Three Things Are About To Derail Trump’s Fiscal Plan, Goldman Warns

For some still unknown reason, Goldman Sachs, the bank that single-handedly accounts for the bulk of Trump’s closest economic and financial advisors, and whose former COO has been reportedly tasked with hatching Trump’s “phenomenal” tax plan, has been on a tear in the past month to discredit his proposed political agenda. Just last week Goldman slammed Trump’s proposed economic plan, warning that unlike its earlier optimism, “one month into the year, the balance of risks is somewhat less positive in our view.”  Goldman’s Jan Hatzius then gave three reasons why his outlook had soured substantially in just a few months:

  • First, the recent difficulty congressional Republicans have had in moving forward on Obamacare repeal does not bode well for reaching a quick agreement on tax reform or infrastructure funding, and reinforces our view that a fiscal boost, if it happens, is mostly a 2018 story.
  • Second, while bipartisan cooperation looked possible on some issues following the election, the political environment appears to be as polarized as ever, suggesting that issues that require bipartisan support may be difficult to address.
  • Third, some of the recent administrative actions by the Trump Administration serve as a reminder that the president is likely to follow through on campaign promises

* * *

Now, in yet another note from Goldman over the weekend, the bank’s Washington analyst Alec Phillips breaks down the “Fiscal Constraints on the Political Agenda” and lays out why, despite Trump’s intention to announce “something phenomenal on taxes in the next 2-3 weeks“, a statement which promptly boosted stocks to new all time highs, the reality is far different, and that between Trump’s tax plans and various other aspects of the president’s fiscal agenda, the most likely outcome will be imminent disappointment as the plan begins to move through Congress where it is about to hit major roadblocks.

The reason for the latest dour outlook on Trump’s fiscal overhaul is that, as Phillips explains, in recent years, congressional Republicans have offered annual budget resolutions that aim to eliminate the federal budget deficit within ten years by reducing spending growth. This has been a politically necessary goal, as some fiscally conservative lawmakers have opposed a budget plan that does not reach balance.

And while in the past such discussions between Democrats and Republicans have been the source of much consternation, infamously leading to the US government shutdown of 2011 and subsequent US downgrade, this year’s budget plans will be even more difficult to put together.

He gives the following three reasons why:

  • First, the projected deficit at the end of the ten-year period that Congress uses for fiscal plans is slightly larger.
  • Second, Republican leaders will need to make room in the budget for tax reform and increased infrastructure spending, unlike previous budget proposals.
  • Third, more of the budget appears to be politically off-limits to proposed cuts than in the past.

As Phillips summarizes, over the next few months, the Trump Administration and congressional Republicans will need to demonstrate how they will piece this puzzle together; the President may submit an abbreviated budget to Congress within the next several weeks. More importantly, Congress will need to pass a budget resolution in order to lay the procedural groundwork for tax reform, which will require that they lay out a fiscal plan for the next ten years.

Goldman takes a middle path, concluding that it expects an eventual agreement that accommodates some of these new priorities while still achieving balance. “However, reaching this eventual agreement is likely to be a political challenge and is likely to be an early indication to financial markets that a large fiscal stimulus will be difficult to achieve in light of fiscal constraints.

This, incidentally, is what JPMorgan’s trading desk has been warning for nearly two months, cautioning that “the market’s focus will likely turn back to the precise scope, timing, and structure of the Trump/Ryan fiscal/regulatory agenda.”

Considering the S&P closed on Friday at new all time highs, this moment has yet to pass, and Goldman and JPM’s warnings have yet to be heeded by traders.

In any case, for those wondering why Goldman continues to temper expectations for a major fiscal breakthrough from Trump, here is the full report.

From Goldman’s Alec Phillips

Fiscal Constraints on the Political Agenda

Spring marks the start of budget season in Washington, and the upcoming process looks likely to be more difficult than usual, as congressional Republicans try to accommodate new policy priorities while facing greater political constraints. Over the last several years, Republicans in Congress have supported significant spending cuts in the annual budget resolution that Congress traditionally uses to guide fiscal decisions for the coming fiscal year. These spending cuts have been used to demonstrate a balanced budget by the tenth and final year of the projection. Doing so has become politically necessary as some conservative lawmakers are likely to oppose a budget plan that does not reach balance.

While the annual budget resolution is often seen as symbolic, this year’s will be more significant as it will lay the institutional groundwork for tax reform and potentially infrastructure legislation, which cannot pass until after the budget resolution does. Exhibit 1 contrasts the Congressional Budget Office’s (CBO) recently released baseline deficit projection with the FY17 budget resolution that passed the House Budget Committee last year.

Exhibit 1: A wide gap between projections and plans

Source: Congressional Budget Office, House Budget Committee

In recent budget resolutions, spending cuts have done essentially all of the work in achieving projected balance by the end of the ten-year period. While this strategy looks likely again this year, Republican leaders will face three new challenges.

  • First, the baseline budget deficit they will be trying to eliminate is slightly larger than last year, mainly because the 10-year budget window has rolled one year forward in a period of widening budget deficits. The CBO projects a deficit at the end of the current 10-year projection period of 5% of GDP.
  • Second and more importantly, budget plans will need to accommodate new political priorities, particularly tax reform. The Urban/Brookings Tax Policy Center estimates the revenue effect of the House Republican Blueprint on tax reform at roughly $2.5 trillion over ten years, including their most generous estimate of macroeconomic feedback on revenues (“dynamic scoring”). This is equal to nearly half of the primary spending cuts that House Republicans proposed last year to reach a balanced budget by 2026, and would increase the deficit by 0.9% of GDP by the end of the 10-year budget window. Since the border-adjusted tax (BAT) proposal in the House Republican plan raises an estimated $1.2 trillion over ten years in revenue, the low probability in our view that eventual tax reform legislation will include it suggest that fitting a substantial corporate tax rate reduction could be even greater.  President Trump has yet to make a specific proposal on infrastructure, but the proposal released by his advisors shortly before the election would authorize another $140bn in tax credits, and would add another 0.1% of GDP to the deficit in ten years.
  • Third, it is difficult to see how congressional Republicans can propose the same spending cuts they did last year in certain areas of the budget, in light of changed political circumstances. Last year’s budget resolution proposed reducing Medicare spending by $450bn over ten years (0.4% of GDP by the end of the budget window), but President Trump campaigned on a position that Medicare and Social Security should be left largely unchanged.

A more substantial source of previously proposed savings is the repeal of benefits under the Affordable Care Act (ACA). However, President Trump has insisted that he intends to replace it with a new program that maintains or increases coverage levels, as have some congressional Republicans. Last year’s Republican budget assumed the savings from repealing (but not replacing) ACA benefits, a difference of around $2 trillion over the next ten years, or around 1.2% of GDP by the end of the 10-year budget window. Exhibit 2 shows how the spending cuts proposed last year would reduce the baseline budget deficit in FY2027 and how much might be offset by new policy considerations.

Exhibit 2: Reaching balance after ten years is harder in light of new political priorities and constraints

Source: Congressional Budget Office, House Budget Committee, Goldman Sachs Global Investment Research

In theory, these additional costs could be offset with savings elsewhere in the budget. However, these cuts would be very deep as a share of projected spending in those categories. Exhibit 3 presents a scenario in which Medicare is considered off limits, savings from the ACA are not counted because they would need to be redirected into new benefits for those currently covered, and defense spending is kept at the same slightly increased level as last year’s proposal, and cuts in the remaining areas are scaled up proportionately to achieve balance while covering the cost of the tax cuts and infrastructure spending.

The upshot is that Medicaid, non-defense “discretionary” spending (funds appropriated by Congress for purposes other than defense) and other “mandatory” spending (income support programs, federal and military pensions, and veterans’ benefits) would need to be cut by between 50-80% to achieve a balanced budget within the next ten years. We are skeptical that a budget resolution that proposes cuts of this size could win the 51 votes necessary to pass in the Senate.

Exhibit 3: Large concentrated cuts are improbable but would be necessary to reach balance within political constraints

Source: Congressional Budget Office, House Budget Committee, Goldman Sachs Global Investment Research

This dilemma might be resolved by a combination of three things.

  • First, it is possible though unlikely that congressional Republicans might abandon their goal of a balanced budget within ten years. Fiscal conservatives are likely to vote against a budget proposal that does not eventually achieve balance, which could sink the effort since no Democrats are likely to vote for it.
  • Second, entitlement reform might be on the table after all, at least as far as the congressional budget process is concerned. While we expect changes to be made to the Affordable Care Act, we are skeptical that Congress will make meaningful changes to other social benefit programs like Medicare this year or next. That said, it is difficult to see how congressional Republicans will put together a credible budget proposal that achieves balance within ten years without proposing changes in this area.
  • Third, tax cut plans might be scaled back. Compared to the roughly $3 trillion “static” cost of the House Republican plan, our expectation is that Congress will ultimately enact a tax cut of around $1.75 trillion over ten years, which would probably show up in official projections as well under $1 trillion once “dynamic scoring” is applied and various adjustments to the budget baseline are taken into account.

We note that the budget resolution that congressional Republicans will release in the next couple of months—the normal timing is early March but this looks likely to be delayed due to the ongoing debate over ACA reforms—does not become law, so congressional leaders will have some flexibility to propose policies that have a low probability of actually taking effect. That said, some aspects of the budget resolution will be quite important since the levels set in the budget outline that Congress adopts this spring will govern consideration of tax reform and potentially infrastructure legislation. If those bills exceed the limits in the resolution, they could lose procedural protections and could require 60 votes (and therefore Democratic support) in the Senate to pass.

* * *

Finally, here are the clues to look for over the next several weeks to see how Trump’s agenda is progressing.

  • February 28 – State of the Union Address: President Trump seems unlikely to go into much detail, but his comments on the broad aspects of some of the issues discussed above could shed light on the administration’s general approach.
  • March – President’s Budget? White House officials continue to indicate that some type of budget proposal will be released in the next few weeks. This looks likely to touch on tax reform and infrastructure, but it is unclear whether it will constitute an abbreviated budget that presents a summary across all areas of the budget, similar to what other new presidents have proposed, or whether it will include proposals in just a few areas.
  • April – Congressional budget resolutions: As discussed above, Congress traditionally approves (or tries to approve) a budget resolution by April that includes spending and revenue levels for each of the next ten fiscal years. This resolution is also likely to include “reconciliation instructions” for tax reform, which is the only way that legislation can pass with 51 votes in the Senate. While the resolution itself does not have the force of law—the President never signs it—it must pass before tax reform legislation can begin to move forward.

Normally the first iteration of the budget resolution is released in the first or second week in March, but this year’s process might begin slightly later due to delays in considering ACA repeal legislation, which for procedural reasons needs to be largely concluded before the budget process can begin.

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Germans Outraged After US Tennis Association Plays “Nazi Anthem”

Germany responded with outrage after the United States Tennis Association made the embarrassing gaffe of playing the Nazi-era version of Germany’s national anthem during a Federation Cup tie in Hawaii, Reuters reported. The version played included the first stanza, beginning “Deutschland, Deutschland uber alles,” which was used as Nazi propaganda. Germany’s Andrea Petkovic described it as “the worst thing that has ever happened to me.”

The offensive first stanza has been banned in Germany since the end of the Second World War, but was inexplicably sung during the opening ceremony of the quarter final match on Saturday between  Alison Riske of the US and Germany’s Andrea Petkovic.

I’ve never felt more disrespected in my whole life, let alone in Fed Cup, and I’ve played Fed Cup for 13 years now and it is the worst thing that has ever happened to me,” Germany’s Andrea Petkovic said, adding “it’s 2017 – something like this simply should not happen in the United States.”

She also said that “we were left shocked and did not know how to react” saying she considered walking off court before the singles match against Alison Riske. Riske subsequently beat Petkovic.

Petkovic’s teammates and traveling fans attempted to drown out the outdated tune by singing the correct “Einigkeit und Recht und Freiheit” (Unity and justice and freedom) verse over the amplified Nazi anthem.

Germany’s coach, Barbara Ritter, was distraught saying: “This is an absolute scandal, a disrespectful incident and inexcusable, I could have sobbed. Hearing the national anthem at the Fed cup is a holy moment.”

Shortly after the gaffe, the USTA tweeted its apologies, saying it extended “its sincerest apologies to the German Fed Cup team and all of its fans for the performance of an outdated national anthem.” “In no way did we mean any disrespect. This mistake will not occur again, and the correct anthem will be performed for the remainder of this first-round tie,” it said in a statement. German tennis federation chief Ulrich Klaus confirmed that his American counterpart had apologised for the mistake.

The USTA extends a sincere apology to the German Fed Cup team & fans 4 the outdated National Anthem. This mistake will not occur again.

— USTA (@usta) February 11, 2017

@DTB_Tennis We can assure you that it won’t. Again, our sincere apologies.

— USTA (@usta) February 11, 2017

“Our American hosts at the Fed Cup opening in Hawaii made a mistake that should not happen,” Klaus said in a statement. “The fact that in the year 2017 a wrong anthem can be played that is associated with the horror of the past was for players and staff and the officials present both shocking and disturbing.”

“The USTA through its president Katrina Adams has apologised officially in writing and in person and deeply regrets the blunder.”

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Consumer Spending “Pothole” Ahead: IRS Refunds Tumble As New Law Delays Payments

A period of consumer spending, retail sales and housing weakness may be imminent, after federal tax refunds tumbled by 78% in the early part of February compared to 2016, the  result of a new law which requires the IRS to delay the printing of checks to households claiming specific tax credits.  The reason for the slowdown is that in late 2015 Congress passed a law forcing the IRS to hold back refund checks related to the earned-income tax credit and the child tax credit until at least Feb. 15. The delay would reportedly give the IRS more time to match tax returns with income data on W-2s filed by employers. Allegedly, such payments had become a tempting target for identity thieves and unscrupulous tax preparers, who falsify tax returns to get thousands of dollars.

The IRS has told affected taxpayers that they shouldn’t expect to receive their refunds until Feb. 27 because of weekends, holidays and bank delays.

While the Joint Committee on Taxation projected the law would increase federal revenue by $779 million over a decade, it may result in a period of stagnant spending until the calendar effects are wrinkled out and US households get the money they are owed. According to a WSJ analysis, refunds paid through Feb. 3 were only $13.2 billion, down almost 80% from $58.6 billion through Feb. 5, 2016. Additionally, the average refund also declined, to $1,994 from $3,385.

While perfect comps are impossible as the 2016 data includes four more processing days, the number of returns is down just 24%, far less than the drop in refunds.

The delay in cash disbursement could temporarily slow overall consumer spending, impact retail sales and delay mortgage payments. That’s because tax refunds are often the largest financial event of the year for low-income households, which make major purchases or use the refunds to pay off debts according to the WSJ. “Overall U.S. retail and restaurant sales in January and February 2016 totaled $814.48 billion, not adjusted for seasonal variations, according to the Commerce Department.”

The good news is that after a period of initial slowness in the first half of the month, spending should pick up and compensate in the last two weeks of the month. According to Chris Christopher, director of consumer economics at IHS Global Insight, the IRS delays should push some spending back into February and March without affecting overall sales.

Still, according to a Goldman note, the refund delays could cause a “pothole” in consumer spending in February and said an expected decline of 40%-50% in February refunds would be “surprisingly large.”

Putin tax seasons in context, in 2016, the IRS paid out more than 111 million tax refunds for a total of $317.6 billion.

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Is Priebus Out? Trump Friend Slams Chief Of Staff As “Weak, Incompetent”

Just a day after Chris Ruddy, Newsmax Media CEO, joined President Trump for a drink (Trump had a diet Coke, Ruddy had a scotch), the long-time friend appeared Sunday on CNN’s Reliable Sources and unprompted, launched into an attack on the President’s chief of staff, Reince Priebus, describing him as weak and incompetent.

Drinks two days ago…

After @POTUS finished dinner w. PM Abe, asked me to join him for drink, him diet Coke, me Macallan’s. Talked for half hour.

— Christopher Ruddy (@ChrisRuddyNMX) February 11, 2017

And now Chris Ruddy tells CNN, Trump’s not the problem, Priebus is…


News from @ReliableSources: Chris Ruddy @ChrisRuddyNMX says Trump’s not the problem, Reince Priebus is

— Brian Stelter (@brianstelter) February 12, 2017


“The White House is showing not the amount of order that we need to see. I think there’s a lot of weakness coming out of the chief of staff. I think Reince Priebus, good guy, well intentioned, but he clearly doesn’t know how the federal agencies work.


He doesn’t have a really good system. He doesn’t know how the communications flow … the President’s not getting the back-up he needs in the operation of the White House and sometimes the pushback he needs to have with a stronger … White House chief of staff.

Is Priebus on the out? And will Steve Bannon now become de facto Chief of Staff?

A position many believed he should have been in from the start…

The selection of @reince for COS in a @realDonaldTrump WH would cause a rebellion in Trump’s base. #RyansBoy

— Roger Stone (@RogerJStoneJr) November 12, 2016

And his public stance seems popular…

After Ruddy hit Reince on @brianstelter‘s show, he told me he got text messages from 3 sitting Cabinet secretaries praising his performance.

— Philip Rucker (@PhilipRucker) February 12, 2017

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Fed ‘Insider’ Exposes The Evils Of US Monetary Policy Recklessness

Submitted by Adam Taggart via,

Danielle DiMartino Booth, former analyst at the Federal Reserve Bank of Dallas, has just released the book Fed Up: An Insider’s Take On Why The Federal Reserve Is Bad For America.

In it, Danielle describes how the Federal Reserve is controlled by 1,000 PhD economists and run by an unelected West Coast radical with no direct business experience. The Fed continues to enable Congress to grow our nation’s ballooning debt and avoid making hard choices, despite the high psychological and monetary costs. And our addiction to the “heroin” of low interest rates is pushing our economy towards yet another collapse.

This reckless monetary policy pursued by the Fed has resulted in the rich elite becoming markedly richer, while savers and retirees are being absolutely gutted. All while risking a coming conflagration in the bond markets that will destroy a painful percentage of the world’s financial wealth:

On The Ticking Bond Market Time-Bomb

That’s the trillion-dollar question. We didn’t used to call it that did we? We used to call it the million-dollar question. But it’s now the trillion-dollar question. The punditry up there will tell you that The Fed has been in tightening mode since the taper began several years ago, but I say hooey to that. What we have today is absolute fungibility with central bank purchases on a global basis. You’re talking about something upwards of $200 billion every single month.


What the global bond market now revolves around, and relies upon, is the assumption that somebody somewhere will be conducting quantitative easing. As long as they do that, we’re operating in a bond market that is assuming that every single bond purchased by a central bank globally has been expired permanently.


You’re taking supply out of the system, which is the only thing that could get you to justify where bond yields are and, therefore the mirror image of that, where bond prices are, which is at record highs or close to record highs. That I think is at the crux of central bankers’ global dilemma. The first central bank that even hints that they are going to reduce the size of the balance sheet or even worse, sell off a single bond, it is game over at that point for the world bond market.

On The Ticking Pension Time-Bomb

The problem with pensions is that the sins are compounding over time. They are piling up. Every single fiscal year that goes into the history books with a 6%+ gap between what was assumed versus what was returned piles on to the next year of equal, if not worse, relative underperformance.


You’re talking about having to make up for all of that lost time, but in spades — at multiples of what the current rate of return assumptions are. Going forward, on an ongoing basis for years to come. Which is highly unrealistic when you are staring down the barrel of an almost 40-year bull market in bonds and the second longest bull market in US history. The assumptions are simply Herculean in magnitude and impossible to achieve. That’s why you’re seeing rate of return assumptions begin to come down.


This is all good, fine and well until you completely square the circle and understand that every time a municipality or a state pension plan reduces their rate of return assumptions, some entity, whether it be the state, the school district, some entity has to write a bigger check in order to make up for the cash flow that is no longer being assumed in by the actuaries via rate of return investments. It doesn’t work. You can’t do it for very long when you’re not bringing money in as a state municipality.

Click the play button below to listen to Chris’ interview with Danielle DiMartino Booth (40m:01s).

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Why ZH Fight Club matters: The scarcity of real discussion and debate in today’s society and what we can do about it.

“Time spent arguing is, oddly enough, almost never wasted.”

-Christopher Hitchens
Letters to a Young Contrarian

This is the second article regarding the upcoming ZeroHedge Symposium and Live Fight Club in Marfa, TX, June 16-18.  

Updates and speakers can be found in the first article, here:

The time has come for The First ZeroHedge Symposium and Live Fight Club

I think it is important to begin with the following excerpt from another article, Nobody is Ready, Willing, or Able to Ask and/or Answer Questions of Substance

In observing politicians, the media, and American citizens, one thing is clear to me about the presidential, congressional, and local campaigns.  Nobody is ready, willing, or able to ask and/or answer questions of substance.

Quite some time ago, my family and I ran across one of our elected representatives, our United States Congressman, campaigning at the town square.  We observed more than 100 of our fellow Texans shaking hands with him, and offering their support, which he was grateful to accept.  Not one person asked a question about his party’s platform, or his voting record.  The congressman did not make a single statement of substance about any issue.  Sure.  There were a few comments and jokes exchanged about the personalities of other candidates, but nothing at all about policy.

Finally, our family approached him, introduced ourselves, told him where we live (in his district) and exchanged warm greetings.  I asked, “Considering that you voted for both TARP bills in 2008, the most recent of many tax-payer bailouts of bank shareholders, and considering that you reported owning more than $100,000 of JPMorgan Chase Common Stock and Employee Stock in 2007, Congressman Brady, what is your position on the Federal Reserve Banks being responsible for regulating and supervising the very same banks that own them, such as JPMorgan Chase?

Immediately, a twenty-something woman stepped around from behind our elected representative, and in between him and us.  Our congressman stepped backwards several steps.  She said to us, without even a hint of the Texas twang used by Brady, “The congressman believes strongly in protecting our nation’s financial system for the benefit of every American.”

I said, “Well, like the vast majority of Americans, I did not, and do not, own any bank stocks or receive any bank dividends, especially New York banks.  I am, however, paid my salary in the US dollars that continue to lose value, and I use them to purchase the ever more expensive necessities of life.  Back to my question, please.  Doesn’t self-regulation and bailouts put the fox in charge of guarding the tax payer’s hen house?  And hasn’t our congressman shown himself to be one of the foxes?”

Congressman Brady was smiling, waving, and making his escape to a waiting vehicle.  One of our children shouted, “Dad!  He’s getting away!”

I laughed and nodded.

The un-elected twenty-something woman simultaneously smiled and glared at me.  She said, “America has the strongest banking system in the world, and the most stringent regulation.  Your congressman has worked hard to ensure that.  Thank you.”  Then she also left the town square.

I love the United States of America.  But as a parent, I have learned that two very important parts of love is not accepting wrong behavior and holding our loved ones accountable.  If we do not, then we are enabling wrong behavior, and that is not loving.

Many years ago, in high school journalism class, I was taught that journalists held politicians accountable.  In fact, the media used to be known as The Fourth Estate.  However, today, I see no evidence of this.  I only see the media as tools of propagandists and sellers of advertising and advertisers’ products and services.  Nobody in the mass media appears ready, willing, or able to ask our politicians any questions of substance.  When they do, rarely, and the politician is not responsive, usually, journalists are totally incapable of holding the politician accountable for an answer.


I believe that if Americans want to protect and defend what liberty we still have, it is now clearly up to us, We The People!  We cannot rely on The Fourth Estate.    

We must disintermediate The Fourth Estate. 

We must hold our government accountable.  We must be active, not passive.  Fortunately, the internet might just be the tool that enables us to do this.  But the establishment’s mainstream media and television propagandists are not going down without a fight.  Just look around.   So, like I say in my Revolutionary Call to Arms , we have to train for the fight.  We The People have to gain knowledge to overcome fear, False Evidence Appearing Real, and we have to train for the fight that we know in our hearts has arrived.  Only then can we find the courage and ability to begin to even practice disintermediating The Fourth Estate.  This is what I see many of us doing, here, now, in the ZeroHedge comments section.  Even when we are not convincing others, or being convinced, then we are at least increasing our own knowledge (and often others) and honing our own intellect and debate skills. 

There is much work to be done.  Just take 5 minutes to learn exactly how the American educational establishment is teaching us to debate with each other:

This is how the establishment prefers We The People think and behave. 


“I think in our desire to create a better America, we have to have civilized debate in this country, and not just yelling.”


– Craig Ferguson


So, why should we get together in person, in Marfa, when we can all debate with each other on the internet?  There are many reasons, but I will give two.  First, it is an exercise in courage to come out from behind the keyboard, look other humans in the eye, and hold an intelligent discussion when our opinions are not in alignment.  We need to get more comfortable with being courageous.

Second, most of us on ZeroHedge are human beings, and have a deep and ancient need for community and the mutual love and respect that humans tend to naturally have with other members of our community.  Sadly, community is missing from many of our lives, today, and I believe this sometimes has a very negative effect on the way we interact here, on Zerohedge, which may be easily remedied simply by us getting together in the high desert for a few days of listening, talking, eating, drinking, dancing, star gazing, and possibly even sleeping together (although my bed is already booked).

In communications with some of you that are coming to Marfa, and several of the speakers, we seem to have come up with two general aspects that will make this very different from other events.  First, if you want to remain anonymous, then we aren’t going to stop you.  Anyone will be welcome to simply walk in to all events, free of charge.  There will be nobody at the doors to check identification and there will be no registration or badges.  Second, all speakers are going to be ready, willing, and able to take a lot of questions from the audience at the end of each presentation, and everyone that asks a question will get the opportunity to ask at least one follow-up question.  Debate will be encouraged. 

If you have spent enough time reading ZeroHedge and engaged in the comment section discussions, then you probably have come to agree with Hitchens’ quote posted at the top of this article, “Time spent arguing is, oddly enough, almost never wasted.” 

Here is to argument, courage, and community!

I sincerely hope to see you in Marfa.


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“Pro-Russian” Steinmeier Elected German President; Putin Delighted

Germany’s former foreign minister Frank-Walter Steinmeier was elected as the country’s next president on Sunday. Steinmeier, a Social Democrat who had served as foreign minister until last month, won 931 of the 1,239 valid votes by lawmakers of Germany’s 16 federal states, becoming the 12th person to hold the largely ceremonial post in Germany’s post-war era.

He will succeed current president Joachim Gauck, a 77-year-old former pastor and pro-democracy activist from east Germany, when he steps down on March 18.

Germany’s new president Frank-Walter Steinmeier

His election was largely predetermined last November, when as reported at the time, Angela Merkel suffered her latest a political setback “by accepting that foreign minister Frank-Walter Steinmeier, a candidate from the rival Social Democrat party, should be the country’s next president. Steinmeier was likely to be voted into the largely honorary post with reluctant backing from the chancellor’s conservative CDU/CSU alliance, which has failed to find a suitable candidate”

Merkel’s reported antagonism to the candidate, however, was not on display after Bundestag president Norbert Lammert announced the results, at which point all representatives held a standing ovation except for a few dozen members of the anti-immigrant Alternative for Germany (AfD) party, Reuters reports. The anti-immigrant AfD, which has no lawmakers in the lower house but holds seats in 10 of Germany’s 16 state parliaments, is forecast to be the third-largest party after a general election on Sept. 24.

“I have faith in him to lead our country in these difficult times,” Chancellor Angela Merkel, who is seeking a fourth term, said after the vote.

The presidency of Steinmeier, while ceremonial, may spark a pro-Kremlin turn in Germany. Dubbed as “pro-Russian” during his foreign ministerial days, Steinmeier last year drew criticism when he said NATO’s decision to stage military maneuvers in eastern Europe amounted to “saber-rattling”. His Social Democrats prefer a softer stance towards Russia than Merkel’s conservatives.

As we reported last June, Steinmeier criticized NATO for having a bellicose policy towards Russia, describing it as “warmongering”, according to an interview with Bild. He added that “what we should avoid today is inflaming the situation by warmongering and stomping boots.” As such, in a time when NATO is worried about losing US support under a Trump administration, it has just suffered another blow even as it continues its expansion and encirclement of Russia.

Meanwhile, the Kremlin said that a delighted Russian President Vladimir Putin promptly congratulated Germany’s new president-elect, Frank-Walter Steinmeier, on his victory, and invited him to visit Russia at his earliest possible convenience.

“Vladimir Putin has confirmed his interest in continuing a constructive dialogue on international and bilateral issues, and invites Steinmeier to visit Russia at a convenient time for him,” an official press release from the Kremlin read.

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Trump To Nominate Former Bear Stearns Chief Economist For International Treasury Role

Having filled up his administration to the brim with former Goldman staffers, to the point where even President Trump realizes there may be too many “Goldman Guys” on his team, Bloomberg reports that in an attempt to branch out, Donald Trump plans to nominate David Malpass, 60, the former Bear Stearns economist, as U.S. Treasury undersecretary for international affairs.

For those trading FX, his role will be critical: “His first job will be to help guide policy as the world wonders whether the new administration will make a habit of talking up or down other countries’ currencies.”

Malpass will report to the Treasury secretary on the U.S.’s international economic relationships, most importantly with China. Ties between the world’s two largest economies have become more tenuous since Trump’s election. The Republican and his advisers have not only talked about China and Japan artificially manipulating their currencies — after walking back a pledge to label the former as a manipulator in the early days of the administration — but have also moved foreign exchange markets by jawboning the U.S. and Canadian dollars, Mexico peso, and the euro.

In other words, with much confusion within the Trump admin over whether the US Dollar should be stronger or weaker, Malpass will – hopefully – provide some much needed clarity. He will also be the point person, i.e., fall guy, should Trump’s dollar policy backfire.

His nomination will likely be heated as most other Trump candidates: Malpass, due to his high profile Bear Stearns roots prior to its collapse in 2008, may face heat from Democrats already bitter over the number of Wall Street alums joining the Trump administration.

Confirmations in the Senate are gummed up, with Democrats debating for 30 hours or boycotting committee votes on some cabinet picks. Treasury Secretary nominee Steven Mnuchin is expected to be confirmed in a vote on Monday.

The good news for Trump is that if confirmed by the Senate, Malpass would bring “extensive government experience to an economic team that has little background in public service. He served as a deputy assistant secretary in the Treasury and State departments during the administrations of Ronald Reagan and George H.W. Bush.”

Malpass’ ascent will be notable to Fed watchers because he has stated in the past that he views the Federal Reserve’s asset purchases as “very harmful” to the economy by channeling credit to corporations and the government instead of to new, more dynamic small businesses. That said, as Bear Stearns’ chief economist, Malpass in 2007 wrote a Wall Street Journal column advising markets not to panic over a $2 trillion loss in equity markets, calling it a “correction” that may eventually drive economic growth. The following year, that credit crunch turned into a global crisis, taking Bear Stearns down with it.

After Bear Stearns’ demise Malpass founded Encima Global, an economic research company, and has been a frequent commentator in print and on television. He served on the Trump campaign’s economic advisory council.

Bloomberg adds that Malpass would replace Nathan Sheets, who served as undersecretary of international affairs in the final stages of the Obama administration. Lael Brainard, now a Fed governor, also held that role under Obama from 2010 to 2013. As explained yesterday, Brainard is one of the Fed governors closely tied to the Clinton regime, and some see her as the next head to roll at the Fed following Daniel Tarullo’s unexpected departure on Friday.

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