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The story of the $120,000 (eaten) banana just won't end, and tonight it took another, even more surreal turn.

The now-iconic white wall that as recently as Saturday held a duct-taped banana - arguably the world's most expensive - at Art Basel Miami Beach was "vandalized" on Sunday afternoon, forcing exhibitors to cover up the writing in red lipstick with a white cardboard. The banana, which attracted hundreds after it sold to an art collector for $120,000, was replaced with the phrase “Epstien (sic) didn’t kill himself,” written with red lipstick.

There's always money in the banana stand.https://t.co/Up3lydwv98 pic.twitter.com/ZrIXPGYew5

— Rudy Havenstein, Just the right amount of malarkey (@RudyHavenstein) December 9, 2019

According to the Miami Herald, the surreal scene confused those who were present in the gallery, most who assumed it was just another "art" performance: "This is the gallery where anyone can do art, right?” the man is heard saying in a video provided to the Miami Herald when a security guard confronted him.

This guy decided to write on the banana wall LOL ????????? #ArtBasel @OfficialJoelF pic.twitter.com/jjWDyugNuv

— sacha-stephanie (@sachasteph_) December 8, 2019

Sacha Medici, 24, was strolling inside the Miami Beach Convention Center, hoping to spot Italian artist Maurizio Cattelan’s banana art piece, titled “Comedian,” which was eaten by a performance artist on Saturday afternoon.

“When we got to the wall, it was white and empty,” Medici said. “We saw this guy live-streaming... and he starts writing on the wall and I was like, ‘No way, there’s no way this guy is writing.”

Miami Beach Police spokesman Ernesto Rodriguez said the incident was reported at 4:50 p.m. and a man they identified as 46-year-old Roderick Webber of Massachusetts was arrested on charges of criminal mischief. A spokesperson for Art Basel directed any questions to authorities. Katherine Wisniewski, spokesperson for the Emmanuel Perrotin art gallery, where the vandalized wall is located, said their gallery is not affiliated with Webber.

“If someone can eat the $120,000 banana and not get arrested, why can’t I write on the wall?” Webber shouted as he was escorted out of the convention center, according to a police report.

The duct-taped banana at Art Basel is gone and has been replaced with “Epstein Didn’t Kill Himself,” which security quickly covered up. ?? pic.twitter.com/nPtnuCm6sc

— Giancarlo Sopo (@GiancarloSopo) December 9, 2019

Medici said that as the man wrote on the wall, everyone around her stared and recorded videos on their phones. Some pointed out he had misspelled the last name of Jeffrey Epstein.

And since art imitates life, security promptly covered up the "Epstien didn't kill himself" sign.

Earlier in the day, the infamous $150,000 banana duct-taped to a wall had disappeared again, this time because the gallery owners decided it was becoming an unsafe distraction, clearly anticipating an event such as this.

“We sincerely apologize to all the visitors of the fair who today will not be able to participate in Comedian,” Galerie Perrotin, where the work was being showcased, said in a statement early Sunday, the last day of the exhibition.

The Comedian is the name of the work by the Italian artist provocateur Maurizio Cattelan, composed of a ripe banana, duct tape and a 14-page manual for its installation and upkeep.

As we reported yesterday, just before 2pm on Saturday another artist provocateur named David Datuna unpeeled tape and skin and ate the banana. “Art performance,” he said. He was a “hungry artist,” adding that it was “delicious.”

In its statement, Art Basel thanked the security guards who helped control the lines to see the banana - or the concept of transience of oblong yellow fruit or something, as Bloomberg put it. In short, enough was enough.

“The installation caused several uncontrollable crowd movements and the placement of the work on our booth compromised the safety of the artwork around us, including that of our neighbors,” the statement said. “Comedian, with its simple composition, ultimately offered a complex reflection of ourselves,” it said.

No it didn't: it was a damn banana duct-taped to a wall and some idiots thought it was worth $150,000.

So to summarize:

1. Banana duct-taped to a wall sells for $150,000
2. Someone eats the banana
3. Someone writes Epstein didn't kill himself
4. Security covers up the message.

Not even the Fed could come up with a fake version of reality as warped as this one.

What makes a person healthy, wealthy, and wise? The UN’s Human Development Index (HDI) measures this by one’s life expectancy, average income, and years of education.

However, as Visual Capitalist's Iman Ghosh notes, the value of each metric varies greatly depending on where you live. Today’s data visualization from Max Roser at Our World in Data summarizes five basic dimensions of development across countries—and how our average standards of living have evolved since 1800.

Health: Mortality Rates and Life Expectancy

Child mortality rates and life expectancy at birth are telltale signs of a country’s overall standard of living, as they indicate a population’s ability to access healthcare services.

Iceland stood at the top of these ranks in 2017, with only a 0.21% mortality rate for children under five years old. On the other end of the spectrum, Somalia had the highest child mortality rate of 12.7%—over three times the current global average.

While there’s a stark contrast between the best and worst performing countries, it’s clear that even Somalia has made significant strides since 1800. At that time, the global average child mortality rate was a whopping 43%.

Lower child mortality is also tied to higher life expectancy. In 1800, the average life expectancy was that of today’s millennial—only 29 years old:

Today, the global average has shot up to 72.2 years, with areas like Japan exceeding this benchmark by more than a decade.

Education: Mean and Expected Years of Schooling

Education levels are measured in two distinct ways:

• Mean years: the average number of years a person aged 25+ receives in their lifetime

• Expected years: the total years a 2-year old child is likely to spend in school

In the 1800s, the mean and expected years of education were both less than a year—only 78 days to be precise. Low attendance rates occurred because children were expected to work during harvests, or contracted long-term illnesses that kept them at home.

Since then, education levels have drastically improved:

Research shows that investing in education can greatly narrow the inequality gap. Just one additional year of school can:

• Raise a person’s income by up to 10%

• Raise average annual GDP growth by 0.37%

• Reduce the probability of motherhood by 7.3%

• Reduce the likelihood of child marriage by >5 percentage points

Education has a strong correlation with individual wealth, which cascades into national wealth. Not surprisingly, average income has ballooned significantly in two centuries as well.

Wealth: Average GDP Per Capita

Global inequality levels are the most stark when it comes to GDP per capita. While the U.S. stands at $54,225 per person in 2017, resource-rich Qatar brings in more than double this amount—an immense $116,936 per person.

The global average GDP per capita is $15,469, but inequality heavily skews the bottom end of these values. In the Central African Republic, GDP per capita is only $661 today—similar to the average income two hundred years ago.

A Virtuous Cycle

These measures of development clearly feed into one another. Rising life expectancies are an indication of a society’s growing access to healthcare options. Compounded with more years of education, especially for women, this has had a ripple effect on declining fertility rates, contributing to higher per capita incomes.

People largely agree on what goes into human well-being: life, health, sustenance, prosperity, peace, freedom, safety, knowledge, leisure, happiness… If they have improved over time, that, I submit, is progress.

- Steven Pinker

As technology accelerates the pace of change across these indicators, will the global inequality gap narrow more, or expand even wider?

In a potentially stinging blow to US computer makers such as Dell, HP and Microsoft, and an ominous development for all those who think the US-China trade war is about to come to an end, the FT reports that Beijing has ordered all government offices and public institutions to remove foreign computer equipment and software within three years.

While the US has been extremely vocal over the past year about banning US companies from using Chinese technology, mostly emerging from the Huawei ecosystem, the directive is "the first publicly known instruction with specific targets given to Chinese buyers to switch to domestic technology vendors" and is meant to echo efforts by the Trump administration to curb the use of Chinese technology in the US and its allies. The order is said to have come directly from the Chinese Communist party’s Central Office earlier this year.

Additionally, the FT notes that the move is part of a broader campaign to increase China’s reliance on home-made technologies, "and is likely to fuel concerns of “decoupling”, with supply chains between the US and China being severed." The big irony here is that it was IBM's sale of its PC group China's Lenovo in 2004 that allowed China to develop its own PC architecture and supply chain, and effectively reverse engineer US dominance in the PC sector.

Quoting analysts at broker China Securities, the FT notes that some 20-30 million pieces of hardware will need to be swapped out as a result of the Chinese directive, with large scale replacement beginning next year. They added the substitutions would take place at a pace of 30 per cent in 2020, 50 per cent in 2021, and 20 per cent the year after, earning the policy the nickname “3-5-2”.

The 3-5-2 policy is part of a drive for China’s government agencies and critical infrastructure operators to use “secure and controllable” technology, as enshrined in the country’s Cyber Security Law passed in 2017.

But unlike previous pushes for self-sufficiency in technology, recent US sanctions have added urgency to the project, said Paul Triolo of consultancy Eurasia Group.

“China’s 3-5-2 programme is just the tip of the new spear,” said Mr Triolo. “The goal is clear: getting to a space largely free of the type of threats that ZTE, Huawei, Megvii, and Sugon now face,” he added, naming some of the Chinese companies that over the past two years have been blocked from buying from US suppliers.

Needless to say, if executed, such a drastic move by China would lead to massive lost revenue. How much? According to analysts at Jefferies, US technology companies generate as much as $150 billion a year in revenues from China, although much of that will come from private sector buyers. Still, it's probably just a matter of time before Beijing expands the rule to all Chinese organizations, both public and private, especially since in China there is no such thing as purely private sector.

To be sure, Beijing faces an uphill battle as the proposed pace of replacement is extremely ambitious. Government offices already tend to use Lenovo’s desktop computers, following the company’s acquisition of US giant IBM’s personal computer division. Meanwhile, analysts say that it will be difficult to replace software with domestic alternatives, since most software vendors develop products for popular US-made operating systems such as Microsoft’s Windows and Apple’s macOS.

And although Microsoft did produce a “Chinese Government Edition” of Windows 10 in 2017 with its Chinese joint venture, Chinese cyber security firms now say government clients must move to entirely Chinese-made operating systems.

The other problem is that organic Chinese replacements don't really exist yet: "China’s homemade operating systems, such as Kylin OS, have a much smaller ecosystem of developers producing compatible software."

Defining “domestically made” is also challenging. Even though Lenovo is a Chinese-owned company that assembles many products in China, its computer processor chips are made by Intel and its hard drives by Samsung.

The take home message here is that US PC and software giants are about to lose billions in sale to Chinese customers, a move that will infuriate Trump who will, correctly, see such attempts to isolate the Chinese PC market from US vendors.

Meanwhile, as China seeks to onshore its reliance on US computers and operating systems, we are confident that Bloomberg's Terminal sales in China are safe and sound. After all, recall that in the aftermath of Bloomberg reporter Mike Forsythe and Ben Richardson quitting the media empire over a censored China story, Bloomberg LP chairman Peter T. Grauer said publicly that the company should have reconsidered publishing critical articles about Chinese President Xi Jinping because they harmed Bloomberg's bottom line.

In other words, when it comes to Bloomberg's integrity, there are two key loopholes: coverage of Mike Bloomberg's own affairs, reporting on Bloomberg's democratic competitors in the presidential primary and, of course, coverage of China.

Resistance activist and NBC host Chuck Todd lost his cool on Sunday after Sen. Ted Cruz (R-TX) said that Ukraine "blatantly interfered" in the 2016 US election.

Of note, less than three months before Donald Trump was elected, Ukrainian officials working with a DNC operative leaked a "black ledger" containing evidence of off-book payments to Trump campaign manager Paul Manafort - leading to his disruptive ouster, while Ukraine's ambassador to the UK, Valeriy Chaly wrote in an Op-Ed for The Hill slamming Trump in the same month.

While Democrats have sought to ignore or downplay this as a 'debunked' theory, Republicans aren't letting it go - nor are they giving the Bidens a pass for what looks like textbook corruption while then-Vice President Joe Biden was in charge of the Obama administration's Ukraine policy.

"Any president, any administration is justified in investigating corruption. There was serious evidence of real corruption concerning Hunter Biden. [He] was on the board of Burisma, the largest natural gas company in Ukraine. Do you know how much he was paid every month? $83,000 — that’s a million dollars a year," said Cruz - adding "The media ought to care if there is actual corruption ... Do you think Hunter Biden with zero experience justifies making ten times as much as the board member of Exxon Mobil?"

Todd then asked Cruz: "Do you believe Ukraine meddled in the American election in 2016?" - to which Cruz replied "I do. And I think there is considerable evidence."

Todd then suggested that President Trump could have created "a false narrative" in order to hurt Cruz during the 2016 Republican primary - to which Cruz shot back: "Ha, ha, ha. Except that’s not what happened. The president released the transcript of the phone call. You can read what was said in the phone call."

"On the evidence, Russia clearly interfered in our election, but here’s the game the media is playing because Russia interfered, the media pretends nobody else did. Ukraine blatantly interfered in our election. The sitting ambassador from Ukraine wrote an op-ed blasting Donald Trump during the election season."

"I understand that you want to dismiss Ukrainian interference because they were trying to get Hillary Clinton elected, which is what the vast majority of the media wanted anyway."

Ukraine’s campaign meddling led directly to the resignation of Trump’s campaign chairman

We can all see the effects of this

To say this didn’t happen is denying reality

— Ukrainian Meddler Poso???? (@JackPosobiec) December 8, 2019

For his insolence, Cruz is of course being labeled a Putin puppet - while Axios showed their true colors with the headline: "Cruz promotes conspiracy that Ukraine "blatantly interfered" in U.S. election." - Their article, meanwhile, makes no mention of Manafort or the black ledger, which is what Cruz was referring to.

Oh for fuck's sake https://t.co/B2evKw9gMv

— Caitlin Johnstone ? (@caitoz) December 8, 2019

Meanwhile...

Only Putin stooges would suggest any connection between Ukraine and Hillary Clinton pic.twitter.com/y6IWUOpZBs

— Ukrainian Meddler Poso???? (@JackPosobiec) December 8, 2019

Mediate & Chuck Todd, having lied throughout the Russia “collusion” BS, now lie about Ukraine.And if Todd wants to be the mouthpiece for the Dems, then he should have the integrity to resign from the news business &push his propaganda as a paid DNC hack https://t.co/SEvHr57Rfp

— Mark R. Levin (@marklevinshow) December 8, 2019

Wealth inequality has erupted across the country over the last decade as the Federal Reserve's policy of ramping asset prices to the moon has widely failed to distribute wealth evenly. If you want to figure out where all the money went on a geographical basis, Bloomberg has published a new report that shows the 200 wealthiest counties in the US. 

It's no secret by now that asset holders (those who own real estate, stocks, bonds, classic cars, wine, and fancy artwork) were the largest beneficiaries of the Fed's unconventional money printing. 

The homeownership rate has crashed to decade lows; at least half of Americans work in low wage jobs; most people don't own stocks and bonds, and at least half of Americans have less than $500 in savings. 

So the flow of wealth from the Fed's aggressive easing policy went to the limited few, those who hold assets, we call the top 10%. 

These millionaires and billionaires have been getting richer over the last decade, while the vast majority of Americans have been getting poorer. 

To find where all the money went, Bloomberg analyzed per-capita income across all US counties and discovered the 200 wealthiest counties that saw the most significant jumps in per-capita income in the last decade. 

Take, for example, the per-capita income for Teton County, Wyoming, is the top of the list, averaged $156k in 2008, jumped to $252k in 2018, a 40% increase in ten years.

Some of the most significant jumps in per-capita income were also seen in New York, New York; Pitkin, Colorado; Bristol Bay Borough, Arkansas; Marin, California; Summit, Utah; and San Francisco California. 

Across America, total personal income increased in 3,019 counties, or 97% of the total, and decreased in just 2.9%, according to estimates released by the Bureau of Economic Analysis. That includes wages, proprietors’ income, dividends, interest, rents, and government benefits by county residents.

Notably, on a per-capita income basis, which factors in the change in population, 2018 marks the largest share of counties with a positive increase since 1981, based on a Bloomberg analysis.

Authored by Eric Zuesse for The Saker Blog,

In the December 4th statement that was made by Stanford University law professor Pamela Karlan was this:

We have become the shining city on a hill. We have become the nation that leads the world in understanding what democracy is. One of the things we understand most profoundly is it’s not a real democracy, it’s not a mature democracy if the party in power uses the criminal process to go after its enemies. I think you heard testimony, the Intelligence Committee heard testimony about how it isn’t just our national interest in protecting our own elections. It’s not just our national interest in making sure that the Ukraine remains strong and on the front lines so they fight the Russians there and we don’t have to fight them here.

It’s also our national interest in promoting democracy worldwide, and if we look hypocritical about this, if we look like we’re asking other countries to interfere in our election, if we look like we’re asking other countries to engage in criminal investigations of our President’s political opponents, then we’re not doing our job of promoting our national interest in being that shining city on a hill.

She said: “We have become the shining city on a hill.”

Here is a list of just a few of the democratically elected presidents and prime ministers in foreign countries whom the U.S. regime overthrew, by coups, in order to install brutal dictatorial regimes there that would do sweetheart deals with America’s international corporations. Also, unsuccessful, merely attempted, U.S. coups are discussed there.

Furthermore, the scientific studies of whether the U.S. Government is controlled by the public (a democracy) or is instead controlled only by its very wealthiest (an aristocracy) are clear: this country is an aristocracy, not a democracy at all, except, perhaps, in the purely formal senses of that term — our great Constitution. Far-right judges have recently been interpreting that Constitution in the most pro-aristocratic, anti-democratic, ways imaginable, and this might have something to do with why the scientific studies are finding that the U.S. is now a dictatorship. And this fact, of America’s now being a dictatorship, was blatantly clear in America’s last Presidential election, which was actually a s‘election’ by Americas’ billionaires — not  by the American public.

How, then, can Professor Karlan be respected about anything, if she lives in a dictatorship (by its aristocracy) and is deluded to think that it’s still (which it never was completely) a democracy?

Furthermore: her statements about Ukraine are equally deluded. She is obviously unaware that the Obama Administration started planning its coup against Ukraine in 2011 and started implementing it in the U.S. Embassy in Ukraine on 1 March 2013, and started in June 2013 soliciting bids from U.S. companies to renovate at least one building in Crimea for use by the U.S. Navy to replace Russia’s main naval base — which Russian naval base was and is in Crimea — by a new U.S. naval base to be installed there.

The craziest thing of all about Karlan’s statement, however, is this part:

“It’s not just our national interest in making sure that the Ukraine remains strong and on the front lines so they fight the Russians there and we don’t have to fight them here.”

Imagine if someone said, “It’s not just our national interest in making sure that the Mexico remains strong and on the front lines so they fight the Americans there and we [Russians] don’t have to fight them here.”

If a Russian were to assert that, would the statement be any more justifiable than what Karlan said regarding Ukraine? Of course not! Even an idiot can recognize this fact. But Karlan can’t.

On December 5th, the anonymous “Moon of Alabama” blogger, whose opinions and predictions turn out to have been correct at perhaps the highest rate of anyone on the internet, headlined “The Delusions Of The Impeachment Witnesses Point To A Larger Problem” and he not only pointed out the “delusional” beliefs of Professor Karlan (“One must be seriously disturbed to believe such nonsense. How can it be that Karlan is teaching at an academic level when she has such delusions?”), but he noted that:

How is it in U.S. interest to give the Ukraine U.S. taxpayer money to buy U.S. weapons? The sole motive behind that idea was greed and corruption, not national interest:

[U.S. special envoy to Ukraine] Volker started his job at the State Department in 2017 in an unusual part-time arrangement that allowed him to continue consulting at BGR, a powerful lobbying firm that represents Ukraine and the U.S.-based defense firm Raytheon. During his tenure, Volker advocated for the United States to send Raytheon-manufactured antitank Javelin missiles to Ukraine — a decision that made Raytheon millions of dollars.

The missiles are useless in the conflict. They are kept near the western border of Ukraine under U.S. control. The U.S. fears that Russia would hit back elsewhere should the Javelin reach the frontline in the east and get used against the east-Ukrainians. That Trump shortly held back on some of the money that would have allowed the Ukrainians to buy more of those missiles thus surely made no difference.

To claim that it hurt U.S. national interests is nonsense.

It is really no wonder that U.S. foreign policy continuously produces chaos when its practitioners get taught by people like Karlan. …

The Democrats are doing themselves no favor by producing delusional and partisan witnesses who repeat Reaganesque claptrap. They only prove that the whole affair is just an unserious show trial.

In the meantime Trump is eliminating food stamps for some 700,000 recipients and the Democrats are doing nothing about it. Their majority in the House could have used the time it spent on the impeachment circus to prevent that and other obscenities.

Do the Democrats really believe that their voters will not notice this?

(Of course, they do, and they might be right. After all, polls show that Democrats still believe that Barack Obama was a terrific President, just as Republicans believe that George W. Bush was a terrific President. The fact that both  — and Trump himself —were/are among the worst in American history eludes the voters in both Parties. But though I disagree with his opinion on that particular matter, he’s just asking a question there, and I hope that his more optimistic take than mine turns out to be right, and that the voters — in both Parties — are coming to recognize that American politics right now is almost 100% a con-game, in both Parties.)

Why do people pay subscription-fees, to Jeff Bezos’s Washington Post, and to the New York Times, and to other media that are controlled by America’s billionaires, when far higher-quality journalism, like that of “Moon of Alabama” (and like the site you’re reading here) is freely available on the internet? Who needs the mainstream ‘news’-media, when it’s filled with such unreliable claptrap, as respects (instead of exposes) what persons such as Karlan say? Jonathan Turley is to be taken seriously, and he is at the very opposite end from Karlan’s opinions in the impeachment hearings (and regarding much else). (And the hearings-transcript in which both law-professors testified is here.) But the exception is Turley, and Karlan is far more the norm in the U.S.-media mainstream. And virtually all Democratic-Party propaganda-organs (‘the liberal press’) are playing up the Karlan claptrap.

So: yes, I do think that “the Democrats [referring to the ones in the House of Representatives, of course] really believe that their voters will not notice this.” Most voters are just as “deluded” (misinformed by the ‘news’-media) as Professor Karlan is.

*  *  *

Investigative historian Eric Zuesse is the author, most recently, of  They’re Not Even Close: The Democratic vs. Republican Economic Records, 1910-2010, and of  CHRIST’S VENTRILOQUISTS: The Event that Created Christianity.

Before House Democrats move forward with articles of impeachment against President Trump - which may come later in the week, they're going to hold a 'trial' on Monday in which the House Intelligence and Judiciary committees will present evidence to support their case, according to CNN.

On Saturday night, the House Judiciary Committee released a 52-page report, an update to previous Judiciary Committee reports issued in 1974 and 1998 during the Nixon and Clinton impeachments. While it does not accuse Trump of committing any impeachable offenses, it it lays out what Congressional Democrats consider constitutional grounds for impeachment.

Here's now Monday's hearing will go, per CNN, citing a Democratic official working on the impeachment inquiry:

• Nadler and Republican Rep. Doug Collins, the ranking member of the committee, will first deliver opening statements
• House Judiciary Committee counsels will then present opening arguments for an hour (30 minutes for each side). It will be “like a trial,” the official said, presenting “our theory of the case.” The Democratic counsel will be Barry Berke and GOP counsel will be Steve Castor. They will not take questions.
• House Intelligence Committee counsels will then present findings from their respective reports. First, Democratic counsel Dan Goldman will present for 45 minutes with Castor presenting the GOP report for 45 minutes. Both will take questions afterward.
• Nadler and his counsel will then have a 45-minute round of questioning followed by a 45-minute round of questioning by Collins and his counsel.
• Each member will then get their 5-minute round of questioning.

Democrats plan to argue that President Trump's abused his power by requesting that Ukraine conduct investigations into former Vice President Joe Biden and his son Hunter, as well as allegations that Ukraine meddled in the 2016 US election for Hillary Clinton.

What you can expect Democrats to argue Monday is that Ukraine is a “part of a repeating pattern” of Trump abusing his office, the source said.

“That’s why Ukraine is so important,” the source said. They plan to argue that the abuse of power “betrays national security” and involves “corruption of our elections,” the source added. “This is the framers’ nightmare.” -CNN

On Saturday, House Judiciary Democrats met to hold a mock impeachment hearing, where Harvard law professor Laurence Tribe was present and spoke with committee Democrats, according to the report. Tribe has suggested in the past that Trump could be impeached through an interpretation of the Constitution's impeachment clause that would allow for fewer Senators to vote in order to remove President Trump - a prospect deemed "not very likey" by the Washingtonian.

On Sunday, Nadler said that Trump will 'rig' the 2020 election if he isn't impeached and removed.

"The Framers worst nightmare is what we are facing in this very moment," House Judiciary Committee Chairman Jerry Nadler (D-NY) said in a statement. "President Trump abused his power, betrayed our national security, and corrupted our elections, all for personal gain. The Constitution details only one remedy for this misconduct: impeachment. The safety and security of our nation, our democracy, and future generations hang in the balance if we do not address this misconduct. In America, no one is above the law, not even the President."

Apparently losing a ton of weight makes you a hypocrite.

Ranking member Doug Collins, meanwhile, demanded on Saturday that Nadler postpone Monday's hearing after Democrats dumped "thousands of pages of documents" to House Judiciary Republicans "less than 48 hours before Judiciary's hearing scheduled to examine impeachment presentations from Intelligence and Judiciary Committees.

The document release comes 25 days after Republican members of the House Judiciary Committee wrote to Chairman Nadler requesting all documents related  to the impeachment investigation according to House Rule XI, 2(e)2(a). Republicans received no response from the chairman. -House Judiciary Republicans

"Chairman Nadler has no choice but to postpone Monday’s hearing in the wake of a last-minute document transmission that shows just how far Democrats have gone to pervert basic fairness. Nearly a month after every Republican on our committee asserted our clear right to see all underlying documents held by the committees involved in the impeachment investigation, we have received no response from the chairman. Instead, Democrats waited until after Speaker Pelosi announced that articles of impeachment were imminent and chose the eve of the Judiciary Committee’s impeachment hearing to share loads of documents that Chairman Schiff has had since this investigation began. It is impossible for Judiciary members to sift through thousands and thousands of pages in any meaningful way in a matter of hours," said Collins.

"Moreover, Democrats still refuse to release all documentation in their possession, though Republicans have demanded this according to rules of the House — which Democrats themselves adopted in January. The information Democrats released today is partial, biased and curated to support accusations that have, to date, been thinner than cotton candy."

"Americans still don’t have access to any information that Adam Schiff hasn’t chosen to weave into his trail of lies. On behalf of millions of American voters who deserve the truth, Chairman Nadler must postpone this hearing while the Judiciary Committee examines these documents. At the same time, Chairman Schiff must release to House members the complete body of underlying evidence that he has concealed.

"The unfairness and dishonesty of this impeachment sham continue to be unprecedented. In violating the rules that this House adopted democratically, Democrats have violated their oaths of office. Under Speaker Pelosi’s leadership, House Democrats have eroded the integrity of our chamber and sacrificed the confidence of Americans who trust Congress to balance power, not abuse it."

On Friday, the White House said in a statement that it would be a "reckless abuse of power" for House Democrats to impeach Trump, and "would constitute the most unjust, highly partisan, and unconstitutional attempt at impeachment in our Nation's history."

A White House senior administration told The Hill that they won't be participating in the House's efforts. "We don't see any reason to participate because the process is unfair," said the source. "Speaker Pelosi has already announced the predetermined result. They will not give us the ability to call any witnesses."

"House Democrats have wasted enough of America's time with this charade," wrote White House counsel Pat Cipillone in the Friday letter to Nadler, calling the impeachment inquiry "completely baseless."

"You should end this inquiry now and not waste even more time with additional hearings. Adopting articles of impeachment would be a reckless abuse of power by House Democrats, and would constitute the most unjust, highly partisan, and unconstitutional attempt at impeachment in our Nation's history," he added, before concluding that the House should get this over with so that Trump can be acquitted in the Senate.

About a month ago, we first laid out how the sequence of liquidity-shrinking events that started about a year ago, and which starred the largest US commercial bank, JPMorgan, ultimately culminated with the mid-September repo explosion. Specifically we showed how JPM's drain of liquidity via Money Markets and reserves parked at the Fed may have prompted the September repo crisis and subsequent launch of "Not QE" by the Fed in order to reduce its at risk capital and potentially lower its G-SIB charge - currently the highest of all major US banks.

Shortly thereafter, the FT was kind enough to provide confirmation that the biggest US bank had been quietly rotating out of cash, while repositioning its balance sheet in a major way, pushing more than $130bn of excess cash away from reserves in the process significantly tightening overall liquidity in the interbank market. We learned that the bulk of this money was allocated to long-dated bonds while cutting the amount of loans it holds, in what the FT dubbed was a "major shift in how the largest US bank by assets manages its enormous balance sheet."

The moves saw the bank’s bond portfolio soar by 50%, and were prompted by capital rules that treated loans as riskier than bonds. And since JPM has been aggressively returning billions of dollars to shareholders in dividends and share buybacks each year, JPMorgan had far less room than most rivals to hold riskier assets, explaining its substantially higher G-SIB surcharge, which indicated that the Fed currently perceives JPM as the riskiest US bank for a variety of reasons.

An executive at a large institutional investor told the FT that what JPM did "is incredible", adding that "the scale of what JPMorgan is doing is mind-boggling . . . migrating out of cash into securities while loans are flat."

The dramatic change, which occurred gradually over the year, and which may have catalyzed the spike in repo rates in September, was first flagged by JPMorgan at an investor event back in February. Then CFO Marianne Lake said that, after years of industry-leading loan growth, “we have to recognize the reality of the capital regime that we live in”.

About half a year later, the rest of the world did too when the overnight general collateral rate briefly did something nobody had ever expected it to do, when it exploded from 2% to about 10% in minutes, an absolutely unprecedented move, and certainly one that was seen as impossible in a world with an ocean of roughly $1.3 trillion in reserves floating around.

While readers can catch up on the nuances of what JPM did in our prior post, the bottom line is that the execution of the plan was flawless, and as we said at the start of November, "to ensure that JPM's tens of billions in buybacks and dividends continue flowing smoothly and enriching the company's shareholders, Jamie Dimon may have held the entire US financial system hostage, forcing the Fed's hand to restart "Not QE."

To be sure, the mere hint that the September repocalypse was an orchestrated event (in some ways similar to the Lehman failure which ushered in QE1), meant to extract liquidity concessions out of the Fed (NOT QE or QE 4 depending on one's semantic persuasion) and enrich a handful of bank executives was scandalous enough, and could not be left unaddressed, especially since fears about repo market stability are once again growing now that just three weeks are left until the traditionally liquidity sapping year-end moment.

Well, to address just that, and to provide a fascinating new perspective on what may have catalyzed the Sept 16 events, which were "this close" from triggering an LTCM-like cascade within the market, the Bank of International Settlements - the central banks' central bank - today published a paper as part of its quarterly review, titled "September stress in dollar repo markets: passing or structural?", which "found" several things that we already knew - the September event was not a one-time, passing shock to the repo system contrary to what a handful of "know it all" fintwit accounts claimed but is a structural problem with US liquidity plumbing; it also found that just four commercial banks are now the dominant marginal lenders in the US repo market (and where just one, JPMorgan saw its liquidity provisioning collapse in the course of 2019 as noted above). However, in a novel twist, the BIS also found that hedge funds exacerbated the turmoil in the repo market with their thirst for borrowing cash to juice up returns on their trades.

Here is what the BIS said:

US repo markets currently rely heavily on four banks as marginal lenders. As the composition of their liquid assets became more skewed towards US Treasuries, their ability to supply funding at short notice in repo markets was diminished. At the same time, increased demand for funding from leveraged financial institutions (eg hedge funds) via Treasury repos appears to have compounded the strains of the temporary factors.

The BIS also echoed the now widely accepted justification for the Fed's recent decision to resume POMOs, saying that it is also possible that the "low" level of reserves, and the financial system's inability to revert back to normalcy, may also have catalyzed the repo move:

Finally, the stress may have been amplified in part by hysteresis effects brought about by a long period of abundant reserves, owing to the Federal Reserve's large-scale asset purchases.

Here, one can argue that the implication of that sentence alone are staggering, as they confirm what most have already known: there is no way the financial system can ever return to a world without trillions and trillions in "excess reserves." For the BIS to make that admission is rather striking, as it underscores that the world will never again be able to exist in a regime in which central banks do not constantly create money (or reserves) out of thin air to prop up asset prices.

Yet while that topic alone is worth a post or several thousand (we have certainly beaten this particular horse to death over the past decade), the core focus of the BIS paper in question was to identify more "usual suspects" on which to blame both the recent, and all future - because these are only just starting - repo crises.

Enter hedge funds.

First, a quick detour: when it comes to potentially systemic factors affecting the US financial system, none have more importance and gravity than the repo market. As the BIS writes, "Repo markets redistribute liquidity between financial institutions: not only banks (as is the case with the federal funds market), but also insurance companies, asset managers, money market funds and other institutional investors. In so doing, they help other financial markets to function smoothly. Thus, any sustained disruption in this market, with daily turnover in the US market of about $1 trillion, could quickly ripple through the financial system. The freezing-up of repo markets in late 2008 was one of the most damaging aspects of the Great Financial Crisis (GFC)."

Keeping the above in mind, here's a quick remind of what happened on September 16: the secured overnight funding rate (SOFR), the new, repo market-based, US dollar overnight reference rate which is supposed to replace over the next two years - more than doubled, and the intraday range jumped to about 700 basis points when repo rates typically fluctuate in an intraday range of 10 basis points, or at most 20 basis points. Intraday volatility in the federal funds rate exploded. Hot take explanations for this move include a due date for US corporate taxes and a large settlement of US Treasury securities. However, as first we, and then now the BIS admits, "none of these temporary factors can fully explain the exceptional jump in repo rate."

Ok, but all of the above was known before. What's new about the BIS' paper?

Well, in the aftermath of Sept 16, attention focused on the role played by banks, which had become reluctant to lend cash into the market despite the higher interest rates on offer. And while the BIS acknowledged that the pullback by banks, especially the "Big Four", was a significant factor in the shake-up,

... it also said that cash-hungry hedge funds had amplified the dislocation.

"High demand for secured (repo) funding from non-financial institutions, such as hedge funds heavily engaged in leveraging up relative value trades," was a key factor behind the chaos, said Claudio Borio, head of the monetary and economic department at the BIS.

The BIS's finding is novel, and surprising, as they highlight the "growing clout of hedge funds in the repo market" according to the FT, which notes something we pointed out one year ago: hedge funds such as Millennium, Citadel and Point 72 are not only active in the repo market, they are also the most heavily leveraged multi-strat funds in the world, taking something like $20-$30 billion in net AUM and levering it up to $200 billion. They achieve said leverage using repo.

One increasingly popular hedge fund strategy involves buying US Treasuries while selling equivalent derivatives contracts, such as interest rate futures, and pocketing the arb, or difference in price between the two.

While on its own this trade is not very profitable, given the close relationship in price between the two sides of the trade. But as LTCM knows too well, that's what leverage is for. Lots and lots and lots of leverage.

As the FT notes, people active in the short-term borrowing markets say that to fire up returns, "some hedge funds take the Treasury security they have just bought and use it to secure cash loans in the repo market. They then use this fresh cash to increase the size of the trade, repeating the process over and over and ratcheting up the potential returns."

In short, and as shown in the chart above, some of the world's biggest hedge funds are active in the repo market to boost their returns. The problem is what happens when repo rates get unhinged as happened on September 16: for the best example of how market players react when their underlying correlations go tilt, look no further than what happened to LTCM in 1998.

This also explains why the Fed panicked in response to the GC repo rate blowing out to 10% on Sept 16, and instantly implemented repos as well as rushed to launch QE 4: not only was Fed Chair Powell facing an LTCM like situation, but because the repo-funded arb was (ab)used by most multi-strat funds, the Federal Reserve was suddenly facing a constellation of multiple LTCM blow-ups that could have started an avalanche that would have resulted in trillions of assets being forcefully liquidated as a tsunami of margin calls hit the hedge funds world.

Here it is the Big Four banks that were once again instrumental in allowing this arb to emerge in the first place. As the BIS notes, "concurrent with the growing role of the largest four banks in the repo market, their liquid asset holdings have become increasingly skewed towards US Treasuries, much more so than for the other, smaller banks. (chart below, right-hand panel). As of the second quarter of 2019, the big four banks alone accounted for more than 50% of the total Treasury securities held by banks in the United States - the largest 30 banks held about 90% (chart below, left-hand panel). At the same time, the four largest banks held only about 25% of reserves (ie funding that they could supply at short notice in repo markets).

Ironically, for years this "arb" strategy was once popular among the dealer banks themselves, but higher capital charges since the financial crisis led to their displacement by hedge funds, which have more ability to take on risk.

This is how the BIS explains, in not so many words, how the financial system came close to the verge of collapse on September 16, poetically enough the 11 year anniversary of Lehman's bankruptcy:

Shifts in repo borrowing and lending by non-bank participants may have also played a role in the repo rate spike. Market commentary suggests that, in preceding quarters, leveraged players (eg hedge funds) were increasing their demand for Treasury repos to fund arbitrage trades between cash bonds and derivatives. Since 2017, MMFs have been lending to a broader range of repo counterparties, including hedge funds, potentially obtaining higher returns. These transactions are cleared by the Fixed Income Clearing Corporation (FICC), with a dealer sponsor (usually a bank or broker-dealer) taking on the credit risk. The resulting remarkable rise in FICC-cleared repos indirectly connected these players. During September, however, quantities dropped and rates rose, suggesting a reluctance, also on the part of MMFs, to lend into these markets (Graph A.2, right-hand panel). Market intelligence suggests MMFs were concerned by potential large redemptions given strong prior inflows. Counterparty exposure limits may have contributed to the drop in quantities, as these repos now account for almost 20% of the total provided by MMFs.

What this means is that contrary to our initial take that banks were pulling from the repo market due to counterparty fears about other banks, they were instead spooked over exposure by other hedge funds, who have become the dominant marginal- and completely unregulated - repo counterparty to liquidity lending banks; without said liquidity, massive hedge fund regulatory leverage such as that shown above would become effectively impossible.

Meanwhile, as banks pulled back from the repo market amid their "reluctance" to lend to these markets amid "concerns for large redemptions", hedge funds have sought cash from new sources, such as non-bank dealers or through a platform run by the Fixed Income Clearing Corporation that gives them access to cash from money market funds and other lenders. As a reminder, the "hail mary" thesis of the uber bearish CIO of Horseman Global, Russel Clark, is that clearinghouses will collapse as liquidity is drained from the market:

LCH claim to have done a quadrillion of compression trades or netting in the last year, this is more than twice the notional of all outstanding interest rate derivatives.

If initial margins rise significantly, the only assets that will see a bid will be cash, US treasuries, JGBs, Bunds, Yen and Swiss Franc. Everything else will likely face selling pressure. If a major clearinghouse should fail due to two counterparties failing, then many centrally cleared hedges will also fail. If this happens, you will not receive the cash from your bearish hedge, as the counterparty has gone bust, and the clearinghouse needs to pay from its own capital or even get be recapitalised itself.

The growing significance of these new cash sources "can result in unfamiliar market dynamics", said BIS' Claudio Borio. Dynamics such as the one where impossible moves such as repo rates exploding from 2% to 10% in seconds become a daily occurence.

So where does that leave us? Well, as the BIS concludes, since 17 September, "the Federal Reserve has taken various measures to supply more reserves and alleviate repo market pressures. These operations were expanded in scope to term repos (of two to six weeks) and increased in size and time horizon (at least through January 2020). The Federal Reserve further announced on 11 October the purchase of Treasury bills at an initial pace of $60 billion per month to offset the increase in non-reserve liabilities (eg the TGA). These ongoing operations have calmed markets."

We have covered all these "mitigating events", and the problem is that even though the Fed has now injected $208BN in liquidity via overnight and term repos, and $114BN via permanent T-Bill purchases, or POMO (i.e. "Not QE"), expanding the Fed's balance sheet by $322 billion, the repo market still remains broken...

... and the world may find just how broken it is as soon as December 31, when the next repocalypse event is tentatively scheduled to strike. The big question is whether the world's mega hedge funds, the Millenniums, the Citadels, the Point72s afraid they will lose access to the precious repo funding that permits them to lever up as much as 10x, will sharply deleverage ahead of this event, in the process sending risk prices tumbling and precipitating the next market crash.

But don't take our word: here again is the top financial expert at the BIS, Claudio Borio, warning that that September’s dislocation suggests that such repo "events" are only just starting and the repo markets "may again find themselves in the eye of the storm should financial stress arise at some point", a point which as the Fed recently revealed in its October FOMC Minutes could take place as soon as year-end.