Today’s News 27th February 2023

• 5 Reasons Why Much Of The Global South Isn't Automatically Supporting The West In Ukraine
  5 Reasons Why Much Of The Global South Isn’t Automatically Supporting The West In Ukraine

  Authored by Krishen Mehta via EurAsiaReview.com,

  In October 2022, about eight months after the war in Ukraine started, the University of Cambridge in the UK harmonized surveys conducted in 137 countries about their attitudes towards the West and towards Russia and China.

  The findings in the study, while not free of a margin of error, are robust enough to take seriously.

  These are:

  • For the 6.3 billion people who live outside of the West, 66 percent feel positively towards Russia and 70 percent feel positively towards China, and,

  • Among the 66 percent who feel positively about Russia the breakdown is 75 percent in South Asia, 68 percent in Francophone Africa, and 62 percent in Southeast Asia.

  • Public opinion of Russia remains positive in Saudi Arabia, Malaysia, India, Pakistan, and Vietnam.

  Sentiments of this nature have caused some ire, surprise, and even anger in the West. It is difficult for them to believe that two-thirds of the world’s population is not siding with the West.

  What are some of the reasons or causes for this?

  

  I believe there are five reasons as explained in this brief essay.

  1. The Global South does not believe that the West understands or empathizes with their problems.

  India’s foreign minister, S. Jaishankar, summed it up succinctly in a recent interview: “Europe has to grow out of the mindset that Europe’s problems are the world’s problems, but the world’s problems are not Europe’s problems.” He is referring to the many challenges that developing countries face whether they relate to the aftermath of the pandemic, the high cost of debt service, the climate crisis that is ravaging their lives, the pain of poverty, food shortages, droughts, and high energy prices. The West has barely given lip service to the Global South on many of these problems. Yet the West is insisting that the Global South join it in sanctioning Russia.

  The Covid pandemic is a perfect example—despite the Global South’s repeated pleas to share intellectual property on the vaccines, with the goal of saving lives, no Western nation was willing to do so. Africa remains to this day the most unvaccinated continent in the world. Africa had the capability to make the vaccines but without the intellectual property they could not do it.

  But help did come from Russia, China, and India. Algeria launched a vaccination program in January 2021 after it received its first batch of Russia’s Sputnik V vaccines. Egypt started vaccinations after it got China’s Sinopharm vaccine at about the same time. South Africa procured a million doses of AstraZeneca from the Serum Institute of India. In Argentina, Sputnik became the backbone of their vaccine program. All of this was happening while the West was using its financial resources to buy millions of doses in advance, and often destroying them when they became outdated. The message to the Global South was clear—your problems are your problems, they are not our problems.

  2. History Matters: Who stood where during colonialism and after independence? 

  Many countries in Latin America, Africa, and Asia view the war in Ukraine through a different lens than the West. Many of them see their former colonial powers regrouped as members of the Western alliance. The countries that have sanctioned Russia are either members of the European Union and NATO or the closest allies of the United States in the Asia Pacific region. By contrast, many countries in Asia, and almost all countries in the Middle East, Africa, and Latin America have tried to remain on good terms with both Russia and the West, and to shun sanctions against Russia. Could it be because they remember their history at the receiving end of the West’s colonial policies, a trauma that they still live with but which the West has mostly forgotten.

  Nelson Mandela often said that it was the Soviet Union’s support, both moral and material, that helped inspire Southern Africans to overthrow the Apartheid regime. It is because of this that Russia is still viewed in a favorable light by many African countries. And once Independence came for these countries, it was the Soviet Union that supported them even though it had limited resources itself. The Aswan Dam in Egypt which took 11 years to build, from 1960 to 1971, was designed by the Moscow based Hydro project Institute and financed in large part by the Soviet Union. The Bhilai Steel Plant in India, one of the first large infrastructure projects in a newly independent India, was set up by the USSR in 1959. Other countries also benefited from the support provided by the former Soviet Union, both political and economic, including Ghana, Mali, Sudan, Angola, Benin, Ethiopia, Uganda, and Mozambique.

  On February 18, 2023, at the African Union Summit in Addis Ababa, Ethiopia, the foreign minister of Uganda, Jeje Odongo, had this to say, “We were colonized and forgave those who colonized us. Now the colonizers are asking us to be enemies of Russia, who never colonized us. Is that fair? Not for us. Their enemies are their enemies. Our friends are our friends.”

  Rightly or wrongly, present day Russia is seen by many countries in the Global South as an ideological successor to the former Soviet Union. These countries have a long memory that makes them view Russia in a somewhat different light. Given the history, can we blame them?

  3. The war in Ukraine is seen by the Global South as mainly about the future of Europe rather than the future of the entire world.

  The history of the Cold War has taught developing countries that getting embroiled in great power conflicts generates few benefits for them yet carries enormous risks. And they view the Ukraine proxy war as one that is more about the future of European security than the future of the entire world. Furthermore, the war is seen by the Global South as an expensive distraction from the most pressing issues that they are dealing with. These include higher fuel prices, food prices, higher debt service costs, and more inflation, all of which have become more aggravated because of the Western sanctions that have been imposed on Russia.

  A recent survey published by Nature Energy states that up to 140 million people could be pushed into extreme poverty due to the higher energy prices that have come about over the past year.

  Soaring energy prices not only directly impact energy bills, but they also lead to upward price pressures on all supply chains and consumer items, including food and other necessities. This hurts the developing countries even more than it hurts the West.

  The West can sustain the war “as long as it takes” since they have the financial resources and the capital markets to do so. But the Global South does not have the same luxury. A war for the future of European security has the potential of devastating the security of the entire world.

  The Global South is also alarmed that the West is not pursuing negotiations that could bring this war to an early end. There were missed opportunities in December 2021 when Russia proposed revised security treaties for Europe that could have prevented the war and which were rejected by the West. The peace negotiations of April 2022 in Istanbul were also rejected by the West in part to “weaken” Russia. And now the entire world is paying the price for an invasion that the Western media like to call “unprovoked” and which could have been avoided.

  4. The world economy is no longer American dominated or Western led and the Global South does have other options.

  Several countries in the Global South increasingly see their future tied to countries that are no longer in the Western sphere of influence. Whether this is their perception of how the power balance is shifting away from the West, or wishful thinking as part of their colonial legacy, let us look at some metrics that may be relevant.

  The U.S. share of global output declined from 21 percent in 1991 to 15 percent in 2021, while China’s share rose from 4 percent to 19 percent during the same period. China is the largest trading partner for most of the world, and its GDP in purchasing power parity already exceeds that of the United States. The BRICS (Brazil, Russia, China, India, and South Africa) had a combined GDP in 2021 of $42 trillion compared with $41 trillion in the G7. Their population of 3.2 billion is more than 4.5 times the combined population of the G7 countries, at 700 million.

  The BRICS are not imposing sanctions on Russia nor supplying arms to the opposing side. While Russia is the biggest supplier of energy and foodgrains for the Global South, China remains the biggest supplier of financing and infrastructure projects to them through the Belt and Road Initiative. And now Russia and China are closer than ever before because of the war. What does it all mean for developing countries?

  It means that when it comes to financing, food, energy, and infrastructure, the Global South must rely more on China and Russia more than on the West. The Global South is also seeing the Shanghai Cooperation Organization expanding, more countries wanting to join the BRICS, and many countries now trading in currencies that move them away from the dollar, the Euro, or the West. They also see a deindustrialization taking place in some countries in Europe because of higher energy costs, along with higher inflation. This makes quite apparent an economic vulnerability in the West that was not so evident before the war. With developing countries having an obligation to put the interests of their own citizens first, is it any wonder that they see their future tied more to countries that are not Western led or American dominated?

  5. The “rule based international order” is lacking in credibility and is in decline.

  The “rule based international order” is a concept that is seen by many countries in the Global South as one that has been conceived by the West and imposed unilaterally on other countries. Few if any non-Western countries ever signed on to this order. The South is not opposed to a rule-based order, but rather to the present content of these rules as conceived by the West.

  But one must also ask, does the rule based international order apply even to the West?

  For decades now, for many in the Global South, the West is seen to have had its way with the world without regard to anyone else’s views. Several countries were invaded at will, mostly without Security Council authorization. These include the former Yugoslavia, Iraq, Afghanistan, Libya, and Syria. Under what “rules” were those countries attacked or devastated, and were those wars provoked or unprovoked? Julian Assange is languishing in prison, and Ed Snowden is in exile, for having the courage (or perhaps the audacity) to expose the truths behind these actions.

  Sanctions imposed on over 40 countries by the West impose considerable hardship and suffering. Under what international law or “rules-based order” did the West use its economic strength to impose these sanctions? Why are the assets of Afghanistan still frozen in Western banks while the country is facing starvation and famine? Why is Venezuelan gold still held hostage in the UK while the people of Venezuela are living at subsistence levels? And if Sy Hersh’s expose is true, under what “rules-based order” did the West destroy the Nord Stream pipelines?

  There appears to be a paradigm shift that is taking place away from a Western dominated world and into a more multipolar world. And the war in Ukraine has made more evident those differences or chasms that are part of this paradigm shift. Partly because of its own history, and partly because of the economic realities that are emerging, the Global South sees a multipolar world as a preferable outcome in which their voices are more likely to be heard.

  President Kennedy ended his American University speech in 1963 with the following words: “We must do our part to build a world of peace where the weak are safe and the strong are just. We are not helpless before that task or hopeless for its success. Confident and unafraid, we must labor on towards a strategy of peace.”

  That strategy of peace was the challenge before us in 1963 and they remain a challenge for us today. And the voices for peace, including those of the Global South, need to be heard.

  Tyler Durden
  Mon, 02/27/2023 – 00:00

• Second Home Hotspots For US Centi-Millionaires
  Second Home Hotspots For US Centi-Millionaires

  Investment migration consultancy firm “Henley & Partners” published a comprehensive overview of the private wealth sector in the USA, including trends among centi-millionaire. One key trend that piqued our interest was the revelation of where these affluent people have been buying second homes. 

  “Beachfront areas feature prominently in the top holiday home hotspots for centi-millionaires in the USA shown here, as do towns in the Rocky Mountains. Peak-month figures include centi-millionaire residents and second home owners but exclude those staying in hotels,” the report said.

  Here are the top cities and towns, including Miami, Florida; The Hamptons, New York; West Palm Beach, Florida; Napa, California; and Aspen, Colorado, to name a few, of where centi-millionaires have bought second homes in the last few years. 

  

  “The pandemic prompted many Americans to turn their second homes into primary residences, which had both lifestyle and taxation benefits,” Henley & Partners analysts pointed out. We noted this in the early pandemic as many of these folks panic left the Northeast region and other high-tax metro areas for places with either warmth, fewer taxes, and or vast amounts of land around them. 

  The report continued:

  The trend of hybrid living was evident in vacation home hotspots in naturally beautiful settings such as Aspen, the Hamptons, and Jackson Hole. It also arose in emerging tech hubs such as Austin and Miami, which attracted wealthy buyers working in tech. The cities’ business-friendly environments and the influx of superior talent attracted major corporates and they reinvented themselves as new tech industry capitals.

  With no state income tax and abundant space, Austin has been a growth market for luxury real estate, with the metro in particular gaining from internal migration due to tech firms such as Amazon, Google, Meta, SpaceX, and Tesla expanding their presences, and Apple investing USD 1 billion in a new campus. Crypto-friendly Miami has attracted cryptocurrency businesses and has also seen a spate of technology and real estate headquarters opening. These developments appeared to signal a new era for the two cities.

  It’s no secret that rich folks have shifted around the country in a post-Covid world. Many fled to rural and suburban areas and warm climate areas. It’s important to know this because, as the old saying goes, “follow the money.” 

  Tyler Durden
  Sun, 02/26/2023 – 23:30

• The Power Of Woke: How Leftist Ideology Is Undermining Our Society And Economy
  The Power Of Woke: How Leftist Ideology Is Undermining Our Society And Economy

  Authored by Allen Mendenhall via The Mises Institute,

  “It’s an important part of society whether you like it or not,” lexicologist Tony Thorne, referring to “wokeness,” told The New Yorker’s David Remnick in January. That’s an understatement.

  

  Wokeness is poisoning the Western workplace and constraining small and family businesses, midsized banks, and entrepreneurs while enriching powerful corporations and billionaires. It’s eating away at the capitalist ethos and killing the bottom-up modes of economic ordering and exchange that propelled the United States of America to prosperity during the nineteenth and twentieth centuries. It’s infecting Gen Z and millennials, who, suffering high depression rates and prone to “quiet quitting,” are not as well off as their parents and grandparents, and who feel isolated and alone even as they enjoy a technological connectivity that’s unprecedented in human history.

  What, exactly, is wokeness, and how does it impact business and the wider society?

  The term as it’s widely used today differs from earlier significations. “Woke,” which plays on African American vernacular, once meant “awake to” or “aware of” social and racial injustices. The term expanded to encompass a wider array of causes from climate change, gun control, and LGTBQ rights to domestic violence, sexual harassment, and abortion.

  Now, wielded by its opponents, it’s chiefly a pejorative dismissing the person or party it modifies. It’s the successor to “political correctness,” a catchall idiom that ridicules a broad range of leftist hobbyhorses. Carl Rhodes submits, in Woke Capitalism, that “woke transmuted from being a political call for self-awareness through solidarity in the face of massive racial injustice, to being an identity marker for self-righteousness.”

  John McWhorter’s Woke Racism argues that wokeness is religious in character, unintentionally and intrinsically racist, and deleterious to black people. McWhorter, a black linguist, asserts that “white people calling themselves our saviors make black people look like the dumbest, weakest, most self-indulgent human beings in the history of our species.” Books like Stephen R. Soukup’s The Dictatorship of Woke Capital and Vivek Ramaswamy’s Woke, Inc. highlight the nefarious side of the wokeism adopted by large companies, in particular in the field of asset management, investment, and financial services.

  Wokeism, in both the affirming and derogatory sense, is predicated on a belief in systemic or structural forces that condition culture and behavior. The phrases “structural racism” or “systemic racism” suggest that rational agents are nevertheless embedded in a network of interacting and interconnected rules, norms, and values that perpetuate white supremacy or marginalize people of color and groups without privilege.

  Breaking entirely free from these inherited constraints is not possible, according to the woke, because we cannot operate outside the discursive frames established by long use and entrenched power. Nevertheless, the argument runs, we can decenter the power relations bolstering this system and subvert the techniques employed, wittingly or unwittingly, to preserve extant hierarchies. That requires, however, new structures and power relations.

  Corporate executives and boards of directors are unsuspectingly and inadvertently—though sometimes deliberately—caught up in these ideas. They’re immersed in an ideological paradigm arising principally from Western universities. It’s difficult to identify the causative origin of this complex, disparate movement to undo the self-extending power structures that supposedly enable hegemony. Yet businesses, which, of course, are made up of people, including disaffected Gen Zs and millennials, develop alongside this sustained effort to dismantle structures and introduce novel organizing principles for society.

  The problem is, rather than neutralizing power, the “woke” pursue and claim power for their own ends. Criticizing systems and structures, they erect systems and structures in which they occupy the center, seeking to dominate and subjugate the people or groups they allege to have subjugated or dominated throughout history. They replace one hegemony with another. 

  The old systems had problems, of course. They were imperfect. But they retained elements of classical liberalism that protected hard-won principles like private property, due process of law, rule of law, free speech, and equality under the law. Wokeism dispenses with these. It’s about strength and control. And it has produced a corporate-government nexus that rigidifies power in the hands of an elite few.

  Consider the extravagant spectacle in Davos, the beautiful resort town that combined luxury and activism at the recent meeting of the World Economic Forum, perhaps the largest gathering of self-selected, influential lobbyists and “c suiters” across countries and cultures. This annual event occasions cartoonish portrayals of evil, conspiratorial overlords—the soi-disant saviors paternalistically preaching about planetary improvement, glorifying their chosen burden to shape global affairs. The World Economic Forum has become a symbol of sanctimony and lavish inauthenticity, silly in its ostentation.

  The near-ubiquitous celebration of lofty Environmental, Social, and Governance (ESG) strategies at the World Economic Forum reveals a seemingly uniform commitment among prominent leaders to harness government to pull companies—and, alas, everyone else—to the left.

  ESG is, of course, an acronym for the nonfinancial standards and metrics that asset managers, bankers, and investors factor while allocating capital or assessing risk. A growing consortium of governments, central banks, nongovernmental organizations (NGOs), asset management firms, finance ministries, financial institutions, and institutional investors advocates ESG as the top-down, long-term solution to purported social and climate risks. Even if these risks are real, is ESG the proper remedy?

  Attendees of the World Economic Forum would not champion ESG if they did not benefit from doing so. That plain fact doesn’t alone discredit ESG, but it raises questions about ulterior motives: What’s really going on? How will these titans of finance and government benefit from ESG?

  One obvious answer involves the institutional investors that prioritize activism over purely financial objectives or returns on investment (for legal reasons, activist investors would not characterize their priorities as such). It has only been a century since buying and selling shares in publicly traded companies became commonplace among workers and households. The U.S. Securities and Exchange Commission (SEC), created in response to the Great Depression, isn’t even 100 years old.

  Until recently, most investors divested if they owned stock in a company that behaved contrary to their beliefs. They rarely voted their shares or voted only on major issues like mergers and acquisitions. In 2023, however, institutional investors such as hedge funds and asset management firms engage boards of directors, exercise proxy voting, and issue shareholder reports with the primary goal of politicizing companies. As intermediaries, they invest pension funds, mutual funds, endowments, sovereign wealth funds, 401(k)s and more on behalf of beneficiaries who may or may not know what political causes their invested assets support.

  If a publicly traded company “goes woke,” consider which entities hold how much of its shares and whether unwanted shareholder pressure is to blame. Consider, too, the role of third-party proxy advisors in the company’s policies and practices.

  Big companies go woke to eliminate competition. After all, they can afford the costs to comply with woke regulations whereas small companies cannot. Institutional investors warn of prospective risks of government regulation while lobbying for such regulation. In the United States, under the Biden Administration, woke federal regulations are, unsurprisingly, emerging. Perhaps publicly traded companies will privatize to avoid proposed SEC mandates regarding ESG disclosures, but regulation in other forms and through other agencies will come for private companies too.

  The woke should question why they’re collaborating with their erstwhile corporate enemies. Have they abandoned concerns about poverty for the more lucrative industry of identity politics and environmentalism? Have they sold out, happily exploiting the uncouth masses, oppressing the already oppressed, and trading socioeconomic class struggle for the proliferating dogma of race, sexuality, and climate change? As wokeness becomes inextricably tied to ESG, we can no longer say, “Go woke, go broke.” Presently, wokeness is a vehicle to affluence, a status marker, the ticket to the center of the superstructure.

  ESG helps the wealthiest to feel better about themselves while widening the gap between the rich and poor and disproportionately burdening economies in developing countries. It’s supplanting the classical liberal rules and institutions that leveled playing fields, engendered equality of opportunity, expanded the franchise, reduced undue discrimination, eliminated barriers to entry, facilitated entrepreneurship and innovation, and empowered individuals to realize their dreams and rise above their station at birth.

  When politics is ubiquitous, wokeness breeds antiwokeness. The right caught on to institutional investing; counteroffensives are underway. The totalizing politicization of corporations is a zero-sum arms race in which the right captures some companies while the left captures others.

  Soon there’ll be no escaping politics, no tranquil zones, and little space for emotional detachment, contemplative privacy, or principled neutrality; parallel economies will emerge for different political affiliations; noise, fighting, anger, distraction, and division will multiply; every quotidian act will signal a grand ideology. For the woke, “silence is violence”; there’s no middle ground; you must speak up; and increasingly for their opponents as well, you must choose sides.

  Which will you choose in this corporatized dystopia? If the factions continue to concentrate and centralize power, classical liberals will have no good options. Coercion and compulsion will prevail over freedom and cooperation. And commerce and command will go hand in hand.

  Tyler Durden
  Sun, 02/26/2023 – 23:00

• Why One Strategist Believes The Recession Starts By Mid-Year, "That's When The Cutting Begins"
  Why One Strategist Believes The Recession Starts By Mid-Year, “That’s When The Cutting Begins”

  Amid the mounting speculation of a soft landing, and even chatter of a “no landing” (see here and here), one strategist is laughing at the market’s renewed sense of optimism and hope, which he counters simply by observing the latest economic and Fed developments and says that “a typical end-cycle environment is coming into place — mixed economic signals with a downward bias combining with a Fed laser-focused on corralling inflation by reducing labor demand.”

  Yes, for TS Lombard economist Steven Blitz, there is no thesis drift (or rather elevation) and his big picture assessment refuses to budge: “recession will result.” Here’s why: “Forget the Fed stopping to wait and watch and hope that inflation bends towards 2% without a recession. That horse has left the barn. A key question is where the funds rate is when the Fed realizes recession is already underway.“

  Blitz’s base case is “this summer” with the funds rate around 5.25%, or about 2 more hikes. That said, the TS Lombard analyst hedges and warns that if he is wrong, the funds rate can easily move up to 6.5%, which will make the coming recession that much more brutal.

  Here a quick compare and contrast: according to Blitz, the policy tack in 2005-07 is the one the Fed are communicating: “get to a spot and stay there”, but of course the problem with 2007 was that “it was not the idealized recession” as everyone still remember what happened in 2008.

  

  The policy approach in this cycle has been quite different because the Fed started so late, and the economy’s underlying dynamics are very different from 04-07, so too the Fed’s balance sheet policy. At this stage, they keep hiking until recession begins – even though they continue to advertise that getting to spot and sticking is the intention.

  

  Looking at Chart 2, the TSL strategist says that it was good to read in the latest Fed Minutes that the FOMC sees the funds rate only now “moving toward a sufficiently restrictive stance of monetary policy”. As Blitz has repeatedly argued, rates have just gotten to the starting gate in terms of restricting activity. He also notes that in his view, the economic slowdown to date has little to do with Fed policy (though they took their bows), it had to with the economy naturally slowing from the unsustainable 6% pace in 2021– created by fiscal transfer, reopening, and Fed underwriting. Chart 1 above also suggests “why the Fed thinks they have a much longer road of hikes ahead before inflation bends back to 2%, but they are probably wrong on this too.”

  With this 2005-2007 idealized tack (which, again, ended in disaster) as the Fed’s focus, it makes allowing financial conditions to ease by slowing the pace of hikes an incredibly counterproductive move, according to Blitz: “they seem to now understand that — “[a] number of participants observed that financial conditions had eased in recent months, which some noted could necessitate a tighter stance of monetary policy”, and in the strategist’s view, “if they had to do it again, especially given the run of data after the meeting, they would’ve hiked rates 50BP, as some wanted to.” Although, as Mester noted last week, after going 25, they are now pretty much stuck with that, unless they feel like risking another major communications disaster.

  Additionally, in the latest FOMC minutes, we also read that “Participants observed that a restrictive policy stance would need to be maintained until the incoming data provided confidence that inflation was on a sustained downward path to 2 percent, which was likely to take some time.” And “stressed that substantially more evidence of progress across a broader range of prices would be required to be confident that inflation was on a sustained downward path.” To that point, “as long as the labour market remained very tight, wage growth in excess of 2 percent inflation and trend productivity growth would likely continue to put upward pressure on some prices in this component. A couple of participants observed that changes in wages tend to lag changes in prices, which can complicate the assessment of inflation pressures.”

  Taking all this in, Blitz concludes that the Fed may well hike 50BP in March (overriding Fed concerns about reversing to a 25bps cadence) if there is a large enough upside surprise to February employment (that said, Blitz agrees with us that the January number was a grotesque outlier and that “the employment surprise will be weakness”). Otherwise, we get a 25BP hike and the data watch begins for May, although according to TS Lombard, “the Fed keeps hiking until unemployment hits 4.5%, at least. As for when that occurs, it depends on one’s start date for recession. I still believe there is a 55% probability of a mid-year recession, so they stop in Q3.”

  But what if the “no landing” narrative ends up being right, and how high for the funds rate if there is no recession?

  According to Blitz, very dovish inputs in a Taylor Rule model produce a 6.5% rate. Somewhat less dovish inputs deliver a 7.2% rate, and more traditional inputs (including 2% neutral real rate) produce a 9.7% rate. In other words, the longer it takes to weaken employment, the higher the rate, which means that if the unemployment rate has been artificially sustained lower as per Biden admin instructions we may see a Fed Funds rate on the edge of double digits, which would presage a great depression.

  One final point brought up by Blitz who notes that the latest FOMC Minutes had a brief discussion of QT which noted the potential for private money-market rates to “experience some temporary pressures as reserves declined if use of the Federal Reserve’s ON RRP facility continued to remain high.” This facility is about 25% of the Fed balance sheet – up from zero two years ago.

  The Fed has repeatedly assumed that these pressures on RRP work themselves out as wide spreads pull MMMF monies from ON RRP and move them into CP, CDs, etc. The Fed would love this result because banks have pretty much hit their desired bottom for reserve/asset ratios – banks began reducing reserves on their own in mid-2021 and flipped them into loans. Going forward, the balance sheet shrinks with ON RRP dropping, something the Fed can do arbitrarily, but they appear unlikely to “just say no”.

  
  With rising real returns on cash, and increased recession risk, banks are buying T-bills along with the Fed and MMMFs may not rescue private money market disruptions (i.e., lower usage of the Reverse Repo facility) as the Fed hopes. According to Blitz, “disruption, or even a credible threat, plus sharply rising marginal funding costs for banks, will eventually curtail credit extensions and, in turn, bring forward recession’s start date” who notes that “this dynamic alone makes unlikely the idealized policy tack of getting the funds to a spot and staying there for an extended period.”

  In conclusion, between the upcoming reserve crunch, and the continued Fed hikes, Blitz holds that the coming “asset crunch” will be enough to create a mild recession mid-year. And if it doesn’t, “steadily rising real funding costs deliver a “credit crunch” at some point. Recession is inevitable. And once it occurs, the cutting begins.”

  Tyler Durden
  Sun, 02/26/2023 – 22:30

• Censors Use AI To Target Podcasts
  Censors Use AI To Target Podcasts

  Authored by Bret Swanson via The Brownstone Institute,

  Elon Musk’s purchase of Twitter may have capped the opening chapter in the Information Wars, where free speech won a small but crucial battle.

  

  Full spectrum combat across the digital landscape, however, will only intensify, as a new report from the Brookings Institution, a key player in the censorship industrial complex, demonstrates.

  First, a review.

  Reams of internal documents, known as the Twitter Files, show that social media censorship in recent years was far broader and more systematic than even we critics suspected. Worse, the files exposed deep cooperation – even operational integration – among Twitter and dozens of government agencies, including the FBI, Department of Homeland Security, DOD, CIA, Cybersecurity Infrastructure Security Agency (CISA), Department of Health and Human Services, CDC, and, of course, the White House. 

  Government agencies also enlisted a host of academic and non-profit organizations to do their dirty work. The Global Engagement Center, housed in the State Department, for example, was originally launched to combat international terrorism but has now been repurposed to target Americans.

  The US State Department also funded a UK outfit called the Global Disinformation Index, which blacklists American individuals and groups and convinces advertisers and potential vendors to avoid them. Homeland Security created the Election Integrity Partnership (EIP) – including the Stanford Internet Observatory, the University of Washington’s Center for an Informed Public, and the Atlantic Council’s DFRLab – which flagged for social suppression tens of millions of messages posted by American citizens.

  Even former high government US officials got in on the act – appealing directly (and successfully) to Twitter to ban mischief-making truth-tellers. 

  With the total credibility collapse of legacy media over the last 15 years, people around the world turned to social media for news and discussion. When social media then began censoring the most pressing topics, such as Covid-19, people increasingly turned to podcasts. Physicians and analysts who’d been suppressed on Twitter, Facebook, and YouTube, and who were of course nowhere to be found in legacy media, delivered via podcasts much of the very best analysis on the broad array of pandemic science and policy. 

  Which brings us to the new report from Brookings, which concludes that one of the most prolific sources of ‘misinformation’ is now – you guessed it – podcasts. And further, that the underregulation of podcasts is a grave danger.

  In “Audible reckoning: How top political podcasters spread unsubstantiated and false claims,” Valerie Wirtschafter writes:

  Due in large part to the say-whatever-you-want perceptions of the medium, podcasting offers a critical avenue through which unsubstantiated and false claims proliferate. As the terms are used in this report, the terms “false claims,” “misleading claims,” “unsubstantiated claims” or any combination thereof are evaluations by the research team of the underlying statements and assertions grounded in the methodology laid out below in the research design section and appendices. Such claims, evidence suggests, have played a vital role in shaping public opinion and political behavior. Despite these risks, the podcasting ecosystem and its role in political debates have received little attention for a variety of reasons, including the technical difficulties in analyzing multi-hour, audio-based content and misconceptions about the medium.

  To analyze the millions of hours of audio content, Brookings used natural language processing to search for key words and phrases. It then relied on self-styled fact-checking sites Politifact and Snopes – pause for uproarious laughter…exhale – to determine the truth or falsity of these statements. Next, it deployed a ‘cosine similarity’ function to detect similar false statements in other podcasts. 

  The result: “conservative podcasters were 11 times more likely than liberal podcasters to share claims fact-checked as false or unsubstantiated.”

  One show Brookings misclassified as “conservative” is the Dark Horse science podcast hosted by Bret Weinstein and Heather Heying. Over the past three years, they meticulously explored the complex world of Covid, delivering scintillating insights and humbly correcting their infrequent missteps. Brookings, however, determined 13.8 percent of their shows contained false information. 

  What would the Brookings methodology, using a different set of fact checkers, spit out if applied to CNN, the Washington Post, the FDA, CDC, or hundreds of blogs, podcasts, TV doctors, and “science communicators,” who got nearly everything wrong? 

  Speaking on journalist Matt Taibbi’s podcast, novelist Walter Kirn skewered the new AI fact-checking scheme. It pretends to turn censorship into a “mathematical, not Constitutional, concern” – or, as he calls it, “sciency, sciency, sciency bullshit.” 

  The daisy chain of presumptuous omniscience, selection bias, and false precision employed to arrive at these supposedly quantitative conclusions about the vast, diverse, sometimes raucous, and often enlightening world of online audio is preposterous. 

  And yet it is deadly serious. 

  The collapse of support for free speech among Western pseudo-elites is the foundation of so many other problems, from medicine to war. Misinformation is the natural state of the world. Open science and vigorous debate are the tools we deploy to become less wrong over time. Individual and collective decision-making depend on them.

  *  *  *

  Reposted from the author’s Substack

  Tyler Durden
  Sun, 02/26/2023 – 22:00

• "This Kind Of Growth Is Almost Impossible For The Human Brain To Comprehend"
  “This Kind Of Growth Is Almost Impossible For The Human Brain To Comprehend”

  By Eric Peters, CIO of One River Asset Management

  Dark Forest

  “Sorry to tell you, but there are no aliens,” said the intelligence analyst.

  “The Tic Tac videos, balloons, UFOs – they’re not aliens,” he said. “We’re all alone here, it’s just us.”

  For those of us who read Cixin Liu, China’s brilliant Sci-Fi author, the notion that we are alone is extremely comforting. Cixin turned me onto the Dark Forest hypothesis, which postulates that while there may be many alien civilizations out there, we see no sign of them because they are silent and paranoid, lest they alert others to their existence and invite invasion, annihilation. 

  “What we see is our next generation military technology,” continued the intelligence analyst.

  “We all see what the Ukrainians did to Russia’s military using battlefield technology that we would generally consider obsolete relative to our state of the art,” he said. “But America’s actual state of the art is one or two generations ahead of what the public sees today,” he said, which was simultaneously comforting and terrifying.

  “It is not in our interest to show our adversaries how far advanced our capabilities have grown.”

  “Look carefully at this chart,” said the technology investor.

  It was the kind of curve I’ve seen often, an upward sloping trend that accelerates through time. On the vertical axis was the computing power used to train artificial intelligence systems. The horizontal axis was time, going back to the early 1950s. “I know you’re thinking you’ve seen this kind of chart before, it’s a classic hockey stick. But here’s the thing, it’s a logarithmic chart, it should not curve upward. This kind of growth is almost impossible for the human brain to comprehend.”

  ChatGPT has had the steepest adoption of any technology in history. It hit 1mm users in five days. Within 2mths, it crossed 100mm users. It is estimated to have 1bln users by the end of the year. It is a remarkable technology, and while we can have no certainty about how it will change the world, there is no doubt that the arc of its influence is only just starting. Governments will lag far behind in regulating it. We don’t yet know what will happen when it gets connected to the internet. And ChatGPT is 2-3 generations behind state-of-the-art AI.

  “Time is the one thing that can’t be stopped. Like a sharp blade, it silently cuts through hard and soft, constantly advancing. Nothing is capable of jolting it even the slightest bit, but it changes everything,” wrote Cixin Liu, in The Dark Forest. “Staying alive is not enough to guarantee survival. Development is the best way to ensure survival,” said Cixin. “Do you know what the greatest expression of regard for a race or civilization is? Annihilation. That’s the highest respect a civilization can receive. They would only feel threatened by a civilization they truly respect.”

  Tyler Durden
  Sun, 02/26/2023 – 21:00

• "Climate Change Cult At It Again": Apple Users Frustrated With 'Green Charging'
  “Climate Change Cult At It Again”: Apple Users Frustrated With ‘Green Charging’

  A silly feature introduced with iOS 16.1 called “Clean Energy Charging” has upset some iPhone users as their devices will only charge when lower carbon-emission electricity on the grid is available. 

  Some iPhone users reported when iOS 16.1 was installed — their devices were automatically selected for Clean Energy Charging. Charging when the grid is ‘green’ has its disadvantages for the user experience, who might incur slower charge times. 

  

  Twitter is a buzz this morning with frustrated Apple users. Some complained about ‘slower iPhone charging’ and encouraged others to turn off the setting. 

  If you noticed your iPhone is charging a little slower recently it may be due to a new setting Apple added in iOS 16.1 — Clean Energy Charging

  With it turned on, iOS will only recharge the iPhone’s battery when the electrical grid uses cleaner energy sources like solar or wind… https://t.co/r35GkgivQl pic.twitter.com/ANW3GZwYSd

  — Chief Nerd (@TheChiefNerd) February 26, 2023

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

  The Climate Change Cult at it again. No thank you. Just switched the Clean Energy Charging off.

  — Company of Champions (@CompanyChampion) February 26, 2023

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

  If you noticed your iPhone is charging a little slower, it may be due to the new update: Clean Energy Charging

  You can disable it under Settings > Battery > Battery Health & Charging at which point you are lectured & asked if you’re sure pic.twitter.com/sIAFT6MnVm

  — Matthew Gregoire (@BreakngNewsPhtg) February 26, 2023

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

  If you noticed your iPhone is charging a little slower recently, it’s likely due to a new setting Apple added in iOS 16.1 update— Clean Energy Charging

  When turned on, iOS will only recharge the iPhone’s battery when the electrical grid uses cleaner energy sources like solar or… https://t.co/QoDdBPeNTT pic.twitter.com/GKRjrhhxJU

  — Adam Pokornicky ∞/21M (@callmethebear) February 26, 2023

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

  While Apple is forcefully trying to reduce the carbon footprint of iPhone users to fight climate change, don’t bring up the sobering reality about all the carbon emissions it takes to mine lithium and other rare Earth metals for Apple products. Also, don’t bring up company execs, such as Tim Cook, who fly on private jets. 

  What irks the average person is that corporate elites and governments impose life-altering climate change measures on the working poor while the rules don’t apply to the rich. Recall the Biden administration is trying to ban gas stoves. 

  Tyler Durden
  Sun, 02/26/2023 – 20:30

• Project Veritas Staffers Release New Statement As Whistleblowers Say They Stand With James O'Keefe
  Project Veritas Staffers Release New Statement As Whistleblowers Say They Stand With James O’Keefe

  Authored by Zachary Stieber via The Epoch Times (emphasis ours),

  Staffers at Project Veritas have released a new statement as whistleblowers say they support ousted founder James O’Keefe.

  

  In a Feb. 24 video statement, Project Veritas staffers said they “are at a crossroads” due to the dispute between O’Keefe and the organization’s board of directors.

  O’Keefe departed Project Veritas this week after being suspended and stripped of his authority. The board has said it uncovered signs of “financial malfeasance” but that it did not terminate O’Keefe. Staffers said Thursday that supporters should “give us a chance” as they work to continue O’Keefe’s mission.

  “We want James back,” staffers said in the new video. “But we have a duty to our generous supporters, to all of you, and to our journalistic integrity to break record stories, which impact our culture, and most importantly, the future of our country.”

  Staffers said they’re committed to continuing working to expose waste, fraud, and abuse, and that “no board or donor ever tells us what to report.

  “We will never replace James O’Keefe. But for now, we see it as our job to hold the torch for him while keeping the door wide open for his return. We will keep the spirit of James’s mission alive for as long as we are able. We have investigations underway and stories to release. Our reporters are in the field,” they said. “As James has always told us, content is king. Our visionary may not be with us right now, but the Project Veritas mission is vital. We will produce stories and break news until a day may come when we can’t.”

  The group acknowledged that many supporters are disenchanted with O’Keefe’s ouster.

  “We don’t want to see a Project Veritas without James O’Keefe,” they said. “Due to decisions made outside of our control, it’s possible we may never earn back the trust of this audience. But we owe it to all of you to try.”

  O’Keefe has said that, after board members rebuffed his request for them to resign, he could not return to the company. In a farewell message to staffers at the group’s headquarters, he said he was planning to “start anew” and that he hoped to see some of the staffers soon.

  O’Keefe has since posted several times on Twitter, sharing a new email address for tips.

  “Those who are crazy enough to think they can change the world are the ones who actually do,” he said in his last update on Feb. 24.

  Tyler Durden
  Sun, 02/26/2023 – 20:00

• Former Treasury Secretary Admits Doubts On Soft Economic Landing – Looks To Global Institutions For Solutions
  Former Treasury Secretary Admits Doubts On Soft Economic Landing – Looks To Global Institutions For Solutions

  Former Treasury Secretary under Bill Clinton, Larry Summers, joins Bloomberg to answer questions on persistent inflation indicators despite Federal Reserve tightening measures and rising interest rates.  Summers, with some carefully chosen words, essentially admits what alternative economists have been warning about all along – That short term positive indicators are misleading and that longer term indicators show impending recession and a sharp decline in the US. 

  

  After $8 trillion+ in fiat helicopter money pumped into the economy during the pandemic lockdowns, an impressive spike in retail and service sector activity was the result, spurring a hiring blitz in mostly low wage jobs.  The lockdowns led to over 25 million job losses and the covid stimulus bought 12 million jobs back.  This heightened activity, however, has been fleeting.  Equally impressive has been the aggressive spike in stagflation.  High prices continue to hang on and the Fed has little choice but to roll forward on increased interest rates. 

  The central bank has expressed steady hawkish sentiments in the past few weeks, which have run contrary to media and political claims of easing inflation and an inevitable “soft landing.” 

  In a somewhat similar dynamic to the early-1980s under former Fed chairman Paul Volcker (inflation stats today are calculated far differently from the 80s in an attempt to hide true inflation), the mainstream economic media is starting to realize that interest rates will have to go much higher than they expected and a hard landing is an inevitable outcome. 

  Summers then hints at what he thinks the solution will be, which of course involves global policy makers and global banking institutions like World Bank.  If we were to run Summer’s comments through a truth translator, here is what we would likely hear:

  “A soft economic landing is not going to happen and the negative data is becoming too obvious to deny.  Inflation signals are not relenting and the Fed will continue hiking rates.  This will lead to a recessionary crash, so we’re going to admit to the issue now in order to avoid looking like complete fools later.  In the meantime, we’re going to use the ongoing crisis to promote more globalism, which was our intention all along.”

  A message to Larry – You can’t hit the brakes on the car when you’ve already driven off a cliff.  

  Tyler Durden
  Sun, 02/26/2023 – 19:30

• Biden Admin's New Equity Atlas: An Unconstitutional Equity Redistribution Scheme
  Biden Admin’s New Equity Atlas: An Unconstitutional Equity Redistribution Scheme

  Authored by Robert A. Bishop via AmericanThinker.com,

  The Biden administration’s $1.2 trillion American Rescue Plan Act (ARPA) gives cities a blank check for hundreds of billions of dollars in federal grants. An astonishingly massive windfall for municipal budgets. Janet Yellen, U.S. Treasury Secretary, followed up by forming an Advisory Committee on Racial Equity (a.k.a. TACRE) to ensure cities channel those funds and future federal grants towards racial equity justice.  

  The Committee’s mission is to “identify, monitor, and review aspects of the domestic economy that have directly and indirectly resulted in unfavorable conditions…for persons of color.”

  The ulterior motive is to produce a permanent mechanism that is a data-driven approach forcing racial equity justice outcomes. Leftists refer to the concept as “democratizing data,” a contrary term that is an affirmative action contrivance.

  At the TACRE launch, Ron Nirenberg, ultra-leftist Mayor of San Antonio, promoted (see this 45-second clip) the City’s first-of-its-kind working Equity Atlas model as the best practice for measuring and doling out resources based on equity. The City’s Equity Atlas is a workaround to the U.S. Constitution and Bill of Rights.   

  San Antonio’s model assigns equity scores by census tracts and then aggregates them by districts. Census tracts can earn a favorable score based on the higher percentage of Spanish as a first language, high illiteracy, people of color, and below-median household income. Census tracts with the highest scores receive prioritized resource allocations—violating the Equal Protection Clause of the 14th Amendment and Article 1 of the Texas Constitution. Shouldn’t the City focus on tracking spiking crime rates and street potholes instead?

  Case Study

  The City of San Antonio’s Equity Atlas is an ideal case study of how data-driven narratives are used for citywide equity goals and strategies. No surprise, the City is dedicating most of its $465.5 million in ARP grants for affordable housing, drug rehabilitation, violence prevention, small business equitable outcomes, and community benefit navigators. Like a spoiled trust-fund baby, the City foolishly spends on those progressive pet projects will likely result in fraud, waste, and abuse – bank on it. All the while ignoring over $6 billion in crumbling infrastructure.

  Below is the City’s equity map using GIS technology. The darker the shade, the greater allocation of resources and opportunities. The lighter shade areas have the highest tax burdens and coincidentally contain the most significant share of the City’s 23% non-Hispanic white minority population. This is blatant and shameful redlining around the neighborhoods where the City will limit or not invest based on race and affluence.

  

  I filed an Open Records Request for my census tract 1211.10, asking for the data sources and the calculation for race, income, education, language, and combined components.

  The census tract has one of the lowest equity scores in the City, with two out of a possible ten. The low score means that the census tract and, indirectly, the district have the lowest priority for resources. Astonishingly, the City coughed up the citywide Equity Atlas database in an Excel workbook which can be downloaded HERE.

  The calculations rely on problematic federal government estimates and census data with an unacceptably high statistical margin of error, as high as 16%. As a result, the data lacks precision and has an inherent bias invalidating the Equity Atlas. But, of course, the mandarins couldn’t care less as long as it advances their social justice agenda.

  Mark Twain defines it best: “Facts are stubborn things, but statistics are pliable.”

  Deep-Pocketed Influencers

  Large donations and government grants are pouring into nonprofits to promote the adoption of a data-driven system for social justice. One of the most militant and influential nonprofit organizations is PolicyLink, which advocates for wealth redistribution, reparations, and abolishing the police. PolicyLink is supported by overly generous grants from the usual suspects like Gates, Ford, Packard, and Johnson foundations.   

  PolicyLink partnered with USC Equity Research Institute and created the National Equity Atlas. This platform provides starter dashboards and how-tos for municipalities to advance racial equity.

  Michael Bloomberg’s Bloomberg Philanthropies has initiatives called “Bloomberg City Network” and “C40,” focusing on social justice and climate change. The initiatives promote data-smart city solutions and provide training and grants to cities. Bloomberg, through Harvard University, also has funded Data-Smart City Solutions using what it calls civic engagement technology. Bloomberg, like other billionaires, supports radical nonprofits as ‘tribute’ to avoid criticism of his pursuit of wealth.

  Cities like Portland, Austin, and Tacoma have created custom equity dashboards. Visit your municipal website, and you may discover the city is developing its own custom dashboard or an equity atlas.

  So where is your city spending its windfall ARPA grant?     

  Equity is not Equality

  “Equity” is a Neo-Marxist euphemism for resource redistribution to favored racial and ethnic groups. Equity isn’t equality; its meaning and use are deliberately inverted to mislead the gullible and ignorant public. The term clashes with the Constitution and the Bill of Rights’ bedrock principle that the law must equally protect everyone.

  Constitutionally protected personal and economic freedom can lead to inequitable consequences based on an individual’s abilities, intellect, deferred gratification, impulse control, and motivation. Yet, it creates a more dynamic and affluent society. On the other hand, equity is utopian socialism destroying personal responsibility and property rights, producing third-world living standards, conflict, and violence.

  Tyler Durden
  Sun, 02/26/2023 – 19:00

• "We're Dying Slowly": East Palestine Residents Report Bizarre Health Issues After Toxic Train Derailment
  “We’re Dying Slowly”: East Palestine Residents Report Bizarre Health Issues After Toxic Train Derailment

  Residents of East Palestine, Ohio have been reporting bizarre symptoms following the Feb. 3 Norfolk Southern train derailment and subsequent toxic explosion, the NY Post reports.

  

  “Doctors say I definitely have the chemicals in me but there’s no one in town who can run the toxicological tests to find out which ones they are,” said 40-year-old Wade Lovett, whose high-pitched voice now sounds as if he’s been inhaling helium.

  “My voice sounds like Mickey Mouse. My normal voice is low. It’s hard to breathe, especially at night. My chest hurts so much at night I feel like I’m drowning. I cough up phlegm a lot. I lost my job because the doctor won’t release me to go to work.”

  Leading the charge to fight for the community is 46-year-old Jami Cozza, a lifelong East Palestinian who counts 47 close relatives here. Many of them are facing health issues from the chemical fire as well as the psychic toll of their town becoming, in the words of a scientist visiting the area Thursday, the new “Love Canal” — a reference to the Niagara Falls, NY, neighborhood that became a hotbed issue in 1978 because people were getting sick from living above a contaminated waste dump. -NY Post

  Many residents are also complaining of mystery rashes and sore throats after returning home following the lifting of evacuation orders on February 8.

  “Yesterday was the first day in probably three or four days that I could smell anything. I lost my smell and my sense of taste. I had an eye infection in both eyes. I was having respiratory issues like I was just out of breath. Other members of my family have had eye infections and strep throat,” said Shelby Walker, who lives a few yards from the epicenter from the crash and explosion. “The cleanup crew drives past us at night and won’t even look at us. It’s like we don’t exist. No one has reached out to us or told us anything.”

  According to an independent analysis of EPA data by Texas A&M University released on Friday, nine air pollutants were found around East Palestine at levels that could raise long-term health concerns.

  “My fiancé was so sick that I almost took him to the hospital,” Jami Cozza told the Post. “Not only am I fighting for my family’s life, but I feel like I’m fighting for the whole town’s life. When I’m walking around hearing these stories, they’re not from people. They’re from my family. They’re from my friends that I’ve have grown up with,” she said. “People are desperate right now. We’re dying slowly. They’re poisoning us slowly.“

  

  According to a class-action lawsuit filed on behalf of hundreds of residents, Norfolk Southern ‘went rogue’ when it made the decision three days after the derailment to blow up five train cars containing deadly vinyl chloride. Around 1.1 million pounds of the toxic compound were spilled and later burned, the suit claims.

  Norfolk Southern, meanwhile, says they consulted with experts and Gov. Mike DeWine (R) before the controlled burn, which they say they did to avoid a potential ‘catastrophic failure of the cars.’

  “What they could have done and should have done is remove all the vinyl chloride from the train cars and put them in secure containment vessels,” said Rene Rocha of the Morgan & Morgan law firm, one of the lead attorneys on the class-action case. “They then should have excavated tons of soil and monitored and remediated the soil and groundwater.”

  Cozza’s hearing included a panel with scientists from the University of Pittsburgh, an environmental lawyer, and a veteran Ohio hazardous materials expert. None of them painted a rosy picture of the town’s future, despite Norfolk Southern’s insistence that the area is safe and will be cleaned up and tested more.

  The experts listened as desperate residents asked about the safety of breastfeeding their babies and getting water from their wells. Planting season is coming soon in an area where many farm. One woman cried when she spoke about her worry over her pregnant goats. -NY Post

  According to Harvard-trained toxicologist, Stephen Lester, the hot zone at East Palestine is one of the ‘most concerning’ he’s ever seen – and warned that the chemical dioxin that was released during the controlled burn will be embedded in the soil and water. 

  “Until the government takes this seriously there are going to be real problems,” said Lester. “It’s criminal that the EPA didn’t come forward with information about dioxin and start testing for it.”

  Tyler Durden
  Sun, 02/26/2023 – 18:30

• Chicago's Pursuit Of 'Criminal Justice Reform' Utter Failure; Homicides Top Nation For 11th Year, Crime Still Rising
  Chicago’s Pursuit Of ‘Criminal Justice Reform’ Utter Failure; Homicides Top Nation For 11th Year, Crime Still Rising

  Authored by Ted Dabrowski and John Klingner via Wirepoints.org,

  Rising crime is the number one crisis facing Chicago today. More specifically, the city’s propensity for murder.

  Chicago was the nation’s extreme outlier for homicides in 2022, with 697 deaths. More people were murdered here than anywhere else. 

  What’s worse, Chicago has out-paced the entire nation in murders for 11 years in a row. It’s become an embedded, chronic wound for the city.

  That’s not a surprising result given the failed policies of Chicago’s leadership in recent years, from a dramatic drop in arrests to ever-fewer prosecutions to reduced sentencing. The pursuit of “equity” and “social justice,” instead of actual justice, has only increased the protection of criminals, crushed police morale and increased the violence inflicted on ordinary Chicagoans.

  That’s just one of the facts contained in Wirepoints’ latest Special Report: Chicago, New Orleans were the nation’s murder capitals in 2022: A Wirepoints survey of America’s 75 largest cities.

  New Orleans is the nation’s other murder capital with more than 74 homicides per 100,000 residents. That’s the worst rate in the nation, by far. But Chicago still shares the crown due to the sheer amount of lives lost and its 11-year run at the top.

  

  Apologists claim that the city’s mass number of murders is just a typical big-city problem. But it’s easy to dispel that myth. If that were the case, New York City would be the nation’s homicide capital. 

  But it’s not. 

  Chicago’s murder rate of 25.8 per 100K people in 2022 was 5 times higher than New York’s 5.2. That’s a staggering difference. Chicago would have had just 140 homicides last year if it had had the same murder rate as the Big Apple’s.

  Conversely, New York City would have suffered 2,150 murders – not it’s actual 438 – if it had had the same homicide rate as Chicago’s.

  

  Despite Chicago’s horrific results, city and state leaders continue to downplay the city’s overall crime crisis. Gov. Pritzker recently told CNBC in Davos, Switzerland recently that “crime is coming down gradually in the city,” a statement that is patently false. See him say it here. Mayor Lori Lightfoot said last year “we’re making progress on crime.” That’s also grossly untrue. 

  Though murders did drop 13 percent in 2022, overall major crimes in Chicago ended up 41% higher in 2022 vs. 2021. And in 2023 major crimes are already up 55% compared to the same period last year.

  These are the facts that city leaders should be obsessed about changing:

  • The average arrest rate for major crimes in Chicago fell to just 5% in 2022.

  • There were no police available in 2021 for more than 400,000 high-priority 911 dispatches. That included 15,000 assaults in progress, 1,300 instances of people shot, 14,000 instances of domestic battery, and many more serious crimes.

  • Cook County Chief Judge Tim Evans’ no bail, low-cash bail “reforms” of 2017 have, since then, resulted in an additional 15,000 new offenses for defendants already awaiting trial. 

  • Every day there are about 1,000 more defendants accused of violent crimes on the street than there were in 2016 due to the expansion of electronic monitoring, Many of them are felons that end up committing more heinous crimes.

  • The number of beat cops on the streets since Mayor Lightfoot took office is down by nearly 1,500, a drop of nearly 20%.

  

  The city’s leadership, including Cook County State’s Attorney Kim Foxx, County President Preckwinkle, Mayor Lori Lightfoot and Tim Evans have had years, some even more than a decade, to implement their equity-focused “reforms. They’ve had their chance and they’ve failed miserably. 

  The crime data overwhelmingly tells us so. There can’t be any “equity” when blacks and Latinos, who make up 95% of all Chicago murder victims, are dying and being victimized in ever-higher numbers.

  The chain of criminal justice is broken in Chicago. We are not arresting. We are not prosecuting and convicting. We are not sentencing. What few criminals are caught just go through a revolving door. And the SAFE-T Act, with the elimination of cash bail and the allowance of anonymous complaints against police, will only make things worse.

  Chicago has already spent more than a decade as “The Murder Capital of the Nation.” At this rate the city will hold that title for two decades if nothing is done.

  The obvious thing to do is to unwind these destructive policies that treat criminals like victims while the real victimization of ordinary residents continues to spike. The first target should be Los Angeles’ homicide rate of 9.9 per 100K – or 270 homicides a year for Chicago. And then go for New York’s, resulting in a murder total for Chicago of 140.

  Still too many – but it would be progress – and it would free Chicago from the title of the nation’s murder capital.

  Tyler Durden
  Sun, 02/26/2023 – 18:00

• Watch: El Salvador Sends Thousands Of Tattooed Gang Members To Mega-Prison
  Watch: El Salvador Sends Thousands Of Tattooed Gang Members To Mega-Prison

  Government authorities in El Salvador are circulating some surreal images in order to prove to the nation and the world that they are cleaning up crime in a country that’s currently under a state of emergency due to rampant murders and violent crime. 

  President Nayib Bukele has recently declared a “war on crime” and his message to gangs came in the form of publicizing ‘shocking’ video footage showing some 2,000 suspected gang members being huddled into a newly opened large prison using military tactics. Tens of thousands more suspected criminals have reportedly been rounded up. Watch below: 

  Video from the president of El Salvador.

  Seems like “lock up all the guys with gang tattoos all over their bodies and throw away the key” was pretty low-hanging fruit?

  It’s interesting how many countries can’t even manage that. The criminals make it easy pic.twitter.com/xUk2Cj1l3U

  — Richard Hanania (@RichardHanania) February 25, 2023

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

  The footage has been met with some controversy, given there are allegations that innocent men may have been caught in the broad anti-gang dragnet. 

  Additionally, the police appear to be utilizing military prison tactics not seen since post 9/11 Gitmo images. According to international reports: 

  President Bukele tweeted that the first 2,000 people were transferred “at dawn, in a single operation” to the Center for the Confinement of Terrorism, which he says is the largest jail in the Americas.

  “This will be their new house, where they will live for decades, all mixed, unable to do any further harm to the population.”

  

  Once widely dubbed the “homicide capital of the world” – authorities in recent years thought they had it under control, but murders spiked over the past year. 

  

  This caused President Nayib Bukele to declared a state of emergency eight months ago, and police went ‘gloves off’ in attempting to clear the streets of gangs.

  Tyler Durden
  Sun, 02/26/2023 – 17:30

• How Will Markets Respond To This Ongoing "Surprise" Turn In The Economy
  How Will Markets Respond To This Ongoing “Surprise” Turn In The Economy

  By Peter Tchir of Academy Securities

  Surprise, Surprise

  There is one chart I keep turning to, the Citi Economic Surprise Index.

  

  The surprise index started rolling over in the middle of December. For a month, no matter what expectations were, the actual data was worse. Then, since the middle of January, the data has started outperforming expectations. Part of that is because expectations were lowered, making it easier to beat. That also happens with earnings estimates, which are dropped to the point that typically 70% or more of companies beat their expectations (Q1 has been at the low end of the range last time I checked). But a lot of the data was simply good, especially on the job front.

  What did I miss in the turning of the economy? That is the question we explore today and how markets will respond to this ongoing “surprise” as many missed this turn in the economy.

  Geopolitical “Surprises”

  As Academy prepares to host our 2nd annual San Diego Geopolitical Summit there are a lot of very interesting things to discuss.

  • Friday’s Around the World piece updates the War in Ukraine, China and Unintended Consequences (also explored in 999 Luftballons), Iran and their relationship with China,  and the tragic Earthquake in Turkey.

  • Chips, rare earths and critical minerals, and their processing will be discussed along with the topic of World War v3.1 (as opposed to World War III).

  • Finally, China’s 12 point plan for peace will be discussed. The 1st point “Respecting the sovereignty of all countries” seems to be written in such a way Taiwan might not benefit from China adhering to this point. It is an interesting way of trying to paint the West, now, as war mongers, rather than Russia. But, for me, and I suspect markets, the big question is will China start selling weapons to Russia? Any last vestige of pretense about the direction China wants to go, will be shed, if they go down that path. There is a wide range of opinions, even within the Geopolitical Intelligence Group, on the subject, which should make for an exciting conversation. I for one, think this “plan” is the air cover China needs to sell weapons. They can tell the world, listen, we are trying for peace, and it isn’t our fault there isn’t peace, so we have to sell weapons to balance the situation (or something along those lines). Probably, from preliminary discussions on the topic, the most contentious issue is how much that would hurt the Chinese economy. For that part of the engagement, I’m sticking with Who Needs Who from almost a year ago.

  

  Yes, it is crude and simplistic, but wherever Russia has an “x”, China has a “check” and vice versa.

  It seems that either we get the “surprise” of peace talks being announced in the very near term (which would be a surprise because Zelensky seems so against it, and Putin can’t really afford to “lose”) or after some “appropriate waiting period” we get the “surprise” of China selling arms to Russia.

  Back to the Economy

  With the economic data taking a turn for the better (both on an absolute basis and relative basis), what is next?

  I guess, as a curmudgeon, we can start by questioning some of the data.

  • Inflation measures have ticked higher. That is undeniable. Does it mean inflation is about to return to prior levels? Is this just a “normal” bounce in the data which is rarely smooth? Does the bounce preclude inflation turning back down in the coming weeks and months? No, in fact, while respecting the uptick in inflation, I remain more concerned that we’ve pushed too hard on the inflation fight already (and are about to push harder) which will turn out to be a mistake.

  • Don’t fight the American consumer. That is probably the biggest area of contention right now. On one side, spending remained robust. The services side hasn’t shown any evidence of slowing down. Last Tuesday, Global Services PMI popped above 50 and helped keep the composite PMI above 50, and almost 3 points higher than consensus.  That was important, and could defy my view that we had a wave of pent up services demand, that like the goods demand wave of 2021 and early 2022, will fade.

    • On the other hand, credit metrics are not looking great for the consumer. Credit card debt has been rising rapidly. Many pointed out, that for awhile, it was still below trend, after consumers had reduced debt during covid, but it seems now to be back above trend. Delinquencies, especially in certain segments of the auto lending category are ticking up. Could the consumer be tapping out?

    • Inventories remain an issue. Despite all the hype about consumer spending (where the bulls tend to conveniently pick and choose when to use nominal versus inflation adjusted data) inventories remain above trend. I’d be more concerned about inflation if we didn’t have this inventory overhang, with evidence of a consumer who is reaching their limits.

  • Jobs. The most “surprising” data of the year, at least for me, was the Non-Farm Payroll data for January. It was a Simply “Stunning” Report. I still have difficulty reconciling much of that report with anything else. I’m betting on some major disappointment for February (or more likely, substantial revisions). In any case, the February report tends to be “cleaner” than the January one, so we will see.

  • Earnings season is almost done, meaning we will have to find something else to focus on every day. There is no shortage of economic data this week, but we will all miss the daily excitement around earnings.

  • Volatility, Liquidity and 0DTE. We clarified some of our views on zero day to expiration options in Is 4,000 More Than Just a Round Number? Daily options have become the #1 topic of discussion, after Fed policy, for more and more of the market. I think they amplify moves.

  Back to the Markets (and the Fed)

  It is difficult to extricate markets from the Fed at this point. But as we wrote on Friday, we may have entered the 5th Stage of Rate Hike Grief – Acceptance.

  Have we entered the “acceptance” stage?

  • Markets held their own, on Thursday with some inflation fears and while they sold off on Friday, stocks managed to bounce on a key technical level and never seemed to panic.

  • There is no denying that the Fed will be more cautious on hikes. The size and timing will be data dependent. Yes, inflation has ticked higher, but a lot has been accomplished and there is still a “lag” effect that hasn’t fully impacted the market.

    • We might get some “negative” surprises in the data. As economists ratchet up expectations, we could get some “disappointing” data on a relative front. We might, and I expect we will see some disappointing data on the absolute front as well. I am convinced that coming into the week we are in a “bad news” is “good news” for the market, and since I expect some “bad news” I like being bullish stocks and bonds!

    • Has “good” news been “accepted”? Even if we get strong economic news, will bond markets sell-off hard, dragging equities down with them? I don’t think so (though with 0DTE, we might get an explosive move post data, but unless something changes for me, I’d be fading any sell-off).

  Bottom Line

  I like owning stocks and bonds here. I’m looking for a bounce in both (3.7% on 10s and 4,200 on the S&P 500).

  In the meantime, I might be going to San Diego in the only week March, ever, that San Diego has worse weather than Connecticut! Now that is surprising!

  Tyler Durden
  Sun, 02/26/2023 – 17:00

• "Neither Easy Nor Fast": Electric Vehicle Owners Admit To "Logistical Nightmare" Over Charging
  “Neither Easy Nor Fast”: Electric Vehicle Owners Admit To “Logistical Nightmare” Over Charging

  Owners of electric vehicles are finally admitting that recharging away from home is a total “logistical nightmare,” between finding charging stations, and the fact that in the best case scenarios it takes 30 to 40 minutes, and up to two hours, to recharge.

  

  “We’re going through the planning process of how easily Maddie can get from Albany to Gettysburg [College] and where she can charge the car,” said YouTube personality Steve Hammes, who leased a Hyunday Kona Electric SUV for his 17-year-old daughter, Maddie.

  “It makes me a little nervous. We want fast chargers that take 30 to 40 minutes — it would not make sense to sit at a Level 2 charger for hours. There isn’t a good software tool that helps EV owners plan their trips,” he told ABC News.

  The report comes on the heels of the Biden administration’s announcement that Tesla would open its Supercharger network to non-Tesla owners by the end of next year – a plan which includes 3,500 Tesla fast chargers and 4,000 of the slower, Level 2 chargers.

  John Voelcker, an industry expert on EVs and the former editor of Green Car Reports, said this arrangement will allow Tesla to learn a lot about U.S. drivers — “how you charge, where you drive and what car you have.” He does not expect Tesla to commit to additional charging stations.

  “Tesla does not want its highly reliable and tightly integrated charging network to be clogged with people whose cars can’t charge as fast as Teslas,” he told ABC News. -ABC News

  To try and cope with an increase in EVs, the Biden administration’s 2021 infrastructure law has a goal of installing 500,000 new chargers across the country – as well as dramatically boosting EV sales, by 2030.

  That said, Voelcker hasn’t seen much improvement in the nation’s recharging infrastructure over the past four years, and says he’s heard a food of complaints over dead chargers and ‘sticky cables.’

  “The incentive right now is to get stations in the ground,” he said. “It’s not making sure they actually work.”

  Car and Driver editor-in-chief Tony Quiroga, says he’s now been forced to wander around a local Walmart in Burbank, California while his Tesla recharges. He’s also become a regular at a Mohave, California Mexican restaurant, where a Telsa charger is located.

  

  “I imagine an ecosystem will be built around charging stations eventually,” he told ABC News. “Longer trips bring up flaws with EVs. People are leery of taking them on long trips — that’s why older EVs don’t have 40,000 miles on them.”

  Last March Swedish automaker Volvo and Starbucks said they were teaming up to install as many as 60 DC fast chargers at 15 Starbucks stores along a 1,350-mile route that spans from Seattle to Denver.

  Quiroga’s sister, who lives in Northern California, takes her internal combustion car — not her Tesla Model S — when she needs to drive across the state. Even Quiroga’s team of reporters has to carefully plan and calculate how far EV charging stations are when they conduct comparison tests among manufacturers. -ABC News

  “These comparisons tests are a logistical nightmare. We plan meals around recharging the vehicles,” said Quiroga. “We need to have the battery at 100% or close to it to test a vehicle’s performance. We have to time everything — it requires more work.“

  What’s more, the range of EVs plummets in the cold, or if you use things like the heater.

  Sharon Bragg of Clifton Park, New York, has to charge her Ford Mustang Mach-E GT more frequently in the winter months. The GT’s EPA rating is 270 miles on a full charge. Bragg said it’s closer to 200 in the colder weather. Last December a Level 2 charging plug got stuck in her Mach-E and would not budge. After multiple failed attempts by bystanders, she called an electrician, who blew hot air on the plug for 20 minutes to release it.

  “The whole process took two hours,” she told ABC News. “I was in the parking lot from 5 p.m. to 7 p.m. It was a cold day.”

  That said, Quiroga of Car and Driver calls these inconveniences “teething pains,” which he says have greatly improved over the years.

  “Where we are now versus 10 years ago — it’s radically different,” he said. “Range has tripled, even quintupled. Look at the Lucid Air — it gets over 500 miles of range in a single charge.”

  Now if states like California could only provide an infrastructure robust enough to handle EV demand legislated over the next 10-15 years…

  Tyler Durden
  Sun, 02/26/2023 – 16:30

• No, Red State Economies Don't Depend On A "Gravy Train" From Blue States
  No, Red State Economies Don’t Depend On A “Gravy Train” From Blue States

  Authored by Ryan McMaken via The Mises Institute,

  When Congresswoman Marjorie Taylor Greene called (again) for “national divorce” this week, a common retort among her detractors on Twitter was to claim that so-called red states are heavily dependent on so-called blue states to pay for pretty much everything.

  

  Reporter Molly Knight claimed, for example, that “Red states get their money for roads and cops and schools from blue states. You cut off that gravy train and you e [sic] got a third world country.”

  

  Others claimed that red states would be “entirely broke” without blue states. America’s social democrats have apparently fully gone over to pushing the narrative that the “red states” are poor and backward while the “blue states” are productive and economically sophisticated.

  

  The implication here is that red states would never survive any sort of separation from the blue states because the red states would then miss out on the presumably large amounts of free money.

  Unfortunately for these critics, the data doesn’t really back them up. While it is certainly true that a handful of red states receive much more in federal spending than their residents pay in federal taxes, this is not at all the situation across most red states. This is especially not the case in states with states with larger metropolitan areas such as Florida and Texas. 

  The real story is more complicated, and to see the details, we can look at state-by-state comparisons in terms of “return on taxes paid.” This is a measure of how much each state receives in federal spending for every dollar extracted in federal taxes. States with a “return” above one dollar are getting back more than their residents paid in federal taxes. Residents in a state with a “return” below a dollar pay more than they receive. 

  To do this analysis, we start with the tax collections from each state, as reported by the Internal Revenue service. Then, we look at federal spending in each state. There are some smaller categories of spending that are difficult to track, but we can capture the overwhelming majority of federal spending in each state by looking at several key categories:

  • State revenues from federal intergovernmental transfers (2019).

  • Department of Defense spending by state (2019).

  • Federal share of Medicaid by state (2021).

  • Medicare spending by state (2019).

  • Social security spending (OASDI) by state1 (2021).

  Once we add it all up we can see the “return on taxes paid” in graph form below:

  

  By this analysis, the federal spending in Minnesota only amounted to 48 cents for every tax dollar extracted from the state. On the other hand, Mississippi received more than three dollars for every tax dollar paid by residents. Contrary to the idea that most red states are like Mississippi, however, we find that most states—both red and blue—are much closer to the middle on this. The states that are within a few cents of receiving a dollar for a dollar—i.e., “breaking even”—include the Dakotas, North Carolina, Nevada, Wisconsin, Missouri, Utah, Maryland, Kansas, and Florida. Meanwhile, California and Texas are approximately equal with each other, receiving about 80 cents in federal spending for every dollar paid by residents in taxes. 

  My findings here are similar to the study that was repeatedly sent to Rep. Greene by many of her scoffing critics. Specifically, Green was instructed to read this Moneygeek article which purportedly “proves” that the red states depend heavily on blue-state largesse to survive.  Yet, with both our analysis here, and with the Moneygeek article, we will find that the characterization of red states as an economic drain on the country requires quite a bit of hyperbole.2

  After “National Divorce”: A Red State vs. Blue State Breakdown

  Just how badly would red states fare if they were to break off from the blue states? Well, only a minority of these states would be “in the red” and get back significantly more than they pay in. 15 out of 27 red states are either net-tax-paying states or within a few cents of “breaking even.”  In other words, with the exception of states like Mississippi and West Virginia and Alabama, most of these states could realistically expect to be self-funding in case of a national break-up. Moreover, viewed as a single bloc, the red states’ overall “return” on taxes paid is only $1.02. Were these states to become an independent region of their own, it would hardly be impossible to manage with current tax resources. In fact, if a “Red States of America” wanted to ensure available revenues exceeded current tax liabilities, the bloc could simply exclude the less productive states.  If Mississippi and West Virginia don’t bring much to the table, there’s no immutable law of nature requiring the “Red States of America” to include them.

  

  Some of the current net tax receiver states could also easily change their fortunes by simply splitting off the less productive areas such as southwest Alabama, western Mississippi, and eastern Kentucky. The blue states would surely be happy enough to have those areas as dependencies

  How Much GDP Do the Red States Produce? 

  One other tactic used to portray the red states as a bunch of impoverished welfare queens is to claim that the overwhelming majority of the US’s GDP is produced in the blue states. Again, this is a sizable exaggeration. Breaking out the blue and red states as we did above, we find that the blue states naturally produce more GDP because they have more people. Specifically, the blue states contain about 54 percent of the US population and they produce about 59 percent of GDP. In contrast, the red states contain about 46 percent of the US population and produce 40 percent of GDP. In this scenario, a red state bloc would still have a GDP over $8 trillion and would have the world’s third largest economy behind China and the “Blue States of America.” It would have an economy larger than Germany, Japan, and India. 

  Looking at GDP per capita, we find the red state bloc would remain on a par with western Europe and Canada. If divided up, the blue states today would come in around $69,000 per capita. The red states would come in at about $55,000. Taken as two groups, this would place the blue states on a par with Denmark (at approximately $68,000), and the red states a little above Finland (at approximately $54,000). 

  Why Some States Are Net Taxpayers, and Some Aren’t

  Why do we have these large disparities among states? Federal tax revenues are driven heavily by the number of high-earning and full-time workers in each state. States with large numbers of retirees and elderly will thus produce less tax revenue while receiving more in federal spending. States with large low-income populations (relative to overall size) will receive a proportionally higher amount of federal spending. Thus, it’s not surprising that Mississippi, with its large low-income population in the Delta region, is a net recipient of federal spending. Similarly, the population in West Virginia is relatively low-income and elderly. Neither of these states have notably large metropolitan areas to balance out these lower-income households. On the other hand, Florida, Texas, Utah, and Ohio have the productive metropolitan areas necessary to balance out populations of pensioners and the unemployed.

  It should also be noted that when I say “metropolitan area” I don’t mean “urban core.” Activists on the Left often like to promote the idea that the most entrepreneurial, productive, and dynamic sectors of society are necessarily concentrated in urban cores. But the data does not show this. Rather “suburbanization” of both employment and labor is a longstanding trend, meaning that many sectors of the economy in recent decades have been decentralized out of the urban core, and each state’s most productive centers are often found in the suburban counties—where political leanings are not at all necessarily “blue.” Moreover, many of a state’s most productive workers—engineers, medical personnel, entrepreneurs, financial workers, for example—choose to live in suburbs. Thus, the most productive states are often states with large sprawling suburban areas, and not necessarily “big cities” in the twentieth-century sense.  

  The Red States Would Survive

  Rep. Greene’s Twitter critics are clearly very enthusiastic about portraying Americans in red states as impoverished unsophisticated welfare queens unable to get by without wealth transfers from the blue states. It’s a convenient narrative, although an inaccurate one. It is likely in most scenarios, however, that secession would come with short-term economic dislocations and disruptions.  Yet, short-term economic troubles have never been an insurmountable obstacle to secession and revolution. The American revolutionaries, after all, voluntarily cut themselves off from trade and took on huge debts to achieve political independence. Short term economic realities also do not dictate long-term prospects. If a Red States of America embraced global trade and a reduced regulatory burden, it could expect to see its economy accelerate in the medium and longer term. Moreover, cultural issues often trump economic ones, and residents may be willing to sacrifice some amount of wealth (measurable in dollars) for the perceived advantages of political self-determination. Were red-state Americans given the option to secede in exchange for per capita GDP levels similar to those of Germany, I suspect that many would take that bargain. 

  Tyler Durden
  Sun, 02/26/2023 – 16:00

• $27 Million Buys This In Naples, Florida
  $27 Million Buys This In Naples, Florida

  A few days ago, a half-acre of beachfront property in Naples, Florida, was listed on the market for a whopping $27 million. The listing comes as a ‘major slowdown’ in sales has hit the South Florida real estate market. 

  The 156 feet of beach frontage is situated on .59 acres of “unimproved” land listed for sale last week and located at 3600 Gordon Dr.

  

  The tiny “unimproved” lot commands a higher price than many other homes currently listed for sale in the area. 

  

  Even though South Florida real estate is in what Chris Krzemien, president of the Broward Palm Beaches and St. Lucie Realtors, recently described as a “major slowdown in the fourth quarter of 2022,” prices have yet to crash. Unlike in 2008, when massive amounts of supply hit the market and tanked home prices, today’s environment is much different because of one word: scarcity. 

  Tyler Durden
  Sun, 02/26/2023 – 15:30

• Morgan Stanley: "Maybe This Time Is Different"
  Morgan Stanley: “Maybe This Time Is Different”

  By Seth Carpenter, Global Chief Economist at Morgan Stanley

  As markets look to the future, the standard practice is to assume that cycles are cycles, and taking history as a guide, anyone shouting, “This time is different” is met with skepticism. But of course, we have all lived through Covid now, and that fact alone sets this cycle apart from others. So, it is worth asking, “What is different this time and what is not?”

  The Covid pandemic distinguishes this cycle from any post-WWII business cycle. Demand collapsed in a highly correlated way. Nearly every economic data series now has a very clear statistical break, marking the first difference relative to other cycles.

  The key characteristic of this cycle is volatility in supply and demand, and how shocks evolved across different sectors. The initial collapse in demand for both goods and services was followed by a resurgence of demand for goods against a sclerotic supply chain. The decoupling of demand for goods from demand for services had not been seen in previous cycles. The initial collapse in demand led to disinflation, but the surge in demand for goods in particular led goods inflation to decouple from services inflation.

  Subsequently, services demand recovered as the economy reopened, but the reopening was rife with frictions, as a large swath of the labor market reinvented itself or was displaced for a period of time. While the collapse in demand was highly correlated, the recovery was not. One consequence of this rather uncorrelated cycle is that inflation has been noisy. Today, we see that inflation for goods has retreated notably, but services inflation remains robust, even after an aggressive tightening cycle.

  

  With inflation running higher than at any point since the 1970s, we have another key difference. The Federal Reserve (and other DM central banks) is hiking rates to bring inflation down.

  This hiking cycle is the first since the 1970s with that motivation. Put differently, in most previous cycles, hiking rates went along with strong growth, and when growth and earnings showed signs of slowing, policy retreated. This time, the Fed is intentionally raising rates to slow growth substantially below the potential growth rate of the economy and plans to keep them high while the economy slumps. This central bank strategy is clearly a key difference relative to other cycles.

  So, where does this discussion leave us? Why is it important to highlight the differences in this cycle? We have had a “soft landing” view for the US for a long time. The pushback has consistently been that previous cycles have not had soft landings, so it is not reasonable to forecast one now. We were comfortable that there were enough differences in the cycle to produce a different outcome. The market narrative has shifted toward us, and now the question arises whether we are actually seeing enough slowing or even a re-acceleration.

  

  So far, we do not think that there is sufficient evidence to change our fundamental view of a slowing economy. And, going back to the Fed’s strategy of intentionally slowing the economy below potential to squeeze inflation out, a “no landing” scenario does not really make sense to us.

  But the data for January do reflect underlying strength. The seasonally adjusted non-farm payrolls were strong, reflecting much less of a contraction in jobs than is typical for a January. This labor hoarding dynamic is a key part of why we have been in favor of a soft landing. In past cycles, when there has been a slowdown, there have been waves of layoffs.

  This time, we see that pattern in tech, but not across the rest of the economy. So, maybe this time is different.

  Tyler Durden
  Sun, 02/26/2023 – 15:00

• EPA Halts Norfolk Southern's Removal Of Toxic Ohio Train Derailment Debris
  EPA Halts Norfolk Southern’s Removal Of Toxic Ohio Train Derailment Debris

  The Environmental Protection Agency ordered Norfolk Southern to halt all shipments of contaminated waste from the train derailment site in East Palestine, Ohio, to ensure proper disposal, according to Bloomberg. 

  “Moving forward, waste disposal plans, including disposal location and transportation routes for contaminated waste, will be subject to federal EPA review and approval,” said Debra Shore, the regional administrator for EPA’s Region 5 office. 

  

  Shore said, “EPA will ensure that all waste is disposed of in a safe and lawful manner at EPA-certified facilities to prevent further release of hazardous substances and impacts to communities.”

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

  Until Friday, Norfolk Southern “had been solely responsible for the disposal of waste,” she said. 

  The move comes as state officials in Michigan and Texas complained they weren’t notified when truckloads of contaminated soil and water from East Palestine were shipped into their jurisdictions for disposal. 

  The Ohio governor’s office said Saturday night that of the twenty truckloads (approximately 280 tons) of hazardous solid waste hauled away, 15 truckloads of contaminated soil was disposed of at a Michigan hazardous waste treatment and disposal facility while five truckloads had been returned to East Palestine.

  Liquid waste already trucked out of East Palestine would be disposed of at a licensed hazardous waste treatment and disposal facility in Texas, but that facility would not accept more liquid waste, the Ohio governor’s office said.

  “Currently, about 102,000 gallons of liquid waste and 4,500 cubic yards of solid waste remain in storage on site in East Palestine, not including the five truckloads returned to the village,” the governor’s office said. “Additional solid and liquid wastes are being generated as the cleanup progresses.” —AP News

  The Biden administration has been criticized for its response time and lack of coordination following the train derailment on Feb. 3. But, on Saturday, Transportation Secretary Pete Buttigieg said the response by federal agencies “has been really well coordinated.”

  If that’s the case, why would the EPA temporarily suspend the removal of contaminated waste while evaluating Norfolk Southern’s plan? Wouldn’t a concrete plan already be in play?

  Tyler Durden
  Sun, 02/26/2023 – 14:30

Digest powered by RSS Digest