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FBI Director Patel To Take Over ATF Too – Will He Burn It To The Ground?

Filed Under: THE NEWS, Zerohedge

FBI Director Patel To Take Over ATF Too – Will He Burn It To The Ground?

Leftists were already apoplectic that Donald Trump managed to install firebrand Kash Patel as FBI director. Now, upping the ante, Trump is about to turn the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) over to Patel too, according to sources cited by multiple news outlets on Saturday evening. The extraordinary move has some wondering if Trump might move to dissolve the ATF altogether. 

Gun Owners of America has lauded Patel as being “fiercely pro-gun.” However, during his confirmation hearings, Patel skirted direct questioning about whether civilians should be allowed to own machine guns, or whether background checks are constitutional, saying, “Whatever the courts rule in regards to the Second Amendment is what is protected by the Second Amendment.”  

The ATF is already the focus of a Trump II overhaul. Last week, Attorney General Pam Bondi fired the ATF’s top lawyer, Pamela Hicks. “These people were targeting gun owners. Not gonna happen under this administration,” Bondi told Fox News. The FBI and ATF both reside within the Department of Justice.

Patel may be sworn in as acting director of the ATF this week, a Justice official told AP. The agency has roughly 5,500 employees — today, at least. With Trump’s Department of Government Efficiency looking to slash the federal employment rolls, the ATF should be a prime target for headcount reduction. 

The 1993 federal government massacre of innocents at Waco started with an ATF raid over dubious suspicions that the Branch Davidians were stockpiling prohibited weapons

Better yet, many are hoping — and others fearing — that putting the ATF in Patel’s portfolio could signal that the ultimate objective is to dismantle it. That would be a bold move for a president who comes into his second term with a decidedly spotty record where the right to armed self-defense is concerned. 

  • Trump embraced “red flag” laws that empower police to seize firearms from people they deem dangerous, without due process. In 2018, Trump infamously told reporters, “Take the firearms first, and then go to court…I like taking the guns early…Take the guns first, go through due process second.” 
  • Exceeding its authority, his first-term ATF imaginatively reinterpreted the definition of an automatic weapon to include bump stocks, banned their sale, and demanded that civilians turn them in the ones they already owned. 
  • Trump promised to push for increasing the legal age for purchasing firearms to 18.

That said, Trump’s second term is off to a strong start on the gun rights front. On Feb 7, Trump signed an executive order that sought to curtail federal infringements on rights guaranteed by the Second Amendment. Among other things, the multifaceted order directed Bondi to:

  • Catalogue and address all actions of the Biden administration that infringed on gun rights
  • Reverse the heavy-handed “zero tolerance” or “enhanced regulatory enforcement policy” by which enforcement actions against Federal Firearms Licensees (FFL’s) — many of them small businesses –skyrocketed nearly six-fold. 
  • Review how firearms and ammunition are categorized and thus regulated

Vicki Weaver before she was shot in the head in the 1992 Ruby Ridge standoff that started when the ATF entrapped her husband into illegally shortening the length of a shotgun barrel

Rightly resented by liberty-minded Americans, the ATF has played central roles in some of the most ghastly crimes committed by the federal government in recent decades, from the ATF entrapment of Randy Weaver that led to the killing of his 14-year-old son and his wife as she held their 10-month-old daughter, to the standoff in Waco that ended in the mass slaughter of 76 Branch Davidians, including 25 children.   

Like the vast majority of the federal government, there’s no constitutional authority for the ATF to exist in the first place. As the old joke goes, “Alcohol, Tobacco and Firearms should be a convenience store, not a government agency.” Here’s hoping that wry aspiration become reality. 

Tyler Durden
Sun, 02/23/2025 – 18:05

More USAID Fraud? Billions Of US Tax Dollars Are Missing From Haiti Relief Projects

Filed Under: THE NEWS, Zerohedge

More USAID Fraud? Billions Of US Tax Dollars Are Missing From Haiti Relief Projects

There are those that say all government aid is a scam in one way or another, and so far the revelations surrounding USAID are proving those people right daily.  Democrats and the establishment media, in a bid to muddy the waters and save face, continue to claim that there was never any fraud at USAID and that the Trump Administration is simply labeling projects they “disagree with” as suspect. 

Of course, spending American tax dollars on projects the public never asked for and were never told about is the epitome of fraud, and waste is never a good thing.  Beyond that, the question of billions in missing funds certainly falls into the category of criminality. 

Trump has taken a lot of heat from the media with the shut down of USAID and much of the criticism suggests that without US funds people in third world countries will fall back into desperation.  The Washington Post recently claimed that Trump’s cuts to USAID are a “gift to Haitian gangs” terrorizing the locals; a typical leftist appeal to emotion that assumes most of the funds were getting to the Haitians in the first place. 

Yet another example of this problem has been revealed in a New York Post expose on the audit of USAID which shows a disturbing shortfall in funds surrounding ongoing relief projects in Haiti.  The Post notes:

“Since the 2010 earthquake in Haiti killed as many as 300,000 people, the US government has disbursed around $4.4 billion in foreign assistance to the small island nation.

At least $1.5 billion was disbursed for immediate humanitarian aid, while another $3 billion went to recovery, reconstruction and development.

Of the at least $2.13 billion in contracts and grants for Haiti-related work, less than $50 million, or 2% went to Haitian organizations or firms. By comparison, $1.3 billion, or 56%, has gone to firms located in or near the US capitol. Little wonder USAID is so threatened by the sudden scrutiny.

It remains unclear how exactly the billions have been spent and whether US tax dollars have had a sustainable impact. USAID and its vendors have generally failed to make such data public…”

The exposure of USAID by DOGE actually confirms long running suspicions of mishandled aid.  Some Haitian reporters warned about this disappearing money years ago under the Obama Administration.  USAID funds to Haiti were dispersed in part through the Clinton Foundation. 

The lack of funding transparency was also noted by the Government Accountability Office (GAO) in 2023.  Though, not surprisingly, the impotent agency did nothing about it.  The GOA stated in their analysis of USAID activities in Haiti: 

“The USAID mission in Haiti does not fully track data on its local partnerships, or its activities to strengthen local organizational capacity, which limits institutional knowledge about these efforts and understanding of results and lessons learned to inform future activities.”

“The Administrator of USAID should ensure that USAID/Haiti develops a process to track and assess consistent and complete results information for infrastructure activities, such as the final outputs, outcomes, costs, time frames, and lessons learned.”

“The Administrator of USAID should ensure that USAID/Haiti establishes a process to completely and consistently track and analyze data on awards made to local organizations, such as the amount and percent of total funding awarded and the percent of total awards provided to these organizations.”

Of the five “recommendations for executive action” put forward by the GAO for USAID, two are marked as “completed”.  Transparency was never achieved and no one was held accountable.  The question is, if only 2% of the $4.4 billion allotted for Haitian relief was actually used in Haiti, where did the rest of the money go?

As the New York Post points out, 56% went to firms located in or near the US capitol, and apparently the money stayed there.  A comprehensive forensic accounting of these funds (along with all other missing funds) needs to be undertaken and tracked to the recipients.  Not just because it is is politically advantageous for the Trump Administration, but because justice needs to be served for once in the case of government fraud.  Americans are tired of seeing bureaucratic conmen get away with it. 

The public is welcome to debate whether or not any American taxes should be spent in Haiti (proximity to the US does not mean they are entitled), but if the money was already sent and it never arrived, then whoever took it stole from both sides of the equation – Americans and Haitians. 

Tyler Durden
Sun, 02/23/2025 – 16:55

FBI, DoD, State Dept. Push Back On Musk’s Monday Deadline For ‘Accomplishments’ Email

Filed Under: THE NEWS, Zerohedge

FBI, DoD, State Dept. Push Back On Musk’s Monday Deadline For ‘Accomplishments’ Email

Update (1647ET): Following Elon Musk’s Saturday tweet instructing federal workers to list at least five accomplishments over the past week by Monday at midnight, or face termination – which was followed up by an actual email from the Office of Personnel Management (OPM), several agencies issued statements telling their employees to pump the brakes.

So far the Pentagon, FBI, State Department, and various parts of the Intelligence Community have told their employees to hold off.

“When and if required, the Department will coordinate responses to the email you have received from OPM. For now, please pause any response to the OPM email titled ‘What did you do last week,” said DoD Under Secretary of Defense for Personnel and Readiness Darin Selnick in a statement.

That followed a similar statement by FBI Director Kash Patel, who told the bureau that they would conduct their own employee reviews that align with the agency’s procedures.

The State Department told its employees; “The State Department will respond on behalf of the Department. No employee is obligated to report their activities outside of their Department chain of command.”

While National Intelligence Director Tulsi Gabbard told employees of agencies she oversees in the Intelligence Community (IC): “Given the inherently sensitive and classified nature of our work, I.C. employees should not respond to the OPM email,” according to The Hill.

Meanwhile, Everett Kelley, the national president of the American Federation of Government Employees (AFGE), wrote a letter to Musk and OPM acting director Charles Ezell, directing its 800,000 members to defy the demand.

“Federal employees report to their respective agencies through their established chains of command; they do not report to OPM,” said Kelly, adding that the demand was “irresponsible” and a “sophomoric attempt” to cause confusion and intimidate federal workers.

“I am also requesting that OPM rescind the email and apologize to all federal employees,” he said.

Musk has defended the ‘accomplishments’ email, saying that it was designed to weed out “non-existent people or the identities of dead people” who are collecting government checks. He also agreed with commentator and author Mike Cernovich that this also helps to identify high-performing employees.

*  *  *

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Update (1118ET): After panic swept through Washington over Elon Musk’s email requiring all federal employees to send an email by Monday at midnight with five bullet points explaining what they got done last week, Musk explained the reasoning behind the last minute demand: “immense fraud.”

“The reason this matters is that a significant number of people who are supposed to be working for the government are doing so little work that they are not checking their email at all!” Musk wrote on X. “In some cases, we believe non-existent people or the identities of dead people are being used to collect paychecks. In other words, there is outright fraud.”

Musk then said that the email is “a very basic pulse check,” adding in a subsequent post “They are covering immense fraud.“

*  *  *

Update (2356ET): Panic has predictably ensued over Elon Musk’s requirement that all federal employees provide a five bullet point summary of what they accomplished last week, due by midnight on Monday (full details below).

 

While newly minted FBI Director Kash Patel exempted agency employees from the requirement (with much of the intelligence community reportedly set to get the same pass), there’s a lot of upset feds out there.

Senator Tina Smith (D-MN) lashed out, posting to X, “This is the ultimate dick boss move from Musk – except he isn’t even the boss, he’s just a dick.” (she said on the heels of a coordinated campaign to brand him ‘Co-President Musk’)

To which Musk replied, “What did you accomplish this week?”

The Rapid Response team, which posts daily information about the Trump agenda, was happy to oblige.

Stay tuned for more…

* * *

Update (2308ET): New FBI Director Kash Patel sent an email to all agency employees on Saturday night instructing them to “pause any responses” to Elon Musk’s request that all federal employees provide summaries of their accomplishments over the past week or face termination.

“The FBI, through the Office of the Director, is in charge of all of our review processes, and will conduct reviews in accordance with FBI procedures,” reads the note from Patel. “When and if further information is required, we will coordinate the responses. For now, please pause any responses.“

Meanwhile, at least one federal employee apparently don’t have time to answer the email – but did have time to complain to a MSM reporter about having to do it.

*  *  *

Elon Musk is ‘running the Twitter playbook on the government,’ after writing in a Saturday post on X that all federal employees will be receiving an email “shortly” requesting to “understand what they got done last week.”

Those who fail to reply “will be taken as a resignation.”

And there it is (though no mention of the implied resignations for failure to respond):

When X user ‘The Rabbit Hole’ commented that Musk is “running the Twitter playbook on the government,” Musk replied: “It works.“

The post came hours after President Donald Trump encouraged Musk to “get more aggressive” with the Department of Government Efficiency (DOGE), adding “REMEMBER, WE HAVE A COUNTRY TO SAVE.“

Musk’s email comes after roughly 77,000 federal employees accepted DOGE’s “Fork in the Road” email offering roughly 8 months of pay in exchange for resigning. After that, DOGE moved to fire thousands of employees across various agencies – mostly those in a probationary period who have been in their jobs for less than one year.

It also comes after the Trump administration scored a legal victory when a judge allowed Musk and crew to continue accessing federal data and arranging for mass layoffs.

Last week, Trump signed an executive order directing agencies to work with DOGE to make “preparations to initiate large-scale reductions in force.”

*  *  *

 

Tyler Durden
Sun, 02/23/2025 – 16:47

Student Loan Borrowers Crushed By Appeals Court Ruling, Credit Scores Plunge

Filed Under: THE NEWS, Zerohedge

Student Loan Borrowers Crushed By Appeals Court Ruling, Credit Scores Plunge

Authored by Mike Shedlock via MishTalk.com,

The courts are busy. This one goes against Biden. Economic repercussions are significant…

The New York Post reports Biden’s $475B student debt cancellation plan blocked as federal appeals court issues final decision

A federal appeals court delivered a crushing blow Tuesday to a more than $475 billion student debt cancellation program begun by former President Joe Biden, ordering the underlying regulation be blocked in its entirety.

The Eighth US Circuit Court of Appeals had partially blocked the loan forgiveness effort last year — but a three-judge panel at the St. Louis-based court issued a final judgment to a lower court prohibiting any part of the initiative from taking effect.

Judge L. Steven Grasz in a 25-page opinion ruled that Biden’s Education Secretary, Miguel Cardona, had “gone well beyond” his constitutional authority in creating the Saving on a Valuable Education (SAVE) plan.

“Rather than implying by omission or other ambiguities, Congress has spoken clearly when creating a repayment plan with loan forgiveness or otherwise authorizing it — explicitly stating the Secretary should cancel, discharge, repay, or assume the remaining unpaid balance,” Grasz wrote, finding “no comparable language” in the SAVE Plan.

In 2023, the Penn Wharton Budget Model estimated the so-called “repayment plan,” which Grasz said allowed for student debt to be “largely forgiven rather than repaid, would cost taxpayers $475 billion over the next decade.

That was after $1.2 billion already went out the door to student borrowers under the program, which started in February 2024. Around 7.5 million Americans signed up for debt cancellation in all.

“We obtained another court order BLOCKING an illegal Biden-era student loan scheme,” Missouri AG Andrew Bailey crowed on X. “Though @JoeBiden is out of office, this precedent is imperative to ensuring a President cannot force working Americans to foot the bill for someone else’s Ivy League debt.”

In total, the Biden administration cancelled around $183.6 billion in student debt.

“He isn’t ‘forgiving’ debt. He is taking the debt from those who willingly took it out to go to college and transferring it onto taxpayers who decided not to go to college or already paid off their loans,” Sen. Bill Cassidy (R-La.) charged in a statement last year.

Supreme Court Chief Justice John Roberts wrote in the majority opinion striking down the first $430 billion effort that an education secretary “has never previously claimed powers of this magnitude.”

Student Loan Borrowers Are Losing 100+ Credit Points

The College Investor reports Student Loan Borrowers Are Losing 100+ Credit Points

For thousands of federal student loan borrowers, the past few weeks have been a wake-up call. As credit monitoring services send out alerts, many are realizing that their credit scores have dropped by over 100 points—some by as much as 200—due to missed student loan payments.

The issue stems from student loan servicers now reporting 90-day delinquencies to credit bureaus after the federal repayment “on-ramp” period ended. 

Collection activity and negative credit reporting was turned off during the payment pause from March 2020 to August 2023. After that, borrowers had a grace period protecting them from negative credit reporting between September 2023 and September 2024, which has now expired.

If we rewind the clock on student loan payments, it’s important to remember that payments were automatically paused for most borrowers starting in March 2020. After multiple extensions, that pause officially ended in August 2023. During the pause, negative credit reporting and collection activity were also paused.

To help ease borrowers back into repayment, the government created a one-year “on-ramp” period from September 2023 to September 2024. During this time, missed payments wouldn’t be reported as late, preventing credit damage.

But as of October 2024, missing payments once again counted toward delinquency. By February 2025, borrowers who hadn’t made payments since then began seeing the impact—90-day late marks appearing on credit reports.

Economic Impact

Money that was spent on vacations, movies, rent, food, or whatever, will now be forced towards payments on debt.

And due to credit dings, it will be harder to get an auto loan or a mortgage.

On February 14, I noted Retail Sales Crash – Did the Consumer Finally Throw in the Towel?

The Census Department shows huge across-the-board declines in multiple categories, down 0.9 percent overall.

The shutdown of illegal immigration and student loans may both have contributed.

At the margin, this is quite recessionary.

Tyler Durden
Sun, 02/23/2025 – 16:20

Ashley St. Snare? Laura Loomer Goes Scorched Earth On Musk’s Baby Mama As ‘Seduce Elon’ Text Emerges

Filed Under: THE NEWS, Zerohedge

Ashley St. Snare? Laura Loomer Goes Scorched Earth On Musk’s Baby Mama As ‘Seduce Elon’ Text Emerges

Warning: Bail now on this post if you don’t give two shits about the whole Elon Musk baby controversy. If you do, grab some popcorn (and a multitool – on sale until Monday), because this is getting wild.

Here’s the latest…

‘Conservative influencer’ Ashley St. Clair (26) claimed last week that she had secretly given birth to Elon Musk’s 13th child. Yet, after various receipts began trickling out suggesting the tryst was a targeted operation, things began to get ugly.

On Friday, St. Clair filed a petition to legally recognize Musk as her child’s father and seek full custody. According to the paternity suit filed in the New York Supreme Court (for which she tried to serve Musk at the White House), St. Clair alleges that she and Musk got into a romantic relationship in May 2023, and conceived said love child in January 2024 in St. Barts. Read more on the paternity suit here.

It Gets Uglier

In response to the controversy, journalist Laura Loomer dropped several bombshells.

1) St. Clair has retained an anti-Trump lawyer to go after Musk…

Dror Bikel @Drorbikel, the lawyer hired by @stclairashley to sue @elonmusk for custody of their child, is an Israeli, ANTI-TRUMP lawyer who is a former foreign judicial clerk for the Supreme Court of Israel. Dror Bikel has a long history of attacking @elonmusk, President Trump and Trump lawyer @RudyGiuliani.

The Israeli lawyer once wrote a book called “The 1 % Divorce: When Titans Clash” that has an entire chapter dedicated to President Trump’s divorces. Dror used his Trump hatred to promote his book sales. The book was published in 2020.

Loomer asks: 

  • “Is @elonmusk potentially being targeted by a possible Israeli intelligence operation?”
  • “How long has Ashley St. Clair been planning her attack on Trump admin official @elonmusk?”

2) Loomer suggests St. Clair – who said she never wanted media attention over this, coordinated with the NY Post to run an anti-Elon smear campaign.

And now the Post is sniffing around…

3) St. Clair has previously stated that a man “should be able to opt out” of child support if he doesn’t want the child, and that “family court is the most evil institution ever.”

“Seduce Elon”

Now things get even more interesting – as another influencer, Isabella Moody, posted what she claims are text messages with St. Clair from May 2023 in which she says “Look, ill take one for the team, seduce elon, and get in a rocket to see what’s up.”

Via @IsabellaIsMoody

To which Musk replied “Whoa!”

Stay tuned for more…

Tyler Durden
Sun, 02/23/2025 – 15:45

Chilean Migrants Charged In String Of Multi-Million Dollar NFL Player Heists

Filed Under: THE NEWS, Zerohedge

Chilean Migrants Charged In String Of Multi-Million Dollar NFL Player Heists

We wonder if Taylor Swift still has Travis Kelce voting Democrat…

After all, it is now being reported that Chilean migrants were at the center of a string of heists that stung NFL players like Kelce, along with Joe Burrow and Patrick Mahomes. 

A newly unsealed federal complaint reveals that since October 2024, a South American Theft Group (SATG) has been breaking into the homes of NFL and NBA players while they were away for games, according to Fox News.

The complaint says: “In many circumstances, professional sports teams will publicize their schedules and locations of their games, making it easy for the SATG to know when a particular athlete on a particular professional sports team will be away from his residence.” 

The Fox News report says that newly unsealed federal complaint adds four more suspects to a group accused of nationwide burglaries targeting professional athletes.

Authorities say the suspects, part of a South American Theft Group (SATG), conducted extensive surveillance on their targets, sometimes posing as groundskeepers or delivery workers. A photo released by the U.S. Attorney’s Office shows them posing with stolen goods, with one suspect wearing Kansas City Chiefs gear.

The complaint details burglaries of multiple NFL and NBA players, including Chiefs stars Patrick Mahomes and Travis Kelce on Oct. 5 and 7, 2024, as well as Milwaukee Bucks’ Bobby Portis on Nov. 2, 2024. “This is a place I’ve considered home,” Portis posted after the burglary. “While I was at my game yesterday, I had a home invasion, and they took most of my prized possessions.”

Three of the suspects have also been charged in the December burglary of Cincinnati Bengals quarterback Joe Burrow’s home. The complaint mentions similar incidents involving a Tampa Bay Buccaneers player, a Cincinnati Bengals player, and a Memphis Grizzlies player, though their names were not disclosed.

All seven defendants face charges of conspiracy to commit interstate transportation of stolen property, carrying a maximum penalty of 10 years in federal prison.

Following the arrests, the NFL issued a security alert warning players that professional athletes have become “increasingly targeted for burglaries by organized and skilled groups.” The memo advised players to enhance home security and avoid sharing real-time updates or displaying valuables online.

Tyler Durden
Sun, 02/23/2025 – 14:35

This Next Market Crash Will Break Our Fragile Brains

Filed Under: THE NEWS, Zerohedge

This Next Market Crash Will Break Our Fragile Brains

Submitted by QTR’s Fringe Finance

I always find it funny when I think about critics of people viewing the economy from an Austrian lens. The old joke is that “newsletter writers” like myself could never cut it managing a portfolio and, to make a living, need to scare people into reading and subscribing—not only to my view on the economy, but to my newsletter.

But at least for now the stocks I’m watching for 2025 are holding up this year (currently about +10.4% vs. the S&P +1.9% as of this weekend, on an equal weighted basis) and, as I’ve explained on countless podcasts, I write an Austrian-centric newsletter because it is derived from the basis of my core beliefs about the economy and the world of finance, as best as I can understand it.

In other words, I’m an Austrian school thinker first, and a “fear monger” second.

Take, for another example, my friend Peter Schiff. I know Peter well and believe him to be a person who is ethically beyond reproach and someone who comes by his steadfast views on free market capitalism honestly. He is constantly criticized as someone who is disingenuous in his economic beliefs because he happens to run a gold company. But I know the truth: he runs a gold company because it is based on his beliefs to begin with, not the other way around.

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And let’s be realists for a second. Our “pessimistic” beliefs on markets and the economy—simply referred to by people like me as “reality”—are vastly outnumbered by the majority of perma-bull financial market participants: retail investors, institutional investors, sell-side analysts, corporate executives, financial media personalities, the government, central bankers, and almost every single other person that has some place in the global financial economy. Not unlike us “newsletter writers” that supposedly need to shill our beliefs to make a living, the majority of other people in the financial universe also need to shill their shit and their beliefs to hold up in order to make a living.

While us Austrians haven’t upended modern monetary theory just yet, every time the Fed can’t predict what inflation is going to do, and every time CNBC anchors and Wharton professors shit their pants at the first sight of a market drawdown, and every time a financial institution goes bust from being too optimistic with its capital, credibility erodes slightly from the mainstream financial bedrock and osmoses itself over to our little dark, tinfoil-hat-wearing corner of the financial world.

And I’ll be the first to admit: the “establishment” view on the global economy has continued to dominate—not just the nominal stock market scoreboard but also the prevailing state of mind of all participants contained therein over the last few decades. When you’re a sports bettor that constantly lays the chalk on the favorite, and the favorite has come in the last 99 times out of your last 99 bets, why wouldn’t you take the favorite one more time on the 100th bet?

So once again, after this past Friday’s market selloff, strategists like a concerned-looking Tom Lee do what they do best: return to financial airwaves in order to proclaim that everything is fine, this time definitely isn’t different, and investors should consistently be buying the top of the market regardless of macroeconomic conditions, valuations, or a guarantee of certain death via asteroid the very next day.

Stop me if you’ve heard this one before.

It’s difficult to ignore that Tom Lee has “nailed it” on markets over the last decade, and I need to give credit where it’s due. Holding your nose and buying stocks without giving a single solitary fuck about valuations or the macroeconomy has sadly been the most effective way to generate returns over the last decade or two. But as every piece of financial literature you’ve ever read says somewhere on it: past performance is not indicative of future results.

And people that don’t make daily appearances on CNBC — like, oh, say, Warren Buffett, for instance — are taking another road: getting into cash.

Maybe it’s a just a coincidence?

Though the tune of buying the dip has hardly changed, the environment it’s being sung in has. Stocks now trade at a Shiller PE that’s approaching 40x, a level only eclipsed once in history during the 2000s dot-com bubble.

But if the market’s price-to-earnings ratio and the macroeconomy didn’t matter when stocks were trading at 30x earnings, why should they matter with stocks trading at 40x earnings?

This indifference to valuations—helped along by the “passive bid” of 401(k)s and ETFs consistently buying the market at any given price (well explained by Bill Fleckenstein here on Julia LaRoche’s podcast, and then updated here during his appearance last week), combined with what is widely perceived to be an unlimited Fed put, combined with the unprecedented amount of liquidity doled out as a result of COVID, combined with the stock market becoming accessible to literally any human being on earth that wants to take their shot thanks to the advent of retail trading apps—has distorted expectations and psychology not just about the stock market, but also about the basic fundamentals of economics and finance, in a way that many of us probably would not have even thought fathomable 50 years ago.

Modern monetary theory has acted like a risk-hunger marijuana edible that all traders and investors have been forced to swallow, resulting in an insatiable, decades long case of the market munchies.

In fact, liquidity has been so ubiquitous and markets have been so rigged that people are speculating upwards of $3 trillion in an asset class — crypto — that, to the best of my understanding, offers very little product or service and exists almost entirely digitally.

If you want to try to make the argument that overvalued equities can sometimes be hard to recognize, especially when they only seem to continue to go up and valuations only seem to continue to expand, that’s one thing. But how, with a straight face, can anyone argue that $3 trillion worth of crypto is in some way “undervalued,” let alone serves a purpose at all?

Here’s a list of the top 19 cryptocurrencies by market cap.

Let’s put Bitcoin aside for a second and assume there’s a value to the protocol in the network. What are the other 18 of these doing? Dogecoin? Sui? Hedera? The rest of the top 50 gets even better. Uniswap? Polkadot? Ondo? Kaspa? VeChain?

I feel like the guys in Major League reading the roster before opening day.

“Ricky Vaughn, Willie Hays? I’ve never heard of most of em. Mitchell Friedman?”

What are all these…things…doing? As best as I can tell, pretty much nothing—other than becoming $1.5 billion in liabilities for those who custody them, like Ethereum was this past week.

I’m fairly confident that almost all of the crypto market outside of Bitcoin and Ethereum is nothing more than pure excess.

And, of course, the same type of useless excess exists in equity markets, as well, in the form of thousands of companies burning cash and surviving while paying their executives solely from stock sales. But at least these completely useless, bullshit equities give us the courtesy of inventing some idiotic story about their product or service and what it will do to help humanity. Joke memecoins like Dogecoin and Fartcoin, don’t even do that. They are the literal definition of pure, useless speculation, with their respective labels laughing back directly in the face of the investors who buy them. The first line of this NBC article about Fartcoin is: “Yes, it’s called Fartcoin. Yes, it is totally useless.”

If the saying “hubris comes before the fall” turns out to be even 1% accurate, we are likely in for an unexpected comeuppance for the ages. Other than lighting giant sacks of $100 bills on fire on live television just to make a statement about how little you care about return on investment, it doesn’t get more hubris-laden than buying something like the Hawk Tuah girl’s crypto coin.

Global corporate bonds or this. You decide.

And we see the same bullshit with equities too.

Last week, when there was a momentary headline about the Pentagon possibly cutting spending, Palantir—a stock known loosely to be tied to defense spending—took a momentary breather from its 18 month long parabolic rise, which has seen its stock go up nearly 10x, to correct 5% in one session. Any investor even remotely interested in fundamentals would have told you going into that week that at roughly 550x trailing earnings and 95x sales, the stock was already trading in extraordinarily aggressive territory.

Even after the 5% move lower, the stock still closed the session at about 530x trailing 12-month earnings and 86x trailing 12-month sales. In other words, the stock took in a minuscule hiccup of reality after doing nothing but tearing ass higher for two years.

One may think to themselves: “Any analyst with half a brain or investor with the slightest bit of financial acumen probably could have or should have seen a pullback in the company’s valuation coming.”

But no. Instead of accepting a subatomic level of reality and warming to the notion that the stock probably shouldn’t be trading anywhere near where it is today to begin with, Jim Cramer took to Twitter to watch every tick and cheer for the company—using a very matter-of-fact tone that came across to me as though he was saying bulls should be able to see the stock double again and again and again, ad infinitum, despite any lack of reason for doing so. Behold, this “analysis”:

And then, commenting on the overall market, Cramer took what appeared to be the same tone, indicating to me he thinks bulls should always be vindicated, bears should always be eating large quantities of shit, and the market should go up every single day, all day, regardless of whether or not it has any reason to.

“Not enough time to rally,” he lamented at the end of the day, succumbing to the horrifying reality that we’re going to have one of those rare ‘red’ days in the market that feel like they come once every academic semester at this point.

“This marks the end. All life as we know it ends at 4PM with the closing bell,” Cramer may have thought to himself before hitting “Tweet”.

Behold the horror of the great crash of February 2025:

Oh, the humanity. Won’t someone think of the children?

I know Jim Cramer has a job to do, and I respect that. I like him just like I like Tom Lee. It isn’t personal. I know his job is to side with retail investors and try to show market neophytes that there is “a bull market somewhere.” I actually agree with the sentiment—there can always be a bull market somewhere—but that doesn’t mean that stocks always have to go up.

When you take these types of disturbing assumptions and you download them onto Cramer’s millions of Twitter followers and television viewers—then you couple that with a Federal Reserve whose unwritten third mandate has proven to be never letting stocks go down, ever, for any reason—is it any wonder that the entire retail investing public has subscribed to the notion of closing their eyes, holding their breath, and buying the dip in any situation, including the end of the world?

This hubris and outright delusion exists as the sharpest tip of an exceptionally long spear of irrational market exuberance, arrogance, crowd-herd mentality, and greed, mixed with financial unsophistication.

The entire economy existing within the confines of a Modern Monetary Theory system that is set up to rig asset prices higher is one thing. To be fair, it would be foolish not to expect the market to have irrational and overly optimistic expectations.

But the fever pitch of where expectations are now, combined with what I believe is a mathematical certainty that markets will eventually have to move lower in dramatic fashion, means that the next crash might just very well break the brains of a good portion of the investing public.

From here, a sharp and decisive move lower in markets probably first comes as the result of an economy grinding slower, and then, in dramatic fashion, the quick cascade of deleveraging and speculation unwinding will torture people financially. But psychologically is where it is really going to torture a whole new generation of investors who have yet to feel any significant prolonged financial pain. Think about it: the COVID crash was over in a couple of weeks.

This means that there is an entire market full of investors who have not felt any type of prolonged recession or drawdown in markets. And they have definitely not felt a depression or the psychological uncertainty of what can happen if the market loses confidence in the currency or the creditworthiness of the United States.

The Fed put is always going to be there, and nominal prices are probably always going go up. But at some point, just like a lot of the populace has learned about money printing over the last 10 years thanks to Bitcoin, people are also going to learn about the differences between nominal prices and real prices. They will compare the price of assets to inflation. They won’t be fooled by prices rising faster than the value of their assets. In fact, they will know exactly what it means: that the system, as the Fed wants it to exist today, doesn’t work, widens the inequality gap, and disproportionately negatively affects the middle and lower classes.

We bailed out a tech bubble in the early 2000s, and the result of our bailout came back as a housing crisis. We bailed out housing in 2008, and the result of that, if you ask me, is going to either be a currency or sovereign debt crisis.

Total assets of the Federal Reserve. Guess what comes next.

There will come a point one day where, psychologically, the Fed intervenes and stock prices may go up again, but the average investor is living out depressionary hardships. And I mean this for people who are lucky enough to even own financial assets. Many lower- and middle-class families don’t even have significant amounts of financial assets but, rather, have negative net worth. The wreckage to these classes will be unlike anything we’ve ever seen before.

Make no mistake about it—we appear to be stuck between a rock and a hard place where the only exit door seems to be stagflation. This is something we haven’t combated since the 1970s, and the monetary policy and fiscal layout of the country right now is so distorted that people from the 1970s wouldn’t even recognize it.

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The Fed has no option to raise rates into a stagflationary environment because of the ungodly amount of debt we have outstanding. Even with rates where they are now, I believe the Fed is out over its skis and has already sealed the fate of guaranteed defeat for the economy and markets.

So what happens then? We’re stuck between welcoming a deflationary depression by raising rates to try to combat inflation, or we’re going to have to let inflation run wild. We’ve never been in this situation before in modern history. And even more frightening than that is the fact that market participants and the average American citizen are the most coddled and the least equipped to handle bad news related to the economy than they’ve ever been.

I write this article today not to stir up fear but to do what I did leading up to the country panicking about COVID: to try and get some mental exercise in so that if the shit truly hits the fan, psychologically, it won’t be a total blindside surprise to everyone, including myself.

See you Monday morning.

QTR’s Disclaimer: Please read my full legal disclaimer on my About page here. This post represents my opinions only. In addition, please understand I am an idiot and often get things wrong and lose money. I may own or transact in any names mentioned in this piece at any time without warning. Contributor posts and aggregated posts have been hand selected by me, have not been fact checked and are the opinions of their authors. They are either submitted to QTR by their author, reprinted under a Creative Commons license with my best effort to uphold what the license asks, or with the permission of the author.

This is not a recommendation to buy or sell any stocks or securities, just my opinions. I often lose money on positions I trade/invest in. I may add any name mentioned in this article and sell any name mentioned in this piece at any time, without further warning. None of this is a solicitation to buy or sell securities. I may or may not own names I write about and are watching. Sometimes I’m bullish without owning things, sometimes I’m bearish and do own things. Just assume my positions could be exactly the opposite of what you think they are just in case. If I’m long I could quickly be short and vice versa. I won’t update my positions. All positions can change immediately as soon as I publish this, with or without notice and at any point I can be long, short or neutral on any position. You are on your own. Do not make decisions based on my blog. I exist on the fringe. The publisher does not guarantee the accuracy or completeness of the information provided in this page. These are not the opinions of any of my employers, partners, or associates. I did my best to be honest about my disclosures but can’t guarantee I am right; I write these posts after a couple beers sometimes. I edit after my posts are published because I’m impatient and lazy, so if you see a typo, check back in a half hour. Also, I just straight up get shit wrong a lot. I mention it twice because it’s that important.

Tyler Durden
Sun, 02/23/2025 – 14:00

Zelensky Says ‘Ready’ To Resign For The Sake Of Peace, NATO Membership

Filed Under: THE NEWS, Zerohedge

Zelensky Says ‘Ready’ To Resign For The Sake Of Peace, NATO Membership

Speaking at the “Ukraine: The Year 2025” forum on Sunday, Ukrainian President Volodymyr Zelensky told an audience of all heads of ministries, agencies, and top officials that he’s ready to resign as president if it brings peace. He suggested the country be guaranteed NATO membership in exchange for his stepping down.

“I am ready to leave my post if it brings peace. Or exchange it for NATO,” Zelensky said in response to journalists’ questions, and at a moment he’s feeling immense pressure from US President Donald Trump. Ukraine regional media Kyiv Post was among the first to report the resignation comments.

Via Associated Press

The same statement was also translated in Russian state media as follows: “If peace for Ukraine, if you really need me to leave my post, then I’m ready. I can exchange this for NATO, if there are such conditions. I am focusing on the security of Ukraine today, not in 20 years, and I do not intend to be in power for decades,” Zelensky said. He still asserted that martial law has to be lifted before their can be national elections, according to Ukraine’s constitution.

This comes after a week of an open spat with the White House, wherein Trump called Zelensky a ‘dictator’ for refusing to hold democratic elections and for criticizing US efforts at achieving peace with Moscow. Kiev complains it’s been cut out of US-Russia engagement, while Trump has pointed out the Ukrainians and Europeans had three years in which they rebuffed peace openings at every turn.

Zelensky briefly addressed this tit-for-tat at the forum, saying he is not offended by Trump calling him a dictator as he’s not a dictator, according to the remarks.

Zelensky tries to brush off Trump calling him a ‘dictator’: “Only a dictator would be offended by the word dictator.”

According to Ukraine media sources, Zelensky on Sunday “also announced an important international summit on the Russo-Ukrainian war scheduled for Monday, Feb 24. Leaders from 13 partner countries will attend in person, while 24 others will join online. Zelensky hinted that major decisions could come from the meeting.”

“Tomorrow’s summit is crucial. It might even be a turning point – we’ll see,” he said. Zelensky in the comments affirmed that previously approved military aid continued to flow, but that Ukraine still needs 20 Patriot air defense systems.

He explained his government needs to sign agreement that will be ‘win-win’ for both US and Ukraine, ‘pleasant’ for both parties. But so far the haggling over mineral rights has been anything but pleasant.

Ukrainian Foreign Minister Andrii Sybiha addressed the same forum and said the following, “We are convinced that in this third year of brutal Russian aggression, we truly have a chance. We are telling many partners that perhaps now is the time to fasten diplomatic seat belts. We must not give in to emotions.”

There have been weekend reports that the two sides are close to achieving a mineral deal. However, the US side has stuck by some demands that Zelensky and his officials previously rejected as not doable.

“Ukraine on Saturday was seriously considering a revised American proposal for its vast natural resources that contains virtually the same provisions that Kyiv previously rejected as too onerous, according to Ukrainian officials and a draft of the deal,” The New York Times reports.

“In fact, some of the terms appear even tougher than in a previous draft,” the report emphasizes. “The latest proposal comes after a week in which President Volodymyr Zelensky of Ukraine resisted signing the earlier version in a public dispute with President Trump.”

Tyler Durden
Sun, 02/23/2025 – 13:25

House Speaker Johnson Responds To The Idea Of ‘DOGE Dividend’ Checks

Filed Under: THE NEWS, Zerohedge

House Speaker Johnson Responds To The Idea Of ‘DOGE Dividend’ Checks

Authored by Jack Phillips via The Epoch Times (emphasis ours),

House Speaker Mike Johnson (R-La.) on Thursday appeared cool to the idea that the Trump administration could send checks to Americans based on savings related to the Department of Government Efficiency (DOGE).

House Speaker Mike Johnson (R-La.) speaks during the annual Conservative Political Action Conference (CPAC) at the Gaylord National Resort & Convention Center at National Harbor in Oxon Hill, Md., on Feb. 20, 2025. Saul Loeb/AFP via Getty Images

When discussing the prospect on Thursday, Johnson downplayed the idea in light of the budget deficit, while allowing that it would be politically beneficial to the Republican Party.

“Everybody loves a check, but … we have a giant deficit. I think we need to pay down the credit card,” he told a crowd at the Conservative Political Action Committee (CPAC) event held in Washington on Thursday. “Fiscal responsibility is what we do,” he added, according to live streaming video of the event.

Earlier this week, President Donald Trump and Elon Musk, a Trump adviser who championed the work of DOGE, said that checks might be distributed to Americans.

A day earlier, Trump said at the FII Priority summit, an investment conference in Miami, that his administration is “thinking about giving 20 percent back to the American citizens and 20 percent back to pay down debt.”

Trump also said the potential for dividend payments would incentivize people to report wasteful spending. “They’ll be reporting it themselves,” Trump said. “They participate in the process of saving us money.”

Later, as the president flew back to Washington aboard Air Force One, a reporter asked him about the plan floated by Musk.

“I love it,” Trump said.

Earlier this week, Musk wrote on his social media platform X that he “will check with the president” in response to a suggestion that Trump and Musk should announce a “DOGE Dividend” that would send a refund to taxpayers from part of the savings resulting from DOGE’s audits of federal agencies and programs. Its efforts to downsize the government have also led to thousands of federal government employees being fired or laid off.

In a press briefing on Thursday, Trump’s deputy chief of staff for policy, Stephen Miller, said the checks would be worked on in the budget reconciliation process in Congress. He said Congress needs to pass a measure in order to send those checks.

“This is all going to be worked on in the reconciliation process that is going on right now,” Miller said.

Miller, Trump, and Musk have not provided further details about the refund proposal. The Epoch Times contacted the White House press office for comment.

In terms of cost-cutting, U.S. Treasury Secretary Scott Bessent said in a Fox News interview that about $50 billion in spending has been slashed due to DOGE’s findings since it started.

“So that’s a very good start,” Bessent said, adding that DOGE’s efforts could ultimately lead to “several percent” of the U.S. gross domestic product, or GDP, in savings.

Responding to criticism about the Musk-affiliated agency that was created by Trump in an executive order last month, Bessent said that Americans “don’t have to be concerned” about DOGE’s activity in the IRS.

DOGE and Musk have recently faced multiple lawsuits, including one filed by tax groups earlier this week that accused the advisory body of possibly violating American taxpayers’ privacy. In a separate case, meanwhile, a federal judge in Washington declined to block Musk and DOGE from accessing data or suggesting cuts at seven federal agencies.

The Associated Press contributed to this report.

Tyler Durden
Sun, 02/23/2025 – 12:50

German Exit Polls Are Out: Conservatives Win, Will Form 2-Party Coalition Govt; AfD Comes In Light

Filed Under: THE NEWS, Zerohedge

German Exit Polls Are Out: Conservatives Win, Will Form 2-Party Coalition Govt; AfD Comes In Light

Update: The German election exit polls are in, and the result is on light side for the AfD which were polling around 21%, but appear to have ended up with 19.5% of the vote, coming in short of a blocking position.

  • *GERMAN CONSERVATIVES GET 29% IN ELECTION: ARD EXIT POLL
  • *GERMAN AFD GETS 19.5% IN ELECTION: ARD EXIT POLL
  • *GERMAN SOCIAL DEMOCRATS GET 16% IN ELECTION: ARD EXIT POLL
  • *GERMAN GREENS GET 13.5% IN ELECTION: ARD EXIT POLL
  • *GERMAN LEFT PARTY GETS 8.5% IN ELECTION: ARD EXIT POLL
  • *GERMAN LIBERAL FDP GETS 4.9% IN ELECTION: ARD EXIT POLL
  • *GERMAN FAR-LEFT BSW GETS 4.7% IN ELECTION: ARD EXIT POLL

And visually, the ARD exit poll:

And ZDF: here AfD just fractionally better at 20%, but still below the 21-22% they would poll last week.

Unlike previous elections which were anemic affairs, participation today was a whopping 84%, the highest since German reunification in 1990.

The emerging picture is one where the initial exit polls are in line with the most recent public polling, showing a CDU victory, with the SPD and Greens collapsing while the AFD doubles its support from 10% in 2021 and is set to become the main opposition power in the new government. Of note, and to get an indication of how unpopular legacy politics in Germany have become, the Social Democrat party of Chancellor Olaf Scholtz posted its worst result since World War 2.

In other words, Germany’s opposition conservatives won the national election on Sunday, putting leader Friedrich Merz on track to be the next chancellor while the populist Alternative for Germany came in second, its best ever result. Naturally, the SPD was not happy:

  • *SPD’S MIERSCH: IT’S A HISTORICAL DEFEAT FOR SPD, BITTER EVENING
  • *SPD’S MIERSCH: FRIEDRICH MERZ HAS THE MANDATE TO FORM A GOVT
  • *SPD’S MIERSCH: BORIS PISTORIUS WILL PLAY IMPORTANT ROLE IN SPD

That said, with 29% of votes in exit polls, the CDU/CSU falls short of parliamentary majority needed to govern alone. However, it will likely be able to form a two-party governing coalition with the SPD.

Meanwhile, since the AfD – which has been shunned by every other party and will not participate in any strategic alliances with anyone – did not enjoy a last minute burst in support, and came in at or just below where the polls said would, it will come in short of having a blocking position in the new government, and as a result will not be able to prevent either the stimulus flood or the easing of the debt brake which so many had already priced in. Still, the AfD’s spirit was high:

  • AFD’S WEIDEL: WILL OVERTAKE CDU AT NEXT ELECTION

Finally, the Greens – which came in at 13.5% – have succeeded at minimizing their losses and remaining a significant player in the Bundestag, which was the goal their entire campaign was structured to achieve.

* * *

We previously previewed tomorrow’s German election in an extensive article (see “Everything You Need To Know About The Upcoming German Election“) but with so much at stake, with Elon now going all in…

… and with the situation more fluid by the day…

Source: Polymarket

… it’s time for a quick reassessment of where we stand (we summarize various reports from DB, Goldman and Bloomberg).

1. Executive Summary

Polls, coalition options and potential impact on policies

  • Polls: The conservative CDU/CSU is leading the polls with 31 followed by the far right AfD at around 21 the Social Democrats at 15 and the Greens at 13%. A lot of attention will be on whether the three smaller parties (FDP, BSW, Left) make it into parliament
  • Timeline: First projections based on exit polls after 6 pm CET on February 23 preliminary results from 6 30 pm CET on and then updated during the night/early morning
  • Coalition formation: Coalition negotiations might take several weeks as they require some difficult compromises 

Coalition options

  • Base case – two party grand coalition: Polls suggest that the Conservatives could form a coalition government with either the SPD or the Greens A CDU/CSU SPD coalition appears more likely as polls suggest it could achieve a more comfortable majority On defence/foreign policy, there are significant policy overlaps with the Greens
  • Surprise – three party centrist coalition – “Kenya”(CDU/CSU-SPD-Greens) or “Germany”(CDU/CSU-SPD-FDP). On the one hand, a three party coalition could prove to be rather fractious and result in fraught policy compromises On the other hand, a “ coalition might increase the chance of a meaningful shift in fiscal policy if centrist parties kept the two thirds majority 

What’s are the risks?

  • Downside risk – blocking minority of fringe parties (AfD & BSW): This would imply that constitutional change for setting up an off budget defense/infrastructure fund/debt brake reform is contingent on concessions to the fringe parties or not possible at all
  • Absolute tail risk – AfD as part of the government: Extremely high bar to be crossed all parties credibly rule out that option ex ante

Potential impact on policies

  • Fiscal policy pivot towards higher spending – The perceived erosion of Europe’s security architecture makes it likely for the new government to swiftly agree on funding higher defence spending outside the debt brake. The fiscal impulse could be material However, the short term growth multiplier should not be overestimated, with the bulk of military procurement going abroad Debt brake reform for the Länder might provide additional and more immediate fiscal stimulus from 2026 onwards
  • Compromises on structural reforms – A CDU/CSU led coalition could potentially agree on a step by step reduction of the corporate tax burden, streamlined administrative processes, and measures to lower electricity prices, but no major pension reform 

How much of the election is already factored into our forecasts?

  • For 2025, Deutsche Bank expects the economy to grow by 0.5%. The bank’s 2026 forecast is predicated on a meaningful probability that the next government relaxes the constitution debt brake to allow more debt financed investment. Without it, the status quo would imply structural stagnation

2. Backround

  • A deeply divided coalition government in Berlin has failed to take the hard decisions needed to turn Germany’s economy around. The snap election on Feb 23. is therefore a chance for voters to deliver a stronger government capable of tackling the country’s pressing problems.
  • The main danger is that the poll yields another fragmented parliament. This could leave a power vacuum at the heart of Europe during a particularly challenging time and, eventually, result in a government that is too weak to implement much-needed reform. Furthermore, much of the proposed fiscal stimulus emanating out of Germany has already been priced into European stocks, so a “tail” outcome tomorrow could have a major adverse impact on European markets.
  • The greater the number of parties that enter parliament, the higher the risk that the center-right Christian Democratic Union (CDU)/Christian Social Union (CSU) alliance and the Social Democratic Party (SPD) have too few seats to form a grand coalition.
  • Policy uncertainty is already through the roof in Germany and this is weighing on growth as companies delay investment decisions. The more time it takes to form a coalition, the greater the delay in kickstarting an economic recovery.
  • The duration of coalition talks will also show how willing parties are to overcome their differences to tackle urgent issues such as structurally weak growth, a potential US-Russia deal on Ukraine and a transatlantic trade war.
  • Polling stations will close on Sunday at 6:00 pm Berlin time. Sufficient clarity about the election results should emerge during the evening. The CDU/CSU alliance is set to win, according to opinion polls. The far-right Alternative for Germany (AfD) would have to close a 10-percentage-point gap to defeat the center-right parties.  
  • Barring any surprises, CDU leader Friedrich Merz will become the next chancellor. However, the CDU/CSU alliance is unlikely to have enough seats to lead a cabinet on its own, which means it will have to form a coalition with other parties.
  • Merz has repeatedly declared he will not cut a deal with the AfD. The Free Democratic Party (FDP) isn’t seen as a suitable partner, since it will probably not have enough seats to make a difference — it might even struggle to make it into the Bundestag (national parliament).
  • The most obvious option for Merz is to form a coalition with either the SPD, the Greens, or both. The ideological distance between the Greens and the CDU on social issues such as migration remains large, which means it might be easier for him to cut a deal with the social democrats.
  • Still, much will depend on the distribution of seats in parliament. The more parties enter the Bundestag, the higher the risk that the CDU/CSU and the SPD might not have enough seats to form a government by themselves.

3. Timeline:

Timeline for the Bundestag election 2025: What will happen from voting until government formation

4. Polls

Germany heading towards new leadership? Conservatives are leading the polls, while the right wing AfD and Left gained further support

Accuracy of polls seems reasonably good: Far right AfD seems not to be systematically underestimated in polls

What is driving voters’ decisions? State of the economy is more important for voters’ decisions than immigration

5. Electoral System

Germany‘s mixed electoral system demystified: Peculiarities of the voting system might have an impact on the election outcome

Postal voting has started two weeks ago: Increasingly popular option among German voters

6. Coalition Formation

Zooming in on coalition negotiations: Coalition agreement in spring might provide psychological boost to confidence

Preview of potential coalition options: Conservatives likely to lead the next government according to current polls

7. Policy Outcomes

CDU/CSU – SPD or CDU/CSU – Green coalition – agree to disagree? Where do ex ante policy stances differ?

Potential impact of CDU/CSU policies on the economy: More supply-side policies, but still fiscal hawkishness

Economic policy implications: Fiscal policy pivoting towards higher defence spending

The fiscal defence policy nexus: Smaller parties not necessarily standing in the way of constitutional reform

Constitutional majorities and fiscal regime change: The more fragmentation, the less likely a fiscal regime shift

Zeitenwende 2.0 moment in defence spending: Pivot towards higher defence spending early in the next parliamentary term

Fiscal regime change – a cheat sheet for potential options: Policy options, needed majorities and potential timelines

Germany’s stance on joint EU borrowing: How to fund the VdL 2.0 policy priorities

8. Economic Outlook

How much of the election outcome is already factored into DB’s forecasts? A meaningful relaxation of the debt brake is not part of the 2025 baseline forecasts

9. Much-Needed Reforms

  • A stable coalition would also strengthen Germany’s ability to respond to a long list of pressing economic challenges and thus, support growth in the medium and long term. Germany has to improve its productivity and revive competitiveness while at the same time deal with the threat of high US tariffs and the requirement to boost defense spending.  
  • What all these challenges have in common is that they will likely end up costing a lot of money. The good news is that, in principle, Germany would have the necessary fiscal leeway. According to our estimates, it could raise public investment spending by 1% of GDP in the coming years and the debt-to-GDP ratio would still fall until 2040 and settle below the 60% mark.
  • One main thing to watch is whether the parties that favor a reform of the very strict national fiscal rule, the so-called debt brake, will have the necessary two-third majority in parliament to deliver the required constitutional revision. Conversely, a very fragmented parliament would undermine the ability of the centrist parties to revise the current borrowing limit.

10. Tail Risks

What’s in the tails? Surprises, downside and extreme tail risks

Scenarios for a blocking minority of the far right AfD: Would require significant shift of approval rates and no small party entering the Bundestag

11. Challenges to Forming a Government

  • The country’s political fragmentation means that negotiations to form a coalition might not be straightforward. CDU’s Merz has shown during the campaign that he wants to move more to the right on migration.
  • That’s further away from the SPD’s stance and in order to make any deal with Merz more palatable to its electorate, the social democrats will try to extract as much as possible (for instance on economic issues) during negotiations.
  • Recent elections show coalition negotiations have taken a substantially long time to wrap up. However, the bleak economic situation and uncertain geopolitics might provide an incentive for parties to accelerate discussions. In fact, how long it takes to form a government will indicate how willing parties are to work together to deal with Germany’s impending challenges.
  • A minority government or new elections would be the available options if coalition negotiations were to fail. However, parties would likely try to avoid a repeat poll given voters might punish them for failing to form a government.

12. Election of the Federal Chancellor: Usually just a formality

More in the full presentation available to pro subscribers.

Tyler Durden
Sun, 02/23/2025 – 12:15

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