Authored by Robert Burrows via BondVigilantes.com,

In recent years, the transmission mechanism of monetary policy—the intricate process through which central bank actions impact the economy—has undergone significant changes, notably as global debt levels have surged. With governments around the world carrying heavier debt burdens, the impact of rising interest rates on the economy has shifted in ways that policymakers must grapple with. This complex situation underscores the need for a deeper understanding of the economic dynamics. One of the most pressing issues is the effect of increasing interest payments on government debt, reshaping how central banks think about and implement monetary policy.

The traditional transmission mechanism

Historically, central banks have used interest rates as their primary tool to influence economic activity. When inflation is high, or the economy is overheating, central banks raise interest rates to cool demand by making borrowing more expensive. Conversely, when the economy is sluggish, they lower rates to stimulate spending and investment by making credit cheaper.

This process works through several channels:

1. Interest rates: higher rates increase the borrowing costs for businesses and consumers, reducing spending and investment, and vice versa.

2. Wealth effect: changes in interest rates affect asset prices, which influence household wealth and, in turn, consumer spending.

3. Exchange rates: higher interest rates can attract foreign capital, strengthen the domestic currency, and impact trade balances.

However, with unprecedented levels of government debt, the traditional transmission of monetary policy is becoming increasingly complicated.

The role of high debt in changing the transmission mechanism

Now government debt is at historically high levels, the impact of interest rate changes reverberates more strongly through fiscal channels. Rising interest rates affect private borrowers and significantly increase the cost of servicing government debt. This creates a feedback loop between monetary and fiscal policy, which may ultimately constrain the central bank’s ability to use its tools as freely as it did in the past.

Rising interest payments and the fiscal-monetary policy nexus

As interest rates rise, governments must allocate more of their budgets to debt servicing costs. This presents a significant dilemma: higher interest payments can crowd out other forms of government spending, such as infrastructure investments, social programs, or healthcare. In countries with very high debt-to-GDP ratios, such as the United States, Japan, and several European nations, the cost of debt servicing has become a substantial part of the national budget.

The figure below illustrates the substantial size of the US net interest expense. It’s on track to be the second largest outlay, second only to Social Security. Perhaps this is why Japan, with its 250% debt to GDP, has been so slow to raise interest rates.

Source: US Department of the Treasury, Monthly Statement, April 2024.

This increase in government spending on interest payments due to rising rates means two things:

1. Constrained fiscal policy: governments may have less room to manoeuvre when it comes to fiscal stimulus, as a larger proportion of their revenue goes towards interest payments. This could limit the effectiveness of countercyclical fiscal measures in future recessions.

2. Political pressure on central banks: central banks may face political pressure to keep interest rates low to help reduce the government’s borrowing costs. This creates a risk of ‘fiscal dominance’, where the need to manage government debt trumps the central bank’s focus on controlling inflation.

The impact on economic growth

The rising cost of government debt can also significantly dampen economic growth. As governments are forced to spend more on debt servicing, they may cut back on productive investments that drive long-term economic growth. The gravity of the situation is a cause for concern. Additionally, higher interest rates can squeeze private-sector borrowing, especially for small businesses and consumers, leading to lower levels of economic activity overall.

How high debt affects central bank decisions

A central bank’s traditional objective is to manage inflation and stabilise the economy. However, with high debt levels, central bankers must now also consider the fiscal implications of their actions. Raising interest rates aggressively to combat inflation could potentially destabilise public finances, especially if governments are already struggling with large deficits and high debt loads.

For example, a country with high debt that faces rising interest rates may see its credit rating downgraded, leading to higher borrowing costs and a vicious cycle of debt accumulation. Central banks may be forced to adopt a more cautious approach to tightening monetary policy, even when inflation rises, to avoid exacerbating fiscal pressures. This caution could lead to a situation of ‘fiscal dominance’, where the central bank’s ability to control inflation is compromised by political pressure to keep interest rates low for the government’s benefit, highlighting the potential risks to inflation control when central bank independence is threatened.

Changing policy transmission

Another significant shift in the transmission mechanism is that high debt levels have led to greater uncertainty about how quickly or effectively monetary policy actions translate into economic outcomes and through which channel—monetary or fiscal.

Consider a scenario where a central bank hesitates to raise rates due to concerns over government debt. In this case, inflation could persist at high levels, diminishing purchasing power and undermining the efficacy of future policy interventions. This erosion of the central bank’s control over inflation due to ‘fiscal dominance’ could result in less effective future policy interventions, highlighting the enduring impact of high debt levels on the economy.

The US economy, along with others, is approaching a critical juncture, with the upcoming election potentially serving as a catalyst. Despite being in the fourth year of economic expansion and with unemployment at or near all-time lows, current deficit levels mirror those seen during recessionary periods.

The chart below shows the unemployment rate vs. the deficit (inverted):

Source: Bloomberg, M&G, August 2024

When the next economic downturn arrives, the government may find itself in a precarious situation. Will it be able to respond with a Keynesian splurge given the current levels of debt and deficits? If the new administration fails to curb spending, the market may force austerity measures on the government. Fearing this outcome, the government will likely have to tighten fiscal spending, potentially leading to an economic slowdown.  

This dynamic has made life increasingly difficult for investors, and they should remain cautious. With interest rates starting to move lower on the back of rate cuts and valuations looking stretched with still relatively flat curves, fixed income is at risk of yields moving materially steeper as investors lose confidence or central banks respond to an economic slowdown.

From a long term perspective, the curve remains exceptionally flat:

Source: M&G, Bloomberg as at September 2024

Worryingly, politicians seem more concerned about people eating dogs and cats over the pending fiscal crisis. Perhaps investors will continue turning to alternative assets such as gold, which is known to protect against inflation, currency devaluation and geopolitical risk, which seems to be rising by the day. Alternatively, we may see a greater focus on economies with strong fiscal positions and low outstanding debt.

Authored by Luis Cornelio via HeadlineUSA.com,

Texas Attorney General Ken Paxton has demanded that the Biden-Harris administration turn over data to verify the citizenship status of nearly 454,289 registered voters in Texas. 

In a letter addressed to USCIS Director Ur M. Jaddou on Monday, Paxton raised concerns that these individuals may have unlawfully registered to vote without having their citizenship status confirmed.  

Paxton requested Jaddou’s assistance in identifying non-citizens on the voter rolls to ensure only eligible voters cast ballots in the 2024 presidential election, which is expected to be close.

“The Biden-Harris Administration is legally obligated to assist States in doing so, and it is imperative that we use every tool available to uphold the integrity of our elections,” Paxton wrote. 

I demand full cooperation from the federal government to ensure that any noncitizens remaining on Texas’s voter registration rolls are identified. The Biden-Harris Administration is legally obligated to assist States in doing so, and it is imperative that we use every tool… https://t.co/dvNkOpiLC4

— Attorney General Ken Paxton (@KenPaxtonTX) October 7, 2024

Paxton’s request follows an investigation by his office and Secretary of State Jane Nelson, which found individuals who registered to vote without providing a state driver’s license or other state-issued identification.  

This, Paxton argued, made it near impossible for state officials to verify these individuals’ citizenship. It is not immediately clear when these individuals were registered to vote. 

“I am not asking for verification of the citizenship of anyone whose voter registration records contains [sic] a driver’s license or state-issued identification number,” Paxton clarified. 

According to Paxton, over 1,300 non-citizens were found registered to vote during an audit of four randomly selected counties. 

“That is 1,300 too many when so many of our federal, state, and local election [sic] are decided by a handful of votes,” Paxton wrote.

Paxton noted that Texas has exhausted all available methods to confirm the citizenship status of the voters in question and is now demanding federal assistance.

However, it is unlikely that the Biden-Harris administration will respond or cooperate with Texas on this issue. 

On Sept. 27, the DOJ filed a lawsuit against Alabama after Wes Allen, the Republican secretary of state, inactivated the voter registrations of 3,251 individuals due to a lack of citizenship verification. 

The actual details of this DOJ lawsuit against Alabama are insane.

Kamala’s DOJ is suing them because they removed less than 4,000 people from the voter rolls who registered despite not being citizens. pic.twitter.com/rXne2h4l9d

— Greg Price (@greg_price11) September 28, 2024

The DOJ argued that Alabama’s actions violated the National Voter Registration Act of 1993.

Allen defended his decision in an interview with Headline USA, stating, “I was elected Secretary of State by the people of Alabama, and it is my Constitutional duty to ensure that only American citizens vote in our elections.”

Yesterday when commenting on Goldman’s recent upgrade of China’s market  to Overweight, only after a furious 30% rally had already taken place, we said this suggested that the “move in China has peaked and it’s all downhill from here, which incidentally none other than Goldman’s trading desk already predicted! Indeed, as we reported this weekend, while Goldman’s sellside desk was finally set to recommend China, the bank’s much more actionable FICC/S&T desk was already warning that the move in China is over unless Beijing does QE immediately, or else China “will end up in a bigger hole in 12 months.” And just a few hours later, that’s precisely what happened on Tuesday morning when China A-shares reopened from a week-long holiday and tried to catch up to the meltup only to see their gains slashed. Meanwhile, Hong Kong markets which were open the entire time, and which soared as much as 30% since the Beijing Bazooka was unveiled on Sept 26, cratered the most since the Lehman bankruptcy!

For those who missed it, here is a full rundown of everything that happened in China overnight courtesy of Goldman’s trading desk:

1/ What happened

HK shares had their worst single day since Oct 2008 with double-digit percentage losses for major indices as the highly anticipated NDRC press conference added little fresh details on China’s stimulus plans, leaving investors hoping for concrete numbers feeling disappointed (although expectations were high heading into the event).

The HSCEI also recorded its worst day since 2008, plunging 10.2% while CSI300 opened near limit up +10.8%, faded to +2% and managed to bounce and close +5.9%.  With that said HSCEI is still up 17% in the past 2 weeks. CSI300 is now up 32% in the past 2 weeks and been up every day. 

Indeed, while A-shares markets pared from opening strength they still managed to close with gains on their first day back, suggesting rotation out of HK market drove the losses. The move essentially erased all of HK market gains during the break with HSI -9.4% back to levels seen on Sep 30th. Out of the major indices, all 82 HSI names / 50 HSCEI names / 30 HSTECH names closed in the red, speaking to the breadth of the drawdown today. HSCI, a more broad index that covers 95% of total market cap in HK, has 517 constituents with just 12 gainers. Southbound returned for the first time in more than a week, and it clawed back from outflow of nearly US$1b in the morning to a US$265m of inflow by end of the session suggesting mainland investors started to see value as HK shares sold off aggressively.

Some more details:

• Record volume, again: one week after HK volume made fresh record high of HK$505b, today’s HK$620b absolutely knocked it out of the park again. However, even that pales in comparison to the activity level China’s A-shares market today: it took less than 27 minutes of trading for turnover to break above 1t yuan, and by end of the session over 3.4t yuan of A-shares changed hands. For context, that’s more than the turnover of HK market, every single day from Sep 24th up to today, combined.
   
• NDRC disappointment: The NDRC presser at 10am HKT was an reiteration of Politburo’s easing pledge with little fresh details offered. Investors were expecting, or hoping for, more solid numbers regard any fiscal stimulus, but walked away empty handed outside of more pledges and vague policy headers such as increased investment and increase subsidies for low-income groups and students. On new fiscal announcement, very small. Front load the planning of 2025 projects, with 100b yuan strategic and national security projects and 100b yuan on-budget investment front loaded to 2024. So the total 200b yuan is very small compared to 2-3t yuan market expectation for additional fiscal this year. Goldma’s view: any large stimulus package may require joint efforts from many key ministries, and will need to be largely funded by fiscal resources. The bank will be watching for upcoming ad hoc meetings and the next NPC standing committee meeting late October; expect policymakers to approve an additional RMB1-2tn ultra-long-term central government special bond quota by year-end, tap unspent local government bond issuance quota accumulated from previous years to facilitate debt swaps, and maintain their fiscal easing stance in 2025 and even beyond.

• Profit taking & rotation: Just like how the recent rally in HK was fueled by foreign inflows and fast money, today’s sell-off felt profit taking driven by hedge funds and rotations from Long Onlies out of H-shares into A, there was large size inflows into A from LOs from the open. The NDRC meeting this morning was a disappointment vs investors high expectations for China to keep strong stimulus rhetoric and incremental easing going. Note that short sells only made up 12% of the turnover today indicating that most of the selling were long selling / profit taking
   
• Within thematics, investors were trading policy again with China Semis (+14.4%) and China AI (+13.7%) leading gains while Little Giants (+13.6%) and China EV (+13.2%) rounding out the top performers. Meanwhile strong outperformers during Golden Week like H-listed Fins ex-Banks (-24.1%) and H-listed China Prop (-23.4%) tumbling. There is some equalizing effect there given divergence in A/H move – note that HSAHP now back to 150.9 level, sharply higher from 128.5 level seen yesterday on back of relentless rally in HK while China was out: China Brokers (+8.2%) and China Prop (-3.9%) move was not as aggressive if you include the A-shares components.
   
• Southbound: In the morning southbound was net selling almost US$1bn, this turned around intraday and ended up being net buyers of ~US$300m. 
   
• Movers:
  • Leading the positive moves: China Semis +14.53%, China AI +13.80% and China EV +13.36%
  • Selling in China H Real Estate -24.12%, SB Favorites-16.60%, China Consumption -11.87% and HK Tech -12.30%.
     
• Putting things in context: huge moves all over the place here with lots of “worst day since…” being thrown out. Bigger picture, after today’s move – ChiNext overtook HSCEI as top performing major index with +34.8% return. All China/HK indices are still outperforming SPX and NDX. CSI500 still lagging large cap counterparts CSI300 on YTD basis.

 2/ China retail

Securities times published an article talking about forbidding bank loans to households to go into stock market and former director of the PBOC warning about the risk of blind speculation. I believe China could be getting cautious of the growing soundbites of onshore retail frenzy (record cash transferred into stock trading accounts, explosive amount of broker account opening etc), especially considering the current administration have scar tissues from the 2014/2015 retail frenzy episode. This could potentially make the government more cautious around how they handle further stimulus policy roll-out. 

Worth keeping in mind, retail investors who opened new account during the National day holidays are only able to trade from tomorrow and not today (fund transfer settles T+1) article.

3. Now what

In terms of catalyst and events, we have to wait for ad-hoc meetings in the coming days/weeks to re-fuel the stimulus expectations led rally (especially joint ministry or MoF one). 

The next focus event is NPC standing committee meeting in late Oct/early Nov, which is when we expect the new fiscal budget to be approved. 

In conclusion, Goldman trader William Chan writes that “while I think profit taking is prudent especially if the sharp rally is behind us, I wouldn’t fade the China trade yet. China might want to pace the market, but the retail community hasn’t really started getting involved and the recent change of tone from the government be it on equity market downside, property stabilization or more stimulus is not something I think they will turn 180 on.“

And there you have it: Goldman, which this weekend upgraded China to overweight, admits it’s a bubble, but it’s not a full-fledged bubble with retail participation just yet. When it becomes that, Goldman will be selling hand over feet and, eventually, tell its sellside clients to do the same.

Authored by Steve Watson via modernity.news,

Disgraced former fixer Michael Cohen has ludicrously claimed that if elected in November, Donald Trump will command US Navy Seals to go after his political opponents and critics.

Without providing a shred of evidence, Cohen made the claim, specifically that Trump has said he would use SEAL Team Six to target his enemies, and MSNBC host and former Biden Press Secretary Jen Psaki provided zero pushback.

“The big warning I want people to understand is when Donald Trump says something, stop sane-washing it,” Cohen blathered.

“Stop trying to make it into something which has some normalcy to it,” he continued, adding “When he turns around and says the head of this network or other people who are critics, that he intends to use SEAL Team Six or the military to round up his critics or his opponents, he intends to do it.”

Trump has, of course, never said anything of the sort.

Cohen’s ridiculous accusation comes less than a week after he stated that he is working on creating an alternate identity with a foreign passport in a different name for when Trump gets back into office.

NEW: Michael Cohen says Donald Trump will use SEAL Team 6 to round up his political opponents if elected president.

The comment comes one week after Cohen said he was going to change his name and flee the country if Trump is elected in November.

Someone may need to do a… pic.twitter.com/77M67AL5nN

— Collin Rugg (@CollinRugg) October 7, 2024

The guy is clearly completely deranged, yet MSNBC presents his comments as if they hold gravitas.

Michael Cohen changing his name and leaving the country for no reason would be pretty hilarious.

— Collin Rugg (@CollinRugg) October 7, 2024

What a joke.

I heard Iran is really nice this time of year

— Angry Elephant (@Craptocracy) October 7, 2024

These people are clearly unwell.

Delusions and hallucinations are the bedrock of the ideologically possessed and mentally ill.

— Brian Kennedy (@Brian_Kennedy) October 7, 2024

They have severe, possibly terminal TDS.

Michael Cohen needs mental help. As much as I wouldn’t be sad if that happened, it’s definitely not going to happen. However, if I were Trump, and considering all of the lawfare and then attempts to kill him, I would find it very hard to resist the temptation.

— M Brace (@MBrace777) October 7, 2024

They all also hold weird fantasies about Trump using the office to throw them into detention camps and instituting a military dictatorship, meanwhile he’s the one fending off the weaponisation of the government against him by Democrats.

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.

Roblox has come under some scrutiny before, but not quite like this.

In a new report out this morning from short seller Hindenburg Research,  the firm accuses the gaming company not just of running an in-game “pedophile hellscape”, but also inflating key metrics that have helped drive the company’s stock price since its direct listing in 2021.

Hindenburg says its research “indicates that Roblox is lying to investors, regulators, and advertisers about the number of ‘people’ on its platform, inflating the metric by 25-42%+”. 

“We also show how engagement hours, another key metric, is inflated by an estimated 100%+,” the report alleges. “Since Roblox isn’t profitable, its stock price (and, in turn, insiders’ ability to dump hundreds of millions of dollars of stock) is reliant on the growth metrics it presents to Wall Street,” the firm adds. 

Hindenburg writes: “To better understand the company’s reported engagement, we hired a technical consultant that monitored the top ~7,200 Roblox games across ~2.1 million Roblox servers, collecting 297.7 million rows of real-time player data.”

“The data suggests that Roblox could be massively overstating the true level of user engagement across its platform: our review of an average of 30.4 million unique daily users found they spent just ~22 minutes in games per day,” it adds. 

On top of questions about daily active users and engagement hours, the short seller called its in-game experience “an X-rated pedophile hellscape, exposing children to grooming, pornography, violent content and extremely abusive speech”.

“Following years of scandals, we performed our own checks to see if the platform had cleaned up its act. As a test, we attempted to set up an account under the name ‘Jeffrey Epstein’…only to see the name was taken, along with 900+ variations,” Hindenburg wrote.

Then, the details get graphic: “After we found a username, we listed our age as “under 13” to see if children are being exposed to adult content. By merely plugging ‘adult’ into the Roblox search bar, we found a group called “Adult Studios” with 3,334 members openly trading child pornography and soliciting sexual acts from minors.”

“We tracked some of the members of “Adult Studios” and easily found 38 Roblox groups – one with 103,000 members – openly soliciting sexual favors and trading child pornography,” Hindenburg says. 

The examples continued: “Posing as a child in Roblox’s “therapy” experience, our therapist introduced himself as a “rapper with only one p”. We were advised to run away from home and that he would come pick us up so we could move into his basement in exchange for paying rent with our body.”

“The chatrooms trading in child pornography had no age restrictions. Roblox reports that 21% of its users are under the age of 9, a number that is likely underestimated given that Roblox has no age verification aside from users seeking 17+ experiences,” it said.

““LGBTQ+ Vibes” is a game available to all ages that has accumulated over 40.6 million visits and over 224,000 favorites. Users regularly described lewd sex acts while others used hateful slurs,” the report added.

The report says there is “simulated rape, naked users, and rampant in-game sexual harassment”. 

It also detailed violent content: “In the game “Beat Up The Pregnant”, users hacked pregnant women to death in a Wal-Mart parking lot with machetes or killed them with frying pans or a selection of guns.”

Finally, Hindenburg calls out the listen company’s valuation: “The company has reported net losses every quarter since becoming a public company, with last twelve months (LTM) losses totaling $1.07 billion. Its stock trades at 8.6x sales, a 57% premium to gaming peers, pricing in expectations of rapid future growth and profitability.”

Hindenburg, best known for its ongoing row with Indian billionaire Gautam Adani and most recently for a critical report on Super Micro Computers that came one day before the company said it had to delay its 2023 annual report filing, says that meanwhile, Roblox “insiders have cashed out $1.7 billion in stock since the company’s 2021 direct listing”. 

You can read the full report here. 

94-year-old Warren Buffett’s Berkshire Hathaway has been on a multi-month dump-a-thon of Bank of America shares. The reason for the abrupt selling, which began in mid-July, has yet to be officially disclosed but should be viewed as an ominous sign that the ‘Oracle of Omaha’ foresees economic trouble ahead. 

The latest Bloomberg data shows that Berkshire’s total proceeds from selling BofA shares have now topped a whopping $10bln.

Traders at Berkshire began paring down the massive investment in mid-July, pressuring the bank’s shares ever since. In the last three trading days, Berkshire sold $383mln worth of shares. 

The latest selling is the first round of Berkshire selling BofA shares since right before the pandemic.

Even with all the selling, Berkshire’s BofA position is still massive, totaling $31.35bln. 

Berkshire is still the largest shareholder of the bank.

Buffett’s stake in BofA has now dwindled to 10.1%, meaning just a bit more selling would drop it below the 10% regulatory threshold. Once that threshold is reached, Berkshire will no longer be required to report additional sales to the SEC.

We offered some theories about possible motives behind Buffett’s BofA dumping, including an overvalued market, recession risk, consumer downturn, and the possibility that a US regulatory probe into anti-money laundering surrounding fentanyl cash laundering could expand to major US banks. 

Buffett’s cash pile has also soared to record highs. 

Hmm.

Buffett also dumped half its Apple shares. 

The bottom line is that unlike in October 2008, Buffett led the call to “Buy American“…

… this time, he is selling American at a worrisome pace. 

Milton weakened overnight to a Category 4 hurricane. The storm is an “extremely dangerous” threat as it churns near the Yucatan Peninsula, barreling toward Florida’s Gulf Coast this AM, with landfall impacts expected on Wednseday night or early Thursday morning. 

According to the National Hurricane Center’s 0500 ET update, Milton was downgraded from a Cat. 5 to Cat. 4, with maximum winds up to 155 mph while traversing the warm waters of the Gulf of Mexico at 12 mph with an east-northeast heading.  

The latest storm data shows Milton is completing an eyewall replacement cycle. This means the strongest winds extend further out from the center as the eye grows in size. 

Hurricane Milton has weakened by 30 mb over the last 5 hours due to eye wall replacement. Wow. pic.twitter.com/mQKqvfIwqM

— Max Velocity (@MaxVelocityWX) October 8, 2024

The Weather Channel’s Jim Cantore warned on X, “Focus on the surge NOT the category!”

Focus on the surge NOT the category! https://t.co/0nf1ZCtLwD

— Jim Cantore (@JimCantore) October 8, 2024

NHC’s peak storm surge forecast shows Milton could generate a wall of water as high as 15 feet across Tampa Bay, Sarasota, and Venice. 

Computer models are shifting south with landfall impacts from Sarasota to Port Charlotte instead of the initial forecasts for Tampa. 

#Milton – southward trends in the overnight ECMWF guidance…

The ensemble system has exhibited a southerly trend overnight, bringing the most likely track (black line) closer to Sarasota – this would expose Sarasota and Port Charlotte to the worst of the storm surge.

There’s… pic.twitter.com/QPdYmnN0WD

— Ben Noll (@BenNollWeather) October 8, 2024

More trajectory models. 

On Sunday, Florida launched the largest evacuation since Hurricane Irma in 2017. Hurricane warnings have been posted for the region. 

Authored by Mike Shedlock via MishTalk.com,

Unlike US auto manufacturers, Germany’s counterparts did not want tariffs on China’s EV. Germany lost the vote in the European Council…

EU Votes for Tariffs on Chinese EVs

This story may seem counteractive but Germany does not want the EU to place tariffs on Chinese EVs.

This is because Germany is still dependent on its internal combustion engines for exports and China will undoubtedly retaliate.

TheDriven reports EU Votes for China EV Tariffs Despite Protests from Germany and Others.

Euronews reported that just under half (12) of the members states abstained from the vote, with 10 voting in favour and five voting against including Germany, Hungary, Malta, Slovenia and Slovakia.

Despite the vote, EU-China negotiations can continue until October 30 with the possibility of finding an agreement to prevent the tariffs. China attacked the probe from the very outset, labelling it a “naked protectionist act,” an denying the existence of any subsidies, wrote Euronews.

Germany sought to block the proposal to protect its car industry, which relied on China for a third of its sales last year, from any Chinese retaliatory measures. To block the proposal Germany, would have needed to win the support of another 14 member states for a so-called qualified majority, comprising 65 percent of the EU’s population.

Germany is not currently on track to meet its target of having 15 million electric cars on its roads by 2030, despite being the world’s second largest producer of electric cars in 2023.

Brussels Breaks Impasse

EuroNews reports Brussels Breaks Impasse after EU Countries Fail to Agree on Chinese EV Tariffs

European Union countries failed to agree on whether to slap China-made electric vehicles (EVs) with steeper tariffs during a closely watched vote that ended with too many abstentions, forcing the European Commission to overcome the political impasse and push its proposal over the finish line.

The outcome of Friday’s vote was not publicly available, although several diplomats told Euronews how each member state positioned itself:

• 10 were in favour: Bulgaria, Denmark, Estonia, France, Ireland, Italy, Lithuania, Latvia, the Netherlands and Poland. (45.99% of the EU population)

• 12 abstained: Belgium, the Czech Republic, Greece, Spain, Croatia, Cyprus, Luxembourg, Austria, Portugal, Romania, Sweden and Finland. (31.36%)

• Five were against: Germany, Hungary, Malta, Slovenia and Slovakia. (22.65%)

The Commission “should not trigger a trade war. We need a negotiated solution,” Germany’s Finance Minister Christian Lindner said in reaction to the vote.

The dispute around Chinese EVs marked a rare moment where the [European Council] president, [Ursula von der Leyen] a German native, defended a position strenuously opposed by her home country.

The political fiasco could reverberate until the country holds its federal election in September 2025.

Only 45.99 percent of the EU was in favor of tariffs but the European Council rammed through the tariffs over Germany’s objection.

Tariffs are one of the areas where changes do not have to be unanimous. But 45.99 percent is quite the ramrod.

Of those voting for vs against it was 45.99 percent to 22.65 percent a 67 percent margin to enact.

EU Tariffs

• Tesla: 7.8%

• BYD: 17%

• Geely: 18.8%

• SAIC: 35.3%

• Other EV producers in China that cooperated in the investigation but have not been individually sampled: 20.7%

• Other EV producers in China that did not cooperate: 35.3%

Those are on top of existing tariffs.

As in the US

This is just as in the US. Those in charge not only mandate EVs, they set policy to ensure the cars are as expensive as possible.

Electric Big Rigs Don’t Make Sense Even With $40,000 in Tax Credits

This morning I noted Electric Big Rigs Don’t Make Sense Even With $40,000 in Tax Credits

Due to Biden’s regulations, truckers are driving older engines longer because they can’t afford newer diesel models. The result is more pollution.

Joe Biden’s Position on Tariffs

The Above Tweet was from June 11, 2019.

On May 14, 2024, Biden changed his tune.

White House announces new anti-China tariffs:

🚗 Electric vehicles: from 25% to 100%
🔋 EVs batteries: from 7.5% to 25%
🌞 Solar cells: from 25% to 50%
🏭 Steel and aluminum: from 0%-7.5% to 25%#EnergyTransition #EVshttps://t.co/gSnLerBfz0

— Javier Blas (@JavierBlas) May 14, 2024

On June 13, I noted The EU Taxes Vehicles from China that its Own Companies Make

Eurointelligence: The trickle-down profit margins that permeated through German industry will be a thing of the past. The new cars will have fewer components, and fewer German-made components. This is the reason why the decline in cars constitutes a decline in industry and in the economy – to the extent that countries depend on it. Germany is one of those.

On October 5, I noted Buy American Provisions Cost $125,000 Per Job Created

“Buy America” sounds great. But it’s costly and about to rise steeply.

One wonders how idiotic tariff policy can get. Competition is stiff between Biden, the EU, Harris, and Trump.

Via Remix news,

Poland’s Piotr Serafin will probably take over as EU commissioner for budget on Dec. 1, but the president of the European Commission is already organizing his most important task: the draft EU budget for 2028-34. The document, seen by Polish media outlet Rzeczpospolita shows that the German, Ursula von der Leyen, wants to dismantle regional policy across the EU, which will have a profound effect on Poland.

The money that is currently given to the regions, and largely managed by them (two-thirds of EU structural funds), would be given instead to the governments of the member states. These governments would then divide it as they saw fit, allowing for more centralization and control, a move that would better suit a Brussels looking to expand its control through a top-down approach.

Instead of the 530 currently operating programs (including 398 concerning cohesion policy), Ursula von der Leyen proposes 27 national operational programs. Each such program will include all expenditures that have so far made up cohesion policy and agricultural policy, including even subsidies for farmers. The programs will be divided into sectors, e.g., transport, energy, agriculture, or internal affairs and migration — all under the slogan of simplification. The second slogan repeated by von der Leyen is “flexibility.” She wants to introduce the principle of an “annual review” of the multiannual budget, which she argues will increase flexibility. Money allocated to one area could therefore be shifted to another purpose if necessary.

Experts who spoke to Rzeczpospolita unofficially have no doubt that this proposal means the elimination of regional policy, which von der Leyen clearly does not like, which is more control for rural areas on how funding is spent with these rural areas often leaning more conservative.

The end of EU regional policy

Why is this dangerous? In such a scenario, the liberal elite in Brussels could win every time. First, when the central government is of a different political color than the local government, the distribution of EU funds can be an element of rewarding its party allies.

Let’s imagine a situation where Poland’s Law and Justice (PiS) returns to power and does not transfer money to voivodeships or cities governed by PO. However, in such a scenario, Brussels could turn around and cut funding to Poland if it disagrees with PiS’ policies. In the event that a left-liberal government carries out such actions, it could simply look the other way and allow funds to continue to flow.

Von der Leyen also wants the payment of money to be on the condition of reforms at the central level, even if the regions have nothing to do with the lack of reforms. Finally, the transfer of competencies to the central level means that many regions will not have coherent investment programs.

For decades, the EU has been building a regional policy based on the principle of convergence, or raising the level of development of poorer areas. It had a developed methodology, instruments for negotiating programs with governments and regions, and criteria for granting money. The aim of such a policy was also to bring the EU closer to its citizens: local authorities were involved in writing operational programs and the effects of EU money were visible on the ground.

Now, von der Leyen proposes throwing this policy in the trash and introducing a transactional method: the government carries out reforms and, in return receives money and divides it between sectors.

Ursula von der Leyen’s revolution a problem for Poland. Local authorities fear centralization

“We urgently need new investments and solutions, and therefore funds, available quickly, easily and flexibly at the levels where they occur, i.e. at the level of municipalities and counties, to the extent adapted to their needs,” said Hanna Zdanowska, mayor of Łódź, member of the European Committee of the Regions, during an interview with Rzeczpospolita.

“Centralization or nationalization of cohesion policy in times of an ongoing global political crisis can become a very dangerous trap,” she added.

Many EU countries may like such a reform.

“We like it,” a diplomat from one of the net-contributor countries tells Rzeczpospolita. According to him, this limits Serafin’s scope of action.

“He is very competent, but he will have to move within the limits set by von der Leyen,” he adds.

Strict control over Polish commissioner Piotr Serafin

The new plan by the German EU commission president gives direct supervision over the draft budget to herself and the secretary-general of the European Commission, who is an official completely dependent on von der Leyen. In short, the new budget proposal would increase her power immensely.

The document provides for the creation of a steering committee, in which, in addition to Serafin, two people will be mentioned. 

Von der Leyen’s plan will certainly not appeal to several member states with a strong regional voice, such as Poland, Germany, Romania, or Belgium. It will also certainly be contested by many MEPs, who may demand commitments from the commissioners-designate (including the Italian Raffaele Fitto, responsible for cohesion policy) as early as November.

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