University of Michigan consumer survey’s One-Year Inflation Expectations component jumped to 4.6% from April’s 3.4%. 

Inflation Expectations have not been higher since June 2008’s 5.1%. 

It’s worth noting WTI Crude surged to $140 back in June ‘08, as aggressive Fed rate cuts (3.25 percentage points over eight months to 2.0%) fueled myriad speculative Bubble blow-offs. 

It’s worth noting that the UofM survey’s Five-Year Inflation Expectations jumped from 2.7% to 3.1%, the high since March 2011.

“Higher Inflation Prompts Sharp Drop in Michigan Sentiment,” read the Bloomberg headline. 

Unexpectedly, Consumer Sentiment dropped to 82.8 in May from April’s 88.3, the weakest reading since February. 

The Current Economic Conditions component sank 6.4 points to 90.8. 

Elsewhere, April Retail Sales badly missed estimates.

May 11 – Bloomberg (Payne Lubbers): 

“Optimism among U.S. small businesses rose in April to a five-month high… 

Still, a record 44% respondents said they were unable to fill open positions, stunting potential sales growth, the group said. 

Some 31% of firms said they boosted worker compensation, the largest share in more than a year. 

‘Finding qualified employees remains the biggest challenge for small businesses and is slowing economic growth,’ Bill Dunkelberg, chief economist at the NFIB, said… 

‘Owners are raising compensation, offering bonuses and benefits to attract the right employees.” 

In addition, commodities have been soaring, helping explain a 10 percentage point increase in the share of small-business owners raising prices. 

That was the largest reading since the 1980s…”

The Treasury five-year “breakeven inflation rate” traded up to 2.75% in Wednesday trading - the high since September 2005 – before ending the week up slightly to 2.71%.

The Treasury reported a fiscal deficit of $226 billion for the month of April, almost 10% above estimates. 

Washington borrowed 34 cents of every dollar spent. 

After seven months of the fiscal year, the deficit has reached $1.932 TN, 30% ahead of comparable 2020 ($1.481 TN). 

Year-to-date expenditures were up 22.5%, while receipts rose 16.1%. 

Forty-six cents of every dollar spent so far in the fiscal year has been borrowed. 

Washington is on pace for back-to-back $3 TN plus annual deficits.

Curiously, 10-year Treasury yields rose a meager five bps this week to 1.63%, reversing the previous week’s drop, but remaining 11 bps below the March 31st high. 

German 10-year bund yields surged nine bps this week to a two-year-high negative 0.13%. 

French yields rose nine bps to a 14-month high of 0.26%. 

Italian yields surged 11 bps to a 10-month high 1.07%. 

It’s now only a few weeks until the ECB’s June meeting. 

Bloomberg headline: “ECB Officials Expect Heated June Decision on Crisis Program.” 

And Friday from Reuters: “ECB sets stage for crucial June decision on emergency bond buys.” 

Eurozone yields could certainly be rising in anticipation of an ECB taper announcement. 

May 14 – Bloomberg (Catarina Saraiva): 

“The Federal Reserve’s policy is in a good place right now, said Cleveland Fed President Loretta Mester, while playing down signals from data that she warns will be volatile as the economy reopens… 

‘I think we’re in a good place right now with our policy and we’re going to adjust it as appropriate depending on how the actual recovery progresses,’ Mester said. 

‘This is not the time to be adjusting anything on policy. 

It really is a time for watchful waiting, seeing how the recovery evolves.’”

How could $120 billion monthly QE and zero rates be “in a good place”? 

At least for now, if the Fed is not concerned with inflation risk, the Treasury market will not be bothered either. 

But I can’t help but contemplate the possibility that factors are supporting Treasury bond prices beyond Fed dovishness. 

Between September 2007 and March 2008, Crude prices surged from $74 to $110 (Bloomberg Commodities Index up 30% over this period), while 10-year Treasury bond yields dropped about 120 bps to 3.30%. 

The Bond market completely disregarded the inflationary surge, anticipating big trouble on the horizon. 

Is a similar dynamic at play these days? 

What might the bond market be sniffing out? 

Chinese Credit growth slowed markedly in April. 

Aggregate Financing expanded $287 billion during the month, down significantly from March’s $523 billion and almost 20% below estimates. 

April’s growth was 40% below that from April 2020. 

Aggregate Financing has expanded $1.882 TN y-t-d, down 15% from comparable 2020, but up 18% from comparable 2019. 

Over the past 16 months, Aggregate Financing surged $7.284 TN, up 45% from the previous 16-month period. 

China’s New Loans expanded $228 billion, down from March’s $424 billion and about 8% below estimates. 

April Loans were down 14% from April 2020. 

At $1.419 TN, y-t-d New Loan growth was 4% ahead of comparable 2020 and 34% above comparable 2019. 

Chinese Consumer lending had been booming. 

But at $82 billion, Consumer Loans were less than half March’s $178 billion and 21% below April 2020. 

Yet y-t-d growth of $480 billion was still 65% ahead of comparable 2020. 

Outstanding Consumer Loans jumped 15.9% over the past year, 32% over two years, 55% in three years and 131% over five years. 

Corporate Loan growth also slowed notably. 

At $117 billion, April Corporate Loans were less than half March’s $249 billion and 21% below April 2020. 

Year-to-date growth of $948 billion was about 13% below comparable 2020. 

Corporate Loans expanded 10.9% over the past year, 25% over two years, 39% in four years and 65% over five years. 

China’s M2 money supply aggregate contracted $223 billion during April, this following March’s record $628 billion expansion. 

At 8.1%, y-o-y M2 growth was the slowest since July 2019. 

The $1.169 TN y-t-d growth was 30% below comparable 2020 - while 30% ahead of 2019. 

M2 inflated $4.28 TN, or 13.6%, over the past 16 months. 

M2 was up 20% in two years, 30% in three and 57% over five years.

Reported quarterly, Total Bank Assets expanded $1.528 TN during Q1 to a record $51.177 TN. 

This was second only to Q1 2020’s blistering $1.924 quarterly growth. 

Chinese Bank Assets surged $4.222 TN over the past year, or 9.0%. 

Bank Assets jumped 20% over two years, 29% over three years, and 58% in five years. 

In one of history’s great lending booms, Bank Assets have inflated 10-fold over 16 years. 

One month does not a trend make. 

Yet Chinese officials have been pressing for slower lending, and a slowdown was apparent in April data. 

A system inflated by years of such incredible Credit excess will not respond well to tighter conditions. 

We need to be on guard for a long-overdue Chinese Credit downturn. 

May 12 – Bloomberg (Rebecca Choong Wilkins and Ailing Tan): 

“Chinese corporations are defaulting on local bonds at the fastest pace on record, as authorities ramp up efforts to introduce more financial discipline and transparency in the world’s second-largest debt market. 

Firms so far this year have failed to make payments on 99.8 billion yuan ($15.5bn) of onshore bonds… 

While 2021 is set to be the fourth straight year the 100 billion yuan level has been topped, it previously hadn’t happened before September… 

Missed payments are running at a record pace this year, following the late 2020 defaults of some state-linked firms which affirmed convictions that authorities in China are increasingly willing to not bail out weak firms.”

May 14 – Bloomberg: 

“A sharp drop in one of China Huarong Asset Management Co.’s lightly traded onshore bonds left investors puzzled as they searched for potential catalysts. 

The embattled financial conglomerate’s 19 billion yuan ($2.95bn) local bond maturing in 2022 plunged by 12.4 yuan Thursday to a record low of 86.15 yuan…”

It seems we haven’t heard the end of the Huarong saga. 

China Huarong International CDS surged 178 bps this week to an almost three-week high of 958 bps. 

Beyond mounting Credit problems, Chinese officials have their own inflation worries. 

Chinese April PPI was reported at a stronger-than-expected 6.8% y-o-y.

May 12 – Reuters (Lusha Zhang, Kevin Yao and Tom Daly): 

“China will monitor changes in overseas and domestic markets and effectively cope with a fast increase in commodity prices, the state council said… 

China will step up coordination between monetary policy and other policies to maintain stable economic operations, the cabinet also said… 

Prices for commodities such as copper, coal and steelmaking raw material iron ore extended recent rallies to hit all-time highs this week on concerns a post-coronavirus pandemic demand rebound in China is outpacing supply. 

China is the world’s biggest market for copper, coal and iron ore and consumers face much higher costs as some analysts expect a commodities ‘super-cycle’. 

The cabinet did not say how it would cope with the rise in commodity prices.”

Chinese officials have been talking tightening measures. 

Perhaps spiking commodities prices are giving them some teeth. 

In the midst of spectacular global commodities price surge and inflation focus, little attention is being paid to the possibility of a momentous change in China’s monetary backdrop. 

The industrial metals reversed sharply lower this week. 

Iron Ore dropped 2.5%, Copper 2.0%, Aluminum 3.0%, Nickel 3.0%, Zinc 2.6% and Lead 3.6%. 

In the agriculture commodities, Corn sank 12.1% and Wheat fell 7.2%.

China’s historic Bubble has been inflating for so long everyone assumes it will inflate indefinitely. 

Perhaps the Treasury market discerns Bubble fragility from China to the U.S. Friday afternoon from Bloomberg: “Dip-Buyers Report to Duty to Save Stocks From Worst Week of 2021.” 

While the late-week rally had traders feeling pretty good about things, the bottom line is Monday through Wednesday market action was ugly. 

It looked about as one would expect from faltering Bubbles – from tech stocks to crypto to ARK. 

Unsettled by mounting inflationary pressures, the Treasury market finds peace in global Bubble fragilities. 

And I actually believe the Fed is on the same page. 

Officials will resolutely dismiss inflation risk - because they’re scared to death of collapsing Bubbles. 

At this point, they must believe it’s best to just let the Bubbles and manias run their course.

The Fed and market pundits stick blindly to the assertion “inflation expectations will remain well anchored” – assuring the bond market, dovish Fed policies and the great bull market are all equally well anchored. 

Yet this is not an environment where anything is securely anchored. 

We live in a period of acute disorder – monetary and otherwise. 

Society has been rocked off its foundation. 

The insecurity that comes with a once-in-a-century pandemic – our health, our economy, our institutions and our social cohesion. 

Hurricanes, floods, drought, devastating fires - the frightening uncertainties associated with global climate change. 

Power outages. 

Water shortages. 


A ransomware hack that takes down a major U.S. pipeline and leaves millions fearing they won’t be able to fill their tanks. 

Who and what next? 

The Fed “printing” Trillions – seemingly blind to inflation and Bubble risks. 

Multi-Trillion dollar deficits. 

Wealth redistribution. 

Traditions and political institutions in disarray.

It was an unnerving week. 

Things seem particularly Un-Anchored. 

Covid catastrophe

India’s giant second wave is a disaster for it and the world

The government’s distraction and complacency has amplified the surge

April 14th was a big day in India. 

Hindus and Sikhs gathered to mark the new year. 

Many Muslims celebrated the first day of Ramadan at late-night feasts with friends and family. 

In Haridwar, a temple town that this year hosts the Kumbh Mela, an intermittent Hindu festival that is the world’s biggest religious gathering, between 1m and 3m people shoved and jostled to take a ritual dip in the Ganges. 

And across the country, the number of people testing positive for covid-19 for the first time surpassed 200,000 in a single day. 

It has continued to surge since, reaching 315,000 just one week later—the highest daily figure in any country at any point during the pandemic. 

Deaths, too, are beginning to soar, and suspicions abound that the grisly official toll is itself a massive underestimate. 

Makeshift pyres are being constructed on pavements outside crematoriums to deal with the influx of bodies.

This horrifying second wave is a catastrophe not only for India but for the world. 

Allowing the virus to circulate unchecked increases the risk that dangerous new strains will emerge. 

One worrying variant first detected in India, called the “double mutant”, has already been found in several other countries, including America and Britain. 

Even as scientists labour to understand how big a threat it poses, more variants are appearing.

A more immediate consequence of India’s second wave for the rest of the world is a disruption to vaccine supplies. 

India had hoped to be the world’s pharmacy. 

But with case numbers exploding the government has restricted exports of vaccines. 

In the first half of April India shipped just 1.2m doses abroad, compared with 64m in the three prior months. 

The Serum Institute of India, a private company that manufactures the AstraZeneca vaccine, has defaulted on commitments to Britain, the European Union and covax, a scheme to supply more shots worldwide. 

African countries that had been counting on India to provide them with vaccines are looking on in dismay.

With its crowded cities and rickety health care, India is not an easy place to curb an infectious disease. 

Yet some parts of the country were remarkably successful for a time at slowing transmission. 

Deaths from the first wave of the pandemic, which peaked in September, were surprisingly low, for reasons that are not clear. 

And Narendra Modi, the prime minister, was quick to institute a nationwide lockdown a year ago, albeit one that failed to plan for the millions of unemployed migrant workers who were at first corralled, destitute, in cities and then allowed to return to their native villages, taking covid-19 with them.

In short, until earlier this year, India’s government, like so many others, had a patchy but not disastrous record in fighting the pandemic. 

But through complacency and distraction, Mr Modi has allowed things to spiral out of control. 

In January he boasted, “We not only solved our problems but also helped the world fight the pandemic.”

Yet in early March, as cases began ticking up in the opposition-run state of Maharashtra, his government, far from helping, attacked the state government in the hope of bringing it down.

Mr Modi’s unrelenting quest for partisan advantage has also been on display in West Bengal, one of four states holding elections this month. 

He and his lieutenants, like their rivals, have held countless huge rallies during a weeks-long campaign, without masks or any form of social distancing. 

This risks propagating the pandemic among the state’s 100m people, of course, but it has also distracted the government from fighting the spread of the disease. 

Amit Shah, Mr Modi’s right-hand man and the home minister, was on the campaign trail for 12 of the first 18 days of April.

That may help explain why Mr Modi’s vaccine policy has been such a shambles. 

By mid-February the government had ordered barely enough doses to protect 3% of the population (not counting those it is hoping to get from covax).

Keen to promote India’s scientific prowess, regulators approved Covaxin, an indigenous vaccine, before it had completed all the necessary trials, even as they insisted that foreign shots must clear extra hurdles. 

Less than 10% of the population has received a first dose of vaccine. 

This is more than in many countries, but India is a huge vaccine-producer and could have done better.

There are signs of improvement. 

On April 13th the government announced fast-track approval for imports of vaccines that have been approved by various rich countries. 

It is also belatedly throwing money at procurement. 

This week it said it would release some $400mto help the Serum Institute boost production. 

Mr Modi’s Bharatiya Janata Party (bjp) called off its remaining big election rallies on April 18th. 

And on April 19th the government updated its vaccine policy to allow anyone over the age of 18 to get a shot, starting next month.

That is of limited use, however, given the shortage of supply that prevails in most of the country. Several states have already run out. 

India is vaccinating only 3m people a day, or 0.2% of the population, barely exceeding some rough estimates of the real number of daily infections. 

And even if production increases or more doses arrive from abroad, the current wave is too severe to be stopped by inoculations alone.

The irony is that, having won election after election, Mr Modi commands tremendous authority. 

He is India’s most powerful prime minister in a generation. 

The bjp controls both houses of parliament, and runs most state governments. 

If there was ever a moment to make use of all this clout, this is it.

Mr Modi should adopt strict curbs on mass gatherings right away—including the religious events he promotes as part of his Hindu-nationalist ideology. 

He ought also to be trying to limit travel around the country, without leaving migrant workers high and dry, as in his first lockdown. 

The health minister, who thinks diseases can be cured with the help of cow urine, must go.

Ways must quickly be found to ramp up vaccine production. 

That does not mean seizing control of private firms or their output, but rather helping them secure the supplies they need from countries such as the United States. 

Unless India’s second wave is brought under control, the entire world will suffer.


By Egon von Greyerz

“O Zeus, why is it you have given men clear ways of testing whether gold is counterfeit but, when it comes to fiat money, it carries no stamp of nature for distinguishing bad from good.” 

― Euripides & EvG

The Greek playwright Euripides’ (450 BC) statement on gold (slightly amended by me), tells us why it has remained money for 5,000 years.

Because gold is constant wealth and can’t be altered or forged successfully.

As regards distinguishing bad from good fiat money, bankers and central bankers have made that task both ridiculously and criminally easy for us all.

Because there is no good fiat money.

All fiat money is fake and produced at will with the press of a button by the culpable bankers.

Fiat money is today produced electronically which means at no cost. So it is obviously today not even worth the piece of paper it is written on.

Anything that can be produced in unlimited quantities at no cost can by definition not by worth more than ZERO.


Ayn Rand said that “we can ignore reality but not the consequences of reality”.

And reality is that just in this century over $200 trillion of debt or fake money has been produced in the world.

That is 200% more than all the debt monies created ($100T) in history until year 2000. 

This sum obviously excludes promises and lies in the form of global unfunded liabilities, (medicare, social security, pensions etc) plus up to $2 quadrillion of derivatives which will end up worthless.

But few realise the consequences of the world’s insatiable need of fake money. 

The super bubble will inflate until it one day it totally implodes.


Central bankers have a love – hate relationship with gold. 

On the one hand they are obliged to love it since they hold 34,000 tonnes or $2 trillion worth of the yellow metal. 

Well, at least that’s what they say they own. 

But since virtually no central bank has an official audit of their physical position plus all outstanding paper contracts, nobody really knows how much of these 34,000 tonnes actually is held by them free and clear.

If central banks have nothing to hide, why don’t they open up their books for public scrutiny. After all this gold belongs to the people. 

The answer is simple.

They clearly don’t hold the gold they state they have.

Much of this gold has probably been sold covertly. 

Also, major amounts have been leased to the market via the bullion banks. 

Much of the leased gold has then been bought by major international buyers like China and India. 

These countries will clearly never return the gold.

Again, we can’t ignore the consequences of the vanishing gold. 

Because all the central banks have for their leased gold is an IOU from a bullion bank. 

And the bullion bank obviously knows that they will never get the gold back from China, India or wherever it has been sold to.

Between the bullion banks and the BIS, they are juggling gold paper positions of $280 billion per day which is 600X daily mine production. 

The only reason they trade at this colossal level must be that they in the paper market must cover major deficiencies in the physical market. 

When one day a major number of paper gold holders panic and ask for delivery, the bullion banks will no longer manage to fool the market and will be caught with their pants down.

The former Governor of the Bank of England, Eddie George, described such a moment back in 1999:

“We looked into the abyss if the gold price rose further. 

A further rise would have taken down one or several trading houses, which might have taken down all the rest in their wake. 

Therefore at any price, at any cost, the central banks had to quell the gold price, manage it. 

It was very difficult to get the gold price under control but we have now succeeded. 

The US Fed was very active in getting the gold price down. 

So was the U.K.”

At the time, gold had moved up from a low of $251 to $340. 

As George said, a further move up in gold would have taken down the whole caboodle. 

The total paper position in gold today is multiples of what it was in 1999 and very little need to go wrong for the whole thing to blow up. 

To roll over around $280 billion in paper gold daily can easily go wrong at any time.

This situation is untenable and very likely to put enormous pressure on the whole paper gold market in due course. 

This market is a pest that is as far from the true gold market as you can get. 

It deserves to go under. 

And like all fake systems that break the laws of nature, its life is ephemeral.

As Ralph Waldo Emerson said:

“The desire of gold is not for gold.

It is for the means of freedom and benefit.”

Fake and totally encumbered paper gold is neither freedom and nor does it have any sustainable benefit. 

Especially since like most financial paper assets it is not backed by anything.

The coming rise in the gold price combined with very strong demand could easily be the catalyst for breaking the paper market.


As I mentioned in a Tweet last week, gold has now finished the correction since August 2020 and is on its way to around $3,000 as an initial target.

The important initial confirmation of gold’s continued secular bull market was confirmed when the 6 year Maginot Line was broken at $1,350 in June 2019 as I predicted in my Feb 2019 article “The Chinese and Maginot Gold Lines”.

Most investors don’t understand gold or the role of gold. 

This is why only 0.5% of world financial assets are invested in gold.

Very few investors are aware that gold has outperformed virtually all asset classes, including stocks, in this century.

But gold should not be seen as an investment but as an asset for “freedom and benefit”.

In an investment world which consists primarily of insanely overvalued paper assets, physical gold represents sanity and eternal wealth.

Gold is also the ultimate insurance and wealth preservation asset against a very fragile financial system.

Anyone who fails to protect his family’s and future generations’ wealth is not only irresponsible but stands to lose virtually everything as the most epic asset bubble in history bursts.

EM issuers raise record $191bn on foreign debt markets in early 2021

Risks are rising for developing nations after a blockbuster start to the year

Jonathan Wheatley in London

Borrowing through eurobonds has reached a new peak, but coronavirus is threatening the economies of India and Brazil © FT montage; Getty Images

Governments and companies in developing nations borrowed on foreign markets at a record pace in early 2021, but investors say the risks are mounting as some countries endure a resurgence of coronavirus.

Borrowing through eurobonds — debt issued overseas, mostly in dollars, euros and yen — reached a new quarterly peak in the three months to March, with fundraising reaching $191bn, according to data from Dealogic and Moody’s Investors Service.

The increase in issuance in the first quarter was especially strong among borrowers rated below investment grade, the data show, suggesting buoyant demand for riskier assets.

“Supply and demand are both in play,” said Atsi Sheth, global head of emerging markets at Moody’s. “On the supply side, there is an increased need for finance at the government and corporate level in emerging markets and, on the demand side, global financial conditions are still quite liquid and there is still money seeking returns.” 

But with many developing countries battling a resurgent virus, and bond yields having jumped from the beginning of 2021, the number of potential pitfalls for EM assets has increased, analysts and investors say.

The IMF this month raised its forecasts for global growth this year and next, but warned of “divergent recoveries”, with large parts of the developing world faring less well than advanced economies and, in some cases, worse than previously expected.

India’s currency has tumbled as a new and ferocious wave of coronavirus threatens its recovery. 

The country set a grim milestone on Wednesday, reporting a world record of 315,000 new coronavirus infections, surpassing the US peak earlier this year.

Brazil’s economy, previously expected to ride a wave of demand for its exports from China, instead risks being derailed again as its leaders push back against lockdowns and the virus spreads unchecked. 

Death rates have also jumped back again in central and eastern Europe.

“Pandemic containment is definitely key to recovery and many of the large emerging markets are not there,” Sheth said.

Financial conditions, too, are changing. 

After a rapid, large-scale dash out of emerging market assets at the onset of the pandemic, investors returned in a rising flood, with the election of Joe Biden as US president last November and the rollout of vaccines in developed markets helped to drive a broad rally in risk assets into this year.

At the start of 2021, said Phoenix Kalen, emerging market strategist at Société Générale, “we were still in that space where things looked quite benign”. 

EM currencies were holding up, inflation and US bond yields had yet to pick up and many finance ministers and corporate treasurers in emerging markets were able to take advantage of attractive yields to retire older, more expensive debt.

Since then, however, US bond yields and inflation expectations have risen, and inflationary pressures have bubbled up around the developing world — partly, for many countries, as a consequence of currency weakness. 

“Going forward, things will become more tricky,” Kalen said. 

With volatility returning to currency markets, “finance ministers will be reluctant to issue in foreign currency and leave themselves vulnerable to currency fluctuations”.

Pockets of more severe risk are emerging. 

Brazil’s government, in particular, has borrowed on its domestic market at much shorter maturities than before the pandemic, raising the possibility that it could struggle to refinance its debts if growth fails to take off this year.

“Brazil really stands out,” said Tatiana Lysenko, lead emerging market economist at S&P Global Ratings. 

“It definitely has the greatest rollover risk because of its short-term debt.”

Some analysts warn that emerging markets may struggle to recover, even where the virus has been more successfully contained.

Arend Kapteyn, UBS chief economist, says the “massive switching effect” that will happen as households come out of lockdown and start spending more on services and less on goods, will work against emerging markets.

“For EMs, we say if anything they will be hurt by this,” he said. 

“If anyone has benefited [from the pandemic-induced growth in goods trade] it is in Asia, and as it is undone, they would presumably lose.”

For emerging market fixed income investors, says Bhanu Baweja, UBS strategist, it will be “much harder work from now on”, as emerging market yields move higher still than those in advanced economies.

“Most of the things that drive [bond] prices higher — spread compression, high commodity prices, the pick-up in global trade — all these things are done. 

From now on, credit spreads are not going to get tighter but wider.”

Analysts say the longer-term threats are also sharpening. 

Many sovereign borrowers came into the pandemic with severe imbalances that have only been exacerbated. 

While previous crises have spurred reform in some cases, this looks unlikely this time, Lysenko said.

“In this crisis, I don’t think we have seen that momentum,” she said. 

“On the contrary, we are more concerned that reforms that were in the pipeline may be delayed.”

Mask? No Mask? New Rules Leave Americans Recalibrating, Hour by Hour

The C.D.C. said fully vaccinated people could safely go most places without a mask. Not everyone was sure, or ready.

By Mitch Smith

Angela Garbacz, a pastry shop owner in Lincoln, Neb., said she had not decided whether to continue requiring masks at her business when a local mandate expires.Credit...Calla Kessler for The New York Times

CHICAGO — For Americans whose bare faces had scarcely been seen in public for a year, there were suddenly options. 

Would they leave the mask behind for a jog? 

What about the coffee shop? 

What about the neighbor’s house? 

The office?

A sudden loosening this week of federal health guidance on masks has handed Americans a new calculation to make. 

And it isn’t just one calculation, but a maze of many. 

As people walked through their days, hour by hour, errand by errand, some wondered at every new doorway: Mask or no mask?

In interviews this weekend with dozens of residents from Los Angeles to Atlanta, people said they were mostly encouraged by the Centers for Disease Control and Prevention’s finding that masks were no longer needed for fully vaccinated people in most indoor and outdoor situations.

But the details, many said, were perplexing, and had stirred new questions about science, but also about trust, social norms and even politics. 

How can one be certain that people no longer wearing masks have actually gotten a vaccine? 

What will the neighbors think if you take yours off? 

(And what will they think if you don’t?) And what if, some asked, you just feel more comfortable in a mask?

Since the start of the pandemic, many conservatives bristled at being told they should wear face coverings, while liberals often took pride in masking, making mask mandates a constant source of debate and division. 

But now, as something close to the opposite of a mandate was arriving, that, too, was creating tumult within shops, neighborhoods and even families in the parts of the country where masks had remained common.

“At first, as a citizen, I was like, ‘Wow, these are so great, I haven’t been out to eat in a year,’”  Angela Garbacz, 34, a pastry shop owner in Lincoln, Neb., said of the new recommendations, which have begun filtering out to states and cities and stores. 

“But as a private business owner, it has been like panic and, ‘What do we do?’ 

Are people just going to think they can come in without masks? 

Do I get rid of my mask requirement? 

It’s just so much uncertainty with the one thing that’s helped us feel safe in a really scary time.”

Masking, a rare practice in the United States just 14 months ago, has become a normal part of American life. 

Some people questioned the C.D.C.’s abrupt shift in guidance — noting that the agency’s position on masks has shifted before — and wondered aloud whether the latest turn was really safe.

Gerry Corn, 56, who was picking up food to-go on Friday night in Los Angeles, said he had concerns about how long vaccine protection would last. 

“I’m thinking that until we really know more about it from empirical scientific evidence, that we should keep the mask in place, especially in public,” he said.

Others seemed willing to accept the science behind the masking guidance, at least in theory. Practice was another matter.

“It freaked me out,” Mary Beagan, 77, said of riding the elevator in her Minneapolis apartment building on Friday and seeing a woman step on with no mask. 

Yes, Ms. Beagan had heard about the C.D.C’s announcement. 

And yes, she has had her Covid-19 vaccines. 

Still, after all these months, it felt kind of scary.

“I wasn’t ready,” Ms. Beagan said.

“I have to learn to deal with this.”

In some parts of the country, masks were largely discarded long ago, so the new guidance had little effect. 

But in states with mask mandates, and in large, liberal cities where masks have been ubiquitous throughout the pandemic, the federal guidance set off a wave of changes that reopened the whole question of masks. 

Stores set new policies and posted new signs. 

Customers ventured uneasily into the new landscape, which sometimes looked a lot like the old landscape.

At a coffee shop on Chicago’s North Side, a sign asked that customers “wear a mask regardless of vaccine status.” 

A few miles away, on the door of a bookstore, shoppers were told, “MASKS REMAIN REQUIRED. NO EXCEPTIONS.” 

And face coverings were compulsory on Saturday at an outdoor farmers’ market in a parking lot, a policy for which there appeared to be universal compliance and no obvious pushback.

“I still don’t know where people have been to; they don’t know where I’ve been,” said Yamilet Rebolledo, 24, who wore a fuchsia mask to the farmers’ market and said she plans to continue covering her face even once she is vaccinated.

People gathered for Songkran, a celebration of the Thai New Year, in St. Louis Park, Minn., on Saturday. Many wore masks but some did not.Credit...Tim Gruber for The New York Times

Though masks have been found to slow the spread of the coronavirus, their place in the American wardrobe has become more than just epidemiological. 

Over the last year, as Republicans pushed back against mask mandates, some Democrats wore masks even while outdoors and alone, and updated their Facebook profile photos to show their mouths and noses covered.

“I’m hyper-aware that wearing a mask or not wearing a mask says something about me,”  said Annie Krabbenschmidt, 27, a gig worker and writer who lives in Los Angeles. 

She said she had apprehensions about giving up her mask. 

“They are so much more than a safety vest, at this point.”

The new guidance seemed to scramble all the presumptions people had come to understand about who wears masks and who does not.

Someone with no mask might still signify that they oppose masks and doubt the risks of Covid-19 — or it now might mean the person is fully vaccinated and following C.D.C. guidance to the letter. 

And someone with a mask might now be signaling their support for virus-control efforts but rejection of the latest C.D.C. guidance — or it might mean that a person is unvaccinated and following the rules to stay masked. 

Or it might mean something else altogether. 

Easy labels have vanished.

With no national system to check who is vaccinated and who is not, the new federal guidance leaves an unavoidable — but gaping — hole, some people said. 

There’s no guarantee, they said, that unvaccinated people will not discard their masks along with the vaccinated ones, potentially creating a risk that the virus will continue to circulate.

“You never know who is vaccinated or who is lying,” said Bayleigh Harshbarger, 22, who said that she is vaccinated (and telling the truth). 

She covered her face to go shopping Saturday in Kansas City, Mo., though a mask mandate expired a day earlier. 

“It’s just so normal now that I feel weird walking places without a mask,” she said.

Inertia, too, is a force. 

A few people said they had gotten used to masks and had come to (almost) like their presence — as a fashion accessory, a protection against common colds, a chance for anonymity along the street. 

Some people said they just needed more time to get used to the idea of a switchback.

“They didn’t say ‘in a couple of weeks.’ If they had, I could have stomached it more,” said Jill Roberts, who co-owns a wine bar in downtown Helena, Mont. 

“It came out of left field.”

People took part in an outdoor cycling class in Lincoln, Neb., on Saturday.Credit...Calla Kessler for The New York Times

Still, across the country, Americans were taking their first, awkward steps into a less-masked world.

John Doherty of Oswego, Ill., said he was eager for the mask-wearing era to end. On Friday, Mr. Doherty, who said he has gotten vaccinated, walked into a store without a mask to see how it would go.

“And they went, ‘Sir! You’ve got to put your mask on! This is private property!’” 

Mr. Doherty, 66, said. “I was like, ‘OK, OK.’”

On the other side of a counter, Eric Walliman, a librarian in Helena, said he hoped a bare-faced patron who walked in on Friday was vaccinated, but there was no way to know.

“It was strange,” said Mr. Walliman, who has gotten a vaccine but continues to wear a mask at work. 

“You wonder if he’s an anti-masker.”

The shifting guidance was a relief for some, especially those who had long been mask skeptics.

Marina Zaslavskaya, 34, a fitness instructor and college student in Massachusetts, said she resented mask mandates and was eager for them to end. 

As she lounged on the grass with her boyfriend in front of a public library in Cambridge, she said she never wore masks outside and, at times, had people yell at her.

“I think they should let us live our lives and be responsible for ourselves,” said Ms. Zaslavskaya, who said she planned to eventually get vaccinated.

But for some who had long followed federal mask guidance, the new suggestions meant a move toward normalcy. 

Dave Rubin, 66, said he was ready to start going out more without wearing a mask. 

But he was taking a cautious approach, especially at crowded places like movie theaters.

“I’m not going to run around 100 percent without my mask,” said Mr. Rubin, who lives in Orlando, Fla.  

“I’ll always have a mask in my pocket.”

Reporting was contributed by Jim Robbins from Helena, Mont., Kate Taylor from Cambridge, Mass., Edgar Sandoval from San Antonio, Sean Keenan from Atlanta, Deena Winter from Minneapolis, Benjamin Guggenheim from Los Angeles, Grace Gorenflo from Kansas City, Mo., Lauryn Higgins from Lincoln, Neb., Alison Saldanha from Chicago, Carly Stern from Winston-Salem, N.C., Dave Montgomery in Austin, Texas. Giulia McDonnell Nieto del Rio also contributed reporting.

The Xinjiang Genocide Allegations Are Unjustified

US President Joe Biden's administration has doubled down on the claim that China is mounting a genocide against the Uighur people in the Xinjiang region. But it has offered no proof, and unless it can, the State Department should withdraw the charge and support a UN-based investigation of the situation in Xinjiang.

Jeffrey D. Sachs, William Schabas

NEW YORK/LONDON – The US government needlessly escalated its rhetoric against China by claiming that a genocide is being mounted against the Uighur people in the Xinjiang region. 

Such a grave charge matters, as genocide is rightly considered “the crime of crimes.” 

Many pundits are now calling for a boycott of the 2022 Winter Olympics in Beijing, dubbing them the “Genocide Olympics.”

The genocide charge was made on the final day of Donald Trump’s administration by then-Secretary of State Michael Pompeo, who made no secret of his belief in lying as a tool of US foreign policy. 

Now President Joe Biden’s administration has doubled down on Pompeo’s flimsy claim, even though the State Department’s own top lawyers reportedly share our skepticism regarding the charge.

This year’s State Department Country Reports on Human Rights Practices (HRP) follows Pompeo in accusing China of genocide in Xinjiang. 

Because the HRP never uses the term other than once in the report’s preface and again in the executive summary of the China chapter, readers are left to guess about the evidence. 

Much of the report deals with issues like freedom of expression, refugee protection, and free elections, which have scant bearing on the genocide charge.

There are credible charges of human rights abuses against Uighurs, but those do not per se constitute genocide. 

And we must understand the context of the Chinese crackdown in Xinjiang, which had essentially the same motivation as America’s foray into the Middle East and Central Asia after the September 2001 attacks: to stop the terrorism of militant Islamic groups.

As the Hong Kong-based businessman and writer Weijian Shan has recounted, China experienced repeated terrorist attacks in Xinjiang during the same years that America’s flawed response to 9/11 led to repeated US violations of international law and massive bloodshed. 

Indeed, until late 2020, the US classified the Uighur East Turkestan Islamic Movement as a terrorist group, battled Uighur fighters in Afghanistan, and held many as prisoners. 

In July 2020, the United Nations noted the presence of thousands of Uighur fighters in Afghanistan and Syria.  

The charge of genocide should never be made lightly. 

Inappropriate use of the term may escalate geopolitical and military tensions and devalue the historical memory of genocides such as the Holocaust, thereby hindering the ability to prevent future genocides. 

It behooves the US government to make any charge of genocide responsibly, which it has failed to do here. 

Genocide is defined under international law by the UN Genocide Convention (1948). Subsequent judicial decisions have clarified its meaning. 

Most countries, including the United States, have incorporated the Convention’s definition into their domestic legislation without any significant alteration. 

In the past few decades, the leading UN courts have confirmed that the definition requires proof to a very high standard of the intentional physical destruction of a national, ethnic, racial, or religious group.

The definition specifies that one of five acts must be perpetrated. 

Obviously, killing tops the list. 

The State Department’s report on China says there were “numerous reports” of killings, but that “few or no details were available,” and cites only one case – that of a Uighur man detained since 2017 who died of natural causes, according to the authorities. 

The report doesn’t even explain why the official explanation should be questioned.

Technically, genocide can be proven even without evidence that people were killed. 

But because courts require proof of intent to destroy the group physically, it is hard to make the case in the absence of proof of large-scale killings. 

This is especially true when there is no direct evidence of genocidal intent, for example in the form of policy statements, but merely circumstantial evidence, what international courts refer to as a “pattern of conduct.”

International courts have repeatedly said that where genocide charges are based only upon inferences drawn from a pattern of conduct, alternative explanations must be ruled out definitively. 

That’s why the International Court of Justice rejected in 2015 the genocide charge against Serbia and the counter-charge against Croatia, despite evidence of brutal ethnic cleansing in Croatia.

So, what else might constitute evidence of genocide in China? 

The State Department report refers to mass internment of perhaps one million Uighurs. 

If proven, that would constitute a gross violation of human rights; but, again, it is not evidence, per se, of intent to exterminate.

Another of the five recognized acts of genocide is “imposing measures intended to prevent births within the group.” 

The State Department report refers to China’s notoriously aggressive birth-control policies. 

Until recently, China strictly enforced its one-child policy on the majority of its population but was more liberal toward ethnic minorities, including the Uighur.

Today, the one-child policy is no longer applied to the majority Han Chinese, but stricter measures have been imposed on Xinjiang’s Muslim minority, whose families are traditionally larger than China’s average. 

Still, Xinjiang records a positive overall population growth rate, with the Uighur population growing faster than the non-Uighur population in Xinjiang during 2010-18.

The genocide charge is being fueled by “studies” like the Newlines Institute report that recently made global headlines. 

Newlines is described as a “non-partisan” Washington, DC-based think tank. 

On closer inspection, it appears to be a project of a tiny Virginia-based university with 153 students, eight full-time faculty, and an apparently conservative policy agenda. 

Other leading human rights organizations have refrained from using the term.

UN experts are rightly calling for the UN to investigate the situation in Xinjiang. 

China’s government, for its part, has recently stated that it would welcome a UN mission to Xinjiang based on “exchanges and cooperation,” not on “guilty before proven.”

Unless the State Department can substantiate the genocide accusation, it should withdraw the charge. 

It should also support a UN-led investigation of the situation in Xinjiang. 

The work of the UN, and notably of UN Human Rights Special Rapporteurs, is essential to promote the letter and spirit of the Universal Declaration of Human Rights.

Jeffrey D. Sachs, University Professor at Columbia University, is Director of the Center for Sustainable Development at Columbia University and President of the UN Sustainable Development Solutions Network. He has served as adviser to three UN Secretaries-General, and currently serves as an SDG Advocate under Secretary-General António Guterres. His books include The End of Poverty, Common Wealth, The Age of Sustainable Development, Building the New American Economy, A New Foreign Policy: Beyond American Exceptionalism, and, most recently, The Ages of Globalization.

William Schabas is Professor of Law at Middlesex University, London, and author of Genocide in International Law: The Crime of Crimes (Cambridge University Press, 2009).