“Burn, Baby, Burn!”

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Not far from our house lies Pimlico race course, site of the Preakness, the middle leg of the Triple Crown each year. Horse racing is big, or at least pretends to be, in Maryland.

Pimlico during Preakness is bedlam. Our neighbors rent out their lawns for parking… then spend all the money they make to repair ruts in their lawns, bag beer cans and fast food wrappers and usher drunk millennials off to their next destinations.

Okay, that’s a slight exaggeration, but there are pros and cons to living near one of horse racing’s most famous venues.

Not far from Pimlico lies the neighborhood of Park Heights.

You may recall Park Heights was the ignition point for three days of rioting in Baltimore in 2015. Buildings burned. Bands of teenagers looted various dollar stores and 7–Elevens.

At one point, a group of them marched to the Inner Harbor and tried to lay waste to an upscale shopping mall.

The mayhem was sparked by the death of Freddie Gray while in custody of the Baltimore police department.

A Ringside Seat to Chaos

We watched the whole drama play out on CNN like the rest of the world, often commenting things like: “Hey, look, there’s the McDonald’s we stopped by on the way back from soccer practice the other night.”

The distance between our neighborhood and Park Heights is only a couple miles. But the social divide is a canyon.

During the Freddie Gray protests in Baltimore in 2015, over 285 businesses were destroyed. Over $10 million of small business property value went up in smoke overnight.

Our employees got an advanced preview of what it would be like to work from home during the Pandemic… because they were too afraid to work downtown. A band of protesters marched right down St. Paul street under the windows of what was at the time our customer service center.

Like Minneapolis today, the National Guard was called out. A curfew was imposed.

We feel for the folks of South Minneapolis this week.

The Spark That Lit the Fuse

On Memorial Day, we saw iPhone images of George Floyd, a petty criminal, a black man, get his neck crushed by Derek Chauvin, a white cop. Just what we needed following weeks of claustrophobia, eh?

Now Minneapolis is burning as mobs have looted and torched stores — and police stations (doesn’t look like they’re not practicing social distancing. What would Dr. Fauci say?).


Source: CNN

Since the riots began Monday evening in Minneapolis, over 170 businesses have been burned, looted and vandalized.

One “protester” said yesterday that they’re coming for the suburbs next. Reassuring for suburban Minneapolis.

Protests have also spread to other cities like Los Angeles, Denver, Memphis and Columbus. Though on lesser scales.

Things are quiet here in Baltimore, or at least no louder than usual — for now anyway.

One Minneapolis woman asked poignantly on NBC news: “We understand the anger. Police brutality is wrong. But what does any of this prove?”

She was standing in front of a building smoldering after having been torched by protesters the night before.

Insanity Is Rare in Individuals, the Rule in Groups

One thing we know is that crowds often bring out the worst in people. “Insanity in individuals is something rare,” said Nietsche — “but in groups,. parties, nations, and epochs it is the rule.”

To protest injustice is certainly worthwhile. But to loot and burn down the stores of people who had nothing to do with the injustice? That’s a different story.

In the process they destroyed many jobs of those who needed them most during this time of crisis. Where’s the justice for these victims?

To take things to the level of politics, you can call mass political movements like Fascism and Communism a madness of crowds.

Maybe that’s why at times like these I think of José Ortega y Gasset…

The Revolt of the Masses

Ortega was from the old school in Europe, a gentleman of Spanish origin. Think white suits and fedora hats. Maybe a glass of wine and some fine conversation among the ruins.

In 1929, he foresaw the rise of fascism and extreme nationalism. Which dictated the structure of lives for men, women and children all over the world for most of the 20th century.

Big ideas, bad results.

His 1929 work The Revolt of the Masses, “traces the genesis of the ‘mass-man’ and analyzes his constitution en route to describing the rise to power and action of the masses in society” [from Wikipedia… I’m cheating a little here, but it’s still good information for you].

Again from Wiki: “Ortega is throughout quite critical of both the masses and the mass-men of which they are made up, contrasting ‘noble life and common life’ and excoriating the barbarism and primitivism he sees in the mass-man.”

“The Fascist and Syndicalist species,” wrote Ortega, “were characterized by the first appearance of a type of man who ‘did not care to give reasons or even to be right, but who was simply resolved to impose his opinions. That was the novelty: the right not to be right, not to be reasonable: ‘the reason of unreason.’”

The Revolt of the Masses was a seminal work in the early 20th century. And I have to admit the first couple of times I read it, I didn’t really understand what Ortega was trying to get at.

But having now lived through the last couple of political cycles, oy, I understand a heckuva lot more.

It ain’t a reality show anymore. It’s reality. OK, enough windy political philosophy

So, to return to that woman in Minneapolis asked, what does it all prove?

The Thin Veil of Civilization

It proves that we all live within a very thin veil of civilized behavior. The pandemic is what it is… but the anger and violence resides very close to the surface and is not very far away.

We’re seeing it come to the surface in Minneapolis and in other cities right now. It’ll be something else that brings it to the surface tomorrow.

If the economy sinks into full-blown depression while Wall Street thrives, you could see similar scenes.

Let me conclude with a personal story…

Several years ago, I was selected to sit on a jury for a murder trial here in Baltimore.

The prosecutor had a written and audio confession. He had a live witness testify that he’d been at the scene. He had photos of where the incident had taken place. A full description of the events and corroboration from police reports at the scene.

When the defense got up to cross–examine the live witness, he asked: “It wasn’t possible for you to be at the scene, was it?”

“No,” said the witness.

“And why is that?” asked the defense attorney.

“Because I was in prison at the time,” the witness replied.

A few gasps in the courtroom… and some frenzied typing from the court reporter… later confirmed that the witness was, indeed, in prison at the time.


We, the jury, were released. What fate befell the defendant? One thing for sure, he wasn’t convicted.

A thin veil of civilization.


Addison Wiggin
for The Daily Reckoning

The post “Burn, Baby, Burn!” appeared first on Daily Reckoning.

Hong Kong Headed for Crisis Again

This post Hong Kong Headed for Crisis Again appeared first on Daily Reckoning.

I’ve been visiting Hong Kong for over 35 years. My first visit was in 1982 and my most recent was in May 2018.

All large cities change over time. New districts are developed. New buildings are erected and some old ones torn down.

Cities on the water, like Hong Kong, can use landfills to build more land and transform colourful (if dangerous) dockside alleys into sleek convention centres and hotel districts. None of that is unexpected, especially in dynamic cities like Hong Kong.

Yet in addition to physical infrastructure (which changes), cities have a kind of soul or zeitgeist, which is less susceptible to change.

St Mark’s Square in Venice, the Louvre in Paris and the Houses of Parliament in London are all defining and, if not eternal, at least help to keep a place rooted over time.

My visits to Hong Kong in the late 1990s and early 2000s were characterised by the same energy and dynamism I had encountered decades earlier.

I had routinely described Hong Kong to friends as the most energetic city in the world after New York.

The ‘One country, two systems’ seemed to work well together.

Yet as China’s growth ‘miracle’ gathered steam from 2002-2007, a legal heavy hand and gloomy administrative culture directed from Beijing descended on Hong Kong. You could feel it in the air.

At first, I noticed the lack of energy. The city was still rich and active, but there was a ‘business as usual’ attitude that was less driven than the energetic venue I had always known. Then I noticed a more depressed attitude among the bankers, investors and event planners I associated with.

They still made money, but the typical upbeat smile had been replaced with a more worried look.

This was accompanied by a rise in street protests against the heavy hand of Beijing on matters such as free speech, government autonomy and the relative importance of Hong Kong in the Chinese master plan.

Clearly, Shanghai had come into its own as the financial centre of China, so Hong Kong’s special role had been greatly diminished. The starkest evidence of change came during my last visit in May 2018…

I was presenting to a group of elite policymakers and property developers at the prestigious Asia Society local headquarters. At one point, one of the local elites took me aside, looked over his shoulder and at a near whisper said, ‘Be careful what you say.’

Global investors are accustomed to treating Hong Kong as a bastion of free markets and fair dealing. Those assumptions were suddenly no longer true, as Beijing began to treat Hong Kong as just another piece on a chessboard of market manipulation and geopolitical ambition.

The Chinese authoritarianism evident in Hong Kong last year only cemented that policy shift. What developments can we expect now that the freewheeling Hong Kong we knew from 1960-2005 has come to an end?

Last year’s unrest in Hong Kong was another symptom of the weakening grip of the Chinese Communist Party on civil society. The unrest spread from street demonstrations to a general strike and shutdown of the transportation system, including the cancellations of hundreds of flights.

This social unrest died down after the proposed bill to extradite Hong Kong citizens to China was pulled off the table. But now Beijing is clamping down hard with its proposed legislation to punish dissent.

Expect the pro-democracy protests to resume again. They may even grow larger. How will China react?

A direct Chinese invasion cannot be ruled out if local authorities cannot squash the unrest.

Of course, that would be the last nail in the coffin of the academic view of China as a good global citizen.

That view was always false, but now even the academics have started to understand what’s really going on. The situation in Hong Kong today is eerily reminiscent of the days leading up to the Tiananmen Square massacre on 4 June 1989.

In both cases, a particular cause for complaint gave rise to demonstrations, which soon grew and led to wider demands for political liberty and justice. Tiananmen started as a demonstration against inflation, which drew college students and housewives.

At its height, over one million protestors were active in Beijing, while demonstrations sympathising with the Tiananmen protestors appeared in over 400 Chinese cities.

Tiananmen Square is immediately adjacent to the Forbidden City and the Chinese leadership compound, so the demonstrators posed a potential threat to the government itself. Finally, hard-line Communist Party leaders ordered tanks and troops to attack the demonstrators.

No one knows the exact number killed, but estimates range from the low thousands to the tens of thousands. The entire incident has been covered up and is never mentioned in official communications or taught in Chinese schools…

As I described earlier, Last year’s Hong Kong demonstrations began on a small scale to protest a proposed law that would allow extradition of Hong Kong people to Beijing for trial on charges that arose in Hong Kong.

That would have deprived Hong Kong people of legal protections in local law, and could have subjected prisoners to torture and summary execution. The demonstrations grew exponentially and involved hundreds of thousands of protestors.

The list of demands also grew to include more democracy and freedom, and adherence to Hong Kong’s rule of law. Now the protests look like they’re starting again, and rightly so. Here’s China’s dilemma…

If Beijing tolerates more protests (and they succeed), they may lead to greater autonomy for Hong Kong at a time when Beijing is trying to strengthen and centralise its control. But if Beijing cracks down on the protestors, it will have another Tiananmen Square massacre on its hands with two important differences.

Hong Kong is a major city and will not be as easy to control as a confined square in Beijing.

And the rise of social media, mobile devices and live streaming guarantee that Beijing will not be able to hide or cover up any atrocities.

The jury is out on which path the Communists would take. But with China’s increasing belligerence in the region, don’t count out a strong response.

Unfortunately, the resolution may not be the peaceful one hoped for but another bloody massacre.

With the U.S. warning China against strong action in Hong Kong, let’s just hope the situation doesn’t light a powder keg resulting in a shooting war.

In case investors didn’t have enough to worry about with the coronavirus, they may have a whole lot more to deal with before too long.


Jim Rickards
for The Daily Reckoning

The post Hong Kong Headed for Crisis Again appeared first on Daily Reckoning.

Is War Next?

This post Is War Next? appeared first on Daily Reckoning.

Remember the pro-democracy protests in Hong Kong against Chinese authoritarianism?

Well, guess what? They’re about to start again. And U.S.-Chinese relations could get even worse than they are right now.

Are you prepared for a bumpy ride?

Let’s unpack this…

Last year’s protests came in response to a proposed law that would have allowed the extradition of Hong Kong residents to Beijing for trial on charges that arose in Hong Kong.

That would have deprived Hong Kong residents of legal protections in local law and subjected prisoners to torture and summary execution.

The legislation was proposed by Hong Kong’s Chief Executive Carrie Lam, who many consider a puppet of Beijing.

The demonstrations grew exponentially, ultimately involving hundreds of thousands of protesters.

The list of demands also grew to include more democracy and freedom and adherence to Hong Kong’s rule of law.

Due to social media, these protests were seen around the world.

The proposed bill behind the original protests was scrapped last October, which was a victory for the pro-democracy protesters.

The protests didn’t end altogether, but tensions were at least diffused to a great extent and the world moved on.

Well, here comes round two…

China’s Communist parliament is preparing to roll out legislation that would ban “treason, secession, sedition (and) subversion” in Hong Kong.

This is different from the previous legislation because this bill actually originates in Beijing, not Hong Kong. It’s a direct assault on Hong Kong’s democracy. The Chinese parliament would insert the legislation directly into Hong Kong’s constitution.

It’s scheduled for passage next week.

Pro-democracy activists have called for mass protests this weekend in response to what they rightly consider a Chinese invasion of their autonomy.

We could be in for a fresh round of protests, with as many or more people. China’s reaction will be key.

Will they try to put the protests down by force? That could have major consequences.

Yesterday, news emerged that the U.S. Senate is introducing bipartisan legislation to impose sanctions on officials and business entities that enforce the new law.

And President Trump warned yesterday that the U.S. would react “very strongly” to the Chinese legislation.

In response, China’s foreign ministry warned Beijing would “fight back” against any U.S. interference.

At a time when U.S.-Chinese relations are already at a low ebb due to China’s almost criminal handling of the coronavirus pandemic, it looks like things are about to get even worse.

This situation could become very interesting.

But you shouldn’t be surprised. The current trajectory of U.S.-China relations is following a familiar course. It started with the currency war…

When my first book, Currency Wars, was published in 2011, I made the point that currency wars don’t exist all the time, but when they emerge they can last for 15 or 20 years.

The reason is that the currency devaluations just go back and forth between major trading partners and no one is any further ahead in the long run.

Readers said, “OK, we get that, but what comes next?”

The answer is trade wars. Once currency devaluations fail, countries turn to tariffs to slow down imports and help their own exports.

That’s where the U.S. and China are now, with the ongoing trade war (which could get worse).

But that’s also a dead end from an economic perspective. Again, the question is: What comes next?

Well, with history as a guide, we can see that today’s pattern is a repeat of what the world went through in the 1920s and 1930s.

First came currency wars (1921–1936). Then came trade wars (1930–34) and then finally a shooting war (1939–1945).

Are we heading for another shooting war with China? The signs are not good.

Trade war tariffs can be weaponized to pursue geopolitical goals. Trump is using tariffs to punish China for its criminal negligence (or worse) in connection with the spread of the Wuhan virus to the U.S. and the rest of the world.

This also has historical precedent.

Between June and August 1941, President Franklin Roosevelt placed an oil embargo on Japan and froze Japan’s accounts in U.S. banks.

In December 1941, the Japanese retaliated with the sneak attack on Pearl Harbor. Will China now escalate its retaliation to the point of armed conflict?

We’ll find out soon, possibly in the South China Sea or the Taiwan Strait. The latest reemergence of tensions in Hong Kong only adds kerosene to the fire.

Investors should prepare for U.S.-China geopolitical tension to grow worse. Maybe a lot worse. That’s the lesson of history.


Jim Rickards
for The Daily Reckoning

The post Is War Next? appeared first on Daily Reckoning.

Villagers in Peru decide to impose new road blockade on Las Bambas mine-ombudsman

The indigenous community of Fuerabamba in Peru decided to impose a new road blockade on MMG's Las Bambas copper mine after talks with the company over compensation broke down, a representative of the ombudsman's office said on Tuesday. The community planned to start the blockade at midnight on Tuesday, the representative, Americo Contreras, said by phone, citing a document from government officials who mediated the talks that ended without a solution late on Monday.