Oct 25

Today’s News 25th October 2022

  • 26 Of France's 56 Nuclear Reactors Are Offline For Pipe Corrosion Or Maintenance
    26 Of France’s 56 Nuclear Reactors Are Offline For Pipe Corrosion Or Maintenance

    Authored by Mike Shedlock via MIshTalk.com,

    Gear up for a cold Winter in France. The protests have started already…

    Nuclear reactor image from WSJ Tweet below

    Pipe corrosion, maintenance, and labor unrest have nearly half of French nuclear reactors offline. 

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    The result is France’s Worst Energy Crisis Since the 1970s.

    Twenty-six of France’s 56 nuclear reactors are offline for maintenance or because of corrosion on piping that cools the reactor cores. Fixing the corrosion is taking longer than expected at several reactors, delaying their restart by as much as six weeks, according to regulatory filings and a French nuclear executive familiar with the matter.

    Labor unrest is another obstacle. Strikes at 18 reactors owned by EDF SA, France’s state-controlled power giant, have delayed their restart by several weeks, threatening the government’s plans to have all of them back online by the end of the winter. EDF and union leaders said they reached an agreement Friday on salary increases, ending the strikes.

    EDF, the world’s largest owner of nuclear plants, is one of Western Europe’s most important power companies. Its fleet of reactors normally exports large quantities of low-cost nuclear power to neighboring countries, helping stabilize prices across the region.

    The situation changed drastically this year, when France swung from being one of Europe’s largest exporters of electricity to a net importer because of the outages at its reactors. The rash of outages has officials worried that France and the broader region might run short of electricity in the winter, when power demand in Europe peaks.

    The outages have forced EDF to absorb huge losses because the company was forced to buy replacement power on Europe’s wholesale market, where prices have soared, for sale to retail clients at much lower prices.

    Labor Unions Call for General Strike

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    Protests in France, Italy Holland

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    Irritated Farmers Dump Merde

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    Protests in France, Serbia, Germany, Italy, and Spain

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    Check Out This Line of People in France

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    140,000 people took part in the France protest. There were calls for France to withdraw from NATO. Leftists and trade unions organized protests against soaring living costs, inflation EU NATO 

    Just a Prelude

    If those reactors don’t come back on line in time, and that’s a good bet, things are going to get really messy in Europe.

    *  *  *

    Please Subscribe to MishTalk Email Alerts.

    Tyler Durden
    Tue, 10/25/2022 – 02:00

  • China After The Party Congress: What Now?
    China After The Party Congress: What Now?

    Authored by Roger Garside via The Epoch Times,

    When Xi Jinping’s predecessor as leader of China and its Communist Party, Hu Jintao, was removed from the closing session of the Party Congress on Oct. 22 in full view of the 2,300 delegates, it was a demonstration to the world that Xi had swept aside all rivals and is now the undisputed ruler of the nation.

    Yet, in his political report to the Congress, Xi listed an array of deep-seated problems, which his victory does nothing to resolve because they are the product of the political system he is determined to defend. Indeed, his victory will exacerbate these problems because in choosing subordinates, he has given priority to loyalty to him over experience and competence in government.

    More importantly, the problems have essentially been caused by the very political system that Xi and his supporters are ever more determined to defend. They include economic problems like the debt mountain, an ecological catastrophe, a “zero-COVID” strategy that has led to isolation and perpetual lockdown, and the increasing hostility of the United States and its allies.

    China’s body politic is terminally sick. It is like a person suffering from an advanced stage of uremia who can only be saved by a kidney transplant. China requires a political transplant: a democratic revolution.

    Instead of systemic change, Xi has chosen a trajectory that has intensified China’s problems. He has replaced the “reform and opening” of Deng Xiaoping with regression and closure. He prioritizes state-owned enterprises over the private sector that produces the wealth. To rule, he relies upon techno-totalitarianism, not trust. His premature strategic challenge to the United States and its allies has turned their benign partnership into hostility and distrust. In all this, he is alienating 500 million Chinese who produce wealth, and enjoyed the newfound freedoms to create businesses, and travel and study abroad that Deng’s strategy brought them.

    As unsolved problems give birth to crises – the debt mountain led first to the collapse of the property sector, and now to a slow-motion financial crisis – Xi will intensify confrontation with the United States and its allies, to mobilize nationalist sentiment behind him, exploiting the chauvinism long nurtured by the regime. This will be very dangerous for the world. Xi will be surrounded by yes-men who will not dare to restrain him.

    We cannot sit back and wait for China’s autocracy to implode. We must be proactive.

    We have great assets to mobilize, such as the world’s major reserve currencies, capital markets, pools of investment finance, and centers of scientific and technological creativity. After a slow start, the United States is taking decisive action; its allies must follow suit.

    We cannot dictate how China is governed, but we can enable those Chinese who want systemic change to achieve it. Occasions such as the 20th Congress give a false picture. This is a regime that is outwardly strong and inwardly weak. If Xi were truly strong, he would not need to have his predecessor dragged out of the Congress. If the Party were truly confident, it would submit itself to the judgment of the people in free elections in place of this charade of strength and unity.

    Tyler Durden
    Mon, 10/24/2022 – 23:40

  • La Nina Transforms Australian Desert Into Wetlands
    La Nina Transforms Australian Desert Into Wetlands

    Australia is experiencing the third consecutive year of La Nina — an oceanic and atmospheric phenomenon that usually brings above-average rainfall to the country. Cooling of the western Indian Ocean is one of the drivers of La Nina and has transformed deserts into wetlands this year. 

    “With a third consecutive La Nina period on the way for only the fourth time since records began, large parts of Australia have seen unrelenting rainfall with little chance for the ground to dry up,” according to the Australian website news.com.au.

    Sydney has already exceeded rainfall records dating back more than a century. The recent deluge of wet weather has been a relief for a country battling extreme drought, which sparked intense wildfires in 2019-20. 

    Rain has transformed deserts into areas overflowing with water in the country’s remote central region, especially in Channel Country, Queensland. 

     One cattle farmer about 300 miles West of Charleville told The Australian he was ‘blessed’ with rain. 

    “We couldn’t ask for anything better. We’re getting good rains at the right time,” farmer Nathan Keogh said.

    “The stars couldn’t have aligned more perfectly. The cattle are fat and the pastures couldn’t be better.

    “It lifts everybody’s spirits. It can be hard out here in drought times, but this is a game-changer. It’s a lot easier when it’s green.”

    Another area in Channel Country shows rivers coming to life after all the rainfall. 

    “The region experiences flooding rains roughly once a decade, which spread across floodplains through Queensland, South Australia and the Northern Territory into Lake Eyre, bringing out some of the most unique wildflower scenery in the country,” news.com.au explained. 

    And mainstream media outlets like WaPo cite researchers who blame “climate change” for Australia’s flooding. We will note the UN Office for the Coordination of Humanitarian Affairs, stating: “El Nino and La Nina are naturally occurring climate patterns and humans have no direct ability to influence their onset, intensity or duration.” 

    And for those wondering what type of weather La Nina will bring to the Western Hemisphere … read “When Can You Expect El Niño And La Niña?” 

    Tyler Durden
    Mon, 10/24/2022 – 23:20

  • JPMorgan's Bullish China Stock Call Is Backed By History
    JPMorgan’s Bullish China Stock Call Is Backed By History

    By Ye Xie and Amy Li, Bloomberg Markets Live reporters and analysts

    The meltdown that engulfed Chinese stocks Monday is a clear sign investors are worried that President Xi Jinping’s tightening grip on power will exact a heavy toll on free enterprise and economic growth. But some Wall Street banks haven’t given up on China just yet. JPMorgan’s strategist Marko Kolanovic, for one, is urging investors to buy the dip (ZH: as he always does with everything).

    While the quant guru’s bullish call on the nation’s assets has misfired this year, history shows a market rebound after a rout of this scale is more than likely.

    Monday’s selloff in Chinese assets was savage with few precedents outside economic crises.

    Following the Party Congress where Xi stuff the Politburo Standing Committee with his allies, the Nasdaq Golden Dragon China Index of 65 Chinese stocks sank as much as 21%. The MSCI China Index fell more than 8%, the most since 2008. Foreign investors took out a record 18 billion yuan ($2.5 billion) from the mainland’s stock market via the connect programs — more than wiping out the inflows this year. 

    Markets are clearly worried that Xi’s consolidation of power means a likely continuation of recent economically damaging policies, including Covid Zero and the campaign to rein in private-sector enterprises. “The market got the feeling of a continuous lack of focus on the state of the Chinese economy,” said Giuliano Gasparet, head of equity at Generali Insurance Asset Management.

    For some investors, though, the selloff may be overdone. “We believe this is a good opportunity to add given an expected growth recovery, gradual COVID reopening, and monetary and fiscal stimulus,” JPMorgan’s Kolanovic wrote in a note Monday.

    The widely followed strategist has been one of the most vocal China bulls throughout the year, even as his colleague at one point controversially labeled Chinese stocks as “uninvestable.” (The word was never meant to see the light of day, Bloomberg later reported.)

    Kolanovic’s thesis has been that China’s economic stimulus would lead to a recovery. Yet the call has floundered as continued Covid restrictions severely hampered the economy.

    Still, he may be on to something this time. Prior to Monday, there have been only 13 times when the MSCI China Index tumbled at least 8% over the past three decades. The index rebounded in 11 out of those 13 occasions in the the next five days, and advanced 10 times in the following 60 days. In fact, since 1998, the hit ratio for the next 60 days is 100%.

    These historic stats looks encouraging. But for the markets to have a sustained recovery, Beijing needs to retool its Covid policies and rebuild investor confidence. As Yan Wang, China strategist at Alpine Macro, puts it, “market volatility will remain high until investors get better clarity on how Xi Jinping will manage the country going forward.”

    Tyler Durden
    Mon, 10/24/2022 – 23:00

  • US Wants To Break Up Taiwan's Chip Hub To Shield Supply Chains In Event Of China Invasion
    US Wants To Break Up Taiwan’s Chip Hub To Shield Supply Chains In Event Of China Invasion

    The global semiconductor industry is entirely dominated by Taiwan. And that is a significant security risk for Western countries if China were to invade the island nation. 

    “If you allow yourself to think about a scenario where the United States no longer had access to the chips currently being made in Taiwan, it’s a scary scenario.

    “It’s a deep and immediate recession. It’s an inability to protect ourselves by making military equipment. We need to make this in America,” US Commerce Secretary Gina Raimondo told CNBC this past summer. 

    In August, US House Speaker Nancy Pelosi made a controversial trip to Taiwan. In one of her meetings, Taiwan Semiconductor Manufacturing Co. founder Morris Chang told Pelosi very bluntly that Washington’s efforts to rebuild domestic chip manufacturing would fail. 

    “He was pretty blunt, and the esteemed guests were a bit surprised,” one person familiar with the talks told Financial Times. 

    As tensions between Taiwan and China mount, Washington plans to shift the global semiconductor supply chain out of the region to the US and elsewhere. And the reason for it is due to a scenario where China invades or blockades Taiwan, which would mean the global chip industry would grind to a halt overnight. 

    “If China cuts off TSMC’s supply chain, it could cause a major crisis in the world economy,” said Paul Clifford, a non-resident fellow at Harvard’s Kennedy School. TSMC is moving toward shifting “some of their production out of Taiwan because of that concern.”

    Jason Hsu, a former Taiwanese lawmaker and now a senior fellow at the Harvard Kennedy School, said the US is playing a delicate balancing act by pressuring TSMC to move production lines to the US while it unleashes an economic war on China’s semiconductor industry. He said that puts Taiwan at risk.

    The West’s concerns around Taiwan’s security and independence are why the Biden administration is pursuing the CHIPS Act to expand domestic semiconductor output. One problem for TSMC is that Washington is beginning to diversify chip manufacturing away from Taiwan. 

    For example, the Pentagon’s dependency on Taiwan for chips that power leading-edge devices and weapons is central to the battle for tech supremacy between the US and China. Due to future disruption risks, the DoD has to source chips from more secure supply chains. 

    Besides the US, there are efforts in Europe, Japan, Singapore, and India to increase semiconductor manufacturing. New manufacturing plants could take a couple of years to start producing chips. 

    The West’s strategy to diversify semiconductor supply chains out of Taiwan is becoming more clear:

    “Everyone realizes that there is a big watershed moment here for the whole industry,” said Peter Hanbury, a partner and expert in semiconductor and technology supply chains at Bain, the consultancy. “But it kind of snuck up on people.”

    Credit Suisse analysts recently pointed out if Taiwan’s chip plants were disrupted for any reason. The production of automobiles to computers would be severely impacted. 

    As of right now, the West’s goal is to break up Taiwan’s chip hub, though, as we noted earlier, TSMC’s Chang warned that any such move would fail. 

    However, TSMC customers are already looking to diversify production out of the region, as explained by Sebastian Hou, managing director at Neuberger Berman, an investment management company:

    “There have been some concerns among TSMC customers since two years ago … It was the time when in Taiwan we started to have more fighter jets from China hovering around the Taiwan Strait, and that has become a daily routine.”

    So far, those customers include Qualcomm and Nvidia, who have recently stated that some chip production from TSMC’s facilities would be shifted elsewhere. 

    Hanbury said the big question would be if Apple changes manufacturing partners due to the increasing risks in the Taiwan Strait. 

    “Taiwan’s monopoly in semiconductor production creates instability,” Brad Martin, director of the National Security Supply Chain Institute at the Rand Corporation, said. “If the US is faced with a need to make a decision between protecting its economy and defending Taiwan, that starts to become a very stark decision.”

    It’s becoming increasingly clear that the West wants TSMC and others in Taiwan to shift chip production elsewhere, so chip supplies aren’t drastically disrupted in the event of a China invasion. 

    Tyler Durden
    Mon, 10/24/2022 – 22:40

  • Chinese Yuan Craters As PBOC Continues Stealth Devaluation With Weakest Fix In 14 Years
    Chinese Yuan Craters As PBOC Continues Stealth Devaluation With Weakest Fix In 14 Years

    Back on March 30, when the downward move in the yen was only just starting, we explained why the “Yen Is At Risk Of “Explosive” Downward Spiral With Kuroda Trapped, And Why China May Soon Devalue.”

    We won’t waste our readers’ time going into the details (they can click on the hyperlink above for the details), suffice to point out that since then, the yen has cratered by about 30 big figures…

    … prompting the BOJ to intervene, in an act of futile desperation, in the FX market by blowing what now appears to be $50 billion (and rising fast) in open market yen purchases to contain the collapse of the currency. Of course, until and unless the BOJ ends YCC, all interventions will be completely pointless, and the USDJPY can easily hit 200 within the next 12 months unless Kuroda allows the 10Y yield to rise above 0.25%… which he won’t do as the alternative is an immediate bond market collapse.

    But while the yen has been remarkable, it is the move in the yuan that has been the real stunner… just as we predicted. Behold the biggest stealth devaluation in modern Chinese history!

    And tonight, one day after the biggest drop in US-traded Chinese stocks following the absolute revulstion to what happened in China over the weekend, it went from bad to worse for the offshore yuan which cratered as low as 7.3686, a relentless drop in recent days and the lowest level on record for the offshore yuan…

    … which was sparked by the official fixing of the onshore yuan at 7.1668, which while still stronger than the estimate of 7.2198 (if well of record spreads observed in the past few weeks), was still the weakest reference rate in 14 years. In kneejerk reaction, the USDCNY, which is limited how far away from the reference rate it can trade, immediately proceeded to dump by 0.6% to 7.3050, the highest (i.e., weakest) since Dec. 2007.

    Commenting on the move, Mizuho Bank Asia FX strategist Ken Cheung said that the yuan fixing at 7.1668 is “a clear sign of the PBOC letting go of the currency as outflow pressure mounts” adding that “the weaker fixing means the policies are going back to normal after the 20th party congress.”

    Cheung also wrote that “the previous CNY fixing guidance could be a temporary measure and the PBOC is now letting the CNY to be more driven by market forces.”

    Which begs just two questions: how long until the current stealth devaluation which has seen the yuan drop the fastest 15% on record, is called for what it is, especially when compared to the dwarf of an official devlauation that took place back in August 2015.

    The second question: the last time China devalued aggressively – and officially – bitcoin saw its first sizable move from the low-hundreds into four digits. Will this time Beijing be successful at blocking off the capital flight firewall, or will those $55 trillion in Chinese bank assets finally starting moving out again…

    Tyler Durden
    Mon, 10/24/2022 – 22:38

  • Ferguson: How Cold War II Could Turn Into World War III
    Ferguson: How Cold War II Could Turn Into World War III

    Authored by Niall Ferguson, op-ed via Bloomberg,

    History shows that nothing causes fiscal and monetary instability quite like multiple big, long conflicts…

    A large proportion of the world’s top tourist destinations are the remains of dead empires. A week of sightseeing with my younger children in Italy reminded me of this. The city of Rome was the capital of an empire that at its height stretched from Britannia to Babylonia. The city of Venice once ruled a realm that extended across what are now Albania, Croatia, Cyprus, Greece, Montenegro and Slovenia.

    To walk among the monuments of the most Serene City and the Eternal City is at once inspiring and melancholy. Like Edward Gibbon, “I sat musing amid the ruins of the Capitol” — but musing about the decline and fall of other empires.

    My grandparents and parents witnessed the decline and fall of the British Empire, but not before it had helped polish off the more ephemeral empires of Mussolini, Hitler and Hirohito. I experienced the decline and fall of the Soviet empire built by Lenin and Stalin. There are those who subscribe to the delusion that the age of empires is over. But all history is the history of empires.

    The world today is dominated by two empires: the US, which originated in the British colonization of North America, and the ethnic-Han-dominated Middle Kingdom we call the People’s Republic of China. But a number of former empires continue to play disproportionate roles in world politics: The Russian empire limps on in the guise of the Russian Federation; the Persian empire is now the Islamic Republic of Iran; one might say the Holy Roman Empire has been reincarnated in the form of the European Union, at once extensive, German-centered and weak.

    It is not civilizations that clash, but empires. Indeed, it is often border clashes that define their extents. As a schoolboy, I was taught the world wars as if they had been contests between European nation states. Only later did I see that they were struggles between empires. That was why they were global and not just European conflicts.

    More recently, I saw that the term “world war” was a kind of optical illusion. What my paternal grandfather’s Victory Medal called “The Great War for Civilisation, 1914-1919” was really many conflicts: Austria’s against Serbia; Germany’s against Russia and its ally France; Britain’s to preserve Belgian neutrality (the one my grandad fought in); Britain’s and France’s to acquire Germany’s overseas colonies and to partition the Ottoman Empire between themselves.

    My mother’s father served in the Royal Air Force in Burma and India between 1942 and 1945, returning home via the ruins of Germany. His was Britain’s imperial war to prevent its vast Asian empire from being taken over by the Japanese. But there were many other wars: Japan’s against China; Germany’s with the Soviet Union against the rest of Europe; then Germany’s with much of Europe against the Soviet Union; America’s war against all the Axis powers.

    And after the world wars came the Cold War. We think of this as a struggle between two empires that pretended not to be empires: the US and the Soviet Union. But its conflict zones were largely defined by the process of decolonization, as the European empires disintegrated.

    Like the world wars, the Cold War was an agglomeration of conflicts. What happened in Vietnam had little to do with what happened in the Middle East or southern Africa, aside from the fact that both superpowers had dogs in each fight — dogs that they armed and financed, enlarging and prolonging local conflicts by turning them into proxy wars.

    These great conflicts were the dominant phenomena of the 20th century, transforming economic, social and political life almost everywhere. But in recent times, their importance has somewhat faded in most minds. It would not be too much to say that during the interwar era of 1991 to 2018 — in other words, the period between Cold War I and Cold War II — many economists and policymakers lost interest in war.

    Because the wars of the interwar era were relatively small (Bosnia, Afghanistan, Iraq), more closely resembling colonial policing operations, we forgot that war is history’s most consistent driver of inflation, debt defaults — even famines.

    Large-scale war is simultaneously destructive of productive capacity, disruptive of trade, and destabilizing of fiscal and monetary policies. Compare global battle deaths from interstate conflict with international inflation data from the Organization for Economic Co-operation and Development. You will see that behind the era of economic stability known as the Great Moderation, there was period of declining conflict that lasted from the early 1970s until the outbreak of the war in Ukraine. The coming of peace, like monetary policy, acted with lag.

    Rising Prices, Rising Tensions

    Source: OECD

    Seven Decades of Casualties

    Source: Our World in Data

    The events of this year have reminded us of what is at stake in cases of great-power conflict. The war in Ukraine qualifies because Russia is still clearly a great enough power that it would probably have achieved its annexationist aims by now had it not been for large-scale financial, military and technological assistance to Ukraine from the US, the European Union and other associated states. This is a big war, measured by both casualties and costs.

    There are honorable exceptions to the modern economists’ neglect of war. For example, in a nice 2008 paper on “Macroeconomic Crises since 1870,” Robert Barro and José Ursúa pointed out that of the 70 consumption and output disasters they identified for OECD countries in the modern period, one-third (23) were war-related.

    A new paper I have co-authored with Martin Kornejew, Paul Schmelzing and Moritz Schularick, which draws on four centuries of data, shows that central bank balance sheets have been as much affected by geopolitical crises as by financial crises. The large quantities of government bonds held by central banks today are not exceptional by the standards of the 18th and 20th centuries. (The years 1815-1914 saw few really big, expensive wars.)

    Economists tend to treat wars as “exogenous shocks,” generally omitting them from their models. From the historian’s standpoint, however, war is not exogenous, but the endogenous prime mover of the historical process — “the father of all things,” as Heraclitus said.

    Two general points are especially worthy of notice. First, wars have played a very noticeable role in the history of inflation expectations. Thanks to the excellent historical work of the Bank of England, we can trace the history of UK inflation expectations all the way back to the late 17th century. The peaks in short-run expectations nearly all align with wars (generally years when they weren’t going well): 1709 (the Spanish War of Succession); 1757 (the Seven Years’ War); 1800 (Napoleonic Wars); 1917 (World War I); 1940 (World War II). The upward move in 1975 is the exception. (See here for the chart.)

    Second, wars have often been responsible for discontinuities in the history of interest rates. As Schmelzing has argued, there has been a long-term “supra-secular” decline in nominal and real interest rates, dating back to the period after the Black Death of the 14th century (probably the greatest pandemic in history). The major breaks in the downward trend were nearly all associated with wars, particularly those that destroyed capital stock and generated monetary financing of debt.

    An unusual feature of the recent past is that in 2020 a pandemic had the fiscal and monetary consequences of a world war. This was unprecedented. No previous pandemic, including the much more devastating 1918-19 influenza, had elicited comparable responses from finance ministries and central banks.

    Because most (not all) countries followed the US in offsetting the supply-shock caused by lockdowns and spontaneous behavioral changes with generous transfers and significant monetary expansion, the first pandemic year was associated with extraordinarily large deficits and monetary growth rates — comparable in their size with those of the world wars.

    Regrettably, major policy errors were committed in the second plague year of 2021. The newly elected Joe Biden administration embarked on an overambitious and supposedly “transformative” fiscal stimulus, while the Federal Reserve retained its accommodative stance, even as the rapid rollout of vaccines permitted a gradual return to normal social and economic behavior. Like those who thought the pandemic would last forever, those who argued that inflation would be “transitory,” as it was after World War II, turned out to be wrong. Those who saw a better analogy with the Fed’s “great mistake” of the late 1960s have been vindicated by the persistence of inflation.

    Most accounts of the Great Inflation of the 1970s tend to underestimate the role that war played. Obviously, the 1973 Yom Kippur War played a significant part in driving up inflation in 1974 because of the oil embargo imposed by the Arab members of OPEC on the US and other countries supporting Israel.

    But it is worth remembering that the August 1968 monetary policy mistake (cutting rates by 25 basis points, despite the fact that inflation was creeping up) coincided with the peak of US intervention in the Vietnam war, a conflict that played as big a part as President Lyndon B. Johnson’s “Great Society” policies in widening the US fiscal deficit — tiny though it was by modern standards — and ultimately breaking the dollar’s peg to gold in 1971. In 2022, a war played an analogous role in pouring kerosene on the inflationary fire. Food and energy prices were driven up the outbreak of the war in Ukraine and the sanctions imposed on Russia by the US and the EU.

    It goes without saying that the return of great-power conflict has made the life of policymakers difficult, just as it did in 1973. I recently heard it said that the 2020s are not likely to be as inflationary as the 1970s because labor is less organized, so the risk of a wage-price spiral is lower. But I would draw your attention to a number of important differences that make our contemporary circumstances more worrisome than the situation in the 1970s.

    Monetary growth rates were significantly higher between the second quarter of 2020 and that of 2021 than at any point in the 1970s. Year over year, they remained in double digits even after velocity, the rate at which money changes hands, had recovered.

    Productivity growth is lower today in nearly all OECD countries than it was 50 years ago. Demographic trends are worse today, with a significantly higher ratio of dependents to the working-age population. Fiscal positions are worse today, with much larger amounts of government debt and projected deficits relative to GDP, not least in the US.

    Financial markets are more complex today and therefore more fragile. There were no such things as liability-driven investments for pension funds in the 1970s. The onset of Covid in March 2020 exposed fragility in the US Treasury market not dissimilar to what we saw in the UK gilts market at the end of last month.

    Then we had pollution; now we have climate change. Our political stability looks even worse than it seemed at the time of Watergate. In a recent poll, Americans were asked: “Do you think the nation’s democracy is in danger of collapse, or don’t you think so?” — 69% of Republicans and 69% of Democrats answered in the affirmative.

    The war in Ukraine is lasting much longer than the war of 1973 (approaching eight months compared with 19 days). So far, there is no sign of détente in Cold War II — quite the opposite, in fact — so there is a non-trivial risk that we could soon witness a confrontation between the US and China over Taiwan.

    Finally, although media attention currently focuses on the women’s protests sweeping Iranian cities, they coincide with the failure of the attempt to revive the Iran nuclear deal. The Tehran regime will likely speed up its effort to acquire a nuclear weapon, increasing the probability of war in the region, as no Israeli government will countenance a nuclear-armed Iran.

    We may get lucky. We may get away with just re-running the 1970s — though judging by recent events in the UK, we may do it at a rather higher speed: from the inflationary Barber budget (1972) to the Winter of Discontent (1978-9) in a matter of weeks rather than years. (When a head of lettuce has a longer shelf-life than a prime minister, British politics has entered the realm of Monty Python, the best of 1970s comedy.)

    Yet there is a much worse scenario, in which we get something closer to the 1940s, with regional conflicts coalescing into something like World War III — albeit with smaller armies, many unmanned weapons systems, and far more powerful and accurate bombs.

    What makes me worry more about this scenario is the Biden-Harris administration’s new National Security Strategy, belatedly published last week. “We do not seek conflict or a new Cold War,” write the authors, presumably led by National Security Adviser Jake Sullivan. They then proceed to delineate an unmistakable cold war strategy. As they say, “the post-Cold War era is definitively over and a competition is underway between the major powers to shape what comes next.” In other words, Cold War II has begun, in all but name.

    Strip away the woke stuff about “climate change … the greatest and potentially existential [problem] for all nations” and “the needs of the most marginalized, including the LGBTQI+ community,” and you are left with a significant amount of President Donald Trump’s NSS from five years ago, which was all about “great power competition.” In fact, the word “competition” appears 44 times in the new NSS, compared with just 25 in the 2017 edition.

    See if you can spot the difference. “China and Russia challenge American power, influence, and interests, attempting to erode American security and prosperity. They are determined to make economies less free and less fair, to grow their militaries, and to control information and data to repress their societies and expand their influence.” That’s 2017.

    “Russia poses an immediate threat to the free and open international system, recklessly flouting the basic laws of the international order today, as its brutal war of aggression against Ukraine has shown. The PRC, by contrast, is the only competitor with both the intent to reshape the international order and, increasingly, the economic, diplomatic, military, and technological power to advance that objective. … Russia and the PRC … seek to remake the international order to create a world conducive to their highly personalized and repressive type of autocracy.” That’s 2022.

    “We will work with our partners to contest China’s unfair trade and economic practices and restrict its acquisition of sensitive technologies.” 2017.

    “We must ensure strategic competitors cannot exploit foundational American and allied technologies, know-how, or data to undermine American and allied security.” 2022.

    Biden’s plan for Russia might be described cynically as fighting to the last Ukrainian, but to what end? Ostensibly the US is determined to “support Ukraine in its fight for its freedom,” but the real goal is “to degrade Russia’s ability to wage future wars of aggression.” That is why the administration has made almost no effort to broker a cease-fire, much less peace. The White House seems to want this war to keep going, though I suspect that will change after the mid-term elections.

    Given that China is clearly the administration’s higher priority, it is not immediately apparent what purpose is served by a protracted war in Eastern Europe. But a recent speech by Sullivan provided the answer.

    “On export controls” against China, he said, “we have to revisit the longstanding premise of maintaining ‘relative’ advantages over competitors in certain key technologies. We previously maintained a ‘sliding scale’ approach that said we need to stay only a couple of generations ahead. That is not the strategic environment we are in today. Given the foundational nature of certain technologies, such as advanced logic and memory chips, we must maintain as large of a lead as possible.”

    And here’s the key point. Sanctions on Russia, Sullivan declared, have “demonstrated that technology export controls can be more than just a preventative tool … they can be a new strategic asset in the U.S. and allied toolkit.” In other words, the US-led economic war against Russia is like a demo for China’s benefit: This is what we can do to you, too.

    The remarkable thing is that the US has not waited for China to invade Taiwan to go ahead and do it. New restrictions just imposed by the US limit the transfer of advanced graphics processor units to China. (These are chips used in AI applications in data centers.) Washington has also limited the use of US chips and expertise in Chinese supercomputers, and China’s imports of chipmaking technology.

    The aim is to impair Beijing’s ability to deploy artificial intelligence by driving up the cost of computing in China, whether for companies or the government. In short, the Biden administration aims to halt technological progress in China — rather in the way Trisolarans try to stunt Earth’s technological progress in Liu Cixin’s science-fiction novel The Three-Body Problem.

    As Edward Luce noted in the Financial Times, “The new restrictions are not confined to the export of high-end US semiconductor chips. They extend to any advanced chips made with US equipment. This incorporates almost every non-Chinese high-end exporter, whether based in Taiwan, South Korea or the Netherlands. The ban also extends to ‘US persons,’ which includes green card holders as well as US citizens.”

    The most extraordinary thing about these measures is how little comment they have elicited in the media. Trump did nothing so radical.  As Luce put it: “A superpower declared war on a great power and nobody noticed.”

    To understand the full significance of this move, you need to read Chris Miller’s brilliant new history of the microprocessor, Chip War: The Fight for the World’s Most Critical Technology. Last week, I interviewed Miller, and asked him if this might be a repeat of the mistake the US made with Japan between 1939 and 1941, when economic sanctions so boxed in the imperial government that in the end there seemed no better option than to gamble on surprise attack.

    Miller thought this was the wrong analogy, because US sanctions against China today are more targeted than those against Japan. I am not so sure. Cutting China off from high-end chips today seems a lot like cutting Japan off from oil in 1941. And it is an especially hazardous move when more than 90% of the production of those chips takes place in Taiwan, an island that China claims as its own.

    “Taiwan is China’s Taiwan,” President Xi Jinping declared at the 20th Chinese Communist Party Congress last Tuesday. “Resolving the Taiwan question is a matter for the Chinese, a matter that must be resolved by the Chinese. We will continue to strive for peaceful reunification with the greatest sincerity and the utmost effort, but we will never promise to renounce the use of force, and we reserve the option of taking all measures necessary.”

    The spectacle of Xi’s predecessor, Hu Jintao, being humiliatingly and publicly removed from the closing ceremony of the party congress on Saturday was a chilling one. The intent was clear: to signal to the world that China now has, for the first time since 1976, a leader as powerful and as ruthless as Mao Zedong. What did Xi say so coldly as Hu seemed to remonstrate? “You’re out, Tom,” from The Godfather came to mind. (And why did Michael Corleone drop Tom Hagen? Because he was not a “wartime consigliere.”)

    Empires fall. Two weeks ago, I optimistically suggested that I would live to see the fall of the empires of the Chinese Communists, the Russian fascists and the Iranian theocrats. But we must not make the mistake of assuming that the US is an indestructible empire, for there is no such thing. The Biden administration would not be the first Democratic administration elected on a progressive domestic program that stumbled into a major war: Woodrow Wilson, Franklin D. Roosevelt, Harry Truman and Johnson — they all did it. The record is: won two, tied one, lost one.

    The city of Washington once ruled over an empire that stretched from North America across both the Atlantic and Pacific oceans — and beyond. I was in the nation’s capital last weekend for the International Monetary Fund meetings and saw abundant evidence that the empire still rules. The restaurants were crowded with the representatives of poorer countries — the “global South” as they sometimes call themselves — whose principal goal was debt renegotiation, not tourism. The governors of lesser central banks sat on panels; the mighty Fed chair, Jerome Powell, absented himself.

    Yet can one imagine the White House as a future Palazzo Ducale, our Capitol like the Roman Capitol, a ruin where some future historian will one day “sit musing”?

    The answer is: All too easily, if we pursue Cold War II to the extent of stumbling into World War III.

    Tyler Durden
    Mon, 10/24/2022 – 22:20

  • The Danger Of Bubble Wrap (Or How Democrats Learned To Love Ignoring Voters)
    The Danger Of Bubble Wrap (Or How Democrats Learned To Love Ignoring Voters)

    Authored by Thomas Buckley via ‘The Point’ Substack,

    There is thinking inside the box.

    Then there is living inside a bubble.

    And then there is thinking inside a bubble which is in a box in a cage in the basement tucked behind the furnace with a giant sign “Beware of the Leopard!” draped across it (apologies to Douglas Adams.)

    In politics – as in some many aspects of life – it’s always handy to know where your enemies are.  In this case the DC Democrats are right there, which is right where we want them.

    From the utterly oblivious nonsense coming out of Nancy Pelosi – inflation and crime are not big issues this November – to the inability of any major Democrat to even hint about being open to any limits on abortion – well, they may get Cartman’s mom from “South Park” vote at least –

    – to doubling down on “climate change” as people are facing utility rate hikes and power grid instability, the tone deafness is astonishing.

    But why is this happening – why are the Democrats focusing on what, the polls clearly state, are not the major concerns of voters?

    One possibility is that they are true believers and absolutely mean everything they say and are cretain they are making the world better and are just fighting an honest and truthful fight.

    Mm-hmm.

    Another possibility is that they are rock paper stupid, but there is a difference between intellectual dishonesty and intellectual deficiency and it would seem the former, not the latter, would make more sense (though one must also wonder if it is inconceivable to them that they may not represent the feelings and ideas of the general public –

    Then there is the knowledge that they can win because the game is so rigged by the media, voting systems, and the power to shame away from polite society anyone or thing that would dare to ask for better explanations of the whys and wherefores of their policies, let alone disagree with them.  This confidence that they can run a hamster on a platform of giving each and every tweaker in the nation a bag of cash and a machete and still prevail definitely plays a role in the Democrat mindset.  Look at New York, Los Angeles, Chicago, Portland, Seattle, etc. and it’s pretty much what they’ve been running on locally and winning so it seems to work.

    Of course, a major difficulty with running on the issues voters care about is that the voters care about them because the Democrats made them care by causing the problems in the first place – inflation, crime, energy instability, etc. can all be appropriately laid at their feet

    But it may be a combination of all those things plus one extra very important fact: they are only talking amongst themselves.

    Imagine a conference room full of Democratic operatives strategizing campaign themes and one says “hey, maybe we should layoff the January 6 stuff and focus on issues that the vast majority of everyday Americans really care about?”

    The first sound heard in response would be crickets.  The second sound would be of a pink slip hitting the table.  The third sound would be the revocation of a building security clearance.  The fourth sound would be the pinging of cell phones as the entire room simultaneously engages in ritualized contact info removal.

    In other words, many Democratic candidates are engaged in campaigns that are not being run by people who are- first and foremost – interested in winning but by people who are deathly afraid of saying the wrong thing, being socially ostracized, and seeing their future careers instantaneously evaporate in a woke cloud of revenge. 

    It’s one of the reasons why excuses for the upcoming mid-term bloodbath are already coming out – it wasn’t us or our ideas but it was the Saudis and the oil companies conspiring to raise gas prices – https://slate.com/news-and-politics/2022/10/gas-prices-biden-approval-rating-midterms-democrats.html– and Trump is a liar and people are stupid and evil – MSNBC’s execrable Joy Reid tweeted “It’s terrifying how many Americans will choose literal fascism, female serfdom, climate collapse and the reversal of everything from Social Security & Medicare to student loan relief bc they think giving Republicans the power to investigate Hunter Biden will bring down gas prices” – and Trump is evil and people can’t vote – https://slate.com/news-and-politics/2022/10/democrats-bad-midterm-polls-bad-vibes.html – and on and on.

    It’s also the reason for this –

    For those unaware, Allan Fung is a Republican who may very well take – it’s a toss-up, maybe even leaning his way, right now – a congressional seat in deep blue Rhode Island.  This race has gained the attention of the House Majority PAC – which was created by Pelosi as part of her effort to indenture to herself every other Democrat in Congress by controlling huge amounts of campaign cash – that has just begun airing the above advertisement on the state.

    A short breakdown of the ad (do watch if you have 30 seconds):  It begins by invoking Charlottesville (really?) kids in cages (again, really?) and January 6 (no surprise there), then has Trump inciting a riot “resulting in the death of five police officers (huh? are they counting Ashli Babbitt?) to overturn the election, and finishing with the obligatory “Fung is too loyal to Trump, too extreme” boilerplate.

    The most fascinating part of the ad is the photo the Democrat creators chose to end the spot with – Fung happily standing with two people; their faces are pixelated but one is a woman wearing an American flag scarf and the other is a man dressed as a Revolutionary War soldier, complete with tri-corner hat and red, white, and blue uniform.  That means that someone specifically chose to represent evil Trumpian fascism with the flag and Independence Day.

    Seriously.

    Locally, Fung is running inflation and heating oil price increases and opposing tax hikes ads; Pelosi – and Fung’s opponent Seth Magaziner – are running things like the above and commercials about abortion and the standard “Kevin McCarthy will end Social Security” claptrap.

    Yes, Rhode Island is “blue” but, more importantly, it’s pretty blue collar (outside of Brown University, East Greenwich, Jamestown, Barrington, and half of Newport, of course, and only one of which is in the district) so the disconnect between potential Democratic voters and existing Democratic politicians and strategists is all the more glaring.

    That failed campaign managers – see Steve Schmidt, who went from Meg Whitman’s malpractice of a California gubernatorial campaign to the Lincoln Project grift and Donna Brazile, who ran Al Gore’s 2000 poorly targeted effort and after still got a number of sweet gigs – can go on with their lives as long as they can blame something else for losing is a well-known fact in DC circles as long as you keep the consultanocracy and media establishment well and truly oiled. 

    This fact is obvious to the folks behind Katie Hobbs’ desert disaster, Kathy Hochul’s “empire strikes back” campaign, and Nevada’s Sisolak betting on the hard way.

    And, staying in Nevada, there is the issue of rank incompetence caused by the groupthink political blinders.  The House Majority PAC has run an abortion-related advertisement against April Becker, the Republican running in the 3rd congressional district.  The ad features Dr. Adam Levy, intoning against “botched, back-alley abortions…far too many women died…” etc.  The problem with the ad, beyond the obvious, is that Dr. Levy not only has himself caused the death of a patient during a botched abortion but was also charged with sexual assault of a minor under 16 years old and lewdness with a child under 14 years old, eventually entering an “Alford” plea to lesser charges of abuse and neglect.

    Here is the ad – https://www.thehousemajoritypac.com/our-work/led-us-here – here is his easily available background information – https://abortiondocs.org/abortionists/adam-vincent-levy/ (see license/incident details under “documented deaths or serious injury”) – and here is story that broke the news – https://thenevadaglobe.com/articles/house-majority-pac-ad-features-doctor-criminally-charged-of-sexual-assault-lewd-acts-with-a-minor/ .

    But if you don’t play along and actually try to win by ignoring the hivemind obsessed with identity politics and Trump and abortion and Trump and January 6 and Trump and suggest trying – somehow – to connect on issues that matter to typical voters?

    Adios, sayonara, goodbye, and never darken our doors again.

    And it’s very very cold outside the bubble. 

    And the leopard might still be there, too…

    *  *  *

    The Point is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.

     

    Tyler Durden
    Mon, 10/24/2022 – 21:40

  • Hong Kong Government Loses Court Bid To Invalidate 20,000 Vaccine Exemptions
    Hong Kong Government Loses Court Bid To Invalidate 20,000 Vaccine Exemptions

    A challenge that mounted earlier this month in Hong Kong to invalidate Covid vaccine exemptions issued by certain doctors has lost in court.

    In late September, Hong Kong sought to invalidate certain Covid exemptions issues by doctors who were suspected of malpractice.

    Big brother really seems to be scraping the bottom of the barrel at this point. As if enough people hadn’t already been forced into getting the jab, Hong Kong police “arrested six doctors last month for allegedly issuing vaccination exemption letters without conducting proper consultations,” SCMP wrote last week. 

    From there, the government made a legal challenge to 20,000 vaccination exemption certificates linked to doctors over suspected malpractice in the country’s High Court. But the court then ruled that the government has no power to invalidate the exemptions and a temporary ban on a plan to revoke the exemptions will now likely become permanent. 

    The country’s health secretary couldn’t identify the source of his authority, Mr Justice Russell Coleman ruled: “A government minister gets his or her legal powers from legislation – and not from an announcement made in a press release.”

    “It does not seem to me to be correct to leap from the desirability of enabling the secretary to ‘do something’ when some [medical exemption certificates] are called into question to the conclusion that [the law] must be read as conferring such a power,” his ruling continued. 

    “The question does not identify a choice between being ‘pro-government’ or ‘anti-government’; it identifies a distinction between what is lawful and what is unlawful,” the ruling continued. 

    Litigant Kwok Cheuk-kin was granted an application to restrain authorities from invalidating the certificates. According to reporting by SCMP, he then called the ruling a “miserable loss” for the government and a “disgrace” to city leader John Lee Ka-chiu.

    Executive councillor and barrister Ronny Tong Ka-wah said that the government was considering an appeal. “Amending the laws is not moving the goalposts. The goalposts are in the wrong position so, of course, we have to put them in the right place,” he said. 

    “The citizens of Hong Kong are the biggest winners of the present judicial challenge,” Kwok concluded. You can read the full SCMP writeup here. 

    Tyler Durden
    Mon, 10/24/2022 – 21:20

  • Ron Paul Rages Against "Political Justice" In America
    Ron Paul Rages Against “Political Justice” In America

    Authored by Ron Paul via The Ron Paul Institute for Peace & Prosperity,

    Josef Stalin’s top henchman famously said, “show me the man and I’ll show you the crime.” What it meant was that Soviet justice was about politics, not the rule of law. First decide who, for political reasons, is to be punished, and then the state will provide the crimes for which he will be charged.

    This dark era of politicized “justice” has returned with former Trump campaign advisor Steve Bannon’s recent sentence to four months in jail for “contempt of Congress” over his refusal to appear before the House January 6th Committee.

    How is it politicized justice for Bannon to be punished for ignoring a subpoena from the US Congress? Because many before him have been charged with contempt of Congress – including Democratic Party luminaries such as Eric Holder, Janet Reno, and Lois Lerner – and were never sentenced to jail time.

    Bannon’s sentence is meant to convey a political message to America: if you support Trump you are a criminal and you may find yourself in a cell next to Steve Bannon.

    And you do not have to support Trump to understand the danger in this. Everyone should be afraid of political justice. It cuts both ways and there is no guarantee that Republicans if they capture Congress will not also follow this precedent.

    Sending your political opponents to jail is what happens in a banana republic. It is un-American. But here we are.

    The goal of the January 6th Committee is not to seek justice for the “crime” of trespassing and putting feet on Pelosi’s sacred desk, but to make sure that Donald Trump is never allowed to run for President again. That is the reason hundreds have been unjustly arrested and held in terrible conditions for non-crimes. As they say, if you want to make an omelet you have to break some eggs.

    Speaking of contempt of Congress, the real contempt is the existence of the January 6th Committee in the first place.

    It has been a partisan show trial from the beginning, where the only two “Republican” Members were not chosen by Republicans but by Nancy Pelosi. The purpose of the Committee has been to prop up the false narrative that somehow a few rowdy protesters who broke into the Capitol Building were the equivalent of the storming of the Bastille.

    The US Administration is also involved in narrative control in other areas.

    The media reported last week that Tesla and Space-X chief Elon Musk has come under a “national security review” over, it seems, his on-again-off-again purchase of Twitter and perhaps even his proposing a peace plan for Russia and Ukraine that does not include a nuclear strike on Moscow.

    Musk has also come under fire from the “cancel culture” Left over his repeated vows to return Twitter to a free speech platform once he is in charge. As we have seen in so many cases, including with former New York Times journalist Alex Berenson, Twitter has been working closely with the Biden Administration to silence and ban any users who dare challenge the “accepted wisdom” on Covid, Ukraine, and a number of other things.

    When justice becomes tangled in politics, freedom and liberty go out the window. We are not so naïve to think this is something that just arrived with the Biden Administration, but there seems little doubt it is spreading like a cancer. We must reject political justice if the Republic is to survive.

    Tyler Durden
    Mon, 10/24/2022 – 21:00

  • Democrats In Panic Mode As Midterm Momentum Favors GOP
    Democrats In Panic Mode As Midterm Momentum Favors GOP

    With midterm elections weeks away, desperation among Democrats is palpable.

    After horrendous polling which shows that Americans not only care most about inflation and the economy (‘Change the subject!‘), and a mass exodus of independent voters, Democrats have even resorted to shuffling a clearly-impaired President Biden around to stump for candidates and reassure the base how wonderful things are.

    Here he is discussing ‘ramrod-spined’ VP Kamala Harris – who apparently has “enormous integrity.”

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

    “Enormous integrity.”

    Anyway… 

    As The Hill makes abundantly clear, Democrats are freaking out right now as momentum into midterms is clearly with the GOP.

    As recently as a few weeks ago, Democrats were bullish about their chances of defying harsh historical and political headwinds, believing that voter anger over the Supreme Court’s decision to overturn Roe v. Wade and lingering GOP concerns about the quality of Republican candidates might allow them to not only hold, but expand their paper-thin Senate majority.

    But the political winds appear to be shifting once again in the GOP’s favor. Recent polling has found Republicans regaining an edge on the so-called generic ballot, a survey question that asks voters which party they plan to vote for in November. Meanwhile, the data website FiveThirtyEight’s Senate forecast shows Democrats’ chances of holding the Senate dropping by 11 percent over the past month. -The Hill

    “A month ago, it looked like not only were the Democrats poised to hold the Senate, the question was: were they going to be able to get, you know, two extra seats?” said former Democratic pollster, Fernand Amandi, who worked on former President Obama’s 2008 and 2012 campaigns. “Now I think the hope is just to hang on.“

    “Perhaps Democratic messaging hasn’t been as strong as it could be,” he continued. “But we’re talking about things tightening when the choice is between chaos and competency. The Democrats have governed with a competent, steady hand in a very volatile environment. What we’ve seen from the Republican Party over the last six years has been wholesale unhinged chaos. And what they’re offering is more chaos.“

    Really?

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

    According to Democratic strategist and former Kirsten Gillibrand (D-NY) aide Jon Reinish, “If you look at the Dobbs decision — that seems to have come a little too early for the Democrats,” referring to the Supreme Court decision that overturned Roe vs Wade.

    “And I think there [are] other currents — inflation is probably the biggest one — that have kind of interfered with the singularity of that argument.”

    So – the timing of the USSC overturning Roe wasn’t ideal for maximum outrage, and inflation is highly inconvenient.

    Maybe Democrats can simply campaign on the economy being “strong as hell”?

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

    According to the most recnt NYT-Siena College poll, the economy and inflation top the list of problems facing the country, while just 5% of voter said abortion is the most pressing issue. January 6th came in at 7%. Nobody cares about the hill Democrats have chosen to die on.

    In one of the poll’s more alarming findings for Democrats, women who identified as independents said they preferred Republicans by an 18-point margin, a stark reversal from September, when those voters favored Democrats by a 14-point margin. Democrats have sought relentlessly to sway those voters by warning of threats to abortion rights. -The Hill

    “The voters who would be most susceptible to the Democrats’ messaging on abortion are shifting,” said former GOP strategist and congressional candidate, Ford O’Connell.

    “As long as the Republicans stay focused on two things — my money, my family — then they’ll win in 2022,” he added. “They’ll win in 2024. Because the Democrats aren’t showing any sign of changing their approach.”

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

    Tyler Durden
    Mon, 10/24/2022 – 20:40

  • Ex-Treasury Secretary Warns Of Deficit "Doom Loop", Says Fiscal Debates Need To Be "Back On The Table"
    Ex-Treasury Secretary Warns Of Deficit “Doom Loop”, Says Fiscal Debates Need To Be “Back On The Table”

    Authored by Tom Ozimek via The Epoch Times,

    Former Treasury Secretary Larry Summers said in a recent Bloomberg interview that fiscal debates need to be put “back on the table” as surging borrowing costs risk a potential deficit “doom loop.”

    Summers made the remarks during Friday’s edition of Bloomberg’s “Wall Street Week,” in which he said that the Biden administration’s big spending initiatives, including the student-loan forgiveness that caused the monthly deficit to jump 562 percent, could shake investor confidence.

    “If your deficit projection starts to get out of control and your real interest rates start to rise rapidly, you can get into a kind of doom loop,” Summers told the outlet.

    “We’re going to need to be watching our own fiscal projections in the United States very carefully.”

    While the federal budget deficit is down to $1.38 trillion this year from $2.78 trillion in fiscal 2021, it was 562 percent higher on a monthly basis compared with September 2021. The monthly jump mostly reflects Biden’s student debt forgiveness as several years’ worth of costs were compressed into a single month.

    ‘Stagflationary Debt Crisis’

    Another prominent economist who has warned about the risks of high debt as borrowing costs rise is Nouriel Roubini, a professor of economics at New York University’s Stern School of Business who got the nickname “Dr. Doom” for his accurate prediction of the market meltdown of 2008–09.

    Roubini said in an opinion piece for Time magazine that under conditions of much higher private and public debt levels now than in the past, central bank rate hikes to tame soaring inflation carry a major downside risk.

    “Rapid normalization of monetary policy and rising interest rates will drive highly leveraged households, companies, financial institutions, and governments into bankruptcy and default,” he wrote.

    Roubini expects the next crisis to be some combination of 1970s stagflation and the 2008–09 debt crisis, predicting a toxic mix where “the decade ahead may well be a Stagflationary Debt Crisis the likes of which we’ve never seen before.”

    It comes as Republicans have criticized the Biden administration’s big-ticket spending and have been flagging the need for spending cuts.

    “You can’t just continue down the path to keep spending and adding to the debt,” House Minority Leader Kevin McCarthy (R-Calif.) said in a recent interview on Punchbowl News.

    The GOP lawmaker said that if Republicans win control of the House, they should consider using debt-limit negotiations to pressure Democrats to cut spending.

    “And if people want to make a debt ceiling [for a longer period of time], just like anything else, there comes a point in time where, OK, we’ll provide you more money, but you got to change your current behavior.”

    “We’re not just going to keep lifting your credit card limit,” he added. “And we should seriously sit together and [figure out] where can we eliminate some waste? Where can we make the economy grow stronger?”

    ‘Force as Much Spending Reduction’ as Possible

    In a recent interview for The Epoch Times’ sister outlet NTD, Stephen Moore, former senior economic adviser to former President Donald Trump, blamed soaring inflation on the Biden administration’s massive spending packages and said the only thing that will cool price pressures is a GOP win in the midterm elections so they can pressure Democrats to “stop the spending.”

    Moore acknowledged that there are limits to what a Republican-controlled Congress could do to rein in spending, as some of it is on “automatic pilot” and can’t be stopped by a vote.

    “Republicans should not over-promise,” he said. “They can stop new spending, they can—in a fight over the debt ceiling—pull back some spending, as we did with [former President Barack] Obama.”

    He said a GOP win would likely mean more political friction in Washington.

    “Neither side is going to be very happy,” he said.

    “But the more the Republicans can bring spending and regulations and taxes down, the stronger the economy.”

    In order to tame soaring inflation, Republicans should “force as much spending reduction” as possible, Moore argued.

    Tyler Durden
    Mon, 10/24/2022 – 20:20

  • Amid European Energy Crisis, US Pipeline Capacity Pushes Permian NatGas Prices Near Zero
    Amid European Energy Crisis, US Pipeline Capacity Pushes Permian NatGas Prices Near Zero

    While European NatGas prices have fallen in recent weeks, they remain extremely high relative to ‘old norms’ as Russian supply restrictions amid EU self-sacrificing sanctions are leading to fears of deaths and starvation as ‘winter is coming’.

    However, things are a little different in the US where Bloomberg reports that booming production in the vast Permian basis known as Waha is overwhelming pipeline networks, creating a regional glut of the fuel.

    That glut has meant that, according to traders, Waha gas was trading for as little as 20 cents to 70 cents per mmBTU this morning (which compares to around $5 for the US benchmark NG contract and around $30 in Europe)…

    If West Texas prices tumble into negative territory, energy producers will effectively be paying someone to take gas off their hands – something that hasn’t happened since October 2020.

    Waha gas went negative eight times times in 2020 and more than two dozen times in 2019, data compiled by Bloomberg shows.

    Bloomberg reports that the Texas price plunge stems from maintenance scheduled for Kinder Morgan’s Gulf Coast Express and El Paso Natural Gas pipeline systems.

    Permian pipeline constraints “have never been relieved,” making the region more susceptible to sudden gluts and price volatility, said Campbell Faulkner, chief data analyst at OTC Global Holdings LP.

    Tyler Durden
    Mon, 10/24/2022 – 20:00

  • Cheney Says She'll Do "Whatever It Takes", Including Presidential Run, To Stop Trump In 2024
    Cheney Says She’ll Do “Whatever It Takes”, Including Presidential Run, To Stop Trump In 2024

    Authored by Lorenz Duscamps via The Epoch Times,

    Outgoing Rep. Liz Cheney (R-Wyo.) said on Sunday that she will do everything possible, including a potential 2024 presidential run, to prevent former President Donald Trump from entering the Oval Office again.

    Cheney, who has become one of the most vocal voices in the Republican Party against Trump, made the comment in an interview on NBC’s “Meet the Press,” arguing the Republican Party “will shatter” if Trump becomes the GOP presidential nominee.

    “I think the party has either to come back from where we are right now, which is a very dangerous and toxic place, or the party will splinter and there will be a new conservative party that rises,” Cheney told anchor Chuck Todd, adding that if Trump becomes the Republican nominee, “the party will shatter and there will be a conservative party that rises in its place.”

    Todd continued by telling Cheney that some Americans believe that if she “would be a third-party candidate” in the 2024 presidential elections, it would potentially “be enough to stop Trump” from becoming president again.

    “Well, we’ll do whatever it takes as I said,” she responded.

    “He will not be president again.”

    Trump has not made any definitive statements on whether he would run for the nation’s highest office, but he has strongly suggested that he would in numerous speeches and interviews after departing office in January 2021.

    Todd also asked Cheney, who said in mid-August that she was considering running for president but hasn’t yet made a decision on the matter, what it would take for her to run for president and face Trump.

    “Look, I’m going to be very focused on all the things we’ve been talking about and I care deeply, as I know you do, as millions of people do, about this nation and about the blessing that we have as a constitutional republic,” Cheney said.

    “I am focused on what we’ve got to do to save the country from this very dangerous moment we’re in,” she added, “not right now on whether I’m going to be a candidate or not.”

    Cheney, who has been called a “Republican in name only” by others in her party and lost the Republican primary to Trump-backed challenger Harriet Hageman in August, said in September that she will not remain a Republican if Trump is the GOP presidential nominee in 2024.

    Arizona Republican gubernatorial candidate Kari Lake in Tuscon, Ariz., on Oct. 2, 2022. (Otabius Williams/The Epoch Times)

    Cheney also said that she would be willing to campaign for Democrats to stop GOP nominee Kari Lake from being elected in the Arizona gubernatorial race.

    “I’m going to do everything I can to make sure Kari Lake is not elected,” Cheney said.

    When asked by Texas Tribune CEO Evan Smith whether doing everything she can to ensure Lake is not elected includes campaigning for Democrats, Cheney simply stated, “Yes.”

    Former television anchor Lake, who is endorsed by Trump, won the Republican nomination in the Arizona primary election in August. Lake has been vocal in alleging fraud in the 2020 election and has pledged to improve election security if she wins the gubernatorial race.

    Cheney was one of 10 House Republicans to vote to impeach Trump. She is also one of two Republican members sitting on the Democrat-led House panel investigating the Jan. 6, 2021, breach of the U.S. Capitol.

    Tyler Durden
    Mon, 10/24/2022 – 19:40

  • Last Four US Cities Where Renters Can Afford A Starter Home
    Last Four US Cities Where Renters Can Afford A Starter Home

    Homebuyers feel the squeeze as vanishing inventory, soaring mortgage rates, and near-record-high home prices spark one of the worst affordability crises in decades. Homeownership has doubled in the last year, making many large metro areas unaffordable for renters to purchase their starter homes. 

    “Vanishing inventory is just the tip of the unaffordability iceberg as daunting mortgage rates crush renters’ homeownership goals overnight,” real estate research firm Point2 said. 

    The good news is that Point2’s new study found the last four metro areas where renters can afford starter homes. Those cities include Detroit, Michigan; Tulsa, Oklahoma; Memphis, Tennessee; and Oklahoma City, Oklahoma. 

    Point2’s data shows the percentage of starter homes built over the years has collapsed. 

    Once upon a time, nearly 70% of all new builds were starter homes — single-family houses with 1,400 square feet or less that started at $6,990. But that was in the 1940s. Fast forward to 1980 and that share fell to 40%. Then, in 2019, the U.S. Census Bureau reported that a mere 7% of all new homes were represented by the small, entry-level homes that are affordable for first-time buyers — and the prices aren’t even remotely similar.

    Due to the increasing cost of land, as well as zoning restrictions and skyrocketing costs for building materials, the modest, bare-bones homes of yesteryear have become the stuff of myths and legends — the actual unicorns of the real estate market. More elusive than ever, this type of home seems almost extinct.

    Point2′s analysis showed that as mortgage rates skyrocketed, the number of metro areas offering affordable starter homes shrank from six in August to just four this month. 

    In August, when interest rates were hovering around 5.5%, renters in 6 large U.S. cities could comfortably afford to buy a starter home. One month and an interest hike later, that number swiftly fell to 5… and then 4.

    To estimate affordability, Point2 follows the standard personal finance rule that a mortgage payment shouldn’t exceed 30% of a homeowner’s gross monthly income. 

    What does it mean that renters could comfortably afford to buy a starter home? Well, the accepted rule is that a mortgage payment should not exceed 30% of your gross monthly income. Accordingly, after calculating how much the mortgage would be in each of the 50 cities (taking into consideration the median price of a starter home and assuming a 20% down payment), we calculated a renter’s required income and compared it to their actual income. The result? Renters in only four cities earned enough to cover their monthly mortgage payments.

    Lawrence Yun, the chief economist at the National Association of Realtors, expanded more on the affordability crisis:

    “Trying to balance the housing market by choking off demand via higher mortgage rates is damaging to consumers and the economy.” 

    Yun is correct. Inflation has outpaced wage growth for the last 16 months. 

    Under the Biden administration and Powell-led Federal Reserve, the new “American dream” is a starter home in the dangerous neighborhoods of Detroit. 

    Tyler Durden
    Mon, 10/24/2022 – 19:20

  • China's Coming Clash With Economic Reality
    China’s Coming Clash With Economic Reality

    Authored by Jim O’Neill via Project Syndicate,

    As expected, Chinese President Xi Jinping has been given an unprecedented third five-year term. More surprising was the absence of any sign that Xi intends to revise the policies that have done so much economic damage in recent years.

    Judging by the reporting from the Communist Party of China’s 20th National Congress, Xi Jinping, newly anointed to an unprecedented third term as president, is tightening his political grip and strengthening the CPC’s control over society. Can successful economic development continue in this environment?

    I have been thinking for many months now that one day, I would wake up to read that China was revisiting its zero-COVID strategy, overhauling the CPC’s interaction with domestic private business, truly reforming the country’s hukou system of residence permits, and rethinking crucial aspects of its Belt and Road Initiative (BRI) and its recent tactical stance on international governance. It is proving to be a very long wait.

    At a meeting with a senior Chinese official a few months ago, I jokingly said that my 30-plus years of “understanding” China may have been a fluke, because I couldn’t comprehend some policies the country had adopted in recent years. The only way I could rationalize them was to conclude that they must be part of some tactical maneuver to neutralize factions within the CPC’s upper echelons ahead of the Congress. Judging by who the Congress has chosen to be next to Xi in the new leadership, there have certainly been further purges of opponents – and very few signs of a reversal of the policies of recent years.

    Unless the post-Congress days and weeks produce a big surprise, I see growing dilemmas emerging for Xi and the CPC.

    In the BRICs analysis (the purported rise of Brazil, Russia, India, and China) that my then-colleagues and I produced a generation ago, the decade 2021-30 was supposed to be when China’s economy closed in on the US in nominal terms. This was why the BRICs economies collectively might go on in the next decade to become larger than the G7, which would of course represent an enormous change to the modern world order.

    This assumed that countries would achieve their long-term potential productivity rate, because Chinese GDP growth would decelerate as its labor-force growth peaked, implying that most of the 4.5-5% GDP growth we had assumed would reflect productivity gains. This growth rate is consistent with what China has stated is both required and desired to double its GDP per capita by 2035 from the 2020 level.

    But the last three years suggest that China is unlikely to achieve this target unless it reconsiders its current policies. Virtually all scientific evidence suggests that it is impossible to eradicate COVID-19. The only plausible way to manage it is with proven vaccines. Chinese leaders’ fear that abandoning the zero-COVID policy would overrun the health system and cause mortality to rise is understandable, but the policy is entirely inconsistent with the path to the 2035 goal. It has been clear for some time that China can achieve its goal only if Chinese consumers become a central part of the country’s growth model. Rolling lockdowns make this virtually impossible.

    Surely the time has come to import the best Western vaccines and change course. Among other benefits, such a step would send a powerful signal to the rest of the world that China wants to open again. In such a scenario, there could even be a reversal of the ongoing economic decoupling between China and Western countries, as well as of the growing difficulties surrounding most global governance bodies, such as the G20, the World Health Organization, the International Monetary Fund, and the World Bank.

    COVID-19 is hardly the only policy area in need of rapid reform. In particular, the authorities must address the growing signs of a vicious circular weakening of the housing market and construction, as well as the lack of success of Xi’s signature BRI.

    I hope these words will be read as constructive criticism from someone who saw China’s potential over 30 years ago and imagined a world where it could become the biggest economy. Back then, I thought this would benefit not only China, especially its citizens, but also the rest of us.

    This month, the US National Bureau of Economic Research (NBER) published a study, “The Future of Global Economic Power,” looking all the way to 2100. It follows an analytical framework very similar to that of our BRICs analysis, and its main scenario still concludes that China will become the world’s largest economy by the end of the century, with another BRIC country, India, in second place. But there are two other scenarios with less favorable paths of productivity growth. In one of them, India, not China, is the world’s largest economy by 2100. And in the second, productivity falls short of the path of the past three decades, as it has in recent years, and China’s share of global GDP declines notably.

    One can only hope that whoever Xi surrounds himself with in the coming years takes the NBER report to heart.

    Tyler Durden
    Mon, 10/24/2022 – 19:00

  • American Students Have A Math Problem
    American Students Have A Math Problem

    American students have a math problem. That’s according to the latest findings from the National Assessment of Educational Progress (NAEP), also known as The Nation’s Report Card.

    As Statista’s Felix Richter reports, the new batch of results, published by the U.S. Department of Education’s National Center for Education Statistics on Monday, confirms fears about the pandemic’s disruptive effect on education, showing significant declines in mathematics and reading scores among fourth and eighth graders.

    Infographic: American Students Have a Math Problem | Statista

    You will find more infographics at Statista

    In fact, the decline in national average math scores was the largest ever recorded in the nationally representative assessment of student performance dating back to 1969. In the test’s first results since the pandemic began, just 26 percent of eighth graders showed proficiency in math, down from 34 percent in 2019. That’s the worst result since 2000, as math performance among eighth graders declined in 51 participating states and jurisdictions. Fourth graders fared just a little better with 36 percent achieving a proficient score, down from 41 percent three years earlier.

    “The results show the profound toll on student learning during the pandemic, as the size and scope of the declines are the largest ever in mathematics,” NCES Commissioner Peggy G. Carr said in a statement on Monday, while her colleague Daniel J. McGrath, acting as NCES associate commissioner for assessment, warns of possible long-term effects.

    “Eighth grade is a pivotal moment in students’ mathematics education, as they develop key mathematics skills for further learning and potential careers in mathematics and science,” McGrath said.

    “If left unaddressed, this could alter the trajectories and life opportunities of a whole cohort of young people, potentially reducing their abilities to pursue rewarding and productive careers in mathematics, science, and technology.”

    Tyler Durden
    Mon, 10/24/2022 – 18:40

  • Illegal Immigrant Arrests At Border Soar In September, Set New Fiscal Year Record
    Illegal Immigrant Arrests At Border Soar In September, Set New Fiscal Year Record

    Authored by Zachary Stieber via The Epoch Times,

    President Joe Biden is facing fresh criticism after his administration released illegal immigrant apprehension numbers from September, showing the number of arrests soared to a record high.

    Customs and Border Protection (CBP) made 227,547 arrests in September at the U.S.–Mexico border… the most in history.

    That was by far the highest number for a September, coming in at some 35,000 more than the first September under Biden, the previous record, and up 12 percent from August.

    It was also one of the highest numbers in fiscal year 2022, despite September traditionally being one of the months in which illegal immigration slows because of weather and other patterns.

    The number “reflects an accelerating pace of apprehensions when they should be declining seasonally,” Steven Kopits, president of Princeton Policy Advisors, said in a statement.

    “This speaks to both a strong U.S. labor market and deteriorating enforcement at the border.”

    Biden, a Democrat, reversed or weakened various Trump-era border policies, including halting construction of the border wall. His administration has also curtailed the deportation of illegal immigrants.

    “Over the past 21 months, we have witnessed the devastating harm wrought by a rogue administration that is asserting near-dictatorial powers in a relentless effort to keep our borders open,” R.J. Hauman, head of government relations and communications for the Federation for American Immigration Reform, said in a statement.

    “The endless flow of illegal immigrants and the incursion of lethal narcotics pouring across our border will not end until this administration demonstrates a willingness to secure the border and enforce the law.”

    Fiscal year 2021 already set a new record of apprehensions, 1.7 million, despite including nearly four months of below-average illegal immigration under former President Donald Trump. Fiscal year 2022 apprehensions reached more than 2.3 million. The new fiscal year started on Oct. 1.

    In September, some 182,700 illegal immigrants were captured. Some were arrested more than once. The figure was a 15 percent jump from August.

    Neither the White House nor Biden has reacted to the latest numbers, which don’t include “gotaways,” or illegal immigrants who evaded capture after entering the United States.

    CBP Commissioner Chris Magnus, a Biden appointee, blamed the wave of illegal immigrants on “failing regimes in Venezuela, Cuba, and Nicaragua” but said the administration has been taking action with Mexico in a bid to slow the illegal immigration “and create a more fair, orderly, and safe process for people fleeing the humanitarian and economic crisis in their country.”

    Of the illegal immigrants arrested in September, 42 percent were from Venezuela, Cuba, or Nicaragua. About half of the rest were from Mexico or northern Central America.

    About three-quarters of those arrested were single adults. The rest were family units or unaccompanied children.

    According to CBP figures, the number of Venezuelans trying to enter the United States dropped more than 80 percent after “additional joint enforcement actions with Mexico,” Magnus said.

    CBP is part of the Department of Homeland Security (DHS).

    “CBP and DHS will continue to work with our partners in the region to address the root causes of migration, expand legal pathways, facilitate removals, and take thousands of smugglers off the streets,” Magnus said.

    “No matter what smugglers say, those who do not have a legal basis to remain in the country will be removed and people should not make the dangerous journey.”

    Tyler Durden
    Mon, 10/24/2022 – 18:20

  • US Oil Industry Mocks Biden Offer To Refill SPR At $72 As "Inadequate To Lift Oil Output"
    US Oil Industry Mocks Biden Offer To Refill SPR At $72 As “Inadequate To Lift Oil Output”

    Several months ago, we mocked the ridiculous idea spawned by some of the “best and brightest” progressives currently cogitating in the US, according to which even as Biden was actively steamrolling US energy companies by vowing to end US fossil fuel usage in a few decades and single-handedly crushing the price of oil through the biggest ever release of crude from the strategic petroleum reserve (where the term “emergency” now means not war or a natural disaster but Democrats lagging Republicans in midterm polling) he would be throwing them a bone by “promising” to buy oil if and when it tumbled much lower as otherwise US producers would have zero incentive ever to invest even one dollar in growth (or even maintenance) capex…. or so the “best and brightest” progressive thought went.

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    This is how the pro-socialist, far-leftist outlet Vox described this “brilliant plan”:

    In the summer of 2022, President Joe Biden had a problem. Gas prices had been soaring for most of 2021 and 2022, due to a combination of overhang from reduced production during the height of the Covid-19 pandemic and the Russian invasion of Ukraine. And American voters hate when gas prices go up. Biden’s approval rating plunged over his first two years in office. He needed some kind of policy response to address the problem and prevent his party from getting slaughtered in the midterms.

    The plan he ultimately arrived at entailed massive releases from the Strategic Petroleum Reserve combined with a new policy of buying oil futures to provide producers with an incentive to pump more in the near to medium term, preventing another shortage from arising. This approach followed very closely a proposal put out in March by the advocacy and research group Employ America, written by its executive director Skanda Amarnath and his colleagues Alex Williams and Arnab Datta. The Employ America plan explained how the administration could use the petroleum reserve to durably lower gas prices, while also setting a price floor so the cost of gas didn’t fall so far that it imperiled the transition to electric vehicles and renewable energy.

    The brain (we use the term loosely) behind this plan, Skanda Amaranth, also sarcastically dubs himself “Neoliberal sellout” (actually, we merely assume it is sarcastic), and at least on paper, his master plan was noble – to lower prices while also boosting oil sector employment. Alas, as progressives so often find out, there is an gaping chasm between their idealistic vision of the future and what actually ends up happening (for the best example of this just ask Europeans who blindly followed the delightfully insane ideas of a petulant Scandinavian teenager for their energy policy).

    While this plan bore some fruit at least early on, when oil and gas prices did tumble (if only because the SPR was being drained by 1 million barrels every week), the drop has since reversed sharply after OPEC+ openly defied the Biden admin (the neoliberal model did not account for that “eventuality”), and Brent is now trading well above $90, and many banks are warning that oil will soar as high as $120 after the midterms once the SPR drain ends.

    But what about the brilliant progressive plan to collar oil prices while encouraging employment with the stated SPR purchase price floor? Well – and this is why we said the plan was “ridiculous” – as Reuters reports, US shale oil executive Matt Gallagher this week took a poll on Twitter to gauge sentiment toward President Joe Biden’s offer to stock the U.S. emergency oil reserve at prices around $72 a barrel, to give producers an incentive to drill more.

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    The result: nearly 80% of respondents said they did not expect oil futures next year will fall to a level that would trigger any U.S. purchases – negating any boost from what analysts called the “U.S. put,” or using proposed Strategic Petroleum Reserve buys to set a minimum price for new oil production. In other words, the “forward guidance” on where the US would buy SPR oil would by itself assure that the price never fell that low.

    “That announcement was making it appear like he was throwing a bone to the oil industry,” said Trisha Curtis, CEO of consultancy PetroNerds, who dismissed the offer. But “what if oil does not fall to that price: Do we just keep our reserves low?” she asked rhetorically (the answer is of course).

    The release of the last of a 180 million barrel sale coupled with a repurchase price was Biden “trying to walk a fine line between supporting his green base and trying to lower fuel prices. And he did neither,” said Curtis.

    Another reason why the Biden plan is idiotic: with oil now selling for about $85 a barrel, the offer price of about $70 “is a price where there is no supply growth,” said Abhiram Rajendran, a director at consultancy Energy Intelligence.

    But what was so patently obvious to everyone – except a handful of intellectually challenged progressives – is that even though US oil prices hit $120 per barrel this year, that did not trigger a production boom because of shortages and high costs for labor and equipment, said Hunter Kornfeind, oil market analyst at Rapidan Energy Group. The sheer intellectual arrogance of believing that there will be a capex boom if oil tumbles $50 lower but is propped up just because the US is refilling the same SPR it was draining to keep oil from rising above $100, is truly staggering.

    Meanwhile, as Rebecca Babin, senior energy trader at CIBC Private Wealth said, it is tight oil supplies have pushed up price expectations into 2024. But that occurred apart from the SPR offer, she said.

    If the Biden administration wants to boost oil supplies, it “should change its policies around producing more oil and gas in the United States,” said Frank Macchiarola, a senior vice president at trade group American Petroleum Institute.

    Of course, that won’t happen as the same progressive groups that came up with this idiotic idea will be screaming from the rooftops, demanding that they know the oil industry better than, well, the oil industry.

    Tyler Durden
    Mon, 10/24/2022 – 18:00

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