German Official Leaks Report Denouncing Corona as ‘A Global False Alarm’

This Post, the 3rd of our series explains why governments in most countries miscalculated. Poor data, bad statistics and models, groupthink and over reaction. But this time, what we are seeing is not turning back or reconsidering of useless decisions but "damage control" with limits on information, smearing of whistle blowers and other doctors who do not toe the line.

The document originated in Germany, but any other country in Europe would have provided a similar background.


German Official Leaks Report Denouncing Corona as ‘A Global False Alarm’

Daniele Pozzati
May 29, 2020


Germany’s federal government and mainstream media are engaged in damage control after a report that challenges the established Corona narrative leaked from the interior ministry.

Some of the report key passages are:

The dangerousness of Covid-19 was overestimated: probably at no point did the danger posed by the new virus go beyond the normal level.
The people who die from Corona are essentially those who would statistically die this year, because they have reached the end of their lives and their weakened bodies can no longer cope with any random everyday stress (including the approximately 150 viruses currently in circulation).
Worldwide, within a quarter of a year, there has been no more than 250,000 deaths from Covid-19, compared to 1.5 million deaths [25,100 in Germany] during the influenza wave 2017/18.
The danger is obviously no greater than that of many other viruses. There is no evidence that this was more than a false alarm.
A reproach could go along these lines: During the Corona crisis the State has proved itself as one of the biggest producers of Fake News.
So far, so bad. But it gets worse.

The report focuses on the “manifold and heavy consequences of the Corona measures” and warns that these are “grave”.

More people are dying because of state-imposed Corona-measures than they are being killed by the virus.

The reason is a scandal in the making:

A Corona-focused German healthcare system is postponing life-saving surgery and delaying or reducing treatment for non-Corona patients.

Berlin in Denial Mode. The scientists fight back.

Initially, the government tried to dismiss the report as “the work of one employee”, and its contents as “his own opinion” – while the journalists closed ranks, no questions asked, with the politicians.

But the 93-pages report titled “Analysis of the Crisis Management” has been drafted by a scientific panel appointed by the interior ministry and composed by external medical experts from several German universities.

The report was the initiative of a department of the interior ministry called Unit KM4 and in charge with the “Protection of critical infrastructures”.

This is also where the German official turned whistleblower, Stephen Kohn, work(ed), and from where he leaked it to the media.

The authors of the report issued a joint press release already on Mai 11th, berating the government for ignoring expert advise, and asking for the interior minister to officially comment upon the experts joint statement:

“Therapeutic and preventive measures should never bring more harm than the illness itself. Their aim should be to protect the risk groups, without endangering the availability of medical care and the health of the whole population, as it is unfortunately occurring”

“We in the scientific and medical praxis are experiencing the secondary damages of the Corona-measures on our patients on a daily basis.”

“We therefore ask the Federal Ministry of the Interior, to comment upon our press release, and we hope for a pertinent discussion regarding the [Corona] measures, one that leads to the best possible solution for the whole population”

At the time of writing, the German government had yet to react.

But the facts are – sadly – vindicating the medical experts’ worries.

On Mai 23 the German newspaper Das Bild titled: “Dramatic consequences of the Corona-Measures: 52,000 Cancer Ops delayed.”

Inside, a aeading medical doctor warns that “we will feel the side-effects of the Corona crisis for years”.

Shooting the Whistleblower. Ignoring the Message.

As Der Spiegel reported on Mai 15th: “Stephen Kohn [the whistleblower] has since been suspended from duty. He was advised to obtain a lawyer and his work laptop was confiscated.”

Kohn had originally leaked the report on May 9th to the liberal-conservative magazine Tichys Einblick one of Germany’s most popular alternative media outlets.

News of the report went mainstream in Germany during the second week of Mai – but already in the third week media and politicians alike stopped discussing the issue by refusing to comment upon it.

Emblematic was the approach taken by Günter Krings, the representative for Interior Minister Horst Seehofer – the whistleblower’s boss:

Asked it he would treat the document seriously, Krings replied:

“If you start analyzing papers like that, then pretty soon you’ll be inviting the guys with the tin foil hats to parliamentary hearings.”

Men in tin foil hats – Aluhut in German – is a term used to describe people who believe in conspiracy theories.

Indeed one article by Der Spiegel addressing the Corona protest movement and the consequences of the leaked report contained the word “conspiracy” no fewer than 17 times!

And no discussions of the issues raised by the report itself.

Outside Germany the news has virtually gone unreported.

The Protest Movement – or “Corona-Rebellen”.

Germans begun demonstrating against Lockdowns as early as April.

And thousands of citizens keep showing up at demos every week-end, even as the government is easing the restrictions.

The demos are not merely against restrictions, which have actually been comparatively mild compared to many other Western countries.

The demos question the entire Corona Narrative, and even more its principals, especially the role Bill Gates is playing, as the WHO second biggest donor (the first one since Trump suspended U.S. contribution).

Indeed the biggest such demos took place in Stuttgart on May 9th, where tens of thousands people assembled to say no – to the NWO.

Germans are saying no to any Orwellian solution the government might one day impose out of a questionable “emergency status”, from mass surveillance Apps to mandatory vaccinations.

The leaked report has proved their fears to be well founded.

At least as far as the fake nature of the “Corona pandemic” is concerned

Dr Paul: "Listen to the Doctors, End the Lockdowns!"

This is the second post from our series on Corona Virus and the Lockdowns. Probably the most controversial one. Dr Paul is a well known libertarian politician and as such I do not agree with many of his relatively extreme positions. Not that they are stupid, far from it, but often, other political factors just make such ideas difficult or even impossible to apply.

This said, Dr Paul is also a doctor and his opinion is therefore far more educated than many we hear on the net... And he is independent!


Guest Post by Ron Paul

Six hundred physicians recently signed a letter to President Trump calling for an end to the coronavirus lockdowns. The physicians wrote that, far from protecting public health, the lockdowns are causing “exponentially growing negative health consequences” for millions of Americans.

Since the lockdowns began, there have been increases in alcoholism, drug abuse, and domestic violence. There has also been an increase in calls to suicide hotlines. This is a direct result of the mass unemployment and limitations on people’s activities resulting from the lockdowns. As long as millions of Americans are sitting at home wondering how to survive until the government says they can go back to work — assuming the lockdowns did not drive their employers out of business, there will be more substance abuse and suicides.


At the start of the lockdowns, Americans were told to stay away from emergency rooms and doctors’ offices to avoid exposure to coronavirus. This has led Americans to neglect their health. US hospitals have seen a 40 percent decline in the number of patients admitted for severe heart attacks since March. Does anyone believe that the coronavirus panic just happened to coincide with a miraculous decline in heart attacks?

Physicians have also become unable to help many stroke victims who coronavirus lockdowns have kept from seeking medical assistance.
Early in the coronavirus panic, hospitals were told to cancel elective procedures to ensure space was available for an expected wave of coronavirus patients. But hospitals were not overwhelmed by coronavirus patients. Beds and other resources were unused.

According to the American Hospital Association, this has cost healthcare providers tens of billions of dollars in lost revenue. Inner-city and rural hospitals that already operate on slim profit margins are especially hard hit by the financial impact of the lockdowns. These hospitals may have to cut back on services. Some may even close. This will make it even more difficult for rural and inner-city Americans to obtain quality, affordable healthcare.

Postponing needed surgeries will have serious consequences. Many patients whose surgeries have been delayed will find that their once easily treatable conditions now require intensive and expensive care.

Some people are forgoing disease management and checkups that could keep them from developing more serious problems. The coronavirus lockdowns have even caused the canceling of chemotherapy treatments.

According to the physicians’ letter to President Trump, the coronavirus lockdowns are preventing 150,000 Americans a month from finding out they have cancer. Skipped routine cancer screenings mean cancer is not detected in an early stage, when it is most easily treated.

The coronavirus lockdowns have upended the lives of Americans to “protect” them from a virus with a 0.2 percent fatality rate, with the majority of those fatalities occurring in nursing homes and among people with chronic health conditions. Instead, the rational response would be to protect the vulnerable, and let the rest of the people live their lives. But politicians and government-anointed “experts” do not respond rationally to a “crisis,” especially when a panicked reaction can increase their power and prestige.

The lesson of the unnecessary lockdowns is clear: Government bureaucrats and politicians, even the media’s beloved Dr. Fauci, must be stripped of the ability to infringe on our liberty and prosperity.

This is Post one of a series of posts from doctors, Nobel prizes and other authorities highlighting the absurdities and propaganda we have been served concerning the Corona Virus crisis. Now that we are almost 6 months into the so called pandemics, some conclusions can be drawn. I do not necessarily agree with all the points discussed bellow but still believe these people are worth listening to, to form an educated opinion.

In this first post, based on strong statistical evidence, Prof Michael Levitt gives his opinion that the lockdowns were not only mistakes but counter-productive. This is a scientific opinion. We will later listen to economists showing us from an economist point of view, how the social over-reaction was not only counter productive but will in the end kill more people than doing nothing, on top of course of destroying our economies which by itself will end up being even more costly in human lives in the long term.

After these last few posts on Corona virus, we will move to the economic and social consequences as they start boiling over to the surface as can be seen most clearly in the US now. One thing is certain, the virus was only a black swan, our social and economic systems will be facing daunting risks and challenges over the coming years. This is the beginning of a process of transformation on a scale we haven't seen for the last 500 years.   

Nobel Prize Winner: Lockdowns Are "A Huge Mistake"

Authored by Edward Peter Stringham via The American Institute for Economic research,

Michael Levitt is Professor of computer science and structural biology at Stanford Medical School and winner of the 2013 Nobel Prize in chemistry.

He has been a close observer of the pandemic and the response from the outset through its movement to Europe, the U.K., and the U.S.. Last month, speaking to the Unherd podcast and youtube channel, he offered some compelling thoughts and observers, and a striking conclusion.

Below is a transcript of the parts I found most relevant.

Q: So you noticed that the curve was less of an exponential curve than we might have feared, in those early days?
A: In some ways there was never any exponential growth from the minute I looked at it, there were never any two days that had exactly the same growth rate — and they were getting slow…of course you could have non exponential growth where every single day they’re getting more than exponential — but the growth was always sub-exponential. So that’s the first step.
Q: [In the UK] we talk endlessly about the R-rate — the reproduction rate — and apparently that began very high, maybe as high as 3, and … [we’ve now] got it down below 1 in the UK. Intuitively, if there’s a high reproduction rate, you should see that exponential curve just going up and up.
A: Well no, wait, okay. The R-0, which is very popular, is in some ways a faulty number. Let me explain why. The rate of growth doesn’t depend on R-0. It depends on R-0 and the time you are infectious. So if you are twice as long infectious and have half the R-0 you’ll get exactly the same growth rate. This is sort of intuitive, but it’s not explained, and therefore it seems to me that I would say at the present time R-0 became important because of a lot of movies — it was very popular — talked about R-0.
Epidemiologists talk about R-0 but, looking at all the mathematics, you have to specify the time infectious at the same time to have any meaning. The other problem is that R-0 decreases — we don’t know why R-0 decreases. It could be social distancing, it could be prior immunity, it could be hidden cases.
Q: You’ve been observing the shapes of these curves and how the R-0 number tends to come down and the curve tends to flatten in some kind of natural way regardless of intervention. Is that what you are observing?
A: We don’t know. I think the big test is going to be Sweden. Sweden is practicing a level of social distancing that is keeping children in schools, keeping people at work. They are obviously having more deaths in countries like Israel or Austria that are practicing very very strict social distancing but I think it is not a crazy policy. The reason I felt that social distancing was unimportant is practicing very very strict social distancing, but I think it is not a crazy policy.
The reason I felt that social distancing was unimportant is that I had two examples in China to start with and then we had the additional examples. The first one was South Korea (yeah), and Iran, and Italy. The beginning of all the epidemics showing a slowing down, and it was very hard for me to believe that those three countries could practice social-distancing as well as China. China was amazing, especially outside Hubei, in that they had no additional outbreaks. People left Hubei, they were very carefully tracked, had to wear face masks all the time, had to take their temperatures all the time, and there were no further outbreaks.
So this did not happen in either in South Korea or in Italy or in Iran. Now, two months later something else suggests that social distancing might not be important, and that is that the total number of deaths we’re seeing in New York City, in parts of England, in parts of France, in northern Italy — all seem to stop at about the same direction of the population so are they all practicing equally good social distancing? I don’t think so.
The problem I think is outbreaks occurring in different regions. I think social distancing that stops people moving from London to Manchester is probably a really good idea. My feeling is that in London, and in New York City, all the people who got infected, all got infected before anybody noticed. There’s no way that the infection grew so quickly in New York City without the infection spreading very quickly. So one of the key things is to stop people, who know that they’re sick, from infecting the others. Here again, China has three very, very important advantages that are not high-tech that don’t involve security tracking of telephones.
What they involve is, number one, the tradition in China for years, of wearing a face mask when you’re sick. As soon as the coronavirus started everybody wore a face mask. It doesn’t have to be a hygienic face mask it just has to be a face covering to stop you spraying saliva, micro droplets of saliva on somebody you talk to. The second thing in China is that because they were so scared of the SARS epidemic in most airports, stations where you pay tolls et cetera, there are thermometers. Infrared thermometers that that measure your temperature. So having your temperature measured at every single store entrance — either with a handheld thermometer or with something mounted on the wall — is something completely standard in China. And the third thing is that almost all payments in China are made not using a credit card, so in some senses it is very much easier there to practice social distancing. Of course, in addition they know where people are.
Q: What’s your view of the lockdown policy that so many European countries and states in America have introduced?
A: I think it is a huge mistake. I think we need smart lockdowns. If we were to do this again, we would probably insist on face masks, hand sanitizers, and some kind of payment that did not involve touching right from the very beginning. This would slow down new outbreaks and I think that for example they found as I understand, that children, even if they’re infected, never infect adults, so why do we not have children at school? Why do we not have people working? England, France, Italy, Sweden, Belgium, Holland, are all reaching levels of saturation that are going to be very, very close to herd immunity — So that’s a good thing. I think the policy of herd immunity is the right policy. I think Britain was on exactly the right track — before they were fed wrong numbers and they made a huge mistake.
I see the standout winners as Germany and Sweden. They didn’t practice too much lock down, they got enough people sick to get some herd immunity. The standout  losers are countries like Austria, Australia, Israel that actually had very very strict lockdowns but didn’t have many cases. So they have damaged their economies, caused massive social damage, damaged the educational year of their children, but not obtained any herd immunity. 
I think in many ways the European countries are fine. They didn’t need to have lockdown but they have all reached a high enough level of infection not to have to worry about further future attacks of coronavirus. The United States seems to be heading that way, they’re certainly that way in New York City but they still have a long way to go
Q: What you’re saying is that, you believe success — as we are currently measuring it which is as few cases as possible and as small a spread of the virus as possible — is actually failure?
A: I think if you really control your epidemic, for example, California, it’s now had lockdowns for six weeks, and wants another four weeks, they have so far less than a hundred deaths, that means they don’t have more (let’s say a hundred thousand) in people, that is not enough to give them significant herd immunity. They didn’t need to do all that lock down.
The lockdown is particularly hurtful in countries that don’t have good social infrastructure, countries like the United States and Israel. Many, many people have been really really hurt — especially young people. You know I think that everybody panicked — they were fed incorrect numbers by epidemiologists and you know this I think led to led to a situation. 
There is no doubt in my mind that when we come to look back on this, the damage done by lockdowns will exceed any saving of lives by a huge factor. One very easy way to see this is, and again I am getting into a sensitive territory here, but economists have a very simple way of looking at death. They don’t count people. They come to the conclusion that if you’re 20 and you die that’s a greater loss than if you’re 85 and you die. It’s a hard issue, but in some ways are we valuing the potential future life of the 20 year old? Are we valuing the loss of more senior persons by what’s called daily disability-adjusted life years. Basically if somebody is in their 80s, has Alzheimer’s disease, and then dies from pneumonia (perhaps due to corona) that is less of a loss than if a 15 year old is riding his motorcycle bike and gets run over. This is an important way of looking at death.
It’s also you know, right now, the number of excess deaths is around 130,000 up to yesterday, [May 1st]. This is for all of Europe, for a population of around 330 million people. So an excess of 100,000 for this whole year, is actually not that much. In some of the worst flu epidemics we get to those kinds of numbers — sometimes it’s a bit more, sometimes a little bit less. 
Now, I’m not saying flu is like coronavirus, I’m just simply saying that the burden of death of flu is like coronavirus. Especially when we correct for the fact that people who die from coronavirus are older on average than people who died from flu. Flu kills young people, it kills two or three times more people under 65 than does coronavirus. If we put those facts into the situation we find that the burden of death from coronavirus and Phillip Shaw will, in Europe, where we have good numbers in less than that of a very flu.
Another factor which has not been considered are all the cancer patients who aren’t being treated, or all the heart cardiology patients who aren’t being treated. I’ve got estimates of tens of thousands of people who are basically going to be dying because of lack of that treatment — and generally again the age group who die of cancer are younger than the age group who die of coronavirus. 
There’s one very easy way to sort of summarize coronavirus. I put an article in the medium by the pretty famous British statistician Sir David Spiegelhalter of Cambridge [University] and he had said that the numbers coming from Ferguson suggested that we had to lose about one year of people. It turns out that I immediately wrote an article in the same medium and replied to him, saying that in fact the answer was actually one month, not one year. So basically my feeling is, and it’s being supported by the numbers, is that the amount of excess death you need to reach saturation, I’m not going to call it herd immunity, where the virus by itself stops, is on the order of four weeks of excess. Now to give you some idea in the European area where there is good monitoring, by a website called EuroMoMo, run out of Denmark, which covers about 300 million people. Every week in Europe in that area there’s around 50,000 natural deaths. So in four weeks there will be about 200,000 extra deaths in that year — and it looks like coronavirus in Europe where it’s no doubt that it’s the most severely hit area in the world — we’ll probably reach around 200,000 or 4 weeks worth.
Q: So what happens if what you’re saying is there’s a sort of statistical observation which is around four weeks of excess death and then the pandemic seems to peter out, or begin to flatten out. What does that mean policy-wise for these European countries then?
A: If we could protect the old people perfectly, then the death rates would be very, very low. So for example in Europe there were about 140,000 excess deaths in the last nine weeks. The number of those excess deaths who are younger than 65 is about 10%. So basically 13,000 of 130,000 deaths are actually under 65 years old and if we had simply been able to protect elderly people then the death rate would have been much much less. But the key thing is to have as much infection for as little possible death and also do whatever you can to keep the hospitals full but not overflowing. It’s a difficult calculation and the trouble is that in Sweden there’s no political concerns.
The trouble is is that in Israel and I know as well in the United States, everything is political and therefore nobody could say something like this. They would say, “Ah, but you are not valuing death — the thing that should have been done is for the media to stress to people that everyday somebody dies. These people are essentially in the same age band, and they die from Corona and other comorbidities, other diseases. 
I’ve become a huge fan of Twitter. I’d never used twitter before and for me Twitter is the best discussion forum I had seen since I was a student at the Cambridge Laboratory of Natural Biology. Which is a 26 Nobel Prize winning lab. The best lab in the world. The Twitter discussion is phenomenal and I’m getting documents from Italy showing that many of the Covid deaths were either dead before they were tested or else they had up to three other conditions. There is nothing wrong with this, people die for all sorts of reasons, but the news should be stressing this and maybe they should be counting it as a 0.1 Covid death.
Countries seem to be racing to have as many Covid deaths as they could, and this is a huge mistake. In the flu season no one cares about these people. I mean, the total number of Covid deaths in Europe will be very similar to a severe flu season, and you know, this is serious. Flu is a serious disease. Maybe we should just shut down the economy during the flu season. I mean people should have been made to understand it. Unfortunately I think in Britain they started out wanting to go for herd immunity without too much lockdown, there was then a scary paper — which is likely to be retracted — which influenced Italy as well where basically it was claimed they were — [Interviewer interrupts]
Q: I know you had some specific queries about Neil Ferguson’s paper; we had him on the show last week. So, what did you think he got wrong in those models and predictions?
A: His work was on modelling, and around the 10th of February he had his first paper (that I saw) and in there he was getting a case fatality ratio of around 15%, whereas all my observations were saying that it was around three or four percent. So I was suspicious: I looked at the paper very carefully and in a footnote to a table it said “assuming exponential growth for six days at fifteen percent a day.” Now, I had looked at China, and never, ever seen exponential growth that wasn’t decaying rapidly so I was suspicious. My numbers were 10% of the numbers that Ferguson had obtained. I pointed this out, in a reply in the medium — which was out there, it’s clear nobody has ever seen it but it’s there, and I didn’t hide it it just didn’t get any likes and this said that it was much more like one month than one year and have an exchange with Spiegelhalta and Ferguson, where I tried to show my case.
But all I was doing was just simple proportionality using exactly the same profile of — different ages have different death rates, so there’s a profile saying that people over 80 have a certain fraction of the disk [deaths] people between 17 and 80 have a different fraction — just using that data… and simply saying we want the number of deaths that occurred on the Diamond Princess to be the same number that we found which was 7 or 8. If you do that, and then you apply that proportionality to Britain and the USA, you find that for Britain the half a million drops to about 50,000 and in the United States the two million drops to 200,000. Essentially a year dropping to a month.
Q: And so the the argument that is made here is that whether you believe the infection fatality rate is point three percent or whether you believe it’s point eight percent there is still a big chunk of the population, the majority population who hasn’t had been exposed to the disease or hasn’t had it and therefore if we just let it rip there will be many many tens possibly even further hundreds according to Professor Ferguson of thousands of deaths and that’s why it’s politically totally not an option to be at do anything other than follow this ultra cautious approach.What do you say to that?
A: The World Health Organization, and epidemiologists in general, can only go wrong if they give [politicians] a number smaller. If I said it’s going to be 1 billion deaths from coronavirus and it’s, “oh, you guys have done what I’ve said and there’s only gonna be a hundred thousands,” that is considered good policy. They overestimated bird flu by a factor of a hundred, or ten thousand in The Guardian. The Guardian wrote about this. Ebola was overestimated by a factor of 100 I think. They see their role as scaring people into doing something. I can understand that and there’s something to be said for it. If you could practice lock down with zero economic costs, and zero social costs — let’s do it. But the trouble is that those costs are huge, we’re gonna have fatalities from hospitals being closed down, additional children in trauma, businesses damaged — maybe less so in the UK because of the compensation policy — but certainly massive economic damage in the USA and in Israel, and in other countries. So you need to balance both of these things.
That is what I don’t think is responsible. In my work if I say a number is too small and I’m wrong or a number is too big and I’m wrong, both of those errors are the same. If I’m 10 percent too high or 10 percent too low that is okay. It seems that being a factor of a thousand too high is perfectly okay in epidemiology, but being a factor of three too low, is too low. 
Q: I’m trying to think about what this means for the UK and for these countries that are trying to work out what to do next.Is your view then having looked at the numbers that if we had not implemented lockdown we would have seen a fall off anyway is that a fair summary?
A: We could have had smart lockdown. Sweden, for example, doesn’t allow gatherings of more than 50 people. I think a football game would be a really bad idea right now, because people shout and therefore spray saliva on everyone around them, and they could infect a lot of people. But you know Sweden is doing fine, their deaths again are very localized to nursing homes, like they are in England — it’s the same profile.
I think that you know again it’s Sweden so all the evidence suggests that. So my contradiction is the following: Britain, if they had done nothing would have had reported deaths. Now remember there’s a difference of reported death, my numbers are all reported. This would have four weeks of additional reported death when the numbers actually came in from what were the real axis death. My guess is they would be less than that so it would not have been double. It wasn’t in the month but maybe one and three quarters or so on. So that is my feeling — we’re seeing this in Europe we will know the answer in three or four weeks time. We will know for all of Europe exactly what the excess death of coronavirus was, right now it’s a hundred and thirty seven thousand.
Q: Do you find when you’ve been making these points — in the media that you received a lot of backlash? Do you think there’s a lot of political pressure, as an academic and as an academic you know they’re one of your colleagues in Stanford dr. Ioannidis has also put out studies that seem to become skeptical and has received a lot of political blowback.
A: I went on CNN once when he was CNN Vicky Anderson out of London. I appeared on Fox News a couple of times basically said this is all just common sense because I appeared on Fox News CNN wouldn’t have me anymore. So basically I have had very clear of things. I had one article in the Los Angeles Times which did great but since I was not saying things that were too extreme none of the East Coast newspapers wanted me, they quoted me, but they wouldn’t have me. What’s disconcerting is, a few of my academic colleagues — even relatives — were very upset with me. Because in my earlier writing I published a report, the medium report from the 22nd of March but on the 13th or 14th of March I distributed a 19 page report,and three academics got very upset with me. I think they were totally panicked, and they felt that if anyone thought this was true they wouldn’t lock down as tightly as they should, I’m in fact friends with all the people again, there are no hard feelings. 
Q: Let me leave you with one final question: what’s your prognosis, what do you think is now gonna happen with this… what happens next?
A: There will be a reckoning. Maybe countries will start to see that they need governments that are not necessarily great in rhetoric, but actually thinking and doing. I often go back and think about what Socrates said 2,400 years ago: use your common sense instead of listening to the rhetoric of leaders. We have become very influenced by [rhetoric] that. I think this is another foul-up on the part of the baby boomers.
I am a real baby-boomer, I was born in 1947, and I think we’ve really screwed up. We cause pollution, we allowed the world’s population to increase three-fold, we’ve caused the problems of global warming, we’ve left your generation with a real mess in order to save a really small number of very old people. If I was a young person now, I would say, “now you guys are gonna pay for this.”
We have my family whatsapp and very early on I said this is a virus being designed to get rid of the baby boomers. You know I don’t know, I think my wife thinks this is going to be a take it to the streets thing,and we’re gonna have the young people on the street saying you guys have really screwed up it’s time to go. And I always joke with her, saying well at least I’ve made lots of friends among the young people, I’ll be okay.
But quite frankly you know I’ve had a great life, and I must say this to all the young faces in front of me. I have a grandson who’s 17. I’d much rather have young people live for a very long time. That said I do have a mother who’s a hundred and five years old living in London with my brother, she’s in lockdown and I talk to her by whatsapp every single day on FaceTime, and she’s fine. She still uses her phone and so on so you know these differences but…
You guys should get out there and do something don’t accept this anymore we screwed up too much 

Did we allucinate an epidemics?

The corona virus in perspective.
So much economic destruction for so few casualties.
In France the median age of death from the virus is 84 year old.
This is older that life expectancy!
In many cases, it is not even certain that the virus is the cause of death.
Which practically means that the added mortality in 2020 will be nil!

This crisis will remain as one of the biggest blunder in political history when decisions were taken based on faulty mathematical projections from Professor Neil Ferguson of Imperial College in London which showed hundred of thousands of deaths within months which obviously did not materialized.
Conversely, the successful strategy pursued in Asia to wear masks and isolate a few hot spots resulted in a death rate 10 to 20 times less in countries like Japan and Korea.

Now the medical emergency is almost over in Europe and past its peak in the US, just as the economic crisis is gaining speed. The social and political consequences will wait until later this year but will probably go far beyond a mere epidemics.

Coronavirus, what happens when you get the statistics wrong?

The truth is out. We've got the data of the pandemic wrong! Now what?

The Wuhan Coronavirus was born under suspicious circumstances. China obfuscated, tried to hide the truth for as long as possible. First reprimanded the doctors who rang the alarm bells, then put the P4 laboratory in Wuhan under military supervision, ordered all samples destroyed and a shut down of independent publications. Finally, the country reacted strongly, putting the city, then the whole Hebei province under a two month long lock-down, while declaring that there was nothing to fear and the W.H.O parroting the Chinese position, prevaricated for months before declaring that a pandemic was on-going.

But thanks to the one major characteristics of this Coronavirus, its very high number of asymptomatic cases (people being sick but showing no symptoms), the virus did spread around the world, first to Korea and Italy, then to all other countries with very few exceptions. Asia reacted quickly by closing down stores early, requesting that people wear masks and comprehensive detection and tracking policies. The results were immediate and the number of cases slowed almost immediately to a crawl. Europe and especially the US did not. The number of sick people exploded and a couple of weeks later the death's curve followed suit.

Early on, based on a very limited number of test, a low R0 (spread of the virus), and an extremely high death rates of close to 3% were calculated, and models showing millions of deaths down the line were built, especially by the London Imperial College in the UK. Most countries panicked and followed the Chinese example of a complete lock-down... and all without exceptions got it wrong! The reason for the mistake was simple and basic; they got their statistics wrong. The extremely high number of asymptomatic cases created an illusion of a high death rate whereas we now know that this was not the case.

In the end, the Wuhan Coronavirus is a dangerous virus. For people with weak immune systems, mostly the old, obese and diabetics, the risk is clearly high and whenever someone gets sick, the road from emergency to respirator to death can be a quick one. But for everybody else... nothing. Not even mild flu symptoms! The one exception which in itself is a scandal is the very high number of doctors and nurses who have succumbed for the simple reasons of high viral loads and poor protection.

But bad statistics were not limited to poor projections, most countries went one step further by declaring that whenever the virus was detected, the causes of death should be attributed to the virus. Consequently, the number of old age people dying from the virus exploded, while the real number of death in most countries stayed flat. Now that the numbers are out, especially in France, we finally know that the total number of death did not show any uptick. 2020 is turning out to be another ordinary year, and in most case a rather low flu season in Europe. 

But do not expect any countries to cancel their lock-down order any time soon, and even less to apologize, declaring that they got their numbers and consequently policies wrong! That's unfortunately not how things work.

Responsible people will hide their incompetence behind dubious numbers then politicians will focus their attention of the terrible economic consequences of their failed virus mitigation policies. Few will show that countries who did not implement a complete lockdown of their economies like Sweden did not see the predicted explosion, proving that these policies were an over-reaction.

But the legacy of this failure will be with us for years to come. In the end the virus, beyond a few very limited hot spots will not have killed that many people compared to any other ordinary year, but if, as it seems more or more likely, it becomes the pin which burst the financial bubble, it will then have proved far more dangerous than expected, by showing the weakness of our system and the real risks of the contagion of fear.

It may also have a positive consequence demonstrating that our over centralization and over reliance on the state have become toxic and destructive. But don't count on it. The isolated voices of reason will quickly be drawn in a tsunami of spin and propaganda proving that all the wrong decisions were taken for the right reasons; The destruction of millions of jobs and countless thousands of small businesses, the unfortunate byproduct of the need for precautions. The trampling of individual freedom, an absolute necessity for the better good of all.

It would be great if people kept clapping their hands and banging their pans once a day to remember this terrible episode of failed policies of social engineering. But most probably, they won't. They will be far too busy putting back their lives together and coping with the disastrous economic consequences of a virus most caught without even noticing.   

As for the real economy, let's see what happens once the dollars, Euros and Yens stop dropping from the sky. But will they? Or conversely will we see the takeover of the whole economy by the states? We've seen how this worked, rather poorly, in the past. Don't expect miracles, this time won't be different! 

Coronavirus: Who is right?

While trying to understand the arguments about Coronavirus, slowly a clearer picture is emerging. The virus is neither benign not the end of the world, just in-between. Still, the economic consequences of our over-reaction will be beyond our expectations...

The best article I have found which resume this conclusion is the one below.

The Facts That Prove Almost Everyone Is Wrong About This Pandemic

Authored by Michael Snyder via The End of The American Dream blog,
When it comes to COVID-19, most Americans seem to be gravitating toward one of two extremes.  Some are treating this pandemic like it is the end of the world, while many others are dismissing it as a “nothingburger”.
But the truth is somewhere in between.
Nobody can deny that lots of people are getting sick and lots of people are dying.  In fact, the U.S. death toll has doubled in a little over a week and it has now shot past the 47,000 mark.  And as this pandemic progresses, a lot more people are going to get sick and a lot more people are going to die, and this is going to be true whether the lockdowns continue or not.  The lockdowns were never going to stop COVID-19, and anyone that believed that was just being delusional.

The only time a lockdown should be instituted is if a pandemic has gotten so bad in an area that hospitals are being absolutely overwhelmed, because if people can’t get treatment that is a factor that could potentially increase the overall death toll substantially.
In most of the United States that is not happening right now, and so in most of the nation the lockdowns should be immediately ended.
But won’t a lot more people start getting sick if that happens?
Of course, and this is something that the “nothingburger” crowd doesn’t understand.  Lifting the lockdowns is going to cause the virus to cycle through our population at a much faster rate, and the numbers will get pretty ugly.  But as long as the medical system can handle it, lockdowns are not necessary.
What “the end of the world” crowd does not understand is that when you are dealing with a virus that spreads as easily as this one, it is inevitable that most of the population will eventually become infected.  You can “flatten the curve” and delay the inevitable with lockdowns, but that also prolongs the pandemic.  In the end, roughly the same number of people will get sick and roughly the same number of people will die no matter how the pandemic is “managed”.

This week, the “nothingburger” crowd has made a really big deal out of the fact that a study conducted in L.A. county discovered that about 4 percent of all residents had already developed COVID-19 antibodies, and they were trying to use that study to prove that this pandemic is not much of a threat at all.
Actually, it shows just the opposite.
This pandemic is not going to be over until herd immunity is achieved, and according to Johns Hopkins that does not happen until 70 to 90 percent of a population has developed immunity…

When most of a population is immune to an infectious disease, this provides indirect protection—or herd immunity (also called herd protection)—to those who are not immune to the disease.
For example, if 80% of a population is immune to a virus, four out of every five people who encounter someone with the disease won’t get sick (and won’t spread the disease any further). In this way, the spread of infectious diseases is kept under control. Depending how contagious an infection is, usually 70% to 90% of a population needs immunity to achieve herd immunity.

So let’s do some really quick math.
Let’s assume that the study conducted in L.A. County is representative of the nation as a whole and that approximately 4 percent of all Americans have now developed antibodies.
And let’s also assume that herd immunity for COVID-19 will be achieved when 80 percent of the total population has developed antibodies.
If 47,000 Americans have died at the current 4 percent level of exposure, that means that we could potentially be looking at an overall death toll of 940,000 once we hit an 80 percent exposure level.
Does anyone in the “nothingburger” crowd want to try to claim that 940,000 dead Americans is not a big deal?
I keep hearing people say that this virus “is just like the flu”, and that is absolutely absurd.  As Mike Adams of Natural News has pointed out, COVID-19 has killed more Americans in the last 17 days than the flu did in the last year…

In the last 17 days, the Wuhan coronavirus has killed more Americans (35,087) than the regular flu kills in an entire year (34,157 for the last year). It obliterates any last shred of the argument — still heard across the independent media — that the coronavirus is “no worse than the flu.”
The coronavirus remains the No. 1 cause of death in America on a day-to-day basis, clocking in at 2,804 deaths just today. Total deaths in the USA will exceed 46,000 tomorrow, confirming our earlier projection that estimated 46,000 to 93,000 deaths from coronavirus in the USA by the end of July. It’s not even the end of April, and we’re already beyond 45,000. (At the time we made the projection, it was dismissed as “crazy” by the very same people who still claim the coronavirus is “no worse than the flu.” Those are the people who can’t do math.)

And actually the number of Americans dying from the coronavirus is being seriously undercounted.
In New York City, if someone dies at home they are typically not tested to see if they have the coronavirus.  So even though the number of city residents dying at home is now nearly ten times higher than normal, the vast majority of those cases are never showing up in the official numbers.
But the “end of the world” crowd seems to think that if we just keep everyone at home long enough that we can significantly reduce the final death toll from this pandemic, and that just isn’t accurate either.

Right now, the virus continues to spread even though most of the U.S. has now been locked down for weeks.  In fact, there were nearly 30,000 more confirmed cases during the 24 hour period that just ended.  Whether it does it relatively quickly or relatively slowly, this virus will continue to rip through our population until we eventually get to the point of herd immunity.
“Experts” such as Bill Gates are suggesting that the lockdowns are “buying us time” until our scientists can develop a “vaccine”, but the truth is that is really not much more than a pipe dream.

As I pointed out yesterday, there has never been a successful vaccine for any coronavirus in all of human history, and now that scientists have discovered approximately 30 different strains of the virus that will just make the task of trying to develop a vaccine even more complicated.
Sadly, the reality of the matter is that this virus is going to be with us for a very long time to come.  Eventually herd immunity will hopefully be achieved, but until then a lot of people are going to get sick and a lot of people are going to die.
And fear of this virus is going to be with us for a long time to come as well, and that is going to paralyze our economy whether there are lockdowns or not.
The bottom line is that this virus is not going to be stopped, and the economic collapse that has now begun is not going to be stopped either.
But this isn’t the end of the world, and most of us will get through this.  Of course even bigger challenges lie beyond the end of this pandemic, but that is a topic for another article.
As of this moment, COVID-19 has killed more than 184,000 people around the globe, and by the end of this pandemic the overall death toll is likely to be much, much higher than that.

There is no way that you can possibly call that a “nothingburger”, and sticking your head in the sand is not going to help anything.  But on the other hand, trying to lock down the entire planet is not going to solve this crisis either.  It will simply delay the inevitable, because this virus is just going to continue to spread no matter what actions our politicians take.

Confirmation that the Wuhan Coronavirus genome contains HIV sequences (video)

This is a Bombshell: 
Now that Dr Montagnier, French Nobel Prize of medecine on the HIV virus has confirmed that the Wuhan coronavirus genome contains HIV sequences in addition to the S protein, it is time for China to come clean and admit that these research were indeed being conducted in Wuhan and that the virus escaped from the laboratory. Here's the interview. (in French unfortunately) #wuhancoronavirus #wuhanvirus #breakingnews #chinacoronavirus #china #HIV #coronavirus #coronaviruswho

The Eurodollar Market is the real Matrix!

This is a superb article from Michel Every at Rabobank which explains the Eurodollar financial market and summarize the risks it represents for the world economy. Could the Eurodollar be the cause of the breakdown of our financial system? Quite possible and even likely! Read on!

Submitted to Zerohedge by Michael Every of Rabobank / April12, 2020
https://www.zerohedge.com/markets/down-rabbit-hole-eurodollar-market-matrix-behind-it-all

Summary

• The Eurodollar system is a critical but often misunderstood driver of global financial markets: its importance cannot be understated.
• Its origins are shrouded in mystery and intrigue; its operations are invisible to most; and yet it controls us in many ways. We will attempt to enlighten readers on what it is and what it means.
• However, it is also a system under huge structural pressures – and as such we may be about to experience a profound paradigm shift with key implications for markets, economies, and geopolitics.
• Recent Fed actions on swap lines and repo facilities only underline this fact rather than reducing its likelihood

What is The Matrix?

A new world-class golf course in an Asian country financed with a USD bank loan. A Mexican property developer buying a hotel in USD. A European pension company wanting to hold USD assets and swapping borrowed EUR to do so. An African retailer importing Chinese-made toys for sale, paying its invoice in USD.
All of these are small examples of the multi-faceted global Eurodollar market. Like The Matrix, it is all around us, and connects us. Also just like The Matrix, most are unaware of its existence even as it defines the parameters we operate within. As we shall explore in this special report, it is additionally a Matrix that encompasses an implicit power struggle that only those who grasp its true nature are cognizant of.
Moreover, at present this Matrix and its Architect face a huge, perhaps existential, challenge.
Yes, it has overcome similar crises before...but it might be that the Novel (or should we say ‘Neo’?) Coronavirus is The One.
So, here is the key question to start with: What is the Eurodollar system? 

For Neo-phytes

The Eurodollar system is a critical but often misunderstood driver of global financial markets: its importance cannot be understated. While most market participants are aware of its presence to some degree, not many grasp the extent to which it impacts on markets, economies,…and geopolitics - indeed, the latter is particularly underestimated.
Yet before we go down that particular rabbit hole, let’s start with the basics. In its simplest form, a Eurodollar is an unsecured USD deposit held outside of the US. They are not under the US’ legal jurisdiction, nor are they subject to US rules and regulations.
To avoid any potential confusion, the term Eurodollar came into being long before the Euro currency, and the “euro” has nothing to do with Europe. In this context it is used in the same vein as Eurobonds, which are also not EUR denominated bonds, but rather debt issued in a different currency to the company of that issuing. For example, a Samurai bond--that is to say a bond issued in JPY by a nonJapanese issuer--is also a type of Eurobond.
As with Eurobonds, eurocurrencies can reflect many different underlying real currencies. In fact, one could talk about a Euroyen, for JPY, or even a Euroeuro, for EUR. Yet the Eurodollar dwarfs them: we shall show the scale shortly.

More(pheous) background
So how did the Eurodollar system come to be, and how has it grown into the behemoth it is today? Like all global systems, there are many conspiracy theories and fantastical claims that surround the birth of the Eurodollar market. While some of these stories may have a grain of truth, we will try and stick to the known facts.
A number of parallel events occurred in the late 1950s that led to the Eurodollar’s creation – and the likely suspects sound like the cast of a spy novel. The Eurodollar market began to emerge after WW2, when US Dollars held outside of the US began to increase as the US consumed more and more goods from overseas. Some also cite the role of the Marshall Plan, where the US transferred over USD12bn (USD132bn equivalent now) to Western Europe to help them rebuild and fight the appeal of Soviet communism.
Of course, these were just USD outside of the US and not Eurodollars. Where the plot thickens is that, increasingly, the foreign recipients of USD became concerned that the US might use its own currency as a power play. As the Cold War bit, Communist countries became particularly concerned about the safety of their USD held with US banks. After all, the US had used its financial power for geopolitical gains when in 1956, in response to the British invading Egypt during the Suez Crisis, it had threatened to intensify the pressure on GBP’s peg to USD under Bretton Woods: this had forced the British into a humiliating withdrawal and an acceptance that their status of Great Power was not compatible with their reduced economic and financial circumstances.
With rising fears that the US might freeze the Soviet Union’s USD holdings, action was taken: in 1957, the USSR moved their USD holdings to a bank in London, creating the first Eurodollar deposit and seeding our current UScentric global financial system – by a country opposed to the US in particular and capitalism in general.
There are also alternative origin stories. Some claim the first Eurodollar deposit was made during the Korean War with China moving USD to a Parisian bank.
Meanwhile, the Eurodollar market spawned a widely-known financial instrument, the London Inter Bank Offer Rate, or LIBOR. Indeed, LIBOR is an offshore USD interest rate which emerged in the 1960s as those that borrowed Eurodollars needed a reference rate for larger loans that might need to be syndicated. Unlike today, however, LIBOR was an average of offered lending rates, hence the name, and was not based on actual transactions as the first tier of the LIBOR submission waterfall is today.

Dozer and Tank
So how large is the Eurodollar market today? Like the Matrix - vast. As with the origins of the Eurodollar system, itself nothing is transparent. However, we have tried to estimate an indicative total using Bank for International Settlements (BIS) data for:

• On-balance sheet USD liabilities held by non-US banks;
• USD Credit commitments, guarantees extended, and derivatives contracts of non-US banks (C, G, D);
• USD debt liabilities of non-US non-financial corporations;
• Over-the-Counter (OTC) USD derivative claims of non-US non-financial corporations; and
• Global goods imports in USD excluding those of the US and intra-Eurozone trade.

The results are as shown below as of end-2018: USD57 trillion, nearly three times the size of the US economy before it was hit by the COVID-19 virus. Even if this measure is not complete, it underlines the scale of the market.

 It also shows its vast power in that this is an equally large structural global demand for USD.  Every import, bond, loan, credit guarantee, or derivate needs to be settled in USD.
Indeed, fractional reserve banking means that an initial Eurodollar can be multiplied up (e.g., Eurodollar 100m can be used as the base for a larger Eurodollar loan, and leverage increased further). Yet non-US entities are NOT able to conjure up USD on demand when needed because they don’t have a central bank behind them which can produce USD by fiat, which only the Federal Reserve can.
This power to create the USD that everyone else transacts and trades in is an essential point to grasp on the Eurodollar – which is ironically also why it was created in the first place!

Tri-ffi-nity
Given the colourful history, ubiquitous nature, and critical importance of the Eurodollar market, a second question then arises: Why don’t people know about The Matrix?
The answer is easy: because once one is aware of it, one immediately wishes to have taken the Blue Pill instead.
Consider what the logic of the Eurodollar system implies. Global financial markets and the global economy rely on the common standard of the USD for pricing, accounting, trading, and deal making. Imagine a world with a hundred different currencies – or even a dozen: it would be hugely problematic to manage, and would not allow anywhere near the level of integration we currently enjoy.
However, at root the Eurodollar system is based on using the national currency of just one country, the US, as the global reserve currency. This means the world is beholden to a currency that it cannot create as needed.
When a crisis hits, as at present, everyone in the Eurodollar system suddenly realizes they have no ability to create fiat USD and must rely on national USD FX reserves and/or Fed swap lines that allow them to swap local currency for USD for a period. This obviously grants the US enormous power and privilege.
The world is also beholden to US monetary policy cycles rather than local ones: higher US rates and/or a stronger USD are ruinous for countries that have few direct economic or financial links with the US. Yet the US Federal Reserve generally shows very little interest in global economic conditions – though that is starting to change, as we will show shortly.

A second problem is that the flow of USD from the US to the rest of the world needs to be sufficient to meet the inbuilt demand for trade and other transactions. Yet the US is a relatively smaller slice of the global economy with each passing year. Even so, it must keep USD flowing out or else a global Eurodollar liquidity crisis will inevitably occur.
That means that either the US must run large capital account deficits, lending to the rest of the world; or large current account deficits, spending instead.
Obviously, the US has been running the latter for many decades, and in many ways benefits from it. It pays for goods and services from the rest of the world in USD debt that it can just create. As such it can also run huge publicor private-sector deficits – arguably even with the multitrillion USD fiscal deficits we are about to see.
However, there is a cost involved for the US. Running a persistent current-account deficit implies a net outflow of industry, manufacturing and related jobs. The US has obviously experienced this for a generation, and it has led to both structural inequality and, more recently, a backlash of political populism wanting to Make America Great Again.
Indeed, if one understands the structure of the Eurodollar system one can see that it faces the Triffin Paradox. This was an argument first made by Robert Triffin in 1959 when he correctly predicted that any country forced to adopt the role of global reserve currency would also be forced to run ever-larger currency outflows to fuel foreign appetite – eventually leading to the breakdown of the system as the cost became too much to bear.
Moreover, there is another systemic weakness at play: realpolitik. Atrophying of industry undermines the supply chains needed for the defence sector, with critical national security implications. The US is already close to losing the ability to manufacture the wide range of products its powerful armed forces require on scale and at speed: yet without military supremacy the US cannot long maintain its multi-dimensional global power, which also stands behind the USD and the Eurodollar system.
This implies the US needs to adopt (military-) industrial policy and a more protectionist stance to maintain its physical power – but that could limit the flow of USD into the global economy via trade. Again, the Eurodollar system, like the early utopian version of the Matrix, seems to contain the seeds of its own destruction.
Indeed, look at the Eurodollar logically over the long term and there are only three ways such a system can ultimately resolve itself:

1. The US walks away from the USD reserve currency burden, as Triffin said, or others lose faith in it to stand behind the deficits it needs to run to keep USD flowing appropriately;
2. The US Federal Reserve takes over the global financial system little by little and/or in bursts; or
3. The global financial system fragments as the US asserts primacy over parts of it, leaving the rest to make their own arrangements.

See the Eurodollar system like this, and it was always when and not if a systemic crisis occurs – which is why people prefer not focus on it all even when it matters so much. Yet arguably this underlying geopolitical dynamic is playing out during our present virus-prompted global financial instability.
Down the rabbit hole
But back to the rabbit hole that is our present situation. While the Eurodollar market is enormous one also needs to look at how many USD are circulating around the world outside the US that can service it if needed. In this regard we will look specifically at global USD FX reserves.
It’s true we could also include US cash holdings in the offshore private sector. Given that US banknotes cannot be tracked no firm data are available, but estimates range from 40% - 72% of total USD cash actually circulates outside the country. This potentially totals hundreds of billions of USD that de facto operate as Eurodollars. However, given it is an unknown total, and also largely sequestered in questionable cash-based activities, and hence are hopefully outside the banking system, we prefer to stick with centralbank FX reserves.
Looking at the ratio of Eurodollar liabilities to global USD FX reserve assets, the picture today is actually healthier than it was a few years ago.

 Indeed, while the Eurodollar market size has remained relatively constant in recent years, largely as banks have been slow to expand their balance sheets, the level of global USD FX reserves has risen from USD1.9 trillion to over USD6.5 trillion. As such, the ratio of structural global USD demand to that of USD supply has actually declined from near 22 during the global financial crisis to around 9.


Yet the current market is clearly seeing major Eurodollar stresses – verging on panic.
Fundamentally, the Eurodollar system is always short USD, and any loss of confidence sees everyone scramble to access them at once – in effect causing an invisible international bank run. Indeed, the Eurodollar market only works when it is a constant case of “You-Roll-Over Dollar”.
Unfortunately, COVID-19 and its huge economic damage and uncertainty mean that global confidence has been smashed, and our Eurodollar Matrix risks buckling as a result.
The wild gyrations recently experienced in even major global FX crosses speak to that point, to say nothing of the swings seen in more volatile currencies such as AUD, and in EM bellwethers such as MXN and ZAR. FX basis swaps and LIBOR vs. Fed Funds (so offshore vs. onshore USD borrowing rates) say the same thing. Unsurprisingly, the IMF are seeing a wide range of countries turning to them for emergency USD loans.

The Fed has, of course, stepped up. It has reduced the cost of accessing existing USD swap lines--where USD are exchanged for other currencies for a period of time--for the Bank of Canada, Bank of England, European Central Bank, and Swiss National Bank; and another nine countries were given access to Fed swap lines with Australia, Brazil, South Korea, Mexico, Singapore, and Sweden all able to tap up to USD60bn, and USD30bn available to Denmark, Norway, and New Zealand. This alleviates some pressure for some markets – but is a drop in the ocean compared to the level of Eurodollar liabilities.

The Fed has also introduced a new FIMA repo facility. Essentially this allows any central bank, including emerging markets, to swap their US Treasury holdings for USD, which can then be made available to local financial institutions. To put it bluntly, this repo facility is like a swap line but with a country whose currency you don't trust.
Allowing a country to swap its Treasuries for USD can alleviate some of the immediate stress on Eurodollars, but when the swap needs to be reversed the drain on reserves will still be there. Moreover, Eurodollar market participants will now not be able to see if FX reserves are declining in a potential crisis country. Ironically, that is likely to see less, not more, willingness to extend Eurodollar credit as a result.

You have two choices, Neo
Yet despite all the Fed’s actions so far, USD keeps going up vs. EM FX. Again, this is as clear an example as one could ask for of structural underlying Eurodollar demand.

Indeed, we arguably need to see even more steps taken by the Fed – and soon. To underline the scale of the crisis we currently face in the Eurodollar system, the BIS concluded at the end of a recent publication on the matter:

“...today’s crisis differs from the 2008 GFC, and requires policies that reach beyond the banking sector to final users. These businesses, particularly those enmeshed in global supply chains, are in constant need of working capital, much of it in dollars. Preserving the flow of payments along these chains is essential if we are to avoid further economic meltdown.
Channeling dollars to non-banks is not straightforward. Allowing non-banks to transact with the central bank is one option, but there are attendant difficulties, both in principle and in practice. Other options include policies that encourage banks to fill the void left by market based finance, for example funding for lending schemes that extend dollars to non-banks indirectly via banks.”

In other words, the BIS is making clear that somebody (i.e., the Fed) must ensure that Eurodollars are made available on massive scale, not just to foreign central banks, but right down global USD supply chains. As they note, there are many practical issues associated with doing that – and huge downsides if we do not do so. Yet they overlook that there are huge geopolitical problems linked to this step too.
Notably, if the Fed does so then we move rapidly towards logical end-game #2 of the three possible Eurodollar outcomes we have listed previously, where the Fed de facto takes over the global financial system. Yet if the Fed does not do so then we move towards end-game #3, a partial Eurodollar collapse.
Of course, the easy thing to assume is that the Fed will step up as it has always shown a belated willingness before, and a more proactive stance of late. Indeed, as the BIS shows in other research, the Fed stepped up not just during the Global Financial Crisis, but all the way back to the Eurodollar market of the 1960s, where swap lines were readily made available on large scale in order to try to reduce periodic volatility.
However, the scale of what we are talking about here is an entirely new dimension: potentially tens of trillions of USD, and not just to other central banks, or to banks, but to a panoply of real economy firms all around the Eurodollar universe.
As importantly, this assumes that the Fed, which is based in the US, wants to save all these foreign firms. Yet does the Fed want to help Chinese firms, for example? It may traditionally be focused narrowly on smoothly-functioning financial markets, but is that true of a White House that openly sees China as a “strategic rival”, which wishes to onshore industry from it, and which has more interest in having a politically-compliant, not independent Fed? Please think back to the origins of Eurodollars - or look at how the US squeezed its WW2 ally UK during the 1956 Suez Crisis, or how it is using the USD financial system vs. Iran today.
Equally, this assumes that all foreign governments and central banks will want to see the US and USD/Eurodollar cement their global financial primacy further. Yes, Fed support will help alleviate this current economic and brewing financial crisis – but the shift of real power afterwards would be a Rubicon that we have crossed.
Specifically, would China really be happy to see its hopes of CNY gaining a larger global role washed away in a flood of fresh, addictive Eurodollar liquidity, meaning that it is more deeply beholden to the US central bank? Again, please think back to the origins of Eurodollars, to Suez, and to how Iran is being treated – because Beijing will. China would be fully aware that a Fed bailout could easily come with political strings attached, if not immediately and directly, then eventually and indirectly. But they would be there all the same.
One cannot ignore or underplay this power struggle that lies within the heart of the Eurodollar Matrix.
I know you’re out there

 So, considering those systemic pressures, let’s look at where Eurodollar pressures are building most now. We will use World Bank projections for short-term USD financing plus concomitant USD current-account deficit requirements vs. specifically USD FX reserves, not general FX reserves accounted in USD, as calculated by looking at national USD reserves and adjusting for the USD’s share of the total global FX reserves basket (57% in 2018, for example). In some cases this will bias national results up or down, but these are in any case only indicative.

How to read these data about where the Eurodollar stresses lie in Table 1? Firstly, in terms of scale, Eurodollar problems lie with China, the UK, Japan, Hong Kong, the Cayman Islands, Singapore, Canada, and South Korea, Germany and France. Total short-term USD demand in the economies listed is USD28 trillion – around 130% of USD GDP. The size of liabilities the Fed would potentially have to cover in China is enormous at over USD3.4 trillion - should that prove politically acceptable to either side.
Outside of China, and most so in the Cayman Islands and the UK, Eurodollar claims are largely in the financial sector and fall on banks and shadow banks such as insurance companies and pension funds. This is obviously a clearer line of attack/defence for the Fed. Yet it still makes these economies vulnerable to swings in Eurodollar confidence - and reliant on the Fed.
Second, most developed countries apart from Switzerland have opted to hold almost no USD reserves at all. Their approach is that they are also reserve currencies, long-standing US allies, and so assume the Fed will always be willing to treat them as such with swap lines when needed. That assumption may be correct – but it comes with a geopolitical power-hierarchy price tag. (Think yet again of how Eurodollars started and the 1956 Suez Crisis ended.)


Third, most developing countries still do not hold enough USD for periods of Eurodollar liquidity stress, despite the painful lessons learned in 1997-98 and 2008-09. The only exception is Saudi Arabia, whose currency is pegged to the USD, although Taiwan, and Russia hold USD close to what would be required in an emergency. Despite years of FX reserve accumulation, at the cost of domestic consumption and a huge US trade deficit, Indonesia, Mexico, Malaysia, and Turkey are all still vulnerable to Eurodollar funding pressures. In short, there is an argument to save yet more USD – which will increase Eurodollar demand further.

We all become Agent Smith?
In short, the extent of demand for USD outside of the US is clear – and so far the Fed is responding. It has continued to expand its balance sheet to provide liquidity to the markets, and it has never done so at this pace before (Figure 5). In fact, in just a month the Fed has expanded its balance sheet by nearly 50% of the previous expansion observed during all three rounds of QE implemented after the Global Financial Crisis. Essentially we have seen nearly five years of QE1-3 in five weeks! And yet it isn’t enough.

 Moreover, things are getting worse, not better. The global economic impact of COVID-19 is only beginning but one thing is abundantly clear – global trade in goods and services is going to be hit very, very hard, and that US imports are going to tumble. This threatens one of the main USD liquidity channels into the Eurodollar system.

Table 2 above also underlines looming EM Eurodollar stress-points in terms of import cover, which will fall sharply as USD earnings collapse, and external debt service. The further to the left we see the latest point for import cover, and the further to the right we see it for external debt, the greater the potential problems ahead.
As such, the Fed is likely to find it needs to cover trillions more in Eurodollar liabilities (of what underlying quality?) coming due in the real global, not financial economy – which is exactly what the BIS are warning about. Yes, we are seeing such radical steps being taken by central banks in some Western countries, including in the US - but internationally too? Are we all to become ‘Agent Smith’?

If the Fed is to step up to this challenge and expand its balance sheet even further/faster, then the US economy will massively expand its external deficit to mirror it.
That is already happening. What was a USD1 trillion fiscal deficit before COVID-19, to the dismay of some, has expanded to USD3.2 trillion via a virus-fighting package: and when tax revenues collapse, it will be far larger. Add a further USD600bn phase three stimulus, and talk of a USD2 trillion phase four infrastructure program to try to jumpstart growth rather than just fight virus fires, and potentially we are talking about a fiscal deficit in the range of 20-25% of GDP. As we argued recently, that is a peak-WW2 level as this is also a world war of sorts.
On one hand, the Eurodollar market will happily snap up those trillions US Treasuries/USD – at least those they can access, because the Fed will be buying them too via QE. Indeed, for now bond yields are not rising and USD still is.
However, such fiscal action will prompt questions on how much the USD can be ‘debased’ before, like Agent Smith, it over-reaches and then implodes or explodes – the first of the logical endpoints for the Eurodollar system, if you recall. (Of course, other currencies are doing it too.)

Is Neo The One?
In conclusion, the origins of the Eurodollar Matrix are shrouded in mystery and intrigue – and yet are worth knowing. Its operations are invisible to most but control us in many ways – so are worth understanding. Moreover, it is a system under huge structural pressure – which we must now recognise.
It’s easy to ignore all these issues and just hope the Eurodollar Matrix remains the “You-Roll-Dollar” market – but can that be true indefinitely based just on one’s belief?

Is the Neo Coronavirus ‘The One’ that breaks it?
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ORACLE: “Well now, ain’t this a surprise?”
ARCHITECT: “You’ve played a very dangerous game.”
ORACLE: “Change always is.”
ARCHITECT: “And how long do you think this peace is going to last?”
ORACLE: “As long as it can….What about the others?”
ARCHITECT: “What others?”
ORACLE: “The ones that want out.”
ARCHITECT: “Obviously they will be freed.”