Today’s News 20th May 2022

• The Internet Crime Business Is Booming
  The Internet Crime Business Is Booming

  The FBI’s Internet Crime Complaint Center (IC3) has released its 2021 Internet Crime Report which found that 2021 was another record year for both victims of internet crime and dollar losses in the United States.

  847,376 complaints were logged by IC3 in the last calendar year with total losses amounting to $6.9 billion. As Statista’s Martin Armstrong reports, the most frequent internet crimes recorded in 2021 were some form of Phishing/Vishing/Smishing/Pharming.

  

  You will find more infographics at Statista

  2020 was notable for the emergence of schemes exploiting the Covid-19 pandemic with both individuals and businesses targeted.

  Some 28,500 complaints were received relating to Covid-19 scams that year with most of them aimed at the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). In 2021, the pandemic is still being taken advantage of, as IC3 reports:

  “The pandemic and the restrictions on in-person meetings led to increases in telework or virtual communication practices…

  IC3 has observed an emergence of newer BEC/EAC schemes that exploit this reliance on virtual meetings to instruct victims to send fraudulent wire transfers.”

  Business Email Compromise and Email Compromise schemes (BEC/EAC) were the costliest internet crimes last year with adjusted losses of nearly $2.4 billion.

  Tyler Durden
  Fri, 05/20/2022 – 02:45

• Biden Reverses Course On Plans To Ship Long-Range Rockets To Ukraine
  Biden Reverses Course On Plans To Ship Long-Range Rockets To Ukraine

  Authored by by Kyle Anzalone & Will Porter via The Libertarian Institute,

  President Joe Biden is resisting demands from Kiev to supply long-range rocket launchers to the Ukrainian military, Politico reported, suggesting the White House is concerned the weapons could be used for strikes inside Russia.

  Ukrainian officials have requested increasingly advanced weaponry from Washington in recent months – even before Moscow’s invasion commenced earlier this year – and are currently urging the US government to send M270 Multiple Launch Rocket Systems (MLRS), among other hardware.

  

  While Biden was reportedly willing to consider the request during a trip to Germany last month, where dozens of countries met to discuss aid for Ukraine, a congressional staffer told Politico the plan is not moving forward. 

  “There was momentum on it at Ramstein, but that seems to have cooled,” they said, adding that “There’s definitely a frustration building” among officials in Kiev over a perceived reluctance to send heavier arms. 

  The staffer did not offer a reason for the change of heart, but according to three other sources cited by the outlet, Kiev believes the White House is “holding back over worries the weapon could be used to launch strikes inside Russia, thereby expanding and prolonging the conflict.”

  Though the war raging in Eastern Europe has largely been confined to Ukrainian territory and separatist-controlled areas in the Donbass region, a number of mysterious blasts have erupted on Russian soil over the last month, including in the Belgorod, Kursk and Bryansk regions bordering Ukraine. Kiev has stopped short of taking credit for the apparent attacks, but US officials have confirmed that Ukrainian forces were behind at least one of the incidents.

  Depending on the munitions used, the M270 MLRS has a range of between 20 and 40 miles, though more advanced rockets can travel up to 100 miles, potentially putting them far beyond the range of the American M-777 Howitzers supplied to Ukraine in recent weeks. Even with special rocket-assisted rounds, the latter artillery pieces have a maximum range of just over 18 miles. The M270 is also a self-propelled platform and was specifically designed to evade Russian artillery strikes, capable of rapidly firing up to 12 rockets before moving to a new position. 

  

  Washington has sent billions of dollars in weapons to Ukraine since the Russian invasion began in late February, including attack helicopters, artillery, tank-killing Javelin missiles and Stinger anti-aircraft platforms. Moreover, a massive new aid package currently moving through the Senate will bring total US assistance since March to nearly $54 billion if passed, much of it devoted to arms and other military gear. 

  Despite the complaints from Ukrainian officials, however, Under Secretary of State for Political Affairs Victoria Nuland recently suggested Kiev may be receiving US-made multiple-launch rockets after all, telling European Pravda in April that “we already supply MLRS systems.” The comments prompted speculation that Washington could be sending the M142 HIMARS, a lighter-weight, wheeled variant of the M270. President Volodymyr Zelensky has repeatedly mentioned both systems by name in public appeals for additional armaments.

  An unnamed White House official cited by Politico also indicated that Biden’s reluctance to send the M270 did not mean a final decision had been made, stating that Washington and Kiev are still “in active discussion” about the weapon.

  Tyler Durden
  Fri, 05/20/2022 – 02:00

• Stop The Denial: Ukraine Is A Proxy War That Will Lead To Wider World War
  Stop The Denial: Ukraine Is A Proxy War That Will Lead To Wider World War

  Authored by Brandon Smith via Alt-Market.us,

  At the onset of the Russian incursion into Ukraine I argued in my article ‘Order Out Of Chaos: How The Ukraine Conflict Is Designed To Benefit Globalists‘ that US boots would be on the ground within a few months. I was wrong – As it turns out, US and European military boots were ALREADY on the ground. Ukraine was a proxy war from the very beginning.

  

  But what is a proxy war, really? It means that Russian troops are fighting Ukrainian soldiers that are intermingled with western “advisors” and most likely US and European special forces, not to mention US intelligence operatives utilizing all the information gathering technology at the disposal of the Department of Defense. In other words, Russian soldiers are being killed by Western assets. Some pro-Ukraine people might ask why this is a problem?

  To understand the gravity of this situation we have to first examine the historical significance.

  The closest event in history that I could approximate Ukraine to is Vietnam, when communist elements within the country were receiving constant aid, weaponry and even some troops from China, along with monetary and technological aid from the Soviet Union. Vietnam was essentially a “safe” arena or cage match between the West and Communism; a place where the paradigm players could fight it out without risk of a larger nuclear exchange. The globalists could sit back, relax and watch the show while Americans sacrificed their lives over a conflict that did not need to exist.

  Ukraine is similar, but the stakes this time are much higher. This is probably why the mainstream media and the White House have been in full denial that Ukraine is a proxy war at all, and have consistently downplayed the complex involvement of Western military assets. The fact is that Ukraine would have fallen completely by now had it not been for the fact that Russia is not really facing Ukraine; it is facing a proxy force of US and European support elements feeding intel, weaponry and likely direct kinetic support.

  In my article ‘Ukraine Learns The Value Of An Armed Citizenry, But Far Too Late,’ published on March 2nd, I noted that the Ukrainian “militia” programs being instituted at the last minute while Russia troops swiftly marched across the Donbass were a side show. The media was acting as if citizens with no more than a couple of weeks of training were going to make some kind of difference in the war; this was nonsense. In my view, the insurgency narrative was meant as cover for well trained Western assets already in place with advanced anti-tank and anti-aircraft technology. As I stated in that article:

  “Today, as Russia invades, the Ukrainians don’t even have basic [defense] measures in place. Their ability to hold off the Russians at all is predicated on American missile systems like the Javelin which are being steadily funneled into the Ukrainian military.

  Also, the methods which Ukrainian forces are using to ambush Russian armor columns are rather advanced and familiar. I suspect the possibility that there are outside military “advisers” (perhaps US advisers) on the ground right now in Ukraine. The advanced guerrilla-style ambush tactics and the results look similar to training that is often given to Green Berets or SAS. The UK did send anti-tank weapons along with a small group of “trainers” to Ukraine in January.

  Maybe I am mistaken, but if this is the case it would be diplomatically disastrous if such adviser teams were ever discovered to be involved in the fighting…”

  Not long after I wrote this, a stream of information leaks revealed that US and EU military involvement was far deeper than I had expected.

  French journalist and Le Figaro senior international correspondent Georges Malbrunot came back from Ukraine with revelations that Americans are “directly in charge” of the war on the ground. He added that he and the volunteers he was with “almost got arrested” by the officials and that they were forced to sign a contract “until the end of the war” which denied then the right to tell the public about the circumstances they witnessed.

  Citing a French intelligence source, Malbrunot also tweeted that British SAS units “have been present in Ukraine since the beginning of the war, as were the American Deltas.”

  This was obvious from the advanced tactics being used by “Ukrainian” forces to stall the Russian advance, but the first hand accounts confirm the problem is real. The New York Times and other media outlets have been publishing rare admissions of US involvement in intelligence sharing with Ukrainians which have led directly to the deaths of multiple Russian generals as well as the destruction of major assets such as troop transport planes and the Russian flagship Moskva.

  In the meantime, Pentagon officials and Joe Biden have incessantly denied that Ukraine is a “proxy war.” If it’s not a proxy war, then I don’t know what is. Without US, UK and EU involvement, there is NO WAR. It would already be over and Ukraine would have surrendered weeks ago.

  People can argue whether or not this is a good thing or a bad thing. As I have mentioned in multiple articles, I have no feelings either way because the entire event appears to be a distraction from the much more important threat of global economic decline and the inflationary crisis. The thing to remember here is that this is indeed a proxy war and that the very presence of American and European military assets on the ground in Ukraine could be used as a rationale by Russia to expand their operations far beyond the Donbass region.

  Not only that, but it also justifies wider tactics that directly target the US and Europe. For example, a proxy war allows Russia to reasonably argue in favor of completely cutting off the EU from oil and natural gas resources, which Europe relies on for around 40% of its energy needs. It justifies Russian economic strategies including alliances with China to cut out the US dollar as the world reserve currency. And, I continue to expect cyberwarfare attacks sometime this year as a result of the Ukraine situation. At the very least, such attacks will be blamed on Russia and China whether or not they are actually responsible.

  Does the presence of US and European troops in Ukraine mean a global nuclear war is imminent? It;s unlikely. Just as Vietnam did not lead to a nuclear war between Russia, China and the US despite the NVC receiving steady supplies and training from Soviet and Chinese forces, there is minimal chance that global nuclear war will erupt from the Ukraine. Mutual destruction does not serve the interests of the globalists, at least not if they hope to predict the outcome in the slightest.

  That said, I would not be surprised to see at least one mushroom cloud somewhere in the world this decade within a regional conflict. Also, world war does not have to become nuclear to be disastrous.

  Sadly, because of Hollywood movies a large number of people have misguided notions of what World War III might actually look like. Entertainment media always depict WWIII as happening in a flash, an instant in which missiles are launched and a broken civilization of survivors is left to pick up the pieces. What they never show is a long grinding war of financial attrition, supply chain disruptions, cyber attacks, and drawn out regional battles in which Americans are shipped overseas to die for no purpose other than to pretend that these territorial disputes are somehow “our responsibility.”

  What I see in Ukraine is the beginnings of a war unlike any other; a war in which the weapons are primarily indirect and financial rather than kinetic. Because of global interdependency in trade many Western nations have been left utterly defenseless in this kind of conflict. We don’t have the ability to fight back because our economic systems are built around a model that demands we abandon domestic production and rely on the resources and industry of other nations.

  This is never more true than in our relationship with China, which controls around 20% of all export goods into the US. China has closely allied with Russia. This is not going to change because they know that there is nothing the West can do to about it; there is far too much economic leverage involved. Furthermore, the events in Ukraine are probably a precursor to China’s own invasion of Taiwan.

  If this is the plan, then China would have to wait for optimal weather conditions after the monsoon season, sometime in September. This would start with missile bombardment and infrastructure attacks, followed by an amphibious assault sometime in early October.

  The proxy war in Ukraine is a key moment in history going forward (along with the potential invasion of Taiwan), because it offers global power interests with dreams of a “Great Reset” the ability to offload the worldwide economic crisis they created years ago onto the “tides of fate.” They can say that the collapse only happened because of the hubris of sovereign nations and “meaningless borders.” If the US and Europe are directly involved in the killing of Russian troops, and this is widely exposed, then the Russian side of the narrative become clarified and the Western side becomes muddled. Direct Russian retribution becomes logical and rational rather than the crazed reaction of a nation led by a madman as the mainstream media claims.

  Both sides of the Kabuki theater have to feel as though they are justified in escalating a small war into a world war. That is how this has always worked. When the working class population gets a little too unruly and the threat of rebellion against the establishment is at hand, the elites start a war. It’s like clockwork. This tactic weakens the general population, wears down the number of fighting age men that might have otherwise presented a threat to the ruling class and creates enough fear and panic to convince the public to trade away more of their freedoms.

  The wild card right now is the US and European populations, and to some extent the Russian citizenry, and how they respond. The old joke is “What if they held a war and nobody showed up to fight?” This is a potential reality right now as it is in the hands of the public how far the Ukraine issue goes. Are most Americans and Europeans willing to send their sons and in some cases daughters to fight and die over the Donbass? Are Russian citizens willing to fight and die beyond the borders of Ukraine?

  A lot of people are engaging in big talk lately, but is this really the hill they are ready to die on? I think not. Why? Because deep down most people know that this war is a farce, a play on the global chess board by elitists with nefarious aspirations. They know that the reasons for the war are not pure, on either side. They virtue signal in favor of Ukraine, but they will never be willing to go and risk their lives for Ukrainian soil. Nor are they willing to risk a family member’s life for Ukraine.

  I suspect that the globalists know this by now, as the narrative has been shifting away from trying to convince Americans that open military involvement is needed. They will switch to the economic side of the conflict in the hopes that fiscal disaster will fog the minds of the public and make them more willing to support wider war tomorrow.

  *  *  *

  If you would like to support the work that Alt-Market does while also receiving content on advanced tactics for defeating the globalist agenda, subscribe to our exclusive newsletter The Wild Bunch Dispatch.  Learn more about it HERE.

  Tyler Durden
  Fri, 05/20/2022 – 00:00

• Hamptons Pool Craze Has Some Homeowners Waiting Years For A Dip 
  Hamptons Pool Craze Has Some Homeowners Waiting Years For A Dip 

  Hamptons, New York’s summer playground for Wall Street execs and Hollywood celebrities, has an extremely tight housing inventory — following two years of city-dwellers fleeing cities for the cozy beach town. During the pandemic, residents expanded backyards and many desired luxury pools. There has been a backlog of pool building, with some residents waiting at least one year or more for their backyard oasis. 

  Pools and spas are in high demand that has inundated pool builders in the Hamptons. The pool industry has never had this much demand in the area, mainly due to the work-at-home lifestyle and influx of new residents. 

  

  Greg Darvin, the owner of East Hampton, New York-based company, Pristine Pools, told Bloomberg that massive backlogs and long waitlists would persist for the next few years. “If you haven’t planned your 2023 pool yet, you’re too late,” he said. 

  Before the pandemic, Darvin said clients wouldn’t commit until they were ready for a new pool. “Now we book one year ahead, and we immediately go into hard contract,” he added. 

  Supply chain shortages and soaring material costs have also been an issue. “Now we buy anything we can find and store it,” he added. 

  The high-end pool market hasn’t slowed down (yet) and could remain robust through 2023. With so much pool building demand pulled forward in the last few years, the question remains what happens after 2024. 

  Tyler Durden
  Thu, 05/19/2022 – 23:40

• California To Spend $5.2 Billion On 'Electricity Reserve' To Avoid Blackouts
  California To Spend $5.2 Billion On ‘Electricity Reserve’ To Avoid Blackouts

  Authored by Julianne Geiger via OilPrice.com,

  California has proposed spending $5.2 billion on creating a “strategic electricity reliability reserve” that would help the state avoid blackouts when its electric grid is stressed, a 2022-2023 budget revision document showed on Friday according to Bloomberg.

  California has weathered a fair amount of criticism over its electric grid, which contributed to rolling blackouts as recently as 2020. California warned last week that it could run into electricity shortages this summer with drought, heatwaves, and wildfires continuing to stress the grid.

  

  But renewables and California’s electricity exports have also stressed the grid.

  The Reserve will be developed using existing generation capacity that was scheduled to retire, new generation, new storage projects, clean backup generation projects, customer side load reduction capacity that is visible to and dispatchable by CAISO during grid emergencies, and diesel and natural gas backup generation projects – which the budget document stressed would have emission controls and all required permits.

  Of note were two items in that list: “existing generation capacity that was scheduled to retire” and “diesel and natural gas backup generation projects”.

  California is set to retire 6,000 MW of nuclear and gas-fired energy production.

  The Reserve will be capable of providing up to 5,000 MW that will be available whenever the grid is stressed.

  The new budget would also earmark $8 billion over five years to increase the state’s system reliability and provide relief to consumers as electricity rates rise.

  The budget now calls for $22.5 billion in funds for the purpose of “climate resilience and integrated climate, equity, and economic opportunity across the state’s budget to mobilize a coordinated all-of-government response to the climate crisis.

  Tyler Durden
  Thu, 05/19/2022 – 23:20

• Maersk & Goldman Warns China Restart Will Spark Renewed Supply Chain Congestion
  Maersk & Goldman Warns China Restart Will Spark Renewed Supply Chain Congestion

  A.P. Møller – Maersk A/S, the world’s largest container shipping company by capacity, and Goldman Sachs’ supply chain congestion analysis (in separate reports) indicate if China restarts, renewed supply chain congestion will be seen worldwide. 

  Maersk told its Asia-Pacific customers that China’s zero COVID policy to lockdown Shanghai, the world’s largest port and China’s financial hub, for nearly two months, will “have an effect all over the world in the coming months.” 

  For seven weeks, a massive parking lot of vessels has been building outside Shanghai ports as operations came to a crawl because of the lockdown of 26 million residents. 

  

  Since the lockdown began in late March, Goldman Sachs’ weekly congestion index has slid as US West and East Coast port congestion plunged. This is because the trans-Atlantic volume of vessels from China to the US declined as port capacity was restricted due to lockdowns. 

  

  Maersk told clients, “statically speaking, the virus is under control,” and this could soon indicate Chinese port capacity may expand and sailings could increase to the US, which will only complicate things down the line for US West Coast ports as a backlog of goods will flood US ports. 

  Goldman also agrees and warns: “We could see a resurgence of ship bottlenecks if sudden restarts in China lead to renewed sailings all at once.”

  A forward leading indicator of Chinese port activity and if a resurgence of bottlenecks is ahead for the US are global container freight rates. 

  Weekly changes of the World Container Index show that when China went into lockdown, container rates for 40-foot boxes dropped. 

  

  By shipping lane, if there’s a tick-up in freight rates between China and the US West Coast, then it would be safe to assume China is restarting. 

  

  If China restarts and container rates begin to rise, the countdown will be about 1-2 months until a massive backlog hits US ports, renewing port congestion right before midterm elections. 

  Tyler Durden
  Thu, 05/19/2022 – 23:00

• NY Governor Announces New Gun Control Plans After Buffalo Shooting, Signs Order On Domestic Terrorism
  NY Governor Announces New Gun Control Plans After Buffalo Shooting, Signs Order On Domestic Terrorism

  Authored by Mimi Nguyen Ly via The Epoch Times,

  New York Gov. Kathy Hochul on Wednesday proposed new measures and signed an executive order to “strengthen and close loopholes” in the state’s gun laws in the wake of the deadly shooting in Buffalo, New York.

  

  The governor also signed a separate executive order to “combat the steady rise in domestic terrorism and violent extremism” and “crack down on social media platforms that host and amplify content that promotes and broadcasts violent, lawless acts,” according to a press release from her office.

  Payton Gendron, 18, is accused of having opened fire at a supermarket in Buffalo on May 14, killing 10 people and injuring three others. He surrendered to police who confronted him at the site. Gendron was arraigned on a first-degree murder charge to which he has pleaded not guilty. As of May 19, he is jailed under a suicide watch.

  

  Gun Control Proposals

  Hochul said her office will work with legislators to propose a package of laws that will strengthen current gun control measures and tighten any loopholes in the state.

  The suspected shooter had legally bought his weapon, a Bushmaster XM-15 rifle, and later modified it with an extended magazine, which is illegal to own in New York.

  “The gun the individual purchased in our state was legal,” Hochul told reporters. “But what happened was, is that you can go literally across the border to Pennsylvania and buy a magazine with 30 bullets in it. And that’s what happened. You can get the base gun here legally in the state of New York, go buy a high capacity magazine, and just attach it. That’s what happened.”

  “So, we have to deal with this. And we will, we will. We have announced there is a package of gun laws that we’re going to be proposing. We have more guns to deal with.”

  As part of a slew of measures, Hochul said her office will address “AOW” or “any other weapons,” which refers to a new category of weapons with characteristics that fall between rifles, shotguns, and pistols. Such weapons were “specifically designed to fall outside the realm of regulation, so they’re not subject to [New York] laws,” Hochul said.

  “We are introducing legislation that revises the definition of a firearm to include those weapons, which means we’ll be able to charge and prosecute people accordingly,” she said.

  Hochul also said New York’s red flag law needs to be strengthened. Red flag laws allow law enforcement to confiscate guns from those who are believed to pose a danger to themselves or others.

  “People are wondering how you had the right to acquire the weapon in the first place when you are this individual. We have red flag laws in place to prevent exactly this situation,” Hochul said.

  The governor issued an executive order to require the New York State Police to file an extreme-risk order of protection under New York’s red flag law when they have probable cause to believe that an individual is a threat to themselves or others.

  “Previously, current law, it’s an option to do so. And now, it’ll be a requirement,” Hochul noted.

  Gendron was able to purchase his weapon in part because he was never reported under New York’s red flag law, which would have prevented the store from selling him the weapon.

  Officials said on May 15 that last year, Gendron had made a reference to a murder-suicide in a paper he submitted at his high school, after which New York State Police took him into custody and had him undergo a mental health evaluation in June 2021. He was released about a day-and-a-half later, and was not charged criminally.

  According to a 180-page manifesto posted online that is alleged but not confirmed to have been written by Gendron, the Buffalo area was chosen as the target of the shooting because of strict laws governing gun ownership there and because it has a large black population.

  The Epoch Times has not been able to independently verify whether the manifesto was written by Gendron. The Erie County DA’s office told The Epoch Times that they are investigating the manifesto.

  

  Domestic Terrorism

  The author of the manifesto had identified themselves as a white supremacist. Authorities said Gendron live-streamed the shooting online. Police have called the shooting a “hate crime and racially motivated violent extremism.”

  Hochul told reporters on Wednesday that the suspect shooter was “radicalized by white supremacists and white nationalist beliefs.” She said such messages and racist philosophies are “easily accessible on social media platforms.”

  The incident was “white supremacy in this nation at its worst,” Hochul said, adding, “The most serious threat we face as a nation is from within … It’s white supremacism.”

  Hochul is signing another executive order to “fight the troubling surge in domestic terrorism and violent extremism frequently inspired by, planned on, and posted about on social media platforms and Internet forums,” her office said.

  The order will establish a unit within the Office of Counter-Terrorism at the Department of Homeland Security and Emergency Service to focus exclusively on domestic terrorism.

  “First time ever. They’ll develop the best practices for law enforcement, for mental health professionals, for school officials to address the rise in homegrown extremism. And we’ll make sure that they’re trained to know how it occurs, where it occurs, and how to stop it,” Hochul said.

  She said a “Threat Assessment Management Program” will be launched that will include multi-disciplinary teams in counties throughout New York State that will identify and assess the domestic terrorism threats.

  “This coordination is critical, it does not exist now,” Hochul said. “It does not exist, that these stakeholders need to be communicating and sharing information … Who heard what, who saw something? And then you get the law enforcement, and the mental health professionals, in some cases, school professionals, actually communicating about what they’re seeing. We have a much better opportunity to be in the prevention business, instead of just the cleanup business.”

  

  Social Media

  Hochul said the executive order she’s signing will also establish a dedicated domestic terrorism unit in the New York State Intelligence Center to track domestic violent extremism through social media.

  “We’re going to ensure that we have the best-in-the-nation cybersecurity teams to monitor the places where radicalization occurs,” Hochul said.

  She said the suspected shooter’s live-stream of the shooting had “created an opportunity for people to see this and share what he was doing,” after which people would “create platforms so they can share their demented ideas with each other in the hopes that this continues to spread, the virus spreads,” thereby “radicalizing more.”

  The governor said that algorithms on some social media platforms can serve to “elevate hateful incendiary speech.”

  “There’s algorithms in place that ramp up and share this [hateful speech] even more, with higher frequency than other messages. So this incendiary content is pushed out to more people in 2022,” she said. “That’s how radicalization is occurring, through the social media echo chamber. … These social media platforms have to take responsibility. They must be more vigilant in monitoring the content, and they must be held accountable for favoring engagement over public safety.”

  Hochul said she has requested New York State Attorney General Letitia James’s office to investigate the social media platforms that broadcast the attack and that “promote and elevate hate speech.”

  James announced on Twitter on Wednesday: “My office is launching investigations into the social media companies that the Buffalo shooter used to plan, promote, and stream his terror attack. We are investigating Twitch, 4chan, 8chan, and Discord, among others, all platforms that the shooter used to amplify this attack.”

  Zachary Stieber contributed to this report.

  Tyler Durden
  Thu, 05/19/2022 – 22:40

• China In Talks To Buy Cheap Russian Oil For Strategic Reserves
  China In Talks To Buy Cheap Russian Oil For Strategic Reserves

  China is in talks with Russia to buy its cheap oil to replenish strategic reserves, in the latest indicator of deepened energy ties between the two large powers and rivals to the United States. It’s also the latest sign that a mulled EU Russian oil embargo may in the end be blunted before it ever gets off the ground, amid continuing inter-EU resistance led by Hungary.

  Bloomberg reports Thursday that “The crude would be used to fill China’s strategic petroleum reserves, and talks are being conducted at a government level with little direct involvement from oil companies, said a person with knowledge of the plan.”

  

  Currently the EU is negotiating toward a phased embargo, seeking to find compromise with those central and eastern European members which are heavily dependent on Russian energy.

  The prior US ban on imports of Russian oil, which came early in the invasion of Ukraine, has already served to push more Russian oil tankers east towards Asia, diverting from Western markets. India too has reportedly been taking advantage of the comparatively cheaper prices.

  A source privy to the talks said they aren’t close enough that a deal is guaranteed to be signed, nor is an estimated volume of crude Beijing is reportedly seeking known at this point.

  “There is still room to replenish stocks and it would be a good opportunity for them to do so, if they can be sourced on commercially attractive terms,” a senior oil analyst at industry firm Kpler, Jane Xie, told Bloomberg.

  The report cites the data analytics firm to estimate that China’s “overall stockpiles are at 926.1 million barrels, up from 869 million barrels in mid-March — but still 6% lower than a record in September 2020.” And by way of comparison, “the US Strategic Petroleum Reserve has a capacity of 714 million barrels. It currently holds about 538 million barrels.”

  

  Chart via Reuters

  China remains the world’s single biggest buyer of Russian oil, with official Chinese government figures for 2021 showing it imported almost 1.6 million barrels per day of Russian crude that year.

  But the immediate impact of Western punitive action targeting Moscow has seen more shipments sent to Asia. “China is now clearly buying more Ural cargoes. Ural exports to China have more than tripled. This is despite a weakening of Chinese imports,” said Homayoun Falakshahi, senior analyst at Kpler, as cited in Reuters

  Tyler Durden
  Thu, 05/19/2022 – 22:20

• The Fed Has Crossed The "Hard Landing" Rubicon So How High Will It Hike? One Bank Crunches The Numbers
  The Fed Has Crossed The “Hard Landing” Rubicon So How High Will It Hike? One Bank Crunches The Numbers

  One month ago, a SocGen strategist calculated something remarkable: at a time when the Fed is warning of multiple 50bps hikes in coming FOMC meetings and Powell is threatening to take fed funds above neutral – somewhere in the great unknown zone between 2.0% and 4.5% – and even the gradually fading market consensus still expects just under 8 hikes this cycle…

  

  … quant Solomon Tadesse calculated that according to his analysis, if the Fed i focused on preserving growth (at the expense of higher inflation), then Fed Funds will peak at just around 1.0%, which combined with a QT programme to the tune of about $1.8tn, means the Fed will very soon be forced to reverse.

  Furthermore, as Tadesse has since pointed out, with the Fed’s recent bold 50bp hike, “there does not seem much room left for manoeuvring for the desired soft-landing.” He then echoes what we have been saying in recent weeks, namely that the “type of week-long market meltdown witnessed since the recent hike often precedes a policy about-face in line with our projection.”

  Ok but what if having decided to push the US into a recession, growth be damned, the Fed is now focusing only and entirely on inflation?  After all, current rates are far, far below the prevailing CPI which is around 8%, and while many argue whether CPI has peaked, there is a significant possibility CPI could hit double digits in the coming months.

  This is the question that Tadesse addresses in his latest must-read note (available to pro subs in the usual place), in which he writes that “an inflation-fighting impulse is currently in the air, begging the question of what it could take to stamp out the current trend for good, even at the cost of a hard landing.”

  According to the SocGen quant, given the rising inflation prints and accompanying political pressure, if the pro-growth tightening threshold is breached – which it likely will be as soon as the next FOMC meeting, making a hard landing inevitable, and unleashing the Fed in favor of a single-minded inflation-fighting policy stance, Tadesse’s analysis suggests that it “could take overall monetary tightening of as much as 9.25% to arrest inflation, with the policy rate going up to 4.5% and the balance coming from QT of about $3.9tn, which would slash the current Fed balance sheet by about half.”

  

  Here is some more detail from the SocGen quant on this potential “alternative” in which the Fed single-mindedly pursues inflation containment, going Volcker-style with accelerated rate hikes reminiscent of the 1970s and early 1980s, when the average MTE (tightening to easing) ratio was about 1.5x (left-hand chart below).:

  Such aggressive monetary tightening with a focus solely on inflation containment, even at the cost of inducing recession, according to our analysis, would require overall monetary tightening of about 11.6%. Given that rates have already been tightened by 2.5%, another 9.25% of monetary tightening might be expected via policy rate hikes and an aggressive QT program. The policy rate could go up by as much as 4.5%, with the remainder coming from QT (right-hand chart above). These projections are all before the 4 May rate hike of 50bp, which lowers the balance proportionately.

  

  At a rate of 12bp per $100bn of QT, this also amounts to a QT program of about $3.9tn, roughly equivalent to the net growth in the Fed’s balance sheet during the pandemic. An important caveat in the analysis is the presumption that current inflation levels resemble those of the late 1970s through the 1980s. As recent inflation prints are the highest in 40 years, this might be a reasonable assumption, particularly in reference to the rates seen in the early 1980s. In addition, in interpretating the results, there is an implicit assumption that the current inflation prints are persistent and demand driven. However, as our earlier analysis shows, the current inflation dynamics are driven both by transitory supply-related disruptions and demand-driven price pressures. Should the supply bottlenecks ease over time, the degree of monetary tightening needed to contain inflation through demand destruction could turn out to be lower.

  

  The above-left chart shows monetary policy frontiers (MPF). These are all the policy-rate hike and QT combinations that could generate the inflation-containing overall tightening of upwards of 9pp and the growth-conscious overall tightening discussed earlier, with the most likely outcomes of policy combinations identified with stars. Thus, our analysis suggests that while it might only take another 25-50bp for growth-conscious tightening to peak before a hard landing, an aggressive inflation-containing policy could mean additional policy rate hikes of up to 4.0pp.

  As noted earlier, the above analysis assumes that the Fed is resigned to a hard-landing. Does it mean that a soft-landing is now inevitable? Pretty much. Here is Tadasse again:

  In an earlier research note, we argued that if current monetary policy follows a pro-growth impulse, as has been the case over the past four decades, the current tightening phase could peak with only 0.75-1pp of rate hikes, combined with a QT program to the tune of about $1.8tn. After the Fed’s recent bold 50bp hike, there now does not seem to be much room left for manoeuvring toward a soft landing. Moreover, the type of week-long market meltdown witnessed since the hike has often preceded a policy about-face, which is what we expect.

  Summarizing the above, the SocGen quant writes that “monetary policy is thus at a crossroads, with a stark choice between a ‘growth’ conscious, albeit inflationary, rate-hike cycle, peaking after 300bp of tightening (with a mix of QT and FFR) or an inflation-containing, albeit recessionary, rate-hike cycle, peaking at about a 925bp of overall tightening (with a mix of 450bp in policy rate and the balance from QT).”

  And while there could be possibilities in between these two extremes, the middle ground may not, in general, be an admissible rational strategy. Such an intermediate path, plausible due to political pressure or a mid-course reversal in policy priorities between price stability and full employment, would likely fail to accomplish either mandate and could damage central bank credibility.

  

  What does this mean for traders? Nothing good – as Tadesse concludes, equity strategies do not fare well in scenarios of high inflation and declining growth (i.e. stagflation), as companies struggle with falling revenues and rising costs, lower growth causes lower earnings, and higher rates combined with an increase in the equity-risk premium negatively impact valuations. And while SocGen notes, that “cash flow and balance-sheet strength would matter for relative performance here”, we would add that the real question is how fast does the market expect inflation to shrink back to the 2-3% range. The answer to that question will determine most investing strategies for the next year or so.

  For those unable or unwilling to answer, a simple heuristic is that strategies that pay high dividends at cheap valuations (such as quality income) should do well in this environment. So should equity strategies dominated by firms with pricing power, such as those in the upstream of the production chain, as should defensive equity strategies with stable cash flows and relative pricing power (such as utilities, the quality and quality income factors). Pair trades can use these as the long legs, offset with shorts among cyclical and aggressive growth strategies.

  The full note quantifying how high Powell will raise rates is available to pro subs.

  Tyler Durden
  Thu, 05/19/2022 – 22:00

• 68% Of CEOs Say Fed Policy Is About To Trigger A Recession
  68% Of CEOs Say Fed Policy Is About To Trigger A Recession

  No matter how many Tom Lees and Marko Kolanovics CNBC wants to roll out to try and play things off like everything is fine, most CEOs – who spend their time in the real world instead of “analyzing” it – are bracing for a recession. 

  In fact, “CEO confidence has tumbled to the weakest level since the beginning of the Covid-19 pandemic”, a new report from CNN, citing The Conference Board, said this week.

  CEO confidence is now negative for the first time during the economic expansion, the report notes. The C suite is bracing for a turndown as a result of Fed policy, the report notes. 

  68% of CEOs expect that Fed policy is going to trigger a recession, according to a survey fielded between April 25 and May 9 which looked at the responses of 133 CEOs.

  

  Despite this, only 11% of these CEOs are predicting a “hard landing”. Most CEOs said they expect a “very short, mild” recession. We’ll make sure to keep an eye on this figure as we progress further into 2022, especially if the Fed decides to hold course. 

  Dana Peterson, The Conference Board’s chief economist, said: “Businesses are being challenged on so many fronts right now and CEOs have elevated expectations of a recession.”

  61% of CEOs surveyed also said that economic conditions have worsened over the last 6 months. This compares to 35% who said the same in Q1. Only 14% of CEOs said they see “improving economic conditions”. 

  Mike Sommers, CEO of the American Petroleum Institute, commented: “Recessionary-concerns are real.” He added that recessions often follow interest rate hikes. 

  Despite this, there are some “economists” who continue to argue that recession isn’t necessarily imminent. RSM chief economist Joe Brusuelas concluded: “Concerns about an immoderate near term recession are generally overblown. The Fed is attempting to thread the needle while wearing boxing gloves and a mouth guard which reduces its degrees of freedom to act without causing damage to the real economy.”

  Tyler Durden
  Thu, 05/19/2022 – 21:40

• Rickards: "We Are On The Precipice"
  Rickards: “We Are On The Precipice”

  Authored by James Rickards via DailyReckoning.com,

  I don’t believe many people grasp the enormity of the global food crisis we’ll be facing in the months ahead. But the world could be on the verge of a massive humanitarian crisis. Let’s dive in…

  

  The supply chain collapse preceded the war in Ukraine, but the war has only intensified the problems. You can see it with your own eyes when you walk into a supermarket and find long stretches of empty shelves in stores that used to be chock-full of food and other merchandise.

  Even goods that are available such as gasoline are being sold at much higher prices. Prices for gasoline (and diesel, which is critical for goods transportation) have more than doubled in the past nine months. All of this is clear. The question is will it get worse from here?

  Unfortunately, the answer is yes.

  Bob Unanue is the CEO of Goya Foods, which is one of the largest food distributors in the world. Few people are better positioned to assess the global food situation than Unanue, who deals with raw food deliveries on the one hand and retail customers on the other.

  Unanue is now warning, “We are on the precipice of a global food crisis.” Other experts are quoted making a similar point. That’s not hyperbole or fearmongering, but a serious analysis. Here’s why…

  29% of All Wheat Exports in Jeopardy

  In the Northern Hemisphere, the planting season for 2022 is well underway. Crops were planted (or not) in March and April. Based on that, you can already form estimates of output next September and October during the harvest season (subject to some variability based on weather and other factors).

  Plantings have been far below normal in 2022, either due to a lack of fertilizer or to much higher costs for fertilizer where farmers simply chose to plant less. This predictable shortage is in addition to the much greater shortages due to the fact that Russian output is sanctioned and Ukrainian output is nonexistent because it’s at war.

  Russia and Ukraine together account for 29% of global wheat and 19% of global corn exports.

  Russia and Ukraine together produce 29% of all the wheat exports in the world. That doesn’t mean they grow 29% of the wheat in the world. It means they grow 29% of the wheat exports.

  The U.S., Australia, Canada and others grow a lot of wheat but consume most of it themselves. They export relatively little. Importantly, they don’t simply eat it. They feed it to their farm animals. People don’t often make the connection between grain and animal products, but it’s critical.

  Many countries get 70–100% of their grains from either Russia or Ukraine or both. Lebanon gets 100%. Egypt is over 70%. Kenya, Sudan, Somalia, many central African countries and Jordan and other Middle Eastern countries receive much of their grain from Russia or Ukraine.

  No Planting, No Crops

  But it’s worse than that because not only are many Ukrainian exports shut down now, but the planting season is nearly over. And you’re not going to get any grain in October if you didn’t plant it in April or May. And they didn’t for obvious reasons.

  What that means is you project ahead to October, November, December of this year, those countries I mentioned are not going to be able to get their grain supplies. There simply aren’t going to be any, or they’ll be greatly reduced. The combined population of countries that get between 70% and 100% of their imports from Russia or Ukraine is 700 million people.

  That’s 10% of the global population. So you’re looking at mass starvation. You’re looking at a humanitarian crisis of unprecedented proportions, probably the worst since the Black Death of the 14th century. That’s coming down the road, even if most people can’t see it coming or fully fathom the depths of the coming crisis.

  In short, we know enough now to predict much higher prices, empty shelves and, in some cases, mass starvation in the fourth quarter of this year and beyond.

  Beyond the humanitarian aspect of the coming food shortages, there are also potentially serious social and geopolitical ramifications.

  Another Arab Spring?

  You remember the “Arab Spring” starting in 2010. It started in Tunisia and spread from there. Well, it was triggered by a food crisis. There was a shortage of wheat, which triggered the protests.

  There were underlying problems in these societies, but a food crisis was the catalyst for the protests.

  Now, many poorer countries in the Middle East and Africa are facing a much greater crisis as the impact of shortages manifests itself later this year and into next year. Will we see even more social unrest than in 2011?

  It’s very possible, and it could be even more destabilizing than the Arab Spring. We could also see waves of mass migration from Africa and the Middle East as desperate and hungry people flee their homelands.

  Europe endured a wave of mass immigration in 2015. Many migrants were attempting to flee the war in Syria, but there were great amounts of people who weren’t affected by the war. They were just seeking better lives in the welfare states of Europe.

  Mass starvation could trigger an even greater migration, which would present Europe with enormous challenges.

  The United States could also witness another wave of migration at the southern border, which is currently being inundated by migrants. A global food crisis could send the numbers spiraling to uncontrollable limits.

  What if the War Drags On?

  And what if the war in Ukraine drags on well into next year? Next year’s growing season would also be disrupted and the shortages could extend into late 2023 and beyond.

  Well, maybe some would argue that other nations could pick up the slack and grow additional grain. That’s nice in theory, but it’s not that simple.

  Russia is the largest exporter of fertilizer, and sanctions are cutting off supplies. Many farmers cannot get fertilizer at all, and those who can are paying between twice and three times last year’s price.

  That means that crops actually produced will have much higher prices because of the higher price of inputs such as fertilizer, and the higher transportation costs due to higher prices for diesel and gasoline.

  Like I said earlier, we’re looking at a humanitarian crisis of unprecedented proportions, probably the worst since the black death of the 14th century.

  And we’re not prepared to handle it.

  Tyler Durden
  Thu, 05/19/2022 – 21:20

• '76' Gas-Station Chain Repograms Washington State Pumps For $10 A Gallon 
  ’76’ Gas-Station Chain Repograms Washington State Pumps For $10 A Gallon 

  Gas station pumps in Washington state are being reprogrammed to accommodate $10 a gallon and even higher as the summer driving season begins amid tight fuel supplies, according to a report. 

  The Post Millennial has learned gas station chain “76” has reprogrammed its pumps to include double-digit numbers in “price per gallon” at Washington state gas stations.

  A 76 spokesperson confirmed to The Post Millennial they added an extra digit to pumps, noting the change doesn’t necessarily imply the company was anticipating prices above $10 a gallon. 

  The 76 gas station in Auburn, Washington, located at 1725 Auburn Way North, is one of the stations that has had reprogrammed pumps. It also sells high-octane race fuel, which tends to be more expensive, though the special fuel is sold at separate pumps than regular, plus, premium, and diesel. 

  The Post Millennial also reports Washingtonians in the eastern part of the state, specifically in Kennewick, Pasco, and West Richland, are experiencing fuel shortages. 

  

  According to AAA, the average price of gas at a pump in Washington State is $5.18 — above the national average of $4.59 as of Thursday morning. Some of the most expensive gas in the US can be found just south of the state in California, where prices outside of San Francisco range between $6-7 a gallon for regular. 

  76’s move for double-digit prices comes as JPMorgan’s commodity strategist Natasha Kaneva warns the national average for gas can rise another 37% by August to around $6.20. Since much of the West Coast is priced above the national average, this may suggest double-digit prices could be seen in some areas. 

  Tyler Durden
  Thu, 05/19/2022 – 21:00

• Biden's Big Lie: 'Green' Energy Doesn't Save Money, It's 4-6 Times More-Expensive
  Biden’s Big Lie: ‘Green’ Energy Doesn’t Save Money, It’s 4-6 Times More-Expensive

  Op-Ed authored by Stephen Moore via The Epoch Times,

  President Joe Biden keeps claiming that wind and solar energy are going to save money for consumers. But more government subsidies to “renewable energy” is a key feature of the White House anti-inflation strategy recently announced by Biden.

  

  He probably got that idea from John Kerry, the administration’s climate czar, who recently claimed that “solar and wind are less expensive than coal or oil or gas.” Pete Buttigieg, the Biden Transportation secretary, makes the same claims about the thousands of dollars that motorists can save if they buy electric cars.

  This couldn’t be more wrong.

  Proponents of “green” energy boondoggles are often masters at playing with the numbers, because that is the only way that wind and solar electricity generation make any sense. Advocates such as Kerry love to focus on the low operating costs of solar and wind since they don’t require constant purchases of fuel. Ignoring the relatively short lifespan of solar and wind components, as well as the high initial investment, can make it appear as though solar and wind operate at lower costs than fossil fuels or nuclear power.

  Let’s get the facts straight. The cost isn’t just what you pay at the retail level for gas or power. It also includes the taxes you pay to subsidize the power. A 2017 study by the Department of Energy found that for every dollar of government subsidy per BTU unit of energy produced from fossil fuels, wind and solar get at least $10.

  That’s anything but a money saver.

  The reason the subsidies are so high is that solar and wind have additional costs compared to their more reliable competition. “Green” energy sources are non-dispatchable, meaning their output can’t be changed to match demand. The wind doesn’t blow harder, and the sun doesn’t shine brighter, just because electricity use is peaking.

  Conversely, fossil fuel entities—such as a coal plant—can ramp up generation when we need it most and ramp down when demand falls.

  Widespread adoption of solar and wind generation would necessitate expensive batteries on a large scale to ensure that people still have power when the wind stops blowing or when the sun stops shining—like it does every single night.

  So, unlike reliable and flexible natural gas, solar and wind require large-scale storage solutions: massive banks of batteries that are hardly environmentally friendly but are also extremely expensive. And since batteries don’t last forever, they add to both the initial expense and maintenance costs during the life of a solar or wind energy generating station.

  The same problem exists with electric cars. The sticker price on EVs is considerably higher than for conventional gas-operated cars, and the so-called savings over time assume that the electric power for recharging is free. But it isn’t and power costs are rising almost as fast as gas prices.

  Factors such as these are consistently ignored by Kerry and other “green” energy activists.

  To genuinely evaluate dissimilar energy sources and provide an apples-to-apples comparison, the U.S. Energy Information Administration uses the Levelized Cost of Energy (LCOE) and the Levelized Cost of Storage (LCOS). These measures consider the initial costs, the lifespan of generation and storage systems, maintenance and fuel costs, decommissioning expenses, subsidies, etc., and compare that to how much electricity is produced over a power plant’s lifetime.

  The numbers don’t lie: “green” energy is a complete waste of resources.

  The LCOE and LCOS for solar and on-shore wind farms are four times as expensive as natural gas. But offshore wind takes the cake—it’s six times as expensive as natural gas.

  Imagine paying four to six times as much every month for the same electricity! That’s the green paradise world that the Biden administration wants for America.

  Yet, it’s even worse than that because electric power costs greatly affect the cost of producing nearly everything else. In the case of producing aluminum, for example, a third of the total production cost is electricity alone.

  Imagine what quadrupling electricity prices would do to the prices of all the goods and services that people buy. If you think inflation is bad now, just wait until the nation is dependent on wind and solar—then you’ll see REAL price increases.

  And despite official government data contradicting their own claims, the Biden administration—including Kerry—continues spouting simple untruths on wind and solar. They hope that no one will check their fantastic facts.

  To the left, wanting it to be true, makes it true.

  All the while, the middle class is being crushed by $4-a-gallon gasoline and businesses everywhere are buckling under $5-per-gallon diesel. The Wall Street Journal warns that electric power blackouts could be coming because of overreliance on wind and solar power.

  At some point, if this push for green energy continues, the whole nation will start to look like California, where gas is $6 a gallon, the lights go out, and electric cars are stranded because of rolling blackouts.  If that’s our “green” future, then Americans should want nothing to do with it.

  Stephen Moore is a distinguished fellow in economics at the Heritage Foundation, and E.J. Antoni is a research fellow in Heritage’s Center for Data Analysis. Moore is a co-founder of the Committee to Unleash Prosperity, where Antoni is a senior fellow.

  Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times or Zero Hedge.

  Tyler Durden
  Thu, 05/19/2022 – 20:40

• "Build Blackouts Better": Half Of America Faces Power Blackouts This Summer, Regulator Warns 
  “Build Blackouts Better”: Half Of America Faces Power Blackouts This Summer, Regulator Warns 

  Tens of millions of Americans could be thrown into a summer of hell as a megadrought, heatwaves, and reduced power generation could trigger widespread rolling electricity blackouts from the Great Lakes to the West Coast, according to Bloomberg, citing a new report from the North American Electric Reliability Corporation (NERC), a regulatory body that manages grid stability. 

  NERC warned power supplies in the Western US could be strained this summer as a historic drought reduces hydroelectric power generation due to falling reservoir levels and what’s expected to be an unseasonably hot summer. Compound the hellacious weather backdrop with grids decommissioning fossil fuel power plants to fight climate change and their inability to bring on new green power generation, such as solar, wind, and batteries, in time, is a perfect storm waiting to happen that will produce electricity deficits that may force power companies into rolling blackouts for stability purposes.

  

  The regulatory body pointed out that supply-chain woes are delaying major Southwest solar projects, while some coal plants have trouble procuring supplies because of increased exports. They said there’s also an increasing threat of cyberattacks from Russia. 

  By region, the Midwest power grid will be extremely tight. Across the Western US, power generation capacity has declined 2.3% since last summer, even as demand is expected to increase. Grids in the region may have to source power from neighboring grids as extreme heat will cause people to crank up their air conditioners. A situation of low wind speeds could trigger blackouts, according to NERC. They outlined how the Midwest could face power shortfalls due to the removal of power capacity from retiring fossil fuel power plants. 

  NERC issued a similar warning last year, stating power grids that serve 40% of the US population were at risk of blackouts. One year later, there was only one notable blackout last June during a heatwave in the Pacific Northwest that left 9,000 customers without power. But with reduced electricity generation capacity outpacing new green power sources, the risks of blackouts are increasing this year. 

  In Texas, the Electric Reliability Council of Texas (ERCOT)has already warned multiple times of grid stress as early summer-like heatwaves sent temperatures in certain parts of the state into triple-digit territory. 

  California’s grid operators have also warned of rising blackout threats –for the next three summers — as the state transitions to greener forms of energy. The drought and shrinking reservoir levels have reduced hydroelectric power generation on top of decommissioned fossil fuel power plants. “We know that reliability is going to be difficult in this time of transition,” said Alice Reynolds, president of the California Public Utilities Commission, during a May 6 press conference. 

  NERC’s report is an eye-opener for those living in the Western US. Many households face out-of-control inflation, soaring fuel prices, and food shortages ahead of what could be a summer of unrest as the Biden administration is bracing for a wave of violence upon the Supreme Court’s overturn of Roe V. Wade. 

  America is slipping into the abyss as households get a taste of what it’s like to live in Venezuela. It’s not that far off from what people are experiencing today: soaring inflation, shortages, a ruling regime which so many claim was not elected by the majority and soon, rolling blackouts. 

  Tyler Durden
  Thu, 05/19/2022 – 20:20

• Japan Probably Needs To Move To The Pro-China Camp
  Japan Probably Needs To Move To The Pro-China Camp

  By Russell Clark of the Capital Flows and Asset Markets Substack

  Japan has benefited massively from the free trade world that the US conjured into existence 40 years ago.

  

  Japanese industry and particularly its auto industry benefited hugely from access to the US auto market. For this reason, I expected US new car CPI moved higher (car prices rising after years of stagnation) that this would be Yen bullish. Instead the Yen has weakened considerably.

  

  From a macro and micro perspective, the idea of a stronger Yen with surging automobile prices makes sense. However, from a political point of view, I think this is probably wrong. Japan has for many years had a huge imbalance in auto markets with the US. Nissan, Toyota and Honda all have huge operations in the US, but you barely see a US auto brand in Japan.

  In a competitive democracy like the US, how could politicians possibly be elected pushing policies that expose domestic labour to foreign competition? I suspect after the inflationary 70s, politically there seems to me to be a coalition of consumers who wished to see inflation tamed, as well as business and capital owners that wanted to see union power crushed. Allowing first Japanese, and then other producers destroy the unionized US auto makers was a political win. That is the Japanese automakers were the spear tip of a policy to destroy US unions.

  

  However, the rise of “populism” everywhere in the West has shown is that the electorate has tired of “pro-capital” policies. For someone my age, pro-capital policies, or Washington Consensus policies were implemented by governments of all stripes, regardless of any political promises that were made. And I learned to ignore politics when investing, but 2016 I think has changed that calculation. Perhaps the best graph I can find to show the political change manifesting in real world change is US tax collections from Customs (ie tariffs). This is still a small number, but the political implications are huge. The US now cares when its imports come from, after decades of not caring, and will use tariffs to achieve political ends.

  

  Why is this a negative for Japan? Well of the three big economic blocs, Japan only runs a trade surplus with the US.

  

  At what point do political calculations, lets say for Candidate Trump, move to the idea of supporting US unionised workers in electorally competitive North East? As this map of unionisation in the US shows, unions members are more prevalent in the north east and California. Republicans candidates running on socially conservative issues, while protecting US businesses from foreign competition looks like an election winner to me, as it has been in the UK.

  

  On this analysis, Japan has real problem. The market it generates its trade surplus with looks to be changing politically. The current economic policy of weak yen and export lead growth looks to be an economic and politically dead end to me. The question is whether Japan will change policies? The biggest possible change they could embrace would be to come to a détente with China. The biggest sign that such a change was in the offing would be Japan beginning to build up gold reserves instead of treasuries, as this would allow them to facilitate trade with China, while avoiding any possible US sanctions. Maybe the small increase in gold holdings in Japan are a sign of this change?

  

  Japan is often considered Western, but culturally it is much closer to China than the US. The US/Japan military and economic alliance made Japan Western. If the US is unable to defend the Asia Pacific, which is increasingly likely, and US politics is turning against free trade, Japan is going to have to come to an “understanding” with China. If Japan builds gold reserves instead of treasuries, the financial effects will be profound.

  Tyler Durden
  Thu, 05/19/2022 – 20:00

• $18 For A Michelob Ultra: 'Beer-Flation' Hits PGA Championship
  $18 For A Michelob Ultra: ‘Beer-Flation’ Hits PGA Championship

  This week’s beer prices at the 2022 PGA Championship at Southern Hills Country Club in Tulsa, Oklahoma, shocked many who attended the event (and even players) and sparked just as much buzz as Tiger Woods. 

  After spending hundreds of dollars for a basic ticket to walk around the course, watching players tee off or sink a putt (or miss a crucial putt), many craved a refreshing cold beer. However, ‘beer-flation’ hit the PGA as it costs $18 for a Michelob Ultra and $19 for a Stella Artois. 

  Pro-golfer Justin Thomas, who is in the tournament, tweeted Monday, “$18(!!!!!!) for a beer… uhhhh what. Gotta treat the fans better than that!”

  $18(!!!!!!) for a beer… uhhhh what. Gotta treat the fans better than that! 🤦🏽‍♂️ https://t.co/7DeyC7WTJE

  — Justin Thomas (@JustinThomas34) May 17, 2022

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

  When asked about his Tweet, ESPN quoted Thomas saying, “I was blown away … You want people to come to the tournament. If I’m on the fence and I’m looking at the concession stand, that’s not the greatest thing.” 

  

  Twitter golf wasn’t pleased with the PGA. 

  Who really benefits from this gouging?..The rich golfer or the average sucker fan? https://t.co/M5NmiVlkxH

  — Louis Barbosa (@Spanaird50) May 18, 2022

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

  @PGAChampionship how the hell do you justify this?😂 https://t.co/LinyUavrEo

  — Shastor (@lShastorl) May 19, 2022

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

  It’s a rich man’s game lol https://t.co/VACYiFsx49

  — Wosny Lambre (@BigWos) May 17, 2022

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

  Kerry Haigh, PGA of America chief championships officer, told ESPN beer prices are somewhat “comparable to stadium events” and that the organization is comfortable with prices. 

  And, of course, the PGA can charge an entire Andrew Jackson for a Michelob Ultra because those attending the event are wealthy people who have so far survived the worst inflation in four decades because they own assets, unlike the working poor who own nothing and have been crushed under negative real wage growth. 

  Tyler Durden
  Thu, 05/19/2022 – 19:40

• Hunter Biden Took In $11 Million Over 5 Years According To NBC Analysis
  Hunter Biden Took In $11 Million Over 5 Years According To NBC Analysis

  Hunter Biden and his company brought in around $11 million over a five-year span, most of which was while his father was Vice President of the United States, according to an analysis by of his abandoned laptop by NBC News obtained through Rudy Giuliani.

  

  Perhaps most interesting is the harsh tone NBC takes with the first son…

  “Biden and his company brought in about $11 million via his roles as an attorney and a board member with a Ukrainian firm accused of bribery and his work with a Chinese businessman now accused of fraud.”

  The documents and the analysis, which don’t show what he did to earn millions from his Chinese partners, raise questions about national security, business ethics and potential legal exposure. In December 2020, Biden acknowledged in a statement that he was the subject of a federal investigation into his taxes. NBC News was first to report that an ex-business partner had warned Biden he should amend his tax returns to disclose $400,000 in income from the Ukrainian firm, Burisma. GOP congressional sources also say that if Republicans take back the House this fall, they’ll demand more documents and probe whether any of Biden’s income went to his father, President Joe Biden. -NBC News

  $5.8 million of Biden’s income – more than half his total earnings over the five years – came from two deals with Chinese business interests. The most lucrative of the two was a consulting relationship with a powerful (and now missing) CCP-linked Chinese businessman, Ye Jianming, who’s company, CEFC, paid $4,790,375.25 to Biden’s Owasco PC over the course of about one year. Jianming was accused by Chinese prosecutors of “economic crimes” in 2018, and hasn’t been seen in public since he was detained.

  

  “No government ethics rules apply to him,” said Walter Shaub, a former director of the U.S. Office of Government Ethics who is now an ethics expert with the Project on Government Oversight, who added that “it’s imperative that no one at DOJ and no one at the White House interfere with the criminal investigation in Delaware.”

  Shaub has previously raised questions over Hunter’s lucrative ‘art’ sales being a method for laundering influence.

  And according to the FBI’s former assistant director for counterintelligence, Frank Figliuzzi, there’s a national security risk when the CCP can get close to people like Biden.

  “It’s all about access and influence, and if you can compromise someone with both access and influence, that’s even better,” he said, adding “Better still if that target has already compromised himself.”

  An analysis of Hunter’s expenses reveal over $200,000 per month from October 2017 through February 2018 on everything from Porsche payments, dental work, cash withdrawals and luxury hotel rooms – which Biden has admitted he used on drugs and partying with strangers who often stole from him.

  

  Hunter also struggled to keep current on multiple mortgages, alimony, and child support payments to his ex-wife.

  Things got so bad that Hollywood attorney Kevin Morris, who began advising Hunter in 2020, arranged to pay off around $2 million owed to the IRS (which legal experts say doesn’t let Hunter off the hook for criminal liability, or necessarily erase his debts).

  NBC News analyst Chuck Rosenberg, a former Justice Department official, said that Biden’s paying what he owes could even be seen as an admission of criminal violations. Not paying taxes for many years, rather than one or two, Rosenberg said, helps establish intent, which can otherwise be a struggle for prosecutors in white-collar cases.

  Paying the bill, Rosenberg said, might help Biden if he faced sentencing and “mitigate some of the damage, but it doesn’t undo the crime. That would be like returning money to a bank that you robbed. You still robbed the bank.” -NBC News

  According to a Senate GOP report on Hunter’s finances, CEFC was one of three firms involved in certain transactions that were “among those identified as potential efforts to layer funds.”

  The U.S. Treasury Financial Crimes Enforcement Network describes the layering of funds as “separating the illegally obtained money from its criminal source by layering it through a series of financial transactions, which makes it difficult to trace the money back to its original source.”

  But the report doesn’t say whether or not Hunter Biden was personally involved in any transactions that were suggested to involve “layering.” -NBC News

  Hunter also worked for Jianming associate Patrick Ho, who was convicted in US federal court of bribery in relations to oil deals in Chad and Uganda starting in September 2014. A jury found that Ho – while employed by CEFC – bribed or attempted to bribe officials to the tune of $2 million, and was sentenced to three years in prison on March 2019.

  Biden has denied any illegal activity and says he’s “cooperating completely” with a federal investigation in Delaware.

  “And I’m absolutely certain, 100 percent certain,” said Hunter, “that at the end of the investigation, I will be cleared of any wrongdoing.”

  Tyler Durden
  Thu, 05/19/2022 – 19:22

• Is The Global Debt Bubble About To Burst?
  Is The Global Debt Bubble About To Burst?

  Authored by Gail Tverberg via Our Finite World blog,

  Is the debt bubble supporting the world economy in danger of collapsing?

  The years between 1981 and 2020 were very special years for the world economy because interest rates were generally falling:

  

  Figure 1. Yields on 10-year and 3-month US Treasuries, in a chart made by the Federal Reserve of St. Louis, as of May 10, 2022.

  In some sense, falling interest rates meant that debt was becoming increasingly affordable. The monthly out-of-pocket expense for a new $500,000 mortgage was falling lower and lower. Automobile payments for a new $30,000 vehicle could more easily be accommodated into a person’s budget. A business would find it more affordable to add $5,000,000 in new debt to open at an additional location. With these beneficial effects, it would be no surprise if a debt bubble were to form.

  With an ever-lower cost of debt, the economy has had a hidden tailwind pushing it long between 1981 to 2020. Now that interest rates are again rising, the danger is that a substantial portion of this debt bubble may collapse. My concern is that the economy may be headed for an incredibly hard landing because of the inter-relationship between interest rates and energy prices (Figure 2), and the important role energy plays in powering the economy.

  

  Figure 2. Chart showing the important role Quantitative Easing (QE) to lower interest rates plays in adjusting the level of “demand” (and thus the selling price) for oil. Lower interest rates make goods and services created with higher-priced oil more affordable. In addition to the items noted on the chart, US QE3 was discontinued in 2014, about the time of the 2014 oil price crash. Also, the debt bubble crash of 2008 seems to be the indirect result of the US raising short term interest rates (Figure 1) in the 2004 to 2007 period.

  In this post, I will try to explain my concerns.

  [1] Ever since civilization began, a combination of (a) energy consumption and (b) debt has been required to power the economy.

  Under the laws of physics, energy is required to power the economy. This happens because it takes the “dissipation” of energy to perform any activity that contributes to GDP. The energy dissipated can be the food energy that a person eats, or it can be wood or coal or another material burned to provide energy. Sometimes the energy dissipated is in the form of electricity. Looking back, we can see the close relationship between total energy consumption and world total GDP.

  

  Figure 3. World energy consumption for the period 1990 to 2020, based on energy data from BP’s 2021 Statistical Review of World Energy and world Purchasing Power Parity GDP in 2017 International Dollars, as published by the World Bank.

  The need for debt or some other approach that acts as a funding mechanism for capital expenditures (sale of shares of stock, for example), comes from the fact that humans make investments that will not produce a return for many years. For example, ever since civilization began, people have been planting crops. In some cases, there is a delay of a few months before a crop is produced; in other cases, such as with fruit or nut trees, there can be a delay of years before the investment pays back. Even the purchase by an individual of a home or a vehicle is, in a sense, an investment that will offer a return over a period of years.

  With all parts of the economy benefiting from the lower interest rates (except, perhaps, banks and others lending the funds, who are making less profit from the lower interest rates), it is easy to see why lower interest rates would tend to stimulate new investment and drive up demand for commodities.

  Commodities are used in great quantity, but the supply available at any one time is tiny by comparison. A sudden increase in demand will tend to send the commodity price higher because the quantity of the commodity available will need to be rationed among more would-be purchasers. A sudden decrease in the demand for a commodity (for example, crude oil, or wheat) will tend to send prices lower. Therefore, we see the strange sharp corners in Figure 2 that seem to be related to changing debt levels and higher or lower interest rates.

  [2] The current plan of central banks is to raise interest rates aggressively. My concern is that this approach will leave commodity prices too low for producers. They will be tempted to decrease or stop production.

  Politicians are concerned about the price of food and fuel being too high for consumers. Lenders are concerned about interest rates being too low to properly compensate for the loss of value of their investments due to inflation. The plan, which is already being implemented in the United States, is to raise interest rates and to significantly reverse Quantitative Easing (QE). Some people call the latter Quantitative Tightening (QT).

  The concern that I have is that aggressively raising interest rates and reversing QE will lead to commodity prices that are too low for producers. There are likely to be many other impacts as well, such as the following:

  • Lower energy supply, due to cutbacks in production and lack of new investment

  • Lower food supply, due to inadequate fertilizer and broken supply lines

  • Much defaulting debt

  • Pension plans that reduce or stop payments because of debt-related problems

  • Falling prices of stock

  • Defaults on derivatives

  [3] My analysis shows how important increased energy consumption has been to economic growth over the last 200 years. Energy consumption per capita has been growing during this entire period, except during times of serious economic distress.

  

  Figure 4. World energy consumption from 1820-2010, based on data from Appendix A of Vaclav Smil’s Energy Transitions: History, Requirements and Prospects and BP Statistical Review of World Energy for 1965 and subsequent. Wind and solar energy are included in “Biofuels.”

  Figure 4 shows the amazing growth in world energy consumption between 1820 and 2010. In the early part of the period, the energy used was mostly wood burned as fuel. In some parts of the world, animal dung was also used as fuel. Gradually, other fuels were added to the mix.

  

  Figure 5. Estimated average annual increase in world energy consumption over 10-year periods using the data underlying Figure 4, plus similar additional data through 2020.

  Figure 5 takes the same information shown in Figure 4 and calculates the average approximate annual increase in world energy consumption over 10-year periods. A person can see from this chart that the periods from 1951-1960 and from 1961-1970 were outliers on the high side. This was the time of rebuilding after World War II. Many families were able to own a car for the first time. The US highway interstate system was begun. Many pipelines and electricity transmission lines were built. This building continued into the 1971-1980 period.

  

  Figure 6. Same chart as Figure 5, except that the portion of economic growth that was devoted to population growth is shown in blue at the bottom of each 10-year period. The amount of growth in energy consumption “left over” for improvement in the standard of living is shown in red.

  Figure 6 displays the same information as Figure 5, except that each column is divided into two pieces. The lower (blue) portion represents the average annual growth in population during each period. The part left over at the top (in red) represents the growth in energy consumption that was available for increases in standard of living.

  

  Figure 7. The same information displayed in Figure 6, displayed as an area chart. Blue areas represent average annual population growth percentages during these 10-year periods. The red area is determined by subtraction. It represents the amount of energy consumption growth that is “left over” for growth in the standard of living. Captions show distressing events during periods of low increases in the portion available to raise standards of living.

  Figure 7 shows the same information as Figure 6, displayed as an area chart. I have also shown some of the distressing events that happened when growth in population was, in effect, taking up essentially all of energy consumption growth. The world economy could not grow normally. There was a tendency toward conflict. Strange events would happen during these periods, including the collapse of the central government of the Soviet Union and the restrictions associated with the COVID pandemic.

  The economy is a self-organizing system that behaves strangely when there is not enough inexpensive energy of the right types available to the system. Wars tend to start. Layers of government may disappear. Strange lockdowns may occur, such as the current restrictions in China.

  [4] The energy situation at the time of rising interest rates in the 1960 to 1980 period was very different from today.

  If we define years with high inflation rates as those with inflation rates of 5% or higher, Figure 8 shows that the period with high US inflation rates included nearly all the years from 1969 through 1982. Using a 5% inflation cutoff, the year 2021 would not qualify as a high inflation rate year.

  

  Figure 8. US inflation rates, based on Table 1.1.4 Price Index for Gross Domestic Product, published by the US Bureau of Economic Analysis.

  It is only when we look at annualized quarterly data that inflation rates start spiking to high levels. Inflation rates have been above 5% in each of the four quarters ended 2022-Q1. Trade problems related to the Ukraine Conflict have tended to add to price pressures recently.

  

  Figure 9. US inflation rates, based on Table 1.1.4 Price Index for Gross Domestic Product, published by the US Bureau of Economic Analysis.

  Underlying these price spikes are increases in the prices of many commodities. Some of this represents a bounce back from artificially low prices that began in late 2014, probably related to the discontinuation of US QE3 (See Figure 2). These prices were far too low for producers. Coal and natural gas prices have also needed to rise, as a result of depletion and prior low prices. Food prices are also rising rapidly, since food is grown and transported using considerable quantities of fossil fuels.

  The main differences between that period leading up to 1980 and now are the following:

  [a] The big problem in the 1970s was spiking crude oil prices. Now, our problems seem to be spiking crude oil, natural gas and coal prices. In fact, nuclear power may also be a problem because a significant portion of uranium processing is performed in Russia. Thus, we now seem to be verging on losing nearly all our energy supplies to conflict or high prices!

  [b] In the 1970s, there were many solutions to the crude oil problem, practically right around the corner. Electricity production could be switched from crude oil to coal or nuclear, with little problem, apart from building the new infrastructure. US cars were very large and fuel inefficient in the early 1970s. These could be replaced with smaller, more fuel-efficient vehicles that were already being manufactured in Europe and Japan. Home heating could be transferred to natural gas or propane, to save crude oil for places where energy density was really needed.

  Today, we are told that a transition to green energy is a solution. Unfortunately, this is mostly wishful thinking. At best, a transition to green energy will need a huge investment of fossil fuels (which are increasingly unavailable) over a period of at least 30 to 50 years if it is to be successful. See my article, Limits to Green Energy Are Becoming Much Clearer. Vaclav Smil, in his book Energy Transitions: History, Requirements and Prospects, discusses the need for very long transitions because energy supply needs to match the devices using it. Furthermore, new energy types are generally only add-ons to other supply, not replacements for those supplies.

  [c] The types of economic growth in (a) the 1960 to 1980 period and (b) the period since 2008 are very different. In the earlier of these periods (especially prior to 1973), it was easy to extract oil, coal and natural gas inexpensively. Inflation-adjusted oil prices of less than $20 per barrel were typical. An ever-increasing supply of this oil seemed to be available. New machines (created with fossil fuels) made workers increasingly efficient. The economy tended to “overheat” if interest rates were not repeatedly raised (Figure 1). While higher interest rates could be expected to slow the economy, this was of little concern because rapid growth seemed to be inevitable. The supply of finished goods and services made by the economy was growing rapidly, even with headwinds from the higher interest rates.

  On the other hand, in the 2008 to 2020 period, economic growth is largely the result of financial manipulation. The system has been flooded with increasing amounts of debt at ever lower interest rates. By the time of the lockdowns of 2020, would-be workers were being paid for doing nothing. World production of finished goods and services declined in 2020, and it has had difficulty rising since. In the first quarter of 2022, the US economy contracted by -1.4%. If headwinds from higher interest rates and QT are added, the economic system is likely to encounter substantial debt defaults and increasing breakdowns of supply lines.

  [5] Today’s spiking energy prices appear to be much more closely related to the problems of the 1913 to 1945 era than they are to the problems of the late 1970s.

  Looking back at Figure 7, our current period is more like the period between the two world wars than the period in the 1970s that we often associate with high inflation. In both periods, the “red” portion of the chart (the portion I identify with rising standard of living), has pretty much disappeared. In both the 1913 to 1945 period and today, it is nearly all the energy supplies other than biofuels that are disappearing.

  In the 1913 to 1945 period, the problem was coal. Mines were becoming increasingly depleted, but raising coal prices to pay for the higher cost of extracting coal from depleted mines tended to make the coal prohibitively expensive. Mine operators tried to reduce wages, but this was not a solution either. Fighting broke out among countries, almost certainly related to inadequate coal supplies. Countries wanted coal to supply to their citizens so that industry could continue, and so that citizens could continue heating their homes.

  

  Figure 10. Slide prepared by Gail Tverberg showing peak coal estimates for the UK and for Germany.

  As stated at the beginning of this section, today’s problem is that nearly all our energy supplies are becoming unaffordable. In some sense, wind and solar may look better, but this is because of mandates and subsidies. They are not suitable for operating the world economy within any reasonable time frame.

  There are other parallels to the 1913 to 1945 period. One of the big problems of the 1930s was prices that would not rise high enough for farmers to make a profit. Oil prices in the United States were extraordinarily low then. BP 2021 Statistical Review of World Energy reports that the average oil price in 1931, in 2020 US$, was $11.08. This is the lowest inflation-adjusted price of any year back to 1865. Such a price was almost certainly too low for producers to make a profit. Low prices, relative to rising costs, have recently been problems for both farmer and oil producers.

  Another major problem of the 1930s was huge income disparity. Wide income disparity is again an issue today, thanks increased specialization. Competition with unskilled workers in low wage countries is also an issue.

  It is important to note that the big problem of the 1930s was deflation rather than inflation, as the debt bubble started popping in 1929.

  [6] If a person looks only at the outcome of raising interest rates in the 1960s to 1980 timeframe, it is easy to get a misleading idea of the impact of increased interest rates now.

  If people look only at what happened in the 1980s, the longer-term impact of the spike in interest rates doesn’t seem too severe. The world economy was growing well before the interest rates were raised. After the peak in interest rates, the world economy generally continued to grow. As a result of the high oil prices and the spiking interest rates, the world hastened its transition to using a bit less crude oil per person.

  

  Figure 11. Per capita crude oil production from 1973 through 2021. Crude oil amounts are from international statistics of the US Energy Information Administration. Population estimates are from UN 2019 population estimates. The low population growth projection from the UN data is used for 2021.

  At the same time, the world economy was able to expand the use of other energy products, at least through 2018.

  

  Figure 12. World per capita total energy supply based on data from BP’s 2021 Statistical Review of World Energy. World per capita crude oil is based on international data of the EIA, together with UN 2019 population estimates. Note that crude oil data is through 2021, but total energy amounts are only through 2020.

  Since 2019, our problem has been that the total energy supply has not been keeping up with the rising population. The cost of extraction of all kinds of oil, coal and natural gas keeps rising due to depletion, but the ability of customers to afford the higher prices of finished goods and services made with those energy products does not rise to match these higher costs. Energy prices probably would have spiked in 2020 if it were not for COVID-related restrictions. Production of oil, coal and natural gas has not been able to rise sufficiently after the lockdowns for economies to fully re-open. This is the primary reason for the recent spiking of energy prices.

  Turning to inflation rates, the relationship between higher interest rates (Figure 1) and annual inflation rates (Figure 8) is surprisingly not very close. Inflation rates rose during the 1960 to 1973 period despite rising interest rates, mostly likely because of the rapid growth of the economy from an increased per-capita supply of inexpensive energy.

  Figure 8 shows that inflation rates did not come down immediately after interest rates were raised to a high level in 1980, either. There was a decline in the inflation rate to 4% in 1983, but it was not until the collapse of the central government of the Soviet Union in 1991 that inflation rates have tended to stay close to 2% per year.

  [7] A more relevant recent example with respect to the expected impact of rising interest rates is the impact of the increase in US short-term interest rates in the 2004 to 2007 period. This led to the subprime debt collapse in the US, associated with the Great Recession of 2008-2009.

  Looking back at Figure 1, a person can see the effect of raising short-term interest rates in the 2004 to 2007 era. This eventually led to the Great Recession of 2008-2009. I wrote about this in my academic paper, Oil Supply Limits and the Continuing Financial Crisis, published in the journal Energy in 2010.

  The situation we are facing today is much more severe than in 2008. The debt bubble is much larger. The shortage of energy products has spread beyond oil to coal and natural gas, as well. The idea of raising interest rates today is very much like going into the Great Depression and deciding to raise interest rates because bankers don’t feel like they are getting an adequate share of the goods and services produced by the economy. If there really aren’t enough goods and services for everyone, giving lenders a larger share of the total supply cannot work out well.

  [8] The problems we are encountering have been hidden for many years by an outdated understanding of how the economy operates.

  Because of the physics of the economy, it behaves very differently than most people assume. People almost invariably assume that all aspects of the economy can “stay together” regardless of whether there are shortages of energy or of other products. People also assume that shortages will be immediately become obvious through high prices, without realizing the huge role interest rates and debt levels play. People further assume that these spiking prices will somehow bring about greater supply, and the whole system will go on as before. Furthermore, they expect that whatever resources are in the ground, which we have the technical capability to extract, can be extracted.

  It is important to note that prices are not necessarily a good indicator of shortages. Just as a fever can have many causes, high prices can have many causes.

  The economy can only continue as long as all of its important parts continue. We cannot assume that reported reserves of anything can really be extracted, even if the reserves have been audited by a reliable auditor. What actually can be extracted depends on prices staying high enough to generate funds for additional investment as required. The amount that can be extracted also depends on the continuation of international supply lines providing goods such as steel pipe. The continued existence of governments that can keep order in the areas where extraction is to take place is important, as well.

  What we should be most concerned about is a very rapidly shrinking economic system that cannot accommodate very many people. It seems that such a situation might occur if the debt bubble is popped and too many supply lines are broken. There may be a time lag between when interest rates are raised and when the adverse impacts on the economy are seen. This is a reason why central bankers should be very cautious about the increases in interest rates they make as well as QT. The situation may turn out much worse than planned!

  Tyler Durden
  Thu, 05/19/2022 – 19:20

• "Utter Nonsense": Hawley Eviscerates Energy Secretary For Blaming Inflation On 'Putin Price Hike'
  “Utter Nonsense”: Hawley Eviscerates Energy Secretary For Blaming Inflation On ‘Putin Price Hike’

  Senator Josh Hawley (R-MO) ripped into Biden’s Energy Secretary Jennifer Granholm on Thursday after she tried to blame soaring inflation on Russian President Vladimir Putin.

  

  Hawley asked Granholm whether she thought the rising price of gasoline was “acceptable,” to which she said “it is not, and you can thank the activity of Vladimir Putin for invading Ukraine, and pulling–“

  To which Hawley said “With all due respect, Madame Secretary, that’s utter nonsense,” adding “The average gas price in my state was $2.07. Eight months later, eight months later, long before Vladimir Putin invaded Ukraine, that price was up over 30%, and it’s been going up consistently since.”

  “What are you doing to reverse this administration’s policies?” Hawley asked, to which Granholm replied: “It is not the administration policies that have affected supply and demand.”

  Hawley didn’t let her get away with it – shooting back: “From January to August, the price of gasoline was up 30% in my state alone. It’s been a continuous upward tick since then. And here’s what your president did when he first came to office; he immediately re-entered the Paris Climate Accord, he canceled the Keystone pipeline, he halted leasing programs in ANWAR, he issued a 60-day halt on all new oil and gas leases and drilling permits on federal lands and waters – that’s nationwide, that accounts by the way for 25% of US oil production, he directed federal agencies to eliminate all support for fossil fuels, he imposed new regulations on oil and gas and methane emissions.

  Those were all just in the first few days! Are you telling me it’s had no effect?”

  Visualizing the “utter nonsense”…

  

  Watch:

  Secretary Granholm tries to repeat Biden’s bogus “Putin Price Hike” talking point and it… does not end well for her…

  “That’s utter nonsense,” says @HawleyMO. Long before Putin invaded Ukraine, “from January to August the price of gasoline was up over 30% in my state…” pic.twitter.com/nM809xJove

  — Abigail Marone 🇺🇸 (@abigailmarone) May 19, 2022

  https://platform.twitter.com/widgets.jsFull clip below:

  Tyler Durden
  Thu, 05/19/2022 – 19:20

Digest powered by RSS Digest