At least for the time being, EV sales are still pushing higher. 

Helped along by Trump’s threat to end EV tax credits, sales of EVs were up 12% in the fourth quarter of 2024, according to a new report from Bloomberg. Forecasts from researcher Cox Automotive put the year’s total at 1.3 million EVs sold. 

Plug-in vehicles now make up about 8% of the US car market, only slightly more than last year, despite a rise in sales from the prior quarter’s 8% growth rate. A strong fourth quarter boosted total car sales, with the annualized 2024 rate hitting 15.9 million, up from 15.5 million in 2023.

Bloomberg writes that this EV growth may not continue into 2025. Only 25% of shoppers are considering an EV, down two points from last year, per JD Power.

Jonathan Smoke, Cox’s chief economist said last month: “Threats and worries” sparked a “sense of urgency to buying. That’s true in overall purchase activity, and it’s also very much true to the EV story.”

Donald Trump plans to dismantle federal EV incentives, including the $7,500 tax credit, calling Biden’s EV policies “insane.” Proposed tariffs on Canada and Mexico could also raise car prices.

Improved interest rates, manufacturer incentives, and post-election confidence have boosted 2024 car sales forecasts, despite earlier setbacks from inflation and a dealership cyberattack. GM led US sales with 2.7 million vehicles, while Stellantis fell to sixth with a 15% decline.

Tesla remains the top EV seller but saw its first annual sales drop in over a decade, as we detailed this week. For the year, the company reported sales of 1.79 million vehicles for the year, falling short of the 1.8 million delivered in 2023 and missing analysts’ consensus estimate of 1.8 million.

High costs and limited charging infrastructure keep EVs out of reach for many, with demand projected to fall by 27% if tax credits are removed, the article says. 

Meanwhile, hybrids continue gaining favor as automakers like Stellantis and Ford delay EV launches to focus on more affordable options. Hyundai plans to double its hybrid lineup, while Ford pledges hybrid versions across its models by 2030.

Update (1111ET):

Nippon Steel is furious that President Biden blocked their proposed $14.9 billion deal to take over US Steel. 

“We are dismayed by President Biden’s decision to block Nippon Steel’s acquisition of US Steel, which reflects a clear violation of due process and the law governing CFIUS,” the Japanese steelmaker wrote in a press release, adding, “Instead of abiding by the law, the process was manipulated to advance President Biden’s political agenda.” 

Nippon said the $55-per-share deal would have revitalized American steel plants with a $2.7 billion investment, protected union jobs, and enhanced America’s steel supply chain against low-cost Chinese competition. 

“Blocking this transaction means denying billions of committed investment to extend the life of US Steel’s aging facilities and putting thousands of good-paying, family-sustaining union jobs at risk. In short, we believe that President Biden has sacrificed the future of American steelworkers for his own political agenda,” Nippon continued. 

According to Nikkei Asia, the Japanese steelmaker plans to sue the US government, targeting the Committee on Foreign Investment in the United States (CFIUS), which conducted the national security review of the proposed transaction and ultimately influenced President Biden’s decision.

*   *   * 

Update: 

President Biden has released a statement indicating that he will “block” Nippon Steel’s $14.9 billion takeover of US Steel.

Here’s the full statement: 

As I have said many times, steel production—and the steel workers who produce it—are the backbone of our nation.  A strong domestically owned and operated steel industry represents an essential national security priority and is critical for resilient supply chains.  That is because steel powers our country: our infrastructure, our auto industry, and our defense industrial base. Without domestic steel production and domestic steel workers, our nation is less strong and less secure.

For too long, U.S. steel companies have faced unfair trade practices as foreign companies have dumped steel on global markets at artificially low prices, leading to job losses and factory closures in America. I have taken decisive action to level the playing field for American steelworkers and steel producers by tripling tariffs on steel imports from China.  With record investments in manufacturing, more than 100 new steel and iron mills have opened since I took office, and U.S. companies are producing the cleanest steel in the world. Today, the domestic steel industry is the strongest it has been in years.

We need major U.S. companies representing the major share of US steelmaking capacity to keep leading the fight on behalf of America’s national interests. As a committee of national security and trade experts across the executive branch determined, this acquisition would place one of America’s largest steel producers under foreign control and create risk for our national security and our critical supply chains.

So, that is why I am taking action to block this deal. It is my solemn responsibility as President to ensure that, now and long into the future, America has a strong domestically owned and operated steel industry that can continue to power our national sources of strength at home and abroad; and it is a fulfillment of that responsibility to block foreign ownership of this vital American company. U.S. Steel will remain a proud American company – one that’s American-owned, American-operated, by American union steelworkers – the best in the world.  

Today’s action reflects my unflinching commitment to utilize all authorities available to me as President to defend U.S. national security, including by ensuring that American companies continue to play a central role in sectors that are critical for our national security. As I have made clear since day one: I will never hesitate to act to protect the security of this nation and its infrastructure as well as the resilience of its supply chains.

*   *   * 

Biden administration officials seem to have leaked the president’s impending decision, expected on Friday, to block Japan’s Nippon Steel from purchasing US Steel. The Washington Post was the first to report on the president’s planned move. 

The report states that two administration officials revealed President Biden chose to block the deal between Nippon Steel and US Steel, despite warnings from some senior advisers about potential negative consequences surrounding future foreign investment in US companies. 

On Dec. 23, the Committee for Foreign Investment in the United States, also known as CFIUS, notified the Biden administration it had not reached a consensus about whether Nippon’s potential purchase of US Steel would pose a national security risk, essentially leaving the decision up to the elderly president who doesn’t know what day it is.

The panel, chaired by Treasury Secretary Janet Yellen, said Nippon purchasing US Steel could reduce domestic steel production and pose “risks to the national security of the United States,” adding, “Potential reduced output by US Steel could lead to supply shortages and delays that could affect industries critical to national security.” 

CFIUS noted that Nippon’s global operations might not support ‘America First’ amid US Treasury trade actions against low-cost steel imports. They said this could leave “the US economy more exposed to dumping and unfair subsidization of steel.” 

On Monday, Nippon executives made a last-ditch attempt to sway Biden. The execs sent a proposal to the White House that would allow the government to veto any reduction in US Steel’s “production capacity.” 

For many months, Biden has publicly opposed Nippon’s $14.9 billion takeover of US Steel, ultimately siding with David McCall, the president of the United Steelworkers union. McCall has called Nippon’s bid as “bad for workers.” 

Meanwhile, President-elect Donald Trump has opposed the transaction and said he would support US Steel with tariffs and tax incentives. 

In premarket trading, shares of US Steel are down 6% in New York. 

If Nippon Steel’s purchase of US Steel is rejected due to national security concerns, foreign investors could reconsider allocating resources toward mergers, acquisitions, or investments in the United States.

Authored by Aaron Wood via CoinTelegraph.com,

Since its inception, Bitcoin has faced relentless opposition fueled by fear, uncertainty and doubt, or FUD. Critics regularly denounce Bitcoin as volatile, unsustainable or a tool for crime. 

These narratives resurface with every Bitcoin bull market, often deterring newcomers. Dan Held, a prominent Bitcoin advocate, said, “Naysayers try to cope with missing the boat by rationalizing why it will fail through ‘Fear, Uncertainty, and Doubt.’” But how much truth do these arguments hold?

Once dismissed as a niche project, Bitcoin is now embraced by financial institutions, investors and even politicians. Yet skepticism persists, with critics questioning its intrinsic value, energy consumption and societal utility.

Here are a few FUD narratives that pop up whenever Bitcoin is doing well. 

Bitcoin has no intrinsic value

Among Bitcoin’s most persistent critics are legendary investors Warren Buffett and the late Charlie Munger.

Buffett famously called Bitcoin “rat poison squared,” arguing that it lacks intrinsic value because it doesn’t generate earnings or dividends. Munger echoed these sentiments, describing Bitcoin as “disgusting” and its development “contrary to the interests of civilization.”

“I hate the Bitcoin success,” said Munger.

Bitcoin has been around since 2008, growing substantially in value into the highest-performing asset of the last decade.

Bitcoin’s performance against significant traditional market assets over the past decade. Source: CoinGecko

Held counters this argument by saying that it does not make sense to criticize Bitcoin as having no intrinsic value “when their primary government currency has absolutely no intrinsic value.”

On Jan. 10, 2018, economists Aleksander Berentsen and Fabian Schär wrote in a Federal Reserve review article:

“Bitcoin is not the only currency that has no intrinsic value. State monopoly currencies, such as the US dollar, the euro, and the Swiss franc, have no intrinsic value either.”

The study said, “The history of state monopoly currencies is a history of wild price swings and failures […] this is why decentralized cryptocurrencies are a welcome addition to the existing currency system.”

The intrinsic value of a particular asset is abstract, as it depends on the people’s perception. Bitcoin’s scarcity, utility and technology underpin its value.

Bitcoin has a capped supply of 21 million coins, drawing comparisons to gold and earning it the nickname “digital gold.” Institutional interest, such as spot Bitcoin exchange-traded funds (ETFs), has solidified its position as a store of value, as it is scarce by design.

Bitcoin is just tulip mania 

Bitcoin’s rapid price growth has made many compare Bitcoin to financial bubbles like the dot-com crash or the Dutch tulip mania of the 17th century. 

Held disagrees, saying, “Bitcoin ain’t tulips. It provides the world with the best digital store of value ever created, allowing people to store value that is hard to seize and transmit to anyone else without permission.”

In 2017, JPMorgan CEO Jamie Dimon heavily criticized Bitcoin, calling it a “fraud.” In 2018, he said Bitcoin was “worse than tulip bulbs.”

He has since qualified his remarks and walked back some of his criticism. During a JPMorgan earnings call in 2021, Dimon remarked that “fads typically don’t last 12 years.”

In May 2024, reports emerged that JPMorgan had invested in Bitcoin through the spot Bitcoin ETFs, and the bank even created its own digital currency, JPM Coin. 

Since its creation, Bitcoin has experienced consistent upward trends marked by cyclical waves. Unlike infamous financial bubbles, it has not faced a catastrophic collapse that permanently devalued the asset.

Bitcoin, tulips, the South Sea Company and the Dotcom bubble comparison from November 2020. Source: James Todaro

Bitcoin is a tool for money laundering

Bitcoin is frequently attacked for its alleged role in illicit activities. United States Senator Elizabeth Warren has described Bitcoin as a mere “tool for money laundering” and called for stricter regulations to crack down on digital assets. 

However, Bitcoin’s blockchain is fully transparent, making illicit activity easier to trace than cash. 

Initially, criminals saw it as a great tool to hide their illegal activities, but they learned quickly that using transparent ledger technology may not help them. Bitcoin is pseudonymous. Accounts are anonymous, but if an account is linked to an identity, its history and financial movements will be exposed.

“The problem rests with government money, not Bitcoin or crypto which most operate on transparent ledgers that make it hard to obfuscate funds,” said Held.

That said, there are services that can obscure Bitcoin movements and abet illicit activity. Services like mixers and tumblers, which specialize in obscuring the flow of crypto funds, have seen a rise in money-laundering activities, according to blockchain data analysis firm Chainalysis.

Bitcoin is hungry for energy

Bitcoin’s network uses proof-of-work (PoW) as its consensus mechanism, where miners solve complex mathematical puzzles to validate transactions and secure the network in exchange for rewards.

Initially, anyone with a laptop could mine Bitcoin, but as competition increased, large-scale mining facilities were established, making Bitcoin mining an energy-intensive process.

The concerns are legitimate as, according to the University of Cambridge Electricity Consumption Index, Bitcoin’s energy usage is higher than Egypt’s annual energy consumption and is close to overtaking South Africa’s.

Country energy ranking chart and Bitcoin. Source: University of Cambridge

Held said that PoW is an efficient energy model. He criticized individuals for complaining about Bitcoin’s energy consumption without “comparing it to the energy consumption of gold mining, the financial system, government, courts, military, selfies, watching the Kardashians” or AI-generative models such as ChatGPT.

Bitcoin mining has been increasingly shifting toward using green energy in recent years. The dynamics of PoW push miners to search for the cheapest energy sources possible, and as Bitcoin mining is location-agnostic, miners can move globally.

One of the most affordable energy sources is renewable energy, and Bitcoin miners have taken notice.

New research has shown that Bitcoin mining may potentially boost the transition to renewable energy. Researchers say monetizing the excess power collected by renewable energy could generate hundreds of millions of dollars in revenue, thanks to Bitcoin mining.

On May 12, 2021, Elon Musk directed Tesla to stop offering Bitcoin as a means of payment for its electric vehicles, as he was concerned about its environmental effects. On June 13, 2021, Musk said that Tesla would allow BTC transactions again once it was sure that at least 50% of the energy used by miners was clean and had a positive future trend.

According to blockchain data analyst Willy Woo and Bitcoin advocate and environmentalist Daniel Batten, Bitcoin’s usage of renewable energy is close to 57%; however, Musk hasn’t reacted to these new rates.

The lack of transparency in Bitcoin mining data remains an ongoing challenge. Batten argues that traditional media often publish misleading information about Bitcoin’s environmental impact, relying on poorly researched studies or “junk science.”

Batten observed a growing shift in media sentiment, with many news outlets adopting a more favorable or neutral stance toward Bitcoin mining as they conduct deeper investigations into the topic.

Q-day: Bitcoin is under a quantum threat

The internet relies on encryption protocols to protect data, with the US National Security Agency setting AES 256-bit encryption as the standard. Bitcoin uses this same encryption for its wallets, but many say that a future quantum computer could easily breach this encryption, compromising Bitcoin’s security.

With each quantum computing breakthrough, the crypto markets are flooded with FUD and claims that Bitcoin could become an easy target. 

On Dec. 10, 2024, Google unveiled its new quantum computing chip, Willow. It can supposedly solve computational problems in less than five minutes that traditional computing would take 10 septillon years.

Concerns over the “quantum threat” overlook a crucial point: A quantum computer capable of breaching Bitcoin’s security would likely target much larger honeypots, such as traditional banking systems, before Bitcoin.

Held claimed that Bitcoin is already ready for such an attack, and in the event of a real quantum threat, the Bitcoin protocol would simply need to be updated. 

“Quantum computers are still largely experimental; we’ll know far in advance as to when they’ll be viable.” 

The never-ending Tether story

Tether’s USDt (USDT), the largest stablecoin by market capitalization and a common trading pair to Bitcoin, is one of the most significant sources of Bitcoin-related FUD. Critics allege that Tether’s reserves lack transparency, fueling fears of a collapse.

The controversy began years ago when Tether was accused of issuing USDT without adequate backing, to manipulate Bitcoin prices during market rallies. The issue intensified in 2021 after the company revealed that only a portion of its reserves was held in cash, with the rest in commercial paper, secured loans and other assets.

Despite Tether’s efforts to improve transparency, skeptics remain unconvinced. They argue that Tether’s dominance in crypto trading and the absence of a full third-party audit present systemic risks.

Justin Bons, founder of crypto fund CyberCapital, said that these concerns resonate with many crypto investors, and says a Tether collapse could be “one of the biggest existential threats to crypto as a whole.”

Justin Bons says Tether is a much bigger threat than Terra. Source: Justin Bons

Held said the idea that a stablecoin that only represents 10% of Bitcoin’s market cap “could hurt Bitcoin by going bust is absurd.” Held said the genuine concern should be on Ethereum and its decentralized finance (DeFi) ecosystem. 

“Tether becoming worthless would cause a massive structural earthquake to the Ethereum ecosystem.”

The collapse of USDt would be catastrophic, but Held said Bitcoin would ultimately survive, just as it has over the past 12 years through crises like the Mt. Gox hack, the Silk Road shutdown, the Chinese mining ban and the Bitcoin civil war with Bitcoin Cash. He argued that the real threat lies not in Tether’s potential fall but in the fear surrounding it.

Authored by Paul Joseph Watson via Modernity.news,

Allstate CEO Tom Wilson received a measure of backlash after he insisted that Americans must respond to the New Orleans terror attack by accepting people’s “imperfections and differences.”

Wilson made the comments after ISIS supporter Shamsud-Din Jabbar drove into crowds in the early hours of New Year’s Day, killing 14 and injuring at least 35.

Jabbar posted a video online professing his support for Islamic State shortly before going on the rampage, according to authorities.

In remarks coinciding with the start of the Allstate Sugar Bowl in New Orleans, the corporation’s CEO suggested the attack was a reminder of the importance of political correctness.

NEW: Allstate CEO Tom Wilson says Americans need to overcome their “addiction of divisiveness” and “accept people’s differences” following the terror attack in New Orleans.

If only Shamsud Din Jabbar had heard this message two days ago!

The comment was made at the start of the… pic.twitter.com/WDPWZhPrru

— Collin Rugg (@CollinRugg) January 2, 2025

“Welcome to the All-State Sugar Bowl. Wednesday, tragedy struck the New Orleans community. Our prayers are with the victims and their families,” said Wilson.

“We also need to be stronger together by overcoming an addiction to divisiveness and negativity. Join Allstate, working in local communities all across America to amplify the positive, increase trust, and accept people’s imperfections and differences.”

“Together, we win.”

Some questioned who exactly the comments were supposed to be aimed at given that the only ‘divisiveness’ and ‘negativity’ on display was that which motivated Jabbar to carry out his heinous attack.

So according to @Allstate plowing through a crowd and k*lling 15 people is just an “imperfection”? pic.twitter.com/Gsy9fwDm22

— Libs of TikTok (@libsoftiktok) January 2, 2025

“So according to @Allstate plowing through a crowd and k*lling 15 people is just an “imperfection”?” remarked Libs of TikTok.

Allstate previously triumphed their advocacy for DEI policies in a year end report, boasting about how the company employed a declining number of white men.

In their year end report for 2023, @Allstate boasts about their dedication to DEI and having less White men in their company.

Were White men discriminated against in their hiring practices? https://t.co/0oFW8AYVdJ pic.twitter.com/ztHy7nWI8e

— Libs of TikTok (@libsoftiktok) January 3, 2025

Others asserted that they would be canceling their insurance policy with the company as a result of Wilson’s odd statements.

@Allstate my wife and I will be canceling our insurance with you first thing in the morning and we’ll have a new insurance company for our home and auto policies by noon. As well, my four sons and our two daughters all who have insurance with you. Pound salt.

— 1st Cav (@Cav1Cav) January 3, 2025

*  *  *

Your support is crucial in helping us defeat mass censorship. Please consider donating via Locals or check out our unique merch. Follow us on X @ModernityNews.

The federal government’s plan to impose “net neutrality” regulations went beyond its authority, a U.S. appeals court ruled on Jan. 2, the Epoch Times reported.The Federal Communications Commission (FCC) regulations, which bar internet service providers from blocking or limiting access to users, violate federal law because the providers provide an information service, not a telecommunications service, U.S. Circuit Judge Judge Richard Allen Griffin wrote for a unanimous panel of the U.S. Court of Appeals for the Sixth Circuit.

A federal law enables the FCC to impose strict requirements on telecommunications services but not information services.

Griffin referenced a recent U.S. Supreme Court ruling known as Loper Bright that struck down a doctrine that gave government officials wide leeway to interpret laws.

“We acknowledge that the workings of the Internet are complicated and dynamic, and that the FCC has significant expertise in overseeing ’this technical and complex area,‘” Griffin wrote. “Yet, post-Loper Bright, that ’capability,’ if you will, cannot be used to overwrite the plain meaning of the statute.”

The ruling strikes down regulations revived in a 3–2 vote by the FCC in 2024. The regulations were originally promulgated during the Obama administration but were revoked during President Donald Trump’s time in office. The commission voted with encouragement from President Joe Biden.

Industry groups brought the case, which had earlier prompted the Sixth Circuit to pause the regulations as judges considered whether they were lawful.

Following the decision, FCC Chairwoman Jessica Rosenworcel called for Congress to act.

“Consumers across the country have told us again and again that they want an internet that is fast, open, and fair,” she said in a statement. “With this decision it is clear that Congress now needs to heed their call, take up the charge for net neutrality, and put open internet principles in federal law.”

Continue reading at the Epoch Times

US equity futures posted modest gains suggesting stocks may finally halt a five-day losing streak, the longest since April, although we have seen early strength quickly turn to selling so it is unclear if today’s modest bounce will last. As of 8:00am, S&P 500 contracts rose a modest 0.2%, fading stronger gains earlier, while the Nasdaq 100 rose 0.3%. European stocks dropped while Asian equities rebounded to erase Thursday’s losses, boosted by gains in the region’s technology companies even as Mainland China shares sank again as Chinese yields plunged to a new record low. And speaking of yields, the 10Y TSY yield ticked lower, dipping 2 bps to 4.54% while the dollar slipped from the two-year high it set Thursday. The US economic data calendar includes December ISM manufacturing at 10am. Fed speakers scheduled for the session include Barkin (11am).

In premarket trading, Tesla rebounding partially from Thursday’s slump prompted by disappointing vehicle sales numbers. US Still plunged more than 9% after reports that President Joe Biden has decided to block Nippon Steel’s purchase of the company. Here are some other notable premarket movers:

• Block rose 2% after Raymond James turned bullish on the digital payments firm, expressing confidence in the company’s seller gross payments volume.
• Nu Skin Enterprises jumped 12% on a pact to sell its Mavely marketing technology platform.
• Stellantis dropped slips 1.6% as some EV models that had previously received US tax credits for electric vehicles and plug-in hybrids failed to make it into the new list under tougher rules.

Overnight, Bloomberg reported that Biden has decided to block the sale of US Steel to Nippon Steel, ending a $14.1 billion deal that has faced months of vocal opposition and raising questions over the future of a US industrial giant. The news sent the stock sliding by double digits. The president had indicated his opposition to the proposed acquisition, arguing US Steel should remain American owned and operated, though the White House has never said outright that he would block the deal.

Separately, investors will be watching the US House Speaker vote Friday to see if Mike Johnson will retain his position. Republican squabbling over his reelection could bode ill for Trump’s agenda, according to Tom Essaye, founder of the Sevens report.

It’s been a volatile start to the year for stocks, with the S&P 500 index posting intraday gains in the previous two sessions, only to close lower. US manufacturing data due later will give investors clues on the health of the economy while they look ahead to Trump’s inauguration 17 days away to reduce uncertainty over future US policy.

“We really need to see more of that clarity on January 20th for markets to have greater conviction,” said Laura Cooper, global investment strategist at Nuveen. “But I think US exceptionalism will continue to be the dominant theme at least in the first half of the year, regardless of what some of those policies that come through are.”

In Europe, the Stoxx 600 fell 0.3% while French stocks underperform their regional peers. Autos, consumer products and miners are the biggest laggards on growing concerns about Chinese demand. Stellantis NV fell as much as 3.8% as some EV models that had previously received US tax credits for electric vehicles were excluded under tougher rules. Here are some other notable European movers:

• Tullow Oil gains after an international body found it wasn’t liable for a $320 million tax assessment in Ghana, where its key oil assets are located
• Outokumpu falls as much as 2.2% after being downgraded at BNP Paribas Exane in a review of its steelmaking coverage; Voestalpine meanwhile falls as much as 2.4% after also receiving a downgrade in the same review
• Shares of European hearing-aid makers GN Store Nord and Demant drop after EssilorLuxottica’s acquisition of Pulse Audition, a French startup delivering AI-based noise reduction and voice enhancement

Earlier in the session, Asian equities rebounded to erase Thursday’s losses, boosted by gains in the region’s technology companies. Mainland China shares sank extending their worst start to the year since 2016. The MSCI Asia Pacific excluding Japan index rose as much as 0.8%, the most since Dec. 23, with TSMC, Xiaomi and SK Hynix contributing the most. South Korean shares led the gains in the region after five days of selling. Benchmarks also gained in Hong Kong, Taiwan and Australia, while India’s fell.  China’s stocks were mixed after a selloff on Thursday that saw mainland equities register their worst start to the year since 2016. China’s CSI 300 slumped 1.2%, while the Hang Seng Index rose 0.7%. The weakness was more prominent in the country’s small-caps stock after the CSI 2000 index marked its worst day in more than a week. The yuan fell to breach the psychological milestone of 7.3 per dollar for the first time since late 2023. The nation’s 10-year government bond yield slipped below 1.6% for the first time ever.

“There’s been many false dawns in China in recent months and it looks as though it’s unraveling again,” said Kenneth Broux, a strategist at Societe Generale. “We’ve seen three big days of selling which is not really conducive to sentiment.”

In FX, the Bloomberg Dollar Spot Index fell 0.2% from the two-year high it set Thursday, while the Swiss franc tops the G-10 FX leader board, rising 0.3% against the greenback. The onshore yuan weakened past 7.3 per dollar, a level that China had been defending since late last year.

In rates, Treasuries edged up, with US 10-year yields falling 2 bps to 4.54%. German government bonds underperform, more notably at the short-end of the curve with German two-year borrowing costs up 3 bps. Gilts advance.

In commodities, oil prices dipped with WTI falling 0.5% to $72.80 after a four-day rally. European natural gas prices are also in the red. Spot gold is steady near $2,656/oz on track for its biggest weekly gain since November. Bitcoin dropped for the first time in four days, trading below $97K.

Looking at today’s calendar, US economic data calendar includes December ISM manufacturing at 10am. Fed speakers scheduled for the session include Barkin (11am).

Market Snapshot

• S&P 500 futures up 0.3% to 5,938.50
• STOXX Europe 600 down 0.2% to 509.80
• MXAP up 0.2% to 181.45
• MXAPJ up 0.3% to 568.60
• Nikkei down 1.0% to 39,894.54
• Topix down 0.6% to 2,784.92
• Hang Seng Index up 0.7% to 19,760.27
• Shanghai Composite down 1.6% to 3,211.43
• Sensex down 0.9% to 79,236.01
• Australia S&P/ASX 200 up 0.6% to 8,250.49
• Kospi up 1.8% to 2,441.92
• German 10Y yield little changed at 2.38%
• Euro up 0.3% to $1.0297
• Brent Futures down 0.5% to $75.58/bbl
• Gold spot down 0.1% to $2,654.67
• US Dollar Index down 0.39% to 108.97

Top Overnight News

• President-elect Donald Trump is throwing more weight behind Mike Johnson’s speakership bid, as a handful of Republicans are weighing whether to block Johnson’s attempt to reclaim the gavel. Trump has argued publicly and privately that Johnson is the only Republican who can secure the 218 necessary to win the post, a critical step for both Trump and GOP lawmakers to quickly implement his agenda. Politico
• US House Speaker vote is scheduled for today, NBC reports that the first call should begin at around 12pm EST.
• Joe Biden will block the sale of US Steel to Nippon Steel. An announcement is expected today. The Washington Post said senior officials attempted to dissuade Biden, arguing it could damage relations with Japan. US Steel shares -8.5% in the premarket. BBG
• US President-elect Trump named a team to work in conjunction with US Treasury Secretary nominee Scott Bessent with Ken Kies to be Assistant Secretary for Tax Policy and he named Cora Alvi as Deputy Chief of Staff.
• China’s PBOC says it will cut interest rates this year “at an appropriate time” as it looks to shift and simplify its monetary policy framework toward a Fed/ECB-like focus on a single benchmark rate. FT
• China will sharply increase issuance of ultra-long treasury bonds in 2025 to spur business investment and consumer-boosting initiatives, a state planner official said on Friday, as Beijing cranks up fiscal stimulus to revitalize the faltering economy. RTRS
• Apple received another negative headline from China as reports suggest shipments of foreign-branded smartphones to the country (including the iPhone) slumped 47% Y/Y in November, down for the fourth straight month. RTRS
• The UN food price index came in at 127 in Dec, down 0.5% from Nov, as decreases in the price indices for sugar, dairy products, vegetable oils and cereals more than offset increases in meat. UN
• US EV sales jumped 12% in the fourth quarter, pushing the full-year total to a record 1.3 million, boosted by Trump’s threat to eliminate tax credits for plug-in cars, Cox Automotive said. Total car sales also rose. BBG
• Reserves in the US banking system fell to the lowest in over four years in the week through Jan. 1, as year-end dynamics forced lenders to pare balance-sheet intensive activities. At the same time, the Fed has been removing excess cash through its QT program. BBG
• Investors yanked a net $333 million from BlackRock’s iShares Bitcoin Trust ETF yesterday, the most withdrawn since the fund’s launch. BBG

A more detailed look at global markets courtesy of Newsquawk

APAC stocks were ultimately mixed with most major indices higher although the gains were capped amid the holiday closure in Japan and after the negative handover from the US where the dollar strengthened and Tesla deliveries disappointed. ASX 200 was underpinned with energy and gold miners leading the advances after recent gains in underlying commodity prices. KOSPI outperformed despite reports of a standoff between a military unit and South Korean investigative authorities attempting to arrest impeached President Yoon, while acting President Choi ordered to deploy market stabilising measures swiftly and boldly if volatility heightens. Hang Seng and Shanghai Comp traded mixed despite falling yields amid a report the PBoC is said to plan a policy overhaul as pressure mounts on the economy and would likely cut interest rates from the current level of 1.5% at an appropriate time. Nonetheless, some support was seen for Hong Kong tech stocks after an NDRC official said they will sharply increase funding from ultra-long treasury bonds this year to support “two new” programmes and will broaden the consumer trade-in initiative to include smartphones, while the mainland failed to benefit amid the ongoing US-China trade-related frictions.

Top Asian News

• PBoC is reportedly to plan a policy overhaul as pressure mounts on the economy and said it was likely it would cut interest rates from the current level of 1.5% at an appropriate time, while the report noted it would prioritise “the role of interest rate adjustments” and move away from “quantitative objectives” for loan growth in what would amount to a transformation of Chinese monetary policy, according to FT.
• China’s NDRC held a briefing regarding high-quality growth and announced it will sharply increase funding from ultra-long treasury bonds this year to support “two new” programmes, while it is to broaden the consumer trade-in initiative to include smartphones. NDRC expects consumption to maintain steady growth in 2025 and noted China’s economy is facing many new difficulties and challenges in 2025 but added there is ample room for macro policies in 2025. Furthermore, the NDRC deputy head announced an allocation of CNY 100bln in 2025 for two new and two major projects in advance, while it will push major reforms in 2025 to stabilise expectations, boost confidence and promote development, as well as step up efforts surrounding employment.
• South Korean investigative authorities visited President Yoon’s residence to attempt to carry out an arrest warrant but were prevented from carrying out the arrest amid a standoff with a military unit, while two South Korean military officials including the martial law commander were indicted and detained by prosecutors. Furthermore, South Korean acting President Choi ordered to deploy market stabilising measures swiftly and boldly if volatility heightens, as well as announced to prepare tax support measures for small and medium-sized firms to boost corporate investment.

European bourses opened modestly mixed, but quickly succumbed to some selling pressure to display a negative picture in Europe thus far. European sectors opened mixed, but now hold a slight negative bias. A broker upgrade for UBS has helped to prop up Financial Services; Consumer Products once again is towards the foot of the sector list, with Luxury names doing much of the dragging. US equity futures are modestly firmer, with modest outperformance in the NQ after trading lower in the prior session. Phone shipments within China -5.1% Y/Y at 29.61mln handsets in November (vs +1.8% Y/Y to 29.67mln units in October), according to CAICT; shipments of foreign branded phones including Apple (AAPL) iPhone within China -47.4% Y/Y at 3.04mln handsets in November (vs -44.3% Y/Y in October), according to Reuters calculations based on CAICT data.

Top European News

• UK Chancellor Reeves warned ministers to consider cuts to frontline services to fund above-inflation pay increases for public sector workers, according to The Times.

FX

• USD is giving back some of yesterday’s gains vs. peers with DXY returning to a 108 handle after topping out at 109 yesterday (highest since November 2022); currently around the 109.00 mark. For today’s data docket, focus will be on the December ISM manufacturing print which is expected to remain in contractionary territory at 48.4. Elsewhere, markets will be awaiting the outcome of the US House speaker vote (from around 17:00GMT, according to NBC).
• EUR has managed to claw back some lost ground vs. the broadly softer USD but is yet to undo a bulk of the damage yesterday which saw the pair slip from a 1.0375 peak to a 1.0224 low (lowest since November 2022).
• Japanese-specific newsflow remains on the light side with Japan way from market overnight. As such, the USD leg of the USD/JPY pair has been doing a bulk of the heavy lifting and therefore the broadly softer USD has dragged the pair lower. That being said, the pair has been unable to return to a 157 handle after delving as low as 156.44 yesterday.
• GBP is attempting to reverse some of yesterday’s heavy selling pressure which dragged the pair from a 1.2540 peak to a 1.2353 low. Whilst there was no specific catalyst for yesterday’s price action, desks pointed to a reversal of last year’s relative outperformance of the GBP vs. peers (ex-USD).
• Antipodeans are both firmer vs. the broadly weaker USD with AUD managing to overlook losses in iron ore. Newsflow for both has been light, however, attention was on events in China overnight amid reports of support measures from China’s state planner.
• RBI likely selling USD around 85.77-79 levels to support the INR, according to traders cited by Reuters.
• PBoC set USD/CNY mid-point at 7.1878 vs exp. 7.2868 (prev. 7.1879).

Fixed Income

• A relatively contained start for benchmarks, with USTs in a narrow 108-27+ to 109-01 band with the docket light until we get to the US morning when ISM Manufacturing PMI is due before the expected commencement of the vote concerning House Speaker Johnson at around 17:00GMT.
• Bunds hold a bearish bias as the benchmark pares some of the upside seen late-doors on Thursday. Currently, at the low-end of a 132.95-133.48 band, which remains entirely within but approaching the trough of Thursday’s 132.90-133.86 range.
• OATs are the EGB laggard, with pressure stemming from reports in Le Monde that French PM Bayrou is aiming for a 2025 budget deficit as a % of GDP of 5.4%, higher than the 5.0% targeted by Barnier’s failed administration.
• Gilts stand as the marginal outperformer, initially gapped higher at the open, but has since succumbed to the broader fixed income pressure; currently near the day’s trough at 92.24. Specifics include mortgage and money supply data for November from the BoE, metrics which came in below forecast across the board but spurred no real Gilt follow through.

Commodities

• Subdued trade in the crude complex as prices take a breather from the prior day’s surge, and amid a generally cautious risk tone. Brent sits in a USD 75.53-76.26/bbl parameter.
• Nat gas is slightly softer intraday in tandem with broader energy markets, with Dutch TTF front-month oscillating on either side of EUR 50/MWh.
• Mixed trade across precious metals with Palladium clearly benefitting from the softer Dollar, whilst silver ekes mild gains and gold trades subdued. Spot gold resides towards the middle of a current USD 2,649.95-2,665.40/oz range.
• Base metals are modestly higher but with price action contained to a tight range between 8,781.50-8,852.00/t awaiting the next catalyst.
• Goldman Sachs sees significant risks that TTF gas prices rally towards oil-switching economics in a EUR 63-84/MWh range in the coming months.
• Russian oil product exports from the Black Sea port of Tuapse are reportedly planned at 0.798mln/T in January (0.885mln/T scheduled in Dec.), via Reuters citing sources.
• Austria’s Grid Manager says other NatGas sources are compensating for the loss of Russian fuel via Ukraine, gas imports via Germany and Italy are sufficient, according to Bloomberg’s Stapczynski.
• Indonesia Minister says Indonesia is reviewing nickel ore mining quote, seeking to prevent further price falls.

Geopolitics

• Israeli PM Netanyahu will convene a meeting today to discuss the mandate of the Israeli delegation that will leave for Qatar, according to Journalist Stein.
• Israeli army noted sirens sounded in several areas of central Israel after a rocket was fired from Yemen, according to Sky News Arabia.
• Sky News Arabia correspondent reported huge explosions in Syria’s Aleppo amid Israeli raids.

US Event Calendar

• 10:00: Dec. ISM Manufacturing, est. 48.2, prior 48.4
  • Dec. ISM Employment, prior 48.1
  • Dec. ISM New Orders, prior 50.4
  • Dec. ISM Prices Paid, est. 51.8, prior 50.3

DB’s Jim Reid concludes the overnight wrap

Markets got 2025 off to a gloomy start yesterday, with the S&P 500 (-0.22%) extending its post-Christmas losses as various headlines added to the downbeat tone. The latest decline is now the 5th consecutive move lower for the S&P, making it the longest run of declines for the index since April. But as we mentioned yesterday, the first trading day has been a very poor guide to the rest of the year in recent times, so we shouldn’t extrapolate things too far. Indeed, both of the last two years saw the S&P 500 lose ground on the first day, before going on to rise more than +20% over the year as a whole.

Several factors helped to extend the selloff over the last 24 hours. First up, we had a lot of negative headlines out of Europe, as concerns mounted about the energy situation after the expiry of the transit deal between Russia and Ukraine. That meant European natural gas futures closed above €50/MWh for the first time since October 2023, and the end of the transit deal has also coincided with some very cold temperatures in northern Europe right now. So the fear is that higher gas prices are going to add to inflationary pressures, whilst gas storage has been falling faster than usual this year as well.

That backdrop saw the euro (-0.88%) close at its weakest level against the US Dollar since November 2022, ending the session at $1.0265. This continues the declining trend that’s been evident since late-September, as the prospect of US tariffs and a more hawkish Fed have put the currency under pressure. In the meantime, sterling saw even bigger losses, falling by -1.09% to $1.2380, which is its weakest closing level since April. And with inflationary pressures mounting, including from a weaker currency, sovereign bonds struggled across much of Europe, with yields on 10yr bunds (+1.2bps), OATs (+3.8bps) and gilts (+3.1bps) all moving higher. In fact, for another sign of the risk-off tone yesterday, the Franco-German 10yr spread moved up to 85.6bps, which is the widest it’s been since December 2, the day that the National Rally announced they’d back a motion of no confidence in Michel Barnier’s government.

That downbeat European narrative got a further push yesterday from the final manufacturing PMIs for December, which saw modest downward revisions compared to the flash prints. For example, the Euro Area manufacturing PMI came down a tenth to 45.1, and the UK reading came down three-tenths to 47.0. And in the UK’s case, that also leaves the manufacturing PMI at an 11-month low.

To be fair, the European equity performance was pretty good in the circumstances, with the STOXX 600 (+0.60%) and all the other major indices advancing. That was driven by an outperformance from energy stocks given the upward moves for energy commodities, and Brent crude oil ended the session up+1.73% at $75.93/bbl, marking its 4th consecutive move higher. That trend has continued this morning too, with Brent crude prices up another +0.28% to $76.14/bbl. But for US equities there was a much more negative story, with the S&P 500 (-0.22%) posting a 5th consecutive loss, driven by even deeper losses for the Magnificent 7 (-0.69%). In fact, Tesla (-6.08%) was the worst performer in the entire S&P 500 after they reported that their annual vehicle sales had fallen for the first time since 2011. The NASDAQ (-0.16%) and the Dow Jones (-0.36%) lost ground as well, with the small-cap Russell 2000 (+0.07%) outperforming as it posted a modest gain.

Whilst there were several negative headlines yesterday, a more positive story were some upside surprises in the US data. For instance, the weekly initial jobless claims fell to their lowest since April over the week ending December 28, coming in at just 211k (vs. 221k expected). That pushed the 4-week moving average down to 223.25k, and the continuing claims for the previous week also fell to their lowest since September, at 1.844m (vs. 1.890m expected). Separately, we had the final manufacturing PMI for December, which was revised up from the flash reading to 49.4 (vs. flash 48.3). So that was all coming in on the upside.

But even with those upside data surprises, it meant investors dialled back their expectations for rate cuts from the Fed over the next few months, so that meant risk assets lost a bit of support. Moreover, given the latest moves in energy prices, investors moved to raise their near-term inflation expectations, with the US 1yr inflation swap up +4.9bps yesterday to 2.57%. And after the jobless claims numbers were out, the 2yr Treasury yield (-0.2bps) moved off its intraday low of 4.20%, paring back that decline to end the session at 4.24%. It was a similar story for the 10yr yield (-1.0bps) too, which came off its intraday low of 4.51% to close at 4.56%.

Overnight, there have been some signs of a recovery, with advances for South Korea’s KOSPI (+1.78%) and Australia’s S&P/ASX 200 (+0.60%). And looking forward, US equity futures are also positive, with those on the S&P 500 up +0.14%. However, Chinese equities have continued to lose ground, with both the CSI 300 (-0.25%) and the Shanghai Comp (-0.69%) extending their 2025 losses. That comes as China’s 10yr government bond yield has fallen below 1.6% intraday for the first time ever this morning, whilst the FT reported comments from the People’s Bank of China that they would likely cut interest rates “at an appropriate time” this year. The article said that the PBoC would prioritise “the role of interest rate adjustments”, moving away from “quantitative objectives” for loan growth. Otherwise, Japanese markets remain closed for a holiday.

Looking forward, one thing to look out for today will be the start of the new session of Congress in the United States, including the vote to elect the Speaker of the House of Representatives. The incumbent Speaker Mike Johnson is trying to stay in post and has the endorsement of Donald Trump, but the Republicans have a very tight majority in the House, with a 220-215 margin over the Democrats. A few Republicans haven’t committed to voting for Johnson for Speaker, and two years ago it took 15 ballots over multiple days before Kevin McCarthy was elected. From a market standpoint, this will be an interesting test as to the unity of the new Republican majority as they seek to enact Trump’s second term agenda, as it’s a much tighter margin than they had after the 2016 election, when the Republicans began with a 241-194 majority in the House.

To the day ahead now, and data releases include the US ISM manufacturing print for December, German unemployment for December, and UK mortgage approvals for November. From central banks, we’ll hear from the Fed’s Barkin and the ECB’s Lane.

Update: 

President Biden has released a statement indicating that he will “block” Nippon Steel’s $14.9 billion takeover of US Steel.

Here’s the full statement: 

As I have said many times, steel production—and the steel workers who produce it—are the backbone of our nation.  A strong domestically owned and operated steel industry represents an essential national security priority and is critical for resilient supply chains.  That is because steel powers our country: our infrastructure, our auto industry, and our defense industrial base. Without domestic steel production and domestic steel workers, our nation is less strong and less secure.

For too long, U.S. steel companies have faced unfair trade practices as foreign companies have dumped steel on global markets at artificially low prices, leading to job losses and factory closures in America. I have taken decisive action to level the playing field for American steelworkers and steel producers by tripling tariffs on steel imports from China.  With record investments in manufacturing, more than 100 new steel and iron mills have opened since I took office, and U.S. companies are producing the cleanest steel in the world. Today, the domestic steel industry is the strongest it has been in years.

We need major U.S. companies representing the major share of US steelmaking capacity to keep leading the fight on behalf of America’s national interests. As a committee of national security and trade experts across the executive branch determined, this acquisition would place one of America’s largest steel producers under foreign control and create risk for our national security and our critical supply chains.

So, that is why I am taking action to block this deal. It is my solemn responsibility as President to ensure that, now and long into the future, America has a strong domestically owned and operated steel industry that can continue to power our national sources of strength at home and abroad; and it is a fulfillment of that responsibility to block foreign ownership of this vital American company. U.S. Steel will remain a proud American company – one that’s American-owned, American-operated, by American union steelworkers – the best in the world.  

Today’s action reflects my unflinching commitment to utilize all authorities available to me as President to defend U.S. national security, including by ensuring that American companies continue to play a central role in sectors that are critical for our national security. As I have made clear since day one: I will never hesitate to act to protect the security of this nation and its infrastructure as well as the resilience of its supply chains.

*   *   * 

Biden administration officials seem to have leaked the president’s impending decision, expected on Friday, to block Japan’s Nippon Steel from purchasing US Steel. The Washington Post was the first to report on the president’s planned move. 

The report states that two administration officials revealed President Biden chose to block the deal between Nippon Steel and US Steel, despite warnings from some senior advisers about potential negative consequences surrounding future foreign investment in US companies. 

On Dec. 23, the Committee for Foreign Investment in the United States, also known as CFIUS, notified the Biden administration it had not reached a consensus about whether Nippon’s potential purchase of US Steel would pose a national security risk, essentially leaving the decision up to the elderly president who doesn’t know what day it is.

The panel, chaired by Treasury Secretary Janet Yellen, said Nippon purchasing US Steel could reduce domestic steel production and pose “risks to the national security of the United States,” adding, “Potential reduced output by US Steel could lead to supply shortages and delays that could affect industries critical to national security.” 

CFIUS noted that Nippon’s global operations might not support ‘America First’ amid US Treasury trade actions against low-cost steel imports. They said this could leave “the US economy more exposed to dumping and unfair subsidization of steel.” 

On Monday, Nippon executives made a last-ditch attempt to sway Biden. The execs sent a proposal to the White House that would allow the government to veto any reduction in US Steel’s “production capacity.” 

For many months, Biden has publicly opposed Nippon’s $14.9 billion takeover of US Steel, ultimately siding with David McCall, the president of the United Steelworkers union. McCall has called Nippon’s bid as “bad for workers.” 

Meanwhile, President-elect Donald Trump has opposed the transaction and said he would support US Steel with tariffs and tax incentives. 

In premarket trading, shares of US Steel are down 6% in New York. 

If Nippon Steel’s purchase of US Steel is rejected due to national security concerns, foreign investors could reconsider allocating resources toward mergers, acquisitions, or investments in the United States.

Authored by Mike Shedlock via MishTalk.com,

Other than exports, no country wants to be like China.

China Overindebtedness, Overbuilding and Overcapacity

The Wall Street Journal reports China’s Economy Is Burdened by Years of Excess. Here’s How Bad It Really Is.

Destiny deferred

China’s rapid growth meant that for years forecasters expected China to overtake the U.S. as the world’s largest economy. As recently as 2019, some forecasters were expecting China’s GDP to eclipse the U.S.’s around 2030. Today, it is the U.S. powering the global economy and China that is battling stumbling growth. Few now expect China to catch up with the U.S. before midcentury, if it manages to at all.

Ticking time bomb

China is also facing demographic headwinds that will make it harder to restore its economic vigor. China’s working-age population is shrinking, reversing the demographic dividend that powered its economic ascent.

China’s Working-Age Population

China’s economy has for decades been powered by heady levels of investment. At first, that yielded modern infrastructure and propelled the expansion of China’s manufacturing engine and its megacities. But sticking with that strategy year after year has meant China today is beset by colossal debts, unneeded apartments and industrial overcapacity.

Debt as Percentage of GDP China

Debt: Borrowing by government, households and corporations in China is approaching 300% of its annual GDP. “Hidden” borrowing by local governments—debt held off the books on their behalf by opaque investment companies known as local government financing vehicles—is a major problem. On some measures, the scale of those debts and the burden of servicing them in China is more severe than in the U.S. before the financial crisis or in Europe in the depths of its own debt crisis a decade ago.

Real estate: China’s real-estate boom was unprecedented—and so is the ongoing bust. New construction and sales have cratered since the government took steps to rein in the bubble in 2020. It has struggled to stabilize the market, despite measures to ease purchase restrictions and offer cheap credit to would-be buyers.

One sign of the boom’s excesses: There are as many as around 80 million vacant units in China, according to the latest estimates at the end of November, equivalent to half the total housing stock of the entire U.S.

Share of Global Manufacturing

Industrial Overcapacity

In response to the slowing economy, and to transform China into a technological colossus, leader Xi Jinping has been funneling investment into China’s already huge factory sector. The result has been a surge in industrial capacity and two years of falling prices for Chinese producers, which are increasingly looking overseas to find buyers for goods they can’t sell at home. That is sparking trade spats with the U.S.-led West and emerging markets such as Brazil and India.

Debt Deflation Trap

China is in a debt deflation trap of its own making.

It makes sense to add capacity if the debt is productive and can be serviced.

China should write down debts but much of that is in State Owned Enterprises (SOE), and the political class will not take a hit or admit mistakes (just like everywhere else).

Mirage of Growth

Image WSJ

For decades, China depended on property bubbles for growth. With building now crumbling, all of that growth was a mirage.

I have been writing about China’s “ghost cities” where no one lives for a decade. They are a result of malinvestment.

Building those cities added to GDP, but it was really 100 percent waste.

World’s Biggest Property Bubble

On March 23, 2011 I noted World’s Biggest Property Bubble: China’s Ghost Cities Revisited; 64 Million Vacant Properties

The true state of affairs is China’s banks are insolvent. China is building units for which there is little demand and few can afford. China will have to print money to pay for all of this malinvestment. The idea the Yuan is undervalued fails to take into consideration any of this.

Bonds of China’s Largest Property Developer Crash

On August 10, 2023, I noted Bonds of China’s Largest Property Developer Crash to 25 Percent of Notional Value

Hello there Purchasing Power Parity (PPP) GDP advocates and China horn tooters in general, let’s discuss real estate.

It was a long time waiting for the inevitable.

Flashback Hoot of the Day: When Will China Overtake the US?

On August 6, 2023 In Flashback Hoot of the Day: When Will China Overtake the US? I discussed a bet that Michael Pettis made with the Economist on when China would pass the US in GDP.

The Economist made a bet with Pettis in 2012 that by 2018 China would pass the US. The Economist lost the bet by a mile. China is still not close to the US in GDP. A couple of my readers say not so, based on PPP.

Fundamentally, PPP is horrendously flawed. 

Purchasing Power Parity Silliness and the Myth China Passed the US in GDP

On August 8, 2023, I discussed Purchasing Power Parity Silliness and the Myth China Passed the US in GDP

Some of my readers claim China passed the US in GDP based on Purchasing Power Parity (PPP). The rationale is hugely flawed.

Michael Pettis: “Adjusting GDP for differences in purchasing power makes a great deal of sense in certain cases, but the way it is done is so filled with problems that it is extremely difficult to find any economist who takes these measures very seriously.“

What I Said in 2011

All this talk about how undervalued the Yuan is, how China will rule the world, and why the Yuan will be the next global reserve currency is pure silliness.

China’s growth is nothing more than a credit bubble on steroids. Cities are vacant, yet China keeps building, and building and building.

Savings Glut Thesis

There is still rampant belief that China is this big nation of savers, and US trade deficits are the other side of the coin.

Ben Bernanke, Larry Summers, and even Michael Pettis believe in the savings glut thesis. It is my one ongoing disagreement with Pettis.

But Pettis is slightly different in that he calls it a savings imbalance. I still disagree, but “imbalance” is closer.

I highly respect Michael Pettis, he taught me nearly everything I know about trade.

Here’s my question: China now has a debt to GDP ratio of nearly 300 percent. So where the heck is the saving either in China or here?

We can look at M2 or money supply and the massive wealth of people like Elon Musk, but printing money (yaun or dollars) is not savings.

What is Saving?

Saving is production minus consumption. China’s property bubble is a great example.

People alleged “saved” their money by investing in property bubbles. But entire cities are now worthless. China needs to spend money to tear them down.

That savings has been rendered worthless, but the debt remains, and the cities are now of negative value (they need to be torn down).

That China made a few billionaires in the process is not a savings glut, not a savings imbalance, and not net savings.

Ghost cities do not constitute savings. They do constitute savings destroyed. And the process is still ongoing.

Hoot of the Day

People are still predicting the demise of the US and destruction of the US dollar. Nonsensical US hyperinflation talk has been ongoing the whole time.

China is a manufacturing miracle but all China did was replace a property bubble with an even bigger manufacturing bubble to keep people employed.

We are now at a point where China is subsidizing exports to an extent the world has never before seen, just to keep it’s economy growing (on paper).

This is a better use for “saving” than property bubbles that have been more than 100 percent wiped out (again think of cleanup costs), but the return on these manufacturing investments is less than zero.

Who’s Paying the Price?

Chinese consumers paid the price of now less than worthless property bubbles.

Chinese consumers continue to pay the price of subsidizing exports.

China desperately needs a course correction but there are no signs China is about to do so.

So, What Country Wants to Be Like Germany Now?

On December 17, 2024, I asked So, What Country Wants to Be Like Germany Now?

The collapse of Germany shocks many. But I have been discussing why this was inevitable for over a decade.

The current chancellor has called for bailouts and subsidies to save jobs and prop up struggling carmakers, while Merz has floated a menu of supply-side measures such as lower taxes, less bureaucracy and steps that would make it cheaper for businesses to reach Berlin’s climate goals.

Shocked? I’m Not

This is all so predictable. The only thing debatably shocking is how it too so long.

Flashback April 11, 2013: Eurozone Math; One Size Fits Germany; Door Number Two

As a direct result of the unstable eurozone treaty, sovereign interest rate imbalances, Target II imbalance, and trade imbalances are out of control. Germany and the other European creditor countries are owed money that cannot be paid back.

Few have made the connection, but Germany and China are both following in the footsteps of Japan’s debt deflation trap.

Price deflation is a benefit. Debt deflation and writeoffs of debt are a curse.

We are in this mess because Central banks and governments fail to differentiate. Don’t be like central banks and confuse the two.

Authored by Stuart Englert via The Mises Institute,

Gold enthusiasts can celebrate a golden anniversary on New Year’s Eve and simultaneously mark a market manipulation milestone. Fifty years ago, President Gerald R. Ford legalized private gold ownership, allowing Americans once again to stack the regal metal as a wealth-preserving asset and safe haven against monetary inflation and dollar depreciation. Gold futures trading and market meddling also began in the United States a half-century ago.

On December 31, 1974, Ford issued an executive order revoking President Franklin D. Roosevelt’s 1933 decree that criminalized gold hoarding and prohibited American citizens from owning more than $100 worth (about 5 troy ounces at the time) of the demonetized metal. President Ford signed the order without celebratory remarks or public fanfare. He simply released an official statement citing the legal authority he had to take the action.

While no confetti flew or champagne corks popped in the White House to mark the momentous occasion, repeal of FDR’s 41-year-old edict sparked the largely dormant gold industry and restored trading of the yellow metal as a commodity. Gold could be owned, bought, and sold domestically as an investment without risking a $10,000 fine and 10 years in prison. However, gold coins weren’t US legal tender at the time and bullion wasn’t used in official foreign exchange after President Richard Nixon delinked the dollar from gold in 1971.

As the nation’s only unelected president and vice president, Ford didn’t have a political or public mandate to legalize gold, nor was he a fervent goldbug or hard-money proponent. “Mr. Nice Guy,” as the nation’s 38th president came to be known, merely went along with a bipartisan measure passed by Congress four months earlier. The no-name bill—Public Law 93-373—permitted “United States citizens to purchase, hold, sell, or otherwise deal with gold in the United States or abroad.”

Introduced by Sen. James Fulbright (D-Ark.), the legislation was approved by a coalition of Democrats and Republicans following a grassroots movement led by James U. Blanchard III, founder of the National Committee to Legalize Gold. The measure’s passage was attributed to support from free-market gold advocates and its link to a foreign aid package promoted by Nixon. Ford signed the bill into law on August 14, 1974, six days after the partial-term Republican took the presidential oath following Nixon’s resignation over the Watergate scandal.

Gold legalization wasn’t without its concerns and opposition. The decision raised alarms within the US Treasury Department and Federal Reserve, particularly after the gold price climbed to a record high, topping $195 an ounce on December 30, 1974. At the time, the statutory gold price was $44.22 an ounce and the nation’s gold stocks were undergoing a highly-publicized audit that began with a congressional, media-covered, and question-raising inspection of a single vault at Fort Knox (KY) Bullion Depository on September 23, 1974.

US Treasury & IMF Sold Gold to Cap Price

Treasury officials worried strong public demand for gold might drive prices higher, increase the nation’s trade deficit if the commodity were imported and further weaken the unbacked, devalued, and expanding supply of Federal Reserve notes. Those were valid concerns amid the inflationary spiral triggered by Nixon’s suspension of the international gold standard, the lingering effects of the 1973 Arab oil embargo, and persistent federal budget deficits and rising national debt.

To contain the price, the Treasury announced plans to sell 2 million ounces of gold bars. The first auction was held January 6, 1975, less than a week after Ford legalized private gold ownership. With a subsequent sale on June 30, a total of 1.25 million ounces of gold were sold at prices ranging from $153 to $185 an ounce. Sales of 25 million ounces of International Monetary Fund (IMF) gold commenced in 1976 and Treasury sales of 15.8 million ounces resumed in 1978 to curtail prices and defend the debased dollar.

Federal Reserve Chairman Arthur Burns called Congress’s decision to remove the ban on private gold ownership “ill-timed” and urged a delay. He feared investors might withdraw funds from savings accounts and sell stocks to buy gold, causing extreme price movements, widespread speculation, and financial market disruptions. He also expressed concern that US Treasury gold sales aimed at controlling the price might require future interventions. “Once some Treasury sales have been made, it might be difficult to resist pressures for further intervention in the future—either to support the price or to keep it from rising,” Burns wrote in a November 13, 1974 letter to Treasury Secretary William Simon.

Within a few months, Burns negotiated a deal to restrict official gold purchases and restrain gold prices. A declassified letter—dated June 3, 1975—confirms Burns’ clandestine intervention. Burns wrote to Ford, who ostensibly was agreeable to the confidential agreement as no evidence has emerged to suggest otherwise,

I have a secret understanding in writing with the Bundesbank [German central bank] — concurred in by Mr. [Helmut] Schmidt [West Germany’s chancellor at the time] — that Germany will not buy gold, either from the market or from another government, at a price above the official price of $42.22 per ounce….

All in all, I am convinced that by far the best position for us to take at this time is to resist arrangements that provide wide latitude for central banks and governments to purchase gold at a market-related price.

Futures Market Intended to Increase Volatility, Reduce Demand

Various forms of market manipulation and price suppression have been ongoing since gold futures trading opened on the COMEX in New York and four other US-based commodity exchanges on December 31, 1974, which coincided with Ford’s executive order rescinding the ban on private gold ownership.

A telegram sent to the US Secretary of State from the US Embassy in London, England, on December 10, 1974, revealed the importance of gold sales and futures trading. In the telegram—presumably written by the embassy’s Deputy Chief Ronald Speirs—London gold dealers are described as praising the announced sale of 2 million ounces of US gold and predicting deregulation of—and volatility in—the futures market would reduce demand for physical metal.

“Each of the dealers expressed the belief that the futures market would be of significant proportion and physical trading would be miniscule by comparison,” reads the cable released by WikiLeaks.

“Also expressed was the expectation that large volume futures dealing would create a highly volatile market. In turn, the volatile price movements would diminish the initial demand for physical holdings and most likely negate long-term hoarding by U.S. citizens.”

Despite fears, opposition, and market meddling, the ability of Americans to own gold revived the retail and wholesale gold business in the United States beyond the dental, jewelry, and collectible coin trade, which were exempt from Roosevelt’s 1933 prohibitive edict. In anticipation of legal gold ownership, pre-1933s gold coins returned from overseas. Bullion dealers built or leased vaults to store gold. Private mints launched or expanded operations to produce gold rounds and foreign coins. Coin shops opened from coast to coast to meet pent-up public demand for gold as a hedge against currency debasement and price inflation. The sleepy gold industry was awakened from its four-decade slumber with the stroke of President Ford’s New Year’s Eve pen.

The consequential event warrants a toast to 50 years of legalized gold.