The U.S. Consumer Product Safety Commission has no plans to ban gas stoves, the agency said, according to Bloomberg.
A commissioner from the same agency, Richard Trumka Jr., earlier this week said that the CPSC had been considering a ban on gas stoves for months, with Trumka recommending in October that the agency seek public comment on the hazards of gas stoves.
But the head of the CPSC, Alexander Hoehn-Saric, said on Wednesday that the agency had no such plans.
“I am not looking to ban gas stoves and the CPSC has no proceeding to do so,” Hoehn-Saric said in a statement to Bloomberg on Wednesday, just a day after discussions of a ban set off a flurry of reactions on both sides.
Hoehn-Saric added that the Commission—made up of just four members—was researching emissions from gas stoves.
Back in August of last year, the Committee on Oversight and Reform—the principal oversight committee of the House of Representatives, asked the Commission to turn over documents and information “about the CPSC’s failure to establish safety standards and provide adequate warnings to consumers addressing the significant health risks posed by indoor air pollution from gas stoves.” The Committee document was retrieved in Cached form, as the document can no longer be found at its original web location.
The push against gas stoves has resulted in GOP backlash, with Senator Joe Manchin (D-W.Va.) also speaking out against the idea of a ban on the cooking appliance preferred by most chefs.
“This is a recipe for disaster. The federal government has no business telling American families how to cook their dinner,” Manchin said, adding that if this was the CPSC’s greatest concern, “I think we need to reevaluate the commission.”
Largest US Grid Saw Nearly 25% Of Power Generation Fail During Christmas Cold Blast
PJM Interconnection, a regional power grid that stretches from Illinois to New Jersey, declared an emergency during Christmas and was on the brink of implementing rolling blackouts for millions of customers due to a partial power-generation fleet shutdown.
The regional power grid operator has over 65 million customers in 13 states and the District of Columbia. It published its first analysis explaining the grid strain when temperatures dove well below freezing due to 23% of its power-generation fleet shuttering on Dec. 24.
About 70% of the 46 gigawatts of outages were due to NatGas-fired power generation going offline, which left the grid operator in dire straits as temperatures continued to plunge and electricity demand soared as customers turned up their thermostats.
Here’s PJM’s report explaining how the cold blast last month nearly sparked an energy crisis.
PJM shows the cold shot lasted between Dec. 23-25.
Temperatures recorded one of the most dramatic drops in a decade.
The grid saw a record-high load versus the previous ten years over the holiday weekend.
Power demand was elevated for days as the grid struggled to keep up.
Then came power generation outages. Here’s a timeline of what happened:
Most of the power generation that was lost was natural gas and coal.
Even though the winter has been mild, there has been increasing chatter on Twitter about a possible cold snap at the end of January or next month. But remember, no forecast is locked yet.
Keeping an eye on differences in the extended range…
🧐EPS would be a moderation with some cooler air behind storms.
🥶GEFS taps into the Arctic a bit more and dumps colder air in at the end of the run.
#Natgas demand will be volatile over the next 2 weeks. Withdrawals will dip to -7 BCF/d tomorrow before jumping close to the 5-yr avg this weekend, only to drop back into single digits next week. By Jan 23 or 24, a more sustained shot of cooler temperatures may *finally* arrive. pic.twitter.com/b8TEH1A1V4
#natgas
By Jan 27 the center of polar air is right over North America with -40C, an historic cold air mass. I am accumulating natgas derivatives for March. It is an outstanding opportunity, yet everybody has to decide on its own what to do with it. pic.twitter.com/VANIYpvXkd
The Department of Defense is formally ending the COVID-19 vaccine mandate for the U.S. military and the National Guard, but did not provide any signal as to whether those discharged over having refused the vaccine would have any chance of being reenlisted.
Meanwhile, for those who are currently serving in the armed forces, none “shall be separated solely on the basis of their refusal to receive the COVID-19 vaccination if they sought an accommodation on religious, administrative, or medical grounds,” Secretary of Defense Lloyd Austin wrote in a memorandum (pdf) on Jan. 10.
“The Military Departments will update the records of such individuals to remove any adverse actions solely associated with denials of such requests, including letters of reprimand,” Austin said in the memo.
“The Secretaries of the Military Departments will further cease any ongoing reviews of current Service member religious, administrative, or medical accommodation requests solely for exemption from the COVID-19 vaccine or appeals of denials of such requests.”
The directive comes after a Pentagon official announced on Jan. 5 the department had rescinded the mandate and was in the process of developing “further guidance” on vaccines for the force.
All actions related to the COVID-19 vaccine mandate, which Austin had imposed in August 2021, had been halted by the Pentagon in late December 2022.
Austin said in the Jan. 10 memo that COVID-19 vaccines have been given to over 2 million service members and that 96 percent of the active and reserve forces are fully vaccinated against COVID-19. He said he is “deeply proud” of the Pentagon’s efforts to combat COVID-19.
More than 8,000 service members have been discharged for refusing the vaccine.
The Pentagon “will continue to promote and encourage COVID-19 vaccination for all Service members,” Austin said.
For the service members who were administratively discharged “on the sole basis that the Service member failed to obey a lawful order” to take the vaccine, Austin said the Pentagon is prevented by law from giving anything less than a general (under honorable conditions) discharge. A general discharge is a step down from an honorable discharge and is generally given to troops who had satisfactory service but had minor misconduct.
Those who received a general discharge may petition their military department’s discharge review boards for “correction of military or naval records” to request a correction to the characterization of their discharge, he said.
Reenlistment Unclear After Thousands Discharged
President Joe Biden, on Dec. 23, 2022, signed into law the $858 billion National Defense Authorization Act (NDAA) for the fiscal year 2023, which had passed via bipartisan majorities in the House and Senate. The legislation stipulated that Austin must rescind the COVID-19 vaccine mandate for members of the armed forces within 30 days of Biden’s signature.
Austin cited the legislation in repealing the mandates issued in August 2021 for U.S. military members and in November 2021 for the National Guard.
Republican lawmakers, who comprised the minority in both chambers last year, had pushed for the removal of the vaccine mandate and celebrated the provision in the NDAA upon its passing in the House and Senate.
The Pentagon discharged a total of “3,300 Marines, 1,800 soldiers, 1,800 sailors, and 900 airmen simply based on their personal decision to not take the COVID vaccine,” House Speaker Kevin McCarthy (R-Calif.) said in a statement on Dec. 6, 2022.
“These heroes deserve justice now that the mandate is no more,” he said.
“The Biden administration must correct service records and not stand in the way of reenlisting any service member discharged simply for not taking the COVID vaccine.”
The Pentagon has not immediately responded to a request for comment from The Epoch Times on whether it has any plans to reenlist those who had been discharged for the sole reason of refusing the COVID-19 vaccine.
A member of the U.S. military receives the Moderna COVID-19 vaccine at Camp Foster in Ginowan, Japan, on April 28, 2021. (Carl Court/Getty Images)
Opposition to Mandates
Until the passing of the NDAA, the military COVID-19 mandates had been kept in place—even amid plummeting efficacy of the vaccine against infection and severe illness since the spread of the Omicron variant in late 2021, and research suggesting that natural immunity could be more effective than vaccination.
The mandates saw resistance among troops and Americans at large, including lawmakers in Congress, who argued in favor of bodily autonomy free from coercion.
Even before the mandates, Rep. Thomas Massie (R-Ky.) in July 2021 shared that military members said they would quit instead of receiving a COVID-19 vaccine.
By October 2022, just two months before Congress passed the NDAA, The Epoch Times reported that military officers who became injured after their COVID-19 vaccinations called for the mandate to be scrapped.
The military has notoriously issued mass rejections for religious requests for exemptions to the mandate, triggering multiple court challenges. Judges had blocked three of the four branches from discharging most members seeking religious exemptions over the treatment, which the judges said violated the Religious Freedom Restoration Act.
Just 0.5 percent of the religious accommodation requests have been approved by the Marines, followed by 1 percent for the Navy, 2.3 percent for the Air Force, and 6 percent for the Army. Thousands of requests were still not adjudicated before the mandate was withdrawn.
Soldiers file paperwork before being administered COVID-19 vaccines in Fort Knox, Ky., on Sept. 9, 2021. (Jon Cherry/Getty Images)
Troop Retention Concerns
McCarthy said at the time the Army and Navy “missed their 2022 recruitment goals by thousands of service members.” Meanwhile, noting the thousands discharged, McCarthy said the COVID-19 vaccine mandate “was detrimental to the ranks, and there is no doubt it put our national security at risk.”
McCarthy’s concerns over military retention were reflected in a projection by the Army National Guard in October 2022 of a loss of as many as 14,000 soldiers across the country over the next two years. This was attributed to refusals to comply with the COVID-19 vaccine mandate. A loss of 9,000 soldiers was projected for the fiscal year 2023, and another 5,000 soldiers was projected for fiscal 2024, if the mandate persisted.
Austin, also on Dec. 6, 2022, drew public attention to recruitment and said there’s no “hard data that directly links the COVID mandate to an affect on our recruiting.” A day later, Deputy Pentagon Press Secretary Sabrina Singh said in a statement that the mandate “appears to have very minimal impact on recruiting.” The two did not comment on retention.
Legislators have a strange relationship with magic. To achieve that which physically cannot be done, they like to wave magic wands and pretend that it can. Reality puts a limit on political power, a realization that always sits poorly with those in charge of our trillion-dollar bureaucratic machinery.
Senator Elizabeth Warren is a stunning case in point, and she’s had her aim at the magic-seeming world of digital assets like bitcoin for a while. Last month she cosponsored The Digital Asset Anti-Money Laundering Act of 2022 with Roger Marshall which attempts to put those assets under rules that echo the regulatory system that cryptocurrencies were created to escape.
The bill’s purpose is “closing loopholes and bringing the digital asset ecosystem into greater compliance with the anti–money laundering and countering the financing of terrorism (AML/CFT) frameworks governing the greater financial system.”
This turns tens of thousands of node runners, wallet users, or bitcoin holders into licensed money service businesses for running software on their computers. The bill’s text especially rallies against “unhosted” wallets, which are just assets that are not under the custody of a regulated exchange or bank-like entity—that are owned outright instead of being counterparty to a censorable banking contract. There can be no financial privacy in the senator’s world.
Money transmitter entities would be required to perform the sort of identification and counterparty checks that banks submit to, but the bill takes things one step further:
Prohibit financial institutions from using or transacting with digital asset mixers and other anonymity-enhancing technologies and from handling, using, or transacting with digital assets that have been anonymized using these technologies.
An old-world analogy of the absurdity of this is physical cash, where using an ATM and then making a bank deposit is the most rudimentary form of “anonymity enhancing technologies.” If the senators get their way, the kind of privacy that cash permits would be ruled out in the new world of bitcoin: we must see what you’re up to and make sure you’re not spending any funds we disapprove of.
Reality Reasserts Itself
Never before was a piece of proposed legislation so resolutely defeated by reality.
Reality doesn’t go away simply because you label it “money laundering” or tangentially connect it to criminal behavior by the rogue states that ostensibly motived the bill.
Warren cannot do this for three reasons:
Bitcoin doesn’t work the way she thinks.
Congress is constitutionally barred from doing it.
And because the bitcoin protocol doesn’t care about her magic-wand waving.
While bitcoin attempts to be money, it doesn’t conform to the physical properties of pieces of paper (or regulated banking institutions) that Warren pretends to understand. Paper dollars are handed over in trade, and bank transfers clear between banks or on the Federal Reserve’s balance sheet; something that has monetary value moves, and we therefore get money transmitter laws to keep tabs on who is moving funds to whom.
On the surface it seems that bitcoin operates in the same way: I have satoshis in a mobile app or a hardware wallet, I press send, and then you have sats in your wallet. Something money-like moved, right?
Wrong. What shifts are the open sesame–like secret words that allow a transaction to be accepted by the tens of thousands of nodes running bitcoin, recognizing that now someone else is in command of the protocol address existing all over the world at the same time. It’s like passing secret notes to the entire world, enciphered by a secret code.
There’s no bank for Warren to lean on for regulatory purposes. What shifts is the protocol-level recognition that someone else now has access to the funds, whereas the funds themselves never move. L0la L33tz writes in Bitcoin Magazine that “non-custodial wallets transmit Bitcoin the currency as much as the key to one’s door moves the house around.”
And words are speech which Congress has long been forbidden from interfering with. The counterintuitive notion of a monetary system that operates without money moving has yet to reach the offices of America’s legislators. Money transmission laws are as unfit to regulate bitcoin as they are regulating the janitors in the Capitol.
Bitcoin doesn’t move, so how can the software that manages one’s balance be subject to money transmitter laws? Warren faces problems on three levels:
1. You can’t achieve it. Bitcoin was made for attacks like these, attempts to regulate or control it. It is resilient; its ledger and block confirmations are completely unresponsive to any magician’s waving. Last spring, China tried to ban bitcoin mining—a physical process more difficult and obvious than just holding, transacting, or validating bitcoin—in a state much more authoritarian than the US, and they couldn’t do it. A year and a half later, plenty of covert mining operations exist in China, not to mention the exodus of machinery that set up in the US, Canada, Kazakhstan, and Russia. A huge authoritarian crackdown with zero impact on bitcoin.
Good luck subduing the mere transactions and privacy-enhancing methods that people run on their phones and computers.
2. You’re not allowed to. The First Amendment says that government cannot abridge the freedom of speech, and since Bernstein v. United States in the 1990s, the Supreme Court has said that code is speech. Every aspect of bitcoin is code: The validators running bitcoin is code. The “unhosted” wallets and the mixers the bill laments are code.
The mobile apps that allow spending is code. At no point does anything related to bitcoin cease being code. End of discussion.
3. You’re not supposed to. Money is a neutral entity, a system that exists entirely to facilitate trade between humans. If it performs its role well, some unsavory types are going to use it (cue criminals and cash). When you meddle with it, it performs that function less well, and you harm the rest of society. Senators in a galaxy far, far away have no business interfering with it.
You cannot make words illegal—primarily because they’re nonrivalrous and exist in the human mind, available for anyone to use. When Harry Potter’s enemies in J.K. Rowling’s fantastic world enforce the “Taboo”—an enchantment that lets the Death Eaters punish anyone who utters Voldemort’s name—they do so via the use of magic, a realm that Congress thankfully has not yet uncovered.
Not for lack of trying, as we learned a few weeks ago when Senator Warren tried to regulate the code that people run when they use bitcoin. Central planners always try to plan that which is beyond their understanding—and frequently beyond their capacity.
Good news is that it won’t pass; it’s the sort of Hail Mary marketing tool for which Warren has become quite known. Bad news is that it reflects the mistaken view held by many a legislator and plenty more everyday people.
You can be in favor of bitcoin, oppose it, or be lukewarm or uninterested. What you can’t do is straw man its operation and then try to use government power to magically make it behave the way you want. Ignorance is not a good reason to mistakenly overstep one’s authority.
As the former chief of staff to the Defense Department under the Trump administration, Kash Patel was one of the first people the now-shuttered House Jan. 6 Committee sought testimony from in its investigation of the Capitol breach.
Despite this, the transcript of his deposition was one of the last to be released as the committee concluded its work, and the reason, according to Patel, was simple.
“I gave them the hard truths that they didn’t want the answers to because it didn’t fit their political narrative,” he told The Epoch Times’ Jan Jekielek on the Jan. 6 episode of his Kash’s Corner podcast.
Burying the Evidence
Revisiting the events of Jan. 6, 2021, and the aftermath, Patel held that the committee failed to abide by its own rules when it excluded the exhibits he and his legal team entered into the record during his deposition.
Among those exhibits, of which Patel said there were roughly nine, was a key report (pdf) released in November 2021 by the Biden Defense Department (DoD), which concluded that the actions the department took under the Trump administration to prepare for the Jan. 6 protests were “appropriate” and “complied with laws, regulations, and other applicable guidance.”
That report, Patel said, along with his testimony that former President Donald Trump’s authorization of the deployment of 20,000 National Guardsmen to protect the Capitol, contradicted the committee’s conclusions that Trump was responsible for the violence that occurred that day.
Patel also noted that, when they were offered additional assistance from federal law enforcement, both Mayor Muriel Bowser and the Capitol Police (USCP) declined.
In fact, on Jan. 5, 2021, Bowser announced publicly that she would not be requesting additional federal law enforcement, sharing a letter she had written that stated as much to her Twitter account.
“To be clear, the District of Columbia is not requesting other federal law enforcement personnel, and discourages any additional deployment without immediate notification to, and consultation with, MPD [Metropolitan Police Department] if such plans are underway,” Bowser wrote in the letter to Acting Defense Secretary Chris Miller, Acting Attorney General Jeffrey Rosen, and Army Secretary Ryan McCarthy.
Likewise, according to the Capitol Police’s official Jan. 6 timeline, the Pentagon contacted USCP to confirm if a request for National Guardsmen was being considered. The next day, USCP Deputy Chief Gallagher replied that “a request for National Guard support is not forthcoming at this time after consultation with COP [chief of police] Sund.”
According to Patel, both Bowser’s letter and USCP’s timeline were also submitted as exhibits but were not released along with the transcript of his deposition.
Under the House’s rules (pdf) for deposition procedure, “the transcript and any exhibits shall be filed, as shall any video recording, with the clerk of the Committee.”
While the committee released exhibits from other interviews with the supporting materials for its final report, none of the exhibits listed as being on file with the committee include those produced by Patel.
“No surprise, the Jan. 6 Unselect Committee broke its rules, broke the House rules, broke its commitment—and not just orally, but in writing to my legal team—by saying the exhibits would be included,” he said. “They excluded every single exhibit.”
Unanswered Questions
Patel also slammed the committee for failing to investigate significant questions and concerns that remain largely unexplained.
The majority of his deposition, he noted, was not even about Jan. 6 but other, unrelated matters the committee simply wanted information on.
“That just showed me that all they cared about, this committee, was setting up perjury traps and looking for political ammunition, not the facts,” he said.
One question Patel said he is still seeking an answer to is why a “no-climb” fence was not constructed around the Capitol prior to Jan. 6.
Patel recounted how he showed up at the scene on Jan. 6, after the protests had broken out, to find no fence had been erected to help secure a perimeter.
Noting that he had to buy the fence himself and have the National Guardsmen put it up later that day, he wondered: “If we could do it that fast, why wasn’t it done before? What are they going to say, optics? They didn’t have the intelligence? This committee never bothered to examine that question.”
Further, according to Patel, he and other DoD officials offered to remove the fence after the protests had subsided, but their offers were rejected by then-Speaker Nancy Pelosi (D-Calif.) and the incoming Biden administration.
The fence would remain up for half a year, serving as a reminder of the events of Jan. 6 to all who passed by.
“That’s what I believe that this partisan political charade was about,” Patel said. “They wanted the optics before Jan. 6 with no security, and they wanted the optics after Jan. 6 with heavy security to show that their political narrative was the one that was right. But when you look at the underlying facts, their narrative is defeated.”
Another unexplained mystery Patel pointed to was the role played by Ray Epps, a former Arizona Oath Keepers leader who was filmed encouraging protesters to enter the Capitol on Jan. 6.
While Epps maintains that he was at the Capitol that day to support Trump, many have come to believe that he was there as a provocateur, potentially on the orders of the FBI.
Noting that the FBI has repeatedly failed to give a straight answer on whether Epps is an operative of theirs or not, Patel said: “Look, as a former federal prosecutor who ran sources and informants, if the answer is, ‘This guy is not on our payroll, and we don’t know him, and he did absolutely nothing for the United States government,’ you come out hard and fast out of your press office and say those things. And those things have never been said by this DOJ or FBI about Ray Epps.”
Patel also pointed to the recent revelation that Pelosi’s office played a key role in planning security for the event and the fact that the FBI withheld a crucial report indicating thousands of protesters could show up at the Capitol as additional mysteries that should be investigated by the Republican-controlled House.
“Look, if the FBI and DOJ are willing to subpoena my records from five years ago, maybe we can get this Congress to actually subpoena some records of consequence to answer some of these questions.”
US To Hit Debt Ceiling One Week From Today, Starting Countdown To Epic Chaos
In the final days of 2022, Goldman’s economists predicted that “the biggest political risk” of 2023 will be the Congressional showdown over America’s favorite periodic drama: the debt limit.
This is what the bank’s chief economist Jan Hatzius said then: “The debt limit likely poses the greatest political risk next year, and we expect it to rival the 2011 episode in its disruption to financial markets and the economy. That said, we do not expect Congress to enact major fiscal changes. Republicans might press for spending cuts in a debt limit deal, but we do not expect substantial cuts next year. The White House might press for increased fiscal support, but this also looks unlikely as we believe a soft landing is more likely and a divided Congress would have difficulty responding to a recession even if one occurs.”
And while the US has about 9 months to go until the mid-September D-Day, or the moment when various emergency measures meant to provide breathing room under the debt ceiling, the existing US cash balance and new tax payments are all exhausted, a new analysis by Wrightson ICAP has calculated that the recent surge in Treasury bill supplies will likely push the outstanding amount of public debt about $10 billion above the debt ceiling after the close of business on Jan. 19, absent the implementation of measures to extend the government’s borrowing authority. Currently, the government is roughly $64 billion away from reaching its $31.4 trillion statutory borrowing limit, a level it will breach in about a week.
More than half of that $64 billion buffer will be chewed up by a swath of benchmark bill, note and bond auctions taking place this week. The net increase to the debt pile from those, after the last of them is settled next Tuesday, will be around $36.6 billion, leaving a little under $27.7 billion of clearance, according to ICAP and Bloomberg.
And that doesn’t even account for the new cash-management bill which settles two days later on Jan. 19. To accommodate that $60 billion security, it’s likely the Treasury will need to implement its extraordinary measures before then.The Treasury plans to sell $36 billion of four-month bills Wednesday, which is $3 billion larger than the previous week’s auction.
Of course, all that hitting the debt threshold level – which is always just a formality for a country that is debt-funded like the US means, is that the Treasury will notify Congress it’s invoking extraordinary accounting measures in the next few days.
“Even if our projections of nonmarketable debt are too high, the Treasury would probably be too close to the ceiling for day- to-day operational comfort,” Wrightson ICAP economist Lou Crandall writes in a note.
Once the Treasury invokes its extraordinary measures, that will give it “ample borrowing capacity” for at least the next few weeks so it could continue increasing the size of the three- and six-month bill sales for the next couple of weeks. Still, Wrightson expects Treasury to keep the sizes steady when it announces the next round Thursday.
Also, the fact that Treasury’s cash management bill offering is only 35 days suggests the department wants to “retain some flexibility” under the debt cap, which argues for relying on boosts to shorter maturities.
And while the debt ceiling will likely be breached in about a week, as the Goldman chart below shows, analysts doubt the government is actually at risk of defaulting until the second half of 2023 because of the extraordinary measures the Treasury usually uses to avoid exceeding the cap, including using up the existing Treasury cash balance and funding from tax payments.
And so, the question is not if and when the US will breach the debt ceiling and cross the infamous D-Day, but how will broken Congress reach a solution. As we explained one week ago in “Investors Are Already Dreading The Debt Ceiling Chaos In 2023”, not even the always cheerful Wall Street expects a smooth and drama-free resolution to a process that will be nothing short of absolutely chaotic and expose the full Congressional dysfunction for the entire world to see.
For those who missed it, here are our thoughts from last week:
With the House paralyzed indefinitely after Kevin McCarthy just lost his 10th House Speaker vote (the longest such stretch since before the civil war) as a group of Republican holdouts refuses to side the GOP establishment, Bloomberg rates strategist Alexandra Harris writes that the debt ceiling is already top of mind for investors even though the US isn’t likely to face the threat of a technical default until the second half of 2023 and Treasury bills aren’t yet pricing such concerns. That’s because the Republican standstill surrounding the House speak vote foreshadows the chaos that could unfold when must-pass bills, like government funding legislation and an increase or suspension of the debt ceiling, have to be addressed.
clip and save for fights over government funding and the debt ceiling https://t.co/HQaF98JcRs
“Although the markets did not react on Tuesday to the political chaos in the House, the dysfunction is a clear signal that House Republicans will struggle to raise the debt ceiling when the time comes in 3Q23,” Stifel Financial’s chief Washington policy strategist Brian Gardner says in a note.
“Investors should be on guard as the summer approaches as to the possibility that the brinksmanship over the debt ceiling could lead to market volatility and a risk-off trade.” Well at least the Fed will be happy.
The good news is that the debt ceiling crisis isn’t due for a while: the government is roughly $102 billion away from reaching the $31.4 trillion statutory limit, although analysts doubt the government is actually at risk of defaulting until the second half of 2023 because of the extraordinary measures it usually uses to avoid exceeding the cap.
Treasury has been reducing its cache of bills in order to give itself more breathing room under the cap before invoking their accounting tricks. And speaking of tricks, California Democrat Brad Sherman floated a potential deal that would trade Democratic votes to make McCarthy the speaker of the House in return for rules aimed at preventing a US government shutdown or a debt limit crisis.
According to Harris, from a money-market standpoint, a dragged-out fight over the debt ceiling will likely result in less T-bill supply at a time when there’s still a glut of cash in the overnight funding, pushing rates even lower and motivating eligible counterparties to keep parking cash at the Fed. Yes: that means the Overnight Reverse Repo balance will balloon even more.
This comes at a time when Federal Reserve policy makers are expecting balances at the overnight reverse repo facility to drop from its current levels above $2 trillion. It rose by another $41 billion on Wednesday to $2.23 trillion. In the minutes of the December gathering, Patricia Zobel, manager pro tem of the New York Fed’s system open market account, noted that greater competition among banks for funding could contribute to drawdowns in the RRP, but clearly that has not been the case since most banks still refuse to raise rates on their deposits.
All of which brings us to what Goldman predicted in its “10 questions for 2023“, would be the biggest political risk of this year. Not surprisingly, it was another debt ceiling crisis. For those who missed it, here is what Goldman said:
Will the debt limit have as negative an impact on financial markets in 2023 as it in 2011?
Yes. The political and fiscal conditions next year will be similar to the last two extremely disruptive debt limit increases, in 1995 and 2011. Like next year, in those periods a Democratic President in his third year faced a Republican House after losing the majority in the midterm election. Those episodes also followed a run-up in public debt as a share of GDP and/or a rise in federal interest expense, similar to the experience over the last few years. However, midterm gains of 54 seats in 1994 and 63 in 2010 gave Republicans a clearer political mandate and the votes to carry it out, at least in the House. By contrast, Republicans netted only 9 seats in the 2022 midterms and enter 2023 with a very thin House majority. Public focus on the public debt is also much lower compared to those prior periods, and Republicans have not emphasized fiscal restraint nearly as much recently as they had in the mid-1990s or early part of the Obama Administration.
Prior disruptive debt limit standoffs led to increased market volatility and a sell-off in Treasury securities maturing around the debt limit deadline, and we would expect this to occur next year. In 2023, we would expect yields on bills maturing around the deadline to rise by at least as much as they did in 2011 and 2013, and for volatility in financial markets to rise similar to those periods (Exhibit 14).
There is also a real chance that Congress fails to raise the debt limit in time next year, forcing Treasury to reduce daily payments to the level of receipts (i.e., immediately eliminating the budget deficit), resulting in a spending cut of around 10% of GDP at an annualized rate. While we think it is more likely that Congress manages to avoid this and raise the debt limit before it constrains Treasury’s ability to pay its obligations, the risk appears higher than at any point since 2011.
The deadline for Congress to raise the debt limit before Treasury must cut back net borrowing will likely be sometime in August but could be as late as October depending on Treasury cash flows. An early signal of the risk the debt limit poses will come at the start of 2023, when the new House of Representatives is seated. If Republicans reinstate the “motion to vacate” that allows any member of the House to call for a vote for a new speaker of the House—several Republican House members have recently called for this in return for their vote for speaker—it could be difficult for the next speaker to put a clean debt limit increase to a vote until forced by financial markets.
For more detailed on these, and other questions and predictions, read the full note available to pro subs.
A Ukrainian official said it was logical for Kiev to become a member of the North Atlantic Treaty Organization and the European Union. The country’s Ambassador to the UK, Vadym Prystaiko, claimed it was “silly” to exclude Kiev from the Brussels-based alliance because Ukraine will be “full” of weapons manufactured in NATO member states.
In an interview with Newsweek, Prystaiko called for Kiev to gain immediate ascension into the North Atlantic alliance. The Ambassador said, “NATO is just logical. Ukraine will be full of NATO weaponry, and the people will be prepared. So what is the difference? Just place a seat at the table.” He continued, “So we’re becoming interoperable because we’re doing it on the ground. And that’s why I’m sure that whether the political decision is here or not now, we will be a part of NATO.”
Ukraine was put on the path to NATO membership, along with Georgia, in 2008. Giving Ukraine the status as a potential member crossed key redlines set out by the Kremlin.
While Ukraine has been on the path to membership in the North Atlantic alliance for nearly 15 years, Kiev falls short of meeting several requirements to formally join the defense pact.
During that period, Washington has repeatedly told Kiev it does not qualify to join the alliance. At the same time, it refused to take membership off the table, violating a core Russian security concern.
Under President Joe Biden, Washington took several steps to make Kiev a member of the alliance, including; signing agreements, providing billions in military aid, and conducting NATO war games in Ukrainian territory.
Ukraine’s growing military ties with NATO was a key factor in Russian President Vladimir Putin’s decision to invade his neighbor. Ukrainian President Volodymyr Zelensky claimed his country was already a “de facto” member of the alliance.
Prystaiko claimed that eventual membership in NATO and the EU was a guarantee for Kiev, and it was “silly” to pretend otherwise. “Our conversation with the rest of the world—at least the Western world—should be very easy. Ukraine wins, becomes a member of the European Union and NATO. And that’s it,” he said.
Back The Market Over The Fed In Who’s Right On Recession
Authored by Simon White, Bloomberg macro strategist,
The Fed continues to maintain its hawkish stance and a desire to keep rates higher for longer. However, the weight of history lies with the market which, through the medium of the yield curve, is sending the message that a potentially deep recession – requiring steep rate cuts – is on the way.
The mantra from many at the Fed continues to be to keep rates high, perhaps above 5%, and keep them there for an extended period. But the market is not really listening. The peak expected fed funds rate was 5.14% on November 3rd last year and has not been higher since.
Longer-term yields have been falling too, leading to the most inverted yield curve since the 1980s.
Much discussed is the yield-curve’s ability to predict recessions, but it also leads the ups as well as the downs in growth, by around one year. As the chart below shows, the yield curve is pointing to a potentially quite steep fall in growth.
There is overall a modestly positive relationship between the maximum yield-curve inversion before a recession and the subsequent peak fall in real GDP growth. The usual caveat applies with recession analysis in that the sample size is necessarily small, but nonetheless we can see that in general, steeper yield-curve inversions tend to precede deeper recessions.
Excluding the 2000 and 2007 recessions increases the correlation between the peak GDP trough and maximum curve inversion, leaving the 1970s and 1980s inflationary recessions that are more relevant to today’s backdrop.
There is an even stronger relationship between the depth of the curve inversion before a recession and the total size of the subsequent Fed cutting cycle. This suggests that it is how much “room” the Fed has to cut – gauged by how inverted the yield curve is – rather than how deep the recession proves to be, that is the ultimate arbiter of the size of the cutting cycle.
The current curve inversion is consistent with almost 500 bps of Fed cuts.
That’s not to say history will repeat itself exactly, but it gives a strong indication of the direction of travel.
The Fed currently foresees just over 100 bps of rate cuts from their expected peak by the end of 2024, according to the dot plot.
The market is increasingly at odds with this, with over 185 bps cuts priced in over the same period.
Given the historical record, put your money with the market in who’ll be proven more right.
Computer “Outage” Hits Canadian Flight System Hours After US System Went Down
Update (1426ET):
Nav Canada, the not-for-profit corporation that operates Canada’s civil air navigation system, reports the Candian real-time safety alerts system for pilots, otherwise known as NOTAM — short for Notice to Air Mission — has been hit with an outage.
So far, no delays have been attributed to the outage.
“We are assessing impacts to our operations and will provide updates as soon as they are available,” Nav Canada said.
This is the second NOTAM system in North America over the last 12 hours that has been hit with outages. As we explained below, the US grounded all planes earlier this morning due to NOTAM outages but restored departures around 0900 ET.
The disruption was enough to spark a travel nightmare for US travelers today and is worsening by the hour. The latest figures from flight tracking website FlightAware show 8,000 flights have been delayed and another 1,200 canceled.
So how do authorities explain the US and Canada’s NOTAM systems experiencing outages on the same day?
* * *
Update (1210ET):
This is one travel mess the airlines can deflect and blame the federal government.
Three hours after the FAA reopened the skies after a nationwide grounding of all commercial jets following a computer outage, there are 7,000 flights delayed and another 1,000 canceled, according to flight tracking website FlightAware.
People are not happy with Secretary of Transportation Pete Buttigieg:
MAYOR Pete an expert? Where in the hell was the backup system dude? When system updates occur usually a backup or parallel system is running to make sure the update installed correctly.Delayed flights will happen and backup airports.
.@PeteButtigieg is running a master class on how to f-up a political career. Somehow he was in better shape when he was just a former Mayor of a small town in Indiana.
“Normal air traffic operations are resuming gradually across the US following an overnight outage to the Notice to Air Missions system that provides safety info to flight crews. The ground stop has been lifted,” FAA tweeted.
But, grounding all domestic flights for hours has sparked travel chaos this morning. There are currently 4,000 delays within, into, or out of the US, flight tracking website FlightAware showed. Another 700 were canceled.
And then there’s this…
If you’re surprised that the FAA’s systems went down this morning grounding all domestic flights, you shouldn’t be.
Below are DOT and FAA’s approps focus in the 2023 budget:
FAA ordered all airlines to halt domestic departures until 0900 ET.
Update 3: The FAA is still working to fully restore the Notice to Air Missions system following an outage.⁰⁰The FAA has ordered airlines to pause all domestic departures until 9 a.m. Eastern Time to allow the agency to validate the integrity of flight and safety information.
So far, 1,366 flights have been delayed within, into, or out of the US, flight tracking website FlightAware showed. Another 108 were canceled.
* * *
Update (0719ET):
“The FAA is still working to fully restore the Notice to Air Missions system following an outage … some functions are beginning to come back online, National Airspace System operations remain limited,” FAA tweeted.
Cleared Update No. 2 for all stakeholders: ⁰⁰The FAA is still working to fully restore the Notice to Air Missions system following an outage. ⁰⁰While some functions are beginning to come back on line, National Airspace System operations remain limited.
Early Wednesday morning, the US Federal Aviation Administration’s (FAA) system that notifies pilots about hazards or any changes to airport facility services suffered an outage that might result in a nationwide grounding.
The FAA wrote in an advisory update that its NOTAM (Notice to Air Missions) system had “failed.” The aviation agency provided no immediate estimate for when it would return online.
“THE FAA is experiencing an outage that is impacting the update of NOTAMS. All flights are unable to be released at this time,” the FAA said in a statement.
In a statement to NBC News, the FAA said, “Operations across the National Airspace System are affected.”
So far, 1,162 flights have been delayed within, into, or out of the US, flight tracking website FlightAware showed. Another 94 were canceled.
Flights are being grounded nationwide.
Just an FYI if you are planning to fly today (as I sit on a plane I boarded at 5am), FAA’s NOTAM system is down and basically all planes within and coming in and out of the U.S. are grounded. Our pilot says they have no idea when it will be functioning again. So. pic.twitter.com/4iW11Ns2vr
BREAKING NEWS: 🚨🚨
Dozens of flights have been delayed at Charleston International airport due to a FAA computer malfunction.
We haven’t seen any flights leave Charleston in the past 40-45 minutes.
Tune into @ABCNews4 for the latest updates #Working4Youpic.twitter.com/kcZugsJaqo
It’s probably not a good time to fly this morning.
BREAKING: Widespread U.S. flight delays expected after critical FAA system goes down; agency currently working on getting it back online pic.twitter.com/DVQAw4nsTE
Passengers are beginning to complain on social media about delayed flights.
FAA computer outage has grounded flights nationwide this morning. Boarded at 5:30AM as the first flight of the day. Currently delayed indefinitely. Idk if I’ll be making this cruise out of Florida… 😢🌴🚢 pic.twitter.com/SBy8q2sD2N
@AmericanAir I’ve been sitting on a full plane at the gate at LAX for 2+ hours for a system issue with the FAA. When will this be resolved? #flightdelay
