Micron Slides After Cutting Wafer Starts By 20%, Slashing CapEx; Drags Chipmakers Lower
As the global recession starts to accelerate, we are seeing not only mass layoffs…
… first mostly among tech companies and soon everywhere else…
… but also companies realizing that demand they have budgeted for 2023 will not materialize. We just saw earlier today with Target which plunged after slashing its guidance and warning of a sharp slowing in consumer spending in recent weeks, and moments ago we saw that in an entirely different industry, when chipmaking giant Micron Technology said it was slashing capex by reducing DRAM and NAND wafer starts by about 20% versus 4Q 2022 in response to market conditions.
The company said that it is “these reductions will be made across all technology nodes where Micron has meaningful output” and added that Micron is also working toward additional capex cuts. In calendar 2023, Micron now expects its year-on-year bit supply growth to be negative for DRAM, and in the single-digit percentage range for NAND.
“Micron is taking bold and aggressive steps to reduce bit supply growth to limit the size of our inventory. We will continue to monitor industry conditions and make further adjustments as needed,” said Micron President and CEO Sanjay Mehrotra. “Despite the near-term cyclical challenges, we remain confident in the secular demand drivers for our markets, and in the long term, expect memory and storage revenue growth to outpace that of the rest of the semiconductor industry.”
The chipmaker elaborates that recently, “the market outlook for calendar 2023 has weakened” and adds that “in order to significantly improve total inventory in the supply chain, Micron believes that in calendar 2023, year-on-year DRAM bit supply will need to shrink and NAND bit supply growth will need to be significantly lower than previous estimates.”
The news hammered MU stock, which dropped as much as 6% before rebounding modestly.
Nvidia and Advanced Micro Devices were among semiconductor companies that were dragged lower in sympathy; both NVDA and AMD slid as much as -2.4% as realization the coming recession will further cripple demand across the semis space.
US Industrial Production Unexpectedly Contracts In October, Capacity Utilization Slows
US Industrial Production unexpectedly fell 0.1% MoM in October – the biggest drop since Dec 2021 and less than the expected 0.1% MoM jump. Additionally, September’s 0.4% MoM rise was revised drastically lower to just 0.1% MoM.
That is the 4th monthly decline in the last 6 months and the slowest YoY rise since January.
Source: Bloomberg
Manufacturing output rose 0.1% MoM (half the expected 0.2% rise).
Utilities fell 1.5% in Oct. after falling 1.7% in Sept.
Mining fell 0.4% in Oct. after rising 0.7% in Sept.
Notably, Capacity Utilization dropped back below 80% (79.875%)…
Not exactly the “strong as hell” recovery we were told about.
Bitcoin Slides After Genesis Suspends Withdrawals From Crypto Lending Business
The fallout from Sam Bankman-Fried’s massive farce continues as crypto brokerage Genesis suspends withdrawals from its lending business.
On Oct 10th, Genesis trading revealed that its derivatives business had around $175 million worth of funds locked away in an FTX trading account (hit by its exposure to bankrupt crypto hedge fund Three Arrows Capital, to which it had made a $2.4 billion loan).
On Nov 10th, Genesis trading announced that it will receive an additional equity infusion of $140 million from its parent company, Digital Currency Group. According to the company, this decision was made to “strengthen its balance sheet” and boost its “position as a global leader in crypto capital markets.”
Genesis sent letters to clients stating that it had obtained an additional equity infusion of $140M from parent company, Digital Currency Group. Genesis, with $175 million locked in FTX, is also the largest creditor to Three Arrows Capital Babel Finance. pic.twitter.com/d77QCODdsf
However, it doesn’t appear to have helped stem the tide of pain amid the FTX farce as Bloomberg reports that Genesis is suspending redemptions and new loan originations at its lending business after facing what it described as “abnormal withdrawal requests.”
Chief Executive Officer Derar Islim admitted that withdrawal requests exceeded current liquidity at Genesis Global Capital, the lending arm; but made it clear that Genesis’s spot and derivatives trading and custody businesses “remain fully operational.”
Genesis also reassured its clients that it doesn’t have “an ongoing lending relationship with FTX or Alameda.”
As Bloomberg notes, Genesis is one of the oldest and most well-known cryptocurrency brokers, offering trading and custody services to professional investors in digital assets. Over the past few years it had also established itself as one of the largest cryptocurrency lenders, allowing funds or other market makers to borrow dollars or virtual currencies to leverage their trades.
“We are aware that Genesis Global Capital, LLC (Genesis) – the lending partner of the Earn program – has paused withdrawals and will not be able to meet customer redemptions within the service-level agreement (SLA) of 5 business days. We are working with the Genesis team to help customers redeem their funds from the Earn program as quickly as possible. We will provide more information in the coming days.”
“The past week has been an incredibly challenging and stressful time for our industry. We are disappointed that the Earn program SLA will not be met, but we are encouraged by Genesis’ and its parent company Digital Currency Group’s commitment to doing everything in their power to fulfill their obligations to customers under the Earn program. We will continue to work with them on behalf of all Earn customers. This is our highest priority. We greatly appreciate your patience,” the statement said.
However, the Winklevi make it clear that this does not impact any other Gemini products and services, reassuring clients that Gemini is a full-reserve exchange and custodian -“all customer funds held on the Gemini exchange are held 1:1 and available for withdrawal at any time.”
The Bank of England is bailing out U.K. pension funds. The Bank of Japan uses excessive monetary policy to protect its currency and cap interest rates. China encourages its banks to buy stocks. The dollar, the world’s currency, is on a tear, interest rates are surging, and the financial world is fracturing.
Unlike any other currency, the U.S. dollar drives the global economy and financial markets. Because of the dollar’s status as the world’s reserve currency, the Fed’s monetary policy actions play a critical role in steering the U.S. economy and all global economies and financial markets.
To foresee the next crisis, it is imperative to understand the dollar’s role in global finance and economics and the resulting role that the Fed plays in influencing international monetary policy. To do so, we start with insight from Triffin Warned Us, an article we published in 2018.
These “cliff notes” for the article lay the groundwork for Part 2. Following this article, we will discuss the risks investors face as the Fed attempts to quell inflation.
The Bretton Woods Agreement
In 1944, the United States and many nations forged a significant financial arrangement in Bretton Woods, New Hampshire. The agreement has paid enormous economic dividends to the United States. However, it has a flawed incongruity with a dear price that is rearing its ugly head today.
Per the terms of the 1944 Bretton Woods Agreement, the U.S. dollar supplanted the British Pound to become the world’s reserve currency. The agreement assured a large majority of global trade would occur in U.S. dollars, regardless of whether the United States was participating in such trade. Additionally, it set up a system whereby other nations would peg their currency to the dollar. This arrangement is akin to the global currency concept made popular by John Maynard Keynes. Keynes’s brainchild was Bancor, a supranational currency.
Within the terms of the agreement was a supposed remedy for one of the abuses that countries with reserve currency status typically commit, running continual trade and fiscal deficits. The pact discouraged such behavior by allowing participating nations to exchange U.S. dollars for gold. Therefore, other countries that were accumulating too many dollars, the side effect of American trade deficits, could exchange their excess dollars for U.S.-held gold. As a result, a rising price of gold, indicative of a devaluing U.S. dollar, would be a telltale sign that America was abusing her privilege.
London Gold Pool
The agreement started fraying shortly after. In 1961, the world’s leading nations established the London Gold Pool. The objective was to fix the price of gold at $35 an ounce. The action was an attempt to maintain the Bretton Woods status quo. By manipulating the price of gold, an important gauge of the size of U.S. trade deficits was broken. Therefore, there was less incentive to swap dollars for gold.
Seven years later, France broke the ranks. France withdrew from the Gold Pool and demanded large amounts of gold in exchange for dollars. As a result, in 1971, President Richard Nixon, fearing the U.S. would lose its gold, suspended the convertibility of dollars into gold.
From that point forward, the U.S. dollar was a floating currency. There was no longer the discipline imposed upon it by gold convertibility. Nixon’s actions essentially annulled the Bretton Woods Agreement.
The following decade saw double-digit inflation, persistent trade deficits, and weak economic growth. These were signs that America was abusing its privilege as the reserve currency. The first graph below shows that, like clockwork, the U.S. began running annual trade deficits in 1971. The second graph highlights how inflation picked up markedly after 1971.
By the late-1970s, Fed Chair Paul Volcker raised interest rates from 5.875% to nearly 20.00% to break inflations back decisively. While economically painful, Volcker’s actions not only ended ten years of persistently high inflation and restored economic stability but, more importantly, satisfied America’s trade partners. The now floating rate dollar regained the integrity required to be the world’s reserve currency. This was despite lacking the checks and balances imposed upon it by the Bretton Woods Agreement and the gold standard.
Our article The Fifteenth of August discusses how Nixon’s “suspension” of the gold window unleashed the Federal Reserve.
Enter Dr. Triffin
In 1960, 11 years before Nixon’s suspension of gold convertibility and the effective demise of the Bretton Woods Agreement, Robert Tiffin foresaw this inevitable problem in his book Gold and the Dollar Crisis: The Future of Convertibility. According to his logic, the privilege of becoming the world’s reserve currency would eventually carry a heavy penalty for the U.S.
At the time, few paid attention to Triffin’s thesis. However, he was invited to a congressional hearing of the Joint Economic Committee in December of the same year.
What he described in his book and Congressional testimony became known as Triffin’s Paradox. Events have played out primarily as he envisioned.
Essentially, he argued the reserve status forces a good percentage of global trade to occur in U.S. dollars. For trade and global economies to grow under such a system, the U.S. must supply the world with U.S. dollars.
To supply the world with dollars, the United States must consistently run a trade deficit. Running persistent deficits, the United States would become a debtor nation.
Foreign Creditors Enable U.S. Deficits
Foreign nations accumulate and spend dollars through trade. They keep extra dollars on hand to manage their economies and limit financial shocks. These dollars, known as excess reserves, are invested primarily in U.S.-denominated investments ranging from bank deposits to U.S. Treasury securities and a wide range of other financial securities. As the global economy expanded and more trade occurred, additional dollars were required. As a result, foreign dollar reserves grew and were lent back to the U.S. economy.
Making the world even more dependent on the dollar, many foreign countries and companies issue U.S. dollar-denominated debt to better facilitate trade and take advantage of America’s liquid capital markets.
The arrangement benefits all parties involved. The U.S. purchases imports with dollars lent to her by the same nations that sold the goods. Additionally, the need for foreign countries to hold dollars and invest them in the U.S. results in lower U.S. interest rates, further encouraging domestic consumption and providing relative support for the dollar.
For their part, foreign nations benefit as manufacturing shifted away from the United States to their countries. As this occurred, increased demand for their products supported employment and income growth, thus raising the prosperity of their respective citizens.
A Win-Win or a Ponzi Scheme?
While it may appear the post-Bretton Woods covenant is a win-win pact, there is a massive cost accruing to everyone involved.
The U.S. has too much debt. As such, it has become increasingly dependent on low-interest rates to spur debt-driven consumption and to pay interest and principal on existing debt.
Lower than appropriate interest rates lead to unproductive debt, as can be seen with debt outstanding rising at a much faster pace than GDP. Simply the growing divergence between debt and the ability to pay for it, GDP, is unsustainable.
Summary
Triffin’s paradox states that with the benefits of the reserve currency also comes an inevitable tipping point or failure.
As we see with the current instance of rising interest rates and inflation, that point of failure is closing in on the U.S. and the rest of the world.
Part two of this article will focus on the dollar and Fed monetary policy and what it may entail as the Fed continues to push interest rates higher.
Attractive Female Students Saw Grades Drop After Switch To Online Learning During Pandemic, New Study Shows
In what we’re sure is simply totally a coincidence and nothing more, the grades of attractive female students examined by a new study fell after classes were moved online during the Covid lockdowns.
A brand new research paper called “Student beauty and grades under in-person and remote teaching” found that “when education is in-person, attractive students receive higher grades”.
The same study found that “grades of attractive females declined when teaching was conducted remotely” and that “the effect is only present in courses with significant teacher–student interaction.”
The paper had a jury of 74 people rate the looks of 307 engineering students on a scale of 1 to 10. From there, it looked at the data behind the students’ grades prior to, and during, pandemic lockdowns, at the Industrial Engineering Program at Lund University.
“This paper has shown that students’ facial attractiveness impact academic outcomes when classes are held in-person,” the study concluded.
“As education moved online following the onset of the pandemic, the grades of attractive female students deteriorated. This finding implies that the female beauty premium observed when education is in-person is likely to be chiefly a consequence of discrimination,” it continued.
“On the contrary, for male students, there was still a significant beauty premium even after the introduction of online teaching. The latter finding suggests that for males in particular, beauty can be a productivity-enhancing attribute.”
“The pandemic provided us with a great opportunity to disentangle whether this beauty premium is due to discrimination or the result of some productive attribute,” the author of the study, Adrian Mehic of Lund University, told The Times.
US Sanctions External Network Supplying Russia With Military Tech
Treasury Secretary Janet Yellen on Sunday announced the US will sanction a transnational network that’s been illicitly supplying Russia with military technology to support its war in Ukraine.
She identified that 14 individuals and 28 entities will fall under the sanctions, following widespread allegations particularly against Iran and North Korea. In the former case, advanced Iranian-manufactured suicide drones have been observed used with greater frequency by Russian forces on the Ukraine battlefield. Tehran has since admitted to selling Moscow drones; however, Iranian officials have claimed this was done before the invasion and the deal had nothing to do with the Ukraine conflict.
“This is part of our larger effort to disrupt Russia’s war effort and deny equipment it needs through sanctions and export controls,” Yellen, who is currently attending the Group of 20 summit in Bali, Indonesia with President Joe Biden, said. Notably she had said earlier that she would refuse to attend the G20 if Putin is also in attendance.
More details are expected via the US Treasury website on Monday. Upon the initial announcement, Yellen didn’t specifically name the entities being targeted.
Previewing a central focus of discussion this week at the Bali G20, Yellen called ending the war in Ukraine the top priority for the global economy. “Ending Russia’s war is a moral imperative and the single best thing we can do for the global economy,” she said.
Managing soaring fuel and food prices is a key topic under discussion among world leaders at the summit. While Putin is not in attendance, the Kremlin sent Foreign Minster Sergei Lavrov to represent Moscow.
Yellen said Friday at the G20, “Russia’s officials, including those participating in this session, should recognize that they are adding to the horrific consequences of this war through their continued support of the Putin regime,” She was addressing G20 finance ministers and central bank heads.
Iran Court Issues First Protest-Related Death Sentence
Anti-government protests have continued raging in Iran since they started in mid-September, following the death in police custody of 22-year-old Mahsa Amini for alleged non-compliance with the country’s strict Islamic dress code.
The protests have at times gotten violent, with buildings across various cities burned down, and also with live fire used by security services to quell the unrest. Last week hardliners in parliament demanded that authorities take a harsher stance in order to finally halt the so-called “anti-hijab” demonstrations.
A majority of the members of Iran’s parliament last week formally requested that the judiciary “deal decisively with the perpetrators of these crimes [the protests] and with all those who assisted in the crimes and provoked rioters.”
This as the death toll has grown into the hundreds – though the government says the police and security services side has suffered scores of casualties. The BBC reports that “At least 326 protesters, including 43 children and 25 women, have been killed in a violent crackdown by security forces, according to Iran Human Rights.”
But it seems the judiciary has taken the criticism from parliament to heart, as it has handed down its first execution sentence for alleged protest-related crimes. According to Al Jazeera:
The Iranian judiciary said late on Sunday that an unnamed individual has been sentenced to execution for “setting fire to a government center, disturbing public order and collusion for committing crimes against national security” in addition to “moharebeh” (waging war against God) and “corruption on Earth”.
Five more unnamed people, who authorities described as “rioters” – a word the government uses to describe the ongoing protests and those participating in them – were handed between five and 10 years in prison on national security-related charges.
More such extreme penalties are expected, given that Tehran officials have long accused the protest movement of being fueled by Iran’s enemies such as Israeli and US intelligence, hence the charge of “collusion for committing crimes against national security.”
John Bolton, who spearheaded Trump’s policies towards Iran for years, insists to BBC Persian that Iranian protesters are armed. He adds that he’s seen images of Kurdish forces that have been trained & armed in Iraq & says they are making a big difference in the current protests. https://t.co/69rxcm5Y2c
President Biden and the White House have spurred on the protests, saying that the US stands on the “side of the Iranian people”.
Early this month at a Democratic campaign event in California, Biden said, “Don’t worry, we’re gonna free Iran. They’re gonna free themselves pretty soon.” Iranian officials have meanwhile taken these and similar statements as evidence of an externally driven regime change operation.
Following news of an Iranian court issuing a death sentence for a demonstrator, the White House condemned the disturbing development, with Jake Sullivan stating from the G20 in Bali, “We are deeply concerned about reports from Iran of mass arrests, sham trials, and now a death sentence for protesters voicing legitimate demands against a government that systematically denies basic dignity and freedom to its people.”
WEF’s Klaus Schwab Gives Speech To G20 On The “Need To Restructure The World”
Klaus Schwab and the World Economic Forum find themselves waiting around for the next global crisis event after the covid pandemic turned out to be much less threatening to the public than they had originally hoped. In the meantime, Schwab continues to pontificate on the virtues of the “Great Reset” and the usefulness of crisis as a means to accomplish a “restructuring” of the current world order.
The restructuring that the WEF obsesses over is a global socialist system based on Schwab’s concepts of the 4th Industrial Revolution, the Shared Economy and Stakeholder Capitalism (corporate governance). He does not say much in terms of planning in his speech to the G20, but he does imply that while fragmentation is necessary, too much fragmentation could be troublesome. In other words, controlled chaos is valuable to the globalist agenda, but uncontrolled chaos would be disastrous for them.
Serbia Under Fire Over Launch Of “RT Balkan” Network
Russia’s state-funded broadcaster RT is in retreat in much of the rest of the world, particularly after it was booted from a number of Western countries, including the United States. RT America, for example, had shuttered its Washington D.C. headquarters and laid off all its local staff by early March.
By that point the RT wing in the US had ceased all live programming following the majority of its cable and satellite coverage being dropped, a process which began in 2018 amid greater US government scrutiny and Congressional efforts to crackdown on “Russian influence”.
Online platforms where RT International had tens of millions of followers also took action, with the biggest among them YouTube (owned by Google), having shut down RT’s popular channel including live news streaming and show archives. It was also suspended in the European Union in the wake of the Ukraine war.
But on Tuesday, the broadcaster announced it is expanding into more friendly territory with the launch of a channel and online portal in Serbia called “RT Balkan”.
RT’s chief editor, Margarita Simonyan, unveiled the new project in a Telegram statement:
“We have launched RT in the Balkans. Because Kosovo is Serbia.”
“The new multimedia website will cover the most important regional and international events from an alternative point of view,” RT said. This new opening will include a television station broadcasting exclusively in Serbian, to be operational by 2024. The website also has a Russian-language version.
“From now on the people in the region will have access to RT in Serbian, which will provide them with a more complete picture of the world today. Becoming an integral part of the Balkans’ media space is a big challenge, yet one that we are ready for,” RT Balkan Editor-in-Chief Jelena Milincic said in a state media announcement.
Ukraine on Tuesday quickly protested, urging the Serbian government to block RT access and shut down the project, with Ukrainian Foreign Ministry spokesman Oleh saying “the aggression against Ukraine is constantly being justified and calls for the genocide of Ukrainians are being made.”
“RT has nothing in common with freedom of speech and journalism. The propaganda and disinformation that this channel spreads will not benefit Serbian society. We are calling upon Belgrade not to make this decision” Nikolenko added.
Russian propaganda channel RT, banned in most Europe, launches a broadcasting hub in #Serbia, blessed by the Serbian government. https://t.co/AOdkM9Pefh
Though ironically Ukraine itself is a long way off from EU membership, the official further remarked that “permitting the RT broadcast is not in line with Serbia’s course to become a member of the EU, which introduced sanctions against this propagandistic Russian media source,” according to a regional sources.
The Serbian government has reportedly given its blessing for the RT expansion, as the two countries – both predominantly Orthodox – shore up ties. Russia has remained among the few world powers to reject Kosovo independence, something which for Belgrade has remained a top hot button geopolitical issue.
Poland Missile Strike May Have Come From Ukraine Self-Defense: US Officials
Update (0017ET): The missile that struck Poland may have been fired by Ukrainian forces at an incoming Russian missile, AP reports, citing three unidentified US officials.
[K]ey questions around the circumstances of the missile launch remained amid the confusion caused by a blistering series of Russian airstrikes across the nearby border in Ukraine, none larger than who fired it. Russia denied any involvement in the Poland blast.
Three U.S. officials said preliminary assessments suggestedthe missile was fired by Ukrainian forces at an incoming Russian one amid the crushing salvo against Ukraine’s electrical infrastructure Tuesday. The officials spoke on condition of anonymity because they were not authorized to discuss the matter publicly. -AP
The Associated Press also points out that the above assessment, in addition to President Biden’s comments that it was “unlikely” the missile was fired from Russia, contradicts information earlier Tuesday from a senior US intelligence official who told AP “that Russian missiles crossed into Poland.”
So it was a ‘stray’ missile after all?
US Finds Ukraine Self-Defense May Have Caused Poland Strike: AP
Update (2100ET): So much for Russia almost starting World War 3 (even if under the guise of a false flag). As we noted earlier (see below), even pro-Ukraine accounts noted that the S-300 SAM that fell in Poland was a Ukrainian one. And while Biden will never admit that Ukraine nearly started war with Poland (as much as the deep state via its AP connections or the Ukraine president would have wanted Russia to get the blame), moments ago Biden explicitly said that based on preliminary information, it is “unlikely” that the rocket strike in Poland originated in Russia. Oops.
“There is plenty of information to contest that. I don’t want to say until we completely investigate. It’s unlikely in the minds of [sic] the trajectory that it was fired from Russia. But we’ll see.”
So if it was not fired by Russia, where was it fired from?
Ukrainian military telegram admits that the deadly explosion in Poland was caused by a Ukrainian anti-missile defense S-300P to protect their country against Russian missile barrages. https://t.co/1qLFCMhIaV
Says he briefed NATO, G7 members on his talks with Poland
Leaders have agreed to support investing to figure out exactly what happened
Leaders will then determine next steps after finding out what ahppened
Russia continues to escalate its attacks in Ukraine
There is preliminary information that contests whether Poland incident was due to a missile fired from Russia
Based on the trajectory its unlikely the missile was fired from Russia
BREAKING: Pres. Biden makes remarks on Poland following meeting with world leaders, says preliminary information indicates “it’s unlikely” that projectile was fired from Russia. https://t.co/U7pWMhVsM9pic.twitter.com/0V5jhK4rcG
Russia now promotes a conspiracy theory that it was allegedly a missile of Ukrainian air defense that fell on the Polish theory. Which is not true. No one should buy Russian propaganda or amplify its messages. This lesson should have been long learnt since the downing of #MH17.
And with that Ukraine, and its western sponsors, will be busy for the next few hours de-escalating and memory-holing events from today which nearly sparked NATO to trigger Article 5 and launch a nuclear war against Russia.
* * *
Update(1920ET): Polish President Andrzej Duda is seeking to calm the public, and has issued a statement saying there’s as yet no definite evidence of who fired missile that fell in Poland. But he did say that a state of heightened readiness has been introduced for all Polish services, including the police, firefighters, border guards, according to breaking international reports.
Duda further said the military is increasing the monitoring of national airspace as investigators are still working to establish the causes of the explosion. He urged all Poles to remain. He added that “there are no indications that today’s incident would be repeated.”
Earlier Warsaw announced a “Russia made” missile landed on the border village of Przewodów, and Poland’s Foreign Ministry said it has summoned the Russian ambassador for a meeting. However, it should be noted that Ukraine’s anti-air defense arsenal has always been “Russia made” – especially its S-300 systems. Poland’s statement is interesting in that it did not say “Russia launched” missile, leaving the question of the missile’s origins open.
All of the above points in the direction that this was actually a projectile fired by Ukraine, as some of our coverage below suggested.
That’s a ‘Western’ source so it makes it quasi official:
President Biden sent a condolence message for the two lives lost to Poland’s Duda…
I spoke with President Andrzej Duda of Poland to express my deep condolences for the loss of life in Eastern Poland and offer our full support for Poland’s investigation of the explosion.
We will remain in close touch to determine appropriate next steps as it proceeds. pic.twitter.com/m6OSwcHKtD
Update(1715ET): Despite the alarmist talk all afternoon that NATO could invoke the Article 5 collective defense treaty over the alleged Russian rocket attack on a border town, the result of the Polish government national security emergency meeting is going in the opposite direction, and it seems there won’t be escalation today.
Polish govt spokesman Piotr Mueller said Poland has agreed to“increase its military readiness” – though crucially still admitted “It was not clear what caused the explosion in the southeastern town of Hrubieszów.” Russia has vehemently denied it was behind the explosions which killed two people. So instead of Article 5, Warsaw is merely talking the much lesser known Article 4. Article 4 requires “consultations” when a NATO member is threatened.
NATO AMASSADORS TO MEET ON WEDNESDAY AT REQUEST OF POLAND ON BASIS OF ALLIANCE’S ARTICLE 4 – TWO EUROPEAN DIPLOMATS SAY
“A moment ago it was decided to increase the readiness of some military units in Poland and other uniformed services,” Mueller told reporters in a press briefing. Across Ukraine and as far west as Lviv, Russian airstrikes pummeled Ukraine’s energy infrastructure on Tuesday. The Hill reports after a terrifying day for Ukraine, “Russia’s widespread missile attack on Ukraine – firing what Zelensky said was 90 missiles – was aimed primarily at the country’s electrical infrastructure following an embarrassing Kremlin retreat from the key Ukrainian city of Kherson.”
It is entirely possible that amid this large barrage of rockets, which also triggered Ukraine’s anti-air defense measures, an errant projectile strayed into NATO member Poland’s territory. Polish Senate Advisor Marcin Zaborowski said late in the day that if indeed it was accidental, Moscow should immediately apologize. So far the Kremlin has denounced the reports as a “deliberate provocation” – suggesting that Ukraine’s backers are seeking to draw NATO into escalation.
Article 4 call is wise. It seems Poland does not want to be blamed for a possible fait accompli. Discussion with NATO countries buys time for investigations to reach definitive data.
All NATO decisions are made by consensus, after discussion and consultation among member countries. Consultation between member states is therefore at the heart of NATO since Allies are able to exchange views and information, and discuss issues prior to reaching agreement and taking action.
As for the Ukrainian government reaction, it was somewhat predictable, with President Zelensky calling it a “really significant escalation” in the war while demanding “action” from the West.
Top Ukrainian officials, including Zelensky, are not waiting for the outcome of any ongoing Western investigation. They are on-record blaming Russia. https://t.co/IXls08KjNs
“Hitting NATO territory with missiles… This is a Russian missile attack on collective security! This is a really significant escalation. Action is needed,” Zelensky said his Tuesday night video address. He said it is “only a matter of time before Russian terror goes further.”
Unconfirmed video purporting to show the strike aftermath on the Polish side of the border was aired on a Polish TV station:
NEW: Footage reported to show the immediate aftermath of the explosion in Poland today pic.twitter.com/vTsbg0CpYX
Meanwhile, a highly respected weapons tracker social media account that’s generally seen as sympathetic to the Ukrainian side has broken ranks, suggesting what landed on the Polish town was a Ukrainian anti-air missile…
So what crashed in the village of Przewodów, Poland today?
With the cooperation of @blueboy1969 we analyzed the available photos of fragments and came to a clear conclusion that they belong to the 48D6 motor of the 5V55-series missile of the S-300 AD system- a Ukrainian one. pic.twitter.com/f0Ex3USLN8
With the narrative quickly changing, and available photographic evidence from the impact site now coming under broader scrutiny, Ukraine officials are in damage control…
Update(1500ET): Russia has issued its first statements in the wake of conflicting reporting concerning the suspected missile attack on Polish territory, just across the border with Ukraine. Russia is calling the reports a “deliberate provocation” and is denying that its forces have aimed any missiles near the Ukraine-Poland border, per Interfax news.
The Russian Defense Ministry issued a statement saying it has not taken part in “strikes against targets near the Ukrainian-Polish border” using “Russian weapons” – as is being alleged by Polish sources. The Russian statement further said it’s Warsaw’s attempt to escalate the situation. The Pentagon has meanwhile said it can’t corroborate the reports at this early stage but is gathering more information. A Pentagon spokesman vowed the US stands ready to “defend every inch of NATO territory.”
According to Polish radio broadcaster Radio Zet, local reports have said what hit Przewowo is most likely the remains of a rocket shot down by Ukraine’s armed forces. But there are conflicting and many unconfirmed claims still circulating. The US State Dept. said, “We are working with the Polish government to collect information and assess what happened.” It also called the reports “incredibly concerning.”
Russia’s defence ministry has denied reports that Russian missiles hit Polish territory, describing them as “a deliberate provocation aimed at escalating the situation”.
“No strikes on targets near the Ukrainian-Polish state border were made by Russian means of destruction,” it said in a statement.
Wreckage reportedly found at the scene “has nothing to do with Russian weapons”, it added.
Meanwhile “Article 5” is trending on Twitter.
Article 5 is not an automatic tripwire, it relies on consensus like other NATO decision-making processes. Ukraine (and Poland’s) defense wishlists just became more achievable but a NATO consensus on direct conflict with Russia is hardly a given and all parties involved know this https://t.co/A0m4yR62gu
Are we about to test Art Cashin’s thesis that you should never bet on the end of the world (i.e. sell stocks as the ICBMs start flying). As a reminder:
Art Cashin, the dean of the NYSE floor, told a story on Tuesday at Barry Ritholtz’s Big Picture conference in midtown that illustrated this point perfectly. It was in the days before the Cuban missile crisis. Mr. Cashin was a young trader. One day a rumor mushroomed that the Russians had launched their missiles. World War III was starting. Mr. Cashin ran across the street to find the best trader he knew – who was in a bar having a drink. Mr. Cashin ran in breathlessly, hardly able to talk.
“Stop,” the trader said. “Have a drink. Explain everything.” After hearing all the information, the trader had one order: “Buy. Don’t sell. Buy.”
“Why?” Mr. Cashin wondered.
“Because if you’re wrong, the trade’ll never clear. We’ll all be dead.”
Well, moments ago futures ignored the venerable market strategist’s words and tumbled after a report from Polish Radio ZET according to which two stray rockets fell in the town of Przewodów on the border of NATO-member Poland with Ukraine (while unreported, the prevailing assumption is that the rockets are Russian).
The Associated Press is also confirming, citing a senior US intelligence official who says two people were killed by the missiles. However, the Pentagon followed by saying it cannot corroborate the reports at this time. Stocks quickly reversed higher on the headline.
And Polish sources are reporting – albeit emphasizing the report is still unofficial – that Polish military planes have been scrambled out of the airport near Tomaszów Lubelski. “The Polish Air Force took fighter jets into the air from the Tomaszow-Lubelski airfield in the Lublin Voivodeship,” the local reports say.
And as Bloomberg also confirms, Polish Prime Minister Morawiecki has convened an urgent meeting of the Committee of the Council of Ministers for National Security. Hungarian PM Viktor Orban has also reportedly convened a national defense council meeting.
Estonia has meanwhile issued a statement saying it is “ready to defend every inch of NATO territory, We’re in full solidarity with our close ally Poland,” according to its ministry of foreign affairs.
The news has sent futures tumbling.
And further on the news:
US DEFENSE STOCKS JUMP TO SESSION HIGHS; NORTHROP UP 5%
It will be amusing when reputable news sources deny the whole thing but for now, stocks are dumping and are red on the day after soaring more than 2% earlier.
Hours earlier in the day Ukrainian authorities were reporting a series of fresh missile attack on the capital, and rare airstrikes in Western regions as well, including the city of Lviv.
