Today’s News 2nd May 2022

• The Countries Committing The Most Of Their GDP To Ukraine Aid
  The Countries Committing The Most Of Their GDP To Ukraine Aid

  While not directly intervening in the war in Ukraine so far, countries in Europe and the United States have been contributing to the defence of Ukraine via financial, humanitarian and military aid. In absolute terms, the largest supporter as of March 27 was the United States, with a total of €7.6 billion made up of €3.2 billion in humanitarian aid and €4.4 billion in military aid.

  But as Statista’s Martin Armstrong shows in the infographic below, using Kiel Institute for the World Economy data, when it comes to a country’s commitment in relative terms, no country came close to Estonia in the first four weeks of the war – its contribution of €0.22 billion in military aid equates to 0.8 percent of the country’s GDP.

  

  You will find more infographics at Statista

  The United States’ financial input up to this point was equivalent to 0.04 percent of its economic output.

  Worth noting is that the indirect aid sent by countries such as Germany, France and Italy via the EU is not taken into account for these individual assessments. The source states that EU institutions have contributed €1.4 billion and a further €2 billion is attributed to the European Investment Bank.

  Tyler Durden
  Mon, 05/02/2022 – 02:45

• Decentralized And Neutral
  Decentralized And Neutral

  Authored by Hans-Hermann Hoppe via The Mises Institute,

  States, regardless of their constitution, are not economic enterprises. In contrast to the latter, states do not finance themselves by selling products and services to customers who voluntarily pay, but by compulsory levies: taxes collected through the threat and use of violence (and through the paper money they literally create out of thin air). Significantly, economists have therefore referred to governments—i.e., the holders of state power—as stationary bandits.

  Governments and everyone on their payroll live off the loot stolen from other people. They lead a parasitic existence at the expense of a subdued and “host” populace.

  

  A number of further insights emerge from this.

  Naturally, stationary bandits prefer larger loot to smaller loot. This means that states will always try to increase their tax revenue and further increase their spending by issuing more paper money. The larger the loot, the more favors they can do for themselves, their employees, and their supporters. But there are natural limits to this activity.

  On the one hand, the bandits have to be careful not to burden their “host,” whose work and performance make their parasitic existence possible, so much that the latter stops working. On the other hand, they have to fear that their “hosts”—and especially the most productive among them—will migrate from their dominion (territory) and settle elsewhere.

  Against this background, a number of historical tendencies and processes become understandable.

  • First of all, it becomes understandable why there is a tendency towards territorial expansion and political centralization: with this, states succeed in bringing more and more “hosts” under their control and making it more difficult for them to emigrate to foreign territories. This is expected to result in a larger amount of loot. And it becomes clear why the end point of this process, the establishment of a world state, would by no means be a blessing for all mankind, as is often claimed. Because one cannot emigrate from a world state, and in this respect there is no possibility of escaping state looting by emigration. It is therefore to be expected that with the establishment of a world state, the scope and extent of state exploitation—indicated, among other things, by the level of state income and expenditure, by monetary inflation, the number and volume of so-called public goods and persons employed in the “public service”—will continue to increase beyond any previously known level. And that is certainly not a blessing for the “host population” that has to fund this state superstructure!

  • Secondly, a central reason for the rise of the “West” to become the world’s leading economic, scientific, and cultural region becomes understandable. In contrast to China in particular, Europe was characterized by a high degree of political decentralization, with hundreds or even thousands of independent dominions from the early Middle Ages up until the recent past. Some historians have described this state of affairs as “orderly political anarchy.” And it is now common among economic historians to see in this quasi-anarchic state a key reason for the so-called European miracle. Because in an environment with a large variety of independent, small-scale territories in the immediate vicinity of each other, it is comparatively easy for the subjects to vote with their feet and escape the robberies of state rulers by emigration. To avert this danger and to keep local producers in line, these rulers are constantly under great pressure to moderate their exploitation. And this moderation, in turn, promotes economic entrepreneurship, scientific curiosity, and cultural creativity.

  • Finally, in the light of the above considerations, a well-founded historical classification and assessment of the European Union (EU) is possible.

  The EU is a prime example of the aforementioned tendency towards territorial expansion and political centralization, with the resulting consequences: an increase in exploitative state measures and a corresponding growth in the parasitic state superstructure (keyword: Brussels).

  More concretely: the EU and the European Central Bank (ECB) are the first step towards the establishment of a European superstate, which should eventually merge into a one-world government dominated by the USA and its central bank, the Federal Reserve. Contrary to euphonious political pronouncements, the EU and the ECB have never been about free international trade and competition. You don’t need thousands and thousands of pages of paper for this, full of ordinances and regulations! Rather, it was always and above all a matter of harmonization of the tax, legal, and regulatory provisions of all member states in order to reduce or eliminate all economic location competition in this way. Because if the tax rates and state regulations are the same everywhere or are increasingly being aligned, then there are fewer and fewer economic reasons for productive people to relocate their activities to another location, and the stationary bandits can be all the more undisturbed and therefore continue in their activity of taking and distributing booty.

  In addition, the current EU, as a cartel of various governments, only holds together as long as the wealthier bandits, who can draw on a more productive “host population,” above all the German governments, are willing and able to support their needier counterparts in the south and east, with their less productive “hosts,” on a permanent and large scale. And all at the expense of local producers!

  In sum, the EU and the ECB are moral and economic monstrosities. You cannot consistently penalize productivity and economic success while rewarding parasitism, waste, and economic failure without causing disaster. The EU will tumble from one economic crisis to the next and eventually disintegrate.

  In view of this, it seems urgent to gain a clear idea of ​​possible alternatives to the current course of increasing political centralization. And the memory of the aforementioned “European miracle” should point the way to proceed. Radical decentralization is required for Europe to thrive. Instead of the EU and the ECB, what is needed is a Europe made up of thousands of Liechtensteins and Swiss cantons, linked by free trade and an international gold standard and competing to keep and attract productive people with attractive locational conditions.

  However, in order to make this situation not only conceivable, but feasible, it is necessary that states and politicians are no longer regarded as what they claim to be, but as what they actually are: stationary bandits, gangsters and crooks. Until recently, this insight was unthinkable for the overwhelming majority of the population. But the coronavirus regime over the last two years, with its arbitrary and absurd bans on going out, contact, and assembly, and its constantly changing test, certificate, and vaccination regulations, including compulsory vaccinations, has meanwhile caused a great many politicians to be regarded as heavily armed and unscrupulous violent criminals.

  *  *  *

  PS: Do the current military events in Ukraine require a revision or correction of the above analyses? 

  On the contrary.

  First of all, it is not the Russians, the Ukrainians, the Germans, or the Americans who cause wars, but the bandit gangs that rule Russia, Ukraine, Germany, and America and who can pass on the costs of a war to the civilian population in question.

  Then, small states or bandit gangs only wage small wars against small opponents. Large states, on the other hand, which emerged from successful earlier small wars, are generally more warlike and wage not only small but also larger wars against large opponents. And the largest and most powerful of all states, the USA, and its vassal states assembled in NATO (the North Atlantic Treaty Organization), is the most keen on war and expansion. That alone is a reason for small states and decentralization.

  Finally, when a smaller state is faced with the expansionist drive and threat of a larger one, it basically has two options: It can submit. Or it can try to maintain its independence. And in order to achieve this goal and avoid war or minimize the risk of war, there is only one promising recipe: neutrality. One does not interfere in the internal affairs of the great power, and one does not threaten or provoke it. Even a great power cannot simply invade another country. For this always requires justification to its own population, which has to bear the burden of a war. And the smaller a state, the more difficult it is to portray its behavior as a threat or a provocation. (Who feels threatened by Liechtenstein?!) And this imperative of neutrality applies all the more when, as in the case of Ukraine, you are faced with two major powers with rival claims at the same time and taking the side of one means an additional threat for the other. The current war is the result of multiple violations of this rule by the government of Ukraine. If the government that came to power in a US-orchestrated coup in 2014 had expressly refrained from joining NATO and the EU, like Switzerland did, and the two then breakaway Russian-speaking provinces in the east of the country would have been let go instead of bullied and terrorized, the potential threat to Russia would have been reduced and the present catastrophe would almost certainly not have occurred. Under sustained US pressure, combined with their own audacity, the Ukrainian ruling clique did nothing of the sort and continued to demand NATO membership. This would have extended the US military presence right up to the borders of greater Russia, which had been declared an enemy state. Therefore, no one could doubt that the behavior of the Ukrainian government would be perceived by the Russian side as a tremendous provocation and a serious threat. The actual result of this provocation, which is now available, was not foreseeable, but it was quite foreseeable that one’s own behavior would also make a Russian reaction like the one that actually took place more likely. In the war in Ukraine, as so often in history, Putin does not have just one father, but several. The completely one-sided anti-Russia hysteria and agitation that is currently widespread in the West is therefore not only factually incorrect, but is primarily intended to distract from the West’s own role in the current drama. And it is meant to make us forget that the United States and its NATO vassals have been responsible for far more war casualties and war damage over the past thirty years than Russia has since the collapse of the Soviet Union and currently in Ukraine.

  Tyler Durden
  Mon, 05/02/2022 – 02:00

• Gordon Chang: What To Do About China
  Gordon Chang: What To Do About China

  Authored by Gordon Chang via The Gatestone Institute,

  • Since about 2018, Chinese officials have been talking about the moon and Mars as sovereign Chinese territory, part of the People’s Republic of China. This means that China considers those heavenly bodies to be like the South China Sea. This also means that China will exclude other nations from going to the moon and Mars if they have the capability to do so. We do not have to speculate about that: Chinese officials say this is what they are going to do.

  • [W]hen Biden says, “Oh, the Chinese just want to compete with us,” he is wrong. They do not want to “compete” within the international system. They do not even want to change that system… They want to overthrow it altogether, period.

  • Is Xi Jinping really that bold… to start another war? … First, China considers the United States to be its enemy. Second the United States is no longer deterring China. China feels it has a big green light to do whatever it wants.

  • We Americans don’t pay attention to propaganda… After all, these are just words. At this particular time, these words… [suggest] to me that China is laying the justification for a strike on the United States. We keep ignoring what Beijing is saying. We kept ignoring what Osama bin Laden was saying.

  • We have to remember that the Chinese regime, unlike the Japanese, always warn its adversaries about what it is going to do

  • The second reason war is coming is that America’s deterrence of China is breaking down.

  • Di’s message was that with cash, China can do anything it wants, and that all Americans would take cash. He mentioned two words in this regard: Hunter Biden.

  • In February, [Biden] had a two‑hour phone call with Xi Jinping. By Biden’s own admission, he didn’t raise the issue of the origins of COVID‑19 even once. If you are Xi Jinping, after you put down the receiver, your first thought is, “I just got away with killing hundreds of thousands of Americans.”

  • We have news that China is building something like 345 missile silos in three locations: in Gansu, Xinjiang, and in Inner Mongolia. These silos are clearly built to accommodate the DF‑41. The DF‑41 has a range of about 9,300 miles, which means that it can reach any part of the United States. The DF‑41 carries 10 warheads. This means that China could, in about two years…, have a bigger arsenal than ours. …we have to assume the worst because Chinese leaders and Chinese generals, on occasion, unprovoked, have made threats to nuke American cities.

  • In July, 2021 China tested a hypersonic glide warhead, which circled the world. This signals China intends to violate the Outer Space Treaty, to which China is a party.

  • As of today, more than eight million people have died outside China. What happened? No one imposed costs on China.

  • For at least a half‑decade, maybe a little bit longer, Chinese military researchers have been openly writing about a new type of biological warfare….They talk about a new type of biological warfare of “specific ethnic genetic attacks.” In other words, pathogens that will leave the Chinese immune but sicken and kill everybody else, which means that the next disease from China can be a civilization killer.

  • A lot of military analysts talk about how the first seconds of a war with China are going to be fought in outer space. They are going to blind our satellites, take them down, do all sorts of stuff. Those statements are wrong. The first day of war against the United States occurs about six months earlier, when they release pathogens in the United States. Then we are going to have that day in space. The war starts here, with a pathogen ‑‑ a virus, a microbe, a bug of some kind. That is where it begins.

  • The One‑China policy is something many people misunderstand. Probably because Beijing uses propaganda to try to fuzzy up the issue…. China has a One‑China principle: that Taiwan is part of the People’s Republic of China, full stop. We have a One‑China policy…, that the status of Taiwan is unresolved…. that the resolution of the status of Taiwan must be with the consent of people on both sides of the Strait.

  • We need a policy of “strategic clarity,” where we tell China that we will defend Taiwan. We also say we will extend a mutual defense treaty to Taiwan if it wants it, and we will put American troops on the island as a tripwire.

  • We are Americans. We naturally assume that there are solutions, and good solutions, to every problem. After three decades of truly misguided China policy, there are no … solutions that are “undangerous.” …The current trend of policy is unsustainable. There will be no American republic if we continue to do what we are currently doing and if we continue to allow China to do what it does. I do not think that enforcing a trade deal will start World War III.

  • China has not met its obligations. As of a few months ago, China had met about 62% of its commitments….. We should be increasing the tariffs that President Trump imposed under Section 301 of the Trade Act of 1974. Remember, those tariffs are meant to be a remedy for the theft of US intellectual property. China has continued to steal US IP. As matter of fact, it has gotten worse…

  • I do not think that we should be trying to foster integration of Wall Street into China’s markets…. Do not take it from me, just look at their failure to comply with very simple, easy‑to‑comply-with requirements. It was a mistake.

  • The best response would be if we hit them with everything at once because China right now is weak. If we were going to pick the number one thing to do, I would think trade.

  • China now has a debt crisis, so they are not going to invest their way out of this crisis, which means the only way they can save their economy is net exports. We should stop buying their stuff.

  • China has bought the political establishment in the Solomon Islands, except for one brave man named David Suidani. Recently, somebody got the bright idea of publishing all of the specific payments that Beijing has made to Solomon Islands politicians…. We should be doing this with payments to American politicians, we should be doing this across the board.

  • What bothers me is that, although their assumptions about China have demonstrably been proven wrong, American policymakers still continue with the same policies. There is, in some people’s mind, an unbreakable view that we have to cooperate with China…. This is what people learn in international relations school when they go to Georgetown, and they become totally stupid.

  • Clearly, Nike and Apple and other companies are now, at this very moment, trying to prevent Congress from enacting toughened rules on the importation of forced‑labor products into our country.

  • Moreover, the Chinese regime is even more casualty‑averse than we are. Even if Beijing thinks it can take Taiwan by force, it is probably not going to invade because it knows an invasion would be unpopular with most people in China. It is not going to risk hundreds of thousands of casualties that would result from an invasion.

  • Unfortunately…, we taught the Chinese that they can without cost engage in these dangerous maneuvers of intercepting our planes and our ships. That is the problem: because as we have taught the Chinese to be more aggressive, they have been.

  • [W]e should have made it clear to the Chinese leadership that they cannot kill Americans without cost. Hundreds of thousands Americans have been killed by a disease that China deliberately spread. From October 2020 to October 2021, more than 105,000 Americans died from fentanyl — which China has purposefully, as a matter of state and Communist Party policy — sold to Americans… we have to change course.

  • I would close China’s four remaining consulates. I would also strip the Chinese embassy down to the ambassador and his personal staff. The thousands who are in Washington, DC, they would be out.

  • I would also raise tariffs to 3,600%, or whatever. This is a good time to do it. We have supply chain disruptions. We are not getting products from China anyway. We can actually start to do this sort of stuff.

  • I would… just hammer those guys all the time verbally. People may think, “Those are just words.” For communists, words are really important, because they are an insecure regime where propaganda is absolutely critical.

  • I would be going after the Communists on human rights, I would be going after them on occupying the South China Sea, on Taiwan, unrelentingly — because I would want to show the world that the United States is no longer afraid of China…. State Department people, they are frightened. We need to say to the Chinese regime, like Dulles, “I’m not afraid of you. I’m going after you, and I’m going to win.”

  Is Xi Jinping really that bold… to start another war?…

  • First, China considers the United States to be its enemy.

  • Second the United States is no longer deterring China.

  China feels it has a big green light to do whatever it wants.

  

  All the conditions for history’s next great war are in place. Jim Holmes, the Wiley Professor at the Naval War College, actually talks about this period as being 1937.

  1937 was the year in which if you were in Europe or America, you could sense the trouble. If you were in Asia in 1937, you would be even more worried, because that year saw Japan’s second invasion of China that decade.

  No matter where you lived, however, you could not be sure that the worst would happen, that great armies and navies around the world would clash. There was still hope that the situation could be managed. As we now know, the worst did happen. In fact, what happened was worse than what anyone thought at the time.

  We are now, thanks to China, back to 1937.

  We will begin our discussion in Afghanistan. Beijing has had long‑standing relations with the Afghan Taliban, going back before 9/11, and continuing through that event.

  After the US drove the Taliban from power and while it was conducting an insurgency, China was selling the group arms, including anti‑aircraft missiles, that were used to kill American and NATO forces.

  China’s support for killing Americans has continued to today. In December 2020, Indian Intelligence was instrumental, in Afghanistan, in breaking up a ring of Chinese spies and members of the Haqqani Network. The Trump administration believed that the Chinese portion of that ring was actually paying cash for killing Americans.

  What can happen next? We should not be surprised if China gives the Taliban an atomic weapon to be used against an American city. Would they be that vicious?

  We have to remember that China purposefully, over the course of decades, proliferated its nuclear weapons technology to Pakistan and then helped Pakistan sell that Chinese technology around the world to regimes such as Iran’s and North Korea’s.

  Today, China supports the Taliban. We know this because China has kept open its embassy in Kabul. China is also running interference for the Taliban in the United Nations Security Council. It is urging countries to support that insurgent group with aid. It looks as if the Taliban’s main financial backers these days are the Chinese.

  Beijing is hoping to cash in on its relationship in Central Asia. Unfortunately, there is a man named Biden, who is helping them.

  In early August, Biden issued an executive order setting a goal that by 2030, half of all American vehicles should be electric‑powered. To be electric‑powered, we need rare earth minerals, we need lithium. As many people have said, Afghanistan is the Saudi Arabia of rare earths and lithium.

  If Beijing can mine this, it makes the United States even more dependent on China. It certainly helps the Taliban immeasurably.

  Unfortunately, Beijing has more than just Afghanistan in mind. The Chinese want to take away our sovereignty, and that of other nations, and rule the world. They actually even want to rule the near parts of the solar system. Yes, that does sound far‑fetched, but, no, I’m not exaggerating. Chinese President Xi Jinping would like to end the current international system.

  On July 1, in a landmark speech, in connection with the centennial of China’s ruling organization, he said this: “The Communist Party of China and the Chinese people, with their bravery and tenacity, solemnly proclaim to the world that the Chinese people are not only good at taking down the old world, but also good in building a new one.”

  By that, China’s leader means ending the international system, the Westphalian international system. It means he wants to impose China’s imperial‑era notions of governance, where Chinese emperors believed they not only had the Mandate of Heaven over tianxia, or all under Heaven, but that Heaven actually compelled the Chinese to rule the entire world.

  Xi Jinping has been using tianxia themes for decades, and so have his subordinates, including Foreign Minister Wang Yi, who in September 2017 wrote an article in Study Times, the Central Party School’s influential newspaper.

  In that article, Wang Yi wrote that Xi Jinping’s thought on diplomacy ‑‑ a “thought” in Communist Party lingo is an important body of ideological work ‑‑ Wang Yi wrote that Xi Jinping’s thought on diplomacy made innovations on and transcended the traditional theories of Western international relations of the past 300 years.

  Take 2017, subtract 300 years, and you almost get to 1648, which means that Wang Yi, with his time reference, was pointing to the Treaty of Westphalia of 1648, which established the current system of sovereign states.

  When Wang Yi writes that Xi Jinping wants to transcend that system, he is really telling us that China’s leader does not want sovereign states, or at least no more of them than China. This means that when Biden says, “Oh, the Chinese just want to compete with us,” he is wrong. They do not want to “compete” within the international system. They do not even want to change that system so it is more to their liking. They want to overthrow it altogether, period.

  China is also revolutionary with regard to the solar system. Since about 2018, Chinese officials have been talking about the moon and Mars as sovereign Chinese territory. In other words, as part of the People’s Republic of China. This means that China considers those heavenly bodies to be like the South China Sea: theirs and theirs alone.

  This also means that China will exclude other nations from going to the moon and Mars if they have the capability to do so. We do not have to speculate about that: Chinese officials say this is what they are going to do.

  Let us return to April 2021. Beijing announced the name of its Mars rover. “We are naming the Mars rover Zhurong,” the Chinese said, “because Zhurong was the god of fire in Chinese mythology, ” How nice. Yes, Zhurong is the god of fire. What Beijing did not tell us is that Zhurong is also the god of war—and the god of the South China Sea.

  Is Xi Jinping really that bold or that desperate to start another war? Two points. First, China considers the United States to be its enemy. The second point is that the United States is no longer deterring China. China feels it has a big green light to do whatever it wants.

  On the first point, about our enemy status, we have to go back to May 2019. People’s Daily, the most authoritative publication in China, actually carried a piece that declared a “people’s war” on the US. This was not just some isolated thought.

  On August 29th 2021, People’s Daily came out with a landmark piece that accused the United States of committing “barbaric” acts against China. Again, this was during a month of hostile propaganda blasts from China.

  On the August 29th, Global Times, which is controlled by People’s Daily, came right out and also said that the United States was an enemy or like an enemy.

  We Americans don’t pay attention to propaganda. The question is, should we be concerned about what China is saying? After all, these are just words.

  At this particular time, these words are significant. The strident anti‑Americanism suggests to me that China is laying the justification for a strike on the United States. We keep ignoring what Beijing is saying. We kept ignoring what Osama bin Laden was saying.

  We have to remember that the Chinese regime, unlike the Japanese, always warn its adversaries about what it is going to do. Jim Lilley, our great ambassador to Beijing during the Tiananmen Massacre, actually said that China always telegraphs its punches. At this moment, China is telegraphing a punch.

  That hostility, unfortunately, is not something we can do very much about. The Chinese Communist regime inherently idealizes struggle, and it demands that others show subservience to it.

  The second reason war is coming is that America’s deterrence of China is breaking down. That is evident from what the Chinese are saying.

  In March of 2021, China sent its top two diplomats, Yang Jiechi and Wang Yi, to Anchorage to meet our top officials, Secretary of State Antony Blinken and National Security Advisor Jake Sullivan. Yang, in chilling words, said the US could no longer talk to China “from a position of strength.”

  We saw the same theme during the fall of Kabul. China then was saying, “Look, those Americans, they can’t deal with the insurgent Taliban. How can they hope to counter us magnificent Chinese?” Global Times actually came out with a piece referring to Americans: “They can’t win wars anymore.”

  We also saw propaganda at that same time directed at Taiwan. Global Times was saying, again, in an editorial, an important signal of official Chinese thinking, “When we decide to invade, Taiwan will fall within hours and the US will not come to help.”

  It is probably no coincidence that this propaganda came at the time of incursions into Taiwan’s air-defense identification zone.

  We need to be concerned with more than just the intensity and with the frequency of these flights, however. We have to be concerned that China was sending H‑6K bombers; they are nuclear‑capable.

  Something is wrong. Global Times recently came out with an editorial with the title, “Time to warn Taiwan secessionists and their fomenters: war is real.”

  Beijing is at this moment saying things heard before history’s great conflicts. The Chinese regime right now seems to be feeling incredibly arrogant. We heard this on November 28th in 2020, when Di Dongsheng, an academic in Beijing, gave a lecture live-streamed to China.

  Di showed the arrogance of the Chinese elite. More importantly, he was showing that the Chinese elite no longer wanted to hide how they felt. Di, for instance, openly stated that China could determine outcomes at the highest levels of the American political system.

  Di’s message was that with cash, China can do anything it wants, and that all Americans would take cash. He mentioned two words in this regard: Hunter Biden.

  Unfortunately, President Joe Biden is reinforcing this notion. China, for instance, has so far killed nearly one million Americans with a disease that it deliberately spread beyond its borders. Yet, what happened? Nothing.

  We know that China was able to spread this disease with its close relationship with the World Health Organization. President Trump, in July of 2020, took us out of the WHO. What did Biden do? In his first hours in office, on January 20th, 2021, he put us back into the WHO.

  In February, he had a two‑hour phone call with Xi Jinping. By Biden’s own admission, he didn’t raise the issue of the origins of COVID‑19 even once. If you are Xi Jinping, after you put down the receiver, your first thought is, “I just got away with killing hundreds of thousands of Americans.”

  Then there’s somebody named John Kerry. Our republic is not safe when John Kerry carries a diplomatic passport, as he now does. He is willing to make almost any deal to get China to sign an enhanced climate arrangement.

  Kerry gave a revealing interview to David Westin of Bloomberg on September 22, 2021. Westin asked him, “What is the process by which one trades off climate against human rights?” Climate against human rights?

  Kerry came back and said, “Well, life is always full of tough choices in the relationship between nations.” Tough choices? We Americans need to ask, “What is Kerry willing to give up to get his climate deal?”

  Democracies tend to deal with each other in the way that Kerry says. If we are nice to a democracy, that will lead to warm relations; warm relations will lead to deals, long‑standing ties. Kerry thinks that the Chinese communists think that way. Unfortunately, they do not.

  We know this because Kerry’s successor as Secretary of State, Hillary Clinton, in February 2009, said in public, “I’m not going to press the Chinese on human rights because I’ve got bigger fish to fry.” She then went to Beijing a day after saying that and got no cooperation from the Chinese.

  Even worse, just weeks after that, China felt so bold that it attacked an unarmed US Navy reconnaissance vessel in the South China Sea. The attack was so serious that it constituted an act of war. The Chinese simply do not think the way that Kerry believes they do.

  All of this, when you put it together, means that the risk of war is much higher than we tend to think. Conflict with today’s aggressor is going to be more destructive than it was in the 1930s. We have news that China is building something like 345 missile silos in three locations: in Gansu, Xinjiang, and in Inner Mongolia.

  These silos are clearly built to accommodate the DF‑41. The DF‑41 has a range of about 9,300 miles, which means that it can reach any part of the United States. The DF‑41 carries 10 warheads. This means that China could, in about two years, as some experts think, have a bigger arsenal than ours.

  China has built decoy silos before. We are not sure they are going to put all 345 missiles into these facilities, but we have to assume the worst because Chinese leaders and Chinese generals, on occasion, unprovoked, have made threats to nuke American cities.

  This, of course, calls into question their official no‑first‑use policy, and also a lot of other things. China will not talk to us about arms control. We have to be concerned that China and Russia, which already are coordinating their military activities, would gang up against us with their arsenals.

  In July, 2021 China tested a hypersonic glide warhead, which circled the world. This signals China intends to violate the Outer Space Treaty, to which China is a party. It also shows that in hypersonic technology, which was developed by Americans, China is now at least a decade ahead of us in fielding a weapon.

  Why is China doing all this now? The country is coming apart at the seams. There is, for instance, a debt crisis. Evergrande and other property developers have started to default. It is more than just a crisis of companies. China is basically now having its 2008.

  Even more important than that, they have an economy that is stumbling and a food crisis that is worsening year to year. They know their environment is exhausted. Of course, they also are suffering from a continuing COVID‑19 epidemic.

  To make matters worse, all of this is occurring while China is on the edge of the steepest demographic decline in history in the absence of war or disease.

  Two Chinese demographers recently stated that China’s population will probably halve in 45 years. If you run out those projections, it means that by the end of the century, China will be about a third of its current size, basically about the same number of people as the United States.

  These developments are roiling the political system. Xi Jinping is being blamed for these debacles. We know he has a low threshold of risk. Xi now has all the incentive in the world to deflect popular and regime discontent by lashing out.

  In 1966, Mao Zedong, the founder of the People’s Republic, was sidelined in Beijing. What did he do? He started the Cultural Revolution. He tried to use the Chinese people against his political enemies. That created a decade of chaos.

  Xi Jinping is trying to do the same thing with his “common prosperity” program. The difference is that Mao did not have the means to plunge the world into war. Xi, with his shiny new military, clearly does have that ability.

  So here is a 1930s scenario to consider. The next time China starts a conflict, whether accidentally or on purpose, we could see that China’s friends — Russia, North Korea, Iran, Pakistan — either in coordination with China or just taking advantage of the situation, move against their enemies.

  That would be Ukraine in the case of Russia, South Korea in the case of North Korea, Israel in the case of Iran, India in the case of Pakistan, and Morocco in the case of Algeria. We could see crises at both ends of the European landmass and in Africa at the same time.

  This is how world wars start.

  *  *  *

  Question: Why do you believe China attacked the world with coronavirus?

  Chang: I believe that SARS‑CoV‑2, the pathogen that causes COVID‑19, is not natural. There are, for example, unnatural arrangements of amino acids, like the double‑CGG sequence, that do not occur in nature.

  We do not have a hundred percent assurance on where this pathogen came from. We do, however, have a hundred percent assurance on something else: that for about five weeks, maybe even five months, Chinese leaders knew that this disease was highly transmissible, from one human to the next, but they told the world that it was not.

  At the same time as they were locking down their own country ‑‑ Xi Jinping by locking down was indicating that he thought this was an effective way of stopping the disease — he was pressuring other countries not to impose travel restrictions and quarantines on arrivals from China. It was those arrivals from China that turned what should have been an epidemic confined to the central part of China, into a global pandemic. As of today, more than eight million people have died outside China. What happened? No one imposed costs on China.

  For at least a half‑decade, maybe a little bit longer, Chinese military researchers have been openly writing about a new type of biological warfare. This was, for instance, in the 2017 edition of “The Science of Military Strategy,” the authoritative publication of China’s National Defense University.

  They talk about a new type of biological warfare of “specific ethnic genetic attacks.” In other words, pathogens that will leave the Chinese immune but sicken and kill everybody else, which means that the next disease from China can be a civilization killer.

  Remember, Xi Jinping must be thinking, “I just got away with killing eight million people. Why wouldn’t I unleash a biological attack on the United States? Look what the virus has done not only to kill Americans but also to divide American society.”

  A lot of military analysts talk about how the first seconds of a war with China are going to be fought in outer space. They are going to blind our satellites, take them down, do all sorts of stuff. Those statements are wrong.

  The first day of war against the United States occurs about six months earlier, when they release pathogens in the United States. Then we are going to have that day in space. The war starts here, with a pathogen ‑‑ a virus, a microbe, a bug of some kind. That is where it begins.

  Question: You mentioned 1939. Taiwan is the Poland of today. We get mixed signals: Biden invites the Taiwanese foreign minister to his inauguration, but then we hear Ned Price, his State Department spokesman, say that America will always respect the One‑China policy. Meaning, we’re sidelining defending Taiwan?

  Chang: The One‑China policy is something many people misunderstand. Probably because Beijing uses propaganda to try to fuzzy up the issue. China has a One‑China principle: that Taiwan is part of the People’s Republic of China, full stop.

  We have a One‑China policy, which is different. We recognize Beijing as the legitimate government of China. We also say that the status of Taiwan is unresolved. Then, the third part of our One‑China policy is that the resolution of the status of Taiwan must be with the consent of people on both sides of the Strait. In other words, that is code for peace, a peaceful resolution.

  Our policies are defined by the One‑China policy, the Three Communiques, Reagan’s Six Assurances, and the Taiwan Relations Act.

  Our policy is difficult for someone named Joe Biden to articulate, because he came back from a campaign trip to Michigan, and he was asked by a reporter about Taiwan, and Biden said, “Don’t worry about this. We got it covered. I had a phone call with Xi Jinping and he agreed to abide by the Taiwan agreement.”

  In official US discourse, there is no such thing as a “Taiwan agreement.” Some reporter then asked Ned Price what did Biden mean by the Taiwan agreement. Ned Price said, “The Taiwan agreement means the Three Communiques the Six Assurances, the Taiwan Relations Act, and the One‑China policy.”

  Ned Price could not have been telling the truth because Xi Jinping did not agree to America’s position on Taiwan. That is clear. There is complete fuzziness or outright lying in the Biden administration about this.

  Biden’s policies on Taiwan are not horrible, but they are also not appropriate for this time. decades, we have had this policy of “strategic ambiguity,” where we do not tell either side what we would do in the face of imminent conflict. That worked in a benign period. We are no longer in a benign period. We are in one of the most dangerous periods in history.

  We need a policy of “strategic clarity,” where we tell China that we will defend Taiwan. We also say we will extend a mutual defense treaty to Taiwan if it wants it, and we will put American troops on the island as a tripwire.

  Question: You think he is not saying that because he has no intention of actually doing it, so in a way, he is telling the truth?

  Chang: The mind of Biden is difficult to understand. We do not know what the administration would do. We have never known, after Allen Dulles, what any administration would do, with regard to Taiwan. We knew what Dulles would have done. We have got to be really concerned because there are voices in the administration that would give Taiwan, and give other parts of the world, to China. It would probably start with John Kerry; that is only a guess.

  Question: You mentioned earlier the growing Chinese economic problems. Would you use taking action on the enormous trade deficits we run with China to contribute to that problem?

  Chang: Yes, we should absolutely do that. Go back to a day which, in my mind, lives in infamy, which is January 15th, 2020, when President Trump signed the Phase One trade deal, which I think was a mistake. In that Phase One trade deal, it was very easy for China to comply, because there were specific targets that China had to meet in buying US goods and services. This was “managed trade.”

  China has not met its obligations. As of a few months ago, China had met about 62% of its commitments. That means, they have dishonored this deal in a material and significant way. If nothing else, China has failed to meet its Phase One trade deal commitments.

  We should be increasing the tariffs that President Trump imposed under Section 301 of the Trade Act of 1974. Remember, those tariffs are meant to be a remedy for the theft of US intellectual property. China has continued to steal US IP. As matter of fact, it has gotten worse: for instance, these Chinese anti‑lawsuit injunctions, which they have started to institute.

  We need to do something: China steals somewhere between $300 to $600 billion worth of US intellectual property each year. That is a grievous wound on the US economy, it is a grievous wound on our society in general. We need to do something about it.

  Question: As a follow‑up on that, Japan commenced World War II because of the tariffs Roosevelt was strapping on oil imports into Japan, do you think that might well have the same effect on China, where we do begin to impose stiffer tariffs on American imports?

  Chang: That is a really important question, to which nobody has an answer. I do not think that China would start a war over tariffs. Let me answer this question in a different way. We are Americans. We naturally assume that there are solutions, and good solutions, to every problem. After three decades of truly misguided China policy, there are no good solutions. There are no solutions that are “undangerous.”

  Every solution, going forward, carries great risk. The current trend of policy is unsustainable. There will be no American republic if we continue to do what we are currently doing and if we continue to allow China to do what it does.

  I do not think that enforcing a trade deal will start World War III. The point is, we have no choice right now. First, I don’t think the Chinese were ever going to honor the Phase One agreement . This was not a deal where there were some fuzzy requirements. This deal was very clear: China buys these amounts of agricultural products by such and such date, China buys so many manufactured products by such and such date. This was not rocket science. China purposefully decided not to honor it.

  There are also other issues regarding the trade deal do not think that we should be trying to foster integration of Wall Street into China’s markets, which is what the Phase One deal also contemplated. Goldman Sachs ran away like a bandit on that. There are lot of objections to it. I do not think we should be trading with China, for a lot of reasons. The Phase One trade deal, in my mind, was a great mistake. Do not take it from me, just look at their failure to comply with very simple, easy‑to‑comply-with requirements. It was a mistake.

  Question: Concerning cybersecurity, as we saw in the recent departure of a Pentagon official, ringing the alarm on how we are completely vulnerable to China’s cyberattacks. From your perspective, what would an attack look like on China that would hurt them? What particular institutions would be the most vulnerable? Is it exposing their secrets? Is it something on their financial system? Is it something on their medical system or critical infrastructure? What does the best way look like to damage them?

  Also, regarding what you mentioned about Afghanistan, we know that China has been making inroads into Pakistan as a check on American hegemony in relationships with India and Afghanistan.

  Now that the Afghanistan domino is down, what do you see in the future for Pakistan’s nuclear capability, in conjunction with Chinese backing, to move ever further westward towards Afghanistan, and endangering Middle East security?

  Chang: Right now, India has been disheartened by what happened, because India was one of the main backers of the Afghan government. What we did in New Delhi was delegitimize our friends, so that now the pro‑Russian, the pro‑Chinese elements in the Indian national security establishment are basically setting the tone. This is terrible.

  What has happened, though, in Pakistan itself, is not an unmitigated disaster for us, because China has suffered blowback there. There is an Afghan Taliban, and there is a Pakistani Taliban. They have diametrically‑opposed policies on China. The Afghan Taliban is an ally of China; the Pakistani Taliban kill Chinese.

  They do that because they want to destabilize Pakistan’s capital, Islamabad. Beijing supports Islamabad. The calculation on part of the Pakistani Taliban is, “We kill Chinese, we destabilize Islamabad, we then get to set up the caliphate in Pakistan.” What has happened is, with this incredible success of the Afghan Taliban, that the Pakistani Taliban has been re‑energized — not good news for China.

  China has something called the China‑Pakistan Economic Corridor, part of their Belt and Road Initiative. Ultimately that is going to be something like $62 billion of investment into Pakistani roads, airports, electric power plants, utilities, all the rest of it.

  I am very happy that China is in Pakistan, because they are now dealing with a situation that they have no solutions to. It’s like Winston Churchill on Italy, “It’s now your turn.”

  We should never have had good relations with Pakistan. That was always a short‑term compromise that, even in the short term, undermined American interests. The point is that China is now having troubles in Pakistan because of their success in Afghanistan.

  Pakistan is important to China for a number of reasons. One of them is, they want it as an outlet to the Indian Ocean that bypasses the Malacca Strait — a choke point that the US Navy ‑‑ in their view ‑‑ could easily close off, which is correct.

  They want to bypass that, but their port in Gwadar is a failure in many respects. Gwadar is in Pakistan’s Baluchistan. The Baluchs are one of the most oppressed minorities on earth. They have now taken to violence against the Chinese, and they have been effective. Pakistan is a failure for China.

  The best response would be if we hit them with everything at once because China right now is weak. If we were going to pick the number one thing to do, I would think trade.

  Trade is really what they need right now. Their economy is stalling. There are three parts to the Chinese economy, as there are to all economies: consumption, investment, and net exports. Their consumption right now is extremely weak from indicators that we have. The question is can they invest?

  China now has a debt crisis, so they are not going to invest their way out of this crisis, which means the only way they can save their economy is net exports. We should stop buying their stuff.

  We have extraordinary supply chain disruptions right now. It should be pretty easy for us to make the case that we must become self‑sufficient on a number of items. Hit them on trade. Hit them on investment, publicize the bank account details of Chinese leaders. All these things that we do, we do it all at the same time. We can maybe get rid of these guys.

  Question: In the Solomon Islands, they published China’s under-the-table payments to political figures. Should we do the same thing with China’s leaders?

  Chang: Yes. There is now a contest for the Solomon Islands, which includes Guadalcanal. China has bought the political establishment in the Solomon Islands, except for one brave man named David Suidani. Recently, somebody got the bright idea of publishing all of the specific payments that Beijing has made to Solomon Islands politicians. This was really good news. We should be doing this with payments to American politicians, we should be doing this across the board.

  Why don’t we publish their payments to politicians around the world? Let’s expose these guys, let’s go after them. Let’s root out Chinese influence, because they are subverting our political system.

  Similarly, we should also be publishing the bank account details of all these Chinese leaders, because they are corrupt as hell.

  Question: Could you comment, please, on what you think is the nature of the personal relationships between Hunter Biden, his father, and Chinese financial institutions. How has it, if at all, affected American foreign policy towards China, and how will it affect that policy?

  Chang: There are two things here. There are the financial ties. Hunter Biden has connections with Chinese institutions, which you cannot explain in the absence of corruption.

  For instance, he has a relationship with Bohai Harvest Partners, BHR. China puts a lot of money into the care of foreign investment managers. The two billion, or whatever the number is, is not that large, but they only put money with people who have a track record in managing investments. Hunter Biden only has a track record of being the son of Joe Biden.

  There are three investigations of Hunter Biden right now. There is the Wilmington US Attorney’s Office, the FBI — I don’t place very much hope in either of these – but the third one might actually bear some fruit: the IRS investigation of Hunter Biden.

  Let us say, for the moment, that Biden is able to corrupt all three of these investigations. Yet money always leaves a trail. We are going to find out one way or another. Peter Schweizer, for instance, is working on a book on the Biden cash. Eventually, we are going to know about that.

  What worries me is not so much the money trail — and of course, there’s the art sales, a subject in itself, because we will find out.

  What worries me is that Hunter Biden, by his own admission, is a troubled individual.

  He has been to China a number of times. He has probably committed some embarrassing act there, which means that the Ministry of State Security has audio and video recordings of this. Those are the things that can be used for blackmail. We Americans would never know about it, because blackmail does not necessarily leave a trail. This is what we should be most concerned about.

  Biden has now had two long phone calls with Xi Jinping. The February call, plus also one a few months ago. We do not know what was said. I would be very worried that when Xi Jinping wants to say something, there will be a phone call to Biden, and it would be Xi doing the talking without note takers.

  Question: Please tell us about the China desk over the 30 years, the influence of the bureaucracy on politics; what can they affect?

  Chang: I do not agree with our China policy establishment in Washington, in general, and specifically the State Department and NSC.

  This a complicated issue. First, there is this notion after the end of the Cold War, that the nature of governments did not matter. You could trade with them, you could strengthen them, and it would not have national security implications. That was wrong for a number of reasons, as we are now seeing.

  What bothers me is that, although their assumptions about China have demonstrably been proven wrong, American policymakers still continue with the same policies. There is, in some people’s mind, an unbreakable view that we have to cooperate with China.

  You hear this from Blinken all the time: “We’ve got to cooperate where we can.” It is this formulation which is tired, and which has not produced the types of policies that are necessary to defend our republic. That is the unfortunate thing.

  This is what people learn in international relations school when they go to Georgetown, and they become totally stupid. We Americans should be upset because we have a political class that is not defending us. They are not defending us because they have these notions of China. George Kennan understood the nature of the Soviet Union. I do not understand why we cannot understand the true nature of the Chinese regime.

  Part of it is because we have Wall Street, we have Walmart, and they carry China’s water. There are more of us than there are of them in this country. We have to exercise our vote to make sure that we implement China policies that actually protect us.

  Policies that protect us are going to be drastic and they will be extreme, but absolutely, we have now dug ourselves into such a hole after three decades of truly misguided views on China, that I don’t know what else to say. This is not some partisan complaint. Liberals and conservatives, Republicans and Democrats, all have truly misguided China policies.

  I do not know what it takes to break this view, except maybe for the deaths of American servicemen and women.

  Question: Is the big obstacle American businesses which, in donations to Biden, are the ones stopping decoupling of commerce, and saying, “Do not have war; we would rather earn money”?

  Chang: It is. You have, for instance, Nike. There are a number of different companies, but Nike comes to mind right now, because they love to lecture us about racism.

  For years they were operating a factory in Qingdao, in the northeastern part of China, that resembled a concentration camp. The laborers were Uighur and Kazakh women, brought there on cattle cars and forced to work.

  This factory, technically, was operated by a South Korean sub‑contractor, but that contractor had a three‑decade relationship with Nike. Nike had to know what was going on. This was forced labor, perhaps even slave labor.

  Clearly, Nike and Apple and other companies are now, at this very moment, trying to prevent Congress from enacting toughened rules on the importation of forced‑labor products into our country.

  One of the good things Trump did was, towards the end of his four years, he started to vigorously enforce the statutes that are already on the books, about products that are made with forced and slave labor. Biden, to his credit, has continued tougher enforcement.

  Right now, the big struggle is not the enforcement, but enhancing those rules. Apple and all of these companies are now very much trying to prevent amendment of those laws. It’s business, but it’s also immoral.

  Question: It is not just big Wall Street firms. There are companies that print the Bible. Most Bibles are now printed in China.

  When President Trump imposed the tariffs, a lot of the Bible printers who depended on China actually went to Trump and said, “You cannot put those tariffs in because then the cost of Bibles will go up.”

  Chang: Most everyone lobbies for China. We have to take away their incentive to do so.

  Question: What are the chances that China’s going to invade Taiwan?

  Chang: There is no clear answer.

  There are a number of factors that promote stability. One of them is that, for China to invade Taiwan, Xi Jinping has to give some general or admiral basically total control over the Chinese military. That makes this flag officer the most powerful person in China. Xi is not about to do that.

  Moreover, the Chinese regime is even more casualty‑adverse than we are. Even if Beijing thinks it can take Taiwan by force, it is probably not going to invade because it knows an invasion would be unpopular with most people in China. It is not going to risk hundreds of thousands of casualties that would result from an invasion.

  The reason we have to be concerned is because it is not just a question of Xi Jinping waking up one morning and saying, “I want to invade Taiwan.” The danger is the risk of accidental contact, in the skies or on the seas, around Taiwan.

  We know that China has been engaging in hostile conduct, and this is not just the incursions into Taiwan’s air-defense identification zone. There are also dangerous intercepts of the US Navy and the US Air Force in the global commons. One of those accidents could spiral out of control.

  We saw this on April 1st, 2001, with the EP‑3, where a Chinese jet clipped the wing of that slow‑moving propeller plane of the US Navy. The only reason we got through it was that George W. Bush, to his eternal shame, paid China a sum that was essentially a ransom.

  He allowed our crew to be held for 11 days. He allowed the Chinese to strip that plane. This was wrong. This was the worst incident in US diplomatic history, but Bush’s craven response did get us through it. Unfortunately, by getting through it we taught the Chinese that they can without cost engage in these dangerous maneuvers of intercepting our planes and our ships.

  That is the problem: because as we have taught the Chinese to be more aggressive, they have been. One of these incidents will go wrong. The law of averages says that. Then we have to really worry.

  Question: You don’t think Xi thinks, “Oh well, we can sacrifice a few million Chinese”?

  Chang: On the night of June 15th, 2020, there was a clash between Chinese and Indian soldiers in Ladakh, in the Galwan Valley. That was a Chinese sneak attack on Indian-controlled territory. That night, 20 Indian soldiers were killed. China did not admit to any casualties. The Indians were saying that they killed about 45 Chinese soldiers that night.

  Remember, this was June 15th of 2020. It took until February of 2021 for China to admit that four Chinese soldiers died. TASS, the Russian news agency, recently issued a story reporting that 45 Chinese soldiers actually died that night.

  This incident shows you how risk‑averse and casualty‑averse the Chinese Communist Party is. They are willing to intimidate, they are willing to do all sorts of things. They are, however, loath to fight sustained engagements. Remember, that the number one goal of Chinese foreign policy is not to take over Taiwan. The number one goal of Chinese foreign policy is to preserve Communist Party rule.

  If the Communist Party feels that the Chinese people are not on board with an invasion of Taiwan, they will not do it even if they think they will be successful. Right now, the Chinese people are not in any mood for a full‑scale invasion of Taiwan.

  On the other hand, Xi Jinping has a very low threshold of risk.

  He took a consensual political system where no Chinese leader got too much blame or too much credit, because everybody shared in decisions, and Xi took power from everybody, which means, he ended up with full accountability, which means — he is now fully responsible.

  In 2017, when everything was going China’s way, this was great for Xi Jinping because he got all the credit. Now in 2021, where things are not going China’s way, he is getting all the blame.

  The other thing, is that Xi has raised the cost of losing a political struggle in China. In the Deng Xiaoping era, Deng reduced the cost of losing a struggle. In the Maoist era, if you lost a struggle, you potentially lost your life. In Deng’s era, if you lost a struggle, you got a nice house, a comfortable life.

  Xi Jinping has reversed that. Now the cost of losing a political struggle in China is very high. So there is now a combination of these two developments. Xi has full accountability. He knows that if he is thrown out of power, he loses not just power. He loses his freedom, his assets, potentially his life.

  If he has nothing to lose, however, it means that he can start a war, either “accidentally” or on purpose. He could be thinking, “I’m dying anyway, so why don’t I just roll the dice and see if I can get out of this?”

  That is the reason why this moment is so exceedingly risky. When you look at the internal dynamics inside China right now, we are dealing with a system in crisis.

  Question: China has a conference coming up in a year or so. What does Chairman Xi want to do to make sure he gets through that conference with triumph?

  Chang: The Communist Party has recently been holding its National Congresses once every five years. If the pattern follows — and that is an if — the 20th National Congress of the Communist Party will be held either October or November of next year.

  This is an important Congress, more so than most of them because Xi Jinping is looking for an unprecedented third term as general secretary of the Communist Party.

  If you go back six months ago, maybe a year, everyone was saying, “Oh, Xi Jinping. No problem. He’s president for life. He’s going to get his third term. He will get his fourth term. He will get his fifth term, as long as he lives. This guy is there forever.” Right now, that assumption is no longer valid. We do not know what’s going to happen because he is being blamed for everything.

  Remember, as we get close to the 20th National Congress, Xi Jinping knows he has to show “success.” Showing “success” could very well mean killing some more Indians or killing Americans or killing Japanese or something. We just don’t know what is going to happen.

  Prior to the National Congress, there is the sixth plenum of the 19th Congress. Who knows what is going to happen there. The Communist Party calendar, as you point out, does dictate the way Xi Jinping interacts with the world.

  Question: Going back to the wing-clip incident, what should Bush have done?

  Chang: What Bush should have done is immediately demand the return of that plane. What he should have done was to impose trade sanctions, investment sanctions, whatever, to get our plane back.

  We were fortunate, in the sense that our aviators were returned, but they were returned in a way that has made relations with China worse, because we taught the Chinese regime to be more aggressive and more belligerent. We created the problems of today and of tomorrow.

  I would have imposed sanction after sanction after sanction, and just demand that they return the plane and the pilots. Remember, that at some point, it was in China’s interests to return our aviators. The costs would have been too high for the Chinese to keep them. We did not use that leverage on them.

  While we are on this topic, we should have made it clear to the Chinese leadership that they cannot kill Americans without cost. Hundreds of thousands Americans have been killed by a disease that China deliberately spread.

  In one year, from 2020 to 2021, nearly 80,000 Americans died from fentanyl, which China has purposefully, as a matter of state and Communist Party policy — sold to Americans. China is killing us. We have to do something different. I’m not saying that we have good solutions; we don’t. But we have to change course.

  Question: Biden is continuing this hostage thing with Huawei, returning the CFO of Huawei in exchange for two Canadians. Have we taught the Chinese that they can grab more hostages?

  Chang: President Trump was right to seek the extradition of Meng Wanzhou, the chief financial officer of Huawei Technologies. Biden, in a deal, released her. She did not even have to plead guilty to any Federal crime. She signed a statement, which I hope we’ll be able to use against Huawei.

  As soon as Meng was released, China released the “two Michaels,” the two Canadians who were grabbed within days of our seeking extradition of Meng Wanzhou. In other words, the two Michaels were hostages.

  We have taught China that any time that we try to enforce our own laws, they can just grab Americans. They have grabbed Americans as hostages before, but this case is high profile. They grabbed Americans, and then they grabbed Canadians, and they got away with it. They are going to do it again.

  We are creating the incentives for Beijing to act even more dangerously and lawlessly and criminally in the future. This has to stop.

  Question: On the off-chance that the current leader does not maintain his position, what are your thoughts on the leaders that we should keep an eye on?

  Chang: There is no one who stands out among the members of the Politburo Standing Committee. That is purposeful. Xi Jinping has made sure that there is nobody who can be considered a successor; that is the last thing he wants.

  If there is a change in leadership, the new leader probably will come from Jiang Zemin’s Shanghai Gang faction. Jiang was China’s leader before Hu Jintao, and Hu came before Xi Jinping.

  There is now a lot of factional infighting. Most of the reporting shows that Jiang has been trying to unseat Xi Jinping because Xi has been putting Jiang’s allies in jail.

  Remember, the Communist Party is not a monolith. It has a lot of factions. Jiang’s faction is not the only one. There is something called the Communist Youth League of Hu Jintao. It could, therefore, be anybody.

  Question: Double question: You did not talk about Hong Kong. Is Hong Kong lost forever to the Chinese Communist Party? Second question, if you could, what are the three policies that you would change right away?

  Chang: Hong Kong is not lost forever. In Hong Kong, there is an insurgency. We know from the history of insurgencies that they die away — and they come back. We have seen this in Hong Kong. The big protests in Hong Kong, remember, 2003, 2014, 2019. In those interim periods, everyone said, “Oh, the protest movement is gone.” It wasn’t.

  China has been very effective with its national security law, but there is still resistance in Hong Kong. There is still a lot of fight there. It may not manifest itself for quite some time, but this struggle is not over, especially if the United States stands behind the people there. Biden, although he campaigned on helping Hong Kong, has done nothing.

  On the second question, I would close China’s four remaining consulates. I would also strip the Chinese embassy down to the ambassador and his personal staff. The thousands who are in Washington, DC, they would be out.

  I would also raise tariffs to 3,600%, or whatever. This is a good time to do it. We have supply chain disruptions. We are not getting products from China anyway. We can actually start to do this sort of stuff.

  The third thing, I would do what Pompeo did, just hammer those guys all the time verbally. People may think, “Those are just words.” For communists, words are really important, because they are an insecure regime where propaganda is absolutely critical.

  I would be going after the Communists on human rights, I would be going after them on occupying the South China Sea, on Taiwan, unrelentingly — because I would want to show the world that the United States is no longer afraid of China.

  We have taught the world that we are afraid of dealing with the Chinese. State Department people, they are frightened. We need to say to the Chinese regime, like Dulles, “I’m not afraid of you. I’m going after you, and I’m going to win.”

  Tyler Durden
  Sun, 05/01/2022 – 23:20

• DoD Sends "Phoenix Ghost" Kamikaze Drones To Ukraine 
  DoD Sends “Phoenix Ghost” Kamikaze Drones To Ukraine 

  The Department of Defense announced it was sending “121 Phoenix Ghost Tactical Unmanned Aerial Systems” to Ukraine. The never-before-seen kamikaze drone is a brand-new weapon system designed for ambushing Russian tanks.

  As reported by Breaking Defense, the Phoenix Ghost tactical drone is similar to the Switchblade drone already fielded in Ukraine. 

  Ok a bit more from a DoD official, who is loathe to detail the requirements that differentiate Phoenix Ghost from a Switchblade. Its a “one way drone” that “delivers a punch” — likely meaning that it’s a kamikaze drone similar to Switchblade.

  — Valerie Insinna (@ValerieInsinna) April 21, 2022

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

  Not much is known about the new drone. The DoD described it as a “one-way” drone that will “deliver a punch” and said it would operate similar to the Switchblade drone system. 

  

  The War Zone reported that Pentagon Press Secretary Jack Kirby said the Phoenix Ghost’s capabilities differ from Switchblades. 

  “I’m gonna be loath to get into much more detail about the system at this point for classification purposes, but you can safely assume that, in general, it works,” Kirby said. “It provides the same sort of tactical capability that a Switchblade does. Switchblade is a one-way drone if you will, and it clearly is designed to deliver a punch. It’s a tactical UAS, and Phoenix ghost is of that same category.”

  California-based AEVEX Aerospace is the defense company that designed and manufactured Phoenix Ghost. The company markets itself as “a recognized leader in full-spectrum airborne intelligence solutions.” 

  The new drone is part of the latest U.S. arms package to Ukraine. Here’s what’s included:

  • Over 1,400 Stinger anti-aircraft systems;
  • Over 5,500 Javelin anti-armor systems;
  • Over 14,000 other anti-armor systems;
  • Over 700 Switchblade Tactical Unmanned Aerial Systems;
  • 90 155mm Howitzers and 183,000 155mm artillery rounds;
  • 72 Tactical Vehicles to tow 155mm Howitzers;
  • 16 Mi-17 helicopters;
  • Hundreds of Armored High Mobility Multipurpose Wheeled Vehicles;
  • 200 M113 Armored Personnel Carriers;
  • Over 7,000 small arms;
  • Over 50,000,000 rounds of ammunition;
  • 75,000 sets of body armor and helmets;
  • 121 Phoenix Ghost Tactical Unmanned Aerial Systems;
  • Laser-guided rocket systems;
  • Puma Unmanned Aerial Systems;
  • Unmanned Coastal Defense Vessels;
  • 14 counter-artillery radars;
  • Four counter-mortar radars;
  • Two air surveillance radars;
  • M18A1 Claymore anti-personnel munitions;
  • C-4 explosives and demolition equipment for obstacle clearing;
  • Tactical secure communications systems;
  • Night vision devices, thermal imagery systems, optics, and laser rangefinders;
  • Commercial satellite imagery services;
  • Explosive ordnance disposal protective gear;
  • Chemical, Biological, Radiological, Nuclear protective equipment;
  • Medical supplies to include first aid kits.

  Russia’s Ambassador to the U.S., Anatoly Antonov, accused Biden of pumping Ukraine with weapons:

  “The U.S. authorities do not seem to be interested in a ceasefire. What matters for John Kirby and his colleagues is that the American military-industrial complex receives additional income by getting rid of obsolete weapons from their warehouses,” Antonov said.

  So far, the Biden administration has committed more than $4 billion in security assistance to Ukraine and has just requested a whopping $33 billion more. The massive request includes billions of dollars for economic and humanitarian aid. 

  Tyler Durden
  Sun, 05/01/2022 – 22:45

• Food Shortages In Six Months – The Globalists Are Telling Us What Happens Next
  Food Shortages In Six Months – The Globalists Are Telling Us What Happens Next

  Authored by Brandon Smith via Alt-Market.us,

  In mid 2007 the Bank for International Settlements (The central bank of central banks) released a statement predicting an impending “Great Depression” caused by a credit market implosion. That same year the International Monetary Fund also published warnings of “subprime woes” leading to wider economic strife. I started writing alternative economic analysis only a year earlier in 2006 and I immediately thought it was strange that these massive globalist institutions with far reaching influence on the financial world were suddenly starting to sound a lot like those of us in the liberty movement.

  This was 16 years ago, so many people reading this might not even remember, but in 2007 the alternative media had already been warning about an impending deflationary crash in US markets and housing for some time. And, not surprisingly, the mainstream media was always there to deny all of our concerns as “doom mongering” and “conspiracy theory.” Less than a year later the first companies awash in derivatives began to announce they were on the verge of bankruptcy and everything tanked.

  The media response? They made two very bizarre claims simultaneously: “No one could have seen it coming” and “We saw this coming a mile away.” Mainstream journalists scrambled to position themselves as the soothsayers of the day as if they said all along that the crash was imminent, yet, there were only a handful of people who actually did call it and none of them were in the MSM. Also ignored was the fact that the BIS and IMF had published their own “predictions” well before the crash; the media pretended as if they did not exist.

  In the alternative media we watch the statements and open admissions of the globalists VERY carefully because they are not in the business of threat analysis; rather, they are in the business of threat synthesis. That is to say, if something goes very wrong in the world economically, central bankers and money elites with aspirations of a single centralized economic authority for the world are ALWAYS found to have a hand in that disaster.

  For some reason, they like to tell us what they are about to do before they do it.

  The idea that globalists artificially create economic collapse events will of course be criticized as “conspiracy theory,” but it is a FACT. For more information on the reality of deliberate financial sabotage and the “order out of chaos” ideology of globalists please read my articles ‘Fed One Meeting Away From Creating A Doomsday Sinkhole’ and ‘What Is The Great Reset And What Do The Globalists Actually Want?’

  The Great Reset agenda proposed by WEF head Klaus Schwab is just one example of the many discussions hidden in plain sight by globalists concerning their plans to use economic and social decline as an “opportunity” to quickly establish a new one world system based on socialism and technocracy.

  The primary problem with discerning what the globalists are planning is not in uncovering secret agendas – They tend to openly discuss their agendas if you know where to look. No, the problem is in separating the admissions from the disinformation, the lies from the truth. This requires matching up globalist white papers and statements to the facts and evidence at hand in the real world.

  

  Let’s look specifically at the food shortage problem in detail…

  Food Shortages In Six Months

  A week ago there was a torrent of press releases from global institutions all mentioning the same exact same concern: Food shortages within the next 3 to 6 months. These statements line up very closely with my own estimates, as I have been warning regularly about impending dangers of inflation leading to food rationing and supply chain disruptions.

  The IMF, the BIS, World Bank, The UN, the Rockefeller Foundation, the World Economic Forum, Bank of America and even Biden himself are all predicting a major food crisis in the near term, and it is not a coincidence that the policies of these very institutions and the actions of puppet politicians that work with them are causing the crisis they are now predicting. That is to say, it’s easy to predict a disaster when you created the disaster.

  The claim is that Russia’s invasion of Ukraine is the primary cause, but this is a distraction from the real issue. Yes, sanctions against Russia will eventually lead to less food supply, but the globalists and the media are purposely ignoring the bigger threat, which is currency devaluation and price inflation created by central banks pumping out tens of trillions of dollars in stimulus packages to prop up “too big to fail” corporate partners.

  In 2020 alone, the Fed created over $6 trillion from nothing and air dropped it into the economy through covid welfare programs. Add that to the many trillions of dollars that the Fed has printed since the credit crash in 2008 – It has been a nonstop dollar destruction party and now the public is starting to feel the consequences. Lucky for the central bankers that covid struck and Russia invaded Ukraine, because now they can deflect all the blame for the inflationary calamity they have engineered onto the pandemic and onto Putin.

  Inflation hit 40 year highs in the US well before Russia invaded Ukraine, but let’s consider the ramifications of that war and how it affects the food supply.

  The Russian invasion certainly disrupts Ukrainian grain production, which makes up around 11% of the total world wheat market. Russia also maintains a 17% share and together these two nations feed a large swath of third world nations and parts of Europe with 30% of wheat and barley exports, 19% of corn exports, 23% of canola exports, and 78% of sunflower exports.

  It is the sanctions on Russia that are a problem well beyond Ukraine, however, as Russia also produces around 20% of global ammonia and 20% of global potash supplies. These are key ingredients to fertilizers used in large scale industrial farming. Farmers are estimating an overall price spike of around 10% in food markets, but I believe this is very conservative. I am already seeing overall price increases of at least 20% from six months ago, and I expect there to be another 30% in price hikes before this year is over. In other words, we are looking at 50% in average increases in 2022.

  Official government inflation data and CPI cannot be trusted. Double whatever numbers they give and you will be much closer to the truth. The inflation rate used by Shadowstats.com, calculated using methods once applied by the US government in the 1980s before they “adjusted” their models to hide the data, supports my position so far.

  The expectation among US agricultural experts is that China will fill the void where Russian supplies disappear, but it’s a mistake to make this assumption.

  Something Weird Is Going On In China

  China’s crackdown on covid infections has reached levels so bizarre I have to ask the question: Are their lockdowns really about covid, or are they hiding something else?

  The death rate of covid in China is impossible to calculate accurately because they have never released proper data that can be confirmed. However, almost everywhere else in the world we see a median infection fatality rate of 0.27% for covid; meaning, over 99.7% of people in the world on average have nothing to fear in terms of dying from the virus. But in China, the CCP is acting as if they are dealing with the Black Plague. Why?

  Lockdowns have resulted in food shortages across the country as supply chains become strained and manufacturing remains shut in many cases. The story many westerners are not hearing much about, though, is the fact that Chinese exports have essentially been frozen. This is very important so I think it needs emphasis – Over 1 IN 5 container ships IN THE WORLD are now backed up in Chinese ports due to their covid lockdowns. This is incredible.

  Why would China do this over a virus we all know is not dangerous to the vast majority of people? Why institute the worst lockdown in the country so far and starve their own people when the majority of Western governments have now given up on their pandemic fear mongering and the forced vaccination agenda?

  I would suggest the possibility that China might already be engaging in an economic war that many Americans and Europeans don’t even realize is going on. This may be a beta test for a shut down of exports to the US and Europe, or it is an incremental shutdown that is meant to become permanent. The bottleneck on trade may also be a precursor to a Chinese invasion of Taiwan.

  Taiwan is actually more dependent and intertwined with China’s economy than many people know. China is the biggest buyer of Taiwan’s exports and those exports account for 10% of Taiwan’s GDP. Taiwan has hundreds of thousands of workers and businessmen that travel regularly to China to work, another economic factor that is now strained by lockdowns. Furthermore, Taiwan has multiple corporations that operate their factories on mainland China, all of which could be closed due to covid lockdowns.

  All I’m saying is, if I was China planning on invading Taiwan in the near future, I might consider using covid as a cover for damaging their economy first and disrupting their export model. Communists see the population as a utility that can be sacrificed if necessary, and China is perfectly willing to cause short term suffering to their people if it means long term gains for the party. Beyond that, if I was going to engage in economic warfare with the west covertly, what better way than to tie up 20% of the world’s cargo ships and disrupt supply chains in the name of protecting the country form a “pandemic?”

  The bottom line? Don’t rely on China to fill export needs for fertilizer ingredients or anything else as sanctions on Russia continue.

  Inflation vs. Supply vs. Control

  It’s not just globalist organizations talking about incoming food shortages; the CEO of international food corporation Goya has also recently warned we are on the precipice of a food crisis. As I have noted in the past, inflation leads to government price controls, price controls lead to lack of production incentives (profits), lack of profits leads to loss of production, loss of production leads to shortages, and shortages lead to government rationing (control over all large food sources).

  As we have seen with almost every authoritarian regime in modern history, control over the food supply is key to controlling the population. It is only surpassed as a strategic concern by control over energy (which we will also see shortages of soon as Europe sanctions Russian oil and gas and starts eating up supplies from other exporters). The food issue hits closest to home because we can see the effects immediately on our wallets and on our families. There is nothing worse for many parents than the prospect of their children going hungry.

  The mainstream media is once again ignoring any potential economic threat, specifically they are denying the notion of food shortages as something to be worried about. I say, why listen to a group of people that are always wrong on these types of events? If anything, I would at least take the words of the globalists seriously when it comes to economic collapse; they benefit the most from such disasters after all, and they also have the most influence when it comes to triggering crisis.

  Preparedness today costs nothing tomorrow. Lack of preparedness today costs EVERYTHING tomorrow. The choice for anyone with a brain is simple – Get prepared for the end of affordable and easily available food before this year is out.

  *  *  *

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

  You can also follow me at – Parler: @AltMarket Gettr:  @Altmarket1

  Tyler Durden
  Sun, 05/01/2022 – 22:10

• US Cities With Hottest Inflation May Cause Pain For Democrats 
  US Cities With Hottest Inflation May Cause Pain For Democrats 

  Inflation doesn’t strike the whole economy evenly. Some metropolitan areas across the U.S. recorded hotter inflation than others. Democratic lawmakers in these regions, up for re-election, could be in jeopardy come midterms. 

  Bloomberg found the four top metro areas where consumer prices cracked above the 10% barrier in February. Phoenix-Mesa-Scottsdale, Arizona, had the highest inflation of any urban region at 10.9%. 

  Inflation is so rampant in the metro area that Arizona Democratic Senator Mark Kelly’s re-election bid could be at risk as the high cost of living has crushed residents. 

  Evangelina Diaz, 56, drives about an hour from Maricopa, Arizona, to her job in central Phoenix. Gasoline prices hit particularly hard in the state, where workers drive further and more often than the average American. She says filling her tank now costs up to $50. 

  “We’re working to put gas in our car,” Diaz said. “It’s real ridiculous.”

  

  Stan Barnes, a former Arizona state senator and GOP political consultant, said Kelly is a “likable person who’s married to one of the most important and admired people in Arizona [Gabby Giffords]. But this time, he needs to carry Joe Biden around like a sack of bricks and somehow explain his record.” 

  Biden’s presidency depends on campaigns like Kelly’s. Republicans are expected to win a majority in the U.S. House in November. 

  “It’s one of the most critical races,” said Jennifer Duffy, Senate editor of the Cook Political Report. “If Democrats lose him [Kelly], they’re on very shaky ground.”

  Vulnerable Democrats in other metro areas where inflation is running hot could also be in trouble.

  The other cities, Atlanta-Sandy Springs-Roswell, Georgia; Miami-Fort Lauderdale-West Palm Beach, Florida; and Baltimore-Columbia-Towson, Maryland, have hit 10% or are close to double-digit inflation.

  

  When it comes time to vote in the upcoming midterms, many people will be voting with their depleted wallets, which could be a “biblical disaster” for Democrats. Perhaps that’s why the Biden adminstration created a “Disinformation Governance Board” to control narratives combat whatever they deem ‘misinformation’ before the 2022 midterms and beyond. 

  Tyler Durden
  Sun, 05/01/2022 – 21:35

• Hedge Fund CIO: Can A Modern Nation Pull Off A Debt Jubilee Without Full Monetary Collapse?
  Hedge Fund CIO: Can A Modern Nation Pull Off A Debt Jubilee Without Full Monetary Collapse?

  By Eric Peters, CIO of One River Asset Management

  “While central banks in the U.S. and Europe are moving toward monetary tightening or rate increases, the Japanese economy is still on the road to recovery,” said the Bank of Japan Governor. “It is most important to support economic recovery by patiently continuing monetary easing,” added Kuroda-san.

  The Bank of Japan first cut interest rates to zero 23yrs ago, and ignoring a couple aborted attempts to briefly normalize policy they have remained at zero or lower ever since.

  Government debt exploded in that time, with annual deficits and stimulus packages becoming so commonplace they lost their effectiveness.  The central bank bought nearly half the 1.4 quadrillion Yen of government debt that mounted, a stunning 260% of GDP. And yet, through it all, core prices in Japan’s economy remain almost identical today as they were when its zero-interest-rate experiment began.

  For decades, it seemed everyone lost money trading Japanese bonds, which moved in counter-intuitive ways. They called the inexorable government bond rally the “Widow-Maker.” Traders with the highest IQs tend to have the least-disciplined risk management, so they suffered most profoundly.

  In the years preceding the pandemic, economists claimed they definitively understood how and why Japan’s disinflation developed, persisted, and then manifested in other nations. Secular Stagnation.

  Perhaps they did actually figure it out. But no sooner had the economists named their magnificent mental model then the world started to change — which of course is the only durable model in all of economics. There are others that tend to work too. Like when major central banks are tightening, while others are easing, volatility rises until something breaks badly, at which point policy makers panic (for more on this topic, see “The Biggest Story No-One Is Talking About”: Why Albert Edwards Expects “Something In The Market Is About To Snap“).

  

  Another model that seems to hold is that highly intelligent economists and central bankers generally believe they understand inflation, as if it is a mathematical equation. And even though inflation appears when they least expect it, and fails to manifest when they most anticipate it, they remain remarkably confident in their ability to predict it.

  Anecdote:

  The more you think about money, the less it makes sense. That is why the topic is so alluring for the masochists amongst us, attempting to solve the unsolvable, climb the unclimbable, conquer the unconquerable.

  We engineer thought experiments and mental models in the hope of gaining a glimpse of some truth, the scent of something real, a money-making opportunity. Japan provides an enigma to explore. It once had a bubble so big the Emperor’s Palace was worth more than the state of California. Unreal. Impossible. But so it was.

  When that bubble burst, real estate and equity prices utterly collapsed. The Yen strengthened for decades. It remains stronger today than back then. Japan’s exporters carried on, managing costs lower, maintaining competitiveness. The government supported the system, running persistent deficits and in each recession announced a special stimulus.

  The central bank stimulated too. In 1999 the Bank of Japan reduced rates to zero, unsuccessfully lifted them a couple times, and in 2015 cut them to -0.10% where they remain. The level of government debt expanded in ways that almost everyone agreed would lead to an inflationary collapse. It did not. The Bank of Japan bought bonds, and now owns roughly 130% of GDP worth of government debt, which is half of the 260% outstanding.

  It also pledged yield curve control, bidding for an unlimited quantity of 10yr government bonds at a 0.25% yield. Could the central bank create money, buy all the outstanding bonds, and simply burn them? Execute a modern version of an Old Testament debt jubilee? The currency of a nation that chooses this path should weaken, as it is now doing in Japan.

  But might it be possible for a country to pull off such a feat without full monetary collapse? We don’t know, yet. What seems certain though, is that if you were to attempt such a bold maneuver, you would absolutely want to be the first nation to try. 

  Tyler Durden
  Sun, 05/01/2022 – 21:00

• Texas Gov. Threatens To Declare 'Invasion' As Illegal Immigration Expected To Skyrocket
  Texas Gov. Threatens To Declare ‘Invasion’ As Illegal Immigration Expected To Skyrocket

  Texas Governor Greg Abbott (R) is considering invoking war powers to expand the state’s authority to manage the southern border by officially declaring an “invasion” – verbiage which would comply with a clause in the US Constitution that says states are prohibited from engaging in war except when “actually invaded.”

  

  Top lawyers for Mr. Abbott and for the Texas attorney general, Ken Paxton, met this month to debate the move, which would put the state in a head-on collision with the federal government by allowing state police to arrest and deport migrants, according to two people familiar with the discussions. Mr. Abbott says he remains open to the approach, but he has expressed concern about unintended consequences. -NYT

  “If we do use this strategy, it could expose law enforcement in the state of Texas to being prosecuted,” said Abbott during a recent press converence. “Is it something we’re looking into? Yes,” he added.

  Abbott has already mobilized thousands of National Guard troops to patrol the border, and ordered safety inspections of incoming trucks from Mexico – a short-lived program after it caused massive gridlock and disrupted international trade. He’s also overseen the construction of around 20 miles of new border fencing at key ares. What’s more, Abbott repurposed several state prisons to hold migrants charged with trespassing.

  Perhaps most famously, Abbott recently began busing migrants from Texas to Washington DC.

  The New York Times echoes the Biden administration, which has framed Abbott’s immigration policy as nothing more than a political stunt, writing that his “aggressive posture has done little to stem the tide and also exposed him to fierce criticism that he is using his authority to meddle in a policy area that belongs to the federal government,” however they acknowledge that his attempts to tighten border security along the state’s 1,254 mile border have helped him hold off political challengers.

  Federal agents recorded nearly 129,000 crossings into Texas in March, about 11,000 more than during the same month last year, when Mr. Abbott began the effort known as Operation Lone Star. The biggest increase occurred in an area of the border that includes Eagle Pass, a sun-faded city of 28,000 people, numerous stray cats and dogs and few resources to spare.

  Costs have been mounting. Just maintaining the National Guard deployment through the summer will require another $531 million, state officials said this month. A 22-year-old soldier assigned to the mission drowned last week while attempting to rescue two migrants in swift water. -NYT

  INCOMING

  While immigration levels have been out of control in recent years, Texas officials are bracing for an even larger influx of illegal immigrants when the Biden administration ends a Trump-era policy known as Title 42 – which used the pandemic to justify turning back hordes of asylum seekers.

  The current surge in migrants kicked off with the election of President Biden, which was taken as a virtual green light to flood into the country without the same level of border security as former President Donald Trump employed.

  Now, Abbott is under pressure to do more as Biden pull back.

  “Lone Star hasn’t moved the needle one iota for the simple reason that they’re not returning people to Mexico,” said former Trump DHS official Ken Cuccinelli, a vocal proponent of declaring an invasion.

  The White House has pushed back against Texas, with Press Secretary Jen Psaki saying that the state “does not need to replace C.B.P. at the southern border,” referring to the federal Customs and Border Protection Agency.

  We wonder which political party the immigrants will support, should they be granted amnesty at some point in the future?

  Tyler Durden
  Sun, 05/01/2022 – 20:25

• Morgan Stanley: "In Hindsight, 2022 Is Kind Of Simple, It's Not Exactly Fermat's Last Theorem"
  Morgan Stanley: “In Hindsight, 2022 Is Kind Of Simple, It’s Not Exactly Fermat’s Last Theorem”

  By Andrew Sheets, Chief Cross-Asset Strategist for Morgan Stanley

  It’s a funny year. Returns are awful, with significant losses in almost every asset class not labelled ‘commodities’. Investors still face wide-ranging uncertainties, from how fast the Fed tightens, to whether Europe sees an energy crisis, to how China addresses Covid, to the ongoing fall of the yen. Cross-asset performance feels confused, with defensive equities unusually strong while government bonds are unusually weak.

  But step back a bit, and 2022, in hindsight, is also kind of simple. Valuations were high and policy is tightening and growth is slowing…and prices have fallen. Cheaper stocks are (finally) outperforming more expensive ones. Bond yields were very low and are (finally) rising. Credit and MBS spreads were tight, and have widened. The UK has weak growth, a large current account deficit and world-beating negative real yields, and has seen its currency weaken substantially. It’s not exactly Fermat’s Last Theorem.

  So what should investors do, given a complex set of challenges, but also signs of underlying rationality? This can be a good time to step back and look at what rules-based indicators are telling us.

  Let’s start by focusing on what these indicators say about where we are in the cycle, and what that means for investment strategy. Our cycle indicator looks at a range of economic indicators and tries to map them to historical patterns of cross-asset performance.

  Our indicator sees the data as highly extended versus trend. We call this ‘late cycle’ because, historically, readings sharply above trend have often (but not always) occurred later in an economic expansion. This statement is not about predicting a recession, necessarily, but our economists are convicted that we are seeing a meaningful deceleration. And thinking probabilistically, that type of deceleration almost surely increases the chances of a downturn. Whether the contraction materializes or not, it will affect cross-asset performance today.

  At present, the late-cycle indicator is consistent with underperformance of high yield credit relative to both equities and bonds, the outperformance of defensive equities, a flatter curve and fewer headwinds to long-end duration.

  Of course, our cycle indicator isn’t alone in flagging caution. With the risks to the market so obvious, sentiment is negative. Which brings us to the next question – despite the macro challenges, is sentiment now extreme enough to boost markets?

  It’s possible. But our best attempts to statistically quantify a sentiment signal say ‘not yet’. In a recent report led by my colleague Naomi Poole, we explored the efficacy of different measures of ‘sentiment’ and turning them into a signal. We think that using a composite of sentiment indicators is most powerful, and that level and trend of sentiment matter for creating a signal with good returns and hit rates over time. Our indicator is not yet extreme, and has not yet turned (it is ‘neutral’). We are watching it closely.

  Given the swirling mix of storylines and volatility, a third related question is what would a fully rules-based cross-asset strategy do today? For that, we turn to CAST, our Cross-Asset Systematic Trading strategy, developed by my colleague Phani Naraparaju. CAST is the most powerful quantitative instrument in our cross-asset toolkit, evaluating ~1,500 factors across ~150 global assets. For all that complexity, it asks a simple question – what looks most attractive today based on what some of those factors (different measures of carry, valuation, momentum and fundamentals) have meant in the past?

  CAST has helped our process so far this year. While it has certainly gotten things wrong, it has gotten more things right, especially a positive view on commodities, a defensive skew in US equities and a negative view on JPY, GBP and global 2yr rates. It has been most successful with cross-asset relative value, while struggling more with directional views, a not-so-subtle hint that this is a better market for alpha than beta. And while CAST is a completely rules-based tool, we pay special attention where its views align with the bottom-up, fundamental calls of our strategy colleagues. A few things stand out.

  CAST is dialling back its beta, especially in commodities, where it has become more negative on copper (but still likes energy). Second, CAST is giving the same signals as our Asia macro strategists, who expect CNY weakness and like receiving CNY rates. And similar to views in equity strategy, it is positive on the Nikkei (FX-hedged) and Healthcare, and negative on the NASDAQ and Russell 2000. CAST has also unwound a large credit compression trade it had been running post-Covid, which lines up with the decompression and dispersion theme our credit strategists expect to be more prominent.

  

  Rules-based tools help in markets that are volatile, emotional and present more storylines than a reasonable investor can process. For the moment, they suggest that cross-asset performance continues to follow the late-cycle playbook, sentiment has not yet given a conclusive tactical signal, and following historical factor-based patterns is helping to trade relative value. They won’t solve everything, but given the challenges of 2022 so far, every little bit helps.

  Tyler Durden
  Sun, 05/01/2022 – 19:50

• Building Balanced Exposure To The Blockchain Economy
  Building Balanced Exposure To The Blockchain Economy

  Blockchain technology extends far beyond Bitcoin, Dogecoin, and other popular cryptocurrencies, as it provides a foundation for verifiable financial systems and proof of ownership for digital goods and assets.

  From privacy concerns to anti-trust issues, big tech has eaten away at the world’s trust in the technology sector. And, as Visual Capitalist’s Niccolo Conte details below, as people search for better and more trustless solutions for their financial services, the blockchain economy is flourishing to meet their needs.

  This infographic from MSCI outlines how quickly decentralized solutions and services have grown, and how investors can be a part of this exciting new sector.

  

  The Three Key Trends of Blockchain Adoption

  By cutting out the need for a centralized middleman that facilitates transactions, blockchains can provide more efficient systems to power three key trends of the fintech future:

  • Digital hard money and assets

  • Decentralized finance (DeFi)

  • Digital goods and collectibles

  As the first cryptocurrency and deflationary monetary asset, Bitcoin is the ambassador for digital hard money. By having a fixed supply of 21 million bitcoin set in code and a decentralized network powering transactions on the network, Bitcoin provides anyone access to a deflationary digital asset that they can transfer in minutes without having to trust centralized intermediaries.

  While Bitcoin pioneered the blockchain revolution over the past decade, further functionality built on blockchain technology is enabling digital goods and collectibles with non-fungible tokens (NFTs) along with more equitable and trustless financial systems through decentralized finance.

  Decentralized Finance (DeFi) Makes Financial Services Accessible

  Along with seeking decentralized hard money assets in the form of cryptocurrencies like Bitcoin, the world is looking for trustless financial services through which they can borrow, lend, and perform other essential financial services.

  Decentralized finance (DeFi) enables these services through decentralized applications (Dapps) powered by smart contracts. Today, more than $260 billion is currently “locked” or engaged with some form of smart contract in a DeFi application.

  Below are the 10 largest DeFi applications by the amount of value currently “locked” or engaged with the applications’ smart contracts.

  

   

  Source: DeFi Llama
  As of Jan 2022

   

  From staking tokens within a protocol in exchange for governance votes to providing market liquidity by locking tokens up in exchange for a portion of trading fees, DeFi is providing functionality and incentives for participants in the blockchain economy.

  What is the MSCI Blockchain Index?

  The MSCI Blockchain Index was developed in collaboration with ARK Invest with the aim of representing the performance of a set of companies associated with the development of products and services for the blockchain economy.

  From providing payments services for cryptocurrencies to the actual hardware products used for verifying blockchains, these companies fall into five core segments of the digital blockchain sector:

  1. Developers of tech and protocols of decentralized finance like Dapps and smart contracts

  2. Products and services for the infrastructure of digital markets like cryptocurrency exchanges and payment gateways

  3. Providers of blockchain solutions and services through corporations

  4. Hardware and software providers for the verification of blockchains

  5. Buyers and sellers of cryptocurrency providing liquidity and facilitating payments

  With a broad variety of industries contributing to the blockchain economy, companies like AMD, Visa, and the Intercontinental Exchange (ICE) are among the top constituents of the index.

  As decentralized finance and other technologies bring about a trustless revolution for financial systems and the ownership of digital goods, the MSCI Blockchain Index ensures you aren’t left behind.

  Tyler Durden
  Sun, 05/01/2022 – 19:15

• Bad To The Bone
  Bad To The Bone

  Authored by Peter Tchir via Academy Securities,

  If last Friday’s price action was ugly, this Friday’s can only be described as mega-ugly!

  This weekend’s T-Report follows in the footsteps of The Not So Good, The Bad, and The Ugly and Welcome to Thunderdome!!! Sadly, there is a theme emerging in the tone of these T-Reports and the markets – decidedly negative.

  On Thursday, we asked the question Is The Worst Behind Us? We decided it was not, which seemed like a horrid decision as stocks skyrocketed ahead of Thursday’s earnings, but hasn’t looked so bad since 3:25pm on Thursday when stocks resumed their downward decent.

  Today, we try to figure out where markets and the economy head next and try and identify a bottom!

  Geopolitics

  Academy published Around the World on Thursday night. This month’s topics include:

  • Update on the Russian Invasion of Ukraine.

  • China’s Solomon Islands Partnership and Influence in the Region.

  • Israeli / Palestinian Violence Escalates.

  • Protests in Peru Over Inflation Crisis.

  General Spider Marks also discussed the latest on the war on CNN with Wolf Blitzer.

  Bad to the Bone

  With so much going on, we are going to try to address what’s next by focusing on:

  • Markets themselves. Price action and the alleged “capitulation” so many are talking about.

  • Earnings. What I think is playing out with earnings.

  • Bad Actors Behaving Badly. This will touch on Russia, but go beyond that as we examine risks (that are still a low probability), but are things we should be thinking about.

  • Inflation. This section will be brief, which is not actually the case with inflation. Food and Energy.

  • The Fed. We get the FOMC announcement and press conference on Wednesday. This will be the first opportunity for the Fed to address the market volatility and the last FOMC meeting set the stage for a strong rally!

  What Are Markets Telling Us?

  One thing the markets are certainly telling us is that they are as illiquid as heck! The Nasdaq 100 rose 1.5% on Monday, fell almost 4% on Tuesday, started Wednesday up 2%, back to slightly negative then back to up almost 2%, only to finish the day wildly unchanged. On Thursday, it was up 4.25% and finished up 3.5%, only to finish down 4.5% the next day.

  It is concerning when the weekly drop of 3.7% doesn’t do justice to just how volatile and crazy the week was.

  This “chaotic” trading occurred in almost every market I watch. I picked the Nasdaq 100 because a few of the juggernauts in that index reported earnings this week, but you name a market and “crazy” trading patterns were evident.

  CDX IG had some vicious trading and closed the week at 84 bps, the highest since June 2020 (the Bloomberg Corporate Bond OAS isn’t back to mid-March levels, but a lack of liquidity is evident in credit trading as well based on all the reports I’m getting from customers).

  These wild oscillations bring back memories of watching the Tacoma Narrows Bridge collapse in some elementary school class. Will the market’s oscillations resolve themselves in the same way as they did with the bridge? I hope not, but that seems to be a non-zero risk. I also must be cautious about getting too bearish as the lack of liquidity is evident in both directions! Rallies like Thursday’s will be just as sharp and vicious as the declines.

  Last Week’s Chart – Updated

  

  We have now broken through the 12,570 line I had on the chart. We had broken it on Tuesday and stayed below on Wednesday and made a valiant attempt to bounce on Thursday, but are now below that, and are at the lowest close on the Nasdaq composite since December 2020! I am concerned that we have to fall to the next rough level of support, which is below 11,000 (just over 10% further to fall).

  PARA

  Bill Hwang was arrested this week so I felt it was appropriate to bring out this chart of PARA, which traded under a different ticker during the time that was highlighted.

  

  Based on the allegations made around the arrest, I think we can assume that at least some part of the rise can be attributed to “flows” (him buying more and more, because he could) and a substantial portion of the fall can also be attributed to “flows” (stop losses, triggering selling). In full disclosure, I own some of this right around current levels (it had been a nice contrarian dip buy for me until the recent plunge started about 2 weeks ago).

  The point of this chart is to really hammer home the point about how important flows are, and how illiquid things can become, as that is an important part of my current view on where markets are headed.

  I would like the “capitulation” story to be a little more obvious!

  Speculative Fund Flows

  

  I am closely watching 3 funds:

  • The $13 billion TQQQ, which is a triple leveraged ETF on the Nasdaq 100 (so it represents over $40 billion of “QQQ” purchasing power).

  • SQQQ, which is only $3 billion, but is a 3x short fund.

  • ARKK, which is just under $9 billion and is invested in “disruptive” companies.

  Due to the leverage in the two funds and the volatility of the ARKK fund, I think these give some good insight into whether we are seeing “capitulation” or not.

  ARKK, which is down 50% YTD and down 29% in April, had inflows. I appreciate the buy the dip mentality and a lot of the companies in the ETF have interesting valuations here (for full disclosure I am flat as of the close on Friday and am tempted to buy). But, regarding signs of “capitulation,” I just don’t see it.

  But the TQQQ story is even more interesting because it got significant inflows last week! Even as the market has been selling off and getting more volatile, money poured into this triple leveraged fund, which was down 12% on the week, down 37% on the month, and down 56% year to date. From a “traditional” view where returns correlate with flows, these things wouldn’t happen. As a contrarian, I’m impressed that they are happening, but I cannot help but wonder if we aren’t nearing a breaking point? Every dollar that has come into TQQQ (and ARKK) this year is underwater, often by significant amounts. If we’d seen “real” capitulation, I would expect fund outflows, rather than inflows last week.

  The SQQQ finally got some inflows late last week, so that at least is a sign that we are seeing some hedges.

  Yes, there are all sorts of ways to determine positioning, and this sample set is really much more retail focused, but the lesson is:

  • Capitulation may be getting talked about a lot more than it is actually occurring.

  • In general, the bearish discussions do not seem to be getting backed up by fully bearish positioning (90% of my conversations are about dip buying and finding the bottom).

  The Non-Virtuous Cycle

  I am going to try and tie the previous charts and stories into a simple narrative. There was a group of people out there who had this happen to them during the pandemic:

  • They worked at fun, interesting, disruptive firms and had stock prices soar or were even able to participate in their companies’ IPOs.

  • That wealth was heavily tied to their company.

  • When they could access this wealth, they “diversified” into:

    • Other disruptive companies because they loved the disruptive mindset and they could relate to it, and the excitement was palpable.

    • Big buyers of crypto. Crypto met the “disruptive” and “change the world” feelings that were often pervasive during the wild rebound post pandemic. Bitcoin hit $60k in March 2021 and then again in November, but is languishing around $40k right now.

  I would argue that you had a “virtuous” cycle that started after Covid and has been running out of steam. This “cycle” theory helps explain why crypto is so correlated to some volatile tech sectors (they are owned by the same people).

  I cannot tell if this “group” (which I completely believe exists) has managed to properly diversify themselves, or if we have another leg down?

  Maybe I’ve picked my charts too narrowly, but I am not getting a good “vibe” from the market itself. And I didn’t even bring up, at least not too much, that the cost of credit is rising and will be a drag on earnings.

  Earnings and Multiples

  I spend very little time on earnings, but this week was as good as any to pay attention to. What I think about earnings season, especially right now, is that:

  • It is not so much about what was made, but what will be made.

  • It is far more about the multiple the market is willing to pay, than about the earnings or even the outlook.

  Going back to January of this year, we discussed the Valuation Evaluation. This earnings season is still more about what multiple we will pay for future earnings, rather than about the future earnings themselves. We are about to embark on balance sheet reduction and that is influencing what investors will pay for future earnings.

  When I look at price action post-earnings, the bigger moves are related to this valuation evaluation, rather than the prospects of future earnings (though that plays a role given the global uncertainty and higher rates). So far earnings haven’t been a help for stocks (though I’d argue that is more about this valuation adjustment than the earnings themselves) and neither have some hefty buyback announcements. The buyback announcements will help over time as they are a flow that is going in the right direction for stocks.

  At the moment, earnings and buybacks aren’t enough to create a bounce in stocks and risk assets, but they do set the stage for a nice long rebound once we get to that stage.

  Bad Actors Behaving Badly

  People keep wondering when China will abandon Russia. I cannot think of a reason for them to do so. Yes, they need us, but we need them far more than they need us, and we’ve already shown our colors (the West that is) by continuing to buy Russian oil. Xi cares about China and their long-term needs. I’m willing to bet that China sells military equipment to Russia long before they stop buying Russian commodities.

  Any leader of an autocratic nation, whose behavior goes against what the U.S. stands for, has to be working to establish even better and closer relationships with China, as they have the money (and the need for resources), don’t care about internal politics, and haven’t weaponized their currency the way we did when we froze the Russian Central Bank’s dollar reserves.

  On Putin, I spend about 2% of my time thinking about how we come to a peaceful outcome and about 98% of my time thinking about how he can use a nuclear weapon to further his goals. The nuclear threat is there, but it seems so “binary” that it isn’t as powerful as it might be. Putin, of all people, would seem to benefit by making the threat of nuclear attacks more real! Yes, he needs to be careful with India and China to ensure their ongoing purchases in the event he does something. Yes, he has to be extremely careful about our retaliation. No, I haven’t come up with a way that seems plausible, but this is coming up in conversation after conversation. If Putin’s only option is to “win” and he is most definitely not “winning” by any true measure, what will he do to “win”?

  Again, no one seems to have come up with a strategy that works for him to elevate his nuclear threat to get more from the West, but we have to believe he is exploring that option. One very sobering thought that came out of some of these discussions is that from the Russian (or Soviet) perspective, the only country to ever use a nuclear weapon was the U.S. I’m not sure what to say about that, other than it is sobering and may well factor into Putin’s thoughts.

  On the subject of nuclear, every bad actor (most are already pursuing nuclear weapons, if they don’t already have them) will be aggressively pursuing them now, having seen what a deterrent they are. I believe they aren’t working as well as Putin would like, but there is no argument that they are working.

  So far, Russia has held off on a full-scale cyber assault, but that remains a risk. I do have to say that our Geopolitical Intelligence Group has been spot on with their analysis that our defenses are thwarting Russian attempts. There have been a lot more cyber attacks than we hear about because our defenses (at a national and corporate level) have been so good! A big shout-out for the good team, but vigilance is still required.

  We live in a world where bad actors feel more emboldened to act badly, which gets me back to my “closeness” of supply chains, which I won’t regurgitate here, but I think is crucial and the direction countries and companies are headed!

  Inflation

  High energy costs are here for some time as we need to spend to build out sustainable energy sources and we need to re-invest in traditional energy sources that in many cases suffer from underinvestment. Personally, I don’t understand why starting the Keystone Pipeline isn’t on the table, but that is a topic for another day. Food inflation is likely to be worse than energy inflation.

  • War in Ukraine. With the war dragging on, it is almost impossible to expect much of a crop out of Ukraine. Russia may get a crop, but how will they ship it? Or even transport it within Russia as the invasion is co-opting their rail system. More problematic is this has the risk of becoming a muti-year problem.

  • Fertilizer. Our conversations are literally filled with fertilizer. Nitrates, peat, natural gas, etc. are all working against the cost of fertilizer. That is a major problem and is still getting worse rather than better.

  • Equipment. Like with most heavy equipment, there are supply chain issues.

  • Farms are expensive to run. Not only is fertilizer expensive, but workers are also expensive and the fuel to power the equipment is expensive.

  • Ukrainian refugees. Countries in Europe are finding homes for millions of refugees from Ukraine. That is straining existing supply and delivery systems. The food distribution system will adapt, but the massive displacement of people is not helping the food problem as logistics need to catch up with this shift in consumption.

  Since fuel and food inflation are real, I don’t see the politicians backing down on “fighting” inflation. I don’t really think that the Fed is in a great position to fight the type of inflation that we are getting. I also think that subsidies to help people purchase food and fuel are deflationary. They are potentially necessary as the poor are the hardest hit, but policies like that do more to offset the costs of inflation rather than stopping inflation.

  The Fed

  The Fed meeting is on Wednesday. The last Fed meeting sparked a big rally. There are two things that might be different this time:

  • Everyone knows the last Fed meeting sparked a rally, so they might be holding off selling risky assets until after the Fed meeting! I know that as a bear, I am deathly afraid of a post Fed rally, which might mean we don’t get it this time.

  • We will get balance sheet reduction and while that seems much more priced in, that could still be a scenario where we sell the news because it becomes real.

  I am scared of a post FOMC rally (and that could be the turning point), but it seems almost too obvious to happen again!

  On the bright side, I’m on the road for the next two weeks straight seeing customers, investors, and friends in person! That is the best part of this job, and I will enjoy it even if I still cannot get to the point of being bullish! I’m closer to being bullish, but not there yet! Small positions and nimble trading still seem to be the order of the day (and I don’t mind rates – the 10-year was only 3 bps higher on the week). I do hope that “Bad to the Bone” turns out to be a bad title, but that’s where I’m stuck right now.

  Tyler Durden
  Sun, 05/01/2022 – 18:40

• Alarming Signs Farmers Reduce Fertilizer May Wreck Crop Yields 
  Alarming Signs Farmers Reduce Fertilizer May Wreck Crop Yields 

  There is growing concern farmers worldwide are reducing chemical fertilizer, which may threaten yields come harvest time, according to Bloomberg. The repercussions could be huge: Lower yields may exacerbate the food crisis. 

  There are alarming signs commercial farmers in top growing areas in the world are decreasing the use of essential nutrients — nitrogen, phosphorus, and potassium. 

  Revealed last week, SLC Agricola SA, one of Brazil’s largest farming operations, managing fields of soybeans, corn, and cotton fields in an area larger than the state of Delaware, will reduce the use of fertilizer by 20% and 25%. 

  Coffee farmers in Brazil, Nicaragua, Guatemala, and Costa Rica, some of the largest coffee-producing countries, are expected to spread less fertilizer because of high costs and shortages. A coffee cooperative representing 1,200 farmers in Costa Rica predicts coffee output could slip 15% next year because of soaring fertilizer costs. 

  The International Fertilizer Development Center (IFDC) warned a reduction in fertilizer use would shrink yields of rice and corn come harvest time. Farmers in China, India, Bangladesh, Indonesia, and Vietnam — the largest rice-producing countries — are spreading less fertilizer, and may result in a 10% reduction in output, equating to about 36 million tons of rice, or enough food to feed a half billion people.

  

  More fertilizer equals more food production; Less fertilizer equals lower food production. It’s a simple concept to understand and may suggest an even larger food crisis is on the horizon. 

  The US won’t be spared. Chairman of the Kansas Wheat Commission Gary Millershaski said his “biggest fear” this spring is that farmers in North America skip out on applying nitrogen to wheat plantings. He said, if farmers did, this might suggest harvests would be a “lower class of wheat.”

  In March, Tony Will, the chief executive of the world’s largest nitrogen fertilizer company CF Industries Holdings Inc., warned: “My biggest concern is that we end up with a very severe shortage of food in certain areas of the world.” 

  Rockefeller Foundation President Rajiv Shah provided Bloomberg Television’s David Westin with a timeline of when the “massive, immediate food crisis” begins. He said, “in the next six months.” 

  Tyler Durden
  Sun, 05/01/2022 – 18:05

• California Expands Medi-Cal To Adults 50 And Older, Regardless Of Immigration Status
  California Expands Medi-Cal To Adults 50 And Older, Regardless Of Immigration Status

  Authored by Vanessa Serna via The Epoch Times (emphasis ours),

  California will extend Medi-Cal health care coverage to more than 185,000 residents 50 years and older, regardless of their immigration status starting May 1.

  

  “This is an investment in our people, our economy, and our future,” Gov. Gavin Newsom said in an April 29 statement.

  This Medi-Cal coverage extension was a part of Assembly Bill 133, which was voted into law in July 2021, following Newsom’s proposal to expand health care to low-income residents and address “health disparities and inequities, especially among populations of color” during the COVID-19 pandemic, according to the statement.

  Medi-Cal currently provides low-income individuals under the age of 25 or above the age of 65, pregnant women, and those with disabilities with free or low-cost medical and dental care.

  Until recently, Medi-Cal was only available for U.S. citizens in the state, except for refugees staying in the country temporarily.

  “We’re delivering concrete results for Californians, continuing to fulfill the promise of a Healthy California for All, and I encourage all those eligible to take advantage of these essential health services,” Newsom said.

  Looking forward, Newsom has also proposed expanding Medi-Cal coverage to about 700,000 people from ages 26 to 49, regardless of their immigration status by January 2024.

  Tyler Durden
  Sun, 05/01/2022 – 17:30

• Buyback Blackout Period Is Over, And 10 More Reasons Why Goldman Calls The End Of The Market Carnage
  Buyback Blackout Period Is Over, And 10 More Reasons Why Goldman Calls The End Of The Market Carnage

  Two weeks ago, when looking at a recent matrix of market bull and bear cases, we asked if it was time to get bullish on stocks and concluded that the since fundamentals leaned in either direction, the answer was most likely “not yet” for one simple reason: JPM’s resident permabull, Marko Kolanovic, had just turned from modestly bearish – an extremely rare stance for him – to bullish again, urging his clients to reverse from taking profits (unclear on what exactly since he had been bullish all the way down from the market’s all time high)…

  

  … to buying the dip again. Meanwhile, at roughly the same time, the far more accurate strategists at Goldman’s flow desk – in this case Tony Pasquariello – had just warned that the market was likely to be well lower in several weeks time, not higher. After last week’s furious rout in the market they were right. 

  Which is why we find it worth mentioning that after correctly calling the market’s downward inflection point in April, those same Goldman folks are once again leaning bullish, and in a Friday note from Goldman Scott Rubner (which is not for mass distribution to the bank’s entire client base and instead is reserved for a handful of the bank’s top client as it indicate what the bank’s traders actually do believe, it is also available to zero hedge professional subscribers), he says that the worst is behind us and gives 11 reasons why the late April rout may have been the market bottom for the time being.

  Rubner’s argument in a nutshell: pointing to Thursday’s explosive move higher as testament of the market’s extremely negative sentiment and low positioning (which of course was followed by Friday’s rout), the Goldman trader thinks that global stocks will rally “significantly” in May as the flow-of-funds is set to improve starting on Monday (even though the closely watched 50bps rate hike FOMC meeting is due on May the 4th).

  Below we lay out Rubner’s bullish 11-point checklist in greater detail.

  • 1. US Corporates return back to the open window on Monday with dry powder. Rubner calculates $5BN of demand per day, every day until mid-June. US corporates are the largest buyer of equities in 2022 and have authorized record YTD (AAPL = $90bn; GOOG = $70bn; MSFT = $60bn; FB = $50bn, etc).
  • 2. Pensions flipped to buy given the recent outperformance of bonds vs stock. This should carry over into next week.
  • 3. S&P Index gamma turned negative on Thursday for the first time since March.
  • 4. Synthetic Short Gamma through CTA and Vol-Control strategies supply will fade over the next week (Thursday’s move will lower some of the supply expectations and Goldman’s estimates will dramatically change next week).
  • 5. Liquidity is simply not available to try to cover liquid macro. As we noted on several occasions last week [insert hyperlink to liquidity tweet], top book liquidity in the S&P 500 futures is $2.8M. This ranks in the 1st percentile in the last 10-years. This is as low as it gets.
  • 6. Sentiment is the most bearish since the market crash lows in March 2009. Rubner says that he has done “more bearish zoom calls these past two weeks, than I can recall.” The bears (AAIIBEAR) published a reading of 59.40 today. This was the highest level since March 5th 2009 (70.27). S&P500 rallied 8.54% in March 2009 and 9.39% in April of 2009. That was the generational market bottom.
  • 7. Money Market Inflows Logged a massive +$60B inflows last week, which was the largest weekly inflow since Covid 2020 (and typically another fear gauge).

  

  • 8. For the fixed income watchers, Goldman’s CTA models show some impressive demand. Goldman has +$20B of bonds to buy in a flat tape, but +$117B of bonds to buy in an up tape, and $37B of bonds to buy in a down tape. This should ease some of the pressure on long duration equities and largest construction of market cap.
  • 9. Goldman’s Prime Desk notes that hedge funds exposure is dismal. Gross and Net Exposure are currently at 2-year lows. And vs the past 5 years, Gross ranks in the 21st and Net ranks in the 38th. US TMT Megacap L/S ratio declined by -48% in the past 1-month. (~right before earnings)
  • 10. Everyone is short: Short leverage (with options) ranks in the 98th percentile in the last 5 years.
  • 11. New month = New Inflows. There should be some decent inflows to start May per normal rebalancing cycle in retirement accounts.

  

  * * *

  Rubner then does a more detailed breakdown of what the latest flows indicate for markets. We excerpt from the main points below (professional subscribers have access to the full note).

  1. Passive USA Large Cap Outflows (and resulting MOC 3:50pm imbalances): = “you ask me for money and I sell”

  • US Equity Funds registered their largest outflows of 2022.

  

  • b) US large cap Equity funds registered the largest outflows since 2018.

  

  • c) this is LIFO (last in, first out) behavior. This is where all of the new repatriated safe haven has flowed.

  * * *

  2. “Everything cross-asset outflow” – this is rare. Stocks, Bonds, and Cash all saw outflows this past week

  • You don’t see this very often. This is what we call an everything outflow. No lines saw inflows, and its back to checking accounts.

  

  

  

  * * *

  3. Retail Investors buyers of 0-1 DTE (days-to-expiry) puts are largest on record – does retail start buying calls again?

  • Friday’s same-day SPX were the highest dollar-volume ever traded for a single expiry on a single day
  • $225bln of puts and $160bln notional of calls traded
    • Already in 12 figures on Friday’s SPX expiration – $105bln in just the the first hour. Keep an eye on DTEs
  • Daily option volume Notional volume ($bln) traded in listed US equity options

  

  Final-day trading volume: Notional SPX option volume traded on the day of expiration, excluding Third Friday and end-of-month expirations

  

  * * *

  4. Both Professional and Retail Sentiment have reached new lows. Rules and Tools have historically marked a contrarian indicator.

  • GS sentiment indicator (SI) current reading of -2.2 is a signal of extremely light positioning and typically acts as a solid contra indicator for the market. Out of 687 weekly readings (first recording: 2/27/09), there have only been 14 instances in which the sentiment indicator was more negative (below -2.2).

  

  • AAIIBULL (bullish investors) reached the 9th lowest reading since 1987 (1820) observations (zeroth percentile).

  

  • Market returns after such extremely negative readings have been uniformly bullish, and the hit rate six months after such a reading is 100% (14 of 14 occasions), leading to a median 19% return!

  

   * * *

  5. Futures Positioning has been unwound and ranks in the 15th percentile over the past 10 years.

  • For context, the high futures position for 2022 was +$138.4B (January 25th ) vs. +$10B currently.

  

  * * *

  6. Peak Blackout is behind us. US Corporates return from the blackout window on May 2nd (Monday). The largest buyer of equities in 2022 has been out of the market for much of April and is now back.

  • 51% of the S&P 500 reported last week. This is the largest week for earnings in Q1. Corporates are slowing re-emerging from the blackout.

  

  • 2022 US corporate authorizations are off to the best year on record. Do they come back to buy stocks at these levels having already authorized? Do we hear about more big authorizations this week?

  

  • GS buyback activity last week was 2.4x the bank’s average 2021 levels – despite being in the earnings ‘blackout window.’ the bank estimates ~59% of companies will emerge by this time next week

  

  * * *

  7. S&P Index Gamma (no longer long) given institutional “forced hedging” of May puts – do we see monetization of puts after the big FOMC event next week?

  Dealer long gamma has been unwound, and works in both directions. This will exacerbate, not buffer moves in the same direction as the market.

  

  * * *

  8. Systematic Equity Supply is far smaller than some have feared given recent deleveraging.

  • Goldman calculates that CTA strategies have to sell $8B over the next 1 week and $21B to sell over the next month.
  • In an up tape, CTA strategies have up to buy $78B vs. down tape -$81B to sell. Said otherwise, they will continue to trade negative synthetic gamma in the same direction as the market

  

  

  * * *

  9. Synthetic fixed income short gamma (CTA strategies) have triggered flip levels. Does FI demand ease pressure on rate move and long duration equities?

  • Bond yields lower = SPX construction higher? This might be important chart for equity traders given the large cap tech weighting of the indices.

  

  * * *

  10. S&P 500 Top Book Liquidity “works in both directions”

  • Liquidity in the most liquid equity future in the world ranks in the 7th percentile in the past 10 years, and offers just $6M to trade on the screens.

  

  * * *

  12. Seasonals – “Sell in May and Go Away” this year? Positioning is already too low to sell from here. (30-yr look back)

  • This chart will matter if and when May inflows come back.

  

  * * *

  13. HF Leverage Exposure remains at cycle lows, does May the 4th become another clearing event and quick adding back of exposure?

  • Overall book Gross leverage +1.0 pts to 228.4% (5th percentile one-year) and Net leverage -0.6 pts to 72.9% (lowest since May ‘20). Overall book L/S ratio -0.9% to 1.937 (lowest since May ‘20).
  • Fundamental L/S Gross leverage +1.3 pts to 172% (6th percentile one-year) and Fundamental L/S Net leverage -1.1 pts to 49.3%, near the lowest levels since Apr ‘20.

  

  As Rubner concludes, “choppy and wide trading range continues but market technicals flip in favor of the bulls for may.” One thing is clear: the market can’t take much more pain without the Fed having to step in – we are talking the proverbial “flush” – no matter how much Biden berates Powell into standing to the side as stocks crash if it somehow means that inflation will shrink – and boost Biden’s approval rating – just because we enter a bear market. Incidentally, we wonder if Biden’s handlers have considered what will happen to the president’s approval rating if in additional to a stagflationary recession, the president were to also add a market crash to his list of achievements.

  Finally, for those curious how to best trade the world as envision by the Goldman flow trader, details can be found in the full note available to professional subscribers.

  Tyler Durden
  Sun, 05/01/2022 – 16:55

• 'We're Taking Back Our Street" – Sacramento Man Barricades Street To Stop Out-Of-Control Crime 
  ‘We’re Taking Back Our Street” – Sacramento Man Barricades Street To Stop Out-Of-Control Crime 

  People are fed up with the urban utopian socialist experiment in California. One business owner barricaded a public street in Sacramento to prevent a further spillover in crime from other areas. 

  “The game is over. We’re taking back our streets,” business owner Rich Eaton told FOX40. He barricaded part of Railroad Drive to prevent the commercial area from additional car burglaries, rampant building theft, prostitution, and homeless encampments. 

  

  “The city’s dereliction of duty has just come to a boiling point and I’m really just begging for help,” Eaton said, adding he has complained about the out-of-control crime to the mayor. So far, he’s received no response. 

  “I paid some homeless people some money so they would leave. I fed them; I took care of them and helped them and when Railroad Drive was cleared. I put up barriers,” Eaton said.

  A person who didn’t want to be identified and works for a company on the street told the local news: “It was like walking through a working meth lab to get to work.” 

  “There’s days when they’ll be parked three-wide on the street and we can barely get by. They’ve had our gates completely blocked. I’ve pulled up and had employees waiting to get in because they were afraid to get out of their gate and punch in the code.

  “Literally a week ago from this spot to there, all the way down and around the corner there were 57 motor homes and trailers parked,” the employee said.

  Eaton said someone scaled his building last week and stole his surveillance cameras from the roof. 

  “The prostitution, the stolen cars, people meeting on the street at 3 a.m.,” Eaton said, it’s just chaos he added. 

  Sacramento responded to Eaton’s barricade with an order to stop blocking the street. 

  Business owners taking action as city governments seem unresponsive is a new emerging trend. Last year, dozens of Baltimore City businesses banded together. They collectively threatened the mayor with no tax payment because they were fed up and frustrated “with the outburst of violence.”  

  Tyler Durden
  Sun, 05/01/2022 – 15:45

• Being A Successful Trader Is A Paradox
  Being A Successful Trader Is A Paradox

  By Alex Barrow of Macro Ops Musings

  Winners Evolve

  This will make you sit up in your chair (emphasis mine):

  In the 1990’s Harvard Business School’s Amy Edmondson performed some research to try to understand some of the qualities that make up a well-run hospital. She was not prepared, however, for one of the results her research produced. After surveying the nurses at eight different institutions, one of the things her study found was that in those hospitals where nurses reported the very best leadership team, along with great relationships with their co-workers, the number of medical errors reported was ten times higher!

  What could possibly explain this outcome?

  …In hospitals where the nurses felt safe and highly regarded, both by their peers and by their managers, the reason they reported more errors was that they felt more psychologically “safe.” Nurses in these more cohesive, well-led units made comments such as “mistakes are natural and normal to document,” and “mistakes are serious because of the toxicity of the drugs, so you are never afraid to tell the nurse manager.”

  By contrast, in those environments where mistakes were not forgiven and miscreants were punished, nurses were more likely to report that “The environment is unforgiving, heads will roll.” In other words, it was highly likely that just as many mistakes — if not more — were made in these institutions, but not reported. Instead of learning from their mistakes, these hospitals were hiding from them.

  – Don P, Peppers & Rogers Group, Does Your Company Make Enough Mistakes?

  That opener is so eye-opening it is worth repeating:

  “in those hospitals where nurses reported the very best leadership team, along with great relationships with their co-workers, the number of medical errors reported was ten times higher!”

  Think about what this implies:

  • the sheer number of hospital errors that DON’T get reported

    • the number of errors that even top hospitals make (a lot)

    • the number of errors that marginal to poorly run hospitals make (surely a lot more)

    • the number of hidden or non-reported errors that are missed completely

  An observed reporting spread of 10-to-1 suggests the hospital error base rate is remarkably high. If there are remarkably high error rates in the confines of hospitals — where medical processes are exhaustively detailed and regimented — think how much more capacity there is for error in the relatively undocumented world of discretionary trading and investing.

  And if top hospitals report an order of magnitude more errors than second or third-rate peers… while surely having a lower absolute number of errors (because top-performing institutions are better run)… think of the overwhelming number of errors sloppy performers must make… and by simple logical extension, the vast quantity of errors marginal traders and investors must be making over and over again, every single day.

  (The collective presence of investor error fuels real trading opportunity, by the way, for the same reason errors at the poker table are profit opportunities for the skilled. Difference being, in a poker game you typically only have one opponent on the other side of a big hand. In a big trade you can have myriad investors, who have collectively all made the same mistake, pooling profits in your pocket by way of their positioning.)

  “Heads Will Roll”

  This fuels a delicious irony: If Edmondson’s findings translate to traders, one of the strongest indicators of performance quality is the frequency with which one admits and reports weaknesses or mistakes rather than hides them. This is 180 degrees from the attitude of “I never make mistakes ever.”

  When interviewing a prospective money manager, then, what you want to hear is: “We’ve messed up plenty of times but learned a lot, and continue to learn.” If instead you get some variant of “We’ve always been perfect and will continue to be perfect,” walk away fast.

  Why is it, then, that top performers are more willing to admit mistakes? Perhaps because lesser performers operate out of fear:

  • fear that bosses will judge them harshly
    • fear that clients or investors will judge harshly (or even pull funding)
    • an inaccurate self-judging compass (the perception that all mistakes are bad)
    • an ego-preserving data distortion field (fear of ego being bruised or even shattered)

  Unfortunately, bad bosses and bad clients actually justify such fear in all too many cases. The notion that “heads will roll” is the result of subconscious signals delivered and received. Within organizations, bad leaders really do “shoot messengers”… confuse useful feedback with negative performance… fail to distinguish between luck and skill… fail to cultivate small improvements… R&D expansion into adjacent areas… better results monitoring… and so on.

  In the investment world, bad clients are even worse: Rewarding slickly polished presentations from “empty suits”… chasing performance over a cliff… being emotionally averse to inevitable flat periods… disregarding the value of risk control… preferring artificial smoothness to organic robusticity… etcetera ad infinitum.

  (The answer to the “heads will roll” problem is tongue-in-cheek but effective: Avoid bad bosses and clients! If someone with a functional lack of understanding and/or an obtuse point of view has the ability to impact your future in a negative way, change your situation to remove that person’s impact — or at least minimize it — as soon as you can…)

  Mistakes vs Weaknesses

  For mechanical traders, and discretionary traders who long ago check-listed their basic processes, it is also important to distinguish between “mistakes” and “weaknesses” — and to recognize that reporting and studying a “weakness” can have the same beneficial impact as a mistake.

  Take the practice of honoring one’s risk points, for example, or always following a daily homework routine. For traders with a certain level of experience and professionalism, these standards are virtually never deviated from. For a seasoned and disciplined trader, mistakes defined as “a deviation from established best practices” might happen once in a quarter, or even less frequently than that (e.g. less than 2% percent of the time).

  Even still though, weaknesses can be treated as a form of mistake — and every process that crosses a minimum complexity threshold – like most any trading or investing methodology — has potential weaknesses embedded that can be observed, reported on and contemplated: Flaws in the structure of the process… potential adjustments to variable component weightings… adjustments to the step-by-step pre- and post-analysis process… the shoring up of knowledge gaps or re-tooling of assumptions… and so on.

  An Emphasis on Culture

  At Macro Ops we are keenly aware of mistakes — and “weaknesses,” which apply even when processes are down cold — and as a result have a very strong emphasis on culture.

  Institutional culture is real and powerful. You cultivate it, establish it, and strengthen it via what you do and how you do it, day after day. Think of the winning habits, processes and mindsets a successful person relies on until they are “second nature.” Then expand those mental models, ways of thinking and doing and interpreting, across a team, an organization, an entity of multiple individuals, where values and step-by-step actions, “ways of doing things” are passed on to anyone new who comes through the door. That’s culture.

  As the size of our research team grows — and we are hiring in 2021 by the way! — an emphasis on growing and maintaining the MO culture becomes ever more important. This is not just because culture contributes massively to consistent outperformance (though it certainly does)… but because the quality of your culture determines the rate at which you evolve.

  And the rate at which you evolve goes back to errors, weaknesses and mistakes…

  EVOLUTION, MORPHEUS, EVOLUTION

  Think of the following logic chain:

  • Error Data (Mistakes + Weaknesses) = Constructive Feedback

    • Constructive Feedback = Opportunity to Analyze and Refine

    • Analyzing and Refining = Incremental Improvement

    • Incremental Improvement = Micro-Evolution

    • Micro-Evolution over extended time cycles = Macro-Evolution

    • Macro-Evolution = Smarter, Faster, Deeper, Stronger

    • Smarter, Faster, Deeper, Stronger = DOMINATE

  To approach from another angle:

  • Natural evolution = serendipitous impact of randomly distributed trial and error

    • Accelerated evolution = guided impact of shaped and observed trial and error

    • Trial and error = experimentation, hypothesis, “useful failures” etc

    • Which cycles back around to errors, weaknesses etc as “Constructive Feedback”

  The trading organizations that deliberately nurture a “culture of embracing mistakes” will receive a much higher volume of constructive feedback… and will further be better positioned to respond and hypothesize… in turn allowing them to “analyze and refine” at a faster rate… allowing them to improve and evolve at a faster rate than their peers.

  In trading and investing, this is huge.

  But individuals can apply these ideas too. You don’t need a team to create a culture (though it certainly helps). You can embrace mistakes on your own by asking questions like:

  • Am I a vigilant observer of my trading and investing process?

    • Do I diligently record my errors and mistakes?

    • Do I seek out and contemplate potential weaknesses?

    • Do I probe and test for weaknesses as a matter of habit…

    • …not to bring myself down, but to make my process stronger?

    • Do I constantly seek to analyze, refine and evolve as a matter of survival?

    • Do I give myself permission to acknowledge weaknesses and still feel like a winner?

  Cheerful vs Zero Tolerance

  Keep in mind, too, that there is an important balance here. Being a winner means walking the line between tolerating mistakes — responding to them cheerfully and constructively — and ruthlessly stamping them out with a “zero tolerance” attitude.

  At Macro Ops, our general mode of operation is a response of positive urgency to fresh mistakes we uncover. When the observation bell goes off, we “halt the assembly line” and ask questions like:

  • What was the origin of this mistake (or observed weakness)?

    • Did it come from a gap in process, misread of information, judgment error etc?

    • Was it something subtle and nuanced, or big and obvious?

    • Does it fall under research, execution, strategic allocation, or something else?

    • How do we extract maximum tuition from this?

    • Should a specific step-by-step aspect of the process be modified?

    • Should a conceptual or philosophical principle be explored (or re-explored)?

    • How can we best evolve and strengthen from this?

    • How do we use this to become more awesome?

  We can’t claim originality in this. The most successful organizations in the world, be they trading-focused or something completely different, all have some variant of the same mindset.

  For instance: The following quotes are from Ray Dalio, the founder of Bridgewater (one of the most successful hedge funds of all time):

  More than anything else, what differentiates people who live up to their potential from those who don’t is a willingness to look at themselves and others objectively.

  I believe the biggest problem humanity faces is an ego sensitivity to finding out whether one is right or wrong and identifying what one’s strengths and weaknesses are.

  Your ability to see the changing landscape and adapt is more a function of your perceptive abilities and reasoning abilities than your ability to learn and process quickly.

  Recognize that you will certainly make mistakes; so will those around you and those who work for you. And what matters is how you deal with them. If you treat mistakes as learning opportunities that can yield rapid improvement if handled well, you will be excited by them.

  If you don’t mind being wrong on the way to being right, you will learn a lot.

  Of course, there is also a certain class of mistakes we have “zero tolerance” for — things like:

  • Neglecting risk or failing to follow a risk management protocol

    • Blatantly neglecting an established process step

    • Any type of “phoning it in” or extended delivery of subpar effort

    • Being “mentally hard of hearing” — not paying attention to repeated instruction

    • Making the same mistake repeatedly (failing to learn from repeated trials)

  In other words, some mistakes are understandable and even exciting — as Ray Dalio puts it — because their presence indicates forward evolution and opportunity for advancement on the capability frontier.

  But other mistakes — the ones that go back to well-covered areas, well-developed process, or issues of moral code and doing one’s best work — represent serious internal issues and thus receive a brutally harsh response. (We aren’t afraid to lose our tempers.)

  The Circle of Competence

  In evaluating mistakes, you can picture acceptable vs unacceptable in the context of a circle — a “circle of competence.”

  

  Mistakes on the circumference of the growth circle are acceptable, and even desirable… if they represent intelligent efforts at expanding competence. The only way you make the circle bigger is by evolving your capabilities… and you do this via thoughtful trial and error, risk-adjusted tinkering and refining, allocations to R&D, and so on.

  Mistakes deep within the circle are unacceptable, however, because they represent failure in areas already covered… or failure in areas that should be covered… or worse yet, a failure of internal structure as relating to things like capacity for hard work, commitment to accuracy, moral commitment to excellence, and so on.

  Furthermore there are at least two competence circles that matter: The circle for the individual team member, and the circle for the organization as a whole. Efforts to expand the organization as a whole — via contributions to team knowledge or net capability — are appreciated and rewarded. There are many “good failures” in respect to this endeavor, because the potential ROI (return on investment) is so long-term beneficial. (This is a good acid test of leadership by the way. Does the leadership “get” this? Do they embrace it as a directive?)

  On the individual team member side, competence circles should match up with experience levels and expectations. A senior trader or analyst with 10+ years of experience will be expected to have a much larger competence circle than, say, a fresh analyst with lots of talent but only a modicum of seasoning. For this reason a certain type of mistake or weakness may be acceptable in one team member but not in another, again relative to situational differences.

  Altogether this unites to create an enlightened (in our opinion) and goal-oriented approach to evaluating mistakes and weaknesses: We want to maximize top performance, minimize “unforced errors” and low-grade process failures, and cultivate a healthy expansion of competence for both individual team members and the organization as a whole. Mistakes made in alignment with this goal are not only tolerated but appreciated — “winners evolve” is our short and sweet motto, and it applies across the board. Mistakes of the unacceptable kind, if made too frequently, result in a friendly parting of the ways (so as to avoid team resentment and “Full Metal Jacket” treatment).

  Confidently Humble

  In many ways, being a successful trader is a paradox. You must develop a deep sense of confidence in your methodology and talent, yet remain ever humble and flexible. You have to trust yourself, but also know when to intelligently doubt yourself — and have no fear of doing so. You need a profound unshakeable faith in who you are and what you can do… yet at the same time maintaining the attitude of the humble student, the raw beginner, the white belt always ready to learn.

  Getting this mix right is also the key to personal evolution and incremental improvement, because evolution itself is such an iterative, trial-and-error driven process (and thus a reflective / contemplative process).  It’s not enough to get your hands dirty and fall on your face every so often. Having fallen, you must have the presence of mind to put your ego aside… objectively examine your weakness or mistake… and then put in the elbow grease of analyzing, and intelligently responding to, the data born of your stumble.

  None of this is rocket science. But it is harder than it sounds… harder even than rocket science in some aspects… and thus represents a golden opportunity, because so few can do it! The need for ego preservation is a massive block to trading in so many ways — even among people who appear “humble” on the outside, yet cannot apply a “culture of embracing mistakes” on the internal level.

  Tyler Durden
  Sun, 05/01/2022 – 15:10

• Biden Price Hike: Most Americans Blame US President For Higher Gas Prices
  Biden Price Hike: Most Americans Blame US President For Higher Gas Prices

  A majority of Americans still don’t believe the Biden administration’s ham-fisted attempts to shove the “Putin’s Price Hike™” narrative down our throats.

  According to a new Rasmussen poll, when asked whether Biden or Russian President Vladimir Putin is to blame for higher fuel prices, “76% of Republicans think Biden bears most responsibility for higher fuel prices, as do 24% of Democrats and 54% of voters not affiliated with either major party.“

  

  What’s more, 84% of likely US voters believe the rising price of gasoline, home heating oil and other petroleum products is a ‘serious problem.’ 61% say it’s a ‘very serious problem.’

  And when did the vast majority of this inflation occur? Pre-Ukraine.

  

  Rasmussen’s findings echo those from several weeks ago, as NBC’s Tom Costello reported on “The Today Show” that people aren’t buying the Putin Price Hike narrative.

  “President Biden is trying to label this Putin’s price hike. Well most Americans, according to an NBC News poll, are not buying that. Only 6% blame Putin; most believe that President Biden’s policies are very much to blame.“

  And in March, a Quinnipiac University poll revealed that more Americans blame Biden than the Ukraine invasion or corporate greed for the rise in gas prices.

  Forty-one percent of those polled say the Biden Administration’s economic policies are more responsible for the recent rise in gas prices.

  Two other factors tied for second place at 24% each. The first was the war in Ukraine and resulting sanctions against Russia, while the second factor was oil companies charging more. -WCSC, Mar. 30

  What was that, Joe?

  

  That said, talk to us about the cost of energy when Putin shuts off gas to Europe.

  Europe may be hurtling toward a sudden halt of Russian natural #gas, which would trigger energy rationing and a deep recession. The continent’s gas balance is “just one supply disruption away from completely falling apart,” says a JPMorgan analyst. https://t.co/37c5Gq9dUH

  — Bloomberg Energy (@BloombergNRG) May 1, 2022

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

  Tyler Durden
  Sun, 05/01/2022 – 14:35

• Diesel For Dinner
  Diesel For Dinner

  Via Doomberg Substack,

  “Governing a great nation is like cooking a small fish – too much handling will spoil it.” – Lao Tzu

  The words edible and eatable are often used interchangeably but embedded within their respective definitions is a distinction that makes an important difference. Edible means “safe to eat,” whereas eatable means “pleasant to eat.” A variant of the word eatable is delicious, commonly defined as “highly pleasant to eat.” Delicious certainly sounds more enticing than highly eatable, a phrase nobody would use to compliment an exquisite meal crafted by a professional chef. We find such linguistic nuances pleasing.

  Whether the balance of calories a person consumes is edible, eatable, or delicious depends on where they sit on Maslow’s hierarchy of needs, a concept we covered at length in a piece we wrote last July called Why Are Cows Sacred?  For those at the base of the pyramid, the struggle to consume enough edible food just to see another sunrise defines much of their existence. At the top of the pyramid sit those fortunate souls who can afford to cook delicious meals with fresh ingredients, eat at fine restaurants, or even hire a personal chef to tend to their every dietary indulgence.

  

  At the molecular level, the distinction between edible and inedible can be subtle. The rearrangement of a few atoms within an otherwise similar chemical structure can make the difference between satiation and a trip to the emergency room.  Prior to the advent of the modern chemical and energy industries, humanity leveraged animal and plant byproducts to create many of the functional materials used in daily life, making the tradeoff between food and other needs a more visceral one than it is today. The edible parts were eaten, and the inedible stuff – presumably identified through an unfortunate series of trial and error experiments – was converted into other useful things or burned to create energy.

  Armed with humanity’s mastery of chemistry, we can now rearrange atoms with astonishing specificity at an unimaginable scale, pushing billions of people further up Maslow’s hierarchy than they would otherwise be. In addition to using fossil fuels to create most of the materials that surround us, we leverage them to produce fertilizers, herbicides, fungicides, and other inputs into the farming process, boosting crop yields to levels once thought impossible. We also synthesize mountains of edible ingredients directly from oil and gas. Touring a modern food processing factory would seem almost indistinguishable from a specialty chemical plant, mostly because they aren’t all that different.

  

  While it makes perfect sense to leverage our bounty of fossil fuels and ability to manipulate them at the molecular level to increase global food abundance, going through the effort to grow food only to turn around and burn it for energy seems less than ideal. In a controversial piece we wrote in January titled “In Praise of Corn Ethanol,” we put forth a theory that the adoption of corn ethanol as a mandated additive to gasoline was a scheme to coverup one of the greatest environmental scandals of the past century: the use of tetraethyl lead as an anti-knock agent. While some readers interpreted our piece as supporting this policy – undoubtedly because of the title – our primary purpose was to highlight the ugly history that got us to the current situation, and how it was predominantly a dirty political compromise. In hindsight, “Why Corn Ethanol is a Thing” might have been a better title.

  No such compromise underpins the decision to use foodstuffs as replacements for diesel, a policy that will make the unfolding global food crisis substantially worse if it is not soon overturned.

  When a barrel of oil is refined, it is separated into various products using the different boiling points of its components. Gasoline boils at a lower temperature than diesel and represents about 43% of each barrel of oil. Diesel makes up approximately 27%, with the other 30% destined to become heating oil, jet fuel, asphalt, and other important materials. Because of its higher energy density per gallon and the efficiency of engines designed to use it, diesel is a desirable fuel, especially for long-haul trucking.

  

  Trucks at the pump | Getty Images

  Unfortunately for those near the bottom of Maslow’s pyramid, many cooking oils – liquid fat isolated from various crops used extensively in frying, baking, and other types of food preparation all over the world – have a molecular structure quite similar to that of diesel. It does not take much chemical magic to transform previously edible cooking oils into workable substitutes for the valuable fuel. Now that the environmental lobby has convinced government officials worldwide that “renewable carbon content” is prima facia a desirable thing – a fallacy that deserves its own Doomberg piece – various mandates exist to literally take food out of the mouths of the hungry and pump it into our trucks for burning. For the planet, and whatnot.

  The first commercially relevant incarnation of a diesel substitute derived from crops is a product known as biodiesel. Oils derived from palm, sunflower, soybean, rapeseed, and castor are used as inputs, to name a few, and they are reacted with methanol (derived from fossil fuels) in a chemical process known as transesterification. Transesterification generates a product with higher oxygen content than standard diesel. This presents some challenges, including poor low-temperature performance, increased microbial growth, corrosion of engine parts, and higher shipping costs (biodiesel cannot leverage existing pipelines that are used to transport regular diesel). Much like corn ethanol, biodiesel is blended with regular diesel at concentrations between 2-20% before being marketed. Despite these limitations, government mandates have motivated farmers the world over to redirect a sizable chunk of their crops from the grocery store to the gas station.

  Nearly all of the challenges with biodiesel have been overcome with the recent development of renewable diesel, a material synthesized by hydrotreating cooking oils. Here’s how the US Energy Information Agency (EIA) describes the differences (emphasis added throughout):

  “Renewable diesel is a biomass-based diesel fuel similar to biodiesel, but with important differences. Unlike biodiesel, renewable diesel is a hydrocarbon that is chemically equivalent to petroleum diesel and can be used as a drop-in biofuel that does not require blending with petroleum diesel for use…

  Because renewable diesel is a drop-in fuel, it meets ASTM D975 specification for petroleum diesel and can be seamlessly blended, transported, and even co-processed with petroleum diesel.”

  

  Image credit: iStockPhoto / Lori Hays

  To the truckers forced to meet renewable carbon content mandates, renewable diesel is a godsend. It requires no change on their part, is indistinguishable from regular diesel, and allows them to proudly proclaim their green bonafides. To the companies who produce it, renewable diesel is a government-mandated financial pot of gold. The US Environmental Protection Agency (EPA) issues valuable renewable identification numbers (RINs) to track compliance with various mandates and to stoke production. There’s also a national $1-per-gallon tax credit to further incentivize producers.

  While support at the federal level has been important, the real driver for renewable diesel adoption has been the State of California. Through its low-carbon fuel standards (LCFS) program, credits currently trading for $115 per carbon ton are being issued, and renewable diesel is now the largest source of incremental credits. This is before the real capacity to produce renewable diesel comes online.

  Where will all this renewable diesel come from? In the US, soybean oils are the main input, and it should come as no surprise that planting strategies are being quickly modified to produce more of it. This quote from an industry consultant frames the magnitude of the upcoming disruption well:

  “The dramatic development of the U.S. renewable diesel industry is similar to how ethanol changed the U.S. corn industry from 2007 to 2010, says Dan Basse, president of AgResource Company. But he believes renewable diesel could be more disruptive.

  ‘We are calling for 90.5 million soybean acres in 2022 versus this year’s 87 million, and that just gets us started in meeting renewable diesel demand,” he says. “Then we’d need to increase soybean acres by 5 million to 7 million each year. We have to top 120 million acres of soybeans to meet the growing demand for renewable diesel.’”

  With the force of the government’s thumb on the scale of demand compounding pre-existing inflationary pressures hitting farmers, the price of soybeans has soared to fresh all-time highs. At the time of this writing, soybeans trade for $17 per bushel, more than double the price seen just two years ago. Unless these policies are unwound, it is difficult to imagine a scenario where positive price momentum abates.

  

  In a piece we wrote last October called Starvation Diet, we warned that the unfolding energy crisis would trigger a global famine, a process that would be exacerbated by protectionism. Here’s a key passage:

  “We’ve written extensively about how the market for energy in Europe broke and how the ripple effects will snap through our delicate supply chains like a whip. When the supply of critical goods goes short, countries implement protectionist policies in a futile attempt to minimize the impact at home. A cascading series of retaliatory moves usually follows, leading to economic vapor lock. We are seeing that pattern play out now in agriculture.”

  Although we take no joy in being proven right in this regard, more evidence of our prescience emerged last week when Indonesia shocked the world by banning all exports of palm oil. Cooking oils can be substituted for each other and price pressures on one oil inevitably puts a bid under the others. Here’s how The Guardian describes the situation:

  “The price of edible oils such as soyoil, sunflower oil and rapeseed oil is expected to rise after Indonesia announced a surprise export palm oil ban, experts have warned.

  Major edible oils are already in short supply due to adverse weather and Russia’s invasion of Ukraine. The move by Indonesia to pause exports will place extra strain on cost-sensitive consumers in Asia and Africa hit by higher fuel and food prices.”

  The magnitude of this ban cannot be overstated. According to data from Statista, palm oil accounted for 35% of all cooking oil produced last year. Indonesia is responsible for a staggering 60% of global palm oil production. The blast waves emanating from this explosive move will be felt the world over, most acutely by those already on the brink that can least afford to react. Bluntly, people are going to starve.

  In the face of a global energy crisis, the war in Ukraine, food shortages, and rampant inflation, does it make sense to be redirecting so many acres of valuable cropland to make renewable diesel, a fuel we can easily and directly drill for domestically? Do our policymakers understand the interconnected nature of these markets, and how forcing a strong link between diesel and soybeans creates a tunnel through which the contagion of crisis in one market bleeds directly into the other? Imagine how grotesque this spectacle must seem to the most vulnerable among us. While they scramble to secure enough edible food to survive, our elite know-it-alls gorge themselves on the most delicious hors d’oeuvres the cocktail party circuit can provide. Through either shocking ignorance or callous indifference, they convince themselves they are saving the planet.

  Saving the planet for who, exactly? The poorest citizens on Earth? Nah.

  Let them eat diesel.

  

  *  *  *

  If you have enjoyed this or any of the 105 articles we’ve published in the last year, please hit the “Like” button and consider upgrading your subscription. New articles will be limited to paid subscribers after April 30th. Claim your spot in the Chicken Coop today!

  Tyler Durden
  Sun, 05/01/2022 – 14:00

• New COVID Bill Fines Parents For Unvaxxed Kids And Doubles Income Taxes 
  New COVID Bill Fines Parents For Unvaxxed Kids And Doubles Income Taxes 

  An absurd COVID-19 bill by radical leftist Road Island Senator Samuel W. Bell says that residents who refuse the vaccine and its booster shots are subjected to fines and pay more income tax unless they receive an exemption. 

  Bell introduced Rhode Island Senate Bill S2552 on March 1. As of last week, the bill had not been passed into law is currently in review by the Senate Health and Human Services committee. 

  S2552 states eligible Rhode Island residents would have to be vaccinated against COVID. If they reject, they could face a $50 monthly fine and pay double the state income tax. There are also fines for unvaccinated children under the age of 16 that would be imposed on the parents. Text from the bill reads:

  This act would mandate all residents sixteen (16) years or older to be vaccinated against COVID-19. If a resident is under sixteen (16) years of age, the resident would be required to be immunized against COVID-19, with the responsibility for ensuring compliance falling on all parents or guardians with medical consent powers.

  Additionally, any person who violates this chapter would be required to pay a monthly civil penalty of fifty dollars ($50.00) and would owe twice the amount of personal income taxes.

  Talking about the bill, Bell told the Boston Globe:

  “The reason I introduced the bill is we have a crisis with the pandemic.

  “Thousands of Rhode Islanders have died. I’ve had really painful calls from constituents who can’t go to the store because they’re immuno-compromised, who have lost loved ones to this pandemic, who are really ill and not fully recovered, suffering long-term effects.”

  Bell has faced harsh criticism for the introduction of the bill. He tweeted this email he received from one angry Rhode Islander. 

  

  Subjecting adults to fines and more taxes for not being vaxxed or even their kids not being vaxxed is a significant overreach by government. Also, the vaccine is not risk-free, especially for children.

  Dr. Robert Malone, a virologist and immunologist who has contributed to the technology of mRNA vaccines, recently said: “Think twice before you vaccinate your kids. Because if something bad happens, you can’t go back and say, ‘whoops, I want a do-over.'” 

  Tyler Durden
  Sun, 05/01/2022 – 13:25

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