Today’s News 13th September 2022

• The Specter Of Germany Is Rising
  The Specter Of Germany Is Rising

  Authored by Diana Johnstone via ConsortiumNews.com,

  The European Union is girding for a long war against Russia that appears clearly contrary to European economic interests and social stability. A war that is apparently irrational – as many are – has deep emotional roots and claims ideological justification. Such wars are hard to end because they extend outside the range of rationality.

  

  Olaf Scholz, Federal Chancellor of Germany, meets Volodymyr Zelenskyy, President of Ukraine, in Kiev, Feb. 14, 2022. (President of Ukraine)

  For decades after the Soviet Union entered Berlin and decisively defeated the Third Reich, Soviet leaders worried about the threat of “German revanchism.” Since World War II could be seen as German revenge for being deprived of victory in World War I, couldn’t aggressive German Drang nach Osten be revived, especially if it enjoyed Anglo-American support? There had always been a minority in U.S. and U.K. power circles that would have liked to complete Hitler’s war against the Soviet Union.

  It was not the desire to spread communism, but the need for a buffer zone to stand in the way of such dangers that was the primary motivation for the ongoing Soviet political and military clampdown on the tier of countries from Poland to Bulgaria that the Red Army had wrested from Nazi occupation.

  This concern waned considerably in the early 1980s as a young German generation took to the streets in peace demonstrations against the stationing of nuclear “Euromissiles” which could increase the risk of nuclear war on German soil. The movement created the image of a new peaceful Germany. I believe that Mikhail Gorbachev took this transformation seriously.

  On June 15, 1989, Gorbachev came to Bonn, which was then the modest capital of a deceptively modest West Germany. Apparently delighted with the warm and friendly welcome, Gorbachev stopped to shake hands with people along the way in that peaceful university town that had been the scene of large peace demonstrations.

  I was there and experienced his unusually warm, firm handshake and eager smile. I have no doubt that Gorbachev sincerely believed in a “common European home” where East and West Europe could live happily side by side united by some sort of democratic socialism.

  

  Gorbachov on June 13, 1989 in the market-square in Bonn. (Jüppsche/Wikimedia Commons)

  Gorbachev died at age 91 two weeks ago, on Aug. 30. His dream of Russia and Germany living happily in their “common European home” had soon been fatally undermined by the Clinton administration’s go-ahead to eastward expansion of NATO. But the day before Gorbachev’s death, leading German politicians in Prague wiped out any hope of such a happy end by proclaiming their leadership of a Europe dedicated to combating the Russian enemy.

  These were politicians from the very parties – the SPD (Social Democratic Party) and the Greens – that took the lead in the 1980s peace movement.

  German Europe Must Expand Eastward

  German Chancellor Olaf Scholz is a colorless SPD politician, but his Aug. 29 speech in Prague was inflammatory in its implications. Scholz called for an expanded, militarized European Union under German leadership. He claimed that the Russian operation in Ukraine raised the question of “where the dividing line will be in the future between this free Europe and a neo-imperial autocracy.” We cannot simply watch, he said, “as free countries are wiped off the map and disappear behind walls or iron curtains.”

  (Note: the conflict in Ukraine is clearly the unfinished business of the collapse of the Soviet Union, aggravated by malicious outside provocation. As in the Cold War, Moscow’s defensive reactions are interpreted as harbingers of Russian invasion of Europe, and thus a pretext for arms buildups.)

  To meet this imaginary threat, Germany will lead an expanded, militarized EU. First, Scholz told his European audience in the Czech capital, “I am committed to the enlargement of the European Union to include the states of the Western Balkans, Ukraine, Moldova and, in the long term, Georgia”. Worrying about Russia moving the dividing line West is a bit odd while planning to incorporate three former Soviet States, one of which (Georgia) is geographically and culturally very remote from Europe but on Russia’s doorstep.

  In the “Western Balkans”, Albania and four extremely weak statelets left from former Yugoslavia (North Macedonia, Montenegro, Bosnia-Herzegovina and widely unrecognized Kosovo) mainly produce emigrants and are far from EU economic and social standards. Kosovo and Bosnia are militarily occupied de facto NATO protectorates. Serbia, more solid than the others, shows no signs of renouncing its beneficial relations with Russia and China, and popular enthusiasm for “Europe” among Serbs has faded.

  Adding these member states will achieve “a stronger, more sovereign, geopolitical European Union,” said Scholz. A “more geopolitical Germany” is more like it. As the EU grows eastward, Germany is “in the center” and will do everything to bring them all together. So, in addition to enlargement, Scholz calls for “a gradual shift to majority decisions in common foreign policy” to replace the unanimity required today.

  What this means should be obvious to the French. Historically, the French have defended the consensus rule so as not to be dragged into a foreign policy they don’t want. French leaders have exalted the mythical “Franco-German couple” as guarantor of European harmony, mainly to keep German ambitions under control.

  But Scholz says he doesn’t want “an EU of exclusive states or directorates,” which implies the final divorce of that “couple.” With an EU of 30 or 36 states, he notes, “fast and pragmatic action is needed.” And he can be sure that German influence on most of these poor, indebted and often corrupt new Member States will produce the needed majority.

  France has always hoped for an EU security force separate from NATO in which the French military would play a leading role. But Germany has other ideas. “NATO remains the guarantor of our security,” said Scholz, rejoicing that President Biden is “a convinced trans-atlanticist.”

  “Every improvement, every unification of European defense structures within the EU framework strengthens NATO,” Scholz said. “Together with other EU partners, Germany will therefore ensure that the EU’s planned rapid reaction force is operational in 2025 and will then also provide its core.

  This requires a clear command structure. Germany will face up to this responsibility “when we lead the rapid reaction force in 2025,” Scholz said. It has already been decided that Germany will support Lithuania with a rapidly deployable brigade and NATO with further forces in a high state of readiness.

  Serving to Lead … Where?

  

  Robert Habeck speaking at protest before Green Party headquarters, Berlin, Oct. 28, 2020. (Leonhard Lenz/Wikimedia Commons)

  In short, Germany’s military buildup will give substance to Robert Habeck’s notorious statement in Washington last March that: “The stronger Germany serves, the greater its role.” The Green’s Habeck is Germany’s economics minister and the second most powerful figure in Germany’s current government.

  The remark was well understood in Washington: by serving the U.S.-led Western empire, Germany is strengthening its role as European leader. Just as the U.S. arms, trains and occupies Germany, Germany will provide the same services for smaller EU states, notably to its east.

  Since the start of the Russian operation in Ukraine, German politician Ursula von der Leyen has used her position as head of the EU Commission to impose ever more drastic sanctions on Russia, leading to the threat of a serious European energy crisis this winter. Her hostility to Russia seems boundless. In Kiev last April she called for rapid EU membership for Ukraine, notoriously the most corrupt country in Europe and far from meeting EU standards. She proclaimed that “Russia will descend into economic, financial and technological decay, while Ukraine is marching towards a European future.” For von der Leyen, Ukraine is “fighting our war.” All of this goes far beyond her authority to speak for the EU’s 27 Members, but nobody stops her.

  Germany’s Green Party foreign minister Annalena Baerbock is every bit as intent on “ruining Russia.” Proponent of a “feminist foreign policy”, Baerbock expresses policy in personal terms. “If I give the promise to people in Ukraine, we stand with you as long as you need us,” she told the U.S. National Endowment for Democracy (NED)-sponsored Forum 2000 in Prague on Aug. 31, speaking in English. “Then I want to deliver no matter what my German voters think, but I want to deliver to the people of Ukraine.”

  “People will go on the street and say, we cannot pay our energy prices, and I will say, ‘Yes I know so we will help you with social measures. […] We will stand with Ukraine and this means the sanctions will stay also til winter time even if it gets really tough for politicians.’”

  Certainly, support for Ukraine is strong in Germany, but perhaps because of the looming energy shortage, a recent Forsa poll indicates that some 77 percent of Germans would favor diplomatic efforts to end the war – which should be the business of the foreign minister. But Baerbock shows no interest in diplomacy, only in “strategic failure” for Russia – however long it takes.

  In the 1980s peace movement, a generation of Germans was distancing itself from that of their parents and vowed to overcome “enemy images” inherited from past wars. Curiously, Baerbock, born in 1980, has referred to her grandfather who fought in the Wehrmacht as somehow having contributed to European unity. Is this the generational pendulum?

  The Little Revanchists

  

  Stepan Bandera torchlight parade in Kiev, Jan. 1, 2020. (A1/Wikimedia Commons)

  There is reason to surmise that current German Russophobia draws much of its legitimization from the Russophobia of former Nazi allies in smaller European countries.

  While German anti-Russian revanchism may have taken a couple of generations to assert itself, there were a number of smaller, more obscure revanchisms that flourished at the end of the European war that were incorporated into United States Cold War operations. Those little revanchisms were not subjected to the denazification gestures or Holocaust guilt imposed on Germany. Rather, they were welcomed by the C.I.A., Radio Free Europe and Congressional committees for their fervent anticommunism. They were strengthened politically in the United States by anticommunist diasporas from Eastern Europe.

  Of these, the Ukrainian diaspora was surely the largest, the most intensely political and the most influential, in both Canada and the American Middle West. Ukrainian fascists who had previously collaborated with Nazi invaders were the most numerous and active, leading the Bloc of Anti-Bolshevik Nations with links to German, British and U.S. Intelligence.

  Eastern European Galicia, not to be confused with Spanish Galicia, has been back and forth part of Russia and Poland for centuries. After World War II it was divided between Poland and Ukraine. Ukrainian Galicia is the center of a virulent brand of Ukrainian nationalism, whose principal World War II hero was Stepan Bandera. This nationalism can properly be called “fascist” not simply because of superficial signs – its symbols, salutes or tatoos – but because it has always been fundamentally racist and violent.

  Incited by Western powers, Poland, Lithuania and the Habsburg Empire, the key to Ukrainian nationalism was that it was Western, and thus superior. Since Ukrainians and Russians stem from the same population, pro-Western Ukrainian ultra-nationalism was built on imaginary myths of racial differences: Ukrainians were the true Western whatever-it-was, whereas Russians were mixed with “Mongols” and thus an inferior race. Banderist Ukrainian nationalists have openly called for elimination of Russians as such, as inferior beings.

  So long as the Soviet Union existed, Ukrainian racial hatred of Russians had anticommunism as its cover, and Western intelligence agencies could support them on the “pure” ideological grounds of the fight against Bolshevism and Communism. But now that Russia is no longer ruled by communists, the mask has fallen, and the racist nature of Ukrainian ultra-nationalism is visible – for all who want to see it.

  However, Western leaders and media are determined not to notice.

  Ukraine is not just like any Western country. It is deeply and dramatically divided between Donbass in the East, Russian territories given to Ukraine by the Soviet Union, and the anti-Russian West, where Galacia is located. Russia’s defense of Donbass, wise or unwise, by no means indicates a Russian intention to invade other countries. This false alarm is the pretext for the remilitarization of Germany in alliance with the Anglo-Saxon powers against Russia.

  The Yugoslav Prelude

  

  Cutting firewood in Sarajevo during wars that broke up Yugoslavia, 1993. (Christian Maréchal/Wikimedia Commons)

  This process began in the 1990s, with the breakup of Yugoslavia.

  Yugoslavia was not a member of the Soviet bloc. Precisely for that reason, the country got loans from the West which in the 1970s led to a debt crisis in which the leaders of each of the six federated republics wanted to shove the debt onto others. This favored separatist tendencies in the relatively rich Slovenian and Croatian republics, tendencies enforced by ethnic chauvinism and encouragement from outside powers, especially Germany.

  During World War II, German occupation had split the country apart. Serbia, allied to France and Britain in World War I, was subject to a punishing occupation. Idyllic Slovenia was absorbed into the Third Reich, while Germany supported an independent Croatia, ruled by the fascist Ustasha party, which included most of Bosnia, scene of the bloodiest internal fighting. When the war ended, many Croatian Ustasha emigrated to Germany, the United States and Canada, never giving up the hope of reviving secessionist Croatian nationalism.

  In Washington in the 1990s, members of Congress got their impressions of Yugoslavia from a single expert: 35-year-old Croatian-American Mira Baratta, assistant to Sen. Bob Dole (Republican presidential candidate in 1996). Baratta’s grandfather had been an important Ustasha officer in Bosnia and her father was active in the Croatian diaspora in California. Baratta won over not only Dole but virtually the whole Congress to the Croatian version of Yugoslav conflicts blaming everything on the Serbs.

  In Europe, Germans and Austrians, most notably Otto von Habsburg, heir to the defunct Austro-Hungarian Empire and member of the European Parliament from Bavaria, succeeded in portraying Serbs as the villains, thus achieving an effective revenge against their historic World War I enemy, Serbia. In the West, it became usual to identify Serbia as “Russia’s historic ally”, forgetting that in recent history Serbia’s closest allies were Britain and especially France.

  In September 1991, a leading German Christian Democratic politician and constitutional lawyer explained why Germany should promote the breakup of Yugoslavia by recognizing the Slovenian and Croat secessionist Yugoslav republics. (Former CDU Minister of Defense Rupert Scholz at the 6th Fürstenfeldbrucker Symposium for the Leadership of the German Military and Business, held September 23 – 24, 1991.)

  By ending the division of Germany, Rupert Scholz said, “We have, so to speak, overcome and mastered the most important consequences of the Second World War … but in other areas we are still dealing with the consequences of the First World War” – which, he noted “started in Serbia.”

  “Yugoslavia, as a consequence of the First World War, is a very artificial construction, never compatible with the idea of self-determination,” Rupert Scholz said. He concluded: “In my opinion, Slovenia and Croatia must be immediately recognized internationally. (…) When this recognition has taken place, the Yugoslavian conflict will no longer be a domestic Yugoslav problem, where no international intervention can be permitted.”

  And indeed, recognition was followed by massive Western intervention which continues to this day. By taking sides, Germany, the United States and NATO ultimately produced a disastrous result, a half dozen statelets, with many unsettled issues and heavily dependent on Western powers. Bosnia-Herzegovina is under military occupation as well as the dictates of a “High Representative” who happens to be German. It has lost about half its population to emigration.

  Only Serbia shows signs of independence, refusing to join in Western sanctions on Russia, despite heavy pressure. For Washington strategists the breakup of Yugoslavia was an exercise in using ethnic divisions to break up larger entities, the USSR and then Russia.

  Humanitarian Bombing

  Western politicians and media persuaded the public that the 1999 NATO bombing of Serbia was a “humanitarian” war, generously waged to “protect the Kosovars” (after multiple assassinations by armed secessionists provoked Serbian authorities into the inevitable repression used as pretext for the bombing).

  But the real point of the Kosovo war was that it transformed NATO from a defensive into an aggressive alliance, ready to wage war anywhere, without U.N. mandate, on whatever pretext it chose.

  This lesson was clear to the Russians. After the Kosovo war, NATO could no longer credibly claim that it was a purely “defensive” alliance.

  As soon as Serbian President Milosevic, to save his country’s infrastructure from NATO destruction, agreed to allow NATO troops to enter Kosovo, the U.S. unceremoniously grabbed a huge swath territory to build the its first big U.S. military base in the Balkans. NATO troops are still there.

  Just as the United States rushed to build that base in Kosovo, it was clear what to expect of the U.S. after it succeeded in 2014 to install a government in Kiev eager to join NATO. This would be the opportunity for the U.S. to take over the Russian naval base in Crimea. Since it was known that the majority of the population in Crimea wanted to return to Russia (as it had from 1783 to 1954), Putin was able to forestall this threat by holding a popular referendum confirming its return.

  East European Revanchism Captures the EU

  The call by German Chancellor Scholz to enlarge the European Union by up to nine new members recalls the enlargements of 2004 and 2007 that brought in twelve new members, nine of them from the former Soviet bloc, including the three Baltic States once part of the Soviet Union.

  That enlargement already shifted the balance eastward and enhanced German influence. In particular, the political elites of Poland and especially the three Baltic States, were heavily under the influence of the United States and Britain, where many had lived in exile during Soviet rule. They brought into EU institutions a new wave of fanatic anticommunism, not always distinguishable from Russophobia.

  The European Parliament, obsessed with virtue signaling in regard to human rights, was particularly receptive to the zealous anti-totalitarianism of its new Eastern European members.

  

   European Parliament in Strasbourg, France. (UN Photo/Eskinder Debebe)

  Revanchism and the Memory Weapon

  As an aspect of anti-communist lustration, or purges, Eastern European States sponsored “Memory Institutes” devoted to denouncing the crimes of communism. Of course, such campaigns were used by far-right politicians to cast suspicion on the left in general. As explained by European scholar Zoltan Dujisin, “anticommunist memory entrepreneurs” at the head of these institutes succeeded in lifting their public information activities from the national, to the European Union level, using Western bans on Holocaust denial to complain, that while Nazi crimes had been condemned and punished at Nuremberg, communist crimes had not.

  The tactic of the anti-communist entrepreneurs was to demand that references to the Holocaust be accompanied by denunciations of the Gulag. This campaign had to deal with a delicate contradiction since it tended to challenge the uniqueness of the Holocaust, a dogma essential to gaining financial and political support from West European memory institutes.

  In 2008, the EP adopted a resolution establishing August 23 as “European Day of Remembrance for the victims of Stalinism and Nazism” – for the first time adopting what had been a fairly isolated far right equation of. A 2009 EP resolution on “European Conscience and Totalitarianism” called for support of national institutes specializing in totalitarian history.

  Dujisin explains, “Europe is now haunted by the specter of a new memory. The Holocaust’s singular standing as a negative founding formula of European integration, the culmination of long-standing efforts from prominent Western leaders … is increasingly challenged by a memory of communism, which disputes its uniqueness.”

  East European memory institutes together formed the “Platform of European Memory and Conscience,” which between 2012 and 2016 organized a series of exhibits on “Totalitarianism in Europe: Fascism—Nazism—Communism,” traveling to museums, memorials, foundations, city halls, parliaments, cultural centers, and universities in 15 European countries, supposedly to “improve public awareness and education about the gravest crimes committed by the totalitarian dictatorships.”

  Under this influence, the European Parliament on Sept. 19, 2019 adopted a resolution “on the importance of European Remembrance for the Future of Europe” that went far beyond equating political crimes by proclaiming a distinctly Polish interpretation of history as European Union policy. It goes so far as to proclaim that the Molotov-Ribbentrop pact is responsible for World War II – and thus Soviet Russia is as guilty of the war as Nazi Germany.

  The resolution,

  “Stresses that the Second World War, the most devastating war in Europe’s history, was started as an immediate result of the notorious Nazi-Soviet Treaty on Non-Aggression of 23 August 1939, also known as the Molotov-Ribbentrop Pact, and its secret protocols, whereby two totalitarian regimes that shared the goal of world conquest divided Europe into two zones of influence;”

  It further:

  “Recalls that the Nazi and communist regimes carried out mass murders, genocide and deportations and caused a loss of life and freedom in the 20th century on a scale unseen in human history, and recalls the horrific crime of the Holocaust perpetrated by the Nazi regime; condemns in the strongest terms the acts of aggression, crimes against humanity and mass human rights violations perpetrated by the Nazi, communist and other totalitarian regimes;”

  This of course not only directly contradicts the Russian celebration of the “Great Patriotic War” to defeat the Nazi invasion, it also took issue with the recent efforts of Russian President Vladimir Putin to put the Molotov-Ribbentrop agreement in the context of prior refusals of Eastern European states, notably Poland, to ally with Moscow against Hitler.

  But the EP resolution:

  “Is deeply concerned about the efforts of the current Russian leadership to distort historical facts and whitewash crimes committed by the Soviet totalitarian regime and considers them a dangerous component of the information war waged against democratic Europe that aims to divide Europe, and therefore calls on the Commission to decisively counteract these efforts;”

  Thus the importance of Memory for the future, turns out to be an ideological declaration of war against Russia based on interpretations of World War II, especially since the memory entrepreneurs implicitly suggest that the past crimes of communism deserve punishment – like the crimes of Nazism. It is not impossible that this line of thought arouses some tacit satisfaction among certain individuals in Germany.

  When Western leaders speak of “economic war against Russia,” or “ruining Russia” by arming and supporting Ukraine, one wonders whether they are consciously preparing World War III, or trying to provide a new ending to World War II. Or will the two merge?

  As it shapes up, with NATO openly trying to “overextend” and thus defeat Russia with a war of attrition in Ukraine, it is somewhat as if Britain and the United States, some 80 years later, switched sides and joined German-dominated Europe to wage war against Russia, alongside the heirs to Eastern European anticommunism, some of whom were allied to Nazi Germany.

  History may help understand events, but the cult of memory easily becomes the cult of revenge. Revenge is a circle with no end. It uses the past to kill the future. Europe needs clear heads looking to the future, able to understand the present.

  Tyler Durden
  Tue, 09/13/2022 – 02:00

• Bear Traps' Highest Conviction Trade: A Perfect Storm Is About To Hammer The Dollar
  Bear Traps’ Highest Conviction Trade: A Perfect Storm Is About To Hammer The Dollar

  At a time when Wall Street is stuck in a furious debate with itself whether or not the Fed will pivot because inflation this or that, we recently proposed on Sept 1 an alternative theory: the coming Fed pivot will come not because an “inflation target has been hit” (it won’t be for quite a while, especially since US unemployment will need to rise by over 4 million to contain inflation, a political unpalatable outcome), but because the dollar is soaring, and recently hit almost daily all time highs. As such we suggested that the Fed pivot will come not because of inflation but due to “devastation across the ROW.”

  BBG dollar index 1300, back over covid panic highs, and new record as dollar margin call sweeps emerging markets. Pivot will not come from “inflation target is hit” but from devastation across ROW pic.twitter.com/C3h15bko0B

  — zerohedge (@zerohedge) September 1, 2022

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  Over a week later, we were surprised that someone even as patently clueless as Paul “fax machine” Krugman had figured out that the multi-trillion global dollar short squeeze is having catastrophic consequences on the rest of the world, when he wrote that “whatever the reasons, however, it’s clear that the strong dollar is inflicting a lot of pain on economies around the world. Once again, it’s our currency but their problem. Should this influence policy?“

  Claudia Sahm, a former Fed economist (inventor of the famous Sahm Rule recession indicator), has been a strong critic of the Fed’s hard line on inflation and more recently has been arguing passionately that the Fed has a responsibility to consider the damage its policies are inflicting on the rest of the world. She has a point. Unfortunately, I don’t think the Fed will listen — yet.

  But…

  Federal Reserve officials are still deeply worried about the possibility that high inflation will get entrenched in the U.S. economy, and that concern will dominate everything else until there are clear signs that underlying inflation is coming down. Once the Fed feels that it has some breathing room, however, it should start taking international repercussions into account. The dollar may be other countries’ problem, but even a purely self-interested America needs to live in the world our policies help shape.

  Of course, the growing USD-bearish consensus is hardly news to Zero Hedge readers who knew more than two weeks ago that according to Michael Hartnett, the most accurate Wall Street analyst of 2022 by far, the top trade of 2023 will be to short the dollar, while going long the inverse trade, EMs:

  The Trade of 2023: it’s “short US dollar, long Emerging Markets”… but only after the US recession starts (which will mark peak US$) and China troughs (likely after the coming China currency devaluation).

  All of which brings us to the latest Bear Traps note by Larry McDonald, who not only echoes everything we have previously said about the Fed’s coming funding squeeze (see “The Fed Is Quietly Paying $250 Million To A Handful Of Happy Banks Every Single Day” from July 1) but puts the coming dollars crisis in stark contrast.

  Here is how Larry explains it:

  After the Great Financial Crisis – regulators wanted to make sure the U.S. financial system would never again succumb to the double-edged sword of excess leverage. Regulators forced U.S. banks to “reserve up” and so – for the last 14 years – Wall Street’s financial epicenter stored an ever-enormous dollar number of reserves – mostly found in U.S. Treasuries.

  Today, as promised the Fed must pay these banks MORE and MORE interest on these reserves. As the central bank hikes rates – the unintended consequences are MOUNTING along with a political backlash – potentially louder than a Donald Trump appearance on “The View.”

  This time next year, the Federal Government is looking at a near $400B negative swing;

  • a) from profit to a loss on the Fed’s transfer of net interest income – triggered by a surge in interest payments to banks on reserves,
  • b) plus $200B additional interest on their $31T debt load.

  Dollar headwinds are mounting from; emerging market credit risk, China currency devaluation, the Eurozone energy crisis, a weaker U.S. consumer (see Capital One CDS), and one-year inflation expectations crashing at the fastest pace since the fall of Lehman Brothers.

  Sit back, think of taking the Fed Funds rate from 25bps in March to 325bps this month, that’s three years of accommodation withdrawal in just six months. The price has yet to be paid for this violent right hook. A freshman-year economist can tell you it will take 12-24 months for the full effects to play out.

  Now think of great films. Anyone that ́s ever seen the Hollywood classics in “Top Gun” knows how “Maverick” plays the game. Take extreme chances and push your next move as close to recklessness as possible – make the other-side believe there are no limits to your unpredictable path – when you know in your heart of hearts there are.

  Running, not walking while blind in the dark. This is Powell ́s dangerous dollar–rates game.

  Make NO mistake, the Fed knows what they don’t know. It’s time to get real. No academic on this planet can calculate the 12–24-month forward outcome of 300-450bps of rate hikes and $1T of QT – all delivered in less time than a “Hamilton” intermission on Broadway.

  The whole lot has been tossed on a massively levered global financial system. They have very publicly sold investors on a path littered with incalculable risks with their pawns delivering weekly golf claps along the way.

  After all the drama, genesis knocked on the door early Wednesday morning after breakfast. The truth is starting to come out. “Fed’s Brainard: There’s a risk of raising rates too much” – said Axios.

  Let’s be clear, the S&P 500 is up nearly 4% since Lael started to acknowledge two-sided economic risks of a “global nature…. risks with overtightening.” Gold miners are 8-10% higher since the speech.

  When stocks rally like this into a tape filled with really bad news, there is almost always a central banker behind the move. As much as “Maverick” shows off his dance with darkness, the political will to kill inflation just isn’t there.

  Here we agree 100%: in fact this was our (rare) criticism of Zoltan Pozsar’s August note “War and Interest Rates“, in which the Hungarian predicted that Powell will pull a Volcker and push rates into the stratosphere. We countered that there is no way this will happen, since the tradeoff would be a crushing recession and millions unemployed as even Obama’s chief economist Jason Furman admitted late last week. In fact, with inflation now trending back down, we expect the Fed to pivot very soon, a move which will reverberate across commodities and send prices truly exponentially higher… but not for a few months. Meanwhile, the dollar will be crushed as near record longs scramble to cover. And speaking of the cost of fighting runaway inflation, McDonald writes that…

  In reality, similar to the 1970s, it’s a social price just too high. As the breadth of bearishness rose, in recent weeks we covered half our shorts, and added to longs. JPM notes that after front-end rates have screamed 10x + higher, there are $15T of adjusted excess cash balances outstanding, or 16% of World GDP – highest level on record.

  Bottom line: re-read Hartnett’s “top trade of 2023” reco: it could, and most likely will be, the most profitable trade of the coming year. Not surprisingly, his top trade is identical to what McDonald sees as the best risk-reward looking out 12 months: “Our high conviction – U.S. dollar bear basket is locked and loaded – EWZ Brazil, EEM Emerging Markets, FXI – KWEB China, global value names in EWU and gold miners GDX.”

  Tyler Durden
  Mon, 09/12/2022 – 23:40

• Fuel Efficiency Tops Safety As Most Important Factor When Buying A Car
  Fuel Efficiency Tops Safety As Most Important Factor When Buying A Car

  Buying a car is for many, one of the biggest purchases they will ever make.

  There are a lot of factors to consider in choosing the right one, but which are prioritized by potential buyers in the United States?

  As Martin Armstrong details below, using data from Statista’s Global Consumer Survey, at the top of the checklist are fuel efficiency and safety (switching places since 2018).

  

  You will find more infographics at Statista

  With 56 and 55 percent, respectively, these two characteristics easily outpunch a low price, with 46 percent saying this was a top priority when shopping around.

  Even design isn’t as important as the classic TV advert might lead us to believe.

  Only 32 percent seem to be primarily concerned with the appearance of their new car. It’s substance over style for the average car buyer, with 43 percent of respondents saying they prioritize high quality, while driving comfort also ranks more highly than design.

  Tyler Durden
  Mon, 09/12/2022 – 23:20

• Armenia Requests Russian Military Assistance As Fighting Breaks Out With Azerbaijan
  Armenia Requests Russian Military Assistance As Fighting Breaks Out With Azerbaijan

  Update (2305ET): The overnight outbreak of fighting in multiple spots along the Armenian-Azerbaijan border is serious enough for Yerevan to have asked for its powerful ally Russia’s help. This has been revealed hours after Armenian Prime Minister Nikol Pashinyan held a late night telephone conversation with President Vladimir Putin. The Armenian government has since confirmed it has requested Russian military assistance to repel Azerbaijan aggression and shelling, according to a statement (machine translation):

  “During the meeting, further steps were discussed to counter the aggressive actions of Azerbaijan against the sovereign territory of Armenia that began at midnight. In connection with the aggression against the sovereign territory of the Republic of Armenia, it was decided to officially appeal to the Russian Federation in order to implement the provisions of the Treaty of Friendship, Cooperation and Mutual Assistance, as well as to the Collective Security Treaty Organization and the UN Security Council. 

  Armenia is basing the request on the Collective Security Treaty Organization pact it has with Russia, and under which Russia previously sent peacekeeping forces to Nagorno-Karabakh after the Fall 2020 conflict. 

  Independent geopolitical analyst and Russia watcher Clint Ehrlich concludes of the hugely significant request at a time the Ukraine war is raging: “If Russia accepts, we could see a second NATO-Russia proxy war explode.”

  The Armed Forces of Azerbaijan are shelling Armenia. Local reports indicate that the residents of Jermuk, Goris and Vardenis took shelter in the basements. pic.twitter.com/p9piXkqbqB

  — Vugar Bakhshalizade (@vbakhshalizade) September 12, 2022

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  Of the earlier in the night Putin phone call, the Kremlin said via TASS: 

  “The Prime Minister gave details about the provocative, aggressive actions of the Azerbaijani Armed Forces in the direction of the sovereign territory of Armenia, which began at midnight and were accompanied by shelling from artillery and large-caliber firearms. The Prime Minister considered the actions of the Azerbaijani side unacceptable and stressed the importance of an adequate response from the international community.”

  However, it should be noted that during the last major flare-up in fighting between the two longtime rival nations which share a restive border, Moscow was careful to not get too deeply drawn in – only agreeing to help broker a ceasefire and send several hundred Russian peacekeeping forces to oversee the terms of the agreement.

  If Moscow does get pulled in, it might be seen in the West as an opportunity to “weaken” Russian forces on a separate front.

  The same day Azerbaijan launched a cross-border attack on Armenia, Azerbaijan’s Energy Minister bragged that AZ gas exports to Europe will increase by 30% this year. pic.twitter.com/KZpXuxzj6d

  — Lindsey Snell (@LindseySnell) September 12, 2022

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  Some US Congressional leaders have meanwhile spoken out and stood firmly on the side of Armenia, citing unprovoked Azerbaijan aggression.

  Azerbaijan has reportedly shelled the homes of innocent civilians in Artsakh and is now attacking Armenia’s border.

  An egregious violation of the ceasefire and direct attack on Armenia’s sovereignty.

  The U.S. must halt all assistance to Azerbaijan – immediately and permanently.

  — Adam Schiff (@RepAdamSchiff) September 13, 2022

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  * * *

  Heavy fighting has broken out between Armenia and Azerbaijan along the border shortly after midnight local time, with the ministry of defenses for both countries citing clashes at several locations. Armenia is saying its territory is coming under attack, and that intensive shelling is currently targeting Goris, Sotk and Jermuk in the east.

  Crucially there are reports of exchanges of fire beyond far beyond the contested Nagorno-Karabakh region, but shelling on Armenia proper. “Azerbaijani Armed Forces have launched military offensive against Armenian positions in Armenia proper,” writes one regional correspondent.

  Heavy artillery fire being reported from Azerbaijan towards Armenia. pic.twitter.com/q3uNO4mJHi

  — Moshe Schwartz (@YWNReporter) September 12, 2022

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  It appears the fighting has already been sustained for two hours, suggesting this could be the beginning of a broader full-scale war as tensions have simmered going back to the last war for Nagorno-Karabakh in September through November 2020.

  Arman Torosyan, spokesman for Armenia’s Defense Ministry has confirmed that “intense skirmishes are continuing following Azerbaijan’s large-scale provocation along the Armenia-Azerbaijan border.” Both sides are now charging the other with aggression and provocations. 

  The Jerusalem Post is additionally reporting that “large clashes broke out between Armenia and Azerbaijan forces along the border between the two countries on Monday night, according to Azerbaijani and Armenian Defense Ministries.”

  “Azerbaijani artillery and UAVs reportedly targeted sites in Vardenis, Goris, Sotk and Jermuk in eastern Armenia.”

  Below is the full Azerbaijan defense ministry statement:

  Statement from Azerbaijan’s defense ministry, claiming they are taking “decisive response measures” against Armenian forces.

  They claim they were attacked from inside Armenian territory – not Nagorno-Karabakh – and are now responding. Armenia reports shelling near cities. pic.twitter.com/4rjgbyjb9j

  — Gabriel Gavin (@GabrielCSGavin) September 12, 2022

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  Contesting these Azerbaijan accusations of a “sabotage” operation which were alleged to have kicked off the fresh hostilities, Armenia’s military countered with the following official statement:

  On September 13, at 00:05, units of the Azerbaijani Armed Forces began to fire intensively at the Armenian positions from artillery and large-caliber firearms in the direction of Goris, Sotk and Jermuk. The Azerbaijani Armed Forces also use UAVs.

  Complicating matters, there are still several hundred Russian peacekeeping troops in the restive Nagorno-Karabakh border region, as part of the settlement from the last round of fighting centered there.

  Azerbaijani armed forces allegedly shelling the town of Jermuk. pic.twitter.com/fAi90Sg3Ye

  — Tigran Grigoryan (@Tigartsakh) September 12, 2022

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  BREAKING:

  There are active reports of mortar use and explosions on the Armenian-Azerbaijani border. This may be a full invasion. Shots are being heard from Vardenis, Jermuk, Goris, and Tatev.

  This is NOT the contested region of Artsakh. This is Armenia proper. pic.twitter.com/DIxGEcYhrw

  — Kars Collective (@KarsCollective) September 12, 2022

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  This peacekeeping mission is now in doubt, and Russia’s major base in Armenia territory is said to be on “high alert”. 

  Tyler Durden
  Mon, 09/12/2022 – 23:05

• Life For Border Ranchers: Assaulted, Dogs Beaten, Fences Destroyed, Dead Bodies
  Life For Border Ranchers: Assaulted, Dogs Beaten, Fences Destroyed, Dead Bodies

  Authored by Charlotte Cuthbertson via The Epoch Times (emphasis ours),

  Ranchers along the south Texas border are having their livelihoods crushed by the volume of illegal aliens trampling through their properties, assaulting and threatening them, beating their dogs, cutting fences, destroying water lines, and breaking into their homes.

  

  Some have moved their families off the property for safety and ranch managers are quitting their jobs.

  One rancher has found 17 dead bodies on his property this year, and on three occasions he had his young children with him.

  “How am I supposed to explain to a young child what a dead body is doing there, rotting, just laying there?” rancher and wildlife biologist Ben Binnion said in front of the Texas Senate Committee on Border Security in Eagle Pass, Texas, on Aug. 10.

  “My kids shouldn’t have to see that, especially on private property.”

  Binnion manages about 150,000 acres of ranchland, which is mainly used for recreation hunting, 10 miles off the U.S.–Mexico border.

  

  Nine years ago, when he first moved to the Maverick County ranch, he said Border Patrol apprehended 37 illegal aliens on his property during the year. Right now, he sees an average of 200 illegal aliens per night on the cameras he’s personally set up.

  “They’re absolutely trashing our fences,” Binnion said. “​​I had to hire a full time employee who spends 40 hours a week fixing fences and picking up trash. And that’s literally all he does.”

  He said he’s added security cameras and installed hurricane shutters on the ranch houses to prevent break-ins.

  “The houses that are not secure, we have to leave unlocked because they break the windows to get in. Those houses are broken into at least once a week,” he said.

  “I’ve actually moved my wife and kids off the ranch due to safety reasons. I don’t want to put them in that danger.”

  Binnion said the financial loss is tough to estimate, but he’s looking at about $300,000 so far this year from patching the damage being done.

  “And that is simply putting a bandaid on a bullet hole. That has nothing to do with replacing anything. If we were to replace everything it’d be $800,000 plus,” he said.

  “We’re actually looking at hiring additional security for hunting season so our guests feel safer.”

  Maverick County shares 88 miles of international border with Mexico, which is divided by the winding Rio Grande. It has one of the highest rates of “gotaways”—up to 10,000 per month—of all 31 counties that border Mexico. Gotaways are recorded by Border Patrol as having been detected, but not apprehended.

  The illegal alien gotaways traversing this region are trying to evade law enforcement because they are either criminals, previously deported, or they know they won’t gain legal entry.

  Such was the case with a Colombian man being smuggled in a vehicle headed to San Antonio after he entered through Maverick County. The man, along with five other illegal aliens were stopped in Kinney County and apprehended. Once Border Patrol took the six into custody, agents discovered the Colombian is wanted for child sex offenses in the United States.

  

  ‘Completely Insane’

  The border ranchers rarely call Border Patrol for help anymore. Agents are usually too tied up processing large groups of illegal aliens to respond. The ranchers’ main lifeline now are Texas state troopers, who Gov. Greg Abbott has deployed to border areas to provide some relief from the unending streams of traffic surging across the border.

  Christopher Roswell’s family has owned property in Maverick County for several generations and he’s lived there for 26 years.

  “What I’ve witnessed over the last two years has been completely insane. Safety has become a major concern. My wife, my kids, our employees, and myself carry a pistol everywhere we go on the ranch,” he said during the hearing at Eagle Pass.

  “We have been cussed at, threatened, had rocks and sticks thrown at us. Our dogs have been beaten on multiple occasions by illegals. In the past, we have not had these issues.”

  Roswell recently moved his family off the ranch due to safety fears.

  As with many ranchers in this area of south Texas, Roswell’s main income is recreational hunting. Exotic or native game is a prized catch for some hunters and they’ll pay tens of thousands of dollars to get a shot at a home-grown trophy.

  That means ranchers rely on their high game fences to keep stock on their ranch and particularly off any highways, where they’d be liable if an animal escaped and caused injury.

  Roswell said his fence by the main highway has been “completely ruined” from being cut and driven through countless times.

  “Every hunting camp I have has been vandalized. Our headquarters have been broken into. Over half of our highway gates have been run through. We’ve had three electric gates destroyed. Most of my hunting blinds have been vandalized, windows and doors broken, one set on fire, several used as bathrooms,” Roswell said. All of the illegal aliens carry knives and travel in groups.

  “For the first time, I’ve received phone calls asking if it’s safe to come hunt. We’ve had countless hunts ruined by illegals. Our hunters have been threatened by illegals. My livelihood is being threatened.

  “It’s not just the damages that we have to deal with, it’s also the abuses of the human trafficking. In the last year, we have found six dead illegals that I’m aware of. I have helped women and men who have been beaten, raped, and abandoned by their groups.

  “This past winter, we found a little girl, she was 8 years old. She had been lost for three days all by herself because her group left her.”

  Roswell urges people to think about the same thing happening to their own property and their own backyards and gardens.

  “And then imagine your kids or your grandkids playing in those yards. Because that’s what we’re living through every single week,” he said.

  “We’ve had our ranch truck stolen. The amount of trash on the property is completely disgusting. We have tons and tons of backpacks and bottles and trash bags. Probably about 200,000 gallons of fresh water has just been wasted and poured out onto the ground.

  “All of these damages in two years time have added up to a little over $200,000. And that’s without us building any new fence. Why should I incur this cost?”

  

  Organics on Hold

  Ruben Garibay bought some land and moved to Maverick County to start an organic farming operation. In 2019 he started clearing and preparing the land for his crops.

  But at the beginning of 2021, when he was ready to get things underway, the border crisis hit and he couldn’t plant anything.

  “We have yet to be able to start it because of all the trampling already in the fields. As some of you may know, in organic farming, any kind of contamination deems the crop completely useless and you’ve got to destroy it within a 10-foot radius of any footprint, animal, anything that comes in,” he said.

  “So although we have high fences—not to keep exotic game in, but to keep any kind of traffic or animals out—they’re still jumping them.”

  Garibay said he tried to place ladders for illegal aliens to climb his fences without ruining them, or to direct them to walk along the equipment pathways, but to no avail.

  He has no choice but to wait and hope things will change.

  “It’s pretty discouraging,” he said.

  ‘Fear Factor’

  Wayne King spends four and a half hours every day checking fences on the exotic game ranch he manages in Kinney County. Prior to January 2021, he said he checked the fences once a week or maybe once every two weeks.

  “Since then I have fixed 252 holes in my fence. I fixed water troughs, I fixed water lines. They come through our place like it’s a highway. I have been woke up at night at 11 p.m., 12 a.m., 1 o’clock in the morning with them banging all over my doors, my windows. I’ve had to use my pistol to run them off,” he said.

  “It’s become a dangerous, dangerous thing to live every night of your life wondering. I sleep with pistols under my pillow, pistols in every room. Pistols on my nightstand. It’s just crazy.”

  King is located 25 miles from the nearest town: “911 doesn’t help me a bit.”

  He said illegal aliens have cut his fences wide enough to drive vehicles through. His gates have been destroyed and left open. He estimates he’s lost in revenue between $150,000 and $200,000 worth of exotic game.

  “It’s just getting to the point where if it was not for … our highway patrol agency, we might as well give up. We’re done,” he said.

  “To live every day of your life in fear. Not accounting the work that’s lost or the work we have to do, it’s the fear factor of being in the pasture.”

  Read more here…

  Tyler Durden
  Mon, 09/12/2022 – 23:00

• Xi Poised To Build Support For "Taiwan Reunification" With 4 Top Military Picks
  Xi Poised To Build Support For “Taiwan Reunification” With 4 Top Military Picks

  If you thought the global economic chaos resulting from one hot war was more than enough, well… we have some bad news: a second one is on its way as the specter of a China-Taiwan war grows by the day.

  According to Japan’s Nikkei, Chinese President Xi Jinping is expected to stack the country’s senior military leadership during next month’s Communist Party congress with loyalists aligned on his goal of unifying Taiwan and the mainland.

  Xi – who is expected to accept an unprecedented third term at next month’s twice-a-decade Party Congress – serves concurrently as general secretary of the Communist Party and chair of the Central Military Commission, the top decision-making body for the armed forces. Four of the commission’s seven members are due to retire at the twice-a-decade congress in mid-October.

  According to Nikkei, much attention is focused on how Xi, who is all but guaranteed to receive a precedent-breaking third term as China’s top leader at the event, will fill the vacancies on the military commission given his belligerent stance toward the U.S. and Taiwan.

  Miao Hua, one of the commission’s members, is seen as the top candidate to replace Xu Qiliang, one of the two vice chairman. Miao has known Xi for three decades, since the latter served in Fujian Province.

  Xi in 2015 began restructuring China’s ground-forces-centric military into a modern and mobile organization in which all branches fight as one. In an effort to break through the silos among the armed branches, Miao, an army man, had been appointed to a senior post within the navy.

  A contender for promotion onto the commission is Li Qiaoming, former head of the People’s Liberation Army’s Northern Theater Command. Li apparently caught Xi’s eye by writing an article that struck a chord with the leader, who sought to tighten the party’s grip on the armed forces. Though the PLA serves as China’s military, it is part of the Communist Party.

  “The Soviet Union collapsed because the party didn’t have its own army,” Li had argued in the article.

  Longtime Xi protege Liu Zhenli commands the PLA ground forces. Liu’s resume includes a lengthy stint overseeing a unit that safeguarded Beijing, a contingent formed by the best-trained fighters in the army. He ranks among the top 200 Communist Party officials, as does Li. That puts Liu in the running for a vice chairman post on the military commission.

  Among other things, Xi is expected to reiterate his vision for Taiwanese unification during the congress. But since many officials in the military are currently reluctant to achieve that goal through force, promoting Miao, Li and Liu could smooth the way for the president to make such decisions regarding Taiwan.

  Speculation also suggests that Xi will promote Zhang Shengmin, a Central Military Commission member who led anti-corruption dragnets in the PLA, to vice chairman. This would put other senior military officers on notice.

  Military leaders with experience in the region including Taiwan have drawn attention as potential commission members. He Weidong commands the PLA’s Eastern Theater, which oversees operations involving Taiwan and Japan’s Nansei archipelago. He is believed to have taken part in the large-scale military exercise near Taiwan in early August.

  Another likely candidate is Xu Qiling, who once commanded PLA ground forces in the Eastern Theater. Chang Dingqiu, commander of the air force and the youngest active full general, is seen to be in contention as well.

  

  In the last party congress in 2017, Xi reduced the seats on the Central Military Commission to seven from 11. In 2022, many of these seats will now be filled with Xi’s preferred puppets, greenlighting any military overtures the Chinese ruler orders.

  Tyler Durden
  Mon, 09/12/2022 – 22:40

• Xi's Meeting With Putin Seen As Major Market Risk
  Xi’s Meeting With Putin Seen As Major Market Risk

  By Ye Xie, Bloomberg markets live reporter and commentator

  President Xi Jinping’s planned visit to Central Asia this week will mark his first trip aboard since the pandemic hit more than two years ago. In normal times, it wouldn’t register strongly on a trader’s radar.

  But these aren’t normal times, and it comes at a rather delicate moment for China, domestically and internationally. Some analysts are fearful that Xi’s trip, which reportedly includes a meeting with Russian President Vladimir Putin, may pose a major risk for the Chinese market.

  Xi’s trip to Kazakhstan and Uzbekistan was announced just as Beijing doubled down on its Covid restriction before the Party Congress next month. The policy is weighing on the economy and the rhythms of daily life, with the state media reporting that the number of China’s passenger trips expected during the holiday may fall 38% from a year earlier. Is it just a coincidence — or is the party leader’s traveling schedule a signal that normalcy is returning to China, albeit slowly?

  

  More importantly, the trip comes barely a month ahead of the twice-a-decade Party Congress, where Xi is expected to accept an unprecedented third term. Analysts at Clocktower Group, an alternative asset management platform, noted that it’s “extremely rare” for the party leader to travel abroad ahead of the Party Congress. President Xi, for example, stopped making overseas trips three months ahead of the 19th Party Congress in 2017. “President Xi was not expected to leave the country unless it was extremely urgent for him to do so,” the analysts wrote.

  What’s the urgency? Uzbekistan is hosting the Shanghai Cooperation Organization summit, which will give Xi a chance to meet Putin in person for the first time since Russia’s invasion of Ukraine in February. It comes at a time when Russia is suffering major setbacks as Ukraine mounts counter attacks to take back lost territory. Clocktower’s analysts wrote:

  If the Western high-tech sanctions are pushing Russian industries and military to the brink of collapse, China may be the only white knight that is capable of providing a rescue. As such, an “SOS” from the Kremlin is likely the reason behind the reported Xi-Putin meeting in the coming week.

  The meeting will pose a significant risk for Chinese markets. If China decides to help Russia beyond merely buying its commodities, there is considerable risk that the US and Europe will implement secondary sanctions on China. There may also be pressure on Chinese assets from a general investor aversion – likely strengthened by a social media “cancel” campaign against Beijing – to hold them once Beijing recalibrates policy to more concretely support Moscow.

  It might be too speculative to guess what might come out it. But keep in mind that at the onset of Russia’s invasion, foreign investors dumped Chinese stocks and bonds because they were worried that China may be embroiled in the second-round sanctions because of Beijing’s ties with Moscow.

  

  So don’t be surprised if what would look like a lackluster trip by Xi winds up moving the market.

  Tyler Durden
  Mon, 09/12/2022 – 22:40

• New Zealand Scraps Nearly All COVID-19 Restrictions, Including Mask And Vaccination Mandates
  New Zealand Scraps Nearly All COVID-19 Restrictions, Including Mask And Vaccination Mandates

  Authored by Rebecca Zhu via The Epoch Times (emphasis ours),

  New Zealand will be retiring its COVID-19 traffic light system and significantly scaling down COVID restrictions from Sept. 13 so Kiwis could “move forward with certainty,” Prime Minister Jacinda Ardern announced.

  “It’s time to safely turn the page on our COVID-19 management and live without the extraordinary measures we have previously used,” Ardern said, calling it a “milestone.”

  

  With the abolition of the traffic light COVID protection framework, mask mandates will be lifted in all areas except in healthcare and aged care settings.

  Household contacts will no longer need to isolate, while people tested positive to COVID-19 will continue to be required to isolate for seven days.

  All government vaccine mandates will end on Sept. 26, and all vaccination requirements for incoming travellers and aircrew will also be removed.

  After restrictions are lifted, it will be up to the employer’s discretion whether they will require workers to wear masks or get vaccinated for COVID-19.

  “In short, we now move on to a simple two requirements system of masks in healthcare settings and seven days isolation for positive cases only,” Ardern said.

  The COVID-19 protection framework, or traffic light system, set out the rules for different traffic light settings, where red was the highest alert setting, and green meant no restrictions. At the time of removal, New Zealand was at orange.

  The government also confirmed that COVID leave payments will continue.

  COVID-19 Minister Ayesha Verrall also announced the purchase of an additional 40,000 anti-viral medicine courses, expected to arrive in New Zealand within days.

  “So now, anyone over the age of 65, and Maori and Pacific people over the age of 50, or anyone who meets Pharmac requirements, can access the treatment in the early stages of contracting the virus.

  “This means more than double the number of New Zealanders will be able to access these medicines if they need them than previously,” Verrall said.

  Decision Welcomed Across the Board

  Retail NZ welcomed the move to return New Zealand to a “sense of normality.”

  “After over two years of being at the forefront of COVID-19 rules, alert level changes, low foot traffic, and nonsensical mask rules, retailers across New Zealand will be pleased with today’s revised approach,” Retail NZ Chief Executive Greg Harford said.

  “The revision today largely brings New Zealand in line with most of the rest of the world.”

  But Harford encouraged the government to further revise the isolation period down to between three to five days.

  ACT party agreed with the idea, with ACT Leader David Seymour noting that New Zealand had among the strictest isolation rules in the world.

  “Keeping people locked in their houses longer than is necessary imposes real costs to them and the economy without improving our COVID-19 response,” he said.

  “New Zealand is holding on to a long COVID hangover. It turns out an ‘abundance of caution’ is an abundance of cost for New Zealanders.”

  Tyler Durden
  Mon, 09/12/2022 – 22:20

• Don't Blink, You'll Miss The Merge
  Don’t Blink, You’ll Miss The Merge

  As One River Asset Management’s Sebastian Bea writes, the Ethereum Merge set for this Wednesday, is like upgrading a rocket ship after its launch: “It is an epic engineering feat.” However, for those expecting the fully-priced in event to lead to even more price upside, you will likely be disappointed – as Bea writes, “the value of the Merge to Ethereum will be in attracting a deeper network over time. That will take patience – the Merge is not an immediate catalyst.”

  To explain the real significance of the Merge, below are the latest thoughts and market notes, from One River’s head of research Marcel Kasumovich, who writes the following note, which we have republished below:

  “5.8×10^22 – Don’t Blink, You’ll Miss the Merge.”

  1/ Escape velocity. A simple, tidy equation quantifying what is needed to escape gravity. It’s far less tidy in the behavioral sciences that govern digital ecosystems. “Functional” escape velocity is a moving target, achieved when everything else can be done on top of a base layer without changing it materially. Becoming the dominant base layer is the target in the digital space-race. The Merge gets Ethereum closer to that target, hence the excitement around it.

  2/ The Ethereum protocol aims to dominate the digital space-race with the long-awaited Merge of the Mainnet and the Beacon chains (Figure 1). There are excellent resources explaining the Merge from technical to philosophical. Can the Merge fail? What if there is a hard fork? How long will smart contracts be locked? These are all questions extremely well covered. The Merge was planned so its flaws would be visible over a lengthy trial phase – 20 “shadow forks” on private testing networks were deployed along the way. Our focus is on investment dynamics.

  Figure 1: Approaching the Merge (via image here)

  

  3/ Ethereum has already met the objectives of a successful layer 1, validating transactions without reliance on a third-party network. The migration to proof-of-stake is more of a philosophical shift than a required engineering one. In the past two years, the protocol has averaged 1.2 million blockchain transactions a day, securely and without downtime. The Merge doesn’t change Ethereum’s objectives, only the means. Transactions will now be validated by way of algorithmic selection of validators rather than computing competition. This is a material shift in narrative, steering clear of politically charged issues around energy consumption.

  4/ The question we are most asked is whether the Merge is in the price. Of course, it is. Even the most casual observer is familiar with the Merge and the spike in option open interest shows speculators are alert (Figure 2). It is an engineering upgrade, not a corporate merger evaluated on cash flows. The benefits of the Merge are only relevant with greater adoption and a deeper network. The Merge is an engineering feat that is sending out invitations, not directly initiating new participation in Ethereum.

  Figure 2: Ether Options Open Interest, USD Billions (view image here)

  

  5/ So how should we think about the Merge and its value to ether? It is all about attracting users to the Ethereum base layer. It will be most successful when changes to the base layer are rare. How the Ethereum Network is valued will also undergo a material change. To use Ethereum you need to hold ether; holding and staking ether turns it into a bond-like asset. Ethereum’s growing network will treat ether as the reserve asset to the ecosystem and staking that asset to support the validation of transactions will give it bond-like features of a reserve asset.

  6/ The network effect is in motion. The goal of any layer 1 is to be so foundational that anyone can build upon it with little reason to change it, like a Constitution. That building is happening, even in the crypto winter. Take Polygon, the most widely used Ethereum scaling solution (1.1% of our Core Index and 5.3% of Size Tilt). There are currently more than 37,000 applications running on the Polygon Network, an explosion from 200 in June 2021. These are leading to “real” products. Polygon is integrating Web 3.0 functionality into existing smartphones with the Nothing Phone (1) being the first. The coming wave of layer 2s will widen the set of opportunities.

  7/ The growing network will lead investors to see ether for its bond-like characteristics. There are two components of the ether-bond. The first is the coupon paid for staking ether. Payments are made to validators for their staking services, which takes little more than powering on your computer, connecting to internet, and running the latest software. The odds of being called upon to validate a transaction are inversely proportional to the number of validators. More validators means that a larger number of investors share in the rewards, lowering the coupon and vice versa (Figure 3).

  Figure 3: Ethereum Perpetual Bond Coupon (view image here)

  

  8/ The second bond-like component is fees. You can think of this like a GDP warrant in traditional finance where the coupon is positively linked to activity in the economy. Fees on the Ethereum protocol – including tips paid to prioritize single or bundled transactions – will be earned by validators after the Merge. Stronger activity in the Ethereum economy leads to higher fees and more economics for staking. During last year’s boom, gross fees were more than 15% annualized share of the Ethereum market capitalization (Figure 4). With this year’s downturn, fees have collapsed by 96% and a ratio of less than 1% annualized.

  Figure 4: Fees Pro-Cyclical Yield Akin to GDP Warrant (view image here)

  

  9/ The two sources of yield work in opposite directions over the cycle – a very attractive feature for investors. In a boom scenario, a rise in staking demand leads to lower ether coupons, and more income is earned from fees. In a bust scenario, a decline in staking demand raises the ether coupons, and fee income declines. We anticipate this centering the yield around 6-8% over the next year – not bad for an invisible reserve asset in the future of finance. Ether’s role in the financial ecosystem will compete with bond assets that are held for their surety of collateral – a valuation that is many multiples its current state.

  10/ It’s the final countdown to the total terminal difficulty rate of 58750000000000000000000, expected around September 15. It’ll be boring if all goes according to plan, nothing like the excitement of watching the force of a rocket launch. Alas, the dream of every successful layer 1 is precisely that – to be a boring, secure platform that is eventually taken for granted, invisible to the users who demand more from their tools. The Merge is one step closer to that reality.

  Tyler Durden
  Mon, 09/12/2022 – 22:00

• Previewing The "Pivotal" August CPI Report: Expect A Miss… A 7-Handle Likely Sees A Very Strong Rally
  Previewing The “Pivotal” August CPI Report: Expect A Miss… A 7-Handle Likely Sees A Very Strong Rally

  Ahead of tomorrow’s CPI print, Wall Street is split between those who say tomorrow’s inflation data is fully priced in and won’t have an impact on either stocks or the Fed which won’t ease until the breadth of price increases comes closer to the Fed’s 2% goal, and those who – echoing recent comments from the Fed – believe that the CPI is all that matters for the Fed’s upcoming rate decision, even though odds of a 75bps rate hike in two weeks time are just over 90%.

  Among the former is Goldman trader Matt Fleury who quotes Bullard’s comments from last week, namely that a good CPI report shouldn’t affect the Sept Fed call, and notes that “he is exactly right… We are priced for 75bps already. CPI doesn’t matter. People who don’t have enough length will tell you it does, but it doesn’t. Its priced. The asymmetry is higher here” and is why this traditionally bearish Goldman trader predicted that “we might be starting the Q4 chase early.”

  But while there may be disagreement over how the market or Fed will react to the CPI, there appears to be agreement that the August inflation print will miss to the downside (by a little or a lot), if mostly at the headline level thanks to plunging commodity prices (core inflation may actually shit higher as Americans shift spending on items such as food and gas into “core” inflation). There is also agreement that whatever the BLS deems the proper CPI number, “it is unlikely that it will reflect what we see and feel every day” as Peter Tchir put it, adding that it also “doesn’t tell us anything about where September will be (actually, that is not true, as some of the data will be so off, that it will have to get fixed in next month’s report, and some is just stale by its nature (housing).”

  Some more hard truths from Tchir on CPI’s 15 minutes of fame:

  The reality is that CPI, away from quirks in how it is calculated (the all-important housing component might be the quirkiest off the quirky, but heuristic adjustments, how prices are measured, etc.) all impact the number that we will be given, but don’t really impact the inflation we have. And again, it doesn’t tell us much about the future of inflation.

  As we sent out on Friday, the market has concluded that both the ECB and even the Fed, despite their protestations otherwise, are both being viewed as data dependent.

  Most importantly, the Academy strategist “cannot see any scenario, where the market doesn’t decide that CPI is heading the right direction and that October will be lower than September and so on and so forth (so many commodity futures contracts that I checked out are all lower forward than spot).”

  Indeed, one look at not just today’s unexpectedly low NY Fed consumer survey inflation expectations for both the 1 and 3Y horizon…

  

  …. but also 3Y breakevens which have dropped to a nearly two year low….

  

  … as well as two-year inflation swaps…

  

  … now suggesting CPI will average less than 3% in the near term (excluding energy the market expects prices may still grow near 4%.)

  There is another reason why it is clear that the market is now convinced that peak inflation is behind us and tomorrow’s CPI print will likely miss: stocks and bonds have gained in tandem as economists expect the first negative monthly reading in more than two years, even though as noted above but core inflation is still expected to post an increase in August while the y/y index of underlying prices is set to tick up back above 6% from 5.9% previously. Core inflation is then expected to stay around that level through early 2023 as rents will keep the core rate high (remember what we wrote in August 2021, when conventional wisdom was still that inflation would be transitory: “What Rental Hyperinflation Looks Like: “Soaring Prices. Competition. Desperation“”).

  Another measure to watch, according to Bloomberg’s Tatiana Darie is the share of the CPI basket that is rising more than 4% on an annualized basis: July saw a drop to 71.8% from June’s high of 74.8% as three-quarters of prices are rising faster than their 5-year average. The direction and speed of these gauges will also tell us a lot about the inflation outlook.

  After that long preamble, here’s what Wall Street expects tomorrow for the August CPI:

  • CPI M/M Exp. -0.1%, last flat
  • Core CPI M/M Exp. +0.3%, last +0.3%
  • CPI Y/Y Exp. +8.1%, last +8.5%
  • Core CPI Y/Y Exp. +6.1%, last +5.9%

  there are 39 estimates on Bloomberg (compared to 72 estimates for this month’s NFP data). The range is incredibly narrow (7.9% to 8.3% for YOY).

  

  Here are some of the more indicative examples:

  • BMO 8.3%
  • HSBC 8.2%
  • BofA 8.2%
  • ING 8.2%
  • JPMorgan 8.1%
  • Soc Gen 8.1%
  • Citi 8%
  • Goldman 8%
  • TD 8%
  • BNP 8%
  • Jefferies 8%
  • Standard Chartered 8%
  • Stifel 8%
  • Nomura 8%
  • Wells Fargo 7.9%
  • Credit Suisse 7.9%
  • Morgan Stanley 7.9%

  Some details from the bigger banks, starting with Goldman (full note available to pro subs, along with a bunch of other pre-CPI reports):

  “We estimate a 0.32% increase in August core CPI (mom sa), which would boost the year-on-year rate by two tenths to 6.1%. Our forecast reflects a further drop in airfares on the back of lower oil prices (we assume -5% mom sa) as well as net softness in autos categories (new +0.75%, used -1.25%, parts flat) due to easing supply chain constraints and the arrival of 2023 model years on dealer lots. However, we expect continued strength in services inflation due to wage pressures, labor shortages, and elevated short-term inflation expectations. Specifically, we look for a strong set of shelter readings (rent +0.65% and OER 0.55%) and a 0.6% rise in education prices due to higher tuition and daycare costs for the new school year. We also expect another gain in car insurance, as carriers push through price increases to offset higher repair and replacement costs. We estimate a 0.13% monthly decline in headline CPI, reflecting lower gasoline prices but higher food prices.”

  

  “Food inflation increased to 7.6% yoy (Exhibit 2) in August (from 6.7% yoy in July), contributing almost 40bp to the overall increase in headline inflation. Further, sequentially food prices increased by 0.5% mom s.a. (vs. -0.5% mom s.a. in July) mainly driven by higher cereal prices”

  

  Away from GS research, here a good take from Goldman flow trader John Flood and market reactions (full note also available to pro subs):

  All eyes on CPI tomorrow @ 8:30am. Interesting dynamic in sense Fed essentially preannounced 75bps @ 9/21 meeting when THIS Nick Timiraos (fed’s mouthpiece) article dropped last week. Market clearly wants/expects a cooler headline print w/ recent sharp decline in gas prices. Street is braced for core print to remain stickier (and even tick slightly higher). Headline number most likely shows some disinflation and wont impact mkt meaningfully after tape’s recent run higher (unless shockingly cool…call it sub 7%…then keep your rally caps on). If we get a surprise hotter reading of >8.5% (prior) mkt likely gets hit by at 100+bps.

  Here’s JPMorgan forecasting that “in-line print that indicates a second consecutive MoM decline would be supportive for equities” while “a 7-handle CPI YoY (exp. is 8.1% so certainly not unthinkable) we would likely to see a strong rally tomorrow:

  Andrew Tyler: We have seen new shorts added with some sub-sectors back to YTD highs in terms of  short interest. If this market continues to move higher does a squeeze take us back to 4300 level into earnings season? If so, it will start with CPI on Tuesday (Headline YoY +8.1% exp.; +8.5% prior. Headline MoM -0.1% exp.; 0.0% prior) where an inline print supports a move higher. Should Headline CPI YoY print with a 7-handle, then think we see a very strong day for stocks. Given light positioning and low liquidity, we could see another sharp rally coming out of CPI.

  Mike Feroli:, “We estimate that the consumer price index (CPI) was basically unchanged in August. With this soft headline print, we think the year-ago inflation rate will moderate from 8.5% in July to 8.1% in August. We expect the monthly changes in the main details of the report to be pretty similar between July and August, with a drop in energy prices being offset by gains in food and core prices. We forecast that the energy CPI fell 5.6% in August while the food CPI rose 0.9% and the core index increased 0.33%. If our forecast is correct, the year-ago rate for the core CPI should pick up from 5.9% in July to 6.1%.”

  

  Ultimately, while a miss tomorrow will likely unleash market animal spirits, in the grand scheme of things it will not really change the big picture: even assuming sequential inflation growth slows to a trickle, the chart below from BofA shows how long it will take for inflation to normalize on an annual basis.

  

  Bottom line: an line print will be supportive; a big miss – especially if it is a 7-handle Y/Y stocks will fly, while a big beat will – predictably – hammer stocks. As for the Fed, barring a major surprise, tomorrow’s report isn’t expected to alter the Fed’s outlook until the breadth of price increases slows further and comes closer to the Fed’s 2% goal. And the St. Louis Fed’s James Bullard told us that 75 bps this month is still on the table despite a “good” CPI report.

  Tyler Durden
  Mon, 09/12/2022 – 21:40

• Israeli Prime Minister Announces In Berlin: Iran Nuclear Talks "Dead"
  Israeli Prime Minister Announces In Berlin: Iran Nuclear Talks “Dead”

  In yet more confirmation that the long-running attempt to reach a restored JCPOA Iran nuclear deal has failed, a senior Israeli official representing Prime Minister Yair Lapid on Monday declared that Iran talks are “dead”. 

  This comes as the Israeli government has been touting its “successful” lobbying of the US administration to not go through with a ‘bad deal’: 

  A senior Israeli official called on Europe and the US on Monday to begin talking about demands for a “longer, stronger” nuclear agreement with Iran, saying current talks aimed at reviving a 2015 pact were dead after Jerusalem provided proof that Tehran had not been forthright during negotiations.

  

  Lapid and his top aides were in Berlin Monday, where the Israeli Prime Minister says he passed German Chancellor Olaf Scholz “sensitive and relevant intelligence information” on Iran’s nuclear program

  The day prior, Germany, France, and the UK issued a joint statement calling out Iran’s sincerity and motives in seeking a restored nuclear agreement, citing “serious doubts” the Western signatories to the original JCPOA have. 

  A senior Israeli official traveling with Lapid told reporters: “We gave information to the Europeans that proved that the Iranians are lying while talks are still happening.” 

  “There’s not going to be a JCPOA, say the Americans and most Europeans. They say, ‘We have a lot of reservations about the possibility of a nuclear agreement,'” the official added, as quoted in The Times of Israel. “There are no talks right now with Iran. There is no one in Vienna.”

  Despite only weeks ago some officials were hailing that the Vienna process had reached the “finish line” – and that a final text was under scrutiny after the EU delivered it to Washington and Tehran, there’s been increasing acknowledgement that it’s permanently stalled, if not collapsed altogether.

  Israel has all along charged that the Islamic Republic simply wanted to use a restored deal as cover to continue to secretly pursue nuclear weapons – something Tehran has consistently denied. Lapid meanwhile, has claimed he has “up-to-date intelligence information on Iranian activity at the nuclear sites” which contradicts what Iranian officials say in public.

  Tyler Durden
  Mon, 09/12/2022 – 21:20

• Taiwan Anticipated Many Of The Lessons From The War In Ukraine
  Taiwan Anticipated Many Of The Lessons From The War In Ukraine

  Authored by Julian Spencer-Churchill & Liu Zongzo via The Epoch Times (emphasis ours),

  Recent Taiwanese military exercises indicate that Taipei has anticipated many of the most important lessons of the February 2022 Russian invasion of Ukraine, and has also been addressing issues more specific to its precarious security situation. U.S. Joint Chiefs Chair Gen. Mark Milley advised the ROC to assimilate promptly the insights from the Ukraine War. These lessons include the importance of strategic political intelligence to avert a surprise attack, surveillance by Unmanned Combat Aerial Vehicles (UCAV), and their principal counter-measures including electronic warfare and local air defense; the persisting importance of combined arms warfare, the use of precision artillery, and the exploitation of built-up terrain with light troops equipped with anti-tank systems; logistics; and the economic, social and political preparation for a long war.

  

  In recent months, Taiwan has become concerned about the threat value of the people’s Republic of China’s (PRC) People’s Liberation Army Air Force’s (PLAAF)’s top to bottom modernization that has given Beijing the ability to conduct limited anti-access and air denial (A2/AD) operations in the South China Sea, and with the potential to create a regional blockade around the island. Recent exercises around Taiwan show that the PLA is forging ahead with an emphasis on network-centric warfare and information operations to coordinate the PLA units of its different elements, in particular between its naval platforms and aircraft.

  Taiwan’s current defense framework, introduced by former Republic of China (ROC) Deputy Minister of National Defense, Admiral Lee Hsi-ming between 2016 to 2020, emphasizes force preservation, coastal victory, and beach landing denial. This entails a rapid movement and concentration of land units while under interdiction, and surviving air and sea units, to contain and then counter-attack against a specific beach landing. This is in contradistinction from a more stable and proven practice of relying on a defense-in-depth to wear down an attack as it builds-up and pushes inland. However, Taiwan is counting on a joint land-sea-air attack to deliver a shock to Chinese amphibious, airborne and heliborne forces, before they are able to consolidate. Taiwan validates its operational doctrines through its annual Han Kuang Exercises.

  During the 2018’s Han Kuang 34, commercial drones were used for the first time by Taiwan, in addition to public SMS notifications on aerial threat warnings. In 2019, the emphasis was placed on the use of highway strips as emergency runways as a counter to China’s concentrated targeting of Taiwanese airbases with land-based missiles. That year, Taiwan also explored concepts of asymmetric warfare, combined arms combat aimed at coastal denial, and civilian cooperation in communications, civil defense, and evacuation drills.

  In 2020, while retaining the core strategy of force preservation, in order to resist Chinese tactics intended to inflict attrition and pin down Taiwanese land forces, Han Kuang 36 examined the use of joint air defense battalions to protect high-value infrastructure. Taiwan has a missile defense density higher than that of South Korea or Japan, and second to only Israel, although the survivability of these systems are difficult to ascertain. The exercise also notably incorporated Taiwan’s cross-strait long-range precision strike capabilities, using the Hsiung Feng II and the supersonic Hsiung Feng III, anti-ship missiles, in joint operations between the navy and air force.

  The first post-pandemic exercise, Han Kuang 38, was held on July 25, 2022, with the location of the exercises chosen to simulate multiple a response scenario against a principal and diversionary amphibious landing, with a joint focus on adapting to C2 (command and control) disruption inflicted by Chinese jamming and strikes. The settings ranged from the northeastern area – Taipei’s Songshan Airport, Hsinchu, to the northern cities Taichung and Chiayi, to the southern area around Tainan, Pingtung, and the eastern coastal cities Hualien, and Taitung. These included a focus on artillery units’ readiness by training with live D-485 HE rounds to simulate landing beach denial against PLA’s amphibious operations.

  The 2022 Han Kuang 38 exercise responded to a need to prepare given the People’s Liberation Army (PLA) increased use of realistic combat-oriented exercises, modernization, heightened recruitment, and improved restructuration. Counter A2/AD air defense simulations were conducted around Taipei to maintain its defense capabilities against a first-wave missile strikes from the Chinese mainland and People’s Liberation Army Navy (PLAN) ships and submarines. Live fire, marines amphibious maneuvers, urban warfare preparations, special forces and airborne coordination, were also conducted to simulate a near-real invasion scenario. Taiwan has taken preparation for real war seriously, as evinced by its emphasis on cross-element (land, sea, air) training, inter-unit synergy and coordination, which is in effect combined arms warfare on the strategic level.

  Besides seeking to improve the readiness of its military defense posture through the step-level intensification of the Han Kuang exercises, Taiwan is also intending to send a strategic deterrent message to Xi Jinping’s cell of policy decision-makers. This is especially important given that Taiwan’s investment in its defense may not be enough to deter a decision by Chinese Communist Party Secretary General Xi Jinping to invade: China may not wait until it has a significant force advantage, and may make its move instead based on domestic political issues.

  There remain major three major areas of military investments where expected payoffs for Taiwan lend urgency to the effort. First, the ROC needs international ship-building assistance to accelerate its sub-surface deterrence and its indigenous defense submarine (IDS) program. The ROC’s current sub-surface combatants are limited to 2 Hai Lung class and 2 Hai Shih Guppy II class submarines. An unlocated Taiwanese sub-surface force would compel the PLAN’s vulnerable Amphibious LPDs to deploy father offshore, discharging their landing units father from their landing beaches.

  Second, Taiwan’s investment in Unmanned Combat Aerial Vehicles (UCAV) lags behind that of other similarly threatened middle-sized democracies under threat, like South Korea. One of the clear highlights of the War in Ukraine is the role of Electronic Counter Measure –resistant artillery reconnaissance and strike drones. Third, in order to survive the initial missile strikes and A2/AD capabilities, the ROC needs more underground megastructures for force preservation to prevent C3 denial. Taiwan already has an extensive civil defense shelter system, and now it needs a network along the Taiwanese littoral for ground force survivability.

  ---

  Dr. Julian Spencer-Churchill is an associate professor of international relations at Concordia University (Montreal) along with Liu Zongzo.

  Tyler Durden
  Mon, 09/12/2022 – 21:00

• Failing Forward? Fired CNN Host Brian Stelter Gets Harvard Fellowship
  Failing Forward? Fired CNN Host Brian Stelter Gets Harvard Fellowship

  Disgraced ex-CNN personality Brian Stelter has landed a new gig since he was fired by the struggling network as part of their effort to regain credibility.

  

  This fall, the former “Reliable Sources” host – who breathlessly peddled Russiagate and other far-left conspiracy theories for half-a-decade – will be joining the Harvard Kennedy School’s Shorenstein Center on Media, Politics and Public Safety.

  “Personal news: I’m joining the @ShorensteinCtr at Harvard Kennedy School,” Stelter tweeted. “This fall I’ll be the Walter Shorenstein Media and Democracy Fellow, convening discussions, some of which will be live-streamed. Grateful to @nancygibbs and her team for the home!”

  Personal news: I’m joining the @ShorensteinCtr at Harvard Kennedy School. This fall I’ll be the Walter Shorenstein Media and Democracy Fellow, convening discussions, some of which will be live-streamed. Grateful to @nancygibbs and her team for the home! https://t.co/cOD0SyeuwE

  — Brian Stelter (@brianstelter) September 12, 2022

  Harvard confirmed the move, reporting that Stelter “will convene a series of discussions about threats to democracy and the range of potential responses from the news media.”

  Stelter was hired by CNN in 2013 from the New York Times, where he was essentially their Taylor Lorenz. In addition to hosting “Reliable Sources,” Stelter produced a daily email newsletter about the media for CNN.

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  Tyler Durden
  Mon, 09/12/2022 – 20:40

• Alarm Bells Sound As World's Second Largest Appliance Company Reports Demand Plunge
  Alarm Bells Sound As World’s Second Largest Appliance Company Reports Demand Plunge

  Swedish appliance maker Electrolux AB announced a cost reduction program after reporting a plunge in demand for its home appliances across Europe and the US. 

  The world’s second-largest home appliances manufacturer after Whirlpool said, “market demand for core appliances in Europe and the US so far in the third quarter is estimated to have decreased at a significantly accelerated pace compared with the second quarter, driven by the impact of high inflation on consumer durables purchases and low consumer confidence.” 

  It noted: “High retailer inventory levels have amplified the impact of the slowdown in consumer demand.” 

  Remember, there’s a massive inventory glut of consumer goods at retailers.  

  

  Electrolux warned a combination of snarled supply chains had pressured the company, which is expected to report an even more significant operating loss in the third quarter. 

  “In combination with supply chain imbalances resulting in significant production inefficiencies and increased costs, the third quarter earnings for the Group are expected to decline significantly compared to the second quarter 2022 also excluding the one-time cost to exit the Russia market. This has been driven mainly by Europe and North America. Business Area North America is expected to report an operating loss in the third quarter exceeding the loss in the second quarter.” 

  Waning consumer demand, retailer inventory building, and mounting losses for the Swedish company forced its board to “initiate a Group-wide cost reduction program addressing both variable and structural costs.” Electrolux explained more about the cost reductions:  

  “The program, which starts immediately, will focus on reducing variable costs, with special attention to eliminating cost inefficiencies in our supply chain and production. The structural cost reductions will primarily take place in Europe and North America and include prioritization and efficiency measures leveraging recent organizational changes which took effect July 1. The measures include increasing productivity in operations as well as optimizing the R&D portfolio, administration, sales and marketing activities.”

  The souring outlook for Electrolux initially sent shares down 7% but have since recovered most losses late in the European session. 

  

  Electrolux’s CEO Jonas Samuelson said consumer confidence is expected to stay depressed in Europe, adding, “I think people will hold on to their wallets quite hard.” The same is likely true in the US — consumers have backed off buying durables goods and focused on purchasing staple products as the highest inflation in decades has sent wage growth deeply negative for more than a year. Households on both sides of the Atlantic are struggling. 

  Tyler Durden
  Mon, 09/12/2022 – 20:28

• Shipping's 'China Syndrome': Demand Sinks Across Multiple Cargo Markets
  Shipping’s ‘China Syndrome’: Demand Sinks Across Multiple Cargo Markets

  By Greg Miller, of FreightWaves

  In the mid-2000s, when shipping stocks first became popular on Wall Street, the shares were commonly bought as a play on China’s economy. China is pivotal to ocean shipping, whether it’s container ships, oil tankers, bulkers or gas carriers.

  “There’s a saying that everything that moves out of China in containers has to come into China as raw materials,” noted Oeyvind Lindeman, chief commercial officer of Navigator Gas, on his company’s latest conference call. Ominously, signs of China’s weakening economy are showing up across all shipping sectors at once.

  The glass-half-empty view is that pullbacks in shipping demand are bellwethers of more severe economic problems to come. The glass-half-full view is that declines are temporary. A rebound of Chinese demand for iron ore, oil and gas will eventually boost commodity shipping rates.

  Container shipping

  Sales of containerized goods to the U.S. and Europe supported the Chinese economy throughout the pandemic era. Markets were rattled Wednesday when China’s official monthly export stats came in much lighter than expected.

  China’s exports rose 7.1% year on year (y/y) in August, well below the consensus forecast for 12.8% growth. Exports had grown 18% y/y in July. China’s exports to the U.S. declined 3.8% y/y in August, compared to an 11% increase in July.

  Outbound volumes are being squeezed from both sides. Demand for Chinese goods is falling at the same time COVID-19 lockdowns and weather issues are constraining Chinese manufacturing and logistics.

  

  The government has extended lockdowns in Chengdu and announced new nationwide precautions through the end of October. Analysts do not foresee any relaxation of China’s zero-COVID policy this year.  

  Meanwhile, China recorded its highest temperatures and lowest rainfall in over six decades last month. Resultant power outages forced factory closures in Sichuan.

  Dry bulk imports

  China is the world’s largest producer of steel. Its steel production in January-July was down 6.1% y/y. Production in July fell 10% versus June.

  “The decline in Chinese steel production has predominantly come from the ailing property sector and the stop-start industrial activity due to COVID-19 lockdowns,” wrote Mark Nugent, dry bulk analyst at shipbroker Braemar, in a research note on Thursday.

  Brokerage EastGate Shipping said that the heatwave and power shortages forced 20 steel mills to go offline for around a week in mid-August.

  Steel production drives Chinese demand for iron ore imports, largely from Australia and Brazil. These are the most important cargoes for Capesizes, larger bulkers with capacity of around 180,000 deadweight tons. Average Capesize spot rates collapsed from $38,200 in late May to just $5,600 per day on Friday, according to data from Clarksons Securities.

  Brokerage BRS blamed the plunge on diversions of Australian iron ore from China to Southeast Asia, and more damaging to rates, a sharp decline in Chinese imports of long-haul Brazilian iron ore in August.

  “Scorching temperatures and a relentless zero-COVID policy seriously crippled steel demand in China,” said BRS. It does not expect a full recovery of Chinese steel production until next spring, “casting doubts on a radical rebound in seaborne iron ore demand.”

  Oil imports

  China is by far the world’s largest importer of oil. Chinese imports are the most important driver for spot rates of larger 2-million-barrel-capacity tankers known as very large crude carriers.

  According to Poten & Partners, Chinese crude imports grew rapidly from 4.1 million barrels per day (b/d) in 2009 to 10.1 million b/d in 2019. Growth slowed in 2020 when the pandemic hit and declined by 550,000 b/d in 2021.

  Chinese imports sank to 8.7 million b/d in June, the lowest monthly average since July 2018. Imports were 8.8 million b/d in July and 9.5 million b/d in August. In the first eight months of this year, Chinese crude imports fell 5.2% versus the same period in 2021.

  The International Energy Agency said in its latest outlook that China’s lockdowns “set back our projected demand recovery by two months.”

  BRS noted that China has 920,000 b/d in new refinery capacity scheduled to come online by the end of the year. Normally, that would increase crude import demand. However, China’s refining capacity is already higher than domestic consumption and the government has not been pushing exports.

  “Considering our relatively pessimistic short-term outlook for China, [with] COVID and lockdowns to remain a going concern until at least the beginning of next year, we expect little upside in Chinese runs as Beijing appears unwilling to permit its refiners to focus on export markets,” said BRS.

  LPG shipping

  China also is one of the world’s largest importers of liquefied petroleum gas (LNG): propane and butane. 

  Beyond its use for energy, China imports propane as feedstock for propane dehydrogenation (PDH) plants for the creation of propylene. The propylene is used to produce polypropylene, which is in turn used to manufacture plastic.

  Tim Hansen, chief commercial officer of Dorian LPG (NYSE: LPG), referred to Chinese demand headwinds during his company’s latest call. Hansen cited “renewed impact of COVID-19 lockdowns” and worries about Chinese demand that “were a factor for market players, which resulted in more risk-averse [behavior] and reduced opportunistic trades.”

  According to Lindeman of Navigator Gas, “All eyes are on China and when they are getting out of their malaise.”

  LNG shipping

  In the liquefied natural gas (LNG) sector, Europe is now buying a much higher share of U.S. exports than usual due to fallout from the Ukraine-Russia war.

  Oystein Kalleklev, CEO of Flex LNG (NYSE: FLNG), said on his company’s latest call: “In a sense, you could say that Europe has been very lucky, because the cooldown in the Chinese economy driven by COVID lockdowns has resulted in lower demand from China.

  “Chinese imports this year are down by more than 20% [or] 9 million tons. And European buyers have been able to get access to these cargoes, which would have been a lot more difficult if the Chinese economy was running at normal capacity.”

  Kalleklev believes China will come back to the LNG import market, in a big way, pointing to commitments for new volumes that have yet to come onstream.

  “Even though China has a reduction in LNG imports this year, they are signing for almost half of these new volumes, because the LNG story in China is in its early phases,” Kalleklev said. “This year, actually, Japan will probably import more LNG than China. And there are more than 10 times as many people in China. So, China will continue to grow once they get control of COVID and reflate their economy.”

  Tyler Durden
  Mon, 09/12/2022 – 20:20

• Biden Immigration Boss Apologizes After CBP 'Retweets' Ex-Trump Adviser Stephen Miller
  Biden Immigration Boss Apologizes After CBP ‘Retweets’ Ex-Trump Adviser Stephen Miller

  While Vice President Kamala Harris has assured us that the southern US border is ‘secure’ (despite illegal immigration on track for a record-breaking 2 million arrests this fiscal year), some Customs and Border Protection social media kid is probably out of a job for ‘liking’ a tweet by former Trump senior adviser Stephen Miller which was critical of the Biden administration’s immigration policies.

  

  “Violent criminals lay waste to our communities undisturbed while the immense power of the state is arrayed against those whose only crime is dissent,” Miller tweeted. “The law has been turned from a shield to protect the innocent into a sword to conquer them.”

  In a separate tweet, Miller said that “The media’s greatest power is its ability to frame what is a dire national crisis (eg “cops are racist” summer ’20) and what is not. Biden’s eradication of our border means we are no longer a Republic-he’s ended nearly 250 years of constitutional government. The media is silent.”

  Both of which CBP West Texas retweeted.

  

  Where’s the lie?

  Liberals promptly melted down – resulting in CBP Commissioner Chris Magnus apologizing for the retweets.

  

  “This must not happen again,” he tweeted Saturday.

  Totally unacceptable and disappointing that any CBP Twitter account was used to R/T offensive, unauthorized content. We’ve removed the content and will deactivate the account. The Office of Professional Responsibility will investigate. This must not happen again. pic.twitter.com/O0Vwr3K7nI

  — CBP Commissioner Chris Magnus (@CBPChrisMagnus) September 11, 2022

  We hope whoever tweeted that lands on their feet.

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  Tyler Durden
  Mon, 09/12/2022 – 20:00

• GOP Leader Says Homes Of Trump Supporters May Soon Be Raided By FBI
  GOP Leader Says Homes Of Trump Supporters May Soon Be Raided By FBI

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

  A top former Republican leader and prominent attorney has said that the homes of more supporters of former President Donald Trump may soon be raided by FBI agents—weeks after the unprecedented Aug. 8 raid of Mar-a-Lago.

  

  Harmeet Dhillon, who was the vice chairwoman of the California Republican Party, told Fox News that within 24 hours of a Politico reporter’s Twitter post claiming that the FBI is ready to serve warrants, “three of our clients … did either get search warrants or subpoenas. And these subpoenas are extremely broad.”

  In a Twitter post, Dhillon alleged that someone within the Department of Justice’s (DOJ) Jan. 6 team “told a Politico reporter that 50 or so search warrants and grand jury subpoenas were being issued to Trump allies—before it happened. Clients, already being harassed by House J6 Committee investigators.”

  “Our clients [Women for America First] are among those targeted for their peaceful, First-Amendment-protected, speech about 2020 election,” she wrote. “These bullying tactics are designed to target [and] intimidate Trump supporters.”

  🧵1/2 DOJ’s “Capitol Seige Section” has been busy these last few days: someone told a Politico reporter that 50 or so search warrants and grand jury subpoenas were being issued to Trump allies—before it happened. Clients, already being harassed by House J6 Committee investigators pic.twitter.com/dRybORWkUR

  — Harmeet K. Dhillon (@pnjaban) September 10, 2022

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  She did not elaborate on the other individuals who may be targeted by the FBI, including whether they were Trump administration staffers or associates of the former president. Last week, former Trump adviser Steve Bannon was arrested and charged by New York state officials for allegedly partaking in a scheme connected to a private border wall construction effort.

  Dhillon added that the subpoenas “ask for broad categories of documents” and ask “for all communications dating from a month before the election until a month, two months after the election.”

  The Epoch Times has contacted the Department of Justice (DOJ) and FBI for comment.

  The subpoenas “ask for all communications regarding dozens of people and the categories are alternate electors, fundraising around irregularities around the election,” Dhillon told host Tucker Carlson, “and also a rally that happened before the Jan. 6 situation at the Capitol.”

  

  Dhillon then speculated that based on the Politico reporter’s Twitter post, the FBI is leaking information to reporters before they’re executed. For years, Trump and members of his team have accused the agency of passing on confidential information or even disinformation to mainstream outlets in a bid to denigrate his presidency and reelection chances.

  “There’s no other explanation for this,” the lawyer said. “And I think the reason for this is to instill fear into Donald Trump’s supporters and into those who would challenge election irregularities right before an upcoming election.”

  She did note, however, that it is “illegal for the DOJ to leak this information to the media.”

  Special Master

  In the battle over whether to appoint a special master in handling documents that were taken from Trump’s Florida residence last month by FBI agents, a Florida federal judge, Aileen Cannon, last week sided with the former president and argued that leaks to the media would cause him harm. She ordered the appointment of a special master, while the DOJ appealed the decision to the U.S. Court of Appeals for the 11th Circuit, which features six Trump-appointed judges.

  Read more here…

  Tyler Durden
  Mon, 09/12/2022 – 19:40

• San Francisco Is On The Verge Of An Economic Reckoning
  San Francisco Is On The Verge Of An Economic Reckoning

  Known for decades as a bug hive of progressive ideology and ground zero for many socialist movements within the US, San Francisco is no stranger to instability.  However, the political schizophrenia of the region was long tempered by extensive business interests and California’s profit potential.  Entrepreneurs helped to balance out the cultism and CA was lucky enough to see unprecedented economic fortune.  Many leftist politicians to this day try to take credit for the prosperity of the state, but the days of wine and roses are long gone.  

  While LA lost its shining gloss in the early 1970s when crime rates began to skyrocket, San Francisco was able to hold on to its affluent image for much longer and was once considered one of the greatest cities in the US.  The silicon valley revolution extended the otherwise dwindling life span of the area as major tech companies set up shop well into the 2000s, but the past decade in particular has not been so kind to the Bay Area.  

  This may be because the traditional dynamic has changed.  The free market mentality of the business contingent used to keep the insanity of the Frisco leftist ideologues in check, but now, the corporate world has joined the cult and is engaging in activism right along side all the crazies.  There is no longer any balance – California and specifically San Francisco went “full retard.”  

  The city is now famous for its depravity and decline.  With multiple “poop tracking” apps to help residents avoid stepping in human fecal matter piled on the sidewalks as well as entire neighborhoods and street corners overrun with homeless people and Fentanyl addicts, it’s very hard for the city to play itself off as a destination of dreams (though they still try).  Much like LA and the city of Portland, wherever the political left takes full control these are the kinds of unfortunate scenes you are likely to witness on a regular basis in San Francisco:

  Recent estimates project at least 20,000 homeless will reside in the city in 2022, and poverty levels will remain around 11.3% of the population.  Previous homeless estimates date back to 2019, and surveys were skipped in 2020 due to the covid lockdowns.  The Bay Area’s crime rates are FAR above the national average according to FBI stats, with property crime more than double that of the rest of the US.    

  The social implosion along with the draconian CA covid mandates caused hundreds of thousands of people to flee the state.  Progressives moved out of the major cities as well, but only about one hour away on average.  The top destinations for people leaving San Francisco were Sacramento, Stockton and San Diego according to U-Haul statistics.  The rumors of conservative states like Texas being overtaken by CA leftists are greatly exaggerated, but the stats do show that CA residents are indeed moving away from the big cities in large numbers and expanding into 2nd tier cities and smaller towns close by.    

  San Francisco saw a 6.8% population decline from 2020 to 2021.  Sales tax revenues dropped by 50% from 2019 to 2020 and city officials do not expect a recovery until 2025. 

  The effects of the exodus along with political mismanagement by Democrats is leading to a complete implosion of California’s major cities.  The mainstream media and the state’s PR spin teams are fond of citing their global financial standings, but what they have been hiding is the steady decline in major population centers and the fact that places like San Francisco are built on foundations of economic sand.  

  The most visible signals of collapse are in the real estate market for now.  Residential home sales have cratered by around 30% and prices are beginning to drop.  Though, a loss in home sales is happening across the country and median home prices in California spiked by at least 36% in the past two years.  It’s unlikely that they will fall back to previous lows anytime soon, even with the Federal Reserve raising interest rates. 

  The real damage is in commercial real estate.  Mass office vacancies in San Francisco have not been repaired and the city’s downtown recovery has ranked dead-last out of 60 US metropolitan areas.  Commercial property value losses are now estimated to average around 40%.  In some cases, bids for office space in downtown San Francisco are coming in at 60%-70% less than they would have in 2019.   

  The region’s core financial support comes from the wealth activity in the city’s center, and now it’s crumbling because no businesses want to operate there (nor can many of them afford to operate there due to taxation).  The amazing thing is, they did it to themselves.  

  Impractical and destructive green tech and carbon laws, totalitarian covid lockdowns and mandates, extremely high taxes and endless bureaucratic red tape have all incrementally sabotaged the cities of the Golden State.  And, the worst of it began the moment business interests decided to stop caring about profits and growth and instead felt the need to virtue signal their political loyalties and push leftist propaganda.  This emboldened far-left factions within the cities and gave them a free pass to implement whatever insane policies they wanted.  Thus, the golden goose has been destroyed.

  CA politicians and leftists will continue to deny reality, but the state is on life support and it’s fading fast.  San Francisco is a prime example of the obvious fall.  By this time next year they won’t even try to hide it, they’ll only be looking for a scapegoat to blame.    

  Tyler Durden
  Mon, 09/12/2022 – 19:20

• "It's Very Big Size" – FOMO Sparks Big Bullish, Levered Bets Ahead Of CPI
  “It’s Very Big Size” – FOMO Sparks Big Bullish, Levered Bets Ahead Of CPI

  As we noted earlier, stocks squeezed higher for the 4th straight day, but VIX (unusually) rose today along with the equity indices (extending the decoupling we started to see on Friday)…

  

  Source: Bloomberg

  These are the tell-tale footprints of large levered-long bets being placed as options traders chase the market higher.

  And, as Bloomberg reports, a number of large, bullish bets were flagged following last week’s reports from Goldman’s trading desk that they’d seen the largest notional long-buying in a year ahead of tomorrow’s CPI print.

  There were “several examples of investors turning to upside calls for exposure to (or protection against) further momentum, both outright and versus downside put sales,” Christopher Jacobson, a strategist at Susquehanna Financial Group, wrote in a note.

  “They could certainly be driven by investors who are underweight looking to these upside calls for limited-risk exposure.”

  Susquehanna pointed out one trader that paid 53 cents each for 30,000 calls betting the iShares Russell 2000 ETF would rise to $199 by month-end. Another involved paying about $2.65 for roughly 15,000 calls linked to the SPDR S&P Biotech ETF (ticker XBI) with a strike price at $100 expiring in November.

  Danny Kirsch, head of options at Piper Sandler, noticed a rather large derivatives trade coinciding with the initial rally.

  One trader paid $90 each for 9,000 S&P 500 calls (at a cost of around $80 million) wagering that the S&P 500 would rally to 4,300 by December.

  Putting this altogether, we see the Put-Call ratio collapse today…

  

  “It’s very big size,” said Kirsch. “Maybe someone is under-invested or just bullish looking to play for year-end rally.”

  We do note that the morning started off with S&P Delta having shifted into positive territory ahead of today’s squeeze and the event risk of tomorrow…

  

  But as we noted, CTA flo-flops from short-to-long are the ammo needed for the next leg to squeeze higher from significant negative delta lows.

  Just bear in mind one thing…

  

  The S&P 500 has lost 0.5% on average on a CPI day YTD.

  Tyler Durden
  Mon, 09/12/2022 – 18:40

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