Jul 12

Today’s News 12th July 2022

  • Europe On High Alert: July Shutdown Of Nord Stream Pipeline Has The EU Worried
    Europe On High Alert: July Shutdown Of Nord Stream Pipeline Has The EU Worried

    It’s a dynamic which some in the alternative media have been warning about for months – While the establishment claimed that Russia would be crushed under the weight of NATO sanctions, others have suggested that Russia could hurt the west more (specifically Europe) by implementing sanctions of their own.  While mainstream governments and journalists argued about how fast NATO should implement restrictions on Russian oil and gas, none of them seemed to consider the possibility that Putin would cut off energy exports himself.  

    This is the problem with instituting foreign policy and engaging in geopolitics using a “cancel culture” mentality; it leads to childish thinking and a lack of foresight.  You can’t “cancel” a nation if you are dependent on them for 40% of your energy needs.  

    Anyone with moderate industry knowledge in oil and gas could have seen this coming.  Europe is now on “high alert” as the Nordtream 1 pipeline to Germany has lost 60% of its natural gas transfers as Russia pressures Canada for the return of a massive turbine being held in Canada for repairs.  Canada has lifted sanctions in response and allowed the shipment of the turbine back to Russia, showing that the Kremlin does indeed have economic leverage over NATO countries. 

    Even more concerning is that the pipeline will be undergoing an extended shutdown due to “maintenance” until July 21st.  Some officials in Europe believe this shutdown may be a precursor (a beta test) to a total block of Russian gas to the EU, and they are probably right.

    Speaking at the economic forum Les Rencontres Économiques, French Minister Bruno Le Maire said: ‘Let’s get ready for a total shutdown of the Russian gas supply…This is the most likely event.’  He added ‘We should not take Vladimir Putin’s threats lightly.’

    It’s important to remember that Europe is not only dependent on oil and gas imports for heating, it is also dependent on them for electricity and many other needs.  The middle of summer does not seem like the worst time to face heating shortages, but the overall effect of energy loss would drag the EU economy down into panic.  Will the gas supply return after July 21?  Probably, but this shutdown indicates that the Kremlin may be sending a message that they could end Europe’s economic stability anytime they want.  

    The closer we get to winter, the more pressure will be applied, no doubt.

    The US is far less dependent on Russian energy resources, but there is the greater problem of a “shrinking energy pie” to consider.  With Europe cut off, they will be scrambling (as they already are) to find replacement imports from alternative sources.  This means less oil and gas on the overall global market and even more price inflation for everyone, including Americans.  

    The Ukrainian government has chimed in on the scenario, arguing that Putin is “bluffing.”  However, if we look at recent developments in terms of Russia’s trading partners, this sounds like political spin.  Both China and India have greatly increased their purchases of Russian oil over the past few months and Russia’s oil revenues have soared despite western sanctions. Russian natural gas exports to China jumped 60% in May.  This shift in trade is part of a 30 year energy deal signed with China in February before the Ukraine war even began, indicating well planned contingencies on the part of the Kremlin.  

    Russia’s economic backing from its trade partners was solidified at the recent BRICS summit, where nations like China and India showed full support and offered only passing interest in Ukraine.  With The BRICS representing well over 30% of the human population and China representing the largest importer exporter economy in the world today, Russia is not facing any shortage of export alternatives.  It is highly unlikely that they are bluffing when it comes to cutting off energy to Europe.

    If this does happen for any length of time during winter, prepare for a considerable reduction in living standards in the EU as energy inflation buries their economy and creates the potential for civil unrest.  In the US, prepare for even higher prices in terms of oil and gas as Europe gobbles up whatever energy exports they can find on the market to replace Russian losses.     

    Tyler Durden
    Tue, 07/12/2022 – 02:45

  • Biden Heads To Middle East, Plans To Abase Himself Before Saudi Royals
    Biden Heads To Middle East, Plans To Abase Himself Before Saudi Royals

    Authored by Doug Bandow via AntiWar.com,

    President Joe Biden is off to the Middle East. He apparently plans to welcome Saudi Crown Prince Mohammed bin Salman – ole “Slice ‘n Dice,” when it comes to journalistic critics – in from the cold. The president is abandoning the pretense that human rights motivate his administration.

    Of course, this should come as no surprise. Campaign promises rarely last much beyond election day. Candidates collect votes from hapless citizens, only to announce after winning that their commitments are impossible to keep. So it has been with treating Mideast royal dictatorships as the criminal regimes they are.

    President Donald Trump set the standard for shamelessly catering to Saudi whims. So ostentatious was his subservience that some suspected mercenary objectives, perhaps hoping to build a Trump Tower in Riyadh after leaving office or collect future investments for his son-in-law Jared Kushner. The more mundane explanation may be that the Kingdom of Saudi Arabia brilliantly played to Trump’s vanities while the Israelis convinced him that Riyadh was a necessary ally against Iran. Whatever the reason, there was no Saudi crime the Trump administration would not aid, abet, and cover-up.

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    Candidate Biden responded by sharply criticizing Trump and promising to make the crown prince, known as MbS, a “pariah.” President Biden began well, by refusing to meet or even call the killer prince. The governments could still cooperate, and Americans could still buy oil even if Washington stopped pretending that the KSA was a vital pillar of US Mideast policy.

    However, Biden quickly fell back into the conventional wisdom of which he has been a poster boy since entering politics. One factor is Iran. Although Biden committed to restoring the Joint Comprehensive Plan of Action, or nuclear deal, with Tehran, he blundered away his chance to improve relations, proving hopelessly timid and fearful of Republican criticism.

    Vicious GOP attacks were inevitable if he did anything less than launch a nuclear attack on the Islamic Republic, and even that probably would have been dismissed as insufficient by congressional Republicans. He should have accepted the inevitable and immediately entered into negotiations with Iran. Instead, he dithered and accepted the poison pill sanctions imposed by Trump to prevent his successor from making a deal.

    Now seemingly stuck with Trump’s disastrous “maximum pressure” campaign – instead of causing Tehran to accept Washington’s dictates, the policy spurred the Islamic Republic to speed up its nuclear program – Biden is similarly increasing sanctions and threatening military action. Which means effectively turning Iran policy over to Israel and Saudi Arabia. Instead of attempting to extricate Washington from a sectarian feud between Shiites and Sunnis, Biden appears to be going all in for the Saudis, no matter how loathsome and irresponsible the royal regime.

    Biden’s second objective is to win over Israel first fans who voted Republican during Trump’s reign. The Abrahamic Accords brought no peace, since Israel was not at war with the likes of the United Arab Emirates, Bahrain, and Morocco. Indeed, the US had to buy Arab assent – for instance, accepting Morocco’s illicit annexation of the Western Sahara. Rather, the public normalization of relations created the basis of a Sunni Arab-Israeli alliance against Tehran. Israel would like to add the Saudis, which in practice means the administration wants the same, even though the American people get little out of the bargain. At least President Barack Obama made a pretense of caring about promiscuous Israeli violations of Palestinians’ human rights.

    Finally, Biden is desperate to get more oil flowing. He fears a Democratic wipeout in November with inflation raging and his approval rating plummeting. The US has spent years using sanctions to drive producers off the market, recently Iran and Venezuela and since February Russia. Playing the craven beggar, he hopes to convince the crown prince to open the spigots.

    Officially, the president said he doesn’t plan to ask for the Kingdom to sell more oil, but he doesn’t have to. That message has been communicated for weeks. He also said he wasn’t going for the purpose of seeing Crown Prince Slice ‘n Dice, though they would be in meetings together. However, no one doubts that the president and MbS will do more than greet one another. The only question is whether the crown prince will insist that Biden kiss the royal feet first.

    It’s not clear that the Kingdom can deliver a lot more oil – apparently MbS told French President Emmanuel Macron that the Kingdom was already at maximum production. Moreover, the KSA has no reason to give up the opportunity to fill its coffers with petroleum prices running at record levels. It is easier to take money from American and European consumers than to again turn the Riyadh Ritz-Carlton into an informal prison and shake down the Saudi mercantile class. (Not that anyone can be certain Prince Slice ‘n Dice won’t use that tactic again!)

    In any case, the only reason MbS would agree to even a little moderation in oil policy is if Biden offered something more valuable in return. And that appears to be some sort of security guarantee, officially or unofficially turning American military personnel into royal bodyguards. This is an awful idea. If the Saudi people can’t be trusted to defend their nation’s brutal, rapacious ruling class – the Kingdom is ranked by Freedom House among the world’s dozen least free nations, with China, Iran, and Russia ranking above Riyadh – young Americans certainly shouldn’t be dispatched.

    MbS has loosened totalitarian social controls, leading to a burst of popularity among the young. Imagine, Saudis now can attend movie theaters! However, he has tightened political controls. There is no sign that he is willing to stop kidnapping, jailing, imprisoning, murdering, and even dismembering his critics. Moreover, despite his studied appeal to credulous evangelicals, he maintains the ban on any faith but Islam. Although no one could confuse the United Arab Emirates with a liberal society, the Kingdom is in a class almost by itself.

    Riyadh and its well-renumerated Greek Chorus in Washington promote the KSA as a vital ally. However, the reality is quite different. The energy market has diversified. Biden is desperate to expand Saudi oil production because the US is now waging economic war against multiple oil producers. Instead of empowering the Saudis, Biden should abandon the Trump administration’s failed strategies of starving already suffering Venezuelans and wrecking Iran’s economy. The US also should be offering Ukraine at least as much encouragement to make peace as war.

    The Kingdom’s factotums also present the Saudi royals as a heroic barrier to aggressive Iranian Islamic revolutionaries. Yet the KSA has been even more disruptive and interventionist than Tehran. Riyadh financed the brutal al-Sisi coup and dictatorship in Egypt, sent troops to preserve the oppressive minority Sunni monarchy in Bahrain, blockaded and threatened to invade neighboring Qatar, underwrote Islamist fighters in Libya and Syria, kidnapped Lebanon’s prime minister, and invaded Yemen, the poorest country in the region. Quite a record!

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    The latter misadventure has proved to be an extraordinary humanitarian disaster. The situation even worsened after Biden was elected. Reported the Yemen Data Project: “January 2022 was the most violent month in the Saudi-led air war in Yemen in more than five years. Yemen Data Project recorded 139 civilian deaths and 287 civilians injured in Saudi coalition airstrikes in January, taking the casualty toll to over 19,000 civilians killed and injured since Saudi Arabia launched its bombing campaign in Yemen in March 2015. Not since October 2016 have more civilian casualties been recorded in a single month in the air war. Saudi-led coalition airstrikes caused more civilian harm in the first month of 2022 than in the two previous years combined.”

    The KSA and its propagandists blame Iran, but Yemen’s Ansar Allah, or Houthis, always kept their distance from Tehran. The latter got heavily involved only after the Saudis and Emiratis, armed and supported by Washington, provided Tehran with an Allah-sent opportunity to bleed them. The royals turned another round of internal strife which has bedeviled Yemen for a half century into an international sectarian war, with catastrophic results. More than seven years later a ceasefire has finally halted fighting. However, no one knows if MbS has learned from his folly and is prepared to make a realistic peace.

    Perhaps the worst aspect of Biden’s trip is the US president going as impecunious petitioner, acting as if the KSA was the superpower and America was the supplicant. This long has been Saudi Arabia’s perspective of Washington. Defense Secretary Robert Gates recognized that the Saudi royals were ever ready to “fight the Iranians to the last American.” Biden seems likely to grant the Kingdom’s wish. Once he does his ostentatious kowtow to MbS, Saudi Arabia is unlikely to be the last dubious “ally” to take this administration’s measure and treat the president with disdain. No wonder polls show that less than a quarter of Americans approve of his trip.

    Instead of abasing himself, the president should transform the bilateral relationship into something approaching normalcy. First, he should encourage the ongoing dialogue between Riyadh and Tehran. The Kingdom decided to engage its potential antagonist after sensing Washington’s waning interest in treating the royals as permanent defense dependents. Better for Iran and the KSA to defuse their hostility than for Americans to make the Mideast safe for despotic Medieval monarchies.

    As for a security guarantee, Saudi Arabia should turn to Israel. The Mideast is perpetually unstable and shouldn’t consume so much attention and many resources from Washington. Israel is a regional superpower. Instead of expecting forever US subsidies, Jerusalem should underwrite the security of neighbors it believes to be important for its security.

    Moreover, if Riyadh (and Abu Dhabi) want to make nice to China and Russia, so be it. Beijing’s economic strength ensures that it will play an important commercial role, but it is unlikely to offer much militarily. Moscow’s role will be naturally limited by its modest reach beyond the “near abroad” and the disastrous fallout from its aggression against Ukraine. With far more important issues to worry about, starting with fiscal solvency at home, the US need not dominate every region on earth forever.

    If the Saudis complain, the Biden administration should publicly reconsider the federal government’s previous resistance to lawsuits against the Kingdom for alleged complicity in the 9/11 attacks. Moreover, the president could note that the Saudis and Emiratis might be appropriately declared state sponsors of terrorism, given their manifold war crimes in Yemen. And the administration could create a commission to investigate Riyadh’s influence-peddling in Washington, which exceeds anything undertaken by, say, China. Why continue to exempt the Saudis from rules applied to other nations?

    Every president seems to fall for the myth that the Kingdom is a vital partner for America. It is the Saudi royals who need the US. Washington policy should reflect this geopolitical reality.

    Tyler Durden
    Tue, 07/12/2022 – 02:00

  • "We Are Not Tacos": Hispanic Association Slams Jill Biden For Comparing Latinos To 'Breakfast Tacos'
    “We Are Not Tacos”: Hispanic Association Slams Jill Biden For Comparing Latinos To ‘Breakfast Tacos’

    Hispanics are livid after First Lady Jill Biden compared them to “breakfast tacos” during a Monday speech to the 2022 UnidosUS Annual Conference held in Texas, where she opined on Hispanics’ “Quest for Equity.”

    During her speech, Biden said that “the diversity of this community, as distinct as the bodegas of the Bronx, as beautiful as the blossoms of Miami and as unique as the breakfast tacos here in San Antonio, is your strength.”

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    This did not sit well with Latinos, who spent the day dragging her on Twitter. It also caught the attention of the National Association of Hispanic Journalists (NAHJ), which said in a statement: “We are not tacos.”

    “Using breakfast tacos to try to demonstrate the uniqueness of Latinos in San Antonio demonstrates a lack of cultural knowledge and sensitivity to the diversity of Latinos in the region,” reads the statement.

    “Our heritage as Latinos is shaped by a variety of diasporas, cultures and food traditions, and should not be reduced to a stereotype.”

    Memes and hot takes abound:

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    In short:

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    Tyler Durden
    Tue, 07/12/2022 – 01:46

  • America's Path To War With Russia
    America’s Path To War With Russia

    Authored by Christopher Blattman via RealClear Politics (emphasis ours),

    The Biden administration has worked hard to keep Russia from treating America as a co-combatant in Ukraine. But that doesn’t mean NATO isn’t deeply embroiled in the fight. The level of support is extraordinary and increasing, including sanctions, intelligence sharing, weapons transfers, and money. Add to that the ever-heightening political rhetoric: “The United States is in this to win it,” one US Congressman tweeted from Kyiv.

    pic via africametro.com

    But nothing in international law stops Russia from changing its mind and treating the United States as an active party to the conflict. Instead of providing bright red lines, the conventions are fuzzy and subjective. The fact that Vladimir Putin hasn’t deemed NATO a co-combatant comes from a mix of murky international norms, strategic calculation, and luck.

    At some point, that could change. Perhaps a Ukrainian military unit uses a long-range system from NATO to attack Belgorod, just inside the Russian border, and Putin orders his military to retaliate against a Western country. Or, as the torrent of heavy weapons to Ukraine grows, perhaps Russia decides that supply depots in Poland are fair game. We can imagine these scenarios by the dozen.

    In all likelihood, however, none of these will come to pass. Fighting is ruinous, and so, as a general rule, countries do their best to avoid open conflict—especially one that could go nuclear. The costs of war also mean that (when they do fight) nations have powerful incentives not to escalate and expand those wars—to keep the fighting contained. This is one of the most powerful insights from both history and game theory, and the subject of my recent book, Why We Fight: The Roots of War and the Paths to Peace. War is a last resort, and the costlier that war, the harder both sides will work to avoid it.

    For the most part, that logic holds here. The United States and Russia have an exceedingly low risk of conflict. But that risk is not zero. In their vociferous support for Ukraine, it’s important for American politicians and their publics to be clear-eyed about the perils involved. It’s not just that NATO could get unlucky, and see the fighting escalate for idiosyncratic or irrational reasons. Game theory and history show us how NATO or Russian aggression could come about for rational, calculated reasons.

    Before we get there, however, let’s go back to why a Russia-NATO war is unlikely. The conflict in Ukraine makes this a strange moment to argue that war is rare, or a nation’s last resort.

    A powerful example came two weeks into Russia’s invasion of Ukraine, when India accidentally launched a cruise missile at Pakistan. Predictably, calm ensued—as it has for decades. War between the two hostile, nuclear-armed rivals would have been so unimaginably costly, both sides strove to avoid it.

    For years, Putin also avoided invading Ukraine. Instead, for two decades he tried every other underhanded means possible to co-opt the country: dark money, propaganda, political stooges, assassinations, and support for separatists. He tried everything else he could because as violent and costly as these things were, not one of them was as risky or as ruinous as war.

    Likewise, Putin successfully pacified Russia’s other neighbors with varying degrees of persuasion and force, from the subjugation of Belarus to “peacekeeping missions” in Kazakhstan (to say nothing of the cowing of the Russian people). None of these confrontations required long campaigns of violence.

    Finally, once the war did break out, both sides took steps to avoid escalation. Russia has the missiles to level every government building in Ukraine’s capital, but they haven’t done so yet. And while it’s hard to look at the recent attack on shoppers at a mall in Kyiv and see evidence of restraint, the fact is that Putin has the ability to do much worse. Similarly, Ukrainian forces could step up their attacks across the Russian border, but have kept these incursions to a minimum. Each one of these choices is likely to be a strategic one—a decision to concentrate the fight to the Donbas and reduce the costs and risks of escalation. A war between NATO and Russia would be more costly than all these conflicts put together.

    Three Ways War Could Happen

    Escalation is unlikely, but every day the war rages on means a small chance of world war. Some of this risk is idiosyncratic or even irrational. A NATO or Russian officer could misread the situation, or a computer system could produce an error, and one side mistakenly launches an attack on the other. Even if they’re unlikely, such events are easy for most people to imagine.

    Less evident are the strategic reasons that one side could decide war—whatever its price—is worth the gamble. There are at least three ways this could come about.

    • First, there is the logic of reputation and deterrence. NATO has incentives to be confrontational with Russia—to take excessive risks in supporting Ukraine—to deter future adversaries. That’s because every one of NATO’s other rivals is watching and drawing lessons. If the West treats Russia gently, just because it is a nuclear-armed power, that sends a clear message to every other strongman in the world: atomic weapons are the ticket to impunity; get them as soon as possible.

    To avoid this signal, America and its allies would have to be willing to show that they are willing to stand up to a nuclear armed state and endure some chance of escalation. This would mean taking more risks than in a world where NATO only has to think about Russia. Sadly, no rivalry exists in isolation.

    • Second, Ukraine or NATO could unwittingly give Russia an incentive for a preventive strike. Suppose Ukrainians concentrate their forces and heavy arms, tempting Putin to use a tactical nuke while he can. Or perhaps the West pledges to deliver even heavier arms onto Ukraine, but those systems will not be operational for months. This could give Russia an incentive for an aggressive push to encircle Ukrainian forces, cut off Western supplies, and attack NATO supply depots while they can.

    In both circumstances, Russia has a window of opportunity in which it believes it is temporarily strong. Quick action can lock their advantage in—an incentive to escalate the war, even if it risks drawing NATO into the fight.

    Now, in theory, Russia could use their momentary advantage to demand concessions rather than escalate. As a rule, adversaries prefer to bargain rather than fight. But doing so could undermine the secrecy and effectiveness of a preventative strike. And besides, how could Ukraine and the West credibly commit to those concessions? Once Russia is weaker, its adversaries may have incentives to renege. This is what international relations scholars call the “security dilemma”, and what game theorists call a “commitment problem”—arguably one of the most common but underappreciated causes of war in history.

    • Third, the last rational road to war involves canny leaders with incentives to rile up public opinion against certain kinds of compromise, only to find that they’ve overshot the mark, and eliminated any possibility of a peaceful deal.

    Suppose, six months from now, the war of attrition has ground on, leaving Russia in control of large swathes of the Donbas, where Ukraine has little chance of regaining them by force. Imagine that, privately, the Ukrainian government believes that some kind of settlement is necessary. Optimistically, they reason, Russia might withdraw from the Donbas in return for the region’s autonomy, Ukrainian neutrality, and formal annexation of Crimea.

    Unfortunately, it is easy to imagine a world where Western and Ukrainian public opinion is against such a deal, even if it is the pragmatic path. As a result, Ukraine’s parliament could not be trusted to implement any peace deal. NATO membership—enshrined in the Ukrainian constitution—would be even harder to change. Amidst this opposition, Western leaders would feel pressure to publicly distance themselves from a peace agreement they’d secretly like to see. This could pit Russia and Ukraine in a forever war—a permanent festering wound—one that could escalate into a NATO-Russia war for all the idiosyncratic and rational reasons above.

    Why would leaders in Ukraine and the West ever find themselves in such a predicament, where the sensible path is anathema in public? Many reasons, but one is because public opinion is a weapon and a bargaining tool. Clever politicians know that they can foster public anger to build broad support for recruitment, taxes, and other costly sacrifices needed to wage the war. This strengthens the government’s hand against an enemy. What’s more, riling up public opinion can shut down a whole range of deals that are unfavorable to your side. “I know it makes sense to concede what you ask,” you can tell the rival leader, “but look at public opinion—my hands are tied.” In short, leaders on both sides of a war have incentives to demonize the enemy and manufacture discontent.

    Unfortunately, a few wrong choices and politicians may find they’ve shut off any possibility of a deal—especially if the other side has been playing the same risky strategic game. Suddenly, by month 12 of the war, both rivals are exhausted, depleted, and yet unable to find peace.

    Time to Assess Reasonable Settlement Options

    For Western leaders, these three logics mean there will be hard choices ahead.

    On deterrence, it means working to strengthen Ukraine’s position in ways that minimize the risk of escalation. The Biden administration’s caution against no-fly zones, or long-range weapons that can reach into Russia, seems well warranted.

    When it comes to security dilemmas and other commitment problems, it means no moves that give Russia reason to believe its advantage is enormous and temporary. Public declarations of massive military support months down the road could be worse than no declaration at all. Swifter, steady support is wiser.

    Finally, leaders should be wary of whipping up hostility to any deal. “In it to win it,” plays well on Twitter and cable news, but ignores that few wars ever end in decisive victory. Almost all require painful concessions. Resoluteness in public is reasonable, but it is also time to assess what kinds of settlements Ukraine’s leaders foresee, and not undermine them in advance.

    Christopher Blattman is a Professor of Global Conflict Studies at The University of Chicago, and the author of Why We Fight: The Roots of War and the Paths of Peace (Viking, 2022). He tweets at @cblatts.

    Tyler Durden
    Mon, 07/11/2022 – 23:40

  • China Credit Growth Explodes To 4th Highest Ever In June… It's Still Not Enough
    China Credit Growth Explodes To 4th Highest Ever In June… It’s Still Not Enough

    After several months of surprisingly, almost painfully low credit creation in China – the country that for the past decade was the sole global growth dynamo – in June Beijing has finally redeemed itself.

    In June, China’s total social financing, RMB loans and M2 all came in far above expectations, with the rapid credit growth in June likely reflecting a combination of strong fiscal policy support (record-high single-month government bond issuance), further easing in credit supply (PBOC urged banks to accelerate loan extensions) and recovery of credit demand on easing Covid restrictions and activity growth recovery.

    June total social financing (TSF) beat expectations again after showing a strong rebound in May, and rose by 5.17 trillion CNY, the fourth highest monthly increase on record. The sequential growth of TSF stock accelerated to 15.4% mom annualized in June, from 12.8% in May. Overall CNY loans growth also accelerated and grew 13.7% M/M annualized from 13.0% in May. M2 year-on-year growth increased to 11.4% yoy in June, vs. 11.1% in May, and expanded by 14.8% in month-over-month annualized terms, vs. 15.6% in May. Here are the numbers:

    • New CNY loans: RMB 2810bn in June vs. consensus: RMB 2400bn. Outstanding CNY loan growth: 11.2% yoy in June (13.7% SA ann mom, estimated by GS); May: 11% yoy (13% SA ann mom).
    • Total social financing: RMB 5170bn in June, vs. consensus: RMB 4200bn.
    • TSF stock growth was 10.8% yoy in June, faster than the 10.5% in May. The implied month-on-month growth of TSF stock accelerated to 15.4% (seasonally adjusted annual rate) from 12.8% in May.
    • M2: 11.4% yoy in June vs. Bloomberg consensus: 11% yoy. May: 11.1% yoy (+15.6% SA ann mom estimated by GS).

    And visually:

    Among major TSF components, shadow banking credit showed a small net increase in June (entrusted loans and undiscounted bankers’ acceptance bills grew by RMB 99bn in June, vs. the RMB 20bn increase in May, seasonally adjusted). Based on loans to different sectors, the rebound in loan growth was broad-based. Corporate mid-to-long term loan growth was 24.8% vs. 12.4% mom annualized in May. Corporate bill financing showed a small contraction of 0.7% vs May, perhaps due to policymakers’ guidance and concerns over arbitrage via bill financing. On loans to households, total household loans expanded by 10.2% month-over-month annualized, vs. an increase of 3.9% in May. Household medium-to-long term loans, which are mostly mortgages, grew 7.7% month-over-month annualized in June, vs. 2.6% in May. Government bond net issuance surged to RMB 1.6 trillion (NSA basis), the highest single-month net issuance on record, as policymakers required local governments to finish special bond issuance by the end of 1H. Corporate bond net issuance was RMB 327bn in June (after seasonal adjustment).

    M2 growth also surprised to the upside at 11.4% Y/Y, the highest since late 2016. Fiscal deposits declined by RMB 437bn in June, broadly similar to the change in June 2021 despite record-high government bond net issuance, implying very strong fiscal spending in June.

    According to Goldman, detailed breakdown of June credit data pointed to improvement of credit demand – corporate medium-to-long term loan growth accelerated in June while bill financing slowed. Household loan growth also improved although short-term household loans (consumer credit) grew faster than medium-to-long term household loans (mostly mortgages). That said, the bank believes that similar to previous outlier credit creation months, broad credit growth could slow in the near term after the rapid growth in June, barring additional major policy easing measures such as additional local government special bond issuance, or more credit support from policy banks.

    That’s the not so good news, because as Bloomberg’s Simon White writes, “China’s nascent recovery will remain muted, restraining further equity upside, until there is a clear sign measures of liquidity are sustainably turning up.”

    Taking a step back, White notes that China’s total social financing (TSF) increased in June as the effects from the country’s incrementally rising credit and fiscal easing feed through. In May, the PBoC urged banks to lend more, while last week the Ministry of Finance announced it was considering allowing local governments to issue a chunky $220 billion of special government bonds in the second half, an unprecedented rise.

    In any case, the 12-month sum of the TSF is now rising almost 10% on a year-on-year basis, after spending most of the past 15 months in contraction territory.

    Echoing Goldman, the Bloomberg Markets Live strategist notes that while this would normally be a pretty unassailable sign of a strong boost to growth ahead, in China that is not necessarily the case: “Given banks are effectively arms of the state, government-directed financing means that new credit finds its way most easily to SOEs, who are often not the companies most in need. This means the growth multiplier from new credit is lower than if it was extended more broadly to the private enterprises that need it most.”
     
    As White notes, the kind of stimulus in China that has a more pronounced impact on growth is so-called “flood-like stimulus.” This is broad-based, unfettered easing with limited control from the authorities where the credit created ends up. It was the flood-like stimulus in the mid-2010s that led to rampant expansion in the shadow banking sector that eventually prompted China to pull back on easing for the sake of financial stability and greater state control. As a result, “there has been little appetite for flood-like stimulus since then, with officials stating as lately as June that such easing is not on the cards.”
     
    That said, the constraints on state-mandated lending mean that TSF growth has a poor relationship with economic growth. A much better relationship is seen with real M1 growth. This rose strongly in previous episodes when stimulus was flood-like, but the modest upturn this year looks already to be sputtering.

    As White concludes, “this means economic growth in China is likely to continue to incrementally improve, but remain muted and at risk of stalling” especially since Covid remains an ongoing headache for the stock market, as today’s news showed. In short, after an impressive 20% bounce off the lows, the market has hit resistance. But much bad news is already priced in. Yet, it is difficult to see how we get the next leg up in the stock market while real M1 growth remains subdued…

    Tyler Durden
    Mon, 07/11/2022 – 23:20

  • China And Pakistan Engage In Naval War Games As Eastern Military Cooperation Rises
    China And Pakistan Engage In Naval War Games As Eastern Military Cooperation Rises

    War games highlighting cooperation between China and its allies are not a new thing, but such events are increasing in frequency and the nature of these exercises indicates that current global tensions are more than just a passing phase.  

    Chinese naval training with Russia has dramatically expanded in the past year, with exercises around Japan and Taiwan as well as exercises in the Indian Ocean which included Iran.  The war games suggest a model for countering US military power in the region, as well as possible training for locking down the South China Sea after a Chinese invasion of Taiwan.  Concerns are growing within nations like Japan and India that the string of naval exercises this year are a form of saber rattling leading to further geopolitical strife. 

    Russian military representatives suggested last month that the country is preparing for a ‘colossal war with NATO.’  In the meantime, China’s rhetoric against Taiwan has escalated, with the Chinese Defense Minister threatening “all out war” if they ever try to assert official independence.  Whether or not the US would actually intervene in defense of Taiwan is still in question under the Biden Administration. 

    Pakistan’s military alliance with China is increasing at a time when the nation’s economy is on the verge of implosion.  The official inflation rate has hit 13.37% and the Pakistani Finance Minister, Miftah Ismail, has stated publicly that the country is facing economic collapse if they do not receive a long awaited IMF loan agreement to the tune of $36 billion ($30 billion more than they initially asked for).  It is possible that a closer military alliance is a trade Pakistan is willing to make in order to access greater economic support from the Chinese. 

    In the meantime India, another economic ally of China with precarious border relations, is left wondering what Pakistan’s military relationship with China means for them.  The naval drills this week followed the visit of Pakistan’s Chief of Army Staff General to China where he held talks with China’s top ranking General.  The statements by Pakistan claim a ‘rock solid’ alliance between the two militaries.

    Pulling Pakistan in close may be China’s attempt to force India into deeper ties, beyond the economic and into the realm of defense.  India and China have become highly interdependent in financial terms, but India’s military connections to the west remain.  A strong alliance between Pakistan and China could be used as leverage to force India to choose support for China in military engagements, or at least remain neutral during a major conflict (like an invasion of Taiwan).  

    China would likely suggest that strong economic and defense ties will secure peace in the region under their leadership, and prevent nuclear conflagration between India and Pakistan.  What it would really accomplish is a free hand for China to project military power in the Pacific, specifically against Taiwan.  With China, Russia, India and Pakistan all in alignment, or at least unwilling to help NATO interests, it would be very difficult for the west to use geopolitical deterrence as a means to stop a regional war.  Clearly, sanctions are not working against Russia for this very reason, so why would they work against China?  

    War games alone are never a sure sign of impending conflict, but the wash of war games across multiple eastern nations, the areas in which they are operating, and the economic conditions involved all indicate that at the very least we will be facing a powder keg environment in the Pacific for many years to come.  What this means is that China will be able to operate with more impunity and with less fear of a US or NATO response.  And, with the current leadership available in the US, there is very little to scare China away from pursuing their greatest obsession – The surrender of Taiwan into the communist fold.  

    Tyler Durden
    Mon, 07/11/2022 – 23:00

  • DOJ Probes PGA Tour Over Its Tactics Against Saudi-Backed LIV Golf
    DOJ Probes PGA Tour Over Its Tactics Against Saudi-Backed LIV Golf

    Just days ahead of President Biden’s controversial visit to the Kingdom of Saudi Arabia comes news that the Department of Justice has launched an antitrust investigation of the PGA Tour over its maneuvering against Saudi-backed LIV Golf. 

    Players have already received initial DOJ inquiries about the PGA Tour’s actions over the past few months. One anonymous player’s agent told ESPN the DOJ investigators are “a little bit like a dog with a bone. They’re on this. I expect them to dig as deep as they can because they’re all over this. I could tell.”

    According to ESPN: 

    The inquiry, according to player agents who have been contacted by DOJ officials, is focused on the PGA Tour’s actions regarding the Official World Golf Ranking, warnings it has issued to players who were contemplating joining LIV Golf and suspensions that have been levied against players who left by PGA Tour commissioner Jay Monahan.

    The PGA Tour has dished out more than 20 indefinite suspensions to players who’ve competed in LIV Golf events. The investigation will also reportedly scrutinize whether the PGA Tour is colluding with the DP World Tour and others to deny world ranking points to LIV participants. 

    Last week an arbiter issued a stay of a suspension that had barred LIV Golf players from competing in the Scottish Open, which is co-sanctioned by the PGA Tour. 

    The LIV Golf Invitational Series is a high-spending newcomer funded by Saudi Arabia’s Public Investment Fund. One top of regular-season tournaments with prize purses totaling $25 million, LIV Golf has announced an eight-event series with a more than a quarter of a billion dollars in prize money at stake. The Saudis are reportedly paying golfer Phil Mickelson alone $200 million to switch from the PGA Tour to LIV Golf.   

    In June, PGA Tour commissioner Jay Monahan said, “If this is an arms race and if the only weapons here are dollar bills, the PGA Tour can’t compete. The PGA Tour, an American institution, can’t compete with a foreign monarchy that is spending billions of dollars in attempt to buy the game of golf.

    “We welcome good, healthy competition. The LIV Saudi golf league is not that,” he said. “It’s an irrational threat, one not concerned with the return on investment or true growth of the game.”

    “This was not unexpected,” the PGA Tour said in a statement. “We went through this in 1994 and we are confident in a similar outcome.” That’s a reference to a Federal Trade Commission probe prompted by the PGA Tour’s requirement that player’s obtain permission to play in non-PGA Tour matches. The PGA Tour emerged unscathed. 

    LIV Golf been condemned by many as a “sportswashing” venture—a public relations initiative designed to divert attention from Saudi Arabia’s atrocious human rights record, its catastrophic war in Yemen and links between Saudi officials and the 9/11 hijackers.   

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    Tyler Durden
    Mon, 07/11/2022 – 22:20

  • These Are All The World Leaders Assassinated Since 2000
    These Are All The World Leaders Assassinated Since 2000

    Former Japanese Prime Minister Shinzo Abe, 67, was assassinated on Friday (July 8) during a campaign speech in western Japan.

    In a country where gun control laws are stringent, the attack is the first the country has seen since before World War II. The suspected killer is reported to have said he held a grudge against an organization he believed the premier was connected to, yet police say investigations into the claims are ongoing.

    As Statista’s Anna Fleck details below, the stakes can be high for political leaders. Looking back over the past twenty years, a number of leaders have been assassinated either while in office or after having stepped down. In the following chart, we take a look at the presidents and prime ministers who have been killed since 2000, as listed by AP here.

    Infographic: The Leaders Assassinated Since 2000 | Statista

    You will find more infographics at Statista

    Just last year, Haitian President Jovenel Moïse was reportedly tortured before he was killed by a group of hired assassins in an overnight raid.

    A few months earlier, Chad’s President Idriss Deby Itno had been killed while fighting rebels in the north of the country, just hours after having won a re-election.

    The chart then shows a ten year lull, where no presidents or prime ministers were killed. In that time, however, high profile leaders such as Tunisian left-wing opposition leader Chokri Belaid and Mohammed Brahmi lost their lives.

    Benazir Bhutto, the sole female on the list, and first female prime minister of Pakistan, was shot then hit by suicide bomber’s blast at a political rally in the city of Rawalpindi.

    In 2011, Libyan dictator Moammar Gaddafi was captured and killed after his government was overthrown by a NATO-backed rebellion.

    Congo’s President Kabila and Guinea-Bissau’s João Bernardo Vieira were each shot by inside men, the first by a child soldier who had become his teenaged bodyguard, and the second by a soldier in his presidential palace.

    Meanwhile, Nepal’s King was murdered by his own son, who massacred nine members of the family – including the king – in the royal palace, reportedly over an argument about the prince’s marriage.

    Tyler Durden
    Mon, 07/11/2022 – 21:40

  • The Parade Of Horribles: A Democratic Talking Point On Dobbs Is Dangerous Disinformation
    The Parade Of Horribles: A Democratic Talking Point On Dobbs Is Dangerous Disinformation

    Authored by Jonathan Turley,

    Below is today’s column on common talking point among Democratic members and pundits on how the recent Dobbs decision will present a barrier to women seeking treatment for ectopic pregnancies.

    It is not only legally and medically false but it is dangerous if women actually believe what they are hearing or reading from these figures. There are ample grounds for pro-choice advocates to oppose the decision without spreading alarm over a danger that does not exist.

    Here is the column:

    After the Court’s decision in Dobbs v. Jackson Women’s Health Organization, a common rallying cry for pro-choice advocates has been the endangerment of women with ectopic pregnancies who would now be barred in some states banning or severely limiting abortion services. Reps. Judy Chu, Jan Schakowsky, and others have insisted that women with such pregnancies are now without protection. Rep. Alexandria Ocasio-Cortez even used the issue to justify hounding and harassing justices eating in public in reference to a recent incident involving Justice Brett Kavanaugh at a restaurant with his wife: “Poor guy. He left before his soufflé because he decided half the country should risk death if they have an ectopic pregnancy within the wrong state lines.”  These views have been amplified by academics like Harvard Professor Laurence Tribe. 

    It is a great talking point but it just happens to be untrue as both a legal and medical matter. Worse yet, this common claim could be putting women physically at risk by suggesting that they might be legally at risk if they seek such treatment.

    There are obviously good-faith objections to the Dobbs decisions on the underlying constitutional interpretation. However, critics have created a parade of horribles that extend beyond that opinion, including arguments expressly rejected by the Court. That includes President Biden who has repeatedly suggested that contraceptives and travel for women could be now curtailed under the decision.

    The majority expressly and repeatedly rejected the application of this holding to these other rights. It stressed “intimate sexual relations, contraception, and marriage” are not impacted by its holding because “abortion is fundamentally different.” The court and Justice Brett Kavanaugh’s concurrence return to the point again and again: “Nothing in this opinion should be understood to cast doubt on precedents that do not concern abortion.” Only Justice Clarence Thomas suggested that these other cases should be examined. Yet even Thomas stressed this opinion expressly rejects that application.

    However, the ectopic pregnancy talking point is not just false, it is dangerous. These pregnancies can be life threatening and must be addressed as soon as possible. These interventions are not abortions and even restrictive states expressly state so.

    When a pregnancy implants in the fallopian tube, it is not a viable pregnancy but it creates a potentially fatal risk for the mother from tubal rupture and internal bleeding. Treating such woman is not an abortion of a viable pregnancy. Indeed, as noted in a recent column, the procedures are vastly different, including the fact that “mifepristone and misoprostol, used commonly to provide medical abortions, specifically do not treat a pregnancy outside of the uterus.”

    This is reflected in some of the most restrictive laws.

    For example, Oklahoma’s law expresses states “An act is not an abortion if the act is performed with the purpose to . . . remove an ectopic pregnancy.” Texas, Louisiana, and other states have the same express exemption.  However, even if the law were silent on ectopic pregnancies, it is doubtful that the courts would ignore the medical and factual classifications to treat such emergencies procedures as abortions or ignore that the mother’s life is in danger without medical intervention.

    Yet, women would not know that in listening to leaders or reading news accounts.

    In the New Yorker, Jia Tolentino explained “abortion bans will hurt, disable, and endanger many people … who encounter medical difficulties…One woman in Texas was told that she had to drive fifteen hours to New Mexico to have her ectopic pregnancy—which is nonviable, by definition, and always dangerous to the mother—removed.” That is based on a story from 2021 before the Dobbs decision and an account from an abortion hotline of a doctor refusing to deal with an ectopic pregnancy. It is not explained how, even when Roe v. Wade was still good law, such a procedure could be denied under Texas law.

    A woman reading such accounts might easily conclude that she could be charged with a crime or face other legal penalties if she sought treatment for an ectopic pregnancy in restrictive states. These politicians stress that time is of the essence and that such a loss of time in an ectopic pregnancy could prove lethal. Yet, their false claims could have precisely that effect.

    That makes this not just disinformation but the most lethal form of disinformation. Indeed, it is precisely the type of disinformation that many of these same leaders have called to be censored. Indeed, this year, Rep. Ocasio-Cortez continued her call for corporate censorship on social media because “disinformation through U.S.-founded companies like Facebook … have absolutely slowed and frankly sabotaged” efforts in areas like Covid treatment. Many have rallied to this anti-free speech cause. Indeed, this week, another medical professor was suspended for simply calling for a discussion of concerns over the need for Covid vaccines of children.

    I remain opposed to government and corporate censorship of disinformation, including the false statements made by Rep. Ocasio-Cortez. Like many of the false claims surrounding the Dobbs decision, these issues can be addressed without curtailing free speech, but that only increases the importance of countering these false narratives.

    President Biden and other Democratic members have called for censorship because social media companies are “killing people” with disinformation. That is precisely what could could occur if women believe the claims of politicians and pundits on these ectopic pregnancies.

    Tyler Durden
    Mon, 07/11/2022 – 21:20

  • Ackman Returning $4BN To Investors In Largest Ever SPAC After Failing To Find A Deal
    Ackman Returning $4BN To Investors In Largest Ever SPAC After Failing To Find A Deal

    It came like a lion, with days of non-stop investor fanfare constant TV coverage; it’s leaving like a shorn lamb.

    Two years after unleashing the largest ever blank check company in history, billionaire investor and CNBC drama queen, Bill Ackman, told investors that he is returning their $4 billion after failing to consummate a merger deal.

    Pershing Square Tontine Holdings’ efforts to find a target company were thwarted in part by what Ackman said was the unexpected recovery of capital markets during the coronavirus pandemic, according to a statement late on Monday.

    “We have been unable to consummate a transaction that both meets our investment criteria and is executable” Ackman said, noting that “while there were transactions that were potentially actionable for PSTH during the past year, none of them met our investment criteria” due to  an “adverse market for SPAC merger transactions.

    “The rapid recovery of the capital markets and our economy were good for America but unfortunate for PSTH, as it made the conventional IPO market a strong competitor and a preferred alternative for high-quality businesses seeking to go public,” Ackman said, referring to the blank-check firm by its trading symbol.

    In other words, Ackman used the Buffett excuse: “everything got too expensive for us to invest.” Which of course doesn’t explain why the billionaire didn’t look for opportunities now that stocks are more than 20% lower (and in many cases 50% or more). What explains it, is that with market sentiment dismal, it would have been difficult to find buyers into any new investment that was predicted on exponential growth as most SPAC do, at a time when the US economy is in a recession and flirting with depression.

    Ackman’s Tontine Holdings in July 2020 helped catapult special purpose acquisition companies, or SPACs, to record levels as the pandemic took hold, which we said at the time was the surest indicator of a market bubble similar to what happened in early 2008 just before the credit bubble burst. Since the start of that year, more than 1,200 SPACs have raised in excess of $271 billion in initial public offerings, almost three times the volume of all previous years combined, according to data compiled by Bloomberg.

    As Bloomberg reminds us, a 2021 effort by Ackman to buy a 10% stake in Universal Music from Vivendi with a portion of the SPAC’s funds was shot down by regulators. Early discussion with companies including Airbnb and Stripe also failed to yield a deal.

    Ackman also said in Monday’s statement that he’s still “working diligently to launch” a new type of privately funded acquisition vehicle, Pershing Square SPARC Holdings Ltd., that will issue publicly traded warrants allowing holders to acquire stock in a newly merged company, to wit:

    “With the SPAC and IPO market effectively shut today, now is a highly opportunistic investment environment for a public acquisition vehicle which does not suffer from the negative reputation of SPACs. With this in mind, as we have previously explained, we are working diligently to launch Pershing Square SPARC Holdings, Ltd., a privately funded acquisition vehicle which intends to issue publicly traded, long-term warrants called SPARs, which will offer SPAR owners the opportunity to acquire common stock in the newly merged company, the outcome of a business combination between SPARC and a private company. The SPARC structure has many favorable attributes compared with conventional SPACs that should increase the probability a transaction can be executed on favorable terms.”

    “We intend to distribute SPARs to PSTH security holders who own either Class A Common Stock (ticker: PSTH) or warrants (ticker: PSTH.WS) as of the close of business on July 25, 2022 (the last date such instruments are redeemed or cancelled): ½ of a SPAR for each share of common stock and one SPAR for each warrant. The timing of the SPAR distribution will be determined by reference to the date SPARC’s registration statement becomes effective, which we would not expect to occur until Fall 2022.”

    Tyler Durden
    Mon, 07/11/2022 – 21:00

  • Shinzo Abe's Ruling Party Gains Supermajority In Upper-House Election Following His Assassination
    Shinzo Abe’s Ruling Party Gains Supermajority In Upper-House Election Following His Assassination

    Authored by Aldgra Fredly via The Epoch Times (emphasis ours)

    Japan’s ruling center-right party scored a supermajority in the House of Councillors election on July 10, claiming more than half of the 125 contested seats, in the wake of the assassination of former prime minister and party leader Shinzo Abe.

    Japan’s prime minister and president of the Liberal Democratic Party (LDP) Fumio Kishida, second left, speaks after placing a red paper rose on an LDP candidate’s name, to indicate a victory in the upper house election, at the party’s headquarters in Tokyo, Japan, on July 10, 2022. (Toru Hanai, Pool Photo via AP)

    Abe’s factious Liberal Democratic Party (LDP) won 119 of the 248 seats in the upper chamber of parliament, while its coalition partner Komeito secured 27 seats, broadcaster NHK reported.

    This has secured for the party the two-thirds majority required to amendment Japan’s pacifist post-war Constitution. As part of Abe’s Japan-first policies, he was looking to revise Article 9, forbidding Japan from possessing its own military or forces with “war potential.”

    If unchallenged by other factions within the party, the victory will allow Kishida to preside until the next election in 2025. Kishida, a moderate from Hiroshima who wants nuclear weapons banned, represents the smaller, more left-leaning liberal wing of the LDP, while Abe lead the right-leaning nationalist wing.

    Kishida is more dovish on foreign policy than Abe, who was considered hawkish on China for his revitalising of the Quad forum and nationalizing of the uninhabited Senkaku islands that China contests as part of its territory—the Diaoyu islands.

    Japan’s Prime Minister Shinzo Abe in Rome, Italy, on April 24, 2019. (Tiziana Fabi/AFP via Getty Images)

    The LDP held a moment of silence for Abe at its Tokyo headquarters. Kishida carried a solemn expression as he placed victory ribbons next to the names of winning candidates on the whiteboard, The Japan Times reported.

    “Violence threatened the electoral process, the very foundation of our democracy. I was determined to go through with this election at all costs,” he said, referring to the shooting of Abe that occurred two days before the poll.

    Speaking at a press conference, Kishida said that his administration will focus on addressing the COVID-19 pandemic, the Russia-Ukraine war, and the soaring cost of living. He also pledged to revive the Japanese economy.

    “I am determined to achieve results as part of my ‘new capitalism’ economic model, which is aimed primarily at revitalizing the economy,” he said.

    “At the same time, I will take a step-by-step approach to continue our work on diplomacy, security, and constitutional revision.”

    The party’s victory might allow Kishida to revise Japan’s pacifist constitution—a dream Abe never achieved.

    Asked about the plans for constitutional revision on Sunday, Kishida said that he would focus on putting together a bill to be discussed in parliament.

    Abe’s Murder

    Abe, Japan’s longest-serving leader, was fatally shot on July 8 during a campaign speech in the western city of Nara. Police arrested a 41-year-old man who allegedly shot Abe at close range, and said the suspect had used a homemade gun.

    Japan’s former Prime Minister Shinzo Abe (C) falls on the ground in Nara, western Japan, on July 8, 2022. (Kyodo News via AP)

    The local police force manning the campaign event said on Saturday that security arrangements had been flawed.

    Local media reported that the suspect, Tetsuya Yamagami, told police that he intended to kill Abe because he believed that the ex-premier was connected to a religious organization that had bankrupted his family. Police have not identified the group.

    Abe’s death has drawn condolences from across political divides, and from around the world. U.S. Secretary of State Antony Blinken visited Tokyo on Sunday to offer condolences over Abe’s death and to meet with senior Japanese officials.

    “Thank you, Prime Minister Kishida, for the opportunity to visit and pay my respects to mourn with you and your nation a great statesman. We are deeply saddened over the killing of one of our dearest friends. The U.S.-Japan alliance will always remain strong,” Blinken said on Twitter.

    Mourners offer flowers for former Japanese Prime Minister Shinzo, at the entrance of the Liberal Democratic Party (LDP) headquarters building in Tokyo, Japan, on July 10, 2022. (Toru Hana/Pool via AP)

    Many Japanese have been in mourning Abe’s assassination, with hundreds visiting the LDP headquarters over the weekend to remember the former prime minister. Abe’s wake will be held on Monday night and funeral for family and close friends on Tuesday.

    Tyler Durden
    Mon, 07/11/2022 – 20:40

  • Real-Time Card Data Reveals "Broad-Based Slowdown": Spending Growth Turns Negative For Low Income Households
    Real-Time Card Data Reveals “Broad-Based Slowdown”: Spending Growth Turns Negative For Low Income Households

    After last month’s disappointing retail sales, which confirmed what we already knew, namely that the US consumer was getting tapped out after maxing out credit cards in recent months, the latest total card spending per household, as measured by BAC aggregated credit and debit cards, returned modestly to the green, rising 0.3% month-over-month (mom) in June on a seasonally-adjusted basis, prompting BofA economist Aditya Bhave to forecast a 0.4% mom increase in the Census Bureau’s ex-auto retail sales figure in June, and expects the core control group (retail sales ex auto, gas, building materials and restaurants) to increase by a below-consensus 0.1% mom.

    While the headline retail sales number may appear solid, since inflation remained solid-er in June, the card data suggest there is a risk that real (inflation-adjusted) consumer spending declined for the second consecutive month.

    Which brings us to the next point: the latest BofA card spending data reveals a broad-based slowdown.

    As BofA notes, last month we were encouraged by the fact that services spending was picking up the slack as stay-at-home goods demand faded. Alas, the story for June is more concerning. Gas prices reached all-time highs in mid-June before easing off modestly through month-end. Gasoline spending rose another 4% in June and is up 20% over the last five months.

    This has started to take a toll on other categories of consumer spending, including services.

    In June, spending on travel and restaurants fell for the first time since January (when the Omicron wave peaked), while durable goods spending dropped for the fourth consecutive month. 

    Worse, for the week ending July 2, airline, lodging and restaurant spending by lower-income households were all basically flat on a year-over-year (yoy) basis…

    … and on a consolidated bases is now negative compared to 2021!

    What about the split between debit and credit card spending? BofA economists note that one common concern they hear is whether lower-income households with liquidity constraints are being forced to spend more on their credit cards because of inflation; while they claim they have not seen much evidence of this in the BAC card data, they admit that credit card spending has modestly outpaced debit card spending for lower-income cohorts over the last year..

    … even though debit card spending has grown much more relative to pre-pandemic levels, which of course is to be expected courtesy of trillions in stimmies which parked in various checking accounts (and has been mostly bled dry by now).

    What is more concerning is that as exhibit 21 shows, credit card usage among low income cohorts is declining, not because of increased frugality but because as we showed last week, after an explosive move higher in Q1 in credit card balances..

    … most American households are now maxed out and the “easy” sources of purchasing power are gone, which means the Biden admin will be hard pressed to come up with another major crisis that allows it to dispense with a few more trillion in stimmies to preserve social order and peace.

    Tyler Durden
    Mon, 07/11/2022 – 20:20

  • Crypto Is Dead, Except For One Part…
    Crypto Is Dead, Except For One Part…

    Authored by Scott Hill via BombThrower.com,

    June was the worst month for Crypto markets ever. A huge drawdown in Bitcoin pricing, bankruptcies and scandal dominated the headlines. But there is one big bright spot, one thing within the industry that can tell us that this technology isn’t going away. To understand why this is an important marker for investors we need to go through the list of what got broken in the Crypto industry in June and why it broke.

    Luna and Three Arrows Capital

    Patient Zero for this entire collapse was the Terra/Luna ecosystem and its stablecoin UST. There are plenty of longer form descriptions of the collapse but the point is that when the stablecoin depegged and collapsed a large portion of the industry who had been relying on the peg ended up with a massive hole in their books.

    The largest example of this was Singapore based hedge fund Three Arrows Capital (3AC) who was running a highly leveraged strategy using UST. This strategy had a significant part of the fund’s assets committed to it, but the UST collapse wasn’t enough to end the fund by itself.

    3AC also had large positions in the Grayscale Bitcoin Trust (GBTC) and staked Ethereum (stETH). The Grayscale position would have paid off if the Trust had been converted to an ETF this month, allowing the huge discount on GBTC to be arbitraged away to more closely reflect the pricing of the Bitcoin held in the Trust.

    GBTC was the last hope for the troubled fund, but 3AC collapsed before the SEC could even make a ruling on the ETF conversion. The stETH depeg was what really put the nail in 3AC’s coffin.

    stETH is a form of Ethereum that represents tokens deposited in the Proof of Stake beacon chain. This allowed stETH holders to gain a yield while still being able to use stETH in DeFi. For a long time it traded at the same price as regular Ethereum, but in mid May prices began to diverge with stETH trading at a discount.

    Unlike a stablecoin peg, there were no implicit guarantees from the company that issued stETH that the two assets would trade at parity. There was no one to defend the peg.

    Despite this, most Crypto companies and funds treated the two assets as interchangeable.

    In a similar way to the ETF conversion being the hope for salvation on the GBTC trade, the Ethereum merge into the Proof of Stake network was the way out for the underwater stETH trade. The merge is looking good, but it has been severely delayed from projections made in late 2021. It didn’t arrive fast enough to bail out 3AC.

    3AC was by far the most prominent and dominant fund in the industry. This wasn’t some small operation, nor were they unknown. Everyone in the industry loaned funds to 3AC.

    Default

    As it became clear that 3AC would not be able to close their bets on GBTC and stETH in profit, whispers of insolvency grew louder. Some counter parties even warned that 3AC had stopped communicating. The lenders that had given collateralized loans to 3AC began liquidating collateral. Those that had allowed 3AC to access credit based purely on reputation looked to the courts.

    The unwind was brutal. Liquidation of collateral led to more loans going bad which led to further liquidation of collateral. Once the dust settled Celsius, Voyager, Babel Finance and scores of smaller Crypto lenders were forced to limit or block user withdrawals. Crypto prices tanked. Liquidity dried up. Retail investors who had placed their trust in these lenders to safeguard their assets suffered.

    The pain is real and not to be taken lightly. Huge amounts of people lost investments in Crypto banks that they trusted.

    The real take away from the collapse of Crypto lenders is a lesson in knowing your counterparty. It was always clear that these lenders were lending user funds out to Crypto hedge funds and market makers. The risk of this was not well understood and it’s now highly questionable whether the yields on offer were high enough to compensate for the risk being taken.

    What was not so obvious was the concentration of risk. Now that we have seen Voyager’s books via their bankruptcy application we can see that 3AC was by far their largest counterparty, representing almost two thirds of their total loans outstanding. It’s beginning to look like none of the Crypto lenders were aware of how large each other’s 3AC exposure was, nor how much debt 3AC had accessed in total. There’s no way to soften this, concentrating that much risk on one counterparty was irresponsible and a complete failure of risk management.

    This fallout will scar the industry for years.

    Depositing your Crypto into a lending platform will never be seen as a low risk move again. Even the companies that weren’t affected as badly will have their operations scrutinized and questioned. Yields will need to justify the risk being taken. Especially as we come to see that Crypto deposits are no way near as safe as bank account deposits during a bankruptcy.

    Opportunity out of Crisis

    So once all the bankruptcies have been processed and the dust settles, what comes out the other side of this debacle?

    The large signpost is that DeFi survived.

    Through all of the turmoil major DeFi protocols functioned exactly as intended. Collateral was liquidated, yields adjusted, nothing broke, there was no impairment.

    This bull run has been a rough growth phase for DeFi with frequent hacks and dysfunction, but the core, large protocols have performed spectacularly well considering these systems hadn’t been properly stress tested before. A big part of this resiliency was that DeFi loans on major platforms are over-collateralized. Losses are not possible from bad loans.

    This era of contagion was a baptism of fire for DeFi and it passed with flying colors. We can take this knowledge with us to the next bull run. We now know that companies offering access to DeFi to customers who hand over their Crypto are risky. We can use this experience to inform our decisions moving forward. We also know that the undercollateralized DeFi lenders that will inevitably show up in the next cycle will be significantly more risky than overcollateralized lenders, meaning that much higher yields will need to be offered to compensate for that risk.

    What this means for DeFi tokens is still up in the air. Most tokens do not offer a share of revenue from the protocol and will struggle to activate dividends until US Crypto regulations allow it. Until then these tokens simply offer a vote in how the protocol is governed which may or may not be valued by the market.

    The thing we know for sure is that Crypto based financial systems work.

    This is the proof of concept that the entire industry has been looking for and should mean that these systems will continue to be built, expanded and used once market conditions recover. A major factor in the losses from the 3AC collapse was their ability to take loans from multiple counterparties without disclosing their total debt position. This is impossible in DeFi where all positions and trades are transparent and auditable, preserved on blockchains for anyone to verify. The next cycle seems likely to involve much more on-chain finance as firms look for better ways to provide assurances of solvency.

    In an increasingly low trust world, finance may move on-chain.

    One Big Survivor

    The main thing that survived this Crash is Bitcoin.

    Not Bitcoin the asset. That obviously got smoked. Bitcoin the network.

    Blocks kept getting mined. Transactions kept moving. The cold wallet under your bed kept your coins secure. The network survived this, just like it always does. Cementing the idea in another cohort of new Crypto traders that amongst all of the leverage and nonsense the core and solid innovation is Bitcoin. Everything else is built around it.

    The catastrophes even overshadowed a major announcement from Jack Dorsey’s Bitcoin skunkworks built within Block (formerly known as Square). The company would be building out the Bitcoin infrastructure necessary to launch DeFi protocols based on Bitcoin.

    The foundations of the next Crypto bull run are being laid in the crater of the previous run.

    We’ve also seen the collapse of prominent negative narratives. “Governments will ban it”. China tried. It didn’t go so well. “It’s all frothy speculation”. Third world countries continue their adoption in the face of out of control inflation and a threatening IMF.

    Using the Bitcoin network I can send value nearly instantly to anyone in the world, even if their country’s banking system has collapsed. That technology is powerful and will become increasingly useful as we see more governments collapse in what is shaping up to be a decade of turmoil.

    This is the third major collapse of Crypto asset markets, but the value of the underlying technology has never been more obvious.

    Tyler Durden
    Mon, 07/11/2022 – 20:00

  • White House Says Iran Supplying "Several Hundred" Armed Drones To Russia 
    White House Says Iran Supplying “Several Hundred” Armed Drones To Russia 

    In a truly unexpected and entirely bizarre development, the White House has announced that the US has intelligence showing that the Iranian government is preparing to transfer combat drones to Russia in order to help with the ongoing offensive against Ukraine.

    As revealed for the first time in a Monday afternoon White House press briefing previewing President Biden’s upcoming Middle East trip, the transfer doesn’t just involve a symbolic few drones in order for Tehran to merely defiantly thumb its nose at Washington, but allegedly will include “up to several hundred” unmanned aerial vehicles.

    IRGC’s “Sahed 129”. Source: state media/Wiki Commons

    White House national security adviser Jake Sullivan told reporters, “Our information indicates that the Iranian government is preparing to provide Russia with up to several hundred UAVs, including weapons-capable UAVs on an expedited timeline.” 

    This marks the first time that Iran has been accused of helping Russia amid its ongoing assault on Ukraine. The new charge is unusual and curious given Russia already maintains an advanced drone program, and in general its military is considered high-tech and is deemed rival to other major superpowers like the US and China, especially in the area of hypersonic weapons technology. Naturally, this leaves some pundits wondering why Russia would need a whole large fleet of drones from Iran of all countries.

    Sullivan told reporters that the drone transfer will even include training Russian troops on how to use them: “Our information further indicates that Iran is preparing to train Russian forces to use these UAVs with initial training sessions slated to begin as soon as early July,” he said.

    The US national security adviser did attempt to provide a possible motive or reason why Iran and Russia would make such an unusual deal, per Axios:

    Sullivan said it’s proof that Russia’s efforts to overtake Ukraine are “coming at a cost to the sustainment of its own weapons.”

    It’s just “one example of how Russia is looking to countries like Iran for capabilities that … have been used before we got the ceasefire in place in Yemen, to attack Saudi Arabia,” he noted.

    This appears to hinge on the assessment currently coming out of the West that Russia is losing more of its military hardware and munitions than it was prepared for during these opening four months of the war while seeking to sustain its non-stop bombardment of Ukrainian front lines in the East and South.

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    Sullivan is suggesting that Russia fears it will be depleted of the weapons and ammunition stockpile needed to achieve its goals in Ukraine. During the briefing, he added the caveat that “It’s unclear whether Iran has delivered any of these UAVs to Russia already.” It’s also uncertain at this point which UAV types or models the Iranians are allegedly sending.

    One possibility is the Sahed 129 or the newer Sahed 136 – the latter which is a ‘suicide drone’. Both were developed and are operated by Iran’s elite Islamic Revolutionary Guard Corps (IRGC), and are considered relatively recent, advanced additions to the Iranian military’s arsenal.

    Tyler Durden
    Mon, 07/11/2022 – 19:40

  • Buchanan: Latest Symptoms Of A Disintegrating Nation
    Buchanan: Latest Symptoms Of A Disintegrating Nation

    Authored by Pat Buchanan,

    In Stephen Vincent Benet’s “The Devil and Daniel Webster,” the tale is told that if you approached Webster’s grave and called out his name, a voice would boom in reply, “Neighbor, how stands the Union?”

    “Then you better answer the Union stands as she stood, rock-bottomed and copper-sheathed, one and indivisible, or he’s liable to rear right out of the ground.”

    Today, it would be untruthful to answer to the soul of Webster that our Union is “rock-bottomed and copper-sheathed, one and indivisible.”

    For the divisions among us replicate those Webster witnessed in his last years before the War Between the States.

    A Gallup survey reports the lowest figure ever recorded, 38%, for that share of our population that proclaims itself to be “extremely proud” to be Americans. Another 27% say they are “very proud.”

    But the share of our people who say they are only “moderately proud” or a “little proud” or “not at all proud” to be Americans adds up to a third of the nation.

    In the past, those “extremely” or “very proud” to be Americans used to average 80% of the country. Now it is down to 65%.

    To love one’s country, Edmund Burke said, one’s country ought to be lovely. It would appear that 1 in 3 Americans, more than 100 million of us, no longer see our country as truly lovely.

    While patriotism and pride in U.S. citizenship and in being part of this national community are eroding, other problems are being revealed by public surveys.

    In a new AP-NORC poll, 85% of all Americans believe the country is headed in the wrong direction, with 92% of Republicans believing this to be true and 78% of Democrats agreeing.

    On July 5, a Monmouth poll reported that President Joe Biden’s approval rating had sunk to 36%, with 59% disapproving of his presidency.

    As for our Democratic-led Congress, 15% of all Americans approved of its performance, with 85% disapproving.

    Another Gallup survey from July 5 reported that this last year has seen a fall in public confidence in every one of 16 major U.S. institutions.

    The institutions in which Americans now place the least confidence are the presidency, newspapers, the criminal justice system, big business, television news and, at rock bottom, Congress. Only 7% of Americans have great confidence or quite a bit of confidence in Capitol Hill.

    The institutions that enjoy the greatest measures of confidence – though here, too, the levels are receding like Lake Mead – are small business, the military, the police, the medical system and religious institutions.

    That small business is the most trusted of American institutions suggests that Biden’s attack on the alleged greed of gas station owners may not be politically wise.

    American institutions that tend to be conservative — small business, the military, cops — are where the American people repose the greatest confidence. Journalistic institutions — newspapers and TV news — both largely liberal, appear to be ones in which the nation reposes the lowest levels of confidence and the greatest deposits of distrust.

    Why are Americans so down on their country and disapproving of its direction, and of their president who is leading them?

    Surely, the pandemic, which has taken a million lives in 30 months and infects 10 times as many of us today as it did a year ago, with the death toll roughly the same now as then, is a primary cause.

    The crisis at the Mexican border where a quarter of a million illegal migrants enter our country, uninvited, every month, with cartel mules ferrying the fentanyl and other narcotics that kill tens of thousands of young Americans every year is surely another.

    Then there is the worst inflation in 40 years and the record rise in the price of food and fuel for America’s families.

    Also, since the first of the year, there have been an average of 10 “mass shootings” a week, where a criminal gunman wounds or kills four or more victims. Major atrocities like Buffalo, New York; Uvalde, Texas; and Highland Park, Illinois, dominate the news for days.

    And each weekend seems to bring a new casualty report of the dead and wounded from Chicago’s streets that reminds us of the early days of Vietnam.

    Then there is the poisonous character of American politics.

    In the 2016 campaign, Hillary Clinton famously described half of the supporters of Donald Trump as a “basket of deplorables.”

    They are, said Hillary, “racist, sexist, homophobic, xenophobic, Islamophobic … irredeemable … bigots” all.

    Following the Supreme Court decision overturning Roe v. Wade and sending the issue of abortion back to the states for decision, the term “fascist” has been applied by the left to its right-to-life opponents.

    Which makes one wonder.

    If Republicans capture two or three dozen House seats in this fall’s midterm elections, would that constitute a triumph of American fascism?

    And how does the left argue that we should come together and stand on “common ground” with folks such as those Clinton describes?

    Tyler Durden
    Mon, 07/11/2022 – 19:20

  • Illinois Economy, Jobs Suffer Under Potential Presidential Candidate J.B. Pritzker
    Illinois Economy, Jobs Suffer Under Potential Presidential Candidate J.B. Pritzker

    By Ted Dabrowski of Wirepoints

    With rumors heating up about Gov. J.B. Pritzker’s potential run for president and the federal governments’ recent release of GDP numbers for the first quarter of 2022, it’s a good moment to review the governor’s economic performance since he took office in 2019. Polls today consistently show economic issues as the biggest concern for Americans.

    Illinois’ growth and jobs numbers aren’t pretty for Gov. Pritzker and they’re dwarfed by the much better numbers coming from Illinois’ neighboring states. 

    Illinois’ real GDP (adjusted for inflation) has grown an anemic 0.5 percent over the three-year period the governor has held the economic reins, according to U.S. Bureau of Economic Analysis data. 

    Contrast that to Indiana’s GDP increase of 6.1 percent and Iowa’s 5.2 percent. Michigan, Kentucky and Missouri all experienced an increase of more than 3 percent.

    Slower-growing Wisconsin managed to grow 1.6 percent – still three times more than Illinois’ 0.5 percent growth.

    Overall, Illinois’ GDP growth ranks 41st nationally (50 = worst) during the governor’s three years in office.

    The governor can’t separate himself from those poor GDP numbers given the Covid policies he’s imposed on Illinoisans over the last two-plus years. His lockdowns and other mitigations have been among the most draconian in the country. A recent study published through the National Bureau of Economic Research gave Illinois an “F” for its handling of Covid – one of just five states to get an “F” – and found that the state’s policies did more economic harm than good.

    In fact, Gov. Pritzker continues to declare Illinois and all its counties a “disaster area,” allowing him to maintain his executive order powers over masking, school and business closures, and vaccinations. None of Illinois’ neighboring states have any such disaster declaration or emergency rules. See our Instagram reel on Gov. Pritzker’s most recent disaster declaration.    

    The impact of those policies can be seen in the collapse of the state’s GDP compared to Illinois’ neighboring states. The graphic below shows the cumulative growth for each state since Q1 2019, when Pritzker became governor. 

    Illinois was the last to recover its economic losses from the pandemic and it has lagged its neighbors throughout. 

    The failure to grow has negatively impacted Illinoisans’ overall wealth and welfare. The growth in economic output over the three years was the equivalent of just $300 per capita in Illinois. In Indiana, it was 10 times higher at $2,994 per capita. The full comparison of Illinois versus its neighbors is in the appendix.

    And when it comes to jobs, Illinois’ unemployment number still lags far behind the rest of the nation. The state is tied with Pennsylvania for the nation’s 4th-worst unemployment rate.

    Illinois’ unemployment rate is a full percentage point higher than the national average of 3.6 percent. It’s also more than double Indiana’s 2.2 percent rate. 

    What if Illinois’ unemployment rate was the same low rate as Indiana’s? An additional 155,000 unemployed Illinoisans would have work today.

    Pritzker’s poor economic record stands in sharp contradiction with the record he’s been pushing at the state and national level. In recent speeches, he’s been taking credit for what he claims are “balanced” state budgets, as well as Illinois’ first credit upgrades in two decades.

    But those credit upgrades and “improved” finances have nothing to do with any fiscal or economic reforms implemented by the governor or the legislature. He’s passed no reforms of any consequence. In fact, most of the laws passed since Pritzker took office have increased the cost of government – we’ve documented much of that here and here.

    The real difference in Illinois’ situation, which the governor fails to acknowledge, is the $186 billion in federal Covid aid that the private and public sectors in Illinois have received over the last two years. That influx of cash has pushed up the state’s tax receipts to record levels and that’s taken immediate pressure off of the state when it comes to repaying its bond holders. Illinois has gotten credit upgrades as a result, the first in more than 20 years. Just two years ago Illinois was just one notch away from a junk rating.

    To buttress our point, it’s been a similar story in New Jersey and Connecticut, two of the nation’s other fiscal basket cases. There, floods of federal cash also bailed them out, resulting in the first credit upgrades in 20 years for both New Jersey and Connecticut.

    An honest appraisal

    If Gov. Pritzker would give an honest assessment of Illinois, he’d tell Americans that the massive inflow of COVID aid is only temporarily hiding the state’s major problems. That Illinois still has the country’s worst and biggest pension crisis. That it is one of the country’s three states with a shrinking population. That Illinoisans are punished by the country’s highest property taxes. And that Illinois is still only three notches away from a junk rating, the worst in the country.

    And an honest assessment would tell Illinoisans that the state needs massive reforms to begin fixing the above. 

    Unsurprisingly, we’re not going to get that kind of assessment from a politician more concerned with his presidential aspirations than with his record in Illinois. 

    Appendix

    Tyler Durden
    Mon, 07/11/2022 – 18:40

  • As Biden Approval Crashes To Record Lows, The 2024 Anti-Trump Strategy Is "Hoping He Dies"
    As Biden Approval Crashes To Record Lows, The 2024 Anti-Trump Strategy Is “Hoping He Dies”

    Just when you thought it couldn’t get any worse, it does.

    President Biden is now over 6 percentage points less favored than Trump was at this time into his term, and perhaps worse still for the Washington spin-meisters, Biden’s own record low approval rating is equal to the lowest level that Trump ever achieved…

    Source: Bloomberg

    Worse still, Biden’s approval rating is plunging despite gas prices starting to come down (amid recession fears)

    Source: Bloomberg

    So perhaps it’s something else that is bugging ‘average joe’ about ‘president joe’?

    In fact, it is so bad that, according to a new New York Times/Siena College poll published Monday, a majority of Democrats say they would prefer a new candidate over President Biden on the ballot in 2024.

    Decades-high inflation, record-high gas prices, record-low approval ratings and concerns about Biden’s age are among the many issues that have prompted roughly 64% of Democratic voters polled to they believe the party should nominate a different candidate for president in 2024.

    As Axios reports, that figure is even more stark among young Democratic voters, with 94% of those aged 18–29 saying they would prefer a new candidate. Furthermore, a mere 33% of all respondents in the survey said they somewhat or strongly approved of the job Biden has done as president.

    Only 13% of respondents said they believe the country is on the right track, the lowest the Times has found since the height of the financial crisis over 10 years ago, per the New York Times.

    The good news for Republicans is that President Biden has stated more than once he intends to run for re-election in 2024.

    But, a panel on Chuck Todd’s NBC show Sunday let slip the new strategy for 2024 – hope Trump dies…

    As Summit News’ Steve Watson reports, the Meet The Press host asked his guests how would Trump accept losing if he ran again, to which National Review editor Rich Lowry began to respond that there is only a 15% chance that Trump will not run.

    Todd then suggested that “the only answer [to that question] is death.”

    Atlantic journalist Mark Leibovich then chimed in and suggested that “the only plan we have, as one former Republican congressman said… is sitting around hoping he [Trump] dies.”

    Watch:

    While we are well aware of the macabre-ness of this, if we were gambling men, we might humbly suggest these Democratic and anti-Trump strategists are betting on the wrong man to die first.

    Tyler Durden
    Mon, 07/11/2022 – 18:20

  • Rebranding Elitism: Calling The Liberal World Order For What It Is
    Rebranding Elitism: Calling The Liberal World Order For What It Is

    Authored by Mark Jeftovic via BombThrower.com,

    Today’s elites are caught in a dilemma: nobody wants what they’re selling.

    They promised a world where under their expert management, the economy would function unfailingly, there would be peace in our time, and when the pandemic hit they had it all under control (anybody remember “Two weeks to flatten the curve?”). They even tease us with transhumanist visions of perpetual bliss in a metaverse and the abolition of death itself.

    All we have to do in exchange for these trappings of an AI driven post-singularity bliss is cede our sovereignty and our individual free will. Sure, we get decide the little things for ourselves. iOS or Android. Pfizer or Moderna. But for really big issues, like “how will we ratchet down the living standards of every plebeian on Earth in order to deal with this debt bubble climate change, all of this has already been decided. You’ll get to choose how you want to follow the rules, not whether the rules are fair or even make any sense (it’s called “subsidiarity”).

    But there’s a problem. A big one.

    It threatens the bring down the elites and even the idea of globalism itself:

    The problem that is none of their policies are working. In fact they’re actually causing even more damage to the global economy and unleashing greater havoc on the social fabric:

    • Supply chains are failing because of second-order effects of lockdowns.

    • Energy crises are unfolding due to delusional ESG narratives and platitudes.

    • The global economy is imploding because of a super-sized credit bubble and central bank interventions.

    To top it all off, looking at the data coming out now it would not surprise me if we figure out that the vaccines are doing more damage than COVID ever did.

    The elite response has included incessant rebranding, from “The Great Reset” and “Build Back Better”, to “Stakeholder Capitalism”, or so called “Woke Capitalism”, and then (the short lived and lame) “The Great Narrative”.

    The “Liberal World Order” is the latest incarnation of this branding exercise. This is the new name for the hill the peasants are expected to die on…

    https://platform.twitter.com/widgets.js

    What the Liberal World Order actually is

    To understand what the ruling elites are trying to achieve, it helps to look at the worldview of one of the high priests of globalism: Henry Kissinger and his book, simply titled “World Order”.

    The era we have been in since a group of treaties were signed in the mid-1600’s that ended The Thirty Years War is defined as The Peace of Westphalia. It codifies the nation state as supreme sovereign within its borders. It conferred legitimacy to rule on each sovereign, be it a monarch, or a democracy or some kind of hybrid.

    The supreme objective of the Westphalian system was to achieve world order through balance of power. No more total wars, like the Thirty Years War. Just limited ones to fine tune (“recalibrate”, in Kissinger’s terms) power shifts between nations.

    One characteristic of the Westphalian system was that there was indeed an undeclared, albeit widely acknowledged, hegemon, who acted as the guarantor of “the rules based order” of the day. It used to be the United Kingdom, but after World War II became the United States.

    However make no mistake, the Westphalian system was not democratic, even if some of its building blocks were nominally democracies. It was

    “a new era of Enlightenment governance by benevolent despotism which was legitimized by its effectiveness, not ideology”.

    Kissinger was referring specifically to Frederick II of Prussia in that passage, but it accurately encompasses his overall approach to statesmanship. (I’ve heard it said that the difference between Machiavelli and Kissinger was that Machiavelli was an idealist, but that Kissinger is a Machiavellian – the source eludes me, sorry)

    To its credit, the Westphalian system enabled human flourishing, not seen since before the Dark Ages. The developments we call the Enlightenment and Renaissance became unstoppable waves of change, under which the level of intellectual abstraction and socio-economic decentralization undertook a quantum leap, and with it, the living standards of the masses.

    Make no mistake, the machinations of rival states and ever-shifting alliances required a lubricant, and that was an elite class that could inject congruent agendas across all spheres:

    “International orders that have been the most stable have had the advantage of uniform perceptions. The statesmen who operated the eighteenth century European order were aristocrats who interpreted intangibles like honour and duty in the same way and agreed upon fundamentals. They represented a single elite society who spoke the same language… a sense of overarching common purpose was inherent. Power calculations in the eighteenth century took place against this ameliorating background of a shared sense of legitimacy and unspoken rules of international conduct.”

    The big loser, was the Catholic Church. Since the Fall of Rome, they had inexorably centralized all the power, inserted themselves as sole arbiter of spiritual truth, became the largest land owner in the world, and who basically decided and enforced the “social contract” for most of the known world.

    They too, were the guarantors of a world order of sorts in their day. Arguably less effectively than what was achieved under the Westphalian framework.

    The Catholic Church’s hegemony was doomed, because it was attempting to maintain its order on an increasingly obsolete worldview. Settled science of the day included that the heavens revolved around the earth and the Bubonic Plague was caused by Jews.

    Like the preceding order before it, the Westphalian system is started to break down over a century ago, disrupted by revelations on par with “the world is not flat” (like the discovery of quantum mechanics that consciousness precedes matter) not to mention self-inflicted follies like the advent of central banking and fiat money.

    It’s no surprise that the Westphalian Peace was economically supported by large periods of gold backed money and only started to breakdown in earnest when combatants abandoned sound money to fight the world wars of the 20th century.

    What we have today is the the transition of the Westphalian System to whatever comes next, and its still a little early define what that next phase is (In my old podcasts with Charles and Jesse we used to call it “The Network State”. That phrase turned out to be coined earlier by Balaji Srinivasan who’s new book by that name just came out).

    When the Catholic Church entered its long descent, they fought it tooth and nail. The Holy Inquisition, which lasted centuries and inflicted untold misery, can be seen as the last, frantic clinging to relevancy and power by a system that was being outrun by history.

    So too, the elite class that lords over the Westphalian System (known in our time as “globalism”), will not go easily into that good night. Via technocratic authoritarianism, promulgated under harmless sounding platitudes (“recalibrating” your rights, “reset” the system, “re-imagining” your future), it will cause immeasurable harm and destruction, only to ultimately fail for the sole reason of trying to shoehorn outdated modes of organization (top-down force of the state) on a new, incompatible reality (decentralized networks secured by public-key cryptography).

    The silver lining of pandemic is that it has acted as a catalyst, pulling forward decades of creeping totalitarianism and compressing it into 18 months, has resulted in a quickening of this transition. The Liberal World Order’s manipulations to manage the pandemic and to control this wider transition are simply accelerating it, into something foreign to legacy institutions and beyond their control.

    These machinations include these incessant and frantic rebranding exercises. The aspiration behind all of these labels is that they are trying to condition into your psyche, as if it were objective fact, that the natural order of things is that they get to set the rules and we get to follow them.

    However the growing perception among the public, is that with every policy failure and each rebranding iteration, these elites are conceding that they are, in fact, losing control, losing relevance …and scared.

    Each renaming emphasizes their aloofness, showing how their obsessions with models and nomenclature in their minds trump results and reality. By enacting draconian, one-sided arbitrary dictums that have backfired catastrophically, they’ve produced untold misery and destruction. Now they want to double down and keep running the show.

    The biggest difference between the shift half a millennia ago and this one is the speed with which it is happening. Where entire generations were born, lived and died without ever experiencing any noticeable change in the order of things, today we see it changing in realtime.

    The New Order is Emergent

    As Kissinger ruminates near the end of ‘World Order’, we’re in the Twilight of the Westphalian system:

    “In the world of geopolitics, the order established and proclaimed by Western countries stands at a turning point. It’s nostrums are understood globally, but there is no consensus about their application; indeed concepts such as democracy, human rights, and international law are given such divergent interpretations that warring parties regularly invoke them against each other as battle cries”

    What humanity is gradually figuring out is that true order is emergent. Market signals traverse the medium of individual experience in a way that often defies institutionalized understanding, especially when those institutions insist on being informed by outdated modes of thinking.

    For example, why in Canada, where 85% of the population took two doses of vaccines in order to become “fully vaxxed” are we now the lowest uptake of third shot boosters in the G7?

    https://platform.twitter.com/widgets.js

    In decentralized, multi-polar architectures, understanding signal is more of an art than science, especially given the incessant distortions inflicted by legions of corporate media “fact checkers”.

    In this coming era of network states and legions of sovereign individuals (empowered by holding unseizable, frictionless capital in form of Bitcoin and other digital assets), formalized top-down frameworks are doomed not only to fail, but to exacerbate problems.

    Kissinger, again:

    “Every international order must sooner or later face the impact of two tendencies challenging its cohesion: either a redefinition of legitimacy or a significant shift in the balance of power”

    Or, maybe both.

    *  *  *

    Sign up for The Bombthrower mailing list to ge updates straight into your inbox and get a free copy of The Crypto Capitalist Manifesto while you’re at it. Follow me on Gettr, Telegram or if you haven’t been kicked off Twitter yet, there.

    Tyler Durden
    Mon, 07/11/2022 – 18:00

  • Costco CEO Warns "A Lot Of Consumers Are In Recession Right Now"
    Costco CEO Warns “A Lot Of Consumers Are In Recession Right Now”

    One question macro-watchers have on their minds is the state of the US consumer amid increasing threats of recession. The White House and Federal Reserve offer their perspective of a healthy consumer, but that’s in total aggregate. It fails to show the entire story of working-poor Americans suffering amid the worst inflation storm in forty years. 

    What better way to get a fresh glimpse of consumer health is via CNBC’s “Squawk on the Street” interview with Craig Jelinek, CEO of Costco Wholesale Corporation, on Monday, who said overall “the consumer isn’t doing bad,” but also mentioned, “a lot of people, right now, they’re in a recession because they’re just trying to survive by just buying gas and making house and rent payments.” 

    Sounds confusing, right? But it’s not. With some clarification, Jelinek said wealthier households still have “discretionary income to buy goods,” which means the lower tier of consumers is perhaps tapped out. 

    What’s important is the CEO of the second-largest retailer in the world said, “consumers are getting more cautious.” It’s not necessarily a sign that all consumption is about to roll over, but cracks appear in lower-tier spenders.

    He pointed out that luxury spending, such as jewelry sales, is beginning to slow, and many consumers have shifted away from buying computers and televisions. 

    Jelinek’s interview sheds more light on some consumers, especially lower-tier ones, who are pulling back on spending as their credit cards are maxed out, and personal savings are drained. Though, the Biden administration, White House-aligned economists, and Fed conveniently ignore the bottom tier of consumers and only concentrate on the aggregate — not allowing for the entire consumption story to be told. 

    This matters because 70% of the US GDP is driven by consumption. If not all consumers are healthy, it could be an ominous sign that economic trouble is ahead. 

    One particularly troubling data point is the University of Michigan Consumer Sentiment survey hitting new lows. 

    Then there’s America’s ‘Misery Index‘ – a broad measure of household wellbeing that combines unemployment rates with inflation rates – is back to levels not seen since the stagflationary period of one-termer Jimmy Carter. 

    And the jobs number last Friday wasn’t all that great because it showed some people taking on multiple jobs — a sign the consumer isn’t strong. 

    Optically, consumers appear in decent shape if one is to examine the aggregate, but that doesn’t tell the whole story as Costco’s CEO speaks about the inconvenient truth that not all consumers are healthy as some folks have begun to use micro-loans to afford gas and groceries. 

    Watch here for the full interview. 

    Tyler Durden
    Mon, 07/11/2022 – 17:40

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