- Visualizing The EU's Energy Dependency
Visualizing The EU’s Energy Dependency
In response to Russia’s 2022 invasion of Ukraine, the U.S. and EU have imposed heavy sanctions aimed at crippling the Russian economy. However, as Visual Capitalist’s Marcus Lu details below, these bold actions also come with some potentially messy complications: Russia is not only one of the world’s largest exporters of energy products, but it is also Europe’s biggest supplier of these fuels.
As of October 2021, Russia supplied 25% of all oil imported by the EU, which is three times more than the second-largest trade partner. Naturally, the policies and circumstances that have led to this dependency have been under major scrutiny in recent weeks.
To help you learn more, this infographic visualizes energy data from Eurostat.
Energy Dependency, by Country
To start, let’s compare the energy dependence of each EU member, both in 2000 and 2020 (the latest year available). This metric shows the extent to which a country relies upon imports to meet its energy needs.
Note that Denmark’s value of -35.9% for the year 2000 is not a typo. Rather, it means that the country was a net exporter of energy.
Over this 20-year timeframe, the EU-27 average country’s energy dependence has increased from 56.3% to 57.5%, meaning EU members became slightly more reliant on energy imports over those two decades.
Where Do EU’s Energy Imports Come From?
Looking further into energy imports reveals that Russia is the main supplier of crude oil, coal, and natural gas. Continue below for more details.
Crude Oil Imports
The EU imports more crude oil from Russia than the next three countries combined.
This shouldn’t come as a surprise, as Russia was the world’s third largest producer of oil in 2020. The country has several state-owned oil companies including Rosneft and Gazprom.
Coal Imports
Coal-fired power plants are still being used across the EU, though most member states expect to completely phase them out by 2030.
Russia has the second largest coal reserves in the world. In 2020, it mined 328 million metric tons, making it the sixth largest producer globally.
Natural Gas Imports
Natural gas is commonly used to heat buildings and water. A majority of the EU’s supply comes from Russia via the Nord Stream series of pipelines.
Nord Stream 1 is the longest sub-sea pipeline in the world and was completed in 2011. It starts from the Russian city of Vyborg and connects to the EU through Germany.
Nord Stream 2 is a recently constructed expansion which was expected to double the project’s capacity. Germany has since halted the approval process for this pipeline in response to Russia’s 2022 invasion of Ukraine.
What Happens Now?
In retaliation against Western sanctions, Russia has announced an impending ban on exports of certain goods and raw materials.
European gas prices skyrocketed in response, as many fear that Russia could cut off natural gas supplies. This, of course, would have very negative effects on both consumers and businesses.
In early March 2022, both the European Commission and the International Energy Agency (IEA) introduced proposals on how Europe could reduce its energy dependency.
We must become independent from Russian oil, coal and gas. We simply cannot rely on a supplier who explicitly threatens us.
– URSULA VON DER LEYEN, PRESIDENT OF THE EUROPEAN COMMISSION
Cutting off one’s biggest supplier is likely to cause issues, especially when dealing with something as critical as energy. Few countries have the capacity (or willingness) to immediately replace Russian imports.
The proposals also discussed options for boosting Europe’s domestic output, though the commission’s report notably excluded nuclear power. For various reasons, nuclear remains a polarizing topic in Europe, with countries taking either a pro or anti stance.
Tyler Durden
Fri, 03/25/2022 – 02:45 - Pentagon Says Russian Military Leaders Repeatedly Declining 'Deconfliction' Calls
Pentagon Says Russian Military Leaders Repeatedly Declining ‘Deconfliction’ Calls
Authored by Dave DeCamp via AntiWar.com,
Top Russian military officials have repeatedly declined calls with US military leaders since the attack on Ukraine started on February 24, The Washington Post reported on Wednesday, raising fears of a miscalculation between the two nuclear powers.
Secretary of Defense Lloyd Austin and Chairman of the Joint Chiefs of Staff Gen. Mark Milley have tried to set up calls with Russian Defense Minister Sergei Shoigu and Gen. Valery Gerasimov. But Pentagon spokesman John Kirby said in a statement that the Russian officials “have so far declined to engage.”
Prior image of Putin with defense chiefs, Sputnik via AP The US and Russian militaries have set up a deconfliction line meant to avoid miscalculations, but it is operated by lower-level officials. US officials told the Post that higher-level contacts are needed.
Consider the following deeply alarming quote from a former NATO commander:
“There is a high risk of escalation without the firebreak of direct contact between the most senior officials,” said James Stavridis, who served as the Supreme Allied Commander at NATO from 2009 to 2013. “Very young people are flying in jets, operating warships, and conducting combat operations in the Ukrainian war. They are not seasoned diplomats, and their actions in the heat of operations can be misunderstood.”
“We must avoid a scenario of NATO and Russia sleepwalking into war because senior leaders can’t pick up a phone and explain to each other what is happening,” he added.
The lack of high-level contact comes as the US and NATO are building up forces in Eastern Europe, stepping up flights in the region, and are pouring weapons into Ukraine via the Polish border. In a message to the Western powers, Russia recently launched a missile strike on a Ukrainian base housing foreign arms and volunteers only 15 miles from the Polish border.
While the Pentagon has been attempting high-level talks with Russia, Secretary of State Antony Blinken, the US’s top diplomat, has not. US officials told the Post that since Russia’s invasion began, Blinken hasn’t even tried to speak with his Russian counterpart, Sergey Lavrov.
The US hasn’t shown an interest in pushing for a diplomatic solution in the conflict and is instead pledging more weapons for the Ukrainians and preparing more sanctions on Russia.
Tyler Durden
Fri, 03/25/2022 – 02:00 - Victor Davis Hanson: The Real 'Reset' Is Coming
Victor Davis Hanson: The Real ‘Reset’ Is Coming
Authored by Victor Davis Hanson,
President Joe Biden believes the Ukraine war will mark the start of a “new world order.”
In the middle of the COVID global pandemic, Klaus Schwab and global elites likewise announced a “great reset.”
Accordingly, the nations of the world would have to surrender their sovereignty to an international body of experts. They would enlighten us on taxes, diversity, and green policies.
When former President Donald Trump got elected in 2016, marquee journalists announced partisan reporting would have to displace the old, supposedly disinterested approach to the news.
There is a common theme here.
In normal times progressives worry that they do not have public support for their policies. Only in crises do they feel that the political Left and media can merge to use apocalyptic times to ram through usually unpopular approaches to foreign and domestic problems.
We saw that last year: fleeing from Afghanistan, the embrace of critical race theory, trying to end the filibuster, pack the court, junk the Electoral College, and nationalize voting laws.
These “new orders” and “resets” always entail far bigger government and more unelected, powerful bureaucracies. Elites assume that their radical changes in energy use, media reporting, voting, sovereignty, and racial and ethnic quotas will never quite apply to themselves, the architects of such top-down changes.
So we common folk must quit fossil fuels, but not those who need to use corporate jets. Walls will not mar our borders but will protect the homes of Nancy Pelosi, Mark Zuckerberg, and Bill Gates.
Hunter Biden’s lost laptop will be declared, by fiat, not news. In contrast, the fake Alfa Bank “collusion” narrative will be national headline news for weeks.
Middle class lifestyles will be curbed as we are instructed to strive for sustainability and transition to apartment living and mass transit. But the Obamas will still keep their three mansions, and Silicon Valley futurists will insist on exemptions for their yachts.
In truth, we are about to see a radical reset – of the current reset. It will be a different sort of transformation than the elites are expecting and one that they should greatly fear.
The world and the United States are furious over hyperinflation that may soon exceed 10% per year. We will be lucky if it ends only in recession or stagflation, rather than a global depression.
The mess was created by the same apparat who bought into “modern monetary theory.” That silly university idea claimed prosperity would follow vastly expanding the money supply, keeping interest rates at de facto zero levels, running huge annual deficits, piling up unsustainable national debt, and subsidizing workers to stay home.
Natural gas and oil costs are now soaring to unsustainable levels – and to the point where the middle class simply will not be able to travel, keep warm in winter, or cool in summer.
Both in Europe and the United States left-wing governments deliberately curbed drilling and non-Russian pipelines. They shut down nuclear power plants and subsidized costly, inefficient solar and wind projects. They ended up not with utopia, but with fuel shortages, high prices, and energy dependency on the world’s most repressive regimes.
The woke revolution in the West was supposed to teach us that the “white male”-dominated Western world is toxic. Its origins, ascendence, and current leisure and affluence were supposedly due only to systemic exploitation, racism, and sexism.
Elites introduced cancel culture, doxxing, deplatforming, and social ostracism to shame these supposed exploiters and to destroy their lives and careers.
Few asked how a supposedly noxious West of some 2,500 years duration became the number one destination of millions of global non-Western migrants and offered the greatest degree of global prosperity and freedom for its citizens.
So a reset reckoning is coming – in reaction to the “new orders” championed by Biden and the Davos set.
In the November 2022 midterms, we are likely to see a historic “No!” to the orthodox left-wing agenda that has resulted in unsustainable inflation, unaffordable energy, war, and humiliation abroad, spiraling crime, racial hostility – as well as arrogant defiance from those who deliberately enacted these disastrous policies.
What will replace it is a return to what until recently had worked.
Closed and secure borders with only legal and measured immigration will return. Americans will demand tough police enforcement and deterrent sentencing, and a return to integration and the primacy of individual character rather than separatist fixations on the “color our skin.”
The public will continue to tune out of the partisan and mediocre “mainstream” media. We will see greater increased production of oil and natural gas to transition us slowly to a wider variety of energy, strong national defense, and deterrent foreign policies.
The prophets of the new world order sowed the wind and they will soon reap the whirlwind of an angry public worn out by elite incompetence, arrogance, and ignorance.
Tyler Durden
Thu, 03/24/2022 – 23:40 - China's Pursuit Of Food Security Comes As Crop Conditions Set To Be "Worst In History"
China’s Pursuit Of Food Security Comes As Crop Conditions Set To Be “Worst In History”
In September 2020, Michael Every of Rabobank floated the question: What possible disruption is coming that requires China to start massive stockpiling of all possible commodities?
It was no secret by 2021, China panic hoarded half of the world’s maize and other grains resulting in increased food inflation.
China’s buying spree of all commodities left many market observers puzzled by Beijing’s stockpiling motives. Now we understand the second-largest economy in the world was forecasting a global catastrophe of widespread famine due to disrupted food supply chains.
Global food supplies were already tight on a post-COVID basis due to snarled supply chains and adverse weather conditions in key growing areas worldwide. The Ukraine invasion by Russia was a shock. It fractured global food supply chains and sent food prices to record highs with the very risk shortages will materialize in emerging market economies dependent on the eastern European country.
Ukraine is one of the world’s largest agricultural exporters of corn and wheat. Before the invasion, Ukraine was the second-largest supplier of grains for the European Union and one of the largest suppliers for emerging markets in Asia and Africa. Breaking down the numbers, Ukraine produced 49.6% of global sunflower oil, 10% of global wheat, 12.6% of global barley, and 15.3% of global maize. This year harvest will be severely reduced because of war.
Last week, the United Nations (UN) World Food Programme (WFP) warned that disruptions in Ukraine “risk imminent famine and starvation in more places around the world.”
So it’s apparent President Xi Jinping made the right decision in prioritizing food stockpiling ahead of the global food supply chains fracturing. However, Xi has an emerging food production problem.
Bloomberg cites Tang Renjian, China’s agriculture minister, who warned that last year’s record-breaking floods had sparked “big difficulties” with food production.
“China faces big difficulties in food production because of the unusual floods last autumn.
“Many faming experts and technicians told us that crop conditions this year could be the worst in history,” he said.
Next, food protectionism may flourish in agricultural-centric countries that want to first satisfy domestic supplies before exporting. This is already beginning and may increase food prices and induce shortages.
Tyler Durden
Thu, 03/24/2022 – 23:20 - DOJ Accused Of Assault On Free Speech And Press In Project Veritas Case
DOJ Accused Of Assault On Free Speech And Press In Project Veritas Case
Authored by Jonathan Turley via jonathanturley.org,
I previously wrote about deep concerns over the FBI investigation of Project Veritas over the missing diary of Ashley Biden, daughter of President Joe Biden. The use of the FBI in a case involving a missing diary is itself difficult to square with its priorities, let alone the different treatment given the New York Times. Now, counsel for Project Veritas has filed a motion detailing what could be a very serious violation of court orders as well as an attack on free speech and free press.
There has been relatively little attention to the extraordinary efforts of the Biden Justice Department in pursuing those connected with the disappearance of the diary of the President’s daughter. The concern is that the FBI is acting like a Praetorian Guard in acting on what is a crime ordinarily handled on a local level.
The controversy over Ashley Biden‘s diary began during her father’s campaign for the presidency in 2020. Like her brother Hunter, Ashley has struggled with addiction and was living in a two-bedroom house in Delray Beach, Fla., with a friend. According to the New York Times, she decided to go to Philadelphia but to leave some belongings in two bags in the Delray house. The owner later allowed a friend named Aimee Harris and her two children to move in. The Times strongly suggests that Ms. Harris searched the possessions, noting that she was hard up for money and was also a Trump supporter. The Times then simply says “exactly what happened next remains the subject of the federal investigation.”
Project Veritas and its founder, James O’Keefe, maintained that they were given the diary by a “tipster” but decided not to use it. Indeed, the group later turned over the material to law enforcement.
As noted by the New York Times, court records show that on Oct. 12, 2020, O’Keefe told Project Veritas staff that said they would not publish a story about the diary. He explained that, while they had “no doubt the document is real,” he was concerned that publishing the diary would be seen “as a cheap shot.”
Now we have new details of the lengths that the government has gone in this case, including allegedly evading a court order to protect the confidentiality of journalistic and attorney-client material.
In its 45-page court filing, counsel accused the Department of Justice of such circumvention after Microsoft recently revealed that the DOJ had previously seized Project Veritas documents from a cloud account using a warrant. I testified on such abuses recently in Congress.
The Project describes the investigation as “retributive” on behalf of the Biden Administration. It did so with “extreme measures that violate the First Amendment and corrode freedom of the press,” according to the filing.
Judge Torres appointed a special master, retired U.S. District Judge Barbara S. Jones, to protect confidential information on Dec. 8, 2021 in the Southern District of New York. The court specifically recognized that “potential First Amendment concerns that may be implicated by the review of the materials seized from Petitioners.” However, the letter from Project Veritas counsel states:
“We have recently learned, however, that the government already had in place mechanisms for circumventing these protective processes and invading the First Amendment and attorney- client privileges of Project Veritas and its journalists, the existence of which the government concealed from counsel for Project Veritas and its journalists and, we believe, from this Court. We have discovered that from November 2020 to April 2021, the government used compulsory demands, including secret warrants and 18 U.S.C. § 2703(d) orders, to obtain voluminous materials from Microsoft, the email services provider used by Project Veritas, spanning the email accounts of eight journalists and Project Veritas’s Human Resources Manager.
…It appears that the government misled this Court by omission, failing to disclose during the briefing and arguments over the appointment of a Special Master that the government had already obtained through these surreptitious actions many of the privileged communications this Court charged the Special Master with protecting. The government’s clandestine invasions of journalist’s communications corrode the rule of law.”
That is a familiar pattern and was discussed at the prior congressional hearing.
Some of the search demands clearly would implicate areas that the court previously sought to protect with the appointment of Judge Brown as special master. That includes:
According to court papers attached to the letter, here is some of what the feds were after:
b. Evidence of communications regarding or in furtherance of the Subject Offenses, such as communications with or regarding Ashley Biden, President Joseph R. Biden, Jr. (and representatives thereof), and/or Ashley Biden’s associates regarding her stolen property.
c. Evidence of the location of Ashley Biden’s property and the location of the user of the Subject Account at times relevant to the Subject Offenses, such as communications that reference particular geographic locations or refer to the property being located in a particular place.
d. Evidence of the identity and locations of potential co-conspirators, such as communications with other individuals about obtaining, transporting, transferring, disseminating, or otherwise disposing of Ashley Biden’s stolen property, including but not limited to communications reflecting the knowledge of co-conspirators that the property obtained from Ashley Biden had been stolen, and communications that contain personally identifiable information of co-conspirators and references to co-conspirators’ places of residence or locations at particular points in time.
e. Evidence regarding the value of any of Ashley Biden’s stolen property, such as communications about the resale or market value of any of the items stolen from her, or any plans to sell or market the same.
f. Evidence of steps taken in preparation for or in furtherance of the Subject Offenses, such as surveillance of Ashley Biden or property associated with her, and drafts of communications to Ashley Biden, President Biden, and Ashley Biden’s associates regarding her stolen property and communications among co-conspirators discussing what to do with her property.
Any search of those sweeping terms would net confidential and privileged information.
Putting aside the concerns over a crackdown on a journalistic organization, there remain unanswered questions over why this extraordinary effort was launched by the FBI over a missing diary.
The concerns over the Project Veritas investigation continue to mount, but neither Congress nor the media have demanded answers from the Biden Administration.
Tyler Durden
Thu, 03/24/2022 – 23:00 - Israelis Refused To Share 'World's Most Powerful Cyberweapon' With Ukraine And Estonia Over Russia Concerns
Israelis Refused To Share ‘World’s Most Powerful Cyberweapon’ With Ukraine And Estonia Over Russia Concerns
After being widely condemned by the international community for allowing Pegasus, which the NYT once described as “the world’s most powerful cyberweapon”, to be sold to every African despot and authoritarian government with the means to pay for it, the Israeli government apparently drew the line at sharing the powerful hacking tool with the governments of Ukraine and Estonia, for fear they would use it against Russia.
For those who aren’t familiar with Pegasus, the software was developed by secretive Israeli spyware company NSO Group, which found itself on the receiving end of international condemnation after it was revealed that the spyware had been used by the Saudi government to spy on Amazon chief Jeff Bezos (and murdered dissident Jamal Khashoggi). More recently, the Israeli government was accused of using the spyware to carry out warrantless surveillance of its own citizens.
According to the NYT, Ukraine and Estonia had hoped to buy Pegasus in the hopes of using it to infiltrate Russian phones, but Israel’s ministry of defense refused to grant the licenses required for the sale.
Ukraine had been pushing to obtain Pegasus for espionage purposes since as far back as 2014, while the Estonians started the process of trying to purchase it in 2018, going so far as to make a large down payment to NSO, which was eventually returned after the Russian government learned of Estonia’s plans and contacted the Israeli’s to put a stop to it.
In the case of Ukraine, the requests for Pegasus go back several years. Since the Russian invasion of Crimea in 2014, the country has increasingly seen itself as a direct target of Russian aggression and espionage. Ukrainian officials have sought Israeli defense equipment to counter the Russian threat, but Israel has imposed a near-total embargo on selling weapons, including Pegasus, to Ukraine.
In the Estonian case, negotiations to purchase Pegasus began in 2018, and Israel at first authorized Estonia to have the system, apparently unaware that Estonia planned to use the system to attack Russian phones. The Estonian government made a large down payment on the $30 million it had pledged for the system.
The following year, however, a senior Russian defense official contacted Israel security agencies to notify them that Russia had learned of Estonia’s plans to use Pegasus against Russia. After a fierce debate among Israeli officials, Israel’s Ministry of Defense blocked Estonia from using the spyware on any Russian mobile numbers worldwide.
During a recent speech to the Knesset, Ukrainian President Volodymyr Zelensky criticized Israel for refusing to provide Ukraine with the Israeli Iron Dome antimissile system and other defensive weapons, and for not joining the West in imposing strict economic sanctions on Russia.
Israel has used Pegasus as a critical bargaining chip in its diplomatic relations with other nations; it has been reported that sharing the spyware tool was an important piece of the bargaining that led to the Abraham Accords, the landmark Israeli deal with several of its Middle Eastern neighbors brokered by President Trump and his administration.
As a spyware tool, Pegasus is incredibly powerful. Once a device is targeted, the software can stealthily and remotely extract everything stored on the device, including photos, contacts, messages and video recordings, without the user having to click on a phishing link to give Pegasus remote access. It can also transform the mobile phone into a tracking and secret recording device, essentially transforming a phone into a tool to spy on its owner.
Tyler Durden
Thu, 03/24/2022 – 22:40 - Russia Is Open To Selling Natural Gas For Bitcoin, Gold
Russia Is Open To Selling Natural Gas For Bitcoin, Gold
By Namcios of Bitcoin Magazine
Russia is open to accepting bitcoin for its natural resources exports, the chairman of the country’s Congressional energy committee, Pavel Zavalny, said in a press conference on Thursday.
Zavalny explained that Russia is open to accepting different currencies for its exports, beginning with natural gas, depending on the buyer’s preferred method of payment. However, the chairman said terms will depend on the importing country’s foreign relations status with Russia.
“When it comes to our ‘friendly’ countries, like China or Turkey, which don’t pressure us, then we have been offering them for a while to switch payments to national currencies, like rubles and yuan,” Zavalny said during the press conference.
“With Turkey, it can be lira and rubles. So there can be a variety of currencies, and that’s a standard practice. If they want bitcoin, we will trade in bitcoin.”
Zavalny’s statement comes on the heels of President Vladimir Putin’s comments on Wednesday demanding that ‘unfriendly’ countries pay for Russian gas in rubles. Putin’s message was clear, but it is unclear whether Russia can unilaterally change existing contracts agreed upon in euros.
The State Duma’s energy committee chair echoed Putin’s decision while adding that the country should also accept gold.
“When we exchange with Western countries…they should pay in hard money,” Zavalny said.
“And hard money is gold, or they must pay in currencies which are convenient for us, and that is the national currency – ruble. That relates to our ‘unfriendly’ countries.”
Russia being open to accepting bitcoin shift the tide as Putin last year had dismissed the possibility in an interview at the Russian Energy Week event in Moscow.
“I believe that it has value,” Putin said at the time, referring to Bitcoin. “But I don’t believe it can be used in the oil trade.”
The current size of the Bitcoin market and its liquidity do pose questions as to whether the peer-to-peer currency could be used widely by countries in international trade at this moment.
However, by being open to the possibility and eventually conducting pilot trades with interested parties, Russia could set the stage for an upcoming trend where nations choose to transact in the stateless, global monetary system.
The news helped push bitcoin and ether to the highest level since the start of the Russian invasion.
Tyler Durden
Thu, 03/24/2022 – 22:20 - JGBs Slide, Yen Spikes As Parazlyed BOJ Fails To Intervene With Yields Hitting 6 Year High
JGBs Slide, Yen Spikes As Parazlyed BOJ Fails To Intervene With Yields Hitting 6 Year High
After sliding relentlessly for much of the past month on expectations that the BOJ will be the “odd” central bank out, refusing to join its developed peers in tightening financial conditions, and the USDJPY rising as high as 122.44 earlier (from 115 three weeks ago), the yen jumped on Friday morning in Japan, after the 10Y JGB crossed a critical resistance level without intervention from Kuroda.
Entering the final trading day of the week, with 10Y JGB yields on the verge of rising above 0.23%, traders were bracing for another massive bond market intervention by the BOJ. As Bloomberg’s Wes Goodman put it, “there’s a good chance the Bank of Japan will buy bonds as soon as Friday to curb the advance in yields. JGB ten-year rates are climbing in tandem with yields globally, rising to 0.23%.”
As shown in the chart below, when JGBs hit that level last month, the central bank responded with one of its an unlimited fixed-rate purchases, in effect putting a hard stop to further declines in JGBs.
As a reminder, as part of its Yield Curve Control, the BOJ capped the maximum yield on the 10Y JGB at 0.25% although it would never let it rise quite as high. And while a move to curb yields may also weaken the yen, already at a six-year low, that shouldn’t deter the BOJ according to Goodman, who notes that “Governor Kuroda said last week that a weak currency should still be seen as positive for the economy, and he repeated his admonition that the BOJ won’t hesitate to add to easing if needed.”
Or perhaps not… because with the 10Y rising as high as 0.24% on Friday morning, the BOJ remains oddly silent so far, which to some traders this suggests that even the BOJ may be willing to risk higher (and perhaps sharply higher) yields to stay in sync with its peers.
Alternatively, had the BOJ intervened, it could have set off a selling cascade in the Yen which could push it into uncontrollable freefall.
And indeed, with 10Y JGBs rising to a level not seen since 2016 moments ago Kuroda hit the tape, suggesting that the central bank is suddenly worried that the yen may in fact fall so far it would never come back:
- *KURODA: DON’T THINK MARKETS HAVE LOST FAITH IN YEN
- *KURODA: DESIRABLE FOR FOREX TO MOVE IN STABLE MANNER
- *KURODA: RISING U.S. RATES SAID TO BE BEHIND RECENT WEAK YEN
But what he said next was the punchline:
- *KURODA: FAITH IN FISCAL SITUATION IS KEY FOR MONETARY POLICY
- *KURODA: LOSING FISCAL FAITH CAN SPUR YIELDS, CUT EASING EFFECT
- *KURODA: BOND BUYING IN YCC IS SOLELY FOR MONETARY POLICY
And so Japan, that paragon of MMT crackpots everywhere, suddenly finds itself trapped in a lose-lose dilemma: intervene in the bond market and spark a furious, potentially destabilizing and uncontrolled plunge in the yen which would also lead to galloping (if not worse) inflation, which could collapse what little faith remains in the BOJ, or do nothing and contain the slump in the yen while risking far higher yields which in a country where the debt is orders of magnitude greater than GDP, could also spell fiscal and monetary doom.
As a result, the market – having long gotten used to amicable interventions from the BOJ – will now surely test one of these two outcomes, and how the BOJ responds could have dramatic consequences for this original MMT test case. Should the BOJ’s reaction spark further erosion of faith in either Japan’s fiscal or monetary policies, the outcome for the world’s most indebted nation would be disastrous.
Tyler Durden
Thu, 03/24/2022 – 22:04 - "Ripple Effect" – Chinese Port Congestion Soars To Five-Month High
“Ripple Effect” – Chinese Port Congestion Soars To Five-Month High
Top Chinese ports in Shenzhen and Hong Kong record some of the largest congestion in nearly half a year due to China’s zero-tolerance approach, locking down more than 50 million people and shuttering factories to mitigate the spread of COVID-19.
Bloomberg reports 174 vessels anchored or loaded off the country’s top ports, the largest number since Oct. 21, when a massive typhoon battered the area.
“Shenzhen is the second-busiest port next to Shanghai, so we will expect to see significant volume shift to the other ports within China,” said Ryan Closser, a director at FourKites, a supply-chain information provider.
“A couple more weeks of shutdown may not have a huge disruption, but the longer the area is shut down, the more of a ripple effect it will have,” Closser said.
Even though workers have been sent back to factories, and some lockdowns have been lifted, the disruption alarmed A.P. Møller – Maersk A/S, the world’s largest container shipping company by capacity, last Friday, telling clients to expect new supply chain snarls and logistical delays.
“While manufacturing also takes place in other parts of the country, these delays will still affect output, though not drastically,” Maersk said in a memo to clients.
Vessel observation data show increased congestion of container ships at Chinese ports. Meanwhile, congestion at Port of Los Angeles/Long Beach has subsided this year.
Bloomberg notes the growing threat of “possible delays to goods heading to the U.S. this summer.”
Tyler Durden
Thu, 03/24/2022 – 22:00 - Buchanan: Is Ukraine's Partition Zelenskyy's Fate?
Buchanan: Is Ukraine’s Partition Zelenskyy’s Fate?
“It’s time to meet, time to talk … time to restore territorial integrity … for Ukraine,” said President Volodymyr Zelenskyy on Saturday.
Zelenskyy added that the need to negotiate was even greater for Moscow.
“Otherwise, Russia’s losses will be so huge that several generations will not be enough to rebound.”
According to the Pentagon, Russia has lost 7,000 soldiers; Kyiv puts the figure at 14,000 dead.
Still, Russian President Vladimir Putin appears less pressured to meet and talk. What does this tell us?
Zelenskyy does not believe further fighting will benefit Ukraine as much as it will cost his country. And he wants the war over.
As for Putin, as Secretary of Defense Lloyd Austin said Sunday, “He’s not been able to achieve the goals that he wants to achieve as rapidly as he wants to achieve them.” Putin wants more time.
The Russian president began the invasion of Ukraine with Crimea already annexed and the enclaves of Luhansk and Donetsk having already declared their independence of Kyiv.
Since the invasion began, however, Putin’s forces have besieged but not taken Ukraine’s capital, Kyiv, or second largest city, Kharkiv.
Yet, Russian troops are now in Mariupol on the Sea of Azov, having completed a land bridge from Russia through the Donbas to Crimea and, from there, halfway to Odessa, the last major Ukrainian port on the Black Sea.
While the Ukrainian army and citizens have put up fiercer resistance than was anticipated in Moscow, Russia is not losing this war.
Measured by territorial gains, Putin is winning
He has not captured Kyiv or Kharkiv, but he has expanded the Russian-controlled territories of Donetsk, Luhansk and Crimea that he had at the start of his invasion.
While Russia’s costs and casualties have been far greater than was anticipated, Putin has added to the Ukrainian lands he held when the war began. And Mother Russia has not lost an inch of land in this war.
“How does this thing end?” Gen. David Petraeus famously asked on the road to Baghdad.
No political solution appears more likely than a new partition of Ukraine, with lands east of the Dnieper River and along the coasts of the Sea of Azov and the Black Sea being ceded to Moscow, and the west of Ukraine being declared a neutral nation like Austria or Finland in the Cold War.
The problem with this probable outcome is that Zelenskyy has ruled out any territorial concessions or land transfers from Ukraine to Russia. And he seeks to “restore,” not to make permanent, the 2014 amputations of Crimea and the Donbas.
The dilemma: Zelenskyy probably cannot survive ceding control of any Ukrainian land to Russia. And Putin probably cannot survive a failure in peace talks to expand the Ukrainian holdings with which he began the war.
The “territorial integrity” of Ukraine is the crucial issue in ending this war.
And it is precisely here where it appears impossible for both sides to come to terms.
The one issue on which both parties will likely agree in any peace settlement is the issue that should have been agreed to — to prevent the war: a formal declaration by Kyiv that it will never join a NATO alliance created to contain Russia and, if necessary, defeat Russia in a war.
A frustrated and enraged President Joe Biden has taken to calling Putin a “killer,” a “murderous dictator” and a “war criminal” who has launched an “immoral war” — comments the Kremlin calls “unforgivable”
Such rhetoric would seem to rule out any role for U.S. diplomacy in negotiating the end to this war.
Other nations — Israel, Turkey, France, Germany — have maintained regular relations and constant contact with Putin, who sits and broods atop the world’s largest nuclear arsenal.
Consider the moral dilemma the U.S. has put itself in.
Our president says Russia is led by “a war criminal,” conducting an “immoral” war in which deliberate atrocities are committed at hospitals, schools, kindergartens and art theaters.
Yet, the U.S. and NATO will not provide weapons to Ukraine, including secondhand MiGs, that might cause Russia to retaliate against us or NATO or risk World War III or risk Russia’s use of tactical atomic weapons.
Because, pillaged and persecuted though Ukraine may be, it is not a member of NATO.
If Latvia, however, with 5% of Ukraine’s population, is encroached upon, we will engage Russia militarily, and to hell with the risk of World War III or Russia’s possible retaliation with atomic weapons.
In war, the moral is to the material as three is to one, said Napoleon. Unfortunately, what George Bernard Shaw said cynically also appears to be true: In war, God is on the side of the big battalions.
Zelenskyy probably cannot survive signing away the title to any Ukrainian land, be it Crimea or the Donbas. And Putin likely cannot survive not bringing home new territory from a Russian “victory.”
Again, perhaps the one issue on which almost all now agree is that Ukraine renounce its right to join the NATO alliance.
Tyler Durden
Thu, 03/24/2022 – 21:40 - IMF Warns Countries May Cut Dollar Reserves In Response To US Sanctions Against Russia
IMF Warns Countries May Cut Dollar Reserves In Response To US Sanctions Against Russia
Did the IMF just parrot one of Russian President Vladimir Putin’s favorite criticisms of Western sanctions?
During an interview with Foreign Policy, the IMF’s first deputy managing director, Gita Gopinath, warned that Western sanctions on Russia, and more specifically, the confiscation of dollar- and euro-denominated reserves held by the Russian Central Bank, could backfire by making other foreign central banks more reluctant to hold such a large amount of their own foreign reserves in dollars and euros.
For decades now, the international dollar-based financial system has been underpinned by free market principles. Unfortunately, when western institutions effectively confiscate reserves belonging to an independent central bank, they cut against this notion, and prompt other nations to ponder the possibility – however remote – that they could be next.
Ultimately, it’s likely that some countries will “reconsider” the wisdom of so heavily relying on Washington.
“We are likely to see some countries reconsidering how much they hold of certain currencies in their reserves,” she told Foreign Policy.
While Russia accuses the West of trying to engineer a default on Russia’s foreign-currency bonds by restricting its access to euros and dollars, Gopinath pointed out that the sanctions imposed over the past month have effectively cut Russia’s ties to the global financial system, and a default (however technical in nature) would likely lock Russia out of said system for years.
“When you’ve defaulted, reentry into the market is not easy. And that can take a long time.”
The IMF is already seeing an “increasing fragmentation” in global payments systems. On Thursday morning, it was reported that Russia and Iran are working on a global financial messaging system that could act as an alternative to SWIFT.
Of course, the IMF isn’t the only institution to highlight this trend. Just the other day, Goldman Sachs released a note warning that the twilight of the US dollar’s global hegemony could be at hand – citing the possibility of Saudi Arabia accepting yuan for oil instead of dollars (leading to deep fissures in the edifice of the petrodollar) – as evidence.
Since the annexation of Crimea in 2014, Russia’s central bank had steadily divested its reserves of most U.S. dollar assets. But the dollar, euro and sterling still account for more than 50% of its holdings, located in France, Germany, Japan, Britain, the United States, Canada and Australia.
Russia isn’t alone in this: Increasingly, Latin American nations are diversifying their reserves away from the dollar, including larger percentages of alternatives like the Chinese yuan.
And Russia isn’t alone in this. As Credit Suisse’s Zoltan Poszar recently pointed out, western sanctions could help spark a larger move away from holding reserves in the form of “inside” (aka fiat) money, and instead see a movement toward a new system where crypto, or perhaps a hybrid of gold and other commodities like oil, serve as the new reserve asset of choice. Of course, the Fed – which is pushing the adoption of a central bank digital currency to seize the last bit of financial autonomy Americans have left – will likely push back with force. We’re already seeing it today as the US and its G7 allies seek to halt purchases of gold by the Russian Central Bank.
Tyler Durden
Thu, 03/24/2022 – 21:20 - Former FBI Agent Pleads Guilty To Tampering With Evidence
Former FBI Agent Pleads Guilty To Tampering With Evidence
Authored by Zachary Stieber via The Epoch Times (emphasis ours),
A former FBI agent who was tapped to help investigate Missouri’s governor pleaded guilty on March 23 to tampering with evidence, deciding not to go to trial on seven counts.
Former FBI agent William Don Tisaby, left, is accompanied by attorney Jermaine Wooten as he turns himself in at St. Louis Police headquarters in St. Louis, Mo., on June 17, 2019. (Robert Cohen/St. Louis Post-Dispatch via AP) William Don Tisaby, 69, now a private investigator, was hired by St. Louis Circuit Attorney Kimberly Gardner to help probe Missouri Gov. Eric Greitens over an alleged invasion of privacy. Greitens resigned in 2018 after the investigation was opened.
Tisaby was indicted on seven felonies, including perjury and evidence tampering, in 2019.
Tisaby acknowledged in the plea deal that he said in a deposition that certain documents did not exist when, in fact, they did, Robert Russell, the special prosecutor in the case, told reporters outside the courthouse in St. Louis after the deal was reached.
“He’s admitting to hiding or at least testifying that the notes that Ms. Gardner gave to him were not given to him by testifying that he did not take any notes, when in fact he did take notes on those notes Ms. Gardner gave him,” Russell said.
Tisaby also took notes from an interview with a witness and sent them to Gardner but falsely testified that he never did.
Gardner is set to face a disciplinary hearing soon for allegedly hiding details about the probe into Greitens from members of her team.
Russell declined to put himself in Gardner’s shoes but said prosecutors “have an ethical obligation to correct and make sure the record is clear” regarding documents and that they should correct witnesses who offer false information.
The deal means Tisaby, who was facing serious prison time, will not serve any time in jail. He will serve one year of probation and must pay court costs.
Missouri Gov. Eric Greitens, right, during a rally in St. Charles, Mo., in a file image. (Whitney Curtis/Getty Images) “I think we’ve reached an appropriate resolution for Mr. Tisaby in this case based on what occurred,” Russell said, adding that it was important to make sure anybody attached to law enforcement is held accountable for being untruthful.
Jermaine Wooten, a lawyer for the defendant, told reporters that he and his colleagues were prepared to go to trial but Tisaby wanted to put the case behind him because of his age and health.
“I think it was just more of an issue of just negligence in this matter. It was a slew of documents that he had and he just went into that deposition not prepared. There was no malice in this man’s heart,” Wooten said, adding that no one instructed his client to hide the existence of the documents.
But Russell said the defendant admitted to purposefully shielding evidence. ” I think he just didn’t want anybody to see what he had done,” Russell said.
The investigation in question was looking into whether Greitens snapped a picture of a woman at his house in 2015. The alleged picture has never been found.
Greitens, who is running for a U.S. Senate seat, said on Steve Bannon’s show that the guilty plea was “a great victory.”
“The corrupt former FBI agent, William Tisaby, pled guilty,” he said. “What everyone recognizes now is what we said from the beginning, is that this was a criminal witch hunt against me.”
Tyler Durden
Thu, 03/24/2022 – 21:00 - Goldman's Hatzius: Can US Consumers Weather Commodity-Shock-Driven Recessionary Impulse?
Goldman’s Hatzius: Can US Consumers Weather Commodity-Shock-Driven Recessionary Impulse?
Goldman Sachs chief economist Jan Hatzius told clients Wednesday that the Russian invasion of Ukraine and the resulting commodity shock of soaring crude oil prices are “eerie parallels” to the geopolitical and economic turmoil three decades ago during the Gulf War. Hatzius makes the case consumers are in a much better position to weather an economic shock unlike in the past.
Hatzius notes the latest spike in energy and agriculture prices, represents 1.9% of US consumer spending over the last year, adding that today’s commodity shock on consumers is similar to 2008 and 1990.
Goldman predicts soaring commodity costs are eroding the real incomes of consumers. They forecast 2022 GDP above potential (+1.9% Q4/Q4 basis vs. potential of +1.75%, consensus of +2.7%, and FOMC median projection of +2.8%), adding the risk of recession is increasing (Morgan Stanley told clients last week to expect a downturn in 5-10 months).
“Higher commodity prices can also increase the risk of recession by constraining the ability of policymakers to respond to growth shocks,” Hatzius said.
On Monday, Fed Chair Powell said, “a brief burst of inflation associated with commodity price shocks” risks “extending the period of high inflation could push longer-term expectations uncomfortably higher.”
Hatzius asks: “Could the current commodity price shock tilt the economy into recession as it did in 1990 against a similar backdrop of heightened geopolitical risk and declining consumer confidence?”
He noted the size of the commodity shock shouldn’t be the focus but rather the health of the consumer.
Compared with the commodity shocks in the early stages of 1974, 1980, 1990, and 2008 recessions, consumers now have $2 trillion of excess savings accumulated during the virus pandemic, rising year-on-year trend in real incomes (but still negative bc of high inflation), and record-high household wealth-to-income ratio as significant buffers to combat price shocks for now.
Hatzius believes, “it would take a sustained oil price increase to $200 per barrel to produce an income shock similar in magnitude to those that precipitated the 1974 and 1979 recessions—and this would significantly increase the 2022 recession odds.”
He said his commodity team’s upside target for Brent is around $165 per barrel, though he cannot rule out such an outcome ($200) if things worsen in Ukraine.
He pointed to “eerie parallels” of today’s commodity shock that could produce an economic downturn similar to 1990-91.
Hatzius concluded by saying recessions risks are rising over the next year between 20-35% range as an overheating labor market and fiscal tightening by the Fed could drag on growth.
The consumer might be stronger than most believe, well, at least in Goldman’s view. Maybe this is why we have yet to see gasoline demand destruction.
Tyler Durden
Thu, 03/24/2022 – 20:40 - LA Spends Up To $837K Per Unit To House Just 5,600 Of Over 40,000 Homeless
LA Spends Up To $837K Per Unit To House Just 5,600 Of Over 40,000 Homeless
Authored by Mike Shedlock via MishTalk.com,
In 2016, the city of Los Angeles had 28,464 Homeless. It passed HHH authorizing $1.2 billion to tackle the problem. Let’s check in on the progress…
Los Angeles Passed Proposition HHH in 2016. Cost per unit from LA City Audit.
Inquiring minds are investigating Los Angeles City Controller’s Audit Report on the Progress of Proposition HHH a 2016 measure that authorized spending $1.2 billion to tackle homelessness in LA.
Key Points
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California had 28,464 Homeless in 2016.
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LA then passed proposition HHH, authorizing $1.2 billion to address the problem.
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In early 2020, pre-Covid, the city had 41,250 homeless. There are no current homeless stats and due to Covid are undoubtedly much higher.
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The city is building units to address the problem. 1,200 units have been completed.
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4,400 units are in construction.
LA Homelessness
Homelessness chart from LA City audit pre-Covid, annotations by Mish.
Proposition HHH Cost Per Unit
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Average completed cost is $520,879 per unit
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Average cost of units underway is $596,486 per unit
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Approximately 14% of units in construction exceed $700,000 per unit.
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One project is currently estimated to cost $837,000 per unit.
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It took 3.4 years for the 1,200 completed units.
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The estimated timeline is another 4.3 years for the additional 4,400 units.
My guess is there are now 60,000 LA homeless (possibly a lowball number due to Covid). At the current average of $600,000 per unit (and rising), LA will need to spend another $36,000,000,000.
The controller says “Projects exceeding $600,000 per unit are no longer outliers.“
Interim Housing
What about interim housing?
Good question. Although six years have come and gone since HHH passed, the city is just now addressing delays.
Ron Galperin says “The City should use remaining HHH funds—or any HHH funds that become available—to prioritize the development of facilities such as interim housing, clinics, storage, and showers to help better manage the immediate needs of Angelenos experiencing homelessness.”
How Timely!
Q: How much money is left anyway?
A: Less than 5%, according to the audit, and that is a 2018 figure after the city suspended building HHH facilities and still struggles to complete them.
Current vs Ongoing Costs
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Housing the current estimated homeless would cost another $36 billion taxpayer dollars at the current rate. Unfortunately, that’s not the end of it.
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What about food, electricity, mental health treatments, and other services?
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What about building maintenance?
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What about building security at union wages?
Of the $1.2 billion authorized, we have the same questions, just on a smaller scale.
In another 4.3 years, LA will have a total of 5,600 units built for $1.2 billion while needing perhaps 60,000 units. Then what?
When Does it Stop?
The report says “Even after housing being built through Proposition HHH is completed, it is likely that tens of thousands of people will remain unsheltered.”
Duh? Ya think?
I assure you that whatever the the number of homeless is, be it 45,000 or 75,500 there is an endless demand for free services.
If the city were to give away 100,000 free units at a cost of $600,000 to $800,000 each, there would be 200,000 willing takers if not 2 million takers.
What’s to stop San Diego or Austin, Texas from offering $200 and free bus transportation to LA for willing participants?
Perhaps Austin should consider that right now. The obvious snag is unlimited demand for a mere 5,600 “free” units.
Some will manage to get to LA from nearby areas even without the free transportation.
Progress? What Progress?
There will never be progress in combatting homelessness by building $600,000 units to shelter the homeless.
Inflationary Madness
Paying $600,000 per unit to shelter homeless is inflationary madness.
So is the entirety of Build Back Better: Free college, student debt cancellation, more union jobs, free child care, combined with an attack on energy to allegedly save the world, while now promoting free gas money for dependents who don’t even drive.
On the table if Build Back Better happened to pass was a guaranteed “living wage” proposal.
One courageous Democrat, Senator Joe Manchin of West Virginia saved the US from massive perpetual inflation of “free” stuff.
Meanwhile, Biden Doing Everything Possible to Drive Up the Price of Oil, Some of It’s Illegal.
Stop!
* * *
Tyler Durden
Thu, 03/24/2022 – 20:20 -
- NATO Doubles Battlegroups In 'Eastern Flank' States: Bulgaria, Hungary, Romania & Slovakia
NATO Doubles Battlegroups In ‘Eastern Flank’ States: Bulgaria, Hungary, Romania & Slovakia
Authored by Dave DeCamp via AntiWar.com,
NATO Secretary-General Jens Stoltenberg announced that the military alliance will double the number of battlegroups it has deployed in Eastern Europe. Stoltenberg made the announcement just ahead of the major NATO summit attended by President Biden on Thursday.
“The first step is the deployment of four new NATO battlegroups in Bulgaria, Hungary, Romania, and Slovakia, along with our existing forces in the Baltic countries and Poland,” Stoltenberg said. “This means that we will have eight multinational NATO battlegroups all along the eastern flank, from the Baltic to the Black Sea.”
NATO file image Stoltenberg didn’t initially detail how many troops would be in the new battlegroups. According to a NATO fact sheet from 2021, there are 4,615 NATO troops spread across the four battlegroups that are currently deployed across Poland, Latvia, Lithuania, and Estonia.
Stoltenberg also hinted that there will be other plans for NATO to bolster its forces in Eastern Europe announced at Thursday’s summit. “I expect leaders will agree to strengthen NATO’s posture in all domains, with major increases in the eastern part of the alliance on land, in the air and at sea,” he said.
Here’s what NATO put out in its statement after Thursday’s emergency summit, which Joe Biden and other world leaders attended:
In response to Russia’s actions, we have activated NATO’s defense plans, deployed elements of the NATO Response Force, and placed 40,000 troops on our eastern flank, along with significant air and naval assets, under direct NATO command supported by Allies’ national deployments. We are also establishing four additional multinational battlegroups in Bulgaria, Hungary, Romania, and Slovakia. We are taking all measures and decisions to ensure the security and defence of all Allies across all domains and with a 360-degree approach.
Over the past few months, the US has deployed tens of thousands of additional troops to Europe and is expected to send more, or at least make the deployments permanent. Sources told NBC News on Tuesday that Biden is expected to announce a plan to permanently maintain an increased number of troops in NATO countries near Ukraine.
The US and NATO military buildup in Eastern Europe is done in the name of deterring Russia. But some of Russian President Vladimir Putin’s primary motivations for the invasion were Ukraine’s alignment with NATO and the Western military alliance’s presence on Russia’s borders. In the lead-up to the attack, Putin sought security guarantees that NATO wouldn’t expand further eastward, but the US didn’t take his concerns seriously.
Tyler Durden
Thu, 03/24/2022 – 20:00 - Historic Treasury Front-End Selloff Approaching Peak As 2Y Notes Trade Below "Fails Charge"
Historic Treasury Front-End Selloff Approaching Peak As 2Y Notes Trade Below “Fails Charge”
It has been a harrowing month for rates traders, with 2-Year TSY yields blowing out by more than 17bps on two occasions in the past three weeks, representing two of the three biggest one-day selloffs since 2009 driven by the Fed’s historic hawkish pivot which now sees at least one rate hike on every FOMC meeting for the rest of 2022 and with banks such as Goldman and Morgan Stanley expecting two 50bps rate hikes in May and June.
The unprecedented liquidation in the front-end has led to a massive pile up of shorts in bills and 2Y notes. As Curvature’s Scott Skyrm notes overnight, the market sell-off led to massive short positions across the short-end of the curve (as a reminder, when investors short the market they need to physically have possession of the securities to do so; if they don’t own the securities, they have to borrow them and for Treasuries they do so in the repo market, where the greater the negative repo rate on a given Treasury, the stronger the shorting pressure is). As shown in the chart below, two bills and 2 Year Note are trading at or below the Fail Charge (-2.75%); bills maturing on 6/23 averaged at -2.55% on Tuesday and -3.10% yesterday, while year bills (2/23/23) averaged at -3.20% two days ago and -0.95% on Wednesday, and even July 12 bills trading slightly Special averaging at -0.50% yesterday.
Worse, 2 Year Notes were clearing over the past few days, but some failed yesterday, closing at -3.00% amid an unprecedented front-end shorting frenzy. Why would someone cover a short below the Fail Charge, Skyrm asks rhetorically and answers that “some firms have internal rules that require their Repo traders to cover, no matter what the rate is!”
So as an epic pile up of shorts keep accumulating and pushing 2Y yields ever higher, so high that even Goldman now expects the 2s10s to invert as soon as next quarter when the 2Y hits 2.60%…
… some are taking the other side, and in a note published overnight from Bloomberg’s Ven Ram, the Markets Live commentator writes that “we may be fast approaching its zenith for this year as bond traders are probably in the last lap of pricing the Federal Reserve’s intent to raise rates aggressively.”
According to Ram’s calculations, two-year yields have surged about 145 basis points this quarter, roughly equivalent to about 205 basis points of Fed tightening based on historical correlations. And with the Fed’s dot plot pointing to about 10 hikes between this year and next, the two-year yield may reach a peak at 2.51% and settle around a 2.18%-2.26% range
In an outlier scenario, it is conceivable that two-year yields go higher than the peak mentioned if the markets price in tightening on a scale seen in 1994. That cycle is “the best analogy” to what the Fed aims to do now, Federal Reserve Bank of St. Louis President James Bullard said this week. Back then, the monetary authority doubled its benchmark to 6% in just more than a year.
In other words, that would mean the market factoring in even more hikes than what the Fed has penciled in, though that scenario would necessarily involve inflation prints remaining stubbornly high past the first half of the year, by which time the Fed would have already raised rates by 75 basis points to 100 basis points.
Looking back, Ram notes that in November, when the two-year yield was around 0.42% (and when the dot plot hinted at just a handful of hikes in 2022), he suggested that front-end Treasuries represented an “accident waiting to happen”, and warned that the yield was in danger of breaching 1.75% based on the dot plot then. However, with the Fed having revised its median view of rates to factor in a much more aggressive path, the selloff has extended beyond that level.
So fast forward to this week when Chair Jerome Powell sent bond yields spiraling when he remarked that the Fed was open to raising rates by 50 basis points in May should the data warrant such a response. He also outlined the Fed’s intent to start its balance sheet run-off sooner than in the previous cycle, which may sap sentiment more than usual, though that would pose bigger issues for longer-duration maturities.
The selloff after his remarks has exacerbated fault lines in the market, with the Bloomberg Treasury Index having declined 5.93% through Tuesday, making it the worst quarter for U.S. bonds in data going back to 1973. At the same time, the Bloomberg Global Bond Aggregate Index is suffering its biggest drawdown on record.
Historically, after such massive oversold liquidations, the subsequent move is a sharp reversal in flows as profit-taking begins; in this case profit-taking would be coupled with a record short squeeze. Meanwhile, with the war still raging in Europe Ram notes that there is still a possibility of systemic risk, an eruption of which may slow the Fed’s hand and send front-end yields much lower.
As the Bloomberg analyst concludes, “all told, front-end Treasuries seem closer to the last leg of the selloff that has been rippling through the markets for a few months now.”
Tyler Durden
Thu, 03/24/2022 – 19:40 - Chinese Investigators Release First Clues About What Caused Crash Of China Eastern Airlines Flight
Chinese Investigators Release First Clues About What Caused Crash Of China Eastern Airlines Flight
Chinese authorities have just released some of the first definitive information about the circumstances surrounding the crash of China Eastern Airlines flight MU5735, which suddenly nosedived into the Guangxi Mountains on Monday, killing all 132 passengers and crew on board, and snapping China’s 12-year streak with no passenger airliner crashes. Unfortunately, their cryptic revelation raises more questions than it provides answers.
According to Bloomberg, at least one piece of the ill-fated Boeing Co. 737-800 appears to have broken loose well before impact, possibly in mid-air, and potentially resulting in the devastating crash, which occurred before the plane’s pilots had time to send an emergency signal to air traffic control.
Authorities didn’t say which piece exactly had broken off – only that it was found about 6 miles from the main wreckage area.
Assuming that investigators confirm that the part did indeed come from the jet (of course, that would be some coincidence if it didn’t), this would indicate that the plane suffered some kind of midair breakup, which could in turn offer clues about what exactly precipitated Monday’s crash – or at the very least shed light on the flight’s final seconds.
“The questions are: exactly what piece was it and when did it come off?” said Jeff Guzzetti, the former chief of accident investigations at the U.S. Federal Aviation Administration.
As we have reported, the highly unusual arc of the plane’s dive, and the suddenness with which it occurred, has baffled airline safety experts.
It’s impossible to know at this early stage in the investigation whether the piece came loose as a result of stresses during the high-speed plunge or broke off before the sudden descent.
Source: Bloomberg
The most likely scenario is that the piece sheared off as the plane plummeted from its cruising altitude of about 29,000 feet, which occurred in the span of about 1 minute and 35 seconds.
“In my view, that’s the aircraft shedding parts as it’s coming down,” Guzzetti said.
Rescue workers have found 183 pieces of wreckage, but heavy rainfall has hampered efforts to find the plane’s second black box, and its cockpit voice recorded was found to be heavily damaged, possibly rendering data recovery impossible. They have also found human remains at the site, and confirmed that there were in fact no survivors.
Tyler Durden
Thu, 03/24/2022 – 19:20 - Malone: Are You Better Off Financially?
Malone: Are You Better Off Financially?
Authored by Robert W. Malone via Who is Robert Malone,
I book a lot of air travel. In February we were away for 19 nights. In January, even more. We know what to expect to pay when we book a flight. But even I had a huge sticker shock when I booked a flight to Nashville for mid-April this week and the cost came close to $600 for each ticket. This is over triple what I normally pay, as it is a short “puddle jump” from Washington DC to Nashville – with plenty of flights going to and from.
Of course it isn’t just airfare, it is literally everything has gone up – from gas to service to bread. As predicted in an earlier Substack, shortages and general economic hardship are likely on the way due to both the current economic situation of the last year (lockdowns, “stimulus”, inflation) together with the Russia/Ukraine disruptions. The predicted global food shortage is almost here.
If one goes to the export numbers of Russia, it turns out (excluding rice), that they produce more grain than any other country in the world.
Yesterday’s below the fold news was that White house is now signaling that Biden working on supply chain issues in conjunction with corporations. Yikes – he might have thought of that earlier (maybe he should have read my Substack)! It turns out that China has already secured a lot of the grain supply available globally. The worry is that Biden has done too little and too late to secure oil, grain and fertilizer supplies.
Smash these dire observations with the latest polling data that shows that Americans are already hurting economically and things get scary tough. To assess how people felt about the economy, a March I&I/TIPP Poll asked the question:
“Generally speaking, is your family better off today than it was one year ago, worse off than it was one year ago, or about the same as it was a year ago?”
Fewer than one in five (20%) said they were “better off.” while more than twice that number — 42% — said they were “worse off.” Another 36% said they were “about the same.”
What is interesting about this poll is the majority of Democratic respondents, who can clearly recognize that such a poll could reflect poorly on President Biden, answered that they were the worse off or the same than a year before. Only 29% of self-identified Democrats and 26% of liberals answered that they were better off.
For the mid-terms, a quick glance at the independent responses show that only 17% believe that their family was better off than a year ago. Almost nine out of ten (89%) of Republican respondents felt that they were worse off or the same than a year before
Taken as a whole, that means 78% of Americans have seen no progress or improvement at all in their financial and economic lives since Biden took over in early 2021.
The I&I/TIPP poll also asked Americans,
“How much does your household have in emergency savings — that is, money that is readily available in either a checking, savings or money-market account?”
Respondents were given eight possible responses: “No emergency savings,” “One month’s expenses,” “Two months’ expenses,” “Three months’ expenses,” “Four months’ expenses,” “Five months’ expenses,” “Six months’ expenses or more,” and “Not sure.”
The category “No emergency savings” garnered the biggest response at 34%. Both “One month’s” and “Two months’ ” had 11% each.
That means 56% of all adult Americans have either no emergency savings or at most, barely enough to last two months. The loss of a job or an injury, for even for a couple of months would mean economic disaster for the majority of Americans.
The opportunity to stop the Russian invasion before it started is long gone. The consequences are and will continue to cause us all to experience additional economic hardships. So buckle up, the worst has yet to come.
Therefore, it is no surprise that a Reuters/Ipsos poll came out yesterday showing Biden’s approval rating has dropped to a new low of 40%. This is three percentage points lower than the week before.
The national poll, conducted on March 21 and 22, found that 54% of Americans disapprove of his job performance. High inflation, food and supply shortages, the COVID-19 response, as well as how the President has handled the Ukrainian war, has convinced most Americans that Biden is doing a poor job.
So my friends, get ready. Get prepared and be smart in your economic decisions. And watch for further examples of politicized public health policy decisions and messaging designed to distract from and bolster these dismal projections.
* * *
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Tyler Durden
Thu, 03/24/2022 – 19:00 - Washington "Alarmed" As Beijing Nears Sweeping Security Pact With Solomon Islands
Washington “Alarmed” As Beijing Nears Sweeping Security Pact With Solomon Islands
Weeks after China’s foreign minister cautioned the US against trying to form a “Pacific NATO” – a veiled reference to the growing national security orientation of “the Quad” (a security and economic cooperation alliance involving the US, Australia, India and Japan) – Beijing has reportedly reached a deal with the Solomon Islands to station Chinese military and police personnel on the island, dramatically altering the balance of military power in the Pacific, and potentially re-orienting the small island nation toward Beijing, and away from Washington and Canberra.
The FT broke the news, citing a draft agreement outlining the terms for China’s latest military outpost in the Pacific. At least two sources with “direct knowledge of the document” confirmed its details to the FT.
Initial stirrings of what would become a broader security pact were first seen last year when China sent 10 police officers to the island nation to help quell unrest in the capital, Honiara. The Solomon Islands switched its diplomatic ties from Taiwan to Beijing in 2019, which reportedly contributed to “discontent” that led to riots in the capital, Reuters reported.
One Australian security analyst slammed the deal as an example of “Belt and Road colonialism”.
Rory Medcalf, head of the National Security College at the Australian National University, described the draft document as symptomatic of “Belt and Road colonialism, China’s Indo-Pacific empire”.
Meanwhile, Reuters cited a senior Solomon Islands official who said that the deal covered “policing”, and that a wider security and military arrangement was in the works. The country’s cabinet must approve the deal, and any future deals, for them to be ratified.
“We have a broad security treaty with Australia and policing cooperation. If there is anything with the PRC it will be just the same,” she said, referring to China.
“Any other arrangement on broad security would be just the same as the Australian agreement,” she told Reuters in a telephone interview, giving the first public confirmation of the broader security talks.
“It will have to go to Cabinet,” she said.
The security deal was apparently signed late last week, according to another Solomon Islands official.
Anthony Veke, minister for police in the Solomon Islands, said in a statement on Thursday that he had signed a memorandum of understanding (MOU) with Wang Xiaohong, executive vice minister of China’s Ministry of Public Security, on policing cooperation in a virtual meeting on March 18.
“The signing of this MOU simply shows to the global community that we are here building meaningful cooperation, one that is based on teamwork and seriousness to develop Solomon Islands,” Veke said.
Of course, geopolitics is a zero-sum game. Any advance in security in military cooperation between the PRC and the Solomon Islands will place it closer to Beijing’s sphere of influence, and further away from the West. Perhaps this is why Washington has reportedly been “alarmed” by the deal.
Tyler Durden
Thu, 03/24/2022 – 18:40
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