Sam Altman, co-founder and CEO of artificial intelligence firm OpenAI, published a cryptic blog post on Sept. 23, apparently celebrating that “deep learning worked” and claiming that humanity was on the precipice of an era of unimaginable prosperity.
The CEO also boasted that his company’s technology would be capable of creating more powerful versions of itself within a matter of decades that will accelerate humanity’s scientific progress “across the board.”
Altman announces the dawn of the “Intelligence Age”. Source: Sam Altman
Deep learning worked
Altman’s premise appears to be based on the recent debut of the company’s “o1” AI model, which is purportedly capable of reasoning through problems that its previous models struggled to solve.
Many of the company’s detractors have claimed that deep learning, the specific type of AI that powers models such as ChatGPT and Google’s Gemini, can’t be scaled to create human-level artificial intelligence.
In his latest blog post, however, Altman skewers that idea outright:
“In 15 words: deep learning worked, got predictably better with scale, and we dedicated increasing resources to it.”
Per Altman, this appears to mean humanity is on the brink of an area of a new “Intelligence Age” where AI systems will begin to solve Earth’s biggest problems.
“Although it will happen incrementally,” he writes, “astounding triumphs – fixing the climate, establishing a space colony, and the discovery of all of physics – will eventually become commonplace.”
Unimaginable prosperity
There’s no specific timeline for these changes to occur, and Altman mentions several times that they will happen incrementally and over time.
However, the post itself begins with the statement that “in the next couple of decades, we will be able to do things that would have seemed like magic to our grandparents.”
It’s unclear if Altman’s post is setting the stage for the launch of a new consumer-facing product or major announcement or if he’s simply predicting the onset of the “Intelligence Age” as an exercise in exposition.
Ultimately, Altman appears optimistic about this new age, whether it’s about to begin or already has. He writes that “a defining characteristic of the Intelligence Age will be massive prosperity.”
According to the Global Freedom Index by Democratic watchdog organization Freedom House,Iran scored just 11 points out of 100 in 2024, which is one point worse off than in 2023 and categorizes the country as “not free”.
On this index, Iran ranks one point better off than Yemen and one point worse than Cuba, Laos and Bahrain.
Despite the fact the Islamic Republic of Iran holds elections regularly, these are deemed to fall short of democratic standards, due partly to the heavy influence of an unelected body named the Guardian Council.
The continued crackdown on dissent is also cited by Freedom House for the country’s low score, particularly in the wake of the ‘Women, Life, Freedom‘ uprising of 2022.
For the index, a total of 210 countries and territories were analyzed on their levels of access to political rights and civil liberties, before being categorized as either “free”, “partly free” or “not free”.
While democracy has been in decline for nearly two decades, the global landscape has improved since the report was first published 51 years ago.
Back then, 44 out of 148 countries were counted as “free”, versus 81 out of 210 countries and territories today.
Shell Plc has ditched plans to build a low-carbon hydrogen plant on Norway’s west coast due to a lack of demand, Reuters reported on Monday.
“We haven’t seen the market for blue hydrogen materialize and decided not to progress the project,” a Shell spokesperson has told Reuters.
Shell’s announcement comes hot on the heels of a similar move by oil and gas giant, Equinor ASA.
Last week, the Norwegian state-owned multinational energy company announced that it will not move forward with plans to build a pipeline to carry hydrogen from Norway to Germany with partner RWE (OTCPK:RWEOY), citing a lack of customers as well as an inadequate regulatory framework. Equinor was to build hydrogen plants that would enable Norway to send up to 10 gigawatts per annum of blue hydrogen to Germany.
“We have decided to discontinue this early-phase project. The hydrogen pipeline hasn’t proved to be viable. That also implies that hydrogen production plans are also put aside,” an Equinor spokesman told Reuters.
Over the past decade, climate experts have touted the outsized role that hydrogen could play in helping the planet limit catastrophic global warming. Indeed, net-zero models have forecast that hydrogen could provide as much as 20% of the world’s primary energy by 2050, nearly as much as all renewables currently contribute to the United States’ energy mix. Not surprisingly, there’s no shortage of big hydrogen ambitions.
Unfortunately, the hydrogen sector is struggling mainly due to high costs.
Even among projects that have signed offtake deals, most have vague, nonbinding arrangements that can be quietly discarded if the potential buyers back out.
“No sane project developer is going to start producing hydrogen without having a buyer for it, and no sane banker is going to lend money to a project developer without reasonable confidence that someone’s going to buy the hydrogen,” BNEF analyst Martin Tengler notes.
Green hydrogen made by electrolyzing water using renewable energy costs nearly four times as much as gray hydrogen created from natural gas, or methane, using steam methane reformation but without capturing the greenhouse gasses emitted in the process. This makes it hard to build hydrogen infrastructure when the demand may not materialize for years.
As Statista’s Katharina Buchholz reports,Chinese investors or U.S. corporations with Chinese shareholders owned just around 500,000 acres of U.S. land at the end of 2022 – 7 percent less than at the end of 2021.
Much more was owned by Canadian and European entities, for example from the Netherlands, the United Kingdom, Italy and Germany.
Experts said that they saw no threat from Chinese land and agricultural land purchases.
However, the purchase of land close to military installations by foreign investors was recently restricted under the Biden Administration, following controversies around Chinese purchases.
Some states have also taken action in this regard.
The EU’s stringent regulations on data and technology are stifling AI innovation within the bloc.
The UK, with a more flexible approach to AI development, could benefit from the EU’s regulatory overreach and become a global leader in AI.
Former Italian Prime Minister Mario Draghi acknowledges the EU’s competitiveness gap but proposes solutions that may exacerbate the problem.
EU regulatory overreach has gone from a Brexiteer conspiracy theory and source of ridicule to something that EU leaders themselves acknowledge and are trying to address. But when it comes to AI, they’re already behind, says James Price
If you’ve bought a plastic drinks bottle in recent months, you may have noticed a maddening change – the lid can no longer be detached from the rest of the bottle. You may find this rather annoying; you may even pretend to yourself that you like the increase in spills and mess in order to help save the environment. Regardless, it represents one of the major regulation-led innovations emanating from the European Union.
At the same time, the United States has fostered companies that have created large language models like ChatGPT, self-driving cars, drones, commercial space walks, and many, many other things that I’m not smart enough to understand.
This shocking gap in competitiveness across Europe has, like many ideas, gone from a crazy Brexiteer conspiracy theory and source of ridicule to something that EU leaders themselves acknowledge and are trying to address.
This has come to a head with the recent publication of former Italian Prime Minister Mario Draghi’s long-awaited report into the EU’s competitiveness gap. Whilst correctly diagnosing some of the problems, the remedies it offers are – inevitably – more European integration, government spending and decarbonisation. That means more expensive energy, less competition or experimentation between member states, and higher taxes. Good luck with that!
But Mr Draghi’s first lament in a piece he wrote on the report focuses on something even the layman knows is a potentially enormous growth area, artificial intelligence (AI). This new wellspring of technologies could prove to quite literally be a deus ex machina for the economic and governmental ills of the world, and there’s no reason why Europe shouldn’t be able to be a leader in it.
Mr Draghi’s report literally proposes “making it easier for researchers to commercialise ideas”. But the EU has been blocking some of the biggest tech companies who are investing in AI from training its products on user data inside the bloc. This means less innovation, and products that are not as useful inside the EU as they are outside.
At the same time, Thierry Breton, an EU Commissioner, decided that the major tech challenge in Europe was Elon Musk’s Twitter removing blue ticks from celebrities. Threatening to ban Twitter across the EU has at least seen Monsieur Breton quit his post after being told he would lose it.
Barmy EU priorities
These barmy EU priorities are proving another Brexiteer talking point that was called ‘crazy’ at the time: the idea that over time the UK could benefit from diverging from statist EU rules.
The UK Information Commissioner’s Office (ICO) has recently decided NOT to intervene to prevent user data training AI models in the UK. Partly thanks to the beefed-up guidance on regulators’ duties to promote growth, instituted by the Conservative government back in May, companies like Meta will be able to release and develop exciting new AI products that will benefit users in the UK, but will be absent across the Channel.
This was such a divergence from the EU that Meta President of Global Affairs and former EU MEP (oh, and former Deputy Prime Minister) Sir Nick Clegg has acknowledged the deep damage the EU is doing to itself here.
Sir Nick is a serious man who has spent enough time amongst the geniuses of Silicon Valley to know which way the world is turning. He will also understand that the UK can be a world leader in these new techs, thanks to its university talent, access to capital markets and the sheer good luck of having Google Deepmind based here.
The potential benefits are enormous, and other countries are already stealing a march. When the UAE appointed a minister for AI in 2017 others laughed at it as a gimmick. They aren’t laughing now as the Gulf state pioneers all manner of new tech.
There are some great European AI companies, from defence firms like Helsing in Germany to Mistral AI in France who are world-leaders, but they risk being left behind by the American primes because of the EU’s backwards take on regulation.
If you don’t trust politicians not to mess up a bottle of fizzy pop, don’t trust them not to strangle the world-changing, life-saving tech of AI.
EVs Are “Up To Twice As Expensive” To Run As Regular Gas Cars In The UK, New Data Finds
As if the EV boom needed another nail its in coffin, the UK has now produced figures showing that driving and electric vehicle is “up to twice as expensive” as driving a regular gas powered car.
Data from the app ZapMap has confirmed that operating an electric vehicle (EV) can cost over 24p per mile, compared to 12.5p per mile for a diesel vehicle, according to Yahoo Finance and The Telegraph.
And charging an EV at a rapid or ultra-rapid roadside station can reach up to 80p per kilowatt hour.
According to calculations by The Times, a typical electric car travels 3.3 miles per kWh, making rapid chargers cost 24.1p per mile, while slower chargers cost 16.4p per mile. This is roughly double the cost of a diesel car at 12.5p per mile, with petrol cars costing 14.5p per mile.
A round trip from London to Penzance would cost £148 using rapid chargers, compared to £77 for diesel and £89 for petrol. Charging at home is much cheaper, costing less than a third of rapid chargers.
ZapMap noted a 5% rise in rapid charger prices over the past year, despite a 30% drop in electricity wholesale prices and falling oil prices, the report says.
The Yahoo report says that even drivers using slower public chargers, which can fully recharge a vehicle in about 30 minutes, pay more per mile than petrol or diesel users.
The number of rapid and ultra-rapid charging stations in Britain has risen by 40%, now exceeding 12,500. However, electric car sales have slowed, making up 17.2% of new registrations in 2024, down from 18.7% in late 2022.
Currently, rapid chargers cost EV drivers 24.1p per mile, while slower chargers cost 16.4p per mile.
French President Emmanuel Macron has called for reform of the current “unjust” world order so that humans can coexist more peacefully in the “New World Order.”
What the ruler didn’t say was that the slaves would still be slaves, and governments would still rule them, it’s only that illusion that is going to go away.
While speaking before the Catholic community of Sant’Egidio, Macron said “We must be imaginative enough to think about the peace of tomorrow, a peace in Europe in a new form.”
If the European continent is to become more stable, everyone should acknowledge that it is “neither quite the European Union nor resolutely NATO,” he stated.
“We will have to think of a new form of organization for Europe and rethink our relationship with Russia” after the Ukraine conflict is over, the president added.
Macron further claimed that the global system that was created in the wake of World War II was “incomplete and unjust,” because many modern nations did not even exist at that time and don’t have a “proper place at the table.”
He said international bodies, such as the United Nations, the World Bank, and the International Monetary Fund, should be reformed accordingly.
However, if anyone wants freedom, reforming the governing structure isn’t the way to go about it.
Abolishing the system of slavery is what we should be doing, not changing it.
Hopefully, no one is falling for this horrific propaganda anymore.
The speech comes as Ukrainian leader Vladimir Zelensky is set to meet US President Joe Biden to present his so-called ‘victory plan’ – a purported roadmap to pressuring Russia into conceding defeat. He wants permission to conduct long-range strikes deep inside Russia with Western weapons as part of the plan, according to a report by RT.
Macron has never been in the habit of promoting peace. No ruler will ever want peace, because it would mean their power is nonexistent. In early 2024, he said the West should not rule out the deployment of NATO troops on Ukrainian soil. Multiple other national rulers have rejected that idea.
France is among a handful of nations that have donated such military hardware to Ukraine in the form of SCALP/Storm Shadow cruise missiles, which the country produces jointly with the UK. British officials have supported Kiev’s request to strike Russia, but the ultimate decision is understood to be in Washington’s hands.
Russian President Vladimir Putin has stated that any such attack would be considered an act of war by NATO member states and Moscow would respond appropriately.
No reforms to the ruling systems will ever result in peace.
They are inherently violent in nature and the only way to achieve anything close to peace is to abolish all slave systems for good and stop falling for the rhetoric.
Because all government is slavery, and slavery will never be peaceful, unless every ruling class is going to disband itself and stop stealing from others and hiring thugs to force compliance with its edicts, there will be no peace.
On March 7, 2022, two weeks after Moscow entered the civil war in Ukraine, U.S. Secretary of State Antony Blinken told CBS News from Moldova that the U.S. would give NATO-member Poland a “green light” to send Mig-29 fighter jets to Ukraine to enforce a no-fly zone against Russian aircraft.
U.S. House Speaker Nancy Pelosi and Senate Majority Leader Chuck Schumer then also backed the no-fly zone. But within days the Pentagon shot down the idea as it engaged in a consequential battle with the State Department and members of Congress to prevent a direct NATO military confrontation with Russia that could unleash history’s most unimaginable horrors.
A no-fly zone “could result in significant Russian reaction that might increase the prospects of a military escalation with NATO,” according to then Pentagon spokesman John Kirby. President Joe Biden was caught in the middle of the fray. Pressure on the White House from some members of Congress and the press corps was unrelenting to recklessly bring NATO directly into the war.
Biden ultimately sided with the Defense Department, and he couldn’t be more explicit why. He opposed a NATO no-fly zone over Ukraine fighting Russian aircraft, he said, because “that’s called World War III, okay? Let’s get it straight here, guys. We will not fight the third world war in Ukraine.”
U.S. Defense Secretary Lloyd Austin backed him up:
“President Biden’s been clear that U.S. troops won’t fight Russia in Ukraine, and if you establish a no-fly zone, certainly in order to enforce that no-fly zone, you’ll have to engage Russian aircraft. And again, that would put us at war with Russia.”
(The administration plan was, and apparently still is, to bring down the Russian government through a proxy counteroffensive and an economic and information war, not a direct military one.)
Blinken, who stepped out of line to speak above the heads of the president and the Pentagon, lost that round. It’s surprising he kept his job. But he survived and now he’s come back for more.
Relentless
Blinken’s recklessness emerged yet again last week when he peddled a story — eagerly picked up by The Guardian and The New York Times — that Biden would approve a British request to fire its Storm Shadow missiles deep into Russia.
“The US secretary of state, Antony Blinken, gave his strongest hint yet that the White House is about to lift its restrictions on Ukraine using long-range weapons supplied by the west on key military targets inside Russia, with a decision understood to have already been made in private.
Speaking in Kyiv alongside the UK foreign secretary, David Lammy, Blinken said the US had ‘from day one’ been willing to adapt its policy as the situation on the battlefield in Ukraine changed. ‘We will continue to do this,’ he emphasized.”
To fire British Storm Shadows, Ukraine would have to depend on British technical soldiers on the ground in Ukraine to actually launch them and on U.S. geolocation technology. German Chancellor Olaf Scholz revealed those British soldiers are already in Ukraine.
In other words, it would be a NATO attack on Russia, dressed up as a Ukrainian one. It would mean the U.S. and Britain were at war with Moscow, something Blinken seems to want and said was going to happen.
The next day Russian President Vladimir Putin warned that launching such missiles into Russia “will mean that NATO countries — the United States and European countries — are at war with Russia. And if this is the case, then, bearing in mind the change in the essence of the conflict, we will make appropriate decisions in response to the threats that will be posed to us.”
Polish MP Grzegorz Braun tells U.S. & Sec. Blinken to GO HOME ASAP! :
Nevertheless, The New York Times ran a story on the same day with the headline: “Biden Poised to Approve Ukraine’s Use of Long-Range Western Weapons in Russia.”
The Guardian added:
“British government sources indicated that a decision had already been made to allow Ukraine to use Storm Shadow cruise missiles on targets inside Russia, although it is not expected to be publicly announced on Friday when Starmer meets Biden in Washington DC.”
Blinken’s words evidently raised British Prime Minister Keir Starmer‘s hopes that he would satisfy his desire to strike Russia with his nation’s arsenal of long-range missiles, despite Putin saying that meant direct war with NATO.
Blinken and the British are trying to lead us to the brink.
Sanity in Arlington
Except that the Pentagon, the purveyor of the most monstrous violence in world history, has pulled the world back from it. For at least the second time — publicly known — the Department of War secured peace from neocon recklessness fronted by Blinken.
Starmer was sent back on his chartered British Airways flight from the White House meeting licking his wounds. He’d evidently been led by Blinken to believe that it was a done deal: the U.S. would let Britain attack Russia with its long-range missiles using U.S. technology — even if the U.S. wouldn’t allow its own long-range ATACMS to be used.
The Times of London reported that Biden withholding approval “surprised British officials who had listened closely to hints from Antony Blinken, the US secretary of state, that America was edging towards authorizing Storm Shadow, an Anglo-French weapon which relies on American GPS guidance systems.”
Starmer’s mania to strike Russia illustrates the British elite’s continuing pathological hatred of Russia, extending back centuries, compared to a perhaps more tempered, though determined, American geostrategic rivalry with Moscow.
Biden’s Limits With the Neocons
Biden has proven himself a supreme warmonger, his advocacy for the illegal invasion of Iraq and his complicity in the genocide in Gaza as the most egregious examples.
Like the two presidents before him, Biden allowed neocons to worm themselves into positions of power in his administration. But the extent to which Biden himself is a neocon, as opposed to a traditional warmonger, is subject to question.
As a creature of Washington of more than half a century, he seems to respect the military’s judgement about military matters and, on his good days, understands that even America has limits.
Barack Obama let Hillary Clinton, the “Queen of Warmongers,” bring Neocon Queen Victoria Nuland into his administration. Donald Trump let neocons John Bolton and Mike Pompeo into his. And Biden has Blinken (and for a time Nuland too.)
Instead of banishing these people, they are allowed to linger and drag the U.S. into evermore perilous failures: Iraq, Afghanistan, Gaza and Ukraine, leaving behind a mountain of squandered dollars and an ocean of blood.
As a careerist, Blinken said what he had to say to get to where he is. Obama in 2015 wisely decided against arming Ukraine after the Nuland and Biden-led 2014 coup because he did not want to antagonize Russia, for whom he said Ukraine was a vital interest, while it was not for the U.S. Obama also feared U.S. arms would fall into the hands of “thugs” — meaning neo-Nazi Azov types, whom Obama was well aware of.
Blinken at the time was Obama’s deputy secretary of state. To support the president’s position, he told a conference in Berlin:
“If you’re playing on the military terrain in Ukraine, you’re playing to Russia’s strength, because Russia is right next door. It has a huge amount of military equipment and military force right on the border. Anything we did as countries in terms of military support for Ukraine is likely to be matched and then doubled and tripled and quadrupled by Russia.”
But once he was freed of the restraints of Obama, he joined Biden’s aggressive Ukraine policy at the top of the State Department. From that position, and with a power vacuum in the White House because of Biden’s dementia, Blinken has been openly pushing the neocon agenda, laid out plainly in the 2000 report of the Project for a New American Century.
And what is that agenda? In another age, before it became a dirty word, it would have been proudly proclaimed as imperialism. It contains all of the hubris and sense of invincibility and impunity of any empire in history.
PNAC plainly promulgates that no power or alliance of powers will be allowed to rise up to stand in the way of the neocons’ mad quest to harness American power to achieve world domination. An alliance of powers such as that of China, Russia and the BRICS countries, which has only accelerated in opposition to unhinged, neoconservative adventurism.
No matter the many disasters piling up, notably Iraq, Palestine and now Ukraine, the neocons are undeterred and unrestrained. It’s about power and murder but it is made palatable to themselves with flowery language about America saving the world for democracy.
Their belief in their own supremacy, cloaked in an American flag, remains fanatic, no matter the death and destruction they cause. They do not understand that American power has limits and to test that, they risk everything.
really brilliant move by Biden-Blinken to pick fights with both China & Russia at the same time, every serious book on diplomacy ever written recommends picking fights with all your rivals simultaneously to force them to join together against you in ways they otherwise wouldn’t pic.twitter.com/zctOP70ZuM
In 2019, Blinken teamed up with arch-neoconservative Robert Kagan to write a Washington Post op-ed arguing for more aggressive use of U.S. power abroad and against U.S. domestic trends towards non-interventionism.
With Kagan’s wife Nuland out of the Biden Administration and National Security Advisor Jake Sullivan crucially siding with the realists, Blinken has emerged as the undisputed leader of who George H.W. Bush called the “crazies in the basement.”
That was 30 years ago. The neocons are in the penthouse now and only the restraint of the Pentagon and Sullivan’s persuasion brought Biden back from the brink.
Your Tax Dollars At Work: San Fran Cops Dress Up As Inflatable Chicken To Catch Speeding Drivers
Today in “your tax dollars at work” news, San Francisco police are donning inflatable chicken suits to catch drivers speeding through crosswalks.
SFGate first reported on officer Lt. Jonathan Ozol in costume at a crosswalk on Alemany Boulevard, where Capt. Amy Hurwitz said the goal is to get drivers to yield to pedestrians.
Some drivers didn’t seem to care and failed to yield to the giant inflatable chicken, according to Fox News. Imagine that.
Captain Hurwitz told Fox News: “I don’t want them to get run over. But the costume is so bright, it’s like, how can you miss it?”
“If you don’t see someone in a giant chicken costume, then we really have a problem,” Ozol added. “It’s having an impact. Drivers seem more aware, more cognizant. Certainly when they see the chicken.”
Monday marked the fifth stunt in six months, with officers dressing up as characters like unicorns or Big Bird to cross various intersections.
Capt. Hurwitz noted that each operation led to 30-40 citations, with fines up to $400. Lt. Ozol expressed disappointment at the consistently high numbers.
SFGate first reported last week: “The exercise has been featured in police newsletters, and in fact, after police performed the exercise at the same crosswalk previously, someone with a sense of humor put up a ‘chicken crossing’ sign nearby.”
Meanwhile, while this nonsense is taking place, the Fox report notes that in 2023, homicides in San Francisco increased by 83%, while the overall violent crime rate went up by 4%.
China Panics: Cuts Multiple Rates And Reserve Ratio Requirements, Goes All-In To Prop Up Stocks
This morning, when we reported that a sudden – and extremely overdue – urgency appeared to grip Beijing’s top power echelons in fasttracking a bunch of new monetary stimulus measures, including a cut in the 14-day reverse repo tool, we said to expect much more during today’s impromptu briefing on the economy, attended by the country’s three top financial regulators, which had fueled speculation that China was about to unleash far more efforts to revive growth, among which further cuts to the country’s Reverse Repo rate, and LPR rate but also cuts to the RRR and various other monetary stimulus measures.
That’s precisely what happened moments ago when PBoC Governor Pan Gongsheng unleashed what Bloomberg called a “stimulus blitz”, and what we call “sheer panic”, when he announced a bevy of stimulus measures to prop up the sinking economy and crashing stock market. Among these:
The PBOC will reduce the 7-day reverse repo rate by 20bps.
The PBOC will cut the reserve requirement ratio by 0.5%, a move that will free up1 trillion yuan ($142 billion) in liquidity, Pan said.
China may also cut the RRR further this year by another 0.25 to 0.5% at the appropriate time.
The PBOC will cut the 1 Year MLF rate by 30bps
The PBOC will also lower the rates for existing mortgages and cut the down payment ratio on second homes to 15% from 25%.
The deposit rate will be lowered to “neutralize” the impact on bank margins.
“Monetary policy easing come bolder than expected, with both rate cuts and RRR cuts announcing at the same time,” said Becky Liu, head of China macro strategy at Standard Chartered Plc. “We see room for bolder easing ahead in the coming quarters, following the Fed’s outsized rate cuts.”
Or, to quote Mike Ehrmantraut, no more half measures, just as we predicted on Friday.
But wait, there’s much more: at a time when not even the shoeshine boy wants to be within a ten foot pole of Chinese stocks, the PBOC governor also said that – in a last ditch attempt to bail out the country’s stock market – it will set up a swap facility allowing securities firms, funds and insurance companies to tap liquidity from PBOC to buy stocks. Brokers, funds and insurers will be allowed to pledge assets in exchange for liquidity for funds and buy stocks; the PBOC will also set up a separate specialized refinancing facility for listed companies and major shareholders to buy back shares, raise holdings. In other words, Beijing is greenlighting direct intervention in the stock market to prop up stocks.
According to Goldman, “this is very interesting new way of supporting stock market as so far it’s mainly national teams.”
While the devil will certainly be in the details, China is making it clear that it is not playing around, with Bloomberg reporting that China plans at least 500 billion yuan in liquidity support to stocks!
Over the past two years, Xi Jinping’s government has enacted piecemeal rate cuts that have completely failed to reverse a slowdown in the world’s No. 2 economy, with growth weakening further after grinding to its worst pace in five quarters and the housing market collapsing at an unprecedented pace.
That deterioration, which has translated into growing social unrest and surging labor strikes, has tested the Chinese leadership’s tolerance for missing its high-profile annual target for the second time in three years, at a moment when investor confidence is waning.
In May, China unveiled a laughable property rescue package which not only failed to turn around a years-long real estate slump that’s wiped out an estimated $18 trillion in wealth from households, but somehow made it even worse. Only 29 cities out of 200 urged to participate are heeding Beijing’s call to help absorb an excess of housing. New home prices clocked their biggest decline last month from July since 2014.
Not surprisingly, the central bank governor made the latest announcement at his first high-profile press conference since March, when he defended the government’s growth goal of about 5% alongside other top economic officials.
This year the PBOC chief has displayed a more transparent approach to policy in a bid to stabilize sentiment. Pan used a similar briefing in January to announce a cut to the amount of money banks must hold in reserve two weeks ahead of time, as authorities tried to halt a $6 trillion stock-market rout.
In response to the larger than expected – if not yet bazooka stimulus – the offshore yuan weakened 0.1% as PBOC announced the various rate cuts while China’s 10-year government bond yields declined to 2%, a fresh record low.
The plunge in yields confirms that the market was certainly taken aback with the size of the monetary stimulus, although for the real kick, Beijing will also have to unleash the fiscal firehose, which is also what Standard Chartered’s Becky LIu said when she predicted that the PBOC could take more aggressive action in the future, after a series of surprise rate cuts on Tuesday.
“The possibility for USD-CNY to dip below 7.0 is rising. China rates also have more downside.”
Echoing this view, Lynn Song, chief economist for Greater China at ING, said that China’s 10-year yield could decline to 1.8% should PBOC ease monetary policy further.
“It will be interesting to see if the PBOC steps in again to try and protect the 2% level, but I am personally expecting it to move below 2% at some point,” said Song. “If we are seeing more easing later in the year, it would not surprise me to see it move down to 1.8% or so.”
Tuesday’s RRR cut is “in line with expectations as it has been signaled for some time, but will not have too much of an impact as the issue currently is not banks lacking the funds to lend out but rather limited quality borrowing demand.”
What does today’s barrage of rate cuts mean for the economy? According to Jing Liu HSBC Global Research Greater China Chief Economist, China’s policy rate cuts are to support its 5% growth target goals, and there may be further reductions in the reserve requirement ratio: “This is basically to ensure that China can deliver the 5% growth target. With stronger support now I think we are going to see some kind of lifting effect… Don’t forget we could still have further fiscal stimulus. We still have more than one trillion yuan of quota left to be used up this year.” And with rates at all time lows, China can certainly afford to see yields tick up amid a flood of new debt.
“I personally think they are likely to use ultra long-term bonds because that doesn’t change the longer-term deficit and at the beginning of the year they left room for more operation on that” Liu said adding that “the next move to watch is whether the central government can put money directly into stabilizing the housing market. And whether China can have PPI inflation turn positive relatively soon.”
Xiaojia Zhi, head of research at Credit Agricole CIB, said that a big driver for the Chinese move was the Fed’s 50bp rate cut and the rebound in the yuan, which gave China room to ease monetary policy: “While PBOC rate cut and increase in liquidity would weigh on CNY and CNH, an partial offsetting factor could arrive if there is a boost to sentiment,” she says
While it remains to be seen how long this latest stimmy will last, at least the kneejerk reaction among risk assets was favorable, and the Chinese stock market rose with Chinese property stocks jumping after the PBOC’s announcement. “Good to see policy makers’ proactive moves to help overall economy and to support property market. The 15% down payment for second home is one of the lowest levels in history, which coupled with lower mortgage rate, could help reduce financial burden of homebuyers,” says Raymond Cheng, head of China property research at CGS International Securities Hong Kong.
Meanwhile, Pan’s mentioning of support to buy unsold homes could suggest more implementation of the policy. Overall, the stimulus was positive for the sector near term although yet to see impact on property sales.
Despite all that, the skeptics remain. According to Oversea-Chinese Banking Corp, China’s policymakers are clearly attempting to repair market confidence though more information is needed on the measures themselves. “The cuts were more or less within expectations but what is slightly different this time is a tool to support equity markets,” says Singapore strategist Christopher Wong. “This clearly shows that policymakers are making attempts to repair confidence — but it still remains to be seen if this sees sustained gains or just another one to two days of gains. Equity markets should cheer the move but devil is still in the details.”
Worse, according to ANZ bank head of Asia research Khoon Goh, the easing package – while the most comprehensive to date, “is far from being a bazooka.”
“If the new measures to support the equity market is successful, it could see a return of foreign inflows, supporting the yuan”
“Whether any rally in the equity market can be sustained ultimately lies in the ability for these measures to turn confidence around. Still, markets will welcome this announcement” if only for a few days at which point the selling will resume, as traders do everything in their power to force the PBOC panic to hit boss level.
Which it will: now that China has finally tipped its hand with what appears to be a barrage of monetary easing, it may pretend it won’t do a fiscal bazooka but when this “panicked” stimmy fizzles as it will, as have all previous ones, Beijing will have no choice but to flood the economy with debt, which will then send commodities soaring, and restart China’s export of its favorite commodity – inflation… and just in time for the Fed’s aggressive rate cuts.
In short, 2025 is shaping up like a very exciting year, if only for the second coming of the Arthur Burns Fed.
