- Fiat Currencies Are Going To "Fail Spectacularly": Lawrence Lepard
Fiat Currencies Are Going To “Fail Spectacularly”: Lawrence Lepard
Submitted by QTR’s Fringe Finance
Friend of Fringe Finance Lawrence Lepard released his most recent investor letter a few weeks ago with his updated take on the monetary miasma spreading across the globe.
Larry had joined me for several interviews last year and I believe him to truly be one of the muted voices that the investing community would be better off for considering. He’s the type of voice that gets little coverage in the mainstream media, which, in my opinion, makes him someone worth listening to twice as closely.
Lawrence Lepard (Photo: Kitco) Larry was kind enough to allow me to share his thoughts heading into 2022.
Before Russia invaded Ukraine, Larry predicted that a “crack up boom” could be on its way and also offered his take on gold, inflation, monetary policy, bitcoin, fiscal policy, the ongoing supply chain crunch, and much, much more. That analysis is included.
Now, the invasion of Ukraine has helped catalyze a number of his predicted scenarios.
Here are several Fringe Finance excerpts from Larry’s thoughts on the Ukraine invasion and the markets heading into 2022, from prior to the invasion.
Russia Invading Ukraine Has Caused A ‘Monetary Earthquake’
What just happened in the last two weeks is enormously important and misunderstood by many investors.
The Russian invasion of Ukraine and the corresponding Western sanctions and seizure of Russian FX reserves are nothing short of a monetary earthquake. The last comparable event was Nixon’s abandonment of the gold standard in 1971.
Russia, with the backing and support of China, just told the world that it is no longer going to sell its oil, gas and wheat for Western currencies which are programmed to debase.
The West in its response just said to all countries around the world: “If you have foreign exchange reserves, held in our system, they are no longer safe if we disagree with your politics.”
Russian FX Reserves It is similar to what the Canadians did when they moved to seize the bank accounts of Canadians who had demonstrated support for the truckers without due process of law.
Both of these political moves are blatant advertisements for what I call “non state controlled money without counterparty risk”, like gold and bitcoin. If governments can weaponize their money when they do not like what you are doing, what is the natural defense?
Gold Will Rip Higher Because Of What Russia Is Doing
The US Dollar has been the reserve currency of the world since WW II and the Bretton Woods agreement. This has given the US an enormous advantage and subsidy from the rest of the world because everyone else needs to produce goods and services to obtain dollars and the US can simply produce dollars at no cost by printing them.
Putin is now cast in the role of Charles de Gaulle who complained about the “exorbitant privilege” of the US with its dollar hegemony. As we all know, de Gaulle demanded gold in exchange for France’s US dollar FX surpluses and this outflow forced Nixon to close the gold window.
Recall that post this event, gold went from $35 per ounce to $800 per ounce (23x). Russia’s move will lead to a similar move in favor of gold. Putin could see that the US fiscal and monetary situation was becoming untenable and he decided to use this to create an existential threat to the US and the world financial system.
He undoubtedly knows that the West has artificially suppressed the price of gold and that is why he has been building his gold reserves steadily for the past 20 years.
Putin just shot “King Dollar” in the head.
We can see it in the financial markets, as the price of everything commodity related is going up relentlessly in dollar terms.
Russia is long commodities, long gold and doesn’t need fiat currency. His debt to GDP ratio is low and taxes are low. If the world financial markets collapse on a relative basis, the position of Russia will be improved significantly. This is what I believe he is playing for. If investors do not recognize this they will be caught wrong footed as I believe many are today.
The implications for investors are quite clear. None of us own enough gold, real assets or commodities. Fiat currencies are going to fail spectacularly, and soon, in my opinion.
Before Russia invaded Ukraine, Larry predicted that a “crack up boom” could be on its way and also offered his take on gold, inflation, monetary policy, bitcoin, fiscal policy, the ongoing supply chain crunch, and much, much more.
Now, the invasion of Ukraine has likely catalyzed a number of his scenarios.
A Crack Up Boom Could Be Coming
The bottom line is that the monetary system is exhibiting many of the early characteristics of a crack-up boom.
A crack-up boom is the crash of the credit and monetary system due to continual credit expansion and price increases that cannot be sustained long-term.
In the face of excessive credit expansion, consumers’ inflation expectations accelerate to the point that money becomes worthless and the economic system crashes.
Wow, does that sound familiar? “Real resource crunch” – do we have any shortages in commodities or labor? Well, ask the people in Europe who are worried about their costs for electricity, natural gas and heating oil this winter. Or, how about the labor shortages that we are seeing develop everywhere? How about the shortages of goods that are backed up in ships off the California coast? Supply chain issues have been blamed on COVID and government officials have, until recently, tried to spin the resulting inflation as transitory.
Certainly some of the current rip-roaring inflation could abate as supply chain delivery times improve (left chart below) which may permit PMI Input / Output prices to soften (right chart below): But to date there is little evidence of abatement.
But perhaps there is also something else going on.
Labor and product supply shortages can easily lead to further price increases and there is the potential for a vicious “cost-push” spiral upward. Eventually businesses may not be able to operate and business failures begin to occur. (They cannot get the necessary inputs, or properly price their goods and services). When highly levered businesses fail, the destruction of credit and demand soon follow.
Historically, the Government response is to print more in a vain attempt to prevent failures – as if money printing could produce goods and services.
We are seeing some of this in our personal observations. We know of builders who cannot get needed supplies to build houses. One builder in Las Vegas reported that his cost of building a house went up 40% LAST QUARTER. We know of an interior designer who cannot source products (furniture delivery times of 6 months plus) and so his business is likely to fail.
We are concerned that if inflationary expectations continue to grow, the path to a crack up will become clear. We believe that inflation expectations will continue to grow as this present inflation is “cost-push” rather than the more temporary “demand-pull” form of inflation.
Today’s blog post has been published without a paywall because I believe the content to be far too important. However, if you have the means and would like to support my work by subscribing, I’d be happy to offer you 22% off to become a subscriber in 2022: Get 22% off forever
While we may not be on the precipice of a Crack Up Boom (yet), the probabilities of it occurring have certainly increased. We believe investors must begin to consider the “tail risk” that all confidence could be lost in our current monetary system.
When price signals are so distorted that markets no longer function, the only possible outcome is total collapse of the market structure. We believe that the US Treasury and Federal Reserve see these risks and that is why they are trying hard to control Government spending, and are accelerating the pace of tapering the extraordinary QE that was initiated in March 2020 when Jerome Powell vowed to do whatever it takes to keep the markets functioning (the Third Fed Mandate).
So, just how probable is a crack up boom? Sometimes it is easier to see these things visually. The US stock market below:
And the Venezuelan Stock market just before its currency became worthless as a result of hyperinflation:
The important driver here is inflationary expectations. Note the earlier quote on Crack Up Booms, “consumers’ inflation expectations accelerate to the point that money becomes worthless”. This is the major point of the Austrian School Economists: when individuals discover that not only is inflation occurring, but it is the policy of government, and that inflation cannot and will not be reversed. Then there becomes a rush to substitute their store of value savings of the inflated fiat money with stores of value that are of more limited supply and will hold value for the future.
This is Gresham’s Law: bad money drives out good. If people perceive that the money is becoming worthless they will spend it as quickly as possible on any tangible good before prices rise further.
We are not at or near that point yet, but inflation awareness and inflation expectations are growing.
Here are some of Larry’s additional observations about 2021:
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The last time an inflation print came in at 7.0% (June 1982), 10-year Treasury yields exceeded 14%. Ten-year yields ended 2021 at 1.51%, with inflation-adjusted “real” yields deeply into negative territory. (-5.49%)
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Producer Price Index (PPI) was up 13.3% in November y-o-y (highest since 1980). The Bloomberg Commodities Index jumped 27.1% in 2021.
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The S&P hit over 70 new all-time highs, ending the year up 27%. Off the March 2020 low, the S&P is now up 113% and trading at 21.2x forward P/Ex, near its March 2000 peak P/Ex.
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The 2021 federal fiscal deficit reached $2.77 TN, with a historic $5.9 TN two-year shortfall (28% of GDP). The federal deficit was $3.1T in fiscal 2020 (September year-end). Recall that US Federal Tax Revenues totaled $3.86T in 2021. Budget deficit was 42% of total fiscal spending.
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The Fed’s balance sheet inflated an astonishing $5.015 TN, or 135%, in the 120 weeks since QE was restarted in September 2019. Federal Reserve Assets have now inflated nearly 10x since the mortgage finance Bubble collapse. [went from $0.907T at Sept. 2008 to $8.766T today]
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In the same time frame (2008-2021) the US CPI gauge of inflation went from 211.4 to 278.9 or an increase of 31.9% (annual average 2.2%). If inflation is a monetary phenomenon (we believe it is) there is a lot of catching up to be done as CPI increases to reflect money supply growth.
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During the same time frame (2008-2021) M2 (Money supply) went from $8.2T to $21.4T, growth of 161%, or annualized growth of over 7.7%.
o Notably, M2 growth since March 2020 has been 38.6%, a sharp acceleration above trend.∙ The monthly U.S. Goods Trade Deficit ballooned to a record $98 billion in November vs. a two decade average $56bn.
Larry echoed the sentiments of Doug Noland when opining on inflation in 2021:
Books will be written chronicling 2021. I’ll boil an extraordinary year’s developments down to a few simple words: “Things Ran Wild”. COVID ran wild. Monetary inflation ran wild. Inflation, in general, ran completely wild. Speculation and asset inflation ran really wild. More insidiously, mal-investment and inequality turned wilder. Bucking the trend, confidence in Washington policymaking ran – into a wall.
M2 “money” supply inflated another $2.478 TN (12 months through November) to a record $21.437 TN – with egregious two-year growth of $6.185 TN, or 40.6%. Bank Deposits surged $1.957 TN over the past year (12.1%), with two-year growth of $4.812 TN (36%). Money Fund Assets rose another $408 billion y-o-y, or 9.5%, to $4.70 TN. The myth that QE effects remain well contained within Treasury and securities markets has been debunked.
And took to pointing out analysis by Trey Reik on gold:
Between 3/31/20 and 12/31/21, the Fed grew its balance sheet $3.503 trillion (66.67%). During this time span, the S&P 500 appreciated 84.41% while spot gold increased just 15.98%.
We find it bewildering that even though gold has been maligned for “not doing better” while stocks soared during 2021’s QE and inflation, now that the Fed is telegraphing tightening, consensus is equally confident that equity markets are well prepared and will power-through on the back of strong earnings, but gold will surely suffer.
Watching The Fed
In March 2020, COVID erupted and the US Stock and Bond markets began to plunge. In a period of just 23 days, the S&P 500 Index plunged 35% from its high in late February to a low on March 23rd.
At the same time, something very unusual happened in the US Treasury bond market. In the early part of the stock sell off, government bond prices rallied and yields declined as selling stock investors sought safety in US Treasuries. This was normal. But then suddenly, 10 year US Treasury bonds sold off hard too and the treasury yield went from 39 bps to 126 bps in a period of just 7 days! The Fed meeting minutes from that period discussed that for a brief period the US Treasury bond market went “no bid”. This led to Fed Chairman Jay Powell’s announcement on March 15, 2020 to cut the discount rate to effectively zero, resume quantitative easing and expand swap lines.
This was the Fed’s worst nightmare. If the market for US Treasury securities fails, the entire world financial system collapses. What transpired from there was another chapter of the long standing “Fed Put” that was initially written by Greenspan and then enthusiastically renewed by Bernanke, Yellen and now Powell. Originally the put only protected equities but at the base of the entire financial system is the so called “risk free” US Treasury bond.
The put now clearly includes the US Treasury bond. Additionally, we have seen the Fed and financial commentators discuss an additional mandate: “maintaining orderly markets”. Powell has explicitly said that the Fed will take “whatever action is necessary” to maintain orderly markets which we believe is now a Third Fed Mandate, behind stable prices and full employment. In extremis, the Fed will print as much money as is necessary, perhaps a nearly infinite amount.
The stock and bond markets have taken the recent Fed “hawkish” policy shift in stride. Yes, there is still tons of liquidity in the system, but also, we believe investors realize that Powell will execute another “pivot” when the market stumbles. Perhaps investors are willing to front run the next episode of money printing. Thus the market behavior which looks like a “crack up boom” is actually rational if you know that the Fed can never stop printing.
Recently, to the Fed’s credit (and to preserve their credibility), Chairman Powell admitted that it is turning out that inflation is not transitory. Thus, they have announced that they will accelerate the tapering of QE which began slowly a few months ago.
Today’s blog post has been published without a paywall because I believe the content to be far too important. However, if you have the means and would like to support my work by subscribing, I’d be happy to offer you 22% off to become a subscriber in 2022: Get 22% off forever
At the current proposed rate they will not be purchasing any bonds in April of 2022. Furthermore, they have also indicated that taking interest rates off the zero bound in 2022 and the consensus dot plot is that the Fed Funds rate will go to 0.75% via three quarter point hikes this year. Now, whether the markets can handle this withdrawal of monetary stimulus appears to be an open question. [QTR: In the past few weeks, since this letter, inflation has continued, most recently at a 7.5% clip and investment banks are predicting up to 9 or 10 rate hikes for 2022].
In a system that is dependent upon the supply of new money and credit growing at an ever accelerating rate, it is merely a matter of time until the next crisis erupts and the Fed is forced to reverse course again. Hopefully for them, by that time inflation will have abated a bit and so we will start the next inflationary episode off a lower base.
We fear that, as Luke Gromen said, that in trying to control the economy the Fed thinks they have a thermostat when it may be more akin to an on/off switch on a nuclear reactor!
Interestingly, given the Repo markets enhancements by the Fed, it’s possible the Taper of QE is irrelevant. As a former Federal Reserve Open Markets Senior Trader Joseph Wang points out:
There is still $1 trillion in Fed liquidity that will gradually flow into the private sector after QE stops. A large chunk of liquidity created by QE over the past two years never entered the banking system, but instead sat first in the Treasury’s Fed account and later in the RRP Facility. In the coming months Treasury will restart bill issuance and draw those funds out of the RRP into the TGA, and then spend those funds into the banking sector. Over time that will leave the banking sector with about $1T more in reserves, and the non-banks with a $1T more in deposits. If the past is any guide, that suggests more portfolio rebalancing where banks will purchase more Treasuries and non-banks more risk assets.
Why Soft Gold And Bitcoin Prices?
Gold and Bitcoin, analog and digital sound money, respectively, are the two monetary fire alarms in our system.
Gold began 2020 at $1,550. It is at $1,830 at year end 2021, appreciation of 18%. Bitcoin began 2020 at $8,000 per coin. It closed 2021 at $47,000, appreciation of 487%.
As we have discussed in the past, we believe the price of gold is heavily suppressed through the futures markets and the issuance of paper claims on gold. Bitcoin does not suffer from this problem yet, although there is a $20B futures market in Bitcoin.
Bitcoin’s total market value is $966B and it trades approximately $25B of value per day in on chain transactions. We do not believe the futures market is a big factor in Bitcoin price discovery….yet. But there is no doubt that the leveraged Bitcoin exchanges and their growth have had an impact on prices. Still, Bitcoin is the monetary debasement fire alarm which is working.
Both the Bitcoin and gold prices are somewhat soft at present. Gold is 11% below its recent all-time high. Bitcoin is 40% below its recent all-time high. We believe this is occurring because the market is reacting to the threat of less monetary accommodation.
And while we concede that the Fed is trying to slow down the printing (sort of), as stated above we do not believe that in the intermediate term they can stop in any sort of meaningful way.
The prescient words of Richard Russell apply here: INFLATE OR DIE.
Our friend and Austrian based investor Ronnie Stoeferle recently posted this missive on Twitter which serves as a good reminder of how history often rhymes:
“Two years ago gold bugs ran wild as the price of gold rose nearly six times. But since cresting two years ago it has steadily declined, almost by half, putting the gold bugs in flight. The most recent advisory from a leading Wall Street firm suggests .that the price will continue to drift downward, and may ultimately settle 40% below current levels. The sharply reduced rates of inflation combined with resurgence of other, more economically productive investments, such as stocks, real estate and bank savings have combined to eliminate gold’s allure. Although the American economy has reduced its rate of recovery, it is on a firm expansionary course.”
– New York Times, August 1976
And as our friend Brien Lundin, CEO of the New Orleans Investment Conference points out:
“Gold bottomed in early September 1976, but really took off when the Treasury began gold auctions in ’78. This overt manipulation for covert reasons was a desperation move that ironically fueled another 8x rise in the gold price!”
History often rhymes indeed, in this case in terms of an inflationary decade like the 1970s and the reaction of hard money assets.
About Larry Lepard
Larry manages the EMA GARP Fund, a Boston based investment management firm. Their strategy is focused on providing “Monetary Debasement Insurance”. He has 38 years experience and an MBA from Harvard Business School. On Twitter he is @LawrenceLepard Managing Partner and, via email, he is llepard@ema2.com
Disclaimer: QTR is long various gold and silver miners and have both long and short exposure to the market through equities and derivatives. I have no position in Larry’s funds. Larry is a subscriber to Fringe Finance and has been on my podcast. The excerpts from Larry’s letter, above, shall not be construed as an offer to sell, or the solicitation of an offer to sell, any securities or services. Any such offering may only be made at the time a qualified investor receives from EMA formal materials describing an offering plus related subscription documentation. There is no guarantee the Fund’s investment strategy will be successful. Investing involves risk, and an investment in the Fund could lose money. The strategy is also subject to the following risks: Currency Risk, Non-US Investment Risks, Issuer Specific Risk.
Tyler Durden
Sat, 03/12/2022 – 22:30 -
- Iraq Kurdish Capital Struck By Missiles Launched From Outside The Country
Iraq Kurdish Capital Struck By Missiles Launched From Outside The Country
Update (2130ET): Initial reports that missiles ‘struck’ the US Embassy in Erbil, Iraq have been downgraded.
A dozen ballistic missiles launched from outside the country did hit the northern Kurdish regional capital on Sunday – however there were no casualties, and no parties have claimed responsibility.
According to Reuters, a US State Department spokesperson called it an “outrageous attack,” however no Americans were hurt – nor was there any damage to US government facilities in Erbil.
U.S. forces stationed at Erbil’s international airport complex have in the past come under fire from rocket and drone attacks that U.S. officials blame on Iran-aligned militia groups, but no such attacks have occurred for several months. -Reuters
Kurdish officials did not reveal where the missiles struck – however a spokesperson for regional authorities said there were no flight interruptions at Erbil airport, according to the report.
* * *
The US consulate in Erbil, Iraq has been hit with multiple missiles, which has been attributed to Iran in early, yet unconfirmed reports. Sky News Arabia reports that the consulate, located in Kurdistan, was hit. No casualties have been reported, a US official told Reuters.
#erbil #explosion pic.twitter.com/bMffdC9b84
— Rawchi (@Rawchihasan) March 12, 2022
FATAH 110 MISSILES EN ROUTE FROM TABRIZ, IRAN TOWARDS US CONSULATE IN ERBIL IRAQ
pic.twitter.com/wad9T8MEEA— The_Real_Fly (@The_Real_Fly) March 12, 2022
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Fateh 110s impacting Erbil pic.twitter.com/dg3C5lgcCY
— OSINTtechnical (@Osinttechnical) March 12, 2022
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According to BBC journalist Shabnam Shabani, “The governor of Erbil, Omed Khoshnaw, stated that multiple missiles fell in the area, saying it was unclear whether the target was the US consulate or the airport in the city. According to INA, five explosions were heard in the attack.”
“The governor of Erbil, Omed Khoshnaw, stated that multiple missiles fell in the area, saying it was unclear whether the target was the US consulate or the airport in the city. According to INA, five explosions were heard in the attack.”
— Shabnam Shabani (@ShabnamShabani) March 12, 2022
BREAKING – Missile attack on Erbil was launched from OUTSIDE Iraq, 12 ballistic missiles fired, Iraqi state media says, quoting anti-terrorism forces in Kurdistan – Reuters
— Phil Stewart (@phildstewart) March 13, 2022
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Another journalist, José Miguel Sardo, reports that the Kurdistan News Channel appears to have also been targeted.
#Iraq #Latest Kurdistan News Channel seems to have been one of the targets of tonight’s explosions in #Erbil https://t.co/V1o9iDWwJ8
— José Miguel Sardo (@jmsardo) March 12, 2022
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MAP BREAK
Erbil, Iraq pic.twitter.com/zagwNq2IWQ
— Jack Posobiec 🇺🇸 (@JackPosobiec) March 12, 2022
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It is being reported right now that a number of missiles were fired towards the US consulate in Erbil in northwestern Iraq on Saturday night.pic.twitter.com/TQwmkWFsKr
— David Yankovich (@DavidYankovich) March 12, 2022
The governor of Erbil, Omed Khoshnaw, stated that multiple missiles fell in the area, saying it was unclear whether the target was the US consulate or the airport in the city. According to INA, five explosions were heard in the attack. –Jerusalem Post
geolocation of a video showing missiles launched from Khasabad https://t.co/vChFIzfNcX https://t.co/gShLvpArI0 pic.twitter.com/iDWucRCdeM
— Samir (@obretix) March 12, 2022
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RUMINT that Fateh-110 ballistic missiles were utilized to hit U.S. targets in Erbil, Iraq. Footage is circulating of missiles reportedly over Iran. pic.twitter.com/PIHX1qukJH
— Global: MilitaryInfo (@Global_Mil_Info) March 12, 2022
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On Friday we noted that the Iran nuclear talks had been abruptly suspended. As the WSJ wrote at the time; “The Iran nuclear talks broke off Friday with no agreement, imperiling negotiations… After weeks of round-the-clock negotiations in Vienna, the breakoff in talks significantly raises the prospect that efforts to revive the 2015 nuclear deal may fail.”
And then there’s this;
4 days ago: https://t.co/bG7C1vbbZe
— Jack Posobiec 🇺🇸 (@JackPosobiec) March 12, 2022
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Previous #IRGC attacks against U.S. targets in #Syria & #Iraq have drawn U.S. retaliation — normally in the form of striking isolated, unmanned #PMU targets.
That minimalist response has rarely deterred #Iran though — and tonight seems far more significant.
— Charles Lister (@Charles_Lister) March 12, 2022
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If early reports are confirmed and Iran indeed attacked the US Consulate, we think it’s safe to assume the talks are over. Needless to say, oil is going to have an interesting day on Monday.
Tyler Durden
Sat, 03/12/2022 – 21:31 - South Korea Elects Conservative Anti-North Hawk As President
South Korea Elects Conservative Anti-North Hawk As President
Authored by Dave DeCamp via AntiWar.com,
On Thursday, South Korean President-elect Yoon Suk Yeol vowed to take a firmer stance on North Korea and rebuild Seoul’s military alliance with Washington.
South Koreans went to the polls and elected Yoon on Wednesday, and he will take office in May. During his campaign, Yoon accused outgoing President Moon Jae-in, a strong proponent of peaceful reunification with North Korea, of being “submissive” to Pyongyang and Beijing.
Newly elected president Yoon Suk-yeol. Xinhua/Alamy As the US has become more focused on countering China, Washington is looking to Seoul to help. Yoon is expected to take a harder line on China and signaled that he was ready to be involved in the US’s efforts to strengthen alliances in the region as part of its strategy against Beijing.
“I’ll rebuild the South Korea-US alliance. I’ll [make] it a strategic comprehensive alliance while sharing key values like liberal democracy, a market economy, and human rights,” Yoon said at a press conference.
“I’ll establish a strong military capacity to completely deter any provocation,” Yoon said. “I’ll firmly deal with illicit, unreasonable behavior by North Korea in a principled manner, though I’ll always leave open the door for South-North talks.”
The Associated Press described of this particularly “bitter” election contest:
Yoon, who ran on the ticket of the main opposition People Power Party, previously served as Moon’s prosecutor general. But he left the Moon government and joined the opposition last year after high-profile infighting over his investigations of some of Moon’s allies.
Wednesday’s election was largely a two-way showdown between Yoon and liberal governing party candidate Lee Jae-myung. The two spent months slamming, mocking and demonizing each other in one of the most bitter political campaigns in recent memory, aggravating the country’s already severe domestic division.
▪ FOREIGN MEDIA COVERAGE OF YOON’S VICTORY
Major news outlets around the world cover Yoon’s victory in S. Korea’s presidential race#President_elect #YoonSukyeol #SouthKorea
Arirang News ▶ https://t.co/mVDEocNgm0
News Center ▶ https://t.co/mZQ2egcQgF pic.twitter.com/qmWWO5psZA— Arirang News (@arirangtvnews) March 10, 2022
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So far, the Biden administration hasn’t done much to try to engage with North Korea. Biden officials say they’re ready for dialogue with Pyongyang but have made no offers for sanctions relief to get the North Koreans to come to the table and are now ramping up sanctions in response to recent missile tests.
Tyler Durden
Sat, 03/12/2022 – 21:30 - Stoltenberg Says Ukraine's NATO Membership Was Never "Imminent" Or "On The Agenda"
Stoltenberg Says Ukraine’s NATO Membership Was Never “Imminent” Or “On The Agenda”
There may be some confusion within the top echelons of US power as to whether Ukraine is in NATO:
So our precious @VP believes #Ukraine is in the #NATO? Tell her to come tf home. pic.twitter.com/riRu8esiRo
— Kimberly Klacik (@kimKBaltimore) March 12, 2022
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There shouldn’t be: as NATO Secretary-General Jens Stoltenberg said on Friday, Ukraine’s NATO membership was never “imminent” and will not be on the agenda in the near future. Speaking at the Antalya Diplomacy Forum, the NATO chief said that “it has been clear for a long time that membership for Ukraine was not something that was imminent, not something which is relevant in the near future.” he said.
Stoltenberg emphasized that Ukraine has the right to pursue NATO membership and the organization respects every nation’s choice. Nonetheless, it’s up to the 30 NATO allies to decide whether Ukraine is ready for membership, he said according to the Epoch Times.
Ukraine’s pursuit of NATO membership plays a critical role in the Russia-Ukraine war.
In February 2019, then-Ukrainian President Petro Poroshenko signed a constitutional amendment committing the country to become a member of NATO and the European Union after the parliament passed the bill. Poroshenko told the leadership of the Armed Forces of Ukraine days after he signed the amendment that joining NATO was a guarantee of security for Ukraine.
On the Russian side, Russian President Vladimir Putin says Russia needs to lay down “red lines” to prevent Ukraine from joining NATO, saying that Ukraine’s growing ties with the alliance could make it a launchpad for NATO missiles targeted at Russia.
However, the NATO allies were shy about clarifying their stance on letting Ukraine join NATO, though it was clearly not on their agenda before Putin ordered the invasion of Ukraine. As the war intensified and caused millions of people to flee Ukraine, some NATO leaders started to admit that Ukraine’s membership is not on the agenda and voice objection to membership for the former Soviet Union country openly.
German Chancellor Olaf Scholz said on March 4 that Ukraine’s NATO membership “will not take place.”
“I also made it clear in Moscow and in my visit that this option [Ukraine’s membership of NATO] is not on the table and will not take place,” he said during an interview with German public broadcaster ZDF.
“I said publicly that we all know that Ukraine’s NATO membership is not on the alliance’s agenda today,” he added. “That was understood by the American president, that [was] also understood by the French president.”
Scholz said he shares Russian President Vladimir Putin’s security concern and clarified to Putin that Ukraine will not be allowed to join NATO.
“The Russians were worried about the control issue of their security. [Putin was worried] that NATO has a military setup and rockets in Ukraine targeting Russian territory. That is why we tried to make it clear that this will not occur,” he elaborated.
Tyler Durden
Sat, 03/12/2022 – 20:30 - India Is Mulling Rupee-Ruble Payments System For Trade With Russia
India Is Mulling Rupee-Ruble Payments System For Trade With Russia
Authored by Jerri-Lynn Scofield via NakedCapitalism.com,
India is discussing how to set up a rupee-ruble payment mechanism to enable it to trade with Russia, to circumvent the U.S. sanctions regime.
India abstained from voting on the March United Nations (UN) General Assembly Resolution demanding an end to Russian offensive in Ukraine (General Assembly resolution demands end to Russian offensive in Ukraine).
Since its Independence, India has tried to steer a neutral course between the U.S. and Russia (and previously, the USSR). During the 1950s, India’s first prime minister, Jawaharlal Nehru, was a prime architect behind the Non-Aligned Movement, under which developing countries tried to pursue their national interests without binding themselves to either the U.S. or Soviet bloc. India, Indonesia, and Yugoslavia were mainstays of that movement, which today includes 120 member states, 18 observer states, and 10 international organisations.
Following the collapse of the Soviet Union, India developed closer relations with the United States. Most recently, under prime minister Narendra Modi, India’s policy tilted even more decisively in a pro-U.S. direction. Modi and Trump shared a strong affinity, and Modi even travelled to the U.S, to host massive rallies intended to galvanize Indian Americans in support of Trump. See this BBC account for further details, What did the Trump-Modi ‘bromance’ achieve?
During the last several months, several considerations have prompted the Modi government to rethink the wisdom of putting all its eggs in the U.S. basket. Instead, India is returning to a more balanced approach, assessing its national interests vis-a-vis those of other countries and acting accordingly.
Two developments this summer caused India to question the reliability and integrity of the U.S. as an ally.
The first was the manner of the U.S. pullout from Afghanistan, which had External Affairs Minister S. Jaishankar wondering about the value of U.S. security guarantees. Washington’s Ukraine policy is only increasing those misgivings. The United States was willing to push Ukraine to take actions that many – including Henry Kissinger, George Kennan, and Noam Chomsky – warned Russia couldn’t abide. But then when the shooting started, the United States wasn’t willing to get in line of fire.
And in the second, in September, the U.S. stunned many when it announced a new Australia/United Kingdom/United States security grouping (AUKUS), as part of which Australia would receive American nuclear submarines. Prior to the new arrangement, the Quad –comprised of the U.S., Australia, India, and Japan – was the principal counterweight to China in the Indo-Pacific (see this Council on Foreign Relations summary, The Quad in the Indo-Pacific: What to Know).
This AUKUS announcement caused consternation both in France and India. Australia cancelled a $37 billion deal with a French company to supply diesel -powered submarines, prompting French foreign minister Jean-Yves Le Drian, according to the BBC, Aukus: French minister condemns US and Australia ‘lies’ over security pact to accuse the three countries of “duplicity, a major breach of trust and contempt”..” The United States has consistently told India that it couldn’t share sensitive nuclear submarine technology, according to the South China Morning Post, Aukus fallout: for years, US told India it couldn’t share nuclear submarine technology. ‘And now this …’). In the wake of the AUKUS development, France and India have strengthened their bilateral ties, with more of the same expected.
Another reason India must tread carefully arises from its past military procurement policy. Since the early 1970s, India has purchased much of its armaments from Russia. Although as part of its tilt towards Washington, India has in recent yearsdecreased its reliance on Russian arms, “Today, 60% of India’s military hardware inventory is from Russia or the former Soviet Union and the bulk of India’s license-based defense manufacturing comes from Russia,” according to Defense News, India braces for sanctions on Russia to delay weapons programs, deliveries. This makes India dependent on Russia for the supply of spare parts. Shunning Russia would mean India must find new sources of armaments.
The realization of the shakiness of U.S security guarantees means that India is rethinking the state of its relations with China. Although the two countries have gone to war since Independence, their bilateral relationship has not always been hostile. Now that the value of U.S. security guarantees is being more openly questioned, one option for India is to try and ensure that its bilateral relations with China don’t deteriorate to the point of outright hostility again. That the two countries are becoming more closely bound is true, at least on the economic level, with the latest bilateral trade figures showing imports from China increasing by 30% over 2019 (to $97.5 billion) and exports climbing by 30% over 2019 (to 28.1billion). according to The Hindu, India-China trade crossed $125 bn in 2021.
China (1.4 billion) and India (1.38 billion) together account for more than a quarter of the world’s 7.9 billion people, so anything that dials down bilateral tensions is to be encouraged.
To Be Non-Aligned on Russia Policy Implies India Finding Trade Workaround
The U.S. led economic sanctions regime against Russia is inevitably porous to some degree. Not all Russian banks have been excluded from SWIFT. Crimping Russia’s ability to spend dollars doesn’t shut off its ability to trade with willing partners. India appears to be one such partner. Despite loud squawking in the U.S. Congress about its failure to support the UN Russia resolution, India appears to be banking that the Biden administration won’t impose sanctions on India (for more on that sound and fury, see this Times of India account, Biden officials bat for India amid criticism of New Delhi’s stand on Russia-Ukraine spat).
The bilateral relationship between the United States and India the two countries has changed significantly since the 1960s, when then-prime minister Indira Gandhi was forced to muzzle her criticisms of U.S. bombing of Hanoi and Haiphong in order to secure necessary U.S. food grains after a savage drought. Per the Indian Express, Swallowing the humiliation:
Many of us still have hurtful memories of the mid-’60s when, after two successive years of savage drought, India desperately needed American wheat under the US Public Law 480 on rupee payment — and at relatively low prices because the country had no foreign exchange to buy food in the world market. Indira Gandhi had just become prime minister and chose to go to Washington on an official visit. Lyndon Johnson gave her a gushing welcome and responded to the food problem confronting her effusively, promising as many as 10 million tons of PL480 wheat. However, at an early stage the transaction turned sour.
Infuriated by India’s criticism of American bombings of Hanoi and Haiphong in the course of the Vietnam War, the irascible Texan put food shipments on such a tight leash that India literally lived from ship to mouth. With every morsel we swallowed a little humiliation. When told that the Indians were saying exactly the same thing as the UN Secretary-General and the Pope were, Johnson had retorted: “The Pope and the Secretary-General do not need our wheat.” Many in India started demanding that we should say no to American wheat. Sensibly, Indira Gandhi said nothing. Privately, she told some confidants: “If food imports stop, these ladies and gentlemen won’t suffer. Only the poor would starve.”
Back to the present. Permit me to quote extensively from this Hindustan Times account, Panel to scrutinise impact of Russia sanctions on India’s economy:
A top interministerial panel has been formed to scrutinise a barrage of economic sanctions imposed by the West on Russia following its invasion of Ukraine and their likely impacts on India’s economy, an official familiar with the development said.
As the Ukraine conflict deepens, India has stepped up efforts to secure critical imports from Russia, particularly potassium chloride (popularly known as muriate of potash), a key fertiliser, and sunflower (edible) oil.
Led by economic affairs secretary Ajay Seth, the high-level panel also includes top bureaucrats of the ministries of food and consumer affairs, fertilisers, commerce, external affairs, agriculture and petroleum.
The panel is scouring for avenues to set up a rupee-ruble bilateral payment system to escape a wave of unprecedented sanctions on Russia, which have crippled the former Soviet state’s financial system.
“Official talks with Russians will be needed to set up an alternative payment mechanism but the government will be given various options after a comprehensive review of the sanctions,” the official cited above said, requesting anonymity.
India fears disruption to supplies of murate of potash ahead of its main summer-sown kharif season could hobble its farm sector, which is a major source of income for half of the country’s population.
The war has caused oil prices to skyrocket and the rupee has hit a record low. Note that India still has a number of state-owned backs that could be used to implement any arrangements that might be devised. A private bank might be vulnerable to sanctions. Per the Hindustan Times:
The Russia-Ukraine conflict has already begun hurting Asia’s third-largest economy, which had only started to revive after a pandemic-induced recession in 2020-21. On Monday, the rupee sunk to a record low to 76.9, falling 1% against the dollar as oil prices soared.
At least $400 million of payments and receivables by Indian exporters to Russia are now stranded because the sanctions have cut off Russia’s ability to transact in dollars, the currency for international payments. Russian banks have been severed from a global payments highway known as SWIFT.
The panel has representatives from the Reserve Bank of India, which is looking to designate a smaller Indian bank with minimal exposure to dollar or euro transactions, where a Russian bank could open an account because the sanctions don’t prohibit a rupee-ruble exchange system, the official said.
India had successfully used a similar payment system to pay for oil imports from Iran when that country faced sanctions from the West. At that time, the UCO Bank was set up as the main payment gateway.
An alternate mechanism for payments, however, is not easy to set up. While the idea is that a Russian bank will set up a so-called “vostro account” in an Indian bank and both countries will deposit a certain amount to guarantee for payments to importers and exporters, determining the rupee-ruble exchange rate will be a key challenge.
“One reason is that even if a rupee-ruble exchange rate is pegged to the dollar for determining a notional exchange rate, we must keep in mind that the value of ruble is continuously sliding vis-a-vis the dollar,” said Amarendra Patil, a trade economist who formerly taught at the Indian Institute of Foreign Trade.
“This could make the payment system ineffective because of continuous erosion of one of the two currencies (ruble),” he added.
There is urgency to agree viable arrangements, as planting season is – or will soon be – underway, and farmers need fertiliser. Per The Hindustan Times:
The government, which last week reviewed stocks of fertilisers, is scouting for alternative suppliers to fill the fertiliser gap at prices similar to those charged by Russians.
According to official data, 11-11.5% of total imports of edible oils and fertilisers are sourced from Russia-Ukraine region. The two countries also account for over 90% of sunflower oil imports. Within a basket of fertilisers India imports, Russia accounts for over 17% of MOP (muriate of potash) and 60% of NPK (nitrogen, phosphorus and potassium).
“In response, the government is identifying alternate supply sources for both edible oils and fertiliser, although these will be expensive,” said Sonal Varma, an analyst with Nomura Holdings, a global financial advisory and securities firm, in a research note.
There are of course precedents for similar arrangements. In fact, India and the USSR set up one such arrangement during the 1950s, according to
S Murlidharan writing in Northlines, Crisis as an opportunity: Rupee-Rouble trade should become template to break US hegemony:The rupee-rouble exchange is not new. In 1953 Indo-Soviet trade agreement contemplated all payments in settlement of imports and exports between the two nations being made in INR. But this arrangement was dropped in 2005 when it resulted in Russia being saddled with enormous quantity of INR what with India being the net importer. However, the two nations once again embraced rupee payment for Russian export of S-400 Triumf air defence system in 2019 with the deal being for US 5.2 to 5,6 billion to escape sanctions by the US under its Countering America’s Adversaries Through Sanctions Act (CAATSA). INR-Rial agreement with Iran similarly was to escape the American ire but had to be abandoned when the Trump administration extended the bar on its currency being used to a complete bar on import of oil itself from the Gulf nation.
The two governments are keen on INR-Rouble trade and the nuts and bolts of the arrangement would be announced soon hopefully. Indian exporters are in a quandary with Rouble testing new low every day. How to fix the price is the issue. Trade cannot come to a screeching halt. Russia’s deputy chief of mission Roman Babushkin was quoted in news report three years ago saying that there had been a five-fold increase in payments in national currencies from about 6 percent to over 30 percent now. There should be no let up in this healthy trend except that war has queered the pitch with steep devaluation of the Rouble; thus calling for negotiations in a spirit of give and take to neutralise partially Russian currency’s devaluation on the back of war and the Western boycott.
By institutionalizing INR-Rouble trade we would be sending a strong signal that the US dollar need not be invincible and unavoidable in international trade and payments. If more and more such agreements are signed between nation states, the world could well one day break free at least partially from the vice-like grip of the greenback on fortunes of other nations.
The Indo-Russian initiative should by no means be construed as acquiescence by India in the Russian expansionism and condonation of its warmongering. Rather it should be seen as pursuit of enlightened self-interest, both short-term and long-term.
Within India, there’s broad political support for pulling away from Modi’s previous policy of tightening ties with the U.S. The strongest criticisms – actually, denunciations – of U.S. policy I’ve seen in any mainstream English language television broadcasts are coming from India’s Republic TV. I’ve found myself tuning in each evening to the nightly debates refereed by BJP mouthpiece Arnab Goswami. Refereed is the right word, as these debates generate lots of shouting. An appearance on Arnab Live is not for the faint-hearted – nor, for that matter, is watching these slugfests. Goswami intervenes actively in the debate; he minces no words. And rest assured, he wouldn’t say anything that’s not consistent with the general contours of current Modi policy. If you’d told me a year ago that I would find myself tuning into a nightly Goswami broadcast, I would have told you you were mad.
But, here we are.
* * *
Jerri-Lynn Scofield, who has worked as a securities lawyer and a derivatives trader. She is currently writing a book about textile artisans.
Tyler Durden
Sat, 03/12/2022 – 19:30 - Goldman Cuts S&P Target To 4,700 In Second Downgrade Of Past Month, Warns Of "Recession Downside" To 3,600
Goldman Cuts S&P Target To 4,700 In Second Downgrade Of Past Month, Warns Of “Recession Downside” To 3,600
On February 12, when Goldman’s permabullish chief equity strategist David Kostin finally capitulated and cut his year-end S&P price target from 5,100 to 4,900, we said that “in addition to his baseline, Kostin considers three alternative scenarios.
- If inflation remains high and prompts continued Fed hiking that lifts the terminal funds rate well beyond the market and our economists’ estimates, we expect thecost of equity would rise on net and the S&P 500 would decline by 12% to 3900.
- Alternatively, if inflation recedes by more than expected this year and results in fewer Fed hikes, we expect the cost of equity would fall and the S&P 500 would riseby 24% to 5500.
- Finally, if the US economy tips into a recession –a question which Goldman’s investors have increasingly been asking –the typical 24% recession peak-to-trough price decline would reduce the S&P 500 to 3600.
And gave readers a spoiler alert: “the right scenario will be #3, but before we get there expect another 200 point S&P target in one month, and then another, and then another…”
We were off by a few hours because on March 11, just shy of one month later, Kostin did precisely what we said he would and late on Friday, the bank cut its year-end 2022 S&P 500 target for the second time in a month, from 4900 to 4700, which the bank cheerfully informs its clients is still a 10% upside from current levels.
Why? Because “a surge in commodity prices and a weaker outlook for US and global economic growth lead us to lower our EPS estimates.” It is shocking that in early February, weeks after we said that “The Market Is Starting To Think Recession“, Goldman had yet to grasp that global economic growth was slowing or that with commodities already soaring there would be stagflationary hell to pay.
Well, better late than never, especially for the market’s biggest cheerleaders (behind JPMorgan of course, because to this day, Marko Kolanovic keeps tells his clients to BTFD which they would if they still had any money left to BTFD).
So what is Goldman’s new base case? As Kostin explains, “our new 2022 EPS estimate of $221 reflects 5% year/year growth compared with our prior estimate of 8% growth to $226. Our forecast 2023 earnings growth rate remains unchanged at 6% but the EPS level is trimmed to $233 (from $240). A 12% upward revision to Energy sector EPS partially offsets headwinds to profits in other sectors from decelerating consumer spending and increased input cost pressures. Excluding Energy, we expect S&P 500 EPS will grow by just 2% in 2022 vs. 6% for consensus.”
And since Goldman will trim its ex-energy EPS forecast in another month or so, we are now officially in an earning recession, aside from the one sector that benefits from commodity hyperinflation which unfortunately also pushes the economy into stagflation.
So if Goldman is taking the axe to its earnings forecast, how does it cut its S&P target by just 200 points? Simple: somehow, Goldman thinks that in a year when the Fed is expected to hike “six or seven” times” in hopes of pushing the economy straight into recession, a view which we first voiced back in January and which has since become consensus…
Goldman: “inflation risks—rather than improving growth expectations—have driven the recent hawkish pivot,”
Translation: the Fed is i) either hiking into a stagflation or ii) hiking with hopes of creating a recession
— zerohedge (@zerohedge) January 15, 2022
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…. that PE multiples will magically rise! To wit: “our 4700 target embeds an expectation that the forward P/E multiple will rebound from 19x today to 20x by year-end as the Equity Risk Premium (ERP) compresses. Our year-end 2022 implied absolute valuation represents a 5% P/E decline from the 21x multiple at the start of 2022. In our base case, real yields climb from recent lows but remain negative through 2022 despite Fed tightening.”
At the same time, Kostin believes that decelerating growth and inflation and reduced political uncertainty should compress the ERP from today’s elevated level. According to Goldman, the current 620 bps gap between the S&P 500 earnings yield and the real 10-year US Treasury yield is the widest since March 2020 and matches levels in 4Q 2018, underscoring the potential value opportunity in US stocks if the growth outlook improves. Of course, if it does not improve as the US economy slides into a stagflationary recession as Goldman will admit as its base case in about 3 months, well… oops.
So while Goldman’s traditional optimism has been dramatically neutered in the past month, it is still present although not even Goldman can see itself predicting an imminent bounce in stocks, and as Kostin notes, “because we expect the various sources of current investor uncertainty will take time to be resolved, most of the equity upside should come later in 2022. Our 3- and 6-month S&P 500 targets are 4300 and 4400, respectively.“
But what if they don’t get resolved. Well, one day after Goldman said recession odds for the next year have risen to 20-35% (we, on the other hand, believe that they remain at 100% for the current year), Kostin grudgingly raises the odds of a recession even higher and writes that “the current S&P 500 index level of 4260 suggests roughly a 40% likelihood of a downside recessionary case” adding that “investors have recently expressed concerns that the US economy might tip into recession, leading to much lower EPS and valuations.”
In such a “recession” scenario, which Goldman does not anticipate yet diligently models out for right after it hits, the bank expects reduced earnings and valuation multiples would cause the S&P 500 to decline by 15% to 3600, in line with the median historical peak-to-trough price decline of 24% around past recessions. Here, unlike above, Goldman is less excited to note that this represent a 15% drop from current levels and is probably sufficient to trigger the Fed’s put.
However, were the US economy to avoid recession, Goldman is quick to note that 10%+ S&P 500 corrections such as this one typically represent good buying opportunities, with a median subsequent 12-month return of 15% (if the recession is confirmed however, it’s an entirely different matter .
Alas, the market does not see things quite as cheerfully as Goldman, and as stocks continue to slide, so does liquidity and positioning: as we have repeatedly noted in past weeks…
Checking in on liquidity: <4MM to move ES 1 tick pic.twitter.com/rBtoteblXP
— zerohedge (@zerohedge) February 28, 2022
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… extremely low levels of equity market liquidity have amplified the impact of widespread investor selling, and Goldman’s US Equity Sentiment Indicator, which combines nine measures of positioning across institutional and retail investors, has fallen into negative territory “but remains above levels that have generally marked the bottoms of large market drawdowns during the past several years.” In other words, there is more selling to come.
Amid poor market liquidity, highly liquid stocks have underperformed less liquid peers, as is typically the case during market sell-offs and periods of tightening financial conditions, as investors dump what they can – something they will continue doing for a while.
Finally, in addition to turning more bearish, Goldman is also rebalancing its liquidity baskets, to help those who wish to trade out of most liquid stocks, which just happen to be the most popular ones…
… and into the least liquid ones.
The full Goldman report is available to pro subs in the usual place.
Tyler Durden
Sat, 03/12/2022 – 19:00 - JP Morgan Hires Ex-Jailbirds As Staffing Shortage Worsens
JP Morgan Hires Ex-Jailbirds As Staffing Shortage Worsens
As JP Morgan and the other major Wall Street banks struggle to hire enough personnel, Insider reports that the banks are now turning to an unlikely place: the largest bank in the US has hired thousands of people with criminal records and hundreds with disabilities like autism, Brian Lamb, JPMorgan’s global head of diversity, equity, and inclusion revealed during an interview on Thursday. In total, the bank employees more than 200K people around the world.
But right now, the company is “tapping into the talent pools that have historically been left behind,” Lamb said. This includes people who have formerly been incarcerated, who typically have a more difficult time getting hired.
As we noted early last month, the US had 4.6 million job openings according to the latest data released in February. Looking at the details, job openings increased in several industries with largest increases in accommodation and food services (+133,000), information (+40,000), and nondurable goods manufacturing and state and local government education (+31,000 each). Job openings decreased in finance and insurance (-89,000) and in wholesale trade (-48,000).
The pandemic gave rise to what has been dubbed the Great Resignation. Millions of workers have quit their jobs for myriad reasons, including stagnant wages, inadequate flexibility, a desire to switch careers, and shifting childcare needs. McDonald’s in particular has been hit hard, as the pandemic inspired a phenomenon called the ‘Great Resignation’, as more workers opted to arre
JP Morgan says it’s pulling out all the stops to combat the labor shortage that’s affecting many US businesses. That includes casting ‘a wider net’ and hiring people that have historically had difficulty finding employment.
Here’s more from Lamb’s interview:
Contending with the labor shortage — which has seen masses of Americans walk off the job and made it more difficult for employers to hire — “is going to require unconventional approaches,” Lamb said. Job seekers no longer need to answer questions about their criminal backgrounds on the bank’s initial applications, he said.
The company is “tapping into the talent pools that have historically been left behind,” Lamb said. Formerly incarcerated people often have a more difficult time getting hired.
Fortunately for JPM, there are plenty of experienced shoplifters and oh other ex-con’s running around the Big Apple. But unfortunately, they seem to already appreciate the work they’re doing.
Tyler Durden
Sat, 03/12/2022 – 18:00 - Why Sanctions Don't Work, And Why They Mostly Hurt Ordinary People
Why Sanctions Don’t Work, And Why They Mostly Hurt Ordinary People
Authored by Ryan McMaken via The Mises Institute,
The United States and its Western European allies have in recent days repeatedly increased economic sanctions against not only the Russian regime, but against millions of ordinary Russians.
It has done this by cutting much of Russian trade and Russian finance out of international markets. Moody’s and S&P Global have both downgraded Russia’s credit rating. The US has frozen Russian reserves and cut many Russian banks off from SWIFT, the international banking communications system. Europe is planning on big cuts to its purchases of natural gas from Russia. The US is mulling a stop on all purchases of Russian crude. The ruble has fallen to a record low against the dollar. Russia is at risk of defaulting on its foreign debts for the first time in more than a century. Many of the sanctions appear targeted at only certain wealthy Russians, but these moves greatly increase perceptions of geopolitical risk for anyone with Russian investments or investments connected to Russia. That means many investors and corporations will “voluntarily” cut back their activities in Russia to reduce risk and because they figure they might be targeted next. Ground-up pressure is mounting also: corporations like Coca-Cola and McDonald’s are being pressured to close their operations—and thus lay off all their workers—in Russia. This means a real decline in overall investment in Russia far beyond just some Russian banks and oligarchs.
The trickle-down effect to ordinary Russians will be immense. Purchasing power, incomes, and employment will be significantly impacted, and many Russians will suffer serious setbacks to their standards of living. The Russian ruling class will be affected too, but given they live much further from subsistence levels, they’ll fare much better overall.
And yet if history is any guide, the sanctions won’t work to get the Russian military out of Ukraine or to achieve regime change in Russia.
The Political Logic of Sanctions
The idea behind sanctions has long been to make the population suffer so that “the people” will revolt against the ruling regime and force it to cease the policies that the sanction-imposing regimes find objectionable.
In many cases, the stated goal is regime change. It’s essentially the same philosophy behind Allied efforts to bomb German civilians during World War II: it was assumed the bombing would ruin civilians’ morale and lead to domestic demands that Berlin surrender.
Economic sanctions are less despicable than bombers targeting civilians, of course, but they are also likely less effective. Instead of convincing the domestic population to abandon their own regime, foreign attacks on civilians—whether military or economic—often cause the domestic population to double down on their opposition to foreign powers.
Nationalism Trumps Economic Interests
When it comes to economic sanctions, there are several reasons that sanctions fail to achieve stated ends.
First of all, sanctions will fail unless there is near universal cooperation from other states. In the case of the American embargo of Cuba, for instance, few other states cooperated, which meant the Cuban state and the Cuban population could obtain resources from many sources other than the United States. US-led sanctions against Iran, on the other hand, have been more successful because a large number of key trading states have cooperated with the sanctions.
The situation with Russia sanctions are likely to be somewhere between Cuba and Iran. While several key Western states like the US and the UK have taken a hard line against Russia, many other sizable states have been reluctant to impose similar sanctions.
Germany, for example, has refused to impose sanctions in the near term, noting that Germany—as well as much of Europe—cannot meet its energy needs without first making time-consuming changes in energy policy and industrial output. Several key medium-sized states have shied away from a hard line on sanctions as well. India, for instance, has refused to void a weapons agreement with Russia. Mexico has stated it will not impose sanctions, and Brazil states it is seeking out a neutral position.
Most importantly, China has not cooperated with US-led sanction efforts, and China stands to benefit from sanctions imposed by other states. While China has not yet signaled outright support for Moscow, it nonetheless abstained in the UN vote condemning the Russian invasion of Ukraine. This is likely less than what Moscow hoped for, but Russia can likely count on China as a willing buyer of Russian oil and other resources. After all, China has been uncooperative with US-led sanctions in Iran, and has been a significant buyer of Iranian oil. China is likely to strike similar deals with Russia. Moreover, if Russia faces a restricted number of buyers for oil, this gives Beijing more leverage in obtaining Russian resources at a discount.
So long as Russia can continue to trade with sizable states like China, Mexico, Brazil, and possibly India, Russia will not face the sort of isolation the US hopes to impose.
A second reason that sanctions fail is that nationalism—a potent force among most populations—tends to impel sanctioned populations to support the regime when they are threatened.
As Robert Keohane has noted, even in noncrisis situations, nationalism can be a general source of strength for a state, since nationalism can unify populations behind the regime. Moreover, as John Mearsheimer shows in The Great Delusion: Liberal Dreams and International Realities: “Nationalism is an enormously powerful political ideology…. There is no question that liberalism and nationalism can coexist, but when they clash, nationalism almost always wins.”
That is, in crisis situations, we can often expect even disgruntled liberal reformers to defer to nationalistic impulses over liberal ones, further strengthening national opposition to sanctions imposed from the outside.
To see the plausibility of our claims, we need look no further than the United States, which has long been remarkably safe from any realistic threat of foreign conquest. Yet even in the United States, it doesn’t take much in terms of foreign aggression to convince the population to unite in support of the regime. Certainly, the regime has rarely enjoyed more support than in the wake of Pearl Harbor and 9/11. Were some foreign power—say, China—to attempt to coerce Americans to commit to regime change through economic sanctions, it’s hard to imagine this would produce much support for the foreign power in the US.
Similarly, US sanctions have not exactly invigorated pro-American or antiregime efforts in Cuba, Iran, North Korea, Venezuela, or any other state where the US sought to bring about domestic political change through sanctions.
There are few cases where sanctions might have worked; however, the two go-to examples of this—i.e., Iraq and Serbia—are cases where where economic sanctions were accompanied by overwhelming military force or plausible threats of it. Needless to say, that’s a very specific type of sanction, and has little to do with a conflict involving a nuclear power like Russia.
Sanctions might also bring undesirable side effects. As Richard Haass at the Brookings Institution shows:
Trying to compel others to join a sanctions effort by threatening secondary sanctions against third parties unwilling to sanction the target can cause serious harm to a variety of U.S. foreign policy interests. This is what happened when sanctions were introduced against overseas firms who violated the terms of U.S. legislation affecting Cuba, Iran, and Libya. This threat may have had some deterrent effect on the willingness of certain individuals to enter into proscribed business activities, but at the price of increasing anti-American sentiment…. Sanctions increased the economic distress on Haiti, triggering a dangerous and expensive exodus of people from Haiti to the United States. In the former Yugoslavia, the arms embargo weakened the Bosnian (Muslim) side given the fact that Bosnia’s Serbs and Croats had larger stores of military supplies and greater access to additional supplies from outside sources. Military sanctions against Pakistan increased its reliance on a nuclear option, both because the sanctions cut off Islamabad’s access to U.S. weaponry and by weakening Pakistani confidence in American reliability.
And finally, even if sanctions “worked,” that would be insufficient to justify their use. They are, after all, a type of protectionism on steroids and that requires sanctioning American individuals and American firms that run afoul of these government regulations—many of them difficult for Americans to navigate legally.
Yet sanctions remain popular because they placate the voters who insist “we” must “do something,” and government officials are more than happy to engage in policies that grow state power and can be used to reward friends of the regime.
But having the regime “do something” is a dangerous game, and if the voters want to signal their virtuous opposition to perceived foreign enemies, the voters can always take action on their own. If Americans don’t like Russian goods and services, they’re free to boycott these goods, just as Americans boycotted British goods during the Revolution. But embracing yet more federal power in the name of teaching foreign regimes a lesson tends to harm ordinary people in many ways few can anticipate, while also potentially placing many Americans in legal jeopardy. And all of this will be done, no less, with little hope of success.
Tyler Durden
Sat, 03/12/2022 – 17:30 - Russia Threatens Attack On NATO Weapons Shipments To Ukraine: "Legitimate Targets"
Russia Threatens Attack On NATO Weapons Shipments To Ukraine: “Legitimate Targets”
Setting the stage for a potential major escalation with Western and NATO powers, the Kremlin warned on Saturday that the Russian military is prepared to target Western arms shipments that are continuing to pour into Ukraine. Russia’s Deputy FM Sergei Ryabkov said on state TV that Washington had been informed in the last days that Moscow will see weapons supply convoys entering Ukraine as “legitimate targets”.
“We warned the United States that the orchestrated pumping of weapons from a number of countries is not just a dangerous move, it is a move that turns these convoys into legitimate targets,” Ryabkov said in the remarks, which served as a severe warning to the West.
Image source: Associated Press He added that Russia has formally warned “about the consequences of the thoughtless transfer to Ukraine of weapons like man-portable air defense systems, anti-tank missile systems and so on.” He added that from Moscow’s point of view, the US administration has failed to take these warnings seriously.
Weeks prior the lead-up to Russia’s Feb.24 invasion of Ukraine, the US Embassy in Kiev had tweeted photographs anytime a major arms shipment arrived. The US authorized Baltic allies in the transfer of Javelin anti-tanks missiles to supply Ukrainian forces; at the same time, the UK had sent many rounds of transport plane-loads of munitions and weapons systems.
It’s also believed that supplies Stinger anti-aircraft missiles are being ramped up. The fresh Russian warning also comes following the US-Poland MiG-29 fiasco. Warsaw had prematurely offered to give all off its MiGs to the US so that they could be flown into Ukraine from Ramstein Air Force Base in Germany.
The Biden admin said the offer was a “surprise” while the Pentagon flat-out rejected the plan, saying that the risk would be too high of bringing NATO into direct conflict with Russian forces, given that the planes would have to enter Ukraine from the West, risking an aerial engagement incident.
#Ukraine: Another gift from NATO; UA forces training with newly delivered RPG-76 Komar single-use RPG, made in Poland in great quantities during the Cold War.
Though these aren’t very effective against modern Russian MBT, they would still work against structures & light armour. pic.twitter.com/yjycel94uJ
— 🇺🇦 Ukraine Weapons Tracker (@UAWeapons) March 12, 2022
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Recent battlefield videos have appeared to confirm that in many instances invading Russian tanks and armored vehicles are being destroyed and disabled by West-supplied Javelin and other anti-armor missiles that are in the hands of Ukraine’s military.
Without doubt the Kremlin is blaming the West for these attacks, given they are taking place with NATO-supplied advanced weapons.
JAVELIN in first cut. Notice the Turret blown off – by design. Notice also the Russian rifles (INFANTRY) do not attack the firing point to suppress add fires but keep running the opposite direction. Not good. @cspanwj @gregkellyusa pic.twitter.com/EZbcbhLfi1
— Bill Badey (@10903) March 11, 2022
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In some instances entire Russian convoys appear to scramble when under ambush in narrow corridors, as is seen in the above video has gained much media attention in the past two days.
Washington has actually been supplying Ukraine’s military with the “tank busting” Javelin for many years now, and this has also included training local forces on how to use them effectively. Ahead of the conflict, Moscow had long warned that his was a huge provocation, and announced a “red line” regarding NATO military infrastructure being extended into Ukraine. The Russians apparently took the increased Western arms shipments as signal for impending NATO military expansion there.
It’s likely that any new and current West-supplied shipments into Ukraine are occurring through covert means, especially now that Russia has in effect declared ‘open season’ on any external weapons convoys.
Tyler Durden
Sat, 03/12/2022 – 16:44 - Idiocracy: CDC Lowers Expectations For Child Development, Raising New Questions for Parents
Idiocracy: CDC Lowers Expectations For Child Development, Raising New Questions for Parents
Authored by Shanxi Omoniyi via RealClear Education (emphasis ours),
The CDC has changed its list of children’s developmental milestones for infants and young children, marking the first update of its kind since 2004.
The move has generally been portrayed in the media as a positive adjustment, with claims that it provides clearer benchmarks and can help identify developmental delays early.
However, the update essentially moves the milestones later and later – following a similar trend in academic standards across the nation.
Is this something to be celebrated, or is it one more example of lowering standards?
The supposed reasoning behind the update is that the earlier milestones used only 50th percentile data, which means that only half of the children were expected to reach them at a specific age.
The updated checklist moves milestones back so that 75 percent of children should reach them at a given age. One news report claims it’s necessary for “eliminating unnecessary confusion and alarm while ensuring children who need additional evaluation and resources are properly identified.”
What the article doesn’t highlight, however, is that the changes effectively move developmental milestones to older ages.
An article from the American Academy of Pediatrics details the changes. In short, one-third of the original milestones were moved to different ages, and of those moved, just over two-thirds were moved to an older age.
In other words, the CDC is shifting developmental goalposts later and later for infants and young children.
One reason for moving the developmental goalposts may be the learning loss resulting from the COVID-19 pandemic.
Jaclyn Theek, a clinic director and speech-language pathologist at the Florida-based Speech and Learning Institute, has raised the alarm over the increase in babies and toddlers she is seeing with speech delays.
“We’ve seen a 364% patient increase in patient referrals of babies and toddlers from pediatricians and parents,” she said.
Before the pandemic, only 5% of patients were babies and toddlers, she told reporters. Now it’s 20% of her patients, with parents calling it “COVID-delayed.”
Theek says the widespread use of face masks could be affecting children’s speech development, as babies start learning how to read lips as young as 8 months old.
“There’s no research out there yet saying that this could be causing speech and language delays. But, most definitely, I’m sure it’s a factor,” she said. “It’s very important that kids do see your face to learn, so they’re watching your mouth.”
Other detrimental effects on children have included a decrease in academic performance after widespread remote and virtual learning options, which tend to hurt minority and low-income students hardest.
Even before the pandemic, however, the U.S. educational system was easing academic standards, often to the detriment of students: Just one example is Virginia, where the reading scores of fourth- and eighth-grade students dropped after the state loosened academic standards and accountability.
Even the Washington Post argued that easing these standards did not help children.
“Some critical (Standards of Learning) tests, such as fifth-grade writing, were eliminated; score standards were adopted that made it easier for students to pass; and changes in accreditation regulations let schools off the hook for their failures,” the newspaper’s editorial team wrote.
Instead of constantly adjusting developmental milestones and academic standards, parents and educators should question what’s causing this downward shift in the first place.
Earlier critics of the U.S. educational system such as John Taylor Gatto predicted schools would never achieve the successful education of students without changing their current approach.
“No one believes anymore that scientists are trained in science classes or politicians in civics classes or poets in English classes,” he said in a 1990 speech where he accepted the New York City Teacher of the Year award. “The truth is that schools don’t really teach anything except how to obey orders.”
Gatto said in his speech that U.S. students ranked “at the bottom of nineteen industrial nations in reading, writing and arithmetic.”
Today’s rankings aren’t much better. The Programme for International Student Assessment (PISA) released a lackluster report in 2018, with the U.S. ranking roughly the same – in the middle of the pack – for all countries tested.
“The trend lines of United States’ mean performance in reading since 2000, mathematics since 2003 and science since 2006 are stable, with no significant improvement or decline,” the report concluded.
When viewed against the broader sweep of human history, the academic standards now in use are substantially lower than what was required in 20th-century American schools (this 1912 eighth-grade exam serves as an interesting example).
For too long parents have counted on so-called “expert institutions” such as the CDC and public schools to help us raise our children. However, current events have started exposing important flaws and concerns within the educational system.
Thankfully for many children, alternatives exist to the current public educational situation – including the choice to homeschool. If the pandemic has taught us anything, it’s that parents are better equipped to handle their children’s education than they may have previously thought.
One of these parents is Tera Thomas, who withdrew her children to homeschool in Virginia after schooling went virtual in response to the pandemic.
“You just are kind of at the mercy of whatever they’re choosing to do – ‘one size fits all,’” she said of her experience in the public schools.
Thomas chose to continue homeschooling even after in-person learning resumed.
“We wanted there to be more value in their education, more individualized (attention), more freedom to explore and do things,” she said.
Like Thomas, an increasing number of parents are opting out of public education with its continually changing developmental and academic goalposts.
Instead of closing our eyes to the problems facing our students, let’s choose to address them and raise the next generation of mature, responsible citizens who not only thrive, but also excel in the real world – long after their schooling has ended.
Tyler Durden
Sat, 03/12/2022 – 16:30 - Americans Panic Hoard Ammo In Wake Of Russian Invasion Of Ukraine
Americans Panic Hoard Ammo In Wake Of Russian Invasion Of Ukraine
Ever since Russian forces invaded Ukraine, Americans have panic hoarded all types of ammunition, according to a top US online gun retailer.
“A recent surge in consumer demand for small arms ammunition – the onset of which perfectly coincided with the Russian invasion of Ukraine on Feb. 24, 2022,” AMMO, Inc., a US-based ammunition and components manufacturer, said in a press release Friday.
Los Angeles-based Ammo reports between Feb. 24 and Mar. 10 that revenues surged 166%, and transactions are up 110% over the previous two weeks. Website traffic for the period is up 59%.
Customers in Texas, Florida, and Washington bought the most ammunition by volume. They mainly bought 9mm and 5.56×45. Here’s the complete list of the top ten states for ammunition sales for the period.
“We noted a similar surge in demand for ammunition during the onset of the COVID-19 pandemic,” said Alex Horsman, marketing manager for Ammo.
“As neoconservatives and the mainstream media both began calling for American intervention in the Russian invasion, wary firearm enthusiasts sensed that the products they need to enjoy their favorite hobby could soon become scarce.
“Many Americans predict that a war effort would significantly limit the amount of ammunition available to consumers. Others fear that the Biden administration, via executive fiat, will somehow limit private sales of ammunition under the pretext that those products must be shipped overseas in support of the Ukrainian resistance.”
Across the Mid-Atlantic area, Maryland-based gun shop The Machine Gun Nest notes that the conflict overseas has sparked buying interest for AR platform weapons and increased ammo sales in-store and on their online e-commerce shop.
“We have definitely seen a major surge in ammo sales here in the mid-Atlantic region. The war in Ukraine certainly sparked interest in the US, particularly among gun owners, who feel that the Ukrainian people are a testament to the absolute necessity of an armed population.
“We have seen sales of 9mm & 5.56mm skyrocket, with some customers purchasing as many as 20,000 rounds at a time. We’ve also seen increased demand for Russian ammo, with 7.62×39 and 5.45×39 seeing increased demand. The Biden Administration blocked the importation of Russian ammunition with sanctions in the fall of 2021, and the war has certainly added to the demand for these imports that are slowly drying up.”
Taking a look at ammo prices via ammo tracking website Ammo Prices Now, they report 9mm prices are steady near 30 cents a round on Saturday. However, 5.56 has jumped 23% since the invasion, from .44 cents to .55 cents.
Also, internet searches for 5.56 ammo jumped to the highest level since January 2021, when people were panic buying guns and ammo due to the summer of social unrest in 2020.
The firearms market has since “cooled significantly from the height of the pandemic surge,” according to Smith & Wesson Brands Inc.
However, with a larger pool of gun owners since the pandemic and corporate media feeding people wartime propaganda, another round of gun buying could be underway. Maybe this time around, people will be panic hoard larger caliber weapons because of war threats.
Tyler Durden
Sat, 03/12/2022 – 16:00 - California, Home Of Happiness?
California, Home Of Happiness?
Four of the eight highest-ranked U.S. cities in terms of overall happiness are situated in California.
You will find more infographics at Statista
As Statista’s Florian Zandt details below, according to an analysis by WalletHub, only one city not located on the United States’ west coast managed to break into the top 3 last year.
The city in question is Columbia, Maryland, which ranks second on WalletHub’s index of the 182 happiest U.S. cities. When looking at the individual scores for each of the three dimensions analyzed, the picture portrayed changes quite a bit. For example, Columbia is ranked as one of the worst cities when it comes to income and employment, a category encompassing poverty rates, job satisfaction, job security, weekly work hours or underemployment rate, but ranks fifth and third in terms of emotional and physical well-being and community and environment, respectively.
The top city in the latter category, which includes separation and divorce rate, hate crime incidence and leisure time spent per day, is Casper, Wyoming, coming in 79th place overall.
Fremont, on the other hand, is not only the number one happiest city in the U.S. according to WalletHub, but also scored top marks in the well-being category, which takes into consideration issues like depression and suicide rates, adequate sleep, sports participation and food insecurity.
We have only one question: if everyone in California is so ‘happy’, why are we seeing record numbers exiting the state and birth rates plummeting?
Tyler Durden
Sat, 03/12/2022 – 16:00 - Ron Paul: Is Putin the New Coronavirus?
Ron Paul: Is Putin the New Coronavirus?
Authored by Ron Paul via The Ron Paul Institute,
President Biden’s “maskless” State of the Union signifies the near-end of the COVID tyranny we have lived under for the past two years. Fortunately for Congress, the President, and the Federal Reserve, the Ukraine-Russia conflict is replacing COVID as a ready-made excuse for their failures and a justification for expanding their power.
Even before politicians began declaring the end of the pandemic, polls showed that rising prices were the people’s top concern – particularly the increase in gas prices. Since Russia is one of the world’s leading energy producers, sanctions imposed on Russia, as well as Germany’s decision (made under pressure from the US) to shut down the Nord Stream 2 pipeline, provide a convenient excuse for rising gas prices. This is the case even though the US, citing the “instability” in world energy markets created by the Russian-Ukraine conflict, has yet to officially ban imports of Russian oil.
The Federal Reserve has been planning several interest rate increases this year, even though some fear that rate increases could decrease growth and increase unemployment. The Russian crisis allows the Fed to either postpone rate increases or blame Russia for any unemployment that accompanies the rate increases. Either way, the Fed can use the crisis to deflect attention away from its responsibility for our economic problems. As of now, it appears the Fed will go through with at least a modest rate increase this month, but because of the Ukraine crisis, the increase will be smaller than previously expected.
The Ukraine crisis also provides an excuse for Congress to do what Congress does best: increase federal spending. President Biden has requested Congress provide an additional $10 billion in emergency military aid to Ukraine. Congress will likely quickly approve the President’s request. This will not likely be the last time Congress rushes billions of “emergency” money to Ukraine.
It is also certain that lobbyists for the military-industrial-complex are already “explaining” to a very receptive Capitol Hill audience why the Ukraine crisis justifies increasing the military budget to “counter the threats” from Russia, China, and whoever else can serve as a convenient boogeyman. It is unlikely there will be much resistance in Congress to a further increase, even though the US already spends more than the combined defense budgets of the next nine biggest spending countries.
Over the past two years, many leading Internet companies did the government’s bidding by “de-platforming” anyone who expressed skepticism of vaccines or promoted alternative treatments — even when they presented evidence to support their claims. These companies are once again helping the government by de-platforming those who question, or are suspected of questioning, the official narrative regarding Ukraine. Yet these companies’ concerns with “fake news” have not led them to stop people from sharing widely debunked stories supporting the US-backed Ukrainian government.
The lockdown and mandates did more harm than the coronavirus itself. They were based on lies promoted by the government and its allies in the “private” sector.
Yet too many Americans refuse to even question the US government’s claims regarding the Ukraine crisis or question whether Russia is really responsible for our economic problems as opposed to a spendthrift Congress, successive spendthrift Presidents, and an out-of-control Federal Reserve. The only way to stop authoritarians from using crises like these to grow their power is to make enough people understand a simple truth: authoritarian politicians will always lie to the people to protect and increase their own power.
Tyler Durden
Sat, 03/12/2022 – 15:30 - Biggest Commodity Trading Houses In The West Continue To Buy Russian Oil And Gas
Biggest Commodity Trading Houses In The West Continue To Buy Russian Oil And Gas
Despite headline-grabbing maneuvers by the big western oil giants (Shell, BP, Exxon-Mobil etc.) to simply walk away from certain Russian projects, commodity traders like Trafigura, Vitol and Glencore have all loaded cargos of oil, gas and fuel onto tankers at Russian ports, which is just the latest evidence that the west can’t simply go without Russia’s commodity wealth (as Chinese analysts have explained, Russia is one of the richest countries in the world when it comes to natural commodity wealth). And it’s not just industrial commodities: the Middle East and Africa depend on exports of Russian wheat.
This commodity might is why Credit Suisse’s Zoltan Poszar proclaimed this week that the new international financial order, which he called “Bretton Woods III” will be based around commodities and the currencies of the countries that export them.
It’s also why the big commodities trading houses that we mentioned above have no plans to stop buying Russian oil or gas, as the Times of London explains.
Trafigura, Vitol and Glencore have all loaded cargos of oil products on to tankers in Russian ports this week, even as Russia’s attacks on Ukraine intensified, shipping data shows.
The commodities traders have come under less scrutiny over their ties with Russia than the oil majors and have not made any commitments to stop buying Russian oil.
And even Shell, BP and the majors will continue to buy commodities from Russia, as they have already promised.
Shell is contracted to buy liquefied natural gas from Russian projects until 2035 and has given no timescale for its planned “phased withdrawal” from this. BP has pledged to quit its stake in Rosneft, the Kremlin-backed oil company, but is contracted to buy fuel from Rosneft in Germany and has said only that it is “reviewing” its commitments.
This might seem like a contradiction after the Biden Administration announced on Tuesday that Americans would face an immediate ban on new contracts for Russian oil, with a 45-day grace period for buyers to see out existing deals. The UK has made similar assurances as Ukraine has called for a global embargo on buyers of Russian oil and gas.
But the big commodity trading houses likely have contracts to continue buying Russian oil and gas for years, or even decades, hence. There’s plenty of data to show that their Russian business has continued uninterrupted.
Many western companies have stopped buying oil and oil products from Russia voluntarily, but analysis of shipping data by SourceMaterial, an investigative journalism organisation, shows that commodities trading houses are still doing business there.
On Wednesday, an Indian-registered tanker, the JAG Laxmi, was docked at Taman in Russia on the Black Sea to take on a cargo of vacuum gas oil, a petroleum by-product. The tanker is understood to have been chartered by Trafigura and the cargo supplied by Rosneft.
At another Russian Black Sea port, Tuapse, Glencore was due this week to load a charter vessel, the Gulf Coral, with 60,000 tonnes of naphtha, the raw material for solvents, also from Rosneft. A similar Glencore cargo left Tuapse earlier in the week.
To be sure, there’s no evidence to suggest that the three commodity trading houses have violated any sanctions.
SourceMaterial’s data also shows that since the February 24 invasion Vitol loaded or was due to load seven cargos of oil products including diesel, naphtha and liquid petroleum gas, some of them from Rosneft. Vitol’s cargos alone are estimated to be worth nearly $100 million.
There is no suggestion that the three traders have broken sanctions, but the disclosures highlight the extent of continued energy trade with Russia even as many companies in other sectors make immediate moves to cut ties.
Spokespeople for all three firms told the Times that they weren’t in violation of any sanctions, and that they were continuing to abide by contracts signed long before the invasion of Ukraine began.
Tyler Durden
Sat, 03/12/2022 – 15:00 - FBI Whistleblower Raises Questions About Pipe Bombs Set Near DNC, RNC Headquarters: Lawmaker
FBI Whistleblower Raises Questions About Pipe Bombs Set Near DNC, RNC Headquarters: Lawmaker
Authored by Katabella Roberts via The Epoch Times (emphasis ours),
Ohio Republican lawmaker Jim Jordan said he has requested a briefing with the FBI after a whistleblower allegedly disclosed information regarding the bureau’s investigation into pipe bombs planted near the Democratic National Committee and Republican National Committee headquarters in Washington the night before the Jan. 6 breach of the U.S. Capitol.
Rep. Jim Jordan (R-Ohio) speaks at a news conference in Washington, on July 21, 2021. (Kevin Dietsch/Getty Images) Jordan, who is ranking member of the House Judiciary Committee, said he sent a letter to FBI Director Christopher Wray on March 9 after a senior FBI special agent came forward with information regarding an “unusual” request from the FBI’s Washington Field Office.
“According to the special agent, on February 7, 2022—over a year after the placement of the bombs—the FBI’s Washington Field Office asked FBI field offices to canvass all confidential human sources nationwide for information about the individual and the crime,” Jordan said in his letter.
“In part, the message asked that the canvass ‘include sources reporting on all [types of] threats’ because the suspect’s ‘motive and ideology remain unknown.’”
Jordan said that the special agent had described the request as “unusual” because it “was transmitted more than a year after the FBI had begun the investigation, and it raises questions about the progress and extent of the FBI’s investigation.”
The FBI began investigating the incident after an unknown individual dressed in a hooded sweatshirt, gloves, and a mask placed two pipe bombs in the Capitol Hill neighborhood of Washington, D.C. on Jan. 5, 2021.
An unknown individual placed two pipe bombs in the Capitol Hill neighborhood of Washington on Jan. 5, 2021. (FBI) Both the FBI and other law enforcement entities say one bomb was placed in an alley behind the Republican National Committee (RNC) headquarters, located at 310 First Street Southeast. The other was left near the headquarters of the Democratic National Committee (DNC), located at 430 South Capitol Street Southeast #3.
Some of the components in the bombs included 1×8-inch threaded galvanized pipes, a kitchen timer, and homemade black powder, according to officials.
While both of the bomb threats were neutralized by authorities, the devices triggered the evacuation of the U.S. Capitol and nearby buildings when they were found on the afternoon of Jan. 6, officials said.
In his letter to the FBI Director, Jordan said that in addition to the disclosure from the whistleblower, the House Judiciary Committee had learned that the FBI had failed to “sufficiently answer questions” posed by Rep. Bill Posey, a Florida Republican, in September 2021.
Those questions regarded the status of the FBI’s investigation and requested a briefing on the matter, and Posey cited concerns for his office’s safety as well as the safety of “the residences of many Members of Congress, and for the public at large.”
“The FBI, however, has not fully responded to Rep. Posey’s request, explaining that it was exclusively providing information to the partisan Democrat-led Select Committee investigating the events of January 6, 2021,” Jordan said.
Jordan said the FBI’s decision to provide information on a partisan basis “further erodes public confidence in the FBI’s senior leadership.” He requested the FBI briefing take place “as soon as possible” but no later than March 23.
The Epoch Times has contacted the FBI for comment.
The FBI has offered members of the public a reward of $100,000 if the information they provide leads to the identification of the person responsible for planting the bombs.
“Identifying the perpetrator of this attempted attack remains a priority for the FBI’s Washington Field Office and our partners at the Bureau of Alcohol, Tobacco, Firearms and Explosives; U.S. Capitol Police; and D.C. Metropolitan Police Department,” the bureau said in a September 2021 statement.
Tyler Durden
Sat, 03/12/2022 – 14:30 - White House Holds 'Briefing' For TikTok Creators On Ukraine: "Like A Kindergarten News Conference"
White House Holds ‘Briefing’ For TikTok Creators On Ukraine: “Like A Kindergarten News Conference”
Not The Onion: there’s a war in Europe, a massive refugee crisis of well over 2.5 million leaving Ukraine, global markets in chaos, soaring energy prices amid rising inflation, talk of avoiding World War 3… and the White House is busy giving a “briefing” to TikTok influencers, as in the popular Chinese app…
“The White House on Thursday briefed around 30 social media creators covering Russia’s invasion of Ukraine, according to multiple media reports,” The Hill writes. “The briefing was led by White House National Security Council special adviser for communications Matt Miller and press secretary Jen Psaki. News of the briefing was first reported by the Washington Post.”
Screengrabs via Washington Post A White House statement indicated that since so many young people get their news via TikTok and other major social media platforms, it’s important to make sure the most prominent influencers are getting their info “from an authoritative source”.
As cited in The Hill, the statement said:
“this is a critically important avenue in the way the American public is finding out about the latest” and they wanted to make sure the influencers had the “latest information from an authoritative source.”
And to be expected some of the content which resulted from the briefing reads like it’s straight out of a State Department script…
Ukrainian American TikTok creator Aaron Parnas, who has 1.2 million followers on TikTok, tweeted on Friday that “I still cannot believe how blessed I am to have had the opportunity to attend a White House briefing yesterday to be armed with accurate information about how America is helping Ukraine and our European allies.”
One TikTok creator was cited in media reports as parroting the Biden admin line after the briefing that the anti-Russia “sanctions are working” – though we’re scratching our heads trying to determine what they’ve actually deterred in terms of the Russian invasion.
But it looks like at least one of the individuals in attendance mocked the event. He described it as like a briefing prepared for kindergarteners. Apparently there were a few actual serious questions floated, and avoided…
However, Jules Suzdaltsev, a Ukrainian-born journalist with a popular TikTok page, told the Washington Post that he believes the administration avoided tough questions. He said, “The enthusiasm of the call felt like a kindergarten news conference.”
This is one of the TikTok stars that the White House invited on a zoom call to get briefed on Ukraine.
Her channel, which is just hundreds of videos of her dancing, is definitely the first place I would go to get Biden approved news on the war 🤡
The adults are back in charge. pic.twitter.com/yzxiPOsZ22
— Libs of Tik Tok (@libsoftiktok) March 11, 2022
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It’s not the first time the White House and Press Secretary Jen Psaki have been subject of widespread mockery and scorn over such carefully choreographed attempts at propagandizing the youth.
It was false statements like this that not only conditioned millions of American liberals to hate Russia and Russians as if it were the Cold War, but also caused *2/3 of Democrats to believe* that “Russia tampered with vote tallies in order to get Donald Trump elected President.” https://t.co/bbeus5HI2b
— Glenn Greenwald (@ggreenwald) March 11, 2022
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Last August there was the infamous video of a ‘TikTok star’ parading around the White House as part of a message to get people vaccinated.
Tyler Durden
Sat, 03/12/2022 – 14:00 - Phoenix's Tent City Expands To Nearly 1,000 As Housing Affordability Crisis Worsens
Phoenix’s Tent City Expands To Nearly 1,000 As Housing Affordability Crisis Worsens
A massive homeless encampment in downtown Phoenix, Arizona, known as the “Zone,” raises eyebrows as the shelter’s population swells to more than 900 people.
The Zone is located on 9th Avenue, Jackson Street, 13th Avenue, and Jefferson Street in Phoenix, down the street from the Arizona State Capitol complex.
Vice News points out, “the camp more than doubling in size over two years may be a testament to how bad Phoenix’s housing crisis has become.”
“People say, ‘Are you surprised?’ And I say, ‘No, not really, because all of the housing forces in Phoenix and Maricopa County have been working against us for years,'” said Human Services Campus Executive Director Amy Schwabenlender, who works in the Zone.
“We’ve had ongoing population increases in Phoenix and Maricopa County. We haven’t had housing production at all income levels keep up and meet that increase in population,” Schwabenlender said.
According to Schwabenlender, the tent city had a population of 200 people last summer. By the end of 2021, the population climbed to 500, then 700, and in the last three weeks, the number jumped to 900 unsheltered people. The rapid increase coincides with a massive boom in Arizona’s residential real estate market, where rents and housing prices skyrocketed during the virus pandemic, thanks to rock bottom interest rates and low inventory.
Phoenix home prices up 32.5% Y/Y in Dec. pic.twitter.com/jdOwlLgVkw
— zerohedge (@zerohedge) February 22, 2022
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Home prices in the metro area have soared above 2008 levels.
“With rising rents and lack of affordable housing—which was a crisis a few years ago and still is—we’re going to continue to see rises in homelessness,” the shelter’s CEO Lisa Glow said.
It’s not clear how everyone living at the downtown Phoenix encampment got there. But data is expected to show a rise in first-time homelessness in Maricopa County over the pandemic, according to Glow. More people becoming homeless for the first time could be indicative of greater housing affordability issues in the county, rather than showing that the same people are cycling in and out of shelters and camps. – Vice
The growing number of unsheltered people in
the Zone’Bidenville’ is the second-largest encampment in the US. The first is Skid Row in the Downtown liberal paradise of Los Angeles, with an approximate stable population of around 4,200 to 8,000. Some people in skid row live like kings (read: here).Tyler Durden
Sat, 03/12/2022 – 14:00 - The Only Non-Totalitarian Solution To Resource Scarcity: Decentralized Degrowth
The Only Non-Totalitarian Solution To Resource Scarcity: Decentralized Degrowth
Authored by Charles Hugh Smith via OfTwoMinds blog,
Totalitarian-imposed-inequality is the only possible path of centralized Degrowth: 10,000 for me, one for you, unless you disobey, and then you get zero.
The fantasy is that everything will soon be super-abundant and cheap again because creating money out of thin air creates demand out of thin air and supply will always magically appear if there is demand. The reality is super-abundant and cheap is gone for good. Demand doesn’t create new supply by magic; if the supply is gone, then demand has no magical power to conjure supply out of thin air.
The other fantasy is that there will always be a cheap substitute for whatever’s been depleted. If the oil is depleted in one place, there’s still plenty to extract in Timbukthree. Or we’ll replace oil with electricity generated by high-tech paint on our roofs, and we’ll replace all those thousands of giant airliners using jet fuel with little, slow electric aircraft–nothing will change except we’ll continue to have more of everything.
The reality is the current global economy is a Landfill Economy that glorifies waste as growth. The faster shoddy goods fail and are taken to the Landfill and replaced with a new one, the higher our “growth.” The greater the waste, friction and fraud, the greater the “growth.”
There is an sane alternative to this insanity. It’s called Degrowth. Degrowth is the English translation of decroissance, a French word coined in 1976 to describe a philosophy that has expanded into a global movement from 1977 to the present. The root meaning is decline, which refers to both the economy and the state. The core thesis of my new book and the degrowth movement is the global economy based on permanent expansion of consumption is unsustainable due to physical and cost limits: infinite growth on a finite planet is not possible.
The problem is the current global economic system is optimized for permanent expansion, as the consensus holds that without permanent expansion, the world will fall into the abyss of depression and the conflicts that arise from widespread economic hardship.
What the consensus conveniently ignores is the world has changed in the past 90 years of fast-rising consumption. The human population was much smaller in 1930 and per capita consumption was a fraction of current consumption of energy and resources. Recoverable resources are no longer abundant, and humanity’s vast consumption of hydrocarbons has had planetary consequences.
The degrowth movement holds that this obsession with permanent growth is not just unrealistic, it is destructive to society, as every aspect of everyday life has been oriented to the goal of expanding consumption. This tyranny of growth has distilled all of human endeavor into measures of growth such as Gross Domestic Product (GDP) while ignoring the costs and risks of this absurd tyranny of infinite growth or we all die.
In practical terms, Degrowth means:
1) Doing more–much more–with much less by eliminating unproductive waste, friction, fraud and speculative skimming
2) Incentivizing radically improving efficiencies and productivity: doing more with less capital, resources and labor
3) Decentralizing capital and agency down to local levels of problem-solving and production of essentials
4) Eliminating the :Landfill Economy of shoddy goods and services and planned obsolescence
5) Deglobalizing and definancializing our economy and our daily lives to improve adaptability, flexibility and innovation in service not of highly concentrated wealth in the hands of the few but of the well-being of the many.
The billionaire’s toadies in the World Economic Forum (WEF) have promoted a centralized, totalitarian version of Degrowth that leaves the wealth and power in the hands of the few while imprisoning the rest of us in a new-fangled Gulag. It’s called The Great Reset. The glossy The Great Reset PR is a packaged set of superficial happy stories about climate change, the 4th Industrial Revolution, blah blah blah which studiously avoids mentioning the most important feature of The Great Reset:
The billionaires get to enjoy their $100 million yachts, private jets and heavily guarded compounds while the rest of us toil as serfs on the plantations of the wealthiest few. The The Great Reset PR tagline is “You’ll own nothing and be a happy serf!” or something like that.
As for serfs who try to escape the plantation–no bread for you. The core of The Great Reset is a system of social control and punishment that would make totalitarian dictators everywhere weep with envy.
Totalitarian imposed inequality is the only possible path of centralized Degrowth: 10,000 for me, one for you, unless you disobey, and then you get zero.
The alternative is decentralized Degrowth that resets the system’s incentives from waste, friction, fraud and the dominance of centralized inequality to a locally controlled sustainability. I’ve prepared a roadmap to such a system. Maybe somebody else has a better one, but we have to start somewhere. Here’s mine: Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States. You don’t have to buy the book; the first section is free.
There is a solution that works for everyone except those with the $100 million yachts, jets and compounds and their WEF toadies: decentralized degrowth. Maybe the billionaires will have to squander fewer resources and the WEF toadies will have to learn to do something other than kiss billionaire’s derrieres. Oh, boo-hoo. How cruel and awful that the rest of us might actually have a say and some capital.
Charles Hugh Smith on The Great Reset Agenda (42 minutes, with Richard Bonugli)
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My new book is now available at a 10% discount this month: Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $8.95, print $20). If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.
Tyler Durden
Sat, 03/12/2022 – 13:30 - Israeli PM Bennett Pushed Zelensky To "Surrender" To Russia: Ukraine Official
Israeli PM Bennett Pushed Zelensky To “Surrender” To Russia: Ukraine Official
Submitted by Blue Apples
Almost without fail, diplomatic efforts diffusing conflicts that the Prime Minister of Israel becomes involved in center around the resurgence of hostilities in the West Bank or Gaza Strip. However, the Ukraine-Russia conflict has become center stage for the highest profile diplomatic engagement of the post-Netanyahu era thus far.
Israeli Prime Minister Naftali Bennett surprised the international community last week when it was revealed that he had taken an clandestine trip to Moscow in order to meet with Russian President Vladimir Putin in an apparent peacemaking effort. According to sources, Bennett had apprised Ukrainian President Volodymyr Zelesky and French President Emmanuel Macron of his trip to Moscow before it had become public knowledge. After 3 hours of deliberations in the Kremlin, Bennett then traveled to Germany to meet with Chancellor Olaf Scholz to discuss the outbreak of the Russia-Ukraine war among other issues.
Bennett’s coincided with on-going ceasefire talks between Russian and Ukrainian officials in the last couple of weeks. The confluence of those diplomatic engagements resulted in the first tangible offer from Russia to conclude the conflict when Kremlin spokesperson Dmitry Peskov declared that Putin offered to end the war if Ukraine if they fulfilled 4 conditions. According to Peskov, the terms offered by Putin were
- the end of any military action against Russia,
- recognition of Crimea as Russian territory,
- the acknowledgement of the sovereignty of the Luhansk and Donetsk people’s republics, and
- amending Ukraine’s constitution to solidify their standing as a neutral state serving as a buffer between Russia and NATO member states in eastern Europe.
Ukraine and the international community balked at Putin’s supposed olive branch, citing the enormous secession of territory to Russia as being unfathomable. In the days of continued bloodshed since the initial peace terms were put on the table, Bennett has surprisingly departed from the sentiment echoed by that international response. According to the Times of Israel, the Jerusalem Post and Ukrainian sources, the Israeli Prime Minister spoke with Zelensky again on Tuesday and advised the Ukrainian President to agree to the terms offered by Putin. The Prime Minister’s Office denied the claim.
Sources breaking this news from Ukraine stated that Bennett initiated the phone call with Zelensky in which he pleaded for him, saying “If I were you, would think about the lives of my people and take the offer.”
Zelensky did not take well to the proposal, responding with a brief “I hear you.” Ukrainian officials offered no other immediate insight into what Zelensky said to Bennett. Zelensky and his inner circle characterized Bennett’s advice as directing Ukraine to surrender, to which they all resoundingly agreed would not happen. Those same officials believe that Putin’s terms were just the first step toward his greater ambitions to seize more territory from Ukraine.
Prime Minister Naftali Bennett poses for a picture at the Prime Minister’s Office in Jerusalem, on January 26, 2022; Ukrainian President Volodymyr Zelensky addresses the nation in Kyiv, Ukraine, on February 24, 2022. “Bennett has proposed that we surrender,” the senior Ukrainian official tells the Hebrew news sites. “We have no intention of doing so. We know that Putin’s proposal is just the beginning.”
The report says that Israel has also asked that Ukraine cease its requests for Israeli military or defense assistance, as this could hinder Jerusalem’s efforts to mediate and maintain neutrality.
Bennett’s call to Zelensky marks a departure from the previously amicable relationship between the leaders. Following the suggestion of the Israeli Prime Minister, Ukrainian officials changed their tone to go on the offensive against Bennett by criticizing his role as a mediator. “We don’t need a mailbox,” said one official. “We have enough of those. If Bennett wants to be neutral and mediate, we would expect to see him appoint someone to work on it day and night and try to get a compromise.”
The fallout between Bennett and Zelensky comes on the heels of a meeting between Ukrainian Ambassador to Israel Yvgeni Kornichuk and Knesset Chairman Mickey Levi scheduled for next Tuesday. The crux of their meeting is to agree to a speech to the Knesset from Zelensky to be conducted virtually in the same manner he recently addressed the US Senate. Israel is the first state that Ukraine has engaged with in the interest of diplomacy with Russia that hasn’t wholly echoed the sentiments held by NATO member states. Given the integral importance of Israel on the global stage, their position certainly advances Russia’s efforts to conclude the war on their terms. This unforeseen development comes at a particularly perilous time when Russia has been overtaken by a stranglehold of sanctions imposed by western states.
In response, Russia had looked eastward to China and India, among others, to forge closer ties in an effort to mitigate the impact of those sanctions. Surprisingly, Israel has entered into that fold following Bennett’s most recent discussion with Zelensky in a manner that evidently took the Ukrainian President by complete surprise. Zelensky likely isn’t alone with that reaction, as Israeli’s position certainly marks a watershed moment in which the Ukraine-allied axis is forced to adjust its calculus as it is confronted with a reality in which support for Russia is greater than previously expected.
Tyler Durden
Sat, 03/12/2022 – 13:09
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